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)

 

James Ash, Gemini Fund Services, LLC

17605 Wrigh 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: 9/30/15

 

 

Item 1. Reports to Stockholders.

 

	Vertical Capital Income Fund
	Cusip: 92535C104
	VCAPX
	Annual Report
	September 30, 2015
	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

 

November 25, 2015

 

Dear Shareholders:

 

We are pleased to report another successful year for Vertical Capital Income Fund. Consistent with our investment objective to seek current income, the Fund once again made continuous monthly dividends for its fiscal year, which ended September 30, 2015 aggregating $0.44 per share. For the same period, the Fund produced a total return (load waived) of 8.86% compared to one of its key benchmarks, the Barclays Capital Mortgage Backed Securities Index which had a total return of 3.43%. Including the maximum load of 4.50%, the Fund had a total return of 3.97%. Since inception the Fund has produced a cumulative total return of 8.35%. The current SEC Annual Yield is 0.35% as measured on September 30, 2015.

 

Changes in Adviser and other Servicers

 

During 2015, the Fund changed its adviser and several other service providers. In late June, the Board of Trustees terminated the Fund’s advisory agreement with Vertical Capital Asset Management, LLC, and, in early July appointed Behringer Advisors, LLC as the Fund’s interim adviser. The decision was subsequently approved by the Fund’s shareholders in mid-November. We are pleased to report that the transition of advisers went smoothly, and that the Fund was able to absorb the non-recurring costs associated with the transition without any material negative financial impact to the Fund’s performance.

 

The Fund also replaced its previous loan servicer, an affiliate of the prior adviser, with a third party institutional residential mortgage servicing firm, Statebridge Company, LLC. The transition to Statebridge was completed in July. The Fund also engaged KPMG LLP—a nationally recognized auditing firm—for fiscal years 2015 and 2016, replacing the prior firm that resigned earlier in the year. The prior firm resigned because it was narrowing the type of funds for which it provides audit services; there were no disagreements as to the Fund’s financials. The Fund additionally contracted with a third-party loan valuation firm, Mortgage Industry Advisory Corporation, to support the Fund’s daily share valuation process. This function was previously performed internally by the Fund’s prior adviser using a proprietary pricing model. Although these changes will slightly increase the cost of managing the Fund, we believe strengthening the Fund’s resources with these nationally recognized service providers is in the best interests of the shareholders over the long term.

 

In addition to the capabilities of Northern Lights Distributors, LLC as the principal underwriter of the Fund’s public offering, we are pleased that Provasi Capital Partners LP, a Behringer Advisors affiliate, became associated with the Fund’s distribution efforts in September. We believe Provasi Capital Partners’ capabilities will help increase the Fund’s capital base, thus reducing the Fund’s operating expenses as a percent of assets under management and allowing the Fund to invest in a broader range of loan sizes and structures, as well as further diversifying the risk profile of the portfolio.

Update on Fund Strategy and Economic Outlook

 

The Fund’s investment objective is to seek income, which it does by primarily investing in whole residential mortgage loans. Earlier in the Fund’s life, there were opportunities to buy loans at significant discounts from holders of “distressed” loans; however, most of those opportunities have diminished as borrower credit and home values have increased as a result of the U.S.’s economic recovery in the last few years. The investment focus during 2015 from both the Fund’s prior and current advisers has been to acquire loans that are generally known as “scratch and dent” or “agency ineligible.”

 

Most residential mortgages in the U.S. are originated by banks and then sold to Freddie Mac, Fannie Mae and Ginnie Mae (the “Agencies”) for securitization in the global capital markets. This arrangement creates more liquidity in the residential mortgage market which, in turn, results in lower mortgage rates than otherwise would be obtainable by borrowers. This securitization market is governed by detailed rules and regulations, including the requirements for residential mortgage loans to be eligible for securitization. Given the volume of mortgage originations and the propensity toward human error, a percentage of loans are rejected by the Agencies due to incorrect technical documentation or underwriting criteria. When rejected, the loans are returned to the originating banks. Once returned, the originating banks move quickly to dispose of the loans, because generally, the cost of holding the loans while correcting the “defects” is dilutive to the banks’ earnings. As a result, the banks are willing to sell these “scratch and dent” loans at a discount to their unpaid principal balances. Since these defects do not typically relate to the ultimate collectability of the loan’s principal and interest, we are able to buy loans at what we believe to be attractive yields.

 

Interest rates on residential mortgage loans reflect a yield premium to the U.S. Treasury intermediate bond market, which historically is approximately 1.70%. Buying a loan at a discount to its unpaid principal balance increases the investment yield. So regardless of the interest rate environment, we believe we will be able to buy loans at competitive spreads to interest rates in the then current bond market. However, since our portfolio does not turn over every day, the current income yield on our portfolio will always be somewhat higher or lower than market benchmarks. For example, as of September 30, 2015, the Fund’s loan portfolio was generating a current effective yield of 5.29%, or 3.23% higher than the 10-Year U.S. Treasury note interest rate of 2.06%.

 

The Fund’s dividend rate has been drifting lower, primarily because market interest rates and mortgage rates have been going down. The benchmark 30-year fixed rate mortgage interest rate was 4.49% in September 2013, 4.16% in September 2014 and 3.89% in September 2015. As the economy has improved there has been speculation that the Federal Reserve would raise interest rates, but that has not happened so far. If interest and mortgage rates go up, we may have the benefit of investing into higher yielding assets as additional capital is made available to the Fund through new shareholder investment, including the Fund’s dividend reinvestment plan, sales of existing assets and early loan payoffs. In addition, as rates begin to increase, many homeowners—especially those with adjustable rate, shorter term mortgages—tend to refinance so they can lock in rates before they rise too much. In effect, the Fund has a natural readjustment to the bond market built into its investment strategy.

 

Notwithstanding the fall in interest rates, home sales and mortgage applications have been at historically low levels. In a period of uncertainty, consumers are less likely to make major purchases. Concerns about the slowing Chinese economy, job reductions in the oil industry, continued and escalating global conflicts, terrorism and the outcome of the presidential election, among other factors, weigh on the minds of American consumers. Additionally, there has been a significant reduction in the number of first-time

home buyers who are critical to any sustainable housing recovery. They have been disadvantaged by tighter credit standards, lack of inventory, increasing home prices and lower income levels.

 

Nevertheless, there are many positive attributes influencing the Fund’s future. The U.S. population continues to grow creating more households, which means more demand for single family housing. Even with the percent of for-sale housing in decline, the absolute number of homes needed to fill demand is increasing. Single family housing starts have been on the rise, but as a percent of housing stock, is still low by historical standards. In spite of this lack of inventory, housing affordability, in all but a select number of cities, remains generally stable. The amount of outstanding residential loans in the U.S. is estimated at approximately $20 trillion with approximately $1 trillion of new loans originated each year. Loans past due and loans started in foreclosure, as a percent of all loans, have been falling since 2010. The credit-worthiness of borrowers, evidenced by their FICO scores, has been increasing. Loan to purchase price or value on originated loans is hovering around 78%, slightly above historical norms, but well within comfort ranges. Assuming interest rates rise as generally projected, mortgage rates will still be within a historically low range. Given these economic indicators, we believe we have ample runway to continue executing our core investment strategy and producing competitive market returns with an acceptable degree of risk.

 

Fund Results of Operations and Liquidity

 

Overall, the Fund is in very good financial condition. The Fund began the year with $108 million ($107 million at cost) of loans under management and ended the year with 940 loans valued at $148.2 million ($146.1 million at cost). During fiscal 2015, the Fund acquired 434 loans for an aggregate purchase price of $78.5 million and sold 147 loans generating approximately $29 million in net sale proceeds. During the same period, 57 loans having an unpaid principal balance of $13.4 million were prepaid by borrowers, thereby realizing $1.6 million of imbedded gain.

 

The Fund has very low leverage—less than 8% of total assets as of September 30, 2015—and began and ended the year in positive net working capital positions. As of September 30, 2015 the Fund owed approximately $13.5 million on its bank line of credit but had cash on hand of approximately $20.5 million. We could have paid off the line of credit, but we choose to retain cash in a defensive position during the second half of the year to satisfy anticipated redemptions requests, to clarify certain arrangements with the Fund’s line of credit bank and to reserve cash for the required special capital gain distribution in December.

 

Because many financial advisory firms have policies requiring their clients to liquidate securities upon a change of adviser to an investment fund, the Fund had to use approximately $16.3 million of cash to satisfy the quarterly repurchase obligation for both the second and third calendar quarters of 2015. The Fund expects that additional cash will be needed to satisfy some trailing requests for another quarter or two. The change of fund adviser also triggered a breach of a loan covenant with the Fund’s lender, which the bank has decided not to act on after discussions with Behringer Advisors. The Fund is currently on good terms with the bank and is in discussions to extend the current facility, which matures in early 2016. In the interim, the Fund has been retaining enough cash to pay off the line upon satisfactory agreement of both parties going forward. Cash that is un-invested in mortgage assets is dilutive to the Fund’s earnings. We appreciate the negative implications on the Fund’s operation in the short run; however, we feel that holding this cash is the right decision until these transitional issues are behind us. Regardless, the Fund seeks to continue to distribute a competitive monthly dividend and we appreciate your patience in this regard. We thank you for your investment in Vertical Capital Income Fund.

Regards,

 

 

Michael D. Cohen
President

 

This release 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. 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 release.

 

Barclays U.S. MBS Index (mortgage backed securities) covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). Investors cannot directly invest in an index, and unmanaged index returns do not reflect fees, expenses, or sales charges.

 

The Fund’s distribution rate may be affected by numerous factors, including changes in realized and projected market returns, Fund performance, and other factors. There can be no assurance that an unanticipated change in market conditions or other unforeseen factors will not result in a change in the Fund’s distribution rate at a future time. The Fund’s distribution amounts were calculated based on the ordinary income received from the underlying investments, any short-term capital gains realized from the disposition of such investments will be paid out annually. A portion of the distributions may consist of a return of capital based on the character of the distributions received from the underlying holdings. Distributions shown are Cumulative.

 

2635-NLD-12/1/2015

Vertical Capital Income Fund

PERFORMANCE OF A $10,000 INVESTMENT (Unaudited)

Since Inception through September 30, 2015*

 

 

		One Year		Since Inception*
The Vertical Capital Income Fund		8.86%		8.35%
The Vertical Capital Income Fund with load		3.97%		7.04%
Barclays Capital Mortgage Backed Securities Index		3.43%		2.33%

*

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

 

The 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, is 2.46% per the January 31, 2015 Prospectus as supplemented July 23, 2015. The graph does not reflect the deduction of taxes that a shareholder would have to pay on Fund distributions or the redemption of the Fund shares. For performance information current to the most recent month end, please call 1-866-277-VCIF.

 

 

PORTFOLIO COMPOSITION** (Unaudited)
Mortgage Notes			99.7	%
Other Investments			0.3	%
			100.0	%
**  Based on Investments at Value as of September 30, 2015.

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4%
$	121,783			Loan ID 200003		Balloon		7.250%		9/1/2035		$	89,961
	290,965			Loan ID 200004		Fixed		7.990%		10/1/2036			223,684
	73,111			Loan ID 200006		ARM		7.990%		1/1/2036			56,422
	52,934			Loan ID 200008		ARM		4.000%		3/28/2035			33,434
	52,144			Loan ID 200012		ARM		9.800%		7/1/2037			44,722
	58,245			Loan ID 200013		Fixed		5.250%		9/1/2040			37,368
	35,518			Loan ID 200015		Fixed		7.000%		8/1/2030			26,965
	41,028			Loan ID 200016		ARM		10.375%		1/1/2031			37,102
	54,910			Loan ID 200018		Fixed		7.000%		1/1/2033			40,846
	63,183			Loan ID 200019		Fixed		5.000%		12/1/2036			41,160
	80,004			Loan ID 200020		Fixed		5.630%		7/1/2033			55,211
	101,540			Loan ID 200023		Fixed		5.875%		12/1/2050			68,206
	139,803			Loan ID 200025		ARM		2.875%		3/1/2034			81,612
	205,980			Loan ID 200026		Fixed		4.750%		1/1/2050			65,583
	228,102			Loan ID 200028		Fixed		4.750%		6/1/2050			225,776
	223,134			Loan ID 200029		Fixed		5.310%		7/1/2037			144,484
	283,044			Loan ID 200031		Fixed		5.000%		1/1/2051			246,387
	311,277			Loan ID 200032		Fixed		3.130%		1/1/2051			268,478
	568,931			Loan ID 200035		Fixed		3.000%		11/1/2050			327,858
	68,735			Loan ID 200036		Fixed		7.940%		1/12/2034			53,565
	167,674			Loan ID 200037		Fixed		7.800%		5/1/2035			128,482
	26,682			Loan ID 200039		Fixed		11.500%		11/5/2033			25,393
	125,029			Loan ID 200041		Fixed		4.875%		8/1/2039			78,612
	42,565			Loan ID 200042		Fixed		7.000%		12/1/2037			30,872
	65,100			Loan ID 200043		Fixed		6.125%		7/1/2039			43,937
	124,208			Loan ID 200045		Fixed		5.625%		12/1/2038			83,027
	40,376			Loan ID 200046		Fixed		8.000%		7/1/2027			33,762
	54,478			Loan ID 200048		Fixed		5.500%		8/1/2039			35,082
	242,800			Loan ID 200049		Fixed		3.875%		3/1/2042			203,927
	161,329			Loan ID 200052		Fixed		5.125%		5/1/2040			105,844
	60,274			Loan ID 200053		Fixed		4.000%		9/1/2042			40,593
	57,537			Loan ID 200054		Fixed		8.250%		3/1/2039			44,888
	85,204			Loan ID 200055		Fixed		10.000%		1/5/2036			74,256
	277,664			Loan ID 200056		Fixed		7.375%		12/1/2037			206,526
	127,883			Loan ID 200057		ARM		2.625%		10/1/2036			108,927
	60,626			Loan ID 200059		Fixed		6.000%		8/1/2039			40,500
	35,997			Loan ID 200060		Fixed		5.750%		8/1/2039			23,612
	34,205			Loan ID 200061		Fixed		5.750%		7/1/2024			27,261
	183,427			Loan ID 200064		Fixed		4.875%		4/1/2034			160,085
	27,391			Loan ID 200065		ARM		6.875%		1/1/2037			9,660
	226,834			Loan ID 200072 **		Fixed		0.000%		2/1/2051			82,532
	186,448			Loan ID 200073 **		Fixed		0.000%		2/1/2026			117,912
	168,179			Loan ID 200074 **		Fixed		0.000%		2/1/2031			90,313
	212,644			Loan ID 200075		Fixed		4.250%		2/1/2042			124,603

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	176,413			Loan ID 200076		Fixed		4.250%		12/1/2041		$	103,446
	77,469			Loan ID 200077		Fixed		3.750%		8/1/2042			43,329
	35,147			Loan ID 200078		Fixed		7.000%		8/1/2036			33,032
	138,252			Loan ID 200079		Fixed		2.000%		8/1/2049			71,923
	76,163			Loan ID 200081		Fixed		2.000%		9/1/2037			64,569
	69,227			Loan ID 200082		Fixed		8.250%		4/1/2040			53,852
	191,118			Loan ID 200084		Fixed		7.000%		3/1/2039			139,713
	165,365			Loan ID 200086		Fixed		2.000%		11/1/2050			140,814
	227,119			Loan ID 200087		Fixed		5.000%		3/1/2051			147,702
	126,437			Loan ID 200088		Fixed		7.000%		6/1/2039			92,376
	269,073			Loan ID 200089		Fixed		2.000%		3/1/2052			113,538
	73,675			Loan ID 200090		Fixed		2.000%		11/1/2036			62,706
	290,251			Loan ID 200091		Fixed		2.000%		11/1/2051			153,559
	269,707			Loan ID 200092		Fixed		2.375%		5/1/2036			149,359
	139,973			Loan ID 200093		Fixed		4.000%		2/1/2038			125,067
	234,518			Loan ID 200094		ARM		2.750%		9/1/2037			200,067
	388,888			Loan ID 200100		Fixed		2.000%		7/1/2037			205,469
	75,553			Loan ID 200102		Fixed		8.250%		3/1/2040			59,688
	119,634			Loan ID 200105		Fixed		2.000%		12/1/2050			102,121
	94,204			Loan ID 200106		Fixed		2.000%		2/1/2052			81,030
	326,534			Loan ID 200107		Fixed		2.000%		7/1/2052			172,067
	191,010			Loan ID 200108		Fixed		3.000%		6/1/2047			95,532
	115,270			Loan ID 200110		Fixed		8.250%		8/1/2039			132,832
	187,463			Loan ID 200111		Fixed		5.000%		11/1/2050			121,503
	305,250			Loan ID 200112		Fixed		3.000%		9/1/2049			175,486
	115,347			Loan ID 200114		Fixed		2.000%		10/1/2051			61,494
	267,243			Loan ID 200115		Fixed		2.000%		11/1/2051			139,072
	150,811			Loan ID 200116		Fixed		7.125%		3/1/2039			110,481
	308,694			Loan ID 200125		Fixed		2.000%		5/1/2051			262,045
	128,076			Loan ID 200126		Fixed		8.250%		8/1/2039			99,629
	143,829			Loan ID 200127		Fixed		5.000%		8/1/2039			93,377
	51,843			Loan ID 200128		Fixed		3.000%		7/1/2037			47,609
	467,549			Loan ID 200129		Fixed		4.625%		3/1/2052			295,547
	36,837			Loan ID 200131		Fixed		3.875%		11/1/2027			33,222
	235,177			Loan ID 200133		Fixed		3.490%		1/1/2043			196,384
	189,212			Loan ID 200134		Fixed		3.750%		12/1/2042			170,177
	126,930			Loan ID 200135		Fixed		4.375%		12/1/2042			108,922
	249,186			Loan ID 200136		Fixed		2.875%		10/1/2027			224,477
	130,257			Loan ID 200137		Fixed		4.500%		9/1/2042			113,336
	50,614			Loan ID 200139		Fixed		4.625%		5/1/2027			36,916
	81,343			Loan ID 200141		Fixed		4.250%		2/1/2042			67,656
	188,187			Loan ID 200142		Fixed		3.300%		1/1/2037			86,600
	131,179			Loan ID 200143		Fixed		3.000%		2/1/2037			105,694
	283,202			Loan ID 200145		Fixed		2.000%		8/1/2051			241,638

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	100,325			Loan ID 200152		ARM		3.250%		9/1/2037		$	86,334
	100,091			Loan ID 200154		Fixed		11.050%		9/1/2037			92,439
	55,474			Loan ID 200156		Fixed		8.130%		9/19/2032			44,120
	124,663			Loan ID 200157		Fixed		3.750%		1/1/2043			110,435
	162,434			Loan ID 200158		Fixed		3.625%		12/1/2042			146,038
	187,969			Loan ID 200159		Fixed		3.750%		6/1/2042			160,321
	131,079			Loan ID 200160		Fixed		3.250%		2/1/2043			71,462
	482,817			Loan ID 200161		Fixed		3.875%		11/1/2041			406,018
	232,062			Loan ID 200162		Fixed		3.875%		7/1/2042			194,674
	123,236			Loan ID 200163		Fixed		4.000%		1/1/2042			103,658
	105,655			Loan ID 200164		Fixed		4.000%		7/1/2042			100,133
	204,295			Loan ID 200165		Fixed		4.375%		12/1/2041			172,330
	124,460			Loan ID 200166		Fixed		4.000%		2/1/2032			109,505
	132,158			Loan ID 200168		Fixed		3.750%		10/1/2042			110,667
	25,316			Loan ID 200169		Fixed		6.923%		9/1/2034			18,467
	102,017			Loan ID 200171		Fixed		6.500%		4/1/2036			87,502
	145,473			Loan ID 200172		Fixed		7.250%		2/1/2037			106,395
	203,807			Loan ID 200173		Fixed		3.575%		10/1/2046			77,217
	93,874			Loan ID 200174		Fixed		7.340%		4/1/2037			68,989
	54,788			Loan ID 200175		Fixed		9.600%		5/1/2037			45,095
	103,103			Loan ID 200176		Fixed		6.600%		3/1/2037			59,587
	63,668			Loan ID 200177		Fixed		8.000%		1/11/2022			56,856
	43,583			Loan ID 200178		Fixed		6.500%		5/10/2016			42,707
	21,829			Loan ID 200179		Fixed		7.250%		7/27/2019			14,827
	19,579			Loan ID 200180		Fixed		6.500%		7/8/2016			19,107
	112,305			Loan ID 200181		Fixed		7.500%		3/1/2016			110,781
	90,634			Loan ID 200182		Fixed		8.750%		10/10/2016			88,669
	272,061			Loan ID 200183		Fixed		4.125%		12/1/2032			224,533
	76,363			Loan ID 200184		Fixed		4.375%		12/1/2042			60,734
	28,701			Loan ID 200185		Fixed		5.375%		6/1/2042			18,346
	55,279			Loan ID 200186		Fixed		5.125%		8/1/2042			48,439
	155,567			Loan ID 200188		Fixed		3.875%		2/1/2043			130,270
	174,473			Loan ID 200189		Fixed		4.125%		8/1/2042			144,307
	348,040			Loan ID 200190		Fixed		3.625%		11/1/2042			313,733
	136,067			Loan ID 200191		Fixed		4.125%		11/1/2042			111,412
	193,025			Loan ID 200192		Fixed		4.250%		11/1/2042			174,305
	169,519			Loan ID 200194		Fixed		4.750%		9/1/2041			144,477
	276,797			Loan ID 200195		Fixed		3.875%		3/1/2042			232,483
	103,811			Loan ID 200196		Fixed		4.500%		1/1/2043			89,755
	40,352			Loan ID 200197		Fixed		4.750%		11/1/2042			35,076
	42,154			Loan ID 200198		Fixed		5.250%		10/1/2042			35,439
	298,177			Loan ID 200199		Fixed		4.000%		9/1/2042			282,580
	253,649			Loan ID 200200		Fixed		3.875%		9/1/2042			204,843
	59,709			Loan ID 200201		Fixed		5.125%		8/1/2041			52,342

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	61,045			Loan ID 200202		Fixed		4.375%		12/1/2042		$	57,192
	150,033			Loan ID 200204		Fixed		3.875%		7/1/2042			108,251
	24,508			Loan ID 200206		Fixed		3.990%		12/1/2042			20,545
	51,151			Loan ID 200208		Fixed		4.250%		1/1/2043			38,217
	218,218			Loan ID 200209		Fixed		3.875%		8/1/2042			194,269
	91,136			Loan ID 200210		Fixed		4.625%		5/1/2043			83,432
	219,464			Loan ID 200211		Fixed		3.750%		5/1/2042			201,866
	139,801			Loan ID 200212		Fixed		3.875%		2/1/2042			111,195
	295,713			Loan ID 200213		Fixed		4.125%		1/1/2038			199,013
	61,053			Loan ID 200214		Fixed		5.750%		7/1/2039			50,262
	119,319			Loan ID 200216		Fixed		5.750%		9/1/2039			93,161
	145,868			Loan ID 200217		Fixed		5.250%		7/1/2040			119,858
	77,937			Loan ID 200218		Fixed		4.250%		12/1/2041			48,441
	206,295			Loan ID 200219		Fixed		4.250%		4/1/2043			192,501
	222,159			Loan ID 200220		Fixed		3.875%		5/1/2043			183,442
	171,229			Loan ID 200221		Fixed		4.250%		4/1/2043			158,923
	130,631			Loan ID 200222		Fixed		4.125%		5/1/2043			108,727
	256,603			Loan ID 200223		Fixed		4.125%		5/1/2043			232,823
	218,931			Loan ID 200224		Fixed		4.000%		7/1/2043			187,513
	84,540			Loan ID 200226		Fixed		5.250%		7/1/2041			77,576
	53,257			Loan ID 200228		Fixed		4.625%		8/1/2042			46,176
	169,077			Loan ID 200229		Fixed		3.750%		7/1/2042			148,853
	151,926			Loan ID 200230		Fixed		3.500%		2/1/2043			128,537
	135,372			Loan ID 200231		Fixed		3.625%		12/1/2042			77,396
	71,682			Loan ID 200232		Fixed		3.875%		8/1/2042			57,424
	189,728			Loan ID 200233		Fixed		2.990%		11/1/2027			161,171
	96,838			Loan ID 200235		Fixed		3.750%		12/1/2042			87,095
	328,807			Loan ID 200238		ARM		3.625%		7/1/2035			306,643
	149,331			Loan ID 200242		Fixed		3.250%		10/1/2042			117,134
	123,173			Loan ID 200243		Fixed		3.750%		4/1/2043			99,036
	29,567			Loan ID 200244		Fixed		5.000%		5/1/2042			24,487
	210,073			Loan ID 200245		Fixed		3.875%		3/1/2043			178,277
	95,370			Loan ID 200286		Fixed		4.500%		7/1/2043			84,234
	103,883			Loan ID 200287		Fixed		4.375%		7/1/2043			86,925
	350,258			Loan ID 200288		Fixed		4.375%		11/1/2041			275,672
	353,711			Loan ID 200289		Fixed		5.500%		9/1/2043			326,566
	300,490			Loan ID 200290		Fixed		4.250%		4/1/2043			257,073
	456,047			Loan ID 200292		Fixed		3.875%		6/1/2043			388,882
	185,964			Loan ID 200294		Fixed		3.875%		2/1/2043			156,308
	265,168			Loan ID 200295		Fixed		3.875%		6/1/2043			234,190
	215,521			Loan ID 200296		Fixed		3.250%		2/1/2043			171,001
	185,810			Loan ID 200297		Fixed		3.375%		10/1/2042			147,876
	201,911			Loan ID 200299		Fixed		3.625%		10/1/2042			164,844
	120,335			Loan ID 200300		Fixed		8.400%		10/20/2037			100,428

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	104,548			Loan ID 200302		Fixed		9.875%		10/1/2035		$	74,887
	60,800			Loan ID 200303		Fixed		5.250%		10/1/2032			53,905
	146,917			Loan ID 200304		Fixed		7.250%		10/1/2033			126,142
	252,502			Loan ID 200305		Fixed		7.000%		3/1/2036			184,337
	736,584			Loan ID 200306		Fixed		4.870%		5/1/2049			634,860
	51,252			Loan ID 200307		Fixed		6.500%		7/1/2031			44,065
	111,642			Loan ID 200308		ARM		6.750%		5/1/2035			97,363
	216,518			Loan ID 200309		Fixed		2.000%		12/1/2048			181,342
	173,414			Loan ID 200310		Fixed		8.000%		9/1/2039			109,495
	135,209			Loan ID 200312		Fixed		9.000%		4/1/2039			114,045
	47,815			Loan ID 200313		Fixed		8.500%		3/1/2028			33,248
	64,276			Loan ID 200314		Fixed		8.000%		3/1/2040			48,390
	321,974			Loan ID 200315		ARM		3.500%		6/1/2037			235,844
	77,745			Loan ID 200317		Fixed		7.000%		9/1/2032			66,638
	283,394			Loan ID 200318		Fixed		6.500%		10/1/2036			213,089
	66,857			Loan ID 200319		ARM		2.750%		12/1/2034			46,859
	303,463			Loan ID 200321		Fixed		2.375%		6/1/2049			213,096
	139,222			Loan ID 200322		Fixed		7.375%		8/1/2033			112,115
	349,359			Loan ID 200324		Fixed		5.500%		11/1/2037			301,000
	246,251			Loan ID 200325		Fixed		6.000%		5/1/2042			172,518
	79,602			Loan ID 200326		Fixed		8.375%		10/1/2036			67,758
	155,372			Loan ID 200327		Fixed		6.790%		10/26/2036			117,316
	114,621			Loan ID 200329		Fixed		6.880%		3/1/2036			106,830
	260,918			Loan ID 200330		Fixed		7.000%		8/1/2037			200,755
	105,721			Loan ID 200332		Fixed		5.775%		10/1/2037			93,466
	92,919			Loan ID 200334		Fixed		7.000%		1/1/2033			76,433
	279,075			Loan ID 200335		Fixed		2.000%		11/1/2052			225,317
	58,359			Loan ID 200336		Fixed		7.000%		12/1/2042			44,960
	46,895			Loan ID 200337		Fixed		7.000%		10/1/2034			43,561
	55,348			Loan ID 200338		ARM		10.500%		8/1/2029			50,117
	170,781			Loan ID 200339		Fixed		2.000%		10/1/2033			147,689
	36,436			Loan ID 200340		Fixed		7.000%		3/1/2030			26,907
	187,027			Loan ID 200341		Fixed		7.000%		8/1/2035			168,689
	24,355			Loan ID 200342		Fixed		5.375%		10/1/2019			21,509
	65,213			Loan ID 200348		Fixed		6.500%		7/1/2038			45,523
	141,394			Loan ID 200349		Fixed		7.000%		1/1/2037			117,222
	61,824			Loan ID 200350		Fixed		7.500%		3/1/2029			47,698
	73,439			Loan ID 200352		Fixed		7.000%		8/1/2030			60,779
	44,579			Loan ID 200355		ARM		7.875%		7/1/2032			33,759
	109,264			Loan ID 200357		Fixed		8.500%		4/1/2027			92,675
	143,329			Loan ID 200358		Fixed		3.000%		4/1/2025			138,924
	30,980			Loan ID 200360		ARM		3.000%		1/1/2025			28,406
	74,148			Loan ID 200361		Fixed		7.500%		1/1/2034			68,957
	111,952			Loan ID 200362		Fixed		5.000%		6/1/2045			69,163

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	149,162			Loan ID 200363		Fixed		6.000%		3/1/2049		$	102,669
	93,593			Loan ID 200364		Fixed		10.000%		11/1/2037			79,224
	71,149			Loan ID 200366		Fixed		6.250%		1/1/2033			58,514
	233,947			Loan ID 200368		Fixed		4.500%		4/1/2036			199,421
	273,918			Loan ID 200369		Fixed		6.000%		4/1/2044			243,366
	62,003			Loan ID 200373		Fixed		7.000%		12/1/2036			41,968
	78,474			Loan ID 200374		ARM		7.000%		5/1/2034			57,322
	436,593			Loan ID 200376		Fixed		2.900%		6/1/2053			386,184
	84,420			Loan ID 200377		ARM		4.500%		10/1/2036			68,140
	235,249			Loan ID 200378		Fixed		5.500%		5/1/2045			202,590
	110,144			Loan ID 200379		Fixed		8.250%		3/1/2039			102,203
	188,731			Loan ID 200380		Fixed		4.220%		4/1/2049			167,125
	290,897			Loan ID 200381		Fixed		4.780%		6/1/2037			271,372
	114,030			Loan ID 200382		Fixed		4.850%		7/1/2037			86,231
	398,027			Loan ID 200383		Fixed		5.030%		12/1/2046			378,714
	301,567			Loan ID 200384		Fixed		5.000%		11/1/2047			225,183
	148,779			Loan ID 200385		Fixed		8.250%		1/1/2040			151,472
	227,746			Loan ID 200386		Fixed		6.000%		3/1/2041			202,906
	77,472			Loan ID 200387		Fixed		4.000%		6/1/2039			66,495
	197,296			Loan ID 200388		Fixed		4.000%		3/1/2051			160,451
	123,447			Loan ID 200389		Fixed		4.820%		8/1/2047			107,496
	204,851			Loan ID 200390		Fixed		4.780%		4/16/2047			169,338
	182,054			Loan ID 200391		Fixed		4.000%		1/13/2035			159,796
	68,853			Loan ID 200392		Fixed		10.000%		6/5/2034			61,955
	107,563			Loan ID 200393		Fixed		5.070%		8/1/2037			93,736
	132,374			Loan ID 200394		Fixed		7.150%		8/1/2037			123,121
	82,003			Loan ID 200395		Fixed		4.860%		4/1/2047			73,177
	74,724			Loan ID 200396		Fixed		10.000%		2/1/2036			71,569
	125,828			Loan ID 200397		ARM		9.375%		9/1/2037			103,846
	141,034			Loan ID 200398		Fixed		4.800%		2/1/2037			118,593
	81,629			Loan ID 200399		Fixed		4.980%		6/1/2037			58,550
	54,613			Loan ID 200403		Fixed		8.300%		10/15/2032			48,404
	59,059			Loan ID 200404		Fixed		8.100%		5/1/2037			54,846
	102,506			Loan ID 200405		Fixed		4.870%		12/1/2035			93,675
	118,320			Loan ID 200406		Fixed		4.875%		10/1/2051			112,912
	239,263			Loan ID 200407		Fixed		6.500%		4/1/2042			225,660
	208,274			Loan ID 200408		Fixed		6.000%		4/1/2039			159,695
	349,937			Loan ID 200409		Fixed		6.000%		2/1/2049			276,539
	108,475			Loan ID 200411		Fixed		8.275%		6/1/2037			104,493
	294,761			Loan ID 200412		Fixed		5.500%		8/1/2040			234,696
	254,639			Loan ID 200413		Fixed		5.150%		11/1/2047			248,809
	86,184			Loan ID 200415		Fixed		6.000%		4/1/2050			79,899
	185,480			Loan ID 200416		Fixed		4.670%		8/1/2053			158,400
	73,320			Loan ID 200417		Fixed		7.000%		5/1/2035			70,933

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	58,870			Loan ID 200418		Fixed		4.000%		6/1/2035		$	50,605
	174,186			Loan ID 200419		Fixed		4.000%		12/19/2035			165,962
	173,894			Loan ID 200420		Fixed		4.225%		4/10/2038			154,381
	78,298			Loan ID 200421		Fixed		7.710%		8/1/2037			69,199
	137,960			Loan ID 200422		Fixed		3.830%		8/1/2053			105,768
	133,810			Loan ID 200423		Fixed		4.500%		6/1/2043			114,422
	121,357			Loan ID 200424		Fixed		4.000%		9/1/2028			107,389
	259,230			Loan ID 200427		Fixed		3.625%		3/1/2043			228,324
	232,968			Loan ID 200430		Fixed		3.625%		7/1/2043			209,527
	194,227			Loan ID 200431		Fixed		4.625%		7/1/2043			175,609
	314,583			Loan ID 200432		Fixed		4.875%		5/1/2043			287,924
	132,762			Loan ID 200433		Fixed		4.250%		8/1/2043			120,427
	164,308			Loan ID 200434		Fixed		5.250%		10/1/2043			153,294
	202,542			Loan ID 200435		Fixed		4.625%		11/1/2052			159,967
	220,704			Loan ID 200436		Fixed		3.750%		4/1/2043			204,181
	337,933			Loan ID 200437		Fixed		5.625%		10/1/2043			315,329
	46,122			Loan ID 200439		Fixed		5.000%		8/1/2041			30,044
	3,526			Loan ID 200440		Fixed		8.000%		6/1/2016			3,513
	198,244			Loan ID 200441		Fixed		6.000%		4/1/2045			197,208
	441,256			Loan ID 200442		Fixed		5.000%		12/1/2043			338,805
	276,499			Loan ID 200443		Fixed		3.000%		7/1/2049			175,585
	265,327			Loan ID 200444		Fixed		4.380%		11/1/2038			150,470
	167,373			Loan ID 200445		Fixed		5.250%		2/1/2039			157,574
	56,464			Loan ID 200447		Fixed		5.875%		11/4/2034			51,696
	78,666			Loan ID 200448		Fixed		5.750%		5/1/2042			48,042
	129,117			Loan ID 200449		Fixed		5.000%		7/1/2041			117,444
	371,469			Loan ID 200451		Fixed		6.250%		7/1/2038			331,504
	139,250			Loan ID 200452		Fixed		2.000%		11/1/2041			93,631
	17,056			Loan ID 200453		Fixed		4.550%		3/1/2026			13,407
	251,703			Loan ID 200456		Fixed		2.000%		11/1/2038			232,299
	215,670			Loan ID 200457		Fixed		5.750%		12/10/2030			165,698
	148,371			Loan ID 200458		Fixed		6.625%		12/1/2038			113,550
	193,450			Loan ID 200460		Fixed		7.000%		7/1/2041			192,621
	391,628			Loan ID 200462		Fixed		6.000%		7/1/2037			222,415
	157,872			Loan ID 200463		Fixed		6.000%		3/1/2037			78,070
	411,571			Loan ID 200464		ARM		8.750%		8/1/2037			249,327
	252,145			Loan ID 200465		Fixed		6.500%		7/1/2037			165,373
	457,436			Loan ID 200466		Fixed		7.000%		7/1/2037			308,122
	331,377			Loan ID 200467		Fixed		5.500%		9/1/2044			217,462
	96,069			Loan ID 200468		Fixed		5.625%		12/1/2044			54,035
	133,568			Loan ID 200469		Fixed		6.500%		7/1/2037			107,952
	364,870			Loan ID 200472		Fixed		4.250%		9/1/2042			325,808
	299,481			Loan ID 200473		Fixed		4.000%		12/1/2042			206,604
	245,434			Loan ID 200474		Fixed		5.750%		11/1/2050			214,279

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	172,372			Loan ID 200475		Fixed		5.450%		7/1/2049		$	133,401
	194,141			Loan ID 200476		Fixed		6.000%		9/1/2050			165,303
	235,009			Loan ID 200477		Fixed		4.125%		12/1/2028			213,768
	137,611			Loan ID 200479		Fixed		3.500%		8/1/2026			123,827
	120,666			Loan ID 200482		Fixed		4.375%		11/1/2028			109,381
	113,353			Loan ID 200483		Fixed		4.375%		11/1/2028			103,546
	77,160			Loan ID 200485		Fixed		4.125%		2/1/2043			65,638
	257,826			Loan ID 200486		Fixed		3.500%		1/1/2043			215,312
	476,755			Loan ID 200487		Fixed		6.000%		3/1/2037			309,376
	163,585			Loan ID 200488		Fixed		4.250%		1/1/2044			142,890
	118,220			Loan ID 200489		Fixed		4.000%		3/1/2043			99,740
	88,144			Loan ID 200490		Fixed		4.000%		11/1/2028			77,918
	211,260			Loan ID 200491		Fixed		5.500%		10/1/2039			186,919
	124,875			Loan ID 200492		Fixed		4.000%		1/1/2043			106,488
	72,240			Loan ID 200493		Fixed		4.500%		12/1/2025			65,470
	284,355			Loan ID 200494		Fixed		4.625%		10/1/2043			256,408
	363,086			Loan ID 200495		Fixed		4.875%		12/1/2041			316,570
	207,071			Loan ID 200496		Fixed		3.875%		2/1/2043			182,631
	334,208			Loan ID 200497		Fixed		3.250%		4/1/2043			278,321
	280,164			Loan ID 200499		Fixed		4.250%		1/1/2043			242,076
	226,414			Loan ID 200500		Fixed		5.875%		2/1/2037			178,980
	155,032			Loan ID 200501		Fixed		7.250%		12/1/2037			134,504
	145,128			Loan ID 200502		Fixed		5.000%		6/1/2049			118,791
	269,435			Loan ID 200503		Fixed		7.500%		8/1/2037			231,076
	396,651			Loan ID 200504		Fixed		3.375%		3/1/2043			330,738
	76,324			Loan ID 200507		Fixed		4.500%		9/1/2042			63,020
	259,773			Loan ID 200508		Fixed		2.000%		10/1/2040			190,859
	211,838			Loan ID 200509		Fixed		2.000%		12/1/2052			135,978
	253,685			Loan ID 200511		Fixed		4.875%		1/1/2044			229,673
	175,182			Loan ID 200513		Fixed		3.000%		10/1/2038			138,583
	342,557			Loan ID 200514		Fixed		3.000%		4/1/2047			259,279
	102,365			Loan ID 200515		Fixed		8.250%		2/1/2039			93,949
	394,619			Loan ID 200516		Fixed		5.250%		1/1/2037			337,846
	106,614			Loan ID 200517		Fixed		8.000%		5/1/2039			95,430
	207,858			Loan ID 200518		Fixed		3.000%		12/1/2050			171,571
	322,664			Loan ID 200519		Fixed		3.000%		11/1/2049			262,789
	68,968			Loan ID 200520		Fixed		3.260%		7/1/2053			53,499
	124,914			Loan ID 200524		Fixed		3.500%		6/1/2043			106,065
	294,154			Loan ID 200525		Fixed		3.250%		12/1/2042			249,885
	162,302			Loan ID 200526		Fixed		3.625%		3/1/2043			137,941
	114,368			Loan ID 200527		Fixed		4.500%		12/1/2043			102,684
	140,397			Loan ID 200528		Fixed		4.375%		2/1/2044			122,825
	406,813			Loan ID 200529		Fixed		4.625%		2/1/2044			370,818
	33,280			Loan ID 200530		Fixed		5.375%		2/1/2044			26,919

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	178,573			Loan ID 200531		Fixed		4.625%		11/1/2043		$	163,757
	116,627			Loan ID 200532		Fixed		3.250%		7/1/2043			98,791
	62,538			Loan ID 200536		Fixed		3.750%		10/1/2042			41,526
	126,543			Loan ID 200537		Fixed		4.500%		3/1/2042			100,941
	95,957			Loan ID 200538		Fixed		4.750%		1/1/2043			85,291
	86,783			Loan ID 200540		Fixed		3.875%		2/1/2043			73,950
	57,622			Loan ID 200543		ARM		7.250%		2/1/2037			31,637
	389,997			Loan ID 200544		Fixed		5.000%		2/1/2044			361,654
	61,527			Loan ID 200545		Fixed		4.375%		2/1/2029			53,364
	124,517			Loan ID 200546		Fixed		5.375%		12/1/2043			109,842
	266,758			Loan ID 200547		Fixed		3.750%		3/1/2043			232,112
	174,436			Loan ID 200548		Fixed		5.250%		2/1/2044			159,845
	171,864			Loan ID 200550		Fixed		3.750%		3/1/2043			146,274
	315,392			Loan ID 200551		Fixed		4.375%		1/1/2044			277,907
	197,900			Loan ID 200552		Fixed		4.500%		1/1/2044			174,474
	288,168			Loan ID 200553		Fixed		4.625%		12/1/2043			264,550
	225,599			Loan ID 200555		Fixed		4.375%		1/1/2044			197,853
	394,733			Loan ID 200556		Fixed		3.625%		12/1/2028			348,249
	110,712			Loan ID 200557		Fixed		9.077%		8/1/2035			91,533
	104,427			Loan ID 200558		Fixed		6.590%		7/1/2037			85,264
	195,807			Loan ID 200559		Fixed		9.500%		4/14/2035			161,808
	124,848			Loan ID 200560		Fixed		5.750%		5/1/2035			102,179
	226,155			Loan ID 200561		Fixed		6.375%		12/1/2036			185,316
	231,689			Loan ID 200563		Fixed		5.125%		1/1/2039			191,671
	142,979			Loan ID 200564		Fixed		4.875%		5/1/2039			117,318
	531,186			Loan ID 200565		Fixed		4.000%		6/1/2037			448,459
	372,632			Loan ID 200566		Fixed		6.500%		7/1/2047			265,134
	136,078			Loan ID 200567		Fixed		3.375%		5/1/2043			114,807
	63,271			Loan ID 200568		Fixed		4.000%		12/1/2043			55,681
	101,619			Loan ID 200569		Fixed		5.125%		2/1/2044			86,953
	440,269			Loan ID 200570		Fixed		3.625%		6/1/2043			394,738
	139,991			Loan ID 200571		Fixed		4.500%		7/1/2043			123,646
	170,089			Loan ID 200572		Fixed		4.375%		3/1/2044			152,469
	98,992			Loan ID 200573		Fixed		3.750%		9/1/2042			73,754
	133,483			Loan ID 200574		Fixed		4.875%		1/1/2044			123,611
	230,709			Loan ID 200577		Fixed		3.125%		4/1/2028			205,481
	188,742			Loan ID 200578		Fixed		4.750%		8/1/2040			174,144
	50,225			Loan ID 200579		Fixed		4.875%		5/1/2042			39,733
	182,091			Loan ID 200580		Fixed		4.125%		11/1/2041			155,444
	39,657			Loan ID 200581		Fixed		4.750%		9/1/2042			33,351
	384,176			Loan ID 200582		Fixed		4.000%		11/1/2042			318,568
	93,856			Loan ID 200583		Fixed		3.625%		9/1/2027			83,675
	360,104			Loan ID 200584		Fixed		3.375%		4/1/2043			308,486
	161,498			Loan ID 200585		Fixed		4.000%		5/1/2042			126,709

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	337,846			Loan ID 200586		Fixed		3.500%		1/1/2043		$	306,208
	259,952			Loan ID 200588		Fixed		3.750%		5/1/2042			240,159
	62,085			Loan ID 200590		Fixed		4.125%		7/1/2042			52,174
	105,462			Loan ID 200591		Fixed		4.875%		3/1/2043			96,224
	100,889			Loan ID 200592		Fixed		4.375%		6/1/2042			87,020
	69,400			Loan ID 200593		Fixed		3.875%		6/1/2042			58,655
	233,903			Loan ID 200594		Fixed		4.250%		4/1/2043			214,611
	40,449			Loan ID 200597		Fixed		5.625%		2/1/2044			33,558
	139,086			Loan ID 200598		Fixed		4.625%		2/1/2044			125,932
	123,540			Loan ID 200599		Fixed		4.125%		2/1/2043			105,427
	204,386			Loan ID 200600		Fixed		4.625%		4/1/2044			183,939
	112,286			Loan ID 200601		Fixed		4.000%		3/1/2043			97,176
	190,233			Loan ID 200602		Fixed		3.750%		3/1/2043			159,060
	73,287			Loan ID 200603		Fixed		4.125%		6/1/2043			60,903
	75,804			Loan ID 200604		Fixed		3.500%		1/1/2043			63,304
	143,534			Loan ID 200605		Fixed		4.875%		11/1/2043			123,276
	131,821			Loan ID 200606		Fixed		3.625%		12/1/2042			112,546
	236,231			Loan ID 200607		Fixed		2.875%		11/1/2027			196,506
	139,530			Loan ID 200608		Fixed		4.125%		11/1/2043			118,719
	62,090			Loan ID 200611		Fixed		4.625%		5/1/2043			52,678
	129,365			Loan ID 200612		Fixed		4.500%		2/1/2043			114,880
	211,773			Loan ID 200613		Fixed		3.369%		1/1/2043			181,068
	106,093			Loan ID 200614		Fixed		5.000%		1/1/2044			93,702
	104,761			Loan ID 200615		Fixed		4.250%		8/1/2043			94,542
	348,718			Loan ID 200616		Fixed		4.875%		2/1/2044			314,467
	93,334			Loan ID 200617		Fixed		4.750%		9/1/2043			57,160
	132,924			Loan ID 200618		Fixed		4.375%		5/1/2042			110,700
	235,909			Loan ID 200620		Fixed		4.250%		10/1/2043			189,904
	136,543			Loan ID 200621		Fixed		3.625%		1/1/2043			123,794
	75,846			Loan ID 200623		Fixed		4.375%		12/1/2042			64,914
	261,712			Loan ID 200624		Fixed		4.125%		4/1/2043			224,551
	120,949			Loan ID 200625		Fixed		4.500%		11/1/2043			90,027
	119,945			Loan ID 200626		Fixed		4.500%		10/1/2043			102,223
	135,189			Loan ID 200627		Fixed		4.250%		10/1/2043			119,179
	87,109			Loan ID 200628		Fixed		3.250%		2/1/2028			77,375
	158,926			Loan ID 200629		Fixed		4.375%		9/1/2043			136,751
	169,544			Loan ID 200630		Fixed		5.250%		9/1/2043			155,018
	300,323			Loan ID 200631		Fixed		3.250%		6/1/2043			262,606
	351,251			Loan ID 200632		Fixed		5.250%		5/1/2044			326,513
	229,751			Loan ID 200633		Fixed		5.125%		5/1/2044			213,971
	238,220			Loan ID 200634		Fixed		4.375%		1/1/2044			211,082
	111,964			Loan ID 200635		Fixed		3.750%		5/1/2029			101,549
	198,510			Loan ID 200636		Fixed		3.750%		2/1/2053			170,541
	193,104			Loan ID 200638		Fixed		3.875%		3/1/2043			164,744

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	150,373			Loan ID 200640		Fixed		5.125%		3/1/2044		$	137,577
	174,564			Loan ID 200641		Fixed		5.250%		4/1/2044			158,225
	148,497			Loan ID 200642		Fixed		5.000%		3/1/2044			127,224
	172,268			Loan ID 200644		Fixed		4.750%		3/1/2044			154,383
	120,412			Loan ID 200645		Fixed		5.000%		4/1/2044			110,560
	120,865			Loan ID 200647		Fixed		4.250%		1/1/2044			108,575
	157,444			Loan ID 200648		Fixed		4.750%		3/1/2044			142,700
	146,011			Loan ID 200649		Fixed		4.375%		3/1/2044			131,786
	132,565			Loan ID 200650		Fixed		4.875%		5/1/2044			119,245
	270,957			Loan ID 200651		Fixed		3.625%		7/1/2043			237,341
	173,061			Loan ID 200652		Fixed		4.125%		5/1/2038			97,680
	358,799			Loan ID 200653		Fixed		4.000%		4/1/2053			254,153
	283,266			Loan ID 200654		Fixed		5.125%		2/1/2041			229,084
	144,469			Loan ID 200655		Fixed		3.375%		5/1/2043			123,018
	157,802			Loan ID 200656		Fixed		6.875%		7/1/2037			101,173
	147,670			Loan ID 200657		Fixed		4.875%		8/1/2051			126,599
	348,525			Loan ID 200658		Fixed		2.000%		1/1/2044			151,982
	212,567			Loan ID 200659		Fixed		4.000%		3/1/2053			188,044
	187,756			Loan ID 200660		Fixed		5.875%		3/1/2038			147,085
	216,574			Loan ID 200662		Fixed		5.000%		3/1/2044			197,809
	70,756			Loan ID 200663		Fixed		4.750%		5/1/2044			64,371
	281,886			Loan ID 200664		Fixed		4.750%		4/1/2044			259,481
	271,793			Loan ID 200665		Fixed		5.299%		12/1/2046			126,955
	220,175			Loan ID 200666		Fixed		5.890%		8/26/2035			111,154
	311,249			Loan ID 200668		Fixed		3.625%		4/1/2043			269,069
	158,869			Loan ID 200669		Fixed		5.250%		4/1/2044			144,132
	67,813			Loan ID 200670		Fixed		4.375%		2/1/2029			54,669
	243,069			Loan ID 200671		Fixed		4.625%		8/1/2043			215,056
	162,429			Loan ID 200672		Fixed		3.750%		7/1/2043			137,945
	317,339			Loan ID 200674		Fixed		4.500%		5/1/2044			266,479
	313,067			Loan ID 200675		Fixed		5.125%		4/1/2044			283,214
	132,874			Loan ID 200677		Fixed		3.625%		5/1/2028			117,969
	477,141			Loan ID 200678		Fixed		4.375%		2/1/2044			436,107
	260,203			Loan ID 200679		Fixed		5.000%		4/1/2044			206,646
	65,137			Loan ID 200680		Fixed		5.375%		3/1/2044			50,472
	194,867			Loan ID 200682		Fixed		4.875%		5/1/2044			165,858
	217,765			Loan ID 200683		Fixed		4.500%		4/1/2044			195,215
	129,320			Loan ID 200684		Fixed		4.875%		4/1/2044			117,508
	235,443			Loan ID 200685		Fixed		4.875%		5/1/2044			200,737
	153,010			Loan ID 200688		Fixed		4.250%		3/1/2053			104,275
	138,037			Loan ID 200689		Fixed		4.375%		12/1/2043			102,580
	232,228			Loan ID 200690		Fixed		4.250%		4/1/2044			204,270
	295,275			Loan ID 200691		Fixed		4.500%		5/1/2044			251,150
	249,679			Loan ID 200692		Fixed		4.625%		7/1/2044			224,423

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	110,119			Loan ID 200694		Fixed		4.500%		9/1/2043		$	87,435
	136,359			Loan ID 200695		Fixed		5.000%		12/1/2043			111,160
	50,092			Loan ID 200696		Fixed		3.750%		10/1/2042			41,784
	139,304			Loan ID 200697		Fixed		4.500%		1/1/2044			111,515
	191,067			Loan ID 200699		Fixed		4.125%		7/1/2044			167,911
	97,178			Loan ID 200700		Fixed		4.250%		2/1/2044			82,783
	171,700			Loan ID 200701		Fixed		4.750%		6/1/2044			146,777
	156,682			Loan ID 200702		Fixed		4.750%		5/1/2044			133,641
	99,709			Loan ID 200704		Fixed		4.375%		3/1/2043			88,598
	137,366			Loan ID 200705		Fixed		4.625%		4/1/2044			120,974
	105,409			Loan ID 200706		Fixed		4.990%		6/1/2044			95,154
	102,593			Loan ID 200707		Fixed		4.875%		2/1/2044			92,516
	136,640			Loan ID 200708		Fixed		4.875%		2/1/2044			122,687
	52,689			Loan ID 200709		Fixed		4.375%		4/1/2043			44,713
	118,449			Loan ID 200710		Fixed		4.500%		7/1/2044			104,161
	119,532			Loan ID 200711		Fixed		3.750%		7/1/2043			95,945
	222,286			Loan ID 200712		Fixed		3.875%		2/1/2044			196,380
	100,728			Loan ID 200713		Fixed		4.250%		12/1/2043			90,486
	619,297			Loan ID 200714		Fixed		3.175%		11/1/2036			500,702
	210,969			Loan ID 200716		ARM		3.198%		8/1/2037			146,263
	145,816			Loan ID 200720		ARM		3.250%		4/1/2042			124,486
	188,597			Loan ID 200721		Fixed		3.000%		8/1/2037			132,952
	191,871			Loan ID 200725		Fixed		7.000%		7/1/2037			139,240
	151,305			Loan ID 200726		Fixed		4.125%		9/1/2037			94,978
	182,102			Loan ID 200727		Fixed		2.625%		7/1/2037			154,289
	351,276			Loan ID 200729		ARM		3.375%		11/1/2037			235,806
	446,642			Loan ID 200730		ARM		2.750%		9/1/2036			377,058
	203,776			Loan ID 200732		Fixed		3.125%		9/1/2027			177,895
	238,683			Loan ID 200733		Fixed		3.750%		12/1/2042			204,668
	250,782			Loan ID 200734		ARM		3.375%		4/1/2044			212,376
	104,954			Loan ID 200735		Fixed		4.500%		6/1/2044			94,007
	148,677			Loan ID 200736		Fixed		4.750%		5/1/2044			120,158
	146,141			Loan ID 200737		Fixed		4.750%		5/1/2044			87,856
	605,046			Loan ID 200738		Fixed		4.125%		6/1/2044			546,767
	362,313			Loan ID 200739		Fixed		4.625%		8/1/2044			317,326
	135,025			Loan ID 200740		Fixed		4.875%		6/1/2044			116,724
	111,376			Loan ID 200741		Fixed		4.250%		6/1/2044			86,391
	182,595			Loan ID 200742		Fixed		4.250%		4/1/2043			152,524
	198,713			Loan ID 200744		Fixed		3.625%		6/1/2043			169,132
	127,220			Loan ID 200745		Fixed		3.250%		6/1/2043			107,104
	378,148			Loan ID 200746		Fixed		5.250%		6/1/2044			313,160
	342,912			Loan ID 200747		Fixed		4.125%		5/1/2043			296,672
	463,484			Loan ID 200748		Fixed		4.750%		12/1/2043			425,983
	157,974			Loan ID 200749		Fixed		4.750%		9/1/2043			144,453

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	251,156			Loan ID 200750		Fixed		4.750%		5/1/2044		$	234,052
	169,393			Loan ID 200751		Fixed		3.750%		7/1/2029			153,888
	171,903			Loan ID 200752		Fixed		4.750%		10/1/2043			131,532
	61,517			Loan ID 200753		Fixed		5.250%		5/1/2044			49,247
	229,995			Loan ID 200754		Fixed		4.750%		8/1/2044			211,784
	58,012			Loan ID 200755		Fixed		4.250%		6/1/2043			46,223
	195,351			Loan ID 200756		Fixed		4.875%		11/1/2043			171,987
	131,536			Loan ID 200759		Fixed		3.750%		6/1/2043			115,264
	179,980			Loan ID 200760		Fixed		3.750%		6/1/2043			154,021
	112,843			Loan ID 200761		Fixed		4.625%		1/1/2044			75,661
	312,259			Loan ID 200762		Fixed		3.875%		5/1/2042			278,649
	158,940			Loan ID 200763		Fixed		4.250%		11/1/2043			144,490
	319,091			Loan ID 200764		Fixed		3.875%		6/1/2043			276,880
	210,713			Loan ID 200765		Fixed		4.875%		11/1/2043			182,669
	512,671			Loan ID 200766		Fixed		3.625%		12/1/2042			453,830
	520,446			Loan ID 200768		Fixed		4.000%		6/1/2043			446,341
	140,998			Loan ID 200770		Fixed		4.000%		5/1/2043			124,892
	181,921			Loan ID 200771		Fixed		4.500%		4/1/2043			145,396
	256,266			Loan ID 200772		Fixed		3.750%		3/1/2043			226,859
	60,038			Loan ID 200773		Fixed		3.750%		10/1/2043			40,091
	213,501			Loan ID 200774		Fixed		3.875%		7/1/2043			187,801
	45,986			Loan ID 200775		Fixed		4.250%		4/1/2043			39,483
	84,008			Loan ID 200776		Fixed		4.250%		3/1/2044			71,177
	55,119			Loan ID 200777		Fixed		4.750%		6/1/2044			47,119
	110,180			Loan ID 200778		Fixed		4.625%		6/1/2044			102,008
	147,077			Loan ID 200779		Fixed		4.625%		8/1/2044			132,968
	38,031			Loan ID 200780		Fixed		4.250%		8/1/2044			32,244
	172,239			Loan ID 200781		Fixed		4.625%		9/1/2044			159,017
	144,248			Loan ID 200783		Fixed		4.750%		9/1/2044			133,360
	409,815			Loan ID 200784		Fixed		4.125%		9/1/2044			367,383
	118,061			Loan ID 200785		Fixed		4.500%		8/1/2044			107,009
	233,803			Loan ID 200786		Fixed		4.625%		7/1/2044			214,134
	44,383			Loan ID 200787		Fixed		4.750%		9/1/2044			36,469
	204,586			Loan ID 200788		Fixed		3.625%		12/1/2028			181,753
	134,617			Loan ID 200789		Fixed		3.750%		9/1/2044			116,663
	155,974			Loan ID 200790		Fixed		4.250%		8/1/2044			139,194
	208,938			Loan ID 200791		Fixed		4.875%		6/1/2044			192,707
	373,495			Loan ID 200792		Fixed		3.375%		1/1/2043			286,223
	375,643			Loan ID 200793		Fixed		2.000%		10/1/2051			296,680
	234,875			Loan ID 200794		Fixed		3.000%		4/1/2050			141,128
	97,068			Loan ID 200795		Fixed		6.750%		8/1/2036			65,577
	73,232			Loan ID 200796		Fixed		2.170%		12/1/2053			46,619
	426,973			Loan ID 200797		Fixed		3.000%		6/1/2052			285,982
	60,531			Loan ID 200799		Fixed		3.000%		2/5/2053			50,544

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	62,684			Loan ID 200800		Fixed		4.000%		1/1/2053		$	37,377
	216,803			Loan ID 200802		Fixed		6.000%		1/1/2042			118,217
	365,329			Loan ID 200803		Fixed		2.250%		11/1/2050			315,153
	76,745			Loan ID 200804		Fixed		2.000%		6/1/2050			42,195
	163,015			Loan ID 200805		Fixed		3.000%		7/1/2050			144,731
	159,706			Loan ID 200806		Fixed		5.000%		8/1/2049			99,736
	302,504			Loan ID 200807		Fixed		2.460%		7/1/2047			250,201
	65,687			Loan ID 200808		Fixed		2.000%		11/1/2050			53,486
	118,101			Loan ID 200809		Fixed		3.000%		4/1/2050			103,647
	145,277			Loan ID 200810		Fixed		3.000%		1/1/2050			126,150
	118,382			Loan ID 200811		Fixed		3.000%		4/1/2050			107,255
	279,266			Loan ID 200813		Fixed		2.000%		12/1/2049			227,382
	246,088			Loan ID 200814		Fixed		8.250%		7/1/2039			201,970
	317,310			Loan ID 200815		Fixed		2.000%		3/1/2053			260,679
	291,225			Loan ID 200817		Fixed		3.000%		1/1/2050			174,089
	55,657			Loan ID 200818		Fixed		3.490%		8/1/2051			37,308
	265,339			Loan ID 200819		Fixed		2.000%		9/1/2053			206,025
	139,457			Loan ID 200820		Fixed		4.000%		7/1/2044			115,126
	214,993			Loan ID 200821		Fixed		4.250%		8/1/2044			188,751
	328,048			Loan ID 200822		Fixed		4.750%		1/1/2042			295,676
	84,088			Loan ID 200823		Fixed		4.250%		9/1/2044			67,220
	227,911			Loan ID 200824		Fixed		4.250%		8/1/2044			200,651
	109,330			Loan ID 200826		Fixed		4.375%		9/1/2044			97,565
	192,125			Loan ID 200827		Fixed		3.875%		6/1/2044			169,707
	241,533			Loan ID 200828		Fixed		4.375%		7/1/2044			210,390
	266,435			Loan ID 200829		Fixed		4.375%		7/1/2043			241,810
	217,042			Loan ID 200830		ARM		2.875%		7/1/2044			186,818
	88,058			Loan ID 200831		Fixed		4.250%		10/1/2044			78,651
	351,686			Loan ID 200832		Fixed		4.250%		10/1/2044			319,639
	368,207			Loan ID 200833		Fixed		4.250%		1/1/2043			332,197
	165,683			Loan ID 200834		Fixed		4.125%		7/1/2043			146,760
	338,865			Loan ID 200835		Fixed		5.000%		8/1/2043			299,313
	340,607			Loan ID 200837		Fixed		4.625%		8/1/2044			315,615
	188,985			Loan ID 200838		Fixed		3.750%		8/1/2044			168,373
	242,387			Loan ID 200839		Fixed		5.000%		5/1/2044			223,401
	187,894			Loan ID 200842		Fixed		4.250%		8/1/2044			168,952
	369,029			Loan ID 200843		Fixed		4.750%		10/1/2043			335,977
	313,746			Loan ID 200844		Fixed		4.500%		7/1/2043			278,892
	210,848			Loan ID 200846		Fixed		4.375%		11/1/2043			162,973
	187,090			Loan ID 200847		Fixed		4.750%		10/1/2044			172,814
	182,524			Loan ID 200848		Fixed		2.000%		6/1/2051			133,300
	227,134			Loan ID 200849		Fixed		5.014%		11/1/2047			141,132
	148,445			Loan ID 200850		Fixed		2.000%		6/1/2051			78,575
	189,990			Loan ID 200851		Fixed		5.000%		7/1/2051			143,062

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	632,296			Loan ID 200852		Fixed		2.868%		2/1/2053		$	464,884
	117,133			Loan ID 200853		Fixed		3.818%		4/1/2037			88,170
	107,644			Loan ID 200854		Fixed		2.500%		4/1/2053			86,547
	225,162			Loan ID 200855		ARM		3.548%		7/1/2037			165,566
	221,638			Loan ID 200856		Fixed		4.000%		6/1/2042			120,581
	244,616			Loan ID 200857		Fixed		2.125%		7/1/2040			141,756
	273,671			Loan ID 200858		Fixed		2.000%		1/1/2053			200,391
	247,242			Loan ID 200859		Fixed		2.170%		12/1/2052			155,234
	172,012			Loan ID 200860		Fixed		2.000%		3/1/2052			91,838
	438,188			Loan ID 200861		Fixed		2.000%		6/1/2054			358,254
	158,222			Loan ID 200862		Fixed		2.748%		8/1/2050			116,206
	258,745			Loan ID 200863		Fixed		2.000%		7/1/2052			211,117
	276,263			Loan ID 200864		Fixed		2.000%		1/1/2037			143,918
	214,139			Loan ID 200865		Fixed		3.060%		11/1/2053			156,843
	274,818			Loan ID 200866		Fixed		2.000%		5/1/2053			225,602
	116,834			Loan ID 200867		Fixed		2.370%		9/1/2053			85,221
	317,734			Loan ID 200869		ARM		3.740%		4/1/2037			212,152
	2,762,526			Loan ID 200871		Fixed		2.000%		8/1/2053			1,738,707
	395,917			Loan ID 200872		Fixed		3.200%		8/1/2050			288,370
	203,640			Loan ID 200873		Fixed		3.525%		11/1/2053			149,515
	216,152			Loan ID 200874		Fixed		2.000%		11/1/2047			130,719
	584,278			Loan ID 200875		Fixed		2.000%		5/1/2054			421,740
	203,294			Loan ID 200876		ARM		2.625%		5/1/2035			169,817
	402,408			Loan ID 200877		Fixed		4.750%		9/1/2042			293,203
	139,796			Loan ID 200878		Fixed		3.000%		7/1/2050			105,291
	196,893			Loan ID 200880		Fixed		4.250%		6/1/2043			167,942
	184,018			Loan ID 200882		Fixed		5.125%		9/1/2043			167,191
	91,899			Loan ID 200883		Fixed		3.375%		5/1/2028			81,421
	177,913			Loan ID 200885		Fixed		4.875%		10/1/2044			157,414
	99,877			Loan ID 200886		Fixed		4.250%		10/1/2044			87,009
	259,312			Loan ID 200887		Fixed		4.750%		9/1/2044			237,766
	246,815			Loan ID 200888		Fixed		4.500%		9/1/2044			213,174
	138,395			Loan ID 200890		Fixed		4.375%		11/1/2044			118,564
	213,417			Loan ID 200891		Fixed		4.250%		10/1/2044			182,465
	262,954			Loan ID 200892		Fixed		3.750%		9/1/2043			229,788
	229,277			Loan ID 200893		Fixed		5.000%		11/1/2043			202,074
	101,990			Loan ID 200894		Fixed		5.000%		10/1/2043			90,570
	232,244			Loan ID 200895		Fixed		3.875%		11/1/2043			197,929
	200,393			Loan ID 200897		Fixed		4.750%		10/1/2044			165,944
	226,445			Loan ID 200898		Fixed		4.250%		10/1/2043			131,720
	119,634			Loan ID 200899		Fixed		4.625%		1/1/2044			67,587
	386,834			Loan ID 200900		Fixed		4.375%		9/1/2044			336,968
	680,779			Loan ID 200902		Fixed		4.250%		9/1/2044			612,580
	257,627			Loan ID 200904		Fixed		5.125%		9/1/2044			225,518

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	411,253			Loan ID 200905		Fixed		5.375%		9/1/2044		$	369,153
	327,910			Loan ID 200906		Fixed		4.875%		2/1/2035			289,405
	355,573			Loan ID 200907		ARM		3.250%		8/1/2047			269,644
	108,190			Loan ID 200908		Fixed		4.000%		6/1/2049			91,315
	118,104			Loan ID 200909		Fixed		4.870%		3/1/2046			103,309
	207,964			Loan ID 200910		Fixed		3.300%		4/1/2053			164,616
	150,092			Loan ID 200911		Fixed		3.380%		9/1/2053			126,010
	723,314			Loan ID 200912		Fixed		3.500%		3/1/2037			653,678
	61,114			Loan ID 200913		Fixed		4.250%		5/1/2047			44,372
	156,672			Loan ID 200914		Fixed		2.875%		12/1/2047			93,501
	144,386			Loan ID 200915		Fixed		2.990%		9/1/2053			96,775
	93,494			Loan ID 200916		Fixed		4.000%		10/1/2037			77,466
	163,070			Loan ID 200917		Fixed		4.875%		1/1/2051			140,530
	522,594			Loan ID 200918		Fixed		3.875%		10/1/2035			391,366
	564,857			Loan ID 200919		Fixed		3.000%		8/1/2045			470,890
	100,781			Loan ID 200921		ARM		3.250%		7/1/2051			84,225
	433,456			Loan ID 200922		Fixed		3.340%		9/1/2053			361,347
	451,905			Loan ID 200923		Fixed		2.750%		12/1/2036			372,901
	518,503			Loan ID 200924		Fixed		5.000%		9/1/2051			486,573
	462,691			Loan ID 200925		Fixed		4.000%		4/1/2055			410,330
	346,125			Loan ID 200927		Fixed		3.000%		8/1/2038			292,791
	128,333			Loan ID 200928		Fixed		4.800%		12/1/2036			109,935
	167,548			Loan ID 200929		Fixed		4.625%		1/1/2043			147,604
	188,513			Loan ID 200930		Fixed		2.000%		12/1/2050			164,897
	315,529			Loan ID 200931		Fixed		4.250%		12/1/2052			276,380
	314,699			Loan ID 200933		Fixed		4.250%		3/1/2043			276,597
	119,649			Loan ID 200934		Fixed		3.810%		1/1/2043			96,043
	186,140			Loan ID 200935		Fixed		3.875%		4/1/2043			155,733
	204,058			Loan ID 200936		Fixed		4.000%		5/1/2042			170,135
	108,066			Loan ID 200937		Fixed		5.500%		5/1/2041			79,807
	180,296			Loan ID 200938		Fixed		4.125%		4/1/2043			149,936
	127,085			Loan ID 200939		Fixed		4.170%		5/1/2042			106,094
	208,636			Loan ID 200940		Fixed		3.250%		2/1/2043			173,915
	121,442			Loan ID 200941		Fixed		3.780%		1/1/2043			103,406
	291,164			Loan ID 200942		Fixed		4.000%		4/1/2043			249,328
	124,192			Loan ID 200943		Fixed		4.875%		11/1/2043			110,048
	108,405			Loan ID 200944		Fixed		4.500%		2/1/2044			96,747
	146,010			Loan ID 200945		Fixed		5.125%		4/1/2044			127,009
	300,702			Loan ID 200947		Fixed		4.000%		2/1/2043			257,764
	133,799			Loan ID 200948		Fixed		4.625%		12/1/2042			117,265
	293,641			Loan ID 200949		Fixed		3.875%		4/1/2043			257,608
	109,678			Loan ID 200950		Fixed		4.750%		12/1/2042			95,335
	189,928			Loan ID 200952		Fixed		3.875%		1/1/2043			157,787
	123,230			Loan ID 200953		Fixed		3.750%		12/1/2042			104,866

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	395,463			Loan ID 200954		Fixed		3.625%		1/1/2043		$	336,486
	347,430			Loan ID 200955		Fixed		3.250%		5/1/2043			295,241
	268,733			Loan ID 200956		Fixed		5.000%		8/1/2051			221,496
	174,724			Loan ID 200957		Fixed		3.875%		6/1/2043			149,355
	100,672			Loan ID 200958		Fixed		3.875%		6/1/2043			85,789
	437,342			Loan ID 200959		Fixed		4.000%		11/1/2042			374,940
	392,877			Loan ID 200960		Fixed		3.500%		1/1/2043			328,095
	186,445			Loan ID 200961		Fixed		4.750%		6/1/2043			164,113
	217,656			Loan ID 200962		Fixed		4.250%		10/1/2044			184,661
	122,625			Loan ID 200963		Fixed		4.750%		9/1/2044			106,993
	369,176			Loan ID 200964		Fixed		3.750%		7/1/2043			315,054
	214,176			Loan ID 200965		Fixed		4.125%		11/1/2044			180,416
	151,736			Loan ID 200966		Fixed		4.875%		7/1/2044			128,638
	98,426			Loan ID 200968		Fixed		4.250%		11/1/2044			72,665
	375,957			Loan ID 200969		Fixed		4.875%		8/1/2043			337,824
	137,792			Loan ID 200972		Fixed		4.750%		2/1/2044			123,910
	159,501			Loan ID 200974		Fixed		4.250%		10/1/2044			140,362
	59,162			Loan ID 200975		Fixed		4.750%		12/1/2044			52,798
	207,756			Loan ID 200976		Fixed		4.500%		12/1/2044			176,423
	363,903			Loan ID 200977		Fixed		4.875%		9/1/2044			323,308
	125,304			Loan ID 200978		Fixed		4.625%		11/1/2044			110,249
	184,399			Loan ID 200980		Fixed		4.250%		11/1/2044			163,663
	320,185			Loan ID 200981		Fixed		4.625%		11/1/2044			289,828
	148,147			Loan ID 200982		Fixed		4.375%		11/1/2044			92,660
	228,664			Loan ID 200983		Fixed		4.375%		8/1/2044			196,788
	158,774			Loan ID 200984		Fixed		5.000%		10/1/2043			137,564
	268,852			Loan ID 200985		Fixed		4.250%		12/1/2044			240,364
	159,592			Loan ID 200986		Fixed		4.250%		12/1/2044			135,352
	118,427			Loan ID 200987		Fixed		4.625%		10/1/2044			100,778
	234,825			Loan ID 200989		Fixed		3.750%		6/1/2029			185,811
	297,630			Loan ID 200992		Fixed		4.125%		5/1/2043			254,847
	175,872			Loan ID 200993		Fixed		2.004%		7/15/2049			123,923
	207,326			Loan ID 200994		Fixed		4.125%		5/1/2053			173,028
	202,071			Loan ID 200995		Fixed		2.750%		5/1/2047			157,566
	58,930			Loan ID 200996		Fixed		2.500%		8/1/2048			38,387
	101,583			Loan ID 200997		Fixed		2.000%		3/1/2051			76,349
	373,312			Loan ID 200998		Fixed		3.250%		12/1/2050			291,427
	101,322			Loan ID 200999		Fixed		4.250%		4/1/2044			81,573
	76,834			Loan ID 201000		Fixed		5.125%		2/1/2039			68,425
	104,439			Loan ID 201001		Fixed		7.413%		9/1/2037			93,191
	37,473			Loan ID 201002 **		Fixed		0.000%		10/1/2024			32,278
	38,161			Loan ID 201003 **		Fixed		0.000%		12/1/2024			32,870
	136,650			Loan ID 201005		Fixed		4.750%		7/1/2041			118,529
	45,109			Loan ID 201006		Fixed		6.875%		3/1/2038			38,942

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	83,521			Loan ID 201007		Fixed		7.125%		4/1/2037		$	71,471
	80,319			Loan ID 201008		Fixed		7.125%		10/1/2038			72,075
	77,313			Loan ID 201009 **		Fixed		0.000%		4/1/2033			66,754
	84,165			Loan ID 201010		Fixed		5.500%		4/1/2039			74,963
	51,293			Loan ID 201011 **		Fixed		0.000%		2/1/2023			44,348
	47,947			Loan ID 201012		Fixed		7.500%		12/1/2038			42,695
	58,275			Loan ID 201013		Fixed		7.500%		12/1/2038			51,891
	100,591			Loan ID 201014 **		Fixed		0.000%		2/1/2033			86,704
	21,072			Loan ID 201015 **		Fixed		0.000%		3/29/2021			18,169
	108,532			Loan ID 201016		Fixed		6.500%		2/1/2036			93,989
	29,953			Loan ID 201017 **		Fixed		0.000%		4/1/2032			25,801
	318,683			Loan ID 201018		Fixed		6.750%		6/1/2037			286,207
	104,650			Loan ID 201019		ARM		2.875%		2/1/2037			86,071
	104,970			Loan ID 201020 **		Fixed		0.000%		10/1/2034			90,587
	103,754			Loan ID 201021		Fixed		6.870%		8/1/2047			92,542
	84,566			Loan ID 201022		ARM		2.625%		5/1/2037			73,473
	149,292			Loan ID 201023		Fixed		6.450%		2/1/2036			99,188
	101,604			Loan ID 201024		Fixed		9.000%		3/1/2037			89,065
	193,930			Loan ID 201025		ARM		2.875%		1/1/2042			166,171
	84,093			Loan ID 201026		Fixed		7.750%		12/1/2035			64,772
	108,385			Loan ID 201027		Fixed		9.538%		3/1/2037			95,910
	174,680			Loan ID 201028		Fixed		4.625%		4/1/2044			148,014
	107,622			Loan ID 201030		Fixed		5.000%		7/1/2042			88,000
	196,541			Loan ID 201031		Fixed		4.375%		12/1/2044			166,672
	146,713			Loan ID 201032		Fixed		4.500%		11/1/2044			117,197
	297,146			Loan ID 201033		Fixed		4.125%		12/1/2044			251,727
	106,970			Loan ID 201035		Fixed		4.375%		9/1/2044			70,687
	102,007			Loan ID 201036		Fixed		4.375%		12/1/2044			86,494
	71,343			Loan ID 201037		Fixed		8.250%		7/1/2039			61,739
	114,189			Loan ID 201038		Fixed		8.250%		5/1/2039			99,297
	462,886			Loan ID 201039		ARM		4.500%		10/1/2045			300,119
	286,731			Loan ID 201040		Fixed		2.000%		11/1/2045			201,995
	93,584			Loan ID 201041		Fixed		3.750%		11/1/2052			79,963
	118,258			Loan ID 201043		Fixed		4.000%		4/1/2039			112,281
	192,019			Loan ID 201044		Fixed		4.870%		3/29/2037			167,546
	116,320			Loan ID 201045		Fixed		2.000%		7/1/2037			95,029
	273,359			Loan ID 201046		Fixed		2.000%		4/1/2053			203,573
	112,005			Loan ID 201047		Fixed		2.000%		4/1/2053			82,133
	178,833			Loan ID 201048		Fixed		2.000%		4/1/2052			150,397
	498,821			Loan ID 201049		Fixed		2.000%		4/1/2052			321,624
	657,869			Loan ID 201050		Fixed		2.000%		8/1/2053			511,031
	279,523			Loan ID 201051		Fixed		3.174%		9/1/2053			212,527
	132,135			Loan ID 201052		Fixed		2.000%		4/1/2053			85,193
	67,221			Loan ID 201053		Fixed		3.860%		7/1/2053			56,660

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	220,767			Loan ID 201054		Fixed		2.400%		5/17/2050		$	179,840
	614,944			Loan ID 201056		Fixed		2.000%		7/1/2054			504,092
	174,485			Loan ID 201057		Fixed		2.000%		1/1/2050			132,062
	144,719			Loan ID 201058		Fixed		2.500%		8/1/2037			118,592
	139,372			Loan ID 201059		Fixed		2.000%		4/1/2053			104,913
	121,804			Loan ID 201060		ARM		2.625%		7/1/2035			101,811
	89,246			Loan ID 201061		Fixed		3.000%		3/1/2050			74,955
	123,993			Loan ID 201062		Fixed		3.100%		4/1/2047			101,932
	129,027			Loan ID 201063		Fixed		4.000%		9/1/2047			99,443
	52,511			Loan ID 201064		Fixed		2.000%		12/1/2052			37,966
	221,448			Loan ID 201065		Fixed		3.000%		7/1/2037			151,678
	239,368			Loan ID 201066		Fixed		4.250%		12/1/2046			205,560
	451,881			Loan ID 201067		Fixed		4.750%		1/1/2044			389,640
	308,927			Loan ID 201068		Fixed		5.250%		5/1/2044			273,721
	72,776			Loan ID 201069		Fixed		4.625%		12/1/2044			65,926
	641,003			Loan ID 201070		Fixed		4.250%		2/1/2045			555,787
	186,518			Loan ID 201071		Fixed		4.625%		11/1/2044			154,739
	130,176			Loan ID 201072		Fixed		3.500%		3/1/2028			97,403
	57,745			Loan ID 201073		Fixed		3.125%		4/1/2023			45,675
	99,892			Loan ID 201075		Fixed		4.375%		10/1/2044			85,816
	132,477			Loan ID 201076		Fixed		3.500%		12/1/2042			106,532
	140,834			Loan ID 201077		Fixed		3.625%		7/1/2044			111,596
	111,192			Loan ID 201078		Fixed		3.990%		7/1/2042			89,522
	274,726			Loan ID 201081		ARM		3.000%		10/1/2044			226,345
	128,449			Loan ID 201082		Fixed		3.875%		12/1/2044			111,482
	375,172			Loan ID 201083		Fixed		5.375%		2/1/2044			314,282
	235,263			Loan ID 201084		Fixed		5.000%		8/1/2038			197,112
	152,557			Loan ID 201086		Fixed		4.625%		11/1/2044			136,660
	282,338			Loan ID 201089		Fixed		4.000%		8/1/2044			241,882
	261,866			Loan ID 201090		Fixed		3.625%		11/1/2044			224,878
	165,284			Loan ID 201091		Fixed		4.125%		1/1/2045			144,962
	231,195			Loan ID 201092		Fixed		5.250%		9/1/2043			181,015
	143,186			Loan ID 201093		Fixed		4.125%		9/1/2043			87,968
	157,196			Loan ID 201094		Fixed		4.550%		3/1/2044			129,975
	244,335			Loan ID 201095		Fixed		3.875%		8/1/2044			212,226
	245,302			Loan ID 201097		Fixed		3.990%		1/1/2045			207,716
	159,646			Loan ID 201099		Fixed		2.875%		3/1/2030			139,077
	103,306			Loan ID 201100		Fixed		4.125%		7/1/2043			86,502
	362,941			Loan ID 201101		Fixed		4.625%		3/1/2045			326,022
	162,655			Loan ID 201103		ARM		2.875%		5/1/2044			132,459
	165,788			Loan ID 201104		Fixed		4.375%		4/1/2045			140,208
	305,895			Loan ID 201105		Fixed		4.250%		11/1/2044			268,121
	84,165			Loan ID 201107		Fixed		5.150%		2/1/2036			73,443

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	155,748			Loan ID 201108		Fixed		4.750%		2/1/2054		$	138,871
	561,392			Loan ID 201110		ARM		3.375%		4/1/2037			486,928
	163,992			Loan ID 201111		Fixed		3.000%		4/1/2050			143,102
	261,113			Loan ID 201112		Fixed		3.750%		8/1/2037			228,393
	79,705			Loan ID 201113		Fixed		5.750%		12/1/2052			69,784
	111,335			Loan ID 201114		Fixed		8.087%		5/1/2054			96,911
	520,934			Loan ID 201115		Fixed		4.000%		2/1/2051			433,309
	82,835			Loan ID 201116		Fixed		4.250%		10/1/2052			66,281
	132,984			Loan ID 201117		Fixed		4.500%		11/1/2037			108,514
	219,497			Loan ID 201118		Fixed		2.000%		11/1/2054			179,806
	136,747			Loan ID 201119		Fixed		4.000%		5/1/2034			118,974
	56,269			Loan ID 201120		Fixed		4.500%		4/1/2037			48,804
	97,305			Loan ID 201121		Fixed		2.000%		11/1/2048			72,947
	87,847			Loan ID 201122		Fixed		4.750%		11/1/2048			76,578
	177,471			Loan ID 201123		Fixed		2.000%		7/1/2054			135,973
	259,620			Loan ID 201124		Fixed		4.000%		4/1/2040			237,597
	435,652			Loan ID 201126		Fixed		6.500%		4/1/2049			367,392
	85,509			Loan ID 201127		ARM		2.625%		4/1/2037			68,186
	283,258			Loan ID 201128		Fixed		2.000%		10/1/2036			232,761
	162,384			Loan ID 201129		Fixed		4.875%		6/1/2051			133,575
	126,455			Loan ID 201130		Fixed		4.850%		2/1/2038			110,896
	117,918			Loan ID 201131		Fixed		5.353%		5/1/2053			105,261
	175,084			Loan ID 201132		Fixed		2.000%		7/1/2037			143,036
	156,187			Loan ID 201133		Fixed		2.000%		6/1/2051			127,598
	203,449			Loan ID 201134		Fixed		2.000%		10/1/2053			168,030
	545,401			Loan ID 201135		Fixed		2.000%		6/1/2051			415,035
	536,120			Loan ID 201136		Fixed		2.000%		2/1/2036			443,092
	320,129			Loan ID 201137		Fixed		2.000%		12/1/2052			265,419
	61,734			Loan ID 201138		Fixed		4.250%		3/1/2034			54,152
	167,545			Loan ID 201139		Fixed		2.000%		11/1/2053			132,643
	164,154			Loan ID 201140		Fixed		4.870%		1/1/2038			135,380
	146,959			Loan ID 201141		Fixed		2.000%		5/1/2052			110,745
	456,983			Loan ID 201142		Fixed		2.000%		9/1/2035			381,980
	93,893			Loan ID 201143		Fixed		2.000%		11/1/2037			76,476
	105,306			Loan ID 201144		Fixed		2.000%		9/1/2045			86,735
	233,433			Loan ID 201145		Fixed		4.000%		4/1/2051			202,410
	133,390			Loan ID 201146		Fixed		4.875%		8/1/2054			117,049
	112,450			Loan ID 201147		Fixed		2.000%		11/1/2051			94,503
	100,759			Loan ID 201148		Fixed		3.950%		10/1/2042			88,253
	281,826			Loan ID 201149		Fixed		5.719%		6/1/2051			245,716
	127,035			Loan ID 201150		Fixed		2.000%		7/1/2037			105,136
	429,687			Loan ID 201151		Fixed		5.000%		5/1/2049			376,546
	487,683			Loan ID 201152		Fixed		2.000%		8/1/2050			396,542
	253,839			Loan ID 201153		Fixed		3.000%		6/1/2050			229,702

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	64,611			Loan ID 201154		ARM		4.500%		11/1/2041		$	56,311
	98,211			Loan ID 201155		Fixed		2.000%		11/1/2053			79,590
	65,914			Loan ID 201156		Fixed		3.000%		4/1/2050			54,248
	295,386			Loan ID 201157		Fixed		4.000%		3/1/2055			258,056
	303,020			Loan ID 201158		Fixed		2.000%		8/1/2052			252,283
	72,992			Loan ID 201159		Fixed		2.000%		6/1/2039			52,761
	206,540			Loan ID 201160		Fixed		3.000%		10/1/2049			171,884
	301,642			Loan ID 201161		Fixed		2.000%		6/1/2054			233,173
	146,516			Loan ID 201162		Fixed		2.125%		12/1/2052			110,080
	388,539			Loan ID 201163		Fixed		3.000%		12/1/2049			318,211
	169,113			Loan ID 201164		Fixed		3.000%		11/1/2051			154,550
	118,928			Loan ID 201165		Fixed		4.750%		1/1/2044			104,531
	122,354			Loan ID 201166		Fixed		2.000%		12/1/2054			102,108
	446,097			Loan ID 201168		Fixed		2.000%		4/1/2052			365,182
	113,682			Loan ID 201169		Fixed		5.934%		9/1/2037			100,221
	70,316			Loan ID 201170		Fixed		3.365%		7/1/2037			59,197
	71,327			Loan ID 201171		Fixed		2.000%		5/1/2051			56,312
	106,443			Loan ID 201172		Fixed		3.000%		6/1/2050			97,189
	111,542			Loan ID 201173		Fixed		2.000%		11/1/2047			86,290
	151,469			Loan ID 201174		Fixed		4.750%		1/1/2053			118,901
	66,445			Loan ID 201175		Fixed		3.000%		9/1/2044			54,855
	137,259			Loan ID 201176		Fixed		4.250%		8/1/2053			119,671
	276,127			Loan ID 201177		Fixed		2.000%		7/1/2046			226,297
	313,380			Loan ID 201178		Fixed		3.193%		6/1/2051			231,354
	305,848			Loan ID 201179		Fixed		2.000%		5/1/2051			236,797
	425,592			Loan ID 201180		Fixed		2.000%		6/1/2053			348,160
	333,103			Loan ID 201181		Fixed		4.500%		4/1/2034			289,792
	53,188			Loan ID 201182		Fixed		3.290%		3/1/2034			44,971
	138,099			Loan ID 201183		Fixed		2.375%		10/1/2052			108,154
	65,065			Loan ID 201184		Fixed		4.000%		6/1/2049			57,179
	267,256			Loan ID 201185		Fixed		5.760%		10/1/2053			232,659
	84,270			Loan ID 201187		Fixed		2.000%		11/1/2048			64,258
	636,898			Loan ID 201188		Fixed		2.000%		8/1/2052			515,454
	106,816			Loan ID 201189		Fixed		4.500%		12/1/2051			94,645
	164,281			Loan ID 201190		Fixed		4.250%		6/1/2051			144,181
	214,202			Loan ID 201191		Fixed		3.000%		2/1/2037			179,502
	122,039			Loan ID 201192		Fixed		2.000%		2/1/2051			98,180
	236,319			Loan ID 201193		Fixed		2.000%		5/1/2051			184,137
	336,183			Loan ID 201194		Fixed		2.000%		6/1/2054			259,527
	151,773			Loan ID 201195		Fixed		3.500%		5/1/2036			130,154
	654,511			Loan ID 201196		Fixed		2.000%		11/1/2036			537,617
	184,978			Loan ID 201197		Fixed		5.125%		8/1/2037			162,500
	52,110			Loan ID 201198		Fixed		4.125%		9/1/2053			45,518
	347,743			Loan ID 201199		Fixed		3.000%		11/1/2046			293,371

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

Vertical Capital Income Fund

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2015

 

Principal						Loan Type		Interest Rate		Maturity		Value
				MORTGAGE NOTES - 92.4% (Continued)
$	300,304			Loan ID 201200		Fixed		4.500%		3/1/2044		$	268,811
	300,508			Loan ID 201201		Fixed		4.500%		8/1/2044			264,128
	198,544			Loan ID 201202		Fixed		3.750%		8/1/2044			164,749
	130,277			Loan ID 201203		Fixed		3.875%		12/1/2044			109,798
	469,636			Loan ID 201204		Fixed		3.750%		4/1/2045			421,478
	155,072			Loan ID 201205		Fixed		4.625%		1/1/2045			139,574
	135,010			Loan ID 201206		Fixed		3.990%		4/1/2045			116,627
	416,860			Loan ID 201207		Fixed		4.625%		8/1/2051			354,800
	119,143			Loan ID 201208		Fixed		4.625%		4/1/2045			105,659
	185,782			Loan ID 201209		Fixed		4.250%		4/1/2045			156,891
	180,506			Loan ID 201210		Fixed		3.500%		12/1/2042			154,758
	135,181			Loan ID 201211		Fixed		4.125%		7/1/2044			118,564
	372,324			Loan ID 201212		Fixed		4.625%		3/1/2045			320,536
	210,343			Loan ID 201213		Fixed		4.875%		8/1/2044			183,398
	572,573			Loan ID 201214		ARM		2.875%		9/1/2043			446,781
	144,172			Loan ID 201215		Fixed		3.250%		3/1/2043			114,267
	278,854			Loan ID 201216		Fixed		3.500%		2/1/2043			221,886
				TOTAL MORTGAGE NOTES (Cost - $146,113,438)*									148,189,668
				OTHER INVESTMENTS* (Cost - $476,916)(a) - 0.3%									487,243
				TOTAL INVESTMENTS (Cost - $146,590,354)(a) - 92.7%								$	148,676,911
				CASH AND OTHER ASSETS LESS LIABILITIES - 7.3%									11,705,587
				NET ASSETS - 100.0%								$	160,382,498

ARM - Adjustable Rate Mortgage

 

*

Illiquid Securities, priced by fair value method approved by Board

 

**

Non income producing security.

 

(a)

Represents cost for financial reporting purposes. Aggregate cost for federal tax purposes is the same as there are no book to tax differences.

 

Unrealized appreciation:		$	4,666,773
Unrealized depreciation:			(2,580,216	)
Net unrealized appreciation:		$	2,086,557

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

Vertical Capital Income Fund

Statement of Assets and Liabilities

September 30, 2015

 

Assets:
Investments at Value (identified cost $146,590,354)		$	148,676,911
Cash			20,495,037
Interest Receivable			2,105,573
Receivable for Securities Sold and Principal Paydowns			2,665,648
Receivable for Fund Shares Sold			181,690
Prepaid Expenses and Other Assets			302,368
Total Assets			174,427,227
Liabilities:
Line of Credit			13,521,750
Accrued Advisory Fees			121,656
Accrued Shareholder Servicing Fees			2,124
Accrued Expenses and Other Liabilities			399,199
Total Liabilities			14,044,729
Net Assets		$	160,382,498
Composition of Net Assets:
At September 30, 2015, Net Assets consisted of:
Paid-in-Beneficial Interest		$	153,285,234
Accumulated Net Realized Gain From Investments			5,010,707
Net Unrealized Appreciation on Investments			2,086,557
Net Assets		$	160,382,498
Net Asset Value Per Share
Net Assets		$	160,382,498
Shares of Beneficial Interest Outstanding (no par value; unlimited shares authorized)			13,914,798
Net Asset Value and Repurchase Price per Share		$	11.53
Offering Price per Share (Maximum sales charge of 4.50%)		$	12.07

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

Vertical Capital Income Fund

Statement of Operations

For the Year Ended September 30, 2015

 

Investment Income:
Interest Income		$	8,386,251
Total Investment Income			8,386,251
Expenses:
Investment Advisory Fees			1,563,374
Security Servicing Fees			483,016
Interest Expense			338,290
Adviser Transition Services			303,738
Administration Fees			159,074
Audit Fees			157,468
Transfer Agent Fees			141,288
Legal Fees			103,950
Custody Fees			98,161
Trustees’ Fees			88,941
Printing Expense			75,962
Non Rule 12b-1 Shareholder Servicing Expense			64,735
Registration and Filing Fees			47,000
Fund Accounting Fees			45,988
Line of Credit Fees			40,103
Chief Compliance Officer Fees			25,793
Insurance Expense			17,308
Other Loan Servicing Fees			10,680
Shareholder Servicing Fees			1,124
Miscellaneous Expense			1,906
Total Expenses			3,767,899
Less: Expenses Waived by Adviser			(470,514	)
Net Expenses			3,297,385
Net Investment Income			5,088,866
Net Realized and Unrealized Gain on Investments:
Net Realized Gain on Investments			5,577,999
Net Change in Unrealized Appreciation on Investments			1,042,946
Net Realized and Unrealized Gain on Investments			6,620,945
Net Increase in Net Assets Resulting From Operations		$	11,709,811

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

Vertical Capital Income Fund

Statements of Changes in Net Assets

 

		For the Year				For the Year
		Ended				Ended
		September 30, 2015				September 30, 2014
Operations:
Net Investment Income		$	5,088,866			$	3,438,040
Net Realized Gain on Investments			5,577,999				530,177
Net Change in Unrealized Appreciation on Investments			1,042,946				828,698
Net Increase in Net Assets
Resulting From Operations			11,709,811				4,796,915
Distributions to Shareholders From:
Net Investment Income ($0.44 and $0.56 per share, respectively)			(5,481,291	)			(3,757,137	)
Net Realized Gains ($0.04 and $0.05 per share, respectively)			(496,914	)			(254,224	)
Total Distributions to Shareholders			(5,978,205	)			(4,011,361	)
Beneficial Interest Transactions:
Proceeds from Shares Issued			63,006,549				71,268,179
Distributions Reinvested			3,206,422				2,305,559
Cost of Shares Redeemed			(20,172,498	)			(5,735,581	)
Total Beneficial Interest Transactions			46,040,473				67,838,157
Total Increase in Net Assets			51,772,079				68,623,711
Net Assets:
Beginning of Period			108,610,419				39,986,708
End of Period (including accumulated net investment income (loss) of $(476,009) and $0, respectively)		$	160,382,498			$	108,610,419
Share Activity
Shares Issued			5,565,739				6,469,996
Shares Reinvested			283,130				209,971
Shares Redeemed			(1,769,354	)			(521,780	)
Net Increase in Shares of Beneficial Interest Outstanding			4,079,515				6,158,187

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, 2015

 

Increase (Decrease) in Cash
Cash Flows Provided by (Used for) Operating Activities:
Net Increase in Net Assets Resulting from Operations		$	11,709,811
Adjustments to Reconcile Net Increase in Net Assets Resulting from
Operations to Net Cash Used for Operating Activities:
Purchases of Long-Term Portfolio Investments			(78,524,491	)
Proceeds from Sale of Long-Term Portfolio Investments and Principal Paydowns			45,573,166
Increase in Interest Receivable			(818,220	)
Increase in Receivable for Securities Sold and Principal Paydowns			(2,063,162	)
Decrease in Receivable for Fund Shares Sold			80,071
Increase in Prepaid Expenses and Other Assets			(227,962	)
Increase in Accrued Advisory Fees			56,751
Increase in Accrued Shareholder Servicing Fees			1,124
Increase in Accrued Expenses and Other Liabilities			316,433
Net Amortization on Investments			(1,339,361	)
Net Realized Gain on Investments			(5,577,999	)
Change in Unrealized Appreciation on Investments			(1,042,946	)
Net Cash Used for Operating Activities			(31,856,785	)
Cash Flows Provided by (Used for) / Financing Activities:
Proceeds from Sale of Shares			63,006,549
Redemption of Shares			(20,172,498	)
Dividends Paid to Shareholders, Net of Reinvestments			(2,771,783	)
Proceeds from Line of Credit			37,935,889
Payments on Line of Credit			(27,914,139	)
Net Cash Provided by Financing Activities			50,084,018
Net Increase in Cash			18,227,233
Cash at Beginning of Period			2,267,804
Cash at End of Period		$	20,495,037

Supplemental Disclosure of Cash Flow Information:

 

Non-Cash Financing Activities Included Reinvestment of Distributions During the Fiscal Period of $3,206,422

 

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

Vertical Capital Income Fund

Financial Highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.

 

		Year				Year				Year				Period
		Ended				Ended				Ended				Ended
		September 30, 2015				September 30, 2014				September 30, 2013				September 30, 2012**
Net Asset Value, Beginning of Period		$	11.04			$	10.87			$	10.58			$	10.00
From Operations:
Net investment income (a)			0.41				0.51				0.50				0.33
Net gain from investments (both realized and unrealized)			0.56				0.27				0.28				0.44
Total from operations			0.97				0.78				0.78				0.77
Distributions to shareholders from:
Net investment income			(0.44	)			(0.56	)			(0.42	)			(0.19	)
Net realized gains			(0.04	)			(0.05	)			(0.07	)			—
Total distributions			(0.48	)			(0.61	)			(0.49	)			(0.19	)
Net Asset Value, End of Period		$	11.53			$	11.04			$	10.87			$	10.58
Total Return (b)			8.86	%			7.29	%			7.42	%			7.70	% (d)
Ratios/Supplemental Data
Net assets, end of period (in 000’s)		$	160,382			$	108,610			$	39,987			$	11,756
Ratio of gross expenses to average net assets			2.67	% (e)(f)			2.32	% (e)			3.20	%			9.42	% (c)
Ratio of net expenses to average net assets			2.33	% (e)(f)			1.91	% (e)			1.85	%			1.85	% (c)
Ratio of net investment income to average net assets			3.54	% (e)(f)			4.68	% (e)			4.61	%			4.21	% (c)
Portfolio turnover rate			2.58	%			8.37	%			11.68	%			1.50	% (d)

 

**

The Fund commenced operations on December 30, 2011.

 

(a)

Per share amounts are calculated using the 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)

Annualized.

 

(d)

Not annualized.

 

(e)

Ratio includes 0.27% and 0.06% for the year ended September 30, 2015 and September 30, 2014, respectively, that attributed to interest expenses and fees.

 

(f)

Ratio includes 0.21% for the year ended September 30, 2015 that attributed to adviser transition expenses.

 

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

Vertical Capital Income Fund

Notes to Financial Statements

September 30, 2015

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 commenced operations on December 30, 2011. The Fund currently offers shares at net asset value plus a maximum sales charge of 4.50%. On June 22, 2015, the Board of Trustees (the “Board’) of the Fund terminated the investment advisory agreement with Vertical Capital Asset Management, LLC (“VCAM”). The Board determined, based on information provided by VCAM, that VCAM lacked sufficient resources to meet its obligations to the Fund, and failed to adequately monitor the actions of its affiliate Vertical Recovery Management (“VRM”) in its duties as the servicing agent of the mortgage notes held by the Fund. Effective July 6, 2015, Behringer Advisors, LLC (the “Advisor”) serves as the Fund’s investment adviser.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements 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.

 

Security Valuation

 

Mortgage Notes – During the year ended September 30, 2015, the Fund utilized a proprietary discounted cash flow model approved by the Fund’s Board of Trustees (“the Board”) to value its Mortgage Notes. The model was used daily by the adviser to calculate the net present value of discounted cash flows based on a combination of servicing data (maturity dates, rates, loan type, etc.) that was fed into the pricing model along with various readily available inputs including yield curves, prepayment speeds, default rates and loss severity assumptions. The future expected cash flows and related treasury yields were also utilized to compare with each individual Mortgage Note yield in the model. That yield was determined as a spread to the interpolated treasury curve, based on market knowledge of the collateral type, prepayment history, average life, and credit quality. The combination of loan level criteria and daily market adjustments produced 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.

 

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; 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.

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

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. As described above, the Mortgage Notes, which are fair valued daily, are priced by the Adviser and through a proprietary discounted cash flow model, under the direction of the Board.

 

The Fund’s management contracted with LCAP Advisors to create an asset valuation model along with policies and maintenance procedures for the Fund. The valuation procedures and the Model are reviewed and maintained on a daily basis within the management of the Fund. 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 by the Advisor relative to interest rate environment along with third party data from the U.S. Department of the Treasury, Reuters and Moody’s which is uploaded into the pricing model along with a daily loan servicing tape. In addition to the readily available data from the financial markets, the Advisor uses a number of pricing criteria that represent the Advisor’s credit and collateral underwriting experience related to mortgage notes to fairly value the Mortgage Notes.

 

Subsequent to September 30, 2015, the Fund’s management contracted with Mortgage Industry Advisory Corporation (“MIAC”) to provide asset valuation services previously provided by LCAP Advisors.

 

The Fund utilizes various methods to measure the fair value of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:

 

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

 

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.

 

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.

 

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, 2015 for the Fund’s assets measured at fair value:

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

 

Assets		Level 1				Level 2				Level 3				Total
Mortgage Notes		$	—			$	—			$	148,189,668			$	148,189,668
Other Investments							—				487,243			$	487,243
Total		$	—			$	—			$	148,676,911			$	148,676,911

 

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		$	107,654,564			$	110,716			$	107,765,280
Net realized gain (loss)			5,583,125				(5,126	)			5,577,999
Change in unrealized appreciation (depreciation)			1,036,495				6,451				1,042,946
Cost of purchases			78,489,207				35,284				78,524,491
Proceeds from sales and principal pay			(45,458,561	)			(114,605	)			(45,573,166	)
Amortization			1,335,538				3,823				1,339,361
Net Transfers in/out of level 3			(450,700	)			450,700				—
Ending balance		$	148,189,668			$	487,243			$	148,676,911

 

The total change in unrealized appreciation (depreciation) included in the Statement of Operations attributable to Level 3 investments still held at September 30, 2015 is $1,064,072.

 

The following table provides quantitative information about the Fund’s Level 3 values, as well as its inputs, as of September 30, 2015. The table is not all inclusive, but provides information on the significant Level 3 inputs.

 

Weighted

Range of

Average of

Unobservable

Unobservable

Unobservable

Value

Valuation Technique

Inputs

Inputs

Inputs

Mortgage Notes

$

148,189,668

Comprehensive pricing model with emphasis on discounted cash flows

Constant  prepayment rate

0-200

3.21

Comparability  adjustment

-1.5% - 27.3%

5.8%

Other Investments

487,243

Market comparable

Sales prices

$149-$173 sq/ft

$159 sq/ft

Closing Balance

$

148,676,911

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 Input
Investment security		Input Increases		Decreases
Constant prepayment rate		Increase		Decrease
Comparability adjustment		Decrease		Increase

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

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.

 

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. On May 27, 2015, the Fund entered into an amendment to the credit agreement whereby, the maximum amount of borrowing allowed under the agreement increased to the lesser of $15,000,000 or 33 1/3% of the Fund’s gross assets. The Fund is charged an annual fee of $25,000 for this agreement. Borrowings under this agreement bear interest at a rate equal to the Wall Street Journal Prime, with a floor rate of 3.25%, per annum, on the outstanding principal balance. During the year ended September 30, 2015, the Fund utilized the line of credit. The average amount of borrowing for the period was $9,373,093 and the total interest expense for the year ended was $338,290. As of September 30, 2015, the Fund had an outstanding loan balance of $13,521,750.

 

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 2012-2014 tax returns or expected to be taken in the Fund’s 2015 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.

 

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 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.

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

3.

INVESTMENT IN RESTRICTED SECURITIES

 

Notes secured by a mortgage or deed of trust held by the Fund (“Restricted Securities”), while exempt from registration under the Securities Act of 1933 (the “1933 Act”), are subject to certain restrictions on resale and cannot be sold publicly. The Fund may invest in Restricted Securities 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 accordance with procedures adopted by the Board of Trustees. The Fund has no rights to compel the obligor or issuer of a Restricted Security to register such a Restricted Security under the 1933 Act.

 

4.

ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS

 

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 Interim 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, 2015, the Advisor earned advisory fees of $461,208, and VCAM earned advisory fees of $1,102,166.

 

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) at least until January 31, 2017, so that the total annual operating expenses of the Fund do not exceed 1.85% of the average daily net assets of the Fund. The Fund incurred expenses totaling $303,738 during the year ended September 30, 2015 associated with the transition to the new Advisor. These transition expenses are not subject to the operating expense limitation. VCAM had 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) at least until January 31, 2016, so that the total annual operating expenses of the Fund did not exceed 1.85% of the average daily net assets of the Fund and 2.50% through at least April 30, 2024. This agreement with VCAM terminated June 22, 2015. Waivers and expense reimbursements may be recouped by the Advisor from the Fund, to the extent that overall expenses fall below the expense limitation, within three years of when the amounts were waived. For the year ended September 30, 2015, the Advisor waived advisory fees of $178,366 that are subject to recapture which will expire on September 30, 2018 and VCAM waived advisory fees of $292,148.

 

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 will pay 0.01% per year of its average daily net assets for such shareholder service activities. For the year ended September 30, 2015, the Fund incurred shareholder servicing fees of $1,124.

 

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.

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

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.

 

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.

 

Security Servicing Agent – The Fund pays a fee for the collections from and maintenance of its securities by providing services such as contacting delinquent borrowers and managing the foreclosure process or other recovery processes for the Fund in the event of a borrower’s default. For the year ended September 30, 2015, the Fund incurred total security servicing fees of $483,016. The Fund transitioned its loan servicing to Statebridge Company, LLC (“Statebridge”), an unaffiliated party, in July 2015. The Fund paid Statebridge security servicing fees totaling, $164,702 during the year ended September 30, 2015. The Fund also paid VRM, an affiliate of VCAM, and the prior security servicing agent, security servicing fees totaling $318,314 during the year ended September 30, 2015.

 

Trustees – The Fund pays each Trustee who is not affiliated with the Fund or advisor a quarterly fee of $5,000, 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 securities, other than U.S. Government securities and short-term investments, for the year ended September 30, 2015 amounted to $78,524,491 and $45,573,166, 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.

 

During the year ended September 30, 2015, 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			09/12/14				12/15/14				03/20/15				06/15/15
Repurchase Request Deadline			10/17/14				01/20/15				04/24/15				07/21/15
Repurchase Pricing Date			10/17/14				01/20/15				04/24/15				07/21/15
Net Asset Value as of Repurchase Pricing Date		$	11.31			$	11.40			$	11.51			$	11.31
Amount Repurchased		$	1,976,379			$	1,798,754			$	8,378,813			$	8,018,552
Percentage of Outstanding Share Repurchased			1.74	%			1.31	%			5.41	%			5.00	%

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

The following repurchase offer occurred subsequent to the reporting period:

 

Repurchase
Offer
	09/11/15
	10/16/15
	10/16/15
$	12.35
$	8,668,005
	5.00	%

7.

DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

The tax character of distributions paid during the fiscal years ended September 30, 2015 and September 30, 2014 was as follows:

 

		Fiscal Year Ended				Fiscal Year Ended
		September 30, 2015				September 30, 2014
Ordinary Income		$	5,734,414			$	3,881,567
Long-Term Capital Gain			243,791				129,794
		$	5,978,205			$	4,011,361

As of September 30, 2015, 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)
$	765,647			$	4,245,060			$	—			$	—			$	—			$	2,086,557			$	7,097,264

Permanent book and tax differences, primarily attributable to the reclassification of Fund distributions, resulted in reclassification for the period ended September 30, 2015 as follows:

 

Paid				Undistributed				Accumulated
In				Net Investment				Net Realized
Capital				Income (Loss)				Gains (Loss)
$	—			$	392,425			$	(392,425	)

8.

AFFILIATED BROKER COMMISSIONS

 

During the year ended September 30, 2015, Vertical Recovery Management LLC, an affiliate of VCAM, provided execution support and trade settlement services on behalf of the Fund and received $779,032 in trade-related payments and fees (brokerage commissions).

 

9.

CHANGE OF SERVICE PROVIDER

 

On September 9, 2015, at an in person meeting, the Audit Committee of the Board of Trustees and the full Board of Trustees of Vertical Capital Income Fund approved engaging KPMG LLP as the Fund’s independent registered public

Vertical Capital Income Fund

Notes to Financial Statements (Continued)

September 30, 2015

accountants for the fiscal year ending September 30, 2015. KPMG LLP accepted its appointment on September 17, 2015.

 

10.

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.

Report of Independent Registered Public Accounting Firm

 

The Board of Trustees and Shareholders of

Vertical Capital Income Fund:

We have audited the accompanying statement of assets and liabilities of Vertical Capital Income Fund (the Fund), including the portfolio of investments, as of September 30, 2015, and the related statements of operations, changes in net assets, financial highlights, and cash flows for the year then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The accompanying statement of changes in net assets for the year ended September 30, 2014 and financials highlights for each of the years in the two-year period then ended and for the period December 30, 2011 (commencement of operations) through September 30, 2012 of Vertical Capital Income Fund were audited by other auditors whose report thereon dated November 28, 2014, expressed an unqualified opinion on those statements.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2015, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Vertical Capital Income Fund as of September 30, 2015, the results of its operations, changes in net assets, financial highlights, and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

 

/s/KPMG LLP
Dallas, Texas
November 30, 2015

Supplemental Information (Unaudited)

FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT*

 

The Investment Advisory Agreement (“New Agreement”) was approved by a majority of the Board, including the Independent Trustees, at an in-person meeting held on June 29, 2015. The Board reviewed the materials provided by the Advisor in advance of the meeting. The Trustees were assisted by independent legal counsel throughout the New Agreement review process. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the New Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the New Agreement.

 

Nature, Extent and Quality of Services. The Trustees discussed the Advisor’s history and portfolio management experience. They noted that the Advisor and its affiliates currently serves a variety of retail, registered investment advisers and institutional investor clients, managing approximately $787 million in assets across its non-listed real-estate investment trust (“REIT”), closed-end funds and DST/Net Lease platform (a real-estate related investment vehicle). The Trustees reviewed the background and experience of the Advisor’s team proposed to advise and service the Fund. They noted that although the Advisor had not provided advisory services to a registered investment company directly, they considered the varied and extensive experience of the portfolio management and compliance teams, and the Advisor’s ability to leverage the experience and expertise of its affiliates to the benefit of the Fund and shareholders. The Trustees discussed the investment advisory and related services to be provided to the Fund noting that the Advisor would oversee the day-to-day operations of the Fund, provide a variety of investment advisory services including execution and management of the Fund’s investment portfolio, and provide oversight and compliance. They considered that although the Advisor does not have experience in the residential mortgage markets, it does have previous experience with REIT and real-estate related investments. The Trustees noted positively the significant support the Advisor has in the Advisor-affiliated entities which further strengthen the services available to the Fund and shareholders. The Trustees discussed the Advisor’s proposal for the ongoing management and implementation of strategy changes for the Fund over time, and agreed that it had given thoughtful consideration to the development of a strategic and promising plan for the Fund. After further discussion, the Trustees concluded that the Advisor has the potential to provide advisory services to the Fund in line with the Board’s expectations.

 

Performance. The Trustees reviewed the performance of a variety of accounts currently managed by the Advisor. They noted that the Advisor does not currently manage a fund with a strategy substantially similar to that of the Fund, so the performance information provided was merely illustrative of the Advisor’s general capabilities. They also reviewed the performance of multiple REITs managed by the Advisor noting the positive returns in each period shown. The Trustees considered that while the Advisor does not have experience in the residential mortgage market, its experience and successful track record in the commercial real-estate and REIT markets suggest it has the capacity to provide positive returns for shareholders.

 

Fees and Expenses. The Trustees noted that the Advisor proposed to charge an advisory fee of 1.25%, equal to that currently paid by the Fund. They considered that the proposed fee was higher than the Morningstar category of real-estate related funds average but within the range of fees of the peer group. The Trustees noted that Morningstar does not have a closed-end interval fund category and, therefore, the Morningstar comparison, while informative is not directly on point as to the relative reasonableness of the proposed fee. The Trustees further considered that the Advisor would maintain a contractual fee waiver until January 31, 2017 limiting the Fund’s total expense ratio to 1.85%. After further discussion, the Trustees concluded that the proposed advisory fee was reasonable.

Profitability. The Trustees reviewed a profitability analysis provided by the Advisor, and discussed the Advisor’s estimated profitability in connection with its relationship with the Fund. They noted that the Advisor anticipates realizing a net profit during the initial term of the New Agreement but agreed that the amount of profit was not excessive in terms of actual dollars or as a percentage of revenue. The Trustees further noted that the Advisor had agreed, if shareholders approve the New Agreement, to pay a portion of an existing shortfall in the Fund’s mortgage loan servicing account. They considered that the Advisor’s profitability analysis did not take this expense into account, and if it had, the Advisor would realize a net loss in connection with its relationship with the Fund for the first year. After further discussion, the Trustees concluded the Advisor’s estimated profitability was reasonable.

 

Economies of Scale. The Trustees considered whether there will be economies of scale with respect to the management of the Fund. The Trustees noted the absence of breakpoints in the Advisor’s fee proposal. They considered the Advisor’s representation that the Fund could benefit from economies as certain expenses of the Fund will be leveraged across the Advisor’s shared services platform and firm resources. After further discussion, the Trustees agreed that the matter of economies of scale would be revisited in connection with the renewal of the New Agreement as the Advisor’s costs are more clearly identified and prospects for Fund growth are better understood.

 

Conclusion. Having requested and received such information from the Advisor as the Trustees believed to be reasonably necessary to evaluate the terms of the New Agreement, and as assisted by the advice of Counsel, the Trustees concluded that the fee structure is reasonable and that approval of the New Agreement is in the best interests of the shareholders of Vertical Capital Income Fund.

 

PROXY VOTE

 

At a Special Meeting of Shareholders of the Fund, held at the offices of Gemini Fund Services, LLC, 80 Arkay Drive, Suite 110, Hauppauge, NY 11788, on Friday, October 30, 2015, shareholders of record as of the close of business on September 4, 2015 voted to approve the following proposal:

 

Proposal 1: To Elect a new Trustee
Shares Voted		Shares Voted Against
In Favor		or Abstentions
12,293,980		878,966

 

At a Special Meeting of Shareholders of the Fund, held at the offices of Gemini Fund Services, LLC, 80 Arkay Drive, Suite 110, Hauppauge, NY 11788, on Monday, November 16, 2015, shareholders of record as of the close of business on September 4, 2015 voted to approve the following proposal:

 

Proposal: To approve a new investment Advisory Agreement between the Fund and Behringer Advisors, LLC.

 

Shares Voted		Shares Voted Against
In Favor		or Abstentions
6,909,137		255,810

Vertical Capital Income Fund

Supplemental Information (Continued)

September 30, 2015 (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, Hauppauge, NY 11788.

 

Independent Trustees
Name (Year of Birth) Position held with the Fund* Principal Occupations and Other Directorships During Past 5 Years			Number of Portfolios in Fund Complex Overseen by Trustee**
Robert J. Boulware (1956) Trustee, since August 2011 Managing Director, Pilgrim Funds, LLC (private equity fund), Sept. 2006 to present. Other Directorships: Trustee, Met Investors Series Trust (48 portfolios), March 2008 to present; Metropolitan Series Funds (30 portfolios) April 2012 to Present; Director, Gainsco Inc. (auto insurance) May 2005 to present, Trustee, Sharespost 100 Fund, March 2013 to Present.			1
Mark J. Schlafly (1961) Trustee, since August 2011 Managing Director, Russell Investments, June 2013 to present; Staff Member, Weston Center, Washington University, August 2011 to present; President and Chief Executive Officer, FSC Securities Corporation, July 2008 to April 2011; Other Directorships: None			1
T. Neil Bathon (1961) Trustee, since August 2011 Managing Partner, FUSE Research Network, LLC, (financial services industry consulting firm), Aug. 2008 to present; Managing Director, PMR Associates LLC (consulting firm), July 2006 to Present; Other Directorships: Financial Investors Variable Insurance Trust (5 portfolios), Jan. 2007 to Feb. 2010; BNY Mellon Chartable Gift Fund, July 2003 to Present			1
Interested Trustees and Officers
Robert J. Chapman *** (1947) Trustee, since August 2015 Executive Vice President, Behringer Advisors, LLC (investment adviser), a position held since July 2015. Executive Vice President, Behringer Harvard Holdings, LLC (financial services holding company) a position held since 2007. Other Directorships: None			1
Michael D. Cohen (1974) President, since July 2015 President of Behringer Harvard Holdings, LLC, (financial services holding company) a position held since April 2015; Executive Vice President, Jan. 2013 to Apr. 2015. President of Harvard Property Trust, LLC, Apr. 2015 to present; Executive Vice President, Jan. 2011 to Apr. 2015; Senior Vice President, Sep. 2008 to Jan. 2011. Executive Vice President of Behringer Harvard Opportunity Advisors I, LLC, Jan. 2015 to present. Executive Vice President of Behringer Harvard Opportunity Advisors II, LLC, Jan. 2015 to present. Managing Director of Behringer Lodging Group, LLC, Nov. 2014 to present. 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 present. Executive Vice President, Pathway Energy Infrastructure Fund, LLC, Feb 2013 to present. Chief Executive Officer of Behringer Harvard Europe Holdings, LLC. Jan. 2013 to present. Executive Vice President of Behringer Net Lease Advisors, LLC, Dec. 2012 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. Other Directorships: N/A			N/A

Vertical Capital Income Fund

Supplemental Information (Continued)

September 30, 2015 (Unaudited)

 

 

Interested Trustees and Officers continued
Name (Year of Birth) Position held with the Fund* Principal Occupations and Other Directorships During Past 5 Years			Number of Portfolios in Fund Complex Overseen by Trustee**
Jason Hall (1966) Treasurer, since July 2015 Senior VP, Chief Financial Officer, Chief Accounting Officer and Treasurer, Behringer Harvard Opportunity REIT II Inc., positions held since Oct. 2014; Senior VP, Chief Accounting Officer, Treasurer, Sept. 2013 to Oct. 2014; Treasurer, Director of Financial Reporting, Senior Fund Controller, Jan 2012 to Sept. 2013, Director of Financial Reporting, Senior Fund Controller, Behringer Harvard Holdings, LLC (financial services holding company), Jan. 2011 to Dec. 2011; Director of Financial Reporting, Jan. 2010 to Dec. 2010; SEC Reporting Manager, Jan. 2005 to Dec. 2010. Other Directorships: N/A			N/A
Harris Cohen (1981) Assistant Treasurer since 2011 Manager of Fund Administration, Gemini Fund Services, LLC, Nov. 2004 to present. Other Directorships: N/A			N/A
Stanton P. Eigenbrodt (1965) Secretary since July 2015 Executive Vice President and General Counsel of Behringer Harvard Holdings, LLC (financial services holding company) a position held since 2006. Other Directorships: 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). Other Directorships: 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 also an officer of the Fund’s investment adviser.

 

The Fund’s Statement of Additional Information includes additional information about the Trustees and is available free of charge, upon request, by calling toll free at 1-866-277-VCIF.

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

Behringer Advisors, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

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.

 

(c) Amendments: During the period covered by the report, there have not been any amendments to the provisions of the code of ethics.

 

(d) Waivers: During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.

 

Item 3. Audit Committee Financial Expert.

 

The registrant’s board of trustees has determined that the registrant does not have an audit committee financial expert serving on its audit committee.

 

Item 4. Principal Accountant Fees and Services

 

(a)

Audit Fees

		Registrant		Advisor
FYE 09/30/15		$135,193		N/A
FYE 09/30/14		$25,000		N/A

 

 

(b)

Audit-Related Fees

		Registrant		Advisor
FYE 09/30/15		$0		N/A
FYE 09/30/14		$0		N/A

 

 

(c)

Tax Fees

		Registrant		Advisor
FYE 09/30/15		$0		N/A
FYE 09/30/14		$3,000		N/A

 

 

Preparation of Federal & State income tax returns, assistance with calculation of required income, capital gain and excise distributions and preparation of Federal excise tax returns.

 

(d)

All Other Fees

		Registrant		Advisor
FYE 09/30/15		$0		N/A
FYE 09/30/14		$0		N/A

(e) (1) Audit Committee’s Pre-Approval Policies

 

The registrant’s Audit Committee is required to pre-approve all audit services and, when appropriate, any non-audit services (including audit-related, tax and all other services) to the registrant. The registrant’s Audit Committee also is required to pre-approve, when appropriate, any non-audit services (including audit-related, tax and all other services) to its adviser, or any entity controlling, controlled by or under common control with the adviser that provides ongoing services to the registrant, to the extent that the services may be determined to have an impact on the operations or financial reporting of the registrant. Services are reviewed on an engagement by engagement basis by the Audit Committee.

 

(2)

Percentages of Services Approved by the Audit Committee

 

	Registrant		Advisor
Audit-Related Fees:	N/A		N/A
Tax Fees:	N/A		N/A
All Other Fees:	N/A		N/A

 

(f)

During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

 

(g)

The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:

 

		Registrant		Advisor
FYE 09/30/2015		$0		N/A
FYE 09/30/2014		$3,000		N/A

 

(h) The registrant's audit committee has considered whether the provision of non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence.

 

Item 5. Audit Committee of Listed Companies. Not applicable.

 

Item 6. Schedule of Investments. See Item 1.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds.

 

Pursuant to the adoption by the Securities and Exchange Commission (the “Commission”) of Rule 206(4)-6 (17 CFR 275.206(4)-6) and amendments to Rule 204-2 (17 CFR 275.204-2) under the Investment Adviser Act of 1940 (the “Act”), it is a fraudulent, deceptive, or manipulative act, practice or course of business, within the meaning of Section 206(4) of the Act, for an investment adviser to exercise voting authority with respect to client securities, unless (i) the adviser has adopted and implemented written policies and procedures that are reasonably designed to ensure that the adviser votes proxies in the best interests of its clients, (ii) the adviser describes its proxy voting procedures to its clients and provides copies on request, and (iii) the adviser discloses to clients how they may obtain information on how the adviser voted their proxies.

In order to fulfill its responsibilities under the Act, Vertical Capital Asset Management, LLC (hereinafter, “we” or “our”) has adopted the following policies and procedures for proxy voting with regard to direct investments in companies held in investment portfolios of our clients.

KEY OBJECTIVES

The key objectives of these policies and procedures recognize that a company’s management is entrusted with the day-to-day operations and longer term strategic planning of the company, subject to the oversight of the company’s board of directors. While “ordinary business matters” are primarily the responsibility of management and should be approved solely by the corporation’s board of directors, these objectives also recognize that the company’s shareholders must have final say over how management and directors are performing, and how shareholders’ rights and ownership interests are handled, especially when matters could have substantial economic implications to the shareholders.

Therefore, we will pay particular attention to the following matters in exercising our proxy voting responsibilities as a fiduciary for our clients:

Accountability. Each company should have effective means in place to hold those entrusted with running a company’s business accountable for their actions. Management of a company should be accountable to its board of directors and the board should be accountable to shareholders.

Alignment of Management and Shareholder Interests. Each company should endeavor to align the interests of management and the board of directors with the interests of the company’s shareholders. For example, we generally believe that compensation should be designed to reward management for doing a good job of creating value for the shareholders of the company.

Transparency. Promotion of timely disclosure of important information about a company’s business operations and financial performance enables investors to evaluate the performance of a company and to make informed decisions about the purchase and sale of a company’s securities.

DECISION METHODS

 

We generally believe that portfolio managers that invest in and track particular companies have a unique perspective to make decisions with regard to proxy votes. Therefore, we rely on that perspective to make the final decisions on how to cast proxy votes.

No set of proxy voting guidelines can anticipate all situations that may arise. In special cases, we may seek insight and expertise from outside sources as to how a particular proxy proposal will impact the financial prospects of a company, and vote accordingly.

In some instances, a proxy vote may present a conflict between the interests of a client, on the one hand, and our interests or the interests of a person affiliated with us, on the other. In such a case, we will abstain from making a voting decision and will forward all of the necessary proxy voting materials to the client to enable the client to cast the votes.

SUMMARY OF PROXY VOTING GUIDELINES

 

Election of the Board of Directors

 

We believe that good corporate governance generally starts with a board composed primarily of independent directors, unfettered by significant ties to management, all of whose members are elected annually. We also believe that some measure of turnover in board composition typically promotes more independent board action and fresh perspectives on governance. Of greater importance is the skill set of the proposed board member. We will also look at the backgrounds of the directors to gauge their business acumen and any special talent or experience that may add value to their participation on the board.

The election of a company’s board of directors is one of the most fundamental rights held by shareholders. Because a classified board structure prevents shareholders from electing a full slate of directors annually, we will pay special attention to efforts to declassify boards or other measures that permit shareholders to remove a majority of directors at any time.

Approval of Independent Auditors

We believe that the relationship between a company and its auditors should be limited primarily to the audit engagement, although it may include certain closely related activities that do not raise an appearance of impaired independence.

We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with a company to determine whether we believe independence has been, or could be, compromised.

Equity-based compensation plans

We believe that appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of shareholders and the interests of directors, management, and employees by providing incentives to increase shareholder value. Conversely, we are opposed to plans that substantially dilute ownership interests in the company, provide participants with excessive awards, or have inherently objectionable structural features.

We will generally support measures intended to increase stock ownership by executives and the use of employee stock purchase plans to increase company stock ownership by employees. These may include:

1. Requiring senior executives to hold stock in a company.

2. Requiring stock acquired through option exercise to be held for a certain period of time.

 

These are guidelines, and we consider other factors, such as the nature of the industry and size of the company, when assessing a plan’s impact on ownership interests.

Corporate Structure

 

We view the exercise of shareholders’ rights, including the rights to act by written consent, to call special meetings and to remove directors, to be fundamental to good corporate governance.

Because classes of common stock with unequal voting rights limit the rights of certain shareholders, we generally believe that shareholders should have voting power equal to their equity interest in the company and should be able to approve or reject changes to a company’s by-laws by a simple majority vote.

We will generally support the ability of shareholders to cumulate their votes for the election of directors.

Shareholder Rights Plans

There are arguments both in favor of and against shareholder rights plans, also known as poison pills. For example, such measures may tend to entrench or provide undue compensation to current management, which we generally consider to have a negative impact on shareholder value. Therefore, our preference is for a plan that places shareholder value in a priority position above interests of management.

SUMMARY OF PROXY VOTING PROCEDURES

 

As a fiduciary to its investors, we recognize the need to actively manage and vote proxies and other shareholder actions and consents that may arise in the course of its investment advisory activities on behalf of its clients. However, due to the nature of the investments of the Fund and indirect exposure to underlying equity investments, we believe that it would be rare that we would be in a position to cast a vote or called upon to vote a proxy.

 

In the event that we do receive a proxy notice, shareholder consent, or is otherwise entitled to vote on any issue related to the investments of its advisory client accounts, we will process and vote all shareholder proxies and other actions in a timely manner insofar as we can determine based on the facts available at the time of its action, in the best interests of the affected advisory client(s). Although we expect that proxies will generally be voted in a manner consistent with the guidelines set forth in this policy, there may be individual cases where, based on facts available, voting according to policy would not be in the best interests of the fund and its shareholders. In such cases, we may vote counter to the stated policy.

 

Proxy Voting Procedure

1) Notices received are reviewed by the Compliance Department;

2) Forwarded to the Investment Department for review and voting decision;

3) Vote or consent entered according to our best judgment under the facts and circumstances presented. Such decision shall be made and documented;

4) Final review and sign-off by Compliance Department and filing with a copy in the Proxy Voting Log.

 

We may at any time, outsource Proxy Voting responsibilities to Institutional Shareholder Services (“ISS”) or similar service provider that we may approve, provided that such service provider votes each proxy based on decisions made by us.

 

CLIENT INFORMATION

A copy of these Proxy Voting Policies and Procedures is available to our clients, without charge, upon request, by calling 1-866-277-VCIF. We will send a copy of these Proxy Voting Policies and Procedures within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery.

In addition, we will provide each client, without charge, upon request, information regarding the proxy votes cast by us with regard to the client’s securities.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

 

As of September 30, 2015, Mr. Chapman, Chairman of the Board and Executive Vice President of the Adviser, and Mr. David Aisner, Executive Vice President of the Adviser, are the Fund's co-portfolio managers. Each share primary responsibility for management of the Fund's investment portfolio and have served the Fund in this capacity since July 6, 2015. Mr. Chapman and Mr. Chase are not compensated through their share of the profits, if any, of the Adviser. Because the portfolio managers may manage assets for other pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals) (collectively "Client Accounts"), or may be affiliated with such Client Accounts, there may be an incentive to favor one Client Account over another, resulting in conflicts of interest. For example, the Adviser may, directly or indirectly, receive fees from Client Accounts that are higher than the fee it receives from the Fund, or it may, directly or indirectly, receive a performance-based fee on a Client Account. In those instances, a portfolio manager may have an incentive to not favor the Fund over the Client Accounts. The Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest. As September 30, 2015, Mr. Chapman and Mr. Aisner owned no shares of the Fund.

 

As of September 30, 2015, Mr. Chapman was responsible for the management of the following types of accounts in addition to the Fund:

 

Other Accounts By Type	Total Number of Accounts by Account Type	Total Assets By Account Type	Number of Accounts by Type Subject to a Performance Fee	Total Assets By Account Type Subject to a Performance Fee
Registered Investment Companies	0	$0	0	$0
Other Pooled Investment Vehicles	0	$0	0	$0
Other Accounts	0	$0	0	$0

 

As of September 30, 2015, Mr. Aisner was responsible for the management of the following types of accounts in addition to the Fund:

 

Other Accounts By Type	Total Number of Accounts by Account Type	Total Assets By Account Type	Number of Accounts by Type  Subject to a Performance Fee	Total Assets By Account Type Subject to a Performance Fee
Registered Investment Companies	0	$0	0	$0
Other Pooled Investment Vehicles	0	$0	0	$0
Other Accounts	0	$0	0	$0

 

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable.

 

Item 10. Submission of Matters to a Vote of Security Holder. None.

 

Item 11. Controls and Procedures.

 

(a) Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report (in the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12. Exhibits.

 

(a)(1) Code of Ethics filed herewith.

 

(a)(2) Certification(s) required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith.

 

(a)(3) Not applicable.

 

(b) Certification(s) required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant) Vertical Capital Income Fund

 

By (Signature and Title)

* /s/ Michael D. Cohen

Michael D. Cohen, President

 

Date 12/8/15

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)

* /s/ Michael D. Cohen

Michael D. Cohen, President

 

Date 12/8/15

 

By (Signature and Title)

* /s/ S. Jason Hall

S. Jason Hall Treasurer

 

Date 12/8/15

 

* Print the name and title of each signing officer under his or her signature.

 

 

EX-99.CODE ETH 4 codeofethics.htm

 

Vertical Capital Income Fund

 CODE OF ETHICS

August 2, 2011

 

 

The Vertical Capital Income Fund (the "Trust") has adopted this Code of Ethics (the "Code") in order to set forth guidelines and procedures that promote ethical practices and conduct by all of its Access Persons and to ensure that all Access Persons comply with the federal securities laws.  Although this Code contains a number of specific standards and policies, there are four key principles embodied throughout the Code.

 

THE INTERESTS OF THE FUND MUST ALWAYS BE PARAMOUNT

 

Access Persons have a legal, fiduciary duty to place the interests of the Fund ahead of their own.  In any decision relating to their personal investments, Access Persons must scrupulously avoid serving their own interests ahead of those of the Trust.

 

Access Persons may not take advantage of their relationship with the Fund

 

Access Persons should avoid any situation (unusual investment opportunities, perquisites, accepting gifts of more than token value from persons seeking to do business with the Fund) that might compromise, or call into question, the exercise of their fully independent judgment in the interests of the Fund.

 

All Personal Securities Transactions should avoid any actual, potential, or apparent conflicts of interest

 

Although all Personal Securities Transactions by Access Persons must be conducted in a manner consistent with this Code, the Code itself is based on the premise that Access Persons owe a fiduciary duty to the Fund, and should avoid any activity that creates an actual, potential, or apparent conflict of interest. This includes executing transactions through or for the benefit of a third party when the transaction is not in keeping with the general principles of this Code.

 

Access Persons must adhere to these general principles as well as comply with the specific provisions of this Code. Technical compliance with the Code and its procedures will not automatically prevent scrutiny of trades that show a pattern of abuse of an individual's fiduciary duty to the Fund.

 

Access Persons must comply with all applicable laws

 

In both work-related and personal activities, Access Persons must comply with all applicable laws, including the federal securities laws.

 

Any violations of this Code should be reported promptly to the Chief Compliance Officer.  Failure to do so will be deemed a violation of the Code.

 

DEFINITIONS

 

"Access Person" shall have the same meaning as set forth in Rule 17j-1 under the Investment Company Act of 1940, as amended (the "1940 Act") and shall include:

1. all officers and directors (or persons occupying a similar status or performing a similar function) of the Fund;

2. all officers and directors (or persons occupying a similar status or performing a similar function) of each Adviser or Sub-Adviser with respect to its corresponding series of the Trust (together, the "Advisers");

3. any employee of the Trust or the Adviser (or of any company controlling or controlled by or under common control with the Trust or the Adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Funds, or whose functions relate to the making of any recommendations with respect to the purchase or sale; and

4. any other natural person controlling, controlled by or under common control with the Trust or the Adviser who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of Covered Securities by the Fund.

 

"Beneficial Ownership" means in general and subject to the specific provisions of Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, having or sharing, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, a direct or indirect "pecuniary interest" in the security.

 

"Chief Compliance Officer" means the Code of Ethics Compliance Officer of the Trust with respect to Trustees and officers of the Trust, or the CCO of the Adviser with respect to Adviser personnel.

 

"Code" means this Code of Ethics.

 

"Covered Security" means any Security, except (i) direct obligations of the U.S. Government, (ii) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, and (iii) shares issued by open-end mutual funds.

 

"Decision Making Access Person" means any Access Person who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Funds, or whose functions relate to the making of any recommendations with respect to such purchases or sales. Decision Makers typically are Adviser personnel.

 

"Fund" means the Trust.

 

"Immediate family" means an individual's spouse, child, stepchild, grandchild, parent, stepparent, grandparent, siblings, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and should include adoptive relationships.  For purposes of determining whether an Access Person has an "indirect pecuniary interest" in securities, only ownership by "immediate family" members sharing the same household as the

Access Person will be presumed to be an "indirect pecuniary interest" of the Access Person, absent special circumstances.

 

"Independent Trustees" means those Trustees of the Trust that would not be deemed an "interested person" of the Trust, as defined in Section 2(a)(19)(A) of the 1940 Act.

 

"Indirect Pecuniary Interest" includes, but is not limited to: (a) securities held by members of the person's Immediate Family sharing the same household (which ownership interest may be rebutted); (b) a general partner's proportionate interest in portfolio securities held by a general or limited partnership; (c) a person's right to dividends that is separated or separable from the underlying securities (otherwise, a right to dividends alone will not constitute a pecuniary interest in securities); (d) a person's interest in securities held by a trust; (e) a person's right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; and (f) a performance-related fee, other than an asset based fee, received by any broker, dealer, bank, insurance company, investment company, investment manager, trustee, or person or entity performing a similar function, with certain exceptions.

 

"Pecuniary Interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in securities.

 

"Personal Securities Transaction" means any transaction in a Covered Security in which an Access Person has a direct or indirect Pecuniary Interest.

 

"Purchase or Sale of a Security" includes the writing of an option to purchase or sell a Security. A Security shall be deemed "being considered for Purchase or Sale" for the Trust when a recommendation to purchase or sell has been made and communicated by a Decision Making Access Person, and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation.  These recommendations are placed on the "Restricted List" until they are no longer being considered for Purchase or Sale, or until the Security has been purchased or sold.

 

"Restricted List" means the list of securities maintained by the Chief Compliance Officer in which trading by Access Persons is generally prohibited.

 

"Security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, an interest or instrument commonly know as "security", or any certificate or interest or participation in temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase (including options) any of the foregoing.

 

"Sub-Adviser" means the sub-adviser, if any, to the Trust.

 

"Trust" means the Vertical Capital Income Fund.

 

 

PROHIBITED ACTIONS AND ACTIVITIES

 

A.

No Access Person shall purchase or sell directly or indirectly, any Covered Security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he or she knows or should have known at the time of such purchase or sale;

 

(1)

is being considered for purchase or sale by the Fund, or

 

(2) is being purchased or sold by the Fund.

 

A.

Decision-Making Access Persons may not participate in any initial public offering of Covered Securities in any account over which they exercise Beneficial Ownership.  All other Access Persons must obtain prior written authorization from the Chief Compliance Officer prior to such participation;

 

B. No Access Person may purchase a Covered Security in which by reason of such transaction they acquire Beneficial Ownership in a private placement of a Security, without prior written authorization of the acquisition by the Chief Compliance Officer;

 

C. Access Persons may not accept any fee, commission, gift, or services, other than de minimis gifts, from any single person or entity that does business with or on behalf of the Trust;

 

D. Decision-Making Access Persons may not serve on the board of directors of a publicly traded company without prior authorization from the Chief Compliance Officer based upon a determination that such service would be consistent with the interests of the Trust.  If such service is authorized, procedures will then be put in place to isolate such Decision-Making Access Persons serving as directors of outside entities from those making investment decisions on behalf of the Trust.

 

Advanced notice should be given so that the Trust, Adviser, or Sub-Adviser may take such action concerning the conflict as deemed appropriate by the Chief Compliance Officer.

 

E.

Decision-Making Access Person may not execute a Personal Securities Transaction involving a Covered Security without authorization of the Chief Compliance Officer or such persons who may be designated by the Chief Compliance Officer from time to time.

 

F.

It shall be a violation of this Code for any Access Person, in connection with the purchase or sale, directly or indirectly, of any Covered Security held or to be acquired by a Fund:

a.

to employ any device, scheme or artifice to defraud the Trust;

b.

to make to the Trust any untrue statement of a material fact or to omit to state to the Trust a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

c.

to engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Trust; or

d.

to engage in any manipulative practice with respect to the Trust.

 

 

EXEMPTED TRANSACTIONS

 

The provisions described above under the heading Prohibited Actions and Activities and the preclearance procedures under the heading Preclearance of Personal Securities Transactions do not apply to:

 

· Purchases or Sales of Securities effected in any account in which an Access Person has no Beneficial Ownership;

 

· Purchases or Sales of Securities which are non-volitional on the part the Access Person (for example, the receipt of stock dividends);

 

· Purchase of Securities made as part of automatic dividend reinvestment plans;

 

· Purchases of Securities made as part of an employee benefit plan involving the periodic purchase or company stock or mutual funds; and

 

· Purchases of Securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sale of such rights so acquired.

 

 

PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS

 

All Decision-Making Access Persons wishing to engage in a Personal Securities Transaction must obtain prior authorization of any such Personal Securities Transaction from the Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate to make such authorizations. Personal Securities Transactions by the Chief Compliance Officer shall require prior authorization from the President or Chief Executive Officer of the Trust (unless such person is also the Chief Compliance Officer), who shall perform the review and approval functions relating to reports and trading by the Chief Compliance Officer. The Trust shall adopt the appropriate forms and procedures for implementing this Code of Ethics.

 

Any authorization so provided is effective until the close of business on the fifth trading day after the authorization is granted. In the event that an order for the Personal Securities Transaction is not placed within that time period, a new authorization must be obtained. If the order for the transaction is placed but not executed within that time period, no new

authorization is required unless the person placing the order originally amends the order in any manner.  Authorization for "good until canceled" orders are effective unless the order conflicts with a Trust order.

 

If a person wishing to effect a Personal Securities Transaction learns, while the order is pending, that the same Security is being considered for Purchase or Sale by a Fund, such person shall cancel the trade.

 

REPORTING AND MONITORING

 

The Chief Compliance Officer or his designees shall monitor all personal trading activity of all Access Persons pursuant to the procedures established under this Code.

Disclosure of Personal Brokerage Accounts

 

Within ten days of the commencement of employment or at the commencement of a relationship with the Trust, all Access Persons, except Independent Trustees, are required to submit to the Chief Compliance Officer a report stating the names and account numbers of all of their personal brokerage accounts, brokerage accounts of members of their Immediate Family, and any brokerage accounts which they control or in which they or an Immediate Family member has Beneficial Ownership.  Such report must contain the date on which it is submitted and the information in the report must be current as of a date no more than 45 days prior to that date.  In addition, if a new brokerage account is opened during the course of the year, the Chief Compliance Officer must be notified immediately.  

 

The information required by the above paragraph must be provided to the Chief Compliance Officer on an annual basis, and the report of such should be submitted with the annual holdings reports described below.

 

Each of these accounts is required to furnish duplicate confirmations and statements to the Chief Compliance Officer. These statements and confirms for each series of the Trust may be sent to its respective Adviser.

 

INITIAL HOLDINGS REPORT

Within ten days of becoming an Access Person (and with information that is current as of a date no more than 45 days prior to the date that the report was submitted), each Access Person, except Independent Trustees must submit a holdings report that must contain, at a minimum, the title and type of Security, and as applicable, the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each Covered Security in which the Access Person has any direct or indirect Beneficial Ownership.  This report must state the date on which it is submitted.

 

ANNUAL HOLDINGS REPORTS

 

All Access Persons, except Independent Trustees, must supply the information that is required in the initial holdings report on an annual basis, and such information must be current as of a date no more than 45 days prior to the date that the report was submitted.  Such reports must state the date on which they are submitted.

 

Quarterly Transaction Reports

 

All Access Persons shall report to the Chief Compliance Officer or his designees the following information with respect to transactions in a Covered Security in which such person has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership in the Covered Security:

 

· The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and the principal amount of each Covered Security;

· The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

· The price of the Covered Security at which the transaction was effected; and

· The name of the broker, dealer, or bank with or through whom the transaction was effected.

· The date the Access Person Submits the Report.

 

Reports pursuant to this section of this Code shall be made no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall include a certification that the reporting person has reported all Personal Securities Transactions required to be disclosed or reported pursuant to the requirements of this Code. Confirmations and Brokerage Statements sent directly to the appropriate address noted above is an acceptable form of a quarterly transaction report.

 

An Independent Trustee need only make a quarterly transaction report if he or she, at the time of the transaction, knew, or in the ordinary course of fulfilling his or her official duties as a Trustee, should have known that during the 15-day period immediately preceding or following the date of the transaction by the Independent Trustee, the Covered Security was purchased or sold by a Fund or was considered for purchase or sale by a Fund.

 

ENFORCEMENTS AND PENALTIES

 

The Chief Compliance Officer or his designee shall review the transaction information supplied by Access Persons.  If a transaction appears to be a violation of this Code, the transaction will be reported to the Fund's Board of Trustees.

 

Upon being informed of a violation of this Code, the Fund's Board of Trustees may impose sanctions as it deems appropriate, including but not limited to, a letter of censure or suspension, termination of the employment of the violator, or a request for disgorgement of any profits received from a securities transaction effected in violation of this Code.  The Fund shall impose sanctions in accordance with the principle that no Access Person may profit at the expense of its clients. Any losses are the responsibility of the violator. Any profits realized on personal securities transactions in violation of the Code must be disgorged in a manner directed by the Board of Trustees.

 

Annually, the Chief Compliance Officer at each regular meeting of the Board shall issue a report on Personal Securities Transactions by Access Person. The report submitted to the board shall:

 

· Summarize existing procedures concerning Personal Securities investing and any changes in the procedures made during the prior year;

· Identify any violations of this Code and any significant remedial action taken during the prior year; and;

· Identify any recommended changes in existing restrictions or procedures based upon the experience under the Code, evolving industry practices or developments in applicable laws and regulations.

 

ACKNOWLEDGMENT

 

The Trust must provide all Access Persons with a copy of this Code.  Upon receipt of this Code, all Access Persons must do the following:

 

All new Access Persons must read the Code, complete all relevant forms supplied by the Chief Compliance Officer (including a written acknowledgement of their receipt of the Code in a form substantially similar to the example below), and schedule a meeting with the Chief Compliance Officer to discuss the provisions herein within two calendar weeks of employment.

 

I certify that I have read and understand the Code of Ethics of Vertical Capital Income Fund and recognize that I am subject to it.  [if an employee of the Adviser] I further certify I will fulfill my personal securities holdings and transactions reporting obligates through the procedures of the Adviser with respect to covered securities.  

 

 

Printed Name:

Signature:

 

Date:

 

Existing Access Persons who did not receive this Code upon hire, for whatever reason, must read the Code, complete all relevant forms supplied by the Chief Compliance Officer (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer to discuss the provisions herein at the earliest possible time, but no later than the end of the current quarter.

 

All Access Persons must certify on an annual basis that they have read and understood the Code.

 

 

 

 

Exhibit 99.CERT

 

CERTIFICATIONS

 

I, Michael D. Cohen, certify that:

 

1. I have reviewed this report on Form N-CSR of the Vertical Capital Income Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 ) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report (in the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

	Date:  12/8/15		/s/ Michael D. Cohen
			Michael D. Cohen, President

 

I, S. Jason Hall, certify that:

 

1. I have reviewed this report on Form N-CSR of the Vertical Capital Income Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 ) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 for the registrant and have:

 

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report (in the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

	Date:   12/8/15		/s/ S. Jason Hall
			S. Jason Hall, Treasurer

 

 

 

 

EX-99.906CERT

 

 

certification

Michael D. Cohen, President, and S. Jason Hall, Treasurer of the Vertical Capital Income Fund (the “Registrant”), each certify to the best of his or her knowledge that:

1. The Registrant’s periodic report on Form N-CSR for the period ended September 30, 2015 (the “Form N-CSR”) fully complies with the requirements of Sections 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

President	Treasurer
Vertical Capital Income Fund	Vertical Capital Income Fund
/s/ Michael D. Cohen	/s/ S. Jason Hall
Michael D. Cohen	S. Jason Hall
Date: 12/8/15	Date: 12/8/15

 

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Vertical Capital Income Fund and will be retained by the Vertical Capital Income Fund and furnished to the Securities and Exchange Commission (the “Commission”) or its staff upon request.

 

This certification is being furnished to the Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR filed with the Commission.