XAI Octagon Floating Rate & Alternative Income Trust Declares its Monthly Common Shares Distribution of $0.085 per Share

Rhea-AI Summary

XAI Octagon Floating Rate & Alternative Income Trust (XFLT) has declared a regular monthly distribution of $0.085 per share, payable on March 1, 2024, with no change from the previous month's distribution. The Trust's common shares are traded on the New York Stock Exchange under the symbol 'XFLT'. The investment objective of the Trust is to seek attractive total return with an emphasis on income generation across multiple stages of the credit cycle.

Financial Analyst

The announcement by XAI Octagon Floating Rate & Alternative Income Trust regarding its regular monthly distribution maintains the status quo, with no change from the previous month's distribution. This consistency in payouts could be perceived positively by investors seeking stable income streams. However, it's crucial to examine the underlying assets and the Trust's ability to generate income. The Trust's investment in floating rate credit instruments and structured credit investments, typically CLOs, is designed to provide income that adjusts with market interest rates, potentially offering a hedge against inflation. Nevertheless, the complexity of these instruments and their tax implications require careful analysis to understand the Trust's performance and the sustainability of its distributions.

Investors should be aware that distributions can include a return of capital, which is not derived from the Trust's earnings but rather from the invested capital. This can affect the tax basis of the investment and potentially the long-term value of the Trust's shares. The Trust's ability to maintain its distribution without resorting to a return of capital is a critical factor in assessing its financial health. The Trust's adherence to distribution requirements to avoid excise tax, as well as its management's discretion in retaining income or capital gains, further complicates the picture. Monitoring the Trust's compliance with financial covenants and its overall financial performance is essential for evaluating the risk and sustainability of the investment.

Tax Specialist

For shareholders of XAI Octagon Floating Rate & Alternative Income Trust, the tax implications of the distributions are a significant consideration. The Trust's investments in CLOs and other structured credit instruments involve complex tax rules that can lead to substantial differences between GAAP income and taxable income. It is imperative for shareholders to understand that the character of the distributions, which may consist of net investment income, capital gains, or a return of capital, will ultimately impact their individual tax situations.

Given that the Trust's final taxable income will only be known upon filing tax returns, shareholders must be prepared for potential discrepancies between received distributions and their expected tax liabilities. The Trust's strategy to manage distributions to minimize the excise tax liability, while lawful, requires careful planning and communication with shareholders to ensure transparency regarding the tax characteristics of distributions. The potential for reclassification of distributions after year-end further underscores the need for shareholders to consult with tax advisors to understand the impact on their personal tax returns.

Market Research Analyst

From a market perspective, XAI Octagon Floating Rate & Alternative Income Trust's focus on floating rate credit instruments positions it within a niche market that may appeal to investors looking for income generation that keeps pace with interest rate fluctuations. The Trust's ability to invest dynamically across private credit markets suggests an active management approach that could capitalize on market inefficiencies. However, the performance of such investments is highly dependent on credit market conditions and the effectiveness of the Trust's management team.

Investor sentiment towards the Trust can be influenced by the broader economic context, particularly in environments with volatile interest rates or credit spreads. The Trust's performance relative to its peers and benchmarks will be a key determinant of its attractiveness to investors. Given the lack of change in the distribution amount, it is important to monitor the Trust's managed assets' performance and the potential impact of market conditions on its investment strategy. The Trust's ability to meet its investment objective of attractive total return with an emphasis on income generation will be critical in maintaining investor confidence and supporting the value of its common shares.

CHICAGO--(BUSINESS WIRE)-- XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”)¹ has declared its regular monthly distribution of $0.085 per share on the Trust’s common shares (NYSE: XFLT), payable on March 1, 2024, to common shareholders of record as of February 15, 2024, as noted below. The amount of the distribution represents no change from the previous month's distribution amount of $0.085 per share.

The following dates apply to the declaration:

Ex-Dividend Date		February 14, 2024
Record Date		February 15, 2024
Payable Date		March 1, 2024
Amount		$0.085 per common share
Change from Previous Month		No change

Common share distributions may be paid from net investment income (regular interest and dividends), capital gains and/or a return of capital. The specific tax characteristics of the distributions will be reported to the Trust’s common shareholders on Form 1099 after the end of the 2024 calendar year. Shareholders should not assume that the source of a distribution from the Trust is net income or profit. For further information regarding the Trust’s distributions, please visit www.xainvestments.com.

The Trust’s net investment income and capital gain can vary significantly over time; however, the Trust seeks to maintain more stable common share monthly distributions over time. The Trust’s investments in CLOs are subject to complex tax rules and the calculation of taxable income attributed to an investment in CLO subordinated notes can be dramatically different from the calculation of income for financial reporting purposes under accounting principles generally accepted in the United States (“U.S. GAAP”), and, as a result, there may be significant differences between the Trust’s GAAP income and its taxable income. The Trust’s final taxable income for the current fiscal year will not be known until the Trust’s tax returns are filed.

As a registered investment company, the Trust is subject to a 4% excise tax that is imposed if the Trust does not distribute to common shareholders by the end of any calendar year at least the sum of (i) 98% of its ordinary income (not taking into account any capital gain or loss) for the calendar year and (ii) 98.2% of its capital gain in excess of its capital loss (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless an election is made to use the Trust’s fiscal year). In certain circumstances, the Trust may elect to retain income or capital gain to the extent that the Board of Trustees, in consultation with Trust management, determines it to be in the interest of shareholders to do so.

The common share distributions paid by the Trust for any particular period may be more than the amount of net investment income from that period. As a result, all or a portion of a distribution may be a return of capital, which is in effect a partial return of the amount a common shareholder invested in the Trust, up to the amount of the common shareholder’s tax basis in their common shares, which would reduce such tax basis. Although a return of capital may not be taxable, it will generally increase the common shareholder’s potential gain, or reduce the common shareholder’s potential loss, on any subsequent sale or other disposition of common shares.

The distribution shall be paid on the Payment Date unless the payment of such distribution is deferred by the Board of Trustees upon a determination that such deferral is required in order to comply with applicable law to ensure that the Trust remains solvent and able to pay its debts as they become due and continue as a going concern, or to comply with the applicable terms or financial covenants of the Trust’s senior securities.

Future common share distributions will be made if and when declared by the Trust’s Board of Trustees, based on a consideration of number of factors, including the Trust’s continued compliance with terms and financial covenants of its senior securities, the Trust’s net investment income, financial performance and available cash. There can be no assurance that the amount or timing of common share distributions in the future will be equal or similar to that described herein or that the Board of Trustees will not decide to suspend or discontinue the payment of common share distributions in the future.

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The investment objective of the Trust is to seek attractive total return with an emphasis on income generation across multiple stages of the credit cycle. The Trust seeks to achieve its investment objective by investing in a dynamically managed portfolio of opportunities primarily within the private credit markets. Under normal market conditions, the Trust will invest at least 80% of its Managed Assets in floating rate credit instruments and other structured credit investments. There can be no assurance that the Trust will achieve its investment objective.

The Trust’s common shares are traded on the New York Stock Exchange under the symbol “XFLT,” and the Trust’s 6.50% Series 2026 Term Preferred Shares are traded on the New York Stock Exchange under the symbol “XFLTPRA”.

About XA Investments

XA Investments LLC (“XAI”) serves as the Trust’s investment adviser. XAI is a Chicago-based firm founded by XMS Capital Partners in April, 2016. In addition to investment advisory services, the firm also provides investment fund structuring and consulting services focused on registered closed-end funds to meet institutional client needs. XAI offers custom product build and consulting services, including development and market research, sales, marketing, fund management and administration. XAI believes that the investing public can benefit from new vehicles to access a broad range of alternative investment strategies and managers. XAI provides individual investors with access to institutional-caliber alternative managers. For more information, please visit www.xainvestments.com.

About XMS Capital Partners

XMS Capital Partners, LLC, established in 2006, is a global, independent, financial services firm providing M&A, corporate advisory and asset management services to clients. It has offices in Chicago, Boston and London. For more information, please visit www.xmscapital.com.

About Octagon Credit Investors

Octagon Credit Investors, LLC (“Octagon”) serves as the Trust’s investment sub-adviser. Octagon is a 25+ year old, $34.6B below-investment grade corporate credit investment adviser focused on leveraged loan, high yield bond and structured credit (CLO debt and equity) investments. Through fundamental credit analysis and active portfolio management, Octagon’s investment team identifies attractive relative value opportunities across below-investment grade asset classes, sectors and issuers. Octagon’s investment philosophy and methodology encourage and rely upon dynamic internal communication to manage portfolio risk. Over its history, the firm has applied a disciplined, repeatable and scalable approach in its effort to generate attractive risk-adjusted returns for its investors. For more information, please visit www.octagoncredit.com.

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XAI does not provide tax advice; please consult a professional tax advisor regarding your specific tax situation. Income may be subject to state and local taxes, as well as the federal alternative minimum tax.

Investors should consider the investment objectives and policies, risk considerations, charges and expenses of the Trust carefully before investing. For more information on the Trust, please visit the Trust’s webpage at www.xainvestments.com.

This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

NOT FDIC INSURED	NO BANK GUARANTEE	MAY LOSE VALUE

Foreside Fund Services, LLC - Distributor

¹ Effective February 1, 2024, the name of the Trust was changed from “XAI Octagon Floating Rate & Alternative Income Term Trust” to “XAI Octagon Floating Rate & Alternative Income Trust.”

View source version on businesswire.com: https://www.businesswire.com/news/home/20240201935625/en/

Kimberly Flynn, Managing Director

XA Investments LLC

Phone: 888-903-3358

Email: KFlynn@XAInvestments.com

www.xainvestments.com

Source: XA Investments LLC

What is the amount of the regular monthly distribution declared by XAI Octagon Floating Rate & Alternative Income Trust?

The regular monthly distribution declared by XAI Octagon Floating Rate & Alternative Income Trust is $0.085 per share.

When is the payable date for the regular monthly distribution declared by XAI Octagon Floating Rate & Alternative Income Trust?

The payable date for the regular monthly distribution declared by XAI Octagon Floating Rate & Alternative Income Trust is March 1, 2024.

What is the ticker symbol for the common shares of XAI Octagon Floating Rate & Alternative Income Trust?

The ticker symbol for the common shares of XAI Octagon Floating Rate & Alternative Income Trust is 'XFLT'.

What is the investment objective of XAI Octagon Floating Rate & Alternative Income Trust?

The investment objective of XAI Octagon Floating Rate & Alternative Income Trust is to seek attractive total return with an emphasis on income generation across multiple stages of the credit cycle.