AEFS.L Regulatory News (AEFS)

Alcentra European Floating Rate Income Fund Limited

Market Commentary

April continued the strong market tone, with the Credit Suisse Western European Leveraged Loan Index ("CS WELLI") returning +1.35% (hedged to Euro), after the +2.06% seen in March, which was the strongest monthly performance in nearly five years1. Year to date performance is now at +2.14%, following this recovery from the weaker market conditions we saw in the first two months.

New issue loan volumes increased to €6.4 billion2 during April, more than double March's level. A more significant proportion of issuance was from refinancings than seen earlier in the year, with borrowers such as Numericable and Altice announcing new facilities. With issuers such as Parques Reunidos and Avago also making repayments the increased supply was comfortably absorbed without changing the supply-demand dynamic in the market.

The CLO market also continued to provide demand for loan assets, with improved confidence leading to demand for new CLO paper, with four new transactions pricing for a total of €1.79 billion. That takes the year to date volume to €4.44 billon, slightly ahead of the same period last year3.

Looking forward there appears to be a reasonable number of loan transactions in the primary pipeline, although some of the large potential transactions that had been rumoured are not now expected to be going the Private Equity route, with Ardagh acquiring the Ball/Rexam disposal and Philips announcing the IPO of its lighting division. We expect new primary issuance to continue to provide attractive investment opportunities, with clearing yields of new primary at the highest level in four years2, although it will remain important we see adequate supply to prevent downward pressure on new issue spreads.

Portfolio Update

Within the Portfolio, the best performing assets were the loan positions that had been under pressure over the early part of the year, in line with our thesis that the market had oversold these names. The strongest two performers were food and Health Care businesses, both of which were up more than 10%, with the remainder of the top ten all up more than 2% as they benefitted from strong market conditions.

The weakest performers were all high yield bonds and floating rate notes. Four of the six weakest performers were UK companies with the market showing some signs of nervousness as we head towards the referendum on EU membership. The weakest performer is a UK educational publishing business, which has been under pressure since reporting weaker than expected results and declined 2.8% during the month. Fixed rate bonds continue to represent less than 10% of the overall Portfolio.

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 10 Gresham Street, London EC2V 7JD

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

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