<PAGE>
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MAIRS AND POWER
GROWTH FUND, INC.
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3RD QUARTER REPORT
September 30, 1999
To Our Shareholders: November 19, 1999
On September 30, 1999, the net asset value per share of Mairs and
Power Growth Fund was $97.24, a 5.3% increase from the year-end valuation after
adjustment for dividend reinvestment. This compares with returns of 5.3% for the
Standard and Poor's 500 Stock Index and 1.3% for the Russell 2000. For the ten
year period ending September 30, the Fund registered an 18.3% average annual
return, outpacing returns of 16.8% for the Standard and Poor's 500, 11.0% for
the Russell 2000 and 14.1% for the average domestic growth fund. The WALL STREET
JOURNAL compiled a list of the 50 Best Performing stock funds for the ten year
period. Mairs and Power Growth Fund was one of 25 diversified funds appearing on
that list.
The U.S. economy had a stellar performance in the third quarter. Gross
Domestic Product advanced at an annual rate of 4.8%. Unemployment declined to
4.1%, the lowest level since 1970. Despite tight labor markets, labor costs as
measured by the Employment Cost Index were up just 3.1% from a year ago. Any
inflationary implications from that pace are easily being held in check by
strong growth in productivity, which rose at an annual rate of 4.2% during the
quarter. However, the Federal Reserve Board has remained intent on slowing
domestic demand and on November 16 took its third step to raise short term
interest rates a quarter percentage point to 5.5%, thus reversing the three cuts
taken in the fall of 1998, which were intended to calm fears of an international
currency crisis. Since that time, foreign economies have stabilized and are now
showing renewed growth. For the first time in years, nearly all the world's
industrialized countries are strengthening and are projected to expand at an
average inflation adjusted 3% rate both in 1999 and 2000. Corporate America
continues its impressive performance. According to a Business Week survey of 900
companies, third quarter earnings rose 24% from the depressed year-earlier
period, powered by strong domestic demand, recovery in Asia and rebounding oil
prices. 1998 third quarter earnings were penalized by several non-recurring
events but after adjustment for these factors, 1999 operating profits rose a
healthy 16%.
The outlook remains favorable for most stocks based on solid corporate
performance and continuing low inflation. Earnings should remain strong in the
fourth quarter and continue to advance throughout 2000. The economy is expected
to slow somewhat during the first quarter of 2000 but still show above trend
growth throughout the year which should enable corporate profits to rise 10% or
better for the year. While we believe that most stocks are fairly priced at
current levels, we also believe that an excessive amount of speculation has
taken place in many internet and high technology related issues which we have
avoided because they do not meet our valuation criteria. We do believe that
technology is transforming our economy resulting in stronger growth, greater
employment opportunities and lower inflation. We also believe that every company
in our portfolio must be an active participant in this technological
transformation in order to maintain and sharpen its competitive edge. As an
example, we cite Wells Fargo which has more internet based customers than any
other bank and yet a very reasonable valuation. Therefore, we believe that we
are fully participating in this technological transformation while largely
avoiding the significant market risk which we see in certain stocks. Based on
our expectations of a solid economy and rising earnings in 2000, we believe that
the broad market will strengthen next year even while speculation may decline.
George A. Mairs
President
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1999
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NUMBER OF MARKET
SHARES COMMON STOCKS VALUE
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<S> <C> <C>
CHEMICAL 5.6%
510,000 Ecolab, Inc. $ 17,403,750
222,500 H. B. Fuller 13,544,688
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30,948,438
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CONSUMER 10.6%
247,000 General Mills, Inc. 20,037,875
490,000 Hormel Foods 20,243,125
282,610 Jostens, Inc. 5,404,916
345,800 The Toro Company 12,924,275
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58,610,191
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DRUGS AND HOSPITAL SUPPLIES 9.9%
282,000 Baxter International, Inc. 16,990,500
215,000 Johnson & Johnson 19,753,125
498,000 Pfizer Inc. 17,896,875
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54,640,500
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FINANCIAL 15.0%
330,000 ReliaStar Financial Corporation 10,972,500
436,000 St. Paul Companies, Inc. 11,990,000
640,000 TCF Financial Corporation 18,280,000
600,000 US Bancorp 18,112,500
600,000 Wells Fargo & Company 23,775,000
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83,130,000
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INFORMATION SERVICES 10.2%
470,000 Deluxe Corp. 15,980,000
981,500 Merrill Corporation 19,568,656
538,400 National Computer Systems Inc. 20,644,275
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56,192,931
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MEDICAL DEVICES 6.5%
652,000 Medtronic, Incorporated 23,146,000
415,000 St. Jude Medical, Inc. * 13,072,500
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36,218,500
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RETAILING 6.6%
368,000 Dayton Hudson Corporation 22,103,000
658,000 SUPERVALU Inc. 14,352,625
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36,455,625
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TECHNOLOGY 16.5%
460,000 Ceridian * 11,442,500
318,050 Emerson Electric Co. 20,096,784
170,000 Honeywell Inc. 18,923,125
1,248,100 MTS Systems Corporation 12,949,037
213,000 Minnesota Mining & Manufacturing Company 20,461,313
618,500 TSI Inc. 7,595,953
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91,468,712
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TELECOMMUNICATIONS 4.5%
594,000 ADC Telecommunications Inc. * 24,910,875
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OTHER INDUSTRIALS 13.4%
384,000 Bemis Company, Inc. 13,008,000
892,300 BMC Industries, Inc. 10,986,444
450,000 Burlington Northern Santa Fe 12,375,000
554,800 Donaldson Company, Inc. 12,864,425
609,850 Graco Inc. 20,010,703
152,200 The Valspar Corporation 4,975,038
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74,219,610
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TOTAL COMMON STOCKS 98.8% $546,795,382
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OTHER ASSETS IN EXCESS OF LIABILITIES 1.2% 6,546,515
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NET ASSETS 100% $553,341,897
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</TABLE>
*Non-income producing
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AT SEPTEMBER 30, 1999
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<S> <C> <C>
ASSETS
Investments as annexed, at market value (cost $395,006,544)...................................... $ 546,795,382
Cash............................................................................................. 6,404,842
Dividends and interest receivable................................................................ 499,036
Receivables for securities sold, not yet delivered............................................... 0
Prepaid expense.................................................................................. 6,928
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553,706,188
LIABILITIES
Accrued management fee................................................. $ 273,696
Accrued custodian and transfer agent fee............................... 90,595
Payable for securities purchased, not yet received..................... 0 364,291
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NET ASSETS
Equivalent to $97.24 per share on 5,690,285 shares outstanding................................... $ 553,341,897
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<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
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<S> <C> <C>
NET ASSETS, December 31, 1998.................................................................... $ 580,460,523
Net investment income, per statement below............................. $ 3,463,706
Reversal of Capital Gain Distribution Paid............................. 1,660
Distribution to Shareholders........................................... (1,992,799) 1,472,567
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Fund shares issued and repurchased:
Received for 579,078 shares issued.................................. 55,574,820
Paid for 1,151,625 shares repurchased............................... (109,012,852) (53,438,032)
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Increase in unrealized net appreciation (depreciation) of investments............................ (3,366,865)
Net gain (or loss) realized from sales of securities............................................. 28,213,704
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NET ASSETS, September 30, 1999................................................................... $ 553,341,897
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<CAPTION>
STATEMENT OF NET INVESTMENT INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
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<S> <C> <C>
INVESTMENT INCOME
Dividends........................................................................................ $ 6,551,347
Interest......................................................................................... 268,891
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6,820,238
EXPENSES
Management fee (Note A)................................................ $ 2,536,771
Fees and expenses of custodian, transfer agent and
dividend disbursing agent (Note A)................................. 419,369
Legal and auditing fees and expenses................................... 21,160
Insurance.............................................................. 9,974
Other Fees and Expenses................................................ 369,258 3,356,532
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NET INVESTMENT INCOME............................................................................ $ 3,463,706
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</TABLE>
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 and is 1/20th of one percent of the net
asset value of the Fund on the last valuation day of the month. The transfer
agent fee was also paid to Firstar Mutual Fund Services, LLC which serves as
transfer agent.
SUPPLEMENTARY INFORMATION: 1) Each director of the Fund not affiliated with
Mairs and Power, Inc. received $16,200.00 compensation for meetings attended
during this nine 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 nine months ended September 30, 1999 aggregated $21,164,702 and
$62,696,472 respectively.
<PAGE>
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MAIRS AND POWER
GROWTH FUND, INC.
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A NO-LOAD FUND
W-1420 First National Bank Building, 332 Minnesota Street,
St. Paul, Minnesota 55101-1363
651-222-8478
Shareholder Information: 800-304-7404
SUMMARY OF FINANCIAL INFORMATION
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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 result from an investment made in the Fund today.
<TABLE>
<CAPTION>
PER SHARE
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DISTRIBUTIONS DIVIDENDS
OF REALIZED FROM NET
SHARES TOTAL NET NET ASSET SECURITIES INVESTMENT
DATES OUTSTANDING ASSETS VALUE GAINS INCOME
------------- ----------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Dec. 31, 1979 914,635 $ 14,104,765 $15.42 - $0.45
Dec. 31, 1980 840,882 14,540,014 17.29 - 0.55
Dec. 31, 1981 861,678 13,148,158 15.26 $0.74 0.60
Dec. 31, 1982 850,942 16,784,217 19.72 0.58 0.50
Dec. 31, 1983 881,592 18,972,177 21.52 0.70 0.48
Dec. 31, 1984 872,069 17,304,204 19.84 0.76 0.46
Dec. 31, 1985 856,738 21,553,457 25.16 0.86 0.46
Dec. 31, 1986 893,850 22,235,453 24.88 2.74 0.40
Dec. 31, 1987 914,139 19,816,097 21.68 2.29 0.48
Dec. 31, 1988 929,039 20,630,251 22.21 1.21 0.41
Dec. 31, 1989 866,584 22,630,081 26.11 1.83 0.43
Dec. 31, 1990 867,432 22,501,587 25.94 0.70 0.42
Dec. 31, 1991 904,023 31,440,529 34.78 1.58 0.39
Dec. 31, 1992 956,814 34,363,306 35.91 1.16 0.40
Dec. 31, 1993 1,006,285 39,081,010 38.84 1.22 0.43
Dec. 31, 1994 1,064,019 41,889,850 39.37 0.98 0.65
Dec. 31, 1995 1,245,325 70,536,880 56.64 1.51 0.56
Dec. 31, 1996 2,161,246 150,161,759 69.48 1.39 0.71
Dec. 31, 1997 4,760,515 412,590,619 86.67 1.69 1.00
Dec. 31, 1998 6,262,832 580,460,523 92.68 1.36 0.72
Sep. 30, 1999 5,690,285 553,341,897 97.24 - 0.35
</TABLE>
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.
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AVERAGE ANNUAL TOTAL RETURNS
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THE AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND (PERIOD ENDED
SEPTEMBER 30, 1999) ARE AS FOLLOWS:
1 YEAR: +23.7% 5 YEARS: +23.4% 10 YEARS: +18.3%
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.
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OFFICERS AND DIRECTORS
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George A. Mairs, III William B. Frels Peter G. Robb
President and Director Secretary and Director Vice-President and Director
Lisa J. Hartzell Charlton Dietz Donald E. Garretson J. Thomas Simonet
Treasurer Director Director Director
