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File Numbers 333- and 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment Number
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Post-Effective Amendment Number
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment Number
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ADVANTUS REAL ESTATE SECURITIES 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
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after this
Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
REAL ESTATE
SECURITIES
As with all mutual funds, the Securities and Exchange Commission
does not guarantee that the information in this prospectus is
accurate or complete, nor has it judged this fund for investment
merit. It is a criminal offense to state otherwise.
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
PROSPECTUS DATED , 1999
[LOGO]
[GRAPHIC]
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ADVANTUS REAL ESTATE SECURITIES FUND, INC.
Advantus Real Estate Securities Fund, Inc. (Fund) is a mutual fund that offers a
single class 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, other than the Fund and the
Advantus Money Market Fund, Inc., are referred to as "Advantus Multiple Class
Funds."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
THE FUND - SUMMARY ................................................. 3
Investment Policies, Practices and Main Risks ............... 3
Fees and Expenses ........................................... 4
INVESTING IN THE FUND .............................................. 5
Managing the Fund ........................................... 5
Investment Policies and Practices ........................... 5
Defining Risks .............................................. 7
BUYING AND SELLING SHARES .......................................... 9
Sales and Distribution Charges .............................. 9
Reducing Sales Charges ...................................... 10
Buying Shares ............................................... 11
Selling Shares .............................................. 12
Exchanging Shares ........................................... 13
Telephone Transactions ...................................... 14
GENERAL INFORMATION ................................................ 15
Dividends and Capital Gains Distributions ................... 15
Taxes ....................................................... 15
Service Providers ........................................... 18
Advantus Family of Funds .................................... 19
Additional Information About the Fund ....................... 20
How to Obtain Additional Information ........................ 20
</TABLE>
<PAGE>
THE FUND - SUMMARY
Advantus Real Estate Securities Fund, Inc. (Real Estate Securities Fund) is an
open-end, diversified investment company, commonly called a mutual fund.
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.
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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.
INVESTMENT POLICIES, PRACTICES AND MAIN RISKS
REAL ESTATE SECURITIES FUND seeks total return through a combination of capital
appreciation and current income.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in real estate and real estate-related securities. "Real estate
securities" include securities issued by companies that receive at least 50% of
their gross revenue from the construction, ownership, management, financing or
sale of residential, commercial or industrial real estate. "Real estate-related
securities" include securities issued by companies engaged in businesses that
sell or offer products or services that are closely related to the real estate
industry.
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. 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
- REAL ESTATE RISK - the risk that the value of the Fund's investments may
decrease due to a variety of factors related to the construction,
development, ownership, financing, repair or other events affecting the
value of real estate, buildings or other real estate fixtures
- REIT-RELATED RISK - the risk that the value of the Fund's equity
securities issued by REITs (as discussed in "Investing in the
Fund - Investment Policies and Practices" below) will be adversely
affected by changes in the value of the underlying property
THE FUND - SUMMARY 3
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REFERENCE POINT
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For more information on Fund portfolio turnover, see "General Information -
Taxes."
FEES AND EXPENSES
Investors pay certain 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. You should note that since the Fund may make frequent
changes in its portfolio securities, such changes may result in higher Fund
costs.
<TABLE>
<CAPTION>
<S> <C> <C>
SHAREHOLDER FEES
Maximum Sales Charge on Purchases
(as a percentage of offering price) % 5.50
Maximum Deferred Sales Charge
(as a percentage of sales proceeds) % 1.00*
Exchange Fees
- -On First Twelve Exchanges Each Year none
- -On Each Additional Exchange $ 7.50
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees % 0.75
Rule 12b-1 Fees % 0.25
Other Expenses % 1.00
TOTAL FUND OPERATING EXPENSES** % 2.00
</TABLE>
* 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.
** Because the Fund has only recently commenced operations, the figure for
"other expenses" has been based on estimated expenses for the current fiscal
year. Advanus Capital Management, Inc. (Advantus Capital), the Fund's
investment adviser, has voluntarily agreed to absorb "other expenses",
excluding investment advisory fees and Rule 12b-1 fees, in excess of .50% of
the average net assets of the Fund. Ascend Financial Services, Inc. (Ascend
Financial), the Fund's underwriter, has voluntarily agreed to waive Rule
12b-1 fees in excess of .10% of the average net assets of the Fund. After
such absorption and waiver, the Fund's total operating expenses will equal
1.35% of average net assets. Advantus Capital and Ascend Financial reserve
the right to discontinue such absorption or waiver, respectively, at any time
at their sole discretion.
SHAREHOLDER EXPENSE 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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 742 1,143 1,568 2,749
</TABLE>
4 THE FUND - SUMMARY
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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 $13.7 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 $15.7 billion. Personnel of Advantus
Capital also manage Minnesota Life's investment portfolio. Minnesota Life is a
third-tier subsidiary of a mutual insurance holding company called Minnesota
Mutual Companies, Inc. 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 0.75% of its average daily net assets.
Joseph R. Betlej has served as the portfolio manager of the Fund since its
inception. Mr. Betlej has also served as a Vice President of Advantus Capital
since September 1996. Mr. Betlej has served as a portfolio manager at Advantus
Capital managing the real estate securities portfolio for Advantus Series Fund,
Inc. since May 1998, and managing other private real estate securities accounts
since May 1996. Mr. Betlej previously served as an investment officer and real
estate analyst at Advantus Capital and its predecessor, MIMLIC Asset Management
Company, since 1987.
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FOR YOUR INFORMATION
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One of the advantages of investing in mutual funds is continuous professional
management of your investment. Skilled, experienced professionals manage the
Fund's assets.
Joseph Betlej holds a bachelor's degree in architecture from the University of
Minnesota and a master's degree in real estate appraisal and investment analysis
from the University of Wisconsin. Mr. Betlej is a Chartered Financial Analyst.
INVESTMENT POLICIES AND PRACTICES
The Fund seeks total return through a combination of capital appreciation and
current income.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in real estate and real estate-related securities. The Fund will
primarily invest in real estate and real estate-related equity securities
(including securities convertible into equity securities). The Fund does not
invest directly in real estate. "Real estate securities" include securities
issued by companies that receive at least 50% of their gross revenue from the
construction, ownership, management, financing or sale of residential,
commercial or industrial real estate. Real estate securities issuers typically
include real estate investment trusts (REITs), real estate brokers and
developers and real estate holding companies.
INVESTING IN THE FUND 5
<PAGE>
"Real estate-related securities" include securities issued by companies engaged
in businesses that sell or offer products or services that are closely related
to the real estate industry. Real estate-related securities issuers typically
include construction and related building companies, manufacturers and
distributors of building supplies, financial institutions that issue or service
mortgages and resort companies.
Most of the Fund's real estate securities portfolio will consist of securities
issued by REITs that are listed on a securities exchange or traded
over-the-counter. A REIT is a corporation or trust that invests in fee or
leasehold ownership of real estate, mortgages or shares issued by other REITs.
REITs may be characterized as equity REITs (i.e., REITs that primarily invest in
fee ownership and leasehold ownership of land), mortgage REITs (i.e., REITs that
primarily invest in mortgages on real estate) or hybrid REITs which invest in
both fee and leasehold ownership of land and mortgages. The Fund mostly invests
in equity REITs but also invests lesser portions of its assets in mortgage REITs
and hybrid REITs. A REIT that meets the applicable requirements of the Internal
Revenue Code of 1986 may deduct dividends paid to shareholders, effectively
eliminating any corporate level federal tax. As a result, REITs distribute a
larger portion of their earnings to investors than other corporate entities
subject to the federal corporate tax.
Advantus Capital assesses an investment's potential for sustainable earnings
growth over time. In selecting securities, Advantus Capital considers factors
such as an issuer's financial condition, financial performance, quality of
management, policies and strategies, real estate properties and competitive
market position.
In addition, the Fund may invest lesser portions of its assets in securities
issued by companies outside of the real estate industry. The Fund may also
invest in non-real estate-related equity securities, convertible debt
securities, investment-grade fixed income securities, securities of other mutual
funds (including those advised by Advantus Capital), repurchase agreement
transactions, restricted and illiquid securities, securities issued by foreign
companies, securities purchased on a when issued or forward commitment basis,
secured portfolio loan transactions and money market securities.
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 a description of these securities in the Statement of Additional
Information.
6 INVESTING IN THE FUND
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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.
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:
- MARKET RISK - is the risk that equity securities are subject to adverse
trends in equity markets. 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, industry, sector
of the economy or the market as a whole.
- 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.
- 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.
- REAL ESTATE RISK - is the risk that the value of the Fund's investments
may decrease due to fluctuations in rental income, overbuilding and
increased competition, casualty and condemnation losses, environmental
costs and liabilities, extended vacancies of property, lack of available
mortgage funds, government regulation and limitations, increases in
property taxes, cash flow dependency, declines in real estate value,
physical depreciation of buildings, inability to obtain project financing,
increased operating costs and changes in general or local economic
conditions.
- INTEREST RATE RISK - is the risk that the value of a portfolio of
mortgages or debt securities will decline due to changes in market
interest rates. Generally, when interest rates rise, the value of a
portfolio of mortgages (including mortgage REITs) and debt securities
decreases. Conversely, when interest rates decline, the value of a
portfolio of mortgages and debt securities increases (including mortgage
REITs).
- CREDIT RISK - is the risk that an issuer of a REIT or debt security will
not make payments on the security when due. There is also the risk that an
issuer could suffer adverse changes in financial condition that could
lower the credit quality of a security. This could lead to greater
volatility in the price of the security and in shares of the Fund. Also, a
change in the quality rating of a REIT security or debt security can
affect the security's liquidity and make it more difficult to sell.
- REIT-RELATED RISK - is the risk that the value of the Fund's equity REIT
securities will be adversely affected by changes in the value of the
underlying property. In addition, the value of equity or mortgage REITs
could be adversely affected if the REIT fails to qualify for tax-free pass
through income under the Internal Revenue Code of 1986 (as amended), or
maintain its exemption from registration under the Investment Company Act
of 1940.
INVESTING IN THE FUND 7
<PAGE>
- PREPAYMENT RISK - is the risk that falling interest rates could cause
prepayments of mortgage loans to occur more quickly than expected. This
occurs because, as interest rates fall, more property owners refinance the
mortgages underlying mortgage REIT securities. The REIT must reinvest the
prepayments at a time when interest rates of new mortgage investments are
falling, potentially reducing the portion of the REIT's income
distributable to the Fund. In addition, when interest rates fall, prices
of mortgage loans held by a REIT may not rise as much as for other types
of comparable securities because investors may anticipate an increase in
mortgage prepayments.
- EXTENSION RISK - is the risk that rising interest rates could cause
property owners to prepay their mortgages more slowly than expected,
resulting in slower prepayments of real estate debt securities. This
would, in effect, convert a short or medium-duration REIT security into a
longer-duration security, increasing its sensitivity to interest rate
changes and causing its price to decline. Duration measures the expected
price sensitivity of a fixed income security or portfolio for a given
change in interest rates. For example, if interest rates rise by one
percent, the value of a security or portfolio having a duration of two
years generally will fall by approximately two percent.
- NON-DIVERSIFIED RISK - is the risk that an investment in the Fund may
present greater volatility, due to the limited number of issuers of real
estate and real estate-related securities, than an investment in a more
diversified portfolio of securities. The Fund is subject to
non-diversified risk because the Fund may invest in a smaller number of
individual issuers than a more diversified portfolio.
- 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
no 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. Advantus Capital also attempts to
assess each potential issuer's Year 2000 readiness program prior to
investing in the issuer's securities. In most instances, Advantus Capital
will rely on the representations of issuer management as to the issuer's
Year 2000 readiness.
You can find more information about other risks in the Statement of Additional
Information.
8 INVESTING IN THE FUND
<PAGE>
BUYING AND SELLING SHARES
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REFERENCE POINT
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Real Estate Securities Fund offers one share class - Class A - to investors. All
other Advantus Funds, except the Advantus Money Market Fund, offer three classes
of shares, Class A, Class B, and Class C, which lets investors choose among
three classes of shares that offer different sales charges and bear different
expenses. Please see "General Information - Advantus Family of Funds" for a
listing of all Advantus Funds.
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.
If you purchase Fund shares, you will generally pay an initial sales charge.
Fund 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>
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>
(1) You will not be assessed an initial sales charge for purchases of Fund
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.
As you see, the sales charge depends on the total value of your investment in
the Fund and not the amount of any single investment you make in the Fund. For
example, if you already own shares with a net asset value of $40,000 and you
decide to invest in additional Fund 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.
Fund 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 shares of the Fund,
the maximum Rule 12b-1 fee is 0.25%.
BUYING AND SELLING SHARES 9
<PAGE>
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 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 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.
- 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 at a lower average cost per share through
the principle of "dollar cost averaging."
For more information on any of these plans, please contact Advantus Shareholder
Services by telephone at (800) 665-6005.
WAIVER OF SALES CHARGE ON SHARE PURCHASES. Fund 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
For more information on these waivers, please see the Statement of Additional
Information or contact Advantus Shareholder Services.
10 BUYING AND SELLING SHARES
<PAGE>
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 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.
NAV for one Fund share is the value of that share's portion of the Fund's total
investments. 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. The Fund may
hold portfolio securities that are listed on foreign stock exchanges. These
foreign securities may trade on weekends or other days when the Fund typically
does not calculate NAV. As a result, the NAV of the Fund may change on days when
you will not be able to purchase or sell Fund shares.
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. 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 (please be sure to write your account number on your
check) 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.
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.
BUYING AND SELLING SHARES 11
<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. 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 contingent deferred sales
charge (CDSC) for Class A shares subject to a CDSC. Fund shares not otherwise
subject to a CDSC 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 without a signature guarantee, 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 your account falls below $150 because you
previously have sold shares, you may be required to sell your remaining shares.
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 Fund shares purchased in amounts of $1 million or more
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
- shares are to be transferred to another Fund account holder
- ---------------
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.
12 BUYING AND SELLING SHARES
<PAGE>
- 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 at no sales
charge. Following your sale of Fund shares, you will be entitled to purchase
only Fund shares or Class A shares of any of the Advantus Multiple Class Funds
under this reinstatement privilege. Any CDSC incurred in connection with the
prior sale of Fund shares within a 90 day period will not be refunded to a
shareholder's account.
EXCHANGING SHARES
You may exchange some or all of your Fund shares - which are designated "Class
A" shares - for shares of the same class of any other Advantus Multiple Class
Fund or of the 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 charges on exchanges after giving 60 days' prior notice to
shareholders.
Exchanges will be made based on the NAVs of the shares. No additional purchase
or sales charges will be imposed on exchanges for shares. However, shares of the
Money Market Fund acquired by exchange will still be subject to any applicable
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.
- ---------------
REFERENCE POINT
- ---------------
Please see "Telephone Transactions" for instructions on how to exchange shares
by telephone.
BUYING AND SELLING SHARES 13
<PAGE>
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.
14 BUYING AND SELLING SHARES
<PAGE>
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.
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 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.
- --------------------
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.
GENERAL INFORMATION 15
<PAGE>
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.
16 GENERAL INFORMATION
<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.
P.O. Box 64809
St. Paul, Minnesota 55101-0809
(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
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
GENERAL COUNSEL
Dorsey & Whitney LLP
18 SERVICE PROVIDERS
<PAGE>
ADVANTUS FAMILY OF FUNDS
Real Estate Securities Fund is a member of the Advantus family of funds. The
following is a brief description of the investment 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.
*"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]
19
<PAGE>
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
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 1-800-SEC-0330). 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. 20549-6009. You will be charged
a duplicating fee for copies.
Investment Company Act No. 811-
[LOGO]
-C-1998 Minnesota Life Insurance Company. All rights reserved.
F. 48218 Rev. 2-1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
_________________, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THIS STATEMENT OF
ADDITIONAL INFORMATION RELATES TO THE SEPARATE PROSPECTUS DATED ____________,
1999, AND SHOULD BE READ IN CONJUNCTION THEREWITH. A COPY OF THE PROSPECTUS MAY
BE OBTAINED BY TELEPHONE FROM ADVANTUS SHAREHOLDER SERVICES AT (800) 665-6005 OR
BY WRITING TO 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 AND ANNUAL REPORT TO SHAREHOLDERS FOR THE FUND.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . . . . .4
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . .4
Real Estate Investment Trust Securities . . . . . . . . . . . . . . . . . . . . . .4
Debt and Money Market Securities. . . . . . . . . . . . . . . . . . . . . . . . . .4
Low Rated Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Foreign Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Loans of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Restricted and Illiquid Securities. . . . . . . . . . . . . . . . . . . . . . . . .8
When-Issued Securities and Forward Commitments. . . . . . . . . . . . . . . . . . .9
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Defensive Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 14
DIRECTOR LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . 16
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Control and Management of Advantus Capital and Ascend Financial . . . . . . . . . 16
Investment Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Distribution Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Payment of Certain Distribution Expenses of the Fund. . . . . . . . . . . . . . . 18
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE . . . . . . . . . . . . . . . . 20
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . 22
CAPITAL STOCK AND OWNERSHIP OF SHARES. . . . . . . . . . . . . . . . . . . . . . . 24
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Alternative Purchase Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 24
Purchase by Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Purchase by Wire. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Timing of Purchase Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Minimum Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Public Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SALES CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
NET ASSET VALUE AND PUBLIC OFFERING PRICE. . . . . . . . . . . . . . . . . . . . . 26
REDUCED SALES CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Right of Accumulation-Cumulative Purchase Discount. . . . . . . . . . . . . . . . 27
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Combining Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Group Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Waiver of Sales Charges For Certain Sales of Class A Shares . . . . . . . . . . . 28
2
<PAGE>
EXCHANGE AND TRANSFER OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . 28
Systematic Exchange Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Open Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Automatic Investment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Group Systematic Investment Plan. . . . . . . . . . . . . . . . . . . . . . . . . 30
Retirement Plans Offering Tax Benefits. . . . . . . . . . . . . . . . . . . . . . 31
Systematic Withdrawal Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Signature Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Telephone Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Delay in Payment of Redemption Proceeds . . . . . . . . . . . . . . . . . . . . . 34
Fund's Right to Redeem Small Accounts . . . . . . . . . . . . . . . . . . . . . . 34
Reinstatement Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
TELEPHONE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
DISTRIBUTIONS AND TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Dividends and Capital Gains Distributions . . . . . . . . . . . . . . . . . . . . 35
Taxation - General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Taxation on Portfolio Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . 37
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDIX A BOND AND COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . .A-1
</TABLE>
3
<PAGE>
GENERAL INFORMATION AND HISTORY
Advantus Real Estate Securities Fund, Inc. (the "Fund") is an open-end
diversified investment companies, commonly called a mutual fund. The Fund,
together with twelve 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 the Fund and Advantus Money Market Fund, Inc.,
offers more than one class of shares (the "Advantus Multiple Class Funds"). The
Fund currently offers one class of shares (Class A). The Fund was incorporated
as a Minnesota corporation in September, 1998.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of the Fund are
set forth in detail in the text of the Fund's Prospectus under "Investing in the
Fund - Investment Policies and Practices."
REAL ESTATE INVESTMENT TRUST SECURITIES
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),
75% of its assets must be in real estate, mortgages or REIT stock, and must
distribute to shareholders annually 95% or more of its otherwise taxable income.
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
The 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.
4
<PAGE>
See "Low Rated Securities," below. For a description of the ratings used
by Moody's and S&P, see Appendix A ("Bond and Commercial Paper Ratings")
below.
--Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
--Debt obligations of banks.
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 such 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 or sub-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.
5
<PAGE>
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
The Fund may also hold 5% of its net assets in securities rated below
"investment grade" (i.e. below BBB) where such securities were investment grade
at the time of purchase but subsequently down-graded. 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 Fund's 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.
6
<PAGE>
CONVERTIBLE SECURITIES
The Fund 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. The 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
The Fund may invest up to 10% of the market value 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 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 th 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.
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
7
<PAGE>
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.
LOANS OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured
loans of portfolio securities amounting to not more than 20% of its total
assets. Securities loans are made to broker-dealers or financial institutions
pursuant to agreements requiring that the loans be continuously secured by
collateral at least equal at all times to the value of the securities lent. The
collateral received will consist of cash, 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 in some
cases may 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.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets 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
8
<PAGE>
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.
If through the appreciation of restricted securities or the depreciation of
unrestricted securities, the Fund is in a position where more than 15% of its
net assets are invested in restricted and other illiquid securities, the Fund
will take appropriate steps to protect liquidity.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may each purchase securities offered on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities takes place at a later date. Normally, the settlement date
occurs within two months after the transaction, but delayed settlements beyond
two months may be negotiated. During the period between a commitment to
purchase by the Fund and settlement, no payment is made for the securities
purchased by the Fund and, thus, no interest accrues to the Fund from the
transaction.
The use of when-issued transactions and forward commitments enables the
Fund to hedge against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling prices, the Fund might
sell securities in its portfolio on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising
prices, the Fund might sell a security in its portfolio and purchase the same or
a similar security on a when-issued or forward commitment basis, thereby fixing
the purchase price to be paid on the settlement date at an amount below that to
which the Fund anticipates the market price of such security to rise and, in the
meantime, obtaining the benefit of investing the proceeds of the sale of its
portfolio security at currently higher cash yields. Of course, the success of
this strategy depends upon the ability of the Fund's investment adviser to
correctly anticipate increases and decreases in interest rates and prices of
securities. If the 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 from investment of the proceeds of the sale of
the
9
<PAGE>
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, except for mortgage dollar roll transactions, 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.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Repurchase agreements are
agreements by which the Fund purchases a security and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, if
permitted by law or regulation and if the Board of Directors of the Fund has
evaluated its creditworthiness through adoption of standards of review or
otherwise, a securities dealer) to repurchase the security at an agreed upon
price and date. The creditworthiness of entities with whom the Fund enters into
repurchase agreements is monitored by the Fund's investment adviser throughout
the term of the repurchase agreement. The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash. The Fund's
custodian, or a duly appointed subcustodian, holds the securities underlying any
repurchase agreement in a segregated account or such securities may be part of
the Federal Reserve Book Entry System. The market value of the collateral
underlying the repurchase agreement is determined on each business day. If at
any time the market value of the collateral falls below the repurchase price of
the repurchase agreement (including any accrued interest), the Fund promptly
receives additional collateral, so that the total collateral is in an amount
10
<PAGE>
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
The Fund 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. The market price of a
warrant is determined by market participants by the addition of two distinct
components: (1) the price of the underlying shares less the warrant's exercise
price, and (2) the warrant's premium that is attributed to volatility and
leveraging power. 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.
SHORT SALES AGAINST THE BOX
The 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 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 Fund has no present intention to sell securities short in this
fashion.
DEFENSIVE PURPOSES
The Fund may invest approximately 5% of its net assets in cash or cash
items. In addition, for temporary or defensive purposes, the Fund may invest up
to 20% of its net assets in cash or cash items without limitation. The "cash
items" in which the Fund 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 the 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 Fund may so invest include money market funds advised
by the Fund's investment adviser.
11
<PAGE>
INVESTMENT RESTRICTIONS
The Fund is "diversified" as defined in the Investment Company Act of 1940
(the "1940 Act"). 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.
The Fund is also subject to certain "fundamental" investment restrictions,
which may not be changed without the vote of a "majority" of the Fund's
outstanding shares. As used in the Prospectus and this Statement of Additional
Information, "majority" means the lesser of (i) 67% of the 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 the 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.
(The investment restrictions numbered 1 through 7 below are fundamental.
Restrictions numbered 8 through 13 are not fundamental.)
The 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 indicies or interest rate indicies)
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 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.
12
<PAGE>
(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 Funds 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.
Any investment policy set forth under "Investing in the Fund -- Investment
Policies and Practices" in the Prospectus, or any restriction set forth above
which involves a maximum percentage of securities or assets shall not be
considered to be violated unless an 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.
The 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
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<PAGE>
emphasize short-term trading profits. The Fund had not commenced operations
prior to the date hereof.
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of
directors and executive officers of the Fund are given below:
<TABLE>
<CAPTION>
Position with Principal Occupation and other
Name and Address the Fund Affiliations (past 5 years)
- ---------------- --------- ---------------------------
<S> <C> <C>
William N. Westhoff* President and President, Treasurer and Director,
Advantus Capital Director Advantus Capital Management, Inc.;
Management, Inc. Senior Vice President and Treasurer,
400 Robert Street North Minnesota Life Insurance Company;
St. Paul, Minnesota 55101 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
Frederick P. Feuerherm* Vice President, Vice President, Assistant Secretary and
Advantus Capital Director and Director, Advantus Capital
Management, Inc. Treasurer Management, Inc.; Vice President,
400 Robert Street North Minnesota Life Insurance Company;
St. Paul, Minnesota 55101 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
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<PAGE>
Charles E. Arner Director Retired, Vice Chairman of The First
E-1218 First National National Bank of Saint Paul from
Bank Building November 1983 through June 1984;
332 Minnesota Street Chairman and Chief Executive Officer
St. Paul, Minnesota 55101 of The First National Bank of Saint Paul
from October 1980 through November
1983
Ellen S. Berscheid Director Regents' Professor of Psychology at 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 Fund who are "interested persons" (as defined under
the Investment Company Act of 1940) of the Fund.
__________________________________
Legal fees and expenses are paid to the law firm of which Michael J. Radmer
is a partner. No compensation is paid by the Fund to any of its officers or
directors who is affiliated with Advantus Capital Management, Inc. ("Advantus
Capital").
Each director of the Fund who is not affiliated with Advantus Capital is
also a director of the other twelve investment companies of which Advantus
Capital is the investment adviser (13 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 the Fund is a pro rata portion based on the ratio that the Fund's total net
assets bears to the total net assets of the Fund Complex. The Fund had not
commenced operations prior to the date hereof.
DIRECTOR LIABILITY
Under Minnesota law, the Board of Directors of the 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
15
<PAGE>
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 the 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
heir 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 the Fund since its inception. Ascend
Financial Services, Inc. ("Ascend Financial") acts as the Fund's 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
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 $15.7 billion. Ascend Financial is also a
subsidiary of Minnesota Life. William N. Westhoff, President and a Director of
the Fund, is President, Treasurer and Director of Advantus Capital. Frederick
P. Feuerherm, Vice President, Treasurer and a Director of the Fund, 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.
16
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Advantus Capital acts as investment adviser and manager of the Fund under
an Investment Advisory Agreement (the "Advisory Agreement") dated October 22,
1998 for the Fund, which became effective on ___, 1999, when the Fund's initial
shareholder approved the Advisory Agreement. The Advisory Agreement was
approved by the Board of Directors of the Fund (including a majority of the
directors who are not parties to the contract, or interested persons of any such
party) on October 22, 1998. The Advisory Agreement will terminate automatically
in the event of its assignment. In addition, the Advisory Agreement is
terminable at any time, without penalty, by the Board of Directors of the 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, the 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 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 Agreement the Fund pays Advantus Capital an
advisory fee equal on an annual basis to a .75% of the Fund's average daily net
assets. The Fund had not commenced operations prior to the date hereof.
For this fee, Advantus Capital acts as investment adviser and manager for
the Fund. In addition, separate from the Investment Advisory Agreement, the
Fund has entered into an agreement with Minnesota Life under which Minnesota
Life, through its Advantus Shareholder Services division, provides (i)
accounting, legal and other administrative services and (ii) shareholder
servicing to the Fund. Minnesota Life currently provides accounting, legal and
administrative services at a monthly cost to the Fund of $3,700, and shareholder
servicing at a cost to the Fund of $5 per shareholder account per year. The
Fund pays its own transfer agent expenses and has engaged First Data Investor
Services Group, Inc. to act as its transfer agent.
Under the Advisory Agreement, Advantus Capital furnishes the Fund office
space and all necessary office facilities, equipment and personnel for servicing
the investments of the Fund, and pays the salaries and fees of all officers and
directors of the Fund who are affiliated with Advantus Capital. In addition,
except to the extent that Ascend Financial receives Rule 12b-1 distribution fees
(see "Payment of Certain Distribution Expenses of the Fund" below), Ascend
Financial bears all promotional expenses in connection with the distribution of
the Fund's shares, including paying for prospectuses and statements of
additional information for new shareholders, and shareholder reports for new
shareholders, and the costs of sales literature. The Fund pays all other
expenses not so expressly assumed.
17
<PAGE>
DISTRIBUTION AGREEMENT
The Board of Directors of the Fund, including a majority of the directors
who are not parties to the contract, or interested persons of any such party,
approved the Fund's Distribution Agreement with Ascend Financial (the
"Distribution Agreement"), on October 22, 1998.
The Distribution Agreement may be terminated by the 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 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 Agreement requires Ascend Financial to pay all advertising
and promotional expenses in connection with the distribution of the Fund's
shares including paying for Prospectuses and Statement of Additional Information
(if any) for new shareholders, shareholder reports for new shareholders, and the
costs of sales literature.
In the Distribution Agreement, Ascend Financial undertakes to indemnify the
Fund against all costs of litigation and other legal proceedings, and against
any liability incurred by or imposed upon the Fund in any way arising out of or
in connection with the sale or distribution of the Fund's 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 Fund but not with Ascend
Financial.
PAYMENT OF CERTAIN DISTRIBUTION EXPENSES OF THE FUND
The Fund has adopted a Plan of Distribution applicable to Class A shares
relating to the payment of certain shareholder servicing expenses pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The Fund, pursuant to its
Plan of Distribution, pays fees to Ascend Financial which equal, on an annual
basis, .25% of the Fund's average daily net assets attributable to Class A
shares.
The 12b-1 fees payable with respect to Class A shares, equal to .25% of the
average daily net assets, constitute a shareholder servicing fee designed to
compensate Ascend Financial for the provision of certain services to the holders
of Class A shares.
Amounts expended by the Fund under the Plan of Distribution 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 administrative support services
to customers who directly or beneficially own shares of the Fund. The
administrative support services rendered by dealers may include, but are not
limited to, the following: answering routine customer inquiries concerning
the Fund; assisting customers in changing dividend options, account
designation and addresses, and in enrolling into the pre-authorized check
plan or systematic
18
<PAGE>
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 Fund's shares and providing such other information and
services as the Fund 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 Fund.
Ascend Financial may also provide compensation to certain institutions such
as banks ("Service Organizations") which have purchased shares of the Fund for
the accounts of their clients, or which have made the Fund's shares available
for purchase by their clients, and/or which provide continuing service to such
clients. The Glass-Steagall Act and other applicable laws, among other things,
prohibit certain banks from engaging in the business of underwriting securities.
In such circumstances, 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 Fund and alternative means for
continuing servicing of such shareholders would be sought. In such event
changes in the operation of the Fund might occur and a shareholder serviced by
such bank might no longer be able to avail itself of any automatic investment or
other services then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
In addition, the Plan of Distribution contains, among other things,
provisions complying with the requirements of Rule 12b-1 discussed below. Rule
12b-1(b) provides that any payments made by 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)
19
<PAGE>
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 October 22, 1998, the directors of the Fund so
concluded. Since the Fund had not commenced operations prior to the date
hereof, no information regarding 12b-1 fees paid by the Fund is provided.
The Plan of Distribution could be construed as a "compensation plan"
because Ascend Financial is paid a fixed fee and is given discretion concerning
what expenses are payable under the Plan of Distribution. 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 less for the distribution and promotion of the Fund's shares than
it receives as distribution fees pursuant to the Plan of Distribution. However,
to the extent fees received exceed expenses, including indirect expense such as
overhead, Ascend Financial could be said to have received a profit.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
In a number of security transactions, it is possible for the Fund to deal
in the over-the-counter security markets (including the so-called "third market"
which is the "over-the-counter" market for securities listed on the New York
Stock Exchange) without the payment of brokerage commissions but at net prices
including a spread or markup; the Fund trades 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 Fund. Since the Fund had not
commenced operations prior to the date hereof, no information regarding
brokerage commissions paid by the Fund is provided.
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
Fund pays 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 Fund enables 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
Fund. To the extent such commissions are directed to these other brokers who
furnish research services to Advantus Capital, Advantus Capital receives a
20
<PAGE>
benefit, not capable of evaluation in dollar amounts, without providing any
direct monetary benefit to the Fund from these commissions.
There is no formula for the allocation by Advantus Capital of the Fund's
brokerage business to any broker-dealer for brokerage and research services.
However, Advantus Capital will authorize the 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. Since the Fund had not commenced operations prior to the
date hereof, no information regarding brokerage commissions paid by the Fund is
provided.
No brokerage is allocated for the sale of Fund shares. Advantus Capital
believes that most research services obtained by it generally benefit one or
more of the investment companies which it manages and also benefit accounts
which it manages. Normally research services obtained through managed funds and
managed accounts investing in common stocks would primarily benefit such funds
and accounts; similarly, services obtained from transactions in fixed income
securities would be of greater benefit to the managed funds and managed accounts
investing in debt securities.
The Fund 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 Fund. In the event any transactions are executed on an
agency basis, Advantus Capital will authorize the Fund 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 Fund as to
which it exercises investment discretion. If the Fund executes any transactions
on an agency basis, it 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 Fund 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 Fund does not deem it practicable
and in its 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.
21
<PAGE>
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to
"yield," "average annual total return" and "cumulative total return."
Performance quotations are computed separately for each class of shares of the
Fund.
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.
Since the Fund had not commenced operations prior to the date hereof, no
Fund yield information is provided.
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:
22
<PAGE>
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period.
Since the Fund had not commenced operations prior to the date hereof, no
information regarding the average annual total return of the Fund is provided.
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.
Since the Fund had not commenced operations prior to the date hereof, no
information regarding the cumulative total return of the Fund is provided.
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.
23
<PAGE>
CAPITAL STOCK AND OWNERSHIP OF SHARES
The Fund's shares of common stock 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.
The Fund has 10 billion authorized shares of common stock and has
designated 2 billion authorized shares as Class A shares. As of the date
hereof, there were ___ Class A shares of the Fund outstanding, all of which were
owned by Advantus Capital and its affiliates.
HOW TO BUY SHARES
The 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 Fund may be purchased at a
price equal to its net asset value.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers Class A shares of the Fund. Purchase orders for $1,000,000
or more 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.
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 Fund's 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 (800) 665-6005 for instructions. Promptly after making an initial
purchase by wire, an investor should complete an account application and mail it
to First Data at 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.
24
<PAGE>
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.
MINIMUM INVESTMENTS
A minimum initial investment of $250 is required, and the minimum
subsequent investment is $25.
PUBLIC OFFERING PRICE
The public offering price of the Fund will be the net asset value per share
of the Fund next determined after an order is received by First Data and becomes
effective, plus the applicable sales charge, if any. The net asset value per
share of Class A shares 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 (as of the date hereof, New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day).
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
25
<PAGE>
accurately reflect the fair market value of such securities. Short-term
investments in debt securities are valued daily at market.
SALES CHARGES
The public offering price of Class A shares of the Fund is the net asset
value of the Fund's shares plus the applicable front end sales charge ("FESC"),
which will vary with the size of the purchase. Ascend Financial receives all
applicable sales charges. The Fund receives the net asset value. The current
sales charges are:
Sales Charge as a Percentage of:
<TABLE>
<CAPTION>
Offering Net Amount Amount Paid to Broker-Dealers
Value of Total Investment Price Invested as a Percentage of Offering Price:
- ------------------------- ----- -------- ----------------------------------
<S> <C> <C> <C>
Less than $50,000 5.5% 5.82% 4.95%
$50,000 but less than
$100,000 4.5 4.71 4.05
$100,000 but less than
$250,000 3.5 3.63 3.15
$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 1.80
$1,000,000 and over (1) 0 0 .90
</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.
Note that the sales charge depends on the total value of an investment (net
asset value of shares currently owned plus the cost of any new investment) in
the Fund, and not on the amount of a single investment. For example, if an
investor already owns shares with a net asset value of $40,000 and decides to
invest in additional Class A shares having a public offering price of $10,000,
the investor will pay a sales charge equal to 4.5% of the entire additional
$10,000 investment, since the total value of the investment is now $50,000.
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."
The portfolio securities in which the Fund invests fluctuate in value, and
hence the net asset value per share of the Fund also fluctuates.
26
<PAGE>
Since the Fund had not commenced operations prior to the date hereof, no
information regarding the net asset value of the Fund's shares is provided.
REDUCED SALES CHARGES
Special purchase plans are enumerated in the text of the Fund's Prospectus
under "Buying and Selling Shares - Reducing Sales Charges" and are fully
described below.
RIGHT OF ACCUMULATION-CUMULATIVE PURCHASE DISCOUNT
The front end sales charge and contingent deferred sales charge applicable
to each purchase of Class A shares of the Fund is based on the next computed net
asset value of all Class A shares of the Fund held by the shareholder (including
dividends reinvested and capital gains distributions accepted in shares), plus
the cost of all Class A shares of the Fund 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 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 the Fund
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 Class A shares currently held in
the Fund, on the date of the first purchase under the Letter of Intent, may be
used as a credit toward Fund shares to be purchased under the Letter of Intent.
Class A shares of the Fund may also be included in the purchases during the
13-month period.
The Letter of Intent includes a provision for payment of additional
applicable sales charges at the end of the period in the event the investor
fails to purchase the amount indicated. 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 Fund to sell, the full amount indicated.
Nevertheless, the Letter of Intent should be read carefully before it is signed.
27
<PAGE>
COMBINING PURCHASES
With respect to the Fund, purchases of Class A 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 Fund at the reduced sales charge applicable to the group taken as a
whole. The sales charge is calculated by taking into account not only the
dollar amount of the Class A shares of the Fund being purchased by the
individual member, but also the aggregate dollar value of such Class A shares
previously purchased and currently held by other members of the group. Members
of a qualified group may not be eligible for a Letter of Intent.
A "qualified group" is one which (i) has been in existence for more than
six months, (ii) has a purpose other than acquiring Fund shares at a discount,
and (iii) satisfies uniform criteria which enable 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 Fund 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 Fund.
WAIVER OF SALES CHARGES FOR CERTAIN SALES OF CLASS A SHARES
Directors and officers of Advantus Capital, Ascend Financial, the Fund,
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 Fund 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 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 shares in the
Fund, including shares acquired by reinvestment of dividends, for shares of the
same class of any of the other Advantus Multiple Class Funds (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,
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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.
Class A shares may also be exchanged for shares of the Money Market Fund at
their net asset values. 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 such time period will not be included.
Shares of Money Market Fund acquired in an exchange for Class A shares of
the Fund may also be re-exchanged at relative net asset values for Class A
shares of the Fund.
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
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. 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.
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The costs of maintaining the open account system are paid by the Fund. No
direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
AUTOMATIC INVESTMENT PLAN
The 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 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. It is essential that the investor consider his or her financial
ability to continue this investment program during times of market decline as
well as market rise. The principle of dollar cost averaging will not protect
against loss in a declining market, as a loss will result if the plan is
discontinued when the market value is less than cost.
A Plan may be opened by indicating 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 the 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
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"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 the Fund. 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 the 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 the Fund 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 the Fund purchased in amounts of $1 million or
more may also be subject to a contingent deferred sales charge ("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
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.
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.
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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 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. 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 Fund may redeem their shares at the per
share net asset value next determined following receipt by the Fund (at its
mailing address listed on the cover page) of a written redemption request signed
by all shareholders exactly as the account is registered (and a properly
endorsed stock certificate if one has been issued). Class A shares may be
redeemed without charge. However, a contingent deferred sales charge may be
applicable upon redemption of certain Class A 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.
The Fund will pay in cash all redemption requests by any shareholder of
record, limited in amount during any 90-day period to the lesser of $250,000 or
1% of the net asset value of the Fund at the beginning of such period. When
redemption requests exceed such amount, however, the Fund reserves the right to
make part or all of the payment in the form of securities or other assets of the
Fund. An example of when this might be done is in case of emergency, such as in
those situations enumerated in the following paragraph, or at any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. Any securities being so distributed would be valued in
the same manner as the portfolio of the Fund is valued. If the recipient sold
such securities, he or she probably would incur brokerage charges. The Fund has
filed with the Securities and Exchange Commission a notification of election
pursuant to Rule 18f-1 under the Investment Company Act of 1940 in order to make
such redemptions in kind.
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Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable, or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or during any other period when
the 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 Fund 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.
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 (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
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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 Fund describes redeeming shareholders' reinstatement
privileges in "Buying and Selling Shares" in the Fund's 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 shares will be issued as Class A shares.
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
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.
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Shareholders, or persons authorized by shareholders, may initiate telephone
transactions by telephoning Advantus Shareholder Services, toll free, at
1-800-665-6005. 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.
DISTRIBUTIONS AND TAX STATUS
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The policy of the Fund is to pay dividends from net investment income
quarterly. Any net realized capital gains are generally distributed once a
year, during December. Distributions paid by the Fund, if any, with respect to
Class A shares will be calculated in the same manner, at the same time, on the
same day and will be in the same amount.
Any dividend payments or net capital gains distributions made by the Fund
are in the form of additional shares of the same class of the Fund rather than
in cash, unless a shareholder specifically requests the Fund in writing that the
payment be made in cash. The distribution of these shares is made at net asset
value on the payment date of the dividend, without any sales or other charges to
the shareholder. The taxable status of income dividends and/or net capital
gains distributions is not affected by whether they are reinvested or paid in
cash. Authorization to pay dividends in cash may be made on the application
form, or at any time by letter.
Upon written request to the Fund, a shareholder may also elect to have
dividends from the Fund invested without sales charge in shares of Money Market
Fund or shares of the same class of another of the Advantus Multiple Class Funds
at the net asset value of such other Advantus Multiple Class Fund on the payable
date for the dividends being distributed (subject to the applicable sales
charge). To use this privilege of investing dividends from the Fund in shares
of another of the Funds, shareholders must maintain a minimum account value of
$250 in both the Fund and the other Fund in which dividends are reinvested.
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TAXATION - GENERAL
The following is a general summary of certain federal tax considerations
affecting the Fund and its shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or its shareholders, and
the discussion here is not intended as a substitute for careful tax planning.
The Fund intends to fulfill the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, the Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
Distributions of investment company taxable income from the Fund generally
will be taxable to shareholders as ordinary income, regardless of whether such
distributions are paid in cash or are invested in additional shares of the
Fund's stock. A distribution of net capital gain (a "capital gain
distribution"), whether paid in cash or reinvested in shares, 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 the Fund are expected to
qualify for the 70% dividend received deduction for corporations.
Prior to purchasing shares of the Fund, prospective shareholders (except
for tax qualified retirement plans) should consider the impact of dividends or
capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or 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.
Gain or loss upon the sale of shares of the Fund will be treated as capital
gain or loss, provided that the shares represented a capital asset in the hands
of the shareholder. For shareholders, such gain or loss will be long-term gain
or loss if the shares where held more than one year.
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.
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Shareholders of the Fund receive an annual statement detailing federal tax
information. Distributions by the Fund, including the amount of any redemption,
are reported to shareholders in such annual statement and to the Internal
Revenue Service to the extent required by the Code.
The Fund is 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.
Before investing in the Fund, an investor should consult a tax adviser
concerning the consequences of any local and state tax laws, and of any
retirement plan offering tax benefits.
TAXATION ON PORTFOLIO HOLDINGS
Except for the transactions identified as hedging transactions, the Fund is
required for federal income tax purposes to recognize as income for each taxable
year its net unrealized gains and losses on futures contracts, options and
forward currency contracts as of the end of the year as well as those actually
realized during the year. Except for transactions in futures contracts,
options, or forward currency contracts that are classified as part of a "mixed
straddle," gain or loss recognized with respect to such contracts is considered
to be 60% long-term capital gain or loss and 40% short-term capital gain or
loss, without regard to the holding period of the contracts. In the case of a
transaction classified as a "mixed straddle," the recognition of losses may be
deferred to a later taxable year.
Sales of futures contracts, options, or forward currency contracts that are
intended to hedge against a change in the value of securities or currencies held
by the Fund may affect the holding period of such securities or currencies and,
consequently, the nature of the gain or loss on such securities or currencies
upon disposition.
It is expected that any net gain realized from the closing out of futures
contracts, options, or forward currency contracts will be considered gain from
the sale of securities or currencies and therefore be qualifying income for
purposes of the requirement under the Code that a regulated investment company
derive at least 90% of its gross income from dividends interest, gains from the
sale or disposition of securities, or otherwise from the business of investing
in securities.
Any realized gain or loss on closing out a futures contract, option, or
forward currency contract such as a forward commitment for the purchase or sale
of foreign currency, will generally result in a recognized capital gain or loss
for tax purposes.
The 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
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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 Fund may in the future sell securities "short against the box." Under
provisions of the Taxpayer Relief Act of 1997, if the Fund sells short against
the box a security in which it has an appreciated position, it will be treated
as if it had sold the security for its fair market value on the date of the
short sale, and will be required to recognize gain as of that date. On a
subsequent sale of the security that has been sold short against the box, the
Fund's basis in the security will be adjusted to take into account the amount of
gain previously recognized.
The foregoing relates only to federal taxation. Prospective shareholders
should consult their tax advisers as to the possible application of state and
local income tax laws to Fund distributions.
FINANCIAL STATEMENTS
Because the Fund was not in operation prior to the date hereof, no
financial information for the Fund is available.
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APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
BOND RATINGS
Moody's Investors Service, Inc. describes its five highest ratings for
corporate bonds and mortgage-related securities as follows:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Bonds which are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Moody's Investors Service, Inc. also applies numerical modifiers, 1, 2, and
3, in each of these generic rating classifications. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
Standard & Poor's Corporation describes its five highest ratings for
corporate bonds and mortgage-related securities as follows:
AAA. Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
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AA. Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A. Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB. Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB. Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments.
Standard & Poor's Corporation applies indicators "+", no character, and "-"
to the above rating categories. The indicators show relative standing within
the major rating categories.
COMMERCIAL PAPER RATINGS
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. Among the factors considered by Moody's
Investors Service, Inc. in assigning the ratings are the following: (1)
evaluation of the management of the issuer, (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; an (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
The rating A-1 is the highest rating assigned by Standard & Poor's
Corporation to commercial paper which is considered by Standard & Poor's
Corporation to have the following characteristics:
Liquidity ratios of the issuer are adequate to meet cash redemptions.
Long-term senior debt is rated "A" or better. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow
have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a
strong position within the industry. The reliability and quality of
management are unquestioned.
A-2
<PAGE>
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)
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.
Capitol City Property Management, Inc.
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MCM Funding 1997-1, Inc.
MCM Funding 1998-1, Inc.
Personal Finance Company (Delaware)
MIMLIC Venture Corporation
HomePlus Insurance Agency, Inc.
Ministers Life Resources, Inc.
Enterprise Holding Corporation
Wedgewood Valley Golf, 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.
Wholly-owned subsidiary of HomePlus Insurance Agency, Inc.:
HomePlus Insurance Agency of Texas, Inc. (Texas)
Majority-owned subsidiaries of MIMLIC Imperial Corporation:
J. H. Shoemaker Advisory Corporation (Tennessee)
Consolidated Capital Advisors, Inc. (Tennessee)
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.
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 Money Market Fund, Inc.
MIMLIC Cash Fund, Inc.
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 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 Venture
Corporation; 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
<PAGE>
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, MIMLIC Venture
Corporation; 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.
Marilyn Froelich Vice President Vice President, MCM Funding
1997-1, Inc.; Vice President,
MCM Funding 1998-1, Inc.;
Director, Investment Advisory,
Minnesota Life Insurance
Company
Loren Haugland Vice President Vice President, MCM Funding
1997-1, Inc.; Vice 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, Total
Return, Minnesota Life
Insurance Company
Kent R. Weber Vice President Vice President, MCM Funding
1997-1, Inc.; Vice President,
MCM Funding
<PAGE>
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, Total
Return, 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 -
Fixed Income PM, 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, Minnesota Life
Insurance Company
Steven Laude Vice President Vice President, MCM Funding
1997-1, Inc.; Vice President,
MCM Funding 1998-1, Inc.;
Senior Investment Officer -
Fixed Income, Minnesota Life
Insurance Company
<PAGE>
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
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
Rodney Hare Vice President Director of Institutional
Marketing, Minnesota Life
Insurance Company; Vice
President, MCM Funding 1997-1,
Inc.; Vice President, MCM
Funding 1998-1, Inc.
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 Senior Investment Officer -
Mortgage, 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 Senior Investment Officer -
Fixed Income, Minnesota Life
Insurance Company; Vice
President, MCM Funding 1997-1,
Inc.; Vice President, MCM
Funding 1998-1, Inc.
Mark L. Henneman Vice President Value Portfolio Manager,
Minnesota Life Insurance
<PAGE>
Company; Vice President, MCM
Funding 1997-1, Inc.; Vice
President, MCM Funding 1998-1,
Inc.
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.
</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.
MIMLIC Cash 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, Chief
400 Robert Street North Compliance Officer and
St. Paul, Minnesota 55101 Director
<PAGE>
Margaret Milosevich Vice President, Chief Assistant
Ascend Financial Services, Inc. Operations Officer, Secretary
400 Robert Street North Treasurer and Secretary
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:
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this 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 10th day of
December, 1998.
ADVANTUS REAL ESTATE SECURITIES 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 December 10, 1998
William N. Westhoff executive officer)
and Director
- ------------------------ Director and Treasurer December 10, 1998
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: December 10, 1998
)
)
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 REAL ESTATE SECURITIES FUND, INC.
EXHIBIT INDEX
Exhibit Number and Description:
(a) Articles of Incorporation for the Registrant.
(b) Bylaws of the Registrant.
(c) Not applicable.
(d) Investment Advisory Agreement between Advantus Capital Management,
Inc. and the Registrant.
(e)(1) Underwriting and Distribution Agreement between the Registrant and
Ascend Financial Services, Inc.
(e)(2) 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 U.S. Bank National
Association.
(h) Shareholder and Administrative Services Agreement between the
Registrant and Minnesota Life Insurance Company.
(i) Opinion and Consent of Dorsey & Whitney LLP.
(j) Consent of KPMG Peat Marwick LLP.
(k) Not applicable.
(l) Not applicable.
(m) Plan of Distribution for Class A shares of the Registrant.
(n) Not applicable.
(o) Not applicable.
(p) Power of Attorney to sign Registration Statement executed by Directors
of Registrant.
<PAGE>
ARTICLES OF INCORPORATION
OF
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
For the purpose of forming a corporation pursuant to the provisions of
Minnesota Statutes, Chapter 302A, the following Articles of Incorporation are
adopted:
1. The name of the corporation (the "Corporation") is Advantus Real
Estate Securities Fund, Inc.
2. The Corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all lawful
businesses for which corporations may be organized under the Minnesota Statutes,
Chapter 302A. Without limiting the generality of the foregoing, the Corporation
shall have specific power:
(a) To conduct, operate and carry on the business of a so-called
"open-end" management investment company pursuant to applicable state and
federal regulatory statutes, and exercise all the powers necessary and
appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise acquire, and
to own, hold, pledge, mortgage, hypothecate, sell, possess, transfer or
otherwise dispose of, or turn to account or realize upon, and generally
deal in, all forms of securities of every kind, nature, character, type and
form, and other financial instruments which may not be deemed to be
securities, including but not limited to futures contracts and options
thereon. Such securities and other financial instruments may include but
are not limited to shares, stocks, bonds, debentures, notes, scrip,
participation certificates, rights to subscribe, warrants, options,
certificates of deposit, bankers' acceptances, repurchase agreements,
commercial paper, choses in action, evidences of indebtedness, certificates
of indebtedness and certificates of interest of any and every kind and
nature whatsoever, secured and unsecured, issued or to be issued, by any
corporation, company, partnership (limited or general), association, trust,
entity or person, public or private, whether organized under the laws of
the United States, or any state, commonwealth, territory or possession
thereof, or organized under the laws of any foreign country, or any state,
province, territory or possession thereof, or issued or to be issued by the
United States government or any agency or instrumentality thereof, options
on stock indexes, stock index and interest rate futures contracts and
options thereon, and other futures contracts and options thereon.
(c) In the above provisions of this Article 2, purposes shall also be
construed as powers and powers shall also be construed as purposes, and the
enumeration of specific purposes or powers shall not be construed to limit
other statements of purposes or to limit purposes or powers which the
Corporation may otherwise have under applicable law, all of the same being
separate and cumulative, and all of the same may be carried on, promoted
and pursued, transacted or exercised in any place whatsoever.
<PAGE>
3. The Corporation shall have perpetual existence.
4. The location and post office address of the registered office in
Minnesota is 400 Robert Street North, St. Paul, Minnesota 55101-2098.
5. (a) The total authorized number of shares of the Corporation is ten
billion (10,000,000,000), all of which shall be common shares of the par
value of $.01 per share (individually, a "Share" and collectively, the
"Shares"). The Corporation may issue and sell any of its Shares in
fractional denominations to the same extent as its whole Shares, and Shares
and fractional denominations shall have, in proportion to the relative
fractions represented thereby, all the rights of whole Shares, including,
without limitation, the right to vote, the right to receive dividends and
distributions, and the right to participate upon liquidation of the
Corporation.
(b) The Shares may be classified by the Board of Directors in one or
more classes (individually, a "Class" and, collectively, together with any
other class or classes, the "Classes") with such relative rights and
preferences as shall be stated or expressed in a resolution or resolutions
providing for the issue of any such Class or Classes as may be adopted from
time to time by the Board of Directors of the Corporation pursuant to the
authority hereby vested in the Board of Directors and Minnesota Statutes,
Section 302A.401, Subd. 3, or any successor provision. The Shares of each
Class may be subject to such charges and expenses (including by way of
example, but not by way of limitation, front-end and deferred sales
charges, expenses under Rule 12b-1 plans, administration plans, service
plans, or other plans or arrangements, however designated) as may be
adopted from time to time by the Board of Directors in accordance, to the
extent applicable, with the Investment Company Act of 1940, as amended
(together with the rules and regulations promulgated thereunder, the "1940
Act"), which charges and expenses may differ from those applicable to
another Class, and all of the charges and expenses to which a Class is
subject shall be borne by such Class and shall be appropriately reflected
(in the manner determined by the Board of Directors in the resolution or
resolutions providing for the issue of such Class) in determining the net
asset value and the amounts payable with respect to dividends and
distributions on and redemptions or liquidations of, such Class. Subject
to compliance with the requirements of the 1940 Act, the Board of Directors
shall have the authority to provide that Shares of any Class shall be
convertible (automatically, optionally or otherwise) into Shares of one or
more other Classes in accordance with such requirements and procedures as
may be established by the Board of Directors.
6. The shareholders of each Class of common Shares of the Corporation:
(a) shall not have the right to cumulate votes for the election of
directors; and
(b) shall have no preemptive right to subscribe to any issue of
Shares of any Class of the Corporation now or hereafter created, designated
or classified.
-2-
<PAGE>
7. A description of the relative rights and preferences of all Classes of
Shares is as follows, unless otherwise set forth in one or more amendments to
these Articles of Incorporation or in the resolution providing for the issue of
such Classes:
(a) On any matter submitted to a vote of shareholders of the
Corporation, all Shares of the Corporation then issued and outstanding and
entitled to vote, irrespective of Class, shall be voted in the aggregate
and not by Class, except: (i) when otherwise required by Minnesota
Statutes, Chapter 302A, in which case Shares will be voted by individual
Class, as applicable; (ii) when otherwise required by the 1940 Act or the
rules adopted thereunder, in which case Shares shall be voted by individual
Class, as applicable; and (iii) when the matter does not affect the
interests of a particular Class thereof, in which case only shareholders of
the Class affected shall be entitled to vote thereon and shall vote by
individual Class.
(b) The Board of Directors may, to the extent permitted by Minnesota
Statutes, Chapter 302A or any successor provision thereto, declare and pay
dividends or distributions in Shares, cash or other property on any or all
Classes of Shares, the amount of such dividends and the payment thereof
being wholly in the discretion of the Board of Directors.
(c) With the approval of a majority of the shareholders of each of
the affected Classes of Shares present in person or by proxy at a meeting
called for the following purpose (provided that a quorum of the issued and
outstanding Shares of each affected Class in present at such meeting in
person or by proxy), the Board of Directors may transfer the assets of any
Class to any other Class. Upon such a transfer, the Corporation shall
issue Shares representing interests in the Class to which the assets were
transferred in exchange for all Shares representing interests in the Class
from which the assets were transferred. Such Shares shall be exchanged at
their respective net asset values.
8. The following additional provisions, when consistent with law, are
hereby established for the management of the business, for the conduct of the
affairs of the Corporation, and for the purpose of describing certain specific
powers of the Corporation and of its directors and shareholders.
(a) In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Corporation, the Board of
Directors is expressly authorized to do the following:
(i) to make, adopt, alter, amend and repeal Bylaws of the
Corporation unless reserved to the shareholders by the Bylaws or by
the laws of the State of Minnesota, subject to the power of the
shareholders to change or repeal such Bylaws;
(ii) to distribute, in its discretion, for any fiscal year (in
the year or in the next fiscal year) as ordinary dividends and as
capital gains distributions, respectively, amounts sufficient to
enable the Corporation to qualify under the Internal Revenue Code as a
regulated investment company to avoid any liability
-3-
<PAGE>
for federal income tax in respect of such year. Any distribution or
dividend paid to shareholders from any capital source shall be
accompanied by a written statement showing the source or sources of
such payment;
(iii) to authorize, subject to such vote, consent, or approval
of shareholders and other conditions, if any, as may be required by
any applicable statute, rule or regulation, the execution and
performance by the Corporation of any agreement or agreements with any
person, corporation, association, company, trust, partnership (limited
or general) or other organization whereby, subject to the supervision
and control of the Board of Directors, any such other person,
corporation, association, company, trust, partnership (limited or
general), or other organization shall render managerial, investment
advisory, distribution, transfer agent, accounting and/or other
services to the Corporation (including, if deemed advisable, the
management or supervision of the investment portfolios of the
Corporation) upon such terms and conditions as may be provided in such
agreement or agreements;
(iv) to authorize any agreement of the character described in
subparagraph (iii) of this paragraph (a) with any person, corporation,
association, company, trust, partnership (limited or general) or other
organization, although one or more of the members of the Board of
Directors or officers of the Corporation may be the other party to any
such agreement or an officer, director, employee, shareholder, or
member of such other party, and no such agreement shall be invalidated
or rendered voidable by reason of the existence of any such
relationship;
(v) to allot and authorize the issuance of the authorized but
unissued Shares of any Class of the Corporation;
(vi) to accept or reject subscriptions for Shares of any Class
made after incorporation;
(vii) to fix the terms, conditions and provisions of and
authorize the issuance of options to purchase or subscribe for Shares
of any Class including the option price or prices at which Shares may
be purchased or subscribed for;
(viii) to take any action which might be taken at a meeting of
the Board of Directors, or any duly constituted committee thereof,
without a meeting pursuant to a writing signed by that number of
directors or committee members that would be required to take the same
action at a meeting of the Board of Directors or committee thereof at
which all directors or committee members were present; provided,
however, that, if such action also requires shareholder approval, such
writing must be signed by all of the directors or committee members
entitled to vote on such matter; and
(ix) to determine what constitutes net income and the net asset
value of the Shares of each Class of the Corporation. Any such
determination made in good faith shall be final and conclusive, and
shall be binding upon the
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Corporation, and all holders (past, present and future) of Shares of
each Class thereof.
(b) Except as provided in the next sentence of this paragraph (b),
Shares of any Class hereafter issued which are redeemed, exchanged, or
otherwise acquired by the Corporation shall return to the status of
authorized and unissued Shares of such Class. Upon the redemption,
exchange, or other acquisition by the Corporation of all outstanding Shares
of any Class hereafter issued, such Shares shall return to the status of
authorized and unissued Shares without designation as to Class and all
provisions of these Articles of Incorporation relating to such Class
(including, without limitation, any statement establishing or fixing the
rights and preferences of such Class), shall cease to be of further effect
and shall cease to be a part of these articles. Upon the occurrence of
such events, the Board of Directors of the Corporation shall have the
power, pursuant to Minnesota Statutes Section 302A.135, Subd. 5 or any
successor provision and without shareholder action, to cause restated
articles of incorporation of the Corporation to be prepared and filed with
the Secretary of State of the State of Minnesota which reflect such removal
from these articles of all such provisions relating to such Class thereof.
(c) The determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties, shall be final and
conclusive and shall be binding upon the Corporation and every holder of
Shares of its capital stock: namely, the amount of the obligations,
liabilities and expenses of each Class of the Corporation; the amount of
the net income of each Class of the Corporation for any period and the
amount of assets at any time legally available for the payment of dividends
in each Class; the amount of paid-in surplus, other surplus, annual or
other net profits, or net assets in excess of capital or undivided profits
of each Class; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety
thereof (whether or not any obligation or liability for which such reserves
or charges shall have been created shall have been paid or discharged); the
market value, or any sale, bid or asked price to be applied in determining
the market value, of any security owned or held by the Corporation; the
fair value of any other asset owned by the Corporation; the number of
Shares of each Class of the Corporation issued or issuable; any matter
relating to the acquisition, holding and disposition of securities and
other assets by the Corporation; and any question as to whether any
transaction constitutes a purchase of securities on margin, a short sale of
securities, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of
any securities.
(d) The Board of Directors or the shareholders of the Corporation may
adopt, amend, affirm or reject investment policies and restrictions upon
investment or the use of assets of the Corporation and may designate some
such policies as fundamental and not subject to change other than by a vote
of a majority of the outstanding voting securities, as such phrase is
defined in the 1940 Act, of the Corporation.
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9. The Corporation shall indemnify such persons for such expenses and
liabilities, in such manner, under such circumstances, and to the full extent
permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or
hereafter amended, provided, however, that no such indemnification may be made
if it would be in violation of Section 17(h) of the 1940 Act, as now enacted or
hereafter amended.
10. To the fullest extent permitted by the Minnesota Statutes, Chapter
302A, as the same exists or may hereafter be amended (except as prohibited by
the 1940 Act, as the same exists or may hereafter be amended), a director of the
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
11. The names of the first directors, who shall serve until the first
annual meeting of shareholders or until their successors are elected and
qualified, are:
Name
----
William N. Westhoff
Frederick P. Feuerherm
Charles E. Arner
Ellen S. Berscheid
Ralph E. Ebbott
12. The name and address of the incorporator, who is a natural person of
full age, is:
Michael P. Boyle 400 Robert Street North
St. Paul, Minnesota 55101
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IN WITNESS WHEREOF, the undersigned sole incorporator has executed these
Articles of Incorporation on this ____ day of ________________, _____.
--------------------------------------
Michael P. Boyle
STATE OF MINNESOTA )
) ss
COUNTY OF RAMSEY )
On ___________________, ______, before me, a Notary Public, personally
appeared Michael P. Boyle, to me known to be the person named as incorporator
and who executed the foregoing Articles of Incorporation, and he acknowledged
that he executed the same as his free act and deed.
---------------------------------------
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BYLAWS
OF
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
SECTION 1.01. NAME. The name of the corporation is Advantus Real Estate
Securities Fund, Inc.
SECTION 1.02. REGISTERED OFFICE. The registered office of the corporation
in Minnesota shall be that set forth in the Articles of Incorporation or in the
most recent amendment of the Articles of Incorporation or resolution of the
directors filed with the Secretary of State of Minnesota changing the registered
office.
SECTION 1.03. CORPORATE SEAL. The corporation shall have no seal.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 2.01. PLACE AND TIME OF MEETINGS. Except as provided otherwise by
Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at any
place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at 10:00 A.M.
SECTION 2.02. REGULAR MEETINGS.
(a) Annual meetings of shareholders are not required by these Bylaws.
Regular meetings of shareholders shall be held only with such frequency and at
such times and places as required by law.
(b) At each regular meeting, the shareholders, voting as provided in the
Articles of Incorporation and these Bylaws, shall designate the number of
directors to constitute the Board of Directors (subject to the authority of the
Board of Directors thereafter to increase the number of directors as permitted
by law), shall elect directors, and shall transact such other business as may
properly come before them.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the shareholders may
be held at any time and for any purpose and may be called by the Chairman of the
Board, the President, any two directors, or by one or more shareholders holding
ten percent (10%) or more of the shares entitled to vote on the matters to be
presented to the meeting.
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SECTION 2.04. QUORUM, ADJOURNED MEETINGS. The holders of ten percent
(10%) of the shares outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any regular or special meeting. In case a
quorum shall not be present at a meeting, those present in person or by proxy
shall adjourn the meeting to such day as they shall, by majority vote, agree
upon without further notice other than by announcement at the meeting at which
such adjournment is taken. If a quorum is present, a meeting may be adjourned
from time to time without notice other than announcement at the meeting. At
adjourned meetings at which a quorum is present, any business may be transacted
which might have been transacted at the meetings as originally noticed. If a
quorum is present, the shareholders may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
SECTION 2.05. VOTING. At each meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation provide
otherwise, shall have one vote for each share having voting power registered in
his name on the books of the corporation. Except as otherwise specifically
provided by these Bylaws or as required by provisions of the Investment Company
Act of 1940 or other applicable laws, all questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote.
SECTION 2.06. VOTING - PROXIES. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself or by his attorney thereunto duly authorized
in writing. No proxy shall be voted on after eleven months from its date unless
it provides for a longer period.
SECTION 2.07. CLOSING OF BOOKS. The Board of Directors may fix a time,
not exceeding sixty (60) days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the thirtieth
(30th) day preceding the date of such meeting.
SECTION 2.08. NOTICE OF MEETINGS. There shall be mailed to each
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at his address as shown by the books of the corporation, a notice
setting out the time and place of each regular meeting and each special meeting,
which notice shall be mailed at least ten (10) days prior thereto; except that
notice of a meeting at which an agreement of merger or consolidation is to be
considered shall be mailed to all shareholders of record, whether entitled to
vote or not, at least two (2) weeks prior thereto. Every notice of any special
meeting shall state the purpose or purposes for which the meeting has been
called, pursuant to Section 2.03, and the business transacted at all special
meetings shall be confined to the purpose stated in such notice.
SECTION 2.09. WAIVER OF NOTICE. Notice of any regular or special meeting
may be waived either before, at or after such meeting orally or in writing
signed by each shareholder or representative thereof entitled to vote the shares
so represented. A shareholder, by his attendance at any meeting of
shareholders, shall be deemed to have waived notice of such meeting, except
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where the shareholder objects at the beginning of the meeting to the transaction
of business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and does not participate in the consideration of the
item at that meeting.
SECTION 2.10. WRITTEN ACTION. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action.
ARTICLE III.
DIRECTORS
SECTION 3.01. NUMBER, QUALIFICATION AND TERM OF OFFICE. Until the first
meeting of shareholders, the number of directors shall be the number named in
the Articles of Incorporation. Thereafter, the number of directors shall be
established by resolution of the shareholders (subject to the authority of the
Board of Directors to increase the number of directors as permitted by law). In
the absence of such shareholder resolution, the number of directors shall be the
number last fixed by the shareholders or the Board of Directors, or the Articles
of Incorporation. Directors need not be shareholders. Each of the directors
shall hold office until the regular meeting of shareholders next held after his
election and until his successor shall have been elected and shall qualify, or
until the earlier death, resignation, removal or disqualification of such
director.
SECTION 3.02. ELECTION OF DIRECTORS. Except as otherwise provided in
Sections 3.11 and 3.12 hereof, the directors shall be elected at each regular
shareholders' meeting. In the event that directors are not elected at a regular
shareholders' meeting, then directors may be elected at a special shareholders'
meeting, provided that the notice of such meeting shall contain mention of such
purpose. At each shareholders' meeting for the election of directors, the
directors shall be elected by a plurality of the votes validly cast at such
election.
SECTION 3.03. GENERAL POWERS.
(a) Except as otherwise permitted by statute, the property, affairs and
business of the corporation shall be managed by the Board of Directors, which
may exercise all the powers of the corporation except those powers vested solely
in the shareholders of the corporation by statute, the Articles of
Incorporation, or these Bylaws, as amended.
(b) All acts done by any meeting of the Directors or by any person acting
as a director, so long as his successor shall not have been duly elected or
appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the directors or such person acting as
aforesaid or that they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly elected and
were or was qualified to be directors or a director of the corporation.
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SECTION 3.04. POWER TO DECLARE DIVIDENDS.
(a) The Board of Directors, from time to time as they may deem advisable,
may declare and pay dividends in cash or other property of the corporation, out
of any source available for dividends, to the shareholders according to their
respective rights and interests.
(b) The Board of Directors may at any time declare and distribute pro rata
among the shareholders a "stock dividend" out of the corporation's authorized
but unissued shares of stock, including any shares previously purchased by the
corporation.
SECTION 3.05. BOARD MEETINGS. Meetings of the Board of Directors shall be
held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
SECTION 3.06. CALLING MEETINGS, NOTICE. A director may call a meeting by
giving five (5) days notice to all directors of the date, time, and place of the
meeting; provided that if the day or date, time and place of a board meeting
have been announced at a previous meeting of the board, no notice is required.
SECTION 3.07. WAIVER OF NOTICE. Notice of any meeting of the Board of
Directors may be waived by any director either before, at, or after such meeting
orally or in writing signed by such director. A director, by his attendance and
participation in the action taken at any meeting of the Board of Directors,
shall be deemed to have waived notice of such meeting, except where the director
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.
SECTION 3.08. QUORUM. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting; provided, however,
notwithstanding the above, if the Board of Directors is taking action pursuant
to the Investment Company Act of 1940, as now enacted or hereafter amended, a
majority of directors who are not "interested persons" (as defined by the
Investment Company Act of 1940, as now enacted or hereafter amended) of the
corporation shall constitute a quorum for taking such action.
SECTION 3.09. ADVANCE CONSENT OR OPPOSITION. A director may give advance
written consent or opposition to a proposal to be acted on at a meeting of the
Board of Directors. If such director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected.
SECTION 3.10. CONFERENCE COMMUNICATIONS. Directors may participate in any
meeting of the Board of Directors, or of any duly constituted committee thereof,
by means of a conference telephone conversation or other comparable
communication technique whereby all persons participating in the meeting can
hear and communicate to each other. For the purposes
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of establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person at
the meeting; and the place of the meeting shall be the place or origination of
the conference telephone conversation or other comparable communication
technique.
SECTION 3.11. VACANCIES; NEWLY CREATED DIRECTORSHIPS. Vacancies in the
Board of Directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.01 may be filled by a two-thirds (2/3) vote of the directors serving at the
time of such increase; and each person so elected shall be a director until his
successor is elected by the shareholders, who may make such election at their
next regular meeting or at any meeting duly called for that purpose; provided,
however, that no vacancy can be filled as provided above if prohibited by the
provisions of the Investment Company Act of 1940.
SECTION 3.12. REMOVAL. The entire Board of Directors or any individual
director may be removed from office, with or without cause, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors. In the event that the entire Board or any one or more directors be
so removed, new directors shall be elected at the same meeting, or the remaining
directors may, to the extent vacancies are not filled at such meeting, fill any
vacancy or vacancies created by such removal. A director named by the Board of
Directors to fill a vacancy may be removed from office at any time, with or
without cause, by the affirmative vote of the remaining directors if the
shareholders have not elected directors in the interim between the time of the
appointment to fill such vacancy and the time of the removal.
SECTION 3.13. COMMITTEES. A resolution approved by the affirmative vote
of a majority of the Board of Directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors, except as provided by Minnesota Statutes Section 302A.243.
A majority of the members of the committee present at a meeting is a quorum
for the transaction of business, unless a larger or smaller proportion or number
is provided in a resolution approved by the affirmative vote of a majority of
the directors present.
SECTION 3.14. WRITTEN ACTION. Any action which might be taken at a
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by a majority of
the directors or committee members.
SECTION 3.15. COMPENSATION. Directors who are not salaried officers of
this corporation or affiliated with its investment adviser shall receive such
fixed sum per meeting attended or such fixed annual sum as shall be determined,
from time to time, by resolution of the Board of Directors. All such directors
shall receive their expenses, if any, of attendance at meetings of the Board of
Directors or any committee thereof. Nothing herein contained shall be
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construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
SECTION 3.16. RESIGNATION. A director may resign by giving written notice
to the corporation, and the resignation is effective without acceptance when
given, unless a later effective time is specified in the notice.
ARTICLE IV.
OFFICERS
SECTION 4.01. NUMBER. The officers of the corporation shall consist of a
Chairman of the Board (if one is elected by the Board), the President, one or
more Vice Presidents (if desired by the Board), a Secretary, a Treasurer and
such other officers and agents as may, from time to time, be elected by the
Board of Directors. Any number of offices may be held by the same person.
SECTION 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Board of
Directors shall elect, from within or without their number, the officers
referred to in Section 4.01 of these Bylaws, each of whom shall have the powers,
rights, duties, responsibilities, and terms in office provided for in these
Bylaws or a resolution of the Board not inconsistent therewith. The President
and all other officers who may be directors shall continue to hold office until
the election and qualification of their successors, notwithstanding an earlier
termination of their directorship.
SECTION 4.03. RESIGNATION. Any officer may resign his office at any time
by delivering a written resignation to the Board of Directors, the President,
the Secretary, or any Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
SECTION 4.04. REMOVAL AND VACANCIES. Any officer may be removed from his
office by a majority of the whole Board of Directors with or without cause.
Such removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation, or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
SECTION 4.05. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
SECTION 4.06. PRESIDENT. The President shall have general active
management of the business of the corporation. In the absence of the Chairman
of the Board, he shall preside at all meetings of the shareholders and
directors. He shall be the chief executive officer of the corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall be ex officio a member of all standing committees. He may
execute and deliver, in the name of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments pertaining to the business of the
corporation and, in general, shall perform all duties usually
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incident to the office of the President. He shall have such other duties as
may, from time to time, be prescribed by the Board of Directors.
SECTION 4.07. VICE PRESIDENT. Each Vice President shall have such powers
and shall perform such duties as may be specified in the Bylaws or prescribed by
the Board of Directors or by the President. In the event of absence or
disability of the President, Vice Presidents shall succeed to his power and
duties in the order designated by the Board of Directors.
SECTION 4.08. SECRETARY. The Secretary shall be secretary of, and shall
attend, all meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. He
shall give proper notice of meetings of shareholders and directors. He shall
perform such other duties as may, from time to time, be prescribed by the Board
of Directors or by the President.
SECTION 4.09. TREASURER. The Treasurer shall be the chief financial
officer and shall keep accurate accounts of all moneys of the corporation
received or disbursed. He shall deposit all moneys, drafts and checks in the
name of, and to the credit of, the corporation in such banks and depositories as
a majority of the whole Board of Directors shall, from time to time, designate.
He shall have power to endorse, for deposit, all notes, checks and drafts
received by the corporation. He shall disburse the funds of the corporation, as
ordered by the Board of Directors, making proper vouchers therefor. He shall
render to the President and the directors, whenever required, an account of all
his transactions as Treasurer and of the financial condition of the corporation,
and shall perform such other duties as may, from time to time, be prescribed by
the Board of Directors or by the President.
SECTION 4.10. ASSISTANT SECRETARIES. At the request of the Secretary, or
in his absence or disability, any Assistant Secretary shall have power to
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the Board of Directors or the President.
SECTION 4.11. ASSISTANT TREASURERS. At the request of the Treasurer or in
his absence or disability any Assistant Treasurer shall have power to perform
all the duties of the Treasurer, and when so acting, shall have all the powers
of, and be subject to all the restrictions upon, the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
SECTION 4.12. COMPENSATION. The officers of this corporation shall
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.
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ARTICLE V.
SHARES AND THEIR TRANSFER
SECTION 5.01. CERTIFICATES FOR SHARES.
(a) The corporation may have certificated or uncertificated shares, or
both, as designated by resolution of the Board of Directors. Every owner of
certificated shares of the corporation shall be entitled to a certificate, to be
in such form as shall be prescribed by the Board of Directors, certifying the
number of shares of the corporation owned by him. Within a reasonable time
after the issuance or transfer of uncertificated shares, the corporation shall
send to the new shareholder the information required to be stated on
certificates. Certificated shares shall be numbered in the order in which they
shall be issued and shall be signed, in the name of the corporation, by the
President or a Vice President and by the Treasurer or Secretary or by such
officers as the Board of Directors may designate. Such signatures may be by
facsimile if authorized by the Board of Directors. Every certificate
surrendered to the corporation for exchange or transfer shall be cancelled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 5.08.
(b) In case any officer, transfer agent or registrar who shall have signed
any such certificate, or whose facsimile signature has been placed thereon,
shall cease to be such an officer (because of death, resignation or otherwise)
before such certificate is issued, such certificate may be issued and delivered
by the corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 5.02. ISSUANCE OF SHARES. The Board of Directors is authorized to
cause to be issued shares of the corporation up to the full amount authorized by
the Articles of Incorporation in such amounts as may be determined by the Board
of Directors and as may be permitted by law. No shares shall be allotted except
in consideration of cash or other property, tangible or intangible, received or
to be received by the corporation under a written agreement, of services
rendered or to be rendered to the corporation under a written agreement, or of
an amount transferred from surplus to stated capital upon a share dividend. At
the time of such allotment of shares, the Board of Directors making such
allotments shall state, by resolution, their determination of the fair value to
the corporation in monetary terms of any consideration other than cash for which
shares are allotted. No shares of stock issued by the corporation shall be
issued, sold, or exchanged by or on behalf of the corporation for any amount
less than the net asset value per share of the shares outstanding as determined
pursuant to Article XII hereunder.
SECTION 5.03. REDEMPTION OF SHARES. Upon the demand of any shareholder,
this corporation shall redeem any share of stock issued by it held and owned by
such shareholder at the net asset value thereof as determined pursuant to
Article XII hereunder. The Board of Directors may suspend the right of
redemption or postpone the date of payment during any period as may be permitted
by law.
SECTION 5.04. TRANSFER OF SHARES. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney-in-fact, and upon
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surrender of the certificate or the certificates for such shares or a duly
executed assignment covering shares held in unissued form. The corporation may
treat, as the absolute owner of shares of the corporation, the person or persons
in whose name shares are registered on the books of the corporation.
SECTION 5.05. REGISTERED SHAREHOLDERS. The corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Minnesota.
SECTION 5.06. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
SECTION 5.07. TRANSFER REGULATIONS. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
the shares of stock of the corporation.
SECTION 5.08. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
holder of any stock of the corporation shall immediately notify the corporation
of any loss, theft, destruction or mutilation of any certificate therefor, and
the Board of Directors may, in its discretion, cause to be issued to him a new
certificate or certificates of stock, upon the surrender of the mutilated
certificate or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss, theft, or destruction. A new certificate or
certificates of stock will be issued to the owner of the lost, stolen or
destroyed certificate only after such owner, or his legal representatives, gives
to the corporation and to such registrar or transfer agent as may be authorized
or required to countersign such new certificate or certificates a bond, in such
sum as they may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be made against them or any of them on
account of or in connection with the alleged loss, theft, or destruction of any
such certificate.
ARTICLE VI.
DIVIDENDS, SURPLUS, ETC.
SECTION 6.01. The corporation's net investment income will be determined,
and its dividends shall be declared and made payable at such time(s) as the
Board of Directors shall determine.
It shall be the policy of the corporation to qualify for and elect the tax
treatment applicable to regulated investment companies under the Internal
Revenue Code, so that the corporation will not be subjected to Federal income
tax on such part of its income or capital gains as it distributes to
shareholders.
-9-
<PAGE>
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
SECTION 7.01. SHARE REGISTER. The Board of Directors of the corporation
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the board:
(1) a share register not more than one year old, containing the names and
addresses of the shareholders and the number and classes of shares
held by each shareholder; and
(2) a record of the dates on which certificates or transaction statements
representing shares were issued.
SECTION 7.02. OTHER BOOKS AND RECORDS. The Board of Directors shall cause
to be kept at its principal executive office, or, if its principal executive
office is not in Minnesota, shall make available at its registered office within
ten days after receipt by an officer of the corporation of a written demand for
them made by a shareholder or other person authorized by Minnesota Statutes
Section 302A.461, originals or copies of:
(1) records of all proceedings of shareholders for the last three years;
(2) records of all proceedings of the board for the last three years;
(3) its articles and all amendments currently in effect;
(4) its bylaws and all amendments currently in effect;
(5) financial statements required by Minnesota Statutes Section 302A.463
and the financial statement for the most recent interim period
prepared in the course of the operation of the corporation for
distribution to the shareholders or to a governmental agency as a
matter of public record;
(6) reports made to shareholders generally within the last three years;
(7) a statement of the names and usual business addresses of its directors
and principal officers;
(8) any shareholder voting or control agreements of which the corporation
is aware; and
(9) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.
-10-
<PAGE>
SECTION 7.03. AUDIT; ACCOUNTANT.
(a) The Board of Directors shall cause the records and books of account of
the corporation to be audited at least once in each fiscal year and at such
other times as it may deem necessary or appropriate.
(b) The corporation shall employ an independent public accountant or firm
of independent public accountants as its Accountant to examine the accounts of
the corporation and to sign and certify financial statements filed by the
corporation.
(c) Any vacancy occurring between regular meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
SECTION 7.04. FISCAL YEAR. The fiscal year of the corporation shall be
determined by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 8.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by Section 302A.521 of the Minnesota Statutes, as now
enacted or hereafter amended, provided, however, that no such indemnification
may be made if it would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereafter amended.
ARTICLE IX.
VOTING OF STOCK HELD
SECTION 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
which the corporation may be entitled to cast as a stockholder or otherwise in
any other corporation or association, any of whose stock or securities may be
held by the corporation, at meetings of the holders of the stock or other
securities of any such other corporation or association, or to consent in
writing to any action by any such other corporation or association, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed on behalf
of the corporation and under its corporate seal, or otherwise, such written
proxies, consents, waivers, or other instruments as it may deem necessary or
proper; or any of such officers may themselves attend any meeting of the holders
of stock or other securities of any such corporation or association and thereat
vote or exercise any or all other powers of the corporation as the holder of
such stock or other securities of such other corporation or association, or
consent in writing to any action by any such other corporation or association.
-11-
<PAGE>
ARTICLE X.
VALUATION OF NET ASSET VALUE
SECTION 10.01. The net asset value per share of the corporation shall be
determined in good faith by or under the supervision of the officers of the
corporation as authorized by the Board of Directors as often and on such days
and at such time(s) as the Board of Directors shall determine, or as otherwise
may be required by law, rule, regulation or order of the Securities and Exchange
Commission.
ARTICLE XI.
CUSTODY OF ASSETS
SECTION 11.01. All securities and cash owned by this corporation shall, as
hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
This corporation shall enter into a written contract with the Custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of this corporation held by the Custodian. Said
contract and all amendments thereto shall be approved by the Board of Directors
of this corporation. In the event of the Custodian's resignation or
termination, the corporation shall use its best efforts promptly to obtain a
successor Custodian and shall require that the cash and securities owned by this
corporation held by the Custodian be delivered directly to such successor
Custodian.
ARTICLE XII.
AMENDMENTS
SECTION 12.01. These Bylaws may be amended or altered by a vote of the
majority of the Board of Directors at any meeting provided that notice of such
proposed amendment shall have been given in the notice given to the directors of
such meeting. Such authority in the Board of Directors is subject to the power
of the shareholders to change or repeal such Bylaws by a majority vote of the
shareholders present or represented at any regular or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the Board of
Directors, or fixing the number of directors or their classifications,
qualifications or terms of office, except that the Board of Directors may make
or alter any Bylaw to increase their number.
-12-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, Made this 22d day of October 1998, by and between Advantus
Real Estate Securities Fund, Inc., a Minnesota corporation (the "Fund") and
Advantus Capital Management, Inc., a Minnesota corporation ("Management").
WITNESSETH:
1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.
The Fund hereby engages Management, and Management hereby agrees to act, as
investment adviser for, and to manage the affairs, business, and the investment
of the assets of the Fund.
The investment of the assets of the Fund shall at all times be subject to
the applicable provisions of the Articles of Incorporation, the Bylaws, the
Registration Statement, the current Prospectus and the Statement of Additional
Information, if any, of the Fund and shall conform to the investment objective
and policies of the Fund as set forth in such documents and as interpreted from
time to time by the Board of Directors of the Fund. Within the framework of the
objective and investment policies and restrictions of the Fund, Management shall
have the sole and exclusive responsibility for the management of the Fund's
portfolio and the making and execution of all investment decisions for the Fund.
Management shall report to the Board of Directors regularly at such times and in
such detail as the Board may from time to time determine to be appropriate, in
order to permit the Board to determine the adherence of Management to the
investment policies of the Fund.
Management shall, at its own expense, furnish the Fund office space and all
necessary office facilities, equipment, and personnel for servicing the
investments of the Fund. Management shall arrange for officers or employees of
Management to serve without compensation from the Fund as directors, officers,
or employees of the Fund if duly elected to such positions by the shareholders
or directors of the Fund.
<PAGE>
Management hereby acknowledges that all records necessary in the operation
of the Fund, including records pertaining to its shareholders and investments,
are the property of the Fund, and in the event that a transfer of management or
investment advisory services to someone other than Management should ever occur,
Management will promptly, and at its own cost, take all steps necessary to
segregate such records and deliver them to the Fund.
2. COMPENSATION FOR SERVICES.
In payment for the investment advisory and other services to be rendered by
Management hereunder, the Fund shall pay to Management a quarterly fee, which
fee shall be paid to Management not later than the fifth business day following
the end of each calendar quarter in which said services were rendered. Said
quarterly fee shall be based on the average of the net asset values of all of
the issued and outstanding shares of the Fund as determined as of the close of
each business day of the quarter pursuant to the Articles of Incorporation,
Bylaws and currently effective Prospectus and Statement of Additional
Information, if any, of the Fund and shall be equal to an annual rate of .75 of
1.0% of the Fund's average daily net assets. The fee shall be pro rated for any
fraction of a month at the commencement or termination of this Agreement.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, the Fund shall
pay all its costs and expenses which are not assumed by Management.
The Fund expenses include, by way of example, but not by way of
limitation, all expenses incurred in the operation of the Fund and any
public offering of its shares, including, among others, interest,
taxes, brokerage fees and commissions, fees of the directors who are
not employees of Management or Ascend Financial Services, Inc.,
underwriter of the Fund's shares (the "Underwriter"), or any of their
affiliates, expenses of directors' and shareholders' meetings,
including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of
redemption of shares, expenses of
-2-
<PAGE>
issue and sale of shares (to the extent not borne by the Underwriter
under its agreement with the Fund), expenses of printing and mailing
stock certificates representing shares of the Fund, association
membership dues, transfer agent and shareholder services expenses,
charges of custodians, and bookkeeping, auditing, and legal expenses.
The Fund will also pay the fees and bear the expense of registering
and maintaining the registration of the Fund and its shares with the
Securities and Exchange Commission and registering or qualifying its
shares under state or other securities laws and the expense of
preparing and mailing Prospectuses and reports to shareholders.
(b) The Underwriter shall bear all advertising and promotional expenses in
connection with the distribution of the Fund's shares, including
paying for Prospectuses and Statements of Additional Information (if
any) for new shareholders, shareholder reports for new shareholders,
and the costs of sales literature.
4. FREEDOM TO DEAL WITH THIRD PARTIES.
Management shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
5. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
This Agreement shall not become effective unless and until it is approved
by the Board of Directors of the Fund, including a majority of the members who
are not "interested persons" to parties to this Agreement, by a vote cast in
person at a meeting called for the purpose of voting such approval, and by a
majority of the outstanding voting securities of the Fund. Wherever referred to
in this Agreement, the vote or approval of the holders of a majority of the
outstanding voting securities of the Fund shall mean the vote of 67% or more of
such securities if the holders of more than 50% of such securities are present
in person or by proxy or the vote of more than 50% of such securities, whichever
is the lesser.
-3-
<PAGE>
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect until the next annual meeting of the Fund's shareholders and
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by the Board of Directors of the Fund,
including the specific approval of a majority of the directors who are not
interested persons of Management, the Underwriter, or the Fund, cast in person
at a meeting called for the purpose of voting on such approval, or by the vote
of the holders of a majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
Management, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment
as such term is defined by the Investment Company Act of 1940, as amended.
6. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until approved
by vote of the holders of a majority of the outstanding voting securities of the
Fund.
7. NOTICES.
Any notice under this Agreement shall be in writing, addressed, delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, The Fund and Management have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
Advantus Real Estate Securities Fund, Inc.
By
---------------------------------------
William N. Westhoff
Its President
Advantus Capital Management, Inc.
By
---------------------------------------
Frederick P. Feuerherm
Its Vice President
-4-
<PAGE>
UNDERWRITING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT, Made this 22nd day of October, 1998, by and between
Advantus Real Estate Securities Fund, Inc., a Minnesota corporation (the "Fund")
and Ascend Financial Services, Inc. (the "Underwriter").
WITNESSETH:
1. UNDERWRITING SERVICES.
The Fund hereby engages the Underwriter, and the Underwriter hereby agrees
to act, as principal underwriter for the Fund in the sale and distribution of
the shares of the Fund to the public, either through dealers or otherwise. The
Underwriter agrees to offer such shares for sale at all times when such shares
are available for sale and may lawfully be offered for sale and sold.
2. SALE OF FUND SHARES.
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively presumed to have
been accepted by the Fund if the Fund shall fail to notify the Underwriter of
the rejection of such offer or sales prior to the computation of the net asset
value of the Fund's shares next following receipt by the Fund of notice of such
offer or sale.
(b) No share of the Fund shall be sold by the Underwriter (i) for any
consideration other than cash or, pursuant to an exchange privilege provided for
by the Fund's currently effective Prospectus, shares of any other investment
company for which the Underwriter acts as principal underwriter, or (ii), except
in instances otherwise provided for by the Fund's currently effective
Prospectus, for any amount less than the public offering price per share, which
shall be determined in accordance with the Fund's currently effective
Prospectus.
(c) In connection with certain sales of Fund shares, a contingent deferred
sales charge will be imposed in the event of a redemption transaction occurring
within a certain period of time following such a purchase, as described in the
Fund's currently effective Prospectus and Statement of Additional Information.
(d) The front-end sales charge, if any, for the Fund may, at the
discretion of the Fund and the Underwriter, be reduced or eliminated as
permitted by the Investment Company Act of 1940, and the rules and regulations
thereunder, as they may be amended from time to time (the "1940 Act"), provided
that such reduction or elimination shall be set forth in the Prospectus for the
Fund, and provided that the Fund shall in no event receive for any shares sold
an amount less than the net asset value thereof. In addition, any contingent
deferred sales charge for the Fund may, at the discretion of the Fund and the
Underwriter, be reduced or eliminated in accordance with the terms of an
exemptive order received from the Securities and Exchange
<PAGE>
Commission by the Fund, and any amendments thereto, provided that such reduction
or elimination shall be set forth in the Prospectus for the Fund.
3. REGISTRATION OF SHARES.
The Fund agrees to make prompt and reasonable efforts to effect and keep in
effect, at its expense, the registration or qualification of its shares for sale
in such jurisdictions as the Fund may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER.
The Fund agrees that it will furnish the Underwriter with such information
with respect to the affairs and accounts of the Fund as the Underwriter may from
time to time reasonably require, and further agrees that the Underwriter, at all
reasonable times, shall be permitted to inspect the books and records of the
Fund.
5. ALLOCATION OF EXPENSES.
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs, and fees incurred by the Fund which are not assumed by the
Underwriter or Advantus Capital Management, Inc., a Minnesota corporation and
the Fund's investment adviser. The Underwriter agrees to provide, and shall pay
costs which it incurs in connection with providing, administrative or accounting
services to shareholders of the Fund (such costs are referred to as "Shareholder
Servicing Costs"). The Underwriter shall also pay all costs of distributing the
share of the Fund ("Distribution Expenses"). Distribution Expenses include, but
are not limited to, initial and ongoing sales compensation (in addition to sales
loads) paid to investment executives of the Underwriter and to other
broker-dealers and participating financial institutions; expenses incurred in
the printing of prospectuses, statements of additional information and reports
used for sales purposes; expenses of preparation and distribution of sales
literature; expenses of advertising of any type; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution related expenses. Shareholder Servicing Costs include all expenses
of the Underwriter incurred in connection with providing administrative or
accounting services to shareholders of the Fund, including, but not limited to,
an allocation of the Underwriter's overhead and payments made to persons,
including employees of the Underwriter, who respond to inquiries of shareholders
regarding their ownership of Fund shares, or who provide other administrative or
accounting services not otherwise required to be provided by the Fund's
investment adviser or transfer agent.
6. COMPENSATION TO THE UNDERWRITER.
It is understood and agreed by the parties hereto that the Underwriter will
receive as compensation for services it performs hereunder:
(a) The Underwriter shall be entitled to receive or retain the front-end
sales charge imposed in connection with sales of Fund shares, as set forth in
Schedule A hereto. Up to the entire amount of the front-end sales charge with
respect to the Fund may be reallowed by the Underwriter to broker-dealers and
participating financial institutions in connection with their sale
-2-
<PAGE>
of Fund shares. The amount of the front-end sales charge may be retained or
deducted by the Underwriter from any sums received by it in payment for shares
so sold. If such amount is not deducted by the Underwriter from such payments,
such amount shall be paid to the Underwriter by the Fund not later than five
business days after the close of any calendar quarter during which any such
sales were made by the Underwriter and payment received by the Fund.
(b) The Underwriter shall be entitled to receive or retain any contingent
deferred sales charge imposed in connection with any redemption of Fund shares,
as set forth in Schedule A hereto.
(c) Pursuant to the Fund's Plan of Distribution adopted by Class A
shareholders in accordance with Rule 12b-1 under the 1940 Act (the "Plan"), the
Fund shall pay the Underwriter a total fee each month equal to .25% per annum of
the average daily net assets represented by Class A shares of the Fund to cover
Shareholder Servicing Costs and a portion may be designated as a "distribution
fee" designed to cover Distribution Expenses. As determined from time to time
by the Board of Directors of the Fund, a portion of such fee may be designated
as a "distribution fee" designed to cover Distribution Expenses, and a portion
may be designated as "shareholder servicing fee" designed to cover Shareholder
Servicing Costs. Until further action by the Board of Directors, all of such
fees for Class A shall be designated as a "shareholder service fee" designed to
cover only Shareholder Servicing Costs. Average daily net assets shall be
computed in accordance with the Prospectus of the Fund. Amounts payable to the
Underwriter under the Plan may exceed or be less than the Underwriter's actual
Shareholder Servicing Costs. In the event such Distribution Expenses and
Shareholder Servicing Costs exceed amounts payable to the Underwriter under the
Plan, the Underwriter shall not be entitled to reimbursement by the Fund.
(d) In each year during which this Agreement remains in effect, the
Underwriter will prepare and furnish to the Board of Directors of the Fund, and
the Board will review, on a quarterly basis, written reports complying with the
requirements of Rule 12b-1 under the 1940 Act that set forth the amounts
expended under this Agreement and the Plans and the purposes for which those
expenditures were made.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY.
The Underwriter shall be deemed to be an independent contractor and, except
as specifically provided or authorized herein, shall have no authority to act
for or represent the Fund.
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS.
The Underwriter shall subscribe for the shares of the Fund only for the
purpose of covering purchase orders already received by it or for the purpose of
investment for its own account. In the event that an order for the purchase of
shares of the Fund is placed with the Underwriter by a customer or dealer and
subsequently cancelled, the Underwriter shall forthwith cancel the subscription
for such shares entered on the books of the Fund, and, if the Underwriter has
paid the Fund for such shares, shall be entitled to receive from the Fund in
refund of such payment the lesser of:
-3-
<PAGE>
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation by the
Underwriter.
9. INDEMNIFICATION OF THE FUND.
The Underwriter agrees to indemnify the Fund against any and all litigation
and other legal proceedings of any kind or nature and against any liability,
judgment, cost, or penalty imposed as a result of such litigation or proceedings
in any way arising out of or in connection with the sale or distribution of the
shares of the Fund by the Underwriter. In the event of the threat or
institution of any such litigation or legal proceedings against the Fund, the
Underwriter shall defend such action on behalf of the Fund at its own expense,
and shall pay any such liability, judgment, cost, or penalty resulting
therefrom, whether imposed by legal authority or agreed upon by way of
compromise and settlement; provided, however, the Underwriter shall not be
required to pay or reimburse the Fund for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of the
omission to supply information by, the Fund to the Underwriter, or to the
Underwriter by a director, officer, or employee of the Fund who is not an
interested person of the Underwriter, unless the information so supplied or
omitted was available to the Underwriter or Management without recourse to the
Fund or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES.
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
The effective date of this Agreement is set forth in the first paragraph of
this Agreement. Wherever referred to in this Agreement, the vote or approval of
the holders of a majority of the outstanding voting securities of the Fund shall
mean the vote of 67% or more of such securities if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of such securities, whichever is the lesser.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect only so long as such continuance is specifically approved at
least annually (a) by the Board of Directors of the Fund, or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, and (b)
by a majority of the directors who are not interested persons of the Underwriter
or of the Fund cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Underwriter, upon 60 days' written notice to the other party.
-4-
<PAGE>
This Agreement shall automatically terminate in the event of its assignment
(as defined by the provisions of the Investment Company Act of 1940, as
amended).
12. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until approved
by the Underwriter and by vote of majority of the Board of Directors of the Fund
who are not interested persons of the Underwriter.
13. NOTICES.
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, The Fund and the Underwriter have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
Advantus Real Estate Securities Fund, Inc.
By
---------------------------------------
William N. Westhoff
Its President
Ascend Financial Services, Inc.
By
---------------------------------------
George I. Connolly
Its President
-5-
<PAGE>
SCHEDULE A
The Underwriter shall receive, as compensation for its services pursuant to
this Agreement, a front-end sales charge for each investment in the Fund's Class
A shares, which shall be a percentage of the offering price of such Class A
shares, or a contingent deferred sales charge in certain circumstances, as
determined in accordance with the Fund's currently effective Prospectus,
determined in accordance with the following table:
<TABLE>
<CAPTION>
Front-End Sales Charge
as a Percentage
Amount of Investment of Offering Price
-------------------- -----------------------
<S> <C>
Less than $50,000 5.5%
$50,000 but less than $100,000 4.5%
$100,000 but less than $250,000 3.5%
$250,000 but less than $500,000 2.5%
$500,000 but less than $1,000,000 2.0%
$1,000,000 or more(1) -0-
</TABLE>
- ---------------------
(1) The customers will not be assessed an initial sales charge for purchase of
Class A Shares of at least $1,000,000, but a contingent deferred sales charge of
1.00% will be imposed if the customer redeems such shares within one year of the
date of purchase.
-6-
<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 ________________
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.
Advantus Money Market Fund, Inc.
A. DEALER COMMISSIONS
DEALER CONCESSION AS PERCENTAGE OF OFFERING PRICE
<TABLE>
<CAPTION>
Class A Shares Class B Shares
Mortgage Mortgage
Securities Fund Class A Shares Securities Fund Class B Shares
and Bond All Other and Bond All Other Class C
Amount of Sale Fund Only Funds Fund Only Funds Shares
-------------- --------- ----- --------- ----- ------
<S> <C> <C> <C> <C> <C>
Less than $50,000 4.05% 4.95% 3.37% 4.12% -0-
$50,000 but less
than $100,000 4.05% 4.05% 3.37% 3.37% -0-
$100,000 but less
than $250,000 3.15% 3.15% 2.62% 2.62% -0-
$250,000 but less
than $500,000 2.25% 2.25% 1.87% 1.87% -0-
$500,000 but less
than $1,000,000 1.80% 1.80% 1.50% 1.50% -0-
$1,000,000 .9%* .9%* n/a* n/a* n/a*
</TABLE>
* Orders of $1,000,000 or more will be accepted only for Class A Shares. No
initial sales charge will be assessed the customer for purchase of Class A
Shares of at least $1,000,000, but a
A-1
<PAGE>
contingent deferred sales charge of 1.00% will be imposed if the customer
redeems such shares within one year of the date of purchase.
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 AGREEMENT
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
U.S. BANK NATIONAL ASSOCIATION
THIS AGREEMENT, made in duplicate this 22d day of October, 1998, by and
between Advantus Real Estate Securities Fund, Inc., a Minnesota corporation
(hereinafter called the "Fund"), and U.S. Bank National Association, a national
banking association organized and existing under the laws of the United States
of America with its principal place of business at St. Paul, Minnesota
(hereinafter called the "Custodian").
WITNESSETH:
WHEREAS, the Fund desires that its securities and cash shall be hereafter
held and administered by the Custodian, pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and Custodian agree as follows:
ARTICLE 1. DEFINITIONS
The word "securities" as used herein shall be construed to include, without
being limited to, shares, stocks, treasury stocks, including any stocks of the
Fund, notes, bonds, debentures, evidences of indebtedness, certificates of
interest or participation in any profit-sharing agreements, collateral trust
certificates, reorganization certificates or subscriptions, transferable shares,
investment contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas, or other mineral
rights, or any certificates of interest or participation in, temporary or
interim certificates for, receipts for, guarantees of, or warrants or rights to
subscribe to or purchase any of the foregoing, acceptances and other
obligations, and any evidence of any right or interest in or to any property or
assets and any other interest or instrument commonly known as a security.
The words "written order from the Fund" shall mean a request or direction
or certification in writing, by wire, computer terminal, magnetic tape or other
mutually accepted means with or without a manual signature which the Custodian
in good faith believes to be genuine and to have been sent by the Fund. Any
such order in writing shall be signed in the name of the Fund by any two of the
individuals designated in the current certified list referred to in Article 2.
<PAGE>
ARTICLE 2. NAMES, TITLES AND SIGNATURES OF FUND'S OFFICERS
The Fund shall certify to the Custodian the names, titles and signatures of
officers and other persons who are authorized to give written or oral orders to
the Custodian on behalf of the Fund. The Fund agrees that whenever any change
in such authorization occurs it will file with the Custodian a new certified
list of names, titles and signatures which shall be signed by at least one
officer previously certified to the Custodian if any such officer still holds an
office in the Fund. The Custodian is authorized to rely and act upon the names,
titles and signatures of the individuals as they appear in the most recent such
certified list which has been delivered to the Custodian as hereinbefore
provided.
ARTICLE 3. RECEIPT AND DISBURSING OF MONEY
SECTION (1)
The Fund shall from time to time cause cash held by the Fund to be
delivered or paid to the Custodian, but the Custodian shall not be under any
obligation or duty to determine whether all cash of the Fund is being so
deposited or to take any action or give any notice with respect to cash not so
deposited. The Custodian agrees to hold such cash, together with any other sum
collected or received by it for or on behalf of the Fund, for the account of the
Fund, in the name of "Advantus Real Estate Securities Fund, Inc., Custodian
Account," in conformity with the terms of this Agreement. The Custodian shall
make payments of cash for the account of the Fund upon receipt of a written
order from the Fund.
SECTION (2)
The Custodian is hereby appointed the attorney-in-fact of the Fund to
enforce and collect all checks, drafts or other orders for the payment of money
received by the Custodian for the account of the Fund and drawn to or to the
order of the Fund and to deposit them in the Custodian Account of the Fund.
ARTICLE 4. RECEIPT OF SECURITIES
The Fund agrees to place all of its securities of the Fund in the custody
of the Custodian, but the Custodian shall not be under any obligation or duty to
determine whether all securities of the Fund are being so deposited or to
require that they be so deposited, or to take any action or give any notice with
respect to the securities not so deposited. The Custodian agrees to hold such
securities for the account of the Fund, in the name of the Fund or of bearer or
of a nominee of the Custodian, and in conformity with the terms of this
Agreement. The Custodian also agrees, upon written order from the Fund, to
receipt from persons other than the Fund and to hold for the account of the Fund
securities specified in said written order, and, if the same are in proper form,
to cause payment to be made therefor to the persons from whom such securities
were received, from the funds of the Fund held by it in the Custodian Account in
the amounts provided and in the manner directed by the written order from the
Fund. The Custodian shall have no power, or authority to assign, hypothecate,
pledge or otherwise dispose of any such
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<PAGE>
securities and investments, except pursuant to a written order from the Fund and
only for the account of the Fund as set forth in Article 5 of this Agreement.
The Custodian agrees that all securities of the Fund placed in its custody
shall be kept segregated in a separate account at all times from those of any
other person, firm or corporation, and shall be held by the Custodian with all
reasonable precautions for the safekeeping thereof, with safeguards
substantially equivalent to those maintained by the Custodian for its own
securities.
ARTICLE 5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
The Custodian agrees to transfer, exchange or deliver securities as
provided in Article 6, or on receipt by it of, and in accordance with, a written
order from the Fund in which the Fund shall state specifically which of the
following cases is covered thereby, provided that it shall not be the
responsibility of the Custodian to determine the propriety or legality of any
such order:
(a) In the case of deliveries of securities sold by the Fund, against
receipt by the Custodian of the proceeds of sale and after receipt of a
confirmation from a broker or dealer with respect to the transaction;
(b) In the case of deliveries of securities which may mature or be called,
redeemed, retired or otherwise become payable, against receipt by the Custodian
of the sums payable thereon or against interim receipts or other proper delivery
receipts;
(c) In the case of deliveries of securities which are to be transferred to
and registered in the name of the Fund or of a nominee of the Custodian and
delivered to the Custodian for the account of the Fund, against receipt by the
Custodian of interim receipts or other proper delivery receipts;
(d) In the case of deliveries of securities to the issuer thereof, its
transfer agent or other proper agent, or to any committee or other organization
for exchange for other securities to be delivered to the Custodian in connection
with a reorganization or recapitalization of the issuer or any split-up or
similar transaction involving such securities, against receipt by the Custodian
of such other securities or against interim receipts or other proper delivery
receipts;
(e) In the case of deliveries of temporary certificates in exchange for
permanent certificates, against receipt by the Custodian of such permanent
certificates or against interim receipts or other proper delivery receipts;
(f) In the case of deliveries of securities upon conversion thereof into
other securities, against receipt by the Custodian of such other securities or
against interim receipts or other proper delivery receipts;
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<PAGE>
(g) In the case of deliveries of securities in exchange for other
securities (whether or not such transactions also involve the receipt or payment
of cash), against receipt by the Custodian of such other securities or against
interim receipts or other proper delivery receipts;
(h) In a case not covered by the preceding paragraphs of this article,
upon receipt of a resolution adopted by the Board of Directors of the Fund, or
any Executive Committee of such Board, signed by an officer of the Fund and
certified to by the Secretary, specifying the securities and assets to be
transferred, exchanged, or delivered, the purposes for which such delivery is
being made, declaring such purposes to be proper corporate purposes, and naming
a person or persons to whom such transfer, exchange or delivery is to be made;
and
(i) In the case of deliveries pursuant to paragraphs (a), (b), (c), (d),
(e), (f), and (g) above, the written order from the Fund shall direct that the
proceeds of any securities delivered, or securities or other assets exchanged
for or in lieu of securities so delivered, are to be delivered to the Custodian.
ARTICLE 6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until the Custodian receives contrary written orders from the
Fund, the Custodian shall without order from the Fund:
(a) Present for payment all bills, notes, checks, drafts and similar
items, and all coupons or other income items (except stock dividends), held or
received for the account of the Fund, and which require presentation in the
ordinary course of business, and credit such items to the Custodian Account of
the Fund conditionally, subject to final payment;
(b) Present for payment all securities which may mature or be called,
redeemed, retired, or otherwise become payable and credit such items to the
Custodian Account of the Fund conditionally, subject to final payment;
(c) Hold for and credit to the account of the Fund all shares of stock and
other securities received as stock dividends or as the result of a stock split
or otherwise from or on account of securities of the Fund, and notify the Fund
promptly of the receipt of such items;
(d) Deposit any cash received by it from, for or on behalf of the Fund to
the credit of the Fund in the Custodian Account of the Fund (without liability
for interest);
(e) Charge against the aforesaid Custodian Account for the Fund
disbursements authorized to be made by the Custodian hereunder and actually made
by it, and notify the Fund of such charges at least once a month;
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<PAGE>
(f) Deliver securities which are to be transferred to and reissued in the
name of the Fund, or of a nominee of the Custodian for the account of the Fund,
and temporary certificates which are to be exchanged for permanent certificates,
to a proper transfer agent for such purposes against interim receipts or other
proper delivery receipts; and
(g) Hold for disposition in accordance with written orders from the Fund
hereunder all options, rights and similar securities which may be received by
the Custodian and which are issued with respect to any securities held by it
hereunder, and notify the Fund promptly of the receipt of such items.
ARTICLE 7. DELIVERY OF PROXIES
The Custodian shall deliver promptly to the Fund all proxies, notices and
communications with relation to securities held by it which it may receive from
sources other than the Fund.
ARTICLE 8. TRANSFER
The Fund shall furnish to the Custodian appropriate instruments to enable
the Custodian to hold or deliver in proper form for transfer any securities
which it may hold for the account of the Fund. For the purpose of facilitating
the handling of securities, unless the Fund shall otherwise direct by written
order, the Custodian is authorized to hold securities deposited with it under
this Agreement in the name of its registered nominee or nominees (as defined in
the Internal Revenue Code and any Regulations of the United States Treasury
Department issued thereunder or in any provision of any subsequent Federal tax
law exempting such transaction from liability for stock transfer taxes) and
shall execute and deliver all such certificates in connection therewith as may
be required by such laws or regulations or under the laws of any state. In
consideration of Custodian's registration of any securities or other property in
the name of Custodian or its nominee or agent, Customer agrees to pay on demand
to Custodian or to Custodian's nominee or agent the amount of any loss or
liability for stockholders assessments, or otherwise, claimed or asserted
against Custodian or Custodian's nominee or agent by reason of such
registration. Securities of the Fund which are held in nominee name shall be
identified as belonging to the Fund on the books and records of the Custodian.
ARTICLE 9. TRANSFER TAXES AND OTHER DISBURSEMENTS
The Fund shall pay or reimburse the Custodian for any transfer taxes
payable upon transfers of securities made hereunder, including transfers
incident to the termination of this Agreement, and for all other necessary and
proper disbursements and expenses made or incurred by the Custodian in the
performance or incident to the termination of this Agreement, and the Custodian
shall have a lien upon any cash or securities held by it for the account of the
Fund for all such items, enforceable, after thirty days' written notice by
registered mail to the Fund, by the sale of sufficient securities to satisfy
such lien. The Custodian may reimburse itself by deducting from the proceeds of
any sale of securities an amount sufficient to pay any transfer taxes payable
upon the transfer of securities sold. The Custodian shall execute such
certificates in connection
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<PAGE>
with securities delivered to it under this Agreement as may be required, under
the provisions of any federal revenue act and any Regulations of the Treasury
Department issued thereunder or any state laws, to exempt from taxation any
transfers and/or deliveries of any such securities as may qualify for such
exemption.
ARTICLE 10. CUSTODIAN'S LIABILITY
If the mode of payment for securities to be delivered by the Custodian is
not specified in the written order from the Fund directing such delivery, the
Custodian shall make delivery of such securities against receipt by it of cash,
a postal money order or a check drawn by a bank, trust company, or other banking
institution, or by a broker named in such written order from the Fund, for the
amount the Custodian is directed to receive. The Custodian shall be liable for
the proceeds of any delivery of securities made pursuant to this Article, but
provided that it has complied with the provisions of this Article, only to the
extent that such proceeds are actually received.
ARTICLE 11. CUSTODIAN'S REPORT
The Custodian shall furnish the Fund as of the close of business on the
last business day of each month a statement showing all cash transactions and
entries for the account of the Fund. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement shall be open to
inspection and audit, at reasonable times, by officers of, and auditors employed
by, the Fund. The Custodian shall furnish the Fund with a list of the
securities held by it in custody for the account of the Fund as of the close of
business on the last business day of each month.
ARTICLE 12. CUSTODIAN'S COMPENSATION
The Custodian shall be paid compensation at such rates and at such times as
may from time to time be agreed on in writing by the parties hereto, and the
Custodian shall have a lien for unpaid compensation, to the date of termination
of this Agreement, upon any cash or securities held by it for the account of the
Fund, enforceable in the manner specified in Article 9 hereof.
ARTICLE 13. DURATION, TERMINATION AND AMENDMENT OF AGREEMENT
This Agreement shall remain in effect, as it may from time to time be
amended, until it shall have been terminated as hereinafter provided, but no
such alteration or termination shall affect or impair any rights or liabilities
arising out of any acts or omissions to act occurring prior to such amendment or
termination.
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<PAGE>
The Custodian may terminate this Agreement by giving the Fund ninety (90)
days' written notice of such termination by registered mail addressed to the
Fund at its principal place of business.
The Fund may terminate this Agreement by giving ninety (90) days' written
notice thereof delivered, together with a copy of the resolution of the Board of
Directors authorizing such termination and certified by the Secretary of the
Fund, by registered mail to the Custodian at its principal place of business.
Upon termination of this Agreement, the assets of the Fund held by the
Custodian shall be delivered by the Custodian to a successor custodian upon
receipt by the Custodian of a copy of the resolution of the Board of Directors
of the Fund, certified by the Secretary, designating the successor custodian.
Upon any termination of this Agreement, pending the appointment of a
successor custodian or a decision by the Fund to dissolve or to function without
a custodian of its cash, securities and other property, Custodian shall not
deliver the cash, securities and other property of the Fund to the Fund, but may
deliver them to a bank or trust company in the Cities of Minneapolis or St.
Paul, Minnesota, of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than five
hundred thousand dollars ($500,000.00) as a Custodian for the Fund to be held
under terms similar to those of this Agreement; provided, however, that
Custodian shall not be required to make any such delivery or payment until full
payment shall have been made by the Fund of all liabilities constituting a
charge on or against the properties then held by Custodian or on or against
Custodian, and until full payment shall have been made to Custodian of all its
fees, compensation, costs and expenses, subject to the provisions of Section 12
of this Agreement.
This Agreement may be amended at any time by the mutual agreement of the
Fund and the Custodian.
This Agreement may not be assigned by the Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
ARTICLE 14. SUCCESSOR CUSTODIAN
Any bank or trust company into which the Custodian or any successor
custodian may be merged or converted or with which it or any successor custodian
may be consolidated, or any bank or trust company resulting from any merger,
conversion or consolidation to which the Custodian or any successor custodian
shall be a party, or any bank or trust company succeeding to the business of the
Custodian, shall be and become the successor custodian without the execution of
any instrument or any further act on the part of the Fund or the Custodian or
any successor custodian.
Any such successor custodian shall have all the power, duties and
obligations of the preceding custodian under this Agreement and any amendments
thereof and shall succeed to all the exemptions and privileges of the preceding
custodian under this Agreement and any amendments thereof.
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<PAGE>
ARTICLE 15. USE OF SUB-CUSTODIAN BANKS
Notwithstanding any provisions of this Agreement to the contrary, the
Custodian is authorized to make, from time to time, appropriate arrangements
with other banks selected by it for the custody by such banks of the Fund
securities in circumstances where direct custody of such securities by the
Custodian would be impracticable. Any bank so selected by the Custodian to act
as a sub-custodian shall have aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than five hundred thousand
dollars ($500,000.00). For the purposes of this Agreement, any bank selected by
the Custodian to act as a sub-custodian for the Fund shall be deemed to be an
agent of the Custodian, and receipt and possession by such sub-custodian bank of
securities for the Fund shall constitute receipt and possession of such
securities by the Custodian. The account holdings of the Customer at such an
entity shall not include any assets of the Custodian other than assets held as a
fiduciary, Custodian or otherwise for Customers, and securities of the Fund
which are maintained in such an entity shall be identified as belonging to the
Fund on the books and records of the Custodian. The Custodian shall indemnify
the Fund for any losses arising from the negligence of any sub-custodian bank
selected by it. The Custodian shall promptly notify the Fund of its selection
of a bank to act as sub-custodian hereunder.
ARTICLE 16. USE OF DEPOSITORY
The Custodian may deposit all or any part of the securities owned by the
Fund in a (a) clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository, or (b) the book-entry system as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR 350, and the
book-entry regulations of federal agencies substantially in the form of Subpart
O, (hereinafter referred to as "Depository") in accordance with the provisions
of Rule 17f-4 under the Investment Company Act of 1940, or the applicable
provisions of a comparable rule adopted by the Securities and Exchange
Commission, and this Agreement.
The Custodian shall establish, for the participation of the Fund, an
account at the Depository which shall not include any assets held by the
Custodian other than as a fiduciary, custodian or otherwise for customers. The
Custodian shall send the Fund confirmation of any transfers to or from the
account of the Fund including those where the transaction takes place by book
entry at the Depository and shall identify securities held by the Depository
belonging to the Fund. Upon request, the Custodian shall also provide the Fund
with any report obtained by the Custodian on the Depository's system of internal
accounting control and such reports on the Custodian's own system of internal
accounting control as the Fund may reasonably require. The Custodian shall
indemnify the Fund for any loss or damage resulting from the use of the
Depository arising by reason of any negligence, misfeasance or misconduct of the
Custodian or its employees or agents or from a failure of the Custodian to
enforce effectively such rights as it may have against the Depository.
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<PAGE>
ARTICLE 17. GENERAL
Nothing expressed or mentioned in or to be implied from any provisions of
this Agreement is intended to give or shall be construed to give any person or
corporation other than the parties hereto any legal or equitable right, remedy
or claim under or in respect of this Agreement or any covenant, condition or
provision herein contained, this Agreement and all of the covenants, conditions
and provisions hereof being intended to be, and being, for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns.
It is the purpose and intention of the parties hereto that the Fund shall
retain all the power, rights and responsibilities of determining policy,
exercising discretion and making decisions with respect to the purchase, or
other acquisitions, and the sale, or other disposition, of all of its
securities, and that the duties and responsibilities of the Custodian hereunder
shall be limited to receiving and safeguarding the assets and securities of the
Fund and to delivering or disposing of them pursuant to the written order of the
Fund as aforesaid, and the Custodian shall have no authority, duty or
responsibility for the investment policy of the Fund or for any acts of the Fund
in buying or otherwise acquiring, or in selling or otherwise disposing of, any
securities, except as hereinbefore specifically set forth.
The Custodian shall in no case or event permit the withdrawal of any money
or securities of the Fund upon the mere receipt of any director, officer,
employee or agent of the Fund, but shall hold such money and securities for
disposition under the procedure herein set forth.
All notices and communications from the Custodian to the Fund shall be
addressed to Advantus Real Estate Securities Fund, Inc., 400 Robert Street
North, St. Paul, Minnesota 55101, unless and until the Fund, in writing, directs
the Custodian otherwise, in which event the last such written direction shall be
controlling. All notices and other communications from the Fund to the
Custodian shall be addressed to U.S. Bank National Association, 4th Floor -
Custody Window, and delivered to it at 180 East Fifth Street, St. Paul,
Minnesota 55101, unless and until the Custodian in writing directs the Fund
otherwise in which event the last such written direction shall be controlling.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or assessed against it or its
nominee in connection with the performance of this Agreement, except such as may
arise from its or its nominee's own negligent action, negligent failure to act
or willful misconduct; provided, however, that the Custodian will give the Fund
reasonable opportunity to defend against such claim in the name of the Fund or
Custodian, or both. The Custodian is authorized to charge any account of the
Fund for such items. In the event of any advance of cash for any purpose made
by the Custodian resulting from orders or instructions of the Fund, 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 Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor.
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<PAGE>
ARTICLE 18. LIABILITY OF CUSTODIAN
The Custodian shall not be liable for any action taken in good faith upon
oral or written instructions of the Fund or upon any written order herein
described or certified copy of any resolution of the Board of Directors and may
rely on the genuineness of any such document which it in good faith believes to
have been validly executed.
The Custodian shall be responsible for any loss of the physical property of
the Fund while deposited in the Fund account or accounts or otherwise in the
actual possession of Custodian, its officers, agents or employees. The
Custodian shall not be responsible to the Fund for any loss of the Fund's
securities caused by war, civil war, insurrection, military, naval or usurped
power, hurricane, cyclone, tornado, earthquake, volcanic eruption or other
similar disturbance of nature. Custodian shall not be responsible to the Fund
for any loss of the Fund's securities in time of peace or war, directly or
indirectly caused by or resulting from the effects of nuclear fission or fusion
or radioactivity.
No loss shall excuse Custodian from any of its responsibilities under the
terms of this Agreement.
The Custodian shall also be responsible for any loss of the physical
property of the Fund while such physical property is in transit between the
banking premises of Custodian and any other place in the custody of an officer,
employee or agent of Custodian, or an armored motor vehicle company employed by
Custodian, provided Custodian has selected the means of transportation or
delivery used. Unless instructed otherwise pursuant to this Agreement by the
Fund, Custodian shall be the only party entitled to select the means of
transportation or delivery used.
The Custodian is to maintain in its own name bankers' blanket bond
insurance. Upon request from the Fund, Custodian shall provide the Fund with a
letter executed by an authorized officer of Custodian describing the insurance
then in force. If, at any time, such insurance is not satisfactory to the Fund,
the Fund may terminate this Agreement in accordance with its provisions.
Custodian's responsibilities under this Agreement shall in no way be limited by
the coverage limits of insurance carried by Custodian.
ARTICLE 19. INSTRUCTIONS TO CUSTODIAN
The Custodian may, when it deems it expedient, apply to the Fund, or to
counsel for the Fund, or to its own counsel, for instructions and advice; and
the Custodian shall not be liable for any action taken by it in accordance with
the written instructions or advice of the Fund or of counsel for the Fund.
ARTICLE 20. EFFECTIVE DATE
This Agreement shall become effective when it shall have been approved by
the Board of Directors of the Fund. The Fund shall transmit to the Custodian
promptly after such
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<PAGE>
approval by said Board of Directors a copy of its resolution embodying such
approval, certified by the Secretary of the Fund.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be executed in duplicate as of the date first above written by their duly
authorized officers.
ATTEST: ADVANTUS REAL ESTATE SECURITIES
FUND, INC.
By
- --------------------------------- --------------------------------
Assistant Secretary Its
--------------------------------
ATTEST: U.S. BANK NATIONAL ASSOCIATION
By
- --------------------------------- --------------------------------
Officer Its
--------------------------------
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<PAGE>
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
AND
MINNESOTA LIFE INSURANCE COMPANY
<PAGE>
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 22nd of October, 1998, by and between Advantus
Real Estate Securities Fund, Inc., a Minnesota corporation, having its principal
office and place of business at 400 Robert Street North, St. Paul, Minnesota,
55101, (the "Fund"), and Minnesota Life Insurance Company, a Minnesota
corporation having its principal office and place of business at 400 Robert
Street North, St. Paul, Minnesota, 55101, ("ML").
WHEREAS, the Fund has contracted 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 ML 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 ML; and
WHEREAS, the Fund desires to appoint ML as its Shareholder Services agent
and agent in connection with certain other Administrative Services, and ML
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 ML
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 ML, ML 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;
(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
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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, ML agrees to provide or
perform the following Shareholder Services in accordance with procedures
established from time to time by agreement between the Fund and ML:
(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. ML shall transmit electronically, via U.S. mail or
any other delivery means ML determines to be suitable, any
Shareholder or account transaction instructions received, to
the Transfer Agent in a timely fashion; and
(c) ML 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.
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<PAGE>
Article 2 ADDITIONAL DUTIES
2.01 ML 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, ML agrees that all such records prepared or maintained
by ML relating to the services to be performed by ML 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 ML 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 ML 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. ML 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 ML pursuant to this
Agreement, the Fund will pay ML an annual account servicing fee as set forth in
Schedule A. In addition to the fees, the Fund will reimburse ML for
out-of-pocket expenses or advances incurred by ML. Such fees, out-of-pocket
expenses or advances may be changed from time to time subject to mutual written
agreement between the Fund and ML.
3.02 For Administrative Services performed by ML pursuant to
this Agreement, the Fund will pay ML a monthly Administrative Services Fee as
set forth in Schedule A. In addition to the fees, the Fund will reimburse ML
for out-of-pocket expenses or advances incurred by ML. Such fees, out-of-pocket
expenses or advances may be changed from time to time subject to mutual written
agreement between the Fund and ML.
Article 4 REPRESENTATIONS AND WARRANTIES OF ML
ML represents and warrants to the Fund that:
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.
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<PAGE>
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 ML 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 ML shall not be responsible for, and the Fund shall
indemnify and hold ML 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 ML 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.
(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 ML or its agents or subcontractors
of information, records and documents which (i) are received by ML 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 ML or its agents or
subcontractors of any instructions or requests of the Fund.
-5-
<PAGE>
(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 ML 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 ML as a result of ML's lack of good faith, negligence or
willful misconduct, or ML'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
ML hereunder.
6.03 At any time ML 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 ML under this
Agreement, and ML 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. ML, 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 ML 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. ML, 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.
6.05 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.
-6-
<PAGE>
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.
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 management of the Fund.
-7-
<PAGE>
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 REAL ESTATE SECURITIES FUND, INC.
By
----------------------------------------------
William N. Westhoff, President
Attest
------------------------------------------
Frederick P. Feuerherm, Treasurer
MINNESOTA LIFE INSURANCE COMPANY
By
----------------------------------------------
Robert E. Hunstad, Executive Vice-President
Attest
------------------------------------------
Dennis E. Prohofsky, Senior Vice
President, General Counsel and Secretary
-8-
<PAGE>
SCHEDULE A
TO THE
SHAREHOLDER AND ADMINISTRATIVE SERVICES AGREEMENT
FOR
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
(1) Minnesota Life shall receive, as compensation for services
performed as its shareholder servicing agent, an annual account servicing fee
for each shareholder account, determined in accordance with the following table:
Annual Account Fee
------------------
$ 5.00
(2) 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
Service Fee
-----------
$3,700.00
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 Real Estate Securities Fund, Inc.
400 Robert Street North
St. Paul, Minnesota 55101
Dear Sir/Madam:
Reference is made to the Registration Statement on Form N-1A which you
will file with the Securities and Exchange Commission pursuant to the Securities
Act of 1933 for the purpose of the registration for sale by Advantus Real Estate
Securities Fund, Inc. (the "Fund") of an indefinite number of shares of the
Fund's Common Stock, par value $.01 per share.
We are familiar with the proceedings to date with respect to the
proposed sale by the Fund, and have examined such records, documents and matters
of law and have satisfied ourselves as to such matters of fact as we consider
relevant for the purposes of this opinion.
We are of the opinion that:
(a) the Fund is a legally organized corporation under Minnesota law;
and
(b) the shares of Common Stock to be sold by the Fund will be legally
issued, fully paid and nonassessable when issued and sold upon
the terms and in the manner set forth in said Registration
Statement of the Fund.
We consent to the reference to this firm under the caption "Service
Providers" in the Prospectus and to the use of this opinion as an exhibit to the
Registration Statement.
Dated: December 7, 1998
Very truly yours,
/s/ Dorsey & Whitney LLP
Dorsey & Whitney LLP
MJR
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Advantus Real Estate Securities Fund, Inc.:
We consent to the reference to our Firm under the heading "General
Information - Service Providers" in Part A of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 10, 1998
<PAGE>
ADVANTUS REAL ESTATE SECURITIES FUND, INC.
RULE 12b-1 PLAN OF DISTRIBUTION
APPLICABLE TO CLASS A SHARES
This Plan of Distribution (the "Plan") is adopted pursuant to Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (as amended, the "1940
Act") by Advantus Real Estate Securities Fund, Inc., a Minnesota corporation
(the "Fund"), for and on behalf of the Fund's shares of common stock designated
as Class A, on October 22, 1998.
1. Compensation
The Fund is obligated to pay the principal underwriter of the Fund's Class
A shares (the "Underwriter") a total fee in connection with the servicing of
Class A shareholder accounts of the Fund provided in respect of Class A shares
of the Fund, calculated and payable monthly, at the annual rate of .25% of the
value of the Fund's average daily net assets attributable to Class A shares.
All or any portion of such total fee may be payable as a Shareholder
Servicing Fee and all or any portion of such fee may be payable as a
Distribution Fee, as determined from time to time by the Company's Board of
Directors. Until further action by the Board of Directors, all of such fee,
equal to .25% per annum of the value of the Fund's average daily net assets
attributable to Class A shares, shall be designated and payable as a Shareholder
Servicing Fee.
2. Expenses Covered by the Plan
(a) The Shareholder Servicing Fee may be used by the Underwriter to
provide compensation for ongoing servicing and/or maintenance of Class A
shareholder accounts with the Fund. Compensation may be paid by the Underwriter
to persons, including employees of the Underwriter, and institutions who respond
to inquiries of Class A shareholders of the Fund regarding their ownership of
shares or their accounts with the Fund or who provide other administrative or
accounting services not otherwise required to be provided by the Fund's
investment adviser, transfer agent or other agent of the Fund.
(b) The Distribution Fee may be used by the Underwriter to provide initial
and ongoing sales compensation to its investment executives and to other
broker-dealers in respect of sales of Class A shares of the Fund and to pay for
other advertising and promotional expenses in connection with the distribution
of Class A shares of the Fund. These advertising and promotional expenses
include, by way of example but not by way of limitation, costs of printing and
mailing prospectuses, statements of additional information and shareholder
reports to prospective investors in Class A shares of the Fund; preparation and
distribution of sales literature; advertising of any type; an allocation of
overhead and other expenses of the Underwriter related to the distribution of
Class A shares of the Fund; and payments to, and expenses of, officers,
employees or representatives of the Underwriter, of other broker-dealers, banks
or other financial institutions, and of any other persons who provide support
services in
<PAGE>
connection with the distribution of Class A shares of the Fund, including
travel, entertainment, and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the expenses for
shareholder servicing and distribution related activities actually incurred by
the Underwriter in connection with Class A shares of the Fund, so that such
payments may exceed expenses actually incurred by the Underwriter. The Fund's
Board of Directors will evaluate the appropriateness of the Plan and its payment
terms on a continuing basis and in doing so will consider all relevant factors,
including expenses borne by the Underwriter and amounts it receives under the
Plan.
3. Additional Payments by Adviser and the Underwriter
The Fund's investment adviser and the Underwriter may, at their option and
in their sole discretion, make payments from their own resources to cover the
costs of additional distribution and shareholder servicing activities.
4. Approval by Shareholders
The Plan will not take effect with respect to the Fund, and no fee will be
payable in accordance with Section 1 of the Plan, until the Plan has been
approved by a vote of at least a majority of the outstanding voting securities
of the Fund designated as Class A shares.
5. Approval by Directors
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Fund and (b)
those Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
6. Continuance of the Plan
The Plan will continue in effect from year to year so long as its
continuance is specifically approved annually by vote of the Fund's Board of
Directors in the manner described in Section 5 above.
7. Termination
The Plan may be terminated at any time with respect to the Fund, without
penalty, by vote of a majority of the Independent Directors or by a vote of a
majority of the outstanding voting securities of the Fund designated as Class A
shares.
-2-
<PAGE>
8. Amendments
The Plan may not be amended with respect to the Fund to increase materially
the amount of the fees payable pursuant to the Plan, as described in Section 1
above, unless the amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Fund designated as Class A shares, and all
material amendments to the Plan must also be approved by the Fund's Board of
Directors in the manner described in Section 5 above.
9. Selection of Certain Directors
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of the
Fund.
10. Written Reports
In each year during which the Plan remains in effect, the Underwriter and
any person authorized to direct the disposition of monies paid or payable by the
Fund pursuant to the Plan or any related agreement will prepare and furnish to
the Fund's Board of Directors, and the Board will review, at least quarterly,
written reports, complying with the requirements of the Rule, which set out the
amounts expended under the Plan and the purposes for which those expenditures
were made.
11. Preservation of Materials
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 10 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
12. Meaning of Certain Terms
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Company under the 1940
Act by the Securities and Exchange Commission.
-3-
<PAGE>
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
