During the last six months, equity markets have been volatile, causing many global investors to seek comfort in the U.S. Treasury market. This has driven interest rates down and caused a flattening of the yield curve; and as such, the 10-year Treasury yield now hovers at less than 2%. The Fed continues to send signals that it would like to raise short-term rates, but has not yet done so. Domestic interest rate policy continues to balance the effects of a potentially stronger dollar and whether it will negatively influence continued economic recovery, both in the U.S. and beyond. The outcome of the U.S. presidential election, terrorist attacks in Europe, the unsettled situation in the Middle East, and other negative world events continue to weigh heavily on investors and have resulted in increased demands for principal investment safety coupled with stable current yield.

The Fund’s primary investment objective is to generate current income, which it does primarily by investing in whole residential mortgage loans at a discount to their unpaid principal balance—thereby increasing the returns that would otherwise be generated based on the loans’ contractual interest rates.

The Fund does this by acquiring loans that are not eligible for purchase and securitization by U.S. government sponsored entities (GSEs) such as Fannie Mae and Freddie Mac. Such loans typically include technicalities that, in our opinion, do not materially affect the collectability of their principal and interest.

Our ability to find loans that meet the Fund’s targeted investment criteria depends largely on two factors:

We believe we will continue to see quality opportunities to invest in mortgage instruments that generate attractive yields over the mid-term bond market, including this segment of the residential mortgage market, as well as other segments such as non-prime, re-performing and jumbo loans, for example. That said, the current yield of our portfolio—net of the cost of administering the Fund—will at times be higher or lower than market benchmarks.

Consistent with past history, we continue to see a number of loans prepaid before maturity, allowing the Fund to capture the differences between cost bases and its unpaid principal balances as capital gains. The Fund has not sold assets during this reporting period; however, we continue to evaluate the benefits of asset sales and reinvestment to improve the quantitative and qualitative aspects of the portfolio.

Fund Results of Operations and Liquidity

Overall, the Fund is in good financial condition. It began the fiscal year with $166 million in total assets under management, which increased to $178 million as of March 31, 2016. The increase reflects new capital investment, net of redemptions and an increase in the underlying value of the assets.

Furthermore, the Fund continues to employ very low leverage—less than 8% of total assets—and began and ended this period with positive net working capital positions. The Fund continues to hold cash, which

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is somewhat dilutive to returns in the short term, primarily to satisfy potential redemption requests and the pending extension of the Fund’s line of credit.

We look forward to another successful year and thank you for your investment in the Vertical Capital Income Fund.

Sincerely,

Michael D. Cohen
President

Past performance is neither indicative nor a guarantee of future results. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. The Fund’s investment Adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until 1/31/17, to ensure that the net annual Fund operating expenses will not exceed 1.85% (excluding Acquired Fund Fees and Expenses), subject to possible recoupment from the Fund in future years. Results shown reflect the Fund’s expense ratio, without which the results could have been lower. Without these waivers, the Fund’s total annual operating expenses would be 2.46%, and returns would have been lower. Please review the Fund’s prospectus for more information regarding the Fund’s fees and expenses. For performance information current to the most recent month-end, please go to provasicapital.com or call 866.655.3600.

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

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 shortterm 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.

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

SEC Yield calculated according to SEC form N-1A. The Adviser and the Fund have entered into an expense limitation agreement. The Fund’s SEC Yield without the expense limitation is 3.40% as of June 30, 2015 and 3.76% as of March 31, 2015.

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