<PAGE>
- --------------------------------
------------------
MAIRS AND POWER
GROWTH FUND, INC.
------------------
2ND QUARTER REPORT
June 30, 1996
August 20, 1996
To Our Shareholders:
On June 30, 1996, the net asset value per share of Mairs and Power Growth Fund
was $62.29, a gain of 10.4% from the year end valuation after adjustment for the
June dividend. This compares with returns of 10.0% for the Standard and Poor's
500 Stock Index and 11.7% for the Dow Jones Industrial Average. The average gain
for U.S. growth funds was 8.0% for the period. In a study of mutual funds
performance by CDA/Wiesenberger, the Fund ranked 14th out of 520 long-term
growth funds for the three year period ending June 30, with an average annual
return of 23.4%. A WALL STREET JOURNAL survey ranked the Fund 13th out of over
613 long-term growth funds for the 52 week period ending July 25. The Fund was
one of three funds featured in an article entitled "Midyear Money Outlook"
appearing in the July 8th edition of U.S. NEWS AND WORLD REPORT.
The U.S. economy strengthened in the second quarter with GDP rising at an
annual rate of 4.2%, far outpacing the 2% first quarter gain. Factors that
contributed to the gain included inventory rebuilding, home construction and
consumer spending. While this rate of growth is well above the level targeted by
the Federal Reserve for sustainable, non-inflationary growth, analysts believe
that growth is already slowing to a moderate level below 3% which may encourage
the Fed to hold short term interest rates at the current level for a few more
months. Inflation has been well contained so far this year but labor markets
have been tightening as unemployment levels approach a 25 year low. Since labor
costs account for 70% of the cost of production for U.S. output, upward pressure
on these costs could prompt the Fed to move rates higher next year in an effort
to rein in the economy.
The stock market experienced a correction of approximately 10% during June and
July. Certain technology issues and many recent initial public offerings
sustained much sharper corrections. It appears that the level of speculation in
the market is now reduced which may result in somewhat lower volatility during
the balance of the year. We view this as a welcome development. Market
leadership seems now confined to quality stocks which has produced a significant
recovery in the net asset value of our shares. Corporate earnings continue to
show sustained strength. A BUSINESS WEEK survey of 2nd quarter profits indicate
that earnings for 900 companies rose 11% on a sales increase of 8% over the year
earlier period. The economy is enjoying a durable economic expansion,
characterized by strong earnings growth, that should continue for at least the
next twelve months. Stock valuations are currently very much in line with other
periods of low inflation. Therefore, we continue to be positive on the outlook
for stock prices.
June 30th marked the retirement of Kathleen Kellerman who has served as the
Treasurer of the Fund since 1986. Kathy performed with great distinction and her
many contributions have been deeply appreciated. She will continue to serve as a
consultant to the Fund. We are pleased to announce that Lisa J. Hartzell has
been elected Treasurer of the Fund. Lisa joined Mairs and Power in 1993, having
previously been employed by the law firm of Oppenheimer Wolff and Donnelly.
George A. Mairs
<PAGE>
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES COMMON STOCK COST VALUE
- --------- ------------------------------------------ ------------ ------------
<C> <S> <C> <C>
CHEMICAL 3.4%
106,000 Ecolab, Inc. $ 1,772,326 $ 3,498,000
------------ ------------
CONSUMER 12.2%
83,000 Darden Restaurants 676,113 892,250
77,000 General Mills, Inc. 2,758,644 4,196,500
76,000 Hormel Foods 1,909,266 2,033,000
105,810 Jostens, Inc. 1,838,127 2,089,748
105,000 The Toro Company 2,341,830 3,478,125
------------ ------------
9,523,980 12,689,623
------------ ------------
DRUGS AND HOSPITAL SUPPLIES 9.4%
22,000 Baxter International, Inc. 398,146 1,039,500
5,500 Caremark International Inc. 40,230 138,875
68,000 Johnson & Johnson 869,985 3,366,000
73,000 Pfizer Inc. 1,479,058 5,210,375
------------ ------------
2,787,418 9,754,750
------------ ------------
FINANCIAL 14.4%
90,000 First Bank System, Inc. 2,201,282 5,220,000
152,000 Norwest Corporation 2,002,616 5,301,000
82,000 St. Paul Companies, Inc. 2,605,279 4,387,000
------------ ------------
6,809,177 14,908,000
------------ ------------
INFORMATION SERVICES 4.3%
50,000 DeLuxe Corp. 499,872 1,775,000
107,500 Merrill Corporation 1,255,455 2,687,500
------------ ------------
1,755,327 4,462,500
------------ ------------
MEDICAL DEVICES 9.5%
113,000 Medtronic, Incorporated 846,234 6,328,000
105,000 St. Jude Medical, Inc. 3,260,310 3,517,500
------------ ------------
4,106,544 9,845,500
------------ ------------
NATURAL RESOURCES 2.0%
50,000 Weyerhaeuser Company 1,564,914 2,125,000
------------ ------------
RETAILING 5.4%
38,000 Dayton Hudson Corporation 1,697,872 3,918,750
54,000 SUPERVALU Inc. 1,285,816 1,701,000
------------ ------------
2,983,688 5,619,750
------------ ------------
TECHNOLOGY 14.6%
59,025 Emerson Electric Co. 2,647,461 5,334,384
35,000 Honeywell Inc. 1,366,235 1,907,500
184,000 MTS Systems Corporation 1,839,898 3,864,000
80,000 National Computer Systems Inc. 1,473,563 1,710,000
125,750 T S I Inc. 838,049 2,389,250
------------ ------------
8,165,205 15,205,134
------------ ------------
TELECOMMUNICATIONS 5.5%
127,000 ADC Telecommunications Inc. 673,015 5,715,000
------------ ------------
OTHER INDUSTRIALS 13.0%
200,000 BMC Industries, Inc. 408,886 5,750,000
186,000 Graco Inc. 1,975,475 3,766,500
58,000 Minnesota Mining & Manufacturing Company 1,827,210 4,002,000
------------ ------------
4,211,571 13,518,500
------------ ------------
TOTAL COMMON STOCKS 93.7% $ 44,353,165 $ 97,341,757
Other Assets in Excess of Liabilities 6.3% 6,520,342
TOTAL NET ASSETS 100% $103,862,099
------------
------------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS AT JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $44,353,165)......................... $ 97,341,757
Cash................................................................................. 7,138,766
Dividends and interest receivable.................................................... 118,381
Receivables for securities sold, not yet delivered................................... 0
Prepaid expense...................................................................... 39,872
------------
$104,638,776
LIABILITIES
Accrued management fee....................................... $ 46,962
Accrued custodian and transfer agent fee..................... 19,715
Payable for securities purchased, not yet received........... 710,000 776,677
------------ ------------
NET ASSETS
Equivalent to $62.29 per share on 1,667,310 shares outstanding....................... $103,862,099
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C> <C>
NET ASSETS, December 31, 1995........................................................ $ 70,536,880
Net investment income, per statement below................... $ 490,728
Net accrued income in price of shares sold and repurchased... 41,717
------------
532,445
Distribution to shareholders................................. 415,379 117,066
------------
Fund shares issued and repurchased:
Received for 476,856 shares issued......................... 28,275,107
Paid for 54,870 shares repurchased......................... 3,275,010 25,000,097
------------
Increase in unrealized net appreciation (depreciation) of investments................ 6,922,615
Net gain or (loss) realized from sales of securities................................. 1,285,441
Distribution from net realized gain.................................................. 0
------------
NET ASSETS, June 30, 1996............................................................ $103,862,099
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF NET INVESTMENT INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................................................................ $ 745,331
Interest............................................................................. 127,885
------------
873,216
EXPENSES
Management fee (Note A)...................................... $ 267,822
Fees and expenses of custodian, transfer agent and dividend
disbursing agent (Note A)................................... 63,336
Legal and auditing fees and expenses......................... 9,887
Insurance.................................................... 4,009
Other Fees and Expenses...................................... 37,434 382,488
------------ ------------
NET INVESTMENT INCOME................................................................ $ 490,728
------------
------------
</TABLE>
NOTE A: The investment advisory fee was paid to Mairs and Power, Inc., which is
owned by individuals who are directors and officers of the Fund, for its
services as investment adviser. Investment advisory fees are paid to the adviser
pursuant to an advisory agreement approved by the Directors of the Fund. The
advisor fee is computed each month and is 1/20th of one percent of the net asset
value of the Fund on the last valuation day of the month. The transfer agent fee
was paid to 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 6-30-96, 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 $10,800. 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) The annual meeting of
stockholders of Mairs and Power Growth Fund, Inc. was held on Monday, May 20,
1996. Proxies representing 942,794 shares were received, which represented 63%
of the total outstanding shares. 3) Purchases and sales of investment securities
during the six months ended June 30, 1996 aggregated $22,790,552 and $1,387,662
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
June 30, 1996 1,667,310 103,862,099 62.29 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 JUNE 30, 1996) ARE AS FOLLOWS:
1 YEAR: +33.7% 5 YEARS: +19.4% 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>
- --------------------------------------------------------------------------------
<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>