AEFS.L Regulatory News (AEFS)

Alcentra European Floating Rate Income Fund Limited

Market Commentary

The European loan market was steady again in October with the Credit Suisse Western European Leveraged Loan Index ("CS WELLI") (hedged to EUR) up +0.33%, bringing year-to-date performance to +3.22%[1].

Many of the themes the market has seen through-out the past year were prevalent in October, with good demand for loans and no new fundamental concerns affecting the loan market. The market default rate fell again to 1.41%, which represents a 20-month low[2].

On the demand side, there was continued activity from unlevered loan funds and also CLOs. Alcentra priced a new CLO, Jubilee XIX, with the AAAs paying 80bps, a new post-crisis low[3]. Anecdotally, Alcentra also heard of more buying of loans from traditional High Yield accounts, which would seem to be a function of the depressed yields available there, with the Bank of America Merrill Lynch European High Yield Index yielding just over 2% now[4].

Supply of loans was also decent during the period with €12.5 billion of new issue[5]. However, the biggest new debt issuer was Wind Tre, the Italian mobile market leader, which printed €7.3 billion of new bonds[6]. Wind Tre had traditionally printed loans as well as bonds, but this time issued floating rate notes and fixed rate bonds to avoid complicated tax issues for non-Italian loan lenders.

One more point to mention on CLOs was the European Union approval of the final version of the new securitisation regulations. A key feature is that this version keeps risk retention capital requirements for managers at 5%[7], which is something of a relief for the market after previous proposals had hinted at an increase to as high as 20%[8], which would have significantly impacted CLO issuance and also loan market liquidity.

Portfolio Update

The Fund continued to benefit from some strong performances from holdings that had been bid lower earlier in the year. Concordia (+8.5%) saw more buyers as lenders believed that proposals to remove the junior debt burden through a restructuring were gaining momentum. Vivarte (+6.8%) also continued its rally after better results. The worst performer was Deoleo (-8.8%), the CVC owned food business which announced some weaker results.

ENDS.

For further information please contact:

Alcentra Limited

Simon Perry +44 20 7367 5272

Factsheet

An accompanying factsheet which includes the information above as well as wider commentary on the investments made by the Fund can be found on the Fund's website www.aefrif.com.

Background Information

Alcentra European Floating Rate Income Fund Limited, a Guernsey Authorised Closed-Ended Collective Investment Scheme, regulated by the Guernsey Financial Services Commission and listed on the Main Market of the London Stock Exchange invests predominantly in senior secured loans and senior secured bonds issued by European corporates and targets returns (net of fees and expenses) of 7% to 10% per annum. The Fund targets a dividend yield of 5.5 pence per £1.00 issue price of the initial offering of shares in the Fund for the first full year of investment, paid quarterly.

Important Notices

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This report is aimed at existing investors in the fund and has not been approved by any competent regulatory authority.

The information contained in this document is given as at the date of its publication (unless otherwise marked) and is based on past performance. Past performance is not a guide to future performance and the value of investments and investment value can go down as well as up. The future performance of the Fund will depend on numerous factors which are subject to uncertainty. Including changes in market conditions and interest rates and exchange rates and in response to other economic, political or financial developments, investment return and principal value of your investment will fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past or current yields are not indicative of future yields.

This document does not contain any representations, does not constitute or form part of any solicitation of any offer to sell or invitation to purchase any securities of the Fund, nor shall it or any part of it or the fact of its distribution form the basis of or be relied upon in connection with any contract therefor, and does not constitute a recommendation regarding the securities of the Fund. Nothing in this document should be construed as a profit or dividend forecast.

This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, without limitation, statements typically containing words such as "believes", "considers", "intends", "expects", "anticipates", "targets", "estimates", "will", "may", or "should" and words of similar import. The forward-looking statements are based on the beliefs, assumptions and expectations of future performance and market development of Alcentra Limited ("Alcentra"), taking into account information currently available and made as at the date of this document. These can change as a result of many possible events or factors, not all of which are known or within Alcentra's control. If a change occurs, the Fund's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance. Alcentra qualifies any and all of the forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.

An investment in the Fund is suitable only for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear losses (which may equal the whole amount invested) that may result from such an investment. An investment in the Fund should constitute part of a diversified investment portfolio. Accordingly, typical investors in the Fund are expected to be sophisticated and/or professional investors who understand the risks involved in investing in the Fund.

Alcentra gives no undertaking to provide recipients of this document with access to any additional information, or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent including in relation to any forward-looking statements. The distribution of this document shall not be deemed to be any form of commitment on the part of Alcentra to proceed with any transaction.

This document is issued by Alcentra Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and whose registered address is at 160 Queen Victoria Street, London, United Kingdom, EC4V 4LA.

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