<PAGE>
Registration Number 2-18269
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Post-Effective Amendment No. 45 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 45
Mairs and Power Balanced Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
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W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (651) 222-8478
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William B. Frels, President
W-1420 First National Bank Building
332 Minnesota Street
St. Paul, MN 55101-1363
(Name and Address of Agent for Service)
with copies to:
Christopher C. Cleveland, Esq.
Briggs and Morgan, P.A.
2400 IDS Center
Minneapolis, MN 55402
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It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) 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>
-----------------------------------
MAIRS AND POWER
BALANCED FUND, INC.
-----------------------------------
W-1420 FIRST NATIONAL BANK BLDG.
332 MINNESOTA STREET
ST. PAUL, MN 55101-1363
1-800-304-7404
OBJECTIVE
The objective of the Fund is to provide 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.
ADDITIONAL INFORMATION ABOUT THE FUND
This Prospectus, which should be kept for future
reference, is designed to set forth the information
you should know before you invest. A "Statement of
Additional Information" dated April 26,2000, contains
more information about the Fund and has been filed
with the Securities and Exchange Commission. It is
incorporated by reference into this Prospectus. You
may obtain a copy of the Statement, without charge, by
writing to the Fund or by calling our Customer Service
Department at 1-800-304-7404.
PROSPECTUS
April 26, 2000
FEES AND EXPENSES
The Fund is offered on a no-load basis, which means
that you pay no sales charge for the purchase or sale
of Fund shares and no 12b-1 marketing fees. You will,
however, incur expenses for investment advisory,
management, and administrative services, which are
included in annual fund operating expenses.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
DETERMINED IF THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE OR COMPLETE, NOR HAS IT APPROVED OR
DISAPPROVED THESE SECURITIES. IT IS A CRIMINAL OFFENSE
TO STATE OTHERWISE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary..............................................................3
Investment Objective/Goals.....................................................3
Principal Investment Strategies................................................3
Principal Risks of Investing in the Fund.........................................3
Bar Chart and Performance Table..................................................4
Fees and Expenses of the Fund....................................................5
Investment Objective and Policies and Related Risks..............................6
Management's Discussion of Fund Performance......................................8
Comparison Chart (Fund, S & P 500 Index and the Consumer Price Index)............9
Management of the Fund..........................................................10
Types of Accounts...............................................................10
Determining Net Asset Value Per Share...........................................11
Purchasing Shares...............................................................12
Wiring Instructions...........................................................13
Redeeming Shares................................................................14
Signature Guarantee Instructions..............................................15
Exchanging Shares...............................................................16
Transferring Registration.......................................................16
Income Dividends and Capital Gain Distributions.................................17
Taxes...........................................................................17
Other Shareholder Services......................................................18
Condensed Financial Information.................................................20
Officers and Directors..........................................................21
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
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INVESTMENT OBJECTIVE/GOALS
The objective of the Fund is to provide 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.
PRINCIPAL INVESTMENT STRATEGIES
We expect 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:
- - Invest in a list of holdings that is diversified by both security type and
by industry.
- - Invest at least 25% of its assets in non-convertible fixed income
securities.
- - Emphasize investments in common stock and other securities convertible into
common stock.
- - Keep assets reasonably fully invested at all times.
- - Hold cash equivalent investments (money market funds and other short-term
investments) from time to time as a buying reserve to better enable the
Fund to meet its objective.
- - Keep portfolio turnover relatively low as compared to other balanced mutual
funds.
- - 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 rewards outweigh the incremental risks.
PRINCIPAL RISKS OF INVESTING IN THE FUND
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All investments have risks. Although the Fund cannot eliminate all risk, it
seeks to moderate risk by investing in a diversified portfolio. The Fund is
designed for long-term investors. Shareholders should be prepared to accept
fluctuations in portfolio value as the Fund seeks to achieve its investment
objective. There can be no assurance, of course, that the Fund will achieve its
objective.
Risks of investing in the Fund include:
- - Adverse market conditions (the chance that stock prices in general will
fall, sometimes suddenly and sharply).
- - Volatility in the market prices of equity securities (which are generally
subject to greater price fluctuations than prices of fixed income
securities, such as bonds and other debt obligations). Equity prices may
fluctuate markedly over the short-term due to:
- - changing market conditions,
- - interest rate fluctuations, and
- - various economic and political factors.
- - Credit risk, which is the risk that the issuer of a debt security will fail
to make interest and principal payments when due.
- - Call risk, which is the risk that a debt security 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.
- - Interest rate risk, which is the risk that the value of a fixed-rate debt
security will decline due to an increase 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.
- - Loss of money is a risk of investing in the Fund.
3
<PAGE>
BAR CHART AND PERFORMANCE TABLE
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The bar chart and table shown below provide an indication of the risks of
investing in the Mairs and Power Balanced Fund. The bar chart shows changes in
the Fund's performance from year to year over a 10-year period. The table shows
how the Fund's average annual returns for one, five and ten years compare to
those of the CDA/Wiesenberger Balanced-Domestic Fund Index, and the S & P 500.
The S & P 500 is a widely recognized, broad-based, unmanaged market index of
common stock prices.
How the Fund has performed in the past is not necessarily an indication of how
the Fund will perform in the future.
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
1990 1.4%
1991 25.9%
1992 5.9%
1993 10.9%
1994 (2.1)%
1995 30.0%
1996 17.9%
1997 28.0%
1998 14.2%
1999 4.6%
<CAPTION>
10 YEAR PERIOD SHOWN IN THE BAR CHART
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<S> <C>
Highest Quarter - June 30, 1997: + 13.3%
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Lowest Quarter - September 30, 1998: - 5.9%
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<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDING DECEMBER 31, 1999)
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Past One Year Past Five Years Past Ten Years
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<S> <C> <C> <C>
Mairs and Power Balanced Fund +4.6% +18.6% +13.1%
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CDA/Wiesenberger
Balanced-Domestic Fund Index* +8.5% +16.1% +11.7%
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S & P 500** +21.0% +28.6% +18.2%
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</TABLE>
* The CDA/Wiesenberger Balanced-Domestic Fund Index is an index presently
consisting of 359 domestic balanced funds.
** The S & P 500 is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices.
4
<PAGE>
FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Sales charge (load) imposed on purchases........................................None
Deferred sales charge (load)....................................................None
Sales charge (load) imposed on reinvested dividends and other distributions.....None
Redemption fee..................................................................None
Exchange fee....................................................................None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
FOR THE YEAR ENDED DECEMBER 31, 1999
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<CAPTION>
<S> <C>
Management fees................................................................. 0.60%
Distribution (12b-1) fees....................................................... None
Other expenses (transfer agent, custodian, accounting, legal, audit, etc.)...... 0.28%
-----
Total Annual Fund Operating Expenses............................................ 0.88%
</TABLE>
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The example assumes that :
- - You invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods.
- - Your investment has a 5% return each year.
- - The Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEAR 5 YEAR 10 YEAR
- -------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
$90 $288 $503 $1,121
<CAPTION>
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEAR 5 YEAR 10 YEAR
- -------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
$90 $288 $503 $1,121
</TABLE>
Although these examples are based on actual expenses in the most recent year,
they should not be considered a representation of past or future expenses
because actual expenses in future years may be greater or less than those shown.
Federal securities regulations require the example to assume an annual rate of
return of 5%, but the actual return for the Fund may be more or less than 5%.
These examples are for comparison only.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES AND RELATED RISKS
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This section takes a closer look at the investment objective and policies of the
Fund and certain risks of investing in the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The objective of the Fund is to provide 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.
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.
Our strategy is to purchase quality growth stocks at reasonable valuation
levels. The intention is to hold these issues for relatively long periods of
time to allow the power of compounding to build wealth for our shareholders.
However, sales are made from time to time in response to such factors as
changing fundamentals and excessive valuation.
Assets in 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 to provide liquidity to meet
redemptions, act as a reserve for future purchases, and to better enable the
Fund to achieve its objective.
Portfolio turnover is expected to be relatively low when compared to other
balanced mutual funds. The Fund's portfolio turnover rates for the periods
ending December 31, 1999, 1998 and 1997 were 13.40%, 11.88% and 5.32%,
respectively. During periods of changing economic, market and political
conditions, there may be more portfolio changes than in more stable periods. A
higher turnover rate could result in the realization of higher capital gains and
losses. 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 rewards outweigh the incremental risks.
A detailed description of the Fund's investment limitations is contained in the
Statement of Additional Information. Such limitations are fundamental policies,
which means that they cannot be changed without the approval of a majority of
the Fund's shareholders, as defined in the Statement of Additional Information.
The Fund will not invest in oil, gas or other mineral leases and real estate
limited partnership interests.
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. There can be no assurance, of course, that the Fund will achieve its
objective. Loss of money is a risk of investing in the Fund.
6
<PAGE>
MARKET CONDITIONS
The Fund is subject to the general risk of adverse market conditions for equity
and fixed income securities. 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
historically 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.
CREDIT RISK
The Fund invests in debt securities and is subject to credit risk, which is the
risk that the issuer of a debt security will fail to make interest and principal
payments when due. Securities issued or guaranteed by the United States
Government generally are viewed as carrying minimal credit risk. Securities
issued by governmental entities but not backed by the full faith and credit of
the United States, and securities issued by private entities, are subject to
higher levels of credit risk. Investors in the Fund bear the risk that payment
defaults could cause the value of the Fund's investment portfolio to decline.
INTEREST RATE RISK
The Fund invests in fixed-rate debt securities and is subject to interest rate
risk, which is the risk that the value of a fixed-rate debt security will
decline due to an increase in market interest rates. When interest rates rise,
the value of a fixed-rate debt security generally decreases. When interest rates
decline, the value of a fixed-rate debt security generally increases. The final
maturity of debt securities will also affect interest rate risk and the price
volatility of the portfolio. Generally, a debt security with a longer maturity
will have greater price volatility as a result of interest rate changes than a
debt security with a shorter maturity. Consequently, investors in the Fund bear
the risk that increases in market interest rates will cause the value of the
investment portfolio to decline.
CALL RISK
The Fund invests in corporate bonds, which are subject to call risk. Corporate
bonds and some securities issued by United States agencies may be called
(redeemed) at the option of the issuer at a specified price before reaching
their stated maturity date. 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. If a bond held by the Fund is called during a
period of declining interest rates, the Fund will likely reinvest the proceeds
received by it at a lower interest rate than that of the called bond, causing a
decrease in the Fund's income.
MORTGAGE RELATED AND OTHER ASSET-BACKED SECURITIES
Mortgage-backed securities are securities representing interests in pools of
mortgage loans secured by residential or commercial real estate. Payments of
interest and principal on the mortgage-backed securities are generally made
monthly by passing through the monthly payments made by the individual borrowers
on the mortgage loans in the pool (net of any interest rate spread and fees paid
to the issuer or guarantor of the securities). The Fund bears a risk of early
repayment of principal on some mortgage-backed securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure). Additionally, if the Fund has purchased the security at a premium,
in the event of prepayment the value of the premium would be lost. Like other
fixed income securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however, when interest rates
are declining, the value of mortgage-backed securities with prepayment features
may not increase as much as other fixed income securities.
7
<PAGE>
Payment of principal and interest on some mortgage-backed securities (but not
the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA) or guaranteed by agencies or instrumentalities of the U.S. Government (in
the case of securities guaranteed by FNMA or FHLMC). Mortgage-backed securities
created by non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies and mortgage bankers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage originators.
FUND MANAGEMENT
The Fund's performance depends on the active management by the investment
adviser, Mairs and Power, Inc., in selecting and maintaining a portfolio of
securities which will achieve the Fund's investment objective. The Fund could
underperform compared to other Funds having similar investment objectives.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
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1999 IN REVIEW
Due largely to the significant rise in interest rates that took place last year
(+136 basis points on the 30 year benchmark U. S. Treasury bond), the Balanced
Fund experienced a very difficult year, especially in terms of relative
performance. Rising interest rates adversely affected the Fund because some 35%
of the Fund's investments were in fixed income securities and a significant
portion of the common stock investments were in interest rate sensitive
industries such as banking and insurance. Consequently, the Fund produced a
relatively modest 4.6% total investment return compared to 21.0% for the
Standard & Poor's 500 and an even greater 27.3% for the Dow Jones Industrial
Average. The effect of rising interest rates caused the Lehman Bros. Gov't/Corp.
Bond Index to have a negative 2.2% rate of return. The Fund underperformed its
composite benchmark index (60% S & P 500 and 40% Lehman Bros. Gov't/Corp.) which
was up 11.7%. Among other comparable funds, the Fund ranked 234th within a
CDA/Wiesenberger universe of 359 domestic balanced mutual funds for the full
year.
As indicated by the fourth quarter, the economy performed superbly last year
with real GDP advancing more than 4.0%. Personal spending increased an amazing
6.9% with the help of a second half surge perhaps in part stimulated by Y2K
concerns. Inflation remained remarkably well-behaved in the face of a
significant increase in oil prices with the Consumer Price Index rising only
2.7%. Corporate earnings are estimated to have increased at an unexpectedly
strong rate well into the "double digits" in response to improved productivity
and higher profitability. Aside from rising interest rates, the only major area
of concern was an expanding trade deficit.
8
<PAGE>
The strength in the stock market, as suggested by the major market indices, was
somewhat of a mirage with approximately half of all stocks in the Standard &
Poor's 500 experiencing a negative return for the year. In fact, it can be
argued that some 30 stocks contributed all of the performance for the S & P 500
and only seven stocks contributed 50% of last year's return. These high
performing issues can almost exclusively be classified as large capitalization,
technology issues.
Over the course of the year, the Fund continued to hold more than half of its
assets in common stocks (64.6% 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 0.7% at year end.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FUND,
S & P 500 INDEX, AND THE CONSUMER PRICE INDEX
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[GRAPH]
(Figures adjusted and used for charting purpose)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund 10 10.14 12.76 13.51 14.97 14.66 19.07 22.48 28.78 32.86 34.37
S & P 10 9.68 12.63 13.61 14.98 15.17 20.87 25.67 34.24 44.07 53.34
CPI 10 10.54 10.98 11.31 11.62 11.93 12.23 12.63 12.85 13.05 13.41
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDING DECEMBER 31, 1999)
<TABLE>
<CAPTION>
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1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mairs and Power Balanced Fund +4.6% +18.6% +13.1%
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</TABLE>
PAST INVESTMENT RESULTS SHOULD NOT BE TAKEN AS NECESSARILY
REPRESENTATIVE OF FUTURE PERFORMANCE.
9
<PAGE>
MANAGEMENT OF THE FUND
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The Board of Directors has overall responsibility for the Fund. The Fund employs
Mairs and Power, Inc. as its investment adviser to manage the Fund's investment
portfolio and certain other business affairs. Mairs and Power, Inc. is
compensated by the Fund 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 since 1931. Mairs and Power, Inc. is located at
W-1420 First National Bank Building, 332 Minnesota Street, St. Paul, Minnesota
55101-1363.
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.
Firstar Bank, N.A., 615 East Michigan Street, P.O. Box 701, Milwaukee, Wisconsin
53201-0701 acts as custodian for the Fund. Firstar controls all securities and
cash for the Fund, receives and pays for securities purchased, delivers against
payments for securities sold, receives and collects income from investments,
makes all payments for Fund expenses and performs other administrative services.
Firstar is not affiliated with the Fund or investment adviser.
Firstar Mutual Fund Services, LLC, a wholly owned subsidiary of Firstar Bank,
N.A. serves as the Fund's transfer agent and dividend disbursing agent.
The Fund has adopted a Code of Ethics that restricts personal investing
practices by the adviser's employees. The Code of Ethics is designed to ensure
that the interest of the Fund's shareholders comes before the interests of the
adviser who manages the Fund.
TYPES OF ACCOUNTS
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The Fund offers several different types of accounts. You can use the Fund's
regular purchase application form to establish the following types of accounts:
- - Accounts for one or more people (single or joint accounts).
- - Accounts for minor children (UGMA/UTMA - Uniform Gifts/Transfers to Minors
Act). Age of majority and other requirements are set by state law.
- - Trust Accounts. These accounts may require pages of the trust document
which name the individuals authorized to act.
- - Third-Party Trustee Retirement Accounts (Firstar Bank, N.A. is not the
custodian or trustee).
- - Accounts opened for an organization such as a corporation, partnership or
other entity. These accounts may require a corporate resolution or other
document to name the individuals authorized to act.
10
<PAGE>
The following types of Retirement Accounts can be established by using the Mairs
and Power Growth Fund, Inc. IRA (Individual Retirement Account ) Application
form:
- - Traditional IRA.
- - Roth IRA.
- - SEP-IRA (Simplified Employee Pension Plan Account).
- - SIMPLE IRA (Savings Incentive Match Plan for Employees Account).
Firstar Bank, N.A. is the custodian and trustee for the above retirement
accounts. There is a $12.50 annual custodial fee per account (up to a maximum of
two accounts) for these types of retirement accounts. This fee will be
automatically charged to your account(s) if not received by the announced due
date, usually the last week of September. For further information on retirement
accounts, please ask for the Individual Retirement Account Disclosure Statement
& Custodial Account Agreement. You may also call Customer Service at
1-800-304-7404 to ask questions about investing for retirement.
DETERMINING NET ASSET VALUE PER SHARE
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The Fund's share price, also called its net asset value or NAV, is calculated
once daily, after the close of trading on the New York Stock Exchange (the
"Exchange"), generally 3:00 p.m., Central Time, on each day the Exchange is open
for trading. As a result, shares of the Fund will not be priced on the days
which the Exchange is closed: 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 calculated
by adding up the total assets of the Fund, subtracting all of its liabilities,
or debts, and then dividing by the total number of Fund shares outstanding:
Net Asset Value = Total Assets - Liabilities
----------------------------
Number of Shares Outstanding
Securities traded on one or more of the national securities exchanges or Nasdaq
are valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on Nasdaq, 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 sale 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 the investment adviser, 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
the adviser believes will determine a fair value.
11
<PAGE>
PURCHASING SHARES
- --------------------------------------------------------------------------------
You may purchase shares of the Fund directly through the Fund's transfer agent,
Firstar Mutual Fund Services, LLC. The price you pay per share will be the NAV
computed after the close of trading on the Exchange, generally 3:00 p.m. Central
Time. Your purchase will have no sales charge or marketing fees included in the
price of the Fund shares. 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. Purchase orders received after the close of
trading on a day the Exchange is open for trading will be valued as of the close
of trading on the next day the Exchange is open.
The Fund cannot accept orders that request a particular day or price for your
transaction or any other special conditions.
An initial purchase must be for at least $2,500 ($1,000 for an IRA account) and
each subsequent purchase must be for at least $100, although the Fund reserves
the right to waive or change these minimums at its discretion. All applications
to purchase shares 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 , or sent by wire
transfer. Checks should be made payable to "Mairs and Power Balanced Fund". The
Fund will not accept payment in cash or third party checks for the purchase of
shares. If your payment is not received or if you pay with a check that does not
clear, your purchase will be canceled.
The Fund reserves the right to reject applications for the following reasons:
- - Applications received without payment.
- - If your payment is made by check that does not clear, your purchase will be
canceled. A $25 fee will be charged by the transfer agent against your
account for any payment check returned for insufficient funds. If any loss
is sustained by the Fund, this loss will also be charged against your
account.
- - Applications that would be considered disadvantageous to shareholders.
- - Individuals who previously tried to purchase shares with a bad check.
- - Individuals who omit their social security number or tax identification
number, or applications which do not include a certified social security or
tax identification number.
If you do not have a social security number, you should indicate on the purchase
application form that an application to obtain a number is pending. The Fund's
transfer agent may be required to withhold federal income tax at a rate of 31%
(backup withholding) from dividend payments, distributions, and redemption
proceeds if you fail to submit your social security or tax identification
number. To submit a social security number after an initial purchase has been
made, complete Form W-9 and mail to: Mairs and Power Balanced Fund, Inc.,
Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701.
12
<PAGE>
The Fund and its agents reserve the right to cancel or rescind any purchase if:
- - An account has engaged in excessive trading or fraud. Notice will be given
to the shareholder within five business days of the trade to freeze the
account and temporarily suspend services.
- - Notice has been received of a dispute between the registered or beneficial
account owners.
- - There is reason to believe that the transaction is fraudulent.
- - Instructions are received and are believed not to be genuine.
Stock certificates will not ordinarily be issued to you unless you make a
request for a certificate in writing. The Fund will invest the entire dollar
amount of your purchase order in full and fractional shares. Income dividends
and capital gain distributions will be reinvested for you in additional full and
fractional shares unless you request that income dividends and/or capital gain
distributions are to be paid in cash.
The Fund does not consider the U.S. Postal Service or other independent delivery
services to be its agents. Deposit in the mail or with such other services, or
receipt at the transfer agent's post office box, of purchase applications does
not constitute receipt by the transfer agent or the Fund.
- --------------------------------------------------------------------------------
WIRING INSTRUCTIONS
You should use the following instructions when wiring funds for the
purchase of Fund shares. IMPORTANT: Prior to wiring any funds, you must
notify Firstar Mutual Fund Services, LLC at 1-800-304-7404 that the wire
will be sent and to verify the proper wiring instructions so that the wire
is properly applied when received. If you are making an initial investment
by wire transfer, you must first complete an Account Application Form and
mail it to the Fund. No account services will be established until the
complete application has been received by the Fund. IRA accounts cannot be
opened by wire transfer.
MAILING ADDRESS
Mairs and Power Balanced Fund, Inc.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
WIRE TO:
Firstar Bank, N.A.
ABA Number 075000022
CREDIT TO:
Firstar Mutual Fund Services, LLC
Account 112-952-137
FURTHER CREDIT:
Mairs and Power Balanced Fund, Inc.
[Shareholder Account Number]
[Shareholder Name/Registration]
EXPRESS, CERTIFIED OR REGISTERED MAIL
Purchase orders, redemption requests or correspondence mailed by overnight
courier should be sent to the Fund at:
Mairs and Power Balanced Fund, Inc.
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202-5207
- --------------------------------------------------------------------------------
13
<PAGE>
REDEEMING SHARES
- --------------------------------------------------------------------------------
You may redeem for cash all or a portion of your shares in the Fund by
instructing Firstar Mutual Fund Services, LLC, the Fund's transfer agent, at its
office in Milwaukee, Wisconsin. Your shares will be redeemed at the NAV computed
after the receipt of an acceptable redemption request by the Fund. The price you
receive for your redemption of shares will be the NAV computed after the close
of trading on the Exchange on that day, generally 3:00 p.m. Central Time. If
your request for redemption of shares is received after the close of trading on
that day, your redemption request will be valued as of the close of trading on
the next day the Exchange is open. Your redemption request must be in "good
order" before your proceeds can be released. This means the following will be
required:
- - A letter of instruction or a stock assignment signed by all owners of the
shares EXACTLY as their names appear in the Fund's shareholder records. You
must specify the account number, the number of shares or dollar amount to
be redeemed. If certificates have been issued representing shares to be
redeemed, they must accompany the letter.
- - A guarantee of the signature of each owner for redemption requests greater
than $25,000. Redemption requests less than $25,000 do not require a
signature guarantee. However, in order to comply with the signature
guarantee limitation level, the Fund will not accept multiple redemption
requests for less than $25,000 on the same day. (See Signature Guarantee
Instructions on page 15.)
- - In the case of estates, trusts, guardianships, custodianships, corporations
and pension and profit-sharing plans, other supporting legal documents may
be required.
- - A guarantee of the signature of each owner if the address of record has
been changed within the 15 days preceding any redemption. (See Signature
Guarantee Instructions on page 15.)
- - If your redemption request is from an IRA or other retirement plan, you
must indicate on the redemption request whether or not to withhold federal
income tax. If you fail to indicate an election not to have tax withheld,
you will be subject to withholding.
If the proceeds of any redemption are requested to be made payable to or sent to
an address other than the address of record, the signature(s) on the request
must be guaranteed by an eligible signature guarantor.
(See Signature Guarantee Instructions on page 15.)
If any portion of the shares you are redeeming represent an investment made by
check, we may delay the payment of the redemption proceeds until our transfer
agent is reasonably satisfied that your check has been collected. This may take
up to 12 days from the purchase date.
We will mail your payment to you for the shares you are redeeming typically
within one or two business days. The payment will be mailed no later than the
seventh business day after the redemption request is received by the transfer
agent or within such shorter period as may
14
<PAGE>
legally be required. The redemption request must be in good order as stated
above. If you wish not to receive your proceeds by mail, the following methods
for redemption are also available:
- - Proceeds may be received by wire transfer. A $12 wire fee will be applied.
If you choose this method, you must attach a written request with your
signature guaranteed. (See Signature Guarantee Instructions below. Also see
Wiring Instructions on page 13.)
- - Redemption proceeds may also be received by your bank via electronic
transfer through the Automated Clearing House ("ACH") network. You can
elect this option by writing to the Fund. You must attach a voided check or
deposit slip to your written request. If money is moved by ACH transfer,
you will not be charged by the Fund's transfer agent for these services.
There is a $100 minimum per ACH transfer.
The Fund's transfer agent may be required to withhold federal income tax at a
rate of 31% (backup withholding) from dividend payments, distributions, and
redemption proceeds if you fail to submit your social security or tax
identification number. To submit a social security number after an initial
purchase has been made, complete Form W-9 and mail to: Mairs and Power Balanced
Fund, Inc., Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, WI
53201-0701.
No interest will accrue on amounts represented by uncashed redemption checks.
The Fund reserves the right to close any non-IRA account in which the balance
falls below the minimum initial investment.
The right of redemption may be suspended or the date of payment may be postponed
as follows:
- - During weekend or holiday closings, or when trading is restricted as
determined by the Securities and Exchange Commission ("SEC").
- - 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.
- - For such a period as the SEC may permit.
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE INSTRUCTIONS
A signature guarantee must be obtained from an eligible signature guarantor such
as a U.S. commercial bank, trust company or a broker who is a member of the New
York Stock Exchange.
You may need to have your signature guaranteed in certain situations such as:
/X/ Redeeming an amount greater than $25,000.
/X/ Redeeming shares in your account after changing your address of record in
the last 15 days.
/X/ Sending to or making redemption proceeds payable to any person, address or
bank account other than that on record.
/X/ Requesting to wire redemption proceeds.
/X/ Transferring shares from your account to another person or legal entity, or
changing the name(s) on your account.
THE FUND CANNOT ACCEPT GUARANTEES FROM NOTARIES PUBLIC OR ORGANIZATIONS THAT DO
NOT PROVIDE REIMBURSEMENT IN THE CASE OF FRAUD.
- --------------------------------------------------------------------------------
15
<PAGE>
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 redemption proceeds
in your account at the current NAV.
In the event of a redemption of shares, or an exchange of shares for shares of
the Mairs and Power Growth Fund, the transaction will be treated as a sale of
the Fund's shares and any gain (or loss) on the transaction may be reportable as
a gain (or loss) on your federal income tax return.
Once your redemption order is received and accepted by the Fund, you may not
revoke or cancel it. The redemption value may be worth more or less than the
price originally paid for the shares, and you may realize a gain or loss on
redemption.
If you have additional questions regarding the redemption procedure, you should
contact the Fund's transfer agent at 1-800-304-7404.
EXCHANGING SHARES
- --------------------------------------------------------------------------------
You may exchange shares between the Fund and the Mairs and Power Growth Fund. An
exchange is treated as a redemption and a purchase, and therefore, you may
realize a taxable gain or loss. You should read the current prospectus of the
fund into which the exchange is being made.
There is a $1,000 minimum for all exchanges. If a new account is being opened by
exchange, the minimum investment requirements must be met. After the exchange,
the account from which the exchange is made must have a remaining balance of at
least $2,500 ($1,000 for an IRA account) in order to remain open. The Fund
reserves the right to terminate or materially modify the exchange privilege upon
60 days' advance notice to shareholders.
TRANSFERRING REGISTRATION
- --------------------------------------------------------------------------------
If you request a change in your account registration -- such as changing the
name(s) on your account, or transferring your shares to another person or legal
entity -- you must submit your request in writing. A signature guarantee is
required. (See Signature Guarantee Instructions on page 15). Please call our
transfer agent, Firstar Mutual Fund Services, LLC at 1-800-304-7404 for full
instructions.
16
<PAGE>
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- --------------------------------------------------------------------------------
Dividends and capital gain distributions are reinvested in additional Fund
shares in your account unless you select another option on your Account
Application form. The advantage of reinvesting distributions is that you receive
dividends and capital gains on an increasing number of shares. This is known as
compounding. A capital gain or loss is the difference between the purchase and
sale price of a security. The Fund distributes all of its net investment income
to its shareholders in the form of semi-annual dividends. The dividend payments
are normally made in March, June, September and December. If a capital gain is
realized, the Fund will distribute it near year-end in the year in which such
gains are realized.
Dividends and capital gains which are not reinvested by you are paid to you by
check or transmitted to your bank account via the ACH network. If the post
office cannot deliver your check, or if your check remains uncashed for six
months, your distribution option will be changed to reinvestment. Your
distribution check will be reinvested into your account at the Fund's current
NAV. All subsequent distributions will be reinvested in shares of the Fund. No
interest will accrue on the amount represented by uncashed distribution checks.
TAXES
- --------------------------------------------------------------------------------
The Fund intends to comply, as it did in 1999, with the special provisions of
Subchapter M of the Internal Revenue Code that relieve 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 nondeductible 4% excise tax if less than 98% of ordinary
income and 98% of capital gains are 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 this excise tax.
As a shareholder you will be subject to federal income tax at ordinary rates on
the distribution of dividend income. Short-term capital gains, if any, are also
subject to federal income tax at ordinary rates. Distributions of net long-term
capital gains are taxable to you as long-term capital gain regardless of the
length of time you have held your shares of the Fund. Long-term capital gains
are subject to 10% (for investors in the 15% tax bracket) or 20% (for investors
in the 28% tax bracket or higher) tax rates.
NOTE: The Fund's distribution of dividends and capital gains, whether you
received them in cash or reinvested them in additional shares of the Fund, may
be subject to federal and state income taxes.
In January, you will be sent Form 1099-DIV indicating the tax status of any
dividend and capital gain 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. A portion of the Fund's ordinary dividends should be
eligible for the 70% deduction for dividends received by corporations.
17
<PAGE>
The Fund's dividends and distributions are paid on a per share basis. When the
dividend and capital gain payments are made, the value of each share will be
reduced by the amount of the payment. If you purchase shares shortly before the
payment of a dividend or a capital gain distribution, you will pay the full
price for the shares and then receive some portion of the price back as a
taxable dividend or capital gain.
The above statements are a general summary of current federal income tax law
regarding the Fund. You should consult with your own tax adviser regarding
federal, state and local tax consequences of an investment in the Fund.
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The following reports will be sent to you as a shareholder:
- - CONFIRMATION STATEMENTS
You will be sent a confirmation statement each time you buy or sell Fund
shares. Quarterly and annual confirmation statements will also be sent to
you detailing the income dividend and capital gain distributions made by
the Fund. The trade date and amount of your transaction will be confirmed.
The confirmation will also show the market value of your account at the
close of the statement period.
- - FUND FINANCIAL REPORTS
Quarterly and Annual Reports will be mailed to you in February, May, August
and November. These reports include the performance of the Fund, a report
from the Fund adviser, as well as a listing of the Fund's holdings and
other financial statements. Note: To reduce Fund expenses, the Fund
attempts to identify related shareholders within a household and send only
one copy of a financial report.
- - TAX STATEMENTS
Tax statements will generally be mailed in January and report to you the
previous year's dividend and capital gain distribution (1099-DIV), proceeds
from the sale of shares (1099-B), and distributions from IRAs or other
retirement accounts (1099-R).
- - AVERAGE COST STATEMENTS
Average cost statements will be mailed in February to shareholders whose
accounts were opened after January 1, 1999 and who had redemptions in
taxable accounts. The statement will show all redemptions reportable for
the current tax year and the average cost per share. The purpose of this
statement is to provide help to you with the preparation of your tax
return. This information is not reported to the IRS and you do not have to
use it. You may calculate the cost basis using other methods acceptable to
the IRS.
18
<PAGE>
The following services are available to you as a shareholder:
- - REINVESTMENT PLAN
Dividend and capital gain distributions may be reinvested into additional
shares of the Fund.
- - AUTOMATED TELEPHONE SERVICES
Fund and shareholder account information is available 24 hours per day,
seven days a week. You may obtain share prices and price changes for the
Fund, your account balance and last two transactions, dividend distribution
information, and account statement.
- - AUTOMATIC INVESTMENT PLAN
You may make regular monthly or quarterly investments of $100 or more
through automatic deductions from your bank account. To request an
Automatic Investment Plan application form, please write or call the Fund
at 1-800-304-7404.
- - SYSTEMATIC WITHDRAWALS
If you own $10,000 or more of our Fund's shares, you may arrange to have
monthly or quarterly withdrawals of cash by sending a systematic withdrawal
request to the Fund. Shares are redeemed from your account to meet the
designated payments. You may terminate the withdrawal plan at any time by
writing to the Fund.
- --------------------------------------------------------------------------------
MAILING ADDRESS
The following mailing address should be used for all written shareholder
communications:
Mairs and Power Balanced Fund, Inc.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
EXPRESS, CERTIFIED OR REGISTERED MAIL
Purchase orders, redemption requests or correspondence mailed by overnight
courier should be sent to the Fund at:
Mairs and Power Balanced Fund, Inc.
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
19
<PAGE>
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following table shows certain important financial information which may help
you understand the Fund's financial performance for the past five years. Certain
information reflects financial results for a single Fund share. The total
investment returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has 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 you may obtain, 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
1999 1998 1997 1996 1995
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
PER SHARE
Net asset value, beginning of year $ 50.05 $ 45.52 $ 36.84 $ 32.70 $ 26.21
Investment operations:
Net investment income 1.38 1.29 * 1.18 1.09 1.01
Net realized and unrealized gains
(losses) on investment 0.90 5.08 9.04 4.69 6.78
---- ---- ---- ---- ----
Total from investment operations 2.28 6.37 10.22 5.78 7.79
Less distributions:
Dividends (from net investment income) (1.39) (1.24) (1.19) (1.10) (1.02)
Distributions (from capital gains) (0.81) (0.60) (0.35) (0.54) (0.28)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (2.20) (1.84) (1.54) (1.64) (1.30)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $ 50.13 $ 50.05 $ 45.52 $ 36.84 $ 32.70
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN 4.6% 14.2% 28.0% 17.9% 30.0%
---- ----- ----- ----- -----
---- ----- ----- ----- -----
</TABLE>
* In 1998, net investment income per share represents net investment income
divided by the average shares outstanding throughout the period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000's omitted) $40,611 $38,356 $28,790 $20,565 $16,979
Ratio of expenses to average net assets 0.88% 0.91% 0.92% 1.08% 1.12%
Ratio of net investment income
to average net assets 2.70% 2.69% 2.81% 3.16% 3.47%
Portfolio turnover rate 13.40% 11.88% 5.32% 8.25% 3.95%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
William B. Frels......................................................President and Director
George A. Mairs, III...................................................Secretary and Director
Peter G. Robb.....................................................Vice-President and Director
Lisa J. Hartzell....................................................................Treasurer
Norbert J. Conzemius.................................................................Director
Charlton Dietz.......................................................................Director
Donald E. Garretson..................................................................Director
J. Thomas Simonet....................................................................Director
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRANSFER AGENT
Mairs and Power, Inc. (REGULAR MAIL ADDRESS)
W-1420 First National Bank Building Firstar Mutual Fund Services, LLC
332 Minnesota Street 615 East Michigan Street
Saint Paul, Minnesota 55101 P. O. Box 701
Milwaukee, Wisconsin 53201-0701
CUSTODIAN
Firstar Bank, N.A. (OVERNIGHT OR EXPRESS MAIL
615 East Michigan Street ADDRESS)
P.O. Box 701 Firstar Mutual Fund Services, LLC
Milwaukee, Wisconsin 53201 3rd Floor
615 East Michigan Street
INDEPENDENT AUDITORS Milwaukee, Wisconsin 53202
Ernst & Young, LLP
1400 Pillsbury Center SHAREHOLDER ACCOUNT INFORMATION
200 South Sixth Street AND INQUIRIES
Minneapolis, Minnesota 55402 1-800-304-7404
- --------------------------------------------------------------------------------
THE FOLLOWING INFORMATION ON THE FUND IS AVAILABLE FREE UPON REQUEST BY CALLING
1-800-304-7404:
- - ANNUAL AND QUARTERLY REPORTS, WHICH DESCRIBE THE FUND'S PERFORMANCE AND
LIST ITS PORTFOLIO HOLDINGS.
- - STATEMENT OF ADDITIONAL INFORMATION (SAI), WHICH PROVIDES MORE DETAILS
ABOUT THE FUND AND ITS INVESTMENT POLICIES AND RESTRICTIONS.
ADDITIONAL INFORMATION:
- - DOCUMENTS FILED BY THE FUND WITH THE SEC ARE AVAILABLE ON THE SEC'S
INTERNET SITE AT HTTP://WWW.SEC.GOV, WHERE THEY ARE LISTED UNDER "MAIRS AND
POWER BALANCED FUND, INC."
- - INFORMATION ABOUT THE FUND, INCLUDING THE SAI, CAN ALSO BE REVIEWED AND
COPIED AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, D.C. YOU CAN ALSO
OBTAIN COPIES BY MAILING YOUR REQUEST AND A DUPLICATING FEE TO THE SEC'S
PUBLIC REFERENCE SECTION, WASHINGTON, DC 20549-6009. INFORMATION ABOUT THE
OPERATION OF THE PUBLIC REFERENCE ROOM IS AVAILABLE BY CALLING THE SEC AT
1-800-SEC-0330.
- - THE FUND'S INVESTMENT COMPANY ACT FILE NUMBER IS 811-1048.
21
<PAGE>
MAIRS AND POWER BALANCED FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Dated April 26, 2000
Mairs and Power Balanced Fund, Inc. (the "Fund") is a no-load mutual
fund. The objective of the Fund is to provide 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.
This Statement of Additional Information is not a prospectus, but
contains information in addition to what is contained in the Fund's Prospectus.
It should be read in conjunction with the Prospectus, dated April 26, 2000,
which has been filed with the Securities and Exchange Commission. The Fund's
Prospectus and most recent annual financial statement may be obtained, without
charge, by writing the Fund or calling our Customer Service Department at
1-800-304-7404. Certain portions of the Propectus have been incorporated by
reference into this Statement of Additional Information, as noted herein. The
address of the Fund is Mairs and Power Balanced Fund, c/o Firstar Mutual Fund
Services, LLC, P. O. Box 701, Milwaukee, WI 53201-0701.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
The Fund.....................................................................2
Investment Objective and Policies............................................2
Investment Limitations.......................................................2
Portfolio Turnover...........................................................3
Principal Holders of Securities..............................................3
Officers and Directors.......................................................4
Investment Adviser...........................................................5
Transfer Agent and Custodian.................................................6
Independent Accountant.......................................................6
Brokerage Allocation and Other Practices.....................................6
Purchasing and Redeeming Shares..............................................7
Taxation.....................................................................7
Principal Underwriter........................................................7
Calculation of Performance Data..............................................7
Financial Statements.........................................................8
</TABLE>
1
<PAGE>
THE FUND
The Fund is 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
shareholder to one vote at all meetings of Fund shareholders. Shareholders will
participate equally in dividends and capital gains distributions declared by the
Fund for each share owned. Fund shares are transferable without restrictions and
are redeemable at net asset value. The Fund is not required to hold annual
meetings of shareholders until such times as substantial changes are proposed in
either the governance or the policies of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
As discussed in "Investment Objective and Policies" in the Fund's
Prospectus, the objective of the Fund is to provide 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.
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 the holders of a majority of the Fund's
outstanding shares. The vote of a majority of the outstanding shares means the
vote, at the annual or a special meeting of the shareholders representing (a)
67% or more of the voting shares present at such meeting, if the holders of more
than 50% of the outstanding voting shares of the Fund are present or represented
by proxy; or (b) more than 50% of the outstanding voting shares of the Fund,
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;
2
<PAGE>
(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 gain 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;
(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; or
(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.
1999 1998
---- ----
<S> <C> <C>
Common Stocks 6.40% 3.08%
All Other Securities 7.00% 8.79%
</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, Mairs and Power, Inc., 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.
PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000, the only shareholder holding more than 5% of the
Fund's outstanding shares was Smyth Profit Sharing and Savings Plan, St. Paul,
MN (50,777 shares or 6.8%).
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 55101-1363.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age With Registrant During Past Five Years
- --------------------- --------------- ----------------------
<S> <C> <C>
William B. Frels, * 60 President and Director Vice President and Secretary of the
Investment Adviser
George A. Mairs, III, * 71 Secretary and Director President of the Investment Adviser
Peter G. Robb, * 51 Vice President and Director Vice President of the Investment Adviser
Lisa J. Hartzell, 55 Treasurer Manager of Mutual Fund Services of the
Investment Adviser
Norbert J. Conzemius,** 58 Director Retired Chief Executive Officer, Road
121 Wildwood Avenue Rescue Incorporated, St. Paul, Minnesota
Birchwood, MN 55110
Charlton Dietz, 69 Director Retired Senior Vice President, Legal
3050 Minnesota World Trade Center Affairs and General Counsel, Minnesota
30 Seventh Street East Mining and Manufacturing Company
St. Paul, MN 55101
Donald E. Garretson, 78 Director Retired Vice President, Minnesota Mining
1146 Ivy Hill Drive and Manufacturing Company
Mendota Heights, MN 55118
J. Thomas Simonet, 73 Director Retired Chief Executive Officer,
315 Stonebridge Boulevard U.S. Bank Trust National Association
St. Paul, MN 55105 (formerly First Trust National
Association)
</TABLE>
* Interested person of the Fund, as defined in the Investment Company Act of
1940.
** Effective April 14, 2000, Mr. Norbert J. Conzemius was elected by the Board
of Directors to serve as an independent director for the Fund.
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.
4
<PAGE>
The Fund's Board of Directors oversees Fund operations and performs
duties required by applicable state and federal law.
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 fees totaled $7,200 in 1999. As of March 31, 2000, the Directors and
Officers of the Fund, as a group, and their spouses and minor children
beneficially owned 13,691 shares, or 1.8% of the Fund.
The Fund and its adviser have adopted codes of ethics under Rule 17j-1
of the Investment Company Act. These codes of ethics permit personnel subject to
the codes to invest in securities including securities that may be purchased or
held by the Fund. However, the code of ethics have been designed to ensure that
the interest of the Fund's shareholders comes before the interest of the adviser
who manages the Fund. The codes contain restrictions on personal investing
practices.
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>
<S> <C>
George A. Mairs, III 41.7%
William B. Frels 36.1%
Peter G. Robb 22.2%
</TABLE>
Mairs and Power, Inc. has served as an investment advisory firm since
1931 and 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, 1999 were $546,836,085.
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 60 days' written notice by the Fund's Board of Directors, by
the holders of a majority of the Fund's outstanding voting shares 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). Mairs and Power, Inc. conducts investment research and supervises
investment accounts for individuals, trusts, pension and profit sharing funds,
charitable and educational institutions. It is not a broker and does not sell
securities.
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 1999 was 0.6%; the ratio of
total expenses to average net assets was 0.88%.
5
<PAGE>
Advisory fees paid by the Fund to Mairs and Power, Inc. amounted to
$245,014 in 1999, $203,541 in 1998, and $150,554 in 1997. 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, directors fees, taxes, premiums on fidelity
bonds, supplies, and all other miscellaneous expenses are borne by the Fund.
TRANSFER AGENT AND CUSTODIAN
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, P. O. Box
701, Milwaukee, Wisconsin 53201-0701 has acted as the Fund's transfer agent and
dividend disbursing agent since June 1, 1999. Reimbursements for all
expenditures incurred in the discharge of these responsibilities are as follows:
For the period June 1, 1999 to December 31, 1999, Firstar Mutual Fund Services,
LLC was reimbursed $8,573. Mairs and Power, Inc. acted as the Fund's transfer
agent and dividend disbursing agent prior to June 1, 1999. For the period
January 1, 1999 to May 31, 1999, Mairs and Power Inc was reimbursed $10,917 for
these services. Reimbursements for previous years amounted to $22,911 in 1998
and $11,743 in 1997. Firstar Mutual Fund Services, LLC also serves as fund
accountant for the Fund.
Custodial services for the Fund are performed by Firstar Bank, N.A.,
615 East Michigan Street, P.O. Box 701, Milwaukee, Wisconsin 53201, pursuant to
the terms of a Custodial Agreement reviewed annually by the Board of Directors.
As custodian, Firstar Bank, N.A 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, as
directed in writing by authorized officers of the Fund. For these services,
Firstar Bank, N.A received $8,921 in 1999, $8,284 in 1998 and $4,794 in 1997.
INDEPENDENT ACCOUNTANT
Ernst & Young, LLP, 1400 Pillsbury Center, 200 South Sixth Street,
Minneapolis, Minnesota 55402 is the independent accountant to the Fund, and is
subject to annual appointment by the Board of Directors. Ernst & Young, LLP
conducts an annual audit of the accounts and records of the Fund, reports on the
Fund's annual financial statements and performs tax and accounting advisory
services.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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. The broker-dealers used by the Fund have no affiliation with the
Fund, its investment adviser, or any of their officers or directors.
6
<PAGE>
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 1999, the Fund paid $8,886 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 1998 and 1997 amounted to $11,825 and $2,729 respectively.
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.
TAXATION
The Fund intends to comply, as it did in 1999, 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 nondeductible 4% excise tax if less than 98% of
ordinary income and less than 98% of capital gains are 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 this excise
tax.
PRINCIPAL UNDERWRITER
The Fund is the sole distributor of its mutual fund shares.
CALCULATION OF PERFORMANCE DATA
The Fund may publish its total return information from time to time.
Quotations of the Fund's average annual total rate of return will be expressed
in terms of the average annual compounded rate of return on a hypothetical
investment in the Fund over periods of one, five and ten years. Performance data
will reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and will assume that all dividends and capital gains
distributions are reinvested when paid.
Performance information reflects only the performance of a hypothetical
investment in the Fund during the particular time periods on which the
calculations are based. Such information should not be considered as
representative of the performance of the Fund in the future. Performance of the
Fund will vary based not only on the current market value of the securities held
in its portfolio, but also on changes in its expenses and amount of assets.
7
<PAGE>
FINANCIAL STATEMENTS
The Fund's financial statements, including a listing of portfolio
securities as of December 31, 1999, are included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1999 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.
8
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Articles of Incorporation, dated
April 8, 1991, filed herewith.
(a)(1) Articles of Amendment to Amended and Restated Articles
of Incorporation Article I, dated May 23, 1997, filed
herewith.
(b) Amended and Restated By-laws, filed herewith.
(c) None.
(d) Agreement for Investment Counsel Service, dated March 21,
1972, as amended by Amendment to Agreement for Investment
Counsel Service, dated May 17, 1982, filed herewith.
(e) None.
(f) None.
(g) Custodian Agreement entered into between the Fund and
Firstar Trust Company on April 15, 1996, filed herewith.
(h) None.
(i) None.
(j) Consent of Independent Auditors, filed herewith.
(k) None.
(l) None.
<PAGE>
(m) None.
(n) None.
(o) 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.
(p) Code of Ethics. Mairs and Power Balanced Fund, Inc. Code
of Ethics dated 4/14/00.
Item 24. Persons Controlled By or Under Common Control with Registrant
Inapplicable
Item 25. 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 interest of the corporation.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Inapplicable
Item 27. Principal Underwriters
Inapplicable
Item 28. Location of Accounts and Records
<TABLE>
<S><C>
Custodian: Firstar Bank, N.A.
615 East Michigan Street
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Transfer Agent: Overnight Deliveries Firstar Mutual Fund Services, LLC
3rd Floor, 615 East Michigan Street
Milwaukee, Wisconsin 53202
Transfer Agent: Mailing Address Firstar Mutual Fund Services, LLC
615 East Michigan Street
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Investment Adviser: Mairs and Power, Inc.
W-1420 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1363
</TABLE>
Item 29. Management Services
Inapplicable
Item 30. Undertakings
Inapplicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund certifies that it meets all of the requirements
for effectiveness of the registration statement under 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, duly authorized, in the City of St.
Paul, and State of Minnesota on the 26th day of April, 2000.
MAIRS AND POWER BALANCED FUND, INC.
/s/ William B. Frels, President
--------------------------------------------
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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William B. Frels President and Director
- ----------------------------- (Principal Executive Officer) April 26, 2000
William B. Frels
/s/ George A. Mairs, III Secretary and Director
- ----------------------------- (Principal Financial and Accounting
George A. Mairs, III Officer) April 26, 2000
/s/ Peter G. Robb
- -----------------------------
Peter G. Robb Vice President and Director April 26, 2000
/s/ Norbert J. Conzemius
- -----------------------------
Norbert J. Conzemius Director April 26, 2000
/s/ Charlton Dietz
- -----------------------------
Charlton Dietz Director April 26, 2000
/s/ Donald E. Garretson
- -----------------------------
Donald E. Garretson Director April 26, 2000
/s/ J. Thomas Simonet
- -----------------------------
J. Thomas Simonet Director April 26, 2000
</TABLE>
<PAGE>
EXHIBIT INDEX
ITEM DESCRIPTION
(a) Amended and Restated Articles of Incorporation.
(a)(1) Articles of Amendment to Amended and Restated Articles of
Incorporation Article I.
(b) Amended and Restated By-laws.
(c) Not filed herewith.
(d) Agreement for Investment Counsel and Amendment thereto.
(e) Not filed herewith.
(f) Not filed herewith.
(g) Custodian Agreement.
(h) Not filed herewith.
(i) Not filed herewith.
(j) Consent of Independent Auditors.
(k) Not filed herewith.
(l) Not filed herewith.
(m) Not filed herewith.
(n) Not filed herewith.
(o) Not filed herewith.
(p) Code of Ethics.
<PAGE>
Exhibit (a)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MAIRS AND POWER INCOME FUND, INC.
The following Amended and Restated Articles of Incorporation of Mairs and
Power Income Fund, Inc. are hereby adopted under and pursuant to the Minnesota
Business Corporation Act, Minnesota Statutes, Chapter 302A, as amended:
ARTICLE I.
The name of this corporation shall be "MAIRS AND POWER INCOME FUND, INC."
ARTICLE II.
The duration of this corporation shall be perpetual.
ARTICLE III.
The purpose of this corporation shall be to operate a so-called "open end"
mutual investment fund pursuant to applicable state and federal regulatory
statutes. In furtherance of such purpose, the corporation shall possess all the
power bestowed upon or permitted to it by law which, in the judgment of the
Board of Directors of the corporation, are necessary or convenient to effect the
purpose of the corporation.
ARTICLE IV.
The address of the registered office of this corporation in the State of
Minnesota is W-2062 First National Bank Building, 332 Minnesota Street, St.
Paul, Minnesota 55101.
1
<PAGE>
Exhibit (a)
ARTICLE V.
SECTION 1. This corporation shall have and issue only one class of shares
of stock. All shares in this corporation shall be shares of common stock and all
shares of this corporation shall be equal in all respects and shall confer equal
rights upon the holders thereof.
SECTION 2. All shares of stock in this corporation may be issued as full or
as fractional shares. Each fractional share shall have the same rights which are
provided in these Articles of Incorporation, the By-laws of this corporation and
by law to which a full share of stock is entitled, but in the proportion to
which such fractional share bears to a full share of stock.
SECTION 3. Every shareholder of record or his proxy or legal representative
at the date fixed by the Board of Directors for the determination of persons
entitled to vote at a meeting of shareholders, or if no date has been fixed, at
the time of the meeting, shall be entitled at any such meeting to one vote or a
fraction thereof, for each share or fraction thereof standing in his name on the
books of the corporation at such date.
SECTION 4. There shall be no cumulative voting by shareholders in this
corporation.
SECTION 5. No shareholder as such shall have any preemptive right to
acquire securities or rights to purchase securities of this corporation.
ARTICLE VI.
The total authorized number of shares in this corporation shall be ten
million (10,000,000) shares which shall have a par value of ten cents ($.10) per
share.
ARTICLE VII.
SECTION 1. The directors shall have the general management and control of
the business and affairs of this corporation and shall exercise all of the
powers that may be exercised or performed by this corporation under these
Articles, its By-laws and the applicable statutes of the United States and the
several states thereof.
<PAGE>
Exhibit (a)
SECTION 2. A director of this 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, excepted as prohibited by the Investment Company Act of 1940,
as amended.
The foregoing Amended and Restated Articles of Incorporation of Mairs and
Power Income Fund, Inc. have been adopted pursuant to Minnesota Statutes,
Chapter 302A by vote of the holders of a majority of the outstanding shares of
stock of the corporation on April 3, 1991.
IN WITNESS WHEREOF, we have hereunder set our hands this 8th day of April,
1991.
/s/ George A. Mairs, III /s/ Ronald J. DeSellier
- -------------------------------- -------------------------------------
Secretary President
STATE OF MINNESOTA )
) SS
COUNTY OF RAMSEY )
On this 8th day of April, 1991, before me a Notary Public within and for
said County, personally appeared Ronald J. DeSellier, President of Mairs and
Power Income Fund, Inc., and George A. Mairs, III, Secretary of Mairs and Power
Income Fund, Inc., who executed the foregoing Amended and Restated Articles of
Incorporation and each acknowledged that he executed the same as his own free
act and deed for the uses and purposes therein expressed.
/s/ Kathleen M. Kellerman
-----------------------------
Notary Public
<PAGE>
Exhibit (a)(1)
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>
Exhibit (b)
AMENDED AND RESTATED BY-LAWS
OF
MAIRS AND POWER INCOME FUND, INC.
I.
REGISTERED OFFICE. The registered office shall be in the City of Saint
Paul, Minnesota, but the corporation may also have offices at other places as
the Board of Directors may from time to time determine.
II.
SHAREHOLDERS' MEETINGS. All meetings of shareholders shall be held at the
office of the corporation in Saint Paul, Minnesota, unless the Directors shall
designate some other place. Meetings of shareholders may occur within or without
the State of Minnesota as may be determined by the Board of Directors. The
annual meeting of shareholders shall be held at such time, not earlier than
February 1 nor later than May 31 in each year, as the Board of Directors shall
by resolution determine. At the annual meeting shareholders shall elect
directors and transact such other business as may properly be brought before the
meeting. Written notice of the annual meeting stating the time and place thereof
shall be mailed to each shareholder of record at least ten days and no more than
sixty days before the meeting, at his last known address. Special meetings of
the shareholders for any purpose or purposes may be called by the Chairman, the
President, or any two officers, any two directors, or by any shareholder or
shareholders holding, of record, not less than 10% of the shares of the
corporation issued and outstanding and entitled to vote. Any call for a special
meeting shall state the purpose or purposes of such meeting; and no business
other than that stated in the call for such meeting shall be transacted thereat.
Written notice of all special meetings of shareholders, stating the time, place
and purpose thereof, shall be mailed to each shareholder of record at his last
known address, at least ten days and no more than sixty days in advance of such
meeting.
1
<PAGE>
Exhibit (b)
QUORUM. The presence in person or by proxy of the holders of a majority of
the shares of stock outstanding and entitled to vote at any annual or special
meeting of the shareholders of this corporation shall constitute a quorum for
the transaction of business. In the absence of a quorum any meeting may be
adjourned from time to time without further notice other than by announcement at
the meeting at which such adjournment is taken until a quorum is secured at any
such adjourned meeting. The shareholders present at any duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
III.
DIRECTORS. The management and conduct of the business of this corporation
shall be vested in a Board of Directors which shall consist of such number of
directors not less than three nor more than fifteen as shall be elected by the
shareholders at each annual meeting. Directors need not be shareholders of the
corporation. The terms of office of the directors of this corporation, except as
hereinafter set forth, shall be for a period of one year and until their
respective successors are elected and qualified. Vacancies on the Board of
Directors shall be filled by the remaining members of the board, although less
than a quorum, and each person so elected shall serve during the term which is
unexpired of the vacancy which he is elected to fill; provided that at least
two-thirds (2/3) of the directors shall at all times have been elected by the
shareholders; and provided further that no more than 60 per centum of directors
shall be persons who are investment advisers of, affiliated persons of an
investment adviser of, or officers or employees of, the company. In the event
that at any time less than a majority of the directors shall have been elected
by the shareholders, it shall be the duty of the directors and officers
forthwith to cause a meeting of shareholders to be held for the purpose of
electing directors to fill any existing vacancies.
MEETINGS OF THE DIRECTORS. Regular meetings of the board may be held
without notice at such time and place either within or without the State of
Minnesota as shall from time to time be determined by the board. At all meetings
of the Board of Directors a majority shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the acts of the
majority present at any meeting at which a quorum is present shall be the acts
2
<PAGE>
Exhibit (b)
of the board itself. Any action which might be taken at a meeting of the Board
of Directors may be taken without a meeting if done in writing and signed by all
directors.
IV.
OFFICERS. The officers of the corporation shall be a chairman, president,
vice-president, secretary and treasurer. Any two offices except that of
chairman, president and vice-president may be held by the same person. Unless
otherwise determined by the Board of Directors, the President shall be the Chief
Executive Officer of the corporation and the Treasurer shall be the Chief
Financial Officer of the corporation. The Board of Directors may also appoint
one or more vice-presidents, assistant secretaries and assistant treasurers, and
such officers and agents as it may deem necessary who shall hold their offices
for such terms and exercise such powers and perform such duties as shall be
determined from time to time by the board. The Board of Directors shall hold its
annual meeting immediately following the annual meeting of shareholders, and
shall elect all officers to serve for the ensuing year and until the election
and qualification of their respective successors. No officer need be a director
or a shareholder.
V.
AGREEMENTS WITH OFFICERS, ETC. It is recognized that a contract or
agreement for the services of one or more of the officers or directors of the
corporation to act as an investment counselor for the corporation at a
recognized fee to be paid by the corporation may be entered into; the propriety
of such a contract for the services described or other like services or expenses
incurred in connection therewith is recognized and confirmed; and all
shareholders take cognizance of the existence of such contract and relationship
and endorse and confirm the same.
VI.
SALE AND REDEMPTION OF SHARES
(a) Within the meaning of these By-laws the term "selling price" shall
mean the net asset value of the shares as determined by the net worth of the
corporation, divided by the number of shares outstanding and giving proper
effect to all cash and assets of the corporation, but without any allowance for
good will, going concern value or intangible factors. The computation of the
selling price shall be made by the investment advisers of the corporation; and,
3
<PAGE>
Exhibit (b)
as to all securities, shall be made on the basis of the value thereof on the
valuation date. "Valuation" as used herein shall mean the market value of
securities for which market quotations are readily available; and with respect
to other securities and assets, the fair value thereof as determined in good
faith by the Board of Directors. The computation of the selling price shall be
expressed in dollars and cents per share. Unless daily determinations of net
asset value of shares is required by law or regulatory authority and not
otherwise exempted, and except as otherwise provided in paragraph (c) hereof,
the net asset value of shares shall be determined as of the close of business on
Friday of each week and on the last day of each month, unless such day is a
holiday, in which case it shall be determined as of the close of business on the
preceding business day.
(b) Shares in the corporation shall be sold by the corporation only at the
selling price therefor for the day wherein the sale occurs; and all sales and
redemption of shares shall be at the net asset value thereof next determined
following the receipt of the purchase order or tender of shares for redemption.
Any purchaser desiring to purchase shares may do so by committing himself to
purchase either a given number of shares or shares up to a given sum or purchase
price. A commitment to buy shares up to a given sum or price shall be construed
to mean the largest number of shares, whole or fractional, which the cash stated
is able to buy. Payment for shares shall be made not later than five business
days after the selling price has been ascertained. The corporation will within
five business days next following any tender for redemption pay such redemption
price; however, the right of redemption may be suspended during such periods
when the New York Stock Exchange is closed, or the Securities and Exchange
Commission of the United States determines that trading therein is restricted,
or that an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practical, or it is not reasonably
practical for the Fund fairly to determine the value of its assets, and for such
other period as the Securities and Exchange Commission may by order permit for
the protection of shareholders of the Fund.
(c) Redemption of shares shall be made at the selling price based on a
special net asset value determination made as of the close of business on the
day on which an order for redemption is received by the Fund and computed in the
manner provided in paragraph (a) hereof. A shareholder desiring redemption of
his shares shall elect the redemption thereof at any date up to the close of
business on such day as the New York Stock Exchange is open for trading; and
notice of such election must actually be received by the corporation. Any notice
of
4
<PAGE>
Exhibit (b)
election for redemption shall state either the number of shares to be redeemed,
or the sum to be realized from redemption. If expressed in terms of a sum to be
realized, the election shall be construed as an election for the redemption of
the smallest number of shares, whole or fractional, as will, at the applicable
selling price, produce the cash elected to be realized. Simultaneously with any
election to redeem, the shareholder so electing shall deliver a certificate or
certificates of shares, properly endorsed, covering the shares to be redeemed,
if such certificate be in fact outstanding.
(d) Fractional shares will be issued, and may be redeemed to such extent
and in such manner as may be determined by the Board of Directors.
(e) The Board of Directors may by resolution, determine the minimum sale
to be made to any new shareholder and the minimum subsequent or supplemental
purchase made or to be made by the existing shareholder, already the owner of
shares in the corporation.
(f) Stock certificates will be made available without charge to any
shareholder desiring the same; but unless specifically requested in writing,
certificates will not be issued to any shareholder; and absence of an
outstanding certificate shall not to any extent impair the standing of any
shareholder as such, nor the title to the shares owned by him.
VII.
DISTRIBUTIONS TO SHAREHOLDERS. The expenses of operation of the company
shall be a first charge against all income thereof. After full discharge
thereof, the remaining income shall be distributed at quarterly intervals during
the months of March, June, September and December, upon such dates therein of
record and for payment as shall be determined by the Board of Directors.
VIII.
INVESTMENTS
(a) The business of the corporation shall be confined to the investment
and reinvestment of its fund and assets; and it shall enter into other lines of
activity only to the extent permitted by its Articles, and only when the result
of a reorganization or change of form of an existing investment. Selection of
investments shall be made by the officers and directors.
(b) To the greatest extent consistent with the present and future
requirements of the corporation, the assets of the corporation shall be invested
in bonds, stocks, notes, debentures
5
<PAGE>
Exhibit (b)
and other securities; or, in the discretion of the directors, in savings
accounts of banks or savings and loan associations.
IX.
AMENDMENTS. These By-laws may be amended or repealed by the Board of
Directors subject to the power of the shareholders, exercisable in the manner
provided in the Minnesota Statutes, Chapter 302A.181, Subd. 3, to amend or
repeal these by-laws. No by-law adopted or amended by the shareholders
subsequent to the date of the effectiveness of these Amended and Restated
By-laws may be amended or repealed by action of the Board of Directors alone and
no by-law repealed by the shareholders after such date may be reinstated by
action of the Board of Directors alone. Any action to amend or repeal these
By-laws by the shareholders shall be taken by the shareholders at any meeting by
a majority vote in person or by proxy of the shares outstanding; provided that
if the text of any proposed amendment shall be stated in writing to all
shareholders, at least ten days prior to any special or annual meeting where the
same is to be considered, then such amendment may be adopted by a majority vote
of the shares represented at any meeting at which a quorum is present. In
accordance with Minnesota Statutes, Chapter 302A.181, the Board of Directors
shall not adopt, amend or repeal a by-law fixing a quorum for meetings of
shareholders, prescribing procedures for removing directors or filling vacancies
in the Board, or fixing the number of directors or their classifications,
qualifications, or terms of office, but may adopt or amend a by-law to increase
the number of directors.
X.
FISCAL YEAR; AUDIT. The fiscal year of the corporation shall be concurrent
with the calendar year. The books of account of this corporation shall be
audited and certified statements prepared as of the close of each fiscal year,
or more often in the discretion of the Board of Directors, by an independent
certified public accountant.
6
<PAGE>
Exhibit (d)
AGREEMENT FOR INVESTMENT COUNSEL SERVICE
THIS AGREEMENT made as of the 21st day of March, 1972 between MAIRS AND
POWER, INC., a Minnesota Corporation, hereinafter called the "Adviser", and
MAIRS AND POWER INCOME FUND, INC., a Minnesota corporation, hereinafter called
the "Fund", witnesseth:
That in consideration of the mutual covenants herein contained and the
performance herein required, the Fund and Adviser hereby mutually agree as
follows:
1. APPOINTMENT OF ADVISER.
The Fund hereby appoints and employs the Adviser to act as investment
adviser for the Fund for the term, with the duties, and subject to the
conditions as provided in this Contract, and the Adviser hereby accepts such
appointment and employment.
2. DUTIES OF ADVISER.
The Adviser shall furnish to the Fund such management, investment advisory,
statistical and research facilities and services as may be required from time to
time by the Fund. The duties of the Adviser under this Contract shall not
prevent the Adviser from rendering similar services to other persons, firms,
trusts, corporations or other entities.
It is recognized the officers of the Adviser may and probably will serve as
officer of the Fund. They shall receive no compensation as officers nor as
directors of the Fund, their compensation being limited to that which they
receive from the Adviser. The propriety of officers of the Adviser acting as
officers and directors of the Fund is fully recognized hereby and it is ratified
and confirmed by the Fund and all its shareholders.
The Fund hereby agrees to indemnify the Adviser for any loss or liability
which may be imposed upon the Adviser or its officers or directors by reason of
any act or acts that are performed by them or any of them in the performance of
this service or the within agreement as long as such act or acts shall have been
performed in good faith, but nothing in this agreement shall be construed as
protecting or purporting to protect the Adviser against any liability to the
Fund or its security holders to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties under
this Contract.
3. ALLOCATION OF EXPENSES.
The Adviser will assume all executive salaries and executive expenses and
office rent, and the Adviser will absorb all such expenses and not charge the
same since the same are included in its fees for management of the Fund. All
other expenses of operating and maintaining the Fund including but not limited
to attorneys and accountants fees, official fees of the Securities and Exchange
Commission and Minnesota Securities Commission, printing, stationery,
mimeographing and postage expenses, and premiums on fidelity bonds and
insurance,
1
<PAGE>
Exhibit (d)
and other like expenses will be paid by the Fund directly to the recipient
thereof. The Adviser will assume all expenses of distribution, sales or
promotion of the Fund.
4. COMPENSATION OF THE ADVISER.
The Adviser shall for its services as such receive a fee to be paid by the
Fund payable monthly, the same to be based upon and equal to one twenty-fourth
(1/24) of one (1) per cent of the net asset value of the Fund on the last
valuation date of each month as defined by the By-laws of the Fund.
In the event that the total expenses incurred by the Fund in any fiscal
year, excluding interest, taxes, brokerage commissions and extraordinary
litigation costs, but including payments to the Adviser, shall exceed 1 1/2% of
the first $30 million dollars and 1% of the balance of the average value of the
net assets of the Fund during said fiscal year, based upon computations of such
value made as of the close of business on the last valuation day of each month
during such fiscal year, then the Adviser agrees to bear, to the extent of
compensation paid to the Adviser by the fund, such excess expenses.
5. EFFECTIVE DATE, DURATION AND TERMINATION OF THIS CONTRACT.
(a) This Contract shall supersede in its entirety the Contract
between the Adviser and the Fund dated April 1, 1962 on the effective date
hereof which shall be at the commencement of business on March 21, 1972.
(b) This Contract shall remain in effect (unless terminated as
hereinafter provided) until April 1, 1973 and from year to year thereafter;
provided that this Contract shall continue in effect after April 1, 1973 only as
long as
(1) such continuance is specifically approved at least annually
by either (A) the Board of Directors of the Fund, or (B) "vote of a majority of
the outstanding voting securities" (as defined in Section 2 (a) (42) of the
Investment Company Act of 1940) of the Fund, and
(2) the terms of this Contract are approved at least annually by
the vote of a majority of the Directors of the Fund, who are not parties to the
Contract or "interested persons" of any such party (as such terms are used in
Section 15 (c) of the Investment Company Act of 1940) cast in person at a
meeting called for the purpose of voting on such approval.
(c) This Contract may be terminated at any time without the payment
of any penalty by vote of the Board of Directors of the Fund or by "vote of a
majority of the outstanding voting securities" (as defined in Section 2 (a) (42)
of the Investment Company Act of 1940) of the Fund, or by the Adviser, in each
case upon sixty calendar days' prior written notice to the other party to the
Contract.
(d) This Contract shall terminate automatically in the event of its
"assignment" (as defined in Section 2 (a) (4) of the Investment Company Act of
1940).
6. AMENDMENTS.
2
<PAGE>
Exhibit (d)
This Contract may be amended at any time or from time to time by an
instrument in writing signed by a duly authorized officer of the Fund and by the
Adviser, but no amendment to this Contract shall be effective until
(1) such amendment is approved by the affirmative "vote of a
majority of the outstanding voting securities" (as defined in Section 2 (a) (42)
of the Investment Company Act of 1940), and
(2) the terms of such amendment are approved by the vote of a
majority of the Directors of the Fund, who are not parties to the Contract or
"interested persons" of any such party (as such terms are used in Section 15 (c)
of the Investment Company Act of 1940), cast in person at a meeting called for
the purpose of voting on such approval.
MAIRS AND POWER INCOME FUND, INC.
By /s/ George C. Power, Jr.
--------------------------------
President
MAIRS AND POWER, INC.
By /s/ George C. Power, Jr.
--------------------------------
President
By /s/ George A. Mairs, III
--------------------------------
Vice President and Treasurer
3
<PAGE>
Exhibit (d)
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. Desellier
-------------------------------------
Secretary
<PAGE>
Exhibit (g)
CUSTODIAN AGREEMENT
THIS AGREEMENT made on April 15, 1996, between Mairs and Power Income Fund,
Inc., a Minnesota corporation (hereinafter called the "Fund"), and FIRSTAR TRUST
COMPANY, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
WHEREAS, the Fund desires that its securities and cash shall be hereafter
held and administered by Custodian pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Fund by any two of the
President, a Vice President, the Secretary and the Treasurer of the Fund, or any
other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of Mairs and Power Growth
Fund, Inc.
2. NAMES, TITLES, AND SIGNATURES OF THE FUND'S OFFICERS
An officer of the Fund will certify to Custodian the names and signatures
of those persons authorized to sign the officers' certificates described in
Section 1 hereof, and the names of the members of the Board of Directors,
together with any changes which may occur from time to time.
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Fund. Custodian shall make payments of cash to, or for the
account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the Fund upon
the delivery of such securities to Custodian, registered in the
name of the Fund or of the nominee of custodian referred to in
Section 7 or in proper form for transfer;
1
<PAGE>
Exhibit (g)
(b) for the purchase or redemption of shares of the common stock of
the Fund upon delivery thereof to Custodian, or upon proper
instructions from the Mairs and Power Growth Fund, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and
custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held
by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of
the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may rely upon)
an officers' certificate requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the Custodian in the amount of checks received in payment for
shares of the Fund which are deposited into the Fund's account.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
2
<PAGE>
Exhibit (g)
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any securities of the
Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefor;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of
the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f), and (g), securities or cash receivable in exchange therefore shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
3
<PAGE>
Exhibit (g)
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Fund, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate, Custodian shall
register all securities, except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued hereunder or in any provision of
any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
4
<PAGE>
Exhibit (g)
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection with
securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exemptable transfers and/or deliveries of any such securities.
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in writing
between the two parties. Until modified in writing, such compensation shall be
as set forth in Exhibit A attached hereto. If the Fund terminates this Agreement
prior to the first anniversary of this Agreement, the Fund agrees to reimburse
Custodian for the difference between the standard fee schedule and the
discounted fee schedule agreed to between the parties.
Custodian shall exercise reasonable care in the performance of its duties
under this Agreement. Custodian shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with matters
to which this Agreement relates, including losses resulting from mechanical
breakdowns or the failure of communications or power supplies beyond Custodian's
control, except a loss resulting from Custodian's refusal or failure to comply
with the terms of this Agreement or from bad faith, negligence, or willful
misconduct on its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Fund shall indemnify
and hold harmless Custodian from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or without basis in fact or law)
of any and every nature (including reasonable attorneys' fees) which Custodian
may sustain or incur or which may be asserted against Custodian by any person
arising out of any action taken or omitted to be taken by it in performing the
services hereunder (i) in accordance with the foregoing standards, or (ii) in
reliance upon any written or oral instruction provided to Custodian by any duly
authorized officer of the Fund, such duly authorized officer to be included in a
list of authorized officers furnished to Custodian and as amended from time to
time in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of communication or power
supplies beyond its control, Custodian shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond Custodian's control. Custodian will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of Custodian. Custodian agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Fund
shall be entitled to inspect Custodian's premises and
5
<PAGE>
Exhibit (g)
operating capabilities at any time during regular business hours of Custodian,
upon reasonable notice to Custodian.
Regardless of the above, Custodian reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Fund may be asked to
indemnify or hold Custodian harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that Custodian will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend Custodian against any claim which may
be the subject of this indemnification. In the event that the Fund so elects, it
will so notify Custodian and thereupon the Fund shall take over complete defense
of the claim, and Custodian shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this section.
Custodian shall in no case confess any claim or make any compromise in any case
in which the Fund will be asked to indemnify Custodian except with the Fund's
prior written consent.
Custodian shall indemnify and hold the Fund harmless from and against any
and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which may be asserted against the Fund by any person arising
out of any action taken or omitted to be taken by Custodian as a result of
Custodian's refusal or failure to comply with the terms of this Agreement, its
bad faith, negligence, or willful misconduct.
11. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank (as defined in
Section 2.5 of the Investment Company Act of 1940) or trust company as a
Subcustodian for all or any part of the Fund's assets, so long as any such bank
or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000) and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Fund by the Subcustodian as fully as if
the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Fund agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Fund's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Fund periodically as agreed upon with a
statement
6
<PAGE>
Exhibit (g)
summarizing all transactions and entries for the account of Fund. Custodian
shall furnish to the Fund, at the end of every month, a list of the portfolio
securities showing the aggregate cost of each issue. The books and records of
Custodian pertaining to its actions under this Agreement shall be open to
inspection and audit at reasonable times by officers of, and of auditors
employed by, the Fund.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Fund, or by Custodian, on sixty
(60) days notice, given in writing and sent by registered mail to Custodian at
P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund at W-2062 First
National Bank Building, 332 Minnesota Street, St. Paul, Minnesota 55101, as the
case may be. Upon any termination of this Agreement, pending appointment of a
successor to Custodian or a vote of the shareholders of the Fund to dissolve or
to function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties then held by
Custodian or on or against Custodian, and until full payment shall have been
made to Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the consent of the
Fund, authorized or approved by a resolution of its Board of Directors.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Directors of the Fund approves by resolution the
use of such central securities clearing agency or securities depository.
15. RECORDS
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Fund pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder, Custodian agrees to make any such records
available to the Fund upon request and to preserve such records for the periods
prescribed in Rule 31a-2 under the Investment Company Act of 1940, as amended.
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<PAGE>
Exhibit (g)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest:
FIRSTAR TRUST COMPANY
/s/ Andrea Mcvoy By /s/ James C. Tyler
- --------------------------------- ------------------------------
Assistant Secretary Vice President
Attest: Mairs and Power Income Fund, Inc.
/s/ Lisa J. Hartzell By /s/ William B. Frels
- --------------------------------- ------------------------------
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Exhibit (j)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Condensed Financial
Information" in the Prospectus and "Independent Accountant" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in Post-Effective Amendment Number 45 to the Registration Statement
(Form N-1A No. 2-18269) and related Prospectus of Mairs and Power Balanced Fund,
Inc., of those references and of our report dated January 24, 2000, 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, 1999,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 24, 2000
<PAGE>
Exhibit (p)
MAIRS AND POWER BALANCED FUND, INC.
CODE OF ETHICS
In accordance with Rule 17j-1 under the Investment Company Act of 1940 (the
"Act"), Mairs and Power, Inc. has adopted the following code of ethics.
1. All access persons, namely the Fund's officers, directors and advisory
persons, should be familiar with Rule 17j-1 under the Act and be
governed by the spirit it represents.
2. No access person, in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired by the
Fund shall
(a) employ any device, scheme or artifice to defraud the Fund;
(b) make to the Fund any untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they
are made, not misleading;
(c) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Fund; or
(d) engage in any manipulative practice with respect to the Fund.
3. Access persons shall be required to submit an initial list of covered
security holdings and the related accounts holding these securities
within 10 days of becoming an access person. The list shall include
all covered securities where the access person had any direct or
indirect beneficial ownership interest and the date the list was
submitted. Subsequent covered security lists shall be submitted no
less frequently than annually thereafter.
4. No access person, or a person acting on his or her behalf, shall act
in such a way as to benefit materially from the knowledge that the
Fund has taken or is considering taking an investment position in a
security, where such an action by the Fund is likely to influence the
market price of that security. In such cases, all access persons are
prohibited from executing personal transactions on a day during which
the Fund has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn. In addition, each Fund
portfolio manager is prohibited from buying or selling a security
within at least seven calendar days before and
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<PAGE>
Exhibit (p)
after the Fund that he or she manages trades in that security. All
trades by access persons in securities either held by the Fund or
being considered for purchase by the Fund require preclearance
authorization before execution. Such trades shall be executed only
during the last half hour of trading so as not to inhibit Fund
transactions. Preclearance is also specifically required for the
purchase of any IPO's and/or private placements.
5. Access persons (other than directors who are not "interested persons"
within the meaning of section 2(a)(19) of the Act) are required to
report all transactions within 10 days of the end of each calendar
quarter. A director who is not an "interested person" will not be
required to report transactions, except where such director knew or,
in the ordinary course of fulfilling his or her official duties as a
director of the Fund, should have known that during the 15-day period
immediately preceding or after the date of the transaction in a
security by the director such security is or was purchased or sold by
the Fund or such purchase or sale by the Fund is or was considered by
the Fund or its investment advisor. The quarterly report shall include
the date, description or security, amount, number of shares, type of
transaction (buy or sell), price and broker used. A signed statement
by each access person will be required on a quarterly basis even if no
personal trades were executed during the previous three-month period.
A copy of each report shall be kept for a period of at least five
years following the end of the fiscal year in which it is made, the
first two years in an easily accessible place.
6. It shall be the responsibility of the Compliance Officer designated by
the Board to report quarterly to the Board of Directors any violations
of this code. The Compliance Officer shall provide the Board at least
annually with a written report attesting to a full review of
compliance activities and detailing any violations that have taken
place since the last report. Violations shall be recorded, with an
appropriate course of action, and kept for at least five years
following the end of the fiscal year in which the violations occurs.
7. The Fund shall identify each access person, supply each access person
with a copy of this code, and shall inform such persons of their duty
to report covered security holdings and transactions.
8. A copy of this code of ethics shall be kept in an easily accessible
place.
Code of Ethics revised 2/1/00
Code of Ethics approved by Board of Directors 4/14/00
Access Persons page revised 4/18/00
2
