<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS MORTGAGE SECURITIES FUND
SEPTEMBER 30, 1997
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 10
STATEMENT OF OPERATIONS 11
STATEMENTS OF CHANGES IN NET ASSETS 12
NOTES TO FINANCIAL STATEMENTS 13
INDEPENDENT AUDITORS' REPORT 18
FEDERAL INCOME TAX INFORMATION 19
SHAREHOLDER SERVICES 21
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
The 1997 fiscal year has been a rewarding one for investors. On the equity side,
despite the anticipation of a market downturn, the equity market continued to
climb. Over the twelve months ending September 30, 1997, the S&P 500* gained
40.5 percent; over 26 percent of that gain was for the trailing six months. We
saw a slight market decline of 5.5 percent in August, but stocks bounced back by
the end of September.
As the stock market continues to push forward, some investors lose sight of the
importance of maintaining a position of their assets in bonds. Investors who
diversify their portfolio assets between stocks and bonds can better position
their portfolio in the event of stock market downturns. There was not a stock
market correction of major significance during this reporting period.
The bond market demonstrated strong performance throughout 1997. For the twelve
months ending September 30, 1997, the Lehman Corporate Bond Index** returned
10.8 percent. This is a 6 percent increase over last year's return. Stable
interest rates and low inflation have contributed to the bond market's stellar
performance.
Your Advantus Family of Funds includes a range of equity and bond offerings. I
recommend that you talk with your Ascend financial representative to ensure that
your portfolio has an appropriate balance for your situation. As we continue to
watch the stock market hit new highs, we cannot assume that upward moves are a
continuing trend.
In the pages that follow, the Fund's manager will give you more information
about the economy and conditions within the market that may have affected the
Fund during this reporting period. The manager will specifically discuss your
Advantus Fund's performance and share some strategies that were used to manage
the Fund.
We assert that a long-range view of investing provides the greatest benefit to
our shareholders. We encourage you to maintain a long-range view, and we believe
that you will derive the greatest benefit by doing so.
Sincerely,
[SIGNATURE]
Paul Gooding, President
Advantus Capital Management, Inc.
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall. The Index includes
approximately 380 industrials, 10 transportations, 45 financials, and 65
utilities.
**The Lehman Corporate Bond Index includes all fixed-rate, publicly traded,
investment grade corporate debt with at least one year to maturity and $50
million par value outstanding.
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
PERFORMANCE UPDATE
[PHOTO]
KENT WEBER, CFA
PORTFOLIO MANAGER
The Advantus Mortgage Securities Fund is
a mutual fund designed for investors
seeking a high level of current income
consistent with prudent investment risk.
The Fund hopes to achieve its income
objective by investing primarily in a
diversified portfolio of mortgage-related
securities.
-Dividends declared daily and paid monthly.
-Capital gains distributions paid annually.
PERFORMANCE
The performance of your Advantus Mortgage Securities Fund for the year ended
September 30, 1997 was as follows for the three classes of shares currently
outstanding:
<TABLE>
<S> <C>
Class A............................ 10.4 percent*
Class B............................ 9.7 percent*
Class C............................ 9.7 percent*
</TABLE>
Our twelve month performance was strong enough to outdistance the 9.2 percent
return registered by Lipper's U.S. Mortgage Category** and the 10.0 percent
return compiled by Lehman Brothers Mortgage-Backed Securities Index+ over the
same period.
PORTFOLIO RECAP
The mortgage market continues to benefit from the economy's return to a kinder
and gentler interest rate environment. An interest rate environment
characterized by the reunion of lower volatility and a narrow trading range.
Patiently, mortgage investors have watched intermediate-term interest rates
grind back and forth between 6.0 percent and 7.0 percent and therefore
prepayment uncertainty has not been an issue.
In this type of environment, it's not uncommon to find institutional mortgage
investors focusing on nice, clean, easy assets. One example of this trend is the
concentration of buyers in the more straight forward pass-through securities
market. This infatuation with pass-through securities has mushroomed over the
last twelve months to a point where strong demand and solid fundamentals has
moved the prices on these securities to the fuller end of their relative value
range. While we do hold core positions in many of the more straight forward
sectors, like pass-through securities, we have been underweighted (relative to
the Lehman Brothers Mortgage-Backed Securities Index+) in these sectors
throughout most of the year.
The majority of our efforts have focused on adding value by selecting securities
that have a little more complexity and character to them or require more
creative analysis through the knowledge of multiple types of mortgage
securities. To this extent we have systematically increased our allocation to
commercial mortgage securities and collateralized mortgage obligations. Like the
pass-through sector, these sectors have also benefited from favorable market
conditions and moved higher in price.
Your Fund is constructed of solid securities from different sectors of the
mortgage market. This balanced approach positions us well to reap the potential
benefits that the mortgage market has to offer. Currently, our asset allocation
is represented by 40 percent residential pass-throughs, 9 percent commercial
mortgage securities, 1 percent asset-backed securities, 43 percent
2
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
SEPTEMBER 30, 1997
collateralized mortgage obligations and 7 percent cash. Finally, to complete the
investment picture, we turn to our duration position. At year end, the duration
on your Fund was 3.6 years which places it moderately longer than the benchmark
Lehman Brothers Mortgage-Backed Securities Index+ at 3.2 years.
OUTLOOK
The economy continues to work in a grove of moderate growth, low inflation and
low unemployment. Unfortunately, the current generation of investors is not
accustomed to the combination of these events remaining in alignment for any
extended period of time without a flare up of inflation which historically has
lead to higher interest rates. Therefore, it's not surprising to see the market
experiencing a heightened level of uncertainty about the future direction of
monetary policy by the Federal Reserve. Nevertheless, as long as the Federal
Reserve remains proactive and continues to position itself as an inflation
fighting machine, this environment could press forward and once again deliver
solid single digit returns to the mortgage investors over the next twelve
months.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5 percent
front-end sales charge or Class B's maximum 5 percent contingent deferred sales
charge. Investment returns and principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
**Average return of 59 mortgage-backed securities funds according to Lipper
Analytical Services.
+The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged benchmark
composite which includes all fixed-rate securities backed by mortgage pools of
the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA).
3
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
SEPTEMBER 30, 1997
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS
MORTGAGE SECURITIES FUND, LEHMAN BROTHER'S GNMA INDEX AND CONSUMER PRICE INDEX
On the following three charts you can see how the total return for each of the
three classes of shares of the Advantus Mortgage Securities Fund compared to the
Lehman Brother's GNMA Index and the Consumer Price Index. The three lines in the
Class A graph represent the cumulative total return of a hypothetical $10,000
investment made on September 30, 1987 through September 30, 1997. The three
lines in the Class B and Class C graphs represent the cumulative total return of
a hypothetical $10,000 investment made on the inception date of Class B and
Class C shares (August 19, 1994 and March 1, 1995, respectively) through
September 30, 1997.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS A LEHMAN BROTHER'S GNMA INDEX CPI
<S> <C> <C> <C>
9/30/87 $10,000 $10,000 $10,000
10/31/87 $9,932 $9,950 $10,550
10/31/88 $11,250 $11,321 $10,999
10/31/89 $12,355 $12,613 $11,503
10/31/90 $13,148 $13,659 $12,227
10/31/91 $15,253 $15,993 $12,585
10/31/92 $16,503 $17,400 $12,988
10/31/93 $18,389 $18,717 $13,336
9/30/94 $17,590 $18,595 $13,740
9/30/95 $19,970 $21,212 $14,042
9/30/96 $20,934 $22,458 $14,464
9/30/97 $23,105 $24,763 $14,785
Average annual total
return:
One year 4.9%
Five year 5.5%
Ten year 8.7%
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS B LEHMAN BROTHER'S GNMA INDEX CPI
<S> <C> <C> <C>
8/19/94 $10,000 $10,000 $10,000
9/30/94 $9,928 $9,874 $10,067
9/30/95 $10,742 $11,264 $10,289
9/30/96 $11,297 $11,926 $10,598
9/30/97 $12,521 $13,150 $10,833
Average annual total
return:
One year 4.7%
Since inception (8/19/94) 7.5%
</TABLE>
4
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
SEPTEMBER 30, 1997
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS C LEHMAN BROTHER'S GNMA INDEX CPI
<S> <C> <C> <C>
3/01/95 $10,000 $10,000 $10,000
9/30/95 $10,791 $10,817 $10,146
9/30/96 $11,230 $11,452 $10,450
9/30/97 $12,314 $12,628 $10,682
Average annual total
return:
One year 9.7%
Since inception (3/1/95) 8.4%
</TABLE>
The preceding charts are useful because they provide you with more information
about your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum applicable
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial professional's investment advice. Individuals cannot buy even an
unmanaged index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
SEPTEMBER 30, 1997
PRUDENT SECTOR DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 5.3%
FHLMC 2.7%
GNMA 23.8%
Vendee Mortgage Trust 13.9%
Mortgage-Backed Securities 52.8%
Preferred Stock 1.5%
</TABLE>
HIGH QUALITY ASSETS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 5.3%
Preferred Stock 1.5%
AAA Rated 64.1%
AA Rated 7.1%
A Rated 11.2%
BBB Rated 10.8%
</TABLE>
SOLID LIQUIDITY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 5.3%
Preferred Stock 1.5%
Private 144A Issues 9.3%
Public Issues 83.9%
</TABLE>
6
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (93.2%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (40.4%)
Federal Home Loan Mortgage Corporation (FHLMC) (2.7%)
$ 381,979 .................................................. 7.000% 12/01/22 $ 383,792
610,001 .................................................. 6.500% 12/01/23 600,235
------------
984,027
------------
Government National Mortgage Association (GNMA) (23.8%)
339,114 .................................................. 8.500% 05/20/17 359,654
300,979 .................................................. 8.000% 07/15/16 313,352
227,537 .................................................. 7.000% 04/15/16 227,514
698,373 .................................................. 8.500% 05/20/17 740,673
79,549 .................................................. 7.000% 02/15/17 80,107
414,067 .................................................. 8.500% 04/20/17 439,147
301,573 .................................................. 7.000% 04/15/17 303,687
338,049 .................................................. 7.000% 12/15/16 340,553
354,742 .................................................. 7.000% 04/15/17 357,228
402,034 .................................................. 7.000% 10/15/17 404,852
494,643 .................................................. 8.000% 10/20/15 515,962
543,114 .................................................. 8.000% 03/15/16 565,441
590,089 .................................................. 7.500% 07/20/16 602,126
122,851 .................................................. 7.000% 09/15/16 123,761
295,064 .................................................. 7.000% 04/15/17 297,132
310,170 .................................................. 8.000% 12/15/15 323,510
524,999 .................................................. 7.000% 09/15/16 528,889
321,396 .................................................. 7.000% 05/15/17 323,649
288,399 .................................................. 7.500% 12/20/15 294,337
374,049 .................................................. 7.000% 10/15/17 376,671
210,818 .................................................. 7.000% 05/15/17 212,294
886,539 Project Loan (d).................................. 8.000% 12/01/16 917,568
18,261 Project Loan...................................... 8.000% 05/15/17 18,859
------------
8,666,966
------------
Vendee Mortgage Trust (13.9%)
663,348 Vendee (c)........................................ 7.206% 02/15/25 674,235
1,000,000 Vendee (c)........................................ 8.000% 07/15/18 1,049,375
917,933 Vendee (c)........................................ 7.793% 02/15/25 952,643
928,190 Vendee (c)........................................ 8.465% 05/15/24 992,003
1,300,681 Vendee (c)........................................ 8.293% 12/15/26 1,386,444
------------
5,054,700
------------
Total U.S. government and agencies obligations (cost: $14,215,700)...... 14,705,693
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- --------- ------------
<C> <S> <C> <C> <C>
OTHER MORTGAGE-BACKED SECURITIES (52.8%)
Asset-Backed Securities (1.2%)
$ 446,016 Green Tree Financial Corporation.................. 6.900% 02/15/04 $ 445,762
------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (43.0%)
750,000 California Housing Finance Agency................. 8.160% 02/01/28 781,172
1,100,000 California Housing Finance Agency................. 7.760% 08/01/25 1,118,219
57,995 New Orleans Home Mortgage Authority............... 6.375% 09/15/05 57,868
1,150,000 CFSB Finance Company 144A Issue (e)............... 7.542% 11/15/05 1,168,328
495,300 Norwest Mortgage Inc.............................. 7.000% 06/25/12 495,454
1,000,000 Pennsylvania Housing Finance...................... 7.410% 10/01/17 1,014,688
1,211,872 Paine Webber Mortgage Acceptance Corporation...... 6.924% 02/25/24 1,185,362
737,155 International Capital Markets Acceptance
Corporation 144A Issue (e)....................... 8.250% 09/01/15 751,207
812,072 Wyoming Community Development..................... 6.850% 06/01/10 813,341
1,000,000 Florida Housing Finance Agency.................... 7.250% 01/01/29 1,014,688
639,760 GE Capital Mortgage Services...................... 6.000% 04/25/09 608,226
500,000 GE Capital Mortgage Services...................... 6.500% 12/25/23 475,425
496,929 Morgan Stanley Capital 144A Issue (e)............. 6.970% 03/01/26 487,145
568,544 Banco Hipotecario Nacional 144A Issue (b)(e)...... 7.916% 07/25/09 580,270
1,028,000 Lehman Brothers Grantor Trust..................... 7.000% 12/01/22 1,026,715
800,000 Westam Mortgage Obligation Series................. 5.350% 06/26/20 753,000
629,922 Collateralized Mortgage Trust..................... 5.000% 07/01/18 592,559
404,708 Prudential Home Mortgage Securities 144A Issue
(e).............................................. 7.500% 08/25/07 409,332
279,420 Santa Barbara Funding II.......................... 5.000% 03/20/18 262,756
635,305 American Housing Trust............................ 8.125% 06/25/18 657,936
742,042 Bear Stearns Mortgage Securities Inc.............. 8.000% 11/25/29 747,374
622,037 Norwest Mortgage Inc.............................. 7.500% 12/25/26 627,604
------------
15,628,669
------------
Commercial Mortgage-Backed Securities (8.6%)
1,250,707 Rosewood Care Center.............................. 7.250% 11/01/13 1,250,953
901,000 Pleasant Hill Revenue Bond........................ 7.950% 09/20/15 955,040
900,000 Massachusetts Industrial Finance.................. 7.100% 02/01/10 903,094
------------
3,109,087
------------
Total other mortgage-backed securities (cost: $18,782,751).............. 19,183,518
------------
Total long-term debt securities (cost: $32,998,451)..................... 33,889,211
------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ------------
PREFERRED STOCK (1.5%)
<C> <S> <C> <C> <C>
FINANCIAL (1.5%)
Finance-Diversified (1.5%)
11,000 Duke Realty Investments Inc............................................. $ 554,125
------------
Total preferred stock (cost: $550,000).................................. 554,125
------------
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.7%)
$ 150,000 Bellsouth Telecommunications CP................... 5.595% 10/27/97 149,394
300,000 Wal-Mart Stores CP................................ 5.571% 10/15/97 299,313
75,000 U.S. Treasury Bill................................ 5.162% 10/02/97 74,992
325,000 U.S. Treasury Bill................................ 4.751% 12/11/97 321,859
475,000 U.S. Treasury Bill................................ 5.227% 11/06/97 472,710
915,000 Baltimore Gas & Electric Co CP.................... 5.606% 10/24/97 911,695
220,000 New Jersey Gas CP................................. 5.598% 10/07/97 219,760
------------
Total short-term securities (cost: $2,449,840).......................... 2,449,723
------------
Total investments in securities (cost: $35,998,291) (f)................. $ 36,893,059
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 1.6% of the net assets in foreign securities as of September
30, 1997.
(c) Represents a debt security with a weighted average net pass-through rate
which varies based on the pool of underlying collateral. The rate disclosed
is the rate in effect at September 30, 1997.
(d) At September 30, 1997 the total cost of investments issued on a when-issued
or forward commitment basis is $912,783.
(e) Represents ownership in a restricted security which has not been registered
with the Security and Exchange Commission under the Securities Act of 1933.
(See note 6 to the financial statements.) Information concerning the
restricted securities held at September 30, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
-------------------------------------------------- ---------- ---------
<S> <C> <C>
CFSB Finance Company 144A Issue................... Various $1,145,969
Morgan Stanley Capital 144A Issue................. 12/19/96 466,181
Banco Hipotecario Nacional 144A Issue............. 04/30/97 568,544
International Capital Markets Acceptance
Corporation 144A Issue............................ 01/09/95 697,533
Prudential Home Mortgage Securities 144A Issue.... 10/01/96 395,982
---------
$3,274,209
---------
---------
</TABLE>
(f) At September 30, 1997 the cost of securities for federal income tax purposes
was $35,998,291. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 902,715
Gross unrealized depreciation..................... (7,947)
----------
Net unrealized appreciation....................... $ 894,768
----------
----------
</TABLE>
9
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying
schedule for detailed listing (identified cost:
$35,998,291)............................................... $ 36,893,059
Cash in bank on demand deposit.............................. 83,701
Receivable for Fund shares sold............................. 84,423
Receivable for investment securities sold................... 44,982
Accrued interest receivable................................. 306,484
------------
Total assets............................................ 37,412,649
------------
LIABILITIES
Payable for investment securities purchased................. 912,783
Payable for Fund shares redeemed............................ 134,815
Payable to Adviser.......................................... 9,043
------------
Total liabilities....................................... 1,056,641
------------
Net assets applicable to outstanding capital stock.......... $ 36,356,008
------------
------------
Represented by:
Capital stock--authorized 10 billion shares (Class A--2
billion shares, Class B--2 billion shares, Class C--2
billion shares and 4 billion shares unallocated) of $.01
par value
(note 1)................................................. $ 34,476
Additional paid-in capital................................ 36,457,473
Undistributed net investment income....................... 23,445
Accumulated net realized loss from investments............ (1,054,154)
Unrealized appreciation of investments.................... 894,768
------------
Total--representing net assets applicable to outstanding
capital stock.......................................... $ 36,356,008
------------
------------
Net assets applicable to outstanding Class A shares......... $ 28,089,174
------------
------------
Net assets applicable to outstanding Class B shares......... $ 6,079,359
------------
------------
Net assets applicable to outstanding Class C shares......... $ 2,187,475
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,664,489..................... $ 10.54
------------
------------
Class B--Shares outstanding 575,760....................... $ 10.56
------------
------------
Class C--Shares outstanding 207,379....................... $ 10.55
------------
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Investment income:
Interest.................................................. $ 2,301,137
-----------
Expenses (note 4):
Investment advisory fee................................... 171,007
Distribution fees--Class A................................ 70,674
Distribution fees--Class B................................ 46,768
Distribution fees--Class C................................ 15,054
Administrative services fee............................... 43,200
Custodian fees............................................ 8,570
Auditing and accounting services.......................... 16,983
Legal fees................................................ 2,776
Directors' fees........................................... 550
Registration fees......................................... 31,895
Printing and shareholder reports.......................... 28,323
Insurance................................................. 5,018
Other..................................................... 9,863
-----------
Total expenses........................................ 450,681
Less fees and expenses waived or absorbed:
Class A distribution fees............................... (11,780)
Other fund expenses..................................... (110,000)
-----------
Total fees and expenses waived or absorbed............ (121,780)
-----------
Total net expenses.................................... 328,901
-----------
Investment income--net................................ 1,972,236
-----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)................ 148,640
Net change in unrealized appreciation or depreciation on
investments.............................................. 791,063
-----------
Net gains on investments.............................. 939,703
-----------
Net increase in net assets resulting from operations........ $ 2,911,939
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Investment income--net.......................... $ 1,972,236 $ 1,604,960
Net realized gains on investments............... 148,640 350,931
Net change in unrealized appreciation or
depreciation on investments.................... 791,063 (689,709)
------------ ------------
Increase in net assets resulting from
operations................................. 2,911,939 1,266,182
------------ ------------
Distributions to shareholders from investment
income--net:
Class A....................................... (1,630,387) (1,434,649)
Class B....................................... (289,700) (125,313)
Class C....................................... (93,478) (37,597)
------------ ------------
Total distributions......................... (2,013,565) (1,597,559)
------------ ------------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A....................................... 8,672,015 4,801,997
Class B....................................... 3,147,537 2,787,439
Class C....................................... 1,651,549 1,182,431
Proceeds from the issuance of shares as a result
of reinvested dividends:
Class A....................................... 1,164,456 976,397
Class B....................................... 228,846 103,411
Class C....................................... 78,808 31,389
Payments for redemption of shares:
Class A....................................... (6,201,994) (7,130,212)
Class B....................................... (760,150) (555,653)
Class C....................................... (729,285) (382,103)
------------ ------------
Increase in net assets from capital share
transactions............................... 7,251,782 1,815,096
------------ ------------
Total increase in net assets................ 8,150,156 1,483,719
Net assets at beginning of year................... 28,205,852 26,722,133
------------ ------------
Net assets at end of year (including undistributed
net investment income of $23,445 and $58,443,
respectively).................................... $ 36,356,008 $ 28,205,852
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) ORGANIZATION
The Advantus Mortgage Securities Fund, Inc. (the Fund) is registered under
the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. The Fund's investment objective is to seek a high
level of current income consistent with prudent investment risk.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses are allocated to each class of shares based upon its relative
net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
resulting from operations during the period. Actual results could differ from
those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value quoted by dealers who make markets in these securities. When
market quotations are not readily available, securities are valued at fair value
as determined in good faith under procedures adopted by the Board of Directors.
Short-term securities are valued at market.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund on
a forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities
13
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
are subject to market fluctuations. As of September 30, 1997, the Fund had
entered into outstanding when-issued or forward commitments of $912,783. The
Fund has segregated assets, with the Fund's custodian, to cover such when-issued
and forward commitment transactions.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income and decrease additional paid in capital by
$6,331.
For federal income tax purposes, the Fund has a capital loss carryover in
the amount of $1,054,154 which, if not offset by subsequent capital gains, will
expire September 30, 2003. It is unlikely the board of directors will authorize
a distribution of any net realized capital gain until the available capital loss
carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly in
cash or reinvested in additional shares. Realized gains, if any, are paid
annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1997, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$31,462,646 and $25,191,496, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital or the Adviser), a wholly-owned subsidiary of
MIMLIC Asset Management Company (MIMLIC Management). Under the agreement,
Advantus Capital manages the Fund's assets and provides research, statistical
and advisory services and pays related office rental and executive expenses and
salaries. In addition, as part of the advisory fee, Advantus Capital pays the
expenses of the Fund's transfer, dividend disbursing and redemption agent, The
Minnesota Mutual Life Insurance Company (Minnesota Mutual), the parent of MIMLIC
Management. The fee for investment management and advisory services is based on
the average daily net assets of the Fund at the annual rate of .575 percent.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to Ascend Financial Services,
Inc. (Ascend), formerly known as MIMLIC Sales Corporation, the underwriter of
the Fund and
14
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
wholly-owned subsidiary of MIMLIC Management, to be used to pay certain expenses
incurred in the distribution, promotion and servicing of the Fund's shares. The
Class A Plan provides for a fee up to .30 percent of average daily net assets of
Class A shares. The Class B and Class C Plans provide for a fee up to 1.00
percent of average daily net assets of Class B and Class C shares, respectively.
The Class B and Class C 1.00 percent fee is comprised of a .75 percent
distribution fee and a .25 percent service fee. Ascend is currently waiving that
portion of Class A distribution fees which exceeds, as a percentage of average
daily net assets, .25 percent. Ascend waived Class A distribution fees in the
amount of $11,780 for the year ended September 30, 1997.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
The Fund pays an administrative services fee, equal to $3,600 per month, to
Minnesota Mutual for accounting, auditing, legal and other administrative
services which Minnesota Mutual provides.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. During the year ended September
30, 1997, Advantus Capital voluntarily agreed to absorb $110,000 in expenses
that were otherwise payable by the Fund.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $190,368.
As of September 30, 1997, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned 621,522 Class A shares which
represents 23.3 percent of the total outstanding Class A shares.
During the period ended September 30, 1997, legal fees were paid to a law
firm of which the Fund's secretary is a partner in the amount of $2,776.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended September 30, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold............................................. 841,660 464,458 296,289 269,093 159,102 114,493
Issued for reinvested distributions.............. 112,100 94,676 22,005 10,057 7,526 3,094
Redeemed......................................... (605,665) (687,451) (72,194) (54,084) (70,547) (37,284)
---------- ---------- --------- --------- --------- ---------
348,095 (128,317) 246,100 225,066 96,081 80,303
---------- ---------- --------- --------- --------- ---------
---------- ---------- --------- --------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At September 30, 1997, investments in securities includes issues which
generally cannot be offered for sale to the public without first being
registered under the Securities Act of 1933 (restricted securities). In the
event the securities are registered, those carrying registration rights allow
for the issuer to bear all the related costs; for issues without rights, the
Fund may incur such costs. The Fund currently limits investments in securities
that are not readily marketable, including restricted securities, to 10% of net
assets at the time of the purchase. Securities are valued by procedures
described in note 2. The aggregate value of restricted securities held by the
Fund at September 30, 1997 was $3,396,282 which represents 9.3% of net assets.
15
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
PERIOD FROM
NOVEMBER 1,
YEAR ENDED SEPTEMBER 30, 1993 TO YEAR ENDED
------------------------------- SEPTEMBER 30, OCTOBER 31,
1997 1996 1995(a) 1994(b) 1993
--------- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.23 $ 10.36 $ 9.70 $ 11.06 $ 10.94
--------- --------- --------- ------- -------
Income from investment
operations:
Net investment income....... .70 .62 .62 .53 .63
Net gains or losses on
securities (both realized
and unrealized)............ .33 (.13) .65 (.99) .55
--------- --------- --------- ------- -------
Total from investment
operations............... 1.03 .49 1.27 (.46) 1.18
--------- --------- --------- ------- -------
Less distributions:
Dividends from net
investment income.......... (.72) (.62) (.61) (.53) (.63)
Distributions from capital
gains...................... -- -- -- (.37) (.43)
--------- --------- --------- ------- -------
Total distributions....... (.72) (.62) (.61) (.90) (1.06)
--------- --------- --------- ------- -------
Net asset value, end of
period....................... $ 10.54 $ 10.23 $ 10.36 $ 9.70 $ 11.06
--------- --------- --------- ------- -------
--------- --------- --------- ------- -------
Total return (d).............. 10.4% 4.8% 13.5% (4.3)% 11.4%
Net assets, end of period (in
thousands)................... $ 28,089 $ 23,692 $ 25,317 $ 27,105 $ 27,073
Ratio of expenses to average
daily net assets (e)......... .95% 1.26% 1.29% 1.24%(f) 1.17%
Ratio of net investment income
to average daily net assets
(e).......................... 6.77% 6.05% 6.23% 5.73%(f) 5.77%
Portfolio turnover rate
(excluding short-term
securities).................. 85.1% 125.2% 203.7% 236.2% 135.0%
</TABLE>
- ------------
(a) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995, the
Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(b) During 1994, the Fund changed its fiscal year end from October 31 to
September 30.
(c) Commencement of operations.
(d) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges.
16
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------- --------------------------------
PERIOD FROM
AUGUST 19,
YEAR ENDED SEPTEMBER 30, 1994(c) TO YEAR ENDED SEPTEMBER 30,
--------------------------------- SEPTEMBER 30, --------------------------------
1997 1996 1995(a) 1994 1997 1996
--------- --------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.24 $ 10.37 $ 9.70 $ 9.83 $ 10.23 $ 10.37
--------- --------- ----------- ------ ------ ------
Income from investment
operations:
Net investment income....... .63 .54 .53 .06 .63 .54
Net gains or losses on
securities (both realized
and unrealized)............ .33 (.13) .67 (.13) .33 (.14)
--------- --------- ----------- ------ ------ ------
Total from investment
operations............... .96 .41 1.20 (.07) .96 .40
--------- --------- ----------- ------ ------ ------
Less distributions:
Dividends from net
investment income.......... (.64) (.54) (.53) (.06) (.64) (.54)
Distributions from capital
gains...................... -- -- -- -- -- --
--------- --------- ----------- ------ ------ ------
Total distributions....... (.64) (.54) (.53) (.06) (.64) (.54)
--------- --------- ----------- ------ ------ ------
Net asset value, end of
period....................... $ 10.56 $ 10.24 $ 10.37 $ 9.70 $ 10.55 $ 10.23
--------- --------- ----------- ------ ------ ------
--------- --------- ----------- ------ ------ ------
Total return (d).............. 9.7% 4.1% 12.7% (.7)% 9.7% 4.1%
Net assets, end of period (in
thousands)................... $ 6,079 $ 3,375 $ 1,084 $ 60 $ 2,187 $ 1,139
Ratio of expenses to average
daily net assets (e)......... 1.70% 2.01% 2.05% .28%(g) 1.70% 2.01%
Ratio of net investment income
to average daily net assets
(e).......................... 6.08% 5.38% 5.32% .60%(g) 6.11% 5.39%
Portfolio turnover rate
(excluding short-term
securities).................. 85.1% 125.2% 203.7% 236.2% 85.1% 125.2%
<CAPTION>
PERIOD FROM
MARCH 1,
1995(c) TO
SEPTEMBER 30,
1995
---------------
<S> <C>
Net asset value, beginning of
period....................... $ 9.90
------
Income from investment
operations:
Net investment income....... .31
Net gains or losses on
securities (both realized
and unrealized)............ .47
------
Total from investment
operations............... .78
------
Less distributions:
Dividends from net
investment income.......... (.31)
Distributions from capital
gains...................... --
------
Total distributions....... (.31)
------
Net asset value, end of
period....................... $ 10.37
------
------
Total return (d).............. 7.9%
Net assets, end of period (in
thousands)................... $ 321
Ratio of expenses to average
daily net assets (e)......... 2.05%(f)
Ratio of net investment income
to average daily net assets
(e).......................... 5.26%(f)
Portfolio turnover rate
(excluding short-term
securities).................. 203.7%
</TABLE>
- ------------
(e) The Fund's Adviser and Distributor voluntarily waived or absorbed $121,780,
$35,718, $36,128, $43,505 and $34,773 in expenses for the years ended
September 30, 1997, 1996 and 1995, the period ended September 30, 1994 and
the year ended October 31, 1993, respectively. If Class A shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 1.37%, 1.40%, 1.42%, 1.41% and 1.31%, respectively,
and the ratio of net investment income to average daily net assets would
have been 6.35%, 5.91%, 6.10%, 5.56% and 5.63%, respectively. If Class B
shares had been charged for these expenses, the ratio of expenses to average
daily net assets would have been 2.07%, 2.09% and 2.11%, and the ratio of
net investment income to average daily net assets would have been 5.71%,
5.30% and 5.26% for years ended September 30, 1997, 1996 and 1995,
respectively. If Class C shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have been 2.07%, 2.08%
and 2.11%, respectively, and the ratio of net investment income to average
daily net assets would have been 5.74%, 5.32% and 5.20% for the years ended
September 30, 1997, 1996 and the period ended September 30, 1995,
respectively.
(f) Adjusted to an annual basis.
(g) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Mortgage Securities Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Mortgage
Securities Fund, Inc. (the Fund) as of September 30, 1997 and the related
statement of operations for the year then ended, the statement of changes in net
assets for the two years then ended and the financial highlights for the three
years then ended, the period from November 1, 1993 to September 30, 1994 and the
year ended October 31, 1993. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1997 and the results of its operations,
changes in its net assets and financial highlights for the periods stated in the
first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 7, 1997
18
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal year ended September 30, 1997. Dividends for the 1997 calendar year will
be reported to you on Form 1099-Div in late January 1998. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
Income distributions--taxable as dividend income, none qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
October 31, 1996............................................................................................ $ .0574
November 30, 1996........................................................................................... .0541
December 31, 1996........................................................................................... .0713
January 31, 1997............................................................................................ .0555
February 28, 1997........................................................................................... .0545
March 31, 1997.............................................................................................. .0566
April 30, 1997.............................................................................................. .0738
May 31, 1997................................................................................................ .0387
June 30, 1997............................................................................................... .0641
July 31, 1997............................................................................................... .0618
August 31, 1997............................................................................................. .0637
September 30, 1997.......................................................................................... .0651
---------
$ .7166
---------
---------
</TABLE>
CLASS B
Income distributions--taxable as dividend income, none qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
October 31, 1996............................................................................................ $ .0509
November 30, 1996........................................................................................... .0477
December 31, 1996........................................................................................... .0647
January 31, 1997............................................................................................ .0490
February 28, 1997........................................................................................... .0488
March 31, 1997.............................................................................................. .0501
April 30, 1997.............................................................................................. .0676
May 31, 1997................................................................................................ .0322
June 30, 1997............................................................................................... .0577
July 31, 1997............................................................................................... .0552
August 31, 1997............................................................................................. .0571
September 30, 1997.......................................................................................... .0588
---------
$ .6398
---------
---------
</TABLE>
19
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
FEDERAL INCOME TAX INFORMATION--CONTINUED
CLASS C
Income distributions--taxable as dividend income, none qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
October 31, 1996............................................................................................ $ .0508
November 30, 1996........................................................................................... .0477
December 31, 1996........................................................................................... .0647
January 31, 1997............................................................................................ .0489
February 28, 1997........................................................................................... .0485
March 31, 1997.............................................................................................. .0501
April 30, 1997.............................................................................................. .0676
May 31, 1997................................................................................................ .0322
June 30, 1997............................................................................................... .0577
July 31, 1997............................................................................................... .0552
August 31, 1997............................................................................................. .0571
September 30, 1997.......................................................................................... .0587
---------
$ .6392
---------
---------
</TABLE>
20
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make four exchanges or telephone transfers between the Funds
each calendar year without incurring a transaction charge. Thereafter, there
will be a $7.50 transaction charge for each additional exchange or transfer
within the calendar year. Systematic Exchange Plans are exempt from this charge.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive checks at
specified intervals from your fund account--subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE TRANSFER: You may transfer money from one Advantus account to any
other Advantus account you own just by calling our toll free number. Sign up for
telephone exchanges on the Advantus Application or complete the telephone
authorization form.
SYSTEMATIC TRANSFER: If you have an Advantus Money Market account you may
transfer a set amount of money to another Advantus Fund to diversify your
investment portfolio and take advantage of dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Our special purchase plans enable you to open an
Advantus Fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets). One of these plans--The
Automatic Investment Plan--allows you to invest automatically each month from
your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPS, SIMPLE,
profit sharing, money purchase or defined benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account. Amounts
over $1,000 may be wire transferred to your personal bank account. The
prevailing wire charge will be added to the withdrawal amount. Sign up for
21
<PAGE>
telephone redemption on the Advantus Application or complete a Service Request
Form. To have the redemption automatically deposited into your checking account,
please send a voided check from your bank. Depending on the performance of the
underlying investment options, the value may be worth more or less than the
original amount invested upon redemption. Some limitations apply, please refer
to the prospectus for details.
ACCOUNT UPDATES: You'll receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
reports to help you track all of your investments in the Advantus Family of
Funds, and annual tax statements. Semi-annual and annual reports will provide
you with portfolio information, fund performance data and the current investment
outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from Advantus Shareholder Services, call (1-800-665-6005).
Our voice response system is available from 7 a.m. to 3 a.m. Central Time Monday
through Friday, and 8 a.m. to 5 p.m. on Saturday. This system allows you to
access current net asset values and your account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through your local
registered representative of Ascend Financial Services, Inc. (formerly known as
MIMLIC Sales Corporation), distributor of the Funds. Contact your representative
for information and a prospectus for any of the Advantus Funds you are
interested in.
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our Systematic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.5 billion in assets in addition to $1.8 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 11 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
22
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-888-AFS-1838
(1-888-237-1838)
<PAGE>
ASCEND FINANCIAL SERVICES, INC. BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
FORWARDING AND RETURN POSTAGE GUARANTEED,
ADDRESS CORRECTION REQUESTED
F.48641 Rev. 11-1997
