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File Numbers 333-12283 and 811-7817
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 ___
Post-Effective Amendment Number 6
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment Number 6
ADVANTUS VENTURE 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: (651) 665-3826
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 LLP
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)
X On December 1, 1999 pursuant to paragraph (b)
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___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
___ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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VENTURE
As with all mutual funds, the Securities and Exchange Commission
has not determined that the information in this prospectus is
accurate or complete, nor has it approved the Fund's securities.
It is a criminal offense to state otherwise.
ADVANTUS VENTURE FUND, INC.
PROSPECTUS DATED DECEMBER 1, 1999
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ADVANTUS VENTURE FUND, INC.
Advantus Venture Fund, Inc. (Fund) is a mutual fund that offers different
classes of shares. This prospectus provides you information about the Fund you
should know before investing. The Fund is a member of the Advantus family of
funds (the Advantus Funds). The Advantus Funds (including the Fund) other than
the Advantus Money Market Fund, Inc. and Advantus Real Estate Securities
Fund, Inc. are referred to as "Advantus Multiple Class Funds."
TABLE OF CONTENTS
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Page No.
<S> <C>
THE FUND - SUMMARY ................................. 3
Investment Objective and Policies ........... 3
Main Risks .................................. 3
Fund Performance ............................ 4
Fees and Expenses ........................... 6
FINANCIAL HIGHLIGHTS ............................... 8
Financial Highlights Class A Shares ......... 8
Financial Highlights Class B Shares ......... 9
Financial Highlights Class C Shares ......... 10
INVESTING IN THE FUND .............................. 11
Managing the Fund ........................... 11
Investment Objective, Policies and
Practices ................................... 11
Defining Risks .............................. 13
BUYING AND SELLING SHARES .......................... 15
Choosing a Share Class ...................... 15
Sales and Distribution Charges .............. 15
Reducing Sales Charges ...................... 18
Buying Shares ............................... 19
Selling Shares .............................. 21
Exchanging Shares ........................... 22
Telephone Transactions ...................... 23
GENERAL INFORMATION ................................ 24
Dividends and Capital Gains Distributions ... 24
Taxes ....................................... 24
Service Providers ........................... 26
Advantus Family of Funds .................... 27
Additional Information About the Fund ....... 28
How to Obtain Additional Information ........ 28
</TABLE>
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THE FUND - SUMMARY
Advantus Venture Fund, Inc. (Venture Fund) is an open-end, diversified
investment company, commonly called a mutual fund. This Fund lets you choose
among three classes of shares that offer different sales charges and bear
different expenses. These alternatives allow you to choose the share class that
you believe is most beneficial given the amount of your purchase, the length of
time you expect to hold onto the shares and whether you plan to make additional
investments.
This section gives you a brief summary of the Fund's investment policies,
practices and main risks, as well as performance and fee information. More
detailed information about the Fund follows this summary.
INVESTMENT OBJECTIVE AND POLICIES
Venture Fund seeks long-term accumulation of capital.
The Fund primarily invests in various types of equity securities of small
capitalization companies (i.e. companies with a market capitalization of less
than $1.5 billion) at the time of purchase. These equity securities will consist
primarily of common stock, but may also include preferred stock and other
securities convertible into equity securities. In selecting equity securities,
the Fund invests in securities that the Fund's investment adviser believes are
undervalued relative to other securities, earn low returns with a potential for
higher returns, are undervalued relative to their potential for improved
operating performance and financial strength or are issued by companies that
have recently undergone a change in management or control and are undervalued
relative to their potential for improved operating performance.
MAIN RISKS
Keep in mind that an investment in the Fund is not a deposit of a bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency and that it is possible to lose money by investing in
the Fund. You should also note that if the Fund makes frequent changes in its
portfolio securities, such changes may result in higher Fund costs and may
adversely affect your return. An investment in the Fund may be subject to
various risks including the following types of main risk:
- MARKET RISK - the risk that equity securities are subject to adverse
trends in equity markets
- FUND RISK - the risk that Fund performance may not meet or exceed that of
the market as a whole
- VALUE STOCK RISK - the risk that the value of a security believed by the
Fund's investment adviser to be undervalued may never reach what the
investment adviser believes is its full value, or that such security's
value may decrease
- SMALL COMPANY RISK - the risk that equity securities of small
capitalization companies are subject to greater price volatility due to,
among other things, such companies' small size, limited product lines,
limited access to financing sources and limited management depth
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FOR YOUR INFORMATION
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A mutual fund is an investment company that invests the money of many people in
a variety of securities to seek a specific objective over time. An open-end
mutual fund buys back an investor's shares at the fund's current net asset
value.
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REFERENCE POINT
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Please see "Investing in the Fund - Defining Risks" for a more detailed
description of these main risks and additional risks in connection with
investing in the Fund.
For more information on Fund portfolio turnover, see "General Information -
Taxes."
THE FUND - SUMMARY 3
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FOR YOUR INFORMATION
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The Fund seeks to achieve its investment objective over longer rather than
shorter periods of time. An investment in the Fund may therefore be more
appropriate for an investor with a longer-term focus.
FUND PERFORMANCE
The following bar chart and table show the Fund's annual returns and long-term
performance. The chart shows how the Fund's performance has varied from year to
year, and provides some indication of the risks in investing in the Fund. The
table shows how the Fund's average annual return over a one, five and ten year
period compare to the return of a broad based index. The chart and table assume
reinvestment of dividends and distributions, and the table reflects applicable
initial and contingent deferred sales charges. Like other mutual funds, the past
performance of the Fund does not necessarily indicate how the Fund will perform
in the future.
CLASS A YEAR TO YEAR TOTAL RETURN(1) (AS OF DECEMBER 31)(3)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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<S> <C>
97 30.41%(2)
98 -7.30%
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(1) Absent reductions for sales loads, account fees and other charges. If such
sales loads, account fees and other charges were included, returns would be
less than shown above.
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<S> <C> <C>
Best Quarter: (Q2'99) 16.23%
Worst Quarter: (Q3'98) -20.20%
</TABLE>
(2) Total return presented for the period from January 31, 1997, inception date
of Class A, to December 31, 1997.
(3) Total return for the period from January 1, 1999 to September 30, 1999 for
Class A shares was -6.42 percent.
4 THE FUND - SUMMARY
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<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIODS ENDING DECEMBER 31, 1998) From
1 Year 5 Years 10 Years Inception
<S> <C> <C> <C> <C> <C>
Class A(1)
(inception 1/31/97) % -12.40 -- -- 7.19
Class B
(inception 1/31/97) -12.84 -- -- 7.10
Class C
(inception 1/31/97) -8.15 -- -- 9.44
Russell 2000 Value Index -6.44 13.13 13.96 --
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<C> <S>
(1) Average annual total returns quoted assume that the Class A
maximum initial sales charge of 5.5% was in effect at the
beginning of each period shown. The maximum initial sales
charge was 5.0% prior to February 1, 1999.
</TABLE>
THE FUND - SUMMARY 5
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FEES AND EXPENSES
Investors pay fees and expenses in connection with investing in the Fund. This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
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CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge on Purchases
(as a percentage of offering price) % 5.50 none none
Maximum Deferred Sales Charge
(as a percentage of sales proceeds) % 1.00* 5.00 none
Exchange Fees
-On First Twelve Exchanges Each Year none none none
-On Each Additional Exchange $ 7.50 7.50 7.50
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees % 0.80 0.80 0.80
Rule 12b-1 Fees % 0.25 1.00 1.00
Other Expenses % 0.56 0.56 0.56
TOTAL FUND OPERATING EXPENSES** % 1.61 2.36 2.36
</TABLE>
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<C> <S>
* Applies only to purchases of at least $1 million, in which
case a contingent deferred sales charge of 1.00% will be
imposed if such shares are sold within one year after the
purchase date.
** Effective February 1, 1999, the Rule 12b-1 fee for Class A
shares was reduced from .30% to .25% of Class A average net
assets. Ascend Financial Services, Inc. (Ascend Financial),
the Fund's underwriter, has voluntarily agreed to waive
Class A Rule 12b-1 fees in excess of .15% of Class A average
net assets. Advantus Capital Management, Inc. (Advantus
Capital), the Fund's investment adviser, has voluntarily
agreed to absorb "other expenses", excluding advisory fees
and Rule 12b-1 fees, in excess of .45% of average net assets
of the Fund. After such waiver and absorption, the ratio of
total fund operating expenses to average net assets will be
1.40% for Class A shares and 2.25% for Class B and Class C
shares. Ascend Financial and Advantus Capital reserve the
right to discontinue such waiver or absorption,
respectively, at any time at their sole discretion.
</TABLE>
6 THE FUND - SUMMARY
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EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
Class A $ 705 1,030 1,378 2,356
Class B 739 1,086 1,410 2,422
Class C 239 736 1,260 2,510
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You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
Class A $ 705 1,030 1,378 2,356
Class B 239 736 1,260 2,422
Class C 239 736 1,260 2,510
</TABLE>
THE FUND - SUMMARY 7
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[GRAPHIC]
FINANCIAL HIGHLIGHTS
The following table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by KPMG LLP, the
Fund's independent auditor, whose report, along with the Fund's Financial
statements, are included in the annual report, which is available upon request.
<TABLE>
FINANCIAL HIGHLIGHTS CLASS A
Period From
January 31,
Year Ended Year Ended '97(a) to
July 31, July 31, July 31,
'99 '98 '97
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.03 11.73 10.17
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .10 .06 .05
Net Gains or Losses on Securities (both realized and
unrealized) (.59) .98 1.55
Total from Investment Operations (.49) 1.04 1.60
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (.09) (.08) (.04)
Distributions from Net Realized Gains (.23) (.66) --
Tax Return of Capital (.02) -- --
Total Distributions (.34) (.74) (.04)
Net Asset Value, End of Period $ 11.20 12.03 11.73
Total Return (b) % (3.89) 8.92 15.79
Net Assets, End of Period (in thousands) $ 31,683 34,630 30,662
Ratio of Expenses to Average Daily Net Assets (d) % 1.40 1.38 1.35(c)
Ratio of Net Investment Income (Loss) to Average Daily Net
Assets (d) % .81 .55 .90(c)
Portfolio Turnover Rate (excluding short-term securities) % 103.9 45.0 39.6
</TABLE>
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(a) Inception date of the Fund.
(b) Total return figures are based on a share outstanding
throughout the period and assume reinvestment of
distributions at net asset value. Total return figures do
not reflect the impact of front-end or contingent deferred
sales charges. For periods less than one year, total return
presented has not been annualized.
(c) Adjusted to an annual basis.
(d) The Fund's Distributor and Adviser voluntarily waived
$77,189, $59,431 and $26,677 in expenses for the years ended
July 31, 1999 and 1998 and the period from January 31, 1997
to July 31, 1997, respectively. If Class A shares had been
charged for these expenses, the ratio of expenses to average
daily net assets would have been 1.64%, 1.55% and 1.55%,
respectively, and the ratio of net investment income to
average daily net assets would have been .57%, .38% and
.70%, respectively.
</TABLE>
8 FINANCIAL HIGHLIGHTS
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<TABLE>
FINANCIAL HIGHLIGHTS CLASS B
Period From
January 31,
Year Ended Year Ended '97 (a) to
July 31, July 31, July 31,
'99 '98 '97
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.94 11.71 10.17
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income -- (.02) .01
Net Gains or Losses on Securities (both realized and
unrealized) (.58) .92 1.54
Total from Investment Operations (.58) .90 1.55
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (.02) (.01) (.01)
Distributions from Net Realized Gains (.23) (.66) --
Total Distributions (.25) (.67) (.01)
Net Asset Value, End of Period $ 11.11 11.94 11.71
Total Return (b) % (4.77) 7.65 15.33
Net Assets, End of Period (in thousands) $ 3,115 3,529 1,052
Ratio of Expenses to Average Daily Net Assets (c) % 2.25 2.25 2.25(d)
Ratio of Net Investment Income (Loss) to Average Daily Net
Assets (c) % (.04) (.26) .01(d)
Portfolio Turnover Rate (excluding short-term securities) % 103.9 45.0 39.6
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<C> <S>
(a) Inception date of the Fund.
(b) Total return figures are based on a share outstanding
throughout the period and assume reinvestment of
distributions at net asset value. Total return figures do
not reflect the impact of front-end or contingent deferred
sales charges. For periods less than one year, total return
presented has not been annualized.
(c) The Fund's Distributor and Adviser voluntarily waived
$77,189 in expenses for the year ended July 31, 1999. If
Class B shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have
been 2.36%, and the ratio of net investment income (loss) to
average daily net assets would have been (.15)%.
(d) Adjusted to an annual basis.
</TABLE>
FINANCIAL HIGHLIGHTS 9
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<TABLE>
FINANCIAL HIGHLIGHTS CLASS C
Period From
January 31,
Year Ended Year Ended '97 (a) to
July 31, July 31, July 31,
'99 '98 '97
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.98 11.71 10.17
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (.01) (.03) .01
Net Gains or Losses on Securities (both realized and
unrealized) (.57) .97 1.54
Total from Investment Operations (.58) .94 1.55
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (.02) (.01) (.01)
Distributions from Net Realized Gains (.23) (.66) --
Total Distributions (.25) (.67) (.01)
Net Asset Value, End of Period $ 11.15 11.98 11.71
Total Return (b) % (4.81) 7.90 15.38
Net Assets, End of Period (in thousands) $ 467 702 175
Ratio of Expenses to Average Daily Net Assets (c) % 2.25 2.25 2.25(d)
Ratio of Net Investment Income to Average Daily Net
Assets (c) % (.04) (.26) .01(d)
Portfolio Turnover Rate (excluding short-term securities) % 103.9 45.0 39.6
</TABLE>
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<C> <S>
(a) Inception date of the Fund.
(b) Total return figures are based on a share outstanding
throughout the period and assume reinvestment of
distributions at net asset value. Total return figures do
not reflect the impact of front-end or contingent deferred
sales charges. For periods less than one year, total return
presented has not been annualized.
(c) The Fund's Distributor and Adviser voluntarily waived
$77,189 in expenses for the year ended July 31, 1999. If
Class C shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have
been 2.36%, and the ratio of net investment income (loss) to
average daily net assets would have been (.15)%.
(d) Adjusted to an annual basis.
</TABLE>
10 FINANCIAL HIGHLIGHTS
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[GRAPHIC]
INVESTING IN THE FUND
MANAGING THE FUND
The investment adviser of the Fund is Advantus Capital Management, Inc.
(Advantus Capital), 400 Robert Street North, St. Paul, Minnesota 55101. Since
its inception in 1994, Advantus Capital has provided investment advisory
services for the Fund and other Advantus Funds, and has managed investment
portfolios for various private accounts. With more than $14 billion of assets
under management, Advantus Capital manages the Fund's investments and furnishes
all necessary office facilities, equipment and personnel for servicing the
Fund's investments. Advantus Capital is a wholly-owned subsidiary of Minnesota
Life Insurance Company (Minnesota Life), which was organized in 1880 and has
assets on a consolidated basis of more than $16.5 billion. Minnesota Life is a
third-tier subsidiary of a mutual insurance holding company called Minnesota
Mutual Companies, Inc. Personnel of Advantus Capital also manage Minnesota
Life's investment portfolio. In addition, Minnesota Life, through its Advantus
Shareholder Services division, serves as shareholder and administrative services
agent to the Fund.
The Fund pays Advantus Capital an advisory fee calculated on an annual basis
equal to 0.80% of its average daily net assets.
Mark L. Henneman has served as the Portfolio Manager of the Fund since October
1998. Mr. Henneman has also served as a Vice President and Portfolio Manager of
Advantus Capital since July 1998. From May 1992 to June 1998, Mr. Henneman
served as a senior equity analyst and quantitative/fundamental analyst with The
St. Paul Companies, Inc.
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FOR YOUR INFORMATION
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Mark L. Henneman graduated from Gustavus Adolphus College with a bachelor's
degree in business. He earned his MBA at the University of Minnesota.
Mr. Henneman is a Chartered Financial Analyst.
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FOR YOUR INFORMATION
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Market capitalization is the total market value of a company. (Share price
multiplied by the number of shares outstanding.) Market capitalization is used
to measure the relative size of corporations.
INVESTMENT OBJECTIVE, POLICIES AND PRACTICES
The Fund seeks long-term accumulation of capital.
The Fund primarily invests in various types of equity securities such as common
stock, preferred stock and securities convertible into equity securities of
small capitalization companies (i.e., companies with a market capitalization of
less than $1.5 billion) at the time of purchase. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in common stocks of small
capitalization domestic companies and foreign issuers that are publicly traded
in the United States. From time to time, the Fund will also invest a lesser
portion of its assets in securities of mid and large capitalization companies
(i.e., companies with a market capitalization of at least $1.5 billion). As of
July 31, 1999, the average weighted market capitalization of the Fund's
investment portfolio was $919 million.
In selecting equity securities, Advantus Capital primarily looks to equity
securities it believes are undervalued. Undervalued securities are securities
that Advantus Capital believes: (a) are undervalued relative to other securities
in the market or currently earn low returns with a
INVESTING IN THE FUND 11
<PAGE>
potential for higher returns, (b) are undervalued relative to the potential for
improved operating performance and financial strength, and (c) are issued by
companies that have recently undergone a change in management or control and
that are undervalued relative to their potential for improved operating
performance. In assessing relative value, Advantus Capital will consider factors
such as a company's ratio of market price to earnings, ratio of market price to
book value, ratio of market price to assets, ratio of market price to cash flow,
estimated earnings growth rate, cash flow, yield, liquidation value, product
pricing, quality of management and competitive market position. As a secondary
focus, Advantus Capital may also consider an investment's potential to provide
current income. In seeking to achieve its investment objectives, the Fund may
also invest in equity securities of companies that Advantus Capital believes
show potential for sustainable earnings growth above the average market growth
rate.
In addition, the Fund may invest lesser portions of its assets in restricted and
illiquid securities, convertible and non-convertible investment-grade and
non-investment grade debt securities, securities of other mutual funds, foreign
securities, warrants, repurchase agreement transactions, index depositary
receipts, covered call options on equity securities written by the Fund, and
money market securities. To generate additional income, the Fund may lend
securities representing up to 20% of the value of its total assets to
broker-dealers, banks and other institutions.
In an attempt to respond to adverse market, economic, political or other
conditions, the Fund may invest for temporary defensive purposes in various
short-term cash and cash equivalent items. When investing for temporary
defensive purposes, the Fund may not always achieve its investment objective.
You can find descriptions of these securities in the Statement of Additional
Information.
12 INVESTING IN THE FUND
<PAGE>
DEFINING RISKS
Investment in the Fund involves risks. The Fund's yield and price are not
guaranteed, and the value of your investment in the Fund will go up or down. The
value of your investment in the Fund may be affected by the following risks:
- FUND RISK - is the risk that Fund performance may not meet or exceed that
of the market as a whole. The performance of the Fund will depend on
Advantus Capital's ability to select securities suited to achieve the
Fund's investment objective and judgment of economic and market policies,
trends in investment yields and monetary policy. Due to its active
management, the Fund could underperform other mutual funds with similar
investment objectives or the market generally.
- VALUE STOCK RISK - the risk that the value of a security believed by
Advantus Capital to be undervalued may never reach what Advantus Capital
believes is its full value, or that such security's value may decrease.
- MARKET RISK - is the risk that equity securities are subject to adverse
trends in equity markets. Securities are subject to price movements due to
changes in general economic conditions, the level of prevailing interest
rates or investor perceptions of the market. In addition, prices are
affected by the outlook for overall corporate profitability. Market prices
of equity securities are generally more volatile than debt securities.
This may cause a security to be worth less than the price originally paid
for it, or less than it was worth at an earlier time. Market risk may
affect a single issuer or the market as a whole. In addition, market risk
may affect a portfolio of equity securities of small capitalization
companies and/or equity securities believed to be undervalued. As a
result, a portfolio of such small capitalization company and/or
undervalued securities may underperform the market as a whole.
- COMPANY RISK - is the risk that individual securities may perform
differently than the overall market. This may be a result of specific
factors such as changes in corporate profitability due to the success or
failure of specific products or management strategies, or it may be due to
changes in investor perceptions regarding a company.
- CONCENTRATION RISK - is the risk that Fund performance may be more
susceptible to a single economic, regulatory or technological occurrence
than more diversified portfolios. The Fund is subject to concentration
risk since the Fund may invest more than 5% of its total assets in the
securities of a single issuer with respect to 25% of its total investment
portfolio.
- SECTOR RISK - the risk that the securities of companies within specific
industries or sectors of the economy can periodically perform differently
than the overall market. This may be due to changes in such things as the
regulatory or competitive environment or to changes in investor
perceptions regarding a company.
- SMALL COMPANY RISK - is the risk that equity securities of small
capitalization companies are subject to greater price volatility due to,
among other things, such companies' small size, limited product lines,
limited access to financing sources and limited management depth. In
addition, the frequency and volume of trading such securities may be less
than is typical of larger companies, making them subject to wider price
fluctuations. In some cases, there could be difficulties in selling
securities of small capitalization companies at the desired time and
place.
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FOR YOUR INFORMATION
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In order to make informed decisions, investors must be aware of both the risks
and rewards associated with investing. Not only should you understand the risks
associated with your investments, but you must be comfortable with them as well.
Risks are an inherent part of investing, and your investment in this Fund is
subject to different types and varying degrees of risk.
INVESTING IN THE FUND 13
<PAGE>
- SECURITIES LENDING RISK - is the risk that the Fund may experience a delay
in the recovery of loaned securities, or even the loss of rights in the
collateral deposited by the borrower if the borrower should fail
financially. To reduce these risks, the Fund enters into loan arrangements
only with institutions that Advantus Capital has determined are
creditworthy.
- YEAR 2000 RISK - is the risk that the Fund may be adversely affected if
the computer systems used by the Fund and other Fund service providers do
not properly process and calculate date-related information on and after
January 1, 2000. In addition, the Fund's return may decrease if the value
of certain securities held by the Fund are adversely affected by the
inability of the applicable issuer's computer systems to properly process
and calculate date-related information on and after January 1, 2000.
Advantus Capital has undertaken a Year 2000 program that it believes will
assess, monitor and address this issue. In evaluating current and
potential portfolio positions, Year 2000 readiness is one of the factors
that Advantus Capital takes into consideration. Advantus Capital will rely
upon public filings and other statements made by companies regarding their
Year 2000 readiness. Issuers in countries outside the United States,
particularly emerging countries, may not be required to make the level of
disclosure regarding Year 2000 readiness that is required in the United
States. Like many other matters, Advantus Capital cannot audit each
portfolio company and its major suppliers, and so cannot verify their Year
2000 readiness. If the value of a Fund investment is adversely affected by
a Year 2000 problem, the net asset value of the Fund will be affected as
well.
You can find information about other risks in the Statement of Additional
Information.
14 INVESTING IN THE FUND
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(GRAPHIC)
[GRAPHIC]
BUYING AND SELLING SHARES
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REFERENCE POINT
- ---------------
All Advantus Funds, except the Advantus Money Market Fund and Advantus Real
Estate Securities Fund, offer three classes of shares, Class A, Class B, and
Class C. See "The Fund - Summary - Fees and Expenses."
CHOOSING A SHARE CLASS
You may purchase Class A, Class B or Class C shares of the Fund. Your decision
to purchase a particular class will depend on a number of factors such as the
amount you wish to invest, the amount of time you wish to hold on to your
investment and whether you intend to make additional investments.
CLASS A SHARES. If you invest in Class A shares you will generally pay an
initial sales charge. However, you will not be assessed an initial sales
charge for purchases of Class A shares of $1 million or more, but a deferred
sales charge will be imposed if you sell such shares within one year after
the date of purchase. There are several ways to reduce or waive these sales
charges that are described in "Reducing Sales Charges" below. Class A shares
generally have lower annual operating expenses than Class B and Class C
shares.
CLASS B SHARES. If you invest in Class B shares, you will not pay an initial
sales charge. However, if you wish to sell your shares within six years from
the date of your purchase, you will pay a deferred sales charge. If you
maintain your Class B shares for a certain period of time, your Class B
shares will automatically convert to Class A shares in the manner described
in "Sales and Distribution Charges" below. Class B shares generally have
higher annual operating expenses than Class A shares.
CLASS C SHARES. If you invest in Class C shares, you will not pay an initial
sales charge. Unlike Class B shares, you will not pay a deferred sales
charge if you wish to sell your shares. Class C shares generally have higher
annual operating expenses than Class A shares. Class C shares will
automatically convert to Class A shares in the manner described in "Sales
and Distribution Charges" below, but you must hold on to such shares for a
longer period of time than Class B shares prior to conversion.
If you qualify for a reduction or waiver of the sales charge you should purchase
Class A shares. If you expect to hold shares for a short period of time you may
prefer to purchase Class C shares since these shares may be purchased and sold
without any initial or deferred sales charge. If you expect to hold shares
longer you may prefer to purchase Class B shares since these shares convert to
Class A shares sooner than Class C shares.
SALES AND DISTRIBUTION CHARGES
As an investor, you pay certain fees and expenses in connection with the Fund.
Sales charges are paid from your account. Annual fund operating expenses
(including distribution fees) are paid out of Fund assets, which affects the
Fund's share price.
BUYING AND SELLING SHARES 15
<PAGE>
CLASS A SHARES. If you purchase Class A shares, you will generally pay an
initial sales charge. Class A sales charges are calculated as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF:
Value of Your Total Investment Net Offering Price Amount Invested
<S> <C> <C> <C>
Less than $50,000 % 5.5 5.82
At least $50,000 but less than $100,000 4.5 4.71
At least $100,000 but less than $250,000 3.5 3.63
At least $250,000 but less than $500,000 2.5 2.56
At least $500,000 but less than
$1,000,000 2.0 2.04
At least $1,000,000 and over(1) 0 0
</TABLE>
<TABLE>
<C> <S>
(1) You will not be assessed an initial sales charge for
purchases of Class A shares of at least $1 million, but a
contingent deferred sales charge of 1.00% will be imposed if
you sell such shares within one year after the date of
purchase.
</TABLE>
The sales charge applicable to your initial investment in the Fund depends on
the offering price of your investment. The sales charge applicable to subsequent
investments, however, depends on the offering price of that investment plus the
current net asset value of your previous investments in the Fund. For example,
if you make an initial investment with an offering price of $40,000 you will pay
a sales charge equal to 5.5% of your $40,000 investment, but if you already own
shares with a current net asset value of $40,000 and you invest in additional
shares with an offering price of $10,000 you will pay a sales charge equal to
4.5% of the additional $10,000 since your total investment in the Fund would
then be $50,000.
Class A shares are also subject to a shareholder servicing fee (Rule 12b-1 fee).
The Fund has adopted a shareholder servicing plan that allows the Fund to pay
fees for services provided to shareholders. Because these fees are paid out of
the Fund's assets continuously, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales charges.
As a percentage of average daily net assets attributable to Class A shares of
the Fund, the maximum Rule 12b-1 fee is 0.25%.
CLASS B SHARES. If you wish to sell your Class B shares within six years from
the date of your purchase, you will pay a contingent deferred sales charge
(CDSC). The amount of the CDSC on Class B shares depends on the number of years
since your purchase was made, the amount of shares originally purchased and the
dollar amount being sold. The CDSC is based on the net asset value (NAV) of the
shares being sold at the time of your purchase or your sale of such shares,
whichever is lower. No CDSC is charged on shares acquired through reinvestment
of dividends or capital gains distributions, or on shares held longer than the
applicable CDSC period. Class B CDSC is calculated as follows:
16 BUYING AND SELLING SHARES
<PAGE>
<TABLE>
<CAPTION>
CDSC APPLICABLE IN
YEAR FOLLOWING DATE OF
PURCHASE
AMOUNT OF SHARES PURCHASED 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Less than $50,000 % 5.0 4.5 3.5 2.5 1.5 1.5
At least $50,000 but less than $100,000 4.5 3.5 2.5 1.5 1.5 0
At least $100,000 but less than $250,000 3.5 2.5 1.5 1.5 0 0
At least $250,000 but less than $500,000 2.5 1.5 1.5 0 0 0
At least $500,000 but less than $1,000,000 1.5 1.5 0 0 0 0
</TABLE>
Purchase orders for Class B shares of $1 million or more will be treated as
orders for Class A shares or declined.
To determine if a CDSC is payable for any redemption of Class B shares, CDSC
calculation will be determined in a manner that results in the lowest CDSC
charged.
Class B shares are also subject to a Rule 12b-1 fee that is payable at an annual
rate of 1.00% of average daily net assets attributable to Class B shares of the
Fund.
The Fund uses the proceeds from the CDSC to pay underwriting fees and expenses.
The Fund uses the proceeds from Rule 12b-1 fees to pay expenses related to
distribution and shareholder services to the Fund. As a result, the combination
of the CDSC and Rule 12b-1 fees allows the Fund to sell Class B shares without
any initial sales charge. Because these fees are paid out of the Fund's assets
continuously, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
Class B shares will automatically convert to Class A shares on a specified date
following your date of purchase. Thereafter, the Class A shares you receive upon
conversion will not be subject to the higher annual operating expenses assessed
on Class B shares. The conversion will be based on the relative NAVs of the two
classes. For a description of NAV, see "Buying Shares" below. The date of
conversion is based on the amount of shares purchased and is determined as
described in the following table:
<TABLE>
<CAPTION>
CONVERSION DATE FOLLOWING EXPIRATION
AMOUNT OF SHARES PURCHASED OF PERIOD AFTER DATE OF PURCHASE*
<S> <C>
Less than $50,000 84 months
At least $50,000 but less than $100,000 76 months
At least $100,000 but less than $250,000 60 months
At least $250,000 but less than $500,000 44 months
At least $500,000 but less than
$1,000,000 28 months
</TABLE>
<TABLE>
<C> <S>
* Conversion will occur on the fifteenth day of the month
immediately following the termination of the applicable
period. If the fifteenth day falls on a Saturday, Sunday or
a national holiday, then conversion will occur on the most
recent business day.
</TABLE>
BUYING AND SELLING SHARES 17
<PAGE>
CLASS C SHARES. Class C shares are sold without an initial sales charge or CDSC.
Class C shares are subject to a Rule 12b-1 fee that is payable at an annual rate
of 1.00% of average daily net assets attributable to Class C shares of the Fund.
The Fund uses the proceeds from Rule 12b-1 fees to pay expenses related to
distribution and shareholder services to the Fund. Because these fees are paid
out of the Fund's assets continuously, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
Purchase orders for Class C shares of $1 million or more will be treated as
orders for Class A shares or declined.
Class C shares will automatically convert to Class A shares on a specified date
following your date of purchase. Thereafter, the Class A shares you receive upon
conversion will not be subject to the higher annual operating expenses assessed
on Class C shares. The conversion will be based on the relative NAVs of the two
classes. Generally, Class C shares must be held longer than Class B shares
before such shares automatically convert to Class A shares. Like Class B shares,
the date of conversion is based on the amount of shares purchased and is
determined as described in the following table:
<TABLE>
<CAPTION>
CONVERSION DATE FOLLOWING EXPIRATION
AMOUNT OF SHARES PURCHASED OF PERIOD AFTER DATE OF PURCHASE*
<S> <C>
Less than $50,000 96 months
At least $50,000 but less than $100,000 88 months
At least $100,000 but less than $250,000 72 months
At least $250,000 but less than $500,000 56 months
At least $500,000 but less than
$1,000,000 40 months
</TABLE>
<TABLE>
<C> <S>
* Conversion will occur on the fifteenth day of the month
immediately following the termination of the applicable
period. If the fifteenth day falls on a Saturday, Sunday or
a national holiday, then conversion will occur on the most
recent business day.
</TABLE>
Since the longer holding period for Class C shares enables the Fund to charge
the higher Rule 12b-1 fee for a longer period, the Fund is able to offer
Class C shares without an initial sales charge or CDSC.
REDUCING SALES CHARGES
PURCHASES OF SHARES. There are several ways you may reduce sales charges on your
purchase of Fund shares.
- LETTER OF INTENT. Lets you purchase Class A shares of the Fund over a 13
month period and receive the same sales charge as if all shares had been
purchased at once.
- COMBINATION PRIVILEGE. Lets you add the value of all shares you already
own (Class A, Class B or Class C) for purposes of calculating the sales
charge.
- FAMILY AND TRUST PRIVILEGE. Lets you combine purchases of shares of any
class made by your spouse, children and/or family trust for purposes of
calculating the sales charge. If you wish to use this privilege, you must
indicate on your account application that you are entitled to the reduced
sales charge.
18 BUYING AND SELLING SHARES
<PAGE>
- GROUP PURCHASES. Lets you purchase shares with others as a group at a
reduced sales charge applicable to the group as a whole. A purchase group
must meet criteria established by Ascend Financial Services, Inc. (Ascend
Financial), the Fund's underwriter.
- AUTOMATIC INVESTMENT PLAN. Lets you automatically invest a specified
amount in the Fund each month, which may result in a lower average cost
per share through the principle of "dollar cost averaging." The automatic
investment plan will not always result in a lower cost per share, nor will
it alone reduce your sales charge.
For more information on any of these plans, please contact Advantus Shareholder
Services by telephone at (800) 665-6005.
WAIVER OF SALES CHARGE ON CLASS A SHARE PURCHASES. Class A shares may be offered
without any sales charge to the following individuals and institutions:
- officers, directors, employees, sales representatives and retirees of the
Fund, Advantus Capital, Ascend Financial, Minnesota Life and affiliated
companies of Minnesota Life, and their respective spouses, siblings,
direct ancestors or direct descendants
- Minnesota Life and its affiliated companies
- trusts, pension or benefit plans sponsored by or on behalf of Advantus
Capital, Ascend Financial, Minnesota Life and affiliated companies of
Minnesota Life
- advisory clients of Advantus Capital or other affiliated companies of
Minnesota Life
- employees of sales representatives of Advantus Capital, Minnesota Life or
affiliated companies of Minnesota Life
- certain accounts as to which a bank or broker-dealer charges an account
management fee, provided that the bank or broker-dealer has an agreement
with Ascend Financial
- certain accounts sold by registered investment advisers
WAIVER OF SALES CHARGES ON CLASS B SHARE SALES. The CDSC for Class B shares will
generally be waived in the following cases:
- upon the automatic conversion of Class B shares to Class A shares;
- upon the Fund's decision to liquidate accounts with less than the minimum
account size; and
- upon a shareholder's death or disability.
For more information on these waivers, please see the Statement of Additional
Information or contact Advantus Shareholder Services or Ascend Financial.
BUYING SHARES
You may purchase shares of the Fund on any day the New York Stock Exchange
(NYSE) is open for business. The price for Fund shares is equal to the Fund's
NAV plus any applicable sales charge. NAV is generally calculated as of the
close of normal trading on the NYSE (typically 3:00 p.m. Central time). However,
NAV is not calculated on (a) days in which
BUYING AND SELLING SHARES 19
<PAGE>
changes in the Fund's portfolio do not materially change the Fund's NAV,
(b) days on which no Fund shares are purchased or sold, and (c) customary
national business holidays on which the NYSE is closed for trading.
The Fund's NAV for each class is equal to the Fund's total investments
attributable to such class less liabilities attributable to such class divided
by the number of shares of such class. To determine NAV, the Fund generally
values the Fund's investments based on market quotations. If market quotations
are not available for certain Fund investments, the investments are valued based
on the fair value of the investments as determined in good faith by the Fund's
board of directors. Debt securities may be valued based on calculations
furnished to the Fund by a pricing service or by brokers who make a market in
such securities.
Your purchase order will be priced at the next NAV calculated after your
purchase order is received by the Fund's transfer agent plus the applicable
initial sales charge (for Class A shares). If your order is received after the
close of normal trading on the NYSE, your order will be priced at the NAV
calculated on the next day the NYSE is open for trading.
A minimum initial investment of $250 is required, and you may make minimum
subsequent investments of $25. The Fund may reject any purchase order when the
Fund determines it would not be in the best interests of the Fund or its
shareholders.
You may purchase shares of the Fund in any of the following ways:
BY CHECK. New investors may purchase shares of the Fund by sending to the
Fund's transfer agent, First Data Investors Services Group, Inc.
(First Data), a completed account application and a check payable
to the Fund at Advantus Funds Group, P.O. Box 9767, Providence,
Rhode Island 02940-5059. If you wish to purchase additional
shares, please send a check payable to the Fund at the above
address (please be sure to write your account number on your
check). Purchase orders may also be submitted through Ascend
Financial or other authorized broker-dealers.
BY WIRE. New investors may also purchase shares of the Fund by Federal
Reserve or bank wire. You should first complete an account
application and send it to Advantus Funds Group, P.O. Box 9767,
Providence, Rhode Island 02940-5059. Prior to wiring any funds,
you must contact Advantus Shareholder Services at (800) 665-6005
for wire instructions. Wire purchases normally take two or more
hours to complete. To be accepted the same day, wire purchases
must be received by the close of normal trading on the NYSE.
All investments must be in U.S. dollars. Cash, money orders and credit card and
third-party checks are not accepted. If a check does not clear your bank, the
Fund may cancel the purchase.
20 BUYING AND SELLING SHARES
<PAGE>
SELLING SHARES
GENERAL. You may sell your shares at any time. You may make such requests by
contacting the Fund directly by mail or by telephone. Requests by mail should be
sent to Advantus Funds Group, P.O. Box 9767, Providence, Rhode Island
02940-5059. You may also sell your shares by sending a facsimile request to
Advantus Funds Group at (508) 871-3560 if no signature guarantee is required.
Shares will be sold at the NAV next calculated after your sale order is received
by the Fund's transfer agent less any applicable CDSC (for Class A shares
subject to a CDSC and for Class B shares). Class A shares not otherwise subject
to a CDSC and Class C shares may be sold without any charge.
The Fund will forward the sales proceeds to you as soon as possible, but no
later than seven days after the Fund has received an order. If you recently
purchased your shares by check sales proceeds may not be available until your
check has cleared (which may take up to 14 days). If you designate a bank
account with the Fund and wish to sell shares with a value of at least $500,
then the proceeds can be wired directly to your bank account. If you elect to
have proceeds sent by wire transfer, the current $5.00 wire charge will be
deducted from your Fund account.
The amount you receive may be more or less than the original purchase price for
your shares.
MINIMUM ACCOUNT WITHDRAWAL. If you sell some of your shares and the remaining
shares in your account have a value of less than $150, the Fund has the right to
require you to sell your remaining shares and close your account. However, you
will not be required to sell your shares if your account falls below the minimum
due to changes in the market value of your account. You will be given at least
60 days' written notice to add funds to your account and avoid any required
sale.
SYSTEMATIC WITHDRAWAL PLAN. If you have an account with a value of at least
$5,000, you may establish a Systematic Withdrawal Plan which allows you to sell
a portion of your shares for a fixed or variable amount over a period of time.
Withdrawal payments for Class A shares purchased in amounts of $1 million or
more and for Class B shares may also be subject to a CDSC. As a result, you
should carefully consider whether a Systematic Withdrawal Plan is appropriate.
More information about the Systematic Withdrawal Plan is provided in the
Statement of Additional Information.
SIGNATURE GUARANTEE. In order to protect the Fund and shareholders against
fraudulent requests, a signature guarantee may be required in certain cases. No
signature guarantee is required if the sale proceeds are less than $50,000 and
are to be paid to the registered holder of the account at the address of record
for that account. A signature guarantee is required if:
- sale proceeds are $50,000 or more
- sale proceeds will be paid to someone other than the registered
shareholder
- sale proceeds will be mailed to an address other than the registered
shareholder's address of record
- instructions were received by the Fund within 30 days before the sale
order to change the registered shareholder's address or bank wire
instructions
- ---------------
REFERENCE POINT
- ---------------
Please see "Telephone Transactions" for instructions on how to sell shares by
telephone.
See "Selling Shares - Signature Guarantee" below to determine whether your sale
will require a signature guarantee.
BUYING AND SELLING SHARES 21
<PAGE>
- shares are to be transferred to another Fund account holder
- the request is not made by a pre-authorized trustee for a plan, trust or
other tax-exempt organization
The Fund reserves the right to require signature guarantees on all sales. If
your sale order requires a signature guarantee, the signature guarantee must be
an original (not a copy) and provided by any of the following:
- national or state banks, savings associations, savings and loan
associations, trust companies, savings banks, industrial loan companies
and credit unions
- national securities exchanges, registered securities associations and
clearing agencies
- broker-dealers who belong to a national securities exchange or clearing
agency, or who have a minimum net capital of at least $100,000
- institutions that participate in the Securities Transfer Agent Medallion
Program or other recognized signature medallion program
REINSTATEMENT PRIVILEGE. If you sell shares of the Fund, you have a one-time
privilege within 90 days after the sale to use some or all of the sale proceeds
to purchase shares of any of the Advantus Multiple Class Funds or Advantus Real
Estate Securities Fund, Inc. (Real Estate Fund) at no sales charge. Following
your sale of Class A or Class B shares, you will be entitled to purchase only
Class A shares under this reinstatement privilege. Any CDSC incurred in
connection with the prior sale of Class A or B shares within a 90 day period
will not be refunded to a shareholder's account. Following your sale of Class C
shares, you will be entitled to purchase only Class C shares under this
reinstatement privilege.
EXCHANGING SHARES
You may exchange some or all of your shares for shares of the same class of any
other Advantus Multiple Class Fund, Real Estate Fund or Advantus Money Market
Fund, Inc. (Money Market Fund) provided the other Advantus Fund is available in
your state. If you are considering an exchange into another Advantus Fund you
should obtain the prospectus for that fund and read it carefully. Exchanges may
only be made between Advantus Fund accounts with identical registrations. You
may make exchanges by contacting the Fund by mail or by telephone. Exchange
requests must be for an exchange amount of at least $250. You may exchange your
shares up to twelve times a year without restriction or charge. A $7.50 service
fee will then be imposed on subsequent exchanges. The Fund reserves the right to
change the terms of and impose additional limitations and charges on exchanges
after giving 60 days' prior notice to shareholders.
Frequent exchanges may interfere with Fund management or operations and drive up
Fund costs. The Fund is not designed for market timers, or for large or frequent
transfers. To protect shareholders, the Fund may restrict or refuse purchases or
exchanges by market timers. You will be considered to be a market timer if you
have: (i) requested an exchange out of any Advantus Fund within two weeks of an
earlier exchange request, or (ii) exchanged shares out of any Advantus Fund more
than three times in a calendar quarter, or (iii) exchanged shares equal to at
least $1 million, or more than 1% of the net assets of any class of shares of
any Advantus Fund, or (iv) followed what otherwise seems to be a timing pattern
in the exercise of exchange or transfer rights. Accounts under common control or
ownership are combined for the purpose of determining these limitations.
- ---------------
REFERENCE POINT
- ---------------
Please see "Telephone Transactions" for instructions on how to exchange shares
by telephone.
22 BUYING AND SELLING SHARES
<PAGE>
Exchanges will be made based on the NAVs of the shares. No additional purchase
or sales charges will be imposed on exchanges for shares. If Class B shares are
acquired by exchange and later sold, any CDSC on such sale will be calculated as
if no previous exchange occurred. However, shares of the Money Market Fund
acquired by exchange will still be subject to the CDSC. The CDSC will be
calculated without including the period that shares of the Money Market Fund are
held.
You may also elect to systematically exchange Fund shares for shares of other
Advantus Funds on a monthly basis. Systematic exchanges must be for an exchange
amount of at least $25.
More information about exchanging shares is provided in the Statement of
Additional Information.
TELEPHONE TRANSACTIONS
You may sell or exchange Fund shares by telephone. You will automatically have
the right to initiate such telephone transactions unless you elect not to do so
on your account application. You may initiate telephone transactions by calling
Advantus Shareholder Services at (800) 665-6005. Automated service is available
24 hours a day or you may speak to a service representative Monday through
Friday, from 8:00 a.m. to 4:45 p.m. (Central time). The maximum amount of shares
you may sell by telephone is $50,000.
During periods of economic or market changes, you may experience difficulty in
selling or exchanging shares due to a heavy volume of telephone calls. In such a
case, you should consider submitting a written request while still trying a
telephone sale or exchange. The Fund reserves the right to change, terminate or
impose a fee on, telephone sale and exchange privileges after giving 60 days'
prior notice to shareholders.
Unless you decline telephone privileges on your account application, you may be
responsible for any fraudulent telephone order as long as the Fund takes
reasonable measures to verify the order.
- ---------------
REFERENCE POINT
- ---------------
Please see "Selling Shares" and "Exchanging Shares" for sale and exchange
details.
BUYING AND SELLING SHARES 23
<PAGE>
(GRAPHIC)
[GRAPHIC]
GENERAL INFORMATION
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized. Dividends are paid
quarterly and net capital gains distributions are generally paid once a year.
Distributions on Class A shares will generally be higher than Class B and
Class C share distribution due to higher Rule 12b-1 fees applicable to Class B
and Class C shares. Your distributions will be reinvested in additional shares
of the Fund unless you instruct the Fund otherwise. Distributions of these
additional shares are made at the NAV of the payment date. There are no fees or
sales charges on reinvestments. If you wish to receive cash distributions, you
may authorize the Fund to do so in your account application or by writing to
Advantus Shareholder Services. If your cash distribution checks cannot be
delivered by the postal or other delivery service to your address of record, all
distributions will automatically be reinvested in additional shares of the Fund.
No interest will be paid on amounts represented by uncashed distribution checks.
You may elect to have dividends invested in shares of the Money Market Fund or
in shares of the same class of another Advantus Multiple Class Fund described in
"Advantus Family of Funds" below. Dividends are valued at the NAV of such other
Advantus Fund on the dividend payment date. To qualify for this privilege, you
must maintain a minimum account balance of $250 in the Fund and the other
applicable Advantus Fund. You must request this privilege by writing to Advantus
Funds Group, P.O. Box 9767, Providence, Rhode Island 02940-5059.
TAXES
You will be taxed on both dividends and capital gains distributions paid by the
Fund (unless you hold your shares through an IRA or other tax-deferred
retirement account). Dividends and distributions are subject to tax regardless
of whether they are automatically invested or are received in cash. Dividends
paid from the Fund's investment income will be taxed as ordinary income. Capital
gains distributions will be taxed as long-term capital gains, regardless of the
length of time for which you have held your shares. Long-term capital gains are
currently taxable to individuals at a maximum federal tax rate of 20%. If you
purchase shares of the Fund before dividends or capital gains distributions,
such dividends and distributions will reduce the NAV per share by the amount of
such dividends and distributions. Furthermore, you will be subject to taxation
on such dividends and distributions.
If you sell your shares, you will generally realize a capital gain or loss. Any
gain will be treated as short-term if you have held the shares for one year or
less, and long-term if you have held the shares more than one year. Short-term
capital gains are taxed as ordinary income, while long-term capital gains are
subject to a maximum federal tax rate of 20%. If
- --------------------
FOR YOUR INFORMATION
- --------------------
The redemption or exchange of Fund shares may generate a taxable event for you.
Depending on the purchase price and the sale price of the shares you redeem or
exchange, you may incur a gain or loss.
24 GENERAL INFORMATION
<PAGE>
you exchange your shares in the Fund for shares of another Advantus Fund, the
exchange will be treated as a sale for federal tax purposes, and you will be
taxed on any capital gain you realize on the sale.
The Fund makes changes in its portfolio that Advantus Capital deems advisable.
The Fund's portfolio turnover may cause the Fund to realize capital gains which,
when distributed to shareholders, will be taxable to them.
You will receive an annual statement from the Fund providing detailed
information concerning the federal tax status of distributions you have received
during the year.
The above is only a general discussion of the federal income tax consequences of
an investment in the Fund. For more information, see the Statement of Additional
Information. You should consult your own tax adviser for the specific federal,
state or local tax consequences to you of an investment in the Fund.
GENERAL INFORMATION 25
<PAGE>
SERVICE PROVIDERS
INVESTMENT ADVISER
Advantus Capital Management, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
(651) 665-3826
UNDERWRITER
Ascend Financial Services, Inc.
400 Robert Street North
St. Paul, Minnesota 55101-2098
(651) 665-4833
(888) 237-1838
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGENT
Advantus Shareholder Services
(a division of Minnesota Life Insurance Company)
(800) 665-6005
TRANSFER AGENT
First Data Investor Services Group, Inc.
Advantus Funds Group
P.O. Box 9767
Providence, Rhode Island 02940-5059
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
INDEPENDENT AUDITORS
KPMG LLP
GENERAL COUNSEL
Dorsey & Whitney LLP
26 GENERAL INFORMATION
<PAGE>
HIGHER POTENTIAL LONG-TERM RISK AND RETURN
[GRAPHIC]
ADVANTUS FAMILY OF FUNDS
Venture Fund is a member of the Advantus family of funds. The following is a
brief description of the investment objectives, policies and practices of the
Advantus Funds.
ENTERPRISE
- -------------------------------------------------
Long-term growth through investing primarily in common stocks issued by small
capitalization companies.
VENTURE
- -------------------------------------------------
Long-term growth through investing primarily in stocks of small capitalization
companies deemed by Advantus Capital to be undervalued relative to their future
earnings and growth potential.
HORIZON
- -------------------------------------------------
Long-term growth combined with a moderate level of current income through
investing primarily in common stocks issued by mid and large capitalization
companies.
INDEX 500
- -------------------------------------------------
Investment results that correspond generally to the S&P 500 Index by investing a
significant portion of its portfolio in common stocks included in the S&P 500
Index.*
CORNERSTONE
- -------------------------------------------------
Long-term growth through investing primarily in stocks of mid and large
capitalization companies deemed by Advantus Capital to be undervalued relative
to their future earnings and growth potential.
INTERNATIONAL BALANCED
- -------------------------------------------------
Total return through investing primarily in stocks and bonds of large and small
companies located outside the U.S.
REAL ESTATE SECURITIES
- -------------------------------------------------
Total return through investing in real estate and real estate-related
securities.
SPECTRUM
- -------------------------------------------------
Total return from a combination of income and capital appreciation through
investing in a portfolio of stocks, bonds and money market instruments.
BOND
- -------------------------------------------------
High level of current income by investing primarily in high quality corporate
bonds.
MORTGAGE SECURITIES
- -------------------------------------------------
High level of current income by investing primarily in mortgage-related
securities.
MONEY MARKET
- -------------------------------------------------
High level of current income by investing primarily in money market securities.
LOWER POTENTIAL LONG-TERM RISK AND RETURN
[GRAPHIC]
*"STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P 500-REGISTERED TRADEMARK-",
"STANDARD & POOR'S 500", AND "500" ARE REGISTERED TRADEMARKS OF THE MCGRAW-HILL
COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY ADVANTUS INDEX 500 FUND, INC.
THE FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND
STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE FUND.
AN INVESTMENT IN ANY ADVANTUS FUND WILL BE SUBJECT TO A VARIETY OF RISKS. AS A
RESULT, AN ADVANTUS FUND MAY NOT ALWAYS ACHIEVE ITS INVESTMENT OBJECTIVE.
THIS INFORMATION IS A RESULT OF LONG-TERM RISK AND RETURN EXPECTATIONS USING
VARIOUS INDICES AND ASSET CLASS HISTORIES, AND IS NOT FROM ACTUAL PERFORMANCE.
PLEASE NOTE THAT THE ACTUAL RISK/RETURN FOR AN INVESTMENT IN THE ABOVE ADVANTUS
FUNDS MAY VARY AND THE ABOVE TABLE DOES NOT NECESSARILY INDICATE HOW EACH
ADVANTUS FUND WILL PERFORM IN THE FUTURE.
[GRAPHIC]
GENERAL INFORMATION 27
<PAGE>
<TABLE>
<S> <C>
ASCEND FINANCIAL SERVICES, INC. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
</TABLE>
ADDITIONAL INFORMATION ABOUT THE FUND
The Fund's annual and semi-annual reports list
portfolio holdings, and discuss recent market
conditions, economic trends and investment
strategies that affected the Fund during the latest
fiscal year.
A Statement of Additional Information (SAI) provides
further information about the Fund. The current SAI
is on file with the Securities and Exchange
Commission and is incorporated by reference (is
legally part of this Prospectus).
HOW TO OBTAIN ADDITIONAL INFORMATION
The SAI and the Fund's annual and semi-annual
reports are available without charge upon request.
You may obtain additional information or make any
inquiries:
By Telephone - Call (800) 665-6005
By Mail - Write to Advantus Funds Group, P.O. Box
9767, Providence, Rhode Island
02940-5059
Web Site Address - www.advantusfunds.com
Information about the Fund (including the SAI and
annual and semi-annual reports) can be reviewed and
copied at the SEC's Public Reference Room in
Washington, D.C. (telephone 1-202-942-8090). This
information and other reports about the Fund are
also available on the SEC's World Wide Web site at
http://www.sec.gov. Copies of this information may
be obtained by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102 or obtained by
electronic request to: [email protected]. You will
be charged a duplicating fee for copies.
Investment Company Act No. 811-7817
F. 50485 Rev. 12-1999
[LOGO]
-C-1999 Advantus Capital Management, Inc.
All rights reserved.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ADVANTUS VENTURE FUND, INC.
ADVANTUS INDEX 500 FUND, INC.
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
DECEMBER 1, 1999
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the separate Prospectuses dated
December 1, 1999 and should be read in conjunction therewith. A copy of each
Prospectus may be obtained by telephone from Advantus Shareholder Services
at (800) 665-6005 or by writing to the Funds at Advantus Funds Group, P.O. Box
9767, Providence, Rhode Island 02940-5059.
THIS STATEMENT OF ADDITIONAL INFORMATION MUST BE ACCOMPANIED OR PRECEDED BY A
COPY OF THE CURRENT PROSPECTUS FOR THE RESPECTIVE FUND.
1
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TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY
INVESTMENT OBJECTIVES AND POLICIES
Equity Securities of Small Capitalization Companies
S&P 500 Index
Real Estate Investment Trust Securities
Debt and Money Market Securities
Low Rated Securities
Convertible Securities
Foreign Securities
Stock Index Futures Contracts
Options
United States Government and Agency Obligations
Short Sales Against the Box
Loans of Portfolio Securities
Restricted and Illiquid Securities
Repurchase Agreements
Warrants
Index Depositary Receipts
When-Issued Securities and Forward Commitments
Defensive Purposes
INVESTMENT RESTRICTIONS
Venture Fund
Index Fund
Real Estate Securities Fund
PORTFOLIO TURNOVER
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR LIABILITY
INVESTMENT ADVISORY AND OTHER SERVICES
General
Control and Management of Advantus Capital and Ascend Financial
Investment Advisory Agreement
Distribution Agreement
Payment of Certain Distribution Expenses of the Funds
Transfer Agent and Administrative Services
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
CALCULATION OF PERFORMANCE DATA
CAPITAL STOCK AND OWNERSHIP OF SHARES
HOW TO BUY SHARES
Alternative Purchase Arrangements
Purchase by Check
Purchase by Wire
Timing of Purchase Orders
Minimum Investments
Public Offering Price
SALES CHARGES
Class A Shares
Class B Shares
Class C Shares
Other Payments to Broker-Dealers
NET ASSET VALUE AND PUBLIC OFFERING PRICE
REDUCED SALES CHARGES
Right of Accumulation-Cumulative Purchase Discount
Letter of Intent
Combining Purchases
Group Purchases
Waiver of Sales Charges For Certain Sales of Class A Shares
EXCHANGE AND TRANSFER OF FUND SHARES
Systematic Exchange Plan
SHAREHOLDER SERVICES
Open Accounts
Automatic Investment Plan
Group Systematic Investment Plan
Retirement Plans Offering Tax Benefits
Systematic Withdrawal Plans
REDEMPTIONS
Signature Guarantee
Contingent Deferred Sales Charge
Telephone Redemption
Delay in Payment of Redemption Proceeds
Fund's Right to Redeem Small Accounts
Reinstatement Privilege
TELEPHONE TRANSACTIONS
THE STANDARD & POOR'S LICENSE
DISTRIBUTIONS AND TAX STATUS
Dividends and Capital Gains Distributions
Taxation - General
Taxation on Portfolio Holdings
FINANCIAL STATEMENTS
Appendix A - Bond and Commercial Paper Ratings
2
<PAGE>
GENERAL INFORMATION AND HISTORY
Advantus Venture Fund, Inc. ("Venture Fund"), Advantus Index 500
Fund, Inc. ("Index Fund"), and Advantus Real Estate Securities Fund, Inc.
("Real Estate Securities Fund"), collectively referred to as the "Funds," are
open-end diversified investment companies, commonly called mutual funds. The
Funds, together with ten other mutual funds which share the same investment
adviser, are members of a family of mutual funds known as the "Advantus
Funds." Each of the Advantus Funds, excluding Real Estate Securities Fund and
Advantus Money Market Fund, Inc., offers more than one class of shares (the
"Advantus Multiple Class Funds"). The Advantus Multiple Class Funds currently
offer three classes of shares (Class A, Class B and Class C). Real Estate
Securities Fund currently offers one class of shares (Class A). Each class is
sold pursuant to different sales arrangements and bears different expenses.
The Venture and Index Funds were incorporated as Minnesota corporations in July
1996. The Real Estate Securities Fund was incorporated as a Minnesota
corporation in September 1998.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of each of
the Funds are set forth in detail in the text of each Fund's Prospectus under
"Investing in the Fund --Investment Policies and Practices."
EQUITY SECURITIES OF SMALL CAPITALIZATION COMPANIES
Venture Fund will invest primarily in equity securities issued by small
capitalization companies. Small capitalization companies may be in a relatively
early stage of development or may produce goods and services which have
favorable prospects for growth due to increasing demand or developing markets.
Frequently, such companies have a small management group and single product or
product-line expertise that may result in an enhanced entrepreneurial spirit and
greater focus which allow such firms to be successful. The Fund's investment
adviser believes that such companies may develop into significant business
enterprises and that an investment in such companies offers a greater
opportunity for capital appreciation than an investment in larger more
established entities. However, small capitalization companies frequently retain
a large part of their earnings for research, development and investment in
capital assets, so that the prospects for immediate dividend income are limited.
While securities issued by smaller capitalization companies have
historically produced better market results than the securities of larger
issuers, there is no assurance that they will continue to do so or that the
Fund will invest specifically in those companies which produce those results.
Because of the risks involved, the Fund is not intended to constitute a
complete investment program.
S&P 500 INDEX
Index Fund invests in common stocks included in the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500"). The S&P 500 is an unmanaged index
of common stocks which emphasizes large capitalization companies and is
comprised of 500 industrial, financial, utility and transportation companies.
The S&P 500 is a well-known stock market index that includes common stocks of
companies representing approximately 70% of the market value of all common
stocks publicly traded in the United States. The weightings of stock in the S&P
500 are based on each stock's relative capitalization or total market value;
that is, its market price per share times the number of shares outstanding.
Because of this weighting, approximately 50% of the S&P 500 is typically
composed of stocks of the 50 to 60 largest companies in the S&P 500. The
composition of the S&P 500 may be changed from time to time. Stocks included in
the S&P 500 are chosen by Standard & Poor's on a statistical basis which
reflects such factors as the market capitalization and trading activity of each
stock and the extent to which each stock is representative of stocks in a
particular industry. Typically, companies included in the S&P 500 are the
largest and most dominant companies in their respective industries. The
inclusion of a stock in the S&P 500 in no way implies that Standard & Poor's
believes the stock to be an attractive investment, nor does it afford any
assurance against declines in the price or yield performance of that stock. The
Fund's investment adviser believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
3
<PAGE>
The Fund will at all times invest at least 80% of its total assets in
common stocks included in the S&P 500. There is no minimum or maximum number of
stocks included in the S&P 500 which the Fund must hold. Under normal
circumstances Advantus Capital generally will seek to match the Fund to the
composition of the S&P 500 to the maximum extent, but may not always invest the
Fund's portfolio to mirror the S&P 500 exactly. Because of the difficulty and
expense of executing relatively small stock transactions, the Fund may not
always be invested in the less heavily weighted stocks included in the S&P 500,
and may at times have its portfolio weighted differently from the S&P 500,
particularly when the Fund has assets of less than $25 million. Regardless of
the number, or relative weightings, of stocks included in the S&P 500 held by
the Fund, however, the Fund's intention is to seek investment results, before
sales charges and other Fund expenses, which match as closely as possible the
investment performance of the S&P 500.
The method used to select investments for the Fund involves investing
primarily in those stocks having the highest statistical weightings in the
S&P 500. Stocks in the S&P 500 are ranked in accordance with their
statistical weightings from highest to lowest. The Fund will invest in all
of the stocks above a specified level in the ranking in approximately the
same proportion as the weightings of those stocks in the S&P 500. However,
the Fund will not invest in all of the stocks below the specified level in
the ranking, but rather will invest only in those stocks, and in amounts, as
the Fund's investment adviser determines to be necessary or appropriate for
the Fund to approximate the performance of the S&P 500. The stocks of the
S&P 500 to be included in the Fund will be selected utilizing a computer
program which provides simulations of alternative investment strategies for
tracking the performance of the S&P 500 and analyzes the estimated tracking
results of such alternative strategies prior to their implementation. This
process selects stocks for the Fund so that various industry weightings and
market capitalizations closely approximate those of the S&P 500. This
technique employed by the Fund is expected to be an effective means of
substantially duplicating the income and capital returns of the S&P 500. The
Fund's ability to duplicate the performance of the S&P 500 will depend to
some extent, however, on the size and timing of cash flows into or out of the
Fund. Investment changes to accommodate these cash flows will be made to
maintain the similarity of the Fund's holdings to the S&P 500 to the maximum
practicable extent.
Over the long term, the Fund's investment adviser will seek a correlation
between the performance of the Fund, before sales charges and other Fund
expenses, and that of the S&P 500 of at least 95% (or 85% - 95% if the Fund's
assets are less than $25 million). A correlation of 100% would indicate perfect
correlation, which would be achieved when the net asset value of the Fund,
including the value of its dividend and capital gains distributions, increased
or decreased in exact proportion to changes in the S&P 500. An investment in
shares of the Fund therefore involves risks similar to those of investing in a
portfolio consisting of the common stocks of some or all of the companies
included in the S&P 500.
REAL ESTATE INVESTMENT TRUST SECURITIES
The Real Estate Securities Fund may invest in securities issued by real
estate investment trusts. A real estate investment trust ("REIT") is a
corporation or a business trust that would otherwise be taxed as a corporation,
which meets certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). The Code permits a qualifying REIT to deduct dividends
paid, thereby effectively eliminating corporate level federal income tax and
making the REIT a pass-through vehicle for federal income tax purposes. In order
to qualify as a REIT, a company must derive at least 75% of its gross income
from real estate sources (rents, mortgage interest, and gains from sale of real
estate assets), and must distribute to shareholders annually 95% or more of its
taxable income. Moreover, at the end of each quarter of its taxable year, at
least 75% of the value of its total assets must be represented by real estate
assets, cash and cash items, and U.S. government securities.
REITs are sometimes informally characterized as equity REITs, mortgage
REITs and hybrid REITs. An equity REIT invests primarily in the fee ownership or
leasehold ownership of land and buildings and derives its income primarily from
rental income. A mortgage REIT invests primarily in mortgages on real estate,
and derives primarily from interest payments received on credit it has granted.
A hybrid REIT combines the characteristics of equity REITs and mortgage REITs.
It is anticipated, although not required, that under normal circumstances, a
majority of the Fund investments in REITs will consist of equity REITs.
DEBT AND MONEY MARKET SECURITIES
Venture Fund and Real Estate Securities Fund may invest in long,
intermediate and short-term debt securities from various industry
classifications and money market instruments. Such instruments may include
the following:
* Corporate obligations which at the time of purchase are rated within
the four highest grades assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Services, Inc. ("Moody's") or any other
national rating service, or, if not rated, are of equivalent
investment quality as determined by the Fund's investment adviser or
sub-adviser, as the case may be. To the extent that the Fund invests
in securities rated BBB or Baa by S&P or Moody's, respectively, it
will be investing in securities which have speculative elements.
Venture Fund may also invest up to 10% of its net assets in securities
(including convertible securities) rated at least B- by S&P or B3 by
Moody's. See "Low Rated Securities," below. For a description of the
ratings used by Moody's and S&P, see Appendix A below.
* Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
* Debt obligations of banks.
4
<PAGE>
In addition to the instruments described above, which will generally be
long-term, but may be purchased by the Fund within one year of the date of a
security's maturity, the Fund may also purchase other high quality securities
including:
* Obligations (including certificates of deposit and bankers'
acceptances) of U.S. banks, savings and loan associations, savings
banks which have total assets (as of the date of their most recent
annual financial statements at the time of investment) of not less
than $2,000,000,000; U.S. dollar denominated obligations of Canadian
chartered banks, London branches of U.S. banks and U.S. branches or
agencies of foreign banks which meet the above-stated asset size; and
obligations of any U.S. banks, savings and loan associations and
savings banks, regardless of the amount of their total assets,
provided that the amount of the obligations purchased does not exceed
$100,000 for any one U.S. bank, savings and loan association or
savings bank and the payment of the principal is insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation.
* Obligations of the International Bank for Reconstruction and
Development.
* Commercial paper (including variable amount master demand notes)
issued by U.S. corporations or affiliated foreign corporations and
rated (or guaranteed by a company whose commercial paper is rated) at
the date of investment Prime-1 by Moody's or A-1 by S&P or, if not
rated by either Moody's or S&P, issued by a corporation having an
outstanding debt issue rated Aa or better by Moody's or AA or better
by S&P and, if issued by an affiliated foreign corporation, such
commercial paper (not to exceed in the aggregate 10% of the Fund's net
assets) is U.S. dollar denominated and not subject at the time of
purchase to foreign tax withholding.
The Fund may also invest in securities which are unrated if the Fund's
investment adviser determines that such securities are of equivalent investment
quality to the rated securities described above. In the case of "split-rated"
securities, which result when nationally-recognized rating agencies rate the
security at different rating levels (e.g., BBB by S&P and Ba by Moody's), it is
the Fund's general policy to classify such securities at the higher rating level
where, in the judgment of the Fund's investment adviser, such classification
reasonably reflects the security's quality and risk.
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 Fund's net asset value.
The Fund may, however, acquire debt securities which, after acquisition,
are down-graded by the rating agencies to a rating which is lower than the
applicable minimum rating described above. In such an event it is the Fund's
general policy to dispose of such down-graded securities except when, in the
judgment of the Fund's investment adviser, it is to the Fund's advantage to
continue to hold such securities. In no event, however, will the Fund hold in
excess of 5% of its net assets in securities which have been down-graded
subsequent to purchase where such down-graded securities are not otherwise
eligible for purchase by the Fund. This 5% is in addition to securities which
the Fund may otherwise purchase under its usual investment policies.
LOW RATED SECURITIES
Venture Fund may also invest up to 10% of its net assets in debt
securities (including convertible debt securities), which, at the time of
acquisition, are rated at least B- or B3 by S&P or Moody's, respectively, or
rated at a comparable level by another independent publicly-recognized rating
agency, or, if not rated, are of equivalent investment quality as determined
by the Fund's investment adviser. Real Estate Securities Fund and Venture
Fund may each also hold an additional 5% of its total assets in low rated
securities rated below "investment grade" (i.e. below BBB) where such
securities were either investment grade or eligible securities at the time of
purchase but subsequently down-graded to a rating not otherwise
5
<PAGE>
eligible for purchase by the Fund (see "Debt and Money Market Securities"
above). Debt securities rated below the four highest categories (i.e., below
BBB) are not considered investment grade obligations and are commonly called
"junk bonds." These securities are predominately speculative and present
more credit risk than investment grade obligations. Bonds rated below BBB
are also regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments.
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 Fund's 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.
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 Fund 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 Fund 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 Fund 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.
CONVERTIBLE SECURITIES
Venture Fund and Real Estate Securities Fund each may invest in debt or
preferred equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than non-convertible
securities. They generally participate in the appreciation or depreciation
of the underlying stock into which they are convertible, but to a lesser
degree. The total return and yield of lower quality (high yield/high risk)
convertible bonds can be expected to fluctuate more than the total return and
yield of higher quality, shorter-term bonds, but not as much as common
stocks. Venture Fund will limit its purchase of convertible debt securities
to those that, at the time of purchase, are rated at least B- by S&P or B3 by
Moody's, or if not rated by S&P or Moody's, are of equivalent investment
quality as determined by the Fund's investment adviser. Real Estate
Securities Fund will limit its purchase of convertible debt securities to
those that, at the time of purchase, are rated at least BBB by S&P or Baa by
Moody's, or if not rated by S&P or Moody's, are of equivalent investment
quality as determined by the Fund's investment adviser.
FOREIGN SECURITIES
Venture Fund and Real Estate Securities Fund each may invest up to 10%
of its total assets in securities of foreign issuers which are not publicly
traded in the U.S. (securities of foreign issuers which are publicly traded
in the U.S., usually in the form of sponsored American Depositary Receipts,
are not subject to this 10% limitation.) Investing in securities of foreign
issuers may result in greater risk than that incurred in investing in
securities of domestic issuers. 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
U.S. 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 U.S. companies.
Further, the Fund may encounter difficulties or
6
<PAGE>
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 U.S., are likely to be higher. Further, the
settlement period 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 U.S. 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 U.S. Also, some countries may withhold portions of interest,
dividends and gains at the source. The Fund may also be unfavorably affected
by fluctuations in the relative rates of exchange between the currencies of
different nations (i.e., when the currency being exchanged has decreased in
value relative to the currency being purchased). There are further risk
considerations, including possible losses through the holding of securities
in domestic and foreign custodial banks and depositories.
The countries of the European Monetary Union (EMU) began the process of
converting their individual country currencies to the Euro on January 1, 1999.
There is also a risk that the value of foreign securities of companies located
in EMU countries may decrease due to market volatility resulting from the
conversion of certain EMU country currencies to the Euro. It is not possible to
predict the impact of the Euro on the business or financial condition of
European issues or on the Fund. The transition and the elimination of currency
risk among EMU countries may change the economic environment and behavior of
investors, particularly in European markets. To the extent the Fund holds
non-U.S. dollar (Euro or other) denominated securities, it will still be exposed
to currency risk due to fluctuations in those currencies versus the U.S. dollar.
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.
STOCK INDEX FUTURES CONTRACTS
Index Fund may purchase and sell stock index futures contracts. The Fund
may enter into stock index futures contracts provided that not more than 5% of
its assets are required as a margin deposit for such contracts and provided that
not more than 20% of its total assets (including assets held as "cover" in
segregated accounts or as margin deposits) are invested in stock index futures
obligations at any time. A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of trading of the contract and the price at
which the futures contract is originally struck. No physical delivery of the
stocks comprising the stock index is made; generally contracts are closed out
prior to the expiration date of the contract. Closing out an open futures
position is done by taking an opposite position ("buying" a contract which has
previously been "sold," or "selling" a contract previously purchased) in an
identical contract to terminate the position. Brokerage commissions are
incurred when a futures contract is bought or sold. No price is paid upon
entering into futures contracts. Instead, the Fund is required to deposit an
amount of cash or U.S. Treasury securities, known as "initial margin," in a
segregated account established with the Fund's custodian in the name of the
futures broker through which the Fund entered into the futures contract.
Subsequent payments, called "variation margin," to and from the futures broker
are required on a daily basis as the value of the futures position varies.
Because the value of index futures depends primarily on the value of their
underlying indexes, the performance of broad-based contracts will generally
reflect broad changes in common stock prices. The Index Fund's investments may
be more or less heavily weighted in securities of particular types of issuers,
or securities of issuers in particular industries, than the index underlying its
index futures positions. Therefore, while the Fund's index futures positions
should provide exposure to changes in value of the underlying index (or
protection against declines in their value in the case of hedging transactions),
it is likely that, in the case of hedging transactions, the price changes of the
Fund's index futures positions will not match the price changes of the Fund's
other investments. Other factors that could affect the correlation of the
Fund's index futures positions with its other investments are discussed below.
FUTURES MARGIN PAYMENTS. Both the purchaser and seller of a futures
contract are required to deposit "initial margin" with a futures broker (known
as a "futures commission merchant," or "FCM"), when the contract is entered
into. Initial margin deposits are equal to a percentage of the contract's
value, as set by the exchange where the contract is traded, and may be
maintained in cash or high quality liquid securities. If the value of either
party's position declines, that party will be required to make additional
"variation margin" payments to settle the change in value on a daily basis. The
party that has a gain may be entitled to receive all or a portion of this
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amount. Initial and variation margin payments are similar to good faith
deposits or performance bonds, unlike margin extended by a securities broker,
an initial and variation margin payments do not constitute purchasing
securities on margin for purposes of the Fund's investment limitations. In the
event of the bankruptcy of a FCM that holds margin on behalf of the Fund, the
Fund may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers. The Fund's investment adviser
will attempt to minimize this risk by monitoring the creditworthiness of the
FCMs with which the Index Fund does business.
LIMITATIONS ON STOCK INDEX FUTURES TRANSACTIONS. Index Fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association, which regulate trading in the
futures markets. Pursuant to regulations under the Commodity Exchange Act,
the Fund may use futures contracts for bona fide hedging purposes within the
meaning of CFTC regulations; PROVIDED, HOWEVER, that, with respect to
positions in futures contracts which are not used for bona fide hedging
purposes within the meaning of CFTC regulations, the aggregate initial margin
required to establish such position will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits
and unrealized losses on any such contracts into which the Fund has entered.
The Fund's investment adviser also intends to follow certain other
limitations on the Fund's futures activities. Under normal conditions, the
Fund will not enter into any futures contract if, as a result, the sum of (i)
the current value of assets hedged in the case of strategies involving the
sale of securities, and (ii) the current value of the indexes or other
instruments underlying the Fund's other futures positions would exceed 20% of
the Fund's total assets. In addition, the Fund does not intend to enter into
futures contracts that are not traded on exchanges or boards of trade.
Index Fund may purchase index futures contracts in order to attempt to
remain fully invested in the stock market. For example, if the Fund had cash
and short-term securities on hand that it wished to invest in common stocks,
but at the same time it wished to maintain a highly liquid position in order
to be prepared to meet redemption requests or other obligations, it could
purchase an index futures contract in order to approximate the activity of
the index with that portion of its portfolio. Index Fund may also purchase
futures contracts as an alternative to purchasing actual securities. For
example, if the Fund intended to purchase stocks but had not yet done so, it
could purchase a futures contract in order to participate in the index's
activity while deciding on particular investments. This strategy is
sometimes known as an anticipatory hedge. In these strategies the Fund would
use futures contracts to attempt to achieve an overall return -- whether
positive or negative -- similar to the return from the stocks included in the
underlying index, while taking advantage of potentially greater liquidity
that futures contracts may offer.
When the Fund wishes to sell securities, it may sell stock index futures
contracts to hedge against stock market declines until the sale can be
completed. For example, if the Fund's investment adviser anticipated a decline
in common stock prices at a time when the Fund anticipated selling common
stocks, it could sell a futures contract in order to lock in current market
prices. If stock prices subsequently fell, the futures contract's value would
be expected to rise and offset all or a portion of the anticipated loss in the
common stocks the Fund had hedged in anticipation of selling them. Of course,
if prices subsequently rose, the futures contract's value could be expected to
fall and offset all or a portion of any gains from those securities. The
success of this type of strategy depends to a great extent on the degree of
correlation between the index futures contract and the securities hedged.
ASSET COVERAGE FOR FUTURES POSITIONS. Index Fund will comply with
guidelines established by the Securities and Exchange Commission with respect to
coverage of futures strategies by mutual funds, and if the guidelines so require
will set aside cash and/or appropriate liquid assets (e.g., United States
Government securities, other investment grade debt obligations and equity
securities) in a segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold while the futures
contract is outstanding, unless they are replaced with other suitable assets.
As a result, there is a possibility that segregation of a large percentage of
the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
CORRELATION OF PRICE CHANGES. As noted above, price changes of the Fund's
futures positions may not be well correlated with price changes of its other
investments because of differences between the underlying index and the types of
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securities the Fund invests in. For example, if the Fund sold a broad-based
index futures contract to hedge against a stock market decline while the Fund
completed a sale of specific securities in its portfolio, it is possible that
the price of the securities could move differently from the broad market average
represented by the index futures contract, resulting in an imperfect hedge which
could affect the correlation between the Fund's return and that of the benchmark
index. In the case of an index futures contract purchased by the Fund either in
anticipation of actual stock purchases or in an effort to be fully invested,
failure of the contract to track its index accurately could hinder the Fund in
the achievement of its objective.
Stock index futures prices can also diverge from the prices of their
underlying indexes. Futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
index, and the time remaining until expiration of the contract, which may not
affect security prices the same way. Imperfect correlation may also result from
differing levels of demand in the futures markets and the securities markets,
from structural differences in how futures and securities are traded, or from
imposition of daily price fluctuation limits for futures contract. The Fund may
sell futures contracts with a greater or lesser value than the securities it
wishes to hedge in order to attempt to compensate for differences in historical
volatility between the futures contract and the securities, although this may
not be successful in all cases.
LIQUIDITY OF FUTURES CONTRACTS. Because futures contracts are generally
settled within a day from the date they are closed out, compared with a
settlement period of three days for some types of securities, the futures
markets can provide liquidity superior to the securities markets in many cases.
Nevertheless, there is no assurance a liquid secondary market will exist for any
particular futures contract at any particular time. In addition, futures
exchanges may establish daily price fluctuation limits for futures contracts,
and may halt trading if a contract's price moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached, it may be impossible for the Fund to enter into new positions
or close out existing positions. Trading in index futures can also be halted if
trading in the underlying index stocks is halted. If the secondary market for a
futures contract is not liquid because of price fluctuation limits or otherwise,
it would prevent prompt liquidation of unfavorable futures positions, and
potentially could require the Fund to continue to hold a futures position until
the delivery date regardless of potential consequences. If the Fund must
continue to hold a futures position, its access to other assets held to cover
the position could also be impaired.
FEDERAL TAX TREATMENT. The Internal Revenue Code of 1986, as amended (the
"Code"), forbids the Fund from earning more than 30% of its gross income from
the sale or other disposition of certain investments, including futures
contracts, which are owned for less than three months. The likelihood of
violating this 30% test is increased by the amount of investing the Fund does in
futures contract. Additionally, the Code requires the Fund to diversify its
investment holdings. The Internal Revenue Service position regarding the
treatment of futures contracts for diversification purposes is not clear, and
the extent to which the Fund may engage in these transactions may be limited by
this requirement. The Code also provides that, with respect to certain futures
contracts held by the Fund at the end of its taxable year, unrealized gain or
loss on such contracts may have to be recognized for tax purposes under a
special system within the Code. The actual gain or loss recognized by the Fund
in an eventual disposition of such contract, however, will be adjusted by the
amount of the gain or loss recognized earlier under the Code's system. See
"Distributions and Tax Status."
OPTIONS
Venture 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
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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.
The use of options contracts involves risk of loss to the Fund due to the
possibility that the prices of the underlying securities on which such options
are written may not move as anticipated.
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS
The Funds may invest in bills, certificates of indebtedness, notes and
bonds issued or guaranteed as to principal or interest by the United States
Government or by agencies or authorities controlled or supervised by and acting
as instrumentalities of the United States Government established under authority
granted by Congress. Obligations issued or guaranteed by agencies of the United
States Government include, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the United States
Government include, among others, the Federal Home Loan Mortgage Corporation,
the Federal Land Banks and the U.S. Postal Service. Some of these securities
are supported by the full faith and credit of the U.S. Treasury (e.g.,
Government National Mortgage Association securities), others are supported by
the right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit
Bank securities), while still others are supported only by the credit of the
instrumentality (e.g., Federal National Mortgage Association securities).
Guarantees of principal by agencies or instrumentalities of the United States
Government may be a guarantee of payment at the maturity of the obligation so
that in the event of a default prior to maturity there might not be a market and
thus no means of realizing on the obligation prior to maturity. Guarantees as
to the timely payment of principal and interest do not extend to the value or
yield of these securities nor to the value of the Funds' shares.
SHORT SALES AGAINST THE BOX
Each Fund may sell securities "short against the box." Whereas a short
sale is the sale of a security the Fund does not own, a short sale is "against
the box" if, at all times during which the short position is open, the Fund owns
at least an equal amount of the securities or securities sold short or other
securities convertible into or exchangeable without further consideration for
securities of the same issue as the securities sold short. Short sales against
the box are typically used by sophisticated investors to defer recognition of
capital gains or losses. The Funds have no present intention to sell securities
short in this fashion.
LOANS OF PORTFOLIO SECURITIES
Each Fund, for the purpose of realizing additional
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income, may make secured loans of portfolio securities amounting to not more
than 20% of their respective 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, letters of credit or securities issued or guaranteed by the
U.S. 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. Although the Fund
does not expect to pay commissions or other front-end fees (including finders
fees) in connection with loans of securities (but may in some cases do so), a
portion of the additional income realized will be shared with the Fund's
custodian for arranging and administering such loans. 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 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. The Fund has no present
intention to make loans of portfolio securities.
RESTRICTED AND ILLIQUID SECURITIES
Venture Fund and Index Fund may invest up to 10% of their respective net
assets, and Real Estate Securities Fund may invest up to 15% of its net
assests, in securities restricted as to disposition under the federal
securities laws or otherwise, or other illiquid assets. 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. Because of such restrictions, the Fund may not be able
to dispose of a block of restricted securities for a substantial period of
time or at prices as favorable as those prevailing in the open market should
like securities of an unrestricted class of the same issuer be freely traded.
The Fund may be required to bear the expenses of registration of such
restricted securities.
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, the Fund's investment adviser believes that 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 the Fund's
investment adviser to be liquid in accordance with standards established by the
Fund's Board of Directors. Under these guidelines, the Fund's investment
adviser 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 such 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.
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If through the appreciation of restricted securities or the depreciation
of unrestricted securities, the Fund is in a position where more than 10% of
its net assets are invested in restricted and other illiquid securities, the
Fund will take appropriate steps to protect liquidity.
REPURCHASE AGREEMENTS
Each 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 U.S. 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 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.
WARRANTS
Venture Fund and Real Estate Securities Fund each may invest in
warrants; however, not more than 5% of its net 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's
assets at the time of purchase may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are instruments
that allow investors to purchase underlying shares at a specified price
(exercise price) at a given future date. 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.
INDEX DEPOSITARY RECEIPTS
Venture Fund and Index Fund may each invest up to 5% of their respective
total assets in one or more types of depositary receipts ("DRs") as a means
of tracking the performance of a designated stock index while maintaining
liquidity. Venture Fund and Index Fund may invest in S&P 500 Depositary
Receipts ("SPDRs"), which track the S&P 500 Index. In addition, Venture Fund
may invest in S&P MidCap 400 Depositary Receipts ("MidCap SPDRs"), which
track the S&P MidCap 400 Index; and "Dow Industrial Diamonds," which track
the Dow Jones Industrial Average; or in other DRs which track indexes,
provided that such investments are consistent with the Fund's investment
objective as determined by the Fund's investment adviser. Each of these
securities represents shares of ownership of a long term unit investment
trust (a type of investment company) that holds all of the stock included in
the relevant underlying index.
DRs carry a price which equals a specified fraction of the value of the
designated index and are exchange traded. As with other equity transactions,
brokers charge a commission in connection with the purchase of DRs. In
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addition, an asset management fee is charged in connection with the underlying
unit investment trust (which is in addition to the asset management fee paid by
the Fund).
Trading costs for DRs are somewhat higher than those for stock index
futures contracts, but, because DRs trade like other exchange-listed equities,
they represent a quick and convenient method of maximizing the use of the Fund's
assets to track the return of a particular stock index. DRs share in the same
market risks as other equity investments.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Real Estate Securities Fund may 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 Fund's investment adviser anticipates a rise in interest
rates 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 investment 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
<PAGE>
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 liquid
securities (marked to the market daily), 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.)
The purchase of securities on a when-issued or forward commitment basis
exposes the Fund to risk because the securities may decrease in value prior to
their delivery. Purchasing securities on a when-issued or forward commitment
basis involves the additional risk that the return available in the market when
the delivery takes place will be higher than that obtained in the transaction
itself. The Fund's purchase of securities on a when-issued or forward commitment
basis while remaining substantially fully invested increases the amount of the
Fund's assets that are subject to market risk to an amount that is greater than
the Fund's net asset value, which could result in increased volatility of the
price of the Fund's shares. No more than 30% of the value of the Fund's total
assets will be committed to when-issued or forward commitment transactions.
DEFENSIVE PURPOSES
Venture Fund and Index Fund may invest up to 20% of their respective net
assets in cash or cash items. Real Estate Securities Fund may invest
approximately 5% of its net assets in cash or cash items. In addition, for
temporary or defensive purposes, the Funds may invest in cash or cash items
without limitation. The "cash items" in which the Funds may invest, include
short-term obligations such as rated commercial paper and variable amount
master demand notes; United States dollar-denominated time and savings
deposits (including certificates of deposit); bankers' acceptances;
obligations of the United States Government or its agencies or
instrumentalities; repurchase agreements collateralized by eligible
investments of a Fund; securities of other mutual funds which invest
primarily in debt obligations with remaining maturities of 13 months or less
(which investments also are subject to the advisory fee); and other similar
high-quality short-term United States dollar-denominated obligations. The
other mutual funds in which the Funds may so invest include money market
funds advised by the Fund's investment adviser.
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 applicable 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.
VENTURE FUND (The investment restrictions numbered 1 through 8 below are
fundamental. Restrictions numbered 9 through 15 are not fundamental.)
Venture 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
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;
(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;
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(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 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, including 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) 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;
(9) Purchase options, except call options in order to close out a
position;
(10) 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%;
(11) Make investments for the purpose of exercising control or management;
(12) Participate on a joint or joint and several basis in any trading
account in securities;
(13) 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;
(14) 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
(15) 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.
INDEX FUND (The investment restrictions numbered 1 through 8 below are
fundamental. Restrictions numbered 9 through 15 are not fundamental.)
Index 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 (provided, however,
that the Fund may invest more than 25% of its assets in a single
industry if the S&P 500 is so concentrated);
14
<PAGE>
(2) Purchase securities on margin, although it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales
or securities (for purposes of this restriction, the deposit or
payment of initial or variation margin in connection with futures
contracts will not be deemed to be a purchase of securities on
margin); 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 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 that it may invest in stock index
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) Write put or call options;
(9) Purchase put or call options;
(10) Purchase or retain securities of any company if officers and directors
of the Fund or of its investment adviser who individually own more
than of 1% of the shares or securities of that company, together own
more than 5%;
(11) Make investments for the purpose of exercising control or management;
(12) Participate on a joint or joint and several basis in any trading
account in securities;
(13) 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;
(14) 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
(15) 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.
REAL ESTATE SECURITIES FUND (The investment restrictions numbered 1 through 7
below are fundamental. Restrictions numbered 8 through 14 are not fundamental.)
Real Estate Securities 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, except that this limitation will not apply to
investments in securities of issuers in the real estate or
real estate-related industry (in which 25% or more of the
value of the Fund's total assets will be invested).
(2) Purchase or sell real estate, except that the Fund may invest
in securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests
therein.
(3) Purchase or sell physical commodities, or futures or options
contracts with respect to physical commodities. This
restriction shall not restrict the Fund from purchasing or
selling any financial contracts or instruments which may be
deemed commodities (including, by way of example and not by
way of limitation, options, futures, and options on futures
with respect, in each case, to interest rates, currencies,
stock indices, bond indices or interest rate indices) or any
security which is collateralized or otherwise backed by
physical commodities.
(4) Borrow money, or enter into reverse repurchase agreements, in
excess of one-third of its net assets, and, with respect to
borrowing money, only from banks for
<PAGE>
temporary purposes. For purposes of this restriction, the
use of options and futures transactions and the purchase of
securities on a when-issued or delayed delivery basis shall
not be deemed the borrowing of money.
(5) Issue any senior securities, as defined in the 1940 Act, other
than as set forth in restriction number 4 above and except to
the extent that using options and futures contracts or
purchasing or selling securities on a when-issued or forward
commitment basis may be deemed to constitute issuing a senior
security.
(6) Make loans to other persons, except that it may lend portfolio
securities representing up to one-third of the value of its
total assets. (The Fund, however, may purchase and hold debt
instruments and enter into repurchase agreements in accordance
with its investment objectives and policies.)
(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) Make investments for the purpose of exercising control or
management.
(9) Participate on a joint or joint and several basis in any
trading account in securities.
(10) 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.
(11) Invest more than a total of 15% of the Fund's net assets in
securities or other assets, including repurchase agreements
with a maturity of over seven days, which are illiquid.
(12) 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).
(13) 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.
(14) Make additional investments while its borrowings exceed 5% of
its total assets.
15
<PAGE>
In addition, as a non-fundamental restriction, each of the Funds will not
issue any senior securities as defined in the Investments Company Act of 1940,
except to the extent that using options and futures contracts or purchasing or
selling securities on a when-issued or forward commitment basis may be deemed to
constitute issuing a senior security.
With respect to each of the Funds, any investment policy set forth under
"Investing in the Fund - Investment Policies and Practices" in the applicable
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 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.
Venture 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. 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. Venture Fund does not
emphasize short-term trading profits. For the fiscal years ended July 31,
1999, 1998 and 1997, the Fund's portfolio turnover rate was 103.9%, 45.0% and
39.6%, respectively.
Index Fund generally seeks to invest for the long term, but reserves the
right to sell securities irrespective of how long they have been held.
However, because of the "passive" investment management approach of the Fund,
the Fund's portfolio turnover rate is expected to be generally lower than the
rate for most other investment companies. Ordinarily, securities will be
sold by Index Fund only to reflect certain administrative changes in the S&P
500 (including mergers or changes in its composition) or to accommodate cash
flows into and out of the Fund while maintaining the similarity of the Fund
to the S&P 500. For the fiscal years ended July 31, 1999, 1998 and 1997,
the Fund's portfolio turnover rate was 25.3%, 59.2% and 5.8%, respectively.
Real Estate Securities 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. 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. The Fund
does not emphasize short-term trading profits. For the period ended July 31,
1999, the Fund's portfolio turnover rate was 51.5%.
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>
William N. Westhoff* President President, Treasurer and
Advantus Capital and Director Director, Advantus Capital
Management, Inc. Management, Inc.; Senior Vice
400 Robert Street North President and Treasurer, Minnesota
St. Paul, Minnesota 55101 Life Insurance Company;
Vice President and Director, Robert
Street Energy, Inc.; President,
MCM Funding 1997-1, Inc.; President.
MCM Funding 1998-1, Inc.; Senior Vice
President, Global Investments, American
Express Financial Corporation,
Minneapolis, Minnesota, from August
1994 to October 1997; Senior Vice
President, Fixed Income Management,
American Express Financial
Corporation, Minneapolis, Minnesota,
from November 1989 to July 1994
16
<PAGE>
Frederick P. Feuerherm* Vice President, Vice President, Assistant Secretary
Advantus Capital Director and and Director, Advantus Capital
Management, Inc. Treasurer Management, Inc.;
400 Robert Street North Vice President, Minnesota Life
St. Paul, Minnesota 55101 Insurance Company; Vice President and
Director, MIMLIC Funding, Inc.; Vice
President and Assistant Secretary, MCM
Funding 1997-1, Inc.; Vice President
and Assistant Secretary, MCM Funding
1998-1, Inc.
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
Charles E. Arner Director Retired, Vice Chairman of The First
E-1430 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 the
University of Minnesota University of Minnesota
N309 Elliott Hall
Minneapolis, Minnesota 55455
Michael J. Radmer Secretary Partner with the law firm of
Dorsey & Whitney LLP Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
</TABLE>
- ------------------------------------------------------------
* Denotes directors of the Funds who are "interested persons" (as defined under
the Investment Company Act of 1940) of the Funds.
- ------------------------------------------------------------
Legal fees and expenses are paid to the law firm of which Michael J. Radmer
is a partner. No compensation is paid by either of the Funds to any of its
officers or directors who is affiliated with Advantus Capital.
Each director of the Funds who is not affiliated with Advantus Capital
Management, Inc. ("Advantus Capital") is also a director of the other eleven
investment companies of which Advantus Capital is the investment adviser (12
investment companies in total -- the "Fund Complex"). As of the date hereof,
such directors receive compensation in connection with all such investment
companies which, in the aggregate, is equal to $8,000 per year and $2,000 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 July 31,
1999, each Director not affiliated with Advantus Capital was compensated by
the Funds in accordance with the following table:
<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 $556.44 n/a n/a $20,000
Ellen S. Berscheid $556.44 n/a n/a $20,000
Ralph D. Ebbott $556.44 n/a n/a $20,000
</TABLE>
17
<PAGE>
(1) During the fiscal year ended September 30, 1999, each Director not
affiliated with Advantus Capital received $234.08 from Venture Fund,
$295.67 from Index Fund and $26.69 from Real Estate Securities Fund.
As of July 31, 1999, the directors and executive officers of the Funds did
not own any shares of the Funds, with the exception of Bill Westhoff who owned
5,996 Class A shares of Real Estate Securities Fund (1.00%).
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 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 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 its inception. Ascend
Financial Services, Inc. ("Ascend Financial") acts as the Funds' underwriter.
Both Advantus Capital and Ascend Financial 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 Ascend
Financial is 400 Robert Street North, St. Paul, Minnesota 55101.
CONTROL AND MANAGEMENT OF ADVANTUS CAPITAL AND ASCEND FINANCIAL
18
<PAGE>
Advantus Capital was incorporated in Minnesota in June, 1994, and is a
wholly-owned subsidiary of Minnesota Life Insurance Company ("Minnesota Life").
Minnesota Life is a third-tier subsidiary of a mutual insurance holding company
called Minnesota Mutual Companies, Inc. Minnesota Life was organized in 1880,
and has assets of more than $16.5 billion. Ascend Financial is a subsidiary of
Advantus Capital. William N. Westhoff, President and a Director of each of the
Funds, is President, Treasurer and Director of Advantus Capital. Frederick P.
Feuerherm, Vice President, Treasurer and a Director of each of the Funds, is a
Vice President, Assistant Secretary and Director of Advantus Capital. Richard
W. Worthing is a Vice President and Head of Equities with Advantus Capital.
INVESTMENT ADVISORY AGREEMENT
Advantus Capital acts as investment adviser and manager of the Funds
under Investment Advisory Agreements (the "Advisory Agreements") dated July
17, 1996 for Venture Fund and Index Fund and October 22, 1998 for Real
Estate Securities Fund, each of which became effective on September 4, 1996,
in the case of Venture Fund and Index Fund, and February 3, 1999 in the case
of Real Estate Securities Fund, when the Funds' initial shareholder approved
the Advisory Agreements. 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 13, 1999. The Advisory Agreements will terminate automatically in
the event of their 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:
<TABLE>
<CAPTION>
Advisory Fee as Percentage of
Fund Average Net Assets
---- ------------------
<S> <C>
Venture Fund .80%
Index Fund .34%
Real Estate Securities Fund .75%
</TABLE>
The fees paid by the Funds for investment advisory services during the
fiscal periods ended July 31, 1999, 1998 and 1997 (before Advantus Capital's
absorption of certain expenses, described below) were as follows:
<TABLE>
<CAPTION>
Fund 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
Venture Fund $275,254 $311,606 $125,176
Index Fund 139,480 61,186 13,820
Real Estate
Securities Fund 18,842 n/a n/a
</TABLE>
For this fee, Advantus Capital acts as investment adviser and manager
for the Funds, and in the case of Venture Fund pays the Fund's transfer agent
and shareholder servicing expenses. Index Fund and Real Estate Securities
Fund each pays its own transfer agent and shareholder servicing expenses.
The advisory fees paid by the Venture Fund are partially offset by Advantus
Capital's payment of certain expenses, such as the transfer agent and
shareholder servicing expenses, which expenses are not customarily paid for
by a mutual fund's investment adviser.
19
<PAGE>
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 Ascend Financial receives Rule 12b-1 distribution fees
(see "Payment of Certain Distribution Expenses of the Funds" below), Ascend
Financial 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.
During the fiscal periods ended July 31, 1999, 1998 and 1997, Advantus
Capital voluntarily absorbed certain expenses of the Funds (which do not include
certain Rule 12b-1 fees waived by Ascend Financial) as set forth below:
<TABLE>
<CAPTION>
Fund 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
Venture Fund $38,804 $ 0 $ 7,397
Index Fund 229,663 162,977 70,164
Real Estate
Securities Fund 46,161 n/a n/a
</TABLE>
Distribution Agreement
The Board of Directors of each Fund, on January 13, 1999, 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 Ascend Financial (the "Distribution Agreements"), each dated
October 22, 1998.
During the fiscal periods ended July 31, 1999, 1998 and 1997, the
commissions received by Ascend Financial under the Distribution Agreements with
respect to shares of all classes were as follows:
<TABLE>
<CAPTION>
Fund 1999 1998 1997
---- ---- ---- ----
<S> <C> <C>
Venture Fund $22,764 $174,716 $47,978
Index Fund 149,932 225,676 73,332
Real Estate
Securities Fund 563 n/a n/a
</TABLE>
During the same period Ascend Financial retained from these commissions the
following amounts:
20
<PAGE>
<TABLE>
<CAPTION>
Fund 1999 1998 1997
---- ---- ---- ----
<S> <C> <C>
Venture Fund $1,323 $ 0 $15,344
Index Fund 0 0 16,544
Real Estate
Securities Fund 0 n/a n/a
</TABLE>
The remainder of these commissions was paid to registered representatives
of Ascend Financial or to broker-dealers who have selling agreements with Ascend
Financial.
Each Distribution Agreement may be terminated by the respective Fund or
Ascend Financial 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 Ascend Financial 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, Ascend Financial 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 Funds' shares,
except to the extent that such liability is the result of information which was
obtainable by Ascend Financial only from persons affiliated with the Funds but
not with Ascend Financial.
PAYMENT OF CERTAIN DISTRIBUTION EXPENSES OF THE FUNDS
Each of Venture Fund and Index Fund 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 and/or shareholder
servicing expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940. Real Estate Securities Fund has a single class of shares (Class A) and has
also adopted a Plan of Distribution pursuant to Rule 12b-1. Each of the Funds,
pursuant to its Plans of Distribution, pays fees to Ascend Financial 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>
Venture Fund 0.25% 1.00% 1.00%
Index Fund 0.25% 1.00% 1.00%
Real Estate
Securities Fund 0.25% n/a n/a
</TABLE>
21
<PAGE>
Such fees are used for distribution-related services for Class B and C
shares in Venture Fund and Index Fund and for servicing of shareholder
accounts in connection with Class A, B and C shares in each of the Funds.
A portion of the Rule 12b-1 fees payable with respect to Class B and
Class C shares in Venture Fund and Index Fund equal to .75% of the average daily
net assets attributable to such Class B and Class C shares, constitute
distribution fees designed to compensate Ascend Financial for advertising,
marketing and distributing the shares of the Funds.
The distribution fees paid by Venture Fund and Index Fund may be used by
Ascend Financial 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 Ascend Financial: (a) to
compensate broker-dealers, including Ascend Financial 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 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 (including overhead
expenses) provided jointly by Ascend Financial and any affiliate thereof; and
compensation paid to and expenses incurred by officers, employees or
representatives of Ascend Financial or of other broker-dealers, banks, or
financial institutions.
All of the 12b-1 fees payable with respect to each Fund's Class A shares
and a portion of the Rule 12b-1 fee payable with respect to Class B and Class
C shares of each of Venture Fund and Index Fund, equal to .25% of the
average daily net assets attributable to such Class A, B and Class C shares,
constitutes a shareholder servicing fee designed to compensate Ascend
Financial for the provision of certain services to the holders of Class A, B
and Class C shares.
Amounts expended by the Funds under the Plans are expected to be used for
the implementation by Ascend Financial of a dealer incentive program. Pursuant
to the program, Ascend Financial 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.
Ascend Financial 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, Ascend Financial, 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
22
<PAGE>
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. In particular, each
Plan provides that (1) the Plan will not take effect until it has been
approved by a vote of a majority of the outstanding voting securities of the
Fund, and by a majority vote of both the full board of directors of the Fund
and 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 relating to it (the Independent Directors), (2) the Plan will
continue in effect from one year to another so long as its continuance is
specifically approved annually by a majority vote of both the full board of
directors and the Independent Directors, (3) the Plan may be terminated at
any time, 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,
(4) the Plan may not be amended to increase materially the amount of the fees
payable thereunder unless the amendment is approved by a vote of a majority
of the outstanding voting securities of the Fund, and all material amendments
must be approved by a majority vote of both the full board of directors and
the Independent Directors, (5) while the Plan is in effect, the selection and
nomination of any new Independent Directors is committed to the discretion of
the Independent Directors then in office, and (6) the Fund's underwriter will
prepare and furnish to the board of directors, and the board of directors
will review, at least quarterly, written reports which set forth the amounts
expended under the Plan and the purposes for which those expenditures were
made.
Rule 12b-1(b) provides that any payments made by 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 13, 1999, the directors of the Funds so concluded.
During the fiscal period ended July 31, 1999, each Fund made payments under
its Plans of Distribution applicable to Class A, Class B and Class C Shares as
set forth below (distribution fees waived by Ascend Financial, if any, are shown
in parentheses).
<TABLE>
<CAPTION>
Fund Class A Class B Class C
---- ------- ------- -------
<S> <C> <C> <C> <C>
Venture Fund $84,272 ($38,385) $ 32,683 $ 5,471
Index Fund 56,894 (25,363) 178,100 21,928
Real Estate
Securities Fund 6,281 (3,769) n/a n/a
</TABLE>
The Plans of Distribution could be construed as "compensation plans"
because Ascend Financial 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. Ascend Financial may spend more or
23
<PAGE>
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, Ascend Financial
could be said to have received a profit.
TRANSFER AGENT AND ADMINISTRATIVE SERVICES
Index Fund and Real Estate Securities Fund each pays its own
transfer agent expenses, but Advantus Capital pays all transfer agent
expenses incurred by Venture Fund. Effective October 26, 1998, the Funds'
transfer agent is First Data Investor Services Group, Inc. Prior to that date
the Funds had engaged Minnesota Life to act as their transfer agent, dividend
disbursing agent and redemption agent. For the period from August 1, 1998 to
October 25, 1998, Index Fund paid Minnesota Life $19,223 for such services.
In addition, separate from the investment advisory agreement, each
of the Funds has entered into an agreement with Minnesota Life under which
Minnesota Life provides (i) accounting, legal and other administrative
services and (ii) shareholder servicing to the Funds. Minnesota Life
currently provides administrative services to the Funds at a monthly cost of
$6,200 per Fund for Index and Venture and $5,100 for Real Estate Securities.
During the fiscal period ended July 31, 1999, each Fund paid the following
amounts for such administrative services:
<TABLE>
<CAPTION>
Fund Amount
---- ------
<S> <C>
Venture Fund $56,400
Index Fund 56,400
Real Estate Securities Fund 28,800
</TABLE>
In the case of Venture Fund, Advantus Capital also pays the Fund's
shareholder servicing expenses. Index Fund and Real Estate Securities Fund
pay their own shareholder servicing expenses. Minnesota Life currently
provides shareholder servicing to Index Fund and Real Estate Securities Fund
at a cost of $5 per shareholder account per year.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
In a number of security transactions, it is possible for the Funds 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; the Funds trade in this manner whenever the net
price appears advantageous.
Advantus Capital selects and (where applicable) negotiates commissions
with the brokers who execute the transactions for the Funds. During the
fiscal periods ended July 31, 1999, 1998 and 1997 brokerage
commissions paid were:
<TABLE>
<CAPTION>
Fund 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C>
Venture Fund $114,586 $60,536 $125,176
Index Fund 17,320 14,282 13,820
Real Estate Securities Fund 29,135 n/a 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 of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities, as well as analysis 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 period ended July 31,
1999, the Funds 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:
24
<PAGE>
<TABLE>
<CAPTION>
Aggregate Transactions Commissions Paid on
Fund Directed for Research Directed Transaction
---- --------------------- --------------------
<S> <C> <C>
Venture Fund $5,896,470 $98,289
Index Fund 5,074,387 2,935
Real Estate
Securities Fund 550,781 26,653
</TABLE>
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 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
period ended July 31, 1999 of securities of the Funds' regular brokers or
dealers, or the parents of those brokers or dealers that derive more than 15
percent of their gross revenue from securities-related activities, is
presented below:
25
<PAGE>
<TABLE>
<CAPTION>
Approximate
Value of Securities
Owned at End of
Fund Name of Issuer Fiscal Period
---- -------------- -------------
<S> <C> <C>
Venture Fund ----- -----
Index Fund Merrill Lynch & Company, Inc. $102,094
Lehman Brothers Holdings, Inc. 91,375
Morgan Stanley Dean Witter 228,016
Paine Webber Group, Inc. 96,000
Real Estate
Securities Fund -- --
</TABLE>
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the 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
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 6
YIELD = 2[( ----- +1) -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 the Funds for the 30-day period ended
July 31, 1999 was 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 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>
Yield
-------
Fund Class A Class B Class C
---- ------- ------- -------
<S> <C> <C> <C>
Venture Fund .32% (.26%) -.50% (-.56%) -.50% (-.56%)
Index Fund .52% (.28%) -.31% (-.56%) -.31% (-.56%)
Real Estate
Securities Fund 3.9% (2.8%) n/a (n/a) n/a (n/a)
</TABLE>
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:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
26
<PAGE>
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 Funds for the
periods indicated ending July 31, 1999, were as set forth in the table below.
Average annual total returns quoted assume that the Class A maximum initial
sales charge of 5.5% was in effect at the beginning of each period shown.
The maximum initial sales charge was 5.0% prior to February 1, 1999. 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.
<TABLE>
<CAPTION>
1 YEAR
-------
FUND CLASS A CLASS B CLASS C
- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Venture Fund -9.18% (-9.39%) -9.53% (-9.63%) -4.77% (-4.88%)
Index Fund 12.58% (11.90%) 13.10% (12.54%) 18.03% (17.47%)
Real Estate Securities Fund n/a (n/a) n/a (n/a) n/a (n/a)
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
---------------
FUND CLASS A CLASS B CLASS C
- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Venture Fund(1) 5.58% (5.44%) 5.66% (5.61%) 7.03% (7.00%)
Index Fund(1) 21.11% (20.74%) 21.78% (21.46%) 22.62% (22.29%)
Real Estate Securities Fund(2) -.99% (-1.78%) n/a (n/a) n/a (n/a)
- ---------------
</TABLE>
(1) Class A, Class B and Class C inception was January 31, 1997.
(2) Class A inception date was February 25, 1999.
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 Funds for the
period indicated ended July 31, 1999, was as set forth in the table below. The
cumulative total returns quoted assume that the Class A maximum initial sales
charge of 5.5% was in effect at the inception of Class A shares. The maximum
initial sales charge was 5.0% prior to February 1, 1999. The Funds' investment
adviser and distributor were 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> <C>
Venture Fund(1) 14.53% (14.15%) 14.75% (14.61%) 18.50% (18.42%)
Index Fund(1) 61.37% (60.15%) 63.61% (62.54%) 66.45% (65.33%)
Real Estate Securities Fund(2) -.99% (-1.78%) n/a (n/a) n/a (n/a)
</TABLE>
27
<PAGE>
- ---------------
(1) Class A, Class B and Class C inception date was January 31, 1997.
(2) Class A inception date was February 25, 1999.
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 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 and
has designated 2 billion authorized shares as Class A shares. Venture Fund
and Index Fund have also each designated 2 billion authorized shares as Class
B shares and 2 billion authorized shares as Class C shares. The Funds have
the number of shares outstanding as of July 31, 1999, as set forth below.
<TABLE>
<CAPTION>
Shares Outstanding at July 31, 1999
-----------------------------------
Fund Class A Class B Class C
---- ------- ------- -------
<S> <C> <C> <C>
Venture Fund 2,829,307 280,417 41,829
Index Fund 1,436,954 1,372,193 165,340
Real Estate
Securities Fund 596,667 n/a n/a
</TABLE>
As of July 31, 1999, 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>
Venture Fund 2,516,527 79.9%
Minnesota Life and affiliates*
Index Fund 515,480 17.3%
Minnesota Life and affiliates*
Real Estate Securities Fund 519,998 87.2%
Minnesota Life and affiliates*
</TABLE>
* 400 Robert Street North, St. Paul, Minnesota 55101.
HOW TO BUY SHARES
Each Fund's shares may be purchased at the public offering price from
Ascend Financial, and from certain other broker-dealers. Ascend Financial
reserves the right to reject any purchase order. Shares of the Funds may be
purchased at a price equal to their respective net asset value.
28
<PAGE>
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. SHAREHOLDERS WHO HOLD PREVIOUSLY ISSUED
CERTIFICATES REPRESENTING ANY OF THEIR SHARES WILL NOT BE ALLOWED TO REDEEM SUCH
CERTIFICATED SHARES BY TELEPHONE.
ALTERNATIVE PURCHASE ARRANGEMENTS
Real Estate Securities Fund offers a single class of shares (Class A).
Venture Fund and Index Fund offer investors the choice among three 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.
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. Other investors in Venture Fund and Index Fund should consider Class
B or Class C shares because all of the purchase price is invested
immediately. Investors who expect to hold shares for relatively shorter
periods of time may prefer Class C shares because such shares may be redeemed
at any time without payment of a contingent deferred sales charge. Investors
who expect to hold shares longer, however, may choose Class B shares because
such shares convert to Class A shares sooner than do Class C shares and thus
pay the higher Rule 12b-1 fee for a shorter period.
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,
but a deferred sales charge will be imposed if such shares are sold within
one year after the date of purchase. Orders for Class B or Class C shares in
Venture Fund and Index Fund for $1,000,000 or more will be treated as orders
for Class A shares or declined.
PURCHASE BY CHECK
New investors may purchase shares of the Fund by completing an account
application and sending it, together with a check payable to the Fund, directly
to First Data Investors Services Group, Inc. ("First Data"), the Funds' transfer
agent, at Advantus Funds Group, P.O. Box 9767, Providence, Rhode Island
02940-5059. Additional purchases may be made at any time by mailing a check,
payable to the Fund, to the same address. Checks for additional purchases
should be identified with the appropriate account number. Purchase orders may
also be submitted through Ascend Financial or other broker-dealers authorized to
sell shares of the Fund.
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 Minnesota Life, through its Advantus Shareholder Services
division, at 1-800-665-6005 for instructions. Promptly after making an initial
purchase by wire, an investor should complete an account application and mail it
to Advantus Funds Group, P.O. Box 9767, Providence, Rhode Island 02940-5059.
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.
TIMING OF PURCHASE ORDERS
An order in proper form for the purchase of shares of the Fund received by
the Fund prior to the close of normal trading on the New York Stock Exchange
("NYSE"), which is generally 3:00 p.m. Central Time, will be effected at the
price next determined on the date received by First Data. Orders received after
the close of the NYSE will be effected at the price next determined on the next
business day.
29
<PAGE>
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 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 close
of normal trading on the New York Stock Exchange (as of the date of this
Statement of Additional Information 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.
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 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
CLASS A SHARES
The public offering price of Class A shares of each 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. Ascend Financial receives all
applicable sales charges. The Fund receives the net asset value. The current
sales charges are:
30
<PAGE>
<TABLE>
<CAPTION>
Sales Charge as a
Percentage of:
Net Amount Paid to Broker-
Offering Amount Dealers as a Percentage of
Value of Total Investment Price Invested Offering Price:
------------------------- ----- -------- ---------------
<S> <C> <C> <C>
Less than $50,000 5.5% 5.82% 5.00%
$50,000 but less than $100,000 4.5 4.71 4.00
$100,000 but less than $250,000 3.5 3.63 3.00
$250,000 but less than $500,000 2.5 2.56 2.25
$500,000 but less than $1,000,000 2.0 2.04 1.75
$1,000,000 and over (1) 0 0 1.00*
</TABLE>
(1) A FESC will not be assessed for purchases of Class A shares of at least $1
million, but a contingent deferred sales charge of 1.00% will be imposed if such
shares are sold within one year after the date of purchase.
* These payments are paid by Ascend Financial or one of its affiliates, at its
own expense, and not by the Fund or its shareholders.
The sales charge applicable to an initial investment in the Fund depends on
the offering price of the investment. The sales charge applicable to subsequent
investments, however, depends on the offering price of that investment plus the
current net asset value of the investor's previous investments in the Fund. For
example, if an investor makes an initial investment in Class A shares of Venture
Fund with an offering price of $40,000 the investor will pay a sales charge
equal to 5.5% of the $40,000 investment, but if an investor already owns Class A
shares of Venture Fund with a current net asset value of $40,000 and invests in
additional Class A shares of Horizon Fund with an offering price of $10,000 the
investor will pay a sales charge equal to 4.5% of the additional $10,000 since
the total investment in the Fund would then be $50,000.
CLASS B SHARES
Class B shares of Venture Fund and Index Fund are sold without an
initial sales charge so that the Fund receives the full amount of the
investor's purchase. However, a contingent deferred sales charge ("CDSC") of
up to 5% will be imposed if shares are redeemed within six years of purchase.
For additional information, see "Redemptions" below. Class B 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 B
shares are subject to higher Rule 12b-1 fees as described below. The amount
of the CDSC will depend on the number of years since the purchase was made,
the amount of shares originally purchased and the dollar amount being
redeemed. The amount of the applicable CDSC and the holding period prior to
conversion are determined in accordance with the following table:
<TABLE>
<CAPTION>
Shares Convert
to Class A in
CDSC Applicable in Year the Month
----------------------- After
Shares Purchased in an Amount 1 2 3 4 5 6 Expiration of
----------------------------- - - - - - - -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than $50,000 5.0% 4.5% 3.5% 2.5% 1.5% 1.5% 84 months
$50,000 but less than $100,000 4.5 3.5 2.5 1.5 1.5 0 76 months
$100,000 but less than $250,000 3.5 2.5 1.5 1.5 0 0 60 months
$250,000 but less than $500,000 2.5 1.5 1.5 0 0 0 44 months
$500,000 but less than $1,000,000 1.5 1.5 0 0 0 0 28 months
</TABLE>
Proceeds from the CDSC are paid to Ascend Financial and are used to defray
expenses related to providing distribution-related services to the Fund in
connection with the sale of Class B shares, such as the payment of compensation
to selected broker-dealers, and for selling Class B shares. The combination of
the CDSC and the Rule 12b-1 fee enables the Fund to sell the Class B shares
31
<PAGE>
without deduction of a sales charge at the time of purchase. Although Class B
shares are sold without an initial sales charge, Ascend Financial pays a sales
commission to broker-dealers, and to registered representatives of Ascend
Financial, who sell Class B shares. The amount of this commission may differ
from the amount of the commission paid in connection with sales of Class A
shares. The higher Rule 12b-1 fee will cause Class B shares to have a higher
expense ratio and to pay lower dividends than Class A shares. Ascend Financial
pays other broker-dealers for the sale of Class B shares in accordance with the
following schedule:
<TABLE>
<CAPTION>
Amount Paid to Broker-Dealers as a
Shares Purchased in an Amount Percentage of Offering Price:
----------------------------- -----------------------------
<S> <C>
Less than $50,000 4.17%
$50,000 but less than $100,000 3.75
$100,000 but less than $250,000 2.92
$250,000 but less than $500,000 2.08
$500,000 but less than $1,000,000 1.25
</TABLE>
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 B 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 subject to any
FESC or CDSC. Class B shares acquired by exchange from Class B shares of
another Advantus Multiple Class Funds will convert into Class A shares based on
the time of the initial purchase. Purchased Class B shares ("Purchased B
Shares") will convert after the specified number of months following the
purchase date. All Class B shares in a shareholder's account that were acquired
through the reinvestment of dividends and distributions ("Reinvestment B
Shares") will be held in a separate sub-account. Each time any Purchased B
Shares convert to Class A shares, a PRO RATA portion (based on the ratio that
the total converting Purchased B Shares bears to the shareholder's total
converting and non-converting Purchased B Shares immediately prior to the
conversion) of the Reinvestment B Shares then in the sub-account will also
convert to Class A shares.
The conversion of Class B 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 B shares to Class A
shares will not occur if such ruling or opinion is not available. In such
event, Class B shares would continue to be subject to higher expenses than
Class A shares for an indefinite period.
CLASS C SHARES
Class C shares of Venture Fund and Index Fund are sold without an
initial sales charge so that the Fund receives the full amount of the
investor's purchase. Unlike Class B shares, however, no CDSC is imposed when
Class C shares are redeemed. 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), and are subject to such higher
fees for a longer period than are Class B shares because of a longer holding
period prior to conversion. The applicable holding period prior to
conversion is determined in accordance with the following table:
32
<PAGE>
<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 longer period during which the Rule 12b-1 fee is charged enables the
Fund to sell the Class C shares without deduction of a sales charge at the time
of purchase and without imposing a CDSC at redemption. Ascend Financial does
not pay a sales commission to broker-dealers, or to registered representatives
of Ascend Financial, 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.
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 subject
to any FESC or CDSC. Class C shares acquired by exchange from Class C shares of
another Advantus Multiple Class 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.
OTHER PAYMENTS TO BROKER-DEALERS
Broker-dealers selling Class A, Class B and Class C shares of the Funds
will receive a shareholder servicing fee (Rule 12b-1 fee) equal, on an annual
basis, to .25% of the net asset values attributable to Class A, Class B and
Class C shares. All such shareholder servicing fees are paid quarterly in
arrears beginning with the second year after the sale of the shares to which
such fees are attributable (i.e., the first payment is at the end of the
fifteenth month). Rule 12b-1 distribution fees will also be paid quarterly in
arrears to broker-dealers selling Class C shares equal, on an annual basis,
to .75% of the net asset values attributable to such Class C shares.
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 heading
"Buying and Selling Shares."
33
<PAGE>
The portfolio securities in which the Funds invest fluctuate in value, and
hence the net asset value per share of each Fund also fluctuates.
On July 31, 1999 the net asset value and public offering price per share
for Class A, Class B and Class C shares of each of the Funds were calculated
as set forth below.
Venture Fund
CLASS A SHARES
Net Assets ($31,682,899) = Net Asset Value Per Share ($11.20)
------------------------------
Shares outstanding (2,829,307)
To obtain the maximum public offering price per share, the Fund's
maximum sales charge must be added to the net asset value obtained above:
$11.20 = Public Offering Price Per Share ($11.85)
------
.945 (1)
CLASS B SHARES
Net Assets ($3,115,233) = Net Asset Value and Public
---------------------------- Offering Price Per Share ($11.11)
Shares outstanding (280,417)
CLASS C SHARES
Net Assets ($466,587) = Net Asset Value and Public
--------------------------- Offering Price Per Share ($11.15)
Shares outstanding (41,829)
Index Fund
CLASS A SHARES
Net Assets ($25,498,132) = Net Asset Value Per Share ($17.74)
------------------------------
Shares outstanding (1,436,954)
To obtain the maximum public offering price per share, the Fund's
maximum sales charge must be added to the net asset value obtained above:
$17.74 = Public Offering Price Per Share ($18.77)
------
.945 (1)
CLASS B SHARES
Net Assets ($24,202,406) = Net Asset Value and Public
---------------------------- Offering Price Per Share ($17.64)
Shares outstanding (1,372,193)
CLASS C SHARES
Net Assets ($2,909,973) = Net Asset Value and Public
---------------------------- Offering Price Per Share ($17.60)
Shares outstanding (165,340)
Real Estate Securities Fund
CLASS A SHARES
Net Assets ($6,112,909) = Net Asset Value Per Share ($10.25)
----------------------------
Shares outstanding (596,667)
To obtain the maximum public offering price per share, the Fund's maximum
sales charge must be added to the net asset value obtained above:
$10.25 = Public Offering
------ Price Per Share ($10.85)
.945
(1) Effective February 1, 1999, the maximum FESC was increased to 5.5%.
REDUCED SALES CHARGES
Special purchase plans are enumerated in the text of each Fund's Prospectus
under "Buying and Selling Shares - Reducing Sales Charges" and are fully
described below.
34
<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
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 Ascend Financial, through his or her dealer or otherwise, that he or
she is entitled to the discount.
LETTER OF INTENT
The applicable sales charge for purchases of Class A shares 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 Ascend Financial 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 within that time. The 13-month period is
measured from the date the Letter of Intent is approved by Ascend Financial, or
at the purchaser's option, it may be made retroactive 90 days, in which case
Ascend Financial 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 shares currently held in Real
Estate Securities Fund and the net asset value of Class A, Class B and Class
C shares currently held in all Advantus Multiple Class 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. Shares of Real Estate
Securities Fund and Class A, Class B and Class C shares of all the Advantus
Multiple Class 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 Class A sales charges at the end of the period in the event the
investor fails to purchase the amount indicated. This is accomplished by
holding 5.5% 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 Ascend Financial 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 Ascend Financial on a timely basis, Ascend Financial will redeem the
appropriate number of shares, and then release or deliver any remaining shares
in the escrow account. 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.
COMBINING PURCHASES
With respect to Real Estate Securities Fund and each of the Advantus
Multiple Class 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.
GROUP PURCHASES
An individual who is a member of a qualified group may also purchase
shares of the Real Estate Securities Fund and the Advantus Multiple Class
Funds 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,
35
<PAGE>
and (iii) satisfies uniform criteria which enable Ascend Financial 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 Ascend Financial, 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 Ascend Financial, and must seek, upon request, to arrange
for payroll deduction or other bulk transmission of investments to the Funds.
WAIVER OF SALES CHARGES FOR CERTAIN SALES OF CLASS A SHARES
Directors and officers of Advantus Capital, Ascend Financial, the Funds,
Minnesota Life, or any of Minnesota Life'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 descendants of such
persons, Minnesota Life and its affiliates themselves, advisory clients of
Advantus Capital, 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 Ascend Financial, and certain accounts
sold by registered investment advisers who charge clients a fee for their
services may purchase Class A shares of the Advantus Multiple Class 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.
EXCHANGE AND TRANSFER OF FUND SHARES
A shareholder can exchange some or all of his or her Class A, Class B
and Class C shares in the Advantus Multiple Class Funds, or shares in Real
Estate Securities Fund, including shares acquired by reinvestment of
dividends, for shares of the same class of any of the other Advantus Multiple
Class Funds or Real Estate Securities Fund (provided such Fund is available
in the shareholder's State), 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 relative net asset values without the imposition of any
additional sales load. When Class B shares acquired through the exchange are
redeemed, the shareholder will be treated as if no exchange took place for
the purpose of determining the contingent deferred sales charge ("CDSC")
period and applying the CDSC.
Class A, Class B and Class C shares may also be exchanged for shares of the
Money Market Fund at net asset values. No CDSC will be imposed at the time of
any such exchange of Class B shares; however, the Money Market Fund shares
acquired in any such exchange will remain subject to the CDSC otherwise
applicable to such Class B shares as of the date of exchange, and the period
during which such shares of Money Market Fund are held will not be included in
the calculation of the CDSC due at redemption of such Money Market Fund shares
or any reacquired Class B shares, except as follows. Ascend Financial is
currently waiving the entire Rule 12b-1 fee due from Money Market Fund. In the
event Ascend Financial begins to receive any portion of such fee, either (i) the
time period during which shares of Money Market Fund acquired in exchange for
Class B shares are held will be included in the calculation of the CDSC due at
redemption, or (ii) such time period will not be included but the amount of the
CDSC will be reduced by the amount of any Rule 12b-1 payments made by Money
Market Fund with respect to those shares.
Shares of Money Market Fund acquired in an exchange for Class A, Class B or
Class C shares from any of the Funds may also be re-exchanged at relative net
asset values for Class A, Class B 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.
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
telephone call, unless the shareholder has elected on the account application
36
<PAGE>
not to have telephone transaction privileges. Up to twelve exchanges each
calendar 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, the
Fund 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. 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
"Distributions and Tax Status" 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.
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 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.
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment is automatically credited to an open account
maintained for the shareholder by First Data, the Funds' transfer agent. 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 First Data 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.
The costs of maintaining the open account system are paid by Advantus
Capital in the case of Venture Fund. The costs of maintaining the open
account system for each of Index Fund and Real Estate Securities 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.
AUTOMATIC INVESTMENT PLAN
Each Fund provides a convenient, voluntary method of purchasing shares in
the Fund through its "Automatic Investment Plan" (the "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 each of the Advantus Funds other than Money Market Fund, to
employ the principle of dollar cost averaging, described below.
By acquiring Fund shares on a regular basis pursuant to the Automatic
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. There is no guarantee, however, that the automatic investment plan
will always result in a lower cost per share compared to other investment
programs. 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.
37
<PAGE>
A Plan may be opened by indicating an intention to invest $25 or more
monthly for at least one year. Investors 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 the Fund
in writing to pay them in cash. The Fund 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 participant's account. If the
group is reduced to less than five participants, the minimums set forth under
"Automatic Investment Plan" shall apply. The Plan may be terminated by the Fund
or the shareholder at any time upon reasonable notice.
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.
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
Ascend Financial.
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.
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. Withdrawal payments for Class A shares of Real Estate
Securities Fund and the Advantus Multiple Class Funds purchased in amounts of
$1 million or more, and for Class B shares of Advantus Multiple Class Funds,
may also be subject to a CDSC. As a result, a shareholder should consider
whether a Systematic Withdrawal Plan is appropriate. It may be appropriate
for the shareholder to consult a tax adviser before establishing such a plan.
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 Ascend Financial.
38
<PAGE>
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.
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, other than by reinvestment of distributions, it should be
understood that, in the case of 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 an "Automatic Withdrawal Plan" and a "Systematic
Investment Plan" in effect simultaneously as it is not, as explained above,
advantageous to do so.
REDEMPTIONS
Registered holders of shares of the Funds 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. A contingent deferred sales charge may be
applicable upon redemption of certain Class A shares and Class B shares. Both
share certificates and stock powers, if any, tendered in redemption must be
endorsed and executed exactly as the Fund shares are registered. 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 the Fund by facsimile (FAX) transmission. The Fund's FAX number is
(508) 871-3560.
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
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is valued. If the recipient sold such securities, he or she probably would
incur brokerage charges. Each 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.
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 SEC, by order, so permits; provided that applicable rules and regulations of
the SEC shall govern as to whether the conditions prescribed in (b) or (c)
exist.
SIGNATURE GUARANTEE
In order to protect both shareholders and the Funds against fraudulent
orders, a shareholder signature is required to be guaranteed in certain cases.
No signature guarantee is required if the redemption proceeds are less than
$50,000 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 $50,000.
A signature guarantee is required, however, if (i) the redemption proceeds
are $50,000 or more, (ii) the redemption proceeds are to be paid to someone
other than the registered holder, (iii) the redemption proceeds are to be mailed
to an address other than the registered shareholder's address, (iv) within the
30-day period prior to receipt of the redemption request, instructions have been
received to change the shareholder's address of record, or, in the case of
redemptions to be paid by wire, instructions have been received within such
period to change the shareholder's bank wire instructions, (v) the shares are
requested to be transferred to the account of another owner, or (vi) in the case
of plans, trusts, or other tax-exempt organizations, the redemption request is
not from a pre-authorized trustee. The Fund reserves the right to require
signature guarantees on all redemptions.
A signature guarantee must be provided by an eligible guarantor
institution. A notarized signature is not sufficient. Eligible guarantors
include (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.
CONTINGENT DEFERRED SALES CHARGE
The CDSC applicable upon redemption of Class A shares purchased in
amounts of $1 million or more and Class B shares will be calculated on an
amount equal to the lesser of the net asset value of the shares at the time
of purchase or their net asset value at the time of redemption. No charge
will be imposed on increases in net asset value above the initial purchase
price. In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions or on shares held
for longer than the applicable CDSC period. See "Sales Charges - Class B
Shares" above.
In determining whether a CDSC is payable with respect to any redemption
of Class B shares, the calculation will be determined in the manner that
results in the lowest rate being charged.
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The CDSC does not apply to: (1) redemption of Class B shares in connection
with the automatic conversion to Class A shares; (2) redemption of shares when a
Fund exercises its right to liquidate accounts which are less than the minimum
account size; and (3) redemptions in the event of the death or disability of the
shareholder within the meaning of Section 72(m)(7) of the Internal Revenue Code.
The CDSC will also not apply to certain exchanges. See "Exchange and Transfer
of Fund Shares," above.
TELEPHONE REDEMPTION
The Fund's shareholders have this privilege automatically, unless they have
elected on the account application not to have such privilege, and may redeem
shares by calling Advantus Shareholder Services at 1-800-665-6005 (see
"Telephone Transactions"). A telephone redemption request will not be honored,
however, if the shareholder's address of record or bank wire instructions have
been changed without a guarantee of the shareholder's signature (see
"Signature Guarantee" above) within the 30-day period prior to receipt of the
redemption request. The maximum amount which may be redeemed by telephone is
$50,000. The proceeds will be sent by check to the address of record for the
account. If the amount is $500 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. The Fund 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 from
the purchase date.
FUND'S RIGHT TO REDEEM SMALL ACCOUNTS
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 $150. 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.
REINSTATEMENT PRIVILEGE
The Prospectus for each of the Funds describes redeeming shareholders'
reinstatement privileges in "Buying and Selling Shares" in the Funds'
Prospectus. Written notice from persons wishing to exercise this
reinstatement privilege must be received by Ascend Financial 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 "Distributions and Tax Status" below 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
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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 "Distributions and Tax Status" below regarding the taxation of
capital gains.
TELEPHONE TRANSACTIONS
Shareholders of the Fund are permitted to exchange or redeem the Fund's
shares by telephone. See "Exchange and Transfer of Fund Shares" and
"Redemptions" for further details. The privilege to initiate such transactions
by telephone is made available automatically unless the shareholder elects on
the account application not to have such privilege.
Shareholders, or persons authorized by shareholders, may initiate telephone
transactions by telephoning Advantus Shareholder Services, toll free, at
at (800) 665-6005. Automated service is available 24 hours a day, and service
representatives are available Monday through Friday, from 8:00 a.m. to 4:45 p.m.
(Central Time). Telephone transaction requests received after 3:00 p.m.
(Central Time) will be treated as received the next business day. The maximum
amount which may be redeemed by telephone is $50,000. During periods of marked
economic or market changes, shareholders may experience difficulty in
implementing a telephone exchange or redemption due to a heavy volume of
telephone calls. In such a circumstance, shareholders should consider
submitting a written request while continuing to attempt a telephone exchange or
redemption. The Fund reserves the right to modify, terminate or impose charges
upon the telephone exchange and redemption privileges upon 60 days' prior notice
to shareholders.
The Fund will not be liable for following instructions communicated by
telephone which it reasonably believes to be genuine; provided, however, that
the Fund 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 number and a
personal identifying number, and providing written confirmation of such
transactions.
THE STANDARD & POOR'S LICENSE
Standard & Poor's ("S&P") is a division of The McGraw-Hill Companies, Inc.
S&P has trademark rights to the marks "Standard & Poor's-Registered Trademark-,"
"S&P-Registered Trademark-," "S&P 500-Registered Trademark-," "Standard & Poor's
500" and "500" and has licensed the use of such marks by the Index Fund.
Index Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes
no representation or warranty, express or implied, to the owners of the Index
Fund or any member of the public regarding the advisability of investing in
securities generally or in the Index Fund particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship to
the Index Fund is the licensing of certain trademarks and trade names of S&P and
of the S&P 500 Index which is determined, composed and calculated by S&P without
regard to the Fund. S&P has no obligation to take the needs of the Index Fund
or the owners of the Fund into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the net asset value or public offering
price of the Index Fund nor is S&P a distributor of the Fund. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Index Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN, NOR DOES S&P HAVE ANY LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE INDEX FUND, OWNERS OF THE FUND, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
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<PAGE>
OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
DISTRIBUTIONS AND TAX STATUS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The policy of the Funds has been to pay dividends from net investment
income quarterly. Any net realized capital gains are generally distributed once
a year, during December. Distributions paid by the Funds, if any, with respect
to Class A, Class B 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 B and Class C shares will be borne
exclusively by such shares. The per share distributions on Class B and 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 B and Class C shares.
Any dividend payments or net capital gains distributions made by the
Funds 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 to pay dividends in cash
may be made on the application form, or at any time by letter.
Upon written request to a Fund, a shareholder may also elect to have
dividends from the Fund invested without sales charge in shares of Advantus
Money Market Fund or shares of the same class of another of the Advantus
Funds at the net asset value of such other Fund on the payable date for the
dividends being distributed (subject to the applicable sales charge). To use
this privilege of investing dividends from a Fund in shares of another of the
Funds, shareholders must maintain a minimum account value of $250 in both the
Fund paying the dividends and the other Fund in which dividends are
reinvested.
TAXATION - GENERAL
The following is a general summary of certain federal tax considerations
affecting the Funds and their shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Funds or their shareholders,
and the discussion here is not intended as a substitute for careful tax
planning.
During the year ended July 31, 1999 each 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, each Fund will not be liable for federal income taxes to the
extent it distributes its taxable income to its shareholders.
Distributions of investment company taxable income from a 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, generally is
taxable to shareholders as long-term capital gain, regardless of the length of
time a shareholder has held his or her 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. Long-term capital gains of individuals are taxed at
a maximum rate of 20%, and the highest marginal regular tax rates on ordinary
income for individuals is 39.6%.
Some or all of the dividend distributions from each Fund are expected to
qualify for the 70% dividend received deduction for corporations, except that
dividend distributions from the Real Estate Securities Fund attributable to
dividends that the Fund receives from REITs will not qualify for such
dividend received deduction for corporations.
Prior to purchasing shares of a Fund, prospective shareholders (except
for tax qualified retirement plans) should consider the impact of dividends or
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capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or 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.
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.
Shareholders of the Fund receive an annual statement detailing federal tax
information. Distributions by the Funds, 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.
The Funds are required by federal law to withhold 31% of reportable
payments (including dividends, capital gain distributions, and redemptions) paid
to certain accounts whose owners have not complied with IRS regulations. In
order to avoid this backup withholding requirement, each shareholder will be
asked to certify on the shareholder's account application that the social
security or taxpayer identification number provided is correct and that the
shareholder is not subject to backup withholding for previous underreporting to
the IRS.
Some of the investment practices that may be employed by the Funds will be
subject to special provisions that, among other things, may defer the use of
certain losses of such Funds, affect the holding period of the securities held
by the Funds and affect the character of the gains or losses realized. These
provisions may also require the Funds to mark-to-market some of the positions in
their respective portfolios (i.e., treat them as closed out) or to accrue
original discount, both of which may cause such Funds to recognize income
without receiving cash with which to make distributions in amounts necessary to
satisfy the distribution requirements for qualification as a regulated
investment company and for avoiding income and excise taxes. Accordingly, in
order to make the required distributions, a Fund may be required to borrow or
liquidate securities. Each Fund will monitor its transactions and may make
certain elections in order to mitigate the effect of these rules and prevent
disqualification of the Funds as regulated investment companies.
The Real Estate Securities Fund may invest in REITs that hold residual
interests in real estate mortgage investment conduits ("REMICs"). Under Treasury
regulations that have not yet been issued, but may apply retroactively, a
portion of the Fund's income from a REIT that is attributable to the REIT's
residual interest in a REMIC (referred to in the Code as an "excess inclusion")
will be subject to federal income tax in all events. These regulations are also
expected to provide that excess inclusion income of a regulated investment
company, such as the Fund, will be allocated to shareholders of the regulated
investment company in proportion to the dividends received by them with the same
consequences as if the shareholders held the related REMIC residual interest
directly. In general, excess inclusion income allocated to shareholders (i)
cannot be offset by net operating losses (subject to a limited exception for
certain thrift institutions) and (ii) will constitute unrelated business taxable
income to entities (including a qualified pension plan, an individual retirement
account, a 401K plan, a Keogh plan or other tax-exempt entity) subject to tax on
unrelated business income, thereby potentially requiring such an entity that is
allocated excess inclusion income, and otherwise might not be required to file a
tax return, to file a tax return and pay tax on some income. In addition, if at
any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year thatis allocable to the
disqualified organization, multiplied by the highest Federal income tax rate
imposed on corporations.
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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 ownership of Fund shares.
FINANCIAL STATEMENTS
Each Funds' financial statements for the fiscal year ended July 31, 1999,
including the financial highlights for each of the respective periods presented,
appearing in such Fund's Annual Report to Shareholders, and the report thereon
of such Fund's independent auditors, KPMG LLP, also appearing
therein, are incorporated by reference in this Statement of Additional
Information.
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APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
BOND RATINGS
Moody's Investors Service, Inc. describes its six 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.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
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 six highest ratings for
corporate bonds and mortgage-related securities as follows:
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.
A-1
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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.
B. Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
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 issuer has a
strong position within the industry. The reliability and quality of
management are unquestioned.
A-2
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PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Wholly-owned subsidiary of Minnesota Mutual Companies, Inc.:
Securian Holding Company (Delaware)
Capitol City Property Management, Inc.
Wholly-owned subsidiary of Securian Holding Company:
Securian Financial Group, Inc. (Delaware)
Wholly-owned subsidiary of Securian Financial Group, Inc.
Minnesota Life Insurance Company
Wholly-owned subsidiaries of Minnesota Life Insurance Company:
Advantus Capital Management, Inc.
HomePlus Insurance Company
Northstar Life Insurance Company (New York)
The Ministers Life Insurance Company
Robert Street Energy, Inc.
Personal Finance Company (Delaware)
Enterprise Holding Corporation
HomePlus Insurance Agency, Inc.
Open-end registered investment company offering shares solely to separate
accounts of Minnesota Life Insurance Company:
Advantus Series Fund, Inc.
Wholly-owned subsidiary of Advantus Capital Management, Inc.:
Ascend Financial Services, Inc.
Wholly-owned subsidiaries of Ascend Financial Services, Inc.:
MIMLIC Insurance Agency of Massachusetts, Inc. (Massachusetts)
MIMLIC Insurance Agency of Texas, Inc. (Texas)
Ascend Insurance Agency of Nevada, Inc. (Nevada)
Ascend Insurance Agency of Oklahoma, Inc. (Oklahoma)
<PAGE>
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Financial Ink Corporation
Oakleaf Service Corporation
Concepts in Marketing Research Corporation
Concepts in Marketing Services Corporation
Lafayette Litho, Inc.
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MCM Funding 1997-1, Inc.
MCM Funding 1998-1, Inc.
MIMLIC Venture Corporation
Ministers Life Resources, Inc.
Wedgewood Valley Golf, Inc.
Wholly-owned subsidiary of HomePlus Insurance Agency, Inc.:
HomePlus Insurance Agency of Texas, Inc. (Texas)
Majority-owned subsidiary of Ascend Financial Services, Inc.:
MIMLIC Insurance Agency of Ohio, Inc. (Ohio)
Majority-owned subsidiaries of Minnesota Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Advantus Venture Fund, Inc.
Advantus Real Estate Securities Fund, Inc.
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Less than majority owned, but greater than 25% owned, subsidiaries of Minnesota
Life Insurance Company:
Advantus Cornerstone Fund, Inc.
Advantus Index 500 Fund, Inc.
Less than 25% owned subsidiaries of Minnesota Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Money Market Fund, Inc.
Advantus Bond Fund, Inc.
Unless indicated otherwise parenthetically, each of the above corporations is a
Minnesota corporation.
ITEM 25. 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
<PAGE>
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 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
<PAGE>
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 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
Directors and Officers Office with
of Investment Adviser Investment Adviser Other Business Connections
- --------------------- ------------------ --------------------------
<S> <C> <C>
William N. Westhoff President, Treasurer Vice President and Director,
and Director Robert Street Energy, Inc.; Senior Vice
President and Treasurer, Minnesota Life
Insurance Company; President, MCM Funding
1997-1, Inc.; President, MCM Funding 1998-1,
Inc.
Frederick P. Feuerherm Vice President, Vice President, Minnesota
Assistant Secretary Life Insurance Company;
and Director Vice President and Director, MIMLIC Funding,
Inc.; Vice President and Assistant
Secretary, MCM Funding 1997-1, Inc.; Vice
President and Assistant Secretary, MCM
Funding 1998-1, Inc.
Guy M. de Lambert Vice President, Second Vice President,
Secretary and Minnesota Life Insurance
Director Company; President, Secretary and Director,
Personal Finance Company; President and
Director, Wedgewood Valley Golf, Inc.;
President and Director, MIMLIC Funding,
Inc.; President, Secretary and Director,
Robert Street Energy, Inc.; Vice President
and Secretary, MCM Funding 1997-1, Inc.;
Vice President and Secretary, MCM Funding
1998-1, Inc.
Lynne M. Mills Vice President Second Vice President, Minnesota Life
Insurance Company; Vice President and
Director, Robert Street Energy, Inc.; Vice
President, MCM Funding 1997-1, Inc.; Vice
President, MCM Funding 1998-1, Inc.
Dianne Orbison Vice President Second Vice President, Minnesota Life
Insurance Company; Vice President and
Director, MCM Funding 1997-1, Inc.; Vice
President and Director, MCM Funding 1998-1,
Inc.
Richard W. Worthing Vice President and Vice President, MCM Funding
Head of Equities 1997-1, Inc.; Vice President, MIMLIC
Funding, Inc.; Vice President, MCM Funding
1998-1, Inc.; Second Vice President,
Minnesota Life Insurance Company
James P. Tatera Vice President, Second Vice President,
Equity Portfolio Minnesota Life Insurance
Manager Company; Vice President, MIMLIC Funding,
Inc.; Vice President and Assistant
Secretary, MCM Funding 1997-1, Inc.; Vice
President and Assistant Secretary, MCM
Funding 1998-1, Inc.
<PAGE>
<S> <C> <C>
Marilyn Froelich Vice President and Vice President, MCM Funding
Director - Insurance 1997-1, Inc.; Vice
Asset Advisory President, MCM Funding 1998-1, Inc.;
Director, Investment Advisory, Minnesota
Life Insurance Company
Loren Haugland Vice President and Vice President, MCM Funding
Insurance Asset 1997-1, Inc.; Vice
Advisory President, MCM Funding 1998-1, Inc.; Senior
Investment Officer, Minnesota Life Insurance
Company
Thomas A. Gunderson Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Investment Officer, Equities, Minnesota Life
Insurance Company
Kent R. Weber Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Investment Officer, Total Return, Minnesota
Life Insurance Company
Jeffrey R. Erickson Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Investment Officer, Equities, Minnesota Life
Insurance Company
Gary A. Aster Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Investment Officer, Equities, Minnesota Life
Insurance Company
Wayne R. Schmidt Vice President Secretary and Treasurer, MIMLIC Funding,
Inc.; Assistant Secretary and Treasurer,
Robert Street Energy, Inc.; Vice President
and Secretary, MIMLIC Imperial Corporation;
Vice President and Assistant Secretary, MCM
Funding 1997-1, Inc.; Vice President and
Assistant Secretary, MCM Funding 1998-1,
Inc.; Investment Officer - Total Return,
Minnesota Life Insurance Company
Joseph R. Betlej Vice President Vice President, Secretary and Director,
Wedgewood Valley Golf, Inc.; Vice President
and Secretary, MIMLIC Venture Corporation;
Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Senior Investment Officer - Real Estate,
Minnesota Life Insurance Company
Erica Bergsland Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Senior Investment Officer - Mortgage,
Minnesota Life Insurance Company
<PAGE>
<S> <C> <C>
Thomas G. Meyer Vice President Vice President, MCM Funding 1997-1, Inc.;
Vice President, MCM Funding 1998-1, Inc.;
Director, Marketing Development, Minnesota
Life Insurance Company
Gary Kleist Financial Vice Director, Investment
President Operations, Minnesota Life Insurance
Company; Vice President, MCM Funding 1997-1,
Inc.; Vice President, MCM Funding, 1998-1,
Inc.
Sean O'Connell Vice President Director, Real Estate Research, Minnesota
Life Insurance Company; Vice President, MCM
Funding 1997-1, Inc.; Vice President, MCM
Funding 1998-1, Inc.
John Leiviska Vice President Senior Investment Officer - Fixed Income,
Minnesota Life Insurance Company; Vice
President, MCM Funding 1997-1, Inc.; Vice
President, MCM Funding 1998-1, Inc.
Annette Masterson Vice President Director, Fixed Income Research, Minnesota
Life Insurance Company; Vice President, MCM
Funding 1997-1, Inc.; Vice President, MCM
Funding 1998-1, Inc.
Mark L. Henneman Vice President Investment Officer, Equities, Minnesota Life
Insurance Company; Vice President, MCM
Funding 1997-1, Inc.; Vice President, MCM
Funding 1998-1, Inc.
David Hackney Vice President Investment Officer, Total Return, Minnesota
Life Insurance Company; Vice President, MCM
Funding 1997-1, Inc.; Vice President, MCM
Funding 1998-1, Inc.
Steven Nelson Vice President Investment Officer, Total Return, Minnesota
Life Insurance Company; Vice President, MCM
Funding 1997-1, Inc.; Vice President, MCM
Funding 1998-1, Inc.
<PAGE>
<S> <C> <C>
Kevin J. Hiniker Associate General Investment Officer - Law
Counsel and Assistant Secretary, Minnesota Life
Insurance Company; Assistant Secretary,
Robert Street Energy, Inc.; Assistant
Secretary, MCM Funding 1997-1, Inc.;
Assistant Secretary, MCM Funding 1998-1, Inc.
Vicki Bailey Associate General Investment Officer,
Counsel Minnesota Life Insurance Company; Assistant
Secretary, Personal Finance Company;
Assistant Secretary, MCM Funding 1997-1,
Inc.; Assistant Secretary, MCM Funding
1998-1, Inc.
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Ascend Financial Services, Inc. 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.
Advantus Venture Fund, Inc.
Advantus Index 500 Fund, Inc.
Advantus Real Estate Securities Fund, Inc.
Variable Fund D
Variable Annuity Account
Minnesota Life Variable Life Account
Group Variable Annuity Account
Minnesota Life Variable Universal Life Account
(b) The name and principal business address, positions and offices with
Ascend Financial Services, Inc., and positions and offices with Registrant of
each director and officer of Ascend Financial Services, Inc. is as follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices Offices
Business Address with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Robert E. Hunstad Director None
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
George I. Connolly President, Chief None
Ascend Financial Services, Inc. Executive Officer and
400 Robert Street North Director
St. Paul, Minnesota 55101
<PAGE>
<S> <C> <C>
Margaret Milosevich Vice President, Chief Assistant
Ascend Financial Services, Inc. Operations Officer, Secretary
400 Robert Street North Treasurer and Secretary
St. Paul, Minnesota 55101
Loyall E. Wilson Vice President and None
Ascend Financial Services, Inc. Chief Compliance
400 Robert Street North Officer
St. Paul, Minnesota 55101
Dennis E. Prohofsky Director None
Minnesota Life
Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Thomas L. Clark Assistant Treasurer Assistant
Ascend Financial Services, Inc. and Assistant Secretary Secretary
400 Robert Street North
St. Paul, Minnesota 55101
</TABLE>
(c) Not applicable.
ITEM 28. 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 Life, 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.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. 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 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 23rd day of November, 1999.
ADVANTUS VENTURE FUND, INC.
Registrant
By
------------------------------
William N. Westhoff, 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.
------------------- President (principal November 23, 1999
William N. Westhoff executive officer)
and Director
---------------------- Director and Treasurer November 23, 1999
Frederick P. Feuerherm (principal financial
and accounting officer)
Ralph D. Ebbott* Director)
---------------------------
Ralph D. Ebbott ) By--------------------
) William N. Westhoff
) Attorney-in-Fact
Charles E. Arner* Director)
----------------------------
Charles E. Arner ) Dated: November 23, 1999
)
)
Ellen S. Berscheid* Director)
----------------------------
Ellen S. Berscheid )
- ----------------
*Registrant's director executing power of attorney dated October 22, 1998, a
copy of which is filed herewith.
<PAGE>
ADVANTUS VENTURE FUND, INC.
EXHIBIT INDEX
Exhibit Number and Description:
(a) Articles of Incorporation for the Registrant. (1)
(b) Bylaws of the Registrant. (1)
(c) Not applicable.
(d) Investment Advisory Agreement between Advantus Capital
Management, Inc. and the Registrant. (1)
(e)(1) Underwriting and Distribution Agreement between the Registrant
and Ascend Financial Services, Inc. (3)
(e)(2) Form of Dealer Sales Agreement between Ascend Financial Services,
Inc., principal underwriter for the Registrant, and dealers.
(f) Not applicable.
(g) Custodian Agreement between the Registrant and Norwest Bank
Minnesota, N.A.
(h) Shareholder and Administrative Services Agreement between the
Registrant and The Minnesota Mutual Life Insurance Company.
(i) Opinion and Consent of Dorsey & Whitney LLP.
(j) Consent of KPMG LLP.
(k) Not applicable.
(l)(1) Letter of Investment Intent regarding the Registrant's initial
capital from Advantus Capital Management, Inc. (1)
(l)(2) Letter of Investment Intent regarding the Registrant's initial
capital from The Minnesota Mutual Life Insurance Company. (2)
(m)(1) Plan of Distribution for Class A shares of the Registrant. (3)
(m)(2) Plan of Distribution for Class B shares of the Registrant. (1)
(m)(3) Plan of Distribution for Class C shares of the Registrant. (1)
(n) Multiple Class Plan pursuant to Rule 18f-3. (3)
(p) Code of Ethics.
(q) Power of Attorney to sign Registration Statement executed by
Directors of Registrant.
- --------------------
<PAGE>
(1) Incorporated by reference to the Registrant's initial registration
statement on Form N-1A filed September 19, 1996.
(2) Incorporated by reference to the Registrant's post-effective amendment to
its registration statement on Form N-1A filed November 20, 1997.
(3) Incorporated by reference to the Registrant's Registration Statement on
Form N-1A filed December 3, 1998.
<PAGE>
ADVANTUS FUNDS
DEALER SALES AGREEMENT
THIS AGREEMENT, made this _____ day of ___________, 199__, by and
between Ascend Financial Services, Inc., 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; PROSPECTUS AND REGISTRATION
STATEMENT. 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 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 Approved Supplemental Sales
Literature (as defined in Paragraph 5) as the Dealer may reasonably request.
<PAGE>
2. DEALER DISCOUNT AND OTHER COMPENSATION. The Dealer shall receive,
for sales of shares of the Funds' common stock, the applicable Dealer Commission
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. Dealer assumes sole
responsibility to pay commissions due Dealer's agents or registered
representatives in connection with sales of the Funds' shares of common stock.
Upon termination of this Agreement, for any reason, all compensation otherwise
payable to Dealer hereunder shall cease automatically, including any Service
Fees or Distribution Fees.
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 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
-2-
<PAGE>
constitute a debt to the Underwriter which the Underwriter may collect by any
lawful means, with interest thereon at the maximum rate possible.
5. DEALER'S UNDERTAKINGS. 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 10.
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 ("Approved Supplemental
Sales Literature"). 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) or Approved
Supplemental Sales Literature. 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) or Approved
Supplemental Sales Literature.
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.
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.
Dealer agrees to furnish to Underwriter such information as may from
time to time be requested by Underwriter for the purpose of complying with the
applicable provisions of federal or state securities laws and the by-laws, rules
or regulations of the NASD or any other securities regulatory authority. Dealer
shall immediately notify the Compliance Department of Underwriter of any
proceeding, suit or action, whether criminal, civil or administrative, or the
commencement by the NASD or any other securities regulatory authority or any
other state or federal authority of any investigation, if such proceeding, suit,
action or investigation arises out of or in connection with Dealer's activities
as broker or dealer with respect to the Funds. Dealer shall also immediately
notify the Compliance Department of Underwriter of any complaint by a customer
or prospective customer or regulatory authority regarding the Funds or Dealer's
activities as broker or dealer with respect to the Funds.
-3-
<PAGE>
Except for those books and records required by law or regulation to be
maintained by Dealer, all books, documents, prospectuses, application forms or
other materials or supplies in the possession of Dealer which pertain to the
Funds or to the business of Underwriter shall be the property of Underwriter,
which at any and all times shall be open to inspection by any duly authorized
representative of Underwriter and at the termination of this Agreement shall be
returned to Underwriter.
6. 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 (the "1934 Act"), 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.
7. 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.
8. INDEMNIFICATION PROVISIONS.
A. 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 "1933 Act") or Section 20(a) of the 1934 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 1933 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 (i)
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, or arise out of any claim based upon any Approved
Supplemental Sales Literature, or (ii) the failure of Underwriter 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.
B. FIDELITY BOND OF DEALER AND INDEMNIFICATION BY DEALER. Dealer
represents that all directors, officers, partners, employees or registered
representatives of Dealer who are
-4-
<PAGE>
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 1933 Act or Section 20(a) of the 1934
Act and their respective successors and assigns (hereinafter in this paragraph
separately and collectively 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 1933 Act, the 1934 Act, 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.
C. NOTICE AND DEFENSE. 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 indemnifying party on account of its
agreement contained in the preceding paragraphs, such Defendant shall with
reasonable promptness give notice in writing of such suit to the indemnifying
party, but failure to so give such notice shall not relieve the indemnifying
party from any liability that it may have to the Defendants otherwise than on
account of this indemnity agreement. The indemnifying party 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 indemnifying party 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 costs as are approved by the
indemnifying party; 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
-5-
<PAGE>
responsibilities, cooperate with the indemnifying party and its counsel. The
indemnifying party's obligations under this Paragraph 8 shall survive the
termination of this Agreement.
D. SETTLEMENT; CONTRIBUTION. The indemnifying party shall not be
liable under this Agreement for any settlement made by an indemnified party
without the indemnifying party's prior written consent, and the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of the settlement of any claim or action
with the consent of the indemnifying party. The indemnifying party shall not
settle any such claim or action without prior written consent of the indemnified
party. If the foregoing indemnifications should, for reasons of public policy,
not be available to any indemnified party, then the indemnifying party will
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and such indemnified party on the other arising out of the matters contemplated
by this Agreement.
9. ASSIGNMENT. This Agreement may not be assigned by the Dealer
without prior written consent of the Underwriter.
10. 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.
11. FIRST CLAIM ON EARNINGS. 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.
12. CONFIDENTIALITY. During the term of this Agreement, a party may
acquire access to confidential or proprietary information of another, including,
but not limited to, the Underwriter's or the Dealer's business affairs,
customers, property, methods of operation, procedures, marketing policies and
practices, computer software and operational systems (collectively,
"Confidential Information"); provided, however, that the term "Confidential
Information" does not include information which: (a) becomes generally available
to the public other than as a result of a disclosure by a party or its agents or
employees; (b) was available to a party prior to its disclosure to the other;
(c) has become available to a party from a source other than that of the parties
to this Agreement; (d) is intended to be transferred to another person or entity
upon the termination of this Agreement; (e) is required to be disclosed to any
regulatory authority or self-regulatory organization or pursuant to a court
order or subpoena; or (f) is
-6-
<PAGE>
derived from customers. Confidential Information designated as such by a party
shall constitute proprietary information and/or trade secrets of such party and
will be the sole property of such party. Each party agrees that:
(a) it shall use such Confidential Information only for the
purposes of carrying out its obligations under, and performing any inspections
or audits permitted by, this Agreement;
(b) all Confidential Information and any physical and
electronic embodiments thereof will be held by each party in strict confidence;
(c) it shall take reasonable steps to ensure that its
employee, representatives and agents are informed of the contents of this
Paragraph 12 and that they shall comply with its terms;
(d) it will not reveal, disclose, publish, sell or
distribute such Confidential Information to other present or future agents or
broker-dealers, or to any other person or entity, without prior written consent
of the other parties;
(e) the parties shall immediately return any Confidential
Information in their possession to the other upon (i) such party's request at
any time or (ii) the termination of this Agreement.
The parties recognize that the disclosure of Confidential
Information by the other or its employees, representatives or agents may give
rise to irreparable injury, which may not be adequately compensated damages.
Accordingly, in the event of a breach or threatened breach by a party or its
employees, representatives or agents of the provisions of this Paragraph 12, the
non-breaching party shall be entitled to an injunction restraining the other
party and its employees from disclosing, in whole or in part, the Confidential
Information.
13. NATURE OF RELATIONSHIP; LIMITATIONS ON DEALER'S AUTHORITY. 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'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 that Dealer has no authority to start any legal proceedings
on Underwriter's behalf or in its name or 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.
-7-
<PAGE>
14. SECTION HEADINGS. The titles of the sections and paragraphs of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision or condition of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in counterparts which,
taken together, shall constitute the whole of the Agreement as between the
parties.
16. 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.
17. 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.
18. 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.
19. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
DEALER:
- ------------------------------------ --------------------------------------
(Name) (NSCC Clearing Number)
- ------------------------------------ --------------------------------------
(Tax Identification Number) (NSCC Executing Broker Symbol)
- ------------------------------------ --------------------------------------
(Street Address) (Telephone Number)
- ------------------------------------
(City) (State) (Zip)
-8-
<PAGE>
Date of offer:_________________, 199__
By
------------------------------------------------------------------------------
(Signature)
Please Print Name
---------------------------------------------------------------
Its
-----------------------------------------------------------------------------
(Title)
Accepted by
ASCEND FINANCIAL SERVICES, INC.
Date of acceptance: _____________________, 19___
By
------------------------------------------------------------------------------
(Signature)
Its
-----------------------------------------------------------------------------
(Title)
-9-
<PAGE>
SCHEDULE A
(Standard)
Dealer Compensation Schedule
Effective February 1, 1999
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.
Advantus Venture Fund, Inc.
Advantus Index 500 Fund, Inc.
Advantus Real Estate Securities Fund, Inc. (Only Class A shares available)
A. DEALER COMMISSIONS
DEALER CONCESSION AS PERCENTAGE OF OFFERING PRICE
<TABLE>
<CAPTION>
Class A Shares
Mortgage
Securities Fund Class A Shares
and Bond All Other Class B Shares Class C
Amount of Sale Fund Only Funds All Funds Shares
-------------- --------- ----- --------- ------
<S> <C> <C> <C> <C>
Less than $50,000 4.00% 5.00% 4.17% -0-
$50,000 but less
than $100,000 4.00% 4.00% 3.75% -0-
$100,000 but less
than $250,000 3.00% 3.00% 2.92% -0-
$250,000 but less
than $500,000 2.25% 2.25% 2.08% -0-
$500,000 but less
than $1,000,000 1.75% 1.75% 1.25% -0-
$1,000,000 1.00%* 1.00%* n/a* n/a*
</TABLE>
* Orders of $1,000,000 or more will be accepted only for Class A Shares.
A-1
<PAGE>
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:
<TABLE>
<CAPTION>
Quarterly Quarterly
Distribution Fee Service Fee
---------------- -----------
Class C Class A Class B Class C
------- ------- ------- -------
<S> <C> <C> <C>
1/4 of .75% 1/4 of .25% 1/4 of .25% 1/4 of .25%
</TABLE>
No Service Fee will be paid on an account unless or until the assets
have been in the account for 15 months or longer. Distribution Fees
are not subject to the 15 month retention requirement.
II. Advantus Money Market Fund, Inc.
No commissions are paid 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 Commission as described above.
III. Termination of Compensation
All compensation payable to Dealer hereunder, including Service Fees or
Distribution Fees, shall automatically cease upon the termination of the
Advantus Funds Dealer Sales Agreement, for any reason.
A-2
<PAGE>
CUSTODIAN CONTRACT
BETWEEN
ADVANTUS VENTURE FUND, INC.
AND
NORWEST BANK MINNESOTA, N.A.
<PAGE>
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held by It ...................1
2. Duties of the Custodian with Respect to Property of the Fund Held
by the Custodian.........................................................1
2.1 Holding Securities.................................................1
2.2 Delivery of Securities.............................................1
2.3 Registration of Securities.........................................4
2.4 Bank Accounts......................................................4
2.5 Payments for Shares................................................4
2.6 Availability of Federal Funds......................................4
2.7 Collection of Income...............................................5
2.8 Payment of Fund Monies.............................................5
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased...............................................6
2.10 Payments for Repurchases or Redemption of Shares of the Fund.......6
2.11 Appointment of Agents..............................................7
2.12 Deposit of Fund Assets in Securities Systems.......................7
2.13 Segregated Account.................................................8
2.14 Ownership Certificates for Tax Purposes............................9
2.15 Proxies............................................................9
2.16 Communications Relating to Fund Portfolio Securities...............9
2.17 Proper Instructions................................................9
2.18 Actions Permitted Without Express Authority.......................10
2.19 Evidence of Authority.............................................10
2.20 Class Actions.....................................................10
2.21 Duties of the Custodian with Respect to Fund Property
Held Outside of the United States.................................11
2.21(a) Appointment of Foreign Sub-Custodian....................11
2.21(b) Assets to be Held.......................................11
2.21(c) Segregation of Securities...............................11
2.21(d) Agreement with Foreign Banking Institution..............12
2.21(e) Access of Independent Accountants of the Company........12
2.21(f) Repots by Custodian.....................................12
2.21(g) Foreign Securities Transactions.........................13
2.21(h) Foreign Securities Lending..............................14
2.21(i) Liability of Foreign Sub-Custodian......................15
2.21(j) Monitoring Responsibilities.............................15
2.21(k) Branches of United States Banks.........................15
2.21(l) Expropriation Insurance.................................15
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income...........................16
i
<PAGE>
4. Records.................................................................16
5. Opinion of Fund's Independent Accountant................................17
6. Reports to Fund by Independent Public Accountants.......................17
7. Compensation of Custodian...............................................17
8. Responsibility of Custodian.............................................17
9. Effective Period, Termination and Amendment.............................18
10. Successor Custodian.....................................................19
11. Interpretive and Additional Provisions..................................20
12. Minnesota Law to Apply..................................................20
13. Prior Contracts.........................................................20
ii
<PAGE>
CUSTODIAN CONTRACT
This Contract is between the Advantus Venture Fund, Inc., a corporation
organized and existing under the laws of the State of Minnesota, having its
principal place of business at 400 Robert Street North, St. Paul, Minnesota
55101, attached hereto (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, that in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund agrees to
deliver to the Custodian 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 Custodian
shall not be responsible for any property of the Fund held or received by the
Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.17), the Custodian 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 Custodian 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 Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN
2.1. HOLDING SECURITIES
The Custodian 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 Custodian shall release and deliver securities owned by the
Fund held by the Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only
in the following cases:
- 1 -
<PAGE>
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
Custodian;
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
Custodian 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
sub-custodian appointed pursuant to Article 1; or for exchange for a
different 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 Custodian;
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 Custodian 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
Custodian'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 Custodian;
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 Custodian;
- 2 -
<PAGE>
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 Custodian 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 Custodian's
account in the book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Fund prior
to 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 Custodian 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 Custodian, 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 be delivered, 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.
- 3 -
<PAGE>
2.3 REGISTRATION OF SECURITIES
Securities held by the Custodian (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 Custodian 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 2.11 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
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 Custodian shall open and maintain a separate bank account or
accounts in the name of the Fund, subject only to draft or order by the
Custodian 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 Custodian for the Fund may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian 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 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 Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 PAYMENTS FOR SHARES
The Custodian 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 Custodian 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 Custodian, the
Custodian 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 Custodian 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
- 4 -
<PAGE>
The Custodian 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 on 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 Custodian 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
Custodian 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 Custodian 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 Custodian of the income to which
the Fund is properly entitled.
2.8 PAYMENT OF FUND MONIES
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian 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 Custodian (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 Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a
nominee of the Custodian 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 Custodian, 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 Custodian'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
Custodian along with written evidence of the agreement by the
Custodian 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;
- 5 -
<PAGE>
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 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
The Custodian shall not make payment for the purchase of domestic
securities for the account of the Fund in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund to so pay in advance. In any and every case where payment for
purchase of domestic securities of the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
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 Custodian
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
Custodian is authorized upon receipt of instructions from the Transfer
Agent to 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 Custodian shall honor checks drawn on the
Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in
accordance with such
- 6 -
<PAGE>
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
2.11 APPOINTMENT OF AGENTS
The Custodian 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 Custodian may from time to time direct; PROVIDED,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
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 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 the 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 the Fund which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased for
the account of the 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 the Fund
upon (a) the simultaneous receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (b) 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 Fund at its
request. Upon request, the Custodian shall furnish the Fund
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confirmation of each transfer to or from the account 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.
4) The Custodian shall provide the Fund 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 9
hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian 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 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 Fund, 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 Fund has not been made whole for any such
loss or damage.
2.13 SEGREGATED ACCOUNT
The Custodian 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
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian 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
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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
The Custodian 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 Custodian 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 Custodian 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 Custodian from issuers of the securities being held for
the Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian 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 Custodian at least three (3) business days prior to the date
on which the Custodian 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 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 Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
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
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accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that
the Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian 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 Custodian 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 Custodian 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 Custodian of written notice to the contrary.
2.20 CLASS ACTIONS
The Custodian 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 Custodian 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.
2.21 DUTIES OF THE CUSTODIAN WITH RESPECT TO FUND PROPERTY HELD OUTSIDE
OF THE UNITED STATES
2.21(a) APPOINTMENT OF FOREIGN SUB-CUSTODIAN
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The Custodian is authorized and instructed, either directly or
indirectly (through one or more sub-custodian U.S. banks), to employ as
sub-custodians for the Fund's securities and other assets maintained
outside of the United States the foreign institutions, foreign securities
depositories and foreign clearing agencies, if any, designated on
Schedule A hereto ("foreign sub-custodians"); provided, however, that,
notwithstanding the contents of Schedule 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 Fund 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
qualifications of either clause (a) or (b) of the preceding proviso.
Upon receipt of Proper Instructions, together with a certified
resolution of the Fund's Board of Directors, the Custodian and the Fund
may agree to amend 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-custodian. 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 Fund
the Custodian shall promptly cease the employment of any one or more of
such sub-custodians for maintaining custody of the assets of the
application Fund(s).
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 Fund may determine to be reasonably
necessary to effect the foreign securities transactions of the Fund.
2.21(c) SEGREGATION OF SECURITIES
The Custodian shall identify on its books as belonging to the
Fund, the foreign securities of the 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 the Fund's securities in a foreign securities
depository, the sub-custodian shall identify on its books as belonging to
the Custodian (or
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is 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) the Fund's assets will not be subject to any right, charge,
security interest, lien or claim or 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 the 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 the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions given under its agreement with the Custodian or
shall be given confirmation of the contents of such books and records;
and (e) assets of the Fund held by the foreign sub-custodian will be
subject only to the instructions of the Fund, the Custodian or their
agents.
2.21(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND
Upon request of the Fund, the Custodian will use its best efforts
to arrange for the independent accountants of the Fund 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 Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of the Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the 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 and Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical
possession of such securities.
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<PAGE>
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 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 the 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 the Fund and delivery of securities maintained for
the account of the 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
cause the 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 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 the 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 Fund 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.
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.
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<PAGE>
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 the 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 the 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 Fund shall not receive, nor be enabled to vote, proxies
in connection with such loaned security.
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<PAGE>
2.21(i) LIABILITY OF FOREIGN SUB-CUSTODIAN
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 performance of its duties and to indemnify, and hold
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 Fund, 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 Fund has
not been made whole for any such loss, damage, cost, expense, liability
or claims.
2.21(j) MONITORING RESPONSIBILITIES
The Custodian shall furnish annually to the Fund information
concerning the foreign sub-custodian 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 Fund 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 Fund 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 the 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 1 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 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
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by Custodian or any sub-custodians 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.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian 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 computer such net asset
value per share. If so directed, the Custodian 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 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 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 Fund in connection
with applicable federal and state tax laws and any other law or administrative
rules or procedures which may be applicable to the Fund. 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 Fund. All such records shall be the
property of the Fund 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 Fund or its agents. Such records shall be made available to the
Fund for review by employees and agents of the Securities and Exchange
Commission. The Custodian shall furnish to the Fund, and its agents, 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 Fund during that month, and all
holdings as of month-end.
All records so maintained in connection with the performance of its
duties under this Contract shall remain the property of the Fund and, in the
event of termination of this Contract, shall be delivered to the Fund.
Subsequent to such delivery, and surviving the termination of this Contract, the
Fund shall provide the Custodian access to examine and photocopy such records as
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the Custodian, in its discretion, deems necessary, for so long as such records
are retained by the Fund.
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian 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-1A, and Form N-SAR 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 Custodian 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 Custodian 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 CUSTODIAN
For performance by the Custodian pursuant to this Contract, the Fund
agrees to pay the Custodian annual asset fees and supplemental charges as set
out in the fee schedule attached hereto.
8. 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 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 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 Fund or its agents 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 Custodian with respect to redemptions effected by check
shall be in accordance with a separate Contract entered into between the
Custodian and the Fund or its agent.
If the Fund 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
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Custodian, result in the Custodian 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 Custodian to take such action, shall
provide indemnity to the Custodian in an amount and form reasonably satisfactory
to it.
If the Fund 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 Fund fail to repay the Custodian promptly, 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 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 a 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 Contract,
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 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 Fund 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-custodian or employees in the performance of
the Custodian's duties and obligations under this Contract.
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 Custodian shall not act under Section 2.12 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
- 18 -
<PAGE>
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 Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian 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 Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer to an account of the successor custodian all of the Fund" securities
held in a Securities System.
If no such successor custodian shall be appointed, the Custodian 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 Custodian 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 Custodian on or before the date when such termination shall become
effective, then the Custodian 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 Custodian and all instruments
held by the Custodian 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 Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian 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 Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, Funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
- 19 -
<PAGE>
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund may from time 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 Custodian 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 1st day of November, 1999.
ADVANTUS VENTURE FUND, INC.
By:
-----------------------------------
ATTEST
By:
-----------------------------------
NORWEST BANK MINNESOTA, N.A.
By:
-----------------------------------
ATTEST
By:
-----------------------------------
- 20 -
<PAGE>
SCHEDULE A
TO THE
CUSTODIAL CONTRACT
BETWEEN
ADVANTUS VENTURE FUND, INC.
AND
NORWEST BANK MINNESOTA, N.A.
No Foreign Sub-Custodians at this time.
A-1
<PAGE>
FEE SCHEDULE
ADVANTUS
ANNUAL MARKET VALUE CHARGE: $.000010
---------------------------------------------------------------
<TABLE>
DOMESTIC TRANSACTION CHARGES:
<S> <C>
DOMESTIC DEPOSITORY SETTLEMENTS -DTC/FED/PTC $6.00
PHYSICAL SETTLEMENTS (NEW YORK, MPLS.) $30.00
MUTUAL FUND SETTLEMENTS $30.00
PRIVATE PLACEMENTS SETTLEMENTS $15.00
OPTIONS/FUTURE SETTLEMENTS $15.00
PRINCIPAL PAYDOWN- NON VARIABLE $8.00
PRINCIPAL PAYDOWNS - CMO'S $15.00
REORGANIZATION/CORPORATE ACTIONS $20.00
MONEY MOVEMENTS (WIRES, CHECKS) $5.00
</TABLE>
Fee Schedule - 1
<PAGE>
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
ADVANTUS VENTURE FUND, INC.
AND
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
<PAGE>
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 23rd of July, 1998, by and between Advantus
Venture Fund, Inc., a Minnesota corporation, having its principal office and
place of business at 400 Robert Street North, St. Paul, Minnesota, 55101, (the
"Fund"), 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, ("MML") and Advantus Capital Management, Inc., a
Minnesota corporation, having its principal office and place of business at 400
Robert Street North, St. Paul, Minnesota 55101, (the "Adviser").
WHEREAS, the Fund is in the process of contracting with First Data Investor
Services Group, Inc., a Massachusetts corporation (the "Transfer Agent"), to
provide customary transfer agent services to the Fund; and
WHEREAS, the Fund has reserved certain shareholder servicing tasks and
responsibilities ("Shareholder Services") which are to be performed by MML
rather than the Transfer Agent; and
WHEREAS, the Fund has further reserved certain accounting, auditing, legal
and other administrative tasks and responsibilities ("Administrative Services")
to be performed by MML; and
WHEREAS, the Fund desires to appoint MML as its Shareholder Services agent
and agent in connection with certain other Administrative Services, and MML
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT AND DUTIES OF MML
1.01 Subject to the terms and conditions set forth in this Agreement, and
in accordance with procedures established from time to time by agreement between
the Fund and MML, MML hereby agrees to provide the following Administrative
Services:
(a) Register or qualify, and maintain the registrations or
qualifications, of the Fund and its common stock ("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;
-2-
<PAGE>
(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;
(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.
1.02 As Shareholder Services agent, MML agrees to provide or perform the
following Shareholder Services in accordance with procedures established from
time to time by agreement between the Fund and MML:
(a) Receive telephone redemption requests, telephone redemption
directions, wire order purchase requests and telephone transfer
instructions, and deliver such requests, directions and instructions
together with other appropriate information, to the Transfer Agent;
(b) Provide customer service representatives to respond to telephone
inquiries relating to the Fund from customers, shareholders and/or
registered representatives and forward any pertinent information,
including without limitation instructions pertaining to any periodic
investment plan, periodic withdrawal plan or other plan set out in the
currently effective prospectus, or requests to the Transfer Agent.
MML shall transmit electronically, via U.S. mail or any other delivery
means MML determines to be suitable, any Shareholder or account
transaction instructions received, to the Transfer Agent in a timely
fashion; and
-3-
<PAGE>
(c) MML will calculate any minimum required distribution amounts for plans
qualified under Section 401(a) or 408 of the Internal Revenue Code, as
that term is defined under the Code or delegate such responsibility to
a suitable agent, with the Fund's approval.
Article 2 ADDITIONAL DUTIES
2.01 MML 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, MML agrees that all such records prepared or
maintained by MML relating to the services to be performed by MML 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.
2.02 MML and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged 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 be law.
2.03 MML will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund in case of any requests or
demands for the inspection of Shareholder records. MML 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 3 FEES AND EXPENSES
3.01 For Shareholder Services performed by MML pursuant to this
agreement, the Adviser will pay MML an annual account servicing fee as agreed
by Adviser and MML. In addition to the fees the Adviser will reimburse MML
for out-of-pocket expenses or advances incurred by MML. Such fees,
out-of-pocket expenses and advances may be changed from time to time subject
to mutual agreement between the Adviser and MML.
3.02 For Administrative Services performed by MML pursuant to
this agreement, the Fund will pay MML a monthly Administrative Services Fee
as set forth in Schedule A. In addition to the fees the Fund will reimburse
MML for out-of-pocket expenses or advances incurred by MML. Such fees,
out-of-pocket expenses and advances may be changed from time to time subject
to mutual written agreement between the Fund and MML.
Article 4 REPRESENTATIONS AND WARRANTIES OF MML
MML represents and warrants to the Fund that:
-4-
<PAGE>
4.01 It is a corporation duly organized and existing and in
good standing under the laws of the State of Minnesota.
4.02 It is duly qualified to carry on its business in the State
of Minnesota
4.03 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
4.04 It agrees to obtain and maintain, all regulatory licensing
as may be required of it, if any, under this Agreement.
Article 5 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MML that:
5.01 It is a corporation duly organized and existing and in good
standing under the laws of Minnesota.
5.02 It is empowered under applicable laws and by its Articles
of Incorporation and Bylaws to enter into and perform this Agreement.
5.03 All corporate proceedings required by said Articles of
Incorporation and Bylaws have been taken to authorize it to enter into and
perform this Agreement.
5.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940.
5.05 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 6 INDEMNIFICATION
6.01 MML shall not be responsible for, and the Fund shall
indemnify and hold MML 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 MML or its agent or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken
in good faith without negligence or willful misconduct.
-5-
<PAGE>
(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 MML or its agents or
subcontractors of information, records and documents which (i) are received
by MML or is 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 MML or its agents or
subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 MML 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 MML as a result of MML's lack of good faith,
negligence or willful misconduct, or MML's refusal or failure to comply with
the terms of this Agreement, or which arise out of the breach of any
representation or warranty of MML hereunder.
6.03 At any time MML may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund with respect to
any matter arising in connection with the services to be performed by MML
under this Agreement, and MML 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 good-faith reliance upon such instructions or upon the opinion of
such counsel. MML, 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 MML 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 or authority of any
person, until receipt of written notice thereof from the Fund. MML, 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 transfer agent or registrar, or of a
co-transfer agent or co-registrar.
6.04 In the event any 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, the party shall not be liable for
damages to the other parties for any damages resulting from such failure to
perform or otherwise from such causes.
-6-
<PAGE>
6.05 No party to this Agreement shall be liable to any other
party for consequential damages, whether under any provision of this
Agreement or for any act or failure to act hereunder.
6.06 In order that the indemnification provisions contained in
this Article 6 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 7 TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty
(60) days written notice to the other party.
Article 8 ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written consent of the
other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
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.
Article 10 GOVERNING LAW
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of
Minnesota.
-7-
<PAGE>
Article 11 ENTIRE 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 EFFECTIVE DATE
12.01 This Agreement shall be effective as of the date agreed to
by MML and First Data Investor Services Group, Inc. ("First Data") for the
conversion of transfer agent services from MML to First Data, or such other
date as selected by management of the Fund.
IT 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.
ADVANTUS VENTURE FUND, INC.
By-------------------------------------------------
William N. Westhoff, President
Attest---------------------------------------------
Frederick P. Feuerherm, Treasurer
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By-------------------------------------------------
Robert E. Hunstad, Executive Vice President
Attest---------------------------------------------
Dennis E. Prohofsky, Senior Vice
President, General Counsel and Secretary
ADVANTUS CAPITAL MANAGEMENT, INC.
By-------------------------------------------------
William N. Westhoff, President
Attest---------------------------------------------
Richard W. Worthing,
Second Vice President - Equity Investments
-8-
<PAGE>
SCHEDULE A
TO THE
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
for
ADVANTUS VENTURE FUND, INC.
(As amended July 21, 1999 and effective August 1, 1999)
Minnesota Life shall receive, as compensation for its accounting,
auditing, legal and other administrative services pursuant to this Agreement, a
monthly fee determined in accordance with the following table:
Monthly Administrative
Services Fee
------------
$6,200.00
The above monthly fees shall be paid to Minnesota Life not later
than five days following the end of each calendar quarter in which said services
were rendered.
A-1
<PAGE>
DORSEY & WHITNEY LLP
Advantus Venture Fund, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Ladies and Gentlemen:
We have acted as counsel to Advantus Venture Fund, Inc., a Minnesota
corporation (the "Fund"), in connection with a Registration Statement on Form
N-1A (File Nos. 333-12283) (the "Registration Statement") relating to the sale
by the Fund of an indefinite number of shares of the Fund's Class A Common
Shares, Class B Common Shares and Class C Common Shares, each with a par value
of $.01 per share (the "Shares").
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering out opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Fund, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Fund and of public officials. We have also
assumed that the Shares will be issued and sold as described in the Registration
Statement.
Based on the foregoing, we are of the opinion that upon issuance,
delivery and payment for the Shares as described in the Registration Statement,
the Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the caption
"Service Providers" in the
<PAGE>
Advantus Venture Fund, Inc.
November 10, 1999
Page 2
Prospectus and under the caption "Investment Advisory and Other Services" in the
Statement of Additional Information, each constituting part of the Registration
Statement.
Dated: November 10, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
Dorsey & Whitney LLP
MJR
<PAGE>
[KPMG LLP Letterhead]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Advantus Venture Fund, Inc.:
We consent to the use of our report included herein and the references to our
Firm under the headings "COUNSEL AND INDEPENDENT AUDITORS" in Part A and
"FINANCIAL STATEMENTS" in Part B of the Registration Statement.
/s/ KPMG LLP
KPMG LLP
Minneapolis, Minnesota
November 23, 1999
<PAGE>
ADVANTUS POLICY & PROCEDURE MANUAL -
ADVANTUS CODE OF ETHICS, PERSONAL SECURITIES TRADING
- --------------------------------------------------------------------------------
PROCEDURE NAME: ADVANTUS CODE OF ETHICS, PERSONAL SECURITIES TRADING
PROCESS REF. #: ADVANTUS 101
CONTACT NAME: GARY PETERSON
AUTHOR: GARY PETERSON
APPROVAL DATE: 10/28/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURPOSE
- --------------------------------------------------------------------------------
While affirming its confidence in the integrity and good faith of all their
employees, officers and directors, Advantus Capital Management, Inc. (Advantus)
and Ascend Financial Services, Inc. (Ascend) recognize that the knowledge of
present or future fund portfolio transactions and, in certain instances, the
power to influence fund portfolio transactions made by or for the Advantus Funds
may place such individuals, if they engage in Personal Securities Transactions
in securities which are eligible for investment by the Advantus Mutual and
Series Funds (Funds), in a position where their personal interest may conflict
with that of the Funds.
In view of the above and of the provisions of Rule 17j-1(b)(1) under the
Investment Company Act of 1940 (the "1940 Act") and other regulations and legal
considerations, Advantus, Ascend, and the Funds have determined to adopt this
Code of Ethics to specify and prohibit certain types of transactions which would
create conflicts of interest (or at least the potential for the appearance of
conflicts of interest), and to establish reporting requirements and enforcement
procedures. This Code supplements but does not supersede or contradict the
Minnesota Life Code of Ethics.
- --------------------------------------------------------------------------------
SCOPE
- --------------------------------------------------------------------------------
The attached Code of Ethics, (Appendix A), applies to all individuals defined as
access persons and certain Employees. This includes all Advantus employees
engaged in making investment decisions or supporting the investment process
regarding marketable securities and other employees of Advantus or Ascend,
(permanent, temporary and/or contractors), as defined in the Code.
1
<PAGE>
- --------------------------------------------------------------------------------
PROCEDURE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TASK/ACTION RESPONSIBILITY
- ---------------------------------------------------------------------------------------------------------
<S> <C>
For Newly Hired and Transferring Access Persons
Provide the Code of Ethics to new or transferred access persons coincident Advantus Human
with their hire or transfer date. Provide an initial holdings report form Resources
to be completed by the access person.
Conduct training/orientation regarding the Code of Ethics and related Advantus Compliance
procedures in groups or in one-on-one meetings, as appropriate. This must
be done within 10 business days of their hire or transfer.
Review the Code of Ethics and complete the attached signoff form within 10 Access Personnel
business days of receipt. Return the signoff forms to Advantus Compliance
department. Complete the initial holdings report and return the report to
the Advantus Compliance department.
For Annual Review or Code of Ethics Revisions
Distribute the Code of Ethics, the annual signoff form, and the annual Advantus Compliance
security holdings report to all access persons according to the annual
schedule as defined by Advantus compliance officer. Complete special
distributions of the Code of Ethics and signoff forms to all access persons
when changes in the Code of Ethics occur.
Review the Code of Ethics, or revisions to the Code, then complete the Access Personnel
signoff form and return it to Advantus Compliance department within 10
business days of receipt. Complete the annual security holdings report and
return to the Advantus Compliance department.
</TABLE>
2
<PAGE>
APPENDIX A
CODE OF ETHICS
FOR
ADVANTUS CAPITAL MANAGEMENT, INC.
AND AFFILIATES
I. PURPOSE AND CONSTRUCTION.
This Code of Ethics ("Code") is adopted by Advantus Capital Management,
Inc. (the "Adviser"), Ascend Financial Services, Inc. ("Ascend"), and the Funds
to set forth their policy with regard to conduct by their officers, directors
and employees and in an effort to comply with and prevent violations of Section
17 of the 1940 Act, Section 15(f) of the Securities Exchange Act of 1934 and
Section 204A of the Investment Advisers Act of 1940. The focus of this Code is
to set forth the standards of ethical conduct expected from employees, officers
and directors and the restriction or prevention of some investment activities by
persons with access to certain information that might be harmful to the
interests of the Funds or which might enable such persons to profit illicitly
from their relationship with the Funds.
II. STATEMENT OF GENERAL ETHICAL PRINCIPLES.
A. Individuals covered by this Code will at all times conduct themselves with
integrity and distinction, putting first the interests of the Funds.
B. The Code is based on the principle that the individuals covered by this
Code owe a fiduciary duty to the Funds, including, among others, the
shareholders of the Funds, to conduct their Personal Securities
Transactions in a manner which does not interfere with Fund portfolio
transactions and in such a manner as to avoid any actual or potential
conflict or interest or abuse of such person's position of trust and
responsibility; or otherwise take inappropriate advantage of such person's
position in relation to the Funds. Individuals covered by this Code must
adhere to this general principle as well as comply with the Code's specific
provisions. It bears emphasis that technical compliance with the Code's
procedures will not automatically insulate from scrutiny, activities which
show a pattern of abuse of the individual's fiduciary duties to the Funds.
III. RESTRICTIONS.
A. NONDISCLOSURE OF INFORMATION. An Access Person shall not divulge to any
person, contemplated or completed securities transactions of a Fund, except
in the performance of his or her duties. This prohibition shall not apply
if such information previously has become a matter of public knowledge.
B. SECTION 17(d) LIMITATIONS. No Affiliated Person of a Fund, or Ascend, or
any Affiliated Person of such person or Ascend, acting as principal, shall
effect any transaction in which a Fund, or a company controlled by a Fund,
is a joint or a joint and several participant with such person, Ascend or
Affiliated Person, in contravention of such rules and regulations as the
Securities and Exchange Commission may prescribe under Section 17(d) of the
1940 Act for the purpose of limiting or preventing participation by the
Funds or controlled companies on a basis different
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from or less advantageous than that of such other participant.
C. PROSCRIBED ACTIVITIES UNDER RULE 17J-1(b). Rule 17j-1(b) under the 1940 Act
provides:
It shall be unlawful for any affiliated person of or principal underwriter
for a Fund, or any affiliated person of an investment adviser of or
principal underwriter for a Fund, in connection with the purchase or sale,
directly, or indirectly, by such person of a Security Held or to be
Acquired, as defined in section IX, by such Fund--
1. To employ any device, scheme or artifice to defraud such Fund;
2. To make to such Fund any untrue statement of a material fact or omit
to state to such Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading;
3. To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such Fund; or
4. To engage in any manipulative practice with respect to such Fund.
Any violation of Rule 17j-1(b) shall be deemed to be a violation of this
Code.
D. COVENANT TO EXERCISE BEST JUDGMENT. An Advisory Person shall act on his or
her best judgment in effecting, or failing to effect, any Fund transaction
and such Advisory Person shall not take into consideration his or her
personal financial situation in connection with decisions regarding Fund
portfolio transactions.
E. LIMITATIONS ON PERSONAL SECURITIES TRANSACTIONS.
1. NO PERSONAL SECURITIES TRANSACTIONS WITHOUT PRIOR APPROVAL. No Access
Person or Employee shall engage in a Personal Securities Transaction
without Pre-Clearance, as defined below.
a. Prior to effecting any Personal Securities Transaction, except as
provided in Paragraph b. below, an Access Person or Employee
shall secure Pre-Clearance utilizing the procedures set forth in
(i) or (ii) below.
i. Manual Pre-Clearance.
An Access Person shall notify the President of the Adviser,
or his or her designee, of the proposed transaction, and
shall provide the name of the issuer, the title or type of
Security, the number of shares and the price per share or
the principal amount of the transaction. The President of
the Adviser, or his or her designee, shall, after
investigation, determine that such proposed transaction
would, may, or would not be consistent with the specific
limitations of Section III.E. and with this Code generally.
The conclusion of the President of the Adviser, or his or
her designee, shall be promptly communicated to the person
making such request. The President of the
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Adviser, or his or her designee, shall make written records
of actions under this Section, which records shall be
maintained and made available in the manner required by Rule
17j-1(f).
ii. E-Mail Based Prior Clearance.
As an alternative to Manual Prior Clearance set forth above,
an Access Person or Employee may utilize the Lotus Notes
based Trade Approval System ("TAS") to pre-clear Personal
Securities Transactions. Thereafter TAS will be loaded onto
the computer of that Access Person or Employee. (An Access
Person or Employee who has undergone TAS training and has
had TAS installed on their computer is called a User).
The User will enter the proposed Personal Securities
Transaction on the TAS system. The User will enter the
security ticker symbol and other information required by
TAS. TAS searches all applicable restricted lists based on
the security ticker symbol. The User has the responsibility
for determining that the security ticker symbol is accurate.
If the proposed Personal Securities Transaction clears the
restricted lists, the User will forward the proposed trade
to the applicable trading desk for further clearance.
Approval or rejection of each proposed Personal Securities
Transaction will be made by e-mail notification to the
mailbox of the User. The User will be required to enter
information as to whether the trade is executed or not
executed and the price at which it was executed.
In utilizing the TAS system, the User is required to make
certifications with regard to the transaction as set forth
on the TAS system. For each proposed Personal Securities
Transaction the User has the responsibility to enter the
information correctly and ensure the accuracy of each of
these statements. Failure to enter the correct security
ticker symbol or to ensure that each certification is
correct may result in disciplinary action being taken
against the User in accordance with the provisions of the
Code. Records of actions under this Section, shall be
maintained and made available in the manner required by Rule
l7j-l(f).
b. Personal Securities Transactions in the following securities do
not require prior approval pursuant to this section:
i. Purchases or sales of securities issued by the Government of
the United States (transactions in securities that are
indirect obligations of the U.S. Government such as
securities of the Federal National Mortgage Association are
not exempted);
ii. Purchases or sales of shares of registered open-end
investment companies;
iii. Purchases or sales of banker's acceptances or bank
certificates of deposit; or
iv. Purchases or sales of commercial paper and high quality
short term instruments, including repurchase agreements.
2. LIMITATIONS RELATED TO TIME OF TRANSACTIONS.
a. No Access Person or Employee shall engage in a Personal
Securities Transaction
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involving any Security which, with respect to any Fund, has been
purchased or sold within the most recent 7 days or which has a
pending "buy" or "sell" order.
b. No Access Person or Employee who is a portfolio manager or
analyst shall engage in a Personal Securities Transaction
involving any Security which, with respect to the Funds they
manage or make recommendations for, is being considered for
purchase or sale within the next 7 days.
c. The following exceptions to Paragraphs a. and b. above will apply
if any such Security:
i. is no longer held by any Fund as a result of a sale within
the most recent 7 days, in which case such Security may be
sold the next day following the completion of such a
transaction by a Fund, or
ii. is purchased or sold solely by a Fund which tracks the
performance of an Index, in which case such Security may be
purchased or sold on any day except a day on which any Fund
is trading in such security.
d. No Access Person or Employee shall profit from the purchase and
sale, or sale and purchase, of the same (or an equivalent)
Security in a Personal Securities Transaction within sixty
calendar days.
e. The following Personal Securities Transactions are not subject to
the limitations set forth in Paragraphs a., b., and d. above:
i. Purchases or sales effected in any account over which the
person has no direct or indirect influence or control;
ii. Purchases or sales of securities which are not eligible for
purchase or sale by any Fund;
iii. Purchases which are part of an automatic dividend
reinvestment plan;
iv. Purchases effected upon the exercise or rights issued by an
issuer PRO RATA to all holders of a class of its securities,
to the extent such rights were acquired from such issuer,
and sales of such rights so acquired.
3. INITIAL PUBLIC OFFERING LIMITATIONS. No Access Person or Employee
shall engage in any Personal Securities Transaction that involves the
purchase of a Security which is part of an Initial Public Offering.
4. LIMITED OFFERING LIMITATIONS.
a. No Access Person or Employee shall engage in any Personal
Securities Transaction that involves a Limited Offering of
Securities without the express prior approval of the
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President of the Adviser, or his or her designee in accordance
with the procedures set forth in Section III.E.6. In reviewing
any such approval request, the President of the Adviser, or his
or her designee, shall consider, among other factors, whether the
investment opportunity should be reserved for a Fund and its
shareholders, and whether the opportunity is being offered to the
requesting individual by virtue of his or her position with the
Funds or the Adviser.
b. Access Persons and Employees who have received approval as set
forth above and who continue to hold the Security acquired in
such Limited Offering, shall disclose any such continuing
investment to the President of the Adviser, or his or her
designee, if and when they should become involved in any
subsequent consideration of an investment in the same issuer for
the portfolio of any Fund. In such case the decision to invest in
the Securities of such an issuer shall be subject to the approval
of the President of the Adviser, or his or her designee.
c. The President of the Adviser, or his or her designee, shall make
written records of actions under this Paragraph.
5. COPIES OF BROKERAGE REPORTS. All Access Persons that engages in a
Personal Securities Transaction are required to have the executing
broker send a duplicate copy of the confirmation of the transaction to
the President of the Adviser or his or her designee at the same time
as it is provided to such person. In such event, the Access Person
shall also direct such broker to provide duplicate copies of any
periodic statements on any account maintained by such person to the
President of the Adviser, or his or her designee.
6. WAIVERS. An Access Person or Employee may also request prior approval
of a Personal Securities Transaction which, on its face, would be
prohibited by the limitations of Section III.E. Such person shall
provide to the President of the Adviser, or his or her designee, a
description of the proposed transaction, including the name of the
issuer, the title or type of the Security, the number of shares and
the price per share or the principal amount of the transaction, and
shall also provide a statement why the applicable limitation should be
waived in the case of the proposed transaction. The President of the
Adviser, or his or her designee, shall, after investigation, determine
that a waiver of the limitations otherwise applicable to the proposed
transaction would, may, or would not be consistent with the purpose of
this Code. Purchases and sales consistent with the Code shall include
those which are only remotely potentially harmful to any Fund, those
which would be very unlikely to affect a highly institutional market,
and those which clearly are not related economically to the securities
to be purchased, sold or held by any Fund.
IV. REPORTING REQUIREMENTS.
A. QUARTERLY REPORT. Not later than ten (10) days after the end of each
calendar quarter, each Employee and each Access Person shall submit a
report (as shown in Exhibit A) which shall specify the following
information with respect to transactions during the then ended calendar
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quarter in any Security in which such Employee or Access Person has, or by
reason of such transaction acquired, any direct or indirect beneficial
ownership in the Security:
1. the date of transaction, the name of the issuer, the title or type of
Security, the interest rate and maturity (if applicable), the number
of shares, and the principal amount of each Security involved;
2. the nature of the transaction (i.e., purchase, sale, or any other type
of acquisition or disposition);
3. the price of the Security at which the transaction was effected;
4. the name of the broker, dealer, or bank with or through whom the
transaction was effected;
5. the date that the report is submitted by the Access Person or
Employee; and
6. any account established in the quarter by the Access Person in which
any securities were held during the quarter for the direct or indirect
benefit of the Access Person.
If no transactions have occurred, or no accounts have been established, in
the quarter, the report shall so indicate.
The President of the Adviser, may in his or her discretion, not require an
Access Person or Employee to make a quarterly transaction report, if the
report duplicates information contained in the broker trade confirmation
received by the Adviser, contains all required information as described in
this section IV.A, the broker trade confirmation is received no later than
10 days after quarter end, and no accounts have been established as
described in this section IV.A.6.
B. LIMITATION ON REPORTING REQUIREMENTS. Notwithstanding the provisions of
Section IV.A., no Access Person or Employee shall be required:
1. To make a report with respect to transactions effected for any account
over which such person does not have any direct or indirect influence
or control; or
2. To make a quarterly report, initial or annual holdings report, if such
person is not an "interested person" of a Fund as defined in Section
2(a)(19) of the 1940 Act, and would be required to make such a report
solely by reason of being a director of a Fund, EXCEPT where such
director knew, or in the ordinary course of fulfilling his or her
official duties as a director of a Fund should have known, that during
the 15-day period immediately preceding or after the date of the
transaction in a Security by the director, such Security was being
purchased or sold by a Fund or such purchase or sale by a Fund was
being considered by a Fund or the Adviser.
C. REPORTS OF VIOLATIONS. In addition to the quarterly reports required under
this Section IV, each Employee and each Access Person promptly shall report
any transaction which is, or might appear to be, in violation of this Code.
Such report shall contain the information required in quarterly reports
filed pursuant to Section IV.A.
D. INITIAL AND ANNUAL REPORTS BY PERSONNEL. All Access Persons and Employees
shall submit to
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the President of the Adviser, or his or her designee, a report of all
Securities beneficially owned by them at the time that they commence
employment with the Adviser or Ascend (or any affiliated company) or at the
time they become an Access Person. This report shall be submitted to the
President of the Adviser, or his or her designee, within 10 days of
commencement of employment or within 10 days after notification of becoming
an Access Person. All Access Persons and Employees shall submit to the
President of the Adviser, or his or her designee, within 30 days of the end
of each calendar year, a report of all Securities beneficially owned by
them as of December 31 of each year or at such other date selected by the
President of the Adviser. The initial and annual security holdings report
must include the following information:
1. the name of the security, number of shares, and principal amount of
each Security in which the Access Person or Employee has any direct or
indirect beneficial ownership;
2. the name of the broker, dealer, or bank with whom the Access Person or
Employee maintains an account in which any securities are held for the
direct or indirect benefit of the Access Person or Employee. The
initial security holdings report should be as of the date the person
became an Access Person; and
3. the date the report is submitted by the Access Person or Employee.
E. FILING OF REPORTS. All reports prepared pursuant to this Section IV shall
be filed with the person designated by the President of the Adviser to
review these materials.
F. QUARTERLY REPORT BY ADVISER. Each calendar quarter, after the receipt of
reports from reporting persons, the President of the Adviser, or his or her
designee, shall prepare a report which shall certify, to the best of his or
her knowledge, that all persons required to file a report under Section
IV.A. have complied with this Code for such prior quarter or, if unable to
make such certification, shall describe in detail incomplete reports,
violations or suspected violations of this Code.
G. DISSEMINATION OF REPORTS. The General Counsel of the Funds shall have the
right at any time to receive or review copies of any reports submitted
pursuant to this Section IV. Such General Counsel shall keep all reports
confidential except as disclosure thereof to the Boards of Directors of the
Funds, the Adviser, Ascend, or other appropriate persons may be reasonably
necessary to accomplish the purposes of this Code.
V. RECORDKEEPING REQUIREMENTS
A. The Adviser, Ascend and the Funds must each at its principal place of
business, maintain records in the manner and extent set out in this Section
of the Code and must make available to the Securities and Exchange
Commission (SEC) or any representative of the SEC at any time and from time
to time for reasonable periodic, special or other examination:
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1. A copy of each code of ethics of the Adviser, Ascend and the Funds
that is in effect, or at any time within the past five years was in
effect, must be maintained in an easily accessible place;
2. A record of any violation of the code of ethics, and of any action
taken as a result of the violation, must be maintained in an easily
accessible place for at least five years after the end of the fiscal
year in which the violation occurs;
3. A copy of each report made by an Access Person or Employee as
required, including any information provided in lieu of a quarterly
transaction report, see Section IV.A, must be maintained for at least
five years after the end of the fiscal year in which the report is
made or the information is provided, the first two years in an easily
accessible place;
4. A record of all persons, currently or within the past five years, who
are or were required to make reports as deemed Access Persons or
Employee, or who are or were responsible for reviewing these reports,
must be maintained in an easily accessible place;
5. A copy of each report defined in Section VI.B must be maintained for
at least five years after the end of the fiscal year in which it is
made, the first two years in an easily accessible place.
B. The Adviser, Ascend, and the Funds must maintain a record of any decision,
and the reasons supporting the decision, to approve the acquisition by
investment personnel of Limited Offering securities, for at least five
years after the end of the fiscal year in which the approval is given.
VI. FIDUCIARY DUTIES OF THE FUND BOARD OF DIRECTORS
A. The Fund Board of Directors, including a majority of directors who are not
interested persons, must approve the Code of Ethics adopted by the Adviser,
Ascend and the Funds and any material change to the Code. The Board must
base its approval of a code and any material changes to the code on a
determination that the code contains provisions reasonably necessary to
prevent Access Persons from engaging in any conduct prohibited by section
III.C. Before approving the Code of the Adviser, Ascend, and the Funds, the
Fund Board of Directors must receive a certification from the Adviser,
Ascend, and the Funds that each has adopted procedures reasonably necessary
to prevent Access Persons or Employees from violating its Code of Ethics.
The Fund Board of Directors must approve the Code of the Adviser, Ascend,
and the Funds before initially retaining the services of the Adviser or
Ascend. The Fund Board of Directors must approve a material change to the
Code no later than six months after adoption of the material change. The
Adviser, Ascend and the Funds must each use reasonable diligence and
institute procedures reasonably necessary to prevent violations of its Code
of Ethics.
B. No less frequently than annually, the Adviser, Ascend, and the Funds must
furnish to the Fund Board of Directors a written report that:
1. Describes any issues arising under the Code of Ethics since the last
report to the Fund Board of Directors, including, but not limited to,
information about material violations of the Code or procedures and
sanctions imposed in response to the material violations; and
2. Certifies that the Adviser, Ascend, and the Funds have adopted
procedures reasonably
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necessary to prevent Access Persons or Employees from violating the
Code.
VII. ENFORCEMENT AND SANCTIONS.
A. GENERAL. Any Affiliated Person of the Adviser or Ascend who is found to
have violated any provision of this Code may be permanently dismissed,
reduced in salary or position, temporarily suspended from employment, or
sanctioned in such other manner as may be determined by the Board of
Directors of the Adviser or Ascend in its discretion. The Board of
Directors of the Adviser or Ascend may delegate this authority to such
person or persons they deem appropriate. If an alleged violator is not
affiliated with the Adviser or Ascend, the Board of Directors of the Fund
or Funds involved shall have the responsibility for enforcing this Code and
determining appropriate sanctions. In determining sanctions to be imposed
for violations of this Code, the Board of Directors may consider any
factors deemed relevant, including but not limited to the following:
1. the degree of willfulness of the violation;
2. the severity of the violation;
3. the extent, if any, to which the violator profited or benefited from
the violation;
4. the adverse effect, if any, of the violation on the Fund or Funds;
5. the market value and liquidity of the class of Securities involved in
the violation;
6. the prior violations of the Code, if any, by the violator;
7. the circumstances of discovery of the violation; and
8. if the violation involved the purchase or sale of Securities in
violation of this Code, (a) the price at which the Fund purchase or
sale was made and (b) the violator's justification for making the
purchase or sale, including the violator's tax situation, the extent
of the appreciation or depreciation of the Securities involved, and
the period the Securities have been held.
B. VIOLATIONS OF SECTION III.E.
1. At its election, a Fund may choose to treat a transaction prohibited
under Section III.E. of this Code as having been made for its account.
Such an election may be made only by a majority vote of the directors
of the Fund who are not Affiliated Persons of the Adviser. Notice of
an election under this Section VII.B.1. shall not be effective unless
given to the Adviser within sixty (60) days after the Fund is notified
of such transaction. In the event of a violation involving more than
one Fund, recovery shall be allocated between the affected
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Funds in proportion to the relative net asset values of the Funds as
of the date of the violation.
2. If securities purchased in violation of Section III.E. of this Code
have been sold in a bona fide sale, the Fund shall be entitled to
recover the profit made by the seller. If such securities are still
owned by the seller, or have been disposed of by such seller other
than by a bona fide sale at the time notice of election is given by
the Fund, the Fund shall be entitled to recover from the seller the
difference between the cost of such Securities to the violator and the
fair market value of such Securities on the date the Fund acquired
such Securities. If the violation consists of a sale of Securities in
violation of Section III.E. of this Code, the Fund shall be entitled
to recover from the violator the difference between the net sale price
per share received by the violator and the net sale price per share
received by the Fund, multiplied by the number of shares sold by the
violator. Each violation shall be treated individually and no
offsetting or netting of violations shall be permitted. The sums due
from a violator under this Paragraph shall include sums due a Fund as
a result of a violation by a Member of the Immediate Family of such
violator.
3. Knowledge on the part of director or officer of a Fund who is an
Affiliated Person of the Adviser of a transaction in violation of this
Code shall not be deemed to be notice under Section VII.B.1.
4. If the Board of Directors of a Fund determines that a violation of
this Code has caused financial detriment to such Fund, upon reasonable
notice to the Adviser, the Adviser shall use its best efforts,
including such legal action as may be required, to cause a person who
has violated this Code to deliver to the Fund such Securities, or to
pay to the Fund such sums, as the Fund shall declare to be due under
this Section VII.B., provided that:
a. the Adviser shall not be required to bring legal action if the
amount reasonably recoverable would not be expected to exceed
$2,500.
b. In lieu of bringing a legal action against the violator, the
Adviser may elect to pay to the Fund such sums as the Fund shall
declare to be due under this Section VII.B.; and
c. the Adviser shall have no obligation to bring any legal action
if the violator was not an Affiliated Person or Employee of
either the Adviser or Ascend.
C. RIGHTS OF ALLEGED VIOLATOR. A person charged with a violation of this Code
shall be informed of the violation in writing and shall have the
opportunity to appear before the Board of Directors (or such Boards
designees) as may have authority to impose sanctions pursuant to this Code,
at which time such person shall have the opportunity, orally or in writing,
to deny any and all charges, set forth mitigating circumstances, and set
forth reasons why the sanctions for any violations should not be severe.
D. DELEGATION OF DUTIES. The Board of Directors of the Adviser, Ascend or of
any Fund may delegate its enforcement duties under this Section VII to a
special committee of the Board of Directors
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comprised of at least three persons; provided, however, that no director
shall serve on such committee or participate in the deliberations of the
Board of Directors hereunder who is charged with a violation of this Code.
The Board of Directors of Adviser or Ascend may delegate its enforcement
duties under this Section VII to such officers of Adviser or Ascend and
with such authority as the Board deem appropriate.
E. NON-EXCLUSIVITY OF SANCTIONS. The imposition of sanctions hereunder by the
Board of Directors of the Adviser or Ascend will not preclude the
imposition of additional sanctions by the Board of Directors of the Funds
and shall not be deemed a waiver of any rights by the Funds.
VIII. MISCELLANEOUS PROVISIONS.
A. IDENTIFICATION OF ACCESS PERSONS. The Adviser shall, on behalf of the Funds
and Ascend, identify all Employees and all Access Persons who are under a
duty to make reports under Section IV and shall inform such persons of such
duty.
B. MAINTENANCE OF RECORDS. The Adviser shall, on behalf of the Funds and
Ascend, maintain and make available records as required by Rule 17j-1(d).
C. ANNUAL CERTIFICATION OF COMPLIANCE. All Access Persons and Employees shall
sign a certificate to be presented to the Adviser at the end of each
calendar year certifying that they have read and understood this Code and
acknowledging that they are subject to the terms of the Code. The
certificate shall additionally provide that such person has disclosed or
reported all Personal Securities Transactions required to be disclosed or
reported pursuant to the provisions of this Code.
D. SERVICE AS DIRECTOR. An Access Person or Employee may not serve as a
director of a publicly traded company without the prior consent of the
President of the Adviser, or his or her designee. The President of the
Adviser, or his or her designee, shall not provide such authorization
unless he or she finds that such board service would be consistent with the
interests of the Funds and their shareholders. Should any person receive
such authorization, any investment by the Funds in the securities of any
such publicly traded company while such person is serving as a director
shall be previously approved by the President of the Adviser, or his or her
designee.
E. EFFECTIVE DATE. The effective date of this Code shall be October 28, 1999.
IX. DEFINITIONS.
A. "ACCESS PERSON" shall mean any director, officer, or Advisory Person of the
Adviser or of a Fund, or with respect to Ascend, any director or officer
who in the ordinary course of his or her business makes, participates in or
obtains information regarding the purchase or sale of Securities for a Fund
or whose functions or duties as part of the ordinary course of his or her
business relate to the making of any recommendation to a Fund regarding the
purchase or sale of Securities.
B. "ADVISORY PERSON" means:
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1. Any employee of the Adviser or of a Fund (or of any company in a
control relationship to the Adviser or a Fund) who, in connection with
his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a Security by a
Fund, or whose functions or duties relate to the making of any
recommendations with respect to such purchases or sales, and
2. Any natural person in a control relationship to the Adviser or a Fund
who obtains information concerning recommendations made to a Fund with
regard to the purchase or sale of a Security.
C. "AFFILIATED PERSON" means:
1. Any person directly or indirectly owning, controlling or holding with
power to vote, five percent (5%) or more of the outstanding voting
securities of such other person;
2. Any person, five percent (5%) or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote, by such other person;
3. Any person directly or indirectly controlling, controlled by, or under
common control with, such other person;
4. Any officer, director, partner, co-partner, or employee of such other
person;
5. If such other person is an investment company, any investment adviser
thereof or any member of any advisory board thereof; and
6. If such other person is an unincorporated investment company not
having a board of directors, the depositor thereof.
D. "SECURITY HELD OR TO BE ACQUIRED" means any Security which, within the most
recent 15 days (i) is or has been held by the Fund, or (ii) is being
considered by the Fund or Adviser for purchase by the Fund, and (iii)
includes any option to purchase or sell, and any Security that is
exchangeable for or convertible into, any Security that is held or to be
acquired by the Fund.
E. "BENEFICIAL OWNERSHIP" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 pursuant to Rule 16a-1
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all Securities which the person has or acquires
Beneficial Ownership includes, but is not limited to those securities owned
by a Person who directly or indirectly through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in the securities. Direct pecuniary interest
includes the opportunity directly or indirectly to profit or share in any
profit derived from a transaction in the securities. The term indirect
pecuniary interest includes but is not limited to securities held by
members of a person's immediate family sharing the same household. You are
generally considered to be the beneficial owner of securities owned by any
of the following:
1. your spouse/domestic partner;
2. minor children of you, your spouse/domestic partner, or both;
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3. a trust of which you are a trustee or a beneficiary;
4. any of your relatives, or relatives of your spouse/domestic partner,
that share your home;
5. a partnership of which you are a partner;
6. a corporation of which you are a substantial shareholder; or
7. any other person who relies on you to make investment decisions.
F. "COMPLIANCE OFFICER" means the Compliance Officer of the Adviser.
G. "CONTROL" shall have the meaning set forth in Section 2(a)(9) of the 1940
Act and shall include the power to exercise a controlling influence over
the management or policies of a company, unless such power is solely the
result of an official position with such company. A person who directly or
indirectly owns more than 25% of the voting securities of a company is
presumed to control such company.
H. "EMPLOYEE" means an employee of the Adviser, or with respect to Ascend or
any other affiliated company an employee who has been notified that he or
she is also subject to this Code.
I. "FUND" means any investment company registered under the 1940 Act for which
the Adviser acts as the investment adviser and manager. For purposes of
this Code, such term shall also include any other account managed by the
Adviser.
J. "1940 ACT" means the Investment Company Act of 1940, 15 U.S.C. 80a-1 to
80a-52, as the same may be amended from time to time.
K. "PERSONAL SECURITIES TRANSACTION" means a transaction in a Security which
an individual effects for his or her own account or for a Member of his or
her Immediate Family.
L. "PRESIDENT OF THE ADVISER" shall mean the President of Advantus Capital
Management, Inc., or its successor.
M. "PURCHASE OR SALE OF A SECURITY" also includes the writing of an option to
purchase or sell a Security.
N. "SECURITY" means any security as that term is defined in Section 2 (a)(36)
of the 1940 Act and includes, but is not limited to: notes, stock, treasury
stock, bonds debentures, evidences of indebtedness, certificates of
interest or participations in any profit-sharing agreement,
collateral-trust certificates, pre-organization certificates or
subscriptions, transferable shares, investment contracts, voting-trust
certificates, any puts, calls, straddles, options or privileges on any
security (including a certificate of deposit) or on any group or index of
securities, or, in general, any interest or instrument commonly known as a
"security". Indirect obligations of the U.S. Government such as securities
of the Federal National Mortgage association are also Securities for the
purposes of the Code. Security does NOT include:
1. direct obligations of the Government of the United States;
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2. bankers acceptances, bank certificates of deposit, commercial paper
and high quality short-term instruments, including repurchase
agreements; and
3. shares issued by registered open-end investment companies.
O. "INITIAL PUBLIC OFFERING" means an offering of securities registered with
the Commission, the issuer of which, immediately before the registration,
was not required to file reports with the Commission.
P. "LIMITED OFFERING" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or
pursuant to rule 504, rule 505, or rule 506 under the Securities Act of
1933.
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EXHIBIT A
QUARTERLY SECURITIES TRANSACTION REPORT *
PURSUANT TO THE CODE OF ETHICS FOR
ADVANTUS CAPITAL MANAGEMENT, INC. AND AFFILIATES
For the Calendar Quarter Ending: MARCH 31, 2000
<TABLE>
<CAPTION>
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
NAME OF ISSUER AND DATE OF NATURE OF NUMBER OF SHARES OR PRICE AT WHICH THROUGH WHOM
TITLE OR TYPE OF SECURITY TRANSACTION TRANSACTION PRINCIPAL AMOUNT EFFECTED TRANSACTION EFFECTED
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
- -------------------------- -------------- --------------- ---------------------- ---------------- ----------------------
<CAPTION>
ACCOUNTS OPENED THIS QUARTER**
- -------------------------------------- ----------------------------------- ---------------------------------------------
BROKER OR BANK NAME ACCOUNT TITLE ACCOUNT NUMBER
- -------------------------------------- ----------------------------------- ---------------------------------------------
<S> <C> <C>
- -------------------------------------- ----------------------------------- ---------------------------------------------
- -------------------------------------- ----------------------------------- ---------------------------------------------
- -------------------------------------- ----------------------------------- ---------------------------------------------
- -------------------------------------- ----------------------------------- ---------------------------------------------
</TABLE>
The reporting of any transaction hereon shall not be construed as an admission
that the reporting person has any direct or indirect beneficial ownership in
such security.
- ---------------------- --------------------------------------- --------------
Name (Please Print) Signature Date
*Transactions by the Access Person, Employee, or family members as defined in
the Code.
** Accounts opened by the Access Person, Employee, or family members as defined
in the Code.
- - SEND TO: 16-5354 NO LATER THAN APRIL 10, 2000
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APPENDIX B
INSIDER TRADING
SUPPLEMENT
TO THE
CODE OF ETHICS
The purpose of this Supplement to the Code of Ethics is to expand upon
the provisions of the Code of Ethics and on prior group and private discussions
regarding the topic of insider trading. If you have any further questions on
insider trading, talk with your supervisor, an Advantus attorney, or the
Compliance Officer.
The term "insider trading" refers to the use of material non-public
information to trade securities. It is also a violation of law to communicate
material non-public information to others.
The Code of Ethics of Advantus Capital Management, Inc., and Ascend
Financial Services, Inc. (together "Advantus") prohibits the use of any special
knowledge, personal contacts or access to property or equipment obtained in
connection with employment at Advantus for personal gain. The use of inside
information for personal securities transactions is clearly included in the
prohibition. In addition to personal transactions, insider trading prohibitions
apply to securities transactions made on behalf of Advantus and any of its
clients.
In recent years several highly publicized insider trading cases involved
the merger and acquisition areas of brokerage companies or had some other
connection with the underwriting of securities. Advantus is not involved in the
merger and acquisition business and does not participate in the sort of
securities underwritings that leads to the typical insider trading violations.
(e.g., a person knowingly takes secret information about a company and tries to
make money by buying or selling securities whose price will be affected by the
secret information). However, the insider trading law applies to a very broad
range of activity and should be a matter of constant consideration in all of
Advantus' security trades.
We at Advantus must be vigilant against even inadvertent violations. We
seldom come across dramatic inside information in the regular course of our
business. What inside information we do come across is so similar in nature to
the non-inside information about companies we regularly use that without a
constant awareness of inside information issues, a trade could be made which is
inadvertently based in part on items of tainted information.
WHO IS AN INSIDER? The concept of insider includes the officers,
directors and employees of the company whose securities are in question. It also
includes people who enter into a special confidential relationship with the
company and as a result are given access to confidential information about the
company. These can include attorneys, accountants, consultants, lenders and the
employees of such organizations. Advantus will most often be an insider due to
being a lender to a company.
WHAT IS MATERIAL INFORMATION? Information for which there is a
substantial likelihood that reasonable investors would consider it important to
making their investment decisions, or information that is reasonably certain to
have a substantial effect on the price of a company's securities is material
information.
WHAT IS NON-PUBLIC INFORMATION? Information that has not yet been
communicated to the public through, for example, SEC filings, newspaper reports
or wire service reports, is non-public information.
PREVENTION AND DETECTION OF INSIDER TRADING. Advantus has a continuing
obligation to prevent and detect insider trading. An Advantus employee who
obtains information about a company which appears to be
18
<PAGE>
material non-public information should disclose that information to his superior
and the Compliance Officer. If it appears that the information is material
non-public information, two things will be done by the Compliance Officer: (1)
Instruct the appropriate Portfolio Management Assistant to put the company on
the restricted stock or bond list so that employees of Advantus know not to
trade the stock or bond in personal transactions and the identified stocks and
bonds are included in the examination of the Securities Transaction Reports
filed quarterly by employees and (2) Inform all investment division heads,
mortgage, bond and stock, that they should not trade the securities of the
identified company because Advantus possesses inside information with respect to
the company. These restrictions will be removed when the Compliance Officer
determines that the information no longer constitutes material non-public
information.
When deemed appropriate, Advantus management may also review trades made
in personal accounts and on behalf of Advantus or any of its clients for
evidence of trading in violation of these rules.
As with all matters concerning ethical conduct, Advantus rules and
procedures for insider trading are intended to promote the highest ethical
standards. It is not sufficient by itself that a course of action is legal. It
also must be the right thing to do. There are no transactions important enough
to risk the reputation of Advantus or Minnesota Life Insurance Company. All
business should be conducted with this in mind.
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<PAGE>
APPENDIX C
GIFT AND BUSINESS ENTERTAINMENT
SUPPLEMENT TO THE CODE OF ETHICS
As an employee of Advantus Capital Management, Inc., or Ascend Financial
Services, Inc., or an employee of an affiliated company who has been notified
that he or she is also subject to the Code of Ethics, you are being paid solely
to conduct the business of the company to the best of your ability. Any special
knowledge or personal contacts you develop while working at Advantus should be
used for the benefit of the company and should not be considered supplemental
compensation or used for personal gain.
No single rule or group of rules can anticipate every circumstance a
person might encounter which has ethical implications. You must use your own
judgment as to right and wrong but be guided by the knowledge that you are being
relied upon by Advantus to preserve and promote its reputation as a trustworthy
and honorable institution. If in doubt, you are encouraged to talk with your
superiors, but ultimately you are responsible for your own actions.
Below are guidelines to assist you in exercising your own good judgment
in two areas that commonly produce questions concerning appropriate conduct.
BUSINESS ENTERTAINMENT
Letting someone pay for a business meal or other entertainment generally
is permissible if the primary purpose is related to company business. Avoid
situations in which such meals or entertainment may influence or appear to
influence your independence of judgment. If you could not provide your host with
a similar meal or entertainment and put it on your expense report it is probably
inappropriate to accept.
GIFTS
You may accept gifts (or prizes) of nominal value, that is, gifts (or
prizes) so low in value that the gift is insignificant.
DUTY TO DISCLOSE CONFLICTS
All employees shall disclose to their superiors in a timely manner all
conflicts of interest and other matters which could reasonably be expected to
interfere with their duty to Advantus or impair their ability to render unbiased
and objective advice.
SANCTIONS
Upon discovering a violation of this Code of Ethics, Advantus may impose
such sanctions as it may deem appropriate. A record will be kept of all known
violations and any sanctions imposed.
Any person charged with a violation of the Code of Ethics shall be
informed of the violation and shall have the opportunity to explain his actions
prior to the imposition of any sanction.
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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.,
Advantus Venture Fund, Inc., Advantus Index 500 Fund, Inc., Advantus Real
Estate Securities Fund, Inc., MIMLIC Cash Fund, Inc., and Advantus Series
Fund, Inc. (the "Funds"), appoint William N. Westhoff, Eric J. Bentley,
Donald F. Gruber 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: October 22, 1998 /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/William N. Westhoff
-----------------------------------
William N. Westhoff
