Vertical
Capital Income Fund |
STATEMENT
OF ASSETS AND LIABILITIES (Unaudited) |
March
31, 2023 |
Assets: | |
| |
Investments in Securities at Market Value (cost $102,996,041) | |
$ | 103,101,100 | |
Cash | |
| 2,237,703 | |
Interest Receivable | |
| 1,656,434 | |
Receivable for Investment Securities Sold and Principal Paydowns | |
| 1,252,720 | |
Prepaid Expenses and Other Assets | |
| 772,295 | |
Total Assets | |
| 109,020,252 | |
| |
| | |
Liabilities: | |
| | |
Line of Credit, net | |
| 3,481,516 | |
Payable for Securities Purchased | |
| 1,710 | |
Accrued Advisory Fees | |
| 72,098 | |
Related Party Payable | |
| 16,133 | |
Accrued Expenses and Other Liabilities | |
| 121,836 | |
Total Liabilities | |
| 3,693,293 | |
| |
| | |
Net Assets | |
$ | 105,326,959 | |
| |
| | |
Net Assets consisted of: | |
| | |
Paid-in-Capital | |
$ | 107,774,611 | |
Accumulated Deficit | |
| (2,447,652 | ) |
Net Assets | |
$ | 105,326,959 | |
| |
| | |
Net Asset Value Per Share | |
| | |
Net Assets | |
$ | 105,326,959 | |
Shares of Beneficial Interest Outstanding (no par value) | |
| 10,381,847 | |
Net Asset Value (Net Assets/Shares Outstanding) | |
$ | 10.15 | |
The
accompanying notes are an integral part of these financial statements.
Vertical
Capital Income Fund |
STATEMENT
OF OPERATIONS (Unaudited) |
For
the Six Months Ended March 31, 2023 |
Investment Income: | |
| |
Interest Income | |
$ | 4,005,510 | |
Total Investment Income | |
| 4,005,510 | |
| |
| | |
Expenses: | |
| | |
Investment Advisory Fees | |
| 660,306 | |
Non-recurring Fees | |
| 348,363 | |
Interest Expense | |
| 232,767 | |
Security Servicing Fees | |
| 203,298 | |
Insurance Expense | |
| 123,413 | |
Audit Fees | |
| 100,265 | |
Trustees Fees | |
| 79,477 | |
Legal Fees | |
| 78,345 | |
Administration Fees | |
| 66,953 | |
Transfer Agent Fees | |
| 48,613 | |
Printing Expense | |
| 35,095 | |
Custody Fees | |
| 27,998 | |
Chief Compliance Officer Fees | |
| 27,683 | |
Line of Credit Fees | |
| 26,179 | |
Fund Accounting Fees | |
| 21,767 | |
Security Pricing Expense | |
| 17,951 | |
Miscellaneous Expenses | |
| 18,030 | |
Total Expenses | |
| 2,116,503 | |
Less: Expenses Waived by Adviser | |
| (188,673 | ) |
Net Expenses | |
| 1,927,830 | |
Net Investment Income | |
| 2,077,680 | |
| |
| | |
Net Realized and Unrealized Gain/Loss on Investments: | |
| | |
Net Realized Gain from: | |
| | |
Investments | |
| 270,733 | |
Net Change in Unrealized Depreciation on: | |
| | |
Investments | |
| (594,299 | ) |
Net Realized and Unrealized Loss on Investments | |
| (323,566 | ) |
| |
| | |
Net Increase in Net Assets Resulting From Operations | |
$ | 1,754,114 | |
The
accompanying notes are an integral part of these financial statements.
Vertical
Capital Income Fund |
STATEMENTS
OF CHANGES IN NET ASSETS |
| |
For the Six Months | | |
For the Year | |
| |
Ended | | |
Ended | |
| |
March 31, 2023 | | |
September 30, 2022 | |
| |
(Unaudited) | | |
| |
Operations: | |
| | |
| |
Net Investment Income | |
$ | 2,077,680 | | |
$ | 5,193,048 | |
Net Realized Gain from Investments | |
| 270,733 | | |
| 2,087,057 | |
Net Change in Unrealized Depreciation on Investments | |
| (594,299 | ) | |
| (10,408,837 | ) |
Net
Increase/Decrease in Net Assets Resulting From Operations | |
| 1,754,114 | | |
| (3,128,732 | ) |
| |
| | | |
| | |
Distributions to Shareholders From: | |
| | | |
| | |
Total Distributions Paid | |
| (4,275,244 | ) | |
| (9,452,773 | ) |
Return of Capital | |
| — | | |
| (912,958 | ) |
Total Distributions to Shareholders | |
| (4,275,244 | ) | |
| (10,365,731 | ) |
| |
| | | |
| | |
Beneficial Interest Transactions: | |
| | | |
| | |
Distributions Reinvested | |
| 18,624 | | |
| — | |
Net Increase in Net Assets from Beneficial Interest Transactions | |
| 18,624 | | |
| — | |
| |
| | | |
| | |
Total Decrease in Net Assets | |
| (2,502,506 | ) | |
| (13,494,463 | ) |
| |
| | | |
| | |
Net Assets: | |
| | | |
| | |
Beginning of Period/Year | |
| 107,829,465 | | |
| 121,323,928 | |
End of Period/Year | |
$ | 105,326,959 | | |
$ | 107,829,465 | |
| |
| | | |
| | |
Share Activity | |
| | | |
| | |
Shares Reinvested | |
| 1,844 | | |
| — | |
Net Increase in Shares of Beneficial Interest Outstanding | |
| 1,844 | | |
| — | |
The
accompanying notes are an integral part of these financial statements.
Vertical
Capital Income Fund |
STATEMENT
OF CASH FLOWS (Unaudited) |
For
the Six Months Ended March 31, 2023 |
Increase in Cash | |
| |
Cash Flows Provided by Operating Activities: | |
| |
Net Increase in Net Assets Resulting from Operations | |
$ | 1,754,114 | |
| |
| | |
Adjustments to Reconcile Net Increase (Decrease) in Net Assets Resulting | |
| | |
from Operations to Net Cash Provided by Operating Activities: | |
| | |
| |
| | |
Purchases of Long-Term Portfolio Investments | |
| (520,506 | ) |
Proceeds from Sale of Long-Term Portfolio Investments and Principal Paydowns | |
| 8,378,718 | |
Decrease in Interest Receivable | |
| 260,889 | |
Increase in Receivable for Investment Securities Sold and Principal Paydowns | |
| (494,135 | ) |
Increase in Prepaid Expenses and Other Assets | |
| (104,503 | ) |
Decrease in Payable for Securities Purchased | |
| (241,383 | ) |
Decrease in Accrued Advisory Fees | |
| (32,729 | ) |
Increase in Related Party Payable | |
| 861 | |
Decrease in Accrued Expenses and Other Liabilities | |
| (102,992 | ) |
Amortization of Deferred Financing Fees | |
| 26,179 | |
Net Amortization on Investments | |
| (722,032 | ) |
Net Realized Gain on Investments | |
| (270,733 | ) |
Change in Unrealized Depreciation on Investments | |
| 594,299 | |
| |
| | |
Net Cash Provided by Operating Activities | |
| 8,526,047 | |
| |
| | |
Cash Flows Used in Financing Activities: | |
| | |
Distributions Paid to Shareholders, Net of Reinvestments | |
| (4,256,620 | ) |
Proceeds from Line of Credit | |
| — | |
Payments on Line of Credit | |
| (4,000,000 | ) |
Net Cash Used in Financing Activities | |
| (8,256,620 | ) |
| |
| | |
Net Increase in Cash | |
| 269,427 | |
Cash at Beginning of Period | |
| 1,968,276 | |
Cash at End of Period | |
$ | 2,237,703 | |
| |
| | |
Supplemental Cash Flow Information: | |
| | |
Cash Paid for Interest of $234,056 | |
| | |
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 year/period presented.
| |
Six
Months | | |
Year | | |
Year | | |
Year | | |
Year | | |
Year | |
| |
Ended | | |
Ended | | |
Ended | | |
Ended | | |
Ended | | |
Ended | |
| |
March
31, 2023 | | |
September
30, 2022 | | |
September
30, 2021 | | |
September
30, 2020 | | |
September
30, 2019 | | |
September
30, 2018 | |
| |
(Unaudited) | | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
Net
Asset Value, Beginning of Year/Period | |
$ | 10.39 | | |
$ | 11.69 | | |
$ | 12.05 | | |
$ | 12.71 | | |
$ | 12.23 | | |
$ | 12.34 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
From
Operations: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
investment income (a) | |
| 0.20 | | |
| 0.50 | | |
| 0.42 | | |
| 0.36 | | |
| 0.30 | | |
| 0.43 | |
Net
gain (loss) from investments (both realized and unrealized) | |
| (0.03 | ) | |
| (0.80 | ) | |
| 0.33 | | |
| (0.50 | ) | |
| 0.72 | | |
| 0.06 | |
Total
from operations | |
| 0.17 | | |
| (0.30 | ) | |
| 0.75 | | |
| (0.14 | ) | |
| 1.02 | | |
| 0.49 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Distributions
to shareholders from: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
investment income | |
| (0.41 | ) | |
| (0.73 | ) | |
| (0.89 | ) | |
| (0.33 | ) | |
| (0.34 | ) | |
| (0.39 | ) |
Net
realized gains | |
| — | | |
| (0.18 | ) | |
| (0.22 | ) | |
| (0.19 | ) | |
| (0.20 | ) | |
| (0.21 | ) |
Return
of capital | |
| — | | |
| (0.09 | ) | |
| — | | |
| — | | |
| — | | |
| — | |
Total
distributions | |
| (0.41 | ) | |
| (1.00 | ) | |
| (1.11 | ) | |
| (0.52 | ) | |
| (0.54 | ) | |
| (0.60 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
Asset Value, End of Year/Period | |
$ | 10.15 | | |
$ | 10.39 | | |
$ | 11.69 | | |
$ | 12.05 | | |
$ | 12.71 | | |
$ | 12.23 | |
Market
Price, End of Year/Period | |
$ | 9.81 | | |
$ | 8.92 | | |
$ | 10.49 | | |
$ | 9.93 | | |
$ | 10.68 | | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
Return-NAV (b) | |
| 1.70 | %
(c) | |
| (2.77 | )% | |
| 6.52 | % | |
| (1.09 | )% | |
| 8.62 | % | |
| 4.03 | % |
Total
Return-Market Price (b) | |
| 14.94 | %
(c) | |
| (5.95 | )% | |
| 17.59 | % | |
| (2.99 | )% | |
| (8.73 | )% | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ratios/Supplemental
Data | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
assets, end of Year/Period (in 000s) | |
$ | 105,327 | | |
$ | 107,829 | | |
$ | 121,324 | | |
$ | 125,034 | | |
$ | 131,945 | | |
$ | 137,659 | |
Ratio
of gross expenses to average net assets (d) | |
| 4.01 | %
(e)(f) | |
| 3.27 | %
(e) | |
| 3.05 | % | |
| 3.06 | % | |
| 3.87 | %(g) | |
| 3.03 | %
(h) |
Ratio
of net expenses to average net assets (d) | |
| 3.65 | %
(e)(f) | |
| 3.09 | %
(e) | |
| 2.88 | % | |
| 2.73 | % | |
| 3.34 | %(g) | |
| 2.09 | %
(h) |
Ratio
of net investment income to average net assets (d) | |
| 3.93 | %
(e)(f) | |
| 4.53 | %
(e) | |
| 3.56 | % | |
| 2.95 | % | |
| 2.43 | %(g) | |
| 3.52 | %
(h) |
Portfolio
turnover rate | |
| 0.49 | %
(c) | |
| 28.39 | % | |
| 14.73 | % | |
| 20.13 | % | |
| 7.12 | % | |
| 5.11 | % |
Loan
Outstanding, End of Year/Period (000s) | |
$ | 3,482 | | |
$ | 7,455 | | |
$ | 1,923 | | |
$ | 13,000 | | |
$ | 2,355 | | |
$ | 6,664 | |
Asset
Coverage Ratio for Loan Outstanding (i) | |
| 3125 | % | |
| 1546 | % | |
| 6409 | % | |
| 1062 | % | |
| 5702 | % | |
| 2167 | % |
Asset
Coverage, per $1,000 Principal Amount of Loan | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Outstanding
(i) | |
$ | 31,253 | | |
$ | 15,463 | | |
$ | 64,090 | | |
$ | 10,618 | | |
$ | 53,778 | | |
$ | 20,680 | |
Weighted
Average Loans Outstanding (000s) (j) | |
$ | 5,786 | | |
$ | 8,051 | | |
$ | 10,788 | | |
$ | 9,796 | | |
$ | 7,500 | | |
$ | 4,500 | |
Weighted
Average Interest Rate on Loans Outstanding | |
| 7.69 | % | |
| 4.50 | % | |
| 3.75 | % | |
| 3.79 | % | |
| 5.14 | % | |
| 4.69 | % |
| (a) | Per
share amounts are calculated using the annual average shares method, which more appropriately presents the per share data for the period. |
| (b) | Total
returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any,
and excludes the effect of sales charges. Had the Adviser not waived expenses, total returns would have been lower. |
| (d) | Ratio
includes 0.49%, 0.41%, 0.41%, 0.48%, 0.46% and 0.24% for the period ended March 31, 2023 and the years ended September 30, 2022, 2021,
2020, 2019 and 2018, respectively, attributed to interest expenses and fees. |
| (e) | Ratio
includes 0.66% and 0.18% for the period ended March 31, 2023 and the year ended September 30, 2022, respectively, that attributed to
extraordinary expenses that relate to the strategic alternative search. |
| (g) | Ratio
includes 0.77% for the year ended September 30, 2019 that attributed to reorganization (NYSE listing) expenses and contested proxy expenses. |
| (h) | Ratio
includes 0.01% for the year ended September 30, 2018 that attributed to advisory transition expenses. |
| (i) | Represents
value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the end of the period. |
| (j) | Based
on monthly weighted average. |
The
accompanying notes are an integral part of these financial statements.
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) |
March
31, 2023 |
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.
The investment objective of the Fund is to seek income. The Fund currently has one class of shares which commenced operations on December
30, 2011. Prior to March 29, 2019, the Fund offered shares at net asset value plus a maximum sales charge of 5.75%. Oakline Advisors,
LLC (the Advisor), serves as the Funds investment adviser.
On
January 12, 2023, the Fund entered into a transaction agreement with an affiliate of global investment firm Carlyle, whereby upon obtaining
approval by the Funds shareholders Carlyle Global Credit Investment Management L.L.C. (CGCIM) will become the investment
adviser to the Fund (the Transaction). In addition, the Funds investment mandate will change to focus on investing
in equity and debt tranches of collateralized loan obligations (CLOs) in order to drive potential shareholder value. Under
the terms of the transaction agreement, if shareholders approve a new investment advisory agreement with CGCIM and the other closing
conditions are satisfied, at the closing of the Transaction, CGCIM or an affiliate will make a special one-time payment to the Funds
shareholders of $10,000,000, or approximately $0.96 per share. In addition, CGCIM or an affiliate will make a $40,000,000 equity commitment
to shareholders and/or the Fund in multiple transactions, including (1) the purchase of up to approximately $25,000,000 through a tender
offer and (2) an investment of approximately $15,000,000 in newly issued shares and private share purchases. All transactions are expected
to occur at prices that are equal to (or greater than) the Funds then-current net asset value per-share. As a result of these
transactions and assuming the tender offer is fully subscribed, Carlyle is expected to own approximately 40% of the Fund.
The
Transaction requires shareholder approval of the following proposals:
| (1) | To
approve the election of five new trustees: Mark Garbin, Sanjeev Handa, Joan McCabe, Brian Marcus, and Lauren Basmadjian. |
| (2) | To
approve the New Advisory Agreement. |
| (3) | To
approve a change in the Funds classification from a diversified investment company to a non-diversified investment company. |
| (4) | To
approve a change in the Funds industry concentration policy from concentrated in the mortgage-related industry to non-concentrated. |
| (5) | To
approve a change to the Funds Declaration of Trust that would increase the shareholder approval threshold in a contested Trustee election
to a majority of shares outstanding. |
| (6) | To
approve a change to the Funds Declaration of Trust to require shareholders representing at least 10% of shares to join in a derivative
action when the demand on the Board is not excused. |
| (7) | To
approve a change to the Funds Declaration of Trust to add a Delaware state court exclusive jurisdiction clause. |
| (8) | To
approve a change to the Funds Declaration of Trust stating that the Fund may only be dissolved upon approval of at least 80% of the
Trustees. |
| (9) | To
approve the change to the Funds Declaration of Trust requiring a 75% shareholder approval threshold to approve mergers or similar transactions
with Principal Shareholders. |
| (10) | To
approve a change to the Funds Declaration of Trust that would increase the shareholder approval thresholds for certain changes to the
Declaration of Trust, including any changes that would reduce the amount payable upon liquidation of the Fund or diminish or eliminate
any voting rights. |
| (11) | To
approve of all other changes to the Funds Declaration of Trust not addressed in Proposals 5-10. |
| (12) | To
approve Amended and Restated By-Laws for the Fund. |
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
In
addition, closing of the Transaction is conditioned upon the Fund selling existing investments with a gross asset value equal to at least
95% of the total gross assets, subject to certain exclusions, as well as certain other customary closing conditions, which may be waived
by one or both parties as provided in the transaction agreement.
| 2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES |
The
Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 Financial Services –
Investment Companies. The following is a summary of significant accounting policies and reporting policies used in preparing the
financial statements. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (GAAP). The Fund amortizes premiums and discounts using the effective interest rate method.
Offering expenses are amortized over 12 months following the time they are incurred.
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could differ from those estimates.
Investment
Security Valuation
Mortgage
Notes – The Fund uses an independent third-party pricing service, approved by the Funds Board of Trustees (the Board)
and the Funds Advisor as the Boards valuation designee, to value its Mortgage Notes on a monthly basis. The third-party
pricing servicer uses a cash flow forecast and valuation model that focuses on forecasting the frequency, timing and severity of mortgage
loss behavior. The model incorporates numerous observable loan-level factors such as unpaid principal balance, remaining term of the
loan and coupon rate as well as macroeconomic data including yield curves, spreads to the Treasury curves and home price indexes. The
model also includes a number of unobservable factors and assumptions (such as voluntary and involuntary prepayment speeds, delinquency
rates, foreclosure timing, and others) to determine a fair value. While the model requires a minimum set of data to develop a reasonable
fair value, the model is capable of accepting additional data elements. The model makes certain assumptions unless a specific data element
is included, in which case it uses the additional data. Not all assumptions have equal weighting in the model. Using assumptions in this
manner is a part of the Funds valuation policy and procedures and provides consistency in the application of valuation assumptions.
The third-party pricing servicer also benchmarks its pricing model against observable pricing levels being quoted by a range of market
participants active in the purchase and sale of Mortgage Notes. The combination of loan level criteria and market adjustments produces
a monthly 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; natural disasters and other factors beyond the control of the borrowers.
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
The
Funds investments in Mortgage Notes are subject to liquidity risk because there is a limited secondary market for Mortgage Notes. Liquidity
risk exists when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling
such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable
times or prices in order to satisfy its obligations. Securities for which current market quotations are not readily available, such as
the Mortgage Notes the Fund invests in, or for which quotations are not deemed to be representative of market values are valued at fair
value as determined in good faith by the Advisor in accordance with the Advisors Portfolio Securities Valuation Procedures (the
Procedures). The Procedures consider, among others, the following factors to determine a securitys fair value: the
nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation
methodologies that could be used to determine the fair value of the security.
The
valuation inputs and subsequent outputs are reviewed and maintained on a monthly basis. Any calibrations or adjustments to the model
that may be necessary are done on an as-needed basis to facilitate fair pricing. Financial markets are monitored relative to the interest
rate environment. If other available market data indicates that the pricing data from the third-party service is materially inaccurate,
or pricing data is unavailable, the Advisor undertakes a review of other available prices and takes additional steps to determine fair
value. In all cases, the Board reviews at least annually its understanding of methodology and assumptions underlying the fair value used
through a report from the Advisor.
The
Fund follows guidance in ASC 820, Fair Value Measurement, where fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between the market participants at the measurement date. The Advisor
utilizes various methods to measure the fair value of its investments on a recurring basis. The sale price could be different than its
fair value determined under ASC 820. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. ASC 820 classifies the
inputs used to measure these fair values into the following hierarchy:
Level
1 – Unadjusted quoted prices in active markets for identical and/or similar assets and liabilities that the Advisor has the
ability to access at the measurement date.
Level
2 – Other significant observable inputs other than quoted prices included in Level 1 for the asset or liability, either directly
or indirectly. These inputs may include quoted prices for similar investments or identical investments in an active market, interest
rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level
3 – Significant unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available,
representing the Advisors 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.
As
of March 31, 2023, management estimated that the carrying value of cash, accounts receivable, prepaid expenses and other assets, line
of credit payable, payables for securities purchased, accrued advisory fees, related party payables, and accrued and other liabilities
were at amounts that reasonably approximated their fair value based on their short-term maturities.
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
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 March 31, 2023 for the Funds assets measured at fair value:
Assets | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Mortgage Notes | |
$ | — | | |
$ | — | | |
$ | 102,943,229 | | |
$ | 102,943,229 | |
Other Investments | |
| — | | |
| — | | |
| 157,871 | | |
| 157,871 | |
Total | |
$ | — | | |
$ | — | | |
$ | 103,101,100 | | |
$ | 103,101,100 | |
There
were no transfers between levels during the current period presented. It is the Funds 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 | |
$ | 110,163,130 | | |
$ | 397,716 | | |
$ | 110,560,846 | |
Net realized gain (loss) | |
| 190,265 | | |
| 80,468 | | |
| 270,733 | |
Change in unrealized depreciation | |
| (558,476 | ) | |
| (35,823 | ) | |
| (594,299 | ) |
Cost of purchases | |
| 520,506 | | |
| — | | |
| 520,506 | |
Proceeds from sales and principal paydowns | |
| (8,092,328 | ) | |
| (286,390 | ) | |
| (8,378,718 | ) |
Purchase discount amortization | |
| 720,132 | | |
| 1,900 | | |
| 722,032 | |
Net Transfers within level 3 | |
| — | | |
| — | | |
| — | |
Ending balance | |
$ | 102,943,229 | | |
$ | 157,871 | | |
$ | 103,101,100 | |
The
total change in unrealized depreciation included in the Statement of Operations attributable to Level 3 investments still held at March
31, 2023 is $378,637.
The
following table provides quantitative information about the Funds Level 3 values, as well as its inputs, as of March 31, 2023. 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 | |
$ | 102,943,229 | | |
Comprehensive pricing model with emphasis
on discounted cash flows | |
Constant prepayment rate | |
0 - 100% | |
11.1% |
| |
| | | |
| |
Delinquency | |
0 - 1,672 days | |
50 days |
| |
| | | |
| |
Loan-to-Value | |
1.0 - 340.0% | |
74.8% |
| |
| | | |
| |
Discount rate | |
3.2 - 17.4% | |
7.6% |
Other Investments | |
| 157,871 | | |
Market comparable | |
Sales price | |
$113.1 sq/ft | |
$113.1 sq/ft |
Closing Balance | |
$ | 103,101,100 | | |
| |
| |
| |
|
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
A
change to the unobservable input may result in a significant change to the value of the investment as follows:
Security Transactions and | |
| |
|
Investment Income - | |
Impact to Value if | |
Impact to Value if |
Investment Security | |
Input Increases | |
Input Decreases |
Constant Prepayment Rate | |
Increase | |
Decrease |
Delinquency | |
Decrease | |
Increase |
Loan to Value | |
Decrease | |
Increase |
Discount rate | |
Decrease | |
Increase |
Cash
– Cash includes 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 – Mortgage Notes 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 are accreted and amortized over the life of the respective securities
using the effective interest method.
Interest
Income on Non-Accrual Loans – The Fund discontinues the accrual of interest on loans when, in the opinion of management, there
is an assessment that the borrower will likely be unable to meet all contractual payments as they become due.
Credit
Facility – On July 21, 2021, the Fund entered into an amended and restated revolving line of credit agreement with Nexbank
for investment purposes and to help maintain the Funds liquidity, subject to the limitations of the 1940 Act for borrowings. The
maximum amount of borrowing allowed under the amended and restated agreement was the lesser of $35 million or 75% of the eligible portion
of the Funds loans. Borrowings under the amended and restated Nexbank agreement bear interest at a rate equal to the Prime Rate
plus applicable margin of 0.5%, per annum, on the outstanding principal balance. The Nexbank agreement matures on July 18, 2023 and has
an one-year extension available. The Nexbank agreement is secured by assets of the Fund.
Accumulated
amortization of deferred financing fees was $26,179 during the six months ending March 31, 2023. The average amount of borrowing outstanding
for the period was $5,785,714 and the total interest expense was $232,767. The outstanding balance under the NexBank line of credit was
$3,500,000 at March 31, 2023.
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 Funds tax positions and has concluded that no liability for
unrecognized tax benefits should be recorded related to uncertain tax positions taken in the Funds September 30, 2020 –
September 30, 2022 tax returns or expected to be taken in the Funds September 30, 2023 tax returns. The Fund identified its major
tax jurisdictions as U.S. Federal jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax
positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next
twelve months. The Fund accounts for interest and penalties for any uncertain tax positions as a component of income tax expense. No
interest or penalty expense was recorded during the six months ended March 31, 2023.
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
Distributions
to Shareholders – Distributions from investment income and capital gains, if any, are declared and paid monthly and are recorded
on the ex-dividend date. The Boards decision to declare distributions will be influenced by its obligation to ensure that the
Fund maintains its federal tax status as a Registered Investment Company (RIC). In order to qualify as a RIC, the Fund
must derive a minimum of 90% of its income from capital gains, interest or dividends earned on investments and must distribute a minimum
of 90% of its net investment income in the form of interest, dividends or capital gains to its shareholders. Otherwise, the Fund may
be subject to an excise tax from the Internal Revenue Service.
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 Funds maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Fund that have not yet occurred. However, management of the Fund expects the
risk of loss due to these warranties and indemnities to be remote.
| 3. | INVESTMENT
IN RESTRICTED SECURITIES |
The
Fund may invest in Restricted Securities (those which cannot be offered for public sale without first being registered under the Securities
Act of 1933) that are consistent with the Funds 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 would typically
have no rights to compel the obligor or issuer of a Restricted Security to register such a Restricted Security under the 1933 Act. No
such securities were owned by the Fund at March 31, 2023.
| 4. | INVESTMENT
ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
The
business activities of the Fund are overseen by the Board, which is responsible for the overall management of the Fund.
Advisory
Fees –Pursuant to an Advisory Agreement with the Fund, the Advisor, under the oversight of the Board, directs certain of the daily
operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation
for its services and the related expenses borne by the Advisor, the Fund pays the adviser a management fee, computed and accrued daily
and paid monthly, at an annual rate of 1.25% of the average daily net assets of the Fund. For the six months ended March 31, 2023 the
Advisor earned advisory fees of $660,306.
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 taxes, leverage interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, expenses of investing
in underlying funds, or extraordinary expenses such as litigation and Advisor transition expenses) so that the total annual operating
expenses of the Fund do not exceed 2.50% of the average daily net assets through September 30, 2023. Waivers and expense reimbursements
may be recouped by the Advisor from the Fund within three years of when the amounts were waived only if the Fund expenses are lower than
both the lesser of the current expense cap and the expense cap in place at the time of waiver. For the six months ended March 31, 2023,
the Advisor waived advisory fees of $188,673. Expenses subject
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
to
recapture by the Advisor amounted to $847,207 of which $428,908 that will expire on September 30, 2023, and $203,867 that will expire
on September 30, 2024, and $214,432 that will expire on September 30, 2025.
In
addition, certain affiliates provide services to the Fund as follows:
Ultimus
Fund Solutions, LLC (UFS) – UFS provides administration and fund accounting services to the Fund. Pursuant
to a separate servicing agreement with UFS, the Fund pays UFS customary fees for providing administration and fund accounting services
to the Fund. Certain officers of the Fund are also officers of UFS, and are not paid any fees directly by the Fund for serving in such
capacities. For the six months ended March 31, 2023 UFS earned $88,719.
Northern
Lights Compliance Services, LLC (NLCS) – NLCS, an affiliate of UFS, provides a Chief Compliance Officer to
the Fund, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Fund. Under the terms of
such agreement, NLCS receives customary fees from the Fund. For the six months ended March 31, 2023 NLCS earned $27,683.
Blu
Giant, LLC (Blu Giant) – Blu Giant, an affiliate of UFS, provides EDGAR conversion and filing services as
well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Blu Giant receives customary
fees from the Fund. For the six months ended March 31, 2023 Blu Giant earned $11,191.
Trustees
– The Fund pays each Trustee who is not affiliated with the Fund or Advisor a quarterly fee of $5,000 and the lead unaffiliated
Trustee a quarterly fee of $10,000. Additionally, each unaffiliated Trustee receives $2,500 per meeting as well as reimbursement for
any reasonable expenses incurred attending meetings. The interested persons who serve as Trustees of the Fund receive no
compensation for their services as Trustees. None of the executive officers receive compensation from the Fund.
| 5. | INVESTMENT
TRANSACTIONS |
The
cost of purchases and proceeds from sales and paydowns of mortgage notes, other than U.S. Government securities and short-term investments,
for the six months ended March 31, 2023 amounted to $520,506 and $8,378,718, respectively.
| 6. | DISTRIBUTIONS
TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL |
The
Statement of Assets and Liabilities represents cost for financial reporting purposes. Aggregate cost for federal tax purposes is $102,901,351
and differs from fair value by net unrealized appreciation (depreciation) of securities as follows:
Unrealized Appreciation | |
$ | 4,591,969 | |
Unrealized Depreciation | |
| (4,392,220 | ) |
Tax Net Unrealized Appreciation | |
| 199,749 | |
The
tax character of distributions paid during the fiscal year ended September 30, 2022 was as follows:
| |
Fiscal Year Ended | |
| |
September 30, 2022 | |
Ordinary Income | |
$ | 5,833,699 | |
Long-Term Capital Gain | |
| 3,619,074 | |
Return of Capital | |
| 912,958 | |
| |
$ | 10,365,731 | |
Vertical
Capital Income Fund |
Notes
to Financial Statements (Unaudited) (Continued) |
March
31, 2023 |
As
of September 30, 2022, 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/ | | |
Distributable Earnings/ | |
Income | | |
Gains | | |
Late Year Loss | | |
Forwards | | |
Differences | | |
(Depreciation) | | |
(Accumulated Deficit) | |
$ | — | | |
$ | — | | |
$ | (720,570 | ) | |
$ | — | | |
$ | — | | |
$ | 794,048 | | |
$ | 73,478 | |
The
difference between book basis and tax basis accumulated net realized losses and unrealized appreciation from investments is primarily
attributable to tax adjustment for securities with significant debt modifications.
Late
year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year
for tax purposes. The Fund incurred and elected to defer such late year losses of $624,328.
Capital
losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for
tax purposes. The Fund incurred and elected to defer such capital losses of $96,242.
| 7. | MARKET
RISK AND CORONAVIRUS |
Unexpected
local, regional or global events, such as war; acts of terrorism; financial, political or social disruptions; natural, environmental
or man-made disasters; the spread of infectious illnesses or other public health issues; and recessions and depressions could have a
significant impact on the Fund and its investments and may impair market liquidity. Such events can cause investor fear, which can adversely
affect the economies of nations, regions and the market in general, in ways that cannot necessarily be foreseen. An outbreak of infectious
respiratory illness known as COVID-19, which is caused by a novel coronavirus (SARS-CoV-2), was first detected in China in December 2019
and subsequently spread globally. This coronavirus has resulted in, among other things, travel restrictions, closed international borders,
enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery,
prolonged quarantines, significant disruptions to business operations, market closures, cancellations and restrictions, supply chain
disruptions, lower consumer demand, and significant volatility and declines in global financial markets, as well as general concern and
uncertainty. The impact of COVID-19 has adversely affected, and other infectious illness outbreaks that may arise in the future could
adversely affect, the economies of the U.S., many other nations and the entire global economy, as well as individual mortgage note borrowers
and capital markets in ways that cannot necessarily be foreseen. Public health crises caused by the COVID-19 outbreak may exacerbate
other pre-existing political, social and economic risks in the U.S., certain other countries or globally. The duration of the COVID-19
outbreak and its effects cannot be determined with certainty.
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 nonrecognized 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 evaluated subsequent events through May
24, 2023, which is the date of these financial statements, and determined that no events or transactions occurred requiring adjustment
or disclosure in the financial statements other than the following.
On
May 22, 2023, a definitive proxy statement was filed with the SEC to solicit shareholder votes regarding the Transaction disclosed in
Note 1 herein. Shareholder meetings will be held on June 15, 2023, to vote on Transaction-related matters.
Supplemental
Information (Unaudited) |
CURRENT
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT POLICIES AND PRINCIPAL RISKS OF THE FUND
Investment
Objective and Policies
The
Funds investment objective is to seek income. The Fund pursues its investment objective by investing primarily in individual interest
income-producing debt securities secured by residential real estate (i.e., mortgage loans made to individual borrowers that are represented
by a note (the security) and a security agreement in the form of a mortgage or deed of trust). These notes are typically
sold individually or in groups or packages, all of which are difficult to value. The Fund acquires loans with varying terms and structures,
levels of borrower equity and credit profiles. The Fund does not limit the allocation of Fund assets in performing loans along the dimensions
of terms and structures, borrower equity, and credit profiles. Up to 10% of the loans the Fund acquires may be delinquent or in default
at the time of acquisition. The Fund will not purchase loans that currently are in foreclosure; however, loans acquired by the Fund may
go into foreclosure subsequent to acquisition by the Fund. In addition, the Fund may invest up to approximately 10% of its assets in
loans that are classified as sub-prime at the time of purchase by the Fund. The Fund does not invest in foreign securities.
The
Fund defines the individual borrowers issuing these types of mortgage-related notes as a type of industry. Therefore, the Fund concentrates
investments in the mortgage-related industry because, under normal circumstances, it invests over 25% of its assets in mortgage-related
securities. This policy is fundamental and may not be changed without shareholder approval.
Principal
Risk Factors
Investing
in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part
or all of your investment.
Borrower
Risk. A specific security can perform differently from the market as a whole for reasons related to the borrower, such as an
individuals economic situation. Compared to investment companies that focus only on securities issued by large capitalization companies,
the Funds net asset value may be more volatile because it invests in notes of individuals. Individuals issuing notes secured by residential
real estate are more likely to suffer sudden financial reversals such as (i) job loss, (ii) depletion of savings or (iii) loss of access
to refinancing opportunities. Further, compared to securities issued by large companies, notes issued by individuals are more likely
to experience more significant changes in market values, be harder to sell at times and at prices that the Adviser believes appropriate,
and offer greater potential for losses.
Concentration
Risk. Because the Fund will invest more than 25% of its assets in the mortgage-related industry, the Fund will be subject to
greater volatility risk than a fund that is not concentrated in a single industry. The Funds investments may be concentrated in regions
or states, which exposes the Fund to region- or state-specific economic risks.
Supplemental
Information (Unaudited)(Continued) |
Credit
Risk. Individual borrowers may not make scheduled interest and principal payments, resulting in losses to the Fund. In addition,
the credit quality of securities may be lowered if a borrowers financial condition deteriorates, which tends to increase the risk of
default and decreases a notes value. Weak or declining general economic conditions tend to increase default risk. Lower-quality notes,
such as those considered sub-prime by the Adviser are more likely to default than those considered prime by the
Adviser or a rating evaluation agency or service provider. An economic downturn or period of rising interest rates could adversely affect
the market for sub-prime notes and reduce the Funds ability to sell these securities. The lack of a liquid market for these securities
could decrease the Funds share price. Additionally, borrowers may seek bankruptcy protection which would delay resolution of security
holder claims and may eliminate or materially reduce liquidity.
Defaulted
Securities Risk. Defaulted securities lack liquidity and may have no secondary market for extended periods. Defaulted securities
may have low recovery values and defaulting borrowers may seek bankruptcy protection which would delay resolution of the Funds claims.
The Fund anticipates a significant likelihood of default by mortgage-related borrowers.
Fixed
Income Risk. Typically, a rise in interest rates causes a decline in the value of fixed income securities. Rising interest rates
tend to increase the likelihood of borrower default.
Leverage
Risk. The use of leverage by borrowing money to purchase additional securities causes the Fund to incur additional expenses and
will magnify losses in the event of underperformance of the securities purchased with borrowed money. In addition, a lender to the Fund
may terminate or refuse to renew any credit facility. If the Fund is unable to access additional credit, it may be forced to sell investments
at inopportune times, which may further depress the returns of the Fund.
Liquidity
Risk. The Funds investments 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.
Management
Risk. The Advisers judgments about the attractiveness, value and potential appreciation of a particular real estate segment
and securities in which the Fund invests may prove to be incorrect and may not produce the desired results.
Market
Risk. An investment in the Funds shares is subject to investment risk, including the possible loss of the entire principal amount
invested. An investment in the Funds shares represents an indirect investment in the securities owned by the Fund. The value of these
securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. The Funds borrowing costs, if any,
will increase when interest rates rise. Additionally, unexpected local, regional or global events, such as war; acts of
Supplemental Information (Unaudited)(Continued) |
terrorism;
financial, political or social disruptions; natural, environmental or man-made disasters; the spread of infectious illnesses or other
public health issues (such as the global pandemic coronavirus disease 2019 (COVID-19)); and recessions and depressions could have a significant
impact on the Fund and its investments and may impair market liquidity. Such events can cause investor fear, which can adversely affect
the economies of nations, regions and the market in general, in ways that cannot necessarily be foreseen.
Prepayment
Risk. Securities may be subject to prepayment risk because borrowers are typically able to prepay principal. Consequently, a
securitys maturity may be longer or shorter than anticipated. When interest rates fall, obligations tend to be paid off more quickly
than originally anticipated and the Fund may have to invest the prepaid proceeds in securities with lower yields. When interest rates
rise, obligations will tend to be paid off by the obligor more slowly than anticipated, preventing the Fund from reinvesting at higher
yields.
Real
Estate Risk. 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. The value of residential real estate collateral
is affected by:
| (i) | changes
in general economic and market conditions including changes in employment; |
| (ii) | changes
in the value of real estate properties generally; |
| (iii) | local
economic conditions, overbuilding and increased competition; |
| (iv) | increases
in property taxes and operating expenses; |
| (v) | changes
in zoning laws; |
| (vi) | casualty
and condemnation losses including environment remediation costs; |
| (vii) | variations
in rental income, neighborhood values or the appeal of property to tenants or potential buyers; |
| (viii) | the
availability of financing; |
| (ix) | changes
in interest rates and available borrowing leverage; and |
Servicer
Risk. Because the Fund engages servicers to collect payments from borrowers, there is a risk that payments to the Fund will be
delayed if a servicer fails to perform its functions or fails to perform them in a timely manner. If a servicer becomes insolvent or
the Fund otherwise decides to move to a new servicer, the Fund will incur expenses in transferring servicing duties to a new servicer
and borrower delinquencies would likely rise during a transition.
Supplemental
Information (Unaudited)(Continued) |
The
Adviser may invest up to 10% of the Funds assets in notes secured by commercial real estate. The Adviser selects securities by evaluating
the issuers credit quality and the potential liquidation value of the commercial real estate collateral securing the issuers debt obligation.
When evaluating credit quality the Adviser uses an underwriting model that takes into account the following factors, but may also take
into consideration others:
Commercial
Issuers
| ● | Issuer
payment history including delinquencies and defaults |
| ● | Securitys
interest rate |
| ● | Issuer
total debt service load and total fixed costs |
| ● | Tenant
quality and lease roll-over |
| ● | Local
market competition |
| ● | Title
search of property to assure clear title by issuer |
When
evaluating commercial real estate collaterals potential liquidation value the Adviser uses a collateral valuation underwriting model
that may take into account the following factors, but may also take into consideration others:
| ● | Current
property value as established by an independent brokers price opinion |
| ● | State
laws pertaining to mortgages in that domicile |
| ● | Local
real estate trends around the respective property |
| ● | Potential
environmental remediation costs at site |
| ● | Estimated
foreclosure value for the property |
Even
though the Adviser re-evaluates each issuers ability to pay, it nonetheless anticipates a significant likelihood of default by issuers
because of difficult-to-predict economic events. The Adviser expects to resolve or forestall defaults primarily by renegotiating note
terms to lower interest and/or principal payments so that an issuer can resume payments on its note. The Adviser also may enter into
an agreement with the issuer and a third party to sell the property to the third party for less than the principal balance on the note
while forgiving any unpaid principal that remains after receiving the proceeds from the sale (commonly referred to as a short-sale).
The Adviser may also foreclose upon the property and seek to recover via sale of the property.
There
are also special risks associated with particular sectors, or real estate operations generally, as described below:
Retail
Properties. Retail properties are affected by the overall health of the economy and may be adversely affected by, among other things,
the growth of alternative forms of retailing, bankruptcy, departure or cessation of operations of a tenant, a shift in consumer demand
due to demographic changes, changes in spending patterns and lease terminations.
Office
Properties. Office properties are affected by the overall health of the economy, and other factors such as a downturn in the businesses
operated by their tenants, obsolescence and non-competitiveness.
Hotel
Properties. The risks of hotel properties include, among other things, the necessity of a high level of continuing capital expenditures,
competition, increases in operating costs which may not be offset by increases in revenues, dependence on business and commercial travelers
and tourism, increases in fuel costs and other expenses of travel, and adverse effects of general and local economic conditions. Hotel
properties tend to be more sensitive to adverse economic conditions and competition than many other commercial properties.
Healthcare
Properties. Healthcare properties and healthcare providers are affected by several significant factors, including federal, state
and local laws governing licenses, certification, adequacy
Supplemental
Information (Unaudited)(Continued) |
of
care, pharmaceutical distribution, rates, equipment, personnel and other factors regarding operations, continued availability of revenue
from government reimbursement programs and competition on a local and regional basis. The failure of any healthcare operator to comply
with governmental laws and regulations may affect its ability to operate its facility or receive government reimbursements.
Multifamily
Properties. The value and successful operation of a multifamily property may be affected by a number of factors such as the location
of the property, the ability of the management team, the level of mortgage rates, the presence of competing properties, adverse economic
conditions in the locale, oversupply and rent control laws or other laws affecting such properties.
Community
Centers. Community center properties are dependent upon the successful operations and financial condition of their tenants, particularly
certain of their major tenants, and could be adversely affected by bankruptcy of those tenants. In some cases a tenant may lease a significant
portion of the space in one center, and the filing of bankruptcy could cause significant revenue loss. Like others in the commercial
real estate industry, community centers are subject to environmental risks and interest rate risk. They also face the need to enter into
new leases or renew leases on favorable terms to generate rental revenues. Community center properties could be adversely affected by
changes in the local markets where their properties are located, as well as by adverse changes in national economic and market conditions.
Self-Storage
Properties. The value and successful operation of a self-storage property may be affected by a number of factors, such as the ability
of the management team, the location of the property, the presence of competing properties, changes in traffic patterns and effects of
general and local economic conditions with respect to rental rates and occupancy levels.
Other
factors may contribute to the risk of commercial real estate investments:
Development
Issues. Certain commercial real estate issuers may engage in the development or construction of real estate properties. These issuers
are exposed to a variety of risks inherent in real estate development and construction, such as the risk that there will be insufficient
tenant demand to occupy newly developed properties, and the risk that prices of construction materials or construction labor may rise
materially during the development.
Lack
of Insurance. Certain commercial real estate issuers may fail to carry comprehensive liability, fire, flood, earthquake extended
coverage and rental loss insurance, or insurance in place may be subject to various policy specifications, limits and deductibles. Should
any type of uninsured loss occur, the portfolio company could lose its investment in, and anticipated profits and cash flows from, a
number of properties and, as a result, adversely affect the Funds investment performance.
Dependence
on Tenants. The value of commercial real estate issuers properties and the ability to repay their notes depend upon the ability
of the tenants at their properties to generate enough income in excess of their operating expenses to make their lease payments. Changes
beyond the control of commercial real estate issuers may adversely affect their tenants ability to make their lease payments and,
in such event, would substantially reduce both their income from operations and ability to repay their notes.
Financial
Leverage. Commercial real estate issuers may be highly leveraged and financial covenants may affect the ability of these issuers
to operate effectively.
Environmental
Issues. In connection with the ownership (direct or indirect), operation, management and development of real properties that may
contain hazardous or toxic substances, a commercial real estate issuer may be considered an owner, operator or responsible party of such
properties and, therefore, may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental
fines and liabilities for injuries to persons and property. The existence of any such material environmental liability could have a material
adverse effect on the results of
Supplemental
Information (Unaudited)(Continued) |
operations
and cash flow of any such issuer and, as a result, the amount available to make interest or principal payments to the Fund could be reduced.
The
Adviser may invest a portion of the Funds assets in indirect real estate loans through loan participations. Loan participations represent
a percentage of an outstanding loan or package of loans. Loan participation holders typically participate on a pro-rata basis in collected
interest and principal payments and are similarly exposed to a proportional risk of default. Loan participations are also subject to
the default risk of the loan participation grantor, which is heightened if that entity also services the underlying loan or loans.
The
Adviser may invest a portion of the Funds assets in second mortgage loans. These are subject to the risks of a first mortgage loan but
are also highly sensitive to default. A borrower default on a second mortgage (or related first mortgage) typically results in a total
loss of the Funds investment in the second mortgage loan.
Fundamental
Policies
The
Funds stated fundamental policies, which may only be changed by the affirmative vote of a majority of the outstanding voting securities
of the Fund (the shares), are listed below. Majority of the outstanding voting securities of the Fund means the vote, at an annual or
special meeting of shareholders, duly called, (a) of 67% or more of the shares present at such meeting, if the holders of more than 50%
of the outstanding shares are present or represented by proxy; or (b) of more than 50% of the outstanding shares, whichever is less.
The Fund may not:
(1) Borrow
money, except to the extent permitted by the Investment Company Act of 1940, as amended (the 1940 Act) (which currently limits
borrowing to no more than 33-1/3% of the value of the Funds total assets, including the value of the assets purchased with the proceeds
of its indebtedness, if any). The Fund may borrow for investment purposes, for temporary liquidity, or to finance repurchases of its
shares.
(2)
Issue senior securities, except to the extent permitted by Section 18 of the 1940 Act (which currently limits the issuance of a
class of senior securities that is indebtedness to no more than 33-1/3% of the value of the Funds total assets or, if the class of
senior security is stock, to no more than 50% of the value of the Funds total assets).
(3) Underwrite
securities of other issuers, except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended (the
Securities Act) in connection with the disposition of its portfolio securities. The Fund may invest in restricted securities
(those that must be registered under the Securities Act before they may be offered or sold to the public) to the extent permitted by
the 1940 Act.
(4) Invest
more than 25% of the market value of its assets in the securities of companies, entities or issuers engaged in any one industry, except
the mortgage-related industry, as defined in the Funds Prospectus. Under normal circumstances, the Fund will invest at least 25% of
its net assets in mortgage-related securities. This limitation does
Supplemental
Information (Unaudited)(Continued) |
not
apply to investment in the securities of the U.S. Government, its agencies or instrumentalities.
(5) Purchase
or sell real estate or interests in real estate. This limitation is not applicable to investments in securities that are secured by or
represent interests in real estate (e.g. mortgage loans evidenced by notes or other writings defined to be a type of security). Additionally,
the preceding limitation on real estate or interests in real estate does not preclude the Fund from investing in mortgage-related securities
or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including
real estate investment trusts), nor from disposing of real estate that may be acquired pursuant to a foreclosure (or equivalent procedure)
upon a security interest.
(6) Purchase
or sell commodities, commodity contracts, including commodity futures contracts, unless acquired as a result of ownership of securities
or other investments, except that the Fund may invest in securities or other instruments backed by or linked to commodities, and invest
in companies that are engaged in a commodities business or have a significant portion of their assets in commodities, and may invest
in commodity pools and other entities that purchase and sell commodities and commodity contracts.
(7) Make
loans to others, except (a) through the purchase of debt securities in accordance with its investment objectives and policies, including
notes secured by real estate, which may be considered loans; (b) to the extent the entry into a repurchase agreement is deemed to be
a loan; and (c) by loaning portfolio securities. Additionally, the preceding limitation on loans does not preclude the Fund from modifying
note terms.
If
a restriction on the Funds investments is adhered to at the time an investment is made, a subsequent change in the percentage of Fund
assets invested in certain securities or other instruments, or change in average duration of the Funds investment portfolio, resulting
from changes in the value of the Funds total assets, will not be considered a violation of the restriction; provided, however, that
the asset coverage requirement applicable to borrowings shall be maintained in the manner contemplated by applicable law.
Approval
of Investment Advisory Agreement
Approval
of the Investment Advisory Agreement with Carlyle Global Credit Investment Management LLC
In
connection with the meeting of the Board of Trustees (the Board) of Vertical Capital Income Fund (the Fund) held
on November 18, 2022 and as continued on November 28, 2022 (the Meeting), the Board, including a majority of the Trustees
who are not interested persons as that term is defined in the Investment Company Act of 1940, as amended, discussed the approval
of an investment advisory agreement (the Proposed Advisory Agreement) between Carlyle Global Credit Investment Management
LLC
Supplemental
Information (Unaudited)(Continued) |
(CGCIM)
and the Fund, with respect to Vertical Capital Income Fund, subject to shareholder approval. In considering the approval of the Proposed
Advisory Agreement the Board received materials specifically relating to the Proposed Advisory Agreement.
The
Board reviewed and discussed the materials that were provided in advance of the Meeting and deliberated on the approval of the Proposed
Advisory Agreement. The Board relied upon the advice of independent legal counsel and its own business judgment in determining the material
factors to be considered in evaluating the Proposed Advisory Agreement on behalf of Vertical Capital Income Fund and the weight to be
given to each factor considered. The conclusions reached by the Board 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 approval of the Proposed Advisory Agreement.
The Trustees considered the following material
factors during their deliberations: (1) the nature, extent and quality of services to be provided
by CGCIM; (2) the investment performance of a similar fund advised by CGCIM; (3) the estimated cost of services to be provided and the
profits to be realized by CGCIM and its affiliates; (4) the extent to which economies of scale will be realized as the Fund grows; and
(5) whether the fee levels reflect these economies of scale for the benefit of investors. The Trustees relied upon the advice of counsel
and their own business judgment in determining the before-mentioned material factors to be considered in evaluating the Proposed Advisory
Agreement and the weight to be given to each factor considered. 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 or her conclusions with respect to the approval of the Proposed Advisory Agreement.
Nature,
Extent and Quality of Services. The Trustees discussed CGCIMs history and the proposed portfolio managers experience.
They noted that CGCIM and its affiliates currently serve a variety of institutional investors, including privately offered pooled investment
funds, insurance companies; as well as SEC registered investment companies, including a closed-end fund operating as an interval fund
that has an investment strategy that allocates a portion of the interval funds portfolio to investments similar to those that the
Fund would pursue under CGCIMs management. The Trustees also considered the implicit shareholder endorsement suggested by CGCIMs
over $20 billion in assets under management. The Trustees reviewed the background and the significant investment experience of key members
of the CGCIM team proposed to advise and service the Fund. They noted that although CGCIM does not presently manage an exchange-traded
closed end fund substantially similar to the Fund, they favorably considered the varied and extensive experience of the portfolio management
and compliance teams, and CGCIMs ability to leverage the experience and expertise of its affiliates to the benefit of the Fund
and shareholders. The Trustees also noted that CGCIM does manage an exchange-traded closed end fund that has elected to be treated as
a business development company, which suggests familiarity with the additional regulatory burdens imposed by an exchange.
Supplemental
Information (Unaudited)(Continued) |
The
Board also reviewed materials provided including CGCIMs Form ADV, an overview of the manner in which investment decisions are made,
a summary of compliance policies, and a Code of Ethics as well as a related representation from CGCIM certifying that it has adopted
a Code of Ethics containing provisions reasonably necessary to prevent Access Persons, as that term is defined in Rule 17j-1 under the
1940 Act, from engaging in conduct prohibited by Rule 17j-1(b) and that it has adopted procedures reasonably necessary to prevent Access
Persons from violating such Code of Ethics. The Trustees discussed the investment advisory and related services to be provided to the
Fund noting that CGCIM would oversee the day-to-day operations of the Fund, provide a variety of investment advisory services including
investment research, execution and management of the Funds investment portfolio, and provide oversight and compliance support. The Trustees
noted positively the significant support that CGCIM has in its affiliated entities which further strengthen the services available to
the Fund and shareholders; as well as potential access to additional capital support from a parent entity should the need arise. They
also considered favorably CGCIMs multi-stage investment selection process, which includes: (i) wide ranging sourcing of possible CLO
investment securities, (ii) in-depth review of the managers of the security issuing CLO entities, (iii) deep credit review on loans held
by each CLO, and (iv) legal and structural review of the CLO governing documents and cash flow protocols and payment mechanics of the
tranches of each CLO. The Trustees discussed CGCIMs proposal for the ongoing management and implementation of strategy changes for the
Fund and agreed that CGCIM had given thoughtful consideration to the development of a strategic and promising plan for the Fund. After
further discussion, the Trustees concluded that CGCIM has the potential to provide high quality advisory services to the Fund in line
with the Boards expectations.
Performance.
They noted that CGCIM does not currently manage an exchange-traded fund with a strategy identical or substantially similar to that
of the Fund. However, they reviewed the performance of a CGCIM-advised SEC-registered closed-end fund that operates as an interval fund.
They noted favorably, that since inception to present this fund had outperformed its benchmark, composed of a blended index of a Bloomberg
Barclays High Yield Index and a Leverage Loan Index. The Trustees observed that the investment strategy of the interval fund allocates
a portion of the interval funds portfolio to investments similar to those that the Fund would pursue under CGCIMs management
and that the above-benchmark was a favorable indication of CGCIMs investment acumen. The Trustees also gave favorable consideration
to the positive performance over several years of two funds which had been advised by CGCIM. Overall, the Trustees concluded that the
totality of performance reviewed suggests CGCIM has the capacity to provide favorable returns for shareholders.
Fees
and Expenses. The Trustees noted that CGCIM proposed to charge an advisory fee composed of a base fee and a performance-related fee.
CGCIM proposed to receive an annual fee from the Fund of 1.75% of the Funds month end managed assets (approximately equal to total
assets), which is higher than the current advisory fee of 1.25% on average daily net assets. The Trustees concluded that paying a management
Supplemental
Information (Unaudited)(Continued) |
fee
based on managed assets rather than net assets was equitable because CGCIMs management burden is dictated by the size of managed assets.
The Trustees noted that the CLO asset class requires a different investment skill set, greater resources, and is generally considered
a more difficult asset class to analyze. Additionally, CGCIM may also receive performance-related fees if the Funds income exceeds an
annual rate of 8.00%, measured on a quarterly basis of 2.00% per quarter. The Trustees concluded that a performance-related fee is reasonable
because it further aligns the interests of CGCIM with those of the Fund.
The
Trustees also favorably considered that CGCIM will contractually agree to reduce its fees and to reimburse expenses from the date of
effectiveness of the new advisory agreement such that certain Fund expenses do not exceed 2.50% of the Funds average daily net assets.
This expense limit will be in place for the period ending on the earlier of (a) four quarters post-closing or (b) the date on which at
least 75% of the Funds gross assets are invested in CLO equity and debt investments. The expense limit excludes certain customary items
such as interest expense and incentive fees and CGCIM will not be able to recoup any amounts waived or reimbursed under the expense limitation
agreement. The Trustees also viewed favorably a secondary fee waiver agreement under which CGCIM will irrevocably waive advisory fees
related to the Funds investment in ETFs that the Fund may hold on a temporary basis as it seeks to transition to the new CLO investment
strategy. The Trustees considered a peer group of funds that follow a similar investment strategy and concluded that the base fee was
within a range of reasonable fees; and that the performance fee was also within a range of reasonable fees. The Trustees also noted that
peer group formulations of base fees and performance fees are not identical, but are substantially similar. As to total expenses, the
Trustees considered the range of peer group expenses, but noted that total Fund expenses are not fully within CGCIMs control and that
the expense limitation agreements will tend to dampen Fund expenses to a reasonable level. After further discussion, the Trustees concluded
that the proposed advisory fee structure was reasonable.
Economies
of Scale. The Trustees considered whether CGCIM will realize economies of scale with respect to the management of the Fund. The Trustees
agreed that at current asset levels and in light of the proposed strategy change, meaningful economies of scale had not yet been reached.
They agreed this issue should be monitored and revisited to evaluate the appropriateness of breakpoints in the advisory fee as Fund assets
increase.
Profitability.
The Trustees considered the projected profits by CGCIM in connection with the operation of the Fund for the first two years under
the Proposed Advisory Agreement and whether the amount of profit would be a fair entrepreneurial profit for the management of the Fund.
The Trustees considered various assumptions that CGCIM used in estimating its future profitability from managing the Fund, some of which
indicated the possibility for significant asset growth as well as a favorable investment environment that would generate enough income
so that CGCIM would receive performance-based fees. The Trustees noted that CGCIM expected to receive a reasonable profit as measured
by percentage of revenue over both years, with an increase in the second year
Supplemental
Information (Unaudited)(Continued) |
assuming
asset growth, leverage costs, and income based on CGCIMs proposed plans for the Fund and the new investment strategy. The Board concluded
that CGCIMs estimated level of profitability from its relationship with the Fund was not excessive.
Conclusion.
Having requested and received such information from CGCIM as the Board believed to be reasonably necessary to evaluate the terms
of the Proposed Advisory Agreement, and as assisted by the advice of counsel, the Board concluded that the proposed advisory fee structure
is reasonable and that approval of the Proposed Advisory Agreement is in the best interests of the shareholders of the Fund.
Vertical
Capital Income Fund
Dividend
Reinvestment Plan
Unless
the registered owner of shares elects to receive cash by contacting the Plan Agent, all dividends declared for the shares of the Fund
will be automatically paid in the form of, or reinvested by American Stock Transfer & Trust Company (AST) (the Plan
Agent), agent for shareholders in administering the Funds Dividend Reinvestment Plan (the Plan), in additional shares
of the Fund. If you are a registered owner of shares and elect not to participate in the Plan, you will receive all dividends or other
distributions (together, a dividend) in cash paid by check mailed directly to you (or, if the shares are held in street or
other nominee name, then to such nominee) by AST, as dividend disbursing agent. You may elect not to participate in the Plan and to receive
all dividends in cash by sending written instructions or by contacting AST, as dividend disbursing agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by contacting the Plan
Agent before the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared
dividend. Some brokers or other financial intermediaries through which shareholders may hold their shares, may automatically elect to
receive cash on the shareholders behalf and may reinvest that cash in additional shares of the Fund for the respective shareholders.
The
Plan Agent will open an account for each shareholder under the Plan in the same name in which such shareholders shares are registered.
Whenever the Fund declares a dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in shares. The shares will be acquired by the Plan Agent for the participants accounts, depending upon the circumstances
described below, either (i) through receipt of additional unissued but authorized shares from the Fund (newly issued shares)
or (ii) by purchase of outstanding shares on the open market (open-market purchases) on the New York Stock Exchange or elsewhere.
Whenever
the Fund declares a dividend, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent
in shares. The shares will be acquired by the
Supplemental
Information (Unaudited)(Continued) |
Plan
Agent for the participants accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued
but authorized shares from the Fund (newly issued shares) or (ii) by purchase of outstanding shares on the open market (open-market purchases)
on the NYSE or elsewhere. If, on the payment date for any dividend, the closing market price plus estimated brokerage commissions per
share is equal to or greater than the NAV per share, the Plan Agent will invest the dividend amount in newly issued shares on behalf
of the participants. The number of newly issued shares to be credited to each participants account will be determined by dividing the
dollar amount of the dividend by the Funds NAV per share on the payment date. If, on the payment date for any dividend, the NAV per
share is greater than the closing market value plus estimated brokerage commissions (i.e., the Funds shares are trading at a discount),
the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases.
In
the event of a market discount on the payment date for any dividend, the Plan Agent will have until the last business day before the
next date on which the shares trade on an ex-dividend basis or 30 days after the payment date for such dividend, whichever
is sooner (the last purchase date), to invest the dividend amount in shares acquired in open-market purchases. It is contemplated
that the Fund will pay monthly income dividends. If, before the Plan Agent has completed its open-market purchases, the market price
per share exceeds the NAV per share, the average per share purchase price paid by the Plan Agent may exceed the NAV of the shares, resulting
in the acquisition of fewer shares than if the dividend had been paid in newly issued shares on the dividend payment date. Because of
the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase
period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued
shares at the NAV per share.
The
Plan Agent maintains all shareholders accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. shares in the account of each Plan participant will be held by the Plan Agent on
behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The
Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance
with the instructions of the participants.
In
the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of shares certified from time to time by the record shareholders name and held for
the account of beneficial owners who participate in the Plan.
Supplemental
Information (Unaudited)(Continued) |
There
will be no brokerage charges with respect to shares issued directly by the Fund. However, each participant will pay a pro rata share
of brokerage commissions incurred in connection with open-market purchases. The automatic reinvestment of dividends will not relieve
participants of any tax that may be payable (or required to be withheld) on such dividends. Accordingly, any taxable dividend received
by a participant that is reinvested in additional shares will be subject to U.S. federal (and possibly state and local) income tax even
though such participant will not receive a corresponding amount of cash with which to pay such taxes. Participants who request a sale
of shares through the Plan Agent are subject to a $15.00 sales fee and pay a brokerage commission of $0.12 per share sold.
The
Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the participants.
All
correspondence concerning the Plan should be directed to the Plan Agent at American Stock Transfer & Trust Company, 6201 15th
Avenue, Brooklyn, New York 11219; telephone 1-866-277-8243.
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 |
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|
■ |
Assets |
■ |
Account Balances |
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■ |
Retirement
Assets |
■ |
Account Transactions |
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■ |
Transaction
History |
■ |
Wire Transfer
Instructions |
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■ |
Checking
Account Information |
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|
When
you are no longer our customer, we continue to share your information as described in this notice. |
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|
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
dont share |
For
joint marketing with other financial companies |
No |
We
dont share |
For
our affiliates everyday business purposes –
information
about your transactions and experiences |
No |
We
dont share |
For
our affiliates everyday business purposes –
information
about your creditworthiness |
No |
We
dont share |
For
nonaffiliates to market to you |
No |
We
dont 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 drivers license
We
also collect your personal information from other companies. |
Why
cant 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 doesnt jointly market. |
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How
to Obtain Proxy Voting Information
Information
regarding how the Fund votes proxies relating to portfolio securities for the most-recent 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 Commissions (SEC) website at www.sec.gov.
How
to Obtain 1st and 3rd Fiscal Quarter Portfolio Holdings
The
Fund files its complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT
as an exhibit to its reports on Form N-PORT, within sixty days after the end of the period. Form N-PORT reports are available at the
SECs website at www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-866-277-VCIF.
|
|
Investment
Adviser |
|
Oakline
Advisors, LLC |
|
5301
Alpha Rd, Suite 80 - 222 |
|
Dallas,
Texas 75240 |
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Administrator |
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Ultimus
Fund Solutions, LLC |
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225
Pictoria Drive, Suite 450 |
|
Cincinnati,
OH 45246 |
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|
VERTICAL-SA23 |
(b) Not applicable.