MADISON INTERNATIONAL STOCK FUND INVESTMENT STRATEGY LETTER

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1 madisonadv.com madisonfunds.com Q EXCELLENCE IN INVESTMENT MANAGEMENT MADISON INTERNATIONAL STOCK FUND INVESTMENT STRATEGY LETTER Market Overview During the second quarter, international equity markets declined modestly in local terms, but due to strength in the euro, the British pound, and other European currencies, dollar returns were slightly positive. Emerging markets equities outperformed developed ones, led by Russia, Brazil, and China. Within developed markets, Japanese equities did well as data showed the economy expanding during the first quarter at a faster rate than initially expected. Additionally, improving corporate governance at a number of Japanese companies helped lift share prices. British equities also performed well after the surprising victory of the incumbent, traditionally business-friendly Conservative party. The euro-zone is holding up relatively well, with better-than-expected economic data, despite the Greek debt stand-off with its creditors. Although the situation continues to evolve, as of June 30th Greece is scheduled to hold a public referendum on whether or not to accept the austerity needed for another bailout. Equities in the Telecom Services and Energy sectors performed well, while the Health Care and Information Technology sectors declined. Portfolio Review The portfolio outperformed the MSCI EAFE Index during the quarter, driven by stock selection. Within the Financials sector, shares of Japanese real estate construction company Daiwa House performed well on earnings that were better than expected, driven by a recovery in logistics, housing, and condos. The company also issued well-received company guidance and raised its dividend. Elsewhere, shares of British bank Lloyds benefited from better-than-expected earnings, and from the favorable UK election results. A number of other holdings in the United Kingdom also rose on the election results, including construction company Taylor Wimpey and bookmaker William Hill. Lastly, in the Consumer Staples sector, shares of Japan Tobacco hit a record high on news that the company would sell its vending machine business as well as two of its beverage brands to Suntory Beverage & Foods. In contrast, shares of Philippine conglomerate Alliance Global declined amid reporting its results and outlook, both of which were disappointing. In the Health Care sector, Israeli pharmaceutical company Teva was hurt by the launch of a generic version of its key drug Copaxone. Low exposure to the Energy sector, which performed strongly amid a recovery in the price of oil, detracted from relative returns. The rise in the oil price also hurt UK-based airline International Consolidated Airlines. Past performance does not predict future results. Please refer to the final two pages of this piece which contain current performance information for the fund, the risks of investing in the fund and a complete list of the fund s individual portfolio holdings as of quarter end. Individual portfolio holdings are identified to illustrate our approach to investing the fund s portfolio and are not intended to represent a recommendation to buy or sell any such security. 550 Science Drive Madison WI 53711

2 Recent Activity and Trade Rationale During the quarter, interesting stock-specific opportunities led to changes in our exposures. Exposure to Continental Europe decreased as the portfolio sold positions in Spanish airport operator Aena, German automobile manufacturer BMW, Spanish television broadcaster Mediaset Espana, Swiss telecommunications equipment-and-services company Sunrise Communications, and Swiss-watch manufacturer Swatch. These sales were slightly offset by purchases of Swiss financial services company Credit Suisse and Norwegian telecom company Telenor. Purchases of insurance broker Aon and building material company Wolsely increased the portfolio s exposure to the United Kingdom. Despite initiating a new position in Brazilian insurance broker BB Seguridade, exposure to emerging markets decreased amid sales of Greek telecommunications company Hellenic Telecom, Greek bank Piraeus, and Brazilian education company Estacio. Overall exposure to Financials increased due to recent purchases in the previously mentioned Aon, BB Seguridade, and Credit Suisse. Exposure to the Energy sector increased as well amid a purchase of Canadian natural gas producer Encana, while exposure to the consumer discretionary sector decreased amid sales of the previously mentioned BMW, Estacio, Mediaset Espana, and Swatch. Exposure to the Telecom sector decreased slightly amid sales of Helenic Telecom and Canadian wireless-and-media company Rogers, despite initiating a position in Norway s Telenor. Outlook Corporate profitability and balance sheets are still in extremely good shape, and if profitability can be sustained in an environment of gently improving, developed markets growth, then equities may still offer attractive valuations compared to the low returns available in other asset markets. However, share prices today appear dependent on both some level of economic recovery, and a continuation of currently very-low interest rates. This is dangerous, as over the medium term it is an unlikely combination. In the euro zone, quantitative easing (QE) and the collapse in the euro should provide some macroeconomic support. In the United States, a housing recovery allied to low-cost gas and labor are still encouraging supports. The fall in the price of oil should help consumers, though so far the negative impact of the oil price shock on the energy industry has outweighed its benefits for the overall economy. In China, despite the latest stimulus, growth is likely to be structurally lower in the future as the economy is close to the limits of its historic model based on low-cost labor and very-high fixed asset investment. The aggressive Japanese monetary experiment has achieved its initial aim of lifting asset prices and depressing the yen, but now needs to feed into wage growth if we are to see a sustainable end to deflation. Structural reforms are key to longer-term prospects here. Following the withdrawal of QE, we have seen a sharp rise in the U.S. dollar, and may potentially see rising U.S. yields, whose impact on a number of related debt and equity markets outside of the United States is likely to be negative. The portfolio teams continue to focus on stock selection, seeking to find stocks with sustainably high or improving returns trading at attractive valuations, and remain confident that the strong track record of the portfolios will continue in a variety of market conditions. 550 Science Drive Madison WI 53711

3 Information and opinions presented have been obtained or derived from sources believed by Lazard to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Allocations and security selection are subject to change. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio. Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one s home market. The values of these securities may be affected by changes in currency rates, application of a country s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Madison Funds are distributed by MFD Distributor, LLC. July 17, Science Drive Madison WI 53711

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5 1Q madisonfunds.com Q 3Q MADISON INTERNATIONAL STOCK FUND Primarily large-capitalization companies located in developed countries Up to 30% in emerging markets The Value of Long-Term Investing - Growth of $10,000 1 Class A Shares Portfolio of stocks $18,038 Investment Objective: Fund seeks long-term growth of capital. Inception Exp Class Ticker Date Ratio A MINAX 12/29/ % B MINBX 12/29/ % Y MINYX 6/30/ % $10, Average Annual Total Returns 2 (%) Three Months YTD 1 Yr 3 Yr 5 Yr 10 Yr Since Inception Class Y without sales charge Class A without sales charge with sales charge Class B without sales charge with sales charge MSCI EAFE Index (net) Calendar Year Returns 2 (%) with Downside Performance Highlighted Class A MSCI EAFE Index (net) Growth of $10,000 is calculated at NAV and assumes all dividends and capital gain distributions were reinvested. It does not take into account sales charges (see Note 2 below) or the effect of taxes. 2 Average annual total returns and calendar year returns assume all distributions are reinvested and reflect applicable fees and expenses. Class A share returns without sales charge would be lower if sales charge were included. Class A share returns with sales charge reflect the deduction of the maximum applicable sales charge of 5.75%. Class B shares have no up-front sales charge. If redeemed within six years, however, B shares are subject to a maximum contingent deferred sales charge of 4.5%. Index returns reflect broad measures of market performance compared to the fund and reflect no deduction for sales charges, account fees, expenses or taxes. You cannot invest directly in an index. The MSCI EAFE (Europe, Australasia & Far East) Index is a free-float adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI EAFE (net) Index is shown above and calculated on a total return basis with dividends reinvested after the deduction of withholding taxes. Performance data shown represents past performance. Investment returns and principal value will fluctuate, so that fund shares, when redeemed, may be worth more or less than the original cost. Past performance does not guarantee future results and current performance may be lower or higher than the performance data shown. Visit madisonfunds.com or call to obtain performance data current to the most recent month-end.

6 (unless otherwise stated) Portfolio Mix Distribution Frequency Annual 88.0% Developed Markets 6.9% Emerging Markets 5.1% Cash Risk Measures (10-Year) Class Y Standard Deviation 15.1% Downside Capture 87.7% Upside Capture 96.6% Total Net Assets $41.9 Million Sector allocation is rounded to the nearest 0.1%. Portfolio Turnover 44% Top Ten Holdings Number of Holdings 67 Security Description % NOVARTIS AG REG 4.5 TEVA PHARMACEUTICAL SP ADR 3.1 LLOYDS BANKING GROUP PLC 3.1 KDDI CORP 2.8 ANHEUSER BUSCH INBEV NV 2.7 BAYER AG REG 2.7 PRUDENTIAL PLC 2.7 DON QUIJOTE HOLDINGS CO LTD 2.5 DAIWA HOUSE INDUSTRY CO LTD 2.4 SUMITOMO MITSUI FINANCIAL GR 2.4 Lazard Asset Management subadvises the fund. Lazard is well known on Wall Street for well over a century of disciplined, globe-spanning investment experience. Lazard manages over $151 billion in assets, on behalf of institutional and individual clients. Shareholder Services Madison Funds Post Office Box 8390 Boston, MA Consultant and Advisor Services 550 Science Drive Madison, WI madisonfunds.com Standard Deviation measures dispersion from an average, which, for a mutual fund, depicts how widely the returns varied over a certain period of time. Higher deviation represents higher volatility. Downside Capture Ratio measures a fund s performance in down markets relative to its benchmark. It is calculated by taking the security s downside capture return and dividing it by the benchmark s downside capture return over the time period. Upside Capture Ratio measures a fund s performance in up markets relative to its benchmark. It is calculated by taking the security s upside capture return and dividing it by the benchmark s upside capture return over the time period. Portfolio Turnover is a measure of the trading activity in an investment portfolio how often securities are bought and sold by a portfolio. It is calculated at the fund level and represents the entire fiscal year ending 10/31/2014. An investment in the fund is subject to risk and there can be no assurance that the fund will achieve its investment objective. The risks associated with an investment in the fund can increase during times of significant market volatility. The principal risks of investing in the fund include: equity risk, value investing risk, capital gain realization risks to taxpaying shareholders, and foreign security and emerging market risk. International securities have additional risks, including exchange rate changes, political and economic unrest, relatively low market liquidity and the potential difference in financial and accounting controls and standards. More detailed information regarding these risks can be found in the fund s prospectus. For more complete information about Madison Funds, including charges and expenses, obtain a prospectus from your financial adviser, by calling or by visiting madisonfunds.com and clicking on prospectus and reports to view or download a copy. Before investing in the funds, consider the investment objectives, risks, charges and expenses. The prospectus contains this and other information about funds and should be read carefully before investing. Madison Funds are distributed by MFD Distributor, LLC and may be purchased directly from the fund or through your investment professional. Portfolio data is as of the date of this piece unless otherwise noted and holdings are subject to change. Not FDIC Insured No Financial Institution Guarantee May Lose Value MF-MINAX