<PAGE>
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MAIRS AND POWER
GROWTH FUND, INC.
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1ST QUARTER REPORT
March 31, 1997
To Our Shareholders
On March 31, 1997, the net asset value per share of Mairs and Power Growth
Fund was $69.30, a decline of 0.25% from the year end valuation. This compares
with returns of 2.7% for the Standard and Poor's 500 Stock Index and 2.6% for
the Dow Jones Industrial Average. The Fund return compared favorably with the
average fund investing in diversified U.S. stocks which lost 2.0% in the
quarter. In a study of mutual funds performance by CDA/Wiesenberger, the Fund
ranked 5th out of 633 long-term growth funds for the three year period ending
March 31 and 7th out of 400 similar funds for the five year period ending March
31. For the ten year period, the Fund ranked 13th out of 251 funds. The Fund was
the subject of a feature article appearing in the February issue of SMART MONEY,
the Wall Street Journal magazine of personal business. The NEW YORK TIMES, in
the March 30th issue, cited the Fund as the fifth best performing domestic stock
fund for the three year period ending December 31, 1996 based on after-tax
returns.
The U.S. economy displayed vigorous growth during the first quarter with
G.D.P. rising at an annual rate of 5.6%. During the past twelve months, the
economy grew 4%, the most rapid pace since 1980. The March quarter surge is
clearly unsustainable and was influenced by several non-recurring factors
including a substantial inventory build-up, early tax refunds, and unusually
warm weather in much of the country. Nonetheless, the Federal Reserve Board was
prompted to increase short-term interest rates for the first time in two years
at their March 25th meeting. While the Fed admitted there is scant evidence of
rising prices, the quarter-percent increase was characterized as a prudent
"insurance policy" intended to curb future inflationary pressures. We continue
to be impressed with the well balanced nature of the economy. Unemployment has
declined to 4.9%, the lowest level in 24 years. The G.D.P. price deflator
registered a 1.8% increase during the past twelve months, the lowest level in 30
years. The current period of economic expansion has now entered its seventh year
but is still two years shy of the record eight year expansions which took place
in both the 1960's and the 1980's. Currently, we see few signs of any excess
that might precipitate the next downturn.
The stock market has appeared to be quite volatile since the first of the
year. However, the past three year period was characterized by unusually low
volatility and the market has now returned to a more normal level of volatility.
A correction of about 10% occurred in late March and early April but in May the
market has moved back into record territory, fueled by very strong corporate
earnings which have been reported for the March quarter. A WALL STREET JOURNAL
survey indicated that earnings rose an average of 18% during the period, well
above consensus expectations. We expect earnings gains to moderate during the
balance of the year but still exceed last year's record level by 10% or more.
Stocks are currently trading at about 19 times estimated 1997 earnings, very
much in line with other periods when inflation was 2 1/2% or lower. Accordingly,
we find most stocks fairly valued and not fully reflecting the higher level of
corporate earnings which we anticipate again in 1998.
George A. Mairs
<PAGE>
SCHEDULE OF INVESTMENTS AT MARCH 31, 1997
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<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES COMMON STOCKS COST VALUE
- --------- ------------------------------------------ ------------ ------------
<C> <S> <C> <C>
CHEMICAL 3.7%
186,000 Ecolab, Inc. $ 4,693,450 $ 7,068,000
------------ ------------
CONSUMER 11.2%
83,000 Darden Restaurants 676,113 653,625
127,000 General Mills, Inc. 5,884,491 7,889,875
153,000 Hormel Foods 3,752,781 3,920,625
162,610 Jostens, Inc. 3,012,766 3,679,051
155,000 The Toro Company 4,096,385 5,270,000
------------ ------------
17,422,536 21,413,176
------------ ------------
DRUGS AND HOSPITAL SUPPLIES 8.0%
4,400 Allegiance Corp. 30,036 97,350
82,000 Baxter International, Inc. 2,911,113 3,536,250
105,000 Johnson & Johnson 2,678,229 5,551,875
73,000 Pfizer Inc. 1,479,058 6,141,125
------------ ------------
7,098,436 15,326,600
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FINANCIAL 13.4%
100,000 First Bank System, Inc. 2,882,529 7,300,000
170,000 Norwest Corporation 2,782,796 7,862,500
75,000 ReliaStar Financial Corporation 3,829,534 4,434,375
93,000 St. Paul Companies, Inc. 3,193,249 6,033,375
------------ ------------
12,688,108 25,630,250
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INFORMATION SERVICES 6.2%
190,000 Deluxe Corp. 5,078,403 6,151,250
237,000 Merrill Corporation 4,304,620 5,688,000
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9,383,023 11,839,250
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MEDICAL DEVICES 7.2%
138,000 Medtronic, Incorporated 2,482,363 8,590,500
155,000 St. Jude Medical, Inc. 5,131,185 5,173,125
------------ ------------
7,613,548 13,763,625
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NATURAL RESOURCES 2.1%
90,000 Weyerhaeuser Company 3,401,403 4,016,250
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RETAILING 6.1%
154,000 Dayton Hudson Corporation 3,110,286 6,429,500
174,000 SUPERVALU Inc. 4,785,317 5,176,500
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7,895,603 11,606,000
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TECHNOLOGY 16.1%
110,000 Ceridian 4,261,962 3,946,250
188,050 Emerson Electric Co. 5,951,375 8,462,250
50,000 Honeywell Inc. 2,141,786 3,393,750
295,500 MTS Systems Corporation 4,144,585 6,501,000
190,700 National Computer Systems Inc. 4,091,151 4,815,175
393,500 T S I Inc. 2,230,924 3,738,250
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22,821,783 30,856,675
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TELECOMMUNICATIONS 4.0%
284,000 ADC Telecommunications Inc. 2,927,399 7,632,500
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OTHER INDUSTRIALS 16.6%
80,000 Bemis Company, Inc. 2,821,072 3,200,000
235,000 BMC Industries, Inc. 1,409,523 6,638,750
80,000 Burlington Northern Santa Fe 6,869,639 5,920,000
238,200 Graco Inc. 3,000,075 6,848,250
115,800 Imation Corporation 2,851,470 2,895,000
73,000 Minnesota Mining & Manufacturing Company 2,884,053 6,168,500
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19,835,832 31,670,500
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TOTAL COMMON STOCKS 94.6% $115,781,121 $180,822,826
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Other Assets in Excess of Liabilities 5.4% 10,256,412
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NET ASSETS 100% $191,079,238
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------------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS AT MARCH 31, 1997
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<TABLE>
<S> <C> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $115,781,121)........................ $ 180,822,826
Cash................................................................................. 11,379,837
Dividends and interest receivable.................................................... 262,637
Receivables for securities sold, not yet delivered................................... 0
Prepaid expense...................................................................... 36,843
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$ 192,502,143
LIABILITIES
Accrued management fee....................................... $ 91,410
Accrued custodian and transfer agent fee..................... 26,779
Payable for securities purchased, not yet received........... 1,304,715 1,422,904
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NET ASSETS
Equivalent to $69.30 per share on 2,757,120 shares outstanding....................... $ 191,079,239
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-------------
</TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<S> <C> <C> <C>
NET ASSETS, December 31, 1996........................................................ $ 150,161,759
Net investment income, per statement below................... 522,039
Net accrued income in price of shares sold and repurchased... 68,717
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590,756
Reversal of Capital Gain Distribution Paid................... (302)
Reversal of Dividend Reinvestment............................ (5,697) 584,757
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Fund shares issued and repurchased:
Received for 653,847 shares issued......................... 47,219,915
Paid for 57,973 shares repurchased......................... 4,120,485 43,099,430
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Increase in unrealized net appreciation (depreciation) of investments................ (2,766,707)
Net gain or (loss) realized from sales of securities................................. 0
Distribution from net realized gain.................................................. 0
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NET ASSETS, March 31, 1997........................................................... $ 191,079,239
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</TABLE>
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STATEMENT OF NET INVESTMENT INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends............................................................................ $ 742,818
Interest............................................................................. 138,247
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881,065
EXPENSES
Management fee (Note A)...................................... $ 265,179
Fees and expenses of custodian, transfer agent and dividend
disbursing agent (Note A)................................... 41,273
Legal and auditing fees and expenses......................... 7,738
Insurance.................................................... 2,434
Other Fees and Expenses...................................... 42,402 359,026
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NET INVESTMENT INCOME................................................................ $ 522,039
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</TABLE>
NOTE A: The investment advisory fee was paid to Mairs and Power, Inc., which is
owned by individuals who are directors and officers of the Fund, for its
services as investment adviser. Investment advisory fees are paid to the adviser
pursuant to an advisory agreement approved by the Directors of the Fund. The
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 Firstar Trust Company which serves as transfer agent. Directors of
the Fund not affiliated with Mairs and Power, Inc. received compensation for
meetings attended during this period totaling $-0-. 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 three months ended March 31, 1997 aggregated
$42,123,428 and $-0- respectively.
<PAGE>
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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, 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
Dec. 31, 1996 2,161,246 150,161,759 69.48 1.39 0.71
Mar. 31, 1997 2,757,120 191,079,239 69.30
</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, 1997) ARE AS FOLLOWS:
1 YEAR: +21.4% 5 YEARS: +20.1% 10 YEARS: +15.1%
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
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<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>
