<PAGE>
------------------
MAIRS AND POWER
GROWTH FUND, INC.
------------------
3RD QUARTER REPORT
September 30, 1996
November 1, 1996
To Our Shareholders
On September 30, 1996, the net asset value per share of Mairs and Power Growth
Fund was $66.07, a gain of 17.1% from the year end valuation after adjustment
for the June dividend. This compares with returns of 13.5% for the Standard and
Poor's 500 Stock Index and 16.9% for the Dow Jones Industrial Average. The
average gain for U.S. growth funds was 13.3% for the period. In a study of
mutual funds performance by CDA/Wiesenberger, the Fund ranked 10th out of 364
long-term growth funds for the five year period ending September 30, with an
average annual return of 19.8%. The Fund was featured in the October issue of
MONEY magazine in an article entitled "Four funds that excel by picking a few
good stocks" as well as the September 9th issue of MEDICAL ECONOMICS which
listed only 10 funds that managed to outperform the S&P 500 Stock Index in each
of the past six consecutive years.
U.S. economic growth moderated during the third quarter with GDP rising at an
annual rate of just 2.2%, less than half the rate of the second quarter. The
most significant factor for the reduced growth was consumer spending which rose
at an annual rate of under 1% during the period. However, that pace follows the
fastest two quarter growth in 3 1/2 years. The slowdown was not caused by lack
of personal income, which posted the largest quarterly gain in more than two
years, or consumer confidence, which is generally very high. Therefore, consumer
spending is expected to rise in the fourth quarter which should benefit retail
sales during the most important holiday season. Capital spending continues to
grow more rapidly than the overall economy as companies purchased more high-tech
items that increase productivity. Orders for capital goods accelerated last
quarter, suggesting further strength in the months ahead.
The Fund had a strong performance during the third quarter, registering a 6.1%
return as compared with 3.1% for the S&P 500. The fundamental background remains
very favorable for stock prices. Inflation continues to be well contained and
near-record agricultural crops have placed downward pressure on commodity prices
that are now at a 12 month low. Worldwide inflation is at the lowest level in
about 25 years as businesses have become ever more globalized, producing
wherever costs are the lowest. 1996 will be the fifth consecutive year that the
U.S. has experienced an inflation rate of 3% or less. We believe that the
current economic expansion, now in its sixth year, could continue for an
extended period. Corporate profits this year have exceeded expectations and have
provided the underpinning for the strong stock market. We anticipate a further
advance in profits next year which should provide a valuation basis for
favorable stock market performance. Therefore, we maintain our positive outlook.
George A. Mairs
<PAGE>
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES COMMON STOCK COST VALUE
- --------- ------------------------------------------ ------------ ------------
<C> <S> <C> <C>
CHEMCAL 3.5%
126,000 Ecolab, Inc. $ 2,392,805 $ 4,252,500
------------ ------------
CONSUMER 11.1%
83,000 Darden Restaurants 676,113 715,875
77,000 General Mills, Inc. 2,758,644 4,648,875
93,000 Hormel Foods 2,285,028 2,173,875
115,810 Jostens, Inc. 2,026,631 2,417,534
105,000 The Toro Company 2,341,830 3,491,250
------------ ------------
10,088,246 13,447,409
------------ ------------
DRUGS AND HOSPITAL SUPPLIES 8.8%
22,000 Baxter International, Inc. 398,146 1,028,500
75,000 Johnson & Johnson 1,218,578 3,843,750
73,000 Pfizer Inc. 1,479,058 5,776,125
------------ ------------
3,095,782 10,648,375
------------ ------------
FINANCIAL 15.9%
90,000 First Bank System, Inc. 2,201,282 6,018,750
152,000 Norwest Corporation 2,002,616 6,213,000
40,000 ReliaStar Financial Corporation 1,698,529 1,900,000
93,000 St. Paul Companies, Inc. 3,193,249 5,161,500
------------ ------------
9,095,676 19,293,250
------------ ------------
INFORMATION SERVICES 3.8%
60,000 DeLuxe Corp. 854,628 2,265,000
107,500 Merrill Corporation 1,255,455 2,311,250
------------ ------------
2,110,083 4,576,250
------------ ------------
MEDICAL DEVICES 9.5%
113,000 Medtronic, Incorporated 846,234 7,246,125
105,000 St. Jude Medical, Inc. 3,260,310 4,239,375
------------ ------------
4,106,544 11,485,500
------------ ------------
NATURAL RESOURCES 1.9%
50,000 Weyerhaeuser Company 1,564,914 2,306,250
------------ ------------
RETAILING 5.5%
114,000 Dayton Hudson Corporation 1,697,872 3,762,000
104,000 SUPERVALU Inc. 2,695,007 2,860,000
------------ ------------
4,392,879 6,622,000
------------ ------------
TECHNOLOGY 14.4%
65,025 Emerson Electric Co. 3,155,391 5,860,378
50,000 Honeywell Inc. 2,141,786 3,156,250
194,000 MTS Systems Corporation 2,029,898 3,831,500
110,000 National Computer Systems Inc. 2,087,313 2,255,000
285,000 T S I Inc. 1,147,111 2,422,500
------------ ------------
10,561,499 17,525,628
------------ ------------
TELECOMMUNICATIONS 5.9%
112,000 ADC Telecommunications Inc. 593,525 7,168,000
------------ ------------
OTHER INDUSTRIALS 14.1%
40,000 Bemis Company, Inc. 1,238,052 1,355,000
200,000 BMC Industries, Inc. 408,886 5,725,000
236,000 Graco Inc. 2,953,991 4,425,000
45,800 Imation Corporation 1,029,247 1,122,100
63,000 Minnesota Mining & Manufacturing Company 2,072,085 4,402,125
------------ ------------
7,702,261 17,029,225
------------ ------------
TOTAL COMMON STOCKS 94.4% $ 55,704,214 $114,354,387
Other Assets in Excess of Liabilities 5.6% 6,721,425
TOTAL NET ASSETS 100% $121,075,812
------------
------------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS AT SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $55,704,214).................................. $ 114,354,387
Cash.......................................................................................... 6,944,032
Dividends and interest receivable............................................................. 123,163
Receivables for securities sold, not yet delivered............................................ 150,528
Prepaid expense............................................................................... 51,826
-------------
$ 121,623,936
LIABILITIES
Accrued management fee.................................................. $ 60,457
Accrued custodian and transfer agent fee................................ 8,886
Payable for securities purchased, not yet received...................... 478,781 548,124
----------- -------------
NET ASSETS
Equivalent to $66.07 per share on 1,832,588 shares outstanding................................ $ 121,075,812
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
NET ASSETS, December 31, 1995................................................................. $ 70,536,880
Net investment income, per statement below.............................. $ 842,569
Net accrued income in price of shares sold and repurchased.............. 69,156
-----------
911,725
Distribution to shareholders............................................ 415,379
Less Adjustment for distribution to shareholders........................ (29) 496,375
-----------
Fund shares issued and repurchased:
Received for 667,559 shares issued.................................... 40,063,043
Paid for 80,295 shares repurchased.................................... 4,865,771 35,197,272
-----------
Increase in unrealized net appreciation (depreciation) of investments......................... 12,584,195
Net gain or (loss) realized from sales of securities.......................................... 2,261,090
Distribution from net realized gain........................................................... 0
-------------
NET ASSETS, September 30, 1996................................................................ $ 121,075,812
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF NET INVESTMENT INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................................................................... $ 1,239,572
Interest...................................................................................... 209,905
-------------
1,449,477
EXPENSES
Management fee (Note A)................................................. $ 440,207
Fees and expenses of custodian, transfer agent and dividend disbursing
agent (Note A)......................................................... 78,642
Legal and auditing fees and expenses.................................... 14,833
Insurance............................................................... 6,014
Other Fees and Expenses................................................. 67,212 606,908
----------- -------------
NET INVESTMENT INCOME......................................................................... $ 842,569
-------------
-------------
</TABLE>
NOTE A: The investment advisory fee was paid to Mairs and Power, Inc., which is
owned by individuals who are directors and officers of the Fund, for its
services as investment adviser. Investment advisory fees are paid to the adviser
pursuant to an advisory agreement approved by the Directors of the Fund. The
advisor fee is computed each month and is 1/20th of one percent of the net asset
value of the Fund on the last valuation day of the month. Transfer agent fees
were paid to Mairs and Power, Inc. which served as transfer agent for the period
1-1-96 through 4-30-96. Transfer agent fees were also paid to Firstar Trust
Company for the period 5-1-96 through 9-30-96, which now serves as transfer
agent. Directors of the Fund not affiliated with Mairs and Power, Inc. received
compensation for meetings attended during this period totaling $16,538. No
compensation was paid to any other director or officer of the Fund.
SUPPLEMENTARY INFORMATION: 1) 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. 2) Purchases and sales of
investment securities during the nine months ended September 30, 1996 aggregated
$34,261,322 and $2,483,031 respectively.
<PAGE>
---------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
Sept. 30, 1996 1,832,588 121,075,812 66.07 0.25
</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 SEPTEMBER 30, 1996) ARE AS FOLLOWS:
1 YEAR: +21.5% 5 YEARS: +19.8% 10 YEARS: +16.8%
PAST INVESTMENT RESULTS SHOULD NOT BE TAKEN AS NECESSARILY REPRESENTATIVE OF
FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
George A. Mairs, III William B. Frels Peter G. Robb Lisa J. Hartzell
President and Secretary and Vice-President and Treasurer
Director Director Director
Litton E. S. Field Donald E. Garretson J. Thomas Simonet
Director Director Director
</TABLE>
