<PAGE>
[LOGO]
FAMILY OF FUNDS
SEMI-ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS CORNERSTONE FUND
MARCH 31, 1996
<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
SHAREHOLDER SERVICES 17
<PAGE>
May 15, 1996
[PHOTO]
Dear Shareholders:
The stock market continued making impressive gains in the first quarter of
1996--up 5.4 percent, as measured by the S&P 500, after finishing 1995 at record
levels. The bond market, however, retreated from year-end highs, yielding a
negative 2.6 percent return according to the Lehman Corporate Bond Index.
Concerns about strong economic growth and full employment were the primary
factors in the bond market's slump, while strong corporate earnings and profits
led the stock market's charge. Retail stocks helped pace the market's first
quarter performance while technology companies returned widely fluctuating
results.
In the near-term, we believe that many large company earnings expectations will
be revised downward. This downward pressure should benefit higher quality
securities. Many small cap companies continue to demonstrate strong earnings
growth and their relative valuations maintain significant upside potential.
While growth in the U.S. market may slow, we maintain confidence that the equity
market holds opportunity for investors.
Improving economic growth and increased inflation have bond investors concerned
about the course of future interest rates. Higher commodity prices and strong
employment caused rates to jump in recent months. Rising interest rates offer
investors the chance to buy fixed income investments at attractive levels but
will keep the bond market in check until rates stabilize.
Diversification across industries and geographic regions remains a key element
of our success. However, determining which investments will perform well in both
the near and long-term requires professional experience. Advantus Capital
Management, Inc. offers a family of eight funds designed to help you reach your
financial goals with a thoughtful, well conceived investment strategy.
Sincerely,
[SIGNATURE]
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 three months and six months
ended March 31, 1996, respectively, for each class of shares offered is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDING 3/31/96 ENDING 3/31/96
------------------- ---------------
<S> <C> <C>
Class A 8.4%* 12.9%*
Class B 8.1%* 12.4%*
Class C 8.2%* 12.4%*
</TABLE>
This performance compares to the S&P Barra Value Index** which posted returns of
6.4 percent and 13.3 percent for the three months and six months ended March 31,
1996, respectively.
PORTFOLIO RECAP
A combination of stock selection and an over weighting in the shares of retail
and chemical companies relative to the S&P Barra Value Index accounted for
almost two-thirds of the Fund's out performance during the second quarter.
Strong performers in these groups included Federated Department Stores and W.R.
Grace. These sectors benefited from a market rotation into economically
sensitive cyclicals. Retail companies comprise less than 5% of the S&P Barra
Value Index but represented 10.7% of the fund. Chemical stocks in the
Cornerstone fund had a weighted average return of over 34% versus a weighted
average return of 14% for the chemical stocks in the S&P Barra Value Index.
Stock selection in the miscellaneous financial sector also contributed to
performance with solid results from American Express, Lehman Bros. Holdings and
TIG Holdings. Lastly, the Fund did not have any of the Regional Bell operating
companies which helped relative performance, whereas this underweighting hurt
relative performance in the first quarter.
Portfolio positions in construction related stocks and an under weighting in
bank stocks held back performance during the period.
Early in the second quarter, profits were taken from financial stocks such as
Greenpoint Financial Corp. and MBIA Inc. The long-term prospects of these firms
remain solid, in our opinion, but the valuations of the stocks fully reflected
near-term operating potential. Also during the period, new proceeds
2
<PAGE>
ADVANTUS CORNERSTONE FUND
MARCH 31, 1996
were invested in economically sensitive equities whose valuation did not fully
reflect our projection for stronger future operating performance. Stocks in this
category include Parker-Hannifin, Ford Motor and Melville Corp.
OUTLOOK
As expected, economically sensitive stocks performed well during the period.
Looking forward, we will continue to look for opportunities to invest in
economically sensitive companies on any weakness in the forthcoming earnings
reports. This includes certain technology stocks that have begun to show better
value as growth rates and earnings short-falls become better known to the
market. We will also look for opportunities to take profits in selected
financial stocks as they reach our target valuations.
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
On the following two charts you can see how the total return for each of the
three classes of shares of the Advantus Cornerstone Fund compared to the S&P 500
Barra Value Index and the Consumer Price Index. The lines in each graph
represent the cumulative total return of a hypothetical $10,000 investment made
on the inception date of each class of shares of the Advantus Cornerstone Fund
(September 16, 1994 for Class A and Class B and March 1, 1995 for Class C)
through March 31, 1996.
CLASS A AND B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
Class A:
One year 26.30%
Since inception 19.50%
Class B:
One Year 26.80%
Since inception 19.80%
Class A Class B S&P 500 Barra Index CPI
09/16/94 10,000.00 10,000.00 10,000.00 10,000.00
09/30/94 9,374.00 9,870.00 9,824.00 10,054.00
09/30/95 11,659.00 11,708.00 12,582.00 10,275.00
03/31/96 13,163.00 13,213.00 14,254.00 10,436.00
</TABLE>
*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
MARCH 31, 1996
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 31.8%
Since inception (3/1/95) 31.8%
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
3/31/96 13,505 13,441 10,305
</TABLE>
The preceding 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 applicable
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. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
4
<PAGE>
ADVANTUS CORNERSTONE FUND
MARCH 31, 1996
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------ ------ ----------- -----------
<S> <C> <C> <C>
Federated Department Stores... 62,400 $ 2,012,400 5.2%
Grace & Co.................... 24,100 1,885,825 4.9%
Owens Corning................. 41,300 1,657,163 4.3%
Parker Hannifin Corporation... 41,900 1,571,250 4.0%
International Business
Machines Corporation......... 13,100 1,455,738 3.8%
Melville Corporation.......... 36,700 1,316,612 3.4%
Columbia Gas System, Inc...... 28,616 1,312,759 3.4%
First Chicago Corporation..... 31,100 1,290,650 3.3%
PNC Bank Corporation.......... 41,900 1,288,425 3.3%
Central & Southwest
Corporation.................. 44,800 1,276,800 3.3%
----------- ---
$15,067,622 38.9%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 11.5%
Consumer Goods and Services 28.8%
Credit Sensitive 24.3%
Technology 7.0%
Intermediate Goods and Services 25.5%
Cash and Other
Assets/Liabbilities 2.9%
</TABLE>
5
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
COMMON STOCKS (97.1%)
CAPITAL GOODS (11.5%)
Machinery (11.5%)
20,000 ITT Hartford Group...................... $ 980,000
16,200 ITT Industries.......................... 413,100
41,900 Parker Hannifin Corporation............. 1,571,250
43,775 Reading & Bates Corporation (b)......... 864,556
31,755 United Dominion Industries.............. 770,059
------------
4,598,965
------------
CONSUMER GOODS AND SERVICES (28.8%)
Consumer Goods (4.1%)
14,489 Columbia/HCA Healthcare
Corporation............................ 836,740
17,200 Harcourt General, Inc................... 780,450
------------
1,617,190
------------
Consumer Services (5.0%)
49,400 Bowne & Company, Incorporated........... 901,550
16,300 Knight-Ridder, Inc...................... 1,110,437
------------
2,011,987
------------
Food (2.0%)
20,100 Kroger Company (b)...................... 814,050
------------
Retail (8.3%)
62,400 Federated Department Stores (b)......... 2,012,400
36,700 Melville Corporation.................... 1,316,612
------------
3,329,012
------------
Consumer Cyclicals (9.4%)
31,100 Ford Motor.............................. 1,069,062
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
41,300 Owens Corning (b)....................... $ 1,657,163
39,600 USG Corporation (b)..................... 1,004,850
------------
3,731,075
------------
CREDIT SENSITIVE (24.3%)
Finance (21.1%)
18,100 American Express Company................ 893,688
21,801 Beneficial Corporation.................. 1,256,283
31,100 First Chicago Corporation............... 1,290,650
32,000 Lehman Brothers Holdings, Inc........... 856,000
41,900 PNC Bank Corp........................... 1,288,425
49,568 Prudential Reinsurance Holdings, Inc.... 1,171,044
20,500 RLI Corporation......................... 507,375
35,000 TIG Holdings Inc........................ 1,137,500
------------
8,400,965
------------
Utilities (3.2%)
44,800 Central & Southwest Corporation......... 1,276,800
------------
INTERMEDIATE GOODS AND SERVICES (25.5%)
Energy (9.3%)
28,616 Columbia Gas System, Inc................ 1,312,759
5,000 Repsol (c).............................. 186,875
20,500 Tidewater Incorporated.................. 779,000
31,900 USX--Marathon Group..................... 614,075
41,300 YPF Sociedad Anonima (c)................ 831,162
------------
3,723,871
------------
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
Materials (12.9%)
36,000 Century Aluminum Company (b)............ $ 468,000
28,800 Citation
Corporation (b)........................ 363,600
4,500 Cytec Industries
Inc (b)................................ 380,250
25,700 Fort Howard Corporation (b)............. 578,250
24,100 Grace & Company......................... 1,885,825
14,996 Kimberly-Clark Corporation.............. 1,117,202
29,083 Sterling Chemicals (b).................. 367,173
------------
5,160,300
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
Transportation (3.3%)
7,600 Burlington Northern Santa Fe............ $ 624,150
25,900 Teekay Shipping Corporation (c)......... 676,637
------------
1,300,787
------------
TECHNOLOGY (7.0%)
20,300 Rohr Incorporated (b)................... 365,400
7,700 Xerox Corporation....................... 966,350
13,100 International Business Machines
Corporation............................ 1,455,738
------------
2,787,488
------------
Total common stocks
(cost: $34,045,969) ................................... 38,752,490
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.6%)
$ 695,000 U.S. Treasury Bill............................ 5.09% 05/16/96 690,330
500,000 U.S. Treasury Bills........................... 5.08%-5.12% 06/13/96 494,680
250,000 GTE Northwest CP.............................. 5.47% 04/09/96 249,590
------------
Total short-term securities (cost: $1,435,166)........................ 1,434,600
------------
Total investments in securities (cost: $35,481,135) (d)............... $ 40,187,090
------------
------------
</TABLE>
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 4.3% of net assets in foreign securities as of March 31,
1996.
(d) At March 31, 1996 the cost of securities for federal income tax purposes
was $35,483,799. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation..................... $ 4,879,480
Gross unrealized depreciation..................... (176,189)
------------
Net unrealized appreciation....................... $ 4,703,291
------------
------------
</TABLE>
7
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $35,481,135).............................................. $ 40,187,090
Cash in bank on demand deposit....................................................... 126,536
Receivable for Fund shares sold...................................................... 118,748
Dividends receivable................................................................. 42,774
Organizational costs................................................................. 37,921
------------
Total assets..................................................................... 40,513,069
------------
LIABILITIES
Payable for Fund shares repurchased.................................................. 91
Payable for investment securities purchased.......................................... 538,122
Payable to Adviser................................................................... 83,213
------------
Total liabilities................................................................ 621,426
------------
Net assets applicable to outstanding capital stock................................... $ 39,891,643
------------
------------
Represented by:
Capital stock--$.01 par value (note 1)............................................. $ 29,417
Additional paid-in capital......................................................... 32,365,842
Distributions in excess of net investment income................................... (6,436)
Accumulated net realized gains from investments.................................... 2,796,865
Unrealized appreciation of investments............................................. 4,705,955
------------
Total--representing net assets applicable to outstanding capital stock........... $ 39,891,643
------------
------------
Net assets applicable to outstanding Class A Shares.................................. $ 36,117,482
------------
------------
Net assets applicable to outstanding Class B Shares.................................. $ 3,381,186
------------
------------
Net assets applicable to outstanding Class C Shares.................................. $ 392,975
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,635,552.............................................. $ 13.70
------------
------------
Class B--Shares outstanding 248,738................................................ $ 13.59
------------
------------
Class C--Shares outstanding 28,914................................................. $ 13.59
------------
------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1995 TO MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 50,342
Dividends.......................................................................... 239,364
------------
289,706
------------
Expenses (note 4):
Investment advisory fee............................................................ 139,430
Distribution fees--Class A......................................................... 48,412
Distribution fees--Class B......................................................... 11,897
Distribution fees--Class C......................................................... 1,017
Administrative services fee........................................................ 19,600
Amortization of organizational costs............................................... 5,549
Custodian fees..................................................................... 1,682
Auditing and accounting services................................................... 6,642
Legal fees......................................................................... 1,281
Directors' fees.................................................................... 262
Registration fees.................................................................. 18,441
Printing and shareholder reports................................................... 11,798
Insurance.......................................................................... 2,710
Other.............................................................................. 7,244
------------
Total expenses................................................................... 275,965
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (32,274)
------------
Total net expenses............................................................. 243,691
------------
Investment income--net......................................................... 46,015
------------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)......................................... 3,212,988
Net change in unrealized appreciation or depreciation on investments............... 1,101,759
------------
Net gains on investments......................................................... 4,314,747
------------
Net increase in net assets resulting from operations................................. $ 4,360,762
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1995 TO MARCH 31, 1996 AND YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Operations:
Investment income--net..................................................... $ 46,015 $ 183,041
Net realized gains on investments.......................................... 3,212,988 1,821,875
Net change in unrealized appreciation or depreciation on investments....... 1,101,759 3,101,643
------------ ------------
Increase in net assets resulting from operations....................... 4,360,762 5,106,559
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A.................................................................. (51,446) (231,132)
Class B.................................................................. -- (5,632)
Class C.................................................................. (118) (87)
Excess of net investment income:
Class A.................................................................. (6,421) --
Class C.................................................................. (15) --
Net realized gains on investments:
Class A.................................................................. (2,024,993) (56,912)
Class B.................................................................. (141,042) (1,628)
Class C.................................................................. (9,744) (7)
------------ ------------
Total distributions.................................................... (2,233,779) (295,398)
------------ ------------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A.................................................................. 4,346,369 14,465,694
Class B.................................................................. 1,534,469 1,365,600
Class C.................................................................. 316,472 42,221
Shares issued as a result of reinvested dividends:
Class A.................................................................. 462,422 15,156
Class B.................................................................. 141,042 7,260
Class C.................................................................. 9,846 94
Payments for redemption of shares:
Class A.................................................................. (145,506) (172,556)
Class B.................................................................. (100,258) (41,569)
Class C.................................................................. (2,257) --
------------ ------------
Increase in net assets from capital share transactions................. 6,562,599 15,681,900
------------ ------------
Total increase in net assets........................................... 8,689,582 20,493,061
Net assets at beginning of period............................................ 31,202,061 10,709,000
------------ ------------
Net assets at end of period [including (distributions in excess of)
undistributed net investment income of ($6,436) and $0, respectively]....... $ 39,891,643 $ 31,202,061
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(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 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 period
declines as the amount of the purchase increases and ranges 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 charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses 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:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
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
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
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 decrease
distributions in excess of net investment income and decrease additional paid-in
capital by $5,549.
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 period from October 1, 1995 to March 31, 1996, purchases of
securities and proceeds from sales, other than temporary investments in
short-term securities aggregated $33,402,035 and $29,154,236, 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 Capital 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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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.
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, respectively. The Class
B and Class C 1.00 percent fee is 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 $32,274 for the period from October 1, 1995 to March 31, 1996.
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, 1996, the administrative service fee for
the Fund was $3,100 per month. Effective February 1, 1996, the administrative
service fee is $3,600 per month.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $95,378.
As of March 31, 1996, Minnesota Mutual and subsidiaries and the directors
and officers of the Fund as a whole own the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ ---------------------
<S> <C> <C>
Class A................................. 2,132,493 80.9%
Class B................................. 8,115 3.3%
Class C................................. 989 3.4%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $1,281.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(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 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 period from October 1, 1995 to March 31, 1996
and the year ended September 30, 1995 for Class A and Class B shares and the
period from October 1, 1995 to March 31, 1996 and from March 1, 1995 to
September 30, 1995 for Class C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
--------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold..................................................... 333,123 1,292,691 118,404 120,786 24,682 3,617
Issued for reinvested distributions...................... 36,020 1,391 11,248 664 767 8
Redeemed................................................. (11,053) (15,257) (7,691) (3,406) (160) --
--------- ---------- --------- --------- --------- ---------
358,090 1,278,825 121,961 118,044 25,289 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
---------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, SEPTEMBER 16,
1995 TO YEAR ENDED 1994 (A) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 (E) 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 12.96 $ 10.63 $ 10.77
------- ------- -------
Income from investment operations:
Net investment income (loss).................... .02 .12 (.01)
Net gains or losses on securities (both realized
and unrealized)................................ 1.56 2.42 (.15)
------- ------- -------
Total from investment operations.............. 1.58 2.54 (.14)
------- ------- -------
Less distributions:
Dividends from net investment income............ (.02) (.16) --
Distributions from capital gains................ (.82) (.05) --
------- ------- -------
Total distributions........................... (.84) (.21) --
------- ------- -------
Net asset value, end of period.................... $ 13.70 $ 12.96 $ 10.63
------- ------- -------
------- ------- -------
Total return (b).................................. 12.9%(c) 24.4% (1.3)%(d)
Net assets, end of period (in thousands).......... $ 36,117 $ 29,520 $ 10,616
Ratio of expenses to average daily net assets
(f).............................................. 1.33%(g) 1.35% .05%(h)
Ratio of net investment income (loss) to average
daily net assets (f)............................. .34%(g) 1.01% .07%(h)
Portfolio turnover rate (excluding short-term
securities)...................................... 88.4% 160.1% 8.1%
Average commission rate on common stock
transactions..................................... $ .0844 N/A N/A
</TABLE>
- ---------
(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 front end and contingent deferred sales
charges.
(c) Total return is presented for the period from October 1, 1995, to March 31,
1996.
(d) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(e) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995, the
Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(f) The Fund's Distributor and Adviser voluntarily waived or absorbed $32,274,
$83,746 and $1,872 in expenses for the period from October 1, 1995 to March
31, 1996, the year ended September 30, 1995 and the period from September
16, 1994 to September 30, 1994, respectively. If Class A shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 1.53%, 1.81% and .07%, respectively, and the ratio of
net investment income to average daily net assets would have been .14%, .56%
and .05%, respectively.
(g) Adjusted to an annual basis.
(h) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------- -------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, SEPTEMBER 16, OCTOBER 1, MARCH 1,
1995 TO YEAR ENDED 1994 (A) TO 1995 TO 1995 (A) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1996 1995 (I) 1994 1996 1995
--------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.90 $ 10.63 $ 10.77 $ 12.90 $ 10.79
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss).......... (.02) .02 (.01) (.01) .02
Net gains or losses on securities
(both realized and unrealized)....... 1.53 2.41 (.13) 1.53 2.14
------ ------ ------ ------ ------
Total from investment
operations......................... 1.51 2.43 (.14) 1.52 2.16
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.. -- (.11) -- (.01) (.05)
Distributions from capital gains...... (.82) (.05) -- (.82) --
------ ------ ------ ------ ------
Total distributions................. (.82) (.16) -- (.83) (.05)
------ ------ ------ ------ ------
Net asset value, end of period.......... $ 13.59 $ 12.90 $ 10.63 $ 13.59 $ 12.90
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total return (b)........................ 12.4%(c) 23.2% (1.3)%(d) 12.4%(e) 20.1%(e)
Net assets, end of period (in
thousands)............................ $ 3,381 $ 1,635 $ 93 $ 393 $ 47
Ratio of expenses to average daily net
assets (f)............................ 2.23%(g) 2.25% .09%(h) 2.22%(g) 2.25%(g)
Ratio of net investment income (loss) to
average daily net assets (f).......... (.54)%(g) .05% .03%(h) (.51)%(g) (.07)%(g)
Portfolio turnover rate (excluding
short-term securities)................ 88.4% 160.1% 8.1% 88.4% 160.1%
Average commission rate on common stock
transactions.......................... $ .0844 N/A N/A $ .0844 N/A
</TABLE>
- ---------
(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 front-end and contingent deferred sales
charges.
(c) Total return is presented for the period from October 1, 1995, to March 31,
1996.
(d) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(e) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(f) The Fund's Distributor and Adviser voluntarily waived or absorbed $32,274,
$83,746 and $1,872 in expenses for the period from October 1, 1995 to March
31, 1996, the year ended September 30, 1995 and the period from September
16, 1994 to September 30, 1994, respectively. If Class B shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 2.23%, 2.45%, and .10%, respectively, and the ratio
of net investment income (loss) to average daily net assets would have been
(.14)%, (.15)% and .02%, respectively. If Class C shares had been charged
for these expenses, the ratio of expenses to average daily net assets would
have been 2.22% and 2.34%, respectively, and the ratio of net investment
income (loss) to average daily net assets would have been (.51)% and (.16)%,
respectively, for the period from October 1, 1995 to March 31, 1996 and the
period from March 1, 1995 to September 30, 1995.
(g) Adjusted to an annual basis.
(h) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(i) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995, The
Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
16
<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 your fund account--subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the 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.
17
<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. The
proceeds will be sent by check to the address of record for the account. Amounts
over $1,000 may be wire transferred to your personal bank account. The
prevailing wire charge will be added to the withdrawal amount. To set this up,
please send a voided check from your bank. Depending on the performance of the
underlying investment options, the 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. manages eight mutual funds containing $301
million in assets in addition to $1.2 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
18
<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.48648 5/96
