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Registration Number 2-18269
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 42
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 42
Mairs and Power Balanced Fund, Inc.
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(Exact Name of Registrant as Specified in Charter)
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (612) 222-8478
William B. Frels, President
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on April 30, 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock, $.10 par value per share.
<PAGE>
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MAIRS AND POWER
BALANCED FUND, INC.
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PROSPECTUS
April 30, 1998
W-1420 FIRST NATIONAL BANK BLDG.
332 MINNESOTA STREET
ST. PAUL, MN 55101-1363
612-222-8478
OBJECTIVE
The objective of the Fund is to provide regular current income, the potential
for capital appreciation and a moderate level of volatility by investing in a
diversified list of securities including bonds, preferred stocks, common stocks
and other securities convertible into common stock.
This Prospectus, which should be retained for future reference, is designed to
set forth concisely the information you should know before you invest. A
"Statement of Additional Information" dated April 30, 1998, and incorporated
herein by reference, has been filed with the Securities and Exchange Commission.
A copy of the Statement may be obtained, without charge, by writing to or
calling the Fund.
A NO-LOAD FUND
There is no sales charge for the purchase or sale of Fund shares.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Expenses.......................................................................... 2
Condensed Financial Information........................................................ 3
Financial Highlights Chart............................................................. 3
Investment Objective and Policies...................................................... 4
Management of the Fund................................................................. 4
Management's Discussion of Fund Performance............................................ 5
Comparison Chart (Fund, S & P 500 Index, Consumer Price Index)......................... 5
The Fund............................................................................... 6
Purchasing Shares...................................................................... 6
Redeeming Shares....................................................................... 7
Transfer of Shares..................................................................... 8
Distributions and Tax Consequences..................................................... 8
Determining Net Asset Value Per Share.................................................. 9
Other Services......................................................................... 9
Risks.................................................................................. 10
</TABLE>
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FUND EXPENSES
The purpose of the following table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly, and importantly, to compare the expense of an investment in the Fund
with other similar investments.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases................................... None
Maximum Sales Load Imposed on Reinvested Dividends and Other
Distributions............................................................ None
Deferred Sales Load....................................................... None
Redemption Fees........................................................... None
Exchange Fee.............................................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fees........................................................... 0.60%
12b-1 Fees................................................................ 0.00
Other Expenses............................................................ 0.32
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Total Operating Expenses.................................................. 0.92%
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</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period: $ 9 $ 29 $ 51 $ 114
</TABLE>
Although this example is based on actual expenses in the most recent year, it
should not be considered a representation of past or future expenses; actual
expenses in future years may be greater or less than those shown.
2
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CONDENSED FINANCIAL INFORMATION
The following table shows certain important financial information which may be
helpful in evaluating the Fund's results. The information is derived from the
Fund's financial statements, which have been audited by Ernst & Young LLP,
independent auditors. The financial statements and auditors' report may be found
in the Fund's most recent annual report which may be obtained, without charge,
by writing to or calling the Fund at the number listed on the front of this
Prospectus.
FINANCIAL HIGHLIGHTS
(SELECTED PER SHARE DATA AND RATIOS -- FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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PER SHARE
Net asset value, beginning of year $ 73.68 $ 65.39 $ 52.42 $ 56.38 $ 53.82 $ 53.34 $ 44.11 $ 45.78 $ 41.39 $ 39.08
Investment operations:
Net investment income 2.35 2.19 2.01 2.09 2.00 2.00 1.98 2.12 2.13 2.24
Net realized and unrealized gains
(losses) on investment 18.07 9.38 13.55 (3.25) 3.79 1.07 9.24 (1.53) 5.07 3.14
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 20.42 11.57 15.56 (1.16) 5.79 3.07 11.22 0.59 7.20 5.38
Less distributions:
Dividends (from net investment
income) (2.37) (2.20) (2.04) (2.06) (1.98) (1.99) (1.99) (2.13) (2.15) (2.23)
Distributions (from capital gains) (0.70) (1.08) (0.55) (0.74) (1.25) (0.60) - (0.13) (0.66) (0.84)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (3.07) (3.28) (2.59) (2.80) (3.23) (2.59) (1.99) (2.26) (2.81) (3.07)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 91.03 $ 73.68 $ 65.39 $ 52.42 $ 56.38 $ 53.82 $ 53.34 $ 44.11 $ 45.78 $ 41.39
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN 28.0% 17.9% 30.0% (2.1)% 10.9% 5.9% 25.9% 1.4% 17.7% 13.9%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF YEAR (000'S
OMITTED) 28,790 20,565 16,979 12,973 13,442 11,536 10,676 8,075 7,886 6,570
Ratio of expenses to average net
assets 0.92% 1.08% 1.12% 1.11% 1.06% 1.13% 1.25% 1.20% 1.22% 1.22%
Ratio of net investment income to
average net assets 2.81% 3.16% 3.47% 3.80% 3.50% 3.72% 4.02% 4.78% 4.78% 5.33%
Portfolio turnover rate 5.32% 8.25% 3.95% 17.28% 24.10% 16.12% 24.37% 20.15% 14.18% 25.83%
Average commission rate paid* $ .1200 $ .1201 - - - - - - - -
</TABLE>
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* Disclosure is required by the SEC beginning in 1996.
3
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective is to provide its shareholders with regular current
income, the potential for capital appreciation and a moderate level of
volatility by investing in a diversified list of securities including bonds,
preferred stocks, common stocks and other securities convertible into common
stock. It is expected that the Fund's assets will be invested in various types
of securities, the proportion of which will vary from time to time in accordance
with the judgment of Mairs and Power, Inc., the Fund's investment adviser. The
Fund seeks to achieve its objective by investing in a list of holdings that is
diversified by both security type and by industry. While it is expected that at
least 25% of the Fund's assets will be invested in non-convertible fixed income
securities, the dominant portfolio emphasis will be on common stock and other
securities convertible into common stock. Assets of the Fund are expected to be
reasonably fully invested at all times. Cash equivalent investments (money
market funds and other short-term investments) may be held from time to time as
a buying reserve to better enable the Fund to meet its objective. Portfolio
turnover is expected to be relatively modest when compared to other balanced
mutual funds. Although the Fund will invest primarily in higher rated investment
grade fixed income securities (Baa or better by Moody's Investors Service),
lower rated fixed income securities may be purchased if, in the opinion of the
Investment Adviser, the potential reward outweighs the incremental risk.
A detailed description of the Fund's investment limitations is contained in
the Statement of Additional Information. Such limitations are fundamental
policies which cannot be changed without the approval of a majority of the
Fund's shareholders, as defined in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Board of Directors has overall responsibility for the Fund. The Fund
employs Mairs and Power, Inc., W-1420 First National Bank Building, 332
Minnesota Street, St. Paul, MN 55101-1363, to manage the Fund's investment
portfolio and certain other business affairs under a contract that compensates
Mairs and Power, Inc. at the rate of one-twentieth of one percent of the Fund's
month-end net asset value (0.6% annually), computed and paid each month. Mairs
and Power, Inc. has managed mutual funds since 1958 and has provided investment
counsel services in St. Paul since 1931.
William B. Frels, Vice President and Treasurer of Mairs and Power, Inc. is
primarily responsible for the day-to-day management of the Fund's portfolio. Mr.
Frels has been an officer and director of Mairs and Power, Inc. since July 1992.
Prior to that time he was a Vice President and Senior Investment Officer for
American National Bank and Trust Company of St. Paul, Minnesota from September
1990 to June 1992.
Mairs and Power, Inc. acts as the Fund's Transfer Agent and Dividend
Disbursing Agent and is reimbursed for all expenditures incurred in the
discharge of these duties. The ratio of the transfer agent fee to average net
assets in 1997 was 0.05%.
Firstar Trust Company acts as Custodian for the Fund pursuant to the terms of
a custodial agreement which must be approved annually by the Board of Directors.
Firstar Trust Company controls all securities and cash for the Fund, receives
and pays for securities purchased, delivers against payment for securities sold,
receives and collects income from investments, makes all payments for Fund
expenses and performs other administrative services, all as directed in writing
by authorized officers of the Fund. The ratio of the custodial fee to average
net assets in 1997 was 0.02%.
The ratio of the management fee to average net assets in 1997 was 0.6%; the
ratio of total Fund operating expenses to average net assets ("expense ratio")
was 0.92%. Mairs and Power, Inc. has agreed with the Fund that the expense ratio
will not exceed the lowest expense limitation of any state in which the Fund's
shares are sold.
4
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
1997 IN REVIEW
Full year 1997 was another banner year for the Balanced Fund with a number of
new records being established. The Fund produced an exceptional 28.0% total rate
of return after adjustment for the reinvestment of cash dividends and capital
gain distributions. This compared with other benchmark returns of 33.4% for the
Standard & Poor's 500 Stock Index, 24.9% for the Dow Jones Industrial Average
and 9.8% for the Lehman Brothers Gov't/Corp. Bond Index. More importantly, the
Fund ranked second in a CDA/Wiesenberger universe of 314 other similar balanced
funds investing in domestic securities which had an average return of 18.8%.
The strong performance of financial markets in 1997 can be attributable to an
ideal economic background. Real GDP advanced a solid 3.8% which was the best
showing since 1988. Inflation remained under good control falling to an eleven
year low of 1.7% based on the Consumer Price Index. Rising productivity and
stable raw material costs have generally more than compensated for modest
increases in unit labor costs. As a result, corporate profitability continued to
improve, thus allowing profits on an operating basis before charge-offs to once
again increase at an above average "double digit" rate.
Over the course of the year, the Fund continued to hold more than half of its
assets in common stocks (65.5% at year end) with the balance invested in a
combination of bonds (corporate and Federal Government), convertible bonds and
preferred stock (convertible and non-convertible). The fund remained pretty
fully invested throughout the year with cash reserves of only 3.0% at year end.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FUND,
S & P 500 INDEX, AND THE CONSUMER PRICE INDEX
<S> <C> <C> <C>
Fund S&P CPI
1987 $10,000.00 $10,000.00 $10,000.00
1988 $11,390.00 $11,660.00 $10,410.00
1989 $13,402.61 $15,334.56 $10,909.68
1990 $13,584.89 $14,853.53 $11,498.80
1991 $17,100.66 $19,383.86 $11,981.75
1992 $18,102.76 $20,876.42 $12,341.21
1993 $20,066.91 $22,984.94 $12,674.42
1994 $19,649.51 $23,283.74 $13,016.63
1995 $25,552.23 $32,024.46 $13,342.04
1996 $30,133.74 $39,383.68 $13,782.33
1997 $38,577.22 $52,537.83 $14,016.63
Year Ending
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year 10 Year
28.0% 16.3% 14.5%
PAST INVESTMENT RESULTS SHOULD NOT BE TAKEN AS
NECESSARILY REPRESENTATIVE OF FUTURE PERFORMANCE.
</TABLE>
5
<PAGE>
THE FUND
The Fund is issued by Mairs and Power Balanced Fund, Inc., an open-ended,
diversified management company which was incorporated in Minnesota in 1961. The
Fund has authorized capital stock of 10,000,000 shares, $0.10 par value per
share. Each share entitles the holder to one vote at all meetings of Fund
shareholders and to participate equally in dividends and distributions declared
by the Fund, and in its remaining net assets on liquidation after satisfaction
of outstanding liabilities. Fund shares are fully paid and non-assessable when
issued, have no preemptive, conversion, or cumulative voting rights, are
transferable without restrictions and are redeemable at net asset value.
PURCHASING SHARES
Shares of the Fund may be purchased, with no sales charge, at the Fund's
office in St. Paul. Shares are purchased at the next-computed net asset value
after receipt and acceptance of a purchase application in proper form. Net asset
value will be calculated as of the close of trading of the New York Stock
Exchange (the "Exchange") on that day (usually 3:00 p.m. Central time).
Accordingly, purchase orders received on a day the exchange is open for trading,
prior to the close of trading on that day, will be valued as of the close of
trading on that day. Applications for purchase of shares after the close of
trading on the exchange will be based upon the net asset value as determined as
of the close of trading on the next day the exchange is open.
An initial purchase must be at least $2,500 ($1,000 for an IRA account) and
each subsequent purchase must be at least $100, although the Fund reserves the
right to waive or change these minimums at its discretion. All applications to
purchase capital stock are subject to acceptance or rejection by authorized
officers of the Fund and are not binding until accepted. Applications will not
be accepted unless accompanied by payment in U.S. funds. Payment should be made
by check drawn on a U.S. bank, savings and loan, or credit union. The Fund will
not accept payment in cash or third party checks for the purchase of shares.
The Fund will charge a $20 fee against a shareholder's account, in addition to
any loss sustained by the Fund, for any payment check returned to the Fund for
insufficient funds. It is the policy of the Fund not to accept applications
under circumstances or in amounts considered disadvantageous to shareholders;
for example, if an individual previously tried to purchase shares with a bad
check, or the proper social security number or tax identification number is
omitted, the Fund reserves the right not to accept future applications from such
individual. The Fund reserves the right to reject any application which does not
include a certified social security or tax identification number.
The Fund reserves the right to cancel or rescind any purchase (for example, if
an account has been restricted due to excessive trading or fraud) upon notice to
the shareholder within five business days of the trade; to freeze any account
and temporarily suspend services on the account when notice has been received of
a dispute between the registered or beneficial account owners or there is reason
to believe a fraudulent transaction may occur; to otherwise modify the
conditions of purchase and any services at any time; or to act on instructions
believed to be genuine.
Stock certificates will not ordinarily be issued unless the investor requests
a certificate in writing. The Fund will invest the entire dollar amount of each
purchase order in full and fractional Fund shares and, unless otherwise
instructed, will reinvest all income dividends and capital gains distributions
in additional full and fractional shares. Investors may, however, request that
income dividends and/or capital gains distributions be paid in cash.
6
<PAGE>
The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services, or receipt at the Custodian's post office box, of purchase
applications does not constitute receipt by the Custodian or the Fund.
REDEEMING SHARES
Shareholders may redeem for cash all or a portion of their shares by
instructing the Fund at its office in St. Paul. Shares will be redeemed at the
net asset value next computed after the receipt of a redemption request and
acceptance by the Fund. The determination of net asset value for a particular
day is applicable to all requests for the redemption of shares received at or
before the close of trading on the New York Stock Exchange (the "Exchange") on
that day (usually 3:00 p.m. Central time). Requests received for redemption on a
day the exchange is open for trading, prior to the close of trading on that day,
will be valued as of the close of trading on that day. Requests for redemption
of shares received after the close of trading on the exchange will be based upon
the net asset value as determined as of the close of trading on the next day the
exchange is open. A redemption request must be in "good order" before the
proceeds can be released. This means the following will be required:
(a) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all owners of the shares
exactly as their names appear in the Fund's shareholder records. If
certificates have been issued representing shares to be redeemed, they must
accompany the letter.
(b) A guarantee of the signature of each owner by an eligible signature
guarantor such as a U.S. commercial bank, trust company, or member of the
New York Stock Exchange for redemption requests greater than $10,000.
(c) In the case of estates, trusts, guardianships, custodianships, corporations
and pension and profit-sharing plans, other supporting legal documents may
be required.
(d) A guarantee of the signature of each owner by an eligible signature
guarantor such as a U.S. commercial bank, trust company, or member of the
New York Stock Exchange if the address of record has been changed within the
15 days preceding any liquidation.
If the proceeds of any redemption are requested to be made payable to or sent
to other than the address of record, signature(s) on the request must be
guaranteed by an eligible signature guarantor such as a commercial bank, trust
company, or a member of the New York Stock Exchange.
If any portion of the shares to be redeemed represents an investment made by
check, the Fund may delay the payment of the redemption proceeds until the
Transfer Agent is reasonably satisfied that the check has been collected, which
may take up to twelve days from the purchase date.
Payment for shares redeemed will be mailed to you typically within one or two
business days, but no later than the seventh business day after receipt by the
Transfer Agent of the redemption request in good order, or within such shorter
period as may legally be required.
The Fund may be required to withhold federal income tax at a rate of 31%
(backup withholding) from dividend payments, distributions, and redemption
proceeds if a shareholder fails to furnish the Fund with his or her social
security or tax identification number. The shareholder also must certify that
the number is correct and that he or she is not subject to backup withholding.
The certification is included as part of the
7
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share purchase application form. If the shareholder does not have a social
security number, he or she should indicate on the purchase form that an
application to obtain a number is pending. The Fund is required to withhold
taxes if a number is not delivered to the fund within seven days.
No redemption request will become effective until all documents have been
received in proper form by the Fund. The shareholder should contact the Fund for
further information concerning documentation required for a redemption of Fund
shares.
Shareholders who have an IRA or other retirement plan must indicate on their
redemption request whether or not to withhold federal income tax. Redemption
requests failing to indicate an election not to have tax withheld will be
subject to withholding.
The right of redemption may be suspended or the date of payment may be
postponed (1) during weekend or holiday closings, or when trading is restricted
as determined by the Securities and Exchange Commission ("SEC"), (2) during any
period when an emergency exists as determined by the SEC as a result of which it
is not reasonably practicable for the Fund to dispose of securities owned by it
or to fairly determine the value of its net assets, and (3) for such a period as
the SEC may permit. A redemption order may not be canceled or revoked by the
shareholder once redemption instructions have been received and accepted by the
Fund. Since the redemption price is net asset value per share determined at the
same time and in the same manner as for a purchase order received at that time,
it reflects the market value of the Fund's investments at the time of
redemption. This value may be more or less than the price originally paid for
the shares, and the investor may realize a gain or loss on redemption.
TRANSFER OF SHARES
Changes in account registrations -- such as changing the name(s) on your
account, or transferring shares to another person or legal entity -- must be
submitted in writing and require a signature guarantee. Please call the Fund at
(612) 222-8478 for full instructions.
DISTRIBUTIONS AND TAX CONSEQUENCES
The Fund distributes all of its net investment income to shareholders in the
form of quarterly dividends, normally in March, June, September and December. If
net capital gains are realized, the Fund will distribute them near year-end in
the year in which such gains are realized. If the Post Office cannot deliver
your check, or if your check remains uncashed for six months, the Fund reserves
the right to reinvest your distribution check in your account at the Fund's then
current net asset value per share (NAV) and to reinvest all subsequent
distributions in shares of the Fund.
The Fund intends to comply, as it did in 1997, with the special provisions of
Subchapter M of the Internal Revenue Code that relieves it from federal income
tax on net investment income and capital gains currently distributed to
shareholders. The Internal Revenue Code requires all regulated investment
companies to pay a non deductible 4% excise tax if at least 98% of ordinary
income and 98% of capital gains are not paid out to shareholders during the year
in which they are earned or realized. The Fund intends to distribute income and
capital gains in such a manner as to avoid the imposition of this excise tax.
Fund shareholders will be subject to federal income tax at ordinary rates on
distributions of investment income and short-term capital gains. Distributions
of net long-term capital gains are taxable to Fund shareholders as long-term
capital gain regardless of the length of time shares of the Fund are held. The
Taxpayer Relief Act of 1997 passed new capital gain tax rates that apply for
1997. Short-term capital gains are taxed at the same rate as an individual's
ordinary income. (The tax treatment of short-term capital gains was
8
<PAGE>
not changed by the new tax law.) Long-term capital gains are taxed at two
different levels. Certain long-term capital gains are subject to tax at 15% (for
investors in the 15% tax bracket) or 28% (for investors in the 28% tax bracket
or higher). Other long-term capital gains are subject to tax at only 10% (for
investors in the 15% tax bracket) or 20% (for investors in the 28% tax bracket
or higher). Dividends and distributions will be taxable whether received in cash
or reinvested in additional shares of the Fund. In January, you will be sent
Form 1099-DIV indicating the tax status of any dividend and capital gains
distributions made to you during the previous year. This information is also
reported to the IRS. Distributions may also be subject to state and local taxes.
Shareholders not subject to tax on income will not be required to pay tax on
amounts distributed from the Fund.
The Fund's dividends and distributions are paid on a per share basis. At the
time of such payment, therefore, the value of each share will be reduced by the
amount of the payment. If shares are purchased shortly before the payment of a
dividend or a capital gains distribution, purchasers will pay the full price for
the shares and then receive some portion of the price back as a taxable dividend
or distribution.
The foregoing is a general summary of current federal income tax law regarding
the Fund. Investors should consult with their own tax adviser regarding federal,
state and local tax consequences of an investment in the Fund.
DETERMINING NET ASSET VALUE PER SHARE
The net asset value per share for purchase and redemption orders is determined
on the days set forth under the paragraphs for "Purchasing Shares" and
"Redeeming Shares," as of the close of regular trading hours on the New Stock
Exchange (currently 3:00 p.m., Central time) on each day the New York Stock
Exchange is open for trading. As a result, shares of the Fund will not be priced
on the days which the Exchange observes: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is determined
by dividing the total market value of the Fund's investment and other assets,
less any liabilities, by the total outstanding shares of the Fund. Each security
traded on one or more of the national securities exchanges are valued at the
last sale price on the securities exchange on which such securities are
primarily traded or a the last sale price on the national securities market, or
on the day of the valuation, or if there were no sales on that day, the most
recent sales price. All other securities are valued at the mean between the bid
and the asked price. For securities where quotations are not readily available,
or where the last quoted price is not considered representative of the value of
that security if it were to be sold on that day, the security will be valued at
fair value as determined in good faith by Mairs and Power, Inc.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. These valuations are reviewed by Mairs and Power,
Inc. If Mairs and Power, Inc. believes that a valuation received from the
service does not represent a fair value, it values the security by a method that
Mairs and Power, Inc. believes will determine a fair value.
OTHER SERVICES
Shareholder Reports -- Shareholders will receive a confirmation statement
reflecting each purchase and redemption of Fund shares, as well as periodic
statements detailing distributions made by the Fund. In addition, the Fund will
send shareholders quarterly and annual reports showing its portfolio holdings
and will provide tax information annually.
9
<PAGE>
Systematic Withdrawals -- Shareholders may arrange to have quarterly or
monthly withdrawals of cash from an account by sending a systematic withdrawal
request to the Fund. Withdrawal payments are derived from liquidation of
sufficient shares from a shareholder's account to meet the designated payments.
The withdrawal plan may be terminated at any time by writing to the Fund. The
minimum investment to establish a systematic withdrawal program is $10,000.
Retirement Plans -- The Fund sponsors IRA, SEP-IRA, Roth IRA, Simple IRA, and
Keogh retirement plans, information on which is available on request from the
Fund's office in St. Paul.
RISKS
All investments have risks. Although the Fund cannot eliminate all risk, it
seeks to moderate risk by investing in a diversified portfolio. Long-term
investors, for whom the Fund is designed, should be prepared to accept
fluctuations in portfolio value as the Fund seeks to achieve its investment
objective of regular current income along with the potential for capital
appreciation. There can be no assurance, of course, that the Fund will achieve
its objective.
The Fund is subject to the general risk of adverse market conditions for
equity securities, which include common and preferred stocks and securities
convertible into common stock. The market prices of equity securities are
generally subject to greater volatility than prices of fixed income securities,
such as bonds and other debt obligations. Although equity securities have
generally demonstrated long-term increases in value, their prices may fluctuate
markedly over the short term due to changing market conditions, interest rate
fluctuations and various economic and political factors.
The debt securities in which the Fund invests are subject to credit risk,
which is the risk that the issuer of a debt security will fail to make payments
when due. Corporate bonds and certain debt securities issued by agencies of the
United States are also subject to call risk, which is the risk that the debt
will be redeemed prior to its maturity. This risk increases when market interest
rates are declining, because issuers may find it desirable to refinance by
issuing new bonds at lower interest rates.
Fixed-rate debt securities are also subject to interest rate risk, which is
the risk that the value of a fixed-rate debt security will decline due to
changes in market interest rates. In general, when interest rates rise, the
value of a fixed-rate debt security declines. Conversely, when interest rates
decline, the value of a fixed-rate debt security generally increases. The length
of maturity of the Fund's debt securities may also affect the price volatility
of the Fund's portfolio, because debt securities with longer maturities are
subject to greater price volatility than debt securities with shorter
maturities.
10
<PAGE>
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
William B. Frels ........................................ President and Director
George A. Mairs, III .................................... Secretary and Director
Peter G. Robb ...................................... Vice President and Director
Lisa J. Hartzell ..................................................... Treasurer
Charlton Dietz ........................................................ Director
Donald E. Garretson ................................................... Director
J. Thomas Simonet ..................................................... Director
<TABLE>
<S> <C>
INVESTMENT ADVISER CUSTODIAN
Mairs and Power, Inc. Firstar Trust Company
W-1420 First National Bank 615 East Michigan Street
Building P. O. Box 701
332 Minnesota Street Milwaukee, Wisconsin 53201-0701
Saint Paul, Minnesota 55101-1363
TRANSFER AGENT INDEPENDENT AUDITORS
Mairs and Power, Inc. Ernst & Young LLP
W-1420 First National Bank 1400 Pillsbury Center
Building 200 South Sixth Street
332 Minnesota Street Minneapolis, Minnesota 55402
Saint Paul, Minnesota 55101-1363
</TABLE>
11
<PAGE>
MAIRS AND POWER
BALANCED FUND, INC.
PROSPECTUS
APRIL 30, 1998
<PAGE>
MAIRS AND POWER BALANCED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Dated April 30, 1998
Mairs and Power Balanced Fund, Inc. (the "Fund") is a no-load mutual fund
that has as its investment objective to provide regular current income along
with the potential for capital appreciation and a moderate level of volatility
by investing in a diversified list of securities including bonds, preferred
stocks, common stocks and other securities convertible into common stock.
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than what is contained in the
Fund's Prospectus. It should be read in conjunction with the Prospectus, dated
April 30, 1998, which has been filed with the Securities and Exchange Commission
and can be obtained, without charge, by calling or writing the Fund. This
Statement of Additional Information has been incorporated by reference into the
Prospectus. The address of the Fund is W-1420 First National Bank Building, 332
Minnesota Street, St. Paul, MN 55101-1363 and its telephone number is (612)
222-8478.
Table of Contents
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . 2
Investment Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchasing and Redeeming Shares . . . . . . . . . . . . . . . . . . . . . 3
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . 3
Officers and Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transfer Agent and Custodian. . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
As discussed in "Investment Objective and Policies" in the Fund's
Prospectus, the Fund will normally invest in a diversified list of securities,
including bonds, preferred stocks, common stocks, and other securities
convertible into common stock. The percentage of the Fund's assets that may be
held in each category will vary in accordance with the judgment of the Fund's
investment adviser, Mairs and Power, Inc. While equities and securities
convertible into equities are expected to remain the dominant holdings in the
Fund, it is expected that at least 25% of the Fund's assets will be invested in
non-convertible fixed income securities. It is also the objective of the Fund
to provide a current income yield of at least 25% greater than that of the
Standard & Poor's 500 Stock Index, although there can be no assurance that this
objective will be met.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which may not be changed
without the approval of a majority of the shareholders of the Fund. The vote of
a majority of the shareholders means the vote, at the annual or a special
meeting of the security holders, of holders representing (a) 67% or more of the
voting securities present at such meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy; or (b)
more than 50% of the outstanding voting securities, whichever is less. The Fund
may not:
(1) Purchase securities of any issuer if as a result, (a) more than 5% of
the value of the total assets of the Fund would then be invested in
the securities of a single issuer (other than U.S. Government
obligations), or (b) more than 10% of any class of securities, or more
than 10% of the outstanding voting securities, of the issuer would
then be held by the Fund;
(2) Purchase securities of other investment companies if as a result more
than 5% of the Fund's total assets would then be (a) invested in the
securities of that investment company, or (b) more than 10% of the
Fund's assets would then be invested in securities of all investment
companies;
(3) Concentrate more than 20% of its investments in a particular industry;
(4) Purchase or sell real estate, real estate investment trusts, or other
interests in real estate which are not readily marketable;
(5) Write, purchase or sell puts, calls, or combinations thereof;
(6) Make loans (although it may acquire portions of an issuer's publicly
distributed securities);
(7) Purchase securities on margin or sell short;
(8) Borrow money, except that the Fund may borrow from banks up to 5% of
its total assets to pay capital gains distributions, to pay income
dividends, or to relieve an extraordinary or emergency situation, but
not for investment purposes;
(9) Mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any securities owned or held by the Fund;
(10) Participate on a joint or a joint and several basis in any trading
account in securities;
2
<PAGE>
(11) Invest in companies for the purpose of exercising control of
management;
(12) Act as an underwriter of securities of other issuers;
(13) Purchase or retain the securities of any issuer if officers and
directors of the Fund or its investment adviser who own individually
more than one-half of one percent of the securities of such issuer,
together own more than 5% of the securities of such issuer;
(14) Purchase or sell commodities or commodity contracts in the ordinary
course of its business;
(15) Purchase or sell "restricted securities" in such a way as to become an
"underwriter" within the meaning of that term as used in the
Securities Act of 1933.
PORTFOLIO TURNOVER
The following table sets forth the annual portfolio turnover rates for the
Fund for the periods indicated.
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1996
---- ----
<S> <C> <C>
Common Stocks 2.63% 3.40%
All Other Securities 2.69% 4.85%
</TABLE>
The Fund has not placed any limit on its rate of portfolio turnover and
securities may be sold without regard to the time they have been held when in
the opinion of the Investment Adviser investment considerations warrant such
action. Portfolio turnover rate is calculated by dividing the lesser of the
Fund's annual sales or purchases of portfolio securities (exclusive of
securities with maturities of one year or less at the time the Fund acquired
them) by the monthly average value of the securities in the Fund's portfolio
during the year.
PURCHASING AND REDEEMING SHARES
The purchase and redemption of the Fund's shares are subject to the
procedures described in "Purchasing Shares" and "Redeeming Shares" in the Fund's
Prospectus, which is incorporated herein by reference.
PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the only shareholder holding more than 5% of the
Fund's outstanding shares was Smyth Profit Sharing and Savings Plan, St. Paul,
MN (27,683 shares or 8.3%).
3
<PAGE>
OFFICERS AND DIRECTORS
The Officers and Directors of the Fund and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the address
for each Director and Officer is 332 Minnesota Street, W-1420 First National
Bank Bldg., St. Paul, MN 55101.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s) During
Name, Address and Age With Registrant Past Five Years
- --------------------- --------------- ----------------------------------------------
<S> <C> <C>
William B. Frels,* 58 President and Vice President and Secretary of the Investment
Director Adviser
George A. Mairs, III,* 69 Secretary and President of the Investment Adviser
Director
Peter G. Robb,* 49 Vice President Vice President of the Investment Adviser
and Director (June 1994 to Present); Vice President and
Portfolio Manager, U. S. Bank Trust National
Association (formerly First Trust National
Association), St. Paul, MN (June 1986 to April
1994)
Lisa J. Hartzell, 53 Treasurer Manager of Mutual Fund Services of the
Investment Adviser
Charlton Dietz, 67 Director Retired Senior Vice President, Legal Affairs
3050 Minnesota and General Counsel, Minnesota Mining and
World Trade Center Manufacturing Company
30 Seventh Street East
St. Paul, Minnesota 55101
Donald E. Garretson, 76 Director Retired Vice President, Minnesota Mining and
709 Linwood Avenue Manufacturing Company
St. Paul, MN 55105
J. Thomas Simonet, 71 Director Retired Chief Executive Officer, U.S. Bank
315 Stonebridge Blvd. Trust National Association (formerly First
St. Paul, MN 55105 Trust National Association)
</TABLE>
*Interested person of the Fund, as defined in the Investment Company Act of
1940.
All of the above listed persons serve in the same officer and/or director
capacities with Mairs and Power Growth Fund, Inc., an open-end investment
company which also retains Mairs and Power, Inc. as its investment adviser,
except that Mr. Mairs is President and Mr. Frels is Secretary of that fund.
The Fund's non-interested Directors are members of the Audit Committee
which makes recommendations to the Board regarding the selection of auditors and
confers with the auditors regarding the scope and results of the annual audit.
The Fund does not pay any remuneration to its Officers and Directors other than
fees to Directors who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of the Fund's Investment Adviser,
which totaled $3,600 in 1997. As of
4
<PAGE>
March 31, 1998, the Directors and Officers of the Fund, as a group, and their
spouses and minor children owned beneficially 8,842 shares, or 2.6% of the Fund.
INVESTMENT ADVISER
Mairs and Power, Inc., a Minnesota corporation, is the Investment Adviser
of the Fund. Mairs and Power, Inc. shareholders, all of whom are officers and
directors of the Fund, along with their percentage ownership positions in Mairs
and Power, Inc., are listed below:
<TABLE>
<CAPTION>
<S> <C>
George A. Mairs, III 44.4%
William B. Frels 36.1%
Peter G. Robb 19.5%
</TABLE>
Mairs and Power, Inc. has furnished continuous investment supervision to
the Fund since 1961. Mairs and Power, Inc. currently provides similar services
to one other mutual fund, Mairs and Power Growth Fund, Inc., the net assets of
which as of December 31, 1997 were $412,590,619.
Mairs and Power, Inc. serves as Investment Adviser to the Fund under the
terms of an Investment Advisory Agreement dated March 21, 1972, as amended
May 17, 1982. The Investment Advisory Agreement must be approved annually by
the Board of Directors of the Fund, including a majority of those directors
who are not parties to such contract or "interested persons" of any such party
as defined in the Investment Company Act of 1940, by vote cast in person at a
meeting called for such purpose. The Agreement may be terminated at any time,
without penalty, on sixty days' written notice by the Fund's Board of
Directors, by the holders of a majority of the Fund's outstanding voting
securities or by the Investment Adviser. The Agreement automatically
terminates in the event of its assignment (as defined in the Investment
Company Act of 1940 and the rules thereunder).
As compensation for its services to the Fund, the Investment Adviser
receives monthly compensation at the rate of one-twentieth of one percent of
month-end net asset value (0.6% annually), computed and paid each month. The
ratio of the management fee to average net assets in 1997 was 0.6%; the ratio of
total expenses to average net assets was 0.92%. Mairs and Power, Inc. has
agreed with the Fund that the expense ratio will not exceed the expense
limitation of any state in which the Fund's share are sold.
Advisory fees paid by the Fund to Mairs and Power, Inc. amounted to
$150,554 in 1997, $113,288 in 1996, and $90,626 in 1995. Under the terms of the
Investment Advisory Agreement, the Investment Adviser agrees to render research,
statistical and advisory services to the Fund, pay for office rental, executive
salaries and executive expenses and pay all expenses related to the distribution
and sale of Fund shares. All other expenses, such as brokerage commissions,
fees charged by the Securities and Exchange Commission, custodian and transfer
agent fees, legal and auditing fees, taxes, premiums on fidelity bonds,
supplies, and all other miscellaneous expenses are borne by the Fund. No
compensation was paid to any other director or officer of the Fund.
TRANSFER AGENT AND CUSTODIAN
Mairs and Power, Inc. acts as the Fund's Transfer Agent and Dividend
Disbursing Agent and is reimbursed for all expenditures incurred in the
discharge of these responsibilities. Reimbursements amounted to $11,743, in
1997, $20,177 in 1996, and $18,833 in 1995.
Custodial services for the Fund are performed by Firstar Trust Company, 615
East Michigan Street, Milwaukee, WI 53201, pursuant to the terms of a Custodial
Agreement reviewed annually by the Board of Directors. As Custodian, Firstar
Trust Company controls all securities and cash for the Fund, receives and
5
<PAGE>
pays for securities purchased, delivers against payment for securities sold,
receives and collects income from investments, makes all payments for Fund
expenses and performs other administrative services, as directed in writing by
authorized officers of the Fund. For these services, Firstar Trust Company
received $4,794 in 1997, and $2,329 for the period May 1, 1996 through
December 31, 1996. Prior to May 1, 1996, Norwest Bank Minnesota, National
Association acted as Custodian for the Fund. For their services as Custodian,
Norwest Bank Minnesota, National Association received $2,581 in 1996, and
$14,100 in 1995.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is responsible for the Fund's portfolio decisions and the
placing of orders to effect the Fund's portfolio transactions. With respect to
such transactions, the Investment Adviser seeks to obtain the best net results
for the Fund taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution
and operational facilities of the firm involved. While the Investment Adviser
generally seeks reasonably competitive commission rates, the Fund will not
necessarily be paying the lowest commission or spread available. The Fund has
no obligation to deal with any broker or dealer in the execution of its
portfolio transactions, and there is no affiliation between the Fund's officers
or directors, or its Investment Adviser, and any broker-dealer or affiliated
persons of any broker-dealer who executes transactions for the Fund.
Investment decisions for the Fund are made independently from those of
Mairs and Power Growth Fund, Inc., also managed by Mairs and Power, Inc. When
these funds are simultaneously engaged in the purchase or sale of the same
securities the transactions are averaged as to price and allocated as to amount
in accordance with a formula deemed equitable to each fund. In some cases this
system may adversely affect the price paid or received by the Fund, or the size
of the position obtainable for the Fund.
Decisions with respect to allocations of portfolio brokerage will be made
by the Investment Adviser. Portfolio transactions are normally placed with
broker-dealers which provide the Fund's Investment Adviser with research and
statistical assistance. Recognizing the value of these factors, the Fund may
pay brokerage commissions in excess of those which another broker might charge
for effecting the same transaction, even though the research services furnished
by brokers through whom the Fund effects securities transactions may benefit
other clients of Mairs and Power, Inc.
For the year 1997, the Fund paid $2,729 in brokerage fees on purchase and
sale of portfolio securities. All of this amount was paid to brokers or dealers
who supplied research services to the Investment Adviser. Total brokerage fees
for 1996 and 1995 amounted to $4,554 and $2,756, respectively.
FINANCIAL STATEMENTS
The Fund's financial statements, including a listing of portfolio
securities as of December 31, 1997, are included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1997 and are incorporated herein by
reference. The financial statements have been audited by Ernst & Young LLP,
independent auditors, 1400 Pillsbury Center, 200 South Sixth Street,
Minneapolis, Minnesota 55402, as set forth in their report appearing in the
Annual Report and incorporated herein by reference. Additional copies of the
Annual Report may be obtained, without charge, by writing or calling the Fund.
6
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements identified with an asterisk (*) in the index
below, together with the report of Ernst & Young LLP dated January 21,
1998, appearing on pages 3 to 13 of the 1997 Annual Report to
Shareholders are incorporated by reference. With the exception of the
preceding information, the Annual Report is not incorporated herein by
reference and is not deemed filed as part of this Form N-1A.
<TABLE>
<CAPTION>
Page Number In:
Prospectus Annual Report
---------- -------------
<S> <C> <C>
*Financial Highlights for each of
the ten years in the period ended
December 31, 1997 3 3
*Statement of Assets and Liabilities
at December 31, 1997 4
*Schedule of Investments at
December 31, 1997 5-8
*Statement of Operations for the year
ended December 31, 1997 9
*Statement of Changes in Net Assets
for the years ended December 31,
1997 and 1996 10
*Notes to Financial Statements 11
Report of Independent Auditors 12
</TABLE>
Schedules are omitted for the reason that they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.
(b) Exhibits
1. Amended and Restated Articles of Incorporation. Incorporated by
reference to registrant's Registration Statement on Form N-1A,
No. 2-18269, Post-Effective Amendment No. 33, filed on April 9,
1990.
1.A. Articles of Amendment dated May 23, 1997 to Amended and Restated
Articles of Incorporation.
2. By-laws. Incorporated by reference to registrant's Registration
Statement on Form N-1A, No. 2-18269, Post-Effective Amendment No.
33, filed on April 9, 1990.
3. None.
<PAGE>
4. Articles of Incorporation, Article V. Incorporated by reference
to registrant's Registration Statement on Form N-1A, No. 2-18269,
Post-Effective Amendment No. 33, filed on April 9, 1990.
5. Investment Advisory Contract. Incorporated by reference to
registrant's Registration Statement on Form N-1, No. 2-18269,
Post-Effective Amendment No. 14, filed April, 1972.
5.A. Amendment to Investment Advisory Contract.
6. None.
7. None.
8. Custodian Agreement entered into between the Fund and Firstar
Trust Company on April 15, 1996. Incorporated by reference to
registrant's Registration Statement on Form N-1A, No. 2-18269,
Post-Effective Amendment No. 39, filed April 29, 1996.
9. None.
10. None.
11. Consent of Independent Auditors
12. Financial Statements contained in 1997 Annual Report to
Shareholders (See Index, Item 24 (a), Part C, Other Information).
13. None.
14. Mairs and Power, Inc. Prototype Self-Employed Money Purchase and
Pension Plan, Trust, Summary Plan Description, Adoption
Agreements Nos. 001 and 002, and Custody Agreement. Incorporated
by reference to registrant's Registration Statement on Form N-1A,
No. 2-18269, Post-Effective Amendment No. 36, filed on April 27,
1993.
15. None.
16. None.
17. Financial Data Schedule.
18. None.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
Title of Class (1) Number of Record Holders (2)
-------------- ------------------------
Capital Stock, 10,000,000 shares 503
par value ten cents ($.10) (As of March 31, 1998)
Item 27. INDEMNIFICATION
The Fund's Amended and Restated Articles of Incorporation state that a
director of the corporation shall have no personal liability to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director to the full extent such immunity is
permitted from time to time under the Minnesota Business Corporation
Act, as now enacted or hereafter amended, except as prohibited by the
Investment Company Act of 1940, as amended.
Section 302A.521 of the Minnesota Business Corporation Act provides
that a Minnesota corporation shall indemnify any director, officer, or
employee of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of
the person, against judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the
proceeding, provided that certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one
by or in the right of the corporation. Indemnification is required
under Section 302A.521 only if the person (i) has not been indemnified
by any other organization with respect to the same acts or omissions,
(ii) acted in good faith, (iii) received no improper personal benefit,
(iv) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful, and (v) reasonably believed that the
conduct was in the best interests of the corporation.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Inapplicable
Item 29. PRINCIPAL UNDERWRITERS
Inapplicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Custodian: Firstar Trust Company
615 East Michigan Street
P.O. Box 701
Milwaukee, WI 53201-0701
Transfer Agent: Mairs and Power, Inc.
W-1420 First National Bank Bldg.
332 Minnesota Street
St. Paul, MN 55101-1363
<PAGE>
Investment Adviser: Mairs and Power, Inc.
W-1420 First National Bank Bldg.
332 Minnesota Street
St. Paul, MN 55101-1363
Item 31. MANAGEMENT SERVICES
Inapplicable
Item 32. UNDERTAKINGS
Inapplicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Paul, and State of Minnesota on the 17th day of
April 1998.
MAIRS AND POWER BALANCED FUND, INC.
/s/ William B. Frels
--------------------------------------------------
William B. Frels, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ William B. Frels President and Director
- -------------------------- (Principal Executive Officer) April 17, 1998
William B. Frels
/s/ George A. Mairs, III Secretary and Director
- -------------------------- (Principal Financial
George A. Mairs, III and Accounting Officer) April 17, 1998
/s/ Peter G. Robb Vice-President and Director
- --------------------------
Peter G. Robb April 17, 1998
/s/ Charleton Dietz Director
- --------------------------
Charleton Dietz April 17, 1998
/s/ Donald E. Garretson Director
- --------------------------
Donald E. Garretson April 17, 1998
/s/ J. Thomas Simonet Director
- --------------------------
J. Thomas Simonet April 17, 1998
<PAGE>
EXHIBIT INDEX
Item Description
- ---- -----------
1. Not filed herewith.
1.A. Articles of Amendment dated May 23, 1997 to Amended and Restated
Articles of Incorporation.
2-4. Not filed herewith.
5. Not filed herewith.
5.A. Amendment to Investment Advisory Contract.
6-10. Not filed herewith.
11. Consent of Independent Auditors.
12. Financial Statements contained in 1997 Annual Report to Shareholders
(See Index Under Item 24 (a) in Part C).
13-16. Not filed herewith.
17. Financial Data Schedule.
18. Not filed herewith.
<PAGE>
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MAIRS AND POWER INCOME FUND, INC.
Mairs and Power Income Fund, Inc., a corporation organized and existing
under the laws of the State of Minnesota (herein referred to as the
"corporation"), in accordance with the provisions of Minnesota Statutes, Section
302A.139, hereby certifies as follows:
1. The name of the corporation is Mairs and Power Income Fund, Inc.
2. Article I of the Amended and Restated Articles of Incorporation of the
corporation is hereby amended to read in its entirety as follows:
ARTICLE I
The name of this corporation shall be MAIRS AND POWER BALANCED FUND, INC.
3. The amendment of the Amended and Restated Articles of Incorporation of
the corporation has been duly adopted by the Board of Directors and the
shareholders pursuant to the Minnesota Business Corporation Act, Minnesota
Statutes, Chapter 302A.
IN WITNESS WHEREOF, these Articles of Amendment of Mairs and Power Income
Fund, Inc. are hereby executed on behalf of the corporation this 23rd day of
May, 1997.
MAIRS AND POWER INCOME FUND, INC.
By /s/ William B. Frels
-------------------------------------
Its President
---------------------------------
<PAGE>
May 17, 1982
MAIRS & POWER INCOME FUND, INC.
AMENDMENT TO AGREEMENT FOR INVESTMENT COUNSEL SERVICE
Under Section 6 of the Agreement For Investment Counsel Service between
Mairs & Power, Inc., and the Corporation listed above, dated March 21, 1972, the
Agreement may be amended at any time provided, however, that such amendment is
approved by the affirmative vote of a majority of the outstanding voting
securities of the Fund, and approved by the vote of a majority of the Directors
of the Fund who are not interested persons of the Fund or the Investment
Adviser.
In accordance with the language in paragraph one, an amendment to revise
the "Compensation of the Adviser" section of the "Agreement" was submitted to
shareholder vote at the Annual Meeting of Shareholders on May 17, 1982, and to
the Directors on that same date. The amendment, if approved, would raise the
fee, paid monthly, to 1/20 of 1% of the net asset value of the Fund on the last
valuation date of each month as defined in the By-Laws of the Fund effective
with the last valuation date of May, 1982.
The amendment did receive an affirmative vote of a majority of the
outstanding voting securities of the Fund and, on that same date, received the
unanimous approval of the Fund's Directors who are not interested persons of the
Fund or the Investment Adviser.
There are no other changes in the "Agreement".
Mairs & Power Income Fund, Inc.
By /s/ George C. Power, Jr.
--------------------------------
President, Mairs & Power, Inc.
By /s/ George C. Power, Jr.
--------------------------------
President
By /s/ Ronald J. De Sellier
--------------------------------
Secretary
<PAGE>
Exhibit 11
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Financial Statements" in Amendment No. 42 to the Registration
Statement (Form N-1A, No. 2-18269) and related Prospectus of Mairs and Power
Balanced Fund, Inc. and to the incorporation by reference therein of our report
dated January 21, 1998, with respect to the financial statements and financial
highlights of Mairs and Power Balanced Fund, Inc. included in its Annual Report
for the year ended December 31, 1997, filed with the Securities and Exchange
Commission.
ERNST & YOUNG, LLP
Minneapolis, Minnesota
April 28, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 14734082
<INVESTMENTS-AT-VALUE> 27939855
<RECEIVABLES> 179200
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 685751
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