<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS CORNERSTONE FUND
SEPTEMBER 30, 1998
<PAGE>
ADVANTUS CORNERSTONE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 9
STATEMENT OF OPERATIONS 10
STATEMENTS OF CHANGES IN NET ASSETS 11
NOTES TO FINANCIAL STATEMENTS 12
INDEPENDENT AUDITORS' REPORT 18
FEDERAL INCOME TAX INFORMATION 19
SHAREHOLDER SERVICES 21
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
Economic prosperity and record-setting U.S. markets over the last few years have
lulled many Americans into dreaming of perpetual gain. In this year, the effects
of global economic turmoil and market volatility have awakened us.
The global economy has been exposed to the negative effects of Asia's economic
debacle for over a year, and this negative growth is highly contagious. About 40
percent of the world's economies are in recession. Japan continues to seek the
financial stimulus necessary to recover. In Russia, a backlash against
capitalism continues to unfold. Also, Latin America, Brazil in particular, has
seen its competitive position deteriorate sharply. We anticipate that world
growth will slow to an annual rate of 1 percent by the end of 1998. This is a
dramatic change from one year ago (down 3 percent).
As expected, the U.S. economy is slowing. The growth forecast for our country at
the end of this reporting period (September 30, 1998) was 1.5 to 2 percent, a
drop from the 3 percent experienced a year ago. Current economic conditions
favor bonds, as yields will likely decline in light of slowing economic
conditions. Deflation fears have sustained a global "flight to quality" as
investors dumped the riskier assets of developing countries and sought the
relative safety of high quality bonds in the major countries.
We anticipate that there will be a continuation of tight fiscal policy. However,
monetary policy will change. We expect interest rates to move lower in the
upcoming quarters, as we believe it is likely that the Federal Reserve Board
will aggressively lower the Fed Funds rate to inject liquidity into a globally
stressed financial system.
The yield curve should steepen, with short-term interest rates declining further
than long-term interest rates. We expect the corporate bond sector will
stabilize and spreads will recover as the Fed acts to provide liquidity.
Many stocks have declined significantly in response to reduced earnings
expectations, and many stocks are now attractively valued. Interest rates have
declined, which improves the relative value of stocks. However, we expect that
stocks may remain volatile for the near term.
We have witnessed a significantly higher level of volatility in the U.S. stock
markets as most indices and stock funds came under pressure. The flight to
quality in all kinds of securities was reinforced and magnified by more visible
risks in a number of sectors.
A declining equity market hurt corporate bonds as investors began worrying about
the likelihood of lower earnings. Companies with international exposure became a
concern. Liquidity in the corporate bond market began to evaporate, as traders
became reluctant to bid on corporate bonds. These factors pushed corporate bond
spreads even wider, causing them to underperform U.S. Treasury securities.
In the pages that follow, the Fund's manager will give you information about how
the economy and conditions within the market affected the Fund during this
reporting period. The manager will specifically discuss your Advantus Fund's
performance and share some strategies that were used to manage the Fund.
Meanwhile, continue investing for the long term. We believe that you will derive
the greatest benefit by doing so. Be thoughtful about the diversification of
your portfolio, and maintain a high quality portfolio. Consider putting a
periodic investment program in place. It will help you weather volatility in the
markets.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<PAGE>
ADVANTUS CORNERSTONE FUND
PERFORMANCE UPDATE
[PHOTO]
GARY ASTER, CFA
PORTFOLIO MANAGER
The Advantus Cornerstone
Fund is a mutual fund designed for
investors seeking long-term accumulation
of capital. In pursuit of this objective,
the Fund will invest primarily in equity
securities of companies, which, in the
opinion of the Adviser, have market
values, which appear low relative to
their underlying value or future growth
potential.
-Dividends paid quarterly.
-Capital gains distributions paid annually.
PERFORMANCE
The Cornerstone Fund's performance for the year ended September 30, 1998 for
each class of shares offered is as follows:
<TABLE>
<S> <C>
Class A.................................. -16.45 percent*
Class B.................................. -17.21 percent*
Class C.................................. -17.28 percent*
</TABLE>
The Fund's benchmark index, the Russell 1000 Value Index,** earned 3.59 percent
and the S&P Barra Value Index+ returned -.24 percent for the same period.
In prior reporting periods, the S&P Barra Value Index+ was used as the Fund's
benchmark. The Russell 1000 Value Index** better fits our stated investment
objective than did the S&P Barra Value Index.+
PERFORMANCE ANALYSIS
Most of the underperformance was recorded in the first six months of the period
as significant anticipated gains in certain commodity prices failed to
materialize. During the fiscal fourth quarter the complexion of the Fund was
significantly changed. The weighted average market capitalization was increased
significantly, valuation measures such as price to earnings, price to book value
and price to cash flow were reduced and the dividend yield increased. Also,
investments, which assumed significant increases in the prices of certain
commodities, such as oil, have been--for the most part--eliminated.
The Communications, Consumer Durables, Financial and Utility sectors provided
the best relative performance for the Fund during the period, while Energy,
Basic Materials and Technology were the worst. Additions to the Fund included
Service Corporation International, the nation's largest operator of funeral
homes, Diebold, the largest producer of Automatic Teller Machines (ATMs) and
Union Pacific Corporation, the largest operator of rail systems in the United
States. Each of these investments, while very different in the types of
businesses they operate, share several common characteristics: a significant
price decline prior to purchase and a commensurate shrinkage in valuation, sound
fundamentals and--in our opinion--modest risk.
OUTLOOK
We believe the Fund will, no doubt, experience further changes in the future
although less dramatic than those described above which were initiated during
this reporting period. The recent market decline has greatly expanded the list
of possible additions to the Fund, if we feel their prospects are superior to
any one of our existing holdings. While it is not possible to predict the
direction of the stock market, it appears to us that a "doomsday" scenario is
not appropriate at this time. The recent declines were mostly the result of a
growing number of earnings disappointments. This was exacerbated by very high
valuations by almost any traditional measure. With most of these excesses now
wrung out of prices, future market declines due to earnings shortfalls will
likely be modest and within the boundaries of normal cyclical adjustments.
2
<PAGE>
ADVANTUS CORNERSTONE
FUND
SEPTEMBER 30, 1998
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS
CORNERSTONE FUND, S&P 500 BARRA VALUE INDEX, RUSSELL 1000 VALUE 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 Cornerstone Fund compared to the S&P 500 Barra
Value Index, Russell 1000 Value Index, and the Consumer Price Index. The lines
in each graph represent the cumulative total return of a hypothetical $10,000
investment made on the inception date of each class of shares of the Advantus
Cornerstone Fund (September 16, 1994 for Class A and Class B and March 1, 1995
for Class C) through September 30, 1998.
CLASS A AND B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C> <C>
Class A:
One year (20.62)%
Since inception (9/16/94) 13.68%
Class B:
One year (21.35)%
Since inception (9/16/94) 13.94%
Class A Class B S&P 500 Barra-Value Index Russell 1000 Value Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000 $10,000
9/30/94 9,374 9,870 9,824 9,743 10,054
9/30/95 11,659 11,708 12,582 12,441 10,275
9/30/96 14,517 14,649 14,929 14,673 10,570
9/30/97 20,085 20,400 20,784 20,880 10,818
9/30/98 16,782 16,947 20,735 21,629 10,973
</TABLE>
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5 percent
front-end sales charge or Class B's maximum 5 percent contingent deferred sales
charge. Investment returns and principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
**The Russell 1000 Growth Index contains stock from the Russell 1000 with low
book to price ratio. The Russell 1000 are the 1,000 largest companies in the
Russell 3000. The Russell 3000 is an unmanaged index of 3,000 common stocks,
which represents approximately 98 percent of the U.S. market.
+The S&P 500 Barra Value Index contains those stocks from the S&P 500 that have
a price-to-book ratio below the capitalization weighted median price-to-book
ratio of the S&P 500.
3
<PAGE>
ADVANTUS CORNERSTONE
FUND
SEPTEMBER 30, 1998
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year (17.28)%
Since inception (3/1/95) 15.64%
Class C S&P 500 Barra Value Index CPI Russell 1000 Value Index
3/01/95 $10,000 $10,000 $10,000 $10,000
9/30/95 12,013 11,865 10,146 12,107
9/30/96 14,846 14,078 10,437 14,280
9/30/97 20,354 19,599 10,682 20,320
9/30/98 16,838 19,553 10,834 21,049
</TABLE>
The preceding charts are useful because they provide you with more information
about your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum applicable
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial professional's investment advice. Individuals cannot buy even an
unmanaged index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
4
<PAGE>
ADVANTUS CORNERSTONE
FUND
SEPTEMBER 30, 1998
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------ ------ ----------- -----------
<S> <C> <C> <C>
Everest Reinsurance
Holdings..................... 119,300 $ 4,451,381 3.9%
Exxon Corporation............. 62,200 4,365,662 3.9%
El Paso Energy Corporation.... 126,554 4,105,095 3.6%
Texas Utilities Company....... 83,500 3,887,969 3.4%
Hormel Foods Corporation...... 143,114 3,873,023 3.4%
Dominion Resources, Inc....... 86,000 3,837,750 3.4%
Teco Energy................... 130,600 3,730,263 3.3%
SBC Communications, Inc....... 75,642 3,361,341 3.0%
International Business
Machine...................... 25,100 3,212,800 2.8%
Federal National Mortgage
Association.................. 47,900 3,077,575 2.7%
----------- ---
$37,902,859 33.4%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 3.9%
Health Care 0.5%
Preferred Stock 1.1%
Transportation 2.2%
Capital Goods 3.6%
Technology 4.1%
Consumer Cyclical 8.7%
Consumer Staples 8.9%
Basic Materials 9.2%
Communication Services 9.8%
Energy 11.2%
Utilities 14.0%
Financial 22.8%
</TABLE>
5
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (95.0%)
BASIC MATERIALS (9.2%)
Aluminum (1.6%)
37,900 Reynolds Metals Company.......................... $ 1,925,794
----------------
Chemicals (4.4%)
20,200 Cytec Industries, Inc. (b)....................... 361,075
22,200 EI DuPont De Nemours & Company................... 1,245,975
105,000 Morton International, Inc........................ 2,296,875
46,600 Sigma-Aldrich.................................... 1,345,575
----------------
5,249,500
----------------
Paper and Forest (3.2%)
76,737 Fort James Corporation........................... 2,517,933
42,400 Mead Corporation................................. 1,248,150
----------------
3,766,083
----------------
CAPITAL GOODS (3.6%)
Electrical Equipment (3.6%)
103,500 Diebold.......................................... 2,277,000
80,500 Raychem Corporation.............................. 1,962,187
----------------
4,239,187
----------------
COMMUNICATION SERVICES (9.8%)
Telecommunication (.4%)
9,999 MCI Worldcom, Inc. (b)........................... 488,701
----------------
Telephone (9.4%)
47,400 AT&T Corporation................................. 2,769,937
39,600 Bell Atlantic Corporation........................ 1,918,125
25,500 Bellsouth Corporation............................ 1,918,875
21,000 GTE Corporation.................................. 1,155,000
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMUNICATION SERVICES--CONTINUED
75,642 SBC Communications, Inc.......................... $ 3,361,341
----------------
11,123,278
----------------
CONSUMER CYCLICAL (8.7%)
Auto (2.1%)
31,000 Ford Motor Company............................... 1,455,062
18,700 General Motors Corporation....................... 1,022,656
----------------
2,477,718
----------------
Retail (4.4%)
30,000 CompUSA, Inc. (b)................................ 519,375
50,100 Federated Department Stores (b).................. 1,822,387
54,000 Officemax (b).................................... 529,875
43,700 Tandy Corporation................................ 2,337,950
----------------
5,209,587
----------------
Service (2.2%)
27,800 H & R Block, Inc................................. 1,150,225
33,200 Service Corporation International................ 1,058,250
11,200 Tele-Communications, Inc. (b).................... 438,200
----------------
2,646,675
----------------
CONSUMER STAPLES (8.9%)
Food (3.3%)
143,114 Hormel Foods Corporation......................... 3,873,023
----------------
Retail (1.6%)
178,000 Food Lion, Inc................................... 1,891,250
----------------
Service (1.5%)
61,300 Deluxe Corporation............................... 1,743,219
----------------
Tobacco (2.5%)
64,700 Philip Morris Companies, Inc..................... 2,980,244
----------------
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
ENERGY (11.2%)
<C> <S> <C>
Oil (10.7%)
25,400 Amoco Corporation................................ $ 1,368,425
17,300 Chevron Corporation.............................. 1,454,281
62,200 Exxon Corporation................................ 4,365,662
20,900 Mobil Corporation................................ 1,587,094
14,200 Texaco, Inc...................................... 890,163
115,800 YPF Sociedad Anonima (c)......................... 3,010,800
----------------
12,676,425
----------------
Oil & Gas (.5%)
7,900 Atlantic Richfield Company....................... 560,406
----------------
FINANCIAL (22.8%)
Banks (7.8%)
38,810 Banc One Corporation............................. 1,654,276
21,500 Chase Manhattan Corporation...................... 929,875
11,700 Citicorp......................................... 1,087,369
24,300 First Union Corporation.......................... 1,243,856
49,800 NationsBank Corporation (b)...................... 2,664,300
44,200 TCF Financial Corporation........................ 878,475
2,170 Wells Fargo & Company............................ 770,350
----------------
9,228,501
----------------
Consumer Finance (1.5%)
23,500 American Express Company......................... 1,824,188
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
Finance-Diversified (3.4%)
47,900 Federal National Mortgage Association............ $ 3,077,575
29,500 Starwood Lodging Trust........................... 899,750
----------------
3,977,325
----------------
Insurance (5.5%)
20,200 Allstate Corporation............................. 842,088
16,000 American International Group..................... 1,232,000
119,300 Everest Reinsurance Holdings..................... 4,451,381
----------------
6,525,469
----------------
Investment Bankers/Brokers (.6%)
15,500 Morgan Stanley Dean Witter....................... 667,469
----------------
Real Estate Investment Trust (2.1%)
57,300 Equity Residential Properties.................... 2,417,344
----------------
Savings and Loans (1.9%)
164,960 Sovereign Bancorp Incorporated................... 2,196,030
----------------
HEALTH CARE (.5%)
Special Services (.5%)
24,500 Equity Corporation (b)........................... 551,250
----------------
TECHNOLOGY (4.1%)
Technology (4.1%)
50,300 Electronic Data Systems Corporation.............. 1,669,331
25,100 International Business Machine................... 3,212,800
----------------
4,882,131
----------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS CORNERSTONE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
TRANSPORTATION (2.2%)
<C> <S> <C>
Railroads (1.1%)
31,100 Union Pacific Corporation........................ $ 1,325,638
----------------
Trucking (1.1%)
45,500 CNF Transportation............................... 1,325,188
----------------
UTILITIES (14.0%)
Electric Companies (10.5%)
24,500 AES Corporation (b).............................. 908,031
86,000 Dominion Resources, Inc.......................... 3,837,750
130,600 Teco Energy...................................... 3,730,263
83,500 Texas Utilities Company.......................... 3,887,969
----------------
12,364,013
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
UTILITIES--CONTINUED
Natural Gas (3.5%)
126,554 El Paso Energy Corporation....................... $ 4,105,095
----------------
Total common stock
(cost: $111,682,871)......................................... 112,240,731
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (1.1%)
COMMUNICATION SERVICES (1.1%)
Telephone (1.1%)
22,100 Mediaone, Inc. (b)............................... 1,234,837
----------------
Total preferred stock
(cost: $1,284,563)........................................... 1,234,837
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.6%)
$3,503,768 Federated Prime Obligation Fund, current rate 5.470%....................... 3,503,768
1,005,000 US Treasury................................................5.041% 10/01/98 1,005,000
390,000 US Treasury................................................4.982% 11/05/98 388,487
1,770,000 US Treasury...................................... 4.593 - 4.797% 12/10/98 1,755,649
------------
Total short-term securities (cost: $6,651,270)............................. 6,652,904
------------
Total investments in securities (cost: $119,618,704) (d)................... $120,128,472
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 2.5% of the net assets in foreign securities as of September
30, 1998.
(d) Also represents the cost of securities for federal income tax purposes at
September 30, 1998. The aggregate unrealized appreciation and depreciation
of investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation........... $ 11,540,794
Gross unrealized depreciation........... (11,031,026)
------------
Net unrealized appreciation............. $ 509,768
------------
------------
</TABLE>
8
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing
(identified cost: $119,618,704)....... $120,128,472
Cash in bank on demand deposit......... 3,681
Receivable for Fund shares sold........ 325,614
Accrued interest receivable............ 14,796
Dividends receivable................... 176,484
Organizational costs (note 5).......... 10,174
------------
Total assets....................... 120,659,221
------------
LIABILITIES
Payable for investment securities
purchased............................. 2,305,723
Payable for Fund shares redeemed....... 76,966
Payable to Adviser..................... 171,840
Other payables......................... 1,617
------------
Total liabilities.................. 2,556,146
------------
Net assets applicable to outstanding
capital stock......................... $118,103,075
------------
------------
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)...................... $ 85,271
Additional paid-in capital........... 121,891,995
Undistributed net investment
income.............................. 18,879
Accumulated net realized losses from
investments......................... (4,402,838)
Unrealized appreciation on
investments......................... 509,768
------------
Total--representing net assets
applicable to outstanding capital
stock............................. $118,103,075
------------
------------
Net assets applicable to outstanding
Class A shares........................ $ 93,833,373
------------
------------
Net assets applicable to outstanding
Class B shares........................ $ 21,176,125
------------
------------
Net assets applicable to outstanding
Class C shares........................ $ 3,093,577
------------
------------
Shares outstanding and net asset value
per share:
Class A--Shares outstanding
6,758,386........................... $ 13.88
------------
------------
Class B--Shares outstanding
1,542,620........................... $ 13.73
------------
------------
Class C--Shares outstanding
226,076............................. $ 13.68
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 436,731
Dividends............................ 2,472,164
------------
Total investment income.......... 2,908,895
------------
Expenses (note 4):
Investment advisory fee.............. 1,091,329
Distribution fees--Class A........... 327,605
Distribution fees--Class B........... 235,935
Distribution fees--Class C........... 36,210
Administrative services fee.......... 44,000
Amortization of organizational
costs............................... 11,099
Custodian fees....................... 9,845
Auditing and accounting services..... 17,670
Legal fees........................... 5,601
Directors' fees...................... 1,953
Registration fees.................... 61,394
Printing and shareholder reports..... 38,715
Insurance............................ 5,202
Other................................ 14,752
------------
Total expenses................... 1,901,310
Less fees and expenses waived or
absorbed:
Class A distribution fees.......... (107,096)
------------
Total net expenses............... 1,794,214
------------
Investment income--net........... 1,114,681
------------
Realized and unrealized losses on
investments:
Net realized losses on investments
(note 3)............................ (957,360)
Net change in unrealized appreciation
or depreciation on investments...... (23,581,265)
------------
Net losses on investments........ (24,538,625)
------------
Net decrease in net assets resulting
from operations....................... $(23,423,944)
------------
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS CORNERSTONE FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Investment income--net............... $ 1,114,681 $ 630,461
Net realized gain (loss) on
investments......................... (957,360) 10,539,073
Net change in unrealized appreciation
or depreciation on investments...... (23,581,265) 18,224,827
------------ ------------
Increase (decrease) in net assets
resulting from operations....... (23,423,944) 29,394,361
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A............................ (1,055,429) (640,427)
Class B............................ (55,277) (9,734)
Class C............................ (7,294) (1,338)
Net realized gains on investments:
Class A............................ (10,892,809) (5,575,937)
Class B............................ (2,297,711) (967,496)
Class C............................ (378,519) (158,217)
------------ ------------
Total distributions.............. (14,687,039) (7,353,149)
------------ ------------
Capital share transactions (notes 4 and
6):
Proceeds from sales:
Class A............................ 29,714,273 43,863,072
Class B............................ 11,465,827 12,068,461
Class C............................ 2,734,418 2,128,188
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 8,864,188 3,121,241
Class B............................ 2,275,526 942,926
Class C............................ 364,701 141,346
Payments for redemption of shares:
Class A............................ (21,641,291) (6,118,647)
Class B............................ (7,290,091) (2,140,767)
Class C............................ (2,399,684) (554,087)
------------ ------------
Increase in net assets from
capital share transactions...... 24,087,867 53,451,733
------------ ------------
Total increase (decrease) in net
assets.......................... (14,023,116) 75,492,945
Net assets at beginning of year........ 132,126,191 56,633,246
------------ ------------
Net assets at end of year (including
undistributed net investment income of
$18,879 and $0, respectively)......... $118,103,075 $132,126,191
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(1) ORGANIZATION
Advantus Cornerstone Fund, Inc. (the Fund) was incorporated on January 27,
1994. The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. The Fund's
investment objective is to seek the long-term accumulation of capital.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses are allocated to each class of shares based upon its relative
net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
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.
12
<PAGE>
ADVANTUS CORNERSTONE 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.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification was made to increase undistributed
net investment income and decrease additional paid-in capital by $22,198.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly.
Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1998, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities aggregated
$153,967,248 and $145,704,758, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital or the Adviser), a wholly-owned subsidiary of
Minnesota Life Insurance Company (Minnesota Life), formerly known as The
Minnesota Mutual Life Insurance Company. Under the agreement, Advantus Capital
manages the Fund's assets and provides research, statistical and advisory
services and pays related office rental and executive expenses and salaries. In
addition, as part of the advisory fee, Advantus Capital pays the expenses of the
Funds transfer, dividend disbursing and redemption agent, Minnesota Life.
Effective October 26, 1998, the Funds transfer agent is First Data Investor
Services Group, Inc. The fee for investment management and advisory services is
based on the average daily net assets of the Fund at the annual rate of .80
percent.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to Ascend Financial Services,
Inc. (Ascend), the underwriter of the Fund and wholly-owned subsidiary of
Advantus Capital, to be used to pay certain expenses incurred in the
distribution, promotion and servicing of the Fund's shares. The Class A Plan
provides for a fee up to .30 percent of average daily net assets of Class A
shares. The Class B and Class C Plans provide for a fee up to 1.00 percent of
average daily net assets of Class B and Class C shares, respectively. The Class
B and Class C 1.00 percent fee is comprised of a .75 percent distribution fee
and a .25 percent service fee. Ascend is currently waiving that portion of Class
A distribution fees which exceeds, as a percentage of average daily net assets,
.25 percent. Prior to January 30, 1998, Ascend waived that portion of Class A
distribution fees which exceeded, as a percentage of average daily net assets,
.10 percent. Ascend waived Class A distribution fees in the amount of $107,096
for the year ended September 30, 1998.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
13
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund pays an administrative services fee, equal to $3,700 per month, to
Minnesota Life for accounting, auditing, legal and other administrative services
which Minnesota Life provides. Prior to February 1, 1998, the administrative
services fee was $3,600 per month. Effective October 26, 1998, Minnesota Life
became the shareholder services agent for the fund. Under the new shareholder
and administrative services agreement, the administrative services fee remains
unchanged, and for shareholder services performed by Minnesota Life, the Adviser
will pay Minnesota Life an annual account servicing fee as agreed by the Adviser
and Minnesota Life.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $488,199.
As of September 30, 1998, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 2,263,846 Class A shares which
represents 33.5 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 $5,520.
(5) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs will be amortized over 60 months on a
straight-line basis beginning with the commencement of operations. If any or all
of the shares held by Advantus Capital, or any other holder, representing
initial capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion (based on the ratio
that the number of initial shares redeemed bears to the total number of
outstanding initial shares of the Fund at the date of redemption) of the
unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended Sepetember 30, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------- ---------------------- ---------------------
1998 1997 1998 1997 1998 1997
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold....................................... 1,800,201 2,693,449 705,598 747,344 169,067 130,326
Issued for reinvested distributions........ 554,502 203,010 144,152 63,541 23,295 9,776
Redeemed................................... (1,342,646) (362,180) (463,039) (130,360) (150,239) (33,515)
----------- ---------- ---------- ---------- ---------- ---------
1,012,057 2,534,279 386,711 680,525 42,123 106,587
----------- ---------- ---------- ---------- ---------- ---------
----------- ---------- ---------- ---------- ---------- ---------
</TABLE>
(7) YEAR 2000 (UNAUDITED)
In 1995, Minnesota Life began addressing computer systems requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Life
plans to spend approximately $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.
14
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
PERIOD FROM
SEPTEMBER 16,
YEAR ENDED SEPTEMBER 30, 1994(b) TO
--------------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
----------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.68 $ 15.06 $ 12.96 $ 10.63 $ 10.77
----------- ---------- -------- -------- -------------
Income from investment operations:
Net investment income (loss).......... .16 .14 .09 .12 .01
Net gains or losses on securities
(both
realized and unrealized)............ (3.04) 5.19 2.91 2.42 (.15)
----------- ---------- -------- -------- -------------
Total from investment operations.... (2.88) 5.33 3.00 2.54 (.14)
----------- ---------- -------- -------- -------------
Less distributions:
Dividends from net investment
income.............................. (.16) (.14) (.08) (.16) --
Distributions from capital gains...... (1.76) (1.57) (.82) (.05) --
----------- ---------- -------- -------- -------------
Total distributions................. (1.92) (1.71) (.90) (.21) --
----------- ---------- -------- -------- -------------
Net asset value, end of period.......... $ 13.88 $ 18.68 $ 15.06 $ 12.96 $ 10.63
----------- ---------- -------- -------- -------------
----------- ---------- -------- -------- -------------
Total return (c)........................ (16.45)% 38.35% 24.52% 24.38% (1.30)%
Net assets, end of period (in
thousands)............................ $ 93,833 $ 107,322 $ 48,383 $ 29,520 $ 10,616
Ratio of expenses to average daily net
assets (d)(e)......................... 1.16% 1.08% 1.26% 1.35% .05%(f)
Ratio of net investment income (loss) to
average daily net assets (d)(e)....... .98% .85% .70% 1.01% .07%(f)
Portfolio turnover rate (excluding
short-term securities)................ 114.4% 87.7% 128.0% 160.1% 8.1%
</TABLE>
- ------------
(a) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995,
the Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(b) Commencement of operations.
(c) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end and contingent deferred
sales charges. For periods less than one year, total return presented has
not been annualized.
(d) The Fund's Distributor voluntarily waived $107,096, $149,466 and $74,454 in
Class A distribution fees for the years ended September 30, 1998, 1997 and
1996, respectively. If the Fund had been charged for these fees, the ratio
of expenses to average daily net assets would have been 1.25%, 1.28% and
1.46%, respectively and the ratio of net investment income to average daily
net assets would have been .89%, .65% and .50%, respectively, for Class A
shares.
(e) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994. If the Fund had been charged for these expenses,
the ratios of expenses to average daily net assets would have been 1.81%
and .07%, and the ratios of net investment income (loss) to average daily
net assets would have been .56% and .05% for Class A shares.
(f) Ratios presented for the period from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
15
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 16,
YEAR ENDED SEPTEMBER 30, 1994(b) TO
---------------------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
----------- ---------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.52 $ 14.92 $ 12.90 $ 10.63 $ 10.77
----------- ---------- ---------- --------- ------
Income from investment operations:
Net investment income (loss).......... .03 -- (.01) .02 (.01)
Net gains or losses on securities
(both
realized and unrealized)............ (3.02) 5.18 2.86 2.41 (.13)
----------- ---------- ---------- --------- ------
Total from investment operations.... (2.99) 5.18 2.85 2.43 (.14)
----------- ---------- ---------- --------- ------
Less distributions:
Dividends from net investment
income.............................. (.04) (.01) (.01) (.11) --
Distributions from capital gains...... (1.76) (1.57) (.82) (.05) --
----------- ---------- ---------- --------- ------
Total distributions................. (1.80) (1.58) (.83) (.16) --
----------- ---------- ---------- --------- ------
Net asset value, end of period.......... $ 13.73 $ 18.52 $ 14.92 $ 12.90 $ 10.63
----------- ---------- ---------- --------- ------
----------- ---------- ---------- --------- ------
Total return (c)........................ (17.21)% 37.68% 23.37% 23.18% (1.30)%
Net assets, end of period (in
thousands)............................ $ 21,176 $ 21,405 $ 7,095 $ 1,635 $ 93
Ratio of expenses to average daily net
assets (d)............................ 1.95% 1.98% 2.15% 2.25% .09%(e)
Ratio of net investment income (loss) to
average daily net assets (d).......... .18% (.05)% (.11)% .05% .03%(e)
Portfolio turnover rate (excluding
short-term securities)................ 114.4% 87.7% 128.0% 160.1% 8.1%
</TABLE>
- ------------
(a) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995,
the Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(b) Commencement of operations.
(c) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end and contingent deferred
sales charges. For periods less than one year, total return presented has
not been annualized.
(d) The Fund's Distributor and Adviser voluntarily waived or absorbed $83,746
and $1,872 in expenses for the year ended September 30, 1995 and the period
ended September 30, 1994. If the Fund had been charged for these expenses,
the ratios of expenses to average daily net assets would have been 2.45%
and .10% for Class B shares, and 2.34% for Class C shares. The ratios of
net investment income (loss) to average daily net assets would have been
(.15)% and .02% for Class B shares and (.16)% for Class C shares.
(e) Ratios presented for the period from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(f) Adjusted to an annual basis.
16
<PAGE>
ADVANTUS CORNERSTONE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------
PERIOD FROM
MARCH 1,
YEAR ENDED SEPTEMBER 30, 1995(b) TO
------------------------------------- SEPTEMBER 30,
1998 1997 1996 1995
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 18.48 $ 14.94 $ 12.90 $ 10.79
----------- ---------- ---------- ------
Income from investment operations:
Net investment income (loss).......... .03 -- -- .02
Net gains or losses on securities
(both
realized and unrealized)............ (3.04) 5.12 2.88 2.14
----------- ---------- ---------- ------
Total from investment operations.... (3.01) 5.12 2.88 2.16
----------- ---------- ---------- ------
Less distributions:
Dividends from net investment
income.............................. (.03) (.01) (.02) (.05)
Distributions from capital gains...... (1.76) (1.57) (.82) --
----------- ---------- ---------- ------
Total distributions................. (1.79) (1.58) (.84) (.05)
----------- ---------- ---------- ------
Net asset value, end of period.......... $ 13.68 $ 18.48 $ 14.94 $ 12.90
----------- ---------- ---------- ------
----------- ---------- ---------- ------
Total return (c)........................ (17.28)% 37.10% 23.59% 20.13%
Net assets, end of period (in
thousands)............................ $ 3,094 $ 3,399 $ 1,156 $ 47
Ratio of expenses to average daily net
assets (d)............................ 1.95% 1.98% 2.13% 2.25%(f)
Ratio of net investment income (loss) to
average daily net assets (d).......... .18% (.05)% (.01)% (.07)%(f)
Portfolio turnover rate (excluding
short-term securities)................ 114.4% 87.7% 128.0% 160.1%
</TABLE>
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Cornerstone Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Cornerstone
Fund, Inc. (the Fund) as of September 30, 1998 and the related statement of
operations for the year then ended, the statement of changes in net assets for
the two years then ended and the financial highlights for the four years then
ended and the period from September 16, 1994 to September 30, 1994. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased but not received, we request confirmations
from brokers, and where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1998 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 6, 1998
18
<PAGE>
ADVANTUS CORNERSTONE FUND
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal year ended September 30, 1998. Dividends for the 1998 calendar year will
be reported to you on Form 1099-Div in late January 1999. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income, 74.8% qualifying for deduction by corporations
December 23, 1997......................................................................................... $ 1.2114
March 25, 1998............................................................................................ .0447
June 25, 1998............................................................................................. .0417
September 24, 1998........................................................................................ .0362
---------
$ 1.3340
---------
---------
Capital gains distribution--taxable as long-term capital gains, 28% rate--88.46%, 20% rate--11.54%
December 17, 1997......................................................................................... $ .5811
---------
---------
</TABLE>
The distribution of $1.2114 payable on December 23, 1997 represents $1.1797
of short-term capital gains (taxable as dividend income) and $.0317 from net
investment income.
CLASS B
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income, 74.8% qualifying for deduction by corporations
December 23, 1997......................................................................................... $ 1.1797
March 25, 1998............................................................................................ .0150
June 25, 1998............................................................................................. .0123
September 24, 1998........................................................................................ .0080
---------
$ 1.2150
---------
---------
Capital gains distribution--taxable as long-term capital gains, 28% rate--88.46%, 20% rate--11.54%
December 17, 1997......................................................................................... $ .5811
---------
---------
</TABLE>
The distribution of $1.1797 payable on December 23, 1997 represents $1.1797
of short-term capital gains (taxable as dividend income).
19
<PAGE>
ADVANTUS CORNERSTONE FUND
FEDERAL INCOME TAX INFORMATION--CONTINUED
CLASS C
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Income distributions--taxable as dividend income, 74.8% qualifying for deduction by corporations
December 23, 1997......................................................................................... $ 1.1797
March 25, 1998............................................................................................ .0145
June 25, 1998............................................................................................. .0106
September 24, 1998........................................................................................ .0063
---------
$ 1.2111
---------
---------
Capital gains distribution--taxable as long-term capital gains, 28% rate--88.46%, 20% rate--11.54%
December 17, 1997......................................................................................... $ .5811
---------
---------
</TABLE>
The distribution of $1.1797 payable on December 23, 1997 represents $1.1797
of short-term capital gains (taxable as dividend income).
20
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make twelve exchanges each calendar year without incurring a
transaction charge. Thereafter, there will be a $7.50 transaction charge for
each additional exchange within the calendar year.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive a check at
specified intervals from your fund account--subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE EXCHANGE: You may move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same class)
just by calling our toll free number. The Telephone Exchange privilege will
automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange may be changed (added/deleted) at any time by
submitting a request in writing.
SYSTEMATIC EXCHANGE: You may move a set amount of money monthly from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) to diversify your investment portfolio and take advantage of
dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge, if any.
SPECIAL PURCHASE PLANS: Special purchase plans enable you to open an Advantus
Fund account for as little as $25 and lower your average share cost through
"dollar-cost averaging." (Dollar-cost averaging does not assure a profit, nor
does it prevent loss in declining markets). The Automatic Investment Plan allows
you to invest automatically each month from your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k), Money Purchase or
Defined Benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account or wire
transferred to your bank of record for the account. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Redemption privilege will automatically be established
unless otherwise indicated on the
21
<PAGE>
Account Application. Telephone Redemption may be changed (added/deleted) at any
time by submitting a request in writing. To have the redemption automatically
deposited into your checking account, please send a voided check from your bank.
Depending on the performance of the underlying investment options, the value may
be worth more or less than the original amount invested upon redemption. Some
limitations apply, please refer to the prospectus for details.
ACCOUNT UPDATES: You'll receive written confirmation of every transaction you
initiate and quarterly statements to help you track all of your Advantus Fund
investments and annual tax statements. Semi-annual and annual reports will
provide you with portfolio information, fund performance data and the current
investment outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from Advantus Shareholder Services, call 1-800-665-6005.
Advantus Account Representatives are available Monday through Friday from 8 a.m.
to 4:45 p.m. Central Time. Our voice response system is available 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., distributor of the
Funds. Contact your representative for information and a prospectus for any of
the Advantus Funds you are interested in. To find a Registered Representative
near you, call the toll-free service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use the Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management. (For the Advantus International Balanced Fund, Inc.,
the sub-adviser, Templeton Investment Counsel, Inc., selects the Fund's
investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.6 billion in assets in addition to $11.1 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 13 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
22
<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. BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
F.48649 Rev. 11-1998
