<PAGE>
- --------------------------------
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MAIRS AND POWER
GROWTH FUND, INC.
------------------
2ND QUARTER REPORT
June 30, 1997
July 17, 1997
To Our Shareholders
On June 30, 1997, the net asset value per share of Mairs and Power Growth Fund
was $82.19, an increase of 18.7% from the year end valuation after adjustment
for the June dividend. This compares with returns of 20.6% for the Standard and
Poor's 500 Stock Index and 20.1% for the Dow Jones Industrial Average. The Fund
return compares favorably with that of the average diversified stock fund which
gained 13.0% for the period. The WALL STREET JOURNAL, in its quarterly review of
Mutual Funds, compiled a list of the 50 best performing stock funds for the most
recent five and ten year periods. Mairs and Power Growth Fund was one of nine
diversified stock funds to appear on both lists. The Fund was the subject of a
feature article in the NEW YORK TIMES on Sunday, May 4th as well as in the SAN
FRANCISCO CHRONICLE on June 16th.
The U.S. economy continues to perform remarkably well. G.D.P. growth in the
second quarter slowed to an annual rate of about 2%, which was a welcomed event
because the 5.9% growth surge registered in the first quarter was clearly
unsustainable and would have resulted in an overheated economy, had it
continued. The unemployment rate is currently 5%, having recently reached the
lowest level in 24 years. New jobs continue to be created at a monthly rate of
over 200,000 which makes the U.S. the envy of the industrialized world. And most
significantly, the inflation rate continues to decline and has now reached a 30
year low. During the first half of this year, the Consumer Price Index rose at
an annual rate of just 1.4%, a rate never seen in the latter stages of a long
business cycle. Also very encouraging is the rapid decline which has occurred in
the federal deficit. Tax receipts are running well ahead of expectation and it
now appears that the deficit for the fiscal year ending September 30 will fall
below $50 billion, having declined 85% during the past six years.
The stock market has clearly recognized these very favorable developments.
After a brief 10% correction which occurred in March and early April, stocks
have again risen into record territory. The strong market is the result of two
major surprises that have taken place this year. Virtually no one believed that
inflation could fall this low in the seventh year of economic expansion, and
very few anticipated that robust corporate earnings growth would continue after
five consecutive years of double digit expansion. Analysts now expect earnings
to advance at better than a 10% rate this year. The question facing investors
today is that of valuation. The market is currently trading at slightly over 20
times anticipated 1997 earnings. However, the market has usually traded in a
range of 18-22 times earnings during periods when inflation was 2 1/2% or lower.
Therefore, if we are correct in our belief that inflation will remain subdued
and earnings growth strong, the market exuberance becomes rational.
We are saddened by the death of Litton Field who passed away on July 14th.
While he had suffered a lengthy illness, he remained intellectually vigorous up
until the time of his death. He served as a director of the Fund for the past
twenty-five years, longer than any other outside director. Throughout that
period, his wise counsel was invaluable. We will miss him, both as a colleague
and a friend.
George A. Mairs
<PAGE>
SCHEDULE OF INVESTMENTS AT JUNE 30, 1997
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<TABLE>
<CAPTION>
NUMBER OF
SHARES COMMON STOCKS COST MARKET VALUE
- --------- ------------------------------------------ ------------ ------------
<C> <S> <C> <C>
CHEMICAL 3.2%
186,000 Ecolab, Inc. $ 4,693,450 $ 8,881,500
------------ ------------
CONSUMER 10.6%
83,000 Darden Restaurants 676,113 752,188
147,000 General Mills, Inc. 7,186,228 9,573,375
274,300 Hormel Foods 6,840,034 7,371,812
162,610 Jostens, Inc. 3,012,766 4,349,818
195,100 The Toro Company 5,593,269 7,389,412
------------ ------------
23,308,410 29,436,605
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DRUGS AND HOSPITAL SUPPLIES 7.7%
92,000 Baxter International, Inc. 3,378,563 4,807,000
105,000 Johnson & Johnson 2,678,229 6,759,375
83,000 Pfizer Inc. 2,333,364 9,918,500
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8,390,156 21,484,875
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FINANCIAL 14.8%
110,000 First Bank System, Inc. 3,596,229 9,391,250
180,000 Norwest Corporation 3,256,053 10,125,000
105,000 ReliaStar Financial Corporation 5,627,622 7,678,125
93,000 St. Paul Companies, Inc. 3,193,249 7,091,250
140,000 TCF Financial Corporation 6,434,797 6,912,500
------------ ------------
22,107,950 41,198,125
------------ ------------
INFORMATION SERVICES 6.2%
230,000 DeluxeCorp. 6,405,011 7,848,750
257,000 Merrill Corporation 4,779,445 9,348,375
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11,184,456 17,197,125
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MEDICAL DEVICES 6.7%
138,000 Medtronic, Incorporated 2,482,363 11,178,000
195,000 St. Jude Medical, Inc. 6,495,360 7,605,000
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8,977,723 18,783,000
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NATURAL RESOURCES 2.4%
130,000 Weyerhaeuser Company 5,394,233 6,760,000
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RETAILING 5.3%
154,000 Dayton Hudson Corporation 3,110,286 8,190,875
194,000 SUPERVALU Inc. 5,388,967 6,693,000
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8,499,253 14,883,875
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TECHNOLOGY 16.3%
170,000 Ceridian 6,275,325 7,182,500
198,050 Emerson Electric Co. 6,468,825 10,905,128
100,000 Honeywell Inc. 5,759,211 7,587,500
324,800 MTS Systems Corporation 4,783,285 9,906,400
217,700 National Computer Systems Inc. 4,822,839 5,796,263
443,500 T S I Inc. 2,703,874 4,213,250
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30,813,359 45,591,041
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TELECOMMUNICATIONS 4.1%
339,000 ADC Telecommunications Inc. 4,237,399 11,314,125
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OTHER INDUSTRIALS 17.4%
170,000 Bemis Company, Inc. 6,274,322 7,352,500
255,000 BMC Industries, Inc. 1,982,361 8,733,750
100,000 Burlington Northern Santa Fe 8,500,244 8,987,500
248,200 Graco Inc. 3,247,715 7,477,025
285,800 Imation Corporation 6,987,933 7,537,975
83,000 Minnesota Mining & Manufacturing Company 3,702,753 8,466,000
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30,695,328 48,554,750
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TOTAL COMMON STOCKS 94.7% $158,301,717 $264,085,021
------------
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OTHER ASSETS IN EXCESS OF LIABILITIES 5.3% 14,823,631
------------
NET ASSETS 100% $278,908,652
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------------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS AT JUNE 30, 1997
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<TABLE>
<S> <C> <C> <C>
ASSETS
Common stocks as annexed, at market value (cost $158,301,717).................................... $264,085,021
Cash............................................................................................. 16,895,187
Dividends receivable............................................................................. 227,863
Interest receivable.............................................................................. 67,349
Receivables for securities sold, not yet delivered............................................... 0
Prepaid expense.................................................................................. 27,038
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$281,302,458
LIABILITIES
Accrued management fee................................................... $ 138,630
Accrued custodian and transfer agent fee................................. 37,753
Payable for securities purchased, not yet received....................... 2,217,423 2,393,806
------------ ------------
NET ASSETS
Equivalent to $82.19 per share on 3,393,542 shares outstanding................................... $278,908,652
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
NET ASSETS, December 31, 1996.................................................................... $150,161,759
Net investment income, per statement below............................... $ 1,114,013
Net accrued income in price of shares sold and repurchased............... 266,811
------------
1,380,824
Distribution to Shareholders............................................. (1,018,063)
Reversal of Capital Gain Distribution Paid............................... (302)
Reversal of Dividend Reinvestment........................................ (5,697) 356,762
------------
Fund shares issued and repurchased:
Received for 1,350,569 shares issued................................... 98,832,802
Paid for 118,274 shares repurchased.................................... (8,502,199) 90,330,603
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Increase in unrealized net appreciation (depreciation) of investments............................ 37,974,896
Net gain or (loss) realized from sales of securities............................................. 84,632
Distribution from net realized gain.............................................................. 0
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NET ASSETS, June 30, 1997........................................................................ $278,908,652
------------
------------
</TABLE>
STATEMENT OF NET INVESTMENT INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................................................................ $ 1,655,959
Interest......................................................................................... 328,952
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1,984,911
EXPENSES
Management fee (Note A).................................................. $ 636,456
Fees and expenses of custodian, transfer agent and dividend disbursing
agent (Note A).......................................................... 107,408
Legal and auditing fees and expenses..................................... 15,475
Insurance................................................................ 4,867
Other Fees and Expenses.................................................. 106,692 870,898
------------ ------------
NET INVESTMENT INCOME............................................................................ $ 1,114,013
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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.
SUPPLEMENTARY INFORMATION: 1) Directors of the Fund not affiliated with Mairs
and Power, Inc. received compensation for meetings attended during this period
totaling $16,200. No compensation was paid to any other director or officer of
the Fund. 2) 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. 3) Purchases and sales of investment securities
during the six months ended June 30, 1997 aggregated $85,337,257 and $114,668
respectively. 4) An annual meeting of shareholders was held on May 19, 1997 for
the purposes of electing six directors and to ratify the selection of Ernst &
Young LLP as independent auditors for the Fund. Of the 2,906,848 shares
outstanding on record date of April 11, 1997, the following votes were cast:
<TABLE>
<CAPTION>
PROPOSAL SHARES FOR SHARES AGAINST ABSTAINING
- ---------------------------------------------- ----------- --------------- -----------
<S> <C> <C> <C>
Elect George A. Mairs, III 1,547,395 11,331 0
Elect William B. Frels 1,547,386 11,341 0
Elect Peter G. Robb 1,546,711 12,015 0
Elect Litton E. S. Field 1,543,271 15,455 0
Elect Donald E. Garretson 1,544,176 14,550 0
Elect J. Thomas Simonet 1,546,884 11,842 0
Ratify Ernst & Young LLP as Independent
Auditors 1,529,204 6,975 22,547
</TABLE>
<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
- --------------------------------------------------------------------------------
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
June 30, 1997 3,393,542 278,908,652 82.19 0.30
</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
JUNE 30, 1997) ARE AS FOLLOWS:
1 YEAR: +35.9% 5 YEARS: +24.3% 10 YEARS: +16.9%
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>
