<PAGE> 1
SEMIANNUAL REPORT
May 31,1998
THOMPSON PLUMB BALANCED FUND
THOMPSON PLUMB BOND FUND
THOMPSON PLUMB GROWTH FUND
8201 Excelsior Drive, Suite 200
Madison, Wisconsin 53717
Telephone: (608) 831-1300
(800) 999-0887
www.thompsonplumb.com
-------------------------------
<PAGE> 2
Thompson Plumb Funds, Inc.
--------------------------
July 15, 1998
SEMIANNUAL REPORT TO SHAREHOLDERS
Dear Fellow Shareholder:
We are proud to present you the following report depicting the investments and
returns of our family of mutual funds for the six month period ending May 31,
1998. Our funds again achieved strong performance results during the six month
period. The goals for each fund are as follows:
THOMPSON PLUMB BALANCED FUND
This 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 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 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.
We hope that you find the report clear and concise and that it provides you with
a sufficient amount of detailed information in order to be able to review your
investment. Please visit our web site (http://www.thompsonplumb.com) for updated
daily information or call with any comments or questions.
Sincerely,
John W. Thompson, CFA Thomas G. Plumb, CFA
Chairman & Secretary President & Treasurer
<PAGE> 3
THOMPSON PLUMB FUNDS, INC.
SEMIANNUAL REPORT TO SHAREHOLDERS
MAY 31, 1998
CONTENTS
Page(s)
REPORT TO SHAREHOLDERS ............................................... 1
OVERALL INVESTMENT REVIEW ............................................ 3
FINANCIAL STATEMENTS
Statements of assets and liabilities ............................ 4
Schedules of investments ........................................ 5-9
Statements of operations ........................................ 10
Statements of changes in net assets ............................. 11
Notes to financial statements ................................... 12-16
Financial highlights ............................................ 17-19
This semiannual report is authorized for distribution to prospective investors
only when preceded or accompanied by a Fund prospectus which contains facts
concerning the Funds' objectives and policies, management, expenses, and other
information.
2
<PAGE> 4
THOMPSON PLUMB FUNDS, INC.
SEMIANNUAL REPORT TO SHAREHOLDERS
JULY 15, 1998
OVERALL INVESTMENT REVIEW
Remarkably strong economic growth, coupled with surprisingly low inflation,
characterized the first six months of the fiscal year. Plentiful jobs and rising
wages put American households in a buying mood, and consumer spending spurred
fast growth in the U.S. economy. Despite a full employment level that usually
has been inflationary in the past, neither consumer nor wholesale prices have
accelerated. In fact, wholesale prices have declined during the past year and
consumer inflation has slowed. Stiff competitive pressure, including an
increasing flow of imported products and materials, appears to be keeping a lid
on prices in spite of the surging economy. Wage pressures are still likely to
increase somewhat, but labor costs should continue to be partly offset by
productivity improvements.
In this setting, stocks continued to do very well, with the big "blue chips"
again leading the market. Interest rates declined slightly, reflecting less
concern about inflation by fixed income investors. In the first six months of
their fiscal year, your Funds' total returns were 8.99 percent for the Balanced
Fund, 3.90 percent for the Bond Fund, and 11.68 percent for the Growth Fund.
These gains for the Balanced and Growth Funds are gratifying, coming on top of
above-average returns in the past several years. While returns for all bond
funds have lagged far behind stocks in recent years, inflation-adjusted returns
on bonds are still excellent on an absolute basis.
Looking ahead, economic troubles in Asia have resulted in lower prices for many
imported goods and are being blamed by some U.S. companies for earnings
disappointments. While Asia's problems haven't yet slowed our growth very much,
some slowing is likely and desirable, lest inflation finally starts to pick up.
We believe that the economy will slow to a sustainable pace, and that the
well-established, secular disinflation trend is intact. Interest rates should,
therefore, remain generally quite stable over the next several years.
Stocks of very large, "blue chip" companies have now led the bull market for
several years and generally sell at relatively high price-earnings multiples. In
contrast, many intermediate-to-smaller-size stocks sell at reasonable
valuations. For this reason, we are now finding attractive stocks mostly among
these smaller companies. Given our outlook for well-contained inflation,
reasonable interest rates and a prospering U.S. economy, we remain optimistic
over the long-term for stock and bond markets. By weathering the short-term
corrections in these markets, we believe we can continue to provide you with
very competitive investment returns in the years ahead.
3
<PAGE> 5
THOMPSON PLUMB FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
BALANCED FUND BOND FUND GROWTH FUND
<S> <C> <C> <C>
ASSETS
Investments, at market value (Cost $35,621,
$31,290, and $50,156, respectively)
Common stocks .................................... $31,396 - $ 64,255
Bonds ............................................ 12,304 $31,236 -
Short-term investments ........................... 162 858 58
------- ------- --------
43,862 32,094 64,313
Receivable from investment advisor.................. - 2 -
Prepaid expenses ................................... 18 13 23
Due from sale of securities ........................ 848 - 73
Dividends and interest receivable .................. 287 475 44
------- ------- --------
Total Assets ................................... 45,015 32,584 64,453
------- ------- --------
LIABILITIES
Due on purchase of securities ...................... 454 265 120
Accrued expenses payable ........................... 18 10 21
Due to investment advisor .......................... 39 23 63
------- ------- --------
Total Liabilities .............................. 511 298 204
------- ------- --------
NET ASSETS ............................................ $44,504 $32,286 $ 64,249
======= ======= ========
Net Assets consist of:
Capital stock ($.001 par value) .................... $34,164 $31,324 $ 47,723
Undistributed net investment income (loss) ......... 211 425 (15)
Net realized gain (loss) on investments ............ 1,888 (267) 2,384
Net unrealized appreciation on
investments ...................................... 8,241 804 14,157
------- ------- --------
Net Assets...................................... $44,504 $32,286 $64,249
======= ======= =======
Shares of capital stock outstanding
(100,000 shares authorized)....................... 2,510 3,027 1,602
Offering and redemption price/Net asset
value per share .................................. $17.73 $10.67 $40.11
====== ====== ======
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 6
THOMPSON PLUMB FUNDS, INC.
SCHEDULES OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
Shares or
Principal Market
Amount Value
------ -----
BALANCED FUND
COMMON STOCKS - 71.6%
BASIC MATERIALS - 2.9%
FiberMark (a) .................. 38,500 $ 745,937
Sigma-Aldrich .................. 15,000 547,500
---------
1,293,437
---------
CAPITAL GOODS - 8.0%
Advanced Lighting (a) .......... 27,500 690,938
Boeing ......................... 12,500 595,312
Emerson Electric ............... 5,000 303,750
General Electric ............... 10,000 833,750
Howmet International (a)........ 30,000 453,750
Xerox .......................... 6,000 616,500
---------
3,494,000
---------
CONSUMER PRODUCTS - 6.5%
Bestfoods ...................... 5,000 282,188
Discount Auto Parts (a) ........ 12,000 308,250
Kimberly-Clark ................. 6,000 297,375
Northland Cranberries - Class A. 25,000 395,312
PepsiCo ........................ 20,000 816,250
Philip Morris .................. 20,000 747,500
---------
2,846,875
---------
ENERGY - 3.3%
Chevron ........................ 6,500 519,188
Exxon .......................... 13,000 916,500
---------
1,435,688
---------
FINANCIAL SERVICES - 9.5%
Anchor Bancorp Wisconsin ....... 12,000 508,500
Associated Banc-Corp ........... 8,000 396,000
Banc One ....................... 13,200 727,650
CIT Group - Class A ............ 20,000 630,000
Fannie Mae ..................... 10,500 628,688
Hartford Life - Class A ........ 12,000 618,000
Household International ........ 5,000 676,562
---------
4,185,400
---------
HEALTH CARE - 13.4%
Abbott Laboratories ............ 6,000 $ 445,125
BioChem Pharma (a)............... 15,000 393,750
HEALTHSOUTH (a).................. 20,000 567,500
Johnson & Johnson .............. 10,000 690,625
Medtronic ...................... 10,000 556,250
Merck & Co. .................... 7,800 913,087
Sofamor Danek Group (a)......... 10,000 831,250
Sybron International (a) ....... 22,500 538,594
Thermo Electron (a) ............. 20,000 702,500
Young Innovations (a) .......... 15,000 236,250
---------
5,874,931
---------
RETAIL - 3.2%
AutoZone (a) ................... 10,000 332,500
Fastenal ....................... 10,000 495,000
Walgreen ....................... 16,000 563,000
---------
1,390,500
---------
SERVICES - 6.6%
BA Merchant Services - Class A (a) 35,000 632,188
CBS (a) ......................... 24,000 762,000
HA-LO Industries (a) ............ 10,000 309,375
Merrill ......................... 27,500 622,187
New York Times - Class A ........ 8,000 564,000
---------
2,889,750
---------
TECHNOLOGY - 13.9%
CheckFree Holdings (a) .......... 12,000 272,250
EMC (a) ......................... 21,000 870,188
Intel ........................... 8,000 571,500
Lattice Semiconductor (a) ....... 18,000 695,250
Linear Technology ............... 11,000 769,313
Maxim Integrated Products (a).... 20,000 667,500
Microchip Technology (a)......... 30,000 735,000
Synopsys (a) .................... 15,000 644,062
Zebra Technologies - Class A (a). 23,000 882,625
---------
6,107,688
---------
TELECOMMUNICATIONS - 4.3%
ADC Telecommunications (a) ...... 25,000 703,125
MCI Communications .............. 10,000 534,688
Northern Telecom Limited ........ 10,000 640,000
---------
1,877,813
---------
TOTAL COMMON STOCKS
(COST $23,404,252) ........... 31,396,082
----------
See Notes to Financial Statements.
5
<PAGE> 7
THOMPSON PLUMB FUNDS, INC.
SCHEDULES OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
Shares or
Principal Market
Amount Value
------ -----
BONDS - 28.0%
CORPORATE BONDS - 23.3%
Aetna Services
6.375% Due 08/15/03 .......... 1,000,000 $1,001,852
Aetna Services
7.125% Due 08/15/06 .......... 1,500,000 1,552,329
American Home Products
7.900% Due 02/15/05 .......... 2,000,000 2,195,850
General Electric Capital
8.750% Due 05/21/07 .......... 640,000 754,214
Johnson Controls
6.300% Due 02/01/08 .......... 2,000,000 2,020,878
Philip Morris
6.375% Due 02/01/06 .......... 1,000,000 991,738
Union Pacific
6.000% Due 09/01/03 .......... 685,000 668,718
Wisconsin Power & Light
7.000% Due 06/15/07 .......... 1,000,000 1,054,555
----------
Total Corporate Bonds .......... 10,240,134
----------
UNITED STATES GOVERNMENT
AND AGENCY ISSUES - 4.7%
United States Treasury Notes
6.500% Due 05/31/02 .......... 2,000,000 2,063,750
----------
Total United States Government
and Agency Issues ........... 2,063,750
----------
TOTAL BONDS
(COST $12,055,260) ........... 12,303,884
----------
SHORT-TERM INVESTMENTS - 0.4%
VARIABLE RATE DEMAND NOTES - 0.4%
Johnson Controls ............... 68,012$ 68,012
Pitney Bowes Credit ............ 94,067 94,067
----------
Total Variable Rate Demand
Notes ........................ 162,079
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $162,079) .............. 162,079
----------
TOTAL INVESTMENTS - 100.0%
(COST $35,621,591) ........... $43,862,045
===========
(a) Non-income producing
See Notes to Financial Statements.
6
<PAGE> 8
THOMPSON PLUMB FUNDS, INC.
SCHEDULES OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
Shares or
Principal Market
Amount Value
------ -----
BOND FUND
BONDS - 97.3%
Corporate Bonds - 91.9%
American Home Products
7.900% Due 02/15/05 .......... 1,000,000 $1,097,925
Anheuser-Busch
7.100% Due 06/15/07 .......... 1,000,000 1,045,792
AT & T
7.000% Due 05/15/05 .......... 1,000,000 1,049,735
Dayton Hudson
6.400% Due 02/15/03 .......... 1,000,000 1,008,475
Disney, Walt
6.750% Due 03/30/06 .......... 1,000,000 1,044,699
duPont, E. I. de Nemours
6.750% Due 09/01/07 .......... 1,000,000 1,044,815
General Electric Capital
8.750% Due 05/21/07 .......... 750,000 883,845
Hartford Life
6.900% Due 06/15/04 .......... 1,000,000 1,029,617
Hartford Life
7.100% Due 06/15/07 .......... 500,000 523,144
Hershey Foods
6.700% Due 10/01/05 .......... 1,000,000 1,038,000
Household Bank
6.870% Due 05/15/01 .......... 1,000,000 1,017,228
Johnson Controls
6.300% Due 02/01/08 .......... 1,198,000 1,210,506
Lucent Technologies
7.250% Due 07/15/06 .......... 1,000,000 1,075,798
Maytag
8.875% Due 07/15/99 .......... 500,000 515,504
Michigan Consolidated Gas
7.210% Due 05/01/07 .......... 500,000 532,437
Morgan, J. P.
6.700% Due 11/01/07 .......... 500,000 512,484
NationsBank
6.690% Due 04/03/02 .......... 1,000,000 1,022,737
Northern Trust
7.300% Due 09/15/06 .......... 1,000,000 1,063,727
Norwest Financial
6.250% Due 11/01/02 .......... 785,000 $ 791,486
Penney, J. C.
7.600% Due 04/01/07 .......... 1,000,000 1,079,677
Philip Morris
9.000% Due 01/01/01 .......... 1,000,000 1,062,481
Philip Morris
7.650% Due 07/01/08 .......... 500,000 533,498
Schwab, Charles
6.520% Due 05/27/08 ......... 1,000,000 1,010,460
Sears, Roebuck
6.700% Due 11/15/06 .......... 1,000,000 1,024,061
SmithKline Beecham
7.375% Due 04/15/05 .......... 950,000 1,023,663
Time Warner
7.950% Due 02/01/00 .......... 1,000,000 1,027,589
Travelers Property & Casualty
6.750% Due 04/15/01 .......... 1,000,000 1,019,646
Tribune
6.875% Due 11/01/06 .......... 1,000,000 1,042,346
Wal-Mart Stores
7.500% Due 05/15/04 .......... 1,000,000 1,073,581
Wells Fargo
7.125% Due 08/15/06 .......... 1,000,000 1,051,247
Wisconsin Power & Light
7.000% Due 06/15/07 .......... 1,000,000 1,054,555
----------
Total Corporate Bonds .......... 29,510,758
----------
UNITED STATES GOVERNMENT
AND AGENCY ISSUES - 5.4%
Federal Home Loan Banks
7.250% Due 10/30/02 .......... 1,000,000 1,010,265
United States Treasury Notes
6.750% Due 04/30/00 .......... 700,000 714,875
----------
Total United States Government
and Agency Issues ............ 1,725,140
----------
TOTAL BONDS
(COST $30,432,014) ........... 31,235,898
----------
See Notes to Financial Statements.
7
<PAGE> 9
THOMPSON PLUMB FUNDS, INC.
SCHEDULES OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
Shares or
Principal Market
Amount Value
------ -----
SHORT-TERM INVESTMENTS - 2.7%
VARIABLE RATE DEMAND NOTES - 2.7%
Johnson Controls ............... 480,672 $ 480,672
Pitney Bowes Credit ............ 377,205 377,205
-----------
Total Variable Rate Demand
Notes ........................ 857,877
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $857,877) .............. 857,877
-----------
TOTAL INVESTMENTS - 100.0%
(COST $31,289,891) ........... $32,093,775
===========
GROWTH FUND
COMMON STOCKS - 99.9%
BASIC MATERIALS - 2.6%
Sigma-Aldrich .................. 45,000 $ 1,642,500
-----------
CAPITAL GOODS - 8.4%
Advanced Lighting (a) .......... 45,000 1,130,625
Boeing ......................... 10,000 476,250
Emerson Electric ............... 15,000 911,250
Howmet International (a) ....... 70,000 1,058,750
Minnesota Mining & Manufacturing 20,000 1,852,500
-----------
5,429,375
-----------
CONSUMER PRODUCTS - 10.5%
Kimberly-Clark ................. 40,000 1,982,500
Northland Cranberries - Class A. 50,000 790,625
PepsiCo ........................ 50,000 2,040,625
Philip Morris .................. 52,000 1,943,500
-----------
6,757,250
-----------
ENERGY - 3.4%
Chevron ........................ 14,000 1,118,250
Exxon .......................... 15,000 1,057,500
-----------
2,175,750
-----------
FINANCIAL SERVICES - 17.7%
Associated Banc-Corp ........... 18,000 891,000
Associates First Capital - Class A 21,000 1,571,063
CIT Group - Class A ............ 50,000 1,575,000
Fannie Mae ..................... 27,000 1,616,625
Hartford Life - Class A ........ 30,000 1,545,000
Household International ........ 8,000 1,082,500
MGIC Investment ................ 10,000 599,375
Morgan, J. P. ................. 5,000 620,937
NationsBank .................... 25,000 1,893,750
-----------
11,395,250
-----------
See Notes to Financial Statements.
8
<PAGE> 10
THOMPSON PLUMB FUNDS, INC.
SCHEDULES OF INVESTMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
Shares or
Principal Market
Amount Value
------ -----
COMMON STOCKS - 99.9% (Continued)
HEALTH CARE - 20.6%
Abbott Laboratories ............ 12,000 $ 890,250
BioChem Pharma (a) ............. 20,000 525,000
DENTSPLY International ......... 50,000 1,687,500
Johnson & Johnson .............. 24,000 1,657,500
Medtronic ...................... 10,000 556,250
Merck & Co. ................... 18,000 2,107,125
Schein, Henry (a) .............. 20,000 770,000
Sofamor Danek Group (a) ........ 23,000 1,911,875
Sybron International (a) ....... 45,000 1,077,188
Thermo Electron (a) ............ 40,000 1,405,000
Young Innovations (a) .......... 40,000 630,000
----------
13,217,688
----------
RETAIL - 7.1%
Albertson's .................... 18,000 833,625
AutoZone (a) ................... 53,000 1,762,250
Fastenal ....................... 30,000 1,485,000
Walgreen ....................... 14,000 492,625
----------
4,573,500
----------
SERVICES - 8.0%
BA Merchant Services - Class A
(a)........................... 72,000 1,300,500
BISYS Group (a) ................ 18,000 668,250
CBS (a) ........................ 44,000 1,397,000
Merrill ........................ 33,000 746,625
New York Times - Class A ....... 15,000 1,057,500
----------
5,169,875
----------
TECHNOLOGY - 21.6%
EMC (a) ........................ 58,000$ 2,403,375
Intel .......................... 16,000 1,143,000
Lattice Semiconductor (a) ...... 34,000 1,313,250
Linear Technology .............. 28,000 1,958,250
Maxim Integrated Products (a) .. 30,000 1,001,250
Microchip Technology (a) ....... 33,000 808,500
Parametric Technology (a) ...... 38,000 1,164,939
Sterling Commerce (a) .......... 24,000 952,500
Synopsys (a) ................... 34,000 1,459,875
Zebra Technologies - Class A
(a) .......................... 44,000 1,688,500
----------
13,893,439
----------
TOTAL COMMON STOCKS
(COST $50,097,629) ........... 64,254,627
-----------
SHORT-TERM INVESTMENTS - 0.1%
VARIABLE RATE DEMAND NOTES - 0.1%
Johnson Controls ............... 58,102 58,102
----------
Total Variable Rate Demand
Notes ........................ 58,102
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $58,102) ............... 58,102
----------
TOTAL INVESTMENTS - 100.0%
(COST $50,155,731) ........... $64,312,729
===========
(a) Non-income producing
See Notes to Financial Statements.
9
<PAGE> 11
THOMPSON PLUMB FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED MAY 31, 1998
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
BALANCED FUND BOND FUND GROWTH FUND
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................... $ 115 - $ 366
Interest ....................................... 365 $ 994 17
----- ------ ------
480 994 383
----- ------ ------
EXPENSES
Accounting services fees ....................... 37 30 46
Directors fees ................................. 5 4 6
Federal & state registration ................... 13 13 14
Investment advisory fees ....................... 172 100 276
Professional fees .............................. 14 12 18
Shareholder servicing costs .................... 13 2 20
Other expenses ................................. 15 7 18
----- ----- ------
Total expenses................................ 269 168 398
Less expenses reimbursable by advisor......... - 2 -
----- ----- ------
Net expenses....................................... 269 166 398
----- ----- ------
NET INVESTMENT INCOME (LOSS) ...................... 211 828 (15)
----- ----- ------
Net realized gain on investments .................. 1,888 114 2,393
Net unrealized appreciation on investments ........ 1,227 279 3,281
----- ----- ------
NET GAIN ON INVESTMENTS ........................... 3,115 393 5,674
----- ----- ------
Net increase in net assets resulting from
operations ..................................... $ 3,326 $ 1,221 $ 5,659
======= ======= =======
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 12
THOMPSON PLUMB FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTH PERIOD ENDED MAY 31,
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
BALANCED FUND BOND FUND GROWTH FUND
------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss) ................ $ 211 $ 133 $ 828 $ 694 $ (15) $ (33)
Net realized gain (loss) on investments ..... 1,888 1,312 114 (220) 2,393 1,288
Net unrealized appreciation
(depreciation) on investments ........... 1,227 581 279 (659) 3,281 1,920
----- ----- ----- ----- ----- -----
Net increase (decrease) in net assets resulting
from operations ......................... 3,326 2,026 1,221 (185) 5,659 3,175
----- ----- ----- ----- ----- -----
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income .... (261) (294) (819) (576) - -
Distributions from net realized gains on
securities transactions ................... (3,478) (1,724) - - (3,968) (1,838)
------ ------ ------ ------ ------ ------
Total distributions to shareholders ........... (3,739) (2,018) (819) (576) (3,968) (1,838)
------ ------ ------ ------ ------ ------
FUND SHARE TRANSACTIONS........................... 8,580 9,878 (253) 7,073 17,182 7,828
----- ----- ---- ----- ------ -----
TOTAL INCREASE IN NET ASSETS ..................... 8,167 9,886 149 6,312 18,873 9,165
NET ASSETS
Beginning of period ........................... 36,337 20,769 32,137 22,153 45,376 24,077
------ ------ ------ ------ ------ ------
End of period ................................ $44,504 $30,655 $32,286 $28,465 $64,249 $33,242
======= ======= ======= ======= ======= =======
Accumulated undistributed net investment
income (loss) included in net assets at end
of period.................................... $211 $ 45 $ 425 $ 395 $ (15) $ (33)
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 13
THOMPSON PLUMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
NOTE 1 - ORGANIZATION
Thompson Plumb Funds, Inc. (the "Company") is a Wisconsin corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, diversified management investment company.
The Company is a series of separate mutual funds: Thompson Plumb Balanced Fund
(the "Balanced Fund"), Thompson Plumb Bond Fund (the "Bond Fund"), and Thompson
Plumb Growth Fund (the "Growth Fund"), collectively the "Funds." The assets and
liabilities of each Fund are segregated and a shareholder's interest is limited
to the Fund in which the shareholder owns shares.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements.
SECURITY VALUATION - Portfolio securities which are traded on an exchange or in
the over-the-counter market are valued at the last sale price reported by the
exchange on which the securities are primarily traded 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. 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 market value as determined in good faith by the Advisor
(Thompson, Plumb & Associates, Inc.) pursuant to procedures established under
the general supervision and responsibility of the Board of Directors of Thompson
Plumb Funds, Inc.
REALIZED GAINS AND LOSSES ON SECURITIES - Gains or losses realized on sales of
securities are determined by comparing the identified cost of the security lot
sold with the net sales proceeds.
VARIABLE-RATE DEMAND NOTES - The Funds invest in short-term, variable-rate
demand notes, which are unsecured instruments. The Funds may be susceptible to
credit risk with respect to these instruments to the extent the issuer defaults
on its payment obligation. Each Fund's policy is to not purchase variable-rate
demand notes unless at the time of purchase the issuer has unsecured debt
securities outstanding that have received a rating within the two highest
categories from either Standard & Poor's (that is, A-1, A-2 or AAA,AA) or
Moody's Investors Service, Inc. (that is, Prime-1, Prime-2 or Aaa, Aa).
Accordingly, the Funds do not anticipate nonperformance of these obligations by
the issuers.
12
<PAGE> 14
THOMPSON PLUMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
PERMANENT BOOK AND TAX DIFFERENCES - Generally accepted accounting
principles require that permanent financial reporting and tax differences
relating to shareholder distributions be reclassified to paid-in capital.
OTHER - Investment securities transactions are accounted for on the trade date.
Discounts and premiums on securities purchased are amortized over the life of
the respective securities on the same basis for book and tax purposes. Dividend
income is recorded on the ex-dividend date. Interest income is recorded as
earned. Each Fund is charged for those expenses that are directly attributed to
it, such as advisory, custodial, accounting services and certain shareholder
servicing fees, while other expenses that cannot be directly attributable to a
Fund are allocated among the Funds in proportion to the net assets of the
respective Fund.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
NOTE 3 - INVESTMENT ADVISORY & ACCOUNTING SERVICES AGREEMENTS AND OTHER
TRANSACTIONS WITH AFFILIATES
The Company has entered into an Advisory Agreement with Thompson, Plumb &
Associates, Inc. (the "Advisor") for management of each Fund's portfolio and for
the administration of other Fund affairs. As compensation for its services, the
Advisor receives a fee computed daily and payable monthly as follows: (i) for
the Balanced Fund, .85 of 1% of average daily net assets up to $50 million and
.80 of 1% of average daily net assets in excess of $50 million; (ii) for the
Bond Fund, .65 of 1% of average daily net assets up to $50 million and .60 of 1%
of average daily net assets in excess of $50 million; (iii) for the Growth Fund,
1.00% of average daily net assets up to $50 million and .90 of 1% of average
daily net assets in excess of $50 million.
Pursuant to an Accounting Services Agreement, the Advisor maintains the Funds'
financial records in accordance with the 1940 Act, prepares all necessary
financial statements of the Funds, and calculates the net asset value per share
of the Funds on a daily basis. As compensation for its services, each Fund pays
the Advisor a fee computed daily and payable monthly at the annual rate of .20
of 1% of net assets up to $30 million and .125 of 1% of net assets in excess of
$30 million, with a minimum fee of $30,000 per year.
13
<PAGE> 15
THOMPSON PLUMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
NOTE 4 - FUND SHARE TRANSACTIONS
Transactions in shares of the Funds during the six months ended May 31, 1998 and
1997 were as follows: (In thousands)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED FUND
Shares sold 378 $ 6,678 732 $ 11,367
Shares issued in reinvestment of dividends 16 252 19 283
Shares issued in reinvestment of realized gains 215 3,401 112 1,660
Shares redeemed (100) (1,751) (224) (3,432)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 509 $ 8,580 639 $ 9,878
===========================================================================================================================
BOND FUND
Shares sold 328 $ 3,478 1,010 $10,414
Shares issued in reinvestment of dividends 75 787 53 541
Shares redeemed (426) (4,518) (380) (3,882)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (23) $ (253) 683 $ 7,073
===========================================================================================================================
GROWTH FUND
Shares sold 383 $15,069 295 $ 9,177
Shares issued in reinvestment of realized gains 111 3,900 54 1,629
Shares redeemed (45) (1,787) (94) (2,978)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 449 $17,182 255 $ 7,828
===========================================================================================================================
</TABLE>
14
<PAGE> 16
THOMPSON PLUMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income and realized gains on
securities for the Balanced Fund and the Growth Fund normally will be declared
on an annual basis within 30 days and paid within 60 days following the Funds'
fiscal year-end. Bond Fund distributions to shareholders from net investment
income normally will be declared on a quarterly basis within 30 days and paid
within 60 days following the Fund's fiscal quarter, and distributions to
shareholders from realized gains on securities normally will be declared on an
annual basis within 30 days and paid within 60 days following the Fund's fiscal
year-end. Distributions are recorded on the ex-dividend date.
For the period ended February 28, 1998, a distribution from net investment
income for the Bond Fund was declared March 24, 1998 payable to shareholders on
March 25, 1998. For the period ended November 30, 1997, a capital gains
distribution for the Balanced Fund and the Growth Fund and a distribution from
net investment income for the Balanced Fund and the Bond Fund were declared
December 24, 1997 payable to shareholders on December 26, 1997.
<TABLE>
<CAPTION>
BALANCED FUND BOND FUND GROWTH FUND
--------------------- --------------------- ---------------------
Total Per Total Per Total Per
Distribution Share Distribution Share Distribution Share
------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Distributions to Shareholders
1998 Net investment income - - $259,231 $0.09 - -
1997 Net investment income $ 261,244 $0.13 $559,725 $0.18 - -
1997 Long-term capital gains $2,451,413 $1.21 - - $1,663,017 $1.41
1997 Short-term capital gains $1,026,307 $0.50 - - $2,305,446 $1.95
</TABLE>
15
<PAGE> 17
THOMPSON PLUMB FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
(Continued)
NOTE 6 - PURCHASE AND SALE OF SECURITIES
Investment transactions for the six months ended May 31, 1998 were as follows:
BALANCED FUND BOND FUND GROWTH FUND
U. S. GOVERNMENT SECURITIES
Purchases $ 1,028,516 $1,023,594 -
Sales $ 1,039,688 $4,388,969 -
SECURITIES OTHER THAN
U. S. GOVERNMENT AND
SHORT-TERM INVESTMENTS
Purchases $16,128,559 $5,836,676 $29,106,975
Sales $10,903,411 $2,694,770 $14,101,957
NOTE 7 - FEDERAL INCOME TAXES
No provision has been made for Federal income taxes since the Funds have elected
to be taxed as regulated investment companies and intend to distribute
substantially all income to shareholders and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. The Bond Fund has $177,789 of net capital losses which expire
November 30, 2002 and $200,225 of net capital losses which expire November 30,
2005 that may be used to offset capital gains in future years to the extent
provided by tax regulations.
The Bond Fund incurred $3,031 of post-October capital losses, during 1997, which
may be used to offset capital gains in future years to the extent provided by
tax regulations.
For Federal income tax purposes at May 31, 1998:
<TABLE>
<CAPTION>
Aggregate Aggregate
unrealized unrealized Net unrealized
Aggregate cost appreciation depreciation appreciation
of investments for investments for investments for investments
in securities held held held
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced Fund $35,621,691 $ 8,754,165 $ (513,811) $ 8,240,354
Bond Fund $31,289,891 $ 813,618 $ (9,734) $ 803,884
Growth Fund $50,164,777 $14,406,169 $ (258,217) $ 14,147,952
</TABLE>
16
<PAGE> 18
THOMPSON PLUMB FUNDS, INC.
FINANCIAL HIGHLIGHTS
The following table presents information relating to a share of capital stock
outstanding for the entire period.
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------------------
1998(a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
BALANCED FUND
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.16 $16.54 $14.23 $13.55 $14.17 $14.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.18 0.19 0.24 0.27 0.28
Net realized and unrealized gains
on investments 1.32 3.01 3.21 2.26 0.04 0.15
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 1.41 3.19 3.40 2.50 0.31 0.43
LESS DISTRIBUTIONS
Distributions from net investment income (0.13) (0.23) (0.23) (0.28) (0.27) (0.28)
Distributions from capital gains (1.71) (1.34) (0.86) (1.54) (0.66) (0.55)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.84) (1.57) (1.09) (1.82) (0.93) (0.83)
NET ASSET VALUE, END OF PERIOD $17.73 $18.16 $16.54 $14.23 $13.55 $14.17
====== ====== ====== ====== ====== ======
TOTAL RETURN 8.99% (b) 21.39% 25.80% 21.02% 2.15% 3.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) $44.5 $36.3 $20.8 $18.1 $17.2 $21.5
Ratios to average net assets:
Ratio of expenses 1.32% (c) 1.40% 1.45% 1.49% 1.42% 1.40%
Ratio of net investment income 1.04% (c) 1.04% 1.32% 1.71% 1.84% 1.89%
Portfolio turnover rate 30.04% (b) 76.66% 134.82% 111.16% 110.01% 91.77%
Average commission rate paid (d) $0.0642 $0.0693 $0.0745 - - -
</TABLE>
(a) For the six month period ended May 31, 1998 (Unaudited).
(b) Calculated on a non-annualized basis.
(c) Calculated on an annualized basis.
(d) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
See Notes to Financial Statements.
17
<PAGE> 19
THOMPSON PLUMB FUNDS, INC.
FINANCIAL HIGHLIGHTS
(Continued)
The following table presents information relating to a share of capital stock
outstanding for the entire period.
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------
1998(a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.54 $10.59 $10.67 $ 9.88 $10.78 $10.33
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.54 0.52 0.57 0.48 0.45
Net realized and unrealized gains (losses)
on investments 0.13 (0.06) (0.07) 0.78 (0.78) 0.44
---- ----- ----- ---- ----- ----
TOTAL FROM INVESTMENT OPERATIONS 0.40 0.48 0.45 1.35 (0.30) 0.89
LESS DISTRIBUTIONS
Distributions from net investment income (0.27) (0.53) (0.53) (0.56) (0.47) (0.42)
Distributions from capital gains - - - - (0.13) (0.02)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.27) (0.53) (0.53) (0.56) (0.60) (0.44)
NET ASSET VALUE, END OF PERIOD $10.67 $10.54 $10.59 $10.67 $ 9.88 $10.78
====== ====== ====== ====== ======= ======
TOTAL RETURN 3.90% (b) 4.74% 4.51% 14.06% (2.96%) 8.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) $32.3 $32.1 $22.2 $14.9 $10.2 $6.2
Ratios to average net assets:
Ratio of expenses 1.08%(c) 1.14% 1.13% 1.13% 1.00% 1.00%
Ratio of expenses without
reimbursement 1.10%(c) - - 1.34% 1.48% 1.76%
Ratio of net investment income 5.32%(c) 5.42% 5.48% 5.70% 4.83% 4.44%
Ratio of net investment income
without reimbursement 5.30%(c) - - 5.49% 4.34% 3.68%
Portfolio turnover rate 20.27%(b) 52.61% 104.43% 111.95% 165.74% 111.18%
</TABLE>
(a) For the six month period ended May 31, 1998 (Unaudited).
(b) Calculated on a non-annualized basis.
(c) Calculated on an annualized basis.
See Notes to Financial Statements.
18
<PAGE> 20
THOMPSON PLUMB FUNDS, INC.
FINANCIAL HIGHLIGHTS
(Continued)
The following table presents information relating to a share of capital stock
outstanding for the entire period.
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------------
1998(a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $39.36 $32.79 $24.74 $20.43 $20.47 $20.37
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.01) (0.12) (0.06) (0.05) (0.20) (0.12)
Net realized and unrealized gains
on investments 4.12 9.16 8.66 6.22 0.16 0.22
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 4.11 9.04 8.60 6.17 (0.04) 0.10
LESS DISTRIBUTIONS
Distributions from net investment income - - - - - -
Distributions from capital gains (3.36) (2.47) (0.55) (1.86) - -
----- ----- ----- ----- ----- ------
TOTAL DISTRIBUTIONS (3.36) (2.47) (0.55) (1.86) - -
NET ASSET VALUE, END OF PERIOD $40.11 $39.36 $32.79 $24.74 $20.43 $20.47
====== ====== ====== ====== ====== ======
TOTAL RETURN 11.68% (b) 29.90% 35.52% 32.87% (0.19%) 0.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) $64.2 $45.4 $24.1 $12.6 $4.7 $7.1
Ratios to average net assets:
Ratio of expenses 1.42% (c) 1.52% 1.58% 2.00% 2.00% 1.93%
Ratio of expenses without
reimbursement - - - - 2.31% -
Ratio of net investment income (0.06%) (c) (0.41%) (0.27%) (0.31%) (0.49%) (0.54%)
Ratio of net investment income
without reimbursement - - - - (0.80%) -
Portfolio turnover rate 25.35% (b) 77.66% 101.91% 86.68% 116.69% 98.93%
Average commission rate paid (d) $0.0648 $0.0734 $0.0858 - - -
</TABLE>
(a) For the six month period ended May 31, 1998 (Unaudited).
(b) Calculated on a non-annualized basis.
(c) Calculated on an annualized basis.
(d) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
See Notes to Financial Statements.
19
<PAGE> 21
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
David B. Duchow
Assistant Vice President
John C. Thompson, CFA
Assistant Vice President
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
P. 0. Box 701
Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
33 South Sixth Street
Minneapolis, Minnesota 55402
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
