<PAGE> 1
As filed with the Securities and Exchange Commission on January 22, 1999.
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. 14 [X]
----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 16 [X]
----
(Check Appropriate box or boxes)
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THOMPSON PLUMB FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1200 JOHN Q. HAMMONS DRIVE
FIFTH FLOOR
MADISON, WISCONSIN 53717
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (608) 831-1300
THOMAS G. PLUMB
1200 JOHN Q. HAMMONS DRIVE
FIFTH FLOOR
MADISON, WISCONSIN 53717
(Name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on March 31, 1999 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 $0.001, under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. The Registrant will file a Rule 24f-2 Notice
for the fiscal year ended November 30, 1998, on or about January 31, 1999.
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THOMPSON PLUMB FUNDS, INC.
1200 JOHN Q. HAMMONS DRIVE
MADISON, WISCONSIN 53717
TELEPHONE: (608) 831-1300
(800) 999-0887
PROSPECTUS
MARCH 31, 1999
THOMPSON PLUMB FUNDS, INC. offers the following no-load mutual funds:
- Thompson Plumb Growth Fund
- Thompson Plumb Balanced Fund
- Thompson Plumb Bond Fund
All of the funds are managed by Thompson, Plumb & Associates, Inc.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
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<PAGE> 3
TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY........................................................... 3
Growth Fund.......................................................... 3
Balanced Fund ....................................................... 5
Bond Fund............................................................ 7
INVESTMENT OBJECTIVES, POLICIES AND RISKS.................................... 11
Growth Fund......................................................... 11
Balanced Fund....................................................... 12
Bond Fund........................................................... 13
Risks............................................................... 14
MANAGEMENT................................................................... 16
Investment Advisor.................................................. 16
Portfolio Managers.................................................. 16
HOW TO BUY SHARES............................................................ 17
General............................................................. 17
Purchase Procedures................................................. 17
Exchange of Fund Shares............................................. 20
Availability of Money Market Fund................................... 21
HOW TO SELL SHARES........................................................... 21
General............................................................. 21
Redemption Procedures............................................... 22
Receiving Redemption Proceeds....................................... 23
Other Redemption Information........................................ 24
OTHER INFORMATION............................................................ 25
Determination of Net Asset Value.................................... 25
Dividends and Distributions......................................... 25
Taxes............................................................... 26
Retirement Plans.................................................... 26
Year 2000 Compliance................................................ 27
FINANCIAL HIGHLIGHTS......................................................... 28
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RISK/RETURN SUMMARY
THOMPSON PLUMB GROWTH FUND
Investment Objective/Goals. 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 its primary objective, the Growth Fund
anticipates that capital growth is accompanied by growth through dividend
income. The term "reasonable risk" refers to our 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 market and general economic
conditions, trends in dividend yields and interest rates, and fiscal and
monetary policies.
We invest in common stocks that possess most of the following
characteristics:
- Leading market positions
- High barriers to entry and other competitive or
technological advantages
- High returns on equity and assets oGood growth prospects
- Strong management
- Relatively low debt burdens
To achieve a better risk-adjusted return on its equity investments, the
Growth Fund invests in many types of stocks, including large company stocks,
small company stocks, growth stocks and value stocks. We believe that holding a
diverse group of stocks will provide competitive returns under different market
environments, as opposed to more narrow investment styles. Our flexible approach
to equity investing enables us to adapt to changing market trends and conditions
and to invest wherever we believe opportunity exists.
The Growth Fund is suitable if you are looking for capital appreciation
by investing in a diverse group of stocks, and have a long-term perspective.
Risks. An investment in the Growth Fund is subject to risks, including
the possibility that its share price and total return may decline as a result of
a decline in the value of its portfolio of common stocks. The common stocks in
which the Growth Fund invests fluctuate in value due to changes in the
securities markets, general economic conditions and factors that particularly
affect the issuers of these stocks and their industries. In addition, we may buy
common stocks of companies with small market capitalizations which involve more
risk than investments in larger companies because their shares may be subject to
greater price fluctuation, and may have less market liquidity.
3
<PAGE> 5
Past Performance. The tables below show the performance of the Growth
Fund since its inception. The first table shows the Fund's total returns have
varied from year to year. The second table shows how the Fund's average annual
total returns compare to a broader measure of market performance. As with all
mutual funds, past performance is not an indication of the future.
GROWTH FUND
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
1992(1) 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.40% 1.60% 0.43% 30.49% 33.05% 32.37% 18.41%
</TABLE>
(1) From its inception date of February 10, 1992 through December 31, 1992.
Not annualized.
The Fund's highest/lowest quarterly results during this period were:
Highest: 25.00% (quarter ended 12/31/98)
Lowest: -14.72% (quarter ended 9/30/98)
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GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
(THROUGH DECEMBER 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Year Since Inception (2/10/92)
------ ------ -------------------------
<S> <C> <C> <C>
Growth Fund 18.41% 22.27% 16.53%
S&P 500 Index(1) 28.58% 24.09% 19.91%
- ------------------------
</TABLE>
(1) The S&P 500 Index is an unmanaged index of 500 U.S. stocks chosen for
market size, liquidity and industry group representation and is a
widely used benchmark of U.S. equity performance.
THOMPSON PLUMB BALANCED FUND
Investment Objective/Goal. The Balanced Fund seeks 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.
We select securities that, in our judgment, will result in the highest
total return consistent with preservation of principal, and we vary the mix of
common stocks and bonds from time to time. A major portion of the Balanced
Fund's assets are normally invested in common stocks. We invest in common stocks
for the Balanced Fund using the same criteria and flexible investment approach
as the Growth Fund.
We also invest a significant portion of the Balanced Fund's assets in
fixed income securities, all of which are investment grade. The fixed income
securities in which the Fund may invest include corporate notes, bonds and
debentures, short-term debt instruments, debt securities issued or guaranteed by
the U.S. Government (including its agencies and instrumentalities), convertible
debt securities and preferred stock that is convertible into common stock. In
establishing what we think is the appropriate mix of equity and fixed income
investments for the Balanced Fund, we assess general economic conditions,
anticipated future changes in interest rates and the outlook for common stocks
generally.
The Balanced Fund is suitable if you are looking for a mix of stocks
and bonds and have a long-term perspective.
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Risks. An investment in the Balanced Fund is subject to risks,
including the possibility that its share price and total return may decline
because of a decline in the value of its portfolio of common stocks and fixed
income securities. The common stocks in which the Balanced Fund invests
fluctuate in value due to changes in the securities markets, general economic
conditions and factors that particularly affect the issuers of these stocks and
their industries. In addition, we may buy common stocks of companies with small
market capitalizations which involve more risk than investments in larger
companies because their shares may be subject to greater price fluctuation, and
may have less market liquidity.
The value of the fixed income securities held by the Balanced Fund is
affected primarily by changes in interest rates, average maturities and the
investment and credit quality of the securities. Bond prices generally move in
the opposite direction of interest rate levels, and movements in interest rates
typically have a greater effect on the prices of long-term bonds than those of
shorter maturities.
Past Performance. The tables below show the performance of the
Balanced Fund over the last 10 calendar years. The first table shows the Fund's
total returns have varied from year to year. The second table shows how the
Fund's average annual total returns compare to broader measures of market
performance. As with all mutual funds, past performance is not an indication of
the future.
BALANCED FUND
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19.97% 3.10% 27.01% 2.26% 4.45% 1.47% 20.03% 23.09% 22.54% 16.84%
</TABLE>
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The Fund's highest/lowest quarterly results during this 10-year period
were:
Highest: 19.41% (quarter ended 12/31/98)
Lowest: -11.15% (quarter ended 9/30/98)
BALANCED FUND
AVERAGE ANNUAL TOTAL RETURN
(THROUGH DECEMBER 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Year 10 Year
------ ------ -------
<S> <C> <C> <C>
Balanced Fund 16.84% 16.51% 13.67%
S&P 500 Index (1) 28.58% 24.09% 19.22%
Lehman Brothers Govt./Corp. 8.44% 6.60% 8.52%
Intermediate Bond Index(2)
</TABLE>
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(1) The S&P 500 Index is an unmanaged index of 500 U.S. stocks chosen for
market size, liquidity and industry group representation, and is a
widely used benchmark of U.S. equity performance.
(2) The Lehman Brothers Government/Corporate Intermediate Bond
Index is an index of all investment grade bonds with
maturities of more than one year and less than 10 years.
THOMPSON PLUMB BOND FUND
Investment Objective/Goal. The Bond Fund seeks a high level of current
income while preserving capital. The Bond Fund invests primarily in a
diversified portfolio of investment-grade debt securities.
We normally invest at least 65% of the Bond Fund's total assets in
corporate debt securities and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. The dollar-weighted average
portfolio maturity of the Bond Fund will normally not exceed 10 years. We do not
purchase securities with a view to rapid turnover. The fixed income securities
in which the Bond Fund may invest include corporate notes, bonds and debentures,
short-term debt instruments and debt securities issued or guaranteed by the U.S.
Government (including its agencies and instrumentalities).
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<PAGE> 9
The Bond Fund is suitable if you are looking for current income
through investment-grade debt securities.
Risks. The share price, total return and yield of the Bond Fund will
fluctuate depending on changes in the market value and yields of the fixed
income securities in the Fund's portfolio. The value of fixed income securities
is affected primarily by changes in interest rates, average maturities and the
investment and credit quality of the securities. A bond's market value increases
or decreases in order to adjust its yield to current interest rate levels. A
bond's yield reflects the bond's fixed annual interest as a percentage of its
current price. Therefore, bond prices generally move in the opposite direction
of interest rates and movements in interest rates typically have a greater
effect on prices of longer term bonds than on those with shorter maturities.
Changes in prevailing interest rates will also affect the yield on Bond Fund
shares. Interest rate fluctuations, however, will not affect the income received
by the Bond Fund from its existing portfolio of fixed income securities (other
than from variable rate securities).
Past Performance. The tables below show the performance of the Bond
Fund since its inception. The first table shows how the Fund's total returns
have varied from year to year. The second table shows how the Fund's average
annual total returns compare to a broader measure of market performance. As with
all mutual funds, past performance is not an indication of the future.
BOND FUND
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
1992(1) 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
5.77% 8.18% -2.67% 14.47% 1.83% 7.42% 8.71%
</TABLE>
(1) From its inception date of February 10, 1992 through December 31, 1992. Not
annualized.
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<PAGE> 10
The Fund's highest/lowest quarterly results during this period were:
Highest: 5.13% (quarter ended 9/30/98)
Lowest: -2.47% (quarter ended 3/31/94)
BOND FUND
AVERAGE ANNUAL TOTAL RETURN
(THROUGH DECEMBER 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Year Since Inception (2/10/92)
------ ------ -------------------------
<S> <C> <C> <C>
Bond Fund 8.71% 5.79% 6.22%
Lehman Brothers Govt./Corp. 8.44% 6.60% 7.16%
Intermediate Bond Index(1)
- ----------------------------
</TABLE>
(1) The Lehman Brothers Government/Corporate Intermediate Bond Index is an
index of all investment grade bonds with maturities of more than one
year and less than 10 years.
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FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if
you buy and hold shares of the Funds:
<TABLE>
<CAPTION>
Growth Balanced Bond
Fund Fund Fund
---- ---- ----
SHAREHOLDER FEES (FEES PAID DIRECTLY
FROM YOUR INVESTMENT)
<S> <C> <C> <C>
Maximum Sales Charge Imposed on None None None
Purchases
Redemption and Exchange Fees(1) None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.99% .85% .65%
Distribution (12b-1) Fees None None None
Other Expenses 0.42% 0.45% 0.43%
Total Annual Fund Operating Expenses 1.41% 1.30% 1.08%
Fee Waiver and/or Expense
Reimbursement (2) (0.11)% (0.05)% (0.13)%
------- ------- -------
Net Expenses 1.30% 1.25% 0.95%
- ------------------------
</TABLE>
(1) You will be charged a $12 fee for the return of redemption proceeds
requested by wire transfer.
(2) The Advisor has agreed to waive management fees and/or reimburse expenses
incurred by the Funds through March 31, 2000 so that the operating expenses
of the funds do not exceed the following percentages of their respective
average daily net assets: Growth Fund - 1.30%; Balanced Fund - 1.25% and
Bond Fund - 0.95%.
Example:
This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in each Fund for the time periods indicated and then
redeem (or sell) all of your shares at the end of those time periods. The
example also assumes that your investment has a 5% return each year and that
each Fund's operating expenses remain the same. The assumed return does not
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<PAGE> 12
represent actual or future performance and your actual costs may be higher or
lower. However, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Growth Fund $132 $435 $761 $1,681
Balanced Fund $127 $407 $708 $1,563
Bond Fund $97 $322 $565 $1,263
</TABLE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Growth Fund
Objective and Principal Strategies. 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 our 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. We generally seek to identify investment
opportunities in equity securities of companies which we believe have
above-average potential for earnings and dividend growth.
We invest in common stocks that possess most of the following
characteristics:
- Leading market positions
- High barriers to entry and other competitive or
technological advantages
- High returns on equity and assets
- Good growth prospects
- Strong management
- Relatively low debt burdens
To achieve a better risk-adjusted return on its equity investments, the
Growth Fund invests in many types of stocks, including large company stocks,
small company stocks, growth stocks and value stocks. We believe that holding a
diverse group of stocks will provide competitive returns under different market
conditions and trends, as opposed to more narrow investment styles. Our flexible
approach to equity investing enables us to adapt to changing market trends and
conditions and to invest wherever we believe opportunity exists.
11
<PAGE> 13
Any assets not invested in common stocks and securities convertible
into common stocks will be invested in income producing short-term debt
instruments as a reserve for future purchases of securities. The Growth Fund may
also invest in convertible preferred and convertible fixed income securities. We
intend generally to limit the Growth Fund's purchase of these securities to
those which are rated in one of the four highest rating categories by Standard &
Poor's Ratings Services (S&P) or Moody's Investors Service, Inc. (Moody's).
Risks. The share price and total return of the Growth Fund will
increase or decrease depending on changes in the value of the common stocks on
its portfolio. See "Risks" below.
Balanced Fund
Objective and Principal Strategies. The Balanced Fund seeks a
combination of income and capital appreciation which will result in highest
total return, while assuming reasonable risk. The Fund invests in both common
stocks and fixed income securities. We vary the mix of stocks and bonds from
time to time, depending on our assessment of economic conditions and investment
opportunities. A major portion of the Balanced Fund's assets will normally be
invested at all times in common stocks. As of March __, 1999, approximately ___%
of the total assets of the Balanced Fund were invested in common stocks. We
invest in common stocks for the Balanced Fund using the same criteria and
flexible investment approach as the Growth Fund. See "Investment Objectives,
Policies and Risks -- Growth Fund" above.
To provide balance, the Fund also invests a significant portion of its
assets in fixed income securities such as corporate notes, bonds and debentures,
short-term debt instruments, debt securities issued or guaranteed by the U.S.
Government (including its agencies and instrumentalities), convertible debt
securities and preferred stock that is convertible into common stock. All of the
debt securities purchased by the Balanced Fund are investment grade. Ordinarily,
at least 25% of the total assets of the Balanced Fund are invested in fixed
income securities. However, we may invest more of the Fund's assets in fixed
income securities if and when we determine, based on our assessment of
prevailing market conditions, that fixed income securities provide a more
effective means than common stocks of achieving the Fund's investment objective.
In determining whether the Balanced Fund should shift its emphasis from common
stocks to fixed income securities, we assess anticipated future changes in
interest rates and the outlook for common stocks generally. The dollar-weighted
average portfolio maturity of the Fund will normally not exceed 10 years. The
corporate debt securities in which the Balanced Fund invests are generally to
those issued by established companies. In addition, we ordinarily invest only in
non-callable bonds (debt that may not be prepaid by the issuer). This eliminates
prepayment risk which would otherwise increase the price sensitivity and
volatility of the debt securities in the Fund's portfolio.
Risks. The Balanced Fund's share price (or net asset value) and total
return will increase or decrease depending on the changes in the value of its
portfolio of common stocks and fixed income securities. See "Risks" below.
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Bond Fund
Objective and Principal Strategies. The Bond Fund seeks a higher 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:
- Debt securities of domestic issuers, and of foreign
issuers payable in United States dollars (corporate debt
securities) rated at the time of purchase within the four
highest grades by either S&P or Moody's;
- 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;
- Mortgage-related securities issued or guaranteed by
private issuers and guarantors rated at the time of
purchase within the four highest grades by S&P or
Moody's;
- 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;
- Obligations of banks and thrifts whose deposits are
insured by the FDIC;
- 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.
Under normal circumstances, at least 65% of the Bond's Fund's total
assets will be invested in corporate debt securities and securities issued or
guaranteed by the United States Government or its agencies or instrumentalities.
Although there are no restrictions on the maturity of securities in which the
Bond Fund may investment, 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 United States Government, its agencies or
instrumentalities, may vary in terms of the degree of support afforded by the
Government. Some of such
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<PAGE> 15
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 U.S. Government securities will
primarily consist of those supported by the full faith and credit of the United
States Treasury.
Risks. The share price, yield and total return of the Bond Fund will
increase or decrease depending on changes in the value of, and interest rates
and yield on, the fixed income securities in the Bond Fund's portfolio. See
"Risks" below.
Risks
Common Stocks. The Growth Fund and Balanced Fund invest in common
stocks. Common stocks fluctuate in value for various reasons, including changes
in the equities markets, general economic or political changes, interest rate
changes and factors particularly affecting the issues of stocks and their
industries. In addition, we may invest some of the Growth and Balanced Funds'
assets in stocks of companies with small market capitalizations (under $1
billion) and which may be traded only in the over-the-counter market. We believe
smaller companies are often undervalued in the marketplace and therefore carry a
greater potential for capital appreciation. However, stocks of smaller companies
are subject to greater price volatility than stocks of large companies and may
have less market liquidity.
We do not purchase smaller company stocks if, at the time of purchase,
the aggregate investment in such securities would exceed one-third of the total
assets of the Balanced or Growth Fund. We believe that our policies of issuer
and industry diversification, together with its strategic investment in
short-term debt investments and fixed income securities, can limit the
volatility of investments in these smaller companies.
Fixed Income Securities. The total return realized on the Bond Fund and
on the fixed income portion of the Balanced Fund's portfolio consists of the
change in the value of the fixed income securities held by the Funds and the
income generated by those securities. The value of fixed income securities is
affected primarily by changes in interest rates, average maturities, the
securities' investment quality and the creditworthiness of the issuer.
A bond's yield reflects the fixed annual interest as a percentage of
its current price. The 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 the 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. Interest rate
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<PAGE> 16
fluctuations also affect the income received on any variable rate demand notes
or other variable rate securities held in the Funds' portfolios. 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. We actively
manage the portfolio maturity of the Balanced and the Bond Funds, consistent
with their respective investment objectives, according to our assessment of the
interest rate outlook. During periods of rising interest rates, we 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, we will likely seek
to lengthen the average maturity.
Although the Balanced and Bond Funds only buy investment-grade debt
securities, securities rated in the fourth highest investment grade category may
have speculative characteristics and changes in economic conditions and other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with securities rates 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, we 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.
Portfolio Turnover. We generally do not purchase securities for
short-term trading. However, when appropriate, we will sell securities without
regard to length of time held. A high portfolio turnover rate may increase
transaction costs and result in increased taxable gains and income to you.
Change in Investment Objective. Each Fund's investment objective may be
changed by the Board of Directors without shareholder approval. However, the
Board does not plan to change any Fund's objective.
Temporary Defensive Positions. The Growth and Balanced Funds may
temporarily invest in short-term instruments for defensive purposes in response
to adverse market, economic and other conditions that could expose the Fund to a
decline in value. The Growth Fund may not invest more than 25% of its assets,
and the Balanced Fund may invest without limitation, in short-term instruments
for these purposes. These temporary defensive positions are inconsistent with
the Funds' principal investment strategies and make it harder for the Funds to
achieve their objectives.
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<PAGE> 17
MANAGEMENT
Investment Advisor
Thompson Plumb & Associates, Inc. (the Advisor), 1200 John Q. Hammons
Drive, Madison, Wisconsin 53717, acts as investment advisor and administrator
for the Funds. Since 1984, the Advisor has provided investment advice to
individuals and institutional clients with substantial investment portfolios.
The Advisor has managed each Fund since its inception. As of December 31, 1998,
the Advisor had approximately $850 million in assets under management.
The Advisor manages the investment of the Funds assets, provides the
Funds with personnel, facilities and administrative services and supervises the
Funds' daily business affairs, all subject to the oversight of the Funds' Board
of Directors.
During the fiscal year ended November 30, 1998, the Growth Fund,
Balanced Fund and Bond Fund paid management fees to the Advisor of 0.99%, 0.85%
and 0.61%, respectively, of such Fund's average daily net assets during that
year. Without fee waivers and expense reimbursements, the Bond Fund would have
paid management fees of 0.65% of its average daily net assets during the year.
Portfolio Managers
Growth and Bond Funds. John W. Thompson serves as portfolio manager
for the Growth and Bond Funds. He has been sole portfolio manager of these Funds
since August 1993. Prior to that time, he was co-portfolio manager of these
funds. Mr. Thompson is the Chairman, Secretary and a Director of Thompson Plumb
Funds, Inc. and has been President of the Advisor since co-founding it in June
1984 and its Treasurer since October 1993. Mr. Thompson is a Chartered Financial
Analyst.
Balanced Fund. Thomas G. Plumb serves as portfolio manager for the
Balanced Fund. He has been sole portfolio manager of the Balanced Fund since
August 1993. Prior to that time, he was co-portfolio manager of the Fund. Mr.
Plumb is President, Treasurer and a Director of Thompson Plumb Funds, Inc. He
has been Vice President of the Advisor since co-founding it in June 1984. Mr.
Plumb is a Chartered Financial Analyst.
16
<PAGE> 18
HOW TO BUY SHARES
General
You may buy shares of any Fund without a sales charge. The price you
pay for the shares will be based on the net asset value per share determined at
the end of the business day on which your purchase order is received by Firstar
Mutual Fund Services, LLC (Firstar), the Funds' transfer agent. You need to
complete the Account Application and submit it to Firstar in order to purchase
Fund shares. The Funds reserve the right to reject any purchase order for any
reason.
The investment minimums for purchases of shares of a Fund are as
follows:
To open an account: $1,000 ($250 for IRAs)
To add to an account: $100 ($50 for Automatic Investment
Plan and Automatic Exchange Plan)
Purchase Procedures
You may buy shares of any Fund in the following ways:
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
BY MAIL: TO OPEN A NEW ACCOUNT:
<S> <C>
Thompson Plumb Funds, Inc. 1. Complete the Account Application.
c/o Firstar Mutual Fund Services, LLC 2. Make your check payable to "Thompson Plumb Funds"
P.O. Box 701 (note: your purchase must meet applicable minimum).
Milwaukee, WI 53201-0701 3. Send the completed Account Application and check to
the applicable address listed to the left (note: $20
charge for checks returned for insufficient funds).
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
BY PERSONAL DELIVERY/DELIVERY TO ADD TO AND EXISTING ACCOUNT:
SERVICE/ EXPRESS MAIL:
<S> <C>
Thompson Plumb Funds, Inc. 1. Complete Additional Investment form included with
c/o Firstar Mutual Fund Services, LLC your account statement (or write a note with your
615 East Michigan Street account number).
Milwaukee, WI 53202 2. Make your check payable to "Thompson Plumb Funds".
3. Send the Additional Investment form (or note) and
check to the applicable address listed to the left
(note: $20 charge for checks returned for
insufficient funds).
<CAPTION>
BY WIRE OR ELECTRONIC FUNDS TRANSFER: TO OPEN A NEW ACCOUNT:
<S> <C>
Wire To: Firstar Bank Milwaukee, N.A. 1. Complete and return the Account Application form to
ABA 075000022 Firstar at the applicable address set forth above.
2. Call Firstar at 1-899-449-0079 or (414) 765-4124 before
making the wire transfer and provide your name, account
number, address, social security or tax indentification
number, the amount being wired, the name of your bank and
the name and phone number of your bank's contact person.
Credit: c/o Firstar Mutual Fund 3. Instruct your bank (which must be a member of, or have a
Services, LLC correspondent relationship with a member of, the Federal
Account 112-952-137 Reserve System for wire transfers, or must be an Automated
Clearing House member for electronic funds transfers) to
wire the funds as shown to the left (note $20 charge for
Further Credit: (Name of Fund) insufficient or unavailable funds for your negligence).
(Account Number)
(Your Name)
Note: Amounts sent by wire or electronic funds
transfers must be received by Firstar before
3:00 p.m Central Time in order to buy shares
that day. Also, you are responsible any changes
that your bank may impose for effecting the
wire or electronic funds transfer.
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C>
TO ADD TO AN EXISTING ACCOUNT:
1. Follow steps 2 and 3 above, and make sure you give Firstar your
correct account number.
AUTOMATIC INVESTMENT PLAN: TO OPEN AN ACCOUNT:
(Note: This plan may be suspended, Not Applicable.
modified or terminated at any time.)
TO ADD TO AN EXISTING ACCOUNT:
1. Call Firstar at 1-800-499-0079 or (414) 765-4124 to
obtain an Automatic Investment Plan Application.
2. Complete the Automatic Investment Plan Application to
authorize the transfer of funds from your bank
account, include a voided check with the application
and indicate how often (monthly, bimonthly, quarter
or yearly) you wish to make automatic investments.
3. Indicate the amount of the automatic investments (must
be at least $50 per investment).
4. Your bank will deduct the automatic investment amount
you have selected from your checking or NOW account on
the business day of your choosing, and apply that
amount to the purchase of fund shares. (Note: you
will be charged $20 for any automatic investments that
do not clear due to insufficient funds or the
closing of your account without notifying the Funds or
Firstar.)
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C>
THROUGH BROKER-DEALERS AND OTHER SERVICE PROVIDERS: You may purchase shares of any Fund through a
broker-dealer, institution or other service provider,
who may charge a commission or other transaction
fee. Certain features of a Fund may not be available
or may be modified in connection with the program
offered by your service provider. The service
provider, rather than you, may be the shareholder of
record of Fund shares, and may be responsible for
delivering Fund reports and other communications
about the Funds to you.
</TABLE>
Exchange of Fund Shares
You may exchange shares of a Fund for shares of another Fund without a
fee or sales charge. The exchange of shares can be made by mail by completing an
Exchange Application (available from Firstar or the Advisor) or by telephone if
you have so elected on your Account Application. In making telephone exchanges,
you assume the risk for unauthorized transactions. However, we have procedures
designed to reasonably assure that the telephone instructions are genuine and
will be liable to you if you suffer a loss from our failure to abide by these
procedures. The exchange privilege may be modified or terminated at any time.
The basic rules for exchanges are as follows:
- You must own shares of a Fund for at least 15 days before
you can exchange them for shares of another Fund.
- Shares being exchanged must have a net asset value of at
least $1,000 (except for the Automatic Exchange Plan) but
less than $100,000.
- We reserve the right to limit the number of times you may
exchange Fund shares.
Automatic Exchange Plan. You may also make regular monthly exchanges
from one Fund to another through our Automatic Exchange Plan. You may
participate by completing the Automatic Exchange Plan Application, which may be
obtained from the Advisor or Firstar. You must establish an account for each
Fund with at least $1,000 before you can make automatic exchanges. You determine
the amount that will automatically exchanged (must be at least $50) and the day
of each month the exchange will be made.
20
<PAGE> 22
Tax Treatment for Exchanges. An exchange of shares from one Fund to
another Fund is treated as a sale of the shares being exchanged and any gain on
the transaction may be subject to income tax.
AVAILABILITY OF MONEY MARKET FUND
If you elect on the Account Application, you may withdraw some or all
of your investment in a Fund and reinvest the proceeds the same day in the
Firstar Money Market Fund. You may also move that investment back into any of
the Funds. Your use of his privilege is subject to the purchase and redemption
amounts set forth in the Firstar Money Market Fund prospectus. There is no
charge for this privilege. However, the Funds receive a fee from Firstar Money
Market Fund for certain distribution and support services at the annual rate of
0.20% of the average daily net asset value of the Firstar Money Market Fund
shares that are issued as a result of exchanges of Fund shares. This privilege
may be modified or terminated at any time.
HOW TO SELL SHARES
GENERAL
You may redeem (sell back to the Fund) all or some shares of any Fund
at any time by sending a written request to Firstar. A Redemption Request Form
is a available from the Advisor or Firstar. The price you receive for the shares
will be based on the net asset value per share next determined after the
redemption request is received in proper form.
21
<PAGE> 23
REDEMPTION PROCEDURES
You may redeem Fund shares in the following ways:
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
BY MAIL: 1. A written request for redemption (or
the Redemption Request form) must
Thompson Plumb Funds, Inc. be signed exactly as the account is
c/o Firstar Trust Company registered and include the account
Mutual Fund Services number and the amount to be re
P.O. Box 701 deemed.
Milwaukee, WI 53201-0701 2. Send the written redemption request
and any certificates for the shares
BY PERSONAL DELIVERY/DELIVERY being redeemed to the applicable
SERVICE/ EXPRESS MAIL: address listed to the left.
3. Signatures may need to be guaruanteed.
Thompson Plumb Funds, Inc. See "Signature Guarantees."
c/o Firstar Trust Company
Mutual Fund Services
615 East Michigan Street
Milwaukee, WI 53202
SYSTEMATIC WITHDRAWAL PLANS: You can elect to participate in our Syste
matic Withdrawal Plan by completing the
Systematic Withdrawal Plan Application
which is available from the Advisor or
Firstar. This plan allows you to arrange for
automatic withdrawals from your Fund
account into a pre-authorized bank account.
You select the schedule for systematic with
drawals, which may be on a monthly basis
or in certain designated months. You also
select the amount of each systematic with
drawal, subject to a $50 minimum. To
begin systematic withdrawals, you must
have a Fund account valued at $10,000 or
more. The Systematic Withdrawal Plan may
be terminated or modified at any time.
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C>
THROUGH BROKER-DEALERS, INSTITUTIONS AND You may redeem Fund shares through
OTHER SERVICE PROVIDERS: broker-dealers, institutions and other service
providers, who may charge a commission or
other transaction fee for processing the
redemption for you.
</TABLE>
RECEIVING REDEMPTION PROCEEDS
You may request to receive your redemption proceeds by mail or by wire
or electronic funds transfer. No redemption will be effective until all
necessary documents have been received in proper form by Firstar. Firstar will
delay sending redemption proceeds for 15 days from their purchase date or until
all payments for the shares being redeemed have cleared, whichever occurs first.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
BY MAIL: Firstar mails checks for redemption proceeds
within seven days after it receives the re
quest and all necessary documents. The
check will be mailed to the address on your
account (unless you request that it be sent to
a different address which would require a
signature guarantee). There is no charge for
mailing out redemption checks. Your re
demption checks will be mailed unless you
expressly request that it be sent by wire or
electronic fund transfer.
</TABLE>
23
<PAGE> 25
<TABLE>
<S> <C>
BY WIRE/ELECTRONIC FUNDS TRANSFER: At your written request and with a guar
anteed signature on your redemption re
quest, Firstar will send you your redemption
proceeds by wire or electronic funds transfer
to your designated bank account. Re
demption proceeds sent by wire transfer
ordinarily will be made the business day
immediately after Firstar receives the re
quest. Redemption proceeds by electronic
fund transfer will be made within two or
three days after Firstar receives the request.
You will be charged $12 for each wire
transfer. There is no charge for electronic
fund transfers. You will be responsible for
any charges that your bank may impose for
receiving wire or electronic fund transfers.
</TABLE>
OTHER REDEMPTION INFORMATION
Signature Guarantees. For your protection, your signature on a
redemption request must be guaranteed by an institution eligible to provide them
under federal or state law (such as a bank, savings and loan, or securities
broker-dealer) under any of the following circumstances:
- The redemption is for $25,000 or more.
- The proceeds are to be sent to someone other than the
registered account holder of the shares being
redeemed.
- The proceeds are to be sent to an address other than
the registered address on the account.
- If you want to change ownership registration on your
account.
- If you have requested a change of address within 30
days prior to the redemption request.
- If you request that the redemption proceeds be sent
by wire or electronic fund transfer.
Closing of Small Accounts. Your account in any Fund may be terminated
if, as a result of any transfer, exchange or redemption of shares in the
account, the aggregate net asset value
24
<PAGE> 26
per share of the remaining shares in the account falls below $750. We will
notify you at least 30 days in advance of our intention to terminate the account
to allow you an opportunity to restore the account balance to at least $750.
Upon any such termination, we will send you a check for the proceeds of
redemption.
Suspension of Redemptions. Your right to redeem shares in any Fund and
the date of payment by the Fund may be suspended when: (1) the New York Stock
Exchange is closed or the Securities and Exchange Commission determines that
trading on the Exchange is restricted; (2) an emergency makes it impracticable
for the Fund to sell its portfolio securities or to determine the fair value of
its net assets; or (3) the Securities and Exchange Commission orders or permits
the suspension for your protection.
OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
Each Fund calculates its share price, also called net asset value, for
purposes of both purchases and sales of shares, as of the close of trading on
the New York Stock Exchange (generally 4:00 p.m., Eastern Time), every day the
Exchange is open. A Fund's net asset value per share is determined by adding up
the total market value of the Fund's investments and other assets and
subtracting its liabilities, and then dividing that amount by the number of
outstanding shares of the Fund. Each Fund's investments are valued at their
market prices (generally the last reported sales price on the exchange where the
securities are primarily traded) or, where market quotations are not readily
available, as determined in good faith by the Advisor pursuant to procedures
established by the Funds' Board of Directors. Debt securities held by a Fund
with remaining maturities of 60 days or less may be valued on a amortized cost
basis.
DIVIDENDS AND DISTRIBUTIONS
The Growth and Balanced Funds annually (generally within 60 days
following their November 30 fiscal year-end) distribute substantially all of
their net investment income and any net realized capital gains. The Bond Fund
distributes its net investment income quarterly (generally within 60 days
following the end of each fiscal quarter) and net realized capital gains
annually (generally within 60 days following its November 30 fiscal year-end).
All income, dividends and capital gains distributions are automatically
reinvested in shares of the relevant Fund at net asset value, without a sales
charge, on the payment date, unless you request payment in cash.
25
<PAGE> 27
TAXES
Dividends and distributions of income and capital gains are generally
taxable when they are paid, whether they are reinvested in additional Fund
shares or received in cash unless you are exempt from taxation or entitled to
tax deferral. Income dividends are taxable as ordinary income. Capital gains are
taxed at different rates depending on the length of time a Fund holds its
assets. You will receive information annually on the federal tax status of the
Fund's dividends and capital gains distributions.
We expect that most of the Growth Fund's distributions will be capital
gains, the Balanced Fund's distributions will be a combination of capital gains
and ordinary income, and most of the Bond Fund's distributions will be ordinary
income, in light of their investment objectives and policies.
In the Account Application you are asked to certify that your taxpayer
identification or social security number is correct and that you are not subject
to backup withholding. If you fail to do so, the Funds are required to withhold
31% of your taxable distributions and redemption proceeds.
The foregoing tax discussion is general. You should consult your own
tax advisor for more information and specific advice.
RETIREMENT PLANS
The Funds sponsor Individual Retirement Accounts (IRAs) through which
you may invest annual IRA contributions and roll-over IRA contributions in
shares of any of the Funds. The IRAs available through the Funds include
traditional IRAs, Roth IRAs and Education IRAs. Firstar will serve as custodian
for all these types of IRA accounts sponsored by the Funds. Firstar will charge
a $12.50 annual maintenance fee for each Traditional IRA or Roth IRA account and
$5.00 for each Education IRA. Shareholders with two or more IRAs using the same
tax ID number will be charged a total of $25.00 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. 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 or not to withhold federal income tax.
26
<PAGE> 28
Purchases may also be made by SEP plans (Simplified Employee Benefit
Plan), SIMPLE plans (Savings Incentive Match Plan for Employees of Small
Employers) and other retirement plans. Forms of SEP and SIMPLE 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. Please consult with your
own tax or financial advisor.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products used by
businesses worldwide will need to be upgraded to accept four digit entries to
distinguish 21st century dates from 20th century dates. Significant uncertainty
exists concerning the potential costs and effectiveness of efforts to achieve
"Year 2000" compliance, and the possible consequences of failure.
The Funds are assessing their exposure with regard to Year 2000 issues.
The Funds have received assurances that the custodial and transfer agency
services provided by Firstar will not be disrupted or otherwise affected by Year
2000 issues, and that Firstar will not find it necessary to increase fees for
its custodial or transfer agent services solely to recover costs incurred in
order to become Year 2000 compliant. The Advisor has established a committee to
consider how Year 2000 issues will affect its ability to render investment
advisory and accounting services to the Funds. Management is optimistic it will
be able to achieve compliance and provide uninterrupted services to the Funds
across the millennium, although definitive assurance cannot be provided on this
point. The Funds are carefully monitoring the situation, and will receive
periodic updates from the Advisor on its progress.
27
<PAGE> 29
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Funds' financial performance for the past 5 fiscal years (which end on November
30). Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned on an investment in the Funds (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Funds' financial statements, are included in the
Annual Report to Shareholders, which is available upon request.
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
GROWTH FUND
PER SHARE DATA:
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $39.36 $32.79 $24.74 $20.43 $20.47
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.07) (0.12) (0.06) (0.05) (0.20)
Net realized and unrealized gains on investments 4.92 9.16 8.66 6.22 0.16
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.85 9.04 8.60 6.17 (0.04)
LESS DISTRIBUTIONS
Dividends 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 $40.85 $39.36 $32.79 $24.74 $20.43
====== ====== ====== ====== ======
TOTAL RETURN 13.74% 29.90% 35.52% 32.87% (0.19%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $68.5 $45.4 $24.1 $12.6 $4.7
Ratios to average net assets:
Ratio of expenses 1.41% 1.52% 1.58% 2.00% 2.00%
Ratio of expenses without reimbursement -- -- -- -- 2.31%
Ratio of net investment income (0.19%) (0.41%) (0.27%) (0.31%) (0.49%)
Ratio of net investment income without reimbursement -- -- -- -- (0.80%)
Portfolio turnover rate 67.13% 77.66% 101.91% 86.68% 116.69%
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
BALANCED FUND
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $18.16 $16.54 $14.23 $13.55 $14.17
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.18 0.19 0.24 0.27
Net realized and unrealized gains on investments 1.65 3.01 3.21 2.26 0.04
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.84 3.19 3.40 2.50 0.31
LESS DISTRIBUTIONS
Dividends from net investment income (0.13) (0.23) (0.23) (0.28) (0.27)
Distributions from capital gains (1.71) (1.34) (0.86) (1.54) (0.66)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.84) (1.57) (1.09) (1.82) (0.93)
NET ASSET VALUE, END OF PERIOD $18.16 $18.16 $16.54 $14.23 $13.55
====== ====== ====== ====== ======
TOTAL RETURN 11.63% 21.39% 25.80% 21.02% 2.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $47.3 $36.3 $20.8 $18.1 $17.2
Ratios to average net assets:
Ratio of expenses 1.30% 1.40% 1.45% 1.49% 1.42%
Ratio of net income 1.16% 1.04% 1.32% 1.71% 1.84%
Portfolio turnover rate 83.07% 76.66% 134.82% 111.16% 110.01%
<CAPTION>
Year Ended November 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
BOND FUND
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.54 $10.59 $10.67 $9.88 $10.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.54 0.52 0.57 0.48
Net realized and unrealized gains on investments 0.39 (0.06) (0.07) 0.78 (0.78)
------ ------ ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS 0.95 0.48 0.45 1.35 (0.30)
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.53) (0.53) (0.56) (0.47)
Distributions from capital gains -- -- -- -- (0.13)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS (0.56) (0.53) (0.53) (0.56) (0.60)
NET ASSET VALUE, END OF PERIOD $10.93 $10.54 $10.59 $10.67 $9.88
====== ====== ====== ====== =====
TOTAL RETURN 9.34% 4.74% 4.51% 14.06% (2.96%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $32.7 $32.1 $22.2 $14.9 $10.2
Ratios to average net assets:
Ratio of expenses 1.04% 1.14% 1.13% 1.13% 1.00%
Ratio of expenses without reimbursement 1.08% -- -- 1.34% 1.48%
Ratio of net investment income 5.30% 5.42% 5.48% 5.70% 4.83%
Ratio of net investment income without reimbursement 5.26% -- -- 5.49% 4.34%
Portfolio turnover rate 35.09% 52.61% 104.43% 111.95% 165.74%
</TABLE>
29
<PAGE> 31
ADDITIONAL FUND INFORMATION
The Statement of Additional Information (SAI) contains additional information
about the Thompson Plumb Funds. The SAI is on file with the Securities and
Exchange Commission (SEC) and is legally part of this Prospectus. The Annual and
Semi-Annual Reports to Shareholders also contain information about the Funds,
including financial statements, investment results and portfolio holdings. In
the Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year.
To obtain a free copy of the SAI or the Annual or SemiAnnual Reports, or to ask
questions about the Funds, you can contact Thompson Plumb & Associates at the
telephone number or address shown to the right. Information and reports about
the Funds (including the SAI) are also available at the SEC's Public Reference
Room in Washington, D.C. (1-800-SEC-0330) or on the SEC's website at
http://www.sec.gov. Copies of such information and reports may be obtained, upon
payment of a duplicating fee, by writing the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
Thompson Plumb
Funds, Inc.
PROSPECTUS
THOMPSON PLUMB GROWTH FUND
THOMPSON PLUMB BALANCED FUND
THOMPSON PLUMB BOND FUND
1200 John Q. Hammons Drive
Madison, WI 53717
Telephone: (608) 831-1300
(800) 999-0887
www.thompsonplumb.com
March 31, 1999
<PAGE> 32
STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 1999
THOMPSON PLUMB FUNDS, INC.
1200 JOHN Q. HAMMONS DRIVE
MADISON, WISCONSIN 53717
TELEPHONE: (608) 831-1300
(800) 999-0887
This Statement of Additional Information ("SAI") contains detailed
information about the Thompson Plumb Growth Fund (the "Growth Fund"), Thompson
Plumb Balanced Fund (the "Balanced Fund") and Thompson Plumb Bond Fund (the
"Bond Fund"). This SAI is not a prospectus and should be read in conjunction
with the Thompson Plumb Funds, Inc. Prospectus (the "Prospectus") dated March
31, 1999. The Prospectus may be obtained by contacting Thompson Plumb Funds,
Inc. at the address or one of the telephone numbers listed above.
TABLE OF CONTENTS
PAGE
----
FUND HISTORY................................................................ 2
DESCRIPTION OF CERTAIN INVESTMENTS AND RISKS................................ 2
INVESTMENT RESTRICTIONS..................................................... 6
DETERMINATION OF NET ASSET VALUE AND PRICING CONSIDERATIONS................. 9
MANAGEMENT................................................................. 10
ADVISORY, ADMINISTRATIVE AND OTHER SERVICES................................ 13
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 15
PERFORMANCE DATA........................................................... 17
TAXES .................................................................. 21
CAPITAL STOCK AND OTHER SECURITIES......................................... 22
FINANCIAL STATEMENTS....................................................... 23
<PAGE> 33
FUND HISTORY
Thompson Plumb Funds, Inc. (the "Investment Company") is a Wisconsin
corporation incorporated in 1986 and registered an open-end, diversified
management investment company under the Investment Company Act of 1940 (the
"1940 Act"). The Growth Fund, Bond Fund and Balanced Fund are separate series of
the Investment Company. The Growth Fund and Bond Fund each commenced operations
on February 10, 1992. The Balanced Fund commenced operations on March 16, 1987.
Prior to April 3, 1995, the Investment Company was known as Thompson, Unger &
Plumb Funds, Inc.
DESCRIPTION OF CERTAIN INVESTMENTS AND RISKS
LENDING PORTFOLIO SECURITIES
Each 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 credit worthiness of firms to
which the Fund lends its securities. Any such loan must be continu ously 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
Each Fund may from time to time enter into repurchase agreements,
although, absent unforeseen market and economic conditions, no Fund has any
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
2
<PAGE> 34
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 1940 Act,
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 a 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
3
<PAGE> 35
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 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 gov ernmental 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
4
<PAGE> 36
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.
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.
5
<PAGE> 37
PORTFOLIO TURNOVER
The portfolio turnover rates for the fiscal years ended November 30,
1997 and 1998 were as follows:
1997 1998
---- ----
Thompson Plumb Growth Fund 77.66% 67.13%
Thompson Plumb Balance Fund 76.66% 83.07%
Thompson Plumb Bond Fund 52.61% 35.09%
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
6
<PAGE> 38
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 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 1940 Act. Subject to certain exceptions, the 1940
Act 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).
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.
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
7
<PAGE> 39
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.
(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.
8
<PAGE> 40
DETERMINATION OF NET ASSET VALUE AND PRICING CONSIDERATIONS
Shares of the Funds are offered to the public directly by Thompson
Plumb Funds, Inc. Fund shares are offered and sold without a sales charge at the
net asset value per share next determined after the purchase order has been
received by the Fund's transfer agent. The net asset value per share of each
Fund is calculated as of the close of trading on the New York Stock Exchange
(generally 4:00 P.M. Eastern Time). Net asset value per share is calculated by
adding the fair market value of all securities and other assets of the
particular Fund, subtracting the liabilities of the Fund, and dividing the
remainder by the number of outstanding shares of the Fund.
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, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, 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.
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
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.
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 market 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
9
<PAGE> 41
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.
The Funds intend to pay all redemptions 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
The business and affairs of the Funds are managed by the Board of
Directors of the Investment Company.
Information pertaining to the directors and officers of the Investment
Company is set forth below. Unless indicated, the address of each director and
officer is 1200 John Q. Hammons Drive, Madison, Wisconsin 53717. An asterisk (*)
indicates those directors who are "interested persons" of the Investment Company
for purposes of the 1940 Act are so indicated by an asterisk (*).
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS THOMPSON PLUMB FUNDS, INC. DURING PAST FIVE YEARS
- --------------------- -------------------------- ----------------------
<S> <C> <C>
George H. Austin, 68* Director Director of Research and Portfolio
Manager of the Advisor since March 1994;
prior thereto, Director of Investments of
the Wisconsin Alumni Research Foundation
from 1976 to 1994.
</TABLE>
10
<PAGE> 42
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS THOMPSON PLUMB FUNDS, INC. DURING PAST FIVE YEARS
- --------------------- -------------------------- ----------------------
<S> <C> <C>
Mary Ann Deibele, 63 Director Retired since September 1994; prior
20029 Reichardt Road thereto, Director and member of the
Kiel, Wisconsin 53042 executive committee of Household
Utilities, Inc. (a high tech sheet metal
fabricating facility).
David B. Duchow, 31 Assistant Vice President Portfolio Manager of the Advisor
since December 1996; formerly,
Associate Portfolio Manager of the
Advisor from January 1994 to
December 1996; Investment Analyst
and Marketing Manager of the
Advisor since September 1992;
Marketing Representative for the
Prudential Co. from December 1991
to September 1992.
John W. Feldt, 56 Director Senior Vice President of Finance of
150 East Gilman Street the University of Wisconsin
Madison, Wisconsin 53703 Foundation since 1984; prior thereto,
Vice President of Finance for the
University of Wisconsin Foundation.
Donald A. Nichols, 58 Director Professor of Economics at the
1180 Observatory Drive University of Wisconsin since 1966;
Madison, Wisconsin 53706 Chairman, Department of Economics
from 1983 to 1986 and from 1988 to 1990;
Director of the Center for Research on the
Wisconsin economy; 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; Consultant to National
Economic Research Associates during 1985.
Thomas G. Plumb, 46* President, Treasurer and Vice President of the Advisor since
Director co-founding it in June 1984; formerly,
Vice President of Firstar Bank Madison,
N.A., Investment Management Division, from
December 1983 to June 1984 and various
officer and other management
responsibilities at Firstar Bank Madison,
N.A. from November 1979 to December 1983; a
Chartered Financial Analyst.
</TABLE>
11
<PAGE> 43
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS THOMPSON PLUMB FUNDS, INC. DURING PAST FIVE YEARS
- --------------------- -------------------------- ----------------------
<S> <C> <C>
John C. Thompson, 30 Assistant Vice President Portfolio Manager of the Advisor
since December 1996; Associate
Portfolio Manager of the Advisor
from January 1994 to December
1996; Investment Analyst for the
Advisor since March 1993; a Char-
tered Financial Analyst.
John W. Thompson, 55* Chairman, Secretary and Di- President of the Advisor since co-
rector founding it in June 1984; Treasurer of
the Advisor since October 1993; formerly,
First Vice President and Division Manager
of the Investment Management Division of
Firstar Bank Madison, N.A. from September
1979 until June 1984; a Chartered Financial
Analyst.
</TABLE>
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 $9,800 in fiscal
year 1998, as set forth in the table below.
<TABLE>
<CAPTION>
TOTAL COM
AGGREGATE ESTIMATED PENSATION FROM
COMPENSATION PENSION OR ANNUAL INVESTMENT
FROM INVESTMENT RETIREMENT BENEFITS UPON COMPANY AND
DIRECTOR COMPANY BENEFITS RETIREMENT FUND COMPLEX
- -------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Mary Ann Deibele $9,800 None None $9,800
John W. Feldt $9,800 None None $9,800
Donald A. Nichols $9,800 None None $9,800
</TABLE>
For fiscal year 1999, those directors who are not so affiliated with
the Advisor will each receive $11,000.
As of December 31, 1998, the Investment Company's Directors and
officers as a group owned 52,742 shares (2.87% of the outstanding shares) of the
Growth Fund, 83,239 shares (2.95% of the outstanding shares) of the Balanced
Fund and 21,503 shares (0.81% of the outstanding shares) of the Bond Fund.
12
<PAGE> 44
ADVISORY, ADMINISTRATIVE AND OTHER SERVICES
Thompson, Plumb & Associates, Inc. acts as the investment advisor and
administrator for each of the Funds. John W. Thompson and Thomas G. Plumb each
own 50% of the outstanding shares of the Advisor. The Advisor manages the
investment and reinvestment of the Fund's provides the Funds with personnel,
facilities and administrative services, and supervises the Fund's daily affairs,
all subject to the supervision of the Board of Directors of the Investment
Company. The Advisor formulates and implements a continuous investment program
for each Fund consistent with its investment objective, policy and restrictions.
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 Informa tion, 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, 1998, 1997 and 1996, in return
for serving as the Funds' investment advisor and administrator, the Advisor
earned fees of $581,250, $333,296 and $171,264, respectively, for the Growth
Fund; $357,956, $247,662 and $163,437, respectively, for the Balanced Fund; and
$206,183 $183,746 and $115,203, respectively, for the Bond Fund.
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 1940 Act,
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
13
<PAGE> 45
reason of willful misfeasance, 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
1940 Act) 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 1940 Act) 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 1940 Act)
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 1940 Act) 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 1940 Act and
calculates the net asset value per share of each Fund on a daily basis.
For the fiscal years ended November 30, November 30, 1998, 1997 and
1996, 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 $96,358, $63,099 and $34,990, respectively, for the Growth Fund; $75,141,
$56,797 and $38,456, respectively, for the Balanced Fund; and $62,104, $56,007
and $35,457, respectively, for the Bond Fund.
EXPENSES
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
14
<PAGE> 46
the Funds' Directors; and extraordinary expenses incurred by the Funds. The
Advisor will bear the expense of printing and distributing prospectuses to
prospective shareholders.
For fiscal year 1999, the Advisor has agreed to reimburse each of the
Growth, Balanced and Bond Funds for all expenses such Fund incurs on an annual
basis in excess of 1.30%, 1.25% and 0.95%, respectively, of its average daily
net assets.
TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Third
Floor, P.O. Box 701, Milwaukee, Wisconsin 53201, is the transfer and dividend
disbursing agent for the Funds.
CUSTODIAN
Firstar Bank Milwaukee, N.A., 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, is the custodian of the Funds' portfolio securities and cash.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Quarles & Brady LLP, 411 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, serves as general counsel to the Funds.
PricewaterhouseCoopers LLP, independent accountants, 650 Third Avenue
South, Suite 1300, Minneapolis, Minnesota 55402, serves as independent
accountants for the Funds.
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
15
<PAGE> 47
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
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.
16
<PAGE> 48
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest 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 November 30, 1998, the Growth Fund,
Balanced Fund and Bond Fund paid brokerage commissions aggregating $92,684,
$69,684 and $2,813, 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 $59,120,116, $42,933,107 and $7,144,188, respectively, other than brokerage
commissions of $1,726 paid to brokers or dealers by the Growth Fund for
executing transactions totaling $1,561,516.
During the fiscal years ended November 30, 1997 and 1996, the Funds
paid brokerage commissions in connection with their portfolio transactions
aggregating $75,213 and $58,839, respectively, for the Growth Fund; $56,729 and
$52,603, respectively, for the Balanced Fund; and $7,906 and $6,647,
respectively, for the Bond Fund.
PERFORMANCE DATA
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.
17
<PAGE> 49
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:
P(1 + T)(n) = ERV
WHERE:
T = average annual total return;
(n) = number of years and portion of a year;
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 returns for the Balanced Fund for the
one-year, five-year and ten-year periods ended November 30, 1998, and the
average annual total returns for the Bond and Growth Funds for the one-year and
five-year periods ended November 30, 1998 and for the period from February 10,
1992 (commencement of operations) through November 30, 1998, are as follows:
<TABLE>
<CAPTION>
FROM
COMMENCEMENT
OF
1 YEAR 5 YEARS 10 YEARS OPERATIONS
------ ------- -------- ----------
<S> <C> <C> <C> <C>
Growth Fund 13.74% 21.57%(1) -- 15.82%(1)
Balanced Fund 11.63% 16.08% 13.26% --
Bond Fund 9.34%(2) 5.78%(2) -- 6.24%(2)
</TABLE>
- ------------------
(1) Without expense reimbursements by the Advisor in 1994 and 1992, the
Growth Fund's average annual return for the five-year period ended
November 30, 1998 and for the period from commencement of operations
through November 30, 1998 would have been 21.50% and 15.76%,
respectively.
18
<PAGE> 50
(2) Without expense reimbursements by the Advisor in 1998, 1995, 1994, 1993
and 1992, the Bond Fund's average annual return for the one-year and
five-year periods ended November 30, 1998 and for the period from
commencement of operations through November 30, 1998 would have been
9.30%, 5.63% and 5.84%, respectively.
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
Yield = 2 [ ( ----- + 1(6) - 1 ]
cd
WHERE:
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
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 Growth and Balanced 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, 1998
was 4.71%. 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.
19
<PAGE> 51
OTHER PERFORMANCE INFORMATION
Each Fund may from time to time advertise its comparative performance
as measured by various independent sources, including, without limitation,
Lipper Inc., Barron's, The Wall Street Journal, The New York Times, U.S.A.
Today, Weisenberger Investment Companies Service, Consumer Reports, Time,
Newsweek, U.S. News and World Report, Business Week, Financial World, U.S. News
and World Reports, Milwaukee Journal Sentinel, Wisconsin State Journal, Forbes,
Fortune, Money, Morningstar Publications, Standard & Poors/Lipper Mutual Fund
Profiles and The Individual Investor's Guide to No-Load Mutual Funds. A Fund may
also note its mention in, or inclusion in lists or rankings prepared or
published by, such independent sources and other newspapers, magazines and media
from time to time. However, the investment company assumes no responsibility for
the accuracy of such information. In addition, each Fund may from time to time
advertise its performance relative to certain other mutual funds or groups of
funds, indices and benchmark investments, including, without limitation, the
Value Line Index, Lipper Capital Appreciation Fund Average, Lipper Growth Funds
Average, Lipper General Equity Funds Average, Lipper Equity Funds Average,
Morningstar Growth Average, Morningstar Equity Fund Average, Morningstar Hybrid
Average, Morningstar All Equity Funds Average, Lipper Balanced Funds Index,
Lipper Balanced Funds Average, Morningstar General Equity Average, Dow Jones
Industrial Average, New York Stock Exchange Composite Index, American Stock
Exchange Composite Index, Standard & Poor's 500 Stock Index, Russell 2000 Small
Stock Index, Russell Mid-Cap Stock Index, Russell 2500 Index, Standard & Poor's
400 Industrials, Standard & Poor's 100, Wilshire 5000, Wilshire 4500, Wilshire
4000, Lehman Brothers Intermediate Corporate/Government Bond Index, Nasdaq
Industrials, Nasdaq-OTC Price Index and Consumer Price Index.
Each Fund may advertise its rankings as published by Lipper Analytical
Services, Inc. in its categories or sub-categories, as well as its rating by
Morningstar, Inc. The Lipper and Morningstar averages are unweighted averages of
total return performance of mutual funds as classified, calculated and published
by Lipper and Morningstar. Morningstar's rating system is based on risk-adjusted
total return performance and is expressed in a star-rating format. The
risk-adjusted number is computed by subtracting a Fund's risk (which is a
function of the Fund's monthly returns less the three-month Treasury bill
return) from the Fund's load-adjusted total return score. This numerical score
is then translated into rating categories, with the top 10% labeled five star,
the next 22.5% labeled four star, then next 35% labeled three star, the next
22.5% labeled two star and bottom 10% rated one star. A high rating reflects
either above-average returns or below-average risks, or both.
20
<PAGE> 52
TAXES
Each Fund intends to qualify as a regulated investment company under
the Internal Revenue Code of 1986 (the "Code"), and to take all other action
required so that no federal income tax will be payable by the Fund itself. In
order to qualify as a regulated investment company, each Fund must satisfy a
number of requirements. If a Fund were to fail to qualify as a regulated
investment company under the Code, it would be treated as a regular corporation
whose net taxable income (including taxable dividends and net capital gains)
would be subject to income tax at the corporate level, and distributions to
shareholders would be subject to a second tax at the shareholder level.
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.
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.
Dividends and other distributions paid to individuals and other
non-exempt persons are subject to a 31% backup federal withholding tax if the
Transfer Agent is not provided with the shareholder's correct taxpayer
identification number or certification that the shareholder is not subject to
such backup withholding or if a Fund is notified that the shareholder has under
reported income in the past. In addition, such backup withholding tax will apply
to the proceeds of redemption or repurchase of shares from a shareholder account
for which the correct taxpayer identification number has not been furnished. For
most individual taxpayers, the taxpayer identification number is the social
security number. A shareholder may furnish the Transfer Agent with such number
and the required certifications by completing and
21
<PAGE> 53
sending the Transfer Agent either the account application form accompanying the
Prospectus or an IRS Form W-9.
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.
CAPITAL STOCK AND OTHER SECURITIES
GENERAL
The authorized capital stock of Thompson Plumb Funds, Inc. consists of
100 million shares of Common Stock, $.001 par value per share. The shares of
Common Stock are presented divided into three series: the Balanced Fund, Bond
Fund and Growth Fund. 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 the 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
accumulative voting rights and are freely transferrable. Shares of Common Stock
can be issued as full shares or fractions of shares. If a fraction of share has
the same kind of rights and privileges as a full share.
Shareholders have the right to vote on the election of the directors at
each meeting of shareholders at which directors are to be elected and on other
matters as provided by law or the Investment Company's Articles of Incorporation
or Bylaws. Shareholders of each Fund vote together to elect a single Board of
Directors of the Investment Company 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 Advisory Agreement), separate votes by shareholders
of each Fund are required. The Investment Company's 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.
22
<PAGE> 54
CONTROL PERSONS AND PRINCIPAL HOLDERS OF FUND SHARES
As of December 31, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Balanced Fund were:
MUGGS & CO. (6.1%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee,
Wisconsin 53201-1787; and Anchorbank S.S.B. Retirement Balanced (7.24%), c/o Old
Kent Bank, 4420 44th Street, Suite A, Grand Rapids, Michigan 49512-4011. Old
Kent Bank,4420 44th Street, Suite A, Grand Rapids, Michigan 49512-4011, was the
holder of record of 9.88% of the outstanding shares of the Balanced Fund as of
that date.
As of December 31, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Bond Fund were:
MUGGS & CO. (43.45%), c/o Firstar Trust Company, P.O. Box 1787, Milwaukee,
Wisconsin 53201-1787; and Wisconsin Auto & Truck Dealers Association Trust
(6.52%), 150 East Gilman Street, Madison, Wisconsin 53703. Old Kent Bank, One
Vandenberg Center, Grand Rapids, Michigan 49503, was the holder of record of
18.33% of the outstanding shares of the Bond Fund as of that date.
As of December 31, 1998, the only persons known to management to
beneficially own 5% or more of the outstanding shares of the Growth Fund was
Anchorbank S.S.B. Retirement Growth (6.61%), c/o Old Kent Bank, 4420 44th
Street, Suite A, Grand Rapids, Michigan 49512-4011. Old Kent Bank,4420 44th
Street, Suite A, Grand Rapids, Michigan 49512-4011, was the holder of record of
17.24% of the outstanding shares of the Growth Fund as of that date.
As of December 31, 1998, 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, or to control, any of the Funds.
FINANCIAL STATEMENTS
The financial statements and related report of PricewaterhouseCoopers
LLP, independent accountants, contained in the Annual Report to Shareholders
for the fiscal year ended November 30, 1998 are incorporated by reference
herein. A copy of the Annual Report may be obtained without charge by writing to
Thompson, Plumb & Associates, Inc., 1200 John Q. Hammons Drive, Madison,
Wisconsin 53717, or by calling Thompson, Plumb & Associates, Inc. at (608)
831-1300 or 1-800-999-0887.
23
<PAGE> 55
PART C
OTHER INFORMATION
-----------------
ITEM 23. EXHIBITS.
See Exhibit Index following the signature page to this Registration
Statement, which Exhibit Index is incorporated herein by this reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. 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.
Paragraph 7 of the Investment Advisory Agreement between the Registrant
and Thompson, Plumb & Associates, Inc. provides for indemnification of Thompson,
Plumb & Associates, Inc. by the Funds or, in lieu thereof, contribution by the
Funds under certain circumstances.
ITEM 26. 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.,
together with information as to any other business, profession, vocation or
employment of a substantial nature of those directors and officers during the
past two fiscal years.
<PAGE> 56
<TABLE>
<CAPTION>
NAME POSITION WITH ADVISOR OTHER AFFILIATIONS
- ---- --------------------- ------------------
<S> <C> <C>
John W. Thompson President and Director Chairman, Secretary and
Director of the Registrant
Thomas G. Plumb Vice President and Director President, Treasurer and Di
rector of the Registrant
Connie M. Redman Corporate Secretary None
Penny M. Hubbard Assistant Vice President None
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
ITEM 28. 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 LLP,
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., 1200 John Q. Hammons Drive, Fifth Floor,
Madison, Wisconsin 53717.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-2
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Madison, State of
Wisconsin, on the 22nd day of January, 1999.
THOMPSON PLUMB FUNDS, INC
By /s/ John W. Thompson
----------------------------
JOHN W. THOMPSON
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below on
this 22nd day of January, 1999, by the following persons in the capacities
indicated.
<TABLE>
<S> <C>
/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
</TABLE>
C-3
<PAGE> 58
THOMPSON PLUMB FUNDS, INC.
---------------------------------------------
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM N-1A
---------------------------------------------
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
------- ----------- ------------------- --------
<S> <C> <C> <C>
(A) Registrant's Amended and Post-Effective Amendment No.
Restated Articles of Incorporation. 12 to the Registrant's Reg-
istration Statement on Form N-
1A (Reg. No. 33-6418) (the
"Registration Statement").
(B) Registrant's Bylaws, as Post-Effective Amendment No.
amended and restated and 13 to the Registration Statement.
presently in effect.
(C) None.
(D) Investment Advisory Agreement between Post-Effective Amendment No.
Registrant and Thompson, 12 to the Registration Statement.
Unger & Plumb, Inc., as amended and
restated as of February 7, 1992.
(E) Not applicable.
(F) Not applicable.
(G) Custodian Agreement with Post-Effective Amendment No.
Bank between Registrant and 12 to the Registration Statement.
First Wisconsin Trust
Company, as amended and
restated as of February 7, 1992.
</TABLE>
C-4
<PAGE> 59
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
------- ----------- ------------------- --------
<S> <C> <C> <C>
(H)(1) Accounting Services Agree- Post-Effective Amendment No.
ment between Registrant and 12 to the Registration Statement.
Thompson, Unger & Plumb,
Inc., as amended and restated
as of February 7, 1992.
(H)(2) Shareholder Services Agree- Post-Effective Amendment No.
ment between Registrant and 12 to the Registration Statement.
Thompson, Unger & Plumb, Inc.,
as amended and restated as of
February 7, 1992.
(H)(3) Operating Agreement be Post-Effective Amendment No.
tween Registrant and Charles 12 to the Registration Statement.
Schwab & Co., Inc. dated as
of January 15, 1997.
(H)(4) Confidentiality Agreement Post-Effective Amendment No.
between Registrant and 12 to the Registration Statement.
Charles Schwab & Co., Inc.
dated as of January 15, 1997.
(H)(5) Services Agreement between Post-Effective Amendment No.
Registrant and Charles 12 to the Registration Statement.
Schwab & Co., Inc. dated as
of January 15, 1997.
(H)(6) Distribution and Servicing Post-Effective Amendment No.
Agreement between 12 to the Registration Statement.
Registrant and Portico Funds,
Inc.
(H)(7) Servicing Agreement between Post-Effective Amendment No.
Registrant and Firstar Funds, 13 to the Registration Statement.
Inc.
(H)(8) Revolving Credit Agreement Post-Effective Amendment No.
dated as of February 6, 1998 13 to the Registration Statement.
between Registrant and M&I
Bank of Southern Wisconsin.
(I) Opinion of Counsel. X
</TABLE>
C-5
<PAGE> 60
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
------- ----------- ------------------- --------
<S> <C> <C> <C>
(J)(1) Consent of Independent X
Public Accountants.
(J)(2) Consent of Counsel. See Exhibit I above.
(K) Not applicable.
(L) Subscription Agreement be X
tween Registrant and
Thompson, Unger & Plumb,
Inc. (f/k/a FMI Capital
Management, Inc.).
(M) Not applicable.
(N)(1) Financial Data Schedule for X
the Balanced Fund
(N)(2) Financial Data Schedule for X
the Growth Fund
(N)(3) Financial Data Schedule for X
the Bond Fund
</TABLE>
C-6
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000795264
<NAME> THOMPSON PLUMB FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> THOMPSON PLUMB BALANCED FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 38840
<INVESTMENTS-AT-VALUE> 47371
<RECEIVABLES> 803
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48180
<PAYABLE-FOR-SECURITIES> 804
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61
<TOTAL-LIABILITIES> 865
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35737
<SHARES-COMMON-STOCK> 2605
<SHARES-COMMON-PRIOR> 2001
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<DISTRIBUTIONS-OF-INCOME> (261)
<DISTRIBUTIONS-OF-GAINS> (3478)
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<NUMBER-OF-SHARES-SOLD> 605
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<NET-CHANGE-IN-ASSETS> 10978
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<PER-SHARE-NAV-BEGIN> 18.16
<PER-SHARE-NII> 0.19
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<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000795264
<NAME> THOMPSON PLUMB FUNDS, INC.
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<NAME> THOMPSON PLUMB GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
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<NAME> THOMPSON PLUMB FUNDS, INC.
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<NAME> THOMPSON PLUMB BOND FUND
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<PAGE> 1
[QUARLES & BRADY LLP LETTERHEAD]
EXHIBIT (I)
January 22, 1999
Thompson Plumb Funds, Inc.
1200 John Q. Hammons Drive, Fifth Floor
Madison, Wisconsin 53717
Ladies and Gentlemen:
In connection with the registration of an indefinite number of shares of
common stock, par value $.01 per share ("Common Stock"), of Thompson Plumb
Funds, Inc., a Wisconsin corporation (the "Registrant"), under the Securities
Act of 1933, you have requested that we furnish you with the following opinion,
which we understand will be used in connection with and filed with the
Securities and Exchange Commission as an exhibit to Post-Effective Amendment No.
14 to the Registration Statement on Form N-1A (as amended, the "Registration
Statement") (1933 Act Registration No. 33-6418).
We understand that the Common Stock to which the Registration Statement
relates are currently issued and offered to the public in three series of the
Registrant, Thompson Plumb Growth Fund, Thompson Plumb Balanced Fund and
Thompson Plumb Bond Fund, in the manner and on the terms described in the
Registration Statement. For purposes of rendering this opinion, we have examined
originals or copies of such documents as we consider necessary, including those
listed below. In conducting such examination, we have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as copies.
The documents we have examined include:
1. The Registration Statement;
2. The Registrant's Articles of Incorporation, including all amendments
thereto, filed with Wisconsin Department of Financial Institutions
(and its predecessor, the Wisconsin Secretary of State);
3. A certificate of active status, as recently issued by the Wisconsin
Department of Financial Institutions; and
<PAGE> 2
Thompson Plumb Funds, Inc.
January 22, 1999
Page 2
4. Such other documents and certificates as to matters of fact and such
matters of law as we have deemed relevant to the opinions expressed
herein.
Based upon and subject to the foregoing, after having given due regard to
such issues of law as we have deemed relevant, and assuming that:
1. The Registration Statement remains effective, and the Prospectus which
is a part thereof and your Prospectus delivery procedures with respect
thereto fulfill all the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940 throughout all periods relevant to
this opinion;
2. All offers and sales of Common Stock of the Registrant (including each
series thereof) registered by means of the Registration Statement are
conducted in a manner complying with the terms of the Registration
Statement; and
3. All offers and sales of Common Stock of the Registrant are made in
compliance with the securities laws of the states having jurisdiction
thereof;
we are of the opinion that the Common Stock of the Registrant (including each
series thereof), when issued, will be legally and validly issued, fully paid and
non-assessable, except as provided under Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law (as it and its predecessor statute have been judicially
interpreted).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the references to our firm in the Prospectus and
Statement of Additional Information constituting parts of the Registration
Statement.
Very truly yours,
QUARLES & BRADY LLP
QUARLES & BRADY LLP
<PAGE> 1
EXHIBIT (J)(1)
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. 14 to the Registration Statement on Form N-1A (the
"Registration Statement") of our report dated January 22, 1999, relating to the
financial statements and financial highlights appearing in the November 30, 1998
Annual Report to Shareholders of Thompson Plumb Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Counsel and Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
January 22, 1999
<PAGE> 1
EXHIBIT (L)
SUBSCRIPTION TO SHARES
OF COMMON STOCK OF
THOMPSON, UNGER & PLUMB FUNDS, INC.
The undersigned has been advised that (i) a corporation known as Thompson,
Unger & Plumb Funds, Inc. (the "Fund") has been established under the laws of
Wisconsin and (ii) the aggregate number of shares which the Fund is currently
authorized to issue is 100,000,000, consisting of one class only, designated as
"Common Stock," of the par value of $.001 per share (the "Shares"). The
undersigned hereby subscribes for and promises to pay for and acquire 10,000 of
the Shares, subject to the following terms and conditions:
1. The undersigned promises to pay to the Fund, as the total
consideration for such Shares, the sum of $10.00 per share or an
aggregate of $100,000, which sum shall be payable in cash.
2. The undersigned represents and warrants to the Fund that:
(a) This subscription is made and such Shares will be acquired by the
undersigned solely for investment purposes and with no present
intention to sell, redeem or otherwise dispose of the same or any
part thereof; and
(b) This subscription is made and such Shares will be accepted by the
undersigned with the understanding that such Shares will not have
been registered under the Securities Act of 1933 or the
securities laws of any State or other jurisdiction and the Fund
has no present intention to register the same under any such Act
or laws.
3. This subscription and the rights, benefits and privileges hereunder
may not be transferred or assigned.
4. It is understood that the aforesaid $100,000 will be paid into the
Fund before subscriptions for Shares will be accepted from any other
persons. Should the undersigned redeem any of the Shares referred to
above ("Initial Shares") before the deferred organization expenses
with respect to the Fund have been completely amortized, there shall
be deducted from the redemption price payable to the undersigned the
pro-rata unamortized portion of such expenses attributable to the
redeemed Shares (based on the ratio that the number of such Shares
bears to the number of Initial Shares then outstanding).
<PAGE> 2
5. If the registration statement filed under the Securities Act of 1933
with respect to the Fund's Shares does not become effective prior to
June 30, 1987, this subscription shall become null and void and the
full amount paid in by the undersigned will be refunded to the
undersigned on demand without any deduction.
Executed this 19th day of December, 1986.
FMI CAPITAL MANAGEMENT, INC.
By: /s/ John W. Thompson
------------------------
As Its: President
--------------------
SUBSCRIPTION accepted this
19th day of December, 1986.
THOMPSON, UNGER & PLUMB FUND, INC.
By: /s/ Raymond F. Unger
--------------------------------
As its: President
--------------------------
