<PAGE>
SPECTRUM
ADVANTUS SPECTRUM FUND, INC.
ANNUAL REPORT TO SHAREHOLDERS DATED SEPTEMBER 30, 2000
[LOGO]
ADVANTUS-TM-
FAMILY OF FUNDS
[ASSET ALLOCATION GRAPHIC]
<PAGE>
ADVANTUS SPECTRUM FUND
TABLE OF CONTENTS
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 VOTING RESULTS 25
SHAREHOLDER SERVICES 26
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
All signs point to a soft landing in progress while the U.S. economy continues
to slow. The pressure on the Federal Reserve to further increase short-term
rates has diminished considerably. The Fed's earlier series of tightenings
appears to have successfully curbed the country's run-away growth. Inflation
remains in check; all in all, we continue to have a healthy backdrop for our
country's capital markets.
In the stock market, companies such as Intel and new economy leaders have seen
some dramatic corrections this quarter. This was a sideways correction for many,
downward for companies that disappointed investors. Value, real estate, and
small stocks' relative performance has improved this quarter. The market has
broadened, demonstrating that investors have acquired an increased appetite for
stocks other than large cap growth. We anticipate that the stock market will
remain volatile throughout the year and into next year. Equity investors should
adjust their expectations and not expect double-digit returns as the norm. We
expect positive returns for equities for the next 12 to 18 months, with above
average earnings growth.
Within the fixed income universe, corporate bonds have been the weakest
performing fixed income sector in 2000. An inverted yield curve (i.e., short-
term bonds have higher yields than long-term bonds), several Fed tightening
moves, increased event risk and equity market volatility have all negatively
impacted corporate bond performance this year. Mortgage-backed securities were
the top performer for the year followed by the government sector. We believe
that upcoming quarters will be a favorable environment for bonds.
We are continually watchful of economic and political events and circumstances
that would likely affect our new President. Significant political unrest,
military buildups, and violence in other countries may test the
President-elect's mettle. A strong Administration increases the odds that our
peace dividend will continue.
We advise investors to consider adding fixed income, value stocks and an
international component to their portfolio. As we've said before, we advise you
to stay well diversified and avoid big bets when the market environment is
uncertain.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<PAGE>
ADVANTUS SPECTRUM FUND
PERFORMANCE UPDATE
[PHOTO]
[PHOTO]
TOM GUNDERSON AND WAYNE SCHMIDT
PORTFOLIO MANAGERS
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, 2000
for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.......................... 16.22 PERCENT*
CLASS B.......................... 15.45 PERCENT*
CLASS C.......................... 15.32 PERCENT*
</TABLE>
The Fund's benchmarks, the Russell 1000 Growth Index** and the Lehman Brothers
Aggregate Bond Index(+) returned 23.41 percent and 6.99 percent, respectively,
for the same period. The Fund's Blended Index(++) returned 17.28 percent for the
same period.
PERFORMANCE ANALYSIS
Over the past 12 months the financial markets were driven by the ongoing battle
between the very strong economy and the Federal Reserve who dutifully tried to
keep economic growth down to a moderate level by raising interest rates. From
October 1999 through March 2000, stocks posted attractive returns as the strong
growth in corporate earnings won the battle over the negative effects of the
higher interest rates. During this period, bonds were the lagging asset
category. Since the Spring months and the last Fed increase in rates by 50 basis
points on May 16, higher rates have won the battle as stocks sold off in fears
of a slowing economy and the associated slowing of earnings growth. During this
period, bonds were the leading asset category.
Significant financial market volatility has been a result of this battle between
earnings growth and higher interest rates. The Spectrum Fund's portfolio
management approach positioned the Fund to take advantage of this volatility
over the past year and made several strategic moves during the period.
Additionally, our strategy of investing in growth stocks proved effective as the
higher growth Technology stocks were the primary drivers of the Fund and the
stock market over the past 12 months. Strength in the growth stocks allowed the
Fund's blended benchmark, the Russell 1000 Growth/Lehman Aggregate Bond Index,
to return 17.28 percent for the 12-month reporting period. The Fund's
performance - as well as its benchmark - clearly exceeded two well-known broad
market indices for the same period: the S&P 500 at 13.17 percent and the Lehman
Aggregate at 6.99 percent.
The current asset mix (as of September 30) is 68 percent stocks, 30 percent
bonds and 2 percent cash. The stocks in the Fund continue to come from two main
areas: 1) 90 percent of the stocks in the Fund are mid to large growth stocks
with an average growth rate 50 percent higher than the overall market. These
stocks are positioned to provide long-term capital appreciation. 2) The
remaining stocks are from the real estate investment trust (REIT) category, real
estate related investments that have mid to upper single digit yields plus some
capital appreciation potential. Low correlations with the growth stocks as well
as the high current yields make the REIT's a strong
2
<PAGE>
addition to the Fund as they help to reduce fund volatility and provide an
attractive current yield. The REIT's in the Fund had a great year posting more
than 20 percent returns as the market again looked more favorably on this asset
category. The bonds in the Fund continue to be a mix of investment-grade rated
fixed income securities including corporate and government bonds as well as
mortgage-backed securities.
In the fixed income portion of the Fund, all three major sectors in the bond
market (government, corporate, and mortgage) posted positive returns for the
year. Mortgage backed securities were the best performing sector as they
benefited from both the rally in intermediate interest rates and the narrowing
of mortgage spreads. Government securities performed well, especially longer-
term maturity bonds that rallied as interest rates fell. Corporate bonds
underperformed both mortgages and governments as their credit spreads gapped to
historic wide levels.
OUTLOOK
Healthy corporate earnings growth along with benign inflation continue to create
a healthy fundamental backdrop for the financial markets. We believe that over
the short term the stock market will continue to struggle with the slowing rate
of growth, the weaker Euro, and the uncertainties resulting from the November
elections. Near-term volatility is creating attractive buying opportunities for
several growth stocks as valuation came back to more reasonable levels.
Over the long run, fundamental economic variables dominate the movements of the
financial markets. We believe the fundamentals are very good and are likely to
remain strong. As always, we will attempt to 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 three 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, 1990 through September 30, 2000. 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, 2000.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Class A:
One year 9.83%
Five year 13.49%
Ten year 12.79%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
RUSSELL 1000 LEHMAN BROTHERS
CLASS A CPI BLENDED INDEX GROWTH INDEX AGGREGATE BOND INDEX
<S> <C> <C> <C> <C> <C>
9/30/90 $10,000 $10,000 $10,000 $10,000 $10,000
10/31/90 9,467 10,068 11,969 9,372 10,586
10/31/91 11,929 10,362 15,194 13,145 12,259
10/31/92 13,250 10,694 16,816 14,567 13,465
10/31/93 14,400 10,981 18,330 15,631 15,064
9/30/94 14,124 11,313 18,713 16,096 14,522
9/30/95 16,720 11,562 22,910 21,276 16,565
9/30/96 19,014 11,909 26,086 25,829 17,376
9/30/97 22,181 12,174 32,205 35,202 19,064
9/30/98 24,690 12,347 36,147 39,110 21,259
9/30/99 28,660 12,672 43,351 52,742 21,180
9/30/00 33,308 13,102 50,846 65,091 22,658
</TABLE>
4
<PAGE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Class B:
One year 10.45%
Five year 13.88%
Since Inception (8/19/94) 14.35%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
RUSSELL 1000 LEHMAN BROTHERS
CLASS B CPI BLENDED INDEX GROWTH INDEX AGGREGATE BOND INDEX
<S> <C> <C> <C> <C> <C>
8/19/94 $10,000 $10,000 $10,000 $10,000 $10,000
9/30/94 $10,003 $10,067 $10,209 $9,863 $9,860
9/30/95 $11,316 $10,289 $12,499 $12,836 $11,343
9/30/96 $12,953 $10,598 $14,231 $15,250 $11,872
9/30/97 $15,184 $10,833 $17,570 $20,504 $13,005
9/30/98 $16,913 $10,987 $19,720 $22,952 $14,425
9/30/99 $19,524 $11,276 $23,650 $31,303 $14,401
9/30/00 $22,714 $11,659 $27,740 $38,631 $15,378
</TABLE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Class C:
One year 15.32%
Five year 13.97%
Since Inception (3/1/95) 14.83%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
RUSSELL 1000 LEHMAN BROTHERS
CLASS C CPI BLENDED INDEX GROWTH INDEX AGGREGATE BOND INDEX
<S> <C> <C> <C> <C> <C>
3/1/95 $10,000 $10,000 $10,000 $10,000 $10,000
9/30/95 $11,263 $10,146 $12,243 $12,272 $10,818
9/30/96 $12,713 $10,450 $13,940 $14,569 $11,323
9/30/97 $14,731 $10,682 $17,210 $19,588 $12,404
9/30/98 $16,288 $10,834 $19,317 $21,927 $13,757
9/30/99 $18,778 $11,119 $23,166 $29,905 $13,708
9/30/00 $21,655 $11,497 $27,172 $36,906 $14,667
</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. 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>
Cisco Systems, Inc......................... 77,100 $ 4,259,775 5.7%
Pfizer, Inc................................ 93,525 4,202,780 5.6%
EMC Corporation............................ 33,700 3,340,513 4.4%
General Electric Company................... 50,956 2,939,524 3.9%
Sun Microsystems, Inc...................... 23,200 2,708,600 3.6%
----------- ---------
$17,451,192 23.2%
=========== =========
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
------ -----------
<S> <C>
U.S. Treasury................................................... 15.0%
U.S. Government Agencies........................................ 39.1%
AAA rated....................................................... 9.4%
AA rated........................................................ 11.1%
A rated......................................................... 14.8%
BBB rated....................................................... 10.3%
BB rated........................................................ 0.3%
---------
100.0%
=========
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 30.6%
Common Stocks 67.1%
Preferred Stocks 0.8%
Cash and Other Assets/Liabilities 1.5%
</TABLE>
6
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 2000
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------ --------------
<C> <S> <C>
COMMON STOCK (67.1%)
BASIC MATERIALS (.8%)
Chemicals (.8%)
15,500 Pharmacia Corporation............................ $ 932,906
-------------
CAPITAL GOODS (4.5%)
Electrical Equipment (3.0%)
50,956 General Electric Company......................... 2,939,524
3,600 SCI Systems, Inc. (b)............................ 147,600
6,100 Solectron Corporation (b)........................ 281,362
-------------
3,368,486
-------------
Manufacturing (1.5%)
4,200 St. Joe Company.................................. 116,550
30,484 Tyco International, Ltd. (c)..................... 1,581,357
-------------
1,697,907
-------------
COMMUNICATION SERVICES (2.0%)
Cellular (.1%)
4,100 Western Wireless Corporation (b)................. 146,062
-------------
Telecommunication (1.9%)
12,500 Alcatel ADR (c).................................. 785,937
8,900 Nextlink Communications, Inc. (b)................ 313,169
13,600 Qualcomm, Inc. (b)............................... 969,000
-------------
2,068,106
-------------
CONSUMER CYCLICAL (6.8%)
Building Materials (.1%)
1,800 Hovnanian Enterprises, Inc....................... 13,387
900 Pulte Corporation................................ 29,700
900 Standard Pacific Corporation..................... 16,200
-------------
59,287
-------------
Lodging-Hotel (.3%)
3,700 Extended Stay America, Inc. (b).................. 49,025
4,300 Hilton Hotels.................................... 49,719
9,900 Host Marriott Corporation........................ 111,375
800 Marriott International, Inc...................... 29,150
4,000 Prime Hospitality Corporation (b)................ 40,500
-------------
279,769
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
CONSUMER CYCLICAL--CONTINUED
<C> <S> <C>
Retail (3.7%)
22,300 Family Dollar Stores............................. $ 429,275
30,850 Home Depot, Inc.................................. 1,636,978
7,900 Kohls Corporation (b)............................ 455,731
3,300 Redback Networks, Inc. (b)....................... 540,994
21,100 Wal-Mart Stores, Inc............................. 1,015,437
-------------
4,078,415
-------------
Service (2.7%)
26,010 Omnicom Group.................................... 1,897,104
12,900 TMP Worldwide, Inc. (b)......................... 1,038,450
-------------
2,935,554
-------------
CONSUMER STAPLES (3.1%)
Entertainment (.7%)
9,500 Time Warner, Inc................................. 743,375
-------------
Retail (1.1%)
24,982 Safeway, Inc (b)................................. 1,166,347
-------------
Service (1.3%)
21,100 Automatic Data Processing, Inc................... 1,411,062
-------------
ENERGY (2.0%)
Oil (.4%)
11,600 Diamond Offshore Drilling, Inc................... 475,600
-------------
Oil & Gas (1.6%)
2,300 Baker Hughes, Inc................................ 85,387
12,600 Nabors Industries, Inc. (b)...................... 660,240
7,375 Veritas DGC, Inc. (b)............................ 1,047,250
-------------
1,792,877
-------------
FINANCIAL (5.8%)
Investment Bankers/Brokers (.8%)
25,100 Charles Schwab Corporation....................... 891,050
336 Frontline Capital Group (b)...................... 5,523
-------------
896,573
-------------
Real Estate (.5%)
3,200 Boardwalk Equities, Inc.......................... 25,521
5,800 Brookfield Properties Corporation (c)............ 93,887
</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>
10,100 Catellus Development Corporation (b)............. $ 176,750
3,500 Mission West Properties, Inc..................... 48,563
1,800 Newhall Land & Farming Company 42,336
3,600 Security Capital Industrial Trust (b)........... 68,175
5,200 Trizechhahn Corporation (c)...................... 87,425
-------------
542,657
-------------
Real Estate Investment Trust (4.5%)
3,500 Alexandria Real Estate Equities.................. 120,094
5,500 AMB Property Corporation......................... 135,094
4,900 Apartment Investment & Management Company........ 225,706
5,000 Archstone Communities Trust...................... 122,812
4,100 Arden Realty, Inc................................ 109,931
3,400 Avalonbay Communities, Inc....................... 162,137
3,500 Boston Properties, Inc........................... 150,281
3,100 BRE Properties, Inc.............................. 99,200
1,700 Cabot Industrial Trust........................... 33,894
2,800 Camden Property Trust............................ 86,800
5,900 Carramerica Realty Corporation................... 178,475
1,800 CBL & Associates Properties, Inc................. 45,112
400 Centerpoint Properties Corporation............... 18,425
600 Charles E. Smith Residential Realty, Inc......... 27,225
2,500 Corporate Office Properties Trust................ 24,844
3,600 Eastgroup Properties, Inc........................ 80,100
11,100 Equity Office Properties Trust................... 344,794
2,500 Equity Residential Properties.................... 120,000
2,500 First Industrial Realty Trust.................... 76,875
3,600 Franchise Finance Corporation of America......... 81,000
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
1,400 General Growth Properties, Inc................... $ 45,063
3,400 Golf Trust of America, Inc....................... 45,900
11,000 Innkeepers USA Trust............................. 112,750
5,300 Kilroy Realty Corporation........................ 141,444
2,700 Kimco Realty Corporation......................... 114,075
6,000 LaSalle Hotel Proerties.......................... 90,750
4,400 Liberty Property Trust........................... 121,000
3,100 Macerich Company................................. 65,875
4,200 Mills Corporation................................ 79,538
2,500 P.S. Business Parks, Inc......................... 68,125
6,500 Pacific Gulf Properties, Inc..................... 173,875
5,300 Pan Pacific Retail Properties, Inc............... 106,000
4,400 Parkway Properties, Inc.......................... 134,200
6,500 Philips International Realty Corporation......... 112,125
3,200 Post Properties, Inc............................. 139,400
2,500 Prentiss Properties Trust........................ 65,313
10,100 Prologis Trust................................... 239,875
6,560 Public Storage, Inc.............................. 157,030
2,200 Reckson Associates Realty Corporation............ 56,100
1,183 Reckson Associates Realty Corporation Class B.... 30,610
1,800 Simon Property Group, Inc........................ 42,188
3,500 SL Green Realty Corporation...................... 98,219
2,000 Spieker Properties, Inc.......................... 115,125
11,500 Starwood Hotels & Resorts Worldwide, Inc......... 359,375
3,500 Summit Properties, Inc........................... 84,219
-------------
5,040,973
-------------
HEALTH CARE (10.3%)
Biotechnology (3.9%)
19,000 Amgen, Inc. (b).................................. 1,326,734
5,100 Genentech, Inc. (b).............................. 947,006
1,400 Human Genome Sciences, Inc. (b).................. 242,375
2,500 Idec Pharmaceuticals Corporation (b)............. 438,398
1,500 Millennium Pharmaceuticals, Inc. (b)............. 219,094
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
HEALTH CARE--CONTINUED
<C> <S> <C>
9,700 PE Corporation-PE Biosystems Group............... $ 1,130,050
-------------
4,303,657
-------------
Drugs (3.8%)
93,525 Pfizer, Inc...................................... 4,202,780
-------------
Medical Products/Supplies (2.6%)
25,700 Guidant Corporation (b).......................... 1,816,669
20,500 Medtronic, Inc................................... 1,062,156
-------------
2,878,825
-------------
TECHNOLOGY (30.8%)
Communications Equipment (1.2%)
900 Brocade Communication Systems, Inc............... 212,400
1,800 Corvis Corporation (b)........................... 109,884
15,900 McLeodUSA, Inc. (b).............................. 227,569
12,800 Nortel Networks Corporation (c).................. 762,400
-------------
1,312,253
-------------
Computer Hardware (5.5%)
64,200 Dell Computer 1,978,163
Corporation (b).................................
20,400 Gateway, Inc. (b)................................ 953,700
3,800 International Business Machines Corporation...... 427,500
23,200 Sun Microsystems, Inc. (b)....................... 2,708,600
-------------
6,067,963
-------------
Computer Networking (5.1%)
77,100 Cisco Systems, Inc. (b).......................... 4,259,775
15,600 Exodus Communications (b)........................ 770,250
2,900 Juniper Networks, Inc. (b)....................... 634,919
-------------
5,664,944
-------------
Computer Peripherals (3.0%)
33,700 EMC Corporation (b).............................. 3,340,513
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
Computer Services & Software (6.9%)
38,400 America Online, Inc. (b)......................... $ 2,064,000
11,100 BEA Systems, Inc. (b)............................ 864,413
12,600 Flextronics International, Ltd. (b)(c)........... 1,034,775
3,400 Gemstar International Group, Ltd. (b)............ 296,438
2,000 McData Corporation (b)........................... 245,781
17,500 Microsoft Corporation (b)........................ 1,054,375
22,900 Oracle Systems (b)............................... 1,803,375
5,900 Real Networks, Inc. (b).......................... 234,525
-------------
7,597,682
-------------
Computer Systems (.9%)
9,300 Comverse Technology, Inc. (b).................... 1,004,400
500 Hotel Reservations Network, Inc. (b)............. 18,313
-------------
1,022,713
-------------
Data Processing (1.0%)
5,255 Verisign, Inc. (b)............................... 1,064,466
-------------
Electrical Instruments (1.6%)
18,900 JDS Uniphase Corporation (b)..................... 1,789,594
-------------
Semiconductor Equipment (.5%)
29,100 Lam Research Corporation (b)..................... 609,281
-------------
Semiconductors (5.1%)
10,800 Altera Corporation (b)........................... 515,700
5,400 Analog Devices, Inc.............................. 445,838
3,400 Applied Materials, Inc. (b)...................... 201,663
32,700 Intel Corporation................................ 1,361,138
40,900 Texas Instruments, Inc........................... 1,929,967
9,500 Vitessa Semiconductor Corporation (b)............ 844,905
4,000 Xilinx, Inc. (b)................................. 342,500
-------------
5,641,711
-------------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
UTILITIES (1.0%)
<C> <S> <C>
Electric Companies (1.0%)
16,400 AES Corporation (b).............................. $ 1,123,400
-------------
Total common stock (cost: $50,244,415).................... 74,255,741
-------------
PREFERRED STOCK (.8%)
FINANCIAL (.8%)
Finance-Diversified (.3%)
5,000 Nationwide Health Property, Inc.- 7.68%.......... 304,844
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------
FINANCIAL--CONTINUED
<C> <S> <C>
Real Estate Investment Trust (.5%)
14,000 Duke Realty Investments, Inc.- 7.99%............. $ 610,313
-------------
Total preferred stock (cost: $1,193,675).................. 915,157
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY
--------- ------ --------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (30.6%)
GOVERNMENT OBLIGATIONS (17.8%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (16.5%)
Federal Home Loan Mortgage Corporation (FHLMC) (3.6%)
$1,250,000 (g)........................ 6.500% 01/01/30 1,201,172
600,000 ........................... 6.875% 07/18/02 603,839
500,000 ........................... 7.000% 03/15/10 507,537
700,000 (g)........................ 7.000% 01/01/30 685,782
498,767 ........................... 7.500% 07/01/30 498,429
450,000 ........................... 7.500% 09/01/30 449,695
--------------
3,946,454
--------------
Federal National Mortgage Association (FNMA) (4.8%)
333,742 ........................... 6.000% 04/01/14 321,311
467,844 ........................... 6.000% 01/01/29 438,294
279,726 ........................... 6.000% 02/01/29 262,058
1,500,000 ........................... 6.500% 08/15/04 1,498,044
458,670 ........................... 6.500% 10/01/28 441,707
717,777 ........................... 6.500% 12/01/28 689,737
276,903 ........................... 6.500% 02/01/29 266,663
439,762 ........................... 6.500% 02/01/29 422,582
86,597 ........................... 7.000% 10/01/29 84,906
400,000 ........................... 7.125% 02/15/05 408,574
500,000 ........................... 7.250% 01/15/10 515,618
--------------
5,349,494
--------------
Government National Mortgage Association (GNMA) (3.5%)
493,851 ........................... 6.500% 04/15/29 476,038
382,440 ........................... 7.000% 06/15/28 377,022
846,197 ........................... 7.000% 07/15/28 834,209
449,916 ........................... 7.000% 02/15/29 443,483
496,763 ........................... 7.000% 08/15/29 489,661
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
----------------------------------------------- -------- --------------
GOVERNMENT OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
$ 355,468 ........................... 7.375% 11/15/11 $ 359,314
200,052 ........................... 7.500% 09/15/28 200,856
207,136 ........................... 7.500% 10/15/28 207,969
74,658 ........................... 7.500% 10/15/28 74,958
475,548 ........................... 7.500% 09/15/29 477,289
--------------
3,940,799
--------------
U.S. Treasury (4.6%)
1,500,000 Principal-only STRIP (f)... 6.118% 11/15/09 860,298
900,000 Bond....................... 5.250% 02/15/29 808,312
1,050,000 Bond....................... 6.000% 02/15/26 1,040,156
350,000 Bond....................... 6.125% 08/15/29 357,437
1,800,000 Bond....................... 6.250% 07/31/02 1,806,188
200,000 Note....................... 5.250% 08/15/03 196,250
--------------
5,068,641
--------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (.2%)
189,000 Wyoming Community
Development Authority..... 6.850% 06/01/10 188,450
--------------
OTHER GOVERNMENT OBLIGATIONS (1.1%)
850,000 Government of
Canada (c)................ 6.375% 11/30/04 842,113
400,000 Ontario Province Of Canada
(c)....................... 7.625% 06/22/04 412,213
--------------
1,254,326
--------------
Total government obligations
(cost: $20,680,817)......................... 19,748,164
--------------
CORPORATE OBLIGATIONS (12.8%)
BASIC MATERIALS (1.1%)
Aluminum (.2%)
250,000 Alcoa, Inc................. 7.375% 08/01/10 252,823
--------------
Chemicals (.9%)
500,000 IMC Global, Inc............ 6.625% 10/15/01 490,117
549,097 Novartis AG-144A
Issue (c) (d)............. 7.240% 01/02/16 539,488
--------------
1,029,605
--------------
CAPITAL GOODS (.7%)
Aerospace/Defense (.7%)
750,000 United Technologies
Corporation............... 6.625% 11/15/04 745,881
--------------
COMMUNICATION SERVICES (.9%)
Telecommunication (.3%)
350,000 Qwest Communications
International, Inc........ 5.750% 02/15/09 320,669
--------------
Telephone (.6%)
750,000 AT&T Corporation........... 5.625% 03/15/04 716,669
--------------
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
----------------------------------------------- -------- --------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
CONSUMER CYCLICAL (.1%)
Auto (.1%)
$ 250,000 Federal Mogul
Corporation............... 7.500% 07/01/04 $ 105,000
--------------
ENERGY (.5%)
Oil (.5%)
350,000 Atlantic Richfield......... 5.900% 04/15/09 325,590
200,000 Conoco, Inc................ 6.950% 04/15/29 184,586
--------------
510,176
--------------
FINANCIAL (7.6%)
Asset Backed (1.1%)
832,249 Prudential Home Mortgage
Security Company.......... 6.500% 10/25/23 803,262
398,829 Residential Funding
Mortgage Secuities........ 7.000% 10/25/23 387,590
--------------
1,190,852
--------------
Auto Finance (.7%)
750,000 Ford Motor Credit
Corporation............... 7.500% 03/15/05 754,030
--------------
Banks (1.0%)
700,000 St. George Bank-144A
Issue (c)(d).............. 8.485% 12/31/49 600,841
500,000 Wells Fargo Bank NA........ 7.550% 06/21/10 510,301
--------------
1,111,142
--------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (3.1%)
111,740 Banco Hipotecario Nacional
144A Issue (c)(d)......... 7.916% 07/25/09 106,121
457,112 Banco Hipotecario Nacional
144A Issue (c)(d)......... 8.000% 03/31/11 433,342
458,620 Bear Stearns & Company,
Inc....................... 8.000% 11/25/29 457,391
350,000 Nomura Asset Securities
Corporation (c)........... 7.709% 04/13/36 355,209
570,008 Paine Webber Mortgage
Acceptance Corporation.... 7.000% 10/25/23 559,919
500,000 Park Avenue Finance
Corporation 144A
Issue (h)................. 7.680% 05/12/07 506,160
954,409 Rosewood Care Centers
Capital Funding........... 7.250% 11/01/13 974,471
--------------
3,392,613
--------------
Commercial Mortgage-Backed Securities (.3%)
-- Asset Securitization
Corporation (e)........... 9.150% 08/13/29 362,208
--------------
Investment Bankers/Brokers (.5%)
500,000 Morgan Stanley Dean Witter
Discover & Company........ 8.000% 06/15/10 523,048
--------------
Mortgage Revenue Bonds (.5%)
553,322 Chase Mortgage Finance
Corporation-144A
Issue (h)................. 6.676% 03/28/25 524,283
--------------
Real Estate Investment Trust (.4%)
500,000 Security Capital Industrial
Trust..................... 7.500% 02/15/14 465,553
--------------
UTILITIES (1.9%)
Electric Companies (1.2%)
1,300,000 Hydro-Quebec (c)........... 8.000% 02/01/13 1,374,667
--------------
</TABLE>
See accompanying notes to investments in securities.
12
<PAGE>
ADVANTUS SPECTRUM FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
----------------------------------------------- -------- --------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Natural Gas (.7%)
$ 800,000 Enron Corporation.......... 6.725% 11/17/08 $ 749,127
--------------
Total corporate obligations
(cost: $13,444,009)......................... 14,128,346
--------------
Total long-term debt securities
(cost: $34,124,826)......................... 33,876,510
--------------
SHORT-TERM SECURITIES (1.9%)
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<C> <S> <C> <C> <C>
270,240 Federated Money Market Obligation Trust -
Prime Obligation Fund, current rate
6.460%...................................... 270,240
1,799,745 Provident Institutional Fund - TempFund
Portfolio, current rate 6.526%.............. 1,799,745
--------------
Total short-term securities
(cost: $2,069,985).......................... 2,069,985
--------------
Total investments in securities
(cost: $87,632,901) (i)..................... $ 111,117,393
==============
</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 8.1% of net assets in foreign securities as of September 30,
2000.
(d) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 6 to the financial statements.) Information concerning the
illiquid securities held at September 30, 2000, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
--------- ----------- --------------
<S> <C> <C>
Novartis AG 144A Issue *............... Various 549,097
St. George Bank 144A Issue *........... 06/12/97 700,000
Banco Hipotecario Nacional 144A Issue
*.................................... 04/01/99 101,404
Banco Hipotecario Nacional 144A Issue
*.................................... 03/07/00 428,257
-------------
$ 1,778,758
=============
</TABLE>
* A 144A Issue represents a security which has not been registered with the
Securities and Exchange Commission under the Securities Act of 1933.
(e) Interest-only security that entitles holders to receive only interest on the
underlying mortgages. The principal amount of the underlying pool represents
the notional amount on which current interest is calculated. The yield to
maturity of an interest-only security is sensitive to the rate of principal
payments on the underlying mortgage assets. The rate disclosed represents
the market yield based upon current cost basis and estimated timing and
amount of future cash flows.
(f) For zero coupon issues, the interest rate disclosed is the effective yield
at the date of acquisition.
(g) At September 30, 2000, the cost of investments purchased on a when-issued or
forward commitment basis is $1,878,211.
(h) Long term debt security sold within terms of a private placement memorandum
exempt from registration under Section 144A of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
accredited investors. These securities have been determined to be liquid
under guidelines established by the board of directors.
(i) At September 30, 2000, the cost of securities for federal income tax
purposes was $88,926,850. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 26,904,208
Gross unrealized depreciation.......... (4,713,665)
--------------
Net unrealized appreciation............ $ 22,190,543
==============
</TABLE>
13
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value -
see accompanying schedule for detailed
listing
(identified cost: $87,632,901).............. $ 111,117,393
Cash in bank on demand deposit............... 83,468
Receivable for Fund shares sold.............. 40,288
Receivable for investment securities sold.... 2,023,914
Accrued interest receivable.................. 350,703
Dividends receivable......................... 64,419
Other receivables............................ 2,072
--------------
Total assets............................. 113,682,257
--------------
LIABILITIES
Payable for investment securities
purchased................................... 2,903,932
Payable for Fund shares redeemed............. 31,906
Payable to Adviser........................... 16,208
--------------
Total liabilities........................ 2,952,046
--------------
Net assets applicable to outstanding capital
stock....................................... $ 110,730,211
==============
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............................. $ 56,238
Additional paid-in capital................. 76,559,535
Undistributed net investment income........ 79,830
Accumulated net realized gains from
investments................................ 10,550,116
Unrealized appreciation on investments..... 23,484,492
--------------
Total - representing net assets
applicable to outstanding capital
stock.................................... $ 110,730,211
==============
Net assets applicable to outstanding Class A
shares...................................... $ 77,964,259
==============
Net assets applicable to outstanding Class B
shares...................................... $ 26,837,728
==============
Net assets applicable to outstanding Class C
shares...................................... $ 5,928,224
==============
Shares outstanding and net asset value per
share:
Class A - Shares outstanding 3,950,859..... $ 19.73
==============
Class B - Shares outstanding 1,368,722..... $ 19.61
==============
Class C - Shares outstanding 304,235....... $ 19.49
==============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 2,320,970
Dividends............................ 685,830
-------------
Total investment income.......... 3,006,800
-------------
Expenses (note 4):
Investment advisory fee.............. 624,481
Rule 12b-1 - Class A................. 198,566
Rule 12b-1 - Class B................. 265,649
Rule 12b-1 - Class C................. 59,740
Administrative services fee.......... 74,400
Transfer agent and shareholder
services fees...................... 143,044
Custodian fees....................... 19,449
Auditing and accounting services..... 41,833
Legal fees........................... 13,746
Directors' fees...................... 1,743
Registration fees.................... 35,931
Printing and shareholder reports..... 86,453
Insurance............................ 3,868
Other................................ 14,318
-------------
Total expenses................... 1,583,221
-------------
Less fees and expenses waived or
absorbed by Adviser.................. (95,590)
-------------
Total net expenses................. 1,487,631
-------------
Investment income - net............ 1,519,169
-------------
Realized and unrealized gains on
investments :
Net realized gains on investments
(note 3)........................... 12,131,756
Net change in unrealized appreciation
or depreciation on investments..... 2,589,973
-------------
Net gains on investments......... 14,721,729
-------------
Net increase in net assets resulting
from operations...................... $ 16,240,898
=============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
ADVANTUS SPECTRUM FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Operations:
Investment income - net.............. $ 1,519,169 $ 1,610,133
Net realized gains on investments.... 12,131,756 3,961,168
Net change in unrealized appreciation
or depreciation on investments..... 2,589,973 8,748,068
------------ ------------
Increase in net assets resulting
from operations................ 16,240,898 14,319,369
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A............................ (1,196,773) (1,291,053)
Class B............................ (226,554) (243,796)
Class C............................ (50,673) (58,152)
Net realized gains on investments:...
Class A............................ (2,859,954) (3,760,571)
Class B............................ (947,791) (1,034,138)
Class C............................ (221,013) (249,664)
------------ ------------
Total distributions.............. (5,502,758) (6,637,374)
------------ ------------
Capital share transactions: (notes 4
and 5):
Proceeds from sales:
Class A............................ 6,606,454 8,626,097
Class B............................ 4,572,057 7,415,526
Class C............................ 1,461,717 2,936,755
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 3,936,115 4,906,922
Class B............................ 1,135,909 1,261,423
Class C............................ 263,983 299,361
Payments for redemption of shares:
Class A............................ (13,875,941) (13,875,745)
Class B............................ (5,777,194) (3,538,481)
Class C............................ (2,023,648) (1,991,116)
------------ ------------
Increase (decrease) in net assets
from capital share
transactions................... (3,700,548) 6,040,742
------------ ------------
Total increase in net assets..... 7,037,592 13,722,737
Net assets at beginning of year........ 103,692,619 89,969,882
------------ ------------
Net assets at end of year (including
undistributed net investment income
of $79,830 and $37,947,
respectively)........................ $110,730,211 $103,692,619
============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 accounting
principles generally accepted in the United States of America 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 value.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund on
a forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities
17
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
are subject to market fluctuations. As of September 30, 2000, the Fund had
entered into outstanding when-issued or forward commitments of $1,878,211. The
Fund has segregated assets to cover such when-issued and forward commitment
transactions.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income (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 or realized gains were recorded by the
Fund.
The Fund elected to utilize equalization debits by which a portion of the
costs of redemptions, which occurred during the year ended September 30, 2000,
reduced accumulated net realized gains for tax purposes by $1,199,840. On the
statement of assets and liabilities, as a result of the fund's election to
utilize equalization debits and other permanent book-to-tax differences, a
reclassification adjustment was made to decrease accumulated net investment
income by $3,286, decrease accumulated net realized gains by $1,186,490, and
increase additional paid-in capital by $1,189,776.
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, 2000, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $143,969,532 and $151,565,045, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital), 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. The
Fund has engaged PFPC Global Fund Services to act as its transfer agent,
dividend disbursing agent and redemption agent and bears the expenses of such
services. Prior to May 1, 2000, Advantus Capital paid the expense related to
transfer agent services. The fee for investment management and advisory services
is based on the average daily net assets of the Fund at the annual rate of
.50 percent on the first $1 billion in net assets, .48 percent on the next $1
billion and .46 on net assets in excess of $2 billion. Prior to May 1, 2000, the
fee was charged at an 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
18
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
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. 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
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
The Fund has entered into a shareholder and administrative services
agreement with Minnesota Life. Under this agreement, effective May 1, 2000, the
Fund pays a shareholder services fee, equal to $5 per shareholder account
annually, to Minnesota Life for shareholder services which Minnesota Life
provides. The Fund also pays Minnesota Life an administrative services fee equal
to $6,200 per month for accounting, legal and other administrative services
which Minnesota Life provides.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. Under the Advisory Agreement,
Advantus Capital has contractually agreed to absorb all Fund costs and expenses
which exceed 1.12% of Class A average daily net assets, 1.87% of Class B average
daily net assets and 1.87% of Class C average daily net assets through the
fiscal year of the Fund ending September 30, 2001. During the year ended
September 30, 2000, Advantus Capital contractually agreed to absorb $95,590 in
expenses which were otherwise payable by the Fund.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $437,766.
As of September 30, 2000, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 48,283 shares or 1.2 percent of the
Funds Class A shares.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $10,406.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 2000, and 1999 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold.................................... 339,039 482,623 235,094 419,625 75,338 167,066
Issued for reinvested distributions..... 205,877 282,951 60,180 73,471 14,082 17,517
Redeemed................................ (710,174) (779,347) (298,913) (201,143) (105,145) (113,167)
-------- -------- -------- -------- -------- --------
(165,258) (13,773) (3,639) 291,953 (15,725) 71,416
======== ======== ======== ======== ======== ========
</TABLE>
(6) ILLIQUID SECURITIES
At September 30, 2000, investments in illiquid securities are limited to 15%
of net assets at the time of the purchase. Securities are valued by procedures
described in note 2. The aggregate value of illiquid securities held by the Fund
at September 30, 2000 was $1,679,792 which represents 1.5% of net assets.
Pursuant to guidelines adopted by the Fund's Board of Directors, certain
unregistered securities are determined to be liquid and are not included within
the percent limitations specified above.
19
<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
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 17.88 $ 16.50 $ 16.40 $ 15.53 $ 14.79
------- ------- ------- ------- -------
Income from investment operations:
Net investment income........................... .31 .31 .33 .39 .34
Net gains on securities (both realized and
unrealized)................................... 2.55 2.30 1.40 2.02 1.59
------- ------- ------- ------- -------
Total from investment operations.............. 2.86 2.61 1.73 2.41 1.93
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income............ (.30) (.31) (.33) (.39) (.34)
Distributions from net realized gains........... (.71) (.92) (1.30) (1.15) (.85)
------- ------- ------- ------- -------
Total distributions........................... (1.01) (1.23) (1.63) (1.54) (1.19)
------- ------- ------- ------- -------
Net asset value, end of year...................... $ 19.73 $ 17.88 $ 16.50 $ 16.40 $ 15.53
======= ======= ======= ======= =======
Total return (a).................................. 16.22% 16.08% 11.31% 16.66% 13.72%
Net assets, end of year (in thousands)............ $77,964 $73,613 $68,157 $62,914 $54,848
Ratio of expenses to average daily net
assets (b)...................................... 1.11% 1.10% 1.19% 1.25% 1.26%
Ratio of net investment income to average daily
net assets (b).................................. 1.58% 1.77% 1.98% 2.53% 2.28%
Portfolio turnover rate (excluding short-term
securities)..................................... 132.0% 100.8% 139.8% 141.4% 140.5%
</TABLE>
------------
(a) 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.
(b) The Fund's Adviser voluntarily waived $95,590 in expenses for the year
ended September 30, 2000. If Class A shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.20%, and the ratio of net investment income to average daily net assets
would have been 1.49%. If Class B and C shares would have been charged for
these expenses, the ratio of expenses to average daily net assets would
have been 1.95% for each class, and the ratio of net investment income to
average daily net assets would have been .72% for each class.
20
<PAGE>
ADVANTUS SPECTRUM FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 17.79 $ 16.43 $ 16.34 $ 15.47 $14.74
------- ------- ------- ------- ------
Income from investment operations:
Net investment income........................... .17 .19 .22 .30 .27
Net gains on securities (both realized and
unrealized)................................... 2.53 2.28 1.39 2.02 1.56
------- ------- ------- ------- ------
Total from investment operations.............. 2.70 2.47 1.61 2.32 1.83
------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income............ (.17) (.19) (.22) (.30) (.25)
Distributions from net realized gains........... (.71) (.92) (1.30) (1.15) (.85)
------- ------- ------- ------- ------
Total distributions........................... (.88) (1.11) (1.52) (1.45) (1.10)
------- ------- ------- ------- ------
Net asset value, end of year...................... $ 19.61 $ 17.79 $ 16.43 $ 16.34 $15.47
======= ======= ======= ======= ======
Total return (a).................................. 15.51% 15.31% 10.55% 16.02% 13.07%
Net assets, end of year (in thousands)............ $26,838 $24,420 $17,751 $12,556 $7,860
Ratio of expenses to average daily net
assets (b)...................................... 1.86% 1.82% 1.84% 1.90% 1.90%
Ratio of net investment income to average daily
net assets (b).................................. .83% 1.06% 1.32% 1.89% 1.67%
Portfolio turnover rate (excluding short-term
securities)..................................... 132.0% 100.8% 139.8% 141.4% 140.5%
<CAPTION>
CLASS C
--------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $17.69 $16.34 $16.27 $15.43 $14.74
------ ------ ------ ------ ------
Income from investment operations:
Net investment income........................... .17 .19 .24 .28 .28
Net gains on securities (both realized and
unrealized)................................... 2.51 2.27 1.36 2.01 1.52
------ ------ ------ ------ ------
Total from investment operations.............. 2.68 2.46 1.60 2.29 1.80
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income............ (.17) (.19) (.23) (.30) (.26)
Distributions from net realized gains........... (.71) (.92) (1.30) (1.15) (.85)
------ ------ ------ ------ ------
Total distributions........................... (.88) (1.11) (1.53) (1.45) (1.11)
------ ------ ------ ------ ------
Net asset value, end of year...................... $19.49 $17.69 $16.34 $16.27 $15.43
====== ====== ====== ====== ======
Total return (a).................................. 15.38% 15.29% 10.57% 15.87% 12.87%
Net assets, end of year (in thousands)............ $5,928 $5,659 $4,062 $1,926 $1,351
Ratio of expenses to average daily net
assets (b)...................................... 1.86% 1.82% 1.83% 1.90% 1.90%
Ratio of net investment income to average daily
net assets (b).................................. .83% 1.07% 1.31% 1.88% 1.73%
Portfolio turnover rate (excluding short-term
securities)..................................... 132.0% 100.8% 139.8% 141.4% 140.5%
</TABLE>
------------
(a) 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.
(b) The Fund's Adviser voluntarily waived $95,590 in expenses for the year
ended September 30, 2000. If Class A shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.20%, and the ratio of net investment income to average daily net assets
would have been 1.49%. If Class B and C shares would have been charged for
these expenses, the ratio of expenses to average daily net assets would
have been 1.95% for each class, and the ratio of net investment income to
average daily net assets would have been .72% for each class.
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, 2000 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000 and the results of its operations,
changes in its net assets and the financial highlights for the periods stated in
the first paragraph above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
November 10, 2000
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, 2000. Dividends for the 2000 calendar year
will be reported to you on Form 1099-Div in late January 2001. Shareholders
should consult a tax adviser on how to report these distributions for state and
local purposes.
INCOME DISTRIBUTION - TAXABLE AS DIVIDEND INCOME, 10.9% QUALIFYING FOR DEDUCTION
BY CORPORATIONS.
CLASS A
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
December 3, 1999*........................................... $.0903
December 21, 1999........................................... .0789
March 23, 2000.............................................. .0686
June 22, 2000............................................... .0717
September 30, 2000.......................................... .0759
------
$.3854
======
</TABLE>
*Represents $.0903 of short-term capital gains (taxable as dividend income).
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
December 3, 1999*........................................... $.0903
December 21, 1999........................................... .0442
March 23, 2000.............................................. .0324
June 22, 2000............................................... .0435
September 30, 2000.......................................... .0460
------
$.2564
======
</TABLE>
*Represents $.0903 of short-term capital gains (taxable as dividend income).
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
December 3, 1999*........................................... $.0903
December 21, 1999........................................... .0446
March 23, 2000.............................................. .0315
June 22, 2000............................................... .0425
September 30, 2000.......................................... .0467
------
$.2556
======
</TABLE>
*Represents $.0903 of short-term capital gains (taxable as dividend income).
<TABLE>
<S> <C>
CAPITAL GAINS DISTRIBUTIONS - TAXABLE AS LONG-TERM CAPITAL
GAINS, 20% RATE
Total long-term capital gain distributions were............. $4,715,448
==========
</TABLE>
23
<PAGE>
ADVANTUS SPECTRUM FUND
SHAREHOLDER VOTING RESULTS
On April 17, 2000, a special meeting of shareholders of Advantus Spectrum
Fund, Inc. was held. Shareholders of record on February 28, 2000, were entitled
to vote on the proposals described below.
(1) To elect a Board of Directors as follows:
<TABLE>
<CAPTION>
VOTES VOTES
DIRECTOR FOR WITHHELD
-------- --------- --------
<S> <C> <C>
Charles E. Arner....................... 3,083,339 197,133
Ellen S. Berscheid..................... 3,090,748 189,724
Ralph D. Ebbott........................ 3,085,028 195,444
Frederick P. Feuerherm................. 3,091,123 189,349
William N. Westhoff.................... 3,088,419 192,053
</TABLE>
(2) To approve the elimination or modification of the following investment
policies for:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C> <C>
A. Modify policy regarding borrowing and the
issuance of senior securities................... 2,670,477 48,793 229,974
B. Modify policy regarding concentration in a
particular industry............................. 2,673,131 49,927 226,186
C. Modify policy regarding investments in real
estate and commodities.......................... 2,683,800 43,824 221,620
D. Modify policy regarding lending.................. 2,680,582 45,897 222,765
E. Eliminate policy restricting the pledging of
assets.......................................... 2,666,514 58,781 223,949
F. Eliminate policy restricting margin purchases and
short sales..................................... 2,659,727 65,385 224,132
G. Eliminate policy prohibiting participation in a
joint trading account........................... 2,671,529 54,586 223,129
H. Eliminate policy limiting options transactions... 2,674,594 51,488 223,162
I. Eliminate policy limiting investment in
restricted securities and other illiquid
assets.......................................... 2,674,101 51,289 223,854
J. Eliminate diversification policy................. 2,665,435 60,573 223,236
K. Eliminate policy regarding investments in issuers
that have been in operation for less than 3
years........................................... 2,679,135 44,951 225,158
L. Eliminate policy addressing potential conflicts
of interest..................................... 2,651,515 74,738 222,990
M. Eliminate policy prohibiting investing in
companies for control........................... 2,675,481 47,140 226,623
N. Eliminate policy restricting investments in other
investment companies............................ 2,673,741 56,142 219,361
</TABLE>
(3) To approve an amendment to the investment advisory agreement between the
Fund and Advantus Capital Management, Inc., as described in the proxy
statement
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
2,698,832 36,361 214,051
</TABLE>
(4) To ratify the selection of KPMG LLP as independent public accountants for
the Fund
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
3,031,865 29,149 219,459
</TABLE>
24
<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
25
<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 7:30
a.m. to 5:15 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.
INTERNET ADDRESS: www.AdvantusFunds.com
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) or visit
www.AdvantusFunds.com.
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.,
Advantus Enterprise Fund, Inc., and Advantus Venture Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., Credit Suisse Asset Management,
LLC, and State Street Research & Management Company, respectively, selects the
Fund's investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing $3.2
billion in assets in addition to $11.5 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 14 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
26
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
<PAGE>
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
FORWARDING SERVICE REQUESTED
F.48639 Rev. 11-2000
