Egan-Jones Recommends Shareholders Vote AGAINST Proposed Sub-Adviser Change at XAI Floating Rate & Alternative Income Trust

NEW YORK, July 28, 2026 /PRNewswire/ -- Egan-Jones released an analysis recommending that shareholders of XAI Floating Rate & Alternative Income Trust (NYSE: XFLT) vote AGAINST the proposal to replace Octagon Credit Investors with Rockford Tower Asset Management, a King Street Capital Management subsidiary, at the Fund's July 30, 2026 Special Meeting. Egan-Jones issued an AGAINST recommendation under each of its proxy voting policies, concluding that the proposed change is not in shareholders' best interests.

The analysis found insufficient evidence that the sub-adviser had underperformed against an appropriate benchmark. The Board cited underperformance relative to the Morningstar LSTA US Leveraged Loan 100 Index as its primary rationale. Egan-Jones concluded this benchmark does not reflect XFLT's strategy because of its allocations to loans, CLO debt, CLO equity, and leverage. Using a composite benchmark matched to the Fund's disclosed allocation, Egan-Jones found a materially different performance picture.

The analysis identifies governance concerns. While the Fund's management fee would remain unchanged, the adviser's share of that fee would increase under the proposed agreement. The report also highlights board relationships with the adviser, noting that while these facts do not establish improper motives, they warrant additional shareholder scrutiny.

The report also questioned the Board's rationale for selecting the proposed sub-adviser. References to an expanded platform and access to European CLO markets don't justify replacing the current sub-adviser. Egan-Jones further notes that management could not clearly explain how many alternative candidates were meaningfully evaluated during the search process.

Egan-Jones is aware of the Board's July 27, 2026 announcement of a tender offer contingent on approval of the sub-advisory agreement, and its agreement with Bulldog Investors, LLP to vote FOR the proposal under a two-year standstill. This does not change Egan-Jones' recommendation. Tender offer decisions rest with the Board and Adviser, not the sub-adviser, and are not evidence bearing on the choice of sub-adviser. Egan-Jones notes the Board has made this shareholder liquidity opportunity contingent on the sub-adviser vote, a linkage shareholders may wish to weigh.

Based on the review, Egan-Jones concluded shareholders have not been presented with sufficient evidence that this change would improve long-term shareholder value and recommends a vote AGAINST the proposal.

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SOURCE Egan-Jones Ratings Co.