<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS CORNERSTONE FUND
SEPTEMBER 30, 1995
<PAGE>
ADVANTUS CORNERSTONE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 8
STATEMENT OF OPERATIONS 9
STATEMENT OF CHANGES IN NET ASSETS 10
NOTES TO FINANCIAL STATEMENTS 11
INDEPENDENT AUDITORS' REPORT 16
FEDERAL INCOME TAX INFORMATION 17
SHAREHOLDER SERVICES 18
<PAGE>
October 31, 1995
[PHOTO]
Dear Shareholders:
The first nine months of 1995 produced exceptional returns for both stock and
bond investors. Subdued inflation and a growing economy combined to create a
positive secular environment for financial assets.
A 140 basis point reduction in the 30-year Treasury Bond produced a 21 percent
return since the beginning of the year. Corporate bonds returned 16.5 percent
according to the Lehman Corporate Bond Index. If this pace continues, the bond
market will finish off one of its best years ever - a sharp reversal from 1994.
Investors reacted strongly to every actual and perceived economic shift creating
unusual volatility in the bond market. The sharp sell off in July and August was
just such an over reaction. Long term yields will be driven by continuing
concerns about the budget process in Washington, the near term direction of the
economy and the dollar's performance. Nonetheless, we expect Treasury Bills to
remain trading in the 6-7 percent range.
Technology, financial and consumer companies drove the stock market to all-time
record highs in the third quarter as measured by the S&P 500. While this
produced spectacular results, the extended run may create additional
vulnerability in the market. The chief concerns are disappointing earnings
announcements and a general slow down in profitability. According to Ibbotson
Associates, there have only been four times since 1927 that stock prices have
risen more in the first nine months of the year. In each instance, the market
cooled off in the final quarter. Factors which could push the market up in the
short term, however, are a significant interest rate reduction or a surge in
foreign portfolio inflows.
The current economic expansion is displaying the mixed signals of maturation.
However, we do not expect an early end to the recovery. The economy's recent
slow growth pattern should lengthen the life of the expansion by reducing
inflationary pressures and consequently, the need for money tightening measures.
It is unlikely that the economy will regain the robust pace of the early stages
of the expansion.
The market does hold opportunity for investors. Diversification across
industries and geographic regions remains a key element to successful investing.
However, determining which investments will benefit in both the near and long
term requires professional experience. Advantus Capital Management, Inc. offers
a family of eight funds which are designed to help you reach your goals with a
thoughtful, well conceived investment strategy.
Sincerely,
Paul Gooding, President
Advantus Capital Management, Inc.
<PAGE>
ADVANTUS CORNERSTONE FUND
PERFORMANCE UPDATE
[PHOTO]
MATTHEW D. FINN, CFA
PORTFOLIO MANAGER
The Advantus Cornerstone Fund is a mutual
fund designed for investors seeking
long-term accumulation of capital. In
pursuit of this objective, the Fund will
invest primarily in equity securities of
companies which, in the opinion of the
Adviser, have market values which appear
low relative to their underlying value or
future growth potential.
-Dividends paid quarterly.
-Capital gains distributions paid annually.
PERFORMANCE
The Advantus Cornerstone Fund's performance for the year ending September 30,
1995 for each class of shares offered is as follows:
<TABLE>
<S> <C>
Class A 24.4 percent*
Class B 23.2 percent*
Class C (since 3/1/95 20.1 percent*
inception)
</TABLE>
The S&P 500 Barra Value Index** returned 26.7 percent for the year ending
September 30, 1995. Performance relative to the S&P 500 Barra Value Index for
the year was held back by holdings of cash equivalents and an underweighting in
banks.
PORTFOLIO RECAP
The Portfolio's strong performance was driven primarily by economically
sensitive holdings and financial services companies. Among economically
sensitive companies Xerox, Cytec--chemicals, Owens Corning Fiberglass, Sears,
Federated Department Stores, B.F. Goodrich--aerospace/chemicals and apparel
companies performed well. In financial services American Express and Golden West
Financial--savings and loan, were stand out performers. Relative performance was
held back by just a few holdings and an underweighting in regional bell
operating companies, "the baby bells."
The Portfolio's primary overweights relative to the S&P 500 remain in financial
services and energy. Our focus in the financial service area is insurance and
savings and loans. However we meaningfully reduced holdings in the S&L industry
during the quarter. Our energy focus shifted from domestic refiners to
integrated natural gas and oil field services. We have been gradually increasing
our weights in economically sensitive companies based on perceived weakness in
these issues. Recent portfolio additions in this area include: Owens Corning
Fiberglass, Morton International--chemicals/auto airbags, Aluminum Company of
America and Burlington Northern/Southern Pacific Railroad.
OUTLOOK
Recently, the market lurched back to safe havens (i.e. utilities and consumer
nondurables) driven by concerns about the economy and third quarter earnings
reports. This troughing process will ultimately be resolved by the Federal
Reserve easing interest rates or continued moderate economic growth.
2
<PAGE>
ADVANTUS CORNERSTONE FUND
SEPTEMBER 30, 1995
In the former case, investors are likely to rotate back to selected cyclical
companies as they discount a recovery sparked by the lower interest rates. In
the latter, selected cyclical companies can post strong earnings comparisons.
The portfolio currently has meaningful exposure to companies with economically
sensitive earnings. However, nearly all of these companies, have ongoing
restructurings, cost saving initiatives or share buybacks in place that should
help support earnings even in a slow economic environment.
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN ADVANTUS CORNERSTONE FUND, S&P 500 BARRA
VALUE INDEX AND CONSUMER PRICE INDEX
CLASS A AND B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS A CLASS B S&P 500 BARRA INDEX CPI CLASS A:
<S> <C> <C> <C> <C> <C> <C>
09/16/94 10,000.00 10,000.00 10,000.00 10,000.00 One year 18.20%
09/30/94 9,374.00 9,870.00 9,824.00 10,054.00 Since inception 15.90%
09/30/95 11,659.00 11,708.00 12,582.00 10,275.00 Class B:
One Year 18.20%
Since inception 16.40%
</TABLE>
On the chart above you can see how the Advantus Cornerstone Fund's Class A and
Class B shares' total return compared to the S&P 500 Barra Value Index and the
Consumer Price Index. The four lines represent the cumulative total return of a
hypothetical $10,000 investment made on the inception date of the Advantus
Cornerstone Fund Class A and Class B shares (September 16, 1994) through
September 30, 1995.
*Historical results are not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5 percent
front-end sales charge or Class B's maximum 5 percent contingent deferred sales
charge.
**The S&P 500 Barra Value Index contains those stocks from the S&P 500 that have
a price-to-book ratio below the capitalization weighted median price-to-book
ratio of the S&P 500.
3
<PAGE>
ADVANTUS CORNERSTONE FUND
SEPTEMBER 30, 1995
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Total return
Since inception 20.1%
Class C S&P 500 Barra Index CPI
3/01/95 10,000 10,000 10,000
9/30/95 12,013 11,865 10,146
</TABLE>
On the chart above you can see how the Advantus Cornerstone Fund's Class C
shares' total return compared to the S&P 500 Barra Value Index and the Consumer
Price Index. The three lines represent the cumulative total return of a
hypothetical $10,000 investment made on the inception date of the Advantus
Cornerstone Fund Class C shares (March 1, 1995) through September 30, 1995.
The above charts are useful because they provide you with more information about
your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum 5 percent
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial adviser's investment advice. Individuals cannot buy even an unmanaged
index fund without incurring some charges and expenses.
Historical results are not an indication of future performance.
4
<PAGE>
ADVANTUS CORNERSTONE FUND
SEPTEMBER 30, 1995
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------ ------ ---------- ----------
<S> <C> <C> <C>
TIG Holdings Inc.............. 66,800 $1,795,250 5.9%
Owens-Corning Fiberglas
Corporation.................. 35,800 1,597,575 5.3%
American Express Company...... 28,200 1,251,375 4.1%
MBIA Inc...................... 17,600 1,240,800 4.1%
Green Point Financial
Corporation.................. 40,200 1,110,525 3.7%
Sears, Roebuck and Co......... 27,500 1,014,063 3.4%
Xerox Corporation............. 7,500 1,007,813 3.4%
Golden West Financial
Corporation.................. 19,700 994,850 3.3%
Tosco Corporation............. 28,200 972,900 3.2%
Case Corporation.............. 26,300 966,525 3.2%
---------- ---
$11,951,676 39.6%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 6.2%
Consumer Goods and Services 23.9%
Credit Sensitive 26.4%
Intermediate Goods and Services 30.3%
Technology 9.9%
Cash and Other
Assets/Liabbilities 3.3%
</TABLE>
5
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
COMMON STOCKS (96.8%)
CAPITAL GOODS (6.2%)
Machinery (6.2%)
26,300 Case Corporation........................ $ 966,525
7,700 ITT Corporation......................... 954,800
------------
1,921,325
------------
CONSUMER GOODS AND SERVICES (24.0%)
Consumer Goods (6.6%)
13,089 Columbia/HCA Healthcare
Corporation............................ 636,453
23,100 Mallinckrodt Group Inc.................. 915,337
18,900 Value Health Incorporated (b)........... 500,850
------------
2,052,640
------------
Consumer Services (2.2%)
33,800 Bowne & Company, Incorporated........... 684,450
------------
Retail (6.1%)
31,100 Federated Department Stores (b)......... 882,462
27,500 Sears, Roebuck and Co................... 1,014,063
------------
1,896,525
------------
Consumer Cyclicals (9.1%)
48,100 Burlington Industries (b)............... 607,262
30,600 Kellwood Company........................ 631,125
35,800 Owens-Corning Fiberglas Corporation
(b).................................... 1,597,575
------------
2,835,962
------------
CREDIT SENSITIVE (26.4%)
Finance (9.5%)
28,200 American Express Company................ 1,251,375
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
19,700 Golden West Financial Corporation....... $ 994,850
31,500 Lehman Brothers Holdings, Inc........... 728,437
------------
2,974,662
------------
Insurance (16.9%)
7,900 American Internationl Group, Inc........ 671,500
40,200 Green Point Financial Corporation....... 1,110,525
17,600 MBIA Inc................................ 1,240,800
20,500 RLI Corporation......................... 458,687
66,800 TIG Holdings Inc........................ 1,795,250
------------
5,276,762
------------
INTERMEDIATE GOODS AND SERVICES (30.3%)
Energy (14.4%)
25,300 Coflexip ADR (c)........................ 388,987
24,600 Columbia Gas System, Inc (b)............ 950,175
27,400 Tidewater Incorporated.................. 770,625
28,200 Tosco Corporation....................... 972,900
33,200 USX--Marathon Group..................... 655,700
41,300 YPF Sociedad Anonima ADR (c)............ 743,400
------------
4,481,787
------------
Materials (11.5%)
14,500 Aluminum Company of America............. 766,688
12,000 Citation Corporation (b)................ 216,000
13,400 Cytec Industries Inc (b)................ 775,525
7,600 Dow Chemical Company.................... 566,200
21,500 Fort Howard Corporation (b)............. 330,563
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
<C> <S> <C>
30,000 Morton International.................... $ 930,000
------------
3,584,976
------------
Transportation (4.4%)
10,500 Burlington Northern Santa Fe (b)........ 761,250
25,900 Teekay Shipping Corporation (b)(c)...... 621,600
------------
1,382,850
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
TECHNOLOGY (9.9%)
44,400 EMC Corporation (b)..................... $ 804,750
14,500 B.F. Goodrich Company................... 955,188
20,300 Rohr Incorporated (b)................... 329,875
7,500 Xerox Corporation....................... 1,007,813
------------
3,097,626
------------
Total common stocks
(cost: $26,585,182) ................................... 30,189,565
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.1%)
$ 480,000 U.S. Treasury Bills........................ 5.55% 10/12/95 479,113
800,000 U.S. Treasury Bills........................ 5.41%-5.45% 12/07/95 791,842
------------
Total short-term securities (cost: $1,271,142)....................... 1,270,955
------------
Total investments in securities (cost: $27,856,324) (d).............. $ 31,460,520
------------
------------
<FN>
Notes to Investments in Securities
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 5.6% of net assets in foreign securities as of September 30,
1995.
(d) At September 30, 1995 the cost of securities for federal income tax
purposes was $27,858,988. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation........................................................................ $ 4,261,727
Gross unrealized depreciation........................................................................ (660,195)
------------
Net unrealized appreciation.......................................................................... $ 3,601,532
------------
------------
</TABLE>
7
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $27,856,324).............................................. $ 31,460,520
Cash in bank on demand deposit....................................................... 79,465
Receivable for Fund shares sold...................................................... 7,154
Receivable for investment securities sold............................................ 1,173,698
Dividends receivable................................................................. 43,244
Organizational costs................................................................. 43,471
------------
Total assets..................................................................... 32,807,552
------------
LIABILITIES
Payable for Fund shares repurchased.................................................. 1,087
Payable for investment securities purchased.......................................... 1,525,338
Payable for organizational costs..................................................... 43,471
Payable to Adviser................................................................... 35,595
------------
Total liabilities................................................................ 1,605,491
------------
Net assets applicable to outstanding capital stock................................... $ 31,202,061
------------
------------
Represented by:
Capital stock--$.01 par value (note 1)............................................. $ 24,079
Additional paid-in capital......................................................... 25,814,130
Undistributed net investment income................................................ --
Accumulated net realized gains from investments.................................... 1,759,656
Unrealized appreciation of investments............................................. 3,604,196
------------
Total--representing net assets applicable to outstanding capital stock........... $ 31,202,061
------------
------------
Net assets applicable to outstanding Class A Shares.................................. $ 29,519,898
------------
------------
Net assets applicable to outstanding Class B Shares.................................. $ 1,635,392
------------
------------
Net assets applicable to outstanding Class C Shares.................................. $ 46,771
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,277,462.............................................. $ 12.96
------------
------------
Class B--Shares outstanding 126,777................................................ $ 12.90
------------
------------
Class C--Shares outstanding 3,625.................................................. $ 12.90
------------
------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 88,637
Dividends.......................................................................... 354,807
------------
443,444
------------
Expenses (note 4):
Investment advisory fee............................................................ 150,365
Distribution fees--Class A......................................................... 54,166
Distribution fees--Class B......................................................... 7,262
Distribution fees--Class C......................................................... 142
Administrative services fee........................................................ 37,800
Amortization of organizational costs............................................... 11,099
Custodian fees..................................................................... 9,421
Auditing and accounting services................................................... 7,165
Legal fees......................................................................... 7,924
Directors' fees.................................................................... 344
Registration fees.................................................................. 35,428
Printing and shareholder reports................................................... 12,127
Insurance.......................................................................... 5,420
Other.............................................................................. 5,486
------------
Total expenses................................................................... 344,149
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (36,111)
Other fund expenses.............................................................. (47,635)
------------
Total fees and expenses waived or absorbed..................................... (83,746)
------------
Total net expenses............................................................. 260,403
------------
Investment income--net......................................................... 183,041
------------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)......................................... 1,821,875
Net change in unrealized appreciation or depreciation on investments............... 3,101,643
------------
Net gains on investments......................................................... 4,923,518
------------
Net increase in net assets resulting from operations................................. $ 5,106,559
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM JUNE 20, 1994 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Investment income--net..................................................... $ 183,041 $ 41,786
Net realized gains (losses) on investments................................. 1,821,875 (3,672)
Net change in unrealized appreciation or depreciation on investments....... 3,101,643 502,553
------------ ------------
Increase in net assets resulting from operations......................... 5,106,559 540,667
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A.................................................................. (231,132) --
Class B.................................................................. (5,632) --
Class C.................................................................. (87) --
Net realized gains on investments:
Class A.................................................................. (56,912) --
Class B.................................................................. (1,628) --
Class C.................................................................. (7) --
------------ ------------
Total distributions.................................................... (295,398) --
------------ ------------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A.................................................................. 14,465,694 10,080,240
Class B.................................................................. 1,365,600 88,098
Class C.................................................................. 42,221 --
Shares issued as a result of reinvested dividends:
Class A.................................................................. 15,156 --
Class B.................................................................. 7,260 --
Class C.................................................................. 94 --
Payments for redemption of shares:
Class A.................................................................. (172,556) --
Class B.................................................................. (41,569) (5)
Class C.................................................................. -- --
------------ ------------
Increase in net assets from capital share transactions................... 15,681,900 10,168,333
------------ ------------
Total increase in net assets............................................. 20,493,061 10,709,000
Net assets at beginning of period............................................ 10,709,000 --
------------ ------------
Net assets at end of period (including undistributed net investment income of
$0 and $42,711, respectively)............................................... $ 31,202,061 $ 10,709,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
Advantus Cornerstone Fund, Inc. (the Fund) was incorporated on January 27,
1994. The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. On February
14, 1995 shareholders of the Fund approved a name change to Advantus Cornerstone
Fund, Inc. (effective March 1, 1995). Prior to March 1, 1995 the Fund was known
as MIMLIC Value Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On June 20, 1994, MIMLIC Asset Management Company (MIMLIC Management)
purchased 7,500 Class A shares and 7,500 Class B shares. Operations of the Fund
did not formally commence until September 16, 1994 when the shares became
effectively registered under the Securities Exchange Act of 1933. The Minnesota
Mutual Life Insurance Company (Minnesota Mutual), the parent of MIMLIC
Management, purchased 990,644 Class A shares for $10 million prior to
commencement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FEDERAL TAXES
The Fund's policy is 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 primarily because of 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 the 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.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income and decrease additional paid-in capital by
$11,099.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$43,619,339 and $28,188,885, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). 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 Captital manages the Fund's assets and provides
research, statistical and advisory services and pays related office rental and
executive expenses and salaries. In addition, as part of the advisory fee,
Advantus Capital pays the expenses of the Fund's transfer, dividend disbursing
and redemption agent (Minnesota Mutual). The fee for investment management and
advisory services is based on the average daily net assets of the Fund at the
annual rate of .80 percent, which is the same as under the old agreement with
MIMLIC Management.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and wholly-owned subsidiary of
MIMLIC Management, to be used to pay certain expenses incurred in the
distribution, promotion and servicing of the Fund's shares. The Class A Plan
provides for a fee up to .30 percent of average daily net assets of Class A
shares. The Class B and Class C Plans provide for a fee up to 1.00 percent of
average daily net assets of Class B and Class C shares. The Class B and Class C
1.00 percent fees are comprised of a .75 percent distribution fee and a .25
percent service fee. MIMLIC Sales is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.10 percent. MIMLIC Sales waived Class A distribution fees in the amount of
$36,111 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee for
the Fund was $3,250 per month. Effective February 1, 1995, the administrative
service fee is $3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital and MIMLIC
Management voluntarily agreed to absorb $47,635 in expenses that were otherwise
payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $62,839.
As of September 30, 1995, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ ---------------------
<S> <C> <C>
Class A..................................................................... 2,116,252 92.9%
Class B..................................................................... 7,613 6.0%
Class C..................................................................... 928 25.6%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $6,410.
(5) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs will be amortized over 60 months on a
straight-line basis beginning with the commencement of
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) ORGANIZATIONAL COSTS--(CONTINUED)
operations. If any or all of the shares held by MIMLIC Management, or any other
holder, representing initial capital of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by the pro rata
portion (based on the ratio that the number of initial shares redeemed bears to
the total number of outstanding initial shares of the Fund at the date of
redemption) of the unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from June 20, 1994 to September 30, 1994 for Class A and Class B shares and the
period from March 1, 1995 to September 30, 1995 for Class C shares were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- -----------
1995 1994 1995 1994 1995
---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold........................................................... 1,292,691 998,637 120,786 8,734 3,617
Issued for reinvested distributions............................ 1,391 -- 664 -- 8
Redeemed....................................................... (15,257) -- (3,406) (1) --
---------- --------- --------- --------- -----
1,278,825 998,637 118,044 8,733 3,625
---------- --------- --------- --------- -----
---------- --------- --------- --------- -----
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
SEPTEMBER 16, SEPTEMBER 16, MARCH 1,
YEAR ENDED 1994 (A) TO YEAR ENDED 1994 (A) TO 1995 (A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994 1995
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 10.63 $ 10.77 $ 10.63 $ 10.77 $ 10.79
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)...... .12 .01 .02 (.01) .02
Net gains or losses on securities
(both realized and unrealized)... 2.42 (.15) 2.41 (.13) 2.14
------- ------- ------- ------- -------
Total from investment
operations..................... 2.54 (.14) 2.43 (.14) 2.16
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income........................... (.16) -- (.11) -- (.05)
Distributions from capital
gains............................ (.05) -- (.05) -- --
------- ------- ------- ------- -------
Total distributions............. (.21) -- (.16) -- (.05)
------- ------- ------- ------- -------
Net asset value, end of period...... $ 12.96 $ 10.63 $ 12.90 $ 10.63 $ 12.90
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (b).................... 24.4% (1.3)%(c) 23.2% (1.3)%(c) 20.1%(d)
Net assets, end of period (in
thousands)......................... $ 29,520 $ 10,616 $ 1,635 $ 93 $ 47
Ratio of expenses to average daily
net assets (e)..................... 1.35% .05%(g) 2.25% .09%(g) 2.25%(f)
Ratio of net investment income
(loss) to average daily net assets
(e)................................ 1.01% .07%(g) .05% .03%(g) (.07)%(f)
Portfolio turnover rate (excluding
short-term securities)............. 160.1% 8.1% 160.1% 8.1% 160.1%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994, respectively. If the Fund had been charged for
theses expenses, the ratio of expenses to average daily net assets would
have been 1.81% and .07% for Class A shares, respectively, 2.45% and .10%
for Class B shares, respectively and 2.34% for Class C shares. The ratio of
net investment income to average daily net assets would have been .56% and
.05% for Class A shares, respectively, (.15)% and .02% for Class B shares,
respectively and (.16)% for Class C shares.
(f) Adjusted to an annual basis.
(g) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
</TABLE>
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Cornerstone Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Cornerstone
Fund, Inc. (the Fund) as of September 30, 1995 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended September 30, 1995 and the period from June 20, 1994 to September
30, 1994 and the financial highlights for the year ended September 30, 1995 and
the period from September 16, 1994 to September 30, 1994. 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. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. 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
16
<PAGE>
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal year ended September 30, 1995. Dividends for the 1995 calendar year will
be reported to you on Form 1099-Div in late January 1996. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
Income distributions--taxable as dividend income, 16.0% qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------- ---------
<S> <C>
December 28, 1994.................................................................... $ 0.1196
March 28, 1995....................................................................... 0.0416
June 28, 1995........................................................................ 0.0533
---------
$ 0.2145
---------
---------
</TABLE>
The distributions of $.1196 payable on December 28, 1994 and $.0533 payable
on June 28, 1995 consisted of $.0482 and $.0038, respectively, from short-term
capital gains (taxable as dividend income) and $.0714 and $.0495, respectively,
from net investment income.
CLASS B
Income distributions--taxable as dividend income, 16.0% qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------- ---------
<S> <C>
December 28, 1994.................................................................... $ 0.1046
March 28, 1995....................................................................... 0.0199
June 28, 1995........................................................................ 0.0339
---------
$ 0.1584
---------
---------
</TABLE>
The distributions of $.1046 payable on December 28, 1994 and $.0339 payable
on June 28, 1995 consisted of $.0482 and $.0038, respectively, from short-term
capital gains (taxable as dividend income) and $.0564 and $.0301, respectively,
from net investment income.
CLASS C
Income distributions--taxable as dividend income, 16.0% qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------- ---------
<S> <C>
March 28, 1995....................................................................... $ 0.0199
June 28, 1995........................................................................ 0.0348
---------
$ 0.0547
---------
---------
</TABLE>
The distributions of $.0348 payable on June 28, 1995 consisted of $.0038
from short-term capital gains (taxable as dividend income) and $.0310 from net
investment income.
17
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value. (Exchanges from the Money Market Fund will incur the
applicable sales charge, if not previously subjected to the charge.)
Shareholders may make four exchanges or telephone transfers between the Funds
each calendar year without incurring a transaction charge. Thereafter, there
will be a $7.50 transaction charge for each additional exchange or transfer
within the calendar year. Systematic Exchange Plans are exempt from this charge.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive checks at
specified intervals from you fund account--subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the cash
value may be worth more or less than the original amount invested when
withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE TRANSFER: You may transfer money from one Advantus account to any
other Advantus account you own just by calling our toll free number. Sign up for
telephone exchanges on the Advantus Application or complete the telephone
authorization form.
SYSTEMATIC TRANSFER: If you have an Advantus Money Market account you may
transfer a set amount of money to another Advantus Fund to diversify your
investment portfolio and take advantage of dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Our special purchase plans enable you to open an
Advantus fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets.) One of these plans--The
Automatic Investment Plan--allows you to invest automatically each month from
your checking or saving account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPs, profit
sharing, money purchase or defined benefit plans.
18
<PAGE>
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. Amounts
over $1,000 will be wire transferred to your personal bank account. The
prevailing wire charge will be added to the withdrawal amount. Amounts for less
than $1,000 will be mailed to your bank on your behalf. To set this up, please
send a voided check from your bank. Depending upon the performance of the
underlying investment options, the cash value may be worth more or less than the
original amount invested upon redemption.
ACCOUNT UPDATES: You'll receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
reports to help you track all of your investments in the Advantus Family of
Funds, and annual tax statements. Semiannual and annual reports will provide you
with portfolio information, fund performance data and the current investment
outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from MIMLIC Sales Corporation, call 1-800-443-3677. Our
voice response system is available from 7 a.m. to 3 a.m. Monday through Friday,
and 8 a.m. to 5 p.m. on Saturday. This system allows you to access current net
asset values and your account balances.
HOW TO INVEST
You can invest in one or more of the eight Advantus Funds through your local
registered representative of MIMLIC Sales Corporation, distributor of the Funds.
Contact your representative for information and a prospectus for any of the
Advantus Funds you are interested in.
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our Systematic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc.'s six portfolio managers manage eight
mutual funds containing $272 million in assets in addition to $1.8 billion in
assets for other clients. Advantus Capital's seasoned portfolio managers average
more than 11 years of investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
19
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
ADVANTUS-TM-
FAMILY OF FUNDS
MIMLIC SALES CORPORATION
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-443-3677
<PAGE>
MIMLIC SALES CORPORATION BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
FORWARDING AND RETURN POSTAGE GUARANTEED,
ADDRESS CORRECTION REQUESTED
F.48649 REV 11-95
