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XA Investments LLC (“XAI”) SUBSCRIPTION SERVICE TERMS AND CONDITIONS

These XAI Subscription Service Terms and Conditions (the “Terms”) together with the applicable subscription order form or invoice (the “Order Form”, collectively with the Terms, the “Agreement”), set forth the terms and conditions governing the access to and use of the Service by the licensee entity set forth in the Order Form (the “Licensee”). The term “Service” means certain compiled data, content, and information, documentation, and functionality provided by XAI to Licensee through a subscription service and further described in the Order Form. The term “Order Form” includes any electronic order form made available to Licensee by XAI for the Service.

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Octagon XAI CLO Income Fund

Class I: OCTIX Class A: OCTAX
Fact Sheet Fund Education Prospectus

As of

Total Managed Assets

NAV

Current distribution rate1

Fund overview

The Fund is a continuously offered closed-end interval fund with monthly distributions and quarterly repurchases. Under normal market conditions, the Fund will invest at least 80% of its net assets in securities of collateralized loan obligation entities (“CLOs”), including CLO debt tranches and CLO equity. The Fund will not invest more than 20% of its Managed Assets in CLO equity. The Fund will purchase CLO Investments in the primary and secondary markets.

Objective

The investment objective of the Fund is to provide high income and total return. There can be no assurance that the Fund will achieve its investment objective, and you could lose some or all of your investment.

Adviser

XA Investments LLC

Sub-Adviser

Octagon Credit Investors, LLC

Snapshot (as of )

Class I Class A
NAV - -
Expense Ratio2 2.18% (Gross/Net) 3.03%/2.53% (Gross/Net)
Investment Minimum $10,000 $2,500
Class I Class A
Ticker -
Distribution Frequency Monthly Monthly
Repurchase Frequency Quarterly Quarterly
CUSIP 67578T206 67578T107
Tax Form 1099 1099

Footnotes are listed at the bottom of the page.

Management

Octagon

Octagon has a 25+ years track record managing institutional client credit portfolios. A leading institutional credit investor with of assets under management (as of ), Octagon serves as the investment sub-adviser for the Fund and is responsible for portfolio management.

About Octagon

As Collateralized Loan Obligation (CLO) investors, Octagon evaluates how a given CLO’s portfolio, structure and manager might affect the risk and value of a given CLO investment. Such judgments rely heavily on Octagon’s experience and skill in synthesizing information into an investment thesis that can withstand the scrutiny of its investment committee. Octagon’s dual role as both a manager and investor in CLOs adds depth of perspective that few firms can match.

Team

The Octagon team—a cohesive, experienced, team of 41 investment specialists—is led by the Octagon investment committee, whose members have worked together for 21 years (on average) across multiple credit cycles.

Portfolio Management

The Octagon portfolio management team dynamically manages the Fund’s portfolio based on its evolving credit market outlook, and continues to search for promising opportunities in the credit markets. The Octagon team meets regularly to monitor portfolios using its robust review process while striving to manage risk via its proprietary internal credit rating and portfolio weighting system.

  • Seeks to optimize relative value
  • Focuses on improving credits to enhance alpha generation
  • Seeks attractive risk-adjusted returns

The Fund will primarily invest in CLO debt securities and will invest to a limited extent in CLO equity securities. Octagon and XAI expect the Fund’s CLO portfolio to perform well in a higher interest rate environment and believe CLO debt is an attractive investment opportunity. The Fund's assets are managed opportunistically primarily within the following investment categories*:

  • CLO debt rated BB and above
  • CLO equity
  • Other floating-rate debt securities

The Fund intends to invest primarily in below investment grade credit instruments but may invest without limitation in investment grade credit instruments. Credit instruments are considered below investment grade quality if rated below Baa3- by Moody’s or below BBB- by S&P or Fitch or, if unrated, judged to be below investment grade quality by Octagon.

At the heart of Octagon’s disciplined investment philosophy is a deep understanding of fundamental credit analysis, enhanced by a process focused on optimizing returns against target risk profiles. Octagon’s investment philosophy combines relative value focus and active portfolio management. Over Octagon’s 25+ year history, it has developed a repeatable and scalable credit selection and investment process.

Octagon’s investment process involves four key steps:

  1. Ongoing assessment of investment opportunities;
  2. Research, analysis and written recommendations with defined investment theses;
  3. Investment committee approval before any credit is considered for investment;
  4. Continual, collaborative monitoring that enhances decision making and risk management.
Octagon Proprietary Evaluations Octagon Proprietary Evaluations

Octagon’s proprietary evaluations of credit, liquidity and collateral quality are a determinant in position size and target weighting. Octagon’s risk management process includes formal portfolio reviews and real-time portfolio monitoring.

Gretchen M. Lam, CFA

Gretchen M. Lam, CFA

Chief Executive Officer

Ms. Lam is a member of Octagon’s Investment Committee and serves as the firm’s Chief Executive Officer. Prior to assuming the Chief Executive Officer position in 2024, Ms. Lam served as a Senior Portfolio Manager across various CLOs, separately managed accounts and commingled funds. She also oversaw the Firm’s Structured Credit (CLO debt & equity) investment strategies. Ms. Lam is a member of the Firm’s ESG Committee.

Ms. Lam joined Octagon in 1999; prior to becoming a Portfolio Manager in 2013, she oversaw Octagon’s investments in the software, business services, finance & insurance, paper & packaging, gaming & lodging, homebuilding and real estate industries. She was also responsible for the Structured Credit exposure held in Octagon’s CLO vehicles.

Ms. Lam attended Babson College where she graduated Summa Cum Laude with a B.S. in Investments. She received her CFA Charter in 2006.

Andrew D. Gordon

Andrew D. Gordon

Executive Chair

Mr. Gordon co-founded Octagon in 1994 and subsequently managed numerous Octagon funds before assuming his current position. He has over 30 years of experience in the below-investment grade leveraged loan and high yield bond asset classes, in both sell-side and buy-side capacities.

Michael B. Nechamkin

Michael B. Nechamkin

Chief Investment Officer, Senior Portfolio Manager

Mr. Nechamkin is a member of Octagon's Investment Committee and serves as a Portfolio Manager across CLOs, Separately Managed Accounts and Commingled Funds. Prior to joining Octagon as Portfolio Manager in 1999, Mr. Nechamkin was a Vice President in the High Yield Research Group at Bankers Trust. Prior to that, he served as a Convertible Securities Analyst at Mabon Securities and a Financial Consultant at Merrill Lynch. He earned a Bachelor and a Master of Talmudic Law, and holds an M.B.A. from the University of Baltimore.

Lauren Law, CFA

Lauren Law, CFA

Senior Portfolio Manager

Ms. Law is a member of Octagon's Investment Committee and serves as a Portfolio Manager across CLOs, Separately Managed Accounts and Commingled Funds. Ms. Law joined Octagon in 2004. In addition, she helps oversee the Firm's Structured Credit (CLO debt and equity) investment strategies. Prior to becoming a Portfolio Manager, Ms. Law was an Investment Team Principal whose coverage areas included healthcare, industrials, financials, business services, and the Firm's CLO debt and equity investments. She holds a Bachelor of Science from Babson College, where she graduated Magna Cum Laude. She received her CFA Charter in 2009.

Sean Gleason

Sean Gleason

Portfolio Manager

Mr. Gleason is a member of Octagon's Investment Committee and serves as a Portfolio Manager across CLOs and a Separately Managed Account. Mr. Gleason is also a member of the Firm's ESG (environmental, social, and corporate governance) Committee. Mr. Gleason joined Octagon in 2010. Prior to becoming a Portfolio Manager, Mr. Gleason was an Investment Team Principal whose coverage areas included the healthcare, retail, gaming, lodging, consumer products, building products and leisure industries. He holds a Bachelor of Science from Babson College, where he graduated Cum Laude.

Maegan Gallagher

Maegan Gallagher

Head of Trading and Capital Markets, Head of Strategic Initiatives

Ms. Gallagher is a member of Octagon's Investment Committee and serves as the firm’s Head of Trading and Capital Markets, and the Head of Strategic Initiatives. In her capacity as Head of Trading and Capital Markets, Ms. Gallagher conducts and oversees Octagon’s daily trading activities, collaborates with other Investment Team members to assess credit and market risk, and manages the firm's financial sponsors and banking relationships. Prior to joining Octagon in 2007, Ms. Gallagher worked in the syndicated and leveraged finance group at J.P. Morgan Securities, Inc. where she primarily covered the technology, media, and telecom sectors. She has a B.S. in Finance from the McDonough School of Business at Georgetown University.

Portfolio composition

Target asset allocation (% as of )

Target asset allocations are measured as a percentage of the Fund's anticipated total investments as of 3/31/2024. Allocations are not GAAP-adjusted, may vary and are subject to change without notice. The total may not equal 100% due to rounding.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end interval funds are subject to investment risks, including the possible loss of principal invested. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be higher or lower than the data shown.

An investment in the Fund presents a number of risks and is not suitable for all investors. Investors should carefully review and consider potential risks before investing. For more detailed information on the specific risks associated with the Fund, please see the “Risks” section of the Fund’s Prospectus here.

Distributions

Frequently Asked Questions

What is Octagon XAI CLO Income Fund (the “Fund”)?

Octagon XAI CLO Income Fund is a non-diversified, closed-end management investment company that continuously offers its shares and is operated as an “interval fund.” The investment objective of the Fund is to provide high income and total return. Under normal market conditions, the Fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in securities of collateralized loan obligation entities (“CLOs”), including the debt tranches of CLOs (“CLO Debt”) and subordinated tranches of CLOs (often referred to as the “residual” or “equity” tranche) (“CLO Equity”). The Fund will not invest more than 20% of its Managed Assets (as defined in this Prospectus) in CLO Equity. The Fund will purchase CLO Investments in the primary and secondary markets. The Fund’s shares are not listed on any exchange.

Who is XA Investments (XAI)?

XAI is a Chicago-based firm founded by XMS Capital Partners in April 2016. XAI believes that the investing public can benefit from new vehicles to access a broad range of alternative investment strategies and managers. XAI provides individual investors with access to institutional-caliber alternative managers. XAI partners with established asset managers with proven capabilities in alternative credit, private debt and select hedge fund strategies. For more information, please visit www.xainvestments.com or click here to read the firm brochure.

Does the Fund pay distributions?

The Fund intends to pay substantially all of its net investment income to shareholders through monthly distributions, and any net realized long-term capital gains at least annually. There is no assurance the Fund will continue to make regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Fund from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital.

Does the Fund have a dividend reinvestment plan (DRIP)?

Yes. Distributions with respect to Shares registered in the name of a broker-dealer or other nominee (that is, in “street name”) will be reinvested in additional Shares under the dividend reinvestment plan (DRIP), unless the broker or nominee does not participate in the DRIP or the Shareholder elects to receive distributions in cash. Investors who own Shares registered in street name should consult their broker-dealer for details regarding reinvestment. All distributions to investors who do not participate in the DRIP will be paid by check mailed directly to the record holder by Paralel Technologies LLC (“Paralel”), as dividend disbursing agent. A participant in the DRIP who wishes to opt out of the DRIP and elect to receive distributions in cash should contact Paralel in writing at the address specified below.

All correspondence concerning the DRIP should be directed to the DRIP Agent, Paralel Technologies LLC, Octagon XAI CLO Income Fund, P.O. Box 2170, Denver, CO 80201.

For more information on the DRIP program, please refer to the Fund prospectus.

What is the distribution payment process for investors who do not participate in the Fund’s DRIP program? Will my dividend post in my investment account on the same day every month?

On the distribution payment date, the Fund pays the distribution to shareholders who do not participate in the Fund’s dividend reinvestment plan (see “Does the Fund have a dividend reinvestment plan (DRIP)” for more information). Such cash distributions are made via check mailed directly to the record holder by Paralel, as the Fund’s distribution disbursing agent. The record holder, often a Shareholder’s broker-dealer or other nominee (“street name” holder), will allocate the cash distributions to its shareholder accounts, or process reinvestment transactions, per its client instructions. Processing times at various record holders may vary depending on each firm’s internal processes. Depending on your firm’s processes, the Fund’s distribution may or may not be posted in your account on the same day every month. Delays processing distributions may occur at your record holder/brokerage firm that are outside of the Fund’s control.

Are distributions taxable to shareholders?

Distributions are generally taxable for stockholders as ordinary income and/or capital gain. The Fund will send each of its U.S. registered stockholders an annual Form 1099 after the calendar year end. Form 1099 details the amounts includible in a U.S. stockholder's taxable income for the year and the source(s) of such income.

How can I receive email alerts from XAI?

To sign up for email alerts regarding fund news, press releases, white papers and webinars, please fill out the form at the bottom of the webpage or contact info@xainvestments.com.

Repurchases

Repurchase Offer Schedule

The Fund provides periodic liquidity to shareholders by making quarterly repurchase offers, at NAV of no less than 5% and no more than 25% of the Fund’s outstanding shares. Shareholders, or their financial representative, will receive written notification of the repurchase offer.

Once the initial invest-up is complete, Fund repurchases will commence in Q4 2024.

First Four Quarters of Repurchases

Q4 2024 Q1 2025 Q2 2025 Q3 2025
Repurchase Notice Date 10/2/2024 1/2/2025 4/2/2025 7/2/2025
Repurchase Request Deadline 11/13/2024 2/12/2025 5/14/2025 8/13/2025
Repurchase Pricing Date 11/19/2024 2/19/2025 5/20/2025 8/19/2025
Repurchase Payment Deadline 11/26/2024 2/26/2025 5/27/2025 8/26/2025

Dates subject to change at the Fund’s discretion.

Repurchase Notice Date: The date on which the Fund will notify each shareholder of record about its next repurchase offer. The notice will include key details and procedures regarding the repurchase offer.

Repurchase Request Deadline: The date by which the Fund must receive repurchase requests submitted by shareholders in response to a repurchase offer or withdrawals or modifications of previously submitted repurchase requests for such repurchase offer.

Repurchase Pricing Date: At the close of business, the Fund determines the NAV applicable to the repurchases of the Fund’s shares.

Repurchase Payment Deadline: The date by which the Fund must pay shareholders for any shares repurchased.

Pricing & fees

Share price and NAV history ()

Pricing history

Date
Share Price
NAV
Premium / Discount
← Swipe to see additional data →
Shareholder Transaction Expenses Class A Class I
Maximum Initial Sales Charge (Load) Imposed On Purchases (as a percentage of offering price)1 2.00% None
Early Withdrawal Charge2 1.00% 1.00%
Dividend Reinvestment Fees None None
ANNUAL EXPENSES (as of 2/15/2024 as a percentage of net assets attributable to shares) Class A Class I
Management Fees3 1.50% 1.50%
Distribution and/or Servicing Fees4 0.85% None
Interest Payment On Borrowed Funds None None
Other expenses5 0.68% 0.68%
Total Annual Fund Operating Expenses6 3.03% 2.18%
Expense Reimbursement6 (0.50%) None
Total annual expenses (After Expense Reimbursement) 2.53% 2.18%
← Swipe to see additional data →

(1) Paralel Distributors LLC is the principal underwriter and distributor of Class A shares and Class I shares and serves in that capacity on a best efforts basis, subject to various conditions. The Fund may be offered through intermediaries that have entered into selling agreements with the Distributor. Intermediaries typically receive the sales load with respect to Class A shares purchased by their clients. The Distributor does not retain any portion of the sales load. Class A shares are sold subject to a maximum sales load of up to 2.00% of the offering price. However, purchases of Class A shares in excess of $100,000 may be eligible for a sales load discount. See the Fund’s prospectus for more information. While neither the Fund nor the Distributor impose an initial sales charge on Class I shares, if an investor buys Class I shares through certain intermediaries, they may directly charge the investor transaction or other fees in such amount as they may determine. Investors should consult with their intermediary for additional information. Investors should consult with their intermediary about the sales load and any additional fees or charges their intermediary might impose on each class of shares.

(2) The Fund imposes early withdrawal charges of up to 1.00% on shares accepted for repurchase that have been held by an investor for less than one year. Payment of the early withdrawal charge is made by netting the charge against the repurchase proceeds. The early withdrawal charge is retained by the Fund for the benefit of remaining shareholders. If a shareholder has made multiple purchases and tenders a portion of its shares, the early withdrawal charge is calculated on a first-in/first-out basis. See “Periodic Repurchase Offers” in the Fund’s prospectus for additional information about share repurchases.

(3) The Fund pays XAI an annual management fee, payable monthly in arrears, in an amount equal to 1.50% of the Fund’s average daily Managed Assets. XAI pays to Octagon a sub-advisory fee out of the management fee received by the XAI.

(4) The Fund may charge a distribution and/or shareholder servicing fee totaling up to 0.85% per year on Class A shares.

(5) "Other Expenses” are estimated based on Fund Managed Assets of $125 million and anticipated expenses for the first year of the Fund’s operations. “Other Expenses” include professional fees and other expenses, including, without limitation, SEC filing fees, printing fees, administration fees, transfer agency fees, custody fees, fees charged by PINE, trustee fees, insurance costs and financing costs. XAI and Octagon have agreed to (i) pay all organizational expenses of the Fund and (ii) pay or reimburse offering expenses of the Fund incurred through the date of effectiveness of this registration statement. Such amounts are not subject to recoupment by the XAI and Octagon.

(6) XAI has agreed to enter into an Expense Limitation and Reimbursement Agreement with the Fund through the 18-month anniversary of the Fund’s inception of operations (the “Limitation Period”) during which XAI has agreed to reimburse the Fund for up to 0.50% of Distribution and/or Shareholder Servicing Fees paid and/or accrued. XAI may at its discretion, agree to extend the Limitation Period for additional period(s) of one year on an annual basis. For three years following a reimbursement XAI may recoup amounts reimbursed to the Fund only if the recoupment would not cause the Fund’s total annual fund operating expenses, excluding certain “excluded expenses,” to exceed the expense ratio at the time the reimbursement was made. “Excluded expenses” are management fees, distribution and/or servicing fees, taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with SEC Form N-2), expenses incurred in connection with any merger or reorganization, and extraordinary expenses, such as litigation expenses.

Risks

An investment in the Fund is subject to investment risk, including the possible loss of your entire investment. There can be no assurance that the Fund’s objectives will be achieved. The Fund is a non-diversified, closed-end management investment company that continuously offers its shares. The Fund does not currently intend to list its shares for trading on any national securities exchange and does not expect any secondary trading market in the shares to develop. The shares are, therefore, not readily marketable. Even though the Fund will make quarterly repurchase offers to repurchase a portion of the shares to try to provide liquidity to shareholders, there is no guarantee that an investor will be able to sell all the shares the investor desires to sell in the repurchase offer. You should consider the shares to be illiquid. The Fund is suitable only for investors who can bear the risks associated with the limited liquidity of the Fund and should be viewed as a long-term investment. The Fund invests at least 80% of its assets in CLO debt and CLO subordinated notes (commonly referred to as CLO “equity”) which often involve risks that are different from or more acute than risks associated with other types of credit instruments. CLOs are a type of structured credit instrument. Holders of structured credit instruments bear risks of the underlying investments, index or reference obligation as well as risks associated with the issuer of the instrument, which is often a special purpose vehicle, and may also be subject to counterparty risk. The Fund intends to invest primarily in below investment grade instruments, which are commonly referred to as “high yield” securities or “junk” bonds. Investments in below investment grade securities are considered predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due and such issuers are not perceived as strong financially as those with higher credit ratings. Investors should review the "Risks" section in the Fund’s most recent Prospectus for a detailed discussion of factors investors should consider carefully before deciding to invest in the Fund’s Shares.

Distributions: The Fund will ordinarily pay distributions from its net investment income, if any, once a month; however, the amount of distributions that the Fund may pay, if any, is uncertain. However, the Fund may pay any distributions from any permitted source and, from time to time, all or a portion of a distribution maybe a return of capital and capital gains. Distributions are not guaranteed in frequency or amount.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Performance data quoted represents past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the data shown.

The Octagon XAI CLO Income Fund is distributed by Paralel Distributors LLC. Paralel is not affiliated with XA Investments LLC or Octagon Credit Investors, LLC.

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. To obtain a prospectus containing this and other information, please call 855-XAI-NVST (924-6878) or download the file here. Please read the prospectus carefully before you invest.

Footnotes

1The current distribution rate is calculated as the most recent distribution annualized and divided by the Class I Shares net asset value per share on the date set forth above. Distributions are intended to be paid from net investment income; however, distributions may be funded from any source including return of capital.

2XAI has agreed to enter into an Expense Limitation and Reimbursement Agreement with the Fund through the 18-month anniversary of the Fund’s inception of operations (the “Limitation Period”) during which XAI has agreed to reimburse the Fund for up to 0.50% of Distribution and/or Shareholder Servicing Fees paid and/or accrued. XAI may jointly at its discretion, agree to extend the Limitation Period for additional period(s) of one year on an annual basis. For three years following a reimbursement XAI may recoup amounts reimbursed to the Fund only if the recoupment would not cause the Fund’s total annual fund operating expenses, excluding certain “excluded expenses,” to exceed the expense ratio at the time the reimbursement was made. “Excluded expenses” are management fees, distribution and/or servicing fees, taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with SEC Form N-2), expenses incurred in connection with any merger or reorganization, and extraordinary expenses, such as litigation expenses.

3The Fund may distribute more or less than the amount of the net investment income earned in a particular period. There is no assurance the Fund will pay regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Fund from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital.

4The ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade rated corporate debt publicly issued in the US domestic market. To qualify for inclusion in the index, securities must have a below investment grade rating (based on an average of Moody's, S&P, and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest. Accrued interest is calculated assuming next-day settlement. Cash flows from bond payments that are received during the month are retained in the index until the end of the month and then are removed as part of the rebalancing. Cash does not earn any reinvestment income while it is held in the index. It is not possible to invest directly in this index.

5The Morningstar LSTA Leveraged Loan Index (“Morningstar LSTA LLI”) is a market value weighted index designed to measure the performance of the US leveraged loan market. The index universe comprises syndicated, senior secured, US-dollar denominated leveraged loans covered by Morningstar PitchBook/LCD, a Morningstar Company. Loan facilities included in the LLI must have a one year (at inception) minimum term, an initial minimum spread of LIBOR/SOFR +1.25%, and a minimum size of $50mm (initially funded). Refinitiv/LPC Mark-to-Market Pricing is used to price each loan in the index. Refinitiv/LPC Mark-to Market Pricing is based on bid/ask quotes gathered from dealers and is not based upon derived pricing models. The index uses the average bid for its market value calculation. It is not possible to invest directly in this index.

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