<PAGE>
[LOGO]
SEMI-ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS CORNERSTONE FUND
MARCH 31, 1997
[GRAPHIC]
<PAGE>
ADVANTUS CORNERSTONE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 8
STATEMENT OF OPERATIONS 9
STATEMENTS OF CHANGES IN NET ASSETS 10
NOTES TO FINANCIAL STATEMENTS 11
SHAREHOLDER SERVICES 17
<PAGE>
April 30, 1997 [PHOTO]
Dear Shareholders:
The last six months have provided investors with some high points and some low.
At year end 1996, the stock market exceeded nearly all expectations. Driven by
ideal fundamentals, combined with unprecedented levels of money flowing into the
market, S&P 500 operating earnings grew by nine percent, while the total return
for the S&P 500 Index was over 20 percent. This trend continued into the first
quarter 1997.
Investors started reacting to possible Federal Reserve action to curb the
economy in the second half of February. Even before short-term money rates were
raised by 1/4 percent at the end of March, the stock market started to drop.
After reaching a high on February 19, the S&P 500 declined by 7.3 percent
resulting in a 2.7 percent increase for the quarter. The largest companies in
the S&P 500 outperformed all other companies and were the driving force behind
the Index.
The investment grade bond market posted low single digit returns at the end of
1997. The Fed's increase in money rates had a negative impact on bond prices. At
the end of the first quarter 1997, the interest rate on the two year Treasury
note increased 54 basis points to yield 6.41 percent. The 30-year U.S. Treasury
Bond closed the period yielding 7.10 percent, 46 basis points higher for the
quarter.
The long-term outlook continues to be favorable. We expect economic growth to
slow to around 2.5 percent from 3.2 percent last year as the result of the
tighter money policy. In this environment, the current level of interest rates
should reward bond investors with historically higher real rates of return which
may eventually translate into bond price appreciation. For 1997, we still
believe investors may see high single digit bond returns. The growth in equity
values should slow as corporate profits decline during the year, to
approximately half the rate of 1996.
Moderate economic growth, low inflation, rising corporate profits, a declining
Federal deficit and strong corporate cash flow provide the catalyst for what we
believe will be a positive financial environment for the balance of the year.
Determining which investments will perform well in both the near and long-term
requires professional experience. Advantus Capital Management, Inc. offers a
family of ten funds designed to help you reach your financial goals with a
thoughtful, well-conceived investment strategy.
Sincerely,
/s/ Paul Gooding
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
For the six month period ended March 31, 1997, the Advantus Cornerstone
Fund's three classes of shares offered posted the following returns:
<TABLE>
<S> <C>
Class A.......................... 14.2 percent*
Class B.......................... 14.1 percent*
Class C.......................... 13.8 percent*
</TABLE>
The S&P 500** returned 11.2 percent and the S&P Barra Value Index+ returned 11.4
percent for the same period.
PORTFOLIO RECAP
The five Fund positions that contributed the most to relative performance
during the six months were as follows:
- -One of the ten largest positions in the Fund, El Paso Energy-- natural gas
distribution, appreciated 30.4 percent during the six months.
- -In the paper & forest products industry Fort Howard Paper--tissue paper,
rose 27.7 percent.
- -The third largest contributor to performance was the aluminum industry,
Aluminum Company of America and Reynolds Metals, which rose 7 percent and
10.6 percent, respectively.
- -A timely sale of Du Pont--chemicals, and purchase of Witco--also chemicals,
made positions in chemicals the fourth largest contributor to portfolio
performance for the six month period.
- -Another top ten holding, Fruit of the Loom--apparel manufacturing--gained
9.6 percent. All of these companies remain in the portfolio with the
exception of Du Pont.
The biggest drag on Fund performance, relative to the S&P 500, was a lack of
representation in the electronics industry in the fourth calendar quarter of
1996. However, Advanced Micro Devices--semiconductors, which was purchased
in December and subsequently sold early in 1997, contributed meaningfully to
performance. In the first calendar quarter of 1997, holdings in the domestic
energy industry hurt Fund performance as the group was weak and the Fund was
over-weighted in this segment.
OUTLOOK
The Federal Reserve Board recently raised the Federal Funds rate. It is not
yet clear if additional increases in interest rates will be necessary to
slow the economy. While Fed action is likely to continue to be the focus of
the market, our focus remains on the shares of companies that are
undervalued with operations that are improving.
2
<PAGE>
ADVANTUS CORNERSTONE
FUND
MARCH 31, 1997
The six largest holdings in the Fund are Fruit of the Loom, Knight-Ridder,
American Stores, Everest Reinsurance, Reynolds Metals and El Paso Energy. Each
of these companies are undervalued and, in our view, earnings estimates will
continue to rise.
The portfolio has substantial representation in the shares of oil companies with
an emphasis on domestic oil refiners including: UNOCAL, Amoco, Amerada Hess,
Valero, Ultramar Diamond Shamrock, and USX-Marathon. This appears to be the most
attractive segment of the energy industry because investment in domestic
refining capacity has slowed and demand for refined products continues to grow.
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 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, 1997.
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 19.7%
Since inception (9/16/94) 22.1%
Class B:
One year 20.3%
Since inception (9/16/94) 22.6%
Class A Class B S&P 500 Barra Value Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000
9/30/94 9,374 9,870 9,824 10,054
9/30/95 11,659 11,708 12,582 10,275
9/30/96 14,517 14,649 14,929 10,570
3/31/97 16,584 16,764 16,633 10,724
</TABLE>
*HISTORICAL PERFORMANCE IS 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 IS A BROAD, UNMANAGED
INDEX OF 500 COMMON STOCKS WHICH ARE
REPRESENTATIVE OF THE U.S. STOCK
MARKET OVERALL.
+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, 1997
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 25.1%
Since inception (3/1/95) 28.6%
Class C S&P 500 Barra Value Index CPI
3/01/95 $10,000 $10,000 $10,000
9/30/95 12,013 11,865 10,146
9/30/96 14,846 14,078 10,437
3/31/97 16,892 15,684 10,589
</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 shares 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 performance is 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, 1997
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ----------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
Fruit of the Loom.................. 115,600 $4,797,400 5.9%
Knight-Ridder, Inc................. 114,573 4,568,598 5.6%
El Paso Energy Corporation......... 79,877 4,523,035 5.6%
American Stores Company............ 100,501 4,472,295 5.5%
Everett Reinsurance Holdings,
Inc.............................. 149,490 4,391,269 5.4%
Reynolds Metals Company............ 66,100 4,098,200 5.1%
TIG Holdings, Inc.................. 101,500 3,222,625 4.0%
Federated Department Stores........ 95,900 3,152,713 3.9%
UNOCAL Corporation................. 69,800 2,661,125 3.3%
YPF Sociedad Anonima............... 97,900 2,594,350 3.2%
---------- ---
$38,481,610 47.5%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 6.6%
Consumer Goods and Services 29.1%
Credit Sensitive 17.5%
Technology 2.2%
Intermediate Goods and
Services 36.7%
Cash and Other
Assets/Liabilities 7.9%
</TABLE>
5
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1997
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (92.1%)
CAPITAL GOODS (6.6%)
Machinery (6.6%)
76,900 ITT Industries............................... $ 1,720,638
55,600 Parker Hannifin Corporation.................. 2,376,900
71,401 United Dominion Industries................... 1,740,399
------------
5,837,937
------------
CONSUMER GOODS AND SERVICES (29.1%)
Consumer Services (5.2%)
114,573 Knight-Ridder, Incorporated.................. 4,568,598
------------
Food (3.5%)
55,197 Hormel Foods Corporation (b)................. 1,414,423
32,400 Kroger Company (b)........................... 1,644,300
------------
3,058,723
------------
Retail (10.8%)
100,501 American Stores Company...................... 4,472,295
40,800 CVS Corporation.............................. 1,881,900
95,900 Federated Department Stores (b).............. 3,152,713
------------
9,506,908
------------
Consumer Cyclicals (9.6%)
42,000 Corning, Incorporated........................ 1,863,750
55,600 Ford Motor................................... 1,744,450
115,600 Fruit of the Loom (b)........................ 4,797,400
6,125 Quest Diagnostics Incorporated (b)........... 91,109
------------
8,496,709
------------
CREDIT SENSITIVE (17.5%)
Finance (11.7%)
44,970 Chubb Corporation (b)........................ 2,422,759
149,490 Everest Reinsurance Holdings, Incorporated... 4,391,269
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
18,300 Sovereign Bancorp, Incorporated (b).......... $ 219,600
101,500 TIG Holdings, Incorporated................... 3,222,625
------------
10,256,253
------------
Utilities (5.8%)
12,800 Bell Atlantic Corporation (b)................ 779,200
41,900 Bellsouth Corporation (b).................... 1,770,275
18,400 Nynex Corporation (b)........................ 839,500
45,897 Pacific Telesis Group (b).................... 1,732,612
------------
5,121,587
------------
INTERMEDIATE GOODS AND SERVICES (36.7%)
Energy (21.2%)
41,600 Amerada Hess Corporation..................... 2,204,800
21,500 Amoco Corporation............................ 1,862,438
79,877 El Paso Energy Corporation................... 4,523,035
30,200 Ultramar Diamond Shamrock Corporation........ 958,850
69,800 UNOCAL Corporation........................... 2,661,125
67,900 USX--Marathon Group.......................... 1,892,713
52,800 Valero Energy Corporation.................... 1,920,600
97,900 YPF Sociedad Anonima (c)..................... 2,594,350
------------
18,617,911
------------
Materials (13.1%)
25,020 Aluminum Company of America.................. 1,701,360
37,200 Century Aluminum Company..................... 627,749
</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
21,617 Champion International Corporation (b)....... $ 983,573
16,000 Cytec Industries, Inc. (b)................... 606,000
61,400 Fort Howard Corporation (b).................. 1,911,075
66,100 Reynolds Metals Company...................... 4,098,200
47,487 Witco Corporation (b)........................ 1,614,558
------------
11,542,515
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
Transportation (2.4%)
18,300 Burlington Northern Santa Fe................. $ 1,354,200
27,800 Teekay Shipping Corporation (c).............. 799,250
------------
2,153,450
------------
TECHNOLOGY (2.2%)
25,090 Compaq Computer Corporation (b).............. 1,922,521
------------
Total common stocks
(cost: $72,794,253)...................................... $ 81,083,112
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (7.4%)
$1,160,000 U.S. Treasury Bills............................... 5.24%-5.29% 05/22/97 1,151,338
2,455,000 U.S. Treasury Bill................................ 5.33% 06/19/97 2,426,686
1,340,000 Baltimore Gas & Electric CP....................... 5.35% 04/03/97 1,339,363
1,575,000 Donnelly RR CP.................................... 5.43% 04/14/97 1,571,539
-----------
Total short-term securities (cost: $6,489,211)........................... 6,488,926
-----------
Total investments in securities (cost: $79,283,464) (d).................. $87,572,038
-----------
-----------
</TABLE>
Notes to Investments in Securities
(a)_Securities are valued by procedures described in note 2 to the financial
statements.
(b)_Presently non-income producing.
(c)_The Fund held 3.7% of net assets in foreign securities as of March 31, 1997.
(d)_At March 31, 1997 the cost of securities for federal income tax purposes was
$79,283,464. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation........... $9,230,161
Gross unrealized depreciation........... (941,587)
----------
Net unrealized appreciation............. $8,288,574
----------
----------
</TABLE>
7
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying
schedule for detailed listing (identified cost:
$79,283,464)............................................... $ 87,572,038
Cash in bank on demand deposit.............................. 177,004
Receivable for Fund shares sold............................. 277,505
Dividends receivable........................................ 122,869
Organizational costs........................................ 26,822
-------------
Total assets............................................ 88,176,238
-------------
LIABILITIES
Payable for Fund shares redeemed............................ 3,018
Payable to Adviser.......................................... 119,980
-------------
Total liabilities....................................... 122,998
-------------
Net assets applicable to outstanding capital stock.......... $ 88,053,240
-------------
-------------
Represented by:
Capital stock--authorized 10 billion shares (Class A--2
billion shares, Class B--2 billion shares, Class C--2
billion shares and 4 billion shares unallocated) of $.01
par value (note 1)....................................... $ 56,957
Additional paid-in capital................................ 74,488,641
Undistributed net investment income....................... 2,077
Accumulated net realized gains from investments........... 5,216,991
Unrealized appreciation of investments.................... 8,288,574
-------------
Total--representing net assets applicable to outstanding
capital stock.......................................... $ 88,053,240
-------------
-------------
Net assets applicable to outstanding Class A Shares......... $ 72,680,045
-------------
-------------
Net assets applicable to outstanding Class B Shares......... $ 13,147,105
-------------
-------------
Net assets applicable to outstanding Class C Shares......... $ 2,226,090
-------------
-------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 4,694,826..................... $ 15.48
-------------
-------------
Class B--Shares outstanding 855,771....................... $ 15.36
-------------
-------------
Class C--Shares outstanding 145,089....................... $ 15.34
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1996 TO MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest.................................................. $ 173,362
Dividends................................................. 529,831
-----------
703,193
-----------
Expenses (note 4):
Investment advisory fee................................... 279,872
Distribution fees--Class A................................ 87,131
Distribution fees--Class B................................ 50,824
Distribution fees--Class C................................ 8,580
Administrative services fee............................... 21,600
Amortization of organizational costs...................... 5,550
Custodian fees............................................ 4,268
Auditing and accounting services.......................... 7,805
Legal fees................................................ 1,776
Directors' fees........................................... 532
Registration fees......................................... 20,011
Printing and shareholder reports.......................... 11,862
Insurance................................................. 2,980
-----------
Total expenses........................................ 502,791
Less fees and expenses waived or absorbed:
Class A distribution fees............................... (58,087)
-----------
Total net expenses.................................... 444,704
-----------
Investment income--net................................ 258,489
-----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)................ 5,631,004
Net change in unrealized appreciation or depreciation on
investments.............................................. 2,422,368
-----------
Net gains on investments.............................. 8,053,372
-----------
Net increase in net assets resulting from operations........ $ 8,311,861
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1996 TO MARCH 31, 1997 AND
YEAR ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Investment income--net.......................... $ 258,489 $ 256,939
Net realized gains on investments............... 5,631,004 6,702,261
Net change in unrealized appreciation or
depreciation on investments.................... 2,422,368 2,262,010
------------ ------------
Increase in net assets resulting from
operations................................. 8,311,861 9,221,210
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A....................................... (277,210) (241,804)
Class B....................................... (5,066) (4,243)
Class C....................................... (724) (953)
Net realized gains on investments:
Class A....................................... (5,574,463) (2,024,993)
Class B....................................... (967,474) (141,042)
Class C....................................... (158,214) (9,744)
------------ ------------
Total distributions......................... (6,983,151) (2,422,779)
------------ ------------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A....................................... 21,381,613 12,858,134
Class B....................................... 5,562,065 4,817,331
Class C....................................... 1,061,004 1,014,692
Proceeds from issuance of shares as a result of
reinvested dividends:
Class A....................................... 2,900,903 516,144
Class B....................................... 938,411 145,189
Class C....................................... 140,791 10,550
Payments for redemption of shares:
Class A....................................... (1,079,579) (540,831)
Class B....................................... (645,719) (169,208)
Class C....................................... (168,205) (19,247)
------------ ------------
Increase in net assets from capital share
transactions............................... 30,091,284 18,632,754
------------ ------------
Total increase in net assets................ 31,419,994 25,431,185
Net assets at beginning of period................. 56,633,246 31,202,061
------------ ------------
Net assets at end of period (including
undistributed net investment income of $2,077 and
$21,038, respectively)........................... $ 88,053,240 $ 56,633,246
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(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 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 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 increases and decreases in net assets
resulting 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 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>
ADVANTUS CORNERSTONE FUND
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
$5,550.
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 ended March 31, 1997, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$52,020,558 and $28,595,505, 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 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
12
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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 $58,087 for the period ended March 31, 1997.
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, equal to $3,600 per month, to
Minnesota Mutual for accounting, auditing, legal and other administrative
services which Minnesota Mutual provides.
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 $248,679.
As of March 31, 1997, 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................................................. 2,185,358 46.55%
Class C................................................. 1,097 .76%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $1,776.
(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.
13
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period from October 1, 1996 to March 31, 1997
and the year ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold.............................................. 1,361,285 933,055 359,038 349,609 68,883 74,263
Issued for reinvested distributions............... 190,719 40,364 63,294 11,527 9,745 788
Redeemed.......................................... (69,228) (38,831) (41,945) (12,529) (10,905) (1,310)
---------- --------- --------- --------- --------- ---------
1,482,776 934,588 380,387 348,607 67,723 73,741
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
</TABLE>
14
<PAGE>
ADVANTUS CORNERSTONE FUND
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, YEAR ENDED SEPTEMBER SEPTEMBER 16,
1996 TO 30, 1994(b) TO
MARCH 31, ---------------------- SEPTEMBER 30,
1997 1996 1995(a) 1994
------------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 15.06 $ 12.96 $ 10.63 $ 10.77
------------- --------- ----------- -------
Income from investment
operations:
Net investment income
(loss)..................... .07 .09 .12 (.01)
Net gains or losses on
securities (both realized
and unrealized)............ 1.99 2.91 2.42 (.15)
------------- --------- ----------- -------
Total from investment
operations............... 2.06 3.00 2.54 (.14)
------------- --------- ----------- -------
Less distributions:
Dividends from net
investment income.......... (.07) (.08) (.16) --
Distributions from capital
gains...................... (1.57) (.82) (.05) --
------------- --------- ----------- -------
Total distributions....... (1.64) (.90) (.21) --
------------- --------- ----------- -------
Net asset value, end of
period....................... $ 15.48 $ 15.06 $ 12.96 $ 10.63
------------- --------- ----------- -------
------------- --------- ----------- -------
Total return (c).............. 14.2%(e) 24.5% 24.4% (1.3)%(d)
Net assets, end of period (in
thousands)................... $ 72,680 $ 48,383 $ 29,520 $ 10,616
Ratio of expenses to average
daily net assets (f)......... 1.12%(h) 1.26% 1.35% .05%(f)
Ratio of net investment income
to average daily net assets
(f).......................... .89%(h) .70% 1.01% .07%(g)
Portfolio turnover rate
(excluding short-term
securities).................. 45.0% 128.0% 160.1% 8.1%
Average commission rate on
stock transactions (i)....... $ .0623 $ .0721 N/A N/A
</TABLE>
- ----------
(a) 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.
(b) Commencement of operations.
(c) 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 sales charges.
(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 October 1, 1996 to March 31,
1997.
(f) The Fund's Distributor and Adviser voluntarily waived or absorbed $58,087,
$74,454, $83,746 and $1,872 in expenses for the period ended March 31, 1997,
years ended September 30, 1996 and 1995 and the period ended 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 1.32%,
1.46%, 1.81% and .07%, respectively, and the ratio of net investment income
to average daily net assets would have been .69%, .50%, .56% and .05%,
respectively.
(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.
(h) Adjusted to an annual basis.
(i) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stock for
the period by the number of related shares purchased and sold.
15
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, YEAR ENDED SEPTEMBER 30, SEPTEMBER 16,
1996 TO 1994(b) TO
MARCH 31, ----------------------------- SEPTEMBER 30,
1997 1996 1995(a) 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 14.92 $ 12.90 $ 10.63 $ 10.77
------------- ------ ------ ------
Income from investment
operations:
Net investment income
(loss)..................... -- -- .02 (.01)
Net gains or losses on
securities (both realized
and unrealized)............ 2.02 2.85 2.41 (.13)
------------- ------ ------ ------
Total from investment
operations............... 2.02 2.85 2.43 (.14)
------------- ------ ------ ------
Less distributions:
Dividends from net
investment income.......... (.01) (.01) (.11) --
Distributions from capital
gains...................... (1.57) (.82) (.05) --
------------- ------ ------ ------
Total distributions....... (1.58) (.83) (.16) --
------------- ------ ------ ------
Net asset value, end of
period....................... $ 15.36 $ 14.92 $ 12.90 $ 10.63
------------- ------ ------ ------
------------- ------ ------ ------
Total return (c).............. 14.1%(e) 23.4% 23.2% (1.3)%(d)
Net assets, end of period (in
thousands)................... $ 13,147 $ 7,095 $ 1,635 $ 93
Ratio of expenses to average
daily net assets (g)......... 2.02%(i) 2.15% 2.25% .09%(h)
Ratio of net investment income
(loss) to average daily net
assets (g)................... (.02)%(i) (.12)% .05% .03%(h)
Portfolio turnover rate
(excluding short-term
securities).................. 45.0% 128.0% 160.1% 8.1%
Average commission rate on
stock transactions (j)....... $ .0623 $ .0721 N/A N/A
<CAPTION>
CLASS C
---------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, MARCH 1,
1996 TO YEAR ENDED 1995(b) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 14.94 $ 12.90 $ 10.79
------ ------ ------
Income from investment
operations:
Net investment income
(loss)..................... -- -- .02
Net gains or losses on
securities (both realized
and unrealized)............ 1.98 2.87 2.14
------ ------ ------
Total from investment
operations............... 1.98 2.87 2.16
------ ------ ------
Less distributions:
Dividends from net
investment income.......... (.01) (.01) (.05)
Distributions from capital
gains...................... (1.57) (.82) --
------ ------ ------
Total distributions....... (1.58) (.83) (.05)
------ ------ ------
Net asset value, end of
period....................... $ 15.34 $ 14.94 $ 12.90
------ ------ ------
------ ------ ------
Total return (c).............. 13.8%(e) 23.6% 20.1%(f)
Net assets, end of period (in
thousands)................... $ 2,226 $ 1,156 $ 47
Ratio of expenses to average
daily net assets (g)......... 2.02%(i) 2.13% 2.25%(i)
Ratio of net investment income
(loss) to average daily net
assets (g)................... (.01)%(i) (.01)% (.07)%(i)
Portfolio turnover rate
(excluding short-term
securities).................. 45.0% 128.0% 160.1%
Average commission rate on
stock transactions (j)....... $ .0623 $ .0721 N/A
</TABLE>
- ----------
(a) 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.
(b) Commencement of operations.
(c) 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 contingent deferred sales charges.
(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 October 1, 1996 to March 31,
1997.
(f) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(g) The Fund's Distributor and Advisor voluntarily waived or absorbed $58,087,
$74,454, $83,746 and $1,872 in expenses for the period from October 1, 1996
to March 31, 1997, the years ended September 30, 1996 and 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 2.03%, 2.15%, 2.45% and .10%,
respectively, and the ratio of net investment income (loss) to average daily
net assets would have been 0%, (.12)%, (.15)% and .02%. If Class C shares
had been charged for these expenses, the ratio of expenses to average daily
net assets would have been 2.03%, 2.13% and 2.34%, respectively, and the
ratio of net investment income (loss) to average daily net assets would have
been (.01)%, (.01)% and (.16)%, respectively, for the period from October 1,
1996 to March 31, 1997, the year ended September 30, 1996 and the period
from March 1, 1995 to September 30, 1995.
(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) Adjusted to an annual basis.
(j) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stock for
the period by the number of related shares purchased and sold.
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 Advantus 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' 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 savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPS, SIMPLE,
profit sharing, money purchase or defined benefit plans.
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. Sign up for
17
<PAGE>
telephone redemption on the Advantus Application or complete a Service Request
Form. To have the redemption automatically deposited into your checking account,
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. Some limitations apply, please refer
to the prospectus for details.
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 Advantus Shareholder Services, call 1-800-665-6005. Our
voice response system is available from 7 a.m. to 3 a.m. Central Time Monday
through Friday, and 8 a.m. to 5 p.m. Central Time 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 ten 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 eleven mutual funds containing
$2.3 billion in assets in addition to $1.4 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
Advantus Venture Fund
Advantus Index 500 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 5-97
