EX-99.(Z)(I) 20 ea0278374-01_ex99zi.htm EXHIBIT (Z)(I)

Exhibit (z)(i)

 

The information in this Prospectus Supplement is not complete and may be changed. A Registration Statement relating to these securities has been filed with and declared effective by the Securities and Exchange Commission. This Prospectus Supplement and the accompanying Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated

 

Filed Pursuant to Rule 424(b)(2)

Registration Statement No. 333-______

 

FORM OF PRELIMINARY PROSPECTUS SUPPLEMENT TO BE USED IN CONNECTION WITH OFFERINGS OF COMMON SHARES1

(to Prospectus dated                 , 2026)

 

                        Shares

 

XAI Madison Equity Premium Income Fund

 

Common Shares

$         per Share

 

The Fund. XAI Madison Equity Premium Income Fund (the “Fund”) is a diversified, closed-end management investment company.

 

Investment Objective. The Fund’s primary investment objective is to provide a high level of current income and current gains, with a secondary objective of long-term capital appreciation. The Fund’s investment objectives are considered fundamental and may not be changed without shareholder approval.

 

Investment Strategy. The Fund seeks to achieve its investment objectives by investing primarily in large and mid-capitalization common stocks that are, in the view of Madison Asset Management, LLC (“Madison” or the “Sub-Adviser”) selling at a reasonable price in relation to their long-term earnings growth rates. Under normal market conditions, the Fund will seek to generate current earnings from option premiums by writing (selling) covered call options on a substantial portion of its portfolio securities.

 

Portfolio Contents. Under normal market conditions, the Fund invests at least 80% of its total assets in common stocks, with at least 65% of its total assets in common stocks of large capitalization issuers. The Fund may invest the remainder of its total assets in companies that meet the Fund’s growth and value criteria but whose market capitalization is considered as middle sized or “mid-cap.”

 

The Fund pursues its primary objective by employing an option strategy of writing (selling) a substantial amount (i.e., 80%) of covered call options on common stocks.

 

NYSE Listing. The Fund’s currently outstanding common shares of beneficial interest, par value $0.01 per share (the “Common Shares”) Common Shares are, and the Common Shares offered by this Prospectus will be, subject to notice of issuance, listed on the New York Stock Exchange (the “NYSE”) under the symbol “MCN.” As of             , the last reported sale price for the Fund’s Common Shares on the NYSE was $             per Common Share, and the net asset value of the Fund’s Common Shares was $               per Common Share, representing a [discount/premium] to net asset value of             %.

 

Investing in the Fund’s Common Shares involves certain risks. See “Risks” on page [   ] of the accompanying Prospectus and “                        ” on page              of this Prospectus Supplement.

 

 

1In addition to the sections outlined in this form of prospectus supplement, each prospectus supplement actually used in connection with an offering conducted pursuant to the registration statement to which this form of prospectus supplement is attached will be updated to include such other information as may then be required to be disclosed therein pursuant to applicable law or regulation as in effect as of the date of each such prospectus supplement, including, without limitation, information particular to the terms of each security offered thereby and any related risk factors or tax considerations pertaining thereto. This form of prospectus supplement is intended only to provide a rough approximation of the nature and type of disclosure that may appear in any actual prospectus supplement used for the purposes of offering securities pursuant to the registration statement to which this form of prospectus supplement is attached, and is not intended to and does not contain all of the information that would appear in any such actual prospectus supplement, and should not be used or relied upon in connection with any offer or sale of securities.

 

i

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus Supplement or the accompanying Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

  Per Share Total(1)
Public offering price $ $
Underwriting discount $ $
Proceeds, before expenses, to the Fund(2) $ $

 

(1)[The Fund has granted the underwriters an option to purchase up to an additional                  Common Shares at the public offering price, less the sales load, within                  days of the date of this prospectus solely to cover overallotments, if any. If such option is exercised in full, the public offering price, sales load, estimated offering expenses and proceeds, before expenses, to the Fund will be $                  , $                  and $                  , respectively. See “Underwriting.”]

 

(2)[Offering expenses payable by the Fund will be deducted from the Proceeds, before expenses, to the Fund. Total offering expenses (other than sales load) are estimated to be $                  , which will be paid by the Fund.]

 

The underwriters expect to deliver the Common Shares to purchasers on or about                  .

 

 

 

This Prospectus Supplement is dated                  .

 

ii

 

 

You should read this Prospectus Supplement and the accompanying Prospectus, which contains important information about the Fund that you should know before deciding whether to invest, and retain it for future reference. A Statement of Additional Information, dated            , 2026, containing additional information about the Fund, has been filed with the SEC and is incorporated by reference in its entirety into the accompanying Prospectus. You may request free copies of the Statement of Additional Information, annual and semi-annual reports to shareholders and other information about the Fund, and make shareholder inquiries, by calling (888) 903-3358 or by writing to XA Investments at 321 North Clark Street, Suite 2430, Chicago, Illinois 60654, or you may obtain a copy (and other information regarding the Fund) from the SEC’s website (www.sec.gov). Free copies of the Fund’s Prospectus, Statement of Additional Information, reports and any incorporated information will also be available from the Fund’s website at www.xainvestments.com.

 

The Fund’s Securities do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

 

[As permitted by regulations adopted by the SEC, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Fund’s website (www.xainvestments.com/MCN), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

You may elect to receive all future reports in paper free of charge. If you own these shares through a financial intermediary, such as a broker-dealer or bank, you may contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies of your shareholder reports by calling (888) 903-3358. Your election to receive reports in paper will apply to all funds held with the fund complex if you invest directly with the Fund or to all funds held in your account if you invest through your financial intermediary.]

 

This Prospectus Supplement and the accompany Prospectus and the SAI, contain (or will contain) or incorporate (or will incorporate) by reference forward-looking statements, within the meaning of the federal securities laws, that involve risks and uncertainties. These statements describe the Fund’s plans, strategies, and goals and the Fund’s beliefs and assumptions concerning future economic and other conditions and the outlook for the Fund, based on currently available information. In this Prospectus Supplement and the accompanying Prospectus, words such as “anticipates,” “believes,” “expects,” “objectives,” “goals,” “future,” “intends,” “seeks,” “will,” “may,” “could,” “should,” and similar expressions, and the negative of such terms, are used in an effort to identify forward-looking statements, although some forward-looking statements may be expressed differently. By their nature, all forward looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by any forward looking statements. Although the Fund believes that the expectations expressed in these forward looking statements are reasonable, actual results could differ materially from those projected or assumed in these forward looking statements. The Fund’s future financial condition and results of operations, as well as any forward looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the “                       ” section of this Prospectus Supplement and the “Risks” section of the accompanying Prospectus, which describes certain currently known risk factors that could cause actual results to differ materially from the Fund’s expectations. The Fund urges you to review carefully that section for a more detailed discussion of the risks associated with an investment in the Fund’s securities. All forward looking statements contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus are made as of the date of this Prospectus. The Fund does not intend, and undertakes no obligation, to update any forward looking statement. The Fund is not entitled to the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933.

 

You should rely only on the information contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. The Fund has not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Fund is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information in this Prospectus Supplement and the accompanying Prospectus is accurate as of any date other than the date of this Prospectus Supplement. The Fund’s business, financial condition and results of operations may have changed since that date. The Fund will amend this Prospectus Supplement and the accompanying Prospectus if, during the period that this Prospectus Supplement and the accompanying Prospectus is required to be delivered, there are any subsequent material changes.

 

Capitalized terms used herein that are not otherwise defined shall have the meanings assigned to them in the accompanying Prospectus.

 

iii

 

 

TABLE OF CONTENTS

 

  Page
Prospectus Supplement  
   
PROSPECTUS SUPPLEMENT SUMMARY S-1
SUMMARY OF FUND EXPENSES S-2
CAPITALIZATION S-4
USE OF PROCEEDS S-5
RECENT DEVELOPMENTS S-5
TAX MATTERS S-5
UNDERWRITERS S-6
LEGAL MATTERS S-7
ADDITIONAL INFORMATION S-7

 

Prospectus  
 
ABOUT THIS PROSPECTUS 1
WHERE YOU CAN FIND MORE INFORMATION 2
INCORPORATION BY REFERENCE 2
THE FUND 3
SUMMARY OF FUND EXPENSES 11
FINANCIAL HIGHLIGHTS 12
USE OF PROCEEDS 13
MARKET AND NET ASSET VALUE INFORMATION 14
INVESTMENT OBJECTIVE AND POLICIES 14
USE OF LEVERAGE 14
RISKS 14
MANAGEMENT OF THE FUND 15
NET ASSET VALUE 17
DISTRIBUTIONS 17
DIVIDEND REINVESTMENT PLAN 17
DESCRIPTION OF CAPITAL STRUCTURE 17
DESCRIPTION OF PREFERRED SHARES 20
DESCRIPTION OF SUBSCRIPTION RIGHTS 21
ANTI-TAKEOVER PROVISIONS IN THE FUND’S GOVERNING DOCUMENTS 22
TAX MATTERS 25
PLAN OF DISTRIBUTION 32
TRANSFER AGENT, CUSTODIAN AND ADMINISTRATOR, SUB-ADMINISTATOR AND PINE ADVISORS 34
LEGAL MATTERS 34
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 34
FISCAL YEAR END AND REPORTS TO SHAREHOLDERS 34
PRIVACY PRINCIPLES OF THE FUND 35

 

iv

 

 

 

PROSPECTUS SUPPLEMENT SUMMARY

 

This is only a summary of information contained elsewhere in this Prospectus Supplement and the accompanying Prospectus. This summary does not contain all of the information that you should consider before investing in the Fund’s Common Shares. You should carefully read the more detailed information contained in this Prospectus Supplement and the accompanying Prospectus and the Statement of Additional Information, dated                   , 2026 (the “SAI”), especially the information set forth under the heading “Risks.”

 

The Fund   XAI Madison Equity Premium Income Fund (the “Fund”) is a diversified, closed-end management investment company registered under the 1940 Act. The Fund’s investment adviser is XA Investments, LLC.
     
Listing and Symbol   The Fund’s currently outstanding Common Shares are, and the Common Shares offered by this Prospectus will be, subject to notice of issuance, listed on the New York Stock Exchange (the “NYSE”) under the symbol “MCN.” As of                    , the last reported sale price for the Fund’s Common Shares on the NYSE was $          per Common Share, and the net asset value of the Fund’s Common Shares was $          per Common Share, representing a [premium/discount] to net asset value of              %.
     
Distributions   The Fund intends to pay substantially all of its net investment income, if any, to shareholders through periodic distributions and to distribute any net realized long-term capital gains to shareholders at least annually. The Fund intends to pay monthly distributions to Common Shareholders. However, there is no assurance the Fund will pay regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Fund from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital.
     
The Offering  

The Fund is offering             Common Shares through a group of underwriters. The Fund has given the             underwriters an option to purchase up to               additional common shares to cover overallotments.

 

Common Shares Offered by the Fund

 

[TO COME]

 

Common Shares Outstanding after the Offering

 

The number of Common Shares offered and outstanding after the offering assumes the underwriters’ over-allotment option is not exercised. If the over-allotment option is exercised in full, the Fund will issue an additional                Common Shares and will have          Common Shares outstanding after the Offering.

 

[The Fund’s Common Shares have recently traded at a premium to net asset value (“NAV”) per share and the price of the Common Shares is expected to be above net asset value per share. Therefore, investors in this offering are likely to experience immediate dilution of their investment. Furthermore, shares of closed-end investment companies, such as the Fund, frequently trade at a price below their NAV. The Fund cannot predict whether its Common Shares will trade at a premium or a discount to NAV.]

     
Risks   See “Risks” beginning on page           of the accompanying Prospectus for a discussion of factors you should consider carefully before deciding to invest in the Fund’s Common Shares.

 

Use of Proceeds  

The Fund estimates the net proceeds of the offering to be approximately $            .

 

The Fund intends to invest the net proceeds of the offering in accordance with its investment objective and policies as stated in the accompanying Prospectus. It is currently anticipated that the Fund will be able to invest substantially all of the net proceeds of the offering in accordance with its investment objective and policies within          months after the completion of the offering. Pending such investment, it is anticipated that the proceeds will be invested in cash, cash equivalents or other securities, including U.S. government securities or high quality, short-term debt securities. The Fund may also use the proceeds for working capital purposes, including the payment of distributions, interest and operating expenses, although the Fund currently has no intent to issue Securities primarily for these purposes.

 

 

S-1

 

 

 

SUMMARY OF FUND EXPENSES

 

The following table contains information about the costs and expenses that Common Shareholders will bear directly or indirectly. The table is based on the capital structure of the Fund as of               (except as noted below) after giving effect to the anticipated net proceeds of the Common Shares offered pursuant to this Prospectus Supplement and the accompanying Prospectus and assuming the Fund incurs the estimated offering expenses. If the Fund issues fewer than all of the Common Shares available for sale pursuant to the Distribution Agreement and the net proceeds to the Fund are less, all other things being equal, the total annual expenses shown would increase. The purpose of the table and the example below is to help you understand the fees and expenses that you, as a holder of Common Shares, would bear directly or indirectly.

 

Shareholder Transaction Expenses

 

Sales load paid by Common Shareholders (as a percentage of offering price)    %
Offering expenses borne by the Fund (as a percentage of offering price)   %
Dividend Reinvestment Plan fees(1)   None

 

   As a Percentage of
Net Assets Attributable to
Common Shares(2)		 
Annual Expenses    
Management fees(3)                %
Other Expenses(4)     
Service Fees(5)    %
Investor Support and Secondary Market Support    %
Other(6)(7)    %
Total annual expenses (before fee waiver)     
Fee Waiver(8)    %
Net annual expenses (after fee waiver)    %

 

 

(1)There will be no brokerage charges with respect to Common Shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with open-market purchases. The Fund’s transfer agent serves as Plan Agent. Fees paid by the Fund to the transfer agent are included in “Other Expenses” below, which are ultimately borne by Common Shareholders.

 

(2)Based upon net assets attributable to common shares as of .

 

(3)The Fund pays the Adviser an annual fee, payable monthly, in an amount equal to 0.80% of the Fund’s average daily Managed Assets.

 

(4)The “Other expenses” shown in the table and related footnotes include operating expenses of the Fund and are based upon estimated amounts for the Fund’s current fiscal year.

 

(5)Pursuant to a Services Agreement, the Adviser has agreed to provide, or arrange to have a third party provide, the Fund with such services as it may require in the ordinary conduct of its business, to the extent that the Fund (or any other person), acting as the Fund’s investment adviser, has not undertaken to provide such services. In this regard, the Adviser shall provide, or arrange to have a third party provide, the following services to the Fund: transfer agent services; custodial services; fund administration services; and fund accounting services; and shall arrange and pay for independent public accounting services for audit and tax purposes, legal services, reasonable out-of-pocket expenses of the Fund’s independent trustees associated with their services to the Fund, a fidelity bond, and directors and officers/errors and omissions insurance; and such other services necessary to the conduct of the Fund’s business (collectively, the “Services”). The annual Services Fee for the Fund, payable monthly, is equal to 0.26% of the Fund’s Managed Assets. The Services Fee shall not include (i) any fees and expenses relating to portfolio holdings (e.g., brokerage commissions, interest on loans, etc.); (ii) extraordinary and non-recurring fees and expenses (e.g., costs relating to any line of credit the Fund maintains with its custodian or another entity for investment purposes); (iii) the costs associated with investment by the Fund in other investment companies (i.e., acquired fund fees and expenses); or (iv) the compensation of the Fund’s independent trustees.

 

S-2

 

 

(6)The Fund has retained the Adviser to provide investor support services and secondary market support services in connection with the ongoing operation of the Fund. The Fund has agreed to pay the Adviser an investor support services and secondary market support service fee, payable monthly in arrears, in an annual amount equal to 0.20% of the Fund’s average daily Managed Assets. The Adviser has agreed to waive all fees under the agreement until at least December 2, 2026.

 

(7)Expenses attributable to the Fund’s investments, if any, in other investment companies, including closed-end funds and exchange-traded funds, are currently estimated not to exceed 0.01% of net assets attributable to Common Shares.

 

(8)The Adviser has contractually agreed to waive the entire investor support services and secondary market support service fee through December 2, 2026. Prior to the termination date, the waiver agreement may be modified, waived or terminated only with the consent of the board of trustees of the Fund.

 

Example

 

The following example illustrates the expenses that you would pay on a $1,000 investment in Common Shares, assuming (1) total annual expenses of               % of net assets attributable to Common Shares, (2) the sales load of $      and estimated offering expenses of $             , and (3) a 5% annual return. The example assumes that the estimated Total Annual Expenses set forth in the Annual Expenses table are accurate and that all dividends and distributions are reinvested at NAV per Common Share. Actual expenses may be greater or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the example.

 

1 Year   3 Years   5 Years   10 Years 
$      $      $        $     

 

The example should not be considered a representation of future expenses or returns. Actual expenses may be higher or lower than those assumed. Moreover, the Fund’s actual rate of return may be higher or lower than the hypothetical 5% return shown in the example.

 

S-3

 

 

CAPITALIZATION

 

The following table sets forth the Fund’s capitalization at                        :

 

(i)on a historical basis;

 

(ii)on an as adjusted basis to reflect the issuance of an aggregate of             Common Shares pursuant to the Fund’s Dividend Reinvestment Plan, and the application of the net proceeds from such issuances of Common Shares; and

 

(iii)on an as further adjusted basis to reflect the assumed sale of                  Common Shares at a price of $               per share in an offering under this Prospectus Supplement and the accompanying Prospectus less the aggregate underwriting discount of $                  and estimated offering expenses payable by the Fund of $        (assuming no exercise of the underwriters’ over-allotment option).

 

   Actual   As Adjusted (unaudited)   As Further Adjusted (unaudited) 
Indebtedness:            
Aggregate Principal Amount of Borrowings  $[   ]   $[   ]   $[   ] 
Common Shareholder’s Equity:               
Common Shares, par value $0.01 per share;      shares issued and outstanding (actual),       shares issued and outstanding (as adjusted),       shares issued and outstanding (as further adjusted)   [   ]    [   ]    [   ] 
Paid-in capital   [   ]    [   ]    [   ] 
Total distributable earnings   [   ]    [   ]    [   ] 
Net Assets  $[   ]   $[   ]   $[   ] 

 

S-4

 

 

USE OF PROCEEDS

 

The Fund estimates that the net proceeds to the Fund from this offering will be approximately $              million, (or $              million if the underwriters exercise their over-allotment option to purchase additional Common Shares in full), after deducting underwriting discounts and commissions and estimated offering expenses borne by the Fund.

 

The Fund intends to invest the net proceeds of the offering in accordance with its investment objective and policies as stated in the accompanying Prospectus. It is currently anticipated that the Fund will be able to invest substantially all of the net proceeds of the offering in accordance with its investment objective and policies within              months after the completion of the offering. Pending the full investment of the proceeds of an offering, it is anticipated that all or a portion of the proceeds will be invested in U.S. Government securities or high grade, short-term money market instruments, which have returns substantially lower than those the Fund anticipates earning once it has fully invested the proceeds of an offering in accordance with its investment objective. A delay in the anticipated use of proceeds could lower returns and reduce the Fund’s distribution to Common Shareholders.

 

RECENT DEVELOPMENTS

 

[TO COME, IF ANY]

 

[ADDITIONAL RISKS, IF ANY, TO COME]

 

TAX MATTERS

 

[TO COME]

 

S-5

 

 

UNDERWRITERS

 

[TO COME]

 

S-6

 

 

LEGAL MATTERS

 

Certain legal matters will be passed on by Skadden, Arps, Slate, Meagher & Flom LLP, Chicago, Illinois, as special counsel to the Fund in connection with the offering of Common Shares. Certain legal matters will be passed on by              as special counsel to the underwriters in connection with the offering of Common Shares.

 

ADDITIONAL INFORMATION

 

This Prospectus Supplement and the accompanying Prospectus constitutes part of a Registration Statement filed by the Fund with the SEC under the Securities Act, and the 1940 Act. This Prospectus Supplement and the accompanying Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement and related exhibits for further information with respect to the Fund and the Common Shares offered hereby. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its rules and regulations or free of charge through the SEC’s website (www.sec.gov).

 

S-7

 

 

 

 

            Shares

 

XAI Madison Equity Premium Income Fund

 

Common Shares

 

_____________

 

FORM OF

PROSPECTUS
SUPPLEMENT

_____________

 

 

S-8