SEC Form N-CSR filed by XAI Madison Equity Premium Income Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

811-21582

(Investment Company Act File Number)

XAI Madison Equity Premium Income Fund

(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: September 30, 2025

*The Fund has changed its fiscal year end from December 31 to September 30. Accordingly, this report covers the fiscal period from January 1, 2025 to September 30, 2025. 

TABLE OF CONTENTS

XAI Madison Equity Premium Income Fund

SHAREHOLDER LETTER

September 30, 2025 (Unaudited)

Dear Shareholder:

We thank you for your investment in the XAI Madison Equity Premium Income Fund (formerly the Madison Covered Call & Equity Strategy Fund) (the “Fund”). The Fund has changed its fiscal year end from December 31 to September 30, and as a result, this report covers the nine month period ended September 30, 2025 (the “Period”).

During the Period, equity markets experienced elevated and persistent volatility, primarily driven by escalating trade tensions and heightened geopolitical risks. These external pressures created a more uncertain investment environment, contributing to sharp shifts in investor sentiment and episodic risk-off behavior across global markets.

At the same time, the Consumer Price Index (“CPI”) rose from 2.4% at the beginning of the year to 3.0% by the end of September.¹ In response to continued inflationary pressures, the U.S. Federal Reserve (“the Fed”) cut its benchmark interest rate multiple times during the Period, signaling a cautious, data-dependent policy stance. Despite continued economic uncertainty surrounding a weaker labor market, interest rates, and the impact of artificial intelligence, the U.S. economy remained resilient during the Period.

During the Period, the U.S. added approximately 1.2 million jobs, as measured by nonfarm payroll figures through August 2025,^2,3 while the August 2025 unemployment rate remained healthy at 4.3%, up slightly from 4.1% at the beginning of the period.^2,4 After a 0.60% decrease in real gross domestic product (“GDP”) growth quarter-over-quarter in Q1 2025, Q2 2025 real GDP increased 3.8% quarter-over-quarter, while the advance estimate for Q3 2025 has been delayed due to the federal government shutdown.^2,5

During the Period, the Fund declared distributions totaling $0.54 per common share. The monthly distribution of $0.06 per common share declared on September 2, 2025, represented an annualized distribution rate of 11.67% based on the Fund’s closing market price of $6.17 per common share on September 30, 2025. Additionally, the Fund changed its distribution frequency during the Period. Effective with the April 1, 2025, declaration, the Fund changed its distribution frequency from quarterly to monthly. XA Investments believes this change will enable shareholders to better manage their cash flow needs.

The market price per common share of $6.17 on September 30, 2025, represented a 4.78% discount to the Fund’s NAV of $6.48 per common share. During the Period, the Fund’s common shares traded on average at a 1.90% discount to NAV.

As we navigate the dynamic market environment, the Fund remains committed to its 20-year track record of delivering lower volatility and strong cash flows for its shareholders. XA Investments and the continued expertise of Madison Asset Management position the Fund well to pursue attractive investment opportunities.

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 Fund’s website at www.xainvestments.com/MCN.

Sincerely,

Kimberly Flynn

President

XA Investments LLC

November 15, 2025

QUESTIONS & ANSWERS

September 30, 2025 (Unaudited)

What happened in the market over the past nine months?

From the inception of the current bull market in late 2022, the S&P 500 has been largely driven higher by a small contingent of mega-cap growth stocks principally tied to Artificial Intelligence (AI). Aside from some tariff-related concerns in the February to April period, the market has consistently surged higher. Unsurprisingly, the leading sectors within the S&P 500 over the past 12 months have been Communication Services (Alphabet, Meta), Information Technology (Nvidia, Microsoft, Apple) and Consumer Discretionary (Amazon) … all sectors loaded with extremely large companies with significant AI exposure. Lagging over this time period were traditionally defensive sectors such as Health Care, Material and Consumer Staples. Since the world seems fixated on AI, we asked some of the leading AI search engines the following question …. When will the stock market correction begin? Unsurprisingly, the general consensus was that predicting the timing of a correction is impossible. We agree. However, most searches warned that current indicators and expert forecasts suggest that a correction in late 2025 or early 2026 is increasingly likely. The potential catalysts for a correction include overheated valuations, persistent inflation, policy uncertainty and speculative excesses in AI. In other words, AI is simply just paying attention just like Real Intelligence. Importantly, we still trust human intelligence to make investment decisions, not the artificial kind.

However, the impact of Artificial Intelligence has been anything but artificial in recent years, at least in the investment world. A universe of AI related stocks within the S&P 500 have accounted for upwards of 75% of the index’s returns in the bull market since November of 2022. Has this created an AI bubble? Market valuations would suggest that it has. Based on the Price to Earnings ratio of forward 12 month earnings expectations, the only time the market has been more expensive was in late 1999, just prior to the peak of the last technology related bubble. Valued on a Price to Sales ratio, the S&P 500 is 50% higher than 1999. Even keys players with the AI industry such as Sam Altman (CEO of Open AI) and Jeff Bezos (Amazon) agree that we are experiencing an AI bubble.

Just as the Tech/Telecom bubble of the late 1990’s was driven by the expansion of the internet and its increasing accessibility, the AI bubble is driven by the ability of ultra-fast computing to integrate, collate and organize vast amounts of data and information in order to assist or ultimately replace many human tasks. The ultimate end game is unknown as we are early in the AI era. At present the benefits of AI are very innocuous and difficult to monetize. A recent study by MIT concluded that 95% of generative AI projects/pilots in companies failed to produce measurable impact on profit and loss or result in meaningful transformation. Ultimately, the ability to generate sales and profit from AI is extremely critical given the vast amounts of capital that have and will be expended in AI infrastructure. The assumption of returns has been driving investment values but at some point there must be an actual realization of returns or the house of cards will collapse. Additional concerns center around AI’s vast requirement for power to feed data centers and potential competition, primarily from China, which could upend the investment case for many of the current AI beneficiaries. The risks are real. The potential benefits and the ability to monetize those benefits have yet to be fully understood.

At some point, the real world and the artificial world will collide and the likely outcome will be a higher level of volatility in the investment world which has most recently been siding with AI.

How did the Fund perform given the marketplace conditions over the past nine months?

As noted, aside from some market weakness over a six week period in early 2025 due to tariff concerns, the overall market moved significantly higher over the full period as the “AI” universe dominated performance. Over the period ending September 30, 2025 (the "Period"), the S&P 500 surged 17.6% while the CBOE S&P BuyWrite Index (BXM) gained 8.2%. Comparatively, the Fund’s Net Asset Value (NAV) gained 4.3% while the Fund’s market price declined 2.9% as its premium to NAV of 2.4% at the beginning of the period fell to a discount of -4.8% on September 30, 2025.

Market performance over the period was very narrowly focused on large-cap growth stocks which were primarily driven by “AI” enthusiasm. Industry sectors which house many of the largest growth companies, such as Communication Services, Technology and Consumer Discretionary, were all among the leadership group. Defensive areas lagged far behind. While the Communication Services sector led all sectors with a 35.6% return, the Health Care sector declined 8%, representing more than a 43% divergence between the S&P 500’s best and worst performing sectors over the full period. Another measure of the market’s relatively narrow performance was the difference between the market-cap weighted S&P 500, which gained almost 18% and its equally weighted version, which gained only 8%. When all is said, the main performance dynamic over the period was clearly a focus on anything “AI” which benefitted a relatively small group of very large index components.

With the Fund’s focus on income generation and risk limitation, its ability to keep up in such a narrow, high beta market environment, was challenged. Given the Fund’s defensive posture, it lagged as the market moved toward all-time highs. However, when the market sentiment began to sour in the February to April time period, the Fund performed very well. Since that decline, however, the market’s growth returned, and the surge bordered on parabolic. During that period, the Fund was simply unable to keep up. While the Fund’s sector positioning was fruitful during the downturn, it became a drag on performance due to its overrepresentation in the traditionally defensive Health Care and Consumer Staples sectors. In addition, the Fund’s cash position was also a small drag on relative performance as would expected in an upwardly trending market. The Fund’s call option coverage was consistently high over the full period, beginning at 84.5% coverage and ending at 89.8 %. Given the hedged nature of utilizing covered call writing, this portion of the strategy was also detractive relative to the long-only market.

Performance of the Fund’s individual equity positions lagged relative to the Fund’s benchmark during the period. The Fund had relatively small mega-cap growth exposure and, as such, did not benefit from that group’s resurgence in leadership, particularly during the period from April 1, 2025 to September 30, 2025. Utility holding company AES Corporation (NYSE: AES) was a laggard during the period as it was negatively impacted by the de-emphasis on wind/solar generation and potential industry subsidy cuts that are coming out of the new presidential administration. Much of this underperformance has already been recouped as AES’s low valuation has attracted potential suitors. In the Technology sector, while any company deemed a beneficiary of “AI” soared, others that could be challenged by “AI”, lagged. Falling into the later category were Accenture plc (NYSE: ACN) and Adobe (NASDAQ: ADBE), both of which had less clear pathways to immediate “AI” glory. Constellation Brands (NYSE: STZ), which primarily distributes Corona and Modelo beer in the U.S, was directly impacted by potentially higher aluminum costs. Also affecting the company was a general consumer movement toward healthier pursuits and away from beer/liquor consumption. Ultra deep-sea driller Transocean Ltd (NYSE:RIG), continues to operate extremely well in a very specialized oligopolistic environment. Offshore drilling demand has slowed recently but is expected to pick up in coming quarters. The company has an industry leading backlog and is benefiting from historically high drilling day rates.

On the positive side, Barrick Mining Corp. (NYSE: B) performed very well as the price of gold rose 46% during the Period. Although the Health Care sector was a laggard, individual Health Care Fund holdings CVS Health Corp, (NYSE: CVS) and Medtronic Plc (NYSE: MDT) were standout performers as both continued to show improvement following a difficult 2024 and both reported improved earnings performance and increased future guidance. Uranium miner and processor, Cameco Corp. (NYSE: CCJ), was lifted by improving growth prospects in the global nuclear power generation industry. Microsoft Corp. (NYSE: MSFT) was a clear beneficiary of the rising tide for “AI” related businesses and despite being a below-market weighting in the Fund, had a meaningfully positive impact on performance.

QUESTIONS & ANSWERS

September 30, 2025 (Continued) (Unaudited)

Describe the Fund’s portfolio equity and option structure:

As of September 30, 2025, the Fund held 39 equity securities and unexpired call options had been written against 88.3% of the Fund’s stock holdings. It is the strategy of the Fund to write “out-of-the-money” call options, as of September 30, 2025, 93% of the Fund’s call options (42 of 45 different options) remained “out- of-the-money.” (Out-of-the-money means the stock price is below the strike price at which the shares could be called away by the option holder). On average, the Fund’s call options had 58.6 days to expiration.

Which sectors are prevalent in the Fund?

From a sector perspective, MCN’s largest exposure as of September 30, 2025, was to the Health Care sector, followed by Information Technology, Financials, Consumer Staples, and Consumer Discretionary. This was followed by smaller exposures in the Energy, Communication Services, Real Estate and Industrial sectors. The Fund also had small exposures to the Utilities and Materials sectors.

Discuss the Fund’s security and option selection process:

The Fund is managed by primarily focusing on active stock selection before adding the call option overlay utilizing individual equity call options rather than index options. We use fundamental analysis to select solid companies with good growth prospects and attractive valuations. We then seek attractive call options to write on those stocks. It is our belief that this partnership of active management of the equity and option strategies provides investors with an innovative, risk-moderated approach to equity investing. The Fund’s portfolio managers seek to invest in a portfolio of common stocks that have favorable “PEG” ratios (Price-Earnings ratio to Growth rate) as well as financial strength and industry leadership. As bottom-up investors, we focus on the fundamental businesses of our companies. Our stock selection philosophy strays away from the “beat the street” mentality, as we seek companies that have sustainable competitive advantages, predictable cash flows, solid balance sheets and high-quality management teams. By concentrating on long-term prospects and circumventing the “instant gratification” school of thought, we believe we bring elements of consistency, stability and predictability to our shareholders.

Once we have selected attractive and solid names for the Fund, we employ our call writing strategy. This procedure entails selling calls that are primarily out-of- the-money, meaning that the strike price is higher than the common stock price, so that the Fund can participate in some stock appreciation. By receiving option premiums, the Fund may receive a high level of investment income and add an element of downside protection. Call options may be written over several time periods and at differing strike prices in an effort to maximize the protective value to the strategy and spread income evenly throughout the year.

What is the management’s outlook for the market and Fund for the remainder of 2025?

Many market watchers have proclaimed the current environment as a Goldilocks scenario. We have improving soft economic data, slightly weaker employment data which should allow the Fed to keep lowering rates, the tightest credit spreads in history, lower oil prices and a very small uptick in corporate earnings. The eternal optimist would conclude that this is a perfect environment for a continued bull market as far out as the eye can see. Unfortunately, this is the mindset at every market top.

We tend to be more realist than optimist. We see a market that has been driven by the hopes, dreams and massive capital spending within one focused area …. Artificial Intelligence. While we agree that AI can be a transformative technology, we also believe that the investment community may have over-hyped the short- term potential of the technology. In order to justify the trillion plus investment promises over the next few years, a path to earning profits on this massive investment has to become clearer or else the hype will turn to a bust.

The rally in equities since the April lows has been one of the greatest in history and has been driven almost exclusively by mega-cap growth stocks which have been driven by AI. The impact on the upside has been impressive. However, any hiccup that could derail the AI trajectory, even for a short time, could have equally impressive downside impact. Given where we are with near historic high valuations and Goldilocks conditions that could change in short order, having at least some assets in a more defensive strategy could be prudent. Even Goldilocks wouldn’t eat the cold porridge.

The Fund continues to adhere to its defensive approach, focused on income generation and a steady total return.

FUND PORTFOLIO INFORMATION

September 30, 2025 (Unaudited)

Growth of a $10,000 Investment (as of September 30, 2025)

The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the past ten years. Past performance does not guarantee future results. Performance reflects the partial waiver of the Fund’s advisory fees and/or reimbursement of expenses for certain periods. 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 Fund distributions or the sale of Fund shares. The chart assumes that distributions from the Fund are reinvested.

Summary Performance (as of September 30, 2025)

* The CBOE S&P 500 BuyWrite Index (BXM) is a benchmark index designed to show the hypothetical performance of a portfolio that purchases all the constituents of the S&P 500® Index and then sells at-the-money (meaning same as purchase price) call options of one-month duration against those positions.

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.

FUND PORTFOLIO INFORMATION

September 30, 2025 (Continued) (Unaudited)

Top Ten Portfolio Holdings (as a % of Total Investments)*

SCHEDULE OF INVESTMENTS

September 30, 2025

See Notes to Financial Statements.

SCHEDULE OF INVESTMENTS

September 30, 2025 (Continued)

See Notes to Financial Statements.

SCHEDULE OF INVESTMENTS

September 30, 2025 (Continued)

Call Options Written

See Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES

September 30, 2025

See Notes to Financial Statements.

STATEMENTS OF OPERATIONS

See Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS

Applicable to Common Shareholders

See Notes to Financial Statements.

FINANCIAL HIGHLIGHTS

For a Share Outstanding Common Stock Through the Periods Presented

See Notes to Financial Statements.

NOTES TO FINANCIAL STATEMENTS

September 30, 2025

NOTE 1 - ORGANIZATION

XAI Madison Equity Premium Income Fund (the “Fund”) is a diversified, closed-end management investment company under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund was organized as a Delaware statutory trust on May 6, 2004, and commenced operations on July 28, 2004. The Fund’s common shares are listed on the NYSE under the symbol “MCN”.

Prior to December 2, 2024, XAI Madison Equity Premium Income Fund was known as Madison Covered Call & Equity Strategy Fund. The Fund changed fiscal year end to September 30, effective August 12, 2025.

XA Investments LLC (“XAI” or the “Adviser”) serves as the investment adviser to the Fund. 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 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. There can be no assurance that the Fund will achieve its investment objectives. The Fund’s investment objectives are considered fundamental and may not be changed without shareholder approval.

NOTE 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 Fund ultimately realizes upon sale of the securities. The Fund 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 September 30, 2025.

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 Fund 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 Fund’s net asset value per common share is calculated by dividing the value of the Fund’s total assets, less its liabilities, by the number of shares outstanding.

Cash – The Fund considers its investment in an FDIC insured interest bearing account to be cash. The Fund maintains cash balances, which at times may exceed federally insured limits. The Fund maintains these balances with a high quality financial institution.

The Fund monitors this credit risk and has not experienced any losses related to this risk.

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 and interest income is recorded on an accrual basis. 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.

Portfolio Valuation – Investments are presented at fair value using the following techniques. Securities traded on a national securities exchange are valued at their closing sale price, except for securities traded on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), which are valued at the NASDAQ official closing price (“NOCP”). If no sale occurs, equities traded on a U.S. exchange or on NASDAQ are valued at the bid price. Options are valued at the mean between the best bid and best ask price across all option exchanges. Debt securities are valued on the basis of the last available bid prices or current market quotations provided by dealers or pricing services approved by the Fund. Mutual funds are valued at their NAV. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures approved by the Board of Trustees.

The Board of Trustees has designated XAI as the “valuation designee” for the Fund 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 Fund (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 Fund 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, 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 Fund’s investments. Fair valuation involves subjective judgments. While the Fund’s use of fair valuation is intended to result in calculation of NAV that fairly reflects values of the Fund’s portfolio securities as of the time of pricing, the Fund cannot guarantee that any fair valuation will, in fact, approximate the amount the Fund 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.

Covered Call and Put Options – An option on a security is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or “strike” price. The writer of an option on a security has an obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price (in the case of a call) or pay the exercise price upon delivery of the underlying security (in the case of a put).

NOTES TO FINANCIAL STATEMENTS

September 30, 2025 (Continued)

The number of call options the Fund can write (sell) is limited by the amount of equity securities the Fund holds in its portfolio. The Fund will not write (sell) “naked” or uncovered call options. The Fund seeks to produce a high level of current income and gains generated from option writing premiums and, to a lesser extent, from dividends.

Options on securities indices are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security and are similar to options on single securities, except that the exercise of securities index options requires cash settlement payments and does not involve the actual purchase or sale of securities.

When an option is written, a liability is recorded equal to the premium received. This liability for options written is marked-to-market on a daily basis to reflect the current market value of the option written. These liabilities are reflected as options written in the Statement of Assets and Liabilities. Premiums received from writing options that expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transactions, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss.

Adopted Accounting Standards – The Fund adopted FASB Accounting Standards Update 2023-07, Segment Reporting (“Topic 280”) – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires a public entity to make enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”). The Fund’s Secretary and Chief Legal Officer acts as the CODM. Adoption of the new standard impacted financial statement disclosures only and did not affect the Fund’s financial position or the results of its operations. The Fund represents a single operating segment, as the CODM monitors the operating results of the Fund as a whole and the Fund’s long-term strategic asset allocation is pre-determined in accordance with the terms of its prospectus, based on a defined investment strategy which is executed by the Fund’s portfolio managers as a team. The financial information in the form of the Fund’s portfolio composition, total returns, expense ratios and changes in net assets resulting from operations, which are used by the CODM to assess the segment’s performance versus the Fund’s comparative benchmarks and to make resource allocation decisions for the Fund’s single segment, is consistent with that presented within the Fund’s financial statements. Segment assets are reflected on the accompanying Statement of Assets and Liabilities and significant segment expenses are listed on the accompanying Statement of Operations.

Valuation – The Fund has adopted FASB applicable guidance on fair value measurements. Fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data “inputs” and minimize the use of unobservable “inputs” and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable.

Observable inputs reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The valuation techniques used by the Fund to measure fair value seek to maximize the use of observable inputs and minimize the use of unobservable inputs.

Various inputs may be used in determining the value of the Fund’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 Fund 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 Fund’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 Fund’s investments as of September 30, 2025:

There were no transfers into or out of level 3 for the fiscal period ended September 30, 2025.

NOTES TO FINANCIAL STATEMENTS
September 30, 2025 (Continued)

Indemnification – The Fund indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on industry experience, the Fund expects the risk of loss due to these warranties and indemnities to be remote.

NOTE 3 - INVESTMENT ADVISORY AND OTHER AGREEMENTS

XAI serves as the investment adviser to the Fund and is responsible for overseeing the Fund’s overall management and implementation of the investment strategy. The Sub-Adviser serves as the investment sub-adviser of the Fund and is responsible for investing the Fund’s assets. The Fund 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.

On December 2, 2024, a new investment advisory agreement (the “New Advisory Agreement”) between the Fund and XAI, pursuant to which XAI serves as the investment adviser to the Fund, and a new investment sub-advisory agreement (the “New Sub-Advisory Agreement”) among the Fund, XAI and Madison, pursuant to which Madison serves as the sub-adviser to the Fund was approved by the Board of Trustees.

Pursuant to the New Advisory Agreement, the Fund pays the Adviser a fee, payable monthly in arrears, in an annual amount equal to 0.80% of the Fund’s average daily Managed Assets. “Managed Assets” means the total assets of the Fund, including assets attributable to the Fund’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 fiscal period ended September 30, 2025, the Fund incurred $801,434 in investment advisory fees.

Pursuant to the New Sub-Advisory Agreement, 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 Fund to the Adviser (before giving effect to any fees waived or expenses reimbursed by the Adviser). The specified percentage is equal to either an absolute or blended percentage, as the case may be, computed by applying the following percentages to the aggregate average daily Managed Assets of the advisory fee payable to the Adviser from the Fund:

The Fund does not pay a performance or incentive fee to the Adviser or the Sub-Adviser.

Prior to December 2, 2024, pursuant to an investment advisory agreement with the Fund, Madison served as the Fund’s investment adviser and received an advisory fee payable monthly, in an amount equal to an annualized rate of 0.80% of the Fund’s average daily Managed Assets.

Prior to December 2, 2024, Madison contractually agreed to enter into an operating expense limitation agreement with the Fund (the “Prior OELA”), as approved by the Fund’s Board of Trustees, under which the Adviser agreed to waive its management fees and/or reimburse expenses to the Fund to the extent necessary to limit the Fund’s total operating expenses (excluding taxes, leverage/borrowing interest, interest expense, dividends paid on short sales, brokerage commissions, acquired fund fees and expenses, extraordinary expenses such as litigation and other “Excluded Expenses”) to the annual rate, as referenced in the Fund’s 2023 Annual Report to Shareholders. The Prior OELA became effective on December 1, 2023 and remained in place until it was superseded by the New OELA (as defined below).

The Adviser has contractually agreed to enter into an Operating Expense Limitation Agreement with the Fund (the “New OELA”), under which the Adviser agreed to waive its management fees and/or reimburse expenses of the Fund to the extent necessary to limit the Fund’s total operating expenses (excluding taxes, leverage/ borrowing interest, interest expense, dividends paid on short sales, brokerage commissions, acquired fund fees and expenses, extraordinary and non-routine expenses such as litigation and other “Excluded Expenses” (as defined in the Administrative Services Agreement, described below)) to 1.08%. The new OELA became effective on December 2, 2024 and will remain in place until at least December 2, 2026. For the fiscal period ended September 30, 2025, the Fund did not receive a reimbursement for any expenses or waiver of any advisory fees.

Under a services agreement between the Fund and the Adviser dated December 2, 2024 (the “Administrative Services Agreement”), XAI provides or arranges to have a third party provide the Fund with such services as it may require in the ordinary course of its business. Services to the Fund include: transfer agent services, custodial services, Fund administration services, Fund accounting services, and such other services necessary to conduct the Fund’s business. In addition, the Adviser shall arrange and pay for independent public accounting services for audit and tax purposes, legal services, a fidelity bond, and directors and officers/ errors and omissions insurance. In exchange for these services, the Fund pays the Adviser a service fee, payable monthly, equal to an annualized rate of 0.26% of the Fund’s managed assets. Not included in this fee and, therefore, the responsibility of the Fund are the following fees and expenses: (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 borrowing costs, overdrafts or taxes the Fund may owe, etc.); (iii) the costs associated with investment by the Fund in other investment companies (i.e., acquired fund fees and expenses); and (iv) Independent Trustees compensation, including Lead Independent Trustee compensation (collectively referred to as “Excluded Expenses”).

The Fund has also retained the Adviser to provide investor support services and secondary market support services in connection with the ongoing operation of the Fund. Such services include providing ongoing contact with respect to the Fund with financial intermediaries, communicating with the NYSE specialist for the shares and with the closed-end fund analyst community regarding the Fund on a regular basis, and hosting and maintaining a website for the Fund. The Fund 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 Fund’s average daily Managed Assets. The Adviser has agreed to waive all fees under the agreement until at least December 2, 2026.

NOTES TO FINANCIAL STATEMENTS
September 30, 2025 (Continued)

Under direction of the Adviser, Paralel Technologies LLC (“PRT”) provides sub-administration and accounting services to the Fund. PRT’s fees are paid by the Adviser.

Employees of PINE Advisors LLC (“PINE”) serve as the Fund’s chief compliance officer and principal financial officer. PINE provides services that assist the Fund’s chief compliance officer in monitoring and testing the policies and procedures of the Fund in conjunction with requirements under Rule 38a-1 under the 1940 Act. PINE receives from the Adviser an annual base fee for the services provided to the Fund and is reimbursed for certain out-of-pocket expenses by the Adviser.

Under direction of the Adviser, Computershare Inc. and Computershare Fund Company, N.A. (together, “Computershare”) provide transfer, dividend paying and shareholder servicing services for the Fund. U.S. Bank N.A. serves as the Fund’s custodian, under which the Custodian holds the Fund’s assets in compliance with the 1940 Act. Transfer agent and custodian fees are paid by the Adviser.

Certain officers and Trustees of the Fund may also be officers, directors and/or employees of XAI or its affiliates. The Fund does not compensate its officers or Trustees who are officers, directors and/or employees of XAI or its affiliates.

NOTE 4 - DISTRIBUTIONS

The Fund declares and pays monthly distributions to shareholders. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These distributions consist of investment company taxable income, which generally includes qualified dividend income, ordinary income and short-term capital gains, including premiums received on written options. Distributions may also include a return of capital. Any net realized long-term capital gains are distributed annually to shareholders. The character of the distributions are determined annually in accordance with federal income tax regulations.

During the fiscal period ended September 30, 2025, the Fund changed the cadence of its distribution payments from quarterly payment to monthly payment. For the fiscal period ended September 30, 2025, the Fund declared the following distributions or dividends totaling $0.54 per common share or $11,403,022 in the aggregate:

The Fund’s net investment income and capital gain can vary significantly over time, however, the Fund seeks to maintain more stable monthly common share distributions over time.

To permit the Fund to maintain more stable monthly common share distributions, the Fund 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.

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 Fund, 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 Fund is net income or profit.

Pursuant to the requirements of the 1940 Act, in the event the Fund 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 Fund’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 Fund. 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 Fund at the close of its fiscal year, based on the Fund’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 Fund may, but is not required to, seek to obtain exemptive relief to permit the Fund 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 Fund to implement a “managed distribution policy” pursuant to which the Fund 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 Fund’s performance during any particular period but would be expected to correlate with the Fund’s performance over time.

The Fund 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 Fund’s Board of Trustees, based on a consideration of number of factors, including the Fund’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.

NOTES TO FINANCIAL STATEMENTS

September 30, 2025 (Continued)

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 to ensure that the Fund remains solvent and able to pay its debts as they become due and continue as a going concern.

NOTE 5 - DERIVATIVES

The FASB issued guidance intended to enhance financial statement disclosure for derivative instruments and enable investors to understand: a) how and why a fund uses derivative investments, b) how derivative instruments are accounted for, and c) how derivative instruments affect a fund’s financial position, and results of operations.

In addition, in November 2020, the SEC adopted Rule 18f-4 under the 1940 Act to govern the use of derivatives and certain related instruments by registered investment companies. Rule 18f-4, which had a compliance date of August 19, 2022, replaced existing SEC and staff guidance with a new framework for the use of derivatives by registered investment companies. Unless a fund qualifies as a “limited derivatives user,” as defined in Rule 18f-4, Rule 18f-4 requires registered investment companies that trade derivatives and other instruments that create future payment or delivery obligations to adopt a value at-risk leverage limit and implement a derivatives risk management program. Because the Fund’s strategy involves investing in derivatives, and the Fund’s use of such derivatives does not meet the conditions applicable to the “limited derivatives user exception” in Rule 18f-4, the Fund has adopted a derivatives program that complies with the requirements of the rule. As part of this, certain officers of the Adviser and the Fund serve as the “derivatives risk manager” for the Fund.

The following table presents the types of derivatives in the Fund by location and as presented in the Statement of Assets and Liabilities as of September 30, 2025

The following table presents the effect of derivative instruments on the Statements of Operations for the period ended September 30, 2025

The following table presents the effect of derivative instruments on the Statements of Operations for the year ended December 31, 2024

The average notional value of purchased option contracts was $17,333,333 during the period ended September 30, 2025. The average notional value of written option contracts for the Fund was $108,100,839 during the period ended September 30, 2025.

NOTE 6 - SECURITIES LENDING

The Fund is authorized to engage in securities lending. During the period ended September 30, 2025 and year ended December 31, 2024, the Fund was subject to a Securities Lending Authorization Agreement (the “Securities Lending Agreement”) with State Street Bank and Trust Company as securities lending agent. The Securities Lending Agreement terminated on March 3, 2025. The Securities Lending Agreement required that loans of Fund securities be collateralized at all times by cash or U.S. government securities, initially equal to at least 102% of the value of the domestic securities and 105% of non-domestic securities, based upon the prior day’s market value for securities loaned. Any loaned securities and collateral were marked to market daily to maintain collateral at 102% of the total loaned portfolio. Amounts earned as interest on investments of cash collateral, net of rebates and fees, if any, are included in the Statement of Operations. As of September 30, 2025, the Fund did not have an active securities lending program, and no securities of the Fund were on loan.

NOTES TO FINANCIAL STATEMENTS

September 30, 2025 (Continued)

NOTE 7 - PORTFOLIO INFORMATION

Purchase and Sale of Securities – For the period ended September 30, 2025, the cost of purchases and proceeds from sales of securities, excluding short-term obligations were as follows:

NOTE 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 Fund’s Statements 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. During the period ended September 30, 2025, there were no permanent differences that resulted in adjustments to accumulated loss or paid-in capital.

The tax character of distributions paid by the Fund during the period ended September 30, 2025, was as follows:

The tax character of distributions paid by the Fund during the year ended December 31, 2024, was as follows:

The tax character of distributions paid by the Fund during the year ended December 31, 2023, was as follows:

At September 30, 2025, the components of distributable earnings/(accumulated loss) on a tax basis for the Fund were as follows:

Tax Basis of Investments – Net unrealized appreciation/(depreciation) of investments (including written options) based on federal tax cost as of September 30, 2025, was as follows:

The primary difference between book basis and tax basis distributable earnings/(accumulated loss) and unrealized appreciation/(depreciation) is primarily attributable to wash sale loss deferrals.

NOTES TO FINANCIAL STATEMENTS

September 30, 2025 (Continued)

The Fund elects to defer post-October capital losses of $1,249,759 as having been incurred in the following fiscal year ending September 30, 2026.

Federal Income Tax Status – For federal income tax purposes, the Fund 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 period ended September 30, 2025, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’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 Fund is subject to a 4% excise tax that is imposed if the Fund 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 Fund may elect to retain income or capital gain to the extent that the Board of Trustees, in consultation with Fund management, determines it to be in the interest of shareholders to do so. Alternatively, the Fund 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 Fund 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 Fund determines that its estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, the Fund accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.

NOTE 10 - SUBSEQUENT EVENTS

On October 2, 2025, the Fund declared a distribution of $0.06 per Common Share, which was paid on November 3, 2025 to common shareholders of record on October 15, 2025.

On November 3, 2025, the Fund declared a distribution of $0.06 per Common Share, which will be paid on December 1, 2025 to common shareholders of record on November 17, 2025.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees of
XAI Madison Equity Premium Income Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of XAI Madison Equity Premium Income Fund (the “Fund”) as of September 30, 2025, and the related statements of operations and changes in net assets, and the financial highlights for the period from January 1, 2025 through September 30, 2025, and the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2025, and the results of its operations, the changes in net assets, and the financial highlights for the period from January 1, 2025 through September 30, 2025, and the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

The Fund’s financial statements and financial highlights for the years ended December 31, 2023, and prior, were audited by other auditors whose report dated February 26, 2024, expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2025, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more of the investment companies advised by XA Investments LLC since 2021.

COHEN & COMPANY, LTD.

Cleveland, Ohio
November 26, 2025

CERTAIN CHANGES OCCURRING DURING THE PRIOR FISCAL YEAR

September 30, 2025 (Unaudited)

The following information is a summary of certain changes during the most recent fiscal year. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund.

CHANGE IN NON-FUNDAMENTAL INVESTMENT POLICIES

None.

MARKET AND NET ASSET VALUE INFORMATION

September 30, 2025 (Unaudited)

The Fund’s current outstanding Common Shares are listed on the NYSE. The Fund’s Common Shares commenced trading on the NYSE on May 6, 2004.

The Common Shares have traded both at a premium and at a discount to the Fund’s net asset value per share. Although the Common Shares recently have traded at a premium to net asset value, there can be no assurance that this will continue after the offering nor that the Common Shares will not trade at a discount in the future. Shares of closed-end investment companies frequently trade at a discount to net asset value. The Fund’s net asset value will be reduced immediately following an offering of the Common Shares due to the costs of such offering, which will be borne entirely by the Fund. The sale of Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may result in downward pressure on the market price for Common Shares.

The following table sets forth, for each of the periods indicated, the high and low closing market prices for the Common Shares on the NYSE, the net asset value per Common Share and the premium or discount to net asset value per Common Share at which the Common Shares were trading.

As of September 30, 2025, the last reported sale price, net asset value per Common Share and percentage discount to net asset value per Common Share was $6.17, $6.48 and 4.78%, respectively.

The Fund cannot predict whether its Common Shares will trade in the future at a premium to or discount from net asset value, or the level of any premium or discount. Shares of closed-end investment companies frequently trade at a discount from net asset value. As a result of recent market conditions, the Fund’s net asset value may fluctuate significantly.

INVESTMENT OBJECTIVE AND POLICIES

September 30, 2025 (Unaudited)

Common Stocks

Common stocks represent the residual ownership interest in the issuer and holders of common stock are entitled to the income and increase in the value of the assets and business of the issuer after all of its debt obligations and obligations to preferred stockholders are satisfied. Common stocks generally have voting rights. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.

The Fund employs an option strategy, as described below, of writing covered call options on common stocks. The Fund may also, to the extent consistent with its policy of writing covered call options on at least 80% of the total assets of the Fund, hold common stocks on which covered call options are not written.

Options—In General

The Fund will pursue its primary investment objective by employing an option strategy of writing (selling) covered call options on common stocks comprising 80% of the total assets of the Fund. The Fund seeks to produce a high level of current income and gains generated from option writing premiums and, to a lesser extent, from dividends. An option on a security (or an index) is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or “strike” price. The writer of a call option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price. The writer of a put option has the obligation upon exercise of the option to pay the exercise price upon delivery of the underlying security.

The Fund may write call options and put options only if they are “covered.” In the case of a call option on a credit instrument or other security, the option is covered if the Fund owns the instrument underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or other liquid assets in such amount are segregated by its custodian) upon conversion or exchange of other instruments held by the Fund.

INVESTMENT OBJECTIVE AND POLICIES
September 30, 2025 (Continued) (Unaudited)

A call option written on an instrument is also “covered” if the Fund does not hold the underlying instrument or have the right to acquire it (a so- called “naked” call option), but the Fund segregates liquid assets in an amount equal to the contract value of the position (minus any collateral deposited with a broker-dealer), on a mark-to-market basis.

For a call option on an index, the option is covered if the Fund segregates liquid assets in an amount equal to the contract value of the index. A call option is also covered if the Fund holds a call on the same index or security as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Fund in segregated liquid assets. A put option on a security or an index is covered if the Fund segregates liquid assets equal to the exercise price. A put option is also covered if the Fund holds a put on the same security or index as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in segregated liquid assets. Obligations under written call and put options so covered will not be construed to be “senior securities” for purposes of the Fund’s investment restrictions concerning senior securities and borrowings.

A put option written by the Fund is “covered” if the Fund segregates liquid assets equal to the exercise price. A put option is also covered if the Fund holds a put on the same security as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in segregated liquid assets.

If an option written by the Fund expires unexercised, the Fund realizes on the expiration date a capital gain equal to the premium the Fund received at the time the option was written. If an option purchased by the Fund expires unexercised, the Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange-traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when the Fund desires.

The Fund may sell put or call options it has previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option when purchased. The Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. Net gains from the Fund’s option strategy will be short-term capital gains which, for federal income tax purposes, will constitute net investment company taxable income. See “Tax Matters.”

The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security in relation to the exercise price of the option, the volatility of the underlying security, and the time remaining until the expiration date. The premium paid for a put or call option purchased by the Fund is an asset of the Fund. The premium received for an option written by the Fund is recorded as an asset and equivalent liability. The Fund then adjusts the liability to the market value of the option. The value of an option purchased or written is marked to market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices.

Call Options and Covered Call Writing

The Fund will not purchase call options as an investment. It will follow a strategy known as “covered call option writing,” which is a strategy designed to produce income and offset a portion of a market decline in the underlying common stock. This strategy will be the Fund’s primary investment strategy. The Fund will only “sell” or “write” options on common stocks held in the Fund’s portfolio. It may not sell “naked” call options, i.e. options representing more shares of the stock than are held in the portfolio.

For conventional listed call options, the option’s expiration date can be up to nine months from the date the call options are first listed for trading. Longer-term call options can have expiration dates up to three years from the date of listing. It is anticipated that most options that are written against Fund stock holdings will be repurchased prior to the option’s expiration date, generating a gain or loss in the options. If the options were not to be repurchased, the option holder would exercise their rights and buy the stock from the Fund at the strike price if the stock traded at a higher price than the strike price. In general, the Fund intends to continue to hold its common stocks rather than allowing them to be called away by the option holders.

Put Options

Put options are contracts that give the holder of the option, in return for a premium, the right to sell to the writer of the option the security underlying the option at a specified exercise price at any time during the term of the option. To a limited extent, but not more than 20% of the Fund’s total assets, the Fund may utilize a strategy in which it will own shares of a common stock, write (sell) call options and write (sell) put options. This strategy may produce a considerably higher return than the Fund’s primary strategy of covered call writing, but involves a higher degree of risk and potential volatility. To offset some of the risk of a larger potential decline in the event the overall stock market has a sizeable short-term or intermediate-term decline, the Fund will purchase put options on certain ETFs (exchanged traded funds) that trade like common stocks but represent certain market indices (such as the Nasdaq 100 or S&P 500) that correlate with the mix of common stocks held in the Fund’s portfolio.

Preferred Stocks

Preferred securities are generally equity securities of the issuer that have priority over the issuer’s common shares as to the payment of dividends (i.e., the issuer cannot pay dividends on its common shares until the dividends on the preferred shares are current) and as to the payout of proceeds of bankruptcy or other liquidation, but are subordinate to an issuer’s senior debt and junior debt as to both types of payments. Additionally, in a bankruptcy or other liquidation, preferred securities are generally subordinate to an issuer’s trade creditors and other general obligations.

Preferred securities pay a dividend, typically contingent both upon declaration by the issuer’s board and on the existence of current earnings (or retained earnings) in sufficient amount to source the payment. Preferred securities typically have no ordinary right to vote for the board of directors, except in some cases voting rights may arise if the issuer fails to pay the preferred share dividends. Preferred securities may be perpetual or have a term and typically have a fixed liquidation (or “par”) value.

INVESTMENT OBJECTIVE AND POLICIES
September 30, 2025 (Continued) (Unaudited)

Hybrid-preferred securities often behave as investments similarly to traditional preferred securities and are regarded by investors as being part of the preferred securities market. Hybrid-preferred securities possess varying combinations of features of both debt and preferred shares, and they may constitute senior debt, junior debt or preferred shares in an issuer’s capital structure. As such, hybrid-preferred securities may not be subordinate to a company’s debt securities (as are traditional preferred securities). Given the various debt and equity characteristics of hybrid-preferred securities, whether a hybrid-preferred security is classified as debt or equity for purposes of reporting the Fund’s portfolio holdings may be based on the portfolio managers’ determination as to whether its debt or preferred features are preponderant, or based on the assessment of an independent data provider. Such determinations may be subjective.

Dividend or interest payments on preferred securities may be cumulative or non-cumulative and often can be skipped or deferred, without limitation. The dividend rates on preferred securities may be fixed or floating, or convert from fixed to floating at a specified future time. Floating rate and fixed-to-floating-rate preferred securities may be traditional preferred or hybrid-preferred securities. Floating rate preferred securities pay a rate of income that resets periodically based on short- and/or longer-term interest rate benchmarks. If the associated interest rate benchmark rises, the return offered by the floating rate security may rise as well, making such securities less price-sensitive to rising interest rates (or yields). Similarly, a fixed-to-floating-rate security may be less price-sensitive to rising interest rates (or yields), because the period over which the rate of payment is fixed is shorter than the maturity term of the security, after which period a floating rate of payment applies.

Convertible Securities

A convertible security is a preferred stock, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both fixed income and equity securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable non-convertible securities. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.

The market value of a convertible security generally is a function of its “investment value” and its “conversion value.” A security’s “investment value” represents the value of the security without its conversion feature (i.e., a comparable nonconvertible fixed-income security). The investment value is determined by, among other things, reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer’s capital structure. A security’s “conversion value” is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or a preferred security in the sense that its market value will not be influenced greatly by fluctuations in the market price of the underlying security into which it can be converted. Instead, the convertible security’s price will tend to move in the opposite direction from interest rates. Conversely, if the conversion value of a convertible security is significantly above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying stock. In that case, the convertible security’s price may be as volatile as that of the common stock. Because both interest rate and market movements can influence its value, a convertible security is not generally as sensitive to interest rates as a similar fixed-income security, nor is it generally as sensitive to changes in share price as its underlying stock.

The Fund’s investments in convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid—that is, the Fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the Fund. The Fund’s investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities (of the same or a different issuer) at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. For issues where the conversion of the security is not at the option of the holder, the Fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

Investment Grade Debt Securities

The Fund may invest in investment grade bonds of varying maturities issued by corporations and other business entities. Bonds are fixed or variable rate debt obligations, including bills, notes, debentures, money market instruments and similar instruments and securities. Bonds generally are used by corporations as well as governments and other issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest and normally must repay the amount borrowed on or before maturity. Certain bonds are “perpetual” in that they have no maturity date. The Fund considers bonds to be investment grade where such bonds are rated AAA, AA, A or BBB by Standard & Poor’s Rating Group or rated Aaa, Aa, A or Baa by Moody’s Investors Service, Inc., or if unrated, are determined by the Fund’s Sub-Adviser to be of comparable credit quality. Additional information on the ratings of investment grade and other fixed income securities is included in the Fund’s Statement of Additional Information under “Appendix A—Ratings of Investments.”

Credit Quality

With respect to the portion of its assets allocated to preferred securities and debt securities, the Fund may invest without limit in securities that at the time of investment are rated below investment grade (known as “junk bonds”) (Baa or lower) by Moody’s, (BBB or lower) by S&P, or an equivalent rating by a nationally recognized statistical rating agency or that are unrated but judged to be below investment grade by the Sub-Adviser.

Debt Securities

The Fund may invest in debt securities. The Fund may also invest in loans and loan participations. The Fund may invest in debt securities of any rating, including below investment grade and unrated debt securities.

INVESTMENT OBJECTIVE AND POLICIES
September 30, 2025 (Continued) (Unaudited)

Derivative Transactions

The Fund uses various derivatives transactions for hedging and risk management purposes, to facilitate portfolio management and to earn income or enhance total return. The use of derivatives transactions to earn income or enhance total return may be particularly speculative. Derivatives are financial instruments the value of which is derived from a reference instrument. The Fund may engage in a variety of derivatives transactions, including options, swaps, swaptions, futures contracts, options on futures contracts and forward currency contracts and options on forward currency contracts. The Fund may purchase and sell exchange- listed, centrally cleared and off-exchange derivatives. If a derivative is centrally cleared, a central clearing entity stands between the two parties to the trade as counterparty to each. The Fund may utilize derivatives that reference one or more securities, indices, commodities, currencies or interest rates. In addition, the Fund may utilize new techniques, transactions, instruments or strategies that are developed or permitted as regulatory changes occur. Derivatives may allow the Fund to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than transactions in other types of instruments. If the Fund invests in a derivative for speculative purposes, the Fund will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The use of derivatives may involve substantial economic leverage and consequently substantial volatility.

There is no assurance that these derivative strategies will be available at any time, that the Sub-Adviser will determine to use them for the Fund or, if used, that the strategies will be successful.

Foreign Securities

The Fund may invest up to 15% of its total assets in U.S. dollar-denominated securities of foreign issuers. The Fund expects that its investments in foreign securities will consist primarily of sponsored American Depository Receipts (“ADRs”). ADRs are receipts issued by United States banks or trust companies in respect of securities of foreign issuers held on deposit for use in the United States securities markets. Although ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies, they continue to be subject to many of the risks associated with investing directly in foreign securities.

Interest Rate Hedging Transactions

The Fund may enter into interest rate hedging transactions to hedge against interest rate risks inherent in its underlying investments and use of leverage.

Other Investment Companies

As an alternative to holding investments directly, the Fund may also obtain investment exposure to securities in which it may invest directly by investing in other investment companies. The Fund may invest in mutual funds, closed-end funds and exchange-traded funds. Under the 1940 Act, the Fund generally may invest only up to 10% of its total assets in the aggregate in shares of other investment companies and only up to 5% of its total assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. However, pursuant to certain exemptions set forth in the 1940 Act and the rules and regulations promulgated thereunder, the Fund may invest in excess of this limitation provided that certain conditions are met. Further, on October 7, 2020, the SEC adopted Rule 12d1-4, which changed the regulation of investments in other investment companies. Rule 12d1-4 permits closed-end funds to invest in other investment companies in excess of the 1940 Act limits, including those described above, subject to certain conditions.

Investments in other investment companies involve operating expenses and fees at the other investment company level that are in addition to the expenses and fees borne by the Fund and are borne indirectly by Common Shareholders.

Temporary Defensive Investments

During periods in which the Sub-Adviser believes that changes in economic, financial or political conditions make it advisable to maintain a temporary defensive posture, or in order to keep the Fund’s cash fully invested, including the period during which the net proceeds of an offering of securities are being invested, the Fund may, without limitation, hold cash or invest its assets in in short-term investments, including high quality, short-term securities or may invest in short-, intermediate-, or long-term U.S. Treasury bonds and repurchase agreements in respect of those instruments. Short- term investments in which the Fund may invest including obligations of the U.S. Government, its agencies or instrumentalities; commercial paper; and certificates of deposit and bankers’ acceptances. During a temporary defensive period, the Fund may also invest in shares of money market mutual funds. Money market mutual funds are investment companies. As a shareholder in a mutual fund, the Fund will bear its ratable share of its expenses, including management fees. There can be no assurance that such strategies will be successful. The Fund may not achieve its investment objective during a temporary defensive period or be able to sustain its historical distribution levels.

U.S. Government Securities

U.S. government securities include (1) U.S. Treasury obligations, which differ in their interest rates, maturities and times of issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury notes (maturities of one year to ten years) and U.S. Treasury bonds (generally maturities of greater than ten years) and (2) obligations issued or guaranteed by U.S. government agencies and instrumentalities that are supported by any of the following: (i) the full faith and credit of the U.S. Treasury, (ii) the right of the issuer to borrow an amount limited to a specific line of credit from the U.S. Treasury, (iii) discretionary authority of the U.S. government to purchase certain obligations of the U.S. government agency or instrumentality or (iv) the credit of the agency or instrumentality. The Fund also may invest in any other security or agreement collateralized or otherwise secured by U.S. government securities.

Agencies and instrumentalities of the U.S. government include but are not limited to: Federal Land Banks, Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks, Federal Home Loan Banks, FHLMC, FNMA, GNMA, Student Loan Marketing Association, United States Postal Service, Small Business Administration, Tennessee Valley Authority and any other enterprise established or sponsored by the U.S. government. Because the U.S. government generally is not obligated to provide support to its instrumentalities, the Fund will invest in obligations issued by these instrumentalities only if the Sub-Adviser determines that the credit risk with respect to such obligations is minimal.

INVESTMENT OBJECTIVE AND POLICIES
September 30, 2025 (Continued) (Unaudited)

CERTAIN OTHER INVESTMENT PRACTICES

Strategic Transactions and Derivatives. In addition to the option strategies described above, the Fund may, but is not required or expected in any significant extent, to utilize certain strategies for purposes such as seeking to hedge various market risks inherent in the Fund’s portfolio, to manage the effective maturity or duration of income-producing securities in the Fund’s portfolio or in connection with any utilization of financial leverage by the Fund. These strategies may be executed through the use of derivative contracts. In the course of pursuing these investment strategies, the Fund may purchase and sell exchange-listed and over-the- counter put and call options on securities, equity and fixed-income indices and other instruments, purchase and sell futures contracts and options thereon, enter into various transactions such as swaps, caps, floors or collars (collectively, all the above are called “Strategic Transactions”). In addition, Strategic Transactions may also include new techniques, instruments or strategies that are permitted as regulatory changes occur. Certain of these Strategic Transactions, such as options and futures contracts, are described briefly below. For a more complete discussion of the Fund’s investment practices involving Strategic Transactions in derivatives and certain other investment techniques, see “Investment Objectives and Policies—Other Derivative Instruments” in the Fund’s Statement of Additional Information.

Futures Contracts and Options on Futures. The Fund may purchase and sell financial futures contracts and options thereon which are traded on a commodities exchange or board of trade for certain hedging, yield enhancement and risk management purposes. A financial futures contract is an agreement to purchase or sell an agreed amount of securities or currencies at a set price for delivery in the future. These futures contracts and related options may be on debt securities, financial indices, securities indices or U.S. government securities.

When Issued, Delayed Delivery Securities and Forward Commitments. The Fund may enter into forward commitments for the purchase or sale of securities, including on a “when issued” or “delayed delivery” basis, in excess of customary settlement periods for the type of security involved. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring, i.e., a when, as and if issued security. When such transactions are negotiated, the price is fixed at the time of the commitment, with payment and delivery taking place in the future, generally a month or more after the date of the commitment. While it will only enter into a forward commitment with the intention of actually acquiring the security, the Fund may sell the security before the settlement date if it is deemed advisable.

Securities purchased under a forward commitment are subject to market fluctuation, and no interest (or dividends) accrues to the Fund prior to the settlement date.

The Fund will segregate with its custodian cash or liquid securities in an aggregate amount at least equal to the amount of its outstanding forward commitments

Short Sales. Although the Fund has no present intention of doing so, the Fund is authorized to make short sales of securities. A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline. To the extent the Fund engages in short sales, the Fund will not make a short sale, if, after giving effect to such sale, the market value of all securities sold short exceeds 25% of the value of its total assets. Also, the market value of the securities sold short of any one issuer will not exceed either 10% of the Fund’s total assets or 5% of such issuer’s voting securities. The Fund may also make short sales “against the box” without respect to such limitations. In this type of short sale, at the time of the sale, the Fund owns, or has the immediate and unconditional right to acquire at no additional cost, the identical security.

If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss will be increased, by the transaction costs incurred by the Fund, including the costs associated with providing collateral to the broker-dealer (usually cash and liquid securities) and the maintenance of collateral with its custodian. Although the Fund’s gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited.

Repurchase Agreements. Repurchase agreements may be seen as loans by the Fund collateralized by underlying debt securities. Under the terms of a typical repurchase agreement, the Fund would acquire an underlying debt obligation for a relatively short period (usually not more than one week) subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed price and time. This arrangement results in a fixed rate of return to the Fund that is not subject to market fluctuations during the holding period. The Fund will not enter into repurchase agreements with XAI, Madison or any of their affiliates.

Reverse Repurchase Agreements. In reverse repurchase agreement transactions, the Fund sells portfolio securities to financial institutions such as banks and broker-dealers and agrees to repurchase them at a particular date and price. The Fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Proceeds of the sale will be invested in additional instruments for the Fund, and the income from these investments will generate income for the Fund. If such income does not exceed the income, capital appreciation and gain or loss that would have been realized on the securities sold as part of the reverse repurchase transaction, the use of this technique will diminish the investment performance of the Fund compared with what the performance would have been without the use of reverse repurchase transactions.

With respect to any reverse repurchase agreement, the Fund’s Managed Assets (as defined below) shall include any proceeds from the sale of an asset of the Fund to a counterparty in such a transaction, in addition to the value of the underlying asset as of the relevant measuring date. With respect to leverage incurred through investments in reverse repurchase agreements and economically similar transactions, the Fund intends to earmark or segregate cash or liquid securities in accordance with applicable interpretations of the staff of the SEC. As a result of such segregation, the Fund’s obligations under such transactions will not be considered senior securities representing indebtedness for purposes of the 1940 Act and the Fund’s use of leverage through reverse repurchase agreements and economically similar transactions will not be limited by the 1940 Act.

Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will be less than the interest expense and expenses associated with the repurchase agreement, that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase such securities and that the securities may not be returned to the Fund. There is no assurance that reverse repurchase agreements can be successfully employed. In connection with reverse repurchase agreements, the Fund will also be subject to counterparty risk with respect to the purchaser of the securities. If the broker/dealer to whom the Fund sells securities becomes insolvent, the Fund’s right to purchase or repurchase securities may be restricted.

Loans of Portfolio Securities. To increase income, the Fund may lend its portfolio securities to securities broker-dealers or financial institutions if (i) the loan is collateralized in accordance with applicable regulatory requirements and (ii) no loan will cause the value of all loaned securities to exceed 33% of the value of the Fund’s total assets.

INVESTMENT OBJECTIVE AND POLICIES
September 30, 2025 (Continued) (Unaudited)

If the borrower fails to maintain the requisite amount of collateral, the loan automatically terminates and the Fund could use the collateral to replace the securities while holding the borrower liable for any excess of replacement cost over the value of the collateral. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in collateral should the borrower of the securities fail financially. There can be no assurance that borrowers will not fail financially. On termination of the loan, the borrower is required to return the securities to the Fund, and any gain or loss in the market price during the loan would inure to the Fund. If the other party to the loan petitions for bankruptcy or becomes subject to the United States Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a result, under extreme circumstances, there may be a restriction on the Fund’s ability to sell the collateral and the Fund would suffer a loss. See “Investment Objectives and Policies—Loans of Portfolio Securities” in the Fund’s Statement of Additional Information.

RISKS

September 30, 2025 (Unaudited)

Investors should consider the following risk factors and special considerations associated with investing in the Fund. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions over the world, the risks below are heightened significantly compared to normal conditions and therefore subject the Fund’s investments and a shareholder’s investment in the Fund to elevated investment risk, including the possible loss of your entire investment.

RISKS
September 30, 2025 (Continued) (Unaudited)

RISKS
September 30, 2025 (Continued) (Unaudited)