<PAGE>
File Numbers 33-80756 and 811-8590
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment Number
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Post-Effective Amendment Number 3
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment Number 4
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ADVANTUS INTERNATIONAL BALANCED FUND, INC.
(Exact Name of Registrant as Specified in Charter)
400 ROBERT STREET NORTH, ST. PAUL, MINNESOTA 55101
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (612) 228-4833
ERIC J. BENTLEY, 400 ROBERT STREET NORTH, ST. PAUL, MINNESOTA 55101
(Name and Address of Agent for Service)
Copy to:
Michael J. Radmer, Esquire
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X On February 1, 1996 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485.
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IF APPROPRIATE, CHECK THE FOLLOWING BOX:
___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Pursuant to Regulation 270.24f-2 under the Investment Company Act of 1940,
Registrant has previously elected to register an indefinite number of its common
shares under the Securities Act of 1933. The Rule 24f-2 Notice for Registrant's
most recent fiscal year was filed November 28, 1995.
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
Registration Statement on Form N-1A
--------------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
--------------------------------
ITEM NO. PROSPECTUS HEADING
- -------- ------------------
1. Cover Page. . . . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . . . . . . . . . . . Prospectus Summary;
Fees and Expenses
3. Financial Highlights. . . . . . . . . . . . . . . Financial Highlights;
Investment
Performance
4. General Description of Registrant . . . . . . . . Investment
Objectives, Policies
and Risks; Portfolio
Turnover; Management
of the Fund; General
Information
5. Management of the Fund. . . . . . . . . . . . . . Management of the
Fund; Limitation of
Director Liability;
General Information
6. Capital Stock and Other Securities. . . . . . . . Dividends and Capital
Gains Distributions;
Taxes; General
Information
7. Purchase of Securities Being Offered. . . . . . . Purchase of Fund
Shares; Sales
Charges; Special
Purchase Plans
8. Redemption or Repurchase. . . . . . . . . . . . . Redemption of Fund
Shares; Reinstatement
Privilege
9. Pending Legal Proceedings . . . . . . . . . . . . Not Applicable
STATEMENT OF
ADDITIONAL
ITEM NO. INFORMATION HEADING
- -------- --------------------
10. Cover Page. . . . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . . . . General Information
and History
13. Investment Objectives and Policies. . . . . . . . Investment Objectives
and Policies; Invest-
ment Restrictions;
Portfolio Turnover
<PAGE>
14. Management of the Fund. . . . . . . . . . . . . . Directors and Exe-
cutive Officers;
Director Liability
15. Control Persons and Principal Holders of
Securities. . . . . . . . . . . . . . . . . . . . Capital Stock and
Ownership of Shares
16. Investment Advisory and Other Services. . . . . . Investment Advisory
and Other Services
17. Brokerage Allocation. . . . . . . . . . . . . . . Portfolio Transac-
tions and Allocation
of Brokerage
18. Capital Stock and Other Securities. . . . . . . . Capital Stock and
Ownership of Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . . . . . . How to Buy Shares;
Net Asset Value and
Public Offering
Price; Reduced Sales
Charges; Shareholder
Services; Redemptions
20. Tax Status. . . . . . . . . . . . . . . . . . . . Distributions and Tax
Status
21. Underwriters. . . . . . . . . . . . . . . . . . . Investment Advisory
and Other Services
22. Calculation of Performance Data . . . . . . . . . Calculation of
Performance Data
23. Financial Statements. . . . . . . . . . . . . . . Financial Statements
<PAGE>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
ADVANTUS-TM- FAMILY OF FUNDS [LOGO]
PROSPECTUS DATED FEBRUARY 1, 1996
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
- -------------------------------------------------------------------------------
400 Robert Street North - St. Paul, Minnesota 55101 - 1-800-443-3677
- -------------------------------------------------------------------------------
Advantus International Balanced Fund, Inc. ("International Fund" or the
"Fund"), is an open-end diversified management investment company, commonly
called a mutual fund. The Fund currently offers its shares in two classes:
Class A and Class C. Each class is sold pursuant to different sales
arrangements and bears different expenses.
International Fund is a mutual fund designed for investors seeking a high
level of total return through a flexible policy of investing in both stocks
and debt securities issued by companies, large and small, outside the United
States and in debt securities of governments outside the United States. The
mix of investments between these market segments will be adjusted in an
attempt to capitalize on total return potential produced by changing
international economic conditions. Investors should understand that all
investments involve risk and there can be no guarantee against loss resulting
from an investment in the Fund, nor can there be any assurance that the
Fund's investment objective will be attained. Investing in securities issued
by companies and governments of foreign nations involves substantial risks,
including the possibility of expropriation, default in foreign government
securities, higher foreign taxes, limitations on the transfer of currency,
and political or social instability which may adversely affect securities of
issuers in those nations. See "Risks of Investing in the Fund" for a
detailed discussion of such risks. The Fund is designed for investors
seeking international diversification.
In pursuit of its investment objective, the Fund will normally maintain
approximately 50% to 70% of its assets in international equities and 30% to
50% of its assets in international debt securities. With respect to
international equities, the Fund will invest primarily in securities of
companies in developed markets but may invest up to 20% of its assets in
securities of companies in emerging or developing markets. With respect to
debt securities, the Fund will also invest primarily in securities of
companies or governments in developed markets but may invest up to 10% of its
assets in debt securities of companies or governments in emerging or
developing markets.
SHARES OF THE FUND MAY BE SOLD THROUGH BANKS OR OTHER FINANCIAL
INSTITUTIONS. THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SUCH SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, DUE TO FLUCTUATIONS IN THE FUND'S
NET ASSET VALUE.
This Prospectus sets forth concisely the information which a prospective
investor should know about the Fund before investing and it should be
retained for future reference. A "Statement of Additional Information" dated
February 1, 1996, which provides a further discussion of certain areas in this
Prospectus and other matters which may be of interest to some investors, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, write or call the Fund at the address
or telephone number shown above.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF
CONTENTS
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<TABLE>
<S> <C>
PROSPECTUS SUMMARY......................... 3
FEES AND EXPENSES.......................... 6
FINANCIAL HIGHLIGHTS....................... 8
INVESTMENT OBJECTIVE, POLICIES AND RISKS... 9
PORTFOLIO TURNOVER......................... 19
MANAGEMENT OF THE FUND..................... 19
PURCHASE OF FUND SHARES.................... 22
SALES CHARGES.............................. 24
SPECIAL PURCHASE PLANS..................... 26
EXCHANGE AND TELEPHONE TRANSFER OF FUND
SHARES..................................... 26
REDEMPTION OF FUND SHARES.................. 27
TELEPHONE TRANSACTIONS..................... 29
REINSTATEMENT PRIVILEGE.................... 29
DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS.............................. 29
TAXES...................................... 30
INVESTMENT PERFORMANCE..................... 31
LIMITATION OF DIRECTOR LIABILITY........... 32
GENERAL INFORMATION........................ 33
COUNSEL AND INDEPENDENT AUDITORS........... 34
CUSTODIAN.................................. 34
</TABLE>
No dealer, sales representative or other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus (and/or in the Statement of Additional Information referred to
on the cover page of this Prospectus), and if given or made, such information or
representations must not be relied upon as having been authorized by the Fund or
MIMLIC Sales. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation.
2
<PAGE>
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PROSPECTUS
SUMMARY
- ------------ Advantus International
Balanced Fund, Inc. ("International Fund," or the "Fund") is
an open-end diversified investment company, commonly called a mutual fund. The
Fund offers investors the choice between two classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. The Fund is a
member of a family of mutual funds known as the "Advantus Funds." The Advantus
Funds consist of the Fund and seven other mutual funds, all of which share the
same investment adviser. Except for Advantus Money Market Fund, Inc., all of the
Advantus Funds offer more than one class of shares (the "Advantus Load Funds").
- ------------------------------------------
INVESTMENT
OBJECTIVE A summary of the investment objective of the Fund, together with a
brief description of the types of securities in which the Fund will invest in
pursuit of its investment objective, can be found on the cover page of this
Prospectus. See also "Investment Objective, Policies and Risks."
- ------------------------------------------
INVESTMENT
ADVISER Advantus Capital Management, Inc. ("Advantus Capital") acts as
investment adviser to the Fund and receives an annual fee equal to a stated
percentage of average daily net assets of the Fund. Advantus Capital is a
wholly-owned subsidiary of MIMLIC Asset Management Company ("MIMLIC
Management"). MIMLIC Management is a subsidiary of The Minnesota Mutual Life
Insurance Company ("Minnesota Mutual"). Advantus Capital has entered into an
investment sub-advisory agreement with Templeton Investment Counsel, Inc., a
Florida corporation with principal offices in Fort Lauderdale ("Templeton
Counsel"), under which Templeton Counsel serves as investment sub-adviser to the
International Fund. See "Management of the Fund."
- ------------------------------------------
HOW TO PURCHASE
FUND SHARES MIMLIC Sales Corporation ("MIMLIC Sales"), a subsidiary of MIMLIC
Management, acts as the principal underwriter (distributor) of the shares of the
Fund. Shares of the Fund may be purchased from MIMLIC Sales, and from certain
other broker-dealers, at the price per share next determined after receipt of a
purchase order in proper form. The minimum initial purchase is $250. Additional
investments can be made at any time for $25 or more. Shares of the Fund are sold
in two classes which are subject to different sales charges. Broker-dealers and
sales personnel of MIMLIC Sales may receive different compensation depending on
which class of shares they sell.
CLASS A SHARES. An investor who purchases Class A shares pays a sales charge
at the time of purchase. (Purchase orders for $1,000,000 or more will be
accepted for Class A shares only and are not subject to a sales charge at the
time of purchase.) Class A shares are not subject to any charges when they are
redeemed. The initial sales charge may be reduced or waived for certain
purchases. Class A shares are subject to a Rule 12b-1 fee payable at an annual
rate of .30% of the Fund's average daily net assets attributable to Class A
shares. See "Sales Charges--Class A Shares."
CLASS C SHARES. Class C shares are sold without an initial sales charge.
Class C shares are also subject to a higher Rule 12b-1 fee than Class A shares.
The Rule 12b-1 fee for Class C shares will be paid at an annual rate of 1.00% of
the Fund's average daily net assets attributable to Class C shares. Class C
shares will automatically convert to Class A shares at net asset value
approximately forty to ninety-six months after purchase, depending on the amount
purchased. Class C shares provide an investor the benefit of
3
<PAGE>
putting all of the investor's dollars to work from the time the investment is
made, but until conversion will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher Rule 12b-1 fee. See "Sales
Charges-- Class C Shares."
CHOOSING A CLASS. The decision as to which class of shares provides a more
suitable investment for an investor may depend on a number of factors, including
the amount and intended length of the investment. Investors making investments
that qualify for a waiver of initial sales charges should purchase Class A
shares. Investors who expect to hold shares for relatively longer periods of
time should also consider whether, depending on the anticipated holding period,
the initial sales charge and Rule 12b-1 fee payable on Class A shares will be
less in the aggregate than the higher Rule 12b-1 fee payable on Class C shares.
Other investors might consider Class C shares because all of the purchase price
is invested immediately. In addition, investors who expect to hold shares for
relatively shorter periods of time may prefer Class C shares because such shares
may be purchased and redeemed at any time without charge and because, depending
on the anticipated holding period, the higher Rule 12b-1 fee payable on Class C
shares may be less in the aggregate than the initial sales charge and Rule 12b-1
fee payable on Class A shares. Orders for Class C shares for $1,000,000 or more
will be treated as orders for Class A shares or declined.
- ------------------------------------------
HOW TO REDEEM
FUND SHARES Shareholders may redeem (sell) shares of the Fund at the per share
net asset value next determined following receipt by the Fund (at the mailing
address listed on the cover page) of a written redemption request. Class A and
Class C shares of the Fund are redeemable at net asset value without charge.
Shares of the Fund may also be redeemed by telephone if this option has been
selected. See "Redemption of Fund Shares."
- ------------------------------------------
INCOME AND
TAXES Net investment income is the amount of dividends and interest earned on
the Fund's securities less operating expenses. It is distributed to shareholders
quarterly. Capital gains may be realized on the sale of the Fund's securities.
Capital gains, when available, are distributed once a year during December. See
"Dividends and Capital Gains Distributions."
As a regulated investment company, the Fund is not taxed on the net investment
income and capital gains it distributes to its shareholders. For income tax
purposes, shareholders must report any net investment income and capital gains
distribution reported to them as income. Shareholders of the Fund receive an
annual statement detailing federal tax information. See "Taxes."
- ------------------------------------------
RISK
FACTORS In addition to the other information set forth in this Prospectus,
prospective investors in the Fund should consider the following factors:
- - Investors should understand that all
investments involve risk and there can be no guarantee against loss resulting
from an investment in the Fund, nor can there be any assurance that the Fund's
investment objective will be attained. As with any investment in securities,
the value of, and income from, an investment in the Fund can decrease as well
as increase, depending on a variety of factors which may affect the values and
income generated by the Fund's portfolio securities.
- - The Fund has the right to purchase securities in
any foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments.
- - The Fund may be affected either unfavorably
or favorably by fluctuations in the relative rates of exchange between the
currencies of different
4
<PAGE>
nations, by exchange control regulations and by indigenous economic and
political developments.
- - The Fund may invest up to 10% of its net assets
in securities which are considered illiquid.
For discussions of risks associated with specific investments and risks
associated with investing in the Fund see "Investment Objective, Policies and
Risks."
5
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
The purpose of this table is to assist the investor in understanding the
FEES AND various costs and expenses that an investor in the Fund will bear
EXPENSES directly or indirectly.
- ---------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
<S> <C> <C>
- -----------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES LOAD IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFER PRICE) 5.00% 0.00%
- -----------------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES LOAD
(AS A PERCENTAGE OF REDEMPTION PROCEEDS) 0.00% 0.00%
- -----------------------------------------------------------------------------------------
SALES LOAD IMPOSED ON REINVESTED DIVIDENDS 0 0
- -----------------------------------------------------------------------------------------
REDEMPTION FEES+ 0 0
- -----------------------------------------------------------------------------------------
EXCHANGE FEES
- ON FIRST FOUR EXCHANGES EACH YEAR 0 0
- ON EACH ADDITIONAL EXCHANGE $7.50 $7.50
+REDEMPTION PROCEEDS SENT BY WIRE ARE SUBJECT TO A WIRE CHARGE
OF $5.00, WHICH WILL BE ADDED TO THE AMOUNT REDEEMED.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
INVESTMENT ADVISORY FEES 0.93% 0.93%
- -----------------------------------------------------------------------------------------
RULE 12b-1 FEES (AFTER EXPENSES WAIVED)* 0.15%** 1.00%
- -----------------------------------------------------------------------------------------
OTHER EXPENSES (AFTER EXPENSES WAIVED)*** 1.00% 1.00%
------- -------
TOTAL FUND OPERATING EXPENSES
(AFTER EXPENSES WAIVED)*** 2.08% 2.93%
------- -------
</TABLE>
<TABLE>
<S> <C>
*A LONG-TERM SHAREHOLDER MAY PAY MORE IN ASSET-BASED SALES' INTENTION TO CONTINUE TO WAIVE CLASS A DISTRIBUTION
SALES CHARGES THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM FEES AT SUCH LEVEL DURING THE CURRENT FISCAL YEAR, BUT IT
FRONT-END SALES CHARGE PERMITTED BY THE NATIONAL ASSOCIATION RESERVES THE RIGHT TO CEASE SUCH WAIVER, IN WHOLE OR IN
OF SECURITIES DEALERS, INC. (SEE "MANAGEMENT OF THE PART, AT ANY TIME.
FUND--THE UNDERWRITER AND PLANS OF DISTRIBUTION"). ***THE FUND'S INVESTMENT ADVISER AND MIMLIC SALES'
**THE FUND HAS ADOPTED A PLAN OF DISTRIBUTION, PURSUANT VOLUNTARILY ABSORBED OR WAIVED CERTAIN EXPENSES OF
TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940, INTERNATIONAL BALANCED FUND FOR THE YEAR ENDED SEPTEMBER 30,
WHICH PROVIDES FOR THE PAYMENT TO MIMLIC SALES OF A 1995. IF THE FUND HAD BEEN CHARGED FOR THESE EXPENSES, THE
DISTRIBUTION FEE EQUAL TO AN ANNUAL RATE OF .30% OF AVERAGE RATIO OF TOTAL FUND OPERATING EXPENSES TO AVERAGE DAILY NET
DAILY NET ASSETS ATTRIBUTABLE TO CLASS A SHARES OF THE FUND. ASSETS WOULD HAVE BEEN 2.30% FOR CLASS A SHARES AND 3.0% FOR
MIMLIC SALES IS CURRENTLY WAIVING THAT PORTION OF CLASS C SHARES. IN ADDITION, IT IS THE FUND'S INVESTMENT
DISTRIBUTION FEE WHICH EXCEEDS, AS A PERCENTAGE OF AVERAGE ADVISER'S PRESENT INTENTION TO ABSORB OTHER EXPENSES DURING
DAILY NET ASSETS ATTRIBUTABLE TO CLASS A SHARES, .15%. IT IS THE CURRENT FISCAL YEAR WHICH EXCEED, AS A PERCENTAGE OF
MIMLIC AVERAGE DAILY NET ASSETS, 1.00%. THE FUND'S INVESTMENT
ADVISER ALSO RESERVES THE OPTION TO REDUCE THE LEVEL OF
EXPENSES WHICH IT WILL VOLUNTARILY ABSORB.
</TABLE>
6
<PAGE>
- ------------------------------------------
SHAREHOLDER EXPENSE
EXAMPLE You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
YEAR
REDEEMED CLASS A CLASS C
<S> <C> <C>
- ----------------------------
1 $ 70 $ 30
3 112 91
5 156 154
10 279 305*
</TABLE>
*REFLECTS CONVERSION OF CLASS C SHARES TO CLASS A SHARES (WHICH PAY LOWER
ONGOING EXPENSES) APPROXIMATELY EIGHT YEARS AFTER PURCHASE.
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
7
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
FINANCIAL The following table shows important financial information for
HIGHLIGHTS evaluating the Fund's results. This information has been audited by
- ----------- KPMG Peat Marwick LLP, independent auditors.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------- -------------
<S> <C> <C> <C>
PERIOD FROM PERIOD FROM
YEAR ENDED SEPTEMBER 16, MARCH 1,
SEPTEMBER 1994(A) TO 1995(H) TO
30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.34 $ 10.54 $ 9.95
-------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .20 .01 .11
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND UNREALIZED) .56 (.21) .91
-------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .76 (.20) 1.02
-------------------------------------------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME (.19) -- (.13)
DISTRIBUTIONS FROM CAPITAL GAINS (.12) -- (.07)
-------------------------------------------
TOTAL DISTRIBUTIONS (.31) -- (.20)
-------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.79 $ 10.34 $ 10.77
----------- ------------- ------
TOTAL RETURN (b) 7.4% (1.9)%(c) 10.3%(d)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSETS, END OF PERIOD (IN THOUSANDS) $30,949 $15,430 $330
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RATIO OF EXPENSES TO AVERAGE DAILY NET ASSETS (e) 2.08% .47%(g) 2.93%(f)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RATIO OF NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS (e) 2.22% .14%(g) 1.39%(f)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO TURNOVER RATE (EXCLUDING SHORT-TERM SECURITIES) 52.0% 12.1% 52.0%
</TABLE>
<TABLE>
<S> <C>
(A) THE INCEPTION OF THE FUND WAS JUNE 20, 1994. HOWEVER, (E) THE FUND'S DISTRIBUTOR AND ADVISER VOLUNTARILY WAIVED OR
OPERATIONS OF CLASS A DID NOT COMMENCE UNTIL SEPTEMBER 16, ABSORBED $56,482 AND $4,034 IN EXPENSES FOR THE YEAR ENDED
1994 WHEN THE CLASS A SHARES OF THE FUND BECAME EFFECTIVELY SEPTEMBER 30, 1995 AND THE PERIOD ENDED SEPTEMBER 30, 1994,
REGISTERED UNDER THE SECURITIES ACT OF 1933. RESPECTIVELY. IF THE FUND HAD BEEN CHARGED FOR THESE
(B) TOTAL RETURN FIGURES ARE BASED ON A SHARE OUTSTANDING EXPENSES, THE RATIO OF EXPENSES TO AVERAGE DAILY NET ASSETS
THROUGHOUT THE PERIOD AND ASSUMES REINVESTMENT OF WOULD HAVE BEEN 2.30% AND .49% FOR CLASS A SHARES,
DISTRIBUTIONS AT NET ASSET VALUE. TOTAL RETURN FIGURES DO RESPECTIVELY, AND 3.00% FOR CLASS C SHARES AND THE RATIOS OF
NOT REFLECT THE IMPACT OF SALES CHARGES. NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE
(C) TOTAL RETURN IS PRESENTED FOR THE PERIOD FROM BEEN 2.00% AND .12% FOR CLASS A SHARES, RESPECTIVELY, AND
SEPTEMBER 16, 1994, COMMENCEMENT OF OPERATIONS, TO SEPTEMBER 1.32% FOR CLASS C SHARES.
30, 1994. (F) ADJUSTED TO AN ANNUAL BASIS.
(D) TOTAL RETURN IS PRESENTED FOR THE PERIOD FROM MARCH (G) RATIOS PRESENTED FOR THE PERIOD FROM SEPTEMBER 16, 1994
1, 1995, COMMENCEMENT OF OPERATIONS, TO SEPTEMBER 30, 1995. TO SEPTEMBER 30, 1994 ARE NOT ANNUALIZED AS THEY ARE NOT
INDICATIVE OF ANTICIPATED ANNUAL RESULTS.
(H) COMMENCEMENT OF THE FUND'S CLASS C SHARES.
</TABLE>
8
<PAGE>
- ------------------------------------------
INVESTMENT
OBJECTIVE,
POLICIES
AND RISKS
- ----------
Advantus International Balanced Fund, Inc. is a mutual fund
designed for investors seeking a high level of total return
through a flexible policy of investing in both stocks and debt securities issued
by companies, large and small, outside the United States and in debt securities
of governments outside the United States. The mix of investments between these
market segments will be adjusted in an attempt to capitalize on total return
potential produced by changing international economic conditions. This
investment objective may not be changed without the approval of a majority of
the outstanding shares of the Fund. The Fund's other investment policies, except
"fundamental" investment restrictions (see below), may be changed at any time
without shareholder approval, although shareholders will be notified of those
changes. Investors should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. The Fund is designed for investors seeking international
diversification.
In pursuit of its investment objective, the Fund will normally maintain
approximately 50% to 70% of its assets in international equities and 30% to 50%
of its assets in international debt securities. With respect to international
equities, the Fund will invest primarily in securities of companies in developed
markets but may invest up to 20% of its assets in securities of companies in
emerging or developing markets. With respect to debt securities, the Fund will
also invest primarily in securities of companies or governments in developed
markets but may invest up to 10% of its assets in debt securities of companies
or governments in emerging or developing markets. Except during temporary
defensive periods, the Fund will maintain at least 25% of the value of its
assets in fixed income senior securities (with regard to senior convertible
securities, only that portion of their value attributable to their fixed income
characteristics will be considered in calculating this 25%).
- ------------------------------------------
INVESTMENT
POLICIES There is no limitation on the percentage of the Fund's assets that may
be invested in any one country, although it is not expected that the Fund will
invest 25% or more of its net assets in securities of a single country. In
addition, it is the Fund's policy to maintain investments in at least three
countries outside the United States under normal circumstances. "Equity
securities," as used in this Prospectus, refers to common stock, preferred
stock, warrants or rights to subscribe to or purchase such securities and
sponsored or unsponsored American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs").
An ADR is sponsored if the original issuing company has selected a single U.S.
bank to serve as its U.S. depositary and transfer agent. This relationship
requires a deposit agreement which defines the rights and duties of both the
issuer and depositary. Companies that sponsor ADRs must also provide their ADR
investors with English translations of company information made public in their
own domiciled country. Sponsored ADR investors also generally have the same
voting rights as ordinary shareholders, barring any unusual circumstances. ADRs
which meet these requirements can be listed on U.S. stock exchanges. Unsponsored
ADRs are created at the initiative of a broker or bank reacting to demand for a
specific foreign stock. The broker or bank purchases the underlying shares and
deposits them in a depositary. Unsponsored shares issued after 1983 are not
eligible for U.S. stock exchange listings. Furthermore, they do not generally
include voting rights.
The Fund considers countries having developing markets to be all countries
that are generally considered to be developing or
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emerging countries by the International Bank for Reconstruction and Development
(more commonly referred to as the World Bank) and the International Finance
Corporation, as well as countries that are classified by the United Nations or
otherwise regarded by their authorities as developing. Currently, the countries
not included in this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and
Switzerland. In addition, as used in this Prospectus, developing market
securities means (i) securities of companies the principal securities trading
market for which is a developing market country, as defined above, (ii)
securities, traded in any market, of companies that derive 50% or more of their
total revenue from either goods or services produced in such developing market
countries or sales made in such developing market countries or (iii) securities
of companies organized under the laws of, and with a principal office in, a
developing market country. The Fund will at all times, except during temporary
defensive periods, maintain investments in at least three countries having
developing markets.
The Fund has a flexible investment policy. The exercise of this flexible
policy may include decisions to purchase securities with substantial risk
characteristics and other decisions such as changing the emphasis on investments
from one nation to another and from one type of security to another. Some of
these decisions may later prove profitable and others may not. No assurance can
be given that profits, if any, will exceed losses.
The Fund is authorized to invest in debt securities (including debt securities
convertible into common stock) that are rated BBB or higher by Standard & Poor's
Corporation ("S&P") and Baa or higher by Moody's Investors Service, Inc.
("Moody's") or, if unrated, are of equivalent investment quality as determined
by Templeton Counsel. As an operating policy, the Fund will not invest more than
5% of its assets in debt securities rated BBB by S&P or Baa by Moody's. (See
also, "Debt Securities and Down-Graded Instruments" in the Statement of
Additional Information.)
Whenever, in the judgment of Templeton Counsel, market or economic conditions
warrant, the Fund may, for temporary defensive purposes, invest without limit in
U.S. Government securities, bank time deposits in the currency of any major
nation and commercial paper meeting the quality ratings set forth herein and
purchase from banks or broker-dealers Canadian or U.S. Government securities
with a simultaneous agreement by the seller to repurchase them within no more
than seven days at the original purchase price plus accrued interest.
The Fund may invest for temporary defensive purposes in commercial paper of
U.S. issuers which, at the date of investment, must be rated A-1 by S&P or
Prime-1 by Moody's or, if not rated, be issued by a company which at the date of
investment has an outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange will be incurred when the Fund converts assets
from one currency to another. Further, the Fund may be affected either
unfavorably or favorably by fluctuations in the relative rates of exchange
between the currencies of different nations. For example, in order to realize
the value of a foreign investment, the Fund must convert that value, as
denominated in its foreign currency, into U.S. dollars using the applicable
currency exchange rate. The exchange rate represents the current price of a U.S.
dollar relative to that foreign currency; that is, the amount of such foreign
currency required to buy one U.S. dollar. If the Fund holds a foreign security
which has appreciated in value as measured in the foreign currency, the level of
appreciation actually realized by the Fund may be reduced or even eliminated if
the foreign currency has decreased
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in value relative to the U.S. dollar subsequent to the date of purchase. In such
a circumstance, the cost of a U.S. dollar purchased with that foreign currency
has gone up and the same amount of foreign currency purchases fewer dollars than
at an earlier date.
CLOSED-END INVESTMENT COMPANIES
Some countries, such as South Korea, Chile and India, have authorized the
formation of closed-end investment companies to facilitate indirect foreign
investment in their capital markets. In accordance with the 1940 Act, the
International Fund may invest up to 10% of its total assets in securities of
closed-end investment companies. This restriction on investments in securities
of closed-end investment companies may limit opportunities for the International
Fund to invest indirectly in certain developing markets. Shares of certain
closed-end investment companies may at times be acquired only at market prices
representing premiums to their net asset values. If the International Fund
acquires shares of closed-end investment companies, shareholders would bear both
their proportionate share of expenses of the International Fund (including
management and advisory fees) and, indirectly, the expenses of such closed-end
investment companies.
ILLIQUID SECURITIES AND RULE 144A PAPER
The Fund is permitted to invest up to 10% of its net assets in illiquid
investments. See "Investment Restrictions," below. An investment is generally
deemed to be "illiquid" if it cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the investment
company is valuing the investment. "Restricted securities" are securities which
were originally sold in private placements and which have not been registered
under the Securities Act of 1933 (the "1933 Act"). Such securities generally
have been considered illiquid by the staff of the Securities and Exchange
Commission (the "SEC"), since such securities may be resold only subject to
statutory restrictions and delays or if registered under the 1933 Act.
The SEC has acknowledged, however, that a market exists for certain restricted
securities (for example, securities qualifying for resale to certain "qualified
institutional buyers" pursuant to Rule 144A under the 1933 Act). Additionally, a
similar market exists for commercial paper issued pursuant to the private
placement exemption of Section 4(2) of the 1933 Act. The Fund may invest without
limitation in these forms of restricted securities if such securities are deemed
by Templeton Counsel to be liquid in accordance with standards established by
the Fund's Board of Directors. Under these guidelines, Templeton Counsel must
consider (a) the frequency of trades and quotes for the security, (b) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers, (c) dealer undertakings to make a market in the security,
and (d) the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). At the present time, it is not possible
to predict with accuracy how the markets for certain restricted securities will
develop. Investing in restricted securities could have the effect of increasing
the level of the Fund's illiquidity to the extent that qualified purchasers of
the securities become, for a time, uninterested in purchasing these securities.
FUTURES CONTRACTS
FINANCIAL FUTURES. The Fund may purchase and sell financial futures
contracts. A financial futures contract is an agreement between two parties to
buy or sell a specified debt security at a set price on a future date.
Currently, futures contracts are available on several types of fixed-income
securities including: U.S. Treasury bonds, notes and bills; commercial paper;
and certificates of deposit.
Although some financial futures contracts call for making or taking delivery
of the underlying securities, in most cases these obligations are
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<PAGE>
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
INDEX FUTURES. The Fund may buy and sell index futures contracts with respect
to any non-U.S. stock or bond index. The Fund may invest in index futures
contracts for hedging purposes only and not for speculation. The Fund may engage
in such transactions only to the extent that the total contract value of the
futures contracts do not exceed 5% of the Fund's total assets at the time when
such contracts are entered into. Successful use of stock or bond index futures
is subject to the ability of Templeton Counsel to predict correctly movements in
the direction of the stock or bond markets. No assurance can be given that
Templeton Counsel's judgment in this respect will be correct.
An index futures contract is a contract to buy or sell units of a stock or
bond index at a specified future date at a price agreed upon when the contract
is made. The value of a unit is the current value of the stock or bond index.
During or in anticipation of a period of market appreciation, the Fund may enter
into a "long hedge" of a security which it proposes to add to its portfolio by
purchasing an index future for the purpose of reducing the effective purchase
price of such security. To the extent that the securities which the Fund
proposes to purchase increase in value in correlation with the index contracts,
the purchase of futures contracts on that index would result in gains to the
Fund which could be offset against rising prices of such security. During or in
anticipation of a period of market decline, the Fund may "hedge" securities in
its portfolio by selling stock or bond index futures for the purpose of limiting
the exposure of its portfolio to such decline. To the extent that a portfolio of
securities decreases in value in relation with a given index, the sale of
futures contracts on that index could substantially reduce the risk to the
portfolio of a market decline and, by so doing, provide an alternative to the
liquidation of securities positions in the portfolio with resultant transaction
costs.
A purchase or sale of a futures contract may result in losses in excess of the
amount invested. There can be significant differences between the securities and
futures markets that could result in an imperfect correlation between the
markets, causing a given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures, including technical influences in futures
trading, and differences between the financial instruments being hedged and the
instruments underlying the standard contracts available for trading in such
respects as interest rate levels, maturities, and creditworthiness of issuers. A
decision as to whether, when, and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close
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<PAGE>
out a futures position, and it would remain obligated to meet margin
requirements until the position is closed. The Fund intends to purchase or sell
futures only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. In addition, many
of the futures contracts available may be relatively new instruments without a
significant trading history. As a result, there can be no assurance that an
active secondary market will develop or continue to exist.
Use of stock and bond index futures for hedging may involve risks because of
imperfect correlations between movements in the prices of the index futures on
the one hand and movements in the prices of the securities being hedged or of
the underlying index on the other. Successful use of stock and bond index
futures by the Fund for hedging purposes also depends upon Templeton Counsel's
ability to predict correctly movements in the direction of the market, as to
which no assurance can be given.
When entering into futures contracts, the Fund will deposit and maintain in a
segregated account with its custodian liquid assets, such as cash or cash
equivalents and high-grade debt obligations, in an amount equal to its purchase
commitment under the contracts.
FOREIGN CURRENCY HEDGING TRANSACTIONS
FORWARD EXCHANGE CONTRACTS. The Fund has authority to deal in forward foreign
currency exchange contracts between currencies of the different countries in
which the Fund will invest as a hedge against possible variations in the foreign
exchange rate between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. Forward contracts are individually
negotiated and privately traded by currency traders and their customers. The
Fund's dealings in forward foreign exchange contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward foreign currency with respect to
specific receivables or payables of the Fund arising from the purchase and sale
of portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the sale
of forward foreign exchange contracts with respect to portfolio security
positions denominated or quoted in such foreign currency. The Fund will not
engage in naked forward foreign exchange contracts.
In addition, when Templeton Counsel believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency, approximating the value of some or all of the Fund's
securities denominated in such foreign currency. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Fund is obligated to
deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to
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<PAGE>
sell the foreign currency. Should forward prices decline during the period
between the Fund entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
CURRENCY FUTURES CONTRACTS. The Fund may also enter into exchange-traded
contracts for the purchase or sale for future delivery of foreign currencies
("foreign currency futures"). This investment technique will be used only to
hedge against anticipated future changes in exchange rates which otherwise might
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities that the Fund intends to purchase at a later
date. The successful use of foreign currency futures will usually depend on
Templeton Counsel's ability to forecast currency exchange rate movements
correctly. Should exchange rates move in an unexpected manner, the Fund may not
achieve the anticipated benefits of foreign currency futures or may realize
losses.
WARRANTS
The Fund may invest in warrants; however, not more than 5% of its assets (at
the time of purchase) will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5% not more than 2% of the
Fund assets at the time of purchase may be invested in warrants that are not
exchange listed. Warrants are pure speculation in that they have no voting
rights, pay no dividends and have no rights with respect to the assets of the
corporation issuing them. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.
Warrants with cash extractions are also permitted, subject to the limitations
above, and may be used as investment alternatives to equity shares (the cash
portion, however, will not be considered an equity for purposes of the Fund's
policy of maintaining 50% to 70% of its assets in international equities). A
warrant with a cash extraction consists of one warrant and cash with a current
value that closely approximates the current value of an equivalent number of
shares that would be delivered if the warrant were exercised. These investment
instruments may (1) provide attractive cash yields and (2) minimize capital loss
risk. Alternatively, perfect replication of underlying share price movements may
be hindered by warrant premiums which occur because shorter-term investors value
the leveraging power of naked warrants. Given these circumstances, capital gains
potential of warrants with cash extractions may be less than that of underlying
shares.
LOANS OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured
loans of portfolio securities amounting to not more than 20% of its total
assets. Securities loans are made to broker-dealers or financial institutions
pursuant to agreements requiring that the loans be continuously secured by
collateral at least equal at all times to the value of the securities lent. The
collateral received will consist of cash or securities issued or guaranteed by
the United States Government, its agencies or instrumentalities. While the
securities are being lent, the Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The
Fund has a right to call each loan and obtain the securities on five business
days' notice. The Fund will not have the right to vote securities while they are
being lent, but it will call a loan in anticipation of any important vote. The
risks in lending portfolio securities, as with other
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<PAGE>
extensions of secured credit, consist of possible delay in receiving additional
collateral or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. Loans will only be made to
firms deemed by the Fund's investment adviser to be of good standing and to have
sufficient financial responsibility, and will not be made unless, in the
judgment of the Fund's investment adviser, the consideration to be earned from
such loans would justify the risk. The creditworthiness of entities to which the
Fund makes loans of portfolio securities is monitored by the Fund's investment
adviser throughout the term of each loan. Although permitted, the Fund has not
employed this investment practice in the past and has no current intention of
employing such practice in the foreseeable future.
WHEN-ISSUED SECURITIES
New issues of certain debt securities are often offered on a when-issued
basis, that is, the payment obligation and the interest rate are fixed at the
time the buyer enters into the commitment, but delivery and payment for the
securities normally take place after the date of the commitment to purchase. The
value of when-issued securities may vary prior to and after delivery depending
on market conditions and changes in interest rate levels. However, the Fund will
not accrue any income on these securities prior to delivery. Such transactions
involve the potential risk of loss to the Fund because interest rate changes in
the marketplace prior to delivery of the security may adversely affect the value
of the security to be delivered. Such trading practices are separate and
distinct from the underlying securities and involve different investment goals,
such as hedging against anticipated changes in interest rates and prices, as
compared to those of investing in the underlying securities. No more than 20% of
the value of the Fund's total portfolio will be committed to such transactions.
The Fund will maintain in a segregated account with its custodian an amount of
cash or high quality liquid debt securities equal (on a daily marked-to-market
basis) to the amount of its commitment to purchase the when-issued securities.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Repurchase agreements are
agreements by which the Fund purchases a security and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, if
permitted by law or regulation and if the Board of Directors of the Fund has
evaluated its creditworthiness through adoption of standards of review or
otherwise, a securities dealer) to repurchase the security at an agreed upon
price and date. The creditworthiness of entities with whom the Fund enters into
repurchase agreements is monitored by the Fund's investment adviser throughout
the term of the repurchase agreement. The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash. The Fund's
custodian, or a duly appointed subcustodian, holds the securities underlying any
repurchase agreement in a segregated account or such securities may be part of
the Federal Reserve Book Entry System. The market value of the collateral
underlying the repurchase agreement is determined on each business day. If at
any time the market value of the collateral falls below the repurchase price of
the repurchase agreement (including any accrued interest), the Fund promptly
receives additional collateral, so that the total collateral is in an amount at
least equal to the repurchase price plus accrued interest. While the underlying
security may be a bill, certificate of indebtedness, note or bond issued by an
agency, authority or instrumentality of the United States Government, the
obligation of the seller is not guaranteed by the U.S. Government. In the event
of a bankruptcy or other default of a
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<PAGE>
seller of a repurchase agreement, the Fund could experience both delays in
liquidating the underlying security and losses, including: (a) possible decline
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights.
INVESTMENT RESTRICTIONS
International Fund has certain investment restrictions, set forth in their
entirety in the Statement of Additional Information, some of which are
fundamental policies and may not be changed without the approval of the holders
of a majority of the outstanding shares of the Fund. The Fund will not: (i)
purchase any security if, as a result, 25% or more of the Fund's total assets
would be invested in the securities of issuers conducting their principal
business activities in a single industry; (ii) borrow money, except from banks
and only as a temporary measure for extraordinary or emergency purposes and not
in excess of 5% of its net assets; (iii) invest in securities of other
investment companies with an aggregate value in excess of 10% of the Fund's
total assets (this restriction is not fundamental); or (iv) invest more than a
total of 10% of the Fund's net assets in securities which are illiquid, or more
than 5% of its net assets in securities of businesses (including predecessors)
less than three years old (this restriction is not fundamental).
See "Financial Highlights" above, and the Statement of Additional Information,
for more information about the Fund's portfolio turnover policies and rates.
- ------------------------------------------
RISKS OF INVESTING
IN THE FUND Shareholders should understand that all investments involve risk
and there can be no guarantee against loss resulting from an investment in the
Fund, nor can there be any assurance that the Fund's investment objective will
be attained. As with any investment in securities, the value of, and income
from, an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions, market
factors and currency exchange rates. Additionally, investment decisions made by
Templeton Counsel will not always be profitable or prove to have been correct.
The Fund is not intended as a complete investment program.
The Fund has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations; foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period
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of securities transactions in foreign markets may be longer than in domestic
markets. In many foreign countries there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. The foreign securities markets of
many of the countries in which the Fund may invest may also be smaller, less
liquid, and subject to greater price volatility than those in the United States.
Also, some countries may withhold portions of interest, dividends and gains at
the source. There are further risk considerations, including possible losses
through the holding of securities in domestic and foreign custodial banks and
depositories. The Fund may invest in Eastern European countries, which involves
special risks that are described herein.
Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
Certain of the recent political and economic developments in Eastern Europe,
including the introduction of aspects of a market economy in certain Eastern
European countries, are related to developments in what was formerly known as
the Soviet Union. Trends in Eastern Europe that may be considered favorable for
achievement of the Fund's investment objectives may be adversely affected by
political or social developments in the former Soviet Union. So long as the
centralist political powers continue to exercise a significant or, in some
countries, dominant role in Eastern European countries, investments in such
countries will involve risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
the Fund could lose a substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in Eastern European
countries. Finally, even though certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to the Fund's shareholders.
Certain Eastern European countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property. Certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
of foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals.
Authoritarian governments in certain Eastern European countries may require
that a governmental or quasi-governmental authority act as custodian of the
Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the
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<PAGE>
requirements of the 1940 Act to act as foreign custodians of the Fund's cash and
securities, the Fund's investment in such countries may be limited or may be
required to be effected through intermediaries. The risk of loss through
governmental confiscation may be increased in such countries.
The Fund endeavors to buy and sell foreign currencies on as favorable a basis
as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another or when proceeds of the sale of shares in U.S. dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from transferring cash
out of the country, withhold portions of interest and dividends at the source,
or impose other taxes, with respect to the Fund's investments in securities of
issuers of that country. Although the Fund's adviser places the Fund's
investments only in foreign nations which it considers as having relatively
stable and friendly governments, there is the possibility of expropriation,
nationalization, confiscatory or other taxation, foreign exchange controls
(which may include suspension of the ability to transfer currency from a given
country), default in foreign government securities, political or social
instability or diplomatic developments that could affect investments in
securities of issuers in those nations.
The Fund may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Through the Fund's flexible policy, the Fund's adviser endeavors
to avoid unfavorable consequences and to take advantage of favorable
developments in particular nations where from time to time it places the Fund's
investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Board of Directors consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Directors also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories. However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of Templeton Counsel, any
losses resulting from the holding of the Fund's portfolio securities in foreign
countries and/or with securities depositories will be at the risk of the
shareholders. No assurance can be given that the Directors' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.
ADRs and EDRs may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Ownership of unsponsored
ADRs and EDRs may not entitle the Fund to financial or other reports from the
issuer, to which it would be entitled as the owner of sponsored ADRs or EDRs.
ADRs and EDRs also involve the risks of other investments in foreign securities,
as discussed above.
The Fund is authorized to invest in debt securities that are rated as low as
BBB by S&P and Baa by Moody's or, if unrated, are of equivalent investment
quality as determined by Templeton Counsel. As an operating policy, which may be
changed by the Board of Directors without shareholder approval, the Fund will
not invest more than 5% of its total assets in debt securities rated BBB by S&P
or Baa by Moody's
18
<PAGE>
or, if unrated, are of equivalent investment quality as determined by Templeton
Counsel. To the extent the Fund invests in securities rated BBB by S&P or Baa by
Moody's, it will be investing in securities which may involve risks and which in
fact have speculative elements not associated with higher-rated securities. The
market value of debt securities generally varies in response to changes in
interest rates and the financial condition of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in the International Fund's net asset value. (See "Debt Securities and
Down-Graded Instruments" and Appendix A in the Statement of Additional
Information for further discussion of debt securities and a description of the
ratings used by S&P and Moody's, respectively.)
There are further risk factors, including possible losses through the use of
futures contracts, described elsewhere in the Prospectus and in the Statement of
Additional Information.
- ------------------------------------------
PORTFOLIO
TURNOVER
- ---------- Portfolio turnover is the ratio of
the lesser of annual purchases or sales of portfolio securities
to the average monthly value of portfolio securities, not including short-term
securities. A 100% portfolio turnover rate would occur, for example, if the
lesser of the value of purchases or sales of portfolio securities for a
particular year were equal to the average monthly value of the portfolio
securities owned during such year.
International Fund makes changes in its portfolio securities which are
considered advisable in light of market conditions. Frequent changes may result
in higher brokerage and other costs for the Fund. The Fund does not emphasize
short-term trading profits and usually expects to have an annual turnover rate
not exceeding 25% with respect to the equity portion of its portfolio and 100%
with respect to the debt portion of its portfolio.
- ------------------------------------------
MANAGEMENT
OF THE FUND
- ------------- Under Minnesota law,
the Board of Directors of the Fund has overall
responsibility for managing the Fund in good faith, in a manner reasonably
believed to be in the best interests of the Fund, and with the care an ordinary
prudent person in like position would exercise in similar circumstances.
However, this management may be delegated.
- ------------------------------------------
INVESTMENT ADVISER
The Fund's investment adviser is Advantus Capital. Advantus Capital commenced
its business in June 1994, and provides investment advisory services to each of
the other Advantus Funds, one other mutual fund (MIMLIC Cash Fund, Inc.) and
various private accounts. Advantus Capital is a wholly-owned subsidiary of
MIMLIC Management which, prior to March 1, 1995, served as investment adviser to
the Fund. The same portfolio manager and other personnel who previously provided
investment advisory services to the Fund through MIMLIC Management continue to
provide the same services through Advantus Capital. MIMLIC Management commenced
its current business in January, 1984, and provides investment advisory services
to one other mutual fund (MIMLIC Series Fund, Inc.) and various private
accounts. The personnel of Advantus Capital and MIMLIC Management have also had
experience in managing investments for The Minnesota Mutual Life Insurance
Company ("Minnesota Mutual") and its separate accounts. MIMLIC Management is a
subsidiary of Minnesota Mutual, which was organized in 1880 and which has assets
of more than $9.8 billion. The address of the Fund, Advantus Capital, MIMLIC
Management,
19
<PAGE>
MIMLIC Sales and Minnesota Mutual is 400 Robert Street North, St. Paul,
Minnesota 55101.
Advantus Capital reviews the Fund's investments and provides executive and
other personnel for the management of the Fund. The Fund's Board of Directors
supervises the affairs of the Fund as conducted by Advantus Capital and
Templeton Counsel.
The Fund pays Advantus Capital an advisory fee equal on an annual basis to a
percentage of the Fund's average daily net assets as set forth in the following
table:
<TABLE>
<CAPTION>
ADVISORY FEE AS
PERCENTAGE OF
AVERAGE
ASSETS DAILY NET ASSETS
<S> <C>
- -----------------------------------------------------
ON THE FIRST $25 MILLION IN ASSETS .95%
ON THE NEXT $25 MILLION IN ASSETS .80%
ON THE NEXT $50 MILLION IN ASSETS .75%
ON ALL ASSETS IN EXCESS OF $100
MILLION .65%
</TABLE>
From its advisory fee, Advantus Capital pays Templeton Counsel a fee equal to
.70% on the first $25 million of average daily net assets, .55% on the next $25
million, .50% on the next $50 million, and .40% on all average daily net assets
in excess of $100 million.
For this fee, Advantus Capital acts as investment adviser and manager for the
Fund and pays the Fund's investment sub-adviser, transfer agent, dividend
disbursing agent and redemption agent expenses. The Fund has engaged Minnesota
Mutual to act as its transfer agent, dividend disbursing agent and redemption
agent. While the advisory fees paid by the Fund are higher than those paid by
most mutual funds, they are partially offset by Advantus Capital's payment of
certain expenses, such as the transfer agent, dividend disbursing agent and
redemption agent expenses, which expenses are not customarily paid for by a
mutual fund's investment adviser. In addition, separate from the investment
advisory agreement, the Fund has entered into an agreement with Minnesota Mutual
under which Minnesota Mutual provides accounting, legal and other administrative
services to the Fund. During the year ended September 30, 1995, the Fund paid
Minnesota Mutual $26,200 for such services.
Under the Advisory Agreement with Advantus Capital, Advantus Capital furnishes
the Fund office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Fund, and pays the salaries and
fees of all officers and directors of the Fund who are affiliated with Advantus
Capital. MIMLIC Sales, the underwriter of the Fund's shares, bears all
promotional expenses in connection with the distribution of the Fund's shares,
including paying for prospectuses and statements of additional information for
new shareholders, shareholder reports for new shareholders and the costs of
sales literature. The Fund pays all other expenses not so expressly assumed.
For the year ended September 30, 1995, the expenses paid by the Fund (after
the voluntary absorption of certain expenses by the Fund's investment adviser
and the voluntary waiver of certain Class A Rule 12b-1 fees by MIMLIC Sales) as
a percentage of average daily net assets attributable to Class A and Class C
shares, were 2.08% and 2.93%, respectively. If the Fund had been charged for the
expenses voluntarily absorbed and waived its annual operating expenses, as a
percentage of average net assets, would have been 2.30% and 3.00% for Class A
and Class C shares, respectively. Advantus Capital and MIMLIC Sales reserve the
option to reduce further the level of expenses which each will voluntarily
absorb or waive for the Fund.
- ------------------------------------------
SUB-ADVISER
Templeton Investment Counsel, Inc. (hereinafter "Templeton Counsel"), a Florida
corporation with principal offices at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394, has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Fund, subject to the
20
<PAGE>
general control of the Board of Directors of the Fund. Templeton Counsel is an
indirect, wholly-owned subsidiary of Templeton Worldwide, Inc., which in turn is
a wholly-owned subsidiary of Franklin Resources, Inc.
The names and titles of the portfolio managers employed by Templeton Counsel
who are primarily responsible for the day-to-day management of the Fund's
portfolio, the length of time employed in that position, and their other
business experience during the past five years are set forth below:
<TABLE>
<CAPTION>
PORTFOLIO MANAGERS PRIMARY PORTFOLIO BUSINESS EXPERIENCE DURING
AND TITLE MANAGER SINCE PAST FIVE YEARS
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
JAMES E. CHANEY INCEPTION EQUITY RESEARCH AND PORTFOLIO MANAGEMENT,
(INTERNATIONAL TEMPLETON INVESTMENT COUNSEL, INC.; VICE
EQUITIES) VICE PRESIDENT, GE INVESTMENTS FROM JUNE 1987 TO JUNE
PRESIDENT, TEMPLETON 1991
INVESTMENT COUNSEL,
INC.
AND
NEIL S. DEVLIN MARCH 1, CHIEF INVESTMENT OFFICER AND EXECUTIVE VICE
(INTERNATIONAL DEBT 1995 PRESIDENT, TEMPLETON GLOBAL BOND MANAGERS,
SECURITIES) CHIEF TEMPLETON INVESTMENT COUNSEL, INC.
INVESTMENT OFFICER AND
EXECUTIVE VICE
PRESIDENT, TEMPLETON
GLOBAL BOND MANAGERS,
TEMPLETON INVESTMENT
COUNSEL, INC.
</TABLE>
- ------------------------------------------
THE UNDERWRITER AND
PLAN DISTRIBUTION The Fund has entered into a Distribution Agreement with
MIMLIC Sales pursuant to which MIMLIC Sales acts as the underwriter of the
Fund's shares. In addition, the Fund has adopted separate Plans of Distribution
applicable to Class A and Class C shares relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Fund, pursuant to its Plans of Distribution, pays fees to MIMLIC Sales
equal, on an annual basis, to a percentage of the Fund's average daily net
assets attributable to Class A shares and Class C shares, respectively, as set
forth in the following table:
<TABLE>
<CAPTION>
RULE 12B-1 FEE AS PERCENTAGE
OF AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO
CLASS A SHARES CLASS C SHARES
<S> <C>
- --------------------------------------------------------------------------------
.30% 1.00%
</TABLE>
All of the Rule 12b-1 fee payable by the Fund and attributable to Class A
shares of the Fund, and a portion of the fee payable with respect to Class C
shares equal to .75% of the average daily net assets attributable to such Class
C shares, constitute distribution fees designed to compensate MIMLIC Sales for
advertising, marketing and distributing the Class A and Class C shares of the
Fund. The distribution fees may be used by MIMLIC Sales for the purpose of
financing any activity which is primarily intended to result in the sale of
shares of the Fund. For example, such distribution fee may be used by MIMLIC
Sales: (a) to compensate (in addition to the sales load) broker-dealers,
including MIMLIC Sales and its registered representatives, for their sale of
Fund shares and for providing administrative support services to their customers
who directly or beneficially own shares of the Fund, banks, and other financial
institutions; and
21
<PAGE>
(b) to pay other advertising and promotional expenses in connection with the
distribution of the Fund's shares. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of prospectuses
for other than current shareholders; preparation and distribution of sales
literature; advertising of any type; expenses of branch offices provided jointly
by MIMLIC Sales and any affiliate thereof; and compensation paid to and expenses
incurred by officers, employees or representatives of MIMLIC Sales or of other
broker-dealers, banks, or financial institutions.
A portion of the Rule 12b-1 fee payable with respect to Class C shares of the
Fund, equal to .25% of the average daily net assets attributable to such Class C
shares, constitutes a shareholder servicing fee designed to compensate MIMLIC
Sales for the provision of certain services to the holders of Class C shares.
The services provided may include personal services provided to shareholders,
such as answering shareholder inquiries regarding the Fund and providing reports
and other information, and services related to the maintenance of shareholder
accounts. MIMLIC Sales may use the Rule 12b-1 fee to make payments to qualifying
broker-dealers and financial institutions that provide such services.
MIMLIC Sales may also provide compensation to certain institutions such as
banks ("Service Organizations") which have purchased shares of the Fund for the
accounts of their clients, or which have made the Fund's shares available for
purchase by their clients, and/or which provide continuing service to such
clients. The Glass-Steagall Act and other applicable laws, among other things,
prohibit certain banks from engaging in the business of underwriting securities.
In such circumstances, MIMLIC Sales, if so requested, will engage such banks as
Service Organizations only to perform administrative and shareholder servicing
functions, but at the same fees and other terms applicable to dealers. If a bank
were prohibited from acting as a Service Organization, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing servicing of such shareholders would be sought. In such event changes
in the operation of the Fund might occur and a shareholder serviced by such bank
might no longer be able to avail itself of any automatic investment or other
services then being provided by the bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences.
- ------------------------------------------
PURCHASE OF
FUND SHARES
- ------------- The Fund's shares may be
purchased at the public offering price from MIMLIC Sales
(the underwriter of the Fund's shares), and from certain other broker-dealers.
MIMLIC Sales reserves the right to reject any purchase order.
Certificates representing shares purchased are not currently issued. However,
shareholders will receive written confirmation of their purchases. Shareholders
will have the same rights of ownership with respect to such shares as if
certificates had been issued.
ALTERNATIVE PURCHASE ARRANGEMENTS. The Fund offers investors the choice among
two classes of shares which offer different sales charges and bear different
expenses. These alternatives permit an investor to choose the method of
purchasing shares that the investor believes is most beneficial given the amount
of the purchase, the length of time the investor expects to hold the shares and
other circumstances. For a detailed discussion of these alternative purchase
arrangements see "Sales Charges" below, or for a summary of these alternative
purchase arrangements see "Prospectus Summary."
The decision as to which class of shares provides a more suitable investment
for an investor may depend on a number of factors, including the amount and
intended length of the investment. Investors making investments that qualify for
a waiver of initial sales charges should
22
<PAGE>
purchase Class A shares. Investors who expect to hold shares for relatively
longer periods of time should also consider whether, depending on the
anticipated holding period, the initial sales charge and Rule 12b-1 fee payable
on Class A shares will be less in the aggregate than the higher Rule 12b-1 fee
payable on Class C shares. Other investors should consider Class C shares
because all of the purchase price is invested immediately. In addition,
investors who expect to hold shares for relatively shorter periods of time may
prefer Class C shares because such shares may be purchased and redeemed at any
time without charge and because, depending on the anticipated holding period,
the higher Rule 12b-1 fee payable on Class C shares may be less in the aggregate
than the initial sales charge and Rule 12b-1 fee payable on Class A shares.
Purchase orders for $1,000,000 or more will be accepted for Class A shares
only and are not subject to a sales charge at the time of purchase. Orders for
Class C shares for $1,000,000 or more will be treated as orders for Class A
shares or declined.
PURCHASE BY CHECK. Investors may purchase shares of the Fund by completing an
account application and sending it, together with a check payable to the Fund,
to MIMLIC Sales, at P.O. Box 64132, St. Paul, Minnesota 55164-0132.
A purchase is effected, at the price next determined, on the business day on
which a purchase order and properly drawn check are received by MIMLIC Sales.
PURCHASE BY WIRE. Shares may also be purchased by Federal Reserve or bank
wire. This method will result in a more rapid investment in shares of the Fund.
Before wiring any funds, contact MIMLIC Sales at (800) 443-3677 for
instructions. Promptly after making an initial purchase by wire, an investor
should complete an account application and mail it to MIMLIC Sales.
Subsequent purchases may be made in the same manner. Wire purchases normally
take two or more hours to complete, and to be accepted the same day must be
received by 3:00 p.m. (Central Time). Banks may charge a fee for transmitting
funds by wire.
MINIMUM INVESTMENTS. A minimum initial investment of $250 is required, and
the minimum subsequent investment is $25.
PUBLIC OFFERING PRICE. The public offering price of the Fund will be the net
asset value per share of the Fund next determined after an order is received by
MIMLIC Sales and becomes effective, plus the applicable sales charge, if any.
The net asset value per share of each class is determined by dividing the value
of the securities, cash and other assets (including dividends accrued but not
collected) of the Fund attributable to such class less all liabilities
(including accrued expenses but excluding capital and surplus) attributable to
such class, by the total number of shares of such class outstanding.
The net asset value of the shares of the Fund is determined as of the primary
closing time for business on the New York Stock Exchange (as of the date of this
Prospectus the primary close of trading is 3:00 p.m. (Central Time), but this
time may be changed) on each day, Monday through Friday, except (i) days on
which changes in the value of the Fund's portfolio securities will not
materially affect the current net asset value of Fund shares, (ii) days during
which no Fund shares are tendered for redemption and no order to purchase or
sell Fund shares is received by the Fund and (iii) customary national business
holidays on which the New York Stock Exchange is closed for trading (as of the
date hereof, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). The offering
price for a purchase order is based on the net asset value next determined after
receipt of such order in the office of the Fund.
Portfolio securities, including put and call options, which are traded
over-the-counter and on a national exchange will be valued according to the
broadest and most representative market. A security which is only listed or
traded on an exchange, or for which an exchange is the most
23
<PAGE>
representative market, is valued at its last sale price (prior to the time as of
which assets are valued) on the exchange where it is principally traded. Lacking
any sales on the exchange where it is principally traded on the day of
valuation, prior to the time as of which assets are valued, the security
generally is valued at the last bid price on that exchange. Futures contracts
will be valued in a like manner, except that open futures contracts sales will
be valued using the closing settlement price or, in the absence of such a price,
the most recent quoted bid price. All other securities for which
over-the-counter market quotations are readily available are valued on the basis
of the last current bid price. When market quotations are not readily available,
such securities are valued at fair value as determined in good faith by the
Board of Directors. Other assets also are valued at fair value as determined in
good faith by the Board of Directors. However, debt securities may be valued on
the basis of valuations furnished by a pricing service which utilizes electronic
data processing techniques to determine valuations for normal institutional-size
trading units of debt securities, without regard to sale or bid prices, when
such valuations are believed to more accurately reflect the fair market value of
such securities. Short-term investments in debt securities are valued daily at
market.
- ------------------------------------------
SALES
CHARGES
- -------- The sales charges applicable to
purchases of the Fund's shares, and also the Rule 12b-1 fees paid
by the Fund which are attributable to such shares, will vary depending on the
class of shares purchased, as described below. An investor should carefully
consider which sales charge alternative is most beneficial in the investor's
circumstances.
- ------------------------------------------
CLASS A SHARES
The public offering price of Class A shares of the Fund is the net asset value
of the Fund's shares plus the applicable front end sales charge ("FESC"), which
will vary with the size of the purchase. MIMLIC Sales receives all applicable
sales charges. The Fund receives the net asset value. The current sales charges
are:
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF:
NET
OFFERING AMOUNT
VALUE OF TOTAL INVESTMENT PRICE INVESTED
<S> <C> <C>
- --------------------------------------------------------
LESS THAN $50,000 5.0% 5.26%
$50,000 BUT LESS THAN $100,000 4.5 4.71
$100,000 BUT LESS THAN $250,000 3.5 3.63
$250,000 BUT LESS THAN $500,000 2.5 2.56
$500,000 BUT LESS THAN $1,000,000 1.5 1.52
$1,000,000 AND OVER -0- -0-
</TABLE>
Note that the sales charge depends on the total value of your investment (net
asset value of shares currently owned plus the cost of any new investment) in
the Fund, and not on the amount of a single investment. For example, if you
already own shares with a net asset value of $40,000 and you decide to invest in
additional shares having a public offering price of $10,000, you will pay a
sales charge equal to 4.5% of your entire additional $10,000 investment, since
the total value of your investment is now $50,000.
RULE 12B-1 FEES. Class A shares are subject to a Rule 12b-1 fee payable at an
annual rate of .30% of average daily net assets of the Fund attributable to
Class A shares. For additional information about this fee, see "Management of
the Fund--The Underwriter and Plans of Distribution," above.
If shares are purchased through a broker-dealer which has a selling agreement
with MIMLIC Sales, the broker-dealer will receive a commission of up to 100% of
the above sales charge. The amount of the commission will depend on various
factors, including whether or not the broker-dealer is affiliated with Minnesota
Mutual and the volume of sales of such broker-dealer. The exact amount of such
commission is subject to prior negotiation
24
<PAGE>
between MIMLIC Sales and each such broker-dealer. A broker-dealer receiving more
than 90% of the sales charge may be deemed to be an "underwriter" under the
Securities Act of 1933, as amended. In addition, MIMLIC Sales or Minnesota
Mutual will pay to such broker-dealers, based uniformly on the sale of Fund
shares by such broker-dealers, credits which allow such broker-dealers'
registered representatives who are responsible for such broker-dealers' sales of
Fund shares to attend conventions and other meetings sponsored by Minnesota
Mutual or its affiliates for the purpose of promoting the sale of the insurance
and/or investment products offered by Minnesota Mutual and its affiliates. Such
credits may cover the registered representatives' transportation, hotel
accommodations, meals, registration fees and the like. Broker-dealers earning
such credits will be allowed to elect to receive from MIMLIC Sales or Minnesota
Mutual, in lieu of such credits, cash in an amount equal to the cost of
providing such credits.
WAIVER OF SALES CHARGES FOR CLASS A SHARES. Officers, directors, full-time and
part-time employees, sales representatives, and retirees of the Fund, Advantus
Capital, MIMLIC Management, Templeton Counsel, MIMLIC Sales, Minnesota Mutual or
any of Minnesota Mutual's other affiliated companies, any trust, pension or
benefit plan for such persons, the spouses, siblings, direct ancestors or direct
descendents of such persons, Minnesota Mutual and its affiliates themselves,
advisory clients of Advantus Capital or MIMLIC Management, employees of sales
representatives employed in offices maintained by such sales representatives,
certain accounts as to which a bank or broker-dealer charges an account
management fee, provided the bank or broker-dealer has an agreement with MIMLIC
Sales, and certain accounts sold by registered investment advisers who charge
clients a fee for their services are allowed to buy Class A shares of the Fund
without paying the FESC.
- ------------------------------------------
CLASS C SHARES
Class C shares of the Fund are sold without an initial sales charge so that
the Fund receives the full amount of the investor's purchase. Class C shares
will automatically convert to Class A shares of the Fund on the fifteenth day of
the month (or, if different, the last business day prior to such date) following
the expiration of a specified holding period. In addition, Class C shares are
subject to higher Rule 12b-1 fees (as described below). The applicable holding
period prior to conversion is determined in accordance with the following table:
<TABLE>
<CAPTION>
SHARES CONVERT
TO CLASS A
IN THE
MONTH AFTER
SHARES PURCHASED IN AN AMOUNT EXPIRATION OF
<S> <C>
- -----------------------------------------------------
LESS THAN $50,000 96 MONTHS
$50,000 BUT LESS THAN $100,000 88 MONTHS
$100,000 BUT LESS THAN $250,000 72 MONTHS
$250,000 BUT LESS THAN $500,000 56 MONTHS
$500,000 BUT LESS THAN $1,000,000 40 MONTHS
</TABLE>
The higher Rule 12b-1 fee enables the Fund to sell the Class C shares without
deduction of a sales charge at the time of purchase. MIMLIC Sales does not pay a
sales commission to broker-dealers, or to registered representatives of MIMLIC
Sales, who sell Class C shares. The higher Rule 12b-1 fee will cause Class C
shares to have a higher expense ratio and to pay lower dividends than Class A
shares.
RULE 12B-1 FEES. Class C shares are subject to a Rule 12b-1 fee payable at an
annual rate of 1.00% of the average daily net assets of the Fund attributable to
Class C shares. For additional information about this fee, see "Management of
the Fund--The Underwriter and Plans of Distribution," above.
CONVERSION FEATURE. On the fifteenth day of the month (or, if different, the
last business day prior to such date) after the expiration of the applicable
holding period described in the table above, Class C shares will automatically
convert to Class A shares and will no longer be subject to a higher Rule 12b-1
fee. Such conversion will be on the basis of the relative net asset values of
the two classes. Class A shares issued upon such conversion will not be
25
<PAGE>
subject to any FESC. Class C shares acquired by exchange from Class C shares of
another Advantus Load Fund will convert into Class A shares based on the time of
the initial purchase. Purchased Class C shares ("Purchased C Shares") will
convert after the specified number of months following the purchase date. All
Class C shares in a shareholder's account that were acquired through the
reinvestment of dividends and distributions ("Reinvestment C Shares") will be
held in a separate sub-account. Each time any Purchased C Shares convert to
Class A shares, a PRO RATA portion (based on the ratio that the total converting
Purchased C Shares bears to the shareholder's total converting and
non-converting Purchased C Shares immediately prior to the conversion) of the
Reinvestment C Shares then in the sub-account will also convert to Class A
shares.
The conversion of Class C shares to Class A shares is subject to the
continuing availability of a ruling from the Internal Revenue Service or an
opinion of counsel that payment of different dividends by each of the classes of
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, as amended,
and that such conversions do not constitute taxable events for Federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class C shares to Class A shares will not occur
if such ruling or opinion is not available. In such event, Class C shares would
continue to be subject to higher expenses than Class A shares for an indefinite
period.
- ------------------------------------------
SPECIAL
PURCHASE
PLANS
- ---------
The following are alternative purchase plans applicable to the
Fund, all of which offer the possibility of a reduced sales
charge:
- - Letter of Intent. (See instructions on
application.)
- - Combined purchases with spouse, children, and/
or single trust estates--all accounts whether invested in Class A shares,
Class C shares or both, are combined to determine sales charge. It is the
obligation of each investor desiring this discount in sales charge to notify
MIMLIC Sales, through his or her dealer or otherwise, that he or she is
entitled to the discount.
- - Group Purchases--individuals who are members
of a qualified group (which must meet criteria established by MIMLIC Sales)
may purchase shares at the reduced sales charge applicable to the group taken
as a whole.
- - Combined investments in all Advantus Load
Funds--all accounts, whether invested in Class A shares, Class B shares (in
the case of the other Advantus Load Funds) or Class C shares, or any
combination, are combined to determine sales charge.
- - Systematic Investment Plan--voluntary periodic
purchases enable an investor to lower his or her average cost per share
through the principle of "dollar cost averaging."
The Fund also offers an Automatic Investment Plan, which allows an investor to
automatically invest a specified amount in the Fund each month. For more
information on any of these plans, contact MIMLIC Sales or a MIMLIC Sales
representative.
- ------------------------------------------
EXCHANGE AND
TELEPHONE TRANSFER
OF FUND SHARES
- --------------------
A shareholder can exchange some or all of his or her
Class A and Class C shares in the Fund, including shares acquired by
reinvestment of dividends, for shares of the same class of any of the other
Advantus Load Funds (provided that the shareholder has an already open account
in such other Advantus Load Fund), and can thereafter re-exchange such exchanged
shares back for shares of the same class of the Fund, provided that the minimum
amount which may be transferred is $250. The exchange will be made on the basis
of the
26
<PAGE>
relative net asset values without the imposition of any additional sales load.
Class A and Class C shares may also be exchanged for shares of Advantus Money
Market Fund, Inc. ("Money Market Fund") at net asset values. Shares of Money
Market Fund acquired in an exchange for Class A or Class C shares from any of
the Advantus Load Funds may also be re-exchanged at relative net asset values
for Class A and Class C shares, respectively, of the Fund. Class C shares
re-acquired in this manner will have a remaining holding period prior to
conversion equal to the remaining holding period applicable to the prior Class C
shares at the time of the initial exchange. Shares of Money Market Fund not
acquired in an exchange from any of the Advantus Load Funds may be exchange at
relative net asset values for either Class A or Class C shares of the Fund,
subject to the sales charge applicable to the class selected.
The exchange privilege is available only in states where such exchanges may
legally be made (at the present time the Fund believes this privilege is
available in all states). An exchange may be made by written request or by a
pre-authorized telephone call (see "Telephone Transactions"). Up to four
exchanges each year may be made without charge. A $7.50 service charge will be
imposed on each subsequent exchange and/or telephone transfer. No service charge
is imposed in connection with systematic exchange plans. However, MIMLIC Sales
reserves the right to restrict the frequency of--or otherwise modify, condition,
terminate, or impose additional charges upon--the exchange and/or telephone
transfer privileges, upon 60 days' prior notice to shareholders. Telephone
transfers and other exchanges can only be made between Advantus Fund accounts
having identical registrations. An exchange is considered to be a sale of shares
for federal income tax purposes on which an investor may realize a long- or
short-term capital gain or loss. See "Taxes" for a discussion of the effect of
redeeming shares within 90 days after acquiring them and subsequently acquiring
new shares in any mutual fund at a reduced sales charge. For further information
on the exchange privilege, contact MIMLIC Sales.
- ------------------------------------------
SYSTEMATIC EXCHANGE PLAN
Shareholders of the Fund may elect to have shares of the Fund systematically
exchanged for shares of any of the other Advantus Funds (provided that such
Advantus Fund accounts must have identical registrations) on a monthly basis.
The minimum amount which may be exchanged on such a systematic basis is $25. The
terms and conditions otherwise applicable to exchanges generally, as described
above, also apply to such systematic exchange plans.
- ------------------------------------------
REDEMPTION OF
FUND SHARES
- --------------- Registered holders of
shares of the Fund may redeem their shares at the per
share net asset value next determined following receipt by the Fund (at its
mailing address listed on the cover page) of a written redemption request signed
by all shareholders exactly as the account is registered (and a properly
endorsed stock certificate if one has been issued). Class A and Class C shares
may be redeemed without charge. Both share certificates and stock powers, if
any, tendered in redemption must be endorsed and executed exactly as the Fund
shares are registered. If the redemption proceeds are less than $25,000 and are
to be paid to the registered holder and sent to the address of record for that
account, or if the written redemption request is from pre-authorized trustees of
plans, trusts and other tax-exempt organizations and the redemption proceeds are
less than $25,000, no signature guarantee is required. However, if the
redemption proceeds are $25,000 or more or are to be paid to someone other than
the registered holder, or are to be mailed to an address other than the
registered shareholder's address, or the shares are to be transferred, or the
request does not come from such a plan trustee, the owner's signature must be
guaranteed by an eligible
27
<PAGE>
guarantor institution, including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities
broker-dealers which are members of a national securities exchange or a clearing
agency or which have minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion Program ("STAMP") or
other recognized signature medallion program. A signature guarantee is also
required in connection with any redemption if, within the 30-day period prior to
receipt of the redemption request, instructions have been received to change the
shareholder's address of record. The Fund reserves the right to require
signature guarantees on all redemptions. Any certificates should be sent to the
Fund by certified mail. Payment will be made as soon as possible, but not later
than seven days after receipt of a properly executed written redemption request
(and any certificates). The amount received by the shareholder may be more or
less than the shares' original cost.
If stock certificates have not been issued, and if no signature guarantee is
required, shareholders may also submit their signed written redemption request
to MIMLIC Sales by facsimile (FAX) transmission. MIMLIC Sales' FAX number is
1-612-223-5959.
If a shareholder owns both Class A and Class C shares, then absent a
shareholder choice to the contrary, Class C shares will be redeemed in full
prior to any redemption of Class A shares.
TELEPHONE REDEMPTION. The Fund's shareholders may elect this option by
completing the appropriate portion of the application, and may redeem shares by
calling MIMLIC Sales at 1-800-443-3677 (see "Telephone Transactions"). The
maximum amount which may be redeemed by telephone is $25,000. The proceeds will
be sent by check to the address of record for the account. If the amount is
$1,000 or more, and if the shareholder has designated a bank account, the
proceeds may be wired to the shareholder's designated bank account, and the
prevailing wire charge (currently $5.00) will be added to the amount redeemed
from the Fund. During periods of marked economic or market changes, shareholders
may experience difficulty in implementing a telephone redemption due to a heavy
volume of telephone calls. In such a circumstance, shareholders should consider
submitting a written redemption request while continuing to attempt a telephone
redemption. MIMLIC Sales reserves the right to modify, terminate or impose
charges upon the telephone redemption privilege.
DELAY IN PAYMENT OF REDEMPTION PROCEEDS. Payment of redemption proceeds will
ordinarily be made as soon as possible and within the periods of time described
above. However, an exception to this is that if redemption is requested after a
purchase by non-guaranteed funds (such as a personal check), the Fund will delay
mailing the redemption check or wiring proceeds until it has reasonable
assurance that the purchase check has cleared (good payment has been collected).
This delay may be up to 14 days.
The Fund has the right to redeem the shares in inactive accounts which, due to
redemptions and not to decreases in market value of the shares in the account,
have a total current value of less than $250. Therefore, shareholders who invest
only $250 (the minimum investment in the Fund), and who redeem any amount in
excess of any market appreciation, may have the remaining shares redeemed by the
Fund. Before redeeming an account, the Fund will mail to the shareholder a
written notice of its intention to redeem, which will give the investor an
opportunity to make an additional investment. If no additional investment is
received by the Fund within 60 days of the date the notice was mailed, the
shareholder's account will be redeemed.
28
<PAGE>
- ------------------------------------------
TELEPHONE
TRANSACTIONS
- -------------- Shareholders of the
Fund are permitted to exchange or redeem the Fund's shares
by telephone. See "Exchange and Telephone Transfer of Fund Shares" and
"Redemption of Fund Shares" for further details. The privilege to initiate such
transactions by telephone is not made available automatically but must be
elected by a shareholder on the account application.
The Fund and its transfer agent, Minnesota Mutual, will not be liable for
following instructions communicated by telephone which they reasonably believe
to be genuine; provided, however, that the Fund and Minnesota Mutual will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and that if they do not, they may be liable for any losses due to
unauthorized or fraudulent instructions. The procedures for processing telephone
transactions include tape recording of telephone instructions, asking
shareholders for their account and social security numbers, and providing
written confirmation of such transactions.
- ------------------------------------------
REINSTATEMENT
PRIVILEGE
- --------------- Shareholders who
redeem shares in the Fund have a one-time privilege to
apply their redemption proceeds (at no sales charge) to the purchase of shares,
of the same class as the shares redeemed, of any of the Advantus Load Funds by
notifying MIMLIC Sales within 90 days after their redemption. Shareholders who
redeem Class C shares and exercise their reinstatement privilege will be issued
only Class C shares having a remaining holding period prior to conversion equal
to the remaining holding period applicable to the prior Class C shares at
redemption. See "Taxes" for a discussion of the effect of redeeming shares
within 90 days after acquiring them and subsequently acquiring new shares in any
mutual fund at a reduced sales charge.
- ------------------------------------------
DIVIDENDS AND
CAPITAL GAINS
DISTRIBUTIONS
- ---------------
The policy of the Fund is to pay dividends from net
investment income quarterly. Any net realized capital
gains are distributed once a year, during December. Distributions paid by the
Fund, if any, with respect to Class A and Class C shares will be calculated in
the same manner, at the same time, on the same day and will be in the same
amount, except that the higher Rule 12b-1 fees applicable to Class C shares will
be borne exclusively by such shares. The per share distributions on Class C
shares will be lower than the per share distributions on Class A shares as a
result of the higher Rule 12b-1 fees applicable to Class C shares.
Any dividend payments or net capital gains distributions made by the Fund are
in the form of additional shares of the same class of the Fund rather than in
cash, unless a shareholder specifically requests the Fund in writing that the
payment be made in cash. The distribution of these shares is made at net asset
value on the payment date of the dividend, without any sales or other charges to
the shareholder. The taxable status of income dividends and/or net capital gains
distributions is not affected by whether they are reinvested or paid in cash.
Authorization may be made on the Application form, or at any time by letter.
Upon written request to the Fund, a shareholder may also elect to have
dividends from the Fund invested without sales charge in shares of Money Market
Fund or in shares of the same class of another of the Advantus Load Funds
(provided that such Advantus Fund accounts must have identical registrations) at
the net asset value of such other Advantus Fund on the payable date for the
dividends being distributed. To use this privilege of investing dividends from
the Fund in shares of another of the Advantus Funds, shareholders must maintain
a minimum account
29
<PAGE>
value of $250 in both the Fund and the Advantus Fund in which dividends are
reinvested.
- ------------------------------------------
TAXES
- -----
The following is a general summary of certain federal tax
considerations affecting the Fund and its shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or its
shareholders, and the discussion here is not intended as a substitute for
careful tax planning.
During the year ended September 30, 1995, the Fund fulfilled, and intends to
continue to fulfill, the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), as a regulated investment company. If so
qualified, the Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to its shareholders.
The Fund may be required to pay withholding and other taxes imposed by foreign
countries, generally at rates from 10% to 40%, which would reduce the Fund's
investment income. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If at the end of the Fund's fiscal
year more than 50% of its total assets consist of securities of foreign
corporations, it will be eligible to file an election with the Internal Revenue
Service pursuant to which shareholders of the Fund will be required to include
their respective pro rata portions of such withholding taxes as gross income,
treat such amounts as foreign taxes paid by them, and deduct such amounts in
computing their taxable incomes or, alternatively, use them as foreign tax
credits against their federal income taxes. The Fund will make this election
only if it deems the election to be in the best interests of its shareholders.
Distributions of investment company taxable income from the Fund generally
will be taxable to shareholders as ordinary income, regardless of whether such
distributions are paid in cash or are invested in additional shares of the
Fund's stock. A distribution of net capital gain (a "capital gain
distribution"), whether paid in cash or reinvested in shares, is taxable to
shareholders as long-term capital gain, regardless of the length of time a
shareholder has held his shares or whether such gain was realized by the Fund
before the shareholder acquired such shares and was reflected in the price paid
for the shares. However, if a shareholder holds for less than six months a share
with respect to which a long-term capital gain distribution has been made, any
loss on the sale of such share will be treated as a long-term capital loss to
the extent that the shareholder previously recognized long-term capital gain.
Under the Revenue Reconciliation Act of 1993, long-term capital gains of
individuals are taxed at a maximum rate of 28%, while the highest marginal
regular tax rates on ordinary income for individuals for 1994 and subsequent
years are 36% (applicable to taxable income in excess of $115,000 for
individuals filing single returns and taxable income in excess of $140,000 for
married couples filing joint returns), and 39.6% (for both individuals filing
single returns and married couples filing joint returns with taxable income in
excess of $250,000). (Effective rates on ordinary income may be somewhat higher,
resulting from a combination of the nominal rates, a phase-out of personal
exemptions for individuals filing single returns with adjusted gross income in
excess of $111,800 and for married couples filing joint returns with adjusted
gross income in excess of $167,700, and a partial disallowance of itemized
deductions for individuals with adjusted gross income in excess of $111,800.)
It is expected that none of the dividend distributions from International Fund
will qualify for the 70% dividend received deduction for corporations.
Prior to purchasing shares of the Fund, prospective shareholders (except for
tax qualified retirement plans) should consider the impact of dividends or
capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or
30
<PAGE>
capital gains distributions paid shortly after a purchase of shares by an
investor prior to the record date will have the effect of reducing the per share
net asset value by the amount of the dividends or distributions. All or a
portion of such dividends or distributions, although in effect a return of
capital, is subject to taxation.
If shares of the Fund are sold or otherwise disposed of more than twelve
months from the date of acquisition, the Fund shareholder will realize a
long-term capital gain or loss equal to the difference between the purchase
price and the sale price of the shares disposed of, if, as is usually the case,
the Fund shares are a capital asset in the hands of the Fund shareholder.
The Code provides that a shareholder who pays a sales charge in acquiring
shares of a mutual fund, redeems those shares within 90 days after acquiring
them, and subsequently acquires new shares in any mutual fund for a reduced
sales charge or no sales charge (pursuant to a reinvestment right acquired with
the first shares), may not take into account the sales charge imposed on the
first acquisition, to the extent of the reduction in the sales charge on the
second acquisition, for purposes of computing gain or loss on disposition of the
first acquired shares. The amount of sales charge disregarded under this rule
will, however, be treated as incurred in connection with the acquisition of the
second acquired shares.
Before investing in the Fund, an investor should consult a tax adviser
concerning the consequences of any local and state tax laws, and of any
retirement plan offering tax benefits.
Shareholders of the Fund receive an annual statement detailing federal tax
information. Distributions by the Fund, including the amount of any redemption,
are reported to shareholders in such annual statement and to the Internal
Revenue Service to the extent required by the Code. Such distributions received
by a Fund shareholder are ordinarily not subject to withholding of federal
income tax. However, a withholding of such tax at a rate of 31% may be made by
reason of the events specified in Section 3406 of the Code and the regulations
promulgated thereunder, including the failure of a Fund shareholder to supply
the Fund or its agent with such shareholder's taxpayer identification number.
Such withholding may also apply to a Fund shareholder who is otherwise exempt
from such withholding if such shareholder fails to properly document its status
as an exempt recipient.
- ------------------------------------------
INVESTMENT
PERFORMANCE
- -------------- Advertisements and
other sales literature for the Fund may refer to "yield,"
"average annual total return" and "cumulative total return." Performance
quotations are computed separately for Class A and Class C shares of the Fund.
All quotations of yield, average annual total return and cumulative total return
are based upon historical information and are not intended to indicate future
performance. The investment return on and principal value of an investment in
the Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The advertised yield of the Fund will be based upon a 30-day period stated in
the advertisement. Yield is calculated by dividing the net investment income per
share (as defined under Securities and Exchange Commission rules and
regulations) earned during the period by the maximum offering price per share on
the last day of the period. The result is then "annualized" using a formula that
provides for semi-annual compounding of income.
Both average annual total return and cumulative total return are based on a
hypothetical $1,000 payment to the Fund at the beginning of the advertised
period. Average annual total return is calculated by finding the average annual
compounded rate of return over the period that would equate the initial
investment to the ending redeemable value. Cumulative total return is the
percentage change
31
<PAGE>
between the public offering price of one Fund share at the beginning of a period
and the net asset value of that share at the end of the period with dividend and
capital gain distributions treated as reinvested. In calculating both average
annual total return and cumulative total return, the maximum sales charge is
deducted from the hypothetical investment and all dividends and distributions
during the period are assumed to be reinvested. Such average annual total return
and cumulative total return figures may also be accompanied by average annual
total return and cumulative total return figures, for the same or other periods,
which do not reflect the deduction of any sales charges.
- ------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS The table below shows the average annual total returns for Class
A and Class C shares of the Fund for the periods indicated. Such figures reflect
the deduction of the Fund's maximum 5% sales load applicable to Class A shares
and the voluntary absorption of certain expenses of the Fund by the Fund's
investment adviser described under "Management of the Fund." (See also,
"Calculation of Performance Data" in the Statement of Additional Information.)
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
FOR THE PERIODS SHOWN
ENDING SEPTEMBER 30,
1995
---------------------------------
<S> <C> <C>
1 YEAR SINCE INCEPTION
- ---------------------------------------------------------------------
CLASS A SHARES (1) 2.0% .1%
CLASS C SHARES (2) N/A 10.3%(3)
</TABLE>
(1) INCEPTION WAS SEPTEMBER 16, 1994.
(2) INCEPTION WAS MARCH 1, 1995.
(3) NOT ANNUALIZED.
- ------------------------------------------------------------
RANKINGS AND
RATINGS The Fund may from time to time also advertise rankings or other ratings
of the Fund as determined by Morningstar, Inc., Lipper Analytical Services,
Inc., INVESTORS DAILY, Wiesenberger Financial Services, FORTUNE MAGAZINE, or
other mutual fund rating firms.
Shareholders of the Fund may also telephone MIMLIC Sales at (800) 443-3677 for
current quotations of yield, average annual total return and cumulative total
return.
For additional information regarding the calculation of yield, average annual
total return and cumulative total return see the Statement of Additional
Information.
- ------------------------------------------
ADDITIONAL PERFORMANCE
INFORMATION Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge by writing or calling the Fund at the address or telephone number shown
on the cover of this Prospectus.
- ------------------------------------------
LIMITATION
OF DIRECTOR
LIABILITY
- ------------
Under Minnesota law, the directors of the Fund owe the Fund
and its shareholders certain fiduciary duties, including a
duty of "loyalty" (to act in good faith and in the best interests of the Fund)
and a duty of "care" (to act with the care that a reasonably prudent person
would exercise under similar circumstances). Minnesota law authorizes
corporations to eliminate the personal monetary liability of directors to the
corporation or its shareholders for breach of the duty of "care." Directors of
corporations adopting such a limitation provision still owe the corporation a
duty of "care" but under most circumstances cannot be sued for monetary damages
for breaches of such duty. The Fund's Articles of Incorporation limit the
liability of directors to the fullest extent permitted by law.
Directors of the Fund remain fully liable (including possibly for monetary
damages) for breaches of their duty of "loyalty", for self-dealing, for bad
faith and intentional misconduct, and for violations of the Securities Act of
1933,
32
<PAGE>
the Securities Exchange Act of 1934, and certain provisions of Minnesota
corporation law. Additionally, the Investment Company Act of 1940 prohibits
limiting a Fund director's liability for gross negligence and reckless
misconduct, and it is uncertain whether and to what extent directors remain
liable for monetary damages for violations of the Investment Company Act.
- ------------------------------------------
GENERAL
INFORMATION
- ------------- The Fund was incorpo-
rated in January 1994 as a Minnesota corporation. The Fund's
name was changed, by vote of its shareholders, to its current name in February
1995. The Fund's authorized capital stock is of two classes (Class A and Class
C), common shares, with a par value of $.01 per share. All shares of the Fund
are nonassessable, fully transferable and have one vote and equal rights to
share in dividends and assets of the Fund. The shares of the Fund possess no
preemptive or conversion rights. Cumulative voting is not authorized for the
Fund. This means that the holders of more than 50% of the shares of the Fund
voting for the election of directors of the Fund can elect 100% of the directors
if they choose to do so, and in such event the holders of the remaining shares
of the Fund will be unable to elect any directors.
On November 30, 1995, Minnesota Mutual and its subsidiaries owned shares in
the Fund as set forth in the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OWNED BY
SHARES MINNESOTA MUTUAL
OUTSTANDING AND SUBSIDIARIES
<S> <C> <C> <C>
- --------------------------------------------------------------------
<CAPTION>
CLASS A CLASS C CLASS A CLASS C
<S> <C> <C> <C>
- --------------------------------------------------------------------
2,949,295 34,681 2,490,955 1,024
</TABLE>
Due to its ownership of more than 25% of the outstanding shares of the Fund,
Minnesota Mutual may be said to control the Fund. Minnesota Mutual, Advantus
Capital, MIMLIC Management and MIMLIC Sales are all organized as Minnesota
corporations.
The Fund does not hold annual or periodically scheduled regular meetings of
shareholders. Regular and special shareholder meetings are held only at such
times and with such frequency as required by law. Minnesota corporation law does
not require an annual meeting; instead, it provides for the Board of Directors
to convene shareholder meetings when it deems appropriate. In addition, if a
regular meeting of shareholders has not been held during the immediately
preceding fifteen months, a shareholder or shareholders holding 3% or more of
the voting shares of Fund may demand a regular meeting of shareholders of the
Fund by written notice of demand given to the chief executive officer or the
chief financial officer of the Fund. Within 30 days after receipt of the demand
by one of those officers, the Board of Directors shall cause a regular meeting
of shareholders to be called and held no later than 90 days after receipt of the
demand, all at the expense of the Fund. Additionally, the Investment Company Act
of 1940 requires shareholder votes for all amendments to fundamental investment
policies and restrictions and for all investment advisory contracts and
amendments thereto.
The Fund sends to its shareholders a six-month unaudited and annual audited
financial report of the Fund, which includes a list of investment securities
held by the Fund. Shareholder inquiries should be directed to a registered
representative of the shareholder's broker-dealer, or to the Underwriter or the
Fund at the telephone number or mailing address listed on the cover of this
Prospectus.
33
<PAGE>
- ------------------------------------------
COUNSEL AND
INDEPENDENT
AUDITORS
- -------------
The firm of Dorsey & Whitney P.L.L.P., 220 South Sixth
Street, Minneapolis, Minnesota 55402, is the General Counsel
for the Fund. KPMG Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402, are the independent auditor s for the
Fund.
- ------------------------------------------
CUSTODIAN
- -----------
The custodian for International Fund is Norwest Bank Minnesota,
N.A., Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479. Morgan
Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201 acts as
sub-custodian of the International Fund's assets and portfolio securities.
Pursuant to Rule 17f-5 under the 1940 Act, the Board of Directors of the
International Fund has also approved the use of various foreign sub-custodian
banks and securities depositories to maintain foreign securities in or near the
market in which they are principally traded and to maintain cash in amounts
reasonably necessary to effect foreign securities transactions in such
locations. The Board of Directors may from time to time approve other
subcustodian banks pursuant to Rule 17f-5.
34
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
FUND INFORMATION:
INVESTMENT ADVISER
Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
(612) 292-5923
INVESTMENT SUB-ADVISER
Templeton Investment Counsel, Inc.
500 East Broward Boulevard
Fort Lauderdale, Florida 33394
(305) 527-7500
UNDERWRITER
MIMLIC Sales Corporation
P.O. Box 64132
St. Paul, Minnesota 55164-0132
(612) 228-4833
(800) 443-3677
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
The Minnesota Mutual Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
(800) 443-3677
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
GENERAL COUNSEL
Dorsey & Whitney P.L.L.P.
[LOGO]
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ADVANTUS HORIZON FUND, INC.
ADVANTUS SPECTRUM FUND, INC.
ADVANTUS MORTGAGE SECURITIES FUND, INC.
ADVANTUS MONEY MARKET FUND, INC.
ADVANTUS BOND FUND, INC.
ADVANTUS CORNERSTONE FUND, INC.
ADVANTUS ENTERPRISE FUND, INC.
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
February 1, 1996
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the separate Prospectuses dated
February 1, 1996 and should be read in conjunction therewith. A copy of each
Prospectus may be obtained from MIMLIC Sales Corporation, P.O. Box 64132, St.
Paul, Minnesota 55101 (telephone (800) 443-3677).
THIS STATEMENT OF ADDITIONAL INFORMATION MUST BE ACCOMPANIED OR PRECEDED BY A
COPY OF THE CURRENT PROSPECTUS FOR EACH OF THE ADVANTUS FUNDS NAMED ABOVE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Horizon Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Spectrum Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Mortgage Securities Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Cornerstone Fund and Enterprise Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
International Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Additional Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
DIRECTOR LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Control and Management of Advantus Capital and MIMLIC Sales . . . . . . . . . . . . . . . . . . . . .26
Investment Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
International Fund Sub-Adviser -- Templeton Counsel . . . . . . . . . . . . . . . . . . . . . . . . .29
International Fund Investment Sub-Advisory Agreement -- Templeton Counsel . . . . . . . . . . . . . .30
Distribution Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Payment of Certain Distribution Expenses of the Funds . . . . . . . . . . . . . . . . . . . . . . . .32
MONEY MARKET FUND AMORTIZED COST METHOD OF PORTFOLIO VALUATION . . . . . . . . . . . . . . . . . . . . . . .35
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
CAPITAL STOCK AND OWNERSHIP OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
NET ASSET VALUE AND PUBLIC OFFERING PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
REDUCED SALES CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Right of Accumulation-Cumulative Purchase Discount. . . . . . . . . . . . . . . . . . . . . . . . . .50
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Combining Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Purchases of Class A shares by Certain Persons Affiliated with the Fund, Advantus Capital MIMLIC
Management, Templeton Counsel, MIMLIC Sales, Minnesota Mutual, or Any of Minnesota Mutual's Other
Affiliated Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Open Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Systematic Investment Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Group Systematic Investment Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Automatic Investment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Group Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Retirement Plans Offering Tax Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Systematic Withdrawal Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Exchange and Telephone Transfer Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Reinstatement Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
DISTRIBUTIONS AND TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
APPENDIX A - MORTGAGE-RELATED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Underlying Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Liquidity and Marketability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Average Life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Yield Calculations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
APPENDIX B - BOND AND COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Bond Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Commercial Paper Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
APPENDIX C - FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Use of Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Description of Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Risks in Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3
Example of Futures Contract Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3
Example of Futures Contract Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-4
Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-5
APPENDIX D - FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Advantus Horizon Fund, Inc. ("Horizon Fund"), Advantus Spectrum Fund,
Inc. ("Spectrum Fund"), Advantus Mortgage Securities Fund, Inc. ("Mortgage
Securities Fund"), Advantus Money Market Fund, Inc. ("Money Market Fund"),
Advantus Bond Fund, Inc. ("Bond Fund"), Advantus Cornerstone Fund, Inc.
("Cornerstone Fund"), Advantus Enterprise Fund, Inc. ("Enterprise Fund") and
Advantus International Balanced Fund, Inc. ("International Fund"),
collectively referred to as the "Advantus Funds" or the "Funds," are open-end
diversified investment companies, commonly called mutual funds. Each of the
Advantus Funds, excluding Money Market Fund, offers more than one class of
shares (the "Advantus Load Funds"). The Advantus Load Funds currently offer
three classes of shares (Class A, Class B and Class C), except for
International Fund which currently offers its shares it two classes (Class A
and Class C). Each class is sold pursuant to different sales arrangements
and bears different expenses. The Funds are incorporated as Minnesota
corporations. Horizon Fund, Spectrum Fund, Mortgage Securities Fund and Money
Market Fund were incorporated in October 1984. Bond Fund was incorporated in
January 1987, and Cornerstone Fund, Enterprise Fund and International Fund
were incorporated in January 1994.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each of the Funds are
summarized on the front page of each Fund's Prospectus and are set forth in
detail in the text of each Fund's Prospectus under "Investment Objectives,
Policies and Risks."
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Mortgage Securities Fund, Spectrum Fund and Bond Fund may each
purchase securities offered on a "when-issued" basis and may purchase or sell
securities on a "forward commitment" basis. When such transactions are
negotiated, the price, which is generally expressed in yield terms, is fixed
at the time the commitment is made, but delivery and payment for the
securities takes place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment to purchase
by the Fund and settlement, no payment is made for the securities purchased
by the Fund and, thus, no interest accrues to the Fund from the transaction.
The use of when-issued transactions and forward commitments enables
the Fund to hedge against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis to
limit its exposure to falling prices. In periods of falling interest rates
and rising prices, the Fund might sell a security in its portfolio and
purchase the same or a similar security on a when-issued or forward
commitment basis, thereby fixing the purchase price to be paid on the
settlement date at an amount below that to which the Fund anticipates the
market price of such security to rise and, in the meantime, obtaining the
benefit of investing the proceeds of the sale of its portfolio security at
currently higher cash yields. Of course, the success of this strategy
depends upon the ability of the Fund's investment adviser to correctly
anticipate increases and decreases in interest rates and prices of
securities. If the adviser anticipates a rise in interest rates
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and a decline in prices and, accordingly, the Fund sells securities on a
forward commitment basis in order to hedge against falling prices, but in
fact interest rates decline and prices rise, the Fund will have lost the
opportunity to profit from the price increase. If the adviser anticipates a
decline in interest rates and a rise in prices, and, accordingly, the Fund
sells a security in its portfolio and purchases the same or a similar
security on a when-issued or forward commitment basis in order to enjoy
currently high cash yields, but in fact interest rates increase and prices
fall, the Fund will have lost the opportunity to profit from investment of
the proceeds of the sale of the security at the increased interest rates.
The likely effect of this hedging strategy, whether the Fund's investment
adviser is correct or incorrect in its prediction of interest rate and price
movements, is to reduce the chances of large capital gains or losses and
thereby reduce the likelihood of wide variations in the Fund's net asset
value.
When-issued securities and forward commitments may be sold prior to
the settlement date, but the Fund enters into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. The Fund may hold a when-issued security or
forward commitment until the settlement date, even if the Fund will incur a
loss upon settlement. To facilitate transactions in when-issued securities
and forward commitments, the Fund's custodian bank maintains, in a separate
account of the Fund, liquid assets, such as cash, short-term securities and
other appropriate high grade debt obligations, having a value equal to, or
greater than, any commitments to purchase securities on a when-issued or
forward commitment basis and, with respect to forward commitments to sell
portfolio securities of the Fund, the portfolio securities themselves. If
the Fund, however, chooses to dispose of the right to acquire a when-issued
security prior to its acquisition or dispose of its right to deliver or
receive against a forward commitment, it can incur a gain or loss. (At the
time the Fund makes the commitment to purchase or sell a security on a
when-issued or forward commitment basis, it records the transaction and
reflects the value of the security purchased or, if a sale, the proceeds to
be received, in determining its net asset value.) No when-issued or forward
commitments with respect to debt securities will be made if, as a result,
more than 20% of the value of the Fund's total assets would be committed to
such transactions.
INTEREST RATE FUTURES CONTRACTS
Mortgage Securities Fund and Bond Fund may each also enter into
contracts for the future delivery of fixed income securities commonly
referred to as "interest rate futures contracts." These futures contracts
will be used only as a hedge against anticipated interest rate changes. The
Fund will sell futures contracts to protect against expected increases in
interest rates and purchase futures contracts to offset the impact of
interest rate declines. The Fund will not enter into an interest rate
futures contracts if immediately thereafter (a) more than 5% of the value of
the Fund's total assets will be committed to initial margin or (b) the sum of
the then aggregate futures market prices of financial instruments required to
be delivered upon open futures contract sales and the aggregate purchase
prices under open futures contract purchases would exceed 30% of the value of
the Fund's total assets. In addition, when purchasing interest rate futures
contracts, the Fund will deposit and maintain in a separate account with its
custodian cash or cash equivalents in an amount equal to the market value of
such futures contracts, less any margin deposited on the Fund's long
position, to cover the Fund's obligation.
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The Commodity Futures Trading Commission (the "CFTC"), a Federal
agency, regulates trading activity on the exchanges pursuant to the Commodity
Exchange Act, as amended. The CFTC requires the registration of "commodity
pool operators," defined as any person engaged in a business which is of the
nature of an investment trust, syndicate, or similar form or enterprise, and
who, in connection therewith, solicits, accepts, or receives from others,
funds, securities, or property for the purpose of trading in any commodity
for future delivery on or subject to the rules of any contract market. The
CFTC has adopted certain regulations which exclude from the definition of
"commodity pool operator" an investment company, like the Fund, registered
with the Securities and Exchange Commission under the Investment Company Act
of 1940, and any principal or employee thereof, which investment company
files a notice of eligibility with the CFTC and the National Futures
Association containing certain information about the investment company and
representing that it (i) will use commodity futures or commodity options
contracts solely for bona fide hedging purposes, (ii) will not enter into
commodity futures and commodity options contracts for which the aggregate
initial margin and premiums exceed 5% of the fair market value of its assets,
after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into, (iii) will not be, and has not been,
marketing participations to the public as or in a commodity pool or otherwise
as or in a vehicle for trading in the commodity futures or commodity options
markets, (iv) will disclose in writing to each prospective participant the
purpose of and the limitations on the scope of the commodity futures and
commodity options trading in which the entity intends to engage, and (v) will
submit to such special calls as the CFTC may make to require the qualifying
entity to demonstrate compliance with these representations. The "bona fide
hedging" transactions and positions authorized by these regulations mean
transactions or positions in a contract for future delivery on any contract
market, where such transactions or positions normally represent a substitute
for transactions to be made or positions to be taken at a later time in a
physical marketing channel, and where they are economically appropriate to
the reduction of risks in the conduct and management of a commercial
enterprise, and where they arising from (i) the potential change in the value
of assets which a person owns, produces, manufactures, processes or
merchandises or anticipates owning, producing, manufacturing, processing or
merchandising, (ii) the potential change in the value of liabilities a person
owes or anticipates incurring, or (iii) the potential change in the value of
services which a person provides, purchases or anticipates providing or
purchasing; provided that, notwithstanding the foregoing, no transactions or
positions shall be classified as bona fide hedging unless their purpose is to
offset price risk incidental to commercial cash or spot operations and such
positions are established and liquidated in an orderly manner in accordance
with sound commercial practices and unless certain statements are filed with
the CFTC with respect to such transactions or positions. The Fund intends to
meet these requirements, or such other requirements as the CFTC or its staff
may from time to time issue, in order to render registration of the Fund and
any of its principals and employees as a commodity pool operator unnecessary.
The Fund will incur certain risks in employing interest rate futures
contracts to protect against cash market price volatility. One risk is the
prospect that futures prices will correlate imperfectly with the behavior of
cash prices. Another risk is that the Fund's investment adviser would be
incorrect in its expectation as to the extent of various investment rate
movements or the time span within which the movements take place.
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<PAGE>
For a detailed discussion of futures contracts and the risks of
investing therein, see Appendix C to this Statement of Additional Information.
OPTIONS - HORIZON FUND, CORNERSTONE FUND AND ENTERPRISE FUND
The Fund may write covered call options which are traded on national
securities exchanges with respect to common stocks in its portfolio ("covered
options") in an attempt to earn additional current income on its portfolio or
to guard against an expected decline in the price of a security. When the
Fund writes a covered call option, it gives the purchaser of the option the
right to buy the underlying security at the price specified in the option
(the "exercise price") at any time during the option period. If the option
expires unexercised, the Fund realizes income, typically in the form of
short-term capital gain, to the extent of the amount received for the option
(the "premium"). If the option is exercised, a decision over which the Fund
has no control, the Fund must sell the underlying security to the option
holder at the exercise price. By writing a covered option, the Fund
foregoes, in exchange for the premium less the commission ("net premium"),
the opportunity to profit during the option period from an increase in the
market value of the underlying security above the exercise price. The Fund
does not write call options in an aggregate amount greater than 15% of its
net assets.
The Fund purchases call options only to close out a position. When an
option is written on securities in the Fund's portfolio and it appears that
the purchaser of that option is likely to exercise the option and purchase
the underlying security, it may be considered appropriate to avoid
liquidating the Fund's position, or the Fund may wish to extinguish a call
option sold by it so as to be free to sell the underlying security. In such
instances the Fund may purchase a call option on the same security with the
same exercise price and expiration date which had been previously written.
Such a purchase would have the effect of closing out the option which the
Fund has written. The Fund realizes a short-term capital gain if the amount
paid to purchase the call option is less than the premium received for
writing a similar option. Generally, the Fund realizes a short-term loss if
the amount paid to purchase the call option is greater than the premium
received for writing the option. If the underlying security has
substantially risen in value, it may be difficult or expensive to purchase
the call option for the closing transaction.
OPTIONS - MORTGAGE SECURITIES FUND
Mortgage Securities Fund may purchase put and call options written by
others covering the types of securities in which the Fund may invest. The
Fund may not write put or call options. The Fund utilizes put and call
options to provide protection against adverse price or yield effects from
anticipated changes in prevailing interest rates.
A put option gives the buyer of such option, upon payment of a
premium, the right to deliver a specified amount of a security to the writer
of the option on or before a fixed date at a predetermined price. A call
option gives the purchaser of the option, upon payment of a premium, the
right to call upon the writer to deliver a specified amount of a security on
or before a fixed date at a predetermined price. The Fund will not purchase a
put or call option if, as a result, the aggregate cost of all outstanding
options purchased and held by the Fund plus all other illiquid assets held by
the Fund would exceed 10% of the value of the Fund's net assets. If an
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<PAGE>
option is permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
In buying a call, the Fund would be in a position to realize a gain
if, during the option period, the price of the security increased by an
amount in excess of the premium paid. It would realize a loss if the price
of the security declined or remained the same or did not increase during the
period by more than the amount of the premium. By buying a put, the Fund
would be in a position to realize a gain if, during the option period, the
price of the security declines in an amount in excess of the premium paid.
It would realize a loss if the price of the security increased or remained
the same or did not decrease during that period by more than the amount of
the premium.
The Fund generally purchases options in negotiated transactions with
the writers of the options. The Fund purchases options only from investment
dealers and other financial institutions (such as commercial banks or savings
and loan institutions) deemed creditworthy by its investment adviser. The
Fund may dispose of an option by entering into a closing sale transaction
with the writer of the option. A closing sale transaction terminates the
obligation of the writer of the option and does not result in the ownership
of an option. The Fund realizes a profit or loss from a closing sale
transaction if the premium received from the transaction is more than or less
than the cost of the option. Options purchased by the Fund in negotiated
transactions are illiquid and there is no assurance that the Fund will be
able to effect a closing sale transaction at a time when its investment
adviser believes it would be advantageous to do so.
OPTIONS - SPECTRUM FUND AND BOND FUND
The Fund may write (sell) "covered" call options and purchase
"covered" put options. The Fund will not purchase call options except to
close out call options previously written by the Fund, nor will it write put
options except to close out put options previously purchased by the Fund.
The effect of writing covered call options and purchasing covered put options
will be to reduce the effect of price fluctuations of the securities owned by
the Fund (and involved in the options) on the Fund's net asset value per
share. Another effect may be the generation of additional revenues in the
form of premiums received for writing covered call options.
Spectrum Fund does not write covered call or purchase covered put
options if, as a result, the aggregate market value of all portfolio
securities covering such options exceeds an aggregate amount greater than 15%
of the market value of its net assets. Bond Fund will not write a covered
call option or purchase a put option if, as a result, the aggregate market
value of all portfolio securities covering call options or subject to put
options exceeds 25% of the market value of the Fund's net assets. In
addition, Bond Fund will purchase covered put options (and purchase call
options to close out call options previously written by the Fund) only to the
extent that the aggregate premiums paid for all such options held do not
exceed 2% of net assets.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a
certain date (the expiration date). So long as the obligation of the writer
of a call option continues, he may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring him to deliver the
underlying security
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<PAGE>
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing the option which he
previously sold. To secure his obligation to deliver the underlying security
in the case of a call option, a writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the
Exchanges and of the Options Clearing Corporation (the "OCC"), an institution
created to interpose itself between buyers and sellers of options. A put
option gives the holder (buyer) the "right to sell" a security at a specified
price (the exercise price) at any time until a certain date (the expiration
date).
The Fund will only write "covered" call and purchase "covered" put
options. This means that the Fund will only write a call option or purchase
a put option on a security which the Fund already owns. Each Fund will only
write covered call options and purchase covered put options in
exchange-traded standard contracts issued by the OCC, or write covered call
options and purchase covered put options in the over-the-counter ("OTC")
market in negotiated transactions entered into directly with investment
dealers meeting the creditworthiness criteria (described below) of the Fund's
investment adviser. Exchange-traded options are third-party contracts and
standardized strike prices and expiration dates, and are purchased from a
clearing corporation such as the OCC. Technically, the OCC assumes the other
side of every purchase and sale transaction on an Exchange and, by doing so,
guarantees the transaction. In contrast, OTC options are two-party contracts
with price and terms negotiated between buyer and seller. The Fund relies on
the dealer from whom it purchases an OTC option to perform if the option is
exercised, and will therefore only negotiate an OTC option with a dealer
subject to the following criteria: (i) the broker-dealer or its predecessor
must have been in business at least 15 years; (ii) the broker-dealer must
have, in the judgment of the Fund's investment adviser, a reputation for
sound management and ethical business practices; (iii) the broker-dealer must
be registered with the Securities and Exchange Commission; and (iv) the
broker-dealer must have at least $50 million in "Excess Capital." ("Excess
Capital" is that portion of a firm's permanent capital which is in excess of
the minimum capital required under the Uniform Net Capital Rule of the
Securities and Exchange Commission.) Broker-dealer subsidiaries of companies
having at least $1 billion in net worth shall also be considered
creditworthy, in the event of a lack of publicly available financial
information. To the extent the Fund invests in OTC options for which there
is no secondary market it will be investing in securities which are illiquid
and therefore subject to the Fund's 10% limitation on aggregate investment in
restricted or other illiquid securities (see "Investment Restrictions").
The writing of covered call options is a conservative investment
technique believed to involve relatively little risk (in contrast to the
writing of naked or uncovered options) but capable of enhancing total return.
When writing a covered call option, the Fund, in return for the premium,
gives up the opportunity for profit from a price increase in the underlying
security above the exercise price, but conversely retains the risk of loss
should the price of the security decline. If a call option which the Fund
has written expires, the Fund will realize a gain in the amount of the
premium; however, such gain may be offset by a decline in the market value of
the underlying security during the option period. If the call option is
exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The Fund will purchase put options involving portfolio
securities only when the Fund's investment adviser believes that a temporary
defensive position is desirable in light of market conditions, but does not
desire to sell the
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portfolio security. Therefore, the purchase of put options will be utilized
to protect the Fund's holdings in an underlying security against a
substantial decline in market value. Such protection is, of course, only
provided during the life of the put option when the Fund, as the holder of
the put option, is able to sell the underlying security at the put exercise
price regardless of any decline in the underlying security's market price.
By using put options in this manner, the Fund will reduce any profit it might
otherwise have realized in its underlying security by the premium paid for
the put option and by transaction costs.
The Fund will purchase a call option only to close out a covered call
option it has written (a "closing purchase transaction"), and will write a
put option only to close out a put option it has purchased (a "closing sale
transaction"). Such closing transactions will be effected in order to
realize a profit on an outstanding call or put option, to prevent an
underlying security from being called or put, or, to permit the sale of the
underlying security. Furthermore, effecting a closing transaction will
permit the Fund to write another call option, or purchase another put option,
on the underlying security with either a different exercise price or
expiration date or both. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, or purchased a put
option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. There is, of course, no
assurance that the Fund will be able to effect such closing transactions at a
favorable price. If the Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case
it would continue to be at market risk on the security. This could result in
higher transaction costs, including brokerage commissions. The Fund will pay
brokerage commissions in connection with the writing or purchase of options
to close out previously written options. Such brokerage commissions are
normally higher than those applicable to purchases and sales of portfolio
securities.
WARRANTS WITH CASH EXTRACTIONS
The International Fund may invest up to 5% of its assets in warrants,
including warrants used in conjunction with the cash extraction method.
Warrants are instruments that allow investors to purchase underlying shares
at a specified price (exercise price) at a given future date. The market
price of a warrant is determined by market participants by the addition of
two distinct components: (1) the price of the underlying shares less the
warrant's exercise price, and (2) the warrant's premium that is attributed to
volatility and leveraging power. If an investor wishes to replicate an
underlying share, the investor can use the warrant with cash extraction
method by purchasing warrants and holding cash. The cash component would be
determined by subtracting the market price of the warrant from the underlying
share price.
For example, ASSUME one share for company "Alpha" has a current share
price of $40 and issued warrants can be converted one for one share at an
exercise price of $31 exercisable two years from today. Also ASSUME that the
market price of the warrant is $10 ($40 - $31 + $1) because investors are
willing to pay a premium ($1) for previously stated reasons. If an investor
wanted to replicate an underlying share by engaging in a warrant with cash
extraction strategy, the amount of cash the investor would need to hold for
every warrant would be $30 ($40 - $10 = $30). A warrant with cash extraction
is, thus, simply a synthetically created quasi-convertible bond.
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If an underlying share issues no or a low dividend and has an
associated warrant with a market price that is low relative to its share
price, a warrant with cash extraction may provide attractive cash yields and
minimize capital loss risk, provided the underlying share is also considered
a worthy investment. For example, ASSUME Alpha's share is an attractive
investment opportunity and its share pays no dividend. Given the information
regarding Alpha provided above, also ASSUME that short-term cash currently
yields 5% per year and that the investor plans to hold the investment at
least two years, barring significant near-term capital appreciation. If the
share price were to fall below $30, the warrant with cash extraction strategy
would yield a lower loss than the underlying share because an investor cannot
lose more than the purchase cost of the warrant (capital risk minimized).
The cash component for this strategy would yield $3.08 after two years
(compound interest). The total value of the underlying investment would be
$43.08 versus $40.00 for the non-yielding underlying share (attractive
yield). Finally, it is important to note that this strategy will not be
pursued if it is not economically more attractive than underlying shares.
DEBT SECURITIES AND DOWN-GRADED INSTRUMENTS
Each of Horizon Fund, Spectrum Fund, Mortgage Securities Fund, Bond
Fund, Enterprise Fund and International Fund may invest in debt securities
rated BBB or Baa or higher by S&P or Moody's, respectively as described in
each Fund's Prospectus. (Cornerstone Fund may invest in debt securities
convertible into common stock which are rated lower than BBB or Baa. See the
Cornerstone Fund Prospectus for information regarding these securities and
the Fund's policy regarding them.)
The market value of debt securities generally varies in response to
changes in interest rates and the financial condition of each issuer. During
periods of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
such securities generally declines. These changes in market value will be
reflected in each Fund's net asset value.
These Funds may, however, acquire debt securities which, after
acquisition, are down-graded by the rating agencies to a rating lower than
BBB or Baa by S&P's or Moody's, respectively. In such an event it is such
Funds' general policy to dispose of such down-graded securities except when,
in the judgment of the Funds' investment adviser, it is to the Funds'
advantage to continue to hold such securities. In no event, however, will
any such Fund hold more than 5% of its net assets in securities rated lower
than BBB or Baa by S&P's or Moody's, respectively. Although they may offer
higher yields than do higher rated securities, low rated and unrated debt
securities generally involve greater volatility of price and risk of
principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low
rated and unrated debt securities are traded are more limited than those in
which higher rated securities are traded. The existence of limited markets
for particular securities may diminish the Funds' ability to sell the
securities at fair value either to meet redemption requests or to respond to
changes in the economy or in the financial markets and could adversely affect
and cause fluctuations in the daily net asset value of the Funds' shares.
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Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Funds to
achieve its investment objective may, to the extent of investment in low
rated debt securities, be more dependent upon such creditworthiness analysis
than would be the case if the Funds were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be
less sensitive to interest rate changes than higher rated investments, but
more sensitive to adverse economic downturns or individual corporate
developments. A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated debt
securities prices because the advent of a recession could lessen the ability
of a highly leveraged company to make principal and interest payments on its
debt securities. If the issuer of low rated debt securities defaults, the
Funds may incur additional expenses to seek recovery. The low rated bond
market is relatively new, and many of the outstanding low rated bonds have
not endured a major business recession.
INVESTMENT RESTRICTIONS
Each of the Funds is "diversified" as defined in the Investment
Company Act of 1940. This means that at least 75% of the value of the Fund's
total assets is represented by cash and cash items, government securities,
securities of other investment companies, and securities of other issuers,
which for purposes of this calculation, are limited in respect of any one
issuer to an amount not greater in value than 5% of the Fund's total assets
and to not more than 10% of the outstanding voting securities of such issuer.
Each Fund is also subject to certain "fundamental" investment
restrictions, which may not be changed without the vote of a "majority" of
the Fund's outstanding shares. As used in the Prospectus and this Statement
of Additional Information, "majority" means the lesser of (i) 67% of a Fund's
outstanding shares present at a meeting of the holders if more than 50% of
the outstanding shares are present in person or by proxy or (ii) more than
50% of a Fund's outstanding shares. An investment restriction which is not
fundamental may be changed by vote of the Board of Directors without further
shareholder approval. Except as otherwise noted, each of the investment
restrictions below is fundamental.
HORIZON FUND
Horizon Fund will NOT:
(1) Purchase any security (other than securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of a single issuer, except
that up to 25% of the value of the Fund's total assets may be
invested without regard to this limitation;
[NOTE: SEE "ADDITIONAL INVESTMENT RESTRICTIONS" BELOW.]
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(2) Purchase any security if, as a result, more than 25% of the
Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in a single industry;
(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales or securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold;
(4) Acquire more than 10% of any class of securities of an issuer
(taking all preferred stock issues of an issuer as a single class and
all debt issues of an issuer as a single class) or acquire more than
10% of the outstanding voting securities of an issuer;
(5) Borrow money, except from banks and only as a temporary measure
for extraordinary or emergency purposes and not in excess of 5% of
its net assets;
(6) Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any assets of the Fund;
(7) Invest more than a total of 5% of its total assets in
securities of businesses (including predecessors) less than three
years old or equity securities which are not readily marketable;
(8) Purchase or retain securities of any company if officers and
directors of the Fund or of its investment adviser who individually
own more than 1/2 of 1% of the shares or securities of that company,
together own more than 5%;
(9) Make loans, except by purchase of bonds, debentures, commercial
paper, certificates of deposit, corporate notes and similar evidences
of indebtedness, which are a part of an issue to the public or to
financial institutions, and except loans of portfolio securities to
broker-dealers and financial institutions, determined by the Fund to
have sufficient financial responsibility, if such loans are secured
at all times by cash or securities issued or guaranteed by the United
States Government, its agencies or instrumentalities, in an amount
at all times equal to at least 100% of the market value of the
portfolio securities loaned and if, immediately after making such
loan, the total amount of portfolio securities loaned does not exceed
20% of the market value of the Fund's total assets;
(10) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, real estate or interests in real estate which are
not readily marketable, commodities or commodity contracts. (This
does not prevent the Fund from purchasing securities of companies
investing in the foregoing.);
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<PAGE>
(11) Act as an underwriter of securities, except to the
extent the Fund may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities;
(12) Make investments for the purpose of exercising control
or management;
(13) Participate on a joint or joint and several basis in
any trading account in securities;
(14) Write put or call options, except covered call options
which are traded on national securities exchanges with respect to
common stocks in its portfolio, in an aggregate amount not greater
than 15% of its net assets; or purchase options, except call options in
order to close out a position;
(15) Invest in the securities of other investment companies
with an aggregate value in excess of 5% of the Fund's total assets,
except securities acquired as a result of a merger, consolidation or
acquisition of assets;
(16) Purchase or sell any securities other than Fund shares
from or to its investment adviser or any officer or director of the
Fund or its investment adviser; or
(17) Invest more than a total of 10% of the Fund's net assets in
securities restricted as to disposition under federal securities laws
or otherwise or other illiquid assets (which include repurchase
agreements with a maturity of over seven days).
SPECTRUM FUND
Spectrum Fund will NOT:
(1) Purchase any security (other than securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of a single issuer, except that
up to 25% of the value of the Fund's total assets may be invested
without regard to this limitation;
(2) Purchase any security if, as a result, more than 25% of
the Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in a single industry,
provided that (a) telephone, gas and electric public utilities are each
regarded as separate industries and (b) banking, savings and loan
associations, savings banks and finance companies as a group will not
be considered a single industry for the purpose of this limitation.
There is no limitation with respect to the concentration of investments
in securities issued or guaranteed by the United States Government, its
agencies or instrumentalities or certificates of deposit and bankers'
acceptances of United States banks and savings and loan associations;
[NOTE: SEE "ADDITIONAL INVESTMENT RESTRICTIONS" BELOW.]
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<PAGE>
(3) Purchase any security on margin (but it may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of securities);
(4) Make short sales except short sales against the box
where it owns the securities sold or, by virtue of ownership of other
securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold;
(5) Acquire more than 10% of any class of securities of
an issuer (taking all preferred stock issues of an issuer as a single
class and all debt issues of an issuer as a single class) or acquire
more than 10% of the outstanding voting securities of an issuer;
(6) Borrow money, except from banks and only as a
temporary measure for extraordinary or emergency purposes and not in
excess of 5% of its net assets;
[NOTE: SEE "ADDITIONAL INVESTMENT RESTRICTIONS" BELOW.]
(7) Mortgage, pledge, hypothecate, or in any manner
transfer, as security for indebtedness, any assets of the Fund,
except that this limitation shall not apply to deposits made in
connection with the entering into and holding of interest rate
futures contracts;
(8) Invest more than a total of 5% of its total assets in
securities of businesses (including predecessors) less than three
years old or equity securities which are not readily marketable;
(9) Purchase or retain securities of any company if
officers and directors of the Fund or of its investment adviser who
individually own more than 1/2 of 1% of the shares of securities of
that company, together own more than 5%;
(10) Make loans, except by purchase of qualified debt
obligations referred to in the Prospectus and except loans of
portfolio securities to broker-dealers and financial institutions,
determined by the Fund's investment adviser to have sufficient
financial responsibility, if such loans are secured at all times by
cash or securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, in an amount at all
times equal to at least 100% of the market value of the portfolio
securities loaned and if, immediately after making such loans, the
total amount of portfolio securities loaned does not exceed 20% of
the market value of the Fund's total assets;
(11) Buy or sell oil, gas or other mineral leases, rights
or royalty contracts, real estate or interests in real estate which
are not readily marketable, commodities or commodity contracts. (This
does not prevent the Fund from purchasing securities of companies
investing in the foregoing.);
(12) Act as an underwriter of securities, except to the
extent the Fund may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities;
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<PAGE>
(13) Make investments for the purpose of exercising
control or management;
(14) Participate on a joint or joint and several basis in
any trading account in securities;
(15) Write call or purchase put options, except covered
options which are traded on national securities exchanges with
respect to securities in its portfolio, in an amount not greater than
15% of its net assets, or purchase a call option or write a put
option, except to close out a position;
(16) Invest in the securities of other investment
companies with an aggregate value in excess of 5% of the Fund's total
assets, except securities acquired as a result of a merger,
consolidation or acquisition of assets; or
(17) Invest more than a total of 10% of the Fund's net
assets in securities restricted as to disposition under federal
securities laws or otherwise or other illiquid assets.
MORTGAGE SECURITIES FUND
Mortgage Securities Fund will NOT:
(1) Purchase any security (other than securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of a single issuer, except
that up to 25% of the value of the Fund's total assets may be
invested without regard to this limitation;
(2) Purchase any security if, as a result, more than 25%
of the Fund's total assets would be invested in the securities of
issuers conducting their principal business activities in a single
industry, except that this limitation shall not apply to investment
in the mortgage and mortgage-finance industry (in which more than
25% of the value of the Fund's total assets will, except for
temporary defensive positions, be invested) or securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities;
[NOTE: SEE "ADDITIONAL INVESTMENT RESTRICTIONS" BELOW.]
(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold;
(4) Lend its portfolio securities;
(5) Borrow money except from banks and only as a
temporary measure for extraordinary or emergency purposes and not in
excess of 5% of its net assets;
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<PAGE>
(6) Mortgage, pledge, hypothecate, or in any manner
transfer, as security for indebtedness, any assets of the Fund,
except that this limitation shall not apply to deposits made in
connection with the entering into and holding of interest rate
futures contracts;
(7) Invest more than a total of 5% of its total assets in
securities of businesses (including predecessors) less than three
years old or equity securities which are not readily marketable;
(8) Purchase or retain securities of any company if
officers and directors of the Fund or of its investment adviser who
individually own more than 1/2 of 1% of the shares or securities of
the company, together own more than 5%;
(9) Make loans, except by purchase of qualified debt
obligations referred to in the Prospectus under "Investment
Objectives and Policies;"
(10) Buy or sell (a) oil, gas or other mineral leases,
rights or royalty contracts; (b) real estate, except that it may
invest in mortgage-related securities and whole loans and purchase
and sell securities of companies which deal in real estate or
interests therein; or (c) commodities or commodity contracts, except
that it may invest in interest rate futures contracts.
(11) Act as an underwriter of securities, except to the
extent the Fund may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities;
(12) Make investments for the purpose of exercising
control or management;
(13) Invest in the securities of other investment
companies with an aggregate value in excess of 5% of the Fund's total
assets, except securities acquired as a result of a merger,
consolidation or acquisition of assets; or
(14) Invest more than a total of 10% of the Fund's net
assets in securities restricted as to disposition under federal
securities laws or otherwise or other illiquid assets (which include
put and call options).
MONEY MARKET FUND (Restriction number 15 is not "fundamental".)
Money Market Fund will NOT:
(1) Purchase any security (other than securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of a single issuer;
(2) Purchase any security if, as a result, more than 25%
of the Fund's total assets would be invested in the securities of
issuers conducting their principal business activities in a single
industry; provided that (a) telephone, gas, and electric public
utilities are each
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<PAGE>
regarded as separate industries and (b) United States banks,
savings and loan associations, savings banks and finance
companies are each regarded as separate industries for the
purpose of this limitation. There are no limitations with respect
to the concentration of investments in securities issued or guaranteed
by the United States Government, its agencies or instrumentalities,
or certificates of deposit and bankers acceptances of domestic
branches of United States banks;
[NOTE: SEE "ADDITIONAL INVESTMENT RESTRICTIONS" BELOW.]
(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold, and only to the extent that the Fund's short
positions will not at the time of any short sale aggregate in total
sale prices more than 10% of its total assets;
(4) Acquire more than 10% of any class of securities of
an issuer (taking all preferred stock issues of an issuer as a single
class and all debt issues of an issuer as a single class) or acquire
more than 10% of the outstanding voting securities of an issuer;
(5) Borrow money or enter into reverse repurchase
agreements in excess of 5% of its net assets and, with respect to
borrowing money, only from banks and only as a temporary measure for
extraordinary or emergency purposes;
(6) Mortgage, pledge, hypothecate, or in any manner
transfer, as security for indebtedness, any assets of the Fund;
(7) Invest more than 5% of its total assets in securities
of businesses (including predecessors) less than three years old;
(8) Purchase or retain securities of any company if
officers and directors of the Fund or of its investment adviser who
individually own more than 1/2 of 1% of the shares or securities of
that company, together own more than 5%;
(9) Make loans, except by purchase of bonds, debentures,
commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public or to
financial institutions;
(10) Buy or sell oil, gas or other mineral leases, rights
or royalty contracts, real estate or interests in real estate which
are not readily marketable, commodities or commodity contracts. (This
does not prevent the Fund from purchasing securities of companies
investing in the foregoing.);
(11) Act as an underwriter of securities, except to the
extent the Fund maybe deemed to be an underwriter in connection with
the disposition of portfolio securities;
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<PAGE>
(12) Make investments for the purpose of exercising control or
management;
(13) Participate on a joint or joint and several basis in any
trading account in securities;
(14) Write or purchase put or call options, or combinations thereof;
(15) Enter into repurchase agreements maturing in more than seven
days, purchase certificates of deposit of banks and savings and loan
associations which at the date of the investment have total assets (as
of the date of their most recent annual financial statements) of less
than $2 billion, purchase variable amount master demand notes, or invest
in any other illiquid assets, if such investments taken together exceed
10% of the Fund's net assets (This restriction is non-fundamental.); or
(16) Invest in the securities of other investment companies with
an aggregate value in excess of 5% of the Fund's total assets, except
securities acquired as a result of a merger, consolidation or acquisition
of assets.
BOND FUND (Restriction number 16 is not "fundamental".)
Bond Fund will NOT:
(1) Purchase any security (other than securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total
assets would be invested in securities of a single issuer, except that
up to 25% of the value of the Fund's total assets may be invested
without regard to this limitation;
(2) Purchase any security if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in a single industry,
provided that (a) the electric, telephone, gas, gas transmission,
water, telegraph and satellite communications utilities are each
regarded as separate industries, and (b) banks, savings and loan
associations, savings banks, and finance companies are each regarded
as separate industries. There is no limitation with respect to the
concentration of investments in securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales or securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold;
(4) Acquire more than 10% of any class of securities of an issuer
(taking all preferred stock issues of an issuer as a single class and
all debt issues of an issuer as a single class) or acquire more than
10% of the outstanding voting securities of an issuer;
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<PAGE>
(5) Borrow money, except from banks and only as a temporary measure
for extraordinary or emergency purposes, including the meeting of
redemption requests which might otherwise require the untimely
disposition of securities, and not in excess of 5% of its net assets;
or enter into reverse repurchase agreements;
(6) Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any assets of the Fund, except that this
limitation shall not apply to deposits made in connection with the
entering into and holding of interest rate futures contracts;
(7) Invest more than a total of 5% of its total assets in securities
of businesses (including predecessors) less than three years old or
equity securities which are not readily marketable;
(8) Purchase or retain securities of any company if officers and
directors of the Fund or of its investment adviser who individually own
more than 1/2 of 1% of the shares or securities of that company,
together own more than 5%;
(9) Make loans, except by purchase of qualified debt obligations
referred to in the Prospectus under "Investment Objectives and
Policies," and except loans of portfolio securities to broker-dealers
and financial institutions, determined by the Fund to have sufficient
financial responsibility, if such loans are secured at all times by
cash or securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, in an amount at all
times equal to at least 100% of the market value of the portfolio
securities loaned and if, immediately after making such loan, the
total amount of portfolio securities loaned does not exceed 20% of
the market value of the Fund's total assets;
(10) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, real estate, or interests in real estate which are
not readily marketable, commodities or commodity contracts, except
that it may invest in interest rate futures contracts. (This does
not prevent the Fund from purchasing securities of companies investing
in the foregoing.);
(11) Act as an underwriter of securities, except to the extent
the Fund may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities;
(12) Make investments for the purpose of exercising control
or management;
(13) Participate on a joint or joint and several basis in
any trading account in securities (but this does not prohibit the
"bunching" of orders for the sale or purchase of the Fund's portfolio
securities with other accounts advised by Advantus Capital to reduce
brokerage commissions or otherwise to achieve best overall execution);
(14) Invest in the securities of other investment companies
with an aggregate value in excess of 5% of the Fund's total assets,
except securities acquired as a result of a merger, consolidation
or acquisition of assets; or
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(15) Invest more than a total of 10% of the Fund's net assets in
securities restricted as to disposition under federal securities laws
or otherwise or other illiquid assets (which include repurchase
agreements with a maturity of over seven days and OTC options for
which there is no secondary market); or
(16) Invest more than 10% of its net assets in securities of
foreign issuers which are not U.S. dollar-denominated and publicly
traded in the United States (This restriction is non-fundamental.).
CORNERSTONE FUND AND ENTERPRISE FUND (The investment restrictions numbered 1
through 7 below are fundamental. Restrictions numbered 8 through 14 are not
fundamental and may be changed by the Funds' Boards of Directors.)
Cornerstone Fund and Enterprise Fund will NOT:
(1) Purchase any security if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in a single industry;
(2) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales or securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold;
(3) Borrow money, except from banks and only as a temporary
measure for extraordinary or emergency purposes and not in excess of
5% of its net assets;
(4) Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any assets of the Fund;
(5) Make loans, except by purchase of bonds, debentures, commercial
paper, certificates of deposit, corporate notes and similar evidences
of indebtedness, which are a part of an issue to the public or to
financial institutions, and except loans of portfolio securities to
broker-dealers and financial institutions, determined by the Fund to
have sufficient financial responsibility, if such loans are secured
at all times by cash or securities issued or guaranteed by the
United States Government, its agencies or instrumentalities, in an
amount at all times equal to at least 100% of the market value of the
portfolio securities loaned and if, immediately after making such loan,
the total amount of portfolio securities loaned does not exceed 20%
of the market value of the Fund's total assets;
(6) Buy or sell oil, gas or other mineral leases, rights
or royalty contracts, real estate, real estate limited partnership
interests, or interests in real estate which are not readily
marketable, commodities or commodity contracts. (This does not
prevent the Fund from purchasing securities of companies investing in
the foregoing.);
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<PAGE>
(7) Act as an underwriter of securities, except to the extent the
Fund may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities;
(8) Purchase or retain securities of any company if officers and
directors of the Fund or of its investment adviser who individually
own more than 1/2 of 1% of the shares or securities of that company,
together own more than 5%;
(9) Make investments for the purpose of exercising control or
management;
(10) Participate on a joint or joint and several basis in any
trading account in securities;
(11) Write put or call options, except covered call options
which are traded on national securities exchanges with respect to
common stocks in its portfolio, in an aggregate amount not greater
than 15% of its net assets; or purchase options, except call options
in order to close out a position;
(12) Invest in the securities of other investment companies
with an aggregate value in excess of 5% of the Funds total assets,
except securities acquired as a result of a merger, consolidation
or acquisition of assets;
(13) Purchase or sell any securities other than Fund shares
from or to its investment adviser or any officer or director of the
Fund or its investment adviser; or
(14) Invest more than a total of 10% of the Fund's net assets in
securities or other assets, including repurchase agreements with a
maturity of over seven days, which are illiquid or securities of
businesses (including predecessors) less than three years old;
provided that investments in securities of businesses (including
predecessors) less than three years old will in no event exceed in
the aggregate more than 5% of the Fund's net assets.
INTERNATIONAL FUND (The investment restrictions numbered 1 through 7 below
are fundamental. Restrictions numbered 8 through 15 are not fundamental and
may be changed by the Fund's Board of Directors.)
International Fund will NOT:
(1) Purchase any security if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in a single industry;
(2) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales or securities); or make short sales except short sales
against the box where it owns the securities sold or, by virtue of
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ownership of other securities, it has the right to obtain, without
payment of further consideration, securities equivalent in kind and
amount to those sold;
(3) Borrow money, except from banks and only as a temporary
measure for extraordinary or emergency purposes and not in excess
of 5% of its net assets;
(4) Mortgage, pledge, hypothecate, or in any manner transfer,
as security for indebtedness, any assets of the Fund;
(5) Make loans, except by purchase of bonds, debentures,
commercial paper, certificates of deposit, corporate notes and
similar evidences of indebtedness, which are a part of an issue to
the public or to financial institutions, and except loans of
portfolio securities to broker-dealers and financial institutions,
determined by the Fund to have sufficient financial responsibility,
if such loans are secured at all times by cash or securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities, in an amount at all times equal to at least 100%
of the market value of the portfolio securities loaned and if,
immediately after making such loan, the total amount of portfolio
securities loaned does not exceed 20% of the market value of the
Fund's total assets;
(6) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, real estate, real estate limited partnership
interests, or interests in real estate which are not readily
marketable, commodities or commodity contracts, except the Fund may
purchase and sell futures contracts on financial instruments and
indices, and options on such futures contracts. (This does not
prevent the Fund from purchasing securities of companies investing in
the foregoing.);
(7) Act as an underwriter of securities, except to the extent
the Fund may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities;
(8) Purchase or retain securities of any company if officers
and directors of the Fund or of its investment adviser who individually
own more than 1/2 of 1% of the shares or securities of that company,
together own more than 5%;
(9) Make investments for the purpose of exercising control or
management;
(10) Participate on a joint or joint and several basis in any
trading account in securities;
(11) Write put or call options, except covered call options
which are traded on national securities exchanges with respect to
common stocks in its portfolio, in an aggregate amount not greater
than 15% of its net assets; or purchase options, except call options
in order to close out a position;
-20-
<PAGE>
(12) Invest in the securities of other investment companies
with an aggregate value in excess of 10% of the Fund's total assets,
except securities acquired as a result of a merger, consolidation or
acquisition of assets;
(13) Purchase or sell any securities other than Fund shares
from or to its investment adviser or any officer or director of the Fund
or its investment adviser;
(14) Invest more than a total of 10% of the Fund's net assets
in securities or other assets, including repurchase agreements with a
maturity of over seven days, which are illiquid or securities of
businesses (including predecessors) less than three years old; provided
that investments in securities of businesses (including predecessors)
less than three years old will in no event exceed in the aggregate more
than 5% of the Fund's net assets; or
(15) Invest more than 5% of its assets in warrants other than
warrants acquired in units or attached to other securities; provided,
that of such 5%, not more than 2% of the Fund's assets shall be invested
in warrants that are not exchange listed.
ADDITIONAL INVESTMENT RESTRICTIONS
Certain of the Funds have agreed with the staff of the Securities and
Exchange Commission that, as a non-fundamental operating policy, the
following additional investment restrictions, which modify certain of the
fundamental investment restrictions described above, will be observed:
(1) Horizon Fund, Spectrum Fund, Mortgage Securities Fund and
Money Market Fund will not purchase any security if, as a result, "25%
or more" of the Fund's total assets would be invested in the securities
of issuers conducting their principal business activities in a single
industry (see investment restriction number 2 for each Fund).
(2) Spectrum Fund, in applying the limitation on investments
in securities of issuers conducting their principal business activities
in a single industry (see Spectrum Fund investment restriction number 2,
as modified by additional investment restriction number 1 above), will
also apply such limitation to certificates of deposit and bankers'
acceptances of United States banks and savings and loan associations.
(3) Spectrum Fund shall include reverse repurchase agreements
as a "borrowing" for purposes of applying the Fund's 5% of net assets
limitation on borrowing money (see Spectrum Fund investment restriction
number 6).
ALL FUNDS
With respect to each of the Funds, any investment policy set forth
under "Investment Objectives, Policies and Risks" in the Prospectus, or any
restriction set forth above which involves a maximum percentage of securities
or assets shall not be considered to be violated unless an
-21-
<PAGE>
excess over the percentage occurs immediately after an acquisition of
securities or utilization of assets and results therefrom, or unless the
Investment Company Act of 1940 provides otherwise.
PORTFOLIO TURNOVER
Portfolio turnover is the ratio of the lesser of annual purchases or
sales of portfolio securities to the average monthly value of portfolio
securities, not including short-term securities. A 100% portfolio turnover
rate would occur, for example, if the lesser of the value of purchases or
sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year.
Horizon Fund makes changes in its portfolio securities which are
considered advisable in light of market conditions. Frequent changes may
result in higher brokerage and other costs for the Fund. For the fiscal year
ended September 30, 1995, the fiscal period ended September 30, 1994, and the
fiscal year ended October 31, 1993, the Fund's portfolio turnover rates were
46.8%, 43.5% and 47.0%, respectively.
Spectrum Fund's objective and policies may cause the annual portfolio
turnover rate to be higher than the average turnover rate of other investment
companies. Accordingly, the Fund may have high brokerage and other costs. A
portfolio turnover rate that exceeds 100% is considered high and will result
in higher costs. For the fiscal year ended September 30, 1995, the fiscal
period ended September 30, 1994, and the fiscal year ended October 31, 1993,
the Fund's portfolio turnover rates were 125.5%, 124.5% and 92.1%,
respectively.
Mortgage Securities Fund's investment activities may result in the
Fund's engaging in a considerable amount of trading of securities held for
less than one year. Accordingly, it can be expected that the Fund will have
a higher turnover rate, and thus a higher incidence of brokerage and other
costs, than might be expected from investment companies which invest
substantially all of their funds on a long-term basis. A portfolio turnover
rate that exceeds 100% is considered high and will result in higher costs.
For the fiscal year ended September 30, 1995, the fiscal period ended
September 30, 1994, and the fiscal year ended October 31, 1993, the Fund's
portfolio turnover rates were 203.7%, 236.2% and 135.0%, respectively.
Money Market Fund, consistent with its investment objective, attempts
to maximize yield through portfolio trading. This may involve selling
portfolio instruments and purchasing different instruments to take advantage
of disparities of yields in different segments of the high grade money market
or among particular instruments within the same segment of the market. As a
result, the Fund may have significant portfolio turnover. There usually are
no brokerage commissions paid by the Fund for such purchases since such
securities are purchased on a net basis. Since securities with maturities of
less than one year are excluded from required portfolio turnover rate
calculations, the Fund's portfolio turnover rate for reporting purposes is
zero.
Bond Fund makes changes in its portfolio securities which are
considered advisable in light of market conditions. Portfolio turnover rates
may vary greatly from year to year and within a particular year and may also
be affected by cash requirements for redemptions of Fund shares. Rate of
portfolio turnover is not a limiting factor, however, and particular holdings
may be sold at any time, if, in the opinion of the Fund's investment adviser,
such a sale is advisable. A portfolio turnover rate that exceeds 100% is
considered high and will result in higher costs. For the fiscal year ended
September 30, 1995, the fiscal period ended September 30, 1994, and the
fiscal year ended October 31, 1993, the Fund's portfolio turnover rates were
270.7%, 163.5% and 139.5%, respectively. The substantial increase in the rate
of portfolio turnover for the year ended September 30, 1995 was attributable
to the fact that the Fund took advantage of opportunities created in the
corporate bond market as a result of tightening spreads between corporate
bonds and U.S. Treasury bonds. The Fund was able to buy corporate bonds at
very attractive prices when the spreads were wide and sell those bonds at
appreciated values when the spreads narrowed.
-22-
<PAGE>
Cornerstone Fund and Enterprise Fund each make changes in their
portfolio securities which are considered advisable in light of market
conditions. Frequent changes may result in higher brokerage and other costs
for the Funds. Portfolio turnover rates may vary greatly from year to year
and within a particular year and may also be affected by cash requirements
for redemptions of Fund shares. Neither Fund emphasizes short-term trading
profits. For the fiscal year ended September 30, 1995 and the fiscal period
ended September 30, 1994, Cornerstone Fund's portfolio turnover rate was
160.1% and 8.1%, respectively. For the fiscal year ended September 30, 1995
and the fiscal period ended September 30, 1994, Enterprise Fund's portfolio
turnover rate was 48.8% and 5.0%, respectively. The apparent increase in
portfolio turnover rates from 1994 to 1995 is attributable to the fact that
the figures for 1994 represent only the 14 days from the Fund's date of
inception to the end of the fiscal period.
International Fund also makes changes in its portfolio securities
which are considered advisable in light of market conditions. The Fund does
not emphasize short-term trading profits. For the fiscal year ended September
30, 1995 and the fiscal period ended September 30, 1994, International Fund's
portfolio turnover rate was 52.0% and 12.1%, respectively. The apparent
increase in portfolio turnover rates from 1994 to 1995 is attributable to the
fact that the figures for 1994 represent only the 14 days from the Fund's
date of inception to the end of the fiscal period.
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of
directors and executive officers of each of the Funds are given below:
<TABLE>
<CAPTION>
Position with Principal Occupation and Other
Name and Address the Funds Affiliations (Past 5 Years)
- ---------------- ------------- ------------------------------
<S> <C> <C>
Paul H. Gooding* President Vice President and Treasurer of
Advantus Capital and Director Minnesota Mutual; President and
Management, Inc. Director of Advantus Capital;
400 Robert Street North President, Treasurer and Director
St. Paul, Minnesota 55101 of MIMLIC Management
Frederick P. Feuerherm* Treasurer Second Vice President of Minnesota
The Minnesota Mutual and Director Mutual; Vice President and Assistant
Life Insurance Company Secretary of MIMLIC Management
400 Robert Street North
St. Paul, Minnesota 55101
Ralph D. Ebbott Director Retired, Vice President and Treasurer
409 Birchwood Avenue of Minnesota Mining and Manufacturing
White Bear Lake, Company (tape, adhesive, photographic,
Minnesota 55110 and electrical products) through June
1989
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Charles E. Arner Director Retired, Vice Chairman of The First
E-1218 First National National Bank of Saint Paul from
Bank Building November 1983 through June 1984;
332 Minnesota Street Chairman and Chief Executive Officer
St. Paul, Minnesota 55101 of The First National Bank of Saint
Paul from October 1980 through
November 1983
Ellen S. Berscheid Director Regents' Professor of Psychology at
University of Minnesota the University of Minnesota
N309 Elliott Hall
Minneapolis, Minnesota 55455
Bardea C. Huppert* Vice President President of MIMLIC Sales; Second
MIMLIC Sales Corporation Vice President of Minnesota Mutual;
400 Robert Street North
St. Paul, Minnesota 55101
Michael J. Radmer Secretary Partner with the law firm of
Dorsey & Whitney P.L.L.P. Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402
</TABLE>
_________________________
* Denotes directors and officers of the Funds who are "interested persons"
(as defined under the Investment Company Act of 1940) of the Funds, Advantus
Capital Management, Inc. ("Advantus Capital"), MIMLIC Asset Management
("MIMLIC Management") or MIMLIC Sales Corporation ("MIMLIC Sales").
_________________________
Legal fees and expenses are paid to the law firm of which Michael J.
Radmer is a partner. No compensation is paid by any of the Advantus Funds to
any of its officers or directors who is affiliated with Advantus Capital or
MIMLIC Management. Each director of the Funds who is not affiliated with
Advantus Capital or MIMLIC Management is also a director of the other two
investment companies of which Advantus Capital or MIMLIC Management is the
investment adviser (10 investment companies in total -- the "Fund Complex").
Such directors receive compensation in connection with all such investment
companies which, in the aggregate, is equal to $5,000 per year and $1,000 per
meeting attended (and reimbursement of travel expenses to attend directors'
meetings). The portion of such compensation borne by any Fund is a PRO RATA
portion based on the ratio that such Fund's total net assets bears to the
total net assets of the Fund Complex. During the fiscal year ended
September 30, 1995, each Director not affiliated with Advantus Capital or
MIMLIC Management was compensated by the Funds in accordance with the
following table:
-24-
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Estimated From Funds and
Compensation Accrued as Annual Fund Complex
from the Part of Fund Benefits Upon Paid to
Name of Director Funds(1) Expenses Retirement Directors
- ---------------- ------- -------- --------- ---------
<S> <C> <C> <C> <C>
Charles E. Arner $1,679.53 n/a n/a $9,000
Ellen S. Berscheid $1,679.53 n/a n/a $9,000
Ralph D. Ebbott $1,679.53 n/a n/a $9,000
</TABLE>
- ------------------
(1) During the fiscal year ended September 30, 1995, each Director not
affiliated with Advantus Capital or MIMLIC Management received $249.10 from
Horizon Fund, $413.31 from Spectrum Fund, $200.16 from Mortgage Securities
Fund, $210.06 from Money Market Fund, $107.73 from Bond Fund, $127.67 from
Enterprise Fund, $109.15 from Cornerstone Fund and $181.16 from
International Fund.
As of September 30, 1995, the directors and executive officers of the Funds
did not own any shares of the Funds, except for Frederick P. Feuerherm who
owned less than 1% of the outstanding shares of Spectrum Fund, Paul H.
Gooding who owned less than 1% of the outstanding shares of each of Horizon
Fund and Bond Fund, Bardea C. Huppert who owned less than 1% of the
outstanding shares of Horizon Fund, Spectrum Fund, Money Market Fund and Bond
Fund, and Michael J. Radmer who owned less than 1% of the outstanding shares
of Horizon Fund.
DIRECTOR LIABILITY
Under Minnesota law, the Board of Directors of each Fund owes certain
fiduciary duties to the Fund and to its shareholders. Minnesota law provides
that a director "shall discharge the duties of the position of director in
good faith, in a manner the director reasonably believes to be in the best
interest of the corporation, and with the care an ordinarily prudent person
in a like position would exercise under similar circumstances." Fiduciary
duties of a director of a Minnesota corporation include, therefore, both a
duty of "loyalty" (to act in good faith and act in a manner reasonably
believed to be in the best interests of the corporation) and a duty of "care"
(to act with the care an ordinarily prudent person in a like position would
exercise under similar circumstances). Minnesota law also authorizes
corporations to eliminate or limit the personal liability of a director to
the corporation or its shareholders for monetary damages for breach of the
fiduciary duty of "care." Minnesota law does not, however, permit a
corporation to eliminate or limit the liability of a director (i) for any
breach of the directors' duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation
of Minnesota law or for violation of certain provisions of Minnesota
securities laws, or (iv) for any transaction from which the director derived
an improper personal benefit. The Articles of Incorporation of each Fund
limit the liability of directors to the fullest extent permitted by Minnesota
statutes, except to the extent that such liability cannot be limited as
provided in the Investment Company Act of 1940 (which Act prohibits any
provisions which purport to limit the liability of directors arising from
such directors' willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability
for violations of that duty. Minnesota
-25-
<PAGE>
law, further, does not permit elimination or limitation of liability of
"officers" to the corporation for breach of their duties as officers
(including the liability of directors who serve as officers for breach of
their duties as officers). Minnesota law does not permit elimination or
limitation of the availability of equitable relief, such as injunctive or
rescissionary relief. Further, Minnesota law does not permit elimination or
limitation of a director's liability under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and it is uncertain whether and to what
extent the elimination of monetary liability would extend to violations of
duties imposed on directors by the Investment Company Act of 1940 and the
rules and regulations adopted under such Act.
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL
Advantus Capital Management, Inc. ("Advantus Capital") has been the
investment adviser and manager of each of the Funds since March 1, 1995.
Prior to that date the Funds' investment adviser was MIMLIC Asset Management
Company ("MIMLIC Management"). Advantus Capital is a wholly-owned subsidiary
of MIMLIC Management. The same portfolio managers and other personnel who
previously provided investment advisory services to the Funds through MIMLIC
Management continue to provide the same services through Advantus Capital.
MIMLIC Sales acts as the Funds' underwriter. Both Advantus Capital and
MIMLIC Sales act as such pursuant to written agreements that will be
periodically considered for approval by the directors or shareholders of the
Fund. The address of both Advantus Capital and MIMLIC Sales is 400 Robert
Street North, St. Paul, Minnesota 55101.
CONTROL AND MANAGEMENT OF ADVANTUS CAPITAL AND MIMLIC SALES
Advantus Capital was incorporated in Minnesota in June, 1994, and is a
wholly-owned subsidiary of MIMLIC Management. MIMLIC Management is a
subsidiary of The Minnesota Mutual Life Insurance Company ("Minnesota
Mutual"), which was organized in 1880, and has assets of more than $9.8
billion. MIMLIC Sales is also a subsidiary of MIMLIC Management. Paul H.
Gooding, President and a Director of each of the Funds, is President and
director of Advantus Capital, and President, Treasurer, and a Director of
MIMLIC Management. Frederick P. Feuerherm, Treasurer and a Director of each
of the Funds, is a Vice President and Assistant Secretary of MIMLIC
Management. Bardea C. Huppert, Vice President of each of the Funds, is
President of MIMLIC Sales. James P. Tatera, Senior Vice President and
Director of Advantus Capital, is also Vice President of MIMLIC Management.
INVESTMENT ADVISORY AGREEMENT
Advantus Capital acts as investment adviser and manager of the Funds
under Investment Advisory Agreements (the "Advisory Agreements") dated March
1, 1995 for each Fund, each of which Advisory Agreements was approved by
shareholders on February 14, 1995. The Advisory Agreements were last
approved by the Board of Directors of each Fund (including a majority of the
directors who are not parties to the contract, or interested persons of any
such party) on January 17, 1996. The Advisory Agreements will terminate
automatically in the event of their
-26-
<PAGE>
assignment. In addition, each Advisory Agreement is terminable at any time,
without penalty, by the Board of Directors of the respective Fund or by vote
of a majority of the Fund's outstanding voting securities on not more than 60
days' written notice to Advantus Capital, and by Advantus Capital on 60 days'
written notice to the Fund. Unless sooner terminated, each Advisory
Agreement shall continue in effect for more than two years after its
execution only so long as such continuance is specifically approved at least
annually by either the Board of Directors of the respective Fund or by a vote
of a majority of the outstanding voting securities, provided that in either
event such continuance is also approved by the vote of a majority of the
directors who are not parties to the Advisory Agreement, or interested
persons of such parties, cast in person at a meeting called for the purpose
of voting on such approval.
Pursuant to the Advisory Agreements each Fund pays Advantus Capital an
advisory fee equal on an annual basis to a percentage of that Fund's average
daily net assets as set forth in the following table:
Advisory Fee as Percentage
Fund of Average Net Assets
---- --------------------------
Horizon Fund .80%
Spectrum Fund .60%
Mortgage Securities Fund .575%
Money Market Fund .50%
Bond Fund .70%
Cornerstone Fund .80%
Enterprise Fund .80%
International Fund:
On the first $25 million in assets .95%
On the next $25 million in assets .80%
On the next $50 million in assets .75%
On all assets in excess of $100 million .65%
From the advisory fee received from International Fund, Advantus
Capital pays Templeton Investment Counsel, Inc. a sub-advisory fee equal to
.70% on the first $25 million of International Fund's average daily net
assets, .55% on the next $25 million, .50% on the next $50 million, and .40%
on all average daily net assets in excess of $100 million.
Prior to March 1, 1995, the fees paid by the Funds for investment
advisory services were paid to MIMLIC Management rather than to Advantus
Capital. MIMLIC Management was compensated at the same rate as is Advantus
Capital under the current Advisory Agreements. The fees paid by the Funds
during the fiscal year ended September 30, 1995, the fiscal period ended
September 30, 1994 and the fiscal year ended October 31, 1993 (before
Advantus Capital's or MIMLIC Management's absorption of certain expenses,
described below) were as follows:
-27-
<PAGE>
<TABLE>
<CAPTION>
Fund 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Horizon Fund $276,972 $222,869 $220,845
Spectrum Fund 338,669 404,391 463,963
Mortgage Securities Fund 155,798 144,561 137,830
Money Market Fund 148,238 110,595 118,134
Bond Fund 104,228 90,854 84,389
Cornerstone Fund 150,365 18,833 n/a
Enterprise Fund 167,883 19,519 n/a
International Fund 241,970 29,922 n/a
</TABLE>
For this fee, Advantus Capital acts as investment adviser and manager
for the Funds, and, except for Money Market Fund, pays the Funds' transfer
agent, dividend disbursing agent and redemption agent expenses. Money Market
Fund pays its own transfer agent, dividend disbursing agent, and redemption
agent expenses. All of the Funds have engaged Minnesota Mutual to act as
their transfer agent, dividend disbursing agent, and redemption agent. While
the advisory fees paid by Horizon Fund, Cornerstone Fund, Enterprise Fund and
International Fund are higher than those paid by most mutual funds, they are
partially offset by Advantus Capital's payment of certain expenses, such as
the transfer agent, dividend disbursing agent and redemption agent expenses,
which expenses are not customarily paid for by a mutual fund's investment
adviser. During the fiscal year ended September 30, 1995, Money Market Fund
paid Minnesota Mutual $93,369 for transfer agent services. In addition,
separate from the investment advisory agreement, each of the Funds has
entered into an agreement with Minnesota Mutual under which Minnesota Mutual
provides accounting, legal and other administrative services to the Funds.
Minnesota Mutual currently provides such services to the Funds at a monthly
cost of $3,600 for Horizon Fund, Spectrum Fund, Mortgage Securities Fund,
Bond Fund, Enterprise Fund, Cornerstone Fund, $3,000 for Money Market Fund,
and $2,500 for International Fund. During the fiscal year ended September 30,
1995, each of the Funds paid Minnesota Mutual the following amounts for such
services:
<TABLE>
<CAPTION>
Fund Amount
---- ------
<S> <C>
Horizon Fund $38,600
Spectrum Fund 39,600
Mortgage Securities Fund 39,200
Money Market Fund 33,400
Bond Fund 39,200
Cornerstone Fund 37,800
Enterprise Fund 37,800
International Fund 26,200
</TABLE>
Under the Advisory Agreements, Advantus Capital furnishes the Funds
office space and all necessary office facilities, equipment and personnel for
servicing the investments of the Funds, and pays the salaries and fees of all
officers and directors of the Funds who are affiliated with Advantus Capital.
In addition, except to the extent that MIMLIC Sales receives Rule 12b-1
distribution fees (see "Payment of Certain Distribution Expenses of the
Funds" below), MIMLIC
-28-
<PAGE>
Sales bears all promotional expenses in connection with the distribution of
the Funds' shares, including paying for prospectuses and statements of
additional information for new shareholders, and shareholder reports for new
shareholders, and the costs of sales literature. The Funds pay all other
expenses not so expressly assumed.
The law of the state of California, in which the Funds' shares may be
offered for sale, currently requires that if a Fund's expenses, including
advisory fees but excluding interest, taxes, brokerage commissions, and
certain extraordinary expenses, whether such expenses are payable by the Fund
or its shareholders, exceed certain percentages of average net assets, MIMLIC
Management must reimburse the Fund for such excess expenses, and the
reimbursement of such excess expenses may not be limited to the amount of the
advisory fee. This limitation is currently 2 1/2% of the first $30,000,000
of average net assets, 2% of the next $70,000,000 of average net assets, and
1 1/2% of the remaining average net assets, but may be modified or eliminated
by future statutory or regulatory changes.
During the fiscal year ended September 30, 1995, the fiscal period
ended September 30, 1994, and the fiscal year ended October 31, 1993,
Advantus Capital or MIMLIC Management (which was formerly the Funds'
investment adviser) voluntarily absorbed certain expenses of the Funds (which
do not include certain Rule 12b-1 fees waived by MIMLIC Sales) as set forth
below:
<TABLE>
<CAPTION>
Fund 1995 1994 1993
----- ---- ---- ----
<S> <C> <C> <C>
Horizon Fund $ 2,814 $ -0- $ -0-
Spectrum Fund -0- -0- -0-
Mortgage Securities Fund 9,655 -0- -0-
Money Market Fund 151,288 156,505 139,512
Bond Fund 100,487 82,132 62,200
Cornerstone Fund 47,635 8,493 n/a
Enterprise Fund 43,566 8,124 n/a
International Fund 17,626 3,015 n/a
</TABLE>
The expenses so absorbed by Advantus Capital or MIMLIC Management were not
required to be reimbursed to the Funds under the expense limitation set forth
above.
INTERNATIONAL FUND SUB-ADVISER -- TEMPLETON COUNSEL
Templeton Investment Counsel, Inc., (hereinafter "Templeton Counsel"),
a Florida corporation with principal offices at 500 East Broward Boulevard,
Fort Lauderdale, Florida 33394 has been retained under an investment
sub-advisory agreement to provide investment advice and, in general, to
conduct the management investment program of the International Fund, subject
to the general control of the Board of Directors of the Fund. Templeton
Counsel is an indirect, wholly-owned subsidiary of Templeton Worldwide, Inc.,
Fort Lauderdale, Florida, which in turn is a wholly-owned subsidiary of
Franklin Resources, Inc. ("Franklin").
Franklin is a large, diversified financial services organization.
Through its operating subsidiaries, Franklin provides a variety of investment
products and services to institutions and
-29-
<PAGE>
individuals throughout the United States and abroad. One of the
country's largest mutual fund organizations, Franklin's business includes the
provision of management, administrative and distribution services to the
Franklin/Templeton Group of Funds, which is distributed through a nationwide
network of banks, broker-dealers, financial planners and investment advisers.
Franklin is headquartered in San Mateo, California, and its common stock is
listed on the New York Stock Exchange under the ticker symbol BEN.
Certain clients of Templeton Counsel may have investment objectives
and policies similar to that of the International Fund. Templeton Counsel
may, from time to time make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with Fund.
If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the
policy of Templeton Counsel to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by Templeton Counsel
to the accounts involved, including the International Fund. When two or more
of the clients of Templeton Counsel (including the International Fund) are
purchasing the same security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
INTERNATIONAL FUND INVESTMENT SUB-ADVISORY AGREEMENT -- TEMPLETON COUNSEL
Templeton Counsel acts as an investment sub-adviser to the
International Fund under an Investment Sub-Advisory Agreement (the "Templeton
Agreement") with Advantus Capital dated March 1, 1995, and approved by
shareholders of the Fund on February 14, 1995. The Templeton Agreement was
last approved for continuance by the Board of Directors of the Fund,
including a majority of the Directors who are not a party to the Templeton
Agreement or interested persons of any such party, on January 17, 1996. The
Templeton Agreement will terminate automatically upon the termination of the
Advisory Agreement and in the event of its assignment. In addition, the
Templeton Agreement is terminable at any time, without penalty, by the Board
of Directors of the Fund, by Advantus Capital or by a vote of the majority of
the International Fund's outstanding voting securities on 60 days' written
notice to Templeton Counsel and by Templeton Counsel on 60 days' written
notice to Advantus Capital. Unless sooner terminated, the Templeton
Agreement shall continue in effect from year to year if approved at least
annually by the Board of Directors of the Fund or by a vote of a majority of
the outstanding voting securities of the International Fund, provided that in
either event such continuance is also approved by the vote of a majority of
the directors who are not interested persons of any party to the Templeton
Agreement, cast in person at a meeting called for the purpose of voting on
such approval.
DISTRIBUTION AGREEMENT
The Board of Directors of each Fund, on January 17, 1996, including a
majority of the directors who are not parties to the contract, or interested
persons of any such party, last approved the respective Fund's Distribution
Agreement with MIMLIC Sales (the "Distribution Agreements"), each dated March
1, 1995. During the fiscal year ended September 30, 1995, the fiscal period
ended September 30, 1994, and the fiscal year ended October 31, 1993, the
commissions received by MIMLIC Sales under the Distribution Agreements,
except in the case of Money Market Fund (which does
-30-
<PAGE>
not provide for MIMLIC Sales to receive a commission), with respect to shares
of all classes under the Distribution Agreements were as follow:
<TABLE>
<CAPTION>
Fund 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Horizon Fund $125,141 $150,713 $183,390
Spectrum Fund 226,547 341,528 787,407
Mortgage Securities Fund 97,402 182,209 286,131
Bond Fund 61,826 103,025 169,542
Cornerstone Fund 62,839 276 n/a
Enterprise Fund 57,059 -0- n/a
International Fund 150,769 -0- n/a
</TABLE>
During the same periods MIMLIC Sales retained from these commissions the
following amounts:
<TABLE>
<CAPTION>
Fund 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Horizon Fund $14,640 $17,868 $10,703
Spectrum Fund 27,391 41,001 28,240
Mortgage Securities Fund 5,436 6,096 8,935
Bond Fund 5,966 6,546 1,809
Cornerstone Fund 5,200 28 n/a
Enterprise Fund 6,201 n/a n/a
International Fund 16,080 n/a n/a
</TABLE>
The remainder of these commissions was paid to registered representatives of
MIMLIC Sales or to broker-dealers who have selling agreements with MIMLIC
Sales.
Each Distribution Agreement may be terminated by the respective Fund
or MIMLIC Sales at any time by the giving of 60 days' written notice, and
terminates automatically in the event of its assignment. Unless sooner
terminated, the Distribution Agreement for the respective Fund shall continue
in effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors of the Fund or by a vote of a majority of the outstanding voting
securities, provided that in either event such continuance is also approved
by the vote of a majority of the directors who are not parties to the
Distribution Agreement, or interested persons of such parties, cast in person
at a meeting called for the purpose of voting on such approval.
The Distribution Agreements require MIMLIC Sales to pay all
advertising and promotional expenses in connection with the distribution of
the Funds' shares including paying for Prospectuses and Statements of
Additional Information (if any) for new shareholders, shareholder reports for
new shareholders, and the costs of sales literature.
In the Distribution Agreements, MIMLIC Sales undertakes to indemnify
the Funds against all costs of litigation and other legal proceedings, and
against any liability incurred by or imposed upon the Funds in any way
arising out of or in connection with the sale or distribution of the
-31-
<PAGE>
Funds' shares, except to the extent that such liability is the result of
information which was obtainable by MIMLIC Sales only from persons affiliated
with the Funds but not with MIMLIC Sales.
PAYMENT OF CERTAIN DISTRIBUTION EXPENSES OF THE FUNDS
Money Market Fund has adopted a Plan of Distribution, and each of the
other Funds has adopted separate Plans of Distribution applicable to Class A
shares, Class B shares 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. Money Market Fund, pursuant to its Plan of
Distribution, pays a fee to MIMLIC Sales which, on an annual basis, is equal
to .30% of the Fund's average daily net assets, and is to be used to pay
certain expenses incurred in the distribution and promotion of its shares.
Each of the other Funds, pursuant to its Plans of Distribution, also pays
fees to MIMLIC Sales which equal, on an annual basis, a percentage of the
Fund's average daily net assets attributable to Class A shares, Class B
shares and Class C shares, respectively, as set forth in the following table:
<TABLE>
<CAPTION>
Rule 12b-1 Fee as Percentage
of Average Daily Net Assets Attributable to
-------------------------------------------
Fund Class A Shares Class B Shares Class C Shares
- ---- -------------- -------------- --------------
<S> <C> <C> <C>
Horizon Fund .30% 1.00% 1.00%
Spectrum Fund .35% 1.00% 1.00%
Mortgage Securities Fund .30% 1.00% 1.00%
Bond Fund .30% 1.00% 1.00%
Cornerstone Fund .30% 1.00% 1.00%
Enterprise Fund .30% 1.00% 1.00%
International Fund .30% n/a 1.00%
</TABLE>
Such fees are also used for distribution-related services and for servicing of
shareholder accounts.
All of the Rule 12b-1 fees payable by Money Market Fund and all of the
Rule 12b-1 fees payable by the Advantus Load Funds and attributable to Class
A shares of such Funds, and a portion of the Rule 12b-1 fees payable with
respect to Class B and Class C shares equal to .75% of the average daily net
assets attributable to such Class B and Class C shares, constitute
distribution fees designed to compensate MIMLIC Sales for advertising,
marketing and distributing the shares of Money Market Fund and the Advantus
Load Funds.
The distribution fees may be used by MIMLIC Sales for the purpose of
financing any activity which is primarily intended to result in the sale of
shares of the particular Fund. For example, such distribution fee may be
used by MIMLIC Sales: (a) to compensate broker-dealers, including MIMLIC
Sales and its registered representatives, for their sale of a Fund's shares,
including the implementation of the programs described below with respect to
broker-dealers, banks, and other financial institutions; and (b) to pay other
advertising and promotional expenses in connection with the distribution of a
Fund's shares. These advertising and promotional
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<PAGE>
expenses include, by way of example but not by way of limitation, costs of
prospectuses for other than current shareholders; preparation and
distribution of sales literature; advertising of any type; expenses of branch
offices provided jointly by MIMLIC Sales and any affiliate thereof; and
compensation paid to and expenses incurred by officers, employees or
representatives of MIMLIC Sales or of other broker-dealers, banks, or
financial institutions.
A portion of the Rule 12b-1 fee payable with respect to Class B and
Class C shares of each of the Advantus Load Funds, equal to .25% of the
average daily net assets attributable to such Class B and Class C shares,
constitutes a shareholder servicing fee designed to compensate MIMLIC Sales
for the provision of certain services to the holders of Class B and Class C
shares.
Amounts expended by the Funds under the Plans are expected to be used
for the implementation by MIMLIC Sales of a dealer incentive program.
Pursuant to the program, MIMLIC Sales may provide compensation to investment
dealers for the provision of distribution assistance in connection with the
sale of the Funds' shares to such dealers' customers and for the provision of
administrative support services to customers who directly or beneficially own
shares of the Funds. The distribution assistance and administrative support
services rendered by dealers may include, but are not limited to, the
following: distributing sales literature; answering routine customer
inquiries concerning the Funds; assisting customers in changing dividend
options, account designation and addresses, and in enrolling into the
pre-authorized check plan or systematic withdrawal plan; assisting in the
establishment and maintenance of customer accounts and records and in the
processing of purchase and redemption transactions; investing dividends and
any capital gains distributions automatically in the Funds' shares and
providing such other information and services as the Funds or the customer
may reasonably request. Such fees for servicing customer accounts would be
in addition to the portion of the sales charge received or to be received by
dealers which sell shares of the Funds.
MIMLIC Sales may also provide compensation to certain institutions
such as banks ("Service Organizations") which have purchased shares of the
Funds for the accounts of their clients, or which have made the Funds' shares
available for purchase by their clients, and/or which provide continuing
service to such clients. The Glass-Steagall Act and other applicable laws,
among other things, prohibit certain banks from engaging in the business of
underwriting securities. In such circumstances, MIMLIC Sales, if so
requested, will engage such banks as Service Organizations only to perform
administrative and shareholder servicing functions, but at the same fees and
other terms applicable to dealers. State law may, however, differ from the
interpretation of the Glass-Steagall Act expressed and banks and other
financial institutions may therefore be required to register as securities
dealers pursuant to state law. If a bank were prohibited from acting as a
Service Organization, its shareholder clients would be permitted to remain
shareholders of the Funds and alternative means for continuing servicing of
such shareholders would be sought. In such event changes in the operation of
the Funds might occur and a shareholder serviced by such bank might no longer
be able to avail itself of any automatic investment or other services then
being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
In addition, the Plan contains, among other things, provisions
complying with the requirements of Rule 12b-1 discussed below. Rule 12b-1(b)
provides that any payments made by
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<PAGE>
an investment company in connection with the distribution of its shares may
only be made pursuant to a written plan describing all material aspects of
the proposed financing of distribution and also requires that all agreements
with any person relating to implementation of the plan must be in writing.
In addition, Rule 12b-1(b)(2) requires that such plan, together with any
related agreements, be approved by a vote of the board of directors and of
the directors who are not interested persons of the investment company and
have no direct or indirect financial interest in the operation of the plan or
in any agreements related to the plan, cast in person at a meeting called for
the purpose of voting on such plan or agreements. Rule 12b-1(b)(3) requires
that the plan or agreement provide, in substance: (1) that it shall continue
in effect for a period of more than one year from the date of its execution
or adoption only so long as such continuance is specifically approved at
least annually in the manner described in paragraph (b)(2) of Rule 12b-1; (2)
that any person authorized to direct the disposition of monies paid or
payable by the investment company pursuant to the plan or any related
agreement shall provide to the investment company's board of directors, and
the directors shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made;
and (3) in the case of a plan, that it may be terminated at any time by vote
of a majority of the members of the board of directors of the investment
company who are not interested persons of the investment company and have no
direct or indirect financial interest in the operation of the plan or in any
agreements related to the plan or by vote of a majority of the outstanding
voting securities of the investment company. Rule 12b-1(b)(4) requires that
such plans may not be amended to increase materially the amount to be spent
for distribution without shareholder approval and that all material
amendments of the plan must be approved in the manner described in
paragraph (b)(2) of Rule 12b-1. Rule 12b-1(c) provides that the investment
company may rely upon Rule 12b-1(b) only if selection and nomination of the
investment company's disinterested directors are committed to the discretion
of such disinterested directors. Rule 12b-1(e) provides that the investment
company may implement or continue a plan pursuant to Rule 12b-1(b) only if
the directors who vote to approve such implementation or continuation
conclude, in the exercise of reasonable business judgment and in light of
their fiduciary duties under state law, and under Sections 36(a) and (b) of
the Investment Company Act of 1940, that there is a reasonable likelihood
that the plan will benefit the investment company and its shareholders. At
the Board of Directors meeting held January 17, 1996, the directors of the
Funds so concluded.
During the fiscal year ended September 30, 1995, each of the Advantus
Load Funds made payments under its Plans of Distribution applicable to Class
A, Class B and Class C shares as follows (distribution fees waived by MIMLIC
Sales, if any, are shown in parentheses):
<TABLE>
<CAPTION>
Class A Class B Class C
------------------- ------- -------
<S> <C> <C> <C> <C>
Horizon Fund $ 50,147 ($50,147) $11,637 $ 270
Spectrum Fund 193,254 n/a 11,904 389
Mortgage Securities Fund 53,343 (26,473) 3,391 846
Bond Fund 14,333 (28,668) 5,214 346
Cornerstone Fund 18,055 (36,111) 7,262 142
Enterprise Fund 20,216 (40,433) 7,499 194
International Fund 38,856 (38,856) n/a 1,119
</TABLE>
-34-
<PAGE>
Money Market Fund made no payments under its Plan of Distribution during the
fiscal year ended September 30, 1995. MIMLIC Sales waived distribution
fees from Money Market Fund in the amount of $88,943 during such period.
The Plans of Distribution could be construed as "compensation plans"
because MIMLIC Sales is paid a fixed fee and is given discretion concerning
what expenses are payable under the Plans. Under a compensation plan, the
fee to the distributor is not directly tied to distribution expenses actually
incurred by the distributor, thereby permitting the distributor to receive a
profit if amounts received exceed expenses. MIMLIC Sales may spend more or
less for the distribution and promotion of the Funds' shares than it receives
as distribution fees pursuant to the Plans. However, to the extent fees
received exceed expenses, including indirect expense such as overhead, MIMLIC
Sales could be said to have received a profit.
MONEY MARKET FUND AMORTIZED COST METHOD OF
PORTFOLIO VALUATION
Money Market Fund values its portfolio securities at amortized cost in
accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in interest rates on the
market value of the instrument and regardless of any unrealized capital gains
or losses. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on shares of the
Fund computed by dividing the annualized daily income of the Fund by the net
asset value computed as described above may tend to be higher than a like
computation made by the Fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of
its securities.
Pursuant to Rule 2a-7, the Board of Directors of the Fund has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Fund and its shareholders to
maintain a stable net asset value per share by virtue of the amortized cost
method of valuation. The Fund will continue to use this method only so long
as the Board of Directors believes that it fairly reflects the market-based
net asset value per share. In accordance with Rule 2a-7, the Board of
Directors has undertaken, as a particular responsibility within the overall
duty of care owed to the Fund's shareholders, to establish procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objectives, to stabilize the Fund's net asset value per
share at a single value. These procedures include the periodic determination
of any deviation of current net asset value per share calculated using
available market quotations from the Fund's amortized cost price per share,
the periodic review by the Board of the amount of any such deviation and the
method used to calculate any such deviation, the maintenance of records of
such determinations and the Board's review thereof, the prompt consideration
by the Board if any such deviation exceeds 1/2 of 1%, and the taking of such
remedial action by the Board as it deems appropriate where it believes the
extent of any such deviation may result in material dilution or other unfair
results to investors or existing
-35-
<PAGE>
shareholders. Such remedial action may include redemptions in kind, selling
portfolio instruments prior to realizing capital gains or losses, shortening
the average portfolio maturity, withholding dividends or utilizing a net
asset value per share as determined by using available market quotations.
The Fund will, in further compliance with Rule 2a-7, maintain a
dollar-weighted average portfolio maturity not exceeding 90 days and will
limit its portfolio investments to those United States dollar-denominated
instruments which the Board determines present minimal credit risks and which
are eligible securities. The Fund will limit its investments in the
securities of any one issuer to no more than 5% of the Fund's total assets
and it will limit investment in securities of less than the highest rated
category to 5% of the Fund's total assets. Investment in the securities of
any issuer of less than the highest rated category will be limited to the
greater of 1% of the Fund's total assets or one million dollars. In
addition, the Fund will reassess promptly any security which is in default or
downgraded from its rating category to determine whether that security then
presents minimal credit risks and whether continuing to hold the securities
is in the best interests of the Fund. In addition, the Fund will record,
maintain, and preserve a written copy of the above-described procedures and a
written record of the Board's considerations and actions taken in connection
with the discharge of its above-described responsibilities.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
HORIZON FUND, SPECTRUM FUND, CORNERSTONE FUND AND ENTERPRISE FUND
In a number of security transactions, it is possible for Horizon Fund,
Spectrum Fund, Cornerstone Fund and Enterprise Fund to deal in the
over-the-counter security markets (including the so-called "third market"
which is the "over-the-counter" market for securities listed on the New York
Stock Exchange) without the payment of brokerage commissions but at net
prices including a spread or markup; these Funds trade in this manner
whenever the net price appears advantageous.
MORTGAGE SECURITIES FUND AND BOND FUND
Portfolio transactions of Mortgage Securities Fund and Bond Fund occur
primarily with issuers, underwriters or major dealers acting as principals.
Such transactions are normally on a net basis which do not involve payment of
brokerage commissions. The cost of securities purchased from an underwriter
usually includes a commission paid by the issuer to the underwriters;
transactions with dealers normally reflect the spread between bid and asked
prices. Premiums are paid with respect to options purchased by these two
Funds and brokerage commissions are payable with respect to transactions in
exchange-traded interest rate futures contracts.
MONEY MARKET FUND
Most transactions in portfolio securities of Money Market Fund are
purchases from issuers or dealers in money market instruments acting as
principal. There usually are no brokerage commissions paid by the Fund for
such purchases since securities are purchased on a net price
-36-
<PAGE>
basis. Trading does, however, involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid
and asked prices of securities. Purchases of underwritten issues may be made
which reflect a fee paid to the underwriter.
INTERNATIONAL FUND
Templeton Counsel, as investment sub-adviser to the International
Fund, is primarily responsible for selecting and (where applicable)
negotiating commissions with the brokers who execute the transactions for the
Fund. Templeton Counsel, in managing the International Fund, follows the
same basic brokerage practices as those described below for Advantus Capital.
In addition, in selecting brokers for portfolio transactions, Templeton
Counsel takes into account its past experience as to brokers qualified to
achieve "best execution," including the ability to effect transactions at all
where a large block is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, the financial strength
and stability of the broker, and whether the broker specializes in foreign
securities held by the International Fund. Purchases and sales of portfolio
securities within the United States other than on a securities exchange are
executed with primary market makers acting as principal, except where, in the
judgment of Templeton Counsel, better prices and execution may be obtained on
a commission basis or from other sources.
GENERALLY
Advantus Capital selects and (where applicable) negotiates commissions
with the brokers who execute the transactions for the Funds (except for
International Fund, as described above). During the fiscal year ended
September 30, 1995, the fiscal period ended September 30, 1994, and the
fiscal year ended October 31, 1993 brokerage commissions paid were:
<TABLE>
<CAPTION>
Fund 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Horizon Fund $ 40,274 $30,332 $80,111
Spectrum Fund 63,194 60,362 95,242
Mortgage Securities Fund -0- -0- -0-
Money Market Fund -0- -0- -0-
Bond Fund -0- -0- -0-
Cornerstone Fund 146,804 18,326 n/a
Enterprise Fund 29,639 10,942 n/a
International Fund 42,199 33,746 n/a
</TABLE>
The primary criteria for the selection of a broker is the ability of
the broker, in the opinion of Advantus Capital, to secure prompt execution of
the transactions on favorable terms, including the reasonableness of the
commission and considering the state of the market at the time. In selecting
a broker, Advantus Capital considers whether such broker provides brokerage
and research services (as defined in the Securities Exchange Act of 1934),
and generally the Funds pay higher than the lowest commission rates
available. Advantus Capital may direct Fund transactions to brokers who
furnish research services to Advantus Capital. Such research services
include advice, both directly and in writing, as to the value of securities,
the advisability
-37-
<PAGE>
of investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, as well as analyses and
reports concerning issues, industries, securities, economic factors and
trends, portfolio strategy, and the performance of accounts. By allocating
brokerage business in order to obtain research services for Advantus Capital,
the Funds enable Advantus Capital to supplement its own investment research
activities and allows Advantus Capital to obtain the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for the Funds. To the extent such
commissions are directed to these other brokers who furnish research services
to Advantus Capital, Advantus Capital receives a benefit, not capable of
evaluation in dollar amounts, without providing any direct monetary benefit
to the Funds from these commissions.
There is no formula for the allocation by Advantus Capital of the
Funds' brokerage business to any broker-dealer for brokerage and research
services. However, Advantus Capital will authorize a Fund to pay an amount
of commission for effecting a securities transaction in excess of the amount
of commission another broker would have charged only if Advantus Capital
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or Advantus
Capital's overall responsibilities with respect to the accounts as to which
it exercises investment discretion. During the fiscal year ended September
30, 1995, Horizon Fund, Spectrum Fund, Cornerstone Fund, Enterprise Fund and
International Fund directed transactions to brokers because of research
services they provided, and paid commissions in connection with such
transactions, in the aggregate amounts set forth below:
<TABLE>
<CAPTION>
Aggregate Transactions Commissions Paid On
Fund Directed for Research Directed Transactions
---- ---------------------- ---------------------
<S> <C> <C>
Horizon Fund $20,850,319 $ 40,274
Spectrum Fund 37,291,180 63,194
Cornerstone Fund 62,868,963 146,803
Enterprise Fund 14,321,343 29,639
International Fund 23,014,149 42,199
</TABLE>
During the same period, Mortgage Securities Fund, Money Market Fund and Bond
Fund directed no transactions to brokers because of research services they
provided.
No brokerage is allocated for the sale of Fund shares. Advantus
Capital believes that most research services obtained by it generally benefit
one or more of the investment companies which it manages and also benefit
accounts which it manages. Normally research services obtained through
managed funds and managed accounts investing in common stocks would primarily
benefit such funds and accounts; similarly, services obtained from
transactions in fixed income securities would be of greater benefit to the
managed funds and managed accounts investing in debt securities.
The same security may be suitable for one or more of the Funds and the
other funds or private accounts managed by Advantus Capital or its
affiliates. If and when two or more funds or
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<PAGE>
accounts simultaneously purchase or sell the same security, the transactions
will be allocated as to price and amount in accordance with arrangements
equitable to each fund or account. The simultaneous purchase or sale of the
same securities by one Fund and other Funds or accounts may have a
detrimental effect on that Fund, as this may affect the price paid or
received by the Fund or the size of the position obtainable by the Fund.
The Funds will not execute portfolio transactions through any
affiliate, unless such transactions, including the frequency thereof, the
receipt of commissions payable in connection therewith and the selection of
the affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the Funds. In the event any transactions
are executed on an agency basis, Advantus Capital will authorize the Funds to
pay an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker-dealer would have charged only if
Advantus Capital determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the overall responsibilities of Advantus Capital with respect
to the Funds as to which it exercises investment discretion. If the Funds
execute any transactions on an agency basis, they will generally pay higher
than the lowest commission rates available.
In determining the commissions to be paid to an affiliated
broker-dealer, it is the policy of the Funds that such commissions will, in
the judgment of Advantus Capital, subject to review by the Fund's Board of
Directors, be both (a) at least as favorable as those which would be charged
by other qualified brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time, and (b) at least as favorable as commissions
contemporaneously charged by such affiliated broker-dealers on comparable
transactions for their most favored comparable unaffiliated customers. While
the Funds do not deem it practicable and in their best interest to solicit
competitive bids for commission rates on each transaction, consideration will
regularly be given to posted commission rates as well as to other information
concerning the level of commissions charged on comparable transactions by
other qualified brokers.
Information regarding the acquisition by the Funds during the fiscal
year ended September 30, 1995, of securities of the Funds' regular brokers or
dealers, or the parents of those broker or dealers that derive more than 15
percent of their gross revenue from securities-related activities, is
presented below:
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<PAGE>
<TABLE>
<CAPTION>
Approximate
Value of Securities
Owned at End of
Name of Issuer Fiscal Period
-------------- ------------------
<S> <C> <C>
CORNERSTONE FUND
Lehman Brothers $728,437
</TABLE>
CALCULATION OF PERFORMANCE DATA
MONEY MARKET FUND
Money Market Fund may issue "current yield" and "effective yield"
quotations. "Current yields" are computed by determining the net change in
the value of a hypothetical account having a balance of one share at the
beginning of a recent seven calendar day period, and multiplying that change
by 365/7. "Effective yields" are computed by determining the net change in
the value of a hypothetical account having a balance of one share at the
beginning of a recent seven calendar day period, dividing that change by
seven, adding one to the quotient, raising the sum to the 365th power, and
subtracting one from the result. For purposes of the foregoing calculations,
the value of the hypothetical account includes accrued interest income plus
or minus amortized purchase discount or premium less accrued expenses, but
does not include realized gains and losses or unrealized appreciation and
depreciation. The Fund will also quote the average dollar-weighted portfolio
maturity for the corresponding seven-day period.
Although there can be no assurance that the net asset value of Money
Market Fund's shares will always be $1.00, Advantus Capital does not expect
that the net asset value of its shares will fluctuate since the Fund uses the
amortized cost method of valuation to maintain a stable $1.00 net asset
value. See "Money Market Fund Amortized Cost Method of Portfolio Valuation."
Principal is not, however, insured. Yield is a function of portfolio
quality and composition, maturity, and operating expenses. Yield information
is useful in reviewing the Fund's performance, but it may not provide a basis
for comparison with bank deposits or other investments, which pay a fixed
yield for a stated period of time, or other investment instruments, which may
use a different method of calculating yield.
For the seven calendar days ended September 30, 1995, Money Market
Fund's annualized current yield was 4.88% and its annualized effective yield
was 5.00%. The Fund's investment adviser was voluntarily absorbing certain
expenses of the Fund during that period. If the Fund had been charged these
expenses its current yield and effective yield for the same period would have
been 4.38% and 4.47%, respectively.
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<PAGE>
ADVANTUS LOAD FUNDS
Advertisements and other sales literature for the Advantus Load Funds
may refer to "yield," "average annual total return" and "cumulative total
return." Performance quotations are computed separately for each class of
shares of the Advantus Load Funds.
YIELD. Yield is computed by dividing the net investment income per
share (as defined under Securities and Exchange Commission rules and
regulations) earned during the computation period by the maximum offering
price per share on the last day of the period, according to the following
formula:
a-b
YIELD = 2[( ----- +1)6-1]
cd
Where: a = dividends and interest earned during
the period;
b = expenses accrued for the period (net
of reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends; and
d = the maximum offering price per share on the
last day of the period.
The yield on investments in each of these Funds for the 30 day period
ended September 30, 1995 was as set forth in the table below. The Funds'
investment adviser was voluntarily absorbing certain expenses of certain of
the Funds during that period. If such Funds had been charged for these
expenses the yield on investments for the same period would have been lower,
as also shown in the table below in parentheses.
<TABLE>
<CAPTION>
Fund Yield
---- -----
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Horizon Fund -.48% (-.58%) -1.34% (-1.46%) -1.35% (-1.47%)
Spectrum Fund 2.21% (2.21%) 1.67% (1.67%) 1.66% (1.66%)
Mortgage Securities Fund 5.92% (5.40%) 5.43% (4.87%) 5.43% (4.88%)
Bond Fund 5.55% (5.19%) 4.94% (4.57%) 4.94% (4.56%)
Cornerstone Fund .42% (.31%) -.43% (-.56%) -.44% (-.56%)
Enterprise Fund -.72% (-.80%) -1.65% (-1.74%) -1.67% (-1.75%)
International Fund 1.55% (1.25%) n/a n/a .78% (.78%)
</TABLE>
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<PAGE>
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is computed
by finding the average annual compounded rates of return over the periods
indicated in the advertisement that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period.
The average annual total return on investments in each of the Advantus
Load Funds for the periods indicated ending September 30, 1995, were as set
forth in the table below. The Funds' investment adviser and distributor were
voluntarily absorbing and waiving certain expenses of certain of the Funds
during these periods. If such Funds had been charged for these expenses the
average annual total returns for the same periods would have been lower, as
also shown in the table below in parentheses.
-42-
<PAGE>
<TABLE>
<CAPTION>
1 Year 5 Year
------ ------
Fund Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Horizon Fund(1) 18.5% (18.4%) 18.7% (18.6%) n/a 14.4% (14.3%) n/a n/a
Spectrum Fund(2) 12.5% (12.5%) 12.6% (12.6%) n/a 10.9% (10.9%) n/a n/a
Mortgage Securities
Fund(1) 7.9% (7.7%) 7.7% (7.7%) n/a 7.8% (7.7%) n/a n/a
Bond Fund(3) 9.3% (8.4%) 8.9% (8.2%) n/a 8.3% (7.3%) n/a n/a
Cornerstone Fund(4) 18.2% (17.5%) 18.2% (17.9%) n/a n/a n/a n/a n/a
Enterprise Fund(4) 21.5% (21.1%) 21.7% (21.6%) n/a n/a n/a n/a n/a
International Fund(4) 2.0% (1.8%) n/a n/a n/a n/a n/a n/a n/a
<CAPTION>
10 Year Since Inception
------- ---------------
Fund Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Horizon Fund(1) 11.3% (11.0%) n/a n/a n/a n/a 18.4% (18.3%) 18.4% (18.3%)
Spectrum Fund(2) n/a n/a n/a n/a 10.3% (9.5%) 11.7% (11.7%) 12.6% (12.6%)
Mortgage Securities
Fund(1) 8.4% (8.2%) n/a n/a n/a n/a 6.6% (6.6%) 7.9% (7.9%)
Bond Fund(3) n/a n/a n/a n/a 7.8% (6.7%) 7.1% (6.3%) 9.3% (8.8%)
Cornerstone Fund(4) n/a n/a n/a n/a 15.9% (15.3%) 16.4% (16.1%) 20.1% (19.9%)
Enterprise Fund(4) n/a n/a n/a n/a 19.6% (19.5%) 20.2% (20.0%) 20.4% (20.3%)
International Fund(4) n/a n/a n/a n/a .1% (-.1%) n/a n/a 10.3% (10.2%)
</TABLE>
- -----------------
(1) Class A Inception May 3, 1985.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(2) Class A Inception November 16, 1987.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(3) Class A Inception August 14, 1987.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(4) Class A and Class B Inception September 16, 1994.
Class C Inception March 1, 1995.
-43-
<PAGE>
CUMULATIVE TOTAL RETURN. Cumulative total return figures are computed
by finding the cumulative compounded rate of return over the period indicated
in the advertisement that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
ERV-P
CTR = ( ------- )100
P
Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.
The cumulative total return on investments in each of the Advantus
Load Funds for the period indicated ended September 30, 1995, was a set forth
in the table below. The Funds' investment adviser was voluntarily absorbing
certain expenses of certain of the Funds during these periods. If such Funds
had been charged for these expenses the cumulative total return for the same
periods would have been lower, as also shown in the table below in
parentheses.
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Horizon Fund(1) 185.7% (180.1%) 20.8% (20.7%) 18.4% (18.3%)
Spectrum Fund(2) 115.7% (103.7%) 13.2% (13.2%) 12.6% (12.6%)
Mortgage Securities Fund(1) 140.6% (136.5%) 7.4% (7.3%) 7.9% (7.8%)
Bond Fund(3) 84.5% (70.9%) 8.0% (7.0%) 9.2% (8.8%)
Cornerstone Fund(4) 16.6% (16.0%) 17.1% (16.7%) 20.3% (19.9%)
Enterprise Fund(4) 20.5% (20.4%) 21.1% (20.9%) 20.4% (20.3%)
International Fund(4) .1% (-.1%) n/a n/a 10.3% (10.1%)
</TABLE>
- -------------------
(1) Class A Inception May 3, 1985.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(2) Class A Inception November 16, 1987.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(3) Class A Inception August 14, 1987.
Class B Inception August 19, 1994.
Class C Inception March 1, 1995.
(4) Class A and Class B Inception September 16, 1994.
Class C Inception March 1, 1995.
The calculations for both average annual total return and cumulative
total return deduct the maximum sales charge from the initial hypothetical
$1,000 investment, assume all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates
-44-
<PAGE>
as described in the Prospectus, and include all recurring fees, such as
investment advisory and management fees, charged as expenses to all
shareholder accounts.
Such average annual total return and cumulative total return figures
may also be accompanied by average annual total return and cumulative total
return figures, for the same or other periods, which do not reflect the
deduction of any sales charges.
CAPITAL STOCK AND OWNERSHIP OF SHARES
Each Fund's shares of common stock, and each class thereof, have a par
value $.01 per share, and have equal rights to share in dividends and assets.
The shares possess no preemptive or conversion rights. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and in such event the holders of the remaining shares will
be unable to elect any directors.
Each of the Funds has 10 billion authorized shares of common stock.
Each of the Advantus Load Funds has designated 2 billion authorized shares as
Class A shares, 2 billion authorized shares as Class B shares (except for
International Fund), and 2 billion authorized shares as Class C shares. The
Funds have the following numbers of shares outstanding:
<TABLE>
<CAPTION>
Shares Outstanding at November 30, 1995
---------------------------------------
Fund Class A Class B Class C
---- ------- ------- -------
<S> <C> <C> <C>
Horizon Fund 1,677,746 147,355 5,896
Spectrum Fund 3,623,030 255,596 19,844
Mortgage Securities Fund 2,255,748 139,048 28,629
Money Market Fund 38,375,420 n/a n/a
Bond Fund 1,499,520 142,164 16,073
Cornerstone Fund 2,405,125 159,253 6,190
Enterprise Fund 2,190,055 135,052 5,534
International Fund 2,949,295 n/a 34,681
</TABLE>
As of November 30, 1995, no person held of record, to the knowledge of
the respective Funds, or owned more than 5% of the outstanding shares of any
of the Funds, except as set forth in the following table:
<TABLE>
<CAPTION>
Number of
Name and Address of Shareholder Shares Percentage
- ------------------------------- ------ ----------
<S> <C> <C>
HORIZON FUND
Minnesota Mutual and affiliates* 478,019 26.1%
SPECTRUM FUND
Minnesota Mutual and affiliates* 139,294 3.6%
</TABLE>
-45-
<PAGE>
<TABLE>
<S> <C> <C>
MORTGAGE SECURITIES FUND
Minnesota Mutual and affiliates* 306,984 12.7%
MONEY MARKET FUND
Minnesota Mutual and affiliates* 11,588,881 30.2%
BOND FUND
Minnesota Mutual and affiliates* 377,655 22.8%
CORNERSTONE FUND
Minnesota Mutual and affiliates* 2,124,793 82.7%
ENTERPRISE FUND
Minnesota Mutual and affiliates* 2,021,141 86.7%
INTERNATIONAL FUND
Minnesota Mutual and affiliates* 2,491,979 83.5%
</TABLE>
* 400 Robert Street North, St. Paul, Minnesota 55101.
HOW TO BUY SHARES
The procedures for purchasing shares of the Funds are summarized in
the Prospectus following the caption "Purchase of Fund Shares."
In addition to purchases of shares through insurance agents and
employees of Minnesota Mutual who are registered representatives of MIMLIC
Sales and who are licensed under applicable state and federal laws, shares
may also be purchased in writing as described in the Prospectus through firms
which are members of the National Association of Securities Dealers, Inc. and
which have selling agreements with MIMLIC Sales.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price and net asset value
per share is summarized in the Prospectus in the text following the headings
"Purchase of Fund Shares" and "Sales Charges."
Shares of Money Market Fund may be purchased at a price equal to their
net asset value, which will normally be constant at $1.00 per share. See
"Money Market Fund Amortized Cost Method of Valuation." There is no
assurance that Money Market Fund can maintain the $1.00 per share value. The
portfolio securities in which the Advantus Load Funds invest fluctuate in
value, and hence the net asset value per share of each Fund also fluctuates.
-46-
<PAGE>
On September 30, 1995, the net asset value and public offering price
per share for Class A, Class B and Class C shares of each of the Funds
(except Money Market Fund) were calculated as follows:
HORIZON FUND
CLASS A SHARES
Net Assets ($36,039,924)
- ------------------------------ = Net Asset Value Per Share ($20.94)
Shares outstanding (1,721,318)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$20.94
------ = Public Offering Price Per Share ($22.04)
.95
CLASS B SHARES
Net Assets ($2,592,256)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (124,967) Offering Price Per Share ($20.74)
CLASS C SHARES
Net Assets ($102,678)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (4,949) Offering Price Per Share ($20.75)
SPECTRUM FUND
CLASS A SHARES
Net Assets ($55,624,248)
- ------------------------------ = Net Asset Value Per Share ($14.79)
Shares outstanding (3,759,787)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$14.79
------ = Public Offering Price Per Share ($15.57)
.95
CLASS B SHARES
Net Assets ($3,131,262)
- ---------------------------- = Net Asset Value AND Public
Shares outstanding (212,378) Offering Price Per Share ($14.74)
CLASS C SHARES
Net Assets ($198,926)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (13,498) Offering Price Per Share ($14.74)
-47-
<PAGE>
MORTGAGE SECURITIES FUND
CLASS A SHARES
Net Assets ($25,316,583)
- ------------------------------ = Net Asset Value Per Share ($10.36)
Shares outstanding (2,444,711)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$10.36
------ = Public Offering Price Per Share ($10.91)
.95
CLASS B SHARES
Net Assets ($1,084,219)
- ----------------------------- = Net Asset Value AND Public
Shares outstanding (104,594) Offering Price Per Share ($10.37)
CLASS C SHARES
Net Assets ($321,331)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (30,995) Offering Price Per Share ($10.37)
BOND FUND
CLASS A SHARES
Net Assets ($15,315,447)
- ------------------------------ = Net Asset Value Per Share ($10.24)
Shares outstanding (1,496,326)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$10.24
------ = Public Offering Price Per Share ($10.78)
.95
CLASS B SHARES
Net Assets ($1,141,804)
- ---------------------------- = Net Asset Value AND Public
Shares outstanding (111,592) Offering Price Per Share ($10.23)
CLASS C SHARES
Net Assets ($112,041)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (10,955) Offering Price Per Share ($10.23)
CORNERSTONE FUND
CLASS A SHARES
Net Assets ($29,519,898)
- ------------------------------ = Net Asset Value Per Share ($12.96)
Shares outstanding (2,277,462)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
-48-
<PAGE>
$12.96
------ = Public Offering Price Per Share ($13.64)
.95
CLASS B SHARES
Net Assets ($1,635,392)
- ---------------------------- = Net Asset Value AND Public
Shares outstanding (126,777) Offering Price Per Share ($12.90)
CLASS C SHARES
Net Assets ($46,771)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (3,625) Offering Price Per Share ($12.90)
ENTERPRISE FUND
CLASS A SHARES
Net Assets ($30,454,200)
- ------------------------------ = Net Asset Value Per Share ($14.08)
Shares outstanding (2,163,222)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$14.08
------ = Public Offering Price Per Share ($14.82)
.95
CLASS B SHARES
Net Assets ($1,720,378)
- ---------------------------- = Net Asset Value AND Public
Shares outstanding (123,403) Offering Price Per Share ($13.94)
CLASS C SHARES
Net Assets ($70,976)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (5,092) Offering Price Per Share ($13.94)
INTERNATIONAL FUND
CLASS A SHARES
Net Assets ($30,948,777)
- ------------------------------ = Net Asset Value Per Share ($10.79)
Shares outstanding (2,868,246)
To obtain the maximum public offering price per share, the Fund's 5%
sales charge must be added to the net asset value obtained above:
$10.79
------ = Public Offering Price Per Share ($11.36)
.95
CLASS C SHARES
Net Assets ($329,813)
- --------------------------- = Net Asset Value AND Public
Shares outstanding (30,622) Offering Price Per Share ($10.77)
REDUCED SALES CHARGES
Special purchase plans are enumerated in the text of each Fund's
Prospectus immediately following the caption "Special Purchase Plans" and are
fully described below.
-49-
<PAGE>
RIGHT OF ACCUMULATION-CUMULATIVE PURCHASE DISCOUNT
The front end sales charge and contingent deferred sales charge
applicable to each purchase of Class A shares and Class B shares,
respectively, of the Advantus Load Funds is based on the next computed net
asset value of all Class A, Class B and Class C shares of such Funds held by
the shareholder (including dividends reinvested and capital gains
distributions accepted in shares), plus the cost of all Class A, Class B and
Class C shares of such Funds currently being purchased. It is the obligation
of each shareholder desiring this discount in sales charge to notify MIMLIC
Sales, through his or her dealer or otherwise, that he or she is entitled to
the discount.
LETTER OF INTENT
The applicable sales charge is based on total purchases over a
13-month period where there is an initial purchase equal to or exceeding
$250, accompanied by filing with MIMLIC Sales a signed "Letter of Intent"
form to purchase, and by in fact purchasing not less than $50,000 of shares
in one of the Funds (except Money Market Fund) within that time. The
13-month period is measured from the date the Letter of Intent is approved by
MIMLIC Sales, or at the purchaser's option, it may be made retroactive 90
days, in which case MIMLIC Sales will make appropriate adjustments on
purchases during the 90-day period.
In computing the total amount purchased for purposes of determining
the applicable sales charge, the net asset value of Class A, Class B and
Class C shares currently held in all Advantus Load Funds, on the date of the
first purchase under the Letter of Intent, may be used as a credit toward
Fund shares to be purchased under the Letter of Intent. Class A, Class B and
Class C shares of all the Advantus Load Funds may also be included in the
purchases during the 13-month period.
The Letter of Intent includes a provision for payment of additional
applicable sales charges at the end of the period in the event the investor
fails to purchase the amount indicated. In the case of Class A shares, this
is accomplished by holding 5% of the investor's initial purchase in escrow.
If the investor's purchases equal those specified in the Letter of Intent,
the escrow is released. If the purchases do not equal those specified in the
Letter of Intent, he or she may remit to MIMLIC Sales an amount equal to the
difference between the dollar amount of sales charges actually paid and the
amount of sales charges that would have been paid on the aggregate purchases
if the total of such purchases had been made at a single time. If the
purchaser does not remit this sum to MIMLIC Sales on a timely basis, MIMLIC
Sales will redeem the appropriate number of shares, and then release or
deliver any remaining shares in the escrow account. In the case of Class B
shares, if the investor fails to purchase shares in the amount indicated, the
contingent deferred sales charge applicable to purchased Class B shares will
be calculated without regard to the Letter of Intent. The Letter of Intent
is not a binding obligation on the part of the investor to purchase, or the
respective Fund to sell, the full amount indicated. Nevertheless, the Letter
of Intent should be read carefully before it is signed.
-50-
<PAGE>
COMBINING PURCHASES
With respect to each of the Advantus Load Funds, purchases of Class A,
Class B and Class C shares for any other account of the investor, or such
person's spouse or minor children, or purchases on behalf of participants in
a tax-qualified retirement plan may be treated as purchases by a single
investor for purposes of determining the availability of a reduced sales
charge.
PURCHASES OF CLASS A SHARES BY CERTAIN PERSONS AFFILIATED WITH THE FUND,
ADVANTUS CAPITAL MIMLIC MANAGEMENT, TEMPLETON COUNSEL, MIMLIC SALES,
MINNESOTA MUTUAL, OR ANY OF MINNESOTA MUTUAL'S OTHER AFFILIATED COMPANIES
Directors and officers of Advantus Capital, MIMLIC Management,
Templeton Counsel (with respect to International Fund only), MIMLIC Sales,
the Funds, Minnesota Mutual, or any of Minnesota Mutual's other affiliated
companies, and their full-time and part-time employees, sales representatives
and retirees, any trust, pension, profit-sharing, or other benefit plan for
such persons, the spouses, siblings, direct ancestors or direct descendents
of such persons, Minnesota Mutual and its affiliates themselves, advisory
clients of Advantus Capital or MIMLIC Management, employees of sales
representatives employed in offices maintained by such sales representatives,
certain accounts as to which a bank or broker-dealer charges an account
management fee, provided the bank or broker-dealer has an agreement with
MIMLIC Sales, and certain accounts sold by registered investment advisers who
charge clients a fee for their services may purchase Class A shares of the
Advantus Load Funds at net asset value. These persons must give written
assurance that they have bought for investment purposes, and that the
securities will not be resold except through redemption or repurchase by, or
on behalf of, the respective Fund. These persons are not required to pay a
sales charge because of the reduced sales effort involved in their purchases.
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment is automatically credited to an open
account maintained for the shareholder by Minnesota Mutual. Stock
certificates are not currently issued. Following each transaction in the
account, a shareholder will receive a confirmation statement disclosing the
current balance of shares owned and the details of recent transactions in the
account. After the close of each year Minnesota Mutual sends to each
shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This should be
retained as a permanent record. A fee may be charged for providing duplicate
information.
The open account system provides for full and fractional shares
expressed to four decimal places and, by making the issuance and delivery of
stock certificates unnecessary, eliminates problems of handling and
safekeeping, and the cost and inconvenience of replacing lost, stolen,
mutilated or destroyed certificates.
-51-
<PAGE>
The costs of maintaining the open account system are paid by Advantus
Capital in the case of the Advantus Load Funds. The costs of maintaining the
open account system for Money Market Fund are paid by the Fund. No direct
charges are made to shareholders. Although the Funds have no present
intention of making such direct charges to shareholders, they reserve the
right to do so. Shareholders will receive prior notice before any such
charges are made.
SYSTEMATIC INVESTMENT PLAN
Each Fund provides a convenient, voluntary method of purchasing shares
in the Fund through its "Systematic Investment Plan".
The principal purposes of the Plan are to encourage thrift by enabling
you to make regular purchases in amounts less than normally required, and, in
the case of the Advantus Load Funds, to employ the principle of dollar cost
averaging, described below.
By acquiring Fund shares on a regular basis pursuant to a Systematic
Investment Plan, or investing regularly on any other systematic plan, the
investor takes advantage of the principle of Dollar Cost Averaging. Under
Dollar Cost Averaging, if a constant amount is invested at regular intervals
at varying price levels, the average cost of all the shares will be lower
than the average of the price levels. This is because the same fixed number
of dollars buys more shares when price levels are low and fewer shares when
price levels are high. It is essential that the investor consider his or her
financial ability to continue this investment program during times of market
decline as well as market rise. The principle of Dollar Cost Averaging will
not protect against loss in a declining market, as a loss will result if the
plan is discontinued when the market value is less than cost.
A Plan may be opened by indicating your intention to invest $25 or
more monthly for at least one year. You will receive a confirmation showing
the number of shares purchased, purchase price, and subsequent new balance of
shares accumulated.
An investor has no obligation to invest regularly or to continue the
Plan, which may be terminated by the investor at any time without penalty.
Under the Plan, any distributions of income and realized capital gains will
be reinvested in additional shares at net asset value unless a shareholder
instructs MIMLIC Sales in writing to pay them in cash. MIMLIC Sales reserves
the right to increase or decrease the amount required to open and continue a
Plan, and to terminate any Plan after one year if the value of the amount
invested is less than $250.
GROUP SYSTEMATIC INVESTMENT PLAN
This Plan provides employers and employees with a convenient means for
purchasing shares of each Fund under various types of employee benefit and
thrift plans, including payroll withholding and bonus incentive plans. The
Plan may be started with an initial cash investment of $50 per participant
for a group consisting of five or more participants. The shares purchased by
each participant under the Plan will be held in a separate account in which
all dividends and capital gains will be reinvested in additional shares of
the Fund at net asset value. To keep his or her account open, subsequent
payments totaling $25 per month must be made into each
-52-
<PAGE>
participant's account. If the group is reduced to less than five
participants, the minimums set forth under "Systematic Investment Plan" shall
apply. The Plan may be terminated by MIMLIC Sales or the shareholder at any
time upon reasonable notice.
AUTOMATIC INVESTMENT PLAN
Each Fund offers an Automatic Investment Plan, which allows you to
automatically invest a specified amount in the Fund each month.
Shares of the respective Fund may be purchased through pre-authorized
bank drafts. With the cooperation of your bank, you may authorize MIMLIC
Sales to make a withdrawal from your checking account on the 1st or 15th day
of each month in the amount you specify to purchase shares of the Fund at the
public offering price next determined after receipt of the proceeds from your
bank draft. A minimum initial investment of $25 is required, and the minimum
subsequent monthly investment under this plan is $25.
You may discontinue your Automatic Investment Plan at any time.
Further information about the plans is available from MIMLIC Sales or your
MIMLIC Sales representative.
GROUP PURCHASES
An individual who is a member of a qualified group may also purchase
shares of the Funds (except Money Market Fund) at the reduced sales charge
applicable to the group taken as a whole. The sales charge is calculated by
taking into account not only the dollar amount of the Class A, Class B and
Class C shares of the Funds being purchased by the individual member, but
also the aggregate dollar value of such Class A, Class B and Class C shares
previously purchased and currently held by other members of the group.
Members of a qualified group may not be eligible for a Letter of Intent.
A "qualified group" is one which (i) has been in existence for more
than six months, (ii) has a purpose other than acquiring Fund shares at a
discount, and (iii) satisfies uniform criteria which enable MIMLIC Sales to
realize economies of scale in distributing such shares. A qualified group
must have more than ten members, must be available to arrange for group
meetings between representatives of MIMLIC Sales, must agree to include sales
and other materials related to the Funds in its publications and mailings to
members at reduced or no cost to MIMLIC Sales, and must seek, upon request,
to arrange for payroll deduction or other bulk transmission of investments to
the Funds.
RETIREMENT PLANS OFFERING TAX BENEFITS
The federal tax laws provide for a variety of retirement plans
offering tax benefits. These plans may be funded with shares of any of the
Funds. The plans include H.R. 10 (Keogh) plans for self-employed individuals
and partnerships, individual retirement accounts (IRA's), corporate pension
trust and profit sharing plans, including 401(k) plans, and retirement plans
for public school systems and certain tax exempt organizations, e.g. 403(b)
plans.
-53-
<PAGE>
The initial investment in each Fund by such a plan must be at least
$250 for each participant in a plan, and subsequent investments must be at
least $25 per month for each participant. Income dividends and capital gain
distributions must be reinvested. Plan documents and further information can
be obtained from MIMLIC Sales.
An investor should consult a competent tax or other adviser as to the
suitability of Fund shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects, including changes made by the Tax Reform Act of 1986.
SYSTEMATIC WITHDRAWAL PLANS
An investor owning shares in any one of the Funds having a value of
$5,000 or more at the current public offering price may establish a
Systematic Withdrawal Plan providing for periodic payments of a fixed or
variable amount. The Plan is particularly convenient and useful for trustees
in making periodic distributions to retired employees. Through this Plan a
trustee can arrange for the retirement benefit to be paid directly to the
employee by the respective Fund and to continue the tax-free accumulation of
income and capital gains prior to their distribution to the employee. An
investor may terminate the Plan at any time. A form for use in establishing
such a plan is available from MIMLIC Sales.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually, or annually for a fixed amount of
not less than $50 or a variable amount based on (1) the market value of a
stated number of shares, (2) a specified percentage of the account's market
value or (3) a specified number of years for liquidating the account (e.g., a
20-year program of 240 monthly payments would be liquidated at a monthly rate
of 1/240, 1/239, 1/238, etc.). The initial payment under a variable payment
option may be $50 or more.
All shares under the Plan must be left on deposit. Income dividends
and capital gain distributions will be reinvested without a sales charge at
net asset value determined on the record date.
Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the initial investment,
particularly in the event of a decline in net asset value. In addition,
withdrawal payments attributable to the redemption of Class B shares may be
subject to a contingent deferred sales charge. Accordingly, the shareholder
should consider whether a Systematic Withdrawal Plan and the specified
amounts to be withdrawn are appropriate in the circumstances. The Funds and
MIMLIC Sales make no recommendations or representations in this regard. It
may be appropriate for the shareholder to consult a tax adviser before
establishing such a plan.
Under this Plan, any distributions of income and realized capital
gains must be reinvested in additional shares, and are reinvested at net
asset value. If a shareholder wishes to purchase additional shares of the
respective Fund under this Plan, except in the case of Money Market Fund,
other than by reinvestment of distributions, it should be understood that, in
the case of
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Class A shares, he or she would be paying a sales commission on such
purchases, while liquidations effected under the Plan would be at net asset
value, and, in the case of Class B shares, he or she would be purchasing such
shares at net asset value while liquidations effected under the Plan would
involve the payment of a contingent deferred sales charge. Purchases of
additional shares concurrent with withdrawals are ordinarily disadvantageous
to the shareholder because of sales charges and tax liabilities. Additions
to a shareholder account in which an election has been made to receive
systematic withdrawals will be accepted only if each such addition is equal
to at least one year's scheduled withdrawals or $1,200, whichever is greater.
A shareholder may not have a "Systematic Withdrawal Plan" and a "Systematic
Investment Plan" in effect simultaneously as it is not, as explained above,
advantageous to do so.
EXCHANGE AND TELEPHONE TRANSFER PRIVILEGE
The exchange and telephone transfer privileges available in connection
with the Funds, the procedures for effecting such transactions and a
description of the applicable charges, are described in each Fund's
Prospectus in the text following the caption "Exchange and Telephone Transfer
of Fund Shares."
Telephone transfers and other exchanges may be made only between
already open Fund accounts having identical registrations.
REDEMPTIONS
The procedures for redemption of Fund shares, and the charges
applicable to redemptions of Class B shares, are summarized in the Prospectus
in the text following the caption "Redemption of Fund Shares."
Class B shares are subject to a contingent deferred sales charge of up
to 5% if redeemed within six years of purchase. See "Sales Charges-Class B
Shares" and "Redemption of Fund Shares" in the Prospectus.
The obligation of each of the Funds to redeem its shares when called
upon to do so by the shareholder is mandatory with the following exceptions.
Each Fund will pay in cash all redemption requests by any shareholder
of record, limited in amount during any 90-day period to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of such
period. When redemption requests exceed such amount, however, the Fund
reserves the right to make part or all of the payment in the form of
securities or other assets of the Fund. An example of when this might be
done is in case of emergency, such as in those situations enumerated in the
following paragraph, or at any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. Any
securities being so distributed would be valued in the same manner as the
portfolio of the Fund is valued. If the recipient sold such securities, he
or she probably would incur brokerage charges. The Fund has filed with the
Securities and Exchange Commission a notification of election pursuant to
Rule 18f-1 under the Investment Company Act of 1940 in order to make such
redemptions in kind.
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Redemption of shares, or payment, may be suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (b) when trading on said Exchange is restricted, (c) when
an emergency exists, as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable, or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by
order, so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist.
REINSTATEMENT PRIVILEGE
The Prospectus for each of the Advantus Load Funds describes redeeming
shareholders' reinstatement privileges in the text following the caption
"Reinstatement Privilege." Written notice from persons wishing to exercise
this reinstatement privilege must be received by MIMLIC Sales within 90 days
after the date of the redemption. The reinstatement or exchange will be made
at net asset value next determined after receipt of the notice and will be
limited to the amount of the redemption proceeds or to the nearest full share
if fractional shares are not purchased. All shares issued as a result of the
reinstatement privilege applicable to redemptions of Class A and Class B
shares will be issued only as Class A shares. Any CDSC incurred in
connection with the prior redemption (within 90 days) of Class B shares will
not be refunded or re-credited to the shareholder's account. Shareholders
who redeem Class C shares and exercise their reinstatement privilege will be
issued only Class C shares, which shares will have a remaining holding period
prior to conversion equal to the remaining holding period applicable to the
prior Class C shares at redemption.
See "Taxes" in the Prospectus for a discussion of the effect of
redeeming shares within 90 days after acquiring them and subsequently
acquiring new shares in any mutual fund at a reduced sales charge. Should an
investor utilize the reinstatement privilege following a redemption which
resulted in a loss, all or a portion of that loss might not be currently
deductible for Federal income tax purposes, for an investor which is not
tax-exempt. Exercising the reinstatement privilege would not alter any
capital gains taxes payable on a realized gain, for an investor which is not
tax-exempt. See discussion under "Taxes" in the Prospectus regarding the
taxation of capital gains.
DISTRIBUTIONS AND TAX STATUS
GENERALLY
The tax status of the Funds and the distributions which they may make
are summarized in the text of the Prospectus following the caption "Taxes."
During the fiscal year ended September 30, 1995, each Fund fulfilled, and
each Fund intends to continue to fulfill, the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, the Funds will not be liable for
federal income taxes to the extent they distribute their taxable income to
their shareholders.
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INTERNATIONAL FUND
Except for the transactions the Fund has identified as hedging
transactions, the Fund is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses
on forward currency contracts as of the end of the year as well as those
actually realized during the year. Except for transactions in forward
currency contracts that are classified as part of a "mixed straddle," gain or
loss recognized with respect to forward currency contracts is considered to
be 60% long-term capital gain or loss and 40% short-term capital gain or
loss, without regard to the holding period of the contract. In the case of a
transaction classified as a "mixed straddle," the recognition of losses may
be deferred to a later taxable year.
Sales of forward currency contracts that are intended to hedge against
a change in the value of securities or currencies held by the Fund may affect
the holding period of such securities or currencies and, consequently, the
nature of the gain or loss on such securities or currencies upon disposition.
It is expected that any net gain realized from the closing out of
forward currency contracts will be considered gain from the sale of
securities or currencies and therefore be qualifying income for purposes of
the requirement under the Code that a regulated investment company derive at
least 90% of its gross income from dividends interest, gains from the sale or
disposition of securities, or otherwise from the business of investing in
securities. Moreover, in connection with the Code requirement that a
regulated investment company must derive less than 30% of its gross income
from gains on the sale or disposition of stock, securities, or (in certain
cases) forward contracts or foreign currencies held less than three months,
the Fund may be required to defer the closing out of forward currency
contracts beyond the time when it would otherwise be advantageous to do so.
It is expected that unrealized gains on forward currency contracts, which
have been open for less than three months as of the end of the Fund's fiscal
year and which are recognized for tax purposes, will not be considered gains
on securities or currencies held less than three months for purposes of the
30% test, as discussed above.
Any realized gain or loss on closing out a forward currency contract
such as a forward commitment for the purchase or sale of foreign currency
will generally result in a recognized capital gain or loss for tax purposes.
Under Code Section 1256, forward currency contracts held by the Fund at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Code
Section 988 may also apply to forward currency contracts. Under Section 988,
each foreign currency gain or loss is generally computed separately and
treated as ordinary income or loss. In the case of overlap between Section
1256 and 988, special provisions determine the character and timing of any
income gain or loss. The Fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
Under the Code, the Fund's taxable income for each year will be
computed without regard to any net foreign currency loss attributable to
transactions after October 31, and any such net foreign currency loss will be
treated as arising on the first day of the following taxable year.
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ALL FUNDS
Each Fund is subject to a non-deductible excise tax equal to 4 percent
of the excess, if any, of the amount required to be distributed pursuant to
the Code for each calendar year over the amount actually distributed. In
order to avoid the imposition of this excise tax, the Fund generally must
declare dividends by the end of a calendar year representing 98 percent of
the Fund's ordinary income for the calendar year and 98 percent of its
capital gain net income (both long-term and short-term capital gains) for the
twelve-month period ending October 31 of the calendar year.
The foregoing relates only to federal taxation. Prospective
shareholders should consult their tax advisers as to the possible application
of state and local income tax laws to Fund distributions.
FINANCIAL STATEMENTS
Financial statements for the Funds are presented in Appendix D. These
financial statements have been audited by KPMG Peat Marwick LLP, independent
auditors. The accompanying financial statements are for year ended
September 30, 1995.
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APPENDIX A
MORTGAGE-RELATED SECURITIES
Mortgage-related securities represent an ownership interest in a pool
of residential mortgage loans. These securities are designed to provide
monthly payments of interest and principal to the investor. The mortgagor's
monthly payments to his lending institution are "passed-through" to investors
such as the Fund. Most insurers or services provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or servicers are backed by various forms of
credit, insurance and collateral.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. Some of
these loans are made to purchasers of mobile homes. The terms and
characteristics of the mortgage instruments are generally uniform within a
pool buy may vary among pools. For example, in addition to fixed-rate
fixed-term mortgages, the fund may purchase pools of variable rate mortgages,
growing equity mortgages, graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Servicers also
establish credit standards and underwriting criteria for individual mortgages
included in the pools. In addition, many mortgages included in pools are
insured through private mortgage insurance companies.
LIQUIDITY AND MARKETABILITY
Since the inception of the mortgage-related pass-through security in
1970, the market for these securities has expanded considerably. The size of
the primary issuance market and active participation in the secondary market
by securities dealers and many types of investors makes government and
government-related pass-through pools highly liquid. The recently introduced
private conventional pools of mortgages (pooled by commercial banks, savings
and loans institutions and others, with no relationship with government and
government-related entities) have also achieved broad market acceptance and
consequently an active secondary market has emerged. However, the market for
conventional pools is smaller and less liquid than the market for the
government and government-related mortgage pools. The Fund may purchase some
mortgage-related securities through private placements, in which case only a
limited secondary market exists, and the security is considered illiquid.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be
shortened by unscheduled or early payments of principal and interest on the
underlying mortgages. The occurrence of mortgage
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prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not
possible to accurately predict the average life of a particular pool. For
pools of fixed-rate 30-year mortgages, common industry practice is to assume
that prepayments will result in a 12-year average life. Pools of mortgages
with other maturities or different characteristics will have varying
assumptions for average life. The assumed average life of pools of mortgages
having terms of less than 30 years is less than 12 years, but typically not
less than 5 years.
YIELD CALCULATIONS
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. In periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities. Conversely, in
periods of rising rates and the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. Historically, actual
average life has been consistent with the 12-year assumption referred to
above.
Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher
or lower interest rates than the original investment, thus affecting the
yield of the Fund. The compounding effect from reinvestments of monthly
payments received by the Fund will increase the yield to shareholders
compared to bonds that pay interest semi-annually.
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APPENDIX B
BOND AND COMMERCIAL PAPER RATINGS
BOND RATINGS
Moody's Investors Service, Inc. describes its five highest ratings for
corporate bonds and mortgage-related securities as follows:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future.
Bonds which are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this
class.
Moody's Investors Service, Inc. also applies numerical modifiers, 1, 2,
and 3, in each of these generic rating classifications. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating
category.
Standard & Poor's Corporation describes its five highest ratings for
corporate bonds and mortgage-related securities as follows:
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AAA. Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA. Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in
small degree.
A. Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB. Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher rated categories.
BB. Debt rated "BB" has less near-term vulnerability to
default than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or
economic conditions that could lead to inadequate capacity to meet timely
interest and principal payments.
Standard & Poor's Corporation applies indicators "+", no character,
and "-" to the above rating categories. The indicators show relative
standing within the major rating categories.
COMMERCIAL PAPER RATINGS
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. Among the factors considered by Moody's
Investors Service, Inc. in assigning the ratings are the following: (1)
evaluation of the management of the issuer, (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; (3) evaluation of the issuer's
products in relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings over a period
of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; an (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations.
The rating A-1 is the highest rating assigned by Standard & Poor's
Corporation to commercial paper which is considered by Standard & Poor's
Corporation to have the following characteristics:
Liquidity ratios of the issuer are adequate to meet cash
redemptions. Long-term senior debt is rated "A" or better. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well
established and the
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issuer has a strong position within the industry. The reliability and
quality of management are unquestioned.
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<PAGE>
APPENDIX C
FUTURES CONTRACTS
USE OF FUTURES CONTRACTS
Prices of debt securities may be established in both the cash market
and the futures market. In the cash market, debt securities are purchased
and sold with payment for the full purchase price being made in cash,
generally within five business days after the trade. In the futures market,
a contract is made to purchase or sell a debt security in the future for a
set price on a certain date. Historically, prices established in the futures
markets have tended to move generally and in the aggregate in concert with
cash market prices and have maintained fairly predictable relationships. The
Fund may use interest rate futures solely as a defense, or hedge, against
anticipated interest rate changes and not for speculation. As described
below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases
to offset the impact of interest rate declines.
The Fund currently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling debt
securities with long maturities and investing in debt securities with short
maturities when interest rates are expected to increase, or conversely,
selling short-term debt securities and investing in long-term debt securities
when interest rates are expected to decline. However, because of the
liquidity that is often available in the futures market, such protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
DESCRIPTION OF FUTURES CONTRACTS
A futures contract sale creates an obligation by the Fund, as seller,
to deliver the specific type of financial instrument called for in the
contract at a specified future time for a specified price. A futures
contract purchase creates an obligation by the Fund, as purchaser, to take
delivery of the specific type of financial instrument at a specified future
time at a specified price. The specific securities delivered or taken,
respectively, at settlement date, would not be determined until at or near
that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was made.
Although futures contracts by their terms call for actual delivery or
acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund entering into a
futures contract purchase for the same aggregate amount of the specific type
of financial instrument and the same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, the Fund immediately is paid
the difference and thus realizes a gain. If the offsetting purchase price
exceeds the sale price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
Fund's entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the purchase
price exceeds the offsetting sale price, the Fund realizes a loss. See
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"Risks of Futures Contracts", below, for a disclosure of the risks of being
unable to close out a position before the settlement date.
A public market now exists in futures contracts covering primarily the
following financial instruments: long-term United States Treasury Bonds;
Government National Mortgage Association modified pass-through
mortgage-backed securities (GNMA); three month United States Treasury Bills;
United States Treasury Notes; and bank certificates of deposit. It is
expected that other financial instruments will be subject to futures
contacts. There is a $100,000 minimum for futures contracts in United States
Treasury Bonds, GNMA pass-through securities, and United States Treasury
Notes, and a $1,000,000 minimum for contracts in United States Treasury Bills
and bank certificates of deposit. The Fund may invest in interest rate
futures contracts covering the financial instruments referred to above as
well as in new types of such contracts that become available in the future.
See "Example of Futures Contract Sale" and "Example of Futures Contract
Purchase" below.
Financial futures contracts are traded in an auction environment on
the floors of several exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. Each exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
The Fund will pay a commission on each contract, including offsetting
transactions. In addition, the Fund is required to maintain margin deposits
with brokerage firms through which it enters into futures contracts.
Currently, the initial margin deposit per contract is $1,500 for Treasury
Bills and commercial paper and $2,000 for Treasury Bonds and GNMAs. The Fund
will establish a custodial account with its bank custodian to hold initial
margin deposits. The account will be in the name of the futures commission
merchant through which the Fund entered into the futures contract. The
futures commission merchant will be able to gain access to the assets held in
this account only if he states that all conditions precedent to his right to
direct disposition have been satisfied. Margin balances will be adjusted
daily to reflect unrealized gains and losses on open contracts. The payments
to or withdrawals from this account are known as variation margin payments.
The Fund can withdraw amounts from this account in excess of the initial
margin payments, and it is the Fund's intention to promptly make withdrawals
of any such excess. If the margin account is depleted below the maintenance
level (a fixed percentage of the initial margin), the Fund will be required
to deposit an amount that will bring the margin account back up to its
initial margin level. If the Fund has an unrealized gain above the amount of
any net variation margin it has already received, the futures commission
merchant, as of the close of that trading day, may receive, on behalf of the
Fund, a variation margin payment from the clearing corporation in the amount
of the gain. By 10:30 A.M. the next day, the futures commission merchant
must notify the Fund of its entitlement to receive a variation margin payment
from the margin account, and the Fund will promptly demand payment of such
amount.
When purchasing interest rate futures contracts, the Fund will deposit
and maintain in a separate account with its custodian cash or cash
equivalents in an amount equal to the market value of such futures contracts,
less any margin deposited on the Fund's long position. These earmarked
assets will be used to cover the Fund's obligation and will not be used to
support any other transaction into which the Fund may enter.
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RISKS IN FUTURES CONTRACTS
One risk in employing futures contracts to protect against cash market
price volatility is the prospect that futures prices will correlate
imperfectly with the behavior of cash prices. The ordinary spreads between
prices in the cash and future markets, due to differences in the nature of
those markets, are subject to distortions. First, all participants in the
futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may
close futures contracts through offsetting transactions which could distort
the normal relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering into
offsetting transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced, thus producing distortion. Third, from the point of view
of speculators the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore
increased participation by speculators in the futures market may cause
temporary price distortions. Due to the possibility of distortion, a correct
forecast of general interest trends by MIMLIC Management may still not result
in a successful transaction.
Another risk is that the Fund's investment adviser would be incorrect
in its expectation as to the extent of various interest rate movements or the
time span within which the movements take place. Closing out a futures
contract purchase at a loss because of higher interest rates will generally
have one of two consequences depending on whether, at the time of closing
out, the "yield curve" is normal (long-term rates exceeding short-term). If
the yield curve is normal, it is possible that the Fund will still be engaged
in a program of buying long-term securities, because the price of long-term
securities will likely have decreased. The closing out of the futures
contract purchase at a loss will reduce the benefit of the reduced price of
the securities purchased. If the yield curve is inverted, it is possible
that the Fund will retain its investments in short-term securities earmarked
for purchase of longer term securities. Thus, closing out of a loss will
reduce the benefit of the incremental income that the Fund will experience by
virtue of the high short-term rates.
A third risk in using interest rates futures contracts is the
possibility that the value of such futures contracts will not vary in direct
proportion to the value of the Fund's portfolio securities. Such deviations
may result in the failure of the closing of futures transactions to
completely offset decreases in the prices of debt securities in the Fund's
portfolio or increases in the prices of debt securities which the Fund may
wish to purchase.
In addition, although the Fund will only purchase and sell futures
contracts for which there is a public market, there can be no assurance that
the Fund will be able to close out its position by entering into an
offsetting transaction before the settlement date. In that event, the Fund
will be required to deliver or accept the underlying securities in accordance
with the terms of its commitment.
EXAMPLE OF FUTURES CONTRACT SALE
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The Fund would engage in a futures contract sale to maintain the
income advantage from continued holding of a long-term security while
endeavoring to avoid part or all of the loss in market value that would
otherwise accompany a decline in long-term securities prices. Assume that
the market value of a certain security in the Fund's portfolio tends to move
in concert with the futures market prices of long-term United States Treasury
bonds ("Treasury bonds"). The Fund wishes to fix the current market value of
this portfolio security until some point in the future. Assume the portfolio
security has a market value of $100, and the Fund believes that, because of
an anticipated rise in interest rates, the value will decline to $95. The
Fund might enter into futures contract sales of Treasury bonds for a price of
$98. If the market value of the portfolio security does indeed decline from
$100 to $95, the futures market price for the Treasury bonds might also
decline from $98 to $93.
In that case, the $5 loss in the market value of the portfolio
security would be offset by the $5 gain realized by closing out the futures
contract sale. Of course, the futures market price of Treasury bonds might
decline to more than $93 or to less than $93 because of the imperfect
correlation between cash and futures prices mentioned above.
The Fund could be wrong in its forecast of interest rates and the
futures market price could rise above $98. In this case, the market value of
the portfolio securities, including the portfolio security being protected,
would increase. The benefit of this increase would be reduced by the loss
realized on closing out the futures contract sale.
If interest rate levels did not change prior to settlement date, the
Fund, in the above example, would incur a loss of $2 if it delivered the
portfolio security on the settlement date (which loss might be reduced by an
offsetting transaction prior to the settlement date). In each transaction,
nominal transaction expenses would also be incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE
The Fund would engage in a futures contract purchase when it is not
fully invested in long-term securities but wishes to defer for a time the
purchase of long-term securities in light of the availability of advantageous
interim investments, e.g., short-term securities whose yields are greater
than those available on long-term securities. The Fund's basic motivation
would be to maintain for a time the income advantage from investing in the
short-term securities; the Fund would be endeavoring at the same time to
eliminate the effect of all or part of the increases in market price of the
long-term securities that the Fund may purchase.
For example, assume that the market price of a long-term security that
the Fund may purchase, currently yielding 10%, tends to move in concert with
futures market prices of Treasury bonds. The Fund wishes to fix the current
market price (and thus 10% yield) of the long-term security until the time
(four months away in this example) when it may purchase the security.
Assuming the long-term security has a market price of $100, and the
Fund believes that, because of an anticipated fall in interest rates, the
price will have risen to $105 (and the yield will have dropped to about
9-1/2%) in four months, the Fund might enter into futures contracts
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purchases of Treasury bonds for a price of $98. At the same time, the Fund
would assign a pool of investments in short-term securities that are either
maturing in four months or earmarked for sale in four months, for purchase of
the long-term security at an assumed market price of $100. Assume these
short-term securities are yielding 15%. If the market price of the long-term
bond does indeed rise from $100 to $105, the futures market price for
Treasury bonds might also rise from $98 to $103. In that case, the $5
increase in the price that the Fund pays for the long-term security would be
offset by the $5 gain realized by closing out the futures contract purchase.
The Fund could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%, and the futures market price could
fall below $98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for
long-term securities. The market prices of available long-term securities
would have decreased. The benefit of this price decrease, and thus yield
increase, will be reduced by the loss realized on closing out the futures
contract purchase.
If, however, short-term rates remained above available long-term
rates, it is possible that the Fund would discontinue its purchase program
for long-term securities. The yields on short-term securities in the
portfolio, including those originally in the pool assigned to the particular
long-term security, would remain higher than yields on long-term bonds. The
benefit of this continued incremental income will be reduced by the loss
realized on closing out the futures contract purchase.
In each transaction, nominal transaction expenses would also be
incurred.
TAX TREATMENT
The amount of any gain or loss realized by the Fund on closing out a
futures contract may result in a capital gain or loss for federal income tax
purposes. Generally, futures contracts held by the Fund at the close of the
Fund's taxable year will be treated for federal income tax purposes as sold
for their fair market value on the last business day of such year. Forty
percent of any gain or loss resulting from such constructive sale will be
treated as short-term capital gain or loss and 60 percent of such gain or
loss will be treated as long-term capital gain or loss. The amount of any
capital gain or loss actually realized by the Fund in a subsequent sale or
other disposition of these futures contracts will be adjusted to reflect any
capital gain or loss taken into account by the Fund in a prior year as a
result of the constructive sale of the contract. Notwithstanding the rules
described above, with respect to futures contracts which are part of futures
contract sales, and in certain other situations, the Fund may make an
election which may have the effect of exempting all or a part of those
identified future contracts from being treated for federal income tax
purposes as sold on the last business day of the Fund's taxable year; all or
part of any gain or loss otherwise realized by the Fund on any closing
transaction may be deferred until all of the Fund's positions with respect to
the futures contract sales are closed; and, all or part of any gain or loss
may be treated as short-term capital gain or loss.
Under the Federal income tax provisions applicable to regulated
investment companies, at least 90% of the Fund's annual gross income must be
derived from dividends, interest, payments with respect to loans of
securities, and gains from the sale or other disposition of securities
C-5
<PAGE>
("qualifying income"). Under the Internal Revenue Code of 1986, as amended
(the "Code"), the Fund may include gains from forward contracts in
determining qualifying income. In addition, in order that the Fund continue
to qualify as a regulated investment company for Federal income tax purposes,
less than 30% of its gross income for any year must be derived from gains
realized on the sale or other disposition of securities held by the Fund for
less than three months. For this purpose, the Fund will treat gains realized
on the closing out of futures contracts as gains derived from the sale of
securities. This treatment could, under certain circumstances, require the
Fund to defer the closing out of futures contracts until after three months
from the date the fund acquired the contracts, even if it would be more
advantageous to close out the contracts prior to that time. However, under
the Code, a special rule is provided with respect to certain hedging
transactions which has the effect of allowing the Fund to engage in such
short-term transactions in limited circumstances. Any gains realized by the
Fund as a result of the constructive sales of futures contacts held by the
Fund at the end of its taxable year, as described in the preceding
paragraph, will in all instances be treated as derived from the sale of
securities held for three months or more, regardless of the actual period for
which the Fund has held the futures contracts at the end of the year.
C-6
<PAGE>
APPENDIX D - FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Horizon Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Horizon
Fund, Inc. (the Fund) as of September 30, 1995 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended September 30, 1995 and the period from November 1, 1993 to
September 30, 1994 and the financial highlights for the year ended September 30,
1995, the period from November 1, 1993 to September 30, 1994 and each of the
years in the three-year period ended October 31, 1993. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
20
<PAGE>
ADVANTUS HORIZON FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
COMMON STOCKS (97.2%)
CAPITAL GOODS (6.4%)
Machinery (6.4%)
19,300 Elsag Bailey Process Automation (b)(c)................. $ 629,663
16,988 General Electric Company............................... 1,082,985
13,400 Kaydon Corporation..................................... 395,300
8,985 York International Corp................................ 378,493
----------
2,486,441
----------
CONSUMER GOODS AND SERVICES (53.1%)
Consumer Goods (24.0%)
8,322 Colgate-Palmolive Company.............................. 554,453
30,381 Columbia/HCA Healthcare Corporation.................... 1,477,275
22,120 Fisher Scientific International Inc.................... 716,135
26,400 Idexx Laboratories Inc (b)............................. 983,400
7,000 Medtronic Inc.......................................... 376,250
11,941 Pepsico, Inc........................................... 608,991
16,200 Pfizer Inc............................................. 864,675
11,100 Procter & Gamble Company............................... 854,700
43,800 Pyxis Corporation (b).................................. 848,625
10,500 Teva Pharmaceutical Industries ADR (c)................. 379,313
17,400 United Health Care..................................... 850,425
31,397 Value Health Incorporated (b).......................... 832,021
----------
9,346,263
----------
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
Consumer Services (10.4%)
21,800 Carmike Cinemas Inc (b)................................ $ 479,600
19,347 CUC International Inc (b).............................. 674,727
30,800 Gartner (b)............................................ 1,008,699
11,400 GTECH Holdings Corporation (b)......................... 343,425
16,000 International House of Pancakes (b).................... 420,000
12,800 Lone Star Steakhouse & Saloon, Inc (b)................. 524,800
19,370 Manpower............................................... 561,730
----------
4,012,981
----------
Retail (14.8%)
14,600 Barnes & Noble Inc (b)................................. 558,450
35,620 Borders Group Incorporated (b)......................... 609,993
33,000 BT Office Products International (b)................... 433,125
44,200 Casey's General Stores Inc............................. 1,000,025
29,700 Home Depot Inc......................................... 1,184,288
8,200 Kohl's Inc (b)......................................... 425,375
40,782 Office Depot, Inc (b).................................. 1,228,557
20,600 Orchard Supply Hardware (b)............................ 298,700
----------
5,738,513
----------
Consumer Cyclicals (3.9%)
12,295 Exide Corporation...................................... 614,750
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS HORIZON FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
27,100 Tommy Hilfiger Corporation (b)......................... $ 880,750
----------
1,495,500
----------
CREDIT SENSITIVE (13.3%)
Finance (10.6%)
6,552 American International Group, Inc...................... 556,920
7,600 First Data Corp........................................ 471,200
11,000 First Financial Management............................. 1,073,874
6,205 First Union Corporation................................ 316,455
9,000 MGIC Investment Corporation............................ 515,250
11,350 Norwest Corporation.................................... 371,713
45,200 Roosevelt Financial Group, Inc......................... 796,650
----------
4,102,062
----------
Utilities (2.7%)
11,600 AT&T Corporation....................................... 762,700
8,175 Florida Progress Corporation........................... 264,666
----------
1,027,366
----------
INTERMEDIATE GOODS AND SERVICES (8.3%)
Energy (2.6%)
4,450 Amoco Corporation...................................... 285,356
3,800 Mobil Corporation...................................... 378,575
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
2,860 Royal Dutch Petroleum ADR (c).......................... $ 351,065
----------
1,014,996
----------
Materials (3.1%)
9,530 Albany International Corp.............................. 222,764
12,000 Lubrizol Corporation................................... 391,500
19,173 McWhorter Technology Inc (b)........................... 294,785
7,240 Valspar Corporation.................................... 276,930
----------
1,185,979
----------
Transportation (2.6%)
28,700 American Freightways (b)............................... 430,500
3,800 Fritz Companies (b).................................... 280,013
3,940 Norfolk Southern Corporation........................... 294,515
----------
1,005,028
----------
TECHNOLOGY (16.1%)
23,324 Computer Associates International...................... 985,439
19,100 Danka Business Systems PLC (c)......................... 687,600
17,300 DSC Communications (b)................................. 1,025,024
13,100 EMC Corporation (b).................................... 237,438
13,200 Informix Corporation (b)............................... 429,000
15,300 Integrated Device Technology, Inc (b).................. 382,500
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS HORIZON FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
TECHNOLOGY--CONTINUED
6,300 Intel.................................................. $ 378,788
19,150 Oracle Corporation (b)................................. 734,881
12,700 Worldcom, Incorporated (b)............................. 407,988
3,200 Xerox Corporation...................................... 430,000
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- ----------
<C> <S> <C>
TECHNOLOGY--CONTINUED
11,400 3 Com (b).............................................. $ 518,700
----------
6,217,358
----------
Total common stocks
(cost: $25,233,341)................................................. 37,632,487
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.2%)
$ 200,000 U.S. Treasury Bill..................................... 5.55%-5.57% 10/12/95 199,630
1,050,000 U.S. Treasury Bill..................................... 5.33%-5.48% 12/07/95 1,039,294
-----------
Total short-term securities (cost: $1,239,237)...................................... 1,238,924
-----------
Total investments in securities (cost: $26,472,578)(d).............................. $38,871,411
-----------
-----------
<FN>
Notes to Investments in Securities
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 5.3% of net assets in foreign securities as of September 30,
1995.
(d) At September 30, 1995 the cost of securities for federal income tax
purposes was $26,473,722. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation....................................................................... $ 13,036,527
Gross unrealized depreciation....................................................................... (638,838)
------------
Net unrealized appreciation......................................................................... $ 12,397,689
------------
------------
</TABLE>
10
<PAGE>
ADVANTUS HORIZON FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for
detailed listing (identified cost: $26,472,578)................................ $ 38,871,411
Cash in bank on demand deposit.................................................. 113,601
Receivable for Fund shares sold................................................. 1,661
Dividends receivable............................................................ 23,624
------------
Total assets................................................................ 39,010,297
------------
LIABILITIES
Payable for investment securities purchased..................................... 142,727
Payable for Fund shares repurchased............................................. 85,991
Payable to Adviser.............................................................. 46,721
------------
Total liabilities........................................................... 275,439
------------
Net assets applicable to outstanding capital stock.............................. $ 38,734,858
------------
------------
Represented by:
Capital stock--$.01 par value (note 1)........................................ $ 18,512
Additional paid-in capital.................................................... 23,992,248
Accumulated net realized gains from investments............................... 2,325,265
Unrealized appreciation of investments........................................ 12,398,833
------------
Total--representing net assets applicable to outstanding capital stock...... $ 38,734,858
------------
------------
Net assets applicable to outstanding Class A Shares............................. $ 36,039,924
------------
------------
Net assets applicable to outstanding Class B Shares............................. $ 2,592,256
------------
------------
Net assets applicable to outstanding Class C Shares............................. $ 102,678
------------
------------
Shares outstanding and net asset value per share
Class A--Shares outstanding 1,721,318......................................... $ 20.94
------------
------------
Class B--Shares outstanding 124,967........................................... $ 20.74
------------
------------
Class C--Shares outstanding 4,949............................................. $ 20.75
------------
------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS HORIZON FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest...................................................................... $ 134,983
Dividends..................................................................... 298,862
-----------
Total investment income..................................................... 433,845
-----------
Expenses (note 4):
Investment advisory fee....................................................... 276,972
Distribution fees--Class A.................................................... 100,294
Distribution fees--Class B.................................................... 11,637
Distribution fees--Class C.................................................... 270
Administrative services fee................................................... 38,600
Custodian fees................................................................ 7,535
Auditing and accounting services.............................................. 19,000
Legal fees.................................................................... 5,972
Directors' fees............................................................... 770
Registration fees............................................................. 40,126
Printing and shareholder reports.............................................. 28,452
Insurance..................................................................... 5,900
Other......................................................................... 17,022
-----------
Total expenses.............................................................. 552,550
Less fees and expenses waived or absorbed:
Class A distribution fees................................................... (50,147)
Other fund expenses......................................................... (2,814)
-----------
Total fees and expenses waived or absorbed.................................. (52,961)
-----------
Total net expenses.......................................................... 499,589
-----------
Investment loss--net........................................................ (65,744)
-----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3).................................... 2,609,672
Net change in unrealized appreciation or depreciation on investments.......... 5,347,200
-----------
Net gains on investments.................................................... 7,956,872
-----------
Net increase in net assets resulting from operations............................ $ 7,891,128
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS HORIZON FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Investment loss--net................................................ $ (65,744) $ (3,911)
Net realized gains on investments................................... 2,609,672 736,521
Net change in unrealized appreciation or depreciation of
investments........................................................ 5,347,200 (290,620)
------------ ------------
Increase in net assets resulting from operations.................. 7,891,128 441,990
------------ ------------
Distributions to shareholders from net realized gains on investments:
Class A........................................................... (981,881) (940,050)
Class B........................................................... (16,148) --
------------ ------------
Total distributions............................................... (998,029) (940,050)
------------ ------------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A........................................................... 3,817,143 4,972,723
Class B........................................................... 2,211,285 96,045
Class C........................................................... 96,617 --
Shares issued as a result of reinvested dividends:
Class A........................................................... 973,291 917,268
Class B........................................................... 16,148 --
Payments for redemption of shares:
Class A........................................................... (6,723,485) (4,018,515)
Class B........................................................... (32,497) (10)
Class C........................................................... (1,043) --
------------ ------------
Increase in net assets from capital share transactions............ 357,459 1,967,511
------------ ------------
Total increase in net assets...................................... 7,250,558 1,469,451
Net assets at beginning of period..................................... 31,484,300 30,014,849
------------ ------------
Net assets at end of period........................................... $ 38,734,858 $ 31,484,300
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS HORIZON FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
The Advantus Horizon Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. On February 14, 1995 shareholders of the Fund
approved a name change to Advantus Horizon Fund, Inc. (effective March 1, 1995).
Prior to March 1, 1995 the Fund was known as MIMLIC Investors Fund I, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 (loss) 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 (loss) or realized gains (losses) were
recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income and decrease additional paid-in capital by
$65,744.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$15,322,690 and $15,105,744, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital).
Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset Management Company
(MIMLIC Management) which, prior to March 1, 1995, served as investment adviser
to the Fund. Under the agreement, Advantus Capital manages the Fund's assets and
provides research, statistical and advisory services and pays related office
rental and executive expenses and salaries. In addition, as part of the advisory
fee, Advantus Capital pays the expenses of the Fund's transfer, dividend
disbursing and redemption agent (The Minnesota Mutual Life Insurance Company
(Minnesota Mutual), the parent of MIMLIC Management). The fee for investment
management and advisory services is based on the average daily net assets of the
Fund at the annual rate of .80 percent, which is the same as under the old
agreement with MIMLIC Management.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and a wholly-owned subsidiary of
MIMLIC
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Management, to be used to pay certain expenses incurred in the distribution,
promotion and servicing of the Fund's shares. The Class A Plan provides for a
fee up to .30 percent of average daily net assets of Class A shares. The Class B
and Class C Plans provide for a fee up to 1.00 percent of average daily net
assets of Class B and Class C shares, respectively. The Class B and Class C 1.00
percent fee is comprised of a .75 percent distribution fee and a .25 percent
service fee. MIMLIC Sales is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.15 percent. MIMLIC Sales waived Class A distribution fees in the amount of
$50,147 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,450 per month. Effective February 1, 1995, the administrative service fee is
$3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital voluntarily
agreed to absorb $2,814 in expenses that were otherwise payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $125,141.
As of September 30, 1995, Minnesota Mutual Life and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A..................................................................... 535,417 31.1%
Class B..................................................................... 3,025 2.4%
Class C..................................................................... 569 11.5%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $5,588.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from November 1, 1993 to September 30, 1994 for Class A shares, the year ended
September 30, 1995 and the period from August 19, 1994 to September 30, 1994 for
Class B shares and the period from March 1, 1995 to September 30, 1995 for Class
C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- -------------------- -----------
1995 1994 1995 1994 1995
---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold........................................................... 209,657 290,469 119,911 5,594 5,001
Issued for reinvested distributions............................ 59,591 53,235 1,084 -- --
Redeemed....................................................... (358,505) (234,962) (1,621) (1) (52)
---------- ---------- --------- --------- -----
(89,257) 108,742 119,374 5,593 4,949
---------- ---------- --------- --------- -----
---------- ---------- --------- --------- -----
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) 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
NOVEMBER 1,
YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31,
SEPTEMBER SEPTEMBER -------------------------
30, 1995 30, 1994 1993 1992 1991
----------- ----------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 17.34 $ 17.64 $ 16.73 $15.65 $11.41
----------- ----------- ------- ------ ------
Income from investment
operations:
Net investment income
(loss)..................... (.03) -- .05 .10 .17
Net gains or losses on
securities (both realized
and unrealized)............ 4.17 .25 1.20 1.47 4.25
----------- ----------- ------- ------ ------
Total from investment
operations............... 4.14 .25 1.25 1.57 4.42
----------- ----------- ------- ------ ------
Less distributions:
Dividends from net
investment income.......... -- -- (.05) (.12) (.18)
Distributions from capital
gains...................... (.54) (.55) (.29) (.37) --
----------- ----------- ------- ------ ------
Total distributions....... (.54) (.55) (.34) (.49) (.18)
----------- ----------- ------- ------ ------
Net asset value, end of
period...................... $ 20.94 $ 17.34 $ 17.64 $16.73 $15.65
----------- ----------- ------- ------ ------
----------- ----------- ------- ------ ------
Total return (b).............. 24.8% 1.4%(c) 7.6% 10.3% 38.9%
Net assets, end of period (in
thousands).................. $36,040 $31,387 $30,015 $24,919 $17,608
Ratio of expenses to average
daily net assets (g)........ 1.41% 1.43%(f) 1.31% 1.40% 1.36%
Ratio of net investment income
(loss) to average daily net
assets (g).................. (.15)% (.01)%(f) .27% .61% 1.20%
Portfolio turnover rate
(excluding short-term
securities)................. 46.8% 43.5% 47.0% 20.6% 16.9%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the
period and assumes reinvestment of distributions at net asset value. Total
return figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from November 1, 1993 to
September 30, 1994.
(d) Total return is presented for the period from August 19, 1994,
commencement of operations, to September 30, 1994.
(e) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(f) Adjusted to an annual basis.
(g) The Fund's Adviser and Distributor voluntarily waived or absorbed $52,961,
$51,147, $48,807, $32,341 and $22,098 in expenses for the year ended
September 30, 1995, the period ended September 30, 1994, and the years
ended October 31, 1993, 1992 and 1991, respectively. If Class A shares had
been charged for these expenses, the ratio of expenses to average daily
net assets would have been 1.57%, 1.61%, 1.49%, 1.55% and 1.54%,
respectively, and the ratio of net investment income to average daily net
assets would have been (.31)%, (.19)%, .09%, .46% and 1.02%, respectively.
If Class B shares had been charged for these expenses, the ratio of
expenses to average daily net assets would have been 2.25% and the ratio
of net investment loss to average daily net assets would have been (1.05)%
for the year ended September 30, 1995. If Class C Shares had been charged
for these expenses, the ratio of expenses to average daily net assets
would have been 2.25% and the ratio of net investment loss to average
daily net assets would have been (1.13)% for the period from March 1, 1995
to September 30, 1995.
(h) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------- ---------------
PERIOD FROM PERIOD FROM
AUGUST 19, MARCH 1,
YEAR ENDED 1994(A) TO 1995(A) TO
SEPTEMBER SEPTEMBER SEPTEMBER 30,
30, 1995 30, 1994 1995
----------- ----------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of
period...................... $ 17.33 $ 17.11 $ 17.52
----------- ----------- ---------------
Income from investment
operations:
Net investment income
(loss)..................... (0.10) (.01) (.06)
Net gains or losses on
securities (both realized
and unrealized)............ 4.05 .23 3.29
----------- ----------- ---------------
Total from investment
operations............... 3.95 .22 3.23
----------- ----------- ---------------
Less distributions:
Dividends from net
investment income.......... -- -- --
Distributions from capital
gains...................... (.54) -- --
----------- ----------- ---------------
Total distributions....... (.54) -- --
----------- ----------- ---------------
Net asset value, end of
period...................... $ 20.74 $ 17.33 $ 20.75
----------- ----------- ---------------
----------- ----------- ---------------
Total return (b).............. 23.7% 1.3%(d) 18.4%(e)
Net assets, end of period (in
thousands).................. $2,592 $97 $103
Ratio of expenses to average
daily net assets (g)........ 2.24% .30%(h) 2.24%(f)
Ratio of net investment income
(loss) to average daily net
assets (g).................. (1.05)% (.13)%(h) (1.13)%(f)
Portfolio turnover rate
(excluding short-term
securities)................. 46.8% 43.5% 46.8%
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Spectrum Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Spectrum
Fund, Inc. (the Fund) as of September 30, 1995 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended September 30, 1995 and the period from November 1, 1993 to
September 30, 1994 and the financial highlights for the year ended September 30,
1995, the period from November 1, 1993 to September 30, 1994 and each of the
years in the three-year period ended October 31, 1993. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
22
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ -------------
<C> <S> <C>
COMMON STOCKS (56.1%)
CAPITAL GOODS (5.9%)
Machinery (5.9%)
21,248 Case Corporation....................................... $ 780,864
16,626 General Electric Company............................... 1,059,908
5,640 Kaydon Corporation..................................... 166,380
21,700 Sensormatic Electronics Corporation.................... 499,100
6,600 United Waste Systems, Inc. (b)......................... 275,550
16,686 York International Corp. .............................. 702,898
-------------
3,484,700
-------------
CONSUMER GOODS AND SERVICES (20.6%)
Consumer Goods (11.8%)
9,921 Colgate-Palmolive Company.............................. 660,987
21,627 Columbia/HCA Healthcare Corporation.................... 1,051,613
11,540 Fisher Scientific International Inc. .................. 373,607
16,600 Gillette Company....................................... 790,575
14,104 Pepsico, Inc. ......................................... 719,304
20,820 Pfizer Inc. ........................................... 1,111,267
9,895 Procter & Gamble Company............................... 761,915
28,800 Pyxis Corporation (b).................................. 558,000
10,200 Teva Pharmaceutical Industries ADR (c)................. 368,475
20,400 Value Health Incorporated (b).......................... 540,600
-------------
6,936,343
-------------
Consumer Services (2.5%)
13,833 CUC International Inc. (b)............................. 482,426
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ -------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
11,569 GTECH Holdings Corporation (b)......................... $ 348,516
23,118 Manpower............................................... 670,422
-------------
1,501,364
-------------
Retail (4.8%)
17,200 Heilig-Meyers Corporation.............................. 399,900
18,520 Home Depot Inc. ....................................... 738,485
11,800 Kohl's Inc. (b)........................................ 612,125
20,976 Office Depot, Inc. (b)................................. 631,902
11,900 Sears, Roebuck and Co. ................................ 438,812
-------------
2,821,224
-------------
Consumer Cyclicals (1.5%)
11,289 Exide Corporation...................................... 564,450
9,000 Tommy Hilfiger Corporation (b)......................... 292,500
-------------
856,950
-------------
CREDIT SENSITIVE (11.3%)
Finance (10.1%)
16,300 American Express Company............................... 723,313
9,167 American International Group, Inc...................... 779,195
10,650 Federal Home Loan Mortgage Corporation................. 736,181
10,110 First Data Corp. ...................................... 626,820
8,300 First Financial Management............................. 810,288
11,400 MBIA Inc. ............................................. 803,700
13,200 MGIC Investment Corporation............................ 755,700
23,300 Norwest Corporation.................................... 763,075
-------------
5,998,272
-------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ -------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
Utilities (1.2%)
7,255 Florida Progress Corporation........................... $ 234,880
12,100 New England Electric System............................ 447,700
-------------
682,580
-------------
INTERMEDIATE GOODS AND SERVICES (18.3%)
Energy (3.3%)
5,350 Amoco Corporation...................................... 343,069
11,100 Columbia Gas System, Inc. (b).......................... 428,738
5,330 Mobil Corporation...................................... 531,001
5,130 Royal Dutch Petroleum ADR (c).......................... 629,708
-------------
1,932,516
-------------
Materials (3.1%)
6,500 Dow Chemical Company................................... 484,250
16,190 Lubrizol Corporation................................... 528,199
30,700 Praxair Inc. .......................................... 821,225
-------------
1,833,674
-------------
Transportation (1.9%)
5,200 Fritz Companies (b).................................... 383,175
14,200 Landstar System, Inc. (b).............................. 342,575
5,315 Norfolk Southern Corporation........................... 397,296
-------------
1,123,046
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ -------------
<C> <S> <C>
TECHNOLOGY (10.0%)
1,200 C-Cube Microsystems Incorporated (b)................... $ 54,900
18,858 Computer Associates International...................... 796,751
21,100 Danka Business Systems PLC (c)......................... 759,600
8,760 DSC Communications (b)................................. 519,030
27,200 EMC Corporation (b).................................... 493,000
18,100 Equifax Incorporated................................... 757,937
8,900 Fore Systems Inc. (b).................................. 329,300
14,940 Informix Corporation (b)............................... 485,550
8,113 Intel.................................................. 487,794
13,265 Oracle Corporation (b)................................. 509,044
10,000 Worldcom, Incorporated (b)............................. 321,250
8,100 3 Com (b).............................................. 368,550
-------------
5,882,706
-------------
Total common stocks (cost: $27,681,596)................ 33,053,375
-------------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (40.3%)
GOVERNMENT OBLIGATIONS (21.5%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (18.6%)
U.S. Treasury (10.6%)
$ 1,300,000 U.S. Treasury Bond..................................... 12.000% 08/15/13 $ 1,918,313
1,050,000 U.S. Treasury Bond..................................... 8.000% 11/15/21 1,222,920
1,250,000 U.S. Treasury Note..................................... 10.750% 08/15/05 1,655,076
600,000 U.S. Treasury Note..................................... 8.875% 11/15/98 649,500
750,000 U.S. Treasury Note..................................... 7.750% 11/30/99 797,344
------------
6,243,153
------------
Government National Mortgage Association (4.0%)
453,606 ....................................................... 7.500% 10/15/23 457,697
711,738 ....................................................... 8.000% 08/15/24 731,196
488,959 ....................................................... 6.500% 11/15/23 472,251
229,263 ....................................................... 7.500% 02/15/24 231,214
480,033 ....................................................... 7.500% 06/15/24 484,117
------------
2,376,475
------------
Other U.S. Government Agencies (3.9%)
71,609 Federal National Mortgage Association Principal only
PAC (d)............................................... 7.000% 07/25/22 71,132
500,000 Federal Home Loan Mortgage............................. 7.030% 04/05/04 503,168
1,250,000 Federal Home Loan Bank................................. 7.270% 10/17/97 1,250,651
500,000 Federal Farm Credit.................................... 6.960% 06/06/00 502,102
------------
2,327,053
------------
OTHER GOVERNMENT OBLIGATIONS (1.3%)
800,000 Quebec Province of Canada (c).......................... 7.500% 07/15/23 789,744
------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.6%)
924,000 Wyoming Community Development Authority................ 6.850% 06/01/10 910,140
------------
Total government obligations (cost: $12,487,571).................................. 12,646,565
------------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS (18.8%)
CAPITAL GOODS (2.4%)
Machinery (1.4%)
$ 750,000 Joy Technologies Incorporated.......................... 10.250% 09/01/03 $ 840,000
------------
Paper and Forest Products (1.0%)
500,000 Bowater Incorporated................................... 9.000% 08/01/09 584,452
------------
CONSUMER CYCLICAL (.9%)
Automotive (.9%)
500,000 Chrysler Corporation................................... 10.950% 08/01/17 559,019
------------
CONSUMER STAPLES (5.1%)
Drugs (1.4%)
850,000 American Home Products................................. 6.500% 10/15/02 845,716
------------
Entertainment (.9%)
500,000 Royal Caribbean Cruises Limited Notes.................. 8.250% 04/01/05 528,990
------------
Food (.6%)
342,857 General Mills Inc. .................................... 6.235% 03/15/97 344,354
------------
Media (2.2%)
500,000 News Corporation Limited............................... 7.750% 01/20/24 487,865
750,000 Time Warner Incorporated............................... 9.150% 02/01/23 811,916
------------
1,299,781
------------
ENERGY (1.8%)
Natural Gas Distribution (1.8%)
1,000,000 Consolidated Natural Gas............................... 8.750% 06/01/99 1,076,743
------------
FINANCIAL (5.5%)
Consumer Finance (4.3%)
900,000 Associates Corp of North America....................... 6.750% 10/15/99 910,148
250,000 Ford Motor Credit (e).................................. 5.340% 03/18/99 246,092
600,000 Ford Motor Credit...................................... 5.625% 12/15/98 587,886
500,000 GMAC................................................... 5.500% 12/15/01 467,625
300,000 Standard Credit Card Master Trust Series 95-5 A (e).... 6.340% 05/08/00 300,188
------------
2,511,939
------------
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ ------------
<C> <S> <C> <C> <C>
Real Estate (1.2%)
$ 500,000 Property Trust of America.............................. 7.500% 02/15/14 $ 473,850
250,000 Security Capital Industrial Trust Notes................ 7.875% 05/15/09 253,528
------------
727,378
------------
UTILITIES (.9%)
Electric (.9%)
500,000 Commonwealth Edison.................................... 8.250% 12/01/07 511,327
------------
TRANSPORTATION (2.2%)
Trucking (.9%)
500,000 Consolidated Freightways (f)........................... 7.350% 06/01/05 499,672
------------
Water Transportation (1.3%)
750,000 Overseas Shipholders................................... 8.750% 12/01/13 780,510
------------
Total corporate obligations (cost: $10,931,682)................................... 11,109,881
------------
Total long-term debt securities (cost: $23,419,253)............................... 23,756,446
------------
SHORT-TERM SECURITIES (3.5%)
650,000 Federal National Mortgage Association Discount Note.... 5.79% 12/15/95 642,048
100,000 U.S. Treasury Bill..................................... 5.46% 11/16/95 99,289
100,000 U.S. Treasury Bill..................................... 5.44% 12/07/95 98,982
1,200,000 Public Service Electric & Gas CP....................... 5.88% 10/26/95 1,194,825
------------
Total short-term securities (cost: $2,035,644).................................... 2,035,144
------------
Total investments in securities (cost: $53,136,493) (g)........................... $ 58,844,965
------------
------------
</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 4.3% of net assets in foreign securities as of September 30,
1995.
(d) Represents a debt security that entitles holders to receive only principal
payments on the underlying mortgages. The yield to maturity of a
principal-only security is sensitive to the rate of principal payments on
the underlying mortgage assets. A slower (more rapid) than expected rate of
principal repayments may have an adverse (positive) effect on yield to
matury. Interest rate disclosed represents current yield based upon the
current cost basis and estimated timing of future cash flows.
(e) Represents a debt security with a variable rate. The interest rate disclosed
is the rate in effect at September 30, 1995.
(f) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1995, the value of these securities amounted to $499,672 or .8% of net
assets.
(g) At September 30, 1995 the cost of securities for federal income tax purposes
was $53,198,742. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation..................... $6,295,678
Gross unrealized depreciation..................... (649,455)
----------
Net unrealized appreciation....................... $5,646,223
----------
----------
</TABLE>
12
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for
detailed listing (identified cost: $53,136,493)................................ $58,844,965
Cash in bank on demand deposit.................................................. 711,885
Receivable for Fund shares sold................................................. 125,583
Receivable for investment securities sold....................................... 321,204
Accrued interest and dividends receivable....................................... 501,698
-----------
Total assets................................................................ 60,505,335
-----------
LIABILITIES
Payable for investment securities purchased..................................... 1,312,320
Payable for Fund shares repurchased............................................. 169,648
Payable to Adviser.............................................................. 68,931
-----------
Total liabilities........................................................... 1,550,899
-----------
Net assets applicable to outstanding capital stock.............................. $58,954,436
-----------
-----------
Represented by:
Capital stock--$.01 par value (note 1)........................................ $ 39,857
Additional paid-in capital.................................................... 50,213,775
Undistributed net investment income........................................... 13,258
Accumulated net realized gains from investments............................... 2,979,074
Unrealized appreciation of investments........................................ 5,708,472
-----------
Total--representing net assets applicable to outstanding capital stock...... $58,954,436
-----------
-----------
Net assets applicable to outstanding Class A shares............................. $55,624,248
-----------
-----------
Net assets applicable to outstanding Class B shares............................. $ 3,131,262
-----------
-----------
Net assets applicable to outstanding Class C shares............................. $ 198,926
-----------
-----------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 3,759,787......................................... $ 14.79
-----------
-----------
Class B--Shares outstanding 212,378........................................... $ 14.74
-----------
-----------
Class C--Shares outstanding 13,498............................................ $ 14.74
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest...................................................................... $2,205,188
Dividends..................................................................... 361,169
----------
2,566,357
----------
Expenses (note 4):
Investment advisory fee....................................................... 338,669
Distribution fees--Class A.................................................... 193,254
Distribution fees--Class B.................................................... 11,904
Distribution fees--Class C.................................................... 389
Administrative services fee................................................... 39,600
Custodian fees................................................................ 17,848
Auditing and accounting services.............................................. 31,850
Legal fees.................................................................... 5,264
Directors' fees............................................................... 1,276
Registration fees............................................................. 38,732
Printing and shareholder reports.............................................. 36,391
Insurance..................................................................... 6,087
Other......................................................................... 39,919
----------
Total expenses.............................................................. 760,183
----------
Investment income--net...................................................... 1,806,174
----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3).................................... 3,056,132
Net change in unrealized appreciation or depreciation on investments.......... 4,774,991
----------
Net gains on investments.................................................... 7,831,123
----------
Net increase in net assets resulting from operations............................ $9,637,297
----------
----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Investment income--net.............................................. $ 1,806,174 $ 1,160,613
Net realized gains on investments................................... 3,056,132 1,523,789
Net change in unrealized appreciation or depreciation of
investments........................................................ 4,774,991 (3,810,302)
----------- -----------
Increase (decrease) in net assets resulting from operations....... 9,637,297 (1,125,900)
----------- -----------
Distributions to shareholders from:
Investment income--net:
Class A........................................................... (1,755,964) (1,170,626)
Class B........................................................... (40,461) (982)
Class C........................................................... (1,580) --
Net realized gains on investments:
Class A........................................................... (1,538,743) (386,851)
Class B........................................................... (10,795) --
----------- -----------
Total distributions............................................... (3,367,543) (1,558,459)
----------- -----------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A........................................................... 5,987,210 9,665,718
Class B........................................................... 2,799,440 140,000
Class C........................................................... 199,159 --
Shares issued as a result of reinvested dividends:
Class A........................................................... 3,022,573 1,351,297
Class B........................................................... 49,410 982
Class C........................................................... 1,482 --
Payments for redemption of shares:
Class A........................................................... (14,784,420) (10,096,669)
Class B........................................................... (28,143) --
Class C........................................................... (7,348) --
----------- -----------
Increase (decrease) in net assets from capital share
transactions..................................................... (2,760,637) 1,061,328
----------- -----------
Total increase (decrease) in net assets........................... 3,529,117 (1,623,031)
Net assets at beginning of period..................................... 55,425,319 57,048,350
----------- -----------
Net assets at end of period (including undistributed net investment
income of $13,258 and $5,089, respectively).......................... $58,954,436 $55,425,319
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
The Advantus Spectrum Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. On February 14, 1995 shareholders of the Fund
approved a name change to Advantus Spectrum Fund, Inc. (effective March 1,
1995). Prior to March 1, 1995 the Fund was known as MIMLIC Asset Allocation
Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees and sales charges charged differs between Class A, Class B and
Class C shares. Income, expenses (other than distribution fees) and realized and
unrealized gains or losses on investments are allocated to each class of shares
based upon its relative net assets.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
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.
16
<PAGE>
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 (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 year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$66,388,532 and $70,284,259, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital).
Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset Management Company
(MIMLIC Management) which, prior to March 1, 1995, served as investment adviser
to the Fund. Under the agreement, Advantus Capital manages the Fund's assets and
provides research, statistical and advisory services and pays related office
rental and executive expenses and salaries. In addition, as part of the advisory
fee, Advantus Capital pays the expenses of the Fund's transfer, dividend
disbursing and redemption agent (The Minnesota Mutual Life Insurance Company
(Minnesota Mutual), the parent of MIMLIC Management). The fee for investment
management and advisory services is based on the average daily net assets of the
Fund at the annual rate of .60 percent, which is the same as under the old
agreement with MIMLIC Management.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and a 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 .35 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.
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, and other miscellaneous
expenses.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,450 per month. Effective February 1, 1995, the administrative service fee is
$3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $226,547.
As of September 30, 1995, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -----------------------
<S> <C> <C>
Class A........................................................... 225,226 6.0%
Class B........................................................... 3,994 1.9%
Class C........................................................... 764 5.7%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $4,879.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from November 1, 1993 to September 30, 1994 for Class A shares, the year ended
September 30, 1995 and the period from August 19, 1994 to September 30, 1994 for
Class B shares and the period from March 1, 1995 to September 30, 1995 for Class
C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------- -------------------- -----------
1995 1994 1995 1994 1995
----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold.............................................. 440,376 712,411 200,130 10,452 13,907
Issued for reinvested distributions............... 228,395 100,454 3,579 74 103
Redeemed.......................................... (1,073,619) (747,207) (1,857) -- (512)
----------- ---------- --------- --------- -----------
(404,848) 65,658 201,852 10,526 13,498
----------- ---------- --------- --------- -----------
----------- ---------- --------- --------- -----------
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
6) RESTRICTED SECURITIES
At September 30, 1995, investments in securities includes an issue which
generally cannot be offered for sale to the public without first being
registered under the Securities Act of 1933 (restricted security). In the event
the securities are registered, those carrying registration rights allow for the
issuer to bear all the related costs; for issues without rights, the Fund may
incur such costs. The Fund currently limits investments in securities that are
not readily marketable, including restricted securities, to 10% of net assets at
the time of the purchase. Securities are valued by procedures described in note
2. The aggregate value of restricted securities held by the Fund at September
30, 1995 was $499,672 which represents .8% of net assets.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
PERIOD FROM
NOVEMBER 1,
YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------------------------
1995 1994 1993 1992 1991
--------------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 13.28 $ 13.92 $ 13.63 $ 13.05 $ 10.87
------- ------- ------ ------ ------
Income from investment
operations:
Net investment income....... .45 .28 .29 .38 .48
Net gains or losses on
securities (both realized
and unrealized)............ 1.88 (.55) .86 1.01 2.28
------- ------- ------ ------ ------
Total from investment
operations............... 2.33 (.27) 1.15 1.39 2.76
------- ------- ------ ------ ------
Less distributions:
Dividends from net
investment income.......... (.44) (.28) (.31) (.38) (.51)
Distributions from capital
gains...................... (.38) (.09) (.55) (.43) (.07)
------- ------- ------ ------ ------
Total distributions....... (.82) (.37) (.86) (.81) (.58)
------- ------- ------ ------ ------
Net asset value, end of
period....................... $ 14.79 $ 13.28 $ 13.92 $ 13.63 $ 13.05
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Total return (b).............. 18.4% (1.9)%(c) 8.7% 11.1% 26.0%
Net assets, end of period (in
thousands)................... $55,624 $55,286 $57,048 $38,417 $18,588
Ratio of expenses to average
daily net assets............. 1.33% 1.27%(f) 1.22% 1.35%(g) 1.35%(g)
Ratio of net investment income
to average daily net
assets....................... 3.22% 2.24%(f) 2.16% 3.02%(g) 4.07%(g)
Portfolio turnover rate
(excluding short-term
securities).................. 125.5% 124.5% 92.1% 123.3% 56.2%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(d) Total return is presented for the period from August 19, 1994, commencement
of operations, to September 30, 1994.
(e) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(f) Adjusted to an annual basis.
(g) The Fund's Adviser voluntarily absorbed $13,585 and $19,759 in expenses for
the years ended October 31, 1992 and 1991 respectively. If Class A shares
had been charged for these expenses, the ratio of expenses to average daily
net assets would have been 1.40% and 1.50% respectively, and the ratio of
net investment income to average daily net assets would have been 2.97% and
3.92%, respectively.
(h) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------- --------------
PERIOD FROM PERIOD FROM
AUGUST 19, MARCH 1,
YEAR ENDED 1994(A) TO 1995(A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of
period...................... $ 13.27 $ 13.36 $ 13.36
------ ------ ------
Income from investment
operations:
Net investment income....... .39 .03 .24
Net gains or losses on
securities (both realized
and unrealized)............ 1.84 (.03) 1.43
------ ------ ------
Total from investment
operations............... 2.23 -- 1.67
------ ------ ------
Less distributions:
Dividends from net
investment income.......... (.38) (.09) (.29)
Distributions from capital
gains...................... (.38) -- --
------ ------ ------
Total distributions....... (.76) (.09) (.29)
------ ------ ------
Net asset value, end of
period...................... $ 14.74 $ 13.27 $ 14.74
------ ------ ------
------ ------ ------
Total return (b).............. 17.6% (.04)%(d) 12.6%(e)
Net assets, end of period (in
thousands).................. $3,131 $ 140 $ 199
Ratio of expenses to average
daily net assets............ 1.99% .23%(h) 2.00%(f)
Ratio of net investment income
to average daily net
assets...................... 2.30% .37%(h) 2.17%(f)
Portfolio turnover rate
(excluding short-term
securities)................. 125.5% 124.5% 125.5%
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Mortgage Securities Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Mortgage
Securities Fund, Inc. (the Fund) as of September 30, 1995 and the related
statement of operations for the year then ended, the statement of changes in net
assets for the year ended September 30, 1995 and the period from November 1,
1993 to September 30, 1994 and the financial highlights for the year ended
September 30, 1995, the period from November 1, 1993 to September 30, 1994 and
each of the years in the three-year period ended October 31, 1993. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
19
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (98.3%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (75.3%)
Federal Home Loan Mortgage Corporation (12.4%)
$ 207,512 CMO Series L, Class 5....................................... 7.900% 05/01/01 $ 211,532
445,524 Bi-weekly................................................... 7.000% 12/01/22 441,095
740,122 Bi-weekly................................................... 6.500% 12/01/23 716,682
1,000,000 20 Year Gold................................................ 6.500% 07/01/13 974,259
1,000,000 Targeted Amortization Class CMO, Series 1640, Class B....... 6.500% 12/15/08 975,720
-----------
3,319,288
-----------
Federal National Mortgage Association (11.3%)
1,085,352 Bi-weekly................................................... 6.000% 07/01/07 1,051,933
1,400,000 CMO Sequential Payer, Series G92-45, Class D................ 6.000% 04/25/19 1,346,630
568,000 CMO PAC Targeted Amortization Class, Series G93-11, Class
H.......................................................... 6.000% 12/25/08 549,185
72,147 Principal only PAC, Series G93-28, Class A (b).............. 7.000% 07/25/22 71,667
-----------
3,019,415
-----------
Government National Mortgage Association (27.0%)
402,203 ............................................................ 8.000% 12/15/15 413,967
567,416 ............................................................ 8.000% 03/15/16 583,905
342,089 ............................................................ 8.000% 07/15/16 352,029
300,000 (e)......................................................... 8.000% 12/01/17 308,437
250,000 (e)......................................................... 7.000% 05/15/24 246,874
598,390 ............................................................ 7.000% 09/15/16 596,702
152,640 ............................................................ 7.000% 09/15/16 152,209
401,997 ............................................................ 7.500% 05/15/17 407,271
321,586 ............................................................ 7.500% 03/15/17 325,805
378,267 ............................................................ 7.000% 05/15/17 376,939
295,506 ............................................................ 7.000% 05/15/17 294,469
354,580 ............................................................ 7.000% 12/15/16 353,580
407,647 ............................................................ 7.000% 04/15/17 406,216
337,641 ............................................................ 7.000% 04/15/17 336,456
91,339 ............................................................ 7.000% 02/15/17 91,018
401,523 ............................................................ 7.000% 04/15/17 400,113
399,719 ............................................................ 7.000% 10/15/17 398,315
459,045 ............................................................ 7.000% 10/15/17 457,434
234,735 GNMA II..................................................... 9.000% 08/20/16 247,059
215,548 GNMA II..................................................... 9.000% 05/20/16 225,885
225,477 GNMA II..................................................... 9.000% 06/20/16 236,291
-----------
7,210,974
-----------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
Other U.S. Government Agency Obligations (24.6%)
$1,134,082 Vendee Mortgage Trust, Series 1994-2, Class 2 (c)........... 8.447% 05/15/24 $ 1,186,888
740,191 Vendee Mortgage Trust, Series 1995-1A, Class 1 (c).......... 7.207% 02/15/25 729,782
1,038,009 Vendee Mortgage Trust, Series 1995-1B, Class 2 (c).......... 7.793% 02/15/25 1,064,283
1,486,053 Vendee Mortgage Trust, Series 1995-2C, Class 3A (c)......... 8.793% 06/15/25 1,580,324
1,000,000 Vendee Mortgage Trust, Series 1995-3, Class 1C (c).......... 7.250% 07/15/14 1,012,813
1,000,000 Vendee Mortgage Trust, Series 1995-3, Class 1D (c).......... 7.250% 07/15/16 1,001,875
-----------
6,575,965
-----------
Total U.S. government and agencies obligations (cost: $19,644,821)............ 20,125,642
-----------
OTHER MORTGAGE-BACKED SECURITIES (23.0%)
1,302,883 Collaterized Mortgage Obligation Trust, Sequential Accrual,
Z Tranche, Series 14, Class Z (d).......................... 8.000% 01/01/17 1,325,435
1,000,000 CSFB Financial Corporation Senior Performance Note Mortgage
Revenue Series 1995-A, Class A (f)......................... 7.000% 11/15/05 1,000,938
115,244 FBC Mortgage Securities Trust 8, Series A, Class A.......... 5.000% 10/01/16 112,289
284,526 Green Tree Finance Company Limited Net Interest Margin
Trust, Series 1995-A, Class A.............................. 7.250% 07/15/05 284,518
1,041,946 International Capital Markets Acceptance Corporation (f).... 8.250% 09/01/15 1,050,412
304,793 Morgan Stanley Mortgage Trust CMO, Sequential Payer, Series
W, Class 5................................................. 9.050% 05/01/18 316,037
621,085 Salomon Brothers Mortgage Securities VI CMO, Sequential
Payer, Series 1986-1, Class A.............................. 6.000% 12/25/11 600,900
1,479,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 1,456,814
-----------
Total other mortgage-backed securities (cost: $5,834,639)..................... 6,147,343
-----------
Total long-term debt securities (cost: $25,479,460)........................... 26,272,985
-----------
SHORT-TERM SECURITIES (2.0%)
550,000 U.S. Treasury Bill.......................................... 5.42% 12/07/95 544,392
-----------
Total short-term securities (cost: $544,503).................................. 544,392
-----------
Total investments in securities (cost: $26,023,963) (g)....................... $26,817,377
-----------
-----------
<FN>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Represents a debt security that entitles holders to receive only principal
payments on the underlying mortgages. The yield to maturity of a
principal-only security is sensitive to the rate of principal payments on
the underlying mortgage assets. A slower (more rapid) than expected rate of
principal repayments may have an adverse (positive) effect on yield to
maturity. Interest rate disclosed represents current yield based upon the
current cost basis and estimated timing of future cash flows.
(c) Represents a debt security with a weighted average net pass-through rate
which varies based on the pool of underlying collateral. The rate disclosed
is the rate in effect at September 30, 1995.
</TABLE>
8
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<S> <C>
Notes to Investments in Securities - continued
- ----------------------------------------------
(d) Represents a debt security that pays no interest or principal during the
initial accrual period, but accrues additional principal at a specified
rate. Interest rate disclosed represents current yield based upon estimated
timing of future cash flows.
(e) At September 30, 1995 the total cost of investments issued on a when-issued
or forward commitment basis is $555,570.
(f) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1995 the value of these securities amounted to $2,051,350 or 7.7% of net
assets.
(g) At September 30, 1995 the cost of securities for federal income tax
purposes was $26,023,963. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation.................................. $ 828,592
Gross unrealized depreciation.................................. (35,178)
---------
Net unrealized appreciation.................................... $ 793,414
---------
---------
</TABLE>
9
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $26,023,963)............................................. $26,817,377
Cash in bank on demand deposit...................................................... 58,034
Receivable for Fund shares sold..................................................... 2,892
Receivable for investment securities sold........................................... 252,959
Accrued interest receivable......................................................... 243,615
-----------
Total assets.................................................................... 27,374,877
-----------
LIABILITIES
Payable for investment securities purchased......................................... 555,570
Payable for Fund shares repurchased................................................. 65,288
Payable to Adviser.................................................................. 28,390
Dividends payable to shareholders................................................... 3,496
-----------
Total liabilities............................................................... 652,744
-----------
Net assets applicable to outstanding capital stock.................................. $26,722,133
-----------
-----------
Represented by:
Capital stock--$.01 par value (note 1)............................................ $ 25,803
Additional paid-in capital........................................................ 27,405,599
Undistributed net investment income............................................... 51,042
Accumulated net realized loss from investments.................................... (1,553,725)
Unrealized appreciation of investments............................................ 793,414
-----------
Total--representing net assets applicable to outstanding capital stock.......... $26,722,133
-----------
-----------
Net assets applicable to outstanding Class A shares................................. $25,316,583
-----------
-----------
Net assets applicable to outstanding Class B shares................................. $ 1,084,219
-----------
-----------
Net assets applicable to outstanding Class C shares................................. $ 321,331
-----------
-----------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,444,711............................................. $ 10.36
-----------
-----------
Class B--Shares outstanding 104,594............................................... $ 10.37
-----------
-----------
Class C--Shares outstanding 30,995................................................ $ 10.37
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest.......................................................................... $2,035,149
Expenses (note 4):
Investment advisory fee........................................................... 155,798
Distribution fees--Class A........................................................ 79,816
Distribution fees--Class B........................................................ 3,391
Distribution fees--Class C........................................................ 846
Administrative services fee....................................................... 39,200
Custodian fees.................................................................... 9,920
Auditing and accounting services.................................................. 17,550
Legal fees........................................................................ 5,531
Directors' fees................................................................... 618
Registration fees................................................................. 38,784
Printing and shareholder reports.................................................. 19,611
Insurance......................................................................... 5,740
Other............................................................................. 11,411
----------
Total expenses.................................................................. 388,216
Less fees and expenses waived or absorbed:
Class A distribution fees....................................................... (26,473)
Other fund expenses............................................................. (9,655)
----------
Total fees and expenses waived or absorbed.................................... (36,128)
----------
Total net expenses............................................................ 352,088
----------
Investment income--net........................................................ 1,683,061
----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)........................................ 140,686
Net change in unrealized appreciation or depreciation on investments.............. 1,594,464
----------
Net gains on investments........................................................ 1,735,150
----------
Net increase in net assets resulting from operations................................ $3,418,211
----------
----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Investment income--net................................................... $ 1,683,061 $ 1,439,948
Net realized gains (losses) on investments............................... 140,686 (1,694,411)
Net change in unrealized appreciation or depreciation of investments..... 1,594,464 (983,565)
----------- -----------
Increase (decrease) in net assets resulting from operations............ 3,418,211 (1,238,028)
----------- -----------
Distributions to shareholders from:
Investment income--net
Class A................................................................ (1,636,844) (1,437,598)
Class B................................................................ (17,742) (316)
Class C................................................................ (4,382) --
Net realized gains on investments:
Class A................................................................ -- (915,257)
----------- -----------
Total distributions.................................................... (1,658,968) (2,353,171)
----------- -----------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A................................................................ 2,594,530 6,429,016
Class B................................................................ 990,008 60,000
Class C................................................................ 340,021 --
Shares issued as a result of reinvested dividends:
Class A................................................................ 969,887 1,530,031
Class B................................................................ 15,797 316
Class C................................................................ 2,840 --
Payments for redemption of shares:
Class A................................................................ (7,089,593) (4,337,552)
Class B................................................................ (2,536) --
Class C................................................................ (22,144) --
----------- -----------
Increase (decrease) in net assets from capital share transactions...... (2,201,190) 3,681,811
----------- -----------
Total increase (decrease) in net assets................................ (441,947) 90,612
Net assets at beginning of period.......................................... 27,164,080 27,073,468
----------- -----------
Net assets at end of period (including undistributed net investment income
of $51,042 and $26,949, respectively)..................................... $26,722,133 $27,164,080
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
The Advantus Mortgage Securities Fund, Inc. (the Fund) is registered under
the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. On February 14, 1995 shareholders of the Fund
approved a name change to Advantus Mortgage Securities Fund, Inc. (effective
March 1, 1995). Prior to March 1, 1995 the Fund was known as MIMLIC Mortgage
Securities Income Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
period declines as the amount of the purchase increases and ranges from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund on
a forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities are subject to market
fluctuations. As of September 30, 1995, the Fund had entered into outstanding
when-issued or forward commitments of $555,570. The Fund has segregated assets,
with the Fund's custodian, to cover such when-issued and forward commitment
transactions.
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.
For federal income tax purposes, the Fund has a capital loss carryover in
the amount of $1,513,301 which, if not offset by subsequent capital gains, will
expire September 30, 2004. 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 daily and paid monthly in
cash or reinvested in additional shares. Realized gains, if any, are paid
annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$53,904,662 and $55,609,136, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset
Management Company (MIMLIC Management) which, prior to March 1, 1995, served as
investment adviser to the Fund. Under the agreement, Advantus Capital manages
the Fund's assets and provides research, statistical and advisory services and
pays related office rental and executive expenses and salaries. In addition, as
part of the advisory fee, Advantus Capital pays the expenses of the Fund's
transfer, dividend disbursing and redemption agent (The Minnesota Mutual Life
Insurance Company [Minnesota
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Mutual], the parent of MIMLIC Management). The fee for investment management and
advisory services is based on the average daily net assets of the Fund at the
annual rate of .575 percent, which is the same as under the old agreement with
MIMLIC Management.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and a wholly-owned subsidiary of
MIMLIC Management, to be used to pay certain expenses incurred in the
distribution, promotion and servicing of the Fund's shares. The Class A Plan
provides for a fee up to .30 percent of average daily net assets of Class A
shares. The Class B and Class C Plans provide for a fee up to 1.00 percent of
average daily net assets of Class B and Class C shares, respectively. The Class
B and Class C 1.00 percent fee is comprised of a .75 percent distribution fee
and a .25 percent service fee. MIMLIC Sales is currently waiving that portion of
Class A distribution fees which exceeds, as a percentage of average daily net
assets, .20 percent. MIMLIC sales waived Class A distribution fees in the amount
of $26,473 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services and other miscellaneous
expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,600 per month. Effective February 1, 1995, the administrative service fee is
$3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital voluntarily
agreed to absorb $9,655 in expenses that were otherwise payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $97,402.
As of September 30, 1995, Minnesota Mutual and subsidiaries, and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
---------------- ----------------
<S> <C> <C>
Class A................................... 395,290 16.2%
Class B................................... 5,386 5.2%
Class C................................... 1,045 3.4%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $5,147.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from November 1, 1993 to September 30, 1994 for Class A shares, the year ended
September 30, 1995 and the period from August 19, 1994 to September 30, 1994 for
Class B shares and the period from March 1, 1995 to September 30, 1995 for Class
C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------ ------------- -------
1995 1994 1995 1994 1995
-------- -------- ------ ----- -------
<S> <C> <C> <C> <C> <C>
Sold......................................... 259,523 622,858 97,026 6,099 32,851
Issued for reinvested distributions.......... 97,409 148,532 1,653 32 276
Redeemed..................................... (704,962) (426,991) (216) -- (2,132)
-------- -------- ------ ----- -------
(348,030) 344,399 98,463 6,131 30,995
-------- -------- ------ ----- -------
-------- -------- ------ ----- -------
</TABLE>
(6) RESTRICTED SECURITIES
At September 30, 1995, investments in securities includes issues which
generally cannot be offered for sale to the public without first being
registered under the Securities Act of 1933 (restricted security). In the event
the securities are registered, those carrying registration rights allow for the
issuer to bear all the related costs; for issues without rights, the Fund may
incur such costs. The Fund currently limits investments in securities that are
not readily marketable, including restricted securities, to 10% of net assets at
the time of the purchase. Securities are valued by procedures described in note
2. The aggregate value of restricted securities held by the Fund at September
30, 1995 was $2,051,350 which represents 7.7% of net assets.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
PERIOD FROM
NOVEMBER 1,
YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31,
SEPTEMBER SEPTEMBER 30, -----------------------------
30, 1995 1994 1993 1992 1991
----------- -------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.70 $ 11.06 $ 10.94 $ 10.8 $ 10.04
Income from investment operations:
Net investment income........................... .62 .53 .63 .71 .79
Net gains or losses on securities (both realized
and unrealized)................................ .65 (.99) .55 .15 .76
----------- ------ ------- ------- -------
Total from investment operations.............. 1.27 (.46) 1.18 .86 1.55
----------- ------ ------- ------- -------
Less distributions:
Dividends from net investment income............ (.61) (.53) (.63) (.72) (.79)
Distributions from capital gains................ -- (.37) (.43) -- --
----------- ------ ------- ------- -------
Total distributions........................... (.61) (.90) (1.06) (.72) (.79)
----------- ------ ------- ------- -------
Net asset value, end of period.................... $10.36 $9.70 $11.06 $10.94 $10.80
----------- ------ ------- ------- -------
----------- ------ ------- ------- -------
Total return (a).................................. 13.5% (4.3)%(b) 11.4% 8.2% 16.0%
Net assets, end of period (in thousands).......... $25,317 $27,105 $27,073 $20,996 $16,554
Ratio of expenses to average daily net assets
(d).............................................. 1.29% 1.24%(c) 1.17% 1.25% 1.18%
Ratio of net investment income to average daily
net assets (d)................................... 6.23% 5.73%(c) 5.77% 6.56% 7.64%
Portfolio turnover rate (excluding short-term
securities)...................................... 203.7% 236.2% 135.0% 137.3% 48.4%
</TABLE>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(b) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(c) Adjusted to an annual basis.
(d) The Fund's Adviser and Distributor voluntarily waived or absorbed $36,128,
$43,505, $34,773, $21,104 and $11,682 in expenses for the year ended
September 30, 1995, the period ended September 30, 1994, and the years ended
October 31, 1993, 1992 and 1991, respectively. If Class A shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 1.42%, 1.41%, 1.31%, 1.36% and 1.29%, respectively,
and the ratio of net investment income to average daily net assets would
have been 6.10%, 5.56%, 5.63%, 6.45% and 7.53%, respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------- ------------
PERIOD FROM PERIOD FROM
AUGUST 19, MARCH 1,
YEAR ENDED 1994 (A) TO 1995 (A) TO
SEPTEMBER SEPTEMBER 30, SEPTEMBER
30, 1995 1994 30, 1995
------------ -------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $ 9.70 $ 9.83 $ 9.90
Income from investment operations:
Net investment income........................................... .53 .06 .31
Net gains or losses on securities (both realized and
unrealized).................................................... .67 (.13) .47
------ ----- ------
Total from investment operations.............................. 1.20 (.07) .78
------ ----- ------
Less distributions:
Dividends from net investment income............................ (.53) (.06) (.31)
Distributions from capital gains................................ -- -- --
------ ----- ------
Total distributions........................................... (.53) (.06) (.31)
------ ----- ------
Net asset value, end of period.................................... $10.37 $9.70 $10.37
------ ----- ------
------ ----- ------
Total return (b).................................................. 12.7% (.7)%(c) 7.9%(d)
Net assets, end of period (in thousands).......................... $1,084 $60 $321
Ratio of expenses to average daily net assets (f)................. 2.05% .28%(g) 2.05%(e)
Ratio of net investment income to average daily net assets (f).... 5.32% .60%(g) 5.26%(e)
Portfolio turnover rate (excluding short-term securities)......... 203.7% 236.2% 203.7%
</TABLE>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from August 19, 1994, commencement
of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(e) Adjusted to an annual basis.
(f) The Fund's Adviser and Distributor voluntarily waived or absorbed $36,128,
$43,505, $34,773, $21,104 and $11,682 in expenses for the year ended
September 30, 1995, the period ended September 30, 1994, and the years ended
October 31, 1993, 1992 and 1991, respectively. If Class B shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 2.11% and the ratio of net investment income to
average daily net assets would have been 5.26% for the year ended September
30, 1995. If Class C shares had been charged for these expenses, the ratio
of expenses to average daily net assets would have been 2.11% and the ratio
of net investment income to average daily net assets would have been 5.20%
for the period from March 1, 1995 to September 30, 1995.
(g) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Money Market Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Money
Market Fund, Inc. (the Fund) as of September 30, 1995 and the related statement
of operations for the year then ended, the statement of changes in net assets
for the year ended September 30, 1995 and the period from November 1, 1993 to
September 30, 1994 and the financial highlights for the year ended September 30,
1995, the period from November 1, 1993 to September 30, 1994 and each of the
years in the three-year period ended October 31, 1993. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
12
<PAGE>
ADVANTUS MONEY MARKET FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (7.5%)
$1,000,000 Farm Credit Discount Note......................... 5.72% 10/19/95 $ 997,060
200,000 Federal Home Loan Bank Discount Note.............. 5.75% 11/21/95 198,385
1,225,000 Federal National Mortgage Association Discount
Note............................................. 5.76% 02/22/96 1,197,616
205,000 U.S. Treasury Bill................................ 5.57% 10/12/95 204,630
120,000 U.S. Treasury Bill................................ 5.44% 12/07/95 118,796
------------
Total U.S. government and agencies obligations (cost: $2,716,487)....... 2,716,487
------------
COMMERCIAL PAPER (89.5%)
CAPITAL GOODS (8.3%)
Aerospace/Defense (4.5%)
1,650,000 Raytheon Co....................................... 5.80% 11/13/95 1,638,586
------------
Information Processing (3.7%)
1,360,000 Hewlett-Packard................................... 5.79% 10/17/95 1,356,384
------------
CONSUMER GOODS AND SERVICES (3.7%)
Management (3.7%)
1,330,000 PHH Corporation................................... 5.83% 11/01/95 1,323,238
------------
CONSUMER STAPLES (34.2%)
Drugs (7.9%)
1,030,000 American Home Products (c)........................ 5.89% 10/12/95 1,028,022
550,000 American Home Products (c)........................ 5.83% 11/13/95 546,168
1,300,000 Schering Corp..................................... 5.75% 01/17/96 1,278,115
------------
2,852,305
------------
Food (13.2%)
1,500,000 Brown Forman...................................... 5.85% 12/27/95 1,479,137
1,000,000 Campbell Soup..................................... 5.84% 11/21/95 991,796
1,100,000 Coca-Cola Company................................. 5.73% 11/22/95 1,090,931
1,200,000 CPC International Inc (c)......................... 5.82% 11/07/95 1,192,805
------------
4,754,669
------------
Media (6.9%)
1,300,000 McGraw-Hill Co.................................... 5.83% 10/24/95 1,295,086
1,200,000 American Broadcast (c)............................ 5.81% 10/04/95 1,199,251
------------
2,494,337
------------
Retail (6.2%)
1,250,000 Melville Corp..................................... 5.92% 10/23/95 1,245,400
1,000,000 Toys R Us, Inc.................................... 5.80% 10/25/95 996,056
------------
2,241,456
------------
</TABLE>
See accompanying notes to investments in securities.
4
<PAGE>
ADVANTUS MONEY MARKET FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
COMMERCIAL PAPER -- CONTINUED
<C> <S> <C> <C> <C>
CREDIT SENSITIVE (2.8%)
Hardware and Tools (2.8%)
$1,000,000 Stanley Works..................................... 5.85% 10/05/95 $ 999,203
------------
ENERGY (8.9%)
Natural Gas Distribution (5.9%)
1,250,000 Consolidated Natural Gas.......................... 5.83% 10/16/95 1,246,822
900,000 Equitable Resources (c)........................... 5.83% 10/31/95 895,583
------------
2,142,405
------------
Oil and Gas Production (3.0%)
1,115,000 Atlantic Richfield................................ 5.71% 12/20/95 1,101,076
------------
FINANCIAL (18.5%)
Consumer Finance (18.5%)
1,300,000 Associates Corp................................... 5.78% 12/01/95 1,287,373
1,015,000 Ford Motor Credit................................. 5.80% 12/21/95 1,001,984
1,270,000 General Electric Capital Corp..................... 5.85% 10/19/95 1,266,186
1,130,000 GMAC.............................................. 5.98% 10/11/95 1,128,001
1,200,000 Norwest Financial................................. 5.85% 10/18/95 1,196,568
800,000 Pitney-Bowes Credit............................... 5.95% 10/02/95 799,744
------------
6,679,856
------------
UTILITIES (13.1%)
Electric (3.0%)
1,100,000 Midamerica Energy................................. 5.87% 10/20/95 1,096,486
------------
Telephones (10.1%)
915,000 AT&T Corp......................................... 5.82% 02/09/96 896,145
740,000 Bellsouth Capital................................. 5.79% 11/03/95 736,065
840,000 Southwestern Bell Capital (c)..................... 5.82% 10/10/95 838,675
1,175,000 US West Capital (c)............................... 5.83% 11/02/95 1,168,873
------------
3,639,758
------------
Total commercial paper (cost: $32,319,759).............................. 32,319,759
------------
Total investments in securities (cost: $35,036,246) (b)................. $ 35,036,246
------------
------------
<FN>
Notes to Investments in Securities
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Also represents the cost of securities for federal income tax purposes at
September 30, 1995.
(c) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program of other
"accredited investors." These securities have been determined to be liquid
under guidelines established by the board of directors.
</TABLE>
5
<PAGE>
ADVANTUS MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value--see accompanying schedule for detailed listing
(identified cost: $35,036,246)...................................................... $ 35,036,246
Cash in bank on demand deposit....................................................... 336,506
Receivable for Fund shares sold...................................................... 840,284
------------
Total assets..................................................................... 36,213,036
------------
LIABILITIES
Payable for Fund shares repurchased.................................................. 77,578
Payable to Adviser................................................................... 24,636
Dividends payable to shareholders.................................................... 4,223
------------
Total liabilities................................................................ 106,437
------------
Net assets applicable to outstanding capital stock................................... $ 36,106,599
------------
------------
Represented by:
Capital stock--authorized 1 billion shares of $.01 par value; outstanding,
36,106,599 shares................................................................. $ 361,066
Additional paid-in capital......................................................... 35,745,533
------------
Total--representing net assets applicable to outstanding capital stock........... $ 36,106,599
------------
------------
Net asset value per share............................................................ $ 1.00
------------
------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
ADVANTUS MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 1,713,401
------------
Expenses (note 3):
Investment advisory fee............................................................ 148,238
Distribution fees.................................................................. 88,943
Transfer Agent fees and expenses................................................... 93,369
Adminstrative services fee......................................................... 33,400
Custodian fees..................................................................... 10,635
Auditing and accounting services................................................... 12,420
Legal fees......................................................................... 4,734
Directors' fees.................................................................... 650
Registration fees.................................................................. 34,983
Printing and shareholder reports................................................... 32,560
Insurance.......................................................................... 5,740
Other.............................................................................. 26,564
------------
Total expenses................................................................... 492,236
Less fees and expenses waived or absorbed:
Distribution fees................................................................ (88,943)
Other fund expenses.............................................................. (151,288)
------------
Total fees and expenses waived or absorbed....................................... (240,231)
------------
Total net expenses............................................................... 252,005
------------
Investment income--net........................................................... 1,461,396
------------
Net increase in net assets resulting from operations................................. $ 1,461,396
------------
------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
ADVANTUS MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Investment income--net............................................ $ 1,461,396 $ 652,265
----------- -----------
Increase in net assets resulting from operations................ 1,461,396 652,265
----------- -----------
Distributions to shareholders from net investment income............ (1,461,396) (652,265)
----------- -----------
Capital share transactions, at a constant net asset value of $1.00:
Proceeds from sales............................................... 65,293,589 48,553,873
Shares issued as a result of reinvested dividends................. 1,438,611 646,223
Payments for redemption of shares................................. (56,344,359) (46,586,984)
----------- -----------
Increase in net assets from capital share transactions.......... 10,387,841 2,613,112
----------- -----------
Total increase in net assets.................................... 10,387,841 2,613,112
Net assets at beginning of period................................... 25,718,758 23,105,646
----------- -----------
Net assets at end of period......................................... $36,106,599 $25,718,758
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Advantus Money Market Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. On February 14, 1995, shareholders of the Fund
approved a name change to Advantus Money Market Fund, Inc. (effective March 1,
1995). Prior to March 1, 1995, the Fund was known as MIMLIC Money Market Fund,
Inc.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
The significant accounting policies of the Fund are summarized as follows:
INVESTMENTS IN SECURITIES
All securities are valued at the close of each business day. Pursuant to
Rule 2a-7 of the Investment Company Act of 1940 (as amended), all securities are
valued at amortized cost which approximates market value, in order to maintain a
constant net asset value of $1.00.
Security transactions are accounted for on the date the securities are
purchased or sold. 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 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 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 daily and paid monthly in
cash or reinvested in additional shares. Capital gains, if any, are paid
annually.
(2) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales aggregated $211,021,643 and $199,737,455, respectively.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). 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. Advantus Capital is a wholly-owned
subsidiary of MIMLIC Asset Management Company (MIMLIC Management) which, prior
to March 1, 1995, served as investment adviser to the Fund. The fee for
investment management and advisory services is based on the average daily net
assets of the Fund at the annual rate of .50 percent, which is the same as under
the old agreement with MIMLIC Management.
The Fund pays The Minnesota Mutual Life Insurance Company (Minnesota
Mutual), the parent of MIMLIC Management, a flat fee of $977 per month plus
$1.50 per month per account for transfer agent fees and expenses.
The Fund has adopted a Plan of Distribution relating to the payment of
certain distribution expenses pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (as amended). The Plan provides for a fee up to .30 percent
of average daily net assets to be paid to MIMLIC Sales Corporation (MIMLIC
Sales), the underwriter of the Fund and wholly-owned subsidiary of MIMLIC
Management, to be used to pay certain expenses incurred in the distribution,
promotion and servicing of the Fund's shares. MIMLIC Sales is currently waiving
all of the distribution fees from the Fund.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,350 per month. Effective February 1, 1995, the administrative service fee is
$2,500 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital (MIMLIC Management prior to March 1, 1995). During the year ended
September 30, 1995 Advantus Capital and MIMLIC Management voluntarily agreed to
absorb $151,288 in expenses which were otherwise payable by the Fund.
As of September 30, 1995, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole own 10,568,810 shares or 29.3
percent of the Fund's total shares outstanding.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $4,350.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 1,
YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31,
SEPTEMBER 30, SEPTEMBER 30, -------------------------
1995 1994 1993 1992 1991
------------- ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------- ------- -------
Income from investment operations:
Net investment income............ .049 .027 .025 .033 .056
------------- ------------- ------- ------- -------
Total from investment
operations.................... .049 .027 .025 .033 .056
------------- ------------- ------- ------- -------
Less distributions:
Dividends from net investment
income.......................... (.049) (.027) (.025) (.033) (.056)
------------- ------------- ------- ------- -------
Total distributions............ (.049) (.027) (.025) (.033) (.056)
------------- ------------- ------- ------- -------
Net asset value, end of period..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------- ------- -------
------------- ------------- ------- ------- -------
Total return (a)................... 5.0% 2.7%(b) 2.5% 3.4% 5.9%
Net assets, end of period (in
thousands)........................ $36,107 $25,719 $23,106 $23,136 $33,889
Ratio of expenses to average daily
net assets (c).................... .85% .85%(d) .85% .85% .85%
Ratio of net investment income to
average daily net assets (c)...... 4.93% 2.95%(d) 2.45% 3.35% 5.63%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value.
(b) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(c) The Fund's Adviser and Distributor voluntarily waived or absorbed $240,231,
$222,862, $210,392, $224,636 and $216,386 in expenses for the year ended
September 30, 1995, the period from November 1, 1993 to September 30, 1994
and the years ended October 31, 1993, 1992 and 1991, respectively. If the
Fund had been charged for these expenses, the ratio of expenses to average
daily net assets would have been 1.66%, 1.86%, 1.74%, 1.59% and 1.36%,
respectively, and the ratio of net investment income to average daily net
assets would have been 4.12%, 1.94%, 1.56%, 2.61% and 5.12%, respectively.
(d) Adjusted to an annual basis.
</TABLE>
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Bond Fund,
Inc. (the Fund) as of September 30, 1995 and the related statement of operations
for the year then ended, the statement of changes in net assets for the year
ended September 30, 1995 and the period from November 1, 1993 to September 30,
1994 and the financial highlights for the year ended September 30, 1995, the
period from November 1, 1993 to September 30, 1994 and each of the years in the
three-year period ended October 31, 1993. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
19
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (92.2%)
GOVERNMENT OBLIGATIONS (28.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (23.0%)
$ 500,000 Federal Home Loan Bank........................... 8.460% 12/20/99 $ 502,520
500,000 Federal Home Loan Mortgage....................... 7.030% 04/05/04 503,168
455,997 Federal National Mortgage Association............ 7.000% 09/01/17 453,502
259,111 Government National Mortgage Association......... 7.000% 03/15/23 255,978
312,942 Government National Mortgage Association......... 7.000% 04/15/22 309,430
250,000 U.S. Treasury Note............................... 6.750% 05/31/99 256,172
750,000 U.S. Treasury Note............................... 10.750% 08/15/05 993,046
500,000 U.S. Treasury Note............................... 7.750% 11/30/99 531,563
------------
3,805,379
------------
OTHER GOVERNMENT (3.0%)
500,000 Quebec Province of Canada(b)..................... 7.500% 07/15/23 493,590
------------
LOCAL AND STATE GOVERNMENT OBLIGATIONS (2.7%)
462,000 Wyoming Community Development Authority.......... 6.850% 06/01/10 455,070
------------
Total government obligations (cost: $4,631,747)........................ 4,754,039
------------
CORPORATE OBLIGATIONS (63.5%)
BASIC INDUSTRIES (3.5%)
Primary Metals (3.5%)
530,000 Reynolds Metals Company.......................... 9.375% 06/15/99 578,705
------------
CAPITAL GOODS (8.9%)
Aerospace/Defense (3.0%)
500,000 Rockwell International........................... 6.750% 09/15/02 506,561
------------
Machinery (2.7%)
400,000 Joy Technologies Incorporated.................... 10.250% 09/01/03 448,000
------------
Telecommunications (3.2%)
500,000 Comsat Corporation............................... 7.700% 05/10/07 523,805
------------
CONSUMER CYCLICAL (3.4%)
Automotive (3.4%)
500,000 Chrysler Corporation............................. 10.950% 08/01/17 559,019
------------
CONSUMER STAPLES (13.0%)
Drugs (3.0%)
500,000 American Home Products........................... 6.500% 10/15/02 497,480
------------
Entertainment (1.6%)
250,000 Royal Caribbean Cruises.......................... 8.250% 04/01/05 264,495
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Food (2.2%)
$ 364,286 General Mills.................................... 6.235% 03/15/97 $ 365,876
------------
Media (3.3%)
500,000 Time Warner...................................... 9.150% 02/01/23 541,277
------------
Printing and Publishing (2.9%)
500,000 News America Corporation......................... 7.750% 01/20/24 487,865
------------
CREDIT SENSITIVE (3.1%)
Building Materials (3.1%)
500,000 CSR Finance...................................... 7.700% 07/21/25 513,512
------------
ENERGY (3.3%)
Natural Gas Distribution (3.3%)
500,000 Consolidated Natural Gas......................... 8.750% 10/01/19 539,844
------------
FINANCIAL (12.7%)
Commercial Finance (5.3%)
500,000 Banc One Corporation............................. 7.000% 07/15/05 504,152
400,000 GMAC............................................. 5.500% 12/15/01 374,100
------------
878,252
------------
Real Estate (7.4%)
237,105 Green Tree Financial, Net Interest Margin, Series
1995-A, Class A................................. 7.250% 07/15/05 237,098
500,000 Property Trust of America........................ 7.500% 02/15/14 473,850
500,000 Security Capital Industrial Trust................ 7.875% 05/15/09 507,054
------------
1,218,002
------------
UTILITIES (6.3%)
Electric (3.1%)
500,000 Commonwealth Edison.............................. 8.250% 12/01/07 511,328
------------
Telephones (3.2%)
500,000 Alltel Corporation............................... 10.375% 04/01/09 530,549
------------
TRANSPORTATION (9.3%)
Air Transportation (3.2%)
500,000 Delta Air Lines.................................. 9.200% 09/23/14 536,460
------------
Trucking (3.0%)
500,000 Consolidated Freightways(c)...................... 7.350% 06/01/05 499,672
------------
</TABLE>
8
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Water Transportation (3.2%)
$ 500,000 Overseas Shipholding Group....................... 8.750% 12/01/13 $ 520,340
------------
Total corporate obligations (cost: $10,454,316)........................ 10,521,042
------------
Total long-term debt securities (cost: $15,086,063).................... 15,275,081
------------
SHORT-TERM SECURITIES (4.4%)
730,000 U.S. Treasury Bills..............................5.44%-5.45% 12/07/95 722,567
------------
Total short-term securities (cost: $722,676)........................... 722,567
------------
Total investments in securities (cost: $15,808,739)(d)................. $ 15,997,648
------------
------------
</TABLE>
Notes to Investments in Securities
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 3.0% of net assets in foreign securities as of September 30,
1995.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1995, the value of these securities amounted to $499,672 or 3.0% of net
assets.
(d) At September 30, 1995 the cost of securities for federal income tax purposes
was $15,808,739. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 251,349
Gross unrealized depreciation..................... (62,440)
---------
Net unrealized appreciation....................... $ 188,909
---------
---------
</TABLE>
9
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for
detailed listing (identified cost: $15,808,739)................................ $15,997,648
Receivable for Fund shares sold................................................. 5,239
Receivable for investment securities sold....................................... 867,658
Accrued interest receivable..................................................... 313,833
-----------
Total assets................................................................ 17,184,378
-----------
LIABILITIES
Cash overdraft.................................................................. 1,003
Payable for Fund shares repurchased............................................. 73,061
Payable for investment securities purchased..................................... 524,606
Payable to Adviser.............................................................. 14,493
Dividends payable to shareholders............................................... 1,923
-----------
Total liabilities........................................................... 615,086
-----------
Net assets applicable to outstanding capital stock.............................. $16,569,292
-----------
-----------
Represented by:
Capital stock--$.01 par value (note 1)........................................ $ 16,189
Additional paid-in capital.................................................... 16,752,143
Undistributed net investment income........................................... 6,706
Accumulated net realized losses from investments.............................. (394,655)
Unrealized appreciation of investments........................................ 188,909
-----------
Total--representing net assets applicable to outstanding capital stock...... $16,569,292
-----------
-----------
Net assets applicable to outstanding Class A Shares............................. $15,315,447
-----------
-----------
Net assets applicable to outstanding Class B Shares............................. $ 1,141,804
-----------
-----------
Net assets applicable to outstanding Class C Shares............................. $ 112,041
-----------
-----------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 1,496,326......................................... $ 10.24
-----------
-----------
Class B--Shares outstanding 111,592........................................... $ 10.23
-----------
-----------
Class C--Shares outstanding 10,955............................................ $ 10.23
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 1,128,433
------------
Expenses (note 4):
Investment advisory fee............................................................ 104,228
Distribution fees--Class A......................................................... 43,001
Distribution fees--Class B......................................................... 5,214
Distribution fees--Class C......................................................... 346
Administrative services fee........................................................ 39,200
Custodian fees..................................................................... 2,674
Auditing and accounting services................................................... 10,550
Legal fees......................................................................... 5,098
Directors' fees.................................................................... 333
Registration fees.................................................................. 37,833
Printing and shareholder reports................................................... 20,735
Insurance.......................................................................... 5,420
Other.............................................................................. 8,423
------------
Total expenses................................................................. 283,055
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (28,668)
Other fund expenses.............................................................. (100,487)
------------
Total fees and expenses waived or absorbed..................................... (129,155)
------------
Total net expenses............................................................. 153,900
------------
Investment income--net......................................................... 974,533
------------
Realized and unrealized gains (losses) on investments:
Net realized losses on investments (note 3)........................................ (56,377)
Net change in unrealized appreciation or depreciation on investments............... 1,185,953
------------
Net gains on investments....................................................... 1,129,576
------------
Net increase in net assets resulting from operations................................. $ 2,104,109
------------
------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM NOVEMBER 1, 1993 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Investment income--net........................................................ $ 974,533 $ 750,863
Net realized losses on investments............................................ (56,377) (338,278)
Net change in unrealized appreciation or depreciation on investments.......... 1,185,953 (1,403,507)
----------- -----------
Increase (decrease) in net assets resulting from operations................. 2,104,109 (990,922)
----------- -----------
Distributions to shareholders from:
Investment income--net:
Class A..................................................................... (939,133) (750,510)
Class B..................................................................... (28,946) (312)
Class C..................................................................... (1,889) --
Net realized gains on investments:
Class A..................................................................... -- (622,857)
----------- -----------
Total distributions......................................................... (969,968) (1,373,679)
----------- -----------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A..................................................................... 1,777,559 3,127,259
Class B..................................................................... 1,038,123 51,433
Class C..................................................................... 116,675 --
Shares issued as a result of reinvested dividends:
Class A..................................................................... 544,661 806,836
Class B..................................................................... 26,143 312
Class C..................................................................... 1,889 --
Payments for redemption of shares:
Class A..................................................................... (1,973,311) (2,185,713)
Class B..................................................................... (16,414) --
Class C..................................................................... (9,920) --
----------- -----------
Increase in net assets from capital share transactions...................... 1,505,415 1,800,127
----------- -----------
Total increase (decrease) in net assets..................................... 2,639,556 (564,474)
Net assets at beginning of period............................................... 13,929,736 14,494,210
----------- -----------
Net assets at end of period (including undistributed net investment income of
$6,706 and $2,141, respectively)............................................... $16,569,292 $13,929,736
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
The Advantus Bond Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. On February 14, 1995 shareholders of the Fund approved a
name change to Advantus Bond Fund, Inc. (effective March 1, 1995). Prior to
March 1, 1995 the Fund was known as MIMLIC Fixed Income Securities Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On January 18, 1994, the Board of Directors elected to change the fiscal
year end of the Fund from October 31 to September 30.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
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. Interest income, including amortization of bond premium
and discount computed on a level yield basis, is accrued daily.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
For federal income tax purposes, the Fund had a capital loss carryover at
September 30, 1995 of $394,655, which, if not offset by subsequent capital
gains, will expire from September 30, 2003 to September 30, 2004. It is unlikely
the board of directors will authorize a distribution of any net realized capital
gains until the available capital loss carryover has been offset or expired.
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 daily and paid monthly in
cash or reinvested in additional shares. Realized gains, if any, are paid
annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$39,992,974 and $37,897,269, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset
Management Company (MIMLIC Management) which, prior to March 1, 1995, served as
investment adviser to the Fund. Under the agreement, Advantus Capital manages
the Fund's assets and provides research, statistical and advisory services and
pays related office rental and executive expenses and salaries. In addition, as
part of the advisory fee, Advantus Capital pays the expenses of the Fund's
transfer, dividend disbursing and redemption agent (The Minnesota Mutual Life
Insurance Company (Minnesota Mutual), the parent of MIMLIC Management). The fee
for investment management and advisory services is based on the average daily
net assets of the Fund at the annual rate of .70 percent, which is the same as
under the old agreement with MIMLIC Management.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and wholly-owned subsidiary of
MIMLIC
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Management, to be used to pay certain expenses incurred in the distribution,
promotion and servicing of the Fund's shares. The Class A Plan provides for a
fee up to .30 percent of average daily net assets of Class A shares. The Class B
and Class C Plans provide for a fee up to 1.00 percent of average daily net
assets of Class B and Class C shares, respectively. The Class B and Class C 1.00
percent fee is comprised of a .75 percent distribution fee and a .25 percent
service fee. MIMLIC Sales is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.10 percent. MIMLIC Sales waived Class A distribution fees in the amount of
$28,668 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, and other miscellaneous
expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,600 per month. Effective February 1, 1995, the administrative service fee is
$3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital and MIMLIC
Management voluntarily agreed to absorb $100,487 in expenses that were otherwise
payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $61,826.
As of September 30, 1995, Minnesota Mutual Life and subsidiaries and the
directors and officers of the Fund as a whole own the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ ---------------------
<S> <C> <C>
Class A..................................................................... 371,243 24.8%
Class B..................................................................... 5,495 4.9%
Class C..................................................................... 1,069 9.8%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $4,713.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from November 1, 1993 to September 30, 1994 for Class A shares, the year ended
September 30, 1995 and the period from August 19, 1994 to September 30, 1994 for
Class B shares and the period from March 1, 1995 to September 30, 1995 for Class
C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- -------------------- -----------
1995 1994 1995 1994 1995
---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold.................................................. 181,987 307,605 105,047 5,310 11,740
Issued for reinvested distributions................... 55,696 78,367 2,629 33 189
Redeemed.............................................. (203,125) (217,456) (1,427) -- (974)
---------- ---------- --------- --------- -----------
34,558 168,516 106,249 5,343 10,955
---------- ---------- --------- --------- -----------
---------- ---------- --------- --------- -----------
</TABLE>
(6) RESTRICTED SECURITIES
At September 30, 1995, investments in securities includes an issue which
generally cannot be offered for sale to the public without first being
registered under the Securities Act of 1933 (restricted security). In the event
the securities are registered, those carrying registration rights allow for the
issuer to bear all the related costs; for issues without rights, the Fund may
incur such costs. The Fund currently limits investments in securities that are
not readily marketable, including restricted securities, to 10% of net assets at
the time of the purchase. Securities are valued by procedures described in note
2. The aggregate value of restricted securities held by the Fund at September
30, 1995 was $499,672 which represents 3.0% of net assets.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
PERIOD FROM
NOVEMBER 1,
YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31
SEPTEMBER 30, SEPTEMBER 30, -------------------------
1995 1994 1993 1992 1991
------------- ------------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.50 $ 11.21 $ 10.72 $10.38 $ 9.79
------ ------ ------- ------ ------
Income from investment operations:
Net investment income........................... .64 .53 .63 .73 .79
Net gains or losses on securities (both realized
and unrealized)................................ .74 (1.24) .78 .36 .59
------ ------ ------- ------ ------
Total from investment operations.............. 1.38 (.71) 1.41 1.09 1.38
------ ------ ------- ------ ------
Less distributions:
Dividends from net investment income............ (.64) (.53) (.63) (.73) (.79)
Distributions from capital gains................ -- (.47) (.29) (.02) --
------ ------ ------- ------ ------
Total distributions........................... (.64) (1.00) (.92) (.75) (.79)
------ ------ ------- ------ ------
Net asset value, end of period.................... $ 10.24 $ 9.50 $ 11.21 $10.72 $10.38
------ ------ ------- ------ ------
------ ------ ------- ------ ------
Total return (a).................................. 15.1% (6.7)%(b) 14.0% 10.8% 14.7%
Net assets, end of period (in thousands).......... $15,315 $13,879 $14,494 $9,415 $5,967
Ratio of expenses to average daily net assets
(d).............................................. 1.00% 1.00%(c) 1.00% 1.00% .97%
Ratio of net investment income to average daily
net assets (d)................................... 6.58% 5.79%(c) 5.78% 6.88% 7.91%
Portfolio turnover rate (excluding short-term
securities)...................................... 270.7% 163.5% 139.5% 115.6% 92.7%
</TABLE>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(b) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(c) Adjusted to an annual basis.
(d) The Fund's Adviser and Distributor voluntarily absorbed or waived $129,155,
$107,448, $86,877, $78,626 and $66,537 in expenses for the year ended
September 30, 1995, for the period from November 1, 1993 to September 30,
1994 and the years ended October 31, 1993, 1992 and 1991, respectively. If
Class A shares had been charged for these expenses, the ratio of expenses to
average daily net assets would have been 1.88%, 1.83%, 1.70%, 2.10% and
2.35%, respectively, and the ratio of net investment income to average daily
net assets would have been 5.70%, 4.95%, 5.08%, 5.78% and 6.53%,
respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------- -------------
PERIOD FROM PERIOD FROM
AUGUST 19, MARCH 1, 1995
YEAR ENDED 1994 (A) TO (A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.50 $ 9.68 $ 9.67
------ ------ ------
Income from investment operations:
Net investment income........................... .55 .06 .33
Net gains or losses on securities (both realized
and unrealized)................................ .73 (.18) .55
------ ------ ------
Total from investment operations.............. 1.28 (.12) .88
------ ------ ------
Less distributions:
Dividends from net investment income............ (.55) (.06) (.32)
Distributions from capital gains................ -- -- --
------ ------ ------
Total distributions........................... (.55) (.06) (.32)
------ ------ ------
Net asset value, end of period.................... $ 10.23 $ 9.50 $ 10.23
------ ------ ------
------ ------ ------
Total return (b).................................. 13.9% (1.2)%(c) 9.3%(d)
Net assets, end of period (in thousands).......... $1,142 $51 $112
Ratio of expenses to average daily net assets
(f).............................................. 1.90% .22%(g) 1.90%(e)
Ratio of net investment income to average daily
net assets (f)................................... 5.61% .69%(g) 5.54%(e)
Portfolio turnover rate (excluding short-term
securities)...................................... 270.7% 163.5% 270.7%
</TABLE>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from August 19, 1994, commencement
of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(e) Adjusted to an annual basis.
(f) The Fund's Adviser and Distributor voluntarily absorbed or waived $129,155,
$107,448, $86,877, $78,626 and $66,537 in expenses for the year ended
September 30, 1995, for the period from November 1, 1993 to September 30,
1994 and the years ended October 31, 1993, 1992 and 1991, respectively. If
Class B shares had been charged for these expenses, the ratio of expenses to
average daily net assets would have been 2.56% and .35%, respectively, and
the ratio of net investment income to average daily net assets would have
been 4.95% and .56%, respectively, for the year ended September 30, 1995 and
the period from August 19, 1994, commencement of operations, to September
30, 1994, respectively. If Class C shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
2.56% and the ratio of net investment income to average daily net assets
would have been 4.88% for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(g) Ratios presented for the periods from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Cornerstone Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Cornerstone
Fund, Inc. (the Fund) as of September 30, 1995 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended September 30, 1995 and the period from June 20, 1994 to September
30, 1994 and the financial highlights for the year ended September 30, 1995 and
the period from September 16, 1994 to September 30, 1994. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
16
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
COMMON STOCKS (96.8%)
CAPITAL GOODS (6.2%)
Machinery (6.2%)
26,300 Case Corporation........................ $ 966,525
7,700 ITT Corporation......................... 954,800
------------
1,921,325
------------
CONSUMER GOODS AND SERVICES (24.0%)
Consumer Goods (6.6%)
13,089 Columbia/HCA Healthcare
Corporation............................ 636,453
23,100 Mallinckrodt Group Inc.................. 915,337
18,900 Value Health Incorporated (b)........... 500,850
------------
2,052,640
------------
Consumer Services (2.2%)
33,800 Bowne & Company, Incorporated........... 684,450
------------
Retail (6.1%)
31,100 Federated Department Stores (b)......... 882,462
27,500 Sears, Roebuck and Co................... 1,014,063
------------
1,896,525
------------
Consumer Cyclicals (9.1%)
48,100 Burlington Industries (b)............... 607,262
30,600 Kellwood Company........................ 631,125
35,800 Owens-Corning Fiberglas Corporation
(b).................................... 1,597,575
------------
2,835,962
------------
CREDIT SENSITIVE (26.4%)
Finance (9.5%)
28,200 American Express Company................ 1,251,375
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
19,700 Golden West Financial Corporation....... $ 994,850
31,500 Lehman Brothers Holdings, Inc........... 728,437
------------
2,974,662
------------
Insurance (16.9%)
7,900 American Internationl Group, Inc........ 671,500
40,200 Green Point Financial Corporation....... 1,110,525
17,600 MBIA Inc................................ 1,240,800
20,500 RLI Corporation......................... 458,687
66,800 TIG Holdings Inc........................ 1,795,250
------------
5,276,762
------------
INTERMEDIATE GOODS AND SERVICES (30.3%)
Energy (14.4%)
25,300 Coflexip ADR (c)........................ 388,987
24,600 Columbia Gas System, Inc (b)............ 950,175
27,400 Tidewater Incorporated.................. 770,625
28,200 Tosco Corporation....................... 972,900
33,200 USX--Marathon Group..................... 655,700
41,300 YPF Sociedad Anonima ADR (c)............ 743,400
------------
4,481,787
------------
Materials (11.5%)
14,500 Aluminum Company of America............. 766,688
12,000 Citation Corporation (b)................ 216,000
13,400 Cytec Industries Inc (b)................ 775,525
7,600 Dow Chemical Company.................... 566,200
21,500 Fort Howard Corporation (b)............. 330,563
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
<C> <S> <C>
30,000 Morton International.................... $ 930,000
------------
3,584,976
------------
Transportation (4.4%)
10,500 Burlington Northern Santa Fe (b)........ 761,250
25,900 Teekay Shipping Corporation (b)(c)...... 621,600
------------
1,382,850
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------ ------------
<C> <S> <C>
TECHNOLOGY (9.9%)
44,400 EMC Corporation (b)..................... $ 804,750
14,500 B.F. Goodrich Company................... 955,188
20,300 Rohr Incorporated (b)................... 329,875
7,500 Xerox Corporation....................... 1,007,813
------------
3,097,626
------------
Total common stocks
(cost: $26,585,182) ................................... 30,189,565
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.1%)
$ 480,000 U.S. Treasury Bills........................ 5.55% 10/12/95 479,113
800,000 U.S. Treasury Bills........................ 5.41%-5.45% 12/07/95 791,842
------------
Total short-term securities (cost: $1,271,142)....................... 1,270,955
------------
Total investments in securities (cost: $27,856,324) (d).............. $ 31,460,520
------------
------------
<FN>
Notes to Investments in Securities
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 5.6% of net assets in foreign securities as of September 30,
1995.
(d) At September 30, 1995 the cost of securities for federal income tax
purposes was $27,858,988. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation........................................................................ $ 4,261,727
Gross unrealized depreciation........................................................................ (660,195)
------------
Net unrealized appreciation.......................................................................... $ 3,601,532
------------
------------
</TABLE>
7
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $27,856,324).............................................. $ 31,460,520
Cash in bank on demand deposit....................................................... 79,465
Receivable for Fund shares sold...................................................... 7,154
Receivable for investment securities sold............................................ 1,173,698
Dividends receivable................................................................. 43,244
Organizational costs................................................................. 43,471
------------
Total assets..................................................................... 32,807,552
------------
LIABILITIES
Payable for Fund shares repurchased.................................................. 1,087
Payable for investment securities purchased.......................................... 1,525,338
Payable for organizational costs..................................................... 43,471
Payable to Adviser................................................................... 35,595
------------
Total liabilities................................................................ 1,605,491
------------
Net assets applicable to outstanding capital stock................................... $ 31,202,061
------------
------------
Represented by:
Capital stock--$.01 par value (note 1)............................................. $ 24,079
Additional paid-in capital......................................................... 25,814,130
Undistributed net investment income................................................ --
Accumulated net realized gains from investments.................................... 1,759,656
Unrealized appreciation of investments............................................. 3,604,196
------------
Total--representing net assets applicable to outstanding capital stock........... $ 31,202,061
------------
------------
Net assets applicable to outstanding Class A Shares.................................. $ 29,519,898
------------
------------
Net assets applicable to outstanding Class B Shares.................................. $ 1,635,392
------------
------------
Net assets applicable to outstanding Class C Shares.................................. $ 46,771
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,277,462.............................................. $ 12.96
------------
------------
Class B--Shares outstanding 126,777................................................ $ 12.90
------------
------------
Class C--Shares outstanding 3,625.................................................. $ 12.90
------------
------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 88,637
Dividends.......................................................................... 354,807
------------
443,444
------------
Expenses (note 4):
Investment advisory fee............................................................ 150,365
Distribution fees--Class A......................................................... 54,166
Distribution fees--Class B......................................................... 7,262
Distribution fees--Class C......................................................... 142
Administrative services fee........................................................ 37,800
Amortization of organizational costs............................................... 11,099
Custodian fees..................................................................... 9,421
Auditing and accounting services................................................... 7,165
Legal fees......................................................................... 7,924
Directors' fees.................................................................... 344
Registration fees.................................................................. 35,428
Printing and shareholder reports................................................... 12,127
Insurance.......................................................................... 5,420
Other.............................................................................. 5,486
------------
Total expenses................................................................... 344,149
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (36,111)
Other fund expenses.............................................................. (47,635)
------------
Total fees and expenses waived or absorbed..................................... (83,746)
------------
Total net expenses............................................................. 260,403
------------
Investment income--net......................................................... 183,041
------------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)......................................... 1,821,875
Net change in unrealized appreciation or depreciation on investments............... 3,101,643
------------
Net gains on investments......................................................... 4,923,518
------------
Net increase in net assets resulting from operations................................. $ 5,106,559
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM JUNE 20, 1994 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Investment income--net..................................................... $ 183,041 $ 41,786
Net realized gains (losses) on investments................................. 1,821,875 (3,672)
Net change in unrealized appreciation or depreciation on investments....... 3,101,643 502,553
------------ ------------
Increase in net assets resulting from operations......................... 5,106,559 540,667
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A.................................................................. (231,132) --
Class B.................................................................. (5,632) --
Class C.................................................................. (87) --
Net realized gains on investments:
Class A.................................................................. (56,912) --
Class B.................................................................. (1,628) --
Class C.................................................................. (7) --
------------ ------------
Total distributions.................................................... (295,398) --
------------ ------------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A.................................................................. 14,465,694 10,080,240
Class B.................................................................. 1,365,600 88,098
Class C.................................................................. 42,221 --
Shares issued as a result of reinvested dividends:
Class A.................................................................. 15,156 --
Class B.................................................................. 7,260 --
Class C.................................................................. 94 --
Payments for redemption of shares:
Class A.................................................................. (172,556) --
Class B.................................................................. (41,569) (5)
Class C.................................................................. -- --
------------ ------------
Increase in net assets from capital share transactions................... 15,681,900 10,168,333
------------ ------------
Total increase in net assets............................................. 20,493,061 10,709,000
Net assets at beginning of period............................................ 10,709,000 --
------------ ------------
Net assets at end of period (including undistributed net investment income of
$0 and $42,711, respectively)............................................... $ 31,202,061 $ 10,709,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
Advantus Cornerstone Fund, Inc. (the Fund) was incorporated on January 27,
1994. The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. On February
14, 1995 shareholders of the Fund approved a name change to Advantus Cornerstone
Fund, Inc. (effective March 1, 1995). Prior to March 1, 1995 the Fund was known
as MIMLIC Value Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On June 20, 1994, MIMLIC Asset Management Company (MIMLIC Management)
purchased 7,500 Class A shares and 7,500 Class B shares. Operations of the Fund
did not formally commence until September 16, 1994 when the shares became
effectively registered under the Securities Exchange Act of 1933. The Minnesota
Mutual Life Insurance Company (Minnesota Mutual), the parent of MIMLIC
Management, purchased 990,644 Class A shares for $10 million prior to
commencement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income and decrease additional paid-in capital by
$11,099.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$43,619,339 and $28,188,885, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). Advantus Capital is a wholly-owned subsidiary of MIMLIC Management
which, prior to March 1, 1995, served as investment adviser to the Fund. Under
the agreement, Advantus Captital manages the Fund's assets and provides
research, statistical and advisory services and pays related office rental and
executive expenses and salaries. In addition, as part of the advisory fee,
Advantus Capital pays the expenses of the Fund's transfer, dividend disbursing
and redemption agent (Minnesota Mutual). The fee for investment management and
advisory services is based on the average daily net assets of the Fund at the
annual rate of .80 percent, which is the same as under the old agreement with
MIMLIC Management.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and wholly-owned subsidiary of
MIMLIC Management, to be used to pay certain expenses incurred in the
distribution, promotion and servicing of the Fund's shares. The Class A Plan
provides for a fee up to .30 percent of average daily net assets of Class A
shares. The Class B and Class C Plans provide for a fee up to 1.00 percent of
average daily net assets of Class B and Class C shares. The Class B and Class C
1.00 percent fees are comprised of a .75 percent distribution fee and a .25
percent service fee. MIMLIC Sales is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.10 percent. MIMLIC Sales waived Class A distribution fees in the amount of
$36,111 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee for
the Fund was $3,250 per month. Effective February 1, 1995, the administrative
service fee is $3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital and MIMLIC
Management voluntarily agreed to absorb $47,635 in expenses that were otherwise
payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $62,839.
As of September 30, 1995, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ ---------------------
<S> <C> <C>
Class A..................................................................... 2,116,252 92.9%
Class B..................................................................... 7,613 6.0%
Class C..................................................................... 928 25.6%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $6,410.
(5) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs will be amortized over 60 months on a
straight-line basis beginning with the commencement of
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) ORGANIZATIONAL COSTS--(CONTINUED)
operations. If any or all of the shares held by MIMLIC Management, or any other
holder, representing initial capital of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by the pro rata
portion (based on the ratio that the number of initial shares redeemed bears to
the total number of outstanding initial shares of the Fund at the date of
redemption) of the unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from June 20, 1994 to September 30, 1994 for Class A and Class B shares and the
period from March 1, 1995 to September 30, 1995 for Class C shares were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- -----------
1995 1994 1995 1994 1995
---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold........................................................... 1,292,691 998,637 120,786 8,734 3,617
Issued for reinvested distributions............................ 1,391 -- 664 -- 8
Redeemed....................................................... (15,257) -- (3,406) (1) --
---------- --------- --------- --------- -----
1,278,825 998,637 118,044 8,733 3,625
---------- --------- --------- --------- -----
---------- --------- --------- --------- -----
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
SEPTEMBER 16, SEPTEMBER 16, MARCH 1,
YEAR ENDED 1994 (A) TO YEAR ENDED 1994 (A) TO 1995 (A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994 1995
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 10.63 $ 10.77 $ 10.63 $ 10.77 $ 10.79
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)...... .12 .01 .02 (.01) .02
Net gains or losses on securities
(both realized and unrealized)... 2.42 (.15) 2.41 (.13) 2.14
------- ------- ------- ------- -------
Total from investment
operations..................... 2.54 (.14) 2.43 (.14) 2.16
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income........................... (.16) -- (.11) -- (.05)
Distributions from capital
gains............................ (.05) -- (.05) -- --
------- ------- ------- ------- -------
Total distributions............. (.21) -- (.16) -- (.05)
------- ------- ------- ------- -------
Net asset value, end of period...... $ 12.96 $ 10.63 $ 12.90 $ 10.63 $ 12.90
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (b).................... 24.4% (1.3)%(c) 23.2% (1.3)%(c) 20.1%(d)
Net assets, end of period (in
thousands)......................... $ 29,520 $ 10,616 $ 1,635 $ 93 $ 47
Ratio of expenses to average daily
net assets (e)..................... 1.35% .05%(g) 2.25% .09%(g) 2.25%(f)
Ratio of net investment income
(loss) to average daily net assets
(e)................................ 1.01% .07%(g) .05% .03%(g) (.07)%(f)
Portfolio turnover rate (excluding
short-term securities)............. 160.1% 8.1% 160.1% 8.1% 160.1%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994, respectively. If the Fund had been charged for
theses expenses, the ratio of expenses to average daily net assets would
have been 1.81% and .07% for Class A shares, respectively, 2.45% and .10%
for Class B shares, respectively and 2.34% for Class C shares. The ratio of
net investment income to average daily net assets would have been .56% and
.05% for Class A shares, respectively, (.15)% and .02% for Class B shares,
respectively and (.16)% for Class C shares.
(f) Adjusted to an annual basis.
(g) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
</TABLE>
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Enterprise Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Enterprise
Fund, Inc. (the Fund) as of September 30, 1995 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year ended September 30, 1995 and the period from June 20, 1994 to September
30, 1994 and the financial highlights for the year ended September 30, 1995 and
the period from September 16, 1994 to September 30, 1994. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
17
<PAGE>
ADVANTUS ENTERPRISE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (89.2%)
CAPITAL GOODS (8.0%)
Machinery (8.0%)
15,000 AES China Generating Co Ltd (b)(c)........... $ 135,000
12,400 Blount Incorporated.......................... 590,550
21,500 Elsag Bailey Process Automation (b)(c)....... 701,438
9,600 J Ray McDermott Holdings Incorporated (b).... 216,000
22,300 United Waste Systems, Inc (b)................ 931,025
------------
2,574,013
------------
CONSUMER GOODS AND SERVICES (44.7%)
Consumer Goods (14.7%)
16,487 Columbia/HCA Healthcare Corporation.......... 801,680
19,000 Fisher Scientific International Inc.......... 615,125
25,200 Idexx Laboratories Inc (b)................... 938,700
5,800 Medtronic Inc................................ 311,750
8,132 Occusystems, Incorporated (b)................ 168,739
29,800 Pyxis Corporation (b)........................ 577,375
8,500 Teva Pharmaceutical Industries ADR (c)....... 307,063
7,600 United Health Care........................... 371,450
24,797 Value Health Incorporated (b)................ 657,121
------------
4,749,003
------------
Consumer Services (10.5%)
15,400 Carmike Cinemas (b).......................... 338,800
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
9,466 CUC International Inc (b).................... $ 330,127
28,500 Gartner (b).................................. 933,375
12,800 GTECH Holdings Corporation (b)............... 385,600
7,700 International House of Pancakes (b).......... 202,125
9,800 Lone Star Steakhouse & Saloon, Inc (b)....... 401,800
16,500 Manpower..................................... 478,500
13,200 Sola International Inc (b)................... 292,050
------------
3,362,377
------------
Retail (14.2%)
2,900 Amerisource Health Corporation (b)........... 78,300
22,600 Barnes & Noble Inc (b)....................... 864,450
27,020 Borders Group Incorporated (b)............... 462,718
26,300 BT Office Products International (b)(c)...... 345,188
28,600 Casey's General Stores Inc................... 647,075
7,200 Eastbay Incorporated (b)..................... 142,200
16,500 Friedman's (b)............................... 358,875
18,600 Global Directmail Corporation (b)............ 458,025
8,100 Home Depot Inc............................... 322,988
6,200 Kohl's Inc (b)............................... 321,625
15,600 Office Depot, Inc (b)........................ 469,950
8,200 Orchard Supply Hardware (b).................. 118,900
------------
4,590,294
------------
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS ENTERPRISE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
CONSUMER GOODS AND SERVICES--CONTINUED
<C> <S> <C>
Consumer Cyclicals (5.3%)
14,400 Cutter and Buck (b).......................... $ 106,200
9,309 Exide Corporation............................ 465,450
11,300 Stant Corporation............................ 113,000
31,200 Tommy Hilfiger Corporation (b)............... 1,014,000
------------
1,698,650
------------
CREDIT SENSITIVE (6.2%)
Finance (5.8%)
4,100 First Data Corp.............................. 254,200
8,800 First Financial Management................... 859,100
3,200 MGIC Investment Corporation.................. 183,200
31,900 Roosevelt Financial Group, Inc............... 562,237
------------
1,858,737
------------
Utilities (.4%)
9,200 Pansamsat Corporation (b).................... 140,300
------------
INTERMEDIATE GOODS AND SERVICES (7.8%)
Materials (3.8%)
6,500 Atchison Casting Corporation (b)............. 110,500
9,425 Cambrex Corporation.......................... 379,356
25,000 Citation Corporation (b)..................... 450,000
13,670 McWhorter Technology Inc (b)................. 210,176
2,300 Valspar Corporation.......................... 87,975
------------
1,238,007
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
Transportation (4.0%)
16,300 American Freightways (b)..................... $ 244,500
8,000 Fritz Companies (b).......................... 589,500
18,900 Landstar System, Inc (b)..................... 455,962
------------
1,289,962
------------
TECHNOLOGY (22.5%)
11,600 Avid Technology, Inc (b)..................... 498,800
13,100 The Bisys Group Inc (b)...................... 334,050
7,200 C-Cube Microsystems Incorporated (b)......... 329,400
6,500 Cognex Corporation (b)....................... 313,625
21,308 Computer Associates International (b)........ 900,263
12,800 Computron Software (b)....................... 220,800
25,800 Danka Business Systems PLC (c)............... 928,800
336 Datastream Systems, Incorporated (b)......... 7,644
14,400 DSC Communications (b)....................... 853,200
9,774 Fore Systems Inc (b)......................... 361,638
11,000 Informix Corporation (b)..................... 357,500
12,600 Integrated Device Technology, Inc (b)........ 315,000
14,800 Mercury Interactive Corporation (b).......... 410,700
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS ENTERPRISE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
15,300 Oracle Corporation (b)....................... $ 587,137
8,100 Telephone and Data Systems, Inc.............. 340,200
3,500 Uunet Technologies, Incorporated (b)......... 161,875
<CAPTION>
MARKET
SHARES VALUE(A)
- ----------- ------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
7,500 3 Com (b).................................... $ 341,250
------------
7,261,882
------------
Total common stocks
(cost: $22,939,314)...................................... 28,763,225
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (12.1%)
$2,050,000 U.S. Treasury Bills............................... 5.50-5.57% 10/12/95 2,046,209
1,870,000 U.S. Treasury Bills............................... 5.34% 12/07/95 1,850,932
-----------
Total short-term securities (cost: $3,897,896)........................... 3,897,141
-----------
Total investments in securities (cost: $26,837,210) (d).................. $32,660,366
-----------
-----------
<FN>
Notes to Investments in Securities
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 7.5% of net assets in foreign securities as of September 30,
1995.
(d) At September 30, 1995 the cost of securities for federal income tax
purposes was $26,837,210. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation........... $6,453,505
Gross unrealized depreciation........... (630,349)
----------
Net unrealized appreciation............. $5,823,156
----------
----------
</TABLE>
8
<PAGE>
ADVANTUS ENTERPRISE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying
schedule for detailed listing (identified cost: $26,837,210).... $32,660,366
Cash in bank on demand deposit................................... 27,286
Receivable for Fund shares sold.................................. 6,706
Receivable for investment securities sold........................ 15,487
Dividends receivable............................................. 2,235
Organizational costs............................................. 42,624
-----------
Total assets................................................. 32,754,704
-----------
LIABILITIES
Payable for Fund shares repurchased.............................. 4,356
Payable for investment securities purchased...................... 424,806
Payable for organizational cost.................................. 42,624
Payable to Adviser............................................... 37,364
-----------
Total liabilities............................................ 509,150
-----------
Net assets applicable to outstanding capital stock............... $32,245,554
-----------
-----------
Represented by:
Capital stock--$.01 par value (note 1)......................... $ 22,917
Additional paid-in capital..................................... 25,394,444
Undistributed net investment income............................ --
Accumulated net realized gains from investments................ 1,005,037
Unrealized appreciation of investments......................... 5,823,156
-----------
Total--representing net assets applicable to outstanding
capital stock............................................... $32,245,554
-----------
-----------
Net assets applicable to outstanding Class A Shares.............. $30,454,200
-----------
-----------
Net assets applicable to outstanding Class B Shares.............. $ 1,720,378
-----------
-----------
Net assets applicable to outstanding Class C Shares.............. $ 70,976
-----------
-----------
Shares outstanding and net asset value per share
Class A--Shares outstanding 2,163,222.......................... $ 14.08
-----------
-----------
Class B--Shares outstanding 123,403............................ $ 13.94
-----------
-----------
Class C--Shares outstanding 5,092.............................. $ 13.94
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS ENTERPRISE FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest....................................................... $ 130,865
Dividends...................................................... 48,979
----------
Total investment income.................................... 179,844
----------
Expenses (note 4):
Investment advisory fee........................................ 167,883
Distribution fees--Class A..................................... 60,649
Distribution fees--Class B..................................... 7,499
Distribution fees--Class C..................................... 194
Administrative services fee.................................... 37,800
Amortization of organizational costs........................... 10,883
Custodian fees................................................. 12,537
Auditing and accounting services............................... 7,165
Legal fees..................................................... 7,857
Directors' fees................................................ 400
Registration fees.............................................. 35,174
Printing and shareholder reports............................... 13,164
Insurance...................................................... 5,500
Other.......................................................... 5,724
----------
Total expenses............................................. 372,429
Less fees and expenses waived or absorbed:
Class A distribution fees.................................... (40,433)
Other fund expenses.......................................... (43,566)
----------
Total fees and expenses waived or absorbed................. (83,999)
----------
Total net expenses......................................... 288,430
----------
Investment loss--net....................................... (108,586)
----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)..................... 1,149,528
Net change in unrealized appreciation or depreciation on
investments................................................... 4,896,004
----------
Net gains on investments................................... 6,045,532
----------
Net increase in net assets resulting from operations............. $5,936,946
----------
----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS ENTERPRISE FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM JUNE 20, 1994 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Investment loss--net............................ $ (108,586) $ (6,282)
Net realized gains (losses) on investments...... 1,149,528 (23,671)
Net change in unrealized appreciation or
depreciation of investments.................... 4,896,004 927,152
----------- -----------
Increase in net assets resulting from
operations................................. 5,936,946 897,199
----------- -----------
Distributions to shareholders from:
Net realized gains on investments:
Class A....................................... (22,643) --
Class B....................................... (474) --
----------- -----------
Total distributions......................... (23,117) --
----------- -----------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A....................................... 11,923,790 12,075,000
Class B....................................... 1,409,271 88,098
Class C....................................... 66,063 --
Shares issued as a result of reinvested
dividends:
Class A....................................... 857 --
Class B....................................... 474 --
Payments for redemption of shares:
Class A....................................... (122,253) --
Class B....................................... (6,361) (5)
Class C....................................... (408) --
----------- -----------
Increase in net assets from capital share
transactions............................... 13,271,433 12,163,093
----------- -----------
Total increase in net assets................ 19,185,262 13,060,292
Net assets at beginning of period................. 13,060,292 --
----------- -----------
Net assets at end of period (including
undistributed net investment income of $0 and $0,
respectively).................................... $32,245,554 $13,060,292
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS ENTERPRISE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
Advantus Enterprise Fund, Inc. (the Fund) was incorporated on January 27,
1994. The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. On February
14, 1995 shareholders of the Fund approved a name change to Advantus Enterprise
Fund, Inc. (effective March 1, 1995). Prior to March 1, 1995 the Fund was known
as MIMLIC Small Company Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C shares are subject to a higher Rule 12b-1 fee
than Class A shares. Both Class B and Class C shares automatically convert to
Class A shares at net asset value after a specified holding period. Such holding
periods decline as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and 40 to 96 months after purchase for
Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees and sales charges charged differs between Class A,
Class B and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On June 20, 1994, MIMLIC Asset Management Company (MIMLIC Management)
purchased 7,500 Class A shares and 7,500 Class B shares. Operations of the Fund
did not formally commence until September 16, 1994 when the shares became
effectively registered under the Securities Exchange Act of 1933. The Minnesota
Mutual Life Insurance Company (Minnesota Mutual), the parent of MIMLIC
Management, purchased 1,167,726 Class A shares for $12 million prior to
commencement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income (loss) 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 (loss) or realized gains (losses) were
recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income by $108,586, decrease accumulated net
realized gains from investments by $97,703 and decrease additional paid-in
capital by $10,883.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$20,981,574 and $9,172,892, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement, effective March 1, 1995, with Advantus Capital Management,
Inc. (Advantus Capital or the Adviser). Advantus Capital is a wholly-owned
subsidiary of MIMLIC Management which, prior to March 1, 1995, served as
investment adviser to the Fund. Under the agreement, Advantus Capital manages
the Fund's assets and provides research, statistical and advisory services and
pays related office rental and executive expenses and salaries. In addition, as
part of the advisory fee, Advantus Capital pays the expenses of the Fund's
transfer, dividend disbursing and redemption agent (Minnesota Mutual). The fee
for investment management and advisory services is based on the average daily
net assets of the Fund at the annual rate of .80 percent, which is the same as
under the old agreement with MIMLIC Management.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and a wholly-owned subsidiary MIMLIC
Management, to be used to pay certain expenses incurred in the distribution,
promotion and servicing of the Fund's shares. The Class A Plan provides for a
fee up to .30 percent of average daily net assets of Class A shares. The Class B
and Class C Plans provide for a fee up to 1.00 percent of average daily net
assets of Class B and Class C shares, respectively. The Class B and Class C 1.00
percent fee is comprised of a .75 percent distribution fee and a .25 percent
service fee. MIMLIC Sales is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.10 percent. MIMLIC Sales waived Class A distribution fees in the amount of
$40,433 for the year ended September 30, 1995.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995, the administrative service fee was
$3,250 per month. Effective February 1, 1995, the administrative service fee is
$3,100 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the period from October 1, 1994 to September 30, 1995, Advantus
Capital and MIMLIC Management voluntarily agreed to absorb $43,566 in expenses
that were otherwise payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $57,059.
As of September 30, 1995, Minnesota Mutual and subsidiaries, and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A................................................. 2,012,765 93.0%
Class B................................................. 7,513 6.1%
Class C................................................. 863 16.9%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $6,342.
(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
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) ORGANIZATIONAL COSTS--(CONTINUED)
operations. If any or all of the shares held by MIMLIC Management, or any other
holder, representing initial capital of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by the pro rata
portion (based on the ratio that the number of initial shares redeemed bears to
the total number of outstanding initial shares of the Fund at the date of
redemption) of the unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
June 20, 1994 to September 30, 1994 for Class A and Class B shares and the
period from March 1, 1995 to September 30, 1995 for Class C shares were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- -----------
1995 1994 1995 1994 1995
--------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sold............................................... 997,759 1,175,226 115,168 8,700 5,124
Issued for reinvested distributions................ 79 -- 44 -- --
Redeemed........................................... (9,842) -- (508) (1) (32)
--------- ---------- --------- --------- -----------
987,996 1,175,226 114,704 8,699 5,092
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
</TABLE>
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------------- -------------------------------- --------------
PERIOD FROM PERIOD FROM PERIOD FROM
SEPTEMBER 16, SEPTEMBER 16, MARCH 1, 1995
YEAR ENDED 1994 (A) TO YEAR ENDED 1994 (A) TO (A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994 1995
-------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 11.03 $ 11.12 $ 11.02 $ 11.12 $ 11.58
------- ------------- ------ ------ ------
Income from investment operations:
Net investment income (loss)..... (.04) -- (.09) (.01) (.06)
Net gains or losses on securities
(both realized and
unrealized)..................... 3.11 (.09) 3.03 (.09) 2.42
------- ------------- ------ ------ ------
Total from investment
operations....................... 3.07 (.09) 2.94 (.10) 2.36
------- ------------- ------ ------ ------
Less distributions:
Dividends from net investment
income.......................... -- -- -- -- --
Distributions from capital
gains........................... (.02) -- (.02) -- --
------- ------------- ------ ------ ------
Total distributions............ (.02) -- (.02) -- --
------- ------------- ------ ------ ------
Net asset value, end of period..... $ 14.08 $ 11.03 $ 13.94 $ 11.02 $ 13.94
------- ------------- ------ ------ ------
------- ------------- ------ ------ ------
Total return (b)................... 27.9% (.8)%(c) 26.7% (.9)%(c) 20.4%(d)
Net assets, end of period (in
thousands)........................ $ 30,454 $ 12,964 $ 1,720 $ 96 $ 71
Ratio of expenses to average daily
net assets (e).................... 1.34% .05%(g) 2.24% .09%(g) 2.24%(f)
Ratio of net investment income
(loss) to average daily net assets
(e)............................... (.48)% (.02)%(g) (1.45)% (.06)%(g) (1.57)%(f)
Portfolio turnover rate (excluding
short-term securities)............ 48.8% 5.0% 48.8% 5.0% 48.8%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,999
and $1,430 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994, respectively. If the Fund had been charged for
theses expenses, the ratio of expenses to average daily net asses would
have been 1.75% and .06% for Class A shares, respectively, 2.39% and .10%
for Class B shares, respectively, and 2.32% for Class C shares. The ratios
of net investment income (loss) to average daily net assets would have been
(.89)% and (.03)% for Class A shares, respectively, (1.60)% and (.07)% for
Class B shares, respectively and (1.65)% for Class C shares.
(f) Adjusted to an annual basis.
(g) Ratios presented for the period from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus International Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus
International Balanced Fund, Inc. (the Fund) as of September 30, 1995 and the
related statement of operations for the year then ended, the statement of
changes in net assets for the year ended September 30, 1995 and the period from
June 20, 1994 to September 30, 1994 and the financial highlights for the year
ended September 30, 1995 and the period from September 16, 1994 to September 30,
1994. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1995 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
26
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (64.6%)
AUSTRALIA (3.5%)
Banking (1.1%)
19,500 National Australia Bank........................................... $ 172,203
46,000 Westpac Banking................................................... 186,099
Building Materials and Components (.9%)
102,000 Pioneer International............................................. 269,457
Transportation (1.5%)
115,000 BTR Nylex Ltd..................................................... 308,139
15,000 Brambles Industries............................................... 165,297
------------
1,101,195
------------
AUSTRIA (1.9%)
Electrical and Electronics (.9%)
2,500 VA Technologie (b)(f)............................................. 288,905
Utilities--Gas and Electric (1.0%)
2,400 EVN Energie-Versorgung............................................ 290,773
------------
579,678
------------
BELGIUM (1.9%)
Chemicals (1.9%)
590 Solvay............................................................ 315,386
4,300 Union Miniere (b)................................................. 275,094
------------
590,480
------------
BRAZIL (.9%)
Telecommunications (.9%)
5,900 Telecomunicacoes Brasileiras ADR.................................. 272,875
------------
CANADA (2.2%)
Banking (1.0%)
12,000 Canadian Imperial Bank of Commerce................................ 312,931
Mining and Metals--Container (.8%)
32,000 Inmet Mining (b).................................................. 249,455
Utilities--Gas and Electric (.4%)
15,500 Nova Corporation of Alberta....................................... 122,268
------------
684,654
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CHILE (.7%)
Utilities--Gas and Electric (.7%)
3,300 Compania de Telefonos de Chile ADR................................ $ 228,113
------------
CZECH REPUBLIC (.9%)
Energy Services (.9%)
7,415 Ceske Energeticke (b)............................................. 293,844
------------
FINLAND (1.5%)
Wholesale and International Trade (1.5%)
15,000 Amer Group........................................................ 288,711
4,700 Metsa-Serla....................................................... 187,545
------------
476,256
------------
FRANCE (4.5%)
Banking (1.0%)
7,500 Banque Nationale de Paris......................................... 294,797
Electrical and Electronics (.5%)
1,950 Alcatel Alsthom................................................... 164,454
Energy Sources (1.1%)
4,920 Societe Nationale Elf Aquitaine................................... 332,966
Health and Personal Care (1.1%)
17,000 Rhone-Poulenc..................................................... 344,490
Transportation (.8%)
8,600 Regie Nationale Des Usines Renault................................ 253,964
------------
1,390,671
------------
GERMANY (2.0%)
Banking (1.0%)
6,650 Deutsche Bank..................................................... 318,165
Chemicals (1.0%)
1,200 Bayer............................................................. 307,727
------------
625,892
------------
HONG KONG (3.3%)
Banking (1.1%)
24,000 Hong Kong and Shanghai Banking.................................... 333,698
Multi-Industry (1.1%)
61,000 Hutchison Whampoa................................................. 330,581
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
HONG KONG--CONTINUED
Transportation (1.1%)
45,000 Swire Pacific..................................................... $ 356,495
------------
1,020,774
------------
INDIA (.5%)
Financial Services (.5%)
90,600 India Fund........................................................ 169,203
------------
INDONESIA (1.1%)
Financial Services (.8%)
200,000 J.F. Indonesia Fund (b)........................................... 243,160
Forest Products and Paper (.3%)
151,500 P.T. Barito Pacific Timber........................................ 111,987
------------
355,147
------------
JAPAN (2.3%)
Building Materials and Components (.4%)
9,000 Daito Trust Construction.......................................... 104,916
Electrical and Electronics (1.8%)
23,000 Hitachi........................................................... 251,799
1,000 Hitachi Koki...................................................... 8,685
6,000 Sony.............................................................. 312,621
Utilities--Gas and Electric (.1%)
3,000 Kyudenko.......................................................... 40,750
------------
718,771
------------
KOREA (.7%)
Financial Services (.7%)
4 Korea International Trust (b)..................................... 230,000
------------
MEXICO (.7%)
Chemicals (.4%)
48,000 Vitro............................................................. 127,748
Utilities--Gas and Electric (.3%)
2,800 Telefonos de Mexico ADR........................................... 88,900
------------
216,648
------------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
NETHERLANDS (4.1%)
Broadcasting, Advertising and Publishing (1.1%)
5,800 International Nederlanden Group................................... $ 338,261
Building Materials and Components (.7%)
6,850 European Vinyls................................................... 240,817
Insurance (1.3%)
11,015 Aegon............................................................. 400,379
Merchandising (1.0%)
4,200 Koninklijke Bijenkorf Beheer...................................... 308,492
------------
1,287,949
------------
NEW ZEALAND (2.0%)
Forest Products and Paper (1.0%)
108,000 Fletcher Challenge................................................ 291,510
15,323 Fletcher Forest................................................... 20,478
Wholesale and International Trade (1.0%)
417,050 Brierley Investments.............................................. 318,487
------------
630,475
------------
NORWAY (2.6%)
Energy Sources (1.0%)
23,000 Saga Petroleum.................................................... 297,799
Health and Personal Care (1.1%)
13,000 Hafslund Nycomed.................................................. 338,721
Mining and Metals--Container (.5%)
13,000 Elkem............................................................. 158,970
------------
795,490
------------
PHILIPPINES (1.0%)
Telecommunications (1.0%)
4,800 Philippine Long Distance Telephone................................ 320,552
------------
PORTUGAL (.7%)
Financial Services (.7%)
2,500 Capital Portugal Fund (b)......................................... 229,120
------------
SPAIN (6.4%)
Banking (2.2%)
18,000 Argentaria Corporacion Bancari de Espanol ADR..................... 324,000
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
SPAIN--CONTINUED
12,000 Banco Bilbao Vizcaya (e)(f)....................................... $ 370,160
Energy Sources (1.0%)
9,800 Repsol............................................................ 309,059
Telecommunications (1.0%)
22,000 Telefonica de Espana.............................................. 303,596
Utilities--Gas and Electric (2.2%)
6,000 Empresa Nacional de Elecrricidad.................................. 308,791
50,072 Iberdrola......................................................... 379,635
------------
1,995,241
------------
SWEDEN (7.0%)
Banking (.5%)
9,600 Stadshypotek...................................................... 169,072
Business and Public Service (1.1%)
24,000 Esselte........................................................... 344,727
Forest Products and Paper (1.2%)
27,000 Stora Kopparbergs Bergslags....................................... 364,432
Health and Personal Care (2.7%)
11,000 Astra............................................................. 387,457
26,300 Svenska Handelsbanken............................................. 455,595
Transportation (1.5%)
18,500 Volvo............................................................. 454,007
------------
2,175,290
------------
SWITZERLAND (3.9%)
Electrical and Electronics (1.3%)
340 BBC Brown Boveri & Cie............................................ 396,206
Health and Personal Care (1.4%)
230 Societe Generale de Surveillance.................................. 428,354
Insurance (1.2%)
1,370 Zuerich Versicherung.............................................. 386,302
------------
1,210,862
------------
THAILAND (1.0%)
Financial Services (1.0%)
12,834 Thai Fund......................................................... 308,016
------------
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
TURKEY (.6%)
Financial Services (.6%)
17,000 Turkish Growth Fund............................................... $ 197,625
------------
UNITED KINGDOM (6.7%)
Banking (1.0%)
27,281 Barclays Bank..................................................... 323,400
Building Materials and Components (.3%)
21,700 BICC.............................................................. 103,721
Energy Services (2.1%)
80,500 British Gas....................................................... 338,266
25,833 Welsh Water....................................................... 317,683
Electrical and Electronics (.3%)
7,200 Waste Management International ADR (b)............................ 79,200
Food and Household Products (2.2%)
415,000 Albert Fisher Group............................................... 348,115
121,844 Hillsdown Holdings................................................ 341,331
Merchandising (.8%)
22,600 Kwik Save Group................................................... 234,645
------------
2,086,361
------------
Total common stocks (cost: $18,765,967)........................... 20,191,182
------------
PREFERRED STOCKS AND OTHER (3.8%)
ARGENTINA (.6%)
Multi-Industry (.6%)
4,010 Compania de Inversiones en Telecomunications convertible
preferred-- 7.00% (e)............................................ 199,498
------------
GERMANY (.4%)
Energy Services (.4%)
825 Veba Warrants (expiring 04/06/98)................................. 110,449
------------
HONG KONG (.9%)
Multi-Industry (.9%)
284,000 Jardine Strategic Holdings LTD cumulative convertible
preferred--7.50%................................................. 293,940
------------
ITALY (1.1%)
Telecommunications (1.1%)
148,000 Stet Spa di Risp.................................................. 345,777
------------
</TABLE>
See accompanying notes to investments in securities.
12
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
MEXICO (.6%)
Financial (.6%)
5,550 Nacional Financiera ADR--11.25%................................... $ 188,700
------------
UNITED KINGDOM (.2%)
Energy Services
27,900 Welsh Water....................................................... 45,592
------------
Total preferred stocks and other (cost: $1,227,929)............... 1,183,956
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (25.9%)
AUSTRALIA (3.9%)
Government (3.9%)
1,273,000 Queensland Treasury Corporation (Australian Dollar)
(c)................................................... 8.000% 05/14/03 926,390
200,000 New South Wales Treasury (Australian Dollar) (c)....... 6.500% 05/01/06 126,535
230,000 Queensland Treasury Corporation (Australian Dollar)
(c)................................................... 8.875% 11/08/96 176,082
------------
1,229,007
------------
CANADA (4.6%)
Government (4.6%)
495,000 Canadian Government Bond (Canadian Dollar) (c)......... 10.500% 10/01/04 431,628
660,000 Canadian Government Bond (Canadian Dollar) (c)......... 5.750% 03/01/99 469,126
675,000 Canadian Government Bond (Canadian Dollar) (c)......... 9.500% 10/01/98 532,708
------------
1,433,462
------------
DENMARK (2.6%)
Government (2.6%)
4,672,000 Denmark Kingdom (Danish Krone) (c)..................... 7.000% 12/15/04 794,385
------------
FRANCE (2.7%)
Government (2.7%)
1,100,000 France Government Bond (French Franc) (c).............. 8.500% 11/12/96 229,177
1,026,000 France Government Bond (French Franc) (c).............. 8.500% 03/28/00 222,746
960,000 France Government Bond (French Franc) (c).............. 9.500% 01/25/01 216,981
</TABLE>
See accompanying notes to investments in securities.
13
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- ------------
<C> <S> <C> <C> <C>
FRANCE--CONTINUED
774,000 France Government Bond (French Franc) (c).............. 10.000% 05/27/00 $ 176,407
------------
845,311
------------
GERMANY (4.6%)
Government (4.6%)
1,435,000 International Bank Reconstruction and Development
(Deutsch Mark) (c).................................... 6.125% 09/27/02 997,427
335,000 Germany Unity Fund (Deutsch Mark) (c).................. 8.000% 01/21/02 255,626
245,000 Germany Unity Fund (Deutsch Mark) (c).................. 8.750% 07/20/00 192,598
------------
1,445,651
------------
HONG KONG (1.0%)
Finance (1.0%)
400,000 PIV Investment Finance (U.S. Dollar) (c)............... 4.500% 12/01/00 323,000
------------
INDIA (.8%)
Finance (.8%)
250,000 Essar Gujarat (U.S. Dollar) (c)(d)(f).................. 7.900% 07/15/99 249,063
------------
ITALY (.8%)
Government (.8%)
430,000,000 Italy Government (Italian Lira) (c).................... 10.500% 07/15/00 259,014
------------
JAPAN (2.5%)
Finance (.7%)
18,000,000 Japan Development Bank (Japanese Yen) (c).............. 6.500% 09/20/01 224,316
Government (1.8%)
48,000,000 European Investment Bank (Japanese Yen) (c)............ 5.875% 11/26/99 569,285
------------
793,601
------------
NEW ZEALAND (1.6%)
Government (1.6%)
140,000 New Zealand Government Bond (New Zealand Dollar) (c)... 6.500% 02/15/00 87,143
430,000 New Zealand Government Bond (New Zealand Dollar) (c)... 10.000% 03/15/02 312,507
</TABLE>
See accompanying notes to investments in securities.
14
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- ------------
<C> <S> <C> <C> <C>
NEW ZEALAND--CONTINUED
125,000 New Zealand Government Bond (New Zealand Dollar) (c)... 8.000% 04/15/04 $ 83,468
------------
483,118
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SPAIN (.8%)
Government (.8%)
29,350,000 Government of Spain (Spanish Peseta) (c)............... 12.250% 03/25/00 251,234
------------
Total long-term debt securities (cost: $7,971,498)........................... 8,106,846
------------
SHORT-TERM SECURITIES (1.5%)
AUSTRALIA (1.5%)
600,000 IBM Australia (Australian Dollar) (c).................. 12.000% 03/26/96 460,228
------------
Total short-term securities (cost: $445,818)................................. 460,228
------------
Total investments in securities (cost: $28,411,212) (g)...................... $ 29,942,212
------------
------------
<FN>
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) Principal amounts for foreign debt securities are denominated in the
currencies indicated.
(d) Represents a debt security with a variable rate. The interest rate
disclosed is the rate in effect at September 30, 1995.
(e) PRIDES--Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred securities issued by a company.
Investors receive an enhanced yield but based upon a specific formula,
potential appreciation is limited. PRIDES pay dividends, have voting
rights, are noncallable for three years and upon maturity, convert into
shares of common stock.
(f) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The Fund
currently limits investments in illiquid securities to 10% of net assets at
the time of purchase. At September 30, 1995, the Fund held illiquid
securities in the amount of $908,128 which represents 2.9% of net assets.
(g) At September 30, 1995 the cost of securities for federal income tax
purposes was $28,721,915. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
</TABLE>
<TABLE>
<S> <C> <C>
Gross unrealized appreciation..................... $2,469,529
Gross unrealized depreciation..................... (1,249,232)
----------
Net unrealized appreciation....................... $1,220,297
----------
----------
</TABLE>
15
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $28,411,212)........................................... $ 29,942,212
Cash in bank on demand deposit.................................................... 1,610,358
Receivable for investment securities sold......................................... 409,266
Accrued interest and dividends receivable......................................... 291,457
Receivable for forward foreign currency contracts held, at value (note 4)......... 4,497,966
Receivable for fund shares sold................................................... 20,985
Receivable for refundable foreign income taxes withheld........................... 35,400
Organizational costs (note 6)..................................................... 32,403
-------------
Total assets.................................................................. 36,840,047
-------------
LIABILITIES
Payable for investment securities purchased....................................... 933,484
Payable to Adviser................................................................ 53,022
Payable for organizational costs (note 6)......................................... 32,403
Payable for forward foreign currency contracts held, at value (note 4)............ 4,542,548
-------------
Total liabilities............................................................. 5,561,457
-------------
Net assets applicable to outstanding capital stock................................ $ 31,278,590
-------------
-------------
Represented by:
Capital stock--$.01 par value (note 1).......................................... $ 28,989
Additional paid-in capital...................................................... 29,347,092
Undistributed net investment income............................................. 92,247
Accumulated net realized gains from investments................................. 326,069
Unrealized appreciation of investments and translation of assets and liabilities
in foreign currencies.......................................................... 1,484,193
-------------
Total--representing net assets applicable to outstanding capital stock........ $ 31,278,590
-------------
-------------
Net assets applicable to outstanding Class A shares............................... $ 30,948,777
-------------
-------------
Net assets applicable to outstanding Class C shares............................... $ 329,813
-------------
-------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,868,246........................................... $ 10.79
-------------
-------------
Class C--Shares outstanding 30,622.............................................. $ 10.77
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 557,282
Dividends (net of foreign withholding taxes of $80,025)............................ 560,024
------------
Total investment income.......................................................... 1,117,306
------------
Expenses (note 5):
Investment advisory fee............................................................ 241,970
Distribution fees--Class A......................................................... 77,712
Distribution fees--Class C......................................................... 1,119
Administrative services fee........................................................ 26,200
Custodian fees..................................................................... 83,425
Auditing and accounting services................................................... 88,675
Legal fees......................................................................... 11,459
Amortization of organizational costs............................................... 8,273
Directors' fees.................................................................... 562
Registration fees.................................................................. 31,012
Printing and shareholder reports................................................... 15,233
Insurance.......................................................................... 5,740
Other.............................................................................. 6,336
------------
Total expenses................................................................... 597,716
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (38,856)
Other fund expenses.............................................................. (17,626)
------------
Total fees and expenses waived or absorbed..................................... (56,482)
------------
Total net expenses............................................................. 541,234
------------
Investment income--net......................................................... 576,072
------------
Realized and unrealized gains (losses) on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)............................................................. 741,899
Foreign currency transactions.................................................... (73,257)
------------
668,642
------------
Net change in unrealized appreciation or depreciation on:
Investments...................................................................... 1,261,251
Translation of assets and liabilities in foreign currencies...................... (48,484)
------------
1,212,767
------------
Net gains on investments and foreign currencies.................................. 1,881,409
------------
Net increase in net assets resulting from operations................................. $ 2,457,481
------------
------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30, 1995 AND
PERIOD FROM JUNE 20, 1994 TO SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operations:
Investment income--net.............................................. $ 576,072 $ 18,405
Net realized gains (losses) on investments and foreign currency
transactions....................................................... 668,642 (9,584)
Net change in unrealized appreciation or depreciation of investments
and translation of assets and liabilities in foreign currencies.... 1,212,767 271,426
------------- -------------
Increase in net assets resulting from operations.................. 2,457,481 280,247
------------- -------------
Distributions to shareholders from:
Investment income--net:
Class A........................................................... (530,846) --
Class C........................................................... (2,174) --
Net realized gains on investments:
Class A........................................................... (310,236) --
Class C........................................................... (925) --
------------- -------------
Total distributions............................................. (844,181) --
------------- -------------
Capital share transactions (notes 5 and 7):
Proceeds from sales:
Class A........................................................... 14,280,071 15,150,000
Class C........................................................... 384,909 --
Shares issued as a result of reinvested dividends:
Class A........................................................... 75,357 --
Class C........................................................... 5,108 --
Payments for redemption of shares:
Class A........................................................... (443,874) --
Class C........................................................... (66,528) --
------------- -------------
Increase in net assets from capital share transactions.......... 14,235,043 15,150,000
------------- -------------
Total increase in net assets.................................... 15,848,343 15,430,247
Net assets at beginning of period..................................... 15,430,247 --
------------- -------------
Net assets at end of period including (undistributed net investment
income of $92,247 and $99,393, respectively)......................... $ 31,278,590 $ 15,430,247
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) ORGANIZATION
The Advantus International Balanced Fund, Inc. (the Fund) was incorporated
on January 27, 1994. The Fund is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company. On
February 14, 1995 shareholders of the Fund approved a name change to Advantus
International Balanced Fund, Inc. (effective March 1, 1995). Prior to March 1,
1995 the Fund was known as MIMLIC International Balanced Fund, Inc.
The Fund currently issues two classes of shares: Class A and Class C shares.
Class A shares are sold subject to a front-end sales charge. Class C shares are
sold without a front-end sales charge, but are subject to a higher Rule 12b-1
fee than Class A shares. Class C shares automatically convert to Class A shares
at net asset value after a specified holding period. Such holding period
declines as the amount of the purchase increases and ranges from 40 to 96 months
after purchase for Class C shares. Both classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that the level of distribution fees and sales charges charged differs between
Class A and Class C shares. Income, expenses (other than distribution fees) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
On June 20, 1994, MIMLIC Asset Management Company (MIMLIC Management)
purchased 15,000 Class A shares for $150,000. 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
1,476,997 Class A shares for $15 million prior to commencement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
INVESTMENTS IN SECURITIES
Investments in securities traded on a U.S. or foreign securities exchange
are valued at the last sales price on that exchange prior to the time when
assets are valued; securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued on the basis
of the last current bid price. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by the Board of
Directors. Such fair values are determined using pricing services or prices
quoted by independent brokers. Short-term securities with maturities of less
than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued at amortized cost which approximates 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.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities, income and expenses are translated at the exchange rate on the
transaction date. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with net realized and unrealized gains or losses from
investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes in
exchange rates.
The Fund also may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuations.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation and
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete the obligations of the contract.
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 (loss) 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 (loss) or realized gains (losses) were
recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, adjustments have been made to decrease additional
paid-in capital in the amount $8,273, decrease undistributed net investment
income in the amount of $50,198 and increase accumulated realized gains in the
amount of $58,471.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly in cash
or reinvested in additional shares. Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1995, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$27,063,595 and $12,213,083, respectively.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On September 30, 1995, the Fund had entered into forward foreign currency
exchange contracts that obligate the Fund to deliver currencies at specified
future dates. The unrealized depreciation of $44,582 on these contracts is
included in the accompanying financial statements. The terms of the open
contracts were as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO U.S. $ VALUE CURRENCY TO U.S. $ VALUE
DATE BE DELIVERED 9/30/95 BE RECEIVED 9/30/95
- ---------- ----------------------- ------------ ------------------------ ------------
<C> <C> <S> <C> <C> <C> <C>
10/31/95 30,400 US$ $ 30,400 48,988,827 ITL $ 30,400
10/04/95 14,379 US$ 14,379 9,082 GBP 14,374
10/02/95 12,331 US$ 12,331 1,231,259 JPY 12,481
10/05/95 28,908 US$ 28,908 123,668 FIM 29,028
10/31/95 35,233 US$ 35,233 173,364 FRF 35,307
10/05/95 12,404 US$ 12,404 7,809 GBP 12,359
10/06/95 5,360 US$ 5,360 3,369 GBP 5,332
10/06/95 13,994 US$ 13,994 21,140 NZD 13,917
10/06/95 31,674 US$ 31,674 19,940 GBP 31,558
10/04/95 31,157 US$ 31,157 193,720 NOK 30,966
10/06/95 31,115 US$ 31,115 19,555 GBP 30,949
10/04/95 8,663 US$ 8,663 868,082 JPY 8,800
10/03/95 13,282 US$ 13,282 1,306,960 JPY 13,248
10/04/95 13,160 US$ 13,160 1,323,635 JPY 13,417
10/09/95 31,258 US$ 31,258 40,994 AUD 30,942
10/31/95 30,038 US$ 30,038 147,802 FRF 30,101
10/31/95 33,415 US$ 33,415 164,417 FRF 33,485
10/04/95 15,412 GBP 24,393 24,266 US$ 24,266
10/04/95 26,434 CHF 23,005 22,896 US$ 22,896
10/03/95 133,529 US$ 133,529 214,368,223 ITL 133,024
10/02/95 133,927 US$ 133,927 214,979,855 ITL 133,404
10/25/95 96,623 US$ 96,623 137,500 DEM 96,630
10/23/95 192,582 US$ 192,582 275,000 DEM 193,261
10/02/95 266,412 US$ 266,412 32,869,875 ESP 266,822
10/05/95 18,500,000 JPY 187,532 190,649 US$ 190,649
10/23/95 18,500,000 JPY 187,532 178,399 US$ 178,399
10/23/95 21,000,000 JPY 212,874 202,098 US$ 202,098
10/23/95 550,000 DEM 386,522 373,253 US$ 373,253
10/25/95 275,000 DEM 193,261 188,627 US$ 188,627
10/06/95 1,000,000 CAD 742,424 737,208 US$ 737,208
10/06/95 460,000 CAD 341,515 339,033 US$ 339,033
10/23/95 275,000 DEM 193,261 194,045 US$ 194,045
10/25/95 137,500 DEM 96,630 97,428 US$ 97,428
10/12/95 550,000 DEM 386,522 382,569 US$ 382,569
10/04/95 522,554 DEM 367,233 367,690 US$ 367,690
------------ ------------
$4,542,548 $4,497,966
------------ ------------
------------ ------------
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS--(CONTINUED)
<TABLE>
<S> <C>
CAD Canadian Dollar
CHF Swiss Franc
ESP Spanish Peseta
FIM Finnish Mark
FRF French Franc
ITL Italian Lira
JPY Japanese Yen
AUD Australian Dollar
DEM German Deutch Mark
GBP British Pound Sterling
CAD Canadian Dollar
NZD New Zealand Dollar
NOK Norwegian Krone
US$ United States Dollar
</TABLE>
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement, effective March 1, 1995, with Advantus Capital Management,
Inc. (Advantus Capital or the Adviser). Advantus Capital is a wholly-owned
subsidiary of MIMLIC Asset Management Company (MIMLIC Management) which, prior
to March 1, 1995, served as investment adviser to the Fund. Under the agreement,
Advantus Capital manages the Fund's assets and provides research, statistical
and advisory services and pays related office rental and executive expenses and
salaries. In addition, as part of the advisory fee, Advantus Capital pays the
expenses of the Fund's transfer, dividend disbursing and redemption agent (The
Minnesota Mutual Life Insurance Company (Minnesota Mutual), the parent of MIMLIC
Management). The fee for investment management and advisory services is based on
the average daily net assets of the Fund at the annual rate of .95 percent on
the first $25 million in net assets, .80 percent on the next $25 million, .75
percent on the next $50 million and .65 percent on net assets in excess of $100
million. Fees under the new agreement with Advantus Capital are the same as
under the old agreement with MIMLIC Management.
On February 14, 1995 shareholders of the Fund also approved a new
sub-advisory agreement between Advantus Capital and Templeton Investment
Counsel, Inc. (Templeton). From its advisory fee, Advantus Capital pays
Templeton, Inc. a fee equal to an annual rate of .70 percent on the first $25
million in net assets, .55 percent on the next $25 million, .50 percent on the
next $50 million and .40 percent on net assets in excess of $100 million. Fees
under the new sub-advisory agreement between Advantus Capital and Templeton
Investment Counsel, Inc. are the same as the old agreement between MIMLIC
Management and Templeton Investment Counsel, Inc.
The Fund has adopted separate Plans of Distribution applicable to Class A
and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to MIMLIC Sales Corporation
(MIMLIC Sales), the underwriter of the Fund and a 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 C Plan provides for a fee of up to 1.00 percent of average
daily net assets of Class C shares.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Class C 1.00 percent fee is comprised of a .75 percent distribution fee and
a .25 percent service fee. MIMLIC Sales is currently waiving that portion of
Class A distribution fees which exceeds, as a percentage of average daily net
assets, .15 percent for the Fund.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1995 the administrative services fee for
the Fund was $2,450 per month. Effective February 1, 1995 the administrative
services fee is $2,050 per month.
Advantus Capital (MIMLIC Management prior to March 1, 1995) directly incurs
and pays the above operating expenses and the Fund in turn reimburses Advantus
Capital. During the year ended September 30, 1995, Advantus Capital voluntarily
agreed to absorb $17,626 in expenses that were otherwise payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's two
classes of shares amounted to $150,769.
As of September 30, 1995, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A................................. 2,490,726 86.8%
Class C................................. 1,024 3.3%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $9,835.
(6) 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.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1995 and the period
from June 20, 1994 to September 30, 1994 for Class A shares and the period from
March 1, 1995 to September 30, 1995 for Class C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS C
---------------------- -----------
1995 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Sold.................................... 1,411,085 1,491,997 36,260
Issued for reinvested distributions..... 7,265 -- 481
Redeemed................................ (42,101) -- (6,119)
---------- ---------- -----------
1,376,249 1,491,997 30,622
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------- -------------
PERIOD FROM PERIOD FROM
SEPTEMBER 16, MARCH 1,
YEAR ENDED 1994(A) TO 1995(A) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period................... $ 10.34 $ 10.54 $ 9.95
------------- ------------- ------
Income from investment operations:
Net investment income................................ .20 .01 .11
Net gains or losses on securities (both realized and
unrealized)......................................... .56 (.21) .91
------------- ------------- ------
Total from investment operations................... .76 (.20) 1.02
------------- ------------- ------
Less distributions:
Dividends from net investment income................. (.19) -- (.13)
Distributions from capital gains..................... (.12) -- (.07)
------------- ------------- ------
Total distributions................................ (.31) -- (.20)
------------- ------------- ------
Net asset value, end of period......................... $ 10.79 $ 10.34 $ 10.77
------------- ------------- ------
------------- ------------- ------
Total return (b)....................................... 7.4% (1.9)%(c) 10.3%(d)
Net assets, end of period (in thousands)............... $30,949 $15,430 $ 330
Ratio of expenses to average daily net assets (e)...... 2.08% .47%(f) 2.93%(g)
Ratio of net investment income to average daily net
assets (e)............................................ 2.22% .14%(f) 1.39%(g)
Portfolio turnover rate (excluding short-term
securities)........................................... 52.0% 12.1% 52.0%
<FN>
- ----------
(a) Commencement of operations.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of sales charges.
(c) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(d) Total return is presented for the period from March 1, 1995, commencement
of operations, to September 30, 1995.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $56,482
and $4,034 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994, respectively. If the Fund had been charged for
theses expenses, the ratio of expenses to average daily net assets would
have been 2.30% and .49% for Class A shares, respectively, and 3.00% for
Class C shares. The ratios of net investment income to average daily net
assets would have been 2.00% and .12% for Class A shares, respectively, and
1.32% for Class C 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.
</TABLE>
25
<PAGE>
PART C. OTHER INFORMATION
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements: The financial statements of the
Registrant are included in Part B of the Registration Statement.
(b) Exhibits:
(1) Articles of Incorporation for the Registrant
(2) Bylaws of the Registrant
(4)(A) Specimen common Class A shares of the Registrant
(4)(B) Specimen common Class C shares of the Registrant
(5)(A) Investment Advisory Agreement between Advantus
Capital Management, Inc. and the Registrant
(5)(B) Investment Sub-Advisory Agreement between
Advantus Capital Management, Inc. and Templeton
Investment Counsel, Inc.
(6)(A) Underwriting and Distribution Agreement between
the Registrant and MIMLIC Sales Corporation
(6)(B) Form of Dealer Sales Agreement between MIMLIC
Sales Corporation, principal underwriter for the
Registrant, and dealers
(8) Custodian Agreement between the Regstrant and
Norwest Bank Minnesota, N.A.
(9) Administrative Service Agreement between the
Registrant and The Minnesota Mutual Life Insurance
Company
(10) Opinion and Consent of Dorsey & Whitney
(11) Consent of KPMG Peat Marwick LLP
<PAGE>
(13)(A) Letter of Investment Intent regarding the
Registrant's initial capital from MIMLIC
Asset Management Company
(13)(B) Letter of Investment Intent regarding the
Registrant's initial capital from The Minnesota
Mutual Life Insurance Company
(15)(A) Plan of Distribution for Class A shares of the
Registrant
(15)(B) Plan of Distribution for Class C shares of the
Registrant
(16) Calculations of Yield and Total Returns of
Registrant
(17)(A) Financial Data Schedule - Class A shares
(17)(B) Financial Data Schedule - Class C shares
(19) Power of Attorney to sign Registration Statement
executed by Directors of Registrant
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Wholly-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Asset Management Company
The Ministers Life Insurance Company
MIMLIC Corporation
Minnesota Fire and Casualty Company
Northstar Life Insurance Company (New York)
Robert Street Energy, Inc.
Open-end registered investment company offering shares solely to separate
accounts of The Minnesota Mutual Life Insurance Company:
MIMLIC Series Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Asset Management Company:
MIMLIC Sales Corporation
Advantus Capital Management, Inc.
Wholly-owned subsidiaries of MIMLIC Corporation:
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MIMLIC Venture Corporation
Personal Finance Company (Delaware)
Wedgewood Valley Golf, Inc.
Ministers Life Resources, Inc.
Enterprise Holding Corporation
HomePlus Agency, Inc.
<PAGE>
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Oakleaf Service Corporation
Lafayette Litho, Inc.
Financial Ink Corporation
Concepts in Marketing Research Corporation
Concepts in Marketing Services Corporation
National Association of Religious Professionals, Inc.
Wholly-owned subsidiary of Minnesota Fire and Casualty Company:
HomePlus Insurance Company
Majority-owned subsidiaries of MIMLIC Imperial Corporation:
J. H. Shoemaker Advisory Corporation
Consolidated Capital Advisors, Inc.
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Wholly-owned subsidiary of Oakleaf Service Corporation:
New West Agency, Inc. (Oregon)
Majority-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
MIMLIC Cash Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Less than majority owned, but greater than 25% owned, subsidiaries of The
Minnesota Mutual Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Money Market Fund, Inc.
Less than 25% owned subsidiaries of The Minnesota Mutual Life Insurance Company:
Advantus Bond Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Unless indicated otherwise parenthetically, each of the above
corporations is a Minnesota corporation.
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of November 30, 1995, a date within 90 days of the date of filing of
this Registration Statement:
Title of Class Number of Record Holders
--------------------- ------------------------
Class A Common Shares 957
Class C Common Shares 59
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide
that the Registrant shall indemnify such persons, for such expenses and
liabilities, in such manner, under such circumstances, to the full extent
permitted by Section 302A.521, Minnesota Statutes, as now enacted or hereafter
amended, provided that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereafter amended. Section 302A.521 of the Minnesota Statutes, as now
enacted, provides that a corporation shall indemnify a person made or threatened
to be made a party to a proceeding against judgments, penalties, fines,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the proceeding, if,
with respect to the acts or omissions of the person complained of in the
proceeding, the person has not been indemnified by another organization for the
same judgments, penalties, fines, settlements and reasonable expenses incurred
by the person in connection with the proceeding with respect to the same acts or
omissions; acted in good faith; received no improper personal benefit and the
Minnesota Statute dealing with directors' conflicts of interest, if applicable,
has been satisfied; in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful and reasonably believed that the
conduct was in the best interests of the corporation or, in certain
circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation.
Section 17(h) of the Investment Company Act of 1940 provides that
neither the charter, certificate of incorporation, articles of association,
indenture of trust, nor the by-laws of any registered investment company, nor
any other instrument pursuant to which such a company is organized or
administered, shall contain any provisions which protects or purports to
protect any director or officer of such company against any liability to the
company or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of duties involved in the conduct of his office. The staff of the
Securities and Exchange Commission has stated that it is of the view that an
indemnification provision does not violate Section 17(h) if it precludes
indemnification for any liability arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties ("Disabling
conduct") and sets forth reasonable and fair means for determining whether
indemnification shall be made. In the staff's view, "reasonable and fair
means" would include (1) a final decision on the merits by a court or other
body before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct or, (2) in the
absence of such a decision, a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of disabling
conduct, by (a) the vote of a majority of a quorum of directors who are
neither "interested persons" of the company as defined in Section 2(a)(19) of
the Investment Company Act of 1940 nor parties to the proceeding
("disinterested, non-party directors") or (b) an independent legal counsel in
a written opinion. The dismissal of either a court action or administrative
proceeding against an indemnitee for insufficiency of evidence of any
disabling conduct with which he has been charged would, in the staff's view,
provide reasonable assurance that he was not liable by reason of disabling
conduct. The staff also believes that a
<PAGE>
determination by the vote of a majority of a quorum of disinterested, non-party
directors would provide reasonable assurance that the indemnitee was not liable
by reason of disabling conduct.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) MIMLIC Asset Management Company
Directors and Officers Office with
of Investment Adviser Investment Adviser Other Business Connections
- ---------------------- ------------------ --------------------------
Paul H. Gooding President and President, Treasurer and
Director Director, MIMLIC Asset
Management Company;
President, Secretary and
Director, MIMLIC Corporation;
Director, MIMLIC Imperial
Corporation; Director, MIMLIC
Venture Corporation; Vice
President and Director, MIMLIC
Funding, Inc.; Vice President
and Director, Robert Street
Energy, Inc.; Vice President,
Director, Personal Finance
Company; Vice President and
Treasurer, The Minnesota
Mutual Life Insurance Company
James P. Tatera Senior Vice President, Vice President and Chief
Treasurer and Director Equity Portfolio Manager,
MIMLIC Asset Management
Company; Vice President,
MIMLIC Funding, Inc.; Second
Vice President, The Minnesota
Mutual Life Insurance Company
Thomas A. Gunderson Vice President None
<PAGE>
Kent R. Weber Vice President None
Wayne R. Schmidt Vice President Secretary and Treasurer,
MIMLIC Funding, Inc.;
Treasurer and Assistant
Secretary, Robert Street
Energy, Inc.; Vice President
and Secretary, MIMLIC Imperial
Corporation
Matthew D. Finn Vice President President, Unified Capital
Management, Inc.
Jeffrey R. Erickson Vice President None
Kevin J. Hiniker Secretary Senior Attorney, MIMLIC Asset
Management Company
(b) Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI"), a Florida corporation with
offices at Broward Financial Centre, Suite 2100, Fort Lauderdale, Florida 33394-
3091, is an indirect, wholly-owned subsidiary of Franklin Resources, Inc. TICI
acts as the investment adviser to, in addition to acting as investment sub-
adviser to the Registrant, the following U.S. registered investment companies or
series:
- Templeton Smaller Companies Growth Fund
- Templeton Income Trust:
- Templeton Income Fund
- Templeton Money Fund
- Templeton Global Income Fund, Inc.
- Templeton Variable Annuity Fund
- Templeton Variable Products Series Fund (TIP):
- Templeton Stock Fund
- Templeton Asset Allocation Fund
- Templeton Bond Fund
- Templeton Money Market Fund
- Templeton International Fund
- Templeton Global Governments Income Trust
- Templeton Global Opportunities Trust
- Templeton Global Utilities, Inc. (Subadviser)
- Templeton Institutional Funds, Inc.:
- Templeton Foreign Equity Series
- Templeton Growth Series
- Templeton Global Fixed Income Series
- Templeton Foreign Equity (South Africa Free) Series
- Templeton Capital Accumulator Fund, Inc.
- Templeton American Trust, Inc.
- Templeton Emerging Markets Income Fund, Inc.
- Templeton Global Infrastructure Fund
- Templeton Emerging Markets Appreciation Fund, Inc. (Subadviser)
- Templeton Americas Government Securities Fund
- Templeton Global Strategy SICAV
- Templeton Global Utilities Fund (Subadviser)
- Templeton Pan American Fund
- Templeton Global Income Fund
- Templeton U.S. Government Fund
- Templeton Deutsche Global Bond Fund
- Templeton U.S. Dollar Liquid Reserve Fund
- Templeton Global Balanced Fund
- Templeton Deutsche Mark Liquid Reserve Fund
- Templeton Global Convertible Fund
- Templeton Global Infrastructure and Communications Fund
- Templeton Emerging Markets Fixed Income Fund
- Templeton Haven Fund
<PAGE>
- Templeton Global Value Fund Limited
- Templeton Global Bond Fund (Subadviser)
- Templeton Global Smaller Companies Fund (Subadviser)
- Templeton Canadian Bond Fund (Subadviser)
- Templeton Balanced Fund (Subadviser)
- Templeton Global Balanced Fund (Subadviser)
- Templeton International Balanced Fund (Subadviser)
- Templeton Canadian Asset Allocation Fund (Subadviser)
- Franklin/Templeton Japan Fund
- Franklin Valuemark Funds (Subadviser):
- Templeton International Equity Fund
- Templeton Pacific Growth Fund
- Global Income Fund
- Templeton Global Asset Allocation Fund
- Franklin International Trust (Subadviser):
- Franklin International Equity Fund
- Franklin Pacific Growth Fund
- Franklin Investors Securities Trust (Subadviser):
- Franklin Global Government Income Fund
- Franklin Tax-Advantaged International Bond Fund (Subadviser)
- Franklin Strategic Series (Subadviser):
- Franklin Strategic Income Fund
- Franklin/Templeton Global Trust (Subadviser):
- Franklin/Templeton German Government Bond Fund
- Franklin/Templeton Global Currency Fund
- Franklin/Templeton Hard Currency Fund
- Franklin/Templeton High Income Currency Fund
- MIMLIC Series Fund, Inc. (Subadviser):
- International Stock Portfolio
- Advantus International Balanced Fund (Subadviser)
- Pacific Select Fund (Subadviser)
- American AAdvantage Funds (Subadviser)
- American Aadvantage Mileage Funds (Subadviser)
- Marshall International Stock Fund (Subadviser)
- Northwest Mutual International Equity Fund (Subadviser)
- Maxim Series Fund, Inc. (Subadviser):
- International Equity Portfolio
The following are Directors of TICI, located at the above-referenced
address unless otherwise indicated, and their principal occupations or other
business connections which are of a substantial nature:
Name, Address and
Position with TICI Principal Occupation
------------------ --------------------
Charles E. Johnson Senior Vice President and
Chairman and Director of Franklin
777 Mariners Island Blvd. Resources, Inc.; President of
San Mateo, California Templeton Worldwide, Inc.
Donald F. Reed President, CEO and Director of
Director and President Templeton Management Limited
Martin L. Flanagan Senior Vice President, Chief
Director and Executive Financial Officer and
Vice President Treasurer of Franklin
777 Mariners Island Blvd. Resources, Inc.
San Mateo, California
Gregory E. McGowan Attorney - International
Director and Executive Marketing
Vice President
Gary P. Motyl Equity Research and Portfolio
Director and Executive Management
Vice President
Elizabeth M. Knoblock Attorney
Senior Vice President,
Secretary and General Counsel
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) MIMLIC Sales currently acts as a principal underwriter for the
following investment companies:
Advantus Horizon Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Money Market Fund, Inc.
Advantus Bond Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
MIMLIC Cash Fund, Inc.
Minnesota Mutual Variable Fund D
Minnesota Mutual Variable Annuity Account
Minnesota Mutual Variable Life Account
Minnesota Mutual Group Variable Annuity Account
Minnesota Mutual Variable Universal Life Account
(b) The name and principal business address, positions and offices
with MIMLIC Sales, and positions and offices with Registrant of each director
and officer of MIMLIC Sales is as follows:
Positions and Positions and
Name and Principal Offices Offices
Business Address with Underwriter with Registrant
- ------------------ ---------------- ---------------
Robert E. Hunstad Chairman of the Board None
The Minnesota Mutual and Director
Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Bardea C. Huppert President, Chief Vice President
MIMLIC Sales Corporation Executive Officer and
400 Robert Street North Director
St. Paul, Minnesota 55101
Derick R. Black Vice President and None
MIMLIC Sales Corporation Chief Compliance Officer
400 Robert Street North
St. Paul, Minnesota 55101
Margaret Milosevich Vice President, Chief None
MIMLIC Sales Corporation Operations Officer and
400 Robert Street North Treasurer
St. Paul, Minnesota 55101
Dennis E. Prohofsky Secretary and Director None
The Minnesota Mutual
Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Thomas L. Clark Assistant Secretary None
MIMLIC Sales Corporation
400 Robert Street North
St. Paul, Minnesota 55101
Kevin Collier Assistant Secretary None
MIMLIC Sales Corporation
400 Robert Street North
St. Paul, Minnesota 55101
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books and other documents
required to be maintained by Section 3(a) of the Investment Company Act of 1940
and Rules 31a-1 to 31a-3 promulgated thereunder is maintained by Minnesota
Mutual, 400 Robert Street North, St. Paul, Minnesota 55101; except that the
physical possession of certain accounts, books and other documents related to
the custody of the Registrant's securities is maintained by the following
custodian:
Norwest Bank Minnesota, N.A.
8th Street and Marquette Avenue
Minneapolis, Minnesota 55479
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish, upon request and
without charge to each person to whom a prospectus is delivered, a copy of the
Registrant's latest annual report to shareholders containing the information
called for by Item 5A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of St.
Paul and the State of Minnesota on the 26th day of January, 1996.
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
Registrant
By /s/ Paul H. Gooding
-----------------------------------
Paul H. Gooding, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
/s/ Paul H. Gooding President (principal
- ------------------------------ executive officer) January 26, 1996
Paul H. Gooding and Director
/s/ Frederick P. Feuerherm Director and Treasurer
- ------------------------------ (principal financial January 26, 1996
Frederick P. Feuerherm and accounting officer)
Ralph D. Ebbott* Director)
- ------------------------------ )
Ralph D. Ebbott ) By /s/ Paul H. Gooding
) ----------------------------
) Paul H. Gooding
Charles E. Arner* Director) Attorney-in-Fact
- ------------------------------ )
Charles E. Arner ) Dated: January 26, 1996
)
)
Ellen S. Berscheid* Director)
- ------------------------------ )
Ellen S. Berscheid )
_______________
*Registrant's director executing power of attorney dated April 19, 1995, a copy
of which is filed herewith.
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number and Description
- ------------------------------
(1) Articles of Incorporation for the Registrant
(2) Bylaws of the Registrant
(4)(A) Specimen common Class A shares of the Registrant
(4)(B) Specimen common Class C shares of the Registrant
(5)(A) Investment Advisory Agreement between Advantus Capital Management,
Inc. and the Registrant
(5)(B) Investment Sub-Advisory Agreement between Advantus Capital
Management, Inc. and Templeton Investment Counsel, Inc.
(6)(A) Underwriting and Distribution Agreement between the Registrant and
MIMLIC Sales Corporation
(6)(B) Form of Dealer Sales Agreement between MIMLIC Sales Corporation,
principal underwriter for the Registrant, and dealers
(8) Custodian Agreement between the Registrant and Norwest Bank
Minnesota, N.A.
(9) Administrative Service Agreement between the Registrant and The
Minnesota Mutual Life Insurance Company
(10) Opinion and Consent of Dorsey & Whitney
(11) Consent of KPMG Peat Marwick LLP
<PAGE>
(13)(A) Letter of Investment Intent regarding the Registrant's initial
capital from MIMLIC Asset Management Company
(13)(B) Letter of Investment Intent regarding the Registrant's initial
capital from The Minnesota Mutual Life Insurance Company
(15)(A) Plan of Distribution for Class A shares of the Registrant
(15)(B) Plan of Distribution for Class C shares of the Registrant
(16) Calculations of Yield and Total Returns of Registrant
(17)(A) Financial Data Schedule - Class A shares
(17)(B) Financial Data Schedule - Class C shares
(19) Power of Attorney to sign Registration Statement executed by
Directors of Registrant
<PAGE>
ARTICLES OF INCORPORATION
OF
MIMLIC INTERNATIONAL ASSET ALLOCATION FUND, INC.
For the purpose of forming a corporation pursuant to the provisions of
Minnesota Statutes, Chapter 302A, the following Articles of Incorporation are
adopted:
1. The name of the corporation (the "Corporation") is MIMLIC
International Asset Allocation Fund, Inc.
2. The Corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all lawful
businesses for which corporations may be organized under the Minnesota Statutes,
Chapter 302A. Without limiting the generality of the foregoing, the Corporation
shall have specific power:
(a) To conduct, operate and carry on the business of a so-called
"open-end" management investment company pursuant to applicable state
and federal regulatory statutes, and exercise all the powers necessary
and appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise acquire, and
to own, hold, pledge, mortgage, hypothecate, sell, possess, transfer or
otherwise dispose of, or turn to account or realize upon, and generally
deal in, all forms of securities of every kind, nature, character, type
and form, and other financial instruments which may not be deemed to be
securities, including but not limited to futures contracts and options
thereon. Such securities and other financial instruments may include
but are not limited to shares, stocks, bonds, debentures, notes, scrip,
participation certificates, rights to subscribe, warrants, options,
certificates of deposit, bankers' acceptances, repurchase agreements,
commercial paper, chooses in action, evidences of indebtedness,
certificates of indebtedness and certificates of interest of any and
every kind and nature whatsoever, secured and unsecured, issued or to
be issued, by any corporation, company, partnership (limited or
general), association, trust, entity or person, public or private,
whether organized under the laws of the United States, or any state,
commonwealth, territory or possession thereof, or organized under the
laws of any foreign country, or any state, province, territory or
possession thereof, or issued or to be issued by the United States
government or any agency or instrumentality thereof, options on stock
indexes, stock index and interest rate futures contracts and options
thereon, and other futures contracts and options thereon.
(c) In the above provisions of this Article 2, purposes shall also
be construed as powers and powers shall also be construed as purposes,
and the enumeration of specific purposes or powers shall not be
construed to limit other statements of purposes or to limit purposes or
powers which the Corporation may otherwise have under applicable law,
all of the same being separate and cumulative, and all of the same may
be carried on, promoted and pursued, transacted or exercised in any
place whatsoever.
3. The Corporation shall have perpetual existence.
<PAGE>
4. The location and post office address of the registered office in
Minnesota is 400 Robert Street North, St. Paul, Minnesota 55101-2098.
5. (a) The total authorized number of shares of the Corporation is ten
billion (10,000,000,000), all of which shall be common shares of the
par value of $.01 per share (individually, a "Share" and collectively,
the "Shares"). The Corporation may issue and sell any of its Shares in
fractional denominations to the same extent as its whole Shares, and
Shares and fractional denominations shall have, in proportion to the
relative fractions represented thereby, all the rights of whole Shares,
including, without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon
liquidation of the Corporation.
(b) The Shares may be classified by the Board of Directors in one or
more classes (individually, a "Class" and, collectively, together with
any other class or classes, the "Classes") with such relative rights
and preferences as shall be stated or expressed in a resolution or
resolutions providing for the issue of any such Class or Classes as may
be adopted from time to time by the Board of Directors of the
Corporation pursuant to the authority hereby vested in the Board of
Directors and Minnesota Statutes, Section 302A.401, Subd. 3, or any
successor provision. The Shares of each Class may be subject to such
charges and expenses (including by way of example, but not by way of
limitation, front-end and deferred sales charges, expenses under Rule
12b-1 plans, administration plans, service plans, or other plans or
arrangements, however designated) as may be adopted from time to time
by the Board of Directors in accordance, to the extent applicable, with
the Investment Company Act of 1940, as amended (together with the rules
and regulations promulgated thereunder, the "1940 Act"), which charges
and expenses may differ from those applicable to another Class, and all
of the charges and expenses to which a Class is subject shall be borne
by such Class and shall be appropriately reflected (in the manner
determined by the Board of Directors in the resolution or resolutions
providing for the issue of such Class) in determining the net asset
value and the amounts payable with respect to dividends and
distributions on and redemptions or liquidations of, such Class.
Subject to compliance with the requirements of the 1940 Act, the Board
of Directors shall have the authority to provide that Shares of any
Class shall be convertible (automatically, optionally or otherwise)
into Shares of one or more other Classes in accordance with such
requirements and procedures as may be established by the Board of
Directors.
6. The shareholders of each Class of common Shares of the Corporation:
(a) shall not have the right to cumulate votes for the election of
directors; and
(b) shall have no preemptive right to subscribe to any issue of
Shares of any Class of the Corporation now or hereafter created,
designated or classified.
7. A description of the relative rights and preferences of all Classes
of Shares is as follows, unless otherwise set forth in one or more amendments to
these Articles of Incorporation or in the resolution providing for the issue of
such Classes:
-2-
<PAGE>
(a) On any matter submitted to a vote of shareholders of the
Corporation, all Shares of the Corporation then issued and outstanding
and entitled to vote, irrespective of Class, shall be voted in the
aggregate and not by Class, except: (i) when otherwise required by
Minnesota Statutes, Chapter 302A, in which case Shares will be voted by
individual Class, as applicable; (ii) when otherwise required by the
1940 Act or the rules adopted thereunder, in which case Shares shall be
voted by individual Class, as applicable; and (iii) when the matter
does not affect the interests of a particular Class thereof, in which
case only shareholders of the Class affected shall be entitled to vote
thereon and shall vote by individual Class.
(b) The Board of Directors may, to the extent permitted by Minnesota
Statutes, Chapter 302A or any successor provision thereto, declare and
pay dividends or distributions in Shares, cash or other property on any
or all Classes of Shares, the amount of such dividends and the payment
thereof being wholly in the discretion of the Board of Directors.
(c) With the approval of a majority of the shareholders of each of
the affected Classes of Shares present in person or by proxy at a
meeting called for the following purpose (provided that a quorum of the
issued and outstanding Shares of each affected Class in present at such
meeting in person or by proxy), the Board of Directors may transfer the
assets of any Class to any other Class. Upon such a transfer, the
Corporation shall issue Shares representing interests in the Class to
which the assets were transferred in exchange for all Shares
representing interests in the Class from which the assets were
transferred. Such Shares shall be exchanged at their respective net
asset values.
8. The following additional provisions, when consistent with law, are
hereby established for the management of the business, for the conduct of the
affairs of the Corporation, and for the purpose of describing certain specific
powers of the Corporation and of its directors and shareholders.
(a) In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Corporation, the Board of
Directors is expressly authorized to do the following:
(i) to make, adopt, alter, amend and repeal Bylaws of the
Corporation unless reserved to the shareholders by the Bylaws or by
the laws of the State of Minnesota, subject to the power of the
shareholders to change or repeal such Bylaws;
(ii) to distribute, in its discretion, for any fiscal year (in
the year or in the next fiscal year) as ordinary dividends and as
capital gains distributions, respectively, amounts sufficient to
enable the Corporation to qualify under the Internal Revenue Code as
a regulated investment company to avoid any liability for federal
income tax in respect of such year. Any distribution or dividend
paid to shareholders from any capital source shall be accompanied by
a written statement showing the source or sources of such payment;
(iii) to authorize, subject to such vote, consent, or approval
of shareholders and other conditions, if any, as may be required by
any applicable statute, rule or regulation, the execution and
performance by the Corporation of any agreement or agreements with
any person, corporation, association, company,
-3-
<PAGE>
trust, partnership (limited or general) or other organization
whereby, subject to the supervision and control of the Board of
Directors, any such other person, corporation, association, company,
trust, partnership (limited or general), or other organization shall
render managerial, investment advisory, distribution, transfer
agent, accounting and/or other services to the Corporation
(including, if deemed advisable, the management or supervision of
the investment portfolios of the Corporation) upon such terms and
conditions as may be provided in such agreement or agreements;
(iv) to authorize any agreement of the character described in
subparagraph (iii) of this paragraph (a) with any person,
corporation, association, company, trust, partnership (limited or
general) or other organization, although one or more of the members
of the Board of Directors or officers of the Corporation may be the
other party to any such agreement or an officer, director, employee,
shareholder, or member of such other party, and no such agreement
shall be invalidated or rendered voidable by reason of the existence
of any such relationship;
(v) to allot and authorize the issuance of the authorized but
unissued Shares of any Class of the Corporation;
(vi) to accept or reject subscriptions for Shares of any Class
made after incorporation;
(vii) to fix the terms, conditions and provisions of and
authorize the issuance of options to purchase or subscribe for
Shares of any Class including the option price or prices at which
Shares may be purchased or subscribed for;
(viii) to take any action which might be taken at a meeting of
the Board of Directors, or any duly constituted committee thereof,
without a meeting pursuant to a writing signed by that number of
directors or committee members that would be required to take the
same action at a meeting of the Board of Directors or committee
thereof at which all directors or committee members were present;
provided, however, that, if such action also requires shareholder
approval, such writing must be signed by all of the directors or
committee members entitled to vote on such matter; and
(ix) to determine what constitutes net income and the net
asset value of the Shares of each Class of the Corporation. Any
such determination made in good faith shall be final and conclusive,
and shall be binding upon the Corporation, and all holders (past,
present and future) of Shares of each Class thereof.
(b) Except as provided in the next sentence of this paragraph (b),
Shares of any Class hereafter issued which are redeemed, exchanged, or
otherwise acquired by the Corporation shall return to the status of
authorized and unissued Shares of such Class. Upon the redemption,
exchange, or other acquisition by the Corporation of all outstanding
Shares of any Class hereafter issued, such Shares shall return to the
status of authorized and unissued Shares without designation as to
Class and all provisions of these Articles of Incorporation relating to
such Class (including, without limitation, any statement establishing
or fixing the rights and preferences of
-4-
<PAGE>
such Class), shall cease to be of further effect and shall cease to be
a part of these articles. Upon the occurrence of such events, the
Board of Directors of the Corporation shall have the power, pursuant to
Minnesota Statutes Section 302A.135, Subd. 5 or any successor provision
and without shareholder action, to cause restated articles of
incorporation of the Corporation to be prepared and filed with the
Secretary of State of the State of Minnesota which reflect such removal
from these articles of all such provisions relating to such Class
thereof.
(c) The determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with
these Articles of Incorporation and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties, shall be final and conclusive and shall be binding upon the
Corporation and every holder of Shares of its capital stock: namely,
the amount of the obligations, liabilities and expenses of each Class
of the Corporation; the amount of the net income of each Class of the
Corporation for any period and the amount of assets at any time legally
available for the payment of dividends in each Class; the amount of
paid-in surplus, other surplus, annual or other net profits, or net
assets in excess of capital or undivided profits of each Class; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged);
the market value, or any sale, bid or asked price to be applied in
determining the market value, of any security owned or held by the
Corporation; the fair value of any other asset owned by the
Corporation; the number of Shares of each Class of the Corporation
issued or issuable; any matter relating to the acquisition, holding and
disposition of securities and other assets by the Corporation; and any
question as to whether any transaction constitutes a purchase of
securities on margin, a short sale of securities, or an underwriting of
the sale of, or participation in any underwriting or selling group in
connection with the public distribution of any securities.
(d) The Board of Directors or the shareholders of the Corporation
may adopt, amend, affirm or reject investment policies and restrictions
upon investment or the use of assets of the Corporation and may
designate some such policies as fundamental and not subject to change
other than by a vote of a majority of the outstanding voting
securities, as such phrase is defined in the 1940 Act, of the
Corporation.
9. The Corporation shall indemnify such persons for such expenses and
liabilities, in such manner, under such circumstances, and to the full extent
permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or
hereafter amended, provided, however, that no such indemnification may be made
if it would be in violation of Section 17(h) of the 1940 Act, as now enacted or
hereafter amended.
10. To the fullest extent permitted by the Minnesota Statutes,
Chapter 302A, as the same exists or may hereafter be amended (except as
prohibited by the 1940 Act, as the same exists or may hereafter be amended), a
director of the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
-5-
<PAGE>
11. The names of the first directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected and
qualified, are:
Name
----
Paul H. Gooding
Frederick P. Feuerherm
Charles E. Arner
Ellen S. Berscheid
Ralph E. Ebbott
12. The name and address of the incorporator, who is a natural
person of full age, is:
Eric J. Bentley 400 Robert Street North
St. Paul, Minnesota 55101
IN WITNESS WHEREOF, the undersigned sole incorporator has executed
these Articles of Incorporation on this 26th day of January, 1994.
___________________________________________
Eric J. Bentley
STATE OF MINNESOTA)
) ss
COUNTY OF RAMSEY )
On January 26, 1994, before me, a Notary Public, personally appeared
Eric J. Bentley, to me known to be the person named as incorporator and who
executed the foregoing Articles of Incorporation, and he acknowledged that he
executed the same as his free act and deed.
___________________________________________
-6-
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MIMLIC INTERNATIONAL BALANCED FUND, INC.
The undersigned, being the President and Assistant Secretary,
respectively, of MIMLIC International Balanced Fund, Inc. (the "Corporation"),
hereby certify as follows:
1. The name of the Corporation is "MIMLIC International Balanced Fund,
Inc."
2. The following resolution was adopted, pursuant to Section 302A.135 of
the Minnesota Statutes, by the Board of Directors of the Corporation
at a meeting held on October 25, 1994:
WHEREAS, the Boards of Directors of each of MIMLIC
Investors Fund I, Inc., MIMLIC Asset Allocation Fund, Inc.,
MIMLIC Money Market Fund, Inc., MIMLIC Mortgage
Securities Income Fund, Inc., MIMLIC Fixed Income Securities
Fund, Inc., MIMLIC Value Fund, Inc., MIMLIC Small Company
Fund, Inc. and MIMLIC International Balanced Fund, Inc. have
been presented with information by MIMLIC Asset Management
Company and MIMLIC Sales Corporation that it would be in the
best interests of said Funds, both in terms of name recognition
and marketability of shares, to amend the Funds' Articles of
Incorporation to change the name of each Fund.
NOW, THEREFORE, BE IT RESOLVED, that Article 1 of the
Articles of Incorporation of each of said Funds shall be and
hereby is amended by deleting in each case, the current name and
substituting therefor the respective new name as set forth below,
and that such amendment of the Funds' Articles of Incorporation
be recommended for approval at the Regular Meeting of
Shareholders to be held February 14, 1995.
Current Name New Name
------------ --------
MIMLIC Investors Fund I, Inc. Advantus Horizon Fund, Inc.
MIMLIC Asset Allocation Advantus Spectrum Fund, Inc.
Fund, Inc.
MIMLIC Money Market Fund, Inc. Advantus Money Market Fund, Inc.
MIMLIC Mortgage Securities Advantus Mortgage Securities
Income Fund, Inc. Fund, Inc.
MIMLIC Fixed Income Securities Advantus Bond Fund, Inc.
Fund, Inc.
MIMLIC Value Fund, Inc. Advantus Cornerstone Fund, Inc.
MIMLIC Small Company Advantus Enterprise Fund, Inc.
Fund, Inc.
MIMLIC International Balanced Advantus International Balanced
Fund, Inc. Fund, Inc.
<PAGE>
3. The above proposed amendment to the Articles of Incorporation of
the Corporation was approved by the shareholders of the
Corporation, pursuant to Section 302A.135 of the Minnesota
Statutes, at a meeting held on February 14, 1995.
4. Article 1 of the Articles of Incorporation (the "Corporation") is
hereby amended to read as follows:
1. The name of the corporation (the "Corporation") is Advantus
International Balanced Fund, Inc.
5. This amendment to the Articles of Incorporation of the
Corporation has been approved pursuant to Minnesota Statutes
Chapter 302A. The undersigned are authorized to execute this
instrument and understand that, by signing this instrument, they
are subject to the penalties of perjury as set forth in Section
609.48 as if they had signed this instrument under oath.
Executed this 24th day of February, 1995.
/s/ Paul H. Gooding
-------------------------------
Paul H. Gooding, President
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
On this 24th day of February, 1995, before me, a Notary Public,
personally appeared Paul H. Gooding to me known to be the person named as
President and who executed the foregoing instrument and acknowledged that he
executed the same as his free act and deed.
__________________________________ (Notarial Seal)
Notary Public
/s/ Eric J. Bentley
----------------------------------------
Eric J. Bentley, Assistant Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
On this 24th day of February, 1995, before me, a Notary Public,
personally appeared Eric J. Bentley to me known to be the person named as
Assistant Secretary and who executed the foregoing instrument and acknowledged
that he executed the same as his free act and deed.
________________________________ (Notarial Seal)
Notary Public
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MIMLIC INTERNATIONAL ASSET ALLOCATION FUND, INC.
The undersigned, being the President and Assistant Secretary,
respectively, of MIMLIC International Asset Allocation Fund, Inc. (the
"Corporation"), hereby certify as follows:
1. The name of the Corporation is "MIMLIC International Asset Allocation
Fund, Inc."
2. The Corporation has not issued any shares.
3. The following resolution was adopted, pursuant to Sections 302A.133 and
302A.171 of the Minnesota Statutes, by the Board of Directors of the
Corporation at a meeting held on April 19, 1994:
WHEREAS, MIMLIC International Asset Allocation Fund, Inc. was
incorporated in Minnesota on January 27, 1994, and has not yet
issued any shares, and
WHEREAS, Minnesota Statutes 1994 Section 302A.133 provides that
the Board of Directors of a corporation may, before the issuance of
shares by such corporation, amend the Articles of Incorporation
pursuant to Minnesota Statutes 1994 Section 302A.171.
NOW THEREFORE, BE IT RESOLVED, that Section 1 of the Articles
of Incorporation of MIMLIC International Asset Allocation Fund,
Inc. be and hereby is amended to read as follows:
1. The name of the corporation (the "Corporation") is MIMLIC
International Balanced Fund, Inc.
BE IT FURTHER RESOLVED, that the officers of the Fund are
hereby authorized to file Articles of Amendment with the Office of
the Secretary of State of Minnesota with respect to such amendment.
4. Section 1 of the Articles of Incorporation of the Corporation is hereby
amended to read as follows:
1. The name of the corporation (the "Corporation") is MIMLIC
International Balanced Fund, Inc.
5. Except as amended by paragraph 4, above, the Articles of Incorporation
of the Corporation shall remain unchanged and in full force and effect.
<PAGE>
6. These Articles of Amendment have been approved pursuant to Minnesota
Statutes Chapter 302A. The undersigned are authorized to execute these
Articles of Amendment and understand that, by signing these Articles of
Amendment, they are subject to the penalties of perjury as set forth in
Section 609.48 as if they had signed these Articles of Amendment under
oath.
Executed this 9th day of May, 1994.
/s/ Paul H. Gooding
----------------------------------------
Paul H. Gooding, President
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
On this 9th day of May, 1994, before me, a Notary Public, personally
appeared Paul H. Gooding to me known to be the person named as President and who
executed the foregoing instrument and acknowledged that he executed the same as
his free act and deed.
______________________________ (Notarial Seal)
Notary Public
/s/ Eric J. Bentley
----------------------------------------
Eric J. Bentley, Assistant Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
On this 9th day of May, 1994, before me, a Notary Public, personally
appeared Eric J. Bentley to me known to be the person named as Assistant
Secretary and who executed the foregoing instrument and acknowledged that he
executed the same as his free act and deed.
______________________________ (Notarial Seal)
Notary Public
-2-
<PAGE>
BYLAWS
OF
MIMLIC INTERNATIONAL BALANCED FUND, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
SECTION 1.01. NAME. The name of the corporation is MIMLIC
International Balanced Fund, Inc.
SECTION 1.02. REGISTERED OFFICE. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.
SECTION 1.03. CORPORATE SEAL. The corporation shall have no seal.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 2.01. PLACE AND TIME OF MEETINGS. Except as provided otherwise
by Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at
any place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at 10:00 A.M.
SECTION 2.02. REGULAR MEETINGS.
(a) Annual meetings of shareholders are not required by these Bylaws.
Regular meetings of shareholders shall be held only with such frequency and at
such times and places as required by law.
(b) At each regular meeting, the shareholders, voting as provided in the
Articles of Incorporation and these Bylaws, shall designate the number of
directors to constitute the Board of Directors (subject to the authority of the
Board of Directors thereafter to increase the number of directors as permitted
by law), shall elect directors, and shall transact such other business as may
properly come before them.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the shareholders
may be held at any time and for any purpose and may be called by the Chairman of
the Board, the President, any two directors, or by one or more shareholders
holding ten percent (10%) or more of the shares entitled to vote on the matters
to be presented to the meeting.
SECTION 2.04. QUORUM, ADJOURNED MEETINGS. The holders of ten percent
(10%) of the shares outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any regular or special meeting. In case a
quorum shall not be present at a meeting, those present in person or by proxy
shall adjourn the meeting to such day as they shall, by majority vote, agree
upon without further notice other than by announcement at the meeting at which
such adjournment is taken. If a quorum is present, a meeting may be adjourned
from time to time without notice other than announcement at
<PAGE>
the meeting. At adjourned meetings at which a quorum is present, any business
may be transacted which might have been transacted at the meetings as originally
noticed. If a quorum is present, the shareholders may continue to transact
business until adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
SECTION 2.05. VOTING. At each meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation provide
otherwise, shall have one vote for each share having voting power registered in
his name on the books of the corporation. Except as otherwise specifically
provided by these Bylaws or as required by provisions of the Investment Company
Act of 1940 or other applicable laws, all questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote.
SECTION 2.06. VOTING - PROXIES. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself or by his attorney thereunto duly authorized
in writing. No proxy shall be voted on after eleven months from its date unless
it provides for a longer period.
SECTION 2.07. CLOSING OF BOOKS. The Board of Directors may fix a time,
not exceeding sixty (60) days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the thirtieth
(30th) day preceding the date of such meeting.
SECTION 2.08. NOTICE OF MEETINGS. There shall be mailed to each
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at his address as shown by the books of the corporation, a notice
setting out the time and place of each regular meeting and each special meeting,
which notice shall be mailed at least ten (10) days prior thereto; except that
notice of a meeting at which an agreement of merger or consolidation is to be
considered shall be mailed to all shareholders of record, whether entitled to
vote or not, at least two (2) weeks prior thereto. Every notice of any special
meeting shall state the purpose or purposes for which the meeting has been
called, pursuant to Section 2.03, and the business transacted at all special
meetings shall be confined to the purpose stated in such notice.
SECTION 2.09. WAIVER OF NOTICE. Notice of any regular or special
meeting may be waived either before, at or after such meeting orally or in
writing signed by each shareholder or representative thereof entitled to vote
the shares so represented. A shareholder, by his attendance at any meeting of
shareholders, shall be deemed to have waived notice of such meeting, except
where the shareholder objects at the beginning of the meeting to the transaction
of business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and does not participate in the consideration of the
item at that meeting.
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<PAGE>
SECTION 2.10. WRITTEN ACTION. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action.
ARTICLE III.
DIRECTORS
SECTION 3.01. NUMBER, QUALIFICATION AND TERM OF OFFICE. Until the
first meeting of shareholders, the number of directors shall be the number named
in the Articles of Incorporation. Thereafter, the number of directors shall be
established by resolution of the shareholders (subject to the authority of the
Board of Directors to increase the number of directors as permitted by law). In
the absence of such shareholder resolution, the number of directors shall be the
number last fixed by the shareholders or the Board of Directors, or the Articles
of Incorporation. Directors need not be shareholders. Each of the directors
shall hold office until the regular meeting of shareholders next held after his
election and until his successor shall have been elected and shall qualify, or
until the earlier death, resignation, removal or disqualification of such
director.
SECTION 3.02. ELECTION OF DIRECTORS. Except as otherwise provided in
Sections 3.11 and 3.12 hereof, the directors shall be elected at each regular
shareholders' meeting. In the event that directors are not elected at a regular
shareholders' meeting, then directors may be elected at a special shareholders'
meeting, provided that the notice of such meeting shall contain mention of such
purpose. At each shareholders' meeting for the election of directors, the
directors shall be elected by a plurality of the votes validly cast at such
election.
SECTION 3.03. GENERAL POWERS.
(a) Except as otherwise permitted by statute, the property, affairs and
business of the corporation shall be managed by the Board of Directors, which
may exercise all the powers of the corporation except those powers vested solely
in the shareholders of the corporation by statute, the Articles of
Incorporation, or these Bylaws, as amended.
(b) All acts done by any meeting of the Directors or by any person
acting as a director, so long as his successor shall not have been duly elected
or appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the directors or such person acting as
aforesaid or that they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly elected and
were or was qualified to be directors or a director of the corporation.
SECTION 3.04. POWER TO DECLARE DIVIDENDS.
(a) The Board of Directors, from time to time as they may deem
advisable, may declare and pay dividends in cash or other property of the
corporation, out of any source available for dividends, to the shareholders
according to their respective rights and interests.
(b) The Board of Directors may at any time declare and distribute pro
rata among the shareholders a "stock dividend" out of the corporation's
authorized but unissued shares of stock, including any shares previously
purchased by the corporation.
-3-
<PAGE>
SECTION 3.05. BOARD MEETINGS. Meetings of the Board of Directors shall
be held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
SECTION 3.06. CALLING MEETINGS, NOTICE. A director may call a meeting
by giving five (5) days notice to all directors of the date, time, and place of
the meeting; provided that if the day or date, time and place of a board meeting
have been announced at a previous meeting of the board, no notice is required.
SECTION 3.07. WAIVER OF Notice. Notice of any meeting of the Board of
Directors may be waived by any director either before, at, or after such meeting
orally or in writing signed by such director. A director, by his attendance and
participation in the action taken at any meeting of the Board of Directors,
shall be deemed to have waived notice of such meeting, except where the director
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.
SECTION 3.08. QUORUM. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting; provided, however,
notwithstanding the above, if the Board of Directors is taking action pursuant
to the Investment Company Act of 1940, as now enacted or hereafter amended, a
majority of directors who are not "interested persons" (as defined by the
Investment Company Act of 1940, as now enacted or hereafter amended) of the
corporation shall constitute a quorum for taking such action.
SECTION 3.09. ADVANCE CONSENT OR OPPOSITION. A director may give
advance written consent or opposition to a proposal to be acted on at a meeting
of the Board of Directors. If such director is not present at the meeting,
consent or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected.
SECTION 3.10. CONFERENCE COMMUNICATIONS. Directors may participate in
any meeting of the Board of Directors, or of any duly constituted committee
thereof, by means of a conference telephone conversation or other comparable
communication technique whereby all persons participating in the meeting can
hear and communicate to each other. For the purposes of establishing a quorum
and taking any action at the meeting, such directors participating pursuant to
this Section 3.10 shall be deemed present in person at the meeting; and the
place of the meeting shall be the place or origination of the conference
telephone conversation or other comparable communication technique.
SECTION 3.11. VACANCIES; NEWLY CREATED DIRECTORSHIPS. Vacancies in the
Board of Directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.01 may be filled by a two-thirds (2/3) vote of the directors serving at the
time of such increase; and each person so elected shall be a director until his
successor is elected by the shareholders, who may make such election at their
next regular meeting or at any meeting duly called for that purpose; provided,
however, that no vacancy can be filled as
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<PAGE>
provided above if prohibited by the provisions of the Investment Company Act of
1940.
SECTION 3.12. REMOVAL. The entire Board of Directors or any individual
director may be removed from office, with or without cause, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors. In the event that the entire Board or any one or more directors be
so removed, new directors shall be elected at the same meeting, or the remaining
directors may, to the extent vacancies are not filled at such meeting, fill any
vacancy or vacancies created by such removal. A director named by the Board of
Directors to fill a vacancy may be removed from office at any time, with or
without cause, by the affirmative vote of the remaining directors if the
shareholders have not elected directors in the interim between the time of the
appointment to fill such vacancy and the time of the removal.
SECTION 3.13. COMMITTEES. A resolution approved by the affirmative
vote of a majority of the Board of Directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors, except as provided by Minnesota Statutes Section 302A.243.
A majority of the members of the committee present at a meeting is a
quorum for the transaction of business, unless a larger or smaller proportion or
number is provided in a resolution approved by the affirmative vote of a
majority of the directors present.
SECTION 3.14. WRITTEN ACTION. Any action which might be taken at a
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by a majority of
the directors or committee members.
SECTION 3.15. COMPENSATION. Directors who are not salaried officers of
this corporation or affiliated with its investment adviser shall receive such
fixed sum per meeting attended or such fixed annual sum as shall be determined,
from time to time, by resolution of the Board of Directors. All such directors
shall receive their expenses, if any, of attendance at meetings of the Board of
Directors or any committee thereof. Nothing herein contained shall be construed
to preclude any director from serving this corporation in any other capacity and
receiving proper compensation therefor.
SECTION 3.16. RESIGNATION. A director may resign by giving written
notice to the corporation, and the resignation is effective without acceptance
when given, unless a later effective time is specified in the notice.
ARTICLE IV.
OFFICERS
SECTION 4.01. NUMBER. The officers of the corporation shall consist of
a Chairman of the Board (if one is elected by the Board), the President, one or
more Vice Presidents (if desired by the Board), a Secretary, a Treasurer and
such other officers and agents as may, from time to time, be elected by the
Board of Directors. Any number of offices may be held by the same person.
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<PAGE>
SECTION 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Board
of Directors shall elect, from within or without their number, the officers
referred to in Section 4.01 of these Bylaws, each of whom shall have the powers,
rights, duties, responsibilities, and terms in office provided for in these
Bylaws or a resolution of the Board not inconsistent therewith. The President
and all other officers who may be directors shall continue to hold office until
the election and qualification of their successors, notwithstanding an earlier
termination of their directorship.
SECTION 4.03. RESIGNATION. Any officer may resign his office at any
time by delivering a written resignation to the Board of Directors, the
President, the Secretary, or any Assistant Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
SECTION 4.04. REMOVAL AND VACANCIES. Any officer may be removed from
his office by a majority of the whole Board of Directors with or without cause.
Such removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation, or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
SECTION 4.05. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
is elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
SECTION 4.06. PRESIDENT. The President shall have general active
management of the business of the corporation. In the absence of the Chairman
of the Board, he shall preside at all meetings of the shareholders and
directors. He shall be the chief executive officer of the corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall be ex officio a member of all standing committees. He may
execute and deliver, in the name of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments pertaining to the business of the
corporation and, in general, shall perform all duties usually incident to the
office of the President. He shall have such other duties as may, from time to
time, be prescribed by the Board of Directors.
SECTION 4.07. VICE PRESIDENT. Each Vice President shall have such
powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to his
power and duties in the order designated by the Board of Directors.
SECTION 4.08. SECRETARY. The Secretary shall be secretary of, and
shall attend, all meetings of the shareholders and Board of Directors and shall
record all proceedings of such meetings in the minute book of the corporation.
He shall give proper notice of meetings of shareholders and directors. He shall
perform such other duties as may, from time to time, be prescribed by the Board
of Directors or by the President.
SECTION 4.09. TREASURER. The Treasurer shall be the chief financial
officer and shall keep accurate accounts of all moneys of the corporation
received or disbursed. He shall deposit all moneys, drafts and checks in the
name of, and to the credit of, the corporation in such banks and depositories as
a majority of the whole Board of Directors shall, from time to time, designate.
He shall have power to endorse, for deposit, all notes, checks and drafts
received by the corporation. He shall disburse the funds of the corporation, as
ordered by the Board of Directors, making proper vouchers therefor. He shall
render to the President and the directors, whenever
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<PAGE>
required, an account of all his transactions as Treasurer and of the financial
condition of the corporation, and shall perform such other duties as may, from
time to time, be prescribed by the Board of Directors or by the President.
SECTION 4.10. ASSISTANT SECRETARIES. At the request of the Secretary,
or in his absence or disability, any Assistant Secretary shall have power to
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the Board of Directors or the President.
SECTION 4.11. ASSISTANT TREASURERS. At the request of the Treasurer or
in his absence or disability any Assistant Treasurer shall have power to perform
all the duties of the Treasurer, and when so acting, shall have all the powers
of, and be subject to all the restrictions upon, the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
SECTION 4.12. COMPENSATION. The officers of this corporation shall
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.
ARTICLE V.
SHARES AND THEIR TRANSFER
SECTION 5.01. CERTIFICATES FOR SHARES.
(a) The corporation may have certificated or uncertificated shares, or
both, as designated by resolution of the Board of Directors. Every owner of
certificated shares of the corporation shall be entitled to a certificate, to be
in such form as shall be prescribed by the Board of Directors, certifying the
number of shares of the corporation owned by him. Within a reasonable time
after the issuance or transfer of uncertificated shares, the corporation shall
send to the new shareholder the information required to be stated on
certificates. Certificated shares shall be numbered in the order in which they
shall be issued and shall be signed, in the name of the corporation, by the
President or a Vice President and by the Treasurer or Secretary or by such
officers as the Board of Directors may designate. Such signatures may be by
facsimile if authorized by the Board of Directors. Every certificate
surrendered to the corporation for exchange or transfer shall be cancelled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 5.08.
(b) In case any officer, transfer agent or registrar who shall have
signed any such certificate, or whose facsimile signature has been placed
thereon, shall cease to be such an officer (because of death, resignation or
otherwise) before such certificate is issued, such certificate may be issued and
delivered by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
SECTION 5.02. ISSUANCE OF SHARES. The Board of Directors is authorized
to cause to be issued shares of the corporation up to the full amount authorized
by the Articles of Incorporation in such amounts as may be determined by the
Board of Directors and as may be permitted by law. No shares shall be allotted
except in consideration of cash or other property, tangible or intangible,
received or to be received by the corporation under a written agreement, of
services rendered or to be rendered to the corporation
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<PAGE>
under a written agreement, or of an amount transferred from surplus to stated
capital upon a share dividend. At the time of such allotment of shares, the
Board of Directors making such allotments shall state, by resolution, their
determination of the fair value to the corporation in monetary terms of any
consideration other than cash for which shares are allotted. No shares of
stock issued by the corporation shall be issued, sold, or exchanged by or on
behalf of the corporation for any amount less than the net asset value per
share of the shares outstanding as determined pursuant to Article XII
hereunder.
SECTION 5.03. REDEMPTION OF SHARES. Upon the demand of any
shareholder, this corporation shall redeem any share of stock issued by it held
and owned by such shareholder at the net asset value thereof as determined
pursuant to Article XII hereunder. The Board of Directors may suspend the right
of redemption or postpone the date of payment during any period as may be
permitted by law.
SECTION 5.04. TRANSFER OF SHARES. Transfer of shares on the books of
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares or a duly executed assignment covering shares held
in unissued form. The corporation may treat, as the absolute owner of shares of
the corporation, the person or persons in whose name shares are registered on
the books of the corporation.
SECTION 5.05. REGISTERED SHAREHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Minnesota.
SECTION 5.06. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
SECTION 5.07. TRANSFER REGULATIONS. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
the shares of stock of the corporation.
SECTION 5.08. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
holder of any stock of the corporation shall immediately notify the corporation
of any loss, theft, destruction or mutilation of any certificate therefor, and
the Board of Directors may, in its discretion, cause to be issued to him a new
certificate or certificates of stock, upon the surrender of the mutilated
certificate or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss, theft, or destruction. A new certificate or
certificates of stock will be issued to the owner of the lost, stolen or
destroyed certificate only after such owner, or his legal representatives, gives
to the corporation and to such registrar or transfer agent as may be authorized
or required to countersign such new certificate or certificates a bond, in such
sum as they may direct, and with such surety or
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<PAGE>
sureties, as they may direct, as indemnity against any claim that may be made
against them or any of them on account of or in connection with the alleged
loss, theft, or destruction of any such certificate.
ARTICLE VI.
DIVIDENDS, SURPLUS, ETC.
SECTION 6.01. The corporation's net investment income will be
determined, and its dividends shall be declared and made payable at such time(s)
as the Board of Directors shall determine.
It shall be the policy of the corporation to qualify for and elect the
tax treatment applicable to regulated investment companies under the Internal
Revenue Code, so that the corporation will not be subjected to Federal income
tax on such part of its income or capital gains as it distributes to
shareholders.
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
SECTION 7.01. SHARE REGISTER. The Board of Directors of the
corporation shall cause to be kept at its principal executive office, or at
another place or places within the United States determined by the board:
(1) a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of
shares held by each shareholder; and
(2) a record of the dates on which certificates or transaction
statements representing shares were issued.
SECTION 7.02. OTHER BOOKS AND RECORDS. The Board of Directors shall
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes Section 302A.461, originals or copies of:
(1) records of all proceedings of shareholders for the last three years;
(2) records of all proceedings of the board for the last three years;
(3) its articles and all amendments currently in effect;
(4) its bylaws and all amendments currently in effect;
(5) financial statements required by Minnesota Statutes Section 302A.463
and the financial statement for the most recent interim period
prepared in the course of the operation of the corporation for
distribution to the shareholders or to a governmental agency as a
matter of public record;
(6) reports made to shareholders generally within the last three years;
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<PAGE>
(7) a statement of the names and usual business addresses of its
directors and principal officers;
(8) any shareholder voting or control agreements of which the
corporation is aware; and
(9) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.
SECTION 7.03. AUDIT; ACCOUNTANT.
(a) The Board of Directors shall cause the records and books of account
of the corporation to be audited at least once in each fiscal year and at such
other times as it may deem necessary or appropriate.
(b) The corporation shall employ an independent public accountant or
firm of independent public accountants as its Accountant to examine the accounts
of the corporation and to sign and certify financial statements filed by the
corporation.
(c) Any vacancy occurring between regular meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
SECTION 7.04. FISCAL YEAR. The fiscal year of the corporation shall be
determined by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 8.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by Section 302A.521 of the Minnesota Statutes, as now
enacted or hereafter amended, provided, however, that no such indemnification
may be made if it would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereafter amended.
ARTICLE IX.
VOTING OF STOCK HELD
SECTION 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
which the corporation may be entitled to cast as a stockholder or otherwise in
any other corporation or association, any of whose stock or securities may be
held by the corporation, at meetings of the holders of the stock or other
securities of any such other corporation or association, or to consent in
writing to any action by any such other corporation or association, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed on behalf
of the corporation and under its corporate seal, or otherwise, such written
proxies, consents, waivers, or other instruments as it may deem necessary or
proper; or any of such officers may themselves attend any meeting of the holders
of stock or other securities of any such corporation or association and thereat
vote or exercise any or all other powers of the corporation as the holder of
such stock or other securities of
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<PAGE>
such other corporation or association, or consent in writing to any action by
any such other corporation or association.
ARTICLE X.
VALUATION OF NET ASSET VALUE
SECTION 10.01. The net asset value per share of the corporation shall
be determined in good faith by or under the supervision of the officers of the
corporation as authorized by the Board of Directors as often and on such days
and at such time(s) as the Board of Directors shall determine, or as otherwise
may be required by law, rule, regulation or order of the Securities and Exchange
Commission.
ARTICLE XI.
CUSTODY OF ASSETS
SECTION 11.01. All securities and cash owned by this corporation shall,
as hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
This corporation shall enter into a written contract with the Custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of this corporation held by the Custodian. Said
contract and all amendments thereto shall be approved by the Board of Directors
of this corporation. In the event of the Custodian's resignation or
termination, the corporation shall use its best efforts promptly to obtain a
successor Custodian and shall require that the cash and securities owned by this
corporation held by the Custodian be delivered directly to such successor
Custodian.
ARTICLE XII.
AMENDMENTS
SECTION 12.01. These Bylaws may be amended or altered by a vote of the
majority of the Board of Directors at any meeting provided that notice of such
proposed amendment shall have been given in the notice given to the directors of
such meeting. Such authority in the Board of Directors is subject to the power
of the shareholders to change or repeal such Bylaws by a majority vote of the
shareholders present or represented at any regular or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the Board of
Directors, or fixing the number of directors or their classifications,
qualifications or terms of office, except that the Board of Directors may make
or alter any Bylaw to increase their number.
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<PAGE>
INCORPORATED UNDER THE LAWS OF
Minnesota Chapter 302A
NUMBER SHARES
- -SPECIMEN- -SPECIMEN-
MIMLIC INTERNATIONAL BALANCED FUND, INC.
10,000,000,000 Authorized Shares
of which 2,000,000,000 are Designated as Class A Shares
This Certifies that -SPECIMEN- is the registered holder of -SPECIMEN- Class A
Shares of MIMLIC INTERNATIONAL BALANCED FUND, INC., of the par value of $.01
each, transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____ day of ________A.D. 19___.
Secretary President
<PAGE>
INCORPORATED UNDER THE LAWS OF
Minnesota Chapter 302A
NUMBER SHARES
- -SPECIMEN- -SPECIMEN-
MIMLIC INTERNATIONAL BALANCED FUND, INC.
10,000,000,000 Authorized Shares
of which 2,000,000,000 are Designated as Class C Shares
This Certifies that -SPECIMEN- is the registered holder of -SPECIMEN- Class C
Shares of MIMLIC INTERNATIONAL BALANCED FUND, INC., of the par value of $.01
each, transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____ day of ________A.D. 19___.
Secretary President
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, Made this 1st day of March, 1995, by and between
Advantus International Balanced Fund, Inc., a Minnesota corporation (the "Fund")
and Advantus Capital Management, Inc., a Minnesota corporation ("Management").
WITNESSETH:
1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.
The Fund hereby engages Management, and Management hereby agrees to
act, as investment adviser for, and to manage the affairs, business, and the
investment of the assets of the Fund.
The investment of the assets of the Fund shall at all times be subject
to the applicable provisions of the Articles of Incorporation, the Bylaws, the
Registration Statement, the current Prospectus and the Statement of Additional
Information, if any, of the Fund and shall conform to the investment objective
and policies of the Fund as set forth in such documents and as interpreted from
time to time by the Board of Directors of the Fund. Within the framework of the
objective and investment policies and restrictions of the Fund, Management shall
have the sole and exclusive responsibility for the management of the Fund's
portfolio and the making and execution of all investment decisions for the Fund.
Management shall report to the Board of Directors regularly at such times and in
such detail as the Board may from time to time determine to be appropriate, in
order to permit the Board to determine the adherence of Management to the
investment policies of the Fund.
Management shall, at its own expense, furnish the Fund office space and
all necessary office facilities, equipment, and personnel for servicing the
investments of the Fund. Management shall arrange for officers or employees of
Management to serve without compensation from the Fund as directors, officers,
or employees of the Fund if duly elected to such positions by the shareholders
or directors of the Fund.
<PAGE>
Management shall arrange for the services of a transfer agent, dividend
disbursing (including reinvestment) agent and redemption agent to be provided to
the Fund, which services shall be provided at the expense of Management and
without compensation from the Fund.
Management hereby acknowledges that all records necessary in the
operation of the Fund, including records pertaining to its shareholders and
investments, are the property of the Fund, and in the event that a transfer of
management or investment advisory services to someone other than Management
should ever occur, Management will promptly, and at its own cost, take all steps
necessary to segregate such records and deliver them to the Fund.
In providing the services and assuming the obligations set forth
herein, Management may at its expense employ one or more Sub-Advisers, or may
enter into such service agreements as Management deems appropriate in connection
with the performance of its duties and obligations hereunder. Reference herein
to the duties and responsibilities of Management shall include any Sub-Adviser
employed by Management to the extent Management shall delegate such duties and
responsibilities to the Sub-Adviser. Any agreement between Management and any
Sub-Adviser shall be subject to the approval of the Fund, its Board of
Directors, and Shareholders as required by the Investment Company Act of 1940,
as amended, and such Sub-Adviser shall at all times be subject to the direction
of the Board of Directors of the Fund and any duly constituted committee thereof
or any officer of the Fund acting pursuant to like authority.
2. COMPENSATION FOR SERVICES.
In payment for the investment advisory and other services to be
rendered by Management hereunder, the Fund shall pay to Management a quarterly
fee, which fee shall be paid to Management not later than the fifth business day
following the end of each calendar quarter in which said services were rendered.
Said quarterly fee shall be based on the average of the net asset values of all
of the issued and outstanding shares of the Fund as determined as of the close
of each business day of the quarter pursuant to the Articles of Incorporation,
Bylaws and currently effective Prospectus and Statement of Additional
Information, if any, of the Fund. The amount of such fee,
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<PAGE>
as applied to the average daily value of the net assets of the Fund on an annual
rate, shall be as described in the schedule below:
Assets Fee
------ ---
On the first $25 million in assets .95%
On the next $25 million in assets .80%
On the next $50 million in assets .75%
On all assets in excess of $100 million .65%
The fee shall be pro rated for any fraction of a month at the commencement or
termination of this Agreement.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, the Fund
shall pay all its costs and expenses which are not assumed by
Management. The Fund expenses include, by way of example, but not
by way of limitation, all expenses incurred in the operation of the
Fund and any public offering of its shares, including, among others,
interest, taxes, brokerage fees and commissions, fees of the
directors who are not employees of Management or MIMLIC Sales
Corporation, underwriter of the Fund's shares (the "Underwriter"),
or any of their affiliates, expenses of directors' and shareholders'
meetings, including the cost of printing and mailing proxies,
expenses of insurance premiums for fidelity and other coverage,
expenses of redemption of shares, expenses of issue and sale of
shares (to the extent not borne by the Underwriter under its
agreement with the Fund), expenses of printing and mailing stock
certificates representing shares of the Fund, association membership
dues, charges of custodians, and bookkeeping, auditing, and legal
expenses. The Fund will also pay the fees and bear the expense of
registering and maintaining the registration of the Fund and its
shares with the Securities and Exchange Commission and registering
or qualifying its shares under state or other securities laws and
the expense of preparing and mailing Prospectuses and reports to
shareholders.
(b) The Underwriter shall bear all advertising and promotional
expenses in connection with the distribution of the Fund's shares,
including paying for Prospectuses and
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<PAGE>
Statements of Additional Information (if any) for new shareholders,
shareholder reports for new shareholders, and the costs of sales
literature.
4. FREEDOM TO DEAL WITH THIRD PARTIES.
Management shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
5. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
This Agreement shall not become effective unless and until it is
approved by the Board of Directors of the Fund, including a majority of the
members who are not "interested persons" to parties to this Agreement, by a vote
cast in person at a meeting called for the purpose of voting such approval, and
by a majority of the outstanding voting securities of the Fund. Wherever
referred to in this Agreement, the vote or approval of the holders of a majority
of the outstanding voting securities of the Fund shall mean the vote of 67% or
more of such securities if the holders of more than 50% of such securities are
present in person or by proxy or the vote of more than 50% of such securities,
whichever is the lesser.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect until the next annual meeting of the Fund's shareholders and
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by the Board of Directors of the Fund,
including the specific approval of a majority of the directors who are not
interested persons of Management, the Underwriter, or the Fund, cast in person
at a meeting called for the purpose of voting on such approval, or by the vote
of the holders of a majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
Management, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment as such term is defined by the Investment Company Act of 1940, as
amended.
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<PAGE>
6. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund.
7. NOTICES.
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, The Fund and Management have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
Advantus International Balanced Fund, Inc.
By /s/ Paul H. Gooding
----------------------------------------
Paul H. Gooding
Its President
Advantus Capital Management, Inc.
By /s/ James P. Tatera
----------------------------------------
James P. Tatera
Its Senior Vice President
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<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made this 1st day of March, 1995, by and between ADVANTUS
CAPITAL MANAGEMENT, INC., a Minnesota corporation registered as an Investment
Adviser under the Investment Advisers Act of 1940 (the "Adviser") and TEMPLETON
INVESTMENT COUNSEL, INC., a Florida corporation registered as an Investment
Adviser under the Investment Advisers Act of 1940 (the "Sub-Adviser").
WHEREAS, the Adviser is the Investment Adviser to Advantus International
Balanced Fund, Inc. (the "Fund"), an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it with
portfolio selection and related research and statistical services in connection
with the Adviser's investment advisory activities on behalf of the Fund, and the
Sub-Adviser desires to furnish such services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. APPOINTMENT OF SUB-ADVISER
In accordance with and subject to the Investment Advisory Agreement (the
"Advisory Agreement") between the Fund and the Adviser dated March 1, 1995, the
Adviser hereby appoints the Sub-Adviser to perform portfolio selection services
described herein for investment and reinvestment of the Fund's assets, subject
to the control and direction of the Fund's Board of Directors, for the period
and on the terms hereinafter set forth. The Sub-Adviser accepts such
appointment and agrees to furnish the services hereinafter set forth for the
compensation herein provided. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized, have no authority to act for or
<PAGE>
represent the Fund or the Adviser in any way or otherwise be deemed an agent of
the Fund or the Adviser.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE SUB-ADVISER
(a) The Sub-Adviser shall provide the following services and assume the
following obligations with respect to the Fund's portfolio:
(1) The investment of the assets of the Fund shall at all times be
subject to the applicable provisions of the Articles of
Incorporation, the Bylaws, the Registration Statement, the current
Prospectus and the Statement of Additional Information of the Fund
and shall conform to the investment objectives, policies and
restrictions of the Fund as set forth in such documents and as
interpreted from time to time by the Board of Directors of the Fund
and by the Adviser. Within the framework of the investment
objectives, policies and restrictions of the Fund, and subject to
the supervision of the Adviser, the Sub-Adviser shall have the sole
and exclusive responsibility for the making and execution of all
investment decisions for the Fund.
(2) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Fund, the Sub-Adviser shall:
(1) obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Fund's portfolio or are under consideration for
inclusion therein; (2) formulate and implement a continuous
investment program for the Fund consistent with the investment
objective and related investment policies for the Fund as set forth
in the Fund's registration statement, as amended; and (3) take such
steps as are necessary to implement the aforementioned investment
program by purchase and sale of securities including the placing,
or directing the placement through an affiliate of the Sub-Adviser,
of orders for such purchases and sales.
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<PAGE>
(3) In connection with the purchase and sale of securities of the
Fund's portfolio, the Sub-Adviser shall arrange for the
transmission to the Adviser and the Custodian for the Fund on a
daily basis such confirmation, trade tickets and other documents as
may be necessary to enable them to perform their administrative
responsibilities with respect to the Fund's portfolio. With
respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Sub-Adviser shall arrange for the
automatic transmission of the I.D. confirmation of the trade to the
Custodian of the Fund, Norwest Bank Minnesota, N.A. The Sub-
Adviser shall render such reports to the Adviser and/or to the
Fund's Board of Directors concerning the investment activity and
portfolio composition of the Fund in such form and at such
intervals as the Adviser or the Board may from time to time
require.
(4) The Sub-Adviser shall, in the name of the Fund, place or direct the
placement of orders for the execution of portfolio transactions in
accordance with the policies with respect thereto, as set forth in
the Fund's Registration Statement, as amended from time to time,
and under the 1933 Act and the 1940 Act. In connection with the
placement of orders for the execution of the Fund's portfolio
transactions, the Sub-Adviser shall create and maintain all
necessary brokerage records of the Fund in accordance with all
applicable law, rules and regulations, including but not limited
to, records required by Section 31(a) of the 1940 Act. All records
shall be the property of the Fund and shall be available for
inspection and use by the Securities and Exchange Commission, the
Fund or any person retained by the Fund. Where applicable, such
records shall be maintained by the Sub-Adviser for the period and
in the place required by Rule 31a-2 under the 1940 Act.
(5) In placing orders or directing the placement of orders for the
execution of portfolio transactions, the Sub-Adviser shall select
brokers and dealers for the
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<PAGE>
execution of the Fund's portfolio transactions. In selecting
brokers or dealers to execute such orders, the Sub-Adviser is
expressly authorized to consider the fact that a broker or dealer
has furnished statistical, research or other information or
services which enhance the Sub-Adviser's investment research and
portfolio management capability generally. It is further
understood in accordance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, that the Sub-Adviser may
negotiate with and assign to a broker a commission which may exceed
the commission which another broker would have charged for
effecting the transaction if the Sub-Adviser determines in good
faith that the amount of commission charged was reasonable in
relation to the value of brokerage and/or research services (as
defined in Section 28(e)) provided by such broker, viewed in terms
either of the Fund or the Sub-Adviser's overall responsibilities to
the Sub-Adviser's discretionary accounts.
(b) The Sub-Adviser shall use the same skill and care in providing services
to the Fund as it uses in providing services to fiduciary accounts for which it
has investment responsibility. The Sub-Adviser will conform with all applicable
rules and regulations of the Securities and Exchange Commission.
3. EXPENSES
During the terms of this Agreement, the Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement.
4. COMPENSATION
In payment for the investment sub-advisory services to be rendered by the
Sub-Adviser in respect of the Fund hereunder, the Adviser shall pay to the Sub-
Adviser as full compensation for all services hereunder a fee computed at an
annual rate which shall be a percentage of the average daily value of the net
assets of the Fund. The fee shall be accrued daily and shall be based on the
net asset values of all of the issued and outstanding shares of the Fund as
determined as of the close of each business day pursuant to the Articles of
Incorporation, Bylaws and currently
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<PAGE>
effective Prospectus and Statement of Additional Information of the Fund. The
fee shall be payable in arrears on the last day of each calendar month.
The amount of such annual fee, as applied to the average daily value of the
net assets of the Fund, shall be as described in the schedule below:
Assets Fee
------ ---
On the first $25 million in assets .70%
On the next $25 million in assets .55%
On the next $50 million in assets .50%
On all assets in excess of $100 million .40%
5. RENEWAL AND TERMINATION
This Agreement shall continue in effect for a period more than two years
from the date of this Agreement, only so long as such continuance is
specifically approved at least annually by a vote of the holders of the majority
of the outstanding voting securities of the Fund, or by a vote of the majority
of the Fund's Board of Directors. And further provided that such continuance is
also approved annually by a vote of the majority of the Fund's Board of
Directors who are not parties to this Agreement or interested persons of parties
hereto, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may be terminated at any time without payment of
penalty: (i) by the Fund's Board of Directors or by a vote of a majority of the
outstanding voting securities of the Fund on sixty days' prior written notice,
or (ii) by either party hereto upon sixty days' prior written notice to the
other. This Agreement will terminate automatically upon any termination of the
Investment Advisory Agreement between the Fund and the Adviser or in the event
of its assignment. The terms "interested person," "assignment" and "vote of a
majority of the outstanding voting securities" shall have the meanings set forth
in the 1940 Act.
6. GENERAL PROVISIONS
(a) The Sub-Adviser may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be provided by the 1940 Act,
neither the Sub-Adviser nor
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<PAGE>
its officers, directors, employees or agents shall be subject to any liability
for any error of judgment or mistake of law or for any loss arising out of any
investment or other act or omission in the performance by the Sub-Adviser of its
duties under this Agreement or for any loss or damage resulting from the
imposition by any government or exchange control restrictions which might affect
the liquidity of the Fund's assets, or from acts or omissions of custodians or
securities depositories, or from any war or political act of any foreign
government to which such assets might be exposed, provided that nothing herein
shall be deemed to protect, or purport to protect, the Sub-Adviser against any
liability to the Fund or to its shareholders to which the Sub-Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder, or by reason of the Sub-
Adviser's reckless disregard of its obligations and duties hereunder.
(b) The Adviser and the Fund's Board of Directors understand that the value
of investments made for the Fund may go up as well as down, is not guaranteed
and that investment decisions will not always be profitable. The Adviser has
not made and is not making any guarantees, including any guarantee as to any
specific level of performance of the Fund. The Adviser and the Fund's Board of
Directors acknowledge that this Fund is designed for investors seeking
international diversification and is not intended as a complete investment
program. They also understand that investment decisions made on behalf of the
Fund by Sub-Adviser are subject to various market and business risks, and that
investing in securities of companies in emerging countries involves special
risks which are not typically associated with investing in U.S. companies.
Risks include but are not limited to, foreign currency fluctuations, investment
and repatriation restrictions, and political and social instability. Although
the Sub-Adviser intends to invest in companies located in countries which the
Sub-Adviser considers to have relatively stable and friendly governments, the
Fund's Board of Directors accepts the possibility that countries in which the
Sub-Adviser invests may expropriate or nationalize properties of foreigners, may
impose confiscatory taxation or exchange controls, including suspending
currency transfers from a
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<PAGE>
given country, or may be subject to political or diplomatic developments that
could affect investments in those countries.
(c) This Agreement shall not become effective unless and until it is
approved by the Board of Directors of the Fund, including a majority of the
members who are not "interested persons" to parties to this Agreement, by a vote
cast in person at a meeting called for the purpose of voting such approval, and
by a majority of the outstanding voting securities of the Fund.
(d) The Adviser understands that the Sub-Adviser now acts, will continue to
act, or may act in the future, as investment adviser to fiduciary and other
managed accounts, including other investment companies, and the Adviser has no
objection to the Sub-Adviser so acting, provided that the Sub-Adviser duly
performs all obligations under this Agreement. The Adviser also understands
that the Sub-Adviser may give advice and take action with respect to any of its
other clients or for its own account which may differ from the timing or nature
of action taken by the Sub-Adviser with respect to the Fund. Nothing in this
Agreement shall impose upon the Sub-Adviser any obligation to purchase or sell
or to recommend for purchase or sale, with respect to the Fund, any security
which the Sub-Adviser or its shareholders, directors, officers, employees or
affiliates may purchase or sell for its or their own account(s) or for the
account of any other client.
(e) Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the right of the Sub-
Adviser, or the right of any of its officers, directors or employees who may
also be an officer, director or employee of the Fund, or persons otherwise
affiliated with the Fund (within the meaning of the 1940 Act) to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other trust, corporation, firm, individual or
association.
(f) Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof. This Agreement
shall be construed and enforced in accordance with and governed by the laws of
the State of Minnesota. The captions in
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<PAGE>
this Agreement are included for convenience only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
(g) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage pre-paid to the appropriate party at the following
address: The Adviser and the Fund at 400 Robert Street North, St. Paul,
Minnesota 55101-2098, and the Sub-Adviser at 500 East Broward Boulevard, Suite
2100, Fort Lauderdale, Florida 33394.
(h) Sub-Adviser agrees to notify Adviser of any change in Sub-Adviser's
officers and directors within a reasonable time after such change.
(i) Both the Adviser and the Sub-Adviser acknowledge that all sales
literature for investment companies are subject to strict regulatory oversight.
The Adviser agrees to submit to the Sub-Adviser any and all sales literature
referencing "Templeton", "Templeton Investment Counsel, Inc.", or any affiliate
thereof, for review and approval prior to filing with any appropriate regulatory
agency or prior to the public release of any such sales literature. Nothing
herein shall be construed as an obligation or duty on the part of either party
to produce sales literature for the Fund.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
ADVANTUS CAPITAL MANAGEMENT, INC.
By /s/ Paul H. Gooding
-----------------------------------
Its President
-------------------------------
TEMPLETON INVESTMENT COUNSEL, INC.
By /s/ Donald F. Reed
-----------------------------------
Its President
-------------------------------
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<PAGE>
UNDERWRITING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT, Made this 1st day of March, 1995, by and between Advantus
International Balanced Fund, Inc., a Minnesota corporation (the "Fund") and
MIMLIC Sales Corporation (the "Underwriter").
WITNESSETH:
1. UNDERWRITING SERVICES.
The Fund hereby engages the Underwriter, and the Underwriter hereby agrees
to act, as principal underwriter for the Fund in the sale and distribution of
the shares of the Fund to the public, either through dealers or otherwise. The
Underwriter agrees to offer such shares for sale at all times when such shares
are available for sale and may lawfully be offered for sale and sold.
2. SALE OF FUND SHARES.
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively presumed to have
been accepted by the Fund if the Fund shall fail to notify the Underwriter of
the rejection of such offer or sales prior to the computation of the net asset
value of the Fund's shares next following receipt by the Fund of notice of such
offer or sale.
(b) No share of the Fund shall be sold by the Underwriter (i) for any
consideration other than cash or, pursuant to an exchange privilege provided for
by the Fund's currently effective Prospectus, shares of any other investment
company for which the Underwriter acts as principal underwriter, or (ii), except
in instances otherwise provided for by the Fund's currently effective
Prospectus, for any amount less than the public offering price per share, which
shall be determined in accordance with the Fund's currently effective
Prospectus.
(c) In connection with certain sales of Fund shares, a contingent deferred
sales charge will be imposed in the event of a redemption transaction occurring
within a certain period of time following such a purchase, as described in the
Fund's currently effective Prospectus and Statement of Additional Information.
(d) The front-end sales charge, if any, for the Fund may, at the
discretion of the Fund and the Underwriter, be reduced or eliminated as
permitted by the Investment Company Act of 1940, and the rules and regulations
thereunder, as they may be amended from time to time (the "1940 Act"), provided
that such reduction or elimination shall be set forth in the Prospectus for the
Fund, and provided that the Fund shall in no event receive for any shares sold
an amount less than the net asset value thereof. In addition, any contingent
deferred sales charge for the Fund
<PAGE>
may, at the discretion of the Fund and the Underwriter, be reduced or eliminated
in accordance with the terms of an exemptive order received from the Securities
and Exchange Commission by the Fund, and any amendments thereto, provided that
such reduction or elimination shall be set forth in the Prospectus for the Fund.
3. REGISTRATION OF SHARES.
The Fund agrees to make prompt and reasonable efforts to effect and keep in
effect, at its expense, the registration or qualification of its shares for sale
in such jurisdictions as the Fund may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER.
The Fund agrees that it will furnish the Underwriter with such information
with respect to the affairs and accounts of the Fund as the Underwriter may from
time to time reasonably require, and further agrees that the Underwriter, at all
reasonable times, shall be permitted to inspect the books and records of the
Fund.
5. ALLOCATION OF EXPENSES.
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs, and fees incurred by the Fund which are not assumed by the
Underwriter or Advantus Capital Management, Inc., a Minnesota corporation and
the Fund's investment adviser. The Underwriter agrees to provide, and shall pay
costs which it incurs in connection with providing, administrative or accounting
services to shareholders of the Fund (such costs are referred to as "Shareholder
Servicing Costs"). The Underwriter shall also pay all costs of distributing the
shares of the Fund ("Distribution Expenses"). Distribution Expenses include,
but are not limited to, initial and ongoing sales compensation (in addition to
sales loads) paid to investment executives of the Underwriter and to other
broker-dealers and participating financial institutions; expenses incurred in
the printing of prospectuses, statements of additional information and reports
used for sales purposes; expenses of preparation and distribution of sales
literature; expenses of advertising of any type; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses. Shareholder Servicing Costs include all expenses
of the Underwriter incurred in connection with providing administrative or
accounting services to shareholders of the Fund, including, but not limited to,
an allocation of the Underwriter's overhead and payments made to persons,
including employees of the Underwriter, who respond to inquiries of shareholders
regarding their ownership of Fund shares, or who provide other administrative or
accounting services not otherwise required to be provided by the Fund's
investment adviser or transfer agent.
6. COMPENSATION TO THE UNDERWRITER.
It is understood and agreed by the parties hereto that the Underwriter will
receive as compensation for services it performs hereunder:
-2-
<PAGE>
(a) The Underwriter shall be entitled to receive or retain the front-end
sales charge imposed in connection with sales of Fund shares, as set forth in
Schedule A hereto. Up to the entire amount of the front-end sales charge with
respect to the Fund may be reallowed by the Underwriter to broker-dealers and
participating financial institutions in connection with their sale of Fund
shares. The amount of the front-end sales charge may be retained or deducted by
the Underwriter from any sums received by it in payment for shares so sold. If
such amount is not deducted by the Underwriter from such payments, such amount
shall be paid to the Underwriter by the Fund not later than five business days
after the close of any calendar quarter during which any such sales were made by
the Underwriter and payment received by the Fund.
(b) The Underwriter shall be entitled to receive or retain any contingent
deferred sales charge imposed in connection with any redemption of Fund shares,
as set forth in Schedule A hereto.
(c) Pursuant to the Fund's Plans of Distribution adopted by Class A and
Class C shareholders in accordance with Rule 12b-1 under the 1940 Act (the
"Plans"), the Fund shall pay the Underwriter a total fee each month equal to
.30% per annum of the average daily net assets represented by Class A shares of
the Fund and 1.0% per annum of the average daily net assets represented by Class
C shares of the Fund to cover Distribution Expenses and Shareholder Servicing
Costs. As determined from time to time by the Board of Directors of the Fund, a
portion of such fee for each Class may be designated as a "distribution fee"
designed to cover Distribution Expenses, and a portion may be designated as a
"shareholder servicing fee" designed to cover Shareholder Servicing Costs.
Until further action by the Board of Directors, all of such fees for both Class
A and Class C shall be designated as a "distribution fee" designed to cover only
Distribution Expenses, except that a portion of such fee for Class C, equal to
.25% per annum of the average daily net assets of Class C, shall be designated
as a "shareholder servicing fee" designed to cover only Shareholder Servicing
Costs. Average daily net assets shall be computed in accordance with the
Prospectus of the Fund. Amounts payable to the Underwriter under the Plans may
exceed or be less than the Underwriter's actual Distribution Expenses and
Shareholder Servicing Costs. In the event such Distribution Expenses and
Shareholder Servicing Costs exceed amounts payable to the Underwriter under the
Plans, the Underwriter shall not be entitled to reimbursement by the Fund.
(d) In each year during which this Agreement remains in effect, the
Underwriter will prepare and furnish to the Board of Directors of the Fund, and
the Board will review, on a quarterly basis, written reports complying with the
requirements of Rule 12b-1 under the 1940 Act that set forth the amounts
expended under this Agreement and the Plans and the purposes for which those
expenditures were made.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY.
The Underwriter shall be deemed to be an independent contractor and, except
as specifically provided or authorized herein, shall have no authority to act
for or represent the Fund.
-3-
<PAGE>
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS.
The Underwriter shall subscribe for the shares of the Fund only for the
purpose of covering purchase orders already received by it or for the purpose of
investment for its own account. In the event that an order for the purchase of
shares of the Fund is placed with the Underwriter by a customer or dealer and
subsequently cancelled, the Underwriter shall forthwith cancel the subscription
for such shares entered on the books of the Fund, and, if the Underwriter has
paid the Fund for such shares, shall be entitled to receive from the Fund in
refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation by the
Underwriter.
9. INDEMNIFICATION OF THE FUND.
The Underwriter agrees to indemnify the Fund against any and all litigation
and other legal proceedings of any kind or nature and against any liability,
judgment, cost, or penalty imposed as a result of such litigation or proceedings
in any way arising out of or in connection with the sale or distribution of the
shares of the Fund by the Underwriter. In the event of the threat or
institution of any such litigation or legal proceedings against the Fund, the
Underwriter shall defend such action on behalf of the Fund at its own expense,
and shall pay any such liability, judgment, cost, or penalty resulting
therefrom, whether imposed by legal authority or agreed upon by way of
compromise and settlement; provided, however, the Underwriter shall not be
required to pay or reimburse the Fund for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of the
omission to supply information by, the Fund to the Underwriter, or to the
Underwriter by a director, officer, or employee of the Fund who is not an
interested person of the Underwriter, unless the information so supplied or
omitted was available to the Underwriter or Management without recourse to the
Fund or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES.
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
The effective date of this Agreement is set forth in the first paragraph of
this Agreement. Wherever referred to in this Agreement, the vote or approval of
the holders of a majority of the outstanding voting securities of the Fund shall
mean the vote of 67% or more of such securities if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of such securities, whichever is the lesser.
-4-
<PAGE>
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect only so long as such continuance is specifically approved at
least annually (a) by the Board of Directors of the Fund, or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, and (b)
by a majority of the directors who are not interested persons of the Underwriter
or of the Fund cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Underwriter, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment
(as defined by the provisions of the Investment Company Act of 1940, as
amended).
12. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until approved
by the Underwriter and by vote of majority of the Board of Directors of the Fund
who are not interested persons of the Underwriter.
13. NOTICES.
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, The Fund and the Underwriter have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
Advantus International Balanced Fund, Inc.
By /s/ Paul H. Gooding
----------------------------------------
Paul H. Gooding
Its President
MIMLIC Sales Corporation
By /s/ Bardea C. Huppert
----------------------------------------
Bardea C. Huppert
Its President
-5-
<PAGE>
SCHEDULE A
The Underwriter shall receive, as compensation for its services
pursuant to this Agreement, a sales charge for each investment in the Fund's
Class A shares, which shall be a percentage of the offering price of such Class
A shares, as determined in accordance with the Fund's currently effective
Prospectus, determined in accordance with the following table:
<TABLE>
<CAPTION>
Sales Charge as a Percentage
Amount of Investment of Offering Price
-------------------- ----------------------------
<S> <C>
Less than $50,000 5.0%
$50,000 but less than $100,000 4.5%
$100,000 but less than $250,000 3.5%
$250,000 but less than $500,000 2.5%
$500,000 but less than $1,000,000 1.5%
$1,000,000 or more -0-
</TABLE>
-6-
<PAGE>
ADVANTUS FUNDS
DEALER SALES AGREEMENT
THIS AGREEMENT, made this _____ day of ________________, 19___, by and
between MIMLIC Sales Corporation, a Minnesota corporation (the "Underwriter"),
having its principal office at 400 Robert Street North, St. Paul, Minnesota,
55101, and ________________ (the "Dealer") having its principal office at
___________________________________________.
WHEREAS, the Underwriter has entered into Distribution Agreements with
certain registered management investment companies (the "Funds"), as listed on
Schedule A hereto and made a part hereof, which Schedule A may be amended
without notice from time to time by the Underwriter, under which the Underwriter
has been engaged and agreed to act as principal underwriter for the Funds in the
sale and distribution of shares of the Funds to the public, either through
dealers or otherwise; and
WHEREAS, the parties hereto desire that the Dealer be a member of a selling
group to sell and distribute shares of the Funds to the public;
NOW, THEREFORE, the Dealer hereby offers to become a member in a selling
group to sell and distribute shares of the Funds to the public subject to the
following terms and conditions.
1. ACCEPTANCE OF SUBSCRIPTIONS; REGISTRATION STATEMENT; PROSPECTUS.
Subscriptions solicited by the Dealer will be accepted only in the amounts and
on the terms which are set forth in the then current Prospectus (and/or
Statement of Additional Information, if any) for the Funds. Underwriter
represents and warrants that the Prospectus (and/or Statement of Additional
Information, if any) for the Funds shown on Schedule A are or will be filed with
the Securities and Exchange Commission ("SEC"), that such filings conform in all
material respects with the requirements of the SEC and that, except as
Underwriter has given written notice to Dealer, there is an effective
Registration Statement relating to such Funds. Underwriter shall give written
notice to Dealer either (i) of specified states or jurisdiction in which the
Funds may be offered and sold by the Dealer or (ii) of all states or
jurisdictions where the Funds may not be offered or sold, but Underwriter does
not assume any responsibility as to the Dealer's right to sell the Funds in any
state or jurisdiction. Underwriter, during the term of this Agreement, shall
(i) notify Dealer in writing of the issuance by the SEC of any stop order with
respect to a Registration Statement or the initiation of any proceedings for
such purpose or any other purpose relating to the registration and/or offering
of the Funds, (ii) of any other action or circumstance known to them that may
prevent the lawful sale of the Funds in any state or jurisdiction, and (iii)
advise the Dealer in writing of any amendment to the Registration Statement or
supplement to any Prospectus. The
<PAGE>
Underwriter shall make available to Dealer such number of copies of the
Prospectus (as amended or supplemented) (and/or Statements of Additional
Information, if any) or any supplemental sales literature created by the
Underwriter as the Dealer may reasonably request.
2. DEALER DISCOUNT AND OTHER COMPENSATION. The dealer shall receive, for
sales of shares of the Funds' common stock, the applicable Dealer Discount or
other compensation as set forth in Schedule A attached hereto and made a part
hereof. Additionally, with respect to certain of the Funds, the Dealer may be
entitled to receive additional compensation upon such terms and conditions and
in such amounts as set forth in Schedule A hereto for providing to Fund
shareholders certain personal and account maintenance services (including, but
not limited to, responding to shareholder inquiries and providing information on
their investments) not otherwise required to be provided by the applicable
Funds' investment adviser or transfer agent ("Service Fees") or (in addition to
the aforementioned Dealer Discount) for sales of shares of the applicable Fund's
common stock ("Distribution Fees"). Schedule A may be amended in whole or in
part without notice from time to time by the Underwriter.
3. ORDERS. Orders to purchase shares of the Funds shall be placed as
described in the then current Prospectus (and/or Statement of Additional
Information, if any) of the Funds and as instructed from time to time by the
Underwriter. Orders shall be placed promptly upon receipt, and there shall be
no postponement of orders received so as to profit the Dealer by reason of such
postponement. Each order shall be confirmed by the Dealer to the Underwriter in
writing on the day such order was placed.
All monies or other settlements received by the Dealer for or on behalf of
the Underwriter shall be received by the Dealer in fiduciary capacity in trust
for the Underwriter and shall be immediately transmitted to the Underwriter,
and, in no event, shall the Dealer commingle such monies with other funds. The
Dealer shall keep correct accounts and records of all business transacted and
monies collected by him for the Underwriter to the extent required by the
Underwriter, which accounts and records shall be open at all times to inspection
and examination by the Underwriter's authorized representative. All accounts,
records and any supplies furnished to the Dealer by the Underwriter shall remain
the property of the Underwriter and shall be returned to the Underwriter upon
demand.
4. FAILURE OF ORDER. The Underwriter reserves the right at any time to
refuse to accept and approve any application for the purchase of shares of the
Funds obtained by the Dealer, and also reserves the right to settle any claims
against the Underwriter arising from the sale of shares of the Funds by the
Dealer and to refund to the investor payments made by him on his shares, without
the Dealer's consent. In the event any order for the purchase of shares of the
Funds is rejected by the Underwriter or any payment received for the purchase of
shares of the Funds cannot be collected or otherwise proves insufficient or
worthless, any compensation paid to the Dealer hereunder shall, promptly upon
notice to the Dealer, be returned by the Dealer to the Underwriter either in
cash or as a charge against the Dealer's account with the Underwriter, as the
-2-
<PAGE>
Underwriter may elect, and the Dealer hereby agrees that until the Underwriter
receives full reimbursement in cash, the amount of compensation due and owing
the Underwriter shall constitute a debt to the Underwriter which the Underwriter
may collect by any lawful means, with interest thereon at the maximum rate
possible.
5. GENERAL. In soliciting purchases of shares of the Funds, the Dealer
shall act as an independent contractor and not on behalf or subject to the
control of the Underwriter. Nothing herein shall constitute the Dealer as a
partner of the Underwriter, any other broker-dealer, any registered
representative of the Underwriter or the Funds, or render any such entity liable
for obligations of the Dealer. The Dealer understands that Dealer has no
authority to incur any expenses or obligations in the name of the Underwriter,
and Dealer agrees to indemnify and save the Underwriter harmless from any and
all expenses, or obligations incurred by Dealer in the name of the Underwriter
for which Dealer is responsible. Dealer agrees to pay all expenses incurred by
Dealer in connection with Dealer's work. The Dealer's participation in the sale
and distribution of shares of the Funds as contemplated by this Agreement is not
exclusive and the Underwriter may engage other broker-dealers and/or its
registered representatives to participate in the sale and distribution of shares
of the Funds on terms and conditions which may differ from the terms and
conditions of this Agreement.
The Dealer understands and agrees that each shareholder account which
includes shares of any Fund subject to the Fund's contingent deferred sales
charge (as described in the applicable Fund's current Prospectus and Statement
of Additional Information) shall not be included in the Dealer's omnibus or
house account, if any, but shall be established as a separate shareholder
account in which purchase and redemption transactions are reported separately to
the Underwriter.
6. DEALER'S UNDERTAKINGS. No person is authorized to make any
representation concerning shares of the Funds except those contained in the then
current Prospectus (and/or Statement of Additional Information, if any). The
Dealer shall not sell shares of the Funds pursuant to this Agreement unless the
then current Prospectus is furnished to the purchaser prior to the offer and
sale. The Dealer shall not use any supplemental sales literature of any kind
without prior written approval of the Underwriter unless it is furnished by the
Underwriter for such purpose. In offering and selling shares of the Funds, the
Dealer shall rely solely on the representations contained in the then current
Prospectus (and/or Statement of Additional Information, if any). In offering
and selling shares of the Funds, the Dealer shall comply with all applicable
state and federal laws and regulations and all applicable rules of the National
Association of Securities Dealers, Inc. (the "NASD"). In the event of the
suspension, revocation, cancellation or other impairment of the Dealer's
membership in the NASD or the Dealer's registration, license or qualification to
sell shares of the Funds under any applicable state or federal law or
regulation, the Dealer shall give the Underwriter prompt notice of such
suspension, revocation, cancellation or other impairment, and the Dealer's
authority under this Agreement shall thereupon terminate as provided in
paragraph 12.
-3-
<PAGE>
With respect to any Fund offering multiple classes of shares, the Dealer
shall disclose to prospective investors the existence of all available classes
of such Fund and shall determine the suitability of each available class as an
investment for each such prospective investor.
7. REPRESENTATIONS AND AGREEMENTS OF THE DEALER. By accepting this
Agreement, the Dealer represents that it: (i) is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended; (ii) is qualified to act
as a dealer in each jurisdiction in which it will offer shares of the Funds;
(iii) is a member in good standing of the NASD; and (iv) will maintain such
registrations, qualifications and memberships throughout the term of this
Agreement.
8. DEALER'S EMPLOYEES. By accepting this Agreement, the Dealer assumes
full responsibility for the actions and course of conduct of its registered
representatives in the solicitation of purchases of shares of the Funds. The
Dealer shall provide thorough and prior training to its registered
representatives concerning the selling methods to be used in connection with the
offer and sale of shares of the Funds, giving special emphasis to the principles
of full and fair disclosure to prospective investors. The Dealer may solicit
sales of shares of the Funds only through properly licensed registered
representatives of the Dealer.
9. INDEMNIFICATION BY UNDERWRITER. The Underwriter hereby agrees to
indemnify and to hold harmless the Dealer and each person, if any, who controls
the Dealer within the meaning of Section 15 of the Securities Act of 1933 (the
"Act") and their respective successors and assigns (hereinafter in this
paragraph separately and collectively referred to as the "Defendants") from and
against any and all losses, claims, demands or liabilities (or actions in
respect thereof), joint or several, to which the Defendants may become subject
under the Act, at common law or otherwise (including any legal or other expense
reasonably incurred in connection therewith), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or allegedly untrue statement of a material fact contained in
the then current Prospectus (and/or Statement of Additional Information, if any)
of the Funds or arise out of or are based upon the omission or alleged omission
to state therein a material fact that is required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that this indemnity agreement is
subject to the condition that notice be given as provided below. Upon the
presentation in writing of any claim or the commencement of any suit against any
Defendant in respect of which indemnification may be sought from the Underwriter
on account of its agreement contained in the preceding sentence, such Defendant
shall with reasonable promptness give notice in writing of such suit to the
Underwriter, but failure so to give such notice shall not relieve the
Underwriter from any liability that it may have to the Defendants otherwise than
on account of said indemnity agreement. The Underwriter shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any such claim or suit, but if the Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Defendants who are parties to such suit or against whom such
claim is presented. If the Underwriter elects to assume the defense and retain
such counsel as herein provided, such Defendant shall bear the fees
-4-
<PAGE>
and expenses subsequently incurred of any additional counsel retained by
them, except the reasonable costs of investigation and such other costs as are
approved by the Underwriter; provided, that if counsel for an indemnified
Defendant determines in good faith that there is a conflict which requires
separate representation for the indemnified Defendant, the indemnified Defendant
shall be entitled to indemnification for the reasonable expenses of one
additional counsel and local counsel to the extent provided above. Such counsel
shall, to the fullest extent consistent with its professional responsibilities,
cooperate with the Underwriter and its counsel. The Underwriter agrees to
notify the Dealer promptly, as soon as it has knowledge thereof, of the
commencement of any litigation or proceedings against the Underwriter or the
Funds or any of their directors or officers, in connection with the offer or
sale of shares of the Funds to the public. The Underwriter's obligation under
this paragraph shall survive the termination of this Agreement.
10. FIDELITY BOND OF DEALER AND INDEMNIFICATION BY DEALER. Dealer
represents that all directors, officers, partners, employees or registered
representatives of Dealer who are authorized pursuant to this Agreement to sell
shares of the Funds or who have access to monies belonging to the Underwriter,
including but not limited to monies submitted with applications for purchase of
shares of the Funds or monies being returned to investors, are and shall be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Dealer at Dealer's expense. Such bond shall be at least of the
form, type and amount required under the NASD Rules of Fair Practice. The
Underwriter may require evidence, satisfactory to it, that such coverage is in
force. Dealer shall give prompt written notice to the Underwriter of any notice
of cancellation or change of coverage with respect to such bond. Dealer hereby
assigns any proceeds received from the fidelity bonding company to the
Underwriter to the extent of the Underwriter's loss due to activities covered by
the bond. If there is any deficiency amount, whether due to a deductible or
otherwise, Dealer shall promptly pay to the Underwriter such amount on demand,
and Dealer hereby indemnifies and holds harmless the Underwriter from any such
deficiency and from the costs of collection thereof, including reasonable
attorneys fees.
Dealer also agrees to indemnify and hold harmless the Underwriter and its
officers, directors and employees and each person who controls them within the
meaning of Section 15 of the Securities Act of 1933 (hereinafter in this
paragraph referred to as Defendants) against any and all losses, claims, damages
or liabilities, including reasonable attorneys fees, to which they may become
subject under the Securities Act of 1933, the Securities Exchange Act of 1934,
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) any oral or written
misrepresentation, any unauthorized action or statement, or any other willful,
reckless or negligent violation of any law, regulation, contract or other
arrangement by Dealer or its officers, directors, employees or agents, or (ii)
the failure of Dealer or its officers, directors, employees or agents to comply
with any applicable provisions of this Agreement; provided, that this indemnity
agreement is subject to the condition that notice be given as provided below.
Upon the presentation in writing of any claim or the commencement of any suit
against any Defendant in respect of which indemnification may be sought from the
Dealer on account of its agreement contained in the preceding sentence, such
Defendant shall with
-5-
<PAGE>
reasonable promptness give notice in writing of such suit to the Dealer, but
failure to so give such notice shall not relieve the Dealer from any liability
that it may have to the Defendants otherwise than on account of this indemnity
agreement. The Dealer shall be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any such claim or
suit with counsel chosen by it and satisfactory to the defendants who are
parties to such suit or against whom such claim is presented. If the Dealer
elects to assume the defense and retain such counsel as herein provided, such
Defendant shall bear the fees and expenses subsequently incurred of any
additional counsel retained by them, except the reasonable costs of
investigation and such other costs as are approved by the Dealer; provided,
that if counsel for an indemnified Defendant determines in good faith that
there is a conflict which requires separate representation for the indemnified
Defendant, the indemnified Defendant shall be entitled to indemnification for
the reasonable expenses of one additional counsel and local counsel to the
extent provided above. Such counsel shall, to the fullest extent consistent
with its professional responsibilities, cooperate with the Dealer and its
counsel. The Dealer's obligations under this paragraph shall survive the
termination of this Agreement.
11. ASSIGNMENT AND TERMINATION. This Agreement may not be assigned by
the Dealer without consent of the Underwriter.
12. TERMINATION. Either party may terminate this Agreement at any time
upon giving written notice to the other party hereto. This Agreement shall
terminate automatically in the event of the suspension, revocation, cancellation
or other impairment of the Dealer's membership in the NASD or the Dealer's
registration, license or qualification to sell shares of the Funds under any
applicable state or federal law or regulation.
13. FIRST CLAIM ON EARNINGS AND LEGAL PROCEEDINGS. Underwriter shall
have first claim on all of Dealer's earnings under this Agreement. This means
that Underwriter as and when it elects may keep all or any part of such earnings
to reduce any debt Dealer owes Underwriter. While Underwriter may release
Dealer's earnings while Dealer owes a debt to Underwriter, this does not mean
Underwriter has waived this right of first claim to Dealer's earnings.
Underwriter's claim also takes precedence over claims of Dealer's creditors.
All Dealer's earnings kept by Underwriter will be used to reduce debt owed to
Underwriter. Dealer has no right to start any legal proceedings on
Underwriter's behalf or in its name.
14. NOTICE. Any notice to be given to a party hereto pursuant to this
Agreement shall be in writing, addressed to such party at the address of such
party set forth in the preamble hereof, or such other address as such other
party may from time to time designate in writing to the party hereto giving
notice. Any notice delivered by the mails, postage fully prepaid, shall be
deemed to have been given five (5) days after mailing or, if earlier, upon
receipt.
-6-
<PAGE>
15. WAIVER. No failure, neglect or forbearance on the part of the
Underwriter to require strict performance of this Agreement shall be construed
as a waiver of the rights or remedies of the Underwriter hereunder.
16. SUSPENDING SALES, AMENDING OR CANCELING THIS AGREEMENT. The
Underwriter may, at any time, without notice, suspend sales or withdraw any
offering of shares entirely. The Underwriter reserves the right to amend or
cancel this Agreement upon notice to Dealer. The Dealer agrees that any order
to purchase shares of Funds placed after notice of any amendment to this
Agreement has been sent to the Dealer shall constitute the Dealer's agreement to
any such amendment.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
-7-
<PAGE>
DEALER:
________________________________ _______________________________
(Name) (NSCC Clearing Number)
________________________________ ________________________________
(Tax Identification Number) (NSCC Executing Broker Symbol)
________________________________ ________________________________
(Street Address) (Telephone Number)
________________________________
(City) (State) (Zip)
Date of offer: _____________________, 19___
By ______________________________________________________________
(Signature)
Please Print Name __________________________________________________
Its_______________________________________________________________
(Title)
Accepted by
MIMLIC SALES CORPORATION
Date of acceptance: _____________________, 19___
By ______________________________________________________________
(Signature)
Its_______________________________________________________________
(Title)
-8-
<PAGE>
SCHEDULE A
Dealer Compensation Schedule
Effective March 1, 1995
I. Advantus Horizon Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Bond Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
(International Fund offers only Class A and Class C Shares.)
A. DEALER COMMISSIONS
Dealer Concession as Percentage of Offering Price
-------------------------------------------------
Class A Class B Class C
Amount of Sale Shares Shares Shares
-------------- ------- ------- -------
Less than $50,000 4.50% 3.75% -0-
$50,000 but less
than $100,000 4.05 3.38 -0-
$100,000 but less
than $250,000 3.15 2.63 -0-
$250,000 but less
than $500,000 2.25 1.88 -0-
$500,000 but less
than $1,000,000 1.35 1.13 -0-
$1,000,000 and over .9* n/a* n/a*
* Orders of $1,000,000 or more will be accepted only for Class A Shares. MIMLIC
does not receive a sales load on sales of Class A Shares of $1,000,000 or more.
The Dealer will receive the commission indicated on such sales; provided,
however, that if the customer redeems any portion of such investment within 18
months after purchase, the pro rated commission paid on the
<PAGE>
portion redeemed shall be charged back against the Dealer's compensation
account in an amount determined as follows:
Percentage of Commission Month After Sale
Charged Back When Redemption Occurs
------------ ----------------------
100% 0-6
66 2/3 7-12
33 1/3 13-18
B. DISTRIBUTION AND SERVICE FEES
In addition to the Dealer Commissions, the Dealer shall receive
quarterly Distribution and/or Service Fees, equal to a percentage of
average daily net assets attributable to Shares held in accounts by
customers for whom the Dealer is the holder or agent of record or with
whom the Dealer maintains a servicing relationship in accordance with
the following table:
Distribution Fees Service Fees
----------------- ------------
Class A Class C Class B Class C
------- ------- ------- -------
1/4 of .25% 1/4 of .75% 1/4 of .25% 1/4 of .25%
II. Advantus Money Market Fund, Inc.
MIMLIC does not receive a sales load on sales of Advantus Money Market
Fund. Shares of Advantus Money Market Fund acquired in an exchange from
any of the other Advantus Funds may be exchanged at relative net asset
values for shares of any of the other Advantus Funds. Shares of Advantus
Money Market Fund not acquired in an exchange from any of the other
Advantus Funds may be exchanged at relative net asset values plus
applicable sales load for shares of any of the other Advantus Funds. In
the event Dealer's customer exchanges shares of Advantus Money Market
Fund for shares of another Advantus Fund and pays a sales load in
connection with such exchange, the Dealer shall receive a Dealer Discount
as described above.
-2-
<PAGE>
CUSTODIAN CONTRACT
between
MIMLIC International Balanced Fund, Inc.
and
NORWEST BANK MINNESOTA, N.A.
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Employment of Bank and Property to be Held by It . . . . . 1
2. Duties of the Bank with Respect to Property of
the Fund Held by the Bank. . . . . . . . . . . . . . . . . 1
2.1 Holding Securities. . . . . . . . . . . . . . . . . . 1
2.2 Delivery of Securities. . . . . . . . . . . . . . . . 2
2.3 Registration of Securities. . . . . . . . . . . . . . 5
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . 5
2.5 Payments for Shares . . . . . . . . . . . . . . . . . 6
2.6 Availability of Federal Funds . . . . . . . . . . . . 6
2.7 Collection of Income. . . . . . . . . . . . . . . . . 6
2.8 Payment of Fund Monies. . . . . . . . . . . . . . . . 7
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . 8
2.10 Payments for Repurchases or Redemptions of Shares
of the Fund . . . . . . . . . . . . . . . . . . . . . 8
2.11 Appointment of Agents . . . . . . . . . . . . . . . . 9
2.12 Deposit of Fund Assets in Securities System . . . . . 9
2.13 Segregated Account. . . . . . . . . . . . . . . . . . 11
2.14 Ownership Certificates for Tax Purposes . . . . . . . 11
2.15 Proxies . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Communications Relating to Fund Portfolio
Securities. . . . . . . . . . . . . . . . . . . . . . 12
2.17 Proper Instructions . . . . . . . . . . . . . . . . . 12
2.18 Actions Permitted Without Express Authority . . . . . 13
2.19 Evidence of Authority . . . . . . . . . . . . . . . . 13
3. Duties of Bank With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income. . . . . 14
4. Records. . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Opinion of Fund's Independent Accountants. . . . . . . . . 15
6. Reports to Fund by Independent Public Accountants. . . . . 15
7. Compensation of Bank . . . . . . . . . . . . . . . . . . . 15
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . 16
9. Effective Period, Termination and Amendment. . . . . . . . 17
10. Successor Bank . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
11. Interpretive and Additional Provisions . . . . . . . . . . 18
12. Minnesota Law to Apply . . . . . . . . . . . . . . . . . . 19
13. Prior Contracts . . . . . . . . . . . . . . . . . . . . . 19
14. Fee Schedule. . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
CUSTODIAN CONTRACT
This Contract between MIMLIC International Balanced Fund, Inc., a
corporation organized and existing under the laws of Minnesota, having its
principal place of business at 400 North Robert Street, St. Paul, Minnesota
55101, hereinafter called the "Fund", and Norwest Bank Minnesota, N.A., a
National Banking Association, having its principal place of business at Sixth
and Marquette, Minneapolis, Minnesota, 55479, hereinafter called the "Bank",
WITNESSETH, that in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF BANK AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Bank as the fund accountant and custodian of
its assets pursuant to the provisions of the Articles of Incorporation. The
Fund agrees to deliver to the Bank all securities and cash owned by it, and
all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or treasury
shares of capital stock ("Shares") of the Fund as may be issued or sold from
time to time. The Bank shall not be responsible for any property of the Fund
held or received by the Fund and not delivered to the Bank.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Bank shall from time to time employ one or more sub-custodians, but only in
accordance with an applicable vote by the Board of Directors of the Fund, and
provided that the Bank shall have no more or less responsibility or liability to
the Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Bank.
2. DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE BANK
<PAGE>
2.1 HOLDING SECURITIES.
The Bank shall hold and physically segregate for the account of the Fund
all non-cash property, including all securities owned by the Fund, other than
(a) securities which are maintained pursuant to Section 2.12 in a clearing
agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively referred to
herein as a "Securities System".
2.2 DELIVERY OF SECURITIES.
The Bank shall release and deliver securities owned by the Fund held by the
Bank or in a Securities System account of the Bank only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt of
payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Fund:
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Bank;
6) To the issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Bank or into the
name or nominee name of any agent appointed pursuant to Section 2.11 or
into the name or nominee name of any subcustodian appointed pursuant to
Article 1; or for exchange for a different
<PAGE>
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Bank;
7) Upon the sale of such securities for the account of the Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Bank shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment
for such securities except as may arise from the Bank's own negligence
or willful misconduct;
8) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Bank;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts of temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Bank;
10) For delivery in connection with any loans of securities made by the
Fund, BUT ONLY against receipt of adequate collateral as agreed upon
from time to time by the Bank and the Fund, which may be in the form
of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Bank's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Bank will not be held liable or responsible for the
delivery of securities owned by the Fund prior to
<PAGE>
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"), relating to the
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund, the Bank, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the Fund's currently effective
prospectus and statement of additional information ("prospectus"), in
satisfaction of requests by holders of Shares for repurchase or
redemptions; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to the be delivered,
<PAGE>
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES.
Securities held by the Bank (other than bearer securities) shall be
registered in the name of the Fund or in the name of any nominee of the Fund or
of any nominee of the Bank which nominee shall be assigned exclusively to the
Fund, UNLESS the Fund has authorized in writing the appointment of a nominee to
be used in common with other registered investment companies having the same
investment adviser as the Fund, or in the name of nominee name of any agent
appointed pursuant to Section 2.1 1 or in the name or nominee name of any sub-
custodian appointed pursuant to Article 1. All securities accepted by the Bank
on behalf of the Fund under the terms of this Contract shall be in "street name"
or other good delivery form.
2.4 BANK ACCOUNts.
The Bank shall open and maintain a separate bank account or accounts in the
name of the Fund, subject only to draft or order by the Bank acting pursuant to
the terms of this Contract, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Bank for the Fund may be deposited by it to its credit as Bank
in the Banking Department of the Bank or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; PROVIDED, however, that
every such bank or trust company shall be qualified to act as a custodian under
the Investment Company Act of 1940 and that each such bank or trust company and
the funds to be deposited with each such bank or trust company shall be approved
by vote of a majority of the Board of Directors of the Fund. Such funds shall
be deposited by the Bank in its capacity as Bank and shall be withdrawable by
the Bank only in that capacity.
<PAGE>
2.5 PAYMENTS FOR SHARES.
The Bank shall receive from the distributor for the Fund's Shares or from
the Transfer Agent of the Fund and deposit into the Fund's account such payments
as are received for Shares of the Fund issued or sold from time to time by the
Fund. The Bank will provide timely notification to the Fund and the Transfer
Agent of any receipt by it of payments for Shares of the Fund.
2.6 AVAILABILITY OF FEDERAL FUNDS.
Upon mutual agreement between the Fund and the Bank, the Bank shall, upon
the receipt of Proper Instructions, make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and the Bank in the
amount of checks received in payment for Shares of the Fund which are deposited
into the Fund's account.
2.7 COLLECTION OF INCOME.
The Bank shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which the Fund shall
be entitled either by law or pursuant to custom in the securities business,
and shall collect an a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Bank or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Bank shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held hereunder.
Income due the Fund on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Bank will have
no duty or responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Bank of the income to which the Fund
is properly entitled.
<PAGE>
2.8 PAYMENT OF FUND MONIES.
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Bank shall pay out
monies of the fund in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but only (a)
against the delivery of such securities or evidence of title to such
options, futures contracts or options on futures contracts, to the
Bank (or any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and has been designated by
the Bank as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Bank referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof or (c) in the case of the
repurchase agreements entered into between the Fund and the Bank, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Bank's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the Bank along
with written evidence of the agreement by the Bank to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or surrender of securities owned
by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section
2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the
<PAGE>
Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in respect of securities
sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
In any and every case where payment for purchase of securities for the
account of the Fund is made by the Bank in advance of receipt of the
securities purchased in the absence of specific written instructions from the
Fund to so pay in advance, the Bank shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had been received
by the Bank.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND.
From such funds as may be available for the purpose but subject
to the limitations of the Articles of Incorporation and any applicable
votes of the Board of Directors of the Fund pursuant thereto, the Bank
shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of Shares who have delivered to
the Transfer Agent a request for redemption or repurchase of their
Shares. In connection with the redemption or repurchase of Shares of
the fund, the Bank is authorized upon receipt of instructions from the
Transfer agent to
<PAGE>
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Bank shall honor checks drawn on the Bank by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Bank in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Bank.
2.11 APPOINTMENT OF AGENTS.
The Bank may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company which is
itself qualified under the Investment Company Act of 1940 to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Bank may from time to time direct; PROVIDED, however,
that the appointment of any agent shall not relieve the Bank of its
responsibilities or liabilities hereunder.
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.
The Bank may deposit and/or maintain securities owned by the Fund
in a clearing agency registered with the Securities and Exchange
commission under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Bank may keep securities of the Fund in a Securities System
provided that such securities are represented in an account
("Account") of the Bank in the Securities System which shall
not include any assets of the Bank other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Bank with respect to securities of the Fund which are
maintained in a Securities System shall identify by book-entry those
securities belonging to the
<PAGE>
Fund;
3) The Bank shall pay for securities purchased for the account of the Fund
upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Bank to reflect such payment
and transfer for the account of the Fund. The Bank shall transfer
securities sold for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an entry on the
records of the Bank to reflect such transfer and payment for the account
of the Fund. Copies of all advises from the Securities System of
transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Bank and be provided to the Fund
at its request. Upon request, the Bank shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Bank shall provide the Fund with any report obtained by the Bank on
the Securities System's accounting system, internal accounting control
and procedures for safeguarding securities deposited in the Securities
System;
5) The Bank shall have received the initial or annual certificate, as the
case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Bank
shall be liable to the Fund for any loss or damage to the Fund resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Bank or any of its agents or of any of
its or their employees or from failure of the Bank or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights
<PAGE>
of the Bank with respect to any claim against the Securities System
or any other person which the Bank may have as a consequence of any
such loss or damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
2.13 SEGREGATED ACCOUNT.
The Bank shall upon receipt of Proper Instructions establish and
maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Bank
pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Bank and a broker-dealer
registered under the Exchange Act and a member of NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for the purpose of segregating cash or government
securities in connection with options purchased, sold or written by
the Fund or commodity futures contracts or options thereon purchased
or sold by the Fund, (iii) for the purpose of compliance by the Fund
with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of the clause (iv), upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES.
<PAGE>
The Bank shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with
receipt of income or other payments with respect to securities of the
Fund held by it and in connection with transfers of securities.
2.15 PROXIES.
The Bank shall, with respect to the securities held hereunder, cause to be
promptly executed by the registered holder of such securities, if the securities
are registered otherwise than in the name of the Fund or a nominee of the Fund,
all proxies, without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES.
The Bank shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Bank from issuers of the
securities being held for the Fund. With respect to tender or exchange offers,
the Bank shall transmit promptly to the Fund all written information received by
the Bank from issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange offer. If the fund
desires to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Bank at least three
business days prior to the date on which the Bank is to take such action.
2.17 PROPER INSTRUCTIONS.
Proper Instructions as used throughout this Article 2 means a writing
signed or initialed by one or more person or persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Bank reasonably believes them to
have been given by a person authorized to give such instructions with respect to
the transaction
<PAGE>
involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors
of the Fund accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions may include
communications effected directly between electromechanical or
electronic devices provided that the Board of Directors and the Bank
are satisfied that such procedures afford adequate safeguards for the
Fund's assets.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.
The Bank may in its discretion, without express authority from the Fund;
1) Make payments to itself or others for minor expenses of handling
securities PROVIDED that all such payments shall be accounted for
to the Fund;
2) Surrender securities in temporary form for securities in definitive
form;
3) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) In general,. attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise
directed by the Board of Directors of the Fund.
2.19 EVIDENCE OF AUTHORITY.
The Bank shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument of paper
believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Bank may receive and accept a certified
copy of a vote of the Board of Directors of the Fund as conclusive
evidence (a) of the authority of any person to act in accordance with
such vote or (b) or any determination or of any action by the Board of
Directors pursuant to the Articles of Incorporation as described in
such vote, and such vote may be considered as in full force and effect
until receipt by the Bank of written notice to
<PAGE>
the contrary. 2.20 CLASS ACTIONS. The Bank shall transmit promptly to
the Fund all notices or other communications received by it in
connection with any class action lawsuit relating to securities
currently or previously held for the Fund. Upon being directed by the
Fund to do so, the Bank shall furnish to the Fund any and all written
materials which establish the holding/ownership, amount held/owned,
and period of holding/ownership of the securities in question.
3. DUTIES OF BANK WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET
ASSET VALUE AND NET INCOME.
The Bank shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund
to keep the books of account of the Fund and/or compute the net asset
value per share of the outstanding shares of the Fund or, if directed
in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Bank shall also calculate daily the net income of the
Fund as described in the Fund's currently effective prospectus and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer
of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of
the Fund shall be made at the time or times described from time to
time in the Fund's currently effective prospectus.
4. RECORDS.
The Bank shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rule 31 a- 1
and 31 a-2 thereunder, applicable federal and state tax laws and any
other law or administrative rules or procedures which may be
applicable to the Fund. All such records shall be the property of the
Fund and shall at all times during the regular business hours of the
Bank
<PAGE>
be open for inspection by duly authority officers, employees or agents
of the Fund and employees and agents of the Securities and Exchange
Commission. The Bank shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by the Fund and held by the Bank
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Bank,
include certificate numbers in such tabulations.
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Bank shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions
from the Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's, Form N- 1
A, and Form NSAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
6. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Bank shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the services
provided by the Bank under this Contract; such reports shall be of sufficient
scope, and in sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the reports shall
so state.
7. COMPENSATION OF BANK
For performance by the Bank pursuant to this Agreement, the Fund agrees to
pay the Bank annual asset fees and supplemental charges as set out in the fee
schedule attached hereto. The fee schedule shall be guaranteed for service
performed and expense incurred through March
<PAGE>
31, 1995. Subsequent to March 31, 1995, such fees and supplemental
charges may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
8. RESPONSIBILITY OF BANK
So long as and to the extent that it is in the exercise of reasonable
care, the Bank shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties. The Bank shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept indemnified
by and shall be without liability to the Fund for any action taken or omitted
by it without negligence. It shall be entitled to rely an and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice. Notwithstanding the foregoing, the responsibility of the Bank
with respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Bank and the Fund.
If the Fund requires the Bank to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to the Fund
being liable for the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Bank to take such action, shall.
provide indemnity to the Bank in an amount and form satisfactory to it.
If the Fund requires the Bank to advance cash or securities for
any purpose or in the event that the Bank or its nominee shall incur
or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security
therefor and should the
<PAGE>
Fund fail to repay the Bank promptly, the Bank shall be entitled to
utilize available cash and to dispose of Fund assets to the extent
necessary to obtain reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
The Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than sixty (60) days after
the date of such delivery or mailing; PROVIDED, however, that the Bank
shall not act under Section 2.1 2 hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that
the Board of Directors of the Fund has approved the initial use of a
particular Securities System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Directors
has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act
of 1940, PROVIDED FURTHER, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund may at any time be action of its
Board of Directors (i) substitute another bank or trust company for
the Bank by giving notice as described above to the Bank, or (ii)
immediately terminate this Contract in the event of the appointment of
a conservator or receiver for the Bank by the Comptroller of the
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Bank such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Bank for its costs, expenses and disbursements.
10. SUCCESSOR BANK
<PAGE>
If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Bank shall, upon termination, deliver to such successor custodian
at the office of the Bank, duly endorsed and in the form for transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Bank shall, in like
manner, upon receipt of a certified copy of a vote of the Board of Directors of
the Fund, deliver at the office of the Bank and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Bank on or before the date when such termination shall become effective,
then the Bank shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940, of its own
selection, having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, or not less than $25,000,000, all securities,
funds and other properties held by the Bank and all instruments held by the Bank
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Bank under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Bank after the date of termination hereof owing to failure of
the Fund to procure the certified copy of the vote referred to or of the Board
of Directors to appoint a successor custodian, the Bank shall be entitled to
fair compensation for its services during such period as the Bank retains
possession of such securities, Funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Bank shall remain in
full force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Contract, the Bank and the Fund
may from time
<PAGE>
to time agree on such provisions interpretive of or in addition to the
provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of
Incorporation of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. MINNESOTA LAW TO APPLY.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The State of
Minnesota.
13. PRIOR CONTRACTS.
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund and the Bank relating to the
custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 13th day of May 1994.
MIMLIC International Balanced Fund, Inc.
By /s/ Paul H. Gooding
-------------------------------------
ATTEST
By /s/ Eric J. Bentley
-------------------------------------
<PAGE>
NORWEST BANK MINNESOTA, N.A.
By /s/ Brent C. Siegel
-------------------------------------
ATTEST
By /s/ Sally J. Kirschman
-------------------------------------
Minnesota Mutual
Fee Schedule For Global Custody & International Mutual Fund Accounting
April 11, 1994
DISCOUNT
Year Year Year
Monthly Account Charge 1700.00 2375.00 2725.00
Monthly Safekeeping Charge Per Issue: $5.25 $5.25 $5.25
Annual Asset Value Charges: (in Basis Points)
Charge for the first $10,000,000.00 18.5 24 24
Charge for the next $20,000,000.00 16 20 20
Charge for the remaining Value 12 15 15
All Transactions other than Global Buys/Sells: $15.00 $15.00 $15.00
<PAGE>
Global Transactions: By Country Group
Tier I Equities Fixed Income Cedel/Euroclear
$47 $100 $47
Austria
Belgium
Denmark
Finland
Germany
Japan
Norway
Switzerland
Tier 11 Equities Fixed Income Cedel/Euroclear
$100 $100 $47
Australia
Canada
ECU
France
Hong Kong
Indonesia
Ireland
Italy
Malaysia
Mexico
Netherlands
New Zealand
Philippines
Singapore
Spain
Thailand
United Kingdom
Tier III Equities Fixed Income Cedel/Euroclear
Greece $135 $135 $47
Brazil $200 $200 $47
Venezuela $200 $200 $47
Korea $270 $270 $47
Turkey $270 $270 $47
Portugal $400 $400 $47
Out-Of-Pocket Expenses
<PAGE>
The above schedule does not include out-of-pocket expenses that would be
incurred on the fund's behalf. Examples of out-of-pocket expenses include:
special pricing projects, forms, postage, mailing services, magnetic tapes,
microfilm/microfiche, etc.
On-Site Terminal Installation
Charges associated with terminal set-up at Minnesota Mutual would be:
Communication Line: $125 Per Month - Unlimited access to the system
Equipment Costs*: $125 PER MONTH - INCLUDES PURCHASE OF
TERMINAL AND CONTROLLER DEPRECIATED OVER THREE YEARS
Total Cost $250.00 Per Month
*Minnesota Mutual may elect to purchase the equipment at about $4000.00 outright
instead of paying a monthly charge. Equipment requirements and specifications
can be supplied on request.
This schedule is valid for 60 days following delivery of proposal.
<PAGE>
Amendment to Custodial Contract
between
MIMLIC INTERNATIONAL BALANCED FUND, INCORPORATED
and
NORWEST BANK MINNESOTA, N.A.
This Amendment made in duplicate this 12th day of January, 1995, by and between
MIMLIC International Balanced Fund, Incorporated, a Minnesota corporation
(hereinafter called the "Fund") and Norwest Bank Minnesota, N.A. a National
Banking Association, having its principal place of business at Sixth and
Marquette, Minneapolis, Minnesota, 55479, (hereinafter called the "Custodian"),
WITNESSETH,
WHEREAS, the Fund and the Custodian have an existing Custodial Contract
effective as of the 13th day of May 1994, and
WHEREAS, That Custodial Contract, in Section 9 thereof, allows the Amendment of
its provisions by mutual agreement between the Fund and the Custodian,
NOW THEREFORE, In consideration of the mutual covenants and agreements
hereinafter contained, the Fund and the Custodian hereby agree to the Amendment
of the Custodial Contract as described below, such Amendments to be effective on
the 18th day of January, 1995.
I.
Section 2.9, "Liability for Payment on Advance of Receipt of Securities
Purchased," shall be amended to read:
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
The Custodian shall not make payment for the purchase of domestic
securities for the account of a Fund in advance of receipt of the securities
purchased in the absence of specific written instructions from the Company to so
pay in advance. In any and every case where payment for purchase of domestic
securities for the account of a Fund is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific written
instructions from the Company to so pay in advance, the Custodian shall be
absolutely liable to the Company (for the amount of the Fund) for such
securities to the same extent as if the securities had been received by the
Custodian.
II.
Section 2.12, "Deposit of Fund Assets in Securities Systems," shall be amended
to read:
<PAGE>
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.
The Custodian may deposit and/or maintain domestic securities owned by any
Fund in a clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Exchange Act, which acts as a securities depository, or
in a Federal Reserve Bank, as Custodian may select, and to permit such deposited
Assets to be registered in the name of Custodian or Custodian's agent or nominee
on the records of such Federal Reserve Bank or such registered clearing agency
or the nominee of either (collectively referred to herein as "Securities
System") in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of a Fund in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic securities of a
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to such Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of a Fund upon (i) the simultaneous receipt of advice from the
Securities System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the
Fund. The Custodian shall transfer domestic securities sold for the
account of a Fund upon (i) the simultaneous receipt of advice from the
Securities System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the
Fund. Copies of all advises from the Securities System of transfers of
securities for the account of a Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to the Company
at its request. Upon request, the Custodian shall furnish the Company
confirmation of each transfer to or from the account of a Fund in the
form of a written advice or notice and shall furnish to the Company
copies of daily transaction sheets reflecting each day's transactions
in the Securities System for the account of each Fund.
4) The Custodian shall provide the Company with any report obtained by the
Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System.
5) The Custodian shall have received the initial or annual certificate, as
the case may be, required by Article 16 hereof;
<PAGE>
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Company (for the account of each Fund)
for any loss or damage to the applicable Fund(s) resulting from use of
the Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent or
employee to enforce effectively such rights as it may have against the
Securities System; at the election of the Company, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the applicable Funds have not been made whole for
any such loss or damage.
III.
The Custodial Contract shall be amended by the addition of Section 2.21, and its
subparagraphs:
2.21 DUTIES OF THE CUSTODIAN WITH RESPECT TO FUND PROPERTY HELD OUTSIDE OF THE
UNITED STATES
2.21(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS.
The Custodian is authorized and instructed, either directly or indirectly
(through one or more sub-custodian U.S. banks), to employed as sub-custodians
for any Fund's securities and other assets maintained outside of the United
States the foreign banking institutions, foreign securities depositories and
foreign clearing agencies designated on Exhibit A hereto ("foreign sub-
custodians"); provided, however, that, notwithstanding the contents of Exhibit A
hereto, the Custodian (including any of its agents and sub-custodians) is
authorized to directly or indirectly employ or retain any sub-custodian,
depository or clearing agency only if said employed or retained institution
qualifies as either (a) an "eligible foreign custodian," as defined in Rule 17f-
5 under the Investment Company Act of 1940, or (b) a "bank," as defined in
Section 2(a)(5) of the Investment Company Act of 1940, that in turn qualifies as
an eligible domestic custodian under Section 17(f) of the Investment Company Act
of 1940; and provided further that the Custodian shall be liable to the Company
for any loss of any Fund assets custodied with any institution directly or
indirectly employed or retained by the Custodian (or any of its agents or sub-
custodians) that does not meet the qualifies of either clause (a) or (b) of the
preceding provision.
Upon receipt of Proper Instructions, together with a certified resolution
of the Company's Board of Directors, the Custodian and the Company may agree to
amended Schedule A hereto from time to time to designate additional or
alternative foreign banking institutions, foreign securities depositories and
foreign clearing agencies to act as sub-custodians. Each foreign banking
institution shall be authorized to deposit securities in foreign securities
depositories and foreign clearing agencies authorized pursuant to Rule 17f-5
under the Investment Company Act of 1940. Upon receipt of Proper Instructions
from the Company the Custodian shall promptly cease the employment of any one or
more of such sub-custodians for maintaining custody of the assets of the
applicable Fund(s).
<PAGE>
2.21(b) ASSETS TO BE HELD.
The Custodian shall limit the securities and other assets maintained in the
custody of the foreign sub-custodian to: (a) "foreign securities," as defined
in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and
(b) cash and cash equivalents in such amounts as the Custodian or the Company
may determine to be reasonably necessary to effect the foreign securities
transactions of the applicable Fund(s).
2.21(c) SEGREGATION OF SECURITIES.
The Custodian shall identify on its books as belonging to the Company for
the account of one or more of the Fund(s) , the foreign securities of each such
Fund held by each foreign sub-custodian. Each agreement pursuant to which the
Custodian or its duly appointed U.S. sub-custodian employs a foreign banking
institution shall require that such institution establish a custody account for
the Custodian (or its U.S. sub-custodian, as the case may be) on behalf of its
customers and physically segregate in that account securities and other assets
of the Custodian's customers, and, in the event that such institution deposits a
Fund's securities in a foreign securities depository, the sub-custodian shall
identify on its books as belonging to the Custodian (or its U.S. sub-custodian,
as the case may be(, as agent for the Custodian's customers, the securities so
deposited (all collectively referred to as the "Account").
2.21(d) AGREEMENT WITH FOREIGN BANKING INSTITUTION.
Each agreement with a foreign banking institution shall provide that: (a)
each Fund's assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or its
creditors, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for each Fund's assets will be freely transferable
without the payment of money or value other than for custody or administration,
which may include payment of stamp duties or government taxes; (c) adequate
records will be maintained identifying the assets as belonging to the customers
of Custodian; (d) officers of or auditors employed by, or other representatives
of the Custodian, including independent public accountants for each Fund, will
be given access to the books and records of the foreign banking institution
relating to its actions given under its agreement with Custodian or shall be
given confirmation of the contents of such books and records; and (e) assets of
each Fund held by the foreign sub-custodian will be subject only to the
instructions of the Company, the Custodian or their agents.
2.21(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE COMPANY.
Upon request of the Company, the Custodian will use its best efforts to
arrange for the independent accountants of the Company to be afforded access to
the books and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the performance of
such foreign banking institutions under its agreement with the Custodian (or its
U.S. sub-custodian, as the case may be).
2.21(f) REPORTS BY CUSTODIAN.
The Custodian will supply to the Company from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Fund held by foreign sub-custodians, including but not limited to an
identification of entities having possession of each
<PAGE>
applicable Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign sub-custodian for the Custodian on
behalf of each applicable Fund indicating, as to securities acquired
for the Fund, the identity of the entity having physical possession of
such securities.
2.21(g)FOREIGN SECURITIES TRANSACTIONS.
1) Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall make or cause its foreign sub-custodian to transfer, exchange or
deliver foreign securities owned by the Company for the account of a
Fund, but except to the extent explicitly provided herein only in any
of the cases specified in Section 2.2.
2) Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out or cause its foreign sub-custodian to pay out monies of
a Fund, but except to the extent explicitly provided herein only in
any of the cases specified in Section 2.8.
3) Settlement and payment for securities received for the account of
a Fund and delivery of securities maintained for the account of a Fund
may, upon receipt of Proper Instructions, be effected in accordance
with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
4) With respect to any transaction involving foreign securities, the
Custodian or any sub-custodian in its discretion may case a Fund's
account to be credited on either the contractual settlement date or
the actual settlement date with the proceeds of any sale or exchange
of foreign securities from the account of the applicable Fund and to
be debited on either the contractual settlement date or the actual
settlement date for the cost of foreign securities purchased or
acquired for such Fund according to Custodian's then current internal
policies and procedures pertaining to securities settlement, which
policies and procedures may change from time to time. Custodian shall
advise the Company of any changes to such policies and procedures.
The Custodian may reverse any such credit or debit made on the
contractual settlement date if the transaction with respect to which
such credit or debit was made fails to settle within a reasonable
period, determined by Custodian in its reasonable discretion, after
the contractual settlement date except that if any foreign securities
delivered pursuant to this section are returned by the recipient
thereof, the Custodian may cause any such credits and debits to be
reversed at any time.
<PAGE>
5) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 of this Contract and the Fund
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
6) Until the Custodian receives written instructions to the contrary
the Custodian shall, or shall cause the sub-custodian to collect all
interest and dividends paid on securities held in each applicable
Fund's account, unless such payment is in default. Unless otherwise
instructed, the Custodian shall convert interest, dividends and
principal received with respect to securities in a Fund's account
into United States dollars, and the Custodian shall perform foreign
exchange contracts for the conversion of United States dollars to
foreign currencies for the settlement of trades whenever it is
practicable to do so through customary banking channels. Customary
banking channels may vary based upon industry practice in each
jurisdiction, and shall include the banking facilities of the
Custodian's affiliates, in accordance with such affiliate's then
prevailing internal policy on funds repatriation. All risk and
expense incident to such foreign collection and conversions is the
responsibility of each applicable Fund's account, and Custodian shall
have no responsibility for fluctuation in exchange rates affecting
collections or conversions.
2.21(h) FOREIGN SECURITIES LENDING.
Notwithstanding any other provisions contained in this Contract, the
Custodian and any sub-custodian shall deliver and receive securities loaned or
returned in connection with securities lending transactions only upon and in
accordance with Proper Instructions; provided, if the Custodian is not the
lending agent in connection with such securities lending, then neither the
Custodian or any sub-custodian shall undertake, or otherwise be responsible for,
(i) marking to market values for such loaned securities,
(ii) collection of dividends, interest or other disbursements or
distributions made with respect to such loaned securities,
(iii) receipt of corporate action notices, communications, proxies or
instruments with respect to such loaned securities, and
(iv) custody, safekeeping, valuation or any other actions or services
with respect to any collateral securing any such securities
lending transactions.
In the event that the Custodian is the applicable Fund's lending agent in
connection with a specific securities loan, the Custodian shall undertake to
perform all of the above duties with regard to such loan, except that the
Company shall not receive, nor be enabled to vote, proxies in connection with
such loaned securities.
2.21(i) LIABILITY OF FOREIGN SUB-CUSTODIANS.
Each agreement pursuant to which the Custodian (or its U.S. sub-custodian
bank, as applicable) employs a foreign banking institution as a foreign sub-
custodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold
<PAGE>
harmless, the Custodian and Custodian's customers from and against
any loss, damage, cost, expense, liability or claim arising out of
such sub-custodian's negligence, fraud, bad faith, willful misconduct
or reckless disregard of its duties. At the election of the Company,
it shall be entitled to be subrogated to the right of the Custodian
with respect to any claims against the Custodian's U.S. sub-custodian
bank (if any) or a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or claim if and to
the extent that the Company has not been made whole for any such
loss, damage, cost, expense, liability or claim.
2.21(j) MONITORING RESPONSIBILITIES.
The Custodian shall furnish annually to the Company information concerning
the foreign sub-custodians employed by the Custodian (or its U.S. sub-custodian
bank, as applicable). Such information shall be similar in kind and scope to
that furnished to the Company in connection with the initial approval of this
Contract (and any contracts with U.S. and foreign sub-custodians entered into
pursuant hereto). In addition, the Custodian will promptly inform the Company
in the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or is notified by the Custodian's
U.S. sub-custodian bank (if any) or a foreign banking institution employed as
foreign sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (United States dollars or
the equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted United
States accounting principles.)
2.21(k) BRANCHES OF UNITED STATES BANKS.
Except as otherwise set forth in this Contract, the provisions hereof shall
not apply where the custody of any Fund's assets maintained in a foreign branch
of a banking institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 which meets the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a sub-
custodian shall be governed by Article I of this Contract.
2.21(l) EXPROPRIATION INSURANCE.
The Custodian represents that it does not intend to obtain any insurance
for the benefit of the Company or any Fund which protects against the imposition
of exchange control restrictions or the transfer from any foreign jurisdiction
of the proceeds of sale of any securities or against confiscation, expropriation
or nationalization of any securities or the assets of the issuer of such
securities is organized or in which securities are held for safekeeping either
by Custodian or any sub-custodian in such country. The Custodian represents
that its understanding of the position of the Staff of the Securities and
Exchange Commission is that any investment company investing in securities of
foreign issuers has the responsibility for reviewing the possibility of the
imposition of exchange control restrictions which would affect the liquidity of
such investment company's assets and the possibility of exposure to political
risk, including the appropriateness of insuring against such risk.
IV.
Section 11 "Records," shall be amended to read:
<PAGE>
11. RECORDS.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Company and each Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rule 31a-1 and 31a-2
thereunder. The Custodian shall also maintain records as directed by the
Company in connection with applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the Company
and the Funds. With respect to securities and cash deposited with a Securities
System, a sub-custodian or an agent of the Custodian, the Custodian shall
identify on its books all such securities and cash as belonging to the Company
for the account of the applicable Fund(s). All such records shall be the
property of the Company and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authority officers, employees or
agents of the Company. Such records shall be made available to the Company for
review by employees and agents of the Securities and Exchange Commission. The
Custodian shall furnish to the Company, and its agents as directed by the
Company, as of the close of business on the last day of each month a statement
showing all transactions and entries for the account of the Company during that
month, and all holdings as of month-end.
All records so maintained in connection with the performance of its duties
under this Agreement shall remain the property of the Company and, in the event
of termination of this Agreement, shall be delivered to the Company. Subsequent
to such delivery, and surviving the termination of this Agreement, the Company
shall provide the Custodian access to examine and photocopy such records as the
Custodian, in its discretion, deems necessary, for so long as such records are
retained by the Company.
V.
Section 15, "Responsibility of Custodian," shall be amended to read:
15. RESPONSIBILITY OF CUSTODIAN.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Company or any Fund for any action taken or omitted by it in good faith
and without negligence. It shall be entitled to rely on and may act upon advice
of counsel of, or reasonably acceptable to, the Company on all matters, and
shall be without liability for any action reasonable taken or omitted pursuant
to such advice. Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the Company.
<PAGE>
If the Company requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to the Company being liable for the payment of money or incurring
liability of some other form, the Company, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form reasonably satisfactory to it.
If the Company requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of a Fund shall be
security therefor and should the Company fail to repay the Custodian promptly
with respect to any Fund, the Custodian shall be entitled to utilize available
cash and to dispose of assets to the extent necessary to obtain reimbursement
The Custodian shall not be liable for any loss or damage to the Company or
any Fund resulting from participation in a securities depository unless such
loss or damage arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its failure to
enforce effectively such rights as it may have against any securities depository
or from use of sub-custodian or agent. Anything in this Contract to the
contrary notwithstanding, the Custodian shall exercise, in the performance of
its obligations undertaken or reasonably assumed with respect to this Agreement,
reasonable care, for which the Custodian shall be responsible to the same extent
as if it were performing such duties directly. The Custodian shall be
responsible for the securities and cash held by or deposited with any sub-
custodian or agent to the same extent as if such securities and cash were
directly held by or deposited with the Custodian. The Custodian hereby agrees
that it shall indemnify and hold the Company and each applicable Fund harmless
from and against any loss which shall occur as a result of the failure of a
foreign sub-custodian holding the securities and cash to provide a level of
safeguards for maintaining any Fund's securities and cash not materially
different from that provided by a United States custodian holding such
securities and cash in the United States.
The Custodian agrees to indemnify and hold the Company and each of the
Funds harmless for any and all loss, liability and expense, including reasonable
legal fees and expenses, arising out of the Custodian's own negligence or
willful misconduct or that of its officers, agents, sub-custodians or employees
in the performance of the Custodian's duties and obligations under this
Contract.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized officers as of the day
and year first above written.
MIMLIC International Balanced Fund, Inc.
By /s/ Paul H. Gooding
---------------------------------------
Attest
By /s/ Eric Bentley
---------------------------------------
NORWEST BANK MINNESOTA, N.A.
By /s/ Brent Siegel
---------------------------------------
Attest
By /s/ Steven W. Guiken
---------------------------------------
<PAGE>
ADMINISTRATIVE SERVICE AGREEMENT
AGREEMENT made as of the 19th of April, 1994, by and between MIMLIC
International Balanced Fund, Inc., a Minnesota corporation, having its principal
office and place of business at 400 Robert Street North, St. Paul, Minnesota,
55101, (the "Fund"), and The Minnesota Mutual Life Insurance Company, a
Minnesota corporation having its principal office and place of business at 400
Robert Street North, St. Paul, Minnesota, 55101, ("Minnesota Mutual").
WHEREAS, the Fund desires to engage Minnesota Mutual to provide to the Fund
accounting, audit, legal and other administrative services, and Minnesota Mutual
desires to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF MINNESOTA MUTUAL
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Minnesota Mutual, and
Minnesota Mutual hereby agrees to provide certain accounting, auditing, legal
and other administrative services to the Fund.
1.02 Minnesota Mutual agrees that it will perform such services as
are required by the Fund, including, without limitation, the following:
(a) register or qualify, and maintain the registrations or
qualifications, of the Fund and its Shares under state or other securities
laws.
(b) calculate the Fund's net asset value per Share at such times
and in such manner as specified in the Fund's current prospectus and
statement of additional information and at such other times as the parties
hereto may from time to time agree upon;
(c) upon the Fund's distribution of dividends and capital gains,
calculate the amount of such dividends and capital gains to be received per
Share and calculate the number of additional Shares to be received by each
Shareholder, other than any shareholder who has elected to receive such
dividends and capital gains in cash;
(d) prepare and maintain all accounting records required by the
Fund, including a general ledger;
(e) prepare the Fund's annual and semi-annual financial statements;
<PAGE>
(f) prepare and file the Fund's income, excise and other tax
returns;
(g) provide audit assistance in conjunction with the Fund's
independent auditors;
(h) provide such legal services as the parties hereto may from
time to time agree upon, including without limitation preparation and filing
with the Securities and Exchange Commission of the annual or more frequent
post-effective amendments to the Fund's registration statement and the Fund's
proxy materials; and
(i) provide such other administrative services as the parties
hereto may from time to time agree upon.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and Minnesota Mutual.
Article 2 COMPENSATION FOR SERVICES
2.01 In payment for the administrative services to be performed by
Minnesota Mutual hereunder, the Fund shall pay to Minnesota Mutual a fee in
accordance with Schedule A hereto.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund will reimburse Minnesota Mutual for out-of-pocket expenses or advances
incurred by Minnesota Mutual in connection with Minnesota Mutual's
performance of services hereunder.
Article 3 REPRESENTATIONS AND WARRANTIES OF MINNESOTA MUTUAL
Minnesota Mutual represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Minnesota.
3.02 It is duly qualified to carry on its business in the State of
Minnesota.
3.03 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to Minnesota Mutual that:
- 2 -
<PAGE>
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Minnesota.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and Bylaws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 INDEMNIFICATION
5.01 Minnesota Mutual shall not be responsible for, and the Fund
shall indemnify and hold Minnesota Mutual harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of Minnesota Mutual or its agents or
subcontractors required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith,
negligence or willful misconduct or which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by Minnesota Mutual or its agents or
subcontractors of information, records and documents which (i) are received
by Minnesota Mutual or its agents or subcontractors and furnished to it by or
on behalf of the Fund, and (ii) have been prepared and/or maintained by the
Fund or any other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by Minnesota Mutual or
its agents or subcontractors of any instructions or requests of the Fund.
5.02 Minnesota Mutual shall indemnify and hold the Fund harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action
or failure or omission to act by Minnesota Mutual as a result of Minnesota
Mutual's lack of good faith, negligence or willful misconduct.
5.03 At any time Minnesota Mutual may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection
- 3 -
<PAGE>
with the services to be performed by Minnesota Mutual under this Agreement, and
Minnesota Mutual and its agents or subcontractors shall not be liable and shall
be indemnified by the Fund for any action taken or omitted by it in reliance
upon such instructions or in good faith reliance upon the opinion of such
counsel. Minnesota Mutual, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided Minnesota Mutual or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. Minnesota
Mutual, its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the proper
countersignature of any current or former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall have
the option to participate with the party seeking indemnification in the
defense of such claim. The party seeking indemnification shall in no case
confess any claim or make any compromise in any case in which the other party
may be required to indemnify it except with the other party's prior written
consent.
Article 6 COVENANTS OF THE FUND AND MINNESOTA MUTUAL
6.01 Minnesota Mutual shall keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable.
To the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, Minnesota Mutual agrees that all such
records prepared or maintained by Minnesota Mutual relating to the services
to be performed by Minnesota Mutual hereunder are the property of the Fund
and will be preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
- 4 -
<PAGE>
6.02 Minnesota Mutual and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanges or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
6.03 In the case of any requests or demands for the inspection of
the Shareholder records of the Fund, Minnesota Mutual will endeavor to notify
the Fund and to secure instructions from an authorized officer of the Fund as
to such inspection. Minnesota Mutual reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder records
to such person.
Article 7 EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
7.01 The effective date of this Agreement is set forth in the
first paragraph of this Agreement. Unless sooner terminated as hereinafter
provided, this Agreement shall continue in effect until the next annual
meeting of the Fund's shareholders and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually by the
Board of Directors of the Fund, including the specific approval of a majority
of the directors who are not interested persons of the Fund, MIMLIC Asset
Management Company ("MIMLIC Asset"), investment adviser to the Fund, or
MIMLIC Sales Corporation ("MIMLIC Sales"), the underwriter of the Fund's
Shares, cast in person at a meeting called for the purpose of voting on such
approval.
7.02 This Agreement may be terminated at any time without the
payment of any penalty by the vote of the Board of Directors of the Fund, or
by Minnesota Mutual, upon 60 days' written notice to the other party.
Article 8 ASSIGNMENT
8.01 This Agreement shall automatically terminate in the event of
its assignment as such term is defined by the Investment Company Act of 1940,
as amended.
Article 9 AMENDMENT
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund, including a majority of the directors
who are not interested persons of the Fund, MIMLIC Asset or MIMLIC Sales,
cast in person at a meeting called for the purpose of voting on such approval.
- 5 -
<PAGE>
Article 10 MINNESOTA LAW TO APPLY
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of
Minnesota.
Article 11 MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 12 NOTICES
12.01 Any notice under this Agreement shall be in writing,
addressed, delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such
notice.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first above
written.
MIMLIC INTERNATIONAL BALANCED FUND, INC.
By /s/ Paul H. Gooding, President
--------------------------------------------------
Attest /s/ Eric Bentley, Assistant Secretary
----------------------------------------------
THE MINNESOTA MUTUAL LIFE INSURANCE
COMPANY
By /s/ Bardea C. Huppert, Second Vice President
--------------------------------------------------
Attest /s/ Dennis E. Prohofsky, Second Vice President
----------------------------------------------
- 6 -
<PAGE>
MIMLIC INTERNATIONAL BALANCED FUND, INC.
SCHEDULE A
(As amended January 18, 1995 and
effective February 1, 1995)
Minnesota Mutual shall receive, as compensation for its services
pursuant to this Agreement, a monthly fee determined in accordance with the
following table:
Monthly Administrative
Services Fee
----------------------
$2,050
Said monthly fees shall be paid to Minnesota Mutual not later than
five days following the end of each calendar quarter in which said services were
rendered.
- 7 -
<PAGE>
Dorsey & Whitney Letterhead
MIMLIC International Balanced Fund, Inc.
400 North Robert Street
St. Paul, MN 55101
Dear Sir/Madam:
Reference is made to the Registration Statement on Form N-1A
which you are filing with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 for the purpose of
registering for sale by MIMLIC International Balanced Fund, Inc.
(the "Fund") of an indefinite number of shares of the Fund's
Common Stock par value $.01 per share.
We are familiar with the proceedings to date with respect to
the proposed sale by the Fund, and have examined such records,
documents and matters of law and have satisfied ourselves as to
such matters of law and have satisfied ourselves as to such
matters of fact as we consider relevant for the purposes of this
opinion.
We are of the opinion that:
(a) The Fund is a legally organized corporation under
Minnesota law.
(b) The shares of Common Stock to be sold by the
Fund will be legally issued, fully paid and
nonassessable when issued and sold upon the terms
and in the manner set forth in said Registration
Statement of the Fund.
We consent to the reference to this firm under the caption
"Counsel and Independent Auditor" in the Prospectus and to the
use of this opinion as an exhibit to the Registration Statement.
Dated: June 21, 1994
Very truly yours,
/s/ Dorsey & Whitney
DORSEY & WHITNEY
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Advantus International Balanced Fund, Inc.:
We consent to the use of our report included herein and the references to our
Firm under the headings "FINANCIAL HIGHLIGHTS" and "COUNSEL AND INDEPENDENT
AUDITORS" in Part A and "FINANCIAL STATEMENTS" in Part B of the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 25, 1996
<PAGE>
MIMLIC Asset Management Company Letterhead
June 20, 1994
MIMLIC International Balanced Fund, Inc.
400 Robert Street North
St. Paul, MN 55101
Dear Sir/Madam:
In connection with the purchase by MIMLIC Asset Management
Company (the "Purchaser") of 15,000 initial shares of common
stock ("Stock") of MIMLIC International Balanced Fund, Inc. (the
"Fund"), the Purchaser hereby represents that it is acquiring
such Stock for investment with no intention of selling or
otherwise disposing or transferring it or any interest in it.
The Purchaser hereby further agrees that any transfer of any such
Stock or any interest in it shall be subject to the following
conditions:
1. The Purchaser shall furnish the Fund and counsel satisfactory
to the Fund prior to the time of transfer, a written
description of the proposed transfer specifying its nature
and consequence and giving the name of the proposed
transferee.
2. The Fund shall have obtained from its counsel a written
opinion stating whether in the opinion of such counsel the
proposed transfer may be effected without registration under
the Securities Act of 1933. If such opinion states that such
transfer may be so effected, the Purchaser shall then be
entitled to transfer its Stock in accordance with the terms
specified in its description of the transaction to the Fund.
If such opinion states that the proposed transfer may not be
so effected, the Purchaser will not be entitled to transfer
its Stock unless such Stock is registered.
3. The Purchaser understands that the Fund expects to incur
organization expenses in connection with the start-up and
initial registration of the Fund. These costs will be
amortized over 60 months on a straight-line basis beginning
on the date the Fund first offers capital stock to the public
(commencement of operations). If the Purchaser redeems any
or all of the Stock representing initial capital prior to the
end of the 60-month amortization period, the redemption
proceeds will be reduced by their pro rata portion of the
unamortized organization costs. Such proration shall be
calculated by dividing the number of shares of Stock to be
redeemed by the number of shares of Stock representing
initial capital.
<PAGE>
MIMLIC International Balanced Fund, Inc.
June 20, 1994
Page Two
4. The Purchaser further agrees that all certificates, if any,
representing such Stock shall contain on the face thereof the
following legend:
"The shares represented by this certificate may
not be transferred without (i) the opinion of
counsel satisfactory to MIMLIC International
Balanced Fund, Inc. that the transfer may be
legally made without registration under the
Federal Securities Act of 1933; or (ii) such
registration."
The Purchaser hereby authorizes the Fund to take such action as
it shall reasonably deem appropriate to prevent any violation of
the Securities Act of 1933 in connection with the transfer of
Stock, including the imposition of a requirement that any
transferee of the Stock sign a letter agreement similar to this
one.
Very truly yours,
MIMLIC Asset Management Company
/s/ Paul H. Gooding
- --------------------------------
Paul H. Gooding, President
PHG/ckk
<PAGE>
Minnesota Mutual Letterhead
August 16, 1994
MIMLIC International Balanced Fund, Inc.
400 Robert Street North
St. Paul, MN 55101
Dear Sir/Madam:
In connection with the purchase by The Minnesota Mutual Life
Insurance Company (the "Purchaser") of $20,000,000 of shares, at
net asset value, of common stock ("Stock") of MIMLIC
International Balanced Fund, Inc. (the "Fund"), the Purchaser
hereby represents that it is acquiring such Stock for investment
with no intention of selling or otherwise disposing or
transferring it or any interest in it. The Purchaser hereby
further agrees that any transfer of any such Stock or any
interest in it shall be subject to the following conditions:
1. The Purchaser shall furnish the Fund and counsel satisfactory
to the Fund prior to the time of transfer, a written
description of the proposed transfer specifying its nature
and consequence and giving the name of the proposed
transferee.
2. The Fund shall have obtained from its counsel a written
opinion stating whether in the opinion of such counsel the
proposed transfer may be effected without registration under
the Securities Act of 1933. If such opinion states that such
transfer may be so effected, the Purchaser shall then be
entitled to transfer its Stock in accordance with the terms
specified in its description of the transaction to the Fund.
If such opinion states that the proposed transfer may not be
so effected, the Purchaser will not be entitled to transfer
its Stock unless such Stock is registered.
3. The Purchaser further agrees that all certificates, if any,
representing such Stock shall contain on the face thereof the
following legend:
"The shares represented by this certificate may not
be transferred without (i) the opinion of counsel
satisfactory to MIMLIC International Balanced Fund,
Inc. that the transfer may be legally made without
registration under the Federal Securities Act of
1933; or (ii) such registration."
<PAGE>
MIMLIC International Balanced Fund, Inc.
August 16, 1994
Page Two
The Purchaser hereby authorizes the Fund to take such action as
it shall reasonably deem appropriate to prevent any violation of
the Securities Act of 1933 in connection with the transfer of
Stock, including the imposition of a requirement that any
transferee of the Stock sign a letter agreement similar to this
one.
Very truly yours,
The Minnesota Mutual Life Insurance Company
/s/ James P. Tatera
- ----------------------------------------------------------
James P. Tatera, Second Vice President
JPT/ckk
--
<PAGE>
MIMLIC INTERNATIONAL BALANCED FUND, INC.
RULE 12b-1 PLAN OF DISTRIBUTION
APPLICABLE TO CLASS A SHARES
WHEREAS, Rule 12b-1 under the Investment Company Act of
1940, (the "Rule"), provides that a registered open-end
management investment company may act as a distributor of
securities of which it is the issuer, provided that any payments
made by such company in connection with such distribution are
made pursuant to a written plan describing all material aspects
of the proposed financing of distribution; and
WHEREAS, it is intended that shares of MIMLIC International
Balanced Fund, Inc., (the "Fund") designated as Class A shares
will be sold to the public through the distribution facilities of
MIMLIC Sales Corporation ("MIMLIC Sales") pursuant to an
Underwriting and Distribution Agreement, dated April 19, 1994.
NOW THEREFORE, the following shall constitute the written
plan pursuant to which such distribution fee payable in
connection with Class A shares of the Fund shall be made.
The Underwriting and Distribution Agreement (the
"Agreement") between the Fund and MIMLIC Sales provides that
MIMLIC Sales will receive, as compensation for services it
renders under the Agreement in connection with Class A shares of
the Fund, in addition to a sales charge, a monthly distribution
fee from the Fund as set forth below.
Monthly Distribution Fee
(as a percentage of the
Fund's average net assets
attributable to Class A Shares)
-------------------------------
1/12 x .30%
The distribution fee may be used by MIMLIC Sales for the
purpose of financing any activity which is primarily intended to
result in the sale of Class A shares of the Fund. For example,
such distribution fee may be used by MIMLIC Sales: (a) to
compensate broker-dealers, including MIMLIC Sales and its
registered representatives, for their sale of Class A shares of
the Fund, including the implementation of various incentive
programs with respect to broker-dealers, banks, and other
financial institutions, and (b) to pay other advertising and
promotional expenses in connection with the distribution of Class
A shares of the Fund. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of
prospectuses for other than current shareholders; preparation and
distribution of sales literature; advertising of any type;
expenses of branch offices provided by MIMLIC Sales and any
affiliate thereof; and compensation paid to and expenses incurred
by officers, employees or representatives of MIMLIC Sales or of
other broker-dealers, banks, or other financial institutions,
including travel, entertainment, and telephone expenses.
The Plan will not take effect with respect to the Fund, and
no fee will be payable in accordance with the Plan, until the
Plan has been approved by a vote of at least a majority of the
outstanding voting securities of the Fund designated as Class A
shares.
<PAGE>
This Plan shall continue in effect for a period of more than
one year from the date of its adoption only so long as such Plan,
together with any related agreements, has been approved by a vote
of the Board of Directors of the Fund, and the Directors who are
not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting
called for the purpose of voting on such Plan or agreements.
The Chairman of MIMLIC Sales, or such other person as he may
designate shall provide to the Board of Directors of the Fund,
and the Directors shall review, at least quarterly, a written
report of the amounts received by MIMLIC Sales pursuant to the
Plan, the expenditures made by MIMLIC Sales out of such proceeds,
and the purpose for which such expenditures were made.
This Plan may be terminated at any time by vote of a
majority of the members of the Board of Directors of the Fund who
are not interested persons of the Fund and have no direct or
indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, or by vote of a majority of
the outstanding voting securities of the Fund designated as Class
A shares.
This Plan may not be amended to increase materially the
amount to be spent by the Fund for distribution without Class A
shareholder approval.
All material amendments to the Plan, together with any
related agreements, must be approved by a vote of the Board of
Directors of the Fund, and of the Directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting
called for the purpose of voting on such Plan or agreements.
-2-
--
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND, INC.
RULE 12b-1 PLAN OF DISTRIBUTION
APPLICABLE TO CLASS C SHARES
This Plan of Distribution (the "Plan") is adopted pursuant to
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940
(as amended, the "1940 Act") by Advantus International Balanced
Fund, Inc., a Minnesota corporation (the "Fund"), for and on
behalf of the Fund's shares of common stock designated as Class
C, on October 25, 1994.
1. Compensation
The Fund is obligated to pay the principal underwriter of the
Fund's Class C shares (the "Underwriter") a total fee in
connection with the servicing of Class C shareholder accounts of
the Fund and in connection with distribution related services
provided in respect of Class C shares of the Fund, calculated and
payable monthly, at the annual rate of 1.00% of the value of the
Fund's average daily net assets attributable to Class C shares.
All or any portion of such total fee may be payable as a
Shareholder Servicing Fee, and all or any portion of such total
fee may be payable as a Distribution Fee, as determined from time
to time by the Company's Board of Directors. Until further
action by the Board of Directors, a portion of such fee, equal to
.25% per annum of the value of the Fund's average daily net
assets attributable to Class C shares, shall be designated and
payable as a Shareholder Servicing Fee, and the balance of such
fee, equal to .75% per annum of the value of the Fund's average
daily net assets attributable to Class C shares, shall be
designated and payable as a Distribution Fee.
2. Expenses Covered by the Plan
(a) The Shareholder Servicing Fee may be used by the
Underwriter to provide compensation for ongoing servicing and/or
maintenance of Class C shareholder accounts with the Fund.
Compensation may be paid by the Underwriter to persons, including
employees of the Underwriter, and institutions who respond to
inquiries of Class C shareholders of the Fund regarding their
ownership of shares or their accounts with the Fund or who
provide other administrative or accounting services not otherwise
required to be provided by the Fund's investment adviser,
transfer agent or other agent of the Fund.
(b) The Distribution Fee may be used by the Underwriter to
provide initial and ongoing sales compensation to its investment
executives and to other broker-dealers in respect of sales of
Class C shares of the Fund and to pay for other advertising and
promotional expenses in connection with the distribution of Class
C shares of the Fund. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of
printing and mailing prospectuses, statements of additional
information and shareholder reports to prospective investors in
Class C shares of the Fund; preparation and distribution of sales
literature; advertising of any type; an allocation of overhead
and other expenses of the Underwriter related to the distribution
of Class C shares of the Fund; and payments to, and expenses of,
officers, employees or representatives of the Underwriter, of
other broker-dealers, banks or other financial institutions, and
of any other persons who provide support services in connection
with the distribution of Class C shares of the Fund, including
travel, entertainment, and telephone expenses.
<PAGE>
(c) Payments under the Plan are not tied exclusively to the
expenses for shareholder servicing and distribution related
activities actually incurred by the Underwriter in connection
with Class C shares of the Fund, so that such payments may exceed
expenses actually incurred by the Underwriter. The Fund's Board
of Directors will evaluate the appropriateness of the Plan and
its payment terms on a continuing basis and in doing so will
consider all relevant factors, including expenses borne by the
Underwriter and amounts it receives under the Plan.
3. Additional Payments by Adviser and the Underwriter
The Fund's investment adviser and the Underwriter may, at
their option and in their sole discretion, make payments from
their own resources to cover the costs of additional distribution
and shareholder servicing activities.
4. Approval by Shareholders
The Plan will not take effect with respect to the Fund, and
no fee will be payable in accordance with Section 1 of the Plan,
until the Plan has been approved by a vote of at least a majority
of the outstanding voting securities of the Fund designated as
Class C shares.
5. Approval by Directors
Neither the Plan nor any related agreements will take effect
until approved by a majority vote of both (a) the full Board of
Directors of the Fund and (b) those Directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to it (the "Independent Directors"), cast in
person at a meeting called for the purpose of voting on the Plan
and the related agreements.
6. Continuance of the Plan
The Plan will continue in effect from year to year so long as
its continuance is specifically approved annually by vote of the
Fund's Board of Directors in the manner described in Section 5
above.
7. Termination
The Plan may be terminated at any time with respect to the
Fund, without penalty, by vote of a majority of the Independent
Directors or by a vote of a majority of the outstanding voting
securities of the Fund designated as Class C shares.
8. Amendments
The Plan may not be amended with respect to the Fund to
increase materially the amount of the fees payable pursuant to
the Plan, as described in Section 1 above, unless the amendment
is approved by a vote of at least a majority of the outstanding
voting securities of the Fund designated as Class C shares, and
all material amendments to the Plan must also be approved by the
Fund's Board of Directors in the manner described in Section 5
above.
9. Selection of Certain Directors
While the Plan is in effect, the selection and nomination of
the Fund's Directors who are not interested persons of the Fund
will be committed to the discretion of the Directors then in
office who are not interested persons of the Fund.
-2-
<PAGE>
10. Written Reports
In each year during which the Plan remains in effect, the
Underwriter and any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to the Plan or any
related agreement will prepare and furnish to the Fund's Board of
Directors, and the Board will review, at least quarterly, written
reports, complying with the requirements of the Rule, which set
out the amounts expended under the Plan and the purposes for
which those expenditures were made.
11. Preservation of Materials
The Fund will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section 10
above, for a period of not less than six years (the first two
years in an easily accessible place) from the date of the Plan,
agreement or report.
12. Meaning of Certain Terms
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the 1940 Act
and the rules and regulations under the 1940 Act, subject to any
exemption that may be granted to the Company under the 1940 Act
by the Securities and Exchange Commission.
-3-
<PAGE>
Advantus International Balanced Fund, Inc.
Performance Calculations
TOTAL RETURN CALCULATIONS
Total return is the percentage change between the public offering
price (maximum sales load being 5% of net asset value) of one
Fund share at the beginning of a period and the net asset value
of that share at the end of a period with income and capital
gains distributions assumed to be entirely reinvested at the net
asset value as of the reinvest date. A data base file is kept
and updated monthly with respect to ending net asset values,
reinvest prices, and income and capital gains distribution
amounts per share. From this data base file, total return can be
calculated for any specified number of periods since the Fund's
date of beginning operations.
CUMULATIVE TOTAL RETURN
Cumulative total return is based on an initial $1,000 investment
made on September 16, 1994 with the maximum sales charge of 5%.
Using the asset valuation and distribution information attached,
the cumulative total return at September 30, 1994 is computed as
follows:
Cumulative = Ending redeemable value - initial amount invested * 100
total return -------------------------------------------------
Initial amount invested
Cumulative total return for Class A shares for the period from
September 16, 1994, commencement of operations, to September 30,
1994 is as follows:
941.93 - 1,000.00 * 100 = -5.81%
-----------------
1,000.00
CLASS B
Cumulative total return for Class B shares is based on an initial
$1,000 investment made on September 16, 1994, commencement of
operations. In calculating ending redeemable value, we assume
that the shares are redeemed as of the date of the total return
calculation. Accordingly, the maximum contingent deferred sales
charge of 5% is deducted in determining the ending redeemable
value. Using the asset valuation and distribution information
attached, the cumulative total return at September 30, 1994 is
computed follows:
Cumulative = Ending redeemable value - initial amount invested * 100
total return -------------------------------------------------
Initial amount invested
Cumulative total return for the period from May 3, 1985 to
October 31, 1989 is as follows:
932.37 - 1,000.00 * 100 = -6.76%
-----------------
1,000.00
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
In accordance with the Securities and Exchange Commission (SEC),
average annual total return (T) allocates equal value among each
period (N) by comparing the initial amount invested (P) to the
ending redeemable value (ERV). The formula prescribed by the SEC
is as follows:
N
P[(1 + T) ] = ERV
Average annual total return is not calculated for the period from
September 16, 1994, commencement of operations, to September 30,
1994 as results are not indicative of anticipated annual results.
Investment information used in the total return calculations is
as follows:
<TABLE>
<CAPTION>
Dividends per share
Net asset -------------------
Public value/reinvest Net investment Capital
Date offering price value income gains
- ---- -------------- ----- ------ -----
<S> <C> <C> <C> <C>
09/16/94 $11.09 $10.54 $ - $ -
09/30/94 10.88 10.34 - -
</TABLE>
YIELD CALCULATIONS
The Fund's yield for the 30-day period ended September 30, 1989
was computed by dividing the net investment income per share
earned during the period by the maximum public offering price per
share on the last day of the period, according to the following
formula as prescribed by the SEC:
6
YIELD = 2([(A+B)+1] - 1)
-----
C*D
Where:
A = Dividends and interest earned during the period calculated
as prescribed by the SEC.
B = Expenses accrued for the period (net of reimbursement by the
investment adviser).
C = The average daily number of shares outstanding during the
period that were entitled to receive dividends.
D = The maximum public offering price per share on the last day
of the period.
<PAGE>
Exhibit 19
ADVANTUS MUTUAL FUNDS
AND MIMLIC CASH FUND
POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENT
The undersigned, Directors of Advantus Horizon Fund, Inc., Advantus
Spectrum Fund, Inc., Advantus Mortgage Securities Fund, Inc., Advantus Money
Market Fund, Inc., Advantus Bond Fund, Inc., Advantus Cornerstone Fund, Inc.,
Advantus Enterprise Fund, Inc., Advantus International Balanced Fund, Inc.,
and MIMLIC Cash Fund, Inc. (the "Funds"), appoint Paul H. Gooding, Eric J.
Bentley and Michael J. Radmer, and each of them individually, as
attorney-in-fact for the purpose of signing in their names and on their
behalf as Directors of the Funds and filing with the Securities and Exchange
Commission Registration Statements on Form N-1A, or any amendments thereto,
for the purpose of registering shares of Common Stock of the Funds for sale
by the Funds and to register the Funds under the Investment Company Act of
1940.
Dated: April 19, 1995 /s/ Charles E. Arner
--------------------------------------------
Charles E. Arner
/s/ Ellen S. Berscheid
--------------------------------------------
Ellen S. Berscheid
/s/ Ralph D. Ebbott
--------------------------------------------
Ralph D. Ebbott
/s/ Frederick P. Feuerherm
--------------------------------------------
Frederick P. Feuerherm
/s/ Paul H. Gooding
--------------------------------------------
Paul H. Gooding
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM N-SAR.
</LEGEND>
<CIK> 0000926034
<NAME> MULTI CLASS ADVANTUS INTERNATIONAL BALANCED FUND
<SERIES>
<NUMBER> 100
<NAME> CLASS A
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 28411
<INVESTMENTS-AT-VALUE> 29942
<RECEIVABLES> 5256
<ASSETS-OTHER> 1642
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36840
<PAYABLE-FOR-SECURITIES> 933
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4628
<TOTAL-LIABILITIES> 5561
<SENIOR-EQUITY> 29
<PAID-IN-CAPITAL-COMMON> 29347
<SHARES-COMMON-STOCK> 2868
<SHARES-COMMON-PRIOR> 1492
<ACCUMULATED-NII-CURRENT> 112
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1484
<NET-ASSETS> 30949
<DIVIDEND-INCOME> 560
<INTEREST-INCOME> 557
<OTHER-INCOME> 0
<EXPENSES-NET> 541
<NET-INVESTMENT-INCOME> 576
<REALIZED-GAINS-CURRENT> 669
<APPREC-INCREASE-CURRENT> 1213
<NET-CHANGE-FROM-OPS> 2457
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 837
<DISTRIBUTIONS-OF-GAINS> 4
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1411
<NUMBER-OF-SHARES-REDEEMED> 42
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 15822
<ACCUMULATED-NII-PRIOR> 99
<ACCUMULATED-GAINS-PRIOR> (90)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 593
<AVERAGE-NET-ASSETS> 30651
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> .58
<PER-SHARE-DIVIDEND> .31
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM N-SAR.
</LEGEND>
<CIK> 0000926034
<NAME> MULTI CLASS ADVANTUS INTERNATIONAL BALANCED FUND
<SERIES>
<NUMBER> 101
<NAME> CLASS C
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 28411
<INVESTMENTS-AT-VALUE> 29942
<RECEIVABLES> 5256
<ASSETS-OTHER> 1642
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36840
<PAYABLE-FOR-SECURITIES> 933
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4628
<TOTAL-LIABILITIES> 5561
<SENIOR-EQUITY> 29
<PAID-IN-CAPITAL-COMMON> 29347
<SHARES-COMMON-STOCK> 31
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 112
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1484
<NET-ASSETS> 330
<DIVIDEND-INCOME> 560
<INTEREST-INCOME> 557
<OTHER-INCOME> 0
<EXPENSES-NET> 541
<NET-INVESTMENT-INCOME> 576
<REALIZED-GAINS-CURRENT> 669
<APPREC-INCREASE-CURRENT> 1213
<NET-CHANGE-FROM-OPS> 2457
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36
<NUMBER-OF-SHARES-REDEEMED> 6
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15822
<ACCUMULATED-NII-PRIOR> 99
<ACCUMULATED-GAINS-PRIOR> (90)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 593
<AVERAGE-NET-ASSETS> 354
<PER-SHARE-NAV-BEGIN> 9.95
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> .87
<PER-SHARE-DIVIDEND> .19
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.77
<EXPENSE-RATIO> 2.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
