<PAGE> 1
As filed with the Securities and Exchange Commission on March 22, 1996.
Registration No. 33-6418
1940 Act File No. 811-4946
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
------
Post-Effective Amendment No. 11 /X/
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 13 /X/
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(Check Appropriate box or boxes)
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THOMPSON PLUMB FUNDS, INC.
(Exact name of registrant as specified in charter)
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
(Address of Principal Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (608) 831-1300
THOMAS G. PLUMB
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
(name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/x/ on March 25, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
Registrant has registered an indefinite number of shares of Common Stock,
par value $0.01, under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. On January 29, 1996, the Registrant filed
a Rule 24f-2 Notice for the fiscal year ended November 30, 1995.
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THOMPSON PLUMB FUNDS, INC.
_____________________________
CROSS REFERENCE SHEET
_____________________________
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM NUMBERS PROSPECTUS CAPTION
- - ------------ ------------------
<S> <C>
1. .................... Outside Front Cover Page
2. .................... Expense Information
3. .................... Financial Highlights; Other Information - Perfor-
mance Information
4. .................... Outside Front Cover Page; General Information
5. .................... General Information; Management of the Funds
5A. .................... Not applicable. See Annual Report to Shareholders
6. .................... Dividends, Distributions and Taxes; Description of Shares;
Other Information - Shareholder Statements, Reports and Inquiries
7. .................... Purchase and Redemption of Shares; Determination of Net
Asset Value; Other Information-Retirement Plans
8. .................... Purchase and Redemption of Shares; Determination of Net
Asset Value
9. .................... Not applicable.
FORM N-1A
PART B STATEMENT OF ADDITIONAL
ITEM NUMBERS INFORMATION CAPTION
------------ -----------------------
<CAPTION>
<S> <C>
10. .................... Cover Page
11. .................... Cover Page
12. .................... Cover Page
13. .................... Description of Certain Investments and Trans-
actions; Investment Restrictions
14. .................... Management
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM N-1A
PART B STATEMENT OF ADDITIONAL
ITEM NUMBERS INFORMATION CAPTION
- - ------------ -----------------------
<S> <C>
15. ................... Management; Other Information
16. ................... Management; Advisory and Administrative
Services
17. ................... Portfolio Transactions and Brokerage
18. ................... Determination of Net Asset Value and Pricing
Considerations; Taxes
19. ................... Determination of Net Asset Value and Pricing
Considerations
20. ................... Taxes
21. ................... Not Applicable
22. ................... Fund Performance
23. ................... Financial Statements
</TABLE>
-2-
<PAGE> 4
THOMPSON PLUMB FUNDS, INC.
PROSPECTUS
MARCH 25, 1996
THOMPSON PLUMB FUNDS, INC.
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
TELEPHONE: (608) 831-1300
THOMPSON PLUMB FUNDS, INC. offers a series of separate mutual funds, each
with its own investment objective:
THOMPSON PLUMB BALANCED FUND
This Fund (the "Balanced Fund") seeks to realize a combination of income
and capital appreciation, which will result in the highest total return while
assuming reasonable risk. The Balanced Fund invests in a diversified portfolio
of common stocks and fixed income securities.
THOMPSON PLUMB BOND FUND
This Fund (the "Bond Fund") seeks a high level of current income while at
the same time preserving investment capital. The Bond Fund invests primarily
in a diversified portfolio of investment-grade debt securities.
THOMPSON PLUMB GROWTH FUND
This Fund (the "Growth Fund") seeks a high level of long-term growth
primarily through capital appreciation, while at the same time assuming
reasonable risk. The Growth Fund invests primarily in a diversified portfolio
of common stocks and securities convertible into common stocks. Although
current income is not a primary objective of the Growth Fund, the Fund
anticipates that capital growth will be accompanied by growth through dividend
income.
The Funds are managed by Thompson, Plumb & Associates, Inc. (the
"Advisor"). See "Management of the Funds." They are offered directly to
investors, without a sales charge. See "Purchase and Redemption of Shares."
This Prospectus sets forth concisely the information about each of the
Funds that a prospective investor should know before investing. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds has been filed with the Securities and Exchange
Commission in the form of a Statement of Additional Information, dated March
25, 1996. Copies of the Statement of Additional Information, which is
incorporated herein by reference in its entirety, will be provided without
charge upon written request to the attention of the Corporate Secretary of the
Advisor at 8201 Excelsior Drive, Suite 200, Madison, Wisconsin 53717, or by
calling the Advisor's offices at 608-831-1300.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 5
PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
EXPENSE INFORMATION .................................................... 3
FINANCIAL HIGHLIGHTS ................................................... 4
GENERAL INFORMATION .................................................... 5
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS ........................ 5
Thompson Plumb Balanced Fund ...................................... 5
Thompson Plumb Bond Fund .......................................... 6
Thompson Plumb Growth Fund ........................................ 7
OTHER INVESTMENT FACTORS REGARDING THE FUNDS ........................... 7
Common Stocks ..................................................... 7
Fixed Income Securities ........................................... 7
Short-Term Instruments ............................................ 8
Portfolio Turnover ................................................ 8
Investment Restrictions ........................................... 9
Other Factors ..................................................... 9
MANAGEMENT OF THE FUNDS ................................................ 9
PURCHASE AND REDEMPTION OF SHARES ...................................... 11
General ........................................................... 11
Purchases ......................................................... 11
Automatic Investment Plan.......................................... 12
Systematic Withdrawal Plan......................................... 12
Exchange Privilege ................................................ 12
Automatic Exchange Plan ........................................... 12
Exchange By Telephone ............................................. 13
Availability of Money Market Fund ................................. 13
Redemptions ....................................................... 13
DETERMINATION OF NET ASSET VALUE ....................................... 15
DIVIDENDS, DISTRIBUTIONS AND TAXES ..................................... 15
General ........................................................... 15
Other Information ................................................. 15
DESCRIPTION OF SHARES .................................................. 16
OTHER INFORMATION ...................................................... 16
Transfer and Dividend Disbursing Agent and Custodian .............. 16
Shareholder Statements, Reports and Inquiries ..................... 16
Retirement Plans .................................................. 16
Performance Information ........................................... 17
Portfolio Transactions and Brokerage .............................. 17
</TABLE>
2
<PAGE> 6
EXPENSE INFORMATION
<TABLE>
<CAPTION>
BALANCED BOND GROWTH
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases None None None
Sales Load Imposed on Reinvested Dividends None None None
Redemption Fees(1) None None None
Exchange Fee (between the Funds)(1) None None None
ANNUAL FUND OPERATING EXPENSES:
(As a percentage of average net assets)(2)
Management Fees .85% .65% 1.00%
12b-1 Fees None None None
Other Expenses (after reimbursement .64% .50% .80%
by the Advisor)(3)
TOTAL FUND OPERATING EXPENSES 1.49% 1.15% 1.80%
(after reimbursement by the Advisor)(3)
</TABLE>
(1) The Funds' transfer agent charges a wire fee for the return of redemption
proceeds requested by wire transfer. The fee is currently $10.00. The
Funds' transfer agent charges a fee for telephone exchanges. That fee is
currently $5.00. The Funds' Advisor may absorb the fee for broker-dealer
accounts.
(2) Annual fund operating expenses for the Balanced Fund are based on amounts
incurred during the fiscal year ended November 30, 1995; annual fund
operating expenses for the Bond and Growth Funds have been restated to
reflect current fees (net of reimbursements).
(3) The Advisor currently intends to voluntarily reimburse the Bond and
Growth Funds for all expenses they incur on an annual basis in excess of
1.15% and 1.80%, respectively, of average daily net assets. During the
fiscal year ended November 30, 1995, the Advisor voluntarily reimbursed
the Bond Fund for expenses incurred on an annual basis over 1.00% of
average net assets from December 1, 1994 to January 31, 1995 and 1.15% of
average net assets thereafter. Without such reimbursement, for the fiscal
year ended November 30, 1995, Other Expenses for the Bond Fund would have
been 0.69% of average net assets, resulting in Total Fund Operating
Expenses of 1.34% of average net assets. Voluntary reimbursement may be
modified or discontinued by the Advisor at any time.
EXAMPLE: A $1,000 investment would result in the incurrence
of the following Fund expenses, assuming: (1) a 5% annual return; (2)
redemption at the end of each time period; and (3) with respect to the
Bond and Growth Funds, continuation throughout the periods of voluntary
reimbursement by the Advisor, as described in footnote (3) above.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Fund $15 $47 $81 $178
Bond Fund $12 $37 $63 $140
Growth Fund $18 $57 $97 $212
</TABLE>
The purpose of this expense information is to assist the investor in
understanding the various costs and expenses that the investor will bear
directly or indirectly in any of the Funds. For more detailed information
concerning these expenses, see "Management of the Funds." THE ABOVE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE> 7
FINANCIAL HIGHLIGHTS
The following financial information for the Funds for the periods
indicated has been examined by Price Waterhouse LLP, independent accountants,
as indicated in their report incorporated by reference into the Statement of
Additional Information from the annual report to shareholders for the fiscal
year ended November 30, 1995. This information should be read in conjunction
with the financial statements and related notes appearing in the annual report.
The annual report contains additional performance information and may be
obtained upon request and without charge by writing or calling the Advisor.
<TABLE>
<CAPTION>
Income From Investment Operations Less Distributions
-------------------------------------- ----------------------------------------
Net Gains or
Losses on
Net Asset Investments Total Dividends
Value, Net (both From (from net Distributions
Beginning investment realized and Investment Investment from capital Total
of Period Income unrealized) Operations income) gains) Distributions
--------- ---------- ------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
March 16, 1987 (Commencement
of Operations) through
November 30, 1987 $10.00 $0.09 ($1.64) ($1.55) -- -- --
Year Ended November 30,
1988 8.45 0.19 1.51 1.70 (0.09) -- (0.09)
1989 10.06 0.30 1.72 2.02 (0.21) -- (0.21)
1990 11.87 0.27 (0.14) 0.13 (0.31) -- (0.31)
1991 11.69 0.27 1.83 2.10 (0.29) -- (0.29)
1992 13.50 0.30 1.16 1.46 (0.28) (0.11) (0.39)
1993 14.57 0.28 0.15 0.43 (0.28) (0.55) (0.83)
1994 14.17 0.27 0.04 0.31 (0.27) (0.66) (0.93)
1995 13.55 0.24 2.26 2.50 (0.28) (1.54) (1.82)
BOND FUND
February 10, 1992
(Commencement of
Operations) through
November 30, 1992 $10.00 $0.20 $0.28 $0.48 ($0.15) -- ($0.15)
Year Ended November 30, 1992
1993 10.33 0.45 0.44 0.89 (0.42) (0.02) (0.44)
1994 10.78 0.48 (0.78) (0.30) (0.47) (0.13) (0.60)
1995 9.88 0.57 0.78 1.35 (0.56) - (0.56)
GROWTH FUND
February 10, 1992
(Commencement of
Operations) through
November 30, 1992 $20.00 ($0.05) $0.42 $0.37 -- -- --
Year Ended Novemberr 30,
1993 20.37 (0.12) 0.22 0.10 -- -- --
1994 20.47 (0.20) 0.16 (0.04) -- -- --
1995 20.43 (0.05) 6.22 6.17 -- (1.86) (1.86)
<CAPTION>
Ratio/Supplemental Data
---------------------------------------------------------------
Net Assets Net Assets Ratio of Ratio of
Value, End of Expenses Net Income Portfolio
End Total Period to average to average Turnover
of Period Return (millions) Net Assets Net Assets Rate
--------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED FUND
March 16, 1987 (Commencement
of Operations) through
November 30, 1987 $ 8.45 (15.50%)(a) $ 4.4 2.00%(b)(c) 1.93%(b)(d) 114.06%
Year Ended November 30,
1988 10.06 20.28% 6.4 2.00%(c) 2.15%(d) 80.96%
1989 11.87 20.46% 9.0 2.00% 2.95% 55.69%
1990 11.69 1.18% 11.4 1.84% 2.49% 56.86%
1991 13.50 18.35% 18.1 1.64% 2.46% 48.46%
1992 14.57 10.91% 20.9 1.48% 2.14% 52.75%
1993 14.17 3.02% 21.5 1.40% 1.89% 91.77%
1994 13.55 2.15% 17.2 1.42% 1.84% 110.01%
1995 14.23 21.02% 18.1 1.49% 1.71% 111.16%
BOND FUND
February 10, 1992
(Commencement of
Operations) through
November 30, 1992 10.33 4.80%(a) $ 3.9 1.15%(b)(c) 4.36%(b)(d) 227.03%
Year Ended November 30,
1993 10.78 8.74% 6.2 1.00%(c) 4.44%(d) 111.18%
1994 9.88 (2.96%) 10.2 1.00%(c) 4.83%(d) 165.74%
1995 10.67 14.06% 14.9 1.13%(c) 5.70% 111.95%
GROWTH FUND
February 10, 1992
(Commencement of
Operations) through
November 30, 1992 $20.37 1.85%(a) $ 7.4 2.00%(b)(c) (0.40%)(b)(d) 43.23%
Year Ended Novemberr 30,
1993 20.47 0.49% 7.1 1.93% (0.54%) 98.93%
1994 20.43 (0.19%) 4.7 2.00%(c) (0.49%)(d) 116.69%
1995 24.74 32.87% 12.6 2.00% (0.31%) 86.68%
</TABLE>
(a) Calculated on a non-annualized basis.
(b) Calculated on an annualized basis.
(c) Computed after giving effect to Advisor's expense reimbursement as follows:
for the Balanced Fund $13,977 and $4,994 in 1988 and 1987, respectively; for
the Bond Fund $25,775, $46,412, $39,759 and $20,582 in 1995, 1994, 1993 and
1992, respectively; for the Growth Fund $16,467 and $2,638 in 1994 and
1992, respectively. Without such reimbursements, the ratios would have
been as follows: for the Balanced Fund 2.2% in 1988 and 2.2%(b) in 1987;
for the Bond Fund 1.34%, 1.48%, 1.76% and 2.36%(b) in 1995, 1994, 1993 and
1992, respectively; for the Growth Fund 2.31% in 1994 and 2.05%(b) in 1992.
(d) Without expense reimbursements, the ratios would have been as follows:
for the Balanced Fund 1.9% and 1.7%(b) in 1988 and 1987, respectively; for
the Bond Fund 5.49%, 4.34%, 3.68% and 3.13%(b) in 1995, 1994, 1993 and
1992, respectively; for the Growth Fund (0.80%) and (0.46%)(b) in
1994 and 1992, respectively.
4
<PAGE> 8
GENERAL INFORMATION
Thompson Plumb Funds, Inc. is a Wisconsin corporation incorporated in 1986
and registered as an open-end, diversified management investment company under
the Investment Company Act of 1940 (the "1940 Act"). This prospectus relates
to the following three separate Funds:
THOMPSON PLUMB BALANCED FUND
THOMPSON PLUMB BOND FUND
THOMPSON PLUMB GROWTH FUND
Each Fund obtains its assets by continuously offering and selling its
shares to the public. Proceeds from such sales are invested by the Fund in
securities of different companies or governmental entities. Each Fund provides
its investors with diversification by investing in the securities of many
different companies in a variety of industries or governmental entities, and
furnishes its investors with experienced management to select and watch over
the Fund's investments. As open-end mutual funds, each Fund will redeem any of
its outstanding shares on demand of the owner at their net asset value. See
"Purchase and Redemption of Shares." Because the Funds invest in stocks and
bonds, the value of shares in the Funds will rise and fall according to market
conditions and over time may be more or less than the price initially paid by
the investor.
As the Advisor, Thompson, Plumb & Associates, Inc. is responsible for
evaluating and selecting the securities held by the Funds and will use its
professional expertise and experience in an effort to ensure that the Funds'
objectives will be met, although there can be no assurance of their success.
See "Management of the Funds."
Each of the Funds is 100% no-load. This means that investors pay no fees
to purchase, exchange or redeem shares, nor any 12b-1 distribution expenses.
Lower asset based charges benefit investors by increasing each Fund's
investment return.
INVESTMENT OBJECTIVES AND POLICIES
OF THE FUNDS
THOMPSON PLUMB BALANCED FUND
The Balanced Fund seeks to realize a combination of income and capital
appreciation which will result in highest total return, while assuming
reasonable risk. The Balanced Fund invests in a diversified portfolio of
common stocks and fixed income securities.
The Advisor will invest in securities that, in its judgment, will result
in the highest total return consistent with preservation of principal, and will
vary the mix of common stocks and bonds from time to time in accordance with
its assessment of economic conditions and investment opportunities. It is
anticipated that a major portion of the Balanced Fund's assets will be invested
at all times in common stocks. As of November 30, 1995, approximately 73% of
the total market value of the Balanced Fund's securities portfolio consisted of
common stocks. The Advisor invests in common stocks that it believes are
undervalued relative to the company's future growth prospects. The Advisor
believes characteristics that typify corporations with such future growth
prospects include quality balance sheets, strong management, high return on
assets and potential for earnings growth.
The Balanced Fund will also invest a significant portion of its assets in
fixed income securities, including corporate notes, bonds and debentures,
short-term money market instruments, debt securities issued or guaranteed by
the United States Government or by its agencies or instrumentalities,
convertible debt securities and preferred stock that is convertible into common
stocks. Ordinarily at least 25% of the total assets of the Balanced Fund will
be invested in such fixed income senior securities. For purposes of this
calculation, only that portion of the market value of the Balanced Fund's
convertible fixed income securities which is attributable to their fixed income
characteristics will be used in determining whether the Fund has maintained
this 25% minimum. Should the Advisor determine, based on its assessment of
prevailing market conditions, that fixed income securities provide the most
effective means for achieving the Balanced Fund's investment objective, it may
elect to temporarily invest all of the Fund's assets in such fixed income
securities. In determining whether the Balanced Fund should shift its emphasis
from common stocks to fixed income securities, the Advisor will assess
anticipated future changes in interest rates and the outlook for common stocks
generally.
The debt securities in which the Balanced Fund invests are generally the
same as those in which the Bond Fund invests. For a more detailed description
of
5
<PAGE> 9
the various kinds and characteristics of such debt securities, see "Thompson
Plumb Bond Fund" below. For a description of quality limitations and other
policies of the Balanced Fund with respect to investing in debt securities, see
"Other Investment Factors Regarding the Funds - Fixed Income Securities."
Under market conditions that, in the judgment of the Advisor, expose the
Balanced Fund to a decline in net asset value, the Balanced Fund may
temporarily invest in short-term money market instruments for defensive
purposes. Such conditions may include declines, or anticipated declines, in
stock prices which are generally accompanied with marked increases in interest
rates (thereby causing longer term fixed income securities to decline
substantially in value). There is no limit on the portion of the assets of the
Balanced Fund which may be invested in short-term money market instruments for
such defensive purposes. The Balanced Fund may also purchase such short-term
money market instruments for investment of idle cash balances. For a
description of such short-term instruments and quality limitations and other
policies of the Balanced Fund with respect to investing in such instruments,
see "Other Investment Factors Regarding the Funds - Short-Term Instruments."
THOMPSON PLUMB BOND FUND
The Bond Fund seeks a high level of current income, while at the same time
preserving investment capital. The Bond Fund invests primarily in a
diversified portfolio of investment-grade debt securities. Such securities
include the following types:
(1) Debt securities of domestic issuers, and of foreign issuers payable in
United States dollars, rated at the time of purchase within the four
highest grades by either Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's") (a description of these
ratings is contained in the Statement of Additional Information);
(2) Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities, including mortgage-related securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities, such as GNMA certificates;
(3) Mortgage-related securities issued or guaranteed by private issuers
and guarantors equivalent to the quality standards of item (1);
(4) Commercial paper rated within the two highest categories for
commercial paper or short-term debt securities by either S&P or Moody's
at the time of purchase;
(5) Obligations of banks and thrifts whose deposits are insured by the
FDIC; and
(6) Short-term corporate obligations, including variable rate demand notes
if the issuer has commercial paper or short-term debt securities rated
within the two highest categories by either S&P or Moody's at the time
of purchase. For a description of variable rate demand notes and an
explanation of how they differ from commercial paper, see "Other
Investment Factors Regarding the Funds - Short-Term Instruments."
Under normal circumstances, at least 65% of the Bond Fund's total assets
will be invested in the bonds described in (1) and (2) above. Although there
are no restrictions on the maturity of securities in which the Bond Fund may
invest, it is anticipated that during normal market conditions, the dollar
weighted average portfolio maturity of the Fund will not exceed 10 years. In
calculating average maturity, the stated final maturity date of a security is
used, unless it is probable that the issuer will shorten the maturity, in which
case the date on which it is probable that the issuer will call, refund or
redeem the security is used. The Bond Fund will not purchase securities with a
view to rapid turnover.
Securities issued by the U.S. Government, its agencies or
instrumentalities, may vary in terms of the degree of support afforded by the
Government. Some of such securities may be supported by the full faith and
credit of the U.S. Treasury, such as U.S. Treasury bills, notes and bonds and
GNMA certificates. Some agency securities are supported by the agency's right
to borrow from the U.S. Treasury under certain circumstances, such as those
issued by the Federal Farm Credit Bank. Still others are supported by the
credit of the agency that issued them, such as those issued by the Student Loan
Marketing Association. It is anticipated that the Bond Fund's investments in
6
<PAGE> 10
Government securities will primarily consist of those supported by the full
faith and credit of the United States Treasury.
The value of the Bond Fund's securities is subject to the effects of
changes in prevailing interest rates. See "Other Investment Factors Regarding
the Funds - Fixed Income Securities."
THOMPSON PLUMB GROWTH FUND
The Growth Fund seeks a high level of long-term growth primarily through
capital appreciation, while at the same time assuming reasonable risk. The
Growth Fund invests primarily in a diversified portfolio of common stocks and
securities convertible into common stocks. Although current income is not a
primary objective of the Growth Fund, the Fund anticipates that capital growth
will be accompanied by growth through dividend income. The term "reasonable
risk" refers to the Advisor's judgment that investments in certain common
stocks would not present a greater than normal risk of loss in light of current
and reasonably anticipated future general market and economic conditions,
trends in dividend yields and interest rates, and fiscal and monetary policies.
Any assets not invested in common stocks and securities convertible into
common stocks will be invested in income producing short-term instruments as a
reserve for future purchases of securities. The Advisor will seek to identify
investment opportunities in equity securities of companies which it believes
have above average potential for earnings and dividend growth. Generally, the
Advisor's analysis will consider a company's financial history and condition,
strength of management and position within its industry.
The Growth Fund may also invest in convertible preferred and convertible
fixed income securities. The Advisor intends generally to limit the Growth
Fund's purchase of these securities to those which are rated in one of the top
four rating categories by S&P or Moody's. A description of the ratings used by
the rating services noted above is contained in the Statement of Additional
Information.
The Growth Fund may also, from time to time, invest in short-term, fixed
income securities. Under ordinary circumstances, it is not anticipated that
more than 10% of the Growth Fund's total assets will be invested in such
short-term, fixed income securities. However, if deemed desirable for
defensive purposes, the Growth Fund may invest up to 25% of its assets in such
securities. For a discussion of special considerations with respect to
investing in short-term instruments, see "Other Investment Factors Regarding
the Funds - Short-Term Instruments."
OTHER INVESTMENT FACTORS REGARDING THE FUNDS
COMMON STOCKS
Both the Balanced Fund and Growth Fund invest in common stocks and
securities convertible into common stocks. A portion of those investments may
be in companies that have market capitalizations of under $200 million and
which may be traded only in the over-the-counter market. The Advisor believes
that such smaller companies often may be undervalued in the marketplace and
therefore carry a greater potential for capital appreciation. The market for
common stocks tends to be cyclical, with periods when stock prices generally
rise and periods when stock prices generally decline. The market values of
stocks of smaller companies may be subject to greater fluctuation than the
market in general and may have less market liquidity then equity securities of
larger companies. The Advisor does not intend to purchase smaller company
securities for the Balanced or Growth Funds if, at the time of purchase, the
aggregate investment in all such securities would exceed one-third of the total
market value of the respective Fund's portfolio. The Advisor believes that its
policies of issuer and industry diversification, together with its strategic
investment in money market instruments and other fixed income securities, can
limit the volatility of investments in these smaller companies. Investors in
the Balanced and Growth Funds should consider their holdings in those Funds to
be long-term investments.
FIXED INCOME SECURITIES
The total return realized on the Bond Fund and the fixed income portion of
the securities portfolio of the Balanced Fund will consist of the change in the
net asset value per share of those Funds attributable to the fixed income
securities, together with the per share income generated by those securities.
The net asset value of the fixed income securities held by those Funds will be
affected primarily by changes in interest rates, average maturities and the
investment and credit quality of the fixed income securities.
A bond's yield reflects the fixed annual interest as a
7
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percent of its current price. This price (the bond's market value) must
increase or decrease in order to adjust the bond's yield to current interest
rate levels. Therefore, bond prices generally move in the opposite direction
of interest rates. As a result, interest rate fluctuations will affect the net
asset values of the Balanced and Bond Funds, but will not affect the income
received by those Funds from their existing portfolio of fixed income
securities. However, changes in prevailing interest rates will affect the
yield on shares subsequently issued by those Funds. Such fluctuations also
affect the income received on any variable rate demand notes or other variable
rate securities held in the Funds' portfolios. Because yields on fixed income
securities available for purchase by these Funds will vary over time, no
specific yield on the fixed income portion of the portfolios of those Funds can
be assured. Total returns on fixed income securities tend to fluctuate in a
wider range than the fluctuation in interest rates since gain or loss in the
market value of those securities is combined with interest derived from those
securities to calculate total return.
Movements in interest rates typically have a greater effect on the prices
of longer term bonds than on those with shorter maturities. The Advisor will
actively manage the portfolio maturity of the Balanced and Bond Funds,
consistent with their respective investment objectives, according to the
Advisor's assessment of the interest rate outlook. During periods of rising
interest rates, the Advisor will likely attempt to shorten the average maturity
of the portfolio to cushion the effect of falling bond prices on the Funds'
share prices. When interest rates are falling and bond prices are increasing,
on the other hand, the Advisor will likely seek to lengthen the average
maturity.
In order to protect against loss, each Fund has adopted policies with
respect to the quality of fixed income securities in which it may invest.
Those policies rely in part on ratings assigned to such securities, or to other
debt securities of the issuer, by S&P or Moody's, two of the most widely known
national securities rating services. A description of the rating systems used
by S&P and Moody's is included in the Statement of Additional Information under
"Description of Ratings of Certain Fixed Income Securities." The minimal
rating standards adopted by each Fund with respect to specific fixed income
securities are described above under the discussion of the particular Fund's
investment objectives and policies. See "Investment Objectives and Policies of
the Funds." Securities rated in the fourth highest rating category may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with securities rated in a higher
category. In the event a debt security held in a Fund's portfolio is
downgraded to a rating below the lowest category permitted by the Fund's
policy, the Advisor will consider this fact together with other relevant
factors in determining whether to continue to hold the security. However,
downgrading alone will not require the sale of the security.
SHORT-TERM INSTRUMENTS
Short-term instruments in which the Funds may invest include United States
Treasury Bills, short-term instruments issued by agencies or instrumentalities
of the United States, commercial paper, variable rate demand notes, bank
certificates of deposit, and units of money market mutual funds. A variable
rate demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder, its amount
may from time to time be increased by the holder (subject to an agreed
maximum), or decreased by the holder or the issuer, and the rate of interest
payable on the security varies with an agreed formula. Transfer of such notes
is usually restricted by the issuer, and there is no secondary trading market
for such notes. The Funds will purchase such variable rate demand notes only
if, at the time of purchase, the issuer has commercial paper or short-term debt
securities rated within the two highest categories by either S&P or Moody's.
To the extent the Funds invest in units of money market mutual funds,
administrative fees and other operating expenses incurred by those funds would
be duplicative of those incurred by the Funds, and would reduce the return
received by the Funds on assets so invested. Minimum rating standards adopted
by each of the Funds with respect to investing in other short-term instruments
are described under "Investment Objectives and Policies of the Funds."
PORTFOLIO TURNOVER
Generally, the Funds do not intend to purchase securities for short-term
trading, however, when circumstances warrant, securities may be sold without
regard to the length of time held. A high turnover rate
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<PAGE> 12
may increase transaction costs and may affect taxes paid by shareholders to the
extent gains are distributed. The portfolio turnover rates for the fiscal
years ended November 30, 1995 and 1994 were 111.16% and 110.01%, respectively,
for the Balanced Fund, 111.95% and 165.74%, respectively, for the Bond Fund,
and 86.68% and 116.69%, respectively, for the Growth Fund.
INVESTMENT RESTRICTIONS
Except as discussed below, the investment objectives, policies and
programs of the Funds discussed in this Prospectus may be changed by the Board
of Directors without shareholder approval. Although the Directors have no
present plans to change the investment objective of any of the Funds, if the
investment objective of any Fund were to be changed it may be different from
that which was deemed appropriate by the shareholder at the time of the
investment.
The Funds are subject to additional investment restrictions which may not
be changed without the vote of a majority of the outstanding shares of the
affected Fund. Among other things, these restrictions prohibit the Funds from
concentrating investments in a single industry or purchasing securities of an
issuer if, as a result, more than 5% of the Fund's total assets would be
invested in that issuer, except that up to 25% of a Fund's assets may be
invested without regard to this limitation and provided that this limitation
does not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. No Fund may purchase the securities of issuers
conducting their principal business activity in the same industry if,
immediately following such purchase, the value of the Fund's investments in
such industry would exceed 25% of the value of its total assets, provided that
there is no limitation with respect to or arising out of investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Each Fund may borrow money, but only: (a) as a temporary measure, and
then only in amounts not exceeding 5% of the value of the Fund's total assets;
or (b) from banks, provided that, immediately after any such borrowing, the
total of all borrowings of the Fund does not exceed one-third of the Fund's
total assets. The Funds may not employ this borrowing authority for investment
leverage purposes, but may use it only for extraordinary or emergency purposes
and to facilitate management of the Funds' portfolios by enabling them to meet
redemption requests when the liquidation of portfolio securities is deemed to
be disadvantageous or impossible. While each Fund may borrow an aggregate
amount in excess of 5% of its total assets, no Fund may make any purchases of
portfolio securities at a time when the aggregate of its borrowings exceeds
that amount. If, due to market fluctuations or other reasons, the net assets
of a Fund fall below 300% of its borrowings, the Fund will promptly reduce its
borrowings in accordance with the requirements and procedures set forth in the
1940 Act. This may require the Fund to sell a portion of its portfolio
securities at a time when it may be disadvantageous to do so. Interest
incurred on borrowings will be an expense of the Fund. Each Fund may also
mortgage or pledge its assets to secure permitted borrowings.
In addition to the foregoing powers and restrictions, the Funds have
adopted other restrictions in order to comply with the securities laws of
various states. For a more complete description of the investment restrictions
summarized above and other investment restrictions to which the Funds are
subject, see "Investment Restrictions" in the Statement of Additional
Information.
OTHER FACTORS
Additional information regarding repurchase agreements, when-issued
transactions and lending of portfolio securities is contained in the Statement
of Additional Information.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed by the Board of
Directors of Thompson Plumb Funds, Inc. Thompson, Plumb & Associates, Inc.,
8201 Excelsior Drive, Suite 200, Madison, Wisconsin, acts as the investment
advisor to, and administrator of, each of the Funds. Since commencing
operations in 1984, the Advisor has been the investment advisor to individuals
and institutional clients with substantial investment portfolios, with
approximately $369 million in assets under management as of December 31, 1995.
John W. Thompson, and Thomas G. Plumb, who have considerable investment
management experience, each own approximately 45% of the outstanding shares of
the Advisor. For biographical information on these individuals, see
"Management" in the Statement of Additional Information. The Advisor does not
currently serve as an investment advisor to any investment companies other than
Thompson Plumb Funds, Inc.
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Pursuant to an Investment Advisory Agreement between the Advisor and the
Funds, the Advisor manages the investment and reinvestment of the Funds'
assets, provides the Funds with personnel, facilities and administrative
services, and supervises the Funds' daily business affairs, all subject to the
supervision of the Board of Directors. The Advisor formulates and implements a
continuous investment program for each Fund consistent with its investment
objective, policies and restrictions.
The Advisor provides office space and executive and other personnel to the
Funds. In addition to the investment advisory fees, each Fund incurs the
following expenses: legal, auditing and accounting expenses, directors' fees
and expenses, insurance premiums, brokers' commissions, taxes and governmental
fees, expenses of issuing and redeeming shares, organizational expenses,
expenses of registering or qualifying shares for sale, postage and printing for
reports and notices to shareholders, fees and disbursements of the custodian,
transfer agent, certain expenses with respect to membership fees of industry
associations and any extraordinary expenses, such as litigation expenses.
As compensation for the services rendered to the Fund and the assumption
by the Advisor of certain related expenses, each Fund pays to the Advisor an
investment advisory fee computed separately and paid monthly at an annual rate
as follows: (i) for the Balanced Fund, 0.85 of 1% on the first $50 million of
average daily net assets and 0.80 of 1% on average daily net assets in excess
of $50 million; (ii) for the Bond Fund, 0.65 of 1% of the first $50 million of
average daily net assets and 0.60 of 1% of average daily net assets in excess
of $50 million; and (iii) for the Growth Fund, 1.00% on the first $50 million
of average daily net assets and 0.90 of 1% of average daily net assets in
excess of $50 million. The investment advisory fees paid by the Balanced Fund
and the Growth Fund are higher than those paid by most other investment
companies. The expenses assumed by the Advisor exclude the cost(s) (including
taxes and brokerage commissions, if any) of securities purchased for the Funds
and the cost of preparation of tax returns, the preparation and submission of
reports to shareholders, the periodic updating of this Prospectus and the
Statement of Additional Information and the preparation of reports filed with
the Securities and Exchange Commission and other regulatory authorities.
The Advisor also provides accounting services to the Funds pursuant to its
Accounting Services Agreement with Thompson Plumb Funds, Inc. Pursuant to the
Accounting Services Agreement, the Advisor provides each Fund with accounting
and bookkeeping services and performs per share net asset value calculations.
For these services and the Advisor's assumption of certain related expenses,
each Fund pays the Advisor a fee computed daily and payable monthly at the
annual rate of 0.20 of 1% of net assets up to $30 million and 0.125 of 1% of
net assets in excess of $30 million, with a minimum fee of $30,000 per year.
For the fiscal year ended November 30, 1995, this fee for the Balanced Fund,
Bond Fund and Growth Fund amounted to $31,168, $30,217 and $30,214,
respectively. In calculating the net asset value per share, the Advisor may
use an independent pricing service to determine the value of some or all of a
Fund's portfolio securities, and, if such a service is used, the cost of such
service is borne by the Fund. See "Determination of Net Asset Value."
The Advisor has agreed that it will reimburse each Fund to the extent that
the Fund's expenses for any fiscal year (including all fees paid and payable to
the Advisor but excluding taxes, interest, brokerage commissions and, where
permitted, extraordinary expenses such as for litigation) exceed state expense
limitations applicable to the Fund. Such state expense limitations may be
increased or decreased from time to time. As of November 30, 1995, the most
restrictive expense limitation of which the Advisor was aware provided that
annual expenses (as defined) could not exceed 2-1/2% of the first $30 million
of a Fund's average net assets, 2% of the next $70 million of such assets and
1-1/2% of such assets in excess of $100 million. In addition, the Advisor
intends to voluntarily reimburse the Bond and Growth Funds for all expenses
they incur on an annual basis in excess of 1.15% and 1.80%, respectively, of
average daily net assets. Voluntary reimbursement may be modified or
discontinued by the Advisor at any time.
For the fiscal year ended November 30, 1995, the Balanced, Bond and Growth
Funds paid the Advisor investment advisory fees at the rate of 0.85%, 0.65%,
and 1.00%, respectively, of average daily net assets.
Thomas G. Plumb serves as portfolio manager for the Balanced Fund. He was
a co-manager of the Funds' portfolios from commencement of each Fund's
operations through mid-August 1993, when he became
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<PAGE> 14
sole portfolio manager of the Balanced Fund. Mr. Plumb is President, Treasurer
and a Director of the Funds and has been Vice President of the Advisor since he
co-founded it in June 1984.
John W. Thompson serves as portfolio manager for the Bond and Growth
Funds. He was a co-manager of the Funds' portfolios from commencement of each
Fund's operations through mid-August 1993, when he became sole portfolio
manager of the Bond and Growth Funds. Mr. Thompson is the Chairman, Secretary
and a Director of the Funds and has been President of the Advisor since he
co-founded it in June 1984 and Treasurer of the Advisor since October 1993.
Messrs. Plumb and Thompson are both Chartered Financial Analysts.
PURCHASE AND REDEMPTION OF SHARES
GENERAL
Applications for the purchase of shares should be submitted on the
accompanying Account Application form, should identify the appropriate Fund(s),
and should be directed to Thompson Plumb Funds, Inc., c/o Firstar Trust
Company, Mutual Funds Services, Third Floor, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. If the application is transmitted by an overnight delivery service
or express mail, it should be addressed to Thompson Plumb Funds, Inc., c/o
Firstar Trust Company, Mutual Funds Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. The Funds and Firstar do not consider the
U.S. Postal Service or other independent delivery services to be their agents.
Therefore, deposit in the mail or with such services, or receipt at Firstar's
post office box does not constitute receipt by Firstar or the Funds. All
purchases of shares, including reinvestments of dividends and distributions,
and all redemptions of shares will be made in full and fractional shares
rounded to the nearest thousandth (the third decimal place).
PURCHASES
The Funds offer and sell their shares at the net asset value per share
next determined after the purchase order has been received by Firstar Trust
Company ("Firstar"), which serves as the transfer and dividend disbursing agent
and custodian for the Funds. See "Determination of Net Asset Value."
Investors purchasing any Fund shares through a broker or agent may be charged a
fee by that broker or agent. The Board of Directors has established $1,000 as
the minimum initial purchase in any Fund, other than for an IRA, and $100 as
the minimum for any subsequent purchase, except through dividend reinvestment
or purchases through the Funds' Automatic Investment Plan or Automatic Exchange
Plan described below.
All applications to purchase shares are subject to acceptance or rejection
by authorized officers of the Funds and are not binding until accepted.
Applications may be made by mail or by wire transfer. If by mail, the
application must be accompanied by a check or money order drawn on a U.S. bank,
money market fund, credit union or savings association. Checks are accepted
subject to collection at full face value in U.S. funds. The transfer agent
will charge a $20 fee against a shareholder's account for any check written by
a shareholder that is returned to the custodian for insufficient funds.
Investors wishing to make an initial purchase by wire transfer must take
the following three steps: (1) telephone Firstar at 1-800-338-1579 or
414-765-4124 and provide his or her account registration, address, social
security or tax identification number, the amount being wired, the name of the
wiring bank and the name and telephone number of the person to be contacted at
his or her bank in connection with the purchase; and (2) instruct his or her
bank (which must be a member of, or have a correspondent relationship with, a
member of the Federal Reserve System) to wire federal funds as follows:
FIRSTAR NATIONAL BANK
ABA NO. 0750-00022
FOR CREDIT TO FIRSTAR TRUST COMPANY
MFS ACCOUNT NO. 112-952-137
FOR FURTHER CREDIT TO (NAME OF SPECIFIC FUND)
ACCOUNT REGISTRATION (NAME(S) OF INVESTOR)
and (3) complete and mail the accompanying Account Application form to Thompson
Plumb Funds, Inc., c/o Firstar Trust Company, Mutual Fund Services, Third
Floor, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. Shareholders who wish to
purchase additional shares by wire may do so by following steps 1 and 2 of
these wire transfer instructions and, in addition, by providing his or her
existing fund account number. Wire order funds must be received in the office
of Firstar prior to 3 P.M. Central Time, in order to purchase shares on that
day. Funds received after 3 P.M. Central Time will purchase shares on the
following
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<PAGE> 15
day. Shareholders are responsible for charges imposed by their bank for
effecting wire transfers.
Certificates representing shares of the Funds will not be issued unless
the shareholder specifically so requests in writing. Where certificates are
not requested, Firstar will credit the shareholder's account in the appropriate
Fund with the number of shares purchased. Written confirmations are issued for
all purchases, except that transactions pursuant to Fund plans for automatic
reinvestment of dividends, monthly automatic investment or systematic
withdrawal may be confirmed quarterly. The Funds reserve the right to reject
any purchase orders.
AUTOMATIC INVESTMENT PLAN
Shareholders who wish to make regular additional investments (monthly,
bimonthly, quarterly or yearly) in amounts of $50 or more to an existing Fund
account may do so through the Funds' Automatic Investment Plan. Under this
Plan, your designated bank or other financial institution debits a
preauthorized amount to your checking or NOW account on a business day of your
choosing and applies the amount to the purchase of Fund shares. The Funds can
accommodate up to four investments per month as long as there are seven days
between investments. The Funds do not charge a fee for participating in this
Plan. To use this service, you must authorize the transfer of funds by
completing the Automatic Investment Plan Application, which may be obtained
from either the Advisor or Firstar. The Funds reserve the right to suspend,
modify or terminate the Automatic Investment Plan without notice. Shareholders
who wish to make a change to their Automatic Investment Plan may call Firstar
at 1-800-338-1579.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders may elect to participate in the Funds' Systematic Withdrawal
Plan. By making this election, you can arrange for automatic withdrawals from
your Fund account according to the schedule you select which may be on a
monthly basis or in certain designated months. The Funds do not charge a fee
for participating in the Systematic Withdrawal Plan. The Systematic Withdrawal
option may be in any amount you select, subject to a $50 minimum. To begin
distributions, a shareholder must have a Fund account valued at $10,000 or
more. You may elect this option
by completing the Systematic Withdrawal Plan Application which is available
from Firstar or the Advisor. Shareholders who wish to make a change to their
Systematic Withdrawal option may call Firstar or the Advisor. Normally,
shareholders should not make automatic investments in a Fund at the same time
they are receiving systematic withdrawals from that Fund because such
shareholders could realize capital gains on the systematic withdrawals from
that Fund while they are automatically investing in that Fund. The Systematic
Withdrawal Plan may be terminated at any time by written notice.
EXCHANGE PRIVILEGE
Shares of any Fund registered in the name of a shareholder for at least 15
days may be exchanged for shares of any other Fund, provided the shares of both
Funds are qualified for sale in the shareholder's state of residence. Under
the exchange privilege, each Fund offers to exchange its shares for shares of
any other Fund on the basis of relative net asset value per share. In order to
qualify for the exchange privilege without further approval of the Fund, the
shares being exchanged must have a net asset value of at least $1,000, and may
not have a net asset value in excess of $100,000. In addition, if the
shareholder holds a certificate(s) for the shares being exchanged, the
shareholder must surrender such certificate(s) in the same manner as though the
shares were being redeemed. See "Redemptions" below.
An exchange between Funds pursuant to this exchange privilege is treated
as a sale for federal income tax purposes and, depending upon the
circumstances, a short or long-term capital gain or loss may be realized.
This exchange privilege may be modified or terminated at any time upon 60
days' prior written notice. The Funds reserve the right to limit the number of
times an investor may exercise the exchange privilege. To exercise the
exchange privilege, you must either authorize telephone exchanges as described
below or obtain, complete and return an Exchange Application available from
Firstar or the Advisor.
AUTOMATIC EXCHANGE PLAN
The Funds offer an Automatic Exchange Plan pursuant to which a shareholder
may elect to make regular monthly exchanges of shares from one Fund to another
Fund. Shareholders may elect to participate
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<PAGE> 16
by completing the Automatic Exchange Plan Application which may be obtained
from the Advisor or Firstar. Accounts for each Fund must be established with
at least $1,000 before automatic exchanges from or to such Funds can be made.
Each exchange will be made in a fixed amount designated by the shareholder,
which must be at least $50. Exchanges will be made on the same day designated
by the shareholder of each month at each Fund's respective net asset value per
share. Exchanges may only be made with respect to Fund accounts with identical
registrations. Like other types of exchanges, automatic exchanges constitute a
sale and purchase of shares for federal income tax purposes and, depending on
the circumstances, a short or long-term capital gain or loss may be realized.
EXCHANGE BY TELEPHONE
If you have elected on your Account Application, you can exchange shares
by phone. By doing so you assume some risks for unauthorized transactions.
The Funds and Firstar have implemented procedures designed to reasonably assure
that the telephone instructions are genuine. These procedures include
recording telephone conversations, requesting verification of information
regarding your account (social security number, account number and/or street
address) and sending a written confirmation of the transaction. If Firstar or
the Funds fail to abide by these procedures, the Funds may be liable to a
shareholder for losses he or she suffers from any resulting unauthorized
transaction(s). However, none of the Funds, the Advisor, Firstar or any of
their employees will be liable for losses suffered by a shareholder which
result from following telephone instructions reasonably believed to be
authentic after verification pursuant to these procedures. A $5.00 transaction
fee will be charged for each telephone exchange. Telephone exchanges may only
be made between identically registered accounts.
AVAILABILITY OF MONEY MARKET FUND
Shareholders may withdraw all or a portion of their investments in any
Fund and reinvest the proceeds the same day in the Portico Money Market Fund.
A shareholder who has moved an investment from any Fund to the Portico Money
Market Fund, may, at any time, move the investment back into any of the Funds.
However, use of this exchange privilege is subject to the minimum purchase and
redemption amounts set forth in the prospectus for the Portico Money Market
Fund, and is available only in states where shares of the Portico Money Market
Fund are qualified for sale. Shareholders may obtain a copy of that prospectus
from Firstar or directly from the Advisor, and are advised to read it carefully
before authorizing any investment in shares of the Portico Money Market Fund.
No charge to shareholders is imposed in connection with the use of this
exchange privilege. However, the Funds are entitled to receive a fee from the
Portico Money Market Fund for certain distribution and support services at the
annual rate of 0.20 of 1% of the average daily net asset value of the shares in
the Portico Money Market Fund that are a result of exchanges of shares of the
Funds.
The withdrawal of an investment from any of the Funds, even if the
proceeds are reinvested in the Portico Money Market Fund, is treated as a sale
for federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized. Therefore, before using this
exchange service, shareholders may wish to consult their own tax or other
financial consultant to determine the tax consequences of a particular
transaction. This exchange privilege may be modified or terminated at any time
upon 60 days' prior written notice.
REDEMPTIONS
The price at which shares of any Fund may be redeemed is the net asset
value per share next determined after the redemption request is received by
Firstar in proper form. See "Determination of Net Asset Value." A shareholder
may require a Fund to redeem his or her shares in whole or in part.
In order to effect a redemption of shares represented by a certificate(s),
the shareholder must mail the certificate(s) to the appropriate Fund at the
appropriate address shown below. The certificate(s) must be properly endorsed
or accompanied by an instrument of transfer.
Shareholders holding shares of any Fund not represented by certificates
may redeem such shares by mailing a signed written request for redemption to
the appropriate Fund at the address shown below. A Redemption Request Form
that may be used for this purpose can be obtained from the Advisor. Any such
written request must be signed exactly as the account is registered. If the
account is owned jointly, both owners must sign.
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<PAGE> 17
Signatures on surrendered stock certificates and Redemption Request Forms
must be guaranteed by a commercial bank, a federally chartered savings and loan
association, trust company, a member firm of a national securities exchange or
other eligible signature guarantor institution, unless the redemption is for
shares with an aggregate net asset value of $25,000 or less and the proceeds
are to be sent to the registered owner(s) of the shares at the current address
for such owner(s), as reflected on Firstar's records. In addition, a signature
guarantee of each owner is required to redeem shares in the following
situations: (i) if you change ownership registration on your account; (ii)
when you want the redemption proceeds sent to a different address from that
registered on the account; (iii) if the proceeds are to be made payable to
someone other than the accounts owner(s); (iv) any redemption transmitted by
federal wire transfer to your bank; and (v) if a change of address request has
been received by the Funds or the Transfer Agent within the last 30 days. If
there is doubt as to what documents or instructions are necessary in order to
redeem shares, please write or call Firstar (telephone no. 1-800-338-1579)
prior to submitting the redemption request. No redemption will become
effective until all documents have been received in proper form by Firstar.
Redemption requests should be addressed to:
IF TRANSMITTED BY REGULAR MAIL:
Thompson Plumb Funds, Inc.
c/o Firstar Trust Company
Mutual Funds Services, Third Floor
P.O. Box 701
Milwaukee WI 53201-0701
IF TRANSMITTED BY OVERNIGHT SERVICE OR EXPRESS MAIL:
Thompson Plumb Funds, Inc.
c/o Firstar Trust Company
Mutual Funds Services, Third Floor
615 East Michigan Street
Milwaukee WI 53202
All redemptions will be processed promptly upon receipt by Firstar. The
Funds and Firstar do not consider the U.S. Postal Service or other independent
delivery services to be their agents. Therefore, deposit in the mail or with
such services, or receipt at Firstar's post office box of redemption requests
does not constitute receipt by Firstar or the Funds. Firstar will return
redemption requests that contain restrictions as to the time or date
redemptions are to be effected. Firstar will normally delay sending redemption
proceeds until the earlier of: (a) the day on which all payments for the
shares being redeemed have cleared; or (b) 15 days after payment for the shares
has been received by Firstar. Firstar will charge $20 for having to stop
payment on any redemption checks which shareholders claim they have not
received. In order to help avoid delay in the sending of redemption proceeds,
shareholders may purchase their shares by Federal Reserve or other bank wire.
The redemption price will depend on the market value of the securities in the
particular Fund's investment portfolio at the time of redemption, and may be
more or less than the cost of the shares so redeemed. Payment for shares
redeemed ordinarily will be made, either by mail or wire transfer, within one
or two business days after Firstar has received the redemption request and all
necessary documents. Firstar currently deducts a $10.00 wire charge from the
redemption proceeds for each wire transfer. This charge is subject to change.
Shareholders will be responsible for any charges which their bank may impose
for receiving wires.
A shareholder's account in any Fund may be terminated by the Fund if, as a
result of any transfer, exchange or redemption of shares in the account, the
aggregate net asset value per share of the remaining shares in the account
falls below $750. The Fund will notify the shareholder at least 30 days in
advance of the Fund's intention to terminate the account to allow the
shareholder an opportunity to restore the account balance to at least $750.
Upon any such termination, a check for the proceeds of redemption will be sent
to the shareholder.
The right of a shareholder to redeem shares in any Fund and the date of
payment by the Fund may be suspended for any period during which the New York
Stock Exchange is closed, other than customary weekends or holidays, or trading
on such Exchange is restricted as determined by the Securities and Exchange
Commission, or during any emergency, as determined by the Securities and
Exchange Commission, as a result of which it is not reasonably practicable for
the Fund to dispose of securities owned by it or fairly to determine the value
of its net assets; or for such other period as the Securities and Exchange
Commission may by order permit for the protection of shareholders of the Fund.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund for purposes of both purchases
and redemptions of shares is calculated as of the close of trading on the New
York Stock Exchange (generally 4:00 P.M. Eastern Time) on each business day.
Net asset value per share is calculated by adding the value of all securities
and other assets of the particular Fund, subtracting the liabilities of the
Fund (including accrued expenses and dividends payable), and dividing the
remainder by the number of outstanding shares.
Portfolio securities which are traded on an exchange or in the
over-the-counter market are valued at the last sale price reported on the day
of valuation. Securities for which there are no transactions on a given day or
securities not traded on an exchange or in the over-the-counter market are
valued at the average of the most recent bid and asked prices. Portfolio
securities which are traded both in the over-the-counter market and on an
exchange are valued according to the broadest and most representative market.
Debt securities for which market quotations are not readily available may be
valued based on information supplied by independent pricing services, including
services using matrix pricing formulas and/or independent broker bid
quotations. Debt securities with remaining maturities of 60 days or less may be
valued on an amortized cost basis, which involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating rates on the
market value of the instrument. Any securities or other assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by the Advisor pursuant to procedures established
under the general supervision and responsibility of the Board of Directors of
Thompson Plumb Funds, Inc. Expenses and fees, including advisory fees, are
accrued daily and taken into account for the purpose of determining net asset
value per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GENERAL
The Funds file their federal income tax returns based on a November 30
fiscal year. Each Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), and to take
all other action required so that no federal income tax will be payable by the
Fund itself. Each Fund will be treated as a separate regulated investment
company under the Code. Shareholders are provided annually with full
information on dividends and capital gains distributions for tax purposes.
Shareholders should consult their tax advisers regarding the applicability of
state and local taxes to dividends and distributions.
All income, dividends and capital gains distributions are reinvested in
full and fractional shares of a Fund at net asset value, without a sales
charge, on a payment date, unless a shareholder has requested payment in cash
on the Account Application or by separate written request. A shareholder may
at any time change his or her election as to whether to receive distributions
in cash or have them reinvested by giving written notice of such change of
election to the appropriate Fund, or by calling 1-800-338-1579.
The Balanced and Growth Funds intend annually to distribute substantially
all of their net investment income and any net realized capital gains. The
Bond Fund expects to distribute to shareholders all of its net investment
income in quarterly dividends and net realized capital gains, if any, annually.
The dividends from net investment income and short-term capital gains of each
of these Funds are taxable as ordinary income to shareholders whether paid in
additional shares or in cash. Any long-term capital gains distributed to
shareholders are treated as such by the shareholders, whether received in cash
or in additional shares, regardless of the length of time a shareholder has
owned the shares. A portion of each Fund's dividends may qualify for the
dividends received deduction for corporations.
OTHER INFORMATION
The Funds are required by federal law to withhold 31% of the reportable
payments (which include dividends, capital gain distributions and redemption
proceeds) paid to certain shareholders who have not properly certified that the
Social Security or other taxpayer identification number provided by the
shareholder is correct and that he or she is not otherwise subject to backup
withholding. The Funds' Account Application includes the required
certification.
The foregoing tax discussion is general in nature and each investor is
advised to consult his or her tax advisor for additional information.
15
<PAGE> 19
DESCRIPTION OF SHARES
The authorized common stock of Thompson Plumb Funds, Inc. consists of 100
million shares of common stock, $.001 par value per share ("Common Stock").
The shares of Common Stock are presently divided into three series: the
Balanced, Bond, and Growth Funds. Each such series consists of 10 million
shares of Common Stock. The Board of Directors may authorize the issuance of
additional series of Common Stock (funds) and may increase or decrease the
number of shares in each series.
Each share of Common Stock has one vote and, when issued and paid for in
accordance with the terms of this Prospectus, will be fully paid and
nonassessable, except that shareholders are subject to personal liability under
Section 180.0622(2)(b) of the Wisconsin Business Corporation Law, as judicially
interpreted, for debts owing to employees of the Funds for services performed,
but not exceeding six months' service in any one case. The Funds currently
have no employees and do not intend to have employees in the future. Shares of
Common Stock are redeemable at net asset value, at the option of the
shareholder. Shares of Common Stock have no preemptive, subscription,
conversion or cumulative voting rights and are freely transferable. Shares of
Common Stock can be issued as full shares or fractions of shares. A fraction
of a share has the same kind of rights and privileges as a full share.
Shareholders have the right to vote on the election of Directors at each
meeting of shareholders at which directors are to be elected and on other
matters as provided by law or the Fund's Articles of Incorporation or By-Laws.
Shareholders of each Fund vote together to elect a single Board of Directors of
the Funds and on other matters affecting the entire investment company, with
each share entitled to a single vote. On matters affecting only one Fund, only
the shareholders of that Fund are entitled to vote. On matters relating to all
Funds, but affecting individual Funds differently (such as a new Investment
Advisory Agreement), separate votes by shareholders of each Fund are required.
The Funds' Articles of Incorporation do not require the holding of annual
meetings of shareholders. However, special meetings of shareholders may be
called (and, at the request of shareholders holding 10% or more of the Funds'
outstanding shares must be called) for purposes such as electing or removing
directors, changing fundamental policies or approving investment advisory
contracts.
OTHER INFORMATION
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Firstar serves as the transfer and dividend disbursing agent for each of
the Funds and also serves as the custodian of the assets of each of the Funds.
SHAREHOLDER STATEMENTS, REPORTS AND INQUIRIES
Shareholders will receive confirmations at least quarterly regarding their
transactions in shares of the Funds, and will also receive reports at least
semiannually setting forth various financial and other information with respect
to the Funds in which they hold shares. The annual financial statements will
be audited by the Funds' independent accountants, Price Waterhouse LLP.
Shareholder inquiries may be directed to Thompson Plumb Funds, Inc. at, 8201
Excelsior Drive, Suite 200, Madison, Wisconsin 53717, Attention: Corporate
Secretary; or by telephone at 608-831-1300. Shareholders who wish to change
their address of record can either send a written request to Firstar or call
1-800-338-1579.
RETIREMENT PLANS
The Funds sponsor Individual Retirement Accounts ("IRAs") through which an
individual may invest annual IRA contributions and roll-over IRA contributions
in shares of any of the Funds. Firstar will serve as custodian for IRA
accounts sponsored by the Funds. Firstar will charge a $12.50 annual
maintenance fee for an IRA. Shareholders with two or more IRAs using the same
tax ID number will be charged a total of $25 annually. Please refer to the IRA
disclosure statement for a detailed listing of other fees. The Individual
Retirement Account Custodial Agreement, the IRA Disclosure Statement and the
Custodial Account Application are available from the Advisor.
Purchases and redemptions of shares of any Fund by IRAs and retirement
plans are treated in the same manner as any other account. See "Purchase and
Redemption of Shares." IRAs must meet a minimum initial investment
requirement of $250 and a minimum subsequent investment requirement of $100.
Redemption requests on behalf of IRA owners or retirement plans must indicate
whether to withhold federal income tax.
16
<PAGE> 20
Purchases may also be made by SEP's (Simplified Employee Benefit Plan),
403(b)(7) plans (for employees of public schools and certain nonprofit
entities) and other retirement plans. Forms of SEP and 403(b)(7) plans are
available from the Advisor.
Because a retirement program involves commitments covering future years,
it is important that the investment objectives of the Funds be consistent with
the participant's retirement objectives. Premature withdrawals from a
retirement plan may result in adverse tax consequences. Consultation with an
individual's own tax or financial advisor is recommended.
PERFORMANCE INFORMATION
From time to time the Funds may advertise their "yield" and "total
return." Yield is based on historical earnings and total return is based on
historical distributions; neither is intended to indicate future performance.
The "yield" of a Fund refers to the income generated by an investment in that
Fund over a one-month period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during the month is assumed to be generated
each month over a 12-month period and is shown as a percentage of the
investment. "Total return" of a Fund refers to the average annual return for
one, five and ten-year periods (or so much thereof as a Fund has been in
operation). Total return is the change in redemption value of shares purchased
with an initial $1,000 investment, assuming the reinvestment of dividends and
capital gain distributions, after giving effect to the maximum applicable sales
charge. The Funds may also from time to time advertise total return on a
cumulative, average, year-by-year or other basis for various specified periods
by means of quotations, charts, graphs or schedules. In addition, the Funds
may from time to time advertise their performance relative to certain
performance rankings and indices.
Performance information should be considered in light of the Funds'
investment objectives and policies, characteristics and quality of their
securities portfolios and the market conditions during the time period, and
should not be considered as a representation of what may be achieved in the
future. Further information is contained in the Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As provided in the Investment Advisory Agreement, the Advisor is
responsible for each Fund's portfolio decisions and the placing of portfolio
transactions. Purchase and sale orders for a Fund's portfolio securities may
be effected through brokers who charge a commission for their services,
although it is expected that transactions in debt securities will generally be
conducted with dealers acting as principals. In executing such transactions,
the Advisor seeks to obtain the best net results for the respective Fund,
taking into account such factors as price (including the brokerage commission
or dealer spread), size of order, competitive commissions on similar
transactions, difficulty of execution and operational facilities of the firm
involved and the firm's risk in positioning a block of securities. While the
Advisor seeks reasonably competitive rates, it does not necessarily pay the
lowest commission or spreads available. Transactions in small companies in
which the Balanced and Growth Funds invest may involve specialized services on
the part of the broker and thereby entail higher commissions or spreads than
would be paid in transactions involving more widely traded securities.
Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Advisor in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is
prompt and efficient execution of orders in an effective manner at the most
favorable price. Subject to this primary consideration, the Advisor may also
consider sales of shares of the Funds as a factor in the selection of brokers
and dealers to execute portfolio transactions.
The Funds may place orders for portfolio transactions with a broker who
recommends the purchase of a Fund's shares to clients if the Advisor believes
that such brokers' commissions or dealer spreads, quality of execution and
overall quality of brokerage and research services are comparable to those of
other brokers.
17
<PAGE> 21
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18
<PAGE> 22
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19
<PAGE> 23
DIRECTORS OF THE FUNDS
George H. Austin
Mary Ann Deibele
John W. Feldt
Donald A. Nichols
Thomas G. Plumb, CFA: Vice President
Thompson, Plumb & Associates, Inc.
John W. Thompson, CFA: President
Thompson, Plumb & Associates, Inc.
OFFICERS OF THE FUNDS
John W. Thompson, CFA
Chairman & Secretary
Thomas G. Plumb, CFA
President & Treasurer
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
P. 0. Box 701
Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INVESTMENT ADVISOR
Thompson, Plumb & Associates, Inc.
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone: (608) 831-1300
THOMPSON PLUMB
FUNDS, INC.
PROSPECTUS
THOMPSON PLUMB BALANCED FUND
THOMPSON PLUMB BOND FUND
THOMPSON PLUMB GROWTH FUND
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone 608-831-1300
March 25, 1996
<PAGE> 24
Thompson Plumb Funds, Inc.
ACCOUNT APPLICATION
For individual, custodial, trust, profit sharing or pension plan accounts.
DO NOT USE FOR IRA, KEOGH ACCOUNTS OR 403(b)(7) PLAN.
For information call 1-800-338-1579.
MAIL TO: THOMPSON PLUMB FUNDS
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1. ACCOUNT REGISTRATION
_______________________________________________________________________________
Owner(s) (individual, joint, custodian, company or trustee)
_______________________________________________________________________________
Mailing Address
( )
_______________________________________________________________________________
City State Zip Daytime Phone
_______________________________________________________________________________
Social security number or taxpayer identification number. (If this is a
custodial account, please use minor's social security number.)
Citizen of / / United States / / Other (specify)___________________________
2. INVESTMENT
Please indicate the amount you wish to invest. ($1,000 minimum initial
purchase) See prospectus for investing in the THOMPSON PLUMB FUNDS.
/ / Thompson Plumb Balanced Fund $______ / / Thompson Plumb Growth Fund $______
/ / Thompson Plumb Bond Fund $______ / / Portico Money Market Fund $______
The Portico Money Market Fund is offered to shareholders of the THOMPSON PLUMB
FUNDS, INC. pursuant to a servicing agreement with
Portico Funds, Inc.
3. METHOD OF INVESTMENT
/ / By check made payable to______________________________________(Name of Fund)
/ / By wire. Call 1-800-338-1579 for instructions. Indicate date and amount of
wire: Date _______________________ $_______________________
/ / By exchange from my_____________________________Fund account. (Name of Fund)
Account number__________________________________. Amount of
exchange $_______________________ or ________________________shares.
4. SIGNATURES AND CERTIFICATION
Under penalties of perjury, I certify: (1) that the number shown on this
application is the corrrect taxpayer identification number, and (2) that the
taxpayer is not subject to backup withholding beacuse either it has not been
notified that it si subject to backup withholding as a result of failure to
report all interest and dividends, or the Internal Revenue Service has notified
it that it is no longer subject to backup withholding. (If it is subject to
backup withholding, cross out all words following (2) in this paragraph.)
I represent that (1) I have the legal capacity to make the purchase indicated
in this application, (2) I have received and reviewed the current prospectus of
the Thompson Plumb Funds in which I am investing, (3) I have read and understan
the tems set forth in this application and Customer Agreement, (4) I understand
the Customer Agreement and this application apply only to the Thompson Plumb
Funds, and 95) if i have selected telephone purchase or redemption options, I
authorize you to debit or credit the account described above.
While Thompson Plumb Funds may be recommended by Elan Investment Services (EIS),
such funds are sponsored by parties independent of EIS and Firstar Corporation,
are not Obligations of and are not guaranteed by EIS or any Firstar bank or
company, and are not insured by the FDIC.
_______________________________________ _____________________________________
Signature(s) of shareholders, officers, Date
partners, trustee or others
_______________________________________
- - --------------------------------------------------------------------------------
5. PORTICO FUNDS CHECK REDEMPTION SIGNATURE FORM
Check redemption privileges are available only for the Portico Money Market
Fund. Check redemption privileges are subject to the conditions on the reverse
side.
Account Number (For Bank Use Only)
/ / Portico Money Market Fund __________________________________
__________________________________
_______________________________________________________________________________
Name on Portico Fund Account
_______________________________________________________________________________
Authorized Signature(s) (For joint accounts, all owners must sign)
_______________________________________________________________________________
_______________________________________________________________________________
For an account for a corporation, trust or other entity, or a joint account,
how many of those authorized to sign must sign checks?________
(over)
<PAGE> 25
6. DISTRIBUTIONS
Distributions will be reinvested in additional shares unless one of the
following boxes is checked.
/ / Please pay dividends and capital gain distributions in cash.*
/ / Please pay dividend distributions in cash and reinvest my capital gain
distributions.*
*For any cash payments attach a void check or deposit slip for your bank
account. Your cash payment will be deposited directly to this account.
7. OTHER SERVICES
Thompson Plumb Funds, Inc. also offers the following shareholder plans and
services as described in the Prospectus. Please check the appropriate box(es)
or call 1-800-338-1579 for an application or more information:
/ / Automatic Investment Plan
/ / Systematic Withdrawal Plan
/ / Automatic Exchange Plan
/ / Prototypes/Forms of certain Individual Retirement Accounts
8. TELEPHONE OPTIONS
I (we) authorize Firstar Trust Company to act upon telephone instructions
believed to be genuine in accordance with the procedures discussed in the
prospectus to execute the following transactions:
/ / Telephone Exchange. This allows a redemption of shares in this account
to be applied for purchase in any identically
registered account. A $1,000 minimum applies.
( $5.00 per exchange )
9. CONSOLIDATED STATEMENTS
<TABLE>
<CAPTION>
All accounts in the Thompson Plumb Funds, Inc. To Link additional accounts, please provided
registered under a common Social Security Number the respective account number(s) below. In the
or Taxpayer Identification Number and address case of accounts registered under different names,
will be sent periodic consolidated statements. the signatures of all account owners are required.
<S> <C>
________________________________________________ _______________________________________________
Account Number Joint Owner Signature
________________________________________________ _______________________________________________
Account Number Joint Owner Signature
________________________________________________ _______________________________________________
Account Number Joint Owner Signature
</TABLE>
CONDITIONS OF CHECK REDEMPTION OPTION
Checks may not be for less than $100 or such other minimum amounts as may from
time to time be established by the Fund upon prior written notice to its
shareholders. Shares purchased by check, (including certified or cashiers
check) will not be redeemed by check writing or any other method of redemption
until the Transfer Agent is reasonably satisfied that the check has been
collected, which could take up to 15 days from the purchase date.
By signing this card, I appoint the Firstar Bank my agent to present checks
drawn on this account to the transfer agent, Firstar Trust Company (FTC), as
requests to redeem shares, and I authorize Portico Funds and FTC to honor such
requests and redeem shares in an amount equal to the amount of the check. I
agree to be subject to the rules pertaining to the check redemption privileges
as amended from time to time. Portico Funds or FTC may reserve the right to
modify or terminate this account and authorization at any time.
<PAGE> 26
PART B
STATEMENT OF ADDITIONAL INFORMATION
_________________
THOMPSON PLUMB FUNDS, INC.
8201 EXCELSIOR DRIVE, SUITE 200
MADISON, WISCONSIN 53717
TELEPHONE: (608) 831-1300
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Thompson Plumb Funds, Inc. Prospectus (the
"Prospectus") dated March 25, 1996. Requests for copies of the prospectus
should be made by writing to Thompson, Plumb & Associates, Inc., 8201 Excelsior
Drive, Madison, Wisconsin 53717, Attention: Corporate Secretary, or by calling
the number listed above.
In this Statement of Additional Information, Thompson Plumb Funds, Inc.
may be referred to as the "Investment Company," and its three separate series,
the Thompson Plumb Balanced Fund, the Thompson Plumb Bond Fund and the Thompson
Plumb Growth Fund may be referred to individually as the Balanced Fund, the
Bond Fund and the Growth Fund, respectively, or simply as a Fund or the Fund,
and may be referred to collectively as the "Funds." Prior to April 3, 1995,
Thompson Plumb Funds, Inc. was known as Thompson, Unger & Plumb Funds, Inc. and
the Funds were known as the Thompson, Unger & Plumb Balanced Fund, the
Thompson, Unger & Plumb Bond Fund and the Thompson, Unger & Plumb Growth Fund.
TABLE OF CONTENTS
PAGE
----
Description of Certain Investments and Transactions .......... B-2
Investment Restrictions ...................................... B-4
Determination of Net Asset Value and Pricing Considerations .. B-6
Management ................................................... B-7
Advisory and Administrative Services ......................... B-8
Portfolio Transactions and Brokerage ......................... B-10
Fund Performance ............................................. B-11
Taxes ........................................................ B-13
Description of Ratings of Certain Fixed Income Securities .... B-14
Other Information ............................................ B-17
Financial Statements ......................................... B-17
The date of this Statement of Additional Information is March 25, 1996.
__________________________
B-1
<PAGE> 27
DESCRIPTION OF CERTAIN INVESTMENTS AND TRANSACTIONS
LENDING PORTFOLIO SECURITIES
A Fund may lend its portfolio securities to broker-dealers and financial
institutions, such as banks and trust companies, however, absent unforeseen
market and economic conditions, the Funds have no present intention to do so.
In the event any Fund engages in this activity, Thompson, Plumb & Associates,
Inc. (the "Advisor") will monitor the creditworthiness of firms to which the
Fund lends its securities. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by the Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive an
additional return which may be in the form of a fixed fee or a percentage of
the collateral. The Fund would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days.
The Fund would not have the right to vote the securities during the existence
of the loan, but would call the loan to permit voting of securities during the
existence of the loan if, in the Advisor's judgment, a material event requiring
a shareholder vote would otherwise occur before the loan was repaid. In the
event of bankruptcy or other default of the borrower, the Fund could experience
both delays in liquidating the loan collateral or recovering the loaned
securities and losses including (a)possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b)possible subnormal levels of
income and lack of access to income during this period and (c)expenses of
enforcing its rights.
REPURCHASE AGREEMENTS
The Funds may from time to time enter into repurchase agreements,
although, absent unforeseen market and economic conditions, the Funds have no
present intention to do so. Repurchase agreements involve the sale of
securities to a Fund with the concurrent agreement of the seller (a bank or
securities dealer) to repurchase the securities at the same price plus an
amount equal to an agreed-upon interest rate within a specified time, usually
less than one week, but on occasion for a longer period. The Funds may enter
into repurchase agreements with broker-dealers who are recognized by the
Federal Reserve Bank of New York as primary dealers in United States Government
securities and with banks. At the time a Fund enters into a repurchase
agreement, the value of the underlying security, including accrued interest,
will be equal to or exceed the value of the repurchase agreement and, in the
case of repurchase agreements exceeding one day, the seller will agree that the
value of the underlying security, including accrued interest, will at all times
be equal to or exceed the value of the repurchase agreement. In the event the
seller of the repurchase agreement enters a bankruptcy or insolvency
proceeding, or in the event of the failure of the seller to repurchase the
underlying security as agreed, the Fund could experience losses that include
(a)possible decline in the value of the underlying security during the period
that the Fund seeks to enforce its rights with respect thereto, and possible
delay in the enforcement of such rights, (b)possible loss of all or a part of
the income or proceeds of the repurchase, (c)additional expenses to the Fund
in connection with enforcing those rights, and (d)possible delay in the
disposition of the underlying security pending court action or possible loss of
rights in such securities. The Advisor intends to cause the Funds to invest in
repurchase agreements only when the Advisor determines that the Funds should
invest in short-term money market instruments and the rates available on
repurchase agreements are favorable as compared to the rates available on other
short-term money market instruments or money market mutual funds, circumstances
that the Advisor does not anticipate will occur in the near future. The
Advisor does not currently intend to invest the assets of any Fund in
repurchase agreements if, after doing so, more than 5% of the Fund's net assets
would be invested in repurchase agreements.
WHEN-ISSUED TRANSACTIONS
A Fund may purchase or sell portfolio securities in when-issued
transactions, although, absent unforeseen market and economic conditions, the
Funds have no present intention to do so. In such transactions, instruments
are bought or sold with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or price to the
Fund at the time of entering into the transactions. In such transactions, the
payment obligations and the interest rate are fixed at the time the buyer
enters into the commitment, although no interest accrues to the purchaser prior
to settlement of the transaction. Consistent with the requirements of the
B-2
<PAGE> 28
Investment Company Act of 1940, securities purchased on a when-issued basis are
recorded as an asset (with the purchase price being recorded as a liability)
and are subject to changes in value based upon changes in the general level of
interest rates. At the time of delivery of the security, the value may be more
or less than the transaction price. To the extent that the Fund remains
substantially fully invested at the same time that it has entered into such
transactions, which all of the Funds would normally expect to do, there will be
greater fluctuations in the market value of the Fund's assets than if the Fund
set aside cash to satisfy the purchase commitment. However, each Fund will
maintain designated liquid assets with a market value, determined daily, at
least equal to the amount of commitments for when-issued securities, such
assets to be ear-marked specifically for the settlement of such commitments.
Each Fund will only make commitments to purchase portfolio securities on a
when-issued basis with the intention of actually acquiring the securities, and
not for the purpose of investment leverage, but the Funds reserve the right to
sell the securities before the settlement date if it is deemed advisable. None
of the Funds currently intend to purchase securities in when-issued
transactions if, after such purchase, more than 5% of the Fund's net assets
would consist of when-issued securities.
ILLIQUID SECURITIES
No Fund will invest more than 10% of the value of its net assets in
securities which are illiquid, including restricted securities, securities for
which there are no readily available market quotations and repurchase
agreements providing for settlement in more than seven days after notice. For
the purposes of this restriction, the Funds do not consider variable rate
demand notes to be restricted securities. See "Variable Rate Demand Notes"
below.
VARIABLE RATE DEMAND NOTES
The Funds may purchase variable rate master demand notes, which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the
Funds may demand payment of principal and accrued interest at any time. The
investment policy of each Fund is to purchase variable rate demand notes only
if, at the time of purchase, the issuer has unsecured debt securities
outstanding that are rated within the two highest rating categories by either
Standard & Poor's Corporation or Moody's Investors Service, Inc.
MORTGAGE-BACKED SECURITIES
The Balanced and Bond Funds may invest in mortgage-related securities,
which include securities that represent interests in pools of mortgage loans
made by lenders such as savings and loan institutions, mortgage bankers,
commercial banks and others. These pools are combined for sale to investors
(such as the Balanced and Bond Funds) by various governmental and
government-related entities, as well as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
private issuers. Mortgage-related securities generally provide for a
"pass-through" of monthly payments made by individual borrowers on their
residential mortgage loans, net of any fees paid to the issuer or guarantor of
the securities.
GNMA is the principal government guarantor of mortgage-related securities.
GNMA is authorized to guaranty, with the full faith and credit of the United
States Government, timely payment of principal and interest on securities it
approves that are backed by pools of FHA-insured or VA-guaranteed mortgages.
GNMA securities are described as "modified pass-through" in that they provide a
monthly payment of interest and principal payments owed on the mortgage pool,
net of certain fees, regardless of whether the mortgagor actually makes the
payment. Other government related guarantors of these securities include the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC securities are guaranteed as to
payment of principal and interest by those agencies, but are not backed by the
full faith and credit of the United States Government. With respect to private
mortgage-backed securities, timely payment of principal and interest of these
pools is supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. There can be no assurance
that private insurers or guarantors can meet their obligations under such
policies.
B-3
<PAGE> 29
Certain mortgage-backed securities purchased by the Balanced and Bond
Funds provide for a prepayment privilege and for amortized payments of both
interest and principal over the term of the security. The yield on the
original investment in such securities applies only to the unpaid principal
balance, as the Fund must reinvest the periodic payments of principal at
prevailing market interest rates which may be higher or lower then the rate on
the original security. In addition, the prepayment privilege may require the
Fund to reinvest at lower yields than were received from the original
investment. If these instruments are purchased at a premium in the market, and
if prepayment occurs, such prepayments will be at par or stated value, which
will result in reduced return on such transactions.
During periods of declining interest rates, prepayment of mortgages from
underlying mortgage-backed securities can be expected to accelerate.
Accordingly, the Balanced and Bond Fund's ability to maintain positions in
high-yielding mortgage-backed securities will be affected by reductions in the
principal amount of such securities resulting from such prepayments, and its
ability to reinvest the returns of principal at comparable yields will depend
on prevailing interest rates at that time. Neither the Balanced Fund nor the
Bond Fund currently intends to purchase mortgage-backed securities if, after
such purchase, more than 5% of the respective Fund's net assets would consist
of mortgage-backed securities.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
An investment by a Fund in another investment company may cause the Fund
to increase payments of administration and distribution expenses. Such
investments are limited by investment restriction(7). See "Investment
Restrictions" in this Statement of Additional Information.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions, none of which
- - -- except for the matters described in the second sentence of item(5) and in
the second sentence of item(7) -- may be changed without the approval of the
holders of a majority of the outstanding shares (as defined in the Investment
Company Act of 1940) of the Fund. A Fund may not:
(1) Purchase the securities of issuers conducting their principal
business activity in the same industry if immediately after such purchase the
value of the Fund's investments in such industry would exceed 25% of the value
of its total assets, provided that there is no limitation with respect to or
arising out of investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
(2) Purchase a security if, as a result, with respect to 75% of the
value of the Fund's total assets, more than 5% of its total assets would be
invested in the securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
(3) Make loans, except through the purchase of debt obligations in
accordance with the Fund's investment objective and policies and through
repurchase agreements with banks, brokers, dealers and other financial
institutions.
(4) Issue senior securities in violation of the Investment Company Act
of 1940 or borrow money, except (a) as a temporary measure, and then only in
amounts not exceeding 5% of the value of the Fund's total assets or (b) from
banks, provided that immediately after any such borrowing all borrowings of the
Fund do not exceed one-third of the Fund's net assets. The exceptions to this
restriction are not for investment leverage purposes but are solely for
extraordinary or emergency purposes and to facilitate management of each Fund's
portfolio by enabling the Fund to meet redemption requests when the liquidation
of portfolio instruments is deemed to be disadvantageous or not possible.
While a Fund has borrowings in excess of 5% of the value of the Fund's total
assets outstanding, it will not make any purchases of portfolio instruments.
If due to market fluctuations or other reasons the net assets of a Fund fall
below 300% of its borrowings, the Fund will promptly reduce its borrowings
B-4
<PAGE> 30
in accordance with the Investment Company Act of 1940. To do this, the Fund
may have to sell a portion of its investments at a time when it may be
disadvantageous to do so.
(5) Mortgage or pledge any assets except to secure permitted borrowings,
and then only in an amount up to 15% of the value of the Fund's net assets,
taken at cost at the time of such borrowings. Notwithstanding the prior
sentence, each Fund's current intention is not to mortgage, pledge or
hypothecate more than 5% of the value of the Fund's net assets.
(6) Purchase or sell real estate or commodities, except that a Fund may
purchase and sell (a) securities issued by real estate investment trusts or
other companies which invest in or own real estate, and (b) securities secured
by interests in real estate, provided in each case that such securities are
marketable.
(7) Purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act of 1940. Subject to certain
exceptions, the Investment Company Act of 1940 prohibits a Fund from investing
more than 5% of its total assets in securities of another investment company,
investing more than 10% of its total assets in securities of such investment
company and all other investment companies, or purchasing more than 3% of the
total outstanding voting stock of another investment company.
(8) Purchase more than 10% of the outstanding voting securities of any
one issuer or invest in companies for the purpose of exercising control or
management.
(9) Act as an underwriter of securities issued by others, except in
instances where the Fund has acquired portfolio securities which it may not be
free to sell publicly without registration under the Securities Act of 1933 (if
the Fund sells such securities, it may technically be deemed an "underwriter"
for purposes of such Act).
For purposes of the restriction in item (2) above, a guarantee of an
instrument will be considered a security separate from such instrument (subject
to certain exclusions allowed pursuant to Rule 5b-2 under the Investment
Company Act of 1940). Such Rule provides that a guarantee of a security will
not be deemed to be a security issued by the guarantor, provided that the value
of all securities issued or guaranteed by the guarantor, and owned by the Fund,
does not exceed 10% of the value of the total assets of the Fund.
In addition to the foregoing restrictions, the Investment Company's Board
of Directors has adopted the following restrictions, which may be changed
without shareholder approval, in order to comply with the securities laws of
various states. A Fund may not:
(a) Purchase the equity securities of companies which have a record of
less than three years continuous operation if any such purchase at the time
thereof would cause more than 5% of the value of the total assets of the Fund
to be invested in securities of such companies. Such period of three years
includes the operation of any predecessor company or companies, partnership or
individual enterprise if the company whose securities are proposed as an
investment has come into existence as the result of a merger, consolidation,
reorganization or the purchase of substantially all of the assets of such
predecessor company or companies, partnership or individual enterprise.
(b) Purchase or retain the securities of an issuer if, to the Fund's
knowledge, those officers or directors of the Fund or its investment adviser
who individually own beneficially more than 0.5 of 1% of the outstanding
securities of such issuer together own beneficially more than 5% of such
outstanding securities.
(c) Purchase securities on margin, but a Fund may obtain such short-term
credits as may be necessary for the clearance of purchase and sales of
securities.
(d) Make short sales of securities.
(e) Participate on a joint or joint-and-several basis in any securities
trading account.
B-5
<PAGE> 31
(f) Invest in puts, calls, straddles or spreads, or combinations
thereof.
(g) Invest in oil, gas or other mineral exploration or development
programs, but this shall not prohibit a Fund from investing in securities of
companies engaged in oil, gas or mineral activities.
(h) Invest in warrants, valued at the lower of cost or market, in an
amount in excess of 5% of the value of the Fund's net assets. Included within
such amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by a Fund in units or attached to securities may be deemed to
be without value for purposes of this restriction.
(i) Buy or sell real estate or invest in the securities of real estate
investment trusts or real estate limited partnerships, provided the Funds may
invest in the securities of other companies whose business involves the
purchase and sale of real estate.
For purposes of the foregoing limitations -- except for the limitation
referred to in the fourth sentence of item (4) above -- any limitation which
involves a maximum percentage shall not be considered violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund.
During the year ended November 30, 1995, each of the Balanced Fund, Bond
Fund and Growth Fund did not borrow money or mortgage or pledge its assets
pursuant to the authority contained in items (4) and (5) above. During such
year each Fund also did not: (i) purchase securities issued by real estate
investment trusts; (ii) purchase securities issued by other investment
companies; (iii) purchase any warrants; (iv) purchase any securities guaranteed
by a third party; or (v) enter into any repurchase agreements. Whether any of
the Funds will engage in the types of transactions or make the types of
investments described in the preceding two sentences in the future will depend
on market conditions and the Advisor's judgment as to whether engaging in such
transactions or making such investments is appropriate, except that none of the
Funds has any present intention to purchase securities issued by real estate
investment trusts.
DETERMINATION OF NET ASSET VALUE AND PRICING CONSIDERATIONS
The Funds' net asset value is determined only on the days on which the New
York Stock Exchange is open for trading. That Exchange is regularly closed on
Saturdays and Sundays and on New Years' Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. If one of those holidays falls on a Saturday or Sunday, the
Exchange will be closed on the preceding Friday or the following Monday,
respectively.
Reliable market quotations are not considered to be readily available for
many long-term corporate bonds and notes and certain preferred stocks in which
the Funds may invest. As authorized by the Board of Directors, these
investments are stated at fair value on the basis of valuations furnished by
independent broker bid quotations and/or independent pricing services.
Independent pricing services approved by the Board of Directors determine
valuations for normal, institutional-sized trading units of such securities
using methods based on market transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders.
Generally, trading in U.S. Government securities and other fixed income
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
determining the net asset value of a Fund's shares are computed as of such
times. Occasionally, events affecting the value of such securities may occur
between such times and the close of the New York Stock Exchange, which events
will not be reflected in the computation of the Fund's net asset value for that
day. If events materially affecting the value of the Fund's securities occur
during such a period, then the securities will be valued at their fair value as
determined in good faith by the Board of Directors.
B-6
<PAGE> 32
The Funds intend to pay all redemptions in cash and are obligated to
redeem shares solely in cash. Redemption proceeds ordinarily will be sent
within seven days after receipt of the redemption request and all necessary
documents. Each Fund reserves the right to suspend or postpone redemptions
during any period when: (a) trading on the New York Stock Exchange is
restricted, as determined by the Securities and Exchange Commission or that
Exchange is closed for other than customary weekend and holiday closing; (b)
the Securities and Exchange Commission has by order permitted such suspension;
or (c) an emergency, as determined by the Securities and Exchange Commission,
exists, making disposal of portfolio securities or valuation of net assets of
the Funds not reasonably practicable.
MANAGEMENT
Information pertaining to the Directors and officers of the Investment
Company is set forth below. Directors deemed to be "interested persons" of the
Funds for purposes of the Investment Company Act of 1940 are so indicated.
GEORGE H. AUSTIN (interested person) , 8201 Excelsior Drive, Suite 200,
Madison, Wisconsin 53717. DIRECTOR. Mr. Austin has been the Director of
Research and Portfolio Manager of the Advisor since March 1994 and, prior
thereto, was the Director of Investments of the Wisconsin Alumni Research
Foundation from 1976 to 1994.
MARY ANN DEIBELE, 20029 Reichardt Road, Kiel, Wisconsin 53042. DIRECTOR.
Ms. Deibele has been retired since September 1994 and, prior thereto, was a
Director and a member of the executive committee of Household Utilities, Inc.,
a high tech sheet metal fabricating facility.
JOHN W. FELDT, 150 East Gilman Street, Madison, Wisconsin 53703.
DIRECTOR. Mr. Feldt has been the Senior Vice President of Finance of the
University of Wisconsin Foundation since 1984 and, prior thereto, was the Vice
President of Finance for the University of Wisconsin Foundation, a
not-for-profit corporation.
DONALD A. NICHOLS, 1180 Observatory Drive, Madison, Wisconsin 53706.
DIRECTOR. Mr. Nichols has been Professor of Economics of the University of
Wisconsin since 1966 and was Chairman, Department of Economics from 1983 to
1986 and from 1988 to 1990. He now serves as Director of the Center for
Research on the Wisconsin economy. He has been a member of the Board of
Advisors of the American Players Theatre since 1993, economic adviser to the
Governor of the State of Wisconsin from 1982 through 1986 and a consultant to
National Economic Research Associates during 1985. In addition, Mr. Nichols
has appeared as an expert witness in numerous court proceedings involving the
estimation of damages, both corporate and individual.
THOMAS G. PLUMB (interested person) , 8201 Excelsior Drive, Suite 200,
Madison, Wisconsin 53717. PRESIDENT, TREASURER AND DIRECTOR. Mr. Plumb has
been Vice President of the Advisor since he co-founded it in June 1984. He was
Vice President of Firstar Bank Madison, N.A., Investment Management Division,
from December 1983 to June 1984. He had various officer and management
responsibilities at Firstar Bank Madison, N.A. from November 1979 to December
1983. He has been in the investment management business since 1975. He is a
Chartered Financial Analyst.
JOHN W. THOMPSON (interested person) , 8201 Excelsior Drive, Suite 200,
Madison, Wisconsin 53717. CHAIRMAN, SECRETARY AND DIRECTOR. Mr. Thompson has
been President of the Advisor since he co-founded it in June 1984 and has been
Treasurer of the Advisor since October 1993. From September 1979 until his
resignation in June 1984, Mr. Thompson was First Vice President and Division
Manager of the Investment Management Division of Firstar Bank Madison, N.A. He
has been in the investment management business since 1971. He is a Chartered
Financial Analyst.
B-7
<PAGE> 33
Directors and officers of the Investment Company who are officers,
directors, employees or shareholders of the Advisor do not receive any
remuneration from the Funds for serving as directors or officers. Those
directors who are not so affiliated with the Advisor received $4,000 in fiscal
year 1995, as set forth in the table below.
<TABLE>
<CAPTION>
Aggregate Estimated Total
Compensation Pension or Annual Compensation From
From Investment Retirement Benefits Upon Investment Company
Director Company Benefits Retirement And Fund Complex
- - ----------------- --------------- ---------- ------------- ------------------
<S> <C> <C> <C> <C>
Mary Ann Deibele $4,000 None None $4,000
John W. Feldt $4,000 None None $4,000
Donald A. Nichols $4,000 None None $4,000
</TABLE>
For fiscal year 1996, those directors who are not so affiliated with the
Advisor will receive $8,000.
John W. Thompson and Thomas G. Plumb each own approximately 45% of the
outstanding shares of the Advisor.
As of February 29, 1996, the Investment Company's Directors and officers
as a group owned 71,763 shares (5.00% of the outstanding shares) of the
Balanced Fund, 24,366 shares (4.10% of the outstanding shares) of the Growth
Fund and none of the outstanding shares of the Bond Fund.
ADVISORY AND ADMINISTRATIVE SERVICES
As stated in the Prospectus, Thompson, Plumb & Associates, Inc. acts as
the investment advisor and administrator for each of the Funds. See
"Management of the Funds" in the Prospectus for a description of the duties of
Thompson, Plumb & Associates, Inc. as investment advisor. The administrative
obligations of the Advisor include: (a) providing supervision of all aspects
of each Fund's non-investment operations, such as custody of the Fund's assets,
shareholder servicing and legal and audit services (the parties giving due
recognition to the fact that certain of such operations are performed by others
pursuant to the Funds' agreements with their custodian and shareholder
servicing agent), (b) providing each Fund, to the extent not provided pursuant
to such agreements or the agreement with the Funds' accounting services agent,
with personnel to perform such executive, administrative and clerical services
as are reasonably necessary to provide effective administration of the Fund,
such as preparing budgets, supplying information for the Prospectus, this
Statement of Additional Information and various reports, and handling meetings
of shareholders, (c) arranging, to the extent not provided pursuant to such
agreements, for the preparation of each Fund's tax returns, reports to
shareholders, periodic updating of the Prospectus and this Statement of
Additional Information, and reports filed with the SEC and other regulatory
authorities, all at the expense of the Fund, (d) providing each Fund, to the
extent not provided pursuant to such agreements, with adequate office space and
certain related office equipment and services in Madison, Wisconsin, and
(e) maintaining all of the records of each Fund other than those maintained
pursuant to such agreements.
For the fiscal years ended November 30, 1995, 1994, and 1993, in return
for serving as the Funds' investment advisor and administrator, the Advisor
earned fees for the Balanced Fund in the amounts of $147,812, $166,119 and
$185,208, respectively, for the Bond Fund in the amounts of $81,158, $61,833
and $34,148, respectively, and for the Growth Fund in the amounts of $78,969,
$54,826 and $72,764, respectively.
The Advisory Agreement provides that the Advisor may render similar
services to others so long as its services under the Agreement are not impaired
thereby. The Advisory Agreement also provides that the Funds will indemnify
the Advisor against certain liabilities, including liabilities under the
federal securities laws, or, in lieu thereof, contribute to resulting losses.
The Advisory Agreement further provides that, subject to Section 36 of the
Investment Company Act of 1940, the Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the matters to which the Agreement relates, except liability to a Fund or
its shareholders to which the Advisor would otherwise be subject by reason of
willful misfeasance,
B-8
<PAGE> 34
bad faith, or gross negligence, in the performance of its duties, or by reason
of its reckless disregard of its obligations and duties under the Agreement.
The Advisory Agreement between the Advisor and the Funds was approved
pursuant to the vote of a majority of the outstanding shares (as defined in the
Investment Company Act of 1940) of the Balanced Fund on March 9, 1988 and of the
Bond and Growth Funds on December 22, 1992. The Advisory Agreement will
continue from year to year with respect to each Fund provided such continuance
is specifically approved at least annually, (a) by the vote of the outstanding
shares of the Fund or by the Directors of the Funds, and (b) by the vote of a
majority of the Directors of the Funds who are not parties to the Advisory
Agreement or "interested persons" (as such term is defined in the Investment
Company Act of 1940) of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically if assigned (as defined in the Investment Company Act of
1940) and is terminable at any time without penalty by the Directors of the
Funds or, with respect to any Fund, by vote of a majority of the outstanding
shares of the Fund (as defined in the Investment Company Act of 1940) on
60 days written notice to the Advisor and by the Advisor on 60 days written
notice to the Funds.
ACCOUNTING SERVICES AGENT
Under its Accounting Services Agreement with the Funds, the Advisor
maintains and keeps current certain accounts and financial records of each
Fund, prepares the financial statements of each Fund as required by the
Investment Company Act of 1940 and calculates the net asset value per share of
each Fund on a daily basis.
For the fiscal years ended November 30, 1995, 1994 and 1993, the Advisor
earned fees for the services it provided to, and the expenses it assumed for,
the Funds under the Accounting Services Agreement in the amounts of $31,168,
$25,950 and $15,180, respectively, for the Balanced Fund, $30,217, $25,950 and
$15,180, respectively, for the Bond Fund, and $30,214, $25,950 and $15,180,
respectively, for the Growth Fund.
EXPENSES
Except as set forth in the Prospectus under "Management of the Funds," the
Funds are responsible for the payment of their own expenses. Such expenses
include, without limitation: the fees payable to the Advisor; the fees and
expenses of the Funds' custodian and transfer and dividend disbursing agent;
the cost of stock certificates; association membership dues; any portfolio
losses; filing fees for the registration or qualification of Fund shares under
federal or state securities laws; expenses of the organization of the Funds;
taxes; interest; costs of liability insurance, fidelity bonds, indemnification
or contribution; any costs, expenses or losses arising out of any liability of,
or claim for damages or other relief asserted against, the Funds for violation
of any law; legal and auditing fees and expenses; expenses of preparing and
setting in type prospectuses, statements of additional information, proxy
material, reports and notices and the printing and distributing of the same to
the Funds' existing shareholders and regulatory authorities; compensation and
expenses of the Funds' Directors; and extraordinary expenses incurred by the
Funds. The Advisor will bear the expense of printing and distributing
prospectuses to prospective shareholders.
As noted in the Prospectus under "Management of the Funds," the Advisor
has agreed to reimburse the Funds if certain expense limitations imposed by
state securities administrators are exceeded. Reimbursements, if any, are
calculated quarterly, based on the cumulative difference between the estimated
annualized ratio of the Fund's expenses and such limitations. The result of
this calculation is reduced by previous payments related to the current fiscal
year. The remainder represents the amount due from or to the Advisor. In
addition, the Advisor intends to voluntarily reimburse the Bond and Growth
Funds for all expenses incurred by them on an annual basis in excess of 1.15%
and 1.80% of average daily net assets, respectively. Voluntary reimbursement
may be initiated, modified or discontinued by the Advisor at any time.
CUSTODIAN
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, is
the custodian of the Funds' portfolio securities and cash.
B-9
<PAGE> 35
COUNSEL AND INDEPENDENT ACCOUNTANTS
Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
serves as general counsel to the Funds, and passes on the validity of the
shares of each Fund.
Price Waterhouse LLP, independent accountants, 100 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, serves as independent accountants for the Funds. The
financial statements of the Funds incorporated by reference into this Statement
of Additional Information (under "Financial Statements") from the annual report
to shareholders for the fiscal year ended November 30, 1995 (the "Annual
Report") and the data set forth under "Financial Highlights" in the Prospectus
have been so incorporated or included herein and therein in reliance upon the
authority of said firm as experts in auditing and accounting.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisor is responsible for decisions to buy and sell securities for
each Fund, the selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions, where applicable. Purchases and
sales of securities on a national securities exchange are effected through
brokers who charge a negotiated commission for their services. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
In placing purchase and sale orders for portfolio securities for the Fund,
it is the policy of the Advisor to seek the best net price and the most
favorable execution in light of the overall quality of brokerage and research
services provided. In addition, the Advisor may place orders for portfolio
transactions with brokers who recommend the purchase of shares of the Funds to
clients if the Advisor believes that such brokers' commissions or dealer
spreads, quality of execution and the overall quality of brokerage and research
services are comparable to those of other brokers. In selecting brokers to
effect portfolio transactions, the determination of what is expected to result
in best net price and the most favorable execution involves a number of largely
judgmental considerations. Among these are the Advisor's evaluation of the
broker's efficiency in executing and clearing transactions and the broker's
financial strength and stability. The best net price takes into account the
brokerage commission or dealer spread involved in purchasing the securities.
Transactions in the securities of small companies may involve specialized
services on the part of the broker and thereby entail higher commissions or
spreads than would be paid in transactions involving more widely traded
securities.
In selecting brokers to effect portfolio transactions for the Funds, the
Advisor also takes into consideration the research, analytical, statistical and
other information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, access to
computerized data bases and the software for analyzing such data bases, and the
availability of the brokerage firm's analysts for consultation. Where computer
software serves other functions than assisting the Advisor in the investment
decision-making process (e.g., recordkeeping), the Advisor makes a reasonable
allocation of the cost of the software to such other functions and bears such
part of the cost itself. While the Advisor believes such information and
services have substantial value, the Advisor considers them supplemental to its
own efforts in the performance of its duties under the Advisory Agreement.
Other clients of the Advisor may benefit from the availability of these
services to the Advisor, and the Funds may benefit from services available to
the Advisor as a result of transactions for other clients. The Advisory
Agreement provides that the Advisor, in placing orders for portfolio
securities, is entitled to rely upon Section 28(e) of the Securities Exchange
Act of 1934. Such section generally permits the Advisor to cause the Funds to
pay a broker or dealer, who provides brokerage and research services to the
Advisor, an amount of commission for effecting a securities transaction in
excess of the amount another broker or dealer would have charged for effecting
the transaction; provided the Advisor
B-10
<PAGE> 36
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker or dealer viewed in terms of either the particular transaction
or the Advisor's overall responsibilities with respect to the Funds and the
other accounts as to which the Advisor exercises investment discretion.
On occasions when the Advisor deems the purchase or sale of a security to
be in the best interests of a Fund as well as the Advisor's other customers
(including any other fund or other investment company or advisory account for
which the Advisor acts as investment advisor), the Advisory Agreement provides
that the Advisor, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be sold or purchased for the Fund with those to
be sold or purchased for such other customers in order to obtain the best net
price and most favorable execution. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Advisor in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund and such other customers.
In some instances, this procedure may adversely affect the size of the position
obtainable for a Fund.
During the fiscal year ended NovemberE30, 1995, the Balanced Fund, Bond
Fund and Growth Fund paid brokerage commissions aggregating $57,196, $6,066 and
$46,307, respectively, in connection with their portfolio transactions. The
entire amount of such commissions was paid to brokers or dealers who provided
research services to the Advisor in transactions amounting to $24,405,406,
$22,892,997 and $11,918,830, respectively.
During the fiscal years ended November 30, 1994 and 1993, the Funds paid
brokerage commissions in connection with their portfolio transactions
aggregating $53,623 and $60,112, respectively, for the Balanced Fund, $4,404
and $1,219, respectively, for the Bond Fund, and $20,473 and $31,729,
respectively, for the Growth Fund.
FUND PERFORMANCE
GENERAL
From time to time the Funds may advertise yield and total return for
various periods of investment. Such information will always include uniform
performance calculations based on standardized methods established by the
Securities and Exchange Commission, and may also include other total return
information. Yield is based on historical earnings and total return is based
on historical calculated earnings; neither is intended to indicate future
performance. Performance information should be considered in light of the
particular Fund's investment objectives and policies, characteristics and
quality of its portfolio securities in the market conditions during the
applicable period, and should not be considered as a representation of what may
be achieved in the future. Investors should consider these factors, in
addition to differences in the methods used in calculating performance
information, when comparing a particular Fund's performance to the performance
data established for alternative investments.
AVERAGE ANNUAL TOTAL RETURN
For each of the Funds, standardized annual total return is computed by
finding the average annual compounded rates of return over the one, five and
ten-year periods (or the portion thereof during which the Fund has been in
existence) that would equate the initial amount invested to the ending
redeemable value according to the following formula:
n
P(1 + T) =ERV
WHERE:
T = average annual total return;
n = number of years and portion of a year;
B-11
<PAGE> 37
ERV = ending redeemable value (of the
hypothetical $1,000 payment) at the end
of the 1, 5 and 10-year periods, or
fractional portion thereof, after
deduction of all non-recurring charges to
be deducted, assuming redemption at the
end of the period; and
P = $1,000 (the hypothetical initial payment).
The average annual total return for the Balanced Fund for the one-year and
five-year periods ended November 30, 1995 and for the period from March 16,
1987 (commencement of operations) through November 30, 1995, and the average
annual total returns for the Bond and Growth Funds for the one-year period
ended November 30, 1995 and for the period from February 10, 1992 (commencement
of operations) through November 30, 1995 are as follows:
<TABLE>
<S> <C> <C> <C>
From
Commencement
1 Year 5 Years of Operations
------ ---------- -----------------
Balanced Fund(1) 21.02% 10.82% 8.71%
Bond Fund(2) 14.06% ----- 6.29%
Growth Fund(3) 32.87% ----- 8.36%
</TABLE>
__________________
(1) If the Advisor had not agreed in 1988 and 1987 to reimburse the Balanced
Fund because a state expense limitation was exceeded, the average annual total
return for the period from commencement of operations through November 30, 1995
would have been 8.66%.
(2) If the Advisor had not voluntarily reimbursed the Bond Fund for all
expenses incurred during the year ended November 30, 1995 in excess of 1.00% of
average net assets from December 1, 1994 to January 31, 1995, and 1.15% of
average net assets thereafter, the average annual return for the one-year
period would have been 13.83%. If the Advisor had not voluntarily reimbursed
the Bond Fund for the period from commencement of operations through November
30, 1992 in excess of 1.15% of average net assets on an annual basis, from
December 1, 1992 through January 31, 1995 in excess of 1.00% of average net
assets on an annual basis, and from February 1, 1995 through November 30, 1995
in excess of 1.15% of average net assets on an annual basis, the average annual
return for the period from commencement of operations would have been 5.59%.
(3) If the Advisor had not voluntarily reimbursed the Growth Fund for the
period from commencement of operations through November 30, 1995 in excess of
2.00% of average net assets on an annual basis, the average annual return for
the period from commencement of operations would have been 8.26%.
CURRENT YIELD
Current yield quotations for the Funds are based on a 30-day (or
one-month) period, and are computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
a-b 6
Yield = 2[(----- + 1) - 1]
cd
WHERE:
<TABLE>
<S> <C> <C>
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
</TABLE>
B-12
<PAGE> 38
d = the maximum offering price per share on the last day
of the period.
For purposes of this calculation, income earned on debt obligations is
determined by applying a calculated yield-to-maturity percentage to the
obligations held during the period. Interest earned on mortgage backed
securities will be calculated using the coupon rate and principal amount after
adjustment for a monthly paydown. Income earned on equity securities is
determined by using the stated annual dividend rate applied over the
performance period. Because the investment objectives of the Balanced and
Growth Funds do not relate solely to current income, these Funds will not
typically advertise yield. The yield for the Bond Fund for the 30-day period
ended November 30, 1995 was 5.17%. When advertising yield, the Bond Fund will
not advertise a one-month or a 30-day period which ends more than 45 days
before the date on which the advertisement is published.
The performance data for the Funds is based on historical results and is
not intended to indicate future performance. Each Fund's total return will
vary based on market conditions, Fund expenses, portfolio investments and other
factors. The value of a Fund's shares will fluctuate and an investor's shares
may be worth more or less than their original cost upon redemption.
OTHER PERFORMANCE INFORMATION
Each Fund may from time to time advertise its comparative performance as
measured by various independent sources, including Lipper Analytical Services,
Inc., Barron's, The Wall Street Journal, Weisenberger Investment Companies
Service, Business Week, Financial World, U.S. News and World Reports, Wisconsin
State Journal, Forbes, Standard & Poors/Lipper Mutual Fund Profiles and The
Individual Investor's Guide to No-Load Mutual Funds. In addition, each Fund
may from time to time advertise its performance relative to certain indices and
benchmark investments, including the Lipper Balanced Funds Index, Lipper
Balanced Funds Average, Dow Jones Industrial Average, New York Stock Exchange
Composite Index, Standard & Poor's Composite Index of 500 Stocks, Lehman
Brothers Intermediate Corporate/Government Bond Index, NASDAQ-OTC Price Index
and Consumer Price Index.
TAXES
The dividends received deduction available to a corporate shareholder with
respect to certain ordinary income distributions from a Fund may be reduced
below 70% if the shareholder has incurred any indebtedness directly
attributable to its investment in Fund shares.
Any ordinary income or capital gain distribution will reduce the net asset
value of Fund shares by the amount of the distribution. Although such a
distribution thus resembles a return of capital if received shortly after the
purchase of shares, it generally will be taxable to shareholders.
All or part of any loss that a shareholder realizes on a redemption of
shares will be disallowed if the shareholder purchases other shares of the same
Fund (including by the automatic reinvestment of Fund distributions in
additional Fund shares) within 30 days before or after the redemption.
In years when a Fund distributes to shareholders amounts exceeding the
Fund's earnings and profits as determined for tax purposes, such excess will
not be taxed to the shareholders as a dividend, but rather will be treated
first as a tax-free return of each shareholder's tax basis in its shares until
such basis is reduced to zero, and thereafter as gain from the sale or exchange
of such shares.
Each Fund will be subject to a nondeductible 4% excise tax if it fails to
meet certain requirements with respect to distributions of net ordinary income
and capital gain net income. It is anticipated that this provision will not
materially affect the Funds or their shareholders. Dividends declared in
October, November or December to shareholders on a date in any such month and
paid during January of the following year will be treated as received by the
shareholders on December 31 of the year declared.
B-13
<PAGE> 39
The foregoing discussion of tax consequences is based on federal tax laws
and regulations in effect on the date of this Statement of Additional
Information, which are subject to change by legislative or administrative
action.
DESCRIPTION OF RATINGS OF CERTAIN FIXED INCOME SECURITIES
As set forth in the Prospectus under the caption "Investment Objectives
and Policies of the Funds," each Fund may invest in corporate notes, bonds,
debentures, convertible debt securities and convertible preferred stocks that
are assigned specified ratings of either Standard & Poor's Corporation ("S&P")
or Moody's Investors Service, Inc. ("Moody's"). A brief description of the
ratings symbols and their meanings follows.
DEBT SECURITIES
STANDARD & POOR'S CORPORATION. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment may take into consideration obligors such
as guarantors, insurers or lessees.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and
willingness of the obligor as to the timely
payment of interest and repayment of principal
in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position
of, the obligation in the event of bankruptcy,
reorganization or other arrangement under the
laws of bankruptcy and other laws affecting
creditors' rights.
S&P's highest four rating categories are as follows:
AAA. Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small
degree.
A. Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in the higher rated categories.
BBB. Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
MOODY'S INVESTORS SERVICE, INC. The purpose of Moody's Ratings is to
provide investors with a simple system of gradation by which the relative
investment qualities of bonds may be noted. Moody's highest four rating
categories are as follows:
Aaa. Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
B-14
<PAGE> 40
Aa. Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
PREFERRED STOCK
STANDARD & POOR'S CORPORATION. An S&P preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred stock
dividends and any applicable sinking fund obligations. A preferred stock
rating differs from a bond rating inasmuch as it is assigned to an equity
issue, which issue is intrinsically different from, and subordinated to, a debt
issue. Therefore, to reflect this difference, the preferred stock rating
symbol will normally not be higher than the bond rating symbol assigned to, or
that would be assigned to, the senior debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment - capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any
applicable sinking fund requirements in accordance with the terms
of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors'
rights.
S&P's highest four rating categories for preferred stock are as follows:
AAA. This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA. A preferred stock issue rated "AA" also qualifies as a
high-quality fixed income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A. An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB. An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred
B-15
<PAGE> 41
stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for
issues in the "A" category.
MOODY'S INVESTORS SERVICE, INC. Because of the fundamental differences
between preferred stocks and bonds, Moody's uses a variation of its bond rating
symbols in the quality ranking of preferred stock. The symbols, presented
below, are designed by Moody's to avoid comparison with bond quality in
absolute terms. It should always be borne in mind that preferred stock
occupies a junior position to bonds within a particular capital structure and
that these securities are rated by Moody's within the universe of preferred
stocks.
Moody's highest four ratings for preferred stock are as follows:
aaa. An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
aa. An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a reasonable
assurance that earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a. An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat
greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa. An issue which is rated "baa" is to be a medium grade preferred
stock, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be
questionable over any great length of time.
GENERAL
The S&P ratings, other than "AAA," may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
Moody's security rating symbols, other than "Aaa," may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
The ratings of S&P and Moody's represent their opinions as to the quality
of the instruments rated by them. It should be emphasized that such ratings,
which are subject to revision or withdrawal, are general and are not absolute
standards of quality.
OTHER INFORMATION
As of February 29, 1996, the only person known to management to own
beneficially 5% or more of the outstanding shares of the Balanced Fund was
CAPINCO (5.31%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee, Wisconsin
53201-1787.
As of February 29, 1996, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Bond Fund were:
CAPINCO (59.30%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee,
Wisconsin 53201-1787. Old Kent Bank, One Vandenberg Ctr., Grand Rapids,
Michigan 49503, and
B-16
<PAGE> 42
Wood County Trust Co., 181 2nd Street South, Wisconsin Rapids, Wisconsin
54494-4100 were the holders of record of 11.52% and 5.02%, respectively, of the
outstanding shares of the Bond Fund as of that date.
As of February 29, 1996, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Growth Fund were:
CAPINCO (17.95%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee,
Wisconsin 53201-1787; BAND & Co. (5.07%), c/o Firstar Trust Company, P.O. Box
1787, Milwaukee, Wisconsin 53201-1787; Norman S. Greenfield, IRA Rollover
(7.05%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee, Wisconsin
53201-1787; Anchorbank Growth (6.63%), held of record by Old Kent Bank, One
Vandenberg Ctr., Grand Rapids, Michigan 45903; and Tyne Cummings Wood & Larson
S.C. Pension & Profit Sharing Trust (5.45%), held of record by Old Kent Bank,
One Vandenberg Ctr., Grand Rapids, Michigan 49503. Old Kent Bank, One
Vandenberg Ctr., Grand Rapids, Michigan 49503, was the holder of record of
22.16% of the outstanding shares of the Growth Fund as of that date.
As of February 29, 1996, no person, other than those named in the
preceding three paragraphs, was known to the Funds to hold of record 5% or more
of the outstanding shares of any of the Funds.
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 with
respect to the securities offered by the Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other document referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The financial statements and related report of Price Waterhouse LLP,
independent accountants, contained in the Annual Report for the fiscal year
ended November 30, 1995 are hereby incorporated by reference. A copy of the
Annual Report may be obtained without charge by writing to Thompson, Plumb &
Associates, Inc., 8201 Excelsior Drive, Suite 200, Madison, Wisconsin 53717, or
by calling Thompson, Plumb & Associates, Inc. at 608-831-1300.
B-17
<PAGE> 43
PART C
OTHER INFORMATION
_________________
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
The following financial statements of the Thompson Plumb Funds, Inc. are
included in the Prospectus dated March 15, 1996:
(1) Financial Highlights for the Thompson Plumb Balanced Fund for
the period from March 16, 1987 (commencement of operations) through
November 30, 1987 and for the fiscal years ended November 30, 1988,
1989, 1990, 1991, 1992, 1993, 1994 and 1995.
(2) Financial Highlights for the Thompson Plumb Bond Fund and the
Thompson Plumb Growth Fund for the period from February 10, 1992
(commencement of operations) through November 30, 1992 and for the
fiscal years ended November 30, 1993, 1994 and 1995.
The following financial statements of the Thompson Plumb Balanced Fund,
the Thompson Plumb Bond Fund and the Thompson Plumb Growth Fund are
incorporated by reference into the Statement of Additional Information dated
March 15, 1996:
(1) Report of Independent Accountants.
(2) Statement of Assets and Liabilities.
(3) Schedule of Investments.
(4) Statement of Operations.
(5) Statement of Changes in Net Assets.
(6) Notes to Financial Statements.
(7) Financial Highlights.
All other financial statements, schedules and historical financial
information have been omitted as the subject matter is not required, not
present, or not present in amounts sufficient to require submission.
(B) EXHIBITS.
See Exhibit Index following Signature Page to this Registration Statement,
which Exhibit Index is incorporated herein by this reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
<PAGE> 44
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
The following table shows the number of shareholders of record for each of
the Funds as of December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF SHAREHOLDERS
SERIES OF RECORD
------ ----------------------
<S> <C>
Balanced Fund 485
Bond Fund 87
Growth Fund 283
</TABLE>
ITEM 27. INDEMNIFICATION.
Article V, Section 4 of the Registrant's Bylaws provides for
indemnification under certain circumstances of any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Registrant. However, no person shall be indemnified by the Registrant
against any liability to any of the Funds or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office. A copy of such Bylaws, as amended and restated as of
January 21, 1991, is included as Exhibit 2 to Post-Effective Amendment No. 6 to
the Registrant's Registration Statement on Form N-1A (Registration No.
33-6418).
Paragraph 7 of the Investment Advisory Agreement between the Registrant
and Thompson, Plumb & Associates, Inc. (formerly Thompson, Unger & Plumb, Inc.)
provides for indemnification of Thompson, Plumb & Associates, Inc. by the Funds
or, in lieu thereof, contribution by the Funds under certain circumstances. A
copy of such Agreement, as amended and restated as of February 7, 1992, is
included as Exhibit 5 to Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Thompson, Plumb & Associates, Inc., the Registrant's investment advisor,
is engaged in the investment advisory business. Set forth below is a list of
the directors and officers of Thompson, Plumb & Associates, Inc. and, with
respect to each such person, the name and business address of each other
company (if any) with which such person has been connected during the two years
ended November 30, 1994 and 1995, as well as the capacity in which such person
was connected.
C-2
<PAGE> 45
NAME AND ADDRESS
OF COMPANY WITH WHICH
NAME PERSON IS CONNECTED CAPACITY
- - ---- ------------------- --------
John W. Thompson None ---
Thomas G. Plumb None ---
Connie M. Redman None ---
Penny M. Hubbard None ---
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The Amended and Restated Articles of Incorporation, Bylaws and minute book
of the Registrant are in the physical possession of Quarles & Brady, 411 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. Accounts, books, records and
other documents required to be maintained under Section 31(a) relating to the
number of shares of the Registrant's common stock held by each shareholder of
record are in the physical possession of Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin 53201. All other accounts, books and other documents
required to be maintained under Section 31(a) of the Investment Company Act of
1940 and the Rules promulgated thereunder are in the physical possession of
Thompson, Plumb & Associates, Inc., 8201 Excelsior Drive, Suite 200, Madison,
Wisconsin 53717.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-3
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Madison, State of Wisconsin, on the 22nd
day of March, 1996.
THOMPSON PLUMB FUNDS, INC
/s/ John W.Thompson
By _____________________________
JOHN W. THOMPSON
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on this 22nd day of March, 1996,
by the following persons in the capacities indicated.
/s/ John W. Thompson Mary Ann Deibele+
____________________________________________ _________________________________
JOHN W. THOMPSON MARY ANN DEIBELE
Director, Chairman and Secretary Director
(Principal Executive Officer)
/s/ Thomas G. Plumb John W. Feldt*
____________________________________________ _________________________________
THOMAS G. PLUMB JOHN W. FELDT
Director, President and Treasurer Director
(Principal Financial and Accounting Officer)
/s/ George H. Austin Donald A. Nichols*
____________________________________________ ________________________________
GEORGE H. AUSTIN DONALD A. NICHOLS
Director Director
/s/ John W. Thompson
+*By: _________________________________________
JOHN W. THOMPSON
+ Pursuant to Power of Attorney
dated January 26, 1995
* Pursuant to Power of Attorney
dated December 6, 1991
C-4
<PAGE> 47
1933 Act Reg. No. 33-6418
1940 Act File No. 811-4946
THOMPSON PLUMB FUNDS, INC.
_____________________________________________
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM N-1A
_____________________________________________
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION BY REFERENCE TO HEREWITH PAGE NO.
- - -------------- ----------- --------------- -------- --------
<S> <C> <C> <C> <C>
1. Registrant's Post-Effective
Amended and Amendment No. 6 to
Restated Articles the Registrant's
of Incorporation, Registration
in the form Statement on Form
proposed for N-1A (Reg. No.
adoption by 33-6418) (the
Shareholders on "Registration
January 21, 1992. Statement").
2. Registrant's Post-Effective
Bylaws, as amended Amendment No. 6 to
and restated as of the Registration
January 21, 1992, Statement.
and presently in
effect.
3. Not applicable.
4(a). Specimen stock Post-Effective
certificate for Amendment No. 6 to
shares of Growth the Registration
Fund. Statement.
4(b). Specimen stock Post-Effective
certificate for Amendment No. 6 to
shares of Balanced the Registration
Fund. Statement.
4(c). Specimen stock Post-Effective
certificate for Amendment No. 6 to
shares of Bond the Registration
Fund. Statement.
5. Investment Advisory Post-Effective
Agreement between Amendment No. 7 to
Registrant and the Registration
Thompson, Unger & Statement.
Plumb, Inc., as
amended and
restated as of
February 7, 1992.
6. Not applicable.
</TABLE>
C-5
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED SEQUENTIAL
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH PAGE NO.
- - ------- ----------- -------------------- -------- ----------
<S> <C> <C> <C> <C>
7. Not applicable.
8. Custodian Agreement with Post-Effective
Bank between Registrant and Amendment No. 7 to
First Wisconsin Trust the Registration
Company, as amended and Statement.
restated as of February 7,
1992.
9(a). Accounting Services Post-Effective
Agreement between Amendment No. 7 to
Registrant and Thompson, the Registration
Unger & Plumb, Inc., as Statement.
amended and restated as of
February 7, 1992.
9(b). Shareholder Services Post-Effective
Agreement between Amendment No. 7 to
Registrant and Thompson, the Registration
Unger & Plumb, Inc., as Statement.
amended and restated as of
February 7, 1992.
10. Consent of Quarles & Brady. Post-Effective
Amendment No. 6 to
the Registration
Statement.
11. Consent of Price Waterhouse. x
12. Not applicable.
13. Subscription Agreement Post-Effective
between Registrant and Amendment No. 1 to
Thompson, Unger & Plumb, the Registration
Inc. (f/k/a FMI Capital Statement.
Management, Inc.)
14(a). Form of Thompson, Unger & Post-Effective
Plumb Funds Individual Amendment No. 8 to
Retirement Account the Registration
Custodial Agreement and Statement
related documents.
14(b). Form of Thompson, Unger & Post-Effective
Plumb 403(b)(7) Plan and Amendment No. 7 to
related documents. the Registration
Statement.
14(c). IRS Model 5305-SEP and Post-Effective
related documents. Amendment No. 7 to
the Registration
Statement.
</TABLE>
C-6
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN FILED SEQUENTIAL
NUMBER DESCRIPTION BY REFERENCE TO HEREWITH PAGE NO.
- - ------- ----------- -------------------- -------- ----------
<S> <C> <C> <C> <C>
14(d). Thompson Plumb & x
Associates, Inc. Prototype
SEP IRA and related
documents
15. Not applicable.
16(a). Schedule of computation of Post-Effective
performance data for the Amendment No. 5 to
Balanced Fund. the Registration
Statement.
16(b). Schedule of computation of Post-Effective
performance data for the Amendment No. 8 to
Growth Fund. the Registration
Statement
16(c). Schedule of computation of Post-Effective
performance data for the Amendment No. 8 to
Bond Fund. the Registration
Statement
27(a). Financial Data Schedule for x
the Balanced Fund
27(b). Financial Data Schedule for x
the Growth Fund
27(c). Financial Data Schedule for x
the Bond Fund
</TABLE>
C-7
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
and Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A (the
"Registration Statement") of our report dated January 15, 1996, relating to the
financial statements and financial highlights appearing in the November 30,
1995 Annual Report to Shareholders of Thompson Plumb Funds, Inc., which are
also incorporated by reference into the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" and
"Shareholder Statements, Reports and Inquiries" in the Prospectus and under the
headings "Counsel and Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
March 20, 1996
<PAGE> 1
EXHIBIT 14(d)
THOMPSON PLUMB & ASSOCIATES, INC.
PROTOTYPE SIMPLIFIED EMPLOYEE PENSION PLAN
Thompson Plumb & Associates, Inc. ("Sponsor") hereby provides a prototype
simplified employee pension which an employer may adopt by completing and
executing the complementary adoption agreement.
ARTICLE I
DEFINITIONS
1.01 "Plan" means the simplified employee pension established by the
Employer in the form of this document, including the Employer's Adoption
Agreement. The Employer will designate the name of the Plan in its Adoption
Agreement. The Employer must use this Plan only in conjunction with an
individual retirement account or individual retirement annuity for which the
Internal Revenue Service has issued a favorable opinion or ruling letter or in
conjunction with model individual retirement accounts issued by the Internal
Revenue Service.
1.02 "Employer" means each employer who adopts this Plan by executing an
Adoption Agreement, and any other employer which is a member with the Employer
of the same controlled group of corporations as defined in Code Section 414(b),
which is a trade or business (whether or not incorporated) under the same
common control as defined in Code Section 414(c) or which is a member of an
affiliated service group within the meaning of Code Section 414(m) or Code
Section 414(o).
1.03 "Custodian" means Thompson Plumb & Associates, Inc. .
1.04 "Employee" means any employee of the Employer, including a
self-employed individual who is an employee of the Employer by reason of Code
Section 401(c)(1), except as otherwise provided in the Employer's Adoption
Agreement. Employee also means any individual (who otherwise is not an Employee
of the Employer) who is the Employer's leased employee under Code Section
414(n).
1.05 "Participant" means an eligible Employee for whose benefit the
Employer makes a contribution to an Account.
1.06 "Compensation" means Compensation as defined in the Employer's
Adoption Agreement. For a Self-Employed Individual, Compensation means Earned
Income. Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.06, unless the Plan reference specifies a
modification to this definition. The Plan will take into account only
Compensation actually paid, or Compensation which the Employee had the right to
receive, for the relevant period. A Compensation payment includes Compensation
paid by the Employer through another person under the common paymaster
provisions in Code Section Section 3121 and 3306.
(A) DEFINITIONS. For purposes of the Compensation definition elections in the
Adoption Agreement, the following definitions apply:
(1) "Federal income tax wages" definition of Compensation. All wages for
federal income tax withholding purposes, as defined under Code Section
3401(a) (for purposes of income tax withholding at the source), disregarding
any rules limiting the remuneration included as wages based on the nature or
location of the employment or the services performed.
(2) "W-2 wages" definition of Compensation. All wages as described in
the "federal income tax wages" definition, and all other payments to an
Employee in the course of the Employer's trade or business, for which the
Employer must furnish the Employee a written statement under
Code Section Section 6041(d) and 6051(a)(3). As long as the instructions to
Form W-2, Box 10, remain consistent with the instructions for the 1990 or
1991 Form W-2, the Employer may treat the amount reported in Box 10 as
satisfying this definition.
(3) "Elective contributions." Elective contributions are amounts
excludible from the
<PAGE> 2
Employee's gross income under Code Section Section 125, 402(a)(8), 402(h) or
403(b), and contributed by the Employer, at the Employee's election, to a
Code Section 401(k) arrangement, a Simplified Employee Pension, cafeteria
plan or tax-sheltered annuity. Elective contributions also include
Compensation deferred under a Code Section 457 plan maintained by the
Employer and Employee contributions "picked up" by a governmental entity and,
pursuant to Code Section 414(h)(2), treated as Employer contributions.
The definitions of Compensation in paragraphs (1) and (2) do not include
elective contributions, unless otherwise specified in the Plan or in the
Adoption Agreement.
(B) COMPENSATION DOLLAR LIMITATION. The Plan must take into account only the
first $200,000 (or such larger indexed amount) of any Participant's
Compensation. For Plan Years beginning after December 31, 1993, "$150,000"
replaces "$200,000" for purposes of this limitation. This dollar limitation
applies on a prorated basis to any measuring period less than 12 months.
1.07 "Highly Compensated Employee" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is more than 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles of Code
Section 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of the
top-paid 20% group of employees (based on Compensation for the relevant
year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Code Section 415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding
12-month period and does not satisfy clause (a) in either period, the Employee
is a Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (d) will not exceed the greater of 3 or 10% of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than 50 officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Employer will treat the
highest paid officer as satisfying clause (d) for that year.
For purposes of applying this definition, Compensation must include
elective contributions and the Employer will disregard any exclusions elected
in Adoption Agreement Section 1.06. The Employer must make the determination of
who is a Highly Compensated Employee, including the determinations of the
number of identity of the top paid 20% group, the top 100 paid Employees, the
number of officers includible in clause (d) and the relevant Compensation,
consistent with Code Section 414(q) and regulations issued under that Code
section. The Employer may make a calendar year election to determine the Highly
Compensated Employees for the Plan Year, as prescribed by
Treasury regulations. A calendar year election must apply to all plans and
arrangements of the Employer.
For purposes of applying any nondiscrimination test, the Employer will
treat a Highly Compensated Employee and all family members (a spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant) as a
single Highly Compensated Employee, but only if the Highly Compensated Employee
is more than 5% owner or is one of the 10 Highly Compensated Employees with the
greatest Compensation for the Plan Year. This aggregation rule applies to a
family member even if that family member is a Highly Compensated Employee
without family aggregation. This family aggregation rule will apply only for
Plan Years in which Code Section 414(q) requires its application.
1.08 "Account" means the IRA account or
<PAGE> 3
annuity contract established and maintained by a Participant to which the
Employer makes contributions pursuant to the Plan.
1.09 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Account.
1.10 "Effective Date" of this Plan is the date specified by the Employer
in its Adoption Agreement.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "Plan Year" means the fiscal year of the Plan, as specified in the
Employer's Adoption Agreement.
* * * * * * * * * *
ARTICLE II
ELIGIBILITY TO PARTICIPATE IN
EMPLOYER CONTRIBUTIONS
2.01 PARTICIPATION. The Employer will specify in its Adoption Agreement
the conditions for eligibility to participate in the Plan.
2.02 PARTICIPANTS' RIGHT TO EMPLOYMENT. Nothing contained in this Plan, or
in the establishment of a Participant's Account, or any modification or
amendment to the Plan or a Participant's Account, or in the creation of any
Account, or the payment of any benefit, shall give any Employee, even if he is
a Participant, or any Beneficiary, any right to continue employment, any legal
or equitable right against the Employer or any officer, or employee of the
Employer, except as expressly provided by the Plan.
* * * * * * * * * *
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.01 AMOUNT. In the Adoption Agreement, the Employer will elect to
contribute under a uniform contribution formula or under a permitted disparity
contribution formula. For each Plan Year, the Employer will contribute to each
Participant's Account, the lesser of the amount determined under this Section
3.01 or the maximum amount permitted under Section 3.02.
(A) UNIFORM CONTRIBUTION FORMULA. For each Plan Year, the Employer will
contribute to each Participant's Account a uniform percentage of
Compensation, as determined in the Employer's sole discretion.
(B) PERMITTED DISPARITY CONTRIBUTION FORMULA. For each Plan Year the
Employer will contribute the following amount to each Participant's
Account:
(1) A uniform percentage of Compensation, as determined in the
Employer's sole discretion; plus
(2) A uniform percentage of Excess Compensation, as determined in
the Employer's sole discretion.
The percentage described in (2) may not exceed the lesser of the
percentage determined in (1) or the percentage determined in the Maximum
Disparity Table in the next paragraph. Furthermore, the Employer may not
contribute an amount described in (2) unless the contribution percentage under
(1) is at least 3%. If at any time during the Plan Year, the Employer maintains
a qualified plan or another SEP that also uses a permitted disparity formula
(or imputes permitted disparity to satisfy the nondiscrimination requirements),
the Employer may not contribute an amount described in (2).
MAXIMUM DISPARITY TABLE.
Integration Level (as percentage Applicable
of taxable wage base). Percentages
- - --------------------- -----------
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% (but at least more
than $10,000) and no more than 80% 4.3%
20% (or $10,000, if greater)
or less 5.7%
<PAGE> 4
(C) OTHER REQUIREMENTS. Employment by a Participant on the last day of the Plan
Year is a not a condition to an allocation of an Employer contribution under
the Plan for that Plan Year. However, the Employer will not make a contribution
for the Plan Year for any Participant whose Compensation is less than $300 (or
the adjusted dollar amount determined by the Internal Revenue Service). For
this purpose, a Participant's compensation must include elective contributions
and the Employer will disregard any exclusions elected in Adoption Agreement
Section 1.06.
(D) DEDUCTION. Contributions to the SEP are deductible by the Employer for the
taxable year with or within which the Plan Year of the SEP ends. The Code
treats contributions made for a particular taxable year and contributed by the
due date of the Employer's income tax return, including extensions, as made
during that taxable year.
3.02 CONTRIBUTION LIMITATION. The total of the Employer contributions (as
determined under Sections 3.01 and 7.01) allocated to a Participant's Account
for any Plan Year may not exceed the lesser of 15% of the Participant's
Compensation or $30,000 (or, if greater, one-fourth of the defined benefit
dollar limitation under Code Section 415(b)(1)(A)).
3.03 EMPLOYER CONTRIBUTIONS NOT CONDITIONAL. The Employer does not
condition any contribution made under the Plan on behalf of a Participant upon
the retention by the Participant of the contribution within the Participant's
Account. Furthermore, the Employer does not impose any restriction on a
Participant's withdrawal of any amount from the Participant's Account.
* * * * * * * * * *
ARTICLE IV
PARTICIPANT'S SIMPLIFIED
EMPLOYEE PENSION IRA
4.01 ESTABLISHMENT OF ACCOUNT. Each Participant must establish in his
own name an individual retirement account with the Custodian or with any bank
or other institution maintaining individual retirement accounts or individual
retirement annuities. The Employer may establish an Account with the Custodian
for the benefit of an eligible Employee if the Employee is unable or unwilling
to execute the necessary documents to establish an Account or if the Employer
is unable to locate the Employee.
4.02 NONFORFEITABLE ACCOUNT. The interest of any Participant in the
balance of his Account is at all times 100% Nonforfeitable.
4.03 EXCLUSIVE BENEFIT. The Employer will have no beneficial interest in
any asset of a Participant's Account and no part of any asset in a
Participant's Account will revert to or be repaid to the Employer, either
directly or indirectly; nor will any part of the corpus or income of a
Participant's Account, or any asset of a Participant's Account, be (at any
time) used for, or diverted to, purposes other than the exclusive benefit of
the Participant or his Beneficiaries.
4.04 ADMINISTRATION OF ACCOUNT. The provisions of the document under which
a Participant maintains his Account will determine the administration,
distribution and investment of the Employer's and the Employee's, if any,
contribution(s) to a Participant's Account. The Employer does not in any way
guarantee a Participant's Account from loss or depreciation.
4.05 PARTICIPANT CONTRIBUTIONS. Nothing in the Plan prohibits a
Participant from making IRA contributions (deductible or nondeductible) to his
Account, as permitted by Code Section Section 219 and 408.
* * * * * * * * * *
<PAGE> 5
ARTICLE V
MISCELLANEOUS
5.01 SUCCESSORS. The Plan is binding upon all persons entitled to benefits
under the Plan and their respective heirs and legal representatives.
5.02 WORD USAGE AND TITLES. Words used in the masculine will apply to
the feminine where applicable, and wherever the context of the Plan dictates,
the plural includes as the singular and the singular includes the plural.
Article and Section titles are for reference only.
5.03 STATE LAW. Except to the extent superseded by Federal statute, the
law of the state of the Employer's principal place of business will determine
all questions arising with respect to the provisions of this Plan.
5.04 PARTICIPATION IN PROTOTYPE. If the Employer ever maintained a
defined benefit plan which is now terminated or, subsequent to the adoption of
this Plan, terminates a defined benefit plan, the Employer can no longer be a
participating Employer in this Prototype. If the Employer currently maintains a
defined benefit plan, the Employer may not elect under Adoption Agreement
Section 7.01 to permit Employees to make salary reduction contributions. An
Employer which is not a participating Employer in this Prototype cannot rely on
the Sponsor's opinion letter issued by the Revenue Service and must treat this
Plan as an individually designed plan.
* * * * * * * * * *
ARTICLE VI
AMENDMENT AND TERMINATION
6.01 AMENDMENT. The Employer has the right at any time and from time to
time:
(a) To amend this Plan and its Adoption Agreement, without any
Participant's consent, in any manner it deems necessary or advisable in order
to qualify (or maintain qualification of) this Plan under the provisions of
Code Section 408(k); and
(b) To amend this Plan and its Adoption Agreement in any other manner.
However, no amendment may authorize or permit any portion of an Account to be
used for or diverted to purposes other than for the exclusive benefit of the
Participant, his Beneficiaries or their estates.
If the Employer amends this Plan and its Adoption Agreement, other than by
changing its elections in the Adoption Agreement, the Employer no longer can
participate in this Prototype. See Section 5.04.
6.02 NOTICE OF AMENDMENT. The Sponsor will inform the Employer of any
amendments to the prototype SEP or if the Sponsor has discontinued sponsorship
of this prototype SEP.
6.03 DISCONTINUANCE. The Employer has the right to suspend or discontinue
its contributions under the Plan, and to terminate this Plan, at any time.
* * * * * * * * * *
ARTICLE VII
ELECTIVE DEFERRAL ARRANGEMENT
7.01 APPLICATION. This Article VII applies to an Employer's Plan only if
the Employer elects in Section 7.01 of the Adoption Agreement to permit
Employees to make salary reduction contributions to the Plan. The Sponsor
intends for this arrangement to qualify as a salary reduction simplified
employee pension ("SARSEP") under Code Section 408(k)(6) and the applicable
regulations.
7.02 ELECTIVE DEFERRALS. The Employer will contribute to each
Participant's Account the elective deferrals the Participant has elected the
Employer to withhold from his Compensation under his salary reduction agreement
on file with the Employer. The salary reduction agreement will not apply to
Compensation actually paid before its effective date. The effective date of the
salary reduction agreement may not be earlier than its execution date. The
salary reduction agreement will apply to subsequent increases in the
Participant's
<PAGE> 6
Compensation unless the Participant revokes or modifies the salary reduction
agreement. The Employer only may contribute elective deferrals for a Plan Year
to any Participant's Account if:
(a) At least 50% of Employer's eligible Employees have salary reduction
agreements in effect for at least part of that Plan Year; and
(b) The Employer has no more than 25 Employees eligible to participate
in the Plan at any time during the prior Plan Year.
(A) DISALLOWED DEFERRALS. If the Plan does not satisfy the 50% requirement at
any time during the Plan Year, the Plan will consider all elective deferrals
made by Employees for the Plan Year as "disallowed deferrals." Disallowed
deferrals are IRA contributions which are not SEP-IRA contributions. If the
Employer determines the Plan has made contributions to Participants' IRAs which
are disallowed deferrals, the Plan must notify each affected Employee the Code
no longer considers the deferrals as SEP-IRA contributions. The Employer must
provide the notification within 2 1/2 months following the end of the Plan Year
to which the disallowed deferrals relate.
(B) NOTIFICATION PROCEDURE. The notification must specify (1) the amount of the
disallowed deferrals (2) that the disallowed deferrals are includible in the
Employee's gross income for the calendar year or years in which the amounts
deferred would have been received by the Employee in cash had he not made an
election to defer and that the income allocable to the disallowed deferrals is
includible in the year withdrawn from the IRA; and (3) that the Employee must
withdraw the disallowed deferrals (and allocable income) from the SEP-IRA by
April 15 following the calendar year of notification by the Employer. The Code
will subject disallowed deferrals not withdrawn by April 15 following the year
of notification to the IRA contribution limitations of Code Section Section 219
and 408. The Code will consider disallowed deferrals in excess of the
limitations as excess IRA contributions and subject to the 6% excise tax on
excess contributions under Code Section 4973. If income allocable to a
disallowed deferral is not withdrawn by April 15 following the year of
notification by the Employer, the income may be subject to the 10% tax on early
distributions under Code Section 72(t) when withdrawn. The Employer will report
disallowed deferrals in the same manner as excess SEP contributions.
7.03 PARTICIPATION. To the extent prohibited by law, an Employer which is
a state or local government or a tax-exempt organization may not permit
Participant salary reduction contributions. In addition, an Employer with
leased employees as defined under Code Section 414(n)(2) may not permit
Participant salary reduction contributions.
7.04 ANNUAL ELECTIVE DEFERRAL LIMITATIONS. A Participant's elective
deferrals may not exceed the lesser of 15% of the Participant's Compensation,
or 402(g) limitation. The 402(g) limitation is the greater of $7,000 or the
adjusted amount determined by the Secretary of the Treasury. If, pursuant to a
salary reduction agreement, the Employer determines the Participant's elective
deferrals to the Plan for a calendar year would exceed the 402(g) limitation,
the Employer will suspend the employee's salary reduction agreement, if any,
until the following January 1 and refund any elective deferrals in excess of
the 402(g) limitation which the Employer has not contributed to the
Participant's Account. The Employer will make all refunds no later than April
15 of the following calendar year.
7.05 DEFINITIONS. For purposes of this Article VII:
(a) "Highly Compensated Employee" means an Eligible Employee who
satisfies the definition in Section 1.07 of the Plan. Family members
aggregated as a single Employee under Section 1.07 constitute a single Highly
Compensated Employee, whether a particular family member is a Highly
Compensated Employee or a Nonhighly Compensated Employee without the
application of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is
not a Highly Compensated Employee and who is not a family member treated as a
Highly
<PAGE> 7
Compensated Employee.
(c) "Eligible Employee" means an Employee who is eligible to enter into
a salary reduction agreement for the Plan Year, regardless of whether he
actually enters into such an agreement.
(d) "Nonhighly Compensated Group" means the group of Eligible Employees
who are Nonhighly Compensated Employees for the Plan Year.
(e) "Compensation" means any definition of Compensation which is
permissible under Adoption Agreement Section 1.06, regardless of the actual
elections made by the Employer in the Adoption Agreement. The definition used
by the Employer for a Plan Year must apply uniformly to all Eligible
Employees.
7.06 ACTUAL DEFERRAL PERCENTAGE TEST. For each Plan Year, the Employer
must determine whether the elective deferrals for each Highly Compensated
Employee satisfy the actual deferral percentage ("ADP") test. A Highly
Compensated Employee satisfies the ADP test if his ADP does not exceed 1.25
times the average ADP of the Nonhighly Compensated Group.
(A) CALCULATION OF ADP. The average ADP for the Nonhighly Compensated group is
the average of the separate ADPs calculated for each Eligible Employee who is a
member of that group. An Eligible employee's ADP for a Plan Year is the ratio
of the Eligible Employee's deferral contributions for the Plan Year to the
Employee's Compensation for the Plan Year. In calculating the average ADP, the
percentage for an eligible Nonhighly Compensated Employee who does not make
deferral contributions for the Plan Year is 0%. For aggregated family members
treated as a single Highly Compensated Employee, the ADP of the family unit is
the ADP determined by combining the deferral contributions and Compensation of
all aggregated family members. A Nonhighly Compensated Employee's ADP does not
include elective deferrals made to this Plan or to any other Plan maintained by
the Employer, to the extent such elective deferrals exceed the 402(g)
limitation described in this Section.
(B) EXCESS SEP CONTRIBUTIONS. If the Employer determines a Highly Compensated
Employee fails to satisfy the ADP test for a Plan Year, the Employer must
notify the affected employee of the excess contribution and tax consequences of
the excess contribution during the next Plan Year. However, the Employer will
incur an excise tax equal to 10% of the amount of the excess SEP contribution
if the Employer does not notify the Employee during the first 2 1/2 months of
that next Plan Year. The excess SEP contributions are that amount of deferral
contributions made by a Highly Compensated Employee which exceeds 1.25 times
the average ADP of the Nonhighly Compensated Group. An Excess SEP contribution
is includible in an Employee's gross income on the earliest date any elective
deferral made by an Employee during the Plan Year would have been received by
the Employee had he originally elected to receive the amounts in cash. However,
if the excess SEP contribution (not including allocable income) totals less
than $100, then the excess contribution is includible in the Employee's
gross income in the year of notification. Income allocable to the excess SEP
contribution is includible in the year of withdrawal from the IRA.
(C) NOTIFICATION PROCEDURE. The Employer's notification to each affected Highly
Compensated Employee of the excess SEP contributions must state specifically,
in a manner calculated to be understood by the average Participant: (1) the
amount of the excess contribution attributable to that Employee's elective
deferrals; (2) the calendar year for which the excess SEP contribution is
includible in the employee's gross income; (3) that the employee must withdraw
the excess SEP contribution (and allocable income) from the SEP-IRA by April 15
following the year of notification by the Employer. Excess SEP contributions
not withdrawn by April 15 following the year of notification will be subject to
the IRA contribution limitations of Code Section Section 219 and 408 for the
preceding calendar year. The Code will consider contributions in excess of the
limitations as excess IRA contributions and subject to the 6% excise tax on
excess contributions under Code Section 4973. If income allocable to an excess
SEP contribution is not withdrawn by April 15 following the year of
notification by the Employer, the income when
<PAGE> 8
withdrawn may be subject to the 10% tax on early distributions under Code
Section 72(t).
If the Employer fails to notify Employees by the end of the Plan year
following the Plan Year in which the Employees made the excess SEP
contribution, the Revenue Service will no longer consider the SEP to meet the
requirements of Code Section 408(k)(6). If the SEP no longer meets the
requirements of Code Section 408(k)(6), any contribution to an Employee's IRA
will be subject to the contribution limitations of Code Section Section 219 and
408. The Code will consider contributions in excess of the limitations as
excess IRA contributions.
(D) WITHDRAWAL RESTRICTIONS. For each Eligible Employee who makes an elective
deferral to a SEP-IRA, the Employer will provide a notice explaining the IRA
distribution rules of Code Section 408(d)(1) and the penalty tax provisions of
Code Section 72(t) will apply to the transfer or distribution from a SEP-IRA of
any elective deferrals prior to the earlier of (1) 2 1/2 months after the close
of the Plan Year or (2) the determination of whether the SEP satisfies the ADP
test.
* * * * * * * * * *
ARTICLE VIII
TOP HEAVY REQUIREMENTS
8.01 DEEMED TOP HEAVY PLAN ELECTION. If the Employer does not permit
Participant salary reduction contributions, the Plan must operate the SEP as a
Deemed Top Heavy Plan. If the Employer permits salary reduction contributions,
the Employer must specify in its Adoption Agreement whether the Plan will
operate as a Deemed Top Heavy Plan or as a Not Deemed Top Heavy Plan.
(A) DEEMED TOP HEAVY PLAN. If the Employer elects in the Adoption Agreement to
treat the Plan as a Deemed Top Heavy Plan, the top heavy minimum allocation
requirement applies in all Plan Years even if the Plan is not top heavy.
(B) NOT DEEMED TOP HEAVY PLAN. The top heavy minimum allocation requirement
applies to a Not Deemed Top Heavy Plan only in Plan Years for which the Plan is
top heavy.
8.02 DETERMINATION OF TOP HEAVY STATUS. The Plan is top heavy for a Plan
Year if the top heavy ratio as of the Determination Date exceeds 60%. The top
heavy ratio is a fraction, the numerator of which is the sum of the Employer
contributions (including election deferrals, if any) made to the Accounts of
all Key Employees as of the Determination Date and the denominator of which is
a similar sum determined for all Employees. The Plan must calculate the top
heavy ratio by disregarding the Employer Contributions of any Non-Key
Employee who was formerly a Key Employee, and by disregarding the Employer
Contributions of an individual who has not received credit for at least one
Hour of Service with the Employer during the Determination Period. The Plan
must calculate the top heavy ratio in accordance with Code Section 416 and the
regulations under that Code section. Under a Deemed Top Heavy Plan, the Plan
need not determine whether the Plan actually is top heavy.
If the Employer maintains (or maintained within the prior 5 years) any
other SEP or qualified plan in which a key employee participates or
participated, the Employer must aggregate contributions, accrued benefits or
account balances (whichever is applicable), with contributions made to this SEP
to determine top heavy status.
8.03 DEFINITIONS. For purposes of applying the top heavy provisions:
(1) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year
in the Determination Period: (i) has Compensation in excess of 50% of the
dollar amount prescribed in Code Section 415(b)(1)(A) and is an officer of
the Employer; (ii) has Compensation in excess of the dollar amount
prescribed in Code Section 415(c)(1)(A) and is one of the Employees owning
the ten largest interests in the Employer; (iii) is a more than 5% owner
of the Employer; or (iv) is a more than 1% owner of the Employer and has
<PAGE> 9
Compensation of more than $150,000. The constructive ownership rules of
Code Section 318 (or the principles of that section, in the case of an
unincorporated Employer,) will apply to determine ownership in the
Employer. The number of officers taken into account under clause (i) will
not exceed the greater of 3 or 10% of the total number (after application
of the Code Section 414(q) exclusions) of Employees, but no more than 50
officers. The Plan will make the determination of who is a Key Employee in
accordance with Code Section 416(i)(1) and the regulations under that Code
section.
(2) "Non-Key Employee" means an Employee who does not meet the
definition of Key Employee.
(3) The Plan defines "Hour of Service" in accordance with the rules of
Labor Reg. Section 2530.200b-2, which the Plan, by this reference,
specifically incorporates in full.
(4) "Determination Date" for any Plan Year is the last day of the
preceding Plan Year or, in the case of the first Plan Year of the Plan,
the last day of that Plan Year. The "Determination Period" is the 5 year
period ending on the Determination Date.
(5) "Participant" includes any Employee otherwise eligible to
participate in the Plan but who is not a Participant because of his
failure to make elective deferrals under the salary reduction arrangement.
(6) "Compensation" The Employer will determine Compensation by
excluding elective contributions (even if included under Adoption
Agreement Section 1.06) and by disregarding any exclusion from
compensation elected in Adoption Agreement Section 1.06.
8.04 TOP HEAVY MINIMUM ALLOCATION. Unless the Employer designates in the
Adoption Agreement another plan to satisfy the top heavy minimum requirements,
the Employer will make a minimum contribution each year to the Account of each
Non-Key Employee eligible to participate in this Plan. The top heavy minimum
contribution is the lesser of 3% of the Participant's Compensation for the Plan
Year or the highest Key Employee contribution rate for the Plan Year. A Key
Employee's contribution is the sum of the Employer contributions made to the
Key Employee's Account under Section 3.01 and 7.01, divided by the Key
Employee's Compensation. A Non-Key Employee's contribution rate is the
Employer's contributions made to the Non-Key Employee's Account, exclusive of
the elective deferrals, divided by the Non-Key Employee's Compensation.
* * * * * * * * * *
<PAGE> 10
THOMPSON PLUMB & ASSOCIATES, INC.
ADOPTION AGREEMENT
PROTOTYPE SIMPLIFIED EMPLOYEE PENSION PLAN
The undersigned Employer establishes a Simplified Employee Pension Plan
under Thompson Plumb & Associates, Inc. Prototype Simplified Employee Pension
Plan which the undersigned incorporates within this Adoption Agreement by this
reference. The undersigned Employer makes the following elections granted
under the Plan:
1.01 PLAN. The name of the Plan as adopted by the Employer is
_________________________________________ Simplified Employee Pension Plan.
1.04 EMPLOYEE. The following Employees are not eligible to
participate in the Plan: (Choose (a) or at least one of (b) or (c)).
/ / (a) No exclusions.
/ / (b) Collective bargaining employees. [Note: If the Employer excludes
union employees from the Plan, the Employer must be able to provide
evidence that retirement benefits were in the subject of good faith
bargaining.]
/ / (c) Nonresident aliens who do not receive any earned income (as
defined in Code section 911(d)(2)) from the Employer which constitutes
United States source income (as defined in Code Section 861(a)(3)).
1.06 COMPENSATION.
DEFINITION OF COMPENSATION (SEE SECTION 1.06 OF THE PLAN). Compensation means:
(Choose (a) or (b); (c) and (d) are available only as additional selections)
/ / (a) Federal income tax wages.
/ / (b) W-2 wages
/ / (c) The Plan increases Compensation by the amount of elective
contributions made by the Employer on the Employee's behalf.
/ / (d) The Plan excludes reimbursements or other expense allowances,
fringe benefits (cash and noncash), moving expenses, deferred
compensation and welfare benefits.
1.09 EFFECTIVE DATE. The effective date of the Plan as adopted by the
Employer is __________________________. This Plan replaces a simplified
employee pension plan adopted___________________________________.
1.11 PLAN YEAR. Plan Year means: (Choose (a) or (b))
/ / (a) The calendar year.
/ / (b) The Employer's taxable year, ending every _______________________.
2.01 PARTICIPATION. For each Plan Year on account of which the
Employer makes a contribution under the Plan, the Employer will contribute on
behalf of each Employee who: (Choose (a) or (b) or both)
<PAGE> 11
/ / (a) Has attained age __________________ (may not exceed age 21), and
/ / (b) Has performed any service for the Employer.
/ / (1) During at least ______________________ (may not exceed 3) of
the 5 Plan Years immediately preceding the Plan Year.
/ / (2) During the Plan Year.
3.01 AMOUNT. The Employer will make its discretionary contribution
under the following formula: (Choose (a) or (b)).
/ / (a) Uniform contribution allocation formula.
/ / (b) Permitted disparity contribution formula. For purposes of this
formula, "Excess Compensation" means Compensation in excess of the
following Integration Level: ______% (not exceeding 100%) of the
taxable wage base, as determined under Section 230 of the Social
Security Act, in effect on the first day of the Plan Year rounded to
the next $______ (but not exceeding the taxable wage base).
7.01 SALARY REDUCTION CONTRIBUTIONS. The Plan: (Choose (a) or (b))
/ / (a) Does not permit Participant Salary Reduction Contributions.
/ / (b) Permits Participant Salary Reduction Contributions (If the
Employer elects (b), the Employer must complete Appendix A.)
IN WITNESS WHEREOF, the Employer has executed this Adoption Agreement,
in duplicate, each constituting an original Adoption Agreement, on this ______
day of ________________________, 199__.
By: __________________________________
"EMPLOYER"
The name or title of the individual the Employer has designated to provide
additional information to Participants concerning this SEP is
_______________________________________________________________________________
[Name or Title]
____________________________________ _______________________________
Street Address City State
____________________________________ _______________________________
Telephone Number Federal Employer Identification
Number
For inquiries regarding the SEP, please contact the Sponsor at the following
address and telephone number:__________________________________________________
_______________________________________________________________________________
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