Vertical Capital Income Fund (VCIF) Announces Hurricane Ian Impact Update and Estimated Sources of October 2022 Distribution

Rhea-AI Summary

Vertical Capital Income Fund (NYSE: VCIF) addressed the impact of Hurricane Ian, noting potential damage to mortgage-backed properties. In 26 Florida counties designated as disaster areas by FEMA, the Fund has 34 loans, with inspections showing 25 are undamaged. The estimated net asset valuation will be reduced by about 1%. A monthly distribution of $0.0700 per share was paid to shareholders on October 19, 2022. The distribution sources include 40.86% net investment income and 59.14% return of capital. Future valuations will adjust as more inspection data becomes available.

Positive

• 25 out of 34 loans in hurricane-affected areas showed no significant damage, indicating potential stability.
• Monthly distribution of $0.0700 per share reflects active income generation despite challenges.

Negative

• Valuation of loans impacted by Hurricane Ian reduced by 35% initially, suggesting significant uncertainty.
• Overall net asset valuation will see a reduction of about 1% due to pending inspections.

DALLAS, Oct. 31, 2022 /PRNewswire/ -- As previously announced, it is important for shareholders in Vertical Capital Income Fund (NYSE: VCIF, the "Fund") to consider that Hurricane Ian may have caused physical damage to houses that secure mortgage notes held by the Fund. The cost of home repair may be significant and may not be fully covered by a homeowner's insurance. Additionally, demand for properties in the hurricane impacted area may be lower and home prices may decline as a result. This is a potential impact on all properties in the area of the hurricane (and ancillary) devastation regardless of whether they were actually physically damaged.

The Fund's investment adviser, as the Board of Trustees' valuation designee, follows a policy for valuation purposes in the event of a natural disaster when specific information about collateral in disaster areas is not yet available. Currently, the policy provides that loans owned by the Fund with collateral in counties that have been deemed by the Federal Emergency Management Agency (FEMA) as disaster areas, will be reduced in value without additional information initially by 35% to take into account the possibility of damage to the underlying collateral pending the receipt of additional information regarding such collateral. As inspections or other information about the collateral in those areas becomes available after the disaster, the Fund's investment adviser will modify the valuation of each loan based upon more accurate information. Many assets backing the Fund's loans may not have damage or other significant displacement or other local housing market value impacts, but it is difficult to ascertain that information immediately after a disaster. 

With Hurricane Ian, twenty-six (26) counties (all in Florida) were deemed by FEMA to be disaster areas. As of October 31, 2022 the Fund owned 34 loans backed by collateral in those 26 counties. The Fund has received property inspections back from 25 out of the 34 loans, all showing no significant damage to the properties. The remaining 9 loans are still pending inspections. Notwithstanding other market factors evaluated and applied by our third party valuation firm to the net asset valuation to be determined today for the Fund, carrying over the initial September 30, 2022, 35% reduction to the valuation of the remaining nine (9) Hurricane Ian-impacted loans pending inspection, the Fund's net asset valuation will remain reduced by approximately 1%. This temporary natural disaster reduction will be revised based upon more accurate information on the impacted loans by the Fund's next determination of net asset value to be released at the end of November. 

Also, as previously announced, the Fund paid a monthly distribution of $0.0700 per share to all shareholders of record as of October 19, 2022, pursuant to the Fund's managed distribution plan (the "Plan").

As a general matter, the amount of the Fund's distributable income depends on the aggregate gains and losses realized by the Fund during the entire year. Distributions may consist of net investment income, capital gains and return of capital but the character of these distributions cannot be determined until after the end of the Fund's fiscal year. However, under the Investment Company Act of 1940, as amended, and the terms of the Plan, the Fund may be required to indicate the source of each distribution to its shareholders. The following table sets forth the estimated sources of the current distribution, and the cumulative distributions paid during the 2022 fiscal year to date from the sources indicated in the table. All amounts are expressed on a per share basis and as a percentage of the distribution amount.

Source	Current Distribution Per Share	Breakdown of Current Distribution Per Share (%)	Fiscal YTD Cumulative Distributions Per Share	Breakdown of Fiscal YTD Cumulative Distributions Per Share (%)
Net Investment Income	$0.0286	40.86 %	$0.0286	40.86 %
Net Realized Short- Term Capital Gains	$0.0000	0.00 %	$0.0000	0.00 %
Net Realized Long-Term Capital Gains	$0.0000	0.00 %	$0.0000	0.00 %
Return of Capital or Other Capital Source(s)	$0.0414	59.14 %	$0.0414	59.14 %
Total Distributions	$0.0700	100.00 %	$0.0700	100.00 %

(1) You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's Distribution Policy.

(2) The amounts and sources of distributions reported in this 19(a) Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.

(3) The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income."

Average annual total return at NAV for the 5-year period ended on September 30, 20221	2.64 %
Annualized current distribution rate expressed as a percentage of NAV as of September 30, 20222	8.26 %
Cumulative total return at NAV for the fiscal year through September 30, 20223	(4.77) %
Cumulative fiscal year to date distribution rate as a percentage of NAV as of September 30, 20224	0.69 %

¹ Average annual total return at NAV represents the change in NAV of the Fund, with all distributions reinvested, for the 5-year period ended on September 30, 2022.

² The annualized current distribution rate is the current distribution rate annualized as a percentage of the Fund's NAV as of September 30, 2022.

³ Cumulative total return at NAV is the percentage change in the Fund's NAV for the period from the beginning of its fiscal year to September 30, 2022 including distributions paid and assuming reinvestment of those distributions.

⁴ Cumulative fiscal year distribution rate for the period from the beginning of its fiscal year measured on the dollar value of distributions in the year-to-date period as a percentage of the Fund's NAV as of September 30, 2022.

The Plan will be subject to periodic review by the Board, and the Board may amend the terms of the Plan including amending the annual rate of payment or may terminate the Plan at any time without prior notice to the Fund's shareholders. 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 amendment or termination of the Plan could have an adverse effect on the market price of the Fund's shares. The public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks to which the Fund is exposed. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty. In order to comply with the requirements of Section 19 of the Investment Company Act of 1940, and an exemptive order received by the Fund from the Securities and Exchange Commission, the Fund will provide its shareholders of record on each distribution date with a 19(a) Notice and issue an accompanying press release disclosing the sources of its distribution payment when a distribution includes anything other than net investment income. 

The amounts and sources of distributions reported in 19(a) Notices are only estimates and are not provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during its full fiscal year and may be subject to changes based on tax regulations. The Fund will send shareholders a Form 1099-DIV for the calendar year that will tell them how to report these distributions for federal income tax purposes. Information on the Fund's 19(a) Notices, if any, can be found at www.vcif.us. The final determination of the source and tax characteristics of all distributions in 2022 will be made after the end of the year.

Shares of closed-end funds often trade at a discount from their net asset value. The market price of Fund shares may vary from net asset value based on factors affecting the supply and demand for shares, such as Fund distribution rates relative to similar investments, investors' expectations for future distribution changes, the clarity of the Fund's investment strategy and future return expectations, and investors' confidence in the underlying markets in which the Fund invests. Fund shares are subject to investment risk, including possible loss of principal invested. No Fund is a complete investment program and you may lose money investing in a Fund. An investment in the Fund may not be appropriate for all investors. Before investing, prospective investors should consider carefully the Fund's investment objective, risks, charges and expenses. For further details, please visit Vertical Capital Income Fund's website at vcif.us.

This release contains forward-looking statements relating to the business and financial outlook of Vertical Capital Income Fund that are based on the Fund's 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 release.

About Vertical Capital Income Fund

Vertical Capital Income Fund (VCIF) is an NYSE-listed closed-end fund that seeks monthly income by investing primarily in performing non-agency residential whole loans secured by real estate. As a secondary strategy the Fund aims to provide total return by acquiring performing residential loans at a discount to the unpaid principal balance (UPB). VCIF realizes capital gains as loans are paid off before maturity. For more information visit VCIF.us and connect with the Fund on Twitter.

About Oakline Advisors, LLC

Oakline Advisors, LLC is the adviser to Vertical Capital Income Fund. Founded in 2013, Oakline Advisors, LLC is an SEC-registered investment adviser that specializes in the residential whole loan market. It is a wholly owned subsidiary of Dallas, TX-based Behringer. Since its inception in 1989, Behringer, together with its affiliates, has raised equity of more than $6 billion in assets through public and private fund structures. For more information about Oakline and Behringer please visit their respective websites at oaklineadvisors.com and behringerinvestments.com. 

Fund shares are identified by CUSIP 92535C104

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SOURCE Vertical Capital Income Fund

FAQ

What is the impact of Hurricane Ian on Vertical Capital Income Fund's loans?

Hurricane Ian may have caused physical damage to some properties securing VCIF's loans, with a 35% initial valuation reduction for loans in affected areas.

How much is the monthly distribution from VCIF as of October 2022?

VCIF paid a monthly distribution of $0.0700 per share to shareholders of record as of October 19, 2022.

When will VCIF provide updates on loan inspections related to Hurricane Ian?

VCIF plans to update the net asset valuation based on loan inspections by the end of November 2022.

What are the sources of the October 2022 distribution for VCIF?

The October 2022 distribution consists of approximately 40.86% net investment income and 59.14% return of capital.