UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-23247
(Investment Company Act File Number)
(Exact Name of Registrant as Specified in Charter)
321 North Clark Street, Suite 2430
Chicago, IL 60654
(Address of Principal Executive Offices)
Benjamin D. McCulloch, Esq.
XA Investments LLC
321 North Clark Street, Suite 2430
Chicago, IL 60654
(Name and Address of Agent for Service)
(312) 374-6930
(Registrant’s Telephone Number)
Date of Fiscal Year End: September 30
Date of Reporting Period: March 31, 2023
Item 1. Reports to Stockholders.
(a)
| TABLE OF CONTENTS |
| Shareholder Letter | 1 |
| Questions & Answers | 2 |
| Trust Portfolio Information | 8 |
| Schedule of Investments | 10 |
| Statement of Assets and Liabilities | 27 |
| Statement of Operations | 28 |
| Statements of Changes In Net Assets Applicable to Common Shareholders | 29 |
| Statement of Cash Flows | 30 |
| Financial Highlights | 31 |
| Notes to Financial Statements | 34 |
| Dividend Reinvestment Plan | 46 |
| Additional Information | 47 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Shareholder Letter |
March 31, 2023 (Unaudited) |
Dear Shareholder:
We thank you for your investment in the XAI Octagon Floating Rate & Alternative Income Term Trust (the “Trust”). This report covers the six months ended March 31, 2023 (the “Period”). During the Period, we observed elevated, but tapering inflation levels, continued rate hikes by the U.S. Federal Reserve, and regional bank failures, including Silicon Valley Bank and Signature Bank. The Consumer Price Index (year over year) started the Period at 8.2% and ended the period at 5.0%.1 The U.S. Federal Reserve raised interest rates three times during the Period for a total increase of 1.50%, with one additional rate hike of 0.25% in May 2023. These dynamics are important to consider as the Trust is primarily invested in floating-rate securities including loans, CLO debt and CLO equity.
Despite overall market volatility and the inflationary environment, the loan market continued to perform relatively well. Loans experienced a default free Q4 2022 followed by eight loan issuers defaulting in Q1 2023. Despite these defaults and a -0.03% return during the month of March, Q1 2023 represented the second strongest first quarter of performance for the asset class in the last 10 years.2 As economic pressures maintained through the course of the Period, leveraged loan prices remained resilient.
The macroeconomic dynamics affecting the loan market have similarly impacted the CLO market, but despite this, the pace of new CLO formation has been stable and resulted in a persistent bids for loans and broad tightening in CLO liability spreads. With meaningful performance dispersion across both the CLO and underlying loan markets, we believe it is important to focus on fundamentally strong CLOs that offer compelling yields and the potential for price appreciation.
For the Period, the S&P 500 Index, the Bloomberg Barclays U.S. High Yield 1% Issuer Capped Index and the Trust’s benchmark, the Morningstar LSTA US Leveraged Loan 100 Index, generated total returns of 14.61%, 7.88%, and 6.79%,3 respectively.
The Trust’s net asset value (“NAV”) decreased during the Period by 1.10% from $6.39 per common share to $6.32 per common share as of March 31, 2023, largely reflecting price declines for the Trust’s investments in CLO equity and loans.
During the Period, the Trust declared monthly distributions totaling an aggregated $0.438 per common share. The monthly distribution of $0.073 per common share declared on March 1, 2023 represented an annualized distribution rate of 13.62% based on the Trust’s closing market price of $6.43 per common share on March 31, 2023. Subsequent to Period-end, the Trust declared a monthly distribution of $0.085 per share on May 1, 2023, representing a 16.44% increase over the previous distribution.
The market price per common share of $6.43 on March 31, 2023 represented a 1.74% premium to NAV of $6.32 per common share. During the Period, the Trust’s common shares traded on average at a 1.24% premium to NAV. From the Trust’s IPO on September 27, 2017 through March 31, 2023, the Trust’s common shares have traded on average at a 3.32% premium to NAV.
We continue to seek operational scale by increasing the Trust’s common assets. During the Period, the Trust issued an additional 571,206 common shares pursuant to an “at-the-market” offering program, resulting in $3,843,658 of net proceeds to the Trust which may result in incremental expense efficiencies for shareholders. In addition to the at-the-market program, $6,500,000 of the Trust’s 6.00% Series 2029 Convertible Preferred Shares were converted to common shares in two separate conversions at a conversion price above the current NAV, resulting in the issuance of an additional 1,035,531 common shares.
We appreciate your investment and look forward to serving your investment needs in the future. For the most up-to-date information on your investment, please visit the Trust’s website at www.xainvestments.com/XFLT.
Sincerely,
Kimberly Flynn Managing Director XA Investments LLC May 15, 2023
| 1 | U.S. Bureau of Labor Statistics, 12-month percentage change, Consumer Price Index, all items, not seasonally adjusted. |
| 2 | Pitchbook LCD, “March Wrap: US leveraged loans slip 0.03% as supply drought continues.” |
| 3 | Source: Bloomberg. See “Index Definitions” in the Questions & Answers for more information. |
Semi-Annual Report | March 31, 2023 |
1 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
XA Investments LLC (“XAI”) serves as the investment adviser to the Trust. Octagon Credit Investors, LLC (“Octagon”) serves as the Trust’s investment sub-adviser and is responsible for the management of the Trust’s portfolio of investments.
Gretchen M. Lam, Senior Portfolio Manager at Octagon and a member of Octagon’s Investment Committee serves as lead portfolio manager of XAI Octagon Floating Rate & Alternative Income Term Trust (the “Trust”). Ms. Lam is supported by a team of Octagon investment professionals in the day-to-day management of the Trust’s portfolio, including the following members of Octagon’s Investment Committee: Andrew D. Gordon (Octagon’s co-founder and Chief Executive Officer), Michael B. Nechamkin (Chief Investment Officer and Senior Portfolio Manager), Lauren B. Law (Portfolio Manager), and Sean M. Gleason (Portfolio Manager). In addition, Maegan Gallagher (Head of Trading and Capital Markets) is a member of the Octagon Investment Committee.
What is the Trust’s investment objective and how is it pursued?
The Trust’s investment objective 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. “Managed Assets” means the total assets of the Trust, including assets attributable to the Trust’s use of leverage, minus the sum of its accrued liabilities (other than liabilities incurred for the purpose of creating leverage).
The Trust’s investments may include (i) structured credit investments, including collateralized loan obligation (“CLO”) debt and subordinated (i.e., residual or equity) securities; (ii) traditional corporate credit investments, including leveraged loans and high yield bonds; (iii) opportunistic credit investments, including stressed and distressed credit situations and long/short credit investments; and (iv) other credit-related instruments.
Leveraged loans are debt obligations (also commonly referred to as “senior loans” or “floating-rate loans”) issued by a bank to a corporation that generally holds legal claim to the borrower’s assets above all other debt obligations. Leveraged loans and CLO debt securities have historically used the one-month LIBOR as an interest rate benchmark, which is currently being phased out. “LIBOR” stands for London Interbank Offered Rate and was the benchmark rate that most of the world’s leading banks charge each other for short-term loans. On July 29, 2021, the Alternative Reference Rates Committee, a group of private market participants formed by the Federal Reserve Board and New York Fed, formally recommended CME Group’s forward-looking Term Standard Overnight Financing Rate (“SOFR”) as the replacement rate for LIBOR. New instruments are now being issued with an alternative rate – typically SOFR - and all existing instruments tied to LIBOR are required to transition to a new reference rate by June 30, 2023. Replacement of LIBOR could adversely affect the market value or liquidity of CLO securities and/or loans, and pose tangential risk for markets and assets that do not rely directly on LIBOR. There is uncertainty with respect to replacement of LIBOR with proposed alternative reference rates, and it is possible that different markets might adopt different rates, resulting in multiple rates at the same time and a potential mismatch between CLO securities and underlying collateral, the effects of which are uncertain at this time, and could include increased volatility or illiquidity. In addition, operational and technology challenges during the transition from LIBOR as well as inconsistent communication from issuers could result in delayed investment analyses and reduced investment opportunities.
CLOs are a type of structured credit vehicle that typically invest in a diverse portfolio of broadly syndicated leveraged loans. CLOs finance this pool of loans with a capital structure that consists of debt and equity. CLO debt includes senior and mezzanine debt (collectively, “liabilities”) of a CLO structure with tranches rated from AAA down to BB or B. Interest earned from the underlying loan collateral pool of a CLO is used to pay the coupon interest on the CLO liabilities. CLO debt investors earn returns based on spreads above 3-month LIBOR or SOFR, as applicable. CLO equity represents a residual stake in the CLO structure and is the first loss position in the event of defaults and credit losses. CLO equity investors receive the excess spread between the CLO assets and liabilities and expenses. CLO equity is junior in priority of payment and is subject to certain payment restrictions generally set forth in an indenture governing the notes.
The Trust pursues its investment objective by investing primarily in below investment grade credit instruments that are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and to repay principal. The Trust may invest without limitation in credit instruments that are illiquid.
The Trust uses leverage to seek to enhance total return and income. Although leverage may create an opportunity for increased return and income for shareholders, it also results in additional risks and can magnify the effect of any losses. There is no assurance that the leverage strategy will be successful. If income and gains on securities purchased with leverage proceeds are greater than the cost of the leverage, common shareholders’ return will be greater than if leverage had not been used. Conversely, if the income or gains from the securities purchased with the proceeds of leverage are less than the cost of leverage, common shareholders’ return will be less than if leverage had not been used.
| 2 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
Describe the current market conditions for the leveraged loan market and Octagon’s outlook.
Leveraged loans returned 5.94% for the six months ended March 31, 2023 (the “Period”), as measured by the Morningstar LSTA US Leveraged Loan Index (the “Morningstar LSTA LLI”),1 reflecting a rebound in loan prices in the fourth quarter of 2022 that continued into January and February 2023. Loan prices peaked in mid-November at 93.06 before retreating to 92.44 by year-end; driven by improving price levels, the Morningstar LSTA LLI returned 2.62% in the final quarter of 2022.1 For the full year 2022, loans returned -0.77%, significantly outperforming most other asset classes, including high yield bonds (-11.22%), investment grade bonds (-15.44%), 10-year US Treasury bonds (-16.28%), and the S&P 500 Index (-19.44%).2 In a challenging year marked by a dramatic increase in interest rates, we observed loans benefiting from their floating-rate coupon and senior secured position in the capital structure.
In concert with other risk assets, loans entered 2023 on a positive note. Amid supportive technical dynamics, the average bid price for the Morningstar LSTA LLI climbed almost two points in January, and reached a high watermark of 94.71 on February 9, 2023—a level not seen since August 2022.1 The Morningstar LSTA LLI’s February return of 0.58% marked the fifth consecutive month of positive performance for loans, despite some price softness in the final two weeks of the month.1 Loan prices remained stable in early March before succumbing to market volatility sparked by the failure of Silicon Valley Bank and broader concerns about U.S. banks, only to partly rebound by month-end. Inclusive of March’s modest loss of -0.03%, loans returned 3.23% in the first quarter of 2023, compared to first quarter returns of 3.72% for high yield bonds, 3.45% for investment grade bonds, 3.70% for 10-year US Treasury bonds, and 7.03% for the S&P 500 Index.3 In the wake of a flight-to-quality that drove significant performance dispersion in the loan market throughout 2022, lower-rated loans outpaced their higher-quality cohorts in the first quarter of 2023.3 Despite comparatively steeper losses among riskier credits in March 2023, CCC rated loans generated a total first quarter return of 3.92%, outperforming B (+3.81%), BB (+2.08%), and BBB rated loans (+2.27%).3 Nevertheless, CCC loans continued to meaningfully underperform higher quality loans on a trailing 12-month basis, underscoring investors’ heightened sensitivity to risk.
After a default-free fourth quarter 2022, eight loan issuers defaulted in the first quarter of 2023.4 As a result, the trailing 12-month default rate of the Morningstar LSTA LLI rose from 0.72% as of December 31, 2022 to 1.32% as of March 31, 2023.4 Ratings agencies continue to swiftly downgrade borrowers that report disappointing earnings results or are deemed at risk of credit deterioration, thereby contributing to increased performance dispersion among loan borrowers. Year-to-date as of March 31, 2023, S&P has downgraded 86 facilities in the Morningstar LSTA LLI, compared to 35 upgrades, resulting in a 3-month downgrade-to-upgrade ratio of 2.46x, modestly below the prior quarter’s level of 2.77x.4 The share of performing loans priced below 80 also demonstrated modest improvement in the first quarter, declining to 6.3% as of March 31, 2023 from 7.4% as of year-end 2022.1 Fundamentals for corporate borrowers generally remain stable, although interest coverage ratios have declined amid rising rates, with some borrowers affected more than others. We anticipate softer corporate earnings, tighter monetary policy, and challenging credit conditions will lead to further deterioration in credit metrics and additional defaults in the coming months. Moreover, the loan market may experience drawn-out ripple effects of the recent banking sector crisis as smaller, regional banks reduce corporate lending and tightening credit conditions create a more costly environment for borrowers. We therefore remain acutely focused on managing risk and positioning the Trust’s portfolio defensively.
Institutional new issue loan volume totaled $49.5 billion in the first quarter of 2023, up from $35.7 billion in the fourth quarter of 2022, but markedly lower than $112.3 billion of new issuance in the first quarter of 2022.3 Refinancing activity accounted for the lion’s share of first quarter 2023 loan supply (70%), as borrowers took advantage of a more supportive technical backdrop to address near-term debt maturities. Companies remain highly focused on maturity profiles and their ability to refinance given uncertain economic conditions. Of the $34.5 billion of loan refinancings executed in the first quarter, $23.5 billion (68%) were from B rated borrowers, whereas refinancing activity in the prior quarter was concentrated among BB rated borrowers (60% of total fourth quarter 2022 refinancings).3 Inclusive of $46.5 billion of amend-and-extend transactions in the first quarter of 2023, the amount of loans coming due between 2023-2025 decreased to roughly $228 billion as of March 31, 2023, versus $280 billion at year-end 2022.3
The steady pace of CLO origination in the first quarter of 2023 precipitated a persistent bid for loans and broad tightening in CLO liability spreads compared to fourth quarter 2022 levels. CLO managers priced $32.3 billion of new deals in the U.S. market in the first quarter, a considerable uptick from $22.6 billion in the fourth quarter of 2022, and slightly exceeding first quarter 2022 volume of $31.2 billion.3 Conversely, loan-focused mutual funds and ETFs reported outflows in each month of the first quarter, totaling $9.3 billion year-to-date as of March 31, 2023.5 Through March 2023, retail loan funds have experienced 11 consecutive months of net withdrawals.5 As of first quarter-end, retail funds comprise just 6.2% of the institutional loan investor base.6
Despite crosswinds, we believe loans have continued to offer interesting risk/return opportunities for fundamental credit pickers. All-in yields for loans have been benefiting from higher LIBOR and SOFR base rates; given high levels of current income with meaningful price convexity, we believe that loans currently present a compelling total return opportunity with the potential for mitigated downside volatility. Though we expect credit stress to remain elevated, we would expect relatively balanced market technicals to provide support for loan prices, notwithstanding issuer-specific price movement driven by earnings results and company outlook. We anticipate periods of market volatility as 2023 progresses, and believe that adherence to Octagon’s rigorous credit research process and proactive risk management will support our ability to navigate an uncertain economic outlook in an effort to uphold the Trust’s capital preservation and income generation objectives.
Semi-Annual Report | March 31, 2023 |
3 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
Describe the current market conditions for the CLO market and Octagon’s outlook.
In tandem with strong performance for loans, CLO debt tranches generated healthy fourth quarter 2022 returns that ranged from 2.54% for AAA tranches to 6.43% for BB tranches (as measured by the J.P. Morgan CLO Index or “CLOIE”).7 For the full-year 2022, CLO debt produced an annual return of 0.21% (across tranches), buoyed by positive performance among AAA tranches (+1.05%), while all other tranches comprising the CLOIE were down on the year (AAs: -0.17%; A: -1.67%; BBB: -2.77%; BB: -3.82%; B: -6.39%).5 Still, CLOs generally performed well in 2022 versus comparably rated assets. CLO AAAs’ 1.05% 2022 annual return compares to -17.53% for AAA rated corporate bonds; CLO BB’s 2022 annual return of -3.82% compares to -9.48% for BB rated high yield bonds.8
New CLO issuance has been steady year-to-date, despite the challenges of macro headwinds, muted loan supply, and persistently wide AAA spreads amid the diminished presence of traditional CLO AAA buyers (large US and Japanese banks). With $33.6 billon priced across 77 new deals year-to-date as of March 31, 2023, primary CLO market activity is running slightly ahead of last year’s pace, and above the 10-year average for first quarter new deal volume ($26.1 billion).3 Meanwhile, secondary CLO trading activity has remained elevated, with approximately $13 billion of U.S. CLO BWIC volume in the first quarter of 2023, largely comprising investment grade debt tranches (rated AAA-A), which accounted for 72% of total quarterly volume.9
While primary CLO AAA spreads marginally widened in mid-March amid banking sector-driven market volatility, on the whole, primary CLO spreads tightened in the first quarter of 2023 from the fourth quarter 2022 but remain wide to historical levels.3 The average AAA coupon for broadly syndicated loan CLOs that priced in the first quarter was SOFR + 1.97%, down 0.34% from the fourth quarter 2022 average spread of SOFR + 2.31%.3 In the first quarter, the weighted average cost of liabilities across the capital stack tightened by 0.23% quarter-over-quarter.3 First quarter CLO origination was driven in part by CLO managers’ internal investments/captive equity funds; deals from established, top-tier managers accounted for 55% of total primary CLO activity in the first quarter,10 and we expect new CLO issuance will continue to be focused among higher tier managers. We have also observed consolidation among CLO managers; we think this trend will continue and drive increased performance dispersion between established, top-tier managers and smaller, newer managers, especially as credit stress increases. We anticipate domestic bank demand to remain muted in light of the recent volatility in the banking sector; in the context of limited CLO AAA investor demand, CLO spreads are likely to remain wide to historical levels, which may impact the pace of new deal formation. Absent an uptick in new issue loan supply, CLO liability spread compression, or a decline in secondary loan prices, CLO arbitrage is likely to remain challenged. It bears noting that approximately 40% of outstanding U.S. broadly syndicated loan CLOs will exit the reinvestment period by the end of 2023,11 these CLOs are likely to remain outstanding barring a contraction in CLO AAA spreads or a sustained rally in loan prices.
CLO fundamentals experienced some marginal deterioration towards year-end 2022, with modest declines reported in market value metrics (weighted average price, CLO equity market value NAV, BB market value overcollateralization) as loan prices came down from mid-November highs.12 The accelerating pace of negative ratings actions and loan defaults in the first quarter of 2023 has sharpened CLO market participants’ focus on increased downgrades and heightened default risk in underlying loan exposures. CLO exposure to CCC/Caa rated assets in excess of 7.5% negatively impacts overcollateralized cushions; though many CLO managers reduced median CCC exposures in 2022 through active trading—and US CLOs have therefore generally maintained healthy junior overcollateralization ratio test cushions—the currently high concentration of B3/B- rated loans in CLOs could inflate CCC buckets in an event of a loan downgrade wave. Roughly 17% of the loan market has been downgraded over the course of 2022 and the first quarter of 2023, with 5% to the CCC bucket (about $65 billion of downgrades to CCC).13 Approximately 3% of B- rated loans held in CLOs have been downgraded to CCC over the first three months of 2023, which is in line with the historical average.13 Credit stress is expected to increase as macroeconomic headwinds strengthen, underscoring the importance of proactive risk management.
The median annualized equity distribution for reinvesting US CLOs declined in 2022,14 as rising rates eliminated the benefit of floors on underlying loan collateral and as the basis between one-month and three-month LIBOR/SOFR increased (in 2022, many loan borrowers took advantage of lower one-month LIBOR/SOFR in 2022, whereas most CLO liabilities pay at the three-month rate). The base rate mismatch has compressed since year-end, though heightened rate volatility impacted first quarter 2023 CLO equity payments. At approximately 10% on an annualized basis, the median first quarter 2023 US CLO equity distribution rate was broadly unchanged quarter-over-quarter, but down from approximately 15.7% one year ago.14 Second quarter equity distributions are tracking meaningfully higher; a survey of reported April 2023 payments across approximately 900 outstanding deals reveals a median quarterly distribution of 4% of notional value, compared to 2.5% for the first quarter.15
Though challenges remain, we believe CLO tranches present compelling investment opportunities, and that the Trust’s portfolio has the potential for further upside. At current levels, we believe BB rated CLO tranches (which comprise the majority of the Trust’s CLO debt holdings) are very attractive given double-digit average current yields, expected price convexity, and additional upside potential. With meaningful performance dispersion across both the CLO and underlying loan markets, we will endeavor to invest in fundamentally strong CLOs that offer compelling yields and the potential for price appreciation. Importantly, the CLO structure has proven resilient over time and is especially valuable during market dislocations when collateral managers can acquire discounted assets with previously locked-in, non-mark-to-market financing. We expect elevated macro risks to drive periods of volatility over the remainder of the year that may create buying opportunities for the Trust.
| 4 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
How did the Trust perform for the six months ended March 31, 2023?
For the six-month period ended March 31, 2023, the Trust’s total return on market price was 15.81% and total return based on net asset value (“NAV”) was 5.81%. NAV return includes the deduction of management fees, operating expenses, and all other Trust expenses. All Trust total returns cited whether based on NAV or market price assume the reinvestment of all distributions. As of March 31, 2023, the Trust’s market price of $6.43 represented a premium of 1.74% to its NAV of $6.32. The market value of the Trust’s shares fluctuates from time to time and may be higher or lower than the Trust’s NAV. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted.
What were the distributions over the period?
From October 1, 2022 through March 1, 2023, the Trust paid a monthly distribution of $0.073 per share. The Trust’s declared distribution payable on March 1, 2023 was consistent with the previous five distributions during the Period and represents annualized distribution rate of 13.62% based on the Trust’s closing market price of $6.43 per common share on March 31, 2023. The Trust’s distribution rate is not constant, and the amount of distributions, when declared by the Trust’s Board of Trustees, is subject to change based on the performance of the Trust.
The Trust intends to pay substantially all of its net investment income, if any, to common shareholders through monthly distributions and to distribute any net realized long-term capital gains to common shareholders at least annually. The Trust’s net investment income and capital gain can vary significantly over time; however, the Trust seeks to maintain stable common share monthly distributions over time. There is no assurance the Trust will pay regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Trust from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital.
Please see Note 4 of the Notes to the Financial Statements for more information on distributions for the period.
What influenced the Trust’s performance for the six months ended March 31, 2023?
The Trust generated positive returns across its main portfolio segments during the Period. Performing loans represented the largest contributor to performance, with a net gain of $0.31 per share for the Period, followed by the Trust’s CLO equity investments, which produced a net gain of $0.19 per share. During the Period, the Trust’s CLO equity positions collected quarterly distribution payments totaling $13,265,803 or $0.37 per share, which were offset by unrealized market value losses of -$6,495,807 or -$0.18 per share. It bears noting that CLO equity pricing can be very volatile. The Trust’s CLO debt portfolio segment and performing high yield bond portfolio segment posted net gains of $0.14 per share and $0.02 per share, respectively, for the Period. The Trust’s opportunistic loan portfolio segment produced a nominal net gain for the Period, while its opportunistic bond and equity holdings generated nominal net losses for the Period.
Relevant indices for the markets in which the Trust invests include the Trust’s benchmark, the Morningstar LSTA Leveraged Loan 100 Index (formerly the S&P/LSTA Leveraged Loan 100 Index), which returned 6.78% for the Period, Bloomberg Barclays U.S. High Yield 1% Issuer Capped Index, which returned -7.88% for the Period, and the JP Morgan BB/B CLO Debt Index, which returned 10.04% for the Period. There is no representative benchmark index for CLO equity in the marketplace.
Discuss the Trust’s secondary market performance and issuance of additional common shares.
During the six months ended March 31, 2023, the Trust issued 571,206 common shares pursuant to an “at-the-market” (“ATM”) offering program resulting in $3,843,658 of net proceeds to the Trust. The ATM program is a form of continuous offering of the Trust’s common shares. The goal of the Trust’s ATM program is to enhance secondary market liquidity for shareholders by increasing the size of the Trust over time and reducing operating expenses per share. In an ATM offering, newly issued shares are sold incrementally into the secondary trading market through a placement agent at prevailing market prices, but always at or above the Trust’s NAV. The placement agent sells the common shares in the open market and the Trust receives cash proceeds from the transaction to be invested pursuant to the Trust’s investment objectives.
The Trust issues common shares pursuant to the ATM program only if the shares are trading at a sufficient premium such that the issuance price, less the placement fee, exceeds the Trust’s NAV per share. For the Period, the Trust’s common shares traded at an average 1.24% premium to NAV and had an average daily trading volume of 161,740 common shares. ATM program daily issuance totals depend on the common shares’ average daily trading volume and market price’s relative premium or discount to NAV.
In addition to the at-the-market program, $6,500,000 of the Trust’s 6.00% Series 2029 Convertible Preferred Shares were converted to common shares in two separate conversions at a conversion price above NAV, resulting in the issuance of an additional 1,035,531 common shares.
Semi-Annual Report | March 31, 2023 |
5 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
Discuss the Trust’s use of leverage.
The Trust uses leverage as part of its investment strategy to finance the purchase of additional securities that may provide increased income and greater appreciation potential to common shareholders than could be achieved from a portfolio that is unlevered. With the current cost of borrowing, the amount of leverage used by the Trust is expected to be accretive to income generation. The Trust currently employs leverage through the combination of a bank borrowing facility and preferred shares outstanding. As of March 31, 2023, the amount of outstanding borrowings under the facility was $122,350,000, which represented approximately 30.50% of the Trust’s Managed Assets (including the proceeds from borrowing). As of March 31, 2023, the Trust also had 6.50% Series 2026 Preferred Shares and 6.00% Series 2029 Convertible Preferred Shares outstanding with a total liquidation preference of $39,900,000 and $3,500,000, respectively. Total leverage was $165,750,000 as of March 31, 2023, representing 41.32% of the Trust’s Managed Assets.
The purchasers of the 6.00% Series 2029 Convertible Preferred Shares also agreed to purchase up to 800,000 additional 6.00% Series 2029 Convertible Preferred Shares, representing an aggregate liquidation preference of $20,000,000, at one or more subsequent closings on or before December 31, 2023, as determined by the Trust in its discretion.
The Trust may use leverage through (i) the issuance of senior securities representing indebtedness, including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper, (ii) the issuance of preferred shares and/or (iii) reverse repurchase agreements, securities lending, short sales or derivatives, such as swaps, futures or forward contracts, that have the effect of leverage. The Trust may utilize leverage, to the maximum extent permitted under the Investment Company Act of 1940, as amended (the “1940 Act”). Because a portion of the Trust’s assets may consist of illiquid investments, to the extent that the Trust must dispose of portfolio holdings to meet such regulatory asset coverage ratio, the Trust may be required to dispose of more liquid holdings at times or on terms that the Trust would otherwise consider undesirable, which may pose particular risks during adverse or volatile market conditions. While leverage may increase the income of the Trust in yield terms, it also amplifies the effects of changing market prices in the portfolio and can cause the Trust’s NAV to change to a greater degree than the market as a whole. This change in NAV can create volatility in Trust pricing.
Index Definitions
The Trust does not seek to track any index. Index returns are stated for illustrative purposes only, do not reflect the deduction of fees and expenses, and do not represent the performance of the Trust. It is not possible to invest directly in an index.
Bloomberg Barclays U.S. High Yield 1% Issuer Capped Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond markets. Securities are classified as high yield if the middle rating of the Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. Issuers are capped at 1% of the index.
J.P. Morgan CLO Debt Index represents the post-crisis J.P. Morgan Collateralized Loan Obligation Index (“CLOIE”). The CLOIE is an index that tracks the market for U.S. dollar-denominated broadly syndicated, arbitrage CLOs. The CLOIE is divided by origination (pre- versus post-crisis) and is broken out further into six original rating classes (AAA, AA, A, BBB, BB, B). The sub-index referenced herein tracks BB-rated CLO debt.
The Morningstar LSTA US Leveraged Loan 100 Index (formerly the S&P/LSTA U.S. Leveraged Loan 100 Index) (“L100”) is designed to measure the performance of the 100 largest facilities in the US leveraged loan market. Index constituents are market-value weighted, subject to a single loan facility weight cap of 2%. LSTA/Refinitiv mark-to-market pricing is used to price each loan in the index. LSTA/ Refinitiv mark-to-market pricing is based on bid/ask quotes gathered from dealers and is not based upon derived pricing models. The index uses the average bid for its market value calculation. Loan facilities included in the L100 must have a one year (at inception) minimum term, an initial minimum spread of LIBOR/SOFR + 1.25%, and a minimum size of $50mm (initially funded).
Risks and Other Considerations
Investing involves risk, including the possible loss of principal and fluctuation in value.
The views expressed in these Questions & Answers reflect those of the portfolio managers only through the report period as stated on the cover. These views are expressed for informational purposes only and are subject to change at any time, based on market and other conditions, and may not come to pass. These views should not be construed as research, investment advice or a recommendation of any kind regarding the Trust or any issuer or security, do not constitute a solicitation to buy or sell any security, and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific investor.
The views expressed in this report may also include forward-looking statements that involve risk and uncertainty, and there is no guarantee that any predictions will come to pass. Actual results or events may differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to the other factors noted with such forward-looking statements, include general economic conditions such as inflation, recession, and interest rates. Neither XAI nor Octagon has any obligation to update or otherwise revise any forward-looking statements, including any revision to reflect changes in any circumstances arising after the date hereof relating to any assumptions or otherwise.
| 6 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Questions & Answers |
March 31, 2023 (Unaudited) |
There can be no assurance that the Trust will achieve its investment objective or that any investment strategies or techniques discussed herein will be effective. The value of the Trust will fluctuate with the value of the underlying securities. Historically, closed-end funds often trade at a discount to their net asset value.
Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted.
Risk Considerations
Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Trust’s investment objective will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. CLOs often involve risks that are different from or more acute than risks associated with other types of credit instruments, and may be difficult to value or be illiquid. The value of CLOs may decrease if ratings agencies revise their ratings criteria and, as a result, lower the rating of a CLO in which the Trust has invested. Senior loans may not be fully secured by collateral, generally do not trade on exchanges, and are typically issued by unrated or below-investment grade companies, and therefore are subject to greater liquidity and credit risk. Lower credit debt securities maybe more likely to fail to make timely interest or principal payments. Leverage increases return volatility and magnifies the Trust’s potential return and its risks; there is no guarantee a trust’s leverage strategy will be successful. The Trust’s shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation.
Please see “Risks” for more information regarding the Trust’s risks and considerations.
Visit the Trust’s website (www.xainvestments.com/XFLT) for additional information regarding the Trust. The Trust regularly updates performance and certain other data and publishes material information as necessary from time to time on its website. Investors and others are advised to check the website for updated information and the release of other material information about the Trust. References herein to the Trust’s website are intended to allow investors public access to information regarding the Trust and do not, and are not intended to, incorporate the Trust’s website in this report.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be, and should not be construed as, legal or tax advice and/or legal opinion. Always consult a financial, tax, and/or legal professional regarding your specific situation.
| 1 | Source: Pitchbook LCD (www.lcdcomps.com). Represents metrics for the Morningstar LSTA US Leveraged Loan Index (the “LLI”) as of March 31, 2023, unless otherwise noted. The LLI is a market-value weighted index designed to measure the performance of the US leveraged loan market, the index universe comprises syndicated, senior secured, US-dollar denominated leveraged loans covered by Morningstar PitchBook/LCD, a Morningstar Company. Loan facilities included in the LLI must have a one year (at inception) minimum term, an initial minimum spread of LIBOR/SOFR + 1.25%, and a minimum size of $50mm (initially funded). LSTA/Refinitiv mark-to-market pricing is used to price each loan in the index. LSTA/Refinitiv mark-to-market pricing is based on bid/ask quotes gathered from dealers and is not based upon derived pricing models. The index uses the average bid for its market value calculation. It is not possible to invest directly in this index. |
| 2 | Source: Bloomberg (March 28, 2023). |
| 3 | Source: LCD, an offering of S&P Global Market Intelligence, “LCD Quarterly Review: First Quarter 2023” (April 3, 2023). |
| 4 | Source: Pitchbook LCD, “Three Chapter 11 filings push loan default rate to 22-month high in March” (April 3, 2023). |
| 5 | Source: J.P. Morgan North America Credit Research, “High Yield Bond and Leveraged Loan Market Monitor” (April 3, 2023). |
| 6 | Source: J.P. Morgan North America Credit Research, “Credit Strategy Weekly Update, High Yield and Leveraged Loan Research” (March 31, 2023). |
| 7 | Source: J.P. Morgan Data Query (April 15, 2023). Represents the post-crisis J.P. Morgan Collateralized Loan Obligation Index (“CLOIE”). The CLOIE is a benchmark to track the market for US dollar denominated broadly syndicated, arbitrage CLOs. The CLOIE is divided by origination (pre- versus post-crisis) and is broken out further into six original rating classes (AAA, AA, A, BBB, BB, B). It is impossible to invest directly in the index. Past performance is not a predictor of future market performance. |
| 8 | Source: J.P. Morgan Data Query (January 14, 2023). Data for AAA IG corporate bonds represents JULI Index; data for BB HY bonds represents JPMorgan US High Yield Index. |
| 9 | Source: J.P. Morgan CLO Research (April 10, 2023). |
| 10 | Source: Pitchbook LCD, “Q1 US CLO Wrap: Despite myriad headwinds, issuance remains strong” (March 28, 2023). |
| 11 | Source: BofA Global Research, “CLO Weekly - Manager Performance: Amortizations, Par build/burn, Moving from Bs” (May 5, 2023). |
| 12 | Source: Barclays Credit Research, “CLO & Leveraged Loan Monthly Update – December 2022” (January 4, 2023). |
| 13 | Source: BofA Global Research, “CLO Weekly: Performance update: Recoveries (or lack thereof) and downgrades” (April 28, 2023). |
| 14 | Source: Barclays Credit Research, “CLOs 1Q23 Distributions Hover Close to Post-GFC Lows” (February 17, 2023). |
| 15 | Source: Source: BofA Global Research, “CLO Weekly: CLO Equity: Cashflows get to enjoy Spring & returns through March end” (April 21, 2023). |
Semi-Annual Report | March 31, 2023 |
7 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Trust Portfolio Information |
March 31, 2023 (Unaudited) |
Growth of a $10,000 Investment (as of March 31, 2023)
The chart above represents historical performance of a hypothetical investment of $10,000 in the Trust since inception. Past performance does not guarantee future results. Performance reflects the partial waiver of the Trust’s advisory fees and/or reimbursement of expenses for certain periods since the inception date. Without these waivers and/or reimbursements, performance would have been lower. This chart does not reflect the deduction of taxes that a shareholder would pay on Trust distributions or the redemption of Trust shares. The chart assumes that distributions from the Trust are reinvested.
Summary Performance (as of March 31, 2023)
| 1 Month | 3 Months | 6 Months | 1 Year | 3 Year | 5 Year | Since the Trust’s Inception (September 27, 2017)^ | |
| XAI Octagon Floating Rate & Alternative Income Term Trust - NAV | -3.14% | 4.22% | 5.81% | -5.83% | 23.43% | 2.47% | 2.87% |
| XAI Octagon Floating Rate & Alternative Income Term Trust – Market Price | -2.93% | 5.20% | 15.81% | -13.58% | 26.76% | 3.49% | 2.78% |
| Morningstar LSTA US Leveraged Loan 100 Index* | -0.26% | 2.86% | 6.78% | 2.42% | 6.50% | 3.37% | 3.51% |
| * | The Morningstar LSTA (Loan Syndications and Trading Association) U.S. Leveraged Loan 100 Index was the first to track the investable senior loan market. This rules-based index consists of the 100 largest loan facilities in the benchmark Morningstar LSTA U.S. Leveraged Loan Index (LLI). |
| ^ | Annualized Returns. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than performance data quoted.
| 8 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Trust Portfolio Information |
March 31, 2023 (Unaudited) |
Top Ten Portfolio Holdings (as a % of Total Investments)*
| Name | Type | |
| Carlyle US CLO, Ltd., CLO 2019-4A, SUB | CLO Equity | 1.65% |
| Elmwood CLO VII, Ltd., CLO 2020-4A, SUB | CLO Equity | 1.58% |
| Rockland Park CLO, Ltd., CLO 2021-1A, SUB | CLO Equity | 1.40% |
| Regatta XIX Funding, Ltd., CLO 2022-1A, SUB | CLO Equity | 1.28% |
| Regatta XVIII Funding, Ltd., CLO 2021-1A, SUB | CLO Equity | 1.25% |
| Elmwood CLO II, Ltd., CLO 2019-2A, SUB | CLO Equity | 1.22% |
| Anchorage Capital CLO 13 LLC, CLO 2019-13A, SUB | CLO Equity | 1.13% |
| Anchorage Capital CLO 19, Ltd., CLO 2021-19A, SUB | CLO Equity | 1.06% |
| Madison Park Funding XXXVII, Ltd., CLO 2019-37A, SUB | CLO Equity | 0.97% |
| Elmwood CLO VIII, Ltd., CLO 2021-1A, SUB | CLO Equity | 0.96% |
| Total | 12.50% |
| * | Holdings may vary and are subject to change. |
Asset Allocation (as a % of Total Investments)
| Senior Secured First Lien | 42.97% |
| CLO Equity | 34.85% |
| CLO Debt | 15.76% |
| High Yield | 4.08% |
| Secured Second Lien | 2.29% |
| Common Stock | 0.05% |
| Cash & Equivalents | 0.00% |
Total may not add up to 100% due to rounding.
Holdings may vary and are subject to change.
| Semi-Annual Report | March 31, 2023 | 9 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| COLLATERALIZED LOAN OBLIGATIONS DEBT(b)- 26.51%* (15.76% of Total Investments) | ||||||||||||||
| Anchorage Capital CLO 13 LLC, CLO 2021-13A, ER(c) | 11.49% | 3M US L + 6.70% | 04/15/2034 | $ | 1,500,000 | $ | 1,295,540 | |||||||
| Anchorage Capital CLO 16, Ltd., CLO 2021-16A, ER(c) | 12.15% | 3M US L + 7.35% | 01/19/2035 | 2,000,000 | 1,769,802 | |||||||||
| Anchorage Capital CLO 17, Ltd., CLO 2021-17A, E(c) | 11.65% | 3M US L + 6.86% | 07/15/2034 | 1,250,000 | 1,074,562 | |||||||||
| Anchorage Capital CLO 19, Ltd., CLO 2021-19A, F(c)(d) | 12.04% | 3M US L + 7.25% | 10/15/2034 | 1,000,000 | 726,757 | |||||||||
| Anchorage Capital CLO 21, Ltd., CLO 2021-21A, E(c) | 12.16% | 3M US L + 7.35% | 10/20/2034 | 500,000 | 441,045 | |||||||||
| Anchorage Capital CLO 4-R, Ltd., CLO 2018-4RA, E(c) | 10.30% | 3M US L + 5.50% | 01/28/2031 | 2,000,000 | 1,585,386 | |||||||||
| Anchorage Capital CLO 9, Ltd., CLO 2021-9A, ER2(c) | 11.61% | 3M US L + 6.82% | 07/15/2032 | 2,000,000 | 1,728,630 | |||||||||
| Apidos CLO XXVII, CLO 2017-27A, D(c) | 11.19% | 3M US L + 6.40% | 07/17/2030 | 375,000 | 331,439 | |||||||||
| Apidos CLO XXXII, CLO 2020-32A, E(c) | 11.56% | 3M US L + 6.75% | 01/20/2033 | 250,000 | 232,798 | |||||||||
| ARES LI CLO, Ltd., CLO 2021-51A, ER(c) | 11.64% | 3M US L + 6.85% | 07/15/2034 | 250,000 | 234,307 | |||||||||
| ARES Loan Funding III, Ltd., CLO 2022-ALF3A, E(c) | 12.24% | 3M SOFR + 7.58% | 07/25/2035 | 1,000,000 | 943,174 | |||||||||
| Ares LV CLO, Ltd., CLO 2021-55A, ER(c) | 11.14% | 3M US L + 6.35% | 07/15/2034 | 1,525,000 | 1,452,821 | |||||||||
| Atrium IX, CLO 2017-9A, ER(c) | 11.40% | 3M US L + 6.45% | 05/28/2030 | 900,000 | 797,858 | |||||||||
| Atrium XIV LLC, CLO 2018-14A, E(c) | 10.44% | 3M US L + 5.65% | 08/23/2030 | 500,000 | 450,989 | |||||||||
| Battalion CLO, Ltd., CLO 2021-21A, E(c) | 11.25% | 3M US L + 6.46% | 07/15/2034 | 1,000,000 | 804,548 | |||||||||
| Benefit Street Partners CLO XVII, Ltd., CLO 2021-17A, ER(c) | 11.14% | 3M US L + 6.35% | 07/15/2032 | 1,100,000 | 971,930 | |||||||||
| Benefit Street Partners CLO XXIX, CLO 2022-29A, E(c) | 12.39% | 3M SOFR + 7.81% | 01/25/2036 | 1,750,000 | 1,694,899 | |||||||||
| Carlyle Global Market Strategies, CLO 2022-2A, D(c) | 12.04% | 3M SOFR + 7.40% | 04/20/2035 | 800,000 | 729,190 | |||||||||
| Carlyle US CLO 2022-5, Ltd., CLO 2022-5A, E(c) | 13.12% | 3M SOFR + 8.46% | 10/15/2035 | 2,000,000 | 1,925,698 | |||||||||
| CIFC Funding 2015-I, Ltd., CLO 2015-1A, ERR(c) | 10.82% | 3M US L + 6.00% | 01/22/2031 | 500,000 | 434,618 | |||||||||
| CIFC Funding 2019-III, Ltd., CLO 2021-3A, DR(c) | 11.59% | 3M US L + 6.80% | 10/16/2034 | 900,000 | 850,886 | |||||||||
| CIFC Funding 2019-V, Ltd., CLO 2021-5A, DR(c) | 11.57% | 3M US L + 6.78% | 01/15/2035 | 1,000,000 | 936,046 | |||||||||
| CIFC Funding 2019-VI, Ltd., CLO 2019-6A, E(c) | 12.19% | 3M US L + 7.40% | 01/16/2033 | 500,000 | 466,078 | |||||||||
| CIFC Funding 2022-I, Ltd., CLO 2022-1A, E(c) | 11.06% | 3M SOFR + 6.40% | 04/17/2035 | 2,000,000 | 1,899,273 | |||||||||
| CIFC Funding 2022-III, Ltd., CLO 2022-3A, E(c) | 11.92% | 3M SOFR + 7.27% | 04/21/2035 | 850,000 | 783,795 | |||||||||
| Elmwood CLO 18, Ltd., CLO 2022-5A, E(c) | 12.42% | 3M SOFR + 7.76% | 07/17/2033 | 600,000 | 570,985 | |||||||||
| Elmwood CLO II, Ltd., CLO 2021-2A, DR(c) | 7.81% | 3M US L + 3.00% | 04/20/2034 | 1,250,000 | 1,186,360 | |||||||||
| Elmwood CLO VI, Ltd., CLO 2021-3A, ER(c) | 11.31% | 3M US L + 6.50% | 10/20/2034 | 750,000 | 702,226 | |||||||||
| Elmwood CLO XI, Ltd., CLO 2021-4A, E(c) | 10.81% | 3M US L + 6.00% | 10/20/2034 | 750,000 | 697,742 | |||||||||
| HPS Loan Management, Ltd., CLO 2017-11A, F(c)(d) | 12.66% | 3M US L + 7.85% | 05/06/2030 | 1,000,000 | 779,239 | |||||||||
| Madison Park Funding LX, Ltd., CLO 2022-60A, E(c) | 13.57% | 3M SOFR + 8.95% | 10/25/2035 | 1,250,000 | 1,231,318 | |||||||||
| Madison Park Funding XLVI, Ltd., CLO 2021-46A, ER(c) | 11.04% | 3M US L + 6.25% | 10/15/2034 | 550,000 | 521,975 | |||||||||
| Madison Park Funding XLVIII, Ltd., CLO 2021-48A, E(c) | 11.05% | 3M US L + 6.25% | 04/19/2033 | 1,500,000 | 1,363,277 | |||||||||
| Madison Park Funding XVII, Ltd., CLO 2015-17A, FR(c) | 12.30% | 3M US L + 7.48% | 07/21/2030 | 1,000,000 | 732,312 | |||||||||
| Madison Park Funding XXVII, Ltd., CLO 2018-27A, D(c) | 9.81% | 3M US L + 5.00% | 04/20/2030 | 1,500,000 | 1,304,775 | |||||||||
| Madison Park Funding XXXVII, Ltd., CLO 2021-37A, ER(c) | 10.94% | 3M US L + 6.15% | 07/15/2033 | 750,000 | 691,637 | |||||||||
| Madison Park Funding, Ltd., CLO 2023-63A, E(c)(e) | 13.23% | 3M SOFR + 8.57% | 04/21/2035 | 1,250,000 | 1,218,750 | |||||||||
| Magnetite XXIV, Ltd., CLO 2022-24A, ER(c) | 11.06% | 3M SOFR + 6.40% | 04/15/2035 | 500,000 | 472,690 | |||||||||
| Neuberger Berman Loan Advisers CLO 24, Ltd., CLO 2017-24A, E(c) | 10.82% | 3M US L + 6.02% | 04/19/2030 | 1,000,000 | 881,679 | |||||||||
| Neuberger Berman Loan Advisers CLO 32, Ltd., CLO 2021-32A, ER(c) | 10.90% | 3M US L + 6.10% | 01/20/2032 | 1,500,000 | 1,323,060 | |||||||||
| Neuberger Berman Loan Advisers CLO 40, Ltd., CLO 2021-40A, E(c) | 10.64% | 3M US L + 5.85% | 04/16/2033 | 1,000,000 | 904,047 | |||||||||
| OHA Credit Funding 11, Ltd., CLO 2022-11A, E(c) | 11.88% | 3M SOFR + 7.25% | 07/19/2033 | 550,000 | 504,053 | |||||||||
| OHA Credit Funding 12, Ltd., CLO 2022-12A, E(c) | 12.40% | 3M SOFR + 7.76% | 07/20/2033 | 1,000,000 | 990,106 | |||||||||
| OHA Credit Funding 2, Ltd., CLO 2021-2A, ER(c) | 11.18% | 3M US L + 6.36% | 04/21/2034 | 1,000,000 | 932,558 | |||||||||
| OHA Credit Funding 5, Ltd., CLO 2020-5A, E(c) | 11.04% | 3M US L + 6.25% | 04/18/2033 | 1,000,000 | 908,011 | |||||||||
| OHA Credit Funding 7, Ltd., CLO 2022-7A, ER(c) | 10.88% | 3M SOFR + 6.25% | 02/24/2037 | 900,000 | 834,343 | |||||||||
| See Notes to Financial Statements. | |
| 10 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread |
Maturity Date | Principal Amount |
Value | ||||||||||
| COLLATERALIZED LOAN OBLIGATIONS DEBT(b) (continued) | ||||||||||||||
| OHA Credit Funding 9, Ltd., CLO 2021-9A, E(c) | 11.05% | 3M US L + 6.25% | 07/19/2035 | $ | 1,000,000 | $ | 933,183 | |||||||
| Rad CLO 10, Ltd., CLO 2021-10A, E(c) | 10.67% | 3M US L + 5.85% | 04/23/2034 | 2,000,000 | 1,780,840 | |||||||||
| Rad CLO 11, Ltd., CLO 2021-11A, E(c) | 11.04% | 3M US L + 6.25% | 04/15/2034 | 1,300,000 | 1,124,286 | |||||||||
| Rad CLO 12, Ltd., CLO 2021-12A, E(c) | 11.15% | 3M US L + 6.35% | 10/30/2034 | 2,000,000 | 1,734,369 | |||||||||
| Regatta VII Funding, Ltd., CLO 2021-1A, ER2(c) | 11.36% | 3M US L + 6.40% | 06/20/2034 | 1,000,000 | 912,015 | |||||||||
| Regatta VIII Funding, Ltd., CLO 2017-1A, E(c) | 10.89% | 3M US L + 6.10% | 10/17/2030 | 500,000 | 458,311 | |||||||||
| Regatta XII Funding, Ltd., CLO 2021-1A, ER(c) | 11.14% | 3M US L + 6.35% | 10/15/2032 | 500,000 | 459,015 | |||||||||
| Regatta XIV Funding, Ltd., CLO 2018-3A, E(c) | 10.77% | 3M US L + 5.95% | 10/25/2031 | 750,000 | 618,593 | |||||||||
| Regatta XIX Funding, Ltd., CLO 2022-1A, E(c) | 11.52% | 3M SOFR + 6.88% | 04/20/2035 | 500,000 | 474,828 | |||||||||
| Regatta XVI Funding, Ltd., CLO 2019-2A, E(c) | 11.79% | 3M US L + 7.00% | 01/15/2033 | 1,000,000 | 937,720 | |||||||||
| Regatta XXII Funding, Ltd., CLO 2022-2A, E(c) | 11.83% | 3M SOFR + 7.19% | 07/20/2035 | 1,350,000 | 1,233,006 | |||||||||
| Regatta XXIII Funding, Ltd., CLO 2021-4A, E(c) | 11.51% | 3M US L + 6.70% | 01/20/2035 | 1,250,000 | 1,176,717 | |||||||||
| Regatta XXIV Funding, Ltd., CLO 2021-5A, E(c) | 11.61% | 3M US L + 6.80% | 01/20/2035 | 250,000 | 234,610 | |||||||||
| RR 19, Ltd., CLO 2021-19A, D(c) | 11.29% | 3M US L + 6.50% | 10/15/2035 | 500,000 | 470,317 | |||||||||
| Sound Point CLO II, Ltd., CLO 2013-1A, B2R(c) | 10.32% | 3M US L + 5.50% | 01/26/2031 | 250,000 | 169,375 | |||||||||
| Sound Point CLO XVIII, Ltd., CLO 2017-4A, D(c) | 10.31% | 3M US L + 5.50% | 01/21/2031 | 500,000 | 339,144 | |||||||||
| Symphony CLO XXI, Ltd., CLO 2019-21A ER, ER(c) | 11.39% | 3M US L + 6.60% | 07/15/2032 | 1,000,000 | 841,612 | |||||||||
| Symphony CLO XXIV, Ltd., CLO 2021-24A, E(c) | 11.82% | 3M US L + 7.00% | 01/23/2032 | 1,000,000 | 928,181 | |||||||||
| THL Credit Wind River 2019-1 CLO, Ltd., CLO 2021-1A, ER(c) | 11.41% | 3M US L + 6.60% | 07/20/2034 | 875,000 | 688,903 | |||||||||
| THL Credit Wind River CLO, Ltd., CLO 2021-1A, EE(c) | 11.85% | 3M US L + 7.06% | 04/18/2036 | 1,500,000 | 1,247,668 | |||||||||
| THL Credit Wind River CLO, Ltd., CLO 2017-4A, E(c) | 10.72% | 3M US L + 5.80% | 11/20/2030 | 500,000 | 406,450 | |||||||||
| Voya CLO 2020-2, Ltd., CLO 2021-2A, ER(c) | 11.20% | 3M US L + 6.40% | 07/19/2034 | 1,125,000 | 1,068,823 | |||||||||
| Wind River 2021-3 CLO, Ltd., CLO 2021-3A, E(c) | 11.41% | 3M US L + 6.60% | 07/20/2033 | 1,000,000 | 868,488 | |||||||||
| Total Collateralized Loan Obligations Debt (Cost $67,971,670) | $ | 69,700,000 | $ | 62,419,666 | ||||||||||
| COLLATERALIZED LOAN OBLIGATIONS EQUITY(f)- 58.65%* (34.85% of Total Investments) | ||||||||||||||
| ALM 2020, Ltd., CLO 2020-1A, SUB(c) | N/A | Estimated yield of 9.20% | 10/15/2029 | 5,000,000 | 1,737,970 | |||||||||
| Anchorage Capital CLO 13 LLC, CLO 2019-13A, SUB(c) | N/A | Estimated yield of 17.13% | 04/15/2034 | 7,000,000 | 4,473,980 | |||||||||
| Anchorage Capital CLO 16, Ltd., CLO 2020-16A, SUB(c) | N/A | Estimated yield of 17.72% | 01/19/2035 | 2,500,000 | 1,412,500 | |||||||||
| Anchorage Capital CLO 18, Ltd., CLO 2021-18A, SUB(c) | N/A | Estimated yield of 19.78% | 04/15/2034 | 850,000 | 553,489 | |||||||||
| Anchorage Capital CLO 19, Ltd., CLO 2021-19A, SUB(c) | N/A | Estimated yield of 17.79% | 10/15/2034 | 7,000,000 | 4,192,580 | |||||||||
| Anchorage Capital CLO 1-R, Ltd., CLO 2018-1RA, SUB(c) | N/A | Estimated yield of 12.14% | 04/13/2031 | 4,150,000 | 1,697,935 | |||||||||
| Anchorage Capital CLO 20, Ltd., CLO 2021-20A, SUB(c) | N/A | Estimated yield of 16.62% | 01/20/2035 | 1,750,000 | 1,058,750 | |||||||||
| Anchorage Capital CLO 3-R, Ltd., CLO 2014-3RA, SUB(c) | N/A | Estimated yield of 12.85% | 01/28/2031 | 1,400,000 | 459,060 | |||||||||
| Anchorage Capital CLO 7, Ltd., CLO 2015-7A, SUBA(c) | N/A | Estimated yield of 20.64% | 01/28/2031 | 1,750,000 | 608,632 | |||||||||
| Apidos CLO XXVII, CLO 2017-27A, SUB(c) | N/A | Estimated yield of 9.15% | 07/17/2030 | 1,300,000 | 359,060 | |||||||||
| ARES LI CLO, Ltd., CLO 2019-51A, INC(c) | N/A | Estimated yield of 18.96% | 07/15/2034 | 1,699,959 | 919,899 | |||||||||
| ARES LI CLO, Ltd., CLO 2019-51A, SUB(c) | N/A | Estimated yield of 18.57% | 07/15/2034 | 2,646,041 | 1,431,852 | |||||||||
| Ares XLI CLO, Ltd., CLO 2016-41A, SUB(c) | N/A | Estimated yield of 19.52% | 04/15/2034 | 2,343,500 | 942,856 | |||||||||
| ARES XLIV CLO, Ltd., CLO 2017-44A, SUB(c) | N/A | Estimated yield of 17.99% | 04/15/2034 | 2,845,572 | 981,480 | |||||||||
| Battalion CLO XV, Ltd., CLO 2020-15A, SUB(c) | N/A | Estimated yield of 17.30% | 01/17/2033 | 4,500,000 | 2,868,750 | |||||||||
| Battalion CLO XVI, Ltd., CLO 2019-16A, SUB(c) | N/A | Estimated yield of 17.38% | 12/19/2032 | 3,500,000 | 1,989,050 | |||||||||
| Carbone CLO, Ltd., CLO 2017-1A, SUB(c) | N/A | Estimated yield of 13.65% | 01/20/2031 | 7,850,000 | 3,451,260 | |||||||||
| CARLYLE US CLO 2021-5, Ltd., CLO 2021-5A, SUB(c) | N/A | Estimated yield of 15.39% | 07/20/2034 | 4,000,000 | 2,715,800 | |||||||||
| CARLYLE US CLO 2021-6, Ltd., CLO 2021-6A, SUB(c) | N/A | Estimated yield of 19.57% | 07/15/2034 | 1,000,000 | 579,653 | |||||||||
| Carlyle US CLO, Ltd., CLO 2019-4A, SUBA(c) | N/A | Estimated yield of 18.87% | 04/15/2035 | 8,740,000 | 6,521,832 | |||||||||
| Catamaran CLO, Ltd., CLO 2015-1A, SUB(c) | N/A | Estimated yield of 0.00% | 04/22/2027 | 750,000 | 75 | |||||||||
| CIFC Funding 2017-III, Ltd., CLO 2017-3A, SUB(c) | N/A | Estimated yield of 5.49% | 07/20/2030 | 1,400,000 | 433,860 | |||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 11 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| COLLATERALIZED LOAN OBLIGATIONS EQUITY(f) (continued) | ||||||||||||||
| CIFC Funding 2017-V, Ltd., CLO 2017-5A, SUB(c) | N/A | Estimated yield of 8.94% | 11/16/2030 | $ | 4,500,000 | $ | 1,533,285 | |||||||
| CIFC Funding 2018-I, Ltd., CLO 2018-1A, SUB(c) | N/A | Estimated yield of 10.31% | 04/18/2031 | 3,250,000 | 1,486,605 | |||||||||
| CIFC Funding 2018-III, Ltd., CLO 2018-3A, SUB(c) | N/A | Estimated yield of 9.76% | 07/18/2031 | 3,000,000 | 1,142,850 | |||||||||
| CIFC Funding 2019-III, Ltd., CLO 2019-3A, SUB(c) | N/A | Estimated yield of 18.97% | 10/16/2034 | 750,000 | 528,458 | |||||||||
| CIFC Funding 2019-V, Ltd., CLO 2019-5A, INC(c) | N/A | Estimated yield of 20.10% | 01/15/2035 | 2,500,000 | 1,765,020 | |||||||||
| CIFC Funding 2019-V, Ltd., CLO 2019-5A, SUB(c) | N/A | Estimated yield of 22.25% | 01/15/2035 | 1,000,000 | 706,008 | |||||||||
| CIFC Funding 2020-II, Ltd., CLO 2020-2A, INC(c) | N/A | Estimated yield of 26.96% | 10/20/2034 | 1,000,000 | 751,602 | |||||||||
| CIFC Funding 2020-III, Ltd., CLO 2020-3A, SUB(c) | N/A | Estimated yield of 19.61% | 10/20/2034 | 150,000 | 115,896 | |||||||||
| CIFC Funding 2021-II, CLO 2021-2A, SUB(c) | N/A | Estimated yield of 16.51% | 04/15/2034 | 4,000,000 | 2,960,000 | |||||||||
| CIFC Funding 2021-VII, Ltd., CLO 2021-7A, SUB(c) | N/A | Estimated yield of 18.01% | 01/23/2035 | 1,000,000 | 737,575 | |||||||||
| Dryden 43 Senior Loan Fund, CLO 2016-43A, SUB(c) | N/A | Estimated yield of 15.00% | 04/20/2034 | 5,000,000 | 2,568,000 | |||||||||
| Dryden 87 CLO, Ltd., CLO 2021-87A, SUB(c) | N/A | Estimated yield of 17.31% | 05/20/2034 | 2,000,000 | 1,425,070 | |||||||||
| Dryden 95 CLO, Ltd., CLO 2021-95A, SUB(c) | N/A | Estimated yield of 17.65% | 08/20/2034 | 3,500,000 | 2,361,769 | |||||||||
| Elmwood CLO I, Ltd., CLO 2019-1A, SUB(c) | N/A | Estimated yield of 15.08% | 10/20/2033 | 6,000,000 | 3,705,000 | |||||||||
| Elmwood CLO II, Ltd., CLO 2019-2A, SUB(c) | N/A | Estimated yield of 18.07% | 04/20/2034 | 6,500,000 | 4,847,128 | |||||||||
| Elmwood CLO III, Ltd., CLO 2019-3A, SUB(c) | N/A | Estimated yield of 17.52% | 10/20/2034 | 5,250,000 | 3,651,354 | |||||||||
| Elmwood CLO VII, Ltd., CLO 2020-4A, SUB(c) | N/A | Estimated yield of 17.80% | 01/17/2034 | 8,350,000 | 6,270,324 | |||||||||
| Elmwood CLO VIII, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 16.96% | 01/20/2034 | 5,000,000 | 3,803,830 | |||||||||
| Invesco CLO, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 18.71% | 04/15/2034 | 3,000,000 | 2,080,563 | |||||||||
| Invesco CLO, Ltd., CLO 2021-2A, SUB(c)(g) | N/A | Estimated yield of 17.26% | 07/15/2034 | 5,000,000 | 3,098,630 | |||||||||
| Invesco CLO, Ltd., CLO 2021-2A, SUB(c)(d) | N/A | Estimated yield of 0.00% | 07/15/2034 | 500,000 | 116,900 | |||||||||
| Madison Park Funding XVIII, Ltd., CLO 2015-18A, SUB(c) | N/A | Estimated yield of 13.53% | 10/21/2030 | 4,000,000 | 1,544,000 | |||||||||
| Madison Park Funding XX, Ltd., CLO 2016-20A, SUB(c) | N/A | Estimated yield of 19.54% | 07/27/2030 | 1,740,000 | 727,447 | |||||||||
| Madison Park Funding XXIX, Ltd., CLO 2018-29A, SUB(c) | N/A | Estimated yield of 15.56% | 10/18/2047 | 3,750,000 | 1,942,140 | |||||||||
| Madison Park Funding XXVIII, Ltd., CLO 2018-28A, SUB(c) | N/A | Estimated yield of 17.74% | 07/15/2030 | 5,000,000 | 2,869,860 | |||||||||
| Madison Park Funding XXXVII, Ltd., CLO 2019-37A, SUB(c) | N/A | Estimated yield of 23.50% | 07/15/2049 | 5,500,000 | 3,832,400 | |||||||||
| Niagara Park CLO, Ltd., CLO 2019-1A, SUB(c) | N/A | Estimated yield of 13.70% | 07/17/2032 | 2,648,000 | 1,423,565 | |||||||||
| NYACK Park CLO, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 16.68% | 10/20/2034 | 1,000,000 | 740,872 | |||||||||
| Oak Hill Credit Partners X-R, Ltd., CLO 2014-10RA, SUB(c) | N/A | Estimated yield of 17.49% | 04/20/2034 | 6,673,000 | 2,651,150 | |||||||||
| OHA Credit Partners XI, Ltd., CLO 2015-11A, SUB(c) | N/A | Estimated yield of 11.94% | 01/20/2032 | 2,750,000 | 1,298,550 | |||||||||
| OHA Credit Partners XII, Ltd., CLO 2016-12A, SUB(c) | N/A | Estimated yield of 15.16% | 07/23/2030 | 1,500,000 | 705,957 | |||||||||
| Point Au Roche Park CLO, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 14.41% | 07/20/2034 | 5,000,000 | 3,292,870 | |||||||||
| Recette CLO, Ltd., CLO 2015-1A, SUB(c)(g) | N/A | Estimated yield of 15.02% | 04/20/2034 | 10,400,000 | 3,613,823 | |||||||||
| Recette CLO, Ltd., CLO 2015-1A, SUB(c)(d) | N/A | Estimated yield of 0.00% | 04/20/2034 | 10,400,000 | 20,176 | |||||||||
| Regatta XIX Funding, Ltd., CLO 2022-1A, SUB(c) | N/A | Estimated yield of 21.15% | 04/20/2035 | 6,017,000 | 5,054,280 | |||||||||
| Regatta XVIII Funding, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 13.66% | 01/15/2034 | 7,175,322 | 4,957,674 | |||||||||
| Regatta XXIV Funding, Ltd., CLO 2021-5A, SUB(c) | N/A | Estimated yield of 14.01% | 01/20/2035 | 5,000,000 | 3,275,000 | |||||||||
| Rockland Park CLO, Ltd., CLO 2021-1A, M2(c)(d) | N/A | Estimated yield of 0.00% | 04/20/2034 | 9,000,000 | 90,270 | |||||||||
| Rockland Park CLO, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 14.77% | 04/20/2034 | 9,000,000 | 5,554,539 | |||||||||
| Rockland Park CLO, Ltd., CLO 2021-1A, M1(c)(d) | N/A | Estimated yield of 0.00% | 04/20/2034 | 9,000,000 | 25,830 | |||||||||
| Sixth Street CLO XVII, Ltd., CLO 2021-17A, SUB(c) | N/A | Estimated yield of 15.78% | 01/20/2034 | 1,100,000 | 769,200 | |||||||||
| THL Credit Wind River CLO, Ltd., CLO 2018-3A, SUB(c) | N/A | Estimated yield of 12.43% | 01/20/2031 | 3,000,000 | 1,620,600 | |||||||||
| THL Credit Wind River CLO, Ltd., CLO 2018-2A, SUB(c) | N/A | Estimated yield of 8.29% | 07/15/2030 | 3,031,000 | 1,097,686 | |||||||||
| Thompson Park CLO, Ltd., CLO 2021-1A, SUB(c) | N/A | Estimated yield of 20.10% | 04/15/2034 | 4,000,000 | 3,214,964 | |||||||||
| Webster Park CLO, Ltd., CLO 2016-1A, SUB(c) | N/A | Estimated yield of 7.57% | 07/20/2030 | 9,000,400 | 2,715,943 | |||||||||
| See Notes to Financial Statements. | |
| 12 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date |
Principal Amount |
Value | ||||||||||
| COLLATERALIZED LOAN OBLIGATIONS EQUITY(f) (continued) | ||||||||||||||
| Wind River CLO, Ltd., CLO 2016-1A, SUB(c) | N/A | Estimated yield of 0.00% | 07/15/2028 | $ | 4,000,000 | $ | 400 | |||||||
| Total Collateralized Loan Obligations Equity (Cost $179,054,216) | $ | 274,909,794 | $ | 138,085,386 | ||||||||||
| CORPORATE BONDS - 6.86%* (4.08% of Total Investments) | ||||||||||||||
| Automobiles - 0.37% (0.22% of Total Investments) | ||||||||||||||
| Ford Motor Credit Co. LLC, Senior Unsecured | 6.95% | N/A | 03/06/2026 | 455,000 | 462,394 | |||||||||
| Ford Motor Credit Co. LLC, Senior Unsecured | 7.35% | N/A | 03/06/2030 | 385,000 | 396,557 | |||||||||
| Total Automobiles | 840,000 | 858,951 | ||||||||||||
| Chemicals - 0.15% (0.09% of Total Investments) | ||||||||||||||
| Herens Holdco Sarl, Senior Secured(c) | 4.75% | N/A | 05/15/2028 | 444,000 | 355,200 | |||||||||
| Diversified Consumer Services - 0.18% (0.11% of Total Investments) | ||||||||||||||
| Sabre GLBL, Inc., Senior Secured(c) | 11.25% | N/A | 12/15/2027 | 461,000 | 429,578 | |||||||||
| Diversified Telecommunication Services - 0.95% (0.56% of Total Investments) | ||||||||||||||
| Altice Financing SA, Senior Secured(c) | 5.75% | N/A | 08/15/2029 | 1,197,000 | 951,615 | |||||||||
| Altice France SA, Senior Secured(c) | 5.50% | N/A | 10/15/2029 | 667,000 | 513,575 | |||||||||
| Consolidated Communications, Inc., Senior Secured(c) | 5.00% | N/A | 10/01/2028 | 1,125,000 | 767,694 | |||||||||
| Total Diversified Telecommunication Services | 2,989,000 | 2,232,884 | ||||||||||||
| Electric Utilities - 0.40% (0.24% of Total Investments) | ||||||||||||||
| PG&E Corp., Senior Secured | 5.00% | N/A | 07/01/2028 | 1,000,000 | 937,800 | |||||||||
| Electronic Equipment, Instruments & Components - 0.06% (0.03% of Total Investments) | ||||||||||||||
| Coherent Corp., Senior Unsecured(c) | 5.00% | N/A | 12/15/2029 | 146,000 | 132,194 | |||||||||
| Health Care Equipment & Supplies - 0.29% (0.17% of Total Investments) | ||||||||||||||
| Medline Borrower LP, Senior Unsecured(c) | 5.25% | N/A | 10/01/2029 | 62,000 | 53,778 | |||||||||
| Mozart Debt Merger Sub, Inc., Senior Secured(c) | 3.88% | N/A | 04/01/2029 | 727,000 | 630,673 | |||||||||
| Total Health Care Equipment & Supplies | 789,000 | 684,451 | ||||||||||||
| Health Care Technology - 0.49% (0.29% of Total Investments) | ||||||||||||||
| AthenaHealth Group, Inc., Senior Unsecured(c) | 6.50% | N/A | 02/15/2030 | 1,411,000 | 1,144,265 | |||||||||
| Hotels, Restaurants & Leisure - 0.81% (0.49% of Total Investments) | ||||||||||||||
| CEC Entertainment LLC, Senior Secured(c) | 6.75% | N/A | 05/01/2026 | 470,000 | 446,500 | |||||||||
| Fertitta Entertainment LLC / Fertitta Entertainment Finance Co., Inc., Senior Unsecured(c) |
6.75% | N/A | 01/15/2030 | 328,000 | 269,855 | |||||||||
| Hilton Grand Vacations Borrower Escrow LLC / Hilton Grand Vacations Borrower Esc, Senior Unsecured(c) | 5.00% | N/A | 06/01/2029 | 529,000 | 469,487 | |||||||||
| Scientific Games Holdings LP/Scientific Games US FinCo, Inc., Senior Unsecured(c) |
6.63% | N/A | 03/01/2030 | 205,000 | 182,655 | |||||||||
| SeaWorld Parks & Entertainment, Inc., Senior Unsecured(c) | 5.25% | N/A | 08/15/2029 | 600,000 | 542,154 | |||||||||
| Total Hotels, Restaurants & Leisure | 2,132,000 | 1,910,651 | ||||||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 13 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date |
Principal Amount |
Value | ||||||||||
| CORPORATE BONDS - 6.86%* (4.08% of Total Investments) (continued) Industrial Conglomerates - 0.36% (0.21% of Total Investments) |
||||||||||||||
| APi Group DE, Inc., Senior Unsecured(c) | 4.75% | N/A | 10/15/2029 | $ | 500,000 | $ | 442,000 | |||||||
| MajorDrive Holdings IV LLC, Senior Unsecured(c) | 6.38% | N/A | 06/01/2029 | 545,000 | 406,134 | |||||||||
| Total Industrial Conglomerates | 1,045,000 | 848,134 | ||||||||||||
| Insurance - 0.54% (0.33% of Total Investments) | ||||||||||||||
| Alliant Holdings Intermediate LLC / Alliant Holdings Co.- Issuer, Senior Secured(c) |
4.25% | N/A | 10/15/2027 | 750,000 | 669,780 | |||||||||
| Alliant Holdings Intermediate LLC / Alliant Holdings Co.- Issuer, Senior Secured(c) | 6.75% | N/A | 04/15/2028 | 622,000 | 621,098 | |||||||||
| Total Insurance | 1,372,000 | 1,290,878 | ||||||||||||
| Machinery - 0.35% (0.20% of Total Investments) | ||||||||||||||
| Chart Industries, Inc., Senior Secured(c) | 7.50% | N/A | 01/01/2030 | 472,000 | 486,509 | |||||||||
| Chart Industries, Inc., Senior Unsecured(c) | 9.50% | N/A | 01/01/2031 | 316,000 | 333,624 | |||||||||
| Total Machinery | 788,000 | 820,133 | ||||||||||||
| Media - 0.01% (0.01% of Total Investments) | ||||||||||||||
| Audacy Capital Corp., Senior Secured(c) | 6.75% | N/A | 03/31/2029 | 390,000 | 26,812 | |||||||||
| Professional Services - 0.74% (0.44% of Total Investments) | ||||||||||||||
| Conduent Business Services LLC / Conduent State & Local Solutions, Inc., Senior Secured(c) | 6.00% | N/A | 11/01/2029 | 2,176,000 | 1,733,516 | |||||||||
| Software - 0.39% (0.23% of Total Investments) | ||||||||||||||
| McAfee Corp., Senior Unsecured(c) | 7.38% | N/A | 02/15/2030 | 1,102,000 | 918,793 | |||||||||
| Transportation Infrastructure - 0.77% (0.46% of Total Investments) | ||||||||||||||
| Uber Technologies, Inc., Senior Unsecured(c) | 4.50% | N/A | 08/15/2029 | 2,000,000 | 1,825,853 | |||||||||
| Total Corporate Bonds (Cost $18,516,437) | $ | 19,085,000 | $ | 16,150,093 | ||||||||||
| SECURED SECOND LIEN LOANS(b) - 3.85%* (2.29% of Total Investments) | ||||||||||||||
| Aerospace & Defense - 0.82% (0.49% of Total Investments) | ||||||||||||||
| Amentum Government Services Holdings LLC, TL | 12.53% | 3M SOFR + 7.50% | 02/15/2030 | 2,016,807 | 1,873,109 | |||||||||
| New Constellis Borrower LLC, Series B | 15.84% | 1M US L + 11.00% | 03/27/2025 | 107,755 | 61,825 | |||||||||
| Total Aerospace & Defense | 2,124,562 | 1,934,934 | ||||||||||||
| Air Freight & Logistics - 0.20% (0.12% of Total Investments) | ||||||||||||||
| LaserShip, Inc., Initial | 12.66% | 3M US L + 7.50% | 05/07/2029 | 745,852 | 473,616 | |||||||||
| Building Products - 0.23% (0.14% of Total Investments) | ||||||||||||||
| Diversitech Holdings, INC. TL | 11.48% | 3M US L + 6.75% | 12/21/2029 | 468,750 | 414,844 | |||||||||
| Visual Comfort Group, Inc. (fka VC GB Holdings, Inc.)(aka Visual Comfort Generation Brands), Initial 2nd Lien Term Loan | 11.59% | 1M US L + 6.75% | 07/23/2029 | 169,492 | 132,344 | |||||||||
| Total Building Products | 638,242 | 547,188 | ||||||||||||
| See Notes to Financial Statements. | |
| 14 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread |
Maturity Date |
Principal Amount |
Value | ||||||||||
| SECURED SECOND LIEN LOANS(b) (continued) | ||||||||||||||
| Chemicals - 0.09% (0.05% of Total Investments) | ||||||||||||||
| CP Iris Holdco I, Inc., Initial | 11.84% | 1M US L + 7.00% | 10/01/2029 | $ | 258,621 | $ | 206,896 | |||||||
| Commercial Services & Supplies - 0.30% (0.18% of Total Investments) | ||||||||||||||
| AVSC Holding Corp., Initial | 12.06% | 3M US L + 7.25% | 09/01/2025 | 805,556 | 714,431 | |||||||||
| Communications Equipment - 0.14% (0.08% of Total Investments) | ||||||||||||||
| Global Tel*Link Corp., 2nd Lien | 14.83% | 3M SOFR + 10.00% | 11/29/2026 | 347,222 | 256,819 | |||||||||
| MLN US Holdco LLC | 11.15% | 3M SOFR + 6.75% | 10/18/2027 | 128,761 | 70,819 | |||||||||
| Total Communications Equipment | 475,983 | 327,638 | ||||||||||||
| Construction & Engineering - 0.11% (0.06% of Total Investments) | ||||||||||||||
| DG Investment Intermediate Holdings 2, Inc., 2nd Lien | 11.59% | 1M US L + 6.75% | 03/30/2029 | 292,804 | 255,960 | |||||||||
| Diversified Consumer Services - 0.50% (0.30% of Total Investments) | ||||||||||||||
| KUEHG Corp. | 13.41% | 3M US L + 8.25% | 08/22/2025 | 800,000 | 766,664 | |||||||||
| Travelport Finance Luxembourg Sarl, 2021 Consented | 13.39% | 3M US L + 8.23% | 05/29/2026 | 583,593 | 329,730 | |||||||||
| TruGreen LP, Initial | 13.33% | 3M US L + 8.50% | 11/02/2028 | 125,392 | 81,505 | |||||||||
| Total Diversified Consumer Services | 1,508,985 | 1,177,899 | ||||||||||||
| Diversified Financial Services - 0.20% (0.12% of Total Investments) | ||||||||||||||
| Edelman Financial Center LLC, Initial | 11.59% | 1M US L + 6.75% | 07/20/2026 | 275,795 | 257,317 | |||||||||
| Nexus Buyer LLC, TL | 11.09% | 1M US L + 6.25% | 11/05/2029 | 245,536 | 214,844 | |||||||||
| Total Diversified Financial Services | 521,331 | 472,161 | ||||||||||||
| Electronic Equipment, Instruments & Components - 0.03% (0.02% of Total Investments) | ||||||||||||||
| Infinite Bidco LLC, Initial | 12.16% | 3M US L + 7.00% | 03/02/2029 | 69,869 | 61,485 | |||||||||
| Health Care Providers & Services - 0.06% (0.03% of Total Investments) | ||||||||||||||
| Verscend Holding Corp., Initial | 11.84% | 1M US L + 7.00% | 04/02/2029 | 135,802 | 135,802 | |||||||||
| Insurance - 0.39% (0.23% of Total Investments) | ||||||||||||||
| Asurion LLC, New B-4 | 10.09% | 1M US L + 5.25% | 01/20/2029 | 1,104,603 | 907,983 | |||||||||
| Professional Services - 0.07% (0.04% of Total Investments) | ||||||||||||||
| National Intergovernmental Purchasing Alliance Co. | 12.40% | 3M SOFR + 7.50% | 05/26/2026 | 169,482 | 166,093 | |||||||||
| Software - 0.71% (0.43% of Total Investments) | ||||||||||||||
| Ascend Learning 11/21 2nd Lien TL | 10.56% | 1M SOFR + 5.75% | 12/10/2029 | 462,963 | 397,375 | |||||||||
| DCert Buyer, Inc., First Amendment Refinancing | 11.70% | 3M US L + 7.00% | 02/19/2029 | 156,627 | 144,097 | |||||||||
| EagleView Technology Corp., Term Loan 2nd Lien | 12.66% | 3M US L + 7.50% | 08/14/2026 | 198,167 | 157,543 | |||||||||
| MH Sub I LLC, 2021 Replacement | 11.06% | 1M SOFR + 6.25% | 02/23/2029 | 1,000,000 | 913,330 | |||||||||
| Ultimate Software 11/21 2nd Lien TL | 10.03% | 3M US L + 5.25% | 05/03/2027 | 75,676 | 72,308 | |||||||||
| Total Software | 1,893,433 | 1,684,653 | ||||||||||||
| Total Secured Second Lien Loans (Cost $10,640,496) | $ | 10,745,125 | $ | 9,066,739 | ||||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 15 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Reference Rate | Maturity | Principal | ||||||||||||
| Coupon(a) | & Spread | Date | Amount | Value | ||||||||||
SENIOR SECURED FIRST LIEN LOANS(b) - 72.31%* (42.97% of Total Investments) Aerospace & Defense - 1.32% (0.79% of Total Investments) |
||||||||||||||
| Amentum Government Services Holdings LLC TLD 1L | 8.91% | 3M SOFR + 4.00% | 02/15/2029 | $ | 1,864,008 | $ | 1,818,190 | |||||||
| Constellis Holdings LLC, Priority | 12.34% | 1M US L + 7.50% | 03/27/2024 | 119,765 | 98,956 | |||||||||
| Peraton Corp., B | 8.59% | 1M US L + 3.75% | 02/01/2028 | 1,098,334 | 1,082,321 | |||||||||
| Spirit AeroSystems, Inc. TL 1L | 9.18% | 3M SOFR + 4.48% | 01/15/2027 | 114,370 | 113,969 | |||||||||
| Total Aerospace & Defense | 3,196,477 | 3,113,436 | ||||||||||||
| Air Freight & Logistics - 0.69% (0.41% of Total Investments) | ||||||||||||||
| Brown Group Hldg TLB2 1L | 8.46% | 3M SOFR + 3.75% | 07/02/2029 | 285,329 | 284,818 | |||||||||
| LaserShip, Inc., Initial | 9.66% | 3M US L + 4.50% | 05/07/2028 | 1,570,463 | 1,329,852 | |||||||||
| Total Air Freight & Logistics | 1,855,792 | 1,614,670 | ||||||||||||
| Airlines - 0.76% (0.45% of Total Investments) | ||||||||||||||
| United AirLines, Inc., Class B | 8.57% | 3M US L + 3.75% | 04/21/2028 | 1,813,232 | 1,797,366 | |||||||||
| Auto Components - 1.75% (1.04% of Total Investments) | ||||||||||||||
| Dealer Tire Financial LLC | 9.31% | 1M SOFR + 4.50% | 12/14/2027 | 1,099,204 | 1,090,278 | |||||||||
| First Brands Group, LLC, Refinanced | 10.25% | 6M SOFR + 5.00% | 03/30/2027 | 570,021 | 546,684 | |||||||||
| FIRST BRANDS GROUP, LLC, TL | 10.25% | 6M SOFR + 5.43% | 03/30/2027 | 870,703 | 833,698 | |||||||||
| IXS Holdings, Inc., Initial | 9.48% | 3M SOFR + 4.25% | 03/05/2027 | 1,611,034 | 1,322,192 | |||||||||
| LTR Intermediate Holdings, Inc., Initial | 9.34% | 1M US L + 4.18% | 05/05/2028 | 366,366 | 329,272 | |||||||||
| Total Auto Components | 4,517,328 | 4,122,124 | ||||||||||||
| Automobiles - 0.50% (0.29% of Total Investments) | ||||||||||||||
| American Axle & Manufacturing, Inc., TLB | 8.45% | 1M SOFR + 3.50% | 12/13/2029 | 226,438 | 224,456 | |||||||||
| Driven Holdings LLC, TLB | 7.76% | 1M US L + 3.00% | 12/17/2028 | 97,681 | 95,606 | |||||||||
| RVR Dealership Holdings LLC, B | 8.55% | 3M SOFR + 3.75% | 02/08/2028 | 1,002,293 | 849,443 | |||||||||
| Total Automobiles | 1,326,412 | 1,169,505 | ||||||||||||
| Banks - 0.17% (0.10% of Total Investments) | ||||||||||||||
| Blackstone Mortgage Trust, Inc. | 8.31% | 1M SOFR + 3.50% | 05/09/2029 | 443,832 | 404,997 | |||||||||
| Beverages - 0.08% (0.05% of Total Investments) | ||||||||||||||
| Triton Water Holdings, Inc., Initial | 8.66% | 3M US L + 3.50% | 03/31/2028 | 201,742 | 180,307 | |||||||||
| Building Products - 1.62% (0.96% of Total Investments) | ||||||||||||||
| Cornerstone Building Brands, Inc., Tranche B | 7.93% | 1M US L + 3.25% | 04/12/2028 | 381,502 | 334,291 | |||||||||
| Foundation Building Materials, Inc., Initial | 8.08% | 3M US L + 3.25% | 01/31/2028 | 222,213 | 215,585 | |||||||||
| LHS Borrower | 9.66% | 1M SOFR + 4.75% | 02/16/2029 | 908,871 | 737,094 | |||||||||
| Osmosis Buyer, Ltd., Initial B | 8.48% | 1M SOFR + 3.75% | 07/31/2028 | 1,288,930 | 1,239,796 | |||||||||
| Park River Holdings, Inc., Initial | 8.52% | 3M US L + 3.25% | 12/28/2027 | 94,627 | 86,820 | |||||||||
| Snap One 11/21 Cov-Lite TLB | 9.66% | 3M US L + 4.50% | 12/08/2028 | 756,540 | 688,451 | |||||||||
| Visual Comfort Group, Inc. (aka Visual Comfort Generation Brands), Initial 1st Lien Term Loan | 7.84% | 1M US L + 3.00% | 07/21/2028 | 321,428 | 304,016 | |||||||||
| White Cap Buyer LLC, Initial Closing Date | 8.56% | 1M SOFR + 3.75% | 10/19/2027 | 217,584 | 214,797 | |||||||||
| Total Building Products | 4,191,695 | 3,820,850 | ||||||||||||
| See Notes to Financial Statements. | |
| 16 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Reference Rate | Maturity | Principal | ||||||||||||
| Coupon(a) | & Spread | Date | Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Capital Markets - 0.68% (0.40% of Total Investments) | ||||||||||||||
| Hudson River Trading LLC, Term Loan | 7.92% | 1M SOFR + 3.00% | 03/20/2028 | $ | 1,721,201 | $ | 1,605,020 | |||||||
| Chemicals - 3.59% (2.13% of Total Investments) | ||||||||||||||
| Ascend Performance Materials Operations LLC, 2021 | ||||||||||||||
| Refinancing | 9.71% | 6M SOFR + 4.75% | 08/27/2026 | 272,223 | 267,203 | |||||||||
| CP Iris Holdco I, Inc. | ||||||||||||||
| Delayed Draw(h) | 8.18% | 3M US L + 3.50% | 10/02/2028 | 4,341 | 1,378 | |||||||||
| Initial | 8.41% | 1M US L + 3.50% | 10/02/2028 | 225,587 | 210,924 | |||||||||
| Discovery Purchaser Corporation TL 1L | 9.28% | 3M SOFR + 4.375% | 10/04/2029 | 655,603 | 619,820 | |||||||||
| Herens Holdco S.a r.l., Facility B | 9.16% | 3M US L + 4.00% | 07/03/2028 | 1,597,515 | 1,476,472 | |||||||||
| Hexion Holdings Corp. TL 1L | 9.30% | 3M SOFR + 4.50% | 03/15/2029 | 846,192 | 754,702 | |||||||||
| Ineos US Finance LLC, TLB | ||||||||||||||
| 2027-II | 8.66% | 1M SOFR + 3.75% | 11/08/2027 | 240,394 | 239,719 | |||||||||
| 2030 | 8.41% | 1M SOFR + 3.50% | 02/15/2030 | 642,114 | 637,869 | |||||||||
| LSF11 A5 HoldCo, LLC TLB 1L | 8.42% | 1M SOFR + 3.50% | 10/15/2028 | 546,829 | 529,402 | |||||||||
| Lummus Technology Holdings V LLC, 2021 Refinancing B | 8.34% | 1M US L + 3.50% | 06/30/2027 | 49,092 | 48,218 | |||||||||
| Nouryon Finance B.V., TLB(e) | N/A | L + 4.00% | 03/09/2028 | 396,621 | 395,134 | |||||||||
| Olympus Water US Holding Corp. | ||||||||||||||
| 2022 Incremental TL | 9.18% | 3M SOFR + 4.50% | 11/09/2028 | 330,909 | 316,266 | |||||||||
| Initial | 8.94% | 3M US L + 3.75% | 11/09/2028 | 345,025 | 326,094 | |||||||||
| PMHC II, Inc. TL | 9.08% | 3M SOFR + 4.25% | 04/21/2029 | 1,439,267 | 1,264,151 | |||||||||
| Polar US Borrower LLC, Initial | 9.02% | 6M SOFR + 4.75% | 10/15/2025 | 838,635 | 695,614 | |||||||||
| VANTAGE SPECIALTY CHEMICALS, INC., TLB | 9.60% | 3M SOFR + 4.77% | 10/26/2026 | 704,441 | 675,383 | |||||||||
| Total Chemicals | 9,134,788 | 8,458,349 | ||||||||||||
| Commercial Services & Supplies - 2.12% (1.26% of Total Investments) | ||||||||||||||
| Allied Universal Holdco LLC, Initial U.S. Dollar | 8.66% | 1M SOFR + 3.75% | 05/12/2028 | 974,633 | 923,991 | |||||||||
| Ankura Consulting Group LLC, Closing Date | 9.42% | 1M SOFR + 4.50% | 03/17/2028 | 176,123 | 166,730 | |||||||||
| BRIGHTVIEW LANDSCAPES, LLC TLB1L | 7.95% | 3M SOFR + 3.25% | 04/20/2029 | 1,265,956 | 1,233,256 | |||||||||
| Garda World Security Corporation TLB 1L | 9.01% | 1M SOFR + 4.25% | 02/01/2029 | 1,292,691 | 1,249,878 | |||||||||
| Viad Corp, Initial | 9.81% | 1M SOFR + 5.00% | 07/30/2028 | 1,477,500 | 1,407,319 | |||||||||
| Total Commercial Services & Supplies | 5,186,903 | 4,981,174 | ||||||||||||
| Communications Equipment - 0.47% (0.28% of Total Investments) | ||||||||||||||
| Casa Systems, Inc., Initial | 8.84% | 1M US L + 4.00% | 12/20/2023 | 893,605 | 726,894 | |||||||||
| Global Tel*Link Corp., 2018 | 9.08% | 3M SOFR + 4.25% | 11/29/2025 | 444,313 | 386,303 | |||||||||
| Total Communications Equipment | 1,337,918 | 1,113,197 | ||||||||||||
| Construction & Engineering - 1.21% (0.72% of Total Investments) | ||||||||||||||
| DG Investment Intermediate Hlgds, Inc. TL 1L | 9.56% | 1M SOFR + 4.75% | 03/31/2028 | 1,471,324 | 1,436,380 | |||||||||
| DG Investment Intermediate Holdings 2, Inc., Initial | 8.56% | 1M US L + 3.75% | 03/31/2028 | 84,851 | 82,247 | |||||||||
| TRC Companies 11/21 TL | 8.59% | 1M US L + 3.75% | 12/08/2028 | 1,385,835 | 1,337,330 | |||||||||
| Total Construction & Engineering | 2,942,010 | 2,855,957 | ||||||||||||
| Construction Materials - 0.50% (0.30% of Total Investments) | ||||||||||||||
| Schweitzer-Mauduit International, Inc., B | 8.63% | 1M US L + 3.75% | 04/20/2028 | 489,431 | 471,077 | |||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 17 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread |
Maturity Date |
Principal Amount |
Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Construction Materials (continued) | ||||||||||||||
| Smyrna Ready Mix Concrete, LLC TLB 1L | 8.97% | 1M SOFR + 4.25% | 04/02/2029 | $ | 705,312 | $ | 700,022 | |||||||
| Total Construction Materials | 1,194,743 | 1,171,099 | ||||||||||||
| Containers & Packaging - 2.98% (1.77% of Total Investments) | ||||||||||||||
| Clydesdale Acquisition Holdings, Inc. | 9.08% | 1M SOFR + 4.18% | 04/13/2029 | 2,542,576 | 2,479,648 | |||||||||
| LABL, INC. TL 1L | 9.84% | 1M US L + 5.00% | 10/29/2028 | 959,730 | 928,539 | |||||||||
| Mauser Packaging Solutions Holding Company, TLB | 8.80% | 1M SOFR + 4.00% | 08/15/2026 | 116,462 | 115,339 | |||||||||
| Pelican Products, Inc. TL | 8.71% | 3M US L + 4.25% | 12/29/2028 | 486,353 | 429,610 | |||||||||
| Pretium PKG Holdings, Inc., Initial | 9.01% | 3M US L + 4.00% | 10/02/2028 | 353,520 | 281,048 | |||||||||
| RLG Holdings LLC, Closing Date Initial | 8.84% | 1M US L + 4.00% | 07/07/2028 | 1,652,454 | 1,590,074 | |||||||||
| Sabert Corp., Initial | 9.38% | 1M US L + 4.50% | 12/10/2026 | 1,195,748 | 1,189,769 | |||||||||
| Total Containers & Packaging | 7,306,843 | 7,014,027 | ||||||||||||
| Distributors - 0.36% (0.22% of Total Investments) | ||||||||||||||
| American Tire Distributors, Inc., TLB | 11.07% | 3M US L + 6.25% | 10/20/2028 | 496,443 | 432,219 | |||||||||
| BCPE Empire Holdings, Inc. | ||||||||||||||
| Initial | 8.84% | 1M US L + 4.00% | 06/11/2026 | 332,943 | 325,728 | |||||||||
| Term Loans | 9.34% | 1M SOFR + 4.63% | 06/11/2026 | 101,053 | 99,646 | |||||||||
| Total Distributors | 930,439 | 857,593 | ||||||||||||
| Diversified Consumer Services - 3.35% (1.99% of Total Investments) | ||||||||||||||
| Anticimex Global AB | 9.74% | 3M SOFR + 4.75% | 11/16/2028 | 666,586 | 661,586 | |||||||||
| KUEHG Corp, B-3 | 8.91% | 3M US L + 3.75% | 02/21/2025 | 1,958,248 | 1,919,905 | |||||||||
| Learning Care Group No. 2, Inc., 2020 Incremental | 13.33% | 3M US L + 8.50% | 03/13/2025 | 381,173 | 375,932 | |||||||||
| LifeMiles, Ltd., Initial | 10.20% | 3M US L + 5.25% | 08/30/2026 | 71,674 | 67,060 | |||||||||
| Pug LLC, B-2 | 9.09% | 1M US L + 4.25% | 02/12/2027 | 1,507,909 | 1,078,155 | |||||||||
| Sabre GLBL Inc., TLB 1L | ||||||||||||||
| 2022 Term B Loans | 9.16% | 1M SOFR + 4.25% | 06/30/2028 | 63,783 | 54,162 | |||||||||
| 2022 Term B-2 Loans | 9.91% | 1M SOFR + 5.00% | 06/30/2028 | 309,657 | 265,014 | |||||||||
| Sabre GLBL, Inc. | ||||||||||||||
| 2021 Other B-1 | 8.34% | 1M US L + 3.50% | 12/17/2027 | 179,369 | 151,267 | |||||||||
| 2021 Other B-2 | 8.34% | 1M US L + 3.50% | 12/17/2027 | 285,924 | 241,129 | |||||||||
| Spin Holdco, Inc., Initial | 8.99% | 3M US L + 4.00% | 03/04/2028 | 1,424,625 | 1,191,086 | |||||||||
| Staples, Inc., 2019 Refinancing New B-1 | 9.81% | 3M US L + 5.00% | 04/16/2026 | 960,315 | 882,145 | |||||||||
| The Knot WorldWide Inc. Tl 1L | 9.32% | 1M SOFR + 4.50% | 12/19/2025 | 845,714 | 841,486 | |||||||||
| TruGreen LP, Second Refinancing | 8.84% | 1M US L + 4.00% | 11/02/2027 | 179,614 | 165,583 | |||||||||
| Total Diversified Consumer Services | 8,834,591 | 7,894,510 | ||||||||||||
| Diversified Financial Services - 2.57% (1.53% of Total Investments) | ||||||||||||||
| ARETEC GROUP, INC., TLB(e) | N/A | L + 4.50% | 03/08/2030 | 378,526 | 371,667 | |||||||||
| Edelman Financial Center LLC, Initial (2021) | 8.59% | 1M US L + 3.75% | 04/07/2028 | 424,070 | 407,837 | |||||||||
| FOCUS FINANCIAL PARTNERS, LLC, TLB | 8.06% | 1M SOFR + 3.25% | 06/30/2028 | 1,031,259 | 1,019,513 | |||||||||
| Galaxy US Opco Inc. TL | 9.56% | 1M SOFR + 4.75% | 04/29/2029 | 613,879 | 541,748 | |||||||||
| HighTower Holding LLC, Initial | 8.82% | 3M US L + 4.00% | 04/21/2028 | 556,086 | 524,111 | |||||||||
| Mercury Borrower, Inc., TL | 8.38% | 1M US L + 3.50% | 08/02/2028 | 254,115 | 246,174 | |||||||||
| Nexus Buyer LLC, B | 8.59% | 1M US L + 3.75% | 11/09/2026 | 345,179 | 311,400 | |||||||||
| Paysafe Holdings US Corp., Facility B1 | 7.59% | 1M US L + 2.75% | 06/28/2028 | 145,041 | 138,877 | |||||||||
| See Notes to Financial Statements. | |
| 18 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Diversified Financial Services (continued) | ||||||||||||||
| VeriFone Systems, Inc., Initial | 8.95% | 3M US L + 4.00% | 08/20/2025 | $ | 2,854,587 | $ | 2,435,506 | |||||||
| VFH Parent LLC TLB 1L | 7.86% | 1M SOFR + 3.00% | 01/13/2029 | 58,971 | 56,704 | |||||||||
| Total Diversified Financial Services | 6,661,713 | 6,053,537 | ||||||||||||
| Diversified Telecommunication Services - 5.18% (3.08% of Total Investments) | ||||||||||||||
| Altice Financing S.A. TL 1L | 9.57% | 3M SOFR + 5.00% | 10/29/2027 | 1,419,281 | 1,401,540 | |||||||||
| Altice France S.A., USD TLB-13 Incremental | 8.86% | 3M US L + 4.00% | 08/14/2026 | 2,256,721 | 2,184,077 | |||||||||
| Altice France SA | 8.52% | 3M US L + 3.69% | 01/31/2026 | 494,128 | 478,686 | |||||||||
| Consolidated Communications, Inc., B-1 | 8.38% | 1M US L + 3.50% | 10/02/2027 | 700,484 | 550,405 | |||||||||
| DIRECTV Financing LLC, Closing Date | 9.63% | 3M US L + 4.64% | 08/02/2027 | 1,380,740 | 1,325,980 | |||||||||
| Intelsat Jackson Holdings S.A. | 9.08% | 3M SOFR + 4.25% | 02/01/2029 | 847,705 | 837,109 | |||||||||
| LCPR Loan Financing LLC, 2021 Additional | 8.43% | 1M US L + 3.75% | 10/16/2028 | 583,258 | 574,147 | |||||||||
| Sorenson Communications LLC, 2021 | 10.34% | 1M US L + 5.50% | 03/17/2026 | 174,259 | 164,966 | |||||||||
| Syniverse Holdings, Inc.TL 1L | 11.90% | 3M SOFR + 7.00% | 05/13/2027 | 428,400 | 377,347 | |||||||||
| Viasat, Inc. | 9.42% | 1M SOFR + 4.50% | 03/04/2029 | 593,891 | 575,183 | |||||||||
| VIRGIN MEDIA BRISTOL LLC TLY 1L | 8.11% | 6M SOFR + 3.25% | 03/31/2031 | 2,039,586 | 2,008,992 | |||||||||
| Windstream Services II LLC, Initial | 11.06% | 1M US L + 6.25% | 09/21/2027 | 1,429,995 | 1,294,146 | |||||||||
| Xplornet Communications, Inc. TL 1L | 8.84% | 1M US L + 4.00% | 10/02/2028 | 139,567 | 112,177 | |||||||||
| Zacapa S.a.r.l. TL 1L | 8.90% | 3M SOFR + 4.00% | 03/22/2029 | 308,530 | 301,314 | |||||||||
| Total Diversified Telecommunication Services | 12,796,545 | 12,186,069 | ||||||||||||
| Electric Utilities - 0.14% (0.08% of Total Investments) | ||||||||||||||
| Generation Bridge Acquisition LLC | ||||||||||||||
| B | 10.16% | 3M US L + 5.00% | 12/01/2028 | 328,375 | 327,075 | |||||||||
| C | 10.16% | 3M US L + 5.00% | 12/01/2028 | 7,560 | 7,529 | |||||||||
| Total Electric Utilities | 335,935 | 334,604 | ||||||||||||
| Electrical Equipment - 0.35% (0.20% of Total Investments) | ||||||||||||||
| Energy Acquisition LP | ||||||||||||||
| Initial | 9.09% | 1M US L + 4.25% | 06/26/2025 | 707,468 | 645,127 | |||||||||
| Tranche B | 7.50% | N/A | 06/26/2025 | 183,748 | 168,129 | |||||||||
| Total Electrical Equipment | 891,216 | 813,256 | ||||||||||||
| Electronic Equipment, Instruments & Components - 1.07% (0.64% of Total Investments) | ||||||||||||||
| Infinite Bidco LLC, Initial | 8.41% | 3M US L + 3.25% | 03/02/2028 | 1,234,515 | 1,178,962 | |||||||||
| Mavenir Systems, Inc., Initial | 9.65% | 3M US L + 4.75% | 08/18/2028 | 485,089 | 335,924 | |||||||||
| Natel Engineering Company, Inc., Initial | 11.11% | 1M US L + 6.25% | 04/30/2026 | 504,018 | 443,536 | |||||||||
| Triton Solar US Acquisition Co., Initial | 10.89% | 3M SOFR + 6.00% | 10/29/2024 | 231,743 | 195,244 | |||||||||
| WORLD WIDE TECHNOLOGY HOLDING CO., LLC, TL | 8.15% | 1M SOFR + 3.25% | 03/01/2030 | 372,862 | 370,998 | |||||||||
| Total Electronic Equipment, Instruments & Components | 2,828,227 | 2,524,664 | ||||||||||||
| Energy Equipment & Services - 0.09% (0.05% of Total Investments) | ||||||||||||||
| Lealand Finance Company B.V. | ||||||||||||||
| Make-Whole | 7.84% | 1M US L + 3.00% | 06/30/2024 | 8,469 | 5,716 | |||||||||
| Take-Back | 8.84% | 1M US L + 3.68% | 06/30/2025 | 48,294 | 31,794 | |||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 19 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Energy Equipment & Services (continued) | ||||||||||||||
| WaterBridge Midstream Operating LLC, Initial | 10.57% | 3M US L + 5.75% | 06/22/2026 | $ | 170,625 | $ | 167,398 | |||||||
| Total Energy Equipment & Services | 227,388 | 204,908 | ||||||||||||
| Food & Staples Retailing - 0.35% (0.21% of Total Investments) | ||||||||||||||
| Upbound Group, Inc. | 8.13% | 3M US L + 3.25% | 02/17/2028 | 844,639 | 834,081 | |||||||||
| Food Products - 0.64% (0.38% of Total Investments) | ||||||||||||||
| Chill Merger Sub, Inc. | 8.66% | 3M US L + 3.50% | 03/20/2024 | 1,250,000 | 1,121,100 | |||||||||
| Pacific Bells LLC, Initial Term | 9.66% | 3M SOFR + 4.50% | 11/10/2028 | 362,431 | 347,934 | |||||||||
| Whole Earth Brands, Inc., Term Loan | 9.55% | 3M SOFR + 4.65% | 02/05/2028 | 32,746 | 27,507 | |||||||||
| Total Food Products | 1,645,177 | 1,496,541 | ||||||||||||
| Health Care Equipment & Supplies - 1.52% (0.90% of Total Investments) | ||||||||||||||
| Bausch & Lomb Inc TL 1L | 8.46% | 3M SOFR + 3.25% | 05/10/2027 | 1,433,406 | 1,389,802 | |||||||||
| Curium BidCo S.a r.l., Term Loan | 9.41% | 3M US L + 4.25% | 12/02/2027 | 419,071 | 405,452 | |||||||||
| Medplast Holdings, Inc., Initial Term Loan (Late June/Early July) | 8.59% | 1M US L + 3.75% | 07/02/2025 | 976,982 | 907,216 | |||||||||
| SOTERA HEALTH HOLDINGS, LLC | 8.82% | 6M SOFR + 3.92% | 12/11/2026 | 452,169 | 444,256 | |||||||||
| ZEST ACQUISITION CORP., TL | 10.22% | 1M SOFR + 5.50% | 02/08/2028 | 443,355 | 425,900 | |||||||||
| Total Health Care Equipment & Supplies | 3,724,983 | 3,572,626 | ||||||||||||
| Health Care Providers & Services - 4.03% (2.39% of Total Investments) | ||||||||||||||
| Accelerated Health Systems, LLC TLB 1L | 9.30% | 3M SOFR + 4.25% | 02/15/2029 | 305,843 | 222,718 | |||||||||
| AEA International Holdings S.a.r.l., Initial | 8.94% | 3M US L + 3.75% | 09/07/2028 | 214,519 | 212,910 | |||||||||
| Cambrex Corp., Tranche B-2 Dollar | 8.41% | 1M SOFR + 3.50% | 12/04/2026 | 248,458 | 245,104 | |||||||||
| Corgi Bidco, INC. TL 1L | 9.90% | 3M SOFR + 5.00% | 10/13/2029 | 1,251,650 | 1,178,116 | |||||||||
| Curia Global, Inc., 2021 | 8.53% | 3M SOFR + 3.75% | 08/30/2026 | 152,107 | 129,196 | |||||||||
| Envision Healthcare Corp. | ||||||||||||||
| New Money First Out Term Loan | 12.92% | 3M SOFR + 7.88% | 03/31/2027 | 114,324 | 94,889 | |||||||||
| Second Out Term Loan | 9.15% | 3M SOFR + 4.25% | 03/31/2027 | 808,908 | 192,116 | |||||||||
| Eyecare Partners LLC, Amendment No. 1 | 8.59% | 1M US L + 3.75% | 11/15/2028 | 960,261 | 775,680 | |||||||||
| Global Medical Response, Inc. | ||||||||||||||
| 2018 New | 9.20% | 3M US L + 4.25% | 03/14/2025 | 643,788 | 449,042 | |||||||||
| 2020 Refinancing | 9.24% | 3M US L + 4.25% | 10/02/2025 | 1,117,366 | 778,436 | |||||||||
| Heartland Dental LLC, 2021 Incremental | 8.84% | 1M US L + 4.00% | 04/30/2025 | 639,097 | 600,086 | |||||||||
| Heartland Dental, LLC, Initial | 8.59% | 1M US L + 3.75% | 04/30/2025 | 414,047 | 386,393 | |||||||||
| Hunter Holdco 3, Ltd., Initial Dollar | 9.41% | 3M US L + 4.25% | 08/19/2028 | 474,011 | 463,345 | |||||||||
| Midwest Veterinary Partners LLC, Initial | 8.84% | 1M US L + 4.00% | 04/27/2028 | 1,416,128 | 1,302,838 | |||||||||
| Pathway Vet Alliance LLC, 2021 Replacement | 8.59% | 1M US L + 3.75% | 03/31/2027 | 296,531 | 259,299 | |||||||||
| Radiology Partners, Inc., B | 8.88% | 1M US L + 4.25% | 07/09/2025 | 705,573 | 566,441 | |||||||||
| Sharp MidCo, LLC TL 1L | 9.16% | 3M US L + 4.00% | 12/31/2028 | 347,396 | 340,448 | |||||||||
| Southern Veterinary Partners LLC, Initial | 8.84% | 1M US L + 4.00% | 10/05/2027 | 89,867 | 86,423 | |||||||||
| Summit Behavioral 11/21 | 9.71% | 3M SOFR + 4.75% | 11/24/2028 | 724,463 | 699,106 | |||||||||
| WCG Purchaser Corp., Initial | 8.95% | 3M US L + 4.00% | 01/08/2027 | 535,538 | 505,082 | |||||||||
| Total Health Care Providers & Services | 11,459,875 | 9,487,668 | ||||||||||||
| See Notes to Financial Statements. | |
| 20 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Health Care Technology - 1.98% (1.18% of Total Investments) | ||||||||||||||
| Athenahealth Group Inc. TLB 1L | 8.26% | 1M SOFR + 3.50% | 02/15/2029 | $ | 3,256,470 | $ | 3,044,800 | |||||||
| Athenahealth Group Inc., 1L(h) | 4.69% | 1M SOFR + 3.50% | 02/15/2029 | 139,044 | 102,892 | |||||||||
| TTF Holdings LLC, Initial | 8.88% | 1M US L + 4.00% | 03/31/2028 | 717,439 | 714,748 | |||||||||
| Waystar Technologies, Inc., Initial | 8.84% | 1M US L + 4.00% | 10/22/2026 | 804,484 | 801,218 | |||||||||
| Total Health Care Technology | 4,917,437 | 4,663,658 | ||||||||||||
| Hotels, Restaurants & Leisure - 2.63% (1.56% of Total Investments) | ||||||||||||||
| 19th Holdings Golf | 7.80% | 1M SOFR + 3.00% | 02/07/2029 | 937,773 | 869,784 | |||||||||
| Aimbridge Hsp Incre CL TLB | 9.53% | 1M US L + 4.75% | 02/02/2026 | 246,215 | 234,520 | |||||||||
| Arcis 11/21 Cov-Lite TLB | 9.09% | 1M US L + 4.25% | 11/24/2028 | 306,511 | 304,212 | |||||||||
| Caesars Entertainment, Inc. | 8.16% | 1M SOFR + 3.25% | 02/06/2030 | 511,008 | 507,743 | |||||||||
| CARNIVAL CORPORATION TLB 1L | 8.09% | 1M US L + 3.25% | 10/18/2028 | 497,481 | 485,198 | |||||||||
| Fertitta Entertainment, LLC TLB 1L | 8.81% | 1M SOFR + 4.00% | 01/27/2029 | 1,577,204 | 1,550,139 | |||||||||
| Herschend Entertainment Company LLC, Initial (2021) | 8.44% | 1M US L + 3.75% | 08/27/2028 | 131,400 | 130,306 | |||||||||
| KINGPIN INTERMEDIATE HOLDINGS LLC, TLB | 8.31% | 1M SOFR + 3.50% | 02/08/2028 | 180,816 | 180,082 | |||||||||
| Playa Hotels & Resorts B.V., TLB | 8.99% | 1M SOFR + 4.25% | 01/05/2029 | 632,186 | 627,640 | |||||||||
| Topgolf Callaway Brands Corp., TLB | 8.26% | 1M SOFR + 3.50% | 03/15/2030 | 443,388 | 440,133 | |||||||||
| Travel + Leisure Co. | 8.96% | 1M SOFR + 4.00% | 12/14/2029 | 147,708 | 147,154 | |||||||||
| United PF Holdings LLC Incremental Term Loan | 13.66% | 3M US L + 8.50% | 12/30/2026 | 351,000 | 301,860 | |||||||||
| Initial | 9.16% | 3M US L + 4.00% | 12/30/2026 | 504,334 | 409,141 | |||||||||
| Total Hotels, Restaurants & Leisure | 6,467,024 | 6,187,912 | ||||||||||||
| Household Durables - 1.71% (1.02% of Total Investments) | ||||||||||||||
| At Home Group, Inc., Initial | 9.43% | 3M US L + 4.25% | 07/24/2028 | 315,516 | 244,885 | |||||||||
| Conair Holdings LLC, Initial | 8.91% | 3M US L + 3.75% | 05/17/2028 | 758,004 | 689,783 | |||||||||
| Hunter Douglas Inc. TLB 1L | 8.37% | 3M SOFR + 3.50% | 02/26/2029 | 2,235,195 | 2,000,902 | |||||||||
| Mattress Firm, Inc., 2021 | 9.39% | 3M US L + 4.25% | 09/25/2028 | 589,837 | 549,434 | |||||||||
| Weber-Stephen Products LLC, Initial B | 8.09% | 1M US L + 3.25% | 10/30/2027 | 492,321 | 421,717 | |||||||||
| Weber-Stephen Products LLC TLB 1L | 9.16% | 1M SOFR + 4.25% | 10/30/2027 | 136,009 | 116,741 | |||||||||
| Total Household Durables | 4,526,882 | 4,023,462 | ||||||||||||
| Household Products - 0.62% (0.37% of Total Investments) | ||||||||||||||
| AMERICAN GREETINGS CORPORATION, TL(e) | N/A | SOFR + 6.00% | 04/06/2028 | 430,338 | 420,656 | |||||||||
| Olaplex, Inc. TL 1L | 8.29% | 1M SOFR + 3.50% | 02/23/2029 | 1,173,369 | 1,043,324 | |||||||||
| Total Household Products | 1,603,707 | 1,463,980 | ||||||||||||
| Industrial Conglomerates - 0.91% (0.54% of Total Investments) | ||||||||||||||
| Madison IAQ LLC, Initial | 8.30% | 3M US L + 3.25% | 06/21/2028 | 165,313 | 157,047 | |||||||||
| Majordrive Holdings IV LLC, Initial | 9.00% | 3M US L + 4.00% | 06/01/2028 | 251,557 | 238,036 | |||||||||
| MajorDrive Holdings IV LLC | 10.41% | 3M SOFR + 5.50% | 06/01/2029 | 294,494 | 281,978 | |||||||||
| Redwood Star Merger Sub, Inc. | 9.41% | 1M SOFR + 4.62% | 04/05/2029 | 1,183,651 | 1,126,694 | |||||||||
| Star US Bidco LLC, Initial | 9.09% | 1M US L + 4.25% | 03/17/2027 | 342,158 | 330,754 | |||||||||
| Total Industrial Conglomerates | 2,237,173 | 2,134,509 | ||||||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 21 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Insurance - 3.26% (1.94% of Total Investments) | ||||||||||||||
| Acrisure LLC | ||||||||||||||
| 11/21 Incremental | 9.09% | 1M US L + 4.25% | 02/15/2027 | $ | 292,713 | $ | 286,036 | |||||||
| 2020 | 8.34% | 1M US L + 3.50% | 02/15/2027 | 799,329 | 772,016 | |||||||||
| 2021-1 Additional | 8.59% | 1M US L + 3.75% | 02/15/2027 | 679,650 | 662,659 | |||||||||
| Term Loan | 10.55% | 3M SOFR + 5.75% | 02/15/2027 | 686,638 | 679,772 | |||||||||
| ALLIANT HOLDINGS INTERMEDIATE, LLC, TLB | 8.35% | 1M SOFR + 3.50% | 11/05/2027 | 30,171 | 29,777 | |||||||||
| AssuredPartners, Inc. | 8.34% | 1M US L + 3.50% | 02/12/2027 | 1,035,362 | 1,021,446 | |||||||||
| ASSUREDPARTNERS, INC. TLB4 1L | 9.06% | 1M SOFR + 4.25% | 02/12/2027 | 96,972 | 96,487 | |||||||||
| Asurion LLC, New B-9 | 8.09% | 1M US L + 3.25% | 07/31/2027 | 1,304,855 | 1,193,942 | |||||||||
| Asurion LLC TLB 1L | 8.91% | 3M SOFR + 4.00% | 08/19/2028 | 480,412 | 442,282 | |||||||||
| HOWDEN GROUP HOLDINGS LIMITED, TL | 8.89% | 1M SOFR + 4.00% | 03/24/2030 | 956,158 | 948,987 | |||||||||
| MIC Glen LLC | 8.73% | 3M SOFR + 4.00% | 11/09/2029 | 280,945 | 279,787 | |||||||||
| OneDigital Borrower, LLC TL 1L | 9.16% | 1M SOFR + 4.25% | 11/16/2027 | 1,316,405 | 1,263,749 | |||||||||
| Total Insurance | 7,959,610 | 7,676,940 | ||||||||||||
| Internet and Catalog Retail - 0.33% (0.19% of Total Investments) | ||||||||||||||
| Shutterfly LLC, 2021 Refinancing B | 9.84% | 1M US L + 5.00% | 09/25/2026 | 665,153 | 322,600 | |||||||||
| Titan Acquisition Co New Zealand Limited TL 1L | 9.16% | 3M US L + 4.00% | 10/18/2028 | 461,517 | 448,248 | |||||||||
| Total Internet and Catalog Retail | 1,126,670 | 770,848 | ||||||||||||
| IT Services - 1.79% (1.06% of Total Investments) | ||||||||||||||
| Avaya Holdings Corp.(i) | 14.83% | 1M SOFR + 10.00% | 12/15/2027 | 93,440 | 22,426 | |||||||||
| Constant Contact, Inc. | 8.81% | 3M US L + 4.00% | 02/10/2028 | 1,662,552 | 1,568,335 | |||||||||
| Endurance International Group Holdings, Inc., Initial | 8.22% | 1M US L + 3.50% | 02/10/2028 | 839,223 | 782,575 | |||||||||
| Intrado Corporation, TLB | 8.68% | 3M SOFR + 3.63% | 01/31/2030 | 490,887 | 483,730 | |||||||||
| Virtusa Corp. | 8.59% | 1M US L + 3.75% | 02/11/2028 | 1,176,680 | 1,159,771 | |||||||||
| Virtusa Corporation TL 1L | 8.66% | 1M SOFR + 3.75% | 02/15/2029 | 188,680 | 185,908 | |||||||||
| Total IT Services | 4,451,462 | 4,202,745 | ||||||||||||
| Machinery - 1.15% (0.69% of Total Investments) | ||||||||||||||
| ELEMENT MTRL TECH GP HLDG DTL | 9.15% | 3M SOFR + 4.25% | 06/22/2029 | 321,987 | 317,559 | |||||||||
| ELEMENT MTRL TECH GP HLDG TL | 9.15% | 3M SOFR + 4.25% | 06/22/2029 | 697,638 | 688,046 | |||||||||
| PRO MACH GROUP, INC, TLB | 9.91% | 1M SOFR + 5.00% | 08/31/2028 | 370,370 | 370,370 | |||||||||
| Pro Mach Group, Inc., Closing Date Initial | 8.84% | 1M US L + 4.00% | 08/31/2028 | 910,221 | 904,660 | |||||||||
| Roper Industrial Products Investment Com LLC 1L | 8.93% | 3M SOFR + 4.50% | 11/22/2029 | 439,758 | 435,831 | |||||||||
| Total Machinery | 2,739,974 | 2,716,466 | ||||||||||||
| Media - 2.23% (1.33% of Total Investments) | ||||||||||||||
| Castle US Holding Corp., Initial Dollar | 8.59% | 1M US L + 3.75% | 01/29/2027 | 1,046,930 | 682,379 | |||||||||
| Cimpress plc, Tranche B-1 | 8.34% | 1M US L + 3.50% | 05/17/2028 | 163,188 | 155,845 | |||||||||
| CREATIVE ARTISTS AGENCY, LLC TLB | 8.31% | 1M SOFR + 3.50% | 11/24/2028 | 976,571 | 972,098 | |||||||||
| Cumulus Media New Holdings, Inc., Initial | 8.58% | 3M US L + 3.75% | 03/31/2026 | 699,859 | 644,045 | |||||||||
| Recorded Books, Inc., 2021 Replacement | 8.79% | 1M SOFR + 4.00% | 08/29/2025 | 938,541 | 932,440 | |||||||||
| Red Ventures, LLC, TLB | 7.81% | 1M SOFR + 3.00% | 03/01/2030 | 877,230 | 868,458 | |||||||||
| United Talent Agency LLC, B | 8.91% | 1M SOFR + 4.00% | 07/07/2028 | 1,007,427 | 997,353 | |||||||||
| Total Media | 5,709,746 | 5,252,618 | ||||||||||||
| See Notes to Financial Statements. | |
| 22 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Oil, Gas & Consumable Fuels - 1.76% (1.05% of Total Investments) | ||||||||||||||
| Brazos Delaware II, LLC | 8.48% | 1M SOFR + 3.75% | 02/11/2030 | $ | 1,403,334 | $ | 1,370,440 | |||||||
| CQP Holdco LP | 8.66% | 3M US L + 3.50% | 06/05/2028 | 61,884 | 61,335 | |||||||||
| Oryx Midstream Services Permian Basin LLC | 8.06% | 1M SOFR + 3.25% | 10/05/2028 | 224,371 | 220,220 | |||||||||
| PAR PETROLEUM, LLC, TLB | 9.24% | 3M SOFR + 4.25% | 02/28/2030 | 1,161,418 | 1,138,190 | |||||||||
| Permian Production Partners, LLC, Initial | 12.85% | 1M US L + 6.00% | 11/20/2025 | 42,143 | 41,932 | |||||||||
| Traverse Midstream Partners LLC | 8.73% | 3M SOFR + 3.75% | 02/16/2028 | 1,183,538 | 1,161,844 | |||||||||
| WHITEWATER WHISTLER HOLDINGS, LLC TLB 1L | 8.15% | 3M SOFR + 3.25% | 02/15/2030 | 148,965 | 148,220 | |||||||||
| Total Oil, Gas & Consumable Fuels | 4,225,653 | 4,142,181 | ||||||||||||
| Personal Products - 0.40% (0.24% of Total Investments) | ||||||||||||||
| KDC/ONE Development Corp., Inc., Initial (2020) | 8.59% | 1M US L + 3.75% | 12/22/2025 | 967,254 | 934,203 | |||||||||
| Pharmaceuticals - 0.96% (0.57% of Total Investments) | ||||||||||||||
| Alvogen Pharma US, Inc. | 12.38% | 3M SOFR + 7.50% | 06/30/2025 | 1,556,654 | 1,354,289 | |||||||||
| Amneal Pharmaceuticals, LLC, Initial Term Loan | 8.38% | 1M US L + 3.50% | 05/04/2025 | 967,708 | 917,513 | |||||||||
| Total Pharmaceuticals | 2,524,362 | 2,271,802 | ||||||||||||
| Professional Services - 1.39% (0.82% of Total Investments) | ||||||||||||||
| AQ Carver Buyer, Inc., Initial | 9.83% | 3M SOFR + 5.00% | 09/23/2025 | 451,514 | 451,514 | |||||||||
| Conduent Business Services, LLC TLB 1L | 9.09% | 1M US L + 4.25% | 10/16/2028 | 307,201 | 286,465 | |||||||||
| EISNER ADVISORY GROUP LLC, TL | 10.17% | 1M SOFR + 5.25% | 07/28/2028 | 379,872 | 378,923 | |||||||||
| Equiniti Group PLC, TLB | 9.54% | 6M SOFR + 4.50% | 12/11/2028 | 332,471 | 331,225 | |||||||||
| UST Global, Inc. | 8.53% | 1M SOFR + 3.75% | 11/20/2028 | 563,494 | 557,391 | |||||||||
| Vaco Holdings LLC | 10.05% | 3M SOFR + 5.00% | 01/21/2029 | 1,284,954 | 1,259,255 | |||||||||
| Total Professional Services | 3,319,506 | 3,264,773 | ||||||||||||
| Real Estate Investment Trusts (REITs) - 0.19% (0.11% of Total Investments) | ||||||||||||||
| STARWOOD PROPERTY MORTGAGE, L.L.C | 8.06% | 1M SOFR + 3.25% | 11/18/2027 | 476,944 | 450,316 | |||||||||
| Real Estate Management & Development - 0.39% (0.23% of Total Investments) | ||||||||||||||
| Forest City Enterprises LP, Replacement | 8.34% | 1M US L + 3.50% | 12/08/2025 | 1,068,045 | 907,390 | |||||||||
| Software - 8.94% (5.31% of Total Investments) | ||||||||||||||
| Apex Group Treasury LLC | 9.66% | 3M SOFR + 5.00% | 07/27/2028 | 75,833 | 74,885 | |||||||||
| Apex Group Treasury, Ltd., USD | 8.56% | 3M US L + 3.75% | 07/27/2028 | 1,024,390 | 996,219 | |||||||||
| Ascend Learning 11/21 TLB | 8.41% | 1M SOFR + 3.50% | 12/11/2028 | 1,131,350 | 1,042,256 | |||||||||
| Astra Acquisition Corp. TL 1L | 10.09% | 1M US L + 5.25% | 10/25/2028 | 319,119 | 274,644 | |||||||||
| Cardinal Parent, Inc., Initial | 9.66% | 3M US L + 4.50% | 11/12/2027 | 237,209 | 209,633 | |||||||||
| CommerceHub, Inc., Initial | 8.78% | 6M SOFR + 4.00% | 12/29/2027 | 817,052 | 759,180 | |||||||||
| Conservice Midco LLC, Initial | 9.09% | 1M US L + 4.25% | 05/13/2027 | 1,099,899 | 1,078,594 | |||||||||
| Cornerstone OnDemand, Inc., Initial | 8.59% | 1M US L + 3.75% | 10/16/2028 | 633,904 | 583,192 | |||||||||
| CT Technologies Intermediate Holdings, Inc., 2021 | 8.88% | 1M US L + 4.25% | 12/16/2025 | 258,579 | 245,529 | |||||||||
| DCert Buyer, Inc., Initial | 8.70% | 6M SOFR + 4.00% | 10/16/2026 | 1,080,669 | 1,056,019 | |||||||||
| EagleView Technology Corp., Term Loan | 8.66% | 3M US L + 3.50% | 08/14/2025 | 787,895 | 670,412 | |||||||||
| Fiserv Investment Solutions, Inc., Initial | 8.76% | 1M SOFR + 4.00% | 02/18/2027 | 435,265 | 415,678 | |||||||||
| Greeneden U.S. Holdings I LLC, Initial Dollar (2020) | 8.84% | 1M US L + 4.00% | 12/01/2027 | 1,419,281 | 1,395,991 | |||||||||
| Idera, Inc., B-1 | 8.51% | 3M US L + 3.75% | 03/02/2028 | 194,955 | 185,390 | |||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 23 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Coupon(a) | Reference Rate & Spread | Maturity Date | Principal Amount | Value | ||||||||||
| SENIOR SECURED FIRST LIEN LOANS(b) (continued) | ||||||||||||||
| Software (continued) | ||||||||||||||
| Imperva, Inc., Term Loan | 8.86% | 3M US L + 4.00% | 01/12/2026 | $ | 402,267 | $ | 350,777 | |||||||
| INDY US BIDCO, LLC, TL | 11.06% | 1M SOFR + 6.25% | 03/06/2028 | 379,613 | 328,840 | |||||||||
| Indy US Holdco LLC(e) | N/A | SOFR + 6.25% | 03/05/2028 | 783,202 | 678,449 | |||||||||
| Magenta Buyer LLC, Initial | 9.58% | 3M US L + 4.75% | 07/27/2028 | 2,148,166 | 1,763,795 | |||||||||
| MCAFEE CORP. TLB 1L | 8.65% | 1M SOFR + 3.75% | 03/01/2029 | 2,912,701 | 2,730,657 | |||||||||
| MH Sub I LLC, 2020 June New | 8.59% | 1M US L + 3.75% | 09/13/2024 | 1,159,451 | 1,138,441 | |||||||||
| Planview Parent, Inc., Closing Date | 9.16% | 3M US L + 4.00% | 12/17/2027 | 948,663 | 894,314 | |||||||||
| Project Alpha Intermediate Holding, Inc., 2021 | ||||||||||||||
| Refinancing | 8.85% | 1M US L + 4.00% | 04/26/2024 | 1,561,790 | 1,550,077 | |||||||||
| Skillsoft Finance II, Inc., Initial | 10.10% | 1M SOFR + 5.25% | 07/14/2028 | 356,319 | 299,689 | |||||||||
| SolarWinds Holdings, Inc., TL | 8.81% | 1M SOFR + 4.00% | 02/05/2027 | 230,372 | 229,284 | |||||||||
| Ultimate Software 11/21 TL | 8.03% | 3M US L + 3.25% | 05/04/2026 | 1,238,555 | 1,205,077 | |||||||||
| Upland Software, Inc., Initial | 8.66% | 1M SOFR + 3.75% | 08/06/2026 | 965,000 | 896,244 | |||||||||
| Total Software | 22,601,499 | 21,053,266 | ||||||||||||
| Specialty Retail - 1.52% (0.91% of Total Investments) | ||||||||||||||
| Bass Pro/Great American 11/21 TLB | 8.59% | 1M US L + 3.75% | 03/06/2028 | 994,784 | 980,489 | |||||||||
| Fender Musical Instruments Corporation | 8.84% | 1M SOFR + 4.00% | 12/01/2028 | 201,264 | 182,647 | |||||||||
| Franchise Group, Inc. | ||||||||||||||
| Incremental TL | 9.70% | 3M SOFR + 5.00% | 03/10/2026 | 346,366 | 334,676 | |||||||||
| Initial | 9.56% | 3M US L + 4.75% | 03/10/2026 | 1,116,957 | 1,079,260 | |||||||||
| Jo-Ann Stores LLC, Additional B-1 | 9.57% | 3M US L + 4.75% | 07/07/2028 | 1,112,677 | 606,965 | |||||||||
| Rising Tide Holdings, Inc., Initial | 9.70% | 3M US L + 4.75% | 06/01/2028 | 249,212 | 147,658 | |||||||||
| Torrid LLC, Closing Date | 10.31% | 3M US L + 5.50% | 06/14/2028 | 295,458 | 258,526 | |||||||||
| Total Specialty Retail | 4,316,718 | 3,590,221 | ||||||||||||
| Textiles, Apparel & Luxury Goods - 1.63% (0.97% of Total Investments) | ||||||||||||||
| ABG Intermediate Holdings 2 LLC | ||||||||||||||
| TLB2 | 9.41% | 6M SOFR + 4.71% | 12/21/2028 | 1,585,574 | 1,558,203 | |||||||||
| Tranche TLB-1 Term Loans | 8.41% | 1M SOFR + 3.50% | 12/21/2028 | 1,207,522 | 1,187,393 | |||||||||
| Champ Acquisition Corp., Initial | 10.71% | 3M US L + 5.50% | 12/19/2025 | 453,433 | 451,959 | |||||||||
| Elevate Textiles, Inc., Initial | 9.80% | 3M US L + 5.00% | 05/01/2024 | 1,125,337 | 650,355 | |||||||||
| Total Textiles, Apparel & Luxury Goods | 4,371,866 | 3,847,910 | ||||||||||||
| Transportation Infrastructure - 0.20% (0.12% of Total Investments) | ||||||||||||||
| Uber Technologies, Inc., TLB | 7.72% | 3M SOFR + 3.02% | 03/01/2030 | 468,299 | 466,983 | |||||||||
| Wireless Telecommunication Services - 0.23% (0.14% of Total Investments) | ||||||||||||||
| LSF9 ATLANTIS HOLDINGS, LLC | 12.15% | 3M SOFR + 7.25% | 03/31/2029 | 552,853 | 537,191 | |||||||||
| Total Senior Secured First Lien Loans (Cost $181,302,169) | $ | 184,184,328 | $ | 170,241,509 | ||||||||||
| Shares | Value | |||||||
| COMMON STOCK - 0.09%* (0.05% of Total Investments) | ||||||||
| Aerospace & Defense - 0.00%(j) (0.00% of Total Investments) | ||||||||
| New Constellis Borrower LLC(k) | 6,795 | $ | 2,127 | |||||
| See Notes to Financial Statements. | |
| 24 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
| Shares | Value | |||||||
| COMMON STOCK (continued) | ||||||||
| Capital Markets - 0.00%(j) (0.00% of Total Investments) | ||||||||
| Carestream 10/22 Equity(k) | 873 | $ | 5,455 | |||||
| Food & Staples Retailing - 0.08% (0.05% of Total Investments) | ||||||||
| CEC Brands, LLC(k) | 10,454 | 188,172 | ||||||
| Oil, Gas & Consumable Fuels - 0.01% (0.00% of Total Investments) | ||||||||
| Permian Production Partners(k) | 18,995 | 12,347 | ||||||
| Total Common Stock (Cost $103,712) | 37,117 | $ | 208,101 | |||||
| Total Investments - 168.27% (Cost $457,588,700) | $ | 396,171,494 | ||||||
| Liabilities in Excess of Other Assets - 1.50% | 3,530,640 | |||||||
| Preferred Shares (Net of $1,317,809 Deferred Financing Costs) - (17.87)% | (42,082,191 | ) | ||||||
| Leverage Facility (Net of $173,179 Deferred Leverage Costs) - (51.89)% | (122,176,821 | ) | ||||||
| Net Assets Applicable to Common Shareholders - 100.00% | $ | 235,443,122 | ||||||
| * | Amounts above are shown as a percentage of net assets applicable to common shareholders as of March 31, 2023. |
| (a) | The rate shown is the coupon as of the end of the reporting period. |
| (b) | Variable rate investment. Interest rates reset periodically. Interest rate shown reflects the rate in effect at March 31, 2023. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description above. Leveraged loans and CLO debt securities typically have reference Rate Floors (“Rate Floors”) embedded in their loan agreements and organizational documents. Leveraged loans generally have Rate Floors of 0% or more, while CLO debt securities often set Rate Floors at 0%. Rate Floors serve to establish a minimum base rate to be paid by the borrower before the fixed spread. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above. |
| (c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Total market value of Rule 144A securities amounts to $214,858,394, which represents approximately 91.26% of the Trust’s net assets as of March 31, 2023. Such securities may normally be sold to qualified institutional buyers in transactions exempt from registration. |
| (d) | As a result of the use of significant unobservable inputs to determine fair value, this investment has been classified as a Level 3 asset. |
| (e) | When-issued or delivery-delayed security. All or a portion of this position has not settled as of March 31, 2023. The interest rate shown represents the stated spread over the applicable reference rate floor; the Trust will not accrue interest until the settlement date, at which point the reference rate floor will be established. The total cost of securities purchased on a when-issued or delivery-delayed basis was $3,084,656 as of March 31, 2023. |
| (f) | CLO subordinated notes, income notes, Y notes and M notes are considered CLO equity positions. CLO equity positions are entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying securities less contractual payments to debt holders and fund expenses. The effective yield is estimated based upon the amount and timing of these recurring distributions in addition to the estimated amount of terminal principal payment. Effective yields for the CLO equity positions are updated generally once per quarter or on a transaction such as an add-on purchase, refinancing or reset. The estimated yield and investment cost may ultimately not be realized. Estimated yields shown are as of March 31, 2023. |
| (g) | Fair value includes the Trust’s interest in fee rebates on CLO subordinated notes. |
| (h) | This investment has an unfunded commitment as of March 31, 2023. |
| (i) | Issuer was in default and is non-income producing. Partial or no payments were paid on the last payment date. The aggregate value of these securities represented less than 0.00% of the Trust’s net assets. |
| (j) | Less than 0.005%. |
| (k) | Non-income producing security. |
All securities held as of March 31, 2023 are pledged as collateral for the Trust’s credit facility. See Note 6 of the Notes to Financial Statements.
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 25 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Schedule of Investments |
| March 31, 2023 (Unaudited) |
1M US L - 1 Month LIBOR (London Interbank Offered Rate)
3M SOFR - 3 Month SOFR (Secured Overnight Financing Rate)
1M SOFR - 1 Month SOFR (Secured Overnight Financing Rate)
6M SOFR - 6 Month SOFR (Secured Overnight Financing Rate)
3M US L - 3 Month LIBOR (London Interbank Offered Rate
S.a.r.l. - Societe Anonyme a Responsabilite Limitee (French: Limited Liability Company)
| See Notes to Financial Statements. | |
| 26 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Statement of Assets and Liabilities |
| March 31, 2023 (Unaudited) |
| ASSETS: | ||||
| Investments, at value (Cost $457,588,700) | $ | 396,171,494 | ||
| Cash | 5,039,268 | |||
| Receivable for investment securities sold | 8,219,686 | |||
| Interest receivable | 2,140,346 | |||
| Prepaid offering costs, net (Note 5) | 302,510 | |||
| Prepaid expenses and other assets | 19,255 | |||
| Total Assets | 411,892,559 | |||
| LIABILITIES: | ||||
| Leverage facility (Net of $173,179 deferred financing costs) (Note 6) | 122,176,821 | |||
| Preferred shares (Net of $1,317,809 deferred financing costs) (Note 6) | 42,082,191 | |||
| Payable for investment securities purchased | 7,026,712 | |||
| Distributions payable to common shareholders | 2,700,140 | |||
| Interest due on leverage facility (Note 6) | 650,525 | |||
| Accrued investment advisory fees payable (Note 3) | 649,244 | |||
| Interest payable on preferred shares | 411,221 | |||
| Accrued fund accounting and administration fees payable | 184,276 | |||
| Accrued investor support services fees payable (Note 3) | 68,708 | |||
| Accrued professional fees payable | 45,745 | |||
| Accrued printing fees payable | 19,155 | |||
| Accrued custodian fees payable | 8,670 | |||
| Accrued transfer agent fees payable | 5,510 | |||
| Accrued chief compliance officer fees payable (Note 3) | 5,451 | |||
| Other payables and accrued expenses | 415,068 | |||
| Total Liabilities | 176,449,437 | |||
| Net Assets Applicable to Common Shareholders | $ | 235,443,122 | ||
| COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: | ||||
| Paid-in capital | $ | 300,542,645 | ||
| Total distributable earnings (accumulated losses) | (65,099,523 | ) | ||
| Net Assets Applicable to Common Shareholders | $ | 235,443,122 | ||
| Common shares of beneficial interest outstanding, at $0.01 par value, and unlimited common shares authorized | 37,229,874 | |||
| Net Asset Value Applicable to Common Shareholders | $ | 6.32 | ||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 27 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Statement of Operations |
| For the Six Months Ended March 31, 2023 (Unaudited) |
| INVESTMENT INCOME: | ||||
| Interest | $ | 27,060,124 | ||
| Dividends | 59,903 | |||
| Total Investment Income | 27,120,027 | |||
| EXPENSES: | ||||
| Investment advisory fees (Note 3) | 3,351,453 | |||
| Interest expense and amortization of deferred leverage costs | 3,399,102 | |||
| Distributions to preferred shares | 1,499,184 | |||
| Investor support services fees (Note 3) | 394,289 | |||
| Excise tax | 371,200 | |||
| Amortization of financing costs (Note 6) | 305,510 | |||
| Fund accounting and administration fees | 209,274 | |||
| Professional fees | 159,783 | |||
| Trustees fees and expenses | 112,346 | |||
| Transfer agent fees | 41,276 | |||
| Custodian fees | 33,914 | |||
| Chief financial officer fees (Note 3) | 22,404 | |||
| Chief compliance officer fees (Note 3) | 17,070 | |||
| Printing expenses | 14,638 | |||
| Other expenses | 137,473 | |||
| Total Expenses | 10,068,916 | |||
| Net Investment Income | 17,051,111 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
| Net realized loss on: | ||||
| Investment securities | (4,634,348 | ) | ||
| Change in unrealized appreciation/(depreciation) on: | ||||
| Investment securities | 736,227 | |||
| Net Realized and Unrealized Loss on Investments | (3,898,121 | ) | ||
| Net Increase in Net Assets Applicable to Common Shareholders from Operations | $ | 13,152,990 | ||
| See Notes to Financial Statements. | |
| 28 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Statements
of Changes in Net Assets Applicable to Common Shareholders |
| For
the Six Months Ended March 31, 2023 (Unaudited) | For
the Year Ended September 30, 2022 | |||||||
OPERATIONS: | ||||||||
| Net investment income | $ | 17,051,111 | $ | 26,066,496 | ||||
| Net realized loss | (4,634,348 | ) | (1,647,420 | ) | ||||
| Change in unrealized appreciation/(depreciation) | 736,227 | (61,102,520 | ) | |||||
| Net Increase/(Decrease) in Net Assets Applicable to Common Shareholders from Operations | 13,152,990 | (36,683,444 | ) | |||||
| TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS: | ||||||||
| From net investment income | (15,856,239 | ) | (26,582,506 | ) | ||||
| From tax return of capital | – | (1,437,750 | ) | |||||
| TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS | (15,856,239 | ) | (28,020,256 | ) | ||||
| CAPITAL SHARE TRANSACTIONS: | ||||||||
| Proceeds from sale of common shares (net of offering costs of $1,302 and $326,927) | 10,342,356 | 70,085,319 | ||||||
| Net asset value of common shares issued to shareholders from reinvestment of dividends | 1,003,183 | 2,855,549 | ||||||
| Net Increase in Net Assets Applicable to Common Shareholders from Capital Share Transactions | 11,345,539 | 72,940,868 | ||||||
| Net Increase in Net Assets Applicable to Common Shareholders | 8,642,290 | 8,237,168 | ||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: | ||||||||
| Beginning of period | $ | 226,800,832 | $ | 218,563,664 | ||||
| End of period | $ | 235,443,122 | $ | 226,800,832 | ||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 29 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Statement of Cash Flows |
For the Six Months Ended March 31, 2023 (Unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES:
| Net increase in net assets applicable to common shareholders from operations | $ | 13,152,990 | ||
| Adjustments to reconcile net increase in net assets applicable to common shareholders from operations to net cash provided by operating activities: | ||||
| Purchases of investment securities | (79,322,667 | ) | ||
| Proceeds from sale of investment securities | 67,223,713 | |||
| Discounts accreted/premiums amortized | (2,734,311 | ) | ||
| Reductions to CLO equity cost basis | 1,153,454 | |||
| Net realized loss on investment securities | 4,634,348 | |||
| Net change in unrealized appreciation/(depreciation) on investment securities | (736,227 | ) | ||
| Net purchase of short-term investment securities | 3,309,153 | |||
| (Increase)/Decrease in assets: | ||||
| Receivable for investment securities sold | 3,205,772 | |||
| Interest receivable | 77,284 | |||
| Deposits held with broker | 101,666 | |||
| Prepaid offering costs | 246,029 | |||
| Prepaid expenses and other assets | (19,255 | ) | ||
| Increase/(Decrease) in liabilities: | ||||
| Payable for investment securities purchased | (4,968,627 | ) | ||
| Interest due on leverage facility | 274,844 | |||
| Interest payable - margin account | (129,899 | ) | ||
| Accrued investment advisory fees payable | 28,145 | |||
| Accrued fund accounting and administration fees payable | 19,951 | |||
| Accrued professional fees payable | (160,486 | ) | ||
| Accrued investor support services fees payable | 3,193 | |||
| Accrued printing fees payable | 2,056 | |||
| Accrued custodian fees payable | (5,337 | ) | ||
| Accrued chief compliance officer fees payable | (358 | ) | ||
| Accrued transfer agent fees payable | (1,100 | ) | ||
| Other payables and accrued expenses | 347,129 | |||
| Net Cash Provided by Operating Activities | 5,701,460 | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
| Proceeds from leverage facility | 15,200,000 | |||
| Payments on leverage facility | (6,000,000 | ) | ||
| Proceeds from offering of preferred shares | (6,590,504 | ) | ||
| Proceeds from shares sold - common shares | 10,343,658 | |||
| Distributions paid - common shareholders | (14,742,118 | ) | ||
| Offering costs paid | (1,302 | ) | ||
| Net Cash Used in Financing Activities | (1,790,266 | ) | ||
| Net Increase in Cash | 3,911,194 | |||
| Cash, beginning balance | 1,128,074 | |||
| Cash, ending balance | $ | 5,039,268 | ||
| Supplemental disclosure of cash flow information: | ||||
| Cash paid for interest on leverage facility | $ | 4,623,442 | ||
| Non-cash activity: | ||||
| Reinvestment of distributions | $ | 1,003,183 |
| See Notes to Financial Statements. | |
| 30 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Financial Highlights |
For a Share of Outstanding Common Stock Throughout the Periods Presented |
For the Six Months Ended March 31, 2023 (Unaudited) | For
the September 30, | For
the September 30, | For
the September 30, 2020 | For
the September 30, 2019 | For
the September 30, 2018 | |||||||||||||||||||
| PER COMMON SHARE OPERATING PERFORMANCE: | ||||||||||||||||||||||||
| Net asset value - beginning of year | $ | 6.39 | $ | 8.19 | $ | 6.56 | $ | 8.22 | $ | 9.50 | $ | 9.78 | ||||||||||||
| INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
| Net investment income/(loss)(a) | 0.47 | 0.82 | 0.76 | 0.72 | 0.89 | 0.64 | ||||||||||||||||||
| Net realized and unrealized gain/(loss) on investments | (0.10 | ) | (1.91 | ) | 1.41 | (1.58 | ) | (1.32 | ) | (0.16 | ) | |||||||||||||
| Total Income/(Loss) from Investment Operations | 0.37 | (1.09 | ) | 2.17 | (0.86 | ) | (0.43 | ) | 0.48 | |||||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS:(b) | ||||||||||||||||||||||||
| From net investment income | (0.44 | ) | (0.84 | ) | (0.34 | ) | (0.57 | ) | (0.77 | ) | (0.45 | ) | ||||||||||||
| From tax return of capital | – | (0.04 | ) | (0.54 | ) | (0.23 | ) | (0.08 | ) | (0.31 | ) | |||||||||||||
| Total Distributions to Common Shareholders | (0.44 | ) | (0.88 | ) | (0.88 | ) | (0.80 | ) | (0.85 | ) | (0.76 | ) | ||||||||||||
| CAPITAL SHARE TRANSACTIONS: | ||||||||||||||||||||||||
| Impact of Capital Share Transactions(a) | – | 0.17 | 0.34 | 0.00 | (c) | 0.00 | (c) | – | ||||||||||||||||
| Total Capital Share Transactions | – | 0.17 | 0.34 | 0.00 | (c) | 0.00 | (c) | – | ||||||||||||||||
| Net asset value per common share - end of period | $ | 6.32 | $ | 6.39 | $ | 8.19 | $ | 6.56 | $ | 8.22 | $ | 9.50 | ||||||||||||
| Market price per common share - end of period | $ | 6.43 | $ | 5.94 | $ | 8.58 | $ | 5.99 | $ | 8.95 | $ | 9.80 | ||||||||||||
| Total Investment Return per Common Share - Net Asset Value(d) | 5.81 | % | (12.63 | %) | 39.14 | % | (9.54 | %) | (4.55 | %) | 5.22 | % | ||||||||||||
| Total Investment Return per Common Share - Market Price(d) | 15.81 | % | (22.47 | %) | 59.63 | % | (24.14 | %) | 0.75 | % | 4.89 | % | ||||||||||||
| RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
| Net assets attributable to common shares, end of period (000s) | $ | 235,443 | $ | 226,801 | $ | 218,564 | $ | 84,989 | $ | 78,707 | $ | 79,322 | ||||||||||||
| Ratio of expenses excluding waivers to average net assets | 8.67 | %(e) | 6.29 | % | 5.28 | % | 5.71 | % | 6.16 | % | 5.60 | % | ||||||||||||
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 31 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Financial Highlights |
For a Share of Outstanding Common Stock Throughout the Periods Presented |
For
the Six Months | For
the | For
the | For
the | For
the | For
the | |||||||||||||||||||
| Ratio of expenses including waivers to average net assets(f) | N/A | N/A | N/A | N/A | 5.22 | % | 4.87 | % | ||||||||||||||||
| Ratio of expenses excluding interest expense and distributions to preferred shares to average net assets | 4.45 | %(e)(g) | 3.94 | %(g)(h) | 3.94 | %(g)(i) | 4.51 | %(g) | 3.27 | %(g) | 3.35 | %(g) | ||||||||||||
| Ratio of net investment income including waivers to average net assets(f) | 14.69 | %(e) | 10.81 | % | 9.82 | % | 10.93 | % | 10.03 | % | 6.57 | % | ||||||||||||
| Portfolio turnover rate | 17 | % | 29 | % | 34 | % | 60 | % | 94 | % | 119 | % | ||||||||||||
| 2026 PREFERRED SHARES: | ||||||||||||||||||||||||
| Liquidation value, end of period, including dividends payable on preferred shares (000s) | $ | 39,900 | $ | 39,000 | $ | 40,258 | N/A | N/A | N/A | |||||||||||||||
| Total shares outstanding (000s) | 1,596 | 1,596 | 1,596 | N/A | N/A | N/A | ||||||||||||||||||
| Asset coverage, end of period per $1,000 of preferred shares(j) | $ | 161 | $ | 139 | $ | 162 | N/A | N/A | N/A | |||||||||||||||
| Liquidation preference per share | $ | 25 | $ | 25 | $ | 25 | N/A | N/A | N/A | |||||||||||||||
2029 CONVERTIBLE PREFERRED SHARES: | ||||||||||||||||||||||||
| Liquidation value, end of period, including dividends payable on preferred shares (000s) | $ | 3,500 | $ | 10,000 | N/A | N/A | N/A | N/A | ||||||||||||||||
| Total shares outstanding (000s) | $ | 140 | $ | 400 | N/A | N/A | N/A | N/A | ||||||||||||||||
| Asset coverage, end of period per $1,000 of preferred shares(j) | $ | 161 | $ | 139 | N/A | N/A | N/A | N/A | ||||||||||||||||
| Liquidation preference per share | $ | 25 | $ | 25 | N/A | N/A | N/A | N/A | ||||||||||||||||
| LEVERAGE FACILITY: | ||||||||||||||||||||||||
| Aggregate principal amount, end of period of leverage facility payable (000s) | $ | 122,350 | $ | 113,150 | $ | 98,150 | $ | 35,650 | $ | 38,965 | $ | 38,865 | ||||||||||||
| Asset coverage, end of period per $1,000 of leverage facility(k) | $ | 3,279 | $ | 3,445 | $ | 3,227 | $ | 3,384 | $ | 3,020 | $ | 3,041 | ||||||||||||
| See Notes to Financial Statements. | |
| 32 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Financial Highlights |
For a Share of Outstanding Common Stock Throughout the Periods Presented |
| (a) | Calculated using average common shares outstanding. |
| (b) | The per share amounts of distributions related to net investment income and tax return of capital are based on amounts determined under U.S. federal income tax regulations which differs from the per share amounts from investment operations which are based on amounts determined under U.S. GAAP. |
| (c) | Less than $0.005 or greater than $(0.005) per share. |
| (d) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at closing on the last day of each period reported. Dividends and distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the Trust’s dividend reinvestment plan. Total investment returns do not reflect brokerage commissions, if any, and are not annualized. |
| (e) | Annualized. |
| (f) | The Adviser’s expense limitation agreement to waive and/or reimburse expenses of the Trust expired on September 27, 2019 and was not renewed. |
| (g) | Includes amortization of deferred leverage costs incurred obtaining leverage facility. |
| (h) | The Trust issued Series 2029 Convertible Preferred Shares on June 30, 2022. |
| (i) | The Trust issued Series 2026 Term Preferred Shares on March 29, 2021 and September 8, 2021. |
| (j) | The asset coverage ratio for a class of senior securities representing stock is calculated as the Trust’s total assets, less all liabilities and indebtedness not represented by the Trust’s senior securities, divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured senior securities which are stock. With respect to the Preferred Shares, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding Preferred Shares (based on a liquidation preference of $25). |
| (k) | Calculated by subtracting the Trust’s total liabilities (excluding the liquidation value of the Preferred Shares, including dividends payable on the Preferred Shares, and the principal amount of the Leverage Facility) from the Trust’s total assets and dividing by the principal amount of the Leverage Facility and then multiplying by $1,000. |
| See Notes to Financial Statements. | |
| Semi-Annual Report | March 31, 2023 | 33 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Notes to Financial Statements |
March 31, 2023 (Unaudited) |
| 1. | ORGANIZATION |
XAI Octagon Floating Rate & Alternative Income Term Trust (the “Trust”) is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust commenced operations on September 27, 2017.
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. “Managed Assets” means the total assets of the Trust, including assets attributable to the Trust’s use of leverage, minus the sum of its accrued liabilities (other than liabilities incurred for the purpose of creating leverage).
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting and Use of Estimates: The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts and disclosures, including contingent assets and liabilities, in the financial statements during the period reported. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Trust ultimately realizes upon sale of the securities. The Trust is considered an investment company under
U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on March 31, 2023.
Expense Recognition: Expenses are recorded on the accrual basis of accounting.
Calculation of Net Asset Value: The calculation of net asset value (“NAV”) per common share of the Trust is determined daily, on each day that the NYSE is open for trading, as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern Time). The Trust’s net asset value per common share is calculated by dividing the value of the Trust’s total assets, less its liabilities, by the number of shares outstanding.
Cash: The Trust considers its investment in an FDIC insured interest bearing account to be cash. Cash is valued at cost plus any accrued interest. The Trust maintains cash balances, which at times may exceed federally insured limits. The Trust maintains these balances with a high quality financial institution.
Securities Transactions and Investment Income: Investment security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities transactions and unrealized appreciation and depreciation of securities are determined using the identified cost basis method for financial reporting purposes.
Interest income from investments is recorded using the accrual basis of accounting to the extent such amounts are expected to be collected. Amortization of premium or accretion of discount is recognized using the effective interest method. Collateralized loan obligation (“CLO”) equity investments recognize investment income on the accrual basis utilizing an effective interest methodology based upon an effective yield to maturity utilizing projected cash flows. ASC Topic 325-40, Beneficial Interests in Securitized Financial Assets, requires investment income from CLO equity investments and fee rebates to be recognized under the effective interest method, with any difference between the cash distribution and the amount calculated pursuant to the effective interest method being recorded as an adjustment to the cost basis of the investment. There were no fee rebates for CLO equity investments held by the Trust as of March 31, 2023.
Effective yields for the Trust’s CLO equity positions are monitored and evaluated on a quarterly basis. The Trust also updates a CLO equity investment’s effective yield in each instance where there is a respective add-on purchase, refinancing or reset involving the CLO equity investment held. The effective yield will be set to 0.00% if: (1) the aggregate projected amount of future recurring distributions is less than the amortized investment cost, and/or (2) there is significant uncertainty with respect to the timing of future residual distributions from equity positions that are in the process of being redeemed or that have missed or are not currently making distributions. The future distributions for CLO equity positions with a 0.00% effective yield will be recognized solely as return of cost basis until the aggregate projected amount of future recurring distributions exceeds the amortized investment cost.
Preferred Shares: Distributions to holders of the Trust’s Series 2026 Term Preferred Shares and Series 2029 Convertible Preferred Shares (collectively, “Preferred Shares”) are accrued on a daily basis as described in Note 6 and are treated as an expense as required by U.S. GAAP. For tax purposes, the payments made to the holders of the Trust’s Preferred Shares are treated as dividends or distributions. The character of distributions to the holders of the Trust’s Preferred Shares made during the year may differ from their ultimate characterization for federal income tax purposes.
| 34 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Notes to Financial Statements |
March 31, 2023 (Unaudited) |
Fair Value Measurements: The Trust records investments at fair value. The Trust values debt securities at the last available bid price for such securities or, if such prices are not available, at prices for securities of comparable maturity, quality, and type. The Trust values exchange-traded options and other exchange-traded derivative contracts at the midpoint of the best bid and asked prices at the close on those exchanges on which they are traded.
The Trust values equity securities at the last reported sale price on the principal exchange or in the principal off-exchange market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if there are no sales, at the mean between the last available bid and asked prices on that day. Securities traded primarily on the Nasdaq Stock Market (“Nasdaq”) are normally valued by the Trust at the Nasdaq Official Closing Price (“NOCP”) provided by Nasdaq each business day. The NOCP is the most recently reported price as of 4:00 p.m., Eastern Time, unless that price is outside the range of the “inside” bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, Nasdaq will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes.
Generally, trading in many foreign securities will be substantially completed each day at various times prior to the close of the NYSE. The values of these securities used in determining the net asset value generally will be computed as of such times. Occasionally, events affecting the value of foreign securities may occur between such times and the close of the NYSE which will not be reflected in the computation of net asset value unless it is determined that such events would materially affect the net asset value, in which case adjustments would be made and reflected in such computation pursuant to the fair valuation procedures described herein. Such adjustments may be based upon factors such as developments in non-U.S. markets, the performance of U.S. securities markets and the performance of instruments trading in U.S. markets that represent non-U.S. securities.
Short-term securities with remaining maturities of less than 60 days may be valued at amortized cost, to the extent that amortized cost is determined to approximate fair value.
The Trust values derivatives transactions in accordance with valuation guidelines adopted by the Board of Trustees of the Trust (the “Board of Trustees”). Accrued payments to the Trust under such transactions will be assets of the Trust and accrued payments by the Trust will be liabilities of the Trust.
The Trust may utilize bid quotations provided by independent pricing services or, if independent pricing services are unavailable, dealers to value certain of its securities and other instruments at their market value. The Trust may use independent pricing services to value certain securities held by the Trust at their market value. The Trust periodically verifies valuations provided by independent pricing services.
If independent pricing services or dealer quotations are not available for a given security, such security will be valued in accordance with valuation guidelines adopted by the Board of Trustees that the Board of Trustees believes are designed to accurately reflect the fair value of securities valued in accordance with such guidelines.
The Board of Trustees has designated XA Investments LLC (“XAI” or the “Adviser”), as the “valuation designee” for the Trust pursuant to Rule 2a-5 under the Investment Company Act. The valuation designee is responsible for making fair value determinations pursuant to Valuation Policies and Procedures adopted by XAI and the Trust (the “Valuation Policy”). A committee of voting members comprised of senior personnel of XAI considers various pricing issues and establishes fair valuations of portfolio securities and other instruments held by the Trust in accordance with the Valuation Policy (the “Pricing Committee”). XAI as valuation designee is subject to monitoring and oversight by the Board of Trustees. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to receive upon the instrument’s current sale. A range of factors and analysis may be considered when determining fair value, including relevant market data, interest rates, credit considerations and/or issuer specific news. The Pricing Committee may consult with and receive input from third parties, such as the Sub-Adviser, and will utilize a variety of market data including yields or prices of investments of comparable quality, type of issue, coupon, maturity, rating, indications of value from security dealers, evaluations of anticipated cash flows or collateral, spread over U.S. Treasury obligations, and other information and analysis. In addition, the Pricing Committee may consider valuations provided by valuation firms retained to assist in the valuation of certain of the Trust’s investments. Fair valuation involves subjective judgments. While the Trust’s use of fair valuation is intended to result in calculation of net asset value that fairly reflects values of the Trust’s portfolio securities as of the time of pricing, the Trust cannot guarantee that any fair valuation will, in fact, approximate the amount the Trust would actually realize upon the sale of the securities in question. It is possible that the fair value determined for a portfolio instrument may be materially different from the value that could be realized upon the sale of that instrument.
| Semi-Annual Report | March 31, 2023 | 35 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Notes to Financial Statements |
March 31, 2023 (Unaudited) |
The Trust generally uses non-binding indicative bid prices provided by an independent pricing service or broker as the primary basis for determining the value of CLO debt and CLO equity (subordinated securities), which may be adjusted for pending distributions, as applicable, as of the valuation date. These bid prices are non-binding, and may not be determinative of an actual transaction price. In valuing the Trust’s investments in CLO debt and CLO equity (subordinated securities), in addition to non-binding indicative bid prices provided by an independent pricing service or broker, the Pricing Committee also may consider a variety of relevant factors, as set forth in the Valuation Policy, including recent trading prices for specific investments, recent purchases and sales known to the Trust in similar securities, other information known to the Trust relating to the securities, and discounted cash flows based on output from a third-party financial model, using projected future cash flows.
Information that becomes known after the Trust’s NAV has been calculated on a particular day will not be used to retroactively adjust the price of a security or the Trust’s previously determined NAV.
The Trust discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Various inputs are used in determining the value of the Trust’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
| Level 1 — | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that the Trust has the ability to access at the measurement date; |
| Level 2 — | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
| Level 3 — | Significant unobservable prices or inputs (including the Trust’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Trust’s investments as of March 31, 2023:
| Investments in Securities at Value* | Level
1 - Quoted Prices | Level
2 - Significant | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
| Corporate Bonds | $ | – | $ | 16,150,093 | $ | – | $ | 16,150,093 | ||||||||
| Secured Second Lien Loans | – | 9,066,739 | – | 9,066,739 | ||||||||||||
| Senior Secured First Lien Loans | – | 170,241,509 | – | 170,241,509 | ||||||||||||
| Collateralized Loan Obligations Debt | – | 60,913,670 | 1,505,996 | 62,419,666 | ||||||||||||
| Collateralized Loan Obligations Equity | – | 137,832,210 | 253,176 | 138,085,386 | ||||||||||||
| Common Stock | – | 208,101 | – | 208,101 | ||||||||||||
| Total | $ | – | $ | 394,412,322 | $ | 1,759,172 | $ | 396,171,494 | ||||||||
| * | For detailed descriptions, see the accompanying Schedule of Investments. |
| 36 | www.xainvestments.com |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Notes to Financial Statements |
March 31, 2023 (Unaudited) |
The changes of the fair value of investments for which the Trust has used Level 3 inputs to determine the fair value are as follows:
| CLO Debt | CLO Equity | Total | ||||||||||
| Balance as of September 30, 2022 | $ | – | $ | 58,050,471 | $ | 58,050,471 | ||||||
| Accrued Discount/Premium(1) | – | (799,705 | ) | (799,705 | ) | |||||||
| Return of Capital | – | (248,595 | ) | (248,595 | ) | |||||||
| Realized Gain/(Loss) | – | (2,019,724 | ) | (2,019,724 | ) | |||||||
| Change in Unrealized Appreciation/(Depreciation) | – | (1,491,789 | ) | (1,491,789 | ) | |||||||
| Purchases | – | – | – | |||||||||
| Sales Proceeds | – | (3,353,439 | ) | (3,353,439 | ) | |||||||
| Transfer into Level 3 | 1,505,996 | – | 1,505,996 | |||||||||
| Transfer out of Level 3 | – | (49,884,043 | ) | (49,884,043 | ) | |||||||
| Balance as of March 31, 2023 | $ | 1,505,996 | $ | 253,176 | $ | 1,759,172 | ||||||
| Net change in unrealized appreciation/(depreciation) included in the Statements of Operations attributable to Level 3 investments held at March 31, 2023 | $ | (122,016 | ) | $ | (38,052 | ) | $ | (160,068 | ) | |||
| (1) | Reduction to cost value on CLO equity investments represents the difference between distributions received, or entitled to be received, and income earned for the six months ended March 31, 2023. |
The following table summarizes the quantitative inputs and assumptions used for investments categorized in Level 3 of the fair value hierarchy as of the end of the reporting period. In addition to the techniques and inputs noted in the table below, according to the Trust’s valuation policy, the Trust may use other valuation techniques and methodologies when determining the Trust’s fair value measurements as provided for in the valuation policy and approved by the Board of Trustees. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the fair value measurements as of the end of the reporting period.
| Quantitative Information about Level 3 Value Measurements | ||||||||||||
Assets | Value
as of March 31, 2023 | Valuation Methodologies | Unobservable Input | Range/Weighted Average(2) | ||||||||
| CLO Debt | $ | 1,505,996 | Market Approach | NBIB(1) | 72.68-77.92/75.30 | |||||||
| CLO Equity | 253,176 | Market Approach | NBIB(1) | 0.19-23.38/0.88 | ||||||||
| Total Level 3 Assets | $ | 1,759,172 | ||||||||||
| (1) | The Trust generally uses non-binding indicative bid (“NBIB”) prices provided by an independent pricing service or broker on or near the valuation date as the primary basis for the fair value determination for CLO debt and CLO equity (subordinated securities), which may be adjusted for pending equity distributions as of the valuation date. These bid prices are non-binding, and may not be determinative of an actual transaction price. In valuing the Trust’s investments in CLO debt and CLO equity (subordinated securities), in addition to NBIB prices provided by an independent pricing service or broker, the Pricing Committee also may consider a variety of relevant factors as set forth in the Valuation Policy, including input from relevant third-parties, recent trading prices for specific investments, recent purchases and sales known to the Trust in similar securities, other information known to the Trust relating to the securities, and discounted cash flows based on output from a third-party financial model, using projected future cash flows. |
| (2) | Weighted averages are calculated based on the value of investments on March 31, 2023. |
Significant increases or decreases in any of the unobservable inputs in isolation may result in a significantly lower or higher fair value measurement.
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 Trust enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on industry experience, the Trust expects the risk of loss due to these warranties and indemnities to be remote.
| Semi-Annual Report | March 31, 2023 | 37 |
| XAI
Octagon Floating Rate & Alternative Income Term Trust |
Notes to Financial Statements |
March 31, 2023 (Unaudited) |
| 3. | INVESTMENT ADVISORY AND OTHER AGREEMENTS |
XAI serves as the investment adviser to the Trust and is responsible for overseeing the Trust’s overall investment strategy and its implementation. Octagon Credit Investors, LLC (“Octagon” or the “Sub-Adviser”) serves as the investment sub-adviser of the Trust and is responsible for investing the Trust’s assets. The Trust pays an advisory fee to the Adviser. The Adviser pays to the Sub-Adviser a sub-advisory fee out of the advisory fee received by the Adviser.
Pursuant to an investment advisory agreement between the Trust and the Adviser, the Trust pays the Adviser a fee, payable monthly in arrears, in an annual amount equal to 1.70% of the Trust’s average daily Managed Assets. “Managed Assets” means the total assets of the Trust, including assets attributable to the Trust’s use of leverage and preferred shares, minus the sum of its accrued liabilities (other than liabilities incurred for the purpose of creating leverage). For the six months ended March 31, 2023, the Trust incurred $3,351,453 in advisory fees.
Pursuant to an investment sub-advisory agreement among the Trust, the Adviser and the Sub-Adviser, the sub-advisory fee, payable monthly in arrears to the Sub-Adviser, is calculated as a specified percentage of the advisory fee payable by the Trust to the Adviser (before giving effect to any fees waived or expenses reimbursed by the Adviser). The specified percentage is equal to the blended percentage computed by applying the following percentages to the aggregate average daily Managed Assets of all registered investment companies in the XAI fund complex for which the Sub-Adviser (or an affiliate of the Sub-Adviser) serves as investment sub-adviser, including the Trust (“Eligible Funds”):
| Aggregate Eligible Funds | Percentage of | |
| Average Daily Managed Assets | Advisory Fee | |
| First $500 million | 60% | |
| Over $500 million | 50% |
As of March 31, 2023, the Trust was the only Eligible Fund, and the sub-advisory fee equals 60% of the advisory fee payable to the Adviser. The Sub-Adviser’s fees are paid by the Adviser. Pursuant to the investment sub-advisory agreement, from time to time the Trust may reimburse the Sub-Adviser for certain costs and expenses incurred by the Sub-Adviser in connection with the management of the Trust’s assets. For the six months ended March 31, 2023, the Trust incurred $95,281 in reimbursements made to the Sub-Adviser. These costs are included in Other Expenses in the Statement of Operations.
The Trust does not pay a performance or incentive fee to the Adviser or the Sub-Adviser.
The Trust pays all costs and expenses of its operations in addition to the advisory fee and investor support services and secondary market support services fee paid to the Adviser. For the period from September 27, 2017 to September 27, 2019, the Adviser and the Trust entered into a fee waiver agreement. The fee waiver agreement expired on September 27, 2019. Under the fee waiver agreement, the Adviser had contractually agreed to waive a portion of the advisory fee and/or reimburse the Trust for certain operating expenses so that the annual expenses of the Trust did not exceed 0.30% of the Trust’s Managed Assets (exclusive of investment advisory fees, investor support and secondary market services fees, taxes, expenses incurred directly or indirectly by the Trust as a result of an investment in a permitted investment (including, without limitation, acquired fund fees and expenses), expenses associated with the acquisition or disposition of portfolio investments (including, without limitation, brokerage commissions and other trading or transaction expenses), leverage expenses (including, without limitation, costs associated with the issuance or incurrence of leverage, commitment fees, interest expense or dividends on preferred shares), expenses incurred in connection with issuances and sales of shares of the Trust (including, without limitation, fees, commissions and offering costs), dividends on short sales, if any, securities lending costs, if any, expenses of holding and soliciting proxies for meetings of shareholders of the Trust (except to the extent relating to routine items such as the election of Trustees), expenses of a reorganization, restructuring, reconciling or merger of the Trust or the acquisition of all or substantially all of the assets of another fund, or any extraordinary expenses not incurred in the ordinary course of the Trust’s business (including, without limitation, expenses related to litigation, derivative actions, demands related to litigation, regulatory or other government investigations and proceeding)). The Adviser was eligible to recoup waived or reimbursed amounts for three years following the date of such waiver or reimbursement, provided total expenses, including such recoupment, do not exceed the lesser of the annual expense limit at the time such expenses were waived or reimbursed or the annual expense limit at the time of recoupment. As of March 31, 2023, all remaining expenses that were available for recoupment by the Adviser have expired.
The Trust has also retained the Adviser to provide investor support services and secondary market support services in connection with the ongoing operation of the Trust. Such services include providing ongoing contact with respect to the Trust with financial intermediaries, communicating with the NYSE specialist for the shares and with the closed-end fund analyst community regarding the Trust on a regular basis, and hosting and maintaining a website for the Trust. The Trust pays the Adviser an investor support services and secondary market support services fee, payable monthly in arrears, in an annual amount equal to 0.20% of the Trust’s average daily Managed Assets. For the six months ended March 31, 2023, the Trust incurred $394,289 in investor support services. A Trustee who is an “interested person”, as defined in the 1940 Act, of the Trust and certain officers of the Trust are affiliated with the Adviser and receive no compensation from the Trust for serving as officers and/or Trustee.
| 38 | www.xainvestments.com |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
SS&C ALPS Fund Services, Inc. (“ALPS”) serves as the Trust’s administrator and accounting agent and receives customary fees from the Trust for such services. Administrative and accounting fees paid by the Trust for the six months ended March 31, 2023 are disclosed in the Statement of Operations.
An employee of ALPS serves as the Trust’s chief compliance officer. ALPS provides services that assist the Trust’s chief compliance officer in monitoring and testing the policies and procedures of the Trust in conjunction with requirements under Rule 38a-1 under the 1940 Act and receives an annual base fee. ALPS is reimbursed for certain out-of-pocket expenses by the Trust. Compliance service fees paid by the Trust for the six months ended March 31, 2023 are disclosed in the Statement of Operations.
An employee of PINE Advisors LLC (“PINE”) serves as the Trust’s principal financial officer. PINE receives an annual base fee for the services provided to the Trust. PINE is reimbursed for certain out-of-pocket expenses by the Trust. Service fees paid by the Trust for the six months ended March 31, 2023 are disclosed in the Statement of Operations.
DST Systems Inc., an affiliate of ALPS, serves as transfer, dividend paying and shareholder servicing agent for the Trust. U.S. Bank N.A. serves as the Trust’s custodian. Transfer agent fees paid by the Trust for the six months ended March 31, 2023 are disclosed in the Statement of Operations.
4. DISTRIBUTIONS
The Trust intends to pay substantially all of its net investment income, if any, to holders of common shares (“Common Shareholders”) through periodic distributions. The Trust intends to distribute any net long-term capital gains to Common Shareholders at least annually. The Trust intends to declare distributions monthly. To permit the Trust to maintain more stable monthly distributions, the Trust may distribute more or less than the amount of the net income earned in a particular period. There is no assurance the Trust will continue to pay regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Trust from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital. Shareholders should not assume that the source of the distribution from the Trust is net income or profit.
The Series 2026 Term Preferred Shares and Series 2029 Convertible Preferred Shares pay a quarterly dividend at a fixed annual rate of 6.50% and 6.00%, respectively, of the Liquidation Preference, or $1.625 and $1.50, respectively, per share per year, which is referred to as the “Fixed Dividend Rate.” The Fixed Dividend Rate is subject to adjustment under certain circumstances.
For the six months ended March 31, 2023, the Trust paid the following distributions or dividends totaling $0.438 per common share, $0.8125 per Series 2026 Term Preferred Share, and $0.75 per Series 2029 Convertible Preferred Share or $15,856,239, $1,296,750, and $225,000, respectively, in the aggregate:
Common Share and Preferred Share Dividends and Distributions:
Payment Date |
Record Date | Distribution per Common Share | Dividend per Series 2026 Term Preferred Share | Dividend per Series 2029 Convertible Preferred Share | ||||||||||
| October 3, 2022 | September 16, 2022 | $ | 0.073 | – | N/A | |||||||||
| October 31/November 1, 2022 | October 17, 2022 | $ | 0.073 | $ | 0.40625 | $ | 0.375 | |||||||
| December 1, 2022 | November 15, 2022 | $ | 0.073 | – | N/A | |||||||||
| December 30, 2022 | December 15, 2022 | $ | 0.073 | – | N/A | |||||||||
| January 31, 2023 | January 17, 2023 | – | $ | 0.40625 | $ | 0.375 | ||||||||
| February 1, 2023 | January 17, 2023 | $ | 0.073 | – | N/A | |||||||||
| March 1, 2023 | February 15, 2023 | $ | 0.073 | – | N/A | |||||||||
The Trust expects that distributions paid on the common shares will consist primarily of (i) investment company taxable income, which includes ordinary income (such as interest, dividends, and certain income from hedging or derivatives transactions) and the excess, if any, of net short-term capital gain over net long-term capital loss, and (ii) net capital gain (which is the excess of net long-term capital gain over net short-term capital loss). All or a portion of a distribution may be a return of capital, which is determined on a tax basis.
| Semi-Annual Report | March 31, 2023 | 39 |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
The Trust’s net investment income and capital gain can vary significantly over time, however, the Trust seeks to maintain more stable monthly common share distributions over time. To permit the Trust to maintain more stable monthly common share distributions, the Trust may initially distribute less than the entire amount of the net investment income earned in a particular period. The undistributed net investment income may be available to supplement future common share distributions. Undistributed net investment income is included in the common shares’ NAV, and, correspondingly, distributions from net investment income will reduce the common shares’ NAV.
The Trust’s investments in CLOs may be subject to complex tax rules and the calculation of taxable income attributed to an investment in CLO equity (subordinated securities) can be dramatically different from the calculation of income for financial reporting purposes under U.S. GAAP, and, as a result, there may be significant differences between the Trust’s U.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.
All or a portion of a distribution may be a return of capital, which is in effect a partial return of the amount a shareholder invested in the Trust, up to the amount of the shareholder’s tax basis in their shares, which would reduce such tax basis. Although a return of capital may not be taxable, it will generally increase the shareholder’s potential gain, or reduce the shareholder’s potential loss, on any subsequent sale or other disposition of shares. Shareholders who periodically receive the payment of a distribution consisting of a return of capital may be under the impression that they are receiving net income or profits when they are not. Shareholders should not assume that the source of a distribution from the Trust is net income or profit.
Pursuant to the requirements of the 1940 Act, in the event the Trust makes distributions from sources other than income, such as return of capital, a notice will be provided in connection with each monthly distribution with respect to the estimated source of the distribution made. Such notices will describe the portion, if any, of the monthly dividend which, in the Trust’s good faith judgment, constitutes long-term capital gain, short-term capital gain, investment company taxable income or a return of capital. The characterization of distributions paid to shareholders reflect estimates made by the Trust. Such estimates are subject to be characterized differently for federal income tax purposes at year-end. The actual character of such dividend distributions for U.S. federal income tax purposes will only be determined finally by the Trust at the close of its fiscal year, based on the Trust’s full year performance and its actual net investment company taxable income and net capital gains for the year, which may result in a recharacterization of amounts distributed during such fiscal year from the characterization in the monthly estimates.
The Trust may, but is not required to, seek to obtain exemptive relief to permit the Trust to make periodic distributions of long-term capital gains with respect to its common shares as frequently as monthly. Such relief, if obtained, would permit the Trust to implement a “managed distribution policy” pursuant to which the Trust would distribute a fixed percentage of the net asset value (or market price if then applicable) of the common shares at a particular point in time or a fixed monthly amount, any of which may be adjusted from time to time. It is anticipated that under such a distribution policy, the minimum annual distribution rate with respect to the common shares would be independent of the Trust’s performance during any particular period but would be expected to correlate with the Trust’s performance over time.
The Trust reserves the right to change its distribution policy and the basis for establishing the rate of distributions at any time and may do so without prior notice to Common Shareholders. Future 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 distributions in the future will be equal or similar to that of past distributions or that the Board of Trustees will not decide to suspend or discontinue the payment of distributions in the future.
Common share distributions shall be paid on their 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 or the applicable terms or financial covenants of the Trust’s senior securities or to ensure that the Trust remains solvent and able to pay its debts as they become due and continue as a going concern.
Cumulative cash dividends or distributions on each Series 2026 Term Preferred Share and Series 2029 Convertible Preferred Share are payable quarterly, when, as and if declared, or under authority granted, by the Board of Trustees out of funds legally available for such payment and in preference to dividends and distributions on Common Shares. If the Trust is unable to distribute the full dividend amount due in a dividend period on the Trust’s Preferred Shares, the dividends will be distributed on a pro rata basis among the preferred shareholders. The Trust pays dividends on the Preferred Shares every January 31, April 30, July 31 and October 31.
| 40 | www.xainvestments.com |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
5. CAPITAL TRANSACTIONS
Pursuant to the Trust’s Agreement and Declaration of Trust, the Trust is authorized to issue an unlimited number of shares of beneficial interest, par value $0.01 per share.
The table below provides information of the Trust’s outstanding common shares of beneficial interest par value of $0.01 per share (“Common Shares”), the Trust’s Series 2026 Term Preferred Shares, par value of $0.01 per share and the Trust’s Series 2029 Convertible Preferred Shares, par value of $0.01 per share.
For the Six Months 2023 | For
the Year | |||||||
| Common Shares outstanding - beginning of period | 35,468,532 | 26,674,283 | ||||||
| Common Shares issued in connection with the at-the-market offering | 571,206 | 6,980,788 | ||||||
| Common Shares issued in connection with a registered direct placement | – | 1,450,000 | ||||||
| Common Shares issued in connection with conversion from Series 2026 Convertible Preferred Shares | 1,035,531 | – | ||||||
| Common Shares issued as reinvestment dividends | 154,605 | 363,461 | ||||||
| Common Shares outstanding - end of period | 37,229,874 | 35,468,532 | ||||||
| Series 2026 Term Preferred Shares | Series 2029 Convertible Preferred Shares | |||||||||||||||
| For the Six Months ended March 31, 2023 | For the Year Ended September 30, 2022 | For the Six Months ended March 31, 2023 | For the Year Ended September 30, 2022 | |||||||||||||
| Preferred Shares outstanding – beginning of period | 1,596,000 | 1,506,000 | 400,000 | – | ||||||||||||
| Preferred Shares converted | – | – | (260,000 | ) | – | |||||||||||
| Preferred Shares issued in a privately negotiated direct purchase agreement | – | – | – | 400,000 | ||||||||||||
| Preferred Shares outstanding – end of period | 1,596,000 | 1,596,000 | 140,000 | 400,000 | ||||||||||||
The Board of Trustees is authorized to classify and reclassify any unissued shares into other classes or series of shares and authorize the issuance of shares without obtaining stockholder approval.
On December 1, 2021, the Trust and Foreside Fund Services, LLC (the “Distributor”) entered into an amended and restated Distribution Agreement (the “Prior Agreement”), pursuant to which the Trust may offer and sell up to 11,367,051 Common Shares, from time to time, through the Distributor, in transactions that are deemed to be “at-the-market” as defined in Rule 415 under the Securities Act of 1933.
On February 10, 2022, the Trust entered into a new Distribution Agreement (the “New Agreement”) with the Distributor, pursuant to which the Trust may offer and sell up to 18,300,000 Common Shares, from time to time, through the Distributor, in transactions that are deemed to be “at-the-market” as defined in Rule 415 under the Securities Act of 1933. The New Agreement superseded the Prior Agreement and any amendments thereto. The minimum price on any day at which Common Shares may be sold will not be less than the then current net asset value per Common Share plus any commissions to be paid to the Distributor. The Trust’s at-the-market program, under the agreements, resulted in shares issued and proceeds generated as follows:
| For the Six Months ended March 31, 2023 | For the Year Ended September 30, 2022 | |||||||
| Common Shares Issued | 571,206 | 6,980,788 | ||||||
| Net Proceeds | $ | 11,345,539 | $ | 60,407,246 | ||||
On June 28, 2022, the Trust entered into a direct purchase agreement (the “Purchase Agreement”) between the Trust and the purchasers listed therein to sell in a privately negotiated transaction up to 1,200,000 Series 2029 Convertible Preferred Shares at a price $23.25 per share. On June 30, 2022, the Trust issued and sold to the purchasers 400,000 Series 2029 Convertible Preferred Shares for total gross proceeds (before deduction of offering expenses) of $9,300,000. The Trust retains the discretion to issue and sell an additional 800,000 shares at a price of $23.25 per share to the purchasers at one or more subsequent closings on or before June 30, 2023. The Purchase Agreement was amended on February 23, 2023 to extend the latest closing date for subsequent closings to December 31, 2023.
| Semi-Annual Report | March 31, 2023 | 41 |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
On June 28, 2022, the Trust entered into a registered direct placement agreement between the Trust and the purchasers listed therein to sell in a privately negotiated transaction 1,450,000 Common Shares at a price of $6.90 per share. On June 30, 2022, the Trust issued and sold to the purchasers 1,450,000 Common Shares for total gross proceeds (before the deduction of offering expenses) of $10,005,000.
The Trust paid $151,288 in offering costs during the period relating to the at-the-market program, the direct purchase agreement and the direct placement agreement offering costs are charged to paid-in capital upon the issuance of shares. For the six months ended March 31, 2023, the Trust deducted $1,302 of offering costs from paid-in capital. The Statement of Assets and Liabilities as of March 31, 2023 reflect $302,510 of deferred offering costs outstanding.
6.
The Trust uses leverage to seek to enhance total return and income. The Trust may use leverage through (i) the issuance of senior securities representing indebtedness, including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper (collectively, “Indebtedness”), (ii) the issuance of preferred shares and/or (iii) reverse repurchase agreements, securities lending, short sales or derivatives, such as swaps, futures or forward contracts, that have the effect of leverage (“portfolio leverage”). The Trust currently intends to use leverage through Indebtedness and may use Indebtedness to the maximum extent permitted under the 1940 Act. Under the 1940 Act, the Trust may utilize Indebtedness up to 33 1/3% of its Managed Assets (specifically, the Trust may not incur Indebtedness if, immediately after incurring such Indebtedness, the Trust would have asset coverage (as defined in the 1940 Act) of less than 300% and the preferred asset coverage shall not be less than 200%).
Credit Facility
The Trust entered into a Credit Agreement dated October 6, 2017 as amended from time to time (the “Credit Agreement”) with Société Générale (the “Lender”) that establishes a revolving credit facility (the “Facility”). Currently, the Trust may borrow up to $175,000,000. The Facility’s maturity date is March 21, 2024, subject to certain reciprocal termination rights. The Trust pays interest on amounts borrowed based on daily compounded secured overnight financing rate (“SOFR”) plus 1.45%. Interest charged to the Trust during the year is presented on the Statement of Operations under Interest expense and amortization of deferred leverage costs. The Trust’s borrowings are secured by eligible securities held in its portfolio of investments. The Credit Agreement includes usual and customary covenants. Among other things, these covenants place limitations or restrictions on the Trust’s ability to (i) incur other indebtedness, (ii) change certain investment policies, or (iii) pledge or create liens upon the assets of the Trust. In addition, the Trust is required to deliver financial information to the Lender, maintain an asset coverage ratios with respect to its Indebtedness and Preferred Shares as required by the 1940 Act, meet certain other coverage tests and financial covenants and maintain its registration as a closed-end management investment company. If the Trust fails to meet such coverage tests and financial covenants, its ability to declare and pay distributions on common and preferred shares may be restricted. No violations of the credit agreement occurred during the six months ended March 31, 2023.
For the six months ended March 31, 2023, the average amount borrowed under the Credit Agreement and the average interest rate for the amount borrowed was $114,913,736 and 5.45%, respectively. As of March 31, 2023, the amount of such outstanding borrowings was $122,350,000. The interest rate applicable to the borrowings on March 31, 2023 was 6.25%. All securities held as of March 31, 2023 are pledged as collateral for the leverage facility. The maximum amount borrowed during the period ended was $122,350,000.
Series 2026 Term Preferred Shares
On March 29, 2021, the Trust issued 1,040,000 shares of Series 2026 Term Preferred Shares with a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). On April 3, 2021, the underwriters partially exercised an overallotment option to purchase 156,000 Series 2026 Term Preferred Shares. On September 9, 2021, the Trust issued an additional 400,000 shares of the Series 2026 Term Preferred Shares. The Series 2026 Term Preferred Shares are listed under the trading symbol XFLTPRA on the NYSE. The Series 2026 Term Preferred Shares are entitled to a dividend at a rate of 6.50% per year, paid quarterly, based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series 2026 Term Preferred Shares are generally not redeemable at the Trust’s option prior to the close of business on March 31, 2023, and are subject to mandatory redemption by the Trust in certain circumstances. On or after September 30, 2026, the Trust may redeem in whole, or from time to time in part, outstanding Series 2026 Term Preferred Shares at a redemption price per share equal to the per share liquidation preference of $25.00 per share, plus accumulated and unpaid dividends, if any, through the date of redemption. Issuance costs related to the Series 2026 Term Preferred Shares of $1,285,375 are deferred and amortized over the period the Series 2026 Term Preferred Shares are outstanding.
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| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
Series 2029 Convertible Preferred Shares
On June 30, 2022, the Trust issued 400,000 shares of Series 2029 Convertible Preferred Shares with a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series 2029 Convertible Preferred Shares are entitled to a dividend at a rate of 6.00% per year, paid quarterly, based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Trust retains the discretion to issue and sell an additional 800,000 shares at a price of $23.25 per share to the purchasers at one or more subsequent closings on or before June 30, 2023. The Series 2029 Convertible Preferred Shares are generally not redeemable at the Trust’s option prior to the close of business on June 30, 2024, and are subject to mandatory redemption by the Trust in certain circumstances. On or after June 30, 2029, the Trust may redeem in whole, or from time to time in part, outstanding Series 2029 Convertible Preferred Shares at a redemption price per share equal to the per share liquidation preference of $25.00 per share, plus accumulated and unpaid dividends, if any, through the date of redemption. Issuance costs related to the Series 2029 Convertible Preferred Shares of $648,375 are deferred and amortized over the period the Series 2029 Convertible Preferred Shares are outstanding.
Shareholders of the Series 2029 Convertible Preferred Shares may opt to convert the shares any time on or after the date six months after the share issuance into Common Shares of the Trust equal to the liquidation preference of the Series 2029 Convertible Preferred Share plus an amount equal to all accumulated but unpaid dividends and distributions on the share, divided by the Conversion Price. The “Conversion Price” is the greater of (i) the market price per Common Share of the Trust, represented by the five-day volume-weighted average price (“VWAP”) per Common Share ending on the trading day immediately preceding the date of conversion exercise, or (ii) the Trust’s most recently NAV per Common Share immediately prior to the date of exercise. If the Trust fails to fulfill its obligations to deliver Common Shares upon conversion, the quarterly dividend rate payable on the unfulfilled Series 2029 Convertible Preferred Shares will increase to a fixed annual rate of 8.00% of the liquidation preference until the date the Trust fulfills its conversion obligation.
7. PORTFOLIO INFORMATION
Purchase and Sales of Securities: For the six months ended March 31, 2023, the cost of purchases and proceeds from sales of securities, excluding short-term obligations were as follows:
| Cost of Investments Purchased | $ | 79,322,667 | ||
| Proceeds from Investments Sold | $ | 67,223,713 |
8. UNFUNDED COMMITMENTS
The Trust may enter into certain credit agreements, all or a portion of which may be unfunded. The Trust is obligated to fund these loan commitments at the borrowers’ discretion. Unfunded loan commitments and funded portions of credit agreements are marked-to-market daily. Net unrealized appreciation/depreciation on unfunded commitments is reflected in other assets and payable for investment securities purchased in the Statement of Assets and Liabilities and unrealized appreciation (depreciation) on investments in the Statement of Operations. At March 31, 2023, the Trust had unfunded commitments with the following securities:
| ABG Intermediate Holdings 2 LLC, Delayed TL | $ | 519,860 | ||
| Athenahealth Group, Inc. (VVC Holding Corp.) | 417,131 | |||
| CP Iris Holdco I, Inc. and CP Iris II, Inc. (IPS Corporation) | 41,237 | |||
| $ | 978,228 |
At the time the Trust entered into each unfunded commitment, the Trust reasonably believed it would have sufficient cash and cash equivalents to meet its obligations with respect to such unfunded commitment.
| Semi-Annual Report | March 31, 2023 | 43 |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
9. TAXES
Classification of Distributions: Because U.S. federal income tax regulations differ from U.S. GAAP, net investment income and net realized gains may differ for financial statement and tax purposes. The “tax return of capital” referenced in the Trust’s Statement of Changes in Net Assets and Financial Highlights is based on the characterization under tax regulations. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. For the Trust, these differences are due to temporary book/tax differences arising primarily from the income recognition deferral for distributions received from certain CLO equity positions that qualify as passive foreign investment companies. Also, due to the timing of dividend distributions, the fiscal year in which the amounts are distributed for tax purposes may differ from the fiscal year in which the income or realized gain was recorded by the Trust.
The tax character of distributions paid by the Trust during the year ended September 30, 2022, was as follows:
| 2022 | ||||
| Distributions Paid From: | ||||
| Ordinary income-Common Shareholders | $ | 25,912,651 | ||
| Ordinary income- Preferred Shareholders | 2,645,168 | |||
| Return of capital | 1,437,750 | |||
| Total | $ | 29,995,569 | ||
Tax Basis of Investments: Net unrealized appreciation/(depreciation) of investments based on federal tax cost as of March 31, 2023, was as follows:
| Cost of investments for income tax purposes | $ | 457,591,048 | ||
| Gross appreciation (excess of value over tax cost) | $ | 1,198,836 | ||
| Gross depreciation (excess of tax cost over value) | (62,618,390 | ) | ||
| Net unrealized depreciation | $ | (61,419,554 | ) |
Federal Income Tax Status: For federal income tax purposes, the Trust currently qualifies, and intends to continue to qualify, as a regulated investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially all of its investment company taxable net income and realized gain, not offset by capital loss carryforwards, if any, to its shareholders. No provision for federal income taxes has been made.
As of and during the six months ended March 31, 2023, the Trust did not have a liability for any unrecognized tax benefits. The Trust files U.S. federal, state, and local tax returns as required. The Trust’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return.
As a registered investment company, the Trust is subject to a 4% excise tax that is imposed if the Trust does not distribute 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. 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. Alternatively, the Trust may have to dispose of portfolio securities to make a distribution at a time when independent investment judgment might not dictate such disposition.
Depending on the level of taxable income earned in a tax year, the Trust may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Trust determines that its estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, the Trust accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.
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| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Notes to Financial Statements |
March 31, 2023 (Unaudited)
10. PREFERRED STOCK AND SENIOR SECURITIES
The following table sets forth information about the Trust’s outstanding senior securities as of the end of each fiscal year since its inception.
| Fiscal Period Ended | Title of Security | Total Principal Amount Outstanding | Aggregate Liquidation Preference | Liquidation Preference Per Share | Asset Coverage | |||||||||||||
| March 31, 2023 | Borrowings | $ | $ | – | $ | – | $ | (1) | ||||||||||
| – | Series 2026 Term Preferred Shares | $ | $ | 39,900,000 | $ | $ | (2) | |||||||||||
| – | Series 2029 Convertible Preferred Shares | $ | 3,500,000 | $ | $ | $ | (2) | |||||||||||
| September 30, 2022 | Borrowings | $ | $ | – | $ | $ | ||||||||||||
| – | Series 2026 Term Preferred Shares | $ | $ | 39,900,000 | $ | $ | ||||||||||||
| – | Series 2029 Convertible Preferred Shares | $ | $ | 10,000,000 | $ | $ | ||||||||||||
| September 30, 2021 | Borrowings | $ | $ | – | $ | $ | ||||||||||||
| – | Series 2026 Term Preferred Shares | $ | $ | 39,900,000 | $ | $ | ||||||||||||
| September 30, 2020 | Borrowings | $ | $ | – | $ | $ | ||||||||||||
| September 30, 2019 | Borrowings | $ | $ | – | $ | $ | ||||||||||||
| September 30, 2018 | Borrowings | $ | $ | – | $ | $ | ||||||||||||
| (1) |
| (2) |
11. SUBSEQUENT EVENTS
On March 1, 2023, the Trust declared a distribution of $0.073 per Common Share, which was paid on April 3, 2023 to Common Shareholders of record on March 15, 2023.
On April 3, 2023, the Trust declared a distribution of $0.073 per Common Share, which was paid on May 1, 2023 to Common Shareholders of record on April 17, 2023. The Trust declared a quarterly dividend of $0.40625 per Series 2026 Term Preferred Share and $0.375 per Series 2029 Convertible Preferred Share, which were paid on May 1, 2023 to preferred shareholders of record on April 17, 2023.
On May 1, 2023, the Trust declared a distribution of $0.085 per Common Share, payable on June 1, 2023 to Common Shareholders of record on May 16, 2023.
On May 2, 2023, shareholders of 140,000 shares of the Series 2029 Convertible Preferred Shares provided conversion notices to the Trust. The Trust converted 140,000 shares of the Series 2029 Convertible Preferred Shares to 543,547 Common Shares at a conversion price equal to the Trust’s net asset value of $6.44 per Common Share.
On May 11, 2023, pursuant to the Purchase Agreement for the Trust’s Series 2029 Convertible Preferred Shares, the Trust issued and sold to the purchasers 400,000 Series 2029 Convertible Preferred Shares for total gross proceeds (before deduction of expenses) of $9,300,000.
| Semi-Annual Report | March 31, 2023 | 45 |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Dividend Reinvestment Plan |
March 31, 2023 (Unaudited)
Under the Trust’s Dividend Reinvestment Plan (the “Plan”), a Common Shareholder whose Common Shares are registered in his or her own name will have all distributions reinvested automatically by DST Systems, Inc., which is agent under the Plan (the “Plan Agent”), unless the Common Shareholder elects to receive cash.
Distributions with respect to Common Shares registered in the name of a broker-dealer or other nominee (that is, in “street name”) will be reinvested in additional Common Shares under the Plan, unless the broker or nominee does not participate in the Plan or the Common Shareholder elects to receive distributions in cash. Investors who own Common Shares registered in street name should consult their broker-dealers for details regarding reinvestment. All distributions to investors who do not participate in the Plan will be paid by check mailed directly to the record holder by DST Systems, Inc., as dividend disbursing agent. A participant in the Plan who wishes to opt out of the Plan and elect to receive distributions in cash should contact DST Systems, Inc. in writing at the address specified below or by calling the telephone number specified below.
Under the Plan, whenever the market price of the Common Shares is equal to or exceeds NAV at the time Common Shares are valued for purposes of determining the number of Common Shares equivalent to the cash dividend or capital gains distribution, participants in the Plan are issued new Common Shares from the Trust, valued at the greater of (i) the NAV as most recently determined or (ii) 95% of the then-current market price of the Common Shares. The valuation date is the dividend or distribution payment date or, if that date is not a NYSE trading day, the next preceding trading day. If the NAV of the Common Shares at the time of valuation exceeds the market price of the Common Shares, the Plan Agent will buy the Common Shares for the Plan in the open market, on the NYSE or elsewhere, for the participants’ accounts, except that the Plan Agent will endeavor to terminate purchases in the open market and cause the Trust to issue Common Shares at the greater of NAV or 95% of market value if, following the commencement of such purchases, the market value of the Common Shares exceeds net NAV. If the Trust should declare a distribution or capital gains distribution payable only in cash, the Plan Agent will buy the Common Shares for the Plan in the open market, on the NYSE or elsewhere, for the participants’ accounts. There is no charge from the Trust for reinvestment of dividends or distributions in Common Shares pursuant to the Plan and no brokerage charges will be incurred with respect to Common Shares issued directly by the Trust pursuant to the Plan; however, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open-market purchases.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in the account, including information needed by shareholders for personal and tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent in non-certificated form in the name of the participant.
In the case of shareholders such as banks, brokers or nominees, which hold Common Shares for others who are the beneficial owners, and participate in the Plan, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the Common Shareholder as representing the total amount registered in the shareholder’s name and held for the account of beneficial owners who participate in the Plan.
Participants that request a sale of shares through the Plan Agent will incur brokerage charges in connection with such sales.
The automatic reinvestment of dividends and other distributions will not relieve participants of any income tax that may be payable or required to be withheld on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate its Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to written notice of the change sent to the members of such Plan at least 90 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by the Plan Agent on at least 90 days’ prior written notice to the participants in such Plan. All correspondence concerning the Plan should be directed to the Plan Agent, DST Systems, Inc., 430 W. 7th Street, Kansas City, Missouri 64105-1594.
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| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Additional Information |
March 31, 2023 (Unaudited)
PROXY VOTING
You may obtain (i) Information on how the Trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 and (ii) a description of the policies and procedures that the Trust used to determine how to vote proxies relating to portfolio securities, without charge, upon request, by calling (888) 903-3358. This information is also available on the SEC’s website at www.sec.gov.
NOTICE TO SHAREHOLDERS REGARDING PURCHASES OF COMMON SHARES
Notice is hereby given in accordance with Section 23(c) of the 1940 Act, that the Trust from time to time may purchase its Common Shares in the open market or in private transactions.
TRUST CERTIFICATIONS
The Trust’s Chief Executive Officer (“CEO”) has submitted to the NYSE the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. The Trust has filed with the SEC the certification of its CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
DELAWARE STATUTORY TRUST ACT – CONTROL SHARE ACQUISITIONS
Because the Trust is organized as a Delaware statutory trust, it is subject to the control share acquisition statute (the “Control Share Statute”) contained in Subchapter III of the Delaware Statutory Trust Act (the “DSTA”), which became automatically applicable to listed closed-end funds, such as the Trust, upon its effective date of August 1, 2022 (the “Effective Date”).
The Control Share Statute provides for a series of voting power thresholds above which shares are considered control shares. The first such threshold is 10% or more, but less than 15%, of all voting power. Voting power is defined by the Control Share Statute as the power to directly or indirectly exercise or direct the exercise of the voting power of Trust shares in the election of trustees. Whether a voting power threshold is met is determined by aggregating the holdings of the acquirer as well as those of its “associates,” as defined by the Control Share Statute.
Once a threshold is reached, an acquirer has no voting rights under the DSTA or the governing documents of the Trust with respect to shares acquired in excess of that threshold (i.e., the “control shares”) unless approved by shareholders or exempted by the Board of Trustees. Approval by shareholders requires the affirmative vote of two-thirds of all votes entitled to be cast on the matter, excluding shares held by the acquirer and its associates as well as shares held by certain insiders of the Trust. The Control Share Statute provides procedures for an acquirer to request a shareholder meeting for the purpose of considering whether voting rights shall be accorded to control shares. Further approval by the Trust’s shareholders would be required with respect to additional acquisitions of control shares above the next applicable threshold level.
The Control Share Statute effectively allows non-interested shareholders to evaluate the intentions and plans of an acquiring person above each threshold level.
Alternatively, the Board of Trustees is permitted, but not obligated, to exempt specific acquisitions or classes of acquisitions of control shares, either in advance or retroactively. As of the date hereof, the Board of Trustees of the Fund has not exempted, and has no present intention to exempt, any acquisition of class of acquisitions.
The Control Share Statute does not retroactively apply to acquisitions of shares that occurred prior to the Effective Date. However, such shares will be aggregated with any shares acquired after the Effective Date for purposes of determining whether a voting power threshold is exceeded, resulting in the newly acquired shares constituting control shares.
The Control Share Statute requires shareholders to disclose to the Trust any control share acquisition within 10 days of such acquisition and, upon request, to provide any information that the Board of Trustees reasonably believes is necessary or desirable to determine whether a control share acquisition has occurred.
The foregoing is only a summary of certain aspects of the Control Share Statute. Shareholders should consult their own legal counsel to determine the application of the Control Share Statute with respect to their shares of the Trust and any subsequent acquisitions of shares.
| Semi-Annual Report | March 31, 2023 | 47 |
| XAI Octagon Floating Rate & | |
| Alternative Income Term Trust | Additional Information |
March 31, 2023 (Unaudited)
QUARTERLY SCHEDULE OF PORTFOLIO INVESTMENTS INFORMATION
The Trust is required to file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. You may obtain this information on the SEC’s website at http://www.sec.gov.
AVAILABILITY OF TRUST UPDATES
The Trust regularly updates performance and certain other data and publishes press releases and other material information as necessary from time to time on its website at www.xainvestments.com/XFLT. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trust. References herein to the Trust’s website are intended to allow investors public access to information regarding the Trust and do not, and are not intended to, incorporate the Trust’s website in this report.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of its shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Trust collects, how the Trust protects that information and why, in certain cases, the Trust may share information with select other parties.
Generally, the Trust does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Trust. The Trust does not disclose any non-public personal information about its shareholders or former shareholders to anyone except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third-party administrator).
The Trust restricts access to non-public personal information about its shareholders to employees of the Adviser and its delegates and affiliates with a legitimate business need for the information. The Trust maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders.
TRANFER AGENT, CUSTODIAN AND ADMINISTRATOR
DST Systems, Inc., 430 W. 7th Street, Kansas City, Missouri 64105, serves as the Trust’s dividend disbursing agent, agent under the Trust’s Plan, transfer agent and registrar with respect to the Trust’s Common Shares.
U.S. Bank N.A., 1555 N. River Center Drive, Milwaukee, Wisconsin 53212, serves as the Trust’s custodian. Under the custody agreement, the custodian is required to hold the Trust’s assets in compliance with the 1940 Act. For its services, the custodian receives a monthly fee based upon, among other things, the average value of the total assets of the Trust, plus certain charges for securities transactions.
SS&C ALPS Fund Services, Inc. (“ALPS”) serves as the administrator of the Trust. Pursuant to an administration, bookkeeping and pricing services agreement, the administrator provides certain administrative services to the Trust. The Trust pays to ALPS a monthly fee equal to the greater of an annual minimum fee or a fee equal to a percentage of the Trust’s net assets, which percentage is subject to breakpoints at increasing levels of net assets, and reimburses ALPS for certain out-of-pocket expenses. ALPS is located at 1290 Broadway, Suite 1000, Denver, CO 80203.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP, 155 North Wacker Drive, Chicago, Illinois 60606, serves as the Trust’s legal counsel.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen & Company Ltd., 1350 Euclid Ave., Suite 800, Cleveland, OH 44115, is the Trust’s independent registered public accounting firm. Cohen & Company is expected to render an opinion annually on the financial statements and financial highlights of the Trust.
UNRESOLVED SEC STAFF COMMENTS
None.
| 48 | www.xainvestments.com |
(b) Not applicable.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | The Schedule of Investments is included as part of the Semi-Annual Report to Shareholders filed under Item 1(a) of this report. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
| (a) | Not applicable. |
| (b) | Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
None.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Board of Directors of the Registrant.
Item 11. Controls and Procedures.
| (a) | The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on an evaluation of the Registrant’s controls and procedures as of a date within 90 days of the filing date of this document. |
| (b) | There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | Not applicable to semi-annual report. |
| (a)(2) | The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as exhibit Ex-99.Cert. |
| (a)(3) | None. |
| (a)(4) | None. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
XAI OCTAGON FLOATING RATE & ALTERNATIVE INCOME TERM TRUST
| By: | (Signature and Title) | /s/ Theodore J. Brombach |
| Theodore J. Brombach | ||
| Date: | May 24, 2023 | President and Chief Executive Officer |
| (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | (Signature and Title) | /s/ Theodore J. Brombach |
| Theodore J. Brombach | ||
| Date: | May 24, 2023 | President and Chief Executive Officer |
| (Principal Executive Officer) | ||
| By: | (Signature and Title) | /s/ Derek J. Mullins |
| Derek J. Mullins | ||
| Date: | May 24, 2023 | Treasurer and Chief Financial Officer |
| (Principal Financial Officer) |