-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CJoBJI58QJpDqipB8uaLsyYe1JGDPRNh9bOld5XyFlbjwaUMIkYQQPHmxubsPMir QrLuWnD5NrS/dnNxb8Fcpg== 0001047469-99-007123.txt : 19990225 0001047469-99-007123.hdr.sgml : 19990225 ACCESSION NUMBER: 0001047469-99-007123 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIRS & POWER GROWTH FUND INC CENTRAL INDEX KEY: 0000061628 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 416019924 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00802 FILM NUMBER: 99548615 BUSINESS ADDRESS: STREET 1: 332 MINNESOTA ST STE W-2062 STREET 2: FIRST NATIONAL BANK BUILDING CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6122228478 MAIL ADDRESS: STREET 1: FIRST NATIONAL BANK BUILDING W-2062 STREET 2: 332 MINNESOTA STREET CITY: ST PAUL STATE: MN ZIP: 55101 FORMER COMPANY: FORMER CONFORMED NAME: MAIRS & POWER FUND INC DATE OF NAME CHANGE: 19680607 N-30D 1 FORM N-30D ----------------- MAIRS AND POWER GROWTH FUND, INC. ----------------- ANNUAL REPORT December 31, 1998 W-1420 First National Bank Building 332 Minnesota Street St. Paul, Minnesota 55101 651-222-8478 February 19, 1999 TO OUR SHAREHOLDERS: In 1998 the Mairs & Power Growth Fund registered a return of 9.4%. The Standard & Poor's 500 Stock Index return for the year was 28.7%. However, that index is highly dependent on the performance of its largest stocks and last year large stocks dramatically outperformed the market. Just fifteen of the largest stocks in the index accounted for half of the return. The median return of all 500 Standard & Poor's stocks was only 6.6%. Mairs and Power Growth Fund is a blend of large-cap, mid-cap and small-cap stocks. Therefore, mutual fund measurement firms such as MORNINGSTAR characterize it as a mid-cap fund. MORNINGSTAR has rated our fund consistently as a five-star fund for the five years it has been included in their coverage. FORBES Magazine, in the February 8th issue, listed just twelve U.S. Stock Funds as Best Buys based both on performance as well as low operating costs. Mairs & Power Growth Fund was one of the twelve funds and the only mid-cap fund in the group. BUSINESS WEEK Magazine, in the November 9th issue, recommended a group of twelve stock funds and Mairs & Power Growth Fund was included in that list as well. Our stock selection emphasizes companies with strong earnings prospects and attractive share valuations. Because of our long-term orientation, we are willing to hold certain underperforming stocks for various periods so long as we are confident of the earnings growth. While many large-capitalization stocks appear generously valued, we believe that the recent flight to quality on the part of investors has left many mid and small-capitalization stocks clearly undervalued. The Fund has produced a 20.5% compound annual rate of return for the past ten year period and is one of a very small number of diversified stock funds to have outperformed the Standard and Poor's 500 Stock Index for that period. The U.S. economy continues to be the envy of the entire world. Gross Domestic Product in 1998 rose 3.9% marking the third consecutive year in which economic growth approximated 4%. While economists believe that growth may moderate this year, there is little evidence of this yet and consensus expectations suggest a fourth year of above-average growth. Labor markets remain strong and the unemployment rate is at a 30 year low. However, inflation remains modest with consumer prices last year rising less than 2% for the second year in a row. Real wage income rose 5.5% a year for the past two years which has supported strong consumer spending that rose 5.2% during 1998. The 1990's have witnessed the strongest capital spending cycle of the past 50 years. Since the expansion began in 1991, capital-goods purchases have risen at an average rate of 11% per year and were up 17% last year. The technology sector has driven this cycle with spending increasing at an average of 19% a year since 1991. This surge in capital spending has resulted in much improved gains in worker productivity which has risen about 2% annually in each of the past three years, double the rate in the 1970s and 1980s. In the manufacturing sector, productivity has risen almost 5% in each of the past two years and has largely offset rising wages and other compensation. Together with a labor-force growth rate of 1%, the higher productivity means the economy can grow 3% a year or more without rekindling inflation. We expect the economy to expand beyond 1999, making this the longest period of economic growth in the nation's history. 1 We believe that the outlook for stock prices in 1999 continues to be favorable. Asian economies appear to be leveling and should begin a slow recovery. Europe will be strengthened by monetary union although growth will be moderate. Inflation should remain very low due to lower energy and commodity prices as well as improving productivity which should allow interest rates to remain stable. Corporate earnings are again strengthening, having increased at a 5% rate in last year's final quarter, and we expect this trend to continue throughout 1999. Against this background, we expect another year of rising stock prices. While common stocks are always subject to volatility, they provide investors with superior returns. Since 1945, U.S. stocks have produced an inflation-adjusted annualized return of 9.3%, clearly exceeding that of any other major asset class. George A. Mairs President COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FUND, S & P 500 INDEX, AND THE CONSUMER PRICE INDEX [CHART]
MPG S&P CPI 1988 10000 10000.00 10000.00 1989 12805.82 12807.00 28.07% 13160.00 31.60% 10480.00 4.80% 1990 13276.74 13277.02 3.67% 12738.88 (3.20%) 11045.92 5.40% 1991 18859.73 18860.00 42.05% 16624.24 30.50% 11509.85 4.20% 1992 20338.20 20338.63 7.84% 17904.30 7.70% 11855.14 3.00% 1993 22953.47 22954.17 12.86% 19712.64 10.10% 12175.23 2.70% 1994 24246.37 24246.49 5.63% 19968.90 1.30% 12503.96 2.70% 1995 36204.06 36204.86 49.32% 27465.23 37.54% 12816.56 2.50% 1996 45763.49 45762.95 26.40% 33776.74 22.98% 13239.51 3.30% 1997 60214.85 58874.03 28.65% 45058.17 33.40% 13464.58 1.70% 1998 64390.36 64390.53 9.37% 57989.87 28.70% 13680.01 1.60%
Average Annual Total Returns PAST INVESTMENT RESULTS 1 Year 5 Year 10 Year SHOULD NOT BE TAKEN AS 9.4% 22.9% 20.5% NECESSARILY REPRESENTATIVE OF FUTURE PERFORMANCE. 2 FINANCIAL HIGHLIGHTS (SELECTED PER SHARE DATA AND RATIOS -- FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED DECEMBER 31 1998 1997 1996 1995 1994 ------------------------------------------------------------------------------ PER SHARE Net asset value, beginning of year $86.67 $69.48 $56.64 $39.37 $38.84 Investment operations: Net investment income 0.86 (*) 1.03 0.75 0.51 0.67 Net realized and unrealized gains (losses) on investment 7.23 18.85 14.19 18.83 1.49 ---- ----- ----- ----- ---- TOTAL FROM INVESTMENT OPERATIONS 8.09 19.88 14.94 19.34 2.16 Less distributions: Dividends (from net investment income) (0.72) (1.00) (0.71) (0.56) (0.65) Distributions (from capital gains) (1.36) (1.69) (1.39) (1.51) (0.98) ----- ----- ----- ----- ----- TOTAL DISTRIBUTIONS (2.08) (2.69) (2.10) (2.07) (1.63) ----- ----- ----- ----- ----- NET ASSET VALUE, END OF YEAR $92.68 $86.67 $69.48 $56.64 $39.37 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL INVESTMENT RETURN 9.4% 28.7% 26.4% 49.3% 5.6% --- ---- ---- ---- --- --- ---- ---- ---- --- NET ASSETS, END OF YEAR (000's OMITTED) $580,461 $412,591 $150,162 $70,537 $41,890 RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets 0.82% 0.84% 0.89% 0.99% 0.99% Ratio of net investment income to average net assets 0.97% 0.98% 1.18% 1.00% 1.74% Portfolio turnover rate 2.04% 5.07% 3.19% 3.87% 5.09%
(*) Net investment income per share represents net investment income divided by the average shares outstanding throughout the period. 3 STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1998
ASSETS Common Stocks as annexed, at market value (cost $408,324,610) $563,480,312 Cash 16,813,411 Dividends and interest receivable 526,355 Receivables for securities sold, not yet delivered 0 Prepaid expense 0 ------------ Total assets 580,820,078 LIABILITIES Accrued management fee 277,236 Accrued custodian and transfer agent fee 82,319 Payable for securities purchased, not yet received 0 ------------ Total liabilities 359,555 NET ASSETS Equivalent to $92.68 per share on 6,262,832 shares outstanding $580,460,523 ------------ ------------ NET ASSETS CONSIST OF: Capital stock $ 62,628 Additional paid-in capital 424,646,283 Accumulated undistributed net investment income 583,348 Accumulated undistributed net realized gain (loss) on investment transactions 12,562 Net unrealized appreciation (depreciation) of investments 155,155,702 ------------ TOTAL NET ASSETS $580,460,523 ------------ CAPITAL STOCK (par value $.01 a share) Shares authorized 25,000,000 ------------ ------------
SEE ACCOMPANYING NOTES. 4 SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
MARKET NUMBER VALUE OF SHARES COMMON STOCK (NOTE2a.) --------- ------------ ----------- CHEMICAL 5.2% 540,000 Ecolab, Inc. $19,541,250 222,500 H. B. Fuller 10,707,812 ----------- 30,249,062 CONSUMER 9.8% 247,000 General Mills, Inc. 19,204,250 490,000 Hormel Foods 16,047,500 442,610 Jostens, Inc. 11,590,849 345,800 The Toro Company 9,855,300 ----------- 56,697,899 DRUGS AND HOSPITAL SUPPLIES 9.8% 282,000 Baxter International, Inc. 18,136,125 215,000 Johnson & Johnson 18,033,125 166,000 Pfizer Inc. 20,822,625 ----------- 56,991,875 FINANCIAL 14.8% 330,000 ReliaStar Financial Corporation 15,221,250 416,000 St. Paul Companies, Inc. 14,456,000 640,000 TCF Financial Corporation 15,480,000 480,000 U.S. Bancorp 17,040,000 590,000 Wells Fargo & Company 23,563,125 ----------- 85,760,375 INFORMATION SERVICES 9.8% 470,000 Deluxe Corp. 17,184,375 965,000 Merrill Corporation 18,636,563 568,400 National Computer Systems Inc. 21,030,800 ----------- 56,851,738 5 SCHEDULE OF INVESTMENTS (CONT.) MARKET NUMBER VALUE OF SHARES COMMON STOCK (CONTINUED) (NOTE2a.) --------- ----------------------- --------- MEDICAL DEVICES 6.4% 356,000 Medtronic, Incorporated $26,433,000 395,000 St. Jude Medical, Inc. * 10,936,563 ----------- 37,369,563 RETAILING 6.7% 398,000 Dayton Hudson Corporation 21,591,500 628,000 SUPERVALU Inc. 17,584,000 ----------- 39,175,500 TECHNOLOGY 15.5% 230,000 Ceridian * 16,056,875 308,050 Emerson Electric Co. 18,637,025 250,000 Honeywell Inc. 18,828,125 1,157,100 MTS Systems Corporation 15,620,850 213,000 Minnesota Mining & Manufacturing Company 15,149,625 618,500 TSI Inc. 5,411,875 ----------- 89,704,375 TELECOMMUNICATIONS 4.4% 729,000 ADC Telecommunications Inc. * 25,332,750 OTHER INDUSTRIALS 14.7% 374,000 Bemis Company, Inc. 14,188,625 892,300 BMC Industries, Inc. 5,576,875 450,000 Burlington Northern Santa Fe 15,187,500 534,800 Donaldson Company, Inc. 11,097,100 569,850 Graco Inc. 16,810,575 355,800 Imation Corporation * 6,226,500 320,000 Weyerhaeuser Company 16,260,000 ----------- 85,347,175 ----------- TOTAL COMMON STOCKS 97.1% 563,480,312 OTHER ASSETS IN EXCESS OF LIABILITIES 2.9% 16,980,211 ----------- NET ASSETS 100% $580,460,523 ----------- -----------
*Non-income producing SEE ACCOMPANYING NOTES. 6 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME Income: Dividends $ 7,854,258 Interest 1,320,167 ------------ TOTAL INCOME $ 9,174,425 Expenses: Investment advisory fees (NOTE 5) 3,112,094 Administrative fees 519,917 Transfer agent fees (NOTE 5) 436,061 Custodian fees 104,875 Legal and audit fees 31,847 Other fees and expenses 13,380 ------------ TOTAL EXPENSES 4,218,174 ------------ NET INVESTMENT INCOME 4,956,251 REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4) Net realized gains on investments sold 8,384,559 Unrealized appreciation of investments 32,342,988 ------------ NET GAIN ON INVESTMENTS 40,727,547 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $ 45,683,798 ------------ ------------
SEE ACCOMPANYING NOTES. 7 STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31 1998 1997 ---------------------------------------- OPERATIONS Net investment income $ 4,956,251 $ 2,734,258 Net realized gains on investments sold 8,384,559 8,848,249 Unrealized appreciation of investments 32,342,988 55,004,307 ------------- ------------- INCREASE IN NET ASSETS FROM OPERATIONS 45,683,798 66,586,814 DISTRIBUTIONS TO SHAREHOLDERS From net investment income (4,372,903) (3,227,197) Short-term gain distributed as ordinary income -- (1,034,180) From net realized gains (8,371,997) (7,830,288) ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (12,744,900) 12,091,665 CAPITAL STOCK TRANSACTIONS Proceeds from shares sold 211,621,886 221,582,938 Reinvestment of distributions from net investment income and net realized gains 11,767,067 10,964,936 Cost of shares redeemed (88,457,947) (24,614,163) ------------- ------------- INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS 134,931,006 207,933,711 ------------- ------------- TOTAL INCREASE IN NET ASSETS 167,869,904 262,428,860 NET ASSETS Beginning of year 412,590,619 150,161,759 ------------- ------------- End of year (including undistributed investment income of $583,348 and $45,826, respectively) $ 580,460,523 $ 412,590,619 ------------- ------------- ------------- ------------- CHANGES IN CAPITAL STOCK Shares sold 2,375,392 2,777,232 Shares issued for reinvested distributions 128,379 127,099 Shares redeemed (1,001,454) (305,062) ------------- ------------- NET INCREASE IN SHARES 1,502,317 2,599,269 ------------- ------------- ------------- -------------
SEE ACCOMPANYING NOTES. 8 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 Note 1 -- The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, no-load, open-end management investment company. The investment objective of the Fund is to provide shareholders with a diversified holding of securities which appear to offer marked possibilities for long-term appreciation. Normally these will be common stocks. Note 2 -- Significant accounting polices of the Fund are as follows: (a) Market value of investments is based on the last reported sale price on December 31 for listed securities traded on one or more of the national securities exchanges on which such securities are primarily traded or at the last sale price on the national securities market. For securities where quotations are not readily available, or where the last quoted sale price is not considered representative of the value of the security if it were to be sold on that day, the security will be valued at fair value as determined in good faith by the adviser, Mairs and Power, Inc. Security transactions are recorded on the trade date, the date on which securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses are reported on an identified cost basis. (b) The Fund is a "regulated investment company" as defined in Subtitle A, Chapter 1, Subchapter M of the Internal Revenue Code, as amended. 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 applicable to investment companies and to make distributions of income and security gains sufficient to relieve it from all or substantially all income taxes. (c) Effective January 1, 1998, the Fund discontinued the accounting practice of equalization, which it had used since its inception. Equalization is a practice whereby a portion of the proceeds from sales and costs of redemptions of Fund shares, equivalent on a per-share basis to the amount of the undistributed net investment income, is charged or credited to undistributed net investment income. 9 NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998 The balance of equalization included in undistributed net investment income at the date of change, which was $592,726, was reclassified to additional paid-in capital. Such reclassification had no effect on net assets, results of operations, or net asset value per share of the Fund. (d) Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Accordingly, cumulative permanent book and tax basis differences relating to shareholder distributions have been reclassified between accumulated undistributed net investment income, accumulated undistributed net realized gain on investment transactions and additional paid-in capital. Net investment income, net realized gains on investments sold, and net assets were not affected by this reclassification. Note 3 -- Purchases and sales of investment securities, excluding short-term securities, during the year ended December 31, 1998 aggregated $142,126,463 and $9,944,245, respectively. Note 4 -- Net unrealized appreciation on investments for Federal income tax purposes aggregated $155,155,702, of which $173,765,438 related to appreciated investment securities and $18,609,736 related to depreciated investment securities. Aggregate cost of investments for federal income tax purposes was $408,324,610. Note 5 -- The investment advisory fees were 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 were paid to the adviser pursuant to an advisory agreement approved by the directors of the Fund. The advisory fee is computed each month and is 1/20th of one percent of the net asset value of the Fund on the last valuation day of the month. Transfer agent fees were paid to Firstar Trust Company who serves as transfer agent. Directors of the Fund not affiliated with Mairs and Power, Inc. received compensation for meetings attended totaling $54,000 in 1998. No compensation was paid to any other director or officer of the Fund. 10 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders Mairs and Power Growth Fund, Inc. We have audited the accompanying statement of assets and liabilities of Mairs and Power Growth Fund, Inc. (the Fund), including the schedule of investments, as of December 31, 1998, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Mairs and Power Growth Fund, Inc. at December 31, 1998, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP January 22, 1999 11 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 or capital gain or loss which may be realized from an investment made in the Fund today.
PER SHARE ------------------------------------------------------------------------ PERFORMANCE OF DISTRIBUTIONS OF DIVIDENDS FROM AN ASSUMED SHARES REALIZED NET INVESTMENT INVESTMENT OF DATES OUT-STANDING TOTAL NET ASSETS NET ASSET VALUE SECURITIES GAINS INCOME $10,000* ------------- ------------ ---------------- --------------- ---------------- -------------- --------------- Dec. 31, 1974 1,123,449 $ 8,115,558 $ 7.22 $ 0.24 $ 6,575 Dec. 31, 1975 1,114,754 $ 10,758,751 $ 9.65 $ 0.24 $ 9,016 Dec. 31, 1976 1,078,864 $ 13,821,528 $ 12.81 $ 0.26 $ 12,235 Dec. 31, 1977 1,057,928 $ 13,145,624 $ 12.43 $ 0.33 $ 12,194 Dec. 31, 1978 998,265 $ 13,282,487 $ 13.31 $ 0.35 $ 13,396 Dec. 31, 1979 914,635 $ 14,104,765 $ 15.42 $ 0.45 $ 16,001 Dec. 31, 1980 840,882 $ 14,540,014 $ 17.29 $ 0.55 $ 18,579 Dec. 31, 1981 861,678 $ 13,148,158 $ 15.26 $ 0.74 $ 0.60 $ 17,874 Dec. 31, 1982 850,942 $ 16,784,217 $ 19.72 $ 0.58 $ 0.50 $ 24,874 Dec. 31, 1983 881,592 $ 18,972 177 $ 21.52 $ 0.70 $ 0.48 $ 28,794 Dec. 31, 1984 872,069 $ 17,304,204 $ 19.84 $ 0.76 $ 0.46 $ 28,212 Dec. 31, 1985 856,738 $ 21,553,457 $ 25.16 $ 0.86 $ 0.46 $ 38,022 Dec. 31, 1986 893,850 $ 22,235,453 $ 24.88 $ 2.74 $ 0.40 $ 42,410 Dec. 31, 1987 914,139 $ 19,816,097 $ 21.68 $ 2.29 $ 0.48 $ 41,421 Dec. 31, 1988 929,039 $ 20,630,251 $ 22.21 $ 1.21 $ 0.41 $ 45,555 Dec. 31, 1989 866,584 $ 22,630,081 $ 26.11 $ 1.83 $ 0.43 $ 58,341 Dec. 31, 1990 867,432 $ 22,501,587 $ 25.94 $ 0.70 $ 0.42 $ 60,482 Dec. 31, 1991 904,023 $ 31,440,529 $ 34.78 $ 1.58 $ 0.39 $ 85,915 Dec. 31, 1992 956,814 $ 34,363,306 $ 35.91 $ 1.16 $ 0.40 $ 92,651 Dec. 31, 1993 1,006,285 $ 39,081,010 $ 38.84 $ 1.22 $ 0.43 $ 104,565 Dec. 31, 1994 1,064,019 $ 41,889,850 $ 39.37 $ 0.98 $ 0.65 $ 110,454 Dec. 31, 1995 1,245,325 $ 70,536,880 $ 56.64 $ 1.51 $ 0.56 $ 164,927 Dec. 31, 1996 2,161,246 $ 150,161,759 $ 69.48 $ 1.39 $ 0.71 $ 208,475 Dec. 31, 1997 4,760,515 $ 412,590,619 $ 86.67 $ 1.69 $ 1.00 $ 268,203 Dec. 31, 1998 6,262,832 $ 580,460,523 $ 92.68 $ 1.36 $ 0.72 $ 293,330
*Assumes the reinvestment of all income dividends and capital gain distributions for a $10,000 investment made at the beginning of 1974. - ------------------------------------------------------------------------------- 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 (PERIODS ENDED DECEMBER 31, 1998) ARE AS FOLLOWS: 1 YEAR: + 9.4% 5 YEARS: + 22.9% 10 YEARS: + 20.5% THE TOTAL RETURN DATA REPRESENTS PAST PERFORMANCE, AND 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. - -------------------------------------------------------------------------------- 12 OFFICERS AND DIRECTORS ---------------------- George A. Mairs, III ....................................President and Director William B. Frels ........................................Secretary and Director Peter G. Robb ......................................Vice-President and Director Lisa J. Hartzell .....................................................Treasurer Charlton Dietz ........................................................Director Donald E. Garretson ...................................................Director J. Thomas Simonet .....................................................Director INVESTMENT ADVISER CUSTODIAN Mairs and Power, Inc. Firstar Bank Milwaukee W-1420 First National Bank Building 615 East Michigan Street 332 Minnesota Street P. O. Box 701 Saint Paul, Minnesota 55101 Milwaukee, Wisconsin 53201-0701 INDEPENDENT AUDITORS Ernst & Young, LLP 1400 Pillsbury Center 200 South Sixth Street Minneapolis, Minnesota 55402 TRANSFER AGENT -------------- (REGULAR MAIL ADDRESS) (OVERNIGHT OR EXPRESS MAIL ADDRESS) Firstar Mutual Fund Services, LLC Firstar Mutual Fund Services, LLC 615 East Michigan Street 615 East Michigan Street P. O. Box 701 3rd Floor Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202 SHAREHOLDER ACCOUNT INFORMATION AND INQUIRIES 1-800-304-7404 13 MAIRS AND POWER GROWTH FUND, INC. -----END PRIVACY-ENHANCED MESSAGE-----