<PAGE>
BOND
ADVANTUS BOND FUND, INC.
ANNUAL REPORT TO SHAREHOLDERS DATED SEPTEMBER 30, 2000 [LOGO]
ADVANTUS-TM-
FAMILY OF FUNDS
[FIXED INCOME GRAPHIC]
<PAGE>
ADVANTUS BOND FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
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 VOTING RESULTS 21
SHAREHOLDER SERVICES 22
</TABLE>
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
All signs point to a soft landing in progress while the U.S. economy continues
to slow. The pressure on the Federal Reserve to further increase short-term
rates has diminished considerably. The Fed's earlier series of tightenings
appears to have successfully curbed the country's run-away growth. Inflation
remains in check; all in all, we continue to have a healthy backdrop for our
country's capital markets.
In the stock market, companies such as Intel and new economy leaders have seen
some dramatic corrections this quarter. This was a sideways correction for many,
downward for companies that disappointed investors. Value, real estate, and
small stocks' relative performance has improved this quarter. The market has
broadened, demonstrating that investors have acquired an increased appetite for
stocks other than large cap growth. We anticipate that the stock market will
remain volatile throughout the year and into next year. Equity investors should
adjust their expectations and not expect double-digit returns as the norm. We
expect positive returns for equities for the next 12 to 18 months, with above
average earnings growth.
Within the fixed income universe, corporate bonds have been the weakest
performing fixed income sector in 2000. An inverted yield curve (i.e., short-
term bonds have higher yields than long-term bonds), several Fed tightening
moves, increased event risk and equity market volatility have all negatively
impacted corporate bond performance this year. Mortgage-backed securities were
the top performer for the year followed by the government sector. We believe
that upcoming quarters will be a favorable environment for bonds.
We are continually watchful of economic and political events and circumstances
that would likely affect our new President. Significant political unrest,
military buildups, and violence in other countries may test the
President-elect's mettle. A strong Administration increases the odds that our
peace dividend will continue.
We advise investors to consider adding fixed income, value stocks and an
international component to their portfolio. As we've said before, we advise you
to stay well diversified and avoid big bets when the market environment is
uncertain.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff
President, Advantus Funds
<PAGE>
ADVANTUS 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 year ended September 30, 2000, for
each class of shares offered was as follows:
<TABLE>
<S> <C>
Class A.......................... 5.04 percent*
Class B.......................... 4.16 percent*
Class C.......................... 4.26 percent*
</TABLE>
The Fund's benchmarks, the Lehman Brothers Government/Credit Index,** and the
Lehman Brothers Aggregate Bond Index,*** returned 6.72 and 6.99 percent,
respectively, for the same period.
In prior reporting periods, the Fund compared its annual total return
performance to the Lehman Brothers Government/Credit Index (formerly called the
Lehman Brothers Government/Corporate Bond Index).** The Lehman Brothers
Aggregate Bond Index*** includes mortgage-related and asset-backed debt
securities, as well as corporate bonds, and better reflects the range of
securities held in the fund's portfolio than does the Lehman Brothers
Government/Credit Index.**
PERFORMANCE ANALYSIS
The Federal Reserve actively raised key short-term interest rates in the past
twelve months in an attempt to slow our economy and keep inflation at bay. After
four interest rate hikes totaling 125 basis points (1.25 percent) and the
highest oil prices in a decade, the economy is beginning to slow, paving the way
for slightly lower interest rates.
During the period, the shape of the yield curve changed dramatically as short-
term interest rose and long-term interest rates fell. The resulting yield curve
became inverted (a situation where short-term interest rates are higher than
long-term interest rates) as the Fed raised short-term interest rates and the
U.S. Treasury Department was buying back its longer-term debt. On September
30th, the two-year U.S. Treasury Note yielded 5.97 percent and 30-year Treasury
yielded 5.88 percent, 9 basis points (0.09 percent) less than the two-year.
All three major sectors in the bond market (government, corporate, and mortgage)
posted positive returns for the year. Mortgage backed securities were the best
performing sector as they benefited from both the rally in intermediate interest
rates and the narrowing of mortgage spreads. Government securities performed
well, especially longer-term maturities that rallied as interest rates fell.
Corporate bonds underperformed both mortgages and governments as their credit
spreads gapped to historic wide levels.
The Fund has been positioned to hold slightly longer than market duration
securities to reflect our view that interest rates would likely decline. The
exposure to corporate bonds was concentrated in intermediate maturities, while
U.S. Treasury securities were positioned at the longer end of the yield curve.
All of these decisions positively impacted the performance of the Fund
2
<PAGE>
during the period. Some individual credit issues negatively impacted the Fund's
performance as earning disappointments caused their credit spread to widen
significantly. Our holdings of Computer Associates, Federal Mogul, and British
Sky Broadcasting hurt overall Fund performance.
OUTLOOK
With mortgage and credit spreads wide and their absolute yields attractive, we
will continue to add spread product through the end of the calendar year setting
the Fund up for 2001. This will be done prudently, as individual credit issues
can be extremely volatile, making diversification an even more important aspect
in managing the Fund. Individual corporate bond positions will be kept between 1
and 2 percent of assets to protect the Fund against any company-specific
problems. The individual holdings will generally be higher quality as they offer
the best relative value in the current market.
In the upcoming quarters, the yield curve should slowly return to a positive
slope with short-term yields falling below long-term yields. The Federal Reserve
is either at, or very near, the end of raising short-term interest rates for
this cycle and the market has just begun to acknowledge this. As this view
becomes more widely shared, short- and intermediate-term interest rates should
fall modestly. It appears that the Federal Reserve will engineer another soft
landing for the United States economy whereby recession is avoided and economic
growth moderates to lessen inflationary pressures. If this scenario plays out,
the spread sectors (mortgages and corporate bonds) will outperform government
securities. The Fund will be constructed to take full advantage of this view by
overweighting high quality spread products in intermediate maturities.
*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/Credit Index is an unmanaged benchmark
composite of the Lehman Brothers Government Index which includes all publicly
issued debt of the U.S. Government and Agencies and the Lehman Brothers Credit
Index which includes all publicly issued fixed rate, nonconvertible domestic
corporate debt.
***The Lehman Brothers Aggregate Bond index is an unmanaged benchmark composite
representing average market-weighted performance of U.S. Treasury and agency
securities, investment-grade corporate bonds and mortgage-backed securities with
maturities greater than one year.
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
ADVANTUS BOND FUND, LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX, LEHMAN BROTHERS
AGGREGATE 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/Credit Index, the Lehman Brothers Aggregate Bond Index, and the
Consumer Price Index. The lines in the Class A graph represent the cumulative
total return of a hypothetical $10,000 investment made on September 30, 1990
through September 30, 2000. The lines in the Class B and Class C 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, 2000.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
CLASS A:
<S> <C> <C>
One year 0.32%
Five year 4.14%
Ten year 6.76%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
LEHMAN BROTHERS LEHMAN BROTHERS
AGGREGATE BOND GOVERNMENT/CREDIT BOND
CLASS A CPI INDEX INDEX
<S> <C> <C> <C> <C>
9/30/90 $10,000 $10,000 $10,000 $10,000
10/31/90 $9,644 $10,068 $10,000 $10,133
10/31/91 $11,057 $10,362 $11,570 $11,690
10/31/92 $12,245 $10,694 $13,005 $12,922
10/31/93 $13,964 $10,981 $14,286 $14,716
9/30/94 $13,032 $11,313 $13,757 $14,052
9/30/95 $14,994 $11,562 $15,662 $15,830
9/30/96 $15,598 $11,909 $16,422 $16,542
9/30/97 $17,247 $12,174 $18,007 $18,130
9/30/98 $18,755 $12,347 $20,042 $21,855
9/30/99 $18,312 $12,672 $19,941 $21,757
9/30/00 $19,235 $13,102 $21,335 $23,214
</TABLE>
4
<PAGE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
CLASS B:
<S> <C> <C>
One year -0.84%
Five year 4.07%
Since Inception (8/19/94) 5.35%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS)
LEHMAN BROTHERS LEHMAN BROTHERS
AGGREGATE BOND GOVERNMENT/CREDIT
CLASS B CPI INDEX INDEX
<S> <C> <C> <C> <C>
8/19/94 $10,000 $10,000 $10,000 $10,000
9/30/94 $9,876 $10,067 $9,957 $9,853
9/30/95 $10,801 $10,289 $11,337 $11,099
9/30/96 $11,252 $10,598 $11,886 $11,599
9/30/97 $12,480 $10,833 $13,033 $12,712
9/30/98 $13,610 $10,987 $14,506 $14,228
9/30/99 $13,200 $11,276 $14,434 $14,164
9/30/00 $13,905 $11,659 $15,443 $15,113
</TABLE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
CLASS C:
<S> <C> <C>
One year 4.26%
Five year 4.26%
Since Inception (3/1/95) 5.46%
</TABLE>
<TABLE>
<CAPTION>
(THOUSANDS) LEHMAN BROTHERS LEHMAN BROTHERS
AGGREGATE BOND GOVERNMENT/CREDIT
CLASS C CPI INDEX INDEX
<S> <C> <C> <C> <C>
3/01/95 $10,000 $10,000 $10,000 $10,000
9/30/95 $10,925 $10,146 $10,808 $10,939
9/30/96 $11,265 $10,450 $11,332 $11,431
9/30/97 $12,348 $10,682 $12,426 $12,529
9/30/98 $13,372 $10,834 $13,830 $14,023
9/30/99 $12,909 $11,119 $13,761 $13,960
9/30/00 $13,458 $11,497 $14,722 $14,895
</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. 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 Bond - 6.125%, 08/15/29............ $1,787,187 8.5%
Federal National Mortgage Association - 6.500%,
08/15/04....................................... 1,747,718 8.3%
U.S. Treasury Bond - 6.125%, 11/15/09............ 975,004 4.7%
U.S. Treasury Bond - 6.840%, 11/15/04............ 822,380 3.9%
Federal Home Loan Mortgage - 7.000%, 07/15/05.... 763,023 3.6%
U.S. Treasury Bond - 6.250%, 07/31/02............ 752,578 3.6%
U.S. Treasury Bond - 6.000%, 02/15/26............ 742,969 3.6%
IMC Global, Inc. - 6.625%, 10/15/01.............. 735,176 3.5%
St. George Bank - 144A Issue - 8.485%,
12/31/49....................................... 600,841 2.9%
Government of Canada - 6.375%, 11/30/04.......... 594,433 2.8%
---------- ----
$9,521,309 45.4%
========== ====
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 26.1%
U.S. Government Agencies 13.9%
AAA Rated 3.3%
AA Rated 12.4%
A Rated 22.6%
BBB Rated 12.4%
BB Rated 1.0%
Preferred Stock 3.0%
Cash and Other Assets/Liabilities 5.3%
</TABLE>
6
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 2000
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
--------- ------- -------- --------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (91.7%)
GOVERNMENT OBLIGATIONS (47.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (40.0%)
Federal Home Loan Mortgage Corporation (FHLMC) (3.3%)
$ 750,000 ................................................. 7.000% 07/15/05 $ 763,023
-------------
Federal National Mortgage Association (FNMA) (9.8%)
1,750,000 ................................................. 6.500% 08/15/04 1,747,718
230,333 ................................................. 7.000% 07/01/29 225,835
250,000 ................................................. 7.250% 01/15/10 257,809
-------------
2,231,362
-------------
Government National Mortgage Association (GNMA) (.8%)
67,208 ................................................. 7.000% 04/15/22 66,497
124,439 ................................................. 7.000% 03/15/23 123,036
-------------
189,533
-------------
U.S. Treasury (26.1%)
1,050,000 Principal-Only Strip (d)........................ 6.840% 11/15/04 822,380
1,700,000 Principal-Only Strip (d)........................ 6.125% 11/15/09 975,004
750,000 Bond............................................. 6.000% 02/15/26 742,969
1,750,000 Bond............................................. 6.125% 08/15/29 1,787,187
750,000 Bond............................................. 6.250% 07/31/02 752,578
350,000 Bond............................................. 6.250% 05/15/30 367,937
500,000 Note............................................. 6.750% 05/15/05 517,969
-------------
5,966,024
-------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.5%)
250,000 City of Eden Prairie, Minnesota.................. 7.350% 02/20/09 251,675
94,500 Wyoming Community Development Authority.......... 6.850% 06/01/10 94,225
-------------
345,900
-------------
OTHER GOVERNMENT OBLIGATIONS (5.9%)
600,000 Government of Canada (b)........................ 6.375% 11/30/04 594,433
500,000 Ontario Province Of Canada (b).................. 7.625% 06/22/04 515,266
250,000 Quebec Province (b)............................. 5.750% 02/15/09 229,050
-------------
1,338,749
-------------
Total government obligations (cost: $10,679,553).................... 10,834,591
-------------
CORPORATE OBLIGATIONS (44.3%)
BASIC MATERIALS (4.3%)
Aluminum (1.1%)
250,000 Alcoa, Inc....................................... 7.375% 08/01/10 252,824
-------------
Chemicals (3.2%)
750,000 IMC Global, Inc.................................. 6.625% 10/15/01 735,176
-------------
CAPITAL GOODS (2.0%)
Aerospace/Defense (2.0%)
500,000 B.F. Goodrich Company............................ 6.600% 05/15/09 458,986
-------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
---------------------------------------------------------------------- -------- --------------
BASIC MATERIALS--CONTINUED
<C> <S> <C> <C> <C>
COMMUNICATION SERVICES (1.7%)
Telephone (1.7%)
$ 400,000 AT&T Corporation................................. 5.625% 03/15/04 $ 382,223
-------------
CONSUMER CYCLICAL (4.0%)
Building Materials (1.9%)
450,000 Masco Corporation................................ 6.125% 09/15/03 432,638
-------------
Hardware and Tools (2.1%)
500,000 The Stanley Works................................ 5.750% 03/01/04 481,498
-------------
CONSUMER STAPLES (7.7%)
Beverage (2.2%)
500,000 Anheuser-Busch Companies, Inc.................... 7.100% 06/15/07 499,616
-------------
Broadcasting (.9%)
250,000 British Sky Broadcasting (b).................... 6.875% 02/23/09 217,108
-------------
Entertainment (2.4%)
500,000 Time Warner, Inc................................. 9.125% 01/15/13 556,517
-------------
Household Products (2.2%)
500,000 Procter & Gamble Company......................... 6.600% 12/15/04 498,294
-------------
ENERGY (3.3%)
Oil (3.3%)
300,000 Atlantic Richfield............................... 5.900% 04/15/09 279,077
250,000 Conoco, Inc...................................... 6.350% 04/15/09 236,969
250,000 Conoco, Inc...................................... 6.950% 04/15/29 230,732
-------------
746,778
-------------
FINANCIAL (17.0%)
Auto Finance (3.5%)
500,000 Ford Motor Credit Corporation.................... 7.500% 03/15/05 502,687
300,000 General Motors Acceptance Corporation............ 7.500% 07/15/05 303,937
-------------
806,624
-------------
Banks (6.0%)
500,000 Bank of America Corporation...................... 5.875% 02/15/09 455,518
700,000 St. George Bank - 144A Issue (b)(c)............. 8.485% 12/31/49 600,841
300,000 Wells Fargo Bank NA.............................. 7.550% 06/21/10 306,180
-------------
1,362,539
-------------
Finance - Diversified (2.2%)
525,000 National Collegiate.............................. 7.240% 09/20/14 493,038
-------------
Investment Bankers/Brokers (2.2%)
500,000 Morgan Stanley Dean Witter Discover & Company.... 6.875% 03/01/07 492,767
-------------
Mortgage Revenue Bonds (1.1%)
300,000 CFSB Finance Company - 144A Issue (c)........... 10.000% 11/15/05 258,000
-------------
Real Estate Investment Trust (2.0%)
500,000 Security Capital Industrial Trust................ 7.500% 02/15/14 465,553
-------------
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL COUPON MATURITY VALUE(A)
---------------------------------------------------------------------- -------- --------------
BASIC MATERIALS--CONTINUED
<C> <S> <C> <C> <C>
UTILITIES (4.3%)
Electric Companies (2.3%)
$ 500,000 Hydro-Quebec (b)................................ 8.000% 02/01/13 $ 528,718
-------------
Natural Gas (2.0%)
500,000 Enron Corporation................................ 6.725% 11/17/08 468,204
-------------
Total corporate obligations (cost: $10,388,668)..................... 10,137,101
-------------
Total long-term debt securities (cost: $21,068,221)................. 20,971,692
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<C> <S> <C> <C> <C>
PREFERRED STOCK (3.0%)
FINANCIAL (3.0%)
Real Estate Investment Trust (3.0%)
16,000 Duke Realty Investments, Inc. - 7.99%............................... 697,501
--------------
Total preferred stock (cost: $801,672).............................. 697,501
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL/
SHARES
------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.3%)
252,423 Federated Prime Obligation Fund, current rate 6.460%................ 252,423
250,000 Idaho Power Corporation, Commercial Paper........ 6.629% 10/3/00 249,818
927,560 Provident Institutional Fund - TempFund Portfolio, current
rate 6.526%........................................................ 927,560
--------------
Total short-term securities (cost: $1,429,892)...................... 1,429,801
--------------
Total investments in securities (cost: $23,299,785) (e)............. $ 23,098,994
==============
</TABLE>
Notes to Investments in Securities
-----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 11.7% of net assets in foreign securities as of September 30,
2000.
(c) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 6 to the financial statements.) Information concerning the
illiquid securities held at September 30, 2000, which includes acquistion
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISTION
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
---------
$ 991,938
=========
</TABLE>
* A 144A issue represents a security which has not been registered with the
Securities and Exchange Commission under the Securities Act of 1933.
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquistion.
(e) At September 30, 2000 the cost of securities for federal income tax purposes
was $23,483,114. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 133,021
Gross unrealized depreciation.......... (517,141)
---------
Net unrealized depreciation............ $(384,120)
=========
</TABLE>
9
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value - see accompanying
schedule for detailed listing
(identified cost: $23,299,785).................................. $23,098,994
Cash in bank on demand deposit................................... 16,613
Receivable for Fund shares sold.................................. 24,115
Receivable for investment securities sold........................ 2,242,406
Accrued interest receivable...................................... 289,193
Other receivables................................................ 1,552
-----------
Total assets................................................. 25,672,873
-----------
LIABILITIES
Payable for investment securities purchased...................... 2,768,393
Payable for Fund shares redeemed................................. 3,819
Dividends payable to shareholders................................ 28,788
Payable to Adviser............................................... 3,508
-----------
Total liabilities............................................ 2,804,508
-----------
Net assets applicable to outstanding capital stock............... $22,868,365
===========
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.................. $ 23,804
Additional paid-in capital..................................... 25,145,507
Undistributed (distributions in excess of) net investment
income......................................................... (27,921)
Accumulated net realized losses from investments............... (2,072,234)
Unrealized depreciation on investments......................... (200,791)
-----------
Total - representing net assets applicable to outstanding
capital stock................................................ $22,868,365
===========
Net assets applicable to outstanding Class A shares.............. $15,001,843
===========
Net assets applicable to outstanding Class B shares.............. $ 6,754,539
===========
Net assets applicable to outstanding Class C shares.............. $ 1,111,983
===========
Shares outstanding and net asset value per share:
Class A - Shares outstanding 1,562,585......................... $ 9.60
===========
Class B - Shares outstanding 701,834........................... $ 9.62
===========
Class C - Shares outstanding 115,932........................... $ 9.59
===========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Investment income:
Interest....................................................... $1,662,170
Dividends...................................................... 114,651
----------
Total investment income...................................... 1,776,821
----------
Expenses (note 4):
Investment advisory fee........................................ 162,489
Rule 12b-1 - Class A........................................... 40,701
Rule 12b-1 - Class B........................................... 70,282
Rule 12b-1 - Class C........................................... 12,807
Administrative services fee.................................... 74,400
Transfer agent and shareholder service fees.................... 43,974
Custodian fees................................................. 5,939
Auditing and accounting services............................... 15,088
Legal fees..................................................... 11,374
Directors' fees................................................ 445
Registration fees.............................................. 28,941
Printing and shareholder reports............................... 39,076
Insurance...................................................... 3,444
Other.......................................................... 4,629
----------
Total expenses............................................... 513,589
----------
Less fees and expenses waived or absorbed by Adviser............. (168,365)
----------
Total net expenses........................................... 345,224
----------
Investment income - net...................................... 1,431,597
----------
Realized and unrealized gains (losses) on investments :
Net realized losses on investments (note 3).................... (1,251,996)
Net change in unrealized appreciation or depreciation on
investments.................................................. 896,196
----------
Net losses on investments.................................... (355,800)
----------
Net increase in net assets resulting from operations............. $1,075,797
==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Operations:
Investment income - net......................... $ 1,431,597 $ 1,522,744
Net realized losses on investments.............. (1,251,996) (805,332)
Net change in unrealized appreciation or
depreciation on investments................... 896,196 (1,512,901)
----------- -----------
Increase (decrease) in net assets resulting
from operations........................... 1,075,797 (795,489)
----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A....................................... (987,709) (1,023,784)
Class B....................................... (372,657) (403,884)
Class C....................................... (68,034) (97,744)
Net realized gains on investments:
Class A....................................... - (350,337)
Class B....................................... - (160,988)
Class C....................................... - (36,465)
----------- -----------
Total distributions......................... (1,428,400) (2,073,202)
----------- -----------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A....................................... 1,410,335 3,097,303
Class B....................................... 926,778 2,270,139
Class C....................................... 158,931 1,123,725
Proceeds from issuance of shares as a result of
reinvested dividends:
Class A....................................... 657,760 973,836
Class B....................................... 319,654 519,553
Class C....................................... 63,581 127,664
Payments for redemption of shares:
Class A....................................... (4,666,183) (3,818,402)
Class B....................................... (2,575,405) (2,672,428)
Class C....................................... (685,331) (1,543,002)
----------- -----------
Increase (decrease) in net assets from
capital share transactions................ (4,389,880) 78,388
----------- -----------
Total decrease in net assets................ (4,742,483) (2,790,303)
Net assets at beginning of year................. 27,610,848 30,401,151
----------- -----------
Net assets at end of year (including
distributions in excess of net investment
income of $27,921 and $0, respectively)....... $22,868,365 $27,610,848
=========== ===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 Rule 12b-1 fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than Rule 12b-1 fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts in
the financial statements. Actual results could differ from those estimates.
INVESTMENTS IN SECURITIES
The Fund's net asset value is generally calculated as of the close of normal
trading on the New York Stock Exchange (typically 3:00 p.m. Central Time).
Investments in securities traded on a national exchange are valued at the last
sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market value.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. 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.
For federal income tax purposes, the Fund has a capital loss carryover in
the amount of $1,888,906 which, if not offset by subsequent capital gains, will
expire September 30, 2007 through September 30, 2009. It is unlikely the Board
of Directors will authorize a distribution of any net realized capital gain
until the available capital loss carryover has been offset or expires.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to decrease
undistributed net investment income and increase additional paid-in capital by
$31,118.
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, 2000, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $45,174,354 and $49,731,780, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital) a wholly owned subsidiary of Minnesota Life
Insurance Company (Minnesota Life). Under the agreement, Advantus Capital
manages the Fund's assets and provides research, statistical and advisory
services and pays related office rental and executive expenses and salaries. The
Fund has engaged PFPC Global Fund Services to act as its transfer agent,
dividend disbursing agent and redemption agent and bears the expenses of such
services. Prior to May 1, 2000, Advantus Capital paid the expense related to
transfer agent services. The fee for investment and advisory services is based
on the average daily net assets of the Fund at the annual rate of .60 percent on
the first $250 million in net assets, .55 percent on the next $250 million, .50
percent on the next $500 million and .45 percent on net assets in excess of $1
billion. Prior to May 1, 2000, the fee was charged at an 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. 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.
14
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
The Fund has entered into a shareholder and administrative services
agreement with Minnesota Life. Under this agreement, effective May 1, 2000, the
Fund pays a shareholder services fee, equal to $5 per shareholder account
annually, to Minnesota Life for shareholder services which Minnesota Life
provides. The Fund also pays Minnesota Life an administrative service fee equal
to $6,200 per month for accounting, legal and other administrative services
which Minnesota Life provides.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. Under the Advisory Agreement,
Advantus Capital has contractually agreed to absorb all Fund costs and expenses
which exceed 1.15% of Class A average daily net assets, 1.90% of Class B average
daily net assets and 1.90% of Class C average daily net assets through the
fiscal year of the Fund ending September 30, 2001. During the year ended
September 30, 2000, Advantus Capital contractually agreed to absorb $168,365 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 $101,969.
As of September 30, 2000, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 390,309 Class A shares which
represents 25.0 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 $10,406.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 2000 and 1999 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold.................................... 146,524 303,385 97,590 221,815 16,936 109,953
Issued for reinvested distributions..... 69,092 97,068 33,420 51,177 6,684 12,601
Redeemed................................ (490,313) (380,350) (268,370) (264,176) (71,962) (153,901)
-------- -------- -------- -------- ------- --------
(274,697) 20,103 (137,360) 8,816 (48,342) (31,347)
======== ======== ======== ======== ======= ========
</TABLE>
(6) ILLIQUID SECURITIES
At September 30, 2000, investments in illiquid securities are limited to 15%
of net assets at the time of the purchase. Securities are valued by procedures
described in note 2. The aggregate value of illiquid securities held by the Fund
at September 30, 2000 was $858,841 which represents 3.8% of net assets. Pursuant
to guidelines adopted by the Fund's Board of Directors, certain unregistered
securities are determined to be liquid and are not included within the percent
limitations specified above.
15
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..... $ 9.71 $ 10.69 $ 10.43 $ 10.03 $ 10.24
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ .58 .54 .59 .63 .62
Net gains (losses) on securities
(both realized and unrealized)..... (.11) (.79) .30 .40 (.22)
------- ------- ------- ------- -------
Total from investment operations... .47 (.25) .89 1.03 .40
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (.58) (.54) (.60) (.63) (.61)
Distributions from net realized
gains.............................. - (.19) (.03) - -
------- ------- ------- ------- -------
Total distributions................ (.58) (.73) (.63) (.63) (.61)
------- ------- ------- ------- -------
Net asset value, end of year........... $ 9.60 $ 9.71 $ 10.69 $ 10.43 $ 10.03
======= ======= ======= ======= =======
Total return (a)....................... 5.04% (2.36)% 8.75% 10.57% 4.03%
Net assets, end of year (in
thousands)........................... $15,002 $17,846 $19,419 $17,122 $16,528
Ratio of expenses to average daily net
assets (b)........................... 1.15% 1.15% 1.10% 1.00% 1.00%
Ratio of net investment income to
average daily net assets (b)......... 6.08% 5.41% 5.55% 6.18% 6.08%
Portfolio turnover rate (excluding
short-term securities)............... 191.4% 211.9% 237.2% 180.5% 222.6%
</TABLE>
------------
(a) Total return figures are based on a share outstanding throughout the period
and assume reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges. For periods less than one year, total return presented has not
been annualized.
(b) The Fund's Adviser voluntarily absorbed or waived $168,365, $115,756,
$119,092, $129,031 and $120,750 in expenses for the years ended September
30, 2000, 1999, 1998, 1997 and 1996, respectively. If Class A had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 1.84%, 1.55%, 1.58%, 1.64% and 1.68%, respectively,
and the ratio of net investment income to average daily net assets would
have been 5.39%, 5.01%, 5.07%, 5.54% and 5.40%, respectively. If Class B
shares had been charged for these expenses, the ratio of expenses to
average daily net assets would have been 2.59%, 2.28%, 2.28%, 2.34% and
2.38%, respectively, and the ratio of net investment income to average
daily net assets would have been 4.64%, 4.26%, 4.40%, 4.88% and 4.71%,
respectively. If Class C shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have been 2.59%, 2.28%,
2.28%, 2.34% and 2.38%, respectively, and the ratio of net investment
income to average daily net assets would have been 4.68%, 4.26%, 4.43%,
4.86% and 4.72%, respectively.
16
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..... $ 9.74 $ 10.71 $ 10.43 $ 10.02 $ 10.23
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ .51 .47 .51 .54 .53
Net gains (losses) on securities
(both realized and unrealized)..... (.12) (.78) .31 .41 (.21)
------- ------- ------- ------- -------
Total from investment operations... .39 (.31) .82 .95 .32
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (.51) (.47) (.51) (.54) (.53)
Distributions from net realized
gains.............................. - (.19) (.03) - -
------- ------- ------- ------- -------
Total distributions................ (.51) (.66) (.54) (.54) (.53)
------- ------- ------- ------- -------
Net asset value, end of year........... $ 9.62 $ 9.74 $ 10.71 $ 10.43 $ 10.02
======= ======= ======= ======= =======
Total return (a)....................... 4.16% (2.98)% 8.09% 9.72% 3.13%
Net assets, end of year (in
thousands)........................... $ 6,755 $ 8,171 $ 8,894 $ 6,263 $ 3,532
Ratio of expenses to average daily net
assets (b)........................... 1.90% 1.90% 1.90% 1.90% 1.90%
Ratio of net investment income to
average daily net assets (b)......... 5.33% 4.64% 4.78% 5.32% 5.19%
Portfolio turnover rate (excluding
short-term securities)............... 191.4% 211.9% 237.2% 180.5% 222.6%
<CAPTION>
CLASS C
------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..... $ 9.70 $ 10.68 $ 10.42 $ 10.02 $ 10.23
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ .51 .47 .51 .54 .52
Net gains (losses) on securities
(both realized and unrealized)..... (.11) (.79) .29 .40 (.21)
------- ------- ------- ------- -------
Total from investment operations... .40 (.32) .80 .94 .31
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (.51) (.47) (.51) (.54) (.52)
Distributions from net realized
gains.............................. - (.19) (.03) - -
------- ------- ------- ------- -------
Total distributions................ (.51) (.66) (.54) (.54) (.52)
------- ------- ------- ------- -------
Net asset value, end of year........... $ 9.59 $ 9.70 $ 10.68 $ 10.42 $ 10.02
======= ======= ======= ======= =======
Total return (a)....................... 4.26% (3.10)% 7.89% 9.61% 3.11%
Net assets, end of year (in
thousands)........................... $ 1,112 $ 1,594 $ 2,089 $ 899 $ 665
Ratio of expenses to average daily net
assets (b)........................... 1.91% 1.90% 1.90% 1.90% 1.90%
Ratio of net investment income to
average daily net assets (b)......... 5.32% 4.64% 4.81% 5.30% 5.20%
Portfolio turnover rate (excluding
short-term securities)............... 191.4% 211.9% 237.2% 180.5% 222.6%
</TABLE>
------------
(a) Total return figures are based on a share outstanding throughout the period
and assume reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges. For periods less than one year, total return presented has not
been annualized.
(b) The Fund's Adviser voluntarily absorbed or waived $168,365, $115,756,
$119,092, $129,031 and $120,750 in expenses for the years ended September
30, 2000, 1999, 1998, 1997 and 1996, respectively. If Class A had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 1.84%, 1.55%, 1.58%, 1.64% and 1.68%, respectively,
and the ratio of net investment income to average daily net assets would
have been 5.39%, 5.01%, 5.07%, 5.54% and 5.40%, respectively. If Class B
shares had been charged for these expenses, the ratio of expenses to
average daily net assets would have been 2.59%, 2.28%, 2.28%, 2.34% and
2.38%, respectively, and the ratio of net investment income to average
daily net assets would have been 4.64%, 4.26%, 4.40%, 4.88% and 4.71%,
respectively. If Class C shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have been 2.59%, 2.28%,
2.28%, 2.34% and 2.38%, respectively, and the ratio of net investment
income to average daily net assets would have been 4.68%, 4.26%, 4.43%,
4.86% and 4.72%, respectively.
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, 2000 and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the years in the five-year period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 2000, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 2000 and the results of its operations,
changes in its net assets and the financial highlights for the periods stated in
the first paragraph above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
November 10, 2000
18
<PAGE>
ADVANTUS BOND FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal period ended September 30, 2000. Dividends for the 2000 calendar year
will be reported to you on Form 1099-Div in late January 2001. Shareholders
should consult a tax adviser on how to report these distributions for state and
local purposes.
CLASS A
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Income distribution - taxable as dividend income, 8.0%
qualifying for deduction by corporations.
October 31, 1999............................................ $.0432
November 30, 1999........................................... .0457
December 31, 1999........................................... .0448
January 31, 2000............................................ .0508
February 29, 2000........................................... .0482
March 31, 2000.............................................. .0552
April 30, 2000.............................................. .0418
May 31, 2000................................................ .0527
June 30, 2000............................................... .0579
July 31, 2000............................................... .0484
August 31, 2000............................................. .0427
September 30, 2000.......................................... .0470
------
$.5784
======
</TABLE>
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Income distribution - taxable as dividend income, 8.0%
qualifying for deduction by corporations.
October 31, 1999............................................ $.0372
November 30, 1999........................................... .0398
December 31, 1999........................................... .0388
January 31, 2000............................................ .0449
February 28, 2000........................................... .0426
March 31, 2000.............................................. .0492
April 30, 2000.............................................. .0360
May 31, 2000................................................ .0469
June 30, 2000............................................... .0522
July 31, 2000............................................... .0425
August 31, 2000............................................. .0367
September 30, 2000.......................................... .0412
------
$.5080
======
</TABLE>
19
<PAGE>
ADVANTUS BOND FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED) - CONTINUED
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
------------ --------
<S> <C>
Income distribution - taxable as dividend income, 8.0%
qualifying for deduction by corporations.
October 31, 1999............................................ $.0371
November 30, 1999........................................... .0397
December 31, 1999........................................... .0387
January 31, 2000............................................ .0448
February 28, 2000........................................... .0425
March 31, 2000.............................................. .0491
April 30, 2000.............................................. .0358
May 31, 2000................................................ .0467
June 30, 2000............................................... .0520
July 31, 2000............................................... .0424
August 31, 2000............................................. .0365
September 30, 2000.......................................... .0410
------
$.5063
======
</TABLE>
20
<PAGE>
ADVANTUS BOND FUND
SHAREHOLDER VOTING RESULTS
On April 17, 2000, a special meeting of shareholders of Advantus Bond
Fund, Inc. was held. Shareholders of record on February 28, 2000, were entitled
to vote on the proposals described below.
(1) To elect a Board of Directors as follows:
<TABLE>
<CAPTION>
VOTES VOTES
DIRECTOR FOR WITHHELD
-------- ---------- --------
<S> <C> <C>
Charles E. Arner....................................... 1,744,645 104,231
Ellen S. Berscheid..................................... 1,744,645 104,231
Ralph D. Ebbott........................................ 1,744,645 104,231
Frederick P. Feuerherm................................. 1,744,645 104,231
William N. Westhoff.................................... 1,739,848 109,028
</TABLE>
(2) To approve the elimination or modification of the following investment
policies for:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
---------- ------- --------
<S> <C> <C> <C> <C>
A. Modify policy regarding borrowing and the issuance
of senior securities............................. 1,392,011 13,386 129,771
B. Modify policy regarding concentration in a 1,393,020 12,325 129,824
particular industry..............................
C. Modify policy regarding investments in real estate 1,393,224 12,173 129,771
and commodities..................................
D. Modify policy regarding lending................... 1,385,310 20,100 129,759
E. Eliminate policy restricting the pledging of 1,384,106 21,192 129,871
assets...........................................
F. Eliminate policy restricting margin purchases and 1,383,718 21,627 129,824
short sales......................................
G. Eliminate policy prohibiting participation in a 1,384,829 20,581 129,759
joint trading account............................
H. Eliminate policy limiting investment in restricted
securities and other illiquid assets............. 1,392,297 12,668 130,204
I. Eliminate diversification policy.................. 1,391,901 13,064 130,204
J. Eliminate policy regarding investments in issuers
that have been in operation for less than 3 1,385,735 19,296 130,138
years............................................
K. Eliminate policy addressing potential conflicts of 1,381,392 23,639 130,138
interest.........................................
L. Eliminate policy prohibiting investing in 1,383,334 22,039 129,796
companies for control............................
M. Eliminate policy restricting investments in other
investment companies............................. 1,383,524 21,406 130,238
</TABLE>
(3) To approve an amendment to the investment advisory agreement between the
Fund and Advantus Capital Management, Inc., as described in the proxy
statement.
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
1,384,390 21,083 129,696
</TABLE>
(4) To ratify the selection of KPMG LLP as independent public accountants for
the Fund.
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
--------- ------- --------
<S> <C> <C> <C>
1,711,088 11,486 126,303
</TABLE>
21
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that may apply.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same share class) at any time as your needs change. Exchanges are at the
then current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make twelve exchanges each calendar year without incurring a
transaction charge. Thereafter, there will be a $7.50 transaction charge for
each additional exchange within the calendar year.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive a check at
specified intervals from your fund account - subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DIVIDEND DEPOSITS: At your request we will deposit your dividends or
systematic withdrawals directly into your checking or savings account instead of
sending you a check.
TELEPHONE EXCHANGE: You may move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same share
class) just by calling our toll-free number. The Telephone Exchange privilege
will automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange may be changed (added/deleted) at any time by
submitting a request in writing.
SYSTEMATIC EXCHANGE: You may move a set amount of money monthly or quarterly
from one Advantus Fund to another Advantus Fund (with identical registrations
within the same share class) to diversify your investment portfolio and take
advantage of "dollar-cost averaging".
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life insurance premiums from your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge, if any.
AUTOMATIC INVESTMENT PLAN: This special purchase plan enables you to open an
Advantus Fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets.) The Automatic Investment
Plan allows you to invest automatically monthly, semi-monthly or quarterly from
your checking or savings account.
IRAs, OTHER QUALIFIED PLANS: You can use the Advantus Family of Funds for your
Traditional, Roth or Education Individual Retirement Account or other qualified
plans including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k) Money Purchase
or Defined Benefit plans.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account or wire
transferred to your bank of record for the account. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Redemption privilege will automatically be established
unless otherwise indicated on the Account Application. Telephone Redemption may
be changed (added/deleted) at any time by submitting a request in writing. To
have the redemption automatically deposited into your checking account, please
send a voided check
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from your bank. Depending on the performance of the underlying investment
options, the value may be worth more or less than the original amount invested
upon redemption. Some limitations apply, please refer to the prospectus for
details.
ACCOUNT UPDATES: You'll receive written confirmation of every investment you
initiate and quarterly statements to help you track all of your Advantus Fund
investments and annual tax statements. Semi-annual and annual reports will
provide you with portfolio information, fund performance data and the current
investment outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from Advantus Shareholder Services, call 1-800-665-6005.
Advantus Account Representatives are available Monday through Friday from 7:30
a.m. to 5:15 p.m. Central Time. Our voice response system is available 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
INTERNET ADDRESS: www.AdvantusFunds.com
HOW TO INVEST
You can invest in one or more of the eleven Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., distributor of the
Funds. Contact your representative for information and a prospectus for any of
the Advantus Funds you are interested in. To find a Registered Representative
near you, call the toll-free service line (1-800-665-6005) or visit
www.AdvantusFunds.com.
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects and
reviews the Fund's investments and provides executive and other personnel for
the Fund's management. (For the Advantus International Balanced Fund, Inc.,
Advantus Enterprise Fund, Inc., and Advantus Venture Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., Credit Suisse Asset Management,
LLC, and State Street Research & Management Company, respectively, selects the
Fund's investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing $3.2
billion in assets in addition to $11.5 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 14 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
Advantus Real Estate Securities Fund
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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.
[LOGO]
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
<PAGE>
<TABLE>
<S> <C>
ASCEND FINANCIAL SERVICES, INC. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL MN
PERMIT NO. 3547
FORWARDING SERVICE REQUESTED
</TABLE>
F.48645 Rev. 11-2000
