<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1999.
Registration Number 2-18269
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 44
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 44
Mairs and Power Balanced Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
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W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (651) 222-8478
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- --------------------------------------------------------------------------------
William B. Frels, President
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
(Name and Address of Agent for Service)
with copies to:
Christopher C. Cleveland, Esq.
Briggs and Morgan, P.A.
2400 IDS Center
Minneapolis, MN 55402
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- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock, $.10 par value per share
<PAGE>
------------------------
MAIRS AND POWER
BALANCED FUND, INC.
------------------------
PROSPECTUS
April 30, 1999
W-1420 FIRST NATIONAL BANK BLDG.
332 MINNESOTA STREET
ST. PAUL, MN 55101-1363
651-222-8478
OBJECTIVE
The objective of the Fund is to provide shareholders with regular current
income, the potential for capital appreciation and a moderate level of
volatility by investing in a diversified list of securities including bonds,
preferred stocks, common stocks, and other securities convertible into common
stock.
ADDITIONAL INFORMATION ABOUT THE FUND
This Prospectus, which should be kept for future reference, is designed to set
forth the information you should know before you invest. A "Statement of
Additional Information" dated April 30, 1999, contains more information about
the Fund and has been filed with the Securities and Exchange Commission. It is
incorporated by reference into this Prospectus. You may obtain a copy of the
Statement, without charge, by writing to the Fund or by calling the Fund at
651-222-8478.
FEES AND EXPENSES
The Fund is offered on a no-load basis, which means that you pay no sales charge
for the purchase or sale of Fund shares and no 12b-1 marketing fees. You will,
however, incur expenses for investment advisory, management, and administrative
services, which are included in annual fund operating expenses.
The Securities and Exchange Commission has not determined if the information in
this prospectus is accurate or complete, nor has it approved or disapproved
these securities. It is a criminal offense to state otherwise.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------
<S> <C>
Risk/Return Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Principal Risks of Investing in the Fund . . . . . . . . . . . . . . . . 3
Bar Chart and Performance Table. . . . . . . . . . . . . . . . . . . . . 5
Fees and Expenses of the Fund. . . . . . . . . . . . . . . . . . . . . . 6
Investment Objective and Policies and Related Risks. . . . . . . . . . . 7
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management's Discussion on Fund Performance. . . . . . . . . . . . . . . 9
Comparison Chart (Fund, S & P 500 Index, Consumer Price Index) . . . . . 10
Types of Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchasing Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Redeeming Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Transferring Registration. . . . . . . . . . . . . . . . . . . . . . . . 14
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . . . . . . 15
Determining Net Asset Value Per Share. . . . . . . . . . . . . . . . . . 16
Other Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . 16
Condensed Financial Information. . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The objective of the Fund is to provide shareholders with regular current
income, the potential for capital appreciation and a moderate level of
volatility by investing in a diversified list of securities including bonds,
preferred stocks, common stocks and other securities convertible into common
stock.
PRINCIPAL INVESTMENT STRATEGIES
We expect that the Fund's assets will be invested in various types of
securities, the proportion of which will vary from time to time in accordance
with the judgment of Mairs and Power, Inc., the Fund's investment adviser.
The Fund seeks to achieve its objective by:
- - Investing in a list of holdings that is diversified by both security type
and by industry.
- - Generally investing at least 25% of its assets in non-convertible fixed
income securities.
- - Emphasizing investments in common stock and other securities convertible
into common stock.
- - Keeping its assets reasonably fully invested at all times.
- - Holding cash equivalent investments (money market funds and other
short-term investments) from time to time as a buying reserve to better
enable the Fund to meet its objective.
- - Keeping portfolio turnover relatively modest compared to other balanced
mutual funds.
- - Investing primarily in higher rated investment grade fixed income
securities (Baa or better by Moody's Investors Service). Lower rated fixed
income securities may be purchased if, in the opinion of the Investment
Adviser, the potential reward outweighs the incremental risk.
PRINCIPAL RISKS OF INVESTING IN THE FUND
All investments have risks. Although the Fund cannot eliminate all risk,
it seeks to moderate risk by investing in a diversified portfolio. The Fund is
designed for long-term investors. Shareholders should be prepared to accept
fluctuations in portfolio value as the Fund seeks to achieve its investment
objective. There can be no assurance, of course, that the Fund will achieve its
objective.
Risks of investing in the Fund include:
- - Adverse market conditions (the chance that stock prices in general will
fall, sometimes suddenly and sharply).
- - Volatility in the market prices of equity securities (which are generally
subject to greater price fluctuations than prices of fixed income
securities, such as bonds and other debt obligations). Equity prices may
fluctuate markedly over the short-term due to:
3
<PAGE>
1) Changing market conditions,
2) Interest rate fluctuations, and
3) Various economic and political factors.
- - Credit risk, which is the risk that the issuer of a debt security will fail
to make payments when due.
- - Call risk, which is the risk that a debt security will be redeemed prior to
its maturity. This risk increases when market interest rates are
declining, because issuers may find it desirable to refinance by issuing
new bonds at lower interest rates.
- - Interest rate risk, which is the risk that the value of a fixed-rate debt
security will decline due to changes in market interest rates. In general,
when interest rates rise, the value of a fixed-rate debt security declines.
Conversely, when interest rates decline, the value of a fixed-rate debt
security generally increases.
- - Loss of money is a risk of investing in the Fund.
4
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in the Mairs and Power Balanced Fund by showing changes in the
Fund's performance from year to year over a 10-year period and by showing how
the Fund's average annual returns for one, five and ten years compare to
those of the CDA/Wiesenberger Balanced-Domestic Fund Index and the S & P 500,
a broad-based market index. How the Fund has performed in the past is not
necessarily an indication of how the Fund will perform in the future.
[GRAPHIC]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 17.7% 1.4% 25.9% 5.9% 10.9% -2.1% 30.0% 17.9% 28.0% 14.2%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was +13.3% (quarter ending June 30, 1997) and the lowest return for a
quarter was -5.9% (quarter ending September 30, 1998).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns (for periods ending
December 31, 1998) Past One Year Past Five Years Past Ten Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mairs and Power Balanced Fund +14.2% +17.0% +14.5%
- ----------------------------------------------------------------------------------------------------------------------
CDA/Wiesenberger
Balanced-Domestic Fund Index* +13.1% +13.5% +12.9%
- ----------------------------------------------------------------------------------------------------------------------
S & P 500* +28.7% +24.1% +19.2%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The CDA/Wiesenberger Balanced-Domestic Fund Index is an index presently
consisting of 340 domestic balanced funds.
* The S & P 500 is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices.
5
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other Distributions. . . . None
Redemption Fee (as a percentage of amount redeemed). . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
FOR THE YEAR ENDED DECEMBER 31, 1998
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.60%
Distribution (12b-1) Fees. . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.31%
-----
Total Annual Fund Operating Expenses . . . . . . . . . . . . . . . . . .0.91%
</TABLE>
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEAR 5 YEAR 10 YEAR
------ ------ ------ -------
<S> <C> <C> <C>
$93 $291 $506 $1,123
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEAR 5 YEAR 10 YEAR
------ ------ ------ -------
<S> <C> <C> <C>
$93 $291 $506 $1,123
</TABLE>
Although these examples are based on actual expenses in the most recent year,
they should not be considered a representation of past or future expenses
because actual expenses in future years may be greater or less than those
shown. These examples are for comparison only.
6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES AND RELATED RISKS
INVESTMENT OBJECTIVE AND POLICIES. The Fund's objective is to provide its
shareholders with regular current income, the potential for capital appreciation
and a moderate level of volatility by investing in a diversified list of
securities including bonds, preferred stocks, common stocks and other securities
convertible into common stock. It is expected that the Fund's assets will be
invested in various types of securities, the proportion of which will vary from
time to time in accordance with the judgment of Mairs and Power, Inc., the
Fund's investment adviser. The Fund seeks to achieve its objective by investing
in a list of holdings that is diversified by both security type and by industry.
While it is expected that at least 25% of the Fund's assets will be invested in
non-convertible fixed income securities, the dominant portfolio emphasis will be
on common stock and other securities convertible into common stock. Assets of
the Fund are expected to be reasonably fully invested at all times. Cash
equivalent investments (money market funds and other short-term investments) may
be held from time to time as a buying reserve to better enable the Fund to meet
its objective. Portfolio turnover is expected to be relatively modest when
compared to other balanced mutual funds. Although the Fund will invest
primarily in higher rated investment grade fixed income securities (Baa or
better by Moody's Investors Service), lower rated fixed income securities may be
purchased if, in the opinion of the Investment Adviser, the potential reward
outweighs the incremental risk.
A detailed description of the Fund's investment limitations is contained in
the Statement of Additional Information. Such limitations are fundamental
policies, which means the Fund's objectives cannot be changed without the
approval of a majority of the Fund's shareholders, as defined in the Statement
of Additional Information.
RISKS. All investments have risks. Although the Fund cannot eliminate all
risk, it seeks to moderate risk by investing in a diversified portfolio.
Long-term investors, for whom the Fund is designed, should be prepared to accept
fluctuations in portfolio value as the Fund seeks to achieve its investment
objective. There can be no assurance, of course, that the Fund will achieve its
objective. Loss of money is a risk of investing in the Fund.
MARKET CONDITIONS. The Fund is subject to the general risk of adverse market
conditions for equity securities. The market prices of equity securities are
generally subject to greater volatility than prices of fixed income
securities, such as bonds and other debt obligations. Although equity
securities have historically demonstrated long-term increases in value, their
prices may fluctuate markedly over the short-term due to changing market
conditions, interest rate fluctuations and various economic and political
factors.
CREDIT RISK. The Fund invests in debt securities and is subject to credit
risk, which is the risk that the issuer of a debt security will fail to make
payments when due. Securities issued or guaranteed by the United States
Government generally are viewed as carrying minimal credit risk. Securities
issued by governmental entities but not backed by the full faith and credit of
the United States, and securities issued by private entities, are subject to
higher levels of credit risk. Investors in the Fund bear the risk that payment
defaults could cause the value of the Fund's investment portfolio to decline.
INTEREST RATE RISK. The Fund invests in fixed-rate debt securities and is
subject to interest rate risk, which is the risk that the value of a fixed-rate
debt security will decline due to changes in market interest rates. When
interest rates rise, the value of a fixed-rate debt security generally
decreases. When interest rates decline, the value of a fixed-rate debt security
generally increases. The final maturity of the debt also will affect interest
rate risk and price volatility of the portfolio. Generally, a debt security
with a longer maturity will have greater price volatility as a result of
interest rate changes than a debt security with a shorter maturity.
Consequently, investors in the Fund bear the risk that increases in market
interest rates will cause the value of the investment portfolio to decline.
7
<PAGE>
CALL RISK. The Fund invests in corporate bonds, which are subject to call
risk. Corporate bonds and some securities issued by United States agencies may
be called (redeemed) at the option of the issuer at a specified price before
reaching their stated maturity date. This risk increases when market interest
rates are declining, because issuers may find it desirable to refinance by
issuing new bonds at lower interest rates. If a bond held by the Fund is called
during a period of declining interest rates, the Fund will likely invest the
proceeds received by it at a lower interest rate than that of the called bond,
causing a decrease in the Fund's income.
MORTGAGE RELATED AND OTHER ASSET-BACKED SECURITIES. Mortgage-backed
securities are securities representing interests in pools of mortgage loans
secured by residential or commercial real estate. Payments of interest and
principal on the mortgage-backed securities are generally made monthly by
passing through the monthly payments made by the individual borrowers on the
mortgage loans in the pool (net of any interest rate spread and fees paid to
the issuer or guarantor of the securities). The Fund bears a risk of early
repayment of principal on some mortgage-backed securities (arising from
prepayments of principal due to sale of the underlying property, refinancing,
or foreclosure). Additionally, if the Fund has purchased the security at a
premium, in the event of prepayment the value of the premium would be lost.
Like other fixed income securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however, when interest
rates are declining, the value of mortgage-backed securities with prepayment
features may not increase as much as other fixed income securities.
Payment of principal and interest on some mortgage-backed securities (but not
the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U. S. Government (in the case of securities
guaranteed by GNMA) or guaranteed by agencies or instrumentalities of the
U.S. Government (in the case of securities guaranteed by FNMA or the Federal
Home Loan Mortgage Corporation). Mortgage-backed securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies and mortgage bankers) may
be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit,
which may be issued by governmental entities, private insurers or the
mortgage originators.
FUND MANAGEMENT. The Fund's performance depends on the active management by
the Investment Adviser, Mairs and Power, Inc., in selecting and maintaining a
portfolio of securities which will achieve the Fund's investment objectives.
The Fund could under-perform compared to other Funds having similar
investment objectives.
YEAR 2000. As with other mutual funds, Year 2000 issues create risks for the
Fund. The Year 2000 problem arises principally from computer programs that
use two digits rather than four to define a year. If uncorrected, computer
systems may be unable to recognize and process information beyond the year
1999. Computer system failures could delay or disrupt pricing and securities
trading for the Fund and the processing of investors' accounts. In addition,
the value of the Fund's portfolio securities could be negatively affected if
the issuers of those securities have not adequately addressed Year 2000
issues.
The Fund is actively addressing Year 2000 issues affecting its own computer
systems and is working with its transfer agent and custodian and other third
party providers to ensure that all of the systems upon which the Fund depends
will be Year 2000 compliant. Additionally, the Fund is reviewing the
potential effect of Year 2000 issues on the companies held in its investment
portfolio.
The Fund's investment adviser has initiated a comprehensive compliance plan
to address Year 2000 issues that may affect its management of the Fund. The
Investment Adviser has replaced all internal computer
8
<PAGE>
hardware, installed new software and is in the process of installing upgrades
for vendor supplied programs. As they are replaced, these systems and other
outside data interfaces are being tested and corrected, if needed. The
Investment Adviser is also contacting appropriate third party service
providers and the issuers of securities held in the Fund's portfolio to
determine their readiness and compliance. Certain Year 2000 risks,
particularly those affecting the Fund's portfolio companies, are beyond the
control of the Fund and its Investment Adviser and create undetermined risks
for the Fund.
MANAGEMENT OF THE FUND
The Board of Directors has overall responsibility for the Fund. The Fund
employs Mairs and Power, Inc. as its investment adviser to manage the Fund's
investment portfolio and certain other business affairs. Mairs and Power,
Inc. is compensated by the Fund at the rate of one-twentieth of one percent
of the Fund's month-end net asset value (0.6% annually), computed and paid
each month. Mairs and Power, Inc. has managed mutual funds since 1958 and has
provided investment counsel services in St. Paul since 1931. It is located
at W-1420 First National Bank Building, 332 Minnesota Street, St. Paul,
Minnesota 55101-1363.
William B. Frels, Vice President and Treasurer of Mairs and Power, Inc. is
primarily responsible for the day-to-day management of the Fund's portfolio.
Mr. Frels has been an officer and director of Mairs and Power, Inc. since July
1992.
Firstar Bank Milwaukee, N.A., 615 East Michigan Street, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701 acts as Custodian for the Fund. Firstar
controls all securities and cash for the Fund, receives and pays for
securities purchased, delivers against payments for securities sold, receives
and collects income from investments, makes all payments for Fund expenses and
performs other administrative services. Firstar is not affiliated with the
Fund or Investment Adviser.
Mairs and Power, Inc. acts as the Fund's Transfer Agent and Dividend Disbursing
Agent and is reimbursed for all expenditures incurred in the discharge of these
duties.
MANAGEMENT'S DISCUSSION ON FUND PERFORMANCE
1998 IN REVIEW
In line with the overall stock market, the Fund recorded its fourth
consecutive year of "double digit" returns in 1998. Although not as high as
in recent years, the Fund earned a solid full year total investment return of
14.2% after adjustment for the reinvestment of cash dividends and capital
gain distributions. This compared to higher respective returns of 28.7% and
18.1% for the Standard & Poor's 500 and DJIA and a lesser return of 9.5% for
the Lehman Bros. Gov't/Corp. Bond Index. Relative to other comparable mutual
funds, the Fund ranked 128th within a CDA/Wiesenberger universe of 340
domestic balanced funds.
The past year marked the seventh straight year of economic growth since the
current expansion began in 1991. Real GDP rose an above average 3.9%
(preliminary basis) matching 1997's rate largely because of continued strength
in consumer spending. This in turn reflected strong employment growth and a
declining savings rate. Inflation remained well contained at 1% on the GDP
deflator and 1.6% for the Consumer Price Index despite strong economic growth
and a low unemployment rate. Corporate operating earnings are estimated to have
increased in the mid "single digits" although special charges may have held net
earnings at the previous year's level. Last year's economic performance was all
the more impressive considering the many problems being faced in other parts of
the world such as Asia/Pacific, Latin America and Russia.
Over the course of the year, the Fund continued to hold more than half of its
assets in common stocks (65.4% at year end) with the balance invested in a
combination of bonds (corporate and Federal Government), convertible bonds and
preferred stock (convertible and non-convertible). The fund remained pretty
fully invested throughout the year with cash reserves of only 3.0% at year end.
9
<PAGE>
------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FUND,
S & P 500 INDEX, AND THE CONSUMER PRICE INDEX
------------------------------------------------------------
[CHART]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MPB 10.0 11.8 11.9 15.0 15.9 17.6 17.3 22.4 26.5 33.9 38.9
S&P 10.0 13.2 12.7 16.0 17.9 19.7 20.0 27.5 33.8 45.1 57.1
CPI 10.0 10.5 11.0 11.5 11.9 12.2 12.5 12.8 13.2 13.5 13.7
</TABLE>
<TABLE>
- ------------------------------------------
Average Annual Total Returns
- ------------------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
- ------------------------------------------
14.2% 17.0% 14.5%
- ------------------------------------------
</TABLE>
PAST INVESTMENT RESULTS SHOULD NOT BE TAKEN AS NECESSARILY REPRESENTATIVE OF
FUTURE PERFORMANCE.
10
<PAGE>
TYPES OF ACCOUNTS
The Fund offers several different types of accounts. The Fund's regular
purchase application form can be used to establish the following types of
accounts:
- - Accounts for one or more people (single or joint accounts).
- - Accounts for a minor child (UGMA/UTMA-Uniform Gifts/Transfers to Minors
Act). Age of majority and other requirements are set by state law.
- - Trust Accounts. These accounts may require pages of the Trust document
which name the individuals authorized to act.
- - Third-Party Trustee Retirement Investments (Firstar Bank Milwaukee is not
the custodian or trustee).
- - Accounts opened for an organization such as a corporation, partnership or
other entity. These accounts may require a corporate resolution or other
document to name the individuals authorized to act.
The following types of Retirement Accounts can be established by using the Mairs
and Power Balanced Fund, Inc. IRA (Individual Retirement Account) Application
form:
- - Traditional IRA.
- - Roth IRA.
- - SEP-IRA (Simplified Employee Pension Plan Account).
- - SIMPLE IRA (Savings Incentive Match Plan for Employees Account).
Firstar Bank Milwaukee is the Custodian for the above retirement accounts. For
further information on retirement accounts, please ask for the Individual
Retirement Account Disclosure Statement & Custodial Account Agreement. You may
also call the Fund at 651-222-8478 to ask questions about investing for
retirement.
PURCHASING SHARES
You may purchase shares of the Fund through Mairs and Power, Inc., the Fund's
Transfer Agent at the Fund's office in St. Paul. The price you pay per share
will be the net asset value computed after the close of trading on the New York
Stock Exchange (the "Exchange") generally 3:00 p.m. Central Time. Your purchase
will have no sales charge or marketing fees included in the price of the Fund
shares. Purchase orders received on a day the Exchange is open for trading,
prior to the close of trading on that day, will be valued as of the close of
trading on that day. Purchase orders received after the close of trading on a
day the Exchange is open for trading will be valued as of the close of trading
on the next day the Exchange is open.
11
<PAGE>
An initial purchase must be at least $2,500 ($1,000 for an IRA account) and each
subsequent purchase must be at least $100, although the Fund reserves the right
to waive or change these minimums at its discretion. All applications to
purchase capital stock are subject to acceptance or rejection by authorized
officers of the Fund and are not binding until accepted. Applications will not
be accepted unless accompanied by payment in U.S. funds. Payment should be made
by check drawn on a U.S. bank, savings and loan, or credit union. The Fund
will not accept payment in cash or third party checks for the purchase of
shares.
The Fund reserves the right to reject applications for the following reasons:
- - Applications received without payment.
- - Payment made by check that does not clear, your purchase will be canceled.
A $25 fee will be charged by the Fund against a shareholder's account, in
addition to any loss sustained by the Fund.
- - Individuals who previously tried to purchase shares with a bad check.
- - Individuals who omit their social security number or tax identification
number or applications which do not include a certified social security or
tax identification number.
- - Other purchase applications that would be considered disadvantageous to
shareholders.
The Fund and its agents reserve the right to cancel or rescind any purchase if:
- - An account has engaged in excessive trading or fraud. Notice will be given
to the shareholder within five business days of the trade to freeze the
account and temporarily suspend services.
- - Notice has been received of a dispute between the registered or beneficial
account owners.
- - There is reason to believe a fraudulent transaction may occur.
- - Instructions are received and believed not to be genuine.
Stock certificates will not ordinarily be issued unless you make a request for a
certificate in writing. The Fund will invest the entire dollar amount of each
purchase order in full and fractional Fund shares. Income dividends and capital
gains distributions will be reinvested for you in additional full and fractional
shares unless you request that income dividends and/or capital gains
distributions be paid in cash.
The Fund does not consider the U.S. Postal Service or other independent delivery
services to be its agents. Deposit of purchase applications in the mail or with
such other services does not constitute receipt by the Transfer Agent or the
Fund.
MAILING ADDRESS
Mairs and Power Balanced Fund, Inc.
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, Minnesota 55101-1363
12
<PAGE>
REDEEMING SHARES
You may redeem for cash all or a portion of your shares in the Fund by
instructing the Fund at its office in St. Paul, Minnesota. Your shares will
be redeemed at the net asset value computed after the receipt of an
acceptable redemption request by the Fund. The price you receive for your
redemption of shares will be the net asset value computed after the close of
trading on the New York Stock Exchange on that day, generally 3:00 p.m.
Central Time. If your request for redemption of shares is received after the
close of trading on that day, your redemption request will be valued as of the
close of trading on the next day the New York Stock Exchange is open. Your
redemption request must be in "good order" before your proceeds can be
released. This means the following will be required:
(a) A letter of instruction or a stock assignment specifying the account
number, number of shares or dollar amount to be redeemed, signed by all
owners of the shares exactly as their names appear in the Fund's
shareholder records. If certificates have been issued representing shares
to be redeemed, they must accompany the letter.
(b) A guarantee of the signature of each owner by an eligible signature
guarantor such as a U.S. commercial bank, trust company, or member of the
New York Stock Exchange for redemption requests greater than $10,000.
(c) In the case of estates, trusts, guardianships, custodianships, corporations
and pension and profit-sharing plans, other supporting legal documents may
be required.
(d) A guarantee of the signature of each owner by an eligible signature
guarantor such as a U.S. commercial bank, trust company, or member of the
New York Stock Exchange, if the address of record has been changed within
the 15 days preceding any redemption.
(e) If your redemption request is from an IRA or other retirement plan, you
must indicate on the redemption request whether or not to withhold federal
income tax. If you fail to indicate an election not to have tax withheld,
you will be subject to withholding.
If the proceeds of any redemption are requested to be made payable to or sent to
other than the address of record, the signature(s) on the request must be
guaranteed by an eligible signature guarantor such as a U.S. commercial bank,
trust company, or member of the New York Stock Exchange.
If any portion of the shares you are redeeming represent an investment made by
check, we may delay the payment of the redemption proceeds until our transfer
agent is reasonably satisfied that your check has been collected. This may take
up to 12 days from the purchase date.
We will mail your payment to you for the shares you are redeeming typically
within one or two business days. The payment will be mailed no later than the
seventh business day after the redemption request is received by the Transfer
Agent or within such shorter period as may legally be required. The redemption
request must be in good order as stated above.
13
<PAGE>
The Fund may be required to withhold federal income tax at a rate of 31%
(backup withholding) from dividend payments, distributions, and redemption
proceeds if you fail to submit to us your social security or tax
identification number. You also must certify that the number is correct and
that you are not subject to backup withholding. The certification is
included as part of the purchase application form. If you do not have a
social security number, you should indicate on the purchase form that an
application to obtain a number is pending. The Fund is required to withhold
taxes if a number is not delivered to the Fund within seven days.
If you have additional questions regarding the redemption procedure you should
contact the Fund.
The right of redemption may be suspended or the date of payment may be postponed
as follows:
(1) During weekend or holiday closings, or when trading is restricted as
determined by the Securities and Exchange Commission ("SEC").
(2) During any period when an emergency exists as determined by the SEC as a
result of which it is not reasonably practicable for the Fund to dispose
of securities owned by it or to fairly determine the value of its net
assets.
(3) For such a period as the SEC may permit.
Once your redemption order is received and accepted by the Fund, you may not
revoke or cancel it. The redemption value may be worth more or less than the
price originally paid for the shares, and you may realize a gain or loss on
redemption.
TRANSFERRING REGISTRATION
If you request a change in your account registration -- such as changing the
name(s) on your account, or transferring your shares to another person or legal
entity -- you must submit your request in writing. A signature guarantee is
required which must be obtained from an eligible signature guarantor such as a
U.S. commercial bank, trust company, or member of the New York Stock Exchange.
Please call the Fund at (651)-222-8478 for full instructions.
14
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund distributes all of its net investment income to shareholders in the
form of quarterly dividends. The dividend payments are normally made in March,
June, September and December. If a capital gain is realized, the Fund will
distribute it near year-end in the year in which such gains are realized.
Dividends and capital gains which are not reinvested by you are paid to you by
check. If the Post Office cannot deliver your check, or if your check remains
uncashed for six months, your distribution option will be changed to
reinvestment. Your distribution check will be reinvested into your account at
the Fund's current net asset value per share (NAV). All subsequent
distributions will be reinvested in shares of the Fund. No interest will accrue
on the amount represented by uncashed distribution checks.
The Fund intends to comply, as it did in 1998, with the special provisions of
Subchapter M of the Internal Revenue Code that relieve it from federal income
tax on net investment income and capital gains currently distributed to
shareholders. The Internal Revenue Code requires all regulated investment
companies to pay a nondeductible 4% excise tax if less than 98% of ordinary
income and 98% of capital gains are paid out to shareholders during the year in
which they are earned or realized. The Fund intends to distribute income and
capital gains in such a manner as to avoid this excise tax.
As a shareholder you will be subject to federal income tax at ordinary rates on
the distribution of dividend income. Short-term capital gains, if any, are also
subject to federal income tax at ordinary rates. Distributions of net long-term
capital gains are taxable to you as long-term capital gain regardless of the
length of time you have held your shares of the Fund. Long-term capital gains
are subject to 10% (for investors in the 15% tax bracket) or 20% (for investors
in the 28% tax bracket or higher) tax rates.
Dividends and distributions will be taxable whether you received them in cash or
reinvested them in additional shares of the Fund. In January, we will send you
Form 1099-DIV indicating the tax status of any dividend and capital gains
distributions made to you during the previous year. This information is also
reported to the IRS. Distributions may also be subject to state and local
taxes. All of the Fund's ordinary dividends will be eligible for the 70%
deduction for dividends received by corporations.
The Fund's dividends and distributions are paid on a per share basis. When the
dividend and capital gain payments are made, the value of each share will be
reduced by the amount of the payment. If you purchase shares shortly before the
payment of a dividend or a capital gains distribution, you will pay the full
price for the shares and then receive some portion of the price back as a
taxable dividend or capital gain.
The above statements are a general summary of current federal income tax law
regarding the Fund. You should consult with your own tax adviser regarding
federal, state and local tax consequences of an investment in the Fund.
15
<PAGE>
DETERMINING NET ASSET VALUE PER SHARE
The Fund's share price, also called its net asset value, or NAV, is calculated
once daily after the close of trading on the New York Stock Exchange, generally
3:00 p.m., Central Time on each day the New York Stock Exchange is open for
trading. As a result, shares of the Fund will not be priced on the days which
the Exchange is closed: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is calculated
by adding up the total assets of the Fund, subtracting all of its liabilities,
or debts, and then dividing by the total number of Fund shares outstanding:
Net Asset Value = Total Assets - Liabilities
----------------------------
Number of Shares Outstanding
Securities traded on one or more of the national securities exchanges or
Nasdaq are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on Nasdaq, or
if there were no sales on that day, the most recent sales price. All other
securities are valued at the mean between the bid and the asked price. For
securities where quotations are not readily available, or where the last
quoted price is not considered representative of the value of that 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 investment adviser, Mairs and Power, Inc.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. These valuations are reviewed by Mairs and Power,
Inc. If Mairs and Power, Inc. believes that a valuation received from the
service does not represent a fair value, it values the security by a method that
the Adviser believes will determine a fair value.
OTHER SHAREHOLDER SERVICES
The following reports will be sent to you as a shareholder:
- - A confirmation statement each time you buy or sell Fund shares, as well as
quarterly confirmation statements detailing the income dividend and capital
gain distributions made by the Fund. The trade date and amount of your
transaction will be confirmed. The confirmation will also set forth the
market value of your account at the close of the statement period.
- - Fund Financial Reports (Quarterly and Annual Reports) will be mailed to you
in February, May, August and November. These reports include the
performance of the Fund, a report from the Fund Adviser, as well as a
listing of the Fund's holdings and other financial statements.
- - Tax Statements will generally be mailed in January and report to you the
previous year's dividend and capital gain distribution, proceeds from the
sale of shares, and distributions from IRAs or other retirement accounts.
Systematic Withdrawals - You may arrange to have quarterly or monthly
withdrawals of cash from an account by sending a systematic withdrawal request
to the Fund. Withdrawal payments are derived from the redemption of sufficient
shares from a shareholder's account to meet the designated payments. The
withdrawal plan may be terminated at any time by writing to the Fund. The
minimum investment to establish a systematic withdrawal program is $10,000.
16
<PAGE>
The following mailing address of the Fund should be used for purchase orders,
redemption requests, and correspondence. Overnight mail should also use this
address:
Mairs and Power Balanced Fund, Inc.
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
17
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following table shows certain important financial information which may
help you understand the Fund's financial performance for the past five years.
Certain information reflects financial results for a single fund share. The
total investment returns in the table represent the rate that an investor
would have earned on an investment in the Fund (assuming reinvestment of all
dividends and distributions). The information has been audited by Ernst &
Young LLP, independent auditors. The financial statements and auditors'
report may be found in the Fund's most recent annual report which you may
obtain, without charge, by writing to or calling the Fund at the number
listed on the front of this Prospectus.
FINANCIAL HIGHLIGHTS
(SELECTED PER SHARE DATA AND RATIOS -- FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996 1995 1994
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE
Net Asset Value, Beginning of Year $ 45.52 $ 36.84 $ 32.70 $ 26.21 $ 28.19
Income From Investment Operations:
Net Investment Income 1.29* 1.18 1.09 1.01 1.05
Net Realized and Unrealized Gains
(Losses) on Investment 5.08 9.04 4.69 6.78 (1.63)
------- ------- ------- ------- --------
Total From Investment Operations 6.37 10.22 5.78 7.78 (0.58)
Less Distributions:
Dividends (from net investment income) (1.24) (1.19) (1.10) (1.02) (1.03)
Distributions (from capital gains) (0.60) (0.35) (0.54) (0.28) (0.37)
------- ------- ------- ------- --------
Total Distributions (1.84) (1.54) (1.64) (1.30) (1.40)
------- ------- ------- ------- --------
Net Asset Value, End of Year $ 50.05 $ 45.52 $ 36.84 $ 32.70 $ 26.21
------- ------- ------- ------- --------
------- ------- ------- ------- --------
TOTAL INVESTMENT RETURN 14.2% 28.0% 17.9% 30.0% (2.1)%
------- ------- ------- ------- --------
------- ------- ------- ------- --------
NET ASSETS, END OF YEAR
(000'S OMITTED) $38,356 $28,790 $20,565 $16,979 $12,973
RATIOS/SUPPLEMENTAL DATA:
Ratio of Expenses to
Average Net Assets 0.91% 0.92% 1.08% 1.12% 1.11%
Ratio of Net Investment Income
to Average Net Assets 2.69% 2.81% 3.16% 3.47% 3.80%
Portfolio Turnover Rate
11.88% 5.32% 8.25% 3.95% 17.28%
</TABLE>
*In 1998 net investment income per share represents net investment income
divided by the average shares outstanding throughout the period.
18
<PAGE>
Mairs and Power Balanced Fund
OFFICERS AND DIRECTORS
----------------------
William B. Frels . . . . . . . . . . . . . President and Director
George A. Mairs, III . . . . . . . . . . . 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 TRANSFER AGENT
Mairs and Power, Inc. Mairs and Power, Inc.
W-1420 First National Bank Building W-1420 First National Bank Building
332 Minnesota Street 332 Minnesota Street
Saint Paul, Minnesota 55101-1363 Saint Paul, Minnesota 55101-1363
INDEPENDENT AUDITORS CUSTODIAN
Ernst & Young LLP Firstar Bank Milwaukee, N.A.
1400 Pillsbury Center 615 East Michigan Street
200 South Sixth Street P. O. Box 701
Minneapolis, Minnesota 55402 Milwaukee, Wisconsin 53201-0701
ADDITIONAL INFORMATION
MORE INFORMATION ON THE FUND IS AVAILABLE FREE UPON REQUEST, INCLUDING THE
FOLLOWING:
- - ANNUAL AND QUARTERLY REPORTS, WHICH DESCRIBE THE FUND'S PERFORMANCE AND
LIST ITS PORTFOLIO HOLDINGS.
- - STATEMENT OF ADDITIONAL INFORMATION (SAI), WHICH PROVIDES MORE DETAILS
ABOUT THE FUND AND ITS INVESTMENT POLICIES AND RESTRICTIONS.
- - YOU CAN OBTAIN A FREE COPY OF THE ANNUAL REPORT, QUARTERLY REPORTS OR SAI,
REQUEST OTHER INFORMATION ABOUT THE FUND OR MAKE SHAREHOLDER INQUIRIES BY
CALLING 1-651-222-8478.
- - DOCUMENTS FILED BY THE FUND WITH THE SEC ARE AVAILABLE ON THE SEC'S
INTERNET SITE AT HTTP://WWW.SEC.GOV, WHERE THEY ARE LISTED UNDER "MAIRS AND
POWER BALANCED FUND, INC."
- - INFORMATION ABOUT THE FUND, INCLUDING THE SAI, CAN ALSO BE REVIEWED AND
COPIED AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. YOU CAN ALSO
OBTAIN COPIES BY MAILING YOUR REQUEST AND A DUPLICATING FEE TO THE SEC'S
PUBLIC REFERENCE SECTION, WASHINGTON, DC 20549-6009. INFORMATION ABOUT THE
OPERATION OF THE PUBLIC REFERENCE ROOM IS AVAILABLE BY CALLING THE SEC AT
1-800-SEC-0330.
- - THE FUND'S INVESTMENT COMPANY ACT FILE NUMBER IS 811-1048.
19
<PAGE>
MAIRS AND POWER BALANCED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Dated April 30, 1999
Mairs and Power Balanced Fund, Inc. (the "Fund") is a no-load mutual fund
that has as its investment objective to provide regular current income along
with the potential for capital appreciation and a moderate level of volatility
by investing in a diversified list of securities including bonds, preferred
stocks, common stocks and other securities convertible into common stock.
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than what is contained in the
Fund's Prospectus. It should be read in conjunction with the Prospectus, dated
April 30, 1999, which has been filed with the Securities and Exchange Commission
and can be obtained, without charge, by calling or writing the Fund. Certain
portions of the Propectus have been incorporated by reference into this
Statement of Additional Information, as noted herein. The address of the Fund
is W-1420 First National Bank Building, 332 Minnesota Street, St. Paul, MN
55101-1363, and its telephone number is 1-651-222-8478.
<TABLE>
<S> <C>
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 2
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchasing and Redeeming Shares. . . . . . . . . . . . . . . . . . . . . 3
Principal Holders of Securities. . . . . . . . . . . . . . . . . . . . . 3
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transfer Agent and Custodian . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 6
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
1
<PAGE>
THE FUND
The Fund is an open-ended, diversified management company which was
incorporated in Minnesota in 1961. The fund has authorized capital stock of
10,000,000 shares, $0.10 par value per share. Each share entitles the
shareholder to one vote at all meetings of Fund shareholders. Shareholders will
participate equally in dividends and capital gains distributions declared by the
Fund for each share owned. Fund shares are transferable without restrictions
and are redeemable at net asset value.
INVESTMENT OBJECTIVE AND POLICIES
As discussed in "Investment Objective and Policies" in the Fund's
Prospectus, the Fund will normally invest in a diversified list of securities,
including bonds, preferred stocks, common stocks, and other securities
convertible into common stock. The percentage of the Fund's assets that may be
held in each category will vary in accordance with the judgment of the Fund's
investment adviser, Mairs and Power, Inc. While equities and securities
convertible into equities are expected to remain the dominant holdings in the
Fund, it is expected that at least 25% of the Fund's assets will be invested in
non-convertible fixed income securities. It is also the objective of the Fund
to provide a current income yield of at least 25% greater than that of the
Standard & Poor's 500 Stock Index, although there can be no assurance that this
objective will be met.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which may not be changed
without the approval of a majority of the shareholders of the Fund. The vote of
a majority of the shareholders means the vote, at the annual or a special
meeting of the security holders, of holders representing (a) 67% or more of the
voting securities present at such meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy; or (b)
more than 50% of the outstanding voting securities, whichever is less.
The Fund may not:
(1) Purchase securities of any issuer if as a result, (a) more than 5% of
the value of the total assets of the Fund would then be invested in
the securities of a single issuer (other than U.S. Government
obligations), or (b) more than 10% of any class of securities, or more
than 10% of the outstanding voting securities, of the issuer would
then be held by the Fund;
(2) Purchase securities of other investment companies if as a result more
than 5% of the Fund's total assets would then be (a) invested in the
securities of that investment company, or (b) more than 10% of the
Fund's assets would then be invested in securities of all investment
companies;
(3) Concentrate more than 20% of its investments in a particular industry;
(4) Purchase or sell real estate, real estate investment trusts, or other
interests in real estate which are not readily marketable;
(5) Write, purchase or sell puts, calls, or combinations thereof;
(6) Make loans (although it may acquire portions of an issuer's publicly
distributed securities);
(7) Purchase securities on margin or sell short;
2
<PAGE>
(8) Borrow money, except that the Fund may borrow from banks up to 5% of
its total assets to pay capital gains distributions, to pay income
dividends, or to relieve an extraordinary or emergency situation, but
not for investment purposes;
(9) Mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any securities owned or held by the Fund;
(10) Participate on a joint or a joint and several basis in any trading
account in securities;
(11) Invest in companies for the purpose of exercising control of
management;
(12) Act as an underwriter of securities of other issuers;
(13) Purchase or retain the securities of any issuer if officers and
directors of the Fund or its investment adviser who own individually
more than one-half of one percent of the securities of such issuer,
together own more than 5% of the securities of such issuer;
(14) Purchase or sell commodities or commodity contracts in the ordinary
course of its business; or
(15) Purchase or sell "restricted securities" in such a way as to become an
"underwriter" within the meaning of that term as used in the
Securities Act of 1933.
PORTFOLIO TURNOVER
The following table sets forth the annual portfolio turnover rates for the
Fund for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31.
1998 1997
---- ----
<S> <C> <C>
Common Stocks 3.08% 2.63%
All Other Securities 8.79% 2.69%
</TABLE>
The Fund has not placed any limit on its rate of portfolio turnover and
securities may be sold without regard to the time they have been held when in
the opinion of the Investment Adviser, Mairs and Power, Inc., investment
considerations warrant such action. Portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of securities with maturities of one year or less at
the time the Fund acquired them) by the monthly average value of the
securities in the Fund's portfolio during the year.
PURCHASING AND REDEEMING SHARES
The purchase and redemption of the Fund's shares are subject to the
procedures described in "Purchasing Shares" and "Redeeming Shares" in the Fund's
Prospectus, which is incorporated herein by reference.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1999, the only shareholder holding more than 5% of the
Fund's outstanding shares was Smyth Profit Sharing and Savings Plan, St. Paul,
MN (61,111 shares or 7.9%).
3
<PAGE>
OFFICERS AND DIRECTORS
The officers and directors of the Fund and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the address
for each Director and Officer is 332 Minnesota Street, W-1420 First National
Bank Bldg., St. Paul, MN 55101-1363.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age With Registrant During Past Five Years
--------------------- ---------------- -----------------------
<S> <C> <C>
William B. Frels, * 59 President and Director Vice President and Secretary of the
Investment Adviser
George A. Mairs, III, * 70 Secretary and Director President of the Investment Adviser
Peter G. Robb, * 50 Vice President and Director Vice President of the Investment
Adviser
Lisa J. Hartzell, 54 Treasurer Manager of Mutual Fund Services of
the Investment Adviser
Charlton Dietz, 68 Director Retired Senior Vice President, Legal
3050 Minnesota World Trade Center Affairs and General Counsel,
30 Seventh Street East Minnesota Mining and Manufacturing
St. Paul, MN 55101 Company
Donald E. Garretson, 77 Director Retired Vice President,
709 Linwood Avenue Minnesota Mining and Manufacturing Company
St. Paul, MN 55105
J. Thomas Simonet, 72 Director Retired Chief Executive Officer, U.S.
315 Stonebridge Boulevard Bank Trust National Association
St. Paul, MN 55105 (formerly First Trust National
Association)
</TABLE>
*Interested person of the Fund, as defined in the Investment Company Act of
1940.
All of the above listed persons serve in the same officer and/or director
capacities with Mairs and Power Growth Fund, Inc., an open-end investment
company which also retains Mairs and Power, Inc. as its investment adviser,
except that Mr. Mairs is President and Mr. Frels is Secretary of that fund.
The Fund's non-interested directors are members of the Audit Committee,
which makes recommendations to the Board regarding the selection of auditors and
confers with the auditors regarding the scope and results of the annual audit.
The Fund does not pay any remuneration to its Officers and Directors other than
fees to Directors who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of the Fund's Investment Adviser,
which fees totaled $6,000 in 1998. As of January 31, 1999, the Directors and
Officers of the Fund, as a group, and their spouses and minor children
beneficially owned 11,859 shares, or 1.5% of the Fund.
4
<PAGE>
INVESTMENT ADVISER
Mairs and Power, Inc. a Minnesota corporation, is the Investment Adviser of
the Fund. Mairs and Power, Inc.'s shareholders, all of whom are officers and
directors of the Fund, along with their percentage ownership positions in Mairs
and Power, Inc., are listed below:
<TABLE>
<S> <C>
George A. Mairs, III 43.1%
William B. Frels 36.1%
Peter G. Robb 20.8%
</TABLE>
Mairs and Power, Inc. has furnished continuous investment supervision to
the Fund since 1961. Mairs and Power, Inc. currently provides similar services
to one other mutual fund, Mairs and Power Growth Fund, Inc., the net assets of
which as of December 31, 1998 were $580,460,523.
Mairs and Power, Inc. serves as Investment Adviser to the Fund under the
terms of an Investment Advisory Agreement dated March 21, 1972, as amended May
17, 1982. The Investment Advisory Agreement must be approved annually by the
Board of Directors of the Fund, including a majority of those directors who are
not parties to such contract or "interested persons" of any such party as
defined in the Investment Company Act of 1940, by vote cast in person at a
meeting called for such purpose. The Agreement may be terminated at any time,
without penalty, on sixty days' written notice by the Fund's Board of Directors,
by the holders of a majority of the Fund's outstanding voting securities or by
the Investment Adviser. The Agreement automatically terminates in the event of
its assignment (as defined in the Investment Company Act of 1940 and the rules
thereunder).
As compensation for its services to the Fund, the Investment Adviser
receives monthly compensation at the rate of one-twentieth of one percent of
month-end net asset value (0.6% annually), computed and paid each month. The
ratio of the management fee to average net assets in 1998 was 0.6%; the ratio of
total expenses to average net assets was 0.91%. Mairs and Power, Inc. has
agreed with the Fund that the expense ratio will not exceed the expense
limitation of any state in which the Fund's shares are sold.
Advisory fees paid by the Fund to Mairs and Power, Inc. amounted to
$203,541 in 1998, $150,554 in 1997 and $113,288 in 1996. Under the terms of
the Investment Advisory Agreement, the Investment Adviser agrees to render
research, statistical and advisory services to the Fund, pay for office
rental, executive salaries and executive expenses and pay all expenses
related to the distribution and sale of Fund shares. All other expenses,
such as brokerage commissions, fees charged by the Securities and Exchange
Commission, custodian and transfer agent fees, legal and auditing fees,
directors fees, taxes, premiums on fidelity bonds, supplies, and all other
miscellaneous expenses are borne by the Fund. No compensation was paid to
any other director or officer of the Fund.
TRANSFER AGENT AND CUSTODIAN
Mairs and Power, Inc. acts as the Fund's Transfer Agent and Dividend
Disbursing Agent and is reimbursed for all expenditures incurred in the
discharge of these responsibilities. Reimbursements amounted to $22,911 in
1998, $11,743 in 1997, and $20,177 in 1996.
Custodial services for the Fund are performed by Firstar Bank Milwaukee,
N.A., 615 East Michigan Street, Milwaukee, WI 53201, pursuant to the terms of a
Custodial Agreement reviewed annually by the Board of Directors. As Custodian,
Firstar Bank Milwaukee, N.A controls all securities and cash for the Fund,
receives and pays for securities purchased, delivers against payment for
securities sold, receives and collects income from investments, makes all
payments for Fund expenses and performs other administrative services, as
directed in writing by authorized officers of the Fund. For these services,
Firstar Bank
5
<PAGE>
Milwaukee, N.A received $8,284 in 1998, $4,794 in 1997, and $2,329 for the
period May 1, 1996 through December 31, 1996. Prior to May 1, 1996, Norwest
Bank Minnesota, National Association acted as Custodian for the Fund. For their
services as Custodian, Norwest Bank Minnesota, National Association received
$2,581 in 1996.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is responsible for the Fund's portfolio decisions and the
placing of orders to effect the Fund's portfolio transactions. With respect to
such transactions, the Investment Adviser seeks to obtain the best net results
for the Fund taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution
and operational facilities of the firm involved. While the Investment Adviser
generally seeks reasonably competitive commission rates, the Fund will not
necessarily be paying the lowest commission or spread available. The Fund has
no obligation to deal with any broker or dealer in the execution of its
portfolio transactions, and there is no affiliation between the Fund's officers
or directors, or its Investment Adviser, and any broker-dealer or affiliated
persons of any broker-dealer who executes transactions for the Fund.
Investment decisions for the Fund are made independently from those of
Mairs and Power Growth Fund, Inc., also managed by Mairs and Power, Inc. When
these funds are simultaneously engaged in the purchase or sale of the same
securities the transactions are averaged as to price and allocated as to amount
in accordance with a formula deemed equitable to each fund. In some cases this
system may adversely affect the price paid or received by the Fund, or the size
of the position obtainable for the Fund.
Decisions with respect to allocations of portfolio brokerage will be made
by the Investment Adviser. Portfolio transactions are normally placed with
broker-dealers which provide the Fund's Investment Adviser with research and
statistical assistance. Recognizing the value of these factors, the Fund may
pay brokerage commissions in excess of those which another broker might charge
for effecting the same transaction, even though the research services furnished
by brokers through whom the Fund effects securities transactions may benefit
other clients of Mairs and Power, Inc.
For the year 1998, the Fund paid $11,825 in brokerage fees on purchase and
sale of portfolio securities. All of this amount was paid to brokers or dealers
who supplied research services to the Investment Adviser. Total brokerage fees
for 1997 and 1996 amounted to $2,729 and $4,554 respectively.
TAXATION
The Fund intends to comply, as it did in 1998, with the special provisions
of Subchapter M of the Internal Revenue Code that relieves it from federal
income tax on net investment income and capital gains currently distributed to
shareholders. The Internal Revenue Code requires all regulated investment
companies to pay a nondeductible 4% excise tax if less than 98% of ordinary
income and 98% of capital gains are paid out to shareholders during the year in
which they are earned or realized. The Fund intends to distribute income and
capital gains in such a manner as to avoid this excise tax.
6
<PAGE>
FINANCIAL STATEMENTS
The Fund's financial statements, including a listing of portfolio
securities as of December 31, 1998, are included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1998 and are incorporated herein by
reference. The financial statements have been audited by Ernst & Young LLP,
independent auditors, 1400 Pillsbury Center, 200 South Sixth Street,
Minneapolis, Minnesota 55402, as set forth in their report appearing in the
Annual Report and incorporated herein by reference. Additional copies of the
Annual Report may be obtained, without charge, by writing or calling the Fund.
7
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
1. Amended and Restated Articles of Incorporation. Incorporated
by reference to registrant's Registration Statement on Form
N-1A, No. 2-18269, Post-Effective Amendment No. 33, filed on
April 9, 1990.
1.A. Articles of Amendment dated May 23, 1997 to Amended and
Restated Articles of Incorporation.
1.B. Articles of Incorporation, Article V. Incorporated by
reference to registrant's Registration Statement on Form N-1A,
No. 2-18269, Post-Effective Amendment No. 33, filed on April
9, 1990.
2. By-laws. Incorporated by reference to registrant's
Registration Statement on Form N-1A, No. 2-18269,
Post-Effective Amendment No. 33, filed on April 9, 1990.
3. None.
4. Investment Advisory Contract. Incorporated by reference to
registrant's Registration Statement on Form N-1A, No. 2-18269,
Post-Effective Amendment No. 14, filed on April, 1972.
5. None.
6. None.
7. Custodian Agreement entered into between the Fund and Firstar
Trust Company on April 15, 1996. Incorporated by reference to
registrant's Registration Statement on Form N-1A, No. 2-18269,
Post-Effective Amendment No. 39, filed on April 29, 1996.
8. None.
9. None.
10. Consent of Independent Auditors.
11. None.
12. None.
13. None.
14. Financial Data Schedule.
15. Mairs and Power, Inc. Prototype Self-Employed Money Purchase
and Pension Plan, Trust, Summary Plan Description, Adoption
Agreements Nos. 001 and 002, and Custody Agreement.
Incorporated by reference to registrant's Registration
Statement on Form N-1A, No. 2-18269, Post-Effective Amendment
No. 36, filed on April 27, 1993.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable
<PAGE>
Item 25. INDEMNIFICATION
The Fund's Amended and Restated Articles of Incorporation state that a
director of the corporation shall have no personal liability to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director to the full extent such immunity is
permitted from time to time under the Minnesota Business Corporation
Act, as now enacted or hereafter amended, except as prohibited by the
Investment Company Act of 1940, as amended.
Section 302A.521 of the Minnesota Business Corporation Act provides
that a Minnesota corporation shall indemnify any director, officer, or
employee of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of
the person, against judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the
proceeding, provided that certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one
by or in the right of the corporation. Indemnification is required
under Section 302A.521 only if the person (i) has not been indemnified
by any other organization with respect to the same acts or omissions,
(ii) acted in good faith, (iii) received no improper personal benefit,
(iv) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful, and (v) reasonably believed that the
conduct was in the best interest of the corporation.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Inapplicable
Item 27. PRINCIPAL UNDERWRITERS
Inapplicable
Item 28. LOCATION OF ACCOUNTS AND RECORDS
Custodian: Firstar Bank Milwaukee, N.A.
615 East Michigan Street
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Transfer Agent: Mairs and Power, Inc.
W-1420 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1363
Investment Adviser: Mairs and Power, Inc.
W-1420 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1363
Item 29. MANAGEMENT SERVICES
Inapplicable
Item 30. UNDERTAKINGS
Inapplicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485 (a)(1) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Paul, and State of Minnesota on the 30th
day of April, 1999.
MAIRS AND POWER BALANCED FUND, INC.
/s/ William B. Frels
---------------------------------------------
William B. Frels, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
/s/ William B. Frels
- ------------------------- President and Director
William B. Frels (Principal Executive April 30, 1999
Officer)
/s/ George A. Mairs, III
- ------------------------- Secretary and Director
George A. Mairs, III (Principal Financial and
Accounting Officer) April 30, 1999
/s/ Peter G. Robb
- -------------------------
Peter G. Robb Vice President and April 30, 1999
Director
/s/ Charlton Dietz
- -------------------------
Charlton Dietz Director April 30, 1999
/s/ Donald E. Garretson
- -------------------------
Donald E. Garretson Director April 30, 1999
/s/ J. Thomas Simonet
- -------------------------
J. Thomas Simonet Director April 30, 1999
<PAGE>
EXHIBIT INDEX
ITEM DESCRIPTION
1-9. Not filed herewith.
10. Consent of Independent Auditors.
11-13. Not filed herewith.
14. Financial Data Schedule.
15. Not filed herewith.
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Condensed
Financial Information" in the Prospectus and "Financial Statements" in the
Statement of Additional Information and to the incorporation by reference in
Post-Effective Amendment No. 44 to the Registration Statement (Form N-1A, No.
2-18269) and related Prospectus of Mairs and Power Balanced Fund, Inc., of
those references and of our report dated January 22, 1999, with respect to
the financial statements and financial highlights of Mairs and Power Balanced
Fund, Inc. included in its Annual Report for the year ended December 31,
1998, filed with the Securities and Exchange Commission.
/s/Ernst & Young LLP
February 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT DATED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000061630
<NAME> MAIRS AND POWER BALANCED FUND, INC.
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<PERIOD-TYPE> 12-MOS
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