N-CSR 1 verticalcapitalncsr.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 811-22554

 

 

Vertical Capital Income Fund

(Exact name of registrant as specified in charter)

 

80 Arkay Drive, Hauppauge, NY 11788

(Address of principal executive offices) (Zip code)

 

Gemini Fund Services, LLC

17605 Wright Street, Omaha, Nebraska, 68130

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 631-470-2616

 

Date of fiscal year end: 9/30

 

Date of reporting period: 9/30/18

 

 

Item 1. Reports to Stockholders.

 

       
       
       
       
       
       
  Vertical Capital Income Fund  
    Class A Class C    
    VCAPX VCCPX    
    Cusip: 92535C104 Cusip: 92535C401    
       
       
  Annual Report  
  September 30, 2018  
       
       
       
       
       
       
       
       
       
       
       
       
       
       
  Investor Information: 1-866-277-VCIF  
       
       
       
       
       
       
       
       
       
  This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing contained herein is to be considered an offer of sale or solicitation of an offer to buy shares of the Vertical Capital Income Fund. Such offering is made only by prospectus, which includes details as to offering price and other material information.  
       
  Distributed by Northern Lights Distributors, LLC
  Member FINRA  
     
     
     

 

 

(VERTICAL CAPITAL INCOME FUND LOGO)(GRAPHICS)

 

November 29, 2018

 

Dear Shareholder,

 

We are pleased to report the completion of another successful year for the Vertical Capital Income Fund (the “Fund”). Consistent with our investment objective to seek income, the Fund once again made continuous monthly distributions aggregating approximately $0.39 per Class A share for the fiscal year ended September 30, 2018. In addition, the Fund expects to make a special distribution of approximately $ 0.23 per share in December 2018 as a result of net capital gains realized on loan sales and loan payoffs. For the year ended September 30, 2018, the Fund produced a total return (load waived) of 4.03% (including the $0.21 special dividend paid in December 2017) compared to one of its key benchmarks, the Barclays Capital Mortgage Backed Securities Index, which reported a total return of -0.92%. Including the maximum load, the Fund’s total return was - 0.64%. Since inception through the end of our fiscal year 2018, the Fund has produced an annualized total return of 7.86%. The SEC Yield as of September 30, 2018, including the expense cap, totaled 2.53%.

 

Update on Economic Outlook and Fund Strategy

 

During the past year, the U.S. again produced solid economic growth. Real GDP is expected to average 3.1% for the twelve months ended September 30, 2018 compared to 2.5% for the twelve months ended September 30, 2017. The economy should continue to do well into 2019 before projected deceleration in 2020 and 2021. The unemployment rate was 3.9% at the end of the second calendar quarter of 2018, the lowest level in 50 years; and it is expected to further decrease to 3.5% by the end of 2019.

 

Reflecting its focus on inflationary trends, The Federal Reserve raised the Federal Funds rate four times during the past year from 1.25% to 2.25% and has indicated that this key short- term rate could be in the ranges of 2.5% by the end of 2018, 3.25% by the end of 2019 and 3.5% by the end of 2020. During the past year, long-term interest rates also rose, though not as much as short-term rates. At September 30, 2018, the 10- year U.S. Treasury rate was 2.9%, an increase of 60 bps from September 30, 2017. Long-term rates are also expected to increase, likely by 25 bps before the end of 2018 and another 50 bps by mid- 2019. The 30-year fixed rate residential mortgage (which is typically bench-marked against the 10-year Treasury rate) was 4.6% in September 2018, reflecting an 80 bps increase during the last year, double the increase seen from September 2016 to September 2017, when the rate was 3.8%.

 

Economic growth helps support jobs and wage growth, and along with population growth and household formation, are important factors in creating demand for housing. Slightly less than two-thirds of all U. S. households own a home. Home ownership generates demand for purchase mortgage originations and for re-financings of existing mortgages. Mortgage volume is also highly influenced by home prices, the inventory of homes for sale, particularly newly constructed housing, and by the cost of mortgage financing.

 

 

 (GRAPHICS)

 

As a result of positive market fundamentals, purchase mortgage originations for calendar year 2018 are expected to be $1.19 trillion, a 7.3% increase over 2017; and they are further forecast to increase by another 4.2% in 2019. The continued increase in purchase mortgages comes as little surprise given the health of the economy and the improving financial conditions of most consumers. However, higher mortgage costs have dampened the demand for refinance originations considerably, reducing their percentage of total mortgage originations from 35% to 25%. “Re-fi’s” are estimated at $420 billion for 2018 compared to more than $500 billion in 2017, with current forecasts projecting a further decrease of 12% to $ 395 billion during 2019.

 

The Fund primarily invests in residential mortgage loans traded in the secondary market at a discount to their unpaid principal balances. The secondary whole loan market is part of the larger $10.7 trillion residential mortgage market which boasts a deep roster of institutional participants. As such, we are comfortable that we will continue to see one-off and portfolio acquisition opportunities, as well as disposition opportunities when it makes sense for us to sell.

 

During the last fiscal year, we continued to actively manage the portfolio, both buying and selling. On a net basis during the past year, the Fund sold more loans than it acquired which reflects our selective acquisition criteria, sellers’ reluctance to adjust pricing expectations in the face of rising rates, as well as the Fund’s need to honor its quarterly shareholder redemptions. This resulted in total net assets decreasing by approximately $ 15 million from September 30, 2017 to September 30, 2018.

 

Fund Results of Operations and Liquidity

 

The last year saw a continued improvement in virtually every one of the portfolio’s key metrics, most notably a reduction in the Fund’s aggregate loan-to-value by 10.36% (reflecting more collateral value) and in both higher coupon and effective interest rates of 0.11% and 0.12%, respectively. These improvements in portfolio fundamentals have occurred while we continue to distribute fully covered monthly distributions and maintain a conservative approach to managing the Fund’s financial position. The Fund continues to have a positive net working capital position, and we continue to maintain cash reserves and a bank line of credit for general fund purposes and contingencies. During 2018, the Fund refinanced its prior credit facility with a new line of credit with a new lender, increasing availability by $15 million to $35 million at a lower cost.

 

We again appreciate your support during the past year and look forward to working on your behalf in 2019.

 

Regards,

 

Robert J. Chapman
Chairman of the Board of Trustees and Co-Portfolio Manager

 

 

 (GRAPHICS)

 

David Aisner
Co-Portfolio Manager

 

Past performance is neither indicative nor a guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. Results shown reflect the Fund’s expense waiver, without which the results could have been lower. The Fund’s total annual operating expenses, as of the Prospectus dated January 19, 2018, would be 2.86% (gross expenses)/1.99% (net expenses after fee waiver) for Class A shares, 3.61% (gross expenses)/2.74% (net expenses after fee waiver) for Class C shares. Please review the Fund’s prospectus for more information regarding the Fund’s fees and expenses. For performance information current to the most recent month-end, please go to provasicapital.com or call 866.655.3600.

 

This material contains forward-looking statements relating to the business and financial outlook of Vertical Capital Income Fund that are based on our current expectations, estimates, forecasts and projections and are not guarantees of future performance. There is no assurance that the Fund will achieve its investment objective. Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. A number of important factors could cause actual results to differ materially from the forward-looking statements contained in this material.

 

Securities may be subject to prepayment risk because borrowers are typically able to prepay principal. The Fund will not invest in real estate directly, but, because the Fund will invest the majority of its assets in securities secured by real estate, its portfolio will be significantly impacted by the performance of the real estate market and may experience more volatility and be exposed to greater risk than a more diversified portfolio. Quarterly repurchases by the Fund of its shares typically will be funded from available cash or sales of portfolio securities. The sale of securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund’s net asset value.

 

9082-NLD-11/28/2018

 

 

Vertical Capital Income Fund
PORTFOLIO REVIEW (Unaudited)
September 30, 2018
 

PERFORMANCE OF A $10,000 INVESTMENT

 

(LINE GRAPH)

 

The Fund’s performance figures for the period ended September 30, 2018, compared to its benchmark:

 

  One Year Three Years Five Years Since Inception * Since Inception **
The Vertical Capital Income Fund Class A 4.03% 7.25% 7.58% 7.86% N/A
The Vertical Capital Income Fund Class A with load (0.64)% 5.59% 6.58% 7.12% N/A
The Vertical Capital Income Fund Class C N/A N/A N/A N/A 1.16%
Bloomberg Barclays Capital Mortgage Backed Securities Index (0.92)% 0.98% 2.02% 1.73% (0.19)%

 

*Class A shares commenced operations on December 30, 2011. The performance of the Fund is based on average annual returns.

 

**Class C shares commenced operations on January 24, 2018. The performance of the Fund is based on average annual returns.

 

The Bloomberg Barclays Capital Mortgage Backed Securities Index is an unmanaged index composed of securities backed by mortgage pools of Ginnie Mae, Freddie Mac and Fannie Mae. Investors cannot invest directly in an index or benchmark.

 

Past performance is not predictive of future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than the original cost. Total return is calculated assuming reinvestment of all dividends and distributions. Total returns would have been lower had the Adviser not waived its fees and reimbursed a portion of the Fund’s expenses. The Fund’s total gross annual operating expenses are 2.86% for Class A and 3.61% for Class C per the latest Prospectus (see Financial Highlights for more current expense ratios). For performance information current to the most recent month-end, please call 1-866-277-VCIF.

 

 

 

PORTFOLIO COMPOSITION*** 
  
Mortgage Notes   100.0%
    100.0%
      
***  Based on Investments at Value as of September 30, 2018.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES - 97.1%          
$115,797   Loan ID 200003  Fixed  7.250%  9/1/2035  $100,876 
 242,053   Loan ID 200004  Fixed  7.990%  10/1/2036   254,156 
 49,720   Loan ID 200012  ARM  9.800%  7/1/2037   48,909 
 37,214   Loan ID 200016  ARM  10.375%  1/1/2031   39,075 
 49,534   Loan ID 200018  Fixed  7.000%  1/1/2033   52,011 
 98,708   Loan ID 200023  Fixed  5.875%  12/1/2050   85,720 
 122,971   Loan ID 200025  ARM  4.375%  3/1/2034   127,859 
 205,980   Loan ID 200026  Interest Only  4.750%  1/1/2050   175,546 
 227,685   Loan ID 200028  Fixed  4.875%  6/1/2050   228,329 
 208,219   Loan ID 200029  Fixed  6.310%  7/1/2037   158,494 
 326,973   Loan ID 200032  Fixed  3.130%  1/1/2051   281,685 
 547,525   Loan ID 200035  Fixed  4.625%  11/1/2050   484,850 
 63,122   Loan ID 200036  Fixed  7.940%  1/12/2034   66,278 
 157,221   Loan ID 200037  Fixed  7.800%  5/1/2035   165,083 
 114,796   Loan ID 200041  Fixed  4.875%  8/1/2039   115,061 
 39,855   Loan ID 200042  Fixed  7.000%  12/1/2037   41,848 
 60,328   Loan ID 200043  Fixed  6.125%  7/1/2039   63,344 
 33,258   Loan ID 200046  Fixed  8.000%  7/1/2027   34,921 
 50,881   Loan ID 200048  Fixed  5.500%  8/1/2039   52,512 
 151,418   Loan ID 200052  Fixed  5.125%  5/1/2040   153,297 
 53,567   Loan ID 200054  Fixed  8.250%  3/1/2039   56,245 
 80,594   Loan ID 200055  Fixed  10.000%  1/5/2036   84,623 
 123,697   Loan ID 200057  ARM  4.375%  10/1/2036   123,925 
 32,764   Loan ID 200060  Fixed  5.750%  8/1/2039   34,091 
 25,021   Loan ID 200065  ARM  9.000%  1/1/2037   26,272 
 209,449   Loan ID 200072  Fixed  0.000%  2/1/2051   163,778 
 132,710   Loan ID 200073  Fixed  0.000%  2/1/2026   104,911 
 135,441   Loan ID 200074  Fixed  0.000%  2/1/2031   107,070 
 195,457   Loan ID 200075  Fixed  4.250%  2/1/2042   188,446 
 162,030   Loan ID 200076  Fixed  4.250%  12/1/2041   155,577 
 27,473   Loan ID 200078  Fixed  7.000%  8/1/2036   27,455 
 131,537   Loan ID 200079  Fixed  4.500%  8/1/2049   55,084 
 66,055   Loan ID 200082  Fixed  8.250%  4/1/2040   56,805 
 180,144   Loan ID 200084  Fixed  7.000%  3/1/2039   146,852 
 193,370   Loan ID 200086  Fixed  4.250%  11/1/2050   142,509 
 220,348   Loan ID 200087  Fixed  6.000%  3/1/2051   193,645 
 119,342   Loan ID 200088  Fixed  7.000%  6/1/2039   97,175 
 260,224   Loan ID 200089  Fixed  3.875%  3/1/2052   190,264 
 272,356   Loan ID 200090  Fixed  4.500%  11/1/2036   74,360 
 128,052   Loan ID 200093  Fixed  5.000%  2/1/2038   129,214 
 71,994   Loan ID 200102  Fixed  8.250%  3/1/2040   69,634 
 109,748   Loan ID 200110  Fixed  8.250%  8/1/2039   112,035 
 121,835   Loan ID 200126  Fixed  8.250%  8/1/2039   126,189 
 70,581   Loan ID 200128  Fixed  4.710%  7/1/2037   42,065 
 450,533   Loan ID 200129  Fixed  4.625%  3/1/2052   354,954 
 29,295   Loan ID 200131  Fixed  3.875%  11/1/2027   27,385 
 118,830   Loan ID 200135  Fixed  4.375%  12/1/2042   115,086 
 122,111   Loan ID 200137  Fixed  4.500%  9/1/2042   118,942 
 37,414   Loan ID 200139  Fixed  4.625%  5/1/2027   36,867 
 75,709   Loan ID 200141  Fixed  4.250%  2/1/2042   72,956 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%       
$122,379   Loan ID 200143  Fixed  3.000%  2/1/2037  $109,360 
 382,914   Loan ID 200145  Fixed  4.625%  8/1/2051   311,598 
 98,489   Loan ID 200152  ARM  5.250%  9/1/2037   100,917 
 150,015   Loan ID 200158  Fixed  3.625%  12/1/2042   135,513 
 121,283   Loan ID 200160  Fixed  3.250%  2/1/2043   108,062 
 214,564   Loan ID 200162  Fixed  3.875%  7/1/2042   200,769 
 190,317   Loan ID 200165  Fixed  4.375%  12/1/2041   184,503 
 109,846   Loan ID 200168  Fixed  3.750%  10/1/2042   101,383 
 22,432   Loan ID 200169  Fixed  6.923%  9/1/2034   23,554 
 135,114   Loan ID 200172  Fixed  7.250%  2/1/2037   141,869 
 87,782   Loan ID 200174  Fixed  7.340%  4/1/2037   92,171 
 50,681   Loan ID 200175  Fixed  9.600%  5/1/2037   53,215 
 37,523   Loan ID 200177  Fixed  8.000%  1/11/2022   39,399 
 4,791   Loan ID 200179  Fixed  7.250%  7/27/2019   5,031 
 109,100   Loan ID 200181  Fixed  7.500%  6/1/2041   110,710 
 71,305   Loan ID 200184  Fixed  4.375%  12/1/2042   68,930 
 27,345   Loan ID 200185  Fixed  5.375%  6/1/2042   28,006 
 52,116   Loan ID 200186  Fixed  5.125%  8/1/2042   52,712 
 145,182   Loan ID 200188  Fixed  3.875%  2/1/2043   135,651 
 321,856   Loan ID 200190  Fixed  3.625%  11/1/2042   295,724 
 158,760   Loan ID 200194  Fixed  4.750%  9/1/2041   158,026 
 253,945   Loan ID 200195  Fixed  3.875%  3/1/2042   237,691 
 97,457   Loan ID 200196  Fixed  4.500%  1/1/2043   94,972 
 37,930   Loan ID 200197  Fixed  4.750%  11/1/2042   37,466 
 39,740   Loan ID 200198  Fixed  5.250%  10/1/2042   40,401 
 276,555   Loan ID 200199  Fixed  4.000%  9/1/2042   261,047 
 236,692   Loan ID 200200  Fixed  3.875%  9/1/2042   217,521 
 47,412   Loan ID 200201  Fixed  5.125%  8/1/2041   48,109 
 22,466   Loan ID 200206  Fixed  3.990%  12/1/2042   21,142 
 46,245   Loan ID 200208  Fixed  4.250%  1/1/2043   44,426 
 193,258   Loan ID 200209  Fixed  3.875%  8/1/2042   180,900 
 54,333   Loan ID 200214  Fixed  5.750%  7/1/2039   56,617 
 111,005   Loan ID 200216  Fixed  5.750%  9/1/2039   114,423 
 139,932   Loan ID 200217  Fixed  5.250%  7/1/2040   142,560 
 71,954   Loan ID 200218  Fixed  4.250%  12/1/2041   69,335 
 193,393   Loan ID 200219  Fixed  4.250%  4/1/2043   185,952 
 158,926   Loan ID 200221  Fixed  4.250%  4/1/2043   153,211 
 190,054   Loan ID 200224  Fixed  4.000%  7/1/2043   179,713 
 79,407   Loan ID 200226  Fixed  5.250%  7/1/2041   81,197 
 49,216   Loan ID 200228  Fixed  4.625%  8/1/2042   48,324 
 141,221   Loan ID 200230  Fixed  3.500%  2/1/2043   128,361 
 66,354   Loan ID 200232  Fixed  3.875%  8/1/2042   62,121 
 114,589   Loan ID 200243  Fixed  3.750%  4/1/2043   105,768 
 26,447   Loan ID 200244  Fixed  5.000%  5/1/2042   26,429 
 194,777   Loan ID 200245  Fixed  3.875%  3/1/2043   181,924 
 88,195   Loan ID 200286  Fixed  4.500%  7/1/2043   86,205 
 97,629   Loan ID 200287  Fixed  4.375%  7/1/2043   94,462 
 326,706   Loan ID 200288  Fixed  4.375%  11/1/2041   317,530 
 279,773   Loan ID 200290  Fixed  4.250%  4/1/2043   269,238 
 198,757   Loan ID 200296  Fixed  3.250%  2/1/2043   177,108 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$171,126   Loan ID 200297  Fixed  3.375%  10/1/2042  $153,946 
 187,666   Loan ID 200299  Fixed  3.625%  10/1/2042   172,306 
 116,235   Loan ID 200300  Fixed  8.400%  10/20/2037   122,047 
 106,685   Loan ID 200302  Fixed  9.875%  10/1/2035   110,865 
 133,569   Loan ID 200304  Fixed  7.250%  10/1/2033   140,247 
 42,680   Loan ID 200307  Fixed  6.500%  7/1/2031   44,814 
 40,142   Loan ID 200313  Fixed  8.500%  3/1/2028   32,748 
 291,534   Loan ID 200315  ARM  4.875%  6/1/2037   172,996 
 69,249   Loan ID 200317  Fixed  7.000%  9/1/2032   72,711 
 74,361   Loan ID 200326  Fixed  8.375%  10/1/2036   78,079 
 142,476   Loan ID 200327  Fixed  6.790%  10/26/2036   149,599 
 247,064   Loan ID 200330  Fixed  7.000%  8/1/2037   201,288 
 97,468   Loan ID 200332  Fixed  5.775%  10/1/2037   101,539 
 88,755   Loan ID 200334  Fixed  7.000%  1/1/2033   93,193 
 262,643   Loan ID 200335  Fixed  3.000%  11/1/2052   203,355 
 42,421   Loan ID 200337  Fixed  7.000%  10/1/2034   44,542 
 48,777   Loan ID 200338  ARM  10.500%  8/1/2029   51,216 
 145,497   Loan ID 200339  Fixed  2.000%  10/1/2033   124,777 
 31,459   Loan ID 200340  Fixed  7.000%  3/1/2030   33,032 
 59,677   Loan ID 200348  Fixed  6.500%  7/1/2038   62,661 
 233,095   Loan ID 200349  Fixed  7.000%  1/1/2037   155,150 
 52,011   Loan ID 200350  Fixed  7.500%  3/1/2029   54,611 
 73,608   Loan ID 200352  Fixed  7.000%  8/1/2030   77,289 
 106,002   Loan ID 200358  Fixed  5.000%  4/1/2025   104,840 
 67,209   Loan ID 200361  Fixed  7.500%  1/1/2034   70,569 
 63,046   Loan ID 200366  Fixed  6.250%  1/1/2033   63,046 
 168,535   Loan ID 200368  Fixed  4.500%  4/1/2036   165,692 
 72,098   Loan ID 200374  ARM  7.375%  5/1/2034   72,098 
 225,332   Loan ID 200378  Fixed  5.500%  5/1/2045   153,961 
 180,412   Loan ID 200380  Fixed  4.220%  4/1/2049   155,514 
 380,579   Loan ID 200383  Fixed  5.030%  12/1/2046   384,637 
 287,456   Loan ID 200384  Fixed  5.000%  11/1/2047   204,097 
 141,361   Loan ID 200385  Fixed  8.250%  1/1/2040   148,429 
 118,200   Loan ID 200389  Fixed  4.820%  9/1/2047   103,207 
 195,582   Loan ID 200390  Fixed  4.780%  4/16/2047   156,153 
 161,054   Loan ID 200391  Fixed  4.000%  1/13/2035   153,587 
 64,402   Loan ID 200392  Fixed  10.000%  6/5/2034   63,004 
 77,897   Loan ID 200395  Fixed  4.860%  4/1/2047   67,323 
 70,570   Loan ID 200396  Fixed  10.000%  2/1/2036   74,098 
 92,225   Loan ID 200397  ARM  5.375%  9/1/2037   96,836 
 128,927   Loan ID 200398  Fixed  4.800%  2/1/2037   111,305 
 73,868   Loan ID 200399  Fixed  4.980%  6/1/2037   65,331 
 47,813   Loan ID 200403  Fixed  8.300%  10/15/2032   50,204 
 54,854   Loan ID 200404  Fixed  8.100%  5/1/2037   57,597 
 92,721   Loan ID 200405  Fixed  4.870%  12/1/2035   90,866 
 114,435   Loan ID 200406  Fixed  4.875%  10/1/2051   114,784 
 227,639   Loan ID 200407  Fixed  6.500%  4/1/2042   239,021 
 340,310   Loan ID 200409  Fixed  6.000%  2/1/2049   144,046 
 102,260   Loan ID 200411  Fixed  8.275%  6/1/2037   107,373 
 307,233   Loan ID 200412  Fixed  5.500%  6/1/2045   95,181 
 178,761   Loan ID 200416  Fixed  4.670%  8/1/2053   155,265 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$67,376   Loan ID 200417  Fixed  7.000%  5/1/2035  $70,744 
 52,623   Loan ID 200418  Fixed  4.000%  6/1/2035   49,694 
 150,857   Loan ID 200419  Fixed  4.000%  12/19/2035   140,165 
 157,950   Loan ID 200420  Fixed  4.225%  4/10/2038   150,437 
 73,629   Loan ID 200421  Fixed  7.710%  8/1/2037   74,008 
 133,223   Loan ID 200422  Fixed  3.830%  8/1/2053   97,278 
 124,786   Loan ID 200423  Fixed  4.500%  6/1/2043   121,834 
 217,066   Loan ID 200430  Fixed  3.625%  7/1/2043   198,513 
 180,960   Loan ID 200431  Fixed  4.625%  7/1/2043   178,322 
 288,180   Loan ID 200432  Fixed  4.875%  5/1/2043   286,691 
 124,509   Loan ID 200433  Fixed  4.250%  8/1/2043   119,712 
 155,559   Loan ID 200434  Fixed  5.250%  10/1/2043   158,687 
 195,561   Loan ID 200435  Fixed  4.625%  11/1/2052   191,871 
 42,464   Loan ID 200439  Fixed  5.000%  8/1/2041   42,766 
 190,163   Loan ID 200441  Fixed  6.000%  4/1/2045   87,063 
 150,424   Loan ID 200445  Fixed  5.250%  2/1/2039   153,508 
 43,963   Loan ID 200447  Fixed  5.875%  11/4/2034   45,859 
 77,168   Loan ID 200448  Fixed  5.750%  5/1/2042   66,746 
 122,633   Loan ID 200449  Fixed  5.000%  7/1/2041   96,262 
 345,641   Loan ID 200451  Fixed  6.250%  7/1/2038   362,923 
 13,861   Loan ID 200453  ARM  5.500%  3/1/2026   14,554 
 197,859   Loan ID 200457  Fixed  5.750%  12/10/2030   206,020 
 184,062   Loan ID 200460  Fixed  7.000%  7/1/2041   193,265 
 375,144   Loan ID 200462  Fixed  6.000%  7/1/2045   329,485 
 236,222   Loan ID 200465  Fixed  6.500%  7/1/2037   227,951 
 102,196   Loan ID 200468  Fixed  5.625%  12/1/2044   47,501 
 124,073   Loan ID 200469  Fixed  6.500%  7/1/2037   112,221 
 279,825   Loan ID 200473  Fixed  4.000%  12/1/2042   200,429 
 238,664   Loan ID 200474  Fixed  5.750%  11/1/2050   248,287 
 165,131   Loan ID 200475  Fixed  5.450%  7/1/2049   169,601 
 188,506   Loan ID 200476  Fixed  6.000%  9/1/2050   197,809 
 171,059   Loan ID 200477  Fixed  4.125%  12/1/2028   162,120 
 98,473   Loan ID 200482  Fixed  4.375%  11/1/2028   95,516 
 92,505   Loan ID 200483  Fixed  4.375%  11/1/2028   89,726 
 72,195   Loan ID 200485  Fixed  4.125%  2/1/2043   68,832 
 238,023   Loan ID 200486  Fixed  3.500%  1/1/2043   216,093 
 110,000   Loan ID 200489  Fixed  4.000%  3/1/2043   103,797 
 63,099   Loan ID 200490  Fixed  4.000%  11/1/2028   59,423 
 195,593   Loan ID 200491  Fixed  5.500%  10/1/2039   201,709 
 116,753   Loan ID 200492  Fixed  4.000%  1/1/2043   110,208 
 268,068   Loan ID 200494  Fixed  4.625%  10/1/2043   264,500 
 193,423   Loan ID 200496  Fixed  3.875%  2/1/2043   180,631 
 308,881   Loan ID 200497  Fixed  3.250%  4/1/2043   274,969 
 261,538   Loan ID 200499  Fixed  4.250%  1/1/2043   250,753 
 205,206   Loan ID 200500  Fixed  5.875%  2/1/2037   214,293 
 363,226   Loan ID 200504  Fixed  3.375%  3/1/2043   326,000 
 69,282   Loan ID 200507  Fixed  4.500%  9/1/2042   67,723 
 320,011   Loan ID 200514  Fixed  3.000%  4/1/2047   285,865 
 95,774   Loan ID 200515  Fixed  8.250%  2/1/2039   100,563 
 100,053   Loan ID 200517  Fixed  8.000%  5/1/2039   101,444 
 197,173   Loan ID 200518  Fixed  3.000%  12/1/2050   175,872 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$304,795   Loan ID 200519  Fixed  3.000%  11/1/2049  $274,183 
 112,330   Loan ID 200524  Fixed  3.500%  6/1/2043   102,035 
 271,519   Loan ID 200525  Fixed  3.250%  12/1/2042   241,653 
 107,725   Loan ID 200527  Fixed  4.500%  12/1/2043   105,336 
 382,173   Loan ID 200529  Fixed  4.625%  2/1/2044   375,680 
 168,934   Loan ID 200531  Fixed  4.625%  11/1/2043   165,590 
 105,943   Loan ID 200532  Fixed  3.250%  7/1/2043   94,200 
 102,780   Loan ID 200537  Fixed  4.500%  3/1/2042   100,833 
 80,990   Loan ID 200540  Fixed  3.875%  2/1/2043   75,650 
 49,968   Loan ID 200545  Fixed  4.375%  2/1/2029   48,331 
 118,247   Loan ID 200546  Fixed  5.375%  12/1/2043   120,882 
 162,956   Loan ID 200548  Fixed  5.250%  2/1/2044   165,860 
 132,664   Loan ID 200564  Fixed  4.875%  5/1/2039   121,940 
 509,376   Loan ID 200565  Fixed  4.000%  6/1/2037   431,560 
 126,178   Loan ID 200567  Fixed  3.375%  5/1/2043   113,358 
 130,601   Loan ID 200571  Fixed  4.500%  7/1/2043   127,431 
 91,721   Loan ID 200573  Fixed  3.750%  9/1/2042   84,913 
 126,247   Loan ID 200574  Fixed  4.875%  1/1/2044   126,366 
 177,451   Loan ID 200578  Fixed  4.750%  8/1/2040   176,763 
 46,693   Loan ID 200579  Fixed  4.875%  5/1/2042   46,332 
 166,341   Loan ID 200580  Fixed  4.125%  11/1/2041   159,100 
 37,264   Loan ID 200581  Fixed  4.750%  9/1/2042   36,400 
 358,128   Loan ID 200582  Fixed  4.000%  11/1/2042   332,883 
 73,660   Loan ID 200583  Fixed  3.625%  9/1/2027   67,611 
 313,929   Loan ID 200586  Fixed  3.500%  1/1/2043   285,066 
 241,487   Loan ID 200588  Fixed  3.750%  5/1/2042   224,150 
 64,315   Loan ID 200593  Fixed  3.875%  6/1/2042   60,163 
 219,224   Loan ID 200594  Fixed  4.250%  4/1/2043   211,371 
 37,413   Loan ID 200597  Fixed  5.625%  2/1/2044   38,687 
 131,737   Loan ID 200598  Fixed  4.625%  2/1/2044   118,211 
 182,651   Loan ID 200600  Fixed  4.625%  4/1/2044   180,102 
 177,244   Loan ID 200602  Fixed  3.750%  3/1/2043   164,089 
 26,017   Loan ID 200603  Fixed  4.125%  6/1/2043   24,690 
 70,433   Loan ID 200604  Fixed  3.500%  1/1/2043   63,964 
 136,457   Loan ID 200605  Fixed  4.875%  11/1/2043   131,129 
 130,025   Loan ID 200608  Fixed  4.125%  11/1/2043   124,064 
 120,974   Loan ID 200612  Fixed  4.500%  2/1/2043   118,343 
 196,397   Loan ID 200613  Fixed  3.369%  1/1/2043   176,701 
 98,342   Loan ID 200615  Fixed  4.250%  8/1/2043   94,487 
 329,013   Loan ID 200616  Fixed  4.875%  2/1/2044   328,402 
 124,076   Loan ID 200618  Fixed  4.375%  5/1/2042   120,558 
 220,555   Loan ID 200620  Fixed  4.250%  10/1/2043   212,167 
 126,817   Loan ID 200621  Fixed  3.625%  1/1/2043   115,914 
 69,776   Loan ID 200623  Fixed  4.375%  12/1/2042   67,547 
 245,038   Loan ID 200624  Fixed  4.125%  4/1/2043   159,275 
 126,887   Loan ID 200627  Fixed  4.250%  10/1/2043   122,063 
 160,685   Loan ID 200630  Fixed  5.250%  9/1/2043   163,827 
 333,708   Loan ID 200632  Fixed  5.250%  5/1/2044   339,121 
 218,042   Loan ID 200633  Fixed  5.125%  5/1/2044   219,812 
 223,120   Loan ID 200634  Fixed  4.375%  1/1/2044   216,489 
 140,915   Loan ID 200642  Fixed  5.000%  3/1/2044   126,177 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$114,126   Loan ID 200645  Fixed  5.000%  4/1/2044  $114,697 
 137,307   Loan ID 200649  Fixed  4.375%  3/1/2044   133,046 
 125,470   Loan ID 200650  Fixed  4.875%  5/1/2044   123,377 
 250,617   Loan ID 200651  Fixed  3.625%  7/1/2043   229,291 
 134,469   Loan ID 200655  Fixed  3.375%  5/1/2043   120,788 
 145,926   Loan ID 200656  Fixed  6.875%  7/1/2037   134,117 
 142,626   Loan ID 200657  Fixed  4.875%  8/1/2051   142,939 
 174,342   Loan ID 200660  Fixed  5.875%  3/1/2038   182,174 
 204,935   Loan ID 200662  Fixed  5.000%  3/1/2044   205,954 
 66,737   Loan ID 200663  Fixed  4.750%  5/1/2044   66,316 
 289,882   Loan ID 200668  Fixed  3.625%  4/1/2043   266,112 
 150,665   Loan ID 200669  Fixed  5.250%  4/1/2044   152,481 
 55,829   Loan ID 200670  Fixed  4.375%  2/1/2029   54,083 
 229,331   Loan ID 200671  Fixed  4.625%  8/1/2043   225,559 
 150,731   Loan ID 200672  Fixed  3.750%  7/1/2043   139,157 
 299,650   Loan ID 200674  Fixed  4.500%  5/1/2044   292,393 
 223,645   Loan ID 200675  Fixed  5.125%  4/1/2044   225,710 
 106,056   Loan ID 200677  Fixed  3.625%  5/1/2028   97,162 
 448,582   Loan ID 200678  Fixed  4.375%  2/1/2044   434,335 
 246,831   Loan ID 200679  Fixed  5.000%  4/1/2044   193,033 
 183,932   Loan ID 200682  Fixed  4.875%  5/1/2044   162,599 
 122,422   Loan ID 200684  Fixed  4.875%  4/1/2044   122,618 
 222,646   Loan ID 200685  Fixed  4.875%  5/1/2044   222,024 
 217,248   Loan ID 200690  Fixed  4.250%  4/1/2044   209,240 
 236,272   Loan ID 200692  Fixed  4.625%  7/1/2044   231,695 
 103,324   Loan ID 200694  Fixed  4.500%  9/1/2043   100,929 
 46,305   Loan ID 200696  Fixed  3.750%  10/1/2042   42,952 
 89,148   Loan ID 200700  Fixed  4.250%  2/1/2044   85,609 
 161,993   Loan ID 200701  Fixed  4.750%  6/1/2044   160,419 
 93,554   Loan ID 200704  Fixed  4.375%  3/1/2043   90,371 
 128,079   Loan ID 200708  Fixed  4.875%  2/1/2044   128,416 
 49,379   Loan ID 200709  Fixed  4.375%  4/1/2043   47,829 
 111,521   Loan ID 200710  Fixed  4.500%  7/1/2044   108,794 
 111,527   Loan ID 200711  Fixed  3.750%  7/1/2043   87,749 
 588,507   Loan ID 200714  Fixed  4.175%  11/1/2036   493,725 
 205,918   Loan ID 200716  ARM  4.844%  8/1/2037   177,594 
 137,334   Loan ID 200720  ARM  4.875%  4/1/2042   108,402 
 147,077   Loan ID 200726  Fixed  4.375%  9/1/2037   93,712 
 160,292   Loan ID 200727  Fixed  3.500%  7/1/2037   147,704 
 446,614   Loan ID 200730  ARM  4.750%  9/1/2036   448,292 
 191,673   Loan ID 200732  Fixed  4.125%  9/1/2027   183,983 
 222,082   Loan ID 200733  Fixed  3.750%  12/1/2042   205,797 
 231,025   Loan ID 200734  ARM  3.375%  4/1/2044   228,458 
 98,636   Loan ID 200735  Fixed  4.500%  6/1/2044   96,433 
 140,250   Loan ID 200736  Fixed  4.750%  5/1/2044   122,831 
 171,233   Loan ID 200742  Fixed  4.250%  4/1/2043   164,121 
 185,238   Loan ID 200744  Fixed  3.625%  6/1/2043   169,541 
 437,707   Loan ID 200748  Fixed  4.750%  12/1/2043   433,564 
 149,247   Loan ID 200749  Fixed  4.750%  9/1/2043   148,395 
 232,948   Loan ID 200750  Fixed  4.750%  5/1/2044   231,901 
 58,180   Loan ID 200753  Fixed  5.250%  5/1/2044   58,640 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%     
$53,663   Loan ID 200755  Fixed  4.250%  6/1/2043  $51,680 
 184,054   Loan ID 200756  Fixed  4.875%  11/1/2043   191,502 
 121,872   Loan ID 200759  Fixed  3.750%  6/1/2043   112,919 
 166,696   Loan ID 200760  Fixed  3.750%  6/1/2043   154,292 
 289,787   Loan ID 200762  Fixed  3.875%  5/1/2042   271,449 
 148,543   Loan ID 200763  Fixed  4.250%  11/1/2043   142,579 
 198,601   Loan ID 200765  Fixed  4.875%  11/1/2043   197,713 
 474,992   Loan ID 200766  Fixed  3.625%  12/1/2042   436,227 
 173,270   Loan ID 200771  Fixed  4.500%  4/1/2043   173,270 
 237,948   Loan ID 200772  Fixed  3.750%  3/1/2043   220,513 
 198,441   Loan ID 200774  Fixed  3.875%  7/1/2043   185,372 
 43,176   Loan ID 200775  Fixed  4.250%  4/1/2043   41,450 
 78,842   Loan ID 200776  Fixed  4.250%  3/1/2044   75,634 
 52,142   Loan ID 200777  Fixed  4.750%  6/1/2044   43,737 
 139,315   Loan ID 200779  Fixed  4.625%  8/1/2044   136,322 
 163,084   Loan ID 200781  Fixed  4.625%  9/1/2044   158,775 
 136,605   Loan ID 200783  Fixed  4.750%  9/1/2044   135,763 
 109,062   Loan ID 200785  Fixed  4.500%  8/1/2044   106,417 
 220,334   Loan ID 200786  Fixed  4.625%  7/1/2044   217,640 
 42,029   Loan ID 200787  Fixed  4.750%  9/1/2044   41,378 
 126,104   Loan ID 200789  Fixed  3.750%  9/1/2044   116,360 
 146,977   Loan ID 200790  Fixed  4.250%  8/1/2044   141,532 
 197,913   Loan ID 200791  Fixed  4.875%  6/1/2044   196,233 
 346,565   Loan ID 200792  Fixed  3.375%  1/1/2043   232,428 
 90,013   Loan ID 200795  Fixed  6.750%  8/1/2036   87,787 
 69,969   Loan ID 200796  Fixed  4.170%  12/1/2053   43,886 
 58,222   Loan ID 200799  Fixed  4.000%  2/5/2053   51,942 
 63,815   Loan ID 200800  Fixed  4.000%  1/1/2053   43,134 
 350,217   Loan ID 200803  Fixed  3.410%  11/1/2050   225,071 
 151,708   Loan ID 200805  Fixed  4.625%  7/1/2050   106,020 
 156,636   Loan ID 200806  Fixed  5.000%  8/1/2049   111,903 
 56,735   Loan ID 200808  Fixed  4.250%  11/1/2050   24,108 
 115,072   Loan ID 200809  Fixed  5.000%  4/1/2050   62,553 
 234,536   Loan ID 200814  Fixed  8.250%  7/1/2039   242,677 
 278,291   Loan ID 200817  Fixed  5.000%  1/1/2050   174,202 
 202,828   Loan ID 200821  Fixed  4.250%  8/1/2044   195,185 
 78,930   Loan ID 200823  Fixed  4.250%  9/1/2044   75,946 
 215,338   Loan ID 200824  Fixed  4.250%  8/1/2044   202,852 
 103,145   Loan ID 200826  Fixed  4.375%  9/1/2044   99,297 
 179,639   Loan ID 200827  Fixed  3.875%  6/1/2044   166,999 
 208,198   Loan ID 200829  Fixed  4.375%  7/1/2043   201,665 
 199,434   Loan ID 200830  ARM  2.875%  7/1/2044   196,986 
 66,606   Loan ID 200831  Fixed  4.250%  10/1/2044   63,685 
 330,327   Loan ID 200832  Fixed  4.250%  10/1/2044   316,831 
 155,285   Loan ID 200834  Fixed  4.125%  7/1/2043   148,005 
 318,305   Loan ID 200835  Fixed  5.000%  8/1/2043   320,749 
 226,663   Loan ID 200839  Fixed  5.000%  5/1/2044   228,003 
 172,790   Loan ID 200842  Fixed  4.250%  8/1/2044   165,891 
 348,297   Loan ID 200843  Fixed  4.750%  10/1/2043   344,190 
 292,290   Loan ID 200844  Fixed  4.500%  7/1/2043   285,746 
 197,127   Loan ID 200846  Fixed  4.375%  11/1/2043   191,621 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$177,228   Loan ID 200847  Fixed  4.750%  10/1/2044  $175,786 
 106,519   Loan ID 200853  Fixed  5.000%  4/1/2037   107,294 
 222,887   Loan ID 200855  ARM  4.727%  7/1/2037   117,115 
 193,050   Loan ID 200856  Fixed  6.500%  6/1/2042   116,486 
 258,632   Loan ID 200858  Fixed  3.000%  1/1/2053   215,004 
 163,041   Loan ID 200860  Fixed  3.875%  3/1/2052   97,376 
 417,670   Loan ID 200861  Fixed  2.000%  6/1/2054   265,715 
 243,928   Loan ID 200863  Fixed  3.000%  7/1/2052   201,307 
 258,969   Loan ID 200866  Fixed  3.000%  5/1/2053   217,115 
 110,336   Loan ID 200867  Fixed  3.370%  9/1/2053   93,391 
 196,136   Loan ID 200873  Fixed  3.525%  11/1/2053   73,811 
 192,940   Loan ID 200876  ARM  3.750%  5/1/2035   154,998 
 184,501   Loan ID 200880  Fixed  4.250%  6/1/2043   177,488 
 73,658   Loan ID 200883  Fixed  3.375%  5/1/2028   66,132 
 89,720   Loan ID 200886  Fixed  4.250%  10/1/2044   86,024 
 245,570   Loan ID 200887  Fixed  4.750%  9/1/2044   243,054 
 229,087   Loan ID 200888  Fixed  4.500%  9/1/2044   223,623 
 200,456   Loan ID 200891  Fixed  4.250%  10/1/2044   192,020 
 245,057   Loan ID 200892  Fixed  3.750%  9/1/2043   226,257 
 94,691   Loan ID 200894  Fixed  5.000%  10/1/2043   95,289 
 217,561   Loan ID 200895  Fixed  3.875%  11/1/2043   203,282 
 188,943   Loan ID 200897  Fixed  4.750%  10/1/2044   186,268 
 357,938   Loan ID 200900  Fixed  4.375%  9/1/2044   347,952 
 638,551   Loan ID 200902  Fixed  4.250%  9/1/2044   614,599 
 244,141   Loan ID 200904  Fixed  5.125%  9/1/2044   247,166 
 392,040   Loan ID 200905  Fixed  5.375%  9/1/2044   399,124 
 294,321   Loan ID 200906  Fixed  4.875%  2/1/2035   295,270 
 355,724   Loan ID 200907  ARM  4.700%  8/1/2047   353,008 
 103,490   Loan ID 200908  Fixed  4.000%  6/1/2049   99,329 
 112,818   Loan ID 200909  Fixed  4.870%  3/1/2046   113,139 
 197,178   Loan ID 200910  Fixed  4.300%  4/1/2053   165,691 
 711,124   Loan ID 200912  Fixed  4.500%  3/1/2037   689,804 
 57,932   Loan ID 200913  Fixed  4.250%  5/1/2047   48,745 
 146,411   Loan ID 200914  Fixed  2.875%  12/1/2047   131,581 
 90,315   Loan ID 200916  Fixed  4.000%  10/1/2037   82,914 
 156,686   Loan ID 200917  Fixed  4.875%  1/1/2051   157,145 
 93,042   Loan ID 200921  ARM  4.750%  7/1/2051   97,695 
 415,131   Loan ID 200922  Fixed  3.340%  9/1/2053   385,565 
 501,968   Loan ID 200924  Fixed  5.500%  9/1/2051   517,592 
 310,820   Loan ID 200927  Fixed  3.000%  8/1/2038   281,545 
 117,341   Loan ID 200928  Fixed  4.800%  12/1/2036   117,026 
 157,468   Loan ID 200929  Fixed  4.625%  1/1/2043   154,775 
 384,336   Loan ID 200931  Fixed  4.250%  12/1/2052   323,209 
 294,572   Loan ID 200933  Fixed  4.250%  3/1/2043   283,441 
 111,286   Loan ID 200934  Fixed  3.810%  1/1/2043   103,423 
 173,172   Loan ID 200935  Fixed  3.875%  4/1/2043   161,955 
 189,230   Loan ID 200936  Fixed  4.000%  5/1/2042   178,884 
 193,024   Loan ID 200940  Fixed  3.250%  2/1/2043   171,883 
 111,811   Loan ID 200941  Fixed  3.780%  1/1/2043   103,715 
 272,269   Loan ID 200942  Fixed  4.000%  4/1/2043   257,000 
 101,902   Loan ID 200944  Fixed  4.500%  2/1/2044   98,998 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%    
$280,991   Loan ID 200947  Fixed  4.000%  2/1/2043  $265,165 
 126,614   Loan ID 200948  Fixed  4.625%  12/1/2042   123,927 
 274,226   Loan ID 200949  Fixed  3.875%  4/1/2043   256,356 
 177,186   Loan ID 200952  Fixed  3.875%  1/1/2043   165,646 
 114,291   Loan ID 200953  Fixed  3.750%  12/1/2042   105,800 
 368,614   Loan ID 200954  Fixed  3.625%  1/1/2043   338,039 
 318,503   Loan ID 200955  Fixed  3.250%  5/1/2043   283,871 
 259,629   Loan ID 200956  Fixed  5.000%  8/1/2051   262,083 
 407,763   Loan ID 200959  Fixed  4.000%  11/1/2042   385,417 
 355,753   Loan ID 200960  Fixed  3.500%  1/1/2043   322,948 
 200,575   Loan ID 200962  Fixed  4.250%  10/1/2044   192,856 
 115,577   Loan ID 200963  Fixed  4.750%  9/1/2044   114,313 
 344,664   Loan ID 200964  Fixed  3.750%  7/1/2043   318,902 
 143,174   Loan ID 200966  Fixed  4.875%  7/1/2044   140,415 
 92,496   Loan ID 200968  Fixed  4.250%  11/1/2044   80,144 
 354,963   Loan ID 200969  Fixed  4.875%  8/1/2043   354,439 
 150,871   Loan ID 200974  Fixed  4.250%  10/1/2044   144,972 
 56,134   Loan ID 200975  Fixed  4.750%  12/1/2044   55,800 
 345,007   Loan ID 200977  Fixed  4.875%  9/1/2044   345,490 
 201,639   Loan ID 200983  Fixed  4.375%  8/1/2044   195,437 
 112,057   Loan ID 200987  Fixed  4.625%  10/1/2044   110,047 
 191,612   Loan ID 200989  Fixed  3.750%  6/1/2029   176,284 
 277,327   Loan ID 200992  Fixed  4.125%  5/1/2043   264,554 
 164,540   Loan ID 200993  Fixed  2.004%  7/15/2049   135,916 
 55,021   Loan ID 200996  Fixed  2.500%  8/1/2048   40,158 
 95,507   Loan ID 200997  Fixed  2.000%  3/1/2051   72,808 
 359,096   Loan ID 200998  Fixed  3.875%  12/1/2050   333,069 
 70,931   Loan ID 201000  Fixed  5.125%  2/1/2039   71,975 
 25,097   Loan ID 201002  Fixed  0.000%  10/1/2024   19,976 
 126,995   Loan ID 201005  Fixed  4.750%  7/1/2041   126,285 
 42,217   Loan ID 201006  Fixed  6.875%  3/1/2038   44,328 
 83,521   Loan ID 201007  Fixed  7.125%  4/1/2037   87,697 
 64,122   Loan ID 201009  Fixed  0.000%  4/1/2033   51,549 
 78,546   Loan ID 201010  Fixed  5.500%  4/1/2039   73,319 
 30,776   Loan ID 201011  Fixed  0.000%  2/1/2023   24,565 
 45,375   Loan ID 201012  Fixed  7.500%  12/1/2038   46,040 
 55,149   Loan ID 201013  Fixed  7.500%  12/1/2038   45,863 
 83,181   Loan ID 201014  Fixed  0.000%  2/1/2033   66,157 
 9,177   Loan ID 201015  Fixed  0.000%  3/29/2021   7,460 
 103,792   Loan ID 201016  Fixed  6.500%  2/1/2036   107,992 
 21,007   Loan ID 201017  Fixed  0.000%  4/1/2032   16,733 
 88,468   Loan ID 201020  Fixed  0.000%  10/1/2034   70,525 
 77,274   Loan ID 201022  ARM  4.625%  5/1/2037   62,600 
 138,337   Loan ID 201023  Fixed  6.450%  2/1/2036   124,927 
 78,071   Loan ID 201026  Fixed  7.750%  12/1/2035   79,756 
 105,646   Loan ID 201027  ARM  9.538%  3/1/2037   110,928 
 101,268   Loan ID 201030  Fixed  5.000%  7/1/2042   102,244 
 138,702   Loan ID 201032  Fixed  4.500%  11/1/2044   134,316 
 280,388   Loan ID 201033  Fixed  4.125%  12/1/2044   267,303 
 90,508   Loan ID 201036  Fixed  4.375%  12/1/2044   87,538 
 67,678   Loan ID 201037  Fixed  8.250%  7/1/2039   71,062 
 89,718   Loan ID 201041  Fixed  3.750%  11/1/2052   74,545 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%       
$112,955   Loan ID 201043  Fixed  4.000%  4/1/2039  $100,446 
 175,780   Loan ID 201044  Fixed  4.870%  3/29/2037   176,230 
 106,091   Loan ID 201045  Fixed  3.000%  7/1/2037   75,150 
 263,076   Loan ID 201046  Fixed  2.000%  4/1/2053   201,468 
 107,517   Loan ID 201047  Fixed  3.625%  4/1/2053   93,971 
 171,525   Loan ID 201048  Fixed  3.875%  4/1/2052   141,817 
 64,573   Loan ID 201053  Fixed  3.860%  7/1/2053   61,058 
 207,822   Loan ID 201054  Fixed  2.400%  5/17/2050   170,817 
 579,981   Loan ID 201056  Fixed  2.000%  7/1/2054   484,479 
 163,312   Loan ID 201057  Fixed  2.000%  1/1/2050   134,738 
 127,592   Loan ID 201058  Fixed  3.500%  8/1/2037   107,990 
 107,839   Loan ID 201060  ARM  4.750%  7/1/2035   93,056 
 85,874   Loan ID 201061  Fixed  5.000%  2/1/2050   68,601 
 116,717   Loan ID 201062  Fixed  3.100%  4/1/2047   104,940 
 122,528   Loan ID 201063  Fixed  4.000%  9/1/2047   100,557 
 208,957   Loan ID 201065  Fixed  3.000%  7/1/2037   164,180 
 226,722   Loan ID 201066  Fixed  4.250%  12/1/2046   219,769 
 427,490   Loan ID 201067  Fixed  4.750%  1/1/2044   423,472 
 67,411   Loan ID 201069  Fixed  4.625%  12/1/2044   66,290 
 605,115   Loan ID 201070  Fixed  4.250%  2/1/2045   580,042 
 101,350   Loan ID 201072  Fixed  3.500%  3/1/2028   92,116 
 40,388   Loan ID 201073  Fixed  3.125%  4/1/2023   26,252 
 93,960   Loan ID 201075  Fixed  4.375%  10/1/2044   90,953 
 122,201   Loan ID 201076  Fixed  3.500%  12/1/2042   110,948 
 132,053   Loan ID 201077  Fixed  3.625%  7/1/2044   118,823 
 222,639   Loan ID 201084  Fixed  5.000%  8/1/2038   224,671 
 144,395   Loan ID 201086  Fixed  4.625%  11/1/2044   140,342 
 155,682   Loan ID 201091  Fixed  4.125%  1/1/2045   146,973 
 245,788   Loan ID 201092  Fixed  5.250%  4/1/2046   249,590 
 134,217   Loan ID 201093  Fixed  4.125%  9/1/2043   79,508 
 144,519   Loan ID 201094  Fixed  4.550%  3/1/2044   140,555 
 90,687   Loan ID 201100  Fixed  4.125%  7/1/2043   86,607 
 343,331   Loan ID 201101  Fixed  4.625%  3/1/2045   337,336 
 149,731   Loan ID 201103  ARM  2.875%  5/1/2044   148,903 
 156,735   Loan ID 201104  Fixed  4.375%  4/1/2045   151,519 
 76,130   Loan ID 201107  Fixed  5.150%  2/1/2036   77,380 
 151,025   Loan ID 201108  Fixed  4.750%  2/1/2054   134,538 
 508,460   Loan ID 201110  ARM  5.125%  4/1/2037   409,754 
 159,280   Loan ID 201111  Fixed  4.875%  4/1/2050   98,112 
 237,964   Loan ID 201112  Fixed  4.750%  8/1/2037   237,151 
 77,685   Loan ID 201113  Fixed  5.750%  12/1/2052   80,840 
 110,231   Loan ID 201114  Fixed  8.087%  5/1/2054   89,222 
 500,177   Loan ID 201115  Fixed  4.000%  2/1/2051   469,163 
 87,716   Loan ID 201121  Fixed  4.125%  10/1/2037   70,432 
 84,341   Loan ID 201122  Fixed  4.750%  11/1/2048   75,680 
 239,408   Loan ID 201124  Fixed  4.750%  4/1/2040   238,467 
 428,350   Loan ID 201126  Fixed  6.500%  4/1/2049   446,964 
 79,627   Loan ID 201127  ARM  4.375%  4/1/2037   72,914 
 116,519   Loan ID 201130  Fixed  4.850%  12/1/2037   115,272 
 115,910   Loan ID 201131  Fixed  8.250%  5/1/2053   118,320 
 167,747   Loan ID 201132  Fixed  4.000%  7/1/2037   113,887 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%     
$194,477   Loan ID 201134  Fixed  2.000%  10/1/2053  $144,047 
 514,044   Loan ID 201135  Fixed  4.000%  6/1/2051   406,299 
 54,821   Loan ID 201138  Fixed  4.250%  3/1/2034   53,292 
 157,678   Loan ID 201139  Fixed  2.000%  11/1/2053   117,988 
 150,466   Loan ID 201140  Fixed  4.870%  1/1/2038   150,847 
 85,796   Loan ID 201143  Fixed  3.000%  11/1/2037   61,734 
 223,966   Loan ID 201145  Fixed  4.375%  4/1/2051   215,897 
 129,273   Loan ID 201146  Fixed  4.875%  8/1/2054   113,453 
 107,624   Loan ID 201147  Fixed  4.000%  11/1/2051   81,843 
 93,773   Loan ID 201148  Fixed  3.950%  10/1/2042   89,673 
 312,957   Loan ID 201149  Fixed  5.000%  5/1/2058   252,931 
 245,295   Loan ID 201153  Fixed  5.850%  6/1/2050   222,063 
 57,095   Loan ID 201154  ARM  4.250%  11/1/2041   59,915 
 92,785   Loan ID 201155  Fixed  2.000%  11/1/2053   57,215 
 63,193   Loan ID 201156  Fixed  5.000%  4/1/2050   45,679 
 285,582   Loan ID 201157  Fixed  4.000%  3/1/2055   272,291 
 200,072   Loan ID 201160  Fixed  4.920%  10/1/2049   133,176 
 375,979   Loan ID 201163  Fixed  4.750%  12/1/2049   228,574 
 162,688   Loan ID 201164  Fixed  4.250%  11/1/2051   158,175 
 108,594   Loan ID 201165  Fixed  4.750%  1/1/2044   107,761 
 425,719   Loan ID 201168  Fixed  3.875%  4/1/2052   353,202 
 104,358   Loan ID 201169  Fixed  5.934%  9/1/2037   91,119 
 63,483   Loan ID 201170  Fixed  4.375%  7/1/2037   61,976 
 106,176   Loan ID 201173  Fixed  4.000%  11/1/2047   51,707 
 143,299   Loan ID 201174  Fixed  4.750%  1/1/2053   142,813 
 61,260   Loan ID 201175  Fixed  5.000%  9/1/2044   61,805 
 132,596   Loan ID 201176  Fixed  4.250%  8/1/2053   127,211 
 297,258   Loan ID 201179  Fixed  4.750%  5/1/2051   216,586 
 293,856   Loan ID 201181  Fixed  4.500%  4/1/2034   289,480 
 131,083   Loan ID 201183  Fixed  3.375%  10/1/2052   100,677 
 62,126   Loan ID 201184  Fixed  4.000%  6/1/2049   59,586 
 253,286   Loan ID 201185  Fixed  5.760%  10/1/2053   204,962 
 80,119   Loan ID 201187  Fixed  2.000%  11/1/2048   20,863 
 614,725   Loan ID 201196  Fixed  2.000%  11/1/2036   500,723 
 170,836   Loan ID 201197  Fixed  5.125%  8/1/2037   121,567 
 327,901   Loan ID 201199  Fixed  5.125%  11/1/2046   328,903 
 279,146   Loan ID 201200  Fixed  4.500%  3/1/2044   273,506 
 441,420   Loan ID 201204  Fixed  3.750%  4/1/2045   405,981 
 145,837   Loan ID 201205  Fixed  4.625%  1/1/2045   143,541 
 127,393   Loan ID 201206  Fixed  3.990%  4/1/2045   119,611 
 414,031   Loan ID 201207  Fixed  4.625%  8/1/2051   400,357 
 113,239   Loan ID 201208  Fixed  4.625%  4/1/2045   110,583 
 175,728   Loan ID 201209  Fixed  4.250%  4/1/2045   157,773 
 126,075   Loan ID 201211  Fixed  4.125%  7/1/2044   92,263 
 357,188   Loan ID 201212  Fixed  4.625%  3/1/2045   300,748 
 194,355   Loan ID 201213  Fixed  4.875%  8/1/2044   189,209 
 530,848   Loan ID 201214  ARM  2.875%  9/1/2043   527,345 
 123,379   Loan ID 201218  Fixed  4.125%  1/1/2045   114,411 
 63,158   Loan ID 201221  Fixed  3.250%  5/1/2043   63,251 
 46,971   Loan ID 201222  Fixed  5.125%  1/1/2045   46,461 
 202,664   Loan ID 201223  Fixed  3.875%  4/1/2030   201,138 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%     
$58,869   Loan ID 201226  Fixed  5.000%  3/1/2045  $58,888 
 67,615   Loan ID 201229  Fixed  3.250%  7/1/2024   65,585 
 121,631   Loan ID 201232  Fixed  4.500%  1/1/2045   117,408 
 252,921   Loan ID 201233  Fixed  4.500%  12/1/2044   244,902 
 229,995   Loan ID 201237  Fixed  3.750%  5/1/2045   212,243 
 155,338   Loan ID 201240  Fixed  4.250%  10/1/2045   121,106 
 290,934   Loan ID 201241  Fixed  4.375%  7/1/2045   282,625 
 222,378   Loan ID 201242  Fixed  4.625%  11/1/2044   216,641 
 108,229   Loan ID 201243  Fixed  4.625%  11/1/2045   106,129 
 392,355   Loan ID 201244  Fixed  4.500%  6/1/2045   381,929 
 112,176   Loan ID 201245  Fixed  4.750%  8/1/2044   111,305 
 182,860   Loan ID 201247  Fixed  4.250%  5/1/2045   146,286 
 98,795   Loan ID 201248  Fixed  4.875%  7/1/2044   98,262 
 458,893   Loan ID 201249  Fixed  4.625%  8/1/2045   287,049 
 57,860   Loan ID 201250  Fixed  4.250%  10/1/2045   55,240 
 6,275   Loan ID 201253  ARM  8.750%  3/1/2019   6,588 
 155,095   Loan ID 201254  ARM  9.000%  9/1/2034   162,849 
 237,769   Loan ID 201255  ARM  9.000%  6/1/2035   249,658 
 26,247   Loan ID 201256  ARM  10.500%  10/1/2021   27,560 
 235,074   Loan ID 201257  Fixed  4.500%  5/1/2044   227,314 
 89,386   Loan ID 201258  Fixed  4.500%  6/1/2045   73,411 
 169,344   Loan ID 201260  Fixed  4.750%  9/1/2045   166,875 
 59,618   Loan ID 201262  Fixed  4.200%  1/1/2046   48,377 
 49,361   Loan ID 201263  Fixed  4.750%  10/1/2045   42,716 
 352,210   Loan ID 201265  Fixed  4.750%  6/1/2045   348,772 
 143,519   Loan ID 201266  Fixed  4.500%  2/1/2046   139,299 
 232,730   Loan ID 201268  Fixed  4.250%  6/1/2045   223,320 
 122,918   Loan ID 201269  Fixed  4.375%  12/1/2045   71,122 
 149,675   Loan ID 201270  Fixed  4.125%  2/1/2045   141,812 
 250,233   Loan ID 201271  Fixed  4.500%  6/1/2045   243,585 
 137,971   Loan ID 201272  Fixed  4.750%  11/1/2044   136,519 
 237,723   Loan ID 201273  Fixed  4.500%  12/1/2045   231,084 
 214,289   Loan ID 201274  Fixed  4.125%  10/1/2045   202,273 
 189,657   Loan ID 201278  Fixed  3.750%  12/1/2045   169,716 
 365,180   Loan ID 201280  Fixed  4.500%  4/1/2046   354,631 
 150,988   Loan ID 201281  Fixed  4.875%  7/1/2044   150,393 
 127,772   Loan ID 201282  Fixed  5.250%  1/1/2046   129,475 
 109,286   Loan ID 201283  Fixed  4.250%  11/1/2045   103,491 
 125,356   Loan ID 201284  Fixed  3.625%  2/1/2029   123,157 
 30,868   Loan ID 201285  Fixed  4.625%  11/1/2028   31,209 
 108,625   Loan ID 201286  Fixed  4.375%  12/1/2045   104,937 
 84,161   Loan ID 201289  Fixed  4.000%  3/1/2045   78,641 
 244,848   Loan ID 201290  Fixed  4.750%  7/1/2045   242,722 
 300,332   Loan ID 201291  Fixed  5.000%  8/1/2045   299,798 
 36,625   Loan ID 201293  Fixed  4.875%  9/1/2045   36,126 
 123,593   Loan ID 201294  Fixed  4.625%  2/1/2046   120,646 
 751,283   Loan ID 201296  Fixed  4.250%  2/1/2046   714,066 
 336,109   Loan ID 201297  Fixed  4.875%  8/1/2045   335,158 
 251,788   Loan ID 201299  Fixed  4.250%  12/1/2045   120,973 
 195,390   Loan ID 201300  Fixed  4.750%  3/1/2046   174,077 
 72,148   Loan ID 201301  Fixed  4.550%  10/1/2044   70,139 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%     
$133,906   Loan ID 201302  Fixed  4.250%  5/1/2045  $127,898 
 96,186   Loan ID 201303  Fixed  3.875%  3/1/2045   89,433 
 223,640   Loan ID 201304  Fixed  4.125%  2/1/2046   211,313 
 146,682   Loan ID 201305  Fixed  4.625%  8/1/2044   143,827 
 115,772   Loan ID 201306  Fixed  3.875%  9/1/2045   108,485 
 167,446   Loan ID 201307  Fixed  4.250%  11/1/2045   129,297 
 61,677   Loan ID 201308  Fixed  4.625%  11/1/2045   60,078 
 160,582   Loan ID 201309  Fixed  4.000%  9/1/2045   147,600 
 185,383   Loan ID 201310  Fixed  4.750%  9/1/2045   156,731 
 134,927   Loan ID 201311  Fixed  4.375%  3/1/2046   129,452 
 319,630   Loan ID 201313  Fixed  4.625%  1/1/2046   313,231 
 111,555   Loan ID 201315  Fixed  4.375%  9/1/2045   107,194 
 160,363   Loan ID 201316  Fixed  4.500%  2/1/2046   117,728 
 165,417   Loan ID 201317  Fixed  5.250%  2/1/2046   172,545 
 84,675   Loan ID 201318  Fixed  4.750%  11/1/2045   64,012 
 170,495   Loan ID 201319  Fixed  4.375%  10/1/2045   161,134 
 122,306   Loan ID 201323  Fixed  4.375%  7/1/2045   117,686 
 134,582   Loan ID 201324  Fixed  5.250%  4/1/2046   134,447 
 175,451   Loan ID 201326  Fixed  4.625%  3/1/2046   171,087 
 189,422   Loan ID 201328  Fixed  4.250%  11/1/2045   111,674 
 267,727   Loan ID 201330  Fixed  4.375%  6/1/2046   257,903 
 345,002   Loan ID 201333  Fixed  3.875%  1/1/2046   311,986 
 190,911   Loan ID 201335  Fixed  4.750%  1/1/2046   187,696 
 188,849   Loan ID 201336  Fixed  4.750%  1/1/2046   141,560 
 413,246   Loan ID 201339  Fixed  4.625%  7/1/2045   432,027 
 143,272   Loan ID 201341  Fixed  4.050%  11/1/2045   134,076 
 143,484   Loan ID 201342  Fixed  4.750%  7/1/2045   142,039 
 86,126   Loan ID 201343  Fixed  4.250%  11/1/2045   82,159 
 72,709   Loan ID 201344  Fixed  5.000%  7/1/2044   72,984 
 134,891   Loan ID 201345  Fixed  4.125%  5/1/2045   125,014 
 469,929   Loan ID 201347  Fixed  5.750%  5/1/2046   469,929 
 448,206   Loan ID 201348  Fixed  6.500%  5/1/2046   466,370 
 240,463   Loan ID 201350  Fixed  4.000%  6/1/2045   188,896 
 62,005   Loan ID 201351  Fixed  4.500%  4/1/2045   45,364 
 72,633   Loan ID 201352  Fixed  4.875%  3/1/2045   71,750 
 501,154   Loan ID 201354  Fixed  3.375%  7/1/2046   476,974 
 133,521   Loan ID 201355  Fixed  5.250%  12/1/2045   135,420 
 103,229   Loan ID 201356  Fixed  4.625%  10/1/2045   101,041 
 149,560   Loan ID 201358  Fixed  4.875%  7/1/2045   128,609 
 144,151   Loan ID 201361  Fixed  5.250%  7/1/2044   145,477 
 123,955   Loan ID 201363  Fixed  4.250%  2/1/2046   102,261 
 111,722   Loan ID 201364  Fixed  3.875%  4/1/2046   100,609 
 340,170   Loan ID 201365  Fixed  4.250%  10/1/2045   324,028 
 109,311   Loan ID 201367  Fixed  4.000%  10/1/2045   101,346 
 47,758   Loan ID 201368  Fixed  5.125%  2/1/2045   47,954 
 181,745   Loan ID 201370  Fixed  4.250%  7/1/2046   144,297 
 100,305   Loan ID 201371  Fixed  4.125%  4/1/2046   94,442 
 259,654   Loan ID 201372  Fixed  4.625%  8/1/2046   253,326 
 156,568   Loan ID 201373  Fixed  5.125%  4/1/2046   157,887 
 600,281   Loan ID 201374  Fixed  4.500%  5/1/2040   588,094 
 143,675   Loan ID 201375  Fixed  4.500%  6/1/2045   139,711 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%  
$269,143   Loan ID 201376  Fixed  4.375%  5/1/2046  $259,027 
 298,590   Loan ID 201377  Fixed  3.875%  5/1/2046   306,607 
 67,754   Loan ID 201379  Fixed  5.000%  10/1/2045   67,655 
 427,901   Loan ID 201380  Fixed  4.500%  5/1/2046   415,311 
 315,828   Loan ID 201381  Fixed  4.875%  7/1/2045   314,748 
 134,441   Loan ID 201383  Fixed  4.125%  12/1/2045   135,086 
 78,588   Loan ID 201384  Fixed  4.375%  10/1/2045   77,725 
 139,468   Loan ID 201385  Fixed  4.625%  12/1/2045   146,442 
 77,042   Loan ID 201386  Fixed  5.250%  5/1/2046   80,894 
 62,426   Loan ID 201387  Fixed  5.250%  8/1/2029   64,320 
 236,033   Loan ID 201390  Fixed  5.125%  9/1/2045   236,715 
 396,566   Loan ID 201391  Fixed  5.125%  10/1/2045   396,137 
 168,674   Loan ID 201392  Fixed  3.750%  2/1/2046   131,981 
 427,996   Loan ID 201393  Fixed  3.750%  4/1/2056   411,756 
 79,079   Loan ID 201394  Fixed  6.700%  6/1/2034   83,033 
 85,124   Loan ID 201395  Fixed  6.300%  7/1/2044   76,224 
 71,968   Loan ID 201396  Fixed  5.000%  9/1/2046   72,629 
 265,181   Loan ID 201397  Fixed  4.125%  1/1/2046   245,869 
 82,473   Loan ID 201399  Fixed  5.000%  11/1/2045   82,345 
 85,802   Loan ID 201400  Fixed  4.750%  7/1/2044   84,596 
 91,018   Loan ID 201401  Fixed  4.750%  10/1/2044   89,732 
 143,789   Loan ID 201402  Fixed  4.750%  8/1/2044   109,119 
 94,086   Loan ID 201403  Fixed  4.750%  8/1/2044   71,131 
 135,087   Loan ID 201404  Fixed  4.750%  10/1/2044   102,814 
 71,548   Loan ID 201405  Fixed  5.250%  8/1/2044   72,601 
 55,131   Loan ID 201406  Fixed  4.250%  6/1/2046   52,175 
 241,434   Loan ID 201407  Fixed  4.875%  1/1/2046   239,686 
 165,376   Loan ID 201408  Fixed  4.125%  1/1/2046   156,801 
 163,219   Loan ID 201411  Fixed  4.750%  12/1/2045   161,579 
 141,852   Loan ID 201412  Fixed  5.750%  12/1/2045   129,623 
 335,331   Loan ID 201413  Fixed  4.500%  7/1/2045   277,598 
 74,451   Loan ID 201414  Fixed  4.250%  7/1/2044   59,143 
 57,872   Loan ID 201415  Fixed  8.000%  4/1/2034   60,766 
 54,894   Loan ID 201416  Fixed  10.000%  7/1/2033   57,639 
 61,404   Loan ID 201417  Fixed  6.000%  8/1/2037   64,389 
 42,492   Loan ID 201419  Fixed  10.000%  11/1/2033   44,617 
 57,192   Loan ID 201422  Fixed  4.625%  10/1/2046   54,503 
 687,726   Loan ID 201423  ARM  3.875%  6/1/2045   683,132 
 286,427   Loan ID 201424  Fixed  4.125%  10/1/2044   271,186 
 664,346   Loan ID 201425  Fixed  3.875%  4/1/2046   615,151 
 314,866   Loan ID 201426  Fixed  4.875%  3/1/2044   313,358 
 540,530   Loan ID 201428  ARM  3.250%  4/1/2045   536,520 
 196,287   Loan ID 201431  Fixed  4.875%  5/1/2045   168,570 
 279,903   Loan ID 201432  Fixed  5.000%  8/1/2046   274,635 
 98,629   Loan ID 201434  Fixed  4.375%  6/1/2046   103,561 
 90,660   Loan ID 201436  Fixed  4.375%  5/1/2045   95,193 
 128,902   Loan ID 201437  Fixed  4.750%  5/1/2046   108,455 
 704,088   Loan ID 201438  ARM  3.375%  4/1/2046   690,285 
 179,648   Loan ID 201439  Fixed  5.000%  12/1/2045   180,114 
 318,069   Loan ID 201440  Fixed  4.625%  7/1/2046   262,110 
 100,051   Loan ID 201441  Fixed  4.750%  10/1/2045   97,663 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%  
$298,482   Loan ID 201442  Fixed  4.875%  12/1/2045  $293,101 
 552,981   Loan ID 201443  Fixed  3.875%  8/1/2046   510,678 
 51,249   Loan ID 201444  Fixed  4.500%  11/1/2044   49,606 
 102,369   Loan ID 201445  Fixed  4.875%  1/1/2045   101,538 
 99,358   Loan ID 201446  Fixed  4.875%  1/1/2045   98,703 
 252,842   Loan ID 201447  Fixed  4.875%  10/1/2044   251,632 
 110,856   Loan ID 201448  Fixed  4.750%  1/1/2045   109,375 
 93,304   Loan ID 201449  Fixed  4.000%  8/1/2044   97,823 
 223,823   Loan ID 201451  Fixed  4.250%  6/1/2045   214,395 
 187,605   Loan ID 201453  Fixed  5.250%  9/1/2046   186,924 
 187,605   Loan ID 201454  Fixed  5.250%  9/1/2046   187,202 
 185,046   Loan ID 201455  Fixed  4.500%  5/1/2046   179,127 
 210,227   Loan ID 201456  Fixed  4.125%  7/1/2046   197,325 
 132,468   Loan ID 201457  Fixed  3.875%  4/1/2046   87,467 
 235,655   Loan ID 201458  Fixed  3.875%  9/1/2046   210,574 
 225,877   Loan ID 201459  Fixed  4.375%  9/1/2044   218,500 
 157,848   Loan ID 201460  Fixed  4.250%  7/1/2045   150,980 
 270,617   Loan ID 201461  Fixed  4.125%  12/1/2044   255,048 
 295,431   Loan ID 201462  Fixed  4.375%  11/1/2044   284,591 
 474,183   Loan ID 201463  Fixed  4.750%  11/1/2044   465,577 
 300,036   Loan ID 201464  Fixed  4.375%  6/1/2045   245,181 
 101,724   Loan ID 201465  Fixed  5.125%  12/1/2044   101,801 
 275,243   Loan ID 201466  Fixed  4.500%  12/1/2044   266,739 
 46,218   Loan ID 201467  Fixed  5.250%  3/1/2044   46,956 
 138,699   Loan ID 201469  Fixed  4.375%  2/1/2045   133,516 
 281,165   Loan ID 201470  Fixed  4.375%  10/1/2044   271,454 
 224,837   Loan ID 201471  Fixed  4.500%  1/1/2045   218,261 
 150,213   Loan ID 201472  Fixed  4.000%  11/1/2044   157,308 
 306,831   Loan ID 201473  Fixed  4.500%  2/1/2045   299,119 
 93,957   Loan ID 201475  ARM  5.625%  9/1/2036   73,718 
 136,631   Loan ID 201476  ARM  8.125%  2/1/2037   143,463 
 86,042   Loan ID 201477  Fixed  6.750%  11/1/2036   90,344 
 107,180   Loan ID 201478  Fixed  4.625%  10/1/2045   105,296 
 128,583   Loan ID 201479  Fixed  4.500%  5/1/2046   124,806 
 159,793   Loan ID 201480  Fixed  4.250%  11/1/2045   152,959 
 69,553   Loan ID 201481  Fixed  4.375%  7/1/2046   64,851 
 135,749   Loan ID 201482  Fixed  4.625%  6/1/2045   132,017 
 296,826   Loan ID 201483  Fixed  4.125%  12/1/2045   241,814 
 76,218   Loan ID 201484  Fixed  4.500%  10/1/2046   73,570 
 63,515   Loan ID 201485  Fixed  5.750%  3/1/2038   66,158 
 164,798   Loan ID 201487  Fixed  4.625%  2/1/2052   171,076 
 215,320   Loan ID 201488  Fixed  4.250%  1/1/2041   177,937 
 92,435   Loan ID 201489  Fixed  4.750%  3/1/2046   91,145 
 107,129   Loan ID 201490  Fixed  4.750%  9/1/2045   105,086 
 226,320   Loan ID 201491  Fixed  4.250%  2/1/2046   214,806 
 380,654   Loan ID 201492  Fixed  4.625%  1/1/2047   308,738 
 481,400   Loan ID 201495  Interest Only  10.000%  10/1/2018   477,790 
 79,993   Loan ID 201499  Fixed  4.750%  5/1/2045   78,435 
 110,022   Loan ID 201500  Fixed  4.500%  1/1/2044   107,503 
 107,549   Loan ID 201502  Fixed  5.250%  4/1/2044   109,480 
 148,948   Loan ID 201503  Fixed  5.000%  7/1/2046   147,360 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%  
$451,088   Loan ID 201504  Fixed  4.500%  7/1/2045  $438,603 
 96,302   Loan ID 201505  ARM  5.750%  9/1/2046   99,564 
 304,594   Loan ID 201506  Fixed  5.000%  2/1/2047   295,310 
 62,862   Loan ID 201507  Fixed  4.750%  7/1/2044   47,655 
 222,205   Loan ID 201508  Fixed  5.000%  2/1/2047   217,194 
 235,844   Loan ID 201509  Fixed  5.000%  12/1/2046   203,575 
 158,142   Loan ID 201510  Fixed  3.990%  1/1/2047   127,622 
 79,870   Loan ID 201511  Fixed  4.375%  1/1/2046   76,512 
 173,678   Loan ID 201512  Fixed  4.375%  7/1/2046   145,891 
 125,171   Loan ID 201513  Fixed  4.000%  1/1/2046   130,548 
 138,088   Loan ID 201515  Fixed  5.125%  4/1/2047   135,312 
 140,524   Loan ID 201516  Fixed  3.875%  4/1/2046   129,669 
 323,408   Loan ID 201517  Fixed  4.625%  6/1/2046   314,359 
 409,263   Loan ID 201518  Fixed  4.875%  1/1/2047   408,626 
 95,762   Loan ID 201519  Fixed  4.750%  9/1/2045   94,699 
 79,200   Loan ID 201522  Interest Only  9.750%  5/1/2018   77,616 
 81,651   Loan ID 201523  Fixed  5.125%  7/1/2045   80,600 
 311,004   Loan ID 201525  ARM  7.500%  9/1/2046   326,554 
 155,743   Loan ID 201526  Fixed  5.250%  5/1/2044   137,274 
 371,420   Loan ID 201527  Fixed  4.375%  7/1/2046   354,940 
 81,855   Loan ID 201528  Fixed  4.625%  1/1/2046   77,345 
 496,988   Loan ID 201533  Fixed  4.750%  5/1/2046   489,925 
 45,310   Loan ID 201534  Fixed  4.875%  5/1/2047   43,143 
 333,398   Loan ID 201535  Fixed  4.875%  8/1/2047   328,868 
 476,737   Loan ID 201536  Fixed  3.375%  4/1/2045   353,209 
 133,220   Loan ID 201537  Fixed  5.000%  10/1/2046   128,567 
 53,778   Loan ID 201539  Fixed  6.750%  4/30/2020   55,187 
 231,350   Loan ID 201544  Fixed  3.750%  9/1/2047   236,419 
 275,069   Loan ID 201545  Fixed  4.000%  9/1/2047   252,221 
 257,615   Loan ID 201546  Fixed  4.375%  1/1/2047   240,685 
 80,900   Loan ID 201548  Interest Only  12.000%  12/1/2018   80,496 
 149,500   Loan ID 201549  Interest Only  12.500%  10/1/2018   147,258 
 144,040   Loan ID 201550  Fixed  5.000%  2/1/2047   143,388 
 203,510   Loan ID 201551  Fixed  4.500%  2/1/2047   112,564 
 137,845   Loan ID 201552  Fixed  4.000%  8/1/2047   131,057 
 84,500   Loan ID 201553  Interest Only  9.000%  11/1/2018   84,078 
 29,925   Loan ID 201554  Interest Only  9.500%  11/1/2018   29,775 
 293,414   Loan ID 201555  Fixed  4.875%  7/1/2047   255,158 
 47,842   Loan ID 201556  Fixed  4.990%  12/1/2047   43,803 
 133,127   Loan ID 201558  Fixed  4.500%  8/1/2047   139,300 
 254,755   Loan ID 201559  Fixed  4.125%  7/1/2047   218,303 
 136,020   Loan ID 201561  Fixed  3.990%  4/1/2047   120,649 
 99,906   Loan ID 201562  Fixed  4.625%  5/1/2047   104,902 
 174,601   Loan ID 201563  Fixed  5.875%  12/1/2047   171,190 
 75,000   Loan ID 201566  Interest Only  11.500%  2/1/2019   73,875 
 50,000   Loan ID 201567  Interest Only  18.000%  1/30/2020   50,000 
 117,500   Loan ID 201569  Interest Only  18.000%  1/30/2019   114,156 
 41,250   Loan ID 201570  Interest Only  18.000%  1/30/2019   39,717 
 32,500   Loan ID 201572  Interest Only  16.000%  1/30/2019   33,331 
 427,000   Loan ID 201578  Interest Only  16.000%  11/30/2018   430,283 
 113,343   Loan ID 201579  Fixed  4.750%  12/1/2036   100,117 
                    

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2018

 

Principal      Loan Type  Interest Rate  Maturity  Fair Value 
     MORTGAGE NOTES (Continued) - 97.1%     
$493,926   Loan ID 201580  Fixed  7.625%  4/1/2047  $512,128 
 86,971   Loan ID 201581  Fixed  4.125%  10/1/2046   72,879 
 88,726   Loan ID 201583  Fixed  5.250%  8/1/2047   90,532 
 100,000   Loan ID 201584  Interest Only  16.000%  1/30/2019   65,000 
 49,171   Loan ID 201585  Fixed  5.500%  3/1/2048   40,405 
 389,512   Loan ID 201586  Fixed  4.625%  5/1/2047   365,243 
 322,185   Loan ID 201587  Fixed  4.375%  1/1/2048   256,593 
 334,443   Loan ID 201588  Fixed  5.125%  2/1/2048   266,548 
 64,781   Loan ID 201589  Fixed  5.375%  6/1/2048   62,298 
 139,620   Loan ID 201590  Fixed  5.200%  5/1/2048   100,527 
 325,980   Loan ID 201591  Fixed  5.375%  8/1/2048   275,453 
 145,278,670   TOTAL MORTGAGE NOTES (Cost - $118,249,891)      133,770,170 
                    
     OTHER INVESTMENTS* (Cost - $165,548) - 0.1%    $161,100 
                    
     TOTAL INVESTMENTS (Cost - $118,415,439) - 97.2%  $133,931,270 
     OTHER ASSETS IN EXCESS OF LIABILITIES - 2.8%      3,829,415 
     NET ASSETS - 100.0%     $137,760,685 
                    

ARM - Adjustable Rate Mortgage

 

*Illiquid Securities

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2018

 

Assets:     
Investments in Securities at Market Value (identified cost $118,415,439)  $133,931,270 
Cash   7,463,671 
Interest Receivable   2,052,319 
Receivable for Investment Securities Sold and Principal Paydowns   791,248 
Receivable for Fund Shares Sold   5,254 
Prepaid Expenses and Other Assets   488,397 
Total Assets   144,732,159 
      
Liabilities:     
Line of Credit   6,664,041 
Payable for Securities Purchased   32,141 
Accrued Advisory Fees   9,519 
Distribution 12b-1 Fees Payable   63 
Related Party Payable   48,811 
Accrued Expenses and Other Liabilities   216,899 
Total Liabilities   6,971,474 
      
Net Assets  $137,760,685 
      
Composition of Net Assets:     
At September 30, 2018, Net Assets consisted of:     
Paid-in-Capital  $119,779,264 
Accumulated Net Investment Income   442,773 
Accumulated Net Realized Gain From Investments   2,022,817 
Net Unrealized Appreciation on Investments   15,515,831 
Net Assets  $137,760,685 
      
Net Asset Value Per Share     
Class A Shares:     
Net Assets  $137,659,077 
Shares of Beneficial Interest Outstanding (no par value; unlimited shares authorized)   11,257,730 
Net Asset Value (Net Assets/Shares Outstanding) and Redemption Price per Share  $12.23 
Offering Price per Share (maximum sales charge of 5.75%)  $12.98 
      
Class C Shares:     
Net Assets  $101,608 
Shares of Beneficial Interest Outstanding (no par value; unlimited shares authorized)   8,206 
Net Asset Value (Net Assets/Shares Outstanding), Offering Price and Redemption Price per Share (a)  $12.38 
      
(a)Early Withdrawal Charge on Shares Repurchased Less Than 365 Days After Purchase of 1.00%

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2018

 

Investment Income:     
Interest Income  $8,411,047 
Total Investment Income   8,411,047 
      
Expenses:     
Investment Advisory Fees   1,875,820 
Distribution 12b-1 Fees:     
Class C   389 
Security Servicing Fees   509,163 
Transfer Agent Fees   250,305 
Interest Expense   224,335 
Audit Fees   224,266 
Printing Expense   156,497 
Administration Fees   149,019 
Shareholder Servicing Fee   144,532 
Security Pricing Expense   144,028 
Custody Fees   133,376 
Trustees’ Fees   132,662 
Insurance Expense   129,571 
Line of Credit Fees   129,427 
Legal Fees   111,352 
Chief Compliance Officer Fees   62,989 
Registration & Filing Fees   62,309 
Fund Accounting Fees   52,440 
Advisor Transition Expenses, Net   8,158 
Miscellaneous Expenses   46,586 
Total Expenses   4,547,224 
Less: Expenses Waived by Adviser   (1,409,845)
Net Expenses   3,137,379 
Net Investment Income   5,273,668 
      
Net Realized and Unrealized Gain (Loss) on Investments:     
Net Realized Gain from:     
Investments   2,218,536 
Net Change in Unrealized Depreciation on:     
Investments   (1,465,814)
Net Realized and Unrealized Gain on Investments   752,722 
      
Net Increase in Net Assets Resulting From Operations  $6,026,390 
      

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
STATEMENT OF CHANGES IN NET ASSETS

 

   For the Year   For the Year 
   Ended   Ended 
   September 30, 2018 (a)   September 30, 2017 
Operations:          
Net Investment Income  $5,273,668   $5,324,698 
Net Realized Gain from Investments   2,218,536    2,504,489 
Net Change in Unrealized Depreciation on Investments   (1,465,814)   (2,373,901)
Net Increase in Net Assets Resulting From Operations   6,026,390    5,455,286 
           
Distributions to Shareholders From:          
Net Investment Income:          
Class A ($0.39 and $0.40 per share, respectively)   (4,720,349)   (5,477,460)
Class C ($0.09 and $0.00 per share, respectively)   (760)    
Net Realized Gains:          
Class A ($0.21 and $0.10 per share, respectively)   (2,683,322)   (1,392,065)
Total Distributions to Shareholders   (7,404,431)   (6,869,525)
           
Beneficial Interest Transactions:          
Proceeds from Shares Issued:          
Class A   5,704,246    11,991,479 
Class C   100,013     
Class I   13     
Class L   13     
Distributions Reinvested:          
Class A   3,740,905    3,372,021 
Class C   760     
Cost of Shares Redeemed:          
Class A   (31,037,285)   (35,327,491)
Class I   (13)    
Class L   (13)    
Net Decrease in Net Assets from Beneficial Interest Transactions   (21,491,361)   (19,963,991)
           
Total Decrease in Net Assets   (22,869,402)   (21,378,230)
           
Net Assets:          
Beginning of Year   160,630,087    182,008,317 
End of Year (including undistributed net investment Income (loss) of $442,773 and $(16,638)  $137,760,685   $160,630,087 
           
(a)The Vertical Capital Income Fund Class C, Class I, and Class L commenced operations on January 24, 2018. Class I and Class L closed on June 27, 2018.

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
STATEMENT OF CHANGES IN NET ASSETS (Continued)

 

   For the Year   For the Year 
   Ended   Ended 
   September 30, 2018 (a)   September 30, 2017 
Share Activity          
Class A:          
Shares Sold   448,705    1,079,378 
Shares Reinvested   301,825    270,734 
Shares Redeemed   (2,510,899)   (2,913,215)
Net Decrease in Shares of Beneficial Interest Outstanding   (1,760,369)   (1,563,103)
           
Class C:          
Shares Sold   8,145     
Shares Reinvested   61     
Net Increase in Shares of Beneficial Interest Outstanding   8,206     
           
Class I:          
Shares Sold   1     
Shares Redeemed   (1)    
Net Increase in Shares of Beneficial Interest Outstanding   0     
           
Class L:          
Shares Sold   1     
Shares Redeemed   (1)    
Net Increase in Shares of Beneficial Interest Outstanding   0     
           
(a)The Vertical Capital Income Fund Class C, Class I, and Class L commenced operations on January 24, 2018. Class I and Class L closed on June 27, 2018.

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
Statement of Cash Flows
For the Year Ended September 30, 2018

 

Decrease in Cash     
Cash Flows Provided by (Used for) Operating Activities:     
Net Increase in Net Assets Resulting from Operations  $6,026,390 
      
Adjustments to Reconcile Net Increase in Net Assets Resulting from Operations to Net Cash Provided by Operating Activities:     
      
Purchases of Long-Term Portfolio Investments   (7,410,744)
Proceeds from Sale of Long-Term Portfolio Investments and Principal Paydowns   25,192,732 
Increase in Interest Receivable   (357,657)
Decrease in Receivable for Investment Securities Sold and Principal Paydowns   339,036 
Increase in Prepaid Expenses and Other Assets   (7,041)
Increase in Payable for Securities Purchased   20,091 
Decrease in Accrued Advisory Fees   (26,212)
Increase in Distribution 12b-1 Fees Payable   63 
Increase in Related Party Payable   15,339 
Increase in Accrued Expenses and Other Liabilities   71,032 
Amortization of Deferred Financing Fees   129,428 
Net Amortization on Investments   (538,088)
Net Realized Gain on Investments   (2,218,536)
Change in Unrealized Depreciation on Investments   1,465,814 
      
Net Cash Provided by Operating Activities   22,701,647 
      
Cash Flows Provided by/(Used) for Financing Activities:     
Proceeds from Sale of Shares   5,833,620 
Redemption of Shares   (31,037,311)
Dividends Paid to Shareholders, Net of Reinvestments   (3,662,766)
Deferred Financing Costs   (438,110)
Proceeds from Line of Credit   19,500,000 
Payments on Line of Credit   (12,500,000)
Net Cash Used for Financing Activities   (22,304,567)
      
Net Increase in Cash   397,080 
Cash at Beginning of Year   7,066,591 
Cash at End of Year  $7,463,671 
      
Supplemental disclosure of Cash Flow Information:     
Non-Cash Financing Activities Included Reinvestment of Distributions During the Fiscal Period of $3,741,665 Cash Paid for Interest of $244,848     
      

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
Financial Highlights
Class A
 
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.

 

   Year   Year   Year   Year   Year 
   Ended   Ended   Ended   Ended   Ended 
   September 30, 2018   September 30, 2017   September 30, 2016   September 30, 2015   September 30, 2014 
Net Asset Value, Beginning of Year  $12.34   $12.49   $11.53   $11.04   $10.87 
                          
From Operations:                         
Net investment income (a)   0.43    0.39    0.36    0.41    0.51 
Net gain (loss) from investments (both realized and unrealized)   0.06    (0.04) (b)   1.33    0.56    0.27 
Total from operations   0.49    0.35    1.69    0.97    0.78 
                          
Distributions to shareholders from:                         
Net investment income   (0.39)   (0.40)   (0.38)   (0.44)   (0.56)
Net realized gains   (0.21)   (0.10)   (0.35)   (0.04)   (0.05)
Total distributions   (0.60)   (0.50)   (0.73)   (0.48)   (0.61)
                          
Net Asset Value, End of Year  $12.23   $12.34   $12.49   $11.53   $11.04 
                          
Total Return (c)   4.03%   2.81%   15.10%   8.86%   7.29%
                          
Ratios/Supplemental Data                         
Net assets, end of period (in 000’s)  $137,659   $160,630   $182,008   $160,382   $108,610 
Ratio of gross expenses to average net assets   3.03% (d)(e)   2.74% (d)(e)   2.95% (d)(e)   2.67% (d)(e)   2.32% (d)
Ratio of net expenses to average net assets   2.09% (d)(e)   2.04% (d)(e)   2.26% (d)(e)   2.33% (d)(e)   1.91% (d)
Ratio of net investment income to average net assets   3.52% (d)(e)   3.24% (d)(e)   2.98% (d)(e)   3.54% (d)(e)   4.68% (d)
Portfolio turnover rate   5.11%   17.69%   13.72%   2.58%   8.37%
Loan Outstanding, End of Period (000s)  $6,664   $   $   $13,522   $3,500 
Asset Coverage Ratio for Loan Outstanding (f)   2167%   0%   0%   1286%   3203%
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding (f)  $20,680   $   $   $12,672   $32,031 
Weighted Average Loans Outstanding (000s) (g)  $4,500   $14,368   $12,330   $12,372   $3,398 
Weighted Average Interest Rate on Loans Outstanding   4.69%   3.88%   3.41%   3.25%   3.25%
                          
 
(a)Per share amounts are calculated using the annual average shares method, which more appropriately presents the per share data for the period.

 

(b)The amount of net gain (loss) on investments (both realized and unrealized) per share does not accord with the amounts reported in the Statement of Operations due to timing of purchases and redemptions of Fund shares.

 

(c)Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, and excludes the effect of sales charges. Had the Adviser not waived expenses, total returns would have been lower.

 

(d)Ratio includes 0.24%, 0.14%, 0.20%, 0.27% and 0.06% for the years ended September 30, 2018, 2017, 2016, 2015 and 2014, respectively, that attributed to interest expenses and fees.

 

(e)Ratio includes 0.01%, 0.05%, 0.21% and 0.21% for the years ended September 30, 2018, 2017, 2016 and the year ended 2015, respectively, that attributed to advisory transition expenses.

 

(f)Represents value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the end of the period.

 

(g)Based on monthly weighted average.

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
Financial Highlights
Class C
 
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.

 

   Period * 
   Ended 
   September 30, 2018 
Net Asset Value, Beginning of Period  $12.33 
      
From Operations:     
Net investment income (a)   0.25 
Net loss from investments (both realized and unrealized)   (0.11) (f)
Total from operations   0.14 
      
Distributions to shareholders from:     
Net investment income   (0.09)
Total distributions   (0.09)
      
Net Asset Value, End of Period  $12.38 
      
Total Return (b)   1.16% (h)
      
Ratios/Supplemental Data     
Net assets, end of period (in 000’s)  $102 
Ratio of gross expenses to average net assets   3.85% (c)(g)
Ratio of net expenses to average net assets   2.60% (c)(g)
Ratio of net investment income to average net assets   2.77% (c)(g)
Portfolio turnover rate   5.11%
Loan Outstanding, End of Period (000s)  $6,664 
Asset Coverage Ratio for Loan Outstanding (d)   2167%
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding (d)  $20,680 
Weighted Average Loans Outstanding (000s) (e)  $4,500 
Weighted Average Interest Rate on Loans Outstanding   4.69%
      
 
*The Vertical Capital Income Fund Class C commenced operations on January 24, 2018.

 

(a)Per share amounts are calculated using the annual average shares method, which more appropriately presents the per share data for the period.

 

(b)Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, and excludes the effect of sales charges. Had the Adviser not waived expenses, total returns would have been lower.

 

(c)Ratio includes 0.31% for the period ended September 30, 2018 that attributed to interest expenses and fees.

 

(d)Represents value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the end of the period.

 

(e)Based on monthly weighted average.

 

(f)The amount of net gain (loss) on investments (both realized and unrealized) per share does not accord with the amounts reported in the Statement of Operations due to timing of purchases and redemptions of Fund shares.

 

(g)Annualized.

 

(h)Not annualized.

 

The accompanying notes are an integral part of these financial statements.

 

 

Vertical Capital Income Fund
Notes to Financial Statements
September 30, 2018

 

1.ORGANIZATION

 

Vertical Capital Income Fund (the “Fund”), was organized as a Delaware statutory trust on April 8, 2011 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company that operates as an interval fund with a continuous offering of Fund shares. The investment objective of the Fund is to seek income. The Fund currently offers two classes of shares: Class A and Class C. Class A shares commenced operations on December 30, 2011. Class C shares commenced operations on January 24, 2018. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. The Fund’s income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class. The Fund currently offers shares at net asset value plus a maximum sales charge of 5.75% for Class A. Oakline Advisors, LLC, serves as the Fund’s investment adviser.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services – Investment Companies” including FASB Accounting Standard Update ASU 2013-08. The following is a summary of significant accounting policies and reporting policies used in preparing the financial statements. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Fund amortizes premiums and discounts using the effective interest rate method. Offering expenses are amortized over 12 months following the time they are incurred.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates.

 

Investment Security Valuation

 

Mortgage Notes – The Fund uses an independent third-party pricing service, approved by the Fund’s Board of Trustees (the “Board”), to value its Mortgage Notes on a daily basis. The third-party pricing servicer uses a cash flow forecast and valuation model that focuses on forecasting the frequency, timing and severity of mortgage loss behavior. The model incorporates numerous observable loan-level factors such as unpaid principal balance, remaining term of the loan and coupon rate as well as macroeconomic data including yield curves, spreads to the Treasury curves and home price indexes. The model also includes a number of unobservable factors and assumptions (such as voluntary and involuntary prepayment speeds, delinquency rates, foreclosure timing, and others) to determine a fair value. While the model requires a minimum set of data to develop a reasonable fair value, the model is capable of accepting additional data elements. The model makes certain assumptions unless a specific data element is included, in which case it uses the additional data. Not all assumptions have equal weighting in the model. Using assumptions in this manner is a part of the Fund’s valuation policy and procedures and provides consistency in the application of valuation assumptions. The third-party pricing servicer also benchmarks their pricing model against observable pricing levels being quoted by a range of market participants active in the purchase and sale of residential mortgage loans. The combination of loan level criteria and daily market adjustments produces a daily price for each Mortgage Note relative to current public market conditions.

 

Prior to purchase, each Mortgage Note goes through a due diligence process that includes considerations such as underwriting borrower credit, employment history, property valuation, and delinquency history with an overall emphasis on repayment of the Mortgage Notes. The purchase price of the Mortgage Notes reflects the overall risk relative to the findings of this due diligence process.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

The Fund invests primarily in Mortgage Notes secured by residential real estate. The market or liquidation value of each type of residential real estate collateral may be adversely affected by numerous factors, including rising interest rates; changes in the national, state and local economic climate and real estate conditions; perceptions of prospective buyers of the safety, convenience and attractiveness of the properties; maintenance and insurance costs; changes in real estate taxes and other expenses; adverse changes in governmental rules and fiscal policies; adverse changes in zoning laws; natural disasters and other factors beyond the control of the borrowers.

 

The Fund’s investments in Mortgage Notes are subject to liquidity risk because there is a limited secondary market for Mortgage Notes. Liquidity risk exists when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations. Securities for which current market quotations are not readily available, such as the Mortgage Notes the Fund invests in, or for which quotations are not deemed to be representative of market values are valued at fair value as determined in good faith by or under the direction of the Board in accordance with the Trust’s Portfolio Securities Valuation Procedures (the “Procedures”). The Procedures consider, among others, the following factors to determine a security’s fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security.

 

The valuation inputs and subsequent outputs are reviewed and maintained on a daily basis. Any calibrations or adjustments to the model that may be necessary are done on an as-needed basis to facilitate fair pricing. Financial markets are monitored daily relative to the interest rate environment. If other available market data indicates that the pricing data from the third-party service is materially inaccurate, or pricing data is unavailable, the Fund undertakes a review of other available prices and takes additional steps to determine fair value. In all cases, the Fund validates its understanding of methodology and assumptions underlying the fair value used.

 

The Fund follows guidance in ASC 820, Fair Value Measurement, where fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the market participants at the measurement date. The Fund utilizes various methods to measure the fair value of its investments on a recurring basis. Notwithstanding, the actual sale price of a Mortgage Note will likely be different than its fair value determined under ASC 820. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:

 

Level 1 – Unadjusted quoted prices in active markets for identical and/or similar assets and liabilities that the Fund has the ability to access at the measurement date.

 

Level 2 – Other significant observable inputs other than quoted prices included in Level 1 for the asset or liability, either directly or indirectly. These inputs may include quoted prices for similar investments or identical investments in an active market, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

 

Level 3 – Significant unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

As of September 30, 2018, management estimated that the carrying value of cash and cash equivalents, accounts receivable, prepaid expenses and other assets, line of credit payable, payables for securities purchased, accrued advisory fees, related party payables, and accrued and other liabilities were at amounts that reasonably approximated their fair value based on their highly-liquid nature and short-term maturities. This is considered a Level 1 valuation technique.

 

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. The following tables summarize the inputs used as of September 30, 2018 for the Fund’s assets measured at fair value:

 

Assets  Level 1   Level 2   Level 3   Total 
Mortgage Notes  $   $   $133,770,170   $133,770,170 
Other Investments           161,100    161,100 
Total  $   $   $133,931,270   $133,931,270 

 

There were no transfers between levels during the current period presented. It is the Fund’s policy to record transfers into or out of levels at the end of the reporting period.

 

The following is a reconciliation of assets in which Level 3 inputs were used in determining value:

 

   Mortgage Notes   Other Investments   Total 
 Beginning Balance  $150,422,448   $   $150,422,448 
 Net realized gain (loss)   2,218,536        2,218,536 
 Change in unrealized depreciation   (1,552,175)   86,361    (1,465,814)
 Cost of purchases   7,410,745        7,410,745 
 Proceeds from sales and principal paydowns   (25,192,732)       (25,192,732)
 Purchase discount amortization   538,087        538,087 
 Net Transfers within level 3   (74,739)   74,739     
 Ending balance  $133,770,170   $161,100   $133,931,270 

 

The total change in unrealized depreciation included in the Statement of Operations attributable to Level 3 investments still held at September 30, 2018 is $82,462.

 

The following table provides quantitative information about the Fund’s Level 3 values, as well as its inputs, as of September 30, 2018. The table is not all-inclusive, but provides information on the significant Level 3 inputs.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

            Weighted
          Range of Average of
        Unobservable Unobservable Unobservable
   Value  Valuation Technique Inputs Inputs Inputs
Mortgage Notes  $133,770,170  Comprehensive
pricing model with
emphasis on
discounted cash
flows
Constant
prepayment rate
0-91.8% 8.3%
         Deliquency 0-486 days 11 days
         Loan-to-Value 2-289% 83.0%
         Discount Rate 0.1-14.4% 5.5%
Other Investments   161,100  Market comparable Sales prices $157.8 sq/ft $157.8 sq/ft
Closing Balance  $133,931,270         

 

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Security Transactions and    
Investment Income - Impact to Value if Impact to Value if
Investment Security Input Increases Input Decreases
Constant Prepayment Rate Increase Decrease
Delinquency Decrease Increase
Loan to Value Decrease Increase
Discount rate Decrease Increase

 

Cash and Cash Equivalents – Cash and cash equivalents include cash and overnight investments in interest-bearing demand deposits with a financial institution with maturities of three months or less. The Fund maintains deposits with a high quality financial institution in an amount that is in excess of federally insured limits.

 

Security Transactions and Investment Income – Investment security transactions are accounted for on a trade date basis. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. Interest income is recorded on the accrual basis. Purchase discounts and premiums on securities are accreted and amortized over the life of the respective securities using the effective interest method.

 

Interest Income on Non-Accrual Loans – The Fund discontinues the accrual of interest on loans when, in the opinion of management, there is an assessment that the borrower will likely be unable to meet all contractual payments as they become due.

 

Credit Facility – On February 5, 2013, the Fund entered into a revolving line of credit agreement with Sunwest Bank for investment purposes and to help maintain the Fund’s liquidity, subject to the limitations of the 1940 Act for borrowings. The maximum amount of borrowing allowed under the agreement was the lesser of $15 million or 33% of the eligible portion of the Fund’s loans. The Fund entered into the Amended and Restated Credit Agreement (“Amended Agreement”) on June 29, 2016. Borrowings under the Amended Agreement continue to bear interest at a rate equal to the Wall Street Journal Prime, with a floor rate of 3.50%, per annum, on the outstanding principal balance and the maximum amount of borrowing allowed continues to be the lesser of $15 million or 33% of the eligible portion of the Fund’s loans. The Amended Agreement matured on January 5, 2018 and was subsequently extended until July 5, 2018. On July 2, 2018 the borrowings under the Amended Agreement were fully repaid and the Amended Agreement was terminated.

 

On July 20, 2018, the Fund entered into a revolving line of credit agreement with NexBank for investment purposes and to help maintain the Fund’s liquidity, subject to the limitations of the 1940 Act for borrowings. The maximum

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

amount of borrowing allowed under the agreement was the lesser of $35 million or 75% of the eligible portion of the Fund’s loans. Borrowings under the Nexbank agreement bear interest at a rate equal to the 30-day LIBOR plus applicable margin of 2.75%, per annum, on the outstanding principal balance. The Nexbank agreement matures on July 19, 2019 and has two one-year extensions available. The Nexbank agreement is secured by assets of the Fund.

 

During the year ended September 30, 2018 the Fund incurred deferred financing fees of $438,110. Accumulated amortization of deferred financing fees was $129,428 as of September 30, 2018. The average amount of borrowing outstanding for the period was $4,500,000 and the total interest expense was $224,335. The outstanding balance under the Nexbank line of credit was $7,000,000 at September 30, 2018.

 

Federal Income Taxes – The Fund intends to continue to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute all of its taxable income, if any, to shareholders. Accordingly, no provision for Federal income taxes is required in the financial statements.

 

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken by the Fund in its 2015 - 2017 tax returns, which remain open for examination, or expected to be taken in the Fund’s 2018 tax returns. The Fund identified its major tax jurisdictions as U.S. Federal jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Fund accounts for interest and penalties for any uncertain tax positions as a component of income tax expense. No interest or penalty expense was recorded during the year ended September 30, 2018.

 

Distributions to Shareholders – Distributions from investment income, if any, are declared and paid monthly and are recorded on the ex-dividend date. The Fund will declare and pay net realized capital gains not previously distributed, if any, annually. The board’s decision to declare distributions will be influenced by its obligation to ensure that the Fund maintains its federal tax status as a Registered Investment Company (“RIC”). In order to qualify as a RIC, the Fund must derive a minimum of 90% of its income from capital gains, interest or dividends earned on investments and must distribute a minimum of 90% of its net investment income in the form of interest, dividends or capital gains to its shareholders. Otherwise, the Fund may be subject to an excise tax from the IRS.

 

The character of income and gains to be distributed is determined in accordance with Federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (i.e., deferred losses, capital loss carry forwards) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require classification.

 

Indemnification – The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, management of the Fund expects the risk of loss due to these warranties and indemnities to be remote.

 

3.INVESTMENT IN RESTRICTED SECURITIES

 

The Fund may invest in Restricted Securities (those which cannot be offered for public sale without first being registered under the Securities Act of 1933) that are consistent with the Fund’s investment objectives and investment strategies. Investments in Restricted Securities are valued at fair value as determined in good faith in

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

accordance with procedures adopted by the Board of Trustees. The Fund would typically have no rights to compel the obligor or issuer of a Restricted Security to register such a Restricted Security under the 1933 Act. No such securities were owned by the Fund at September 30, 2018.

 

4.INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES

 

The business activities of the Fund are overseen by the Board, which is responsible for the overall management of the Fund.

 

Advisory Fees – Pursuant to an Advisory Agreement with the Fund, the Advisor, under the oversight of the Board, directs certain of the daily operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Advisor, the Fund pays the adviser a management fee, computed and accrued daily and paid monthly, at an annual rate of 1.25% of the average daily net assets of the Fund. For the year ended September 30, 2018 the Advisor earned advisory fees of $1,875,820.

 

The Advisor has contractually agreed to waive all or part of its management fees and/or make payments to limit Fund expenses (exclusive of any front-end or contingent deferred loads, taxes, leverage interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, expenses of investing in underlying funds, or extraordinary expenses such as litigation and advisor transition expenses) at least until January 31, 2019, so that the total annual operating expenses of the Fund do not exceed 1.85% of the average daily net assets of Class A and 2.60% of Class C. The Fund incurred advisor transition expenses totaling $8,158 during the year ended September 30, 2018 associated with the transition from the prior adviser in 2015. These expenses are not subject to the operating expense limitation. Waivers and expense reimbursements may be recouped by the Advisor from the Fund within three years of when the amounts were waived only if the fund expenses are lower than both the lesser of the current expense cap and the expense cap in place at the time of waiver. For the year ended September 30, 2018, the Advisor waived advisory fees of $1,409,845. Expenses subject to recapture by the Advisor amounted to $1,063,215 that will expire on September 30, 2019, $1,196,051 that will expire on September 30, 2020, and $1,409,845 that will expire on September 30, 2021.

 

Distributor – The distributor of the Fund is Northern Lights Distributors, LLC (the “Distributor”). The Board of Trustees of the Fund has adopted, on behalf of the Fund, a Shareholder Servicing Plan to pay for certain shareholder services. Under the Plan, the Fund may pay up to 0.25% per year of its average daily net assets for such shareholder service activities. The Fund does not pay shareholder servicing fees to the Distributor. For the year ended September 30, 2018, the Fund incurred shareholder servicing fees of $62,347.

 

The Distributor acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s Class A and Class C shares. The Distributor received $33,956 and $1,000 in underwriting commissions and $3,920 and $0 was retained by the principal underwriter for Class A and Class C, respectively, during the year ended September 30, 2018.

 

The Fund, with respect to its Class C shares, is authorized under a “Distribution Plan” to pay to the Distributor a Distribution Fee for certain activities relating to the distribution of shares to investors and maintenance of shareholder accounts. These activities include marketing and other activities to support the distribution of the Class C shares. The Plan operates in a manner consistent with Rule 12b-1 under the 1940 Act, which regulates the manner in which an open-end investment company may directly or indirectly bear the expenses of distributing its shares. Although the Fund is not an open-end investment company, it has undertaken to comply with the terms of Rule 12b-1 as a condition of an exemptive order under the 1940 Act which permits it to have asset based distribution fees. Under the Distribution Plan, the Fund pays the Distributor a Distribution Fee at an annual rate of 0.75% of average daily net assets attributable to Class C shares. Pursuant to the Distribution Plan, the Fund incurred $389 for Class C during the year ended September 30, 2018.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

In addition, certain affiliates of the Distributor provide services to the Fund as follows:

 

Gemini Fund Services, LLC (“GFS”), an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to a separate servicing agreement with GFS, the Fund pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Fund are also officers of GFS, and are not paid any fees directly by the Fund for serving in such capacities. For the year ended September 30, 2018 GFS earned $451,764.

 

Northern Lights Compliance Services, LLC (“NLCS”) NLCS, an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Fund, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Fund. Under the terms of such agreement, NLCS receives customary fees from the Fund. For the year ended September 30, 2018 NLCS earned $62,989.

 

Blu Giant, LLC (“Blu Giant”)Blu Giant, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Fund. For the year ended September 30, 2018 Blu Giant earned $32,799.

 

Trustees – The Fund pays each Trustee who is not affiliated with the Fund or advisor a quarterly fee of $5,000 and the lead unaffiliated Trustee a quarterly fee of $10,000. Additionally, each unaffiliated Trustee receives $2,500 per meeting as well as reimbursement for any reasonable expenses incurred attending meetings. The “interested persons” who serve as Trustees of the Fund receive no compensation for their services as Trustees. None of the executive officers receive compensation from the Fund.

 

5.INVESTMENT TRANSACTIONS

 

The cost of purchases and proceeds from sales and paydowns of investment securities, other than U.S. Government securities and short-term investments, for the year ended September 30, 2018 amounted to $7,410,744 and $25,192,732 respectively.

 

6.REPURCHASE OFFERS

 

Pursuant to Rule 23c-3 under the Investment Company Act of 1940, as amended, the Fund offers shareholders on a quarterly basis the option of redeeming shares, at net asset value, of no less than 5% and no more than 25% of the shares outstanding. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer, although each shareholder will have the right to require the Fund to purchase up to and including 5% of such shareholder’s shares in each quarterly repurchase. Limited liquidity will be provided to shareholders only through the Fund’s quarterly repurchases.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

During the year ended September 30, 2018, the Fund completed four quarterly repurchase offers. In those offers, the Fund offered to repurchase up to 5% (and an additional 2% at the Fund’s discretion) of the number of its outstanding shares as of the Repurchase Pricing Dates. The results of those repurchase offers were as follows:

 

   Repurchase   Repurchase   Repurchase   Repurchase 
   Offer #1   Offer #2   Offer #3   Offer #4 
Commencement Date   09/14/17    12/13/2017    03/29/18    06/18/18 
Repurchase Request Deadline   10/24/17    1/23/2018    04/27/18    07/23/18 
Repurchase Pricing Date   10/24/17    1/23/2018    04/27/18    07/23/18 
Net Asset Value as of Repurchase Pricing Date  $12.54   $12.29   $12.20   $12.34 
Amount Repurchased *  $8,221,895   $7,931,054   $7,553,708   $7,286,497 
Percentage of Outstanding Shares Repurchased   5.00%   5.00%   5.00%   5.00%
Percentage of Outstanding Shares Tendered   26.89%   28.68%   40.15%   37.44%

 

 

*Repurchases were made on a pro-rata basis.

 

The following repurchase offer occurred subsequent to the reporting period:

 

   Repurchase 
   Offer 
Commencement Date   09/20/18 
Repurchase Request Deadline   10/22/18 
Repurchase Pricing Date   10/22/18 
Net Asset Value as of Repurchase Pricing Date  $12.09 
Amount Repurchased  $6,810,272 
Percentage of Outstanding Share Repurchased   5.00%
    43.15%

 

7.DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

The Statement of Assets and Liabilities represents cost for financial reporting purposes. Aggregate cost for federal tax purposes is $118,415,439 and differs from fair value by net unrealized appreciation (depreciation) of securities as follows:

 

Unrealized appreciation  $17,147,006 
Unrealized depreciation   (1,631,175)
Net unrealized appreciation  $15,515,831 

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

The tax character of distributions paid during the fiscal years ended September 30, 2018 and September 30, 2017 was as follows:

 

   Fiscal Year Ended   Fiscal Year Ended 
   September 30, 2018   September 30, 2017 
Ordinary Income  $5,580,553   $5,975,551 
Long-Term Capital Gain   1,823,878    893,974 
   $7,404,431   $6,869,525 

 

As of September 30, 2018, the components of accumulated earnings/ (deficit) on a tax basis were as follows:

 

Undistributed   Undistributed   Post October Loss   Capital Loss   Other   Unrealized   Total 
Ordinary   Long-Term   and   Carry   Book/Tax   Appreciation/   Accumulated 
Income   Gains   Late Year Loss   Forwards   Differences   (Depreciation)   Earnings/(Deficits) 
$459,411   $2,022,817   $   $   $(16,638)  $15,515,831   $17,981,421 

 

The difference between book basis and tax basis unrealized appreciation (depreciation), undistributed net investment income (loss) and accumulated net realized gain (loss) from security transactions are primarily attributable to the adjustments for defaulted bond adjustments.

 

Permanent book and tax differences, primarily attributable to the book/tax treatment of reclassification of fund distributions and tax adjustments for paydowns resulted in reclassification for the year ended September 30, 2018 as follows:

 

Paid   Undistributed   Accumulated 
In   Net Investment   Net Realized 
Capital   Income (Loss)   Gains (Loss) 
$   $(93,148)  $93,148 

 

8.NEW ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contract with Customers, to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years, or “full retrospective” and one requiring prospective application of the new standard with disclosure of results under old standards, or “modified retrospective”. The Fund completed its initial assessment in evaluating the potential impact on its financial statements and based on its initial assessment determined that its financial contracts are excluded from the scope of ASU 2014-09. As a result of the scope exception for financial contracts, Fund management has determined that there will be no material changes to the recognition timing and classification of revenues and expenses. This guidance was adopted on September 30, 2018 without a material impact to the financial statements or disclosures.

 

 

Vertical Capital Income Fund
Notes to Financial Statements (Continued)
September 30, 2018

 

9.SUBSEQUENT EVENTS

 

The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has determined that other than those disclosed in these financial statements, there were no other subsequent events to report through the issuance of these financial statements.

 

In November 2018 wildfires impacted homes that secure mortgages owned by the Fund. With limited information available as of November 29, 2018, 29 loans located in counties designated by the Federal Emergency Management Agency (“FEMA”) as disaster areas were discounted based on the Fund’s estimate of potential losses relating to these loans. Values of these 29 loans were discounted by 35% which reduced the value of the portfolio by approximately $2.7 million or $0.26 per share.

 

 

(GRAND THORNTON LOGO)

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

  Grant Thornton LLP
  1717 Main Street, Suite 1800
  Dallas, TX 75201-4667
  T 214.561.2300
  F 214.561.2370
  GrantThornton.com
  linkd.in/GrantThorntonUS
Board of Trustees and Shareholders twitter.com/GrantThorntonUS
Vertical Capital Income Fund  

 

Opinion on the financial statements

 

We have audited the accompanying statement of assets and liabilities of Vertical Capital Income Fund (a Delaware corporation) (the “Fund”), including the portfolio of investments, as of September 30, 2018, and the related statements of operations for the year then ended, changes in net assets for each of the two years in the period then ended, cash flows for the year ended, the financial highlights for each of the two years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2018, and the results of its operations for the year then ended, changes in net assets for each of the two years in the period then ended,cash flows for the year then ended, and financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial highlights for each of the years in the two-year period ended September 30, 2016 of Vertical Capital Income Fund were audited by other auditors whose report thereon dated March 21, 2017, expressed an unqualified opinion on those statements. The accompanying financial highlights for the year ended September 30, 2014 of Vertical Capital Income Fund were audited by other auditors whose report thereon date November 28, 2014, expressed an unqualified opinion on those statements

 

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 its 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.

 

Grant Thornton LLP

U.S. member firm of Grant Thornton International Ltd

 

 

(GRAND THORNTON LOGO)  

 

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 supporting the amounts and disclosures in the financial statements. 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. Our procedures included confirmation of securities owned as of September 30, 2018, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.

 

(SIGNATURE)

 

We have served as the Fund’s auditor since 2017.

 

Dallas, Texas

November 29, 2018

 

Grant Thornton LLP

U.S. member firm of Grant Thornton International Ltd

 

 

Vertical Capital Income Fund
Supplemental Information (Continued)
September 30, 2018 (Unaudited)

 

Following is a list of the Trustees and executive officers of the Trust and their principal occupation over the last five years. Unless otherwise noted, the address of each Trustee and Officer is 80 Arkay Drive, Suite 110, Hauppauge, NY 11788.

 

Independent Trustees

 

Name, Address and
Age (Year of Birth)
Position/Term
of Office*
Principal Occupation
During the Past Five Years
Number of
Portfolios in
Fund
Complex**
Overseen by
Trustee
Other Directorships
held by Trustee
Robert J. Boulware
1956
Trustee since August 2011 Managing Director, Pilgrim Funds, LLC (private equity fund), Sept. 2006 to present. 1 Trustee, Met Investors Series Trust (55 portfolios), March 2008 to present; Trustee, Metropolitan Series Fund (33 portfolios), April 2012 to present; Director, Gainsco Inc. (auto insurance) May 2005 to present; SharesPost 100 Fund, March 2013 to present.
Mark J. Schlafly
1961
Trustee since August 2011 Executive Vice President, Waddell & Reed, Inc. (financial services firm), May 2016 to present; Staff Member, Weston Center, Washington University, August 2011 to present; Managing Director, Russell Investments, June 2013 to Jan. 2015; President and Chief Executive Officer, FSC Securities Corporation, July 2008 to April 2011; Senior Vice President, LPL Financial Corporation, July 2006 to July 2008. 1 None
T. Neil Bathon
1961
Trustee since August 2011 Managing Partner, FUSE Research Network, LLC, Aug. 2008 to present; Managing Director, PMR Associates LLC, July 2006 to Present; Financial Research Corp, Oct. 1987 to May 2006. 1 BNY Mellon Charitable Gift Fund, June 2013 to present.

 

 

Vertical Capital Income Fund
Supplemental Information (Continued)
September 30, 2018 (Unaudited)

 

Interested Trustee, Officers

 

Name, Address and
Age (Year of Birth)
Position/Term
of Office*
Principal Occupation
During the Past Five Years
Number of
Portfolios in
Fund
Complex
Overseen by
Trustee
Other Directorships held by
Trustee
Robert J. Chapman ***
1947
Trustee, since August 2015 Executive Vice President, Oakline Advisors, LLC (investment adviser), a position held since July 2015. Executive Vice President, Stratera Holdings, LLC (financial services holding company) a position held since 2007. 1 None
Michael D. Cohen
1974
President, since July 2015 Chief Executive Officer Stratera Holdings, LLC, (financial services holding company), a position held since October 2016, President of Stratera Holdings, LLC, a position held since April 2015; Executive Vice President, Jan. 2013 to Apr. 2015. President of Stratera Services, LLC, Apr. 2015 to present; Executive Vice President, Jan. 2011 to Apr. 2015. Similar positions held at subsidiaries of Stratera Holdings. Executive Vice President of Pathway Energy Infrastructure Management, LLC, Aug. 2014 to present. Director, Behringer Harvard Opportunity REIT I, Inc., July 2014 to present. Director, Behringer Harvard Opportunity REIT II, Inc., Feb. 2013 to Sept. 2017. Executive Vice President, Pathway Energy Infrastructure Fund, LLC, Feb 2013 to present. Executive Vice President of Priority Senior Secured Income Management, LLC, Oct. 2012 to present. Executive Vice President of Priority Income Fund, Inc., July 2012 to present. n/a n/a
Lisa Ross
1963
Treasurer since August 2018 Chief Financial Officer, Stratera Holdings, LLC (financial services holding company), May 2017 to present; Senior Vice President Accounting, Stratera Holdings, LLC, October 2013 to May 2017; Chief Financial Officer, Behringer Harvard Opportunity REIT I, Inc.(a public real estate investment trust), October 2014 to June 2017; Chief Accounting Officer, Behringer Harvard Opportunity REIT I, Inc., January 2012 to October 2014. n/a n/a
Stanton P. Eigenbrodt
1965
Secretary since July 2015 Executive Vice President of Oakline Advisors, a position held since July 2015. Chief Legal Officer of Stratera Holdings, LLC (financial services holding company) a position held since Sept. 2015; Executive Vice President and General Counsel (2011-2015); Senior Vice President and General Counsel (2006- 2011). Similar positions held at subsidiaries of Stratera Holdings, LLC. n/a n/a
Emile R. Molineaux
1962
Chief Compliance Officer and Anti-Money Laundering Officer since August 2011 Northern Lights Compliance Services, LLC (Secretary since 2003 and Senior Compliance Officer since 2011); General Counsel, CCO and Senior Vice President, Gemini Fund Services, LLC; Secretary and CCO, Northern Lights Compliance Services, LLC (2003-2011). n/a n/a

 

*The term of office for each Trustee listed above will continue indefinitely and officers listed above serve subject to annual reappointment.

 

**The term “Fund Complex” refers to the Vertical Capital Income Fund.

 

***Mr. Chapman is an interested Trustee because he is an officer of the Fund’s investment adviser.

 

 

PRIVACY NOTICE

 

Rev. May 2012

 

FACTS WHAT DOES VERTICAL CAPITAL INCOME FUND DO WITH YOUR PERSONAL INFORMATION?
   
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
   
What? The types of personal information we collect and share depend on the product or service you have with us. This information can include:
   
   ■ Social Security number Purchase History
         
  Assets Account Balances
         
  Retirement Assets Account Transactions
         
  Transaction History Wire Transfer Instructions
         
  Checking Account Information    
   
  When you are no longer our customer, we continue to share your information as described in this notice.
   
How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Vertical Capital Income Fund chooses to share; and whether you can limit this sharing.

  

Reasons we can share your personal information Does Vertical
Capital Income
Fund share?
Can you limit this sharing?

For our everyday business purposes –

such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus

Yes No

For our marketing purposes –

to offer our products and services to you

No We don’t share
For joint marketing with other financial companies No We don’t share

For our affiliates’ everyday business purposes –

information about your transactions and experiences

No We don’t share

For our affiliates’ everyday business purposes –

information about your creditworthiness

No We don’t share
For nonaffiliates to market to you No We don’t share

 

Questions?          Call 1-866-277-VCIF

 

 

Rev. May 2012

 

 Who we are

Who is providing this notice?

 

Vertical Capital Income Fund

What we do
How does Vertical Capital Income Fund protect my personal information?

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

 

Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information.

How does Vertical Capital Income Fund collect my personal information?

We collect your personal information, for example, when you

 

■    Open an account

 

■    Provide account information

 

■    Give us your contact information

 

■    Make deposits or withdrawals from your account

 

■    Make a wire transfer

 

■    Tell us where to send the money

 

■    Tells us who receives the money

 

■    Show your government-issued ID

 

■    Show your driver’s license

 

We also collect your personal information from other companies.

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

     Sharing for affiliates’ everyday business purposes – information about your creditworthiness

 

     Affiliates from using your information to market to you

 

     Sharing for nonaffiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing.

Definitions
Affiliates

Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

■    Vertical Capital Income Fund does not share with our affiliates.

Nonaffiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies

 

   Vertical Capital Income Fund does not share with nonaffiliates so they can market to you.

Joint marketing

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

 

   Vertical Capital Income Fund doesn’t jointly market.

           

 

 

How to Obtain Proxy Voting Information

 

Information regarding how the Fund votes proxies relating to portfolio securities for the 12 month period ended June 30th as well as a description of the policies and procedures that the Fund used to determine how to vote proxies is available without charge, upon request, by calling 1-866-277-VCIF by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

How to Obtain 1st and 3rd Fiscal Quarter Portfolio Holdings

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (1-800-SEC-0330). The information on Form N-Q is available without charge, upon request, by calling 1-866-277-VCIF.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Adviser

Oakline Advisors, LLC

14675 Dallas Parkway, Suite 600

Dallas, Texas 75254

 

Administrator

Gemini Fund Services, LLC

80 Arkay Drive

Hauppauge, NY 11788

 

 

Item 2. Code of Ethics.

 

(a)       As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

 

(b)        For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:

 

(1)Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2)Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;

(3)        Compliance with applicable governmental laws, rules, and regulations;

(4)The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

(5)        Accountability for adherence to the code.