<PAGE>
SPECTRUM
ADVANTUS SPECTRUM FUND, INC.
ANNUAL REPORT TO SHAREHOLDERS DATED SEPTEMBER 30, 1999
[LOGO]
[ART]
<PAGE>
ADVANTUS SPECTRUM FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND
LIABILITIES 14
STATEMENT OF OPERATIONS 15
STATEMENTS OF CHANGES IN NET
ASSETS 16
NOTES TO FINANCIAL STATEMENTS 17
INDEPENDENT AUDITORS' REPORT 22
FEDERAL INCOME TAX INFORMATION 23
SHAREHOLDER SERVICES 24
</TABLE>
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
Growth has been the economic story throughout this fiscal year. The domestic
growth story continues, albeit growth is slower than in the past. The Federal
Reserve's proactive stance (i.e., raising rates BEFORE reported inflation)
demonstrates the Fed's continuing resolve to control inflation by reigning in
domestic growth. So far, the Fed has achieved this delicate economic balance.
World growth is slowly accelerating. The global economic picture is vastly
different than it was one year ago. Japan has worked its way back from a
devastating recession and financial crisis. Emerging markets are surging and
international markets, overall, are strong. The world's central banks have
played critical roles in getting their respective countries back on track. Like
the Fed, the world's central banks plotted a course of action, and like the Fed,
these banks espoused an expansionary bias. Relative to conditions, each bank
aggressively used its monetary policy to lower interest rates. These actions
have contributed to global economic recovery, country by country.
As the rest of the world rallies, the conditions in the U.S. will likely put
more pressures on our economic systems. The fixed income market may feel some
pressure too due to higher commodity prices, global economic growth, a weaker
dollar, tight labor market, and a Fed poised to tighten. Conditions may also
bode poorly for the stock market. After several years of good equity markets -
driven by both robust growth and higher valuation levels - investors are acutely
aware that the environment is changing. The markets will continue under pressure
if interest rates move higher and valuations peak, challenging the long-running
bull market. On a brighter note, the loss of price momentum in the U.S. equity
market will allow earnings growth to catch up with multiples, thus building the
base for the next leg up in the secular bull market for equities.
If at any time you have questions about your Advantus mutual fund investments, I
encourage you to contact your financial professional or call Advantus
Shareholders Services at 1-800-665-6005. This number allows you 24-hour access,
seven days a week, to your mutual fund account information via an automated
voice-response system. Or you can speak directly to an Advantus Shareholder
Services Representative during business hours, 8 A.M. to 4:45 P.M. (Central
Time) any day that the New York Stock Exchange is open for business.
We appreciate your continued patronage of Advantus Funds. Helping you move
closer to your investment goals is important to us, and we look forward to
working long-term with you and your financial professional. Thank you for
investing with Advantus.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<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 (from
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,
investment grade 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 Advantus Spectrum Fund's performance for the year ended September 30, 1999
for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.............................. 16.08 PERCENT*
CLASS B.............................. 15.31 PERCENT*
CLASS C.............................. 15.29 PERCENT*
</TABLE>
The Fund's benchmarks, the Russell 1000 Growth Index** and the Lehman Brothers
Aggregate Bond Index+ returned 34.86 percent and -.37 percent, respectively, for
the same period. The Fund's Blended Index++ returned 19.92 percent for the same
period.
PERFORMANCE ANALYSIS
The driving factor for the market over the past year has been the very strong
economy. This has led to acceleration in corporate earnings growth and higher
interest rates. Through the first six months of the past fiscal year (October
through March), the strong earnings of the stock market more than offset the
higher interest rates allowing stocks to stage a powerful advance. The final six
months of the year (April through September) were not as favorable to stocks as
the stock market moved sideways--caught in a battle between the positive effect
of higher earnings, and the negative effect of higher interest rates. The bond
market has had a tough year as interest rates climbed 100 to 150 basis points (1
to 1.5 percent) causing a drop in bond values. Additionally, the summer of 1999
was a period where most corporations decided to raise money via bond offerings,
avoiding the need to raise money in the final quarter of 1999. The over supply
in these bonds added to the bond market's problems. However, the calendar third
quarter sparked a ray of hope for bonds as they posted their first positive
quarter of the calendar year.
STOCKS: The Technology sector led the market with Internet stocks at the
forefront. Explosive growth of Internet usage and potential demand for
applications are expected to fuel continued technology capital spending, as well
as growth for Internet related companies. The Fund had a meaningful position in
the Technology sector and was a beneficiary of the strong technology rally.
Significant contributors to the Fund's performance from this sector included
Microsoft (software), Cisco (networking), Intel (semiconductors), Lucent
(telecommunications equipment), EMC Corporation (data storage) and Lexmark
(printers).
The strong economy led to growth in the Consumer Cyclical sector of the market.
Stocks in this sector that contributed to the Fund's performance include
advertising leader Omnicom Group, and the excellent retailers Home Depot,
Wal-Mart, and Family Dollar. Other winners for the year included the
communications powerhouse MCI/ Worldcom, and the well-managed Tyco
International, a long-held favorite of the Fund.
The lagging sectors of the market and the Fund were in Health Care, Consumer
Staples and the Financials. Slow earnings growth rates hurt Health Care and
Consumer Staples, while higher interest rates hurt the Financials. Stocks in the
Fund were selectively sold from these weaker areas as they failed to meet our
investment criteria. Due to deteriorating fundamentals we
2
<PAGE>
sold our entire position in several stocks over the past year including: Service
Corporation International (death care services), Philip Morris (tobacco),
Coca-Cola, and Health Management Associates (small market hospitals).
We added several new growth stocks to the portfolio including personal computer
leader Gateway, America Online, JDS Uniphase (fiberoptic communications),
Applied Materials (semiconductor equipment), and wireless communications leader
Nokia. The majority of large companies with high earnings growth rates are in
the Technology sector, so it is no surprise that many our new ideas are coming
from that sector.
BONDS: Corporate bonds and U.S. Treasury securities were both negatively
affected by the rising interest rate environment. In the fixed income market,
corporate bonds returned -1.40 percent for the trailing twelve months ended
September 30, 1999 and U.S. Treasury securities returned -1.97 percent for the
same period. The Fund maintained a significant overweight to the corporate
sector throughout the year providing incremental returns to the Fund.
Recent portfolio purchases have included short duration (2-3 year maturity)
corporate bonds with attractive yields over U.S. Treasury securities. Purchases
include: Cox Communication two-year notes to yield 7.06 percent,* Crown Cork and
Seal three-year notes to yield 7.21 percent* and Edison International five-year
notes to yield 7.06 percent.* These are examples of taking advantage of wide
spread in the corporate bond market to add significant yield to the overall
portfolio.
ASSET ALLOCATION: The movements in the asset allocation of the Fund between
stocks, bonds and cash were relatively modest over the past year. At the start
of the reporting period, we had 71 percent of total net assets in stocks, this
amount was a little higher than we generally allocate to stocks because the
turmoil in the foreign markets created a buying opportunity. As the stock market
rallied through last winter we cut the stock allocation to the current level,
roughly 65 percent of total net assets. Real Estate Investment Trusts (REITs)
continue to compose about 6.5 percent of the common stocks in the portfolio.
Over the year, the bond weighting has moved up from the 26 percent of total net
assets in October of 1998 to the current 34 percent weight. The higher yields
now available in bonds provide an attractive return potential versus the level
of risk and the current low level of inflation. Cash was maintained between 1
and 5 percent over the past year.
OUTLOOK
Corporate earnings growth is accelerating, while inflation remains benign.
Additionally, it appears that the flood of corporate bond offerings is starting
to abate, which should help corporate bond spreads. Despite these facts the
market continues to be fearful about a number of things, from future inflation
to notorious Y2K issues. While short-term fluctuations are difficult to predict,
some of the fear in the market should likely diminish with continued strong
fundamentals.
We feel that in the long run the fundamentals dominate the movements of the
financial markets. We believe the fundamentals are very good and are likely to
remain strong. As always, we will position the Fund to significantly participate
in strong market advances while protecting your capital during periods of market
decline.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5.5 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 Russell 1000 Growth Index contains those stocks from the Russell 1000 with
a greater than average growth orientation. The Russell 1000 is the 1,000 largest
companies in the Russell 3000. The Russell 3000 is an unmanaged index of 3,000
common stocks, which represents approximately 98 percent of the U.S. market.
+The Lehman Brothers Aggregate Bond Index is comprised of the Lehman Brothers
Government/ Corporate Bond Index, the Lehman Brothers Mortgage-Backed Securities
Index and the Lehman Brothers Asset-Backed Securities Index.
++The Blended Index is comprised of 60 percent Russell 1000 Growth Index and
40 percent Lehman Brothers Aggregate Bond Index.
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN ADVANTUS SPECTRUM FUND, RUSSELL 1000 GROWTH INDEX,
LEHMAN BROTHERS AGGREGATE BOND INDEX, BLENDED 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 Russell 1000
Growth Index, Lehman Brothers Aggregate Bond Index, a blended index of
60 percent Russell 1000 Growth Index and 40 percent Lehman Brothers Aggregate
Bond Index, and the Consumer Price Index. The lines in the Class A graph
represent the cumulative total return of a hypothetical $10,000 investment made
on September 30, 1989 through September 30, 1999. The lines in the Class B and
Class C graph represent the cumulative total return of a hypothetical $10,000
investment made on the inception date of Class B and Class C shares of the
Advantus Spectrum Fund (August 19, 1994 and March 1, 1995, respectively) through
September 30, 1999.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN: ONE YEAR 9.69% BLENDED INDEX RUSSELL 1000 LEHMAN BROTHERS
(THOUSANDS) FIVE YEAR 13.91% GROWTH INDEX AGGREGATE BOND INDEX
TEN YEAR 11.08%
CLASS A CPI
<S> <C> <C> <C> <C> <C>
9/30/89 $10,000 $10,000 $10,000 $10,000 $10,000
10/31/89 $9,498.00 $10,056.00 $12,154.00 $9,824.00 $10,246.00
10/31/90 $9,448.00 $10,689.00 $11,969.00 $9,268.00 $10,890.00
10/31/91 $11,904.00 $11,002.00 $15,194.00 $12,999.00 $12,612.00
10/31/92 $13,222.00 $11,354.00 $16,816.00 $14,405.00 $13,853.00
10/31/93 $14,370.00 $11,659.00 $18,330.00 $15,457.00 $15,497.00
9/30/94 $14,095.00 $12,011.00 $18,713.00 $15,917.00 $14,940.00
9/30/95 $16,686.00 $12,276.00 $22,910.00 $21,040.00 $17,041.00
9/30/96 $18,974.00 $12,644.00 $26,086.00 $25,542.00 $17,876.00
9/30/97 $22,135.00 $12,925.00 $32,205.00 $34,811.00 $19,612.00
9/30/98 $24,639.00 $13,109.00 $36,147.00 $38,675.00 $21,870.00
9/30/99 $28,600.00 $13,454.00 $43,351.00 $52,155.00 $21,790.00
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN: ONE YEAR 10.31% BLENDED INDEX RUSSELL 1000 LEHMAN BROTHERS
(THOUSANDS) FIVE YEAR 14.31% GROWTH INDEX AGGREGATE BOND INDEX
SINCE INCEPTION (8/19/94) 13.97%
CLASS B CPI
<S> <C> <C> <C> <C> <C>
8/19/94 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
9/30/94 $10,003.00 $10,067.00 $10,209.00 $9,863.00 $9,860.00
9/30/95 $11,316.00 $10,289.00 $12,499.00 $12,836.00 $11,343.00
9/30/96 $12,953.00 $10,598.00 $14,231.00 $15,250.00 $11,872.00
9/30/97 $15,184.00 $10,833.00 $17,570.00 $20,504.00 $13,005.00
9/30/98 $16,913.00 $10,987.00 $19,720.00 $22,952.00 $14,425.00
9/30/99 $19,524.00 $11,276.00 $23,650.00 $31,303.00 $13,708.00
</TABLE>
4
<PAGE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN: ONE YEAR 15.29% BLENDED INDEX RUSSELL 1000 LEHMAN BROTHERS
(THOUSANDS) SINCE INCEPTION (3/1/95) 14.73% GROWTH INDEX AGGREGATE BOND INDEX
CLASS C CPI
<S> <C> <C> <C> <C> <C>
3/01/95 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
9/30/95 $11,263.00 $10,146.00 $12,243.00 $12,272.00 $10,818.00
9/30/96 $12,713.00 $10,450.00 $13,940.00 $14,569.00 $11,323.00
9/30/97 $14,731.00 $10,682.00 $17,210.00 $19,588.00 $12,404.00
9/30/98 $16,288.00 $10,834.00 $19,317.00 $21,927.00 $13,757.00
3/31/99 $18,778.00 $11,119.00 $23,166.00 $29,905.00 $13,708.00
</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 5.5 percent front-end sales charge for Class A and the maximum
applicable contingent deferred sales charge for Class B shares. The maximum
initial sales charge for Class A shares was 5.0 percent prior to February 1,
1999. Sales charges pay for your financial professional's investment advice.
Individuals cannot invest in the index itself, nor can they invest in any fund
which seeks to track the performance of the index 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>
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------- -------- ------------ ----------
<S> <C> <C> <C>
General Electric Company................ 27,352 $ 3,242,921 4.9%
Microsoft Corporation................... 35,500 3,214,969 4.8%
Cisco Systems, Inc...................... 44,100 3,023,606 4.5%
Intel Corporation....................... 40,000 2,972,500 4.4%
Tyco International Ltd.................. 22,192 2,291,324 3.4%
----------- ----
$14,745,320 22.0%
=========== ====
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- ------ ---------
<S> <C>
U.S. Treasury........................................... 21.3%
U.S. Government Agencies................................ 26.2%
AAA rated............................................... 10.9%
AA rated................................................ 5.9%
A rated................................................. 11.8%
BBB rated............................................... 22.0%
BB rated................................................ 1.5%
CC rated................................................ .4%
-----
100.0%
=====
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Preferred Stocks (1.5%)
Bonds (33.6%)
Common Stocks (63.1%)
Cash and Other Assets/Liabilities (1.8%)
</TABLE>
6
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1999
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------ ------------
<C> <S> <C>
COMMON STOCK (63.1%)
CAPITAL GOODS (6.8%)
Electrical Equipment (3.1%)
27,352 General Electric Company.................................... $ 3,242,921
------------
Manufacturing (2.2%)
22,192 Tyco International Ltd. (c)................................. 2,291,324
------------
Office Equipment (1.5%)
19,100 Lexmark International Group, Inc. (c)....................... 1,537,550
------------
COMMUNICATION SERVICES (1.1%)
Telecommunication (1.1%)
15,697 MCI Worldcom, Inc. (c)...................................... 1,128,222
------------
CONSUMER CYCLICAL (8.5%)
Auto (1.0%)
18,900 Danaher Corporation......................................... 995,794
------------
Building Materials ( -- )
2,000 D.R. Horton, Inc. .......................................... 25,875
2,300 Standard Pacific Corporation................................ 23,575
------------
49,450
------------
Houseware (.4%)
19,300 Leggett & Platt, Inc. ...................................... 379,969
------------
Lodging-Hotel (.1%)
7,200 Meristar Hospitality Corporation............................ 109,800
------------
Retail (4.8%)
74,400 Family Dollar Stores........................................ 1,571,700
27,900 Home Depot, Inc. ........................................... 1,914,637
600 Lowe's Companies, Inc. ..................................... 29,250
31,300 Wal-Mart Stores, Inc. ...................................... 1,488,706
------------
5,004,293
------------
Service (2.2%)
28,910 Omnicom Group, Inc. ........................................ 2,289,311
------------
CONSUMER STAPLES (4.6%)
Entertainment (.6%)
14,900 Carnival Corporation........................................ 648,150
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------------------------------------------------------------------------------
CONSUMER STAPLES--CONTINUED
<C> <S> <C>
Food & Health (.5%)
31,000 U.S. Foodservice (b)........................................ $ 558,000
------------
Household Products (1.2%)
34,800 Dial Corporation............................................ 887,400
2,000 Newell Rubbermaid, Inc. .................................... 57,125
2,690 Procter & Gamble Company.................................... 252,187
------------
1,196,712
------------
Retail (1.4%)
36,982 Safeway, Inc. .............................................. 1,407,627
------------
Service (.9%)
20,700 Automatic Data Processing, Inc. ............................ 923,737
------------
FINANCIAL (8.8%)
Finance-Diversified (1.7%)
2,800 Asset Investors Corporation................................. 37,275
7,000 Crescent Real Estate Equity Company......................... 126,000
25,400 Federal Home Loan Mortgage Corporation...................... 1,320,800
6,600 Simon Property Group, Inc. ................................. 148,087
6,600 Trammell Crow Company (b)................................... 87,450
------------
1,719,612
------------
Insurance (2.0%)
14,878 American International Group................................ 1,293,456
8,100 Hartford Life............................................... 398,925
11,900 Nationwide Financial Services, Inc. ........................ 420,962
------------
2,113,343
------------
Investment Bankers/Brokers (.8%)
20,800 Knight/Trimark Group, Inc. (b).............................. 616,200
336 Reckson Service Industries (b).............................. 5,313
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
9,600 T. Rowe Price Associates.................................... $ 263,400
------------
884,913
------------
Real Estate (.2%)
14,100 Catellus Development Corporation............................ 165,675
1,200 Newhall Land & Farming Company.............................. 29,550
------------
195,225
------------
Real Estate Investment Trust (4.1%)
4,600 Apartment Investment & Management Company................... 175,950
5,100 Archstone Communities Trust................................. 98,494
3,200 Arden Realty Group, Inc. ................................... 69,600
6,400 Avalon Bay Communities, Inc. ............................... 216,800
1,500 Boston Properties, Inc. .................................... 46,031
2,000 Camden Property Trust....................................... 53,750
3,400 CarrAmerica Realty Corporation.............................. 74,587
1,800 CBL & Associates Properties, Inc. .......................... 43,987
900 CenterPoint Properties Corporation.......................... 29,756
1,600 Central Parking Corporation................................. 46,800
7,500 Equity Office Properties Trust.............................. 174,375
5,100 Equity Residential Properties............................... 216,112
3,300 Essex Property Trust, Inc. ................................. 115,294
3,200 Felcor Lodging Trust, Inc. ................................. 56,000
3,300 First Industrial Realty Trust............................... 81,675
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
5,300 Franchise Finance Corporation of America.................... $ 123,887
4,700 Gables Residential Trust.................................... 112,800
1,910 Golf Trust of America, Inc. ................................ 37,722
6,700 Highwoods Properties, Inc. ................................. 173,362
2,800 HRPT Properties Trust....................................... 32,550
15,100 Innkeepers USA Trust........................................ 125,519
6,400 Kilroy Realty Corporation................................... 135,200
3,400 Kimco Realty Corporation.................................... 121,550
4,960 Koger Equity, Inc. ......................................... 79,360
3,400 Liberty Property Trust...................................... 77,137
3,900 LNR Property Corporation.................................... 79,462
7,500 Macerich Company............................................ 173,438
5,500 Mack-Cali Realty Corporation................................ 147,469
5,360 New Plan Excel Realty Trust................................. 95,475
5,200 Pacific Gulf Properties, Inc. .............................. 103,675
6,000 Pan Pacific Retail Properties............................... 102,375
5,700 Philips International Realty................................ 89,775
1,000 Post Properties, Inc. ...................................... 39,313
1,300 Prentiss Properties Trust................................... 28,844
2,800 Prologis Trust.............................................. 52,850
9,960 Public Storage, Inc. ....................................... 250,868
5,600 Reckson Associates Realty Corporation....................... 116,550
1,183 Reckson Associates Realty Corporation Class B............... 25,878
3,000 SL Green Realty Corporation................................. 59,625
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
3,000 Spieker Properties, Inc. ................................... $ 104,063
4,200 Summit Properties, Inc. .................................... 83,738
2,600 Trinet Corporation.......................................... 61,913
5,300 Trizec Hahn Corporation (c)................................. 100,369
1,900 Urban Shopping Centers, Inc. ............................... 55,100
------------
4,289,078
------------
HEALTH CARE (9.8%)
Drugs (5.5%)
25,700 Bristol-Myers Squibb Company................................ 1,734,750
5,600 Eli Lilly & Company......................................... 358,400
27,100 Merck & Co., Inc. .......................................... 1,756,419
27,000 Pfizer, Inc. ............................................... 970,313
20,000 Schering Plough Corporation................................. 872,500
------------
5,692,382
------------
Health Care- Diversified (1.9%)
9,900 Abbott Laboratories......................................... 363,825
11,200 Johnson & Johnson........................................... 1,029,000
8,200 Warner-Lambert Company...................................... 544,275
------------
1,937,100
------------
Medical Products/Supplies (2.4%)
24,000 Guidant Corporation......................................... 1,287,000
44,700 Sybron International Corporation (b)........................ 1,201,313
------------
2,488,313
------------
TECHNOLOGY (22.9%)
9,900 America Online, Inc. (b).................................... 1,029,600
4,400 Applied Materials, Inc. (b)................................. 342,650
12,900 BMC Software, Inc. (b)...................................... 923,156
44,100 Cisco Systems, Inc. (b)..................................... 3,023,606
30,800 Dell Computer Corporation (b)............................... 1,287,825
<CAPTION>
MARKET
SHARES VALUE(A)
- ------------------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
22,800 EMC Corporation (b)......................................... $ 1,628,775
17,500 Galileo International, Inc. (b)............................. 704,375
13,600 Gateway, Inc. (b)........................................... 604,350
1,600 Hewlett-Packard Company..................................... 147,200
40,000 Intel Corporation........................................... 2,972,500
7,900 International Business Machines............................. 958,863
6,800 JDS Uniphase Corporation (b)................................ 773,925
25,500 Lucent Technologies, Inc. .................................. 1,654,313
35,500 Microsoft Corporation....................................... 3,214,969
13,400 Nokia Oyj (c)............................................... 1,203,488
16,800 Nova Corporation (b)........................................ 420,000
13,100 Sun Microsystems, Inc. (b).................................. 1,218,300
8,700 Texas Instruments, Inc. .................................... 715,575
19,600 Unisys Corporation (b)...................................... 884,450
------------
23,707,920
------------
UTILITIES (.6%)
Electric Companies (.6%)
11,300 AES Corporation (b)......................................... 666,700
------------
Total common stock (cost: $42,608,510).................................. 65,457,446
------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (1.5%)
FINANCIAL (1.5%)
Real Estate Investment Trust (1.5%)
14,000 Duke Realty Investments, Inc. - 7.99%............ 629,125
5,000 Nationwide Health Property, Inc. - 7.68%......... 455,313
10,000 Prologis Trust - 8.54%........................... 446,875
------------
1,531,313
------------
Total preferred stock (cost: $1,693,675)...................... 1,531,313
------------
</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>
LONG-TERM DEBT SECURITIES (33.6%)
GOVERNMENT OBLIGATIONS (16.2%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (16.2%)
U.S. Treasury (7.2%)
$1,000,000 (e)............................................. 4.955% 05/15/06 $ 668,269
750,000 ................................................. 5.875% 11/15/05 745,078
3,000,000 ................................................. 6.000% 07/31/02 3,021,564
1,250,000 ................................................. 6.000% 02/15/26 1,191,797
600,000 ................................................. 5.250% 08/15/03 588,188
1,200,000 ................................................. 6.000% 08/15/09 1,209,376
------------
7,424,272
------------
Federal National Mortgage Association (FNMA) (5.3%)
366,863 ................................................. 6.000% 04/01/14 352,789
500,000 ................................................. 6.000% 01/01/29 466,455
297,194 ................................................. 6.000% 02/01/29 277,255
500,000 ................................................. 6.250% 12/25/13 479,810
422,339 ................................................. 6.500% 07/01/13 415,078
487,787 ................................................. 6.500% 10/01/28 464,707
500,000 ................................................. 6.500% 10/15/28 490,571
961,478 ................................................. 6.500% 12/01/28 922,589
294,899 ................................................. 6.500% 02/01/29 280,945
488,651 ................................................. 6.500% 02/01/29 468,886
385,000 ................................................. 7.000% 09/01/14 384,867
500,000 ................................................. 7.000% 09/01/29 491,276
------------
5,495,228
------------
Government National Mortgage Association (GNMA) (3.5%)
500,000 ................................................. 6.500% 04/15/29 478,071
426,395 ................................................. 7.000% 06/15/28 418,775
722,030 ................................................. 7.000% 02/15/29 708,959
232,322 ................................................. 7.500% 09/15/28 233,188
254,093 ................................................. 7.500% 10/15/28 255,040
107,137 ................................................. 7.500% 10/15/28 107,537
500,000 ................................................. 7.500% 09/15/29 501,794
930,005 ................................................. 7.000% 07/15/28 913,387
------------
3,616,751
------------
State and Local Government Obligations (.2%)
249,000 Wyoming Community Development.................... 6.850% 06/01/10 249,000
------------
Total government obligations (cost: $17,239,824).................... 16,785,251
------------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (17.4%)
<C> <S> <C> <C> <C>
BASIC MATERIALS (1.9%)
Chemicals (1.0%)
$ 500,000 IMC Global, Inc.................................. 6.625% 10/15/01 $ 496,513
556,854 Novartis AG-144A Issue (d)....................... 7.240% 01/02/16 543,128
------------
1,039,641
------------
Manufacturing (.4%)
500,000 Tyco International Group (c)..................... 6.875% 01/15/29 447,115
------------
Paper and Forest (.5%)
500,000 International Paper Company...................... 6.875% 07/10/00 501,974
------------
CAPITAL GOODS (.7%)
Containers-Metal/Glass (.7%)
700,000 Crown Cork & Seal Company, Inc................... 7.125% 09/01/02 699,275
------------
COMMUNICATION SERVICES (1.3%)
Telephone (1.3%)
1,000,000 AT&T Corporation................................. 6.500% 03/15/29 883,336
500,000 GTE Corporation.................................. 6.940% 04/15/28 466,509
------------
1,349,845
------------
CONSUMER CYCLICAL (.7%)
Auto (.7%)
750,000 Meritor Automotive, Inc.......................... 6.800% 02/15/09 697,689
------------
CONSUMER STAPLES (2.8%)
Broadcasting (1.2%)
700,000 British Sky Broadcasting (c)..................... 6.875% 02/23/09 633,946
600,000 Cox Communications, Inc.......................... 7.000% 08/15/01 601,530
------------
1,235,476
------------
Entertainment (.5%)
500,000 Time Warner, Inc................................. 9.125% 01/15/13 563,863
------------
Household Products (.5%)
500,000 Premark International, Inc....................... 10.500% 09/15/00 518,202
------------
Retail (.6%)
600,000 Safeway, Inc..................................... 7.000% 09/15/02 599,919
------------
FINANCIAL (7.8%)
Asset Backed (.7%)
780,159 Prudential Home Mortgage Securities.............. 6.500% 10/25/23 754,476
------------
Banks (.6%)
700,000 St. George Bank-144A Issue (c)(d)................ 8.485% 12/31/49 619,138
------------
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ---------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (3.2%)
$ 152,910 Banco Hipotecario Nacional 144A Issue (c)(d)..... 7.916% 07/25/09 $ 133,031
473,563 Bear Stearns Mortgage Securities, Inc............ 8.000% 11/25/29 477,612
350,000 Nomura Asset Securities Corporation.............. 7.708% 04/13/36 354,239
500,000 Park Avenue Finance Corporation 144A 508,600
Issue (d)....................................... 7.680% 05/12/07
1,250,000 PNC Bank Corporation............................. 6.728% 01/25/07 1,250,725
578,967 Tyron Mortgage Funding........................... 7.750% 12/20/09 584,052
------------
3,308,259
------------
Commercial Finance (.7%)
750,000 General Electric Capital Corporation............. 6.290% 12/15/01 749,959
------------
Finance-Diversified (.1%)
700,000 Guangdong Enterprises-144A Issue (c)(d).......... 8.875% 05/22/07 147,000
------------
Insurance (.8%)
400,000 Conseco Financing Trust II....................... 8.700% 11/15/26 348,905
500,000 Unum Corporation................................. 6.750% 12/15/28 430,653
------------
779,558
------------
Investment Bankers/Brokers (.7%)
750,000 Morgan Stanley Dean Witter & Company............. 6.875% 03/01/07 734,966
------------
Real Estate Investment Trust (.5%)
500,000 Security Capital Pacific Trust................... 7.500% 02/15/14 472,198
------------
Savings and Loans (.5%)
550,000 Bank United Corporation.......................... 8.875% 05/01/07 537,634
------------
UTILITIES (2.2%)
Electric Companies (1.5%)
700,000 Edison International, Inc........................ 6.875% 09/15/04 691,452
800,000 Hydro-Quebec (c)................................. 8.000% 02/01/13 848,680
------------
1,540,132
------------
</TABLE>
See accompanying notes to investments in securities.
12
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ---------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Natural Gas (.7%)
$ 800,000 Enron Corporation................................ 6.725% 11/17/08 $ 763,087
------------
Total corporate obligations (cost: $19,396,990)..................... 18,059,406
------------
Total long-term debt securities (cost: $36,636,814)................. 34,844,657
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.4%)
737,654 Federated Prime Obligation Fund, current rate 5.220%............... 737,654
740,000 U.S. Treasury Bill............................... 4.702% 11/04/99 736,869
------------
Total short-term securities (cost: $1,474,421)..................... 1,474,523
------------
Total investments in securities (cost: $82,413,420) (f)............ $103,307,939
============
</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 8.8% of net assets in foreign securities as of September 30,
1999.
(d) 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, 1999, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
--------- ----------- ----------
<S> <C> <C>
Novartis AG 144A Issue................. Various $ 556,854
St. George Bank 144A Issue............. 06/12/97 700,000
Guangdong Enterprises 144A Issue....... 08/06/97 722,526
Banco Hipotecario Nacional 144A
Issue................................ 04/01/99 138,765
Park Avenue Finance Corporation 144A
Issue................................ 09/08/99 498,151
----------
$2,616,296
==========
</TABLE>
(e) For zero coupon issues, the interest rate disclosed is the effective yield
at the date of acquisition.
(f) At September 30, 1999 the cost of securities for federal income tax
purposes was $82,795,220. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
<TABLE>
<CAPTION>
Gross unrealized appreciation. $ 24,478,111
<S> <C>
Gross unrealized depreciation...................................................... (3,965,392)
--------------
Net unrealized appreciation........................................................ $ 20,512,719
==============
</TABLE>
13
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value - see accompanying schedule for
detailed listing
(identified cost: $82,413,420)........ $103,307,939
Cash in bank on demand deposit......... 3,064
Receivable for Fund shares sold........ 19,450
Receivable for investment securities
sold.................................. 88,507
Accrued interest receivable............ 399,629
Dividends receivable................... 85,725
Other receivables...................... 5,687
-----------
Total assets....................... 103,910,001
-----------
LIABILITIES
Payable for investment securities
purchased............................. 39,179
Payable for Fund shares redeemed....... 49,702
Payable to Adviser..................... 128,344
Other payables......................... 157
-----------
Total liabilities.................. 217,382
-----------
Net assets applicable to outstanding
capital stock......................... $103,692,619
===========
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)............................. $ 58,085
Additional paid-in capital........... 79,068,460
Undistributed net investment
income............................... 37,947
Accumulated net realized gains from
investments.......................... 3,633,608
Unrealized appreciation on
investments.......................... 20,894,519
-----------
Total - representing net assets
applicable to outstanding capital
stock.............................. $103,692,619
===========
Net assets applicable to outstanding
Class A shares........................ $73,612,896
===========
Net assets applicable to outstanding
Class B shares........................ $24,420,364
===========
Net assets applicable to outstanding
Class C shares........................ $ 5,659,359
===========
Shares outstanding and net asset value
per share:
Class A - Shares outstanding
4,116,117............................ $ 17.88
===========
Class B - Shares outstanding
1,372,361............................ $ 17.79
===========
Class C - Shares outstanding
319,960.............................. $ 17.69
===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Investment income:
Interest............................. $2,110,491
Dividends............................ 826,505
----------
Total investment income.......... 2,936,996
----------
Expenses (note 4):
Investment advisory fee.............. 613,091
Rule 12b-1 fees - Class A............ 210,339
Rule 12b-1 fees - Class B............ 225,080
Rule 12b-1 fees - Class C............ 51,268
Administrative services fee.......... 61,400
Custodian fees....................... 13,347
Auditing and accounting services..... 34,881
Legal fees........................... 11,936
Directors' fees...................... 1,808
Registration fees.................... 42,044
Printing and shareholder reports..... 48,142
Insurance............................ 3,777
Other................................ 9,750
----------
Total expenses................... 1,326,863
----------
Investment income - net.......... 1,610,133
----------
Realized and unrealized gains on
investments:
Net realized gains on investments
(note 3)........................... 3,961,168
Net change in unrealized appreciation
or depreciation on investments..... 8,748,068
----------
Net gains on investments......... 12,709,236
----------
Net increase in net assets resulting
from operations...................... $14,319,369
==========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Operations:
Investment income - net.............. $ 1,610,133 $ 1,583,461
Net realized gain on investments..... 3,961,168 5,349,468
Net change in unrealized appreciation
or depreciation on investments..... 8,748,068 1,790,594
------------ ------------
Increase in net assets resulting
from operations................ 14,319,369 8,723,523
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A............................ (1,291,053) (1,322,444)
Class B............................ (243,796) (211,503)
Class C............................ (58,152) (43,052)
Net realized gains on investments:...
Class A............................ (3,760,571) (5,089,394)
Class B............................ (1,034,138) (1,075,477)
Class C............................ (249,664) (191,928)
------------ ------------
Total distributions.............. (6,637,374) (7,933,798)
------------ ------------
Capital share transactions (notes 4 and
5):
Proceeds from sales:
Class A............................ 8,626,097 14,488,116
Class B............................ 7,415,526 7,106,708
Class C............................ 2,936,755 3,764,605
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 4,906,922 6,228,838
Class B............................ 1,261,423 1,212,158
Class C............................ 299,361 231,844
Payments for redemption of shares:
Class A............................ (13,875,745) (16,214,526)
Class B............................ (3,538,481) (3,190,571)
Class C............................ (1,991,116) (1,843,302)
------------ ------------
Increase in net assets from
capital share transactions..... 6,040,742 11,783,870
------------ ------------
Total increase in net assets..... 13,722,737 12,573,595
Net assets at beginning of year........ 89,969,882 77,396,287
------------ ------------
Net assets at end of year (including
undistributed net investment income
of $37,947 and $20,815,
respectively)........................ $103,692,619 $ 89,969,882
============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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 (from 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 shares 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 Rule 12b-1 fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than Rule 12b-1 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 in the financial statements. Actual
results could differ from those estimates.
INVESTMENTS IN SECURITIES
The Fund's net asset value is generally calculated as of the close of normal
trading on the New York Stock Exchange (typically 3:00 p.m. Central Time).
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.
17
<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 (loss) 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 (loss) 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, 1999, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$101,432,432 and $99,828,333, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital or Adviser), a wholly owned subsidiary of
Minnesota Life Insurance Company (Minnesota Life). 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 (First
Data Investor Services Group). Prior to October 26, 1998, the Fund's transfer
agent was Minnesota Life. 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
expenses pursuant to Rule 12b-1 under the Investment Company Act of 1940 (as
amended). The Fund pays fees to Ascend Financial Services, Inc. (Ascend), the
underwriter of the Fund and wholly-owned subsidiary of Advantus Capital, 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 service fee up
to .25 percent of average daily net assets of Class A shares. Prior to
February 1, 1999, the Class A Plan provided for a distribution fee up to
.30 percent of average daily net assets of Class A shares. The Class B and
Class C Plans provide for a fee up to 1.00 percent of average daily net assets
of Class B and Class C shares, respectively. The Class B and Class C
1.00 percent fee is comprised of a .75 percent distribution fee and a
.25 percent service fee.
18
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
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.
Effective October 26, 1998, the Fund entered into a new shareholder and
administrative services agreement with Minnesota Life. Under this agreement, the
Fund pays an administrative services fee to Minnesota Life for accounting,
auditing, legal and other administrative services which Minnesota Life provides.
Prior to February 1, 1999, the administrative services fee was $3,700 per month.
For the period from February 1, 1999 to July 31, 1999, the administrative
services fee was $5,700 per month. Effective August 1, 1999, the administrative
services fee is $6,200 per month. In addition, for shareholder services
performed by Minnesota Life, the Adviser will pay Minnesota Life an annual
account servicing fee as agreed by the Adviser and Minnesota Life.
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 $244,604.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $11,104.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold..................................... 482,623 875,321 419,625 426,818 167,066 225,999
Issued for reinvested distributions...... 282,951 392,294 73,471 77,708 17,517 14,662
Redeemed................................. (779,347) (974,480) (201,143) (192,699) (113,167) (110,505)
-------- -------- -------- -------- -------- --------
(13,773) 293,135 291,953 311,827 71,416 130,156
======== ======== ======== ======== ======== ========
</TABLE>
(6) RESTRICTED SECURITIES
At September 30, 1999, 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, 1999 was $1,950,897 which represents 1.9% of net assets.
(7) YEAR 2000 (UNAUDITED)
In 1995, Minnesota Life began addressing computer systems requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Life
plans to spend approximately $12 million through 1999 to modify its computer
information systems, enabling proper processing of transactions relating to the
year 2000 and beyond. The Fund will not be charged for these expenses.
19
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(8) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1999 1998 1997 1996 1995(A)
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..... $ 16.50 $ 16.40 $ 15.53 $ 14.79 $ 13.28
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ .31 .33 .39 .34 .45
Net gains on securities (both
realized and unrealized)........... 2.30 1.40 2.02 1.59 1.88
------- ------- ------- ------- -------
Total from investment operations... 2.61 1.73 2.41 1.93 2.33
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (.31) (.33) (.39) (.34) (.44)
Distributions from net realized
gains.............................. (.92) (1.30) (1.15) (.85) (.38)
------- ------- ------- ------- -------
Total distributions................ (1.23) (1.63) (1.54) (1.19) (.82)
------- ------- ------- ------- -------
Net asset value, end of year........... $ 17.88 $ 16.50 $ 16.40 $ 15.53 $ 14.79
======= ======= ======= ======= =======
Total return(c)........................ 16.08% 11.31% 16.66% 13.72% 18.38%
Net assets, end of year
(in thousands)....................... $73,613 $68,157 $62,914 $54,848 $55,624
Ratio of expenses to average daily net
assets............................... 1.10% 1.19% 1.25% 1.26% 1.33%
Ratio of net investment income (loss)
to average daily net assets.......... 1.77% 1.98% 2.53% 2.28% 3.22%
Portfolio turnover rate (excluding
short-term securities)............... 100.8% 139.8% 141.4% 140.5% 125.5%
</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) Commencement of operations.
(c) Total return figures are based on a share outstanding throughout the period
and assume reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges. For periods less than one year, total return presented has not
been annualized.
(d) Adjusted to an annual basis.
20
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- ------------------------------------------------
PERIOD FROM
MARCH 1,
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, 1995(B) TO
------------------------------------------- ------------------------------ SEPTEMBER 30,
1999 1998 1997 1996 1995(A) 1999 1998 1997 1996 1995
------- ------- ------- ------ -------- ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................. $ 16.43 $ 16.34 $ 15.47 $14.74 $13.27 $16.34 $16.27 $15.43 $14.74 $13.36
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............ .19 .22 .30 .27 .39 .19 .24 .28 .28 .24
Net gains on securities (both
realized and unrealized)....... 2.28 1.39 2.02 1.56 1.84 2.27 1.36 2.01 1.52 1.43
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................... 2.47 1.61 2.32 1.83 2.23 2.46 1.60 2.29 1.80 1.67
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income......................... (.19) (.22) (.30) (.25) (.38) (.19) (.23) (.30) (.26) (.29)
Distributions from net realized
gains.......................... (.92) (1.30) (1.15) (.85) (.38) (.92) (1.30) (1.15) (.85) --
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total distributions............ (1.11) (1.52) (1.45) (1.10) (.76) (1.11) (1.53) (1.45) (1.11) (.29)
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year....... $ 17.79 $ 16.43 $ 16.34 $15.47 $14.74 $17.69 $16.34 $16.27 $15.43 $14.74
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
Total return(c).................... 15.31% 10.55% 16.02% 13.07% 17.62% 15.29% 10.57% 15.87% 12.87% 12.63%
Net assets, end of year
(in thousands)................... $24,420 $17,751 $12,556 $7,860 $3,131 $5,659 $4,062 $1,926 $1,351 $ 199
Ratio of expenses to average daily
net assets....................... 1.82% 1.84% 1.90% 1.90% 1.99% 1.82% 1.83% 1.90% 1.90% 2.00%(d)
Ratio of net investment income
(loss) to average daily net
assets........................... 1.06% 1.32% 1.89% 1.67% 2.30% 1.07% 1.31% 1.88% 1.73% 2.17%(d)
Portfolio turnover rate (excluding
short-term securities)........... 100.8% 139.8% 141.4% 140.5% 125.5% 100.8% 139.8% 141.4% 140.5% 125.5%
</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) Commencement of operations.
(c) Total return figures are based on a share outstanding throughout the period
and assume reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges. For periods less than one year, total return presented has not
been annualized.
(d) Adjusted to an annual basis.
21
<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, 1999 and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two year period then ended and the financial highlights
for each of the years in the five year period then ended. 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. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian and brokers. 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, 1999 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 LLP
Minneapolis, Minnesota
November 5, 1999
22
<PAGE>
ADVANTUS SPECTRUM FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
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 period ended September 30, 1999. Dividends for the 1999 calendar year
will be reported to you on Form 1099-Div in late January 2000. 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, 37.7%
qualifying for deduction by corporations.
December 4, 1998*........................................... $.1300
December 22, 1998........................................... .0649
March 19, 1999.............................................. .0847
June 24, 1999............................................... .0780
September 23, 1999.......................................... .0805
------
$.4381
======
Capital gains distributions-taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.7900
======
</TABLE>
*Represents $.1300 of short-term capital gains (taxable as dividend income).
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------ --------
<S> <C>
Income distributions-taxable as dividend income, 37.7%
qualifying for deduction by corporations.
December 4, 1998*........................................... $.1300
December 22, 1998........................................... .0394
March 19, 1999.............................................. .0551
June 24, 1999............................................... .0449
September 23, 1999.......................................... .0469
------
$.3163
======
Capital gains distributions-taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.7900
======
</TABLE>
*Represents $.1300 of short-term capital gains (taxable as dividend income).
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------ --------
<S> <C>
Income distributions-taxable as dividend income, 37.7%
qualifying for deduction by corporations.
December 4, 1998*........................................... $.1300
December 22, 1998........................................... .0399
March 19, 1999.............................................. .0566
June 24, 1999............................................... .0462
September 23, 1999.......................................... .0475
------
$.3202
======
Capital gains distributions-taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.7900
======
</TABLE>
*Represents $.1300 of short-term capital gains (taxable as dividend income).
23
<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 may apply.
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 share 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 twelve 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.
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 a check 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 DIVIDEND 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 may move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same share
class) just by calling our toll-free number. The Telephone Exchange privilege
will automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange may be changed (added/deleted) at any time by
submitting a request in writing.
SYSTEMATIC EXCHANGE: You may move a set amount of money monthly or quarterly
from one Advantus Fund to another Advantus Fund (with identical registrations
within the same share class) to diversify your investment portfolio and take
advantage of "dollar-cost averaging".
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life 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, if any.
AUTOMATIC INVESTMENT PLAN: This special purchase plan enables 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 monthly, semi-monthly or quarterly from
your checking or savings account.
IRAS, OTHER QUALIFIED PLANS: You can use the Advantus Family of Funds for your
Traditional, Roth or Education Individual Retirement Account or other qualified
plans including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k) Money Purchase
or Defined Benefit plans.
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 Redemption privilege will automatically be established
unless otherwise indicated on the Account Application. Telephone Redemption may
be changed (added/deleted) at any time by submitting a request in writing. To
have the redemption automatically deposited into your checking account, please
send a voided check
24
<PAGE>
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 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 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 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
HOW TO INVEST
You can invest in one or more of the eleven Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., 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 our 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. (For the Advantus International Balanced Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., selects the Fund's
investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing $3.2
billion in assets in addition to $10.8 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 13 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
Advantus Real Estate Securities Fund
25
<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.
[LOGO]
[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>
<TABLE>
<S> <C>
ASCEND FINANCIAL SERVICES, INC. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
</TABLE>
F.48639 Rev. 11-1999
