<PAGE>
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MAIRS AND POWER
GROWTH FUND, INC.
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1ST QUARTER REPORT
March 31, 1996
May 22, 1996
To Our Shareholders:
On March 31, 1996, the net asset value per share of Mairs and Power Growth
Fund was $58.84, a 3.9% increase from the year end valuation. This compares with
returns of 5.4% for the Standard & Poor's 500 Stock Index and 9.8% for the Dow
Jones Industrial Average. For the five year period ended March 31, the Fund
registered an average annual return of 18%. In a study of mutual funds
performance by CDA/ Wiesenberger, the Fund ranked 29th out of 320 Long-Term
Growth Funds for the five year period. A WALL STREET JOURNAL article appearing
on April 16 listed Mairs and Power Growth Fund as one of 30 midsize-company
funds ranked as best funds to buy now. The Fund was one of five funds featured
in a SUNDAY NEW YORK TIMES article on May 19 entitled, "Small Funds that Pack a
Punch."
The U.S. economy experienced stronger growth in the first quarter with G.D.P.
advancing at an annual rate of 2.8%. The strength was broad-based led by rising
employment, higher personal income, increased retail sales and improved consumer
sentiment. Inflation remains well contained with the Consumer Price Index having
risen just 2.9% over the past twelve months despite a recent spike in energy
costs. Commodity prices have risen in recent months reflecting both higher grain
and energy prices. This in turn has caused fear of higher inflation rates and
has resulted in rising interest rates. We believe that these fears may be
exaggerated. Labor costs account for about 70% of the cost of production while
commodity costs account for less than 10%. Clearly, labor costs are the single
most important determinant of U.S. inflation. Unit labor costs show little
change with modestly rising wages offset, in large measure, by improving
business productivity, which advanced at a 2.6% annual rate in the first
quarter. Unit labor costs inched up at a 0.6% rate in the quarter, showing that
inflation is under control.
Corporate profits continued to perform well in the first quarter with
operating earnings for all U.S. corporations rising about 8%. We believe that
this rate of increase will continue through the balance of the year as profit
margins continue to benefit from several years of corporate restructuring made
necessary in order to strengthen America's competitive position in world
markets. As a consequence, rising exports have been the major contributor to
U.S. economic growth over the past five years, a period in which U.S. growth has
out-distanced that of both Japan and Western Europe. The stock market has also
performed well since the first of the year despite rising interest rates.
Moderate economic growth coupled with continuing strong earnings provide a
favorable environment for investors and we believe these conditions should
prevail throughout the year. Valuations are generally in line with other periods
of modest inflation and speculative activity has been largely confined to the
new issue market. From a purely historical perspective, the stock market has not
experienced a meaningful decline in the months immediately preceding a U.S.
presidential election in this century. Therefore, we are constructive on our
outlook for the balance of the year.
George A. Mairs
<PAGE>
SCHEDULE OF INVESTMENTS AT MARCH 31, 1996
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<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES COMMON STOCK COST VALUE
- --------- ------------------------------------------ ------------ ------------
<C> <S> <C> <C>
CHEMCAL 3.3%
96,000 Ecolab, Inc. $ 1,458,350 $ 2,880,000
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CONSUMER 12.0%
83,000 Darden Restaurants 676,113 1,120,500
56,000 General Mills, Inc. 1,581,433 3,269,000
51,000 Hormel Foods 1,270,927 1,338,750
85,810 Jostens, Inc. 1,382,493 1,919,999
85,000 The Toro Company 1,715,582 2,730,625
------------ ------------
6,626,548 10,378,874
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DRUGS AND HOSPITAL SUPPLIES 9.4%
22,000 Baxter International, Inc. 398,146 995,500
5,500 Caremark International Inc. 40,230 138,188
30,000 Johnson & Johnson 507,824 2,767,500
63,000 Pfizer Inc. 846,111 4,236,750
------------ ------------
1,792,311 8,137,938
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FINANCIAL 14.2%
73,000 First Bank System, Inc. 1,201,913 4,352,625
120,000 Norwest Corporation 867,200 4,410,000
64,000 St. Paul Companies, Inc. 1,632,340 3,552,000
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3,701,453 12,314,625
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INFORMATION SERVICES 3.9%
50,000 DeLuxe Corp. 499,872 1,568,750
107,500 Merrill Corporation 1,255,455 1,800,625
------------ ------------
1,755,327 3,369,375
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MEDICAL DEVICES 11.0%
113,000 Medtronic, Incorporated 846,234 6,737,625
75,000 St. Jude Medical, Inc. 2,194,685 2,798,437
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3,040,919 9,536,062
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NATURAL RESOURCES 2.7%
50,000 Weyerhaeuser Company 1,564,914 2,306,250
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RETAILING 5.3%
38,000 Dayton Hudson Corporation 1,697,872 3,225,250
44,000 SUPERVALU Inc. 967,086 1,358,500
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2,664,958 4,583,750
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TECHNOLOGY 14.0%
50,025 Emerson Electric Co. 1,906,456 4,039,519
25,000 Honeywell Inc. 845,247 1,381,250
92,000 MTS Systems Corporation 1,839,898 3,450,000
70,000 National Computer Systems Inc. 1,236,063 1,417,500
105,750 T S I Inc. 473,049 1,877,062
------------ ------------
6,300,713 12,165,331
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TELECOMMUNICATIONS 4.9%
123,000 ADC Telecommunications Inc. 534,015 4,243,500
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OTHER INDUSTRIALS 13.8%
250,000 BMC Industries, Inc. 511,107 5,375,000
153,000 Graco Inc. 1,342,369 2,983,500
55,000 Minnesota Mining & Manufacturing Company 1,629,300 3,554,375
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3,482,776 11,912,875
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TOTAL COMMON STOCKS 94.5% $ 32,922,284 $ 81,828,580
Other Assets in Excess of Liabilities 5.5% 4,797,557
TOTAL NET ASSETS 100% $ 86,626,137
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</TABLE>
<PAGE>
STATEMENT OF NET ASSETS AT MARCH 31, 1996
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<TABLE>
<S> <C> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $32,922,824).......................... $ 81,828,580
Cash.................................................................................. 5,385,529
Dividends and interest receivable..................................................... 97,380
Receivables for securities sold, not yet delivered.................................... 0
Prepaid expense....................................................................... 31,952
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$ 87,343,441
LIABILITIES
Accrued management fee........................................ $ 43,291
Accrued custodian and transfer agent fee...................... 11,285
Payable for securities purchased, not yet received............ 662,728 717,304
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NET ASSETS
Equivalent to $58.84 per share on 1,472,206 shares outstanding........................ $ 86,626,137
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------------
</TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<S> <C> <C> <C>
NET ASSETS, December 31, 1995......................................................... $ 70,536,880
Net investment income, per statement below.................... $ 199,782
Net accrued income in price of shares sold and repurchased.... 3,985
------------
203,767
Distribution to shareholders.................................. 0 203,767
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Fund shares issued and repurchased:
Received for 250,816 shares issued.......................... 14,419,095
Paid for 23,935 shares repurchased.......................... 1,373,924 13,045,171
------------
Increase in unrealized net appreciation (depreciation) of investments................. 2,840,319
Net gain or (loss) realized from sales of securities.................................. 0
Distribution from net realized gain................................................... 0
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NET ASSETS, March 31, 1996............................................................ $ 86,626,137
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------------
</TABLE>
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STATEMENT OF NET INVESTMENT INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................................................................. $ 333,033
Interest.............................................................................. 46,794
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379,827
EXPENSES
Management fee (Note B)....................................... $ 123,243
Fees and expenses of custodian, transfer agent and dividend
disbursing agent (Note B).................................... 31,122
Legal and auditing fees and expenses.......................... 4,948
Insurance..................................................... 2,006
Other Fees and Expenses....................................... 18,726 180,045
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NET INVESTMENT INCOME................................................................. $ 199,782
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------------
</TABLE>
NOTE A: 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.
NOTE B: 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 also paid to Mairs and Power, Inc. which serves as transfer agent. Directors
of the Fund not affiliated with Mairs and Power, Inc. received no compensation
during this period. No compensation was paid to any other director or officer of
the Fund.
SUPPLEMENTARY INFORMATION: Purchases and sales of investment securities during
the three months ended March 31, 1996 aggregated $11,257,450 and $-0-
respectively.
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MAIRS AND POWER
GROWTH FUND, INC.
---------------------------
A NO-LOAD FUND
W-2062 FIRST NATIONAL BANK BUILDING,
332 MINNESOTA STREET, ST. PAUL, MINNESOTA 55101
612-222-8478
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, 1976 1,078,864 $ 13,821,528 $ 12.81 $ 0.26
Dec. 31, 1977 1,057,928 13,145,624 12.43 0.33
Dec. 31, 1978 998,265 13,282,487 13.31 0.35
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
Mar. 31, 1996 1,472,206 86,626,137 58.84
</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, 1996) ARE AS FOLLOWS:
1 YEAR: +39.5% 5 YEARS: +18.0% 10 YEARS: +14.7%
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
<PAGE>
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<TABLE>
<S> <C> <C> <C>
George A. Mairs, III William B. Frels Peter G. Robb Kathleen M. Kellerman
President and Secretary and Vice-President and Treasurer
Director Director Director
Litton E.S. Field Donald E. Garretson J. Thomas Simonet
Director Director Director
</TABLE>
