<PAGE>
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MAIRS AND POWER
GROWTH FUND, INC.
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2ND QUARTER REPORT
June 30, 1999
To Our Shareholders: August 27, 1999
SECOND QUARTER RESULTS
On June 30, 1999, the net asset value per share of Mairs and Power Growth
Fund was $101.63, a 10.0% increase from the year-end valuation after adjustment
for reinvestment of the June dividend. This compares with returns of 12.3% for
the Standard and Poor's 500 Stock Index and 8.5% for the Russell 2000. For the
ten year period ending June 30, the Fund registered a 20.1% average annual
return, outpacing returns of 18.8% for the Standard and Poor's 500 Stock Index
and 12.4% for the Russell 2000, as well as 15.0% for the average U.S. stock
fund.
FORBES magazine, in the August 23 issue, presented its annual survey of
mutual funds covering 1,200 funds. The survey includes a list of twenty stock
funds designated Best Buys based on three things that matter: risk, returns and
costs. For the third consecutive year, Mairs and Power Growth Fund appeared on
this list. These twenty funds were also ranked for tax efficiency and the Fund
was one of only two that received an A grade in that category. SMART MONEY
magazine featured the Best Mutual Funds in its September issue. Twenty-six stock
funds were designated finalists in that survey based on performance, tax
efficiency, management experience and low expenses. Mairs and Power Growth Fund
ranked 8th out of these twenty-six funds.
The U.S. economy continues its remarkable performance. During the first six
months of the year, Gross Domestic Product rose at an annual rate of 3.1% after
adjustment for inflation. Consumer spending and business investment remain
strong with leading indicators of future activity pointing to solid growth
during the balance of the year. The economy is now in the ninth year of
expansion and economists are in general agreement that growth should continue at
least through next year. The inflation component of G.D.P. registered a 1.5%
annual rate of increase during the six month period, reflecting an overall
absence of inflationary pressures. However, the Federal Reserve Board has taken
two steps in recent weeks to raise short term interest rates, partially
reversing the reductions made in late 1998 during a period of global distress.
Stock prices have risen this year, properly reflecting investor confidence
in the durability of the economic and profit expansions. Corporate earnings have
been robust and have generally been meeting or exceeding expectations. Intense
world-wide competition has prevented companies from boosting earnings through
price increases which has encouraged cost-cutting through innovation and heavy
investment in information technology. This, in turn, has increased productivity,
which holds inflation at bay. While the stock market is always subject to
periodic corrections, we believe that solid earnings growth should provide an
upward bias to stock prices in the final months of the year.
George A. Mairs
President
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1999
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<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES COMMON STOCKS VALUE
----------- ---------------------------------------- --------------
<S> <C> <C>
CHEMICAL 6.5%
510,000 Ecolab, Inc. $ 22,248,750
222,500 H. B. Fuller 15,213,437
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37,462,187
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CONSUMER 10.2%
247,000 General Mills, Inc. 19,852,625
490,000 Hormel Foods 19,722,500
282,610 Jostens, Inc. 5,952,473
345,800 The Toro Company 13,615,875
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59,143,473
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DRUGS AND HOSPITAL SUPPLIES 9.7%
282,000 Baxter International, Inc. 17,096,250
215,000 Johnson & Johnson 21,070,000
166,000 Pfizer Inc. 18,218,500
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56,384,750
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FINANCIAL 15.5%
330,000 ReliaStar Financial Corporation 14,437,500
426,000 St. Paul Companies, Inc. 13,552,125
640,000 TCF Financial Corporation 17,840,000
540,000 US Bancorp 18,360,000
600,000 Wells Fargo & Company 25,650,000
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89,839,625
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INFORMATION SERVICES 8.8%
470,000 Deluxe Corp. 18,300,625
981,500 Merrill Corporation 14,231,750
538,400 National Computer Systems Inc. 18,171,000
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50,703,375
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MEDICAL DEVICES 6.8%
326,000 Medtronic, Incorporated 25,387,250
395,000 St. Jude Medical, Inc. * 14,071,875
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39,459,125
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RETAILING 6.7%
348,000 Dayton Hudson Corporation 22,620,000
628,000 SUPERVALU Inc. 16,131,750
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38,751,750
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TECHNOLOGY 16.8%
400,000 Ceridian * 13,075,000
308,050 Emerson Electric Co. 19,368,644
210,000 Honeywell Inc. 24,333,750
1,202,100 MTS Systems Corporation 14,650,594
213,000 Minnesota Mining & Manufacturing Company 18,517,687
618,500 TSI Inc. 7,190,063
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97,135,738
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TELECOMMUNICATIONS 4.4%
554,000 ADC Telecommunications Inc. * 25,241,625
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OTHER INDUSTRIALS 13.6%
384,000 Bemis Company, Inc. 15,264,000
892,300 BMC Industries, Inc. 9,201,844
450,000 Burlington Northern Santa Fe 13,950,000
534,800 Donaldson Company, Inc. 13,102,600
609,850 Graco Inc. 17,914,344
265,800 Imation Corporation * 6,595,162
74,200 The Valspar Corporation 2,819,600
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78,847,550
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TOTAL COMMON STOCKS 99.0% $572,969,198
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OTHER ASSETS IN EXCESS OF LIABILITIES 1.0% 5,852,914
------------
NET ASSETS 100% $578,822,112
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------------
</TABLE>
*Non-income producing
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AT JUNE 30, 1999
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<S> <C> <C>
ASSETS
Investments as annexed, at market value (cost $392,144,719)...................................... $ 572,969,198
Cash............................................................................................. 5,457,634
Dividends and interest receivable................................................................ 509,583
Receivables for securities sold, not yet delivered............................................... 248,792
Prepaid expense.................................................................................. 7,114
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579,192,321
LIABILITIES
Accrued management fee................................................. $ 285,051
Accrued custodian and transfer agent fee............................... 85,158
Payable for securities purchased, not yet received..................... 0 370,209
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NET ASSETS
Equivalent to $101.63 per share on 5,695,339 shares outstanding.................................. $ 578,822,112
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<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED JUNE 30, 1999
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<S> <C> <C>
NET ASSETS, December 31, 1998.................................................................... $ 580,460,523
Net investment income, per statement below............................. $ 2,365,235
Reversal of Capital Gain Distribution Paid............................. 1,660
Distribution to Shareholders........................................... (1,992,917) 373,978
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Fund shares issued and repurchased:
Received for 401,998 shares issued.................................. 37,596,678
Paid for 969,492 shares repurchased................................. (90,542,826) (52,946,148)
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Increase in unrealized net appreciation (depreciation) of investments............................ 25,668,776
Net gain (or loss) realized from sales of securities............................................. 25,264,983
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NET ASSETS, June 30, 1999........................................................................ $ 578,822,112
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--------------
<CAPTION>
STATEMENT OF NET INVESTMENT INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999
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<S> <C> <C>
INVESTMENT INCOME
Dividends........................................................................................ $ 4,430,006
Interest......................................................................................... 189,414
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4,619,420
EXPENSES
Management fee (Note A)................................................ $ 1,686,278
Fees and expenses of custodian, transfer agent and
dividend disbursing agent (Note A)................................. 285,325
Legal and auditing fees and expenses................................... 15,934
Insurance.............................................................. 6,690
Other Fees and Expenses................................................ 259,958 2,254,185
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NET INVESTMENT INCOME............................................................................ $ 2,365,235
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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 $10,800 compensation for meetings attended during
this six 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 six months ended June 30, 1999 aggregated $8,852,140 and $50,297,013
respectively.
<PAGE>
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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
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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
---------------------------------------------
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
Jun. 30, 1999 5,695,339 578,822,112 101.63 - 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
THE AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND (PERIODS ENDED
JUNE 30,1999) ARE AS FOLLOWS:
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1 YEAR: 12.3% 5 YEARS: +25.6% 10 YEARS: +20.1%
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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
Treasurer Director Director
J. Thomas Simonet
Director
