<PAGE>
[LOGO]
Semi-Annual Report to Shareholders
Advantus Cornerstone Fund
March 31, 1998
<PAGE>
ADVANTUS CORNERSTONE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 9
STATEMENT OF OPERATIONS 10
STATEMENTS OF CHANGES IN NET ASSETS 11
NOTES TO FINANCIAL STATEMENTS 12
SHAREHOLDER SERVICES 18
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
Investors experienced a positive financial environment with moderate economic
growth and low inflation throughout the six-month reporting period. Fears of
inflation in our economy have dissipated as negative economic events in Asia
unfolded and took on global implications earlier in the reporting period.
The "Asian Flu" severely affected several Far Eastern currencies and stock
markets, leaving a trail of bankruptcies, uncertainties, and fears in its wake.
In fact, a "flight to quality" poured assets into U.S. markets, particularly the
bond market, which is a popular destination for investors during periodic
flights to quality.
Broadly speaking, both equity and fixed income securities have demonstrated
notable results this reporting period. Indices, such as the S&P 500,* which
returned 16.3 percent at the end of the six-month period; and The Lehman
Brothers Government Corporate Bond Index,** which returned 4.8 percent for the
same period, reflected the GENERAL strength of the equity and fixed income
markets respectively.
As investors, we all enjoy "market watching." We have witnessed the financial
markets change, sometimes significantly, because of actual events or because of
mere perceptions in those markets. Keeping a long-range view of investing is
important because it smoothes out the highs and lows. We believe that investors
derive the greatest benefit by maintaining a long-range perspective on
investing.
Investors were notified earlier in a supplement to the Fund prospectus about a
change in the Fund's manager. Gary Aster now manages the Advantus Cornerstone
Fund. Gary joined Advantus on March 9, 1998. His specialty is value investing,
and he brings 24 years of investment experience to the Value Team at Advantus.
Gary's commentary on the Fund's performance for this six-month period follows in
your report.
Thank-you for investing with Advantus.
Sincerely,
[SIGNATURE]
Robert E. Hunstad, President
Advantus Funds
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall. The Index includes
approximately 380 industrials, 10 transportations, 45 financials, and 65
utilities.
**The Lehman Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and The Lehman Brothers
Corporate Bond Index which includes all publicly issued, fixed rate,
nonconvertible investment grade dollar-denominated, SEC registered corporate
debt.
<PAGE>
ADVANTUS CORNERSTONE FUND
PERFORMANCE UPDATE
[PHOTO]
GARY ASTER, 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 Cornerstone Fund's performance for the six month period ended March 31, 1998
for each class of shares offered is as follows:
<TABLE>
<S> <C>
Class A.................................. 1.5 percent*
Class B.................................. .9 percent*
Class C.................................. .8 percent*
</TABLE>
The Fund's benchmark index, the Russell 1000 Value Index,** earned 16.6 percent
for the same period.
In prior reporting periods, the S&P Barra Value Index+ was used as the Fund's
benchmark. The current benchmark, the Russell 1000 Value Index,** better fits
our stated investment objective than did the S&P Barra Value Index.+
PORTFOLIO ANALYSIS
The Advantus Cornerstone Fund significantly underperformed during the six-month
reporting period ended March 31, 1998. During this the six-month reporting
period, the Fund's level of exposure to various economic sectors had a
significant impact on its total return relative to the overall markets. Some
company-specific issues chipped away at the Fund's performance. Several
securities were liquidated because they demonstrated long-term threats to the
Fund. For example, in the Waste Management Sector, WMX Technologies, Inc (WMX)
was eliminated because of their earnings loss as well as key management changes
that threatened investors' confidence in the firm.
The Energy sector proved to be the worst performing sector, down nearly 20
percent. This was due to the sharp drop in the price of oil. Because the Fund
was heavily weighted in Energy stocks, and that sector performed so poorly this
reporting period, the Fund's performance significantly lagged the overall market
and certain value-oriented indices.
The individual companies currently held in the Fund, including those within the
Energy sector, have solid fundamentals and are well managed. Most importantly,
they are selling at quite reasonable relative valuations and should--over
time--perform well regardless of occasional speculative ebbs and flows in the
overall markets.
The much-publicized Asian economic problems began to have a negative impact on
many companies' earnings prospects, which, in turn, created a difficult
environment for stocks in general. The Fund was not immune from these events and
prices of its holdings that had links to Asian economies declined accordingly. A
specific holding that impacted the Fund's return was Lam Research Corporation
(LRCX), a Technology stock that we held for much of the reporting period. LRCX
manufactures its products in the U.S.
2
<PAGE>
ADVANTUS CORNERSTONE
FUND
MARCH 31, 1998
and exports them to Asian markets. Consequently, the Far Eastern currency
debacle had a negative effect on Lam Research's earnings. In addition, LRCX
stock declined in anticipation of downward earnings revisions.
Our positions in the Health Care and Utility sectors performed well during the
reporting period and the Fund's holdings in these areas met or surpassed
earnings expectations.
We have been examining each security within the Fund to ensure that each fits
within our value investing style. Even though the Fund's overweighting in Energy
stocks affected the six-month performance, all of these stocks are good values
today and fit the value considerations for the Fund.
Our focus has been--and will remain--on companies that offer both low relative
valuations and expected improvements in operating performance.
OUTLOOK
Looking ahead, we expect the Fund's performance to improve as oil and gas prices
stabilize and then begin to improve. The overall market's recovery from the
events described above has been robust but selective. Notably, energy related
stocks and retail stocks have lagged recovery in the overall market. We
anticipate that these sectors will likely gain momentum as they seek to achieve
their financial goals.
*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. Investment returns and principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
**The Russell 1000 Value Index contains stock from the Russell 1000 with low
book to price ratio. The Russell 1000 are the 1,000 largest companies in the
Russell 3000. The Russell 3000 is an unmanaged index of 3,000 common stocks
which represents approximately 98 percent of the U.S. market.
+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, 1998
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS
CORNERSTONE FUND, S&P 500 BARRA VALUE INDEX, RUSSELL 1000 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, the Russell 1000 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, 1998.
CLASS A AND B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C> <C>
Class A:
One year 16.7%
Since inception (9/16/94) 22.3%
Class B:
One year 16.7%
Since inception (9/16/94) 22.6%
Class A Class B S&P 500 Barra Value Index Russell 1000 Value Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000 $10,000
9/30/94 9,374 9,870 9,824 9,743 10,054
9/30/95 11,659 11,708 12,582 12,441 10,275
9/30/96 14,517 14,649 14,929 14,673 10,570
9/30/97 20,085 20,400 20,784 20,880 10,818
3/31/98 20,376 20,580 23,700 24,355 10,865
</TABLE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 21.5%
Since inception (3/1/95) 26.2%
Class C S&P 500 Barra Value Index CPI Russell 1000 Value Index
3/01/95 $10,000 $10,000 $10,000 $10,000
9/30/95 12,013 11,865 10,146 12,107
9/30/96 14,846 14,078 10,437 14,673
9/30/97 20,354 19,599 10,682 20,880
3/31/98 20,519 22,348 10,728 24,355
</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.
4
<PAGE>
ADVANTUS CORNERSTONE
FUND
MARCH 31, 1998
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 professional'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.
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------ ------ ----------- -----------
<S> <C> <C> <C>
Hormel Foods Corp............. 191,514 $ 7,433,137 5.2%
Everest Reinsurance
Holdings..................... 177,590 7,303,389 5.1%
Federated Department Stores... 99,100 5,134,619 3.6%
Humana........................ 201,500 4,999,719 3.5%
Enron Oil & Gas............... 207,300 4,754,944 3.3%
Banc One Corporation.......... 73,810 4,668,482 3.3%
Valero Energy Corporation..... 133,300 4,448,887 3.1%
Sovereign Bancorp
Incorporated................. 242,060 4,402,474 3.1%
NationsBank Corp.............. 59,000 4,303,312 3.0%
El Paso Natural Gas Company... 60,677 4,281,521 3.0%
----------- ---
$51,730,484 36.2%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 5.4%
Transportation .4%
Technology 3.2%
Health Care 3.3%
Capital Goods 5.4%
Financial 23.4%
Communication Services 7.0%
Basic Materials 7.4%
Energy 17.0%
Consumer Staples 8.5%
Consumer Cyclical 9.2%
Utilities 9.8%
</TABLE>
5
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------
<C> <S> <C>
COMMON STOCK (94.6%)
BASIC MATERIALS (7.4%)
Aluminum (1.9%)
37,200 Century Aluminum Company......................... $ 558,000
37,900 Reynolds Metals Company.......................... 2,328,481
------------
2,886,481
------------
Chemicals (3.5%)
20,200 Cytec Industries, Inc. (b)....................... 1,112,262
125,500 Morton International, Inc........................ 4,117,969
6,125 Quest Diagnostics, Inc. (b)...................... 102,977
------------
5,333,208
------------
Paper and Forest (2.0%)
67,037 Fort James Corporation........................... 3,071,133
------------
CAPITAL GOODS (5.4%)
Aerospace/Defense (2.8%)
38,000 Lockheed Martin Corporation...................... 4,275,000
------------
Manufacturing (1.1%)
2,034 United Dominion Industries....................... 65,978
73,000 Walter Industries Incorporated (b)............... 1,560,375
------------
1,626,353
------------
Waste Management (1.5%)
213,600 Philip Services Corporation (b)(c)............... 2,229,450
------------
COMMUNICATION SERVICES (7.0%)
Telecommunication (2.1%)
47,400 AT&T Corporation................................. 3,110,625
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------
<C> <S> <C>
COMMUNICATION SERVICES--CONTINUED
Telephone (4.9%)
35,096 Bell Atlantic Corporation........................ $ 3,597,340
88,142 SBC Communications, Inc.......................... 3,845,195
------------
7,442,535
------------
CONSUMER CYCLICAL (9.2%)
Retail (9.2%)
99,100 Federated Department Stores (b).................. 5,134,619
19,400 J.C. Penney Company.............................. 1,468,337
21,800 Philips Electronics (c).......................... 1,600,937
68,200 Tandy Corporation................................ 3,205,400
101,380 Woolworth Corporation (b)........................ 2,534,500
------------
13,943,793
------------
CONSUMER STAPLES (8.5%)
Food (4.9%)
191,514 Hormel Foods Corporation......................... 7,433,137
------------
Tobacco (3.6%)
53,700 Philip Morris Companies, Inc..................... 2,238,619
101,900 RJR Nabisco Holdings Corporation................. 3,190,744
------------
5,429,363
------------
ENERGY (17.0%)
Oil (9.8%)
72,400 Amerada Hess Corporation......................... 4,221,825
34,000 Amoco Corporation................................ 2,936,750
34,300 Unocal Corporation............................... 1,326,981
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------
ENERGY--CONTINUED
<C> <S> <C>
86,000 USX-Marathon Group............................... $ 3,235,750
89,700 YPF Sociedad Anonima (c)......................... 3,049,800
------------
14,771,106
------------
Oil & Gas (7.2%)
207,300 Enron Oil & Gas.................................. 4,754,944
47,300 Ultramar Diamond Shamrock Corporation............ 1,667,325
133,300 Valero Energy Corporation........................ 4,448,887
------------
10,871,156
------------
FINANCIAL (23.4%)
Banks (7.7%)
73,810 Banc One Corporation............................. 4,668,482
29,200 Corestates Financial Corp........................ 2,620,700
59,000 NationsBank Corporation.......................... 4,303,312
------------
11,592,494
------------
Finance-Diversified (4.8%)
37,400 American Express Company......................... 3,433,787
60,000 Federal National Mortgage Association............ 3,795,000
------------
7,228,787
------------
Insurance (4.8%)
177,590 Everest Reinsurance Holdings..................... 7,303,389
------------
Real Estate Investment Trust (1.9%)
57,300 Equity Residential Properties.................... 2,879,325
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------
<C> <S> <C>
FINANCIAL--CONTINUED
Savings and Loans (4.2%)
49,700 Golden State Bancorp (b)......................... $ 1,897,919
242,060 Sovereign Bancorp Incorporated................... 4,402,474
------------
6,300,393
------------
HEALTH CARE (3.3%)
Managed Care (3.3%)
201,500 Humana (b)....................................... 4,999,719
------------
TECHNOLOGY (3.2%)
Technology (3.2%)
43,400 Bay Networks, Inc. (b)........................... 1,177,225
79,200 Electronic Data Systems Corporation.............. 3,633,300
------------
4,810,525
------------
TRANSPORTATION (.4%)
Shipping (.4%)
20,600 Teekay Shipping Corporation (c).................. 641,175
------------
UTILITIES (9.8%)
Electric Companies (7.0%)
86,000 Dominion Resources, Inc.......................... 3,612,000
130,600 Teco Energy...................................... 3,689,450
83,500 Texas Utilities Company.......................... 3,282,594
------------
10,584,044
------------
Natural Gas (2.8%)
60,677 El Paso Natural Gas Company...................... 4,281,521
------------
Total common stocks (cost: $117,829,385)...................... 143,044,712
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.1%)
$ 670,000 US Treasury Bill................................. 5.154% 04/23/98 $ 667,829
4,805,000 US Treasury Bill................................. 5.179% 05/21/98 4,771,427
175,000 US Treasury Bill................................. 5.168% 06/25/98 172,909
2,075,000 Walt Disney CP................................... 5.588% 04/03/98 2,074,019
------------------
Total short-term securities (cost: $7,686,273)..................... 7,686,184
------------------
Total investments in securities (cost: $125,515,658) (d)........... $ 150,730,896
------------------
------------------
</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 5.0% of the net assets in foreign securities as of March 31,
1998.
(d) At March 31, 1998 the cost of securities for federal income tax purposes was
$125,561,954. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $27,799,485
Gross unrealized depreciation.......... (2,630,543)
-----------
Net unrealized appreciation............ $25,168,942
-----------
-----------
</TABLE>
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing
(identified cost: $125,515,658)....... $150,730,896
Cash in bank on demand deposit......... 9,484
Receivable for Fund shares sold........ 387,142
Dividends receivable................... 216,989
Organizational costs (note 5).......... 15,723
------------
Total assets....................... 151,360,234
------------
LIABILITIES
Payable for Fund shares repurchased.... 30,537
Payable to Adviser..................... 187,575
Other payables......................... 10,425
------------
Total liabilities.................. 228,537
------------
Net assets applicable to outstanding
capital stock......................... $151,131,697
------------
------------
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)...................... $ 89,437
Additional paid-in capital........... 128,350,841
Distributions in excess of net
investment income................... (1,095)
Accumulated net realized losses from
investments......................... (2,522,724)
Unrealized appreciation on
investments......................... 25,215,238
------------
Total--representing net assets
applicable to outstanding capital
stock............................. $151,131,697
------------
------------
Net assets applicable to outstanding
Class A shares........................ $120,856,960
------------
------------
Net assets applicable to outstanding
Class B shares........................ $ 26,196,479
------------
------------
Net assets applicable to outstanding
Class C shares........................ $ 4,078,258
------------
------------
Shares outstanding and net asset value
per share:
Class A--Shares outstanding
7,134,980........................... $ 16.94
------------
------------
Class B--Shares outstanding
1,564,304........................... $ 16.75
------------
------------
Class C--Shares outstanding
244,420............................. $ 16.69
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 256,969
Dividends............................ 1,125,737
----------
Total investment income.......... 1,382,706
----------
Expenses (note 4):
Investment advisory fee.............. 540,007
Distribution fees--Class A........... 163,074
Distribution fees--Class B........... 113,109
Distribution fees--Class C........... 18,319
Administrative service fee........... 21,800
Amortization of organizational
costs............................... 5,550
Custodian fees....................... 7,795
Auditing and accounting services..... 8,670
Legal fees........................... 2,298
Directors' fees...................... 914
Registration fees.................... 26,102
Printing and shareholder reports..... 13,569
Insurance............................ 2,819
----------
Total expenses................... 924,026
Less fees and expenses waived or
absorbed by Adviser:
Class A distribution fees.......... (79,675)
----------
Total net expenses............... 844,351
----------
Investment income--net........... 538,355
----------
Realized and unrealized gains on
investments:
Net realized gains on investments
(note 3)............................ 922,743
Net change in unrealized appreciation
or depreciation on investments...... 1,124,205
----------
Net gains on investments......... 2,046,948
----------
Net increase in net assets resulting
from operations....................... $2,585,303
----------
----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1998 AND YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Investment income--net............... $ 538,355 $ 630,461
Net realized gain on investements.... 922,743 10,539,073
Net change in unrealized appreciation
or depreciation on investments...... 1,124,205 18,224,827
------------ ------------
Increase in net assets resulting
from operations................. 2,585,303 29,394,361
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A............................ (518,102) (640,427)
Class B............................ (23,354) (9,734)
Class C............................ (3,544) (1,338)
Net realized gains on investments:
Class A............................ (10,892,798) (5,575,937)
Class B............................ (2,297,711) (967,496)
Class C............................ (378,519) (158,217)
------------ ------------
Total distributions.............. (14,114,028) (7,353,149)
------------ ------------
Capital share transactions (notes 4 and
6):
Proceeds from sales:
Class A............................ 20,310,949 43,863,072
Class B............................ 6,382,060 12,068,461
Class C............................ 1,556,146 2,128,188
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 8,505,359 3,121,241
Class B............................ 2,233,800 942,926
Class C............................ 360,976 141,346
Payments for redemption of shares:
Class A............................ (5,981,768) (6,118,647)
Class B............................ (1,897,137) (2,140,767)
Class C............................ (936,154) (554,087)
------------ ------------
Increase in net assets from
capital share transactions...... 30,534,231 53,451,733
------------ ------------
Total increase in net assets..... 19,005,506 75,492,945
Net assets at beginning of period...... 132,126,191 56,633,246
------------ ------------
Net assets at end of period (including
(distributions in excess of)
undistributed net investment income of
($1,095) and $0, respectively)........ $151,131,697 $132,126,191
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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. The Fund's
investment object is to seek the long-term accumulation of capital.
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
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, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market.
12
<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.
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, 1998, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$80,478,048 and $69,234,539, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital. 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. 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.
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 Ascend Financial Services,
Inc. (Ascend), formally known as MIMLIC Sales Corporation, 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. Ascend is currently
waiving that portion of Class A distribution fees which exceeds, as a percentage
of average daily net assets, .25 percent. Prior to January 30, 1998, Ascend
waived that portion of Class A distribution fees which exceeded, as a percentage
of average daily net assets, .10 percent. Ascend waived Class A distribution
fees in the amount of $79,675 for the period ended March 31, 1998.
13
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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 $3,700, to Minnesota
Mutual for accounting, auditing, legal and other administrative services which
Minnesota Mutual provides. Prior to February 1, 1998, the administrative
services fee was $3,600.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $303,366.
As of March 31, 1998, Minnesota Mutual and subsidiaries and the directors
and officers of the Fund as a whole owned 2,263,262 Class A shares which
represents 31.7 percent of the total outstanding Class A shares.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $2,298.
(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, 1997 to March 31, 1998
and the year ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- ---------------------- --------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold......................................... 1,212,562 2,693,449 380,934 747,344 93,474 130,326
Issued for reinvested distributions.......... 530,840 203,010 142,208 63,541 23,048 9,776
Redeemed..................................... (354,751) (362,180) (114,747) (130,360) (56,055) (33,515)
---------- ---------- ---------- ---------- --------- ---------
1,388,651 2,534,279 408,395 680,525 60,467 106,587
---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- --------- ---------
</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, SEPTEMBER 16,
1997 TO YEAR ENDED SEPTEMBER 30, 1994(b) TO
MARCH 31, ------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
----------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.68 $ 15.06 $ 12.96 $ 10.63 $ 10.77
----------- ---------- -------- -------- -------------
Income from investment operations:
Net investment income (loss).......... .07 .14 .09 .12 .01
Net gains or losses on securities
(both realized and unrealized)....... .03 5.19 2.91 2.42 (.15)
----------- ---------- -------- -------- -------------
Total from investment operations.... .10 5.33 3.00 2.54 (.14)
----------- ---------- -------- -------- -------------
Less distributions:
Dividends from net investment
income............................... (.08) (.14) (.08) (.16) --
Distributions from capital gains...... (1.76) (1.57) (.82) (.05) --
----------- ---------- -------- -------- -------------
Total distributions................. (1.84) (1.71) (.90) (.21) --
----------- ---------- -------- -------- -------------
Net asset value, end of period.......... $ 16.94 $ 18.68 $ 15.06 $ 12.96 $ 10.63
----------- ---------- -------- -------- -------------
----------- ---------- -------- -------- -------------
Total return (c)........................ 1.5% 38.4% 24.5% 24.4% (1.3)%
Net assets, end of period (in
thousands)........................... $120,856 $ 107,322 $ 48,383 $ 29,520 $ 10,616
Ratio of expenses to average daily net
assets (d)(e)........................ 1.09%(g) 1.08% 1.26% 1.35% .05%(f)
Ratio of net investment income (loss) to
average daily net assets (d)(e)...... .96%(g) .85% .70% 1.01% .07%(f)
Portfolio turnover rate (excluding
short-term securities)............... 54.7% 87.7% 128.0% 160.1% 8.1%
Average commission rate on stock
transactions (h)..................... $ .0546 $ .0584 $ .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 and contingent deferred sales
charges. For periods less than one year, total return presented has not been
annualized.
(d) The Fund's Distributor voluntarily waived $79,675, $149,466 and $74,454 in
Class A distribution fees for the period ended March 31, 1998 and the years
ended September 30, 1997 and 1996, respectively. If the Fund had been
charged for these fees, the ratio of expenses to average daily net assets
would have been 1.23%, 1.28% and 1.46%, respectively, and the ratio of net
investment income to average daily net assets would have been .8%, .65% and
.50%, respectively, for Class A shares.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994. If the Fund had been charged for these expenses,
the ratios of expenses to average daily net assets would have been 1.81% and
.07%, respectively, for Class A shares, and the ratios for net investment
income to average daily net assets would have been .56% and .05%,
respectively, for Class A shares.
(f) Ratios presented for the period from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(g) Adjusted to an annual basis.
(h) 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 stocks for
the period by the total 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, SEPTEMBER 16,
1997 TO YEAR ENDED SEPTEMBER 30, 1994(b) TO
MARCH 31, ------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
----------- ---------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.52 $ 14.92 $ 12.90 $ 10.63 $ 10.77
----------- ---------- ---------- --------- --------------
Income from investment operations:
Net investment income (loss).......... .02 -- (.01) .02 (.01)
Net gains or losses on securities
(both realized and unrealized)....... (.01) 5.18 2.86 2.41 (.13)
----------- ---------- ---------- --------- --------------
Total from investment operations.... .01 5.18 2.85 2.43 (.14)
----------- ---------- ---------- --------- --------------
Less distributions:
Dividends from net investment
income............................... (.02) (.01) (.01) (.11) --
Distributions from capital gains...... (1.76) (1.57) (.82) (.05) --
----------- ---------- ---------- --------- --------------
Total distributions................. (1.78) (1.58) (.83) (.16) --
----------- ---------- ---------- --------- --------------
Net asset value, end of period.......... $ 16.75 $ 18.52 $ 14.92 $ 12.90 $ 10.63
----------- ---------- ---------- --------- --------------
----------- ---------- ---------- --------- --------------
Total return (c)........................ .9% 37.7% 23.4% 23.2% (1.3)%
Net assets, end of period (in
thousands)............................ $ 26,196 $ 21,405 $ 7,095 $ 1,635 $ 93
Ratio of expenses to average daily net
assets (d)............................ 1.93%(f) 1.98% 2.15% 2.25% .09%(e)
Ratio of net investment income (loss) to
average daily net assets (d).......... 0.12%(f) (.05)% (.11)% .05% .03%(e)
Portfolio turnover rate (excluding
short-term securities)................ 54.7% 87.7% 128.0% 160.1% 8.1%
Average commission rate on stock
transactions (g)...................... $ .0546 $ .0584 $ .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 and contingent deferred sales
charges. For periods less than one year, total return presented has not been
annualized.
(d) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994. If the Fund had been charged for these expenses,
the ratios of expenses to average daily net assets would have been 2.45% and
.10% for Class B shares and 2.34% for Class C shares. The ratios of net
investment income (loss) to average daily net assets would have been (.15%)
and .02% for Class B shares and (.16%) for Class C shares.
(e) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(f) Adjusted to an annual basis.
(g) 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 stocks for
the period by the total number of related shares purchased and sold.
16
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, YEAR ENDED SEPTEMBER MARCH 1,
1997 TO 30, 1995(b) TO
MARCH 31, ----------------------- SEPTEMBER 30,
1998 1997 1996 1995
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.48 $ 14.94 $ 12.90 $ 10.79
----------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... 0.01 -- -- .02
Net gains or losses on securities
(both realized and unrealized)....... (.03) 5.12 2.88 2.14
----------- ---------- ---------- -------------
Total from investment operations.... (.02) 5.12 2.88 2.16
----------- ---------- ---------- -------------
Less distributions:
Dividends from net investment
income............................... (.01) (.01) (.02) (.05)
Distributions from capital gains...... (1.76) (1.57) (.82) --
----------- ---------- ---------- -------------
Total distributions................. (1.77) (1.58) (.84) (.05)
----------- ---------- ---------- -------------
Net asset value, end of period.......... $ 16.69 $ 18.48 $ 14.94 $ 12.90
----------- ---------- ---------- -------------
----------- ---------- ---------- -------------
Total return (c)........................ .8% 37.1% 23.6% 20.1%
Net assets, end of period (in
thousands)............................ $ 4,079 $ 3,399 $ 1,156 $ 47
Ratio of expenses to average daily net
assets (d)............................ 1.93%(f) 1.98% 2.13% 2.25%(f)
Ratio of net investment income (loss) to
average daily net assets (d).......... 0.11%(f) (.05)% (.01)% (.07)%(f)
Portfolio turnover rate (excluding
short-term securities)................ 54.7% 87.7% 128.0% 160.1%
Average commission rate on stock
transactions (g)...................... $ .0546 $ 0.584 $ .0721 N/A
</TABLE>
17
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make four exchanges each calendar year without incurring a
transaction charge. Thereafter, there will be a $7.50 transaction charge for
each additional exchange 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 EXCHANGE: You can move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same class)
just by calling our toll free number. The Telephone Exchange and Telephone
Redemption privilege will automatically be established unless otherwise
indicated on the Account Application. Telephone Exchange and Redemption may be
changed (added/deleted) at any time by submitting a request in writing or by
completing a Service Request Form.
SYSTEMATIC EXCHANGE: You can move a set amount of money monthly from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) 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 from 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: 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.) 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
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA'S, SIMPLE IRA's, 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 or wire
transferred to your bank of record for the account. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Exchange and Telephone Redemption privilege will
automatically be established unless
18
<PAGE>
otherwise indicated on the Account Application. Telephone Exchange and
Redemption may be changed (added/deleted) at any time by submitting a request in
writing or by completing 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 will receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
statements to help you track all of your Advantus Fund investments and annual
tax statements. Semi-annual 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 personal information
and assistance directly from Advantus Shareholder Services, call
(1-800-665-6005). Advantus Account Representatives are available Monday through
Friday from 8 a.m. to 4:45 p.m. Central Time. 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. on Saturday. This system allows you to access current net asset values
and account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc. (formerly known as
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. To find a Registered Representative near you, call the toll-free
service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use the Automatic 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 twelve mutual funds containing
$2.7 billion in assets in addition to $2.1 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
19
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
<PAGE>
ASCEND FINANCIAL SERVICES, INC. BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
F.48648 Rev. 5-1998
