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PROSPECTUS
MIMLIC CASH FUND, INC.
400 Robert Street North
St. Paul, Minnesota 55101
(612) 223-4239
-----------------------
MIMLIC Cash Fund, Inc. (the "Fund") is a "no-load" mutual fund seeking
a high level of current income consistent with preservation of capital and
maintenance of liquidity. The Fund invests exclusively in debt securities
maturing in 397 calendar days or less from the date of acquisition by the Fund.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Shares of the Fund are not offered to the general public. They are
sold only to persons who have previously entered into investment advisory
agreements (the "Advisory Clients") directly with the Fund's investment adviser
or with other affiliated investment advisers (the "Qualifying Advisers"), and
may be purchased only with funds managed by the Qualifying Advisers. No
investment advisory fee or other expenses, except custodian fees and brokerage
commissions (if any), are charged to the Fund. Other than custodian fees and
brokerage commissions, expenses associated with the Fund's operations and the
registration and sale of its shares are assumed by the Fund's investment adviser
or by its underwriter.
This Prospectus concisely describes the information which you ought to
know before investing. Please read it carefully and keep it for future
reference.
A Statement of Additional Information about the Fund dated February 1,
1996 is available free of charge. Write to MIMLIC Sales Corporation ("MIMLIC
Sales"), 400 Robert Street North, St. Paul, Minnesota 55101, or telephone (612)
223-4239. The Statement has been filed with the Securities and Exchange
Commission and is incorporated by reference in this Prospectus.
Shares of the Fund are offered for sale by MIMLIC Sales. There is no
sales charge. MIMLIC Sales is a subsidiary of The Minnesota Mutual Life
Insurance Company ("Minnesota Mutual").
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dated February 1, 1996
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FEES AND EXPENSES
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases (as a
percentage of offering price). . . . . . . . . . . 0%
Sales load imposed on reinvested dividends. . . . . . . 0
Redemption fees . . . . . . . . . . . . . . . . . . . 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment advisory fees. . . . . . . . . . . . . . . . 0%
Other expenses. . . . . . . . . . . . . . . . . . . . . .10%
----
Total Fund Operating Expenses. . . . . . . . . . . . . . . . .10%
----
Example
An investor would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of each time period.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$1 $3 $6 $13
The example contained in the table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
Because shares of the Fund will be sold only to the Advisory Clients,
and may be purchased only with funds managed by the Qualifying Advisers for the
Advisory Clients, the Fund pays no advisory fee. In addition, Advantus Capital
pays all expenses of the Fund, except custodian fees, brokerage commissions and
those expenses expressly assumed by the Fund's underwriter.
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FINANCIAL HIGHLIGHTS
The following table shows important financial information for evaluating the
Fund's results. This information has been audited by KPMG Peat Marwick LLP,
independent auditors.
<TABLE>
<CAPTION>
Period from
November 1,
Year ended 1993 to Years ended October 31,
September 30, September 30, --------------------------------
1995 1994 (a) 1993 1992 1991
---------- ------------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
---------- ------------- ------- ------- --------
Income from investment operations:
Net investment income..................... 0.0571 0.0342 0.0320 0.0402 0.0638
---------- ------------- ------- ------- --------
Total from investment operations........ 0.0571 0.0342 0.0320 0.0402 0.0638
---------- ------------- ------- ------- --------
Less distributions:
Dividends from net investment income...... (0.0571) (0.0342) (0.0320) (0.0402) (0.0638)
---------- ------------- ------- ------- --------
Total distributions..................... (0.0571) (0.0342) (0.0320) (0.0402) (0.0638)
---------- ------------- ------- ------- --------
Net asset value, end of period................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
---------- ------------- ------- ------- --------
---------- ------------- ------- ------- --------
Total return (c) ............................. 5.87% 3.49%(d) 3.25% 4.10% 6.57%
Net assets, end of period (in thousands) ..... $10,922 $12,316 $16,927 $21,047 $32,691
Ratio of expenses to average daily
net assets (f)............................ 0.10% 0.08%(g) 0.07% 0.06% 0.08%
Ratio of net investment income to
average daily net assets (f) ............. 5.71% 3.68%(g) 3.20% 4.12% 6.21%
Period from
August 14,
Years ended October 31, 1987 (b) to
------------------------------------ October 31,
1990 1989 1988 1987
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------------
Income from investment operations:
Net investment income..................... 0.0818 0.0902 0.0569 0.0100
------- ------- ------- ------------
Total from investment operations........ 0.0818 0.0902 0.0569 0.0100
------- ------- ------- ------------
Less distributions:
Dividends from net investment income...... (0.0818) (0.0902) (0.0569) (0.0100)
------- ------- ------- ------------
Total distributions..................... (0.0818) (0.0902) (0.0569) (0.0100)
------- ------- ------- ------------
Net asset value, end of period................ $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------------
------- ------- ------- ------------
Total return (c) ............................. 8.49% 9.40% 5.85% 1.04%(e)
Net assets, end of period (in thousands) ..... $21,452 $21,865 $10,328 $150
Ratio of expenses to average daily
net assets (f)............................ 0.09% 0.13% 0.13% --
Ratio of net investment income to
average daily net assets (f) ............. 8.18% 8.98% 7.68% 5.84%(g)
</TABLE>
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(a) During 1994, the Fund changed its fiscal year end from October 31 to
September 30.
(b) The inception of the Fund was January 26, 1987. However, the Fund's
shares did not become effectively registered under the Securities Act of
1933 until August 14, 1987. Financial highlights are not presented for
the period from January 26, 1987 to August 13, 1987 as the Fund's shares
were not registered during that period.
(c) Total return figures are based on a share outstanding throughout the
period and assumes reinvestment of distributions at net asset value.
(d) Total return is presented for the period from November 1, 1993 to
September 30, 1994.
(e) Total return is presented for the period from August 14, 1987, commencement
of operations, to October 31, 1987.
(f) The Fund's Adviser voluntarily absorbed $215 and $2,115 in expenses for the
years ended October 31, 1989 and 1988, respectively. If the Fund had been
charged for these expenses the ratio of expenses to average daily net
assets would have been .13% and .17%, respectively, and the ratio of net
investment income to average daily net assets would have been 8.98% and
7.64%, respectively. The Fund did not begin to accrue expenses until
August 31, 1988.
(g) Adjusted to an annual basis.
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INVESTMENT PERFORMANCE
From time to time the Fund advertises its "current yield" and
"effective yield." Both yield figures are based on historical earnings, show
the performance of a hypothetical investment, and are not intended to indicate
future performance. The "current yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be higher than the "current yield"
because of the compounding effect of this assumed reinvestment. "Current yield"
and "effective yield" will vary based upon, among other things, changes in
market conditions, the level of interest rates and the level of the Fund's
expenses.
For additional information regarding the calculation of yield see the
Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
MIMLIC Cash Fund, Inc. is a mutual fund designed to meet the short-
term investment needs of the Advisory Clients by seeking a high level of current
income to the extent consistent with preservation of capital and maintenance of
liquidity. This investment objective of the Fund may not be changed without the
approval of a majority of the outstanding shares of the Fund. The Fund's other
investment policies may be changed at any time without shareholder approval,
although shareholders will be notified of those changes.
The Fund plans to achieve its objective by pooling daily the Advisory
Clients' cash available for short-term investment and investing in a diversified
portfolio of money market instruments. There can be no assurance that the Fund
will achieve its objective.
The Fund is subject to the investment restrictions of Rule 2a-7 under
the Investment Company Act of 1940, as amended (the "1940 Act"), in addition to
its other policies and restrictions discussed below. Pursuant to Rule 2a-7, the
Fund is required to invest exclusively in securities that mature within 397 days
from the date of purchase and to maintain an average weighted maturity of not
more than 90 days. Rule 2a-7 also requires that all investments by the Fund be
limited to United States dollar-denominated investments that (a) present
"minimal credit risk" and (b) are at the time of acquisition "Eligible
Securities." Eligible Securities include, among others, securities that are
rated by two Nationally Recognized Statistical Rating Organizations ("NRSROs")
in one of the two highest categories for short-term debt obligations, such as
A-1 or A-2 by Standard & Poor's Corporation, or Prime-1 or Prime-2 by Moody's
Investors Service, Inc.
Rule 2a-7 also requires, among other things, that the Fund may not
invest, other than in United States "Government securities" (as defined in the
1940 Act), (a) more than 5% of its total assets in Second Tier Securities (i.e.,
Eligible Securities that are not rated by two NRSROs
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in the highest category such as A-1 and Prime-1) and (b) more than the greater
of 1% of its total assets or $1,000,000 in Second Tier Securities of any one
issuer. The Fund's present practice is not to purchase any Second Tier
Securities.
Subject to these limitations, the Fund will invest in a managed
portfolio of money market instruments as follows:
- Obligations issued or guaranteed as to principal or interest by the
United States Government, or any agency or authority controlled or
supervised by and acting as an instrumentality of the United States
Government pursuant to authority granted by Congress.
- Obligations (including certificates of deposit and bankers
acceptances) of United States banks, savings and loan associations and
savings banks which at the date of the investment have total assets (as of
the date of their most recent annual financial statements) of not less than
$2 billion; U.S. dollar denominated obligations of Canadian chartered
banks, London branches of United States banks, and United States branches
or agencies of foreign banks if such banks meet the above-stated asset size
(see "Risks of investing in the Fund"); and obligations of any United
States banks, savings and loan associations and savings banks, regardless
of the amount of their total assets, provided that the amount of the
obligations does not exceed $100,000 for any one United States bank,
savings and loan association or savings bank and the payment of the
principal is insured by the Federal Deposit Insurance Corporation.
- Obligations of the International Bank for Reconstruction and
Development.
- Commercial paper (including variable amount master demand notes)
issued by United States limited partnerships, corporations or affiliated
foreign corporations.
- Other corporate debt obligations that at the time of issuance were
long-term securities, but that have remaining maturities of 397 calendar
days or less.
- Repurchase agreements with respect to any of the foregoing
obligations.
- Forward purchase arrangements committing the Fund to purchase any of
the foregoing obligations at an agreed upon price and future date.
By limiting the maturity of its investments as described above, the
Fund seeks to lessen the changes in the value of its assets caused by market
factors. The Fund intends to maintain a constant net asset value of $1.00 per
share, but there can be no assurance it will be able to do so.
U.S. Government obligations are bills, certificates of indebtedness,
notes and bonds issued or guaranteed as to principal or interest by the United
States or by agencies or authorities controlled or supervised by and acting as
instrumentalities of the U.S. Government established under the authority granted
by Congress, including, but not limited to, the Government National Mortgage
Association, the Export-Import Bank, the Student Loan Marketing Association, the
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U.S. Postal Service, the Tennessee Valley Authority, the Bank for Cooperatives,
the Farmers Home Administration, the Federal Home Loan Bank, the Federal
Financing Bank, the Federal Intermediate Credit Banks, the Federal Land Banks,
the Farm Credit Banks and the Federal National Mortgage Association. Some
obligations of U.S. Government agencies, authorities and other instrumentalities
are supported by the full faith and credit of the U.S. Treasury, such as
securities of the Government National Mortgage Association and the Export-Import
Bank; others by the right of the issuer to borrow from the Treasury, such as
securities of the Student Loan Marketing Association, the Federal Financing Bank
and the U.S. Postal Service; and others only by the credit of the issuing
agency, authority or other instrumentality, such as securities of the Federal
Home Loan Bank and the Federal National Mortgage Association.
Securities issued or guaranteed as to principal and interest by the
United States Government may also be acquired in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. Such notes and bonds are held
in custody by a bank on behalf of the owners. These custodial receipts are
known by various names, including "Treasury Receipts," "Treasury Investment
Growth Receipts" ("TIGR's") and "Certificates of Accrual on Treasury Securities"
("CATS"). The Fund may also invest in separately traded principal and interest
components of securities issued or guaranteed by the United States Treasury.
The principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
Custodial receipts (including Treasury Receipts, TIGR's and CATS) and
STRIPS are sold on a yield basis which represents a compounded rate of return
(bond equivalent yield). The amount of discount therefore depends upon the
maturity of the custodial receipt or STRIP--the longer the maturity the deeper
the discount. Certain of these instruments are available in maturities as long
as thirty years, but the Fund will purchase custodial receipts and STRIPS only
where the time remaining to maturity does not exceed one year. Although these
instruments provide certainty as to the amount and timing of cash flows, the
rate of return on a custodial receipt or STRIP is guaranteed only if it is held
to maturity. There is no income (or reinvestment decision) between the purchase
date and maturity inasmuch as each custodial receipt or STRIP represents a
single interest (coupon) or principal component of an underlying U.S. Treasury
obligation, payable at maturity. A secondary market exists for custodial
receipts and STRIPS, and such instruments are generally thought to be liquid.
Variable amount master demand notes refer to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
They allow the investment of fluctuating amounts by the Fund at varying market
rates of interest pursuant to direct arrangements between the Fund, as lender,
and the borrower. Variable amount master demand notes permit a series of short-
term borrowings under a single note. The lender has the right to increase the
amount under the note at any time up to the full amount provided by the note
agreement. Both the lender and the borrower have the right to reduce the amount
of outstanding indebtedness at any time. Because variable amount master demand
notes are direct lending
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arrangements between the lender and borrower, it is not generally contemplated
that such instruments will be traded and there is no secondary market for the
notes. Typically, agreements relating to such notes provide that the lender
shall not sell or otherwise transfer the note without the borrower's consent.
Thus, variable amount master demand notes are illiquid assets. Such notes
provide that the interest rate on the amount outstanding varies on a daily basis
depending upon a stated short-term interest rate barometer. The Fund's
investment adviser will monitor the creditworthiness of the borrower throughout
the term of the variable amount master demand note.
Repurchase agreements are agreements by which the Fund purchases a
security and obtains a simultaneous commitment from the seller (a member bank of
the Federal Reserve System or, if permitted by law or regulation and if the
Board of Directors of the Fund has evaluated its creditworthiness through
adoption of standards of review or otherwise, a securities dealer) to repurchase
the security at an agreed upon price and date. The resale price is in excess of
the purchase price and reflects an agreed upon market rate unrelated to the
coupon rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash. While the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the United States
Government, the obligation of the seller is not guaranteed by the U.S.
Government. See "Risks of Investing in the Fund."
Forward commitments are arrangements by which the Fund agrees to
purchase a security at a fixed price on a specified future date. Delivery of
and payment for the security normally takes place 15 to 45 days after the date
of the commitment. Such arrangements might be entered into, for example, when
the Fund anticipates a decline in the yield of securities of a certain issuer
and is able to obtain a higher yield by committing currently to purchase such
securities to be issued at a later date. The Fund may enter into forward
commitments if it holds, and maintains until the settlement date in a segregated
account, cash or high-grade, short-term debt obligations in an amount sufficient
to meet the purchase price. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Fund's other
assets. Although the Fund generally enters into forward commitments with the
intention of acquiring the security for its portfolio, the Fund may dispose of a
commitment prior to settlement if its investment adviser deems it appropriate to
do so. No more than 5% of the Fund's total assets may be subject to forward
commitments. Moreover, the Fund will not enter into forward commitments if and
to the extent such investments would, as determined by the Fund's investment
adviser, materially increase the risk of a significant deviation in the Fund's
net asset value per share. See "Amortized Cost Method of Portfolio Valuation"
in the Statement of Additional Information.
The Fund may also enter into reverse repurchase agreements with
respect to any of the foregoing obligations. Reverse repurchase agreements are
the counterparts of repurchase agreements, by which the Fund sells a security
and agrees to repurchase the security from the buyer at an agreed upon price and
future date. Because certain of the incidents of ownership of the security are
retained by the Fund, reverse repurchase agreements may be considered a form of
borrowing by the Fund from the buyer, collateralized by the security. The Fund
uses the proceeds of a reverse repurchase agreement to purchase other money
market securities either maturing, or under an agreement to resell, at a date
simultaneous with or prior to the expiration of the reverse
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repurchase agreement. The Fund utilizes reverse repurchase agreements when the
interest income to be earned from investment of the proceeds of the reverse
repurchase transaction exceeds the interest expense of the transaction.
ILLIQUID SECURITIES AND RULE 144A PAPER--The Fund is permitted to
invest up to 10% of its net assets in illiquid investments. See "Investment
Restrictions," below. An investment is generally deemed to be "illiquid" if it
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the investment company is valuing the
investment. "Restricted securities" are securities which were originally sold
in private placements and which have not been registered under the Securities
Act of 1933 (the "1933 Act"). Such securities generally have been considered
illiquid by the staff of the Securities and Exchange Commission (the "SEC"),
since such securities may be resold only subject to statutory restrictions and
delays or if registered under the 1933 Act.
The SEC has acknowledged, however, that a market exists for certain
restricted securities (for example, securities qualifying for resale to certain
"qualified institutional buyers" pursuant to Rule 144A under the 1933 Act).
Additionally, Advantus Capital and the Fund believe that a similar market exists
for commercial paper issued pursuant to the private placement exemption of
Section 4(2) of the 1933 Act. The Fund may invest without limitation in these
forms of restricted securities if such securities are deemed by Advantus Capital
to be liquid in accordance with standards established by the Fund's Board of
Directors. Under these guidelines, Advantus Capital must consider (a) the
frequency of trades and quotes for the security, (b) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). At the present time, it is not possible
to predict with accuracy how the markets for certain restricted securities will
develop. Investing in restricted securities could have the effect of increasing
the level of the Fund's illiquidity to the extent that qualified purchasers of
the securities become, for a time, uninterested in purchasing these securities.
See the Statement of Additional Information for more information on
the Fund's investment policies, including additional descriptions of money
market obligations and ratings.
PORTFOLIO TURNOVER
The Fund, consistent with its investment objective, attempts to
maximize yield through portfolio trading. This may involve selling portfolio
instruments and purchasing different instruments to take advantage of
disparities of yields in different segments of the high grade money market or
among particular instruments within the same segment of the market. As a
result, the Fund may have significant portfolio turnover. There usually is no
brokerage commissions paid by the Fund for such purchases since such securities
are purchased on a net basis. Since securities with maturities of less than one
year are excluded from required portfolio turnover rate calculations, the Fund's
portfolio turnover rate for reporting purposes is zero.
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INVESTMENT RESTRICTIONS
The Fund has certain investment restrictions, set forth in their
entirety in the Statement of Additional Information, some of which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the outstanding shares of the Fund. The Fund will not:
- Purchase any security (other than securities issued or guaranteed by
the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in
securities of a single issuer.
- Purchase any security if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of issuers conducting
their principal business activities in a single industry; provided that (a)
telephone, gas, and electric public utilities are each regarded as separate
industries and (b) United States banks, savings and loan associations,
savings banks, and finance companies are each regarded as separate
industries for the purpose of this limitation. There are no limitations
with respect to the concentration of investments in securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, or certificates of deposit and bankers acceptances of
United States banks or their domestic branches.
- Make short sales except short sales against the box where it owns
the securities sold or, by virtue of ownership of other securities, it has
the right to obtain without payment of further consideration, securities
equivalent in kind and amount to those sold, and only to the extent that
the Fund's short positions will not at the time of any short sale aggregate
in total sale prices more than 10% of its total assets.
- Borrow money or enter into reverse repurchase agreements in excess
of 5% of its net assets and, with respect to borrowing money, only as a
temporary measure for extraordinary or emergency purposes.
- Invest more than 5% of its total assets in securities of businesses
(including predecessors) less than three years old.
- Enter into repurchase agreements maturing in more than seven days,
purchase certificates of deposit of banks and savings and loan associations
which at the date of the investment have total assets (as of the date of
their most recent annual financial statements) of less than $2 billion,
purchase variable amount master demand notes, or invest in any other
illiquid assets, if such investments taken together exceed 10% of the
Fund's net assets (this restriction is not fundamental).
RISKS OF INVESTING IN THE FUND
As with any money market fund, the value of the securities in the
Fund's portfolio can be expected to vary inversely to changes in prevailing
interest rates, with the amount of such variation depending primarily on the
period of time remaining to maturity of the security. Longer-
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term obligations may fluctuate more in value than shorter-term obligations. If
the security is held to maturity, no gain or loss will be realized as a result
of interest rate fluctuations, although the day-to-day valuation of the
portfolio could fluctuate which would affect the amounts of net income available
for distribution to shareholders.
All of the Fund's investments will mature in 397 calendar days or less
from the date of acquisition by the Fund. By limiting the maturity of its
investments, the Fund seeks to lessen the changes in the value of its assets
caused by market factors. However, substantial redemptions or revised
evaluations of the issuer of portfolio securities could require the Fund to sell
portfolio securities at a time when a sale might not otherwise be favorable, and
thereby decrease the value of the Fund's assets.
Obligations of Canadian chartered banks, London branches of United
States banks, and U.S. branches and agencies of foreign banks may involve
somewhat greater opportunity for income than the other money market instruments
in which the Fund invests, but may also involve investment risks in addition to
any risks associated with direct obligations of domestic banks. These
additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income payable on such
obligations, the possible seizure or nationalization of foreign deposits, the
possible establishment of exchange controls or the adoption of other
governmental restrictions, as well as market and other factors which may affect
the market for or the liquidity of such obligations. Generally, Canadian
chartered banks, London branches of U.S. banks, and U.S. branches and agencies
of foreign banks are subject to fewer U.S. regulatory restrictions than those
applicable to domestic banks, and London branches of U.S. banks may be subject
to less stringent reserve requirements than domestic branches. Canadian
chartered banks, U.S. branches and agencies of foreign banks, and London
branches of U.S. banks may provide less public information than, and may not be
subject to the same accounting, auditing and financial record-keeping standards
as, domestic banks. The Fund will not invest more than a total of 25% of its
total assets in obligations of Canadian chartered banks, London branches of
United States banks, and U.S. branches and agencies of foreign banks.
Repurchase agreements involve the risk that the seller may fail to
repurchase the underlying security. In such event, the Fund would attempt to
dispose of the underlying security in the market or would hold the underlying
security until maturity. However, in the case of a repurchase agreement
construed by the courts as a collateralized loan, the Fund may be subject to
various delays and risks of loss in attempting to dispose of the underlying
security, including (a) possible declines in the value of the underlying
security during the period while the Fund seeks to enforce its rights thereto,
and (b) possible reduced levels of income and lack of access to income during
this period.
The use of reverse repurchase agreements by the Fund allows it to
leverage its portfolio. While leveraging offers the potential for increased
yield, it magnifies the risks associated with the Fund's investments and reduces
the stability of the Fund's net asset value per share. To limit this risk, the
Fund will not enter into a reverse repurchase agreement if all such
transactions, together with any money borrowed, exceed 5% of the Fund's net
assets. Moreover, the Fund will not enter into reverse repurchase agreements if
and to the extent such transactions would, as determined by the Fund's
investment adviser, materially increase the risk of a significant
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deviation in the Fund's net asset value per share. See "Amortized Cost Method
of Portfolio Valuation" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund's investment adviser is Advantus Capital Management, Inc.
("Advantus Capital"). Advantus Capital commenced its business in June 1994, and
provides investment advisory services to eight other mutual funds (Advantus
Horizon Fund, Inc., Advantus Spectrum Fund, Inc., Advantus Money Market Fund,
Inc., Advantus Mortgage Securities Fund, Inc., Advantus Bond Fund, Inc.,
Advantus Cornerstone Fund, Inc., Advantus Enterprise Fund, Inc. and Advantus
International Balanced Fund, Inc.) and various private accounts. Advantus
Capital is a wholly-owned subsidiary of MIMLIC Asset Management Company ("MIMLIC
Management") which, prior to March 1, 1995, served as investment adviser to the
Fund. The same portfolio manager and other personnel who previously provided
investment advisory services to the Fund through MIMLIC Management continue to
provide the same services through Advantus Capital. MIMLIC Management commenced
its current business in January, 1984, and provides investment advisory services
to one other mutual fund (MIMLIC Series Fund, Inc.), Minnesota Mutual and to
various other private accounts. MIMLIC Management is a subsidiary of Minnesota
Mutual. Minnesota Mutual was organized in 1880 and has assets of more than $9.8
billion. The address of the Fund, Advantus Capital, MIMLIC Management, MIMLIC
Sales, and Minnesota Mutual is 400 Robert Street North, St. Paul, Minnesota
55101.
Advantus Capital selects and reviews the Fund's investments, and
provides executive and other personnel for the management of the Fund. The
Fund's board of directors supervises the affairs of the Fund as conducted by
Advantus Capital.
The name and title of the portfolio manager employed by Advantus
Capital who is primarily responsible for the day-to-day management of the Fund's
portfolio, the length of time employed in that position, and other business
experience during the past five years are set forth below:
<TABLE>
<CAPTION>
Portfolio Manager Primary Portfolio Business Experience During
and Title Manager Since Past Five Years
- ----------------- ----------------- --------------------------
<S> <C> <C>
Wayne R. Schmidt May 1, 1991 Vice President of Advantus Capital;
Vice President and Investment Officer of MIMLIC Management;
Portfolio Manager
</TABLE>
Because shares of the Fund will be sold only to the Advisory Clients,
and may be purchased only with funds managed by the Qualifying Advisers for the
Advisory Clients, the Fund pays no advisory fee to Advantus Capital. Advantus
Capital, under the Advisory Agreement with the Fund, acts as investment adviser
and manager for the Fund, and furnishes the Fund office space and all necessary
office facilities, equipment and personnel for servicing the investments of the
Fund. In addition, Advantus Capital pays all expenses of the Fund, except
custodian fees,
-11-
<PAGE>
brokerage commissions and those expenses expressly assumed by the Fund's
underwriter, including the salaries and fees of all officers and directors of
the Fund, auditing and accounting fees, legal fees, and the Fund's transfer
agent, dividend disbursing agent and redemption agent expenses. Minnesota
Mutual acts as the Fund's transfer agent, dividend disbursing agent and
redemption agent.
For the fiscal year ended September 30, 1995, the expenses paid by
the Fund, as a percentage of average daily net assets, were .10%.
MIMLIC Sales, the underwriter of the Fund's shares, bears all
promotional expenses in connection with the distribution of the Fund's shares,
including paying for prospectuses and statements of additional information for
new shareholders, shareholder reports for new shareholders and the costs of
sales literature.
PURCHASE OF FUND SHARES
GENERALLY
Shares of the Fund may be purchased only with funds of the Advisory
Clients managed by the Qualifying Advisers. The purchase of shares of the Fund
will therefore be initiated only by the Qualifying Advisers in accordance with
the terms of the investment advisory agreements with the Advisory Clients. The
Advisory Clients, under the terms of their respective advisory agreements with
the Qualifying Advisers, have authority to instruct the Qualifying Advisers to
refrain from purchasing shares of the Fund.
The Fund's shares may be purchased from MIMLIC Sales (the underwriter
of the Fund's shares) at a price equal to their asset value, which will normally
be constant at $1.00 per share. There is no assurance that the Fund can
maintain the $1.00 per share value. There is no sales charge. MIMLIC Sales
reserves the right to reject any purchase order.
Certificates representing shares purchased are not ordinarily issued.
However, shareholders will receive written confirmation of their purchases.
Shareholders will have the same rights of ownership with respect to such shares
as if certificates had been issued. A shareholder may receive a certificate
representing shares purchased by written request to MIMLIC Sales. No charge is
made for any certificate issued.
MINIMUM INVESTMENTS
There is no minimum amount required for either initial or subsequent
investments.
PUBLIC OFFERING PRICE
The public offering price of Fund shares is equal to the Fund's net
asset value per share next to be determined after an order is received by the
Fund and becomes effective. The Fund's net asset value per share is determined
by adding the current value of all securities and all other assets, subtracting
liabilities, and dividing the remainder by the number of shares outstanding.
-12-
<PAGE>
The net asset value of the Fund's shares is determined once daily,
after the declaration of daily dividend, as of the primary closing time for
business on the New York Stock Exchange (as of the date of this Prospectus the
primary close of trading is 3:00 p.m. (Central Time), but this time may be
changed), on each day, Monday through Friday, except (i) days on which changes
in the value of the Fund's portfolio securities will not materially affect the
current net asset value of Fund shares, (ii) days during which no Fund shares
are tendered for redemption and no order to purchase or sell Fund shares is
received by the Fund and (iii) customary national business holidays on which the
New York Stock Exchange is closed for trading (as of the date hereof, New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day).
The Fund values its portfolio investments at amortized cost in
accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended.
See "Amortized Cost Method of Portfolio Valuation" in the Statement of
Additional Information.
REDEMPTION OF FUND SHARES
Registered holders of Fund shares may redeem their shares without any
charge at the per share net asset value (which will usually be $1.00) next
determined, at the time described in "Purchase of Fund Shares - Public Offering
Price," following receipt by the Fund (at its mailing address listed on the back
cover page) of proper notice of redemption in accordance with the procedures set
forth below. A check will normally be sent on the next business day but not
later than the seventh day following receipt of such notice. If all of the
shares in an account are redeemed, dividends accrued and unpaid at the date of
redemption will be paid when the redemption proceeds are paid.
The Qualifying Advisers, acting in accordance with the terms of the
investment advisory agreements with the Advisory Clients, will ordinarily
initiate all redemption requests with respect to shares of the Fund. The
Advisory Clients may redeem their shares directly, however, by writing to the
Fund. Such requests should be signed exactly as the account registration
appears on the account statement. If the redemption proceeds are less than
$25,000 and are to be paid to the registered holder and sent to the address of
record for that account, or if the written redemption request is from pre-
authorized trustees of plans, trusts and other tax-exempt organizations and the
redemption proceeds are less than $25,000, no signature guarantee is required.
However, if the redemption proceeds are $25,000 or more or are to be paid to
someone other than the registered holder, or are to be mailed to an address
other than the registered shareholder's address, or the shares are to be
transferred, or the request does not come from such a plan trustee, the owner's
signature must be guaranteed by an eligible guarantor institution, including (1)
national or state banks, savings associations, savings and loan associations,
trust companies, savings banks, industrial loan companies and credit unions; (2)
national securities exchanges, registered securities associations and clearing
agencies; (3) securities broker-dealers which are members of a national
securities exchange or a clearing agency or which have minimum net capital of
$100,000; or (4) institutions that participate in the Securities Transfer Agent
Medallion Program ("STAMP") or other recognized signature medallion program. A
signature guarantee is also required in connection with any redemption if,
within the 30-day period prior to
-13-
<PAGE>
receipt of the redemption request, instructions have been received to change the
shareholder's address of record. The Fund reserves the right to require
signature guarantees on all redemptions.
DIVIDENDS
Shareholders begin earning income on the day following investment of
their funds. The net income of the Fund is determined as of the primary close
of business on the New York Stock Exchange (the "Exchange") on each day on which
the Exchange is open, and is immediately declared payable to shareholders of
record as of the close of business on the preceding day. The Fund's net income
for Saturdays, Sundays and other days on which the Exchange is closed will be
declared as dividends on the next business day. Net income includes (i) all
earned interest on portfolio investments of the Fund, plus or minus (ii) all
gains and losses on portfolio investments of the Fund, less (iii) provision for
the expenses of the Fund.
The net income of the Fund is declared as dividends daily, and is paid
on or about the last day of each month. The net income is automatically
reinvested in additional shares of the Fund (valued at net asset value on the
date of such payment, normally $1.00 per share) unless a shareholder
specifically requests the Fund in writing that the payment be made in cash.
Shareholders who redeem all of their shares at any time during the month are
paid all dividends through the date of redemption together with the proceeds of
the redemption. Shareholders who redeem less than all of their shares are paid
the proceeds of the redemption in cash; dividends with respect to the redeemed
shares are paid on the normal monthly payment date in additional shares or cash,
as the shareholder has elected.
TAXES
The following is a general summary of certain federal tax
considerations affecting the Fund and its shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or its
shareholders, and the discussion here is not intended as a substitute for
careful tax planning.
During the fiscal year ended September 30, 1995, the Fund fulfilled,
and the Fund intends to continue to fulfill, the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, the Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
Distributions from the Fund representing its interest income and any
short-term capital gains will be taxable to shareholders as ordinary income,
whether they are received by shareholders in cash or reinvested in additional
shares of the Fund. Such distributions will not qualify for the 70% dividend
received deduction for corporations. The Fund does not expect to realize net
long-term capital gains or losses.
Before investing in the Fund, an investor should consult a tax adviser
concerning the consequences of any local and state tax laws, and of any
retirement plan offering tax benefits.
-14-
<PAGE>
Fund shareholders receive an annual statement detailing federal tax
information. Distributions by the Fund, including the amount of any
redemptions, will be reported to Fund shareholders in such annual statement and
to the Internal Revenue Service to the extent required by the Code. Such
distributions received by a Fund shareholder are ordinarily not subject to
withholding of federal income tax. However, a withholding of such tax at a rate
of 31% may be made by reason of the events specified in Section 3406 of the Code
and the regulations promulgated thereunder, including the failure of a Fund
shareholder to supply the Fund or its agent with such shareholder's taxpayer
identification number. Such withholding may also apply to a Fund shareholder
who is otherwise exempt from such withholding if such shareholder fails to
properly document its status as an exempt recipient.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, the directors of the Fund owe the Fund and its
shareholders certain fiduciary duties, including a duty of "loyalty" (to act in
good faith and in the best interests of the Fund) and a duty of "care" (to act
with the care that a reasonably prudent person would exercise under similar
circumstances). In February 1987, Minnesota enacted legislation that authorizes
corporations to eliminate the personal monetary liability of directors to the
corporation or its shareholders for breach of the duty of "care." Directors of
corporations adopting such a limitation provision still owe the corporation a
duty of "care" but under most circumstances cannot be sued for monetary damages
for breaches of such duty. The Fund's Articles of Incorporation limit the
liability of directors to the fullest extent permitted by law.
Directors of the Fund remain fully liable (including possibly for monetary
damages) for breaches of their duty of "loyalty", for self-dealing, for bad
faith and intentional misconduct, and for violations of the Securities Act of
1933, the Securities Exchange Act of 1934, and certain provisions of Minnesota
corporation law. Additionally, the Investment Company Act of 1940 prohibits
limiting a Fund director's liability for gross negligence and reckless
misconduct, and it is uncertain whether and to what extent directors remain
liable for monetary damages for violations of the Investment Company Act.
GENERAL INFORMATION
The Fund was organized in January 1987 as a Minnesota corporation.
The Fund's authorized capital stock is of only one class, common shares, with a
par value of $.01 per share. All shares of the Fund are nonassessable, fully
transferable and have one vote and equal rights to share in dividends and assets
of the Fund. The shares of the Fund possess no preemptive or conversion rights.
Cumulative voting is not authorized for the Fund. This means that the holders
of more than 50% of the shares of the Fund voting for the election of directors
of the Fund can elect 100% of the directors of the Fund if they choose to do so,
and in such event the holders of the remaining shares of the Fund will be unable
to elect any directors of the Fund.
On November 30, 1995, there were 10,783,369 Fund shares outstanding.
As of November 30, 1995 the following persons held of record 25% or more of the
outstanding shares of the Fund:
-15-
<PAGE>
Number of Percent of
Name of Shareholder Shares Class
- ------------------- --------- ----------
Minnesota Mutual and Subsidiaries 9,541,917 88.5%
Due to their ownership of more than 25% of the outstanding shares of
the Fund, the shareholders identified above may be said to control the Fund.
Minnesota Mutual, Advantus Capital, MIMLIC Management and MIMLIC Sales are all
organized as Minnesota corporations.
The Fund does not hold annual or periodically scheduled regular
meetings of shareholders. Regular and special shareholder meetings are held
only at such times and with such frequency as required by law. Minnesota
corporation law does not require an annual meeting; instead, it provides for the
Board of Directors to convene shareholder meetings when it deems appropriate.
In addition, if a regular meeting of shareholders has not been held during the
immediately preceding fifteen months, a shareholder or shareholders holding 3
percent or more of the voting shares of the Fund may demand a regular meeting of
shareholders of the Fund by written notice of demand given to the chief
executive officer or the chief financial officer of the Fund. Within thirty
days after receipt of the demand by one of those officers, the Board of
Directors shall cause a regular meeting of shareholders to be called and held no
later than ninety days after receipt of the demand, all at the expense of the
Fund. Additionally, the Investment Company Act of 1940 requires shareholder
votes for all amendments to fundamental investment policies and restrictions and
for all investment advisory contracts and amendments thereto.
The Fund sends to its shareholders a six-month unaudited and annual
audited financial report of the Fund, which includes a list of investment
securities held by the Fund. Shareholder inquires should be directed to the
Underwriter or the Fund at the telephone number or mailing address listed on the
cover of this Prospectus.
COUNSEL AND INDEPENDENT AUDITORS
The firm of Dorsey & Whitney P.L.L.P., 220 South Sixth Street,
Minneapolis, Minnesota 55402-1498, is the General Counsel for the Fund. KPMG
Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh Street, Minneapolis,
Minnesota 55402, are the independent auditors for the Fund.
CUSTODIAN
Bankers Trust Company, 280 Park Avenue, New York, New York 10017 acts
as custodian of the securities held by the Fund.
-16-
<PAGE>
No dealer, sales representative or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus (and/or in the Statement of Additional Information referred to on the
cover page of this Prospectus), and if given or made, such information or
representations must not be relied upon as having been authorized by the Fund or
MIMLIC Sales. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation.
INVESTMENT ADVISER INDEPENDENT AUDITORS
ADVANTUS CAPITAL MANAGEMENT, KPMG PEAT MARWICK LLP
INC.
400 Robert Street North
St. Paul, Minnesota 55101
UNDERWRITER CUSTODIAN
MIMLIC SALES CORPORATION BANKERS TRUST COMPANY
400 Robert Street North 280 Park Avenue
St. Paul, Minnesota 55101 New York, New York 10017
(612) 228-4833
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
400 Robert Street North
St. Paul, Minnesota 55101
(612) 298-4985
GENERAL COUNSEL
DORSEY & WHITNEY P.L.L.P.
Prospectus dated February 1, 1996
<PAGE>
MIMLIC CASH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated February 1,
1996 and should be read in conjunction therewith. A copy of the Prospectus
may be obtained from MIMLIC Sales Corporation, 400 Robert Street North, St.
Paul, Minnesota 55101.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <C>
Investment Objectives and Policies . . . . . . . . . . . . . . . 1
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . 2
Commercial Paper and Bond Ratings. . . . . . . . . . . . . . . . 3
A-1 and P-1 Commercial Paper Ratings. . . . . . . . . . . . 4
Bond Ratings. . . . . . . . . . . . . . . . . . . . . . . . 4
Directors and Executive Officers . . . . . . . . . . . . . . . . 5
Director Liability . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Advisory and Other Services . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Control and Management of Advantus Capital and MIMLIC Sales 7
Investment Advisory Agreement . . . . . . . . . . . . . . . 8
Distribution Agreement. . . . . . . . . . . . . . . . . . . 9
Amortized Cost Method of Portfolio Valuation . . . . . . . . . . 9
Portfolio Transactions and Allocation of Brokerage . . . . . . . 10
Calculation of Performance Data. . . . . . . . . . . . . . . . . 12
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . 13
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . 14
Open Accounts . . . . . . . . . . . . . . . . . . . . . . . 14
Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Distributions and Tax Status . . . . . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-i-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of MIMLIC Cash Fund, Inc. (the
"Fund") are summarized on the front page of the Prospectus and in the text of
the Prospectus following the caption "Investment Objectives and Policies." The
types of investments that the Fund will make are described in the Prospectus. A
more detailed description of certain types of obligations in which the Fund
invests is as follows:
CERTIFICATES OF DEPOSIT --are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable.
BANKER'S ACCEPTANCES --are short-term credit instruments issued by
corporations to finance the import, export, transfer or storage of goods. They
are termed "accepted" when a bank guarantees their payment at maturity. These
instruments reflect the obligations of both the bank and drawer to pay the face
amount of the instrument at maturity.
COMMERCIAL PAPER --refers to promissory notes issued by corporations
to finance their short-term credit needs.
REPURCHASE AGREEMENTS --are agreements by which the Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. The Fund's custodian, or a duly
appointed subcustodian, will hold the securities underlying any repurchase
agreement in a segregated account or such securities may be part of the Federal
Reserve Book Entry System. The market value of the collateral underlying the
repurchase agreement will be determined on each business day. If at any time
the market value of the collateral falls below the repurchase price of the
repurchase agreement (including any accrued interest), the Fund will promptly
receive additional collateral, so that the total collateral is in an amount at
least equal to the repurchase price plus accrued interest.
CORPORATE OBLIGATIONS --include bonds and notes issued by corporations
in order to finance longer term credit needs.
The Fund, consistent with its investment objective, attempts to
maximize yield through portfolio trading. This may involve selling portfolio
instruments and purchasing different instruments to take advantage of
disparities of yields in different segments of the high grade money market or
among particular instruments within the same segment of the market. Since the
Fund's assets are invested in securities with short maturities and the Fund
manages its portfolio as described above, the Fund's portfolio of money market
instruments turns over several times a year. However, this does not generally
increase the Fund's costs, since brokerage commissions as such are not usually
paid in connection with the purchase or sale of the instruments in which the
Fund invests. Rather, the Fund pays a spread between the bid and asked prices.
See "Portfolio Transactions and Allocation of Brokerage."
-1-
<PAGE>
INVESTMENT RESTRICTIONS
Except as otherwise noted, the investment restrictions set forth
below, certain of which are described in the Prospectus, are "fundamental"
policies of the Fund and, accordingly, may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. A
"majority" of the outstanding shares of the Fund means the lesser of (i) 67% of
the shares of the Fund represented at the meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares. An investment restriction which is not fundamental may be changed by
vote of the Board of Directors without further shareholder approval. Except as
otherwise noted, each of the investment restrictions below is fundamental. The
Fund will not:
(1) Purchase any security (other than securities issued or guaranteed by
the United States Government, its agencies or instrumentalities) if,
as a result, more than 5% of the Fund's total assets would be invested
in securities of a single issuer;
(2) Purchase any security if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of issuers conducting
their principal business activities in a single industry; provided
that (a) telephone, gas, and electric public utilities are each
regarded as separate industries and (b) United States banks, savings
and loan associations, savings banks and finance companies are each
regarded as separate industries for the purpose of this limitation.
There are no limitations with respect to the concentration of
investments in securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, or certificates of
deposit and bankers acceptances of United States banks or their
domestic branches;
(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales
of securities); or make short sales except short sales against the box
where it owns the securities sold or, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold,
and only to the extent that the Fund's short positions will not at the
time of any short sale aggregate in total sale prices more than 10% of
its total assets;
(4) Acquire more than 10% of any class of securities of an issuer (taking
all preferred stock issues of an issuer as a single class and all debt
issues of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer;
(5) Borrow money or enter into reverse repurchase agreements in excess of
5% of its net assets and, with respect to borrowing money, only from
banks and only as a temporary measure for extraordinary or emergency
purposes;
(6) Mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any assets of the Fund;
-2-
<PAGE>
(7) Invest more than 5% of its total assets in securities of businesses
(including predecessors) less than three years old;
(8) Purchase or retain securities of any company if officers and directors
of the Fund or of its investment adviser who individually own more
than 1/2 of 1% of the shares or securities of that company, together
own more than 5%;
(9) Make loans, except by purchase of bonds, debentures, commercial paper,
corporate notes, repurchase agreements and similar evidences of
indebtedness, which are a part of an issue to the public or to
financial institutions;
(10) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, real estate or interests in real estate which are not
readily marketable, commodities or commodity contracts. (This does
not prevent the Fund from purchasing securities of companies investing
in the foregoing.);
(11) Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the disposition of
portfolio securities;
(12) Make investments for the purpose of exercising control or management;
(13) Participate on a joint or joint and several basis in any trading
account in securities;
(14) Write or purchase put or call options, or combinations thereof;
(15) Enter into repurchase agreements maturing in more than seven days,
purchase certificates of deposit of banks and savings and loan
associations which at the date of the investment have total assets (as
of the date of their most recent annual financial statements) of less
than $2 billion, purchase variable amount master demand notes, or
invest in any other illiquid assets, if such investments taken
together exceed 10% of the Fund's net assets (This restriction is non-
fundamental.); or
(16) Invest in the securities of other investment companies, with an
aggregate value in excess of 5% of the Fund's total assets, except
securities acquired as a result of a merger, consolidation or
acquisition of assets.
Any investment policy or restriction which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or utilization of assets and results therefrom.
COMMERCIAL PAPER AND BOND RATINGS
As is described in the Prospectus, the Fund's investments in high
quality commercial paper and corporate obligations are limited by reference to
the applicable Standard & Poor's and Moody's ratings. These ratings are
described as follows:
-3-
<PAGE>
A-1 AND P-1 COMMERCIAL PAPER RATINGS. The rating A-1 is the highest
rating assigned by Standard & Poor's Corporation ("S&P") to commercial paper
which is considered by S&P to have the following characteristics:
Liquidity ratios of the issuer are adequate to meet cash
redemptions. Long-term senior debt is rated "A" or better. The
issuer has access to at least two additional channels of borrowing.
Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry.
The reliability and quality of management are unquestioned.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors
considered by Moody's in assigning the ratings are the following:
(1) evaluation of the management of the issuer, (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations.
BOND RATINGS. Moody's describes its three highest ratings for
corporate bonds as follows:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.
Standard & Poor's describes its three highest ratings for corporate
bonds as follows:
-4-
<PAGE>
AAA. Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA. Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A. Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of
directors and executive officers of the Fund are given below:
<TABLE>
<CAPTION>
Position with Principal Occupation and other
Name and Address the Fund Affiliations (past 5 years)
- ---------------- ------------- ------------------------------
<S> <C> <C>
Paul H. Gooding* President Vice President and Treasurer of
Advantus Capital and Director Minnesota Mutual; President and
Management, Inc. Director of Advantus Capital;
400 Robert Street North President, Treasurer and Director
St. Paul, Minnesota 55101 of MIMLIC Management
Frederick P. Feuerherm* Treasurer Second Vice President of Minnesota
The Minnesota Mutual and Director Mutual; Vice President and Assistant
Life Insurance Company Secretary of MIMLIC Management
400 Robert Street North
St. Paul, Minnesota 55101
Ralph D. Ebbott Director Retired, Vice President and Treasurer
409 Birchwood Avenue of Minnesota Mining and Manufacturing
White Bear Lake, Company (tape, adhesive, photographic,
Minnesota 55110 and electrical products) through June
1989
Charles E. Arner Director Retired, Vice Chairman of The First
E-1218 First National National Bank of Saint Paul from
Bank Building November 1983 through June 1984;
332 Minnesota Street Chairman and Chief Executive Officer
St. Paul, Minnesota 55101 of The First National Bank of Saint Paul
from October 1980 through November
1983
-5-
<PAGE>
Ellen S. Berscheid Director Regents' Professor of Psychology at the
University of Minnesota University of Minnesota
N309 Elliott Hall
Minneapolis, Minnesota 55455
Bardea C. Huppert* Vice President President of MIMLIC Sales;
MIMLIC Sales Corporation Second Vice President of
400 Robert Street North Minnesota Mutual
St. Paul, Minnesota 55101
Michael J. Radmer Secretary Partner with the law firm of
Dorsey & Whitney P.L.L.P. Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402
</TABLE>
- --------------------------
*Denotes directors and officers of the Fund who are "interested persons" (as
defined under the Investment Company Act of 1940) of the Fund, MIMLIC Asset
Management Company ("MIMLIC Management") or MIMLIC Sales Corporation ("MIMLIC
Sales").
- --------------------------
Legal fees and expenses are paid by Advantus Capital to the law firm of
which Michael J. Radmer is a partner. As of September 30, 1995, the officers
and directors of the Fund owned no shares of the Fund. The Fund does not pay
any compensation to any of its officers or directors. Advantus Capital,
however, pays certain fees to Directors who are not affiliated with Advantus
Capital or MIMLIC Management. Each Director of the Fund who is not affiliated
with Advantus Capital or MIMLIC Management is also a director of the other nine
investment companies of which Advantus Capital or MIMLIC Management is the
investment adviser (ten investment companies in total - the "Fund Complex").
Such Directors receive compensation in connection with all such investment
companies which, in the aggregate, is equal to $5,000 per year and $1,000 per
meeting attended (and reimbursement of travel expenses to attend directors'
meetings). The portion of such compensation borne by any investment company is
a PRO RATA portion based on the ratio that such investment company's total net
assets bears to the total net assets of the Fund Complex. Advantus Capital
bears the Fund's PRO RATA portion. During the fiscal year ended September 30,
1995, each Director not affiliated with Advantus Capital or MIMLIC Management
was compensated by Advantus Capital in accordance with the following table:
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Estimated from Advantus
Compensation Accrued Annual Capital and
Name of from Advantus as Part of Benefits Upon Fund Complex
Director Capital Fund Expenses Retirement Paid to Directors
- -------- ------- ------------- ---------- -----------------
<S> <C> <C> <C> <C>
Charles E. Arner $81.19 N/A N/A $9,000
Ellen S. Berscheid $81.19 N/A N/A $9,000
Ralph D. Ebbott $81.19 N/A N/A $9,000
</TABLE>
DIRECTOR LIABILITY
Under Minnesota law, the Board of Directors of the Fund owes certain
fiduciary duties to the Fund and to its shareholders. Minnesota law provides
that a director "shall discharge the duties of the position of director in good
faith, in a manner the director reasonably believes to be in the best interest
of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances." Fiduciary duties of a
director of a Minnesota corporation include, therefore, both a duty of "loyalty"
(to act in good faith and act in a manner reasonably believed to be in the best
interests of the corporation) and a duty of "care"
-6-
<PAGE>
(to act with the care an ordinarily prudent person in a like position would
exercise under similar circumstances). Minnesota law also authorizes
corporations to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of the fiduciary
duty of "care." Minnesota law does not, however, permit a corporation to
eliminate or limit the liability of a director (i) for any breach of the
directors' duty of "loyalty" to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for authorizing a dividend, stock repurchase or
redemption or other distribution in violation of Minnesota law or for violation
of certain provisions of Minnesota securities laws, or (iv) for any transaction
from which the director derived an improper personal benefit. The Articles of
Incorporation of the Fund limit the liability of directors to the fullest extent
permitted by Minnesota statutes, except to the extent that such liability cannot
be limited as provided in the Investment Company Act of 1940 (which Act
prohibits any provisions which purport to limit the liability of directors
arising from such directors' willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their role as
directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers (including the liability of directors who serve as officers
for breach of their duties as officers). Minnesota law does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or rescissionary relief. Further, Minnesota law does not permit
elimination or limitation of a director's liability under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is uncertain whether and to
what extent the elimination of monetary liability would extend to violations of
duties imposed on directors by the Investment Company Act of 1940 and the rules
and regulations adopted under such Act.
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL
- -------
Advantus Capital Management, Inc. ("Advantus Capital") has been the
investment adviser and manager of the Fund since March 1, 1995. Prior to that
date the Fund's investment adviser was MIMLIC Asset Management Company ("MIMLIC
Management"). Advantus Capital is a wholly-owned subsidiary of MIMLIC
Management. The same portfolio manager and other personnel who previously
provided investment advisory services to the Fund through MIMLIC Management
continue to provide the same services through Advantus Capital. MIMLIC Sales
acts as the Fund's underwriter. Both Advantus Capital and MIMLIC Sales act as
such pursuant to written agreements that will be periodically considered for
approval by the directors or shareholders of the Fund. The address of both is
400 Robert Street North, St. Paul, Minnesota 55101.
CONTROL AND MANAGEMENT OF ADVANTUS CAPITAL AND MIMLIC SALES
- -----------------------------------------------------------
-7-
<PAGE>
Advantus Capital was incorporated in Minnesota in June, 1994, and is a
wholly-owned subsidiary of MIMLIC Management. MIMLIC Management is a subsidiary
of The Minnesota Mutual Life Insurance Company ("Minnesota Mutual"), which was
organized in 1880, and has assets of more than $9.8 billion. MIMLIC Sales is a
subsidiary of MIMLIC Management. Paul H. Gooding, President and a director of
the Fund, is President and a director of Advantus Capital and President,
Treasurer and a director of MIMLIC Management. Frederick P. Feuerherm,
Treasurer and a director of the Fund, is a Vice President and Assistant
Secretary of MIMLIC Management. Bardea C. Huppert, Vice President of the Fund,
is President of MIMLIC Sales. James P. Tatera, Senior Vice President and
Director of Advantus Capital, is also Vice President of MIMLIC Management.
INVESTMENT ADVISORY AGREEMENT
Advantus Capital acts as investment adviser and manager of the Fund
under an Investment Advisory Agreement (the "Advisory Agreement") dated March 1,
1995, and which was approved by shareholders on February 14, 1995. The Advisory
Agreement was last approved by the Board of Directors (including a majority of
the directors who are not parties to the contract, or interested persons of any
such party) on January 17, 1996. The Advisory Agreement will terminate
automatically in the event of its assignment. In addition, the Advisory
Agreement is terminable at any time, without penalty, by the Board of Directors
of the Fund or by vote of a majority of the Fund's outstanding voting securities
on not more than 60 days' written notice to Advantus Capital, and by Advantus
Capital on 60 days' written notice to the Fund. Unless sooner terminated, the
Advisory Agreement shall continue in effect for more than two years after its
execution only so long as such continuance is specifically approved at least
annually by either the Board of Directors of the Fund or by a vote of a majority
of the outstanding voting securities, provided that in either event such
continuance is also approved by the vote of a majority of the directors who are
not parties to the Advisory Agreement, or interested persons of such parties,
cast in person at a meeting called for the purpose of voting on such approval.
Shares of the Fund will be sold only to the Advisory Clients and may
be purchased only with funds managed by Advantus Capital, MIMLIC Management or
other affiliated investment advisers for the Advisory Clients. For that reason,
the Fund does not pay an advisory fee to Advantus Capital under the Advisory
Agreement. Advantus Capital, under the Advisory Agreement with the Fund, acts as
investment adviser and manager for the Fund, and furnishes the Fund office space
and all necessary office facilities, equipment and personnel for servicing the
investments of the Fund. In addition, Advantus Capital pays all expenses of the
Fund, except custodian fees, brokerage commissions (if any), and those expenses
expressly assumed by the Fund's underwriter, including the salaries and fees of
all officers and directors of the Fund, auditing and accounting fees, legal
fees, and the Fund's transfer agent, dividend disbursing agent and redemption
agent expenses. Minnesota Mutual acts as the Fund's transfer agent, dividend
disbursing agent and redemption agent.
MIMLIC Sales, the Fund's underwriter, bears all promotional expenses
in connection with the distribution of the Fund's shares, including paying for
prospectuses and statements of additional information for new shareholders, and
shareholder reports for new shareholders, and the costs of sales literature.
-8-
<PAGE>
DISTRIBUTION AGREEMENT
- ----------------------
On January 17, 1996, the Board of Directors (including a majority of
the directors who are not parties to the contract, or interested persons of any
such party) last approved the Distribution Agreement with MIMLIC Sales (the
"Distribution Agreement") dated February 25, 1987. The Distribution Agreement
may be terminated by the Fund or MIMLIC Sales at any time by the giving of 60
days' written notice, and terminates automatically in the event of its
assignment. Unless sooner terminated, the Distribution Agreement shall continue
in effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors of the Fund or by a vote of a majority of the outstanding voting
securities, provided that in either event such continuance is also approved by
the vote of a majority of the directors who are not parties to the Distribution
Agreement, or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval.
The Distribution Agreement requires MIMLIC Sales to pay all
advertising and promotional expenses in connection with the distribution of the
Fund's shares including paying for Prospectuses and Statements of Additional
Information (if any) for new shareholders, shareholder reports for new
shareholders, and the costs of sales literature.
In the Distribution Agreement, MIMLIC Sales undertakes to indemnify
the Fund against all costs of litigation and other legal proceedings, and
against any liability incurred by or imposed upon the Fund in any way arising
out of or in connection with the sale or distribution of the Fund's shares,
except to the extent that such liability is the result of information which was
obtainable by MIMLIC Sales only from persons affiliated with the Fund but not
with MIMLIC Sales.
AMORTIZED COST METHOD OF PORTFOLIO VALUATION
The Fund values its portfolio securities at amortized cost in
accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended.
This method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuations in interest rates on the market value of the instrument
and regardless of any unrealized capital gains or losses. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund computed by dividing the annualized daily
income of the Fund by the net asset value computed as described above may tend
to be higher than a like computation made by the Fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its securities.
Pursuant to Rule 2a-7, the Board of Directors of the Fund has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Fund and its shareholders to
maintain a stable net asset value per share by virtue of the amortized
-9-
<PAGE>
cost method of valuation. The Fund will continue to use this method only so
long as the Board of Directors believes that it fairly reflects the market-based
net asset value per share. In accordance with Rule 2a-7, the Board of Directors
has undertaken, as a particular responsibility within the overall duty of care
owed to the Fund's shareholders, to establish procedures reasonably designed,
taking into account current market conditions and the Fund's investment
objectives, to stabilize the Fund's net asset value per share at a single value.
These procedures include the periodic determination of any deviation of current
net asset value per share calculated using available market quotations from the
Fund's amortized cost price per share, the periodic review by the Board of the
amount of any such deviation and the method used to calculate any such
deviation, the maintenance of records of such determinations and the Board's
review thereof, the prompt consideration by the Board if any such deviation
exceeds 1/2 of 1%, and the taking of such remedial action by the Board as it
deems appropriate where it believes the extent of any such deviation may result
in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include redemptions in kind, selling
portfolio instruments prior to realizing capital gains or losses, shortening the
average portfolio maturity, withholding dividends or utilizing a net asset value
per share as determined by using available market quotations.
The Fund will, in further compliance with Rule 2a-7, maintain a
dollar-weighted average portfolio maturity not exceeding 90 days and will limit
its portfolio investments to those United States dollar-denominated instruments
which the Board determines present minimal credit risks and which are eligible
securities. The Fund will limit its investments in the securities of any one
issuer to no more than 5% of Fund assets and it will limit investment in
securities of less than the highest rated categories to 5% of Fund assets.
Investment in the securities of any issuer of less than the highest rated
categories will be limited to the greater of 1% of Fund assets or one million
dollars. In addition, the Fund will reassess promptly any security which is in
default or downgraded from its rating category to determine whether that
security then presents minimal credit risks and whether continuing to hold the
securities is in the best interests of the Fund. In addition, the Fund will
record, maintain, and preserve a written copy of the above-described procedures
and a written record of the Board's considerations and actions taken in
connection with the discharge of its above-described responsibilities.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Most transactions in portfolio securities are purchases from issuers
or dealers in money market instruments acting as principal. There usually are
no brokerage commissions paid by the Fund for such purchases since securities
are purchased on a net price basis. During the fiscal year ended September 30,
1995, the fiscal period ended September 30, 1994, and the fiscal year ended
October 31, 1993, the Fund paid no brokerage commissions. Trading does,
however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices of
securities. Purchases of underwritten issues may be made which reflect a fee
paid to the underwriter.
Decisions with respect to the placement of the Fund's portfolio
transactions are made by Advantus Capital. The primary criteria in making these
decisions are efficiency in the execution of orders and obtaining the most
favorable net prices for the Fund. Most Fund
-10-
<PAGE>
transactions are with the issuer or with major dealers acting for their own
account and not as brokers. When consistent with these objectives, business may
be placed with broker-dealers who furnish investment research services to
Advantus Capital. Such research services include advice, both directly and in
writing, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities, as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. By allocating brokerage business in order to
obtain research services for Advantus Capital, the Fund enables Advantus Capital
to supplement its own investment research activities and allows Advantus Capital
to obtain the views and information of individuals and research staffs of many
different securities research firms prior to making investment decisions for the
Fund. To the extent such commissions are directed to these other brokers who
furnish research services to Advantus Capital, Advantus Capital receives a
benefit, not capable of evaluation in dollar amounts, without providing any
direct monetary benefit to the Fund from these commissions.
There is no formula for the allocation by Advantus Capital of the
Fund's brokerage business to any broker-dealers for brokerage and research
services. While it is not expected that the Fund will pay brokerage
commissions, if it does, Advantus Capital will authorize the Fund to pay an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker would have charged only if Advantus Capital
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or Advantus
Capital's overall responsibilities with respect to the accounts as to which it
exercises investment discretion. During the fiscal year ended September 30,
1995, the Fund paid no brokerage commissions and directed no transactions to
brokers because of research services they provided.
No brokerage is allocated for the sale of Fund shares. Advantus
Capital believes that most research services obtained by it generally benefit
one or more of the investment companies which it manages and also benefits
accounts which it manages. Normally research services obtained through managed
funds and managed accounts investing in common stocks would primarily benefit
such funds and accounts; similarly, services obtained from transactions in fixed
income securities would be of greater benefit to the managed funds and managed
accounts investing in debt securities.
The same security may be suitable for the Fund and the other funds or
accounts managed by Advantus Capital or its affiliates. If and when two or more
funds or accounts simultaneously purchase or sell the same security, the
transactions will be allocated as to price and amount in accordance with
arrangements equitable to each fund or account. The simultaneous purchase or
sale of the same securities by the Fund and other funds or accounts may have a
detrimental effect on the Fund, as this may affect the price paid or received by
the Fund or the size of the position obtainable by the Fund.
The Fund will not execute portfolio transactions through any
affiliate, unless such transactions, including the frequency thereof, the
receipt of commissions payable in connection therewith and the selection of the
affiliated broker-dealer effecting such transactions are not unfair
-11-
<PAGE>
or unreasonable to the shareholders of the Fund. In the event any transactions
are executed on an agency basis, Advantus Capital will authorize the Fund to pay
an amount of commission for effecting a securities transaction in excess of the
amount of commission another broker-dealer would have charged only if Advantus
Capital determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
overall responsibilities of Advantus Capital with respect to the Fund as to
which it exercises investment discretion. If the Fund executes any transactions
on an agency basis, it will generally pay higher than the lowest commission
rates available.
In determining the commissions to be paid to an affiliated broker-
dealer, it is the policy of the Fund that such commissions will, in the judgment
of Advantus Capital, subject to review by the Fund's Board of Directors, be both
(a) at least as favorable as those which would be charged by other qualified
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time, and
(b) at least as favorable as commissions contemporaneously charged by such
affiliated broker-dealers on comparable transactions for their most favored
comparable unaffiliated customers. While the Fund does not deem it practicable
and in its best interest to solicit competitive bids for commission rates on
each transaction, consideration will regularly be given to posted commission
rates as well as to other information concerning the level of commissions
charged on comparable transactions by other qualified brokers. During the year
ended September 30, 1995, the Fund did not execute any portfolio transactions
with an affiliated broker-dealer.
Information regarding the acquisition by the Fund during the fiscal
year ended September 30, 1995, of securities of the Fund's regular brokers or
dealers, or the parents of those broker or dealers that derive more than 15
percent of their gross revenue from securities-related activities, is presented
below:
<TABLE>
<CAPTION>
Approximate
Value of Securities Owned
Name of Issuer at End of Fiscal Year
-------------- -------------------------
<S> <C>
None N/A
</TABLE>
CALCULATION OF PERFORMANCE DATA
The Fund may issue "current yield" and "effective yield" quotations.
"Current yields" are computed by determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a recent
seven calendar day period, and multiplying that change by 365/7. "Effective
yields" are computed by determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a recent
seven calendar day period, dividing that change by seven, adding one to the
quotient, raising the sum to the 365th power, and subtracting one from the
result. For purposes of the foregoing calculations, the value
-12-
<PAGE>
of the hypothetical account includes accrued interest income plus or minus
amortized purchase discount or premium less accrued expenses, but does not
include realized gains and losses or unrealized appreciation and depreciation.
The Fund will also quote the average dollar-weighted portfolio maturity for the
corresponding seven-day period.
Although there can be no assurance that the net asset value of the
Fund's shares will always be $1.00, Advantus Capital does not expect that the
net asset value of its shares will fluctuate since the Fund uses the amortized
cost method of valuation to maintain a stable $1.00 net asset value. See
"Amortized Cost Method of Portfolio Valuation." Principal is not, however,
insured. Yield is a function of portfolio quality and composition, maturity,
and operating expenses. Yield information is useful in reviewing the Fund's
performance, but it may not provide a basis for comparison with bank deposits or
other investments, which pay a fixed yield for a stated period of time, or other
investment instruments, which may use a different method of calculating yield.
For the seven calendar days ended September 30, 1995, the Fund's
annualized current yield was 5.59% and its annualized effective yield was 5.75%.
CAPITAL STOCK AND OWNERSHIP OF SHARES
The Fund's shares of common stock have a par value of $.01 per share,
and have equal rights to share in dividends and assets. The shares possess no
preemptive or conversion rights. Cumulative voting is not authorized. This
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and in such
event the holders of the remaining shares will be unable to elect any directors.
The Fund has the following authorized capital and numbers of shares
outstanding:
<TABLE>
<CAPTION>
Number of
authorized shares Par value Share outstanding
of common stock per share at November 30, 1995
----------------- --------- ---------------------
<S> <C> <C>
1,000,000,000 $.01 10,783,369
</TABLE>
As of November 30, 1995, no person held of record, to the knowledge of
the Fund, or owned more than 5% of the outstanding shares of the Fund, except as
set forth in the following table:
<TABLE>
<CAPTION>
Number of Percent of
Name and Address of Shareholder Shares Class
- ------------------------------- --------- ----------
<S> <C> <C>
Minnesota Mutual and affiliates 9,541,917 88.5%
400 Robert Street North
St. Paul, Minnesota 55101
</TABLE>
-13-
<PAGE>
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment is automatically credited to an open
account maintained for the shareholder by Minnesota Mutual. Stock certificates
are issued only upon written request to Minnesota Mutual but will not be issued
for fractional shares. Following each transaction in the account, a shareholder
will receive a confirmation statement disclosing the current balance of shares
owned and the details of recent transactions in the account. After the close of
each calendar year Minnesota Mutual sends to each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. This should be retained as a permanent record.
The open account system provides for full and fractional shares
expressed to four decimal places and, by making the issuance and delivery of
stock certificates unnecessary, eliminates problems of handling and safekeeping,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are paid by Advantus
Capital, and no direct charges are made to shareholders. Although the Fund has
no present intention of making such direct charges to shareholders, it reserves
the right to do so. Shareholders will receive prior notice before any such
changes are made.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus in the text following the questions "How are Fund shares redeemed?"
The obligation of the Fund to redeem its shares when called upon to do
so by the shareholder is mandatory with the following exceptions.
The Fund will pay in cash all redemption requests by any shareholder
of record, limited in amount during any 90-day period to the lesser of $250,000
or 1% of the net asset value of the Fund at the beginning of such period. When
redemption requests exceed such amount, however, the Fund reserves the right to
make part or all of the payment in the form of securities or other assets of the
Fund. An example of when this might be done is in case of emergency, such as in
those situations enumerated in the following paragraph, or at any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. Any securities being so distributed would be valued in
the same manner as the portfolio of the Fund is valued. If the recipient sold
such securities, he or she probably would incur brokerage charges. The Fund has
filed with the Securities and Exchange Commission a notification of election
pursuant to Rule 18f-1 under the Investment Company Act of 1940 in order to make
such redemptions in kind.
Redemption of shares, or payment, may be suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (b) when trading on said Exchange is restricted, (c) when an
emergency exists, as a result of which disposal by the
-14-
<PAGE>
Fund of securities owned by it is not reasonably practicable, or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange Commission,
by order, so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist.
DISTRIBUTIONS AND TAX STATUS
The tax status of the Fund and the distributions which it may make are
summarized in the text of the Prospectus following the caption "Taxes." During
the fiscal year ended September 30, 1995, the Fund fulfilled, and the Fund
intends to continue to fulfill, the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), as a regulated investment
company. If so qualified, the Fund will not be liable for federal income taxes
to the extent it distributes its taxable income to its shareholders.
The Fund is subject to a non-deductible excise tax equal to 4 percent
of the excess, if any, of the amount required to be distributed pursuant to the
Code for each calendar year over the amount actually distributed. In order to
avoid the imposition of this excise tax, the Fund generally must declare
dividends by the end of a calendar year representing 98 percent of the Fund's
ordinary income for the calendar year and 98 percent of its capital gain net
income (both long-term and short-term capital gains) for the twelve-month period
ending October 31 of the calendar year.
The foregoing relates only to federal taxation. Prospective
shareholders should consult their tax advisers as to the possible application of
state and local income tax laws to Fund distributions.
FINANCIAL STATEMENTS
The financial statements, including the schedule of investments, for
the Fund as of September 30, 1995, the statement of operations for the year then
ended and the statement of changes in net assets for the year ended September
30, 1995 and the period from November 1, 1993 to September 30, 1994, presented
on the following pages of this Statement of Additional Information have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, and upon the authority of said firm as experts in
accounting and auditing.
-15-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MIMLIC Cash Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the MIMLIC Cash Fund,
Inc. (the Fund) as of September 30, 1995 and the related statement of operations
for the year then ended, the statements of changes in net assets for the year
ended September 30, 1995 and the period from November 1, 1993 to September 30,
1994 and the financial highlights for the year ended September 30, 1995, the
period from November 1, 1993 to September 30, 1994 and each of the years in the
three-year period ended October 31, 1993. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investment securities held in custody are confirmed
to us by the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
<PAGE>
MIMLIC CASH FUND, INC.
Statement of Assets and Liabilities
September 30, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value - see accompanying
schedule for detailed listing (identified cost:
$10,911,862) $10,911,862
Cash in bank on demand deposit........................... 11,536
----------
Total assets......................................... 10,923,398
----------
LIABILITIES
Payable to Adviser for custodian fees.................... 180
Dividends payable to shareholders........................ 1,281
----------
Total liabilities.................................... 1,461
----------
Net assets applicable to outstanding capital stock....... $10,921,937
----------
----------
REPRESENTED BY:
Capital stock - authorized 1,000,000,000 shares of $.01
par value; outstanding, 10,921,937 shares............ $ 109,219
Additional paid-in capital............................. 10,812,718
----------
Total - representing net assets applicable to
outstanding capital stock.......................... $10,921,937
----------
----------
Net asset value per share of outstanding capital stock... $ 1.00
----------
----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MIMLIC CASH FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest............................................... $ 637,722
----------
EXPENSES (NOTE 3):
Custodian fees......................................... 11,112
Less fees and expenses paid indirectly through expense
offset arrangements.................................. (1,629)
----------
Total net expenses .................................. 9,483
----------
Investment income - net.............................. 628,239
----------
Net increase in net assets from operations............... $ 628,239
----------
----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MIMLIC CASH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 and
THE PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
OPERATIONS:
Investment income - net................ $ 628,239 $ 447,206
----------- -----------
Increase in net assets resulting
from operations................. 628,239 447,206
----------- -----------
Distributions to shareholders from net
investment income.................. (628,239) (447,206)
----------- -----------
CAPITAL SHARE TRANSACTIONS, AT CONSTANT NET
ASSET VALUE OF $1.00:
Proceeds from sales.................... 82,208,336 118,291,544
Shares issued in reinvestment of net
investment income distributions...... 626,208 450,141
Payments for redemption of shares...... (84,228,936) (123,352,179)
----------- -----------
Decrease in net assets from
capital share transactions....... (1,394,392) (4,610,494)
----------- -----------
Total decrease in net assets....... (1,394,392) (4,610,494)
Net assets at beginning of period........ 12,316,329 16,926,823
----------- -----------
Net assets at end of period.............. $10,921,937 $12,316,329
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MIMLIC CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MIMLIC Cash Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. Shares of the Fund are presently sold only to the
advisory clients of Advantus Capital Management, Inc. (Advantus Capital or
the Adviser), MIMLIC Asset Management Company (MIMLIC Management) and other
affiliated investment advisers.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
All securities are valued at the close of each business day. Pursuant to
Rule 2a-7 of the Investment Company Act of 1940 (as amended), all
securities are valued at amortized cost which approximates market value, in
order to maintain a constant net asset value of $1.00.
Security transactions are accounted for on the date the securities are
purchased or sold. Interest income, including amortization of premium and
discount computed on a level-yield basis, is accrued daily.
FEDERAL TAXES
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of
its taxable income to shareholders. Therefore, no income tax provision is
required. The Fund's policy is to make required minimum distributions
prior to December 31 in order to avoid federal excise tax.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes due to temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains (losses) were
recorded by the Fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are declared daily
and paid monthly. Such distributions are payable in cash or reinvested in
additional shares of the Fund's capital stock.
<PAGE>
2
MIMLIC CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(2) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales aggregated $84,835,190 and $86,252,000, respectively.
(3) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement, effective March 1, 1995, with Advantus Capital.
Advantus Capital is a wholly-owned subsidiary of MIMLIC Management which,
prior to March 1, 1995, served as investment adviser to the Fund. Under
the agreement, Advantus Capital manages the Fund's assets and provides
research, statistical and advisory services and pays related office rental
and executive expenses and salaries. Because shares of the Fund are
purchased only with funds managed by Advantus Capital, MIMLIC Management
and other affiliated investment advisers for advisory clients, the Fund
does not pay an advisory fee to Advantus Capital.
Advantus Capital (MIMLIC Management prior to March 1, 1995) pays all
expenses of the Fund except custodian fees. Advantus Capital (MIMLIC
Management prior to March 1, 1995) directly incurs and pays the Fund's
custodian fees and the Fund in turn reimburses Advantus Capital.
The Fund has a compensating balance arrangement with its custodian where
custodian fees are reduced by interest credits earned on cash balances
maintained with the custodian. The total amount of interest credits earned
for the year ended September 30, 1995 was $1,629.
The Minnesota Mutual Life Insurance Company (Minnesota Mutual), the parent
of MIMLIC Management, acts as the Fund's transfer agent, dividend
disbursing agent and redemption agent.
Minnesota Mutual and subsidiaries, as a whole, own 9,760,426 shares or
89.4% of the Fund's outstanding shares as of September 30, 1995.
<PAGE>
3
MIMLIC CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock outstanding during the period
and selected information for each period is as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
YEAR NOVEMBER 1,
ENDED 1993 TO YEAR ENDED OCTOBER 31,
SEPTEMBER SEPTEMBER 30, ---------------------------
30, 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
Income from investment operations:
Net Investment Income........................... 0.0571 0.0342 0.0320 0.0402 0.0638
------- ------- ------- ------- -------
Total from investment operations.............. 0.0571 0.0342 0.0320 0.0402 0.0638
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income............ (0.0571) (0.0342) (0.0320) (0.0402) (0.0638)
------- ------- ------- ------- -------
Total distributions........................... (0.0571) (0.0342) (0.0320) (0.0402) (0.0638)
------- ------- ------- ------- -------
Net asset value, end of period.................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (a).................................. 5.87% 3.49%(b) 3.25% 4.10% 6.57%
Net assets, end of period (in thousands).......... $10,922 $12,316 $16,927 $21,047 $32,691
Ratio of expenses to average daily net assets..... 0.10% 0.08%(c) 0.07% 0.06% 0.08%
Ratio of net investment income to
average daily net assets......................... 5.71% 3.68%(c) 3.20% 4.12% 6.21%
- ------------------------------------
(a) Total return figures are based on a share outstanding throughout the period and assumes reinvestment of distributions
at net asset value.
(b) Total return is presented for the eleven-month period from November 1, 1993 to September 30, 1994.
(c) Adjusted to an annual basis.
</TABLE>
<PAGE>
MIMLIC Cash Fund, Inc.
Investments in Securities
September 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
--------- ----------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS ( 13.5%)
$145,000 Farm Credit Discount Note .................................. 5.70% 10/04/95 $ 144,911
150,000 Farm Credit Discount Note .................................. 5.75% 10/25/95 149,413
100,000 Federal National Mortgage Association Discount Note ........ 5.76% 10/20/95 99,688
200,000 Federal National Mortgage Association Discount Note ........ 5.70% 10/20/95 199,380
120,000 Federal National Mortgage Association Discount Note ........ 5.66% 11/02/95 119,389
125,000 U.S. Treasury Bill.......................................... 5.53% 10/12/95 124,776
640,000 U.S. Treasury Bill.......................................... 5.79% 11/16/95 635,346
--------------
Total U.S. government and agencies obligations (cost: $1,472,903)......................... 1,472,903
--------------
COMMERCIAL PAPER ( 86.5%)
CAPITAL GOODS ( 6.4%)
Aerospace/Defense ( 2.7%)
300,000 Rockwell International (c)................................. 5.75% 11/13/95 297,939
--------------
Information Processing ( 3.7%)
400,000 Hewlett-Packard ............................................ 5.79% 10/17/95 398,937
--------------
CONSUMER STAPLES ( 24.6%)
Drugs ( 6.7%)
440,000 American Home Products (c)................................. 5.89% 10/12/95 439,155
300,000 Schering Corp .............................................. 5.75% 01/17/96 294,950
--------------
734,105
--------------
Food ( 7.9%)
500,000 Coca Cola Company .......................................... 5.73% 11/22/95 495,878
370,000 CPC International Inc (c)................................... 5.81% 10/26/95 368,485
--------------
864,363
--------------
Household Products ( 2.7%)
300,000 Philip Morris .............................................. 5.76% 11/17/95 297,748
--------------
Media ( 4.5%)
500,000 McGraw-Hill Co ............................................. 5.76% 12/11/95 494,400
--------------
Retail ( 2.8%)
300,000 Toys R Us, Inc. ............................................ 5.80% 10/25/95 298,817
--------------
CREDIT SENSITIVE ( 4.6%)
Hardware and Tools ( 4.6%)
500,000 Stanley Works .............................................. 5.85% 10/05/95 499,601
--------------
</TABLE>
See accompanying notes to investments in securites.
<PAGE>
MIMLIC CASH FUND, INC.
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
--------- ----------
<S> <C> <C> <C>
Energy ( 3.6%)
Oil and Gas Production ( 3.6%)
$400,000 Atlantic Richfield ......................................... 5.71% 12/20/95 $ 395,005
--------------
Financial ( 27.3%)
Consumer Finance ( 27.3%)
400,000 American General Finance ................................... 5.84% 11/21/95 396,718
300,000 Associates Corp ............................................ 5.78% 12/01/95 297,086
500,000 Ford Motor Credit .......................................... 5.84% 11/14/95 496,425
400,000 GMAC ....................................................... 6.01% 10/11/95 399,290
500,000 Norwest Financial .......................................... 5.80% 11/15/95 496,371
500,000 Pitney-Bowes Credit ........................................ 5.77% 12/27/95 493,143
400,000 US West Capital (c)......................................... 5.83% 11/02/95 397,921
--------------
2,976,954
--------------
Utilities ( 20.0%)
Electric ( 11.3%)
340,000 Alabama Power .............................................. 5.79% 11/03/95 338,179
500,000 Midamerica Energy .......................................... 5.85% 10/30/95 497,612
400,000 Public Service Electric & Gas .............................. 5.88% 10/27/95 398,275
--------------
1,234,066
--------------
Telephones ( 8.7%)
250,000 Ameritech Corp ............................................. 5.83% 11/09/95 248,417
300,000 AT&T Corp .................................................. 5.82% 10/24/95 298,860
400,000 Southwestern Bell Capital Corp (c).......................... 5.81% 10/04/95 399,747
--------------
947,024
--------------
Total commercial paper (cost: $9,438,959)................................................. 9,438,959
--------------
Total investments in securities (cost: $10,911,862)(b)....................................$ 10,911,862
--------------
--------------
Notes to Investments in Securities
(a) Securities are valued by procedures described in note 1 to the financial statements.
(b) Also represents the cost of securities for federal income tax purposes at September 30, 1995.
(c) Commercial paper sold within terms of a private placement memorandum, exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that
program of other "accredited investors." This security has been determined to be liquid under guide-
lines established by the board of directors.
</TABLE>
