<PAGE>
BOND
ADVANTUS BOND FUND, INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED MARCH 31, 1999
[LOGO]
ADVANTUS-TM-
FAMILY OF FUNDS
FIXED
INCOME
[ART]
<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
SHAREHOLDER SERVICES 18
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
U.S. economic expansion, in its longevity and in vigor, is the envy of the rest
of the world. While growth in Europe and the United Kingdom is falling, we are
finally seeing some small improvements in Asia's economic angst; it also appears
that Japan's economic free fall has stopped. However, a working plan for a
sustainable recovery in Japan is still forthcoming. As you can see, growth
patterns around the globe are mixed, but overall, world growth is forecasted to
decline by about one percent over the course of 1999. (World growth is
forecasted to be two percent in 1999.)
In this six-month reporting period, U.S. Gross Domestic Product (GDP) in the
fourth quarter 1998 was 6.0 percent. This phenomenal result was fueled by strong
consumer demand and spending. GDP figures for the first quarter 1999 are
estimated at a respectable 4 percent. This economic growth was very broad based,
despite some export difficulties. Above-trend growth is expected for the
remainder of the year.
Will inflation spoil the party? It's unlikely. Weak commodity prices coupled
with excess global capital and labor has created an inflation-benign
environment. The inflation outlook in the U.S. continues to be positive, as
well.
The strong momentum in top-tier large cap growth stocks continues to drive the
equity market. Some trends have continued, such as large cap stocks
outperforming small caps and growth stocks outperforming value stocks. The
breadth of leadership of the equity market has continued to narrow, with only
26.3 percent of the issues in the S&P 500* able to outperform their index over
the last twelve months. The average equity mutual fund has lagged the market
unless it has been overweighted in growth and technology investments. Valuations
in the marketplace continue to be high, particularly in the large cap growth
weighted indices.
Stronger economic growth increased investors' comfort with corporate bonds and
thus the spread to Treasury bonds narrowed. In the fixed-income market,
mortgage-backed securities were the star performers this period, followed by
corporate bonds, and then Treasuries.
The economic and market outlook for the U.S. remains strong. Looking ahead, we
are cautiously optimistic for stock and bond prices, but valuations for
large-cap growth issues are high. Economic growth is forecasted, albeit slower
than in the past. With much of the world still in recession, commodity prices
low, and rapid increases in technology and productivity, high inflation is
unlikely. The Federal Reserve and other central banks stand ready to intervene
if necessary. We are watchful of Y2K issues. Certain countries that are mired in
prolonged recessions lack the money to solve these technology-related problems.
We are - along with the rest of the world - watching the political strife in the
Balkans. The military action in Kosovo has commanded world attention. Escalation
will prove costly in money and human resources.
In the pages that follow, the Fund's manager will update you on how the economy
and the market affected the Fund during this reporting period. The manager will
discuss the Fund's performance and some strategies used to maximize performance.
As always, we thank you for investing with Advantus. We encourage you to
maintain a long-range view of investing; we believe you will derive the greatest
benefit by doing so.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
<PAGE>
ADVANTUS BOND FUND
PERFORMANCE UPDATE
[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 six-month period ended March 31,
1999, for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.......................... -1.90 PERCENT*
CLASS B.......................... -2.35 PERCENT*
CLASS C.......................... -2.36 PERCENT*
</TABLE>
The Fund's benchmark, the Lehman Brothers Government/Corporate Bond Index,**
returned .11 percent for the same period.
PERFORMANCE ANALYSIS
The six-month period discussed in this report was a volatile time for the
fixed-income market. As the period began, investor sentiment--based on global
recession, low interest rates around the world and a fear of a bear market in
stocks--heavily favored the safety of the U.S. Treasury market. Liquidity in
corporate bonds and mortgage-backed securities all but disappeared as buyers and
market makers turned away from these asset classes. As the period unfolded, the
Federal Reserve cut key short-term interest rates aggressively, and investor
sentiment turned. The fears that haunted the marketplace subsided, and spreads
on corporate bonds and mortgage-backed securities began to tighten as liquidity
returned to these markets.
Interest rates climbed higher as fixed income investors struggled with strong
economic growth, higher oil prices, and a Federal Reserve that questioned the
appropriateness of its last interest rate cut. While the Fed did not tighten its
monetary policy, investors began to entertain the notion that the Fed's next
move would be to raise interest rates. In Japan, early signs of a potential
recovery caused Japanese investors to leave the U.S. bond market and reinvest
back in their home market. This selling put pressure on U.S. Treasury prices.
When the period ended, the yield on the 30-year bond had increased 66 basis
points, while yields on intermediate maturity bonds rose between 70 and 90 basis
points.
Mortgage-backed securities were the star performers as spreads tightened
dramatically. Corporate bonds outperformed U.S. Treasuries, as investors
reversed their flight-to-quality trade. The Fund benefited from an over
allocation to the spread sectors--corporate bonds and mortgage-backed
securities, which accounted for approximately 72.7 percent of the holdings, as
of March 31, 1999. However, the duration of the Fund was longer than that of the
market. With interest rates rising, longer-maturity bonds underperformed
shorter-maturity bonds, and this cut into the gains made on the credit side of
the portfolio.
With corporate profits strong and the demand for corporate bonds high, the Fund
bought several new issues in which spreads have tightened, including British Sky
Broadcasting, Meritor Automotive, AT&T, Quebec Province and
2
<PAGE>
Noble Drilling. In addition, the Fund purchased Enron Corporation, Tyco
International and Unum Corporation in the secondary market, and their spreads
also tightened after being purchased.
OUTLOOK
From a duration standpoint, the Fund will remain duration-neutral to 5 percent
longer than the benchmark. If long-term interest rates move north of 6 percent,
this would present a buying opportunity, and the duration would be extended to a
range of 5 to 10 percent longer than the Index. The over allocation to the
spread sectors will remain intact, as the fundamental factors driving corporate
profits and credit improvements are still favorable. Further, credit spreads are
still attractive based on historical standards.
Interest rates look to be range-bound for the remainder of 1999. For interest
rates to move significantly lower, U.S. economic growth would have to slow to a
level where recession becomes a fear. After posting a 6 percent economic growth
rate in the fourth quarter of 1998, a recession fear is not imminent. For rates
to move significantly higher, inflation would have to return. With the world in
recession, commodity prices low, and a rapid increase in productivity due to
technology, high inflation is unlikely.
The Federal Reserve has achieved a long sought after "price stability"
environment for the economy, and we believe it will maintain its wait-and-see
approach to monetary policy. Because the Fed will likely remain on hold and the
economy is moving ahead at a 3 to 4 percent growth rate in a low-inflation
environment, we expect bonds to continue generating returns of around 5 to 6
percent.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 4.5 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.
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN ADVANTUS BOND FUND, 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
Government/Corporate 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 March 31, 1989 through March 31, 1999. The 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 March 31, 1999.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C> <C> <C>
One year -1.86%
Five year 6.01%
Ten year 7.81%
(Thousands)
Class A CPI Lehman Govt/Corp
3/31/89 10,000 10,000 10,000
10/31/89 10,666 10,253 11,182
10/31/90 11,142 10,899 11,797
10/31/91 12,774 11,217 13,610
10/31/92 14,146 11,577 15,044
10/31/93 16,133 11,887 17,133
9/30/94 15,056 12,247 16,360
9/30/95 17,323 12,516 18,429
9/30/96 18,020 12,892 19,259
9/30/97 19,925 13,178 21,107
9/30/98 21,668 13,366 25,444
3/31/99 21,316 13,480 25,472
</TABLE>
4
<PAGE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C> <C> <C>
One year -2.71%
Since inception
(8/19/94) 6.43%
(Thousands)
Class B CPI Lehman Govt/Corp
8/19/94 10,000 10,000 10,000
9/30/94 9,876 10,067 9,853
9/30/95 10,801 10,289 11,099
9/30/96 11,252 10,598 11,599
9/30/97 12,480 10,833 12,712
9/30/98 13,610 10,987 14,228
3/31/99 13,336 11,081 14,244
</TABLE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C> <C> <C>
One year 1.99%
Since inception
(3/1/95) 6.75%
(Thousands)
Class C CPI Lehman
Govt/Corp
3/1/95 10,000 10,000 10,000
9/30/95 10,925 10,146 10,939
9/30/96 11,265 10,450 11,431
9/30/97 12,348 10,682 12,529
9/30/98 13,323 10,834 14,023
3/31/99 13,056 10,927 14,038
</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 4.5 percent front-end sales charge for Class A and the maximum
applicable contingent deferred sales charge for Class B shares. The maximum
initial sales charge for Class A shares was 5.0 percent prior to February 1,
1999. Sales charges pay for your financial professional's investment advice.
Individuals cannot invest in the index itself, nor can they invest in any fund
which seeks to track the performance of the index without incurring some charges
and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- --------------------------------------------------- ---------- -----------
<S> <C> <C>
U.S. Treasury Note--6.625%, 03/31/02............... $2,756,829 9.8%
U.S. Treasury Note--5.375%, 07/31/00............... 2,261,250 8.1%
U.S. Treasury Bond--5.875%, 11/15/05............... 1,027,813 3.7%
General Electric Capital Corporation--6.290%,
12/15/07......................................... 1,013,234 3.6%
MidAmerican Funding--144A Issue--6.339%,
03/01/09......................................... 1,000,323 3.6%
Meritor Automotive, Inc.--6.800%, 02/15/09......... 992,799 3.5%
British Sky Broadcasting--6.875%, 02/23/09......... 988,146 3.5%
GNMA--6.500%, 09/15/28............................. 979,723 3.5%
AT&T Corporation--6.500%, 03/15/29................. 979,306 3.5%
U.S. Treasury Note--6.000%, 02/15/26............... 966,625 3.4%
---------- ---
$12,966,048 46.2%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 27.0%
U.S. Government Agencies 5.5%
AAA rated 11.2%
AA rated 4.1%
A rated 21.6%
BBB rated 28.0%
BB rated 2.6%
100.0%
</TABLE>
6
<PAGE>
ADVANTUS Bond Fund
Investments in Securities
March 31, 1999
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (91.9%)
CORPORATE OBLIGATIONS (56.8%)
BASIC MATERIALS (1.7%)
Paper and Forest (1.7%)
$ 500,000 International Paper Company...................... 6.875% 07/10/00 $ 506,307
----------------
CAPITAL GOODS (2.3%)
Aerospace/Defense (2.3%)
750,000 Raytheon Company-144A Issue (c).................. 6.400% 12/15/18 713,641
----------------
COMMUNICATION SERVICES (5.6%)
Telephone (5.6%)
1,000,000 AT&T Corporation................................. 6.500% 03/15/29 979,306
700,000 GTE Corporation.................................. 6.940% 04/15/28 715,191
----------------
1,694,497
----------------
CONSUMER CYCLICAL (4.8%)
Auto (3.3%)
1,000,000 Meritor Automotive, Inc.......................... 6.800% 02/15/09 992,799
----------------
Building Materials (1.5%)
450,000 Masco Corporation................................ 6.125% 09/15/03 452,418
----------------
CONSUMER STAPLES (7.5%)
Beverage (1.7%)
500,000 Anheuser-Busch Companies, Inc.................... 7.100% 06/15/07 520,448
----------------
Broadcasting (3.2%)
1,000,000 British Sky Broadcasting......................... 6.875% 02/23/09 988,146
----------------
Household Products (2.6%)
750,000 Premark International, Inc....................... 10.500% 09/15/00 798,152
----------------
ENERGY (2.5%)
Oil & Gas (2.5%)
750,000 Noble Drilling Corporation....................... 7.500% 03/15/19 754,947
----------------
FINANCIAL (22.2%)
Banks (2.1%)
700,000 St. George Bank-144A Issue (b)(c)................ 8.485% 12/31/49 648,278
----------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (3.9%)
300,000 CSFB Finance Company-144A Issue (c).............. 7.092% 11/15/05 266,438
900,000 PNC Bank Corporation............................. 6.728% 01/25/07 927,345
----------------
1,193,783
----------------
Commercial Finance (3.3%)
1,000,000 General Electric Capital Corporation............. 6.290% 12/15/07 1,013,234
----------------
Finance-Diversified (1.7%)
525,000 National Collegiate.............................. 7.240% 09/20/14 514,563
----------------
</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>
Insurance (1.6%)
$ 500,000 Unum Corporation................................. 6.750% 12/15/28 $ 483,161
----------------
Investment Bankers/Brokers (3.0%)
900,000 Morgan Stanley Dean Witter....................... 6.875% 03/01/07 929,705
----------------
Real Estate Investment Trust (4.2%)
850,000 Bradley Operating LP............................. 7.000% 11/15/04 815,227
500,000 Security Capital Pacific Trust................... 7.500% 02/15/14 478,454
----------------
1,293,681
----------------
Savings and Loans (2.4%)
700,000 Bank United Corporation.......................... 8.875% 05/01/07 717,968
----------------
HEALTH CARE (1.6%)
Medical Products/Supplies (1.6%)
500,000 Tyco International Group......................... 6.875% 01/15/29 488,055
----------------
UTILITIES (8.6%)
Electric Companies (5.7%)
750,000 Georgia Power Company............................ 5.500% 12/01/05 727,393
1,000,000 MidAmerican Funding-144A Issue (c)............... 6.339% 03/01/09 1,000,323
----------------
1,727,716
----------------
Natural Gas (2.9%)
880,000 Enron Corporation................................ 6.725% 11/15/37 895,444
----------------
Total corporate obligations (cost: $17,546,231)..................... 17,326,943
----------------
GOVERNMENT OBLIGATIONS (35.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (29.9%)
U.S. Treasury (24.9%)
605,000 U.S. Treasury Bond............................... 4.528% 06/24/99 598,831
1,000,000 U.S. Treasury Bond............................... 5.875% 11/15/05 1,027,813
2,250,000 U.S. Treasury Note............................... 5.375% 07/31/00 2,261,250
950,000 U.S. Treasury Note............................... 6.000% 02/15/26 966,625
2,650,000 U.S. Treasury Note............................... 6.625% 03/31/02 2,756,829
----------------
7,611,348
----------------
Federal National Mortgage Association (FNMA) (.9%)
265,850 ................................................. 7.000% 09/01/17 269,029
----------------
Government National Mortgage Association (GNMA) (4.1%)
984,043 ................................................. 6.500% 09/15/28 979,723
121,906 ................................................. 7.000% 04/15/22 124,130
154,213 ................................................. 7.000% 03/15/23 156,972
----------------
1,260,825
----------------
OTHER GOVERNMENT OBLIGATIONS (2.4%)
750,000 Quebec Province (b).............................. 5.750% 02/15/09 727,500
----------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
GOVERNMENT OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
STATE AND LOCAL GOVERNMENT OBLIGATIONS (2.8%)
$ 400,000 California Housing Finance Agency................ 7.760% 08/01/25 $ 420,132
240,000 California Housing Finance Agency................ 8.160% 02/01/28 252,000
172,000 Wyoming Community Development.................... 6.850% 06/01/10 170,656
----------------
842,788
----------------
Total government obligations (cost: $10,683,846).................... 10,711,490
----------------
Total long-term debt securities (cost: $28,230,077)................. 28,038,433
----------------
<CAPTION>
SHARES
- ----------
<C> <S> <C> <C> <C>
PREFERRED STOCK (6.3%)
FINANCIAL (6.3%)
Real Estate Investment Trust (6.3%)
16,000 Duke Realty Investments, Inc. - 7.99%............................... 729,000
8,000 Nationwide Health Property, Inc. - 7.68%............................ 755,500
10,000 Prologis Trust - 8.54%.............................................. 440,000
----------------
Total preferred stock (cost: $2,091,552)............................ 1,924,500
----------------
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (.7%)
$ 197,235 Federated Prime Obligation Fund, current rate 4.860%................ 197,235
----------------
Total short-term securities (cost: $197,235)........................ 197,235
----------------
Total investments in securities (cost: $30,518,864)................. $ 30,160,168
----------------
----------------
</TABLE>
Notes to Investments in Securities
- -----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 4.5% of the net assets in foreign securities as of March 31,
1999.
(c) Represents ownership in a restricted security which has not been registered
with the Security and Exchange Commission under the Securities Act of 1933.
(See note 6 to the financial statements.) Information concerning the
restricted securities held at March 31, 1999, 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
CSFB Finance Company 144A Issue......................................... 05/15/96 291,938
MidAmerican Funding 144A Issue.......................................... 03/09/99 1,000,000
Raytheon Company 144A................................................... 02/18/99 739,568
-----------
$ 2,731,506
-----------
-----------
</TABLE>
(d) At March 31, 1999 the cost of securities for federal income tax purposes was
$30,525,986. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation......................................................... $ 195,033
Gross unrealized depreciation......................................................... (560,851)
-----------
Net unrealized depreciation........................................................... $ (365,818)
-----------
-----------
</TABLE>
9
<PAGE>
ADVANTUS Bond Fund
Statement of Assets and Liabilities
March 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at market
value - see accompanying schedule for
detailed listing
(identified cost: $30,518,864)........ $30,160,168
Cash in bank on demand deposit......... 129,844
Receivable for Fund shares sold........ 16,674
Receivable for investment securities
sold.................................. 20,032
Accrued interest receivable............ 329,994
Other receivables...................... 479
-----------
Total assets....................... 30,657,191
-----------
<CAPTION>
LIABILITIES
<S> <C>
Payable for investment securities
purchased............................. 22,901
Payable for Fund shares redeemed....... 29,352
Cash portion of dividends payable to
shareholders.......................... 56,406
Payable to Adviser..................... 39,814
Other payables......................... 588
-----------
Total liabilities.................. 149,061
-----------
Net assets applicable to outstanding
capital stock......................... $30,508,130
-----------
-----------
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)................................... $ 30,316
Additional paid-in capital........... 31,394,946
Distributions in excess of net
investment income.................... (15,590)
Accumulated net realized losses from
investments.......................... (542,846)
Unrealized depreciation on
investments.......................... (358,696)
-----------
Total - representing net assets
applicable to outstanding capital
stock.............................. $30,508,130
-----------
-----------
Net assets applicable to outstanding
Class A shares........................ $19,212,371
-----------
-----------
Net assets applicable to outstanding
Class B shares........................ $ 8,849,474
-----------
-----------
Net assets applicable to outstanding
Class C shares........................ $ 2,446,285
-----------
-----------
Shares outstanding and net asset value
per share:
Class A - Shares outstanding
1,910,281............................ $ 10.06
-----------
-----------
Class B - Shares outstanding
877,816.............................. $ 10.08
-----------
-----------
Class C - Shares outstanding
243,454.............................. $ 10.05
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 886,167
Dividends............................ 84,052
-----------
Total investment income.......... 970,219
-----------
Expenses (note 4):
Investment advisory fee.............. 107,088
Rule 12b-1 fees - Class A............ 27,373
Rule 12b-1 fees - Class B............ 45,051
Rule 12b-1 fees - Class C............ 11,276
Administrative services fee.......... 26,200
Custodian fees....................... 3,600
Auditing and accounting services..... 5,800
Legal fees........................... 4,750
Directors' fees...................... 245
Registration fees.................... 20,528
Printing and shareholder reports..... 21,355
Insurance............................ 1,753
Other................................ 1,583
-----------
Total expenses................... 276,602
-----------
Less fees and expenses waived or
absorbed:
Class A Rule 12b-1 fees............ (3,209)
Other fund expenses................ (55,217)
-----------
Total fees and expenses waived or
absorbed........................ (58,426)
-----------
Total net expenses............... 218,176
-----------
Investment income - net.......... 752,043
-----------
Realized and unrealized losses on
investments:
Net realized losses on investments
(note 3)........................... (527,940)
Net change in unrealized appreciation
or depreciation on investments..... (774,610)
-----------
Net losses on investments........ (1,302,550)
-----------
Net decrease in net assets resulting
from operations...................... $ (550,507)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999 AND YEAR ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Operations:
Investment income - net.............. $ 752,043 $ 1,418,930
Net realized gain (loss) on
investments........................ (527,940) 799,672
Net change in unrealized appreciation
or depreciation on investments..... (774,610) (28,746)
----------- -----------
Increase (decrease) in net assets
resulting from operations...... (550,507) 2,189,856
----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A............................ (511,829) (1,025,790)
Class B............................ (204,491) (347,737)
Class C............................ (51,313) (61,204)
Net realized gains on investments:...
Class A............................ (350,337) (56,664)
Class B............................ (160,988) (26,049)
Class C............................ (36,465) (5,418)
----------- -----------
Total distributions.............. (1,315,423) (1,522,862)
----------- -----------
Capital share transactions (notes 4 and
5):
Proceeds from sales:
Class A............................ 2,109,337 5,944,709
Class B............................ 1,539,304 4,427,845
Class C............................ 981,287 2,010,526
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 620,987 744,235
Class B............................ 343,562 301,278
Class C............................ 83,740 62,923
Payments for redemption of shares:
Class A............................ (1,757,192) (4,846,234)
Class B............................ (1,376,433) (2,279,688)
Class C............................ (571,683) (915,696)
----------- -----------
Increase in net assets from
capital share transactions..... 1,972,909 5,449,898
----------- -----------
Total increase in net assets..... 106,979 6,116,892
Net assets at beginning of period...... 30,401,151 24,284,259
----------- -----------
Net assets at end of period (including
(distributions in excess of)
undistributed net investment income
of $(15,590) and $0, respectively)... $30,508,130 $30,401,151
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS Bond Fund
Notes to Financial Statements
MARCH 31, 1999
(UNAUDITED)
(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 are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
Rule 12b-1 fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than Rule 12b-1 fees) and realized and unrealized gains
or losses are allocated to each class of shares based upon its relative net
assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
INVESTMENTS IN SECURITIES
The Fund's net asset value is generally calculated as of the close of normal
trading on the New York Stock Exchange (typically 3:00 p.m. Central Time).
Investments in securities traded on a national exchange are valued at the last
sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. 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 period ended March 31, 1999, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $39,582,051 and $37,176,921, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
(Advantus Capital or the Adviser), a wholly owned subsidiary of Minnesota Life
Insurance Company (Minnesota Life), formerly 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 (First Data Investor Services Group). Prior to
October 26, 1998, the Fund's transfer agent was Minnesota Life. The fee for
investment management and advisory services is based on the average daily net
assets of the Fund at the annual rate of .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
expenses pursuant to Rule 12b-1 under the Investment Company Act of 1940 (as
amended). The Fund pays fees to Ascend Financial Services, Inc. (Ascend), the
underwriter of the Fund and wholly-owned subsidiary of Advantus Capital, to be
used to pay certain expenses incurred in the distribution, promotion and
servicing of the Fund's shares. The Class A Plan provides for a service fee up
to .25 percent of average daily net assets of Class A shares. Prior to February
1, 1999, the Class A Plan provided for a distribution fee up to .30 percent of
average daily net assets of Class A shares. The Class B and Class C Plans
provide for a fee up to 1.00 percent of average daily net assets of Class B and
Class C shares, respectively. The Class B and Class C 1.00 percent fees are
comprised of a .75 percent distribution fee and a .25 percent service fee. Prior
to February 1, 1999, Ascend waived that portion of Class A Rule 12b-1 fees which
exceeded, as a percentage of average daily net assets, .25 percent. For the
period from October 1, 1998 to January 31, 1999, Ascend waived Class A Rule
12b-1 fees in the amount of $3,209.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
Effective October 26, 1998, the Fund entered into a new shareholder and
administrative services agreement with Minnesota Life. Under this agreement, the
Fund pays an administrative services fee equal to $5,700 per month to Minnesota
Life for accounting, auditing, legal and other administrative services which
Minnesota Life
14
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
provides. Prior to February 1, 1999, the administrative services fee was $3,700
per month. In addition, for shareholder services performed by Minnesota Life,
the Adviser will pay Minnesota Life an annual account servicing fee as agreed by
the Adviser and Minnesota Life.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. During the period ended March 31,
1999, Advantus Capital voluntarily agreed to absorb $55,217 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 $45,723.
As of March 31, 1999, Minnesota Life and subsidiaries and the directors and
officers of the Fund as a whole owned 386,190 Class A shares which represents
20.2 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 $4,750.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period ended March 31, 1999 and the year
ended September 30, 1998 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
Sold.................................... 202,956 562,965 148,547 414,545 95,465 189,746
Issued for reinvested distributions..... 60,857 70,186 32,779 29,523 8,113 6,059
Redeemed................................ (170,711) (457,997) (133,888) (214,474) (55,745) (86,469)
--------- --------- --------- --------- --------- ---------
93,102 175,154 47,438 229,594 47,833 109,336
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At March 31, 1999, investments in securities includes issues which generally
cannot be offered for sale to the public without first being registered under
the Securities Act of 1933 (restricted security). In the event the securities
are registered, those carrying registration rights allow for the issuer to bear
all the related costs; for issues without rights, the Fund may incur such costs.
The Fund currently limits investments in securities that are not readily
marketable, including restricted securities, to 10 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 March 31, 1999
was $2,628,680 which represents 8.6 percent of net assets.
(7) YEAR 2000
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
MARCH 31, 1999
(UNAUDITED)
(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 PERIOD FROM
OCTOBER 1, NOVEMBER 1,
1998 TO YEAR ENDED SEPTEMBER 30, 1993 TO YEAR ENDED
MARCH 31, --------------------------------------------------- SEPTEMBER 30, OCTOBER 31,
1999 1998 1997 1996 1995(a) 1994(b) 1993
------------ --------- --------- --------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 10.69 $ 10.43 $ 10.03 $ 10.24 $ 9.50 $ 11.21 $ 10.72
------------ --------- --------- --------- --------------- -------------- ------------
Income from investment operations:
Net investment income..... .27 .59 .63 .62 .64 .53 .63
Net gains (losses) on
securities (both
realized and
unrealized)............. (.44) .30 .40 (.22) .74 (1.24) .78
------------ --------- --------- --------- --------------- -------------- ------------
Total from investment
operations............ (.17) .89 1.03 .40 1.38 (.71) 1.41
------------ --------- --------- --------- --------------- -------------- ------------
Less distributions:
Dividends from net
investment income....... (.27) (.60) (.63) (.61) (.64) (.53) (.63)
Distributions from capital
gains................... (.19) (.03) -- -- -- (.47) (.29)
------------ --------- --------- --------- --------------- -------------- ------------
Total distributions..... (.46) (.63) (.63) (.61) (.64) (1.00) (.92)
------------ --------- --------- --------- --------------- -------------- ------------
Net asset value, end of
period.................... $ 10.06 $ 10.69 $ 10.43 $ 10.03 $ 10.24 $ 9.50 $ 11.21
------------ --------- --------- --------- --------------- -------------- ------------
------------ --------- --------- --------- --------------- -------------- ------------
Total return (d)............ (1.90)% 8.75% 10.57% 4.03% 15.05% (6.68)% 14.05%
Net assets, end of period
(in thousands) (e)........ $19,212 $ 19,419 $ 17,122 $ 16,528 $ 15,315 $13,879 $14,494
Ratio of expenses to average
daily net assets.......... 1.15%(f) 1.10% 1.00% 1.00% 1.00% 1.00%(f) 1.00%
Ratio of net investment
income (loss) to average
daily net assets (e)...... 5.19%(f) 5.55% 6.18% 6.08% 6.58% 5.79%(f) 5.78%
Portfolio turnover rate
(excluding short-term
securities)............... 124.6% 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 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.
(e) The Fund's Adviser and Distributor voluntarily absorbed or waived $58,426,
$119,092, $129,031, $120,750, $129,155, $107,448 and $86,877 in expenses
for the period ended March 31, 1999, the years ended September 30, 1998,
1997, 1996 and 1995, and 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 1.54%, 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 4.80%, 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 2.26%, 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 4.07%, 4.40%, 4.88%, 4.71%,
4.95% and .56%, respectively, for period ended March 31, 1999, 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 2.26%,
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 4.11%, 4.43%,
4.86%, 4.72% and 4.88%, respectively, for the period ended March 31, 1999,
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.
16
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, AUGUST 19,
1998 TO YEAR ENDED SEPTEMBER 30, 1994(c) TO
MARCH 31, --------------------------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995(a) 1994
------------ --------- --------- --------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $10.71 $ 10.43 $ 10.02 $ 10.23 $ 9.50 $ 9.68
------------ --------- --------- --------- ------- -------
Income from investment operations:
Net investment income..... .23 .51 .54 .53 .55 .06
Net gains (losses) on
securities (both
realized and
unrealized)............. (.44) .31 .41 (.21) .73 (.18)
------------ --------- --------- --------- ------- -------
Total from investment
operations............ (.21) .82 .95 .32 1.28 (.12)
------------ --------- --------- --------- ------- -------
Less distributions:
Dividends from net
investment income....... (.23) (.51) (.54) (.53) (.55) (.06)
Distributions from capital
gains................... (.19) (.03) -- -- -- --
------------ --------- --------- --------- ------- -------
Total distributions..... (.42) (.54) (.54) (.53) (.55) (.06)
------------ --------- --------- --------- ------- -------
Net asset value, end of
period.................... $10.08 $ 10.71 $ 10.43 $ 10.02 $ 10.23 $ 9.50
------------ --------- --------- --------- ------- -------
------------ --------- --------- --------- ------- -------
Total return (d)............ (2.35)% 8.09% 9.72% 3.13% 13.92% (1.24)%
Net assets, end of period
(in thousands) (e)........ $8,849 $ 8,894 $ 6,263 $ 3,532 $ 1,142 $ 51
Ratio of expenses to average
daily net assets.......... 1.90%(f) 1.90% 1.90% 1.90% 1.90% .22%(g)
Ratio of net investment
income (loss) to average
daily net assets (e)...... 4.43%(f) 4.78% 5.32% 5.19% 5.61% .69%(g)
Portfolio turnover rate
(excluding short-term
securities)............... 124.6% 237.2% 180.5% 222.6% 270.7% 163.5%
<CAPTION>
CLASS C
-----------------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, MARCH 1,
1998 TO YEAR ENDED SEPTEMBER 30, 1995(c) TO
MARCH 31, ------------------------------------ SEPTEMBER 30,
1999 1998 1997 1996 1995
------------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 10.68 $ 10.42 $ 10.02 $ 10.23 $ 9.67
------------- ---------- ---------- ---------- -------
Income from investment opera
Net investment income..... .23 .51 .54 .52 .33
Net gains (losses) on
securities (both
realized and
unrealized)............. (.44) .29 .40 (.21) .55
------------- ---------- ---------- ---------- -------
Total from investment
operations............ (.21) .80 .94 .31 .88
------------- ---------- ---------- ---------- -------
Less distributions:
Dividends from net
investment income....... (.23) (.51) (.54) (.52) (.32)
Distributions from capital
gains................... (.19) (.03) -- -- --
------------- ---------- ---------- ---------- -------
Total distributions..... (.42) (.54) (.54) (.52) (.32)
------------- ---------- ---------- ---------- -------
Net asset value, end of
period.................... $ 10.05 $ 10.68 $ 10.42 $ 10.02 $10.23
------------- ---------- ---------- ---------- -------
------------- ---------- ---------- ---------- -------
Total return (d)............ (2.36)% 7.89% 9.61% 3.11% 9.26%
Net assets, end of period
(in thousands) (e)........ $ 2,446 $ 2,089 $ 899 $ 665 $ 112
Ratio of expenses to average
daily net assets.......... 1.90%(f) 1.90% 1.90% 1.90% 1.90%(f)
Ratio of net investment
income (loss) to average
daily net assets (e)...... 4.47%(f) 4.81% 5.30% 5.20% 5.54%(f)
Portfolio turnover rate
(excluding short-term
securities)............... 124.6% 237.2% 180.5% 222.6% 270.7%
</TABLE>
- ------------
17
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same 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.
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 monthly, semi-monthly or quarterly 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 Account
18
<PAGE>
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 investment you
initiate and quarterly statements to help you track all of your Advantus Fund
investments and annual tax statements. Semi-annual and annual reports will
provide you with portfolio information, fund performance data and the current
investment outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from Advantus Shareholder Services, call 1-800-665-6005.
Advantus Account Representatives are available Monday through Friday from 8 a.m.
to 4:45 p.m. Central Time. Our voice response system is available 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
HOW TO INVEST
You can invest in one or more of the eleven Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., distributor of the
Funds. Contact your representative for information and a prospectus for any of
the Advantus Funds you are interested in. To find a Registered Representative
near you, call the toll-free service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our Systematic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects and
reviews the Fund's investments and provides executive and other personnel for
the Fund's management. (For the Advantus International Balanced Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., selects the Fund's
investments.)
Advantus Capital Management, Inc. manages thirteen mutual funds containing $3.2
billion in assets in addition to $10.8 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 13 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
Advantus Real Estate Securities Fund
19
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
<PAGE>
ASCEND FINANCIAL SERVICES, INC.
400 ROBERT STREET NORTH [LOGO]
ST. PAUL, MN 55101-2098
ADDRESS SERVICE REQUESTED
F.48644 Rev. 5-1999
