N-30B-2 1 a2079970zn-30b_2.txt N-30B-2 MAIRS AND POWER GROWTH FUND, INC. 1ST QUARTER REPORT March 31, 2002 To Our Shareholders: May 13, 2002 Mairs and Power Growth Fund registered a return of 6.8% for the three month period ending March 31, 2002. This compares favorably with returns of 0.3% for the Standard & Poor's 500 Stock Index and 4.3% for the Dow Jones Industrial Average. The average domestic diversified stock fund had a gain of 0.4% according to Lipper, Inc. Our ten year average annual return of 18.4% again placed us on the WALL STREET JOURNAL list of the fifty best performing mutual funds for the past 10-year period and within that list we ranked 6th among the diversified stock funds. The Sunday April 7th NEW YORK TIMES, in their quarterly review of mutual funds, tracked 4,058 funds and found that only 11 posted positive returns in each of the past ten years, beat the 13.3% average annual return of the S&P 500 Index over that period, and had managers in place for at least a decade. The Fund appeared at the top of that list. The April issue of CONSUMER REPORTS contained its annual Mutual Funds Ratings. Only thirteen mid-cap funds were recommended and our fund was one of these. Mid-cap funds are funds containing stocks with an average capitalization size under $15 billion which places our fund in that category. The U.S. economy strengthened notably in the first quarter with Gross Domestic Product rising at an annual rate of 5.8%, the fastest pace in two years. Inventory re-stocking contributed to that gain but other indicators suggest that a solid recovery is underway with inflation remaining well controlled. Consumer spending, which grew a healthy 3.5%, has been the backbone of the economy over the past eighteen months and is driving the recovery. Personal income has remained firm, which has resulted in record levels of home sales as well as car sales. Leading economic indicators are predicting that the economy will continue expanding at a healthy clip for the rest of the year. However, the pace of expansion may slow a bit in the current quarter due to certain factors that boosted the first quarter's advance. First, the inventory swing is unlikely to be as great this quarter as it was in the previous period. And second, mild winter weather pulled some housing activity and consumer spending forward from the spring. However, the economy will continue to benefit from very accommodative monetary policy. Federal Reserve Chairman Alan Greenspan has suggested that the Fed was in no hurry to lift interest rates until even more evidence of a solid recovery was at hand. While investors welcome the strengthening economy, they continue to worry about the level of corporate profits. After nine straight years of increases, operating profits for the companies of Standard & Poor's 500 Stock Index plunged 31% last year. Economists are recognizing forces that could result in stronger-than-expected profits later this year. Surprisingly robust growth in productivity is reducing the cost of labor for each unit of production. First-quarter productivity surged at an 8.6 % annual rate, resulting in a 5.4% decline in unit labor costs, the steepest drop in nearly 20 years. Alan Greenspan believes that productivity gains have fundamentally changed the economy and recent data suggests that high rates of productivity may be a long term trend rather than just a cyclical phenomenon. Certainly, some degree of earnings recovery is underway but profits will probably fall short of their 2000 peak, at the end of the last boom. We continue to believe that the combination of low interest rates and strengthening earnings should be beneficial for financial markets and therefore anticipate firming stock prices in the months ahead. George A. Mairs, President William B. Frels, Secretary and Co-Manager SCHEDULE OF INVESTMENTS MARCH 31, 2002
NUMBER OF SHARES COMMON STOCKS MARKET VALUE ---------------------------- ------------------------------------------------------------ ------------------------ BASIC INDUSTRIES 11.0% 728,100 BMC Industries, Inc. $ 1,201,365 324,000 Bemis Company, Inc. 17,609,400 520,000 Ecolab, Inc. 23,774,400 704,000 H. B. Fuller 21,084,800 542,500 The Valspar Corporation 25,530,050 20,000 Weyerhaeuser Company 1,257,200 --------------- 90,457,215 --------------- CAPITAL GOODS 11.2% 673,600 Donaldson Company, Inc. 27,085,456 747,775 Graco Inc. 30,546,609 1,146,600 MTS Systems Corporation 12,555,270 490,000 Pentair, Inc. 22,035,300 --------------- 92,222,635 --------------- CONSUMER CYCLICAL 9.0% 114,000 Arbitron, Inc. * 3,853,200 966,000 Target Corporation 41,653,920 485,800 The Toro Company 28,953,680 --------------- 74,460,800 --------------- CONSUMER STAPLE 10.3% 674,000 General Mills, Inc. 32,924,900 1,030,000 Hormel Foods Corporation 28,170,500 908,000 SUPERVALU Inc. 23,426,400 --------------- 84,521,800 --------------- FINANCIAL 16.5% 586,000 St. Paul Companies, Inc. 26,868,100 780,000 TCF Financial Corporation 41,035,800 1,200,350 US Bancorp 27,091,899 830,000 Wells Fargo & Company 41,002,000 --------------- 135,997,799 --------------- HEALTH CARE 21.2% 604,000 Baxter International, Inc. 35,950,080 470,000 Johnson & Johnson 30,526,500 842,000 Medtronic, Incorporated 38,066,820 260,000 Merck & Co. 14,970,800 778,000 Pfizer Inc. 30,917,720 315,000 St. Jude Medical, Inc. * 24,302,250 --------------- 174,734,170 --------------- TECHNOLOGY 12.1% 1,446,000 ADC Telecommunications Inc. * 5,885,220 980,000 Ceridian * 21,609,000 650,000 Corning, Inc. * 4,953,000 1,227,030 eFunds Corp. * 19,693,832 458,050 Emerson Electric Co. 26,287,489 548,750 Honeywell International Inc. 21,000,663 --------------- 99,429,204 --------------- UTILITIES 1.7% 310,000 Verizon Communications 14,151,500 --------------- DIVERSIFIED 3.0% 213,000 Minnesota Mining & Manufacturing Company 24,497,130 --------------- TOTAL COMMON STOCKS 96.0% 790,472,253 SHORT TERM INVESTMENTS 4.6% 27,666,258 First American Prime Obligation Fund Class I 27,666,258 10,376,181 Merrill Lynch Institutional Money Market Fund 10,376,181 --------------- 38,042,439 --------------- TOTAL INVESTMENTS 100.6% 828,514,692 OTHER ASSETS AND LIABILITIES (NET) -0.6% (5,080,739) --------------- NET ASSETS 100% $823,433,953 ===============
*Non-income producing STATEMENT OF NET ASSETS AT MARCH 31, 2002 ASSETS Investments at market value (cost $508,659,624) $ 790,472,253 Cash 38,042,439 Dividends receivable 821,429 Receivables for securities sold, not yet delivered 0 Prepaid expense 12,322 -------------- 829,348,443 LIABILITIES Accrued management fee $ 410,346 Accrued custodian and transfer agent fee 76,584 Payable for securities purchased, not yet received 5,427,560 5,914,490 ---------- -------------- NET ASSETS Equivalent to $50.03 per share on 14,189,486 shares outstanding $ 823,433,953 ==============
STATEMENT OF CHANGES IN NET ASSETS FOR THE THREE MONTHS ENDED MARCH 31, 2002 NET ASSETS, December 31, 2001 $ 679,026,689 Net investment income, per statement below $ 1,313,965 Distribution to shareholders 86 1,314,051 Fund shares issued and repurchased: ------------ Received for 1,869,271 shares issued 105,663,429 Paid for 170,749 shares repurchased (9,568,596) 96,094,833 Increase in unrealized net appreciation (depreciation) of investments ------------ 46,205,616 Net gain (or loss) realized from sales of securities 792,764 -------------- NET ASSETS, March 31, 2002 $ 823,433,953 ==============
STATEMENT OF NET INVESTMENT INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2002 INVESTMENT INCOME Dividends $ 2,714,889 Other income 140 ------------ 2,715,029 EXPENSES Management fee (Note A) $ 1,143,017 Fees and expenses of custodian, transfer agent and dividend disbursing agent (Note A) 134,709 Legal and auditing fees and expenses 7,614 Insurance 3,258 Other Fees and Expenses 112,466 1,401,064 ------------ ------------ NET INVESTMENT INCOME $ 1,313,965 ============
NOTE A: The investment advisory fee was paid to Mairs and Power, Inc., which is owned by individuals who are directors and officers of the Fund, for its services as investment adviser. Investment advisory fees are paid to the adviser pursuant to an advisory agreement approved by the Directors of the Fund. The advisory fee is computed each month at an annual rate of 0.60% of the net asset value of the Fund on the last valuation day of the month. The transfer agent fee was paid to U.S. Bancorp Fund Services, LLC which serves as transfer agent. SUPPLEMENTARY INFORMATION: 1) The directors of the Fund not affiliated with Mairs and Power, Inc. received no compensation as there were no meetings scheduled during this three month period. No compensation was paid to any other director or officer of the Fund. 2) No provision has been made for federal income taxes as it is the intention of the Fund to comply with the provisions of the Internal Revenue Code available to investment companies and to make distributions of income and security profits which will be sufficient to relieve it from all or substantially all income taxes. 3) Purchases and sales of investment securities during the three months ended March 31, 2002 aggregated $53,962,492 and $2,801,711 respectively. MAIRS AND POWER GROWTH FUND, INC. A NO-LOAD FUND W1520 First National Bank Building, 332 Minnesota Street, St. Paul, Minnesota 55101-1363 Investment Adviser: 651-222-8478 Shareholder Information: 800-304-7404 www.mairsandpower.com SUMMARY OF FINANCIAL INFORMATION This table covers a period of generally rising common stock prices. The results shown should not be considered as a representation of the dividend income and capital gain or loss which may result from an investment made in the Fund today.
PER SHARE ---------------------------------------------- DISTRIBUTIONS DIVIDENDS OF REALIZED FROM NET SHARES TOTAL NET NET ASSET SECURITIES INVESTMENT DATES OUTSTANDING ASSETS VALUE GAINS INCOME ------------- ----------- ------------ --------- ------------- ---------- Dec. 31, 1982 1,701,884 $ 16,784,217 $ 9.860 $ 0.290 $ 0.250 Dec. 31, 1983 1,763,184 18,972,177 10.760 0.350 0.240 Dec. 31, 1984 1,744,138 17,304,204 9.920 0.380 0.230 Dec. 31, 1985 1,713,476 21,553,457 12.580 0.430 0.230 Dec. 31, 1986 1,787,700 22,235,453 12.440 1.370 0.200 Dec. 31, 1987 1,828,278 19,816,097 10.840 1.145 0.240 Dec. 31, 1988 1,858,078 20,630,251 11.105 0.605 0.205 Dec. 31, 1989 1,733,168 22,630,081 13.055 0.915 0.215 Dec. 31, 1990 1,734,864 22,501,587 12.970 0.350 0.210 Dec. 31, 1991 1,808,046 31,440,529 17.390 0.790 0.195 Dec. 31, 1992 1,913,628 34,363,306 17.955 0.580 0.200 Dec. 31, 1993 2,012,570 39,081,010 19.420 0.610 0.215 Dec. 31, 1994 2,128,038 41,889,850 19.685 0.490 0.325 Dec. 31, 1995 2,490,650 70,536,880 28.320 0.755 0.280 Dec. 31, 1996 4,322,492 150,161,759 34.740 0.695 0.355 Dec. 31, 1997 9,521,030 412,590,619 43.335 0.955 0.390 Dec. 31, 1998 12,525,664 580,460,523 46.340 0.680 0.360 Dec. 31, 1999 11,771,794 546,836,085 46.455 2.740 0.465 Dec. 31, 2000 10,891,038 581,668,419 53.410 4.820 0.545 Dec. 31, 2001 12,490,964 679,026,689 54.360 2.000 0.510 Mar. 31, 2002 14,189,486 823,433,953 50.030 - -
The above data has been adjusted to reflect the 2-for-1 stock split paid to shareholders on October 10, 2001. No adjustment has been made for any income tax payable by shareholders on capital gain distributions accepted in shares. This report is not to be used in connection with the offering of shares of the Fund unless accompanied or preceded by an effective Prospectus. Please call or write if you desire further information. AVERAGE ANNUAL TOTAL RETURNS THE AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND (PERIOD ENDED MARCH 31, 2002) ARE AS FOLLOWS: 1 YEAR: +21.1% 5 YEARS: +16.8% 10 YEARS: +18.4% PAST INVESTMENT RESULTS SHOULD NOT BE TAKEN AS NECESSARILY REPRESENTATIVE OF FUTURE PERFORMANCE. 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. OFFICERS AND DIRECTORS George A. Mairs, III William B. Frels Peter G. Robb President and Director Secretary and Director Vice-President and Director Lisa J. Hartzell Norbert J. Conzemius Charlton Dietz Charles M. Osborne Treasurer Director Director Director J. Thomas Simonet Director