<PAGE>
[LOGO]
Semi-Annual Report to Shareholders
Advantus Mortgage Securities Fund
March 31, 1998
<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
SHAREHOLDER SERVICES 18
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
Investors experienced a positive financial environment with moderate economic
growth and low inflation throughout the six-month reporting period. Fears of
inflation in our economy have dissipated as negative economic events in Asia
unfolded and took on global implications earlier in the reporting period.
The "Asian Flu" severely affected several Far Eastern currencies and stock
markets, leaving a trail of bankruptcies, uncertainties, and fears in its wake.
In fact, a "flight to quality" poured assets into U.S. markets, particularly the
bond market, which is a popular destination for investors during periodic
flights to quality.
Broadly speaking, both equity and fixed income securities have demonstrated
notable results this reporting period. Indices, such as the S&P 500,* which
returned 16.3 percent at the end of the six-month period; and the Lehman
Brothers Government Corporate Bond Index,** which returned 4.8 percent for the
same period, reflected the GENERAL strength of the equity and fixed income
markets respectively.
As investors, we all enjoy "market watching." We have witnessed the financial
markets change, sometimes significantly, because of actual events or because of
mere perceptions in those markets. Keeping a long-range view of investing is
important because it smoothes out the highs and lows. We believe that investors
derive the greatest benefit by maintaining a long-range perspective on
investing.
The investment professionals at Advantus Capital Management continue to put
their money management expertise to work on your behalf. We appreciate your
continued participation in the Advantus Funds and urge you to maintain a
long-term investment perspective.
Sincerely,
/s/ Robert E. Hunstad
Robert E. Hunstad, President
Advantus Funds
*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 Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and The Lehman Brothers
Corporate Bond Index which includes all publicly issued, fixed rate,
nonconvertible investment grade dollar-denominated, SEC registered corporate
debt.
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
PERFORMANCE UPDATE
[PHOTO]
KENT WEBER, CFA
PORTFOLIO UPDATE
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 six month
period ended March 31, 1998 was as follows for the three classes of shares
currently outstanding:
<TABLE>
<S> <C>
Class A............. 4.0 percent*
Class B............. 3.6 percent*
Class C............. 3.6 percent*
</TABLE>
The Fund's benchmark index, the Lehman Brothers Mortgage-Backed Securities
Index,** returned 4.0 percent for the same period.
In prior reporting periods, the Lehman Brothers GNMA Index+ was used as the
Fund's benchmark. The current benchmark, the Lehman Brothers Mortgage-Backed
Securities Index,** better fits our stated investment objective than did the
Lehman Brothers GNMA Index.+
PORTFOLIO ANALYSIS
Broadly speaking, the mortgage market put in another good performance by
outperforming duration-matched Treasuries over the past six months. A relatively
benign interest rate environment steadily improved credit fundamentals and
helped to propel the mortgage market forward. Never the less, with interest
rates moving lower throughout the reporting period, the mortgage market has seen
a steady increase in prepayment activity. As a result of these conditions, the
duration of the mortgage market has shortened from 3.2 years to 2.5 years, which
truly makes the mortgage market a low duration asset class.
The Fund's duration was held 10 percent longer than the index throughout the
reporting period. This benefited the Fund, as interest rates fell by about .4
percent, thus adding some price appreciation on top of healthy income.
We are always watchful of prepayment risk. Prepayment concerns escalated as
interest rates moved lower. Our stance grew more cautious as we moved to protect
the Fund from the eye of the prepayment storm by reducing our exposure to
securities most likely to experience high refinancing activities.
Throughout the period, we held mortgages that we felt rewarded us for the amount
of risk (prepayment, credit, etc.) we incurred. When interest rates began moving
lower, the following strategies were put in place:
-Reduced exposure to mortgages with high loan rates.
-Development of a more broadly diversified portfolio to avoid reliance on or
exposure to any one sector of the mortgage market.
-Increased allocation of commercial mortgage-backed securities.
-Increased holdings in non-agency, investment-grade securities.
(Investment-grade securities are those rated BBB and above.)
2
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
MARCH 31, 1998
Fortunately, not all mortgage securities are created equally and investors are
doing a better job this time around of not judging a book by its cover (vs. 1993
generational lows in rates). The market has matured to a point where it now sees
prepayments more like stock earnings with respect to meeting--or not
meeting--expectations on how the price should move.
The Asian currency situation has elicited some secondary effects in the mortgage
market. It has put downward pressure on domestic and global interest rates and
inflation, which have rekindled the topic of refinancing while simultaneously
stimulating domestic growth.
OUTLOOK
We see the Fund's position as well situated. It is broadly diversified,
utilizing numerous sectors of the mortgage market to add value. We are also
ready to handle an inherent increase in volatility that occurs due to the low
interest rate levels. We continue to favor high quality securities from both a
credit and cash flow perspective. Some predictability is comforting.
There may be opportunity for some price appreciation on top of coupon income,
which could lead to mid to high single digit returns for 1998. We anticipate
that the overall market will likely experience consistent growth and mild
inflation, which sets the stage for a fixed-income friendly year. Although we
are in the late innings of the recovery that started in 1991, we see no
recession looming.
*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.
**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).
+The Lehman Brothers GNMA Index includes 15 and 30 year fixed rate securities
backed by mortgage pools of the Government National Mortgage Association.
3
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
MARCH 31, 1998
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$10,000 INVESTMENT IN ADVANTUS MORTGAGE SECURITIES FUND,
LEHMAN BROTHER'S GNMA INDEX, LEHMAN BROTHER'S
MORTGAGE-BACKED SECURITIES 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, the Lehman Brother's Mortgage-Backed Securities
Index, and the Consumer Price Index. The four lines in the Class A graph
represent the cumulative total return of a hypothetical $10,000 investment made
on March 31, 1988 through March 31, 1998. The four 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 March 31, 1998.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Average annual total
return:
One year 5.9%
Five year 5.5%
Ten year 8.0%
Lehman Brother's
Lehman Brother's Mortgage-Backed
Class A GNMA Index CPI Securities Index
3/31/88 $10,000 $10,000 $10,000 $10,000
10/31/88 $10,081 $10,648 $10,686 $10,635
10/31/89 $11,072 $11,863 $11,175 $11,825
10/31/90 $11,782 $12,847 $11,879 $12,826
10/31/91 $13,669 $15,042 $12,226 $14,995
10/31/92 $14,789 $16,365 $12,618 $16,218
10/31/93 $16,478 $17,604 $12,956 $17,498
9/30/94 $15,763 $17,489 $13,348 $17,219
9/30/95 $17,896 $19,951 $13,642 $19,547
9/30/96 $18,759 $21,123 $14,052 $20,681
9/30/97 $20,704 $23,291 $14,363 $22,756
3/31/98 $21,529 $24,204 $14,426 $23,676
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Average annual total
return:
One year 5.8%
Since inception (8/19/94) 7.5%
Lehman Brother's Lehman Brother's Mortgage-
Class B GNMA Index CPI Backed Securities Index
8/19/94 $ 10,000 $ 10,000 $ 10,000 $10,000
9/30/94 9,928 9,874 10,067 9,874
9/30/95 10,742 11,264 10,289 11,209
9/30/96 11,297 11,926 10,598 11,859
9/30/97 12,521 13,150 10,833 13,049
3/31/98 12,980 13,665 10,880 13,576
</TABLE>
4
<PAGE>
ADVANTUS MORTGAGE
SECURITIES FUND
MARCH 31, 1998
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Average annual total
return:
One year 10.7%
Since inception (3/1/95) 8.2%
Lehman Brother's Lehman Brother's Mortgage-
Class C GNMA Index CPI Backed Securities Index
3/1/95 $10,000 $ 10,000 $10,000 $ 10,000
9/30/95 10,791 10,817 10,146 10,793
9/30/96 11,230 11,452 10,450 11,419
9/30/97 12,314 12,628 10,682 12,565
3/31/98 12,757 13,123 10,728 13,073
</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
MARCH 31, 1998
PRUDENT SECTOR DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and
Other
Assets/
Liabilities 1.7%
FNMA 3.5%
FHLMC 4.1%
GNMA 29.9%
Vendee
Mortgage
Trust 8.6%
Mortgage-
Backed
Securities 50.8%
Preferred
Stock 1.4%
</TABLE>
HIGH QUALITY ASSETS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 1.7%
Preferred Stock 1.4%
AAA Rated 64.3%
AA Rated 9.5%
A Rated 12.7%
BBB Rated 10.4%
</TABLE>
SOLID LIQUIDITY
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 1.7%
Preferred Stock 1.4%
Private 144A Issues 8.6%
Public Issues 88.3%
</TABLE>
7
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1998
(UNAUDITED)
(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 (96.9%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (46.1%)
Federal Home Loan Mortgage Corporation (FHLMC) (4.1%)
$ 750,000 (d).............................................. 7.00% 04/15/28 $ 758,555
585,524 ................................................. 6.50% 12/01/23 584,411
364,968 ................................................. 7.00% 12/01/22 371,563
-------------
1,714,529
-------------
Federal National Mortgage Association (FNMA) (3.5%)
788,035 ................................................. 6.50% 01/01/14 788,515
750,000 ................................................. 5.00% 05/25/22 704,250
-------------
1,492,765
-------------
Government National Mortgage Association (GNMA) (29.9%)
505,256 ................................................. 7.00% 09/15/16 513,172
110,714 ................................................. 7.00% 09/15/16 112,449
313,735 ................................................. 7.00% 12/15/16 318,650
78,592 ................................................. 7.00% 02/15/17 79,795
290,542 ................................................. 7.00% 04/15/17 294,990
350,286 ................................................. 7.00% 04/15/17 355,649
275,566 ................................................. 7.00% 04/15/17 279,785
307,570 ................................................. 7.00% 05/15/17 312,279
208,071 ................................................. 7.00% 05/15/17 211,257
369,610 ................................................. 7.00% 10/15/17 375,268
383,093 ................................................. 7.00% 10/15/17 388,958
35,558 ................................................. 7.00% 09/15/26 35,931
769,309 ................................................. 7.00% 08/15/27 777,156
349,087 ................................................. 7.00% 02/01/28 352,588
494,522 ................................................. 7.00% 02/15/28 499,482
985,182 ................................................. 7.50% 12/20/17 1,021,544
594,000 ................................................. 7.50% 09/15/27 609,236
242,893 ................................................. 7.50% 11/15/27 249,123
495,848 ................................................. 7.50% 11/30/27 508,631
279,854 ................................................. 8.00% 12/15/15 292,310
536,621 ................................................. 8.00% 03/15/16 560,393
243,892 ................................................. 8.00% 07/15/16 254,696
122,009 (d).............................................. 8.00% 12/01/16 126,661
370,808 ................................................. 8.50% 04/20/17 390,097
303,653 ................................................. 8.50% 05/20/17 319,449
631,537 ................................................. 8.50% 05/20/17 664,389
687,606 ................................................. 7.00% 02/15/28 694,502
737,519 ................................................. 7.50% 12/01/27 756,436
399,053 ................................................. 7.50% 01/15/28 409,257
781,981 Project Loan..................................... 8.00% 05/01/17 830,855
-------------
12,594,988
-------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -------------
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Vendee Mortgage Trust (8.6%)
$ 647,585 Vendee (c)....................................... 7.21% 02/15/25 $ 667,229
876,028 Vendee (c)....................................... 7.79% 02/15/25 918,187
1,000,000 Vendee (c)....................................... 8.00% 07/15/18 1,043,125
950,310 Vendee (c)....................................... 8.29% 12/15/26 1,014,931
-------------
3,643,472
-------------
Total U.S. government and agencies obligations (cost:
$18,959,401)...................................................... 19,445,754
-------------
OTHER MORTGAGE-BACKED SECURITIES (50.8%)
Asset-Backed Securities (1.8%)
725,859 Tryon Mortgage Funding........................... 7.75% 12/20/09 741,500
-------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (38.4%)
526,482 American Housing Trust........................... 8.13% 06/25/18 541,602
523,752 Banco Hipotecario Nacional-144A Issue (b)(e)..... 7.92% 07/25/09 515,896
500,000 Bear Stearns Mortgage Securities, Inc............ 6.75% 01/30/28 492,187
736,246 Bear Stearns Mortgage Securities, Inc............ 8.00% 11/25/29 767,536
1,100,000 California Housing Finance Agency................ 7.76% 08/01/25 1,130,250
750,000 California Housing Finance Agency................ 8.16% 02/01/28 787,500
546,028 Collateralized Mortgage Trust.................... 5.00% 07/01/18 525,689
1,150,000 CSFB Finance Company-144A Issue (e).............. 7.18% 11/15/05 1,145,687
619,555 GE Capital Mortgage Securities................... 6.00% 04/25/09 600,832
336,051 GE Capital Mortgage Securities................... 6.00% 11/25/08 326,420
500,000 GE Capital Mortgage Securities................... 6.50% 12/25/23 482,110
653,993 International Capital Markets Acceptance 667,072
Corp.-144A Issue (e)............................ 8.25% 09/01/15
1,028,000 Lehman Brothers Grantor Trust.................... 7.00% 12/01/22 1,032,497
500,000 Louisiana Housing Finance Agency................. 6.38% 12/01/23 496,818
889,478 Morgan Stanley Capital-144A Issue (e)............ 6.98% 03/01/26 881,139
619,235 Norwest Mortgage Inc............................. 7.50% 12/25/26 625,607
1,190,779 Paine Webber Mortgage Acceptance Corporation..... 6.93% 02/25/24 1,197,591
1,000,000 Pennsylvania Housing Finance..................... 7.41% 10/01/17 1,018,810
827,993 Prudential Home Mortgage Securities.............. 6.05% 04/25/24 808,846
490,220 Prudential Home Mortgage Securities.............. 8.00% 06/25/22 550,272
400,859 Prudential Home Mortgage Securities-144A Issue 402,394
(e)............................................. 7.50% 08/25/07
446,451 Santa Barbara Funding II......................... 5.00% 03/20/18 427,798
773,404 Wyoming Community Development.................... 6.85% 06/01/10 775,338
-------------
16,199,891
-------------
Commercial Mortgage-Backed Securities (10.6%)
375,000 City of Billings................................. 6.56% 10/01/06 384,562
570,000 Los Angeles Housing Authority.................... 6.75% 11/01/03 570,217
900,000 Massachusetts Industrial Financial............... 7.10% 02/01/10 902,235
888,000 Pleasant Hill Revenue Bond....................... 7.95% 09/20/15 956,702
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -------------
OTHER MORTGAGE-BACKED SECURITIES--CONTINUED
<C> <S> <C> <C> <C>
$1,645,392 Rosewood Care Center............................. 7.25% 11/01/13 $ 1,676,121
-------------
4,489,837
-------------
Total other mortgage-backed securities (cost: $20,929,054)......... 21,431,228
-------------
Total long-term debt securities (cost: $39,888,455)................ 40,876,982
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C>
PREFERRED STOCK (1.4%)
FINANCIAL (1.4%)
Real Estate Investment Trust (1.4%)
11,000 Duke Realty Investments, Inc.-7.99%.............. 574,750
-------------
Total preferred stock (cost: $550,000)........... 574,750
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.7%)
$ 300,000 Bellsouth Telecommunications CP.................. 5.59% 04/07/98 299,672
210,000 General Mills Incorporated CP.................... 5.60% 04/09/98 209,707
155,000 Madison Gas & Electric CP........................ 5.64% 04/13/98 154,691
55,000 US Treasury Bill................................. 5.17% 06/25/98 54,343
-------------
Total short-term securities (cost: $718,526)....................... 718,413
-------------
Total investments in securities (cost: $41,156,981) (f)............ $42,170,145
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 1.2% of the net assets in foreign securities as of March 31,
1998.
(c) Represents a debt secutity 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 March 31, 1998.
(d) At March 31, 1998 the total cost of investments issued on a when-issued or
forward commitment basis is $882,708.
(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 March 31, 1998, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
CSFB Finance Company 144A Issue........ various $ 1,145,969
International Capital Markets 01/09/95 618,840
Acceptance Corporation 144A Issue....
Morgan Stanley Capital 144A Issue...... various 850,378
Banco Hipotecario Nacional 144A 04/30/97 523,752
Issue................................
Prudential Home Mortgage Securities 10/01/96 392,216
144A Issue...........................
-----------
$ 3,531,155
-----------
-----------
</TABLE>
(f) At March 31, 1998 the cost of securities for federal income tax purposes was
$41,158,456. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $1,044,065
Gross unrealized depreciation.......... (32,376)
----------
Net unrealized appreciation............ $1,011,689
----------
----------
</TABLE>
9
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing
(identified cost: $41,156,981)........ $42,170,145
Cash in bank on demand deposit......... 430,849
Receivable for Fund shares sold........ 114,060
Receivable for investment securities
sold.................................. 2,150,076
Accrued interest receivable............ 338,203
-----------
Total assets....................... 45,203,333
-----------
LIABILITIES
Payable for investment securities
purchased............................. 2,833,673
Payable for Fund shares redeemed....... 90,461
Payable to Adviser..................... 105,795
-----------
Total liabilities.................. 3,029,929
-----------
Net assets applicable to outstanding
capital stock......................... $42,173,404
-----------
-----------
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)...................... $ 39,662
Additional paid-in capital........... 41,957,486
Undistributed net investment
income.............................. 33,167
Accumulated net realized losses from
investments......................... (870,075)
Unrealized appreciation on
investments......................... 1,013,164
-----------
Total--representing net assets
applicable to outstanding capital
stock............................. $42,173,404
-----------
-----------
Net assets applicable to outstanding
Class A shares........................ $31,271,359
-----------
-----------
Net assets applicable to outstanding
Class B shares........................ $ 7,932,712
-----------
-----------
Net assets applicable to outstanding
Class C shares........................ $ 2,969,333
-----------
-----------
Shares outstanding and net asset value
per share:
Class A--Shares outstanding
2,941,837........................... $ 10.63
-----------
-----------
Class B--Shares outstanding
745,154............................. $ 10.65
-----------
-----------
Class C--Shares outstanding
279,187............................. $ 10.64
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................. $1,381,965
Dividends............................ 21,972
----------
Total investment income.......... 1,403,937
----------
Expenses (note 4):
Investment advisory fee.............. 112,939
Distribution fees--Class A........... 44,776
Distribution fees--Class B........... 34,975
Distribution fees--Class C........... 12,186
Administrative services fee.......... 21,800
Custodian fees....................... 4,817
Auditing and accounting services..... 12,225
Legal fees........................... 4,233
Directors' fees...................... 256
Registration fees.................... 17,120
Printing and shareholder reports..... 16,584
Insurance............................ 2,509
Other................................ 3,820
----------
Total expenses................... 288,240
Less fees and expenses waived or
absorbed:
Class A distribution fees............ (7,463)
Other fund expenses.................. (58,812)
----------
Total fees and expenses waived or
absorbed......................... (66,275)
----------
Total net expenses............... 221,965
----------
Investment income--net........... 1,181,972
----------
Realized and unrealized gains on
investments:
Net realized gains on investments
(note 3)............................ 184,079
Net change in unrealized appreciation
or depreciation on investments...... 118,396
----------
Net gains on investments......... 302,475
----------
Net increase in net assets resulting
from operations....................... $1,484,447
----------
----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1998
AND THE YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Operations:
Investment income--net............... $ 1,181,972 $ 1,972,236
Net realized gains on investments.... 184,079 148,640
Net change in unrealized appreciation
or depreciation on investments...... 118,396 791,063
----------- -----------
Increase in net assets resulting
from operations................. 1,484,447 2,911,939
----------- -----------
Distributions to shareholders from
investment income--net:
Class A.............................. (916,656) (1,630,387)
Class B.............................. (189,115) (289,700)
Class C.............................. (66,479) (93,478)
----------- -----------
Total distributions.............. (1,172,250) (2,013,565)
----------- -----------
Capital share transactions (notes 4 and
5):
Proceeds from sales:
Class A............................ 5,462,844 8,672,015
Class B............................ 2,866,711 3,147,537
Class C............................ 1,777,164 1,651,549
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 591,960 1,164,456
Class B............................ 149,651 228,846
Class C............................ 56,470 78,808
Payments for redemption of shares:
Class A............................ (3,114,773) (6,201,994)
Class B............................ (1,215,366) (760,150)
Class C............................ (1,069,462) (729,285)
----------- -----------
Increase in net assets from
capital share transactions...... 5,505,199 7,251,782
----------- -----------
Total increase in net assets..... 5,817,396 8,150,156
Net assets at beginning of period...... 36,356,008 28,205,852
----------- -----------
Net assets at end of period (including
undistributed net investment income of
$33,167 and $23,445, respectively).... $42,173,404 $36,356,008
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(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 March 31, 1998, the Fund had entered
into outstanding when-issued or forward commitments of $882,708. The Fund has
segregated assets, with the Fund's custodian, to cover such when-issued and
forward commitment transactions.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
For federal income tax purposes, the Fund has a capital loss carryover in
the amount of $1,054,154 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 period ended March 31, 1998, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$32,009,099 and $25,303,174, 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), 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 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
14
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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 $7,463 for the period ended March 31, 1998.
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 $3,700 per month, to
Minnesota Mutual for accounting, auditing, legal and other administrative
services which Minnesota Mutual provides. Prior to February 1, 1998, the
administrative services fee was $3,600 per month.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. During the period ended March 31,
1998, Advantus Capital voluntarily agreed to absorb $58,812 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 $154,005.
As of March 31, 1998, Minnesota Mutual and subsidiaries and the directors
and officers of the Fund as a whole owned 623,046 Class A shares which
represents 21.2 percent of the total outstanding Class A shares.
During the period ended March 31, 1998, legal fees were paid to a law firm
of which the Fund's secretary is a partner in the amount of $4,233.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period from October 1, 1997 to March 31, 1998
and the year ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- --------------------- ---------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold........................................... 512,604 841,660 269,486 296,289 166,597 159,102
Issued for reinvested distributions............ 55,668 112,100 14,047 22,005 5,319 7,526
Redeemed....................................... (290,924) (605,665) (114,139) (72,194) (100,108) (70,547)
---------- ---------- ---------- --------- ---------- ---------
277,348 348,095 169,394 246,100 71,808 96,081
---------- ---------- ---------- --------- ---------- ---------
---------- ---------- ---------- --------- ---------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At March 31, 1998, 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 March 31, 1998 was
$3,612,188 which represents 8.6% 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 PERIOD FROM
OCTOBER 1, NOVEMBER 1,
1997 TO YEAR ENDED SEPTEMBER 30, 1993 TO YEAR ENDED
MARCH 31, --------------------------------- SEPTEMBER 30, OCTOBER 31,
1998 1997 1996 1995(a) 1994(b) 1993
------------ --------- --------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.54 $ 10.23 $ 10.36 $ 9.70 $ 11.06 $ 10.94
------------ --------- --------- --------- ------- ------------
Income from investment operations:
Net investment income................. .33 .70 .62 .62 .53 .63
Net gains or losses on securities
(both realized and unrealized)...... .09 .33 (.13) .65 (.99) .55
------------ --------- --------- --------- ------- ------------
Total from investment
operations...................... .42 1.03 .49 1.27 (.46) 1.18
------------ --------- --------- --------- ------- ------------
Less distributions:
Dividends from net investment
income.............................. (.33) (.72) (.62) (.61) (.53) (.63)
Distributions from capital gains...... -- -- -- -- (.37) (.43)
------------ --------- --------- --------- ------- ------------
Total distributions............... (.33) (.72) (.62) (.61) (.90) (1.06)
------------ --------- --------- --------- ------- ------------
Net asset value, end of period.......... $ 10.63 $ 10.54 $ 10.23 $ 10.36 $ 9.70 $ 11.06
------------ --------- --------- --------- ------- ------------
------------ --------- --------- --------- ------- ------------
Total return (d)........................ 4.0% 10.4% 4.8% 13.5% (4.3)% 11.4%
Net assets, end of period (in
thousands)............................ $31,271 $ 28,089 $ 23,692 $ 25,317 $27,105 $27,073
Ratio of expenses to average daily net
assets (e)............................ .95%(f) .95% 1.26% 1.29% 1.24%(f) 1.17%
Ratio of net investment income to
average daily net assets (e).......... 6.19%(f) 6.77% 6.05% 6.23% 5.73%(f) 5.77%
Portfolio turnover rate (excluding
short-term securities)................ 66.7% 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. For period less than one year, total returns presented are not
annualized.
(e) The Fund's Adviser and Distributor voluntarily waived or absorbed $66,275,
$121,780, $35,718, $36,128, $43,505 and $34,773 in expenses for the period
ended March 31, 1998, 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 1.30%, 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 5.84%, 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 2.00%, 2.07%, 2.09% and 2.11%, and the ratio of net
investment income to average daily net assets would have been 5.17%, 5.71%,
5.30% and 5.26% for the period ended March 31, 1998, and the 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 2.00%, 2.07%, 2.08% and 2.11%, respectively, and the
ratio of net investment income to average daily net assets would have been
5.22%, 5.74%, 5.32% and 5.20% for the period ended March 31, 1998 and 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.
16
<PAGE>
ADVANTUS MORTGAGE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------------- ------------
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, AUGUST 19, OCTOBER 1,
1997 TO YEAR ENDED SEPTEMBER 30, 1994(c) TO 1997 TO
MARCH 31, -------------------------------- SEPTEMBER 30, MARCH 31,
1998 1997 1996 1995(a) 1994 1998
------------ --------- --------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $10.56 $ 10.24 $ 10.37 $ 9.70 $9.83 $10.55
------ --------- --------- -------- ----- ------
Income from investment operations:
Net investment income................. .29 .63 .54 .53 .06 .29
Net gains or losses on securities
(both realized and unrealized)...... .09 .33 (.13) .67 (.13) .09
------ --------- --------- -------- ----- ------
Total from investment
operations...................... .38 .96 .41 1.20 (.07) .38
------ --------- --------- -------- ----- ------
Less distributions:
Dividends from net investment
income.............................. (.29) (.64) (.54) (.53) (.06) (.29)
Distributions from capital gains...... -- -- -- -- -- --
------ --------- --------- -------- ----- ------
Total distributions............... (.29) (.64) (.54) (.53) (.06) (.29)
------ --------- --------- -------- ----- ------
Net asset value, end of period.......... $10.65 $ 10.56 $ 10.24 $10.37 $9.70 $10.64
------ --------- --------- -------- ----- ------
------ --------- --------- -------- ----- ------
Total return (d)........................ 3.6% 9.7% 4.1% 12.7% (.7)% 3.6%
Net assets, end of period (in
thousands)............................ $7,933 $ 6,079 $ 3,375 $1,084 $ 60 $2,969
Ratio of expenses to average daily net
assets (e)............................ 1.70%(f) 1.70% 2.01% 2.05% .28%(g) 1.70%(f)
Ratio of net investment income to
average daily net assets (e).......... 5.47%(f) 6.08% 5.38% 5.32% .60%(g) 5.52%(f)
Portfolio turnover rate (excluding
short-term securities)................ 66.7% 85.1% 125.2% 203.7% 236.2% 66.7%
<CAPTION>
PERIOD FROM
MARCH 1,
YEAR ENDED SEPTEMBER 30, 1995(c) TO
------------------------------- SEPTEMBER 30,
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $10.23 $10.37 $ 9.90
------ ------ ------
Income from investment operations:
Net investment income................. .63 .54 .31
Net gains or losses on securities
(both realized and unrealized)...... .33 (.14) .47
------ ------ ------
Total from investment
operations...................... .96 .40 .78
------ ------ ------
Less distributions:
Dividends from net investment
income.............................. (.64) (.54) (.31)
Distributions from capital gains...... -- -- --
------ ------ ------
Total distributions............... (.64) (.54) (.31)
------ ------ ------
Net asset value, end of period.......... $10.55 $10.23 $10.37
------ ------ ------
------ ------ ------
Total return (d)........................ 9.7% 4.1% 7.9%
Net assets, end of period (in
thousands)............................ $2,187 $1,139 $ 321
Ratio of expenses to average daily net
assets (e)............................ 1.70% 2.01% 2.05%(f)
Ratio of net investment income to
average daily net assets (e).......... 6.11% 5.39% 5.26%(f)
Portfolio turnover rate (excluding
short-term securities)................ 85.1% 125.2% 203.7%
</TABLE>
17
<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 each calendar year without incurring a
transaction charge. Thereafter, there will be a $7.50 transaction charge for
each additional exchange within the calendar year. 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 EXCHANGE: You can move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same class)
just by calling our toll free number. The Telephone Exchange and Telephone
Redemption privilege will automatically be established unless otherwise
indicated on the Account Application. Telephone Exchange and Redemption may be
changed (added/deleted) at any time by submitting a request in writing or by
completing a Service Request Form.
SYSTEMATIC EXCHANGE: You can move a set amount of money monthly from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) 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 from your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: 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.) 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
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA's, SIMPLE IRA's, 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 or wire
transferred to your bank of record for the account. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Exchange and Telephone Redemption privilege will
automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange and Redemption may be changed
18
<PAGE>
(added/deleted) at any time by submitting a request in writing or by completing
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 will receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
statements to help you track all of your Advantus Fund investments and annual
tax statements. Semi-annual and annual reports will provide you with portfolio
information, fund performance data and the current investment outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining personal information
and assistance directly from Advantus Shareholder Services, call
(1-800-665-6005). Advantus Account Representatives are available Monday through
Friday from 8 a.m. to 4:45 p.m. Central Time. 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 account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through a 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. To find a Registered Representative near you, call the toll-free
service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use the Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.7 billion in assets in addition to $2.1 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
19
<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
ADDRESS SERVICE REQUESTED
F.48640 Rev. 5-1998
