<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS BOND FUND
SEPTEMBER 30, 1998
<PAGE>
ADVANTUS BOND FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND
LIABILITIES 10
STATEMENT OF OPERATIONS 11
STATEMENTS OF CHANGES IN
NET ASSETS 12
NOTES TO FINANCIAL
STATEMENTS 13
INDEPENDENT AUDITORS'
REPORT 18
FEDERAL INCOME TAX
INFORMATION 19
SHAREHOLDER SERVICES 21
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
Economic prosperity and record-setting U.S. markets over the last few years have
lulled many Americans into dreaming of perpetual gain. In this year, the effects
of global economic turmoil and market volatility have awakened us.
The global economy has been exposed to the negative effects of Asia's economic
debacle for over a year, and this negative growth is highly contagious. About 40
percent of the world's economies are in recession. Japan continues to seek the
financial stimulus necessary to recover. In Russia, a backlash against
capitalism continues to unfold. Also, Latin America, Brazil in particular, has
seen its competitive position deteriorate sharply. We anticipate that world
growth will slow to an annual rate of 1 percent by the end of 1998. This is a
dramatic change from one year ago (down 3 percent).
As expected, the U.S. economy is slowing. The growth forecast for our country at
the end of this reporting period (September 30, 1998) was 1.5 to 2 percent, a
drop from the 3 percent experienced a year ago. Current economic conditions
favor bonds, as yields will likely decline in light of slowing economic
conditions. Deflation fears have sustained a global "flight to quality" as
investors dumped the riskier assets of developing countries and sought the
relative safety of high quality bonds in the major countries.
We anticipate that there will be a continuation of tight fiscal policy. However,
monetary policy will change. We expect interest rates to move lower in the
upcoming quarters, as we believe it is likely that the Federal Reserve Board
will aggressively lower the Fed Funds rate to inject liquidity into a globally
stressed financial system.
The yield curve should steepen, with short-term interest rates declining further
than long-term interest rates. We expect the corporate bond sector will
stabilize and spreads will recover as the Fed acts to provide liquidity.
Many stocks have declined significantly in response to reduced earnings
expectations, and many stocks are now attractively valued. Interest rates have
declined, which improves the relative value of stocks. However, we expect that
stocks may remain volatile for the near term.
We have witnessed a significantly higher level of volatility in the U.S. stock
markets as most indices and stock funds came under pressure. The flight to
quality in all kinds of securities was reinforced and magnified by more visible
risks in a number of sectors.
A declining equity market hurt corporate bonds as investors began worrying about
the likelihood of lower earnings. Companies with international exposure became a
concern. Liquidity in the corporate bond market began to evaporate, as traders
became reluctant to bid on corporate bonds. These factors pushed corporate bond
spreads even wider, causing them to underperform U.S. Treasury securities.
In the pages that follow, the Fund's manager will give you information about how
the economy and conditions within the market affected the Fund during this
reporting period. The manager will specifically discuss your Advantus Fund's
performance and share some strategies that were used to manage the Fund.
Meanwhile, continue investing for the long term. We believe that you will derive
the greatest benefit by doing so. Be thoughtful about the diversification of
your portfolio, and maintain a high quality portfolio. Consider putting a
periodic investment program in place. It will help you weather volatility in the
markets.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<PAGE>
ADVANTUS BOND FUND
PERFORMANCE UPDATE
[WAYNE SCHMIDT PHOTO]
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
The Advantus Bond Fund is a mutual fund
designed for investors seeking a high
level of current income consistent with
prudent investment risk. The Fund plans
to achieve its objective primarily by
investing in a diversified portfolio of
investment grade short, intermediate and
long-term debt securities. The Fund
manager varies the proportion of assets
invested in each maturity category
depending upon the evaluation of market
patterns and economic trends by the
Fund's investment adviser.
-Dividends declared daily and paid monthly.
-Capital gains distributions paid annually.
PERFORMANCE
The Advantus Bond Fund's performance for the year ended September 30, 1998, for
each class of shares offered was as follows:
<TABLE>
<S> <C>
Class A.......................... 8.75 percent*
Class B.......................... 8.09 percent*
Class C.......................... 7.89 percent*
</TABLE>
Its benchmark, the Lehman Brothers Government Corporate Bond Index,** returned
12.84 percent, and the Lehman Brothers Corporate Bond Index+ returned 11.07
percent for the same period.
In prior reporting periods, the Lehman Brothers Corporate Bond Index+ was used
as the Fund's benchmark. The Lehman Brothers Government Corporate Bond Index**
better fits our stated investment objective than did the Lehman Brothers
Corporate Bond Index.+
PERFORMANCE ANALYSIS
The collapse of interest rates around the world and in the U.S. has amazed fixed
income investors. The speed and size of the move surprised even the most bullish
forecasters. Yields on the 30-year U.S. Treasury Bond declined nearly 1.5
percent (143 basis points) to its first sub-5 percent level, 4.97 percent for
the year end. Yields on intermediate maturities declined even further, falling
over 175 basis points to the low 4 percent area over the same period.
The rally in bond prices was fueled by a variety of factors. Financial problems
are abundant around the globe; Russia, Latin America, Japan, Asia, and Europe
are all struggling with recession, slower economic growth, weak currencies,
problem loans, and broad banking problems, thus creating a tremendous
flight-to-quality. Globally, everyone wanted the safety of the U.S. Treasury
market. Layer on top of this, a weak equity market, unraveling hedge funds, a
25-basis point cut in the Fed Funds rate by the Federal Reserve (and an
additional 25-basis point cut two weeks after the first adjustment), signs of
slower U.S. economic growth, and a budget surplus, and you have a recipe for
lower interest rates.
While U.S. Treasury securities were appreciating in value with every move lower
in interest rates, corporate bonds and mortgage-backed securities were having
their worst relative performance period in over a decade. In the corporate bond
market, credit spreads were widening as fast as interest rates were falling.
Concern over credit exposure spread like wildfire. It began with the banking and
brokerage sectors as worries over loans to Russia and hedge funds caused the
spread gap to widen. A declining equity market hurt corporate bonds as investors
began worrying about the likelihood of lower earnings. Companies with
international exposure became a concern. Liquidity in the corporate bond market
began to evaporate as traders became
2
<PAGE>
ADVANTUS BOND FUND
SEPTEMBER 30, 1998
reluctant to bid corporate bonds. All of these factors pushed corporate bond
spreads wider, causing them to significantly underperform U.S. Treasury
securities.
Bond fund performance is derived from three main factors: duration (a measure of
interest rate risk), sector allocation (governments, corporate bonds, or
mortgage-backed securities), and security selection. During the period we kept
the portfolio duration slightly longer than the index benchmark duration. This
decision helped returns as interest rates moved lower during the period. The
decision to maintain the over exposure to corporate bonds was the key to our
underperformance for the period. During the summer months, U.S. Treasuries were
added, at the expense of corporate bonds, but it was not enough to offset the
ultimate widening of corporate spreads. Our fundamental belief that corporate
bonds will outperform over the longer term is still intact, although soundly
disproved at the end of the reporting period. In addition to the entire
corporate sector being hit hard, spread widening on specific issues also
negatively impacted performance. Fund positions in the Real Estate Investment
Trust (REIT) sector (Prologis Trust, Nationwide Health Property, Inc., Duke
Realty Investments, Inc.) widened significantly, along with Morgan Stanley Dean
Witter in the brokerage area, and Guangdong Enterprises and Enersis in the
emerging market arena.
OUTLOOK
From a duration standpoint, we will maintain our above market duration which
supports Advantus' view that interest rates will continue to move lower over the
next six to nine months. Corporate bonds will continue to represent a main focus
in the Fund. Emphasis going forward will be on higher rated issuers (A-rated or
better). Their spreads have gapped wider and will likely be the first to rebound
when market order returns. We will look to take advantage of market extremes.
We anticipate that interest rates will move lower in the upcoming quarters, but
not at the speed or magnitude of the recent period. The Federal Reserve will
likely aggressively lower the Fed Funds rate to inject liquidity into a globally
stressed financial system. The U.S. economy will likely begin to show much
slower growth in the upcoming quarters providing the Fed with the latitude to
decrease the Fed Funds rate even more. The yield curve should steepen, with
short-term interest rates declining further than long-term interest rates. The
corporate bond sector will likely stabilize and spreads will recover as the Fed
acts to provide liquidity.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5 percent
front-end sales charge or Class B's maximum 5 percent contingent deferred sales
charge.
**The Lehman Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and The Lehman Brothers
Corporate Bond Index which includes all publicly issued fixed rate,
nonconvertible domestic corporate debt.
+The Lehman Brothers Corporate Bond Index includes all publicly issued, fixed
rate, nonconvertible investment grade dollar-denominated, SEC registered
corporate debt.
3
<PAGE>
ADVANTUS BOND FUND
SEPTEMBER 30, 1998
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS
BOND FUND, LEHMAN BROTHERS CORPORATE BOND INDEX, LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND 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 Bond Fund compared to the Lehman Brothers
Corporate Bond Index, Lehman Brothers Government Corporate Bond Index, and the
Consumer Price Index. The four lines in the Class A graph represent the
cumulative total return of a hypothetical $10,000 investment made on September
30, 1988 through September 30, 1998. The four lines in the Class B and Class C
graphs represent the cumulative total return of a hypothetical $10,000
investment made on the inception date of Class B and Class C shares of the
Advantus Bond Fund (August 19, 1994 and March 1, 1995 for Class B and C,
respectively) through September 30, 1998.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN:
One year 3.31%
Five year 5.12%
Ten year 8.04%
Lehman Brothers Lehman Brothers
Corporate Bond Government
Class A Index CPI Corporate Index
9/30/88 $10,000 $10,000 $10,000 $10,000
10/31/88 $9,622 $10,175 $10,292 $10,177
10/31/89 $10,666 $11,438 $10,763 $11,413
10/31/90 $11,142 $11,926 $11,441 $12,041
10/31/91 $12,774 $14,028 $11,775 $13,891
10/31/92 $14,146 $15,586 $12,153 $15,355
10/31/93 $16,133 $17,951 $12,479 $17,487
9/30/94 $15,056 $17,062 $12,856 $16,698
9/30/95 $17,323 $19,961 $13,139 $18,810
9/30/96 $18,020 $20,908 $13,533 $19,656
9/30/97 $19,925 $23,174 $13,834 $21,543
9/30/98 $21,668 $25,740 $14,031 $25,970
</TABLE>
4
<PAGE>
ADVANTUS BOND FUND
SEPTEMBER 30, 1998
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN:
One year 3.09%
Since inception (8/19/94) 7.77%
Lehman Brothers Lehman Brothers
Corporate Bond Government
Class B Index CPI Corporate Index
8/19/94 $10,000 $10,000 $10,000 $10,000
9/30/94 $9,876 $9,819 $10,067 $9,853
9/30/95 $10,801 $11,488 $10,289 $11,099
9/30/96 $11,252 $12,033 $10,598 $11,599
9/30/97 $12,480 $13,337 $10,833 $12,712
9/30/98 $13,610 $14,814 $10,987 $14,228
</TABLE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN:
One year 7.89%
Since inception (3/1/95) 8.33%
Lehman Brothers Lehman Brothers
Corporate Bond Government
Class C Index CPI Corporate Index
3/01/95 $10,000 $10,000 $10,000 $10,000
9/30/95 $10,925 $11,087 $10,146 $10,939
9/30/96 $11,265 $11,613 $10,450 $11,431
9/30/97 $12,348 $12,872 $10,682 $12,529
9/30/98 $13,324 $14,297 $10,834 $14,023
</TABLE>
The preceding charts are useful because they provide you with more information
about your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum applicable
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial professional's investment advice. Individuals cannot buy even an
unmanaged index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS BOND FUND
SEPTEMBER 30, 1998
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------ ----------- -----------
<S> <C> <C>
US Treasury Note--6.625%, 03/31/02.......................... $ 2,786,875 10.5%
US Treasury Note--6.375%, 09/30/01.......................... 2,425,782 9.1%
US Treasury Note--6.000%, 02/15/26.......................... 2,350,032 8.8%
US Treasury Note--4.966%, 05/15/06.......................... 1,522,415 5.7%
FNMA--6.140%, 03/24/03...................................... 1,019,550 3.8%
Ontario Province--5.500%, 10/01/08.......................... 1,018,010 3.8%
GNMA--6.500%, 09/15/28...................................... 1,011,631 3.8%
PNC Bank Corporation--6.728%, 01/25/07...................... 954,000 3.6%
Morgan Stanley Dean Witter--6.875%, 03/01/07................ 944,137 3.5%
Time Warner, Inc.--6.950%, 01/15/28......................... 833,312 3.1%
----------- ---
$14,865,744 55.7%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities (5.0%)
U.S. Treasury (31.7%)
U.S. Government Agencies (11.5%)
AAA rated (7.1%)
AA rated (6.7%)
A rated (13.8%)
BBB rated (13.6%)
BB rated (3.4%)
Preferred Stock (7.2%)
</TABLE>
6
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (87.8%)
GOVERMENT OBLIGATIONS (49.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (43.2%)
U.S. Treasury (31.7%)
$2,150,000 US Treasury Note (c)............................. 4.966% 05/15/06 $ 1,522,415
550,000 US Treasury Note................................. 5.500% 02/29/00 557,219
2,100,000 US Treasury Note................................. 6.000% 02/15/26 2,350,032
2,300,000 US Treasury Note................................. 6.375% 09/30/01 2,425,782
2,600,000 US Treasury Note................................. 6.625% 03/31/02 2,786,875
-----------
9,642,323
-----------
Federal National Mortgage Association (FNMA) (6.9%)
750,000 ................................................. 5.625% 02/02/06 790,562
1,000,000 ................................................. 6.140% 03/24/03 1,019,550
288,070 ................................................. 7.000% 09/01/17 295,447
-----------
2,105,559
-----------
Government National Mortgage Association (GNMA) (4.6%)
990,000 ................................................. 6.500% 09/15/28 1,011,631
182,638 ................................................. 7.000% 04/15/22 189,240
178,717 ................................................. 7.000% 03/15/23 184,933
-----------
1,385,804
-----------
OTHER GOVERNMENT OBLIGATIONS (3.3%)
1,000,000 Ontario Province (b)............................. 5.500% 10/01/08 1,018,010
STATE AND LOCAL GOVERNMENT OBLIGATIONS (2.9%)
400,000 California Housing Finance Agency................ 7.760% 08/01/25 420,500
245,000 California Housing Finance Agency................ 8.160% 02/01/28 257,556
199,500 Wyoming Community Development.................... 6.850% 06/01/10 199,126
-----------
877,182
-----------
Total goverment obligations (cost: $14,559,950)..................... 15,028,878
-----------
CORPORATE OBLIGATIONS (38.4%)
BASIC MATERIALS (1.7%)
Paper and Forest (1.7%)
500,000 International Paper Company...................... 6.875% 07/10/00 512,283
-----------
CAPITAL GOODS (1.7%)
Aerospace/Defense (1.7%)
500,000 Raytheon Company................................. 6.450% 08/15/02 521,901
-----------
COMMUNICATION SERVICES (2.6%)
Telephone (2.6%)
750,000 Cable and Wireless Communication (b)............. 6.625% 03/06/05 775,080
-----------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
CONSUMER CYCLICAL (1.5%)
Building Materials (1.5%)
$ 450,000 Masco Corporation................................ 6.125% 09/15/03 $ 463,500
-----------
CONSUMER STAPLES (7.2%)
Beverage (1.8%)
500,000 Anheuser-Busch Companies, Inc.................... 7.100% 06/15/07 545,789
-----------
Entertainment (2.7%)
800,000 Time Warner, Inc................................. 6.950% 01/15/28 833,312
-----------
Household Products (2.7%)
750,000 Premark International, Inc....................... 10.500% 09/15/00 821,325
-----------
FINANCIAL (21.6%)
Banks (2.2%)
700,000 St. George Bank-144A Issue (b)(d)................ 8.485% 12/31/49 658,840
-----------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (4.1%)
300,000 CFSB Finance Company-144A Issue (d).............. 7.180% 11/15/05 294,000
900,000 PNC Bank Corporation............................. 6.728% 01/25/07 954,000
-----------
1,248,000
-----------
Consumer Finance (2.7%)
800,000 Associates Corporation of North America.......... 6.625% 05/15/01 826,856
-----------
Finance-Diversified (2.7%)
500,000 Guangdong Enterprises-144A Issue (b)(d).......... 8.875% 05/22/07 269,815
525,000 National Collegiate.............................. 7.240% 09/20/14 542,063
-----------
811,878
-----------
Investment Bankers/Brokers (3.1%)
900,000 Morgan Stanley Dean Witter....................... 6.875% 03/01/07 944,137
-----------
Real Estate Investment Trust (4.3%)
850,000 Bradley Operating LP............................. 7.000% 11/15/04 804,780
500,000 Security Capital Pacific Trust................... 7.500% 02/15/14 511,377
-----------
1,316,157
-----------
Savings and Loans (2.5%)
700,000 Bank United Corporation.......................... 8.875% 05/01/07 741,552
-----------
UTILITIES (2.1%)
Electric Companies (2.1%)
750,000 Enersis S.A. (b)................................. 6.900% 12/01/06 638,400
-----------
Total corporate obligations (cost: $11,816,492)..................... 11,659,010
-----------
Total long-term debt securities (cost: $26,376,442)................. 26,687,888
-----------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ---------- -----------
<C> <S> <C>
PREFERRED STOCK (7.2%)
FINANCIAL (7.2%)
Real Estate Investment Trust (7.2%)
16,000 Duke Realty Investments, Inc.--7.99%............. $ 823,000
8,000 Nationwide Health Property, Inc.--7.68%.......... 875,500
10,000 Prologis Trust--8.54%............................ 497,500
-----------
Total preferred stock (cost: $2,091,552)......... 2,196,000
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.6%)
$ 285,000 US Treasury Bill................................. 4.300% 12/10/98 282,689
1,432,679 Federated Prime Obligation Fund, current rate 5.470%................ 1,432,679
-----------
Total short-term securities (cost: $1,715,348)...................... 1,715,368
-----------
Total investments in securities (cost: $30,183,342)(e).............. $30,599,256
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 11.0% of the net assets in foreign securities as of September
30, 1998.
(c) For zero coupon issues, the interest rate disclosed is the effective yield
at the date of acquisition.
(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, 1998, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
St. George Bank 144A Issue............. 06/12/97 $ 700,000
CFSB Finance Company 144A Issue........ 05/15/96 291,938
Guangdong Enterprises 144A Issue....... 08/06/97 516,090
-----------
$ 1,508,028
-----------
-----------
</TABLE>
(e) At September 30, 1998 the cost of securities for federal income tax purposes
was $30,198,248. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $872,535
Gross unrealized depreciation.......... (471,527)
--------
Net unrealized appreciation............ $401,008
--------
--------
</TABLE>
9
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing
(identified cost: $30,183,342)........ $30,599,256
Cash in bank on demand deposit......... 201,453
Receivable for Fund shares sold........ 403,889
Receivable for investment securities
sold.................................. 111,391
Accrued interest receivable............ 246,830
-----------
Total assets....................... 31,562,819
-----------
LIABILITIES
Payable for investment securities
purchased............................. 994,077
Payable for Fund shares redeemed....... 95,239
Dividends payable to shareholders...... 30,661
Payable to Adviser..................... 33,866
Other payables......................... 7,825
-----------
Total liabilities.................. 1,161,668
-----------
Net assets applicable to outstanding
capital stock......................... $30,401,151
-----------
-----------
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)...................... $ 28,432
Additional paid-in capital........... 29,423,921
Accumulated net realized gains from
investments......................... 532,884
Unrealized appreciation on
investments......................... 415,914
-----------
Total--representing net assets
applicable to outstanding capital
stock............................. $30,401,151
-----------
-----------
Net assets applicable to outstanding
Class A shares........................ $19,418,599
-----------
-----------
Net assets applicable to outstanding
Class B shares........................ $ 8,893,909
-----------
-----------
Net assets applicable to outstanding
Class C shares........................ $ 2,088,643
-----------
-----------
Shares outstanding and net asset value
per share:
Class A--Shares outstanding
1,817,179........................... $ 10.69
-----------
-----------
Class B--Shares outstanding
830,378............................. $ 10.71
-----------
-----------
Class C--Shares outstanding
195,621............................. $ 10.68
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Investment income:
Interest............................. $1,613,351
Dividends............................ 168,377
----------
Total investment income.......... 1,781,728
----------
Expenses (note 4):
Investment advisory fee.............. 187,219
Distribution fees--Class A........... 54,651
Distribution fees--Class B........... 72,435
Distribution fees--Class C........... 12,852
Administrative services fee.......... 44,000
Custodian fees....................... 6,605
Auditing and accounting services..... 13,679
Legal fees........................... 6,226
Directors' fees...................... 684
Registration fees.................... 40,263
Printing and shareholder reports..... 33,643
Insurance............................ 4,665
Other................................ 4,968
----------
Total expenses................... 481,890
Less fees and expenses waived or
absorbed:
Class A distribution fees............ (17,850)
Other fund expenses.................. (101,242)
----------
Total fees and expenses waived or
absorbed......................... (119,092)
----------
Total net expenses............... 362,798
----------
Investment income--net........... 1,418,930
----------
Realized and unrealized gains on
investments:
Net realized gains on investments
(note 3)............................ 799,672
Net change in unrealized appreciation
or depreciation on investments...... (28,746)
----------
Net gains on investments......... 770,926
----------
Net increase in net assets resulting
from operations....................... $2,189,856
----------
----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Operations:
Investment income--net............... $ 1,418,930 $ 1,314,895
Net realized gain on investments..... 799,672 239,770
Net change in unrealized appreciation
or depreciation on investments...... (28,746) 630,935
----------- -----------
Increase in net assets resulting
from operations................. 2,189,856 2,185,600
----------- -----------
Distributions to shareholders from:
Net investment income:
Class A............................ (1,025,790) (1,017,311)
Class B............................ (347,737) (251,336)
Class C............................ (61,204) (43,228)
Net realized gains on investments:
Class A............................ (56,664) --
Class B............................ (26,049) --
Class C............................ (5,418) --
----------- -----------
Total distributions.............. (1,522,862) (1,311,875)
----------- -----------
Capital share transactions (notes 4 and
5):
Proceeds from sales:
Class A............................ 5,944,709 3,674,438
Class B............................ 4,427,845 3,408,787
Class C............................ 2,010,526 541,433
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 744,235 648,833
Class B............................ 301,278 216,906
Class C............................ 62,923 38,398
Payments for redemption of shares:
Class A............................ (4,846,234) (4,367,419)
Class B............................ (2,279,688) (1,099,162)
Class C............................ (915,696) (375,711)
----------- -----------
Increase in net assets from
capital share transactions...... 5,449,898 2,686,503
----------- -----------
Total increase in net assets..... 6,116,892 3,560,228
Net assets at beginning of year........ 24,284,259 20,724,031
----------- -----------
Net assets at end of year (including
undistributed net investment income of
$0 and $15,801, respectively)........ $30,401,151 $24,284,259
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(1) ORGANIZATION
The Advantus Bond Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. The Fund's investment objective is to seek a high level of
current income consistent with prudent investment risk.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C 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 distribution fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than distribution fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Interest income, including amortization of bond premium
and discount computed on a level yield basis, is accrued daily.
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.
13
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly in
cash or reinvested in additional shares. Realized gains, if any, are paid
annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1998, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $65,623,540 and $61,126,229, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital or the Adviser), a wholly owned subsidiary of
Minnesota Life Insurance Company (Minnesota Life), formerly known as The
Minnesota Mutual Life Insurance Company. 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, Minnesota Life.
Effective October 26, 1998, the Fund's transfer agent is First Data Investor
Services Group, Inc. The fee for investment management and advisory services is
based on the average daily net assets of the Fund at the annual rate of .70
percent.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to Ascend Financial Services,
Inc. (Ascend), 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 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 fees are comprised of a .75 percent distribution fee
and a .25 percent service fee. Ascend is currently waiving that portion of Class
A distribution fees which exceeds, as a percentage of average daily net assets,
.25 percent. Prior to January 30, 1998, Ascend waived that portion of Class A
distribution fees which exceeded, as a percentage of average daily net assets,
.10 percent. Ascend waived Class A distribution fees in the amount of $17,850
for the year ended September 30, 1998.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
The Fund pays an administrative services fee, equal to $3,700 per month, to
Minnesota Life for accounting, auditing, legal and other administrative services
which Minnesota Life provides. Prior to February 1, 1998, the administrative
services fee was $3,600 per month. Effective October 26, 1998, Minnesota
14
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Life became the shareholder services agent for the Fund. Under the new
shareholder and administrative services agreement, the administrative services
fee remains unchanged, and 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. During the year ended September
30, 1998, Advantus Capital voluntarily agreed to absorb $101,242 in expenses
that were otherwise payable by the Fund.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $166,299.
As of September 30, 1998, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 384,255 Class A shares which
represents 21.1 percent of the total outstanding Class A shares.
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $6,202.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- ---------------------- --------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold........................................... 562,965 359,147 414,545 335,052 189,746 53,035
Issued for reinvested distributions............ 70,186 63,405 29,523 21,179 6,059 3,757
Redeemed....................................... (457,997) (428,519) (214,474) (107,760) (86,469) (36,827)
---------- ---------- ---------- ---------- --------- ---------
175,154 (5,967) 229,594 248,471 109,336 19,965
---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At September 30, 1998, investments in securities includes issues which
generally cannot be offered for sale to the public without first being
registered under the Securities Act of 1933 (restricted 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 percent 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, 1998 was $1,222,655 which represents 4.0 percent of net
assets.
(7) YEAR 2000 (UNAUDITED)
In 1995, Minnesota Life began addressing computer system requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Life
plans to spend approximately $14 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.
15
<PAGE>
ADVANTUS BOND 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
--------------------------------------------------------------------------------
PERIOD FROM
NOVEMBER 1,
YEAR ENDED SEPTEMBER 30, 1993 TO YEAR ENDED
------------------------------------------------ SEPTEMBER 30, OCTOBER 31,
1998 1997 1996 1995(a) 1994(b) 1993
------------ --------- --------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.43 $ 10.03 $ 10.24 $ 9.50 $ 11.21 $ 10.72
------------ --------- --------- --------- ------- ------------
Income from investment operations:
Net investment income................. .59 .63 .62 .64 .53 .63
Net gains or losses on securities
(both realized and unrealized)...... .30 .40 (.22) .74 (1.24) .78
------------ --------- --------- --------- ------- ------------
Total from investment operations.... .89 1.03 .40 1.38 (.71) 1.41
------------ --------- --------- --------- ------- ------------
Less distributions:
Dividends from net investment
income.............................. (.60) (.63) (.61) (.64) (.53) (.63)
Distributions from capital gains...... (.03) -- -- -- (.47) (.29)
------------ --------- --------- --------- ------- ------------
Total distributions................. (.63) (.63) (.61) (.64) (1.00) (.92)
------------ --------- --------- --------- ------- ------------
Net asset value, end of period.......... $ 10.69 $ 10.43 $ 10.03 $ 10.24 $ 9.50 $ 11.21
------------ --------- --------- --------- ------- ------------
------------ --------- --------- --------- ------- ------------
Total return (d)........................ 8.75% 10.57% 4.03% 15.05% (6.68)% 14.05%
Net assets, end of period (in
thousands)............................ $ 19,419 $ 17,122 $ 16,528 $ 15,315 $13,879 $14,494
Ratio of expenses to average daily net
assets (e)............................ 1.10% 1.00% 1.00% 1.00% 1.00%(f) 1.00%
Ratio of net investment income to
average daily net assets (e).......... 5.55% 6.18% 6.08% 6.58% 5.79%(f) 5.78%
Portfolio turnover rate (excluding
short-term securities)................ 237.2% 180.5% 222.6% 270.7% 163.5% 139.5%
</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) During 1994, the Fund changed its fiscal year end from October 31 to
September 30.
(c) Commencement of operations.
(d) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges. For periods less than one year, total return presented has not
been annualized.
16
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
PERIOD FROM
AUGUST 19,
YEAR ENDED SEPTEMBER 30, 1994(c) TO
----------------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
------------ --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.43 $ 10.02 $ 10.23 $ 9.50 $ 9.68
------ --------- --------- -------- ------
Income from investment operations:
Net investment income................. .51 .54 .53 .55 .06
Net gains or losses on securities
(both realized and unrealized)...... .31 .41 (.21) .73 (.18)
------ --------- --------- -------- ------
Total from investment operations.... .82 .95 .32 1.28 (.12)
------ --------- --------- -------- ------
Less distributions:
Dividends from net investment
income.............................. (.51) (.54) (.53) (.55) (.06)
Distributions from capital gains...... (.03) -- -- -- --
------ --------- --------- -------- ------
Total distributions................. (.54) (.54) (.53) (.55) (.06)
------ --------- --------- -------- ------
Net asset value, end of period.......... $ 10.71 $ 10.43 $ 10.02 $10.23 $ 9.50
------ --------- --------- -------- ------
------ --------- --------- -------- ------
Total return (d)........................ 8.09% 9.72% 3.13% 13.92% (1.24)%
Net assets, end of period (in
thousands)............................ $ 8,894 $ 6,263 $ 3,532 $1,142 $ 51
Ratio of expenses to average daily net
assets (e)............................ 1.90% 1.90% 1.90% 1.90% .22%(g)
Ratio of net investment income to
average daily net assets (e).......... 4.78% 5.32% 5.19% 5.61% .69%(g)
Portfolio turnover rate (excluding
short-term securities)................ 237.2% 180.5% 222.6% 270.7% 163.5%
<CAPTION>
CLASS C
---------------------------------------------------------------
PERIOD FROM
MARCH 1,
YEAR ENDED SEPTEMBER 30, 1995(c) TO
---------------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.42 $ 10.02 $ 10.23 $ 9.67
------ ------ ------ ------
Income from investment operations:
Net investment income................. .51 .54 .52 .33
Net gains or losses on securities
(both realized and unrealized)...... .29 .40 (.21) .55
------ ------ ------ ------
Total from investment operations.... .80 .94 .31 .88
------ ------ ------ ------
Less distributions:
Dividends from net investment
income.............................. (.51) (.54) (.52) (.32)
Distributions from capital gains...... (.03) -- -- --
------ ------ ------ ------
Total distributions................. (.54) (.54) (.52) (.32)
------ ------ ------ ------
Net asset value, end of period.......... $ 10.68 $ 10.42 $ 10.02 $10.23
------ ------ ------ ------
------ ------ ------ ------
Total return (d)........................ 7.89% 9.61% 3.11% 9.26%
Net assets, end of period (in
thousands)............................ $ 2,089 $ 899 $ 665 $ 112
Ratio of expenses to average daily net
assets (e)............................ 1.90% 1.90% 1.90% 1.90%(f)
Ratio of net investment income to
average daily net assets (e).......... 4.81% 5.30% 5.20% 5.54%(f)
Portfolio turnover rate (excluding
short-term securities)................ 237.2% 180.5% 222.6% 270.7%
</TABLE>
- -------------
(e) The Fund's Adviser and Distributor voluntarily absorbed or waived $119,092,
$129,031, $120,750, $129,155, $107,448 and $86,877 in expenses for the
years ended September 30, 1998, 1997, 1996 and 1995, the period ended
September 30, 1994 and the year ended October 31, 1993, respectively. If
Class A shares had been charged for these expenses, the ratio of expenses
to average daily net assets would have been 1.58%, 1.64%,1.68%, 1.88%,
1.83% and 1.70% , respectively, and the ratio of net investment income to
average daily net assets would have been 5.07%, 5.54%, 5.40%, 5.70%, 4.95%
and 5.08%, respectively. If Class B shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
2.28%, 2.34%, 2.38%, 2.56% and .35%, respectively, and the ratio of net
investment income to average daily net assets would have been 4.40%, 4.88%,
4.71%, 4.95% and .56%, respectively, for the years ended September 30,
1998, 1997, 1996 and 1995 and the period ended September 30, 1994. If Class
C shares had been charged for these expenses, the ratio of expenses to
average daily net assets would have been 2.28%, 2.34%, 2.38% and 2.56%,
respectively, and the ratio of net investment income to average daily net
assets would have been 4.43%, 4.86%, 4.72% and 4.88%, respectively, for the
years ended September 30, 1998, 1997 and 1996 and the period ended
September 30, 1995.
(f) Adjusted to an annual basis.
(g) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Bond Fund,
Inc. (the Fund) as of September 30, 1998 and the related statement of operations
for the year then ended, the statement of changes in net assets for the two
years then ended and the financial highlights for the four years then ended, the
period from November 1, 1993 to September 30, 1994 and for the year ended
October 31, 1993. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1998 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 6, 1998
18
<PAGE>
ADVANTUS BOND FUND
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal year ended September 30, 1998. Dividends for the 1998 calendar year will
be reported to you on Form 1099-Div in late January 1999. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distributions--taxable as dividend income, 9.2% qualifying for deduction by corporations
October 31, 1997............................................................................................ $ .0512
November 30, 1997........................................................................................... .0481
December 31, 1997........................................................................................... .0682
January 31, 1998............................................................................................ .0449
February 28, 1998........................................................................................... .0458
March 31, 1998.............................................................................................. .0552
April 30, 1998.............................................................................................. .0419
May 31, 1998................................................................................................ .0541
June 30, 1998............................................................................................... .0646
July 31, 1998............................................................................................... .0417
August 31, 1998............................................................................................. .0449
September 30, 1998.......................................................................................... .0672
---------
$ .6278
---------
---------
</TABLE>
The distribution of $.0672 payable on September 30, 1998 consisted of $.0315
from short-term capital gains (taxable as dividend income) and $.0357 from net
investment income.
CLASS B
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distributions--taxable as dividend income, 9.2% qualifying for deduction by corporations
October 31, 1997............................................................................................ $ .0432
November 30, 1997........................................................................................... .0403
December 31, 1997........................................................................................... .0607
January 31, 1998............................................................................................ .0369
February 28, 1998........................................................................................... .0397
March 31, 1998.............................................................................................. .0485
April 30, 1998.............................................................................................. .0353
May 31, 1998................................................................................................ .0474
June 30, 1998............................................................................................... .0580
July 31, 1998............................................................................................... .0350
August 31, 1998............................................................................................. .0382
September 30, 1998.......................................................................................... .0608
---------
$ .5440
---------
---------
</TABLE>
The distribution of $.0608 payable on September 30, 1998 consisted of $.0315
from short-term capital gains (taxable as dividend income) and $.0293 from net
investment income.
19
<PAGE>
ADVANTUS BOND FUND
FEDERAL INCOME TAX INFORMATION--CONTINUED
CLASS C
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distributions--taxable as dividend income, 9.2% qualifying for deduction by corporations
October 31, 1997............................................................................................ $ .0431
November 30, 1997........................................................................................... .0403
December 31, 1997........................................................................................... .0606
January 31, 1998............................................................................................ .0369
February 28, 1998........................................................................................... .0397
March 31, 1998.............................................................................................. .0485
April 30, 1998.............................................................................................. .0353
May 31, 1998................................................................................................ .0473
June 30, 1998............................................................................................... .0580
July 31, 1998............................................................................................... .0349
August 31, 1998............................................................................................. .0381
September 30, 1998.......................................................................................... .0606
---------
$ .5433
---------
---------
</TABLE>
The distribution of $.0606 payable on September 30, 1998 consisted of $.0315
from short-term capital gains (taxable as dividend income) and $.0291 from net
investment income.
20
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make 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 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 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 from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) to diversify your investment portfolio and take advantage of
dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge, if any.
SPECIAL PURCHASE PLANS: Special purchase plans enable you to open an Advantus
Fund account for as little as $25 and lower your average share cost through
"dollar-cost averaging." (Dollar-cost averaging does not assure a profit, nor
does it prevent loss in declining markets). The Automatic Investment Plan allows
you to invest automatically each month from your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k), Money Purchase or
Defined Benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account or wire
transferred to your bank of record for the account. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Redemption privilege will automatically be established
unless otherwise indicated on the
21
<PAGE>
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 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 transaction 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 ten 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 the Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management. (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
$2.6 billion in assets in addition to $11.1 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
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THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS-TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-888-AFS-1838
(1-888-237-1838)
<PAGE>
ASCEND FINANCIAL SERVICES, INC. BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
F.48645 Rev 11-1998
