<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS SPECTRUM FUND
SEPTEMBER 30, 1997
<PAGE>
ADVANTUS SPECTRUM FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 12
STATEMENT OF OPERATIONS 13
STATEMENTS OF CHANGES IN NET ASSETS 14
NOTES TO FINANCIAL STATEMENTS 15
INDEPENDENT AUDITORS' REPORT 20
FEDERAL INCOME TAX INFORMATION 21
SHAREHOLDER SERVICES 23
<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 month period 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
month period 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,
/s/ Paul Gooding
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 SPECTRUM FUND
PERFORMANCE UPDATE
[PHOTO]
THOMAS A. GUNDERSON, CFA
PORTFOLIO MANAGER
The Advantus Spectrum Fund is a mutual
fund seeking the most favorable total
return (including interest, dividends and
capital appreciation) consistent with
preservation of capital. To achieve this
objective, the Fund will vary the
composition of its portfolio with
prevailing economic conditions. At any
given time, the Fund's portfolio may be
primarily composed of equity securities
(common stock, preferred stock and
securities convertible into equity
securities), mortgage-related securities,
debt securities, money market securities
or any combination of these securities.
The investment adviser's positioning of
the portfolio is determined by the
intermediate term outlook for economic
trends and market momentum.
-Dividends paid quarterly.
-Capital gains distributions paid annually.
PERFORMANCE
The bull market continued through the third calendar quarter of 1997 as stocks
and bonds moved higher. The Advantus Spectrum Fund nicely participated in the
bull market and posted the following returns for year ended September 30, 1997
for each class of shares currently offered:
<TABLE>
<S> <C>
Class A.......................... 16.7 percent*
Class B.......................... 16.0 percent*
Class C.......................... 15.9 percent*
</TABLE>
PORTFOLIO RECAP
Stocks were again the place to be over the past twelve months as the total
return for stocks far exceed that of the bond market and the money market
returns. Measured by the S&P 500** stocks set new highs during the past year,
showing resilience as they came back nicely after the 5.5 percent correction in
August. Stocks were driven by double digit corporate earnings growth, lower
interest rates, lack of inflation and massive cash inflows.
The continued strength of the U.S. dollar was the one factor that had a negative
impact on several multi-national companies during the summer of 1997. This
factor allowed the medium and smaller size companies to catch up to the largest
companies that have done so well.
Throughout the year we continued to apply our disciplined asset allocation
methodology. The year began and ended with a relatively conservative 50 percent
in stocks, 40 percent in bonds and 10 percent in cash. During the year the
percent weighting in stocks or bonds did not fluctuate more than 5 percent from
the year end weights. We sold bonds down to 35 percent in November of 1996 as
interest rates fell to less attractive levels. In the spring of 1997 we
purchased bonds back to 45 percent at much higher interest rate levels as the
market was concerned about possible Federal Reserve tightening. The conservative
asset allocation, averaging only 50 percent in stocks and 10 percent in cash
over the past year was the primary factor for the deviation between the Spectrum
Fund's performance and that of the Merrill Lynch--Wilshire Capital Markets
Index+ which has 68 percent in stocks, 32 percent in bonds and no cash.
Our work indicates that the current valuation levels for stocks incorporate much
of the excellent fundamental factors and that the stock market is not under
valued. Therefore we feel it is prudent to limit the current asset allocation to
50 percent in stocks, while maintaining a meaningful 40 percent in bonds and 10
percent in cash.
The stocks in the Fund rallied along with the overall market during the past
year. Contributing to performance were stocks in the Financial, Consumer
Cyclical and the Capital Goods sectors. Stocks in the Financial sector included
Sunamerica (life insurance and annuities) and T. Rowe Price (mutual funds
management). The Consumer Cyclical Group was helped by
2
<PAGE>
ADVANTUS SPECTRUM
FUND
SEPTEMBER 30, 1997
retailers in general, Kohl's in particular, and by Omnicom (advertising) as
well. (Kohl's was sold out of the Fund by year end due to significant price
appreciation and excessive valuation levels.) The Capital Goods sector was
helped by holdings in Tyco International (diversified manufacturing). Over the
past year the stocks in the Fund lagged the returns of the overall market
primarily due to the technology sector where our steady growth computer services
companies lagged the faster growth computer hardware and semiconductor stocks in
the sector. Looking ahead, the quality growth stocks in the portfolio should be
well positioned if corporate earnings growth begins to slow, making the
relatively consistent growth companies in our Fund more attractive.
The high quality bonds in the Fund continued to provide attractive returns and
contributed to the Fund's stability. The lack of Federal Reserve tightening
combined with benign inflation reports allowed interest rates to fall (and bonds
to rise in value) during the past year.
OUTLOOK
Clearly the place to have been the past three years was in the stock market.
Calendar year 1997 could mark the first time that the S&P 500** has gained 20
percent or more each year for three consecutive years. In this type of an
environment it is not surprising that asset allocation funds have lost some of
their appeal. However, those investors who take a cavalier approach to risk in
the current market environment should not count on upward trends as the norm.
Historical statistics say that the trend of the past three years will not
continue indefinitely into the future. Over the years a great deal of money has
been lost by taking a ruler to the most recent past and extrapolating into the
future. While the fundamentals continue to be excellent, we could see changes at
the margin that may have significant implications for the financial markets.
The Fund will continue to utilize its methodology that successfully navigated
through turbulent markets of the late 1980s and early 1990s.
We have successfully met the goal of "exceeding the return of a fixed income
fund with less volatility than an all equity fund." We will continue to position
the Fund to meaningfully participate in significant market advances while
protecting your assets during market declines.
*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 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 Merrill Lynch-Wilshire Capital Markets Index is a market value-weighted
index measuring the total return performance of the combined domestic taxable
fixed income and equity markets. It includes the entire domestic common stock
universe for which daily pricing is available, as well as all publicly placed
domestic taxable debt issues with at least one year remaining to maturity and at
least ten million dollars par value outstanding.
3
<PAGE>
ADVANTUS SPECTRUM
FUND
SEPTEMBER 30, 1997
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN THE ADVANTUS SPECTRUM FUND,
MERRILL LYNCH-WILSHIRE CAPITAL MARKETS INDEX AND
CONSUMER PRICE INDEX
On the following charts you can see how the total return for each of the three
classes of shares of the Advantus Spectrum Fund compared to the Merrill
Lynch-Wilshire Capital Markets Index and Consumer Price Index. The three lines
in each graph represent the cumulative total return of a hypothetical $10,000
investment made on the inception date of each class of shares of the Advantus
Spectrum Fund (November 16, 1987, August 19, 1994 and March 1, 1995 for Class A,
B and C, respectively) through Spetember 30, 1997.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 10.8%
Five year 9.8%
Since inception (11/16/87) 11.2%
ML-Wilshire Capital
Class A Markets Index CPI
11/16/1987 10,000 10,000 10,000
10/31/1988 10,505 10,762 10,426
10/31/1989 12,273 12,740 10,904
10/31/1990 12,208 12,341 11,590
10/31/1991 15,382 15,647 11,929
10/31/1992 17,086 17,215 12,311
10/31/1993 18,569 19,809 12,641
9/30/94 18,213 19,578 13,023
9/30/95 21,561 23,927 13,310
9/30/96 24,518 27,022 13,710
9/30/1997 28,602 34,319 14,014
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 11.0%
Since inception (8/19/94) 14.3%
ML-Wilshire Capital
Class B Markets Index CPI
8/19/94 10,000 10,000 10,000
9/30/94 10,003 9,952 10,067
9/30/95 11,316 12,162 10,289
9/30/96 12,953 13,735 10,598
9/30/1997 15,184 17,445 10,833
</TABLE>
4
<PAGE>
ADVANTUS SPECTRUM
FUND
SEPTEMBER 30, 1997
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 15.9%
Since inception (3/1/95) 16.2%
ML-Wilshire Capital
Class C Markets Index CPI
3/01/95 10,000 10,000 10,000
9/30/95 11,263 11,626 10,146
9/30/96 12,713 13,130 10,450
9/30/1997 14,731 16,676 10,682
</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 SPECTRUM
FUND
SEPTEMBER 30, 1997
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- -------------------------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
General Electric Company.......................... 26,252 $1,786,777 4.5%
Intel............................................. 17,400 1,606,238 4.0%
Merck & Co., Inc.................................. 14,700 1,469,081 3.7%
Tyco International Ltd............................ 16,346 1,341,394 3.3%
Service Corporation International................. 37,400 1,203,813 3.0%
---------- ---
$7,407,303 18.5%
---------- ---
---------- ---
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
COMPANY PORTFOLIO
- -------------------------------------------------- -----------
<S> <C>
U.S. Treasury..................................... 20.3%
U.S. Government Agencies.......................... 11.5%
AAA rated......................................... 11.4%
AA rated.......................................... 6.6%
A rated........................................... 31.3%
BBB rated......................................... 16.5%
BB rated.......................................... 2.4%
-----
100.0%
-----
-----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Common Stocks 51.8%
Preferred Stocks 1.6%
Bonds 38.5%
Cash and Other
Assets/Liabilities 8.1%
</TABLE>
6
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (51.8%)
BASIC MATERIALS (1.0%)
Chemicals (1.0%)
14,793 Praxair Inc....................................... $ 757,217
------------
CAPITAL GOODS (6.6%)
Electrical Equipment (2.3%)
26,252 General Electric Company.......................... 1,786,776
------------
Manufacturing (1.7%)
16,346 Tyco International Ltd............................ 1,341,393
------------
Office Equipment (1.5%)
15,400 Danka Business Systems PLC (c).................... 685,300
12,700 Wallace Computer Services, Inc.................... 468,313
------------
1,153,613
------------
Waste Management (1.1%)
21,328 USA Waste Services Incorporated (b)............... 850,453
------------
COMMUNICATION SERVICES (1.5%)
Telecommunication (.6%)
14,400 ADC Telecommunications Inc. (b)................... 468,000
------------
Telephone (.9%)
24,800 Cincinnati Bell Incorporated...................... 705,250
------------
CONSUMER CYCLICAL (11.2%)
Auto (1.5%)
6,700 Danaher Corporation............................... 388,600
11,100 Magna International Inc. (c)...................... 767,288
------------
1,155,888
------------
Houseware (.6%)
10,300 Leggett & Platt Incorporated...................... 458,994
------------
Leisure (.7%)
15,480 GTECH Holdings Corporation (b).................... 529,223
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Lodging--Hotel (1.2%)
19,800 Carnival Corporation.............................. $ 915,750
------------
Retail (1.8%)
26,200 Family Dollar Stores.............................. 597,687
7,780 Home Depot Inc.................................... 405,533
10,900 Wal-Mart Stores, Inc.............................. 399,213
------------
1,402,433
------------
Service (4.9%)
29,649 CUC International Inc. (b)........................ 919,119
6,000 HFS Incorporated (b).............................. 446,625
16,305 Omnicom Group..................................... 1,186,189
37,400 Service Corporation International................. 1,203,812
------------
3,755,745
------------
Textiles (.5%)
10,000 Nine West Group Inc. (b).......................... 393,125
------------
CONSUMER STAPLES (8.4%)
Beverage (1.0%)
13,200 Coca-Cola Company................................. 804,375
------------
Food (.8%)
8,800 Conagra, Inc...................................... 580,800
------------
Household Product (1.8%)
25,400 Newell Company.................................... 1,016,000
5,190 Procter & Gamble Company.......................... 358,434
------------
1,374,434
------------
Personal Care (.5%)
4,100 Gillette Company.................................. 353,881
------------
Retail (1.8%)
6,700 CVS Corporation................................... 381,063
18,691 Safeway Inc. (b).................................. 1,016,323
------------
1,397,386
------------
Service (1.0%)
4,200 Automatic Data Processing Inc..................... 210,000
14,810 Manpower.......................................... 584,995
------------
794,995
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Tobacco (1.5%)
27,900 Philip Morris Companies, Inc...................... $ 1,159,594
------------
FINANCIAL (6.7%)
Banks (.7%)
9,000 Norwest Corporation............................... 551,250
------------
Commercial Finance (.7%)
5,500 Finova Finance Trust.............................. 520,438
------------
Consumer Finance (.8%)
10,200 Associates First Capital Corporation.............. 634,950
------------
Finance--Diversified (.5%)
11,500 Federal Home Loan Mortgage Corporation............ 405,375
------------
Insurance (2.4%)
8,501 American Internationl Group, Incorporated......... 877,197
2,000 Hartford Life..................................... 76,875
23,750 Sunamerica Incorporated........................... 930,703
------------
1,884,775
------------
Investment Bankers/Brokers (.7%)
7,600 T. Rowe Price Associates.......................... 511,100
------------
Savings and Loans (.9%)
9,600 Washington Mutual Incorporated.................... 669,600
------------
HEALTH CARE (7.9%)
Drugs (3.1%)
4,100 Eli Lilly & Company............................... 493,794
14,700 Merck & Co., Inc.................................. 1,469,081
9,200 Smithkline Beecham (c)............................ 449,650
------------
2,412,525
------------
Health Care--Diversified (2.3%)
9,800 Abbott Laboratories............................... 626,588
19,700 Johnson & Johnson................................. 1,135,212
------------
1,761,800
------------
Hospital Management (.4%)
11,860 Columbia/HCA Healthcare Corporation............... 340,975
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
HEALTH CARE--CONTINUED
Managed Care (.5%)
7,900 United Health Care................................ $ 395,000
------------
Medical Product/Supplies (1.6%)
14,300 Medtronic Inc..................................... 672,100
13,800 Sybron International Corporation (b).............. 592,537
------------
1,264,637
------------
TECHNOLOGY (8.5%)
6,200 Cisco Systems, Inc. (b)........................... 452,987
8,988 Computer Associates International................. 645,451
20,900 Equifax Incorporated.............................. 657,044
27,143 First Data Corporation............................ 1,019,559
13,600 Galileo International Inc. (b).................... 379,950
5,600 Gartner Group Incorporated (b).................... 168,000
17,400 Intel............................................. 1,606,238
4,500 Microsoft Corporation (b)......................... 595,406
14,700 Parametric Technology Corporation (b)............. 648,637
12,100 Paychex Incorporated.............................. 421,988
------------
6,595,260
------------
Total common stocks
(cost: $30,138,165)........................................... 40,087,010
------------
PREFERRED STOCKS (1.6%)
FINANCIAL (1.6%)
Real Estate Investment Trust (1.6%)
14,000 Duke Realty Investments Inc.-- 7.99%.............. 705,250
10,000 Security Capital Industrial, Series C-- 8.54%..... 534,380
------------
Total preferred stocks
(cost: $1,200,000)............................................ 1,239,630
------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (38.5%)
GOVERNMENT OBLIGATIONS (12.9%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (12.2%)
U.S. Treasury (7.8%)
$ 250,000 U.S. Treasury Bond............................... 12.000% 08/15/13 $ 360,391
175,000 U.S. Treasury Bond............................... 6.500% 11/15/26 176,094
1,000,000 U.S. Treasury Note............................... 5.625% 11/30/98 998,750
900,000 U.S. Treasury Note............................... 6.125% 09/30/00 905,625
300,000 U.S. Treasury Note............................... 5.875% 04/30/98 300,656
4,050,000 U.S. Treasury Interest Strip (d)................. 5.955% 02/15/01 3,322,332
------------
6,063,848
------------
Government National Mortgage Association (1.2%)
460,265 ................................................. 7.000% 10/15/25 460,697
448,612 ................................................. 6.500% 11/15/23 440,263
------------
900,960
------------
Federal National Mortgage Association (2.6%)
356,092 ................................................. 7.000% 05/01/11 359,750
350,642 ................................................. 6.500% 05/01/11 348,489
364,273 ................................................. 6.000% 05/01/11 355,326
715,050 ................................................. 7.000% 02/01/26 713,025
240,165 ................................................. 6.500% 09/01/25 234,119
------------
2,010,709
------------
Other U.S. Government Agencies (.6%)
500,000 Federal Home Loan Mortgage Corporation........... 7.030% 04/05/04 502,998
------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (.7%)
508,326 Wyoming Community Development Authority.......... 6.850% 06/01/10 509,120
------------
Total government obligations (cost: $9,944,505)........................ 9,987,635
------------
CORPORATE OBLIGATIONS (25.6%)
BASIC MATERIALS (.7%)
Chemicals (.7%)
518,621 Ciba Geigy Corporation 144A Issue (e)............ 7.240% 01/02/16 532,214
------------
CAPITAL GOODS (1.1%)
Engineering/Construction (1.1%)
750,000 Joy Technologies Incorporated.................... 10.250% 09/01/03 812,581
------------
COMMUNICATION SERVICES (2.1%)
Telephone (2.1%)
800,000 Bellsouth Telecommunications..................... 6.250% 05/15/03 797,454
800,000 Telekom Malaysia 144A Issue (c) (e).............. 7.875% 08/01/25 800,311
------------
1,597,765
------------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER CYCLICAL (1.6%)
Retail (.7%)
$ 500,000 Fingerhut Company................................ 7.375% 09/15/99 $ 507,258
------------
Service (.9%)
700,000 PHH Corporation.................................. 6.500% 02/01/00 704,558
------------
CONSUMER STAPLES (2.7%)
Broadcasting (1.2%)
850,000 TCI Communications............................... 8.750% 08/01/15 937,363
------------
Entertainment (.8%)
600,000 Time Warner Incorporated 144A Issue (e).......... 6.100% 12/30/01 584,022
------------
Household Product (.7%)
500,000 Premark International Inc........................ 10.500% 09/15/00 555,065
------------
ENERGY (1.9%)
Oil (.9%)
700,000 Petronas 144A Issue (c) (e)...................... 7.125% 10/18/06 693,777
------------
Oil and Gas (1.0%)
750,000 Dresser Industries Inc........................... 8.000% 04/15/03 802,691
------------
FINANCIAL (13.9%)
Auto Finance (.6%)
500,000 Ford Motor Credit Company........................ 6.375% 04/03/00 501,460
------------
Banks (3.9%)
750,000 Midland Bank PLC (c)............................. 7.625% 06/15/06 793,141
700,000 Norwest Corporation.............................. 7.680% 05/10/02 710,190
700,000 St. George Bank 144A Issue (c) (e)............... 8.485% 12/31/49 748,047
750,000 Wells Fargo Capital.............................. 7.960% 12/15/26 765,345
------------
3,016,723
------------
Collateralized Mortgage Obligations/Asset-Backed Securities (2.3%)
494,694 Bear Stearns Mortgage Securities Inc............. 8.000% 11/25/27 498,250
1,250,000 PNC Bank Corporation............................. 6.728% 01/25/07 1,267,969
------------
1,766,219
------------
Commercial Finance (1.0%)
800,000 General Electric Capital Corporation............. 6.660% 05/01/18 808,779
------------
Finance--Diversified (.9%)
700,000 Guangdong Enterprises 144A Issue (c) (e)......... 8.875% 05/22/07 709,570
------------
Insurance (1.0%)
750,000 URC Holdings Corporation 144A Issue (e).......... 7.875% 06/30/06 791,250
------------
Investment Bankers/Brokers (2.6%)
1,000,000 Lehman Brothers Inc.............................. 7.360% 12/15/03 1,029,326
250,000 Morgan Stanley................................... 6.450% 05/15/01 251,705
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
$ 750,000 Morgan Stanley................................... 6.875% 03/01/07 $ 755,233
------------
2,036,264
------------
Real Estate Investment Trust (1.6%)
500,000 Security Capital Pacific Trust................... 7.500% 02/15/14 513,228
700,000 Wharf International Finance (c).................. 7.625% 03/13/07 707,210
------------
1,220,438
------------
UTILITIES (1.6%)
Electric Companies (1.6%)
500,000 Enersis S.A. (c)................................. 6.900% 12/01/06 499,600
750,000 Wisconsin Electric Power Company................. 5.125% 09/15/98 744,810
------------
1,244,410
------------
Total corporate obligations (cost: $19,499,271)........................ 19,822,407
------------
Total long-term debt securities (cost: $29,443,776).................... 29,810,042
------------
SHORT-TERM SECURITIES (10.5%)
3,370,000 U.S. Treasury Bill............................... 5.261% 11/06/97 3,353,753
2,580,000 U.S. Treasury Bill............................... 5.034% 10/02/97 2,579,708
2,200,000 U.S. Treasury Bill............................... 5.005% 12/11/97 2,178,737
------------
Total short-term securities (cost: $8,111,082)......................... 8,112,198
------------
Total investments in securities (cost: $68,893,023) (f)................ $ 79,248,880
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 8.9% of the net assets in foreign securities as of September
30, 1997.
(d) For zero coupon issues (strips) the interest rate disclosed represents the
market yield based upon the current cost basis and estimated timing and
amount of future cash flows.
(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>
Telekom Malaysia 144A Issue.................. Various $ 800,212
Petronas 144A Issue.......................... Various 701,539
Ciba Geigy Corporation 144A Issue............ Various 518,621
St. George Bank 144A Issue................... 06/12/97 700,000
Time Warner Incorporated 144A Issue.......... Various 572,777
Guangdong Enterprises 144A Issue............. 08/06/97 722,526
URC Holdings Corporation 144A Issue.......... Various 768,430
------------
$ 4,784,105
------------
------------
</TABLE>
(f) At September 30, 1997 the cost of securities for federal income tax purposes
was $69,025,430. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $10,614,329
Gross unrealized depreciation................................. (390,879)
----------
Net unrealized appreciation................................... $10,223,450
----------
----------
</TABLE>
11
<PAGE>
ADVANTUS SPECTRUM 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: $68,893,023).................. $ 79,248,880
Cash in bank on demand deposit........................................ 33,809
Receivable for Fund shares sold....................................... 229,214
Receivable for investment securities sold............................. 3,903
Accrued interest and dividends receivable............................. 480,591
------------
Total assets...................................................... 79,996,397
------------
LIABILITIES
Payable for investment securities purchased........................... 2,447,379
Payable for Fund shares repurchased................................... 49,474
Payable to Adviser.................................................... 92,921
Other accrued expenses................................................ 10,336
------------
Total liabilities................................................. 2,600,110
------------
Net assets applicable to outstanding capital stock.................... $ 77,396,287
------------
------------
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)............. $ 47,237
Additional paid-in capital.......................................... 61,254,696
Undistributed net investment income................................. 14,353
Accumulated net realized gains from investments..................... 5,724,144
Unrealized appreciation of investments.............................. 10,355,857
------------
Total--representing net assets applicable to outstanding capital
stock............................................................ $ 77,396,287
------------
------------
Net assets applicable to outstanding Class A shares................... $ 62,914,120
------------
------------
Net assets applicable to outstanding Class B shares................... $ 12,555,823
------------
------------
Net assets applicable to outstanding Class C shares................... $ 1,926,344
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 3,836,755............................... $ 16.40
------------
------------
Class B--Shares outstanding 768,581................................. $ 16.34
------------
------------
Class C--Shares outstanding 118,388................................. $ 16.27
------------
------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Investment income:
Interest............................................................ $ 2,336,923
Dividends........................................................... 401,589
-----------
2,738,512
-----------
Expenses (note 4):
Investment advisory fee............................................. 434,731
Distribution fees--Class A.......................................... 211,730
Distribution fees--Class B.......................................... 102,667
Distribution fees--Class C.......................................... 16,944
Administrative services fee......................................... 43,200
Custodian fees...................................................... 18,340
Auditing and accounting services.................................... 32,483
Legal fees.......................................................... 2,822
Directors' fees..................................................... 1,327
Registration fees................................................... 36,268
Printing and shareholder reports.................................... 39,580
Insurance........................................................... 5,421
Other............................................................... 36,511
-----------
Total expenses.................................................. 982,024
-----------
Investment income--net.......................................... 1,756,488
-----------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3).......................... 6,023,342
Net change in unrealized appreciation or depreciation on
investments........................................................ 3,276,722
-----------
Net gains on investments........................................ 9,300,064
-----------
Net increase in net assets resulting from operations.................. $11,056,552
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS SPECTRUM 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.......................... $ 1,756,488 $ 1,374,606
Net realized gains on investments............... 6,023,342 5,195,317
Net change in unrealized appreciation or
depreciation of investments.................... 3,276,722 1,370,663
------------ ------------
Increase in net assets resulting from
operations................................. 11,056,552 7,940,586
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A....................................... (1,534,364) (1,243,462)
Class B....................................... (204,737) (99,271)
Class C....................................... (34,898) (13,267)
Net realized gains on investments:
Class A....................................... (4,361,553) (3,098,381)
Class B....................................... (645,070) (231,470)
Class C....................................... (116,045) (21,070)
------------ ------------
Total distributions......................... (6,896,667) (4,706,921)
------------ ------------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A....................................... 8,900,153 9,146,231
Class B....................................... 4,388,659 4,901,705
Class C....................................... 1,433,237 1,162,223
Proceeds from issuance of shares as a result of
reinvested dividends:
Class A....................................... 5,687,547 4,172,071
Class B....................................... 812,290 324,198
Class C....................................... 148,275 33,486
Payments for redemption of shares:
Class A....................................... (13,970,583) (12,940,081)
Class B....................................... (1,129,359) (837,113)
Class C....................................... (1,092,396) (92,242)
------------ ------------
Increase in net assets from capital share
transactions............................... 5,177,823 5,870,478
------------ ------------
Total increase in net assets................ 9,337,708 9,104,143
Net assets at beginning of year................... 68,058,579 58,954,436
------------ ------------
Net assets at end of year (including undistributed
net investment income of $14,353 and $31,864,
respectively).................................... $ 77,396,287 $ 68,058,579
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) ORGANIZATION
The Advantus Spectrum Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. The Fund's investment objective is to seek the
most favorable total return (including interest, dividends and capital
appreciation) consistent with the preservation of capital.
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 as 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.
15
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income 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 (losses) may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1997, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $92,068,650 and $92,352,567, 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 MIMIC
Management. The fee for investment management and advisory services is based on
the average daily net assets of the Fund at the annual rate of .60 percent.
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 .35 percent of average
daily net assets of Class A shares. The Class B and Class C Plans provide for a
fee up to 1.00 percent of average daily net assets of Class B and Class C
shares, respectively. The Class B and Class C 1.00 percent fee is comprised of a
.75 percent distribution fee and a .25 percent service fee.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal fees, auditing and accounting services and other miscellaneous
expenses.
16
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $323,690.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $2,822.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years 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.............................................. 568,090 613,576 283,462 329,404 92,091 78,031
Issued for reinvested distributions............... 373,704 283,583 53,627 22,159 9,848 2,279
Redeemed.......................................... (894,370) (867,615) (76,625) (55,824) (71,057) (6,302)
---------- ---------- --------- --------- --------- ---------
47,424 29,544 260,464 295,739 30,882 74,008
---------- ---------- --------- --------- --------- ---------
---------- ---------- --------- --------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At September 31, 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 security). In the event
the securities are registered, those carrying registration rights allow for the
issuer to bear all the related costs; for issues without rights, the Fund may
incur such costs. The Fund currently limits investments in securities that are
not readily marketable, including restricted securities, to 10% of net assets at
the time of the purchase. Securities are valued by procedures described in note
2. The aggregate value of restricted securities held by the Fund at September
30, 1997 was $4,326,977 which represents 5.6% of net assets.
17
<PAGE>
ADVANTUS SPECTRUM 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....................... $ 15.53 $ 14.79 $ 13.28 $ 13.92 $ 13.63
-------- -------- -------- ------------- ------------
Income from investment
operations:
Net investment income....... .39 .34 .45 .28 .29
Net gains or losses on
securities (both realized
and unrealized)............ 2.02 1.59 1.88 (.55) .86
-------- -------- -------- ------------- ------------
Total from investment
operations............... 2.41 1.93 2.33 (.27) 1.15
-------- -------- -------- ------------- ------------
Less distributions:
Dividends from net
investment income.......... (.39) (.34) (.44) (.28) (.31)
Distributions from capital
gains...................... (1.15) (.85) (.38) (.09) (.55)
-------- -------- -------- ------------- ------------
Total distributions....... (1.54) (1.19) (.82) (.37) (.86)
-------- -------- -------- ------------- ------------
Net asset value, end of
period....................... $ 16.40 $ 15.53 $ 14.79 $ 13.28 $ 13.92
-------- -------- -------- ------------- ------------
-------- -------- -------- ------------- ------------
Total return (d).............. 16.7% 13.7% 18.4% (1.9)% 8.7%
Net assets, end of period (in
thousands)................... $ 62,914 $ 54,848 $ 55,624 $ 55,286 $ 57,048
Ratio of expenses to average
daily net assets............. 1.25% 1.26% 1.33% 1.27%(e) 1.22%
Ratio of net investment income
to average daily net
assets....................... 2.53% 2.28% 3.22% 2.24%(e) 2.16%
Portfolio turnover rate
(excluding short-term
securities).................. 141.4% 140.5% 125.5% 124.5% 92.1%
Average commission rate on
stock transactions (g)....... $ .0591 $ .0641 N/A N/A N/A
</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 periods less than one year, total return presented has not been
annualized.
18
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------- -------------------------------------
PERIOD FROM PERIOD FROM
AUGUST 19, YEAR ENDED SEPTEMBER MARCH 1,
YEAR ENDED SEPTEMBER 30, 1994(c) TO 30, 1995(c) TO
-------------------------------- SEPTEMBER 30, -------------------- SEPTEMBER 30,
1997 1996 1995(a) 1994 1997 1996 1995
-------- -------- -------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 15.47 $ 14.74 $ 13.27 $ 13.36 $ 15.43 $ 14.74 $ 13.36
-------- -------- -------- ------ -------- -------- ------
Income from investment
operations:
Net investment income....... .30 .27 .39 .03 .28 .28 .24
Net gains or losses on
securities (both realized
and unrealized)............ 2.02 1.56 1.84 (.03) 2.01 1.52 1.43
-------- -------- -------- ------ -------- -------- ------
Total from investment
operations............... 2.32 1.83 2.23 -- 2.29 1.80 1.67
-------- -------- -------- ------ -------- -------- ------
Less distributions:
Dividends from net
investment income.......... (.30) (.25) (.38) (.09) (.30) (.26) (.29)
Distributions from capital
gains...................... (1.15) (.85) (.38) -- (1.15) (.85) --
-------- -------- -------- ------ -------- -------- ------
Total distributions....... (1.45) (1.10) (.76) (.09) (1.45) (1.11) (.29)
-------- -------- -------- ------ -------- -------- ------
Net asset value, end of
period....................... $ 16.34 $ 15.47 $ 14.74 $ 13.27 $ 16.27 $ 15.43 $ 14.74
-------- -------- -------- ------ -------- -------- ------
-------- -------- -------- ------ -------- -------- ------
Total return (d).............. 16.0% 13.1% 17.6% (.04)% 15.9% 12.9% 12.6%
Net assets, end of period (in
thousands)................... $ 12,556 $ 7,860 $ 3,131 $ 140 $ 1,926 $ 1,351 $ 199
Ratio of expenses to average
daily net assets............. 1.90% 1.90% 1.99% .23%(f) 1.90% 1.90% 2.00%(e)
Ratio of net investment income
to average daily net
assets....................... 1.89% 1.67% 2.30% .37%(f) 1.88% 1.73% 2.17%(e)
Portfolio turnover rate
(excluding short-term
securities).................. 141.4% 140.5% 125.5% 124.5% 141.4% 140.5% 125.5%
Average commission rate on
stock transactions (g)....... $ .0591 $ .0641 N/A N/A $ .0591 $ .0641 N/A
</TABLE>
- ------------
(e) Adjusted to an annual basis.
(f) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
(g) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Spectrum Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Spectrum
Fund, Inc. (the Fund) as of September 30, 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 for 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
20
<PAGE>
ADVANTUS SPECTRUM 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
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- -------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income,
11.0% qualifying for deduction by corporations
December 26, 1996................................. $ .3764
March 26, 1997.................................... .0896
June 25, 1997..................................... .0900
September 24, 1997................................ .1105
---------
$ .6665
---------
---------
Capital gains distribution--taxable as long-term
capital gains
December 19, 1996................................. $ .8772
---------
---------
</TABLE>
The distribution of $.3764 payable on December 26, 1996 consisted of $.2724
from short-term capital gains (taxable as dividend income) and $.1040 from net
investment income.
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- -------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income,
11.0% qualifying for deduction by corporations
December 26, 1996................................. $ .3536
March 26, 1997.................................... .0668
June 25, 1997..................................... .0666
September 24, 1997................................ .0842
---------
$ .5712
---------
---------
Capital gains distribution--taxable as long-term
capital gains
December 19, 1996................................. $ .8772
---------
---------
</TABLE>
The distribution of $.3536 payable on December 26, 1996 consisted of $.2724
from short-term capital gains (taxable as dividend income) and $.0812 from net
investment income.
21
<PAGE>
ADVANTUS SPECTRUM FUND
FEDERAL INCOME TAX INFORMATION--CONTINUED
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- -------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income,
11.0% qualifying for deduction by corporations
December 26, 1996................................. $ .3576
March 26, 1997.................................... .0675
June 25, 1997..................................... .0632
September 24, 1997................................ .0855
---------
$ .5738
---------
---------
Capital gains distribution--taxable as long-term
capital gains
December 19, 1996................................. $ .8772
---------
---------
</TABLE>
The distribution of $.3576 payable on December 26, 1996 consisted of $.2724
from short-term capital gains (taxable as dividend income) and $.0852 from net
investment income.
22
<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
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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
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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
1-800-AFS-1838
(1-800-237-1838)
<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.48639 Rev. 11-1997
