<PAGE>
-------------------------
MAIRS AND POWER
GROWTH FUND, INC.
-------------------------
1ST QUARTER REPORT
March 31, 1999
To Our Shareholders: May 24, 1999
FIRST QUARTER RESULTS
On March 31, 1999, the net asset value per share of Mairs and Power
Growth Fund was $89.24, a decline of 3.7% from the year-end valuation. This
compares with returns of 5.0% for the Standard and Poor's 500 Stock Index and
- -5.8% for the Russell 2000. The stock market has undergone a notable change
since the end of the quarter with investors now focusing on a much broader
group of stocks including many mid-cap equities that had been recent market
laggards. The Fund has had a very strong performance during the past seven
weeks and the year-to-date (May 24) return of 7.1% slightly exceeds that of
the S & P 500. MONEY MAGAZINE devotes much of its June 1999 issue to the
World's Best 100 Mutual Funds and Mairs and Power Growth Fund is included in
this honor roll as it was a year ago when the survey was initiated.
The U.S. economy achieved further strong growth during the first quarter
of the year with Gross Domestic Product rising at a 4.5% annual rate. Once
again, consumer spending led the expansion by rising at an annual rate of
6.7%, the fastest pace in eleven years. Inflation remained tame with consumer
prices rising at an annual rate of 1.5% and unemployment continuing at a 29
year low. While the Federal Reserve Board, as well as most economists, are
wary of declaring this to be a new era, there are some aspects of the economy
that have notably changed. Most past recessions have been preceded by an
excess accumulation of inventories that necessitated a downturn in the
production of manufactured goods. In recent years, businesses have invested
heavily in information technology that has allowed manufacturers to
constantly fine-tune inventory levels to changes in current demand.
Furthermore, the rapidly growing service sector of the economy rarely employs
inventories and consequently inventory induced recessions may no longer
occur. Growth in productivity, or output per hour of work, perhaps the most
important measurement of economic prosperity, surged at an annual rate of 4%
in the first quarter. After World War II, productivity grew 2.8% a year on
average and consequently real personal income for almost all Americans rose
at unprecedented rates. The pace slowed around 1973, and for the next 20
years, productivity growth averaged only 1% a year and real personal incomes
stagnated. Since then, however, the pace has quickened and productivity has
improved by 2% a year since 1995. A continuation of this trend should prolong
the current period of economic expansion now in its ninth year.
While the stock market will continue to experience periodic corrections,
we believe that some strengthening in foreign economies coupled with
continuing well balanced growth in the domestic economy should provide
underlying support for stock prices in the months ahead. Corporate earnings
have strengthened in 1999 and reported earnings for the first quarter
generally exceeded expectations. Corporate restructuring continues to benefit
profit margins and earnings are now expected to rise 8-10% for the year.
Interest rates have moved up moderately in response to economic strength and
some concern over the future rate of inflation. However, we believe that the
federal budget surplus will hold rates in line and perhaps cause some decline
later in the year, which would have a positive effect on stock prices.
George A. Mairs
President
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARCH 31, 1999
- -------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES COMMON STOCKS VALUE
- ---------- ----------------------------------------------- -------------
<S> <C> <C>
CHEMICAL 5.9%
510,000 Ecolab, Inc. $ 18,105,000
222,500 H. B. Fuller 13,113,594
------------
31,218,594
------------
CONSUMER 10.7%
247,000 General Mills, Inc. 18,663,938
490,000 Hormel Foods 17,456,250
442,610 Jostens, Inc. 9,405,462
345,800 The Toro Company 10,849,475
------------
56,375,125
------------
DRUGS AND HOSPITAL SUPPLIES 11.4%
282,000 Baxter International, Inc. 18,612,000
215,000 Johnson & Johnson 20,142,813
156,000 Pfizer Inc. 21,645,000
------------
60,399,813
------------
FINANCIAL 15.6%
330,000 ReliaStar Financial Corporation 14,066,250
426,000 St. Paul Companies, Inc. 13,232,625
640,000 TCF Financial Corporation 16,640,000
520,000 US Bancorp 17,712,500
600,000 Wells Fargo & Company 21,037,500
------------
82,688,875
------------
INFORMATION SERVICES 7.5%
470,000 Deluxe Corp. 13,688,750
981,500 Merrill Corporation 13,127,562
518,400 National Computer Systems Inc. 12,700,800
------------
39,517,112
------------
MEDICAL DEVICES 6.2%
326,000 Medtronic, Incorporated 23,390,500
395,000 St. Jude Medical, Inc. * 9,628,125
------------
33,018,625
------------
RETAILING 7.0%
358,000 Dayton Hudson Corporation 23,851,750
628,000 SUPERVALU Inc. 12,952,500
------------
36,804,250
------------
TECHNOLOGY 15.5%
400,000 Ceridian * 14,625,000
308,050 Emerson Electric Co. 16,307,397
250,000 Honeywell Inc. 18,953,125
1,202,100 MTS Systems Corporation 12,171,262
213,000 Minnesota Mining & Manufacturing Company 15,069,750
618,500 TSI Inc. 5,025,312
------------
82,151,846
------------
TELECOMMUNICATIONS 5.4%
604,000 ADC Telecommunications Inc. * 28,803,250
------------
OTHER INDUSTRIALS 13.4%
384,000 Bemis Company, Inc. 11,928,000
892,300 BMC Industries, Inc. 3,959,581
450,000 Burlington Northern Santa Fe 14,793,750
534,800 Donaldson Company, Inc. 9,626,400
609,850 Graco Inc. 13,454,816
355,800 Imation Corporation * 5,870,700
200,000 Weyerhaeuser Company 11,100,000
------------
70,733,247
------------
TOTAL COMMON STOCKS 98.6% $521,710,737
------------
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4% 7,291,068
------------
NET ASSETS 100% $529,001,805
------------
------------
</TABLE>
*Non-income producing
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AT MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $405,463,833)......................... $521,710,737
Cash.................................................................................. 5,888,749
Dividends and interest receivable..................................................... 474,211
Receivables for securities sold, not yet delivered.................................... 1,257,133
Prepaid expense....................................................................... 19,665
------------
$529,350,495
LIABILITIES
Accrued management fee........................................... $264,080
Accrued custodian and transfer agent fee......................... 84,610
Payable for securities purchased, not yet received............... 0 348,690
----------- ------------
NET ASSETS
Equivalent to $89.24 per share on 5,927,870 shares outstanding....................... $529,001,805
------------
------------
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS FOR THE THREE MONTHS ENDED MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, December 31, 1998....................................................... $580,460,523
Net investment income, per statement below...................... $1,246,249
Reversal of Capital Gain Distribution Paid...................... 1,887
Reversal of Dividend Reinvestment............................... 513 1,248,649
-----------
Fund shares issued and repurchased:
Received for 258,625 shares issued........................... 23,647,512
Paid for 593,587 shares repurchased.......................... (54,270,777) (30,623,265)
-----------
Increase in unrealized net appreciation (depreciation)
of investments................................................................... (38,908,798)
Net gain or (loss) realized from sales of securities................................ 16,824,696
Distribution from net realized gain................................................. 0
------------
NET ASSETS, March 31, 1999.......................................................... $529,001,805
------------
------------
<CAPTION>
STATEMENT OF NET INVESTMENT INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................................................... $ 2,251,965
Interest............................................................................ 113,687
------------
2,365,652
EXPENSES
Management fee (Note A)........................................ $ 834,987
Fees and expenses of custodian, transfer agent and
dividend disbursing agent (Note A).......................... 143,130
Legal and auditing fees and expenses........................... 7,962
Insurance...................................................... 3,345
Other Fees and Expenses........................................ 129,979 1,119,403
----------- ------------
NET INVESTMENT INCOME.............................................................. $1,246,249
------------
------------
</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
advisor 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 paid to Firstar Trust Company which serves as transfer agent.
SUPPLEMENTARY INFORMATION: 1) Each director of the Fund not affiliated with
Mairs and Power, Inc. received $-0- compensation for meetings attended 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, 1999
aggregated $3,984,420 and $24,835,528 respectively.
<PAGE>
-------------------------
MAIRS AND POWER
GROWTH FUND, INC.
-------------------------
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
- --------------------------------------------------------------------------------
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
---------------------------------------------
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
Mar. 31, 1999 5,927,870 529,001,805 89.24 - -
</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.
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
THE AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
(PERIODS ENDED MARCH 31, 1999) ARE AS FOLLOWS:
1 YEAR: -2.8% 5 YEARS: +22.9% 10 YEARS: +19.4%
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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
George A. Mairs, III William B. Frels Peter G. Robb Lisa J. Hartzell
President and Director Secretary and Director Vice-President and Director Treasurer
Charlton Dietz Donald E. Garretson J. Thomas Simonet
Director Director Director
</TABLE>
