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CION Ares Diversified Credit Fund Risk Factors

CION Ares Diversified Credit Fund Risk Factors

Investing in the Fund involves risks, including the risk that a Shareholder may receive little or no return on their investment or that a Shareholder may lose part or all of their investment. Below is a summary of some of the principal risks of investing in the Fund. For a more complete discussion of the risks of investing in the Fund, see ”Types of Investments and Related Risks” in the prospectus. Shareholders should consider carefully the following principal risks before investing in the Fund:

  • Unlike most closed-end funds, the Fund’s Shares will not be listed on any securities exchange;
  • Although the Fund intends to implement a quarterly share repurchase program, there is no guarantee that an investor will be able to sell all of the Shares that the investor desires to sell. The Fund should therefore be considered to offer limited liquidity;
  • The capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on the Fund’s business and operations;
  • If a Shareholder is able to sell its Shares, the Shareholder likely will receive less than its purchase price and the then current NAV per Share;
  • The Fund’s distributions may be funded from offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to the Fund for investment. Any capital returned to Shareholders through distributions will be distributed after payment of fees and expenses, as well as the sales load;
  • Unlike most closed-end funds, the Fund’s Shares will not be listed on any securities exchange;
  • A return of capital to Shareholders is a return of a portion of their original investment in the Fund, thereby reducing the tax basis of their investment. As a result from such reduction in tax basis, Shareholders may be subject to tax in connection with the sale of Fund Shares, even if such Shares are sold at a loss relative to the Shareholder’s original investment;
  • The Fund’s investments in securities and other obligations of companies that are experiencing distress involve a substantial degree of risk, require a high level of analytical sophistication for successful investment, and require active monitoring;
  • Below investment grade instruments have predominantly speculative characteristics and may be particularly susceptible to economic downturns, which could cause losses;
  • Certain investments may be exposed to the credit risk of the counterparties with whom the Fund deals;
  • The valuation of securities or instruments that lack a central trading place (such as fixed-income securities or instruments) may carry greater risk than those that trade on an exchange;
  • The value of convertible securities may be adversely affected by changes in interest rates, as well as the market price and volatility of the underlying security;
  • Derivative investments have risks, including the imperfect correlation between the value of such instruments and the underlying assets of the Fund;
  • The Fund may be materially adversely affected by market, economic and political conditions globally and in the jurisdictions and sectors in which the Fund invests;
  • Non-U.S. securities may be traded in undeveloped, inefficient and less liquid markets and may experience greater price volatility and changes in value;
  • Changes in foreign currency exchange rates may adversely affect the U.S. dollar value of and returns on foreign denominated investments;
  • Credit intermediation involving entities and activities outside the regular banking system (i.e., the ”shadow banking system” in Europe) could result in increased regulatory and operating costs, which could adversely affect the implementation of the Fund’s investment strategies, income and returns;
  • Although the U.S. credit markets are not currently experiencing the same extreme volatility and market disruption as occurred during 2008 to 2009, extreme volatility or market disruption may recur in the future;
  • Legal and regulatory changes, including those implemented in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ”Dodd-Frank Act”), could occur, which may materially adversely affect the Fund;
  • The Fund is a newly organized, diversified, closed-end investment company with no operating history;
  • The Fund’s ability to grow depends on its ability to raise capital;
  • The Fund may borrow money, which magnifies the potential for gain or loss on amounts invested, subjects the Fund to certain covenants with which it must comply and may increase the risk of investing with the Fund;
  • The Fund operates in a highly competitive market for investment opportunities;
  • The Fund is exposed to risks associated with changes in interest rates;
  • The Fund’s financial condition and results of operations could be negatively affected if a significant investment fails to perform as expected;
  • There are significant and potential conflicts of interest that could impact the Fund’s investment returns;
  • To qualify and remain eligible for the special tax treatment accorded to RICs and their shareholders under the Code, the Fund must meet certain source-of-income, asset diversification and annual distribution requirements, and failure to do so could result in the loss of RIC status.

Accordingly, the Fund should be considered a speculative investment that entails substantial risks, and a prospective investor should invest in the Fund only if they can sustain a complete loss of their investment.

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