N-CSR 1 tm227573d1_ncsr.htm N-CSR

 

 

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 Diversified Credit Fund

3 Park Avenue, 36th Floor 

New York, New York 10016

  

Richard Horowitz, Esq.

Jonathan H. Gaines, 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: January 1, 2021 – December 31, 2021

 

 

 

 

 

Item 1. Report to Stockholders.

 

(a)

 

 

 

 

CION Ares Diversified Credit Fund

ANNUAL REPORT

DECEMBER 31, 2021

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

Contents

Letter to Shareholders

    

2

    

Fund Profile & Financial Data

    

5

    

Performance Summary

    

7

    

Consolidated Schedule of Investments

    

9

    

Consolidated Statement of Assets and Liabilities

    

92

    

Consolidated Statement of Operations

    

94

    

Consolidated Statements of Changes in Net Assets

    

95

    

Consolidated Statement of Cash Flows

    

97

    

Financial Highlights

    

98

    

Notes to Consolidated Financial Statements

    

109

    

Report of Independent Registered Public Accounting Firm

    

137

    

Proxy & Portfolio Information

    

138

    

Dividend Reinvestment Plan

    

139

    

Corporate Information

    

141

    

Privacy Notice

    

142

    

Trustees and Executive Officers

    

143

    

Approval of Investment Sub-Advisory Agreement

    

147

    

 

  

Annual Report 2021

CION Ares Diversified Credit Fund

Letter to Shareholders

December 31, 2021

Fellow Shareholders,

We are pleased to present the annual report for the CION Ares Diversified Credit Fund (the "Fund"), for the period ending December 31, 2021. We are happy to report that 2021 was an exceptional year for asset growth in the Fund, which surpassed $2 billion in total assets and concluded 2021 with $2.6 billion under management. The Fund returned an attractive 8.9%1 for the year, all while maintaining a diversified posture; as of period-end, the Fund had 614 total investments, spread across 24 unique industries. Secured debt instruments accounted for 94.5%2 of the Fund and more than 50% of the Fund was deployed in investments directly originated by the Ares platform. The Fund's relative value strategy across liquid and illiquid credit allowed us to capitalize quickly on market opportunities, which has been beneficial as markets and economies continue to emerge from the pandemic.

Investment Philosophy and Process

The Fund employs a dynamic asset allocation framework that seeks to offer enhanced yield and downside risk mitigation, while enabling the manager to respond to changing market conditions. We believe that the differentiated, diversified portfolio of directly originated and liquid investments can provide superior risk-adjusted returns for our shareholders. Active management across a broad spectrum of credit asset classes, including direct lending in the United States and Europe, high yield bonds, leveraged loans, structured credit, real estate debt, and other credit instruments provides the opportunity to generate attractive risk-adjusted returns by capturing the best relative value.

The Fund's investment process is rigorous and incorporates top-down and bottom-up factors. 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 overseeing each of the underlying asset classes share their observations with the Advisor's portfolio managers.

Investment Environment

Market sentiment was supportive for risk assets throughout 2021 due to macroeconomic tailwinds and strengthening corporate fundamentals. However, rising inflation concerns, global supply chain issues, the surging Omicron variant of COVID-19 and expectations for a shift in monetary policy contributed to elevated market volatility in the fourth quarter of the year. Central banks remained accomodative as market participants continued to navigate around pandemic-related devleopments, while additional fiscal measures, such as the $1.9 trillion stimulus package in the U.S., contributed to increased economic activity and elevated growth expectations alongside the rollout of COVID-19 vaccines. Labor market conditions tightened as these fiscal measures contributed to higher job openings, which reached a record 11.1 million in July3. Global supply chains came under pressure as a result of pent-up demand, which, combined with elevated commodity prices, contributed to heightened inflation in the U.S. and Europe. Central bank rhetoric turned hawkish as a result, and markets started to prepare for future tapering measures. Within global credit markets, sub-investment grade credit benefitted from increased demand due to low nominal and real rates as investors sought to enhance income and returns.

From a performance perspective, leveraged credit markets in the U.S. experienced positive returns owing to the continued economic recovery and appetite for credit risk. The syndicated loan market was a consistent source of positive returns, benefitting from record-high CLO issuance and $46.5 billion of retail fund inflows4. Demand in the high yield market was able to absorb record breaking issuance and issuer fundamentals exhbitied steady improvement throughout the year. Syndicated loans returned +5.40% and +4.63% in the U.S. and Europe5, respectively, due to a strong technical backdrop. Despite increased bouts of volatility in the fourth quarter, high yield bonds returned +5.36% and +3.33% in the U.S. and Europe5, respectively. Returns were driven by cyclical sectors and lower quality paper given risk-on market sentiment, and both credit sectors outperformed traditional fixed income asset categories due to their yield premium and relatively muted sensitivity to interest rates. In terms of fundamentals, the default environment was muted throughout the year and fell below one percent in both the syndicated loan and high yield bond markets6 as companies continued to utilize elevated liquidity to lower their cost of capital. Shifting to the middle market, elevated deployment was supported by a strong M&A environment and elevated levels of dry powder from private equity sponsors.

Annual Report 2021
2

CION Ares Diversified Credit Fund

Letter to Shareholders (continued)

December 31, 2021

Within Europe, markets exhibited similar trends as the U.S. during the period. European high yield and leveraged loan markets benefitted from modest corporate earnings growth, strong economic data prints and a supportive technical backdrop as issuance remained steady, though moderated towards year-end. Positive economic developments, such as the Euro Area Composite PMI reaching a 21-year high in July7, contributed to spread tightening throughout the year, while the default environment remained benign. Primary markets were active with new issuance surpassing 2020 volume for both syndicated loans and high yield bonds. While the European Central Bank announced tapering measures in December, risk assets reacted positively to the news given actions were broadly in-line with expectations and had reduced uncertainty around central bank policy for the time being.

As a new calendar year begins, global financial markets have experienced heightened volatility as a result of economic and political events affecting the world's major economies. Equities declined and government bond yields rose amid escalating geopolitical tensions in Eastern Europe and in anticipation of a more restrictive Federal Reserve ("Fed") in 2022. Within credit markets, we have observed diverging return patterns between high yield bonds and syndicated loans as floating rate credit has experienced strong interest from investors seeking protection from rising interest rates, while fixed rate assets have come under pressure. Looking forward, we expect a confluence of factors including inflation, supply chain issues, potential for new COVID-19 variants as well as Fed actions, will lead to increased dispersion and pockets of volatility, creating an opportunity for active managers. Within illiquid credit, the M&A backdrop is expected to remain strong in 2022, providing ample directly originated opportunities for the Fund. Overall, we believe the backdrop for credit is favorable as elevated private equity dry powder buoys supply while investor demand is supported by enhanced yields and reduced duration risk relative to traditional fixed income. We believe our scaled platform, tenured experience and cycle-tested investment process will allow us to successfully navigate these changing market environments and take advantage of any short-term bouts of volatility in the coming months.

Summary

The market's appetite for credit risk was apparent throughout the year as stimulus measures contributed to improved corporate fundamentals and economies "reopening" from the depths of the pandemic. However, investor appetite for rate risk has erorded in recent months as above-trend economic growth and elevated inflation have lead to increased expectations for tighter monetary policy and higher interest rates in the months to come. As a result, the Bloomberg U.S. Aggregate Index, comprised of longer duration assets, returned -1.54% in 2021 and declined by -2.15% in the first month of 20228, suggesting that apprehension around rate sensitive assets will persist over the near term. Conversely, floating rate assets such as syndicated loans have been resilient, performing well during January.

While economic forecasts are positive, we remain cautiously optimistic in our outlook. We continue to monitor fiscal and monetary policy in response to the recovery and elevated growth expectations, as well as labor market conditions and elevated inflation. Central bank missteps, rising geopolitical tensions and new virus strains are also potential concerns and areas of focus.

We are pleased with the ongoing construction of the Fund's diversified portfolio, and we believe the Fund is well positioned to find relative opportunities in a rising rate environment given our emphasis on floating rate assets. Our Advisor will continue to leverage Ares' position as a global leader in credit markets to identify attractive investment opportunities in line with the stated objective of the Fund.

We thank you for your investment in and continued support of CION Ares Diversified Credit Fund.

Sincerely,

  

 
Mitch Goldstein
Portfolio Manager
CION Ares Diversified Credit Fund		   Greg Margolies
Portfolio Manager
CION Ares Diversifed Credit Fund		  

Annual Report 2021
3

CION Ares Diversified Credit Fund

Letter to Shareholders (continued)

December 31, 2021

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 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 December 31, 2021 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-01036

1 Past performance is not indicative of future results. 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 estimated expense ratio is 3.28%. Expense ratios are annualized and calculated as a percentage of estimated average net assets. Share values will fluctuate, therefore if repurchased, they may be worth more or less than their original cost.

2 Secured Debt Includes First and Second Lien assets, Structured Credit Debt, Structured Credit Equity

3 Source: U.S. Bureau of Labor Statistics

4 Source: JP Morgan. As of December 31, 2021

5 Source: Credit Suisse, ICE BofA. As of December 31, 2021.

6 Source: JP Morgan Default Monitor. As of December 31, 2021.

7 Source: IHS Markit. July 23, 2021.

8 Source: Bloomberg U.S. Aggregate Index. As of December 31, 2021.

Annual Report 2021
4

CION Ares Diversified Credit Fund

Fund Fact Sheet — As of December 31, 2021

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

TOTAL MANAGED ASSETS*

    

~$2.61B

    

DISTRIBUTIONS1

   

Monthly

    

TOTAL ISSUES

   

606

    

 



SHARE CLASS		  

INCEPTION		   CURRENT
DISTRIBUTION
RATE2		  
STANDARD
DEVIATION3		  
SHARPE RATIO4
(ANNUALIZED)		  

CLASS A

  

1/26/2017

    

5.41

%

    

4.16

%

    

1.15

    

CLASS C

  

7/12/2017

    

5.43

%

    

4.18

%

    

1.14

    

CLASS I

  

7/12/2017

    

5.35

%

    

4.17

%

    

1.21

    

CLASS L

  

11/2/2017

    

5.39

%

    

4.30

%

    

1.10

    

CLASS U

  

7/25/2019

    

5.38

%

    

5.37

%

    

0.94

    

CLASS U-2

  

4/13/2020

    

5.39

%

    

3.23

%

    

4.68

    

CLASS W

  

12/4/2018

    

5.35

%

    

4.89

%

    

1.17

    

Portfolio Allocation*

  Allocation by Asset Type

  Allocation by Geography

Top 10 Holdings* % of Portfolio

Global Medical Response, Inc.

    

1.4

%

  

Cornerstone OnDemand, Inc.

    

1.3

%

  

TurnPoint Services

    

1.2

%

  

High Street Insurance Partners

    

1.2

%

  

CEP V I 5 Midco Limited (aka Mak System)

    

1.0

%

  

DecoPac, Inc.

    

0.9

%

  

DigiCert

    

0.9

%

  

European Camping Group

    

0.8

%

  

True Potential Group Limited

    

0.7

%

  

Ardonagh

    

0.7

%

  

Allocation by Industry* % of Portfolio

Software & Services

    

20.2

%

  

Health Care Equipment & Services

    

8.8

%

  

Diversified Financials

    

8.2

%

  

Commercial & Professional Services

    

7.8

%

  

Structured Products

    

7.7

%

  

Capital Goods

    

7.7

%

  

Consumer Services

    

7.3

%

  

Insurance

    

6.8

%

  

Other

    

27.3

%

  

Cash

    

-1.9

%

  

* 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.

Annual Report 2021
5

CION Ares Diversified Credit Fund

Fund Fact Sheet — As of December 31, 2021 (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 | 26 Years of Experience

• Greg Margolies, Head of Markets, Ares Management | 33 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 which seeks to provide consistent and attractive investment returns throughout market cycles. Ares Management's global platform had $305.8 billion of assets under management as of December 31, 2021 with over 2,000+ 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 net asset value. The current distribution rate shown may be rounded.

3 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.

4 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.

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, 2021, 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.

Annual Report 2021
6

CION Ares Diversified Credit Fund

Performance Summary

December 31, 2021

The following graph shows the value, as of December 31, 2021, of a $10,000 investment made on January 26, 2017 in Class A Shares at net asset value (with a sales charge of 5.75%). For comparative purposes, the performance of the Credit Suisse Leveraged Loan Index ("CSLLI") is shown. CSLLI is designed to mirror the investable universe of the U.S. Dollar-denominated leveraged loan market, and is deemed to be an appropriate broad-based securities market index for the Fund. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown and in their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the repurchase of Fund shares. The returns set forth below represent past performance. Past performance does not guarantee future results. The Fund's investment return and principal value will fluctuate so that an investor's shares, when repurchased, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted below. Please visit our website at https://www.cioninvestments.com/products/cion-ares-diversified-credit-fund/ to obtain the most recent month-end returns.

CION Ares Diversified Credit Fund's Lifetime Performance

Performance of a $10,000 investment, including any applicable sales charges, with distributions
reinvested, from January 26, 2017 through December 31, 2021

Annual Report 2021
7

CION Ares Diversified Credit Fund

Performance Summary (continued)

December 31, 2021

Average Annual Total Returns through December 31, 2021*

   

Inception Date

  

One Year

  

Since Inception

  

Class A Common Shares

  

1/26/2017

          

Excluding Sales Charge of 5.75%

        

8.21

%

    

6.27

%

  

Including Sales Charge of 5.75%

        

1.99

%

    

5.04

%

  

Class C Common Shares

  

7/12/2017

          

Excluding Sales Charge of 1.00%

        

8.16

%

    

5.98

%

  

Including Sales Charge of 1.00%

        

7.07

%

    

5.98

%

  

Class I Common Shares

  

7/12/2017

    

8.87

%

    

5.99

%

  

Class L Common Shares

  

11/2/2017

          

Excluding Sales Charge of 4.25%

        

8.58

%

    

5.28

%

  

Including Sales Charge of 4.25%

        

3.96

%

    

4.42

%

  

Class U Common Shares

  

7/25/2019

    

8.48

%

    

4.71

%

  

Class U-2 Common Shares

  

4/13/2020

          

Excluding Sales Charge of 2.50%

        

8.44

%

    

14.08

%

  

Including Sales Charge of 2.50%

        

5.47

%

    

12.58

%

  

Class W Common Shares

  

12/4/2018

          

Excluding Sales Charge of 3.00%

        

8.73

%

    

5.34

%

  

Including Sales Charge of 3.00%

        

5.73

%

    

4.59

%

  

* These returns assume reinvestment of all distributions at net asset value and reflect a maximum initial sales charge of 5.75% for Class A, 4.25% for Class L, 2.50% for Class U-2, and 3.00% for Class W and the assumed contingent deferred sales charge for Class C Shares of 1.00% (if repurchased during the first 365 days after their purchase). Because Class I and Class U Shares do not involve a sales charge, such a charge is not applied to their Average Annual Total Returns.

Annual Report 2021
8

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Automobiles & Components

  
Automotive Keys
Group, LLC
 		       1st Lien Term
Loan
   6.00% (3M
LIBOR +
5.00%)		  

11/6/2025

      

$

1,800

  

$

1,800

(e)(f)

    
Continental
Acquisition
Holdings, Inc.		       1st Lien
Revolver
   4.50% (3M
LIBOR +
3.50%)		  

1/20/2026

      

1

  

1

(e)(h)

    
Continental
Acquisition
Holdings, Inc.		       1st Lien Term
Loan
   7.75% (3M
LIBOR +
6.75%)		  

1/20/2027

      

6,211

  

6,211

(e)(f)

    
Continental
Acquisition
Holdings, Inc.		       1st Lien Term
Loan
   7.75% (3M
LIBOR +
6.75%)		  

1/20/2027

      

500

  

500

(e)

    
Continental
Acquisition
Holdings, Inc.		       1st Lien
Delayed Draw
Term Loan		   7.75% (3M
LIBOR +
6.75%)		  

1/20/2027

      

1,461

  

1,461

(e)

    
Highline
Aftermarket
Acquisition, LLC		       1st Lien
Revolver
   3.85% (1M
LIBOR +
3.75%)		  

11/10/2025

      

1

  

1

(e)(h)

    
Highline
Aftermarket
Acquisition, LLC		       2nd Lien Term
Loan
   8.75% (3M
LIBOR +
8.00%)		  

11/9/2028

      

5,942

  

5,586

(e)(f)

    
Highline
Aftermarket
Acquisition, LLC		       2nd Lien
Delayed Draw
Term Loan		   8.75% (3M
LIBOR +
8.00%)		  

11/9/2028

      

4,209

  

3,956

(e)

    
Mavis Tire
Express Services
Topco Corp.		       1st Lien
Revolver
   3.85% (1M
LIBOR +
3.75%)		  

5/4/2026

      

1

  

—

(e)(h)

    
Sun Acquirer
Corp.		       1st Lien
Revolver		    

9/8/2027

      

1,059

  

(21

)(e)(h)

    
Sun Acquirer
Corp.		       1st Lien
Term Loan
   6.50% (1M
LIBOR +
5.75%)		  

9/8/2028

      

6,615

  

6,549

(e)

    
Sun Acquirer
Corp.		       1st Lien Term
Loan		    

9/8/2028

      

1,766

  

1,748

(e)(i)

    
Sun Acquirer
Corp.		       1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.75%)		  

9/8/2028

      

4,869

  

2,556

(e)(h)

    

Truck Hero, Inc.

       1st Lien Term
Loan
   4.00% (1M
LIBOR +
3.25%)		  

1/31/2028

      

7,475

  

7,426

    
Wand Newco 3,
Inc.		       1st Lien Term
Loan
   3.18% (3M
LIBOR +
3.00%)		  

2/5/2026

      

4,191

  

4,126

    
Wand Newco 3,
Inc.		       2nd Lien Term
Loan		   7.43% (3M
LIBOR +
7.25%)		  

2/5/2027

      

3,000

  

3,000

(e)(f)

    
                                     

44,900

      

2.33

%

  

Annual Report 2021
9

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Capital Goods

  
Ali Group S.R.L.
 		   Italy
   1st Lien Term
Loan		    

10/13/2028

      

$

1,890

  

$

1,877

(i)

    
Alliance Laundry
Systems LLC		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.50%)		  

10/8/2027

      

4,933

  

4,930

    
Artera Services,
LLC		     1st Lien Term
Loan		   3.65%
(3M LIBOR +
3.50%)		  

3/6/2025

      

1,333

  

1,288

    

Box Bidco Limited

   United
Kingdom		   1st Lien Term
Loan		   6.10% (6M
LIBOR +
6.10%)		  

11/24/2028

      

1,691

  

1,691

(e)(f)

    

Box Bidco Limited

   United
Kingdom		   1st Lien Term
Loan		   7.83% (6M
EURIBOR +
7.83%)		  

11/24/2028

      

€

878

  

1,000

(e)(f)

    
Brookfield WEC
Holdings Inc.		     1st Lien Term
Loan		   3.25% (1M
LIBOR +
2.75%)		  

8/1/2025

      

6,901

  

6,843

    

Clarios Global LP

  

Canada

   1st Lien Term
Loan		   3.34% (3M
LIBOR +
3.25%)		  

4/30/2026

      

1,925

  

1,912

(i)

    
Conair Holdings
LLC		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.75%)		  

5/17/2028

      

3,526

  

3,524

    
CP Atlas Buyer,
Inc.		     1st Lien Term
Loan		   4.25% (1M
LIBOR +
3.75%)		  

11/23/2027

      

8,512

  

8,465

(i)

    
Crown Subsea
Communications
Holding, Inc.		     1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.75%)		  

4/27/2027

      

1,212

  

1,216

    
Dynamic NC
Aerospace
Holdings, LLC		     1st Lien
Revolver		    

12/30/2025

      

1,296

  

(13

)(e)(h)

    
Dynamic NC
Aerospace
Holdings, LLC		     1st Lien Term
Loan		   7.50% (3M
LIBOR +
6.50%)		  

12/30/2026

      

3,293

  

3,260

(e)(f)

    
Dynasty
Acquisition Co.,
Inc.		     1st Lien Term
Loan		   3.63% (3M
LIBOR +
3.50%)		  

4/6/2026

      

5,985

  

5,814

    

Eleda BidCo AB

  

Sweden

   1st Lien Term
Loan		   6.25% (3M
STIBOR +
6.25%)		  

6/30/2026

      

SEK

21,000

  

2,324

(e)(f)

    

Eleda BidCo AB

  

Sweden

   1st Lien
Delayed Draw
Term Loan		   6.25% (3M
STIBOR +
6.25%)		  

6/30/2026

      

SEK

9,070

  

1,004

(e)(f)

    

Eleda BidCo AB

  

Sweden

   1st Lien
Delayed Draw
Term Loan		    

6/30/2026

      

SEK

8,000

  

—

(e)(h)(i)

    
EPS NASS
Parent, Inc.		     1st Lien
Revolver		   6.75% (1M
LIBOR +
5.75%)		  

4/17/2026

      

158

  

99

(e)(h)

    

Annual Report 2021
10

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
EPS NASS
Parent, Inc.
 		       1st Lien Term
Loan
   6.75% (3M
LIBOR +
5.75%)		  

4/19/2028

      

$

5,832

  

$

5,832

(e)(f)

    
EPS NASS
Parent, Inc.		     1st Lien
Delayed Draw
Term Loan		    

4/19/2028

      

585

  

—

(e)(h)

    
FCG Acquisitions,
Inc.		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.75%)		  

3/31/2028

      

1,990

  

1,983

    
Flow Control
Solutions, Inc.		     1st Lien
Revolver		    

11/21/2024

      

373

  

—

(e)(h)

    
Flow Control
Solutions, Inc.		     1st Lien
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

11/21/2024

      

1,268

  

1,268

(e)(f)

    
Flow Control
Solutions, Inc.		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

11/21/2024

      

1,118

  

1,118

(e)

    
Husky Injection
Molding
Systems Ltd.		  

Canada

   1st Lien Term
Loan		   3.17% (3M
LIBOR +
3.00%)		  

3/28/2025

      

5,987

  

5,880

    
Kene Acquisition,
Inc.		     1st Lien
Revolver		    

8/8/2024

      

676

  

—

(e)(h)

    
Kene Acquisition,
Inc.		     1st Lien Term
Loan		   5.25% (3M
LIBOR +
4.25%)		  

8/10/2026

      

2,848

  

2,848

(e)(f)

    
Kene Acquisition,
Inc.		     1st Lien
Delayed Draw
Term Loan		   5.25% (3M
LIBOR +
4.25%)		  

8/10/2026

      

476

  

476

(e)

    

Kodiak BP, LLC

     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.25%)		  

3/12/2028

      

8,512

  

8,441

(i)

    

Madison IAQ LLC

     1st Lien Term
Loan		   3.75% (6M
LIBOR +
3.25%)		  

6/21/2028

      

2,954

  

2,950

    
Maverick
Acquisition, Inc.		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

6/1/2027

      

5,348

  

5,294

(e)(f)

    
Maverick
Acquisition, Inc.		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

6/1/2027

      

1,915

  

1,197

(e)(h)

    
Maverick
Acquisition, Inc.		     1st Lien
Delayed Draw
Term Loan		    

6/1/2027

      

1,255

  

(13

)(e)(h)

    
Osmose Utilities
Services, Inc.		     2nd Lien Term
Loan
  7.25% (1M
LIBOR +
6.75%)		  

6/25/2029

      

8,237

  

8,155

(e)

    
Osmosis Buyer,
Ltd.		     1st Lien Term
Loan		   4.50% (1M
LIBOR +
4.00%)		  

7/31/2028

      

6,894

  

6,899

    
Osmosis Buyer,
Ltd.		     1st Lien
Delayed Draw
Term Loan		    

7/31/2028

      

790

  

1

(h)(i)

    

Annual Report 2021
11

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Patagonia BidCo
Limited

  

United
Kingdom

  

1st Lien Term
Loan

    

11/1/2028

      

£

4,115

  

$

5,528

(i)

    

Peraton Corp.

    

1st Lien Term
Loan

  

4.50% (1M
LIBOR +
3.75%)

  

2/1/2028

      

1,985

  

1,984

    

Radius Aerospace
Europe Limited

  

United
Kingdom

  

1st Lien
Revolver

    

3/29/2025

      

£

186

  

(2

)(e)(h)

    

Radius Aerospace
Europe Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
5.75%)

  

3/29/2025

      

1,594

  

1,578

(e)(f)

    

Radius Aerospace,
Inc.

    

1st Lien
Revolver

    

3/29/2025

      

429

  

(4

)(e)(h)

    

Radius Aerospace,
Inc.

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
5.75%)

  

3/29/2025

      

2,416

  

2,392

(e)(f)

    

Setanta Aircraft
Leasing DAC

  

Ireland

  

1st Lien Term
Loan

  

2.14% (3M
LIBOR +
2.00%)

  

11/5/2028

      

2,000

  

1,998

    

Sigma Electric
Manufacturing
Corporation

    

1st Lien
Revolver

    

10/31/2022

      

1

  

—

(e)(h)

    

Sigma Electric
Manufacturing
Corporation

    

1st Lien Term
Loan

  

5.75% (3M
LIBOR +
4.75%)

  

10/31/2023

      

423

  

423

(e)(f)

    

Specialty Building
Products Holdings,
LLC

    

1st Lien Term
Loan

    

10/15/2028

      

6,000

  

5,981

(i)

    

SRS Distribution
Inc.

    

1st Lien Term
Loan

  

4.25% (3M
LIBOR +
3.75%)

  

6/2/2028

      

6,108

  

6,088

    

Star US Bidco LLC

    

1st Lien Term
Loan

  

5.25% (1M
LIBOR +
4.25%)

  

3/17/2027

      

3,576

  

3,564

    

Sunk Rock Foundry
Partners LP

    

1st Lien Term
Loan

  

5.75% (3M
LIBOR +
4.75%)

  

10/31/2023

      

201

  

201

(e)(f)

    

Tank Holding Corp.

    

1st Lien Term
Loan

  

3.35% (1M
LIBOR +
3.25%)

  

3/26/2026

      

5,459

  

5,404

(i)

    

Tank Holding Corp.

    

1st Lien Term
Loan

  

5.75% (1M
LIBOR +
5.00%)

  

3/26/2026

      

2,824

  

2,831

(i)

    

TransDigm Group
Incorporated

    

1st Lien Term
Loan

  

2.35% (1M
LIBOR +
2.25%)

  

8/22/2024

      

423

  

418

    

TransDigm Group
Incorporated

    

1st Lien Term
Loan

  

2.35% (1M
LIBOR +
2.25%)

  

12/9/2025

      

2,970

  

2,926

    

Turbo Acquisitions
10 Bidco Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

7.30%
(SONIA +
7.25%)

  

2/26/2027

      

£

2,516

  

3,405

(e)(f)

    

Annual Report 2021
12

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Turbo Acquisitions
10 Bidco Limited
 		   United
Kingdom
   1st Lien
Delayed Draw
Term Loan		   7.42%
(SONIA +
7.25%)		  

2/26/2027

      

£

2,827

  

$

3,826

(e)(f)

    
Turbo Acquisitions
10 Bidco Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.42%
(SONIA +
7.25%)		  

2/26/2027

      

£

1,346

  

1,161

(e)(h)

    
VC GB Holdings I
Corp		     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.50%)		  

7/21/2028

      

735

  

728

    
VC GB Holdings I
Corp		     2nd Lien Term
Loan		   7.25% (3M
LIBOR +
6.75%)		  

7/23/2029

      

3,200

  

3,166

(i)

    

Victory Buyer LLC

     1st Lien Term
Loan		    

11/19/2028

      

5,787

  

5,779

(e)(i)

    

Welbilt, Inc.

     1st Lien Term
Loan		   2.60% (1M
LIBOR +
2.50%)		  

10/23/2025

      

7,902

  

7,866

    

Wilsonart LLC

     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.50%)		  

12/31/2026

      

6,432

  

6,427

    
                                     

171,231

      

8.87

%

  

Commercial & Professional Services

  
Aero Operating
LLC		     1st Lien Term
Loan		   8.00% (1M
LIBOR +
6.50%)		  

2/9/2026

      

2,874

  

2,874

(e)(f)

    
Aero Operating
LLC		     1st Lien Term
Loan		   8.00% (3M
LIBOR +
6.50%)		  

2/9/2026

      

91

  

91

(e)(f)

    
Aero Operating
LLC		     1st Lien
Delayed Draw
Term Loan		   8.00% (3M
LIBOR +
6.50%)		  

2/9/2026

      

825

  

825

(e)

    

AlixPartners, LLP

     1st Lien Term
Loan		   3.25% (1M
LIBOR +
2.75%)		  

2/4/2028

      

1,985

  

1,976

    
Argenbright
Holdings V, LLC		     1st Lien Term
Loan		   7.00% (1M
LIBOR +
6.00%)		  

11/30/2026

      

2,848

  

2,820

(e)(f)

    
Argenbright
Holdings V, LLC		     1st Lien
Delayed Draw
Term Loan		    

11/30/2026

      

178

  

(2

)(e)(h)

    
ASG Bidco Limited   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.05%
(SONIA +
7.00%)		  

4/27/2027

      

£

2,947

  

3,989

(e)(f)

    
ASG Bidco Limited   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		    

4/27/2027

      

£

553

  

—

(e)(h)

    
Auxadi Midco
S.L.U.		  

Spain

   1st Lien Term
Loan		   4.75% (3M
EURIBOR +
4.75%)		  

7/17/2028

      

€

836

  

952

(e)

    

Annual Report 2021
13

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Auxadi Midco
S.L.U.		   Spain
   1st Lien Term
Loan		    

7/17/2028

      

€

1,273

  

$

—

(e)(h)

    
Capstone
Acquisition
Holdings, Inc.		     1st Lien
Revolver		   7.00%
(PRIME +
4.75%)		  

11/12/2025

      

1,150

  

177

(e)(h)

    
Capstone
Acquisition
Holdings, Inc.		     1st Lien Term
Loan		   5.75% (1M
LIBOR +
4.75%)		  

11/12/2027

      

10,953

  

10,953

(e)(f)

    
Capstone
Acquisition
Holdings, Inc.		     1st Lien
Delayed Draw
Term Loan		   5.75% (3M
LIBOR +
4.75%)		  

11/12/2027

      

1,679

  

642

(e)(h)

    
Capstone
Acquisition
Holdings, Inc.		     2nd Lien Term
Loan		   9.75% (1M
LIBOR +
8.75%)		  

11/13/2028

      

3,008

  

3,008

(e)(f)

    
Capstone
Acquisition
Holdings, Inc.		     2nd Lien
Delayed Draw
Term Loan		    

11/13/2028

      

531

  

—

(e)(h)

    
CED France
Holding		  

France

   1st Lien Term
Loan		   6.00% (3M
EURIBOR +
6.00%)		  

12/10/2025

      

€

1,038

  

1,182

(e)(f)

    
Deerfield Dakota
Holding, LLC		     2nd Lien Term
Loan		   7.50% (1M
LIBOR +
6.75%)		  

4/7/2028

      

2,050

  

2,086

    
Dun & Bradstreet
Corporation		     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

2/6/2026

      

6,789

  

6,758

    
Elevation Services
Parent Holdings,
LLC		     1st Lien
Revolver		   7.00% (1M
LIBOR +
6.00%)		  

12/18/2026

      

386

  

296

(e)(h)

    
Elevation Services
Parent Holdings,
LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

12/18/2026

      

1,337

  

1,337

(e)(f)

    
Elevation Services
Parent Holdings,
LLC		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

12/18/2026

      

1,787

  

1,787

(e)

    
Eucalyptus BidCo
Pty Ltd		  

Australia

   1st Lien Term
Loan		    

11/15/2027

      

AUD

1,337

  

1

(e)(h)(i)

    
Eucalyptus BidCo
Pty Ltd		  

Australia

   1st Lien Term
Loan		    

12/23/2027

      

AUD

11,142

  

8,106

(e)(f)(i)

    
FC Sun
Intressenter AB		  

Sweden

   1st Lien Term
Loan		    

12/20/2028

      

€

8,685

  

9,935

(e)(f)(i)

    
FC Sun
Intressenter AB		  

Sweden

   1st Lien
Delayed Draw
Term Loan		    

12/20/2028

      

€

10,909

  

2

(e)(h)(i)

    
GFL Environmental,
Inc.		  

Canada

   1st Lien Term
Loan		   3.50% (3M
LIBOR +
3.00%)		  

5/30/2025

      

2,572

  

2,577

    

HH-Stella, Inc.

     1st Lien
Revolver		   6.50% (1M
LIBOR +
5.50%)		  

4/22/2027

      

444

  

51

(e)(h)

    

Annual Report 2021
14

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

HH-Stella, Inc.

     1st Lien Term
Loan		   6.50% (1M
LIBOR +
5.50%)		  

4/24/2028

      

$

6,154

  

$

6,154

(e)(f)

    

HH-Stella, Inc.

     1st Lien
Delayed Draw
Term Loan		   6.50% (1M
LIBOR +
5.50%)		  

4/24/2028

      

1,979

  

311

(e)(h)

    

IRI Holdings, Inc.

     1st Lien Term
Loan		   4.35% (1M
LIBOR +
4.25%)		  

12/1/2025

      

1,635

  

1,635

(e)(f)

    

IRI Holdings, Inc.

     2nd Lien Term
Loan		   8.10% (1M
LIBOR +
8.00%)		  

11/30/2026

      

1,472

  

1,472

(e)(f)

    
Kellermeyer
Bergensons
Services, LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

11/7/2026

      

1,764

  

1,764

(e)(f)

    
Kellermeyer
Bergensons
Services, LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

11/7/2026

      

6,099

  

6,099

(e)

    
Kellermeyer
Bergensons
Services, LLC		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

11/7/2026

      

4,947

  

2,772

(e)(h)

    
Laboratories
Bidco LLC		     1st Lien
Revolver		    

7/23/2027

      

1,562

  

—

(e)(h)

    
Laboratories
Bidco LLC		     1st Lien Term
Loan		   6.75% (3M
CDOR +
5.75%)		  

7/23/2027

      

CAD

1,780

  

1,407

(e)(f)

    
Laboratories
Bidco LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

7/23/2027

      

5,841

  

5,841

(e)(f)

    
Laboratories
Bidco LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

7/23/2027

      

4,006

  

4,006

(e)

    
Laboratories
Bidco LLC		     1st Lien
Delayed Draw
Term Loan		    

7/23/2027

      

2,201

  

—

(e)(h)

    
Lavatio Midco
Sarl		  

Luxembourg

   1st Lien
Delayed Draw
Term Loan		   7.50% (6M
EURIBOR +
7.25%)		  

11/30/2026

      

€

793

  

857

(e)(f)

    
Lavatio Midco
Sarl		  

Luxembourg

   1st Lien
Delayed Draw
Term Loan		   7.50% (6M
EURIBOR +
7.25%)		  

11/30/2026

      

€

982

  

641

(e)(h)

    
Marmic Purchaser,
LLC		     1st Lien
Revolver		   7.00% (3M
LIBOR +
6.00%)		  

3/5/2027

      

287

  

100

(e)(h)

    
Marmic Purchaser,
LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/5/2027

      

2,047

  

2,047

(e)(f)

    
Marmic Purchaser,
LLC		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/5/2027

      

1,196

  

1,196

(e)

    

Annual Report 2021
15

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
MIP V Waste
Holdings, LLC		     1st Lien Term
Loan		    

12/8/2028

      

$

5,000

  

$

4,981

(i)

    
MPLC Debtco
Limited		  

Jersey

   1st Lien
Delayed Draw
Term Loan		   7.75% (6M
GBP LIBOR +
7.25%)		  

1/7/2027

      

£

1,052

  

1,423

(e)(f)

    
MPLC Debtco
Limited		  

Jersey

   1st Lien
Delayed Draw
Term Loan		   8.75% (6M
LIBOR +
7.25%)		  

1/7/2027

      

2,100

  

2,100

(e)(f)

    
Nest Topco
Borrower Inc.		     1st Lien Term
Loan		   9.00% (3M
LIBOR +
8.50%)		  

8/31/2029

      

13,162

  

13,030

(e)

    
Nest Topco
Borrower Inc.		     1st Lien
Delayed Draw
Term Loan		    

8/31/2029

      

13,162

  

(132

)(e)(h)

    
North American
Fire Holdings, LLC		     1st Lien
Revolver		    

5/19/2027

      

411

  

—

(e)(h)

    
North American
Fire Holdings, LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

5/19/2027

      

2,327

  

2,327

(e)(f)

    
North American
Fire Holdings, LLC		     1st Lien
Delayed Draw
Term Loan		    

5/19/2027

      

2,462

  

—

(e)(h)

    
North Haven
Stack Buyer, LLC		     1st Lien
Revolver		    

7/16/2027

      

259

  

(5

)(e)(h)

    
North Haven
Stack Buyer, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

7/16/2027

      

1,333

  

1,320

(e)

    
North Haven
Stack Buyer, LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

7/16/2027

      

1,016

  

29

(e)(h)

    
P27 BIDCO
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.25% (6M
GBP LIBOR +
7.50%)		  

7/31/2026

      

£

2,031

  

2,149

(e)(h)

    
P27 BIDCO
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.25% (6M
LIBOR +
7.50%)		  

7/31/2026

      

610

  

555

(e)

    
Packers Holdings,
LLC		     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.25%)		  

3/9/2028

      

5,193

  

5,156

    
Petroleum Service
Group LLC		     1st Lien
Revolver		   7.00% (3M
LIBOR +
6.00%)		  

7/23/2025

      

2,106

  

351

(e)(h)

    
Petroleum Service
Group LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

7/23/2025

      

8,930

  

8,930

(e)(f)

    
Petroleum Service
Group LLC		     1st Lien
Delayed Draw
Term Loan		   1.00% (3M
LIBOR +
1.00%)		  

7/23/2025

      

1,607

  

102

(e)(h)

    
Petroleum Service
Group LLC		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

7/23/2025

      

107

  

107

(e)

    

Annual Report 2021
16

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Registrar
Intermediate, LLC		     1st Lien
Revolver		    

8/26/2027

      

$

764

  

$

(15

)(e)(h)

    
Registrar
Intermediate, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

8/26/2027

      

4,188

  

4,146

(e)

    
Registrar
Intermediate, LLC		     1st Lien
Delayed Draw
Term Loan		    

8/26/2027

      

2,327

  

(23

)(e)(h)

    
Rodeo
AcquisitionCo LLC		     1st Lien
Revolver		   7.00% (3M
LIBOR +
6.00%)		  

7/26/2027

      

311

  

37

(e)(h)

    
Rodeo
AcquisitionCo LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

7/26/2027

      

2,118

  

2,097

(e)

    
Rodeo
AcquisitionCo LLC		     1st Lien
Delayed Draw
Term Loan		    

7/26/2027

      

460

  

(5

)(e)(h)

    

RSK Group Limited

   United
Kingdom		   1st Lien Term
Loan		   5.05%
(SONIA +
5.00%)		  

8/7/2028

      

£

3,276

  

2,789

(e)(h)

    

RSK Group Limited

   United
Kingdom		   1st Lien
Term Loan		   5.25%  

8/7/2028

      

€

986

  

1,123

(e)(f)

    

RSK Group Limited

   United
Kingdom		   1st Lien Term
Loan		   7.17%
(SONIA +
7.00%)		  

8/7/2028

      

£

7,881

  

10,667

(e)(f)

    
Schill Landscaping
and Lawn Care
Services, LLC		     1st Lien
Revolver		    

12/16/2027

      

720

  

(14

)(e)(h)

    
Schill Landscaping
and Lawn Care
Services, LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

12/16/2027

      

2,590

  

2,564

(e)(f)

    
Schill Landscaping
and Lawn Care
Services, LLC		     1st Lien
Delayed Draw
Term Loan		    

12/16/2027

      

1,542

  

(15

)(e)(h)

    

SLR BD Limited

   United
Kingdom		   1st Lien Term
Loan		   7.15% (6M
LIBOR +
7.00%)		  

9/22/2028

      

753

  

753

(e)(f)

    

SLR BD Limited

   United
Kingdom		   1st Lien Term
Loan		   7.33%
(SONIA +
7.00%)		  

9/22/2028

      

£

1,226

  

1,660

(e)(f)

    

SLR BD Limited

   United
Kingdom		   1st Lien Term
Loan		   7.33%
(SONIA +
7.00%)		  

9/22/2028

      

£

1,232

  

233

(e)(h)

    

SSE Buyer, Inc.

     1st Lien
Revolver		   3.00% (1M
LIBOR +
2.00%)		  

6/30/2025

      

3

  

1

(e)(h)

    

SSE Buyer, Inc.

     1st Lien
Term Loan		   10.22% (3M
LIBOR +
9.22%)		  

6/30/2026

      

620

  

576

(e)(f)

    
Stealth Holding
LLC		     1st Lien Term
Loan		   7.75% (3M
LIBOR +
6.75%)		  

3/2/2026

      

2,480

  

2,480

(e)(f)

    

Annual Report 2021
17

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Stealth Holding
LLC		     1st Lien
Delayed Draw
Term Loan		   7.75% (3M
LIBOR +
6.75%)		  

3/2/2026

      

$

988

  

$

711

(e)(h)

    
Survitec Group
Holdco Limited		   United
Kingdom		   1st Lien Term
Loan		   7.55%
(SONIA +
7.50%)		  

4/6/2027

      

£

9,000

  

12,182

(e)(f)

    
Tempo Acquisition,
LLC		     1st Lien Term
Loan		   2.85% (1M
LIBOR +
2.75%)		  

5/1/2024

      

170

  

170

    
Tempo Acquisition,
LLC		     1st Lien Term
Loan		   3.75% (1M
LIBOR +
3.25%)		  

11/2/2026

      

1,310

  

1,311

    
Thermostat
Purchaser III, Inc.		     1st Lien
Revolver		    

8/31/2026

      

100

  

(2

)(e)(h)

    
Thermostat
Purchaser III, Inc.		     2nd Lien Term
Loan		   8.00% (1M
LIBOR +
7.25%)		  

8/31/2029

      

3,575

  

3,539

(e)

    
Thermostat
Purchaser III, Inc.		     2nd Lien
Delayed Draw
Term Loan		    

8/31/2029

      

612

  

(6

)(e)(h)

    
UCIT Online
Security Inc.		  

Canada

   1st Lien Term
Loan		   7.75% (3M
LIBOR +
6.75%)		  

3/2/2026

      

1,653

  

1,653

(e)(f)

    
Visual Edge
Technology, Inc.		     1st Lien Term
Loan		   9.75% (3M
LIBOR +
8.25%)		  

8/31/2022

      

161

  

153

(e)(f)

    
Visual Edge
Technology, Inc.		     1st Lien
Delayed Draw
Term Loan		   9.75% (3M
LIBOR +
8.25%)		  

8/31/2022

      

1,976

  

1,877

(e)(f)

    
VLS Recovery
Services, LLC		     1st Lien
Revolver		   6.50% (1M
LIBOR +
5.50%)		  

10/17/2024

      

622

  

53

(e)(h)

    
VLS Recovery
Services, LLC		     1st Lien
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

10/17/2024

      

974

  

974

(e)(f)

    
VLS Recovery
Services, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

10/17/2024

      

3,912

  

3,912

(e)

    
VLS Recovery
Services, LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

10/17/2024

      

1,157

  

1,157

(e)

    
VLS Recovery
Services, LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

10/17/2024

      

43

  

43

(e)(f)

    
VLS Recovery
Services, LLC		     1st Lien
Delayed Draw
Term Loan		    

10/17/2024

      

1,385

  

—

(e)(h)

    

XSYS Global

  

Germany

   1st Lien Term
Loan		    

11/4/2028

      

€

5,000

  

5,691

(i)

    
                                     

203,620

      

10.55

%

  

Annual Report 2021
18

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Consumer Durables & Apparel

  
Centric Brands
LLC		     1st Lien
Revolver		   6.50% (3M
LIBOR +
5.50%)		  

10/9/2024

      

$

269

  

$

79

(e)(h)

    
Centric Brands
LLC		     1st Lien Term
Loan		   10.00% (3M
LIBOR +
10.00%)		  

10/9/2025

      

2,309

  

2,286

(e)

    
DRS Holdings III,
Inc.		     1st Lien
Revolver		    

11/1/2025

      

173

  

—

(e)(h)

    
DRS Holdings III,
Inc.		     1st Lien Term
Loan		   6.75% (1M
LIBOR +
5.75%)		  

11/1/2025

      

15,694

  

15,694

(e)(f)

    
Installed Building
Products, Inc		     1st Lien Term
Loan		    

12/14/2028

      

5,000

  

5,000

(i)

    
MSG National
Properties, LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.25%)		  

11/12/2025

      

743

  

757

(e)

    
Rawlings Sporting
Goods Company,
Inc.		     1st Lien
Revolver		   4.75% (1M
LIBOR +
3.75%)		  

12/31/2025

      

1

  

1

(e)(h)

    
Rawlings Sporting
Goods Company,
Inc.		     1st Lien Term
Loan		   7.75% (3M
LIBOR +
6.75%)		  

12/31/2026

      

6,729

  

6,729

(e)(f)

    
TGP Holdings III
LLC		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.50%)		  

6/29/2028

      

7,308

  

7,268

    
TGP Holdings III
LLC		     1st Lien
Delayed Draw
Term Loan		    

6/29/2028

      

964

  

(5

)(h)

    
                                     

37,809

      

1.96

%

  

Consumer Services

  

A.U.L. Corp.

     1st Lien
Revolver		    

6/5/2023

      

1

  

—

(e)(h)

    

A.U.L. Corp.

     1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.50%)		  

6/5/2023

      

28

  

28

(e)(f)

    
Aimbridge
Acquisition Co.,
Inc.		     2nd Lien Term
Loan		   7.60% (1M
LIBOR +
7.50%)		  

2/1/2027

      

4,788

  

4,549

(e)(f)

    
Alterra Mountain
Company		     1st Lien Term
Loan		   4.00% (1M
LIBOR +
3.50%)		  

8/17/2028

      

2,886

  

2,878

    
American
Residential
Services L.L.C.		     1st Lien
Revolver		    

10/15/2025

      

1

  

—

(e)(h)

    
American
Residential
Services L.L.C.		     2nd Lien Term
Loan		   9.50% (3M
LIBOR +
8.50%)		  

10/16/2028

      

8,314

  

8,314

(e)

    

Annual Report 2021
19

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Apollo Finco

  

Belgium

  

1st Lien Term
Loan

    

10/19/2028

      

€

5,000

  

$

5,486

(i)

    

Aspris Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

6.42%
(SONIA +
6.25%)

  

8/23/2028

      

£

3,234

  

4,378

(e)(f)

    

Aspris Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

    

8/23/2028

      

£

1,406

  

—

(e)(h)

    

Belron Finance
2019 LLC

    

1st Lien Term
Loan

  

2.44% (3M
LIBOR +
2.25%)

  

10/30/2026

      

1,284

  

1,274

    

Caesars Resort
Collection, LLC

    

1st Lien Term
Loan

  

3.59% (1M
LIBOR +
3.50%)

  

7/21/2025

      

2,106

  

2,105

    

Canopy Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

7.75% (3M
GBP LIBOR +
7.25%)

  

12/18/2024

      

£

509

  

689

(e)(f)

    

Canopy Bidco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.75% (3M
GBP LIBOR +
7.25%)

  

12/18/2024

      

£

502

  

178

(e)(f)(h)

    

CC Fly Holding II
A/S

  

Denmark

  

1st Lien Term
Loan

  

9.22% (3M
CIBOR +
8.25%)

  

5/9/2025

      

DKK

626

  

88

(e)(f)

    

CC Fly Holding II
A/S

  

Denmark

  

1st Lien
Delayed Draw
Term Loan

  

8.75% (3M
CIBOR +
8.25%)

  

5/9/2025

      

DKK

4,823

  

664

(e)(f)

    

CC Fly Holding II
A/S

  

Denmark

  

1st Lien
Delayed Draw
Term Loan

  

9.22% (3M
CIBOR +
8.25%)

  

5/9/2025

      

DKK

2,975

  

394

(e)(f)(h)

    

Entain PLC

  

Isle Of Man

  

1st Lien Term
Loan

  

3.00% (3M
LIBOR +
2.50%)

  

3/29/2027

      

4,975

  

4,958

    

Equinox Holdings
Inc.

    

1st Lien Term
Loan

  

4.00% (3M
LIBOR +
3.00%)

  

3/8/2024

      

2,573

  

2,438

    

Equinox Holdings
Inc.

    

2nd Lien Term
Loan

  

8.00% (3M
LIBOR +
7.00%)

  

9/6/2024

      

5,736

  

5,109

    

Essential Services
Holding
Corporation

    

1st Lien
Revolver

    

11/17/2025

      

1,560

  

—

(e)(h)

    

Essential Services
Holding
Corporation

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
5.75%)

  

11/16/2026

      

9,717

  

9,717

(e)(f)

    

Essential Services
Holding
Corporation

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (3M
LIBOR +
5.75%)

  

11/16/2026

      

22,105

  

22,105

(e)

    

Essential Services
Holding
Corporation

    

1st Lien
Delayed Draw
Term Loan

    

11/16/2026

      

8,146

  

—

(e)(h)

    

EuroParcs
Topholding B.V.

  

Netherlands

  

1st Lien Term
Loan

  

5.75% (3M
EURIBOR +
5.75%)

  

7/3/2026

      

€

2,652

  

3,020

(e)

    

Annual Report 2021
20

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

EuroParcs
Topholding B.V.

  

Netherlands

  

1st Lien
Delayed Draw
Term Loan

  

5.75% (3M
EURIBOR +
5.75%)

  

7/3/2026

      

€

313

  

$

356

(e)

    

EuroParcs
Topholding B.V.

  

Netherlands

  

1st Lien
Delayed Draw
Term Loan

  

6.25% (3M
EURIBOR +
6.25%)

  

7/3/2026

      

€

2,830

  

3,221

(e)(h)

    

Flutter
Entertainment plc

  

Ireland

  

1st Lien Term
Loan

  

2.38% (3M
LIBOR +
2.25%)

  

7/21/2026

      

4,978

  

4,956

    

Goldcup 16786 AB

  

Sweden

  

1st Lien
Delayed Draw
Term Loan

  

7.00% (6M
STIBOR +
6.50%)

  

8/18/2025

      

SEK

10,000

  

1,107

(e)(f)

    

Horizon Bidco
S.A.S.

  

France

  

1st Lien Term
Loan

  

6.75% (6M
EURIBOR +
6.75%)

  

10/2/2028

      

€

6,010

  

6,842

(e)(f)

    

Horizon Bidco
S.A.S.

  

France

  

1st Lien Term
Loan

  

6.80%
(SONIA +
6.75%)

  

10/2/2028

      

£

9,567

  

12,949

(e)(f)

    

Horizon Bidco
S.A.S.

  

France

  

1st Lien Term
Loan

    

10/2/2028

      

€

3,082

  

—

(e)(f)(h)

    

IRB Holding Corp.

    

1st Lien Term
Loan

  

3.75% (6M
LIBOR +
2.75%)

  

2/5/2025

      

8,004

  

7,985

    

IRB Holding Corp.

    

1st Lien Term
Loan

  

4.25% (3M
LIBOR +
3.25%)

  

12/15/2027

      

3,656

  

3,653

    

Jim N Nicks
Management LLC

    

1st Lien
Revolver

  

6.25% (3M
LIBOR +
5.25%)

  

7/10/2023

      

1

  

1

(e)(h)

    

Jim N Nicks
Management LLC

    

1st Lien
Term Loan

  

6.25% (3M
LIBOR +
5.25%)

  

7/10/2023

      

48

  

48

(e)(f)

    

KeyStone Sub-Debt
HoldCo, LLC

    

1st Lien Term
Loan

  

10.00% (3M
LIBOR +
10.00%)

  

1/20/2027

      

1,075

  

1,043

(e)(g)

    

Learning Care
Group (US) No. 2
Inc.

    

1st Lien Term
Loan

  

4.25% (3M
LIBOR +
3.25%)

  

3/13/2025

      

216

  

211

    

Learning Care
Group (US) No. 2
Inc.

    

1st Lien Term
Loan

  

9.50% (3M
LIBOR +
8.50%)

  

3/13/2025

      

985

  

983

    

Len The Plumber,
LLC

    

1st Lien Term
Loan

  

7.00% (3M
LIBOR +
6.00%)

  

2/17/2026

      

1,192

  

1,180

(e)(f)

    

LGDN Finco
Limited

  

United
Kingdom

  

1st Lien
Revolver

    

7/9/2027

      

£

100

  

—

(e)(h)

    

LGDN Finco
Limited

  

United
Kingdom

  

1st Lien
Term Loan

  

7.80%
(SONIA +
7.75%)

  

7/9/2027

      

£

641

  

868

(e)

    

LGDN Finco
Limited

  

United
Kingdom

  

1st Lien
Term Loan

  

7.80%
(SONIA +
7.75%)

  

9/6/2027

      

£

1,282

  

764

(e)(h)

    

Annual Report 2021
21

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

LGDN Finco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.80%
(SONIA +
7.75%)

  

7/9/2027

      

£

359

  

$

486

(e)(f)

    

LSP HoldCo, LLC

    

1st Lien
Revolver

    

10/7/2026

      

127

  

(3

)(e)(h)

    

LSP HoldCo, LLC

    

1st Lien Term
Loan

  

7.00% (3M
LIBOR +
6.00%)

  

10/7/2026

      

907

  

898

(e)(f)

    

LSP HoldCo, LLC

    

1st Lien
Delayed Draw
Term Loan

    

10/7/2026

      

1,994

  

(20

)(e)(h)

    

MC Plato Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

6.33%
(SONIA +
6.00%)

  

8/17/2028

      

£

5,702

  

7,717

(e)(f)

    

MC Plato Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

    

8/17/2028

      

£

1,188

  

—

(e)(h)

    

Mister Car Wash
Holdings, Inc.

    

1st Lien Term
Loan

  

3.10% (1M
LIBOR +
3.00%)

  

5/14/2026

      

4,681

  

4,652

(i)

    

Movati Athletic
(Group) Inc.

  

Canada

  

1st Lien Term
Loan

  

7.45% (3M
CDOR +
6.00%)

  

10/5/2024

      

CAD

253

  

184

(e)(f)(g)

    

Movati Athletic
(Group) Inc.

  

Canada

  

1st Lien
Delayed Draw
Term Loan

  

7.45% (3M
CDOR +
6.00%)

  

10/5/2024

      

CAD

184

  

134

(e)(g)

    

Redwood Services,
LLC

    

1st Lien
Revolver

  

9.25%
(PRIME +
6.00%)

  

12/31/2025

      

158

  

35

(e)(h)

    

Redwood Services,
LLC

    

1st Lien Term
Loan

  

8.00% (3M
LIBOR +
7.00%)

  

12/31/2025

      

793

  

793

(e)

    

Redwood Services,
LLC

    

1st Lien
Delayed Draw
Term Loan

  

8.00% (3M
LIBOR +
7.00%)

  

12/31/2025

      

2,796

  

1,383

(e)(h)

    

Safe Home
Security, Inc.

    

1st Lien Term
Loan

  

8.25% (1M
LIBOR +
7.25%)

  

8/5/2024

      

1,300

  

1,300

(e)(f)

    

Safe Home
Security, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

8.25% (1M
LIBOR +
7.25%)

  

8/5/2024

      

287

  

41

(e)(h)

    

Service Logic
Acquisition, Inc.

    

1st Lien
Revolver

    

10/30/2025

      

1,007

  

(12

)(e)(h)

    

Service Logic
Acquisition, Inc.

    

1st Lien Term
Loan

  

4.75% (3M
LIBOR +
4.00%)

  

10/29/2027

      

6,008

  

5,985

(e)

    

Service Logic
Acquisition, Inc.

    

1st Lien
Delayed Draw
Term Loan

    

10/29/2027

      

498

  

(2

)(e)(h)

    

St. George's
University
Scholastic
Services LLC

    

1st Lien Term
Loan

  

3.37% (3M
LIBOR +
3.25%)

  

7/17/2025

      

2,463

  

2,451

(i)

    

Annual Report 2021
22

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Sunshine Cadence
HoldCo, LLC		     1st Lien Term
Loan		   4.38% (3M
LIBOR +
4.25%)		  

3/23/2027

      

$

1,064

  

$

989

(e)

    
Sunshine Cadence
HoldCo, LLC		     2nd Lien Term
Loan		   8.51% (3M
LIBOR +
8.38%)		  

3/23/2028

      

383

  

330

(e)

    

Sunshine Sub, LLC

     1st Lien
Revolver		    

5/28/2024

      

144

  

—

(e)(h)

    

Sunshine Sub, LLC

     1st Lien Term
Loan		   5.75% (1M
LIBOR +
4.75%)		  

5/28/2024

      

692

  

692

(e)(f)

    

Sunshine Sub, LLC

     1st Lien
Delayed Draw
Term Loan		   5.75% (1M
LIBOR +
4.75%)		  

5/28/2024

      

407

  

407

(e)

    
SV-Burton
Holdings, LLC		       1st Lien
Revolver		    

12/6/2027

      

555

  

(11

)(e)(h)

    
SV-Burton
Holdings, LLC		       1st Lien Term
Loan		   6.50% (1M
LIBOR +
5.50%)		  

12/6/2027

      

3,233

  

3,200

(e)(f)

    
SV-Burton
Holdings, LLC		       1st Lien
Delayed Draw
Term Loan		   6.50% (1M
LIBOR +
5.50%)		  

12/6/2027

      

1,847

  

143

(e)(h)

    
United PF
Holdings, LLC		     1st Lien Term
Loan		   4.13% (3M
LIBOR +
4.00%)		  

12/30/2026

      

2,723

  

2,623

    

Whatabrands LLC

     1st Lien Term
Loan		   3.75% (1M
LIBOR +
3.25%)		  

8/3/2028

      

7,201

  

7,168

    
YE Brands
Holdings, LLC		     1st Lien
Revolver		    

10/18/2027

      

165

  

(4

)(e)(h)

    
YE Brands
Holdings, LLC		     1st Lien
Term Loan		   6.25% (3M
LIBOR +
5.50%)		  

10/18/2027

      

1,082

  

1,071

(e)(f)

    
                                     

167,169

      

8.66

%

  

Diversified Financials

  
Alchemy
Copyrights, LLC		     1st Lien Term
Loan		   3.50% (3M
LIBOR +
3.00%)		  

3/10/2028

      

917

  

917

(e)

    

Alpha Luxco 2 Sarl

  

Luxembourg

   1st Lien
Delayed Draw
Term Loan		   6.25% (3M
EURIBOR +
5.75%)		  

1/9/2025

      

€

1,005

  

1,144

(e)(f)(g)

    
BCC Blueprint
Holdings I, LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.25%)		  

9/15/2027

      

7,377

  

7,303

(e)

    
Beacon Pointe
Harmony, LLC		     1st Lien
Revolver		    

12/29/2027

      

909

  

(18

)(e)(h)

    
Beacon Pointe
Harmony, LLC		     1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.25%)		  

12/29/2028

      

6,139

  

6,077

(e)

    

Annual Report 2021
23

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Beacon Pointe
Harmony, LLC		     1st Lien
Delayed Draw
Term Loan		    

12/29/2028

      

$

3,175

  

$

(32

)(e)(h)

    
Camelot U.S.
Acquisition 1 Co.		     1st Lien Term
Loan		   3.12% (3M
LIBOR +
3.00%)		  

10/30/2026

      

3,990

  

3,959

(i)

    
CD&R Firefly Bidco
Limited		   United
Kingdom		   1st Lien Term
Loan		    

6/21/2025

      

£

3,500

  

4,702

(i)

    

Delta Topco, Inc.

     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.75%)		  

12/1/2027

      

1,464

  

1,465

    

Delta Topco, Inc.

     2nd Lien Term
Loan		   8.00% (3M
LIBOR +
7.25%)		  

12/1/2028

      

4,923

  

4,943

    
Driven Holdings,
LLC		     1st Lien Term
Loan		    

11/17/2028

      

7,000

  

6,982

(e)(i)

    
Eagle Bidco
Limited		   United
Kingdom		   1st Lien Term
Loan		   4.33%
(SONIA +
4.25%)		  

3/20/2028

      

£

2,000

  

2,691

    
Freeport LNG
investments, LLLP		     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.50%)		  

11/17/2028

      

2,000

  

1,979

    
Integrated Power
Services Holdings,
Inc.		     2nd Lien Term
Loan		   8.25% (1M
LIBOR +
7.50%)		  

11/22/2029

      

4,983

  

4,884

(e)

    
IU Finance
Management
GmbH		  

Germany

   1st Lien Term
Loan		    

12/8/2028

      

€

10,000

  

11,285

(i)

    
KREF Holdings X
LLC		     1st Lien Term
Loan		   3.69% (3M
LIBOR +
3.50%)		  

9/1/2027

      

1,299

  

1,296

(e)

    
LBM Acquisition
LLC		     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.75%)		  

12/17/2027

      

8,429

  

8,346

(i)

    
LBM Acquisition
LLC		     1st Lien
Delayed Draw
Term Loan		    

12/17/2027

      

1,502

  

1,487

(i)

    

MEDIAN B.V

  

Netherlands

   1st Lien Term
Loan		    

11/3/2027

      

€

5,000

  

5,607

(i)

    
Mercury Borrower,
Inc.		     1st Lien
Revolver		   5.75%
(PRIME +
2.50%)		  

7/31/2026

      

470

  

8

(e)(h)

    
Mercury Borrower,
Inc.		     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.50%)		  

8/2/2028

      

5,728

  

5,698

(i)

    
Mercury Borrower,
Inc.		     2nd Lien Term
Loan		   7.00% (3M
LIBOR +
6.50%)		  

8/2/2029

      

1,213

  

1,213

(i)

    
Monica Holdco
(US), Inc.		     1st Lien
Revolver		    

1/8/2026

      

1,009

  

—

(e)(h)

    

Annual Report 2021
24

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Monica Holdco
(US), Inc.

    

1st Lien Term
Loan

  

7.25% (3M
LIBOR +
6.25%)

  

1/7/2028

      

$

8,179

  

$

8,179

(e)(f)

    

NxtGenPay
Intressenter
BidCo AB

  

Sweden

  

1st Lien Term
Loan

  

6.75% (3M
STIBOR +
6.75%)

  

6/30/2025

      

SEK

5,500

  

609

(e)

    

NxtGenPay
Intressenter
BidCo AB

  

Sweden

  

1st Lien
Delayed Draw
Term Loan

  

6.75% (3M
STIBOR +
6.75%)

  

6/30/2025

      

SEK

2,700

  

299

(e)

    

Paysafe Group
Holdings II Limited

    

1st Lien Term
Loan

  

3.25% (1M
LIBOR +
2.75%)

  

6/28/2028

      

1,378

  

1,336

    

Pegasus (Bidco)
Limited

  

Jersey

  

1st Lien Term
Loan

    

12/22/2027

      

£

1,200

  

—

(e)(h)(i)

    

Pegasus (Bidco)
Limited

  

Jersey

  

1st Lien Term
Loan

    

12/22/2028

      

£

2,925

  

1

(e)(f)(h)(i)

    

Pegasus (Bidco)
Limited

  

Jersey

  

1st Lien
Delayed Draw
Term Loan

    

12/22/2028

      

£

822

  

—

(e)(h)(i)

    

Phoenix Newco,
Inc.

    

1st Lien Term
Loan

  

4.00% (1M
LIBOR +
3.50%)

  

11/15/2028

      

3,000

  

2,999

    

Project Accelerate
Parent LLC

    

1st Lien Term
Loan

  

5.25% (1M
LIBOR +
4.25%)

  

1/2/2025

      

1,995

  

1,985

(e)

    

ProService Finteco
Sp. z o.o.

  

Poland

  

1st Lien Term
Loan

    

12/3/2027

      

€

2,164

  

2,464

(e)(f)(i)

    

ProService Finteco
Sp. z o.o.

  

Poland

  

1st Lien Term
Loan

    

12/3/2027

      

PLN

15,023

  

3,729

(e)(i)

    

ProService Finteco
Sp. z o.o.

  

Poland

  

1st Lien
Delayed Draw
Term Loan

    

12/3/2027

      

€

451

  

—

(e)(h)(i)

    

Redstone
HoldCo 2 LP

    

1st Lien Term
Loan

  

5.50% (3M
LIBOR +
4.75%)

  

4/27/2028

      

1,307

  

1,245

    

SaintMichelCo
Limited

  

Jersey

  

1st Lien Term
Loan

  

8.25% (3M
GBP LIBOR +
7.75%)

  

9/9/2025

      

£

1,531

  

2,072

(e)

    

SaintMichelCo
Limited

  

Jersey

  

1st Lien
Delayed Draw
Term Loan

  

8.25% (3M
GBP LIBOR +
7.75%)

  

9/9/2025

      

£

2,421

  

3,276

(e)

    

Summer (BC)
Bidco B LLC

    

1st Lien Term
Loan

  

5.25% (3M
LIBOR +
4.50%)

  

12/4/2026

      

4,988

  

4,980

    

Symbol Bidco I
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

6.42%
(SONIA +
6.25%)

  

12/21/2026

      

£

571

  

773

(e)(f)

    

Symbol Bidco I
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

6.42%
(SONIA +
6.25%)

  

12/21/2026

      

£

429

  

200

(e)(h)

    

Annual Report 2021
25

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
TA/WEG Holdings,
LLC		     1st Lien
Revolver		   6.75% (3M
LIBOR +
5.75%)		  

10/4/2027

      

$

914

  

$

352

(e)(h)

    
TA/WEG Holdings,
LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

10/4/2027

      

3,485

  

3,485

(e)(f)

    
TA/WEG Holdings,
LLC		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

10/4/2027

      

13,024

  

13,024

(e)

    
TA/WEG Holdings,
LLC		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
6.25%)		  

10/4/2027

      

1,714

  

912

(e)(h)

    
The Ultimus Group
Midco, LLC		     1st Lien
Revolver		    

2/1/2024

      

396

  

—

(e)(h)

    
The Ultimus Group
Midco, LLC		     1st Lien Term
Loan		   5.75% (3M
LIBOR +
4.75%)		  

2/1/2026

      

7,084

  

7,084

(e)(f)

    
TK Elevator Midco
GmbH		  

Germany

   1st Lien Term
Loan		   4.00% (6M
LIBOR +
3.50%)		  

7/30/2027

      

7,455

  

7,454

(i)

    

Toscafund Limited

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.33%
(SONIA +
7.00%)		  

4/2/2025

      

£

4,206

  

5,693

(e)(f)

    

True Potential LLP

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   6.50% (6M
GBP LIBOR +
6.00%)		  

10/16/2026

      

£

2,159

  

2,981

(e)

    

True Potential LLP

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   6.61% (6M
GBP LIBOR +
6.11%)		  

10/16/2026

      

£

1,943

  

2,637

(e)

    

True Potential LLP

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   6.61% (6M
GBP LIBOR +
6.11%)		  

10/16/2026

      

£

8,113

  

11,008

(e)(f)

    

True Potential LLP

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.00% (6M
GBP LIBOR +
6.50%)		  

10/16/2026

      

£

2,159

  

2,981

(e)

    
UPC Financing
Partnership		     1st Lien Term
Loan		   3.11% (1M
LIBOR +
3.00%)		  

1/31/2029

      

3,000

  

2,988

    
Zephyr Bidco
Limited		   United
Kingdom		   1st Lien Term
Loan		   4.93% (1M
GBP LIBOR +
4.75%)		  

7/23/2025

      

£

3,000

  

4,008

    
                                     

180,690

      

9.36

%

  

Energy

  
Birch Permian,
LLC		     2nd Lien Term
Loan		   9.50% (3M
LIBOR +
8.00%)		  

4/12/2023

      

5,989

  

5,989

(e)

    
Cheyenne
Petroleum
Company Limited
Partnership		     2nd Lien Term
Loan		   10.00% (3M
LIBOR +
9.00%)		  

1/10/2024

      

7,244

  

7,244

(e)

    

Annual Report 2021
26

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Halcon Holdings,
LLC		     1st Lien Term
Loan		   7.17% (3M
LIBOR +
7.00%)		  

11/24/2025

      

$

12,016

  

$

11,896

(e)

    
Halcon Holdings,
LLC		     1st Lien
Delayed Draw
Term Loan		    

11/24/2025

      

2,103

  

(21

)(e)(h)

    
                                     

25,108

      

1.30

%

  

Food & Staples Retailing

  
Continental Cafe,
LLC		     1st Lien
Revolver		    

11/30/2027

      

786

  

(16

)(e)(h)

    
Continental Cafe,
LLC		     1st Lien Term
Loan		   8.00% (3M
LIBOR +
7.00%)		  

11/30/2027

      

6,969

  

6,900

(e)(f)

    
Continental Cafe,
LLC		     1st Lien
Delayed Draw
Term Loan		    

11/30/2027

      

2,788

  

(28

)(e)(h)

    

DecoPac, Inc.

     1st Lien
Revolver		   7.00% (1M
LIBOR +
6.00%)		  

5/14/2026

      

2,382

  

340

(e)(h)

    

DecoPac, Inc.

     1st Lien Term
Loan		   9.00% (3M
LIBOR +
8.00%)		  

5/15/2028

      

22,006

  

22,006

(e)(f)

    
SFE Intermediate
HoldCo LLC		     1st Lien
Revolver		    

7/31/2023

      

2

  

—

(e)(h)

    
SFE Intermediate
HoldCo LLC		     1st Lien Term
Loan		   5.75% (3M
LIBOR +
4.75%)		  

7/31/2024

      

2,107

  

2,107

(e)(f)

    
                                     

31,309

      

1.62

%

  

Food & Beverage

  
Berner Food &
Beverage, LLC		     1st Lien
Revolver		   7.50% (1M
LIBOR +
6.50%)		  

7/30/2026

      

262

  

105

(e)(h)

    
Berner Food &
Beverage, LLC		     1st Lien Term
Loan		   7.50% (1M
LIBOR +
6.50%)		  

7/30/2027

      

2,633

  

2,607

(e)

    
CHG PPC Parent
LLC		     2nd Lien Term
Loan		   7.25% (1M
LIBOR +
6.75%)		  

12/10/2029

      

3,000

  

2,970

(e)(f)

    

Chobani, LLC

     1st Lien Term
Loan		   4.50% (1M
LIBOR +
3.50%)		  

10/25/2027

      

2,499

  

2,503

    
Florida Food
Products, LLC		     1st Lien Term
Loan		   5.75% (1M
LIBOR +
5.00%)		  

10/18/2028

      

1

  

1

(e)(i)

    
Florida Food
Products, LLC		     2nd Lien Term
Loan		   8.75% (1M
LIBOR +
8.00%)		  

10/18/2029

      

7,299

  

7,226

(e)(i)

    

Annual Report 2021
27

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Hometown Food
Company		     1st Lien
Revolver		    

8/31/2023

      

$

1

  

$

—

(e)(h)

    
Hometown Food
Company		     1st Lien Term
Loan		   6.25% (1M
LIBOR +
5.00%)		  

8/31/2023

      

1,022

  

1,022

(e)(f)

    
Quirch Foods
Holdings, LLC		     1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.50%)		  

10/27/2027

      

5,391

  

5,404

(e)

    
Triton Water
Holdings, Inc.		     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.50%)		  

3/31/2028

      

7,000

  

6,917

    
Watermill Express,
LLC		     1st Lien
Revolver		    

4/20/2027

      

275

  

—

(e)(h)

    
Watermill Express,
LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.25%)		  

4/20/2027

      

2,285

  

2,285

(e)(f)

    
Watermill Express,
LLC		     1st Lien
Delayed Draw
Term Loan		    

4/20/2027

      

219

  

—

(e)(h)

    
Winebow Holdings,
Inc.		     1st Lien Term
Loan		   7.25% (1M
LIBOR +
6.25%)		  

7/1/2025

      

3,440

  

3,440

(e)(f)

    

Woof Holdings, Inc.

     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.75%)		  

12/21/2027

      

2,978

  

2,978

    
                                     

37,458

      

1.94

%

  

Healthcare Equipment & Services

  
Air Methods
Corporation		     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.50%)		  

4/22/2024

      

1,508

  

1,429

    

Athenahealth, Inc.

     1st Lien
Revolver		    

2/12/2024

      

232

  

—

(e)(h)

    
Auris
Luxembourg III
S.a r.l.		  

Luxembourg

   1st Lien Term
Loan		   3.85% (1M
LIBOR +
3.75%)		  

2/27/2026

      

2,487

  

2,465

    
Auris
Luxembourg III
S.a r.l.		  

Luxembourg

   1st Lien Term
Loan		   4.00% (6M
EURIBOR +
4.00%)		  

2/27/2026

      

€

4,000

  

4,539

    
Aveanna
Healthcare LLC		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.75%)		  

7/17/2028

      

220

  

219

    
Aveanna
Healthcare LLC		     1st Lien
Delayed Draw
Term Loan		    

7/17/2028

      

51

  

51

(i)

    

Bearcat Buyer, Inc.

     1st Lien
Revolver		    

7/9/2024

      

580

  

—

(e)(h)

    

Bearcat Buyer, Inc.

     1st Lien Term
Loan		   5.25% (3M
LIBOR +
4.25%)		  

7/9/2026

      

5,454

  

5,454

(e)(f)

    

Annual Report 2021
28

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Bearcat Buyer, Inc.

    

1st Lien Term
Loan

  

5.75% (3M
LIBOR +
4.75%)

  

7/9/2026

      

$

1

  

$

1

(e)

    

Bearcat Buyer, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

5.25% (3M
LIBOR +
4.25%)

  

7/9/2026

      

967

  

967

(e)

    

Bearcat Buyer, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

5.75% (3M
LIBOR +
4.75%)

  

7/9/2026

      

1

  

1

(e)(h)

    

Bearcat Buyer, Inc.

    

2nd Lien Term
Loan

  

9.25% (3M
LIBOR +
8.25%)

  

7/9/2027

      

2,249

  

2,249

(e)(f)

    

Bearcat Buyer, Inc.

    

2nd Lien Term
Loan

  

9.25% (3M
LIBOR +
8.25%)

  

7/9/2027

      

617

  

617

(e)

    

Bearcat Buyer, Inc.

    

2nd Lien
Delayed Draw
Term Loan

  

9.25% (3M
LIBOR +
8.25%)

  

7/9/2027

      

580

  

184

(e)(h)

    

Bearcat Buyer, Inc.

    

2nd Lien
Delayed Draw
Term Loan

    

7/9/2027

      

726

  

—

(e)(h)

    

CEP V I 5 UK
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.16% (3M
LIBOR +
7.00%)

  

2/18/2027

      

26,654

  

25,321

(e)(f)

    

Change Healthcare
Holdings LLC

    

1st Lien Term
Loan

  

3.50% (1M
LIBOR +
2.50%)

  

3/1/2024

      

7,548

  

7,539

    

Comprehensive
EyeCare Partners,
LLC

    

1st Lien
Revolver

  

7.00% (3M
LIBOR +
5.75%)

  

2/14/2024

      

1

  

—

(e)(h)

    

Comprehensive
EyeCare Partners,
LLC

    

1st Lien Term
Loan

  

7.00% (3M
LIBOR +
5.75%)

  

2/14/2024

      

981

  

981

(e)(f)

    

Comprehensive
EyeCare Partners,
LLC

    

1st Lien
Delayed Draw
Term Loan

  

7.00% (3M
LIBOR +
5.75%)

  

2/14/2024

      

758

  

758

(e)

    

Convey Health
Solutions, Inc.

    

1st Lien Term
Loan

  

5.50% (1M
LIBOR +
4.75%)

  

9/4/2026

      

2,698

  

2,698

(e)(f)

    

CVP Holdco, Inc.

    

1st Lien
Revolver

  

8.00%
(PRIME +
4.75%)

  

10/31/2024

      

326

  

163

(e)(h)

    

CVP Holdco, Inc.

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
5.75%)

  

10/31/2025

      

3,424

  

3,424

(e)(f)

    

CVP Holdco, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (1M
LIBOR +
5.75%)

  

10/31/2025

      

7,730

  

5,577

(e)(h)

    

CVP Holdco, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (3M
LIBOR +
5.75%)

  

10/31/2025

      

2,630

  

2,630

(e)

    

Annual Report 2021
29

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Electron Bidco Inc.

    

1st Lien Term
Loan

  

3.75% (3M
LIBOR +
3.25%)

  

11/1/2028

      

$

7,517

  

$

7,492

(i)

    

Ensemble RCM
LLC

    

1st Lien Term
Loan

  

3.88% (3M
LIBOR +
3.75%)

  

8/3/2026

      

2,201

  

2,198

    

Floss Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

7.75%
(SONIA +
7.25%)

  

9/7/2026

      

£

840

  

1,137

(e)(f)(g)

    

Floss Bidco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.75% (3M
GBP LIBOR +
7.25%)

  

9/7/2026

      

£

1,211

  

555

(e)(g)(h)

    

Global Medical
Response Inc

    

1st Lien Term
Loan

  

5.25% (3M
LIBOR +
4.25%)

  

10/2/2025

      

6,451

  

6,427

    

Global Medical
Response Inc

    

2nd Lien Term
Loan

  

7.50% (3M
LIBOR +
6.75%)

  

12/17/2029

      

29,366

  

29,072

(e)

    

Hanger, Inc.

    

1st Lien Term
Loan

  

3.60% (1M
LIBOR +
3.50%)

  

3/6/2025

      

2,946

  

2,941

    

JDC Healthcare
Management, LLC

    

1st Lien Term
Loan

    

4/10/2023

      

119

  

84

(e)(g)(j)

    

Kedleston Schools
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.67%
(SONIA +
7.50%)

  

5/31/2024

      

£

1,000

  

1,354

(e)(f)

    

MED ParentCo, LP

    

1st Lien Term
Loan

  

4.34% (1M
LIBOR +
4.25%)

  

8/31/2026

      

11,596

  

11,562

    

Medline Borrower,
LP

    

1st Lien Term
Loan

  

3.75% (1M
LIBOR +
3.25%)

  

10/23/2028

      

12,199

  

12,194

    

NueHealth
Performance, LLC

    

1st Lien
Revolver

  

8.25% (1M
LIBOR +
7.25%)

  

9/27/2023

      

1

  

1

(e)

    

NueHealth
Performance, LLC

    

1st Lien Term
Loan

  

8.25% (1M
LIBOR +
7.25%)

  

9/27/2023

      

2,144

  

2,144

(e)(f)

    

NueHealth
Performance, LLC

    

1st Lien
Delayed Draw
Term Loan

  

8.25% (1M
LIBOR +
7.25%)

  

9/27/2023

      

285

  

285

(e)(f)

    

NueHealth
Performance, LLC

    

1st Lien
Delayed Draw
Term Loan

  

8.25% (1M
LIBOR +
7.25%)

  

9/27/2023

      

604

  

592

(e)(h)

    

NueHealth
Performance, LLC

    

1st Lien
Delayed Draw
Term Loan

    

9/27/2023

      

566

  

—

(e)(h)

    

Olympia
Acquisition, Inc.

    

1st Lien
Revolver

  

8.50%
(PRIME +
5.50%)

  

9/24/2024

      

641

  

483

(e)(h)

    

Annual Report 2021
30

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Olympia
Acquisition, Inc.

    

1st Lien
Revolver

  

8.50% (3M
LIBOR +
7.50%)

  

9/24/2024

      

$

12

  

$

10

(e)

    

Olympia
Acquisition, Inc.

    

1st Lien Term
Loan

  

8.50%
(PRIME +
5.50%)

  

9/24/2026

      

2,489

  

2,041

(e)(f)(g)

    

Olympia
Acquisition, Inc.

    

1st Lien Term
Loan

  

8.50% (1M
LIBOR +
7.50%)

  

9/24/2026

      

54

  

45

(e)(f)

    

OMH-HealthEdge
Holdings, LLC

    

1st Lien
Revolver

    

10/24/2024

      

1

  

—

(e)(h)

    

OMH-HealthEdge
Holdings, LLC

    

1st Lien Term
Loan

  

6.50% (3M
LIBOR +
5.50%)

  

10/24/2025

      

2,234

  

2,234

(e)(f)

    

Ortho-Clinical
Diagnostics, Inc.

    

1st Lien Term
Loan

  

3.10% (1M
LIBOR +
3.00%)

  

6/30/2025

      

2,097

  

2,095

    

PetVet Care
Centers, LLC

    

1st Lien Term
Loan

  

4.25% (1M
LIBOR +
3.50%)

  

2/14/2025

      

9,082

  

9,070

    

Pluto Acquisition I,
Inc.

    

1st Lien Term
Loan

  

4.18% (3M
LIBOR +
4.00%)

  

6/22/2026

      

2,458

  

2,445

    

Premise Health
Holding Corp.

    

1st Lien
Revolver

  

3.25% (3M
LIBOR +
3.25%)

  

7/10/2023

      

1

  

—

(e)(h)

    

Premise Health
Holding Corp.

    

1st Lien Term
Loan

  

3.65% (3M
LIBOR +
3.50%)

  

7/10/2025

      

11

  

11

(e)(f)

    

Premise Health
Holding Corp.

    

2nd Lien Term
Loan

  

7.63% (3M
LIBOR +
7.50%)

  

7/10/2026

      

2,000

  

2,000

(e)(f)

    

Radnet
Management, Inc.

    

1st Lien Term
Loan

  

3.75% (3M
LIBOR +
3.00%)

  

4/23/2028

      

2,488

  

2,485

    

RegionalCare
Hospital
Partners Holdings,
Inc.

    

1st Lien Term
Loan

  

3.85% (1M
LIBOR +
3.75%)

  

11/16/2025

      

2,480

  

2,475

    

Rubicone Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

7.17%
(SONIA +
7.00%)

  

12/1/2028

      

£

2,722

  

3,684

(e)(f)

    

Rubicone Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

    

12/1/2028

      

£

1,667

  

—

(e)(h)

    

SiroMed Physician
Services, Inc.

    

1st Lien
Revolver

    

3/26/2024

      

1

  

—

(e)(h)

    

SiroMed Physician
Services, Inc.

    

1st Lien Term
Loan

  

5.75% (1M
LIBOR +
4.75%)

  

3/26/2024

      

653

  

561

(e)(f)

    

Sotera Health
Holdings, LLC

    

1st Lien Term
Loan

  

3.25% (3M
LIBOR +
2.75%)

  

12/11/2026

      

7,459

  

7,424

    

Annual Report 2021
31

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Symplr Software
Inc.

    

1st Lien
Revolver

    

12/22/2025

      

$

1

  

$

—

(e)(h)

    

Symplr Software
Inc.

    

1st Lien Term
Loan

  

5.25% (6M
LIBOR +
4.50%)

  

12/22/2027

      

1

  

1

(e)

    

Symplr Software
Inc.

    

2nd Lien Term
Loan

  

8.63% (3M
LIBOR +
7.88%)

  

12/22/2028

      

10,160

  

10,160

(e)

    

Teligent, Inc.

    

1st Lien
Revolver

    

1/31/2022

      

—

  

—

(e)(h)(j)

    

Teligent, Inc.

    

1st Lien Term
Loan

    

1/31/2022

      

127

  

127

(e)(j)

    

Teligent, Inc.

    

1st Lien
Delayed Draw
Term Loan

    

1/31/2022

      

127

  

74

(e)(h)(j)

    

Teligent, Inc.

    

2nd Lien Term
Loan

    

12/29/2022

      

1,124

  

426

(e)(j)

    

Teligent, Inc.

    

2nd Lien
Delayed Draw
Term Loan

    

12/29/2022

      

696

  

264

(e)(j)

    

Therapy Brands
Holdings LLC

    

2nd Lien Term
Loan

  

7.50% (3M
LIBOR +
6.75%)

  

5/18/2029

      

3,050

  

3,050

(e)(f)

    

Therapy Brands
Holdings LLC

    

2nd Lien
Delayed Draw
Term Loan

    

5/18/2029

      

1,284

  

—

(e)(h)

    

United Digestive
MSO Parent, LLC

    

1st Lien
Revolver

    

12/14/2023

      

511

  

—

(e)(h)

    

United Digestive
MSO Parent, LLC

    

1st Lien Term
Loan

  

5.00% (3M
LIBOR +
4.00%)

  

12/16/2024

      

1,422

  

1,422

(e)(f)

    

United Digestive
MSO Parent, LLC

    

1st Lien
Delayed Draw
Term Loan

  

5.00% (2M
LIBOR +
4.00%)

  

12/16/2024

      

1,022

  

1,022

(e)

    

VPP Intermediate
Holdings, LLC

    

1st Lien
Revolver

    

12/1/2027

      

315

  

(6

)(e)(h)

    

VPP Intermediate
Holdings, LLC

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
5.75%)

  

12/1/2027

      

1,577

  

1,561

(e)(f)

    

VPP Intermediate
Holdings, LLC

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (3M
LIBOR +
5.75%)

  

12/1/2027

      

472

  

5

(e)(h)

    

Waystar
Technologies, Inc.

    

1st Lien Term
Loan

  

4.10% (1M
LIBOR +
4.00%)

  

10/22/2026

      

656

  

655

    

WSHP FC
Acquisition LLC

    

1st Lien
Revolver

  

7.00% (1M
LIBOR +
6.00%)

  

3/30/2027

      

106

  

21

(e)(h)

    

WSHP FC
Acquisition LLC

    

1st Lien
Term Loan

  

7.00% (1M
LIBOR +
6.00%)

  

3/30/2027

      

557

  

557

(e)(f)

    

Annual Report 2021
32

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
WSHP FC
Acquisition LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/30/2027

      

$

2,794

  

$

2,794

(e)(f)

    
WSHP FC
Acquisition LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/30/2027

      

49

  

49

(e)

    
WSHP FC
Acquisition LLC		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/30/2027

      

167

  

167

(e)(f)

    
WSHP FC
Acquisition LLC		     1st Lien
Delayed Draw
Term Loan		   7.00% (3M
LIBOR +
6.00%)		  

3/30/2027

      

1,436

  

1,269

(e)(h)

    
                                     

205,986

      

10.68

%

  

Household & Personal Products

  
CDI Holdings III
Corp.		     1st Lien
Revolver		    

12/22/2027

      

410

  

(8

)(e)(h)

    
CDI Holdings III
Corp.		       1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

12/22/2027

                

1,688

      

1,671

(e)(f)

          
Foundation
Consumer
Brands, LLC		     1st Lien
Revolver		    

10/1/2026

      

389

  

—

(e)(h)

    
Foundation
Consumer
Brands, LLC		     1st Lien Term
Loan		   7.38% (3M
LIBOR +
6.38%)		  

10/1/2026

      

4,729

  

4,729

(e)(f)

    
Premier
Specialties, Inc.		     1st Lien
Revolver		    

8/20/2027

      

385

  

(8

)(e)(h)

    
Premier
Specialties, Inc.		     1st Lien Term
Loan		   6.75% (1M
LIBOR +
5.75%)		  

8/20/2027

      

3,043

  

3,012

(e)

    
Premier
Specialties, Inc.		     1st Lien
Delayed Draw
Term Loan		    

8/20/2027

      

829

  

(8

)(e)(h)

    
Sunshine
Luxembourg VII
S.a r.l.		  

Luxembourg

   1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.75%)		  

10/1/2026

      

4,139

  

4,152

(i)

    
                                     

13,540

      

0.70

%

  

Insurance

  

Acrisure, LLC

     1st Lien
Term Loan		   3.72% (3M
LIBOR +
3.50%)		  

2/15/2027

      

2,963

  

2,926

    
Alliant Holdings
Intermediate, LLC		     1st Lien Term
Loan		   4.00% (1M
LIBOR +
3.50%)		  

11/5/2027

      

1,995

  

1,991

    
Amynta Agency
Borrower Inc.		     1st Lien Term
Loan		   4.60% (1M
LIBOR +
4.50%)		  

2/28/2025

      

2,902

  

2,902

(e)(f)

    

Annual Report 2021
33

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

AQ Sunshine, Inc.

    

1st Lien
Revolver

  

7.00% (3M
LIBOR +
6.00%)

  

4/15/2024

      

$

213

  

$

57

(e)(h)

    

AQ Sunshine, Inc.

    

1st Lien Term
Loan

  

7.00% (3M
LIBOR +
6.00%)

  

4/15/2025

      

1,503

  

1,503

(e)(f)

    

AQ Sunshine, Inc.

    

1st Lien Term
Loan

  

7.00% (3M
LIBOR +
6.00%)

  

4/15/2025

      

1,674

  

1,674

(e)

    

AQ Sunshine, Inc.

    

1st Lien Term
Loan

  

7.00% (6M
LIBOR +
6.00%)

  

4/15/2025

      

3,565

  

3,565

(e)(f)

    

AQ Sunshine, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

7.00% (6M
LIBOR +
6.00%)

  

4/15/2025

      

61

  

—

(e)(h)

    

Ardonagh
Midco 3 PLC

  

United
Kingdom

  

1st Lien Term
Loan

  

7.50% (6M
GBP LIBOR +
6.75%)

  

7/14/2026

      

£

1,491

  

2,018

(e)(f)

    

Ardonagh
Midco 3 PLC

  

United
Kingdom

  

1st Lien Term
Loan

  

7.75% (6M
EURIBOR +
6.75%)

  

7/14/2026

      

€

190

  

216

(e)(f)

    

Ardonagh
Midco 3 PLC

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

6.25% (3M
LIBOR +
5.50%)

  

7/14/2026

      

16,452

  

16,452

(e)

    

Ardonagh
Midco 3 PLC

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.50% (6M
GBP LIBOR +
6.75%)

  

7/14/2026

      

£

312

  

422

(e)

    

Ardonagh
Midco 3 PLC

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

    

7/14/2026

      

£

1

  

—

(e)(h)

    

AssuredPartners,
Inc.

    

1st Lien Term
Loan

  

4.00% (1M
LIBOR +
3.50%)

  

2/12/2027

      

1,397

  

1,393

    

Benefytt
Technologies, Inc.

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
6.00%)

  

8/12/2027

      

3,645

  

3,608

(e)

    

Benefytt
Technologies, Inc.

    

1st Lien
Delayed Draw
Term Loan

    

8/12/2027

      

911

  

(9

)(e)(h)

    

Blackwood Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

8.80% (6M
LIBOR +
7.55%)

  

10/8/2026

      

3,321

  

3,321

(e)(f)

    

Blackwood Bidco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.60%
(SONIA +
7.55%)

  

10/8/2026

      

£

2,659

  

3,599

(e)(f)

    

Blackwood Bidco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.80% (6M
GBP LIBOR +
7.30%)

  

10/8/2026

      

£

464

  

628

(e)(f)

    

Blackwood Bidco
Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

8.05% (6M
GBP LIBOR +
7.55%)

  

10/8/2026

      

£

2,319

  

1,912

(e)(f)(h)

    

Annual Report 2021
34

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

  

Maturity
Date

  

Acquisition
Date

  

Shares

  

Principal
Amount(a)

  

Fair Value(a)

  

Percentage
of Net
Assets

  

Foundation Risk
Partners, Corp.

    

1st Lien
Revolver

    

10/29/2027

      

$

2,627

  

$

(26

)(e)(h)

    

Foundation Risk
Partners, Corp.

    

1st Lien Term
Loan

  

6.50% (2M
LIBOR +
5.75%)

  

10/29/2028

      

16,078

  

15,917

(e)(f)

    

Foundation Risk
Partners, Corp.

    

1st Lien
Delayed Draw
Term Loan

  

6.50% (3M
LIBOR +
5.75%)

  

10/29/2028

      

3,495

  

1,962

(e)(h)

    

Galway Borrower
LLC

    

1st Lien
Revolver

    

9/30/2027

      

969

  

(19

)(e)(h)

    

Galway Borrower
LLC

    

1st Lien Term
Loan

  

6.25% (3M
LIBOR +
5.25%)

  

9/29/2028

      

10,602

  

10,496

(e)

    

Galway Borrower
LLC

    

1st Lien
Delayed Draw
Term Loan

    

9/29/2028

      

1,600

  

(16

)(e)(h)

    

Hammersmith
Bidco Limited

  

United
Kingdom

  

1st Lien Term
Loan

    

12/13/2028

      

£

2,098

  

29

(e)(h)(i)

    

Hammersmith
Bidco Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.94% (1M
GBP LIBOR +
7.44%)

  

9/2/2026

      

£

6,924

  

8,790

(e)(h)

    

Hammersmith
Bidco Limited

  

United
Kingdom

  

1st Lien
Delayed Draw
Term Loan

  

7.94% (1M
GBP LIBOR +
7.44%)

  

9/2/2026

      

£

4,112

  

5,566

(e)(f)

    

High Street
Buyer, Inc.

    

1st Lien
Revolver

    

4/16/2027

      

688

  

(14

)(e)(h)

    

High Street
Buyer, Inc.

    

1st Lien Term
Loan

  

6.75% (3M
LIBOR +
6.00%)

  

4/14/2028

      

4,783

  

4,735

(e)(f)

    

High Street
Buyer, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (1M
LIBOR +
6.00%)

  

4/14/2028

      

2,769

  

2,741

(e)

    

High Street
Buyer, Inc.

    

1st Lien
Delayed Draw
Term Loan

  

6.75% (3M
LIBOR +
6.00%)

  

4/14/2028

      

15,132

  

13,583

(e)(h)

    

Hub International
Ltd

    

1st Lien Term
Loan

  

4.00% (3M
LIBOR +
3.25%)

  

4/25/2025

      

1,995

  

1,993

    

Jewel Bidco
Limited

  

United
Kingdom

  

1st Lien
Revolver

  

4.05%
(SONIA +
4.00%)

  

1/24/2028

      

£

333

  

293

(e)(f)(h)

    

Jewel Bidco
Limited

  

United
Kingdom

  

1st Lien
Term Loan

  

6.55%
(SONIA +
6.50%)

  

7/24/2028

      

£

6,203

  

8,395

(e)(f)

    

Jewel Bidco
Limited

  

United
Kingdom

  

1st Lien Term
Loan

  

6.66%
(SONIA +
6.50%)

  

7/24/2028

      

£

3,797

  

1,611

(e)(h)

    

JMG Group
Investments
Limited

  

United
Kingdom

  

1st Lien
Term Loan

  

5.92%
(SONIA +
5.75%)

  

12/11/2028

      

£

310

  

419

(e)(f)

    

Annual Report 2021
35

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
JMG Group
Investments
Limited		   United
Kingdom		   1st Lien Term
Loan		    

12/11/2028

      

£

1,190

  

$

—

(e)(h)

    
OneDigital
Borrower LLC		     1st Lien Term
Loan		   4.75%
(SOFR +
4.25%)		  

11/16/2027

      

1,785

  

1,779

    
Optio Group
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.25% (6M
GBP LIBOR +
7.50%)		  

3/16/2026

      

£

598

  

379

(e)(h)

    
Optio Group
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.25% (6M
GBP LIBOR +
7.50%)		  

3/30/2026

      

£

500

  

677

(e)(f)

    
Patriot Growth
Insurance
Services, LLC		     1st Lien
Revolver		    

10/16/2028

      

250

  

(5

)(e)(h)

    
Patriot Growth
Insurance
Services, LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

10/16/2028

      

1,304

  

1,291

(e)(f)

    
Patriot Growth
Insurance
Services, LLC		     1st Lien
Delayed Draw
Term Loan		    

10/16/2028

      

501

  

(5

)(e)(h)

    
People
Corporation		  

Canada

   1st Lien
Revolver		   7.25% (3M
CDOR +
6.25%)		  

2/18/2027

      

CAD

898

  

307

(e)(h)

    
People
Corporation		  

Canada

   1st Lien Term
Loan		   7.25% (3M
CDOR +
6.25%)		  

2/18/2028

      

CAD

7,166

  

5,669

(e)(f)

    
People
Corporation		  

Canada

   1st Lien
Delayed Draw
Term Loan		   6.25% (2M
CDOR +
5.50%)		  

2/18/2028

      

CAD

4,116

  

183

(e)(h)

    
People
Corporation		  

Canada

   1st Lien
Delayed Draw
Term Loan		   7.25% (3M
CDOR +
6.25%)		  

2/18/2028

      

CAD

2,338

  

1,848

(e)

    
Project Hammond
Bidco Limited		   United
Kingdom		   1st Lien Term
Loan		   5.67%
(SONIA +
5.50%)		  

12/4/2028

      

£

1,750

  

2,369

(e)(f)

    
Project Hammond
Bidco Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		    

12/4/2028

      

£

1,750

  

—

(e)(h)(i)

    
Right Choice
Holdings Limited		   United
Kingdom		   1st Lien Term
Loan		   7.75% (6M
GBP LIBOR +
7.00%)		  

6/6/2024

      

£

1,000

  

1,354

(e)(f)

    
Right Choice
Holdings Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.75% (6M
GBP LIBOR +
7.00%)		  

6/6/2024

      

£

667

  

902

(e)(f)

    
RSC Acquisition,
Inc.		     1st Lien
Revolver		   7.75%
(PRIME +
4.50%)		  

10/30/2026

      

1

  

1

(e)(h)

    
RSC Acquisition,
Inc.		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

10/30/2026

      

3,178

  

3,178

(e)(f)

    

Annual Report 2021
36

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Ryan Specialty
Group, LLC		     1st Lien Term
Loan		   3.75% (1M
LIBOR +
3.00%)		  

9/1/2027

      

$

988

  

$

986

    
SCM Insurance
Services Inc.		  

Canada

   1st Lien
Revolver		    

8/29/2022

      

CAD

1

  

—

(e)(h)

    
SCM Insurance
Services Inc.		  

Canada

   1st Lien Term
Loan		   6.00% (1M
CDOR +
5.00%)		  

8/29/2024

      

CAD

120

  

95

(e)(f)

    
SCM Insurance
Services Inc.		  

Canada

   2nd Lien Term
Loan		   10.00% (1M
CDOR +
9.00%)		  

3/1/2025

      

CAD

125

  

99

(e)

    

SelectQuote, Inc.

     1st Lien Term
Loan		   5.75% (1M
LIBOR +
5.00%)		  

11/5/2024

      

7,308

  

7,308

(e)

    
SG Acquisition,
Inc.		     1st Lien Term
Loan		   5.50% (1M
LIBOR +
5.00%)		  

1/27/2027

      

2,876

  

2,876

(e)(f)

    
Spring Insurance
Solutions, LLC		     1st Lien Term
Loan		   7.50% (3M
LIBOR +
6.50%)		  

11/24/2025

      

3,454

  

3,315

(e)(f)

    
Spring Insurance
Solutions, LLC		     1st Lien
Delayed Draw
Term Loan		   7.50% (3M
LIBOR +
6.50%)		  

11/24/2025

      

1,151

  

81

(e)(h)

    
Staysure Bidco
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.00% (3M
GBP LIBOR +
7.25%)		  

7/1/2025

      

£

1,000

  

1,272

(e)

    

USI, Inc.

     1st Lien Term
Loan		   3.47% (3M
LIBOR +
3.25%)		  

12/2/2026

      

6,487

  

6,437

    
                                     

167,029

      

8.66

%

  

Materials

  
Anchor
Packaging,
LLC		     1st Lien Term
Loan		   4.10% (1M
LIBOR +
4.00%)		  

7/18/2026

      

3,132

  

3,093

    
Aruba
Investments,
Inc.		     2nd Lien Term
Loan		   8.50% (3M
LIBOR +
7.75%)		  

11/24/2028

      

3,000

  

3,005

    
ASP-R-Pac
Acquisition Co
LLC		     1st Lien
Revolver		   6.75% (3M
LIBOR +
6.00%)		  

12/29/2027

      

839

  

151

(e)(h)

    
ASP-R-Pac
Acquisition Co
LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
6.00%)		  

12/29/2027

      

6,244

  

6,182

(e)(f)

    
Berlin
Packaging
L.L.C.		     1st Lien Term
Loan		   3.75% (3M
LIBOR +
3.25%)		  

3/11/2028

      

4,028

  

3,991

    
Berlin
Packaging
L.L.C.		     1st Lien Term
Loan		   4.25% (1M
LIBOR +
3.75%)		  

3/11/2028

      

4,702

  

4,692

   

Annual Report 2021
37

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
DCG Acquisition
Corp.		     1st Lien Term
Loan		   4.60% (1M
LIBOR +
4.50%)		  

9/30/2026

      

$

5,293

  

$

5,280

(e)

    
Groupe
Solmax
Inc.		  

Canada

   1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.75%)		  

5/29/2028

      

1,300

  

1,295

    
IntraPac
Canada
Corporation		  

Canada

   1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

1/11/2026

      

794

  

794

(e)(f)

    
IntraPac
International
LLC		     1st Lien
Revolver		   6.25% (3M
LIBOR +
5.50%)		  

1/11/2025

      

415

  

135

(e)(h)

    
IntraPac
International
LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

1/11/2026

      

4,318

  

4,318

(e)(f)

    
Kleopatra
Finco S.a r.l.		  

Luxembourg

   1st Lien Term
Loan		   4.75% (6M
EURIBOR +
4.75%)		  

2/12/2026

      

€

3,800

  

4,195

    
Mauser Packaging
Solutions Holding
Company		     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

4/3/2024

      

2,720

  

2,681

    
Nelipak European
Holdings
Cooperatief U.A.		  

Netherlands

   1st Lien
Revolver		    

7/2/2024

      

€

582

  

—

(e)(h)

    
Nelipak European
Holdings
Cooperatief U.A.		  

Netherlands

   1st Lien Term
Loan		   4.50% (3M
EURIBOR +
4.50%)		  

7/2/2026

      

€

806

  

917

(e)(f)

    
Nelipak
Holding
Company		     1st Lien
Revolver		   5.25% (3M
LIBOR +
4.25%)		  

7/2/2024

      

605

  

253

(e)(h)

    
Nelipak
Holding
Company		     1st Lien Term
Loan		   5.25% (3M
LIBOR +
4.25%)		  

7/2/2026

      

2,969

  

2,969

(e)(f)

    
Novipax Buyer,
L.L.C.		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

12/1/2026

      

4,344

  

4,344

(e)(f)

    
PAKNK
Netherlands
Treasury B.V.		  

Netherlands

   1st Lien Term
Loan		   4.50% (3M
EURIBOR +
4.50%)		  

7/2/2026

      

€

5,254

  

5,981

(e)(f)

    
Plaskolite PPC
Intermediate II
LLC		     2nd Lien Term
Loan		   8.00% (3M
LIBOR +
7.00%)		  

12/14/2026

      

2,960

  

2,960

(e)(f)

    
Pregis TopCo
LLC		     1st Lien Term
Loan		   4.09% (1M
LIBOR +
4.00%)		  

7/31/2026

      

3,876

  

3,856

    

Pregis TopCo LLC

     1st Lien Term
Loan		   4.50% (1M
LIBOR +
4.00%)		  

7/31/2026

      

1,292

  

1,284

    
Pretium PKG
Holdings, Inc.		     1st Lien Term
Loan		   4.50% (6M
LIBOR +
4.00%)		  

10/2/2028

      

6,034

  

6,017

(i)

    

Annual Report 2021
38

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Pretium PKG
Holdings, Inc.		     2nd Lien Term
Loan		   7.25% (3M
LIBOR +
6.75%)		  

10/1/2029

      

$

1,025

  

$

1,020

    
Trident TPI
Holdings, Inc.		     1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.25%)		  

10/17/2024

      

3,019

  

3,016

    
Trident TPI
Holdings, Inc.		     1st Lien Term
Loan		   4.50% (3M
LIBOR +
4.00%)		  

9/15/2028

      

7,687

  

7,673

(i)

    
Trident TPI
Holdings, Inc.		     1st Lien
Delayed Draw
Term Loan		   4.50% (3M
LIBOR +
4.00%)		  

9/15/2028

      

1,092

  

438

(h)(i)

    
                                     

80,540

      

4.17

%

  

Media & Entertainment

  
Aventine
Intermediate
LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
6.00%)		  

6/18/2027

      

2,029

  

2,009

(e)(f)

    
Aventine
Intermediate
LLC		     1st Lien
Delayed Draw
Term Loan		    

6/18/2027

      

812

  

(8

)(e)(h)

    
AVSC Holding
Corp.		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

10/15/2026

      

2,026

  

1,876

    
Diamond Sports
Group, LLC		     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

8/24/2026

      

1,104

  

509

    
Global Music
Rights, LLC		     1st Lien
Revolver		    

8/27/2027

      

473

  

(9

)(e)(h)

    
Global Music
Rights, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.75%)		  

8/28/2028

      

5,018

  

4,967

(e)

    
Gray Television,
Inc.		     1st Lien Term
Loan		    

12/1/2028

      

4,597

  

4,570

(i)

    
MMax
Investment
Partners, Inc.		     1st Lien Term
Loan		   10.00% (3M
LIBOR +
10.00%)		  

1/19/2026

      

550

  

495

(e)(g)

    
Nexstar
Broadcasting
Inc		     1st Lien Term
Loan		   2.60% (1M
LIBOR +
2.50%)		  

9/18/2026

      

5,000

  

4,986

    
Production
Resource
Group, LLC		     1st Lien Term
Loan		   9.75% (3M
LIBOR +
9.50%)		  

8/21/2024

      

691

  

691

(e)(g)

    
Production
Resource
Group, LLC		     1st Lien
Delayed Draw
Term Loan		   6.00% (3M
LIBOR +
5.00%)		  

8/21/2024

      

443

  

395

(e)(h)

    
Production
Resource
Group, LLC		     1st Lien
Delayed Draw
Term Loan		   8.50% (3M
LIBOR +
7.50%)		  

8/21/2024

      

17

  

17

(e)

    

Annual Report 2021
39

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Renaissance
Holding Corp.		     1st Lien Term
Loan		   3.35%
(1M LIBOR +
3.25%)		  

5/30/2025

      

$

4,624

  

$

4,576

(i)

    
Rugby
Australia Ltd		  

Australia

   1st Lien Term
Loan		   7.75% (3M
BBSY +
7.00%)		  

3/31/2027

      

AUD

1,250

  

900

(e)

    
Rugby
Australia Ltd		  

Australia

   1st Lien
Delayed Draw
Term Loan		    

3/31/2027

      

AUD

1,250

  

(8

)(e)(h)

    
Storm Investment
S.a.r.l.		  

Luxembourg

   1st Lien Term
Loan		   3.75%  

6/22/2029

      

€

9,193

  

10,466

(e)

      
The E.W.
Scripps
Company		     1st Lien Term
Loan		   3.75% (1M
LIBOR +
3.00%)		  

1/7/2028

      

1,977

  

1,975

    
UFC Holdings,
LLC		     1st Lien Term
Loan		   3.50% (6M
LIBOR +
2.75%)		  

4/29/2026

      

6,476

  

6,440

(i)

    
Univision
Communications
Inc		     1st Lien Term
Loan		   3.75% (1M
LIBOR +
2.75%)		  

3/15/2024

      

1,700

  

1,698

(i)

    
                                 

46,545

      

2.41

%

  

Pharmaceuticals, Biotechnology & Life Sciences

  
Aspire Bidco
Limited		  

Jersey

   1st Lien
Revolver		    

3/3/2028

      

£

500

  

—

(e)(h)

    
Aspire Bidco
Limited		  

Jersey

   1st Lien Term
Loan		   6.80%
(SONIA +
6.75%)		  

3/3/2028

      

£

1,200

  

1,624

(e)(f)

    
Aspire Bidco
Limited		  

Jersey

   1st Lien Term
Loan		   6.80%
(SONIA +
6.75%)		  

9/4/2028

      

£

3,559

  

4,817

(e)(f)

    
Aspire Bidco
Limited		  

Jersey

   1st Lien Term
Loan		    

3/3/2028

      

£

700

  

—

(e)(h)

    
Aspire Bidco
Limited		  

Jersey

   1st Lien Term
Loan		    

9/4/2028

      

£

1,941

  

—

(e)(h)

    
Cambrex
Corporation		     1st Lien Term
Loan		   4.25% (1M
LIBOR +
3.50%)		  

12/4/2026

      

4,429

  

4,427

    
Cobalt Buyer
Sub, Inc.		     1st Lien
Revolver		   5.25% (3M
LIBOR +
5.25%)		  

10/1/2027

      

895

  

72

(e)(h)

    
Cobalt Buyer
Sub, Inc.		     1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.25%)		  

10/2/2028

      

7,427

  

7,353

(e)

    
Cobalt Buyer
Sub, Inc.		     1st Lien
Delayed Draw
Term Loan		    

10/2/2028

      

2,476

  

(25

)(e)(h)

    
Da Vinci
Purchaser Corp.		     1st Lien Term
Loan		   5.00% (1M
LIBOR +
4.00%)		  

1/8/2027

      

5,394

  

5,392

    

Annual Report 2021
40

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Icon Public
Limited
Company		  

Ireland

   1st Lien Term
Loan		   2.75% (3M
LIBOR +
2.25%)		  

7/3/2028

      

$

2,028

  

$

2,028

    
Jazz Financing
Lux S.a.r.l.		  

Luxembourg

   1st Lien Term
Loan		   4.00% (1M
LIBOR +
3.50%)		  

5/5/2028

      

2,488

  

2,496

    
NMC Skincare
Intermediate
Holdings II, LLC		     1st Lien
Revolver		   6.00% (1M
LIBOR +
5.00%)		  

10/31/2024

      

333

  

223

(e)(h)

    
NMC Skincare
Intermediate
Holdings II, LLC		     1st Lien Term
Loan		   6.00% (1M
LIBOR +
5.00%)		  

10/31/2024

      

1,940

  

1,921

(e)(f)

    
NMC Skincare
Intermediate
Holdings II, LLC		     1st Lien
Delayed Draw
Term Loan		   6.00% (1M
LIBOR +
5.00%)		  

10/31/2024

      

654

  

647

(e)

    
North American
Science
Associates, LLC		     1st Lien
Revolver		   5.25% (3M
LIBOR +
4.50%)		  

3/15/2027

      

1

  

1

(e)(h)

    
North American
Science
Associates, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.75%)		  

9/15/2027

      

7,053

  

7,053

(e)(f)

    
North American
Science
Associates, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.75%)		  

9/15/2027

      

4,147

  

4,147

(e)

    
North American
Science
Associates, LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.75%)		  

9/15/2027

      

1,006

  

1,006

(e)

    
North American
Science
Associates, LLC		     1st Lien
Delayed Draw
Term Loan		    

9/15/2027

      

916

  

—

(e)(h)

    

Organon & Co.

     1st Lien Term
Loan		   3.50% (3M
LIBOR +
3.00%)		  

6/2/2028

      

4,993

  

4,994

    
PROTON
JVCO S.A R.L.		  

Luxembourg

   1st Lien Term
Loan		   7.50% (6M
EURIBOR +
7.25%)		  

11/10/2026

      

€

1,667

  

1,897

(e)(f)

    
PROTON
JVCO S.A R.L.		  

Luxembourg

   1st Lien Term
Loan		    

11/10/2026

      

€

833

  

—

(e)(h)

    
TerSera
Therapeutics
LLC		     1st Lien Term
Loan		   6.60% (3M
LIBOR +
5.60%)		  

3/30/2025

      

48

  

48

(e)(f)

    
                                     

50,121

      

2.60

%

  

Retailing

  
Atlas Intermediate
III, L.L.C.		     1st Lien
Revolver		    

4/29/2025

      

264

  

—

(e)(h)

    
Atlas Intermediate
III, L.L.C.		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

4/29/2025

      

1,845

  

1,845

(e)(f)

    

Annual Report 2021
41

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Atlas Intermediate
III, L.L.C.		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

4/29/2025

      

$

404

  

$

404

(e)

    
Autokiniton
US Holdings,
Inc.		     1st Lien Term
Loan		   5.00% (12M
LIBOR +
4.50%)		  

4/6/2028

      

3,102

  

3,104

    
Bamboo
Purchaser, Inc.		     1st Lien
Revolver		   3.00% (3M
LIBOR +
2.50%)		  

11/5/2026

      

1

  

—

(e)(h)

    
Bamboo
Purchaser, Inc.		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
6.00%)		  

11/5/2027

      

3,554

  

3,519

(e)(f)

    
Bamboo
Purchaser, Inc.		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
6.00%)		  

11/5/2027

      

836

  

410

(e)(h)

    
BCP V Modular
Services
Holdings IV
Limited		   United
Kingdom		   1st Lien Term
Loan		    

10/7/2028

      

€

2,133

  

2,426

(i)

    
Grab
Holdings, Inc.		  

Singapore

   1st Lien Term
Loan		   5.50% (3M
LIBOR +
4.50%)		  

1/29/2026

      

6,502

  

6,510

    

Hoya Midco, LLC

     1st Lien Term
Loan		   4.50% (1M
LIBOR +
3.50%)		  

6/30/2024

      

4,303

  

4,298

(i)

    
Marcone
Yellowstone
Buyer Inc.		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

6/23/2028

      

8,420

  

8,336

(e)(f)

    
Marcone
Yellowstone
Buyer Inc.		     1st Lien Term
Loan		    

6/23/2028

      

2,500

  

2,475

(e)(f)(i)

    
Marcone
Yellowstone
Buyer Inc.		     1st Lien
Delayed Draw
Term Loan		   6.25% (3M
LIBOR +
5.50%)		  

6/23/2028

      

2,790

  

2,762

(e)

    
Marcone
Yellowstone
Buyer Inc.		     1st Lien
Delayed Draw
Term Loan		    

6/23/2028

      

800

  

792

(e)(i)

    
Moon Valley
Nursery of Arizona
Retail, LLC		     1st Lien
Revolver		   4.50%
(1M LIBOR +
3.50%)		  

10/8/2026

      

1

  

—

(e)(h)

    
Moon Valley
Nursery of Arizona
Retail, LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

10/8/2027

      

8,408

  

8,324

(e)

    
Moon Valley
Nursery of Arizona
Retail, LLC		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

10/8/2027

      

2,002

  

300

(e)(h)

    

Pug LLC

     1st Lien Term
Loan		   4.75% (1M
LIBOR +
4.25%)		  

2/12/2027

      

2,048

  

2,036

    

Reddy Ice LLC

     1st Lien
Revolver		    

7/1/2024

      

955

  

—

(e)(h)

    

Annual Report 2021
42

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Reddy Ice LLC

     1st Lien Term
Loan		   7.50% (3M
LIBOR +
6.50%)		  

7/1/2025

      

$

7,264

  

$

7,264

(e)(f)

    

Reddy Ice LLC

     1st Lien
Delayed Draw
Term Loan		   7.50% (1M
LIBOR +
6.50%)		  

7/1/2025

      

1,461

  

1,456

(e)(h)

    

Reddy Ice LLC

     1st Lien
Delayed Draw
Term Loan		   7.50% (2M
LIBOR +
6.50%)		  

7/1/2025

      

551

  

551

(e)

    

Reddy Ice LLC

     1st Lien
Delayed Draw
Term Loan		   7.50% (3M
LIBOR +
6.50%)		  

7/1/2025

      

686

  

686

(e)

    
Saldon
Holdings, Inc.		     1st Lien
Revolver		    

3/13/2024

      

381

  

—

(e)(h)

    
Saldon
Holdings, Inc.		     1st Lien Term
Loan		   6.65% (1M
LIBOR +
5.65%)		  

3/13/2025

      

7,147

  

7,147

(e)(f)

    
SCIH Salt
Holdings Inc.		     1st Lien Term
Loan		   4.75% (3M
LIBOR +
4.00%)		  

3/16/2027

      

5,611

  

5,550

(i)

    
Sweetwater
Borrower, LLC		     1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.75%)		  

8/7/2028

      

385

  

385

(e)

    
US Salt
Investors, LLC		     1st Lien
Revolver		    

7/20/2026

      

679

  

(14

)(e)(h)

    
US Salt
Investors, LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

7/19/2028

      

6,027

  

5,967

(e)(f)

    
                                     

76,533

      

3.97

%

  

Software & Services

  

2U, Inc.

     1st Lien Term
Loan		   6.50% (1M
LIBOR +
5.75%)		  

12/30/2024

      

7,732

  

7,732

(e)(f)

    
AffiniPay
Midco, LLC		     1st Lien
Revolver		    

3/2/2026

      

766

  

—

(e)(h)

    
AffiniPay
Midco, LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.00%)		  

3/2/2026

      

9,791

  

9,791

(e)(f)

    
Anaqua Parent
Holdings, Inc.		     1st Lien
Revolver		    

10/10/2025

      

231

  

—

(e)(h)

    
Anaqua Parent
Holdings, Inc.		     1st Lien Term
Loan		   6.25% (6M
EURIBOR +
6.25%)		  

4/10/2026

      

€

665

  

757

(e)

    
Anaqua Parent
Holdings, Inc.		     1st Lien
Term Loan		   7.00% (6M
LIBOR +
6.00%)		  

4/10/2026

      

3,796

  

3,796

(e)(f)

    
Anaqua Parent
Holdings, Inc.		     1st Lien
Delayed Draw
Term Loan		    

4/10/2026

      

523

  

—

(e)(h)

    

Annual Report 2021
43

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
APG Intermediate
Holdings
Corporation		     1st Lien
Revolver		   6.75% (3M
LIBOR +
5.25%)		  

1/3/2025

      

$

1

  

$

—

(e)(h)

    
APG Intermediate
Holdings
Corporation		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.25%)		  

1/3/2025

      

997

  

997

(e)

    
APG Intermediate
Holdings
Corporation		     1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
5.25%)		  

1/3/2025

      

59

  

59

(e)

    
Applied
Systems, Inc.		     1st Lien Term
Loan		   3.75% (3M
LIBOR +
3.25%)		  

9/19/2024

      

8,565

  

8,556

    
Applied
Systems, Inc.		     2nd Lien Term
Loan		   6.25% (3M
LIBOR +
5.50%)		  

9/19/2025

      

989

  

995

    
Appriss
Health, LLC		     1st Lien
Revolver		    

5/6/2027

      

212

  

—

(e)(h)

    
Appriss
Health, LLC		     1st Lien Term
Loan		   8.25% (3M
LIBOR +
7.25%)		  

5/6/2027

      

2,912

  

2,912

(e)

    
Apttus
Corporation		     1st Lien Term
Loan		   5.00% (3M
LIBOR +
4.25%)		  

5/8/2028

      

2,947

  

2,950

    

Asurion, LLC

     1st Lien Term
Loan		   3.10% (1M
LIBOR +
3.00%)		  

11/3/2024

      

2,498

  

2,485

    

Asurion, LLC

     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

12/23/2026

      

1,023

  

1,015

    

Asurion, LLC

     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

7/31/2027

      

2,124

  

2,109

    

Asurion, LLC

     2nd Lien Term
Loan		   5.35% (1M
LIBOR +
5.25%)		  

1/31/2028

      

570

  

572

    

Asurion, LLC

     2nd Lien Term
Loan		   5.35% (1M
LIBOR +
5.25%)		  

1/20/2029

      

7,000

  

6,966

    
Atlanta Bidco
Limited		   United
Kingdom		   1st Lien Term
Loan		   7.75% (6M
EURIBOR +
7.00%)		  

8/23/2024

      

€

1,000

  

1,116

(e)(f)

    

Avaya Inc.

     1st Lien Term
Loan		   4.36% (1M
LIBOR +
4.25%)		  

12/15/2027

      

680

  

681

    
Banyan Software
Holdings, LLC		     1st Lien
Revolver		   7.75% (2M
LIBOR +
6.75%)		  

10/30/2025

      

471

  

189

(e)(h)

    
Banyan Software
Holdings, LLC		     1st Lien Term
Loan		   7.75% (3M
LIBOR +
6.75%)		  

10/30/2026

      

3,556

  

3,556

(e)(f)

    

Annual Report 2021
44

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Banyan Software
Holdings, LLC		     1st Lien
Delayed Draw
Term Loan		   7.75% (3M
LIBOR +
6.75%)		  

10/30/2026

      

$

1,526

  

$

722

(e)(h)

    
Banyan Software
Holdings, LLC		     1st Lien
Delayed Draw
Term Loan		    

10/30/2026

      

3,602

  

—

(e)(h)

    
Bock Capital
Bidco B.V.		     1st Lien Term
Loan		   4.00% (3M
EURIBOR +
4.00%)		  

6/29/2028

      

€

10,000

  

11,381

    
Businessolver.com,
Inc.		     1st Lien Term
Loan		   6.50% (1M
LIBOR +
5.75%)		  

12/1/2027

      

4,445

  

4,400

(e)(f)

    
Businessolver.com,
Inc.		     1st Lien
Delayed Draw
Term Loan		    

12/1/2027

      

1,197

  

(12

)(e)(h)

    

BYJU's Alpha, Inc.

     1st Lien Term
Loan		    

11/24/2026

      

3,999

  

4,037

(i)

    
Capnor Connery
Bidco A/S		  

Denmark

   1st Lien Term
Loan		   7.63% (1M
EURIBOR +
7.63%)		  

4/30/2026

      

€

2,954

  

3,364

(e)(f)

    
Capnor Connery
Bidco A/S		  

Denmark

   1st Lien Term
Loan		   7.63% (1M
STIBOR +
7.63%)		  

4/30/2026

      

SEK

4,210

  

466

(e)(f)

    
Capnor Connery
Bidco A/S		  

Denmark

   1st Lien Term
Loan		   8.50% (1M
NIBOR +
7.63%)		  

4/30/2026

      

NOK

2,551

  

290

(e)(f)

    
Capnor Connery
Bidco A/S		  

Denmark

   1st Lien
Delayed Draw
Term Loan		   7.63% (1M
CIBOR +
7.63%)		  

4/30/2026

      

DKK

22,065

  

3,378

(e)(f)

    
Capnor Connery
Bidco A/S		  

Denmark

   1st Lien
Delayed Draw
Term Loan		   7.63% (1M
CIBOR +
7.63%)		  

4/30/2026

      

DKK

45,968

  

966

(e)(h)

    
Cardinal
Parent, Inc.		     1st Lien
Revolver		   6.75%
(PRIME +
3.50%)		  

11/12/2025

      

1

  

—

(e)(h)

    
Cardinal
Parent, Inc.		     2nd Lien
Term Loan		   8.50% (3M
LIBOR +
7.75%)		  

11/13/2028

      

8,634

  

8,634

(e)(f)

    
Cast & Crew
Payroll, LLC		     1st Lien Term
Loan		   3.59% (1M
LIBOR +
3.50%)		  

2/9/2026

      

2,945

  

2,941

    
CCC Intelligent
Solutions, Inc.		     1st Lien Term
Loan		   3.00% (3M
LIBOR +
2.50%)		  

9/21/2028

      

2,020

  

2,017

    
CED Group
Holding B.V.		  

Netherlands

   1st Lien
Delayed Draw
Term Loan		   6.00% (3M
EURIBOR +
6.00%)		  

12/9/2025

      

€

336

  

382

(e)(f)

    

Confirmasoft AB

  

Sweden

   1st Lien
Delayed Draw
Term Loan		   6.75% (3M
EURIBOR +
6.75%)		  

6/3/2027

      

€

1,995

  

2,271

(e)(f)

    

Annual Report 2021
45

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Confirmasoft AB

  

Sweden

   1st Lien
Delayed Draw
Term Loan		   6.75% (3M
EURIBOR +
6.75%)		  

6/3/2027

      

€

1,505

  

$

634

(e)(h)

    
Consilio Midco
Limited		   United
Kingdom		   1st Lien
Revolver		    

5/26/2028

      

123

  

(2

)(e)(h)

    
Consilio Midco
Limited		   United
Kingdom		   1st Lien
Term Loan		   6.25% (3M
EURIBOR +
6.25%)		  

5/26/2028

      

€

2,024

  

2,281

(e)

    
Consilio Midco
Limited		   United
Kingdom		   1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

5/26/2028

      

6,875

  

6,806

(e)(f)

    
Consilio Midco
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

5/26/2028

      

2,572

  

1,697

(e)(h)

    
Consilio Midco
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		    

5/26/2028

      

€

386

  

(4

)(e)(h)

    
Cority
Software Inc.		  

Canada

   1st Lien
Revolver		    

7/2/2025

      

231

  

—

(e)(h)

    
Cority
Software Inc.		  

Canada

   1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.00%)		  

7/2/2026

      

1,737

  

1,737

(e)(f)

    
Cority
Software Inc.		  

Canada

   1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.00%)		  

7/2/2026

      

130

  

130

(e)

    
Cornerstone
OnDemand, Inc.		     1st Lien
Revolver		    

10/15/2026

      

100

  

(10

)(e)(h)

    
Cornerstone
OnDemand, Inc.		     2nd Lien Term
Loan		    

10/15/2029

      

17,522

  

17,259

(e)(i)

    

Cvent, Inc.

     1st Lien Term
Loan		   3.84% (1M
LIBOR +
3.75%)		  

11/29/2024

      

1,248

  

1,245

    
Datix Bidco
Limited		   United
Kingdom		   1st Lien Term
Loan		   4.18% (6M
LIBOR +
4.00%)		  

4/28/2025

      

2,851

  

2,851

(e)(f)

    
Denali
Holdco LLC		     1st Lien
Revolver		    

9/15/2027

      

592

  

(12

)(e)(h)

    
Denali
Holdco LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

9/15/2027

      

4,118

  

4,077

(e)

    
Diligent
Corporation		     1st Lien
Revolver		    

8/4/2025

      

513

  

—

(e)(h)

    
Diligent
Corporation		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

8/4/2025

      

2,256

  

2,256

(e)(f)

    
Diligent
Corporation		     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

8/4/2025

      

188

  

188

(e)

    
Diligent
Corporation		     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

8/4/2025

      

3,051

  

3,051

(e)(f)

    

Annual Report 2021
46

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Diligent
Corporation		     1st Lien
Delayed Draw
Term Loan		    

8/4/2025

      

$

687

  

$

—

(e)(h)

    

Doxim Inc.

     1st Lien Term
Loan		   7.75% (1M
LIBOR +
6.75%)		  

2/28/2024

      

3,422

  

3,422

(e)(f)

    

Doxim Inc.

     1st Lien Term
Loan		   8.00% (1M
LIBOR +
7.00%)		  

2/28/2024

      

828

  

828

(e)(f)

    

Doxim Inc.

     1st Lien Term
Loan		   9.00% (1M
LIBOR +
8.00%)		  

2/28/2024

      

6,298

  

6,298

(e)(f)

    

Doxim Inc.

     1st Lien Last
Out Term
Loan		   7.00% (1M
LIBOR +
6.00%)		  

2/28/2024

      

710

  

710

(e)(f)

    

Doxim Inc.

     1st Lien Last
Out Delayed
Draw Term
Loan		   7.00% (1M
LIBOR +
6.00%)		  

2/28/2024

      

325

  

325

(e)

    
Drilling Info
Holdings, Inc.		     2nd Lien Term
Loan		   8.34% (1M
LIBOR +
8.25%)		  

7/30/2026

      

8,077

  

8,077

(e)(f)

    
DS Admiral
Bidco, LLC		     1st Lien
Revolver		    

3/16/2026

      

358

  

—

(e)(h)

    
DS Admiral
Bidco, LLC		     1st Lien Term
Loan		   6.75% (3M
LIBOR +
5.75%)		  

3/16/2028

      

2,426

  

2,426

(e)(f)

    
Dye & Durham
Corporation		  

Canada

   1st Lien
Revolver		    

12/3/2026

      

CAD

1,659

  

(21

)(e)(h)

    
Dye & Durham
Corporation		  

Canada

   1st Lien Term
Loan		   6.50% (1M
CDOR +
5.75%)		  

12/3/2027

      

CAD

11,928

  

9,288

(e)(f)

    
Dye & Durham
Corporation		  

Canada

   1st Lien
Delayed Draw
Term Loan		    

12/3/2027

      

CAD

1,569

  

(19

)(e)(h)

    
Elemica
Parent, Inc.		     1st Lien
Revolver		   6.50% (3M
LIBOR +
5.50%)		  

9/18/2025

      

479

  

268

(e)(h)

    
Elemica
Parent, Inc.		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

9/18/2025

      

2,836

  

2,836

(e)

    
Elemica
Parent, Inc.		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

9/18/2025

      

872

  

872

(e)(f)

    
Elemica
Parent, Inc.		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

9/18/2025

      

2,817

  

2,817

(e)

    
Enigma
Acquisition B.V.		  

Netherlands

   1st Lien
Delayed Draw
Term Loan		   7.45% (6M
EURIBOR +
7.25%)		  

1/26/2028

      

€

4,074

  

4,639

(e)(f)

    

Annual Report 2021
47

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Epicor Software
Corporation		     1st Lien Term
Loan		   4.00% (1M
LIBOR +
3.25%)		  

7/30/2027

      

$

2,436

  

$

2,432

    
eResearch
Technology, Inc.		     1st Lien Term
Loan		   5.50% (1M
LIBOR +
4.50%)		  

2/4/2027

      

2,039

  

2,044

    
eResearch
Technology, Inc.		     2nd Lien Term
Loan		   8.50% (1M
LIBOR +
8.00%)		  

2/4/2028

      

10,603

  

10,603

(e)(f)

    
eResearch
Technology, Inc.		     2nd Lien
Delayed Draw
Term Loan		   8.50% (1M
LIBOR +
8.00%)		  

2/4/2028

      

1,343

  

672

(e)(h)

    
Evercommerce
Solutions, Inc.		     1st Lien Term
Loan		   3.50% (1M
LIBOR +
3.00%)		  

7/6/2028

      

3,227

  

3,214

    
ExtraHop
Networks, Inc.		     1st Lien Term
Loan		   8.50% (3M
LIBOR +
7.50%)		  

7/22/2027

      

1,620

  

1,604

(e)

    
ExtraHop
Networks, Inc.		     1st Lien
Delayed Draw
Term Loan		   8.50% (3M
LIBOR +
7.50%)		  

7/22/2027

      

933

  

94

(e)(h)

    
Flexsys
Holdings, Inc.		     1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.25%)		  

11/1/2028

      

1,835

  

1,840

(e)

    
Frontline
Technologies
Holdings, LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.25%)		  

9/18/2023

      

3,853

  

3,853

(e)(f)

    
Frontline
Technologies
Intermediate
Holdings, LLC		     1st Lien Term
Loan		   6.25% (3M
LIBOR +
5.25%)		  

9/18/2023

      

454

  

454

(e)(f)

    
Frontline
Technologies
Intermediate
Holdings, LLC		     1st Lien
Delayed Draw
Term Loan		   6.25% (3M
LIBOR +
5.25%)		  

9/18/2023

      

56

  

56

(e)

    
Gainwell
Acquisition
Corp.		     1st Lien Term
Loan		   4.75% (3M
LIBOR +
4.00%)		  

10/1/2027

      

7,097

  

7,107

    

Gilfoyle Bidco AB

  

Sweden

   1st Lien Term
Loan		   6.25% (3M
STIBOR +
6.25%)		  

9/4/2028

      

SEK

80,000

  

7,065

(e)(h)

    
GraphPAD
Software, LLC		     1st Lien
Revolver		    

4/27/2027

      

2

  

—

(e)(h)

    
GraphPAD
Software, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

4/27/2027

      

1,999

  

1,979

(e)

    
GraphPAD
Software, LLC		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

4/27/2027

      

4,724

  

4,724

(e)(f)

    
GraphPAD
Software, LLC		     1st Lien
Delayed Draw
Term Loan		    

4/27/2027

      

436

  

(4

)(e)(h)

    

Annual Report 2021
48

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Heavy
Construction
Systems
Specialists, LLC		       1st Lien
Revolver		      

11/16/2027

      

$

410

  

$

(8

)(e)(h)

    
Heavy
Construction
Systems
Specialists, LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.75%)		  

11/16/2028

      

4,157

  

4,116

(e)(f)

    

Idera, Inc.

     1st Lien Term
Loan		   4.50% (3M
LIBOR +
3.75%)		  

3/2/2028

      

4,074

  

4,068

    

Idera, Inc.

     2nd Lien Term
Loan		   7.50% (3M
LIBOR +
6.75%)		  

3/2/2029

      

3,567

  

3,567

    
ION Trading
Finance
Limited		  

Ireland

   1st Lien Term
Loan		   4.97% (3M
LIBOR +
4.75%)		  

4/1/2028

      

4,020

  

4,025

    

IQS, Inc.

     1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.00%)		  

7/2/2026

      

540

  

540

(e)(f)

    

IQS, Inc.

     1st Lien Term
Loan		   6.00% (3M
LIBOR +
5.75%)		  

7/2/2026

      

1,094

  

1,094

(e)(f)

    

IQS, Inc.

     1st Lien Term
Loan		   8.00% (3M
LIBOR +
7.00%)		  

7/2/2026

      

139

  

139

(e)(f)

    
Ishtar Bidco
Norway AS		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   8.50% (6M
GBP LIBOR +
7.75%)		  

11/26/2025

      

£

1,000

  

1,354

(e)(f)

    
Ivanti
Software, Inc.		     1st Lien
Revolver		    

12/1/2025

      

460

  

(4

)(e)(h)

    
Ivanti
Software, Inc.		     1st Lien Term
Loan		   4.75% (3M
LIBOR +
4.00%)		  

12/1/2027

      

89

  

88

    
Ivanti
Software, Inc.		     1st Lien Term
Loan		   5.00% (3M
LIBOR +
4.25%)		  

12/1/2027

      

5,921

  

5,922

(i)

    
Ivanti
Software, Inc.		     2nd Lien Term
Loan		   7.75% (3M
LIBOR +
7.25%)		  

12/1/2028

      

5,000

  

4,991

    
MA Financeco.,
LLC		     1st Lien Term
Loan		   5.25% (3M
LIBOR +
4.25%)		  

6/5/2025

      

2,548

  

2,582

    
Magenta
Buyer LLC		     1st Lien Term
Loan		   5.75% (3M
LIBOR +
5.00%)		  

7/27/2028

      

1,176

  

1,172

    

Majesco

     1st Lien
Revolver		    

9/21/2026

      

624

  

—

(e)(h)

    

Majesco

     1st Lien Term
Loan		   8.25% (3M
LIBOR +
7.25%)		  

9/21/2027

      

7,992

  

7,992

(e)(f)

    

Annual Report 2021
49

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
MeridianLink,
Inc.		     1st Lien Term
Loan		   3.50% (3M
LIBOR +
3.00%)		  

11/10/2028

      

$

6,000

  

$

5,989

    

MH Sub I, LLC

     2nd Lien Term
Loan		    

2/23/2029

      

3,000

  

3,014

(i)

    
MH Sub I, LLC
(Micro Holding
Corp.)		     1st Lien Term
Loan		   3.59% (1M
LIBOR +
3.50%)		  

9/13/2024

      

5,464

  

5,433

    
MH Sub I, LLC
(Micro Holding
Corp.)		     1st Lien Term
Loan		   4.75% (1M
LIBOR +
3.75%)		  

9/13/2024

      

2,568

  

2,571

    
Mitchell
International,
Inc.		     1st Lien Term
Loan		   4.25% (1M
LIBOR +
3.75%)		  

10/15/2028

      

3,517

  

3,493

    
Mitchell
International,
Inc.		     2nd Lien Term
Loan		   7.00% (1M
LIBOR +
6.50%)		  

10/15/2029

      

11,352

  

11,403

    
MMIT Holdings,
LLC		     1st Lien
Revolver		   7.25% (3M
LIBOR +
6.25%)		  

9/15/2027

      

651

  

68

(e)(h)

    
MMIT Holdings,
LLC		     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

9/15/2027

      

7,629

  

7,553

(e)(f)

    
MRI Software
LLC		     1st Lien
Revolver		    

2/10/2026

      

508

  

—

(e)(h)

    
MRI Software
LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

2/10/2026

      

6,685

  

6,685

(e)(f)

    
MRI Software
LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.50%)		  

2/10/2026

      

497

  

497

(e)(g)

    
MRI Software
LLC		     1st Lien
Delayed Draw
Term Loan		    

2/10/2026

      

744

  

—

(e)(h)

    
Oakley Ekomid
Limited		   United
Kingdom		   1st Lien Term
Loan		   7.00% (3M
EURIBOR +
6.75%)		  

6/21/2027

      

€

2,250

  

2,562

(e)

    
Oakley Ekomid
Limited		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.00% (3M
EURIBOR +
6.75%)		  

6/21/2027

      

€

563

  

295

(e)(h)

    
Oceankey (U.S.)
II Corp.		     1st Lien Term
Loan		    

12/15/2028

      

4,000

  

3,980

(i)

    

OpenMarket Inc.

     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.25%)		  

9/17/2026

      

6,834

  

6,765

(e)(f)

    
PDI TA
Holdings, Inc.		     1st Lien
Revolver		    

10/24/2024

      

205

  

—

(e)(h)

    
PDI TA
Holdings, Inc.		     1st Lien Term
Loan		   5.50% (3M
LIBOR +
4.50%)		  

10/24/2024

      

2,365

  

2,365

(e)(f)

    

Annual Report 2021
50

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
PDI TA
Holdings, Inc.		     2nd Lien Term
Loan		   9.50% (3M
LIBOR +
8.50%)		  

10/24/2025

      

$

1,107

  

$

1,107

(e)

    
PDI TA
Holdings, Inc.		     2nd Lien Term
Loan		   9.50% (3M
LIBOR +
8.50%)		  

10/24/2025

      

245

  

245

(e)(f)

    
PDI TA
Holdings, Inc.		     2nd Lien
Delayed Draw
Term Loan		   9.50% (3M
LIBOR +
8.50%)		  

10/24/2025

      

138

  

138

(e)

    
Perforce
Software, Inc.		     1st Lien Term
Loan		   3.84% (1M
LIBOR +
3.75%)		  

7/1/2026

      

1,198

  

1,188

    

Pluralsight, Inc.

     1st Lien
Revolver		    

4/6/2027

      

1,204

  

—

(e)(h)

    

Pluralsight, Inc.

     1st Lien
Term Loan		   9.00% (3M
LIBOR +
8.00%)		  

4/6/2027

      

16,506

  

16,506

(e)

    
ProfitSolv
Purchaser, Inc.		     1st Lien
Revolver		    

3/5/2027

      

608

  

—

(e)(h)

    
ProfitSolv
Purchaser, Inc.		     1st Lien Term
Loan		   6.25% (1M
LIBOR +
5.25%)		  

3/5/2027

      

3,804

  

3,804

(e)(f)

    
ProfitSolv
Purchaser, Inc.		     1st Lien
Delayed Draw
Term Loan		   6.25% (3M
LIBOR +
5.25%)		  

3/5/2027

      

2,554

  

530

(e)(h)

    
Project Boost
Purchaser, LLC		     1st Lien Term
Loan		   3.59% (1M
LIBOR +
3.50%)		  

6/1/2026

      

2,480

  

2,477

    
Project Essential
Bidco, Inc.		     1st Lien
Revolver		    

4/20/2027

      

121

  

(2

)(e)(h)

    
Project Essential
Bidco, Inc.		     1st Lien
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

4/20/2028

      

4,098

  

4,016

(e)(f)

    

Proofpoint, Inc.

     1st Lien
Revolver		    

8/31/2026

      

240

  

(5

)(e)(h)

    

Proofpoint, Inc.

     1st Lien Term
Loan		   3.75% (3M
LIBOR +
3.25%)		  

8/31/2028

      

2,080

  

2,070

    

Proofpoint, Inc.

     2nd Lien
Term Loan		   6.75% (3M
LIBOR +
6.25%)		  

8/31/2029

      

5,431

  

5,431

(e)

    

QF Holdings, Inc.

     1st Lien
Revolver		    

12/15/2027

      

317

  

—

(e)(h)

    

QF Holdings, Inc.

     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

12/15/2027

      

1,313

  

1,313

(e)

    

QF Holdings, Inc.

     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

12/15/2027

      

2,500

  

2,500

(e)(f)

    

Annual Report 2021
51

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

QF Holdings, Inc.

     1st Lien
Delayed Draw
Term Loan		   7.50% (3M
LIBOR +
6.50%)		  

12/15/2027

      

$

263

  

$

263

(e)

    

QF Holdings, Inc.

     1st Lien
Delayed Draw
Term Loan		    

12/15/2027

      

263

  

—

(e)(h)

    
Raptor
Technologies, LLC
(Sycamore Bidco
Ltd)		     1st Lien
Revolver		    

10/5/2027

      

498

  

(9

)(e)(h)

    
Raptor
Technologies, LLC
(Sycamore Bidco
Ltd)		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

10/5/2028

      

3,199

  

3,167

(e)(f)

    

RealPage, Inc.

     2nd Lien
Term Loan		   7.25% (1M
LIBOR +
6.50%)		  

4/23/2029

      

9,423

  

9,423

(e)(f)

    

Relativity ODA LLC

     1st Lien
Revolver		    

5/12/2027

      

1

  

—

(e)(h)

    

Relativity ODA LLC

     1st Lien Term
Loan		   8.50% (1M
LIBOR +
7.50%)		  

5/12/2027

      

6,789

  

6,789

(e)

    
RMS Holdco II,
LLC		     1st Lien
Revolver		    

12/16/2027

      

883

  

(18

)(e)(h)

    
RMS Holdco II,
LLC		     1st Lien Term
Loan		   6.50% (3M
LIBOR +
5.75%)		  

12/16/2027

      

7,229

  

7,157

(e)(f)

    
Sedgwick Claims
Management
Services, Inc.		     1st Lien Term
Loan		   3.35% (1M
LIBOR +
3.25%)		  

12/31/2025

      

5,361

  

5,315

(i)

    
Sedgwick Claims
Management
Services, Inc.		     1st Lien Term
Loan		   3.85% (1M
LIBOR +
3.75%)		  

9/3/2026

      

353

  

353

    

Smarsh Inc.

     1st Lien Term
Loan		   9.25% (3M
LIBOR +
8.25%)		  

11/20/2025

      

2,420

  

2,420

(e)

    

Sophia, L.P.

     1st Lien Term
Loan		   4.00% (3M
LIBOR +
3.50%)		  

10/7/2027

      

1,182

  

1,181

    

Sophia, L.P.

     2nd Lien
Term Loan		   9.00% (3M
LIBOR +
8.00%)		  

10/9/2028

      

10,498

  

10,498

(e)(f)

    

Storable, Inc.

     2nd Lien
Term Loan		   7.50% (3M
LIBOR +
6.75%)		  

4/16/2029

      

7,683

  

7,683

(e)(f)

    
Sundance Group
Holdings, Inc.		     1st Lien
Revolver		   7.75% (3M
LIBOR +
6.75%)		  

7/2/2027

      

1

  

—

(e)(h)

    
Sundance Group
Holdings, Inc.		     1st Lien
Term Loan		   7.75% (3M
LIBOR +
6.75%)		  

7/2/2027

      

1,510

  

1,495

(e)(f)

    

Annual Report 2021
52

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Sundance Group
Holdings, Inc.		     1st Lien
Delayed Draw
Term Loan		    

7/2/2027

      

$

453

  

$

(5

)(e)(h)

    
TCP Hawker
Intermediate LLC		     1st Lien
Revolver		   7.75%
(PRIME +
4.50%)		  

8/29/2025

      

458

  

34

(e)(h)

    
TCP Hawker
Intermediate LLC		     1st Lien
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

8/28/2026

      

2,763

  

2,763

(e)(f)

    
TCP Hawker
Intermediate LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

8/28/2026

      

985

  

985

(e)

    
TCP Hawker
Intermediate LLC		     1st Lien
Delayed Draw
Term Loan		   6.50% (3M
LIBOR +
5.50%)		  

8/31/2026

      

921

  

406

(e)(h)

    
The Ultimate
Software
Group, Inc.		     1st Lien
Revolver		    

5/3/2024

      

1

  

—

(e)(h)

    
ThoughtWorks,
Inc.		     1st Lien
Term Loan		   3.50% (1M
LIBOR +
3.00%)		  

3/24/2028

      

1,814

  

1,809

    
TIBCO Software
Inc		     1st Lien
Term Loan		   3.85% (1M
LIBOR +
3.75%)		  

6/30/2026

      

2,286

  

2,267

    
TIBCO Software
Inc		     2nd Lien
Term Loan		    

3/3/2028

      

2,000

  

2,004

(i)

    
TIGER UK BIDCO
LIMITED		   United
Kingdom		   1st Lien
Revolver		   5.91%
(SONIA +
5.75%)		  

12/30/2027

      

£

333

  

75

(e)(h)

    
TIGER UK BIDCO
LIMITED		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   5.80%
(SONIA +
5.75%)		  

12/30/2027

      

£

1,114

  

1,508

(e)(f)

    
TIGER UK BIDCO
LIMITED		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   5.80%
(SONIA +
5.75%)		  

12/30/2027

      

£

814

  

1,046

(e)(h)

    
TIGER UK BIDCO
LIMITED		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   5.80%
(SONIA +
5.75%)		  

6/30/2028

      

£

5,529

  

7,483

(e)(f)

    
TIGER UK BIDCO
LIMITED		   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   5.80%
(SONIA +
5.75%)		  

6/30/2028

      

£

1,543

  

1,981

(e)(h)

    

WebPT, Inc.

     1st Lien
Revolver		   7.75% (3M
LIBOR +
6.75%)		  

8/28/2024

      

216

  

65

(e)(h)

    

WebPT, Inc.

     1st Lien
Term Loan		   7.75% (3M
LIBOR +
6.75%)		  

8/28/2024

      

2,042

  

2,042

(e)

    
Wellness
AcquisitionCo, Inc.		     1st Lien
Revolver		    

1/20/2027

      

504

  

—

(e)(h)

    

Annual Report 2021
53

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Wellness
AcquisitionCo, Inc.		     1st Lien
Term Loan		   6.50% (6M
LIBOR +
5.50%)		  

1/20/2027

      

$

2,790

  

$

2,790

(e)(f)

    
WorkWave
Intermediate II,
LLC		     1st Lien
Revolver		    

6/29/2027

      

460

  

—

(e)(h)

    
WorkWave
Intermediate II,
LLC		     1st Lien
Term Loan		   8.00% (3M
LIBOR +
7.25%)		  

6/29/2027

      

4,081

  

4,081

(e)

    
WorkWave
Intermediate II,
LLC		     1st Lien
Delayed Draw
Term Loan		   8.00% (3M
LIBOR +
7.25%)		  

6/29/2027

      

1,333

  

1,333

(e)

    
                                     

471,171

      

24.43

%

  

Technology Hardware & Equipment

  

Chariot Buyer LLC

     1st Lien
Revolver		   3.59% (1M
LIBOR +
3.50%)		  

11/3/2026

      

100

  

21

(e)(h)

    

Chariot Buyer LLC

     2nd Lien
Term Loan		   7.50% (1M
LIBOR +
6.75%)		  

11/5/2029

      

13,662

  

13,526

(e)(f)

    
FL Hawk
Intermediate
Holdings, Inc.		     1st Lien
Revolver		    

2/22/2027

      

1,312

  

—

(e)(h)

    
FL Hawk
Intermediate
Holdings, Inc.		     1st Lien
Term Loan		   5.75% (3M
LIBOR +
4.75%)		  

2/22/2028

      

7,401

  

7,401

(e)(f)

    
FL Hawk
Intermediate
Holdings, Inc.		     1st Lien
Delayed Draw
Term Loan		    

2/22/2028

      

1,017

  

—

(e)(h)

    

Ingram Micro Inc.

     1st Lien
Term Loan		   4.00% (3M
LIBOR +
3.50%)		  

6/30/2028

      

2,295

  

2,294

    
Micromeritics
Instrument Corp.		     1st Lien
Revolver		    

12/18/2025

      

331

  

—

(e)(h)

    
Micromeritics
Instrument Corp.		     1st Lien
Term Loan		   6.00% (3M
LIBOR +
5.00%)		  

12/18/2025

      

2,586

  

2,586

(e)(f)

    

MWG BidCo ApS

  

Denmark

   1st Lien
Term Loan		   6.90% (3M
CIBOR +
6.90%)		  

2/29/2028

      

DKK

20,066

  

3,072

(e)

  

 

  

MWG BidCo ApS

  

Denmark

   1st Lien
Term Loan		    

2/29/2028

      

DKK

4,934

  

—

(e)(h)

    
Orbit Private
Holdings I Ltd		   United
Kingdom		   1st Lien
Term Loan		    

12/11/2028

      

£

4,915

  

6,619

(e)(i)

  

 

  

Repairify, Inc.

     1st Lien
Revolver		    

6/14/2027

      

766

  

(8

)(e)(h)

    

Repairify, Inc.

     1st Lien
Term Loan		   6.00% (6M
LIBOR +
5.00%)		  

6/14/2027

      

3,562

  

3,526

(e)(f)

    

Annual Report 2021
54

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Sorenson
Communications,
LLC		     1st Lien
Term Loan		   6.25% (3M
LIBOR +
5.50%)		  

3/17/2026

      

$

273

  

$

273

    
TGG TS
Acquisition
Company		     1st Lien
Term Loan		   6.59% (1M
LIBOR +
6.50%)		  

12/14/2025

      

1,465

  

1,464

    
Wildcat BuyerCo,
Inc.		     1st Lien
Revolver		    

2/27/2026

      

255

  

—

(e)(h)

    
Wildcat BuyerCo,
Inc.		     1st Lien
Term Loan		   6.75% (3M
LIBOR +
5.75%)		  

2/27/2026

      

3,220

  

3,220

(e)(f)

    
Wildcat BuyerCo,
Inc.		     1st Lien
Delayed Draw
Term Loan		   6.75%
(3M LIBOR +
5.75%)		  

2/27/2026

      

1,074

  

1,074

(e)

    
Wildcat BuyerCo,
Inc.		     1st Lien
Delayed Draw
Term Loan		    

2/27/2026

      

732

  

—

(e)(h)

    
                                     

45,068

      

2.34

%

  

Telecommunication Services

  

CB-SDG LIMITED

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.88% (3M
GBP LIBOR +
7.13%)		  

4/3/2026

      

£

2,829

  

3,064

(e)(f)(g)

    

CB-SDG LIMITED

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		    

4/3/2026

      

£

317

  

(86

)(e)(h)

  

 

  

Commify Limited

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   6.50% (6M
EURIBOR +
6.25%)		  

9/14/2026

      

€

761

  

277

(e)(h)

  

 

  

Commify Limited

   United
Kingdom		   1st Lien
Delayed Draw
Term Loan		   7.42% (6M
EURIBOR +
7.17%)		  

9/14/2026

      

€

2,771

  

3,155

(e)(f)

    
Iridium Satellite
LLC		     1st Lien
Term Loan		   3.25% (1M
LIBOR +
2.50%)		  

11/4/2026

      

2,975

  

2,973

    
Zayo Group
Holdings, Inc.		     1st Lien
Term Loan		   3.10% (1M
LIBOR +
3.00%)		  

3/9/2027

      

2,631

  

2,593

    
                                     

11,976

      

0.62

%

  

Transportation

  
AAdvantage
Loyality IP, Ltd.		     1st Lien
Term Loan		   5.50% (3M
LIBOR +
4.75%)		  

4/20/2028

      

3,796

  

3,927

    

Air Canada

  

Canada

   1st Lien Term
Loan		   4.25% (3M
LIBOR +
3.50%)		  

8/11/2028

      

1,866

  

1,858

    
Commercial
Trailer
Leasing, Inc.		     1st Lien
Revolver		    

1/19/2026

      

741

  

—

(e)(h)

    

Annual Report 2021
55

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Commercial
Trailer
Leasing, Inc.		     1st Lien Term
Loan		   7.25% (3M
LIBOR +
6.25%)		  

1/19/2026

      

$

12,275

  

$

12,275

(e)(f)

    
Commercial
Trailer
Leasing, Inc.		     1st Lien
Delayed Draw
Term Loan		   7.25% (3M
LIBOR +
6.25%)		  

1/19/2026

      

1,465

  

1,169

(e)(h)

    
Commercial
Trailer
Leasing, Inc.		     2nd Lien Term
Loan		   13.00% (3M
LIBOR +
13.00%)		  

1/19/2027

      

2,222

  

2,222

(e)(f)

    
First Student
Bidco Inc.		     1st Lien Term
Loan		   3.50% (3M
LIBOR +
3.00%)		  

7/21/2028

      

9,141

  

9,099

(i)

    
Neovia
Logistics, LP		     1st Lien Term
Loan		   6.63% (3M
LIBOR +
6.50%)		  

5/8/2024

      

689

  

688

(e)

    
Neovia
Logistics, LP		     2nd Lien Term
Loan		   11.39% (3M
LIBOR +
11.25%)		  

11/8/2024

      

1,372

  

1,386

(e)

    

PODS, LLC

     1st Lien Term
Loan		   3.75% (3M
LIBOR +
3.00%)		  

3/31/2028

      

6,450

  

6,423

(i)

    
Shur-Co
Acquisition, Inc.		     1st Lien
Revolver		   7.00% (3M
LIBOR +
6.00%)		  

6/30/2027

      

441

  

88

(e)(h)

    
Shur-Co
Acquisition, Inc.		     1st Lien Term
Loan		   7.00% (3M
LIBOR +
6.00%)		  

6/30/2027

      

2,378

  

2,378

(e)(f)

    
                                     

41,513

      

2.15

%

  

Utilities

  
WIN Waste
Innovations
Holdings, Inc.		     1st Lien Term
Loan		   3.25% (3M
LIBOR +
2.75%)		  

3/24/2028

      

3,485

  

3,475

(i)

    
                                     

3,475

      

0.18

%

  

Total Senior Loans (Cost $2,093,586)

                                    

2,112,791

      

109.50

%

  

Subordinated Loans(b)(c)(d)

  

Commercial & Professional Services

  
Visual Edge
Technology,
Inc.		     Subordinated
Notes		    

9/3/2024

      

234

  

211

(e)(j)

    
                                     

211

      

0.01

%

  

Consumer Services

  
KeyStone
Sub-Debt
HoldCo, LLC		     Mezzanine
Term Loan		   10.00% (3M
LIBOR +
10.00%)		  

1/20/2027

      

8,065

  

7,823

(e)

    
                                     

7,823

      

0.41

%

  

Annual Report 2021
56

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Subordinated Loans(b)(c)(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Diversified Financials

  
eCapital
Finance Corp.		  

Canada

   Subordinated
Term Loan		   9.00% (1M
LIBOR +
7.50%)		  

1/31/2025

      

$

2,023

  

$

2,023

(e)

    
eCapital
Finance Corp.		  

Canada

   Subordinated
Delayed Draw
Term Loan		   9.00% (1M
LIBOR +
7.50%)		  

1/31/2025

      

2,803

  

2,803

(e)

    
                                     

4,826

      

0.25

%

  

Insurance

  
Ardonagh
Midco 2 PLC		   United
Kingdom		   Unsecured
Notes		   11.50%  

1/15/2027

      

36

  

41

    
                                     

41

      

0.00

%

  

Software & Services

  
AffiniPay
Intermediate
Holdings, LLC		     Subordinated
Notes		   12.75%  

2/28/2028

      

2,967

  

2,967

(e)

    
                                     

2,967

      

0.15

%

  

Total Subordinated Loans (Cost $15,421)

                                    

15,868

      

0.82

%

  

Corporate Bonds(b)(c)

  

Capital Goods

  
American
Builders &
Contractors
Supply Co., Inc.		       3.88%  

11/15/2029

      

392

  

391

(d)

    
American
Builders &
Contractors
Supply Co., Inc.		       4.00%  

1/15/2028

      

3,000

  

3,070

(d)

    
Assemblin
Financing AB		  

Sweden

     5.00% (3M
EURIBOR +
5.00%)		  

5/15/2025

      

€

2,000

  

2,274

      
Cargo Aircraft
Management, Inc.		       4.75%  

2/1/2028

      

2,647

  

2,694

(d)

    

Pike Corporation

           5.50%  

9/1/2028

                

276

      

277

(d)

          
PowerTeam
Services, LLC		       9.03%  

12/4/2025

      

10,505

  

11,114

(d)

    
Specialty Building
Products
Holdings LLC		       6.38%  

9/30/2026

      

2,340

  

2,452

(d)

    
SRS Distribution
Inc.		       6.00%  

12/1/2029

      

5,000

  

5,035

(d)

    
Tutor Perini
Corporation		       6.88%  

5/1/2025

      

2,753

  

2,774

(d)

    
                                     

30,081

      

1.56

%

  

Annual Report 2021
57

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds(b)(c) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Commercial & Professional Services

      
GFL
Environmental,
Inc.		  

Canada

     4.38%  

8/15/2029

      

$

1,475

  

$

1,461

(d)

    
Neighborly Issuer
LLC		       3.58%  

4/30/2051

      

25

  

25

(d)(e)

    
                                 

1,486

      

0.08

%

  

Consumer Durables & Apparel

      
Ashton Woods
USA LLC		       4.63%  

8/1/2029

      

1,600

  

1,580

(d)

    
Ashton Woods
USA LLC		       4.63%  

4/1/2030

      

520

  

511

(d)

    
                                 

2,091

      

0.11

%

  

Consumer Services

      
1011778 BC ULC  

Canada

       4.00%  

10/15/2030

            

2,001

      

1,966

(d)

      
1011778 BC ULC  

Canada

       4.38%  

1/15/2028

            

1,961

      

2,000

(d)

      

AB Issuer LLC

           3.73%  

7/30/2051

            

25

      

25

(d)(e)

      
Caesars
Entertainment,
Inc.		       6.25%  

7/1/2025

      

275

  

289

(d)

    
Gamma Bidco
SpA		  

Italy

     5.13%  

7/15/2025

      

€

2,000

  

2,288

      
Paganini BidCo
S.p.A.		  

Italy

     4.25% (3M
EURIBOR +
4.25%)		  

10/30/2028

      

€

1,250

  

1,429

      
Peninsula Pacific
Entertainment,
LLC		       8.50%  

11/15/2027

      

3,085

  

3,332

(d)

    
ServiceMaster
Funding LLC		       3.34%  

1/30/2051

      

25

  

25

(d)(e)

    
Stonegate Pub
Co. Financing
2019 PLC		   United
Kingdom		     8.00%  

7/13/2025

      

£

2,000

  

2,748

      
                                 

14,102

      

0.73

%

  

Diversified Financials

      
BCC Blueprint
Investments, LLC		       9.30%  

9/15/2026

      

611

  

611

(e)

    
BCP V Modular
Services Finance II
PLC		   United
Kingdom		     6.13%  

11/30/2028

      

£

1,280

  

1,724

      

ITT Holdings LLC

           6.50%  

8/1/2029

            

7,137

      

7,066

(d)

      

Annual Report 2021
58

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds(b)(c) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
LBM Acquisition
LLC		       6.25%  

1/15/2029

      

$

8,174

  

$

8,082

(d)

    
                                     

17,483

      

0.91

%

  

Energy

  
Ascent
Resources -
Utica LLC		       9.00%  

11/1/2027

      

688

  

918

(d)

    
Blue Racer
Midstream LLC		       7.63%  

12/15/2025

      

1,652

  

1,751

(d)

    
Cheniere Energy
Partners LP		       4.00%  

3/1/2031

      

300

  

315

    

CITGO Holding Inc

           9.25%  

8/1/2024

                

3,300

      

3,317

(d)

          
Exterran Energy
Solutions LP		       8.13%  

5/1/2025

      

3,100

  

2,883

    
Laredo
Petroleum, Inc.		       9.50%  

1/15/2025

      

451

  

460

    
New Fortress
Energy, Inc.		       6.50%  

9/30/2026

      

5,340

  

5,300

(d)

    
NGL Energy
Operating LLC		       7.50%  

2/1/2026

      

928

  

957

(d)

    
Summit
Midstream
Holdings LLC		       5.75%  

4/15/2025

      

596

  

539

    
Summit
Midstream
Holdings LLC		       8.50%  

10/15/2026

      

482

  

502

(d)

    
                                     

16,942

      

0.88

%

  

Food & Staples Retailing

  

NBC Funding LLC

           2.99%  

7/30/2051

                

25

      

25

(d)(e)

          
                                     

25

      

0.00

%

  

Food & Beverage

  
Simmons Food
Inc		       4.63%  

3/1/2029

      

3,500

  

3,447

(d)

    
Triton Water
Holdings, Inc.		       6.25%  

4/1/2029

      

100

  

96

(d)

    
                                     

3,543

      

0.18

%

  

Healthcare Equipment & Services

  
Air Methods
Corporation		       8.00%  

5/15/2025

      

8,017

  

6,865

(d)

    
Lifepoint Health
Inc		       4.38%  

2/15/2027

      

1,613

  

1,625

(d)

    

Annual Report 2021
59

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds(b)(c) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Mozart Debt
Merger Sub, Inc.		       3.88%  

4/1/2029

      

$

3,500

  

$

3,488

(d)

    
Mozart Debt
Merger Sub, Inc.		       5.25%  

10/1/2029

      

1,885

  

1,911

(d)

    
Team Health
Holdings, Inc.		       6.38%  

2/1/2025

      

3,898

  

3,669

(d)

    
                                         

17,558

      

0.91

%

  

Insurance

  

NFP Corp.

           6.88%  

8/15/2028

                

2,624

      

2,631

(d)

          
                                         

2,631

      

0.14

%

  

Materials

  

Chemours Co.

           4.63%  

11/15/2029

                

3,003

      

2,980

(d)

          

Constellium SE

  

France

       5.63%  

6/15/2028

                

1,000

      

1,052

(d)

          

Constellium SE

  

France

       5.88%  

2/15/2026

                

250

      

253

(d)

          
Freeport-
McMoRan, Inc.		       4.63%  

8/1/2030

      

2,597

  

2,785

    
Freeport-
McMoRan, Inc.		       5.40%  

11/14/2034

      

807

  

983

    
Kobe US Midco 2,
Inc.		       9.25%  

11/1/2026

      

666

  

682

(d)

    
Kraton Polymers
LLC		       4.25%  

12/15/2025

      

4,132

  

4,277

(d)

    
Mauser Packaging
Solutions Holding
Company		       7.25%  

4/15/2025

      

5,143

  

5,156

(d)

    
Venator
Materials LLC		  

Luxembourg

     5.75%  

7/15/2025

      

4,245

  

4,075

(d)

    
Venator
Materials LLC		  

Luxembourg

     9.50%  

7/1/2025

      

287

  

313

(d)

    
                                         

22,556

      

1.17

%

  

Media & Entertainment

  
Altice Financing
S.A.		  

Luxembourg

     5.00%  

1/15/2028

      

7,000

  

6,831

(d)

    
Aventine
Holdings II LLC		       10.25%  

12/23/2030

      

10,965

  

10,855

(e)

    

CCO Holdings LLC

           4.25%  

2/1/2031

                

969

      

977

(d)

          

CSC Holdings LLC

           3.38%  

2/15/2031

                

4,000

      

3,745

(d)

          

CSC Holdings LLC

           4.50%  

11/15/2031

                

870

      

859

(d)

          

CSC Holdings LLC

           4.63%  

12/1/2030

                

2,000

      

1,893

(d)

          
Dolya Holdco
18 DAC		  

Ireland

     5.00%  

7/15/2028

      

3,000

  

3,023

(d)

    

Annual Report 2021
60

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds(b)(c) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Telenet Finance
Luxembourg
Notes Sarl		  

Luxembourg

     5.50%  

3/1/2028

      

$

400

  

$

412

(d)

    
                                 

28,595

      

1.48

%

  

Real Estate

  

HAT Holdings I LLC

           3.75%  

9/15/2030

            

4,880

      

4,868

(d)

      

Iron Mountain, Inc.

           4.88%  

9/15/2029

            

1,049

      

1,086

(d)

      

Iron Mountain, Inc.

           5.25%  

7/15/2030

            

4,089

      

4,309

(d)

      
                                 

10,263

      

0.53

%

  

Retailing

  

HSE Finance Sarl

  

Luxembourg

     5.75% (3M
EURIBOR +
5.75%)		  

10/15/2026

      

€

4,034

  

4,651

    

Shiba Bidco SpA

  

Italy

       4.50%  

10/31/2028

          

€

3,000

      

3,450

        
                                 

8,101

      

0.42

%

  

Software & Services

  

Avaya Inc.

           6.13%  

9/15/2028

            

1,302

      

1,380

(d)

      
Castle US Holding
Corporation		       9.50%  

2/15/2028

      

594

  

619

(d)

    
CommScope
Technologies LLC		       6.00%  

6/15/2025

      

373

  

373

(d)

    
Insightful Science
Intermediate I, LLC		       10.50%  

4/28/2032

      

1,337

  

1,324

(e)

    

Microstrategy Inc

           0.00%  

2/15/2027

            

500

      

361

        
                                 

4,057

      

0.21

%

  

Technology Hardware & Equipment

  

CommScope, Inc.

           8.25%  

3/1/2027

            

3,553

      

3,648

(d)

      

Viasat, Inc.

           6.50%  

7/15/2028

            

2,790

      

2,797

(d)

      
                                 

6,445

      

0.33

%

  

Telecommunication Services

  
Consolidated
Communications,
Inc.		       5.00%  

10/1/2028

      

614

  

620

(d)

    
Consolidated
Communications,
Inc.		       6.50%  

10/1/2028

      

5,395

  

5,665

(d)

    

Telesat Canada

  

Canada

       5.63%  

12/6/2026

            

5,001

      

4,696

(d)

      

Annual Report 2021
61

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds(b)(c) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Telesat Canada

  

Canada

       6.50%  

10/15/2027

              

$

2,509

    

$

1,947

(d)

          
                                         

12,928

      

0.67

%

  

Utilities

  
Calpine
Corporation		       4.50%  

2/15/2028

      

1,750

  

1,811

(d)

    

Vistra Energy Corp

           7.00%  

6/15/2170

                

7,000

      

7,090

(d)

          
                                         

8,901

      

0.46

%

  

Total Corporate Bonds (Cost $207,892)

                                        

207,788

      

10.77

%

  

Collateralized Loan Obligations — Debt(b)(c)(d)(e)

  
AIMCO CLO
15, Ltd.		   Cayman
Islands		     6.04% (3M
LIBOR +
5.95%)		  

10/17/2034

      

1,000

  

983

    
AMMC CLO XI,
Ltd.		   Cayman
Islands		     5.93% (3M
LIBOR +
5.80%)		  

4/30/2031

      

1,500

  

1,405

    
AMMC CLO XXI,
Ltd.		   Cayman
Islands		     6.63% (3M
LIBOR +
6.50%)		  

11/2/2030

      

100

  

95

    
AMMC CLO XXII,
Ltd.		   Cayman
Islands		     5.62% (3M
LIBOR +
5.50%)		  

4/25/2031

      

750

  

704

    
Apidos CLO XX,
Ltd.		   Cayman
Islands		     8.82% (3M
LIBOR +
8.70%)		  

7/16/2031

      

250

  

228

    
Atlas Senior Loan
Fund VII, Ltd.		   Cayman
Islands		     8.23% (3M
LIBOR +
8.05%)		  

11/27/2031

      

1,750

  

1,415

    

Atrium IX

   Cayman
Islands		     6.63% (3M
LIBOR +
6.45%)		  

5/28/2030

      

1,000

  

979

    

Atrium XIII

   Cayman
Islands		     6.17% (3M
LIBOR +
6.05%)		  

11/21/2030

      

900

  

880

    
Bain Capital
Credit CLO
2021-3, Ltd.		   Cayman
Islands		     6.69% (3M
LIBOR +
6.50%)		  

7/24/2034

      

500

  

492

    
Canyon Capital
CLO 2018-1, Ltd.		   Cayman
Islands		     5.87% (3M
LIBOR +
5.75%)		  

7/15/2031

      

850

  

807

    
Canyon Capital
CLO 2020-1, Ltd.		   Cayman
Islands		     6.47% (3M
LIBOR +
6.35%)		  

7/15/2034

      

1,452

  

1,421

    
CIFC Funding
2014-III, Ltd.		   Cayman
Islands		     6.23% (3M
LIBOR +
6.10%)		  

10/22/2031

      

522

  

508

    

Annual Report 2021
62

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Debt(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Crestline Denali
CLO XIV, Ltd.		   Cayman
Islands		     6.47% (3M
LIBOR +
6.35%)		  

10/23/2031

      

$

750

  

$

681

    
Crestline Denali
CLO XIV, Ltd.		   Cayman
Islands		     8.22% (3M
LIBOR +
8.10%)		  

10/23/2031

      

250

  

197

    
Crestline Denali
CLO XVI, Ltd.		   Cayman
Islands		     2.73% (3M
LIBOR +
2.60%)		  

1/20/2030

      

1,500

  

1,421

    
Denali Capital
CLO XII, Ltd.		   Cayman
Islands		     6.02% (3M
LIBOR +
5.90%)		  

4/15/2031

      

750

  

677

    
Dryden 28 Senior
Loan Fund		   Cayman
Islands		     7.91% (3M
LIBOR +
7.75%)		  

8/15/2030

      

500

  

475

    
Dryden 55 Senior
Loan Fund		   Cayman
Islands		     5.52% (3M
LIBOR +
5.40%)		  

4/15/2031

      

375

  

360

    
Dryden 57 Senior
Loan Fund		   Cayman
Islands		     5.36% (3M
LIBOR +
5.20%)		  

5/15/2031

      

500

  

474

    
Dryden 58 Senior
Loan Fund		   Cayman
Islands		     5.47% (3M
LIBOR +
5.35%)		  

7/17/2031

      

1,000

  

957

    
Elmwood CLO VIII,
Ltd.		   Cayman
Islands		     8.13% (3M
LIBOR +
8.00%)		  

1/20/2034

      

750

  

738

    
Goldentree Loan
Opportunities X,
Ltd.		   Cayman
Islands		     5.78% (3M
LIBOR +
5.65%)		  

7/20/2031

      

750

  

733

    
ICG U.S. CLO, Ltd.
2018-1		   Cayman
Islands		     5.28% (3M
LIBOR +
5.15%)		  

4/21/2031

      

500

  

450

    
INGIM, Ltd.
2013-3		   Cayman
Islands		     6.02% (3M
LIBOR +
5.90%)		  

10/18/2031

      

1,250

  

1,160

    

KKR CLO 34, Ltd.

   Cayman
Islands		     7.02% (3M
LIBOR +
6.85%)		  

7/15/2034

      

600

  

594

    
Madison Park
Funding XIV, Ltd.		   Cayman
Islands		     7.90% (3M
LIBOR +
7.77%)		  

10/22/2030

      

1,000

  

872

    
Madison Park
Funding XLVI, Ltd.		   Cayman
Islands		     6.37% (3M
LIBOR +
6.25%)		  

10/15/2034

      

250

  

248

    
Madison Park
Funding XXII, Ltd.		   Cayman
Islands		     6.82% (3M
LIBOR +
6.70%)		  

1/15/2033

      

550

  

545

    
Madison Park
Funding XXVII, Ltd.		   Cayman
Islands		     5.13% (3M
LIBOR +
5.00%)		  

4/20/2030

      

650

  

616

    

Annual Report 2021
63

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Debt(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Madison Park
Funding XXVIII,
Ltd.		   Cayman
Islands		     7.72% (3M
LIBOR +
7.60%)		  

7/15/2030

      

$

500

  

$

472

    
Madison Park
Funding XXXVI,
Ltd.		   Cayman
Islands		     7.37% (3M
LIBOR +
7.25%)		  

1/15/2033

      

833

  

833

    
Northwoods
Capital XII-B, Ltd.		   Cayman
Islands		     5.99% (3M
LIBOR +
5.79%)		  

6/15/2031

      

750

  

676

    
Octagon
Investment
Partners 35, Ltd.		   Cayman
Islands		     5.33% (3M
LIBOR +
5.20%)		  

1/20/2031

      

1,500

  

1,401

    
OHA Credit
Funding 9, Ltd.		   Cayman
Islands		     6.43% (3M
LIBOR +
6.25%)		  

7/19/2035

      

950

  

943

    
OHA Loan
Funding 2015-1,
Ltd.		   Cayman
Islands		     6.86% (3M
LIBOR +
6.65%)		  

1/19/2037

      

860

  

857

    
OHA Loan Funding
2016-1, Ltd.		   Cayman
Islands		     6.48% (3M
LIBOR +
6.35%)		  

1/20/2033

      

4,000

  

3,980

    

Riserva CLO, Ltd.

   Cayman
Islands		     6.62% (3M
LIBOR +
6.50%)		  

1/18/2034

      

500

  

496

    
Venture 36A CLO,
Ltd.		   Cayman
Islands		     7.05% (3M
LIBOR +
6.92%)		  

4/20/2032

      

300

  

278

    
Venture 37A CLO,
Ltd.		   Cayman
Islands		     7.07% (3M
LIBOR +
6.95%)		  

7/15/2032

      

3,000

  

2,889

    
Voya CLO 2019-4,
Ltd.		   Cayman
Islands		     6.95% (3M
LIBOR +
6.71%)		  

1/15/2035

      

500

  

490

    
Wellfleet CLO
2017-3, Ltd.		   Cayman
Islands		     5.67% (3M
LIBOR +
5.55%)		  

1/17/2031

      

1,000

  

931

    
Wellfleet CLO
2018-3, Ltd.		   Cayman
Islands		     6.38% (3M
LIBOR +
6.25%)		  

1/20/2032

      

250

  

240

    

Total Collateralized Loan Obligations — Debt (Cost $36,643)

                                    

35,601

      

1.85

%

  

Collateralized Loan Obligations — Equity(d)(e)

  
AIMCO CLO 16,
Ltd.		   Cayman
Islands		     13.98%  

1/17/2035

      

5,600

  

5,137

    
AIMCO CLO XI,
Ltd.		   Cayman
Islands		     17.72%  

10/17/2034

      

7,258

  

7,326

    
Allegro CLO VII,
Ltd. 2018-2A		   Cayman
Islands		     16.15%  

7/15/2031

      

2,150

  

1,216

    

Annual Report 2021
64

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Equity(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

ALM, Ltd.

   Cayman
Islands		     13.98%  

10/15/2035

      

$

1,166

  

$

1,033

    
AMMC CLO XXI,
Ltd.		   Cayman
Islands		     20.67%  

11/2/2030

      

500

  

279

    
Anchorage Capital
CLO 20, Ltd.		   Cayman
Islands		     13.98%  

1/20/2035

      

4,650

  

4,120

    
Anchorage Credit
Funding 3, Ltd.		   Cayman
Islands		     5.28%  

1/28/2039

      

520

  

427

    

Atrium XV

   Cayman
Islands		     13.49%  

1/23/2031

      

4,080

  

2,831

    
Avery Point VI
CLO, Ltd.		   Cayman
Islands		     65.44%  

8/5/2027

      

314

  

51

    
Bain Capital
Credit CLO
2017-2, Ltd.		   Cayman
Islands		     0.00%  

7/25/2034

      

3,461

  

3,094

    
Bain Capital
Credit CLO
2018-1, Ltd.		   Cayman
Islands		     14.11%  

4/23/2031

      

1,420

  

923

    
Bain Capital
Credit CLO
2019-1, Ltd.		   Cayman
Islands		     18.94%  

4/18/2032

      

1,400

  

1,055

    
Bain Capital
Credit CLO
2019-2, Ltd.		   Cayman
Islands		     13.96%  

10/17/2032

      

810

  

643

    
Bain Capital
Credit CLO
2020-1, Ltd.		   Cayman
Islands		     23.10%  

4/18/2033

      

1,250

  

1,022

    
Bain Capital
Credit CLO
2020-2, Ltd.		   Cayman
Islands		     37.61%  

7/19/2034

      

800

  

646

    
Bain Capital
Credit CLO
2021-2, Ltd.		   Cayman
Islands		     13.98%  

7/16/2034

      

1,000

  

793

    

Bardot CLO, Ltd.

   Cayman
Islands		     15.92%  

10/22/2032

      

2,250

  

1,961

    
Barings CLO, Ltd.
2021-II		   Cayman
Islands		     13.98%  

7/15/2034

      

5,000

  

4,681

    
Canyon Capital
CLO 2019-1, Ltd.		   Cayman
Islands		     16.96%  

4/15/2032

      

2,798

  

2,082

    
Carlyle Global
Market Strategies
CLO, Ltd. 2013-1		   Cayman
Islands		     19.89%  

8/14/2030

      

500

  

221

    
Carlyle Global
Market Strategies
CLO, Ltd. 2018-3		   Cayman
Islands		     16.61%  

10/15/2030

      

750

  

421

    
Carlyle Global
Market Strategies
CLO, Ltd. 2018-4		   Cayman
Islands		     18.65%  

1/20/2031

      

2,310

  

1,628

    

Annual Report 2021
65

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Equity(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Carlyle Global
Market Strategies
CLO, Ltd. 2019-3		   Cayman
Islands		     12.22%  

10/20/2032

      

$

3,875

  

$

3,098

    
Cedar Funding
CLO V, Ltd.		   Cayman
Islands		     16.54%  

7/17/2031

      

2,300

  

1,891

    
Cedar Funding
CLO VIII, Ltd.		   Cayman
Islands		     9.02%  

10/17/2034

      

365

  

218

    
CIFC Funding
2015-IV, Ltd.		   Cayman
Islands		     13.00%  

4/20/2034

      

2,252

  

1,045

    
CIFC Funding
2018-V, Ltd.		   Cayman
Islands		     17.58%  

1/15/2032

      

625

  

438

    
CIFC Funding
2019-I, Ltd.		   Cayman
Islands		     22.61%  

4/20/2032

      

1,500

  

1,128

    
CIFC Funding
2020-III, Ltd.		   Cayman
Islands		     13.98%  

10/20/2034

      

1,000

  

921

    
CIFC Funding
2021-V, Ltd.		   Cayman
Islands		     13.17%  

7/15/2034

      

5,200

  

4,709

    
Dryden 28 Senior
Loan Fund		   Cayman
Islands		     16.77%  

8/15/2030

      

1,406

  

461

    
Dryden 43 Senior
Loan Fund		   Cayman
Islands		     23.98%  

4/20/2034

      

1,610

  

1,106

    
Dryden 58 Senior
Loan Fund		   Cayman
Islands		     17.42%  

7/17/2031

      

3,125

  

2,289

    
Dryden 75 CLO,
Ltd.		   Cayman
Islands		     13.47%  

7/15/2030

      

1,200

  

1,165

    
Dryden 78 Senior
Loan Fund		   Cayman
Islands		     19.29%  

4/17/2033

      

10,625

  

9,106

    
East West
Investment
Management CLO
2019-1, Ltd.		   Cayman
Islands		     13.98%  

1/20/2033

      

2,175

  

1,836

    

Eastland CLO, Ltd.

   Cayman
Islands		     0.00%  

5/1/2022

      

—

  

132

    
Elmwood CLO V,
Ltd.		   Cayman
Islands		     0.00%  

7/24/2031

      

2,500

  

2,681

    
Elmwood CLO XI,
Ltd.		   Cayman
Islands		     13.98%  

10/20/2034

      

4,050

  

3,982

    
Generate CLO 7,
Ltd.		   Cayman
Islands		     16.08%  

1/22/2033

      

4,000

  

3,216

    
ICG U.S. CLO,
Ltd. 2018-2		   Cayman
Islands		     19.07%  

7/22/2031

      

1,650

  

1,045

    
ICG U.S. CLO, Ltd.
2020-1		   Cayman
Islands		     14.36%  

1/20/2035

      

500

  

391

    
ICG U.S. CLO, Ltd.
2021-1		   Cayman
Islands		     13.80%  

4/17/2034

      

2,600

  

2,067

    
Invesco CLO
2021-3, Ltd.		   Cayman
Islands		     13.98%  

10/22/2034

      

4,022

  

2,936

    

Invesco CLO, Ltd.

   Cayman
Islands		     0.00%  

7/15/2034

      

44

  

12

    

Annual Report 2021
66

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Equity(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Invesco CLO, Ltd.

   Cayman
Islands		     14.56%  

7/15/2034

      

$

440

  

$

346

    
Madison Park
Funding L, Ltd.		   Cayman
Islands		     13.98%  

4/19/2034

      

2,500

  

2,520

    
Madison Park
Funding LIX, Ltd.		   Cayman
Islands		     13.98%  

1/18/2034

      

6,000

  

6,000

    
Madison Park
Funding XXII, Ltd.		   Cayman
Islands		     11.90%  

1/15/2033

      

7,400

  

5,477

    
Madison Park
Funding XXVII, Ltd.		   Cayman
Islands		     16.78%  

1/20/2047

      

250

  

193

    
Madison Park
Funding XXVIII, Ltd.		   Cayman
Islands		     16.78%  

7/15/2030

      

3,000

  

2,144

    
Madison Park
Funding XXXI, Ltd.		   Cayman
Islands		     16.92%  

1/23/2048

      

4,250

  

3,344

    
Madison Park
Funding XXXII, Ltd.		   Cayman
Islands		     22.98%  

1/22/2048

      

1,250

  

998

    
Madison Park
Funding XXXVII,
Ltd.		   Cayman
Islands		     18.25%  

7/15/2049

      

7,500

  

7,508

    

Magnetite VI, Ltd.

   Cayman
Islands		     0.00%  

9/15/2023

      

1,241

  

—

    
Magnetite XXVIII,
Ltd.		   Cayman
Islands		     15.66%  

10/25/2031

      

5,250

  

4,499

    
Neuberger
Berman CLO XXIII,
Ltd.		   Cayman
Islands		     94.84%  

10/17/2027

      

29

  

3

    
Newark BSL
CLO 1, Ltd.		   Cayman
Islands		     54.85%  

7/25/2030

      

250

  

151

    
Oaktree CLO
2018-1, Ltd.		   Cayman
Islands		     19.65%  

10/20/2030

      

2,850

  

1,481

    
Oaktree CLO
2019-2, Ltd.		   Cayman
Islands		     17.71%  

4/15/2031

      

3,860

  

2,284

    
Oaktree CLO
2019-3, Ltd.		   Cayman
Islands		     8.24%  

10/20/2034

      

6,229

  

4,160

    
OHA Credit
Partners X-R, Ltd.		   Cayman
Islands		     10.10%  

4/20/2034

      

1,493

  

732

    
OHA Credit
Partners X-R, Ltd.		   Cayman
Islands		     13.98%  

4/20/2034

      

750

  

368

    
OHA Credit
Partners XV, Ltd.		   Cayman
Islands		     18.61%  

1/20/2030

      

1,360

  

928

    
OHA Credit
Partners XVI		   Cayman
Islands		     13.98%  

10/18/2034

      

4,575

  

4,203

    
OHA Loan
Funding 2013-1,
Ltd.		   Cayman
Islands		     15.88%  

7/23/2031

      

876

  

412

    
OHA Loan
Funding 2016-1,
Ltd.		   Cayman
Islands		     15.87%  

1/20/2033

      

8,800

  

6,809

    

Annual Report 2021
67

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations — Equity(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

OZLM XXI, Ltd.

   Cayman
Islands		     14.54%  

1/20/2031

      

$

1,500

  

$

758

    
Reese Park CLO,
Ltd		   Cayman
Islands		     0.00%  

10/15/2032

      

703

  

—

    
Reese Park CLO,
Ltd		   Cayman
Islands		     17.30%  

10/15/2032

      

703

  

531

    
Rockland Park
CLO, Ltd.		   Cayman
Islands		     13.98%  

4/20/2034

      

6,300

  

1,778

    

RR 14, Ltd.

   Cayman
Islands		     13.11%  

4/15/2121

      

750

  

682

    

RR 2, Ltd.

   Cayman
Islands		     12.76%  

10/15/2117

      

500

  

406

    

RR 6, Ltd.

   Cayman
Islands		     12.44%  

4/15/2036

      

1,000

  

1,026

    

RR 8, Ltd.

   Cayman
Islands		     13.54%  

4/15/2120

      

550

  

486

    
Signal Peak
CLO 5, Ltd.		   Cayman
Islands		     16.33%  

4/25/2031

      

2,500

  

1,600

    
Signal Peak
CLO 8, Ltd.		   Cayman
Islands		     17.10%  

4/20/2033

      

6,350

  

5,671

    
Steele Creek CLO,
Ltd. 2017-1		   Cayman
Islands		     12.98%  

10/15/2030

      

250

  

120

    
Symphony CLO
XI Ltd		   Cayman
Islands		     0.00%  

1/17/2025

      

1

  

—

    
THL Credit Wind
River 2018-3 CLO,
Ltd.		   Cayman
Islands		     14.96%  

1/20/2031

      

250

  

194

    
THL Credit Wind
River 2018-3 CLO,
Ltd.		   Cayman
Islands		     23.28%  

1/20/2031

      

3,875

  

3,002

    
Voya CLO 2020-1,
Ltd.		   Cayman
Islands		     19.32%  

7/16/2034

      

567

  

502

    
Wellfleet CLO
2017-3, Ltd.		   Cayman
Islands		     13.61%  

1/17/2031

      

250

  

144

    
Wellfleet CLO
2018-3, Ltd.		   Cayman
Islands		     14.35%  

1/20/2032

      

2,400

  

1,611

    
Wellfleet CLO
2020-1, Ltd.		   Cayman
Islands		     16.18%  

4/15/2033

      

5,955

  

4,332

    
Wellman Park
CLO, Ltd.		   Cayman
Islands		     0.00%  

7/15/2034

      

5,100

  

1

    
Wellman Park
CLO, Ltd.		   Cayman
Islands		       12.28%  

7/15/2034

                

2,550

      

2,232

            

Total Collateralized Loan Obligations — Equity (Cost $154,391)

                                    

167,099

      

8.66

%

  

Annual Report 2021
68

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Automobiles & Components

  
Automotive Keys
Investor, LLC		    

Class A

      

11/6/2020

  

37,749

      

$

5

(e)(k)

      
Highline PPC
Blocker LLC		          

11/4/2020

  

500

    

30

(e)(k)

    

Metis Topco, LP

                  

5/4/2021

    

50

              

55

(e)(k)

          

Sun TopCo, LP

      

Class A

          

9/8/2021

    

1,000

              

122

(e)(k)

          
                                         

212

      

0.01

%

  

Capital Goods

  
Dynamic NC
Investment
Holdings, LP		          

12/30/2020

  

50,000

    

44

(e)(k)

    
Kene Holdings,
L.P.		    

Class A

      

8/8/2019

  

50,000

    

58

(e)(k)

    
Tutor Perini
Corporation		          

5/19/2021

  

12,650

    

156

    

US Global Jets ETF

                  

9/1/2021

    

13,838

              

292

(k)

          
                                         

550

      

0.03

%

  

Commercial & Professional Services

  
Bedrock Parent
Holdings, LP		    

Class A

      

4/22/2021

  

500

    

57

(e)(k)

    
Capstone Parent
Holdings, LP		    

Class A

      

11/12/2020

  

50

    

68

(e)(k)

    

IRI Parent, L.P.

      

Class A-1

          

11/29/2018

    

250

              

72

(e)(k)

          
KKR Nest
Co-Invest L.P.		          

9/28/2021

  

50,000

    

50

(e)(k)

    
Laboratories
Topco LLC		    

Class A

      

7/23/2021

  

33,333

    

44

(e)(k)

    
Landscape
Parallel Partners,
L.P.		    

Class D

      

12/16/2021

  

13

    

32

(e)(k)

    
North American
Fire Ultimate
Holdings, LLC		          

5/19/2021

  

68,175

    

91

(e)(k)

    
PSP Registrar
Co-Investment
Fund, L.P.		    

Class A

      

8/26/2021

  

50,000

    

50

(e)(k)

    
RC V Tecmo
Investor LLC		          

8/14/2020

  

50,000

    

100

(e)(k)

    

SSE Parent, LP

      

Class A-1

          

6/30/2020

    

25

              

7

(e)(k)

          

SSE Parent, LP

      

Class A-2

          

6/30/2020

    

25

              

7

(e)(k)

          
                                 

578

      

0.03

%

  

Annual Report 2021
69

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Consumer Durables & Apparel

  
Centric Brands
GP LLC		          

10/9/2020

  

9,495

      

$

390

(e)(k)

      
DRS Holdings I,
Inc.		          

11/1/2019

  

50

    

66

(e)(k)

    
                                     

456

      

0.02

%

  

Consumer Services

  
LBC Breeze
Holdings LLC		    

Class A

      

12/6/2021

  

50

    

50

(e)(k)

    
OMERS Mahomes
Investment
Holdings LLC		    

Class A

      

11/16/2020

  

16

    

88

(e)(k)

    
ZBS Mechanical
Group Co-Invest
Fund 2, LLC		          

10/7/2021

  

50,000

    

50

(e)(k)

    
                                         

188

      

0.01

%

  

Diversified Financials

  
Apollo Tactical
Income Fund Inc		          

1/12/2021

  

811

    

12

    
BCC Blueprint
Investments, LLC		          

9/15/2021

  

569,311

    

557

(e)(k)

    
Blackstone
Strategic Credit
Fund		          

10/28/2020

  

3,073

    

41

    
Blackstone/GSO
Long-Short Credit
Income Fund		          

1/14/2021

  

70

    

1

    
LaRousseCo
Limited		  

Jersey

  

Class A

      

9/24/2021

  

6,784

      

205

(e)(k)

    
Owl Rock
Capital Corp		          

8/18/2020

  

2,500

    

35

    

Sera 2021 LLC

      

Class A

          

3/30/2021

    

3

              

—

(e)(k)

          
The Ultimus Group
Aggregator, LP		    

Class A

      

2/1/2019

  

—

    

—

(e)(k)

    
The Ultimus Group
Aggregator, LP		    

Class B

      

2/1/2019

  

182

    

—

(e)(k)

    
The Ultimus
Group, LLC		    

Class B

      

2/1/2019

  

1,609

    

—

(e)(k)

    
Tiger Parent
Inc. (IPS)		          

11/22/2021

  

268

    

2,683

(e)(k)

    
                                         

3,534

      

0.18

%

  

Annual Report 2021
70

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Energy

  
Antero Resources
Corp		          

7/28/2021

  

11,111

      

$

194

(k)

      
Civitas Resources,
Inc.		          

1/21/2021

  

2,197

    

108

      
Extraction Oil &
Gas Inc		          

1/21/2021

  

209

    

14

(k)

    
Occidental
Petroleum
Corporation		          

12/7/2021

  

7,840

    

227

    
Sundance
Energy Inc.		          

4/23/2018

  

2,602

    

1,130

(e)(k)

    
                                         

1,673

      

0.09

%

  

Food & Staples Retailing

  
KCAKE Holdings
Inc.		          

5/14/2021

  

50

    

52

(e)(k)

    
                                         

52

      

0.00

%

  

Food & Beverage

  
PPC CHG Blocker
LLC		          

12/10/2021

  

1

    

50

(e)(k)

    
Sanderson
Farms Inc		          

9/9/2021

  

2,821

    

539

    
                                         

589

      

0.03

%

  

Healthcare Equipment & Services

  
Bearcat Parent,
Inc.		          

7/9/2019

  

51

    

132

(e)(k)

    
Olympia TopCo,
L.P.		    

Class A

      

9/24/2019

  

50,000

    

—

(e)(k)

    
OMERS Bluejay
Investment
Holdings LP		    

Class A

      

7/10/2018

  

25

    

45

(e)(k)

    
OMERS Wildcats
Investment
Holdings LLC		    

Class A

      

10/31/2019

  

169

    

83

(e)(k)

    
SiroMed Equity
Holdings, LLC		          

3/26/2018

  

3,703

    

4

(e)(k)

    
Virence Holdings
LLC		    

Class A

      

2/11/2019

  

—

    

126

(e)(k)

    
VPP Group
Holdings, L.P.		          

12/1/2021

  

50

    

50

(e)(k)

    
                                         

440

      

0.02

%

  

Annual Report 2021
71

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Household & Personal Products

  
CDI Holdings I
Corp.		          

12/22/2021

  

50

      

$

50

(e)(k)

      
RMCF V CIV XLIV,
L.P.		          

8/20/2021

  

50,000

    

44

(e)(k)

      
                                         

94

      

0.01

%

  

Insurance

  
High Street
HoldCo LLC		    

Series A

      

4/16/2021

  

50,000

    

119

(e)(k)

    
High Street
HoldCo LLC		    

Series C

      

4/16/2021

  

437,659

    

1,046

(e)(k)

    
                                         

1,165

      

0.06

%

  

Materials

  
ASP-R-Pac
Holdings LP		    

Class A

      

12/29/2021

  

500

    

50

(e)(k)

    
Berry Global
Group Inc		          

6/11/2020

  

4,487

    

331

(k)

    
KNPAK Holdings,
LP		    

Class A

      

7/2/2019

  

100,000

    

105

(e)(k)

    
Novipax Parent
Holding Company,
L.L.C.		    

Class C

      

12/1/2020

  

50

    

—

(e)(k)

    
Plaskolite PPC
Blocker LLC		          

12/14/2018

  

10

    

2

(e)(k)

    
                                         

488

      

0.03

%

  

Media & Entertainment

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class A

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class B

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class C

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class D

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class E

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class F

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class G

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class H

      

6/24/2021

  

491,621

      

225

(e)(k)

  

 

  

Annual Report 2021
72

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Storm Investment
S.a.r.l.		  

Luxembourg

  

Class I

      

6/24/2021

  

491,621

      

$

225

(e)(k)

  

 

  
Storm Investment
S.a.r.l.		  

Luxembourg

        

6/24/2021

  

590

      

1

(e)(k)

  

 

  
                                         

2,026

      

0.10

%

  

Pharmaceuticals, Biotechnology & Life Sciences

  
Cobalt Holdings I,
LP		    

Class A

      

10/1/2021

  

500

    

45

(e)(k)

    
Coherus
Biosciences Inc		          

11/2/2018

  

2,456

    

39

(k)

    
                                         

84

      

0.00

%

  

Real Estate

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class A

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class B

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class C

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class D

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class E

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class F

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class G

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class H

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

  

Class I

      

9/15/2021

  

3,400,700

      

30

(e)(k)

  

 

  
Illinois Investment
S.a.r.l.		  

Luxembourg

        

9/15/2021

  

4,081

      

—

(e)(k)

  

 

  
                                         

270

      

0.01

%

  

Retailing

  

ARKO Corp.

                  

12/22/2020

    

106

              

1

(e)(k)

          
Emerald Lake
Pearl
Acquisition-A, L.P.		          

7/19/2021

  

43,500

    

43

(e)(k)

    
Fastsigns
Holdings Inc.		          

3/13/2019

  

50

    

83

(e)(k)

    
Marcone
Yellowstone
Holdings, LLC		    

Class A

      

6/23/2021

  

92

    

153

(e)(k)

    

Annual Report 2021
73

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Stonecourt IV
Partners LP		          

10/8/2021

  

2,423,676

      

$

2,424

(e)(k)

      
                                 

2,704

      

0.14

%

  

Software & Services

  
APG Holdings,
LLC		    

Class A

      

1/3/2020

  

50,000

    

59

(e)(k)

    
Astorg VII
Co-Invest ERT		  

Luxembourg

        

1/31/2020

  

1,208,500

      

1,636

(e)(k)

  

 

  
Consilio
Investment
Holdings, L.P.		          

5/28/2021

  

50,000

    

63

(e)(k)

    

Cority Parent, Inc.

  

Canada

  

Class B-1

          

7/2/2019

    

47,536

          

1

(e)(k)

      

Denali Topco LLC

      

Class A

          

9/15/2021

    

50,000

          

50

(e)(k)

      
Destiny Digital
Holdings, L.P.		          

5/27/2021

  

3,076

    

51

(e)(k)

    
EQT IX
Co-Investment (E)
SCSP		          

4/16/2021

  

5,000

    

55

(e)(k)

    
Frontline
Technologies
Parent, LLC		    

Class B

      

9/18/2017

  

2,728

    

43

(e)(k)

    
H&F Unite
Partners, L.P.		          

5/1/2019

  

50,032

    

60

(e)(k)

    
Insight PDI
Holdings, LLC		    

Class A

      

3/19/2019

  

26,548

    

37

(e)(k)

    

Magic Topco, L.P.

      

Class B

          

9/21/2020

    

12,975

          

—

(e)(k)

      

PS Co-Invest, L.P.

                  

3/5/2021

    

50,000

          

51

(e)(k)

      
RMS Group
Holdings, Inc.		          

12/16/2021

  

5

    

50

(e)(k)

    

Rocket Parent, LLC

      

Class A

          

12/17/2018

    

74,502

          

125

(e)(k)

      
Skywalker TopCo,
LLC		          

11/20/2020

  

14,925

    

53

(e)(k)

    
Sunshine Software
Holdings, Inc.		    

Class A-1

      

10/15/2021

  

5,000

    

49

(e)(k)

    
                                 

2,383

      

0.12

%

  

Technology Hardware & Equipment

  
Repairify
Holdings, LLC		    

Class A

      

6/14/2021

  

1,655

    

49

(e)(k)

    

Wildcat Parent, LP

                  

2/27/2020

    

535

          

83

(e)(k)

      
                                 

132

      

0.01

%

  

Annual Report 2021
74

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Common Stocks(d) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Transportation

  
Allegiant
Travel Co.		          

9/1/2021

  

823

      

$

154

(k)

      
Delta Air
Lines, Inc.		          

9/1/2021

  

4,000

    

156

(k)

    
Shur-Co
HoldCo, Inc.		          

6/30/2021

  

50,000

    

58

(e)(k)

    
                                 

368

      

0.02

%

  

Utilities

  
Apex Clean
Energy TopCo,
LLC		    

Class A

      

11/17/2021

  

149,776

    

8,871

(e)(k)

    
                                 

8,871

      

0.46

%

  

Total Common Stocks (Cost $24,400)

                                

26,857

      

1.38

%

  

Preferred Stock(b)(c)(d)(e)

  

Automobiles & Components

  
Automotive Keys
Investor, LLC		       9.00%    

11/6/2020

  

37,749

    

42

(g)

    
McLaren Group
Limited		   United
Kingdom		     12.50%    

8/2/2021

  

63,529

      

8,599

(g)

  

 

  

Metis Holdco, Inc.

      

Class A

   7.00%      

5/4/2021

    

7,959

          

8,326

(g)

      
                                 

16,967

      

0.88

%

  

Commercial & Professional Services

  
IRI Group
Holdings, Inc.		    

Series A-1

   11.50% (6M
LIBOR +
10.50%)		    

11/29/2018

  

25

    

35

(g)

    

Marmic Topco, L.P.

           8.00%      

3/5/2021

    

57,624

          

73

(g)

      
                                 

108

      

0.01

%

  

Consumer Services

  
Aragorn Parent
Holdings LP		    

Series A

   10.00%    

10/15/2020

  

50,000

    

74

(g)

    
Redwood Services
Holdco, LLC		    

Series D

   8.00%    

12/31/2020

  

27,076

    

59

(g)

    
                                 

133

      

0.01

%

  

Diversified Financials

  
LaRousseCo
Limited		  

Jersey

  

Class A

      

9/24/2021

  

297,963

      

403

(k)

  

 

  
LaRousseCo
Limited		  

Jersey

        

9/24/2021

  

21,247

      

30

(k)

  

 

  

Annual Report 2021
75

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Preferred Stock(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
The Ultimus
Group, LLC		    

Class A

      

2/1/2019

  

1

      

$

1

(g)(k)

      
                                 

434

      

0.02

%

  

Energy

  

Ferrellgas, L.P.

           8.96%      

3/30/2021

    

8,734

          

8,734

(g)

      
                                 

8,734

      

0.45

%

  

Food & Beverage

  
Watermill Express
Holdings, LLC		    

Class A

   8.00%    

4/20/2021

  

5,000

    

48

(g)

    
                                 

48

      

0.00

%

  

Healthcare Equipment & Services

  
Olympia TopCo,
L.P.		       15.00%    

7/28/2021

  

2,184

    

1

(g)

    
Symplr Software
Intermediate
Holdings, Inc.		    

Series C-1

   11.00%    

12/22/2020

  

50

    

56

(g)

    
Symplr Software
Intermediate
Holdings, Inc.		    

Series C-2

   11.00%    

6/18/2021

  

5,980

    

6,344

(g)

    
Symplr Software
Intermediate
Holdings, Inc.		    

Series C-3

   11.00%    

10/12/2021

  

789

    

808

(g)

    

Teligent, Inc.

                  

12/11/2018

    

1,797

          

—

(k)

      
                                 

7,209

      

0.37

%

  

Insurance

  
High Street
HoldCo LLC		    

Series A

   10.00%    

4/16/2021

  

8,505,042

    

8,893

(g)

    
                                 

8,893

      

0.46

%

  

Materials

  
Novipax Parent
Holding Company,
L.L.C.		    

Class A

   10.00%    

12/1/2020

  

50

    

66

(g)

    
                                 

66

      

0.00

%

  

Media & Entertainment

  

PRG III, LLC

      

Class A

          

10/6/2020

    

2,250

          

15

(g)(k)

      
                                 

15

      

0.00

%

  

Annual Report 2021
76

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Preferred Stock(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Pharmaceuticals, Biotechnology & Life Sciences

  
Cardinal Topco
Holdings, L.P.		    

Class A

   8.00%    

9/15/2020

  

83

      

$

201

(g)

      
Cobalt Holdings I,
LP		       8.00%    

10/1/2021

  

50

    

5

(g)

    
Cobalt
Intermediate I,
Inc.		    

Series A

   10.75% (3M
LIBOR +
10.00%)		    

10/1/2021

  

8,582

    

8,582

(g)

    
                                 

8,788

      

0.46

%

  

Software & Services

  
Appriss Health
Intermediate
Holdings, Inc.		    

Series A

   11.00%    

5/6/2021

  

3,657

    

3,929

(g)

    
Cority Parent,
Inc.		  

Canada

  

Class A-1

   9.00%    

7/2/2019

  

50

    

139

(g)

    
DCert Preferred
Holdings, Inc.		    

Series A

   10.50%    

5/25/2021

  

22,284

    

23,707

(g)

    
Diligent Preferred
Issuer, Inc.		       10.50%    

4/6/2021

  

1,476

    

1,552

(g)

    
EZ Elemica
Holdings, Inc.		          

9/18/2019

  

50

    

59

(k)

    
Frontline
Technologies
Parent, LLC		    

Class A

   9.00%    

9/18/2017

  

25

    

37

(g)

    
GSV PracticeTek
Holdings, LLC		    

Class A

   8.00%    

3/31/2021

  

216,667

    

151

(g)

    
Insightful Science
Holdings, LLC		       14.00%    

4/28/2021

  

62,340

    

1,721

(g)

    

Magic Topco, L.P.

      

Class A

   9.00%      

9/21/2020

    

58

          

92

(g)

      
Packers Software
Intermediate
Holdings, Inc.		    

Series A

   11.13% (3M
LIBOR +
11.00%)		    

11/12/2020

  

50

    

56

(g)

    
Packers Software
Intermediate
Holdings, Inc.		    

Series A-2

   11.13% (3M
LIBOR +
11.00%)		    

12/23/2020

  

18

    

20

(g)

    
Packers Software
Intermediate
Holdings, Inc.		    

Series A-3

   11.00%    

11/24/2021

  

24

    

26

(g)

    
Peachtree
Parent, Inc.		    

Series A

   13.25%    

3/19/2019

  

25

    

36

(g)

    
Project Essential
Super Parent, Inc.		       10.50% (3M
LIBOR +
9.50%)		    

4/20/2021

  

2,963

    

3,189

(g)

    
Sunshine Software
Holdings, Inc.		    

Series A

   10.50%    

10/15/2021

  

15,929

    

16,282

(g)

    

Annual Report 2021
77

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Preferred Stock(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  
Titan DI Preferred
Holdings, Inc.		       13.50%    

2/11/2020

  

—

      

$

64

(g)

      
                                 

51,060

      

2.65

%

  

Total Preferred Stock (Cost $97,970)

                                

102,455

      

5.31

%

  

Private Asset-Backed Debt(b)(c)(d)(e)

  

Diversified Financials

  
Affirm Operational
Loans VI Trust		     1st Lien
Revolver		   10.36% (1M
LIBOR +
9.76%)		  

12/17/2026

      

$

500

  

$

113

(g)(h)

    
ARM Funding
2019-1, LLC		     1st Lien
Revolver		   8.95% (1M
LIBOR +
7.95%)		  

2/29/2024

      

2,500

  

782

(h)

    
BFS Receivables I
LLC		     1st Lien
Revolver		    

3/14/2025

      

1,250

  

—

(h)

    
DFC Global Facility
Borrower III LLC		     1st Lien
Revolver		   8.00% (1M
CDOR +
7.50%)		  

6/28/2026

      

CAD

8,582

  

4,795

(h)(o)(p)

  

 

  
DFC Global Facility
Borrower III LLC		     1st Lien
Revolver		   8.00% (3M
CDOR +
7.50%)		  

6/28/2026

      

CAD

8,582

  

4,795

(h)

  

 

  
Finance Ireland
Loan and Treasury
DAC		  

Ireland

   1st Lien
Term Loan		   9.25% (3M
EURIBOR +
9.25%)		  

6/29/2026

      

€

2,500

  

982

(h)

  

 

  
NSF Funding
2020 Limited		   United
Kingdom		   1st Lien
Revolver		    

6/10/2026

      

£

11,500

  

2

(h)

  

 

  

Reliant SPV, LLC

     1st Lien
Revolver		   7.00% (1M
LIBOR +
6.00%)		  

5/28/2024

      

500

  

329

(h)

    
SAVOYSPECIAL
LLC		     1st Lien
Revolver		   8.25% (1M
LIBOR +
7.50%)		  

7/1/2024

      

750

  

305

(h)

    

Sera 2021 LLC

     1st Lien
Delayed Draw
Term Loan		   6.25% (3M
LIBOR +
5.75%)		  

3/30/2026

      

1,500

  

1,293

(h)

    
Spring Oaks
Capital SPV, LLC		     1st Lien
Revolver		   9.50% (1M
LIBOR +
8.50%)		  

11/12/2025

      

9,000

  

2,769

(h)

    
Woodchester
Funding Limited		   United
Kingdom		   1st Lien
Revolver		   6.80% (1M
GBP LIBOR +
6.55%)		  

3/15/2026

      

£

2,182

  

854

(h)(m)

  

 

  
                                 

17,019

      

0.88

%

  

Real Estate

  
Illinois Investment
S.a.r.l.		  

Luxembourg

   1st Lien
Term Loan		   5.17%  

12/31/2026

      

SEK

14,277

  

1,580

  

 

  
                                 

1,580

      

0.08

%

  

Annual Report 2021
78

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Private Asset-Backed Debt(b)(c)(d)(e) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Retailing

  
Tricolor Funding
SPV 3 LLC		     1st Lien
Revolver		   8.50% (1M
LIBOR +
7.50%)		  

8/6/2027

      

$

2,273

  

$

1,244

(h)(n)

    
                                 

1,244

      

0.07

%

  

Total Private Asset-Backed Debt (Cost $19,510)

                                

19,843

      

1.03

%

  

Real Estate Debt(b)(c)(d)(e)

  

Real Estate

  
285 Mezz LLC     Mezzanine
Term Loan		   16.28% (1M
LIBOR +
14.00%)		  

5/5/2023

      

2,898

  

2,360

(h)

    
285 Mezz LLC     Mezzanine
Term Loan		   20.00% (1M
LIBOR +
20.00%)		  

5/5/2023

      

1,082

  

1,071

    

Total Real Estate Debt (Cost $3,453)

                                

3,431

      

0.18

%

  

Warrants(d)(e)(k)

  

Automobiles & Components

  
McLaren Group
Limited		   United
Kingdom		  

Common

      

8/2/2021

  

19,998

      

2,063

  

 

  
                                 

2,063

      

0.12

%

  

Commercial & Professional Services

  
Visual Edge
Technology, Inc.		    

Common

      

3/22/2018

  

27,334

    

—

    
                                 

—

      

0.00

%

  

Consumer Services

  
KeyStone
Sub-Debt HoldCo,
LLC		    

Common

      

1/20/2021

  

4

    

618

    
LGDN Finco
Limited		   United
Kingdom		  

Common

      

6/22/2021

  

25

      

17

  

 

  
                                 

635

      

0.03

%

  

Diversified Financials

  
BFS Receivables I
LLC		    

Common

      

8/16/2021

  

34,662

    

—

    
SAVOYSPECIAL
LLC		    

Common

      

7/14/2021

  

345,508

    

2

    
                                 

2

      

0.00

%

  

Annual Report 2021
79

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Warrants(d)(e)(k) (continued)

Company

  

Country(a)

  

Investment

  

Interest

   Maturity
Date		   Acquisition
Date		  

Shares

   Principal
Amount(a)		  

Fair Value(a)

   Percentage
of Net
Assets		  

Healthcare Equipment & Services

  
Air Medical Buyer
Corp		    

Common

      

3/14/2018

  

122

      

$

3

      

GMR Buyer Corp.

      

Common

          

12/17/2021

    

1,927

          

49

        

Teligent, Inc.

      

Common

          

4/6/2020

    

11,342

          

—

        

Teligent, Inc.

      

Common

          

7/20/2020

    

2,834

          

—

        
                                 

52

      

0.00

%

  

Media & Entertainment

  

PFL MMA, Inc.

      

Common

          

1/19/2021

    

115,111

          

69

        
                                 

69

      

0.00

%

  

Retailing

  

ARKO Corp.

      

Common

          

12/22/2020

    

55

          

—

        
                                 

—

      

0.00

%

  

Transportation

  
Neovia Logistics
Holdings Ltd.		    

Common

      

4/26/2019

  

194,454

    

—

    
                                 

—

      

0.00

%

  

Total Warrants (Cost $2,915)

                                

2,821

      

0.15

%

  

Total Investments (Cost $2,656,181)

                                

2,694,554

      

139.65

%

  

Liabilities in Excess of Other Assets

                                

(764,996

)

    

(39.65

)%

  

Net Assets

                              

$

1,929,558

      

100.00

%

  

(a)  Investment holdings in foreign currencies are converted to U.S. Dollars using period end spot rates. Investments are in United States enterprises and all principal balances shown are in U.S. Dollars 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 Bank Bill Swap Bid Rate ("BBSY"), Canadian Dollar Offered Rate ("CDOR"), Copenhagen Interbank Offered Rate ("CIBOR"), Euro Interbank Offered Rate ("EURIBOR"), Norwegian Interbank Offered Rate ("NIBOR"), Prime Rate ("PRIME"), Secured Overnight Financing Rate ("SOFR") Sterling Overnight Index Average ("SONIA"), or Stockholm Interbank Offered Rate ("STIBOR"), at the borrower's option. Stated interest rates in this schedule represents the "all-in" rate as of December 31, 2021.

(c)  Variable rate coupon rate shown as of December 31, 2021.

(d)  These investments, which as of December 31, 2021 represented 137.59% of the Fund's net assets or 90.12% of the Fund's total assets, may be subject to legal restrictions on sales. Acquisition dates are included above for equity securities that may be subject to legal restrictions on sales.

(e)  Investments whose values were determined using significant unobservable inputs (Level 3) (See Note 4 of the Notes to Consolidated 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 6 of the Notes to Consolidated Financial Statements).

(g)  Includes a payment-in-kind provision.

(h)  As of December 31, 2021, 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.

Annual Report 2021
80

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  
285 Mezz LLC  

Mezzanine Term Loan

  

$

2,898

    

$

(2,389

)

  

$

509

    

A.U.L. Corp.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

AffiniPay Midco, LLC

  

1st Lien Revolver Loan

    

766

      

—

      

766

    

Affirm Operational Loans VI Trust

  

1st Lien Revolver Loan

    

500

      

(113

)

    

387

    

American Residential Services L.L.C.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Anaqua Parent Holdings, Inc.

  

1st Lien Delay Draw Loan

    

523

      

—

      

523

    

Anaqua Parent Holdings, Inc.

  

1st Lien Revolver Loan

    

231

      

—

      

231

    

APG Intermediate Holdings Corporation

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Appriss Health, LLC

  

1st Lien Revolver Loan

    

212

      

—

      

212

    

AQ Sunshine, Inc.

  

1st Lien Delay Draw Loan

    

61

      

—

      

61

    

AQ Sunshine, Inc.

  

1st Lien Revolver Loan

    

213

      

(57

)

    

156

    

Ardonagh Midco 3 PLC

  

1st Lien Delay Draw Loan

    

1

      

—

      

1

    

Argenbright Holdings V, LLC

  

1st Lien Delay Draw Loan

    

178

      

—

      

178

    

ARM Funding 2019-1, LLC

  

1st Lien Revolver Loan

    

2,500

      

(782

)

    

1,718

    
ASG Bidco Limited  

1st Lien Delay Draw Loan

    

748

      

—

      

748

    

Aspire Bidco Limited

  

1st Lien Revolver Loan

    

677

      

—

      

677

    

Aspire Bidco Limited

   1st Lien Term Loan    

3,574

      

—

      

3,574

    

Aspris Bidco Limited

   1st Lien Term Loan    

1,903

      

—

      

1,903

    

ASP-R-Pac Acquisition Co LLC

  

1st Lien Revolver Loan

    

839

      

(168

)

    

671

    

Athenahealth, Inc.

  

1st Lien Revolver Loan

    

232

      

—

      

232

    

Atlas Intermediate III, L.L.C.

  

1st Lien Revolver Loan

    

264

      

—

      

264

    

Auxadi Midco S.L.U.

   1st Lien Term Loan    

1,449

      

—

      

1,449

    

Aventine Intermediate LLC

  

1st Lien Delay Draw Loan

    

812

      

—

      

812

    

Bamboo Purchaser, Inc.

  

1st Lien Delay Draw Loan

    

836

      

(418

)

    

418

    

Bamboo Purchaser, Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Banyan Software Holdings, LLC

  

1st Lien Delay Draw Loan

    

5,128

      

(722

)

    

4,406

    

Banyan Software Holdings, LLC

  

1st Lien Revolver Loan

    

471

      

(189

)

    

282

    

Beacon Pointe Harmony, LLC

  

1st Lien Delay Draw Loan

    

3,175

      

—

      

3,175

    

Beacon Pointe Harmony, LLC

  

1st Lien Revolver Loan

    

909

      

—

      

909

    

Bearcat Buyer, Inc.

  

1st Lien Delay Draw Loan

    

1

      

(1

)

    

—

    

Bearcat Buyer, Inc.

  

1st Lien Revolver Loan

    

580

      

—

      

580

    

Bearcat Buyer, Inc.

  

2nd Lien Delay Draw Loan

    

1,306

      

(184

)

    

1,122

    

Benefytt Technologies, Inc.

  

1st Lien Delay Draw Loan

    

911

      

—

      

911

    

Berner Food & Beverage, LLC

  

1st Lien Revolver Loan

    

262

      

(110

)

    

152

    

BFS Receivables I LLC

  

1st Lien Revolver Loan

    

1,250

      

—

      

1,250

    

Blackwood Bidco Limited

  

1st Lien Delay Draw Loan

    

3,139

      

(1,912

)

    

1,227

    

Businessolver.com, Inc.

  

1st Lien Delay Draw Loan

    

1,197

      

—

      

1,197

    

Canopy Bidco Limited

  

1st Lien Delay Draw Loan

    

680

      

(178

)

    

502

    

Capnor Connery Bidco A/S

  

1st Lien Delay Draw Loan

    

7,037

      

(966

)

    

6,071

    

Annual Report 2021
81

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

Capstone Acquisition Holdings, Inc.

  

1st Lien Delay Draw Loan

  

$

1,679

    

$

(642

)

  

$

1,037

    

Capstone Acquisition Holdings, Inc.

  

1st Lien Revolver Loan

    

1,150

      

(177

)

    

973

    

Capstone Acquisition Holdings, Inc.

  

2nd Lien Delay Draw Loan

    

531

      

—

      

531

    

Cardinal Parent, Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

CB-SDG LIMITED

  

1st Lien Delay Draw Loan

    

430

      

—

      

430

    

CC Fly Holding II A/S

  

1st Lien Delay Draw Loan

    

456

      

(439

)

    

17

    

CDI Holdings III Corp.

  

1st Lien Revolver Loan

    

410

      

—

      

410

    

Centric Brands LLC

  

1st Lien Revolver Loan

    

269

      

(79

)

    

190

    

Chariot Buyer LLC

  

1st Lien Revolver Loan

    

100

      

(22

)

    

78

    

Cobalt Buyer Sub, Inc.

  

1st Lien Delay Draw Loan

    

2,476

      

—

      

2,476

    

Cobalt Buyer Sub, Inc.

  

1st Lien Revolver Loan

    

895

      

(89

)

    

806

    

Commercial Trailer Leasing, Inc.

  

1st Lien Delay Draw Loan

    

1,465

      

(1,169

)

    

296

    

Commercial Trailer Leasing, Inc.

  

1st Lien Revolver Loan

    

741

      

—

      

741

    

Commify Limited

  

1st Lien Delay Draw Loan

    

866

      

(277

)

    

589

    

Comprehensive EyeCare Partners, LLC

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Confirmasoft AB

  

1st Lien Delay Draw Loan

    

1,714

      

(634

)

    

1,080

    

Consilio Midco Limited

  

1st Lien Delay Draw Loan

    

3,012

      

(1,723

)

    

1,289

    

Consilio Midco Limited

  

1st Lien Revolver Loan

    

123

      

—

      

123

    

Continental Acquisition Holdings, Inc.

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

Continental Cafe, LLC

  

1st Lien Delay Draw Loan

    

2,788

      

—

      

2,788

    

Continental Cafe, LLC

  

1st Lien Revolver Loan

    

786

      

—

      

786

    

Cority Software Inc.

  

1st Lien Revolver Loan

    

231

      

—

      

231

    

Cornerstone OnDemand, Inc.

  

1st Lien Revolver Loan

    

100

      

—

      

100

    

CVP Holdco, Inc.

  

1st Lien Delay Draw Loan

    

7,730

      

(5,577

)

    

2,153

    

CVP Holdco, Inc.

  

1st Lien Revolver Loan

    

326

      

(163

)

    

163

    

DecoPac, Inc.

  

1st Lien Revolver Loan

    

2,382

      

(340

)

    

2,042

    

Denali Holdco LLC

  

1st Lien Revolver Loan

    

592

      

—

      

592

    

DFC Global Facility Borrower III LLC

  

1st Lien Revolver Loan

    

13,569

      

(9,590

)

    

3,979

    

Diligent Corporation

  

1st Lien Delay Draw Loan

    

687

      

—

      

687

    

Diligent Corporation

  

1st Lien Revolver Loan

    

513

      

—

      

513

    

DRS Holdings III, Inc.

  

1st Lien Revolver Loan

    

173

      

—

      

173

    

DS Admiral Bidco, LLC

  

1st Lien Revolver Loan

    

358

      

—

      

358

    

Dye & Durham Corporation

  

1st Lien Delay Draw Loan

    

1,242

      

—

      

1,242

    

Dye & Durham Corporation

  

1st Lien Revolver Loan

    

1,313

      

—

      

1,313

    

Dynamic NC Aerospace Holdings, LLC

  

1st Lien Revolver Loan

    

1,296

      

—

      

1,296

    

Eleda BidCo AB (fka EISG BidCo AB)

  

1st Lien Delay Draw Loan

    

886

      

—

      

886

    

Elemica Parent, Inc.

  

1st Lien Revolver Loan

    

479

      

(268

)

    

211

    

Elevation Services Parent Holdings, LLC

  

1st Lien Revolver Loan

    

386

      

(296

)

    

90

    

EPS NASS Parent, Inc.

  

1st Lien Delay Draw Loan

    

585

      

—

      

585

    

Annual Report 2021
82

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

EPS NASS Parent, Inc.

  

1st Lien Revolver Loan

  

$

158

    

$

(99

)

  

$

59

    

eResearch Technology, Inc.

  

2nd Lien Delay Draw Loan

    

1,343

      

(672

)

    

671

    

Essential Services Holding Corporation

  

1st Lien Delay Draw Loan

    

8,146

      

—

      

8,146

    

Essential Services Holding Corporation

  

1st Lien Revolver Loan

    

1,560

      

—

      

1,560

    

Eucalyptus BidCo Pty Ltd

   1st Lien Term Loan    

973

      

(1

)

    

972

    

EuroParcs Topholding B.V.

  

1st Lien Delay Draw Loan

    

930

      

(929

)

    

1

    

ExtraHop Networks, Inc.

  

1st Lien Delay Draw Loan

    

933

      

(103

)

    

830

    

FC Sun Intressenter AB

  

1st Lien Delay Draw Loan

    

12,420

      

(2

)

    

12,418

    

Finance Ireland Loan and Treasury DAC

   1st Lien Term Loan    

2,846

      

(1,029

)

    

1,817

    

FL Hawk Intermediate Holdings, Inc.

  

1st Lien Delay Draw Loan

    

1,017

      

—

      

1,017

    

FL Hawk Intermediate Holdings, Inc.

  

1st Lien Revolver Loan

    

1,312

      

—

      

1,312

    

Floss Bidco Limited

  

1st Lien Delay Draw Loan

    

1,640

      

(555

)

    

1,085

    

Flow Control Solutions, Inc.

  

1st Lien Revolver Loan

    

373

      

—

      

373

    

Foundation Consumer Brands, LLC

  

1st Lien Revolver Loan

    

389

      

—

      

389

    

Foundation Risk Partners, Corp.

  

1st Lien Delay Draw Loan

    

3,495

      

(1,997

)

    

1,498

    

Foundation Risk Partners, Corp.

  

1st Lien Revolver Loan

    

2,627

      

—

      

2,627

    

Galway Borrower LLC

  

1st Lien Delay Draw Loan

    

1,600

      

—

      

1,600

    

Galway Borrower LLC

  

1st Lien Revolver Loan

    

969

      

—

      

969

    

Gilfoyle Bidco AB

   1st Lien Term Loan    

2,146

      

(358

)

    

1,788

    

Global Music Rights, LLC

  

1st Lien Revolver Loan

    

473

      

—

      

473

    

GraphPAD Software, LLC

  

1st Lien Delay Draw Loan

    

436

      

—

      

436

    

GraphPAD Software, LLC

  

1st Lien Revolver Loan

    

2

      

—

      

2

    

Halcon Holdings, LLC

  

1st Lien Delay Draw Loan

    

2,103

      

—

      

2,103

    

Hammersmith Bidco Limited

  

1st Lien Delay Draw Loan

    

4,260

      

(3,607

)

    

653

    

Hammersmith Bidco Limited

   1st Lien Term Loan    

2,840

      

—

      

2,840

    
Heavy Construction Systems
Specialists, LLC		  

1st Lien Revolver Loan

    

410

      

—

      

410

    

HH-Stella, Inc.

  

1st Lien Delay Draw Loan

    

1,979

      

(311

)

    

1,668

    

HH-Stella, Inc.

  

1st Lien Revolver Loan

    

444

      

(51

)

    

393

    

High Street Buyer, Inc.

  

1st Lien Delay Draw Loan

    

8,819

      

(7,421

)

    

1,398

    

High Street Buyer, Inc.

  

1st Lien Revolver Loan

    

688

      

—

      

688

    

Highline Aftermarket Acquisition, LLC

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

Hometown Food Company

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Horizon Bidco S.A.S

   1st Lien Term Loan    

3,509

      

—

      

3,509

    

IntraPac International LLC

  

1st Lien Revolver Loan

    

415

      

(135

)

    

280

    

Ivanti Software, Inc.

  

1st Lien Revolver Loan

    

460

      

—

      

460

    

Jewel Bidco Limited

  

1st Lien Revolver Loan

    

451

      

(293

)

    

158

    

Jewel Bidco Limited

   1st Lien Term Loan    

5,140

      

(1,611

)

    

3,529

    

Jim N Nicks Management LLC

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

JMG Group Investments Limited

   1st Lien Term Loan    

1,611

      

—

      

1,611

    

Annual Report 2021
83

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

Kellermeyer Bergensons Services, LLC

  

1st Lien Delay Draw Loan

  

$

4,559

    

$

(2,384

)

  

$

2,175

    

Kene Acquisition, Inc.

  

1st Lien Revolver Loan

    

676

      

—

      

676

    

Laboratories Bidco LLC

  

1st Lien Delay Draw Loan

    

2,201

      

—

      

2,201

    

Laboratories Bidco LLC

  

1st Lien Revolver Loan

    

1,562

      

—

      

1,562

    

Lavatio Midco Sarl

  

1st Lien Delay Draw Loan

    

1,117

      

(697

)

    

420

    

LGDN Finco Limited

  

1st Lien Revolver Loan

    

135

      

—

      

135

    

LGDN Finco Limited

   1st Lien Term Loan    

1,736

      

(764

)

    

972

    

LSP HoldCo, LLC

  

1st Lien Delay Draw Loan

    

1,994

      

—

      

1,994

    

LSP HoldCo, LLC

  

1st Lien Revolver Loan

    

127

      

—

      

127

    

Majesco

  

1st Lien Revolver Loan

    

624

      

—

      

624

    

Marmic Purchaser, LLC

  

1st Lien Revolver Loan

    

287

      

(100

)

    

187

    

Maverick Acquisition, Inc.

  

1st Lien Delay Draw Loan

    

3,170

      

(1,216

)

    

1,954

    

Mavis Tire Express Services Topco Corp.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

MC Plato Bidco Limited

   1st Lien Term Loan    

1,608

      

—

      

1,608

    

Mercury Borrower, Inc.

  

1st Lien Revolver Loan

    

470

      

(13

)

    

457

    

Micromeritics Instrument Corp.

  

1st Lien Revolver Loan

    

331

      

—

      

331

    

MMIT Holdings, LLC

  

1st Lien Revolver Loan

    

651

      

(81

)

    

570

    

Monica Holdco (US), Inc.

  

1st Lien Revolver Loan

    

1,009

      

—

      

1,009

    

Moon Valley Nursery of Arizona Retail, LLC

  

1st Lien Delay Draw Loan

    

2,002

      

(320

)

    

1,682

    

Moon Valley Nursery of Arizona Retail, LLC

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

MRI Software LLC

  

1st Lien Delay Draw Loan

    

744

      

—

      

744

    

MRI Software LLC

  

1st Lien Revolver Loan

    

508

      

—

      

508

    

MWG BidCo ApS

   1st Lien Term Loan    

755

      

—

      

755

    

Nelipak European Holdings Cooperatief U.A.

  

1st Lien Revolver Loan

    

662

      

—

      

662

    

Nelipak Holding Company

  

1st Lien Revolver Loan

    

605

      

(253

)

    

352

    

Nest Topco Borrower Inc.

  

1st Lien Delay Draw Loan

    

13,162

      

—

      

13,162

    

NMC Skincare Intermediate Holdings II, LLC

  

1st Lien Revolver Loan

    

333

      

(227

)

    

106

    

North American Fire Holdings, LLC

  

1st Lien Delay Draw Loan

    

2,462

      

—

      

2,462

    

North American Fire Holdings, LLC

  

1st Lien Revolver Loan

    

411

      

—

      

411

    

North American Science Associates, LLC

  

1st Lien Delay Draw Loan

    

916

      

—

      

916

    

North American Science Associates, LLC

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

North Haven Stack Buyer, LLC

  

1st Lien Delay Draw Loan

    

1,016

      

(39

)

    

977

    

North Haven Stack Buyer, LLC

  

1st Lien Revolver Loan

    

259

      

—

      

259

    

NSF Funding 2020 Limited

  

1st Lien Revolver Loan

    

15,565

      

(2

)

    

15,563

    

NueHealth Performance, LLC

  

1st Lien Delay Draw Loan

    

1,170

      

(592

)

    

578

    

Oakley Ekomid Limited

  

1st Lien Delay Draw Loan

    

641

      

(295

)

    

346

    

Olympia Acquisition, Inc.

  

1st Lien Revolver Loan

    

641

      

(598

)

    

43

    

OMH-HealthEdge Holdings, LLC

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Optio Group Limited

  

1st Lien Delay Draw Loan

    

809

      

(379

)

    

430

    

Annual Report 2021
84

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

Osmosis Buyer Limited

  

1st Lien Delay Draw Loan

  

$

790

    

$

—

    

$

790

    

P27 BIDCO LIMITED

  

1st Lien Delay Draw Loan

    

440

      

(88

)

    

352

    

Patriot Growth Insurance Services, LLC

  

1st Lien Delay Draw Loan

    

501

      

—

      

501

    

Patriot Growth Insurance Services, LLC

  

1st Lien Revolver Loan

    

250

      

—

      

250

    

PDI TA Holdings, Inc.

  

1st Lien Revolver Loan

    

205

      

—

      

205

    

Pegasus (Bidco) Limited

  

1st Lien Delay Draw Loan

    

1,112

      

—

      

1,112

    

Pegasus (Bidco) Limited

   1st Lien Term Loan    

5,583

      

(1

)

    

5,582

    

People Corporation

  

1st Lien Delay Draw Loan

    

3,254

      

(183

)

    

3,071

    

People Corporation

  

1st Lien Revolver Loan

    

710

      

(307

)

    

403

    

Petroleum Service Group LLC

  

1st Lien Delay Draw Loan

    

1,607

      

(102

)

    

1,505

    

Petroleum Service Group LLC

  

1st Lien Revolver Loan

    

2,106

      

(351

)

    

1,755

    

Pluralsight, Inc.

  

1st Lien Revolver Loan

    

1,204

      

—

      

1,204

    

Premier Specialties, Inc.

  

1st Lien Delay Draw Loan

    

829

      

—

      

829

    

Premier Specialties, Inc.

  

1st Lien Revolver Loan

    

385

      

—

      

385

    

Premise Health Holding Corp.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Production Resource Group, LLC

  

1st Lien Delay Draw Loan

    

147

      

(98

)

    

49

    

ProfitSolv Purchaser, Inc.

  

1st Lien Delay Draw Loan

    

2,554

      

(530

)

    

2,024

    

ProfitSolv Purchaser, Inc.

  

1st Lien Revolver Loan

    

608

      

—

      

608

    

Project Essential Bidco, Inc.

  

1st Lien Revolver Loan

    

121

      

—

      

121

    

Project Hammond Bidco Limited

  

1st Lien Delay Draw Loan

    

2,369

      

—

      

2,369

    

Proofpoint, Inc.

  

1st Lien Revolver Loan

    

240

      

—

      

240

    

ProService Finteco Sp. z o.o.

  

1st Lien Delay Draw Loan

    

513

      

—

      

513

    

PROTON JVCO S.A R.L.

   1st Lien Term Loan    

949

      

—

      

949

    

QF Holdings, Inc.

  

1st Lien Delay Draw Loan

    

263

      

—

      

263

    

QF Holdings, Inc.

  

1st Lien Revolver Loan

    

317

      

—

      

317

    

Radius Aerospace Europe Limited

  

1st Lien Revolver Loan

    

251

      

—

      

251

    

Radius Aerospace, Inc.

  

1st Lien Revolver Loan

    

429

      

—

      

429

    
Raptor Technologies, LLC
(Sycamore Bidco Ltd)		  

1st Lien Revolver Loan

    

498

      

—

      

498

    

Rawlings Sporting Goods Company, Inc.

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

Reddy Ice LLC

  

1st Lien Delay Draw Loan

    

1,461

      

(1,456

)

    

5

    

Reddy Ice LLC

  

1st Lien Revolver Loan

    

955

      

—

      

955

    

Redwood Services, LLC

  

1st Lien Delay Draw Loan

    

1,729

      

(316

)

    

1,413

    

Redwood Services, LLC

  

1st Lien Revolver Loan

    

158

      

(35

)

    

123

    

Registrar Intermediate, LLC

  

1st Lien Delay Draw Loan

    

2,327

      

—

      

2,327

    

Registrar Intermediate, LLC

  

1st Lien Revolver Loan

    

764

      

—

      

764

    

Relativity ODA LLC

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Reliant SPV, LLC

  

1st Lien Revolver Loan

    

500

      

(329

)

    

171

    

Repairify, Inc.

  

1st Lien Revolver Loan

    

766

      

—

      

766

    

RMS Holdco II, LLC

  

1st Lien Revolver Loan

    

883

      

—

      

883

    

Annual Report 2021
85

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

Rodeo AcquisitionCo LLC

  

1st Lien Delay Draw Loan

  

$

460

    

$

—

    

$

460

    

Rodeo AcquisitionCo LLC

  

1st Lien Revolver Loan

    

311

      

(44

)

    

267

    

RSC Acquisition, Inc.

  

1st Lien Revolver Loan

    

1

      

(1

)

    

—

    

RSK Group Limited

   1st Lien Term Loan    

4,435

      

(2,790

)

    

1,645

    

Rubicone Bidco Limited

   1st Lien Term Loan    

2,256

      

—

      

2,256

    

Rugby Australia Ltd

  

1st Lien Delay Draw Loan

    

909

      

(1

)

    

908

    

Safe Home Security, Inc.

  

1st Lien Delay Draw Loan

    

287

      

(41

)

    

246

    

Saldon Holdings, Inc.

  

1st Lien Revolver Loan

    

381

      

—

      

381

    

SAVOYSPECIAL LLC

  

1st Lien Revolver Loan

    

750

      

(305

)

    

445

    
Schill Landscaping and Lawn Care
Services, LLC		  

1st Lien Delay Draw Loan

    

1,542

      

—

      

1,542

    
Schill Landscaping and Lawn Care
Services, LLC		  

1st Lien Revolver Loan

    

720

      

—

      

720

    

SCM Insurance Services Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Sera 2021 LLC

  

1st Lien Delay Draw Loan

    

1,500

      

(1,293

)

    

207

    

Service Logic Acquisition, Inc.

  

1st Lien Delay Draw Loan

    

498

      

—

      

498

    

Service Logic Acquisition, Inc.

  

1st Lien Revolver Loan

    

1,007

      

—

      

1,007

    

SFE Intermediate HoldCo LLC

  

1st Lien Revolver Loan

    

2

      

—

      

2

    

Shur-Co Acquisition, Inc.

  

1st Lien Revolver Loan

    

441

      

(88

)

    

353

    

Sigma Electric Manufacturing Corporation

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

SiroMed Physician Services, Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

SLR BD Limited

   1st Lien Term Loan    

1,668

      

(233

)

    

1,435

    

Spring Insurance Solutions, LLC

  

1st Lien Delay Draw Loan

    

1,151

      

(127

)

    

1,024

    

Spring Oaks Capital SPV, LLC

  

1st Lien Revolver Loan

    

9,000

      

(2,769

)

    

6,231

    

SSE Buyer, Inc.

  

1st Lien Revolver Loan

    

3

      

(1

)

    

2

    

Stealth Holding LLC

  

1st Lien Delay Draw Loan

    

988

      

(711

)

    

277

    

Sun Acquirer Corp.

  

1st Lien Delay Draw Loan

    

4,869

      

(2,605

)

    

2,264

    

Sun Acquirer Corp.

  

1st Lien Revolver Loan

    

1,059

      

—

      

1,059

    

Sundance Group Holdings, Inc.

  

1st Lien Delay Draw Loan

    

453

      

—

      

453

    

Sundance Group Holdings, Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

Sunshine Sub, LLC

  

1st Lien Revolver Loan

    

144

      

—

      

144

    

SV-Burton Holdings, LLC

  

1st Lien Delay Draw Loan

    

1,847

      

(162

)

    

1,685

    

SV-Burton Holdings, LLC

  

1st Lien Revolver Loan

    

555

      

—

      

555

    

Symbol Bidco I Limited

  

1st Lien Delay Draw Loan

    

580

      

(200

)

    

380

    

Symplr Software Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

TA/WEG Holdings, LLC

  

1st Lien Delay Draw Loan

    

1,714

      

(912

)

    

802

    

TA/WEG Holdings, LLC

  

1st Lien Revolver Loan

    

914

      

(352

)

    

562

    

TCP Hawker Intermediate LLC

  

1st Lien Delay Draw Loan

    

921

      

(406

)

    

515

    

TCP Hawker Intermediate LLC

  

1st Lien Revolver Loan

    

458

      

(34

)

    

424

    

Teligent, Inc.

  

1st Lien Delay Draw Loan

    

127

      

(74

)

    

53

    

Annual Report 2021
86

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Company

  

Investment Type

   Total revolving
and delayed draw
loan commitments		   Less: funded
commitments		   Total unfunded
commitments		  

Teligent, Inc.

  

1st Lien Revolver Loan

  

$

—

    

$

—

    

$

—

    

TGP Holdings III LLC

  

1st Lien Delay Draw Loan

    

964

      

—

      

964

    

The Ultimate Software Group, Inc.

  

1st Lien Revolver Loan

    

1

      

—

      

1

    

The Ultimus Group Midco, LLC

  

1st Lien Revolver Loan

    

396

      

—

      

396

    

Therapy Brands Holdings LLC

  

2nd Lien Delay Draw Loan

    

1,284

      

—

      

1,284

    

Thermostat Purchaser III, Inc.

  

1st Lien Revolver Loan

    

100

      

—

      

100

    

Thermostat Purchaser III, Inc.

  

2nd Lien Delay Draw Loan

    

612

      

—

      

612

    

TIGER UK BIDCO LIMITED

  

1st Lien Delay Draw Loan

    

3,190

      

(3,026

)

    

164

    

TIGER UK BIDCO LIMITED

  

1st Lien Revolver Loan

    

451

      

(75

)

    

376

    

Tricolor Funding SPV 3 LLC

  

1st Lien Revolver Loan

    

2,273

      

(1,244

)

    

1,029

    

Trident TPI Holdings, Inc.

  

1st Lien Delay Draw Loan

    

1,092

      

(439

)

    

653

    

Turbo Acquisitions 10 Bidco Limited

  

1st Lien Delay Draw Loan

    

1,822

      

(1,161

)

    

661

    

United Digestive MSO Parent, LLC

  

1st Lien Revolver Loan

    

511

      

—

      

511

    

US Salt Investors, LLC

  

1st Lien Revolver Loan

    

679

      

—

      

679

    

VLS Recovery Services, LLC

  

1st Lien Delay Draw Loan

    

1,385

      

—

      

1,385

    

VLS Recovery Services, LLC

  

1st Lien Revolver Loan

    

622

      

(53

)

    

569

    

VPP Intermediate Holdings, LLC

  

1st Lien Delay Draw Loan

    

472

      

(9

)

    

463

    

VPP Intermediate Holdings, LLC

  

1st Lien Revolver Loan

    

315

      

—

      

315

    

Watermill Express, LLC

  

1st Lien Delay Draw Loan

    

219

      

—

      

219

    

Watermill Express, LLC

  

1st Lien Revolver Loan

    

275

      

—

      

275

    

WebPT, Inc.

  

1st Lien Revolver Loan

    

216

      

(65

)

    

151

    

Wellness AcquisitionCo, Inc.

  

1st Lien Revolver Loan

    

504

      

—

      

504

    

Wildcat BuyerCo, Inc.

  

1st Lien Delay Draw Loan

    

732

      

—

      

732

    

Wildcat BuyerCo, Inc.

  

1st Lien Revolver Loan

    

255

      

—

      

255

    

Woodchester Funding Limited

  

1st Lien Revolver Loan

    

2,953

      

(854

)

    

2,099

    

WorkWave Intermediate II, LLC

  

1st Lien Revolver Loan

    

460

      

—

      

460

    

WSHP FC Acquisition LLC

  

1st Lien Delay Draw Loan

    

350

      

(183

)

    

167

    

WSHP FC Acquisition LLC

  

1st Lien Revolver Loan

    

106

      

(21

)

    

85

    

YE Brands Holdings, LLC

  

1st Lien Revolver Loan

    

165

      

—

      

165

    

Total

  

 

$

344,192

    

$

(80,889

)

  

$

263,303

    

(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)  Loan or bond was on non-accrual status as of December 31, 2021.

(k)  Non-income producing security as of December 31, 2021.

(l)  When-Issued or delayed delivery security based on typical market settlement convention for such security.

(m)  The Fund sold a participating interest of £1,200 in aggregate principal amount outstanding of the portfolio company's first lien senior secured revolver. As the transaction did not qualify as a "true sale" in accordance with U.S. generally accepted accounting principles ("GAAP"), the Fund recorded a corresponding secured borrowing of $464 at fair value, included in "accrued expenses and other payables" in the accompanying consolidated statement of assets and liabilities. As of December 31, 2021, the interest rate in effect for the secured borrowing was 4.75%.

(n)  The Fund sold a participating interest of $1,023 in aggregate principal amount outstanding of the portfolio company's first lien senior secured revolver. As the transaction did not qualify as a "true sale" in accordance with GAAP, the Fund recorded a corresponding secured borrowing of

Annual Report 2021
87

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

$560 at fair value, included in "accrued expenses and other payables" in the accompanying consolidated statement of assets and liabilities. As of December 31, 2021, the interest rate in effect for the secured borrowing was 8.50%.

(o)  The Fund sold a participating interest of CAD 3,862 in aggregate principal amount outstanding of the portfolio company's first lien senior secured revolver. As the transaction did not qualify as a "true sale" in accordance with GAAP, the Fund recorded a corresponding secured borrowing of $2,138 at fair value, included in "accrued expenses and other payables" in the accompanying consolidated statement of assets and liabilities. As of December 31, 2021, the interest rate in effect for the secured borrowing was 4.25%.

(p)  The Fund sold a participating interest of CAD 4,720 in aggregate principal amount outstanding of the portfolio company's first lien senior secured revolver. As the transaction did not qualify as a "true sale" in accordance with GAAP, the Fund recorded a corresponding secured borrowing of $2,614 at fair value, included in "accrued expenses and other payables" in the accompanying consolidated statement of assets and liabilities. As of December 31, 2021, the interest rate in effect for the secured borrowing was 4.25%.

  As of December 31, 2021, the aggregate cost of securities for Federal income tax purposes was $2,662,257. Unrealized appreciation and depreciation on investments for Federal income tax purposes are as follows:

Gross unrealized appreciation

  

$

53,365

    

Gross unrealized depreciation

    

(18,688

)

  

Net unrealized appreciation

  

$

34,677

    

Securities sold short as of December 31, 2021 were as follows:

Corporate Bonds Sold Short

Company

  

Industry

   Interest
Rate		  

Maturity Date

  

Principal Amount

  

Value

   Percentage
of Net Assets		  

At Home Group Inc.

  

Retailing

    

7.13

%

  

7/15/2029

  

$

(946

)

  

$

(932

)

      

CoreCivic, Inc

  

Commercial & Professional Services

    

8.25

%

  

4/15/2026

    

(275

)

    

(288

)

      

Hormel Foods Corp

  

Food, Beverage & Tobacco

    

1.80

%

  

6/11/2030

    

(390

)

    

(384

)

      
Occidental Petroleum
Corporation		  

Energy

    

4.40

%

  

4/15/2046

    

(980

)

    

(1,008

)

      

Tenet Healthcare Corp

  

Health Care Equipment & Services

    

6.25

%

  

2/1/2027

    

(63

)

    

(66

)

      
Weight Watchers
International, Inc.		  

Consumer Services

    

4.50

%

  

4/15/2029

    

(769

)

    

(738

)

      

Total Corporate Bonds Sold Short (Cost $(3,400))

                  

$

(3,416

)

    

(0.18

)%

  

Common Stocks Sold Short

Company

  

Industry

  

Shares

  

Value

   Percentage
of Net Assets		  

Invesco Senior Loan ETF

  

Diversified Financials

    

(294

)

  

$

(6,497

)

      

Total Common Stocks Sold Short (Cost $(6,426))

          

$

(6,497

)

    

(0.34

)%

  

Forward currency contracts as of December 31, 2021 were as follows:

Description

   Notional
Amount to be
Purchased		   Notional Amount
to be Sold		  

Counterparty

   Settlement
Date		   Unrealized
Appreciation		   Unrealized
Depreciation		  

Forward currency contract

  

$

(1,251

)

  

€

(1,277

)

  

Goldman Sachs

  

January 5, 2022

  

$

27

    

$

—

    

Forward currency contract

  

$

(944

)

  

£

(923

)

  

Goldman Sachs

  

January 19, 2022

    

—

      

(22

)

  

Forward currency contract

  

$

(10,810

)

  

CAD

(10,691

)

  

Goldman Sachs

  

January 19, 2022

    

—

      

(120

)

  

Forward currency contract

  

$

(333

)

  

£

(339

)

  

Goldman Sachs

  

January 21, 2022

    

5

      

—

    

Forward currency contract

  

$

(248

)

  

DKK

(253

)

  

Goldman Sachs

  

January 21, 2022

    

5

      

—

    

Forward currency contract

  

$

(5,789

)

  

CAD

(5,929

)

  

Goldman Sachs

  

January 21, 2022

    

140

      

—

    

Forward currency contract

  

$

(3,172

)

  

DKK

(3,248

)

  

Goldman Sachs

  

January 21, 2022

    

76

      

—

    

Forward currency contract

  

$

(32,776

)

  

€

(33,579

)

  

Goldman Sachs

  

January 21, 2022

    

803

      

—

    

Forward currency contract

  

$

(55,987

)

  

£

(57,015

)

  

Goldman Sachs

  

January 21, 2022

    

1,028

      

—

    

Annual Report 2021
88

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Description

   Notional
Amount to be
Purchased		   Notional Amount
to be Sold		  

Counterparty

   Settlement
Date		   Unrealized
Appreciation		   Unrealized
Depreciation		  

Forward currency contract

  

$

(508

)

  

NOK

(535

)

  

Goldman Sachs

  

January 21, 2022

  

$

27

    

$

—

    

Forward currency contract

  

$

(9,245

)

  

SEK

(9,721

)

  

Goldman Sachs

  

January 21, 2022

    

476

      

—

    

Forward currency contract

  

$

(262

)

  

£

(268

)

  

Goldman Sachs

  

January 21, 2022

    

5

      

—

    

Forward currency contract

  

$

(251

)

  

CAD

(257

)

  

Goldman Sachs

  

January 21, 2022

    

5

      

—

    

Forward currency contract

  

$

(358

)

  

£

(361

)

  

Goldman Sachs

  

January 21, 2022

    

3

      

—

    

Forward currency contract

  

$

(1,367

)

  

€

(1,389

)

  

Goldman Sachs

  

January 21, 2022

    

22

      

—

    

Forward currency contract

  

$

(269

)

  

£

(268

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(1

)

  

Forward currency contract

  

$

(2,305

)

  

€

(2,268

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(37

)

  

Forward currency contract

  

$

(177

)

  

CAD

(176

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(2

)

  

Forward currency contract

  

$

(72

)

  

CAD

(71

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(1

)

  

Forward currency contract

  

$

(380

)

  

€

(376

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(3

)

  

Forward currency contract

  

$

(405

)

  

£

(397

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(8

)

  

Forward currency contract

  

$

(491

)

  

£

(480

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(11

)

  

Forward currency contract

  

$

(3,966

)

  

€

(3,938

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(28

)

  

Forward currency contract

  

$

(7,843

)

  

AUD

(7,742

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(101

)

  

Forward currency contract

  

$

(2,391

)

  

€

(2,378

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(13

)

  

Forward currency contract

  

$

(6,004

)

  

£

(5,902

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(102

)

  

Forward currency contract

  

$

(3,724

)

  

PLN

(3,660

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(64

)

  

Forward currency contract

  

$

(5,247

)

  

SEK

(5,243

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(4

)

  

Forward currency contract

  

$

(5,954

)

  

€

(5,917

)

  

Goldman Sachs

  

January 21, 2022

    

—

      

(37

)

  

Forward currency contract

  

$

(1,428

)

  

SEK

(1,493

)

  

Goldman Sachs

  

September 18, 2022

    

66

      

—

    

Total

              

 

$

2,688

    

$

(554

)

  

Purchased options outstanding as of December 31, 2021 were as follows:

Options on Equity Indices — Buy Protection

Description

  

Exercise Price

  

Expiration Date

  

Counterparty

  

Notional Amount

  

Premium

  

Fair Value

  
Call-Chicago Board Options
Exchange-VIX US		  

$

30

  

1/19/2022

   Citigroup Global
Markets Inc.		  

$

155

  

$

15

  

$

5

  

Total Purchased Options

                      

$

15

    

$

5

    

Written options outstanding as of December 31, 2021 were as follows:

Options on Equity Indices — Sell Protection

Description

  

Exercise Price

  

Expiration Date

  

Counterparty

  

Notional Amount

  

Premium

  

Fair Value

  
Call-Chicago Board Options
Exchange-VIX US		  

$

40

  

1/19/2022

   Citigroup Global
Markets Inc.		  

$

(155

)

  

$

(8

)

  

$

(3

)

  

Total Written Options

                  

$

(8

)

  

$

(3

)

  

Annual Report 2021
89

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

Swap Agreements outstanding as of December 31, 2021 were as follows:

Swap Agreements: Centrally Cleared or Exchange Traded

Credit Default Swaps on Credit Indices — Buy Protection (1)

Description

   Payment
Frequency		   Fixed
Deal Pay
Rate		  

Expiration Date

  

Exchange

   Notional
Amount (2)		  

Value (3)

   Upfront
Premiums
Paid
(Received)		   Unrealized
Appreciation
(Depreciation)		  
AXL CDS USD SR
5Y		    

Q

      

5.00

%

  

06/20/2025

  

ICE

  

$

250

    

$

(18

)

  

$

(2

)

  

$

(16

)

  
CDX.NA.HY S35
5Y		    

Q

      

5.00

%

  

12/20/2025

  

ICE

    

5,331

      

(473

)

    

(522

)

    

49

    
CDX.NA.HY S37
5Y		    

Q

      

5.00

%

  

12/20/2026

  

ICE

    

865

      

(80

)

    

(79

)

    

(1

)

  
KSS CDS USD SR
5Y		    

Q

      

1.00

%

  

12/20/2025

  

ICE

    

62

      

—

      

7

      

(7

)

  

Total Swap Agreements — Buy Protection: Centrally Cleared or Exchange Traded

                      

$

(571

)

  

$

(596

)

  

$

25

    

Credit Default Swaps on Credit Indices — Sell Protection (4)

Description

   Payment
Frequency		   Fixed
Deal Pay
Rate		  

Expiration Date

  

Exchange

   Notional
Amount (2)		  

Value (3)

   Upfront
Premiums
Paid
(Received)		   Unrealized
Appreciation
(Depreciation)		  
TSLA CDS USD SR
5Y		    

Q

      

1.00

%

  

06/20/2026

  

ICE

  

$

275

    

$

(2

)

  

$

7

    

$

(9

)

  

Total Swap Agreements — Sell Protection: Centrally Cleared or Exchange Traded

                      

$

(2

)

  

$

7

    

$

(9

)

  

Swap Agreements: Over the Counter

Credit Default Swaps on Credit Indices — Buy Protection (1)

Description

   Payment
Frequency		   Fixed
Deal Pay
Rate		  

Expiration Date

  

Counterparty

   Notional
Amount (2)		  

Value (3)

   Upfront
Premiums
Paid
(Received)		   Unrealized
Appreciation
(Depreciation)		  
CDX.NA.HY S33
5Y Tranche 25-35		  

Q

  

5.00

%

  

12/20/2024

   Goldman
Sachs		  

$

1,814

  

$

(207

)

  

$

(210

)

  

$

3

  
CDX.NA.HY S35
5Y Tranche 15-25		  

Q

  

5.00

%

  

12/20/2025

   Goldman
Sachs		  

3,105

  

(253

)

  

(209

)

  

(44

)

  
CMBX.NA.BBB—
S9		  

M

  

3.00

%

  

09/17/2058

   Goldman
Sachs		  

1,030

  

100

  

246

  

(146

)

  

Total Swap Agreements — Buy Protection: Over the Counter

                      

$

(360

)

  

$

(173

)

  

$

(187

)

  

(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.

(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.

Annual Report 2021
90

CION Ares Diversified Credit Fund

Consolidated Schedule of Investments (continued)

December 31, 2021

(in thousands, except shares, percentages and as otherwise noted)

(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.

(4)  If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular 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.

Abbreviations:

144A  Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.

CLO  Collateralized Loan Obligation

Currencies:

€  Euro Currency

£  British Pounds

$  U.S. Dollars

AUD  Australian Dollars

CAD  Canadian Dollars

DKK  Danish Krone

GBP  British Pound

NOK  Norwegian Krone

SEK  Swedish Krone

USD  U.S. Dollars

Annual Report 2021
91

CION Ares Diversified Credit Fund

Consolidated Statement of Assets and Liabilities

December 31, 2021
(in thousands)

Assets

  

Investments in unaffiliated issuers, at fair value (cost $2,656,181)

  

$

2,694,554

    

Derivatives

    

2,793

    

Cash

    

87,433

    

Cash denominated in foreign currency, at value (cost $44,295)

    

44,581

    

Due from brokers

    

15,500

    

Receivable for common shares issued by the Fund

    

27,342

    

Receivable for securities sold

    

55,309

    

Interest and principal receivable

    

12,875

    

Other assets

    

5,597

    

Total assets

    

2,945,984

    

Liabilities

  

Debt

  

$

402,468

    
Mandatory redeemable preferred shares (liquidation preference $300,000, net of unamortized
deferred issuance costs of $3,138)		    

296,862

    

Securities sold short (cost $(9,826))

    

9,913

    

Derivatives

    

1,017

    

Payable for securities purchased

    

273,900

    

Interest and facility fees payable

    

2,486

    

Payable for expense support recoupment

    

224

    

Accrued expenses and other payables

    

29,556

    

Total liabilities

    

1,016,426

    

Commitments and contingencies (See Note 2)

          

Net Assets

  

$

1,929,558

    

Net assets consist of:

  

Paid-in capital

    

1,887,454

    

Accumulated undistributed earnings

    

42,104

    

Net assets

  

$

1,929,558

    

Annual Report 2021
92

CION Ares Diversified Credit Fund

Consolidated Statement of Assets and Liabilities (continued)

December 31, 2021
(in thousands, except per share data)

Common shares:

  

Class A:

  

Net Assets

  

$

62,031

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

2,408

    

Net Asset Value Per Share

  

$

25.75

    

Maximum Offering Price Per Share

  

$

27.33

    

Class C:

  

Net Assets

  

$

77,361

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

3,015

    

Net Asset Value Per Share

  

$

25.65

    

Class I:

  

Net Assets

  

$

1,339,091

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

51,483

    

Net Asset Value Per Share

  

$

26.01

    

Class L:

  

Net Assets

  

$

9,845

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

381

    

Net Asset Value Per Share

  

$

25.85

    

Maximum Offering Price Per Share

  

$

27.00

    

Class U:

  

Net Assets

  

$

345,691

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

13,359

    

Net Asset Value Per Share

  

$

25.87

    

Class U-2:

  

Net Assets

  

$

56,851

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

2,199

    

Net Asset Value Per Share

  

$

25.85

    

Maximum Offering Price Per Share

  

$

26.51

    

Class W:

  

Net Assets

  

$

38,688

    

Shares Outstanding ($.001 par value; unlimited shares authorized)

    

1,486

    

Net Asset Value Per Share

  

$

26.03

    

Maximum Offering Price Per Share

  

$

26.84

    

Annual Report 2021
93

CION Ares Diversified Credit Fund

Consolidated Statement of Operations

For the year ended December 31, 2021
(in thousands)

    For the Year Ended
December 31, 2021		  

Investment income:

  

Interest

  

$

126,405

    

Dividend

    

5,025

    

Total investment income

    

131,430

    

Expenses:

  

Management fee (Note 3)

    

21,825

    

Incentive fee (Note 3)

    

3,000

    

Interest and credit facility fees (Note 6 and 7)

    

9,325

    

Shareholder service expense and distribution fees (Note 3)

    

3,227

    

Other expenses

    

8,393

    

Total operating expenses

    

45,770

    

Tax expenses

    

256

    

Expense support recoupment (Note 3)

    

752

    

Total expenses

    

46,778

    

Net Investment Income

    

84,652

    

Realized and unrealized gains (losses) on investments, foreign currency and derivative contracts

  

Net realized gains on investments

    

12,026

    

Net realized losses on derivative contracts

    

(59

)

  

Net realized losses on foreign currency

    

(357

)

  

Net unrealized gains on investments

    

4,907

    

Net unrealized gains on derivative contracts

    

2,544

    

Net unrealized gains on foreign currency

    

10,600

    

Net realized and unrealized gains on investments, foreign currency and other transactions

    

29,661

    

Net increase in net assets resulting from operations

  

$

114,313

    

Annual Report 2021
94

CION Ares Diversified Credit Fund

Consolidated Statements of Changes in Net Assets

(in thousands, except per share data, percentages and as otherwise noted)

   

For the Years Ended December 31,

  
   

2021

  

2020

  

Increase (decrease) in net assets from operations:

  

Net investment income

  

$

84,652

    

$

43,413

    

Net realized gains (losses) on investments, foreign currency and other transactions

    

11,610

      

(26,916

)

  

Net unrealized gains on investments, foreign currency and other transactions

    

18,051

      

19,461

    

Net increase from operations

    

114,313

      

35,958

    

Distributions to shareholders from (Note 2):

  

Distributed earnings — Class A

    

(3,274

)

    

(3,171

)

  

Distributed earnings — Class C

    

(3,972

)

    

(3,680

)

  

Distributed earnings — Class I

    

(48,871

)

    

(25,067

)

  

Distributed earnings — Class L

    

(506

)

    

(373

)

  

Distributed earnings — Class U

    

(14,207

)

    

(6,939

)

  

Distributed earnings — Class U-2

    

(1,559

)

    

(153

)(a)

  

Distributed earnings — Class W

    

(2,119

)

    

(2,162

)

  

Total distributions

    

(74,508

)

    

(41,545

)

  

Increase (decrease) in net assets from operations and distributions

    

39,805

      

(5,587

)

  

Share transactions:

  

Class A:

  

Proceeds of shares issued

    

9,921

      

16,609

    

Value of distributions reinvested

    

959

      

1,067

    

Cost of shares redeemed

    

(9,228

)

    

(17,200

)

  

Net increase from share transactions

    

1,652

      

476

    

Class C:

  

Proceeds of shares issued

    

12,690

      

12,311

    

Value of distributions reinvested

    

1,965

      

1,876

    

Cost of shares redeemed

    

(7,080

)

    

(9,732

)

  

Net increase from share transactions

    

7,575

      

4,455

    

Class I:

  

Proceeds of shares issued

    

796,866

      

299,889

    

Value of distributions reinvested

    

15,507

      

10,193

    

Cost of shares redeemed

    

(104,271

)

    

(56,812

)

  

Net increase from share transactions

    

708,102

      

253,270

    

Class L:

  

Proceeds of shares issued

    

2,344

      

2,402

    

Value of distributions reinvested

    

376

      

250

    

Cost of shares redeemed

    

(500

)

    

(1,444

)

  

Net increase from share transactions

    

2,220

      

1,208

    

Annual Report 2021
95

CION Ares Diversified Credit Fund

Consolidated Statements of Changes in Net Assets (continued)

(in thousands, except per share data, percentages and as otherwise noted)

   

For the Years Ended December 31,

  
   

2021

  

2020

  

Class U:

  

Proceeds of shares issued

    

141,102

      

151,704

    

Value of distributions reinvested

    

11,759

      

5,937

    

Cost of shares redeemed

    

(13,305

)

    

(4,230

)

  

Net increase from share transactions

    

139,556

      

153,411

    

Class U-2:

  

Proceeds of shares issued

    

43,467

      

11,418

(a)

  

Value of distributions reinvested

    

1,106

      

82

(a)

  

Cost of shares redeemed

    

(460

)

    

—

(a)

  

Net increase from share transactions

    

44,113

      

11,500

(a)

  

Class W:

  

Proceeds of shares issued

    

2

      

—

    

Value of distributions reinvested

    

1,522

      

1,620

    

Cost of shares redeemed

    

(3,833

)

    

(311

)

  

Net increase from share transactions

    

(2,309

)

    

1,309

    

Total increase in net assets

    

940,714

      

420,042

    

Net Assets, beginning of period

    

988,844

      

568,802

    

Net Assets, end of period

  

$

1,929,558

    

$

988,844

    

(a) Period from April 13, 2020, date operations commenced, through December 31, 2020.

Annual Report 2021
96

CION Ares Diversified Credit Fund

Consolidated Statement of Cash Flows

For the year ended December 31, 2021
(in thousands, except per share data, percentages and as otherwise noted)

    For the Year Ended
December 31, 2021		  

Operating activities:

  

Net increase in net assets resulting from operations

  

$

114,313

    

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

  

Purchases of investments

    

(2,170,301

)

  

Proceeds from the sale of investments

    

843,186

    

Proceeds from securities sold short

    

11,481

    

Purchases to cover securities sold short

    

(2,313

)

  

Purchases of derivative contracts

    

3,067

    

Proceeds from the sale of derivative contracts

    

(2,785

)

  

Amortization and accretion of discounts and premiums, net

    

4,077

    

Net realized gains on investments

    

(12,026

)

  

Net realized losses on derivative contracts

    

59

    

Net unrealized gains on investments

    

(4,907

)

  

Net unrealized gains on derivative contracts

    

(2,544

)

  

Net realized and unrealized gains on foreign currency

    

(10,243

)

  

Amortization of debt issuance cost

    

1,234

    

Payment-in-kind ("PIK") interest and dividends

    

(2,837

)

  

Collections of PIK interest and dividends

    

330

    

Changes in operating assets and liabilities:

      

Due from brokers

    

(12,869

)

  

Interest and principal receivable

    

(3,482

)

  

Other assets

    

239

    

Interest and facility fees payable

    

2,174

    

Payable for expense support

    

140

    

Accrued expenses and other payables

    

14,214

    

Net cash used in operating activities

    

(1,229,793

)

  

Financing activities:

  

Borrowings on debt

    

888,840

    

Repayments of debt

    

(667,500

)

  

Proceeds from issuance of mandatory redeemable preferred shares

    

300,000

    

Deferred debt and mandatory redeemable preferred shares issuance costs

    

(8,265

)

  

Proceeds of common shares issued

    

1,012,966

    

Cost of common shares redeemed

    

(138,678

)

  

Distributions to shareholders

    

(70,420

)

  

Value of distributions reinvested

    

33,194

    

Net cash provided by financing activities

    

1,350,137

    

Change in Cash

    

120,344

    

Cash, Beginning of Period

    

11,670

    

Cash, End of Period

  

$

132,014

    

Supplemental disclosure of cash flow information:

  

Cash paid for interest and credit facility fees during the period

  

$

7,151

    

Cash paid for taxes during the period

  

$

236

    

Annual Report 2021
97

CION Ares Diversified Credit Fund

Financial Highlights

(in thousands, except per share data, percentages and as otherwise noted)

    For the
Year Ended
December 31,
2021		   For the
Year Ended
December 31,
2020		   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
January 26,
2017
(commencement
of operations) to
October 31,
2017		  

Class A

  

Per share data:

  
Net asset value, beginning
of period		  

$

25.13

    

$

25.93

    

$

25.44

    

$

25.80

    

$

25.25

    

$

25.00

    
Income from investment
operations:		  

Net investment income(a)

    

1.46

      

1.40

      

0.23

      

1.39

      

1.52

      

0.86

    
Net realized and unrealized
gains (losses)		    

0.55

      

(0.80

)

    

0.49

      

(0.36

)

    

0.42

      

0.44

    
Total income from investment
operations		    

2.01

      

0.60

      

0.72

      

1.03

      

1.94

      

1.30

    
Less distributions declared to
shareholders:		  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(0.86

)

  
From net realized gains on
investments		    

—

      

—

      

—

      

—

      

—

      

(0.12

)

  
From net unrealized gains on
investments and foreign currency		    

—

      

—

      

—

      

—

      

—

      

(0.07

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(1.05

)

  

Net asset value, end of period

  

$

25.75

    

$

25.13

    

$

25.93

    

$

25.44

    

$

25.80

    

$

25.25

    
Total return, excluding expense
support(b)		    

8.93

%

    

3.61

%

    

2.86

%(c)

    

4.37

%

    

(2.44

)%

    

(37.12

)%(c)

  
Total return, including expense
support(d)		    

8.21

%

    

2.77

%

    

2.86

%(c)

    

4.10

%

    

7.91

%

    

5.32

%(c)

  
Ratios to average net assets/
supplemental data:		  

Net assets, end of period

  

$

62,031

    

$

58,881

    

$

60,203

    

$

54,386

    

$

37,915

    

$

12,865

    

Including interest expense:

  
Expenses, excluding expense
support(e)(h)		    

3.11

%

    

3.44

%

    

4.01

%(f)

    

4.03

%

    

5.98

%

    

58.85

%(f)

  
Expenses, including expense
support(e)(g)(h)		    

3.83

%

    

4.28

%

    

4.01

%(f)

    

4.30

%

    

0.34

%

    

0.00

%(f)

  

Excluding interest expense:

  
Expenses, excluding expense
support(h)		    

2.46

%

    

2.90

%

    

3.33

%(f)

    

3.38

%

    

5.97

%

    

58.85

%(f)

  
Expenses, including expense
support(g)(h)		    

3.18

%

    

3.73

%

    

3.33

%(f)

    

3.65

%

    

0.33

%

    

0.00

%(f)

  

Net investment income(e)

    

5.72

%

    

5.86

%

    

5.27

%(f)

    

5.56

%

    

5.91

%

    

4.48

%(f)

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

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.

Annual Report 2021
98

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.58% of base management fees, 0.65% of the cost of borrowing, 0.72% of net expense support and 0.88% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.54% of the cost of borrowing, 0.84% of net expense support and 1.35% 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.

Annual Report 2021
99

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the
Year Ended
December 31,
2021		   For the
Year Ended
December 31,
2020		   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		  

$

25.05

    

$

25.90

    

$

25.44

    

$

25.80

    

$

25.25

    

$

24.95

    
Income from investment
operations:		  

Net investment income(a)

    

1.43

      

1.35

      

0.19

      

1.39

      

1.52

      

0.39

    
Net realized and unrealized
gains (losses)		    

0.56

      

(0.80

)

    

0.50

      

(0.36

)

    

0.42

      

0.33

    
Total income from investment
operations		    

1.99

      

0.55

      

0.69

      

1.03

      

1.94

      

0.72

    
Less distributions declared to
shareholders:		  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(0.39

)

  
From net realized gains on
investments		    

—

      

—

      

—

      

—

      

—

      

(0.02

)

  
From net unrealized gains on
investments and foreign currency		    

—

      

—

      

—

      

—

      

—

      

(0.01

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(0.42

)

  

Net asset value, end of period

  

$

25.65

    

$

25.05

    

$

25.90

    

$

25.44

    

$

25.80

    

$

25.25

    
Total return, excluding expense
support(b)		    

8.20

%

    

2.81

%

    

2.74

%(c)

    

3.70

%

    

(3.19

)%

    

(3.56

)%(c)

  
Total return, including expense
support(d)		    

8.16

%

    

2.57

%

    

2.74

%(c)

    

4.10

%

    

7.91

%

    

2.95

%(c)

  
Ratios to average net assets/
supplemental data:		  

Net assets, end of period

  

$

77,361

    

$

68,039

    

$

65,779

    

$

59,912

    

$

29,868

    

$

3,898

    

Including interest expense:

  
Expenses, excluding expense
support(e)(h)		    

3.87

%

    

4.18

%

    

4.76

%(f)

    

4.82

%

    

6.73

%

    

25.59

%(f)

  
Expenses, including expense
support(e)(g)(h)		    

3.91

%

    

4.41

%

    

4.76

%(f)

    

4.42

%

    

0.34

%

    

0.00

%(f)

  

Excluding interest expense:

  
Expenses, excluding expense
support(h)		    

3.22

%

    

3.64

%

    

4.07

%(f)

    

4.15

%

    

6.72

%

    

22.59

%(f)

  
Expenses, including expense
support(g)(h)		    

3.26

%

    

3.88

%

    

4.07

%(f)

    

3.75

%

    

0.33

%

    

0.00

%(f)

  

Net investment income(e)

    

5.65

%

    

5.66

%

    

4.52

%(f)

    

5.48

%

    

5.91

%

    

5.17

%(f)

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

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.

Annual Report 2021
100

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.58% of base management fees, 0.65% of the cost of borrowing, 0.04% of net expense support and 1.64% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.56% of base management fees, 0.52% of the cost of borrowing, 0.24% of net expense support and 2.09% 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.

Annual Report 2021
101

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the
Year Ended
December 31,
2021		   For the
Year Ended
December 31,
2020		   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		  

$

25.22

    

$

25.93

    

$

25.44

    

$

25.80

    

$

25.25

    

$

24.95

    
Income from investment
operations:		  

Net investment income(a)

    

1.62

      

1.49

      

0.23

      

1.39

      

1.52

      

0.40

    
Net realized and unrealized
gains (losses)		    

0.56

      

(0.80

)

    

0.49

      

(0.36

)

    

0.42

      

0.32

    
Total income from investment
operations		    

2.18

      

0.69

      

0.72

      

1.03

      

1.94

      

0.72

    
Less distributions declared to
shareholders:		  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(0.40

)

  
From net realized gains on
investments		    

—

      

—

      

—

      

—

      

—

      

(0.01

)

  
From net unrealized gains on
investments and foreign currency		    

—

      

—

      

—

      

—

      

—

      

(0.01

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.39

)

    

(0.42

)

  

Net asset value, end of period

  

$

26.01

    

$

25.22

    

$

25.93

    

$

25.44

    

$

25.80

    

$

25.25

    
Total return, excluding expense
support(b)		    

8.90

%

    

3.55

%

    

2.88

%(c)

    

4.78

%

    

(2.19

)%

    

(2.49

)%(c)

  
Total return, including expense
support(d)		    

8.87

%

    

3.12

%

    

2.86

%(c)

    

4.10

%

    

7.91

%

    

2.95

%(c)

  
Ratios to average net assets/
supplemental data:		  

Net assets, end of period

  

$

1,339,092

    

$

603,536

    

$

354,144

    

$

298,481

    

$

111,705

    

$

6,048

    

Including interest expense:

  
Expenses, excluding expense
support(e)(h)		    

3.25

%

    

3.50

%

    

3.74

%(f)

    

3.87

%

    

5.73

%

    

18.62

%(f)

  
Expenses, including expense
support(e)(g)(h)		    

3.28

%

    

3.93

%

    

3.87

%(f)

    

4.55

%

    

0.34

%

    

0.00

%(f)

  

Excluding interest expense:

  
Expenses, excluding expense
support(h)		    

2.56

%

    

2.97

%

    

3.06

%(f)

    

3.17

%

    

5.71

%

    

18.62

%(f)

  
Expenses, including expense
support(g)(h)		    

2.59

%

    

3.39

%

    

3.19

%(f)

    

3.85

%

    

0.32

%

    

0.00

%(f)

  

Net investment income(e)

    

6.34

%

    

6.24

%

    

5.44

%(f)

    

5.38

%

    

5.91

%

    

5.19

%(f)

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

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.

Annual Report 2021
102

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.60% of base management fees, 0.33% of incentive fees, 0.69% of the cost of borrowing, 0.03% of net expense support and 0.63% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.59% of base management fees, 0.25% of incentive fee, 0.53% of the cost of borrowing, 0.43% of net expense support and 1.14% 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.

Annual Report 2021
103

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the
Year Ended
December 31,
2021		   For the
Year Ended
December 31,
2020		   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

  

$

25.14

    

$

25.92

    

$

25.44

    

$

25.80

    

$

25.23

    

Income from investment operations:

  

Net investment income(a)

    

1.54

      

1.44

      

0.19

      

1.39

      

1.52

    

Net realized and unrealized gains (losses)

    

0.56

      

(0.82

)

    

0.52

      

(0.36

)

    

0.43

    

Total income from investment operations

    

2.10

      

0.62

      

0.71

      

1.03

      

1.95

    

Less distributions declared to shareholders:

  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.38

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.39

)

    

(1.38

)

  

Net asset value, end of period

  

$

25.85

    

$

25.14

    

$

25.92

    

$

25.44

    

$

25.80

    

Total return, excluding expense support(b)

    

8.69

%

    

3.27

%

    

2.82

%(c)

    

4.32

%

    

(2.69

)%(c)

  

Total return, including expense support(d)

    

8.58

%

    

2.85

%

    

2.82

%(c)

    

4.10

%

    

7.96

%(c)

  

Ratios to average net assets/supplemental data:

  

Net assets, end of period

  

$

9,845

    

$

7,364

    

$

6,325

    

$

5,536

    

$

1,933

    

Including interest expense:

  

Expenses, excluding expense support(e)(h)

    

3.40

%

    

3.82

%

    

4.24

%(f)

    

4.38

%

    

6.23

%(f)

  

Expenses, including expense support(e)(g)(h)

    

3.51

%

    

4.24

%

    

4.24

%(f)

    

4.60

%

    

0.34

%(f)

  

Excluding interest expense:

  

Expenses, excluding expense support(h)

    

2.75

%

    

3.27

%

    

3.56

%(f)

    

3.67

%

    

6.21

%(f)

  

Expenses, including expense support(g)(h)

    

2.86

%

    

3.69

%

    

3.56

%(f)

    

3.89

%

    

0.32

%(f)

  

Net investment income(e)

    

6.05

%

    

6.04

%

    

4.47

%(f)

    

5.35

%

    

5.19

%(f)

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.58% of base management fees, 0.05% of incentive fees, 0.65% of the cost of borrowing, 0.11% of net expense support and 1.12% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.58% of base management fees, 0.02% of incentive fees, 0.55% of the cost of borrowing, 0.42% of net expense support and 1.68% 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.

Annual Report 2021
104

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the Year Ended
December 31, 2021		   For the Year Ended
December 31, 2020		   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

  

$

25.18

    

$

25.92

    

$

25.44

    

$

25.86

    

Income from investment operations:

  

Net investment income(a)

    

1.52

      

1.42

      

0.20

      

0.40

    

Net realized and unrealized gains (losses)

    

0.56

      

(0.76

)

    

0.51

      

(0.45

)

  

Total income from investment operations

    

2.08

      

0.66

      

0.71

      

(0.05

)

  

Less distributions declared to shareholders:

  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(0.37

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(0.37

)

  

Net asset value, end of period

  

$

25.87

    

$

25.18

    

$

25.92

    

$

25.44

    

Total return, excluding expense support(b)(c)

    

8.48

%

    

3.01

%

    

2.74

%

    

1.60

%

  

Total return, including expense support(c)(d)

    

8.48

%

    

2.99

%

    

2.82

%

    

(0.14

)%

  

Ratios to average net assets/supplemental data:

  

Net assets, end of period

  

$

345,691

    

$

199,175

    

$

42,902

    

$

10,434

    

Including interest expense:

  

Expenses, excluding expense support(e)(f)(h)

    

3.64

%

    

4.00

%

    

4.31

%

    

4.85

%

  

Expenses, including expense support(e)(f)(g)(h)

    

3.64

%

    

4.02

%

    

3.83

%

    

6.59

%

  

Excluding interest expense:

  

Expenses, excluding expense support(f)(h)

    

2.97

%

    

3.51

%

    

3.66

%

    

3.88

%

  

Expenses, including expense support(f)(g)(h)

    

2.97

%

    

3.54

%

    

4.48

%

    

5.62

%

  

Net investment income(e)(f)

    

5.96

%

    

5.98

%

    

5.39

%

    

12.08

%

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

5.42

%(c)

    

63.58

%(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.59% of base management fees, 0.67% of the cost of borrowing and 1.38% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.60% of base management fees, 0.48% of the cost of borrowing, 0.02% of net expense support and 1.92% 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.

Annual Report 2021
105

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the Year Ended
December 31, 2021		   For the Period from
April 13, 2020
(commencement of
operations) to
December 31, 2020		  

Class U-2

  

Per share data:

  

Net asset value, beginning of period

  

$

25.17

    

$

21.79

    

Income from investment operations:

  

Net investment income(a)

    

1.52

      

0.76

    

Net realized and unrealized gains

    

0.55

      

3.62

    

Total income from investment operations

    

2.07

      

4.38

    

Less distributions declared to shareholders:

  

From net investment income

    

(1.39

)

    

(1.00

)

  

Total distributions

    

(1.39

)

    

(1.00

)

  

Net asset value, end of period

  

$

25.85

    

$

25.17

    

Total return, excluding expense support(b)(c)

    

8.44

%

    

19.71

%

  

Total return, including expense support(c)(d)

    

8.44

%

    

19.71

%

  

Ratios to average net assets/supplemental data:

  

Net assets, end of period

  

$

56,851

    

$

12,018

    

Including interest expense:

  

Expenses, excluding expense support(e)(f)(h)

    

3.74

%

    

4.10

%

  

Expenses, including expense support(e)(f)(g)(h)

    

3.74

%

    

4.10

%

  

Excluding interest expense:

  

Expenses, excluding expense support(f)(h)

    

3.00

%

    

3.69

%

  

Expenses, including expense support(f)(g)(h)

    

3.00

%

    

3.69

%

  

Net investment income(e)(f)

    

5.98

%

    

4.48

%

  

Portfolio turnover rate(c)

    

43.72

%

    

59.77

%

  

(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.62% of base management fees, 0.74% of the cost of borrowing and 1.38% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.54% of base management fees, 0.39% of the cost of borrowing, 0.00% of net expense support and 2.17% of other operating expenses.

Annual Report 2021
106

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

    For the Year Ended
December 31, 2021		   For the Year Ended
December 31, 2020		   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

  

$

25.27

    

$

25.92

    

$

25.44

    

$

25.03

    

Income from investment operations:

  

Net investment income(a)

    

1.58

      

1.50

      

0.25

      

1.23

    

Net realized and unrealized gains (losses)

    

0.57

      

(0.75

)

    

0.46

      

0.38

    

Total income from investment operations

    

2.15

      

0.75

      

0.71

      

1.61

    

Less distributions declared to shareholders:

  

From net investment income

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.20

)

  

Total distributions

    

(1.39

)

    

(1.40

)

    

(0.23

)

    

(1.20

)

  

Net asset value, end of period

  

$

26.03

    

$

25.27

    

$

25.92

    

$

25.44

    

Total return, excluding expense support(b)(c)

    

8.73

%

    

3.35

%

    

2.82

%

    

7.00

%

  

Total return, including expense support(c)(d)

    

8.73

%

    

3.35

%

    

2.82

%

    

6.25

%

  

Ratios to average net assets/supplemental data:

  

Net assets, end of period

  

$

38,688

    

$

39,831

    

$

39,449

    

$

38,423

    

Including interest expense:

  

Expenses, excluding expense support(e)(f)(g)

    

3.39

%

    

3.65

%

    

4.28

%

    

4.73

%

  

Expenses, including expense support(e)(f)(g)(h)

    

3.39

%

    

3.65

%

    

4.28

%

    

5.47

%

  

Excluding interest expense:

  

Expenses, excluding expense support(f)(h)

    

2.75

%

    

3.14

%

    

3.59

%

    

3.65

%

  

Expenses, including expense support(f)(g)(h)

    

2.75

%

    

3.14

%

    

3.59

%

    

4.39

%

  

Net investment income(e)(f)

    

6.17

%

    

6.23

%

    

4.97

%

    

5.14

%

  

Portfolio turnover rate

    

43.72

%

    

59.77

%

    

5.42

%(c)

    

63.58

%(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 year ended December 31, 2021, the ratio of operating expenses to average net assets consisted of 1.58% of base management fees, 0.06% of incentive fees, 0.64% of the cost of borrowing and 1.11% of other operating expenses. For the year ended December 31, 2020, the ratio of operating expenses to average net assets consisted of 1.54% of base management fees, 0.03% of incentive fees, 0.50% of the cost of borrowing, 0.00% of net expense support and 1.58% 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.

Annual Report 2021
107

CION Ares Diversified Credit Fund

Financial Highlights (continued)

(in thousands, except per share data, percentages and as otherwise noted)

Information about the Fund's senior securities as of December 31, 2021, December 31, 2020, December 31, 2019 and October 31, 2019 is shown in the following table.

    Total Amount
Outstanding
Exclusive of
Treasury
Securities(a)		   Asset
Coverage
Per Unit(b)		   Involuntary
Liquidating
Preference
Per Unit(c)		   Average
Market Value
Per Unit(d)		  

Class and Period Ended

  

Revolving Credit Facility (Wells Fargo Bank, N.A.)

  

December 31, 2021

  

$

225,664

    

$

6,461

      

—

      

N/A

    

December 31, 2020

    

77,025

      

6,233

      

—

      

N/A

    

December 31, 2019

    

19,054

      

5,383

      

—

      

N/A

    

October 31, 2019

    

19,397

      

3,847

      

—

      

N/A

    

Revolving Credit Facility (State Street Bank and Trust Company)

  

December 31, 2021

  

$

176,803

    

$

6,461

      

—

      

N/A

    

December 31, 2020

    

111,283

      

6,233

      

—

      

N/A

    

December 31, 2019

    

110,387

      

5,383

      

—

      

N/A

    

October 31, 2019

    

144,357

      

3,847

      

—

      

N/A

    

Mandatory Redeemable Preferred Shares*

  

December 31, 2021

  

$

300,000

    

$

3,724

    

$

25.00

      

N/A

    

*  There were no mandatory redeemable preferred shares outstanding as of December 31, 2020, December 31, 2019 and October 31, 2019.

(a)  Total amount of each class of senior securities outstanding at principal value at the end of the period presented.

(b)  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''.

(c)  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 Securities and Exchange Commission expressly does not require this information to be disclosed for certain types of senior securities.

(d)  Not applicable to senior securities outstanding as of period end.

Annual Report 2021
108

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

(1) Organization

CION Ares Diversified Credit Fund (the "Fund") is a closed-end, diversified management investment company that is registered under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). 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.

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.

The Fund is externally managed by CION Ares Management, LLC (the "Adviser") pursuant to an investment advisory and management agreement. The Adviser 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 Management"), a publicly traded, leading global alternative investment manager, and CION Investment Group, LLC ("CION") and is controlled by Ares Management. The Adviser oversees the management of the Fund's activities and is responsible for making investment decisions for the Fund's portfolio. Ares Operations LLC ("Ares Operations"), a subsidiary of Ares Management, provides certain administrative and other services necessary for the Fund to operate.

Fiscal Year End Change

On September 25, 2019, the Board of trustees (the "Board") 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 year ended December 31, 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 the accrual basis of accounting in conformity with U.S. generally accepted accounting principles ("GAAP"), and include the accounts of the Fund and its consolidated subsidiaries. The Fund is an investment company following accounting and reporting guidance in Accounting Standards Codification ("ASC") Topic 946, Financial Services — Investment Companies. The consolidated financial

statements reflect all adjustments and reclassifications, 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.

Cash and Cash Equivalents

Cash and cash equivalents include funds from time to time deposited with financial institutions. Cash and cash equivalents are carried at cost, which approximates fair value.

Concentration of Credit Risk

The Fund places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Investment Transactions

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.

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 Board in accordance with the Fund's valuation policy (the "Valuation Policy"). The Valuation Policy is reviewed and approved at least annually by 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 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

Annual Report 2021
109

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 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. All investments in securities are recorded at their fair value. See Note 4 for more information on the Fund's valuation process.

Interest Income Recognition

Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind ("PIK") interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.

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 the Fund's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Fund'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) or is in the process of collection.

Collateralized loan obligation ("CLO") equity investments recognize investment income by utilizing an effective interest methodology based upon an effective yield to maturity utilizing projected cash flows, as required by ASC 325-40, Beneficial Interest in Securitized Financial Assets.

Dividend Income Recognition

Dividend income on preferred equity securities is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. To the extent preferred equity securities contain PIK provisions, PIK dividends, computed at the contractual rate specified in each applicable agreement, are accrued and recorded as dividend income and added to the principal balance of the preferred equity security. PIK dividends added to the principal balance are generally collected upon redemption of the equity security.

Foreign Currency Transactions and Forward Currency Contracts

The Fund's books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (i) fair value of investment securities, other assets and liabilities at the exchange rates prevailing at the end of the period; and (ii) purchases and sales of investment securities, income and expense at the exchange rates prevailing on the respective dates of such transactions, income or expenses.

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

Annual Report 2021
110

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

income and expense items recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or 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 currency contracts for operational purposes and to protect against adverse exchange rate fluctuations. A forward 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 currency contracts are obtained from an independent pricing source.

Derivative Instruments

The Fund values its derivatives at fair value with the unrealized gains or losses recorded in "net realized and unrealized gains (losses) on investments, from forward currency and derivative contracts" in the consolidated statement of operations.

Mandatory Redeemable Preferred Shares

The Fund carries its mandatory redeemable preferred shares at amortized cost and such shares are included as a liability on the consolidated statement of assets and liabilities. See Note 7 for further details.

Debt and Mandatory Redeemable Preferred Shares Issuance Costs

Debt and mandatory redeemable preferred shares issuance costs are amortized over the life of the relevant senior secured revolving credit facilities and mandatory redeemable preferred shares.

Secured Borrowings

The Fund follows the guidance in ASC Topic 860, Transfers and Servicing, when accounting for participations and other partial loan sales. Certain loan sales do not qualify for sale accounting under ASC 860 because these sales do not meet the definition of a "participating interest," as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest or which are not eligible for sale accounting remain as an investment on the consolidated statement of assets and liabilities as required under GAAP and the proceeds are recorded as a secured borrowing. Secured borrowings are carried at fair value and included in "accrued expenses and other payables" in the accompanying consolidated statement of assets and liabilities.

Income Taxes

The Fund has elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Fund must (among other requirements) meet certain source-of-income and asset diversification requirements and timely distribute to its shareholders all or substantially all of its investment company taxable income, as defined by the Code, for each year. The Fund has made and intends to continue to make the requisite distributions to its shareholders, which will generally relieve the Fund from U.S. federal corporate-level income taxes.

Depending on the level of taxable income earned in a tax year, the Fund may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Fund determines that its estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, the Fund accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.

For tax purposes, the distributions to holders of mandatory redeemable preferred shares as described in Note 7 are treated as dividends.

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

Annual Report 2021
111

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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.

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, 2022, the Adviser has no obligation to make expense support payments in future periods. If the Adviser did not make any expense support payments during such period, all or a portion of the Fund's distributions would have been 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.

Shareholders' Allocations

The Fund currently offers Class A, Class C, Class I, Class L, Class U, Class U-2 and Class W common shares (See Note 5). Realized and unrealized gains and losses and net investment income, excluding class specific expenses, if any, are allocated daily to each class of common 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.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires the Adviser to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates and such differences may be material.

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 London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-04 are 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 and 2021-01 on the Fund's consolidated financial statements.

(3) Investment Advisory and Other Agreements

The Adviser is registered as an investment adviser under the Advisers Act. The Adviser is an affiliate of Ares Management

Annual Report 2021
112

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

and leverages Ares Management's entire investment platform and benefits from the significant capital markets, trading and research expertise of all of Ares Management's 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 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.

Pursuant to the 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 (including any assets attributable to any preferred shares issued or to indebtedness) minus the Fund's liabilities other than liabilities relating to indebtedness. During the year ended December 31, 2021, the Fund incurred $21,825 of Management Fees.

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 each 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 year ended December 31, 2021, Class I, Class L and Class W incurred a total of $3,000 of Incentive Fees.

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. In calculating any Incentive Fee, "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, through the period ending July 31, 2022, reimburse the Fund's operating expenses to the extent that aggregate distributions made to each class' shareholders during the 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

Annual Report 2021
113

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 was renewed for another year in May 2021 and is set to expire on July 31, 2022, unless renewed by the mutual agreement of the Adviser and the Board. The Expense Support Agreement may be terminated only by the Board on notice to the Adviser. For the year ended December 31, 2021, the Adviser did not provide any expense support and the Fund incurred $752 in Adviser Reimbursement.

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 associated dates through which such expenses are eligible for reimbursement from the Fund.

Fund Level Expense Support

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

January 31, 2017

    

335

      

335

      

—

      

—

      

68.82

      

—

    

January 31, 2020

  

April 30, 2017

    

820

      

820

      

—

      

—

      

54.97

      

1.39

    

April 30, 2020

  

July 31, 2017

    

738

      

738

      

—

      

—

      

37.93

      

1.39

    

July 31, 2020

  

Total

    

1,893

      

1,893

      

—

      

—

                

Class A

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

July 31, 2017

    

193

      

193

      

—

      

—

      

9.01

      

1.39

    

July 31, 2020

  

October 31, 2017

    

592

      

291

      

301

      

—

      

7.68

      

1.39

    

October 31, 2020

  

January 31, 2018

    

412

      

111

      

301

      

—

      

5.42

      

1.39

    

January 31, 2021

  

April 30, 2018

    

307

      

118

      

189

      

—

      

4.43

      

1.39

    

April 30, 2021

  

July 31, 2018

    

282

      

137

      

145

      

—

      

3.86

      

1.39

    

July 31, 2021

  

October 31, 2018

    

351

      

66

      

285

      

—

      

3.15

      

1.39

    

October 31, 2021

  

January 31, 2019

    

113

      

—

      

—

      

113

      

1.21

      

1.39

    

January 31, 2022

  

April 30, 2019

    

10

      

—

      

—

      

10

      

1.29

      

1.39

    

April 30, 2022

  

Total

    

2,260

      

916

      

1,221

      

123

                

Annual Report 2021
114

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

Class C

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

July 31, 2017

    

—

      

—

      

—

      

—

      

—

      

—

    

July 31, 2020

  

October 31, 2017

    

99

      

99

      

—

      

—

      

5.32

      

1.39

    

October 31, 2020

  

January 31, 2018

    

174

      

64

      

110

      

—

      

6.07

      

1.39

    

January 31, 2021

  

April 30, 2018

    

206

      

2

      

204

      

—

      

4.94

      

1.39

    

April 30, 2021

  

July 31, 2018

    

264

      

21

      

243

      

—

      

4.33

      

1.39

    

July 31, 2021

  

October 31, 2018

    

313

      

—

      

313

      

—

      

3.66

      

1.39

    

October 31, 2021

  

January 31, 2019

    

163

      

—

      

—

      

163

      

1.96

      

1.39

    

January 31, 2022

  

April 30, 2019

    

84

      

—

      

—

      

84

      

2.03

      

1.39

    

April 30, 2022

  

Total

    

1,303

      

186

      

870

      

247

                

Class I

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

July 31, 2017

    

—

      

—

      

—

      

—

      

—

      

—

    

July 31, 2020

  

October 31, 2017

    

172

      

172

      

—

      

—

      

4.81

      

1.39

    

October 31, 2020

  

January 31, 2018

    

246

      

246

      

—

      

—

      

5.03

      

1.39

    

January 31, 2021

  

April 30, 2018

    

369

      

369

      

—

      

—

      

3.84

      

1.39

    

April 30, 2021

  

July 31, 2018

    

521

      

521

      

—

      

—

      

3.19

      

1.39

    

July 31, 2021

  

October 31, 2018

    

779

      

779

      

—

      

—

      

2.45

      

1.39

    

October 31, 2021

  

January 31, 2019

    

281

      

281

      

—

      

—

      

0.96

      

1.39

    

January 31, 2022

  

April 30, 2019

    

—

      

—

      

—

      

—

      

—

      

1.39

    

April 30, 2022

  

Total

    

2,368

      

2,368

      

—

      

—

                

Class L

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

July 31, 2017

    

—

      

—

      

—

      

—

      

—

      

—

    

July 31, 2020

  

October 31, 2017

    

—

      

—

      

—

      

—

      

—

      

—

    

October 31, 2020

  

January 31, 2018

    

—

      

—

      

—

      

—

      

5.49

      

1.39

    

January 31, 2021

  

April 30, 2018

    

4

      

4

      

—

      

—

      

3.54

      

1.39

    

April 30, 2021

  

July 31, 2018

    

9

      

9

      

—

      

—

      

3.23

      

1.39

    

July 31, 2021

  

October 31, 2018

    

16

      

16

      

—

      

—

      

2.62

      

1.39

    

October 31, 2021

  

January 31, 2019

    

7

      

7

      

—

      

—

      

1.46

      

1.39

    

January 31, 2022

  

April 30, 2019

    

2

      

2

      

—

      

—

      

1.54

      

1.39

    

April 30, 2022

  

Total

    

38

      

38

      

—

      

—

                

Annual Report 2021
115

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

Class U

Three Months Ended

   Expense
Support
from the
Adviser
($)		   Recoupment
of Expense
Support
($)		   Expense
Support
No Longer
Eligible for
Reimbursement
($)		   Unreimbursed
Expense
Support
($)		   Ratio of Other
Fund Operating
Expenses to
Average Net
Assets for the
Period(a) %		   Annualized
Distribution
Ratios for the
Period(b)
($)		   Eligible for
Reimbursement
through		  

December 31, 2019

    

27

      

27

      

—

      

—

      

1.72

      

1.39

    

December 31, 2022

  

Total

    

27

      

27

      

—

      

—

                

(a) 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.

(b) 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.

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 year ended December 31, 2021 was $2,078.

Pursuant to an administration agreement between ALPS Fund Services, Inc. ("ALPS") and the Fund, ALPS performs, or administers the performance of, certain of the Fund's required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, and operations, preparing 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, ALPS coordinates the preparation and filing of the Fund's tax returns and generally coordinates the payment of the Fund's expenses and the performance of administrative and professional services rendered to the Fund by others. The Fund pays ALPS for these services. The total of such expenses incurred by the Fund for the year ended December 31, 2021 was $1,380.

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 year ended December 31, 2021 was $518.

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 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 ALPS Distributor, Inc. (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 Distribution Plan operates in a manner consistent with Rule 12b-1 under the Investment Company

Annual Report 2021
116

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 Investment Company Act which permits it to offer multiple classes of shares. 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. Some or all of such distribution fees may be paid by the Distributor to certain financial intermediaries.

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 or its subsidiaries (for example, the State Street Credit Facility and the Wells Credit Facility, both as defined below), 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%.

(4) Fair Value of Financial Instruments

The Fund follows the provisions of ASC 820-10, Fair Value Measurements and Disclosures ("ASC 820-10"), which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Fund to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Fund has considered its principal market as the market in which the Fund exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether

the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are 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 approved by the Board that is consistent with the provisions of ASC 820-10 (See Note 2 for more information). 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 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.

Annual Report 2021
117

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

The investments 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. The provided prices are checked using internally developed 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.

Annual Report 2021
118

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

The following is a summary of the inputs used as of December 31, 2021, 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

    

—

      

722,763

      

1,390,028

      

2,112,791

    
Subordinated
Loans		    

—

      

41

      

15,827

      

15,868

    
Corporate
Bonds		    

—

      

194,898

      

12,890

      

207,788

    
Collateralized
Loan
Obligations		    

—

      

—

      

202,700

      

202,700

    
Common
Stocks		    

2,299

      

—

      

24,558

      

26,857

    
Preferred
Stocks		    

—

      

—

      

102,455

      

102,455

    
Private
Asset-Backed
Debt		    

—

      

—

      

19,843

      

19,843

    
Real Estate
Debt		    

—

      

—

      

3,431

      

3,431

    

Warrants

    

—

      

—

      

2,821

      

2,821

    
Total
Investments		    

2,299

      

917,702

      

1,774,553

      

2,694,554

    
    Level 1 —
Quoted
Prices ($)		   Level 2 —
Other
Significant
Observable
Inputs ($)		   Level 3 —
Significant
Unobservable
Inputs ($)		  

Total ($)

  

Derivative assets:

  
Forward
Currency
Contracts		    

—

      

2,688

      

—

      

2,688

    
Purchased
Equity Options		    

5

      

—

      

—

      

5

    
Credit Default
Swaps		    

—

      

100

      

—

      

100

    

Derivative liabilities:

  
Common
Stocks
Sold Short		    

(6,497

)

    

—

      

—

      

(6,497

)

  
Corporate
Bonds Sold
Short		    

—

      

(3,416

)

    

—

      

(3,416

)

  
Forward
Currency
Contracts		    

—

      

(554

)

    

—

      

(554

)

  
Written Equity
Options		    

(3

)

    

—

      

—

      

(3

)

  
Credit Default
Swaps		    

—

      

(1,033

)

    

—

      

(1,033

)

  

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 year ended December 31, 2021:

    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, 2020		    

600,554

      

10,693

      

2,811

      

168,707

      

2,624

      

926

      

9,067

      

5,999

      

558

      

801,939

    

Purchases

    

981,274

      

7,447

      

19,912

      

77,007

      

19,996

      

97,312

      

18,582

      

387

      

2,915

      

1,224,832

    
Sales and principal
redemptions		    

(205,233

)

    

(2,616

)

    

(5,264

)

    

(44,827

)

    

(248

)

    

(361

)

    

(11,082

)

    

(3,021

)

    

(10

)

    

(272,662

)

  
Net realized and
unrealized gains
(losses)		    

9,155

      

312

      

345

      

1,758

      

2,186

      

4,578

      

(798

)

    

64

      

(642

)

    

16,958

    
Accrued discounts
(premiums)		    

2,801

      

29

      

28

      

55

      

—

      

—

      

25

      

2

      

—

      

2,940

    
Transfers in to
Level 3(a)		    

7,265

      

—

      

—

      

—

      

—

      

—

      

4,049

      

—

      

—

      

11,314

    
Transfers out of
Level 3(a)		    

(5,788

)

    

(38

)

    

(4,942

)

    

—

      

—

      

—

      

—

      

—

      

—

      

(10,768

)

  
Balance as of
December 31, 2021		    

1,390,028

      

15,827

      

12,890

      

202,700

      

24,558

      

102,455

      

19,843

      

3,431

      

2,821

      

1,774,553

    
Net change in
unrealized gains
(losses) from
investments held at
December 31, 2021		    

9,673

      

288

      

182

      

1,605

      

2,043

      

4,433

      

(724

)

    

44

      

(96

)

    

17,448

    

(a) Investments were transferred into and out of Level 3 during the year ended December 31, 2021. Transfers between Levels 2 and 3 were as a result of changes in the observability of significant inputs or available market data for certain portfolio companies.

Annual Report 2021
119

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 December 31, 2021.

   

Fair Value
($)

  

Primary
Valuation
Techniques

  

Inputs

  

Estimated
Range

  

Weighted
Average(a)

  

Assets
Investment in securities

  

Senior Loans

  

1,340,605

  

Yield
Analysis

  

Market
Yield

  

3.4% -
22.6%

  

7.4%

  

Senior Loans

  

44,539

  

Broker
Quotes

  

N/A

  

N/A

  

N/A

  

Senior Loans

  

4,884

  

Other

  

Recent Price
Transaction

  

98

  

98

  

Subordinated
Loans

  

15,827

  

Yield
Analysis

  

Market
Yield

  

7.8% -
20.5%

  

10.6%

  

Corporate Bonds

  

12,890

  

Yield
Analysis

  

Market
Yield

  

7.1% -
10.9%

  

7.5%

  

Collateralized
Loan Obligations

  

202,700

  

Broker
Quotes

  

N/A

  

N/A

  

N/A

  

Common Stocks

  

21,605

  

EV Market
Multiple
Analysis

  

EBITDA
Multiple

  

3.1x -
40.3x

  

17.1x

  

Common Stocks

  

2,953

  

Other

  

Recent
Transaction
Price

  

0 -
10000

  

9,088

  

Preferred Stocks

  

102,455

  

EV Market
Multiple
Analysis

  

EBITDA
Multiple

  

6.7x -
64.4x

  

17.2x

  

Private
Asset-Backed
Debt
 
 
 
 
 
 
 

  

17,282
 
 
 
 
 
 
 
 
 

  

Income
(Other)
 
 
 
 
 
 
 
 

  

Constant
Default
Rate,
Constant
Prepayment
Rate,
Recovery
Rate,
Collection
Rate

  

1.0% -
44.2%

0.0%-
41.5%
 
0.0% -
80.0%
48.0% -
121.0%

  

22.0%


32.9%


11.3%

85.9%

  

Private
Asset-Backed
Debt

  

2,561

  

Other

  

Recent
Transaction
Price

  

98 -
100

  

99

  

Real Estate Debt

  

3,431

  

Yield
Analysis

  

Market
Yield

  

16.3% -
20.0%

  

17.4%

  

Warrants

  

2,821

  

EV Market
Multiple
Analysis

  

EBITDA
Multiple

  

6.8x -
24.1x

  

15.5x

  

Total Level 3
Investments

    

1,774,553

                    

(a) Weighted averages are calculated based on fair value of investments.

Changes in market yields, discount rates or EBITDA multiples, each in isolation, may change the fair value of certain of the Fund's investments. Generally, an increase in market yields or discount rates or decrease in EBITDA

multiples may result in a decrease in the fair value of certain of the Fund's 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 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 valuations currently assigned.

The following are the carrying and fair values of the Fund's senior secured revolving credit facilities and mandatory redeemable preferred shares as of December 31, 2021.

    Carrying
value
($)		   Fair
value
($)		   Level 1
($)		   Level 2
($)		   Level 3
($)		  
Wells Credit
Facility(a)		    

225,664

      

225,664

      

—

      

225,664

      

—

    
State Street
Credit Facility(a)		    

176,804

      

176,804

      

—

      

176,804

      

—

    
Series A Mandatory
Redeemable
Preferred Shares		    

59,395

      

60,000

      

—

      

60,000

      

—

    
Series B Mandatory
Redeemable
Preferred Shares		    

89,059

      

90,000

      

—

      

90,000

      

—

    
Series C Mandatory
Redeemable
Preferred Shares		    

148,408

      

150,000

      

—

      

150,000

      

—

    
     

699,330

      

702,468

      

—

      

702,468

      

—

    

(a) The Wells Credit Facility and the State Street Credit Facility carrying values are the same as the principal amounts outstanding.

(5) 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

Annual Report 2021
120

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

2,343

      

59,555

    

Common shares issued

    

391

      

9,921

    

Reinvestment of distributions

    

38

      

959

    

Common shares redeemed

    

(364

)

    

(9,228

)

  

Common shares outstanding — end of period

    

2,408

      

61,207

    

Class C

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

2,716

      

69,404

    

Common shares issued

    

501

      

12,690

    

Reinvestment of distributions

    

77

      

1,965

    

Common shares redeemed

    

(279

)

    

(7,080

)

  

Common shares outstanding — end of period

    

3,015

      

76,979

    

Class I

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

23,927

      

603,397

    

Common shares issued

    

31,018

      

796,866

    

Reinvestment of distributions

    

604

      

15,507

    

Common shares redeemed

    

(4,066

)

    

(104,271

)

  

Common shares outstanding — end of period

    

51,483

      

1,311,499

    

Class L

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

293

      

7,467

    

Common shares issued

    

93

      

2,344

    

Reinvestment of distributions

    

15

      

376

    

Common shares redeemed

    

(20

)

    

(500

)

  

Common shares outstanding — end of period

    

381

      

9,687

    

Class U

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

7,909

      

195,677

    

Common shares issued

    

5,515

      

141,102

    

Reinvestment of distributions

    

459

      

11,759

    

Common shares redeemed

    

(524

)

    

(13,305

)

  

Common shares outstanding — end of period

    

13,359

      

335,233

    

Class U-2

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

477

      

11,500

    

Common shares issued

    

1,697

      

43,467

    

Reinvestment of distributions

    

43

      

1,106

    

Common shares redeemed

    

(18

)

    

(460

)

  

Common shares outstanding — end of period

    

2,199

      

55,613

    

Class W

   For the Year Ended
December 31, 2021		  
   

Shares

  

Amount ($)

  
Common shares outstanding — beginning
of period		    

1,576

      

40,494

    

Common shares issued

    

—

      

2

    

Reinvestment of distributions

    

59

      

1,522

    

Common shares redeemed

    

(149

)

    

(3,833

)

  

Common shares outstanding — end of period

    

1,486

      

38,185

    

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 Board in accordance with the Fund's fundamental policy to conduct repurchase offers for between 5%-25% of its outstanding shares each quarter.

Annual Report 2021
121

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

The following table summarizes the share repurchases completed during the year ended December 31, 2021:

Three Months Ended

   Repurchase
Date		   Shares
Repurchased		   Purchase
Price
Per Share		   Aggregate
Consideration
for
Repurchased
Shares		   Size of
Repurchased
Offer		   % of
Outstanding
Shares
Offered
to be
Repurchased		   % of
Outstanding
Shares
Repurchased		  

December 31, 2020

  

January 15, 2021

    

1,226

      

25.24

    

$

30,933

      

2,003

      

5.00

%

    

3.06

%

  

March 31, 2021

  

April 15, 2021

    

1,110

      

25.35

      

28,137

      

2,282

      

5.00

%

    

2.43

%

  

June 30, 2021

  

July 15, 2021

    

1,517

      

25.72

      

39,009

      

2,719

      

5.00

%

    

2.79

%

  

September 30, 2021

  

October 14, 2021

    

1,568

      

25.89

      

40,596

      

3,227

      

5.00

%

    

2.43

%

  

Total

        

5,421

        

$

138,675

                

(6) Debt

In accordance with the Investment Company Act, the Fund is allowed to borrow amounts with respect to senior securities representing indebtedness (such as the senior secured revolving credit facilities), such that its asset coverage, calculated pursuant to the Investment Company Act, is at least 300% after such borrowing.

State Street Credit Facility

The Fund is a party to a senior secured revolving credit facility (as amended, the "State Street Credit Facility"), that allows the Fund to borrow up to $400,000 at any one time outstanding. The State Street Credit Facility stated maturity date is July 21, 2023. 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, including additional mandatory redeemable preferred shares, and liens, (b) limitations on certain restricted payments and (c) maintaining a ratio of total assets (less total liabilities other than senior securities representing indebtedness) to senior securities representing indebtedness plus the involuntary liquidation preference of the mandatory redeemable preferred shares of the Fund and its consolidated subsidiaries (subject to certain exceptions) of not less than 2:1. 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 December 31, 2021, the Fund was in compliance with the terms of the State Street Credit Facility. See Note 12 for a subsequent event relating to the State Street Credit Facility.

As of December 31, 2021, there was $176,804 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 1.00% (as defined in the agreements governing the State Street Credit Facility). The Fund is required to pay a commitment fee of 0.25% per annum on any unused portion of the State Street Credit Facility.

For the year ended December 31, 2021, the components of interest and unused commitment fees expense, average stated interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the State Street Credit Facility were as follows:

    For the Year Ended
December 31, 2021
($)		  

Stated interest expense

    

2,044

    

Unused commitment fees

    

258

    

Amortization of debt issuance costs

    

389

    

Total interest and credit facility fees expense

    

2,691

    

Average stated interest rate

    

1.10

%

  

Average outstanding balance

    

184,979

    

Wells Credit Facility

The Fund and one of the Fund's consolidated subsidiaries, CADEX Credit Financing, LLC (the "Financing Sub"), are party to a revolving funding facility (as amended, the "Wells Credit Facility"), that allows the Financing Sub to borrow up to $500,000 at any one time outstanding. The Wells Credit Facility is secured by all of the assets held by, and the membership interest in, the Financing Sub. The end of the reinvestment period and the stated maturity date for the Wells Credit Facility are November 16, 2024 and November 16, 2026, 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.

Annual Report 2021
122

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 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 December 31, 2021, the Fund and the Financing Sub were in compliance with the terms of the Wells Credit Facility.

As of December 31, 2021, there was $225,664 outstanding under the Wells Credit Facility. The interest rate charged on the Wells Credit Facility is based on an applicable LIBOR rate plus spread of 2.00% (as defined in the agreements governing the Wells Credit Facility). The Financing Sub is also required to pay a commitment fee of between 0.50% and 1.25% per annum depending on the size of the unused portion of the Wells Credit Facility.

For the year ended December 31, 2021, the components of interest and unused commitment fees expense, average stated interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Wells Credit Facility were as follows:

    For the Year Ended
December 31, 2021
($)		  

Stated interest expense

    

2,523

    

Unused commitment fees

    

795

    

Amortization of debt issuance costs

    

678

    

Total interest and credit facility fees expense

    

3,996

    

Average stated interest rate

    

2.30

%

  

Average outstanding balance

    

109,615

    

(7) Mandatory Redeemable Preferred Shares

The Fund has authorized and issued 2,400 shares of Series A Mandatory Redeemable Preferred Shares (the "Series A MRP Shares") for gross proceeds of $60,000, 3,600 shares of Series B Mandatory Redeemable Preferred Shares (the "Series B MRP Shares") for gross proceeds of $90,000 and 6,000 shares of Series C Mandatory Redeemable Preferred Shares (the "Series C MRP Shares" and together with the Series A MRP Shares and Series B MRP Shares, the "MRP Shares") for gross proceeds of $150,000. Each of the MRP Shares has a

liquidation preference of $25.00 per share. The aggregate redemption amount of the MRP Shares is $300,000.

The redemption date for the Series A MRP Shares, Series B MRP Shares and Series C MRP Shares are July 30, 2026, September 30, 2026 and September 30, 2028, respectively.

The Series A MRP Shares and the Series B MRP Shares have a dividend rate of 2.68% per annum, payable quarterly, with a redemption date of five years from issuance. The Series C MRP shares have a dividend rate of 3.07% per annum, payable quarterly, with a redemption date of seven years from issuance. The weighted average dividend rate for the MRP shares is 2.88% per annum. The MRP Shares are subject to optional and mandatory redemption in certain circumstances. The MRP Shares will be subject to redemption, at the option of the Fund, in whole or in part at any time only for the purposes of decreasing leverage of the Fund. The Fund may be obligated to redeem certain of the MRP Shares if the Fund fails to maintain an asset coverage ratio, calculated in accordance with the Investment Company Act, greater than or equal to 225%. Holders of the MRP Shares are entitled to receive quarterly cumulative cash dividend payments on the first business day following each quarterly dividend date.

The redemption price per share is equal to the sum of the liquidation preference per share plus any accumulated but unpaid dividends plus, in some cases, an early redemption premium, which may vary based on the date of redemption. The Fund is subject to certain restrictions relating to the MRP Shares such as maintaining certain asset coverage ratio requirements. Failure to comply with these restrictions could preclude the Fund from declaring any dividends to common shareholders and could trigger the mandatory redemption of the MRP Shares. Additionally, in accordance with the Investment Company Act, the Fund may not issue additional MRP Shares if immediately after such issuance the Fund will not have an asset coverage of at least 200%. As of December 31, 2021, the Fund was in compliance with the terms applicable to the MRP Shares.

The Fund's MRP Shares activity for the year ended December 31, 2021 was as follows:

    Series A
MRP Shares		   Series B
MRP Shares		   Series C
MRP Shares		  
Shares outstanding —
beginning of period		    

—

      

—

      

—

    

Shares issued

    

2,400

      

3,600

      

6,000

    

Shares repurchased

    

—

      

—

      

—

    
Shares outstanding —
end of period		    

2,400

      

3,600

      

6,000

    

Annual Report 2021
123

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

The Fund's MRP Shares balance as of December 31, 2021 were as follows:



   Series A
MRP Shares
($)		   Series B
MRP Shares
($)		   Series C
MRP Shares
($)		   Total
($)		  

Principal amount

    

60,000

      

90,000

      

150,000

      

300,000

    
Unamortized
issuance cost		    

(605

)

    

(941

)

    

(1,592

)

    

(3,138

)

  

Carrying value

    

59,395

      

89,059

      

148,408

      

296,862

    

Dividends on the MRP Shares are accrued on a daily basis and included in interest and credit facility fee expense on the consolidated statement of operations and in interest and facility fees payable on the consolidated statement of assets and liabilities. The table below summarizes the components of interest expense, the effective dividend rates and cash paid on the Fund's MRP Shares for the year ended December 31, 2021:



   Series A
MRP Shares
($)		   Series B
MRP Shares
($)		   Series C
MRP Shares
($)		   Total
($)		  

Stated dividends

    

679

      

616

      

1,177

      

2,472

    
Amortization of
issuance costs		    

56

      

50

      

60

      

166

    
Total interest
expense		    

735

      

666

      

1,237

      

2,638

    
Weighted average
stated
dividend rate		    

2.68

%

    

2.68

%

    

3.07

%

    

2.88

%

  
Cash paid for
dividends		    

402

      

—

      

—

      

402

    

See Note 12 for a subsequent event relating to additional issuances of mandatory redeemable preferred shares.

(8) Investment Transactions

For the year ended December 31, 2021, the cost of investments purchased and proceeds from the sale of investments, excluding short obligations and derivatives, were as follows:

    For the Year Ended
December 31, 2021
($)		  

Cost of investments purchased

    

2,170,301

    

Proceeds from the sale of investments

    

843,186

    

(9) 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. Purchases of derivative contracts and proceeds from the sale of derivative contracts, as disclosed in the consolidated statement of cash flows, are indicative of the volume of derivative activity during the year ended December 31, 2021. The Fund is exposed to 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 year ended December 31, 2021, the Fund held the following instruments meeting the definition of a derivative instrument: forward currency contracts, credit default swaps and equity options.

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.

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 December 31, 2021, the counterparty to these forward currency contracts was Goldman Sachs.

Forward currency contracts are considered undesignated derivative instruments.

Equity Options

The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. The Fund may enter into options contracts based on an equity index or specific security in order to manage its exposure to changes in market conditions. The risks of entering into equity price risk derivative instruments include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments. The Fund may purchase or write an option contract to protect against declines in market value on the underlying index or security. A purchased option contract provides the Fund a right, but not an obligation, to buy (call) or sell (put) an equity-related asset at a specified exercise price within a certain period or on a specific date. A written option contract holds the corresponding obligation to sell (call writing) or buy (put writing) the underlying equity-related asset if the purchaser exercises the option contract. The buyer pays the seller an initial purchase price (premium) for this right. Option contracts purchased by the Fund are

Annual Report 2021
124

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

accounted for in the same manner as marketable portfolio securities. The premium received by the Fund for option contracts written is recorded as a liability. The proceeds from securities sold through the exercise of option contracts are decreased by the premium paid to purchase the option contracts. The Fund may recognize a realized gain or loss when the option contract is closed, exercised or expires. Net realized gains or losses occurring during the holding period of purchased options contracts are included in the "net realized gains or losses on derivative contracts" in the accompanying consolidated statement of operations. Net unrealized gains or losses occurring during the holding period of written options contracts are included in the "net realized gains or losses on derivative contracts" in the accompanying consolidated statement of operations.

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 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 Master Agreements, or futures contracts/OTC addenda 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 December 31, 2021, 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 December 31, 2021, the termination values of these derivative contracts were approximately equal to their fair values.

Certain information related to the Fund's derivative instruments as of December 31, 2021 is presented below.

   

As of December 31, 2021

  

Derivative Instrument

   Notional
Amount		  

Maturity Date

  Gross Amount
of Recognized
Assets		   Gross Amount
of Recognized
Liabilities		   Balance Sheet
Location of Net
Amounts		  

Forward currency contract

  

€

(1,277

)

  

1/5/2022

  

$

27

    

$

—

    

Derivatives

  

Forward currency contract

  

£

(923

)

  

1/19/2022

    

—

      

(22

)

  

Derivatives

  

Forward currency contract

  

CAD

(10,691

)

  

1/19/2022

    

—

      

(120

)

  

Derivatives

  

Forward currency contract

  

£

(339

)

  

1/21/2022

    

5

      

—

    

Derivatives

  

Forward currency contract

  

DKK

(253

)

  

1/21/2022

    

5

      

—

    

Derivatives

  

Forward currency contract

  

CAD

(5,929

)

  

1/21/2022

    

140

      

—

    

Derivatives

  

Forward currency contract

  

DKK

(3,248

)

  

1/21/2022

    

76

      

—

    

Derivatives

  

Forward currency contract

  

€

(33,579

)

  

1/21/2022

    

803

      

—

    

Derivatives

  

Forward currency contract

  

£

(57,015

)

  

1/21/2022

    

1,028

      

—

    

Derivatives

  

Annual Report 2021
125

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

   

As of December 31, 2021

  

Derivative Instrument

   Notional
Amount		  

Maturity Date

  Gross Amount
of Recognized
Assets		   Gross Amount
of Recognized
Liabilities		   Balance Sheet
Location of Net
Amounts		  

Forward currency contract

  

NOK

(535

)

  

1/21/2022

  

$

27

    

$

—

    

Derivatives

  

Forward currency contract

  

SEK

(9,721

)

  

1/21/2022

    

476

      

—

    

Derivatives

  

Forward currency contract

  

£

(268

)

  

1/21/2022

    

5

      

—

    

Derivatives

  

Forward currency contract

  

CAD

(257

)

  

1/21/2022

    

5

      

—

    

Derivatives

  

Forward currency contract

  

£

(361

)

  

1/21/2022

    

3

      

—

    

Derivatives

  

Forward currency contract

  

€

(1,389

)

  

1/21/2022

    

22

      

—

    

Derivatives

  

Forward currency contract

  

£

(268

)

  

1/21/2022

    

—

      

(1

)

  

Derivatives

  

Forward currency contract

  

€

(2,268

)

  

1/21/2022

    

—

      

(37

)

  

Derivatives

  

Forward currency contract

  

CAD

(176

)

  

1/21/2022

    

—

      

(2

)

  

Derivatives

  

Forward currency contract

  

CAD

(71

)

  

1/21/2022

    

—

      

(1

)

  

Derivatives

  

Forward currency contract

  

€

(376

)

  

1/21/2022

    

—

      

(3

)

  

Derivatives

  

Forward currency contract

  

£

(397

)

  

1/21/2022

    

—

      

(8

)

  

Derivatives

  

Forward currency contract

  

£

(480

)

  

1/21/2022

    

—

      

(11

)

  

Derivatives

  

Forward currency contract

  

€

(3,938

)

  

1/21/2022

    

—

      

(28

)

  

Derivatives

  

Forward currency contract

  

AUD

(7,742

)

  

1/21/2022

    

—

      

(101

)

  

Derivatives

  

Forward currency contract

  

€

(2,378

)

  

1/21/2022

    

—

      

(13

)

  

Derivatives

  

Forward currency contract

  

£

(5,902

)

  

1/21/2022

    

—

      

(102

)

  

Derivatives

  

Forward currency contract

  

PLN

(3,660

)

  

1/21/2022

    

—

      

(64

)

  

Derivatives

  

Forward currency contract

  

SEK

(5,243

)

  

1/21/2022

    

—

      

(4

)

  

Derivatives

  

Forward currency contract

  

€

(5,917

)

  

1/21/2022

    

—

      

(37

)

  

Derivatives

  

Forward currency contract

  

SEK

(1,493

)

  

9/18/2022

    

66

      

—

    

Derivatives

  
Call-Chicago Board Options
Exchange-VIX US		  

$

155

    

1/19/2022

    

5

      

—

    

Derivatives

  
Call-Chicago Board Options
Exchange-VIX US		  

$

(155

)

  

1/19/2022

    

—

      

(3

)

  

Derivatives

  

CDX.NA.HY S33 5Y Tranche 25-35

  

$

1,814

    

12/20/2024

    

—

      

(207

)

  

Derivatives

  

CDX.NA.HY S35 5Y Tranche 15-25

  

$

3,105

    

12/20/2025

    

—

      

(253

)

  

Derivatives

  

CMBX.NA.BBB- S9

  

$

1,030

    

9/17/2058

    

100

      

—

    

Derivatives

  
                       

$

2,793

    

$

(1,017

)

          

Net realized gains (losses) on derivative instruments recognized by the Fund for the year ended December 31, 2021 is in the following location in the consolidated statement of operations:

Derivative Instrument

  

Statement Location

   For the Year Ended
December 31, 2021
($)		  

Forward currency contract

  

Net realized loss on derivative contracts

    

1,362

    

Written options

  

Net realized loss on derivative contracts

    

(501

)

  

Credit default swaps

  

Net realized loss on derivative contracts

    

(920

)

  

Total

        

(59

)

  

Annual Report 2021
126

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

Net unrealized gains (losses) on derivative instruments recognized by the Fund for the year ended December 31, 2021 is in the following location in the consolidated statement of operations:

Derivative Instrument

  

Statement Location

   For the Year Ended
December 31, 2021
($)		  

Forward currency contract

  

Net unrealized gain on derivative contracts

    

2,229

    

Written options

  

Net unrealized gain on derivative contracts

    

43

    

Credit default swaps

  

Net unrealized gain on derivative contracts

    

272

    

Total

        

2,544

    

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 as of December 31, 2021:

        Gross Amounts Not Offset in
Statement of Assets and Liabilities		      

Description

   Gross Amount
of Recognized
Assets
(Liabilities)		   Gross Amount
Offset in
Assets
(Liabilities)		   Net Amounts
of Assets
(Liabilities)
Presented		   Financial
Instrument		   Collateral
(Received)
Pledged		  

Net Amount

  

Assets:

  

Goldman Sachs:

  

Forward Foreign Currency Contracts

  

$

2,748

    

$

—

    

$

2,748

    

$

(554

)

  

$

—

    

$

2,194

    

Total

  

$

2,748

    

$

—

    

$

2,748

    

$

(554

)

  

$

—

    

$

2,194

    

Liabilities:

  

Goldman Sachs:

  

Forward foreign currency contracts

  

$

(554

)

  

$

—

    

$

(554

)

  

$

554

    

$

—

    

$

—

    

Swap agreements

    

(187

)

    

—

      

(187

)

    

—

      

187

      

—

    

Total

  

$

(741

)

  

$

—

    

$

(741

)

  

$

554

    

$

187

    

$

—

    

(10) Income Taxes

For U.S. federal income tax purposes, the characterization of distributions made during the fiscal period from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal period in which amounts are distributed may differ from the fiscal period that the income or realized gains or losses were recorded by the Fund. The characterization of distributions

paid during the fiscal years ended December 31, 2021 and 2020 were as follows:

    December 31,
2021
($)		   December 31,
2020
($)		  

Ordinary income

    

74,910

      

41,545

    

Capital gain

    

—

      

—

    

Return of capital

    

—

      

—

    

Annual Report 2021
127

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses for book but not tax, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. For the year ended December 31, 2021, the Fund estimated U.S. federal taxable income exceeded its distributions made from such taxable income during the year; consequently the Fund incurred U.S. federal excise taxes of $256.

The Fund may adjust the classification of net assets as a result of permanent book-to-tax differences. On the consolidated statement of assets and liabilities, the following reclassifications were made for the year ended December 31, 2021:

    December 31, 2021
($)		  

Additional paid-in capital/(reduction)

    

(422

)

  

Distributable earnings accumulated gains

    

422

    

As of December 31, 2021, 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.

As of December 31, 2021, the components of accumulated earnings on a tax basis were as follows:

    December 31, 2021
($)		  

Undistributed ordinary income

    

15,307

    

Accumulated capital and other losses

    

(5,809

)

  

Net unrealized appreciation

    

34,676

    

Other cumulative effect of timing differences

    

(2,070

)

  

Total accumulated earnings

    

42,104

    

Under current law, capital losses maintain their character as short-term or long-term and are carried forward to the next tax year without expiration. As of the current fiscal year end, the following amounts are available as carry forwards to the next tax year:

    December 31, 2021
($)		  

Short-Term

    

3,970

    

Long-Term

    

1,840

    

ASC 740, Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. The Fund has evaluated the implications of ASC 740 for all open tax years and has determined there is no impact to the Fund's financial statements as of the year ended December 31, 2021. The Fund's federal and state income returns for which the applicable statutes of limitations have not expired remain subject to examination by the Internal Revenue Service and states department of revenue.

All penalties and interest associated with income taxes, if any, are included in other expenses in the consolidated statement of operations. There were no penalties and interest incurred by the Fund for the current fiscal year.

(11) Risk Factors

Senior Loans Risk

Although senior loans ("Senior Loans") are senior and typically secured in a first lien (including "unitranche" loans, which are loans that combine both senior and subordinated debt, generally in a first lien position) 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 could 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 could 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 potential 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

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December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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.

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

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Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

speculative characteristics. High yield corporate bonds may be particularly susceptible to adverse Borrower-specific developments.

CLO Securities Risk

CLOs 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 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

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CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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.

"Covenant-Lite" Loans Risk

Some of the loans in which the Fund may invest directly or indirectly through its investments in CDOs, CLOs or other types of structured securities may be "covenant-lite" loans, which means the loans contain fewer maintenance covenants than other loans (in some cases, none) and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached. An investment by the Fund in a covenant-lite loan may potentially hinder the ability to reprice credit risk associated with the issuer and reduce the ability to restructure a problematic loan and mitigate potential loss. The Fund may also experience delays in enforcing its rights on its holdings of covenant-lite loans. As a result of these risks, the Fund's exposure to losses may be increased, which could result in an adverse impact on the Fund's net income and net asset value.

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 intends to utilize leverage, which will magnify 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 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 and Reference 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. On November 30, 2020, ICE Benchmark Administration ("IBA"), the administrator of LIBOR tenors, with the support of the U.S. Federal Reserve and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only

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CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

the one-week and two-month USD LIBOR, and on June 30, 2023 for all other USD LIBOR tenors. The U.S. Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. On March 5, 2021, the IBA confirmed its intention to cease publication of (i) one-week and two-month USD LIBOR tenors after December 31, 2021 and (ii) remaining USD LIBOR tenors after June 30, 2023.

On the same day, the FCA, as supervisor of IBA, made its announcement on the future cessation and loss of representativeness of the LIBOR benchmarks. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is expected to replace U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities. (the "Secured Overnight Financing Rate," "SOFR"), plus a recommended spread adjustment as LIBOR's replacement. Although there have been certain issuances utilizing SOFR or the Sterling Over Night Index Average (an alternative reference rate that is based on transactions), it is unknown whether SOFR or any other alternative reference rates will attain market acceptance as replacements for LIBOR.

Given the inherent differences between LIBOR and SOFR, or any other alternative reference rates that may be established, the transition from LIBOR may disrupt the overall financial markets and adversely affect the market for LIBOR-based securities, including the Fund's portfolio of LIBOR indexed, floating rate debt securities, or the cost of the Fund's 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 and/or transferability of the LIBOR indexed, floating rate debt securities in the Fund's portfolio, or the cost of the Fund's borrowings. Additionally, if as currently expected LIBOR ceases to exist, the Fund may need to renegotiate the credit agreements extending beyond June 30, 2023 with the Fund's lenders and the Fund's portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with SOFR or other alternative reference rates, The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our accounting, financial reporting, loan servicing, liability management and other aspects of our business. We are assessing the impact of a transition from LIBOR; however, we cannot reasonably estimate the impact of the transition at this time.

Additionally, the phase-out or replacement of LIBOR may decrease the demand for floating-rate loans, which could adversely impact our business and financial condition. We

may need to renegotiate the credit agreements extending beyond June 30, 2023 with our credit facility lenders and our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with SOFR or other alternative reference rates, which could require us to incur significant expense and may subject us to disputes or litigation over the appropriateness or comparability to the relevant replacement reference index. The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our accounting, financial reporting, loan servicing, liability management and other aspects of our business. We are assessing the impact of a transition from LIBOR; however, we cannot reasonably estimate the impact of the transition at this time.

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. The Fund's investments may not be readily marketable and may be subject to restrictions on resale. Generally, the Fund's investments are not listed on any national securities exchange and no active trading market may exist. When a secondary market exists, the market 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

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Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 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

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Notes to Consolidated Financial Statements (continued)

December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

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 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 (the "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 (the "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. The UK ceased to be a member state of the EU on January 31, 2020 commonly referred to as "Brexit," and the transition period provided for in the withdrawal agreement entered by the UK and the EU ended on December 31, 2020. In December 2020, the UK and the EU agreed on a trade and cooperation agreement, which was subsequently ratified by the parties. The trade and cooperation agreement covers the general objectives and framework of the relationship between the UK and the EU. The impact of 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. Brexit also may lead to

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December 31, 2021

(in thousands, except per share data, percentages and as otherwise noted)

greater volatility in the global currency and financial markets, which could adversely affect the Fund. In connection with investments in non-U.S. 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 U.S. dollars and the depreciation of the British pound sterling and/or the Euro in relation to the U.S. dollar could adversely affect the Fund's investments denominated in British pound sterling or Euros that are not fully hedged regardless of the performance of the underlying issuer.

Market Disruption Risk

Disease outbreaks, public health emergencies, the European sovereign debt crisis, instability in the Middle East, Afghanistan and Pakistan, the aftermath of the war in Iraq, terrorist attacks in the U.S. and around the world, the impact of natural disasters, growing social and political discord in the U.S., the European debt crisis, the response of the international community — through economic sanctions and otherwise — to Russia's annexation of the Crimea region of Ukraine and invasion of Ukraine, increasingly strained relations between the United States and a number of foreign countries, including traditional allies, such as certain European countries, and historical adversaries, such as North Korea, Iran, China and Russia, and the international community generally, new and continued political unrest in various countries, such as Venezuela and Spain, and other similar events may result in market volatility, may have long-term adverse effects on the United States and worldwide financial markets and may cause further economic uncertainties in the United States and worldwide. The Fund does not know how long the financial markets may be affected by these events and cannot predict the effects of these events or similar events in the future on the U.S. and global economies and financial markets. Wars and occupation, terrorism and related geopolitical risks have led, and may in the future lead, to increased shortterm market volatility and may have adverse long-term effects on U.S. and global economies and markets generally. These events could have an acute effect on individual issuers or related groups of issuers. These events could also impact interest rates, secondary trading, ratings, credit risk, inflation and other factors relating to an investment in the common shares. The Fund may be adversely affected by abrogation of international agreements and national laws which have created the market instruments in which the Fund may invest, failure of the designated national and international authorities to enforce compliance with the same laws and agreements, failure of local, national and international organization to carry out their duties

prescribed to them under the relevant agreements, revisions of these laws and agreements which dilute their effectiveness or conflicting interpretation of provisions of the same laws and agreements.

The novel coronavirus ("COVID-19") pandemic has adversely impacted global commercial activity and contributed to significant volatility in the capital markets. 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 certain businesses. Such actions and effects remain ongoing and the ultimate duration and severity of the COVID-19 pandemic, including COVID-19 variants, such as the recent Delta and Omicron variants, remain uncertain. The COVID-19 pandemic and restrictive 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 good and services, reductions in business activity and financial transactions, supply chain interruptions, labor shortages, increased inflationary pressure and overall economic and financial market instability both globally and in the United States. While several countries, as well as certain states, counties and cities in the United States, relaxed the public health restrictions throughout 2021 partly as a result of the introduction of vaccines, recurring COVID-19 outbreaks caused by different virus variants continue to lead to the re-introduction of certain restrictions in certain states in the United States and globally. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may experience a recession, and the Fund and its operations, as well as the business and operations of its portfolio companies, could be materially adversely affected by a prolonged recession in the U.S. and other major markets.

The COVID-19 pandemic has adversely impacted the fair value of certain of the Fund's investments, including those reported as of December 31, 2021, and the values reported may differ materially from the values that the Fund may ultimately realize with respect to its investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the fair value 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 quarter for which the Fund is reporting. The valuation of the Fund's investments may not show the complete or the continuing impact of the COVID-19 pandemic and the resulting restrictive measures taken in response

Annual Report 2021
135

CION Ares Diversified Credit Fund

Notes to Consolidated Financial Statements (continued)

December 31, 2020

(in thousands, except per share data, percentages and as otherwise noted)

thereto. As a result, the Fund may continue to see a negative impact to the fair value of its investments.

(12) Subsequent Events

The Adviser has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure or would be required to be recognized in the financial statements as of and for the year ended December 31, 2021, except as discussed below:

Subsequent to December 31, 2021, the Fund paid previously declared dividends of $2,741 on the MRP Shares through February 28, 2022.

In January 2022, the Fund authorized and issued 2,200 shares of Series D Mandatory Redeemable Preferred Shares (the "Series D MRP Shares") and 2,600 shares of Series E Mandatory Redeemable Preferred Shares (the "Series E MRP Shares") for gross proceeds of $55,000 and $65,000, respectively. The Series D and Series E MRP Shares have a liquidation preference of $25.00 per share. The Series D MRP Shares have a dividend rate of 2.96% per annum, payable quarterly, and a redemption date of January 6, 2027. The Series E MRP Shares have a dividend rate of 3.48% per annum, payable quarterly, and a redemption date of January 6, 2032. The weighted average dividend rate for the Series D and the Series E MRP Shares is 3.24% per annum. The Series D and the Series E MRP Shares are subject to optional and mandatory redemption in certain circumstances.

The following common share distributions were declared for January and February 2022:

Record Date: daily
Payable Date: January 31, 2022
Per Share Amount: $0.11827337

Record Date: daily
Payable Date: February 28, 2022
Per Share Amount: $0.10682756

Annual Report 2020
136

CION Ares Diversified Credit Fund

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of CION Ares Diversified Credit Fund

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of assets and liabilities of CION Ares Diversified Credit Fund (the "Fund"), including the consolidated schedule of investments, as of December 31, 2021, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the two years in the period then ended, the period from November 1, 2019 to December 31, 2019, each of the two years in the period ended October 31, 2019, and for the period from January 26, 2017 (commencement of operations) through October 31, 2017 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Fund at December 31, 2021, the consolidated results of its operations and its cash flows for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended and its consolidated financial highlights for each of the two years in the period then ended, the period from November 1, 2019 to December 31, 2019, each of the two years in the period ended October 31, 2019, and for the period from January 26, 2017 (commencement of operations) through October 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Fund's auditor since 2016.

Los Angeles, California
February 28, 2022

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137

CION Ares Diversified Credit Fund

Additional Information

December 31, 2021

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 the first quarter and the third quarter of each fiscal year on SEC Form N-PORT. The Fund's Form N-PORT reports are available (1) without charge, upon request, by calling 1-877-855-3434; and (2) on the SEC's website at http://www.sec.gov.

Annual Report 2021
138

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

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 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.

Annual Report 2021
139

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

Plan of Distribution

ALPS Distributors, Inc. 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 net asset value 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 an unlimited number of common 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 Advisers or its affiliates, in the Adviser'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 Adviser may reasonably request.

The Fund and the Adviser 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.

Annual Report 2021
140

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

Investment Adviser

CION Ares Management, LLC
3 Park Avenue, 36th Floor
New York, NY 10016

Administrator

ALPS Fund Services, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111

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

Annual Report 2021
141

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

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 shares 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.

Annual Report 2021
142

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

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, CION Investment Corporation; Director, CION Ares Management, LLC

  

1

  

CION Investment Corporation; CION Ares Management, LLC

  
Mitch Goldstein
1967		  

Trustee

  

2016

  

Partner of Ares Management; Co-President, Ares Capital Corporation

  

1

  

None

  
Michael A. Reisner
1970		  

Trustee

  

2016

  

Co-Chief Executive Officer and Co-President, CION Investment Group, LLC and Co-Chief Executive Officer, CION Investment Corporation; Director, CION Ares Management, LLC

  

1

  

CION Investment Corporation; CION Ares Management, LLC

  
David A. Sachs
1959		  

Trustee and Chairman of the Board

  

2016

  

Partner of Ares Management

  

1

  

Terex Corporation; Ares Dynamic Credit Allocation Fund, Inc

  

Annual Report 2021
143

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

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

  
Jeffrey Perlowitz
1956		  

Trustee

  

2020

  

Prior to 2016, Managing Director, Citigroup, Inc.

  

1

  

PennyMac Financial Services, 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; Ares Dynamic Credit Allocation Fund, Inc.

  
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 Investment Company 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.

Annual Report 2021
144

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

Executive Officers

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

  
John Atherton
1981		  

Vice President and Assistant Secretary

  

2018

  

Mr. Atherton is a Managing Director 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 credit matters. He is General Counsel, Vice President and Secretary of Ares Capital Corporation 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.

  
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 Executive 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.

  
Kevin Early
1971		  

Vice President

  

2017

  

Mr. Early is a Partner, European Chief Financial Officer in the Ares Finance Department. Mr. Early joined Ares in 2012.

  
Anton Feingold
1980		  

Vice President and Assistant Secretary

  

2016

  

Mr. Feingold is a Partner and Associate General Counsel in the Ares Legal Group and Assistant Secretary of Ares Management. He also serves as General Counsel, Vice President and Secretary of Ares Commercial Real Estate Corporation. Mr. Feingold joined Ares in 2014.

  
Ian Fitzgerald
1975		   General Counsel 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 Ivy Hill Asset Management, L.P. and Vice President and Assistant Secretary of Ivy Hill Asset Management GP, LLC, Ivy Hill Asset Management's General Partner. Mr. Fitzgerald joined Ares in 2010.

  
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 of CION Ares Management, LLC. Mr. Gatto joined CION in 1999.

  
Mitch Goldstein
1967		  

Vice President

  

2016

  

Mr. Goldstein is a Partner and Co-Head of the Ares Credit Group and a member of the Executive Management Committee of Ares Management. He additionally serves as Co-President of Ares Capital Corporation ("ARCC"). He is a member of the Ares Credit Group's U.S. Direct Lending and Commercial Finance Investment Committees and Ivy Hill Asset Management Investment Committee. Mr. Goldstein joined Ares Management in 2005.

  
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.

  
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.

  

Annual Report 2021
145

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

Executive Officers

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

  
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 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, Inc. ("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.

  
Greg Margolies
1966		  

Vice President

  

2016

  

Mr. Margolies is a Partner in the Ares Credit Group, the Head of Markets for Ares Management and a member of the Executive Management Committee of Ares Management. Additionally, Mr. Margolies serves as a member of the Ares Credit Group's Alternative Credit Investment Committee, the ARDC Investment Committee and the Ares Private Equity Group's Special Opportunities Investment Committee. Mr. Margolies joined Ares in 2009.

  
Lisa Morgan
1976		  

Chief Compliance Officer and Anti-Money Laundering Officer

  

2021

  

Ms. Morgan is a Managing Director and Head of Regulatory Compliance in the Ares Compliance Department. She also serves as the Chief Compliance Officer of ARCC and Ares Dynamic Credit Allocation Fund, Inc. ("ARDC"). Ms. Morgan joined Ares in September 2017.

  
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 of CION Ares Management, LLC. Mr. Reisner joined CION in 2001.

  
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 and is Treasurer of ARDC. 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 also serves as a member of the Ares Diversity, Equity and Inclusion Council. Ms. Roll joined Ares in 2010.

  
Naseem Sagati Aghili
1981		   Vice President and
Assistant Secretary		  

2019

  

Ms. Sagati Aghili is a Partner, General Counsel and Secretary of Ares Management. She is a Partner in and Head of the Ares Legal Group and additionally serves on the Ares Executive Management Committee, Business Advisory Group, Enterprise Risk Committee and Communications Committee and the Ares Diversity, Equity and Inclusion Council. She also serves as Vice President of ARCC and ARDC. Prior to being named the firm's General Counsel in 2020, Ms. Sagati Aghili served in a variety of roles at Ares Management, including most recently Co-General Counsel and General Counsel, Private Equity. Ms. Sagati Aghili joined Ares in 2009.

  
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.

  

(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.

Annual Report 2021
146

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

Approval of Investment Sub-Advisory Agreement

The Board of Trustees (the "Board") of CION Ares Diversified Credit Fund (the "Fund"), a majority of whom are not "interested persons" (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund (the "Independent Trustees"), renewed the Investment Sub-Advisory Agreement by and among the CION Ares Management, LLC (the "Adviser"), Ares Capital Management II LLC (the "Sub-Adviser") and the Fund (the "Agreement") at a meeting held on August 10, 2021 (the "Meeting").

The Fund's Board has the responsibility under the 1940 Act to consider the renewal of the Fund's Agreement on an annual basis called for the purpose of voting on such renewal. In addition, the Fund's Board generally receives, reviews and evaluates information concerning the services and personnel of the Sub-Adviser and its affiliates at quarterly meetings of the Board. While particular emphasis might be placed on information concerning the Fund's investment performance, comparability of fees, total expenses and profitability at any meeting at which a renewal of the Agreement is considered, the process of evaluating the Sub-Adviser and the Fund's investment advisory and administrative arrangements is an ongoing one.

In connection with the renewal of the Agreement, the Independent Trustees met with their independent counsel in executive session. Counsel to the Independent Trustees reviewed with the Independent Trustees a memorandum outlining the legal duties of the Board under the 1940 Act and applicable state law and discussed the factors outlined by the federal courts as relevant to a board's consideration of the approval of an investment advisory agreement.

In considering whether to renew the Agreement, the Fund's Board reviewed certain information provided to the Board by the Sub-Adviser in advance of the Meeting, and supplemented orally at the Meeting, including, among other things, information concerning the services rendered to the Fund by the Sub-Adviser, comparative fee, expense and performance information, and other reports of and presentations by representatives of the Sub-Adviser concerning the Fund's and Sub-Adviser's operations, compliance programs and risk management. The Board also reviewed a report prepared by the Sub-Adviser which included information comparing (1) the Fund's performance with the performance of a group of comparable funds (the "Performance Group") for various periods ended June 30, 2021 and (2) the Fund's total expenses with those of a group of comparable funds (the "Expense Group"), which was identical to the Performance Group, the information for which was derived in part from Bloomberg and fund financial statements available to the Sub-Adviser as of the date of their analysis.

In determining whether to renew the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Trustee may have attributed different weights to the factors considered.

a. The nature, extent and quality of services to be provided by the Sub-Adviser — With respect to the nature, extent and quality of services to be provided by the Sub-Adviser, the Board reviewed the information regarding the types of services to be provided under the Agreement and information describing the Sub-Adviser's organization and business, including the quality of the investment research capabilities of the Sub-Adviser and the other resources dedicated to performing services for the Fund. The Board noted the professional experience and qualifications of the Fund's portfolio management team and other senior personnel of the Sub-Adviser involved with the Fund, including the portfolio management team's expertise in managing securities in which the Fund invests, the integrated platforms of the Sub-Adviser and its affiliates and the benefits, resources and opportunities of the platforms that the Sub-Adviser is able to access. Fund management discussed the size and experience of the Sub-Adviser's staff, the experience of their key personnel in providing investment management services, including the members of the allocation committee, the systems used by the Sub-Adviser's personnel and the ability of the Sub-Adviser to attract and retain capable personnel. The quality of administrative and other services were also considered. The Board also noted the reputation and track record of the Sub-Adviser's organization as a leading manager of credit assets.

b. Investment performance of the Fund and the Sub-Adviser — With respect to investment performance of the Fund and the Sub-Adviser, the Board reviewed statistical information concerning the Fund's investment performance in relation to its stated objective, as well as comparative data with respect to the performance of unaffiliated closed-end funds operating as interval funds that engage in similar investing, underwriting and origination activity provided by the Sub-Adviser. Representatives of the Sub-Adviser reviewed with the Board the Fund's performance. In connection with its review, the Board discussed the results of the performance comparisons provided by the Sub-Adviser.

Annual Report 2021
147

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

In reviewing the Sub-Adviser's report, the Board took into consideration that the Sub-Adviser identified primarily interval funds that focused on global credit as the peer categories the Sub-Adviser believed were most comparable to the Fund given the Fund's flexible mandate and focus on 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. The Board noted that the Fund's total return performance, on a net asset value basis, had outperformed the average return of the Performance Group in the year-to-date, trailing one-year and inception to date periods ended June 30, 2021.

Representatives of the Sub-Adviser noted that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the Fund and comparable funds, highlighting, in particular, the difficulty in finding an appropriate universe of comparable funds. In discussing the Fund's performance, they noted, among other things, the outperformance may be attributable to its relative value-focused direct origination strategy which yields a defensive investment posture, strong security selection and an overweight allocation to directly originated investments.

c. Cost of the services to be provided and profits to be realized by the Sub-Adviser from the relationship with the Fund — The Board considered information about the profitability of the Fund to the Sub-Adviser, as well as the costs of services provided by the Sub-Adviser to the Fund. The Board received and reviewed information relating to the financial condition of the Sub-Adviser and its affiliates. Representatives of the Sub-Adviser reviewed the expenses allocated and profit received by the Sub-Adviser and its affiliates and the resulting profitability percentage for managing the Fund and the method used to determine the expenses and profit. The Board also considered that the Adviser pays the Sub-Adviser a portion of its advisory fee as compensation for the sub-advisory services.

d. Economies of scale and whether fee levels reflect these economies of scale — The Board considered the extent to which economies of scale are expected to be realized and whether fee levels reflect these economies of scale. The Trustees noted that while the Sub-Adviser is not currently experiencing any economies of scale in servicing the Fund there is a possibility that modest economies of scale related to administrative costs could be realized as asset levels increase.

e. Comparison of services to be rendered and fees to be paid to those under other investment advisory contracts, such as contracts of the same and other investment Sub-Adviser or other clients — In evaluating the management fees and expenses, the Board considered the Fund's management fees and the Fund's expense ratios in absolute terms and as compared with the fees and expenses of the Expense Group. Based upon the comparative fee information provided, the Board noted that the Fund's advisory fees were generally in line with those of comparable funds in the Expense Group identified by the Sub-Adviser. The Board considered that the Agreement provides that the Sub-Adviser may earn a portion of the incentive fee and, to the extent the fee is earned and paid, would effectively result in a higher rate of total compensation from the Fund to the Sub-Adviser than the base-management fee rate stated in the Agreement. In addition, the Board also noted the reputation and track record of the Sub-Adviser's organization as a leading manager of credit assets.

In discussing the Fund's management fees and expenses, representatives of the Sub-Adviser noted, among other things, that the Sub-Adviser believes the management fees and expenses are reasonable when compared to, and are consistent with, other similar funds and portfolios, particularly in light of the Fund's performance. The previous decrease of the management fee to 1.25% of managed assets and of the incentive fee to 15% of pre-incentive fee net investment income was also noted. Representatives of the Sub-Adviser also noted that the Fund's investment strategy of investing in 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 requires additional expertise and expense related to trade support, pricing and valuation, marketing, investor education and regulatory monitoring. In addition, representatives of the Sub-Adviser noted that the Fund's size is smaller than the average and median of the peer group, and thus has a smaller capital base over which to spread fixed costs.

f. Benefits derived or to be derived by the Sub-Adviser from their relationship with the Fund — The Board also considered the extent to which benefits other than the fees and reimbursement amounts might accrue to the Sub-Adviser and its affiliates from their relationships with the Fund. The Board noted in this regard that, while certain funds

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148

CION Ares Diversified Credit Fund

Additional Information (continued)

December 31, 2021

and accounts managed by the Sub-Adviser engage from time to time in cross trade and co-investment transactions with the Fund as permitted by the 1940 Act, neither the Adviser or its affiliate execute portfolio transactions on behalf of the Fund, and that the Sub-Adviser had confirmed that the Fund does not invest in securities issued by affiliates of the Sub-Adviser, including collateralized loan obligations sponsored by the Sub-Adviser. However, the Board recognized that the Sub-Adviser might derive reputational and other benefits from their association with the Fund, including access to a different investor base than historically serviced by the Sub-Advisor and its affiliates.

Conclusion

At the conclusion of these discussions, the Board agreed that it had been furnished with information sufficiently responsive to allow it to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations at the Meeting, and in reliance on information received on a routine and regular basis through the year relating to the operations of the Fund and the investment management and other services provided under the Agreement, the Board, including the Independent Trustees, supported the approval of the renewal of the Agreement for an additional one-year period ending November 1, 2022.

Annual Report 2021
149

 

(b) Not applicable.

 

Item 2. Code of Ethics.

 

(a)            CION Ares Diversified Credit Fund (the “Fund”) has adopted a Code of Ethics that applies to the Fund’s principal executive officer and principal financial officer (the “Code of Ethics”).

 

(c)            The Fund has not made any amendment to its Code of Ethics during the period covered by this Form N-CSR.

 

(d)            There have been no waivers, including any implicit waivers, granted by the Fund to individuals covered by the Fund’s Code of Ethics during the reporting period for this Form N-CSR.

 

(e)            Not applicable.

 

(f)            The registrant’s Code of Ethics is attached herewith as Exhibit 13(a)(1).

 

Item 3. Audit Committee Financial Expert.

 

(a)(1)       The Board of Trustees of the Fund has determined that the Fund has three members serving on the Fund’s Audit Committee that possess the attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert.”

 

(a)(2)       The names of the audit committee financial experts as of the date of filing of this Form N-CSR are John Joseph Shaw and Paula B. Pretlow. Both Mr. Shaw and Ms. Pretlow have been deemed to be “independent” for the purpose of this Item because he or she is not an “interested person” of the Fund as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”) and does not accept directly or indirectly any consulting, advisory, or other compensatory fee from the Fund.

 

Item 4. Principal Accountant Fees and Services.

 

(a)            Audit Fees

 

For the fiscal years ended December 31, 2021 and December 31, 2020, Ernst & Young LLP (“E&Y”), the Fund’s independent registered public accounting firm, billed the Fund aggregate fees of $306,900 and $271,900, respectively, for professional services rendered for the audit of the Fund’s annual financial statements or for services normally provided by E&Y in connection with statutory and regulatory filings or engagements.

 

(b)            Audit-Related Fees

 

For the fiscal years ended December 31, 2021 and December 31, 2020, the aggregate fees billed for assurance and related services rendered by E&Y that are reasonably related to the performance of the audit or review of the Fund’s financial statements and that are not reported under Audit Fees above were $42,100 and $46,000, respectively.

 

 

 

 

For the fiscal years ended December 31, 2021 and December 31, 2020, aggregate Audit-Related Fees billed by E&Y that were required to be approved by the Fund’s Audit Committee for audit-related services rendered to the Fund’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Fund (the “Affiliated Service Providers”) that relate directly to the operations and financial reporting of the Fund were $0 and $0, respectively.

 

(c)            Tax Fees

 

For the fiscal years ended December 31, 2021 and December 31, 2020, E&Y billed the Fund aggregate fees of $36,440 and $14,950, respectively, for professional services rendered for tax compliance, tax advice, and tax planning. The nature of the services comprising the Tax Fees was the review of the Fund’s income tax returns and tax distribution requirements.

 

For the fiscal years ended December 31, 2020 and December 31, 2020, the aggregate Tax Fees billed by E&Y that were required to be approved by the Fund’s Audit Committee for tax compliance, tax advice and tax planning services rendered on behalf of Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund were $0 and $0, respectively.

 

(d)            All Other Fees

 

For the fiscal years ended December 31, 2020 and December 31, 2020, the aggregate fees billed by E&Y to the Fund for all services other than services reported under Audit Fees, Audit-Related Fees, and Tax Fees were $0 and $0, respectively.

 

For the fiscal years ended December 31, 2020 and December 31, 2020, the aggregate fees in this category billed by E&Y that were required to be approved by the Fund’s Audit Committee for services rendered on behalf of Affiliated Service Providers that relate directly to the operations and financial reporting of the Fund were $0 and $0, respectively.

 

(e)(1)       Audit Committee’s Pre-Approval Policies and Procedures

 

The Fund’s Audit Committee Charter requires that the Audit Committee pre-approve all audit and non-audit services to be provided to the Fund by the Fund’s independent registered public accounting firm; provided, however, that the pre-approval requirement with respect to the provision of non-auditing services to the Fund by the Fund's independent registered public accounting firm may be waived by the Audit Committee under the circumstances described in the Securities Exchange Act of 1934, as amended (the “1934 Act”).

 

(e)(2)       Percentage of Services

 

All of the audit and tax services described above for which E&Y billed the Fund fees for the fiscal years ended December 31, 2020 and December 31, 2020, were pre-approved by the Audit Committee.

 

For the fiscal years ended December 31, 2020 and December 31, 2020, the Fund’s Audit Committee did not waive the pre-approval requirement of any non-audit services to be provided to the Fund by E&Y.

 

 

 

 

(f)            Not applicable.

 

(g)            For the fiscal years ended December 31, 2020 and h December 31, 2020, aggregate non-audit fees billed by E&Y for services rendered to the Fund were $0 and $0, respectively.

 

For the fiscal years ended December 31, 2020 December 31, 2020, aggregate non-audit fees billed by E&Y for services rendered to the Affiliated Service Providers were $0 and $0, respectively.

 

(h)            E&Y notified the Fund’s Audit Committee of all non-audit services that were rendered by E&Y to the Fund’s Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, allowing the Fund’s Audit Committee to consider whether such services were compatible with maintaining E&Y’s independence.

 

Item 5. Audit Committee of Listed Registrants.

 

(a)            The Fund has a separately-designated Audit Committee established in accordance with Section 3(a)(58)(A) of the 1934 Act. The members of the Fund’s Audit Committee are Jeffrey Perlowitz, Paula B. Pretlow, John Joseph Shaw, Bruce H. Spector and Mark R. Yosowitz.

 

(b)            Not applicable.

 

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.

 

Attached to this Form N-CSR as exhibit 13(a)(5) is a copy of the proxy voting policies and procedures of the Fund and its investment adviser.

 

Item 8.  Portfolio Managers of Closed-End Management Investment Companies.

 

(a)(1)  As of the date of this filing, the portfolio managers of the Fund are as follows:

 

Mitch Goldstein

Partner, Co-Head of the Ares Credit Group and Portfolio Manager (since inception)

Investment Experience:

 

Mr. Goldstein is a Partner and Co-Head of the Ares Credit Group. He serves on the Ares Executive Management Committee and the firm's Partners Committee. He additionally serves as Co-President of Ares Capital Corporation and Vice President and interested trustee and Portfolio Manager of the Fund. He is a member of the Ares Credit Group's U.S. Direct Lending and Commercial Finance Investment Committees and the Ivy Hill Asset Management Investment Committee. Prior to joining Ares Management in May 2005, Mr. Goldstein worked at Credit Suisse First Boston, where he was a Managing Director in the Financial Sponsors Group. At CSFB, Mr. Goldstein was responsible for providing investment banking services to private equity funds and hedge funds with a focus on M&A and restructurings as well as capital raisings, including high yield, bank debt, mezzanine debt, and IPOs. Mr. Goldstein joined CSFB in 2000 at the completion of the merger with Donaldson, Lufkin & Jenrette. From 1998 to 2000, Mr. Goldstein was at Indosuez Capital, where he was a member of the Investment Committee and a Principal, responsible for originating, structuring and executing leveraged transactions across a broad range of products and asset classes. From 1993 to 1998, Mr. Goldstein worked at Bankers Trust. He also serves on the Board of Managers of Ivy Hill Asset Management GP, LLC. Mr. Goldstein graduated summa cum laude from the State University of New York at Binghamton with a B.S. in Accounting and received an M.B.A. from Columbia University's Graduate School of Business.

 

 

 

 

Greg Margolies

Partner, Head of Markets and Portfolio Manager (since inception)

Investment Experience:

 

Mr. Margolies is a Partner in the Ares Credit Group and is Vice President of the Fund. Additionally, Mr. Margolies serves as a member of the Ares Credit Group's Alternative Credit Investment Committee, the Ares Dynamic Credit Allocation Fund Investment Committee, the Ares Private Equity Group's Special Opportunities Investment Committee and is on the Board of Directors of the Ares Charitable Foundation. Prior to joining Ares in 2009, Mr. Margolies served as a Managing Director and Global Head of Leveraged Finance and Capital Commitments at Merrill Lynch & Co. and was a member of the Executive Committee for Merrill Lynch's Global Investment Banking Group. Previously, Mr. Margolies was Co-Head of the DB Capital Mezzanine Fund. Mr. Margolies serves on the Board of Directors for the International Organization for Women and Development, the Advisory Council for University of Michigan's Life Science Institute and the Board of Trustees for The Juilliard School. Mr. Margolies holds a B.A. from the University of Michigan in International Economics and Finance and an M.B.A. from the University Of Pennsylvania Wharton School Of Business.

 

(a)(2)     As of December 31, 2021, the Portfolio Managers were primarily responsible for the day-to-day portfolio management of the following accounts:

 

Name of Portfolio Manager   Type of
Accounts		      Total # of
Accounts
Managed		         Total Assets
(in millions)		      # of Accounts
Managed for
which Advisory
Fee is Based on
Performance		      Total Assets for
which Advisory Fee
is Based on
Performance
(in millions)		  
Mitch Goldstein   Registered investment companies     2     $ 27,243       2     $ 27,243  
    Other pooled investment vehicles     4     $ 19,972       4     $ 19,972  
    Other accounts     23     $ 12,223       22       9,746  
                                     
Greg Margolies   Registered investment companies     1     $ 3,129       1     $ 3,129  
    Other pooled investment vehicles     2     $ 2,080       2     $ 2,080  
    Other accounts     3     $ 1,193       3     $ 1,193  

 

 

 

 

Material Conflicts of Interest:

 

The Fund’s executive officers and trustees, and the employees of CION Ares Management, LLC (“CAM” or the “Advisor”) and Ares Capital Management II LLC (“Ares Capital” and collectively with CAM, the “Advisors”), serve or may serve as officers, trustees or principals of entities that operate in the same or a related line of business as the Fund or of other Ares- or CION Investment Group, LLC (“CION”)-advised funds (“Other Managed Funds”). As a result, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of the Fund or its shareholders. Moreover, notwithstanding the difference in principal investment objectives between the Fund and the Other Managed Funds, such other funds, including potential new pooled investment vehicles or managed accounts not yet established (whether managed or sponsored by affiliates or the Advisors), have, and may from time to time have, overlapping investment objectives with the Fund and, accordingly, invest in, whether principally or secondarily, asset classes similar to those targeted by the Fund. To the extent the Other Managed Funds have overlapping investment objectives, the scope of opportunities otherwise available to the Fund may be adversely affected and/or reduced. Additionally, certain employees of the Advisors and their management may face conflicts in their time management and commitments as well as in the allocation of investment opportunities to other Ares funds.

 

The results of the Fund’s investment activities may differ significantly from the results achieved by the Other Managed Funds. It is possible that one or more of such funds will achieve investment results that are substantially more or less favorable than the results achieved by the Fund. Moreover, it is possible that the Fund will sustain losses during periods in which one or more affiliates achieve significant profits on their trading for proprietary or other accounts. The opposite result is also possible. The investment activities of one or more Advisor affiliates for their proprietary accounts and accounts under their management may also limit the investment opportunities for the Fund in certain markets.

 

The Advisors may determine that the Fund should invest on a side-by-side basis with one or more Other Managed Funds. In certain circumstances, negotiated co-investments may be made only in accordance with the terms of the exemptive order Ares received from the SEC (the “Order”). Co-investments made under the Order are subject to compliance with the conditions and other requirements contained in the Order, which could limit the Fund’s ability to participate in a co-investment transaction.

 

In the event investment opportunities are allocated among the Fund and Other Managed Funds, we may not be able to structure our investment portfolio in the manner desired. Although the Advisors endeavor to allocate investment opportunities in a fair and equitable manner, the Fund is not generally permitted to co-invest in any portfolio company in which a fund managed by Ares or any of its downstream affiliates (other than the Fund and its downstream affiliates) currently has an investment. However, the Fund may co-invest with funds managed by Ares or any of its downstream affiliates, subject to compliance with existing regulatory guidance, applicable regulations and its allocation procedures.

 

 

 

 

From time to time, the Fund and the Other Managed Funds may make investments at different levels of an issuer’s capital structure or otherwise in different classes of an issuer’s securities. Such investments may inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities that may be held by such entities.

 

The Advisors, their affiliates and their clients may pursue or enforce rights with respect to an issuer in which the Fund has invested, and those activities may have an adverse effect on the Fund. As a result, prices, availability, liquidity and terms of the Fund’s investments may be negatively impacted by the activities of the Advisors and their affiliates or their clients, and transactions for the Fund may be impaired or effected at prices or terms that may be less favorable than would otherwise have been the case.

 

The Advisors may enter into transactions and invest in securities, instruments and currencies on behalf of the Fund in which customers of its affiliates, to the extent permitted by applicable law, serve as the counterparty, principal or issuer. In such cases, such party’s interests in the transaction could be adverse to the interests of the Fund, and such party may have no incentive to assure that the Fund obtains the best possible prices or terms in connection with the transaction. In addition, the purchase, holding and sale of such investments by the Fund may enhance the profitability of the Advisors or their affiliates. One or more affiliates may also create, write or issue Derivatives for their customers, the underlying securities, currencies or instruments of which may be those in which the Fund invests or which may be based on the performance of the Fund. The Fund may, subject to applicable law, purchase investments that are the subject of an underwriting or other distribution by one or more Advisors affiliates and may also enter into transactions with other clients of an affiliate where such other clients have interests adverse to those of the Fund.

 

The Fund will be required to establish business relationships with its counterparties based on the Fund’s own credit standing. Neither the Advisors nor any of their affiliates will have any obligation to allow its credit to be used in connection with the Fund’s establishment of its business relationships, nor is it expected that the Fund’s counterparties will rely on the credit of the Advisors or their affiliates in evaluating the Fund’s creditworthiness.

 

The Advisors are paid a fee based on a percentage of the Fund’s Managed Assets. The participation of the Advisors’ investment professionals in the valuation process could therefore result in a conflict of interest. The Advisors also may have a conflict of interest in deciding whether to cause the Fund to incur leverage or to invest in more speculative investments or financial instruments, thereby potentially increasing the assets or the yield of the Fund and, accordingly, the Management Fees or Incentive Fees (as such terms are defined in the Fund’s Prospectus) received by the Advisors. Certain other Ares-advised funds pay the Advisors or their affiliates performance-based compensation, which could create an incentive for the Advisors or affiliate to favor such investment fund or account over the Fund.

 

By reason of the various activities of the Advisors and their affiliates, the Advisors and such affiliates may acquire confidential or material non-public information or otherwise be restricted from purchasing certain potential Fund investments that otherwise might have been purchased or be restricted from selling certain Fund investments that might otherwise have been sold at the time.

 

The Advisors have adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions made on behalf of advisory clients, including the Fund, and to help ensure that such decisions are made in accordance with its fiduciary obligations to clients. Nevertheless, notwithstanding such proxy voting policies and procedures, actual proxy voting decisions may have the effect of favoring the interests of other clients, provided that the Advisors believe such voting decisions to be in accordance with its fiduciary obligations.

 

 

 

 

(a)(3)  Compensation Structure of Portfolio Manager(s) or Management Team Members

 

Compensation is determined by Advisors’ executive leadership, with recommendations made by the head of each applicable business unit. Compensation may include a variety of components and may vary from year to year based on a number of factors. Generally, Portfolio Managers receive a base salary and are eligible for a discretionary year-end bonus based on performance, a portion of which may be paid in the form of shares of Class A Common Stock of Ares Capital’s publicly traded parent company.

 

Base Compensation.

 

Generally, when the Portfolio Managers receive base compensation from the Advisors it is based on their individual seniority and their position within the firm.

 

Discretionary Compensation.

 

In addition to base compensation, the Portfolio Managers may receive discretionary year-end bonus compensation from the Advisors or its ultimate parent company. Subject to a minimum compensation threshold, a portion of year-end bonus may be paid in the form of shares of Class A Common Stock of the Ares Capital’s publicly traded parent company, which vests over time. Discretionary compensation may be based on individual seniority and contribution, and, if applicable, may include direct carried interest and/or profit participations with respect to funds in which the Portfolio Managers are involved and may also include similar incentive awards relating to the funds in the firm’s other investment groups.

 

(a)(4)  Ownership of Securities

 

The following table sets forth, for each Portfolio Manager, the aggregate dollar range of the Fund's equity securities beneficially owned as of December 31, 2021.

 

Portfolio Manager Dollar Range of Fund Shares Beneficially Owned
Mitch Goldstein None
Greg Margolies None

 

(b) Not applicable.

 

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 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 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.

 

(a)Not applicable.

 

(b)Not applicable.

 

Item 13. Exhibits.

 

(a)(1)The registrant’s Sarbanes Oxley Code of Ethics is attached hereto in response to Item 2(f).

 

(a)(2)The certifications required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) are attached hereto.

 

(a)(3)Not applicable.

 

(a)(4)Not applicable.

 

(a)(5)Proxy voting policies and procedures of the Fund and its investment adviser are attached hereto in response to Item 7.

 

(b)The certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR 270.30a-2(b)) and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

 

 

 

 

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 Chief Executive Officer  
     
Date: March 9, 2022  
     
By: /s/ Mark Gatto  
  Mark Gatto  
  Co-President and Chief Executive Officer  
     
Date: March 9, 2022  

 

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: March 9, 2022  
     
By: /s/ Mark Gatto  
  Mark Gatto  
  Co-President and Co-Chief Executive Officer  
     
Date: March 9, 2022  
     
By: /s/ Scott C. Lem  
  Scott C. Lem  
  Chief Financial Officer  
     
Date: March 9, 2022