<PAGE>
CORNERSTONE
ADVANTUS CORNERSTONE FUND, INC.
ANNUAL REPORT TO SHAREHOLDERS DATED SEPTEMBER 30, 2000
[LOGO]
ADVANTUS-TM-
FAMILY OF FUNDS
EQUITY
[BACKGROUND GRAPHIC]
<PAGE>
ADVANTUS CORNERSTONE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 10
STATEMENT OF OPERATIONS 11
STATEMENTS OF CHANGES IN NET ASSETS 12
NOTES TO FINANCIAL STATEMENTS 13
INDEPENDENT AUDITORS' REPORT 18
FEDERAL INCOME TAX INFORMATION 19
SHAREHOLDER VOTING RESULTS 20
SHAREHOLDER SERVICES 21
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
All signs point to a soft landing in progress while the U.S. economy continues
to slow. The pressure on the Federal Reserve to further increase short-term
rates has diminished considerably. The Fed's earlier series of tightenings
appears to have successfully curbed the country's run-away growth. Inflation
remains in check; all in all, we continue to have a healthy backdrop for our
country's capital markets.
In the stock market, companies such as Intel and new economy leaders have seen
some dramatic corrections this quarter. This was a sideways correction for many,
downward for companies that disappointed investors. Value, real estate, and
small stocks' relative performance has improved this quarter. The market has
broadened, demonstrating that investors have acquired an increased appetite for
stocks other than large cap growth. We anticipate that the stock market will
remain volatile throughout the year and into next year. Equity investors should
adjust their expectations and not expect double-digit returns as the norm. We
expect positive returns for equities for the next 12 to 18 months, with above
average earnings growth.
Within the fixed income universe, corporate bonds have been the weakest
performing fixed income sector in 2000. An inverted yield curve (i.e., short-
term bonds have higher yields than long-term bonds), several Fed tightening
moves, increased event risk and equity market volatility have all negatively
impacted corporate bond performance this year. Mortgage-backed securities were
the top performer for the year followed by the government sector. We believe
that upcoming quarters will be a favorable environment for bonds.
We are continually watchful of economic and political events and circumstances
that would likely affect our new President. Significant political unrest,
military buildups, and violence in other countries may test the
President-elect's mettle. A strong Administration increases the odds that our
peace dividend will continue.
We advise investors to consider adding fixed income, value stocks and an
international component to their portfolio. As we've said before, we advise you
to stay well diversified and avoid big bets when the market environment is
uncertain.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff
President, Advantus Funds
<PAGE>
ADVANTUS CORNERSTONE FUND
PERFORMANCE UPDATE
[PHOTO]
MATTHEW NORRIS, 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 mid and large
capitalization companies
(i.e., companies with a
market capitalization of at
least $1.5 billion) at the
time of purchase. In
selecting equity securities,
the Fund invests in
securities that the
investment adviser believes
are undervalued relative to
other securities, earn low
returns with a potential for
higher returns or are
undervalued relative to their
potential for improved
operating performance and
financial strength.
- Dividends paid quarterly.
- Capital gains distributions paid annually.
PERFORMANCE
The Cornerstone Fund's performance for the year ended September 30, 2000 for
each class of shares offered is as follows:
<TABLE>
<S> <C>
CLASS A.......................... 1.26 PERCENT*
CLASS B.......................... 0.54 PERCENT*
CLASS C.......................... 0.54 PERCENT*
</TABLE>
The Fund's benchmark, the Russell 1000 Value Index,** earned 8.91 percent for
the same period.
PERFORMANCE ANALYSIS
NEVER A DULL MOMENT is a statement that describes the equity investment
environment for the past 12 months. The last three months of 1999 and the first
quarter of 2000 saw technology and growth stocks soar, while almost every other
sector had poor performance. In mid-March, this reversed with a vengeance,
sending most growth funds into negative territory year-to-date, and bringing
value funds back up.
The primary reason for this reversal was a realization that the growth rates of
many of the star technology companies were unsustainable. The Federal Reserve,
in an effort to prevent an upswing in inflation, has been raising interest rates
for nearly a year. These higher rates have begun to have an affect on the
economy. Many economic factors now point to a slow down in growth, as measured
by our country's gross domestic product. While the threat of a recession is
still very slim, it is always a possibility. So the Federal Reserve continues to
watch growth very closely. Under these conditions, the stellar earnings growth
rates of many technology companies have slowed. These stocks were extremely
expensive on almost any measure, and when they fail to meet expectations, they
come down in price significantly.
The rotation in the market shows up when individual economic sectors are
reviewed. Analysis of the Russell 1000 Value Index shows that Utilities,
Financials, Health Care and Energy were the best performers. This is a complete
turnaround from the year before. Poor performers included Basic Materials,
Telecommunications and Consumer Cyclicals. Technology is still in positive
territory, but down from its highs.
The Advantus Cornerstone Fund has undergone considerable change over the last
year. We have expanded the number of analysts working under a new team leader in
order to improve returns. Currently, the Fund is well positioned in stocks we
believe are undervalued, hold low risk, and high potential return. Current areas
of emphasis include high quality telecommunications stocks which we believe have
been unfairly sold based on the performance of a few bellwethers; and energy,
where we can find stocks at the same price as a year ago even though operating
performance has improved dramatically. The Fund holds a cash reserve, which may
be deployed into quality names as the prices come down.
2
<PAGE>
The Fund's investments in Utilities were clearly the stars. Our holdings in AES
Corporation, Enron, and Excelon Energy (companies that produce, trade and sell
electricity and natural gas) were up 123 percent over the time period, handily
outpacing the utility index, which was up 39 percent. The Financials sector also
helped performance, as investors began buying shares of financial companies
believing the end of the interest hikes was at hand. Our best performing names
in this area were Capital One and Citigroup. Energy was a strong performer, as
oil and natural gas prices were at high levels.
At the end of this reporting period, the Fund's exposure to technology hurt
performance as this sector came under pressure. Telecommunications stocks also
suffered, as several prominent companies in this space have reported poor
operating fundamentals.
OUTLOOK
In our past commentaries, we have reported that the equity returns of the past
few years were unsustainable, and that we foresaw a return to single digit
returns. For better or worse, we were accurate, and most equity indices are in
negative territory for the year-to-date 2000. This has been a tremendously
volatile year fraught with a series of market corrections. While negative
returns can be disheartening, they are also a fact of life when investing.
Markets fluctuate and it's important for investors to keep a long-term focus and
make sure their expectations are aligned with the market environment.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5.5 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 those stocks from the Russell 1000 with
low book to price ratio. The Russell 1000 is 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.
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN ADVANTUS CORNERSTONE FUND,
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 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 September 30, 2000.
CLASS A AND B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Class A:
One year -4.31%
Five year 8.68%
Since inception (9/16/94) 10.83%
Class B:
One year -4.46%
Five year 8.85%
Since inception (9/16/94) 10.98%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C> <C> <C> <C>
Russell 1000
Class A Class B Value Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000
9/30/94 $9,325 $9,870 $9,743 $10,054
9/30/95 $11,598 $11,708 $12,441 $10,275
9/30/96 $14,441 $14,649 $14,673 $10,570
9/30/97 $19,980 $20,400 $20,880 $10,818
9/30/98 $16,694 $16,947 $21,629 $10,973
9/30/99 $18,384 $18,531 $25,678 $11,261
9/30/00 $18,616 $18,782 $27,965 $11,643
</TABLE>
4
<PAGE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN:
Class C:
One year 0.54%
Five year 9.01%
Since inception (3/1/95) 11.63%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Russell 1000
Class C Value Index CPI
3/1/95 $10,000 $10,000 $10,000
9/30/95 $12,013 $12,107 $10,146
9/30/96 $14,846 $14,280 $10,437
9/30/97 $20,354 $20,320 $10,682
9/30/98 $16,838 $21,049 $10,834
9/30/99 $18,411 $24,989 $11,119
9/30/00 $18,510 $27,214 $11,497
</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 5.5 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
invest in the index itself, nor can they invest in any fund which seeks to track
the performance of the index 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.
5
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
------- -------- ----------- -----------
<S> <C> <C> <C>
Exxon Mobil Corporation................. 63,803 $ 5,686,441 6.2%
CitiGroup, Inc.......................... 89,013 4,812,265 5.2%
SBC Communications, Inc................. 72,942 3,647,100 4.0%
American International Group............ 37,027 3,543,021 3.9%
Bell Atlantic Corporation............... 57,957 2,807,292 3.1%
Nextlink Communications, Inc............ 63,400 2,230,887 2.4%
Morgan Stanley Dean Witter Discover &
Company............................... 23,540 2,152,439 2.3%
Bank of America Corporation............. 39,800 2,084,525 2.3%
Federal National Mortgage Association... 28,200 2,016,300 2.2%
Household International, Inc............ 34,100 1,930,912 2.1%
----------- ---------
$30,911,182 33.7%
=========== =========
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other Assets/Liabilities 3.7%
Consumer Cyclical 2.7%
Capital Goods 2.8%
Utilities 4.9%
Health Care 5.1%
Basic Materials 5.2%
Consumer Staples 5.3%
Technology 8.8%
Energy 13.9%
Communication Services 14.6%
Financial 33.0%
</TABLE>
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 2000
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------ ---------------
<C> <S> <C>
COMMON STOCK (96.3%)
BASIC MATERIALS (5.2%)
Aluminum (1.2%)
43,432 Alcoa, Inc....................................... $ 1,099,372
------------
Chemicals (1.6%)
26,572 E.I. DuPont de Nemours and Company............... 1,101,077
35,100 Lyondell Petrochemical Company................... 414,619
------------
1,515,696
------------
Mining (1.2%)
27,300 Phelps Dodge Corporation......................... 1,139,775
------------
Paper and Forest (1.2%)
38,900 International Paper Company...................... 1,115,944
------------
CAPITAL GOODS (2.8%)
Electrical Equipment (1.2%)
20,100 General Electric Company......................... 1,159,519
------------
Machinery (1.1%)
32,800 Deere & Company.................................. 1,090,600
------------
Office Equipment (.5%)
11,400 Lexmark International Group, Inc. (b)............ 427,500
------------
COMMUNICATION SERVICES (14.6%)
Telecommunication (1.7%)
35,300 Adelphia Business Solutions, Inc. (b)............ 416,981
40,200 MCI Worldcom, Inc. (b)........................... 1,221,075
------------
1,638,056
------------
Telephone (12.9%)
37,880 AT&T Corporation................................. 1,112,725
47,800 AT&T Corporation-Liberty Media Corp (b)......... 860,400
<CAPTION>
MARKET
SHARES VALUE(A)
---------------------------------------------------------------------------
COMMUNICATION SERVICES--CONTINUED
<C> <S> <C>
57,957 Bell Atlantic Corporation........................ $ 2,807,292
41,700 Bellsouth Corporation............................ 1,678,425
63,400 Nextlink Communications, Inc. (b)................ 2,230,887
72,942 SBC Communications, Inc.......................... 3,647,100
------------
12,336,829
------------
CONSUMER CYCLICAL (2.7%)
Auto (.8%)
31,348 Ford Motor Company............................... 793,496
------------
Retail (.6%)
11,000 Wal-Mart Stores, Inc............................. 529,375
------------
Service (1.3%)
116,025 CUC International (b)............................ 1,261,772
------------
CONSUMER STAPLES (5.3%)
Entertainment (2.7%)
44,800 The Walt Disney Company.......................... 1,713,600
18,500 Time Warner, Inc. (b)............................ 893,781
------------
2,607,381
------------
Household Products (.6%)
7,800 Procter & Gamble Company......................... 522,600
------------
Personal Care (1.2%)
27,400 Avon Products, Inc............................... 1,119,975
------------
Tobacco (.8%)
24,900 Philip Morris Companies, Inc..................... 732,994
------------
ENERGY (13.9%)
Oil (10.2%)
17,672 BP Amoco PLC (c)................................. 936,616
15,185 Chevron Corporation.............................. 1,294,521
18,600 Diamond Offshore Drilling, Inc................... 762,600
63,803 Exxon Mobil Corporation.......................... 5,686,441
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
---------------------------------------------------------------------------
ENERGY--CONTINUED
<C> <S> <C>
16,700 Royal Dutch Petroleum Company (c)................ $ 1,000,956
------------
9,681,134
------------
Oil & Gas (3.7%)
29,000 Baker Hughes, Inc................................ 1,076,625
23,000 Global Marine, Inc. (b).......................... 710,125
21,600 Nabors Industries, Inc. (b)...................... 1,131,840
10,700 Transocean Offshore, Inc......................... 627,287
------------
3,545,877
------------
FINANCIAL (33.0%)
Banks (5.6%)
39,800 Bank of America Corporation...................... 2,084,525
29,235 Chase Manhattan Corporation...................... 1,350,292
40,800 Wells Fargo & Company............................ 1,874,250
------------
5,309,067
------------
Consumer Finance (5.4%)
23,800 American Express Company......................... 1,445,850
25,300 Capital One Financial Corporation................ 1,772,581
34,100 Household International, Inc..................... 1,930,912
------------
5,149,343
------------
Finance-Diversified (8.9%)
89,013 CitiGroup, Inc................................... 4,812,265
31,300 Federal Home Loan Mortgage....................... 1,692,156
28,200 Federal National Mortgage Association............ 2,016,300
------------
8,520,721
------------
<CAPTION>
MARKET
SHARES VALUE(A)
---------------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
Insurance (5.3%)
37,027 American International Group..................... $ 3,543,021
39,500 Nationwide Financial Services, Inc............... 1,476,312
------------
5,019,333
------------
Investment Bankers/Brokers (4.9%)
10,400 Goldman Sachs Group, Inc......................... 1,184,950
19,800 Merrill Lynch & Company, Inc..................... 1,306,800
23,540 Morgan Stanley Dean Witter Discover & Company.... 2,152,439
------------
4,644,189
------------
Investment Companies (1.9%)
17,000 1,812,625
Diamonds Trust Series I..........................
------------
Real Estate Investment Trust (1.0%)
39,800 Highwoods Properties, Inc........................ 940,275
------------
HEALTH CARE (5.1%)
Drugs (2.1%)
14,900 Bristol-Myers Squibb Company..................... 851,163
8,700 Merck & Co., Inc................................. 647,606
11,875 Pfizer, Inc...................................... 533,633
------------
2,032,402
------------
Health Care-Diversified (3.0%)
10,600 Abbott Laboratories.............................. 504,163
15,000 Johnson & Johnson................................ 1,409,063
26,200 Tenet Healthcare Corporation..................... 953,025
------------
2,866,251
------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
---------------------------------------------------------------------------
TECHNOLOGY (8.8%)
<C> <S> <C>
Communications Equipment (1.7%)
46,700 McLeodUSA, Inc. (b).............................. $ 668,394
32,300 Motorola, Inc.................................... 912,475
------------
1,580,869
------------
Computer Hardware (3.8%)
26,500 Compaq Computer Corporation...................... 730,870
15,100 Gateway, Inc. (b)................................ 705,925
10,100 Hewlett-Packard Company.......................... 979,700
10,890 International Business Machines Corporation...... 1,225,125
------------
3,641,620
------------
Computer Services & Software (1.8%)
28,600 Microsoft Corporation (b)........................ 1,723,150
------------
Semiconductor Equipment (.7%)
31,200 Lam Research Corporation (b)..................... 653,250
------------
<CAPTION>
MARKET
SHARES VALUE(A)
---------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
Semiconductors (.8%)
8,400 Intel Corporation................................ $ 349,650
9,300 Texas Instruments, Inc........................... 438,844
------------
788,494
------------
UTILITIES (4.9%)
Electric Companies (3.5%)
23,200 AES Corporation (b).............................. 1,589,200
28,700 PECO Energy Company.............................. 1,738,144
------------
3,327,344
------------
Natural Gas (1.4%)
15,600 Enron Corporation................................ 1,366,950
------------
Power Products-Industrial ( - )
1,400 Southern Energy Inc.............................. 43,925
------------
Total common stock (cost: $83,063,024)........................ 91,737,703
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.8%)
156,306 Federated Prime Obligation Fund, current rate 6.460%............ 156,306
3,460,646 Provident Institutional Fund--TempFund Portfolio, current rate
6.526%......................................................... 3,460,646
-------------
Total short-term securities (cost: $3,616,952).................. 3,616,952
-------------
Total investments in securities (cost: $86,679,976) (d)......... $ 95,354,655
=============
</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 2.0% of net assets in foreign securities as of September 30,
2000.
(d) At September 30, 2000 the cost of securities for federal income tax purposes
was $88,012,103. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $16,970,324
Gross unrealized depreciation.......... (9,627,772)
-----------
Net unrealized appreciation............ $ 7,342,552
===========
</TABLE>
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value - see accompanying schedule for
detailed listing
(identified cost: $86,679,976)........ $ 95,354,655
Cash in bank on demand deposit......... 79,024
Receivable for Fund shares sold........ 1,367
Receivable for investment securities
sold.................................. 53,991
Accrued interest receivable............ 15,584
Dividends receivable................... 50,904
Other receivables...................... 2,237
------------
Total assets....................... 95,557,762
------------
LIABILITIES
Payable for investment securities
purchased............................. 243,942
Payable for Fund shares redeemed....... 15,184
Payable to Adviser..................... 13,926
------------
Total liabilities.................. 273,052
------------
Net assets applicable to outstanding
capital stock......................... $ 95,284,710
============
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............................ $ 63,317
Additional paid-in capital........... 88,613,780
Accumulated net realized losses from
investments.......................... (2,067,066)
Unrealized appreciation on
investments.......................... 8,674,679
------------
Total - representing net assets
applicable to outstanding capital
stock.............................. $ 95,284,710
============
Net assets applicable to outstanding
Class A shares........................ $ 81,389,034
============
Net assets applicable to outstanding
Class B shares........................ $ 12,615,025
============
Net assets applicable to outstanding
Class C shares........................ $ 1,280,651
============
Shares outstanding and net asset value
per share:
Class A - Shares outstanding
5,396,422............................ $ 15.08
============
Class B - Shares outstanding
848,922.............................. $ 14.86
============
Class C - Shares outstanding
86,408............................... $ 14.82
============
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 168,635
Dividends............................ 1,582,448
----------
Total investment income.......... 1,751,083
----------
Expenses (note 4):
Investment advisory fee.............. 797,770
Rule 12b-1 - Class A................. 219,141
Rule 12b-1 - Class B................. 156,522
Rule 12b-1 - Class C................. 15,842
Administrative services fee.......... 74,400
Transfer agent and shareholder
service fees....................... 98,428
Custodian fees....................... 17,830
Auditing and accounting services..... 19,643
Legal fees........................... 13,139
Directors' fees...................... 1,907
Registration fees.................... 30,215
Printing and shareholder reports..... 76,287
Insurance............................ 3,872
Other................................ 10,591
----------
Total expenses................... 1,535,587
----------
Less fees and expenses waived or
absorbed by Adviser.................. (106,763)
----------
Total net expenses............... 1,428,824
----------
Investment income - net.......... 322,259
----------
Realized and unrealized gains (losses)
on investments:
Net realized losses on investments
(note 3)........................... (1,634,621)
Net change in unrealized appreciation
or depreciation on investments..... 2,471,025
----------
Net gains on investments......... 836,404
----------
Net increase in net assets resulting
from operations...................... $1,158,663
==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Operations:
Investment income - net.............. $ 322,259 $ 998,312
Net realized gains (losses) on
investments........................ (1,634,621) 5,320,674
Net change in unrealized appreciation
or depreciation on investments..... 2,471,025 5,693,886
------------ ------------
Increase in net assets resulting
from operations................ 1,158,663 12,012,872
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A............................ (332,612) (954,423)
Class B............................ - (46,968)
Class C............................ - (5,609)
Tax return of capital:
Class A............................ (40,388) -
Class B............................ - -
Class C............................ - -
Net realized gains on investments:
Class A............................ (760,784) -
Class B............................ (151,807) -
Class C............................ (15,257) -
Excess distribution of net realized
gains:
Class A............................ (354,581) -
Class B............................ (70,753) -
Class C............................ (7,111) -
------------ ------------
Total distributions.............. (1,733,293) (1,007,000)
------------ ------------
Capital share transactions (notes 4 and
5):
Proceeds from sales:
Class A............................ 5,178,041 8,232,673
Class B............................ 854,661 2,198,168
Class C............................ 111,411 324,824
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 1,330,582 610,577
Class B............................ 216,243 46,818
Class C............................ 22,191 5,520
Payments for redemption of shares:
Class A............................ (17,321,930) (18,614,760)
Class B............................ (6,953,574) (6,881,002)
Class C............................ (860,962) (1,749,088)
------------ ------------
Decrease in net assets from
capital share transactions..... (17,423,337) (15,826,270)
------------ ------------
Total decrease in net assets..... (17,997,967) (4,820,398)
Net assets at beginning of year........ 113,282,677 118,103,075
------------ ------------
Net assets at end of year (including
undistributed net investment income
of $0 and $10,353, respectively)..... $ 95,284,710 $113,282,677
============ ============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 objective is to seek 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 shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of Rule 12b-1 fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than Rule 12b-1 fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
(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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts in
the financial statements. Actual results could differ from those estimates.
INVESTMENTS IN SECURITIES
The Fund's net asset value is generally calculated as of the close of normal
trading on the New York Stock Exchange (typically 3:00 p.m. Central Time).
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 value.
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.
13
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
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 were recorded by the
Fund. Distributions in excess of book basis net investment income or net
realized gains (but which are not tax returns of capital) are presented as
"excess distributions" in the statement of changes in net assets and the
financial highlights.
For federal income tax purposes, the Fund has a capital loss carryover in
the amount of $734,939 which, if not offset by subsequent capital gains, will
expire September 30, 2008. It is unlikely the Board of Directors will authorize
a distribution of any net realized capital gain until the available capital loss
carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 2000, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $183,407,721 and $200,598,855, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital) a wholly owned subsidiary of Minnesota Life
Insurance Company (Minnesota Life). 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
Fund has engaged PFPC Global Fund Services to act as its transfer agent,
dividend disbursing agent and redemption agent and bears the expenses of such
services. Prior to May 1, 2000, Advantus Capital paid the expense related to
transfer agent services. The fee for investment and advisory services is based
on the average daily net assets of the Fund at the annual rate of .70 percent on
the first $500 million in net assets, .65 percent on the next $500 million, .60
percent on the next $1 billion and .55 percent on net assets in excess of $2
billion. Prior to May 1, 2000, the fee was charged at an 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
expenses pursuant to Rule 12b-1 under the Investment Company Act of 1940 (as
amended). The Fund pays fees to Ascend Financial Services, Inc. (Ascend), the
underwriter of the Fund and wholly-owned subsidiary of Advantus Capital, 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 service fee up
to .25 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.
14
<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 has entered into a shareholder and administrative services
agreement with Minnesota Life. Under this agreement, effective May 1, 2000, the
Fund pays a shareholder services fee, equal to $5 per shareholder account
annually, to Minnesota Life for shareholder services which Minnesota Life
provides. The Fund also pays Minnesota Life an administrative service fee equal
to $6,200 per month for accounting, legal and other administrative services
which Minnesota Life provides.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. Under the Advisory Agreement,
Advantus Capital has contractually agreed to absorb all Fund costs and expenses
which exceed 1.24% of Class A average daily net assets, 1.99% of Class B average
daily net assets and 1.99% of Class C average daily net assets through the
fiscal year of the Fund ending September 30, 2001. During the year ended
September 30, 2000, Advantus Capital contractually agreed to absorb $106,763 in
expenses, which were otherwise payable by the Fund.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $345,082.
As of September 30, 2000, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 4,435,309 Class A shares which
represents 82.2 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 $10,406.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 2000 and 1999 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold................................... 342,146 519,547 57,188 142,407 7,551 21,022
Issued for reinvested distributions.... 84,952 39,130 13,914 2,964 1,429 364
Redeemed............................... (1,150,121) (1,197,618) (465,471) (444,700) (57,511) (112,523)
---------- ---------- -------- -------- ------- --------
(723,023) (638,941) (394,369) (299,329) (48,531) (91,137)
========== ========== ======== ======== ======= ========
</TABLE>
15
<PAGE>
ADVANTUS Cornerstone Fund
Notes to Financial Statements - continued
Financial Highlights
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
2000 1999 1998 1997 1996
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $ 15.14 $ 13.88 $ 18.68 $ 15.06 $ 12.96
------- ------- ------- -------- -------
Income from investment
operations:
Net investment income....... .06 .15 .16 .14 .09
Net gains (losses) on
securities (both realized
and unrealized)........... .13 1.26 (3.04) 5.19 2.91
------- ------- ------- -------- -------
Total from investment
operations.............. .19 1.41 (2.88) 5.33 3.00
------- ------- ------- -------- -------
Less distributions:
Dividends from net
investment income......... (.05) (.15) (.16) (.14) (.08)
Tax return of capital....... (.01) -- -- -- --
Distributions from net
realized gains............ (.13) -- (1.76) (1.57) (.82)
Excess distribution of net
realized gains............ (.06) -- -- -- --
------- ------- ------- -------- -------
Total distributions....... (.25) (.15) (1.92) (1.71) (.90)
------- ------- ------- -------- -------
Net asset value, end of
year........................ $ 15.08 $ 15.14 $ 13.88 $ 18.68 $ 15.06
======= ======= ======= ======== =======
Total return (a).............. 1.26% 10.13% (16.45)% 38.35% 24.52%
Net assets, end of year (in
thousands).................. $81,389 $92,657 $93,833 $107,322 $48,383
Ratio of expenses to average
daily net assets (b)(c)..... 1.24% 1.21% 1.16% 1.08% 1.26%
Ratio of net investment income
(loss) to average daily net
assets (b)(c)............... .43% .94% .98% .85% .70%
Portfolio turnover rate
(excluding short-term
securities)................. 180.1% 78.7% 114.4% 87.7% 128.0%
</TABLE>
------------
(a) Total return figures are based on a share outstanding throughout the period
and assume 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 has not been
annualized.
(b) The Fund's Distributor voluntarily waived $16,931, $107,096, $149,466 and
$74,454 in Class A Rule 12b-1 fees for the years ended September 30, 1999,
1998, 1997 and 1996, respectively. If the Class A had been charged for
these fees, the ratio of expenses to average daily net assets would have
been 1.23%, 1.25%, 1.28% and 1.46%, respectively, and the ratio of net
investment income to average daily net assets would have been .92%, .89%,
.65% and .50%, respectively.
(c) The Fund's Adviser voluntarily waived or absorbed $106,763 in expenses for
the year ended September 30, 2000. If the Fund had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.34% for Class A shares, 2.09% for Class B shares and 2.09% for Class C
shares, and the ratio of net investment income (loss) to average daily net
assets would have been .33% for Class A shares, (.39)% for Class B shares
and (.39)% for Class C shares.
16
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------- --------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
-------------------------------------------- --------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
------- ------- -------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $ 14.97 $ 13.73 $ 18.52 $ 14.92 $12.90 $14.93 $13.68 $ 18.48 $14.94 $12.90
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
Income from investment
operations:
Net investment income....... (.02) .03 .03 -- (.01) (.02) .03 .03 -- --
Net gains (losses) on
securities (both realized
and unrealized)........... .10 1.24 (3.02) 5.18 2.86 .10 1.25 (3.04) 5.12 2.88
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
Total from investment
operations.............. .08 1.27 (2.99) 5.18 2.85 .08 1.28 (3.01) 5.12 2.88
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
Less distributions:
Dividends from net
investment income......... -- (.03) (.04) (.01) (.01) -- (.03) (.03) (.01) (.02)
Tax return of capital....... -- -- -- -- -- -- -- -- -- --
Distributions from net
realized gains............ (.13) -- (1.76) (1.57) (.82) (.13) -- (1.76) (1.57) (.82)
Excess distribution of net
realized gains............ (.06) -- -- -- -- (.06) -- -- -- --
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
Total distributions....... (.19) (.03) (1.80) (1.58) (.83) (.19) (.03) (1.79) (1.58) (.84)
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
Net asset value, end of
year........................ $ 14.86 $ 14.97 $ 13.73 $ 18.52 $14.92 $14.82 $14.93 $ 13.68 $18.48 $14.94
======= ======= ======= ======= ====== ====== ====== ======= ====== ======
Total return (a).............. .54% 9.26% (17.21)% 37.68% 23.37% .54% 9.35% (17.28)% 37.10% 23.59%
Net assets, end of year (in
thousands).................. $12,615 $18,611 $21,176 $21,405 $7,095 $1,281 $2,015 $ 3,094 $3,399 $1,156
Ratio of expenses to average
daily net assets (b)(c)..... 1.99% 1.96% 1.95% 1.98% 2.15% 1.99% 1.96% 1.95% 1.98% 2.13%
Ratio of net investment income
(loss) to average daily net
assets (b)(c)............... (.29)% .20% .18% (.05)% (.11)% (.29)% .21% .18% (.05)% (.01)%
Portfolio turnover rate
(excluding short-term
securities)................. 180.1% 78.7% 114.4% 87.7% 128.0% 180.1% 78.7% 114.4% 87.7% 128.0%
</TABLE>
------------
(a) Total return figures are based on a share outstanding throughout the period
and assume 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 has not been
annualized.
(b) The Fund's Distributor voluntarily waived $16,931, $107,096, $149,466 and
$74,454 in Class A Rule 12b-1 fees for the years ended September 30, 1999,
1998, 1997 and 1996, respectively. If the Class A had been charged for
these fees, the ratio of expenses to average daily net assets would have
been 1.23%, 1.25%, 1.28% and 1.46%, respectively, and the ratio of net
investment income to average daily net assets would have been .92%, .89%,
.65% and .50%, respectively.
(c) The Fund's Adviser voluntarily waived or absorbed $106,763 in expenses for
the year ended September 30, 2000. If the Fund had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.34% for Class A shares, 2.09% for Class B shares and 2.09% for Class C
shares, and the ratio of net investment income (loss) to average daily net
assets would have been .33% for Class A shares, (.39)% for Class B shares
and (.39)% for Class C shares.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Cornerstone Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Cornerstone
Fund, Inc. (the Fund) as of September 30, 2000 and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and the financial highlights
for each of the years in the five-year period then ended. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 2000 and the results of its operations,
changes in its net assets and the financial highlights for the periods stated in
the first paragraph above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
November 10, 2000
18
<PAGE>
ADVANTUS CORNERSTONE FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal period ended September 30, 2000. Dividends for the 2000 calendar year
will be reported to you on Form 1099-Div in late January 2001. Shareholders
should consult a tax adviser on how to report these distributions for state and
local purposes.
CLASS A
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Income distribution - taxable as dividend income, 100% qualifying for
deduction by corporations.
December 21, 1999........................................... .0251
March 23, 2000.............................................. .0168
September 21, 2000.......................................... .0230
------
$.0649*
======
* The total distribution of $.0649 includes $.0075 from tax return of
capital.
Capital gains distributions - taxable as long-term capital gains, 25%
rate.
December 3, 1999............................................ $.1851
======
</TABLE>
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Capital gains distributions - taxable as long-term capital gains, 25%
rate.
December 3, 1999............................................ $.1851
======
</TABLE>
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Capital gains distributions - taxable as long-term capital gains, 25%
rate.
December 3, 1999............................................ $.1851
======
</TABLE>
19
<PAGE>
ADVANTUS CORNERSTONE FUND
SHAREHOLDER VOTING RESULTS
On April 17, 2000, a special meeting of shareholders of Advantus Cornerstone
Fund, Inc. was held. Shareholders of record on February 28, 2000, were entitled
to vote on the proposals described below.
(1) To elect a Board of Directors as follows:
<TABLE>
<CAPTION>
VOTES VOTES
DIRECTOR FOR WITHHELD
-------- --------- --------
<S> <C> <C>
Charles E. Arner....................... 5,674,958 19,705
Ellen S. Berscheid..................... 5,674,911 19,752
Ralph D. Ebbott........................ 5,674,958 19,705
Frederick P. Feuerherm................. 5,674,958 19,705
William N. Westhoff.................... 5,674,958 19,705
</TABLE>
(2) To approve the elimination or modification of the following investment
policies for:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
A. Modify policy regarding borrowing
and the issuance of senior
securities............................ 5,248,014 8,742 35,029
B. Modify policy regarding
concentration in a particular
industry.............................. 5,249,709 7,353 34,723
C. Modify policy regarding investments
in real estate and commodities........ 5,252,165 4,437 35,183
D. Modify policy regarding lending..... 5,246,677 10,540 34,568
E. Eliminate policy restricting the
pledging of assets.................... 5,245,945 9,090 36,750
F. Eliminate policy restricting margin
purchases and short sales............. 5,246,080 9,941 35,764
</TABLE>
(3) To approve an amendment to the investment advisory agreement between the
Fund and Advantus Capital Management, Inc., as described in the proxy
statement
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
5,251,849 3,663 36,273
</TABLE>
(4) To ratify the selection of KPMG LLP as independent public accountants for
the Fund
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
5,653,732 4,274 36,657
</TABLE>
20
<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 may apply.
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 share 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 twelve 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.
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 a check 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 DIVIDEND 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 may move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same share
class) just by calling our toll-free number. The Telephone Exchange privilege
will automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange may be changed (added/deleted) at any time by
submitting a request in writing.
SYSTEMATIC EXCHANGE: You may move a set amount of money monthly or quarterly
from one Advantus Fund to another Advantus Fund (with identical registrations
within the same share class) to diversify your investment portfolio and take
advantage of "dollar-cost averaging".
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life 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, if any.
AUTOMATIC INVESTMENT PLAN: This special purchase plan enables 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 monthly, semi-monthly or quarterly from
your checking or savings account.
IRAs, OTHER QUALIFIED PLANS: You can use the Advantus Family of Funds for your
Traditional, Roth or Education Individual Retirement Account or other qualified
plans including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k) Money Purchase
or Defined Benefit plans.
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 Redemption privilege will automatically be established
unless otherwise indicated on the Account Application. Telephone Redemption may
be changed (added/deleted) at any time by submitting a request in writing. To
have the redemption automatically deposited into your checking account, please
send a voided check
21
<PAGE>
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 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 information and
assistance directly from Advantus Shareholder Services, call 1-800-665-6005.
Advantus Account Representatives are available Monday through Friday from 7:30
a.m. to 5:15 p.m. Central Time. Our voice response system is available 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
INTERNET ADDRESS: www.AdvantusFunds.com
HOW TO INVEST
You can invest in one or more of the eleven Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., 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) or visit
www.AdvantusFunds.com.
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our 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. (For the Advantus International Balanced Fund, Inc.,
Advantus Enterprise Fund, Inc., and Advantus Venture Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., Credit Suisse Asset Management,
LLC, and State Street Research & Management Company, respectively, selects the
Fund's investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing $3.2
billion in assets in addition to $11.5 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 14 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
Advantus Real Estate Securities Fund
22
<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. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
FORWARDING SERVICE REQUESTED
F.48649 Rev. 11-2000
