UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT ON REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act File Number 811-4946

THOMPSON PLUMB FUNDS, INC.

1200 John Q. Hammons Drive
Madison, Wisconsin 53717
(Address of principal executive offices)—(Zip code)

John W. Thompson, Chairman
Thompson Plumb Funds, Inc .
1200 John Q. Hammons Drive
Madison, Wisconsin 53717
(Name and address of agent for service)

With a copy to:

Charles M. Weber, Esq.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Registrant’s telephone number, including area code: (608) 827-5700

Date of fiscal year end: November 30, 2004

Date of reporting period: November 30, 2004

     Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.

     A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Report to Stockholders.

THOMPSON PLUMB FUNDS, INC.
ANNUAL REPORT TO SHAREHOLDERS

NOTE ON FORWARD-LOOKING STATEMENTS

The matters discussed in this report may constitute forward-looking statements. These include any advisor or portfolio manager predictions, assessments, analyses or outlooks for individual securities, industries, investment styles, market sectors, interest rates, economic trends and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each Fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement its strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any Fund to differ materially as compared to its benchmarks.

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THOMPSON PLUMB FUNDS, INC.
ANNUAL REPORT TO SHAREHOLDERS

November 30, 2004

CONTENTS

This annual report is authorized for distribution to prospective investors only
when preceded or accompanied by a Fund prospectus which contains information about
the Funds’ objectives and policies, management, expenses, and other information.

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GROWTH FUND INVESTMENT REVIEW

November 30, 2004

		John W. Thompson Co-Portfolio Manager

		John C. Thompson Co-Portfolio Manager

Performance

The Growth Fund generated a total return of 8.77% for the twelve-month period ended November 30, 2004, as compared to 12.85% for the S&P 500 Index. Over the past three-year, five-year and ten-year periods, the Growth Fund returned 3.26%, 9.99% and 16.77%, versus returns of 2.74%, -1.83% and 11.86% for the S&P 500 Index.

Comparison of Change in Value of a Hypothetical $10,000 Investment

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-800-999-0887 or visiting www.thompsonplumb.com.

Results include the reinvestment of all dividends and capital gains distributions. Investment performance reflects voluntary fee waivers in effect. In the absence of such waivers, total return would be reduced. The performance information reflected in the graph and the table above does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is an unmanaged index commonly used to measure the performance of U.S. stocks. You cannot directly invest in an index.

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Factors Affecting Performance

The Growth Fund’s return for fiscal 2004 was affected by our expectation that large cap stocks would present greater opportunities for appreciation than they actually did.

Back in March 1999, we wrote that “there appears to be as much opportunity to make money in small [mid] cap stocks as there was in large company and healthcare stocks in 1993. Because of this, we have been investing more money in the small [mid] cap area...” In hindsight, this position was correct but was about 12 months early as small cap stocks did not perform well until the middle of 2000. Because we moved smaller in 1999, the Fund’s performance suffered in the short run. In 2003, we wrote that “much of the valuation discrepancy between large and small companies has been erased...” and that “...we have been finding many of our new ideas in the larger company area...” Clearly, we were early with this move as well and our short term results reflect that. However, we remain confident that larger companies offer attractive potential returns vis-à-vis smaller companies, which appear to be fully priced.

In early 2000, the average market capitalization of the stocks in the Growth Fund was roughly $10 billion; as of November 20, 2004, it was roughly $100 billion. In the January 3, 2005 edition of Barron’s , Andrew Bary wrote that “The relative price-earnings multiple of the top 25 stocks in the S&P 500 Index versus the entire index is near a 20-year low” and that “the dividend yield of the top 25 stocks recently stood at 2.2%, versus 1.8% for the entire index – the widest gap in 20 years.” The reason for this is that smaller companies have significantly outperformed large companies over the last five years. For example, the average annual total returns during the past five years for the S&P 500 Index is -1.83%, while the average annual total return for the S&P Small Cap Index is+12.88% over the same period. Granted, large company stocks were extremely overvalued in the late 1990’s and smaller companies were underpriced. However, this effect has been reversed, and smaller companies now appear fully priced compared to larger companies.

The multiple compression that some of the large caps have experienced has been severe. For example, AIG was selling for around $75 per share in late 1999. As of November 30, 2004, it was $63, but its earnings have doubled. Therefore, the P/E has fallen by more than 50% and, at 12.5 times estimated earnings, it looks like a bargain. Coca-Cola stock sold for over $80 per share in 1998; today it is $39 despite the fact that its earnings have increased over 50%. Microsoft is half the price it was in the late 1990’s despite the fact that its earnings are up almost 100%. Pfizer first sold for its current price of $27 in 1998 when it earned $0.67 per share. As of November 30, 2004 it was $28 and should earn $2.13 per share this year, a three-fold increase. Fannie Mae has seen its earnings double in the last 5 years while the stock has only appreciated minimally. Because of the price-earnings multiple compression, we believe that large capitalization, consistent growth stocks are the best place to be invested on a risk adjusted basis. On average, the stocks in the Fund are now selling for roughly 15 times 2005 estimated earnings and 14 times 2006 estimates.

The S&P Small Cap Index is an unmanaged capitalization weighted index that measures the performance of selected US stocks with small market capitalizations. Price-to-earnings ratio is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share.

Current Strategy and Outlook

There are many short term risks to the economy that appear to have been disregarded by the broader markets. First, the average American is saving only 0.2% of his income, which compares to the average of 8% from 1952 to 1992.* This has two harmful effects: it helps create the large trade imbalance with foreign nations as we buy their goods instead of saving and it makes many Americans ill-prepared for retirement or economic shocks. Second, consumer debt levels are at all time highs. Higher short term interest rates, which have been signaled by the Federal Reserve, will reduce discretionary personal income and economic activity. Third, home prices have increased significantly faster than incomes for 4 or 5 years straight. The only way many people can afford homes is to finance them with adjustable rate mortgages and interest only mortgages. For example, only 19% of Californians can afford the state’s median-price home of $460,000.** This creates longer term instability for the value of homes as interest rates rise and should dampen consumer spending through less home equity withdrawals. Fourth, profit margins at industrial and cyclical firms are at all time highs – and their valuations are stretched, too. Competition is alive and well, and this should reduce the profit margins for these sectors. And finally, the Federal Government is spending far more than it receives in taxes, a situation that is likely to reverse at some future point.

While corrections of the above excesses would be healthy for the economy in the long run, they would lower short term economic growth by retuning to more normal levels. Our holdings of Coca-Cola, Fannie Mae, Pfizer, State Street Bank, Microsoft, AIG, First Data, Sysco, Wal-Mart, Fifth Third Bank, etc. would experience significantly less earnings cyclicality than the overall market if economic growth slowed. Therefore, in addition to the attractive valuations of our holdings, we have positioned the Fund to benefit from the slower growth environment we envision.

Please refer to the schedule of investments on page 13 of this report for holdings information. Fund holdings and asset/sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

Sector Weightings at 11/30/04
% of Total Investments

As of November 30, 2004, 100% of the Fund’s net assets were in equity, cash and short-term instruments.

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SELECT FUND INVESTMENT REVIEW

November 30, 2004

		Clint A. Oppermann Portfolio Manager

Performance

The Select Fund generated a total return of 20.26% for the twelve-month period ended November 30, 2004, as compared to 12.85% for the S&P 500 Index. Since inception (December 3, 2001), the Select Fund has generated an average annual total return of 8.73% versus 2.74% for the S&P 500 Index. We continue to be pleased by our relative performance versus the Index but our absolute performance remains below our objectives.

Comparison of Change in Value of a Hypothetical $10,000 Investment

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-800-999-0887 or visiting www.thompsonplumb.com

Results include the reinvestment of all dividends and capital gains distributions. Investment performance reflects voluntary fee waivers in effect. In the absence of such waivers, total return would be reduced. The performance information reflected in the graph and the table above does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is an unmanaged index commonly used to measure the performance of U.S. stocks. You cannot directly invest in an index.

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Factors Affecting Performance

Although many of the companies in the portfolio continue to grow their values at attractive rates with their prices moving up accordingly, much of the outperformance during the last year was fueled by a handful of recent investments. First Health Group agreed to be acquired by Coventry Health and appreciated nearly 15% in one day. Cardinal Health appears to have righted the ship and jumped 20% in one day. Lastly, our investments in the for-profit education companies Corinthian Colleges and Career Education are both up substantially from our purchase prices. Merck was a noteworthy drag on performance over the last year as it fell 40% in one day when it pulled VIOXX from the market.

At this time last year, we had a sizable percentage of the portfolio invested in cash. This cash came in handy earlier this year as a number of high-quality companies momentarily traded at less then 50% of our appraisals. We invested heavily in them and had little excess cash at the end of the third quarter. However, given recent strong stock market performance we’re again finding very little of interest and cash is piling up as we sell companies with stock prices approaching our value estimates. The cash and fixed income position in the portfolio as of November 30, 2004 was 15.40%.

A simple example illustrates why we demand both higher-quality businesses and large discounts to value before we invest. The average business grows its value by about 6.0% a year over the long run. Combining this with an assumed dividend yield of 2.0% gives us an expected return of 8.0% if the business was bought and sold at fair value.

Now suppose that the businesses in the Select Fund are above average and therefore grow slightly faster. For purposes of this illustration let’s say it is 7.0% per year plus a 2.0% dividend yield. Further suppose that the average price paid relative to value is 60% and that price converges to value over 5 years. Under this scenario, the Select Fund’s expected return would be about 20% per year.

Most investors in the Fund, even those that buy and hold, will earn somewhat less than this hypothetical example for a variety of reasons. The first and most important is that the Fund as a whole trades well above 60% of value most of the time. If an investor pays 70% of value on average then expected returns drop to a little over 17%. Netting out the necessary cash drag that comes with the investment discipline as well as commissions and management fees drops the hypothetical return to perhaps 14% to 15% per year. If our average investor comes anywhere close to realizing this return we think that he will be very happy, especially given today’s low-return world.

The examples presented are hypothetical and in no way reflect an actual investment in the Fund nor do they predict future performance of the Fund.

Current Strategy and Outlook

Continued outperformance versus the Index therefore hinges on our twin disciplines – high-quality businesses and cheapness relative to value. The obvious costs to our discipline include extra volatility in results stemming from relatively few portfolio holdings as well as holding cash in rich markets that can move up strongly. We believe, however, that shareholders will continue to earn an excess return that more than compensates for bearing these costs.

Our investment discipline is strict and very few businesses currently have the combination of sufficiently high quality and cheapness relative to value to make it into the Select Fund. We estimate that the businesses in your portfolio are currently trading at about 70% of intrinsic value (on a position-size weighted basis) whereas the S&P 500 is trading at about 110% to 115% of intrinsic value. Because of the absolute discount to value of the Select Fund and the stark relative valuation between the Fund and the Index, we continue to be excited about return prospects.

Please refer to the schedule of investments on page 15 of this report for holdings information. Fund holdings and asset/sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

The Thompson Plumb Select Fund is a non-diversified fund. As a result, the value of the Fund’s shares will fluctuate more widely and tend to be subject to greater market risk than a fund that invests more broadly.

Sector Weightings at 11/30/04
% of Total Investments

As of November 30, 2004, 94.6% of the Fund’s net assets were in equity, cash and short-term instruments.

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BLUE CHIP FUND INVESTMENT REVIEW

November 30, 2004

		David B. Duchow Co-Portfolio Manager

		Timothy R. O’Brien Co-Portfolio Manager

Performance

The Blue Chip Fund generated a total return of 12.40% for the twelve-month period ended November 30, 2004, as compared to 12.85% for the S&P 500 Index. Since inception (August 1, 2002), the Blue Chip Fund has generated an average annual total return of 13.00% as compared to 13.45% for the S&P 500 Index. For the fiscal year, the total return of the Blue Chip Fund has exceeded 85% of all Large-Cap Core Funds nationally.

Lipper Large Cap Core Fund Average is the load-adjusted, equal weighted average performance of all large cap core funds measured by Lipper, Inc. A total of 922 funds were included in this universe during the 12 months ended November 30, 2004.

Comparison of Change in Value of a Hypothetical $10,000 Investment

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-800-999-0887 or visiting www.thompsonplumb.com

Results include the reinvestment of all dividends and capital gains distributions. Investment performance reflects voluntary fee waivers in effect. In the absence of such waivers, total return would be reduced. The performance information reflected in the graph and the table above does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is an unmanaged index commonly used to measure the performance of U.S. stocks. You cannot directly invest in an index.

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Factors Affecting Performance

Most of the Blue Chip Fund’s fiscal year performance came in the last three months of the year as the stock market rallied toward year-end. Individual stock selections also added to the Fund’s performance. The Fund benefited from the addition of out-of-favor growth stocks such as the for-profit secondary school companies, Corinthian Colleges and Career Education, as well as the appreciation of existing positions such as McDonalds, Reuters Group, Catalina Marketing and Computer Sciences. In addition, we added a new position in Kohl’s as concerns about temporary operating issues brought the stock to an attractive valuation in our view. We also significantly increased our holdings in Cardinal Health and Liberty Media over the fiscal year.

The Blue Chip Fund’s performance over the first three quarters of the fiscal year was hurt by our over-weighting of pharmaceuticals and under-weighting in energy and basic materials sectors.

Current Strategy and Outlook

The Blue Chip Fund’s current strategic focus is found in three key principles to our investment process and philosophy. We search out good businesses, run by competent management teams, that sell for good prices.

We believe you must buy average-to-superior quality companies that are growing over the long-term, at reasonable prices, to produce good risk-adjusted returns. A business might have everything going its way with outstanding products, world-class management and exciting new markets, but if the stock is fully valued a “superior” company can become a “poor” investment. We see growth and value as being equal partners. It’s a disciplined approach where we buy companies that are trading at 30-50% below our estimate of value, despite generally possessing better economics than the average company in the S&P 500 Index. We sell positions when the stock reaches 120% of our estimate of value or when a better risk-adjusted opportunity arises. This combination, we believe, will allow us to outperform the market in the long run.

We are cautiously optimistic about the next twelve months. The economy remained strong throughout 2004. The consumer continued to spend and support strong Gross Domestic Production (GDP) growth. The United States economy should continue to grow in 2005 but at a slower rate. Inflation should remain under control. Interest rates on both the short and long end of the yield curve ought to move higher, although we were surprised that long-term interest rates did not move up in 2004. The weakening dollar concerns us, as too often in the last 30 years we have seen currency weakness eventually impact our domestic politics, profits, inflation and interest rates.

Earnings growth in 2005 is estimated at 10% for the S&P 500 Index driven by profit margins that are currently at the highest levels in 50 years. In our view, current profit margins are unsustainable. Even though corporate earnings should continue to improve next year, overall earnings growth may be closer to the historical average of 6-7%. In addition, we anticipate long-term interest rates will move higher over the next twelve months.

Over the next year with earnings growth of the S&P 500 Index slowing, we believe higher quality companies, such as Coca-Cola, Microsoft and the pharmaceutical companies including Merck and Pfizer, will produce good risk-adjusted returns. Some of these companies are providing returns in dividends that are as high as, or higher than, fixed-income investments, and at the same time they have a basic, underlying growing business. We believe our approach of investing in high-quality, inexpensive common stocks will serve our shareholders well over the long term.

Please refer to the schedule of investments on page 16 of this report for holdings information. Fund holdings and asset/sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

Sector Weightings at 11/30/04
% of Total Investments

As of November 30, 2004, 99.6% of the Fund’s net assets were in equity, cash and short-term instruments.

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BOND FUND INVESTMENT REVIEW

November 30, 2004

		John W. Thompson Portfolio Manager

Performance

The Bond Fund generated a total return of 3.90% for the twelve-month period ended November 30, 2004, as compared to 3.23% for the Lehman Brothers Intermediate Government/Credit Index.

Comparison of Change in Value of a Hypothetical $10,000 Investment

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-800-999-0887 or visiting www.thompsonplumb.com.

Results include the reinvestment of all dividends and capital gains distributions. Investment performance reflects voluntary fee waivers in effect. In the absence of such waivers, total return would be reduced. The performance information reflected in the graph and the table above does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Lehman Brothers Intermediate Government/Credit Index is a market value weighted performance benchmark that includes virtually every major U.S. Government and investment-grade rated corporate bond with 1-10 years remaining until maturity. You cannot directly invest in an index.

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Factors Affecting Performance

The Bond Fund’s return was primarily affected by three major factors during 2004. First, the Bond Fund had a very short duration for the year. (Duration, a measure of risk in a bond portfolio, determines the sensitivity of a bond portfolio’s market value to changes in interest rates; the shorter a bond’s duration, the less sensitive the bond’s value is to interest rate fluctuations.) This detracted from returns in the Bond Fund because long-term rates did not rise as we had anticipated. Second, the Adelphia and Charter Communications bonds appreciated significantly in 2004. This was due to improved valuations of cable assets throughout the year. Third, the Bond Fund benefited from tightening yield spreads between corporate bonds and U. S. Government bonds. We have reduced our weightings in corporate bonds and have added significantly to our U.S. Treasuries because the risk-reward tradeoff favors Treasury bonds at this time.

Current Strategy & Outlook

Our current strategy for the Bond Fund is to maintain a short duration, allowing us to reduce interest rate risk. We anticipate that long-term interest rates will rise significantly in the next couple years and believe that preserving principal through owning shorter bonds will be optimal. In addition, because the markets are paying so little for taking credit risk we have been significantly reducing our position in corporate bonds and low-credit-quality in bonds as a percent of the portfolio. The Federal Reserve has recently indicated that they believe short-term interest rates are too low to adequately control the risk of inflation. We interpret this to mean that the Fed will increase short-term interest rates significantly throughout the year. Long-term rates should increase along with short-term rates, at which time we may consider lengthening the duration of the portfolio.

Investments in debt securities typically decrease in value when interest rates rise.

Please refer to the schedule of investments on page 17 of this report for holdings information. Fund holdings and asset/sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

Adelphia Communications bonds are currently in default. When a bond is in default its scheduled interest payments are not currently being paid, and there may be interest due in arrears for previous unpaid interest expense.

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FUND EXPENSES

November 30, 2004

Example

As a shareholder of Thompson Plumb Funds, you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2004 to November 30, 2004.

Actual Expenses

The first line of the table below under each Fund provides information about actual account values and actual expenses for such Fund. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below under each Fund provides information about hypothetical account values and hypothetical expenses based on such Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

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See Notes to Financial Statements.

 13 

 
See Notes to Financial Statements.

15

 
See Notes to Financial Statements.

16

SCHEDULES OF INVESTMENTS (Continued)

November 30, 2004

See Notes to Financial Statements.

17