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 monthly distribution of $0.085 per share for April 2024, with no change from the previous month. The distribution will be paid on April 1, 2024, to shareholders of record as of March 15, 2024. Shareholders should note that distributions may come from various sources, and tax characteristics will be reported on Form 1099. The Trust's investments in CLOs are subject to complex tax rules, and taxable income may differ from GAAP income. The Trust aims to provide stable monthly distributions over time, but final taxable income is determined after filing tax returns. Shareholders should be aware of the potential for return of capital in distributions.

Insights

Financial Analyst

The declaration of a consistent monthly distribution by XAI Octagon Floating Rate & Alternative Income Trust (XFLT) maintains investor expectations regarding cash flow from the investment. Stability in distribution amounts is generally perceived positively by the market, as it suggests a level of predictability in returns, which is particularly appealing to income-focused investors. However, it is essential to monitor the sources of these distributions. If distributions are frequently derived from capital rather than income, it may indicate that the Trust's investments are not generating enough income, which could be a red flag for sustainability of future distributions.

It is also noteworthy that the Trust's investments in Collateralized Loan Obligations (CLOs) can lead to discrepancies between GAAP income and taxable income due to complex tax rules. This could affect the after-tax returns for shareholders and should be carefully considered when assessing the Trust's performance. Additionally, the potential for distributions to constitute a return of capital can have tax implications for shareholders, potentially increasing their capital gains liability upon the sale of shares.

Tax Expert

Investors should be aware of the tax implications of the Trust's distributions, particularly the distinction between ordinary income and return of capital. A return of capital is not immediately taxable but does reduce an investor's cost basis in the investment, potentially leading to higher capital gains taxes upon sale. Furthermore, the Trust's compliance with the excise tax requirements, mandating the distribution of a certain percentage of income and gains, is crucial for avoiding additional tax burdens on the Trust itself, which could indirectly impact shareholder value.

The disclosure that the final taxable income will not be known until tax returns are filed emphasizes the importance of tax planning for shareholders. The complexity of tax treatment for CLOs should not be underestimated and shareholders may need to consult with tax professionals to understand the potential impact on their individual tax situations.

Market Research Analyst

From a market perspective, the Trust's investment strategy focusing on floating rate credit instruments and structured credit investments is designed to provide income across various credit cycles. This approach can offer a hedge against interest rate fluctuations, a significant consideration given the current environment of potential rate changes by central banks. However, the statement that there is no assurance of achieving the investment objective is standard and highlights the inherent risks involved in such investment strategies.

The Trust's emphasis on maintaining stable distributions may appeal to a certain segment of the market, particularly risk-averse investors seeking regular income streams. Nevertheless, the ability of the Trust to continue these distributions without compromising its capital base is contingent upon the performance of its underlying assets and adherence to financial covenants of its senior securities, which requires ongoing scrutiny.

CHICAGO--(BUSINESS WIRE)-- XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”) has declared its regular monthly distribution of $0.085 per share on the Trust’s common shares (NYSE: XFLT), payable on April 1, 2024, to common shareholders of record as of March 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		March 14, 2024
Record Date		March 15, 2024
Payable Date		April 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.

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, $34.2B 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.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20240301947749/en/

Kimberly Flynn, Managing Director

XA Investments LLC

Phone: 888-903-3358

Email: KFlynn@XAInvestments.com

www.xainvestments.com

Source: XA Investments LLC

FAQ

What is the monthly distribution per share declared by XAI Octagon Floating Rate & Alternative Income Trust (XFLT) for April 2024?

XAI Octagon Floating Rate & Alternative Income Trust (XFLT) has declared a monthly distribution of $0.085 per share for April 2024, with no change from the previous month.

When will the distribution be payable to common shareholders of XFLT?

The distribution will be payable on April 1, 2024, to common shareholders of XAI Octagon Floating Rate & Alternative Income Trust (XFLT) who are recorded as of March 15, 2024.

What are the possible sources of common share distributions from XFLT?

Common share distributions from XAI Octagon Floating Rate & Alternative Income Trust (XFLT) may come from net investment income, capital gains, and/or return of capital.

Where can shareholders find further information regarding XFLT's distributions?

Shareholders can find further information regarding XAI Octagon Floating Rate & Alternative Income Trust (XFLT)'s distributions at www.xainvestments.com.

What is the investment objective of XFLT?

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