The
information in this Prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer of sale is not permitted.
Preliminary
Prospectus Dated August 3, 2023
Subject
to Completion
Prospectus
[_____],
2023
MADISON
ETFs®
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Madison
Mosaic Income Opportunities ETF |
MIOP |
Madison
Short-Term Strategic Income ETF |
MSTI |
Madison
Aggregate Bond ETF |
MAGG |
Madison
Covered Call ETF |
CVRD |
Madison
Dividend Value ETF |
DIVL |
Principal
U.S. Listing Exchange: NYSE
Arca, Inc. |
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Except
when aggregated in Creation Units, the shares are not redeemable securities of
the Fund.
The
Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
Please
note that an investment in any of these funds is not a deposit in a financial
institution and is neither insured nor endorsed in any way by any financial
institution or government agency.
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page intentionally left blank.)
MADISON
ETFs®
TABLE
OF CONTENTS
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Fund
Summaries |
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Madison
Mosaic Income Opportunities ETF |
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Madison
Short-Term Strategic Income ETF |
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Madison
Aggregate Bond ETF |
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Madison
Covered Call ETF |
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Madison
Dividend Value ETF |
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Additional
Investment Strategies and Risks |
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How
to Buy and Sell Shares |
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Premium/Discount
Information |
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Management
of the Funds |
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Portfolio
Management |
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Distribution
Plan |
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Other
Information |
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Financial
Highlights |
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More
Information About Madison ETFs |
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Madison
Mosaic Income Opportunities ETF Fund
Summary
Investment
Objective
The
Madison Mosaic Income Opportunities ETF (the “Fund”)
seeks to generate a high level of current income while maintaining the
opportunity for capital appreciation.
Fees
and Expenses
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example below.
Shareholder
Fees: None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fees |
0.20 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses(1) |
None |
Acquired
Fund Fees and Expenses(1) |
0.50 |
% |
Total
Annual Fund Operating Expenses |
0.70 |
% |
(1)“Other
Expenses” and “Acquired Fund Fees and Expenses” are estimates based on the
expenses the Fund expects to incur for the current fiscal year.
Example:
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund has no operational history and therefore no historical turnover
rate.
Principal
Investment Strategies
The
Fund invests primarily in shares of other registered investment companies (the
“underlying
funds”).
The Fund's allocation among underlying funds will be based on an asset
allocation model developed by Madison Asset Management, LLC (“Madison”
or the “Advisor”),
the Fund’s investment advisor. Toroso Investments, LLC (“Toroso” or the
“Subadvisor”) is responsible for implementing the Fund’s investment program by,
among other things, trading portfolio securities and performing related
services, and providing tax optimization services. Under normal circumstances,
the Fund’s total net assets will be allocated among underlying funds, including
exchange traded funds (“ETFs”),
with exposure to various asset classes, including bonds, common stocks, real
estate securities, foreign market bonds and stocks and money market instruments.
The Fund's allocation to underlying funds will vary however, under normal market
conditions, the Fund's portfolio managers generally attempt to target a 60% bond
funds and 40% equity funds investment allocation. Nevertheless, underlying bond
funds (which may hold investment grade, non-investment grade securities (i.e.,
"junk" bonds) and mortgage- or asset-backed securities) may constitute up to 80%
of the Fund's assets. Investments in non-investment grade bond funds may not
exceed 50% of fund assets.
The
balance between the two main asset classes of the Fund (i.e., fixed income
investing and equity investing) is determined after reviewing the risks and
current yields associated with each type of investment, with the goal of
meaningful risk reduction as market conditions demand.
Underlying
funds in which the Fund invests may include funds advised by the Advisor and/or
its affiliates, including other Madison ETFs and Mutual Funds (the “affiliated
underlying funds”).
The
Advisor may employ multiple analytical approaches to determine the appropriate
allocation among the underlying funds, including:
•Macroeconomic
analysis.
This approach analyzes high frequency economic (e.g. monetary/fiscal policy,
money supply, inflation, manufacturing/services production/new orders, personal
income and expenditures, etc.) and market data (e.g. interest rates and spread
differentials, currencies, commodity prices, etc.) across the global markets in
an effort to identify attractive investment opportunities in countries, regions
and/or asset classes by seeking to determine economic and market cycle
positioning.
•Fundamental
analysis.
This approach reviews fundamental asset class valuation data (e.g. P/E, P/S,
EV/Sales multiples, free cash flow yield, etc.) to determine the absolute and
relative attractiveness of existing and potential investment opportunities in
relation to the identified macroeconomic and market cycle.
•Correlation
analysis.
This approach considers the degree to which returns in different asset classes
do or do not move together, and the Fund’s aim to achieve a favorable overall
risk and return profile by utilizing the data for position sizing and overall
portfolio composition. The analysis considers both longer-term (3 to 5 years) as
well as short-term correlations.
In
addition, the Advisor has a flexible mandate that permits the Advisor, in its
sole discretion, to materially reduce equity risk exposures when and if
conditions are deemed to warrant such an action.
Principal
Risks
The
Fund is a fund of funds, meaning that it invests primarily in the shares of
underlying funds, including ETFs. Thus, the Fund’s investment performance and
its ability to achieve its investment goal are directly related to the
performance of the underlying funds in which it invests. Each underlying fund’s
performance, in turn, depends on the particular securities in which that
underlying fund invests and the expenses of that underlying fund. Accordingly,
the Fund is subject to the risks of the underlying funds in direct proportion to
the allocation of its assets among the underlying funds.
You
could lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the Fund’s investment objective will be achieved. The order of
the below risk factors does not indicate the significance of any particular risk
factor.
Asset
Allocation Risk.
The Fund is subject to asset allocation risk, which is the risk that the
selection of the underlying funds and the allocation of the Fund’s assets among
the various asset classes and market segments will cause the Fund to
underperform other funds with a similar investment objective.
Equity
Risk.
The Fund, through the underlying funds, is subject to equity risk. Equity risk
is the risk that securities held by the Fund will fluctuate in value due to
general market or economic conditions, perceptions regarding the industries in
which the issuers of securities held by the Fund participate, and the
circumstances and performance of companies whose securities the Fund holds. In
addition, while broad market measures of common stocks have historically
generated higher average returns than fixed income securities, common stocks
have also experienced significantly more volatility in those
returns.
Mortgage-Backed
Securities Risk.
The Fund may own obligations backed by mortgages issued by a government agency
or through a government-sponsored program. If the mortgage holders prepay
principal during a period of falling interest rates, the Fund could be exposed
to prepayment risk. In that case, the Fund would have to reinvest the proceeds
at a lower interest rate. The security itself may not increase in value with the
corresponding drop-in rates since the prepayment acts to shorten the maturity of
the security.
Real
Estate Investment Risk.
Companies that invest in real estate, such as real estate investment trusts
(“REITs”) and real estate holding and operating companies, expose investors to
the risks of owning real estate directly, as well as to risks that relate
specifically to the way in which real estate companies are organized and
operated. Real estate is highly sensitive to general and local economic
conditions and developments and is characterized by strong competition and
periodic overbuilding. REITs generally derive their income from rents on the
underlying properties or interest on the underlying loans, which can
significantly impact their value. REITs are more susceptible to risks associated
with the ownership of the real estate and the real estate industry in general.
Real estate companies, including REITs, may utilize leverage (and some may be
highly leveraged), which increases investment risk and the risk normally
associated with debt financing, and could potentially increase the Fund’s
losses.
Money
Market and Short-Term Securities Risk.
To the extent the Fund holds cash or invests in money market or short-term
securities, the Fund may be less likely to achieve its investment objective. In
addition, it is possible that the Fund’s investments in these instruments could
lose money.
Debt
Securities Risk.
Investments in debt securities subject the holder to the credit risk of the
issuer. Credit risk refers to the possibility that the issuer or other obligor
of a security will not be able or willing to make payments of interest and
principal when due. Generally, the value of debt securities will change
inversely with changes in interest rates. To the extent that interest rates
rise, certain underlying obligations may be paid off substantially slower than
originally anticipated and the value of those securities may fall sharply.
During periods of falling interest rates, the income received by the Fund may
decline. If the principal on a debt security is prepaid before expected, the
prepayments of principal may have to be reinvested in obligations paying
interest at lower rates. Debt securities generally do not trade on a securities
exchange making them generally less liquid and more difficult to value than
common stock.
Interest
Rate Risk.
To the extent that the Fund invests in underlying funds that invest in debt
securities, the Fund will be subject to interest rate risk,
which is the risk that the value of the debt securities in an underlying
security' portfolio will decline because of rising market interest rates.
Interest rate risk is generally lower for shorter term debt securities and
higher for longer-term debt securities. Typically, a rise in interest rates
causes a decline in the market value of income-bearing securities. When interest
rates rise, bond prices fall; generally, the longer a bond’s maturity, the more
sensitive it is to this risk.
Credit
Risk.
The
Fund, through the underlying funds, is also subject to credit risk, which
is
the
risk that issuer of a security, or the counterparty to a contract, will default
or otherwise not honor a financial obligation, including that the issuer of a
debt security will be unable to meet its interest or principal payment
obligations when due.
Call
Risk.
To the extent the Fund invests in underlying funds that invest in debt
securities, the Fund will be subject to call risk. If a bond issuer "calls" a
bond held by an underlying fund (i.e., pays it off at a specified price before
it matures), the underlying fund could have to reinvest the proceeds at a lower
interest rate. It may also experience a loss if the bond is called at a price
lower than what the underlying fund paid for the bond.
Extension
Risk.
Extension risk is the risk that, when interest rates rise, certain obligations
will be paid off by the issuer (or other obligated party) more slowly than
anticipated, causing the value of these debt securities to fall. Rising interest
rates tend to extend the duration of debt securities, making their market value
more sensitive to changes in interest rates. The value of longer-term debt
securities generally changes more in response to changes in interest rates than
shorter-term debt securities. As a result, in a period of rising interest rates,
securities may exhibit additional volatility and may lose value.
Prepayment
Risk.
Prepayment risk is the risk that the issuer of a debt security will repay
principal prior to the scheduled maturity date. Debt securities allowing
prepayment may offer less potential for gains during a period of declining
interest rates, as an underlying security may be required to reinvest the
proceeds of any prepayment at lower interest rates. These factors may cause the
value of an investment in an underlying security to change.
Income
Risk.
A security’s income may decline when interest rates fall or if there are
defaults in its portfolio. This decline can occur because an underlying security
may subsequently invest in lower-yielding securities as debt securities in its
portfolio mature, are near maturity or are called, or the underlying security
otherwise needs to purchase additional debt securities.
Inflation
Risk.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the present value of the Fund’s assets and distributions
may decline.
Valuation
Risk.
The price the Fund could receive upon the sale of a security or other asset may
differ from the Fund's valuation of the security or other asset, particularly
for securities or other assets that trade in low volume or volatile markets or
that are valued using a fair value methodology as a result of trade suspensions
or for other reasons. In addition, the value of the securities or other assets
in the Fund's portfolio may change on days or during time periods when
shareholders will not be able to purchase or sell the Fund's
shares.
Non-Investment
Grade Security Risk.
The Fund, through the underlying funds, may invest in non-investment grade
securities (i.e.,
“junk”
bonds). Issuers of non-investment grade securities
are
typically in weak financial health and their ability to pay interest and
principal is uncertain. Compared to issuers of investment-grade bonds, they are
more likely to encounter financial difficulties and to be materially affected by
these difficulties when they do encounter them. “Junk” bond markets may react
strongly to adverse news about an issuer or the economy, or to the perception or
expectation of adverse news.
ETF
Risks.
The Fund may invest in other investment companies, including other ETFs. The
Fund will experience similar risks with respect to its holdings in ETFs as
investing in a portfolio of equity securities or other investments underlying
the ETF, although lack of liquidity in an ETF could result in it being more
volatile than the underlying securities. Additionally, the market prices of ETFs
will fluctuate in accordance with both changes in the market value of their
underlying portfolio securities and due to supply and demand for the instruments
on the exchanges on which they are traded (which may result in their trading at
a discount or premium to their net asset values). Index-based ETF investments
may not replicate exactly the performance of their specific index because of
transaction costs and because of the temporary unavailability of certain
component securities of the index. Actively-managed ETFs may not produce the
desired result of its investment objective(s), meet relevant benchmarks or
perform as well as other funds with similar objectives. As a shareholder in
other ETFs, the Fund bears its proportionate share of each ETF's expenses,
subjecting Fund shareholders to duplicative expenses.
Foreign
Security Risk.
Investments in foreign securities involve risks relating to currency
fluctuations and to political, social and economic developments abroad, as well
as risks resulting from differences between the regulations to which U.S. and
foreign issuers and markets are subject. These risks may be greater in emerging
markets. The investment markets of emerging countries are generally more
volatile than markets of developed countries with more mature economies.
New
Fund Risk.
The
Fund is new and has no performance history or assets as of the date of this
prospectus. The Fund expects to have fewer assets than larger funds. Like other
new funds, large inflows and outflows may impact the Fund’s market exposure, and
in turn, the Fund’s returns for limited periods of time.
Market
Risk.
The Fund, through the underlying funds, is subject to market risk, which is the
risk that the value of an investment may fluctuate in response to stock market
movements. Certain of the underlying funds may invest in the equity securities
of smaller companies, which may fluctuate more in value and be more thinly
traded than the general market.
Performance
The
Fund does not have a performance history. Once available, the Fund’s performance
information, and information that gives some indication of the risks of an
investment in the Fund by comparing the Fund’s performance with a broad measure
of market performance, will be available on the Fund’s website at
www.madisonfunds.com.
The
Fund’s past performance (before and after taxes) is not necessarily an
indication of how the Fund will perform in the future.
Management
Investment
Advisor
Madison
Asset Management, LLC
Investment
Subadvisor
Toroso
Investments, LLC
Portfolio
Managers
The
Madison Mosaic Income Opportunities ETF is co-managed by Patrick Ryan, CFA and
Stuart Dybdahl, CFA, CAIA. The portfolio managers are primarily and jointly
responsible for the day-to-day management of the Fund.
Mr.
Ryan, Head of Multi-Asset Solutions and Portfolio Manager of Madison, has
co-managed the Fund since the Funds' inception in 2023. Mr. Dybdahl, Vice
President and Portfolio Manager/Analyst of Madison has co-managed the Fund since
the Funds inception in 2023.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask spread”).
Recent information, including the Fund’s net asset value, market price, premiums
and discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at www.madisonfunds.com.
Tax
Information
Distributions
from the Fund may be taxed as ordinary income or long-term capital gains.
Dividends and capital gains distributions you receive from the Fund are subject
to federal income taxes and may also be subject to state and local taxes, unless
you are tax-exempt or your account is tax-exempt or tax-deferred (in which case,
such distributions may be taxable upon withdrawal).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or trust company), the Fund and the Fund’s
distributor or its affiliates may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
Madison
Short-Term Strategic Income ETF Fund
Summary
Investment
Objective
The
Madison Short-Term Strategic Income ETF (the “Fund”)
seeks to generate a high level of current income.
Fees
and Expenses
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example below.
Shareholder
Fees: None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
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Management
Fees |
0.40 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses(1) |
None |
Total
Annual Fund Operating Expenses |
0.40 |
% |
(1)“Other
Expenses” are estimates based on the expenses the Fund expects to incur for the
current fiscal year.
Example:
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund has no operational history and therefore no historical turnover
rate.
Principal
Investment Strategies
Under
normal market conditions, the Fund invests at least 80% of its net assets (plus
any borrowings for investment purposes) in bonds. To keep current income
relatively stable and to limit share price volatility, the Fund emphasizes
investment grade securities and maintains a short (typically 3.5 years or less)
average portfolio duration, with the goal of being between 75-125% of the market
benchmark duration (for this purpose, the benchmark used is Bloomberg US
Government/Credit Float Adjusted 1-5 Year Index, the duration of which as of
June 30, 2023 was 2.62 years). The maximum average duration of any individual
portfolio security will be 8 years. Duration is an approximation of the expected
change in a debt security’s price given a 1% move in interest rates, using the
following formula: change in debt security value = (change in interest rates) x
(duration) x (-1). By way of example, assume XYZ company issues a five-year bond
which has a duration of 4.5 years. If interest rates were to instantly increase
by 1%, the bond would be expected to decrease in value by approximately
4.5%.
Madison
Asset Management, LLC (“Madison” or the “Advisor”) considers, among other
things, credit risk, sector exposure and yield curve positioning in selecting
securities for the Fund. Toroso Investments, LLC (“Toroso” or the “Subadvisor”)
is responsible for implementing the Fund’s investment program by, among other
things, trading portfolio securities and performing related services, and
providing tax optimization services. The Fund generally holds 100-500 individual
securities in its portfolio at any given time and may invest in the following
instruments:
•Up
to 90% of its assets in corporate debt securities: securities issued by domestic
corporations;
•U.S.
Government debt securities: securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; and
•Up
to 25% of its assets in non-investment grade debt securities (securities not
rated within the four highest categories (i.e., “junk bonds”) or non-rated debt
securities (securities issued or guaranteed by corporations, financial
institutions, and others which, although not rated by a national rating service,
are considered by Madison to have an investment quality equivalent to those
categories in which the Fund is permitted to invest).
•Up
to 50% in asset-backed, mortgage-backed and commercial mortgage-backed
securities as well as collateralized loan obligations: securities issued or
guaranteed by special purpose corporations and financial institutions that
represent direct or
indirect
participation in, or are collateralized by, an underlying pool of assets. The
types of assets that can be “securitized” include, among others, residential or
commercial mortgages, credit card receivables, automobile loans, and other
assets.
Madison
may alter the composition of the Fund with regard to quality and maturity and
may sell securities prior to maturity. Under normal market conditions, however,
turnover for the Fund is generally not expected to exceed 100%. Sales of fund
securities may result in capital gains. This can occur any time Madison sells a
bond at a price that was higher than the purchase price, even if Madison does
not engage in active or frequent trading. Madison’s intent when it sells bonds
is to “lock in” any gains already achieved by that investment or, alternatively,
prevent additional or potential losses that could occur if Madison continued to
hold the bond. Turnover may also occur when Madison finds an investment that
could generate a higher return than the investment currently held. However,
increasing portfolio turnover at a time when Madison’s assessment of market
performance is incorrect could lower investment performance. The Fund pays
implied brokerage commissions when it purchases or sells bonds, which is the
difference between the bid and ask price. As a result, as portfolio turnover
increases, the cumulative effect of this may hurt Fund performance. Under normal
market conditions, the Fund will not engage in active or frequent trading of its
bonds. However, it is possible that Madison will determine that market
conditions require a significant change to the composition of the Fund’s
portfolio. For example, if interest rates begin to rise, Madison may attempt to
sell bonds in anticipation of further rate increases before they lose more
value. Also, if the Fund experiences large swings in shareholder purchases and
redemptions, Madison may be required to sell bonds more frequently in order to
generate the cash needed to pay redeeming shareholders. Under these
circumstances, the Fund could make a taxable capital gain distribution.
The
Fund may invest up to 10% of its net assets in shares of other registered
investment companies that principally invest in fixed income securities. The
Fund may also invest, without limit, in securities that have not been registered
under the Securities Act of 1933 (the “Securities Act”) and continue to be
subject to restrictions on resale, securities held by control persons of the
issuer and securities that are subject to contractual restrictions on their
resale (collectively, “restricted securities”). Restricted securities include,
without limitation, securities eligible for purchase and sale pursuant to Rule
144A under the Securities Act (“Rule 144A”) and other securities issued in
private placements. Under normal market conditions, the Fund will limit its
investments in Rule 144A securities to securities with $100 million or more in
principal amount outstanding as of the time of their original
issuance.
The
Fund’s investment strategy reflects Madison’s general “Participate and
Protect®”
investment philosophy. Madison’s expectation is that investors in the Fund will
participate near fully in market appreciation during bull markets and experience
something less than full participation during bear markets compared with
investors in portfolios holding more speculative and volatile securities;
therefore, this investment philosophy is intended to represent a conservative
investment strategy. There is no assurance that Madison’s expectations regarding
this investment strategy will be realized.
Principal
Risks
You
could lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the Fund’s investment objective will be achieved. The order of
the below risk factors does not indicate the significance of any particular risk
factor.
Debt
Securities Risk.
Investments in debt securities subject the holder to the credit risk of the
issuer. Credit risk refers to the possibility that the issuer or other obligor
of a security will not be able or willing to make payments of interest and
principal when due. Generally, the value of debt securities will change
inversely with changes in interest rates. To the extent that interest rates
rise, certain underlying obligations may be paid off substantially slower than
originally anticipated and the value of those securities may fall sharply.
During periods of falling interest rates, the income received by the Fund may
decline. If the principal on a debt security is prepaid before expected, the
prepayments of principal may have to be reinvested in obligations paying
interest at lower rates. Debt securities generally do not trade on a securities
exchange making them generally less liquid and more difficult to value than
common stock.
Interest
Rate Risk.
Interest rate risk is the risk that the value of the debt securities in an
underlying security’s portfolio will decline because of rising market interest
rates. Interest rate risk is generally lower for shorter term debt securities
and higher for longer-term debt securities. Typically, a rise in interest rates
causes a decline in the market value of income-bearing securities. When interest
rates rise, bond prices fall; generally, the longer a bond's maturity, the more
sensitive it is to this risk. Duration is a reasonably accurate measure of a
debt security’s price sensitivity to changes in interest rates and a common
measure of interest rate risk. Duration measures a debt security’s expected life
on a present value basis, taking into account the debt security’s yield,
interest payments and final maturity. In general, duration represents the
expected percentage change in the value of a security for an immediate 1% change
in interest rates. For example, the price of a debt security with a three-year
duration would be expected to drop by approximately 3% in response to a 1%
increase in interest rates. Therefore, prices of debt securities with shorter
durations tend to be less sensitive to interest rate changes than debt
securities with longer durations. As the value of a debt security changes over
time, so will its duration.
Credit
Risk.
The Fund is also subject to credit risk, which is the risk that issuer of a
security, or the counterparty to a contract, will default or otherwise not honor
a financial obligation, including that the issuer of a debt security will be
unable to meet its interest or principal payment obligations when
due.
Call
Risk.
If a bond issuer “calls” a bond held by the Fund (i.e., pays it off at a
specified price before it matures), the Fund could have to reinvest the proceeds
at a lower interest rate. It may also experience a loss if the bond is called at
a price lower than what the Fund paid for the bond.
Extension
Risk.
Extension risk is the risk that, when interest rates rise, certain obligations
will be paid off by the issuer (or other obligated party) more slowly than
anticipated, causing the value of these debt securities to fall. Rising interest
rates tend to extend the duration of debt securities, making their market value
more sensitive to changes in interest rates. The value of longer-term debt
securities generally changes more in response to changes in interest rates than
shorter-term debt securities. As a result, in a period of rising interest rates,
securities may exhibit additional volatility and may lose value.
Prepayment
Risk.
Prepayment risk is the risk that the issuer of a debt security will repay
principal prior to the scheduled maturity date. Debt securities allowing
prepayment may offer less potential for gains during a period of declining
interest rates, as an underlying security may be required to reinvest the
proceeds of any prepayment at lower interest rates. These factors may cause the
value of an investment in an underlying security to change.
Income
Risk.
A security’s income may decline when interest rates fall or if there are
defaults in its portfolio. This decline can occur because an underlying security
may subsequently invest in lower-yielding securities as debt securities in its
portfolio mature, are near maturity or are called, or the underlying security
otherwise needs to purchase additional debt securities.
Inflation
Risk.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the present value of the Fund’s assets and distributions
may decline.
Valuation
Risk.
The price the Fund could receive upon the sale of a security or other asset may
differ from the Fund's valuation of the security or other asset, particularly
for securities or other assets that trade in low volume or volatile markets or
that are valued using a fair value methodology as a result of trade suspensions
or for other reasons. In addition, the value of the securities or other assets
in the Fund's portfolio may change on days or during time periods when
shareholders will not be able to purchase or sell the Fund's
shares.
ETF
Risks.
The Fund may invest in other investment companies, including other ETFs. The
Fund will experience similar risks with respect its holdings in ETFs as
investing in a portfolio of equity securities or other investments underlying
the ETF, although lack of liquidity in an ETF could result in it being more
volatile than the underlying securities. Additionally, the market prices of ETFs
will fluctuate in accordance with both changes in the market value of their
underlying portfolio securities and due to supply and demand for the instruments
on the exchanges on which they are traded (which may result in their trading at
a discount or premium to their net asset values). Index-based ETF investments
may not replicate exactly the performance of their specific index because of
transaction costs and because of the temporary unavailability of certain
component securities of the index. Actively-managed ETFs may not produce the
desired result of its investment objective(s), meet relevant benchmarks or
perform as well as other funds with similar objectives. As a shareholder in
other ETFs, the Fund bears its proportionate share of each ETF’s expenses,
subjecting Fund shareholders to duplicative expenses.
Non-Investment
Grade Security Risk.
To the extent that the Fund invests in non-investment grade securities, the Fund
is also subject to above-average credit, market and other risks. Issuers of
non-investment grade securities (i.e., “junk” bonds) are typically in weak
financial health and their ability to pay interest and principal is uncertain.
Compared to issuers of investment grade bonds, they are more likely to encounter
financial difficulties and to be materially affected by these difficulties when
they do encounter them. “Junk” bond markets may react strongly to adverse news
about an issuer or the economy, or to the perception or expectation of adverse
news
Restricted
Securities Risk.
Restricted securities are securities that cannot be offered for public resale
unless registered under the applicable securities laws or that have a
contractual restriction that prohibits or limits their resale. The Fund may be
unable to sell a restricted security on short notice or may be able to sell them
only at a price below current value.
Mortgage-Backed
Securities Risk.
The Fund may own obligations backed by mortgages issued by a government agency
or through a government-sponsored program. If the mortgage holders prepay
principal during a period of falling interest rates, the Fund could be exposed
to prepayment risk. In that case, the Fund would have to reinvest the proceeds
at a lower interest rate. The security itself may not increase in value with the
corresponding drop-in rates since the prepayment acts to shorten the maturity of
the security.
Risk
of Default. Although
Madison monitors the condition of bond issuers, it is still possible that
unexpected events could cause the issuer to be unable to pay either principal or
interest on its bond. This could cause the bond to go into default and lose
value. Some federal agency securities are not backed by the full faith and
credit of the United States, so in the event of default, the Fund would have to
look to the agency issuing the bond for ultimate repayment.
New
Fund Risk.
The Fund is new and has no performance history or assets as of the date of this
prospectus. The Fund expects to have fewer assets than larger funds. Like other
new funds, large inflows and outflows may impact the Fund’s market exposure, and
in turn, the Fund’s returns for limited periods of time.
Market
Risk.
The share price of the Fund reflects the value of the securities it holds. If a
security’s price falls, the share price of the Fund will go down (unless another
security’s price rises by an offsetting amount). If the Fund’s share price falls
below the price you paid for your shares, you could lose money when you redeem
your shares.
Performance
The
Fund does not have a performance history. Once available, the Fund’s performance
information, and information that gives some indication of the risks of an
investment in the Fund by comparing the Fund’s performance with a broad measure
of market performance, will be available on the Fund’s website at
www.madisonfunds.com.
The
Fund’s past performance (before and after taxes) is not necessarily an
indication of how the Fund will perform in the future.
Management
Investment
Advisor
Madison
Asset Management, LLC
Investment
Subadvisor
Toroso
Investments, LLC
Portfolio
Managers
The
Madison Short-Term Strategic Income ETF is co-managed Mike Sanders, CFA, Allen
Olson, CFA and Chris Schroeder. The portfolio managers are primarily and jointly
responsible for the day-to-day management of the Fund.
Mr.
Sanders, Head of Fixed Income and Portfolio Manager, has co-managed the Fund
since the Fund's inception in 2023. Mr. Olson, Vice President and Portfolio
Manager/Analyst of Madison has co-managed the Fund since the Fund's inception in
2023. Mr. Schroeder, Vice President and Portfolio Manager/Analyst, has
co-managed the Fund since the Fund's inception in 2023.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask
spread”).Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at www.madisonfunds.com.
Tax
Information
Distributions
from the Fund may be taxed as ordinary income or long-term capital gains.
Dividends and capital gains distributions you receive from the Fund are subject
to federal income taxes and may also be subject to state and local taxes, unless
you are tax-exempt or your account is tax-exempt or tax-deferred (in which case,
such distributions may be taxable upon withdrawal).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or trust company), the Fund and the Fund’s
distributor or its affiliates may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
Madison
Aggregate Bond ETF Fund Summary
Investment
Objective
The
Madison Aggregate Bond ETF (the “Fund”) seeks to generate superior long-term
risk adjusted performance.
Fees
and Expenses
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example below.
Shareholder
Fees: None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
Management
Fees |
0.40 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses(1) |
None |
Total
Annual Fund Operating Expenses |
0.40 |
% |
(1)“Other
Expenses” are estimates based on the expenses the Fund expects to incur for the
current fiscal year.
Example:
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund has no operational history and therefore no historical turnover
rate.
Principal
Investment Strategies
Under
normal market conditions, the Fund invests at least 80% of its net assets (plus
any borrowings for investment purposes) in bonds. To keep current income
relatively stable and to limit share price volatility, the Fund emphasizes
investment grade securities and maintains an intermediate (typically 3-7 year)
average portfolio duration, with the goal of being between 75-125% of the market
benchmark duration (for this purpose, the benchmark used is Bloomberg U.S.
Aggregate Bond Index, the duration of which as of June 30, 2023 was 6.31 years).
Duration is an approximation of the expected change in a debt security’s price
given a 1% move in interest rates, using the following formula: change in debt
security value = (change in interest rates) x (duration) x (-1). By way of
example, assume XYZ company issues a five-year bond which has a duration of 4.5
years. If interest rates were to instantly increase by 1%, the bond would be
expected to decrease in value by approximately 4.5%.
Madison
Asset Management, LLC (“Madison”
or the “Advisor”)
strives to add incremental return in the portfolio by making strategic decisions
relating to credit risk, sector exposure and yield curve positioning. Toroso
Investments, LLC (“Toroso” or the “Subadvisor”) is responsible for implementing
the Fund’s investment program by, among other things, trading portfolio
securities and performing related services, and providing tax optimization
services. The Fund generally holds 100-500 individual securities in its
portfolio at any given time and may invest in the following instruments:
•Corporate
debt securities: securities issued by domestic corporations;
•U.S.
Government debt securities: securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; and
•Up
to 10% of its assets in non-investment grade debt securities (securities not
rated within the four highest categories (i.e., “junk bonds”) or non-rated debt
securities (securities issued or guaranteed by corporations, financial
institutions, and others which, although not rated by a national rating service,
are considered by Madison to have an investment quality equivalent to those
categories in which the Fund is permitted to invest).
Madison
may alter the composition of the Fund with regard to quality and maturity and
may sell securities prior to maturity. Under normal market conditions, however,
turnover for the Fund is generally not expected to exceed 100%. Sales of fund
securities may result in capital gains. This can occur any time Madison sells a
bond at a price that was higher than the purchase price, even if Madison does
not engage in active or frequent trading. Madison’s intent when it sells bonds
is to “lock in” any gains already achieved by that investment or, alternatively,
prevent additional or potential losses that could occur if Madison continued to
hold the bond. Turnover may also occur when Madison finds an investment that
could generate a higher return than the investment currently held. However,
increasing portfolio turnover at a time when Madison’s assessment of market
performance is incorrect could lower investment performance. The Fund pays
implied brokerage commissions when it purchases or sells bonds, which is the
difference between the bid and ask price. As a result, as portfolio turnover
increases, the cumulative effect of this may hurt Fund performance. Under normal
market conditions, the Fund will not engage in active or frequent trading of its
bonds. However, it is possible that Madison will determine that market
conditions require a significant change to the composition of the Fund’s
portfolio. For example, if interest rates begin to rise, Madison may attempt to
sell bonds in anticipation of further rate increases before they lose more
value. Also, if the Fund experiences large swings in shareholder purchases and
redemptions, Madison may be required to sell bonds more frequently in order to
generate the cash needed to pay redeeming shareholders. Under these
circumstances, the Fund could make a taxable capital gain distribution.
The
Fund may invest up to 10% of its net assets in shares of other registered
investment companies that principally invest in fixed income securities. The
Fund may also invest, without limit, in securities that have not been registered
under the Securities Act of 1933 (the “Securities Act”) and continue to be
subject to restrictions on resale, securities held by control persons of the
issuer and securities that are subject to contractual restrictions on their
resale (collectively, “restricted securities”). Restricted securities include,
without limitation, securities eligible for purchase and sale pursuant to Rule
144A under the Securities Act (“Rule 144A”) and other securities issued in
private placements. Under normal market conditions, the Fund will limit its
investments in Rule 144A securities to securities with $100 million or more in
principal amount outstanding as of the time of their original
issuance.
The
Fund’s investment strategy reflects Madison’s general “Participate and
Protect®”
investment philosophy. Madison’s expectation is that investors in the Fund will
participate near fully in market appreciation during bull markets and experience
something less than full participation during bear markets compared with
investors in portfolios holding more speculative and volatile securities;
therefore, this investment philosophy is intended to represent a conservative
investment strategy. There is no assurance that Madison’s expectations regarding
this investment strategy will be realized.
Principal
Risks
You
could lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the Fund’s investment objective will be achieved. The order of
the below risk factors does not indicate the significance of any particular risk
factor.
Debt
Securities Risk.
Investments in debt securities subject the holder to the credit risk of the
issuer. Credit risk refers to the possibility that the issuer or other obligor
of a security will not be able or willing to make payments of interest and
principal when due. Generally, the value of debt securities will change
inversely with changes in interest rates. To the extent that interest rates
rise, certain underlying obligations may be paid off substantially slower than
originally anticipated and the value of those securities may fall sharply.
During periods of falling interest rates, the income received by the Fund may
decline. If the principal on a debt security is prepaid before expected, the
prepayments of principal may have to be reinvested in obligations paying
interest at lower rates. Debt securities generally do not trade on a securities
exchange making them generally less liquid and more difficult to value than
common stock.
Interest
Rate Risk.
Interest rate risk is the risk that the value of the debt securities in an
underlying security’s portfolio will decline because of rising market interest
rates. Interest rate risk is generally lower for shorter term debt securities
and higher for longer-term debt securities. Typically, a rise in interest rates
causes a decline in the market value of income-bearing securities. When interest
rates rise, bond prices fall; generally, the longer a bond's maturity, the more
sensitive it is to this risk. Duration is a reasonably accurate measure of a
debt security’s price sensitivity to changes in interest rates and a common
measure of interest rate risk. Duration measures a debt security’s expected life
on a present value basis, taking into account the debt security’s yield,
interest payments and final maturity. In general, duration represents the
expected percentage change in the value of a security for an immediate 1% change
in interest rates. For example, the price of a debt security with a three-year
duration would be expected to drop by approximately 3% in response to a 1%
increase in interest rates. Therefore, prices of debt securities with shorter
durations tend to be less sensitive to interest rate changes than debt
securities with longer durations. As the value of a debt security changes over
time, so will its duration.
Credit
Risk. The
Fund is also subject to credit risk, which is the risk that issuer of a
security, or the counterparty to a contract, will default or otherwise not honor
a financial obligation including that the issuer of a debt security will be
unable to meet its interest or principal payment obligations when
due.
Call
Risk.
If a bond issuer “calls” a bond held by the Fund (i.e., pays it off at a
specified price before it matures), the Fund could have to reinvest the proceeds
at a lower interest rate. It may also experience a loss if the bond is called at
a price lower than what the Fund paid for the bond.
Extension
Risk.
Extension risk is the risk that, when interest rates rise, certain obligations
will be paid off by the issuer (or other obligated party) more slowly than
anticipated, causing the value of these debt securities to fall. Rising interest
rates tend to extend the duration of debt securities, making their market value
more sensitive to changes in interest rates. The value of longer-term debt
securities generally changes more in response to changes in interest rates than
shorter-term debt securities. As a result, in a period of rising interest rates,
securities may exhibit additional volatility and may lose value.
Prepayment
Risk.
Prepayment risk is the risk that the issuer of a debt security will repay
principal prior to the scheduled maturity date. Debt securities allowing
prepayment may offer less potential for gains during a period of declining
interest rates, as an underlying security may be required to reinvest the
proceeds of any prepayment at lower interest rates. These factors may cause the
value of an investment in an underlying security to change.
Income
Risk.
A security’s income may decline when interest rates fall or if there are
defaults in its portfolio. This decline can occur because an underlying security
may subsequently invest in lower-yielding securities as debt securities in its
portfolio mature, are near maturity or are called, or the underlying security
otherwise needs to purchase additional debt securities.
Inflation
Risk.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the present value of the Fund’s assets and distributions
may decline.
Valuation
Risk.
The price the Fund could receive upon the sale of a security or other asset may
differ from the Fund's valuation of the security or other asset, particularly
for securities or other assets that trade in low volume or volatile markets or
that are valued using a fair value methodology as a result of trade suspensions
or for other reasons. In addition, the value of the securities or other assets
in the Fund's portfolio may change on days or during time periods when
shareholders will not be able to purchase or sell the Fund's
shares.
ETF
Risks.
The Fund may invest in other investment companies, including other ETFs. The
Fund will experience similar risks with respect its holdings in ETFs as
investing in a portfolio of equity securities or other investments underlying
the ETF, although lack of liquidity in an ETF could result in it being more
volatile than the underlying securities. Additionally, the market prices of ETFs
will fluctuate in accordance with both changes in the market value of their
underlying portfolio securities and due to supply and demand for the instruments
on the exchanges on which they are traded (which may result in their trading at
a discount or premium to their net asset values). Index-based ETF investments
may not replicate exactly the performance of their specific index because of
transaction costs and because of the temporary unavailability of certain
component securities of the index. Actively-managed ETFs may not produce the
desired result of its investment objective(s), meet relevant benchmarks or
perform as well as other funds with similar objectives. As a shareholder in
other ETFs, the Fund bears its proportionate share of each ETF’s expenses,
subjecting Fund shareholders to duplicative expenses.
Non-Investment
Grade Security Risk.
To the extent that the Fund invests in non-investment grade securities, the Fund
is also subject to above-average credit, market and other risks. Issuers of
non-investment grade securities (i.e., “junk” bonds) are typically in weak
financial health and their ability to pay interest and principal is uncertain.
Compared to issuers of investment grade bonds, they are more likely to encounter
financial difficulties and to be materially affected by these difficulties when
they do encounter them. “Junk” bond markets may react strongly to adverse news
about an issuer or the economy, or to the perception or expectation of adverse
news.
Restricted
Securities Risk.
Restricted securities are securities that cannot be offered for public resale
unless registered under the applicable securities laws or that have a
contractual restriction that prohibits or limits their resale. The Fund may be
unable to sell a restricted security on short notice or may be able to sell them
only at a price below current value.
Mortgage-Backed
Securities Risk.
The Fund may own obligations backed by mortgages issued by a government agency
or through a government-sponsored program. If the mortgage holders prepay
principal during a period of falling interest rates, the Fund could be exposed
to prepayment risk. In that case, the Fund would have to reinvest the proceeds
at a lower interest rate. The security itself may not increase in value with the
corresponding drop-in rates since the prepayment acts to shorten the maturity of
the security.
Risk
of Default. Although
Madison monitors the condition of bond issuers, it is still possible that
unexpected events could cause the issuer to be unable to pay either principal or
interest on its bond. This could cause the bond to go into default and lose
value. Some federal agency securities are not backed by the full faith and
credit of the United States, so in the event of default, the Fund would have to
look to the agency issuing the bond for ultimate repayment.
New
Fund Risk.
The Fund is new and has no performance history or assets as of the date of this
prospectus. The Fund expects to have fewer assets than larger funds. Like other
new funds, large inflows and outflows may impact the Fund’s market exposure, and
in turn, the Fund’s returns for limited periods of time.
Market
Risk.
The share price of the Fund reflects the value of the securities it holds. If a
security’s price falls, the share price of the Fund will go down (unless another
security’s price rises by an offsetting amount). If the Fund’s share price falls
below the price you paid for your shares, you could lose money when you redeem
your shares.
Performance
The
Fund does not have a performance history. Once available, the Fund’s performance
information, and information that gives some indication of the risks of an
investment in the Fund by comparing the Fund’s performance with a broad measure
of market performance, will be available on the Fund’s website at
www.madisonfunds.com.
The
Fund’s past performance (before and after taxes) is not necessarily an
indication of how the Fund will perform in the future.
Management
Investment
Advisor
Madison
Asset Management, LLC
Investment
Subadvisor
Toroso
Investments, LLC
Portfolio
Managers
The
Madison Aggregate Bond ETF is co-managed Mike Sanders, CFA and Allen Olson, CFA.
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund.
Mr.
Sanders, Head of Fixed Income and Portfolio Manager, has co-managed the Fund
since the Fund's inception in 2023. Mr. Olson, Vice President and Portfolio
Manager/Analyst of Madison has co-managed the Fund since the Fund's inception in
2023.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask
spread”).Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at www.madisonfunds.com.
Tax
Information
Distributions
from the Fund may be taxed as ordinary income or long-term capital gains.
Dividends and capital gains distributions you receive from the Fund are subject
to federal income taxes and may also be subject to state and local taxes, unless
you are tax-exempt or your account is tax-exempt or tax-deferred (in which case,
such distributions may be taxable upon withdrawal).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or trust company), the Fund and the Fund’s
distributor or its affiliates may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
Madison
Covered Call ETF Fund Summary
Investment
Objective
The
Madison Covered Call ETF (the “Fund”)
seeks to provide consistent total return and secondarily, to produce a high
level of income and gains.
Fees
and Expenses
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example below.
Shareholder
Fees: None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
Management
Fees |
0.90 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses(1) |
None |
Total
Annual Fund Operating Expenses |
0.90 |
% |
(1)“Other
Expenses” and “Acquired Fund Fees and Expenses” are estimates based on the
expenses the Fund expects to incur for the current fiscal year.
Example:
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund has no operational history and therefore no historical turnover
rate.
Principal
Investment Strategies
The
Fund will seek to achieve its objectives by (1) investing in common stocks of
equity securities that pay dividends and (2) writing (i.e., selling) covered
call options on a substantial portion of its portfolio of
securities.
Under
normal market conditions, the Fund will invest at least 80% of its net assets
(including any borrowings for investment purposes) in equity securities of
companies, including other investment companies. The Fund invests, under normal
market conditions, in a diversified portfolio of common stocks of large- and
mid-capitalization issuers that, in the view of the Fund’s investment advisor,
Madison Asset Management LLC (“Madison” or the “Advisor”), sell at a reasonable
price in relation to their long-term earnings growth rates, exhibit a high
degree of financial strength and are well-positioned competitively. Toroso
Investments, LLC (“Toroso” or the “Subadvisor”) is responsible for implementing
the Fund’s investment program by, among other things, trading portfolio
securities and performing related services, and providing tax optimization
services. The Fund will invest in growth stocks, value stocks or stocks that
exhibit both style designations.
The
Fund will invest at least 65% of its net assets in common stocks of large
capitalization issuers that meet the Advisor’s investment criteria, which the
Advisor generally considers to be stocks with a market capitalization similar to
those companies in the S&P 500 Index®.
The Fund may invest the remainder of its common stock investments in companies
that meet the Advisor’s selection criteria but whose market capitalization is
considered to be “mid-cap,” which the Advisor generally considers to be stocks
with a market capitalization similar to those companies in the Russell
Midcap®
Index.
The
Fund will generally maintain a “sector neutral” approach relative to the S&P
500 Index’s Global Industry Classification Standard (GICS) sector weightings. In
addition, the Fund may invest up to 15% of its net assets in foreign securities,
including American Depository Receipts (ADRs) and emerging market securities.
The Fund will generally hold 30-60 individual equity and investment company
securities. This reflects Madison’s belief that the Fund should be invested in
Madison’s top investment ideas, and that focusing on Madison’s highest
conviction investment ideas is the best way to achieve the Fund’s investment
objective.
In
addition to investing in common stock that pay a regular dividend, the Fund will
simultaneously write covered call options on a substantial portion of the common
stocks in its portfolio.
In
general, an option contract is an agreement between a buyer and a seller that
gives the purchaser of the option the right (but not the obligation) to purchase
or sell the underlying asset at a specified price (the “strike price”) within a
specified time period (the “expiration date”). A call option gives the purchaser
of the option the right to buy, and obligates the seller (i.e., the Fund) to
sell, the underlying security at the exercise price before the expiration date.
In exchange for writing a call option on an underlying portfolio security, the
Fund receives income, in the form of a premium, from the option buyer. The
Fund's covered call options help to partially offset the effect of a price
decline of the portfolio securities of the Fund through means of the premiums
received by the Fund. At the same time, because the Fund must be prepared to
deliver the underlying security in return for the strike price, even if its
current value is greater, the Fund gives up some ability to participate in the
underlying security price increases. The Fund employs a “covered call” option
strategy meaning the option written by the Fund is a call option on a portfolio
security that the Fund invests in. The extent of option writing activity will
depend upon market conditions and the Advisor's ongoing assessment of the
attractiveness of writing call options on the Fund's stock holdings.
In
addition to its covered call option strategy, the Fund may invest up to 20% of
its net assets in an option strategy that includes the writing of put options on
certain of the common stocks in the Fund’s portfolio. A put option gives the
purchaser of the option the right to sell, and the writer (i.e., the Fund) of
the option the obligation to buy, the underlying security during the option
period at the strike price. To seek to offset some of the risk of a larger
potential decline in the event the overall stock market has a sizable short-term
or intermediate-term decline, the Fund may, to a limited extent (not more than
2% of its total assets) purchase put options or put option debit spreads (where
another put option at a lower strike price is sold to offset the cost of the
first put option) on broad-based securities indices (such as the S&P
500®
Index, S&P MidCap 400®
Index or other indices deemed suitable) or certain ETFs that trade like common
stocks but represent such market indices. To seek to offset some of the risk of
a larger potential decline in an individual holding due to a binary short-term
company specific event, the Fund may, to a limited extent (not more than 2% of
its total assets) purchase put options on individual equity holdings.
The
Fund’s investment strategy reflects Madison’s general “Participate and
Protect®”
investment philosophy. Madison’s expectation is that investors in the Fund will
participate near fully in market appreciation during bull markets and experience
something less than full participation during bear markets compared with
investors in portfolios holding more speculative and volatile securities.
Therefore, the Fund’s investment philosophy is intended to represent a
conservative investment strategy. There is no assurance that Madison’s
expectations regarding this investment strategy will be realized.
Principal
Risks
You
could lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the Fund’s investment objective will be achieved. The order of
the below risk factors does not indicate the significance of any particular risk
factor.
Equity
Risk.
The Fund is subject to equity risk. Equity risk is the risk that securities held
by the Fund will fluctuate in value due to general market or economic
conditions, perceptions regarding the industries in which the issuers of
securities held by the Fund participate, and the circumstances and performance
of companies whose securities the Fund holds. In addition, while broad market
measures of common stocks have historically generated higher average returns
than fixed income securities, common stocks have also experienced significantly
more volatility in those returns.
Growth
Investing Risk.
The Fund may invest in common stocks issued by companies which, based upon their
higher-than-average price-to-book ratios, are expected to experience greater
earnings growth rates relative to other companies in the same industry or the
economy as a whole. Securities of growth companies may be more volatile than
other stocks. If the perception of a company’s growth potential is not realized,
the securities purchased may not perform as expected. In addition, because
different types of stocks tend to shift in and out of favor depending on market
and economic conditions, growth stocks may perform differently from the market
as a whole and other types of securities.
Value
Investing Risk.
The Fund may invest in common stocks issued by companies which, based upon their
lower-than-average price-to-book ratios, are believed to be undervalued or
inexpensive relative to other companies in the same industry or the economy as a
whole. These common stocks are considered undervalued or inexpensive on the
basis of the issuer’s business and economic fundamentals or the securities’
current and projected credit profiles, relative to current market price. Such
securities are subject to the risk of misestimating certain fundamental factors
and will generally underperform during periods when value style investments are
out of favor.
ETF
Risks.
The Fund may invest in other investment companies, including other ETFs. The
Fund will experience similar risks with respect its holdings in ETFs as
investing in a portfolio of equity securities or other investments underlying
the ETF, although lack of liquidity in an ETF could result in it being more
volatile than the underlying securities. Additionally, the market prices of ETFs
will fluctuate in accordance with both changes in the market value of their
underlying portfolio securities and due to supply and demand for the instruments
on the exchanges on which they are traded (which may result in their trading at
a discount or premium to their net asset values). Index-based ETF investments
may not replicate exactly the performance of their specific index because of
transaction costs and because of the temporary unavailability of certain
component securities of the index. Actively-managed ETFs may not produce the
desired result of its investment objective(s), meet relevant benchmarks or
perform as well as other funds with similar objectives. As a shareholder in
other ETFs, the Fund bears its proportionate share of each ETF’s expenses,
subjecting Fund shareholders to duplicative expenses.
Mid
Cap Risk.
The Fund’s investments in midsize companies may entail greater risks than
investments in larger, more established companies. Mid-capitalization companies
tend to have narrower product lines, fewer financial resources, and a more
limited trading market for their securities, as compared to larger companies.
They may also experience greater price volatility than securities of larger
capitalization
companies because growth prospects for these companies may be less certain and
the market for such securities may be smaller. Some growth-oriented companies
may not have established financial histories; often have limited product lines,
markets, or financial resources; may depend on a few key personnel for
management; and may be susceptible to losses and risks of
bankruptcy.
Foreign
Security and Emerging Market Risk. Investments
in foreign securities, including investments in ADRs and emerging market
securities, involve risks relating to currency fluctuations and to political,
social, and economic developments abroad, as well as risks resulting from
differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks may be greater in emerging markets. The
investment markets of emerging countries are generally more volatile than
markets of developed countries with more mature economies.
Derivatives
Risk.
The risk that loss may result from investments in options, forwards, futures,
swaps and other derivatives instruments. These instruments may be illiquid,
difficult to price and leveraged so that small changes in the value of the
underlying instruments may produce disproportionate losses to the Fund.
Derivatives are also subject to counterparty risk, which is the risk that the
other party to the transaction will not fulfill its contractual
obligations.
Options
Risk.
Options are derivatives that give the purchaser the option to buy (call) or sell
(put) an underlying reference from or to a counterparty at a specified price
(the strike price) on or before an expiration date. The use of options involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions and depends on the ability of the Subadvisor
to forecast market movements correctly. The prices of options are volatile and
are influenced by, among other things, actual and anticipated changes in the
value of the underlying securities, changes in interest or currency exchange
rates (including anticipated volatility), which in turn are affected by fiscal
and monetary policies and by national and international political and economic
events, and the remaining time to the options' expiration. At times, there may
be significant differences between the securities and options markets that could
result in an imperfect correlation between these markets. Additionally, the
trading hours for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The Fund’s options transactions will be subject to
limitations established by each of the exchanges, boards of trade or other
trading facilities on which such options are traded. There can be no assurance
that a liquid market will exist when the Fund seeks to close out an option
position. The number of options which the Fund may write or purchase may be
affected by options written or purchased by other clients of Madison or its
affiliates.
Covered
Call Strategy Risk.
As the writer of a covered call option, the Fund forgoes, during the option’s
life, the opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and the strike
price of the call, but has retained the risk of loss should the price of the
underlying security decline.
There
can be no assurance that a liquid market will exist when the Fund seeks to close
out an option position. If the Fund were unable to close out a covered call
option that it had written on a security, it would not be able to sell the
underlying security unless the option expired without exercise. The Fund will
have no control over the exercise of the option by the option holder and may
lose the benefit from any capital appreciation on the underlying security. A
number of factors may influence the option holder’s decision to exercise the
option, including the value of the underlying security, price volatility,
dividend yield and interest rates. To the extent that these factors increase the
value of the call option, the option holder is more likely to exercise the
option, which may negatively affect the Fund.
Covered
Put Strategy Risk. As
the writer of a covered put option, the Fund bears the risk of loss if the value
of the underlying stock declines below the exercise price. If the put option is
exercised, the Fund could incur a loss if it is required to purchase the stock
underlying the put option at a price greater than the market price of the stock
at the time of exercise. Additionally, while the Fund’s potential gain in
writing a covered put option is limited to the interest earned on the liquid
assets securing the put option plus the premium received from the purchaser of
the put option, the Fund risks a loss equal to the entire value of the stock. If
a put option purchased by the Fund is not sold when it has remaining value, and
if the market price of the underlying security remains equal to or greater than
the exercise price, the Fund will lose its entire investment in the
option.
Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e., financial
difficulties, bankruptcy, or insolvency), market activities and developments, or
other reasons, whether foreseen or not. A counterparty’s inability to fulfill
its obligation may result in significant financial loss to the Fund. The Fund
may be unable to recover its investment from the counterparty or may obtain a
limited recovery, and/or recovery may be delayed.
Valuation
Risk.
The price the Fund could receive upon the sale of a security or other asset may
differ from the Fund's valuation of the security or other asset, particularly
for securities or other assets that trade in low volume or volatile markets or
that are valued using a fair value methodology as a result of trade suspensions
or for other reasons. In addition, the value of the securities or other assets
in the Fund's portfolio may change on days or during time periods when
shareholders will not be able to purchase or sell the Fund's
shares.
New
Fund Risk.
The Fund is new and has no performance history or assets as of the date of this
prospectus. The Fund expects to have fewer assets than larger funds. Like other
new funds, large inflows and outflows may impact the Fund’s market exposure, and
in turn, the Fund’s returns for limited periods of time.
Market
Risk.
The share price of the Fund reflects the value of the securities it holds. If a
security’s price falls, the share price of the Fund will go down (unless another
security’s price rises by an offsetting amount). If the Fund’s share price falls
below the price you paid for your shares, you could lose money when you redeem
your shares.
Performance
The
Fund does not have a performance history. Once available, the Fund’s performance
information, and information that gives some indication of the risks of an
investment in the Fund by comparing the Fund’s performance with a broad measure
of market performance, will be available on the Fund’s website at
www.madisonfunds.com.
The
Fund’s past performance (before and after taxes) is not necessarily an
indication of how the Fund will perform in the future.
Management
Investment
Advisor
Madison
Asset Management, LLC
Investment
Subadvisor
Toroso
Investments, LLC
Portfolio
Managers
The
Madison Covered Call ETF is co-managed by Ray DiBernardo, CFA, and Drew Justman,
CFA. The portfolio managers are primarily and jointly responsible for the
day-to-day management of the Fund.
Mr.
DiBernardo, Vice President and Portfolio Manager/Analyst of Madison has
co-managed the Fund since the Fund's inception in 2023. Mr. Justman, Vice
President and Portfolio Manager/Analyst of Madison, has co-managed the Fund
since the Fund's inception in 2023.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask
spread”).Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at www.madisonfunds.com.
Tax
Information
Distributions
from the Fund may be taxed as ordinary income or long-term capital gains.
Dividends and capital gains distributions you receive from the Fund are subject
to federal income taxes and may also be subject to state and local taxes, unless
you are tax-exempt or your account is tax-exempt or tax-deferred (in which case,
such distributions may be taxable upon withdrawal).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or trust company), the Fund and the Fund’s
distributor or its affiliates may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
Madison
Dividend Value ETF Fund Summary
Investment
Objective
The
Madison Dividend Value ETF (the “Fund”)
seeks to produce current income while providing an opportunity for capital
appreciation.
Fees
and Expenses
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example below.
Shareholder
Fees: None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
Management
Fees |
0.65 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses(1) |
None |
Total
Annual Fund Operating Expenses |
0.65 |
% |
(1)“Other
Expenses” are estimates based on the expenses the Fund expects to incur for the
current fiscal year.
Example:
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund has no operational history and therefore no historical turnover
rate.
Principal
Investment Strategies
The
Fund seeks to achieve its investment objective by investing in equity securities
of companies with a market capitalization of over $1 billion and a history of
paying dividends, with the ability to increase dividends over time. Under normal
market conditions, the Fund will invest at least 80% of its net assets
(including any borrowings for investment purposes) in dividend paying equity
securities.
The
Fund's investment advisor, Madison Asset Management, LLC (“Madison”
or the “Advisor”),
will identify investment opportunities by screening for companies that generally
have the following characteristics:
•A
dividend yield of at least 110% of the market dividend yield. For this purpose,
the “market dividend yield" consists of the dividend yield of the companies in
the S&P 500®
Index;
•A
strong balance sheet;
•A
dividend history that has been maintained and which is likely to increase;
and
•Trade
near or within the highest quartile (25%) of the company’s historical dividend
yield relative to the S&P 500® Index, due to issues which Madison views as
temporary. Relative dividend yield is defined as a stock’s dividend yield
divided by the S&P 500 dividend yield. The Advisor compares a company’s
current relative dividend yield to the relative yield over its prior historical
range up to 20 years. When a stock is trading near or within the highest
quartile of its historical relative yield range, it is eligible for purchase in
the fund.
The
Fund may invest up to 50% of its net assets in equity securities rated below A-
by Standard & Poor's. The Fund expects to be fully invested in equity
securities but will maintain the flexibility to hold up to 20% of the Fund’s net
assets in preferred stocks and investment grade fixed income securities when
warranted in Madison's discretion.
The
Fund may also invest up to 50% of its common stock allocation in foreign
securities, including American Depositary Receipts (ADRs) and emerging market
securities. To the extent invested in common stocks, the Fund generally invests
in 30-60 companies at any given time. This reflects Madison's belief that the
Fund should be invested in Madison's top investment ideas, and that focusing on
Madison's highest conviction investment ideas is the best way to achieve the
Fund’s investment objective.
Toroso
Investments, LLC (“Toroso” or the “Subadvisor”) is responsible for implementing
the Fund’s investment program by, among other things, trading portfolio
securities and performing related services, and providing tax optimization
services.
Principal
Risks
You
could lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. There can be no
assurance that the Fund’s investment objective will be achieved. The order of
the below risk factors does not indicate the significance of any particular risk
factor.
Equity
Risk.
Equity risk is the risk that securities held by the Fund will fluctuate in value
due to general market or economic conditions, perceptions regarding the
industries in which the issuers of securities held by the Fund participate, and
the circumstances and performance of companies whose securities the Fund holds.
In addition, while broad market measures of common stocks have historically
generated higher average returns than fixed income securities, common stocks
have also experienced significantly more volatility in those
returns.
Value
Investing Risk.
The Fund may invest in common stocks issued by companies which, based upon their
lower-than-average price-to-book ratios, are believed to be undervalued or
inexpensive relative to other companies in the same industry or the economy as a
whole. These common stocks are considered undervalued or inexpensive on the
basis of the issuer’s business and economic fundamentals or the securities’
current and projected credit profiles, relative to current market price. Such
securities are subject to the risk of misestimating certain fundamental factors
and will generally underperform during periods when value style investments are
out of favor.
Foreign
Security and Emerging Market Risk. Investments
in foreign securities, including investments in ADRs and emerging market
securities, involve risks relating to currency fluctuations and to political,
social, and economic developments abroad, as well as risks resulting from
differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks may be greater in emerging markets. The
investment markets of emerging countries are generally more volatile than
markets of developed countries with more mature economies.
Depository
Receipt Risk. Depository
receipts, such as American depository receipts (“ADRs”), global depository
receipts (“GDRs”), and European depository receipts (“EDRs”), may be issued in
sponsored or un-sponsored programs. In a sponsored program, a security issuer
has made arrangements to have its securities traded in the form of depository
receipts. In an un-sponsored program, the issuer may not be directly involved in
the creation of the program. Depository receipts involve many of the same risks
as direct investments in foreign securities. These risks include, but are not
limited to, fluctuations in currency exchange rates, which are affected by
international balances of payments and other financial conditions; government
interventions; and speculation. With respect to certain foreign countries, there
is the possibility of expropriation or nationalization of assets, confiscatory
taxation, political and social upheaval, and economic instability. Investments
in depository receipts that are traded over the counter may also be subject to
liquidity risk.
New
Fund Risk.
The Fund is new and has no performance history or assets as of the date of this
prospectus. The Fund expects to have fewer assets than larger funds. Like other
new funds, large inflows and outflows may impact the Fund’s market exposure, and
in turn, the Fund’s returns for limited periods of time.
Market
Risk.
The share price of the Fund reflects the value of the securities it holds. If a
security’s price falls, the share price of the Fund will go down (unless another
security’s price rises by an offsetting amount). If the Fund’s share price falls
below the price you paid for your shares, you could lose money when you redeem
your shares.
Performance
The
Fund does not have a performance history. Once available, the Fund’s performance
information, and information that gives some indication of the risks of an
investment in the Fund by comparing the Fund’s performance with a broad measure
of market performance, will be available on the Fund’s website at
www.madisonfunds.com.
The
Fund’s past performance (before and after taxes) is not necessarily an
indication of how the Fund will perform in the future.
Management
Investment
Advisor
Madison
Asset Management, LLC
Investment
Subadvisor
Toroso
Investments, LLC
Portfolio
Managers
The
Madison Dividend Value ETF is co-managed by John Brown, CFA, and Drew Justman,
CFA. The portfolio managers are primarily and jointly responsible for the
day-to-day management of the Fund.
Mr.
Brown, Vice President and Portfolio Manager/Analyst of Madison has co-managed
the Fund since the Fund's inception in 2023. Mr. Justman, Vice President and
Portfolio Manager/Analyst of Madison, has co-managed the Fund since the Fund's
inception in 2023.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to
accept
for shares of the Fund (ask) when buying or selling shares in the secondary
market (the “bid-ask spread”). Recent information, including the Fund’s net
asset value, market price, premiums and discounts, bid-ask spreads and the
median bid-ask spread for the Fund’s most recent fiscal year, is available
online at www.madisonfunds.com.
Tax
Information
Distributions
from the Fund may be taxed as ordinary income or long-term capital gains.
Dividends and capital gains distributions you receive from the Fund are subject
to federal income taxes and may also be subject to state and local taxes, unless
you are tax-exempt or your account is tax-exempt or tax-deferred (in which case,
such distributions may be taxable upon withdrawal).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or trust company), the Fund and the Fund’s
distributor or its affiliates may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
|
|
|
Additional
Investment Strategies and Risks |
Each
Fund is a series of Madison ETFs Trust (the “Trust”) and is regulated as an
“investment company” under the Investment Company Act of 1940 (the “1940 Act”).
Each Fund is actively managed and does not seek to track the performance of an
index. Each Fund has a distinct investment objective and investment policies.
Unless an investment policy is identified as being fundamental, all investment
policies included in this prospectus and the Funds’ Statement of Additional
Information (“SAI”) are non-fundamental and may be changed by the Board of
Trustees of the Trust (the “Board”) without shareholder approval. If there is a
material change to a Fund’s principal investment strategies, you should consider
whether the Fund remains an appropriate investment for you. There is no
guarantee that a Fund will achieve its investment objective.
Temporary
Defensive Positions
Madison
reserves the right to invest a portion of the Fund’s assets in short-term debt
securities (i.e., those with maturities of one year or less) and to maintain a
portion of fund assets in uninvested cash, money market instruments and/or money
market funds. However, Madison may determine that market conditions warrant a
temporary defensive investment position. Under such circumstances, up to 100% of
the Fund may be so invested. To the extent the Fund engages in this temporary
defensive position, the Fund’s ability to achieve its investment objective may
be diminished. Short-term investments may include investment grade certificates
of deposit, commercial paper and repurchase agreements. Madison might also hold
substantial cash reserves in seeking to reduce the Fund’s exposure to bond price
depreciation during a period of rising interest rates and to maintain desired
liquidity while awaiting more attractive investment conditions in the bond
market.
Unknown
Market Risks
Investing
in the Funds involves risk. In addition to the other risks described in this
prospectus, you should understand what we refer to as “unknown market risks.”
While investments in stocks and bonds have been keystones in wealth building and
management for a hundred years, at times these investments have produced
surprises for even the savviest investors. Those who enjoyed growth and income
of their investments were rewarded for the risks they took by investing in the
markets. When the rare calamity strikes, the word “security” itself seems a
misnomer. Although we seek to appropriately address and manage the risks we have
identified in this prospectus, you should understand that the very nature of the
securities markets includes the possibility that there may be additional risks
of which we are not aware and, therefore, have not identified in this
prospectus. We certainly seek to identify all applicable risks and then
appropriately address them, take appropriate action to reasonably manage them
and, of course, make you aware of them so you can determine if they exceed your
risk tolerance. Nevertheless, the often volatile nature of the securities
markets and the global economy in which we work suggests that the risk of the
unknown is something you must consider in connection with your investment in the
Funds. Unforeseen events have the potential to upset the best laid plans, and
could, under certain circumstances, produce a material loss of the value of some
or all of the funds.
Recent
Market Events
U.S.
and international markets have experienced and may continue to experience
significant periods of volatility in recent years and months due to a number of
economic, political and global macro factors including rising inflation,
uncertainty regarding central banks’ interest rate increases, the possibility of
a national or global recession, trade tensions, political events, the war
between Russia and Ukraine and the impact of the coronavirus (COVID-19) global
pandemic. The global recovery from COVID-19 may last for an extended period of
time. As a result of continuing political tensions and armed conflicts,
including the war between Ukraine and Russia, the U.S. and the European Union
imposed sanctions on certain Russian individuals and companies, including
certain financial institutions, and have limited certain exports and imports to
and from Russia. The war has contributed to recent market volatility and may
continue to do so. In addition, recent bank failures may have a destabilizing
impact on the broader banking industry or markets generally, which may also
heighten volatility and reduce liquidity. These developments, as well as other
events, could result in further market volatility and negatively affect
financial asset prices, the liquidity of certain securities and the normal
operations of securities exchanges and other markets, despite government efforts
to address market disruptions. Continuing market volatility as a result of
recent market conditions or other events may have adverse effects on your
account.
Interest
Rate Policy Risk
Federal
Reserve policy changes may expose fixed-income and related markets to heightened
volatility and may reduce liquidity for certain fund investments, which could
cause the value of a Fund’s investments and share price to decline. Until
recently, interest rates were historically low, but the Federal Reserve has
recently increased interest rates quickly and significantly in an effort to
combat inflation. As interest rates rise, the value of fixed-income investments
will generally decrease. A Fund that invests in derivatives tied to fixed-income
markets may be more substantially exposed to these risks than a fund that does
not invest in derivatives.
Authorized
Participant Concentration Risk
Only
an authorized participant may engage in creation or redemption transactions
directly with a Fund. A limited number of institutions act as authorized
participants for a Fund. However, participants are not obligated to make a
market in a Fund’s shares or submit purchase and redemption orders for creation
units. To the extent that these institutions exit the business, reduce their
role or are unable to proceed with creation and/or redemption orders and no
other authorized participant steps forward to create or redeem, a Fund’s shares
may trade at a premium or discount to the Fund’s net asset value and possibly
face delisting and the bid/ask spread on the Fund’s shares may
widen.
Premium/Discount
Risk
The
market price of a Fund’s shares will generally fluctuate in accordance with
changes in the Fund’s net asset value as well as the relative supply of and
demand for shares on the Exchange. Madison cannot predict whether shares will
trade below, at or above their net
asset
value because the shares trade on the Exchange at market prices and not at net
asset value. Price differences may be due, in large part, to the fact that
supply and demand forces at work in the secondary trading market for shares will
be closely related, but not identical, to the same forces influencing the prices
of the holdings of the Fund trading individually or in the aggregate at any
point in time. However, given that shares can only be purchased and redeemed in
Creation Units, and only to and from broker-dealers and large institutional
investors that have entered into participation agreements (unlike shares of
closed-end funds, which frequently trade at appreciable discounts from, and
sometimes at premiums to, their net asset value), the Advisor believes that
large discounts or premiums to the net asset value of shares should not be
sustained absent disruptions to the creation and redemption mechanism, extreme
market volatility or potential lack of authorized participants. During stressed
market conditions, the market for the Fund’s shares may become less liquid in
response to deteriorating liquidity in the market for the Fund’s underlying
portfolio holdings, which could in turn lead to differences between the market
price of the Fund’s shares and their net asset value and the bid/ask spread on
the Fund’s shares may widen.
Market
Maker Risk
The
Funds face numerous market trading risks, including the potential lack of an
active market for a Fund’s shares due to a limited number of market markers.
Decisions by market makers or authorized participants to reduce their role or
step away from these activities in times of market stress could inhibit the
effectiveness of the arbitrage process in maintaining the relationship between
the underlying values of a Fund’s portfolio securities and the Fund’s market
price. A Fund may rely on a small number of third-party market makers to provide
a market for the purchase and sale of shares. Any trading halt or other problem
relating to the trading activity of these market makers could result in a
dramatic change in the spread between a Fund’s net asset value and the price at
which the Fund’s shares are trading on the Exchange, which could result in a
decrease in value of the Fund’s shares. This reduced effectiveness could result
in Fund shares trading at a discount to net asset value and also in greater than
normal intraday bid-ask spreads for Fund shares.
Cybersecurity
Risk
The
computer systems, networks and devices used by the Funds and their service
providers to carry out routine business operations employ a variety of
protections designed to prevent damage or interruption from computer viruses,
network failures, computer and telecommunication failures, infiltration by
unauthorized persons and security breaches. Despite the various protections
utilized by the Funds and their service providers, systems, networks, or devices
potentially can be breached. The Funds and their respective shareholders could
be negatively impacted as a result of a cybersecurity breach. Cybersecurity
breaches can include, but are not limited to, gaining unauthorized access to
digital systems, networks or devices (e.g., through “hacking” or malicious
software coding) for purposes of misappropriating assets or sensitive
information; infection from computer viruses, corrupting data or other malicious
software code; and attacks that shut down, disable, slow, or otherwise disrupt
operations, business processes, or website access or functionality.
Cybersecurity breaches may cause disruptions and impact a fund’s business
operations, potentially resulting in financial losses; interference with a
fund’s ability to calculate its NAV; impediments to trading; the inability of a
fund, its investment advisor or subadvisor, as applicable, and other service
providers to transact business; violations of applicable privacy and other laws;
regulatory fines; penalties, reputational damage, reimbursement or other
compensation costs, or additional compliance costs; as well as the inadvertent
release of confidential information. In addition, substantial costs may be
incurred in order to prevent any cyber incidents in the future.
While
the Funds’ service providers have established business continuity plans in the
event of, and risk management systems to prevent, such cyber incidents, there
are inherent limitations in such plans and systems including the possibility
that certain risks have not been identified. Furthermore, the Funds cannot
control the cyber security plans and systems put in place by its service
providers or any other third parties whose operations may affect the Funds or
their shareholders. The Funds and their shareholders could be negatively
impacted as a result.
Fixed-Income
Market Capacity Risk
While
assets in bond mutual funds and ETFs have grown rapidly, dealer capacity in the
fixed income markets appears to have undergone fundamental changes. Primary
dealer inventories appear to be lower since the financial crisis of 2008. This
apparent reduction in market-making capacity may be a persistent change, to the
extent it is resulting from broader structural changes such as fewer proprietary
trading desks at broker- dealers and increased regulatory capital requirements
at the holding company level. A significant reduction in dealer market-making
capacity has the potential to decrease liquidity and increase volatility in the
fixed income markets at times. Therefore, our funds with income distributions
objectives seek to invest in larger, more liquid issues. However, structural
changes may cause trading in even the most liquid of issues to become challenged
at times. This could negatively affect the price of these securities and the
value of an investment in the fund.
Management
Risk
Each
Fund is subject to management risk as an actively-managed investment portfolio
and depends on the decisions of the co-portfolio managers to produce the desired
results.
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How
to Buy and Sell Shares |
The
Funds list and principally trades their shares on NYSE Arca, Inc. (“NYSE Arca”).
Most investors buy and sell shares of a Fund in secondary market transactions
through brokers. Shares of a Fund are listed for trading on the secondary market
on one or more national securities exchanges. Shares can be bought and sold
throughout the trading day like other publicly traded shares. There is no
minimum investment when buying shares on the Exchange. Although shares are
generally purchased and sold in “round lots” of 100 shares, brokerage firms
typically permit investors to purchase or sell shares in smaller “odd lots,” at
no per-share price differential. When buying or selling shares through a broker,
investors should expect to pay brokerage commissions, investors may receive less
than the net asset value of the shares because shares are bought and sold at
market prices rather than at net asset value, and investors may pay some or all
of the bid-ask spread for each transaction (purchase or sale) of Fund shares.
Share prices are reported in dollars and cents per share.
Under
normal circumstances, a Fund will pay out redemption proceeds to a redeeming
authorized participant within two days after the authorized participant’s
redemption request is received, in accordance with the process set forth in the
Funds’ SAI and in the agreement between the authorized participant and the
Funds’ distributor. However, a Fund reserves the right, including under stressed
market conditions, to take up to seven days after the receipt of a redemption
request to pay an authorized participant, all as permitted by the 1940 Act. If a
Fund has foreign investments in a country where a local market holiday, or
series of consecutive holidays, or the extended delivery cycles for transferring
foreign investments to redeeming authorized participants prevents the Fund from
delivering such foreign investments to an authorized participant in response to
a redemption request, the Fund may take up to 15 days after the receipt of the
redemption request to deliver such investments to the authorized
participant.
For
purposes of the 1940 Act, each Fund is treated as a registered investment
company, and the acquisition of shares by other registered investment companies
and companies relying on Sections 3(c)(1) and 3(c)(7) of the 1940 Act is subject
to the restrictions of Section 12(d)(1) of the 1940 Act and the related rules
and interpretations.
Book
Entry
Shares
are held in book-entry form, which means that no share certificates are issued.
The Depository Trust Company (“DTC”)
or its nominee is the record owner of all outstanding shares of the Funds and is
recognized as the owner of all shares for all purposes.
Investors
owning shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of share certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book-entry or “street name” form.
Share
Trading Prices
The
trading price of shares of each Fund on the secondary market is based on market
price and may differ from the Fund’s daily net asset value and can be affected
by market forces of supply and demand, economic conditions and other
factors.
Frequent
Purchases and Redemptions of a Fund’s Shares
A
Fund imposes no restrictions on the frequency of purchases and redemptions
(“market
timing”).
In determining not to approve a written, established policy, the Board evaluated
the risks of market timing activities by the Fund’s shareholders. The Board
considered that a Fund’s shares can only be purchased and redeemed directly from
the Fund in Creation Units by broker-dealers and large institutional investors
that have entered into participation agreements (i.e., authorized participants)
and that the vast majority of trading in the Fund’s shares occurs on the
secondary market. Because the secondary market trades do not involve a Fund
directly, it is unlikely those trades would cause many of the harmful effects of
market timing, including dilution, disruption of portfolio management, increases
in the Fund’s trading costs and the realization of capital gains. With respect
to trades directly with a Fund, to the extent effected in-kind (i.e., for
securities), those trades do not cause any of the harmful effects that may
result from frequent cash trades. To the extent that a Fund may effect the
purchase or redemption of Creation Units in exchange wholly or partially for
cash, the Board noted that such trades could result in dilution to the Fund and
increased transaction costs, which could negatively impact the Fund’s ability to
achieve its investment objective. However, the Board noted that direct trading
by authorized participants is critical to ensuring that the shares trade at or
close to net asset value. In addition, each Fund imposes fixed and variable
transaction fees on purchases and redemptions of Creation Units to cover the
custodial and other costs incurred by the Fund in effecting trades. Finally, the
Advisor monitors purchase and redemption orders from authorized participants for
patterns of abusive trading and each Fund reserves the right to not accept
orders from authorized participants that the Advisor has determined may be
disruptive to the management of such Fund.
General
Policies
Pricing
of Fund Shares. The
NAV for each Fund is determined each business day at the close of regular
trading on the New York Stock Exchange (typically 4:00 p.m. Eastern Time) by
dividing the net assets of each Fund by the number of shares outstanding of that
Fund. Transaction requests received after the close of regular trading on the
New York Stock Exchange (usually 4:00 p.m. Eastern Time) will be processed using
the next day’s NAV. The NAV per share for each Fund is not determined on days
the New York Stock Exchange is closed for trading. The New York Stock Exchange
is closed on New Year’s Day, Martin Luther King, Jr. Day, President’s Day, Good
Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
A
Fund’s NAV is equal to the market value of its investments and other assets,
less any liabilities, divided by the number of Fund shares. To the extent a Fund
invests in underlying funds, such as the Madison Mosaic Income Opportunities ETF
(the “Mosaic
Fund”),
the NAV of
the
Fund, in part, will be determined based on the NAVs of the underlying funds.
Because the Mosaic
Fund will
only invest in underlying funds, it is not anticipated that Madison will need to
“fair value” any of the investments of the Mosaic
Fund.
An
underlying fund may need to fair value one or more of its investments, which
may, in turn, require the Funds to do the same because of delays in obtaining
the underlying fund’s NAV. The following fair valuation policy is followed by
Madison with respect to the funds that it advises. It is anticipated that
unaffiliated underlying funds will have a fair valuation policy that is similar
and such policy will be described in the prospectus of the underlying fund,
including an explanation of the circumstances under which fair value pricing
will be used and the effects of using fair value pricing.
If
quotations are not readily available for a security or other portfolio
investment, or if it is believed that a quotation or other market price for a
security or other portfolio investment does not represent its fair value,
Madison may value the security or investment using procedures approved by the
Board that are designed to establish its fair value. Rule 2a-5 under the 1940
Act requires the fair valuation of all portfolio investments for which market
quotations are not readily available. Pursuant to Rule 2a-5 under the 1940 Act,
the Board has appointed Madison as its valuation designee for all portfolio
investments.
The
fair valuation procedures may be used to value any investment of any Fund in the
appropriate circumstances. Securities and other investments valued at their fair
value entail significantly greater valuation risk than do securities and other
investments valued at an established market value.
Madison
relies on its fair value procedures most often in connection with foreign
securities whose principal trading market(s) is outside the U.S. and/ or are
denominated in a foreign currency. From time to time, events occur that affect
the issuers of such foreign securities or the securities themselves, or
information about the issuer or securities becomes available, after the close of
trading in the securities but before the close of regular trading on the New
York Stock Exchange (usually 4:00 p.m. Eastern Time). In these situations, the
fair value of the foreign security may be something other than the last
available quotation or other market price. With regard to such foreign
securities, the fair valuation procedures include consultation with an
independent fair value pricing service. Nonetheless, Madison separately
evaluates each such foreign security and may, in conformity with the fair
valuation procedures, establish a different fair value than that reached by the
independent pricing service or other financial institutions or investment
managers.
Determining
the fair value of securities involves consideration of objective factors as well
as the application of subjective judgments about their issuers and the markets
in which they are traded. A number of methodologies are available for
determining the value of securities for which there is no clear market value or
for which after-market events make prior market values unreliable. The value
established by Madison under the fair valuation procedures for any security or
other investment (or underlying fund) may vary from the last quoted sale price
or market close price, or from the value given to the same security or
investment by: (1) an independent pricing service; (2) other financial
institutions or investment managers; or
(3) Madison,
had it used a different methodology to value the security. The Trust cannot
assure that a security or other portfolio investment can be sold at the fair
value assigned to it at any time.
To
the extent that a Fund holds portfolio securities that are primarily listed on
foreign exchanges that trade on weekends or other days when the Funds do not
price their shares, the NAV of such Fund’s shares may change on days when
shareholders will not be able to purchase or redeem the Fund’s
shares.
Disclosure
of Portfolio Information. Portfolio
holdings information is available on the Funds’ website at www.madisonfunds.com.
In addition, a complete description of the Funds’ policies and procedures with
respect to the disclosure of portfolio holdings is available in the
SAI.
Distributions
and Taxes
Schedule
of Distributions. The
Funds generally distribute most or all of their net investment income and
capital gains. Capital gain distributions, if any, are typically made in
December. Income distributions, if any, are made as follows:
Declared
monthly and paid monthly:
•Madison
Mosaic Income Opportunities ETF
•Madison
Short-Term Strategic Income ETF
•Madison
Aggregate Bond ETF
•Madison
Dividend Value ETF
Declared
quarterly and paid quarterly:
•Madison
Covered Call ETF
Taxability
of Distributions. This
section summarizes some of the main U.S. federal income tax consequences of
owning shares of the Funds. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example, these
summaries generally do not describe your situation if you are a corporation, a
non-U.S. person, a broker-dealer, or other investor with special circumstances.
In addition, this section does not describe your state, local or foreign tax
consequences.
This
federal income tax summary is based in part on the advice of counsel to the
Funds. The Internal Revenue Service could disagree with any conclusions set
forth in this section. In addition, our counsel was not asked to review, and has
not reached a conclusion with respect to the federal income tax treatment of the
assets to be deposited in the Funds. This may not be sufficient for prospective
investors to use for the purpose of avoiding penalties under federal tax
law.
As
with any investment, prospective investors should seek advice based on their
individual circumstances from their own tax advisor.
Each
Fund intends to meet the requirements of Subchapter M of the Code applicable to
regulated investment companies. If a Fund qualifies as a regulated investment
company and distributes its income as required by the tax law, the Fund
generally will not pay federal income taxes. All distributions that you receive
from a Fund are generally taxable, whether reinvested or received in cash.
Distributions from a Fund’s investment company taxable income (which includes
dividends, taxable interest, net short-term capital gains, and net gains from
foreign currency transactions), if any, generally are taxable as ordinary
income, unless such distributions are attributable to “qualified dividend”
income eligible for the reduced rate of tax on long-term capital gains or unless
you are exempt from taxation or entitled to a tax deferral. Distributions paid
by each Fund from net capital gains (the excess of net long-term capital gains
over net short-term capital losses) are taxable as long- term capital gains
whether reinvested or received in cash and regardless of the length of time you
have owned your shares unless you are exempt from taxation or entitled to a tax
deferral.. The presence of covered call options in the portfolio may reduce the
amount of dividends that would otherwise be treated as capital gain dividends.
Currently,
the maximum federal income tax rate applicable to long-term capital gains, and
thus to qualified dividend income is 20%. Each Fund will inform its shareholders
of the portion of its dividends (if any) that constitute qualified dividend
income. Capital gain received from assets held for more than one year that is
considered “unrecaptured section 1250 gain” (which may be the case, for example,
with some capital gains attributable to equity interests in REITs) is taxed at a
maximum marginal stated federal tax rate of 25%. In the case of capital gain
dividends, the determination of which portion of the capital gain dividend, if
any, is subject to the 25% tax rate, will be made based on rules prescribed by
the United States Treasury. Capital gains may also be subject to the Medicare
tax described below. Note, however, that if you receive a capital gain dividend
from a Fund and sell your share at a loss after holding it for six months or
less, the loss will be recharacterized as long term capital loss to the extent
of the capital gain dividend received. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for ordinary
income.
Some
portion of the ordinary income distributions that are attributable to dividends
received by a Fund from shares in certain REITs may be designated by the Fund as
eligible for a deduction for qualified business income, provided certain holding
period requirements are satisfied.
Generally,
“qualified dividend” income includes dividends received during the taxable year
from certain domestic corporations and qualified foreign corporations. The
portion of a distribution that a Fund pays that is attributable to qualified
dividend income received by the Fund will qualify for such treatment in the
hands of the non-corporate shareholders of the Fund. If a Fund has income of
which more than 95% was qualified dividends, all of the Fund’s dividends will be
eligible for the lower rates on qualified dividends. Certain holding period
requirements applicable to both the Fund and the shareholder also must be
satisfied to obtain qualified dividend treatment. The presence of covered call
options in the portfolio may reduce the amount of dividends that are eligible
for capital gains rates. The tax laws may require you to treat distributions
made to you in January as if you had received them on December 31 of the
previous year.
Income
from the Funds may also be subject to a 3.8% “Medicare tax.” This tax generally
applies to your net investment income if your adjusted gross income exceeds
certain threshold amounts, which are $250,000 in the case of married couples
filing joint returns and $200,000 in the case of single individuals.
Assuming
a Fund qualifies as a regulated investment company, the dividends received
deduction for shareholders of such Fund who are corporations will apply to
ordinary income distributions to the extent the distribution represents
dividends received by the Fund from certain domestic corporations and that would
qualify for the dividends received deduction to the Fund if such Fund were a
regular corporation, and to the extent designated by the Fund as so qualifying.
The presence of covered call options in the portfolio may reduce the amount of
dividends that are treated as qualifying dividends.
When
a Fund makes a distribution, the Fund’s NAV decreases by the amount of the
payment. If you purchase shares shortly before a distribution, you will,
nonetheless, be subject to income taxes on the distribution, even though the
value of your investment (plus cash received, if any) remains the
same.
Taxes
on Exchange Listed Shares.
If you sell or redeem your shares, you will generally recognize a taxable gain
or loss. To determine the amount of this gain or loss, you must subtract your
tax basis in your shares from the amount you receive in the transaction. Your
tax basis in your shares is generally equal to the cost of your shares,
generally including sales charges. In some cases, however, you may have to
adjust your tax basis after you purchase your shares.
Taxes
on Purchase and Redemption of Creation Units.
If you exchange securities for Creation Units, you will generally recognize a
gain or a loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time and your aggregate basis in the
securities surrendered and the cash component paid. If you exchange Creation
Units for securities, you will generally recognize a gain or loss equal to the
difference between your basis in the Creation Units and the aggregate market
value of the securities received and the cash redemption amount. The IRS,
however, may assert that a loss realized upon an exchange of securities for
Creation Units or Creation Units for securities cannot be deducted currently
under the rules governing “wash sales,” or on the basis that there has been no
significant change in economic position.
Non-U.S.
Tax Credit. If
a Fund invests in non-U.S. securities, the tax statement that you receive may
include an item showing non U.S. taxes the Fund paid to other countries. In this
case, dividends taxed to you will include your share of the taxes the Fund paid
to other countries. You may be able to deduct or receive a tax credit for your
share of these taxes.
Non-U.S.
Investors. If
you are a non-U.S. investor (i.e., an investor other than a U.S. citizen or
resident or a U.S. corporation, partnership, estate or trust), you should be
aware that, generally, subject to applicable tax treaties, distributions from a
Fund will be characterized as
dividends
for federal income tax purposes (other than dividends which the Fund properly
reports as capital gain dividends) and will be subject to U.S. federal income
taxes, including withholding taxes, subject to certain exceptions described
below. However, distributions received by a non-U.S. investor from a Fund that
are properly reported by the Fund as capital gain dividends may not be subject
to U.S. federal income taxes, including withholding taxes, provided that the
Fund makes certain elections and certain other conditions are met. Distributions
from a Fund that are properly reported by the Fund as an interest-related
dividend attributable to certain interest income received by the Fund or as a
short-term capital gain dividend attributable to certain net short-term capital
gain income received by the Fund may not be subject to U.S. federal income
taxes, including withholding taxes when received by certain non-U.S. investors,
provided that the Fund makes certain elections and certain other conditions are
met. For tax years after December 31, 2022, amounts paid to or recognized by a
non-U.S. affiliate that are excluded from tax under the portfolio interest,
capital gain dividends, short-term capital gains or tax-exempt interest dividend
exceptions or applicable treaties, may be taken into consideration in
determining whether a corporation is an “applicable corporation” subject to a
15% minimum tax on adjusted financial statement income.
Distributions
may be subject to a U.S. withholding tax of 30% in the case of distributions to
(i) certain non-U.S. financial institutions that have not entered into an
agreement with the U.S. Treasury to collect and disclose certain information and
are not resident in a jurisdiction that has entered into such an agreement with
the U.S. Treasury and (ii) certain other non-U.S. entities that do not provide
certain certifications and information about the entity’s U.S. owners. This
withholding tax is also currently scheduled to apply to the gross proceeds from
the disposition of securities that produce U.S. source interest or dividends.
However, proposed regulations may eliminate the requirement to withhold on
payments of gross proceeds from dispositions.
This
section is not intended to be a full discussion of tax laws and the effect of
such laws on you. There may be other federal, state, foreign or local tax
considerations applicable to a particular investor. You are urged to consult
your own tax adviser.
Please
refer to the SAI for more information about taxes.
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Premium/Discount
Information |
Information
showing the number of days the market price of each Fund’s shares was greater
(at a premium) and less (at a discount) than the Fund’s net asset value for the
most recently completed year, and the most recently completed calendar quarters
since that year (or life of the Fund, if shorter), is available at
www.madisonfunds.com.
The
Funds’ investment advisor is Madison Asset Management, LLC (“Madison”), a
subsidiary of Madison Investment Holdings, Inc. (“MIH”), both located at 550
Science Drive, Madison, Wisconsin 53711. As of December 31, 2022, MIH, which was
founded in 1974, and its affiliate organizations, including Madison, managed
approximately $21.6 billion in assets, including open-end mutual funds,
exchange-traded funds, a closed-end fund, separately managed accounts and wrap
accounts. Madison is responsible for the day-to-day administration of the Funds’
activities. Investment decisions regarding each of the Funds can be influenced
in various manners by a number of individuals. Generally, all management
decisions are the ultimate responsibility of Madison’s Investment Risk Oversight
Committee. This committee is comprised of senior officers and portfolio managers
of Madison.
Investment
Advisory Agreement
Pursuant
to an investment advisory agreement between Madison and the Trust, on behalf of
each Fund (the “Investment Management Agreement”), each Fund has agreed to pay
an annual unitary management fee to Madison in an amount shown below. This
unitary management fee is designed to pay each Fund’s expenses and to compensate
Madison for the services it provides to the Fund. Out of the unitary management
fee, Madison pays substantially all expenses of each Fund, including the cost of
transfer agency, custody, fund administration, legal, audit and other service
and license fees. However, Madison is not responsible for Investment Advisory
Agreement, interest, taxes, brokerage commissions, acquired fund fees and
expenses and other expenses connected with the execution of portfolio
transactions, distribution and service fees payable pursuant to a Rule 12b-1
plan, if any, an extraordinary expenses.
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Fund |
Fee |
Madison
Mosaic Income Opportunities ETF |
0.20% |
Madison
Short-Term Strategic Income ETF |
0.40% |
Madison
Aggregate Bond ETF |
0.40% |
Madison
Dividend Value ETF |
0.65% |
Madison
Covered Call ETF |
0.90% |
Madison
may from time to time, contractually or voluntarily, agree to waive a portion of
its management fee and/or reimburse each Fund’s operating expenses to ensure
that each Fund’s operating expenses do not exceed certain expense limitations if
applicable. Contractual fee agreements may by modified or terminated at any time
or for any reason, but only with Board approval. Voluntary waivers may be
amended or discontinued at any time without prior notice. Any fees waived are
not typically subject to later recoupment by Madison, except as otherwise
noted.
A
discussion regarding the basis for approval of the Funds’ investment advisory
contract and subadvisory agreement by the Board will be contained in the Funds’
semi-annual report to shareholders for the period ended December 31,
2023.
Investment
Subadvisory Agreement
Toroso
Investments, LLC (“Toroso” or the “Subadvisor”), located at 234 West Florida
Street, Suite 203, Milwaukee, Wisconsin 53204, is a SEC registered investment
advisor and a Delaware limited liability company. Toroso was founded in March
2012, and is dedicated to understanding, researching and managing assets within
the expanding ETF universe. As of November 30, 2022, Toroso had assets under
management of approximately $4.4 billion and non-discretionary assets under
advisement of $1.0 billion, for a total advisory assets of $5.4 billion, and
served as the investment advisor or subadvisor for 97 registered funds. Toroso
serves as investment subadvisor to the Funds and has responsibility for
implementing the Fund’s investment program by, among other things, trading
portfolio securities and performing related services, and providing tax
optimization services.
Pursuant
to an investment subadvisory agreement between Madison, Toroso and the Trust, on
behalf of the Funds, Madison has agreed to pay an annual sub‑advisory fee to
Toroso. Madison is responsible for paying the entirety of Madison’s subadvisory
fee. The Funds do not directly pay Toroso.
Manager
of Managers Structure:
Madison
has received an exemptive order from the SEC to operate under a manager of
managers structure that permits Madison, with the approval of the Board, to
appoint or change unaffiliated subadvisors on behalf of the Funds without
shareholder approval (“Manager
of Managers Structure”).
Under the Manager of Managers Structure, Madison may manage the assets of all of
the Funds using a “manager of managers” approach under which Madison may manage
some or all of the Funds’ assets and may allocate some or all of the Funds’
assets among one or more specialist subadvisors. Madison selects subadvisors
based on a continuing quantitative and qualitative evaluation of their abilities
in managing assets pursuant to a particular investment style. While superior
performance is the ultimate goal, short-term performance by itself will not be a
significant factor in selecting or terminating subadvisors, and Madison does not
expect frequent changes in subadvisors. Madison compensates subadvisors out of
its own assets.
Madison
monitors the performance of each subadvisor to the extent it deems appropriate
to achieve a Fund’s investment objective, reallocates fund assets among its own
portfolio management team and individual subadvisors or recommends to the Board
that a Fund employ or terminate particular subadvisors. If there is a new
appointment or change in unaffiliated subadvisor, shareholders will receive an
“information statement” within 90 days after the date of the change. The
statement will provide shareholders with relevant information about the reason
for the change and information about any new subadvisor.
Fund
Administration Servicing Agreement
Tidal
ETF Services, LLC (“Tidal” or the “Administrator”), located at 234 West Florida
Street, Suite 203, Milwaukee, Wisconsin 53204, serves as the Administrator to
the Funds. Tidal is an affiliate of Toroso. Tidal is entitled to receive an
administration servicing fee from Madison pursuant to the terms of an
Administration Servicing Agreement. Under this fee agreement, Tidal provides or
arranges for each Fund to have all of the necessary operational and support
services it needs for a fee.
Partial
Fund Administration Servicing Agreement
U.S.
Bancorp Fund Services (“USB” or the Partial Administrator) located at 777 East
Wisconsin Ave, Milwaukee, Wisconsin 53202, serves as the Partial Administrator
to the Funds. USB is entitled to servicing fee from Madison pursuant to the
terms of a fee agreement. Under this fee agreement, USB performs various
accounting, partial administrative, transfer agent and tax services.
Madison
Asset Management, LLC
The
Funds are generally managed by members of the applicable asset allocation, fixed
income or equity management teams at Madison. The individuals primarily and
jointly responsible for the day-to-day management of each Fund are as
follows:
Madison
Mosaic Income Opportunities ETF is
co-managed by Patrick Ryan, CFA and Stuart Dybdahl, CFA, CAIA.
Mr.
Ryan is Head of Multi-Asset Solutions and Portfolio Manager of Madison. Prior to
joining Madison in July 2009, Mr. Ryan was a Senior Analyst at MEMBERS Capital
Advisors, Inc. (“MCA”), the former investment advisor to the funds. While at
MCA, Mr. Ryan had been responsible for conducting manager research and due
diligence for MCA’s managed accounts products since 2004.
Mr.
Dybdahl is Vice President and Portfolio Manager/Analyst of Madison. Mr. Dybdahl
joined Madison in 2015 as an investment specialist and has worked in the
financial services industry since 2014.
Madison
Short-Term Strategic Income ETF is
co-managed Mike Sanders, CFA, Allen Olson, CFA and Chris Schroeder.
Mr.
Sanders is Head of Fixed Income and Portfolio Manager of Madison. Mr. Sanders
has been a member of the Madison fixed income team since 2013 and has worked in
the financial services industry since 2004. Prior to joining Madison in 2013, he
was a fixed income portfolio manager and analyst for Ziegler Lotsoff Capital
Management focusing mostly on high yield bonds and preferred stocks.
Mr.
Olson is Vice President and Portfolio Manager/Analyst of Madison. Mr. Olson has
been a member of Madison's fixed income team since joining the firm in 2002 and
has worked in the financial services industry since 1998. Prior to joining
Madison, Mr. Olson worked as a fixed income credit analyst and portfolio manager
for Clarica Insurance.
Mr.
Schroeder is Vice President and Portfolio Manager/Analyst of Madison. Mr.
Schroeder has been a member of the Madison fixed income team since joining
Madison in 2015 and has worked in the financial services industry since
1997.
Madison
Aggregate Bond ETF is
co-managed Mike Sanders, CFA and Allen Olson, CFA.
Mr.
Sanders’ and Mr. Olson’s biographical information is provided
above.
Madison
Dividend Value ETF is
co-managed by John Brown, CFA, and Drew Justman, CFA.
Mr.
Brown is Vice President and Portfolio Manager/Analyst of Madison. Prior to
joining Madison in July 2009, Mr. Brown had been a Managing Director and
Portfolio Manager-Equities of MCA since 1998.
Mr.
Justman is Vice President and Portfolio Manager/Analyst of Madison. Mr. Justman
joined Madison in July 2005 as a research analyst, specializing in the materials
and industrials sectors. Prior to joining Madison, Mr. Justman was with Merrill
Lynch.
Madison
Covered Call ETF
is co-managed by Ray DiBernardo, CFA, and Drew Justman, CFA.
Mr.
DiBernardo is Vice President and Portfolio Manager/Analyst of Madison. Prior to
joining Madison in 2003, Mr. DiBernardo was employed at Concord Trust in
Chicago, IL, as well as a Toronto-based international equity firm.
Mr.
Justman’s biographical information is provided above.
Information
regarding the portfolio managers’ compensation, their ownership of securities in
the Funds and the other accounts they manage can be found in the
SAI.
MFD
Distributor, LLC (the “Distributor”),
located at 550 Science Drive, Madison, Wisconsin 53711, acts as the Funds’
principal distributor pursuant to a Distribution Agreement between the Trust, on
behalf of the Fund, and the Distributor. The Distributor is a wholly owned
subsidiary of MIH. The Board adopted the Distribution and Service Plan pursuant
to Rule 12b-1 under the 1940 Act.
In
accordance with this Rule 12b-1 plan, each Fund is authorized to pay an amount
up to 0.25% of its average daily net assets each year to reimburse the
Distributor for amounts expended to finance activities primarily intended to
result in the sale of Creation Units or the provision of investor services. The
Distributor may also use this amount to compensate securities dealers or other
persons that are
authorized
participants for providing distribution assistance, including broker-dealer and
shareholder support and educational and promotional services.
No
distribution or service fees are currently paid by the Fund, however, and there
are no current plans to impose these fees. However, in the event 12b-1 fees are
charged in the future, because these fees are paid out of a Fund’s assets, over
time these fees will increase the cost of your investment and may cost you more
than certain other types of sales charges.
Each
Fund issues, on a continuous offering basis, its shares in one or more groups of
a fixed number of Fund shares (each such group of such specified number of
individual Fund shares, a “Creation
Unit Aggregation”).
The method by which Creation Unit Aggregations of Fund shares are created and
traded may raise certain issues under applicable securities laws. Because new
Creation Unit Aggregations of shares are issued and sold by the Fund on an
ongoing basis, a “distribution,” as such term is used in the Securities Act, may
occur at any point. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus delivery requirement
and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent shares and sells such shares
directly to customers, or if it chooses to couple the creation of a supply of
new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating in the distribution of
shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(a)(3) of the Securities Act is not
available in respect of such transactions as a result of Section 24(d) of the
1940 Act. As a result, broker-dealer firms should note that dealers who are not
underwriters but are participating in a distribution (as contrasted with
ordinary secondary market transactions) and thus dealing with the shares that
are part of an overallotment within the meaning of Section 4(a)(3)(C) of the
Securities Act would be unable to take advantage of the prospectus delivery
exemption provided by Section 4(a)(3)of the Securities Act. Firms that incur a
prospectus delivery obligation with respect to shares are reminded that, under
the Securities Act Rule 153, a prospectus delivery obligation under Section
5(b)(2) of the Securities Act owed to a broker-dealer in connection with a sale
on the Exchange is satisfied by the fact that the prospectus is available from
the Exchange upon request. The prospectus delivery mechanism provided in Rule
153 is available with respect to transactions on a national securities exchange,
a trading facility or an alternative trading system.
Each
Fund is new and has no performance history as of the date of this Prospectus.
Financial information therefore is not available.
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MORE
INFORMATION ABOUT MADISON ETFs® |
The
following documents contain more information about the Funds and are available
free upon request:
Statement
of Additional Information. The
SAI contains additional information about the Funds. A current SAI has been
filed with the SEC and is incorporated herein by reference. This means that the
SAI, for legal purposes, is part of this prospectus.
Annual
and Semi-Annual Reports. The
Funds’ annual and semi-annual reports will provide additional information about
a Fund’s’ investments. The annual report will contain a discussion of the market
conditions and investment strategies that significantly affected each Fund’s
performance during the last fiscal year.
Requesting
Documents. You
may request a copy of the SAI and the annual and semi-annual reports, make
shareholder inquiries, without charge, or request further information about the
Funds by contacting your financial adviser or by contacting the Funds at:
Madison ETFs®,
550 Science Drive, Madison, Wisconsin 53711; telephone:1-800-767-0300; Internet:
www.madisonfunds.com.
Reports
and other information about the Funds also are available on the EDGAR database
on the SEC’s Internet site at www.sec.gov. Copies of this information may be
obtained, after paying a duplications fee, by electronic request at the
following email address: [email protected].
Madison
ETFs®
550
Science Drive, Madison, Wisconsin 53711
1-800-767-0300
www.madisonfunds.com
SEC
File Nos.: 333-271759
811-23875