UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-23165
CION ARES DIVERSIFIED CREDIT FUND
(Exact name of registrant as specified in charter)
3 PARK AVENUE
36TH FLOOR
NEW YORK, NEW YORK 10016
(Address of principal executive offices)(Zip code)
Eric A. Pinero
3 Park Avenue, 36th Floor
New York, New York 10016
(Name and Address of Agent for Service)
Copy to:
Michael A. Reisner
Mark Gatto
CION Ares Management, LLC
3 Park Avenue, 36th Floor
New York, New York 10016 | Richard Horowitz, Esq.
Matthew K. Kerfoot, Esq.
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036 |
Registrant’s telephone number, including area code: (646) 845-2577
Date of fiscal year end: December 31
Date of reporting period: June 30, 2020
Item 1. Report to Stockholders.
CION Ares Diversified Credit Fund
SEMI-ANNUAL REPORT
JUNE 30, 2020
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by calling 888-729-4266 toll-free or by sending an e-mail request to CION Ares Diversified Credit Fund Investor Relations Department at ir@cioninvestments.com if you invest directly with the Fund, or by contacting your financial intermediary (such as a broker-dealer or bank) if you invest through your financial intermediary. Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling 888-729-4266 toll-free or by sending an e-mail request to CION Ares Diversified Credit Fund Investor Relations Department at ir@cioninvestments.com, or by contacting your financial intermediary. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
CION Ares Diversified Credit Fund
Letter to Shareholders | | | 2 | | |
Fund Profile & Financial Data | | | 5 | | |
Consolidated Schedule of Investments | | | 7 | | |
Consolidated Statement of Assets and Liabilities | | | 41 | | |
Consolidated Statement of Operations | | | 43 | | |
Consolidated Statements of Changes in Net Assets | | | 44 | | |
Consolidated Statement of Cash Flows | | | 46 | | |
Financial Highlights | | | 48 | | |
Notes to Consolidated Financial Statements | | | 55 | | |
Proxy & Portfolio Information | | | 80 | | |
Dividend Reinvestment Plan | | | 81 | | |
Corporate Information | | | 83 | | |
Privacy Notice | | | 84 | | |
Trustees and Executive Officers | | | 85 | | |
Voting Results | | | 89 | | |
Semi-Annual Report 2020
CION Ares Diversified Credit Fund
Letter to Shareholders
June 30, 2020
Fellow Shareholders,
We hope this semi-annual report for the CION Ares Diversified Credit Fund (the "Fund"), for the period ending June 30, 2020 finds you and your loved ones healthy and safe during these unprecedented times.
We are pleased to report that notwithstanding the extraordinary events of COVID-19 and its impact on the U.S. financial markets and economy, the Fund has reached $805 million in total managed assets and delivered a 3.23% annualized return since inception.1 As of period-end, the Fund had 394 total investments, spread across more than 27 unique industries. Secured debt instruments accounted for 95.1%2 of the Fund and approximately 55% of the Fund was deployed in investments directly originated by affiliates of the Fund's investment advisor. The Fund has continued to gain traction with investors, and we are pleased to announce that the Fund has now launched on multiple platforms nationwide, which has led to strong asset growth.
Investment Philosophy and Process
The Fund remains focused on seeking to deliver attractive risk-adjusted returns for our shareholders across market cycles by utilizing a flexible strategy to invest in a diversified pool of liquid and illiquid credit instruments. We believe the optimal investment strategy for non-investment grade credit is an actively managed portfolio that encompasses a broad spectrum of credit asset classes including high yield bonds, leveraged loans, structured credit (CLOs and Private ABS), real estate debt, and direct lending in the United States and Europe. We believe unconstrained flexibility within a single portfolio affords investors an opportunity to capitalize on inefficiencies and dislocations across the credit universe and capture the best relative value.
The process by which the Fund's investments are selected is rigorous. The Fund's Advisor, CION Ares Management ("CAM" or the "Advisor"), leverages the resources of the broader Ares platform to conduct ongoing proprietary analysis at the asset-class level that compares current market conditions with historical and industry-level precedents to examine the rate environment, correlation to public markets, and local/regional risks. This information is brought before the 15-member investment allocation committee in semimonthly meetings, where senior members in each of the underlying asset classes within the Ares Credit Group share their observations with the Advisor's portfolio managers.
Investment Environment
Throughout 2020, global capital markets experienced unprecedented volatility as a result of the COVID-19 pandemic and its impact on the global economy. Investor sentiment plunged in a dramatic manner in March as the impacts of the pandemic magnified and were further exacerbated by the onset of the Saudi-Russian oil price war. During this time, default expectations increased, and credit spreads rose to levels last seen during the Global Financial Crisis. Starting in late March, investor sentiment was boosted behind unprecedented levels of financial stimulus being pumped into the economy and the expansion of eligibility of the Federal Reserve's (the "Fed") credit facilities. Though credit markets rallied significantly in the second quarter, levels remain wide when compared to year-end 2019. Year-to-date, the high yield markets in the U.S. and Europe have returned -4.78% and -4.97%, respectively.3 The bank loan markets remain wide of year-end 2019 levels in the U.S. and Europe as well with returns of -4.76% and -3.80%, respectively.4
Specific to the U.S., high yield and bank loan spreads widened with unprecedented momentum. In March, the high yield market experienced its five largest single day declines in history while the bank loan market experienced four of the five largest single day declines.5 Investor sentiment was decidedly "risk off", pushing the 10-year U.S. Treasury yield to all time lows while high yield mutual funds experienced a $13 billion outflow in March, the second largest on record.6 The loan market experienced a significant increase in downgrades while the high yield market saw a material increase in default activity, largely driven by the energy and retail sectors. Markets started to rebound in late March following unprecedented stimulus from the Fed, which bolstered sentiment and improved liquidity in the liquid credit markets. The bank loan market experienced its two largest daily price increases in history in late March and proceeded to return 9.71% in the second quarter.4 The high yield market returned 9.61% in the second quarter3 as demand from institutional and retail investors offset a record $146 billion of new issuance which occurred during the period.7 The record new issuance provided much needed liquidity to COVID-impacted industries, resulting in dampened default expectations relative to earlier in the year. Though
Semi-Annual Report 2020
2
CION Ares Diversified Credit Fund
Letter to Shareholders (continued)
June 30, 2020
reduced, expectations remain elevated when compared to year-end 2019 and dispersion remains elevated in both markets, underscoring the importance of credit selection and mistake avoidance in the current environment.
The European markets have experienced similar trends year-to-date. In March, European loan and bond spreads reached levels not seen since the sovereign debt crisis in 2011. Unprecedented fiscal packages were unveiled by governments alongside highly accommodative packages from central banks. Markets reacted positively to the stimulus and in a swift manner, retracing ~50% of the spread widening year-to-date in April. European loans, which saw spreads exceed sovereign debt crisis levels in March, rebounded sharply in April and had their strongest monthly return since 2009. Spreads continued to move in a bullish manner behind measures such as the ECB's Pandemic Emergency Purchase Program (PEPP). New issuance started to resume, and the high yield market saw its largest monthly print on record in June.7 Notably, some of the issuers that came to the primary market in June were among those that had their original deals shelved due to the onset of the crisis.
Looking ahead, capital markets volatility is expected to persist, particularly as the COVID-19 pandemic evolves and the U.S. presidential election comes into focus. We believe this should cause further sector and single-name dispersion, creating opportunities for bottom-up, fundamental active managers to uncover value. In the private markets, we're seeing new issuance start to resume with enhanced structures and terms, benefitting active managers who are well-capitalized to take advantage of the emerging opportunity set. Specific to the Fund, we remain strategically focused on high-quality, floating rate assets in defensive sectors and will seek to continue to increase our exposure to directly originated loans in the U.S. and Europe given the attractive risk-adjusted return opportunities in those markets today. Owing to its flexible investment strategy, we believe the Fund offers a compelling combination of yield, diversification, and a level of downside protection. We maintain strong conviction in the current portfolio positioning and believe the Fund can generate attractive risk-adjusted returns going forward.
Summary
The first and second quarters of 2020 saw heightened volatility as headlines and COVID-19 drove the markets. However, the committed and active Fed has largely succeeded so far, and default expectations are decreasing. The U.S. economy officially entered recession in February, but employment rebounded in May and June as the first stimulus took effect, and a new round of stimulus will likely be enacted soon.
We continue to believe this is an attractive entry point for credit as markets remain attractive compared to pre-dislocation levels, dispersion remains elevated and central bank stimulus supports supply and demand in the loan and high yield markets. Though we're optimistic, much uncertainty remains, and we expect volatility to persist as market technicals eventually reconcile with corporate fundamentals. We believe credit selection is of the utmost importance given our expectations for increased volatility in addition to elevated default rates.
We believe flexible mandates are best suited to take advantage of the opportunities in leveraged credit markets; whether by asset class, geography or within individual capital structures. From a risk perspective, we continue to balance a high-quality posture with selective additions to risk, particularly as the market's level of empathy toward COVID-19 impacted issuers and industries continues to evolve. Overall, we believe the go-forward environment will continue to test the full depth and breadth of active managers, and those with scale, experience and a nimble approach to portfolio construction will benefit the most in this unique economic and market backdrop
Against this backdrop, we believe the Fund's strategy, driven by our ability to dynamically allocate capital across credit sectors and geographies, is well situated to seek attractive risk-adjusted returns for our shareholders. We are pleased with the ongoing construction of the Fund's diversified portfolio, and we believe the Fund is well positioned to find relative value-driven opportunities as we move into economic recovery. Our Advisor will continue to leverage its position as a global leader in the liquid and illiquid credit markets to identify attractive investment opportunities in line with the stated objective of the Fund.
Semi-Annual Report 2020
3
CION Ares Diversified Credit Fund
Letter to Shareholders (continued)
June 30, 2020
We thank you for your investment in and continued support of CION Ares Diversified Credit Fund.
Sincerely,
Mark Gatto Michael A. Reisner
Co-CEO Co-CEO
CION Ares Management CION Ares Management
Views expressed are those of CION Ares Management as of the date of this communication, are subject to change at any time, and may differ from the views of other portfolio managers or of Ares as a whole. Although these views are not intended to be a forecast of future events, a guarantee of futures results, or investment advice, any forward-looking statements are not reliable indicators of future events and no guarantee is given that such activities will occur as expected or at all. Information contained herein has been obtained from sources believed to be reliable, but the accuracy and completeness of the information cannot be guaranteed. CION Ares Management does not undertake any obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise, except as required by law. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results.
The recent outbreak of a novel and highly contagious form of coronavirus ("COVID-19"), which the World Health Organization has declared to constitute a pandemic, has resulted in numerous deaths, adversely impacted global commercial activity and contributed to significant volatility in certain equity and debt markets. The global impact of the outbreak is rapidly evolving, and many countries have reacted by instituting quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and other public venues. Businesses are also implementing similar precautionary measures. Such measures, as well as the general uncertainty surrounding the dangers and impact of COVID-19, are creating significant disruption in supply chains and economic activity and are having a particularly adverse impact on energy, transportation, hospitality, tourism, entertainment and other industries. The impact of COVID-19 has led to significant volatility and declines in the global financial markets and oil prices and it is uncertain how long this volatility will continue. As COVID-19 continues to spread, the potential impacts, including a global, regional or other economic recession, are increasingly uncertain and difficult to assess. Any public health emergency, including any outbreak of COVID-19 or other existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on the Fund, the value of its investments and its portfolio companies. The performance information herein is as of June 30, 2020 and not all of the effects, directly and indirectly, resulting from COVID-19 and/or the current market environment, may be reflected herein. The full impact of COVID-19 and its ultimate potential effects on portfolio company performance and valuations is particularly uncertain and difficult to predict.
CION Securities, LLC ("CSL") is the wholesale marketing agent for CION Ares Diversified Credit Fund ("CADC" or the "Fund"), advised by CION Ares Management, LLC ("CAM") and distributed by ALPS Distributors, Inc ("ADI"). CSL, member FINRA, and CAM are not affiliated with ADI, member FINRA. Certain Ares fund securities may be offered through its affiliate, Ares Investor Services LLC ("AIS"), a broker-dealer registered with the SEC, and a member of FINRA and SIPC.
REF: CP?00531
1 Past performance is not indicative of future results. Portfolio characteristics of the Fund are as of June 30, 2020 and are subject to change. Performance shown here is the I-Share Class. The I-Share was incepted on July 12, 2017. Returns include reinvestment of distributions and reflect fund expenses inclusive of recoupment of previously provided expense support. The net expense ratio, which includes expense support recoupment, is 3.47% as of June 30, 2020. The gross expense ratio, which excludes expense support recoupment, is 2.99% as of June 30, 2020. Expense ratios are annualized (except for certain non-recurring costs) and calculated as a percentage of average net assets. The sales charge for Class A is up to 5.75%. Share values will fluctuate, therefore if repurchased, they may be worth more or less than their original cost. Current performance may differ and can be obtained at cioninvestments.com.
2 Secured Debt Includes First and Second Lien assets, Structured Credit Debt, Structured Credit Equity.
3 Source: ICE BofA HY Indices. European returns are hedged to Euro. As of June 30, 2020.
4 Source: Credit Suisse Leveraged Loan Index ("CSLLI"), Credit Suisse Western European Leveraged Loan Index (CS "WELLI"). WELLI returns hedged to Euro. As of June 30, 2020.
5 Sources: ICE BofA US High Yield Index ("HUCO"), CSLLI. As of June 30, 2020.
6 Source: JP Morgan High Yield Market Monitor. As of March 31, 2020.
7 Source: JP Morgan High Yield Market Monitor. As of June 30, 2020.
Semi-Annual Report 2020
4
CION Ares Diversified Credit Fund
Fund Fact Sheet — As of June 30, 2020
CLASS A CADEX | CLASS C CADCX | CLASS I CADUX | CLASS L CADWX
CLASS U CADZX | CLASS U2 CADSX | CLASS W CADFX
FUND OVERVIEW
CION Ares Diversified Credit Fund (CADC) is a diversified, unlisted closed-end management investment company registered under the 1940 Act as an interval fund. The Fund will seek to capitalize on market inefficiencies and relative value opportunities by dynamically allocating a portfolio of directly originated loans, secured floating and fixed rate syndicated loans, corporate bonds, asset-backed securities, commercial real estate loans and other types of credit instruments which, under normal circumstances, will represent at least 80% of the Fund's assets.
Fixed vs. Floating Rate
Excludes cash, other net assets and equity instruments.
KEY FACTS
CLASS A INCEPTION | | | 1/26/2017 | | |
CLASS C INCEPTION | | | 7/12/2017 | | |
CLASS I INCEPTION | | | 7/12/2017 | | |
CLASS L INCEPTION | | | 11/2/2017 | | |
CLASS U INCEPTION | | | 7/25/2019 | | |
CLASS U-2 INCEPTION | | | 4/13/2020 | | |
CLASS W INCEPTION | | | 12/4/2018 | | |
TOTAL MANAGED ASSETS* | | | ~$805M | | |
TOTAL ISSUES | | | 394 | | |
DISTRIBUTIONS1 | | | Monthly | | |
CURRENT DISTRIBUTION
RATE2 | | | 6.00 | % | |
CLASS A SHARPE RATIO3
(ANNUALIZED) | | | 0.20 | | |
CLASS A STANDARD DEVIATION4 | | | 4.35 | % | |
CLASS C SHARPE RATIO3
(ANNUALIZED) | | | 0.18 | | |
CLASS C STANDARD DEVIATION4 | | | 4.41 | % | |
CLASS I SHARPE RATIO3
(ANNUALIZED) | | | 0.21 | | |
CLASS I STANDARD DEVIATION4 | | | 4.42 | % | |
CLASS L SHARPE RATIO3
(ANNUALIZED) | | | 0.00 | | |
CLASS L STANDARD DEVIATION4 | | | 4.67 | % | |
CLASS U SHARPE RATIO3
(ANNUALIZED) | | | -0.95 | | |
CLASS U STANDARD DEVIATION4 | | | 7.67 | % | |
CLASS W SHARPE RATIO3
(ANNUALIZED) | | | -0.26 | | |
CLASS W STANDARD DEVIATION4 | | | 6.08 | % | |
Portfolio Allocation*
Allocation by Asset Type
Allocation by Geography
Top 10 Holdings* % of Portfolio
CEP V I 5 Midco Limited (aka Mak System) | | | 3.3 | % | |
True Potential Group Limited | | | 1.5 | % | |
Nelipak Holding Company | | | 1.3 | % | |
AffiniPay Midco, LLC | | | 1.2 | % | |
Bearcat Buyer, Inc. | | | 1.1 | % | |
GPM Investments, LLC | | | 1.0 | % | |
Capnor Connery Holdco A/S | | | 1.0 | % | |
Drilling Info Holdings, Inc. | | | 1.0 | % | |
Reddy Ice LLC | | | 0.9 | % | |
Foundation Risk Partners, Corp. | | | 0.9 | % | |
Allocation by Industry* % of Portfolio
Structured Products (CLOs & Private ABS) | | | 17.1 | % | |
Information Technology | | | 15.3 | % | |
Healthcare | | | 14.0 | % | |
Financial | | | 13.3 | % | |
Service | | | 11.6 | % | |
Food/Tobacco | | | 4.8 | % | |
Gaming/Leisure | | | 3.5 | % | |
Manufacturing | | | 2.3 | % | |
Other | | | 20.8 | % | |
Cash | | | -2.7 | % | |
* Holdings and allocations, unless otherwise indicated, are based on the total managed assets and subject to change without notice. Total managed assets is defined as the total assets (including any assets attributable to financial leverage) minus accrued liabilities (other than debt representing financial leverage). Data shown is for informational purposes only and not a recommendation to buy or sell any security.
Semi-Annual Report 2020
5
CION Ares Diversified Credit Fund
Fund Fact Sheet — As of June 30, 2020 (continued)
CLASS A CADEX | CLASS C CADCX | CLASS I CADUX | CLASS L CADWX
CLASS U CADZX | CLASS U2 CADSX | CLASS W CADFX
MANAGEMENT TEAM
• Mitch Goldstein, Co-Head of Ares Credit Group | 25 Years of Experience
• Greg Margolies, Head of Markets, Ares Management | 31 Years of Experience
• CADC's allocation committee consists of an additional 13 members, averaging nearly 25 years of experience.
ABOUT CION INVESTMENTS
CION Investments is a leading manager of investment solutions designed to redefine the way individual investors can build their portfolios and help meet their long-term investment goals. With more than 30 years of experience in the alternative asset management industry, CION strives to level the playing field. CION currently manages CION Investment Corporation, a leading non-traded BDC, and sponsors, through CION Ares Management, CION Ares Diversified Credit Fund, a globally diversified interval fund.
ABOUT ARES MANAGEMENT
Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager operating three integrated businesses across Credit, Private Equity and Real Estate. Ares Management's investment groups collaborate to deliver innovative investment solutions and consistent and attractive investment returns for fund investors throughout market cycles. Ares Management's global platform had $165 billion of assets under management as of June 30, 2020 with over 1,200 employees in over 25 offices in more than 10 countries. Please visit www.aresmgmt.com for additional information.
RISK DISCLOSURES & GLOSSARY
Risks and limitations include, but are not limited to, the following: investment instruments may be susceptible to economic downturns; most of the underlying credit instruments are rated below investment grade and considered speculative; there is no guarantee all shares can be repurchased; the Fund's business and operations may be impacted by fluctuations in the capital markets; the Fund is a diversified, closed-end investment company with limited operating history; diversification does not eliminate the risk of investment losses.
1 Monthly Distributions — There is no assurance monthly distributions paid by the fund will be maintained at the targeted level or paid at all.
2 Current Distribution Rate — Current distribution rate is expressed as a percentage equal to the projected annualized distribution amount (which is calculated by annualizing the current cash distribution per share without compounding), divided by the current net asset value. The current distribution rate shown may be rounded.
3 Sharpe Ratio — a risk-adjusted measure that measures reward per unit of risk. The higher the Sharpe Ratio, the better. The numerator is the difference between a portfolio's return and the return of a risk-free instrument. The denominator is the portfolio's standard deviation. Figures shown here are based on non-loaded daily NAV total returns utilizing data since inception.
4 Standard Deviation — a widely used measure of an investment's performance volatility. Standard deviation shows how much variation from the mean exists with a larger number indicating the data points are more spread out over a larger range of values. Figures shown here are based on non-loaded daily NAV total returns utilizing data since inception.
A portion of distributions may be a direct result of expense support payments provided by CION Ares Management, LLC (CAM), which are subject to repayment by CADC within three years. The purpose of this arrangement is to ensure that CADC bears an appropriate level of expenses. Any such distributions may not be entirely based on investment performance and can only be sustained if positive investment performance is achieved in future periods and/or CAM continues to make such expense support payments. Future repayments will reduce cash otherwise potentially available for distributions. There can be no assurance that such performance will be achieved in order to sustain these distributions. CAM has no obligation to provide expense support payments in future periods.
CADC may fund distributions from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital, as well as net income from operations, capital and non-capital gains from the sale of assets, dividends or distributions from equity investments and expense support payments from CAM, which are subject to repayment. For the year ending December 31, 2019, distributions were paid from taxable income and did not include a return of capital for tax purposes. If expense support payments from CAM were not provided, some or all of the distributions may have been a return of capital which would reduce the available capital for investment. The sources of distributions may vary periodically. Please refer to the semi-annual or annu-al reports filed with the SEC for the sources of distributions.
Semi-Annual Report 2020
6
CION Ares Diversified Credit Fund
Schedule of Investments
June 30, 2020 (Unaudited)
Senior Loans 90.2%(b)(c)(d)
| | | Principal
Amount | | Value(a) | |
Aerospace & Defense 1.9% | |
Aero Operating, LLC, 1st Lien
Delayed Draw Term Loan, 1M
LIBOR + 6.50%, 8.00%,
02/09/2026(e) | | $ | 838,503 | | | $ | 796,578 | | |
Aero Operating, LLC, Initial 1st Lien
Term Loan, 1M LIBOR + 6.50%,
8.00%, 02/09/2026(e)(f) | | | 2,922,726 | | | | 2,776,590 | | |
Radius Aerospace Europe, Ltd.,
1st Lien Term Loan, (Great Britain),
3M LIBOR + 5.75%, 6.75%,
03/29/2025(e)(f) | | | 1,618,502 | | | | 1,553,761 | | |
Radius Aerospace Europe, Ltd.,
1st Lien Revolver, (Great Britain),
3M GBP LIBOR + 5.75%, 6.75%,
03/29/2025(e) | | £ | 185,714 | | | | 220,896 | | |
Radius Aerospace, Inc., Initial
1st Lien Term Loan, 3M LIBOR +
5.75%, 6.75%, 03/29/2025(e)(f) | | $ | 2,539,286 | | | | 2,437,714 | | |
Radius Aerospace, Inc., 1st Lien
Revolver, 3M LIBOR + 5.75%,
6.75%, 03/29/2025(e) | | | 428,571 | | | | 411,429 | | |
SecurAmerica, LLC, 1st Lien
6th Amendment Term Loan,
1M LIBOR + 9.00%, 10.25%,
07/16/2021(e)(g) | | | 191,759 | | | | 191,759 | | |
SecurAmerica, LLC, 1st Lien
Delayed Draw Term Loan A,
1M LIBOR + 9.00%, 10.25%,
12/21/2023(e)(g) | | | 615,750 | | | | 615,750 | | |
SecurAmerica, LLC, 1st Lien
Delayed Draw Term Loan B,
1M LIBOR + 9.00%, 10.25%,
12/21/2023(e)(g) | | | 111,611 | | | | 111,611 | | |
SecurAmerica, LLC, 1st Lien
Delayed Draw Term Loan C,
1M LIBOR + 9.00%, 10.25%,
12/21/2023(e)(g) | | | 69,992 | | | | 69,992 | | |
SecurAmerica, LLC, 1st Lien
Revolver, 06/21/2023(e)(h)(i) | | | 1,125 | | | | — | | |
SecurAmerica, LLC, 1st Lien Term
Loan, 1M LIBOR + 9.00%, 10.25%,
12/21/2023(e)(f)(g) | | | 1,644,085 | | | | 1,644,085 | | |
TransDigm Group, Inc., Tranche
Refinancing 1st Lien Term Loan F,
1M LIBOR + 2.25%, 2.43%,
12/09/2025(i) | | | 1,997,222 | | | | 1,791,788 | | |
| | | | | | 12,621,953 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Automotive 1.4% | |
GB Auto Service, Inc., 1st Lien
1st Amendment Delayed Draw Term
Loan, 3M LIBOR + 6.50%, 7.50%,
10/19/2024(e)(h) | | $ | 6,002,624 | | | $ | 2,735,508 | | |
GB Auto Service, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 6.50%, 7.50%,
10/19/2024(e) | | | 1,649,034 | | | | 1,583,073 | | |
GB Auto Service, Inc., 1st Lien
Revolver, 3M LIBOR + 6.50%,
7.52%, 10/19/2024(e)(h) | | | 264,159 | | | | 44,206 | | |
GB Auto Service, Inc., 1st Lien
Term Loan, 3M LIBOR + 6.50%,
7.50%, 10/19/2024(e)(f) | | | 1,200,833 | | | | 1,152,800 | | |
Panther BF Aggregator 2, LP, Initial
1st Lien Term Loan, 1M LIBOR +
3.50%, 3.68%, 04/30/2026 | | | 1,120,211 | | | | 1,064,200 | | |
Truck Hero, Inc., Initial 1st Lien
Term Loan, 1M LIBOR + 3.75%,
3.93%, 04/22/2024 | | | 383,089 | | | | 347,033 | | |
Wand NewCo 3, Inc., Initial 2nd Lien
Term Loan, 1M LIBOR + 7.25%,
7.43%, 02/05/2027(e)(f) | | | 3,000,000 | | | | 2,880,000 | | |
| | | | | | 9,806,820 | | |
Banking, Finance, Insurance & Real Estate 13.4% | |
A.U.L. Corp., 1st Lien Revolver,
06/05/2023(e)(h) | | | 1,000 | | | | (10 | ) | |
A.U.L. Corp., Initial 1st Lien Term
Loan, 1M LIBOR + 4.50%, 5.50%,
06/05/2023(e)(f) | | | 37,344 | | | | 36,971 | | |
Acrisure, LLC, 1st Lien Additional
Term Loan, 1M LIBOR + 3.50%,
3.68%, 02/15/2027 | | | 3,614,279 | | | | 3,406,458 | | |
Affinipay Midco, LLC, 1st Lien
Revolver, 3M LIBOR + 5.50%,
6.75%, 03/02/2026(e)(h) | | | 766,307 | | | | 130,272 | | |
Affinipay Midco, LLC, Initial 1st Lien
Term Loan, 3M LIBOR + 5.50%,
6.75%, 03/02/2026(e)(f) | | | 7,250,308 | | | | 7,032,798 | | |
Affirm Operational Loans VI Trust,
1st Lien Revolver, 12/17/2026(e)(h) | | | 500,000 | | | | (5,426 | ) | |
Amynta Agency Borrower, Inc.,
1st Lien Incremental Term Loan B,
1M LIBOR + 4.50%, 4.68%,
02/28/2025(e)(f) | | | 2,954,896 | | | | 2,659,407 | | |
AQ Sunshine, Inc., 1st Lien Delayed
Draw Term Loan, 04/15/2025(e)(h) | | | 85,975 | | | | (2,579 | ) | |
Semi-Annual Report 2020
7
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
AQ Sunshine, Inc., Initial 1st Lien
Revolver, 6M LIBOR + 5.75%,
6.75%, 04/15/2024(e)(h) | | $ | 136,423 | | | $ | 118,689 | | |
AQ Sunshine, Inc., Initial 1st Lien
Term Loan, 6M LIBOR + 5.75%,
6.75%, 04/15/2025(e)(f) | | | 1,143,613 | | | | 1,109,305 | | |
AQ Sunshine, Inc., Initial 1st Lien
Term Loan, 6M LIBOR + 5.75%,
6.75%, 04/15/2025(e) | | | 299,191 | | | | 290,215 | | |
Ardonagh Midco 3, PLC, EUR
Facility 1st Lien Term Loan B-1,
(Great Britain), 07/14/2026(e)(f)(h)(i)(j) | | € | 193,893 | | | | — | | |
Ardonagh Midco 3, PLC, GBP
Facility 1st Lien Term Loan B-1,
(Great Britain), 07/14/2026(e)(f)(h)(i)(j) | | £ | 1,521,885 | | | | — | | |
Ardonagh Midco 3, PLC, GBP
Facility 1st Lien Term Loan B-2,
(Great Britain), 07/14/2026(e)(h)(i)(j) | | | 323,155 | | | | — | | |
ARM Funding, LLC, 1st Lien
Revolver B, 1M LIBOR + 7.95%,
8.95%, 02/29/2024(e)(h) | | $ | 2,500,000 | | | | 1,412,267 | | |
AssuredPartners, Inc., 1st Lien
Incremental Term Loan, 1M LIBOR +
4.50%, 5.50%, 02/12/2027 | | | 1,074,776 | | | | 1,053,281 | | |
Asurion, LLC, 1st Lien Replacement
Term Loan B-6, 1M LIBOR + 3.00%,
3.18%, 11/03/2023(i) | | | 3,994,728 | | | | 3,858,228 | | |
Asurion, LLC, 2nd Lien Term
Loan B-2, 1M LIBOR + 6.50%,
6.68%, 08/04/2025(i) | | | 963,051 | | | | 955,828 | | |
Blackhawk Network Holdings, Inc.,
2nd Lien Term Loan, 1M LIBOR +
7.00%, 7.25%, 06/15/2026 | | | 150,000 | | | | 134,625 | | |
Blackwood Bidco, Ltd., Facility
1st Lien Term Loan B-1,
(Great Britain), 6M LIBOR + 7.30%,
9.25%, 10/08/2026(e)(f)(j) | | | 3,184,069 | | | | 3,184,069 | | |
Blackwood Bidco, Ltd., GBP
Facility 1st Lien Term Loan B-1,
(Great Britain), 6M GBP LIBOR +
7.30%, 8.11%, 10/08/2026(e)(f)(j) | | £ | 2,550,724 | | | | 3,160,346 | | |
Foundation Risk Partners Corp.,
1st Lien 1st Amendment Delayed
Draw Term Loan, 3M LIBOR +
4.75%, 5.75%, 11/10/2023(e) | | $ | 785,921 | | | | 778,061 | | |
Foundation Risk Partners Corp.,
1st Lien 1st Amendment Term
Loan, 3M LIBOR + 4.75%, 5.75%,
11/10/2023(e)(f) | | | 628,994 | | | | 622,704 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Foundation Risk Partners Corp.,
1st Lien 2nd Amendment Delayed
Draw Term Loan, 3M LIBOR +
4.75%, 5.75%, 11/10/2023(e) | | $ | 3,225,347 | | | $ | 3,193,094 | | |
Foundation Risk Partners Corp.,
1st Lien 3rd Amendment Delayed
Draw Term Loan, 3M LIBOR +
4.75%, 5.75%, 11/10/2023(e)(h) | | | 1,258,791 | | | | 355,348 | | |
Foundation Risk Partners Corp.,
1st Lien Delayed Draw Term Loan,
3M LIBOR + 4.75%, 5.75%,
11/10/2023(e)(f) | | | 139,446 | | | | 138,051 | | |
Foundation Risk Partners Corp.,
1st Lien Revolver, 11/10/2023(e)(h) | | | 3,000 | | | | (30 | ) | |
Foundation Risk Partners Corp.,
1st Lien Term Loan, 3M LIBOR +
4.75%, 5.75%, 11/10/2023(e)(f) | | | 619,394 | | | | 613,200 | | |
Foundation Risk Partners Corp.,
2nd Lien 1st Amendment Delayed
Draw Term Loan, 3M LIBOR +
8.50%, 9.50%, 11/10/2024(e) | | | 292,900 | | | | 289,971 | | |
Foundation Risk Partners Corp.,
2nd Lien 1st Amendment Term
Loan, 3M LIBOR + 8.50%, 9.50%,
11/10/2024(e) | | | 264,795 | | | | 262,147 | | |
Foundation Risk Partners Corp.,
2nd Lien 2nd Amendment Delayed
Draw Term Loan, 3M LIBOR +
8.50%, 9.50%, 11/10/2024(e) | | | 1,007,133 | | | | 997,061 | | |
Foundation Risk Partners Corp.,
2nd Lien 3rd Amendment Delayed
Draw Term Loan, 3M LIBOR +
8.50%, 9.50%, 11/10/2024(e)(h) | | | 720,610 | | | | 55,592 | | |
Foundation Risk Partners Corp.,
2nd Lien Term Loan, 3M LIBOR +
8.50%, 9.50%, 11/10/2024(e) | | | 221,778 | | | | 219,560 | | |
Gulf Finance, LLC, Tranche 1st Lien
Term Loan B, 1M LIBOR + 5.25%,
6.25%, 08/25/2023 | | | 297,241 | | | | 190,235 | | |
Hammersmith Bidco, Ltd., Facility
1st Lien Term Loan B, (Great
Britain), 1M GBP LIBOR + 7.44%,
7.94%, 09/02/2026(e)(f)(j) | | £ | 4,112,437 | | | | 5,095,306 | | |
Hammersmith Bidco, Ltd.,
Acquisition Capex Facility 1st Lien
Term Loan, (Great Britain),
1M GBP LIBOR + 7.44%, 7.94%,
09/02/2026(e)(h)(j) | | | 1,678,545 | | | | 1,089,441 | | |
Leo Bidco, Ltd., GBP Facility
1st Lien Term Loan B, (Great
Britain), 6M GBP LIBOR + 6.25%,
7.00%, 03/30/2026(e)(f)(j) | | | 500,000 | | | | 619,500 | | |
Semi-Annual Report 2020
8
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
London Acquisition Bidco B.V., EUR
Facility 1st Lien Term Loan B-1,
(Netherlands), 3M EURIBOR +
6.75%, 7.25%, 02/09/2026(e)(f)(j) | | € | 430,556 | | | $ | 474,034 | | |
NXTGenpay Intressenter Bidco AB,
Facility 1st Lien Term Loan B,
(Sweden), 3M STIBOR + 6.75%,
6.82%, 06/30/2025(e)(j) | | SEK | 5,500,000 | | | | 590,455 | | |
NXTGenpay Intressenter Bidco AB,
Facility 1st Lien Term Loan D,
(Sweden), 06/30/2025(e)(h)(i)(j) | | | 1,800,000 | | | | — | | |
NXTGenpay Intressenter Bidco AB,
Facility 1st Lien Term Loan D,
(Sweden), 3M STIBOR + 6.75%,
6.82%, 06/30/2025(e)(j) | | | 2,700,000 | | | | 289,860 | | |
PI UK Holdco II, Ltd., Facility
1st Lien Term Loan B-1, (Great
Britain), 3M LIBOR + 3.50%,
4.50%, 01/03/2025 | | $ | 775,056 | | | | 738,892 | | |
Refinitiv U.S. Holdings, Inc., Initial
1st Lien Term Loan, 1M LIBOR +
3.25%, 3.43%, 10/01/2025 | | | 1,994,937 | | | | 1,946,560 | | |
Right Choice Holdings, Ltd., GBP
Facility 1st Lien Term Loan B,
(Great Britain), 3M GBP LIBOR +
6.75%, 7.50%, 06/06/2024(e)(f)(j) | | £ | 1,000,000 | | | | 1,238,999 | | |
RSC Acquisition, Inc., Initial
1st Lien Delayed Draw Term Loan,
3M LIBOR + 5.50%, 6.50%,
10/30/2026(e)(h) | | $ | 554,024 | | | | 15,970 | | |
RSC Acquisition, Inc., Initial
1st Lien Revolver, 10/30/2026(e)(h) | | | 1,000 | | | | (30 | ) | |
RSC Acquisition, Inc., Initial
1st Lien Term Loan, 3M LIBOR +
5.50%, 6.50%, 10/30/2026(e)(f) | | | 2,671,762 | | | | 2,591,609 | | |
SaintMichelCo, Ltd., Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 3M GBP LIBOR +
7.00%, 7.50%, 09/09/2025(e)(h)(j) | | £ | 300,000 | | | | 198,240 | | |
SaintMichelCo, Ltd., Facility
1st Lien Term Loan B, (Great
Britain), 3M GBP LIBOR + 7.00%,
7.50%, 09/09/2025(e)(j) | | | 2,400,000 | | | | 2,973,598 | | |
SCM Insurance Services, Inc.,
1st Lien Revolver, (Canada), CAD
PRIME + 4.00%, 6.45%,
08/29/2022(e)(h) | | CAD | 1,000 | | | | 309 | | |
SCM Insurance Services, Inc.,
1st Lien Term Loan, (Canada),
1M CDOR + 5.00%, 6.00%,
08/29/2024(e)(f) | | | 121,875 | | | | 82,527 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
SCM Insurance Services, Inc.,
2nd Lien Term Loan, (Canada),
1M CDOR + 9.00%, 10.00%,
03/01/2025(e) | | CAD | 125,000 | | | $ | 82,803 | | |
Sedgwick Claims Management
Services, Inc., Initial 1st Lien Term
Loan, 1M LIBOR + 3.25%, 3.43%,
12/31/2025 | | $ | 2,874,905 | | | | 2,707,556 | | |
Selectquote, Inc., Initial 1st Lien
Term Loan, 1M LIBOR + 6.00%,
7.00%, 11/05/2024(e) | | | 779,213 | | | | 779,213 | | |
SG Acquisition, Inc., Initial
1st Lien Term Loan, 1M LIBOR +
5.75%, 5.93%, 01/27/2027(e)(f) | | | 3,372,235 | | | | 3,271,068 | | |
Staysure Bidco, Ltd., Facility
1st Lien Term Loan B, (Great
Britain), 3M GBP LIBOR + 7.00%,
7.75%, 07/01/2025(e) | | £ | 1,000,000 | | | | 1,189,439 | | |
Symbol Bidco I, Ltd., Facility
1st Lien Term Loan B, (Great
Britain), 3M GBP LIBOR + 6.50%,
7.00%, 02/22/2027(e)(f)(j) | | | 571,429 | | | | 708,000 | | |
Symbol Bidco I, Ltd., Acquisition
Capex Facility 1st Lien Term Loan,
(Great Britain), 12/21/2026(e)(h)(j) | | | 428,571 | | | | — | | |
TA/WEG Holdings, LLC, Initial
1st Lien Term Loan, 12M LIBOR +
6.00%, 7.00%, 10/02/2025(e)(f) | | $ | 3,529,018 | | | | 3,458,438 | | |
TA/WEG Holdings, LLC, 1st Lien
Revolver, 12M LIBOR + 6.00%,
7.00%, 10/02/2025(e)(h) | | | 301,041 | | | | 160,822 | | |
TA/WEG Holdings, LLC, Initial
1st Lien Delayed Draw Term Loan,
12M LIBOR + 6.00%, 7.00%,
10/02/2025(e)(h)(i) | | | 2,186,891 | | | | 831,019 | | |
Tempo Acquisition, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
2.75%, 2.93%, 05/01/2024 | | | 1,510,335 | | | | 1,431,042 | | |
Toscafund, Ltd., Facility 1st Lien
Term Loan, (Great Britain),
6M GBP LIBOR + 7.50%, 8.25%,
04/02/2025(e)(f)(j) | | £ | 4,680,000 | | | | 5,798,516 | | |
True Potential LLP, Facility 1st Lien
Term Loan B-2, (Great Britain),
6M GBP LIBOR + 7.17%, 7.90%,
10/16/2026(e)(f)(j) | | | 8,112,754 | | | | 10,051,696 | | |
True Potential LLP, Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 3M GBP LIBOR +
7.17%, 7.84%, 10/16/2026(e)(h)(j) | | | 1,943,174 | | | | 1,963,908 | | |
Semi-Annual Report 2020
9
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Ultimus Group Midco, LLC (The),
1st Lien Revolver, 3M LIBOR +
3.50%, 6.75%, 02/01/2024(e)(h) | | $ | 396,226 | | | $ | 210,566 | | |
Ultimus Group Midco, LLC (The),
Initial 1st Lien Term Loan,
3M LIBOR + 4.50%, 5.50%,
02/01/2026(e)(f) | | | 3,181,215 | | | | 3,053,966 | | |
USI, Inc., 1st Lien Term Loan,
3M LIBOR + 4.00%, 4.31%,
12/02/2026 | | | 497,500 | | | | 482,162 | | |
| | | | | | 90,375,222 | | |
Beverage, Food & Tobacco 4.7% | |
CC Fly Holding II A/S, Unitranche
Facility 1st Lien Term Loan A,
(Denmark), 3M CIBOR + 7.50%,
8.00%, 05/09/2025(e)(f) | | DKK | 2,500,000 | | | | 358,039 | | |
CC Fly Holding II A/S, Unitranche
Facility 1st Lien Term Loan B,
(Denmark), 3M NIBOR + 7.50%,
8.00%, 05/09/2025(e)(f) | | | 2,500,000 | | | | 358,039 | | |
CC Fly Holding II A/S, Accordian
Facility 1st Lien Term Loan,
(Denmark), 3M CIBOR + 7.50%,
8.00%, 05/09/2025(e)(f) | | | 520,833 | | | | 74,592 | | |
CC Fly Holding II A/S, Accordian
Facility 2 1st Lien Term Loan,
(Denmark), 3M NIBOR + 7.50%,
8.00%, 05/09/2025(e)(f) | | | 520,833 | | | | 74,592 | | |
CC Fly Holding II A/S, Accordian
Facility 3 1st Lien Term Loan,
(Denmark), 3M CIBOR + 7.50%,
8.00%, 05/09/2025(e)(f) | | | 1,041,666 | | | | 149,183 | | |
CHG PPC Parent, LLC, 2nd Lien
Term Loan, 1M LIBOR + 7.50%,
7.68%, 03/30/2026(e)(f) | | $ | 1,000,000 | | | | 970,000 | | |
CHG PPC Parent, LLC, 2nd Lien
Additional Term Loan, 1M LIBOR +
7.75%, 7.93%, 03/30/2026(e)(f) | | | 2,000,000 | | | | 1,940,000 | | |
Ferraro Fine Foods Corp., 1st Lien
2nd Amendment Term Loan,
3M LIBOR + 4.25%, 5.32%,
05/09/2024(e)(f) | | | 295,825 | | | | 286,950 | | |
Ferraro Fine Foods Corp., 1st Lien
Incremental Term Loan, 3M LIBOR +
4.25%, 5.32%, 05/09/2024(e) | | | 53,791 | | | | 52,177 | | |
Ferraro Fine Foods Corp., 1st Lien
Revolver, 6M LIBOR + 4.25%,
5.32%, 05/09/2023(e)(h) | | | 1,000 | | | | 303 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Ferraro Fine Foods Corp., 1st Lien
Term Loan, 6M LIBOR + 4.25%,
5.32%, 05/09/2024(e)(f) | | $ | 981,518 | | | $ | 952,072 | | |
Froneri International, Ltd., Facility
1st Lien Term Loan B-2,
(Great Britain), 1M LIBOR + 2.25%,
2.43%, 01/29/2027 | | | 2,501,824 | | | | 2,347,036 | | |
GPM Investments, LLC, 1st Lien
Delayed Draw Term Loan A,
03/01/2027(e)(h) | | | 3,312,452 | | | | (66,249 | ) | |
GPM Investments, LLC, Initial
1st Lien Term Loan, 3M LIBOR +
4.75%, 6.25%, 03/01/2027(e)(f) | | | 8,496,439 | | | | 8,326,510 | | |
Hometown Food Co., 1st Lien
Revolver, 08/31/2023(e)(h) | | | 1,000 | | | | — | | |
Hometown Food Co., 1st Lien Term
Loan, 1M LIBOR + 5.00%, 6.25%,
08/31/2023(e)(f) | | | 1,473,707 | | | | 1,473,707 | | |
IRB Holding Corp., 1st Lien
Replacement Term Loan B,
6M LIBOR + 2.75%, 3.75%,
02/05/2025 | | | 2,192,449 | | | | 2,019,399 | | |
Jim N Nicks Management, LLC,
1st Lien Revolver, 3M LIBOR +
5.25%, 6.25%, 07/10/2023(e) | | | 1,000 | | | | 880 | | |
Jim N Nicks Management, LLC,
Initial 1st Lien Term Loan, 3M
LIBOR + 5.25%, 6.25%,
07/10/2023(e)(f) | | | 48,500 | | | | 42,680 | | |
Portillo's Holdings, LLC, 1st Lien
Additional Term Loan B-3,
09/06/2024(i)(j) | | | 275,969 | | | | 252,856 | | |
Portillo's Holdings, LLC, 2nd Lien
Additional Term Loan B-3,
3M LIBOR + 9.50%, 10.75%,
12/06/2024(e) | | | 2,465,616 | | | | 2,342,335 | | |
Reddy Ice Holdings, Inc., 1st Lien
Delayed Draw Term Loan,
6M LIBOR + 5.50%, 6.70%,
07/01/2025(e)(h) | | | 952,667 | | | | 417,980 | | |
Reddy Ice Holdings, Inc., 1st Lien
Revolver, 1M LIBOR + 5.50%,
6.50%, 07/01/2024(e)(h) | | | 955,102 | | | | 305,633 | | |
Reddy Ice Holdings, Inc., 1st Lien
Term Loan, 6M LIBOR + 5.50%,
6.70%, 07/01/2025(e)(f) | | | 7,375,298 | | | | 6,859,027 | | |
SFE Intermediate HoldCo, LLC,
1st Lien Incremental Term Loan,
3M LIBOR + 5.25%, 6.25%,
07/31/2024(e)(f) | | | 1,904,098 | | | | 1,866,016 | | |
Semi-Annual Report 2020
10
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
SFE Intermediate HoldCo, LLC,
1st Lien Revolver, PRIME + 4.25%,
7.50%, 07/31/2023(e) | | $ | 2,000 | | | $ | 1,960 | | |
SFE Intermediate HoldCo, LLC,
1st Lien Term Loan, 3M LIBOR +
5.25%, 6.25%, 07/31/2024(e)(f) | | | 235,708 | | | | 230,994 | | |
| | | | | | 31,636,711 | | |
Capital Equipment 1.9% | |
Avantor Funding, Inc., Initial 1st Lien
Term Loan, 1M LIBOR + 2.25%,
3.25%, 11/21/2024(i) | | | 2,500,000 | | | | 2,431,250 | | |
Blue Angel Buyer 1, LLC, 1st Lien
1st Amendment Term Loan,
3M LIBOR + 4.50%, 5.64%,
01/02/2026(e)(f) | | | 1,113,930 | | | | 1,102,790 | | |
Blue Angel Buyer 1, LLC, 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 3.25%, 6.50%,
01/02/2026(e)(h) | | | 640,850 | | | | 268,290 | | |
Blue Angel Buyer 1, LLC, 1st Lien
Revolver, 01/02/2025(e)(h) | | | 321,199 | | | | (6,424 | ) | |
Blue Angel Buyer 1, LLC, Initial
1st Lien Term Loan, 6M LIBOR +
4.25%, 5.25%, 01/02/2026(e)(f) | | | 2,010,948 | | | | 1,970,729 | | |
Dynacast International, LLC,
1st Lien Term Loan B-2,
3M LIBOR + 3.25%, 4.25%,
01/28/2022(i) | | | 2,022,935 | | | | 1,638,578 | | |
Flow Control Solutions, Inc.,
1st Lien Delayed Draw Term Loan,
11/21/2024(e)(h) | | | 994,201 | | | | (1 | ) | |
Flow Control Solutions, Inc.,
1st Lien Revolver, 11/21/2024(e)(h) | | | 372,825 | | | | — | | |
Flow Control Solutions, Inc.,
1st Lien Term Loan, 3M LIBOR +
5.25%, 6.25%, 11/21/2024(e)(f) | | | 1,287,695 | | | | 1,287,695 | | |
IMIA Holdings, Inc., 1st Lien
Revolver, 10/26/2024(e)(h) | | | 408,163 | | | | — | | |
IMIA Holdings, Inc., 1st Lien Term
Loan, 3M LIBOR + 4.50%, 5.50%,
10/26/2024(e)(f) | | | 2,517,932 | | | | 2,517,932 | | |
Welbilt, Inc., 1st Lien Term Loan B,
1M LIBOR + 2.50%, 2.68%,
10/23/2025(e) | | | 1,902,256 | | | | 1,635,940 | | |
| | | | | | 12,846,779 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Chemicals, Plastics & Rubber 1.6% | |
Atlas Intermediate III, LLC, Initial
1st Lien Term Loan, 3M LIBOR +
5.75%, 6.75%, 04/29/2025(e)(f) | | $ | 1,150,044 | | | $ | 1,115,543 | | |
Atlas Intermediate III, LLC,
1st Lien Revolver, 3M LIBOR +
5.50%, 6.50%, 04/29/2025(e)(h) | | | 226,621 | | | | 144,282 | | |
DCG Acquisition Corp., Initial
1st Lien Term Loan, 1M LIBOR +
4.50%, 4.69%, 09/30/2026(e) | | | 2,271,070 | | | | 2,021,253 | | |
Laboratories Bidco, LLC, 1st Lien
Term Loan, 1M CDOR + 6.00%,
7.00%, 06/25/2024(e)(f) | | CAD | 1,797,779 | | | | 1,296,746 | | |
Laboratories Bidco, LLC, 1st Lien
2nd Amendment Incremental
Term Loan, 1M LIBOR + 5.75%,
6.75%, 06/25/2024(e)(f) | | $ | 588,426 | | | | 576,658 | | |
Laboratories Bidco, LLC, 1st Lien
Revolver, 06/25/2024(e)(h) | | | 513,489 | | | | (10,270 | ) | |
Laboratories Bidco, LLC, 1st Lien
Term Loan, 1M LIBOR + 5.75%,
6.75%, 06/25/2024(e)(f) | | | 1,916,362 | | | | 1,878,034 | | |
Plaskolite PPC Intermediate II, LLC,
2nd Lien Term Loan, 1M LIBOR +
7.75%, 8.75%, 12/14/2026(e)(f) | | | 3,000,000 | | | | 2,850,000 | | |
Plaskolite PPC Intermediate II, LLC,
1st Lien Term Loan, 3M LIBOR +
4.25%, 5.25%, 12/15/2025(e) | | | 990 | | | | 940 | | |
Trident TPI Holdings, Inc., Tranche
1st Lien Term Loan B-1,
6M LIBOR + 3.25%, 4.07%,
10/17/2024 | | | 691,454 | | | | 658,610 | | |
| | | | | | 10,531,796 | | |
Construction & Building 1.4% | |
EISG Bidco AB, Facility 1st Lien
Term Loan A, (Sweden),
3M STIBOR + 7.50%, 7.57%,
06/30/2026(e)(f)(i)(j) | | SEK | 42,000,000 | | | | 4,508,929 | | |
EISG Bidco AB, Facility 1st Lien
Term Loan B, (Sweden),
06/30/2026(e)(h)(i)(j) | | | 4,000,000 | | | | — | | |
Kene Acquisition, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 4.25%, 5.25%,
08/10/2026(e)(h) | | $ | 632,240 | | | | 458,355 | | |
Kene Acquisition, Inc., 1st Lien
Revolver, 3M LIBOR + 4.25%,
5.25%, 08/08/2024(e)(h) | | | 675,812 | | | | 82,787 | | |
Semi-Annual Report 2020
11
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Kene Acquisition, Inc., 1st Lien
Term Loan, 3M LIBOR + 4.25%,
5.25%, 08/10/2026(e)(f) | | $ | 2,891,887 | | | $ | 2,776,212 | | |
Wilsonart, LLC, Tranche 1st Lien
Term Loan D, 3M LIBOR + 3.25%,
4.25%, 12/19/2023(i) | | | 1,883,674 | | | | 1,812,452 | | |
| | | | | | 9,638,735 | | |
Consumer Goods: Durable 1.6% | |
AI Aqua Merger Sub, Inc., 1st Lien
5th Amendment Incremental Term
Loan, 3M LIBOR + 4.25%, 5.34%,
12/13/2023(e) | | | 2,487,500 | | | | 2,425,312 | | |
AI Aqua Merger Sub, Inc., Tranche
1st Lien Term Loan B-1,
6M LIBOR + 3.25%, 4.32%,
12/13/2023 | | | 1,979,540 | | | | 1,897,884 | | |
DecoPac, Inc., Initial 1st Lien
Revolver, 1M LIBOR + 4.25%,
5.25%, 09/29/2023(e)(h) | | | 1,000 | | | | 190 | | |
DecoPac, Inc., Initial 1st Lien Term
Loan, 3M LIBOR + 4.25%, 5.25%,
09/30/2024(e)(f) | | | 478,791 | | | | 474,003 | | |
DRS Holdings III, Inc., 1st Lien
Term Loan, 3M LIBOR + 5.75%,
6.75%, 11/01/2025(e)(f) | | | 2,021,606 | | | | 1,940,741 | | |
DRS Holdings III, Inc., 1st Lien
Revolver, 1M LIBOR + 5.75%,
6.75%, 11/01/2025(e)(h) | | | 1,000 | | | | 360 | | |
Star US Bidco, LLC, Initial 1st Lien
Term Loan, 1M LIBOR + 4.25%,
5.25%, 03/17/2027 | | | 4,144,583 | | | | 3,750,847 | | |
| | | | | | 10,489,337 | | |
Consumer Goods: Non-Durable 0.0% | |
Movati Athletic Group, Inc., 1st Lien
Delayed Draw Term Loan, (Canada),
3M LIBOR + 6.50%, 8.00%,
10/05/2022(e)(h) | | CAD | 251,915 | | | | 121,008 | | |
Movati Athletic Group, Inc., 1st Lien
Term Loan A, (Canada), 3M LIBOR +
6.50%, 8.00%, 10/05/2022(e)(f) | | | 240,532 | | | | 169,956 | | |
| | | | | | 290,964 | | |
Containers, Packaging & Glass 2.6% | |
Anchor Packaging, LLC, 1st Lien
Delayed Draw Term Loan,
1M LIBOR + 3.75%, 3.93%,
07/18/2026 | | $ | 574,359 | | | | 551,385 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Anchor Packaging, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
3.75%, 3.93%, 07/18/2026 | | $ | 2,605,949 | | | $ | 2,501,711 | | |
BWAY Holding Co., Initial 1st Lien
Term Loan, 3M LIBOR + 3.25%,
4.56%, 04/03/2024(i) | | | 2,764,751 | | | | 2,475,614 | | |
Charter NEX U.S., Inc., Initial
1st Lien Term Loan, 1M LIBOR +
2.75%, 3.75%, 05/16/2024 | | | 314,478 | | | | 300,282 | | |
Charter NEX U.S., Inc., Initial
1st Lien Term Loan, 1M LIBOR +
2.75%, 3.75%, 05/16/2024 | | | 1,436 | | | | 1,371 | | |
IntraPac Canada Corp., 1st Lien
Term Loan, (Canada), 6M LIBOR +
5.50%, 6.57%, 01/11/2026(e)(f) | | | 806,588 | | | | 766,259 | | |
IntraPac International, LLC,
1st Lien Revolver, 6M LIBOR +
5.50%, 6.57%, 01/11/2025(e)(h) | | | 415,407 | | | | 146,431 | | |
IntraPac International, LLC,
1st Lien Term Loan, 6M LIBOR +
5.50%, 6.57%, 01/11/2026(e)(f) | | | 1,582,923 | | | | 1,503,777 | | |
Pregis TopCo LLC, Initial 1st Lien
Term Loan, 1M LIBOR + 4.00%,
4.18%, 07/31/2026 | | | 2,932,321 | | | | 2,821,127 | | |
Reynolds Group Holdings, Inc.,
1st Lien Incremental Term Loan,
1M LIBOR + 2.75%, 2.93%,
02/05/2023 | | | 1,230,194 | | | | 1,172,252 | | |
Ring Container Technologies Group,
LLC, Initial 1st Lien Term Loan,
1M LIBOR + 2.75%, 2.93%,
10/31/2024 | | | 1,470,832 | | | | 1,393,613 | | |
Tank Holding Corp., 1st Lien
Refinancing Term Loan, 1M LIBOR +
3.50%, 3.68%, 03/26/2026 | | | 4,440,599 | | | | 4,135,308 | | |
| | | | | | 17,769,130 | | |
Energy: Oil & Gas 3.0% | |
Birch Permian, LLC, Initial 1st Lien
Term Loan, 3M LIBOR + 8.00%,
9.50%, 04/12/2023(e) | | | 6,981,049 | | | | 5,445,218 | | |
Cheyenne Petroleum Co., LP, 2nd
Lien Term Loan, 3M LIBOR + 8.50%,
10.50%, 01/10/2024(e) | | | 7,244,000 | | | | 5,650,320 | | |
Drilling Info Holdings, Inc., 2nd Lien
Incremental Term Loan, 1M LIBOR +
8.25%, 8.43%, 07/30/2026(e)(f) | | | 8,077,000 | | | | 7,673,150 | | |
Penn Virginia Holding Corp.,
2nd Lien Term Loan, 1M LIBOR +
7.00%, 8.00%, 09/29/2022(e) | | | 500,000 | | | | 375,000 | | |
Semi-Annual Report 2020
12
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Sundance Energy, Inc., 2nd Lien
Term Loan, 3M LIBOR + 8.00%,
8.31%, 04/23/2023(e) | | $ | 1,000,000 | | | $ | 740,000 | | |
Traverse Midstream Partners, LLC,
1st Lien Term Loan, 1M LIBOR +
4.00%, 5.00%, 09/27/2024 | | | 249,365 | | | | 206,662 | | |
| | | | | | 20,090,350 | | |
Environmental Industries 1.3% | |
Core & Main, LP, Initial 1st Lien
Term Loan, 6M LIBOR + 2.75%,
3.75%, 08/01/2024 | | | 4,045,603 | | | | 3,844,577 | | |
GFL Environmental, Inc., 1st Lien
Term Loan B, (Canada),
05/30/2025(i) | | | 2,501,452 | | | | 2,426,934 | | |
Restaurant Technologies, Inc.,
1st Lien 1st Amendment
Incremental Term Loan,
1M LIBOR + 6.25%, 7.25%,
10/01/2025(e) | | | 250,000 | | | | 250,000 | | |
Restaurant Technologies, Inc.,
Initial 1st Lien Term Loan,
1M LIBOR + 3.25%, 3.43%,
10/01/2025 | | | 1,454,921 | | | | 1,333,071 | | |
VLS Recovery Services, LLC,
1st Lien 2nd Amendment Term
Loan, 1M LIBOR + 6.00%, 7.00%,
10/17/2023(e)(f) | | | 729,471 | | | | 729,471 | | |
VLS Recovery Services, LLC,
1st Lien Delayed Draw Term Loan,
1M LIBOR + 6.00%, 7.00%,
10/17/2023(e)(f) | | | 43,692 | | | | 43,692 | | |
VLS Recovery Services, LLC,
1st Lien Delayed Draw Term
Loan B, 1M LIBOR + 6.00%,
7.00%, 10/17/2023(e) | | | 89,557 | | | | 89,557 | | |
VLS Recovery Services, LLC,
1st Lien Delayed Draw Term
Loan C, 10/17/2023(e)(h) | | | 1,070,365 | | | | — | | |
VLS Recovery Services, LLC,
1st Lien Revolver, 10/17/2023(e)(h) | | | 1,000 | | | | — | | |
VLS Recovery Services, LLC,
1st Lien Term Loan, 1M LIBOR +
6.00%, 7.00%, 10/17/2023(e)(f) | | | 259,845 | | | | 259,845 | | |
| | | | | | 8,977,147 | | |
Healthcare & Pharmaceuticals 19.1% | |
Air Medical Group Holdings, Inc.,
1st Lien Term Loan, 6M LIBOR +
3.25%, 4.25%, 04/28/2022 | | | 3,491,049 | | | | 3,350,988 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Athenahealth, Inc., 1st Lien
Revolver, 02/12/2024(e)(h) | | $ | 232,108 | | | $ | (6,963 | ) | |
Athenahealth, Inc., 1st Lien Term
Loan B, 3M LIBOR + 4.50%,
4.82%, 02/11/2026(e)(f) | | | 228,801 | | | | 221,937 | | |
Athenahealth, Inc., 2nd Lien Term
Loan, 3M LIBOR + 8.50%, 8.82%,
02/11/2027(e)(f) | | | 2,187,621 | | | | 2,143,868 | | |
Bausch Health Companies Inc.,
1st Lien Term Loan B, (Canada),
1M LIBOR + 3.00%, 3.19%,
06/02/2025 | | | 2,596,963 | | | | 2,520,041 | | |
Bearcat Buyer, Inc., 1st Lien
Incremental Term Loan,
3M LIBOR + 4.25%, 4.25%,
07/09/2026(e)(f) | | | 828,497 | | | | 820,212 | | |
Bearcat Buyer, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 4.25%, 4.56%,
07/09/2026(e)(h) | | | 1,013,387 | | | | 311,048 | | |
Bearcat Buyer, Inc., 1st Lien
Revolver, 07/09/2024(e)(h) | | | 580,465 | | | | (5,805 | ) | |
Bearcat Buyer, Inc., 1st Lien Term
Loan, 3M LIBOR + 4.25%, 4.56%,
07/09/2026(e)(f) | | | 4,896,949 | | | | 4,847,979 | | |
Bearcat Buyer, Inc., 2nd Lien
Delayed Draw Term Loan,
3M LIBOR + 8.25%, 8.56%,
07/09/2027(e)(h) | | | 580,465 | | | | 178,493 | | |
Bearcat Buyer, Inc., 2nd Lien
Incremental Term Loan,
3M LIBOR + 8.25%, 8.56%,
07/09/2027(e) | | | 617,308 | | | | 611,134 | | |
Bearcat Buyer, Inc., 2nd Lien
Term Loan, 3M LIBOR + 8.25%,
8.25%, 07/09/2027(e)(f) | | | 2,249,302 | | | | 2,226,809 | | |
Cambrex Corp., Initial 1st Lien
Term Loan, 1M LIBOR + 5.00%,
6.00%, 12/04/2026(e) | | | 3,482,500 | | | | 3,412,850 | | |
CEP V I 5 UK, Ltd., Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 02/18/2027(e)(h)(j) | | | 6,346,154 | | | | — | | |
CEP V I 5 UK, Ltd., Facility 1st Lien
Term Loan B, (Great Britain),
6M LIBOR + 7.00%, 8.71%,
02/18/2027(e)(f)(j) | | | 26,653,846 | | | | 26,653,846 | | |
Change Healthcare Holdings, LLC,
1st Lien Term Loan, 1M LIBOR +
2.50%, 3.50%, 03/01/2024 | | | 4,000,000 | | | | 3,833,880 | | |
Semi-Annual Report 2020
13
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Comprehensive EyeCare Partners,
LLC, 1st Lien Delayed Draw Term
Loan, 3M LIBOR + 4.75%, 6.00%,
02/14/2024(e)(h) | | $ | 419,106 | | | $ | 315,165 | | |
Comprehensive EyeCare Partners,
LLC, 1st Lien Revolver, 3M LIBOR +
4.75%, 6.00%, 02/14/2024(e)(h) | | | 1,000 | | | | 855 | | |
Comprehensive EyeCare Partners,
LLC, 1st Lien Term Loan,
3M LIBOR + 4.75%, 6.00%,
02/14/2024(e)(f) | | | 563,907 | | | | 530,073 | | |
Convey Health Solutions, Inc.,
1st Lien Term Loan, 3M LIBOR +
5.25%, 6.25%, 09/04/2026(e)(f) | | | 3,127,797 | | | | 3,065,241 | | |
Convey Health Solutions, Inc.,
1st Lien Incremental Term Loan,
3M LIBOR + 9.00%, 10.35%,
09/04/2026(e)(f) | | | 367,428 | | | | 367,428 | | |
CPI Holdco, LLC, 1st Lien Revolver,
3M LIBOR + 4.00%, 5.18%,
11/04/2024(e)(h) | | | 3,435,381 | | | | 554,678 | | |
CVP Holdco, Inc., 1st Lien Delayed
Draw Term Loan, 3M LIBOR +
6.25%, 7.84%, 10/31/2025(e)(h) | | | 2,725,227 | | | | 643,126 | | |
CVP Holdco, Inc., 1st Lien Revolver,
3M LIBOR + 6.25%, 7.25%,
10/31/2024(e)(h) | | | 326,487 | | | | 302,001 | | |
CVP Holdco, Inc., 1st Lien Term
Loan, 6M LIBOR + 5.75%, 7.34%,
10/31/2025(e)(f) | | | 3,774,630 | | | | 3,548,152 | | |
Da Vinci Purchaser Corp., Initial
1st Lien Term Loan, 6M LIBOR +
4.00%, 5.24%, 01/08/2027 | | | 2,000,000 | | | | 1,942,500 | | |
Emerus Holdings, Inc., 1st Lien
Term Loan, 14.00%, 02/28/2022(e) | | | 18,696 | | | | 18,696 | | |
Evolent Health, LLC, 1st Lien
Delayed Draw Term Loan,
12/30/2024(e)(h) | | | 3,518,192 | | | | (246,273 | ) | |
Evolent Health, LLC, 1st Lien Term
Loan, 3M LIBOR + 8.00%, 9.00%,
12/30/2024(e) | | | 5,277,288 | | | | 4,907,878 | | |
Floss Bidco, Ltd., Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 3M GBP LIBOR +
8.00%, 8.50%, 09/07/2026(e)(h)(i) | | £ | 1,195,339 | | | | 277,217 | | |
Floss Bidco, Ltd., Facility 1st Lien
Term Loan B, (Great Britain),
3M GBP LIBOR + 8.00%, 8.50%,
09/07/2026(e)(f) | | | 814,437 | | | | 978,815 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Gentiva Health Services, Inc.,
1st Lien Term Loan B, 1M LIBOR +
3.25%, 3.44%, 07/02/2025 | | $ | 2,182,611 | | | $ | 2,108,947 | | |
Hanger, Inc., 1st Lien Term Loan,
03/06/2025 | | | 3,000,000 | | | | 2,855,010 | | |
Immucor, Inc., 1st Lien Term
Loan B-3, 3M LIBOR + 5.00%,
6.00%, 06/15/2021 | | | 837,268 | | | | 803,777 | | |
Jaguar Holding Co., 1st Lien Term
Loan, 1M LIBOR + 2.50%, 3.50%,
08/18/2022(i) | | | 2,998,691 | | | | 2,958,389 | | |
JDC Healthcare Management, LLC,
1st Lien Term Loan, 1M LIBOR +
8.00%, 9.00%, 04/10/2023(e)(f)(g)(k) | | | 107,742 | | | | 81,884 | | |
Just Childcare, Ltd., Unitranche
Facility 1st Lien Term Loan,
(Great Britain), 6M GBP LIBOR +
7.00%, 7.75%, 10/16/2026(e)(f)(j) | | £ | 861,006 | | | | 1,066,786 | | |
Just Childcare, Ltd., Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 10/16/2026(e)(h)(j) | | | 426,945 | | | | — | | |
Kedleston Schools, Ltd., GBP
Facility 1st Lien Term Loan B-2,
(Great Britain), 3M GBP LIBOR +
8.00%, 9.00%, 05/30/2024(e)(f)(j) | | | 1,000,000 | | | | 1,238,999 | | |
LivaNova USA, Inc., Initial 1st Lien
Term Loan, 3M LIBOR + 6.50%,
7.50%, 06/30/2025(e) | | $ | 1,033,465 | | | | 1,002,461 | | |
MB2 Dental Solutions, LLC,
1st Lien Revolver, 6M LIBOR +
4.75%, 5.82%, 09/29/2023(e)(h) | | | 1,333 | | | | 1,239 | | |
MB2 Dental Solutions, LLC, Initial
1st Lien Term Loan, 6M LIBOR +
4.75%, 5.81%, 09/29/2023(e)(f) | | | 523,263 | | | | 486,634 | | |
MB2 Dental Solutions, LLC, Initial
1st Lien Term Loan, 6M LIBOR +
4.75%, 5.81%, 09/29/2023(e) | | | 57,387 | | | | 53,370 | | |
National Mentor Holdings, Inc.,
Initial 1st Lien Term Loan,
1M LIBOR + 4.25%, 4.43%,
03/09/2026 | | | 2,193,234 | | | | 2,110,067 | | |
National Mentor Holdings, Inc.,
Initial 1st Lien Term Loan C,
1M LIBOR + 4.25%, 4.43%,
03/09/2026 | | | 99,860 | | | | 96,074 | | |
Nelipak European Holdings
Cooperatief U.A., EUR 1st Lien
Revolver, (Netherlands),
6M EURIBOR + 4.50%, 4.50%,
07/02/2024(e)(h) | | € | 581,751 | | | | 245,362 | | |
Semi-Annual Report 2020
14
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Nelipak European Holdings
Cooperatief U.A., EUR 1st Lien
Term Loan, (Netherlands),
6M EURIBOR + 4.50%, 4.50%,
07/02/2026(e)(f) | | € | 818,283 | | | $ | 891,722 | | |
Nelipak Holding Co., 1st Lien
Incremental Term Loan,
6M LIBOR + 4.25%, 5.25%,
07/02/2026(e)(f) | | $ | 302,460 | | | | 290,362 | | |
Nelipak Holding Co., 1st Lien
Revolver, 3M LIBOR + 4.25%,
5.25%, 07/02/2024(e) | | | 604,780 | | | | 580,589 | | |
Nelipak Holding Co., 1st Lien Term
Loan, 6M LIBOR + 4.25%, 5.25%,
07/02/2026(e)(f) | | | 2,711,840 | | | | 2,603,367 | | |
Nuehealth Performance, LLC,
1st Lien Incremental Delayed Draw
Term Loan, 1M LIBOR + 7.25%,
8.25%, 09/27/2023(e)(f) | | | 289,821 | | | | 281,127 | | |
Nuehealth Performance, LLC,
1st Lien Revolver, 09/27/2023(e)(h) | | | 1,000 | | | | (30 | ) | |
Nuehealth Performance, LLC,
1st Lien Term Loan, 1M LIBOR +
7.25%, 8.25%, 09/27/2023(e)(f) | | | 2,177,348 | | | | 2,112,028 | | |
Olympia Acquisition, Inc., 1st Lien
Term Loan, 1M LIBOR + 5.50%,
6.50%, 09/24/2026(e)(f) | | | 2,527,321 | | | | 2,400,955 | | |
Olympia Acquisition, Inc., 1st Lien
Delayed Draw Term Loan,
09/24/2026(e)(h) | | | 2,425,161 | | | | (121,258 | ) | |
Olympia Acquisition, Inc., 1st Lien
Revolver, 3M LIBOR + 5.50%,
6.50%, 09/24/2024(e)(h) | | | 640,539 | | | | 565,809 | | |
OMH-HealthEdge Holdings, LLC,
1st Lien Revolver, 10/24/2024(e)(h) | | | 1,000 | | | | (10 | ) | |
OMH-HealthEdge Holdings, LLC,
1st Lien Term Loan, 6M LIBOR +
5.50%, 6.57%, 10/24/2025(e)(f) | | | 1,427,195 | | | | 1,412,923 | | |
Option Care Health, Inc., 1st Lien
Term Loan B, 1M LIBOR + 4.50%,
4.68%, 08/06/2026(i) | | | 723,480 | | | | 701,775 | | |
Ortho-Clinical Diagnostics, Inc.,
1st Lien Term Loan B, 1M LIBOR +
3.25%, 3.43%, 06/30/2025 | | | 3,592,401 | | | | 3,352,177 | | |
PAKNK Netherlands Treasury B.V.,
EUR 1st Lien Incremental Term
Loan, (Netherlands), 6M EURIBOR +
4.50%, 4.50%, 07/02/2026(e)(f) | | € | 5,334,513 | | | | 5,813,269 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
PetVet Care Centers, LLC, 1st Lien
Delayed Draw Term Loan,
1M LIBOR + 4.25%, 5.25%,
02/14/2025(e)(f) | | $ | 3,299,566 | | | $ | 3,233,575 | | |
Premise Health Holding Corp.,
1st Lien Delayed Draw Term Loan,
07/10/2025(e)(h) | | | 1,103 | | | | (44 | ) | |
Premise Health Holding Corp.,
1st Lien Revolver, 3M LIBOR +
3.25%, 3.64%, 07/10/2023(e)(h) | | | 1,000 | | | | 543 | | |
Premise Health Holding Corp.,
1st Lien Term Loan, 3M LIBOR +
3.50%, 3.81%, 07/10/2025(e)(f) | | | 13,654 | | | | 13,108 | | |
Premise Health Holding Corp.,
2nd Lien Term Loan, 3M LIBOR +
7.50%, 7.81%, 07/10/2026(e)(f) | | | 2,000,000 | | | | 1,940,000 | | |
ProVation Medical, Inc., 1st Lien
Last Out Term Loan, 1M LIBOR +
7.00%, 7.19%, 03/08/2024(e)(f) | | | 977,500 | | | | 967,725 | | |
RegionalCare Hospital Partners
Holdings, Inc., 1st Lien Term
Loan B, 1M LIBOR + 3.75%,
3.93%, 11/16/2025 | | | 2,865,657 | | | | 2,679,017 | | |
RTI Surgical, Inc., 2nd Lien 2nd
Amendment Incremental Delayed
Draw Term Loan, 1M LIBOR +
13.50%, 15.00%,
04/27/2021(e)(g)(h) | | | 915,319 | | | | 867,581 | | |
RTI Surgical, Inc., 2nd Lien Term
Loan, 1M LIBOR + 8.75%, 9.75%,
12/05/2023(e)(f)(g) | | | 3,216,067 | | | | 3,376,870 | | |
SCSG EA Acquisition Co., Inc.,
1st Lien Revolver, 1M LIBOR +
4.00%, 5.00%, 09/01/2022(e)(h) | | | 1,000 | | | | 162 | | |
SCSG EA Acquisition Co., Inc.,
Initial 1st Lien Term Loan,
3M LIBOR + 3.50%, 4.93%,
09/01/2023(e)(f) | | | 339,403 | | | | 319,038 | | |
SiroMed Physician Services, Inc.,
1st Lien Revolver, 3M LIBOR +
4.75%, 6.19%, 03/26/2024(e) | | | 1,000 | | | | 900 | | |
SiroMed Physician Services, Inc.,
Initial 1st Lien Term Loan,
3M LIBOR + 4.75%, 5.75%,
03/26/2024(e)(f) | | | 945,611 | | | | 851,050 | | |
Sotera Health Holdings, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
4.50%, 5.50%, 12/11/2026 | | | 1,521,434 | | | | 1,483,078 | | |
Semi-Annual Report 2020
15
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Team Health Holdings, Inc., Initial
1st Lien Term Loan, 1M LIBOR +
2.75%, 3.75%, 02/06/2024 | | $ | 1,496,134 | | | $ | 1,145,291 | | |
Teligent, Inc., 1st Lien Revolver,
3M LIBOR + 5.50%, 7.00%,
06/13/2024(e)(h)(k) | | | 1,100 | | | | 758 | | |
Teligent, Inc., 2nd Lien Delayed
Draw Term Loan A, 3M LIBOR +
13.00%, 14.50%, 06/13/2024(e)(g)(k) | | | 719,982 | | | | 561,586 | | |
Teligent, Inc., 2nd Lien Term Loan,
3M LIBOR + 13.00%, 14.50%,
06/13/2024(e)(g)(k) | | | 1,275,369 | | | | 994,788 | | |
TerSera Therapeutics, LLC, 1st Lien
Term Loan, 3M LIBOR + 5.60%,
7.05%, 03/30/2023(e)(f) | | | 48,375 | | | | 47,891 | | |
United Digestive MSO Parent, LLC,
1st Lien Delayed Draw Term Loan,
3M LIBOR + 4.00%, 5.00%,
12/16/2024(e)(h) | | | 1,022,727 | | | | 282,954 | | |
United Digestive MSO Parent, LLC,
1st Lien Revolver, 3M LIBOR +
4.00%, 5.00%, 12/14/2023(e) | | | 511,364 | | | | 511,364 | | |
United Digestive MSO Parent, LLC,
1st Lien Term Loan, 3M LIBOR +
4.00%, 5.00%, 12/16/2024(e)(f) | | | 1,443,920 | | | | 1,443,920 | | |
WSHP FC Acquisition, LLC, 1st Lien
1st Amendment Delayed Draw Term
Loan, 3M LIBOR + 6.25%, 7.25%,
03/30/2024(e) | | | 1,102,778 | | | | 1,102,778 | | |
WSHP FC Acquisition, LLC, 1st Lien
1st Amendment Term Loan,
3M LIBOR + 6.25%, 7.25%,
03/30/2024(e)(f) | | | 875,556 | | | | 875,556 | | |
WSHP FC Acquisition, LLC, 1st Lien
2nd Amendment Delayed Draw
Term Loan, 03/30/2024(e)(h) | | | 350,877 | | | | — | | |
WSHP FC Acquisition, LLC, 1st Lien
2nd Amendment Term Loan,
3M LIBOR + 6.25%, 7.25%,
03/30/2024(e)(f) | | | 557,193 | | | | 557,193 | | |
WSHP FC Acquisition, LLC, 1st Lien
3rd Amendment Incremental Term
Loan, 3M LIBOR + 6.25%, 7.25%,
03/30/2024(e)(f) | | | 596,494 | | | | 596,494 | | |
WSHP FC Acquisition, LLC, 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 6.25%, 7.25%,
03/30/2024(e)(f) | | | 169,244 | | | | 169,244 | | |
WSHP FC Acquisition, LLC, 1st Lien
Revolver, 3M LIBOR + 6.25%,
7.25%, 03/30/2024(e)(h) | | | 88,719 | | | | 28,390 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
WSHP FC Acquisition, LLC, 1st Lien
Term Loan, 3M LIBOR + 6.25%,
7.25%, 03/30/2024(e)(f) | | $ | 808,156 | | | $ | 808,156 | | |
| | | | | | 129,178,639 | | |
High Tech Industries 16.1% | |
Anaqua Parent Holdings, Inc.,
1st Lien EUR Facility Term Note B,
6M EURIBOR + 5.50%, 5.50%,
04/10/2026(e) | | € | 675,422 | | | | 743,627 | | |
Anaqua Parent Holdings, Inc.,
1st Lien Revolver, 6M LIBOR +
5.25%, 6.25%, 10/08/2025(e)(h) | | $ | 230,769 | | | | 70,000 | | |
Anaqua Parent Holdings, Inc.,
Facility 1st Lien Term Loan B,
6M LIBOR + 5.25%, 6.48%,
04/08/2026(e)(f) | | | 1,827,692 | | | | 1,772,862 | | |
Applied Systems, Inc., 2nd Lien
Term Loan, 3M LIBOR + 7.00%,
8.00%, 09/19/2025 | | | 1,000,000 | | | | 995,000 | | |
Applied Systems, Inc., Initial
1st Lien Term Loan, 3M LIBOR +
3.25%, 4.25%, 09/19/2024 | | | 1,940,954 | | | | 1,883,386 | | |
Atlanta Bidco, Ltd., EUR Facility
1st Lien Term Loan A, (Great
Britain), 6M EURIBOR + 7.00%,
7.75%, 08/23/2024(e)(f)(j) | | € | 1,000,000 | | | | 1,100,981 | | |
Cority Software Inc., 1st Lien
Revolver, (Canada), 07/02/2025(e)(h) | | $ | 230,579 | | | | (4,612 | ) | |
Cority Software Inc., 1st Lien Term
Loan, (Canada), 3M LIBOR +
5.75%, 7.21%, 07/02/2026(e)(f) | | | 1,759,074 | | | | 1,723,892 | | |
Creation Holdings, Inc., 1st Lien
Term Loan, 3M LIBOR + 5.75%,
6.75%, 08/15/2025(e)(f) | | | 2,378,432 | | | | 2,283,295 | | |
Creation Holdings, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 5.75%, 6.75%,
08/15/2025(e) | | | 448,203 | | | | 430,275 | | |
Creation Holdings, Inc., 1st Lien
Revolver, 1M LIBOR + 5.75%,
6.75%, 08/15/2024(e)(h) | | | 544,813 | | | | 341,416 | | |
Cvent, Inc., 1st Lien Term Loan,
1M LIBOR + 3.75%, 3.93%,
11/29/2024 | | | 2,754,131 | | | | 2,353,625 | | |
Datix Bidco, Ltd., 1st Lien Term
Loan B-3, (Great Britain),
6M LIBOR + 4.50%, 5.36%,
04/28/2025(e)(f) | | | 1,384,627 | | | | 1,343,088 | | |
Semi-Annual Report 2020
16
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Datix Bidco, Ltd., Additional Facility
1st Lien Term Loan, (Great Britain),
6M LIBOR + 4.50%, 5.36%,
04/28/2025(e)(f) | | $ | 466,003 | | | $ | 452,023 | | |
Datix Bidco, Ltd., Facility 1st Lien
Term Loan B-1, (Great Britain),
6M LIBOR + 4.50%, 5.36%,
04/28/2025(e)(f) | | | 1,000,000 | | | | 970,000 | | |
Doxim, Inc., 1st Lien Last Out
Delayed Draw Term Loan,
3M LIBOR + 6.00%, 7.00%,
02/28/2024(e) | | | 327,399 | | | | 320,851 | | |
Doxim, Inc., 1st Lien Last Out
Term Loan, 3M LIBOR + 6.00%,
7.00%, 02/28/2024(e)(f) | | | 714,286 | | | | 700,000 | | |
DRB Holdings, LLC, 1st Lien
Revolver, 10/06/2023(e)(h) | | | 1,000 | | | | — | | |
DRB Holdings, LLC, Initial 1st Lien
Term Loan, 3M LIBOR + 5.75%,
6.75%, 10/06/2023(e)(f) | | | 486,525 | | | | 486,525 | | |
Elemica Parent, Inc., 1st Lien
Delayed Draw Term Loan,
09/18/2025(e)(h) | | | 561,538 | | | | (39,308 | ) | |
Elemica Parent, Inc., 1st Lien
Revolver, 3M LIBOR + 5.50%,
5.78%, 09/18/2025(e)(h) | | | 478,712 | | | | 317,147 | | |
Elemica Parent, Inc., 1st Lien Term
Loan, 3M LIBOR + 5.50%, 5.81%,
09/18/2025(e) | | | 2,879,520 | | | | 2,677,953 | | |
eResearch Technology, Inc.,
2nd Lien Delayed Draw Term Loan,
02/04/2028(e)(h) | | | 1,343,232 | | | | (40,297 | ) | |
eResearch Technology, Inc., Initial
2nd Lien Term Loan, 1M LIBOR +
8.00%, 8.50%, 02/04/2028(e)(f) | | | 5,305,768 | | | | 5,146,595 | | |
Frontline Technologies Intermediate
Holdings, LLC (fka Project Dublin
Intermediate Target, LLC), 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 5.75%, 6.75%,
09/18/2023(e) | | | 56,721 | | | | 56,154 | | |
Frontline Technologies Intermediate
Holdings, LLC (fka Project Dublin
Intermediate Target, LLC), 1st Lien
Term Loan, 3M LIBOR + 5.75%,
6.75%, 09/18/2023(e)(f) | | | 461,098 | | | | 456,487 | | |
GlobalFoundries, Inc., Initial 1st
Lien Term Loan, 3M LIBOR +
4.75%, 5.06%, 06/05/2026(e) | | | 1,989,950 | | | | 1,910,352 | | |
GraphPAD Software, LLC, 1st Lien
Revolver, 12/21/2023(e)(h) | | | 1,000 | | | | — | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
GraphPAD Software, LLC, 1st Lien
Term Loan, 12M LIBOR + 6.00%,
7.00%, 12/21/2023(e)(f) | | $ | 1,590,867 | | | $ | 1,590,867 | | |
Greeneden U.S. Holdings I, LLC,
1st Lien Term Loan B, 1M LIBOR +
3.25%, 3.43%, 12/01/2023 | | | 780,339 | | | | 749,547 | | |
Huskies Parent, Inc., 1st Lien
Closing Date Term Loan,
1M LIBOR + 4.00%, 4.18%,
07/31/2026(e) | | | 2,728,888 | | | | 2,660,666 | | |
Idera, Inc., Initial 1st Lien Term
Loan, 6M LIBOR + 4.00%, 5.08%,
06/28/2024 | | | 2,578,483 | | | | 2,475,344 | | |
Infoblox, Inc., 1st Lien Term Loan,
1M LIBOR + 4.50%, 4.68%,
11/07/2023(i) | | | 2,354,269 | | | | 2,309,138 | | |
Informatica, LLC, 1st Lien Term
Loan, 1M LIBOR + 3.25%, 3.43%,
02/25/2027 | | | 969,480 | | | | 925,854 | | |
Informatica, LLC, Initial 2nd Lien
Term Loan, 7.13%, 02/25/2025 | | | 1,411,898 | | | | 1,410,133 | | |
Invoice Cloud, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 3.25%, 7.50%,
02/11/2024(e)(g)(h) | | | 1,197,849 | | | | 1,070,189 | | |
Invoice Cloud, Inc., 1st Lien
Revolver, 02/11/2024(e)(h) | | | 255,319 | | | | — | | |
Invoice Cloud, Inc., 1st Lien Term
Loan, 3M LIBOR + 3.25%, 7.50%,
02/11/2024(e)(g) | | | 2,660,281 | | | | 2,660,281 | | |
IQS, Inc., 1st Lien Incremental
Term Loan, 2019, 3M LIBOR +
5.75%, 7.21%, 07/02/2026(e)(f) | | | 547,267 | | | | 536,322 | | |
IQS, Inc., 1st Lien Incremental
Term Loan, 2020, 3M LIBOR +
5.75%, 7.21%, 07/02/2026(e)(f) | | | 1,107,565 | | | | 1,085,414 | | |
Ishtar Bidco Norway AS, Facility
1st Lien Term Loan B, (Great
Britain), 6M GBP LIBOR + 7.25%,
8.00%, 11/26/2025(e)(f)(j) | | £ | 1,000,000 | | | | 1,238,999 | | |
MA FinanceCo., LLC, Tranche
1st Lien Term Loan B-4,
3M LIBOR + 4.25%, 5.25%,
06/05/2025 | | $ | 2,015,000 | | | | 1,961,260 | | |
MH Sub I, LLC, 1st Lien Term
Loan, 3M LIBOR + 3.75%, 4.75%,
09/13/2024 | | | 410,000 | | | | 394,625 | | |
MH Sub I, LLC, Initial 1st Lien
Term Loan, 3M LIBOR + 3.50%,
4.32%, 09/13/2024 | | | 4,544,648 | | | | 4,365,452 | | |
Semi-Annual Report 2020
17
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Micromeritics Instrument Corp.,
1st Lien Revolver, 6M LIBOR +
5.00%, 6.07%, 12/18/2025(e)(h) | | $ | 331,039 | | | $ | 300,141 | | |
Micromeritics Instrument Corp.,
1st Lien Term Loan, 3M LIBOR +
5.00%, 6.07%, 12/18/2025(e)(f) | | | 2,625,869 | | | | 2,468,316 | | |
Mitchell International, Inc., Initial
1st Lien Term Loan, 1M LIBOR +
3.25%, 3.43%, 11/29/2024 | | | 2,570,914 | | | | 2,392,570 | | |
MRI Software, LLC, 1st Lien
Delayed Draw Term Loan,
02/10/2026(e)(h) | | | 473,329 | | | | (14,200 | ) | |
MRI Software, LLC, 1st Lien
Revolver, 02/10/2026(e)(h) | | | 507,673 | | | | (15,231 | ) | |
MRI Software, LLC, Tranche
1st Lien Term Loan B, 3M LIBOR +
5.50%, 6.57%, 02/10/2026(e)(f) | | | 5,523,162 | | | | 5,357,467 | | |
MRI Software, LLC, Tranche
1st Lien Term Loan B, 3M LIBOR +
5.50%, 6.57%, 02/10/2026(e) | | | 788,437 | | | | 764,784 | | |
Oakley Ekomid, Ltd., CAR Facility
1st Lien Term Loan, (Great Britain),
06/23/2025(e)(h)(j) | | € | 750,000 | | | | — | | |
Oakley Ekomid, Ltd., Unitranche
Facility 1st Lien Term Loan,
(Great Britain), 6M EURIBOR +
6.25%, 6.50%, 06/23/2025(e)(j) | | | 750,000 | | | | 842,588 | | |
PDI TA Holdings, Inc., 1st Lien
Revolver, 3M LIBOR + 4.50%,
5.51%, 10/24/2024(e)(h) | | $ | 205,023 | | | | 147,616 | | |
PDI TA Holdings, Inc., 2nd Lien
Term Loan, 12M LIBOR + 8.50%,
9.52%, 10/24/2025(e) | | | 1,106,612 | | | | 1,062,348 | | |
PDI TA Holdings, Inc., Initial
1st Lien Term Loan, 12M LIBOR +
4.50%, 5.51%, 10/24/2024(e)(f) | | | 2,401,685 | | | | 2,329,634 | | |
Perforce Software, Inc., 1st Lien
Term Loan, 1M LIBOR + 3.75%,
3.93%, 07/01/2026 | | | 1,459,800 | | | | 1,400,678 | | |
Project Boost Purchaser, LLC,
1st Lien Term Loan, 1M LIBOR +
3.50%, 3.68%, 06/01/2026 | | | 2,518,128 | | | | 2,382,778 | | |
QF Holdings, Inc., 1st Lien Delayed
Draw Term Loan, 09/19/2024(e)(h) | | | 262,533 | | | | (5,251 | ) | |
QF Holdings, Inc., 1st Lien Revolver,
1M LIBOR + 7.00%, 8.00%,
09/19/2024(e)(h) | | | 1,000 | | | | 113 | | |
QF Holdings, Inc., 1st Lien Term
Loan, 6M LIBOR + 7.00%, 8.00%,
09/19/2024(e) | | | 1,312,663 | | | | 1,286,409 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Raptor Technologies, LLC, 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 6.00%, 7.00%,
12/17/2024(e)(h) | | $ | 1,027,519 | | | $ | 573,028 | | |
Raptor Technologies, LLC, 1st Lien
Revolver, 1M LIBOR + 6.00%,
7.00%, 12/17/2023(e) | | | 1,000 | | | | 920 | | |
Raptor Technologies, LLC, 1st Lien
Term Loan, 3M LIBOR + 6.00%,
7.00%, 12/17/2024(e)(f) | | | 1,925,630 | | | | 1,771,579 | | |
Sophia, LP, 1st Lien Term Loan B,
3M LIBOR + 3.25%, 4.25%,
09/30/2022 | | | 3,216,028 | | | | 3,135,627 | | |
SpareFoot, LLC, 1st Lien Bader
Incremental Term Loan,
6M LIBOR + 5.00%, 6.07%,
04/13/2024(e)(f) | | | 97,150 | | | | 97,150 | | |
SpareFoot, LLC, 1st Lien
Incremental Term Loan,
3M LIBOR + 5.00%, 6.00%,
04/13/2024(e)(j) | | | 252,795 | | | | 250,267 | | |
SpareFoot, LLC, 1st Lien
Incremental Term Loan,
6M LIBOR + 5.00%, 6.07%,
04/13/2024(e) | | | 74,113 | | | | 74,113 | | |
SpareFoot, LLC, 1st Lien
Incremental Term Loan,
6M LIBOR + 5.00%, 6.07%,
04/13/2024(e)(f) | | | 133,205 | | | | 133,205 | | |
SpareFoot, LLC, 1st Lien Revolver,
6M LIBOR + 5.00%, 6.07%,
04/13/2023(e)(h) | | | 1,000 | | | | 829 | | |
SpareFoot, LLC, 1st Lien SBOA
Incremental Term Loan,
6M LIBOR + 5.00%, 6.07%,
04/13/2024(e)(f) | | | 100,620 | | | | 100,620 | | |
SpareFoot, LLC, 1st Lien
StorSmart Incremental Term Loan,
6M LIBOR + 5.00%, 6.07%,
04/13/2024(e)(f) | | | 193,811 | | | | 193,811 | | |
SpareFoot, LLC, 2nd Lien Bader
Incremental Term Loan,
6M LIBOR + 9.25%, 10.45%,
04/13/2025(e)(f) | | | 59,527 | | | | 59,527 | | |
SpareFoot, LLC, 2nd Lien
Incremental Term Loan,
3M LIBOR + 9.25%, 10.25%,
04/13/2025(e)(j) | | | 53,383 | | | | 52,849 | | |
SpareFoot, LLC, 2nd Lien
Incremental Term Loan,
6M LIBOR + 9.25%, 10.32%,
04/13/2025(e)(f) | | | 195,750 | | | | 195,750 | | |
Semi-Annual Report 2020
18
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
SpareFoot, LLC, 2nd Lien
StorSmart Incremental Term Loan,
6M LIBOR + 9.25%, 10.45%,
04/13/2025(e)(f) | | $ | 119,054 | | | $ | 119,054 | | |
SpareFoot, LLC, 2nd Lien Term
Loan, 6M LIBOR + 9.25%,
10.32%, 04/13/2025(e)(f) | | | 285,429 | | | | 285,429 | | |
SpareFoot, LLC, Initial 1st Lien
Term Loan, 6M LIBOR + 5.00%,
6.07%, 04/13/2024(e)(f) | | | 699,300 | | | | 699,300 | | |
Surf Holdings, LLC, 2nd Lien Term
Loan, 3M LIBOR + 8.00%, 9.00%,
03/06/2028(e)(f) | | | 6,649,000 | | | | 6,449,530 | | |
TGG TS Acquisition Co., 1st Lien
Term Loan B, 1M LIBOR + 6.50%,
6.68%, 12/14/2025 | | | 197,156 | | | | 184,834 | | |
TIBCO Software, Inc., 1st Lien
Term Loan B-3, 1M LIBOR +
3.75%, 3.93%, 06/30/2026 | | | 4,325,668 | | | | 4,076,943 | | |
TimeClock Plus, LLC, 1st Lien
Delayed Draw Term Loan,
08/28/2026(e)(h) | | | 495,170 | | | | — | | |
TimeClock Plus, LLC, 1st Lien
Revolver, 1M LIBOR + 5.25%,
6.25%, 08/29/2025(e)(h) | | | 458,311 | | | | 114,578 | | |
TimeClock Plus, LLC, 1st Lien
Term Loan, 3M LIBOR + 5.25%,
6.25%, 08/28/2026(e)(f) | | | 2,358,988 | | | | 2,358,988 | | |
Ultimate Software Group, Inc. (The),
1st Lien Revolver, 1M LIBOR +
3.50%, 3.68%, 05/03/2024(e)(h) | | | 1,000 | | | | 891 | | |
Ultimate Software Group, Inc. (The),
2nd Lien Term Loan, 1M LIBOR +
8.00%, 8.18%, 05/03/2027(e)(f) | | | 3,000,000 | | | | 3,000,000 | | |
Visolit Finco A/S, 1st Lien
Committed Accordion Term Loan,
(Norway), 07/02/2026(e)(h) | | NOK | 11,180,680 | | | | (34,811 | ) | |
Visolit Finco A/S, NOK Facility
1st Lien Term Loan B-1, (Norway),
6M NIBOR + 6.00%, 7.00%,
07/02/2026(e) | | | 33,881,316 | | | | 3,410,812 | | |
Visual Edge Technology, Inc.,
1st Lien Delayed Draw Term Loan,
3M LIBOR + 7.00%, 8.50%,
08/31/2022(e)(f)(g) | | $ | 1,967,713 | | | | 1,908,682 | | |
Visual Edge Technology, Inc.,
1st Lien Term Loan, 3M LIBOR +
7.00%, 8.50%, 08/31/2022(e)(f)(g) | | | 160,380 | | | | 155,569 | | |
WebPT, Inc., 1st Lien Delayed
Draw Term Loan, 08/28/2024(e)(h) | | | 255,205 | | | | (7,656 | ) | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
WebPT, Inc., 1st Lien Revolver,
3M LIBOR + 6.75%, 7.75%,
08/28/2024(e) | | $ | 216,015 | | | $ | 209,535 | | |
WebPT, Inc., Initial 1st Lien Term
Loan, 3M LIBOR + 6.75%, 7.75%,
08/28/2024(e) | | | 2,041,641 | | | | 1,980,392 | | |
Wildcat BuyerCo, Inc., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 5.50%, 6.50%,
02/27/2026(e)(h) | | | 1,079,810 | | | | 348,841 | | |
Wildcat BuyerCo, Inc., 1st Lien
Revolver, 3M LIBOR + 5.50%,
6.89%, 02/27/2026(e)(h) | | | 255,015 | | | | 71,404 | | |
Wildcat BuyerCo, Inc., Initial
1st Lien Term Loan, 3M LIBOR +
5.50%, 6.50%, 02/27/2026(e)(f) | | | 2,058,174 | | | | 1,975,847 | | |
| | | | | | 108,533,605 | | |
Hotel, Gaming & Leisure 3.4% | |
Aimbridge Acquisition Co., Inc.,
Initial 2nd Lien Term Loan,
3M LIBOR + 7.50%, 8.93%,
02/01/2027(e)(f) | | | 4,788,079 | | | | 4,261,391 | | |
Caesars Resort Collection, LLC,
1st Lien Term Loan, 06/19/2025(i) | | | 2,132,299 | | | | 2,000,374 | | |
Canopy Bidco, Ltd., Facility
1st Lien Term Loan B,
(Great Britain), 3M GBP LIBOR +
7.25%, 7.75%, 12/18/2024(e)(f)(g) | | £ | 504,363 | | | | 587,411 | | |
Canopy Bidco, Ltd., Senior Capex
Facility 1st Lien Term Loan,
(Great Britain), 3M GBP LIBOR +
7.25%, 7.75%, 12/18/2024(e)(f)(h) | | | 501,126 | | | | 124,028 | | |
CEOC, LLC, 1st Lien Term Loan B,
10/07/2024(i)(l) | | $ | 1,723,871 | | | | 1,714,717 | | |
Concert Golf Partners Holdco, LLC,
1st Lien Delayed Draw Term Loan,
3M LIBOR + 4.50%, 5.50%,
08/20/2025(e)(h) | | | 573,424 | | | | 125,884 | | |
Concert Golf Partners Holdco, LLC,
1st Lien Revolver, 3M LIBOR +
4.50%, 5.50%, 08/20/2025(e)(h) | | | 764,512 | | | | 183,483 | | |
Concert Golf Partners Holdco, LLC,
1st Lien Term Loan, 3M LIBOR +
4.50%, 5.50%, 08/20/2025(e)(f) | | | 3,416,875 | | | | 3,314,368 | | |
Equinox Holdings, Inc., 1st Lien
Term Loan B-1, 6M LIBOR +
3.00%, 4.07%, 03/08/2024 | | | 2,612,920 | | | | 2,004,005 | | |
Semi-Annual Report 2020
19
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Equinox Holdings, Inc., 1st Lien
Term Loan B-2, 3M LIBOR +
9.00%, 10.00%, 03/08/2024(e) | | $ | 1,500,000 | | | $ | 1,477,500 | | |
Equinox Holdings, Inc., Initial
2nd Lien Term Loan, 6M LIBOR +
7.00%, 8.07%, 09/06/2024(i) | | | 5,736,111 | | | | 3,830,633 | | |
EuroParcs (Top) Holding B.V.,
Acquisition Facility 1st Lien Term
Loan B, (Netherlands),
07/03/2026(e)(h)(i)(j) | | € | 2,013,195 | | | | — | | |
EuroParcs (Top) Holding B.V.,
Acquisition Facility 1st Lien Term
Loan, (Netherlands),
3M EURIBOR + 6.50%, 6.50%,
07/03/2026(e)(j) | | | 312,500 | | | | 351,078 | | |
EuroParcs (Top) Holding B.V.,
Facility 1st Lien Term Loan B,
(Netherlands), 3M EURIBOR +
6.50%, 6.50%, 07/03/2026(e)(j) | | | 2,187,500 | | | | 2,457,548 | | |
EuroParcs (Top) Holding B.V.,
Incremental Facility 1st Lien
Term Loan, (Netherlands),
3M EURIBOR + 7.00%, 7.00%,
07/03/2026(e)(h)(j) | | | 816,993 | | | | 283,617 | | |
| | | | | | 22,716,037 | | |
Media: Advertising, Printing & Publishing 0.4% | |
Merrill Communications, LLC,
Initial 1st Lien Term Loan,
6M LIBOR + 5.00%, 6.20%,
10/05/2026(e) | | $ | 1,488,759 | | | | 1,451,540 | | |
Terrier Media Buyer, Inc., 1st Lien
Term Loan B, 1M LIBOR + 4.25%,
4.43%, 12/17/2026 | | | 1,666,881 | | | | 1,586,321 | | |
| | | | | | 3,037,861 | | |
Media: Broadcasting & Subscription 1.1% | |
Commify, Ltd., Facility 1st Lien
Term Loan B, (Great Britain),
6M EURIBOR + 7.50%, 7.75%,
09/14/2026(e)(f)(j) | | € | 2,739,130 | | | | 3,077,277 | | |
Commify, Ltd., 1st Lien Acquisition
Term Loan, (Great Britain),
09/14/2026(e)(h)(j) | | | 760,870 | | | | — | | |
Diamond Sports Group, LLC,
1st Lien Term Loan, 1M LIBOR +
3.25%, 3.43%, 08/24/2026 | | $ | 786,611 | | | | 638,138 | | |
Nexstar Broadcasting, Inc.,
1st Lien Term Loan B-4,
1M LIBOR + 2.75%, 2.92%,
09/18/2026 | | | 1,369,833 | | | | 1,300,122 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Production Resource Group, LLC,
1st Lien Term Loan, PRIME +
6.00%, 9.25%, 08/21/2024(e)(f)(k) | | $ | 2,000,000 | | | $ | 1,000,000 | | |
Sinclair Television Group, Inc.,
Tranche 1st Lien Term Loan
B-2, 1M LIBOR + 2.50%, 2.69%,
09/30/2026 | | | 1,218,290 | | | | 1,157,375 | | |
Virgin Media Bristol, LLC, Facility
1st Lien Term Loan, 1M LIBOR +
2.50%, 2.69%, 01/31/2028 | | | 463,604 | | | | 441,699 | | |
| | | | | | 7,614,611 | | |
Media: Diversified & Production 0.7% | |
Cast & Crew Payroll, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
3.75%, 3.93%, 02/09/2026(i) | | | 2,990,693 | | | | 2,719,676 | | |
Formula One Management, Ltd.,
Facility 1st Lien Term Loan B-3,
(Great Britain), 02/01/2024 | | | 2,000,000 | | | | 1,898,760 | | |
| | | | | | 4,618,436 | | |
Metals & Mining 0.1% | |
Sigma Electric Manufacturing
Corp., Tranche 1st Lien
3rd Amendment Term Loan A-2,
6M LIBOR + 4.75%, 5.83%,
10/31/2023(e)(f) | | | 132,297 | | | | 127,006 | | |
Sigma Electric Manufacturing
Corp., 1st Lien Revolver,
3M LIBOR + 4.75%, 5.75%,
10/31/2022(e)(h) | | | 1,333 | | | | 1,058 | | |
Sigma Electric Manufacturing
Corp., 1st Lien Term Loan A-2,
6M LIBOR + 4.75%, 5.83%,
10/31/2023(e)(f) | | | 356,973 | | | | 342,694 | | |
Sunk Rock Foundry Partners, LP,
1st Lien Term Loan A-1,
6M LIBOR + 4.75%, 5.83%,
10/31/2023(e)(f) | | | 226,608 | | | | 217,544 | | |
| | | | | | 688,302 | | |
Retail 0.8% | |
FWR Holding Corp., Initial 1st Lien
Delayed Draw Term Loan 4,
3M LIBOR + 5.50%, 6.50%,
08/21/2023(e) | | | 42,432 | | | | 39,037 | | |
FWR Holding Corp., 1st Lien
2nd Amendment Delayed Draw
Term Loan, 08/21/2023(e)(h) | | | 4,280 | | | | (343 | ) | |
Semi-Annual Report 2020
20
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
FWR Holding Corp., 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 5.50%, 6.50%,
08/21/2023(e) | | $ | 31,904 | | | $ | 29,352 | | |
FWR Holding Corp., Initial 1st Lien
Delayed Draw Term Loan 1,
3M LIBOR + 5.50%, 6.50%,
08/21/2023(e)(f) | | | 380 | | | | 350 | | |
FWR Holding Corp., Initial 1st Lien
Delayed Draw Term Loan 2,
3M LIBOR + 5.50%, 6.50%,
08/21/2023(e) | | | 605 | | | | 557 | | |
FWR Holding Corp., Initial 1st Lien
Delayed Draw Term Loan 3,
3M LIBOR + 5.50%, 6.50%,
08/21/2023(e) | | | 31,744 | | | | 29,204 | | |
FWR Holding Corp., Initial 1st Lien
Revolver, 3M LIBOR + 5.50%,
6.50%, 08/21/2023(e)(h) | | | 1,000 | | | | 445 | | |
FWR Holding Corp., Initial 1st Lien
Term Loan, 3M LIBOR + 5.50%,
6.50%, 08/21/2023(e)(f) | | | 339,080 | | | | 311,953 | | |
FWR Holding Corporation, 1st Lien
2nd Amendment Term Loan,
6M LIBOR + 5.50%, 6.50%,
08/21/2023(e) | | | 112,273 | | | | 103,291 | | |
Mister Car Wash Holdings, Inc.,
Initial 1st Lien Term Loan,
6M LIBOR + 3.25%, 4.38%,
05/14/2026 | | | 4,399,680 | | | | 3,946,645 | | |
PetSmart, Inc., Tranche 1st Lien
Term Loan B-2, 03/11/2022(i) | | | 1,045,296 | | | | 1,029,972 | | |
| | | | | | 5,490,463 | | |
Services: Business 8.7% | |
Alpha Luxco 2 Sarl, Facility
1st Lien Term Loan B,
(Luxembourg), 6M EURIBOR +
5.94%, 6.44%, 01/09/2025(e)(f)(j) | | € | 1,000,000 | | | | 1,123,450 | | |
AMCP Clean Intermediate, LLC,
1st Lien 2nd Incremental Term
Loan, 3M LIBOR + 5.50%, 6.50%,
10/01/2024(e)(f) | | $ | 180,166 | | | | 176,563 | | |
AMCP Clean Intermediate, LLC,
1st Lien 3rd Incremental Term
Loan, 3M LIBOR + 5.50%, 6.61%,
10/01/2024(e)(f) | | | 135,049 | | | | 132,348 | | |
AMCP Clean Intermediate, LLC,
1st Lien Incremental Term Loan,
3M LIBOR + 5.50%, 6.57%,
10/01/2024(e) | | | 448,817 | | | | 439,840 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
AMCP Clean Intermediate, LLC,
1st Lien Revolver, 3M LIBOR +
5.50%, 6.50%, 10/01/2024(e)(h) | | $ | 1,100 | | | $ | 559 | | |
AMCP Clean Intermediate, LLC,
1st Lien Term Loan, 6M LIBOR +
5.50%, 6.57%, 10/01/2024(e)(f) | | | 1,964,179 | | | | 1,924,895 | | |
Aramark Services, Inc., 1st Lien
Term Loan B-4, 1M LIBOR +
1.75%, 1.93%, 01/15/2027 | | | 249,375 | | | | 234,258 | | |
AVSC Holding Corp., 1st Lien
Incremental Term Loan,
6M LIBOR + 4.50%, 5.50%,
10/15/2026(e) | | | 2,036,134 | | | | 1,425,294 | | |
AVSC Holding Corp., 1st Lien Term
Loan, 6M LIBOR + 3.25%, 4.25%,
03/03/2025 | | | 124,364 | | | | 88,920 | | |
Capnor Connery Bidco A/S, EUR
Facility 1st Lien Term Loan B,
(Denmark), 1M EURIBOR + 7.38%,
7.38%, 04/30/2026(e)(f)(j) | | € | 2,954,439 | | | | 3,319,165 | | |
Capnor Connery Bidco A/S, Facility
1st Lien Term Loan B, (Denmark),
1M CIBOR + 7.38%, 7.38%,
04/30/2026(e)(f)(j) | | DKK | 12,809,677 | | | | 1,931,102 | | |
Capnor Connery Bidco A/S, Facility
1st Lien Term Loan D, (Denmark),
1M EURIBOR + 7.38%, 7.38%,
04/30/2026(e)(f)(h)(j) | | | 45,967,742 | | | | 611,017 | | |
Capnor Connery Bidco A/S, NOK
Facility 1st Lien Term Loan B,
(Denmark), 1M NIBOR + 7.38%,
7.59%, 04/30/2026(e)(f)(j) | | NOK | 2,551,246 | | | | 264,776 | | |
Capnor Connery Bidco A/S, SEK
Facility 1st Lien Term Loan B,
(Denmark), 1M STIBOR + 7.38%,
7.38%, 04/30/2026(e)(f)(j) | | SEK | 4,209,615 | | | | 451,925 | | |
Conscia Nederland B.V., Facility
1st Lien Term Loan B, (Denmark),
1M CIBOR + 7.38%, 7.38%,
04/30/2026(e)(f)(j) | | DKK | 9,254,839 | | | | 1,395,198 | | |
Dun & Bradstreet Corp., Initial
1st Lien Term Loan, 1M LIBOR +
4.00%, 4.18%, 02/06/2026 | | $ | 4,818,273 | | | | 4,685,771 | | |
IQVIA, Inc., 1st Lien Term Loan
B-2, 01/17/2025(i) | | | 355 | | | | 343 | | |
IRI Holdings, Inc., Initial 2nd Lien
Term Loan, 3M LIBOR + 8.00%,
8.36%, 11/30/2026(e)(f) | | | 1,471,850 | | | | 1,412,976 | | |
IRI Holdings, Inc., Initial 1st Lien
Term Loan, 3M LIBOR + 4.25%,
4.61%, 12/01/2025(e)(f) | | | 1,505,228 | | | | 1,445,019 | | |
Semi-Annual Report 2020
21
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
IRI Holdings, Inc., Initial 1st Lien
Term Loan, 3M LIBOR + 4.25%,
4.61%, 12/01/2025(e) | | $ | 154,872 | | | $ | 148,677 | | |
Kellermeyer Bergensons Services,
LLC, 1st Lien Delayed Draw Term
Loan, 11/07/2026(e)(h) | | | 540,079 | | | | (16,203 | ) | |
Kellermeyer Bergensons Services,
LLC, 1st Lien Delayed Draw Term
Loan, 6M LIBOR + 6.50%, 7.73%,
11/07/2026(e) | | | 394,077 | | | | 382,255 | | |
Kellermeyer Bergensons Services,
LLC, Initial 1st Lien Term Loan,
6M LIBOR + 6.50%, 7.50%,
11/07/2026(e)(f) | | | 1,791,261 | | | | 1,737,523 | | |
Lavatio Midco SARL, Acquisition
Facility 1st Lien Term Loan,
(Luxembourg), 6M EURIBOR +
7.00%, 7.25%, 11/30/2026(e)(h) | | € | 973,913 | | | | 624,443 | | |
Lavatio Midco SARL, Facility
1st Lien Term Loan B,
(Luxembourg), 6M EURIBOR +
7.00%, 7.25%, 11/30/2026(e)(f) | | | 782,609 | | | | 835,261 | | |
Lineage Logistics, LLC, 1st Lien
Term Loan, 1M LIBOR + 3.00%,
4.00%, 02/27/2025 | | $ | 4,126,954 | | | | 3,989,403 | | |
MPLC Debtco, Ltd., GBP Tranche
Facility 1st Lien Term Loan B,
(Great Britain), 6M GBP LIBOR +
7.25%, 7.98%, 01/07/2027(e)(f)(j) | | £ | 1,051,604 | | | | 1,302,936 | | |
MPLC Debtco, Ltd., Tranche Facility
1st Lien Term Loan B, (Great
Britain), 6M LIBOR + 7.25%,
8.75%, 01/07/2027(e)(f)(j) | | $ | 2,100,000 | | | | 2,100,000 | | |
P27 Bidco, Ltd., Capex Facility
1st Lien Term Loan, (Great Britain),
6M GBP LIBOR + 6.75%, 7.50%,
07/31/2026(e)(h) | | £ | 325,380 | | | | 60,471 | | |
P27 Bidco, Ltd., Facility 1st Lien
Term Loan B-1, (Great Britain),
6M GBP LIBOR + 6.75%, 7.57%,
07/31/2026(e) | | | 1,705,510 | | | | 2,007,469 | | |
P27 Bidco, Ltd., Facility 1st Lien
Term Loan B-2, (Great Britain),
6M LIBOR + 6.75%, 8.53%,
07/31/2026(e) | | $ | 609,527 | | | | 579,051 | | |
Packers Holdings, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
3.00%, 4.00%, 12/04/2024 | | | 2,340,082 | | | | 2,235,948 | | |
Petroleum Service Group, LLC,
1st Lien Delayed Draw Term Loan,
3M LIBOR + 5.25%, 6.25%,
07/23/2025(e)(h) | | | 1,313,959 | | | | 55,595 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Petroleum Service Group, LLC,
1st Lien Revolver, 07/23/2025(e)(h) | | $ | 2,105,660 | | | $ | (84,226 | ) | |
Petroleum Service Group, LLC,
1st Lien Term Loan, 3M LIBOR +
5.25%, 6.29%, 07/23/2025(e)(f) | | | 5,753,701 | | | | 5,523,553 | | |
Project Accelerate Parent, LLC,
1st Lien Term Loan, 3M LIBOR +
4.25%, 5.29%, 01/02/2025 | | | 3,739,860 | | | | 3,160,181 | | |
Project Farm Bidco 2016, Ltd.,
Acquisition Capex Facility 1st Lien
Term Loan, (Great Britain),
6M LIBOR + 6.25%, 7.32%,
06/26/2026(e)(j) | | | 93,750 | | | | 93,750 | | |
Project Farm Bidco 2016, Ltd.,
Facility 1st Lien Term Loan B,
(Great Britain), 6M LIBOR +
6.25%, 7.32%, 06/26/2026(e)(j) | | | 1,406,250 | | | | 1,406,250 | | |
Puerto Rico Waste Investment,
LLC, 1st Lien Term Loan,
(Puerto Rico), 1M LIBOR + 7.00%,
8.50%, 09/20/2024(e)(f) | | | 1,660,770 | | | | 1,627,554 | | |
Puerto Rico Waste Investment,
LLC, 1st Lien Revolver, (Puerto
Rico), 09/20/2024(e)(h) | | | 157,737 | | | | (3,154 | ) | |
Revint Intermediate II, LLC (fka
Implementation Management
Assistance, LLC), 1st Lien Delayed
Draw Term Loan, 3M LIBOR +
4.75%, 5.75%, 12/13/2023(e)(f) | | | 2,065,247 | | | | 2,044,594 | | |
Revint Intermediate II, LLC (fka
Implementation Management
Assistance, LLC), 1st Lien
Incremental Term Loan, 3M
LIBOR + 4.75%, 5.75%,
12/13/2023(e)(f) | | | 1,243,510 | | | | 1,231,075 | | |
Revint Intermediate II, LLC (fka
Implementation Management
Assistance, LLC), 1st Lien
Revolver, 3M LIBOR + 4.75%,
5.75%, 12/13/2023(e)(h) | | | 1,000 | | | | 386 | | |
Revint Intermediate II, LLC (fka
Implementation Management
Assistance, LLC), 1st Lien Term
Loan, 3M LIBOR + 4.75%, 5.75%,
12/13/2023(e)(f) | | | 389,610 | | | | 385,714 | | |
RSK Group, Ltd., Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 10/27/2025(e)(f)(h)(i) | | £ | 500,000 | | | | — | | |
RSK Group, Ltd., Acquisition
Facility 1st Lien Term Loan, (Great
Britain), 3M GBP LIBOR + 7.00%,
7.50%, 10/27/2025(e)(f)(g)(h)(j) | | | 508,959 | | | | 597,885 | | |
Semi-Annual Report 2020
22
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
RSK Group, Ltd., Facility 1st Lien
Term Loan B, (Great Britain),
3M GBP LIBOR + 7.00%, 7.50%,
10/27/2025(e)(f)(g)(j) | | £ | 516,153 | | | $ | 639,513 | | |
Saldon Holdings, Inc., 1st Lien
1st Amendment Term Loan,
1M LIBOR + 5.65%, 6.65%,
03/13/2025(e)(f) | | $ | 579,339 | | | | 561,959 | | |
Saldon Holdings, Inc., 1st Lien
Revolver, 1M LIBOR + 5.65%,
6.65%, 03/13/2024(e) | | | 380,952 | | | | 369,524 | | |
Saldon Holdings, Inc., 1st Lien
Term Loan, 3M LIBOR + 5.65%,
6.65%, 03/13/2025(e)(f) | | | 3,582,857 | | | | 3,475,372 | | |
SSE Buyer, Inc., 1st Lien Delayed
Draw Term Loan,
06/30/2026(e)(h)(i)(j) | | | 189,399 | | | | (5,682 | ) | |
SSE Buyer, Inc., 1st Lien Revolver,
3M LIBOR + 5.50%, 6.50%,
06/30/2025(e)(h)(i)(j) | | | 1,000 | | | | 699 | | |
SSE Buyer, Inc., Initial 1st Lien
Term Loan, 3M LIBOR + 9.22%,
10.22%, 06/30/2026(e)(f)(i)(j) | | | 643,977 | | | | 624,658 | | |
| | | | | | 58,755,853 | | |
Services: Consumer 1.6% | |
Centric Brands, Inc., 1st Lien
Revolver, PRIME + 5.50%, 8.75%,
05/18/2021(e)(h) | | | 268,883 | | | | 133,830 | | |
Centric Brands, Inc., 1st Lien
Term Loan, 3M LIBOR + 8.00%,
9.50%, 10/30/2023(e)(f) | | | 1,959,498 | | | | 1,645,978 | | |
Goldcup 16786 AB, Unitranche
Facility 1st Lien Term Loan,
(Sweden), 6M STIBOR + 7.25%,
7.75%, 06/02/2025(e)(f)(j) | | SEK | 10,000,000 | | | | 1,009,141 | | |
Learning Care Group (US) No. 2
Inc., 1st Lien Term Loan B,
6M LIBOR + 3.25%, 4.25%,
03/13/2025 | | $ | 773,187 | | | | 676,778 | | |
LegalZoom.com, Inc., 1st Lien
Term Loan, 1M LIBOR + 4.50%,
4.68%, 11/21/2024(e) | | | 452,077 | | | | 440,775 | | |
NMC Skincare Intermediate
Holdings II, LLC, 1st Lien Delayed
Draw Term Loan, 1M LIBOR +
5.00%, 6.00%, 10/31/2024(e) | | | 663,620 | | | | 630,439 | | |
NMC Skincare Intermediate
Holdings II, LLC, 1st Lien Revolver,
1M LIBOR + 5.00%, 6.00%,
10/31/2024(e)(h) | | | 333,333 | | | | 196,667 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
NMC Skincare Intermediate
Holdings II, LLC, 1st Lien Term
Loan, 1M LIBOR + 5.00%, 6.00%,
10/31/2024(e)(f) | | $ | 1,970,000 | | | $ | 1,871,500 | | |
Spectra Finance, LLC, Initial
1st Lien Revolver, 1M LIBOR +
4.00%, 5.00%, 04/03/2023(e)(h) | | | 1,000 | | | | 872 | | |
Spectra Finance, LLC, Initial
1st Lien Term Loan, 3M LIBOR +
4.25%, 5.70%, 04/02/2024(e)(f) | | | 979,020 | | | | 881,118 | | |
Sunshine Sub, LLC, 1st Lien
Delayed Draw Term Loan,
3M LIBOR + 4.75%, 5.75%,
05/27/2024(e) | | | 413,078 | | | | 371,770 | | |
Sunshine Sub, LLC, 1st Lien
Revolver, 3M LIBOR + 4.75%,
5.75%, 05/27/2024(e)(h) | | | 144,269 | | | | — | | |
Sunshine Sub, LLC, 1st Lien Term
Loan, 3M LIBOR + 4.75%, 5.75%,
05/27/2024(e)(f) | | | 703,240 | | | | 632,916 | | |
United PF Holdings, LLC, Initial
1st Lien Term Loan, 3M LIBOR +
4.00%, 4.31%, 12/30/2026 | | | 2,764,513 | | | | 2,437,388 | | |
| | | | | | 10,929,172 | | |
Telecommunications 1.2% | |
CB-SDG, Ltd., GBP Acquisition
Facility 1st Lien Term Loan,
(Great Britain), 04/03/2026(e)(f)(h) | | £ | 317,460 | | | | (39,333 | ) | |
CB-SDG, Ltd., GBP Facility 1st Lien
Term Loan B-1, (Great Britain),
3M GBP LIBOR + 7.13%, 7.88%,
04/03/2026(e)(f)(g) | | | 2,367,238 | | | | 2,639,705 | | |
CB-SDG, Ltd., GBP Facility 1st Lien
Term Loan B-2, (Great Britain),
3M GBP LIBOR + 7.13%, 7.88%,
04/03/2026(e)(f)(g) | | | 372,920 | | | | 415,843 | | |
Glide Holdings, Ltd. (fka
Cablecom Networking Holdings,
Ltd.), 1st Lien Capex Facility Term
Loan, (Great Britain), 1M GBP
LIBOR + 7.50%, 8.00%,
12/14/2023(e)(f)(j) | | | 438,596 | | | | 543,420 | | |
Glide Holdings, Ltd. (fka Cablecom
Networking Holdings, Ltd.),
Accordian Facility 1st Lien Term
Loan, (Great Britain), 1M GBP
LIBOR + 7.50%, 8.00%,
12/14/2023(e)(j) | | | 146,406 | | | | 181,397 | | |
Semi-Annual Report 2020
23
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
Glide Holdings, Ltd. (fka Cablecom
Networking Holdings, Ltd.), Facility
1st Lien Term Loan A-2,
(Great Britain), 6M GBP LIBOR +
5.50%, 6.23%, 12/14/2023(e)(f)(j) | | £ | 561,404 | | | $ | 695,579 | | |
Iridium Satellite, LLC, Initial
1st Lien Term Loan, 1M LIBOR +
3.75%, 4.75%, 11/04/2026 | | $ | 1,711,984 | | | | 1,676,033 | | |
Zayo Group Holdings, Inc., Initial
1st Lien Term Loan, 1M LIBOR +
3.00%, 3.18%, 03/09/2027 | | | 2,322,610 | | | | 2,199,326 | | |
| | | | | | 8,311,970 | | |
Transportation: Cargo 0.3% | |
Neovia Logistics, LP, Initial 1st Lien
Term Loan, 3M LIBOR + 6.50%,
7.82%, 05/08/2024(e) | | | 689,000 | | | | 661,298 | | |
Neovia Logistics, LP, Initial
2nd Lien Term Loan, 3M LIBOR +
10.25%, 11.39%, 11/08/2024(e)(g)(j) | | | 1,243,436 | | | | 1,198,308 | | |
| | | | | | 1,859,606 | | |
Transportation: Consumer 0.2% | |
APG Intermediate Holdings Corp.,
1st Lien Delayed Draw Term Loan,
6M LIBOR + 5.25%, 6.75%,
01/03/2025(e)(h) | | | 804,480 | | | | 44,247 | | |
APG Intermediate Holdings Corp.,
1st Lien Revolver, 6M LIBOR +
5.25%, 6.75%, 01/03/2025(e)(h) | | | 1,000 | | | | 266 | | |
APG Intermediate Holdings Corp.,
Initial 1st Lien Term Loan,
3M LIBOR + 5.25%, 6.75%,
01/03/2025(e) | | | 1,012,579 | | | | 992,327 | | |
| | | | | | 1,036,840 | | |
Utilities: Electric 0.8% | |
Brookfield WEC Holdings, Inc.,
Refinancing Facility 1st Lien Term
Loan, 1M LIBOR + 3.00%, 3.75%,
08/01/2025 | | | 5,382,552 | | | | 5,186,304 | | |
Utilities: Water 0.3% | |
Storm U.S. Holdco, Inc., Initial
1st Lien Term Loan, 3M LIBOR +
5.25%, 6.25%, 05/05/2023(e)(f) | | | 45,555 | | | | 45,555 | | |
TWH Infrastructure Industries, Inc.,
1st Lien Revolver, 3M LIBOR +
5.50%, 5.81%, 04/09/2025(e) | | | 463,581 | | | | 445,037 | | |
Senior Loans(b)(c)(d) (continued)
| | | Principal
Amount | | Value(a) | |
TWH Infrastructure Industries, Inc.,
1st Lien Term Loan, 3M LIBOR +
5.50%, 5.81%, 04/09/2025(e)(f) | | $ | 1,358,763 | | | $ | 1,304,413 | | |
| | | | | | 1,795,005 | | |
Wholesale 0.6% | |
Pet IQ, LLC, 1st Lien Term Loan,
1M LIBOR + 5.00%, 6.00%,
07/08/2025(e)(f) | | | 4,288,851 | | | | 4,288,851 | | |
Total Senior Loans
(Cost: $627,499,602) | | | | | 609,116,499 | | |
Subordinated Loans 1.4%(b)(c)(d)(e)(j)
Banking, Finance, Insurance & Real Estate 1.2% | |
AffiniPay Intermediate Holdings,
LLC, 1st Lien Term Loan, 12.75%,
02/28/2028 | | | 2,529,386 | | | | 2,428,211 | | |
Ardonagh Midco 2, PLC,
(Great Britain), 11.50%,
01/15/2027(h)(i) | | | 64,410 | | | | (162 | ) | |
eCapital Finance Corp.,
Subordinated Delayed Draw
Term Loan, (Canada), 1M LIBOR +
8.50%, 10.00%, 01/31/2025(h) | | | 3,379,572 | | | | 2,933,469 | | |
eCapital Finance Corp.,
Subordinated Term Loan,
(Canada), 1M LIBOR + 8.50%,
10.00%, 01/31/2025 | | | 2,872,637 | | | | 2,843,910 | | |
Preservation Capital I LLP,
Second Lien Term Loan, 6M GBP
LIBOR + 11.00%, 11.80%,
02/23/2026 | | £ | 163,246 | | | | 202,262 | | |
| | | | | | 8,407,690 | | |
Healthcare & Pharmaceuticals 0.2% | |
Air Medical Group Holdings, Inc.,
Initial Unsecured Term Loan,
6M LIBOR + 7.88%, 8.88%,
03/13/2026(f) | | $ | 1,000,000 | | | | 1,000,000 | | |
High Tech Industries 0.0% | |
Visual Edge Technology, Inc.,
1st Lien Term Loan, 15.00%,
09/03/2024(g) | | | 183,546 | | | | 176,204 | | |
Total Subordinated Loans
(Cost: $9,577,774) | | | | | 9,583,894 | | |
Semi-Annual Report 2020
24
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Corporate Bonds 8.9%
| | | Principal
Amount | | Value(a) | |
Automotive 0.2% | |
Dana, Inc., 5.38%, 11/15/2027 | | $ | 580,000 | | | $ | 578,904 | | |
Dana, Inc., 5.63%, 06/15/2028 | | | 435,000 | | | | 431,824 | | |
Ford Motor Co., 8.50%,
04/21/2023 | | | 125,000 | | | | 132,188 | | |
| | | | | | 1,142,916 | | |
Banking, Finance, Insurance & Real Estate 1.4% | |
Brookfield Property REIT, Inc.,
5.75%, 05/15/2026(d) | | | 250,000 | | | | 211,250 | | |
Brookfield Residential Properties,
Inc. / Brookfield Residential US
Corp., (Canada), 4.88%,
02/15/2030(d) | | | 125,000 | | | | 104,450 | | |
Dolya Holdco 18 DAC, (Ireland),
5.00%, 07/15/2028(d) | | | 3,000,000 | | | | 2,961,600 | | |
Ford Motor Credit Co, LLC, 5.13%,
06/16/2025 | | | 640,000 | | | | 640,256 | | |
HUB International, Ltd., 7.00%,
05/01/2026(d) | | | 2,000,000 | | | | 1,995,800 | | |
Springleaf Finance Corp., 6.63%,
01/15/2028 | | | 1,857,000 | | | | 1,838,430 | | |
Summit Materials, LLC, 5.13%,
06/01/2025(d) | | | 2,000,000 | | | | 1,975,000 | | |
| | | | | | 9,726,786 | | |
Beverage, Food & Tobacco 0.9% | |
Cott Holdings, Inc., 5.50%,
04/01/2025(d) | | | 1,084,000 | | | | 1,089,518 | | |
Del Monte Foods, Inc., 11.88%,
05/15/2025(d) | | | 1,000,000 | | | | 1,010,000 | | |
IRB Holding Corp., 6.75%,
02/15/2026(d) | | | 1,487,000 | | | | 1,420,085 | | |
JBS USA LUX SA / JBS USA Food
Co. / JBS USA Finance, Inc.,
(Cayman Islands), 5.50%,
01/15/2030(d) | | | 2,995,000 | | | | 3,069,875 | | |
Performance Food Group, Inc.,
5.50%, 10/15/2027(d) | | | (250,000 | ) | | | (241,250 | ) | |
| | | | | | 6,348,228 | | |
Chemicals, Plastics & Rubber 0.5% | |
Kraton Polymers, LLC / Kraton
Polymers Capital Corp., 7.00%,
04/15/2025(d) | | | 14,000 | | | | 14,070 | | |
Corporate Bonds (continued)
| | | Principal
Amount | | Value(a) | |
Trident TPI Holdings, Inc., 9.25%,
08/01/2024(d) | | $ | 3,541,000 | | | $ | 3,629,525 | | |
| | | | | | 3,643,595 | | |
Construction & Building 0.6% | |
Hillman Group, Inc., 6.38%,
07/15/2022(d) | | | 3,459,000 | | | | 3,192,553 | | |
PowerTeam Services, LLC, 9.03%,
12/04/2025(d) | | | 295,000 | | | | 300,900 | | |
Tutor Perini Corp., 6.88%,
05/01/2025(d) | | | 344,000 | | | | 327,660 | | |
| | | | | | 3,821,113 | | |
Consumer Goods: Durable 0.2% | |
CommScope, Inc., 8.25%,
03/01/2027(d) | | | (250,000 | ) | | | (256,925 | ) | |
Kronos Acquisition Holdings, Inc.,
9.00%, 08/15/2023(d) | | | 1,750,000 | | | | 1,666,875 | | |
| | | | | | 1,409,950 | | |
Energy: Electricity 0.2% | |
Enviva Partners, LP, 6.50%,
01/15/2026(d)(m) | | | 1,070,000 | | | | 1,112,800 | | |
Energy: Oil & Gas 0.3% | |
Exterran Energy Solutions, LP,
8.13%, 05/01/2025 | | | 2,281,000 | | | | 1,887,527 | | |
Extraction Oil & Gas, Inc., 7.38%,
05/15/2024(d)(k) | | | 250,000 | | | | 48,125 | | |
Great Western Petroleum, LLC /
Great Western Finance Corp.,
9.00%, 09/30/2021(d) | | | 490,000 | | | | 294,000 | | |
Vine Oil & Gas, LP, 9.75%,
04/15/2023(d) | | | 232,000 | | | | 140,360 | | |
| | | | | | 2,370,012 | | |
Healthcare & Pharmaceuticals 0.6% | |
Immucor, Inc., 11.13%,
02/15/2022(d) | | | 4,537,000 | | | | 4,049,272 | | |
High Tech Industries 0.6% | |
Go Daddy Operating Co, LLC /
GD Finance Co., Inc., 5.25%,
12/01/2027(d) | | | 2,000,000 | | | | 2,035,000 | | |
Science Applications International
Corp., 4.88%, 04/01/2028(d) | | | 1,800,000 | | | | 1,789,308 | | |
Semi-Annual Report 2020
25
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Corporate Bonds (continued)
| | | Principal
Amount | | Value(a) | |
Uber Technologies, Inc., 8.00%,
11/01/2026(d) | | $ | 125,000 | | | $ | 127,187 | | |
| | | | | | 3,951,495 | | |
Hotel, Gaming & Leisure 0.1% | |
Colt Merger Sub, Inc., 8.13%,
07/01/2027(d)(m) | | | 962,000 | | | | 929,533 | | |
Media: Broadcasting & Subscription 0.8% | |
Cumulus Media New Holdings,
Inc., 6.75%, 07/01/2026(d) | | | 144,000 | | | | 133,020 | | |
Diamond Sports Group, LLC /
Diamond Sports Finance Co.,
5.38%, 08/15/2026(d) | | | 125,000 | | | | 90,469 | | |
Townsquare Media, Inc., 6.50%,
04/01/2023(d)(e) | | | 2,612,000 | | | | 2,265,910 | | |
Viasat, Inc., 6.50%,
07/15/2028(d) | | | 2,790,000 | | | | 2,790,586 | | |
| | | | | | 5,279,985 | | |
Metals & Mining 0.1% | |
Constellium SE, (France), 5.63%,
06/15/2028(d) | | | 1,000,000 | | | | 980,000 | | |
First Quantum Minerals, Ltd.,
(Canada), 7.25%, 05/15/2022(d) | | | 250,000 | | | | 244,750 | | |
Freeport-McMoRan, Inc., 5.00%,
09/01/2027 | | | (250,000 | ) | | | (251,682 | ) | |
| | | | | | 973,068 | | |
Retail 0.4% | |
L Brands, Inc., 6.88%,
07/01/2025(d) | | | 346,000 | | | | 357,245 | | |
L Brands, Inc., 9.38%,
07/01/2025(d) | | | 76,000 | | | | 76,091 | | |
PetSmart, Inc., 8.88%,
06/01/2025(d) | | | 2,000,000 | | | | 2,004,920 | | |
| | | | | | 2,438,256 | | |
Services: Business 0.5% | |
Iron Mountain, Inc., 4.88%,
09/15/2029(d) | | | 2,000,000 | | | | 1,945,000 | | |
Iron Mountain, Inc., 5.25%,
07/15/2030(d) | | | 1,125,000 | | | | 1,108,125 | | |
| | | | | | 3,053,125 | | |
Corporate Bonds (continued)
| | | Principal
Amount | | Value(a) | |
Services: Consumer 0.4% | |
Korn / Ferry International, 4.63%,
12/15/2027(d) | | $ | 2,500,000 | | | $ | 2,425,000 | | |
Telecommunications 0.5% | |
CenturyLink, Inc., 4.00%,
02/15/2027(d) | | | 3,399,000 | | | | 3,301,279 | | |
Transportation: Cargo 0.5% | |
Cargo Aircraft Management, Inc.,
4.75%, 02/01/2028(d) | | | 2,000,000 | | | | 1,982,500 | | |
Watco Cos., LLC, 6.50%,
06/15/2027(d) | | | 1,126,000 | | | | 1,153,677 | | |
| | | | | | 3,136,177 | | |
Transportation: Consumer 0.1% | |
American Airlines Group, Inc.,
5.00%, 06/01/2022(d) | | | 1,739,000 | | | | 1,008,620 | | |
Utilities: Electric 0.0% | |
NextEra Energy Partners, LP,
1.50%, 09/15/2020(d) | | | 96,000 | | | | 98,516 | | |
Total Corporate Bonds
(Cost: $62,396,971) | | | | | 60,219,726 | | |
Convertible Bonds 0.2%
Construction & Building 0.2% | |
Tutor Perini Corp., 2.88%,
06/15/2021 | | | 1,750,000 | | | | 1,648,677 | | |
Total Convertible Bonds
(Cost: $1,656,188) | | | | | 1,648,677 | | |
Collateralized Loan Obligations 18.4%(d)(e)
Collateralized Loan Obligations — Debt 7.3%(c) | |
AMMC CLO XI, Ltd., (Cayman
Islands), 3M LIBOR + 5.80%,
6.56%, 04/30/2031 | | | 1,500,000 | | | | 1,175,787 | | |
AMMC CLO XIV, Ltd., (Cayman
Islands), 3M LIBOR + 7.35%,
8.34%, 07/25/2029 | | | 250,000 | | | | 220,309 | | |
AMMC CLO XXI, Ltd., (Cayman
Islands), 3M LIBOR + 6.50%,
7.06%, 11/02/2030 | | | 100,000 | | | | 86,324 | | |
AMMC CLO XXII, Ltd., (Cayman
Islands), 3M LIBOR + 5.50%,
6.49%, 04/25/2031 | | | 750,000 | | | | 629,907 | | |
Apidos CLO XX, Ltd., (Cayman
Islands), 3M LIBOR + 8.70%,
9.88%, 07/16/2031 | | | 250,000 | | | | 160,533 | | |
Semi-Annual Report 2020
26
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
Atlas Senior Loan Fund VII, Ltd.,
(Cayman Islands), 3M LIBOR +
8.05%, 8.42%, 11/27/2031 | | $ | 1,792,383 | | | $ | 896,763 | | |
Barings CLO, Ltd. 2019-II,
(Cayman Islands), 3M LIBOR +
6.69%, 7.91%, 04/15/2031 | | | 1,250,000 | | | | 1,156,211 | | |
Canyon Capital CLO, Ltd. 2018-1,
(Cayman Islands), 3M LIBOR +
5.75%, 6.97%, 07/15/2031 | | | 850,000 | | | | 688,500 | | |
Canyon Capital CLO, Ltd. 2019-1,
(Cayman Islands), 3M LIBOR +
6.68%, 7.90%, 04/15/2032 | | | 500,000 | | | | 451,792 | | |
Carlyle Global Market Strategies
CLO, Ltd. 2019-2, (Cayman
Islands), 3M LIBOR + 6.60%,
7.82%, 07/15/2032 | | | 3,000,000 | | | | 2,762,952 | | |
CBAM, Ltd. 2017-3, (Cayman
Islands), 3M LIBOR + 6.50%,
7.64%, 10/17/2029 | | | 511,538 | | | | 446,426 | | |
CIFC Funding 2015-2A, Ltd.,
(Cayman Islands), 3M LIBOR +
6.81%, 8.03%, 04/15/2030 | | | 6,000,000 | | | | 5,575,464 | | |
CIFC Funding 2017-2A, Ltd.,
(Cayman Islands), 3M LIBOR +
5.95%, 7.09%, 04/20/2030 | | | 1,000,000 | | | | 884,928 | | |
CIFC Funding, Ltd. 2018-IV,
(Cayman Islands), 3M LIBOR +
5.90%, 7.04%, 10/17/2031 | | | 1,000,000 | | | | 871,217 | | |
Cook Park CLO, Ltd., (Cayman
Islands), 3M LIBOR + 5.40%,
6.54%, 04/17/2030 | | | 1,250,000 | | | | 1,072,786 | | |
Crestline Denali CLO XIV, Ltd.,
(Cayman Islands), 3M LIBOR +
6.35%, 7.39%, 10/23/2031 | | | 750,000 | | | | 530,844 | | |
Crestline Denali CLO XIV, Ltd.,
(Cayman Islands), 3M LIBOR +
8.10%, 9.14%, 10/23/2031 | | | 250,000 | | | | 128,203 | | |
Crestline Denali CLO XVI, Ltd.,
(Cayman Islands), 3M LIBOR +
2.60%, 3.74%, 01/20/2030 | | | 1,500,000 | | | | 1,177,899 | | |
Denali Capital CLO XII, Ltd.,
(Cayman Islands), 3M LIBOR +
5.90%, 7.12%, 04/15/2031 | | | 750,000 | | | | 517,243 | | |
Dryden 28 Senior Loan Fund,
(Cayman Islands), 3M LIBOR +
6.45%, 6.84%, 08/15/2030 | | | 1,000,000 | | | | 935,785 | | |
Dryden 55 Senior Loan Fund,
(Cayman Islands), 3M LIBOR +
5.40%, 6.62%, 04/15/2031 | | | 375,000 | | | | 313,055 | | |
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
Dryden 57 Senior Loan Fund,
(Cayman Islands), 3M LIBOR +
5.20%, 5.59%, 05/15/2031 | | $ | 500,000 | | | $ | 414,000 | | |
Dryden 58 Senior Loan Fund,
(Cayman Islands), 3M LIBOR +
5.35%, 6.49%, 07/17/2031 | | | 1,000,000 | | | | 838,517 | | |
Goldentree Loan Opportunities X,
Ltd., (Cayman Islands),
3M LIBOR + 5.65%, 6.79%,
07/20/2031 | | | 750,000 | | | | 660,091 | | |
ICG U.S. CLO, Ltd. 2018-1,
(Cayman Islands), 3M LIBOR +
5.15%, 6.26%, 04/21/2031 | | | 500,000 | | | | 358,179 | | |
INGIM, Ltd. 2013-3, (Cayman
Islands), 3M LIBOR + 5.90%,
7.04%, 10/18/2031 | | | 1,250,000 | | | | 969,445 | | |
KKR CLO 24, Ltd., (Cayman
Islands), 3M LIBOR + 6.38%,
7.52%, 04/20/2032 | | | 750,000 | | | | 643,908 | | |
LCM 30, Ltd., (Cayman Islands),
3M LIBOR + 6.95%, 8.09%,
04/20/2031 | | | 2,000,000 | | | | 1,877,322 | | |
Madison Park Funding XIV, Ltd.,
(Cayman Islands), 3M LIBOR +
7.77%, 8.87%, 10/22/2030 | | | 1,000,000 | | | | 611,551 | | |
Madison Park Funding XXIII, Ltd.,
(Cayman Islands), 3M LIBOR +
6.25%, 7.24%, 07/27/2030 | | | 500,000 | | | | 451,145 | | |
Madison Park Funding XXXIV, Ltd.,
(Cayman Islands), 3M LIBOR +
6.75%, 7.74%, 04/25/2031 | | | 1,500,000 | | | | 1,406,556 | | |
Madison Park Funding XXXVI, Ltd.,
(Cayman Islands), 3M LIBOR +
7.25%, 9.19%, 01/15/2033 | | | 2,500,000 | | | | 2,379,982 | | |
Madison Park Funding XXXVII, Ltd.,
(Cayman Islands), 3M LIBOR +
6.55%, 7.77%, 07/15/2032 | | | 1,000,000 | | | | 922,673 | | |
Magnetite CLO, Ltd. 2019-22,
(Cayman Islands), 3M LIBOR +
6.75%, 7.97%, 04/15/2031 | | | 1,000,000 | | | | 943,284 | | |
Mariner CLO, LLC 2019-1A,
(Cayman Islands), 3M LIBOR +
6.89%, 7.65%, 04/30/2032 | | | 1,250,000 | | | | 1,172,879 | | |
Niagara Park CLO, Ltd., (Cayman
Islands), 3M LIBOR + 6.45%,
7.59%, 07/17/2032 | | | 1,000,000 | | | | 918,522 | | |
Northwoods Capital XII-B, Ltd.,
(Cayman Islands), 3M LIBOR +
5.79%, 6.10%, 06/15/2031 | | | 750,000 | | | | 484,380 | | |
Semi-Annual Report 2020
27
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
Octagon Investment Partners 35,
Ltd., (Cayman Islands),
3M LIBOR + 5.20%, 6.34%,
01/20/2031 | | $ | 1,500,000 | | | $ | 1,230,868 | | |
OHA Credit Funding 3, Ltd.,
(Cayman Islands), 3M LIBOR +
5.50%, 6.64%, 07/20/2032 | | | 2,500,000 | | | | 2,161,257 | | |
OHA Loan Funding 2016-1, Ltd.,
(Cayman Islands), 3M LIBOR +
6.35%, 7.49%, 01/20/2033 | | | 4,000,000 | | | | 3,510,764 | | |
Steele Creek CLO, Ltd. 2016-1,
(Cayman Islands), 3M LIBOR +
5.75%, 6.06%, 06/15/2031 | | | 750,000 | | | | 502,618 | | |
TICP CLO V 2016-5, Ltd.,
(Cayman Islands), 3M LIBOR +
5.75%, 6.89%, 07/17/2031 | | | 857,000 | | | | 752,798 | | |
TICP CLO XI, Ltd., (Cayman
Islands), 3M LIBOR + 6.00%,
7.14%, 10/20/2031 | | | 300,000 | | | | 270,713 | | |
TICP CLO XI, Ltd. 2018-11X,
(Cayman Islands), 3M LIBOR +
6.00%, 7.14%, 10/20/2031 | | | 500,000 | | | | 451,188 | | |
Venture 28A CLO, Ltd., (Cayman
Islands), 3M LIBOR + 6.16%,
7.30%, 10/20/2029 | | | 1,000,000 | | | | 813,120 | | |
Venture 37 CLO, Ltd., (Cayman
Islands), 3M LIBOR + 6.95%,
8.17%, 07/15/2032 | | | 3,000,000 | | | | 2,419,995 | | |
Venture XXXVI CLO, Ltd., (Cayman
Islands), 3M LIBOR + 6.92%,
8.06%, 04/20/2032 | | | 300,000 | | | | 230,963 | | |
Voya CLO, Ltd. 2019-2, (Cayman
Islands), 3M LIBOR + 6.60%,
7.74%, 07/20/2032 | | | 1,000,000 | | | | 925,021 | | |
Wellfleet CLO, Ltd. 2020-1,
(Cayman Islands), 3M LIBOR +
7.24%, 8.42%, 04/15/2033 | | | 650,000 | | | | 617,025 | | |
| | | | | | 49,621,692 | | |
Collateralized Loan Obligations — Equity 11.1% | |
Allegro CLO, Ltd. 2018-2A,
(Cayman Islands), 15.63%,
07/15/2031 | | | 1,650,000 | | | | 974,510 | | |
AMMC CLO 22, Ltd., (Cayman
Islands), 19.19%, 04/25/2031 | | | 1,500,000 | | | | 953,257 | | |
AMMC CLO XXI, Ltd., (Cayman
Islands), 18.05%, 11/02/2030 | | | 124,950 | | | | 69,121 | | |
Anchorage Credit Funding 7, Ltd.,
(Cayman Islands), 13.92%,
04/25/2037 | | | 250,000 | | | | 172,647 | | |
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
Atlas Senior Loan Fund I, Ltd.,
(Cayman Islands), 49.22%,
11/17/2027 | | $ | 250,000 | | | $ | 30,782 | | |
Atrium XV, (Cayman Islands),
13.24%, 01/23/2048 | | | 4,080,000 | | | | 2,214,257 | | |
Avery Point VI CLO, Ltd., (Cayman
Islands), 13.92%, 08/05/2027 | | | 314,012 | | | | 68,426 | | |
Bain Capital Credit CLO 2019-1,
(Cayman Islands), 22.35%,
04/18/2032 | | | 1,400,000 | | | | 788,290 | | |
Bain Capital Credit CLO 2020-1,
(Cayman Islands), 13.92%,
04/18/2033 | | | 250,000 | | | | 172,433 | | |
Bain Capital Credit CLO, Ltd.
2018-1, (Cayman Islands),
17.18%, 04/23/2031 | | | 920,000 | | | | 519,477 | | |
Bain Capital Credit CLO, Ltd.
2019-2, (Cayman Islands),
16.28%, 10/17/2032 | | | 810,000 | | | | 530,090 | | |
Canyon Capital CLO, Ltd. 2016-1,
(Cayman Islands), 15.82%,
07/15/2031 | | | 1,000,000 | | | | 610,954 | | |
Canyon Capital CLO, Ltd. 2019-1,
(Cayman Islands), 10.86%,
04/15/2032 | | | 2,797,500 | | | | 1,750,606 | | |
Carlyle Global Market Strategies
CLO, Ltd. 2013-1, (Cayman
Islands), 11.47%, 08/14/2030 | | | 500,000 | | | | 181,963 | | |
Carlyle Global Market Strategies
CLO, Ltd. 2018-3, (Cayman
Islands), 13.43%, 10/15/2030 | | | 500,000 | | | | 244,108 | | |
Carlyle Global Market Strategies
CLO, Ltd. 2018-4, (Cayman
Islands), 20.71%, 01/20/2031 | | | 2,310,000 | | | | 1,321,170 | | |
Carlyle Global Market Strategies
CLO, Ltd. 2019-3, (Cayman
Islands), 14.70%, 10/20/2032 | | | 3,500,000 | | | | 2,384,781 | | |
Cedar Funding CLO V, Ltd.,
(Cayman Islands), 14.79%,
07/17/2031 | | | 2,300,000 | | | | 1,403,506 | | |
Cedar Funding CLO VIII, Ltd.,
(Cayman Islands), 12.85%,
10/17/2030 | | | 250,000 | | | | 129,334 | | |
Cedar Funding X CLO, Ltd.,
(Cayman Islands), 13.92%,
10/20/2032 | | | 250,000 | | | | 170,576 | | |
CIFC Funding 2018-II, Ltd.,
(Cayman Islands), 13.92%,
04/20/2031 | | | 250,000 | | | | 155,822 | | |
Semi-Annual Report 2020
28
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
Crestline Denali CLO XVI, Ltd.,
(Cayman Islands), 12.27%,
01/20/2030 | | $ | 500,000 | | | $ | 263,758 | | |
Dryden 28 Senior Loan Fund,
(Cayman Islands), 18.80%,
08/15/2030 | | | 1,406,251 | | | | 421,635 | | |
Dryden 33 Senior Loan Fund,
(Cayman Islands), 23.30%,
04/15/2029 | | | 500,000 | | | | 185,113 | | |
Dryden 38 Senior Loan Fund,
(Cayman Islands), 16.61%,
07/15/2030 | | | 650,000 | | | | 308,916 | | |
Dryden 41 Senior Loan Fund,
(Cayman Islands), 10.57%,
04/15/2031 | | | 850,000 | | | | 448,220 | | |
Dryden 43 Senior Loan Fund,
(Cayman Islands), 29.23%,
07/20/2029 | | | 1,000,000 | | | | 432,435 | | |
Dryden 57 Senior Loan Fund,
(Cayman Islands), 15.77%,
05/15/2031 | | | 717,000 | | | | 532,933 | | |
Dryden 58 Senior Loan Fund,
(Cayman Islands), 19.63%,
07/17/2031 | | | 3,125,000 | | | | 1,883,319 | | |
Dryden 68 Senior Loan Fund,
(Cayman Islands), 17.07%,
07/15/2049 | | | 500,000 | | | | 320,027 | | |
Dryden 78 Senior Loan Fund,
(Cayman Islands), 11.83%,
04/17/2033 | | | 10,250,000 | | | | 7,361,068 | | |
Eastland Investors Corp.,
(Cayman Islands), 05/01/2022 | | | 300 | | | | 133,500 | | |
Eaton Vance CLO 2015-1, Ltd.,
(Cayman Islands), 13.92%,
01/20/2030 | | | 312,500 | | | | 167,020 | | |
Eaton Vance CLO 2018-1, Ltd.,
(Cayman Islands), 13.92%,
10/15/2030 | | | 1,025,000 | | | | 593,307 | | |
Elmwood CLO I, Ltd., (Cayman
Islands), 22.65%, 04/20/2030 | | | 1,000,000 | | | | 745,443 | | |
Elmwood CLO V, Ltd., (Cayman
Islands), 13.92%, 07/24/2031(m) | | | 2,875,000 | | | | 2,673,750 | | |
Highbridge Loan Management,
Ltd. 2014-3, (Cayman Islands),
17.75%, 07/18/2029 | | | 3,077,500 | | | | 959,432 | | |
ICG U.S. CLO, Ltd. 2018-2,
(Cayman Islands), 26.62%,
07/22/2031 | | | 1,650,000 | | | | 1,225,221 | | |
KKR CLO 12, Ltd., (Cayman
Islands), 13.92%, 10/15/2030 | | | 1,000,000 | | | | 454,093 | | |
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
LCM XVIII, LP, (Cayman Islands),
38.39%, 04/20/2031 | | $ | 1,400,000 | | | $ | 423,373 | | |
Madison Park Funding XXVII, Ltd.,
(Cayman Islands), 12.11%,
01/20/2047 | | | 250,000 | | | | 199,194 | | |
Madison Park Funding XXVIII, Ltd.,
(Cayman Islands), 18.99%,
07/15/2030 | | | 2,000,000 | | | | 1,522,202 | | |
Madison Park Funding XXXI, Ltd.,
(Cayman Islands), 16.12%,
01/23/2048 | | | 4,250,000 | | | | 2,860,127 | | |
Madison Park Funding XXXII, Ltd.,
(Cayman Islands), 17.72%,
01/22/2048 | | | 1,510,000 | | | | 896,079 | | |
Madison Park Funding XXXVII,
Ltd., (Cayman Islands), 15.44%,
07/15/2049 | | | 7,500,000 | | | | 5,865,307 | | |
Magnetite CLO, Ltd. 2012-6,
(Cayman Islands), 09/15/2023(j) | | | 1,241,000 | | | | 496 | | |
Mariner CLO, Ltd. 2018-5A,
(Cayman Islands), 15.78%,
04/25/2031 | | | 500,000 | | | | 315,043 | | |
Neuberger Berman CLO XXIII, Ltd.,
(Cayman Islands), 13.92%,
10/17/2027 | | | 29,095 | | | | 6,386 | | |
Newark BSL CLO 1, Ltd., (Cayman
Islands), 13.92%, 07/25/2030 | | | 250,000 | | | | 112,376 | | |
Oaktree CLO, Ltd. 2018-1,
(Cayman Islands), 6.37%,
10/20/2030 | | | 2,250,000 | | | | 1,472,989 | | |
Oaktree CLO, Ltd. 2019-2,
(Cayman Islands), 4.70%,
04/15/2031 | | | 3,860,000 | | | | 1,640,075 | | |
Oaktree CLO, Ltd. 2019-3,
(Cayman Islands), 11.04%,
07/20/2031 | | | 4,750,000 | | | | 3,136,605 | | |
Octagon Investment Partners
35, Ltd., (Cayman Islands),
16.48%, 01/20/2031 | | | 850,000 | | | | 509,296 | | |
OHA Credit Partners XI, Ltd.,
(Cayman Islands), 15.33%,
01/20/2032 | | | 300,000 | | | | 201,128 | | |
OHA Credit Partners XV, Ltd.,
(Cayman Islands), 16.22%,
01/20/2030 | | | 1,360,000 | | | | 867,641 | | |
OHA Loan Funding, Ltd. 2013-1,
(Cayman Islands), 17.95%,
07/23/2031 | | | 876,000 | | | | 403,054 | | |
Semi-Annual Report 2020
29
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Collateralized Loan Obligations(d)(e) (continued)
| | | Principal
Amount | | Value(a) | |
OZLM XIX, Ltd. 2017-19A,
(Cayman Islands), 10.67%,
11/22/2030 | | $ | 1,000,000 | | | $ | 413,606 | | |
OZLM XIX, Ltd. 2017-19X,
(Cayman Islands), 18.39%,
11/22/2030 | | | 500,000 | | | | 206,803 | | |
OZLM XVI, Ltd. 2017-16A,
(Cayman Islands), 33.95%,
05/16/2030 | | | 562,500 | | | | 181,805 | | |
OZLM XXI, Ltd. 2017-21A,
(Cayman Islands), 12.68%,
01/20/2031 | | | 800,000 | | | | 405,914 | | |
Steele Creek CLO, Ltd. 2017-1,
(Cayman Islands), 18.05%,
10/15/2030 | | | 250,000 | | | | 82,084 | | |
Stewart Park CLO, Ltd., (Cayman
Islands), 19.92%, 01/15/2030 | | | 13,000,000 | | | | 2,868,138 | | |
Symphony CLO XI, Ltd., (Cayman
Islands), 01/17/2025(j) | | | 1,000 | | | | 160 | | |
THL Credit Wind River 2018-2
CLO, Ltd., (Cayman Islands),
13.92%, 07/15/2030 | | | 2,900,000 | | | | 1,984,995 | | |
THL Credit Wind River 2018-3
CLO, Ltd., (Cayman Islands),
13.92%, 01/20/2031 | | | 3,875,000 | | | | 2,670,483 | | |
Venture XVIII CLO, Ltd., (Cayman
Islands), 5.15%, 10/15/2029 | | | 250,000 | | | | 57,004 | | |
Voya CLO, Ltd. 2018-1, (Cayman
Islands), 13.92%, 04/19/2031 | | | 4,000,000 | | | | 2,387,504 | | |
Wellfleet CLO, Ltd. 2017-3,
(Cayman Islands), 20.84%,
01/17/2031 | | | 250,000 | | | | 147,050 | | |
Wellfleet CLO, Ltd. 2018-3,
(Cayman Islands), 20.99%,
01/20/2032 | | | 2,400,000 | | | | 1,541,472 | | |
Wellfleet CLO, Ltd. 2020-1,
(Cayman Islands), 10.83%,
04/15/2033 | | | 5,955,000 | | | | 4,208,154 | | |
York CLO-4, Ltd., (Cayman
Islands), 13.92%, 04/20/2032 | | | 500,000 | | | | 317,000 | | |
York CLO-7, Ltd., (Cayman
Islands), 11.46%, 01/22/2033 | | | 4,000,000 | | | | 2,943,372 | | |
| | | | | | 74,802,215 | | |
Total Collateralized Loan Obligations
(Cost: $145,473,048) | | | | | 124,423,907 | | |
Common Stocks 0.4%(d)
| | | Shares | | Value(a) | |
Automotive 0.0% | |
GB Auto Service Holdings, LLC(e)(l) | | | 23,724 | | | $ | 30,011 | | |
Banking, Finance, Insurance & Real Estate 0.1% | |
Eagle Point Credit Co., Inc. | | | 37,500 | | | | 266,625 | | |
The Ultimus Group Aggregator, LP,
Class B(e)(l) | | | 182 | | | | — | | |
The Ultimus Group, LLC, Class A(e)(l) | | | 1 | | | | 903 | | |
The Ultimus Group, LLC, Class B(e)(j)(l) | | | 1,609 | | | | — | | |
| | | | | | 267,528 | | |
Beverage, Food & Tobacco 0.0% | |
GPM Investments, LLC, Class F(e)(l) | | | — | | | | 1,026 | | |
Italian Fine Foods Holdings, LP,
Class A(e)(l) | | | 25,000 | | | | 28,821 | | |
| | | | | | 29,847 | | |
Chemicals, Plastics & Rubber 0.0% | |
Plaskolite PPC Blocker, LLC(e)(l) | | | 10 | | | | 709 | | |
Construction & Building 0.0% | |
Kene Holdings, LP, Class A(e)(l) | | | 50,000 | | | | 46,949 | | |
Consumer Goods: Durable 0.0% | |
DRS Holdings I, Inc.(e)(l) | | | 50 | | | | 34,268 | | |
Containers, Packaging & Glass 0.0% | |
Berry Global Group, Inc.(l) | | | 2,500 | | | | 110,800 | | |
Healthcare & Pharmaceuticals 0.1% | |
Bearcat Parent, Inc.(e)(l) | | | 51 | | | | 75,830 | | |
Coherus Biosciences, Inc.(l) | | | 2,456 | | | | 43,864 | | |
KNPAK Holdings, LP, Class A(e)(l) | | | 100,000 | | | | 80,244 | | |
Olympia TopCo, LP, Class A(e)(l) | | | 50,000 | | | | 40,763 | | |
OMERS Bluejay Investment
Holdings, LP, Class A(e)(l) | | | 25 | | | | 28,347 | | |
OMERS Wildcats Investment
Holdings, LLC, Class A(e)(l) | | | 162 | | | | 48,000 | | |
SiroMed Equity Holdings, LLC(e)(l) | | | 3,703 | | | | 3,760 | | |
Virence Holdings, LLC, Class A(e)(l) | | | — | | | | 32,536 | | |
| | | | | | 353,344 | | |
Semi-Annual Report 2020
30
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Common Stocks 0.4%(d) (continued)
| | | Shares | | Value(a) | |
High Tech Industries 0.2% | |
Astorg VII Co-Invest ERT,
(Luxemborg)(e)(l) | | | 1,000,000 | | | $ | 1,138,819 | | |
Frontline Technologies Parent,
LLC, Class B(e)(l) | | | 2,728 | | | | 14,249 | | |
H&F Unite Partners, LP(e)(l) | | | 50,032 | | | | 49,926 | | |
Insight PDI Holdings, LLC,
Class A(e)(l) | | | 26,548 | | | | 22,748 | | |
Project Falcon Parent, Inc.,
Class B-1(e)(l) | | | 47,536 | | | | 48,942 | | |
Rocket Parent, LLC, Class A(e)(l) | | | 50,000 | | | | 23,655 | | |
Wildcat Parent, LP(e)(l) | | | 535 | | | | 56,447 | | |
| | | | | | 1,354,786 | | |
Services: Business 0.0% | |
Fastsigns Holdings, Inc.(e)(l) | | | 50 | | | | 58,227 | | |
IRI Parent, LP, Class A-1(e)(l) | | | 250 | | | | 31,085 | | |
| | | | | | 89,312 | | |
Services: Consumer 0.0% | |
Centric Brands, Inc.(e)(l) | | | 3,125 | | | | — | | |
Transportation: Consumer 0.0% | |
APG Holdings, LLC, Class A(e)(l) | | | 50,000 | | | | 55,570 | | |
Total Common Stocks
(Cost: $2,352,609) | | | | | 2,373,124 | | |
Preferred Stocks 0.0%(d)(e)(j)
Capital Equipment 0.0% | |
Blue Angel Holdco, LLC, Class A | | | 243 | | | | 32,805 | | |
Energy: Oil & Gas 0.0% | |
Titan DI Preferred Holdings, Inc. | | | — | | | | 52,625 | | |
Healthcare & Pharmaceuticals 0.0% | |
Virence Intermediate Holding Corp. | | | 25 | | | | 28,985 | | |
High Tech Industries 0.0% | |
EZ Elemica Holdings, Inc. | | | 50 | | | | 39,936 | | |
Frontline Technologies Parent,
LLC, Class A | | | 25 | | | | 32,138 | | |
Peachtree Parent, Inc., Series A | | | 25 | | | | 28,443 | | |
Project Falcon Parent, Inc.,
Class A-1 | | | 50 | | | | 52,956 | | |
| | | | | | 153,473 | | |
Preferred Stocks 0.0%(d)(e)(j) (continued)
| | | Shares | | Value(a) | |
Services: Business 0.0% | |
IRI Group Holdings, Inc., Series A-1 | | | 25 | | | $ | 28,464 | | |
Total Preferred Stocks
(Cost: $299,412) | | | | | 296,352 | | |
Private Asset-Backed Debt 1.8%(c)(d)(e)(j)
| | | Principal
Amount | | | |
Banking, Finance, Insurance & Real Estate 1.8% | |
BFS Receivables I, LLC, 1st Lien
Revolver, 1M LIBOR + 6.00%,
6.17%, 02/09/2022(h)(n) | | $ | 1,000,000 | | | | 406,225 | | |
DFC Funding No. 1, Ltd.,
Mezzanine Revolver, (Great Britain),
1M GBP LIBOR + 9.75%, 10.50%,
12/12/2020(h) | | £ | 865,062 | | | | 1,026,313 | | |
DFC Global Facility Borrower III,
LLC, 1st Lien Revolver, 1M
LIBOR + 10.75%, 11.75%,
09/27/2024(h) | | $ | 10,000,000 | | | | 7,303,202 | | |
HC ABS Funding, Ltd., 1st Lien
Term Loan A, (Cayman Islands),
1M LIBOR + 6.00%, 6.75%,
12/01/2065 | | | 2,453,039 | | | | 2,393,398 | | |
HC ABS Funding, Ltd., Class C,
(Cayman Islands) | | | 1 | | | | 36,000 | | |
NSF Funding 2020, Ltd., 1st Lien
Revolver, (Great Britain), 1M GBP
LIBOR + 4.40%, 6.40%,
03/10/2026(h)(o) | | £ | 11,500,000 | | | | 783,667 | | |
Total Private Asset-Backed Debt
(Cost: $12,826,002) | | | | | 11,948,805 | | |
Real Estate Debt 0.8%(c)(d)(e)(j)
Banking, Finance, Insurance & Real Estate 0.6% | |
285 Mezz, LLC, Junior Mezzanine
Extension Upsize Term Loan,
20.00%, 05/05/2021(g) | | $ | 914,965 | | | | 896,666 | | |
285 Mezz, LLC, Mezzanine
Construction Term Loan, 1M
LIBOR + 14.00%, 16.28%,
05/05/2021(g)(h) | | | 2,592,589 | | | | 2,032,237 | | |
CHDG Phase 1A1 Manager LLC,
Mezzanine Construction Term
Loan, 1M LIBOR + 12.25%,
13.75%, 11/25/2021(g)(h) | | | 1,174,594 | | | | 991,103 | | |
| | | | | | 3,920,006 | | |
Semi-Annual Report 2020
31
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Real Estate Debt 0.8%(c)(d)(e)(j) (continued)
| | | Principal
Amount | | Value(a) | |
Hotel, Gaming & Leisure 0.2% | |
Mandarin Oriental Honolulu,
Extension Upsize Term Loan,
14.00%, 03/31/2020 | | $ | 775,833 | | | $ | 760,316 | | |
Mandarin Oriental Honolulu,
Mezzanine Land Term Loan,
14.00%, 10/01/2020(g) | | | 999,974 | | | | 979,975 | | |
| | | | | | 1,740,291 | | |
Total Real Estate Debt
(Cost: $5,756,244) | | | | | 5,660,297 | | |
Warrants 0.1%(d)(e)(j)(l)
| | | Shares | | Value(a) | |
Healthcare & Pharmaceuticals 0.1% | |
Air Medical Buyer Corp. | | | 122 | | | | 1,475 | | |
Evolent Health, Inc. | | | 106,484 | | | | 443,261 | | |
Teligent, Inc. | | | 11,342 | | | | — | | |
| | | | | | 444,736 | | |
Warrants 0.1%(d)(e)(j)(l) (continued)
| | | Shares | | Value(a) | |
High Tech Industries 0.0% | |
Visual Edge Technology, Inc.,
(Common) | | | 8,166 | | | $ | — | | |
Visual Edge Technology, Inc.,
(Preferred) | | | 7,489 | | | | 10,599 | | |
| | | | | | 10,599 | | |
Transportation: Cargo 0.0% | |
Neovia Logistics Holdings, Ltd. | | | 194,454 | | | | — | | |
Total Warrants
(Cost: $11,261) | | | | | 455,335 | | |
Total Investments — 122.2%
(Cost: $867,849,111) | | | | $ | 825,726,616 | | |
Liabilities in Excess of Other Assets — (22.2%) | | | | | (150,270,408 | ) | |
Net Assets — 100.0% | | | | $ | 675,456,208 | | |
Footnotes:
(a) Investment holdings in foreign currencies are converted to U.S. Dollars using period end spot rates. All investments are in United States enterprises unless otherwise noted.
(b) Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate ("LIBOR") or an alternate base rate such as the Canadian Dollar Offered Rate ("CDOR"), Copenhagen Interbank Offered Rate ("CIBOR"), Euro Interbank Offered Rate ("EURIBOR"), Norwegian Interbank Offered Rate ("NIBOR"), Prime Rate ("PRIME"), or Stockholm Interbank Offered Rate ("STIBOR"), at the borrower's option. Stated interest rates in this schedule represents the "all-in" rate as of June 30, 2020.
(c) Variable rate coupon rate shown as of June 30, 2020.
(d) All of CION Ares Diversified Credit Fund (the "Fund") Senior Loans, Subordinated Loans, Collateralized Loan Obligations, Common Stocks, Corporate Bonds exempt from registration under Rule 144A, Preferred Stock, Private Asset Backed Debt, Real Estate Debt, and Warrants, which as of June 30, 2020 represented 121.2% of the Fund's net assets or 95.6% of the Fund's total assets, are subject to legal restrictions on sales.
(e) Investments whose values were determined using significant unobservable inputs (Level 3) (See Note 3 of the Notes to Financial Statements).
(f) These assets are held at CADEX Credit Financing, LLC, a wholly owned special purpose financing vehicle, and are pledged as collateral for a secured revolving credit facility (see "Note 1 — Organization").
(g) Includes a Payment-In-Kind ("PIK") provision.
(h) As of June 30, 2020, the Fund had entered into the following commitments to fund various revolving and delayed draw senior secured and subordinated loans. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing these loans and there can be no assurance that such conditions will be satisfied. See Note 2 of the Notes to Financial Statements for further information on revolving and delayed draw loan commitments.
Semi-Annual Report 2020
32
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Unfunded Security | | Total revolving and delayed
draw loan commitments | | Less: drawn commitments | | Total undrawn
commitments | |
285 Mezz, LLC, Mezzanine Construction Term Loan | | $ | 2,592,589 | | | $ | 2,084,089 | | | $ | 508,500 | | |
A.U.L. Corp., 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
Affinipay Midco, LLC, 1st Lien Revolver | | | 766,307 | | | | 153,261 | | | | 613,046 | | |
Affirm Operational Loans VI Trust, 1st Lien Revolver | | | 500,000 | | | | — | | | | 500,000 | | |
AMCP Clean Intermediate, LLC, 1st Lien Revolver | | | 1,100 | | | | 581 | | | | 519 | | |
Anaqua Parent Holdings, Inc., 1st Lien Revolver | | | 230,769 | | | | 76,923 | | | | 153,846 | | |
APG Intermediate Holdings Corp., 1st Lien Delayed
Draw Term Loan | | | 804,480 | | | | 60,336 | | | | 744,144 | | |
APG Intermediate Holdings Corp., 1st Lien Revolver | | | 1,000 | | | | 286 | | | | 714 | | |
AQ Sunshine, Inc., 1st Lien Delayed Draw Term Loan | | | 85,975 | | | | — | | | | 85,975 | | |
AQ Sunshine, Inc., Initial 1st Lien Revolver | | | 136,423 | | | | 122,781 | | | | 13,642 | | |
Ardonagh Midco 2, PLC, (Great Britain) | | | 64,410 | | | | — | | | | 64,410 | | |
Ardonagh Midco 3, PLC, EUR Facility 1st Lien Term
Loan B-1, (Great Britain) | | | 217,829 | | | | — | | | | 217,829 | | |
Ardonagh Midco 3, PLC, GBP Facility 1st Lien Term
Loan B-1, (Great Britain) | | | 1,885,614 | | | | — | | | | 1,885,614 | | |
Ardonagh Midco 3, PLC, GBP Facility 1st Lien Term
Loan B-2, (Great Britain) | | | 400,389 | | | | — | | | | 400,389 | | |
ARM Funding, LLC, 1st Lien Revolver B | | | 2,500,000 | | | | 1,499,767 | | | | 1,000,233 | | |
Athenahealth, Inc., 1st Lien Revolver | | | 232,108 | | | | — | | | | 232,108 | | |
Atlas Intermediate III, LLC, 1st Lien Revolver | | | 226,620 | | | | 151,080 | | | | 75,540 | | |
Bearcat Buyer, Inc., 1st Lien Delayed Draw Term Loan | | | 1,013,387 | | | | 321,182 | | | | 692,205 | | |
Bearcat Buyer, Inc., 1st Lien Revolver | | | 580,465 | | | | — | | | | 580,465 | | |
Bearcat Buyer, Inc., 2nd Lien Delayed Draw Term Loan | | | 580,465 | | | | 184,298 | | | | 396,167 | | |
BFS Receivables I, LLC, 1st Lien Revolver | | | 1,000,000 | | | | 413,725 | | | | 586,275 | | |
Blue Angel Buyer 1, LLC, 1st Lien Delayed Draw
Term Loan | | | 640,850 | | | | 281,107 | | | | 359,743 | | |
Blue Angel Buyer 1, LLC, 1st Lien Revolver | | | 321,199 | | | | — | | | | 321,199 | | |
Canopy Bidco, Ltd., Senior Capex Facility 1st Lien
Term Loan, (Great Britain) | | | 620,896 | | | | 161,283 | | | | 459,613 | | |
Capnor Connery Bidco A/S, Facility 1st Lien Term
Loan D, (Denmark) | | | 6,929,793 | | | | 611,017 | | | | 6,318,776 | | |
CB-SDG, Ltd., GBP Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 393,333 | | | | — | | | | 393,333 | | |
Centric Brands, Inc., 1st Lien Revolver | | | 268,883 | | | | 133,830 | | | | 135,053 | | |
CEP V I 5 UK, Ltd., Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 6,346,154 | | | | — | | | | 6,346,154 | | |
CHDG Phase 1A1 Manager LLC, Mezzanine Construction
Term Loan | | | 1,174,594 | | | | 1,014,594 | | | | 160,000 | | |
Commify, Ltd., 1st Lien Acquisition Term Loan,
(Great Britain) | | | 854,800 | | | | — | | | | 854,800 | | |
Comprehensive EyeCare Partners, LLC, 1st Lien Delayed
Draw Term Loan | | | 419,106 | | | | 340,312 | | | | 78,794 | | |
Comprehensive EyeCare Partners, LLC, 1st Lien Revolver | | | 1,000 | | | | 915 | | | | 85 | | |
Semi-Annual Report 2020
33
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Unfunded Security | | Total revolving and delayed
draw loan commitments | | Less: drawn commitments | | Total undrawn
commitments | |
Concert Golf Partners Holdco, LLC, 1st Lien Delayed
Draw Term Loan | | $ | 573,424 | | | $ | 143,087 | | | $ | 430,337 | | |
Concert Golf Partners Holdco, LLC, 1st Lien Revolver | | | 764,512 | | | | 206,418 | | | | 558,094 | | |
Cority Software Inc., 1st Lien Revolver, (Canada) | | | 230,579 | | | | — | | | | 230,579 | | |
CPI Holdco, LLC, 1st Lien Revolver | | | 3,435,381 | | | | 631,974 | | | | 2,803,407 | | |
Creation Holdings, Inc., 1st Lien Revolver | | | 544,813 | | | | 363,209 | | | | 181,604 | | |
CVP Holdco, Inc., 1st Lien Delayed Draw Term Loan | | | 2,725,227 | | | | 806,639 | | | | 1,918,588 | | |
CVP Holdco, Inc., 1st Lien Revolver | | | 326,487 | | | | 321,590 | | | | 4,897 | | |
DecoPac, Inc., Initial 1st Lien Revolver | | | 1,000 | | | | 200 | | | | 800 | | |
DFC Funding No. 1, Ltd., Mezzanine Revolver,
(Great Britain) | | | 1,071,812 | | | | 1,047,749 | | | | 24,063 | | |
DFC Global Facility Borrower III, LLC, 1st Lien
Revolver | | | 10,000,000 | | | | 7,503,202 | | | | 2,496,798 | | |
DRB Holdings, LLC, 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
DRS Holdings III, Inc., 1st Lien Revolver | | | 1,000 | | | | 400 | | | | 600 | | |
eCapital Finance Corp., Subordinated Delayed Draw
Term Loan, (Canada) | | | 3,379,572 | | | | 2,967,264 | | | | 412,308 | | |
EISG Bidco AB, Facility 1st Lien Term Loan B, (Sweden) | | | 429,422 | | | | — | | | | 429,422 | | |
Elemica Parent, Inc., 1st Lien Delayed Draw Term Loan | | | 561,538 | | | | — | | | | 561,538 | | |
Elemica Parent, Inc., 1st Lien Revolver | | | 478,712 | | | | 350,657 | | | | 128,055 | | |
eResearch Technology, Inc., 2nd Lien Delayed Draw
Term Loan | | | 1,343,232 | | | | — | | | | 1,343,232 | | |
EuroParcs (Top) Holding B.V., Acquisition Facility 1st Lien
Term Loan B, (Netherlands) | | | 2,261,725 | | | | — | | | | 2,261,725 | | |
EuroParcs (Top) Holding B.V., Incremental Facility 1st Lien
Term Loan, (Netherlands) | | | 917,851 | | | | 283,616 | | | | 634,235 | | |
Evolent Health, LLC, 1st Lien Delayed Draw Term Loan | | | 3,518,192 | | | | — | | | | 3,518,192 | | |
Ferraro Fine Foods Corp., 1st Lien Revolver | | | 1,000 | | | | 333 | | | | 667 | | |
Floss Bidco, Ltd., Acquisition Facility 1st Lien Term Loan,
(Great Britain) | | | 1,481,024 | | | | 321,648 | | | | 1,159,376 | | |
Flow Control Solutions, Inc., 1st Lien Delayed Draw
Term Loan | | | 994,201 | | | | — | | | | 994,201 | | |
Flow Control Solutions, Inc., 1st Lien Revolver | | | 372,825 | | | | — | | | | 372,825 | | |
Foundation Risk Partners Corp., 1st Lien 3rd Amendment
Delayed Draw Term Loan | | | 1,258,791 | | | | 367,936 | | | | 890,855 | | |
Foundation Risk Partners Corp., 1st Lien Revolver | | | 3,000 | | | | — | | | | 3,000 | | |
Foundation Risk Partners Corp., 2nd Lien 3rd Amendment
Delayed Draw Term Loan | | | 720,610 | | | | 62,798 | | | | 657,812 | | |
FWR Holding Corp., 1st Lien 2nd Amendment Delayed
Draw Term Loan | | | 4,280 | | | | — | | | | 4,280 | | |
FWR Holding Corp., Initial 1st Lien Revolver | | | 1,000 | | | | 525 | | | | 475 | | |
GB Auto Service, Inc., 1st Lien 1st Amendment Delayed
Draw Term Loan | | | 6,002,624 | | | | 2,975,613 | | | | 3,027,011 | | |
GB Auto Service, Inc., 1st Lien Revolver | | | 264,159 | | | | 54,772 | | | | 209,387 | | |
Semi-Annual Report 2020
34
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Unfunded Security | | Total revolving and delayed
draw loan commitments | | Less: drawn commitments | | Total undrawn
commitments | |
GPM Investments, LLC, 1st Lien Delayed Draw Term
Loan A | | $ | 3,312,452 | | | $ | — | | | $ | 3,312,452 | | |
GraphPAD Software, LLC, 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
Hammersmith Bidco, Ltd., Acquisition Capex Facility
1st Lien Term Loan, (Great Britain) | | | 2,079,716 | | | | 1,089,441 | | | | 990,275 | | |
Hometown Food Co., 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
IMIA Holdings, Inc., 1st Lien Revolver | | | 408,163 | | | | — | | | | 408,163 | | |
IntraPac International, LLC, 1st Lien Revolver | | | 415,407 | | | | 167,202 | | | | 248,205 | | |
Invoice Cloud, Inc., 1st Lien Delayed Draw Term Loan | | | 1,197,849 | | | | 1,070,189 | | | | 127,660 | | |
Invoice Cloud, Inc., 1st Lien Revolver | | | 255,319 | | | | — | | | | 255,319 | | |
Just Childcare, Ltd., Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 528,985 | | | | — | | | | 528,985 | | |
Kellermeyer Bergensons Services, LLC, 1st Lien
Delayed Draw Term Loan | | | 540,079 | | | | — | | | | 540,079 | | |
Kene Acquisition, Inc., 1st Lien Delayed Draw
Term Loan | | | 632,240 | | | | 483,645 | | | | 148,595 | | |
Kene Acquisition, Inc., 1st Lien Revolver | | | 675,812 | | | | 109,819 | | | | 565,993 | | |
Laboratories Bidco, LLC, 1st Lien Revolver | | | 513,489 | | | | — | | | | 513,489 | | |
Lavatio Midco SARL, Acquisition Facility 1st Lien Term
Loan, (Luxembourg) | | | 1,094,142 | | | | 679,150 | | | | 414,992 | | |
MB2 Dental Solutions, LLC, 1st Lien Revolver | | | 1,333 | | | | 1,332 | | | | 1 | | |
Micromeritics Instrument Corp., 1st Lien Revolver | | | 331,039 | | | | 320,004 | | | | 11,035 | | |
Movati Athletic Group, Inc., 1st Lien Delayed Draw
Term Loan, (Canada) | | | 185,416 | | | | 128,425 | | | | 56,991 | | |
MRI Software, LLC, 1st Lien Delayed Draw Term Loan | | | 473,329 | | | | — | | | | 473,329 | | |
MRI Software, LLC, 1st Lien Revolver | | | 507,673 | | | | — | | | | 507,673 | | |
Nelipak European Holdings Cooperatief U.A., EUR
1st Lien Revolver, (Netherlands) | | | 653,567 | | | | 264,968 | | | | 388,599 | | |
NMC Skincare Intermediate Holdings II, LLC, 1st
Lien Revolver | | | 333,333 | | | | 213,333 | | | | 120,000 | | |
NSF Funding 2020, Ltd., 1st Lien Revolver,
(Great Britain) | | | 14,248,492 | | | | 1,068,637 | | | | 13,179,855 | | |
Nuehealth Performance, LLC, 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
NXTGenpay Intressenter Bidco AB, Facility 1st Lien
Term Loan D, (Sweden) | | | 193,240 | | | | — | | | | 193,240 | | |
Oakley Ekomid, Ltd., CAR Facility 1st Lien Term Loan,
(Great Britain) | | | 842,588 | | | | — | | | | 842,588 | | |
Olympia Acquisition, Inc., 1st Lien Delayed Draw
Term Loan | | | 2,425,161 | | | | — | | | | 2,425,161 | | |
Olympia Acquisition, Inc., 1st Lien Revolver | | | 640,539 | | | | 597,836 | | | | 42,703 | | |
OMH-HealthEdge Holdings, LLC, 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
P27 Bidco, Ltd., Capex Facility 1st Lien Term Loan,
(Great Britain) | | | 403,145 | | | | 80,629 | | | | 322,516 | | |
PDI TA Holdings, Inc., 1st Lien Revolver | | | 205,023 | | | | 153,767 | | | | 51,256 | | |
Semi-Annual Report 2020
35
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Unfunded Security | | Total revolving and delayed
draw loan commitments | | Less: drawn commitments | | Total undrawn
commitments | |
Petroleum Service Group, LLC, 1st Lien Delayed
Draw Term Loan | | $ | 1,313,959 | | | $ | 108,153 | | | $ | 1,205,806 | | |
Petroleum Service Group, LLC, 1st Lien Revolver | | | 2,105,660 | | | | — | | | | 2,105,660 | | |
Premise Health Holding Corp., 1st Lien Delayed
Draw Term Loan | | | 1,103 | | | | — | | | | 1,103 | | |
Premise Health Holding Corp., 1st Lien Revolver | | | 1,000 | | | | 583 | | | | 417 | | |
Puerto Rico Waste Investment, LLC, 1st Lien
Revolver, (Puerto Rico) | | | 157,737 | | | | — | | | | 157,737 | | |
QF Holdings, Inc., 1st Lien Delayed Draw Term Loan | | | 262,533 | | | | — | | | | 262,533 | | |
QF Holdings, Inc., 1st Lien Revolver | | | 1,000 | | | | 133 | | | | 867 | | |
Raptor Technologies, LLC, 1st Lien Delayed Draw
Term Loan | | | 1,027,519 | | | | 655,229 | | | | 372,290 | | |
Reddy Ice Holdings, Inc., 1st Lien Delayed Draw
Term Loan | | | 952,667 | | | | 484,667 | | | | 468,000 | | |
Reddy Ice Holdings, Inc., 1st Lien Revolver | | | 955,102 | | | | 372,490 | | | | 582,612 | | |
Revint Intermediate II, LLC (fka Implementation
Management Assistance, LLC), 1st Lien Revolver | | | 1,000 | | | | 396 | | | | 604 | | |
RSC Acquisition, Inc., Initial 1st Lien Delayed Draw
Term Loan | | | 554,024 | | | | 32,590 | | | | 521,434 | | |
RSC Acquisition, Inc., Initial 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
RSK Group, Ltd., Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 630,600 | | | | 597,884 | | | | 32,716 | | |
RSK Group, Ltd., Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 619,500 | | | | — | | | | 619,500 | | |
RTI Surgical, Inc., 2nd Lien 2nd Amendment
Incremental Delayed Draw Term Loan | | | 915,320 | | | | 867,582 | | | | 47,738 | | |
SaintMichelCo, Ltd., Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 371,700 | | | | 198,240 | | | | 173,460 | | |
SCM Insurance Services, Inc., 1st Lien Revolver,
(Canada) | | | 736 | | | | 368 | | | | 368 | | |
SCSG EA Acquisition Co., Inc., 1st Lien Revolver | | | 1,000 | | | | 222 | | | | 778 | | |
SecurAmerica, LLC, 1st Lien Revolver | | | 1,125 | | | | — | | | | 1,125 | | |
Sigma Electric Manufacturing Corp., 1st Lien Revolver | | | 1,333 | | | | 1,111 | | | | 222 | | |
SpareFoot, LLC, 1st Lien Revolver | | | 1,000 | | | | 829 | | | | 171 | | |
Spectra Finance, LLC, Initial 1st Lien Revolver | | | 1,000 | | | | 972 | | | | 28 | | |
SSE Buyer, Inc., 1st Lien Delayed Draw Term Loan | | | 189,399 | | | | — | | | | 189,399 | | |
SSE Buyer, Inc., 1st Lien Revolver | | | 1,000 | | | | 729 | | | | 271 | | |
Sunshine Sub, LLC, 1st Lien Revolver | | | 144,269 | | | | 14,427 | | | | 129,842 | | |
Symbol Bidco I, Ltd., Acquisition Capex Facility 1st
Lien Term Loan, (Great Britain) | | | 530,999 | | | | — | | | | 530,999 | | |
TA/WEG Holdings, LLC, 1st Lien Revolver | | | 301,040 | | | | 166,842 | | | | 134,198 | | |
TA/WEG Holdings, LLC, Initial 1st Lien Delayed Draw
Term Loan | | | 2,186,890 | | | | 874,756 | | | | 1,312,134 | | |
Teligent, Inc., 1st Lien Revolver | | | 1,100 | | | | 1,000 | | | | 100 | | |
TimeClock Plus, LLC, 1st Lien Delayed Draw Term Loan | | | 495,170 | | | | — | | | | 495,170 | | |
Semi-Annual Report 2020
36
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Unfunded Security | | Total revolving and delayed
draw loan commitments | | Less: drawn commitments | | Total undrawn
commitments | |
TimeClock Plus, LLC, 1st Lien Revolver | | $ | 458,311 | | | $ | 114,578 | | | $ | 343,733 | | |
True Potential LLP, Acquisition Facility 1st Lien Term
Loan, (Great Britain) | | | 2,407,591 | | | | 1,963,908 | | | | 443,683 | | |
Ultimate Software Group, Inc. (The), 1st Lien Revolver | | | 1,000 | | | | 891 | | | | 109 | | |
Ultimus Group Midco, LLC (The), 1st Lien Revolver | | | 396,226 | | | | 226,415 | | | | 169,811 | | |
United Digestive MSO Parent, LLC, 1st Lien Delayed
Draw Term Loan | | | 1,022,727 | | | | 282,954 | | | | 739,773 | | |
Visolit Finco A/S, 1st Lien Committed Accordion Term
Loan, (Norway) | | | 1,160,363 | | | | — | | | | 1,160,363 | | |
VLS Recovery Services, LLC, 1st Lien Delayed Draw
Term Loan C | | | 1,070,365 | | | | — | | | | 1,070,365 | | |
VLS Recovery Services, LLC, 1st Lien Revolver | | | 1,000 | | | | — | | | | 1,000 | | |
WebPT, Inc., 1st Lien Delayed Draw Term Loan | | | 255,205 | | | | — | | | | 255,205 | | |
Wildcat BuyerCo, Inc., 1st Lien Delayed Draw
Term Loan | | | 1,079,810 | | | | 392,033 | | | | 687,777 | | |
Wildcat BuyerCo, Inc., 1st Lien Revolver | | | 255,015 | | | | 81,605 | | | | 173,410 | | |
WSHP FC Acquisition, LLC, 1st Lien 2nd Amendment
Delayed Draw Term Loan | | | 350,877 | | | | — | | | | 350,877 | | |
WSHP FC Acquisition, LLC, 1st Lien Revolver | | | 88,719 | | | | 28,390 | | | | 60,329 | | |
Total | | $ | 130,836,756 | | | $ | 39,919,351 | | | $ | 90,917,405 | | |
(i) This loan or a portion of this loan represents an unsettled loan purchase. The interest rate will be determined at the time of settlement and will be based upon a spread plus the applicable reference rate determined at the time of purchase.
(j) Security valued at fair value using methods determined in good faith by or under the direction of the board of trustees.
(k) Loan was on non-accrual status as of June 30, 2020.
(l) Non-income producing security as of June 30, 2020.
(m) When-Issued or delayed delivery security based on typical market settlement convention for such security.
(n) The Fund entered into a $500,000 commitment in a secured borrowing with a third party. The secured borrowing provides for the third party to hold a senior interest in the Fund's investment in the first lien revolver. The fair value and commitment of the related first lien revolver associated with the secured borrowing were $122,296 and $500,000, respectively. The fair value of the secured borrowing was $122,296 as of June 30, 2020.
(o) The Fund entered into a $8,970,00 commitment in a secured borrowing with a third party. The secured borrowing provides for the third party to hold a senior interest in the Fund's investment in the first lien revolver. The fair value and commitment of the related first lien revolver associated with the secured borrowing were $641,182 and £6,900,000, respectively. The fair value of the secured borrowing was $651,740 as of June 30, 2020.
As of June 30, 2020, the aggregate cost of securities for Federal income tax purposes was $868,513,301.
Unrealized appreciation and depreciation on investments for Federal income tax purposes are as follows:
Gross unrealized appreciation | | $ | 7,255,374 | | |
Gross unrealized depreciation | | | (50,042,059 | ) | |
Net unrealized depreciation | | $ | (42,786,685 | ) | |
Semi-Annual Report 2020
37
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Foreign Forward Currency Contracts
On June 30, 2020, CION Ares Diversified Credit Fund had entered into forward foreign currency contracts that obligate the Fund to deliver currencies at specified future dates. Unrealized appreciation and depreciation on these contracts is included in the accompanying financial statements. The terms of the open contracts were as follows:
Description | | Notional
Amount to be
Purchased | | Notional Amount
to be Sold | | Counterparty | | Settlement
Date | | Unrealized
Appreciation | | Unrealized
Depreciation | |
Foreign currency forward contract | | $ | (1,117,601 | ) | | £ | (1,098,452 | ) | | GMS | | July 15, 2020 | | $ | 19,149 | | | $ | — | | |
Foreign currency forward contract | | $ | (1,150,721 | ) | | £ | (1,132,532 | ) | | GMS | | July 15, 2020 | | | 18,189 | | | | — | | |
Foreign currency forward contract | | $ | (1,949,057 | ) | | SEK | (1,961,141 | ) | | GMS | | September 18, 2020 | | | — | | | | (12,084 | ) | |
Foreign currency forward contract | | $ | (4,167,715 | ) | | NOK | (4,117,433 | ) | | GMS | | September 18, 2020 | | | 50,282 | | | | — | | |
Foreign currency forward contract | | $ | (2,178,798 | ) | | SEK | (2,177,627 | ) | | GMS | | September 18, 2020 | | | 1,171 | | | | — | | |
Total | | | | | | | | | | $ | 88,791 | | | $ | (12,084 | ) | |
Swap Agreements outstanding as of June 30, 2020 were as follows:
Swap Agreements: Centrally Cleared or Exchange Traded
Credit Default Swaps on Credit Indices — Buy Protection (1)
Descriptions | | Payment
Frequency | | Fixed Deal
Pay Rate | | Expiration Date | | Exchange | | Notional
Amount (2) | | Value (3) | | Upfront
Premium
Paid
(Received) | | Unrealized
Appreciation
(Depreciation) | |
CDX.NA.HY S33 5Y | | | Q | | | | 5.00 | % | | December 20, 2024 | | ICE | | $ | 2,028,600 | | | $ | 8,701 | | | $ | 100,738 | | | $ | (92,037 | ) | |
CDX.NA.HY S33
Tranche 15-25 | | | Q | | | | 5.00 | % | | December 20, 2024 | | ICE | | | 375,000 | | | | 142,153 | | | | 100,250 | | | | 41,903 | | |
Total Swap Agreements: Centrally Cleared or Exchange Traded | | $ | 150,854 | | | $ | 200,988 | | | $ | (50,134 | ) | |
Swap Agreements: Over the Counter
Credit Default Swaps on Credit Indices — Buy Protection (1)
Descriptions | | Payment
Frequency | | Fixed Deal
Pay Rate | | Expiration Date | | Counterparty | | Notional
Amount (2) | | Value (3) | | Upfront
Premium
Paid
(Received) | | Unrealized
Appreciation
(Depreciation) | |
CDX.NA.HY S31
Tranche 15-25 | | | Q | | | | 5.00 | % | | December 20, 2023 | | Goldman Sachs | | $ | 2,784,000 | | | $ | 860,268 | | | $ | (160,312 | ) | | $ | 1,020,580 | | |
CDX.NA.HY S31
Tranche 25-35 | | | Q | | | | 5.00 | % | | December 20, 2023 | | Goldman Sachs | | | 500,000 | | | | (11,067 | ) | | | 56,250 | | | | (67,317 | ) | |
CMBX.NA.BBB-.9 | | | M | | | | 3.00 | % | | September 17, 2058 | | Goldman Sachs | | | 625,000 | | | | 121,191 | | | | 140,563 | | | | (19,372 | ) | |
HCA CDS USD
SR 5Y D14 | | | Q | | | | 5.00 | % | | June 20, 2025 | | Goldman Sachs | | | 375,000 | | | | (49,480 | ) | | | (26,037 | ) | | | (23,443 | ) | |
JWN CDS USD
SR 5Y D14 | | | Q | | | | 1.00 | % | | June 20, 2024 | | Goldman Sachs | | | 210,000 | | | | 31,697 | | | | 11,722 | | | | 19,975 | | |
Total Swap Agreements: Over the Counter | | $ | 952,609 | | | $ | 22,186 | | | $ | 930,423 | | |
Total Swap Agreements: | | $ | 1,103,463 | | | $ | 223,174 | | | $ | 880,289 | | |
(1) If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying investments comprising the referenced index or (ii) receive a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index.
Semi-Annual Report 2020
38
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
(2) The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(3) The quoted market prices and resulting values for credit default swap agreements on credit indices serve as an indicator of the current status of the payment/performance risk and represent the expected amount paid or received for the credit derivative had the notional amount of the swap agreement been closed/sold as of year-end. Increasing values (buy protection) or decreasing values (sell protection), when compared to the notional amount of the swap, represent a deterioration of the referenced entity's credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
The following is a summary of fair values of investments in derivative contracts disclosed in the Fund's Statement of Assets and Liabilities, as of June 30, 2020:
| | | Assets | | Liabilities | |
Swap Credit Contracts | | $ | 1,164,010 | * | | $ | 60,547 | | |
Forward Foreign Currency Contracts | | | 88,791 | | | | 12,084 | | |
* Includes cumulative unrealized appreciation (depreciation) of swap contracts as shown in the schedule of investments. Only the portion of the unrealized appreciation (depreciation) not yet cash settled is shown in the statement of assets and liabilities as variation margin.
The following is a summary of the Fund's realized gain and/or (loss) and change in net unrealized gain and/or (loss) on derivative investments recognized in the Fund's Statement of Operations categorized by primary risk exposure as of June 30, 2020:
| | | Realized Gain (Loss) on Derivative Investments
Recognized in the Statement of Operations | |
| | | Credit
Contracts | | Foreign
Currency
Contracts | | Total | |
Forward Currency Contracts | | $ | — | | | $ | (396,622 | ) | | $ | (396,622 | ) | |
Purchased Swaptions | | | 438,515 | | | | — | | | | 438,515 | | |
Written Swaptions | | | (229,173 | ) | | | — | | | | (229,173 | ) | |
Swaps | | | 632,917 | | | | — | | | | 632,917 | | |
| | | Change in Unrealized Gain (Loss) on Derivative Investments
Recognized in the Statement of Operations | |
| | | Credit
Contracts | | Foreign
Currency
Contracts | | Total | |
Forward Foreign Currency Contracts | | $ | — | | | $ | 771,344 | | | $ | 771,344 | | |
Swaps | | | 1,118,041 | | | | — | | | | 1,118,041 | | |
The average notional amounts of derivative contracts outstanding as of June 30, 2020 which are indicative of the volume of the derivative types were as follows:
| | | Credit
Contracts | | Foreign
Currency
Contracts | | Total | |
Forward Foreign Currency Contracts | |
Buy | | $ | — | | | $ | 15,507,247 | | | $ | 15,507,247 | | |
Sell | | | — | | | | 13,035,886 | | | | 13,035,886 | | |
Purchased Swaptions | | | 2,166,667 | | | | — | | | | 2,166,667 | | |
Written Swaptions | | | 500,000 | | | | — | | | | 500,000 | | |
Swaps | |
Exchange Traded — Buy Protection | | | 1,643,600 | | | | — | | | | 1,643,600 | | |
Over-the-Counter — Buy Protection | | | 4,504,192 | | | | — | | | | 4,504,192 | | |
Abbreviations:
144A Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
CLO Collateralized Loan Obligation
Semi-Annual Report 2020
39
CION Ares Diversified Credit Fund
Schedule of Investments (continued)
June 30, 2020 (Unaudited)
Currencies:
€ Euro Currency
£ British Pounds
$ U.S. Dollars
GBP British Pound
USD U.S. Dollar
USD United States Dollar
Semi-Annual Report 2020
40
CION Ares Diversified Credit Fund
Consolidated Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
Assets: | |
Investments in unaffiliated issuers, at value (cost $867,849,111) | | $ | 825,726,616 | | |
Swaps, at fair value (cost ($8,027)) | | | 1,013,156 | | |
Cash | | | 2,911,396 | | |
Cash denominated in foreign currency, at value (cost $2,939,056) | | | 2,956,645 | | |
Receivable for securities sold | | | 11,418,647 | | |
Forward foreign currency contracts | | | 88,791 | | |
Variation margin on swaps | | | 47,039 | | |
Due from brokers | | | 1,155,627 | | |
Receivable for fund shares issued | | | 1,022,695 | | |
Interest and principal receivable | | | 8,774,802 | | |
Deferred debt issuance costs | | | 1,504,650 | | |
Other assets | | | 76,172 | | |
Total assets | | | 856,696,236 | | |
Liabilities: | |
Credit facilities | | | 131,920,469 | | |
Swaps, at fair value (cost ($30,213)) | | | 60,547 | | |
Payable for securities purchased | | | 44,791,577 | | |
Forward foreign currency contracts | | | 12,084 | | |
Payable for distributions to shareholders | | | 1,592,778 | | |
Payable for investment advisory fees | | | 677,543 | | |
Payable for commitment fee | | | 367,504 | | |
Payable for administration and transfer agent fees | | | 142,175 | | |
Payable for interest expense | | | 501,503 | | |
Payable for distribution and shareholder service fees | | | 190,253 | | |
Payable for expense support | | | 251,062 | | |
Accrued expenses and other payables | | | 732,533 | | |
Total liabilities | | | 181,240,028 | | |
Net assets | | $ | 675,456,208 | | |
Net assets consist of: | |
Paid-in capital | | $ | 738,564,101 | | |
Distributable earnings accumulated loss | | | (63,107,893 | ) | |
Net assets | | $ | 675,456,208 | | |
Semi-Annual Report 2020
41
CION Ares Diversified Credit Fund
Consolidated Statement of Assets and Liabilities (continued)
June 30, 2020 (Unaudited)
Common shares: | |
Class A: | |
Net Assets | | $ | 52,600,404 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 2,263,889 | | |
Net Asset Value Per Share | | $ | 26.24 | | |
Maximum Offering Price Per Share | | $ | 24.65 | | |
Class C: | |
Net Assets | | $ | 62,324,116 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 2,685,841 | | |
Net Asset Value Per Share | | $ | 23.21 | | |
Class I: | |
Net Assets | | $ | 404,804,389 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 17,374,223 | | |
Net Asset Value Per Share | | $ | 23.30 | | |
Class L: | |
Net Assets | | $ | 6,305,421 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 271,455 | | |
Net Asset Value Per Share | | $ | 23.23 | | |
Maximum Offering Price Per Share | | $ | 24.22 | | |
Class U: | |
Net Assets | | $ | 112,112,327 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 4,812,461 | | |
Net Asset Value Per Share | | $ | 23.30 | | |
Class U-2: | |
Net Assets | | $ | 1,083,353 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 46,501 | | |
Net Asset Value Per Share | | $ | 23.30 | | |
Class W: | |
Net Assets | | $ | 36,226,198 | | |
Shares Outstanding ($.001 par value; unlimited shares authorized) | | | 1,551,629 | | |
Net Asset Value Per Share | | $ | 23.35 | | |
Maximum Offering Price Per Share | | $ | 24.08 | | |
Semi-Annual Report 2020
42
CION Ares Diversified Credit Fund
Consolidated Statement of Operations
For the six months ended June 30, 2020 (Unaudited)
Investment income: | | | |
Interest | | $ | 32,199,008 | | |
Dividend | | | 9,002 | | |
Total investment income | | | 32,208,010 | | |
Expenses: | |
Management fee (Note 6) | | | 4,806,222 | | |
Interest expense (Note 5) | | | 1,395,789 | | |
Short sale dividend expense | | | 8,373 | | |
Administrative services of the adviser (Note 6) | | | 623,583 | | |
Legal fees | | | 309,267 | | |
Marketing expense | | | 119,210 | | |
Administration, custodian and transfer agent fees (Note 6) | | | 363,873 | | |
Insurance expense | | | 88,091 | | |
Amortization of debt issuance cost (Note 5) | | | 296,877 | | |
Audit fees | | | 180,326 | | |
Due diligence fees | | | 94,603 | | |
Trustee fees | | | 129,300 | | |
Commitment fee expense (Note 5) | | | 236,959 | | |
Printing expense | | | 115,622 | | |
Class A shareholder service expense | | | 66,411 | | |
Class C shareholder service expense | | | 76,849 | | |
Class L shareholder service expense | | | 7,502 | | |
Class U-2 shareholder service expense(a) | | | 371 | | |
Class C distribution fees | | | 230,546 | | |
Class L distribution fees | | | 7,502 | | |
Class U distribution fees | | | 330,933 | | |
Class U-2 distribution fees(a) | | | 741 | | |
Class W distribution fees | | | 90,989 | | |
Other expenses | | | 496,729 | | |
Total expenses | | | 10,076,668 | | |
Tax expense | | | 57,415 | | |
Expense support recoupment (Note 6) | | | 2,362,845 | | |
Net expenses | | | 12,496,928 | | |
Net investment income | | | 19,711,082 | | |
Net realized and unrealized gain/(loss) on investments, foreign currency and derivative contracts | |
Net realized loss on investments | | | (28,294,132 | ) | |
Net realized loss on foreign currency | | | (1,094,225 | ) | |
Net realized loss on forward foreign currency contracts | | | (396,622 | ) | |
Net realized gain on purchased swaptions | | | 438,515 | | |
Net realized loss on written swaptions | | | (229,173 | ) | |
Net realized gain on swaps | | | 632,917 | | |
Net unrealized loss on investments | | | (49,868,097 | ) | |
Net unrealized gain on foreign currency | | | 5,281,008 | | |
Net unrealized gain on forward foreign currency contracts | | | 771,344 | | |
Net unrealized gain on swaps | | | 1,118,041 | | |
Net realized and unrealized loss on investments, foreign currency and derivative contracts | | | (71,640,424 | ) | |
Total decrease in net assets resulting from operations | | $ | (51,929,342 | ) | |
(a) Period from April 13, 2020, date operations commenced, through June 30, 2020.
Semi-Annual Report 2020
43
CION Ares Diversified Credit Fund
Consolidated Statements of Changes in Net Assets
| | | Six Months Ended
June 30, 2020
(Unaudited) | | For the Period Ended
December 31, 2019(a) | | For the Year Ended
October 31, 2019 | |
Increase (decrease) in net assets from operations: | |
Net investment income | | $ | 19,711,082 | | | $ | 4,627,819 | | | $ | 17,420,309 | | |
Net realized gain/loss on investments and foreign currency | | | (28,942,720 | ) | | | 139,643 | | | | 2,842,157 | | |
Net unrealized gain on investments and foreign currency | | | (42,697,704 | ) | | | 10,447,168 | | | | (8,183,359 | ) | |
Net increase/(decrease) from operations | | | (51,929,342 | ) | | | 15,214,630 | | | | 12,079,107 | | |
Distributions to shareholders from (Note 2): | |
Distributable earnings — Class A | | | (1,556,605 | ) | | | (515,063 | ) | | | (2,776,451 | ) | |
Distributable earnings — Class C | | | (1,807,944 | ) | | | (569,985 | ) | | | (2,551,364 | ) | |
Distributable earnings — Class I | | | (11,142,703 | ) | | | (2,965,640 | ) | | | (11,159,149 | ) | |
Distributable earnings — Class L | | | (176,658 | ) | | | (53,838 | ) | | | (205,652 | ) | |
Distributable earnings — Class U | | | (2,641,944 | ) | | | (304,735 | ) | | | (46,763 | ) | |
Distributable earnings — Class U-2 | | | (9,312 | ) | | | — | | | | — | | |
Distributable earnings — Class W | | | (1,065,027 | ) | | | (352,195 | ) | | | (648,791 | ) | |
Total distributions | | | (18,400,193 | ) | | | (4,761,456 | ) | | | (17,388,170 | ) | |
Increase (decrease) in net assets from operations and distributions | | | (70,329,535 | ) | | | 10,453,174 | | | | (5,309,063 | ) | |
Share transactions: | |
Class A: | |
Proceeds of shares issued | | | 8,471,430 | | | | 4,514,131 | | | | 29,509,300 | | |
Value of distributions reinvested | | | 539,889 | | | | 184,889 | | | | 1,067,687 | | |
Cost of shares redeemed | | | (10,446,710 | ) | | | — | | | | (13,557,079 | ) | |
Net increase (decrease) from share transactions | | | (1,435,391 | ) | | | 4,699,020 | | | | 17,019,908 | | |
Class C: | |
Proceeds of shares issued | | | 8,060,972 | | | | 4,415,043 | | | | 31,409,887 | | |
Value of distributions reinvested | | | 937,997 | | | | 297,112 | | | | 1,301,750 | | |
Cost of shares redeemed | | | (5,338,496 | ) | | | — | | | | (1,992,142 | ) | |
Net increase from share transactions | | | 3,660,473 | | | | 4,712,155 | | | | 30,719,495 | | |
Class I: | |
Proceeds of shares issued | | | 116,811,055 | | | | 47,937,317 | | | | 210,089,276 | | |
Value of distributions reinvested | | | 4,682,059 | | | | 1,153,734 | | | | 3,904,823 | | |
Cost of shares redeemed | | | (27,548,222 | ) | | | — | | | | (23,791,402 | ) | |
Net increase from share transactions | | | 93,944,892 | | | | 49,091,051 | | | | 190,202,697 | | |
Class L: | |
Proceeds of shares issued | | | 1,622,873 | | | | 640,422 | | | | 3,744,948 | | |
Value of distributions reinvested | | | 114,184 | | | | 33,179 | | | | 131,384 | | |
Cost of shares redeemed | | | (1,049,499 | ) | | | — | | | | (211,897 | ) | |
Net increase from share transactions | | | 687,558 | | | | 673,601 | | | | 3,664,435 | | |
Semi-Annual Report 2020
44
CION Ares Diversified Credit Fund
Consolidated Statements of Changes in Net Assets (continued)
| | | Six Months Ended
June 30, 2020
(Unaudited) | | For the Period Ended
December 31, 2019(a) | | For the Year Ended
October 31, 2019 | |
Class U: | |
Proceeds of shares issued | | | 77,291,411 | | | | 31,434,447 | | | | 10,506,151 | (b) | |
Value of distributions reinvested | | | 2,243,059 | | | | 280,233 | | | | 45,636 | (b) | |
Cost of shares redeemed | | | (1,165,800 | ) | | | — | | | | (151 | )(b) | |
Net increase from share transactions | | | 78,368,670 | | | | 31,714,680 | | | | 10,551,636 | (b) | |
Class U-2: | |
Proceeds of shares issued | | | 1,039,525 | (c) | | | — | | | | — | | |
Value of distributions reinvested | | | 4,441 | (c) | | | — | | | | — | | |
Net increase from share transactions | | | 1,043,966 | (c) | | | — | | | | — | | |
Class W: | |
Proceeds of shares issued | | | — | | | | — | | | | 38,374,996 | (d) | |
Value of distributions reinvested | | | 824,855 | | | | 286,441 | | | | 526,013 | (d) | |
Cost of shares redeemed | | | (111,425 | ) | | | — | | | | (305 | )(d) | |
Net increase from share transactions | | | 713,430 | | | | 286,441 | | | | 38,900,704 | (d) | |
Total increase in net assets | | | 106,654,063 | | | | 101,630,122 | | | | 285,749,812 | | |
Net Assets, beginning of period | | | 568,802,145 | | | | 467,172,023 | | | | 181,422,211 | | |
Net Assets, end of period | | $ | 675,456,208 | | | $ | 568,802,145 | | | $ | 467,172,023 | | |
(a) For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(b) Period from July 26, 2019, date operations commenced, through October 31, 2019.
(c) Period from April 13, 2020, date operations commenced, through June 30, 2020.
(d) Period from December 21, 2018, date operations commenced, through October 31, 2019.
Semi-Annual Report 2020
45
CION Ares Diversified Credit Fund
Consolidated Statement of Cash Flows
For the six months ended June 30, 2020 (Unaudited)
Operating activities: | |
Net decrease in net assets resulting from operations | | $ | (51,929,342 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities: | |
Purchases of investments | | | (493,727,012 | ) | |
Proceeds from the sale of investments | | | 282,462,066 | | |
Proceeds from swaps | | | 2,060,627 | | |
Amortization and accretion of discounts and premiums, net | | | (1,362,021 | ) | |
Net realized (gain)/loss on investments | | | 28,294,132 | | |
Net realized (gain)/loss on purchased swaptions | | | (438,515 | ) | |
Net realized (gain)/loss on written swaptions | | | 229,173 | | |
Net realized (gain)/loss on swaps | | | (632,917 | ) | |
Net unrealized (gain)/loss on investments | | | 49,868,097 | | |
Net unrealized (gain)/loss on swaps | | | (1,118,041 | ) | |
Effect of exchange rate changes on line of credit | | | (3,318,470 | ) | |
Amortization of debt issuance cost | | | 296,877 | | |
Payment-in-kind interest | | | (807,267 | ) | |
Changes in operating assets and liabilities: | |
Due from brokers | | | 756,807 | | |
Receivable for securities sold | | | (1,740,796 | ) | |
Forward foreign currency contracts | | | 284,517 | | |
Variation margin on swaps | | | 21,527 | | |
Interest and principal receivable | | | (2,423,045 | ) | |
Other assets | | | 74,048 | | |
Payable for securities purchased | | | 18,624,738 | | |
Forward foreign currency contracts | | | (1,055,861 | ) | |
Payable for investment advisory fees | | | 104,024 | | |
Payable for interest expense | | | 421,148 | | |
Payable for administration, custodian and transfer agent fees | | | (75,192 | ) | |
Payable for distribution and shareholder servicing fees | | | 37,734 | | |
Payable for commitment fees | | | 128,005 | | |
Payable for expense support | | | 207,227 | | |
Accrued expenses and other payables | | | (647,952 | ) | |
Net cash flow used in operating activities | | | (175,405,684 | ) | |
Semi-Annual Report 2020
46
CION Ares Diversified Credit Fund
Consolidated Statement of Cash Flows (continued)
For the six months ended June 30, 2020 (Unaudited)
Financing activities: | |
Borrowings on line of credit | | $ | 307,413,308 | | |
Paydowns of line of credit | | | (301,789,157 | ) | |
Deferred debt issuance costs | | | (237,650 | ) | |
Proceeds of shares issued | | | 215,110,656 | | |
Cost of shares redeemed | | | (45,661,033 | ) | |
Distributions to shareholders | | | (8,786,910 | ) | |
Net cash provided by financing activities | | | 166,049,214 | | |
Net decrease in Cash | | | (9,356,470 | ) | |
Cash: | |
Beginning of period | | | 15,224,511 | | |
End of period | | $ | 5,868,041 | | |
Supplemental disclosure of cash flow information: | |
Cash paid during the period for interest | | $ | 974,641 | | |
Semi-Annual Report 2020
47
CION Ares Diversified Credit Fund
| | | Six Months
Ended
June 30,
2020
(Unaudited) | | For the
Period Ended
December 31,
2019* | | For the
Year Ended
October 31,
2019 | | For the
For the
Year Ended
October 31,
2018 | | Period from
January 26,
2017 to
October 31,
2017 | |
Class A | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.93 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | | $ | 25.00 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.69 | | | | 0.23 | | | | 1.39 | | | | 1.52 | | | | 0.86 | | |
Net realized and unrealized gain (loss) | | | 0.31 | | | | 0.49 | | | | (0.36 | ) | | | 0.42 | | | | 0.44 | | |
Total income from investment operations | | | 1.00 | | | | 0.72 | | | | 1.03 | | | | 1.94 | | | | 1.30 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (0.86 | ) | |
From net realized gains on investments | | | — | | | | — | | | | — | | | | — | | | | (0.12 | ) | |
From net unrealized gain on investments and
foreign currency | | | — | | | | — | | | | — | | | | — | | | | (0.07 | ) | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (1.05 | ) | |
Net asset value, end of period | | $ | 26.24 | | | $ | 25.93 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | |
Total return, excluding expense support(b) | | | (7.08 | )%(c) | | | 2.86 | %(c) | | | 4.37 | % | | | (2.44 | )% | | | (37.12 | )%(c) | |
Total return, including expense support(d) | | | (7.70 | )%(c) | | | 2.86 | %(c) | | | 4.10 | % | | | 7.91 | % | | | 5.32 | %(c) | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 52,600,404 | | | $ | 60,203,302 | | | $ | 54,385,716 | | | $ | 37,915,185 | | | $ | 12,864,545 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(h) | | | 3.23 | %(f) | | | 4.01 | %(f) | | | 4.03 | % | | | 5.98 | % | | | 58.85 | %(f) | |
Expenses, including expense support(e)(g)(h) | | | 3.85 | %(f) | | | 4.01 | %(f) | | | 4.30 | % | | | 0.34 | % | | | 0.00 | %(f) | |
Excluding interest expense: | |
Expenses, excluding expense support(h) | | | 2.78 | %(f) | | | 3.33 | %(f) | | | 3.38 | % | | | 5.97 | % | | | 58.85 | %(f) | |
Expenses, including expense support(g)(h) | | | 3.41 | %(f) | | | 3.33 | %(f) | | | 3.65 | % | | | 0.33 | % | | | 0.00 | %(f) | |
Net investment income(e) | | | 5.89 | %(f) | | | 5.27 | %(f) | | | 5.56 | % | | | 5.91 | % | | | 4.48 | %(f) | |
Portfolio turnover rate | | | 35.61 | %(c) | | | 5.42 | %(c) | | | 63.58 | % | | | 28.36 | % | | | 164.09 | %(c) | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.53% of base management fees, 0.45% of the cost of borrowing, 0.62% of net expense support and 1.25% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.68% of the cost of borrowing, 0.00% of net expense support and 1.77% of other operating expenses. For the year ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.47% of base management fees, 0.65% of the cost of borrowing, 0.27% of net expense support and 1.91% of other operating expenses. For the year ended October 31, 2018, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (5.91)% of net expense support and 4.76% of other operating expenses. For the period ended October 31, 2017, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (56.68)% of net expense support and 55.19% of other operating expenses.
Semi-Annual Report 2020
48
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | Six Months
Ended
June 30,
2020
(Unaudited) | | For the
Period Ended
December 31,
2019* | | For the
Year Ended
October 31,
2019 | | For the
Year Ended
October 31,
2018 | | For the Period
from July 12, 2017
(commencement of
operations) to
October 31, 2017 | |
Class C | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.90 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | | $ | 24.95 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.69 | | | | 0.19 | | | | 1.39 | | | | 1.52 | | | | 0.39 | | |
Net realized and unrealized gain (loss) | | | (2.69 | ) | | | 0.50 | | | | (0.36 | ) | | | 0.42 | | | | 0.33 | | |
Total income from investment operations | | | (2.00 | ) | | | 0.69 | | | | 1.03 | | | | 1.94 | | | | 0.72 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.19 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (0.39 | ) | |
From net realized gains on investments | | | — | | | | (0.04 | ) | | | — | | | | — | | | | (0.02 | ) | |
From net unrealized gain on investments and
foreign currency | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (0.42 | ) | |
Net asset value, end of period | | $ | 23.21 | | | $ | 25.90 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | |
Total return, excluding expense support(b) | | | (7.47 | )%(c) | | | 2.74 | %(c) | | | 3.70 | % | | | (3.19 | )% | | | (3.56 | )%(c) | |
Total return, including expense support(d) | | | (7.71 | )%(c) | | | 2.74 | %(c) | | | 4.10 | % | | | 7.91 | % | | | 2.95 | %(c) | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 62,324,116 | | | $ | 65,778,748 | | | $ | 59,912,232 | | | $ | 29,868,425 | | | $ | 3,897,826 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(h) | | | 3.98 | %(f) | | | 4.76 | %(f) | | | 4.82 | % | | | 6.73 | % | | | 22.59 | %(f) | |
Expenses, including expense support(e)(g)(h) | | | 4.22 | %(f) | | | 4.76 | %(f) | | | 4.42 | % | | | 0.34 | % | | | 0.00 | %(f) | |
Excluding interest expense: | |
Expenses, excluding expense support(h) | | | 3.53 | %(f) | | | 4.07 | %(f) | | | 4.15 | % | | | 6.72 | % | | | 22.59 | %(f) | |
Expenses, including expense support(g)(h) | | | 3.77 | %(f) | | | 4.07 | %(f) | | | 3.75 | % | | | 0.33 | % | | | 0.00 | %(f) | |
Net investment income(e) | | | 5.90 | %(f) | | | 4.52 | %(f) | | | 5.48 | % | | | 5.91 | % | | | 5.17 | %(f) | |
Portfolio turnover rate | | | 35.61 | %(c) | | | 5.42 | %(c) | | | 63.58 | % | | | 28.36 | % | | | 164.09 | %(c) | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.53% of base management fees, 0.45% of the cost of borrowing, 0.24% of net expense support and 2.00% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.68% of the cost of borrowing, 0.00% of net expense support and 2.52% of other operating expenses. For the year ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.47% of base management fees, 0.67% of the cost of borrowing, (0.40)% of net expense support and 2.67% of other operating expenses. For the year ended October 31, 2018, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (6.20)% of net expense support and 5.05% of other operating expenses. For the period ended October 31, 2017, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (33.93)% of net expense support and 32.44% of other operating expenses.
Semi-Annual Report 2020
49
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | Six Months
Ended
June 30,
2020
(Unaudited) | | For the
Period Ended
December 31,
2019* | | For the
Year Ended
October 31,
2019 | | For the
Year Ended
October 31,
2018 | | For the Period
from July 12, 2017
(commencement of
operations) to
October 31, 2017 | |
Class I | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.93 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | | $ | 24.95 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.75 | | | | 0.23 | | | | 1.39 | | | | 1.52 | | | | 0.40 | | |
Net realized and unrealized gain (loss) | | | (2.69 | ) | | | 0.49 | | | | (0.36 | ) | | | 0.42 | | | | 0.32 | | |
Total income from investment operations | | | (1.94 | ) | | | 0.72 | | | | 1.03 | | | | 1.94 | | | | 0.72 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (0.40 | ) | |
From net realized gains on investments | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | |
From net unrealized gain on investments and
foreign currency | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.39 | ) | | | (0.42 | ) | |
Net asset value, end of period | | $ | 23.30 | | | $ | 25.93 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.25 | | |
Total return, excluding expense support(b) | | | (6.99 | )%(c) | | | 2.88 | %(c) | | | 4.78 | % | | | (2.19 | )% | | | (2.49 | )%(c) | |
Total return, including expense support(d) | | | (7.47 | )%(c) | | | 2.86 | %(c) | | | 4.10 | % | | | 7.91 | % | | | 2.95 | %(c) | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 404,804,389 | | | $ | 354,144,166 | | | $ | 298,480,878 | | | $ | 111,705,126 | | | $ | 6,047,638 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(h) | | | 2.99 | %(f) | | | 3.74 | %(f) | | | 3.87 | % | | | 5.73 | % | | | 18.62 | %(f) | |
Expenses, including expense support(e)(g)(h) | | | 3.47 | %(f) | | | 3.87 | %(f) | | | 4.55 | % | | | 0.34 | % | | | 0.00 | %(f) | |
Excluding interest expense: | |
Expenses, excluding expense support(h) | | | 2.54 | %(f) | | | 3.06 | %(f) | | | 3.17 | % | | | 5.71 | % | | | 18.62 | %(f) | |
Expenses, including expense support(g)(h) | | | 3.02 | %(f) | | | 3.19 | %(f) | | | 3.85 | % | | | 0.32 | % | | | 0.00 | %(f) | |
Net investment income(e) | | | 6.37 | %(f) | | | 5.44 | %(f) | | | 5.38 | % | | | 5.91 | % | | | 5.19 | %(f) | |
Portfolio turnover rate | | | 35.61 | %(c) | | | 5.42 | %(c) | | | 63.58 | % | | | 28.36 | % | | | 164.09 | %(c) | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.54% of base management fees, 0.45% of the cost of borrowing, 0.48% of net expense support and 1.00% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.68% of the cost of borrowing, 0.13% of net expense support and 1.51% of other operating expenses. For the year ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.48% of base management fees, 0.71% of the cost of borrowing, 0.68% of net expense support and 1.68% of other operating expenses. For the year ended October 31, 2018, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (4.79)% of net expense support and 3.64% of other operating expenses. For the period ended October 31, 2017, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.00% of the cost of borrowing, (29.81)% of net expense support and 28.33% of other operating expenses.
Semi-Annual Report 2020
50
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | Six Months Ended
June 30, 2020
(Unaudited) | | For the Period Ended
December 31, 2019* | | For the Year Ended
October 31, 2019 | | For the Period from
November 2, 2017
(commencement of
operations) to
October 31, 2018 | |
Class L | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.92 | | | $ | 25.44 | | | $ | 25.80 | | | $ | 25.23 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.70 | | | | 0.19 | | | | 1.39 | | | | 1.52 | | |
Net realized and unrealized gain (loss) | | | (2.70 | ) | | | 0.52 | | | | (0.36 | ) | | | 0.43 | | |
Total income from investment operations | | | (2.00 | ) | | | 0.71 | | | | 1.03 | | | | 1.95 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.19 | ) | | | (1.39 | ) | | | (1.38 | ) | |
From net realized gains on investments | | | — | | | | (0.04 | ) | | | — | | | | — | | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (1.39 | ) | | | (1.38 | ) | |
Net asset value, end of period | | $ | 23.23 | | | $ | 25.92 | | | $ | 25.44 | | | $ | 25.80 | | |
Total return, excluding expense support(b) | | | (7.27 | )%(c) | | | 2.82 | %(c) | | | 4.32 | % | | | (2.69 | )%(c) | |
Total return, including expense support(d) | | | (7.71 | )%(c) | | | 2.82 | %(c) | | | 4.10 | % | | | 7.96 | %(c) | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 6,305,421 | | | $ | 6,324,858 | | | $ | 5,536,090 | | | $ | 1,933,475 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(h) | | | 3.44 | %(f) | | | 4.24 | %(f) | | | 4.38 | % | | | 6.23 | %(f) | |
Expenses, including expense support(e)(g)(h) | | | 3.88 | %(f) | | | 4.24 | %(f) | | | 4.60 | % | | | 0.34 | %(f) | |
Excluding interest expense: | |
Expenses, excluding expense support(h) | | | 3.00 | %(f) | | | 3.56 | %(f) | | | 3.67 | % | | | 6.21 | %(f) | |
Expenses, including expense support(g)(h) | | | 3.44 | %(f) | | | 3.56 | %(f) | | | 3.89 | % | | | 0.32 | %(f) | |
Net investment income(e) | | | 5.96 | %(f) | | | 4.47 | %(f) | | | 5.35 | % | | | 5.91 | %(f) | |
Portfolio turnover rate | | | 35.61 | %(c) | | | 5.42 | %(c) | | | 63.58 | % | | | 28.36 | %(c) | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.54% of base management fees, 0.45% of the cost of borrowing, 0.44% of net expense support and 1.46% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.68% of the cost of borrowing, 0.00% of net expense support and 2.01% of other operating expenses. For the year ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.49% of base management fees, 0.72% of the cost of borrowing, 0.21% of net expense support and 2.18% of other operating expenses. For the period ended October 31, 2018, the ratio of operating expenses to average net assets consisted of 1.48% of base management fees, 0.00% of the cost of borrowing, (4.71)% of net expense support and 3.57% of other operating expenses.
Semi-Annual Report 2020
51
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | Six Months Ended
June 30, 2020
(Unaudited) | | For the Period Ended
December 31, 2019* | | For the Period from
July 26, 2019
(commencement of
operations) to
October 31, 2019 | |
Class U | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.92 | | | $ | 25.44 | | | $ | 25.86 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.75 | | | | 0.23 | | | | 0.40 | | |
Net realized and unrealized gain (loss) | | | (2.68 | ) | | | 0.48 | | | | (0.45 | ) | |
Total income from investment operations | | | (1.93 | ) | | | 0.71 | | | | (0.05 | ) | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.23 | ) | | | (0.37 | ) | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (0.37 | ) | |
Net asset value, end of period | | $ | 23.30 | | | $ | 25.92 | | | $ | 25.44 | | |
Total return, excluding expense support(b)(c) | | | (7.41 | )% | | | 2.74 | % | | | 1.60 | % | |
Total return, including expense support(d)(c) | | | (7.44 | )% | | | 2.82 | % | | | (0.14 | )% | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 112,112,327 | | | $ | 42,902,144 | | | $ | 10,433,963 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(f)(h) | | | 3.75 | % | | | 4.31 | % | | | 4.85 | % | |
Expenses, including expense support(e)(g)(f)(h) | | | 3.78 | % | | | 3.83 | % | | | 6.59 | % | |
Excluding interest expense: | |
Expenses, excluding expense support(f)(h) | | | 3.30 | % | | | 3.66 | % | | | 3.88 | % | |
Expenses, including expense support(g)(f)(h) | | | 3.33 | % | | | 4.48 | % | | | 5.62 | % | |
Net investment income(e)(f) | | | 6.39 | % | | | 5.39 | % | | | 12.08 | % | |
Portfolio turnover rate(c) | | | 35.61 | % | | | 5.42 | % | | | 63.58 | % | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.55% of base management fees, 0.45% of the cost of borrowing, 0.03% of net expense support and 1.75% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.65% of the cost of borrowing, (0.47)% of net expense support and 2.10% of other operating expenses. For the period ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.61% of base management fees, 0.89% of the cost of borrowing, 1.74% of net expense support and 2.35% of other operating expenses.
Semi-Annual Report 2020
52
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | For the
Period from
April 12, 2020 to
June 30, 2020
(Unaudited) | |
Class U-2 | |
Per share data: | |
Net asset value, beginning of period | | $ | 21.79 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.47 | | |
Net realized and unrealized gains | | | 1.34 | | |
Total income from investment operations | | | 1.81 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.30 | ) | |
Total distributions | | | (0.30 | ) | |
Net asset value, end of period | | $ | 23.30 | | |
Total return, excluding expense support(b)(c) | | | 2.34 | % | |
Total return, including expense support(d)(c) | | | 2.34 | % | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 1,083,353 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(f)(h) | | | 3.74 | % | |
Expenses, including expense support(e)(f)(g)(h) | | | 3.74 | % | |
Excluding interest expense: | |
Expenses, excluding expense support(f)(h) | | | 3.41 | % | |
Expenses, including expense support(f)(g)(h) | | | 3.41 | % | |
Net investment income(e)(f) | | | 10.02 | % | |
Portfolio turnover rate(c) | | | 35.61 | % | |
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized.
(g) Includes expense support provided or recouped by the adviser.
(h) For the period ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.65% of base management fees, 0.33% of the cost of borrowing, 0.00% of net expense support and 1.76% of other operating expenses.
Semi-Annual Report 2020
53
CION Ares Diversified Credit Fund
Financial Highlights (continued)
| | | Six Months Ended
June 30, 2020
(Unaudited) | | For the Period Ended
December 31, 2019* | | For the Period from
December 21, 2018
(commencement of
operations) to
October 31, 2019 | |
Class W | |
Per share data: | |
Net asset value, beginning of period | | $ | 25.92 | | | $ | 25.44 | | | $ | 25.03 | | |
Income from investment operations: | |
Net investment income(a) | | | 0.82 | | | | 0.25 | | | | 1.23 | | |
Net realized and unrealized gain (loss) | | | (2.70 | ) | | | 0.46 | | | | 0.38 | | |
Total income from investment operations | | | (1.88 | ) | | | 0.71 | | | | 1.61 | | |
Less distributions declared to shareholders: | |
From net investment income | | | (0.69 | ) | | | (0.23 | ) | | | (1.20 | ) | |
Total distributions | | | (0.69 | ) | | | (0.23 | ) | | | (1.20 | ) | |
Net asset value, end of period | | $ | 23.35 | | | $ | 25.92 | | | $ | 25.44 | | |
Total return, excluding expense support(b)(c) | | | (7.24 | )% | | | 2.82 | % | | | 7.00 | % | |
Total return, including expense support(d)(c) | | | (7.24 | )% | | | 2.82 | % | | | 6.25 | % | |
Ratios to average net assets/supplemental data: | |
Net assets, end of period | | $ | 36,226,198 | | | $ | 39,448,927 | | | $ | 38,423,144 | | |
Including interest expense: | |
Expenses, excluding expense support(e)(f)(h) | | | 3.48 | % | | | 4.28 | % | | | 4.73 | % | |
Expenses, including expense support(e)(g)(f)(h) | | | 3.48 | % | | | 4.28 | % | | | 5.47 | % | |
Excluding interest expense: | |
Expenses, excluding expense support(f)(h) | | | 3.03 | % | | | 3.59 | % | | | 3.65 | % | |
Expenses, including expense support(g)(f)(h) | | | 3.03 | % | | | 3.59 | % | | | 4.39 | % | |
Net investment income(e)(f) | | | 6.89 | % | | | 4.97 | % | | | 5.14 | % | |
Portfolio turnover rate(c) | | | 35.61 | % | | | 5.42 | % | | | 63.58 | % | |
* For the two month period ended December 31, 2019. See Note 1 of Notes to Financial Statements.
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
(b) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return excludes expense support provided or recouped by the adviser.
(c) Not annualized.
(d) Based on net asset value per share. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Total Return is not annualized for periods less than one year. Total return includes expense support provided or recouped by the adviser.
(e) Includes organizational and offering costs.
(f) Annualized, except for certain non-recurring costs.
(g) Includes expense support provided or recouped by the adviser.
(h) For the six months ended June 30, 2020, the ratio of operating expenses to average net assets consisted of 1.53% of base management fees, 0.45% of the cost of borrowing, 0.00% of net expense support and 1.50% of other operating expenses. For the period ended December 31, 2019, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.68% of the cost of borrowing, 0.00% of net expense support and 2.03% of other operating expenses. For the period ended October 31, 2019, the ratio of operating expenses to average net assets consisted of 1.57% of base management fees, 0.91% of the cost of borrowing, 0.74% of net expense support and 2.24% of other operating expenses.
Semi-Annual Report 2020
54
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements
June 30, 2020 (Unaudited)
(1) Organization
CION Ares Diversified Credit Fund (the "Fund") is a diversified, closed-end management investment company that is registered under the Investment Company Act of 1940. The Fund is structured as an interval fund and continuously offers its shares. The Fund was organized as a Delaware statutory trust on June 21, 2016. CION Ares Management, LLC (the "Adviser") serves as the investment Adviser to the Fund and was registered as an investment adviser with the Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940 (the "Advisers Act") on January 4, 2017. The Adviser is a joint venture between affiliates of Ares Management Corporation ("Ares") and CION Investment Group, LLC ("CION") and is controlled by Ares. The Adviser oversees the management of the Fund's activities and is responsible for making investment decisions for the Fund's portfolio.
On August 2, 2018, the Fund formed a wholly owned special purpose financing vehicle, CADEX Credit Financing, LLC (the "Financing Sub"), a Delaware limited liability company. On September 13, 2017, the Fund formed a wholly owned blocker corporation , CADEX Blocker Corp. (the "Blocker Corp"), a Delaware Corporation.
Investment Objective and Policies
The Fund's investment objective is to provide superior risk-adjusted returns across various market cycles by investing in a diversified portfolio of liquid and illiquid asset classes. The Fund seeks to capitalize on market inefficiencies and relative value opportunities throughout the entire global credit spectrum.
Fiscal Year End Change
On September 25, 2019, the Fund's board of trustees approved a change to the fiscal year end of the Fund from October 31 to December 31. Accordingly, the Fund's financial statements and related notes include information as of and for the six months ended June 30, 2020, the two month period ended December 31, 2019 and the year ended October 31, 2019.
(2) Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in conformity with U.S. generally accepted accounting principles ("GAAP"), and includes the accounts of the Fund and its consolidated subsidiaries. The Fund is an investment company following accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, Financial Services — Investment Companies. The consolidated financial statements
reflect all adjustments and reclassification, that, in the opinion of management, are necessary for the fair presentation of the results of operations and financial condition as of and for the periods presented. All significant intercompany balances and transactions have been eliminated. The Adviser makes estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results may differ from those estimates and such differences may be material.
Investments Valuation
All investments in securities are recorded at their fair value. See Note 3 for more information on the Fund's valuation process.
Interest Income
Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected and adjusted for accretion of discounts and amortization of premiums. The Fund may have investments that contain payment-in-kind ("PIK") provisions. The PIK interest, computed at the contractual rate specified, may be added to the principal balance and adjusted cost of the investments and recorded as interest income. The PIK interest for the six months ended June 30, 2020 was $807,267 recorded as interest income.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current. The Fund may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) and is in the process of collection.
Discounts and Premiums
Discounts and premiums on securities purchased are accreted/amortized over the life of the respective security using the effective interest method. The adjusted cost of investments represents the original cost adjusted for PIK interest, the accretion of discounts, and amortization of premiums.
Cash and Cash Equivalents
The Fund considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents. The Fund's cash and cash equivalents are maintained with a major United
Semi-Annual Report 2020
55
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
States financial institution, which is a member of the Federal Deposit Insurance Corporation. While the Fund's current cash balance exceeds insurance limits, the risk of loss is remote.
Investment Transactions, Related Investment Income and Expenses
Investment transactions are accounted for on the trade date. Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, the Fund looks at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Adviser in accordance with the Fund's valuation policy (the "Valuation Policy"). The Valuation Policy is reviewed and approved at least annually by the Fund's board of trustees (the "Board"). The Adviser has been authorized by the Board to utilize independent third-party pricing and valuation services to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12-month period (with certain de minimis exceptions) in accordance with the Valuation Policy and a consistently applied valuation process. As part of the valuation process for investments that do not have readily available market prices, the Adviser may take into account the following types of factors, if relevant, in determining the fair value of the Fund's investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets, which may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Adviser considers the pricing indicated by the external event to corroborate its valuation.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Fund's investments may fluctuate from period to period. Additionally, the fair value of the Fund's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the
Fund may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Fund was required to liquidate a portfolio investment in a forced or liquidation sale, the Fund could realize significantly less than the value at which the Fund has recorded it. 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 ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.
See Note 3 for more information on the Fund's valuation process.
Interest income, adjusted for amortization of premiums and accretion of discounts on investments, is earned from settlement date and is recorded on the accrual basis. Realized gains and losses are reported on the specific identification method. Expenses are recorded on the accrual basis as incurred.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
Foreign Currency Transactions and Forward Foreign Currency Contracts
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the date of valuation; and (ii) purchases and sales of investments and income and expense items denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on transaction dates.
The Fund does not isolate that portion of the results of operations resulting from the changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included within the net realized and unrealized gain (loss) on investments in the Consolidated Statement of Operations.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates of securities transactions, and the difference between the amounts of income and expense items recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or
Semi-Annual Report 2020
56
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
paid. Net unrealized foreign currency gains and losses arise from the changes in fair values of assets and liabilities, other than investments in securities at period end, resulting from changes in exchange rates.
Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.
The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuations. A forward foreign currency contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date. The Fund may also enter into these contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one currency to another. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete the obligations of the contract. The fair values of the forward foreign currency exchange contracts are obtained from an independent pricing source.
Distributions to Shareholders
The Fund records distributions from net investment income daily. These distributions may be reinvested or paid monthly to shareholders. The Fund intends to pay common shareholders at least annually all or substantially all of its taxable income. The Fund intends to pay any capital gains distributions at least annually.
The Fund may make distributions, without limitation, from offering proceeds or borrowings, which may constitute a return of capital, as well as net investment income from operations, capital and non-capital gains from the sale of assets, and dividends or distributions from equity investments. Furthermore, a portion of the Fund's distributions may be derived from expense support payments made by the Adviser, which are subject to repayment by the Fund within three years, pursuant to the Expense Support and Conditional Reimbursement Agreement (the "Expense Support
Agreement"). The purpose of such expense support payments is to ensure that the Fund bears an appropriate level of expenses. As such, the Fund's distributions may not be entirely based on investment performance and can only be sustained if positive investment performance is achieved in future periods and/or the Adviser continues to make such expense support payments. Any future repayments of expenses by the Fund will reduce cash otherwise potentially available for distributions. There can be no assurance that sufficient performance will be achieved in order to sustain the current level of the Fund's distributions. After the expiration of the current term of the Expense Support Agreement on July 31, 2021, the Adviser may not make expense support payments in future periods. If the Adviser does not make any expense support payments during such period, all or a portion of the Fund's distributions may be a return of capital which would reduce the available capital for investment. The sources of the Fund's distributions may vary periodically. Please refer to the Financial Highlights table for the sources of distributions.
Commitments and Contingencies
In the normal course of business, the Fund's investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the Fund's custodian. These activities may expose the Fund to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Fund enters into contracts that contain a variety of indemnifications, and is engaged from time to time in various legal actions. The maximum exposure of the Fund under these arrangements and activities is unknown. However, the Fund expects the risk of material loss to be remote.
Commitments to extend credit include loan proceeds the Fund is obligated to advance, such as delayed draws or revolving credit arrangements. Commitments generally have fixed expiration dates or other termination clauses. Unrealized gains or losses associated with unfunded commitments are recorded in the consolidated financial statements and reflected as an adjustment to the fair value of the related security in the Consolidated Schedule of Investments. The par amount of the unfunded commitments is not recognized by the Fund until it becomes funded. As of June 30, 2020, the Fund had unfunded commitments of $90,917,404.
Income Taxes
The Fund intends to distribute all or substantially all of its taxable income and to comply with the other requirements of Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, applicable to Regulated Investment Companies.
Semi-Annual Report 2020
57
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Accordingly, no provision for U.S. federal income taxes is required.
The Fund may elect to incur an excise tax if it is deemed prudent by its board of trustees from a cash management perspective or in the best interest of shareholders due to other facts and circumstances. For the six months ended June 30, 2020, the Fund incurred U.S. federal excise tax of $57,415.
As of December 31, 2019, which is the end of the Fund's taxable year, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
Deferred Debt Issuance Costs
Debt issuance costs are amortized over the life of the related debt instrument using the straight line method.
Recent Accounting Pronouncement
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Fund is currently evaluating the impact of adopting ASU 2020-04 on the Fund's consolidated financial statements.
(3) Investments
Fair Value Measurements
The Fund follows the provisions of ASC 820, Fair Value Measurements and Disclosures under U.S. GAAP, which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. This standard defines fair value and establishes a hierarchal disclosure framework, which prioritizes and ranks the level of market price observability used in measuring investments at fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820 defines "fair value" as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchal disclosure framework establishes a three-tier hierarchy to maximize the use of observable data and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique.
Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The three tier hierarchy of inputs is summarized in the three broad levels listed below.
• Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
• Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
• Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
In addition to using the above inputs in investment valuations, the Fund continues to employ a valuation policy that is consistent with the provisions of ASC 820. Consistent with the Fund's valuation policy, it evaluates the source of inputs, including any markets in which the Fund's investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. The Fund's valuation policy considers the fact that because there may not be a readily available market value for the investments in the Fund's portfolio, therefore, the fair value of the investments may be determined using unobservable inputs.
The assets and liabilities classified as Level 1 or Level 2 are typically valued based on quoted market prices, forward foreign exchange rates, dealer quotations or alternative pricing sources supported by observable inputs. The Adviser obtains prices from independent pricing services which generally utilize broker quotes and may use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading
Semi-Annual Report 2020
58
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
characteristics and other data. The Adviser is responsible for all inputs and assumptions related to the pricing of securities. The Adviser has internal controls in place that support its reliance on information received from third-party pricing sources. As part of its internal controls, the Adviser obtains, reviews, and tests information to corroborate prices received from third-party pricing sources. For any security, if market or dealer quotations are not readily available, or if the Adviser determines that a quotation of a security does not represent a fair value, then the security is valued at a fair value as determined in good faith by the Adviser and will be classified as Level 3. In such instances, the Adviser will use valuation techniques consistent with the market or income approach to measure fair value and will give consideration to all factors which might reasonably affect the fair value.
The assets and liabilities classified as Level 3 (other than as described below in the following paragraph) are typically valued using two different valuation techniques. The first valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. Enterprise value means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company's EBITDA (generally defined as net income before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Fund may also employ other valuation multiples to determine EV, such as revenues. The Fund may also use industry specific valuation analyses to determine enterprise value, such as capitalization rate analysis used in the real estate industry. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is performed to determine the value of equity investments, the value of debt investments in portfolio companies where the Fund has control or could gain control through an option or warrant security, and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind down analysis may be utilized to estimate enterprise value. The second valuation technique is a yield analysis, which is typically performed for non-credit impaired debt investments in portfolio companies where the
Fund does not own a controlling equity position. To determine fair value using a yield analysis, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the yield analysis, the Fund considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Fund are substantially illiquid with no active transaction market, the Fund depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
The fair value of CLOs is estimated based on various valuation models from third-party pricing services as well as internal models. The valuation models generally utilize discounted cash flows and take into consideration prepayment and loss assumptions, based on historical experience and projected performance, economic factors, the characteristics and condition of the underlying collateral, comparable yields for similar securities and recent trading activity. These securities are classified as Level 3.
Private asset-backed securities classified as Level 3 are typically valued using two different valuation techniques. The first valuation technique is an analysis of the forecasted cash flows of the security. The forecasted cash flows take into consideration prepayment and loss assumptions, based on historical experience and projected performance, economic factors, and the characteristics and condition of the underlying collateral. For equity securities, the projected cash flows are present valued using a market discount rate to determine the fair value. For debt securities, the analysis is used to determine if the borrower has the ability to repay its obligations. If it is determined that the borrower does have the ability to repay its obligations, the second valuation technique that is utilized is a yield analysis. To determine fair value using a yield analysis, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the yield analysis, the Fund considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the borrower and the specific investment. As the debt investments are substantially illiquid with no active transaction market, the Fund depends on primary market data, including newly funded transactions, as inputs in determining the appropriate market yield, as applicable.
Semi-Annual Report 2020
59
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
The following is a summary of the inputs used as of June 30, 2020, in valuing the Fund's investments carried at fair value:
| | Level 1 —
Quoted
Prices ($) | | Level 2 —
Other
Significant
Observable
Inputs ($) | | Level 3 —
Significant
Unobservable
Inputs ($) | | Total ($) | |
Senior Loans | | | — | | | | 176,257,601 | | | | 432,858,898 | | | | 609,116,499 | | |
Subordinated
Loans | | | — | | | | — | | | | 9,583,894 | | | | 9,583,894 | | |
Corporate
Bonds | | | — | | | | 57,953,816 | | | | 2,265,910 | | | | 60,219,726 | | |
Convertible
Bonds | | | — | | | | 1,648,677 | | | | — | | | | 1,648,677 | | |
Collateralized
Loan
Obligations | | | — | | | | — | | | | 124,423,907 | | | | 124,423,907 | | |
Common
Stocks | | | 421,289 | | | | — | | | | 1,951,835 | | | | 2,373,124 | | |
Preferred
Stocks | | | — | | | | — | | | | 296,352 | | | | 296,352 | | |
Private
Asset-Backed
Debt | | | — | | | | — | | | | 11,948,805 | | | | 11,948,805 | | |
| | Level 1 —
Quoted
Prices ($) | | Level 2 —
Other
Significant
Observable
Inputs ($) | | Level 3 —
Significant
Unobservable
Inputs ($) | | Total ($) | |
Real Estate
Debt | | | — | | | | — | | | | 5,660,297 | | | | 5,660,297 | | |
Warrants | | | — | | | | — | | | | 455,335 | | | | 455,335 | | |
Total
Investments | | | 421,289 | | | | 235,860,094 | | | | 589,445,233 | | | | 825,726,616 | | |
Derivative Assets: | |
Foreign
Forward
Currency
Contracts | | | — | | | | 88,791 | | | | — | | | | 88,791 | | |
Credit Default
Swaps | | | — | | | | 1,082,458 | | | | — | | | | 1,082,458 | | |
Derivative Liabilities: | |
Foreign
Forward
Currency
Contracts | | | — | | | | (12,084 | ) | | | — | | | | (12,084 | ) | |
Credit Default
Swaps | | | — | | | | (202,169 | ) | | | — | | | | (202,169 | ) | |
The following is a reconciliation of the Fund's investments in which significant unobservable inputs (Level 3) were used in determining fair value.
For the six months ended June 30, 2020:
| | Senior
Loans ($) | | Subordinated
Loans ($) | | Corporate
Bonds ($) | | Collateralized
Loan
Obligations
($) | | Common
Stocks
($) | | Preferred
Stocks
($) | | Private
Asset
Backed
Debt ($) | | Real Estate
Debt ($) | | Warrants
($) | | Total ($) | |
Balance as of
December 31,
2019 | | | 336,700,275 | | | | 1,150,157 | | | | — | | | | 118,100,940 | | | | 803,875 | | | | 268,294 | | | | 9,800,576 | | | | 5,510,966 | | | | 467,292 | | | | 472,802,375 | | |
Purchases(a) | | | 136,976,250 | | | | 8,468,604 | | | | — | | | | 57,580,004 | | | | 1,217,956 | | | | 48,500 | | | | 3,912,678 | | | | 278,490 | | | | — | | | | 208,482,482 | | |
Sales(b) | | | (26,330,053 | ) | | | (27,996 | ) | | | — | | | | (28,787,947 | ) | | | (76,867 | ) | | | — | | | | (836,674 | ) | | | — | | | | — | | | | (56,059,537 | ) | |
Net Realized and
Unrealized Gains
(Loss) | | | (19,430,895 | ) | | | (20,521 | ) | | | — | | | | (22,600,057 | ) | | | 6,871 | | | | (20,442 | ) | | | (959,384 | ) | | | (132,188 | ) | | | (11,957 | ) | | | (43,168,573 | ) | |
Accrued
Discounts/
(Premiums) | | | 891,396 | | | | 13,650 | | | | — | | | | 130,967 | | | | — | | | | — | | | | 31,609 | | | | 3,029 | | | | — | | | | 1,070,651 | | |
Transfers in to
Level 3 | | | 8,939,604 | | | | — | | | | 2,265,910 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,205,514 | | |
Transfers out of
Level 3 | | | (4,887,679 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (4,887,679 | ) | |
Balance as of
June 30, 2020 | | | 432,858,898 | | | | 9,583,894 | | | | 2,265,910 | | | | 124,423,907 | | | | 1,951,835 | | | | 296,352 | | | | 11,948,805 | | | | 5,660,297 | | | | 455,335 | | | | 589,445,233 | | |
Net Change in
Unrealized
appreciation/
(depreciation)
from investments
held at June 30,
2020 | | | (16,580,078) | | | | (21,596 | ) | | | — | | | | (20,270,423 | ) | | | (1,334 | ) | | | (20,443 | ) | | | (953,245 | ) | | | (132,188 | ) | | | 9,052 | | | | (37,970,255 | ) | |
(a) Purchases include PIK interest and securities received from restructure.
(b) Sales include principal redemptions.
Semi-Annual Report 2020
60
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Investments were transferred into and out of Level 3 and out of and into Level 2 during the six months ended June 30, 2020 due to changes in the quantity and quality of information obtained to support the fair value of each investment as assessed by the Adviser.
The following table summarizes the quantitative inputs and assumptions used for investments in securities at fair value categorized as Level 3 in the fair value hierarchy as of June 30, 2020.
| | Fair Value
($) | | Valuation
Technique | | Unobservable
Inputs | | Range | | Weighted
Average | |
Assets
Investments in securities | |
Senior Loans
| | | 1,412,267
| | | Income
(Other)
| | Constant
Default
Rate (CDR),
Constant
Prepayment
Rate (CPR),
Recovery
Rate | | | 25.9
50.0%,
0.0% | %, | | | 25.9
50.0%,
0.0% | %, | |
Senior Loans | | | 18,861,482 | | | Broker
Quotes
and/or
3rd Party
Pricing
Services | | N/A | | | N/A | | | | N/A | | |
Senior Loans | | | 412,590,575 | | | Yield
Analysis | | Market
Yield | | | 4.1
36.9% | % - | | | 8.6 | % | |
Senior Loans | | | -5,426 | | | Other | | Recent
Transaction
Price | | | 0.99 | | | | 0.99 | | |
Subordinated
Loans | | | 9,583,894 | | | Yield
Analysis | | Market
Yield | | | 8.9
17.8% | % - | | | 11.4 | % | |
Corporate
Bonds | | | 2,265,910 | | | Broker
Quotes
and/or
3rd Party
Pricing
Services | | N/A | | | N/A | | | | N/A | | |
Collateralized
Loan
Obligation | | | 656 | | | Other | | Estimated
Liquidation
Value | | $ | 160 -
$496 | | | $ | 414 | | |
Collateralized
Loan
Obligations | | | 121,749,501 | | | Broker
Quotes
and/or
3rd Party
Pricing
Services | | N/A | | | N/A | | | | N/A | | |
Collateralized
Loan
Obligations | | | 2,673,750 | | | Other | | Recent
Transaction
Price | | | 0.93 | | | | 0.93 | | |
Common Stocks | | | 1,951,835 | | | EV Market
Multiple
Analysis | | EBITDA
Multiple | | | 7.0
26.5x | x - | | | 17.0 | x | |
Preferred Stocks | | | 296,352 | | | EV Market
Multiple
Analysis | | EBITDA
Multiple
| | | 9.0
22.0x | x - | | | 16.3 | x | |
| | Fair Value
($) | | Valuation
Technique | | Unobservable
Inputs | | Range | | Weighted
Average | |
Private
Asset-Backed
Debt | | | 406,225 | | | Income
(Other) | | Cumulative
Collection
Rate | | | 1.1 | x | | | 1.1 | x | |
Private
Asset-Backed
Debt
| | | 7,303,202
| | | Income
(Other)
| | MPL: Constant
Default
Rate (CDR),
Constant
Prepayment
Rate (CPR),
Recovery
Rate; SPL:
Collection
Rate
| | | CAD MPL:
18.0%,
30.0%,
0.0%;
US MPL:
55.0%,
16.0%,
0.0%;
US SPL:
88.3%;
CAD SPL:
89.1% | | | | CAD MPL:
18.0%,
30.0%,
0.0%;
US MPL:
55.0%,
16.0%,
0.0%;
US SPL:
88.3%;
CAD SPL:
89.1% | | |
Private
Asset-Backed
Debt
| | | 1,026,313
| | | Income
(Other)
| | Constant
Default
Rate (CDR),
Constant
Prepayment
Rate (CPR),
Recovery
Rate | | | 15.0
0.0%,
0.0% | %, | | | 15.0
0.0%,
0.0% | %, | |
Private
Asset-Backed
Debt
| | | 783,667
| | | Income
(Other)
| | Constant
Default
Rate (CDR) -
Two
Segments,
Constant
Prepayment
Rate (CPR),
Recovery
Rate | | | 9.7%/
7.9%,
15.0%,
0.0% | | | | 9.7%/
7.9%,
15.0%,
0.0% | | |
Private
Asset-Backed
Debt | | | 2,429,398 | | | Other | | Recent
Transaction
Price | | | 0.99 | | | | 0.99 | | |
Real Estate
Debt | | | 5,660,297 | | | Yield
Analysis | | Market
Yield | | | 13.8
16.3% | % - | | | 15.1 | % | |
Warrants | | | 455,335 | | | EV Market
Multiple
Analysis | | EBITDA
Multiple | | | 2.3
31.2x | x - | | | 30.5 | x | |
Total Level 3
Investments | | | 589,445,233 | | | | | | | | | | |
Changes in market yields or discount rates, each in isolation, may change the fair value of certain of the investments. Generally, an increase in market yields or discount rates may result in a decrease in the fair value of certain of the investments.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may fluctuate from period to period. Additionally, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Fund may ultimately realize. Further, such investments are generally subject to legal
Semi-Annual Report 2020
61
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Fund was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Fund has recorded it.
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 ultimately realized on these investments to be different than the unrealized gains or losses reflected in the values currently assigned.
(4) Common Stock
The Fund, pursuant to an exemptive order granted by the SEC on July 11, 2017, offers multiple classes of shares. On July 11, 2017, the Fund's registration statement offering Class A, Class C, and Class I shares became effective. On November 2, 2017, the Fund's registration statement offering Class L shares became effective. On November 15, 2018, the Fund's registration statement offering Class U shares became effective and on November 30, 2018 the Fund's registration statement offering Class W shares became effective. On March 31, 2020, the Fund's registration statement offering Class U-2 shares became effective. The maximum sales load imposed on purchases, maximum contingent deferred sales charges, shareholder servicing and/or distribution fees charged will vary depending on each share class. Common share transactions were as follows:
| Class A | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 2,321,589 | | | | 59,078,604 | | |
Common shares issued | | | 341,024 | | | | 8,471,430 | | |
Reinvestment of distributions | | | 23,063 | | | | 539,889 | | |
Common shares redeemed | | | (421,787 | ) | | | (10,446,710 | ) | |
Common shares outstanding —
end of period | | | 2,263,889 | | | | 57,643,213 | | |
| Class C | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 2,539,852 | | | | 64,949,429 | | |
Common shares issued | | | 329,107 | | | | 8,060,972 | | |
Reinvestment of distributions | | | 40,117 | | | | 937,997 | | |
Common shares redeemed | | | (223,235 | ) | | | (5,338,496 | ) | |
Common shares outstanding —
end of period | | | 2,685,841 | | | | 68,609,902 | | |
| Class I | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 13,653,699 | | | | 350,127,050 | | |
Common shares issued | | | 4,712,049 | | | | 116,811,055 | | |
Reinvestment of distributions | | | 200,513 | | | | 4,682,059 | | |
Common shares redeemed | | | (1,195,038 | ) | | | (27,548,222 | ) | |
Common shares outstanding —
end of period | | | 17,374,223 | | | | 444,071,942 | | |
| Class L | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 244,006 | | | | 6,258,818 | | |
Common shares issued | | | 66,345 | | | | 1,622,873 | | |
Reinvestment of distributions | | | 4,894 | | | | 114,184 | | |
Common shares redeemed | | | (43,790 | ) | | | (1,049,499 | ) | |
Common shares outstanding —
end of period | | | 271,455 | | | | 6,946,376 | | |
| Class U | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 1,655,229 | | | | 42,266,316 | | |
Common shares issued | | | 3,113,026 | | | | 77,291,441 | | |
Reinvestment of distributions | | | 96,743 | | | | 2,243,059 | | |
Common shares redeemed | | | (52,537 | ) | | | (1,165,800 | ) | |
Common shares outstanding —
end of period | | | 4,812,461 | | | | 120,635,016 | | |
| Class U-2 | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 0 | | | | 0 | | |
Common shares issued | | | 46,307 | | | | 1,039,525 | | |
Reinvestment of distributions | | | 194 | | | | 4,441 | | |
Common shares redeemed | | | 0 | | | | 0 | | |
Common shares outstanding —
end of period | | | 46,501 | | | | 1,043,966 | | |
| Class W | | For the Six Months
Ended June 30, 2020 | |
| | Shares | | Amount ($) | |
Common shares outstanding —
beginning of period | | | 1,521,579 | | | | 39,187,145 | | |
Common shares issued | | | 0 | | | | 0 | | |
Reinvestment of distributions | | | 35,062 | | | | 824,855 | | |
Common shares redeemed | | | (5,012 | ) | | | (111,425 | ) | |
Common shares outstanding —
end of period | | | 1,551,629 | | | | 39,900,755 | | |
Semi-Annual Report 2020
62
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Share Repurchase Program
Beginning in the second quarter of 2017, the Fund began offering and currently intends to continue offering, the quarterly repurchase of shares in such amount as may be determined by the Fund's Board in accordance with the Fund's
fundamental policy to conduct repurchase offers for between 5%-25% of its outstanding shares each quarter.
The following table summarizes the share repurchases completed during the six months ended June 30, 2020:
| Quarter Ended | | Repurchase
Date | | Shares
Repurchased | | Purchase
Price
Per Share | | Aggregate
Consideration
for
Repurchased
Shares | | Size of
Repurchase
Offer | | % of
Outstanding
Shares
Offered
to be
Repurchased | | % of
Outstanding
Shares
Repurchased | |
December 31, 2019 | | January 16, 2020 | | | 679,546 | | | | 26.01 | | | | 17,674,912 | | | | 1,161,309 | | | | 5.00 | % | | | 2.93 | % | |
March 31, 2020 | | April 16, 2020 | | | 1,227,410 | | | | 22.13 | | | | 27,163,080 | | | | 1,415,494 | | | | 5.00 | % | | | 4.34 | % | |
| | | | | 1,906,956 | | | | | | 44,837,992 | | | | | | | | |
(5) Credit Facility
Information about the Fund's senior securities as of June 30, 2020 is shown in the following table.
| Class and Six Months Ended | | Total Amount
Outstanding Exclusive of
Treasury Securities(1) | | Asset Coverage
Per Unit(2)
($) | | Involuntary
Liquidating
Preference
Per Unit(3) | | Average
Market
Value Per
Unit(4) | |
Revolving Credit Facility (Wells Fargo Bank, N.A.) | |
June 30, 2020 | | | 55,950,970 | | | | 6,090.31 | | | | — | | | | N/A | | |
December 31, 2019 | | | 19,053,614 | | | | 5,382.52 | | | | — | | | | N/A | | |
October 31, 2019 | | | 19,396,773 | | | | 3,846.84 | | | | — | | | | N/A | | |
Revolving Credit Facility (State Street Bank and
Trust Company) | |
June 30, 2020 | | | 75,969,499 | | | | 6,090.31 | | | | — | | | | N/A | | |
December 31, 2019 | | | 110,386,661 | | | | 5,382.52 | | | | — | | | | N/A | | |
October 31, 2019 | | | 144,356,650 | | | | 3,846.84 | | | | — | | | | N/A | | |
(1) Total amount of each class of senior securities outstanding at principal value at the end of the period presented.
(2) The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the "Asset Coverage Per Unit.''
(3) The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The "—" in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
(4) Not applicable to senior securities outstanding as of period end.
Wells Credit Facility
The Fund's consolidated subsidiary, Financing Sub, is party to a revolving funding facility (as amended, the "Wells Credit Facility"), which allows the Financing Sub to borrow up to $100 million at any one time outstanding. The Wells Credit Facility is secured by all of the assets held by, and the membership interest in, Financing Sub. The end of the reinvestment period and the stated maturity date for the Wells Credit Facility are October 31, 2022 and October 31, 2024, respectively. Amounts available to borrow under the Wells
Credit Facility are subject to a borrowing base that applies different advance rates to different types of assets held by the Financing Sub. The Financing Sub is also subject to limitations with respect to the loans securing the Wells Credit Facility, including restrictions on loan size, borrower domicile, payment frequency and status, collateral interests, and loans with fixed rates, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow. The Fund and the Financing Sub are also required to comply with various
Semi-Annual Report 2020
63
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
covenants, reporting requirements and other customary requirements for similar facilities. These covenants are subject to important limitations and exceptions that are described in the agreements governing the Wells Credit Facility. As of June 30, 2020, the Fund and Financing Sub were in compliance in all material respects with the terms of the Wells Credit Facility.
As of June 30, 2020, there was $55,950,970 outstanding under the Wells Credit Facility. The interest rate charged under the Wells Credit Facility is generally based on an applicable LIBOR rate plus spread ranging from 1.75% to 2.15%, as defined in the agreements governing the Wells Credit Facility. Unused portions of the Wells Credit Facility accrue a commitment fee equal to an annual rate between 0.50% and 1.50%, depending on the usage. The fair value of the Financing Sub's borrowings under the Wells Credit Facility approximates the carrying amount presented in the accompanying Consolidated Statement of Assets and Liabilities at cost for the remaining maturity for which the Financing Sub has determined would be categorized as Level 2 in the fair value hierarchy.
For the six months ended June 30, 2020 the components of interest and unused commitment fees expense, average stated interest rates (i.e., rate in effect plus the spread) and average outstanding balance for the Wells Credit Facility were as follows:
| | For the Six Months
Ended June 30, 2020
($) | |
Stated interest expense | | | 557,291 | | |
Unused commitment fees | | | 142,496 | | |
Total interest and credit facility fees expense | | | 699,665 | | |
Annualized average stated interest rate | | | 2.56 | % | |
Average outstanding balance | | | 43,696,374 | | |
Amortization of debt issuance costs | | | 268,513 | | |
See Note 10 for further information regarding a subsequent event related to the Wells Credit Facility.
State Street Credit Facility
The Fund is a party to a senior secured revolving credit facility (as amended, the "State Street Credit Facility"), which allows for the Fund to borrow up to $200 million at any one time outstanding. The State Street Credit Facility maturity date is July 17, 2022. Under the State Street Credit Facility, the Fund is required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without limitation, covenants related to: (a) limitations on the incurrence of
additional indebtedness and liens, (b) limitations on certain restricted payments, (c) maintaining a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of the Fund and its consolidated subsidiaries (subject to certain exceptions) of not less than 3:1.0. These covenants are subject to important limitations and exceptions that are described in the documents governing the State Street Credit Facility. Amounts available to borrow under the State Street Credit Facility (and the incurrence of certain other permitted debt) are also subject to compliance with a borrowing base that applies different advance rates to different types of assets in the Fund's portfolio that are pledged as collateral. As of June 30, 2020, the Fund was in compliance in all material respects with the terms of the State Street Credit Facility.
As of June 30, 2020, there was $75,969,499 outstanding under the State Street Credit Facility. The interest rate charged on the State Street Credit Facility is based on an applicable LIBOR rate plus 0.95% (as defined in the agreements governing the State Street Credit Facility). Unused portions of the State Street Credit Facility accrue a commitment fee equal to 0.20%. The fair value of the Fund's borrowings under the State Street Credit Facility approximates the carrying amount presented in the accompanying Consolidated Statement of Assets and Liabilities at cost for the remaining maturity for which the Fund has determined would be categorized as Level 2 in the fair value hierarchy.
For the six months ended June 30, 2020 the components of interest and unused commitment fees expense, average stated interest rates (i.e., rate in effect plus the spread) and average outstanding balance for the State Street Credit Facility were as follows:
| | For the Six Months
Ended June 30, 2020
($) | |
Stated interest expense | | | 835,798 | | |
Unused commitment fees | | | 94,463 | | |
Total interest and credit facility fees expense | | | 930,261 | | |
Annualized average stated interest rate | | | 1.74 | % | |
Average outstanding balance | | | 96,410,479 | | |
Amortization of debt issuance costs | | | 28,364 | | |
Under the Investment Company Act, the Fund is not permitted to incur indebtedness, including through the issuance of debt securities, unless immediately thereafter the Fund will have an asset coverage of at least 300%. In general, the term "asset coverage" for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the
Semi-Annual Report 2020
64
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Fund. In addition, the Fund may be limited in its ability to declare any cash distribution on its capital stock or purchase its capital stock unless, at the time of such declaration or purchase, the Fund has an asset coverage (on its indebtedness) of at least 300% after deducting the amount of such distribution or purchase price, as applicable. For non-public indebtedness issued by the Fund (for example, the Wells Credit Facility and the State Street Credit Facility), the Fund may be able to continue to pay distributions on its capital stock or purchase its capital stock even if the asset coverage ratio on its indebtedness falls below 300%. As of June 30, 2020, the Fund's asset coverage was 989%.
(6) Investment Advisory and Other Agreements
The Adviser is registered as an investment adviser under the Advisers Act. The Adviser is an affiliate of Ares and leverages Ares' entire investment platform and benefits from the significant capital markets, trading and research expertise of all of Ares' investment professionals.
Pursuant to the investment advisory agreement, dated December 6, 2016 (the "Investment Advisory Agreement") (most recently amended and restated as of May 22, 2020), by and between the Fund and the Adviser, the Adviser provides certain investment advisory and administrative services to the Fund and in consideration of the advisory services provided, the Adviser is entitled to a fee consisting of two components — a base management fee (the "Management Fee") and an incentive fee (the "Incentive Fee"). Pursuant to the investment sub-advisory agreement, dated as of December 6, 2016 (the "Investment Sub-Advisory Agreement"), by and between the Adviser and the Fund, the Adviser pays the Ares Capital Management II LLC (the "Sub-Adviser") 40% of the Management Fee and Incentive Fee actually received and retained and not otherwise used to support expenses.
The Adviser provides certain investment advisory and administrative services to the Fund pursuant to the Investment Advisory Agreement. Pursuant to its Investment Advisory Agreement, the Fund has agreed to pay the Adviser the Management Fee at an annual rate of 1.25% of the average daily value of the Fund's total assets of the Fund (including any assets attributable to any preferred shares that may be issued or to indebtedness) minus the Fund's liabilities other than liabilities relating to indebtedness. The management fees incurred by the Fund for the six months ended June 30, 2020 were $4,806,222.
Effective May 22, 2020, applied on a prospective basis the Incentive Fee is calculated and payable quarterly in arrears based upon each share class's "pre-incentive fee net investment income" for the immediately preceding quarter,
and is subject to a hurdle rate, expressed as a rate of return on each share class's "average daily net asset value," equal to 1.50% per quarter (or an annualized hurdle rate of 6.00%), subject to a "catch-up" feature. For this purpose, "pre-incentive fee net investment income" means interest income, dividend income and any other income accrued during the calendar quarter, minus the share class's operating expenses for the quarter and taking into account the Expense Support Agreement. For such purposes, each share class's operating expenses will include the Management Fee, expenses reimbursed to the Adviser under the administration agreement, dated as of December 6, 2016 (the "Adviser Administration Agreement"), by and between the Fund and the Adviser, and any interest expense and distributions paid on any issued and outstanding preferred shares, but will exclude the Incentive Fee.
The "catch-up" provision is intended to provide the Adviser with an incentive fee of 15% on each share class's pre-incentive fee net investment income when the share class's pre-incentive fee net investment income reaches 1.765% of average daily net asset value in any calendar quarter. During the six months ended June 30, 2020 there were no incentive fees incurred.
Prior to May 22, 2020, the Incentive Fee was calculated and payable quarterly in arrears based upon the Fund's (rather than each class's) "pre-incentive fee net investment income" for the immediately preceding quarter, and was subject to a hurdle rate, expressed as a rate of return on the Fund's "adjusted capital," equal to 1.50% per quarter (or an annualized hurdle rate of 6.00%), subject to a "catch-up" feature. "Adjusted Capital" previously was defined as the cumulative gross proceeds received by the Fund from the sale of the Fund's shares (including pursuant to the Fund's DRIP (as defined below), reduced by amounts paid in connection with purchases of the Fund's shares pursuant to the Fund's share repurchase program and further reduced by distribution representing a return of capital. For this purpose, "pre-incentive fee net investment income" means interest income, dividend income and any other income accrued during the calendar quarter, minus the Fund's operating expenses for the quarter.
The Adviser is obligated to pay expenses associated with providing the investment services stated in the Investment Advisory Agreement and Investment Sub-Advisory Agreement, including expenses associated with office space for their officers and employees, investment and economic research, trading and investment management of the Fund.
Under the Expense Support Agreement, the Adviser may at its discretion, for the period ending July 31, 2021, reimburse the Fund's operating expenses to the extent that aggregate distributions made to each class' shareholders during the
Semi-Annual Report 2020
65
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
applicable quarter exceed Available Operating Funds (as defined below). Additionally, during the term of the Expense Support Agreement, the Adviser may reimburse the Fund's operating expenses to the extent that it otherwise deems appropriate such that the Fund bears an appropriate level of expenses (each such payment, an "Expense Payment"). "Available Operating Funds" means the sum attributable to the applicable class of (i) the Fund's net investment Fund taxable income (including net short-term capital gains reduced by net long term capital losses); (ii) the Fund's net capital gains (including the excess of net long-term capital gains over net short-term capital losses); and (iii) dividends and other distributions paid to or otherwise earned by the Fund on account of investments in portfolio companies (to the extend such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).
In consideration of the Adviser's agreement to reimburse the Fund's operating expenses, the Fund has agreed to repay the Adviser in the amount of any Fund expenses reimbursed subject to the limitation that a reimbursement (an "Adviser Reimbursement") will be made only if and to the extent that (i) it is payable not more than three years from the last business day of the calendar quarter in which the applicable Expense Payment was made by the Adviser; (ii) the Adviser Reimbursement does not cause other fund operating expenses attributable to the applicable class (on an annualized basis and net of any reimbursements received by the Fund during such fiscal year) during the applicable quarter to exceed the percentage of the Fund's average net assets attributable to common shares represented by other fund operating expenses
allocable to the applicable class (as defined below) (on an annualized basis) during the quarter in which the applicable Expense Payment from the Adviser was made; and (iii) the distributions per share declared by the Fund for the applicable class at the time of the applicable Expense Payment are less than the effective rate of distributions per share for the applicable class at the time the Adviser Reimbursement would be paid. Other fund operating expenses is defined as, the Fund's total Operating Expenses (as defined below), excluding the Management Fees, the Incentive Fees, offering expenses, financing fees and costs, interest expense and extraordinary expenses. "Operating Expenses" means all operating costs and expenses incurred by the Fund, as determined in accordance with GAAP for investment companies. The Expense Support Agreement will remain in effect at least until July 31, 2021, unless and until the Fund's Board approves it's modifications or termination. The Expense Support Agreement was renewed for another year on July 31, 2020 (see Note 10, Subsequent Events, for information regarding the extension of the Agreement). This Expense Support Agreement may be terminated only by the Fund's Board on notice to the Adviser. For the six months ended June 30, 2020, the Adviser did not provide any expense support and the Fund incurred $2,362,845 in expense support recoupment.
The table below presents a summary of all expenses supported by the Adviser for each of the following three month periods in which the Fund received expense support from the Adviser and the Adviser associated dates through which such expenses are eligible for reimbursement from the Fund.
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
January 31, 2017 | | | 335,238 | | | | 335,238 | | | | 0 | | | | 68.82 | | | | 0 | | | January 31, 2020 | |
April 30, 2017 | | | 820,353 | | | | 820,353 | | | | 0 | | | | 54.97 | | | | 1.39257355 | | | April 30, 2020 | |
July 31, 2017 | | | 738,421 | | | | 738,421 | | | | 0 | | | | 37.93 | | | | 1.39257355 | | | July 31, 2020 | |
Total | | | 1,894,012 | | | | 1,894,012 | | | | 0 | | | | | | | | |
Semi-Annual Report 2020
66
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Class A
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
January 31, 2017 | | | 193,243 | | | | 193,243 | | | | 0 | | | | 9.01 | | | | 1.39257355 | | | January 31, 2020 | |
October 31, 2017 | | | 592,329 | | | | 168,659 | | | | 423,669 | | | | 7.68 | | | | 1.39257355 | | | October 31, 2020 | |
January 31, 2018 | | | 412,396 | | | | 0 | | | | 412,396 | | | | 5.42 | | | | 1.39257355 | | | January 31, 2021 | |
April 30, 2018 | | | 306,581 | | | | 0 | | | | 306,581 | | | | 4.43 | | | | 1.39257355 | | | April 30, 2021 | |
July 31, 2018 | | | 282,399 | | | | 0 | | | | 282,399 | | | | 3.86 | | | | 1.39257355 | | | July 31, 2021 | |
October 31, 2018 | | | 351,380 | | | | 0 | | | | 351,380 | | | | 3.15 | | | | 1.39257355 | | | October 31, 2021 | |
January 31, 2019 | | | 112,892 | | | | 0 | | | | 112,892 | | | | 1.21 | | | | 1.39257355 | | | January 31, 2022 | |
April 30, 2019 | | | 10,033 | | | | 0 | | | | 10,033 | | | | 1.29 | | | | 1.39257355 | | | April 30, 2022 | |
Total | | | 2,261,253 | | | | 361,902 | | | | 1,899,351 | | | | | | | | |
Class C
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
July 31, 2017 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | July 31, 2020 | |
October 31, 2017 | | | 98,889 | | | | 98,889 | | | | 0 | | | | 5.32 | | | | 1.39257355 | | | October 31, 2020 | |
January 31, 2018 | | | 173,902 | | | | 57,212 | | | | 116,690 | | | | 6.07 | | | | 1.39257355 | | | January 31, 2021 | |
April 30, 2018 | | | 206,018 | | | | 0 | | | | 206,018 | | | | 4.94 | | | | 1.39257355 | | | April 30, 2021 | |
July 31,2018 | | | 263,530 | | | | 0 | | | | 263,530 | | | | 4.33 | | | | 1.39257355 | | | July 31, 2021 | |
October 31, 2018 | | | 312,501 | | | | — | | | | 312,501 | | | | 3.66 | | | | 1.39257355 | | | October 31, 2021 | |
January 31, 2019 | | | 163,026 | | | | 0 | | | | 163,026 | | | | 1.96 | | | | 1.39257355 | | | January 31, 2022 | |
April 30, 2019 | | | 84,215 | | | | — | | | | 84,215 | | | | 2.03 | | | | 1.39257355 | | | April 30, 2022 | |
Total | | | 1,302,081 | | | | 156,100 | | | | 1,145,981 | | | | | | | | |
Semi-Annual Report 2020
67
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Class I
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
July 31, 2017 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | July 31, 2020 | |
October 31, 2017 | | | 172,437 | | | | 172,437 | | | | 0 | | | | 4.81 | | | | 1.39257355 | | | October 31, 2020 | |
January 31, 2018 | | | 246,239 | | | | 246,239 | | | | 0 | | | | 5.03 | | | | 1.39257355 | | | January 31, 2021 | |
April 30, 2018 | | | 369,279 | | | | 369,279 | | | | 0 | | | | 3.84 | | | | 1.39257355 | | | April 30, 2021 | |
July 31, 2018 | | | 521,001 | | | | 521,001 | | | | 0 | | | | 3.19 | | | | 1.39257355 | | | July 31, 2021 | |
October 31, 2018 | | | 779,372 | | | | 779,379 | | | | 0 | | | | 2.45 | | | | 1.39257355 | | | October 31, 2021 | |
January 31, 2019 | | | 281,055 | | | | 0 | | | | 281,055 | | | | 0.96 | | | | 1.39257355 | | | January 31, 2022 | |
April 30, 2019 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1.39257355 | | | April 30, 2022 | |
Total | | | 2,369,382 | | | | 2,088,327 | | | | 281,055 | | | | | | | | |
Class L
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
July 31, 2017 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | July 31, 2020 | |
October 31, 2017 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1.39257355 | | | October 31, 2020 | |
January 31, 2018 | | | 27 | | | | 27 | | | | 0 | | | | 5.49 | | | | 1.39257355 | | | January 31, 2021 | |
April 30, 2018 | | | 3,558 | | | | 3,558 | | | | 0 | | | | 3.54 | | | | 1.39257355 | | | April 30, 2021 | |
July 31, 2018 | | | 9,112 | | | | 9,112 | | | | 0 | | | | 3.23 | | | | 1.39257355 | | | July 31, 2021 | |
October 31, 2018 | | | 16,193 | | | | 16,193 | | | | 0 | | | | 2.62 | | | | 1.39257355 | | | October 31, 2021 | |
January 31, 2019 | | | 7,456 | | | | 0 | | | | 7,456 | | | | 1.46 | | | | 1.39257355 | | | January 31, 2022 | |
April 30, 2019 | | | 2,303 | | | | 0 | | | | 2,303 | | | | 1.54 | | | | 1.39257355 | | | April 30, 2022 | |
Total | | | 38,649 | | | | 28,890 | | | | 9,759 | | | | | | | | |
Class U
| Three Months Ended | | Expense
Support
from the
Adviser
($) | | Recoupment
of Expense
Support
($) | | Unreimbursed
Expense
Support
($) | | Annualized
Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(1) % | | Annualized
Distribution
Rate for the
Period(2)
($) | | Eligible for
Reimbursement
through | |
December 31, 2019 | | | 26,627 | | | | 0 | | | | 26,627 | | | | 0.29 | | | | 1.39257355 | | | December 31, 2022 | |
Total | | | 26,637 | | | | 0 | | | | 26,627 | | | | | | | | |
(1) Other Fund Operating Expenses is defined as, the Fund's total Operating Expenses (as defined below), excluding the management fees and Incentive fees, offering expenses, financing fees and costs, interest expense and extraordinary expenses. "Operating Expenses" means all operating costs and expenses incurred by the Fund, as determined in accordance with generally accepted accounting principles for investment companies.
(2) The Annualized Distribution Rate per Share equals the projected annualized distribution amount which is calculated based on the average regular cash distributions per share that were declared during record dates in the applicable Expense Support Payment Quarter.
Semi-Annual Report 2020
68
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Pursuant to the Adviser Administration Agreement, the Adviser furnishes the Fund with office equipment and clerical, bookkeeping and record keeping services at the Adviser's office facilities. Under the Adviser Administration Agreement, the Fund is obligated to reimburse the Adviser, at cost, based upon the Fund's allocable portion of the Adviser's overhead and other expenses (including travel expenses) incurred by the Adviser in performing its obligations under the Adviser Administration Agreement, including the Fund's allocable portion of the compensation, rent and other expenses of certain of its officers (including but not limited to the chief compliance officer, chief financial officer, chief accounting officer, general counsel, treasurer and assistant treasurer) and their respective staffs. The Adviser Administration Agreement may be terminated by either party without penalty upon 60 days' written notice to the other party. The total of such expenses incurred for the six months ended June 30, 2020 was $623,583.
Pursuant to an administration agreement between State Street Bank and Trust Company ("State Street") and the Fund, State Street performs, or oversees the performance of, certain of the Fund's required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, being responsible for the financial records that the Fund is required to maintain and preparing reports to the Fund's shareholders and reports filed with the SEC. In addition, State Street oversees the preparation and filing of the Fund's tax returns and generally oversees the payment of the Fund's expenses and the performance of administrative and professional services rendered to the Fund by others. The Fund pays State Street for these services. The total of such expenses incurred by the Fund for the six months ended June 30, 2020 was $167,936.
Pursuant to a transfer agent agreement between DST Systems, Inc. ("DST") and the Fund, DST performs transfer agency services for the Fund. DST maintains the shareholder accounting records for the Fund. The Fund pays DST for these services. The total of such expenses incurred for the six months ended June 30, 2020 was $195,937.
Shareholder Service Expenses
The Fund has adopted a "Shareholder Services Plan" with respect to its Class A, Class C, Class L and Class U-2 Shares under which the Fund may compensate financial industry professionals for providing ongoing services in respect of clients with whom they have distributed shares of the Fund. Such services may include electronic processing of client orders, electronic fund transfers between clients and the Fund, account reconciliations with the Fund's transfer agent,
facilitation of electronic delivery to clients of Fund documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and liaison services as the Fund or the Adviser may reasonably request. Under the Shareholder Services Plan, the Fund, with respect to Class A, Class C, Class L, and Class U-2 Shares, may incur expenses on an annual basis equal up to 0.25% of its average net assets attributable to Class A, Class C, Class L, and Class U-2 Shares, respectively.
Distribution Plan
The Fund, with respect to its Class C, Class L, Class U, Class W and Class U-2 Shares, is authorized under a "Distribution Plan" to pay to the Distributor a distribution fee for certain activities relating to the distribution of shares to investors. These activities include marketing and other activities to support the distribution of Class C, Class L, Class U, Class W and Class U-2 Shares. The Plan operates in a manner consistent with Rule 12b-1 under the 1940 Act, which regulates the manner in which an open-end investment company may directly or indirectly bear the expenses of distributing its shares. Although the Fund is not an open-end investment company, it has undertaken to comply with the terms of Rule 12b-1 as a condition of an exemptive order under the 1940 Act which permits it to have asset based distribution fees. Under the Distribution Plan, the Fund pays the Distributor a distribution fee at an annual rate of 0.75% of average daily net assets attributable to Class C Shares, 0.25% of the average daily net assets attributable to Class L Shares, 0.50% of the average daily net assets attributable to Class W Shares and Class U-2 Shares, and 0.75% of the average daily net assets attributable to Class U Shares.
(7) Investment Transactions
For the six months ended June 30, 2020, the cost of investments purchased and proceeds from sales of investments, excluding short obligations, were as follows:
Cost of Investments
Purchased | | Proceeds from the
Sale of Investments | |
| $ | 503,396,441 | | | $ | (271,582,901 | ) | |
(8) Derivative Instruments
The Fund recognizes all of its derivative instruments at fair value as either assets or liabilities in the Consolidated Statement of Assets and Liabilities. The changes in the fair value are included in the Consolidated Statement of Operations during the current year. The Fund is exposed to
Semi-Annual Report 2020
69
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
certain risks relating to its ongoing operations; the primary risks managed by using derivative instruments are market risk, credit risk, and foreign exchange risk. Additionally, the Fund holds certain derivative instruments for investment purposes. As of or during the six months ended June 30, 2020, the Fund held the following instruments meeting the definition of a derivative instrument: foreign forward currency contracts, credit default swaps and total return swaps.
Qualitative Disclosures of Derivative Financial Instruments
The following is a description of the derivatives utilized by the Fund during the reporting period, including the primary underlying risk exposure related to each instrument type.
Foreign Forward Currency Contracts: the Fund enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Fund's investments denominated in foreign currencies. As of June 30, 2020, the counterparty to the forward currency contracts was Goldman Sachs. Net unrealized gains or losses on forward currency contracts are included in "net realized gain on foreign currency contracts" in the accompanying Consolidated Statement of Operations.
Forward currency contracts are considered undesignated derivative instruments.
Certain information related to the Fund's foreign currency forward contracts is presented below as of June 30, 2020.
| | As of June 30, 2020 | |
| Description | | Notional
Amount | | Maturity Date | | Gross Amount
of Recognized
Assets | | Gross Amount
of Recognized
Liabilities | | Balance Sheet
Location of Net
Amounts | |
Foreign currency forward contract | | £ | (1,098,452 | ) | | 7/15/2020 | | $ | 19,149 | | | $ | — | | | Forward foreign currency contracts | |
Foreign currency forward contract | | £ | (1,132,532 | ) | | 7/15/2020 | | | 18,189 | | | | — | | | Forward foreign currency contracts | |
Foreign currency forward contract | | SEK | (1,961,141 | ) | | 9/18/2020 | | | — | | | | (12,084 | ) | | Forward foreign currency contracts | |
Foreign currency forward contract | | NOK | (4,117,433 | ) | | 9/18/2020 | | | 50,282 | | | | — | | | Forward foreign currency contracts | |
Foreign currency forward contract | | SEK | (3,691,269 | ) | | 1/17/2020 | | | 1,171 | | | | — | | | Forward foreign currency contracts | |
Total | | | | | | $ | 88,791 | | | $ | (12,084 | ) | | | |
Options: The Fund may write or purchase options on swap agreements (commonly referred to as swaptions) in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains.
An option is a contract giving its owner the right, but not the obligation, to buy (call) or sell (put) a specified item at a fixed price (exercise or strike price) during a specified period or on a specified date. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost basis of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and any change in fair value should the counterparty not perform under the contract.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options which expire unexercised are recorded by the Fund on the expiration date as realized gains from option transactions. The difference between the premium and the
amount paid on the effecting closing purchase transactions, including brokerage commissions, is treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transactions, as a realized loss. If a written call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has realized a gain or loss. If a written put option is exercised, the premium reduces the cost basis of the security purchased by the Fund. In writing options, the Fund bears the market risk of unfavorable change in the price of the security underlying the written option. The risk involved in writing an option is that if the option was exercised, the underlying security may be purchased or sold by the Fund at a disadvantageous price.
Credit Default Swaps: The Fund enters into credit default swap contracts for investment purposes and to manage its credit risk. Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the referenced entity, obligation or index. The Fund may purchase or sell protection. A seller of protection generally receives an upfront payment or periodic payments throughout the term of the swap provided
Semi-Annual Report 2020
70
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
there is no credit event. Such periodic payments received are accrued daily and accounted for as realized gains. If a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The buyer of protection generally pays an upfront premium or periodic payments throughout the term of the swap provided there is no credit event. Such periodic payments paid are accrued daily and accounted for as realized losses.
Entering into credit default swaps involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized in the Consolidated Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligations to perform or disagree as to the meaning of the contractual terms in the agreements, and that there will be unfavorable changes in net interest rates.
The Fund's derivative contracts are subject to either International Swaps and Derivatives Association ("ISDA") Master Agreements, or futures contracts/OTC addendums which contain certain covenants and other provisions that, if violated, may require the Fund to post collateral on derivatives if the Fund is in a net liability position with its counterparties
exceeding certain amounts. As of June 30, 2020 there are no derivative instruments with credit-risk-related contingent features that are in a net liability position after taking into effect permissible offsetting. Additionally, OTC derivative counterparties may immediately terminate these agreements and the related derivative contracts if the Fund fails to maintain sufficient asset coverage for its contracts or its net assets decline by stated percentages or amounts. As of June 30, 2020 the termination values of these derivative contracts were approximately equal to their fair values.
Total Return Swaps: Total return is used as substitutes for owning or shorting the physical securities that comprise a given market index, or to obtain long or short exposure in markets where no physical securities are available, such as an interest rate index. Total return refers to the payment (or receipt) of an index's total return, which is then exchanged for the receipt (or payment) of a floating interest rate. Total return swaps provide the Fund with the additional flexibility of gaining or shedding exposure to a market or sector index by using the most cost-effective vehicle available. To the extent the Fund uses total return swaps to hedge risk, basis risk may cause the hedge to be less effective or ineffective.
Offsetting Arrangements
Although the Fund generally presents derivative and other financial instruments on a gross basis in the Consolidated Statement of Assets and Liabilities, certain derivative and other financial instruments are subject to enforceable master netting arrangements with certain counterparties which allow for the derivative and other financial instruments to be offset.
The following table presents the rights of offset and related arrangements associated with the Fund's derivative instruments:
| | | | Gross Amounts Not Offset in
Statement of Assets and Liabilities | | | |
| Description | | Gross Amounts
of Recognized
Assets
(Liabilities) | | Gross Amounts
Offset in
Assets
(Liabilities) | | Net Amounts
of Assets
(Liabilities)
Presented | | Financial
Instrument | | Collateral
(Received)
Pledged | | Net Amount | |
Assets: | |
Goldman Sachs: | |
Forward Foreign Currency Contracts | | $ | 88,791 | | | $ | — | | | $ | 88,791 | | | $ | (12,084 | ) | | $ | — | | | $ | 76,707 | | |
Swap Agreements | | | 1,040,555 | | | | — | | | | 1,040,555 | | | | (110,132 | ) | | | — | | | | 930,423 | | |
Total | | $ | 1,129,346 | | | $ | — | | | $ | 1,129,346 | | | $ | (122,216 | ) | | $ | — | | | $ | 1,007,130 | | |
Liabilities: | |
Goldman Sachs: | |
Forward Foreign Currency Contracts | | $ | (12,084 | ) | | $ | — | | | $ | (12,084 | ) | | $ | 12,084 | | | $ | — | | | $ | — | | |
Swap Agreements | | | (110,132 | ) | | | — | | | | (110,132 | ) | | | 110,132 | | | | — | | | | — | | |
Total | | $ | (122,216 | ) | | $ | — | | | $ | (122,216 | ) | | $ | 122,216 | | | $ | — | | | $ | — | | |
Semi-Annual Report 2020
71
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
(9) Risk Factors
Senior Loans Risk
Although senior loans ("Senior Loans") are senior and typically secured in a first or second lien position in contrast to other below investment grade fixed income instruments, which are often subordinated or unsecured, the risks associated with such Senior Loans are generally similar to the risks of other below investment grade fixed income instruments. Investments in below investment grade Senior Loans are considered speculative because of the credit risk of the issuers of debt instruments (each, a "Borrower"). Such Borrowers are more likely than investment grade Borrowers to default on their payments of interest and principal owed to the Fund, and such defaults would likely reduce the net asset value of the Fund and income distributions. An economic downturn would generally lead to a higher non-payment rate, and a Senior Loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a Senior Loan may decline in value or become illiquid, which would likely adversely affect the Senior Loan's value.
Senior Loans are subject to the risk of non-payment of scheduled interest or principal. Such non-payment would result in a reduction of income to the Fund, a reduction in the value of the investment and a likely decrease in the net asset value of the Fund. There can be no assurance that the liquidation of any collateral securing a Senior Loan would satisfy the Borrower's obligation in the event of nonpayment of scheduled interest or principal payments, whether when due or upon acceleration, or that the collateral could be liquidated, readily or otherwise. In the event of bankruptcy or insolvency of a Borrower, the Fund could experience delays or limitations with respect to its ability to realize the benefits of the collateral, if any, securing a Senior Loan. The collateral securing a Senior Loan, if any, may lose all or substantially all of its value in the event of the bankruptcy or insolvency of a Borrower. Some Senior Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate such Senior Loans to presently existing or future indebtedness of the Borrower or take other action detrimental to the holders of Senior Loans including, in certain circumstances, invalidating such Senior Loans or causing interest previously paid to be refunded to the Borrower. Additionally, a Senior Loan may be "primed" in bankruptcy, which reduces the ability of the holders of the Senior Loan to recover on the collateral.
There may be less readily available information about most Senior Loans and the Borrowers thereunder than is the case for many other types of securities, including securities issued
in transactions registered under the Securities Act of 1933, as amended (the "Securities Act") or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Borrowers subject to the periodic reporting requirements of Section 13 of the Exchange Act. Senior Loans may be issued by companies that are not subject to SEC reporting requirements and these companies, therefore, do not file reports with the SEC that must comply with SEC form requirements and, in addition, are subject to a less stringent liability disclosure regime than companies subject to SEC reporting requirements. As a result, the Adviser will rely primarily on its own evaluation of a Borrower's credit quality rather than on any available independent sources. Consequently, the Fund will be particularly dependent on the analytical abilities of the Adviser. In certain circumstances, Senior Loans may not be deemed to be securities under certain federal securities laws, other than the Investment Company Act. Therefore, in the event of fraud or misrepresentation by a Borrower or an arranger, the Fund may not have the protection of the antifraud provisions of the federal securities laws as would otherwise be available for bonds or stocks. Instead, in such cases, parties generally would rely on the contractual provisions in the Senior Loan agreement itself and common law fraud protections under applicable state law.
The secondary trading market for Senior Loans may be less liquid than the secondary trading market for registered investment grade debt securities. No active trading market may exist for certain Senior Loans, which may make it difficult to value them. Illiquidity and adverse market conditions may mean that the Fund may not be able to sell Senior Loans quickly or at a fair price. To the extent that a secondary market does exist for certain Senior Loans, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.
Senior Loans are subject to legislative risk. If legislation or state or federal regulations impose additional requirements or restrictions on the ability of financial institutions to make loans, the availability of Senior Loans for investment by the Fund may be adversely affected. In addition, such requirements or restrictions could reduce or eliminate sources of financing for certain Borrowers. This would increase the risk of default. If legislation or federal or state regulations require financial institutions to increase their capital requirements this may cause financial institutions to dispose of Senior Loans that are considered highly levered transactions. If the Fund attempts to sell a Senior Loan at a time when a financial institution is engaging in such a sale, the price the Fund could receive for the Senior Loan may be adversely affected.
Semi-Annual Report 2020
72
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Subordinated Loans Risk
Subordinated loans generally are subject to similar risks as those associated with investments in Senior Loans, except that such loans are subordinated in payment and/or lower in lien priority to first lien holders. In the event of default on a Subordinated Loan, the first priority lien holder has first claim to the underlying collateral of the loan to the extent such claim is secured. Additionally, an over secured creditor may be entitled to additional interest and other charges in bankruptcy increasing the amount of their allowed claim. Subordinated Loans are subject to the additional risk that the cash flow of the Borrower and property securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior obligations of the Borrower. This risk is generally higher for subordinated unsecured loans or debt, which are not backed by a security interest in any specific collateral. Subordinated Loans generally have greater price volatility than Senior Loans and may be less liquid.
Corporate Bonds Risk
The market value of a corporate bond generally may be expected to rise and fall inversely with interest rates. The market value of intermediate- and longer-term corporate bonds is generally more sensitive to changes in interest rates than is the market value of shorter-term corporate bonds. The market value of a corporate bond also may be affected by factors directly related to the Borrower, such as investors' perceptions of the creditworthiness of the Borrower, the Borrower's financial performance, perceptions of the Borrower in the market place, performance of management of the Borrower, the Borrower's capital structure and use of financial leverage and demand for the Borrower's goods and services. There is a risk that the Borrowers of corporate bonds may not be able to meet their obligations on interest or principal payments at the time called for by an instrument. High yield corporate bonds are often high risk and have speculative characteristics. High yield corporate bonds may be particularly susceptible to adverse Borrower-specific developments.
CLO Securities Risk
Collateralized Loan Obligations "CLO" issue securities in tranches with different payment characteristics and different credit ratings. The rated tranches of securities issued by CLOs ("CLO Securities") are generally assigned credit ratings by one or more nationally recognized statistical rating organizations. The subordinated (or residual) tranches do not receive ratings. Below investment grade tranches of CLO Securities typically experience a lower recovery, greater risk of loss or deferral or non-payment of interest than more senior tranches of the CLO.
The riskiest portion of the capital structure of a CLO is the subordinated (or residual) tranche, which bears the bulk of defaults from the loans in the CLO and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CLO typically has higher ratings and lower yields than the underlying securities, and can be rated investment grade. Despite the protection from the subordinated tranche, CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults and aversion to CLO Securities as a class. The risks of an investment in a CLO depend largely on the collateral and the tranche of the CLO in which the Fund invests.
The CLOs in which the Fund invests may have issued and sold debt tranches that will rank senior to the tranches in which the Fund invests. By their terms, such more senior tranches may entitle the holders to receive payment of interest or principal on or before the dates on which the Fund is entitled to receive payments with respect to the tranches in which the Fund invests. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a CLO, holders of more senior tranches would typically be entitled to receive payment in full before the Fund receives any distribution. After repaying such senior creditors, such CLO may not have any remaining assets to use for repaying its obligation to the Fund. In the case of tranches ranking equally with the tranches in which the Fund invests, the Fund would have to share on an equal basis any distributions with other creditors holding such securities in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant CLO. Therefore, the Fund may not receive back the full amount of its investment in a CLO.
The transaction documents relating to the issuance of CLO Securities may impose eligibility criteria on the assets of the CLO, restrict the ability of the CLO's investment manager to trade investments and impose certain portfolio-wide asset quality requirements. These criteria, restrictions and requirements may limit the ability of the CLO's investment manager to maximize returns on the CLO Securities. In addition, other parties involved in CLOs, such as third-party credit enhancers and investors in the rated tranches, may impose requirements that have an adverse effect on the returns of the various tranches of CLO Securities. Furthermore, CLO Securities issuance transaction documents generally contain provisions that, in the event that certain tests are not met (generally interest coverage and over-collateralization tests at varying levels in the capital structure), proceeds that would otherwise be distributed to holders of a junior tranche must be
Semi-Annual Report 2020
73
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
diverted to pay down the senior tranches until such tests are satisfied. Failure (or increased likelihood of failure) of a CLO to make timely payments on a particular tranche will have an adverse effect on the liquidity and market value of such tranche.
Payments to holders of CLO Securities may be subject to deferral. If cash flows generated by the underlying assets are insufficient to make all current and, if applicable, deferred payments on CLO Securities, no other assets will be available for payment of the deficiency and, following realization of the underlying assets, the obligations of the Borrower of the related CLO Securities to pay such deficiency will be extinguished.
The market value of CLO Securities may be affected by, among other things, changes in the market value of the underlying assets held by the CLO, changes in the distributions on the underlying assets, defaults and recoveries on the underlying assets, capital gains and losses on the underlying assets, prepayments on underlying assets and the availability, prices and interest rate of underlying assets. Furthermore, the leveraged nature of each subordinated class may magnify the adverse impact on such class of changes in the value of the assets, changes in the distributions on the assets, defaults and recoveries on the assets, capital gains and losses on the assets, prepayment on assets and availability, price and interest rates of assets. Finally, CLO Securities are limited recourse and may not be paid in full and may be subject to up to 100% loss.
Asset-Backed Securities Risk
Asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. For instance, asset-backed securities may be particularly sensitive to changes in prevailing interest rates. In addition, the underlying assets are subject to prepayments that shorten the securities' weighted average maturity and may lower their return. Asset-backed securities are also subject to risks associated with their structure and the nature of the assets underlying the security and the servicing of those assets. Payment of interest and repayment of principal on asset-backed securities is largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds or other credit enhancements. The values of asset-backed securities may be substantially dependent on the servicing of the underlying asset pools, and are therefore subject to risks associated with the negligence by, or defalcation of, their servicers. Furthermore, debtors may be entitled to the protection of a number of state and federal consumer credit laws with respect to the assets underlying these securities,
which may give the debtor the right to avoid or reduce payment. In addition, due to their often complicated structures, various asset-backed securities may be difficult to value and may constitute illiquid investments. If many Borrowers on the underlying loans default, losses could exceed the credit enhancement level and result in losses to investors in asset-backed securities.
Investment and Market Risk
An investment in the common shares of the Fund is subject to investment risk, including the possible loss of the entire principal amount invested. An investment in the common shares of the Fund represents an indirect investment in the portfolio of Senior Loans, Corporate Bonds, CLO Securities and other securities and loans owned by the Fund, and the value of these securities and loans may fluctuate, sometimes rapidly and unpredictably. For instance, during periods of global economic downturn, the secondary markets for Senior Loans and investments with similar economic characteristics (such as second lien loans and unsecured loans) and Corporate Bonds may experience sudden and sharp price swings, which can be exacerbated by large or sustained sales by major investors in these markets, a high-profile default by a major Borrower, movements in indices tied to these markets or related securities or investments, or a change in the market's perception of Senior Loans and investments with similar economic characteristics (such as second lien loans and unsecured loans) and Corporate Bonds. At any point in time, an investment in the common shares of the Fund may be worth less than the original amount invested, even after taking into account distributions paid by the Fund, if any, and the ability of common shareholders to reinvest dividends. The Fund currently utilizes leverage, which magnifies the Fund's risks and, in turn, the risks to the common shareholders.
Interest Rate Risk
The market value of Corporate Bonds and other fixed-income securities changes in response to interest rate changes and other factors. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as rates rise. Accordingly, an increase in market interest rates (which are currently considered low by historic standards) may cause a decrease in the price of a debt security and, therefore, a decline in the net asset value of the Fund's common shares. The magnitude of these fluctuations in the market price of bonds and other fixed-income securities is generally greater for those securities with longer maturities. Because Senior Loans with floating or variable rates reset their interest rates only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the net asset value of
Semi-Annual Report 2020
74
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
the Fund's common shares. In addition, Senior Loans or similar loans or securities may allow the Borrower to opt between LIBOR-based interest rates and interest rates based on bank prime rates, which may have an effect on the net asset value of the Fund's common shares.
LIBOR Rate Risk
National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices that are deemed to be "reference rates." Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (the "FCA"), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. Such announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It appears highly likely that LIBOR will be discontinued or modified by 2021.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities (the" Secured Overnight Financing Rate," or "SOFR"). The future of LIBOR at this time is uncertain. Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities, or the cost of our borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities, including the value of the LIBOR-indexed, floating-rate debt securities in our portfolio, or the cost of our borrowings. Additionally, if LIBOR ceases to exist, the Fund may need to renegotiate the State Street Credit Facility and Wells Credit Facility agreements extending beyond 2021 with our credit facility lenders that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.
Liquidity Risk
The Fund may not be able to readily dispose of illiquid securities or loans at prices that approximate those at which the Fund could sell the securities or loans if they were more widely traded and, as a result of that illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations.
Limited liquidity can also affect the market price of securities, thereby adversely affecting the net asset value of the common shares and ability to make dividend distributions. Some securities are not readily marketable and may be subject to restrictions on resale. Securities generally are not listed on any national securities exchange and no active trading market may exist for the securities in which the Fund may invest. When a secondary market exists, if at all, the market for some securities may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Further, the lack of an established secondary market for illiquid securities may make it more difficult to value such securities, which may negatively affect the price the Fund would receive upon disposition of such securities.
Duration and Maturity Risk
The Fund has no fixed policy regarding portfolio maturity or duration. Holding long duration and long maturity investments will expose the Fund to certain additional risks.
When interest rates rise, certain obligations will be paid off by the Borrower more slowly than anticipated, causing the value of these obligations to fall. Rising interest rates tend to extend the duration of securities, making them more sensitive to changes in interest rates. The value of longer-term securities generally changes more in response to changes in interest rates than shorter-term securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.
When interest rates fall, certain obligations will be paid off by the Borrower more quickly than originally anticipated, and the Fund may have to invest the proceeds in securities with lower yields. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as Borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the Adviser will generally be at lower rates of return than the return on the assets that were prepaid. Prepayment reduces the yield to maturity and the average life of the security.
Special Situations and Stressed Investments Risk
Although investments in debt and equity securities and other obligations of companies that may be in some level of financial or business distress, including companies involved in, or that have recently completed, bankruptcy or other reorganization and liquidation proceedings ("Stressed Issuers") (such investments, "Special Situation Investments") may result in significant returns for the Fund, they are speculative and involve a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary
Semi-Annual Report 2020
75
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
for successful investment in distressed assets is unusually high. Therefore, the Fund will be particularly dependent on the analytical abilities of the Adviser. In any reorganization or liquidation proceeding relating to a company in which the Fund invests, the Fund may lose its entire investment, may be required to accept cash or securities with a value less than the Fund's original investment and/or may be required to accept payment over an extended period of time. Among the risks inherent in investments in a troubled company is that it may be difficult to obtain information as to the true financial condition of such company. Troubled company investments and other distressed asset-based investments require active monitoring.
The Fund may make investments in Stressed Issuers when the Adviser believes it is reasonably likely that the Stressed Issuer will make an exchange offer or will be the subject to a plan of reorganization pursuant to which the Fund will receive new securities in return for a Special Situation Investment. There can be no assurance, however, that such an exchange offer will be made or that such a plan of reorganization will be adopted. In addition, a significant period of time may pass between the time at which the Fund makes its investment in the Special Situation Investment and the time that any such exchange offer or plan of reorganization is completed, if at all. During this period, it is unlikely that the Fund would receive any interest payments on the Special Situation Investment, the Fund would be subject to significant uncertainty whether the exchange offer or plan of reorganization will be completed and the Fund may be required to bear certain extraordinary expenses to protect and recover its investment. Therefore, to the extent the Fund seeks capital appreciation through investment in Special Situation Investments, the Fund's ability to achieve current income for its shareholders may be diminished. The Fund also will be subject to significant uncertainty as to when, in what manner and for what value the obligations evidenced by Special Situation Investments will eventually be satisfied (e.g., through a liquidation of the obligor's assets, an exchange offer or plan of reorganization involving the Special Situation Investments or a payment of some amount in satisfaction of the obligation). Even if an exchange offer is made or plan of reorganization is adopted with respect to Special Situation Investments held by the Fund, there can be no assurance that the securities or other assets received by the Fund in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made or even no value. Moreover, any securities received by the Fund upon completion of an exchange offer or plan of reorganization may be restricted as to resale. Similarly, if the Fund participates in negotiations with respect to any exchange offer or plan of
reorganization with respect to an issuer of Special Situation Investments, the Fund may be restricted from disposing of such securities. To the extent that the Fund becomes involved in such proceedings, the Fund may have a more active participation in the affairs of the issuer than that assumed generally by an investor.
To the extent that the Fund holds interests in a Stressed Issuer that are different (or more senior or junior) than those held by other funds and/or accounts managed by the Adviser or its affiliates ("Other Accounts"), the Adviser is likely to be presented with decisions involving circumstances where the interests of such Other Accounts may be in conflict with the Fund's interests. Furthermore, it is possible that the Fund's interest may be subordinated or otherwise adversely affected by virtue of such Other Accounts' involvement and actions relating to their investment. In addition, when the Fund and Other Accounts hold investments in the same Stressed Issuer (including in the same level of the capital structure), the Fund may be prohibited by applicable law from participating in restructurings, work-outs, renegotiations or other activities related to its investment in the Stressed Issuer absent an exemption due to the fact that Other Accounts hold investments in the same Stressed Issuer. As a result, the Fund may not be permitted by law to make the same investment decisions as Other Accounts in the same or similar situations even if the Adviser believes it would be in the Fund's best economic interests to do so. Also, the Fund may be prohibited by applicable law from investing in a Stressed Issuer (or an affiliate) that Other Accounts are also investing in or currently invest in even if the Adviser believes it would be in the best economic interests of the Fund to do so. Furthermore, entering into certain transactions that are not deemed prohibited by law when made may potentially lead to a condition that raises regulatory or legal concerns in the future. This may be the case, for example, with Stressed Issuers who are near default and more likely to enter into restructuring or work-out transactions with their existing debt holders, which may include the Fund and its affiliates. In some cases, to avoid the potential of future prohibited transactions, the Adviser may avoid recommending allocating an investment opportunity to the Fund that it would otherwise recommend, subject to the Adviser's then-current allocation policy and any applicable exemptions.
Below Investment Grade Rating Risk
Debt instruments that are rated below investment grade are often referred to as "high yield" securities or "junk bonds." Below investment grade instruments are rated "Ba1" or lower by Moody's, "BB+" or lower by S&P or "BB+" or lower by Fitch or, if unrated, are judged by the Adviser to be of comparable credit quality. While generally providing greater
Semi-Annual Report 2020
76
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
income and opportunity for gain, below investment grade debt instruments may be subject to greater risks than securities or instruments that have higher credit ratings, including a higher risk of default. The credit rating of an instrument that is rated below investment grade does not necessarily address its market value risk, and ratings may from time to time change, positively or negatively, to reflect developments regarding the Borrower's financial condition. Below investment grade instruments often are considered to be speculative with respect to the capacity of the Borrower to timely repay principal and pay interest or dividends in accordance with the terms of the obligation and may have more credit risk than higher rated securities. Lower grade securities and similar debt instruments may be particularly susceptible to economic downturns. It is likely that a prolonged or deepening economic recession could adversely affect the ability of some Borrowers issuing such debt instruments to repay principal and pay interest on the instrument, increase the incidence of default and severely disrupt the market value of the securities and similar debt instruments.
The secondary market for below investment grade instruments may be less liquid than that for higher rated instruments. Because unrated securities may not have an active trading market or may be difficult to value, the Fund might have difficulty selling them promptly at an acceptable price. To the extent that the Fund invests in unrated securities, the Fund's ability to achieve its investment objectives will be more dependent on the Adviser's credit analysis than would be the case when the Fund invests in rated securities.
Under normal market conditions, the Fund will invest in debt instruments rated in the lower rating categories ("Caa1" or lower by Moody's, "CCC+" or lower by S&P or "CCC+" or lower by Fitch) or unrated and of comparable quality. For these securities, the risks associated with below investment grade instruments are more pronounced. The Fund may incur additional expenses to the extent it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating to an investment, the Fund may lose its entire investment or may be required to accept cash or securities with a value substantially less than its original investment.
European Risk
The Fund may invest a portion of its capital in debt securities issued by issuers domiciled in Europe, including issuers domiciled in the United Kingdom ("UK"). Concerns regarding the sovereign debt of various Eurozone countries and proposals for investors to incur substantial write-downs and reductions in the face value of the sovereign debt of certain
countries give rise to concerns about sovereign defaults, the possibility that one or more countries might leave the European Union ("EU") or the Eurozone and various proposals (still under consideration and unclear in material respects) for support of affected countries and the Euro as a currency. The outcome of any such situation cannot be predicted. Sovereign debt defaults and EU and/or Eurozone exits could have material adverse effects on investments by the Fund in securities of European companies, including but not limited to the availability of credit to support such companies' financing needs, uncertainty and disruption in relation to financing, customer and supply contracts denominated in Euro and wider economic disruption in markets served by those companies, while austerity and other measures that have been introduced in order to limit or contain these issues may themselves lead to economic contraction and resulting adverse effects for the Fund. A number of the Fund's securities may be denominated in the Euro. Legal uncertainty about the funding of Euro denominated obligations following any breakup or exits from the Eurozone (particularly in the case of investments in securities of companies in affected countries) could also have material adverse effects on the Fund. On January 31, 2020, the UK officially withdrew from the EU and the two sides entered into a transition agreement whereby the UK effectively remains in the EU from an economic perspective but no longer has any political representation in the EU parliament. During this transition phase, the UK and EU will seek to negotiate and finalize a new trade deal. If no deal is agreed to by the end of the transition phase (currently set as December 31, 2020), the trading relationship between the UK and EU will be governed by World Trade Organization rules (known as a "hard Brexit"). The impact of a hard Brexit on the UK and EU and the broader global economy is unknown but could be significant and could result in increased volatility and illiquidity and potentially lower economic growth. The Brexit process also may lead to greater volatility in the global currency and financial markets, which could adversely affect the Fund. In connection with investments in non-US issuers, the Fund may engage in foreign currency exchange transactions but is not required to hedge its currency exposure. As such, the Fund makes investments that are denominated in British pound sterling or Euros. The Fund's assets are valued in US dollars and the depreciation of the British pound sterling and/or the Euro in relation to the US dollar in anticipation of Brexit or otherwise adversely affects the Fund's investments denominated in British pound sterling or Euros that are not fully hedged regardless of the performance of the underlying issuer. Global central banks may maintain historically low interest rates longer than was anticipated prior to the Brexit vote, which could adversely affect the Fund's income and its level of distributions.
Semi-Annual Report 2020
77
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
Market Disruption Risk
As of the filing date of these financial statements, there is an outbreak of a highly contagious form of a novel coronavirus ("COVID-19"), which the World Health Organization has declared a global pandemic, the United States has declared a national emergency, and for the first time in its history, every state in the United States is under a federal disaster declaration. Many states, including those in which the Fund's portfolio companies operate, have issued orders requiring the closure of, or certain restrictions on the operation of, non-essential businesses and/or requiring residents to stay at home. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, or the re-introduction of business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several countries, as well as certain states, counties and cities in the United States, have begun to lift the public health restrictions with a view to reopening their economies, recurring COVID-19 outbreaks have led to the re-introduction of such restrictions in certain states in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere. Additionally, the absence of viable treatment options or a vaccine could lead people to continue to self-isolate and not participate in the economy at prepandemic levels for a prolonged period of time. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may continue to experience a recession, and the Fund's business and operations, as well as the business and operations the Fund's portfolio companies, could be materially adversely affected by a prolonged recession in the U.S. and other major markets.
The COVID-19 pandemic (including the preventative measures taken in response thereto) has to date (i) created significant business disruption issues for certain of the Fund's portfolio companies, and (ii) materially and adversely impacted the value and performance of certain of the Fund's portfolio companies. The COVID-19 pandemic is having a particularly adverse impact on industries in which certain of the Fund's portfolio companies operate, including energy, hospitality, travel, retail and restaurants. Certain of the Fund's portfolio companies in other industries have also been significantly impacted. The COVID-19 pandemic is continuing as of the filing date of these financial statements,
and its extended duration may have further adverse impacts on the Fund's portfolio companies after June 30, 2020, including for the reasons described below. Although on March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which contains provisions intended to mitigate the adverse economic effects of the COVID-19 pandemic, it is uncertain whether, or how much, the Fund's portfolio companies have benefited or may benefit from the CARES Act or any other subsequent legislation intended to provide financial relief or assistance. As a result of this disruption and the pressures on their liquidity, certain of the Fund's portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.
The effects described above on the Fund's portfolio companies have, for certain of the Fund's portfolio companies to date, impacted their ability to make payments on their loans on a timely basis and in many cases have required us to amend certain terms, including payment terms. In addition, an extended duration of the COVID-19 pandemic may impact the ability of the Fund's portfolio companies to continue making their loan payments on a timely basis or meeting their loan covenants. The inability of portfolio companies to make timely payments or meet loan covenants may in the future require the Fund to undertake similar amendment actions with respect to other of the Fund's investments or to restructure the Fund's investments. The amendment or restructuring of the Fund's investments may include the need for the Fund to make additional investments in the Fund's portfolio companies (including debt or equity investments) beyond any existing commitments, exchange debt for equity, or change the payment terms of the Fund's investments to permit a portfolio company to pay a portion of its interest through payment-in-kind, which would defer the cash collection of such interest and add it to the principal balance, which would generally be due upon repayment of the outstanding principal.
The COVID-19 pandemic has adversely impacted the fair value of the Fund's investments, including those reported as of June 30, 2020, and the values reported may differ materially from the values that the Fund may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of the Fund's investments as the Fund's valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the period
Semi-Annual Report 2020
78
CION Ares Diversified Credit Fund
Notes to Consolidated Financial Statements (continued)
June 30, 2020 (Unaudited)
for which the Fund is reporting. Additionally, the Fund may not have yet received information or certifications from the Fund's portfolio companies that indicate the full and ongoing extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, the Fund's valuations, including those reported as of June 30, 2020, may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of the Fund's investments have reduced, and any additional write downs may further reduce, the Fund's net asset value (and, as a result, the Fund's asset coverage calculation). Accordingly, the Fund may continue to incur additional net unrealized losses or may incur realized losses after June 30, 2020, which could have a material adverse effect on the Fund's business, financial condition and results of operations.
The volatility and disruption to the global economy from the COVID-19 pandemic has affected, and is expected to continue to affect, the pace of the Fund's investment activity and the size of our portfolio, which may have a material adverse impact on the Fund's results of operations, including the Fund's total investment income. Such volatility and disruption have also led to the increased credit spreads in the private debt capital markets.
In response to the COVID-19 pandemic, Ares and CION have instituted a work from home policy until it is deemed safe to return to the office. Such a policy of an extended period of remote working by the Fund's investment adviser and/or its affiliate's employees could strain the Fund's technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic.
(10) Subsequent Events
The Adviser has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were the following subsequent events:
The following common share distributions were declared for July and August 2020:
Record Date: daily
Payable Date: July 31, 2020
Per Share Amount: $0.1182734
Record Date: daily
Payable Date: August 31, 2020
Per Share Amount: $0.1182734
On July 17, 2020, the Fund amended the Wells Credit Facility increasing the amount the Fund is allowed to borrow on the facility to $150 million.
Effective August 1, 2020 the Fund changed its administrator from State Street Bank and Trust Company to ALPS Fund Services, Inc.
On July 31, 2020, the Expense Support Agreement was renewed for an additional year.
Semi-Annual Report 2020
79
CION Ares Diversified Credit Fund
Additional Information
June 30, 2020 (Unaudited)
Proxy Information
The policies and procedures used to determine how to vote proxies relating to securities held by the Fund are available (1) without charge, upon request, by calling 1-877-855-3434, or (2) on the SEC's website at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 will be available on Form N-PX by August 31 of each year (1) without charge, upon request, by calling 1-877-855-3434, or (2) on the SEC's website at http://www.sec.gov.
Portfolio Information
The Fund files its complete schedule of portfolio holdings for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on SEC Form N-PORT. The Fund's Form N-PORT will be available (1) without charge, upon request, by calling 1-877-855-3434; (2) on the SEC's website at http://www.sec.gov.
Semi-Annual Report 2020
80
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Dividend Reinvestment Plan
The Fund will operate under a dividend reinvestment plan, (the "DRIP") administered by DST Systems, Inc. ("DST"). Pursuant to the plan, the Fund's distributions, net of any applicable U.S. withholding tax, are reinvested in the same class of shares of the Fund.
Shareholders automatically participate in the DRIP, unless and until an election is made to withdraw from the plan on behalf of such participating shareholder. A shareholder who does not wish to have distributions automatically reinvested may terminate participation in the DRIP at any time by written instructions to that effect to DST. Shareholders who elect not to participate in the DRIP will receive all distributions in cash paid to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee). Such written instructions must be received by the DST 30 days prior to the record date of the distribution or the shareholder will receive such distribution in shares through the DRIP. Under the DRIP, the Fund's distributions to shareholders are automatically reinvested in full and fractional shares as described below.
When the Fund declares a distribution, DST, on the shareholder's behalf, will receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock. The number of shares to be received when distributions are reinvested will be determined by dividing the amount of the distribution by the Fund's Net Asset Value (the "NAV") per share.
DST will maintain all shareholder accounts and furnish written confirmations of all transactions in the accounts, including information needed by shareholders for personal and tax records. DST will hold shares in the account of the shareholders in non-certificated form in the name of the participant, and each shareholder's proxy, if any, will include those shares purchased pursuant to the DRIP. Each participant, nevertheless, has the right to request certificates for whole and fractional shares owned. The Fund will issue certificates in its sole discretion. DST will distribute all proxy solicitation materials, if any, to participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating under the DRIP, DST will administer the DRIP on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the shareholder's name and held for the account of beneficial owners participating under the DRIP.
Neither DST nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the DRIP, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without limitation, failure to terminate a participant's account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participants account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws.
The automatic reinvestment of dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends. The Fund reserves the right to amend or terminate the DRIP. There is no direct service charge to participants with regard to purchases under the DRIP; however, the Fund reserves the right to amend the DRIP to include a service charge payable by the participants.
All correspondence concerning the DRIP should be directed to DST at CION Ares Diversified Credit Fund c/o DST Systems, Inc., P.O. Box 219422, Kansas City, MO 64121-9422. Certain transactions can be performed by calling the toll free number 888-729-4266.
Semi-Annual Report 2020
81
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Plan of Distribution
ALPS Distributors Inc. (the "Distributor") located at 1290 Broadway, Suite 1100, Denver, CO 80203, serves as the Fund's principal underwriter and acts as the Distributor of the Fund's shares on a best efforts basis, subject to various conditions. The Fund's shares are offered for sale through the Distributor at NAV plus the applicable sales load. The Distributor also may enter into agreements with financial intermediaries for the sale and servicing of the Fund's shares. In reliance on Rule 415 of the Securities Act of 1933, the Fund intends to offer to sell up to $1,061,000,000 of its shares, on a continual basis, through the Distributor. No arrangement has been made to place funds received in an escrow, trust or similar account. The Distributor is not required to sell any specific number or dollar amount of the Fund's shares, but will use its best efforts to solicit orders for the purchase of the shares. Shares of the Fund will not be listed on any national securities exchange and the Distributor will not act as a market marker in Fund shares.
The Distributor has entered into a wholesale marketing agreement with CION Securities, a registered broker-dealer and an affiliate of CION. Pursuant to the terms of the wholesale marketing agreement, CION Securities will seek to market and otherwise promote the Fund through various wholesale distribution channels, including regional and independent retail broker-dealers and registered investment advisers.
CION Securities has also entered into a dealer manager agreement with the Fund pursuant to which CION Securities has agreed to provide certain marketing and wholesale services in consideration of its receipt of the dealer manager fee.
The Advisor or its affiliates, in the Advisor's discretion and from their own resources, may pay additional compensation to financial intermediaries in connection with the sale of the Fund's shares. In return for the additional compensation, the Fund may receive certain marketing advantages including access to a financial intermediaries' registered representatives, placement on a list of investment options offered by a financial intermediary, or the ability to assist in training and educating the financial intermediaries. The additional compensation may differ among financial intermediaries in amount or in the manner of calculation: payments of additional compensation may be fixed dollar amounts, or based on the aggregate value of outstanding shares held by shareholders introduced by the financial intermediary, or determined in some other manner. The receipt of additional compensation by a selling financial intermediary may create potential conflicts of interest between an investor and its financial intermediary who is recommending the Fund over other potential investments. Additionally, the Fund pays a servicing fee to the financial intermediaries or financial institution for providing ongoing services in respect of clients holding shares of the Fund. Such services may include electronic processing of client orders, electronic fund transfers between clients and the Fund, account reconciliations with the Fund's transfer agent, facilitation of electronic delivery to clients of Fund documentation, monitoring client accounts for back-up withholding and any other special tax reporting obligations, maintenance of books and records with respect to the foregoing, and such other information and ongoing liaison services as the Fund or the Advisor may reasonably request.
The Fund and the Advisor have agreed to indemnify the Distributor against certain liabilities, including liabilities under the 1933 Act, or to contribute to payments the Distributor may be required to make because of any of those liabilities. Such agreement does not include indemnification of the Distributor against liability resulting from willful misfeasance, bad faith or negligence on the part of the Distributor in the performance of its duties or from reckless disregard by the Distributor of its obligations and duties under the Distribution Agreement.
Semi-Annual Report 2020
82
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Investment Adviser
CION Ares Management, LLC
3 Park Avenue, 36th Floor
New York, NY 10016
Administrator and Custodian
The following entity is the Fund's custodian and prior to August 1, 2020, it was the Fund's administrator:
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
Effective August 1, 2020, the following entity became the Fund's administrator:
ALPS Fund Services, Inc.
1290 Broadway, Suite 1000
Denver, CO 802023
Transfer Agent and DRIP Administrator
DST Systems, Inc.
333 W 11th Street
Kansas City, MO 64105
Distributor
ALPS Distributors Inc.
1290 Broadway, Suite 1100
Denver, CO 80203
Independent Registered Public Accounting Firm
Ernst & Young LLP
725 S. Figueroa Street
Los Angeles, CA 90017
Fund Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Semi-Annual Report 2020
83
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Privacy Notice
We are committed to maintaining the privacy of our shareholders and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, we will not receive any non-public personal information about shareholders of the common stock of the Fund, although certain of our shareholders' non-public information may become available to us. The non-public personal information that we may receive falls into the following categories:
• Information we receive from shareholders, whether we receive it orally, in writing or electronically. This includes shareholders' communications to us concerning their investment;
• Information about shareholders' transactions and history with us; or
• Other general information that we may obtain about shareholders, such as demographic and contact information such as address.
We do not disclose any non-public personal information about shareholders, except:
• to our affiliates (such as our investment adviser) and their employees that have a legitimate business need for the information;
• to our service providers (such as our administrator, accountants, attorneys, custodians, transfer agent, underwriter and proxy solicitors) and their employees as is necessary to service shareholder accounts or otherwise provide the applicable service;
• to comply with court orders, subpoenas, lawful discovery requests, or other legal or regulatory requirements; or
• as allowed or required by applicable law or regulation.
When the Fund shares non-public shareholder personal information referred to above, the information is made available for limited business purposes and under controlled circumstances designed to protect our shareholders' privacy. The Fund does not permit use of shareholder information for any non-business or marketing purpose, nor does the Fund permit third parties to rent, sell, trade or otherwise release or disclose information to any other party.
The Fund's service providers, such as their adviser, administrator, and transfer agent, are required to maintain physical, electronic, and procedural safeguards to protect shareholder nonpublic personal information; to prevent unauthorized access or use; and to dispose of such information when it is no longer required.
Personnel of affiliates may access shareholder information only for business purposes. The degree of access is based on the sensitivity of the information and on personnel need for the information to service a shareholder's account or comply with legal requirements.
If a shareholder ceases to be a shareholder, we will adhere to the privacy policies and practices as described above. We may choose to modify our privacy policies at any time. Before we do so, we will notify shareholders and provide a description of our privacy policy.
In the event of a corporate change in control resulting from, for example, a sale to, or merger with, another entity, or in the event of a sale of assets, we reserve the right to transfer your non-public personal information to the new party in control or the party acquiring assets.
Semi-Annual Report 2020
84
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Board of Trustees and Executive Officers
Trustees
Information regarding the members of the Board is set forth below. The Trustees have been divided into two groups — Interested Trustees and Independent Trustees. As set forth in the Fund's declaration of trust, each Trustee's term of office shall continue until his or her death, resignation or removal.
Name, address(1)
and Year of Birth | | Position(s) Held
with the Trust | | Term of Office
and Length of
Time Served | | Principal
Occupation(s)
During Past 5 Years | | Number of
Portfolios
in Fund
Complex
Overseen
by Trustee(2) | | Other Directorships
Held by Trustee | |
Interested Trustees(3) | |
Mark Gatto
1972 | | Trustee | | | 2016 | | | Co-Chief Executive Officer and Co-President, CION Investment Group, LLC and Co-Chief Executive Officer of CION Investment Corporation; Director and Co-Chief Executive Officer, CION Ares Management, LLC | | | 1 | | | CION Investment Corporation; CION Ares Management, LLC | |
Mitch Goldstein
1967 | | Trustee | | | 2016 | | | Partner (Ares Credit Group), Ares Management LLC; Co-President, Ares Capital Corporation ("ARCC") | | | 1 | | | None | |
Michael A. Reisner
1970 | | Trustee | | | 2016 | | | Co-Chief Executive Officer and Co-President, CION Investment Group, LLC and Co-Chief Executive Officer of CION Investment Corporation; Director and Co-Chief Executive Officer, CION Ares Management, LLC | | | 1 | | | CION Investment Corporation; CION Ares Management, LLC | |
David A. Sachs
1956 | | Trustee and Chairman of the Board | | | 2016 | | | Partner, Ares Management LLC | | | 1 | | | Terex Corporation; Ares Dynamic Credit Allocation Fund, Inc | |
Semi-Annual Report 2020
85
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Trustees
Name, address(1)
and Year of Birth | | Position(s) Held
with the Trust | | Term of Office
and Length of
Time Served | | Principal
Occupation(s)
During Past 5 Years | | Number of
Portfolios
in Fund
Complex
Overseen
by Trustee(2) | | Other Directorships
Held by Trustee | |
Independent Trustees | |
James K. Hunt
1951 | | Trustee | | | 2016 | | | Consultant, Tournament Capital Advisors, LLC; from 2015 to 2016, Managing Partner and Chief Executive Officer, Middle Market Credit platform — Kayne Anderson Capital Advisors LLC; from 2014 to 2015, Chairman, THL Credit, Inc.; from 2010 to 2014, Chief Executive Officer and Chief Investment Officer, THL Credit, Inc. and THL Credit Advisors LLC | | | 1 | | | PennyMac Financial Services, Inc.; Ares Dynamic Credit Allocation Fund, Inc. | |
Paula B. Pretlow
1955 | | Trustee | | | 2016 | | | Prior to 2012, Senior Vice President, The Capital Group Companies | | | 1 | | | The Kresge Foundation; The Harry & Jeanette Weinberg Foundation; Northwestern University | |
John Joseph Shaw
1951 | | Trustee | | | 2016 | | | Independent Consultant; prior to 2012, President, Los Angeles Rams | | | 1 | | | Ares Dynamic Credit Allocation Fund, Inc. | |
Bruce H. Spector
1942 | | Trustee | | | 2016 | | | Independent Consultant; from 2007 to 2015, Senior Advisor, Apollo Global Management, LLC (private equity) | | | 1 | | | The Private Bank of California (2007-2013); Ares Dynamic Credit Allocation Fund, Inc. | |
Mark R. Yosowitz
1968 | | Trustee | | | 2016 | | | From 2014 to present, President, Mentored; from 2014 to present, Adjunct Professor, Brooklyn Law School; from 2008 to present, Senior Vice President, Corporate Development, ThinkEco Inc. | | | 1 | | | None | |
(1) The address of each Trustee is care of the Secretary of the Fund at 3 Park Avenue, 36th Floor, New York, NY 10016.
(2) The term "Fund Complex" means two or more registered investment companies that share the same investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any of the other registered investment companies or hold themselves out to investors as related companies for the purpose of investment and investor services.
(3) "Interested person," as defined in the 1940 Act, of the Fund. Mr. Gatto, Mr. Goldstein, Mr. Reisner and Mr. Sachs are interested persons of the Fund due to their affiliation with the Adviser.
Semi-Annual Report 2020
86
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Executive Officers
Name, address(1)
and age | | Position(s) Held
with the Trust | | Term of Office
and Length of
Time Served | | Principal Occupation(s) During Past 5 Years | |
Michael Reisner
1970 | | Co-President and Co-Chief Executive Officer | | | 2016 | | | Mr. Reisner is Co-Chief Executive Officer and Co-President of CION Investment Group, LLC as well as Co-Chief Executive Officer of CION Investment Corp. ("CIC"), a business development company focused on middle market loans. Mr. Reisner serves on the investment committee of CIC. In addition, Mr. Reisner is a Director and Co-Chief Executive Officer of CION Ares Management, LLC. Mr. Reisner joined CION in 2001. | |
Mark Gatto
1972 | | Co-President and Co-Chief Executive Officer | | | 2016 | | | Mr. Gatto is Co-Chief Executive Officer and Co-President of CION Investment Group, LLC as well as Co-Chief Executive Officer of CION Investment Corp., a business development company focused on middle market loans. Mr. Gatto serves on the investment committee of CIC. In addition, Mr. Gatto is a Director and Co-Chief Executive Officer of CION Ares Management, LLC. Mr. Gatto joined CION in 1999. | |
Greg Schill
1981 | | Vice President | | | 2016 | | | Mr. Schill is Senior Managing Director of CION Investment Group, LLC. Prior to this, he served as Managing Director since 2012. Mr. Schill joined CION in 2001. | |
Mitch Goldstein
1967 | | Vice President | | | 2016 | | | Mr. Goldstein is a Partner and Co-Head of the Ares Credit Group and a member of the Management Committee of Ares Management Corporation L.P. ("Ares Management"). He additionally serves as Co-President of ARCC. He is a member of the Ares Management Credit Group's U.S. Direct Lending and Commercial Finance Investment Committees and Ivy Hill Asset Management ("IHAM") Investment Committee. Mr. Goldstein joined Ares Management in 2005. | |
Greg Margolies
1966 | | Vice President | | | 2016 | | | Mr. Margolies is a Partner in the Ares Credit Group, the Head of Markets for Ares Management LLC and a member of the Management Committee of Ares Management. Additionally, Mr. Margolies serves as a member of the Ares Credit Group's U.S. Liquid Credit and Global Structured Credit Investment Committees, the Ares Dynamic Credit Allocation Fund, Inc. ("ARDC") Investment Committee and the Ares Private Equity Group's Special Situations Funds Investment Committee. Mr. Margolies joined Ares in 2009. | |
Penni F. Roll
1965 | | Treasurer
Chief Financial Officer | | | 2019
2016-2019 | | | Ms. Roll is a Partner and the Chief Financial Officer of the Ares Credit Group. She also serves as the Chief Financial Officer of ARCC. She may additionally from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Ms. Roll joined Ares in 2010. | |
Scott Lem
1977 | | Chief Financial Officer
Treasurer | | | 2019
2016-2019 | | | Mr. Lem is a Partner and Chief Accounting Officer, Credit (Direct Lending) in the Ares Finance Department. Mr. Lem additionally serves as Chief Accounting Officer, Vice President and Treasurer of Ares Capital Corporation ("ARCC") and previously served as Assistant Treasurer of ARCC from May 2009 to May 2013. Mr. Lem also serves as Chief Financial Officer of Ares Dynamic Credit Allocation Fund ("ARDC"), a NYSE-listed, closed end fund managed by an affiliate of Ares. He may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or investment funds managed by Ares Management and its affiliates. From July 2003 to December 2008, Mr. Lem served as Controller of Ares Management. Mr. Lem joined Ares in 2003. | |
Miriam Krieger
1976 | | Chief Compliance Officer and Anti-Money Laundering Officer | | | 2017 | | | Ms. Krieger is a Partner and Global Chief Compliance Officer and is a member of the Ares Operations Management Group. Ms. Krieger is the firm's Global Anti-Money Laundering Officer and Global Anti-Corruption Officer and also serves as Chief Compliance Officer of several entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates, including Ares Capital Corporation ("ARCC") and Ivy Hill Asset Management, L.P. ("IHAM"). Ms. Krieger joined Ares in 2010. | |
Semi-Annual Report 2020
87
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Executive Officers
Name, address(1)
and age | | Position(s) Held
with the Trust | | Term of Office
and Length of
Time Served | | Principal Occupation(s) During Past 5 Years | |
Ian Fitzgerald
1975 | | General Counsel, Chief Legal Officer and Secretary
Vice President and Assistant Secretary | | | 2019
2017-2019 | | | Mr. Fitzgerald is a Managing Director and Associate General Counsel (Credit) in the Ares Legal Group, where he focuses on credit matters. He also serves as Vice President and Assistant Secretary of IHAM and Vice President and Assistant Secretary of Ivy Hill Asset Management GP, LLC, IHAM's General Partner. Mr. Fitzgerald joined Ares in 2010. | |
John Atherton
1981 | | Vice President and Assistant Secretary | | | 2018 | | | Mr. Atherton is a Principal and Associate General Counsel, Credit in the Ares Legal Department. Prior to joining Ares in 2018, Mr. Atherton was General Counsel, Private Investment Structures at Schroder Adveq. Previously Mr. Atherton was a Senior Associate in the London and Boston offices of Proskauer Rose LLP, where he focused on private investment funds. | |
Joshua Bloomstein
1973 | | Vice President and Assistant Secretary | | | 2016 | | | Mr. Bloomstein serves as a Partner and General Counsel (Credit) and Deputy General Counsel (Corporate) of Ares Management, where he focuses on direct credit lending matters. He is General Counsel, Vice President and Secretary of ARCC and Vice President and Assistant Secretary of Ares Commercial Real Estate Corporation. He is also a member of the Ares Enterprise Risk Committee. Mr. Bloomstein joined Ares in 2006. | |
Anton Feingold
1980 | | Vice President and Assistant Secretary | | | 2016 | | | Mr. Feingold is a Managing Director and Associate General Counsel (Real Estate) in the Ares Legal Group. He also serves as Vice President and Secretary of Ares Commercial Real Estate Corporation. Mr. Feingold joined Ares in 2014. | |
Keith Kooper
1975 | | Vice President and Assistant Secretary | | | 2016 | | | Mr. Kooper is a Partner and General Counsel (Real Estate) in the Ares Legal Group. He also serves as Vice President and Assistant Secretary of Ares Commercial Real Estate Corporation. Mr. Kooper additionally serves as a member of the Ares Enterprise Risk Committee. Mr. Kooper joined Ares in 2013. | |
Naseem Sagati Aghili
1981 | | Vice President and Assistant Secretary | | | 2019 | | | Ms. Sagati Aghili is a Partner and General Counsel of Ares Management and is a member of the Management Committee of Ares Management. Ms. Sagati Aghili joined Ares in 2009. | |
Kevin Early
1971 | | Vice President | | | 2017 | | | Mr. Early is a Partner, European Finance in the Ares Finance Department. Mr. Early joined Ares in 2012. | |
Michael Dennis
1976 | | Vice President | | | 2017 | | | Mr. Dennis is a Partner and Co-Head of European Credit, in the Ares Credit Group. Additionally, Mr. Dennis serves as a member of the Management Committee of Ares Management and the Ares Credit Group's European Direct Lending and European Liquid Credit Investment Committees. Mr. Dennis joined Ares in 2007. | |
Blair Jacobson
1972 | | Vice President | | | 2017 | | | Mr. Jacobson is a Partner and Co-Head of European Credit in the Ares Credit Group and a member of the Management Committee of Ares Management. He also serves on the boards of Ares Management Limited and Ares Management UK Limited. Additionally, Mr. Jacobson serves on the Ares Credit Group's European Direct Lending and European Liquid Credit Investment Committees. He joined Ares in 2012. | |
(1) The address of each officer is care of the Secretary of the Fund at 3 Park Avenue, 36th Floor, New York, NY 10016.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call 888-729-4266 to request the SAI.
Semi-Annual Report 2020
88
CION Ares Diversified Credit Fund
Additional Information (continued)
June 30, 2020 (Unaudited)
Voting Results of Special Meeting of Shareholders
A Special Meeting (the "Meeting") of the Fund was held on May 22, 2020, as adjourned, to consider and act upon the proposal below.
At the Meeting, the shareholders of the Fund approved a Third Amended and Restated Investment Advisory Agreement between the Fund and the Advisor. The Fund's shareholders voted as follows:
Proposal 1.
To approve the Third Amended and Restated Investment Advisory Agreement between the Fund and the Advisor to make certain technical changes to the calculation of the Fund's incentive fee such that it is calculated based on (1) each share class's net investment income (rather than Fund-level net investment income) and (2) each share class's net asset value (rather than the Fund's "Adjusted Capital."
| | For | | Against | | Abstained | | Broker
Non-Votes | |
CION Ares Diversified Credit Fund | | | 9,784,068 | | | | 550,970 | | | | 1,239,367 | | | | 0 | | |
Semi-Annual Report 2020
89
Item 2. Code of Ethics.
Not applicable for this filing.
Item 3. Audit Committee Financial Expert.
Not applicable for this filing.
Item 4. Principal Accountant Fees and Services.
Not applicable for this filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable for this filing.
Item 6. Investments.
(a) Schedule of Investments is included as part of Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Investment Companies.
Not applicable for this filing.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Not applicable for this filing.
(a)(2) Not applicable for this filing.
(a)(3) Not applicable for this filing.
(a)(4) Not applicable for this filing.
(b) There have been no changes to the portfolio managers identified in the most recently filed annual report on Form N-CSR (File Nos. 333-212323 and 811-23165) for CION Ares Diversified Credit Fund (the “Fund”).
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
None during the period covered by this Form N-CSR filing pursuant to a plan or program.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees during the period covered by this Form N-CSR filing.
Item 11. Controls and Procedures.
| (a) | The Fund’s principal executive and principal financial officers have concluded that the Fund’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this Form N-CSR based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 Act, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the Fund’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Item 13. Exhibits.
| (a)(1) | Not applicable for this filing. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Fund has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CION ARES DIVERSIFIED CREDIT FUND | |
| | | |
| | | |
| By: | /s/ Michael A. Reisner | |
| | Michael A. Reisner | |
| | Co-President and Co-Chief Executive Officer | |
| | | |
| | | |
| Date: | September 1, 2020 | |
| By: | /s/ Mark Gatto | |
| | Mark Gatto | |
| | Co-President and Co-Chief Executive Officer | |
| | | |
| | | |
| Date: | September 1, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Fund and in the capacities and on the dates indicated.
| By: | /s/ Michael A. Reisner | |
| | Michael A. Reisner | |
| | Co-President and Co-Chief Executive Officer | |
| | | |
| | | |
| Date: | September 1, 2020 | |
| By: | /s/ Mark Gatto | |
| | Mark Gatto | |
| | Co-President and Co-Chief Executive Officer | |
| | | |
| | | |
| Date: | September 1, 2020 | |
| By: | /s/ Scott C. Lem | |
| | Scott C. Lem | |
| | Chief Financial Officer | |
| | | |
| Date: | September 1, 2020 | |
