EX-99.17(AA) 14 c78747bexv99w17xaay.txt EX-17(AA) ADVANTUS EQUITY FUNDS ANNUAL REPORT EXHIBIT 17(aa) ADVANTUS EQUITY FUNDS [ADVANTUS(TM) CAPITAL MANAGEMENT LOGO] ANNUAL REPORT TO SHAREHOLDERS DATED JULY 31, 2003 ADVANTUS CORNERSTONE FUND, INC. A LARGE COMPANY VALUE FUND ADVANTUS ENTERPRISE FUND, INC. A SMALL COMPANY GROWTH FUND ADVANTUS HORIZON FUND, INC. A LARGE COMPANY GROWTH FUND ADVANTUS INDEX 500 FUND, INC. A LARGE COMPANY INDEX FUND ADVANTUS REAL ESTATE SECURITIES FUND, INC. A REAL ESTATE - RELATED SECURITIES FUND ADVANTUS VENTURE FUND, INC. A SMALL COMPANY VALUE FUND CUT DOWN PAPERWORK, NOT TREES ADVANTUS NOW OFFERS E-DELIVERY OF PROSPECTUSES, ANNUAL AND SEMI-ANNUAL REPORTS. TO FIND OUT MORE, CALL ADVANTUS SHAREHOLDER SERVICES AT (800) 665-6005. ADVANTUS FIXED INCOME AND BLENDED FUNDS AND ADVANTUS EQUITY FUNDS PROSPECTUS SUPPLEMENT DATED AUGUST 20, 2003 TO THE ADVANTUS FIXED INCOME AND BLENDED FUNDS PROSPECTUS DATED JANUARY 31, 2003 AS SUPPLEMENTED APRIL 24, 2003, JUNE 18, 2003 AND AUGUST 8, 2003 AND TO THE ADVANTUS EQUITY FUNDS PROSPECTUS DATED NOVEMBER 29, 2002, AS SUPPLEMENTED FEBRUARY 3, 2003, APRIL 24, 2003, JUNE 18, 2003 AND AUGUST 8, 2003 I. The portfolio manager information for the bond, Money Market and Mortgage Securities Funds which appears in the table on page 24 of the Advantus Fixed Income and Blended Funds Prospectus is amended to read as follows:
PORTFOLIO MANAGER PRIMARY PORTFOLIO BUSINESS EXPERIENCE DURING FUND AND TITLE MANAGER SINCE PAST FIVE YEARS Bond Christopher R. Sebald August 14, 2003 Senior Vice President and Lead Portfolio Manager Portfolio Manager, Total Return Fixed Income, Advantus Capital, since August, 2003; Senior Vice President and Portfolio manager, AEGON USA Investment Management, 2000 through July 2003; Director of Portfolio Management, GMAC-RFC, January 1998 through July 2000 Money Market Tom Houghton August 18, 2003 Vice President and Portfolio Portfolio Manager Manager, Total Return Fixed Income, Advantus Capital, since August 2003; Senior Investment Officer, Advantus Capital, April 2002 to August 2003; Senior Securities Analyst, Public Corporate Bonds, Advantus Capital, July 2001 through March 2002; Senior Investment Officer, Public Corporate Bonds, Advantus Capital, July 1999 to June 2001; Head of Fixed Income Trading, Advantus Capital, January 1998 to June 1999. Mortgage Securities Christopher R. Sebald August 14, 2003 Senior Vice President and Lead Portfolio Manager Portfolio Manager, Total Return Fixed Income, Advantus Capital, since August, 2003; Senior Vice President and Portfolio manager, AEGON USA Investment Management, 2000 through July 2003; Director of Portfolio Management, GMAC-RFC, January 1998 through July 2000
II. The portfolio manager information for the Cornerstone Fund which appears on page 31 of the Advantus Equity Funds Prospectus is amended to read as follows:
PORTFOLIO MANAGER PRIMARY PORTFOLIO BUSINESS EXPERIENCE DURING FUND AND TITLE MANAGER SINCE PAST FIVE YEARS Cornerstone Matthew T. Norris July 21, 2003 Portfolio Manager with Waddell & Portfolio Manager Reed Ivy Investment Company since July 2003; Portfolio Manager from January 2000 to June 2003, and Analyst from December 1997 to January 2000, with Advantus Capital.
Investors should retain this supplement for future reference. F. 59559 8-2003 ADVANTUS EQUITY FUNDS TABLE OF CONTENTS PERFORMANCE UPDATES Cornerstone Fund 3 Enterprise Fund 8 Horizon Fund 13 Index 500 Fund 19 Real Estate Securities Fund 23 Venture Fund 29 INVESTMENTS IN SECURITIES Cornerstone Fund 34 Enterprise Fund 39 Horizon Fund 44 Index 500 Fund 47 Real Estate Securities Fund 64 Venture Fund 67 FINANCIAL STATEMENTS Statements of Assets and Liabilities 78 Statements of Operations 80 Statements of Changes in Net Assets 82 Notes to Financial Statements 88 INDEPENDENT AUDITORS' REPORT 118 FEDERAL INCOME TAX INFORMATION (UNAUDITED) 119 DIRECTORS AND EXECUTIVE OFFICERS 123 SHAREHOLDER SERVICES 125
LETTER FROM THE PRESIDENT [PHOTO] Dear Shareholders: Economic recovery has been a long road. Economic growth dropped below trend nearly three years ago and has not yet FULLY recovered despite external assistance. The Federal Reserve has pumped an unprecedented amount of monetary stimulus into the economy by easing interest rates thirteen times over 2-1/2 years. The federal government has also done its part to pump some fiscal octane into the country's economic engine. The latest federal tax package was the Jobs and Growth Tax Relief Reconciliation Act of 2003 signed into law on May 28, 2003. Improvements are underway with the economy still growing, but at a rate significantly less than expected over the long-term trend. Over this reporting period, we have seen the S&P 500 Index*, a broad index of core large equities, return 10.64 percent for the year ended July 31, 2003. The NASDAQ Composite Index**, including many small and mid-cap stocks, returned 32.91 percent for the same period. Whether as a result of better market psychology or lower interest rates, the equity market looked very favorable in the first half of 2003. In the fixed income market, the yield curve has become steeper with low interest rates on the short end, but the longer end reflects signs of growth and an improving economy. For the year ended July 31, 2003, corporate bonds outperformed Treasuries, and mortgage securities significantly lagged both. (Lehman Brothers Credit Corporate Securities Index*** 11.30 percent, Lehman Brothers Treasury Securities Index+ 4.54 percent, and Lehman Brothers Mortgage-backed Securities Index++ 2.57 percent). We expect the Federal Reserve to remain accommodative until consistent improvements in growth and employment are reported. We expect moderate growth and improving equity market performance. As growth emerges, we feel that fixed income performance may become more challenging. 1 In April 2003, Advantus Capital Management, Inc. (Advantus Capital) and certain companies affiliated with Advantus Capital entered into a Strategic Alliance Agreement and a related Purchase Agreement with Waddell & Reed Financial, Inc. (W&R), a leading U.S. mutual fund firm, its affiliate, Waddell & Reed Ivy Investment Company (WRIICO), and certain other companies affiliated with W&R. Under these agreements, Advantus Capital agreed to sell to WRIICO its assets related to the Advantus Funds. Advantus Capital has also recommended to the Board of Directors of the Advantus Funds that each Advantus Fund be merged into an existing or newly formed mutual fund managed by WRIICO in either Ivy Funds, Inc. (a Maryland corporation) or Ivy Funds (a Massachusetts business trust), and the Board of Directors has approved each Fund's merger subject to approval of the shareholders of the Fund. It is currently anticipated that shareholders will receive a proxy statement/prospectus with detailed information regarding this proposal in early October. If you have any questions regarding the proxy, please call your financial advisor. Your response to the proxy is important, so please vote. Sincerely, /s/ Dianne Orbison Dianne Orbison President, Advantus Equity Funds *The S&P 500 Index is a broad, unmanaged index of 500 common stocks which are representative of the U.S. stock market overall. **The NASDAQ Composite Index is a broad based capitalization-weighted index of all NASDAQ National Market and SmallCap Stocks. ***The Lehman Brothers Credit Corporate Securities Index is a broad index of publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC registered. +The Lehman Brothers Treasury Securities Index is a broad index of public obligations of the U.S. Treasury with a remaining maturity of one year or more. ++The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged benchmark composite which includes all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). 2 ADVANTUS CORNERSTONE FUND PERFORMANCE UPDATE PERFORMANCE The Fund's performance for the year ended July 31, 2003 for each class of shares outstanding is as follows: Class A 7.23 percent* Class B 6.55 percent* Class C 6.49 percent*
This compares to the Fund's benchmark, the Russell 1000 Value Index**, which returned 10.75 percent for the same period. DURING THE PERIOD FROM AUGUST 1, 2002 THROUGH APRIL 30, 2003, THE FUND WAS MANAGED BY ADVANTUS CAPITAL MANAGEMENT, INC. DURING THE BALANCE OF THE YEAR COVERED BY THIS REPORT, FROM MAY 1, 2003 THROUGH JULY 31, 2003, THE FUND WAS MANAGED BY WADDELL & REED IVY INVESTMENT COMPANY. SEPARATE DISCUSSIONS OF FUND PERFORMANCE DURING EACH PERIOD ARE PROVIDED BELOW. PERFORMANCE ANALYSIS AUGUST 1, 2002 - APRIL 30, 2003 DISCUSSION BY ADVANTUS CAPITAL MANAGEMENT, INC. The Cornerstone Fund's performance during the nine months ended April 30, 2003 was attributable primarily to individual stock selections. Over the period from August 1, 2002 through April 30, 2003, our fundamental analysis and risk management tools minimized the potentially negative effects found in Consumer Staple, Industrial, Basic Material and Utility companies. The Fund's Class A shares returned 0.15% (before the impact of sales load) for the nine months ended April 30, 2003, and underperformed the Fund's benchmark index, the Russell 1000 Value Index**, which returned 1.24% for the same period. The Fund's performance was positively affected by superior stock selection within Major Banks, Consumer Staples, Electric Utilities, Basic Materials, Energy and REITs. Strong performers for the period included US Bancorp, Nabors Industries, Home Depot, Clear Channel, Oracle, and Wachovia. The Fund's performance was adversely affected by missing some better performing Telecommunications names, and by owning overweights in LSI Logic, HCA, CSX and Merck. Overall contributions to performance from sector allocations were small. The Fund was adversely affected by underweighting Financials, and by overweighting Transportation and Industrials. These allocations were offset by positive contributions to performance from overweights in Information Technology, Consumer Staples and Energy. 3 PERFORMANCE ANALYSIS MAY 1, 2003 - JULY 31, 2003 DISCUSSION BY WADDELL & REED IVY INVESTMENT COMPANY MATTHEW T. NORRIS, CFA PORTFOLIO MANAGER The stock market came to life in the past three months. The market responded to the successful outcome to the military action in Iraq, the continued easing of interest rates by the Federal Reserve and the passage of tax cut legislation by Congress. We believe that most of the market movement since mid-May has been reflective of massive monetary and fiscal stimulus policies and the unfolding of a better profit picture. In leading the markets, small-cap stocks outpaced the large-cap stocks and large-cap value stocks slightly outperformed large-cap growth stocks. For the three months ending July 31, 2003, the Class A shares of the Fund increased 7.08 percent, before the impact of sales load. This compares with the Russell 1000 Value Index (reflecting the performance of securities that generally represent the value sector of the stock market)**, which increased 9.41 percent during the period. The Fund underperformed the Russell 1000 Value Index during the past three months. Contributing to the Fund's underperformance was the security selection in the healthcare sector. Investment in several large pharmaceutical companies dragged the Fund down. Another factor that caused the Fund to underperform the benchmark was the selection of technology securities. Despite the overall strength of technology in the portfolio, our security selection returned less than the benchmark's. The consumer discretionary sector provided the greatest gains against the benchmark in the portfolio. OUTLOOK Going forward, we continue to believe that pharmaceutical stocks offer attractive valuations given the aging demographic profile of the United States. We also intend to place a greater emphasis on stocks in the portfolio that offer higher-than market dividend yields. We believe that these securities will benefit from the new legislation that eliminates the double taxation of dividends. In the current environment, we continue to view the best strategy to be that of pursuing solid fundamentals. We continue to base our decisions on in-depth research in an effort to turn up solid long-term opportunities and results. *Historical performance is not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge or Class B's maximum 5 percent contingent deferred sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The Russell 1000 Value Index contains those stocks from the Russell 1000 with low book to price ratio. The Russell 1000 is the 1,000 largest companies in the Russell 3000. The Russell 3000 is an unmanaged index of 3,000 common stocks, which represents approximately 98 percent of the U.S. market 4 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- -------- ------------ ---------- Citigroup, Inc. 54,113 $ 2,424,262 3.6% Bank of America Corporation 28,500 2,353,245 3.5% Wells Fargo & Company 41,100 2,076,783 3.1% U.S. Bancorp 83,258 2,041,486 3.1% Exxon Mobil Corporation 55,206 1,964,228 2.9% Northrop Grumman Corporation 20,000 1,844,800 2.7% Chubb Corporation 25,000 1,620,000 2.4% Fannie Mae (FNMA) 24,300 1,556,172 2.3% Abbott Laboratories 38,000 1,491,500 2.2% Microsoft Corporation 55,700 1,470,480 2.2% ------------ ---- $ 18,842,956 28.0% ============ ====
[CHART] Basic Materials 6.3% Capital Goods 10.0% Communication Services 3.7% Consumer Cyclical 11.0% Consumer Staples 9.4% Energy 8.1% Financial 31.5% Cash and Other Assets/Liabilities 2.5% Health Care 6.3% Technology 7.2% Utilities 4.0%
5 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS CORNERSTONE FUND, 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 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 July 31, 2003. [CHART] CLASS A AND B AVERAGE ANNUAL TOTAL RETURN: Class A: One year 1.34% Five year -4.23% Since inception (9/16/94) 5.30% Class B: One year 1.55% Five year -4.14% Since inception (9/16/94) 5.30%
(Thousands)
CLASS A CLASS B CPI RUSSELL 1000 VALUE INDEX 9/16/1994 $ 10 $ 10 $ 10 $ 10 7/31/1995 $ 11 $ 12 $ 10 $ 12 7/31/1996 $ 13 $ 14 $ 11 $ 14 7/31/1997 $ 20 $ 20 $ 11 $ 21 7/31/1998 $ 19 $ 19 $ 11 $ 24 7/31/1999 $ 20 $ 20 $ 11 $ 28 7/31/2000 $ 18 $ 18 $ 12 $ 26 7/31/2001 $ 18 $ 18 $ 12 $ 29 7/31/2002 $ 15 $ 15 $ 12 $ 24 7/31/2003 $ 16 $ 16 $ 12 $ 26 $15,808 $15,815 $12,342 $26,373
6 [CHART] CLASS C AVERAGE ANNUAL TOTAL RETURN: One year 6.49% Five year -3.85% Since inception (3/1/95) 5.24%
(Thousands)
CLASS C CPI RUSSELL 1000 VALUE INDEX 3/1/1995 $ 10 $ 10 $ 10 7/31/1995 $ 11 $ 10 $ 12 7/31/1996 $ 14 $ 10 $ 13 7/31/1997 $ 20 $ 11 $ 20 7/31/1998 $ 19 $ 11 $ 24 7/31/1999 $ 20 $ 11 $ 27 7/31/2000 $ 18 $ 11 $ 26 7/31/2001 $ 18 $ 12 $ 28 7/31/2002 $ 14 $ 12 $ 23 7/31/2003 $ 15 $ 12 $ 26 $15,418 $12,187 $25,623
The preceding charts are useful because they provide you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A and the maximum applicable contingent deferred sales charge for Class B shares. Sales charges pay for your financial professional's investment advice. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. Historical performance is not an indication of future performance. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. 7 ADVANTUS ENTERPRISE FUND PERFORMANCE UPDATE ELIZABETH B. DATER AND SAMMY OH, PORTFOLIO MANAGERS CREDIT SUISSE ASSET MANAGEMENT, LLC PERFORMANCE The performance of the Advantus Enterprise Fund for the year ended July 31, 2003, was as follows for the three classes of shares currently outstanding: Class A 28.84 percent* Class B 28.03 percent* Class C 28.03 percent*
The Fund's benchmark, the Russell 2000 Growth Index** returned 27.97 percent for the same period. PERFORMANCE ANALYSIS The period was ultimately a positive one for the U.S. stock market, though equities struggled early on. The market reached its low point for the period in early October, hurt by a great deal of uncertainty regarding any conflict with Iraq and a related decline in consumer sentiment. Stocks began to recover, however, and were especially buoyant during the March-through-July span. When the war came to a swift and seemingly successful end in April, a major cloud of uncertainty lifted and investors embraced risk. Optimism over a potential recovery in the U.S. economy--and by extension, the global economy--also supported equities. Grounds for this optimism included historically low interest rates, a significant tax-reduction package, and an upturn in leading economic indicators in Europe and non-Japan Asia. Smaller-cap stocks outperformed their larger-cap counterparts for the year. While history is not predictive, this has often been the case during periods of market and/or economic recoveries. The Fund outperformed its benchmark for the period, aided by good showings from its consumer-discretionary and health care holdings. The Fund's financial-services stocks also helped its return, as we focused on non-bank companies that benefited more from the upturn in market performance and trading volume. We made few noteworthy changes to the Fund in terms of sector allocation. We remained roughly neutrally weighted in the technology sector, with a bias toward software companies. One subsector weighting that we are monitoring closely is the Internet. We have a small allocation invested in a select group of companies, those we deem to have compelling business plans, solid balance sheets and positive earnings from trends such as "pay for search" services. The 8 continued growth in broadband access (aided by declining costs) has also been supporting the group. Within health care, where we were modestly overweighted, we maintained a bias toward hospitals and other service companies. While we have seen some near-term disappointments here recently, we think that innovation and long-term demographic trends stand to benefit service companies in general and specific stocks in particular. Elsewhere of note, we were roughly neutrally weighted in the consumer-discretionary sector. Our holdings here continued to include media names, though we may reduce our exposure to radio companies if the economy disappoints (we believe that valuations on these stocks have priced in a fair amount of optimism). We also held several specialty retailers that we think have good economic leverage and the potential for stock-multiple expansion. OUTLOOK We think the U.S. economy has the potential to grow in the year's second half, aided by tax relief, ongoing improvements in corporate balance sheets and a favorable liquidity backdrop. Barring a return of heightened geopolitical risk, we think these factors augur well for growth, though the magnitude of any recovery remains an uncertainty. For our part, we will remain focused on companies we deem to have good business plans and healthy balance sheets. *Historical performance is not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge or Class B's maximum 5 percent contingent deferred sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The Russell 2000 Growth Index contains those securities in the Russell 2000 Index with a greater-than-average growth orientation. The Russell 2000 Index is the 2000 smallest companies in the Russell 3000. The Russell 3000 is an unmanaged index of 3000 common stocks, which represents approximately 98 percent of the U.S. market. Investments in smaller company micro-cap stocks generally carry a higher level of volatility and risk over the short-term. 9 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- -------- ------------ ---------- Avid Technology, Inc. 24,800 $ 1,152,208 3.0% LifePoint Hospitals, Inc. 30,300 855,369 2.3% Medicis Pharmaceutical 13,467 786,473 2.1% Accredo Health, Inc. 31,100 761,328 2.0% Sepracor, Inc. 30,500 739,625 2.0% Varian Semiconductor Equipment Associates, Inc. 21,700 721,525 1.9% Semtech Corporation 38,900 641,850 1.7% Cymer, Inc. 15,704 635,227 1.7% Emmis Communications Corporation 28,300 566,283 1.5% Openwave Systems, Inc. 144,700 557,095 1.5% ------------ ---- $ 7,416,983 19.7% ============ ====
[CHART] Basic Materials 2.2% Capital Goods 4.3% Communication Services 3.0% Consumer Cyclical 19.9% Consumer Staples 7.4% Energy 4.7% Financial 8.3% Health Care 18.0% Transportation 2.2% Cash and Other Assets/Liabilities 3.6% Technology 26.4%
10 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS ENTERPRISE FUND, RUSSELL 2000 GROWTH 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 Enterprise Fund compared to the Russell 2000 Growth 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 Enterprise Fund (September 16, 1994 for Class A and Class B and March 1, 1995 for Class C) through July 31, 2003. [CHART] CLASS A AND B AVERAGE ANNUAL TOTAL RETURN: Class A: One year 21.75% Five year -1.93% Since inception (9/16/94) 3.25% Class B: One year 23.07% Five year -1.80% Since inception (9/16/94) 3.20%
(Thousands)
CLASS A CLASS B CPI RUSSELL 2000 GROWTH INDEX 9/16/1994 $ 10 $ 10 $ 10 $ 10 7/31/1995 $ 12 $ 12 $ 10 $ 12 7/31/1996 $ 13 $ 13 $ 11 $ 13 7/31/1997 $ 15 $ 15 $ 11 $ 16 7/31/1998 $ 14 $ 14 $ 11 $ 16 7/31/1999 $ 15 $ 15 $ 11 $ 18 7/31/2000 $ 19 $ 19 $ 12 $ 22 7/31/2001 $ 15 $ 13 $ 12 $ 17 7/31/2002 $ 10 $ 10 $ 12 $ 12 7/31/2003 $ 13 $ 13 $ 12 $ 15 $ 13,286 $ 13,228 $ 12,342 $ 14,738
11 [CHART] CLASS C AVERAGE ANNUAL TOTAL RETURN: One year 28.03% Five year -1.60% Since inception (3/1/95) 2.68%
(Thousands)
CLASS C CPI RUSSELL 2000 GROWTH INDEX 3/1/1995 $ 10 $ 10 $ 10 7/31/1995 $ 12 $ 10 $ 12 7/31/1996 $ 12 $ 10 $ 13 7/31/1997 $ 14 $ 11 $ 16 7/31/1998 $ 14 $ 11 $ 16 7/31/1999 $ 14 $ 11 $ 18 7/31/2000 $ 18 $ 11 $ 22 7/31/2001 $ 13 $ 12 $ 17 7/31/2002 $ 9 $ 12 $ 11 7/31/2003 $ 13 $ 12 $ 15 $ 12,523 $ 12,187 $ 14,695
The preceding charts are useful because they provide you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A and the maximum applicable contingent deferred sales charge for Class B shares. Sales charges pay for your financial professional's investment advice. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. Historical performance is not an indication of future performance. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. 12 ADVANTUS HORIZON FUND PERFORMANCE UPDATE PERFORMANCE The Fund's performance for the year ended July 31, 2003 for each class of shares outstanding is as follows: Class A 11.04 percent* Class B 10.33 percent* Class C 10.35 percent*
This compares to the Fund's benchmark, the Russell 1000 Growth Index**, which returned 11.64 percent for the same period. DURING THE PERIOD FROM AUGUST 1, 2002 THROUGH APRIL 30, 2003, THE FUND WAS MANAGED BY ADVANTUS CAPITAL MANAGEMENT, INC. DURING THE BALANCE OF THE YEAR COVERED BY THIS REPORT, FROM MAY 1, 2003 THROUGH JULY 31, 2003, THE FUND WAS MANAGED BY WADDELL & REED IVY INVESTMENT COMPANY. SEPARATE DISCUSSIONS OF FUND PERFORMANCE DURING EACH PERIOD ARE PROVIDED BELOW. PERFORMANCE ANALYSIS AUGUST 1, 2002 - APRIL 30, 2003 DISCUSSION BY ADVANTUS CAPITAL MANAGEMENT, INC. The Horizon Fund's performance during the nine months ended April 30, 2003 was attributable primarily to individual stock selections. Over the period from August 1, 2002 through April 30, 2003, our fundamental analysis and risk management tools minimized the potentially negative effects found in Consumer Staple and Industrial companies. A disciplined stock selection approach and a focus on sustainable growth allowed the Fund to select attractive companies for investment and avoid or minimize the worst hit portions of the market. The Fund's Class A shares returned 2.67% (before the impact of sales load) for the nine months ended April 30, 2003, and outperformed the Fund's benchmark index, the Russell 1000 Growth Index**, which returned 2.34% for the same period. Superior stock selection among Consumer Staples, Information Technology, Industrials, Health Care, and Energy companies contributed favorably to the Fund's performance. Strong performers for the period included Wyeth, Best Buy and Bank of America. The Fund's performance was adversely affected by overweighting Laboratory Corp of America and Kohls, and underweighting AOL Time Warner and Merck. Overall contributions to performance from sector allocations were small. The Fund was adversely affected by underweighting Hospitals and Software and by overweighting Financials. These allocations were offset by positive contributions to performance from underweights in Industrials, and other sector allocations. 13 PERFORMANCE ANALYSIS MAY 1, 2003 - JULY 31, 2003 DISCUSSION BY WADDELL & REED IVY INVESTMENT COMPANY DANIEL P. BECKER, CFA PORTFOLIO MANAGER For the first time in many quarters, financial market returns have significantly exceeded our expectations. The combination of lower uncertainty as the Iraqi war ended, meaningfully lower corporate and consumer borrowing costs, and ongoing corporate productivity enhancements is now resulting in an acceleration in the profits reported by major U.S. companies. The financial markets may be signaling that additional strong profit growth will occur in the near future. As positive as the last three quarters were, the strength in the economy and its ultimate slope of recovery is still a heated debate. Consumer spending has not rebounded and may be impaired for quite some time. Corporate spending has stabilized, but signs of a sustained rebound are still scarce. Government spending continues to be a bright spot in the economy, but we believe we must have growth from the other sectors as well. We feel that continued follow through in earnings and GDP are a prerequisite for the financial markets to sustain recent gains. The Fund underperformed its benchmark index for the three months ending July 31, 2003. The Fund's Class A shares increased 8.15 percent, before the impact of sales load. This compares with the Russell 1000 Growth Index** (reflecting the performance of securities that generally represent the stock market) which increased 9.10 percent over the same period. The Fund was underweighted in some of the large stocks that make up a significant part of the indices, and performance was hurt when these large companies performed well later in the year. Large holdings in health care companies, more specifically, biotechnology companies, and select technology companies, had a positive effect on performance relative to the benchmark. OUTLOOK We are in the process of gradually shifting the Fund to a more cyclical bias, one characterized by companies that are levered to a rebound in economic growth. Looking forward, we are shifting our balance between those companies that we feel benefit from stronger economic growth and those whose profits are relatively immune to economic fluctuations. We are emphasizing biotech, capital spending, and financial-related companies. Going forward, we expect to further increase our exposure to economically linked industries and decrease our holdings in more stable businesses. *Historical results are not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge or Class B's maximum 5 percent contingent deferred sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The Russell 1000 Growth Index contains those stocks from the Russell 1000 with greater than average growth orientation. The Russell 1000 is the 1,000 largest companies in the Russell 3000. The Russell 3000 is an unmanaged index of 3,000 common stocks, which represents approximately 98 percent of the U.S. market. 14 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- -------- ------------ ---------- Amgen, Inc. 35,000 $ 2,435,300 8.5% EMC Corporation 150,600 1,602,384 5.6% SAP AG 47,500 1,394,125 4.8% Medtronic, Inc. 26,200 1,349,300 4.7% Smith International, Inc. 34,000 1,218,560 4.2% Gilead Sciences, Inc. 16,200 1,110,510 3.9% Pfizer, Inc. 30,950 1,032,492 3.6% Analog Devices, Inc. 25,666 974,025 3.4% Goldman Sachs Group, Inc. 10,600 923,684 3.2% Zimmer Holdings, Inc. 19,200 917,952 3.2% ------------ ---- $ 12,958,332 45.1% ============ ====
[CHART] Consumer Cyclical 8.3% Consumer Staples 4.3% Energy 6.0% Financial 12.3% Health Care 31.0% Basic Materials 1.9% Technology 36.6%
15 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN ADVANTUS HORIZON FUND, RUSSELL 1000 GROWTH INDEX AND CONSUMER PRICE INDEX On the following three charts you can see how the total return for each of the three classes of shares of the Advantus Horizon Fund compared to the Russell 1000 Growth 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 July 31, 1993 through July 31, 2003. 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 Horizon Fund (August 19, 1994 and March 1, 1995, respectively) through July 31, 2003. [CHART] CLASS A AVERAGE ANNUAL TOTAL RETURN: One year 4.93% Five year -8.24% Ten year 4.87%
(Thousands)
CLASS A CPI RUSSELL 1000 GROWTH INDEX 7/31/1993 $ 10 $ 10 $ 10 7/31/1994 $ 10 $ 10 $ 10 7/31/1995 $ 13 $ 11 $ 14 7/31/1996 $ 13 $ 11 $ 16 7/31/1997 $ 19 $ 11 $ 24 7/31/1998 $ 23 $ 11 $ 29 7/31/1999 $ 27 $ 12 $ 36 7/31/2000 $ 33 $ 12 $ 45 7/31/2001 $ 20 $ 12 $ 29 7/31/2002 $ 14 $ 12 $ 21 7/31/2003 $ 16 $ 13 $ 23 $ 16,091 $ 12,735 $ 23,130
16 [CHART] CLASS B AVERAGE ANNUAL TOTAL RETURN: One year 5.33% Five year -8.05% Since inception (8/19/94) 4.79%
(Thousands)
CLASS B CPI RUSSELL 1000 GROWTH INDEX 8/19/1994 $ 10 $ 10 $ 10 7/31/1995 $ 12 $ 10 $ 13 7/31/1996 $ 13 $ 11 $ 15 7/31/1997 $ 19 $ 11 $ 22 7/31/1998 $ 23 $ 11 $ 27 7/31/1999 $ 26 $ 11 $ 33 7/31/2000 $ 31 $ 12 $ 41 7/31/2001 $ 17 $ 12 $ 27 7/31/2002 $ 14 $ 12 $ 19 7/31/2003 $ 15 $ 12 $ 21 $ 15,206 $ 12,392 $ 21,429
17 [CHART] CLASS C AVERAGE ANNUAL TOTAL RETURN: One year 10.35% Five year -7.86% Since inception (3/1/95) 4.28%
(Thousands)
CLASS C CPI RUSSELL 1000 GROWTH INDEX 3/1/1995 $ 10 $ 10 $ 10 7/31/1995 $ 12 $ 10 $ 12 7/31/1996 $ 12 $ 10 $ 14 7/31/1997 $ 17 $ 11 $ 21 7/31/1998 $ 21 $ 11 $ 25 7/31/1999 $ 25 $ 11 $ 31 7/31/2000 $ 29 $ 11 $ 38 7/31/2001 $ 16 $ 12 $ 25 7/31/2002 $ 12 $ 12 $ 18 7/31/2003 $ 14 $ 12 $ 20 $ 14,270 $ 12,187 $ 19,758
The preceding charts are useful because they provide you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A and the maximum applicable contingent deferred sales charge for Class B shares. Sales charges pay for your financial professional's investment advice. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. Historical performance is not an indication of future performance. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. 18 ADVANTUS INDEX 500 FUND PERFORMANCE UPDATE JAMES SEIFERT, PORTFOLIO MANAGER ADVANTUS CAPITAL MANAGEMENT, INC. PERFORMANCE For the year ended July 31, 2003, the Advantus Index 500 Fund returned the following for each class of shares currently outstanding: Class A 9.76 percent* Class B 8.94 percent* Class C 8.97 percent*
The Fund's benchmark, the S&P 500 Index,** returned 10.64 percent for the same period. PERFORMANCE ANALYSIS All eleven sectors of the S&P 500 Index** ended the period with positive returns. The two largest weighted sectors were also the best contributing sectors. Technology led with a 3.38 percent contribution on a sector return of 22.34 percent. Financials followed with a 2.81 percent contribution on a sector return of 13.85 percent. The smallest market cap names within the Index significantly outperformed the mega cap names. In fact, the smallest market capitalization group ended the period with a positive 55.9 percent return compared to the largest capitalization group that ended the period up 10.1 percent. OUTLOOK We anticipate steady growth and strong market performance for the remainder of 2003. The Federal Reserve has put much stimulus into our economy, and its incubation period is up. The uncertainty that we faced earlier in the year regarding war with Iraq is behind us. The war was fought and won. Different concerns--such as interim government, continuing military presence, and other issues--are apparent, but not impacting our economy and markets as did the question of war. We believe business spending has been the weakest link of the three-legged economic stool (government, business, and consumer) for the past three years. When businesses can finally put the excesses of the late 1990s aside 19 and start producing, instead of relying on oversupply, then we feel that business will come back to life. We believe that when this happens, the job market will strengthen, and recovery will be in full swing. We feel that lower unemployment results will be the cue that the Federal Reserve is waiting for to go to a neutral bias. We believe the performance hierarchy for the remainder of the year will be stocks, cash (i.e. money market), then bonds. As always, we strongly recommend that investors keep a healthy level of diversification in their portfolio. *Historical performance is not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge or Class B's maximum 5 percent contingent deferred sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The S&P 500 Index is a broad, unmanaged index of 500 common stocks which are representative of the U.S. stock market overall. The Advantus Index 500 Fund is a mutual fund whose performance reflects the deduction of an investment advisory fee and other expenses. 20 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- -------- ------------ ---------- General Electric Company 36,361 $ 1,034,107 3.1% Microsoft Corporation 39,060 1,031,184 3.2% Pfizer, Inc. 28,731 958,466 2.9% Wal-Mart Stores, Inc. 15,980 893,442 2.7% Exxon Mobil Corporation 24,323 865,412 2.6% Citigroup, Inc. 18,769 840,851 2.5% American International Group 9,559 613,687 1.8% Intel Corporation 23,695 591,190 1.8% Johnson & Johnson 10,867 562,802 1.7% International Business Machines Corporation 6,306 512,362 1.5% ------------ ---- $ 7,903,503 23.8% ============ ====
[CHART] Basic Materials 2.9% Capital Goods 7.5% Communication Services 4.2% Consumer Cyclical 10.3% Consumer Staples 11.1% Energy 5.2% Financial 20.0% Utilities 2.6% Health Care 13.2% Transportation 1.5% Technology 15.4% Cash and Other Assets/Liabilities 6.1%
21 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE ADVANTUS INDEX 500 FUND, S&P 500 INDEX AND CONSUMER PRICE INDEX On the following chart you can see how the total return for each of the three classes of shares of the Advantus Index 500 Fund compared to the S&P 500 Index and the Consumer Price Index. The lines represent the cumulative total return of a hypothetical $10,000 investment made on the inception date of each class of shares of the Advantus Index 500 Fund (January 31, 1997) through July 31, 2003. [CHART] CLASS A, B AND C AVERAGE ANNUAL TOTAL RETURN: Class A: One year 3.72% Five year -3.05% Since inception (1/31/97) 3.21% Class B: One year 3.94% Five year -3.04% Since inception (1/31/97) 3.24% Class C: One year 8.97% Five year -2.77% Since inception (1/31/97) 3.18%
(Thousands)
CLASS A CLASS B CLASS C CPI S & P 500 INDEX 1/31/1997 $ 10 $ 10 $ 10 $ 10 $ 10 7/31/1997 $ 11 $ 12 $ 12 $ 10 $ 12 7/31/1998 $ 14 $ 14 $ 14 $ 10 $ 15 7/31/1999 $ 16 $ 17 $ 17 $ 10 $ 18 7/31/2000 $ 17 $ 18 $ 18 $ 11 $ 21 7/31/2001 $ 15 $ 15 $ 15 $ 11 $ 17 7/31/2002 $ 11 $ 11 $ 11 $ 11 $ 13 7/31/2003 $ 12 $ 13 $ 12 $ 12 $ 14 $ 12,249 $ 12,606 $ 12,257 $ 11,559 $ 14,149
The preceding chart is useful because it provides you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A and the maximum applicable contingent deferred sales charge for Class B shares. Sales charges pay for your financial professional's investment advice. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. Historical performance is not an indication of future performance. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. 22 ADVANTUS REAL ESTATE SECURITIES FUND PERFORMANCE UPDATE JOSEPH BETLEJ, CFA, PORTFOLIO MANAGER ADVANTUS CAPITAL MANAGEMENT, INC. PERFORMANCE For the year ended July 31, 2003, the Advantus Real Estate Securities Fund returned the following for each class of shares currently outstanding: Class A 19.65 percent* Class B 18.73 percent*
For the same period, the Wilshire Associates Real Estate Securities Index (WARESI)** provided a total return of 16.16 percent. PERFORMANCE ANALYSIS Over the past twelve months, the Advantus Real Estate Securities Fund delivered strong performance within the context of weak fundamentals for real estate. Strong stock picking generated generous performance for the fund relative to the benchmark index (WARESI). The strong rally in interest rates was significant to real estate stocks as investors, starved for current income, found quality high dividend yields in the REIT stocks. The overall equity market, buffeted by the ups and downs of the economy, the war in Iraq, and increased unemployment, found calmer waters in the hard assets and more predictable income stream found with real estate stocks. The sector's strong stock performance caught us somewhat surprised as we expected the rally in the broader equity market would push investors into other sectors at the expense of real estate stocks. Investors in the Fund were fortunate that a broader group of investors now consider real estate stocks a permanent allocation within their investment portfolio. Funds flow continues into this group, leading to peaks in index performance toward the end of the reporting period. Interest rate-sensitive, consumer-related, and cyclically-oriented stocks performed the best during the year. Real estate stocks affected by high levels of new supply or those with poor credit quality performed the worst. Your portfolio benefited by having proper exposures to the above described influences. Homebuilders, net lease companies and mortgage REITs performed extremely well as interest rates plummeted in the past year. Demand for single-family housing reached peak levels as affordability was enhanced by historically low mortgage rates. As current income yields on bond investments dropped, investors reacted by chasing high yield REITs to higher levels. Apartment companies had a difficult operating environment as apartment dwellers moved out after finding new homes while the new supply of apartments continued as 23 lower borrowing costs made more projects feasible. The Fund increased its exposure to homebuilders and reduced its holdings in apartment companies throughout the reporting year. The Fund added to retail REITs as confidence built that they would continue to generate strong operating income and top tier returns. Retail tenants came into the weakening economy with stronger business plans and better balance sheets. As consumer demand continued (in part due to lower mortgage rates) the better retailers continued to seek locations in high productivity malls, many of which are owned by the retail REITs. The stock prices followed the increasing fundamentals here. Hotels and office companies did well as investors anticipated a rebound in the economy. Both of these groups began a cyclical recovery in stock prices as investors sensed the signs of strength in GDP numbers. The move in these stocks came well ahead of improvement in property level fundamentals such as leasing rates, occupancy, and operating margins. Fund performance was hurt by its underweight to these sectors, however, stockpicking within these groups added to results. Apartments and self storage properties were the worst performing groups, largely due to the effects of overbuilding in these sectors. We limited our exposure to these companies because we saw continued weak property fundamentals with high stock valuations that did not leave room for mistakes. Additionally, companies with higher levels of debt were negatively impacted as investors put sale pressure on these stocks as they questioned the quality of their dividends. The Fund was underweighted in both of these groups for the year. The Fund continued to be defensive, favoring stocks trading at high (but safe) dividend yields and those trading at large discounts to the underlying value of company assets. Also favored are stocks that have solid growth prospects, regardless of the tone of the economy. Smaller capitalization real estate stocks provided value relative to their big-cap counterparts during the reporting period. These strategies helped the Fund deliver strong performance due to superior stock selection. OUTLOOK Real estate stocks have performed well in the face of weak property fundamentals. Investors rewarded the current income, predictable income stream, and hard assets available in this sector. Long term, we remain confident in the valuations of the real estate stocks, however, short term volatility may be present as these stocks pause after the strong performance generated thus far in 2003. We continue to monitor the strength of the economy--in particular job growth--to determine when fundamentals can rebound off the depths of 24 occupancy and rental rates exhibited in the market today. We remain confident as corporate decision makers anticipate making the long term commitments of hiring personnel and leasing new space. The Fund favors stocks trading below the value of their underlying properties. Companies generating above average growth rates will be favored going forward as we feel the worst is behind us. As uncertainty is prevalent in the market, stock picking will continue to be rewarded. We thank you for your confidence in the Advantus Real Estate Securities Team. *Historical performance is not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The Wilshire Associates Real Estate Securities Index is a market capitalization-weighted index of equity securities whose primary business is equity ownership of commercial real estate (REITS). 25 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- -------- ------------ ---------- Prologis 133,562 $ 3,679,633 6.0% General Growth Properties, Inc. 40,100 2,734,018 4.5% Developers Diversified Realty Corporation 80,600 2,393,820 3.9% Simon Property Group, Inc. 54,600 2,312,310 3.8% The Mills Corporation 61,300 2,182,893 3.6% The Rouse Company 53,100 2,123,469 3.5% Brookfield Properties Company 91,400 2,063,812 3.4% CarrAmerica Realty Corporation 67,900 1,983,359 3.2% Vornado Realty Trust 39,600 1,815,264 3.0% Apartment Investment & Management Company 45,720 1,801,825 2.9% ------------ ---- $ 23,090,403 37.8% ============ ====
[CHART] Consumer Cyclical 3.6% Real Estate 10.7% Real Estate Investment Trust - Apartments 6.3% Real Estate Investment Trust - Diversified 8.8% Real Estate Investment Trust - Health Care 1.2% Real Estate Investment Trust - Hotels 4.8% Real Estate Investment Trust - Mortgage 0.3% Real Estate Investment Trust - Office Property 20.0% Real Estate Investment Trust - Manufactured Housing 0.1% Real Estate Investment Trust - Regional Mall 19.0% Real Estate Investment Trust - Self Storage 2.7% Real Estate Investment Trust - Shopping Centers 10.4% Real Estate Investment Trust - Warehouse/Industrial 10.4% Cash and Other Assets/Liabilities 1.7%
26 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE ADVANTUS REAL ESTATE SECURITIES FUND, WILSHIRE ASSOCIATES REAL ESTATE SECURITIES INDEX AND CONSUMER PRICE INDEX On the following two charts you can see how the total return for each of the two classes of shares of the Advantus Real Estate Securities Fund compared to the Wilshire Associates Real Estate Securities Index and the Consumer Price Index. The lines in the Class A and Class B graphs represent the cumulative total return of a hypothetical $10,000 investment made on the inception date of Class A and Class B shares of the Advantus Real Estate Securities Fund (February 25, 1999 and November 30, 2001, respectively) through July 31, 2003. [CHART] CLASS A AVERAGE ANNUAL TOTAL RETURN: One year 13.07% Since inception (2/25/99) 12.23%
(Thousands)
WILSHIRE ASSOCIATES REAL ESTATE CLASS A CPI SECURITIES INDEX 2/25/1999 $ 10 $ 10 $ 10 7/31/1999 $ 10 $ 10 $ 11 7/31/2000 $ 11 $ 11 $ 13 7/31/2001 $ 12 $ 11 $ 14 7/31/2002 $ 14 $ 11 $ 15 7/31/2003 $ 17 $ 11 $ 18 $ 16,674 $ 11,193 $ 17,730
27 [CHART] CLASS B AVERAGE ANNUAL TOTAL RETURN: One year 13.73% Since inception (11/30/01) 15.95%
(Thousands)
WILSHIRE ASSOCIATES REAL ESTATE CLASS B CPI SECURITIES INDEX 11/30/2001 $ 10 $ 10 $ 10 7/31/2002 $ 11 $ 10 $ 11 7/31/2003 $ 13 $ 10 $ 13 $ 12,796 $ 10,366 $ 12,680
The preceding charts are useful because they provide you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A. 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. 28 ADVANTUS VENTURE FUND PERFORMANCE UPDATE JOHN BURBANK, PORTFOLIO MANAGER STATE STREET RESEARCH AND MANAGEMENT COMPANY PERFORMANCE For the year ended July 31, 2003, the Advantus Venture Fund returned the following for each class of shares currently outstanding: Class A 14.91 Percent* Class B 14.13 Percent* Class C 14.15 Percent*
By comparison, the Russell 2000 Value Index** returned 18.63 percent for the same period. PERFORMANCE ANALYSIS While more defensive sectors and stocks were favored in the third quarter of 2002 and the first quarter of 2003, generally speaking, cyclically oriented, higher-beta names--along with small-cap stocks--were favored in the fourth quarter of 2002 and the period following March 2003. The Fund's positioning, which is highly leveraged to an economic recovery, was beneficial following the major market reversal away from defensive holdings as investors became increasingly confident in the market's longer-term prospects in the second quarter. However, it was costly when more defensive issues were favored. In the last year, disappointing stock selection in the Consumer Discretionary, Producer Durables, Financial Services and Health Care sectors could not be offset by stronger selection in Transportation, Materials, Energy and Technology. For much of the year, the Fund has been positioned based on a bottom-up valuation of fundamentals, with a strong cyclical tilt and geared toward an economic recovery. While this posture hurt returns when investors tended to favor defensive stocks despite their rich valuations, increased investor confidence favoring high-beta, cyclical names has benefited returns since March. Stock selection aided return comparisons in several sectors in the last year, including Transportation, Materials, Energy and Technology. Within Transportation, both Frontier Airlines and EGL--along with heavy truck and truck engine manufacturer Navistar International--posted strong gains. Frontier Airlines, a national economy carrier based in Denver, has benefited from United Airlines' ongoing bankruptcy proceedings and retrenchment. Navistar International gained during the last quarter as the market began to discount the high probability of a recovery in new truck orders. Our position in EGL, a global freight transportation company, rose sharply on higher earnings numbers that resulted from more efficient domestic shipping and cost-cutting initiatives. 29 The Fund's Technology holdings were also strong as software firm Numerical Technologies' stock price almost doubled following the announcement of its $250 million acquisition by Synopsys. Trimble Navigation, a global positioning system technology provider, benefited from increased civilian and military use of GPS-related software and hardware. Additionally, SanDisk, a solid-state memory manufacturer, has benefited from continued advances within digital consumer electronics, more than doubling in price over the last year. These gains, however, could not offset relatively weaker stock selection results, particularly in the Consumer Discretionary and Producer Durables sectors. Within these sectors, a number of holdings modestly lagged the benchmark, combining to create a significant drag on performance. In the Consumer Discretionary sector, small positions in leisure-time holdings Six Flags, Steinway Musical Instruments and Bally Total Fitness meaningfully detracted from return comparisons as these companies were hurt by economic sluggishness. In the Producer Durables sector, many holdings including Technitrol, Crown Castle and Asyst Technologies lagged the broader index during the year as a meaningful recovery in business spending has yet to materialize. Additionally, our underweighted position in the Health Care sector proved costly as it was one of the top-returning sectors within the index. Within the Index's Health Care sector, biotech and pharmaceutical names drove returns performance as the benchmark sector gained over 35% during the course of the year. While our underweighted position to the sector--and more specifically the biotech and pharmaceutical industries--detracted from relative return comparisons, within our small-cap value approach, we are often underweighted in these areas as it is very difficult to identify stocks that meet the valuation and cash flow requirements of our investment process. OUTLOOK Even with strong recent performance by small-cap stocks, we remain aggressively positioned for a continuation of an economic recovery. We continue to be confident that our portfolio holdings will benefit from a U.S. economic recovery resulting, in part, from the fiscal and monetary stimulus injected into the economy in the first half of the year. While small-cap stocks tend to outperform in the early stages of a recovery, we feel the portfolio is especially well positioned to benefit in the current environment. As a result, we have not changed the positioning of the portfolio significantly. Many of our recent transactions were valuation-driven as we opportunistically trimmed our positions in Navistar, Phelps Dodge, Varian Semiconductor and Micros Systems on strength. We reduced our position in the auto parts industry by trimming our holdings in American Axle & Manufacturing and Borg-Warner, while also eliminating our position in Lear. While these three firms dominate the small-cap arena for auto-parts manufacturers, we have been reducing these names because of the implications of reduced end-market demand. Additionally, at an 30 individual stock level we have decreased our exposure to airlines; notably Midwest Express, which we eliminated, and ExpressJet. As a result, we have a reduced overweighted position in the Transportation sector. Within the Consumer Discretionary sector, we decreased our exposure to gaming names such as Harrah's Entertainment and Mandalay Resort Group. Both companies have aided long-term portfolio returns, resulting in large profits being taken in each of these sales. We added several positions within the retail area of the Consumer Discretionary sector after they became oversold and undervalued on concerns following winter weather and the ability of the consumer to continue to maintain spending levels. We added several new positions in retailers Genesco, Linens 'N Things and Limited Too. We also increased our exposure in the Health Care sector as we initiated several positions in the sector, including Genesis Health Ventures, Hooper Holmes and VIASYS Healthcare. *Historical performance is not an indication of future performance. These performance results do not reflect the impact of Class A's maximum 5.5 percent front-end sales charge or Class B's maximum 5 percent contingent deferred sales charge. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. **The Russell 2000 Value Index contains those stocks from the Russell 2000 with low price to book ratios. The Russell 2000 are the 2,000 smallest 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. Investments in smaller company and micro-cap stocks generally carry a higher level of volatility and risk over the short-term. 31 TEN LARGEST STOCK HOLDINGS
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO -------------------- ------ ------------ ---------- Argosy Gaming Company 50,200 $ 1,164,640 1.9% Technitrol, Inc. 61,400 1,152,478 1.8% Wabtec Corporation 76,900 1,135,044 1.8% Agrium, Inc. 96,500 1,080,800 1.7% The Reader's Digest Association, Inc. 74,500 967,010 1.5% Veeco Instruments, Inc. 49,800 938,232 1.5% Phelps Dodge Corporation 22,200 936,618 1.5% Navistar International Corporation 22,700 885,754 1.4% Martin Marietta Materials. Inc. 18,800 720,040 1.1% Trinity Industries, Inc. 30,000 680,700 1.1% ------------ ---- $ 9,661,316 15.3% ============ ====
[CHART] Basic Materials 11.0% Utilities 0.4% Capital Goods 22.4% Communication Services 4.1% Consumer Cyclical 14.3% Consumer Staples 8.5% Energy 5.2% Financial 5.7% Health Care 4.2% Technology 15.8% Transportation 5.2% Cash And Other Assets/Liabilities 3.2%
32 COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE ADVANTUS VENTURE FUND, RUSSELL 2000 VALUE INDEX AND CONSUMER PRICE INDEX On the following chart you can see how the total return for each of the three classes of shares of the Advantus Venture Fund compared to the Russell 2000 Value Index and the Consumer Price Index. The lines represent the cumulative total return of a hypothetical $10,000 investment made on the inception date of each class of shares of the Advantus Venture Fund (January 31, 1997) through July 31, 2003. [CHART] CLASS A, B AND C AVERAGE ANNUAL TOTAL RETURN: Class A: One year 8.59% Five year 4.89% Since inception (1/31/97) 7.51% Class B: One year 9.13% Five year 4.96% Since inception (1/31/97) 7.50% Class C: One year 14.15% Five year 5.22% Since inception (1/31/97) 7.56%
(Thousands)
CLASS A CLASS B CLASS C CPI RUSSELL 2000 VALUE INDEX 1/31/1997 $ 10 $ 10 $ 10 $ 10 $ 10 7/31/1997 $ 11 $ 12 $ 12 $ 10 $ 12 7/31/1998 $ 12 $ 12 $ 12 $ 10 $ 12 7/31/1999 $ 11 $ 12 $ 12 $ 10 $ 12 7/31/2000 $ 12 $ 12 $ 12 $ 11 $ 13 7/31/2001 $ 16 $ 16 $ 16 $ 11 $ 16 7/31/2002 $ 14 $ 14 $ 14 $ 11 $ 15 7/31/2003 $ 16 $ 16 $ 16 $ 12 $ 18 $ 16,009 $ 15,998 $ 16,056 $ 11,559 $ 18,146
The preceding chart is useful because it provides you with more information about your investments. There are limitations, however. An index may reflect the performance of securities that the Fund may not hold. Also, the index does not deduct sales charges, investment advisory fees and other fund expenses, whereas your Fund does. Performance presented for the Fund reflects the deduction of the maximum 5.5 percent front-end sales charge for Class A and the maximum applicable contingent deferred sales charge for Class B shares. Sales charges pay for your financial professional's investment advice. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. Historical performance is not an indication of future performance. Investment returns and principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. 33 ADVANTUS CORNERSTONE FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ ------------ COMMON STOCK (97.5%) BASIC MATERIALS (6.3%) Aluminum (.7%) 17,800 Alcoa, Inc. $ 494,306 ------------ Chemicals (4.4%) 21,300 Air Products and Chemicals, Inc. 990,024 29,200 Du Pont El de Nemours &Company 1,283,048 20,100 The Dow Chemical Company 709,530 ------------ 2,982,602 ------------ Mining (.9%) 15,000 Phelps Dodge Corporation (b) 632,850 ------------ Paper and Forest (.3%) 3,600 Weyerhaeuser Company 202,644 ------------ CAPITAL GOODS (10.0%) Aerospace/Defense (5.3%) 14,600 Lockheed Martin Corporation 764,164 20,000 Northrop Grumman Corporation 1,844,800 32,000 The Boeing Company 1,059,840 ------------ 3,668,804 ------------ Electrical Equipment (1.5%) 11,000 Emerson Electric Company 590,700 10,000 General Electric Company 284,400 6,700 Honeywell International, Inc. 189,476 ------------ 1,064,576 ------------ Engineering/Construction (.8%) 7,800 Caterpillar, Inc. 526,266 ------------ Manufacturing (2.4%) 4,600 3M Company 644,920 20,800 Sealed Air Corporation (b) 992,784 ------------ 1,637,704 ------------ COMMUNICATION SERVICES (3.7%) Cellular (1.0%) 35,300 Vodafone Group PLC (c) 669,994 ------------ Telephone (2.7%) 29,100 BellSouth Corporation 741,177 32,657 Verizon Communications, Inc. 1,138,423 ------------ 1,879,600 ------------
See accompanying notes to investments in securities. 34
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL (11.0%) Auto (1.8%) 6,800 BorgWarner, Inc. $ 454,036 5,300 Eaton Corporation 446,101 5,400 ITT Industries, Inc. 360,180 ------------ 1,260,317 ------------ Distribution Durables (1.4%) 30,000 Genuine Parts Company 928,200 ------------ Leisure (1.5%) 38,700 Brunswick Corporation 1,042,965 ------------ Publishing (1.1%) 4,300 Gannett Company, Inc. 330,369 8,600 Tribune Company 406,092 ------------ 736,461 ------------ Retail (3.4%) 50,000 Dollar General Corporation 920,000 35,600 Sears Roebuck and Company 1,448,920 ------------ 2,368,920 ------------ Service (1.8%) 68,000 Cendant Corporation (b) 1,220,600 ------------ CONSUMER STAPLES (9.4%) Beverage (.8%) 4,600 Anheuser-Busch Companies, Inc. 238,372 13,200 Pepsi Bottling Group, Inc. 290,136 ------------ 528,508 ------------ Broadcasting (2.9%) 17,600 Clear Channel Communications, Inc. (b) 720,720 31,434 Comcast Corporation (b) 939,003 33,000 Liberty Media Corporation (b) 365,970 ------------ 2,025,693 ------------ Entertainment (1.9%) 25,000 Carnival Corporation 857,750 10,400 Viacom, Inc. (b) 452,608 ------------ 1,310,358 ------------ Food (2.1%) 62,800 ConAgra Foods, Inc. 1,414,884 ------------
See accompanying notes to investments in securities. 35
MARKET SHARES VALUE(a) ------ ------------ CONSUMER STAPLES--CONTINUED Service (.8%) 15,000 Manpower, Inc. $ 571,500 ------------ Tobacco (.9%) 16,000 Altria Group, Inc. 640,160 ------------ ENERGY (8.1%) Oil &Gas (7.3%) 15,500 Anadarko Petroleum Corporation 678,900 13,500 Burlington Resources, Inc. 623,295 55,206 Exxon Mobil Corporation 1,964,228 49,000 GlobalSantaFe Corporation 1,090,250 15,300 Nabors Industries, Ltd. (b) (c) 547,740 4,700 Noble Corporation (b) 154,489 ------------ 5,058,902 ------------ Oil &Gas Services (.8%) 15,100 Smith International, Inc. (b) 541,184 ------------ FINANCIAL (31.5%) Banks (11.0%) 28,500 Bank of America Corporation 2,353,245 10,485 Charter One Financial, Inc. 340,972 10,300 National City Corporation 339,385 14,900 The Bank of New York Company, Inc. 448,788 83,258 U.S. Bancorp 2,041,486 41,100 Wells Fargo &Company 2,076,783 ------------ 7,600,659 ------------ Finance - Diversified (5.6%) 29,400 American Express Company 1,298,598 24,300 Fannie Mae (FNMA) 1,556,172 29,600 JP Morgan Chase &Company 1,037,480 ------------ 3,892,250 ------------ Insurance (6.9%) 14,000 American International Group 898,800 200 Berkshire Hathaway, Inc. (b) 480,600 25,000 Chubb Corporation 1,620,000 8,300 Hartford Financial Services Group, Inc. 433,177 26,200 Lincoln National Corporation 978,308 7,000 Marsh &McLennan Companies, Inc. 347,340 ------------ 4,758,225 ------------
See accompanying notes to investments in securities. 36
MARKET SHARES VALUE(a) ------ ------------ FINANCIAL--CONTINUED Investment Bankers/Brokers (7.3%) 54,113 Citigroup, Inc. $ 2,424,262 7,000 Goldman Sachs Group, Inc. 609,980 16,300 Merrill Lynch &Company, Inc. 886,231 23,140 Morgan Stanley 1,097,762 ------------ 5,018,235 ------------ Real Estate Investment Trust - Warehouse/Industrial (.7%) 16,600 Prologis 457,330 ------------ HEALTH CARE (6.3%) Drugs (5.8%) 38,000 Abbott Laboratories 1,491,500 35,600 Bristol-Myers Squibb Company 932,720 14,600 Merck &Company, Inc. 807,088 16,200 Wyeth 738,396 ------------ 3,969,704 ------------ Medical Products/Supplies (.5%) 10,800 Becton Dickinson &Company 395,604 ------------ TECHNOLOGY (7.2%) Computer Hardware (1.6%) 51,400 Hewlett-Packard Company 1,088,138 ------------ Computer Services &Software (3.9%) 68,500 Check Point Software Technologies (b) (c) 1,218,615 55,700 Microsoft Corporation 1,470,480 ------------ 2,689,095 ------------ Electronic Components-Semiconductor (.7%) 19,600 Intel Corporation 489,020 ------------ Electronics - Computer Distribution (1.0%) 14,200 WW Grainger, Inc. 698,640 ------------ UTILITIES (4.0%) Electric Companies (4.0%) 26,000 Cinergy Corporation 884,520 4,700 Dominion Resources, Inc. 282,470 13,200 Exelon Corporation 758,604 30,000 The Southern Company 853,200 ------------ 2,778,794 ------------ Total common stock (cost: $60,366,893) 67,243,692 ------------
See accompanying notes to investments in securities. 37
MARKET SHARES VALUE(a) ------ ------------ SHORT-TERM SECURITIES (1.0%) 710,523 Federated Money Market Obligations Trust--Prime Obligations Fund, current rate 0.959% $ 710,523 ------------ Total short-term securities (cost: $710,523) 710,523 ------------ Total investments in securities (cost: $61,077,416) (d) $ 67,954,215 ============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 3.5% of net assets in foreign securities at July 31, 2003. (d) At July 31, 2003 the cost of securities for federal income tax purposes was $62,261,948. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 6,238,597 Gross unrealized depreciation (546,330) ------------ Net unrealized appreciation $ 5,692,267 ============
See accompanying notes to financial statements. 38 ADVANTUS ENTERPRISE FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ ------------ COMMON STOCK (96.4%) BASIC MATERIALS (2.2%) Chemicals (.8%) 15,800 Airgas, Inc. $ 307,152 ------------ Paper and Forest (1.4%) 18,100 Constar International, Inc. (b) 110,410 17,900 Delta &Pine Land Company 442,309 ------------ 552,719 ------------ CAPITAL GOODS (4.3%) Containers - Metal/Glass (.9%) 48,700 Crown Holdings, Inc. (b) 363,789 ------------ Electrical Defense (1.1%) 27,900 Titan Corporation (b) 427,986 ------------ Manufacturing (.4%) 9,300 Griffon Corporation (b) 166,470 ------------ Office Equipment (.8%) 20,000 Moore Wallace, Inc. (b) (c) 290,800 ------------ Waste Management (1.1%) 28,900 Headwaters, Inc. (b) 413,270 ------------ COMMUNICATION SERVICES (3.0%) Communications Equipment (2.2%) 19,700 InterDigital Communications Corporation (b) 312,836 144,700 Openwave Systems, Inc. (b) 557,095 ------------ 869,931 ------------ Telecommunication (.8%) 17,600 Polycom, Inc. (b) 293,920 ------------ CONSUMER CYCLICAL (19.9%) Auto (1.3%) 7,400 BorgWarner, Inc. 494,098 ------------ Distribution Durables (.9%) 17,100 MSC Industrial Direct Company 344,565 ------------ Publishing (.8%) 10,100 Scholastic Corporation (b) 294,617 ------------ Retail (9.9%) 15,000 Aeropostale, Inc. (b) 392,250 21,700 American Eagle Outfitters (b) 480,872 15,700 AnnTaylor Stores Corporation (b) 443,525
See accompanying notes to investments in securities. 39
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL--CONTINUED 24,000 BJ's Wholesale Club, Inc. (b) $ 468,000 13,100 Cost Plus, Inc. (b) 488,237 12,400 Guitar Center, Inc. (b) 417,880 21,100 Gymboree Corporation (b) 313,968 12,850 Hot Topic, Inc. (b) 371,365 28,990 Valuevision Media, Inc. (b) 502,977 ------------ 3,879,074 ------------ Service (5.0%) 43,700 Doubleclick, Inc. (b) 490,314 11,659 Getty Images, Inc. (b) 444,558 23,000 Kroll, Inc. (b) 524,860 20,400 Pegasus Solutions, Inc. (b) 303,960 8,200 Penn National Gaming, Inc. (b) 176,300 ------------ 1,939,992 ------------ Textiles (2.0%) 18,800 Linens 'N Things, Inc. (b) 502,900 28,600 Tommy Hilfiger Corporation (b) (c) 297,440 ------------ 800,340 ------------ CONSUMER STAPLES (7.4%) Broadcasting (2.7%) 26,900 Cumulus Media, Inc. (b) 470,481 28,300 Emmis Communications Corporation (b) 566,283 ------------ 1,036,764 ------------ Entertainment (.9%) 18,100 Movie Gallery, Inc. (b) 362,000 ------------ Food (.9%) 9,300 Performance Food Group Company (b) 351,354 ------------ Food &Health (1.0%) 23,100 Hain Celestial Group, Inc. (b) 378,840 ------------ Restaurants (.9%) 16,400 Jack in the Box, Inc. (b) 349,320 ------------ Service (1.0%) 66 Corrections Corporation of America (b) 1,628 7,100 Education Management Corporation (b) 412,297 ------------ 413,925 ------------
See accompanying notes to investments in securities. 40
MARKET SHARES VALUE(a) ------ ------------ ENERGY (4.7%) Oil &Gas (3.1%) 20,000 Remington Oil &Gas Corporation (b) $ 370,400 13,400 Spinnaker Exploration Company (b) 292,790 14,089 Stone Energy Corporation (b) 543,976 ------------ 1,207,166 ------------ Oil &Gas Services (1.6%) 15,300 FMC Technologies, Inc. (b) 343,638 61,300 Newpark Resources (b) 294,853 ------------ 638,491 ------------ FINANCIAL (8.3%) Banks (.8%) 7,100 WestAmerica Bancorporation 314,104 ------------ Finance - Diversified (2.2%) 6,200 Jefferies Group, Inc. 368,094 13,900 Raymond James Financial, Inc. 483,025 ------------ 851,119 ------------ Insurance (2.9%) 16,200 HCC Insurance Holdings, Inc. 484,056 6,900 Mid Atlantic Medical Services (b) 375,222 23,500 USI Holdings Corporation (b) 288,815 ------------ 1,148,093 ------------ Investment Bankers/Brokers (1.4%) 8,500 Affiliated Managers Group (b) 556,070 ------------ Savings and Loans (1.0%) 15,400 IndyMac Bancorp, Inc. 374,836 ------------ HEALTH CARE (18.0%) Drugs (8.7%) 8,800 Angiotech Pharmaceuticals, Inc. (b) (c) 389,400 29,300 Biomar Pharmaceutical, Inc. (b) 317,612 23,900 Cubist Pharmaceuticals, Inc. (b) 314,285 23,300 Inspire Pharmaceuticals, Inc. (b) 351,830 16,600 KV Pharmaceutical Company (b) 471,772 13,467 Medicis Pharmaceutical 786,473 30,500 Sepracor, Inc. (b) 739,625 ------------ 3,370,997 ------------ Hospital Management (3.5%) 22,900 Community Health Systems, Inc. (b) 508,380 30,300 LifePoint Hospitals, Inc. (b) 855,369 ------------ 1,363,749 ------------
See accompanying notes to investments in securities. 41
MARKET SHARES VALUE(a) ------ ------------ HEALTH CARE--CONTINUED Managed Care (1.0%) 7,500 Coventry Health Care, Inc. (b) $ 404,025 ------------ Medical Products/Supplies (2.9%) 16,300 SonoSite, Inc. (b) 356,318 27,900 Therasense, Inc. (b) 415,152 9,000 Wilson Greatbatch Technologies, Inc. (b) 351,990 ------------ 1,123,460 ------------ Special Services (1.9%) 15,000 Apria Healthcare Group, Inc. (b) 389,400 9,400 Fisher Scientific International (b) 355,320 ------------ 744,720 ------------ TECHNOLOGY (26.4%) Communications Equipment (.5%) 16,500 Verisity, Ltd. (b) 190,905 ------------ Computer Networking (1.6%) 40,100 Adaptec, Inc. (b) 271,477 20,700 Ask Jeeves (b) 361,215 ------------ 632,692 ------------ Computer Services &Software (12.1%) 37,500 Agile Software Corporation (b) 315,375 24,800 Avid Technology, Inc. (b) 1,152,208 9,400 CACI International, Inc. (b) 369,796 83,600 Chordiant Software, Inc. (b) 243,276 20,600 FileNET Corporation (b) 375,332 14,500 Hyperion Solutions Corporation (b) 396,285 44,600 Informatica Corporation (b) 326,918 50,442 Manugistics Group, Inc. (b) 233,546 79,100 Matrixone, Inc. (b) 401,828 28,200 RealNetworks, Inc. (b) 162,150 18,200 Take-Two Interactive Software (b) 484,120 34,600 webMethods, Inc. (b) 269,880 ------------ 4,730,714 ------------ Computer Systems (.1%) 5,303 Secure Computing Corporation (b) 49,795 ------------ Drugs (2.0%) 31,100 Accredo Health, Inc. (b) 761,328 ------------ Electrical Semiconductor (.9%) 47,400 Axcelis Technologies, Inc. (b) 348,864 ------------
See accompanying notes to investments in securities. 42
MARKET SHARES VALUE(a) ------ ------------ TECHNOLOGY--CONTINUED Electronic Components-Semiconductor (8.0%) 16,400 Actel Corporation (b) $ 399,340 21,940 Brooks Automation, Inc. (b) 422,345 15,704 Cymer, Inc. (b) 635,227 9,600 Integrated Circuit Systems, Inc. (b) 288,480 38,900 Semtech Corporation (b) 641,850 21,700 Varian Semiconductor Equipment Associates, Inc. (b) 721,525 ------------ 3,108,767 ------------ Service - Data Processing (1.2%) 26,804 Documentum, Inc. (b) 459,689 ------------ TRANSPORTATION (2.2%) Trucking (2.2%) 9,500 JB Hunt Transport Services, Inc. (b) 447,830 19,300 Swift Transportation Company, Inc. (b) 425,372 ------------ 873,202 ------------ Total common stock (cost: $34,326,372) 37,583,712 ------------ WARRANTS ( -- ) TECHNOLOGY ( -- ) Electrical Instruments ( -- ) 19 APW, Ltd. (b) (d) - ------------ Total warants (cost: $757) - ------------ SHORT-TERM SECURITIES (6.8%) 1,999,442 Federated Money Market Obligations Trust -- Prime Obligations Fund, current rate 0.959% 1,999,442 668,318 Wells Fargo &Company -- Cash Investment Fund, current rate 0.951% 668,318 ------------ Total short-term securities (cost: $2,667,760) 2,667,760 ------------ Total investments in securities (cost: $36,994,889) (e) $ 40,251,472 ============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 2.5% of net assets in foreign securities at July 31, 2003. (d) This security is being fair-valued according to procedures approved by the board of directors. (e) At July 31, 2003 the cost of securities for federal income tax purposes was $37,267,571. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 4,299,487 Gross unrealized depreciation (1,315,586) ------------ Net unrealized appreciation $ 2,983,901 ============
See accompanying notes to financial statements. 43 ADVANTUS HORIZON FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ ------------ COMMON STOCK (100.4%) BASIC MATERIALS (1.9%) Chemicals (1.9%) 8,300 Praxair, Inc. $ 536,678 ------------ CONSUMER CYCLICAL (8.3%) Auto (.1%) 600 Harley-Davidson, Inc. 28,128 ------------ Leisure (1.7%) 19,200 International Game Technology 488,640 ------------ Retail (6.5%) 5,400 Autozone, Inc. (b) 449,604 18,100 Dollar General Corporation 333,040 7,500 Kohl's Corporation (b) 445,125 5,100 Target Corporation 195,432 7,600 Wal-Mart Stores, Inc. 424,916 ------------ 1,848,117 ------------ CONSUMER STAPLES (4.3%) Beverage (1.1%) 6,300 Anheuser-Busch Companies, Inc. 326,466 ------------ Service (1.1%) 8,600 Manpower, Inc. 327,660 ------------ Tobacco (2.1%) 14,900 Altria Group, Inc. 596,149 ------------ ENERGY (6.0%) Oil &Gas Services (6.0%) 14,300 BJ Services Company (b) 489,775 34,000 Smith International, Inc. (b) 1,218,560 ------------ 1,708,335 ------------ FINANCIAL (12.3%) Banks (4.4%) 6,800 Bank of America Corporation 561,476 13,700 Wells Fargo &Company 692,261 ------------ 1,253,737 ------------ Consumer Finance (4.7%) 9,400 Capital One Financial Corporation 450,354 21,300 SLM Corporation 883,098 ------------ 1,333,452 ------------
See accompanying notes to investments in securities. 44
MARKET SHARES VALUE(a) ------ ------------ FINANCIAL--CONTINUED Insurance ( -- ) 1,100 Travelers Property Casualty Corporation $ 17,778 ------------ Investment Bankers/Brokers (3.2%) 10,600 Goldman Sachs Group, Inc. 923,684 ------------ HEALTH CARE (31.0%) Biotechnology (12.4%) 35,000 Amgen, Inc. (b) 2,435,300 16,200 Gilead Sciences, Inc. (b) 1,110,510 ------------ 3,545,810 ------------ Drugs (6.1%) 30,950 Pfizer, Inc. 1,032,492 12,600 Teva Pharmaceutical Industries (c) 722,484 ------------ 1,754,976 ------------ Health Care - Diversified (1.0%) 5,300 Johnson &Johnson 274,487 ------------ Hospital Management (1.6%) 23,600 Health Management Associates, Inc. 471,292 ------------ Medical Products/Supplies (9.9%) 9,100 Boston Scientific Corporation (b) 575,393 26,200 Medtronic, Inc. 1,349,300 19,200 Zimmer Holdings, Inc. (b) 917,952 ------------ 2,842,645 ------------ TECHNOLOGY (36.6%) Computer Hardware (2.1%) 17,830 Dell, Inc. (b) 600,514 ------------ Computer Networking (2.9%) 41,885 Cisco Systems, Inc. (b) 817,595 ------------ Computer Peripherals (5.6%) 150,600 EMC Corporation (b) 1,602,384 ------------ Computer Services &Software (8.1%) 34,618 Microsoft Corporation 913,916 47,500 SAP AG (c) 1,394,125 ------------ 2,308,041 ------------ Electrical Instruments (3.2%) 10,800 Garmin, Ltd. (c) 413,208 6,200 Harman International Industries, Inc. 518,320 ------------ 931,528 ------------
See accompanying notes to investments in securities. 45
MARKET SHARES VALUE(a) ------ ------------ TECHNOLOGY--CONTINUED Electronic Components-Semiconductor (12.3%) 25,666 Analog Devices, Inc. (b) $ 974,025 18,300 Applied Materials, Inc. (b) 356,850 14,988 Linear Technology Corporation 552,757 11,822 Maxim Integrated Products 462,004 28,900 Microchip Technology, Inc. 761,804 15,500 Xilinx, Inc. (b) 407,340 ------------ 3,514,780 ------------ Service - Data Processing (2.4%) 22,200 Veritas Software Corporation (b) 683,760 ------------ Total common stock (cost: $24,226,012) 28,736,636 ------------ SHORT-TERM SECURITIES (2.4%) 696,563 Federated Money Market Obligations Trust -- Prime Obligations Fund, current rate 0.959% 696,563 ------------ Total short-term securities (cost: $696,563) 696,563 ------------ Total investments in securities (cost: $24,922,575) (d) $ 29,433,199 ============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 8.8% of net assets in foreign securities at July 31, 2003. (d) At July 31, 2003 the cost of securities for federal income tax purposes was $26,070,078. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 3,378,980 Gross unrealized depreciation (15,859) ------------ Net unrealized appreciation $ 3,363,121 ============
See accompanying notes to financial statements. 46 ADVANTUS INDEX 500 FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ ------------ COMMON STOCK (93.9%) BASIC MATERIALS (2.9%) Agriculture Products (.1%) 886 Monsanto Company $ 20,378 ----------- Aluminum (.2%) 3,078 Alcoa, Inc. 85,476 ----------- Chemicals (1.4%) 802 Air Products and Chemicals, Inc. 37,277 3,639 Du Pont El de Nemours &Company 159,898 273 Eastman Chemical Company 9,910 962 Ecolab, Inc. 23,771 450 Engelhard Corporation 11,826 182 Great Lakes Chemical Corporation 3,967 380 Hercules, Inc. (b) 4,340 292 International Flavors and Fragrances, Inc. 8,804 593 PPG Industries, Inc. 33,487 608 Praxair, Inc. 39,313 771 Rohm &Haas Company 27,270 265 Sigma-Aldrich Corporation 15,097 3,328 The Dow Chemical Company 117,478 487 The Sherwin-Williams Company 14,610 ----------- 507,048 ----------- Construction (.1%) 370 Vulcan Materials Company 14,881 ----------- Iron and Steel (.1%) 293 Allegheny Technologies, Inc. 2,212 293 Nucor Corporation 14,451 374 United States Steel Corporation 5,894 ----------- 22,557 ----------- Mining (.2%) 532 Freeport-McMoRan Copper &Gold, Inc. 14,252 1,482 Newmont Mining Corporation 53,500 340 Phelps Dodge Corporation (b) 14,345 ----------- 82,097 ----------- Paper and Forest (.8%) 232 Bemis Company 10,368 156 Boise Cascade Corporation 3,867 843 Georgia-Pacific Corporation 18,419 1,714 International Paper Company 67,052 1,845 Kimberly-Clark Corporation 89,298 372 Louisiana-Pacific Corporation (b) 4,520 680 MeadWestvaco Corporation 16,463
See accompanying notes to investments in securities. 47
MARKET SHARES VALUE(a) ------ ----------- BASIC MATERIALS--CONTINUED 670 Plum Creek Timber Company, Inc. $ 18,197 223 Temple-Inland, Inc. 10,345 824 Weyerhaeuser Company 46,383 ------------ 284,912 ------------ CAPITAL GOODS (7.5%) Aerospace/Defense (1.5%) 761 General Dynamics Corporation 60,378 426 Goodrich Corporation 9,798 1,632 Lockheed Martin Corporation 85,419 687 Northrop Grumman Corporation 63,369 1,450 Raytheon Company 44,515 676 Rockwell Automation, Inc. 17,468 600 Rockwell Collins, Inc. 15,618 3,059 The Boeing Company 101,314 1,697 United Technologies Corporation 127,665 ------------ 525,544 ------------ Containers - Metal/Glass ( -- ) 200 Ball Corporation 9,940 ------------ Electrical Equipment (3.7%) 639 American Power Conversion (b) 11,138 343 Cooper Industries, Ltd. 15,205 1,510 Emerson Electric Company 81,087 36,361 General Electric Company (e) 1,034,107 3,084 Honeywell International, Inc. 87,216 722 Jabil Circuit, Inc. (b) 16,642 702 Molex, Inc. 19,600 300 Power-One, Inc. (b) 3,177 3,001 Solectron Corporation (b) 15,335 586 Thermo Electron Corporation (b) 13,038 ------------ 1,296,545 ------------ Engineering/Construction (.2%) 1,249 Caterpillar, Inc. 84,270 ------------ Machinery (.3%) 904 Deere &Company 45,905 755 Dover Corporation 27,641 634 Ingersoll-Rand Company (c) 34,388 ------------ 107,934 ------------ Manufacturing (1.4%) 1,469 3M Company 205,954 406 Avery Dennison Corporation 21,908
See accompanying notes to investments in securities. 48
MARKET SHARES VALUE(a) ------ ------------ CAPITAL GOODS--CONTINUED 1,112 Illinois Tool Works, Inc. $ 77,451 400 Parker Hannifin Corporation 18,440 296 Sealed Air Corporation (b) 14,128 505 Textron, Inc. 21,927 7,241 Tyco International, Ltd. (c) 134,682 ------------ 494,490 ------------ Metal Fabrication ( -- ) 296 Worthington Industries 4,351 ------------ Office Equipment (.1%) 879 Pitney Bowes, Inc. 33,490 ------------ Trucks and Parts (.1%) 175 Cummins, Inc. 8,108 255 Navistar International Corporation (b) 9,950 422 Paccar, Inc. 32,578 ------------ 50,636 ------------ Waste Management (.2%) 693 Allied Waste Industries, Inc. (b) 8,399 2,118 Waste Management, Inc. 50,599 ------------ 58,998 ------------ COMMUNICATION SERVICES (4.2%) Cellular (.5%) 9,834 ATTWireless Services, Inc. (b) 83,884 3,713 Nextel Communications, Inc. (b) 67,799 3,653 Sprint Corporation-PCS Group (b) 22,466 ------------ 174,149 ------------ Telecommunication (.9%) 2,898 ADC Telecommunications, Inc. (b) 6,318 560 Andrew Corporation (b) 6,098 1,316 Avaya, Inc. (b) 12,634 1,659 CIENA Corporation (b) 9,639 682 Comverse Technology, Inc. (b) 10,060 4,590 Corning, Inc. (b) 37,363 15,003 Lucent Technologies, Inc. (b) 26,405 8,397 Motorola, Inc. 75,909 2,875 Qualcomm, Inc. 107,698 482 Scientific-Atlanta, Inc. 14,600 1,454 Tellabs, Inc. (b) 9,785 ------------ 316,509 ------------
See accompanying notes to investments in securities. 49
MARKET SHARES VALUE(a) ------ ------------ COMMUNICATION SERVICES--CONTINUED Telephone (2.8%) 1,161 Alltel Corporation $ 54,323 2,794 ATTCorporation 59,400 6,697 BellSouth Corporation 170,573 533 Centurytel, Inc. 18,277 957 Citizens Communications Company (b) 11,340 6,148 Qwest Communications International, Inc. (b) 24,531 12,048 SBC Communications, Inc. 281,441 3,260 Sprint Corporation-FON Group 46,031 9,974 Verizon Communications, Inc. 347,694 ------------ 1,013,610 ------------ CONSUMER CYCLICAL (10.3%) Auto (1.1%) 995 Autonation, Inc. (b) 17,104 237 Cooper Tire &Rubber Company 4,029 538 Dana Corporation 8,285 564 Danaher Corporation 40,721 2,006 Delphi Corporation 16,850 302 Eaton Corporation 25,419 6,637 Ford Motor Company 73,405 2,009 General Motors Corporation 75,197 1,063 Harley-Davidson, Inc. 49,833 375 ITT Industries, Inc. 25,012 330 Johnson Controls, Inc. 31,881 613 The Goodyear Tire &Rubber Company 3,378 474 Visteon Corporation 3,000 ------------ 374,114 ------------ Building Materials (.2%) 297 American Standard Companies, Inc. (b) 22,691 214 Crane Company 5,309 1,687 Masco Corporation 41,112 ------------ 69,112 ------------ Construction (.1%) 250 Centex Corporation 18,142 200 KB Home 11,322 259 Pulte Homes, Inc. 15,830 ------------ 45,294 ------------ Distribution Durables (.1%) 640 Genuine Parts Company 19,802 ------------
See accompanying notes to investments in securities. 50
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL--CONTINUED Hardware and Tools (.1%) 286 Black &Decker Corporation $ 11,686 220 Snap-On, Inc. 6,230 255 The Stanley Works 7,224 ------------ 25,140 ------------ Houseware (.1%) 628 Leggett &Platt, Inc. 13,904 275 Maytag Corporation 6,999 256 Whirlpool Corporation 16,583 ------------ 37,486 ------------ Leisure (.2%) 327 Brunswick Corporation 8,813 628 Hasbro, Inc. 11,838 1,272 International Game Technology 32,372 1,547 Mattel, Inc. 30,058 ------------ 83,081 ------------ Lodging - Hotel (.3%) 371 Harrah's Entertainment, Inc. (b) 16,194 1,309 Hilton Hotels Corporation 19,111 814 Marriott International, Inc. 33,455 677 Starwood Hotels &Resorts Worldwide, Inc. 22,070 ------------ 90,830 ------------ Photography/Imagery (.1%) 1,028 Eastman Kodak Company 28,404 ------------ Publishing (.7%) 324 Dow Jones and Company, Inc. 13,715 1,005 Gannett Company, Inc. 77,214 305 Knight-Ridder, Inc. 20,932 178 Meredith Corporation 8,095 571 New York Times Company 25,467 411 RR Donnelly &Sons Company 10,875 673 The McGraw-Hill Companies, Inc. 40,905 1,158 Tribune Company 54,681 ------------ 251,884 ------------ Retail (6.5%) 239 American Greetings (b) 4,257 404 Autozone, Inc. (b) 33,637 1,049 Bed Bath &Beyond, Inc. (b) 40,733 1,181 Best Buy Company, Inc. (b) 51,551 405 Big Lots, Inc. (b) 6,241
See accompanying notes to investments in securities. 51
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL--CONTINUED 692 Circuit City Stores, Inc. $ 6,353 1,637 Costco Wholesale Corporation (b) 60,651 1,378 CVS Corporation 41,326 553 Darden Restaurants, Inc. 10,347 278 Dillards, Inc. 4,189 1,145 Dollar General Corporation 21,068 1,155 eBay, Inc. (b) 123,816 628 Family Dollar Stores 23,556 638 Federated Department Stores 25,526 8,332 Home Depot, Inc. 259,958 913 JC Penney Company 16,964 1,264 Kohl's Corporation (b) 75,018 1,862 Limited Brands, Inc. 31,114 2,828 Lowe's Companies, Inc. 134,500 997 Nike, Inc. 51,585 423 Nordstrom, Inc. 8,930 1,046 Office Depot, Inc. (b) 17,364 609 RadioShack Corporation 16,181 198 Reebok International, Ltd. 6,514 1,078 Sears Roebuck and Company 43,875 1,765 Staples, Inc. (b) 35,547 3,315 Target Corporation 127,031 3,159 The Gap, Inc. 56,830 988 The May Department Stores Company 24,413 518 Tiffany &Company 17,798 1,806 TJX Companies, Inc. 35,127 768 Toys 'R' US, Inc. (b) 8,563 15,980 Wal-Mart Stores, Inc. (e) 893,442 ------------ 2,314,005 ------------ Service (.7%) 615 Apollo Group, Inc. (b) 39,827 3,690 Cendant Corporation (b) 66,236 478 Convergys Corporation (b) 8,064 313 Fluor Corporation 11,152 674 HRBlock, Inc. 28,571 1,344 Interpublic Group of Companies, Inc. 18,547 405 Monster Worldwide, Inc. (b) 10,753 708 Omnicom Group 52,307 355 Quintiles Transnational Corporation (b) 4,881 554 Robert Half International, Inc. (b) 12,027 514 Sabre Holdings Corporation 11,863 ------------ 264,228 ------------
See accompanying notes to investments in securities. 52
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL--CONTINUED Textiles (.1%) 475 Jones Apparel Group, Inc. (b) $ 13,751 416 Liz Claiborne, Inc. 14,323 350 VF Corporation 13,346 ------------ 41,420 ------------ CONSUMER STAPLES (11.1%) Beverage (2.6%) 164 Adolph Coors 8,426 3,026 Anheuser-Busch Companies, Inc. 156,807 250 Brown-Forman Corporation 19,475 1,595 Coca-Cola Enterprises, Inc. 27,195 948 Pepsi Bottling Group, Inc. 20,837 6,231 PepsiCo, Inc. 287,062 8,933 The Coca-Cola Company 401,717 ------------ 921,519 ------------ Broadcasting (1.0%) 2,227 Clear Channel Communications, Inc. 91,196 8,155 Comcast Corporation (b) 247,260 846 Univision Communications, Inc. (b) 26,395 ------------ 364,851 ------------ Entertainment (1.5%) 2,303 Carnival Corporation 79,016 6,368 Viacom, Inc. 277,135 7,409 Walt Disney Company 162,405 ------------ 518,556 ------------ Food (1.4%) 2,302 Archer-Daniels-Midland Company 30,248 1,444 Campbell Soup Company 34,873 1,918 ConAgra Foods, Inc. 43,213 1,338 General Mills, Inc. 61,374 515 Hershey Foods Corporation 37,497 1,328 HJ Heinz Company 45,232 1,444 Kellogg Company 49,573 450 McCormick &Company, Inc. 11,502 2,778 Sara Lee Corporation 51,921 2,322 Sysco Corporation 69,962 849 WM Wrigley Jr. Company 46,092 ------------ 481,487 ------------
See accompanying notes to investments in securities. 53
MARKET SHARES VALUE(a) ------ ------------ CONSUMER CYCLICAL--CONTINUED Household Products (2.0%) 781 Clorox Company $ 33,888 1,951 Colgate-Palmolive Company 106,525 1,001 Newell Rubbermaid, Inc. 23,654 578 Pactiv Corporation (b) 11,416 4,792 Procter &Gamble Company 421,073 3,703 The Gillette Company 113,904 211 Tupperware Corporation 3,273 ------------ 713,733 ------------ Personal Care (.2%) 249 Alberto-Culver Company 13,852 889 Avon Products, Inc. 55,465 ------------ 69,317 ------------ Restaurants (.5%) 4,575 McDonald's Corporation 105,271 1,359 Starbucks Corporation (b) 37,141 431 Wendy's International, Inc. 12,667 1,027 Yum! Brands, Inc. (b) 30,738 ------------ 185,817 ------------ Retail (.7%) 1,330 Albertson's, Inc. 25,084 2,736 Kroger Company (b) 46,375 1,561 Safeway, Inc. (b) 33,327 485 Supervalu, Inc. 11,422 3,681 Walgreen Company 110,136 510 Winn-Dixie Stores, Inc. 5,845 ------------ 232,189 ------------ Service (.2%) 630 Cintas Corporation 26,057 2,956 Concord EFS, Inc. (b) 40,231 231 Deluxe Corporation 10,256 ------------ 76,544 ------------ Tobacco (1.0%) 7,343 Altria Group, Inc. 293,793 554 Fortune Brands, Inc. 30,808 315 R.J. Reynolds Tobacco Holdings, Inc. 11,189 630 UST, Inc. 20,948 ------------ 356,738 ------------
See accompanying notes to investments in securities. 54
MARKET SHARES VALUE(a) ------ ------------ ENERGY (5.2%) Oil &Gas (4.7%) 328 Amerada Hess Corporation $ 15,406 891 Anadarko Petroleum Corporation 39,026 600 Apache Corporation 37,176 240 Ashland, Inc. 7,870 716 Burlington Resources, Inc. 33,058 3,921 ChevronTexaco Corporation 282,743 2,462 ConocoPhillips 128,861 844 Devon Energy Corporation 39,980 390 EOG Resources, Inc. 15,124 24,323 Exxon Mobil Corporation (e) 865,412 400 Kerr-McGee Corporation 17,600 1,081 Marathon Oil Corporation 27,825 528 Nabors Industries, Ltd. (b) (c) 18,902 497 Noble Corporation (b) 16,336 1,342 Occidental Petroleum Corporation 43,870 320 Rowan Companies, Inc. (b) 7,024 300 Sunoco, Inc. 11,100 1,096 Transocean, Inc. (b) 21,449 898 Unocal Corporation 26,302 ------------ 1,655,064 ------------ Oil &Gas Services (.5%) 1,243 Baker Hughes, Inc. 39,043 573 BJ Services Company (b) 19,625 1,537 Halliburton Company 34,075 237 McDermott International, Inc. (b) 1,401 2,099 Schlumberger, Ltd. 94,602 ------------ 188,746 ------------ FINANCIAL (20.0%) Banks (6.5%) 1,241 Amsouth BanCorp 26,892 5,432 Bank of America Corporation 448,560 4,143 Bank One Corporation 163,897 2,036 BBTCorporation 71,056 776 Charter One Financial, Inc. 25,236 658 Comerica, Inc. 31,900 2,083 Fifth Third BanCorp 114,586 424 First Tennessee National Corporation 18,190 3,869 FleetBoston Financial Corporation 120,287 785 Huntington Bancshares, Inc. 16,045 1,505 Keycorp 40,500 822 Marshall &Ilsley Corporation 25,745 1,538 Mellon Financial Corporation 46,524
See accompanying notes to investments in securities. 55
MARKET SHARES VALUE(a) ------ ------------ FINANCIAL--CONTINUED 2,200 National City Corporation $ 72,490 525 North Fork Bancorporation, Inc. 18,401 831 Northern Trust Corporation 36,281 860 Regions Financial Corporation 31,046 1,221 SouthTrust Corporation 34,994 1,174 State Street Corporation 53,887 995 SunTrust Banks, Inc. 60,596 1,131 Synovus Financial Corporation 26,612 2,794 The Bank of New York Company, Inc. 84,155 6,962 U.S. Bancorp 170,708 730 Union Planters Corporation 23,462 4,878 Wachovia Corporation 213,120 6,075 Wells Fargo &Company 306,970 297 Zions Bancorporation 16,584 ------------ 2,298,724 ------------ Finance - Diversified (3.1%) 4,703 American Express Company 207,732 852 Capital One Financial Corporation 40,819 3,554 Fannie Mae (FNMA) 227,598 405 Federated Investors, Inc. 11,640 2,493 Freddie Mac (FHLMC) 121,783 809 Janus Capital Group, Inc. 14,158 7,361 JP Morgan Chase &Company 258,003 4,633 MBNA Corporation 103,270 570 Moody's Corporation 29,480 1,048 Providian Financial Corporation (b) 10,113 1,740 SLM Corporation 72,140 ------------ 1,096,736 ------------ Insurance (5.0%) 920 ACE, Ltd. (c) 30,351 590 Aetna, Inc. 36,356 1,847 Aflac, Inc. 59,252 396 AMBAC Financial Group, Inc. 26,085 9,559 American International Group 613,687 1,132 AON Corporation 27,225 712 Chubb Corporation 46,138 543 Cigna Corporation 25,402 554 Cincinnati Financial Corporation 21,772 1,057 Hartford Financial Services Group, Inc. 55,165 541 Jefferson-Pilot Corporation 23,804 1,062 John Hancock Financial Services, Inc. 34,674 643 Lincoln National Corporation 24,010 647 Loews Corporation 29,762
See accompanying notes to investments in securities. 56
MARKET SHARES VALUE(a) ------ --------------- FINANCIAL--CONTINUED 1,942 Marsh &McLennan Companies, Inc. $ 96,362 554 MBIA, Inc. 28,043 2,727 Metlife, Inc. 75,592 387 MGIC Investment Corporation 21,478 1,156 Principal Financial Group 37,686 1,959 Prudential Financial, Inc. 69,701 522 Safeco Corporation 19,434 789 St. Paul Companies 27,749 2,556 The Allstate Corporation 97,205 774 The Progressive Corporation 51,038 434 Torchmark Corporation 17,638 3,589 Travelers Property Casualty Corporation 57,927 987 UnumProvident Corporation 13,403 610 WellPoint Health Networks (b) 51,026 540 XL Capital, Ltd. (c) 42,930 --------------- 1,760,895 --------------- Investment Bankers/Brokers (4.4%) 354 Bear Stearns &Company, Inc. 23,718 18,769 Citigroup, Inc. 840,851 896 Franklin Resources, Inc. 38,931 1,703 Goldman Sachs Group, Inc. 148,399 889 Lehman Brothers Holdings, Inc. 56,247 3,443 Merrill Lynch &Company, Inc. 187,196 3,919 Morgan Stanley 185,917 446 T Rowe Price Group, Inc. 18,103 4,878 The Charles Schwab Corporation 50,780 --------------- 1,550,142 --------------- Public Finance (.2%) 510 Countrywide Financial Corporation 34,073 1,017 PNC Financial Services Group, Inc. 49,782 --------------- 83,855 --------------- Real Estate Investment Trust - Apartments (.1%) 350 Apartment Investment &Management Company 13,794 993 Equity Residential 27,705 --------------- 41,499 --------------- Real Estate Investment Trust - Office Property (.1%) 1,451 Equity Office Properties Trust 40,251 --------------- Real Estate Investment Trust - Regional Mall (.1%) 685 Simon Property Group, Inc. 29,010 ---------------
See accompanying notes to investments in securities. 57
MARKET SHARES VALUE(a) ------ --------------- FINANCIAL--CONTINUED Real Estate Investment Trust - Warehouse/Industrial ( -- ) 650 Prologis $ 17,908 --------------- Savings and Loans (.5%) 598 Golden West Financial Corporation 49,395 3,374 Washington Mutual, Inc. 133,206 --------------- 182,601 --------------- HEALTH CARE (13.2%) Biotechnology (1.2%) 4,568 Amgen, Inc. (b) 317,841 548 Biogen, Inc. (b) 21,054 712 Chiron Corporation (b) 32,467 799 Genzyme Corporation-General Division (b) 40,302 200 Millipore Corporation (b) 8,898 --------------- 420,562 --------------- Drugs (7.4%) 5,661 Abbott Laboratories 222,194 7,029 Bristol-Myers Squibb Company 184,160 1,619 Cardinal Health, Inc. 88,640 4,155 Eli Lilly &Company 273,565 1,354 Forest Laboratories, Inc. (b) 64,830 873 King Pharmaceuticals, Inc. (b) 13,147 969 Medimmune, Inc. (b) 37,975 8,232 Merck &Company, Inc. 455,065 28,731 Pfizer, Inc. 958,466 5,326 Schering-Plough Corporation 90,435 375 Watson Pharmaceuticals, Inc. (b) 14,978 4,813 Wyeth 219,377 --------------- 2,622,832 --------------- Health Care - Diversified (1.8%) 484 Allergan, Inc. 38,952 10,867 Johnson &Johnson 562,802 1,661 Tenet Healthcare Corporation (b) 22,889 --------------- 624,643 --------------- Hospital Management (.2%) 1,845 HCA, Inc. 65,036 865 Health Management Associates, Inc. 17,274 --------------- 82,310 --------------- Managed Care (.5%) 573 Humana, Inc. (b) 10,039 332 Manor Care, Inc. (b) 9,462
See accompanying notes to investments in securities. 58
MARKET SHARES VALUE(a) ------ --------------- HEALTH CARE--CONTINUED 1,017 McKesson Corporation $ 32,808 2,156 UnitedHealth Group, Inc. 112,306 --------------- 164,615 --------------- Medical Products/Supplies (1.9%) 392 AmerisourceBergen Corporation 24,731 187 Bausch &Lomb, Inc. 7,904 2,120 Baxter International, Inc. 58,533 944 Becton Dickinson &Company 34,579 913 Biomet, Inc. 27,034 1,532 Boston Scientific Corporation (b) 96,868 227 CR Bard, Inc. 15,563 1,137 Guidant Corporation 53,689 4,421 Medtronic, Inc. 227,682 451 Pall Corporation 10,179 666 St. Jude Medical, Inc. (b) 35,731 752 Stryker Corporation 57,543 718 Zimmer Holdings, Inc. (b) 34,328 --------------- 684,364 --------------- Special Services (.2%) 489 Anthem, Inc. (b) 36,924 365 Quest Diagnostics (b) 21,812 --------------- 58,736 --------------- TECHNOLOGY (15.4%) Computer Hardware (3.4%) 1,325 Apple Computer, Inc. (b) 27,891 9,314 Dell, Inc. (b) 313,696 1,117 Gateway, Inc. (b) 5,708 11,069 Hewlett-Packard Company 234,331 6,306 International Business Machines Corporation 512,362 335 NCR Corporation (b) 9,236 11,676 Sun Microsystems, Inc. (b) 43,668 769 Symbol Technologies, Inc. 9,851 2,793 Xerox Corporation (b) 30,164 --------------- 1,186,907 --------------- Computer Networking (1.6%) 25,453 Cisco Systems, Inc. (b) 496,843 2,205 Yahoo!, Inc. (b) 68,642 --------------- 565,485 ---------------
See accompanying notes to investments in securities. 59
MARKET SHARES VALUE(a) ------ --------------- TECHNOLOGY--CONTINUED Computer Peripherals (.4%) 7,931 EMC Corporation (b) $ 84,386 475 Lexmark International, Inc. (b) 30,481 1,173 Network Appliance, Inc. (b) 18,745 --------------- 133,612 --------------- Computer Services &Software (5.2%) 891 Adobe Systems, Inc. 29,118 16,308 AOL Time Warner, Inc. (b) 251,632 333 Autodesk, Inc. 4,982 781 BMC Software, Inc. (b) 11,012 554 Citrix Systems, Inc. (b) 10,055 2,099 Computer Associates International, Inc. 53,420 701 Computer Sciences Corporation (b) 28,440 1,371 Compuware Corporation (b) 7,061 549 Electronic Arts, Inc. (b) 46,116 825 IMS Health, Inc. 15,956 324 Mercury Interactive Corporation (b) 12,753 39,060 Microsoft Corporation (e) 1,031,184 1,279 Novell, Inc. (b) 4,540 19,013 Oracle Corporation (b) 228,156 958 Parametric Technology Corporation (b) 3,056 1,341 Peoplesoft, Inc. (b) 22,354 1,775 Siebel Systems, Inc. (b) 16,650 1,072 Sungard Data Systems, Inc. (b) 28,129 545 Symantec Corporation (b) 25,490 1,122 Unisys Corporation (b) 13,756 --------------- 1,843,860 --------------- Electrical Instruments (.3%) 1,660 Agilent Technologies, Inc. (b) 36,072 686 Applera Corporation -- Applied Biosystems Group 14,852 5,143 JDS Uniphase Corporation (b) 15,480 457 PerkinElmer, Inc. 6,791 307 Tektronix, Inc. (b) 6,487 453 Waters Corporation (b) 14,365 --------------- 94,047 --------------- Electronics - Computer Distribution ( -- ) 1,849 Sanmina-SCI Corporation (b) 14,681 212 Thomas &Betts Corporation (b) 3,235 344 WW Grainger, Inc. 16,925 --------------- 34,841 ---------------
See accompanying notes to investments in securities. 60
MARKET SHARES VALUE(a) ------ --------------- TECHNOLOGY--CONTINUED Electronic Components-Semiconductor (3.5%) 1,184 Advanced Micro Devices, Inc. (b) $ 8,643 1,343 Altera Corporation (b) 25,839 1,352 Analog Devices, Inc. (b) 51,308 6,009 Applied Materials, Inc. (b) 117,176 1,034 Applied Micro Circuits Corporation (b) 5,925 1,015 Broadcom Corporation (b) 20,574 23,695 Intel Corporation 591,190 710 Kla-Tencor Corporation (b) 36,672 1,187 Linear Technology Corporation 43,777 1,360 LSI Logic Corporation (b) 12,662 1,197 Maxim Integrated Products 46,779 2,172 Micron Technology, Inc. (b) 31,798 661 National Semiconductor Corporation (b) 14,773 505 Novellus Systems, Inc. (b) 18,084 577 Nvidia Corporation (b) 11,032 612 PMC -- Sierra, Inc. (b) 7,503 377 QLogic Corporation (b) 15,891 663 Teradyne, Inc. (b) 10,906 6,271 Texas Instruments, Inc. 118,334 1,235 Xilinx, Inc. (b) 32,456 --------------- 1,221,322 --------------- Service - Data Processing (1.0%) 2,160 Automatic Data Processing 80,093 1,734 Electronic Data Systems Corporation 38,616 511 Equifax, Inc. 11,901 2,250 First Data Corporation 84,960 722 Fiserv, Inc. (b) 28,187 722 Intuit, Inc. (b) 31,060 1,330 Paychex, Inc. 43,265 1,518 Veritas Software Corporation (b) 46,754 --------------- 364,836 --------------- TRANSPORTATION (1.5%) Air Freight (.9%) 1,082 FedEx Corporation 69,670 4,081 United Parcel Service, Inc. 257,429 --------------- 327,099 --------------- Airlines (.2%) 447 Delta Air Lines, Inc. 5,319 2,809 Southwest Airlines Company 46,096 --------------- 51,415 ---------------
See accompanying notes to investments in securities. 61
MARKET SHARES VALUE(a) ------ --------------- TRANSPORTATION--CONTINUED Railroads (.4%) 1,307 Burlington Northern Santa Fe Corporation $ 36,021 726 CSX Corporation 22,724 1,352 Norfolk Southern Corporation 25,999 952 Union Pacific Corporation 58,015 --------------- 142,759 --------------- Trucking ( -- ) 206 Ryder System, Inc. 5,986 --------------- UTILITIES (2.6%) Electric Companies (2.3%) 453 Allegheny Energy, Inc. 3,746 580 Ameren Corporation 24,221 1,445 American Electric Power Company, Inc. 40,547 1,326 Calpine Corporation (b) 7,571 1,033 Centerpoint Energy, Inc. 8,336 613 Cinergy Corporation 20,854 522 CMS Energy Corporation 3,393 802 Consolidated Edison, Inc. 31,847 594 Constellation Energy Group, Inc. 19,840 1,147 Dominion Resources, Inc. 68,935 618 DTE Energy Company 22,069 3,236 Duke Energy Corporation 56,792 1,125 Edison International (b) 18,461 821 Entergy Corporation 42,290 1,205 Exelon Corporation 69,251 1,045 FirstEnergy Corporation 36,042 647 FPL Group, Inc. 39,900 893 NiSource, Inc. 17,235 1,426 PGECorporation (b) 30,588 350 Pinnacle West Capital Corporation 12,012 641 PPL Corporation 25,377 893 Progress Energy, Inc. 36,381 836 Public Service Enterprise Group, Inc. 34,067 640 TECO Energy, Inc. 7,936 2,151 The AES Corporation (b) 13,530 2,668 The Southern Company 75,878 1,115 TXU Corporation 22,490 1,381 Xcel Energy, Inc. 19,997 --------------- 809,586 --------------- Natural Gas (.3%) 1,301 Dynegy, Inc. (b) 4,124 2,159 El Paso Corporation 15,199 587 KeySpan Corporation 19,811
See accompanying notes to investments in securities. 62
MARKET SHARES VALUE(a) ------ --------------- UTILITIES--CONTINUED 487 Kinder Morgan, Inc. $ 26,054 184 Nicor, Inc. 6,676 158 Peoples Energy Corporation 6,476 762 Sempra Energy 21,206 1,826 Williams Companies, Inc. 11,595 --------------- 111,141 --------------- Total common stock (cost: $30,020,770) 33,249,755 --------------- SHORT-TERM SECURITIES (6.0%) 1,767,521 Federated Money Market Obligations Trust -- Prime Obligations Fund, current rate 0.959% 1,767,521 366,169 Wells Fargo & Company -- Cash Investment Fund, current rate 0.951% 366,169 --------------- Total short-term securities (cost: $2,133,690) 2,133,690 --------------- Total investments in securities (cost: $32,154,460) (d) $ 35,383,445 ===============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 0.7% of net assets in foreign securities at July 31, 2003. (d) At July 31, 2003 the cost of securities for federal income tax purposes was $32,884,945. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 6,887,875 Gross unrealized depreciation (4,389,375) --------------- Net unrealized appreciation $ 2,498,500 ===============
(e) Partially pledged as initial margin deposit on open stock index futures purchase contracts (see note 7 to the financial statements). See accompanying notes to financial statements. 63 ADVANTUS REAL ESTATE SECURITIES FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ --------------- COMMON STOCK (97.9%) CONSUMER CYCLICAL (3.6%) Home Builders (1.2%) 2,200 Lennar Corporation $ 143,418 3,400 Standard-Pacific Corporation 115,600 7,900 Toll Brothers, Inc. (b) 209,350 14,400 WCI Communities, Inc. (b) 253,872 --------------- 722,240 --------------- Lodging - Hotel (2.4%) 25,200 Extended Stay America, Inc. (b) 376,992 39,500 Hilton Hotels Corporation 576,700 16,800 Starwood Hotels & Resorts Worldwide, Inc. 547,680 --------------- 1,501,372 --------------- FINANCIAL (94.3%) Real Estate (10.7%) 143,440 Boardwalk Equities, Inc. (c) 1,567,799 91,400 Brookfield Properties Company (c) 2,063,812 47,700 Catellus Development Corporation (b) 1,099,008 29,300 Forest City Enterprises, Inc. 1,201,300 23,100 The St. Joe Company 749,595 --------------- 6,681,514 --------------- Real Estate Investment Trust - Apartments (6.3%) 45,720 Apartment Investment & Management Company 1,801,825 12,400 BRE Properties, Inc. 409,820 23,900 Camden Property Trust 891,709 30,500 Equity Residential 850,950 --------------- 3,954,304 --------------- Real Estate Investment Trust - Diversified (8.4%) 13,300 Colonial Properties Trust 469,756 31,200 Entertainment Properties Trust 960,960 23,700 iStar Financial, Inc. 859,125 52,500 Newcastle Investment Corporation 1,119,300 39,600 Vornado Realty Trust 1,815,264 --------------- 5,224,405 --------------- Real Estate Investment Trust - Health Care (1.2%) 44,100 Ventas, Inc. 729,855 --------------- Real Estate Investment Trust - Hotels (4.8%) 46,100 Host Marriott Corporation (b) 460,078 52,600 Innkeepers USA Trust 431,320
See accompanying notes to investments in securities. 64
MARKET SHARES VALUE(a) ------ --------------- FINANCIAL--CONTINUED 60,000 LaSalle Hotel Properties $ 987,000 128,800 Winston Hotels, Inc. 1,121,848 --------------- 3,000,246 --------------- Real Estate Investment Trust - Manufactured Housing (.1%) 1,500 Sun Communities, Inc. 60,900 --------------- Real Estate Investment Trust - Mortgage (.3%) 13,500 American Mortgage Acceptance Company 198,990 --------------- Real Estate Investment Trust - Office Property (20.0%) 19,500 Alexandria Real Estate Equities, Inc. 892,125 55,500 American Financial Realty Trust 818,070 19,100 Boston Properties, Inc. 826,839 39,900 Brandywine Realty Trust 997,500 67,900 CarrAmerica Realty Corporation (b) 1,983,359 12,200 Cousins Properties, Inc. 344,040 55,700 Equity Office Properties Trust 1,545,118 44,700 Highwoods Properties, Inc. 1,034,358 22,300 Mack-Cali Realty Corporation 821,086 50,200 Maguire Properties, Inc. (b) 1,024,080 46,626 Reckson Associates Realty Corporation 1,012,952 7,500 SL Green Realty Corporation 268,575 73,800 Trizec Properties, Inc. 876,744 --------------- 12,444,846 --------------- Real Estate Investment Trust - Regional Mall (19.0%) 23,300 CBL & Associates Properties, Inc. 1,122,594 40,100 General Growth Properties, Inc. 2,734,018 37,400 MID Atlantic Realty Trust 783,156 54,600 Simon Property Group, Inc. 2,312,310 17,700 Tanger Factory Outlet Centers 624,810 61,300 The Mills Corporation 2,182,893 53,100 The Rouse Company 2,123,469 --------------- 11,883,250 --------------- Real Estate Investment Trust - Self Storage (2.7%) 29,000 Public Storage, Inc. 1,049,800 20,700 Sovran Self Storage, Inc. 656,397 --------------- 1,706,197 --------------- Real Estate Investment Trust - Shopping Centers (10.4%) 80,600 Developers Diversified Realty Corporation 2,393,820 57,000 Equity One, Inc. 969,000 25,350 Kimco Realty Corporation 1,037,576 8,700 Pan Pacific Retail Properties, Inc. 372,273
See accompanying notes to investments in securities. 65
MARKET SHARES VALUE(a) ------ --------------- FINANCIAL--CONTINUED 17,600 Ramco-Gershenson Properties $ 432,608 23,800 Regency Centers Corporation 865,844 30,000 Urstadt Biddle Properties, Inc. 406,500 --------------- 6,477,621 --------------- Real Estate Investment Trust - Warehouse/Industrial (10.4%) 16,500 AMB Property Corporation 463,650 19,200 First Industrial Realty Trust, Inc. 581,760 133,562 Prologis 3,679,633 47,800 PS Business Parks, Inc. 1,771,946 --------------- 6,496,989 --------------- Total common stock (cost: $50,650,340) 61,082,729 --------------- PREFERRED STOCKS (.4%) Financial (.4%) Real Estate Investment Trust - Diversified (.4%) 8,900 IStar Financial, Inc. 226,861 --------------- Total preferred stocks (cost: $222,500) 226,861 --------------- SHORT-TERM SECURITIES (1.7%) 1,085,942 Federated Money Market Obligations Trust -- Prime Obligations Fund, current rate 0.959% 1,085,942 --------------- Total short-term securities (cost: $1,085,942) 1,085,942 --------------- Total investments in securities (cost: $51,958,782) (d) $ 62,395,532 ===============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 5.8% of net assets in foreign securities at July 31, 2003. (d) At July 31, 2003 the cost of securities for federal income tax purposes was $52,734,484. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 9,873,280 Gross unrealized depreciation (212,232) --------------- Net unrealized appreciation $ 9,661,048 ===============
See accompanying notes to financial statements. 66 ADVANTUS VENTURE FUND INVESTMENTS IN SECURITIES JULY 31, 2003 (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) ------ --------------- COMMON STOCK (97.0%) BASIC MATERIALS (11.0%) Agriculture Products (.4%) 8,800 Bunge, Ltd. $ 263,560 --------------- Chemicals (4.2%) 96,500 Agrium, Inc. (c) 1,080,800 9,600 Ferro Corporation 208,896 29,200 IMC Global, Inc. 213,452 23,000 Methanex Corporation (c) 212,980 9,100 Minerals Technologies, Inc. 454,545 39,100 Omnova Solutions, Inc. (b) 165,002 18,300 PolyOne Corporation 83,448 9,100 Spartech Corporation 206,843 4,632 Stepan Company 112,650 --------------- 2,738,616 --------------- Construction (1.1%) 18,800 Martin Marietta Materials, Inc. 720,040 --------------- Iron and Steel (1.7%) 24,400 AK Steel Holding Corporation (b) 58,560 41,700 Allegheny Technologies, Inc. 314,835 9,500 Belden, Inc. 159,030 11,000 GrafTech International, Ltd. (b) 75,900 30,300 United States Steel Corporation 477,528 --------------- 1,085,853 --------------- Manufacturing (.2%) 12,100 RTI International Metals, Inc. (b) 122,089 --------------- Mining (1.7%) 22,200 Phelps Dodge Corporation (b) 936,618 5,150 Titanium Metals Corporation (b) 173,298 --------------- 1,109,916 --------------- Paper and Forest (1.7%) 12,900 Caraustar Industries, Inc. (b) 115,584 32,700 Graphic Packaging International Corporation (b) 164,481 22,800 Louisiana-Pacific Corporation (b) 277,020 22,200 Packaging Corporation of America (b) 419,580 4,950 Rayonier, Inc. 172,408 --------------- 1,149,073 --------------- CAPITAL GOODS (22.6%) Aerospace/Defense (2.6%) 58,900 AAR Corporation (b) 477,090 12,900 Esterline Technologies Corporation (b) 247,035
See accompanying notes to investments in securities. 67
MARKET SHARES VALUE(a) ------ --------------- CAPITAL GOODS--CONTINUED 27,700 Orbital Sciences Corporation (b) $ 227,971 5,100 Precision Castparts Corporation 164,475 18,600 Teledyne Technologies, Inc. (b) 282,348 11,700 United Defense Industries, Ltd. (b) 297,063 --------------- 1,695,982 --------------- Agriculture Products (.5%) 16,400 Valmont Industries, Inc. 345,384 --------------- Construction (.6%) 28,800 Walter Industries, Inc. 361,440 --------------- Electrical Equipment (2.3%) 61,400 Technitrol, Inc. (b) 1,152,478 12,400 Trimble Navigation, Ltd. (b) 339,140 --------------- 1,491,618 --------------- Engineering/Construction (2.3%) 12,000 Dycom Industries, Inc. (b) 204,120 25,000 ElkCorp 605,500 18,000 Granite Construction, Inc. 323,460 23,000 Joy Global, Inc. (b) 363,170 --------------- 1,496,250 --------------- Iron and Steel (.3%) 25,000 NS Group, Inc. (b) 186,500 --------------- Machinery (5.5%) 21,200 AGCO Corporation (b) 406,616 3,700 Denison International PLC (b) (c) 76,738 68,200 JLG Industries, Inc. 613,118 28,400 Kadant, Inc. (b) 562,604 15,300 Manitowoc Company 348,840 12,300 Regal-Beloit Corporation (b) 249,690 10,800 Terex Corporation (b) 231,660 76,900 Wabtec Corporation 1,135,044 --------------- 3,624,310 --------------- Manufacturing (5.6%) 10,700 Acuity Brands, Inc. 194,205 8,800 Excel Technology, Inc. (b) 229,328 10,300 Federal Signal Corporation 205,485 24,700 Flowserve Corporation (b) 475,722 21,500 Jacuzzi Brands, Inc. (b) 129,215 20,500 Maverick Tube Corporation (b) 338,250 7,000 Pentair, Inc. 282,450 8,900 Roper Industries, Inc. 355,110
See accompanying notes to investments in securities. 68
MARKET SHARES VALUE(a) ------ --------------- CAPITAL GOODS--CONTINUED 20,200 Steelcase, Inc. $ 239,370 20,900 Stewart & Stevenson Services 336,490 12,400 Tredegar Corporation 195,300 30,000 Trinity Industries, Inc. 680,700 --------------- 3,661,625 --------------- Metal Fabrication (1.2%) 47,001 Ladish Company, Inc. (b) 287,176 7,504 Penn Engineering & Manufacturing Corporation 100,629 11,700 Triumph Group, Inc. (b) 363,987 --------------- 751,792 --------------- Trucks and Parts (1.7%) 5,000 Cummins, Inc. 231,650 22,700 Navistar International Corporation (b) 885,754 --------------- 1,117,404 --------------- COMMUNICATION SERVICES (4.1%) Communications Equipment (3.1%) 25,200 Anaren, Inc. (b) 277,452 35,500 Andrew Corporation (b) 386,595 8,500 Anixter International, Inc. (b) 189,635 21,500 Commscope, Inc. (b) 222,095 32,500 Inet Technologies, Inc. (b) 361,400 24,000 Plantronics, Inc. (b) 581,760 --------------- 2,018,937 --------------- Computer Hardware (.1%) 37,200 NMS Communications Corporation (b) 62,496 --------------- Telecommunication (.3%) 23,700 American Tower Corporation (b) 215,670 --------------- Telephone (.6%) 63,400 PTEK Holdings, Inc. (b) 407,662 --------------- CONSUMER CYCLICAL (14.3%) Auto (1.8%) 11,100 American Axle & Manufacturing Holdings, Inc. (b) 321,345 4,700 BorgWarner, Inc. 313,819 17,200 Cooper Tire & Rubber Company 292,400 15,600 PEP Boys-Manny Moe & Jack 241,956 --------------- 1,169,520 --------------- Building Materials (.2%) 11,200 Apogee Enterprises, Inc. 114,576 ---------------
See accompanying notes to investments in securities. 69
MARKET SHARES VALUE(a) ------ --------------- CONSUMER CYCLICAL--CONTINUED Entertainment ( -- ) 4,000 Boyd Gaming Corporation (b) $ 61,752 --------------- Footwear (.3%) 9,100 , Inc. (b) 172,172 3,600 Stride Rite Corporation 36,072 --------------- 208,244 --------------- Houseware (.3%) 7,600 Furniture Brands International, Inc. (b) 180,576 --------------- Leisure (1.9%) 22,200 Callaway Golf Company 343,212 13,200 International Game Technology 335,940 45,300 Six Flags, Inc. (b) 215,175 19,120 Steinway Musical Instruments (b) 320,260 --------------- 1,214,587 --------------- Manufacturing (.3%) 7,400 York International Corporation 216,894 --------------- Publishing (3.1%) 10,000 Bowne & Company, Inc. 134,400 48,200 Hollinger International, Inc. 550,444 22,200 Journal Register Company (b) 408,036 74,500 The Readers Digest Association, Inc. 967,010 --------------- 2,059,890 --------------- Retail (2.8%) 10,700 American Eagle Outfitters (b) 237,112 5,300 American Medical Systems Holdings, Inc. (b) 95,241 9,000 Barnes & Noble, Inc. (b) 215,370 1,200 Brookstone, Inc. (b) 27,480 24,600 Charming Shoppes, Inc. (b) 129,150 13,100 Dillards, Inc. 197,417 7,100 Hancock Fabrics, Inc. 127,800 11,400 Talbots, Inc. 376,086 13,600 Too, Inc. (b) 250,240 5,100 Tweeter Home Entertainment Group, Inc. (b) 38,709 2,700 Zale Corporation (b) 128,385 --------------- 1,822,990 --------------- Service (3.3%) 50,200 Argosy Gaming Company (b) 1,164,640 47,000 Integrated Electrical Services, Inc. (b) 341,220 11,300 Penn National Gaming, Inc. (b) 242,950
See accompanying notes to investments in securities. 70
MARKET SHARES VALUE(a) ------ --------------- CONSUMER CYCLICAL--CONTINUED 54,600 Stewart Enterprises, Inc. (b) $ 240,786 6,100 Viad Corporation 135,359 --------------- 2,124,955 --------------- Textiles (.3%) 6,200 Linens 'N Things, Inc. (b) 165,850 --------------- CONSUMER STAPLES (8.5%) Agriculture Products (.9%) 9,600 Corn Products International, Inc. 300,480 15,400 NCO Group, Inc. (b) 296,912 --------------- 597,392 --------------- Broadcasting (.6%) 2,500 COX Radio, Inc. (b) 52,375 11,600 Entravision Communications Corporation (b) 123,540 12,400 Gray Television, Inc. 159,836 3,600 Lin TV Corporation (b) 78,408 --------------- 414,159 --------------- Distribution Durables (.3%) 7,400 International Multifoods Corporation (b) 185,000 --------------- Food (1.0%) 27,600 Interstate Bakeries 282,624 33,400 Wild Oats Markets, Inc. (b) 353,038 --------------- 635,662 --------------- Household Products (1.0%) 8,500 La-Z-Boy, Inc. 181,560 29,300 Tupperware Corporation 454,443 --------------- 636,003 --------------- Personal Care (.7%) 23,700 Playtex Products, Inc. (b) 161,397 19,400 Steiner Leisure, Ltd. (b) (c) 313,310 --------------- 474,707 --------------- Printing and Publishing (.5%) 13,500 John H. Harland Company 356,400 --------------- Restaurants (.6%) 6,500 Ruby Tuesday, Inc. 147,940 16,300 Ryan's Family Steak Houses, Inc. (b) 220,050 --------------- 367,990 ---------------
See accompanying notes to investments in securities. 71
MARKET SHARES VALUE(a) ------ --------------- CONSUMER STAPLES--CONTINUED Retail (1.1%) 21,400 Duane Reade, Inc. (b) $ 358,450 18,100 Longs Drug Stores Corporation 353,493 --------------- 711,943 --------------- Service (1.8%) 28,600 Heidrick &Struggles International, Inc. (b) 512,512 25,900 Tetra Tech, Inc. (b) 415,954 8,500 Valassis Communications, Inc. (b) 240,635 --------------- 1,169,101 --------------- ENERGY (5.2%) Coal (.5%) 9,600 Peabody Energy Corporation 294,624 --------------- Machinery (.5%) 36,400 Hanover Compressor Company (b) 349,076 --------------- Oil & Gas (2.0%) 17,800 Cabot Oil & Gas Corporation 445,890 11,700 Energy Partners, Ltd. (b) 125,892 10,000 Nuevo Energy Company (b) 171,500 5,500 Spinnaker Exploration Company (b) 120,175 6,000 Stone Energy Corporation (b) 231,660 19,500 Vintage Petroleum, Inc. 223,665 --------------- 1,318,782 --------------- Oil & Gas Services (2.2%) 20,100 Core Laboratories NV (b) (c) 259,290 54,900 Global Industries, Ltd. (b) 252,540 46,700 Newpark Resources (b) 224,627 16,200 Veritas DGC, Inc. (b) 159,084 27,900 W-H Energy Services, Inc. (b) 507,222 --------------- 1,402,763 --------------- FINANCIAL (5.7%) Banks (.7%) 12,166 Staten Island Bancorp, Inc. 267,652 18,300 Sterling Bancshares, Inc. 225,822 --------------- 493,474 --------------- Consumer Finance (.7%) 15,200 American Capital Strategies, Ltd. 427,576 ---------------
See accompanying notes to investments in securities. 72
MARKET SHARES VALUE(a) ------ --------------- FINANCIAL--CONTINUED Finance - Diversified (.7%) 16,500 Dollar Thrifty Automotive Group (b) $ 370,095 5,900 SWS Group, Inc. 120,065 --------------- 490,160 --------------- Insurance (2.6%) 10,200 AmerUs Group Company 312,324 6,853 Fidelity National Financial, Inc. 196,613 8,800 Harleysville Group, Inc. 197,912 30,900 Hooper Holmes, Inc. 216,300 15,500 Hub International, Ltd. (c) 294,500 8,300 Odyssey Re Holdings Corporation 152,720 17,000 Ohio Casualty Corporation (b) 252,790 2,200 RLI Corporation 71,192 --------------- 1,694,351 --------------- Investment Bankers/Brokers (.2%) 8,700 Investment Technology Group, Inc. (b) 161,646 --------------- Real Estate Investment Trust - Shopping Centers (.5%) 10,900 Heritage Property Investment Trust 311,195 --------------- Savings and Loans (.3%) 10,200 First Niagara Financial Group, Inc. 167,280 --------------- HEALTH CARE (4.2%) Biotechnology (.2%) 7,504 Invivo Corporation (b) 134,772 --------------- Chemicals (.1%) 3,700 Cambrex Corporation 78,366 --------------- Drugs (1.0%) 19,500 ICN Pharmaceuticals, Inc. 304,395 19,600 Sangstat Medical Corporation (b) 313,796 --------------- 618,191 --------------- Health Care - Diversified (.3%) 9,500 Genesis Health Ventures, Inc. (b) 201,875 --------------- Hospital Management (1.4%) 6,400 Community Health Systems, Inc. (b) 142,080 13,800 LifePoint Hospitals, Inc. (b) 389,574 29,000 Province Healthcare Company (b) 388,600 --------------- 920,254 --------------- Managed Care (.2%) 6,600 Humana, Inc. (b) 115,632 ---------------
See accompanying notes to investments in securities. 73
MARKET SHARES VALUE(a) ------ --------------- HEALTH CARE--CONTINUED Medical Products/Supplies (1.0%) 8,600 ArthoCare Corporation (b) $ 144,050 10,400 Cytyc Corporation (b) 122,928 7,300 Ocular Sciences, Inc. (b) 156,950 10,300 Viasys Healthcare, Inc. (b) 233,295 --------------- 657,223 --------------- TECHNOLOGY (15.8%) Computer Hardware (.4%) 46,900 SimpleTech, Inc. (b) 251,384 --------------- Computer Peripherals (1.3%) 27,900 Electronics for Imaging, Inc. (b) 585,900 9,900 Hutchinson Technology, Inc. (b) 284,328 --------------- 870,228 --------------- Computer Services &Software (1.0%) 14,800 Earthlink, Inc. (b) 113,220 8,500 Micros Systems, Inc. (b) 291,890 9,900 ProQuest Company (b) 248,193 --------------- 653,303 --------------- Computer Systems (.2%) 35,700 Carreker Corporation (b) 158,865 --------------- Electrical Instruments (3.2%) 39,000 BEI Technologies, Inc. (b) 531,960 15,300 Benchmark Electronics, Inc. (b) 608,940 11,500 Cognex Corporation (b) 327,750 12,200 Coherent, Inc. (b) 298,656 16,200 LeCroy Corporation (b) 193,104 6,800 Littelfuse, Inc. (b) 158,372 7,800 OpticNet, Inc. (b)(d) 624 --------------- 2,119,406 --------------- Electronics - Computer Distribution (2.0%) 12,500 Avnet, Inc. (b) 180,000 14,200 AVX Corporation 155,490 61,600 Kemet Corporation (b) 668,360 19,900 Thomas &Betts Corporation (b) 303,674 --------------- 1,307,524 --------------- Electronic Components-Semiconductor (6.6%) 14,700 Actel Corporation (b) 357,945 17,300 ATMI, Inc. (b) 445,821 28,100 Brooks Automation, Inc. (b) 540,925
See accompanying notes to investments in securities. 74
MARKET SHARES VALUE(a) ------ --------------- TECHNOLOGY--CONTINUED 14,400 ChipPAC, Inc. (b) $ 82,080 42,600 Cypress Semiconductor Corporation (b) 595,548 15,700 Helix Technology Corporation 255,282 17,200 MKS Instruments, Inc. (b) 388,892 37,600 Triquint Semiconductor, Inc. (b) 170,328 16,200 Varian Semiconductor Equipment Associates, Inc. (b) 538,650 49,800 Veeco Instruments, Inc. (b) 938,232 --------------- 4,313,703 --------------- Hardware and Tools (.4%) 12,700 Watts Industries, Inc. 232,410 --------------- Service - Data Processing (.7%) 43,700 Ciber, Inc. (b) 435,689 --------------- TRANSPORTATION (5.2%) Air Freight (1.0%) 37,600 EGL, Inc. (b) 621,152 --------------- Airlines (2.3%) 16,600 Alaska Air Group, Inc. (b) 406,036 30,600 Frontier Airlines, Inc. (b) 391,068 63,400 Mesa Air Group, Inc. (b) 676,478 --------------- 1,473,582 --------------- Railroads (.8%) 16,500 GATX Corporation 361,680 21,300 RailAmerica, Inc. (b) 179,985 --------------- 541,665 --------------- Shipping (1.1%) 5,600 Kirby Corporation (b) 152,880 62,600 OMI Corporation (b) 426,306 3,600 Teekay Shipping Corporation (c) 158,688 --------------- 737,874 --------------- UTILITIES (.4%) Natural Gas (.4%) 17,300 NUI Corporation 269,015 --------------- Total common stock (cost: $55,137,750) 63,337,448 ---------------
See accompanying notes to investments in securities. 75
MARKET SHARES VALUE(a) ------ --------------- SHORT-TERM SECURITIES (3.1%) 2,032,887 Federated Money Market Obligations Trust -- Prime Obligations Fund, current rate 0.959% $ 2,032,887 --------------- Total short-term securities (cost: $2,032,887) 2,032,887 --------------- Total investments in securities (cost: $57,170,637) (e) $ 65,370,335 ===============
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Fund held 3.7% of net assets in foreign securities at July 31, 2003. (d) Represents ownership in an illiquid security (see note 8 to the financial statements). Information concerning the illiquid security held at July 31, 2003, which includes acquisition date and cost is as follows: ACQUISITION SECURITY DATE COST -------- ----------- ---- OpticNet, Inc. 10/30/2000 $ 624 (e) At July 31, 2003 the cost of securities for federal income tax purposes was $57,469,675. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 12,581,122 Gross unrealized depreciation (4,680,462) --------------- Net unrealized appreciation $ 7,900,660 =============== See accompanying notes to financial statements. 76 (This page has been left blank intentionally.) ADVANTUS EQUITY FUNDS STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2003 CORNERSTONE ENTERPRISE HORIZON FUND FUND FUND ------------- ------------- ------------- ASSETS Investments in securities, at market value - see accompanying schedule for detailed listing*+ $ 67,954,215 $ 40,251,472 $ 29,433,199 Receivable for Fund shares sold 2,248 2,045 2,444 Receivable for investment securities sold 1,387,684 176,459 - Dividends and accrued interest receivable 135,971 7,057 4,426 Receivable for refundable foreign income taxes withheld - - - Collateral for securities loaned (note 6) - 15,478,749 - Other receivables - - - Variation margin - - - ------------- ------------- ------------- Total Assets 69,480,118 55,915,782 29,440,069 ------------- ------------- ------------- LIABILITIES Payable for Fund shares redeemed 85,422 53,214 87,238 Payable for investment securities purchased 344,832 1,329,346 669,313 Payable to Adviser 59,350 32,753 16,556 Accrued expenses 37,155 35,518 52,496 Payable upon return of securities loaned (note 6) - 15,478,749 - ------------- ------------- ------------- Total Liabilities 526,759 16,929,580 825,603 ------------- ------------- ------------- Net assets applicable to outstanding capital stock $ 68,953,359 $ 38,986,202 $ 28,614,466 ============= ============= ============= 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 $ 55,064 $ 47,406 $ 23,483 Additional paid-in capital 77,365,101 56,809,279 41,047,190 Undistributed (distributions in excess of) net investment income 57,584 - - Accumulated net realized (losses) from investments (15,401,189) (21,127,066) (16,966,831) Unrealized appreciation on investments 6,876,799 3,256,583 4,510,624 ------------- ------------- ------------- Total - representing net assets applicable to outstanding capital stock $ 68,953,359 $ 38,986,202 $ 28,614,466 ============= ============= ============= Net assets applicable to outstanding Class A shares $ 63,548,774 $ 35,537,930 $ 21,928,158 ============= ============= ============= Net assets applicable to outstanding Class B shares $ 4,811,560 $ 3,044,836 $ 6,128,154 ============= ============= ============= Net assets applicable to outstanding Class C shares $ 593,025 $ 403,436 $ 558,154 ============= ============= ============= Net asset value per share: Class A $ 12.54 $ 8.31 $ 12.47 ============= ============= ============= Class B $ 12.32 $ 7.40 $ 11.32 ============= ============= ============= Class C $ 12.28 $ 7.40 $ 11.41 ============= ============= ============= Shares outstanding: Class A 5,067,457 4,274,677 1,757,970 ============= ============= ============= Class B 390,690 411,347 541,397 ============= ============= ============= Class C 48,294 54,549 48,939 ============= ============= ============= * Identified cost $ 61,077,416 $ 36,994,889 $ 24,922,575 + Including securities on loan of $ - $ 15,020,091 $ -
REAL ESTATE INDEX 500 SECURITIES VENTURE FUND FUND FUND ------------- ------------- ------------- ASSETS Investments in securities, at market value - see accompanying schedule for detailed listing*+ $ 35,383,445 $ 62,395,532 $ 65,370,335 Receivable for Fund shares sold 51,328 535,900 60,670 Receivable for investment securities sold - 825,060 168,840 Dividends and accrued interest receivable 43,544 91,047 14,808 Receivable for refundable foreign income taxes withheld 2,390 - - Collateral for securities loaned (note 6) 1,875,689 6,139,431 17,174,007 Other receivables - - 195 Variation margin 5,805 - - ------------- ------------- ------------- Total Assets 37,362,201 69,986,970 82,788,855 ------------- ------------- ------------- LIABILITIES Payable for Fund shares redeemed 31,977 44,883 13,474 Payable for investment securities purchased - 1,346,233 187,312 Payable to Adviser 25,728 55,327 59,796 Accrued expenses 33,875 16,207 26,136 Payable upon return of securities loaned (note 6) 1,875,689 6,139,431 17,174,007 ------------- ------------- ------------- Total Liabilities 1,967,269 7,602,081 17,460,725 ------------- ------------- ------------- Net assets applicable to outstanding capital stock $ 35,394,932 $ 62,384,889 $ 65,328,130 ============= ============= ============= Represented by: Capital stock - authorized 10 billion shares (Class A - 2 billion shares, Class B - 2 billion shares, Class C - 2 billion shares and 4 billion shares unallocated) of $.01 par value $ 27,351 $ 46,509 $ 50,341 Additional paid-in capital 38,823,511 52,769,883 60,582,554 Undistributed (distributions in excess of) net investment income 13,500 - -
Accumulated net realized (losses) from investments (6,691,662) (868,253) (3,504,463) Unrealized appreciation on investments 3,222,232 10,436,750 8,199,698 ------------- ------------- ------------- Total - representing net assets applicable to outstanding capital stock $ 35,394,932 $ 62,384,889 $ 65,328,130 ============= ============= ============= Net assets applicable to outstanding Class A shares $ 20,370,983 $ 60,197,984 $ 59,141,350 ============= ============= ============= Net assets applicable to outstanding Class B shares $ 13,401,754 $ 2,186,905 $ 5,097,364 ============= ============= ============= Net assets applicable to outstanding Class C shares $ 1,622,195 $ - $ 1,089,416 ============= ============= ============= Net asset value per share: Class A $ 13.05 $ 13.42 $ 13.02 ============= ============= ============= Class B $ 12.80 $ 13.36 $ 12.53 ============= ============= ============= Class C $ 12.77 $ - $ 12.60 ============= ============= ============= Shares outstanding: Class A 1,560,939 4,487,155 4,540,734 ============= ============= ============= Class B 1,047,143 163,725 406,867 ============= ============= ============= Class C 127,030 - 86,480 ============= ============= ============= * Identified cost $ 32,154,460 $ 51,958,782 $ 57,170,637 + Including securities on loan of $ 1,794,784 $ 5,921,410 $ 16,492,853
See accompanying notes to financial statements. 78/79 STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 2003 CORNERSTONE ENTERPRISE HORIZON FUND FUND FUND ------------- ------------- ------------- Investment Income: Interest $ 21,671 $ 31,562 $ 6,751 Dividends+ 1,467,270 38,112 280,285 Income from securities lending activities 2,222 9,458 1,178 Commission reimbursement income (note 9) - - - ------------- ------------- ------------- Total investment income 1,491,163 79,132 288,214 ------------- ------------- ------------- Expenses (note 4): Investment advisory fee 446,882 225,183 194,307 Rule 12b-1 fees - Class A 144,960 72,018 51,822 Rule 12b-1 fees - Class B 52,490 29,770 64,537 Rule 12b-1 fees - Class C 6,072 3,848 5,755 Administrative services fee 59,719 59,719 59,876 Transfer agent and shareholder services fees 150,083 114,428 226,899 Custodian fees 6,113 8,664 5,814 Audit and accounting services 43,302 43,303 41,762 Legal fees 6,921 7,021 7,193 Registration fees 42,000 42,000 37,000 Printing and shareholder reports 26,661 20,207 40,965 Directors' fees 1,960 1,100 900 Insurance 2,750 2,396 2,396 Other 8,383 5,857 7,731 ------------- ------------- ------------- Total expenses 998,296 635,514 746,957 Less fees and expenses waived or absorbed by Adviser and Distributor: Class A Rule 12b-1 fees - (148) - Other waived fees (130,768) (125,880) (312,856) ------------- ------------- ------------- Total net expenses 867,528 509,486 434,101 ------------- ------------- ------------- Investment income (loss) - net 623,635 (430,354) (145,887) ------------- ------------- ------------- Realized and unrealized gains (losses) on investments: Net realized gains (losses) from: Investments (note 3) (4,680,268) (3,879,607) 106,189 Futures contracts (note 2) - - - Net change in unrealized appreciation or depreciation on: Investments 8,631,894 13,068,836 2,780,332 Futures contracts - - - ------------- ------------- ------------- Net gains (losses) on investments 3,951,626 9,189,229 2,886,521 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 4,575,261 $ 8,758,875 $ 2,740,634 ============= ============= ============= + Net of foreign withholding tax of $ 1,417 $ - $ 1,931
REAL ESTATE INDEX 500 SECURITIES VENTURE FUND FUND FUND ------------- ------------- ------------- Investment Income: Interest $ 15,216 $ 19,628 $ 20,870 Dividends+ 568,609 1,872,351 347,780 Income from securities lending activities 2,171 4,538 23,134 Commission reimbursement income (note 9) - - 660 ------------- ------------- ------------- Total investment income 585,996 1,896,517 392,444 ------------- ------------- ------------- Expenses (note 4): Investment advisory fee 112,027 322,522 386,688 Rule 12b-1 fees - Class A 45,501 103,510 124,069 Rule 12b-1 fees - Class B 132,048 15,989 43,998 Rule 12b-1 fees - Class C 15,441 - 12,138 Administrative services fee 59,876 52,176 59,876 Transfer agent and shareholder services fees 169,189 34,541 101,695 Custodian fees 6,708 11,507 18,338 Audit and accounting services 44,802 39,040 44,002 Legal fees 7,246 6,673 7,277 Registration fees 38,000 36,685 47,950 Printing and shareholder reports 22,957 7,862 28,389 Directors' fees 1,100 1,450 1,650 Insurance 2,396 2,574 2,750 Other 5,528 4,004 7,799 ------------- ------------- ------------- Total expenses 662,819 638,533 886,619 Less fees and expenses waived or absorbed by Adviser and Distributor: Class A Rule 12b-1 fees (98) (264) (288) Other waived fees (272,536) - - ------------- ------------- ------------- Total net expenses 390,185 638,269 886,331 ------------- ------------- ------------- Investment income (loss) - net 195,811 1,258,248 (493,887) ------------- ------------- ------------- Realized and unrealized gains (losses) on investments: Net realized gains (losses) from: Investments (note 3) (1,384,324) 244,069 (2,979,654) Futures contracts (note 2) 115,494 - - Net change in unrealized appreciation or depreciation on: Investments 3,928,568 8,144,191 11,321,019 Futures contracts 51,043 - - ------------- ------------- ------------- Net gains (losses) on investments 2,710,781 8,388,260 8,341,365 ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 2,906,592 $ 9,646,508 $ 7,847,478 ============= ============= ============= + Net of foreign withholding tax of $ 2,390 $ 4,538 $ 3,886
See accompanying notes to financial statements. 80/81 STATEMENTS OF CHANGES IN NET ASSETS
CORNERSTONE FUND ------------------------------------------------ PERIOD FROM YEAR ENDED OCTOBER 1, YEAR ENDED JULY 31, 2001 TO JULY 31, SEPTEMBER 30, 2003 2002 2001 ------------- ---------------- ------------- Operations: Investment income (loss) - net $ 623,635 $ 387,940 $ 429,308 Net realized gains (losses) on investments (4,680,268) (5,242,003) (3,427,029) Net change in unrealized appreciation or depreciation of investments and futures contracts 8,631,894 1,253,980 (11,683,754) ------------- ---------------- ------------- Increase (decrease) in net assets resulting from operations 4,575,261 (3,600,083) (14,681,475) ------------- ---------------- ------------- Distributions to shareholders from: Investment income - net: Class A (555,525) (377,849) (408,866) Class B (11,955) (5,558) (1,880) Class C (1,447) (594) (254) Net realized gains on investments: Class A - - - Class B - - - Class C - - - ------------- ---------------- ------------- Total distributions (568,927) (384,001) (411,000) ------------- ---------------- ------------- Capital share transactions (note 5): Proceeds from sales: Class A 10,774,848 7,910,021 5,289,579 Class B 362,769 357,179 611,558 Class C 34,487 37,054 64,321 Proceeds from issuance of shares as a result of reinvested distributions: Class A 299,607 207,753 228,567 Class B 11,597 5,340 1,823 Class C 1,395 591 251 Payments for redemptions of shares: Class A (9,200,925) (12,312,791) (8,002,033) Class B (1,999,159) (2,231,688) (3,076,130) Class C (155,168) (192,680) (289,292) ------------- ---------------- ------------- Increase (decrease) in net assets from capital share transactions 129,451 (6,219,221) (5,171,356) ------------- ---------------- ------------- Total increase (decrease) in net assets 4,135,785 (10,203,305) (20,263,831) Net assets at beginning of period 64,817,574 75,020,879 95,284,710 ------------- ---------------- ------------- Net assets at end of period* $ 68,953,359 $ 64,817,574 $ 75,020,879 ============= ================ ============= * Including undistributed (distributions in excess of) net investment income $ 57,584 $ 4,818 $ 18,308
ENTERPRISE FUND ------------------------------------------------ PERIOD FROM YEAR ENDED OCTOBER 1, YEAR ENDED JULY 31, 2001 TO JULY 31, SEPTEMBER 30, 2003 2002 2001 ------------- ---------------- ------------- Operations: Investment income (loss) - net $ (430,354) $ (439,780) $ (561,707) Net realized gains (losses) on investments (3,879,607) (6,244,790) (10,661,326) Net change in unrealized appreciation or depreciation of investments and futures contracts 13,068,836 3,142,493 (17,527,880) ------------- ---------------- ------------- Increase (decrease) in net assets resulting from operations 8,758,875 (3,542,077) (28,750,913) ------------- ---------------- ------------- Distributions to shareholders from: Investment income - net: Class A - - - Class B - - - Class C - - - Net realized gains on investments: Class A - - (17,270,178) Class B - - (2,987,176) Class C - - (359,988) ------------- ---------------- ------------- Total distributions - - (20,617,342) ------------- ---------------- ------------- Capital share transactions (note 5): Proceeds from sales: Class A 2,645,409 7,486,324 3,423,922 Class B 245,892 300,215 701,160 Class C 15,929 61,967 159,604 Proceeds from issuance of shares as a result of reinvested distributions: Class A - - 17,184,998 Class B - - 2,913,962 Class C - - 351,595 Payments for redemptions of shares: Class A (2,415,027) (7,690,490) (4,242,274) Class B (1,260,779) (1,080,529) (1,427,099) Class C (127,896) (137,446) (224,061) ------------- ---------------- ------------- Increase (decrease) in net assets from capital share transactions (896,472) (1,059,959) 18,841,807 ------------- ---------------- ------------- Total increase (decrease) in net assets 7,862,403 (4,602,036) (30,526,448) Net assets at beginning of period 31,123,799 35,725,835 66,252,283 ------------- ---------------- ------------- Net assets at end of period* $ 38,986,202 $ 31,123,799 $ 35,725,835 ============= ================ ============= * Including undistributed (distributions in excess of) net investment income $ - $ - $ -
See accompanying notes to financial statements. 82/83
HORIZON FUND ---------------------------------------------------- PERIOD FROM YEAR ENDED OCTOBER 1, YEAR ENDED JULY 31, 2001 TO JULY 31, SEPTEMBER 30, 2003 2002 2001 --------------- ---------------- --------------- Operations: Investment income (loss) - net $ (145,887) $ (262,466) $ (661,808) Net realized gains (losses) on investments 106,189 (1,803,623) (13,832,622) Net change in unrealized appreciation or depreciation of investments and futures contracts 2,780,332 (1,437,501) (28,342,114) --------------- ---------------- --------------- Increase (decrease) in net assets resulting from operations 2,740,634 (3,503,590) (42,836,544) --------------- ---------------- --------------- Distributions to shareholders from: Investment income - net: Class A - - - Class B - - - Class C - - - Net realized gains on investments: Class A - - (9,628,296) Class B - - (4,375,595) Class C - - (390,723) --------------- ---------------- --------------- Total distributions - - (14,394,614) --------------- ---------------- --------------- Capital share transactions (note 5): Proceeds from sales: Class A 2,351,168 1,969,386 6,031,604 Class B 468,067 539,921 1,569,835 Class C 30,865 46,322 270,628 Proceeds from issuance of shares as a result of reinvested distributions: Class A - - 9,409,680 Class B - - 4,048,610 Class C - - 374,664 Payments for redemptions of shares: Class A (4,374,640) (5,178,717) (12,322,741) Class B (2,412,896) (2,842,922) (5,184,908) Class C (183,704) (306,392) (537,056) --------------- ---------------- --------------- Increase (decrease) in net assets from capital share transactions (4,121,140) (5,772,402) 3,660,316 --------------- ---------------- --------------- Total increase (decrease) in net assets (1,380,506) (9,275,992) (53,570,842) Net assets at beginning of period 29,994,972 39,270,964 92,841,806 --------------- ---------------- --------------- Net assets at end of period* $ 28,614,466 $ 29,994,972 $ 39,270,964 =============== ================ =============== * Including undistributed (distributions in excess of) net investment income $ - $ - $ -
INDEX 500 FUND ---------------------------------- YEAR ENDED YEAR ENDED JULY 31, JULY 31, 2003 2002 --------------- ---------------- Operations: Investment income (loss) - net $ 195,811 $ 157,436 Net realized gains (losses) on investments (1,268,830) (3,219,179) Net change in unrealized appreciation or depreciation of investments and futures contracts 3,979,611 (8,585,433) --------------- ---------------- Increase (decrease) in net assets resulting from operations 2,906,592 (11,647,176) --------------- ---------------- Distributions to shareholders from: Investment income - net: Class A (161,303) (143,635) Class B (32,533) (6,716) Class C (3,928) (649) Net realized gains on investments: Class A - - Class B - - Class C - - --------------- ---------------- Total distributions (197,764) (151,000) --------------- ---------------- Capital share transactions (note 5): Proceeds from sales: Class A 2,690,168 4,652,626 Class B 1,464,655 1,997,234 Class C 303,908 362,915 Proceeds from issuance of shares as a result of reinvested distributions: Class A 102,048 93,414 Class B 31,281 6,471 Class C 3,668 623 Payments for redemptions of shares: Class A (2,199,256) (5,370,976) Class B (3,651,839) (4,188,695) Class C (418,075) (487,518) --------------- ---------------- Increase (decrease) in net assets from capital share transactions (1,673,442) (2,933,906) --------------- ---------------- Total increase (decrease) in net assets 1,035,386 (14,732,082) Net assets at beginning of period 34,359,546 49,091,628 --------------- ---------------- Net assets at end of period* $ 35,394,932 $ 34,359,546 =============== ================ * Including undistributed (distributions in excess of) net investment income $ 13,500 $ 15,318
See accompanying notes to financial statements. 84/85
REAL ESTATE SECURITIES FUND ----------------------------- YEAR ENDED YEAR ENDED JULY 31, JULY 31, 2003 2002 ------------- ------------- Operations: Investment income (loss) - net $ 1,258,248 $ 599,322 Net realized gains (losses) on investments 244,069 324,588 Net change in unrealized appreciation or depreciation of investments and futures contracts 8,144,191 1,180,088 ------------- ------------- Increase (decrease) in net assets resulting from operations 9,646,508 2,103,998 ------------- ------------- Distributions to shareholders from: Investment income - net: Class A (1,712,228) (502,926) Class B (56,474) (3,574) Class C - - Net realized gains on investments: Class A (765,118) (1,186,943) Class B (31,160) (753) Class C - - ------------- ------------- Total distributions (2,564,980) (1,694,196) ------------- ------------- Capital share transactions (note 5): Proceeds from sales: Class A 28,995,531 16,920,073 Class B 896,141 1,266,380 Class C - - Proceeds from issuance of shares as a result of reinvested distributions: Class A 2,069,443 1,132,267 Class B 78,756 4,086 Class C - - Payments for redemptions of shares: Class A (9,967,523) (3,548,144) Class B (169,114) (120,245) Class C - - ------------- ------------- Increase (decrease) in net assets from capital share transactions 21,903,234 15,654,417 ------------- ------------- Total increase (decrease) in net assets 28,984,762 16,064,219 Net assets at beginning of year 33,400,127 17,335,908 ------------- ------------- Net assets at end of year* $ 62,384,889 $ 33,400,127 ============= ============= * Including undistributed (distributions in excess of) net investment income $ - $ 92,822
VENTURE FUND ----------------------------- YEAR ENDED YEAR ENDED JULY 31, JULY 31, 2003 2002 ------------- ------------- Operations: Investment income (loss) - net $ (493,887) $ (408,024) Net realized gains (losses) on investments (2,979,654) 6,024,204 Net change in unrealized appreciation or depreciation of investments and futures contracts 11,321,019 (15,478,121) ------------- ------------- Increase (decrease) in net assets resulting from operations 7,847,478 (9,861,941) ------------- ------------- Distributions to shareholders from: Investment income - net: Class A (9,242) - Class B (798) - Class C (927) - Net realized gains on investments: Class A (3,990,339) (3,292,173) Class B (344,613) (271,697) Class C (400,371) (72,757) ------------- ------------- Total distributions (4,746,290) (3,636,627) ------------- ------------- Capital share transactions (note 5): Proceeds from sales: Class A 16,953,363 23,934,179 Class B 813,948 2,199,878 Class C 4,255,775 1,327,144 Proceeds from issuance of shares as a result of reinvested distributions: Class A 1,571,837 1,073,557 Class B 336,501 259,096 Class C 164,390 69,520 Payments for redemptions of shares: Class A (15,623,532) (14,413,881) Class B (852,981) (1,024,908) Class C (4,471,630) (175,731) ------------- ------------- Increase (decrease) in net assets from capital share transactions 3,147,671 13,248,854 ------------- ------------- Total increase (decrease) in net assets 6,248,859 (249,714) Net assets at beginning of year 59,079,271 59,328,985 ------------- ------------- Net assets at end of year* $ 65,328,130 $ 59,079,271 ============= ============= * Including undistributed (distributions in excess of) net investment income $ - $ -
See accompanying notes to financial statements. 86/87 NOTES TO FINANCIAL STATEMENTS JULY 31, 2003 (1) ORGANIZATION The Advantus Cornerstone Fund, Inc., the Advantus Enterprise Fund, Inc., the Advantus Horizon Fund, Inc., the Advantus Index 500 Fund, Inc., the Advantus Real Estate Securities Fund, Inc. and the Advantus Venture Fund, Inc. (the Funds) are registered under the Investment Company Act of 1940 (as amended) as diversified, open-end management investment companies. The Funds' prospectus' provide a detailed description of each Funds' investment objective, policies and strategies. The Funds currently have three classes of shares outstanding: Class A, Class B and Class C shares, except for the Real Estate Securities Fund which has never issued Class C shares. Effective July 25, 2003, however, all sales of Class B and Class C shares in the Funds were suspended, except for sales occurring in connection with the reinvestment of dividend and capital gains distributions, if any, and exchanges of Class B and Class C shares of a Fund for Class B and Class C shares of another Fund, respectively. Class A shares are sold subject to a front-end sales charge. Class B shares were sold subject to a contingent deferred sales charge payable upon redemption if redeemed within six years of purchase. Class C shares were 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 Funds 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 certain estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, as of the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENTS IN SECURITIES Each Funds' 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 88 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. The pricing service may use models that price securities based on current yields and relative security characteristics, such as coupon rate, maturity date, issuer credit quality and prepayment speeds, as applicable. 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. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Funds may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Funds also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Funds each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Funds recognize a realized gain or loss when the contract is closed or expires. FEDERAL TAXES The Funds' 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 Funds' policy is to make required minimum distributions prior to December 31, in order to avoid federal excise tax. For federal income tax purposes, the following Funds had capital loss carryovers and/or post October losses at July 31, 2003 which, if not offset by subsequent capital gains, will expire July 31, 2010 through July 31, 2012. It is unlikely the Board of Directors will authorize a distribution of any net realized capital gains until available capital loss carryovers have been offset or expire: Cornerstone Fund $ 14,216,656 Enterprise Fund 20,854,384 Horizon Fund 15,819,328 Index 500 Fund 5,967,930 Real Estate Fund 520,770 Venture Fund 3,309,582
89 Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of temporary book-to-tax differences. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Funds. The Funds may elect to utilize equalization debits by which a portion of the costs of redemptions, which occurred during the year ended July 31, 2003, would reduce net realized gain for tax purposes. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were made as follows:
UNDISTRIBUTED ACCUMULATED ADDITIONAL NET INVESTMENT REALIZED PAID IN FUND INCOME GAIN (LOSS) CAPITAL ---- -------------- ----------- ---------- Cornerstone $ (1,942) $ 2,217 $ (275) Enterprise 430,354 - (430,354) Horizon 145,887 - (145,887) Index 500 135 (135) - Real Estate Securities 417,632 (428,859) 11,227 Venture 504,854 (13,337) (491,517)
The tax character of distributions paid for the periods indicated is as follows:
YEAR ENDED PERIOD FROM YEAR ENDED JULY 31, OCTOBER 1, 2001 SEPTEMBER 30, FUND 2003 TO JULY 31, 2002 2001 ---- ---------- ---------------- ------------- CORNERSTONE DISTRIBUTIONS PAID FROM: Ordinary income $ 568,927 $ 384,001 $ 411,000 Long-term capital gain - - - ENTERPRISE DISTRIBUTIONS PAID FROM: Ordinary income - - 9,729,068 Long-term capital gain - - 10,888,274 HORIZON DISTRIBUTIONS PAID FROM: Ordinary income - - 4,147,789 Long-term capital gain - - 10,246,825
90
YEAR ENDED JULY 31, ---------------------------- FUND 2003 2002 ---- ---------- ---------- INDEX 500 DISTRIBUTIONS PAID FROM: Ordinary income 197,764 151,000 Long-term capital gain - - REAL ESTATE SECURITIES DISTRIBUTIONS PAID FROM: Ordinary income 2,151,694 1,127,977 Long-term capital gain 413,286 566,219 VENTURE DISTRIBUTIONS PAID FROM: Ordinary income 10,967 2,204,481 Long-term capital gain 4,735,323 1,432,146
As of July 31, 2003, the components of distributable earnings on a tax basis for each Fund are as follows:
ACCUMULATED UNREALIZED UNDISTRIBUTED LONG-TERM APPRECIATION FUND ORDINARY INCOME GAIN (LOSS) (DEPRECIATION) ---- --------------- ------------- -------------- Cornerstone $ 57,583 $ (14,216,656) $ 5,692,267 Enterprise - (20,854,384) 2,983,901 Horizon - (15,819,328) 3,363,121 Index 500 13,500 (5,967,930) 2,498,500 Real Estate Securities 428,219 (520,770) 9,661,048 Venture - (3,205,064) 7,900,660
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 July 31, 2003, purchases of securities and proceeds from sales, other than temporary investments in short-term securities, were as follows:
FUND PURCHASES SALES ---- ------------ ------------- Cornerstone $ 77,849,888 $ 78,705,257 Enterprise 20,051,349 19,383,398 Horizon 42,867,128 46,228,073 Index 500 1,334,467 4,067,583 Real Estate Securities 40,971,837 20,295,814 Venture 29,472,698 32,226,969
(4) EXPENSES AND RELATED PARTY TRANSACTIONS Enterprise Fund, Index 500 Fund, Real Estate Securities Fund and Venture Fund each has an investment advisory agreement with Advantus 91 Capital Management, Inc. (Advantus Capital), a wholly-owned subsidiary of Securian Financial Group. Under these agreements, Advantus Capital manages the Funds' assets and provides research, statistical and advisory services and pays related office rental and executive expenses and salaries. In April 2003, Advantus Capital (at that time also the investment adviser to Cornerstone Fund and Horizon Fund) and certain companies affiliated with Advantus Capital entered into a Strategic Alliance Agreement and a related Purchase Agreement with Waddell & Reed Financial, Inc. (W&R), a leading U.S. mutual fund firm, its affiliate, Waddell & Reed Ivy Investment Company (WRIICO), and certain other companies affiliated with W&R. Under these agreements, Advantus Capital agreed to sell to WRIICO its assets related to the Advantus Funds. Advantus Capital has also recommended to the Board of Directors of the Advantus Funds that each Advantus Fund be merged into an existing or newly formed mutual fund managed by WRIICO in either Ivy Funds, Inc. (a Maryland corporation) or Ivy Funds (a Massachusetts business trust), and the Board of Directors has approved each Fund's merger subject to approval of the shareholders of the Fund. It is currently anticipated that shareholders will be presented with a merger proposal in early October, 2003. In connection with the agreements discussed above, and effective May 1, 2003, the Board of Directors of each of Cornerstone Fund and Horizon Fund appointed WRIICO to act as the investment adviser to the Fund on an interim basis prior to the mergers. On August 20, 2003, shareholders of Cornerstone Fund and Horizon Fund each approved a definitive investment advisory agreement with WRIICO. WRIICO provides services to Cornerstone Fund and Horizon Fund that are similar to the services provided by Advantus Capital to the other Funds. 92 Each of the Funds pays Advantus Capital, or WRIICO in the case of Cornerstone and Horizon Funds, an annual fee, based on average net assets in the following amounts (the fees paid to WRIICO are the same as the fees formerly paid to Advantus Capital):
FUND ANNUAL FEE -------------------------------------------------------------------------------- Cornerstone .70% of assets to $500 million; and .65% of assets exceeding $500 million to $1 billion; and .60% of assets exceeding $1 billion to $2 billion; and .55% of assets exceeding $2 billion Enterprise .70% of assets to $1 billion; and .68% of assets exceeding $1 billion to $2 billion; and .66% of assets exceeding $2 billion Horizon .70% of assets to $1 billion; and .65% of assets exceeding $1 billion to $2 billion; and .60% of assets exceeding $2 billion Index 500 .34% of assets to $500 million; and .30% of assets exceeding $500 million to $1 billion; and .25% of assets exceeding $1 billion to $2 billion; and .20% of assets exceeding $2 billion. Real Estate Securities .75% of assets to $1 billion; and .725% of assets exceeding $1 billion to $2 billion; and .70% of assets exceeding $2 billion. Venture .70% of assets to $1 billion; and .68% of assets exceeding $1 billion to $2 billion; and .66% of assets exceeding $2 billion
Advantus Capital has a sub-advisory agreement with the following registered investment advisers. Under the sub-advisory agreements, Advantus Capital pays the sub-advisers an annual fee based on average daily net assets, in the following amounts:
FUND SUB-ADVISOR ANNUAL FEE ------------- --------------------- ---------------------------------------- Enterprise Credit Suisse Asset .65% of assets to $425 million; and .60% Management of assets exceeding $425 million to $850 million; and .55% of assets exceeding $850 million to $1.150 billion; and .50% of assets exceeding $1.150 billion to $2 billion and .45% of assets exceeding $2 billion Venture State Street Research .65% of assets to $500 million; and .60% and Management of assets exceeding $500 million to $1 billion; and .50% of assets exceeding $1 billion
93 The Funds have 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 Funds pay fees to Securian Financial Services, Inc. (Securian), the underwriter of the Funds and a wholly-owned subsidiary of Securian Financial Group, to be used to pay certain expenses incurred in the distribution, promotion and servicing of the Funds shares. The Class A Plan provides for a service fee up to .25 percent of average daily net assets of Class A shares. The Class B and Class C Plans provide for a fee up to 1.00 percent of average daily net assets of Class B and Class C shares, respectively. The Class B and Class C 1.00 percent fee is comprised of a .75 percent distribution fee and a .25 percent service fee. Prior to August 5, 2002, Securian was waiving the portion of Class A Rule 12b-1 fees which exceeded, as a percentage of average daily net assets, .15 percent in Enterprise, Index 500 and Venture, and .10 percent in the Real Estate Securities Fund. Currently Securian is not waiving any 12b-1 fees. Securian waived Class A 12b-1 fees in the amounts of $148, $98, $288, and $264 respectively, for the above Funds for the year ended July 31, 2003. The Funds have engaged PFPC Global Fund Services to act as their transfer agent, dividend disbursing agent and redemption agent and bear the expenses of such services. The Funds also bear certain other operating expenses including outside directors' fees, custodian fees, registration fees, printing and shareholder reporting fees, outside legal, auditing and accounting services, and other miscellaneous expenses. The Funds have entered in a shareholder and administrative services agreement with Minnesota Life Insurance Company. Under this agreement, the Funds pay a shareholder services fee, equal to $7 per shareholder account annually, to Minnesota Life Insurance Company for shareholder services which Minnesota Life Insurance Company provides. The Funds also pay Minnesota Life Insurance Company an administrative services fee equal to $3,300 per month for accounting, auditing, legal and other administrative services which Securian Financial Group provides. Prior to March 1, 2003 the Funds paid Minnesota Life Insurance Company an administrative services fee equal to $5,100 per month for the Real Estate Securities Fund and $6,200 per month in all the remaining Funds. VOLUNTARY FEE ABSORPTION Advantus Capital has voluntarily agreed to absorb all Fund costs and expenses that exceed 1.34% of Class A average daily net assets effective February 1, 2003 (previously it was 1.24%) and 2.09% of Class B and C average daily net assets effective February 1, 2003 (previously it was 1.99%) for the Cornerstone Fund, all Fund costs and expenses that exceed 1.53% of Class A average daily net assets effective February 1, 2003 (previously it was 1.38%) and 2.28% of Class B and C average daily net assets effective 94 February 1, 2003 (previously it was 2.23%) for the Enterprise Fund, all Fund costs and expenses that exceed 1.40% of Class A average daily net assets (previously it was 1.35%) and 2.15% of Class B and C average daily net assets (previously it was 2.10%) for the Horizon Fund, all Fund costs and expenses which exceed .85% of Class A average daily net assets and 1.60% of Class B and C average daily net assets for the Index 500 Fund, and all Fund costs and expenses that exceed 1.65% of Class A average daily net assets and 2.40% of Class B average daily net assets for Real Estate Securities Fund. During the year ended July 31, 2003, Advantus Capital voluntarily agreed to absorb $130,768, $125,880, $312,856, $272,536, and $0, respectively, in expenses which were otherwise payable by the Funds. For the year ended July 31, 2003, sales charges received by Securian for distributing the Funds' three classes of shares for Cornerstone, Enterprise, Horizon, Index 500, Real Estate Securities, and Venture are $20,437, $11,729, $29,496, $56,803, $65,805, and $56,803, respectively. As of July 31, 2003 the ownership of shares by Minnesota Life and subsidiaries and the directors and officers of the Funds as a whole was as follows:
PERCENTAGE NUMBER OF OWNED FUND SHARES OF CLASS ---- --------- ---------- Cornerstone Class A 4,223,308 83.3% Enterprise Class A 3,564,912 83.3% Horizon Class A 25,274 1.4% Index 500 Class A 209,332 13.4% Class B 765 -% Class C 11,022 8.6% Real Estate Class A 3,867,584 86.1% Venture Class A 4,054,136 89.2%
For the year ended July 31, 2003, legal fees were paid to a law firm of which the Funds' secretary is a partner, for Cornerstone, Enterprise, Horizon, Index 500, Real Estate Securities, and Venture in the amount of $6,902, $6,687, $6,262, $6,687, $6,902 and $6,262, respectively. 95 (5) CAPITAL SHARE TRANSACTIONS Transactions in shares for the year ended July 31, 2003, the period ended July 31, 2002 and the year ended September 30, 2001, were as follows:
CORNERSTONE FUND ------------------------------------------- CLASS A ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 953,861 590,303 361,247 Issued for reinvested distributions 26,878 15,571 16,815 Redeemed (820,963) (921,372) (551,305) ----------- ----------- ----------- 159,776 (315,498) (173,243) =========== =========== ===========
CORNERSTONE FUND ------------------------------------------- CLASS B ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 32,512 27,171 42,405 Issued for reinvested distributions 1,080 409 128 Redeemed (176,743) (170,656) (214,538) ----------- ----------- ----------- (143,151) (143,076) (172,005) =========== =========== ===========
CORNERSTONE FUND ------------------------------------------- CLASS C ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 3,108 2,846 4,525 Issued for reinvested distributions 130 45 17 Redeemed (13,756) (14,734) (20,295) ----------- ----------- ----------- (10,518) (11,843) (15,753) =========== =========== ===========
96
ENTERPRISE FUND ------------------------------------------- CLASS A ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 387,759 892,251 374,323 Issued for reinvested distributions - - 1,621,745 Redeemed (357,941) (914,738) (429,560) ----------- ----------- ----------- 29,818 (22,487) 1,566,508 =========== =========== ===========
ENTERPRISE FUND ------------------------------------------- CLASS B ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 41,549 38,348 67,534 Issued for reinvested distributions - - 302,899 Redeemed (208,776) (141,912) (151,151) ----------- ----------- ----------- (167,227) (103,564) 219,282 =========== =========== ===========
ENTERPRISE FUND ------------------------------------------- CLASS C ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 2,702 7,676 14,611 Issued for reinvested distributions - - 37,153 Redeemed (21,112) (17,929) (23,563) ----------- ----------- ----------- (18,410) 10,253 28,201 =========== =========== ===========
97
HORIZON FUND ------------------------------------------- CLASS A ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 206,401 144,293 359,055 Issued for reinvested distributions - 466,476 Redeemed (392,676) (386,031) (685,126) ----------- ----------- ----------- (186,275) (241,738) 140,405 =========== =========== ===========
HORIZON FUND ------------------------------------------- CLASS B ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 46,501 42,647 92,722 Issued for reinvested distributions - 216,815 Redeemed (236,407) (230,525) (308,878) ----------- ----------- ----------- (189,906) (187,878) 659 =========== =========== ===========
HORIZON FUND ------------------------------------------- CLASS C ------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- Sold 2,975 3,696 14,967 Issued for reinvested distributions - 20,334 Redeemed (17,599) (24,538) (32,274) ----------- ----------- ----------- (14,624) (20,842) 3,027 =========== =========== ===========
98
INDEX 500 FUND --------------------------------------------------------------------------- CLASS A CLASS B CLASS C ----------------------- ----------------------- ----------------------- 2003 2002 2003 2002 2003 2002 ---------- ---------- ---------- ---------- ---------- --------- Sold 223,456 321,990 125,370 140,642 26,356 25,624 Issued for reinvested distributions 8,988 6,645 2,826 439 331 42 Redeemed (188,184) (374,275) (317,401) (304,910) (36,230) (35,675) ---------- ---------- ---------- ---------- ---------- --------- 44,260 (45,640) (189,205) (163,829) (9,543) (10,009) ========== ========== ========== ========== ========== =========
REAL ESTATE SECURITIES FUND ------------------------------------------------- CLASS A CLASS B ----------------------- ----------------------- 2003 2002 2003 2002 ---------- --------- --------- --------- Sold 2,469,727 1,428,832 76,397 104,942 Issued for reinvested distributions 179,565 101,578 6,905 342 Redeemed (867,006) (311,365) (14,709) (10,152) ---------- --------- --------- ---------- 1,782,286 1,219,045 68,593 95,132 ========== ========= ========= ==========
VENTURE FUND --------------------------------------------------------------------------- CLASS A CLASS B CLASS C ----------------------- ----------------------- ----------------------- 2003 2002 2003 2002 2003 2002 ---------- ---------- ---------- ---------- ---------- ---------- Sold 1,498,212 1,639,269 75,124 154,746 377,025 98,695 Issued for reinvested distributions 145,410 79,848 32,270 19,807 15,801 5,281 Redeemed (1,436,138) (1,023,466) (81,316) (72,399) (429,870) (12,771) ---------- ---------- ---------- ---------- ---------- ---------- 207,484 695,651 26,078 102,154 (37,044) 91,205 ========== ========== ========== ========== ========== ==========
(6) SECURITIES LENDING CONTRACTS To enhance returns, the Funds loan securities to brokers in exchange for collateral. The Funds receive a fee from the brokers measured as a percent of the loaned securities. At July 31, 2003, the collateral is invested in cash equivalents and repurchase agreements and must be 102% of the value of securities loaned. The risk to the Funds is that the borrower may not provide additional collateral when required or return the securities when due. 99 Gain or loss in the market price of the securities loaned that may occur during the term of the loan is reflected in the value of the Fund. Wells Fargo Funds Management, LLC receives 25% of income on securities lending activities and covers the expenses associated with securities lending activities. As of July 31, 2003, the cash collateral of each Fund was invested as follows:
REPURCHASE SHORT-TERM FUND NAME AGREEMENTS SECURITIES TOTAL --------- ---------- ---------- ----- Enterprise Fund 56% 44% 100% Index 500 Fund 56% 44% 100% Real Estate Securities Fund 56% 44% 100% Venture Fund 56% 44% 100%
At July 31, 2003, Enterprise Fund, Index 500 Fund, Real Estate Securities Fund, and Venture Fund had securities valued at $15,020,091, $1,794,784, $5,921,410, and $16,492,853 that were on loan to brokers and the Funds had $15,478,749, $1,875,689, $6,139,431, and $17,174,007 in cash collateral, respectively. (7) STOCK INDEX FUTURES CONTRACTS Investments in securities as of July 31, 2003, included securities valued at $3,155,051 in the Index 500 Fund that were used as collateral to cover initial margin deposits on six open September S&P 500 and thirteen open September S&P 500 EMINI Futures purchase contacts. The market value of the open purchase contracts as of July 31, 2003, was $2,126,963 with an unrealized loss of $6,753. (8) ILLIQUID SECURITIES At July 31, 2003, each of the Funds' investments in illiquid securities is limited to 10% of net assets at the time of purchase. At July 31, 2003, investments in securities of the Venture Fund include an issue that is illiquid. The value of this illiquid security held by the Venture Fund is $624 which represents 0.0% of net assets. (9) COMMISSION RECAPTURE The Venture Fund participates in commission recapture agreements with certain brokers whereby a portion of brokerage commissions on security trades are refunded. The commissions recaptured are reported as commission reimbursement income on the statement of operations. For the year ended July 31, 2003, the Venture Fund recaptured $660 in brokerage commissions. 100 (10) FINANCIAL HIGHLIGHTS ADVANTUS CORNERSTONE FUND Per share data for a share of capital stock and selected information for each period are as follows:
CLASS A ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 11.81 $ 12.59 $ 15.08 $ 15.14 $ 13.88 $ 18.68 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment income .12 .08 .09 .06 .15 .16 Net gains (losses) on securities (both realized and unrealized) .72 (.78) (2.50) .13 1.26 (3.04) ---------- ------------ --------- --------- --------- --------- Total from investment operations .84 (.70) (2.41) .19 1.41 (2.88) ---------- ------------ --------- --------- --------- --------- Less distributions: Dividends from net investment income (.11) (.08) (.08) (.05) (.15) (.16) Distributions from net realized gains - - - (.13) - (1.76) Excess distributions of net realized gains - - - (.06) - - Tax return of capital - - - (.01) - - ---------- ------------ --------- --------- --------- --------- Total distributions (.11) (.08) (.08) (.25) (.15) (1.92) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 12.54 $ 11.81 $ 12.59 $ 15.08 $ 15.14 $ 13.88 ========== ============ ========= ========= ========= ========= Total return (a) 7.23% (5.72)% (15.97)% 1.26% 10.13% (16.45)% Net assets, end of period (in thousands) $ 63,549 $ 57,947 $ 65,766 $ 81,389 $ 92,657 $ 93,833 Ratios to average net assets: Expenses 1.29% 1.24%(b) 1.24% 1.24% 1.21% 1.16% Net investment income 1.05% .70%(b) .61% .43% .94% .98% Expenses without waivers 1.50% 1.41%(b) 1.39% 1.34% 1.23% 1.25% Net investment income without waivers .84% .53%(b) .46% .33% .92% .89% Portfolio turnover rate (excluding short-term securities) 123.4% 95.3% 147.9% 180.1% 78.7% 114.4%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 101
CLASS B ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 11.60 $ 12.38 $ 14.86 $ 14.97 $ 13.73 $ 18.52 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment income (loss) .04 -(c) (.02) (.02) .03 .03 Net gains (losses) on securities (both realized and unrealized) .71 (.77) (2.46) .10 1.24 (3.02) ---------- ------------ --------- --------- --------- --------- Total from investment operations .75 (.77) (2.48) .08 1.27 (2.99) ---------- ------------ --------- --------- --------- --------- Less distributions: Dividends from net investment income (.03) (.01) - - (.03) (.04) Distributions from net realized gains - - - (.13) - (1.76) Excess distributions of net realized gains - - - (.06) - - ---------- ------------ --------- --------- --------- --------- Total distributions (.03) (.01) - (.19) (.03) (1.80) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 12.32 $ 11.60 $ 12.38 $ 14.86 $ 14.97 $ 13.73 ========== ============ ========= ========= ========= ========= Total return (a) 6.55% (6.40)% (16.61)% .54% 9.26% (17.21)% Net assets, end of period (in thousands) $ 4,812 $ 6,190 $ 8,382 $ 12,615 $ 18,611 $ 21,176 Ratios to average net assets: Expenses 2.04% 1.99%(b) 1.99% 1.99% 1.96% 1.95% Net investment income (loss) .30% (.05)%(b) (.14)% (.29)% .20% .18% Expenses without waivers 2.25% 2.16%(b) 2.14% 2.09% 1.96% 1.95% Net investment income (loss) without waivers .09% (.22)%(b) (.29)% (.39)% .20% .18% Portfolio turnover rate (excluding short-term securities) 123.4% 95.3% 147.9% 180.1% 78.7% 114.4%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. (c) Amount is less than $.01. 102
CLASS C ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 11.56 $ 12.35 $ 14.82 $ 14.93 $ 13.68 $ 18.48 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment income (loss) .04 -(c) (.02) (.02) .03 .03 Net gains (losses) on securities (both realized and unrealized) .71 (.78) (2.45) .10 1.25 (3.04) ---------- ------------ --------- --------- --------- --------- Total from investment operations .75 (.78) (2.47) .08 1.28 (3.01) ---------- ------------ --------- --------- --------- --------- Less distributions: Dividends from net investment income (.03) (.01) - - (.03) (.03) Distributions from net realized gains - - - (.13) - (1.76) Excess distributions of net realized gains - - - (.06) - - ---------- ------------ --------- --------- --------- --------- Total distributions (.03) (.01) - (.19) (.03) (1.79) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 12.28 $ 11.56 $ 12.35 $ 14.82 $ 14.93 $ 13.68 ========== ============ ========= ========= ========= ========= Total return (a) 6.49% (6.42)% (16.58)% .54% 9.35% (17.28)% Net assets, end of period (in thousands) $ 593 $ 680 $ 873 $ 1,281 $ 2,015 $ 3,094 Ratios to average net assets: Expenses 2.04% 1.99%(b) 1.99% 1.99% 1.96% 1.95% Net investment income (loss) .30% (.05)%(b) (.14)% (.29)% .21% .18% Expenses without waivers 2.25% 2.16%(b) 2.14% 2.09% 1.96% 1.95% Net investment income (loss) without waivers .09% (.22)%(b) (.29)% (.39)% .21% .18% Portfolio turnover rate (excluding short-term securities) 123.4% 95.3% 147.9% 180.1% 78.7% 114.4%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. (c) Amount is less than $.01. 103 ADVANTUS ENTERPRISE FUND Per share data for a share of capital stock and selected information for each period are as follows:
CLASS A ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 6.44 $ 7.20 $ 20.77 $ 14.56 $ 11.32 $ 15.90 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.09) (.08) (.03) (.19) (.14) (.13) Net gains (losses) on securities (both realized and unrealized) 1.96 (.68) (7.07) 6.40 3.38 (4.45) ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.87 (.76) (7.10) 6.21 3.24 (4.58) ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Total distributions - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 8.31 $ 6.44 $ 7.20 $ 20.77 $ 14.56 $ 11.32 ========== ============ ========= ========= ========= ========= Total return (a) 28.84% (10.56)% (44.09)% 42.65% 28.62% (28.81)% Net assets, end of period (in thousands) $ 35,538 $ 27,357 $ 30,744 $ 56,087 $ 40,009 $ 31,844 Ratios to average net assets: Expenses 1.50% 1.38%(b) 1.38% 1.25% 1.33% 1.27% Net investment loss (1.25)% (1.14)%(b) (1.00)% (.92)% (.97)% (.91)% Expenses without waivers 1.90% 1.69%(b) 1.60% 1.43% 1.45% 1.44% Net investment loss without waivers (1.65)% (1.45)%(b) (1.22)% (1.10)% (1.09)% (1.08)% Portfolio turnover rate (excluding short-term securities) 64.0% 62.2% 105.4% 181.5% 99.3% 71.1%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 104
CLASS B ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 5.78 $ 6.51 $ 19.63 $ 13.88 $ 10.88 $ 15.42 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.13) (.16) (.07) (.35) (.26) (.24) Net gains (losses) on securities (both realized and unrealized) 1.75 (.57) (6.58) 6.10 3.26 (4.30) ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.62 (.73) (6.65) 5.75 3.00 (4.54) ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Total distributions - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 7.40 $ 5.78 $ 6.51 $ 19.63 $ 13.88 $ 10.88 ========== ============ ========= ========= ========= ========= Total return (a) 28.03% (11.22)% (44.59)% 41.43% 27.57% (29.44)% Net assets, end of period (in thousands) $ 3,045 $ 3,345 $ 4,440 $ 9,086 $ 6,491 $ 5,903 Ratios to average net assets: Expenses 2.25% 2.23%(b) 2.23% 2.10% 2.18% 2.14% Net investment loss (2.00)% (1.99)%(b) (1.85)% (1.77)% (1.82)% (1.77)% Expenses without waivers 2.65% 2.44%(b) 2.35% 2.10% 2.18% 2.14% Net investment loss without waivers (2.40)% (2.20)%(b) (1.97)% (1.77)% (1.82)% (1.77)% Portfolio turnover rate (excluding short-term securities) 64.0% 62.2% 105.4% 181.5% 99.3% 71.1%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 105
CLASS C ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 5.78 $ 6.50 $ 19.62 $ 13.87 $ 10.87 $ 15.41 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.13) (.15) (.05) (.36) (.27) (.26) Net gains (losses) on securities (both realized and unrealized) 1.75 (.57) (6.60) 6.11 3.27 (4.28) ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.62 (.72) (6.65) 5.75 3.00 (4.54) ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Total distributions - - (6.47) - - - ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 7.40 $ 5.78 $ 6.50 $ 19.62 $ 13.87 $ 10.87 ========== ============ ========= ========= ========= ========= Total return (a) 28.03% (11.21)% (44.54)% 41.46% 27.48% (29.40)% Net assets, end of period (in thousands) $ 403 $ 421 $ 541 $ 1,079 $ 812 $ 780 Ratios to average net assets: Expenses 2.25% 2.23%(b) 2.23% 2.10% 2.18% 2.14% Net investment loss (2.00)% (1.99)%(b) (1.85)% (1.77)% (1.82)% (1.78)% Expenses without waivers 2.65% 2.44%(b) 2.35% 2.10% 2.18% 2.14% Net investment loss without waivers (2.40)% (2.20)%(b) (1.97)% (1.77)% (1.82)% (1.78)% Portfolio turnover rate (excluding short-term securities) 64.0% 62.2% 105.4% 181.5% 99.3% 71.1%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 106 ADVANTUS HORIZON FUND Per share data for a share of capital stock and selected information for each period are as follows:
CLASS A ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 11.23 $ 12.63 $ 31.08 $ 26.88 $ 23.59 $ 23.06 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.04) (.07) (.16) (.28) (.16) (.09) Net gains (losses) on securities (both realized and unrealized) 1.28 (1.33) (13.38) 5.41 5.77 3.48 ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.24 (1.40) (13.54) 5.13 5.61 3.39 ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Total distributions - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 12.47 $ 11.23 $ 12.63 $ 31.08 $ 26.88 $ 23.59 ========== ============ ========= ========= ========= ========= Total return (a) 11.04% (11.08)% (49.46)% 19.26% 24.74% 16.38% Net assets, end of period (in thousands) $ 21,928 $ 21,830 $ 27,603 $ 63,568 $ 56,581 $ 47,183 Ratios to average net assets: Expenses 1.37% 1.35%(b) 1.35% 1.33% 1.30% 1.36% Net investment loss (.34)% (.58)%(b) (.85)% (.89)% (.61)% (.39)% Expenses without waivers 2.50% 2.17%(b) 1.81% 1.42% 1.30% 1.37% Net investment loss without waivers (1.47)% (1.40)%(b) (1.32)% (.97)% (.61)% (.40)% Portfolio turnover rate (excluding short-term securities) 156.6% 67.6% 129.6% 109.3% 60.1% 72.6%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 107
CLASS B ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 10.27 $ 11.62 $ 29.26 $ 25.54 $ 22.65 $ 22.41 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.13) (.16) (.30) (.49) (.32) (.22) Net gains (losses) on securities (both realized and unrealized) 1.18 (1.19) (12.43) 5.14 5.53 3.32 ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.05 (1.35) (12.73) 4.65 5.21 3.10 ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Total distributions - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 11.32 $ 10.27 $ 11.62 $ 29.26 $ 25.54 $ 22.65 ========== ============ ========= ========= ========= ========= Total return (a) 10.33% (11.71)% (49.85)% 18.40% 23.93% 15.48% Net assets, end of period (in thousands) $ 6,128 $ 7,507 $ 10,679 $ 26,878 $ 23,561 $ 17,100 Ratios to average net assets: Expenses 2.12% 2.10%(b) 2.10% 2.08% 2.04% 2.07% Net investment loss (1.09)% (1.33)%(b) (1.60)% (1.63)% (1.34)% (1.11)% Expenses without waivers 3.25% 2.92%(b) 2.56% 2.17% 2.04% 2.07% Net investment loss without waivers (2.22)% (2.15)%(b) (2.07)% (1.72)% (1.34)% (1.11)% Portfolio turnover rate (excluding short-term securities) 156.6% 67.6% 129.6% 109.3% 60.1% 72.6%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 108
CLASS C ---------------------------------------------------------------------------------------- PERIOD FROM OCTOBER 1, YEAR ENDED 2001 TO YEAR ENDED SEPTEMBER 30, JULY 31, JULY 31, ------------------------------------------------------ 2003 2002 2001 2000 1999 1998 ---------- ------------ --------- --------- --------- --------- Net asset value, beginning of period $ 10.34 $ 11.71 $ 29.44 $ 25.69 $ 22.79 $ 22.38 ---------- ------------ --------- --------- --------- --------- Income from investment operations: Net investment loss (.13) (.16) (.30) (.51) (.36) (.24) Net gains (losses) on securities (both realized and unrealized) 1.20 (1.21) (12.52) 5.19 5.58 3.51 ---------- ------------ --------- --------- --------- --------- Total from investment operations 1.07 (1.37) (12.82) 4.68 5.22 3.27 ---------- ------------ --------- --------- --------- --------- Less distributions: Distributions from net realized gains - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Total distributions - - (4.91) (.93) (2.32) (2.86) ---------- ------------ --------- --------- --------- --------- Net asset value, end of period $ 11.41 $ 10.34 $ 11.71 $ 29.44 $ 25.69 $ 22.79 ========== ============ ========= ========= ========= ========= Total return (a) 10.35% (11.71)% (49.84)% 18.37% 23.82% 15.74% Net assets, end of period (in thousands) $ 558 $ 658 $ 988 $ 2,396 $ 2,540 $ 2,299 Ratios to average net assets: Expenses 2.12% 2.10%(b) 2.10% 2.08% 2.04% 2.07% Net investment loss (1.09)% (1.33)%(b) (1.60)% (1.63)% (1.34)% (1.10)% Expenses without waivers 3.25% 2.92%(b) 2.56% 2.17% 2.04% 2.07% Net investment loss without waivers (2.22)% (2.15)%(b) (2.07)% (1.72)% (1.34)% (1.10)% Portfolio turnover rate (excluding short-term securities) 156.6% 67.6% 129.6% 109.3% 60.1% 72.6%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. 109 ADVANTUS INDEX 500 FUND Per share data for a share of capital stock and selected information for each year are as follows:
CLASS A ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 12.00 $ 15.92 $ 18.93 $ 17.74 $ 15.06 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment income .11 .11 .12 .10 .11 Net gains (losses) on securities (both realized and unrealized) 1.05 (3.94) (2.98) 1.27 2.74 ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.16 (3.83) (2.86) 1.37 2.85 ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income (.11) (.09) (.10) (.03) (.10) Distributions from net realized gains - - (.05) (.15) (.07) ---------- ---------- ---------- ---------- ------------ Total distributions (.11) (.09) (.15) (.18) (.17) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 13.05 $ 12.00 $ 15.92 $ 18.93 $ 17.74 ========== ========== ========== ========== ============ Total return (a) 9.76% (24.14)% (15.12)% 7.67% 19.13% Net assets, end of year (in thousands) $ 20,371 $ 18,196 $ 24,870 $ 24,723 $ 25,498 Ratios to average net assets: Expenses .85% .75% .75% .75% .75% Net investment income .93% .77% .72% .52% .64% Expenses without waivers 1.68% 1.53% 1.43% 1.38% 1.43% Net investment income (loss) without waivers .10% (.01)% .04% (.11)% (.04)% Portfolio turnover rate (excluding short-term securities) 4.3% 13.6% 17.2% 42.6% 25.3%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. 110
CLASS B ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 11.78 $ 15.66 $ 18.68 $ 17.64 $ 15.01 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment income (loss) .03 (.01) (.02) (.06) (.03) Net gains (losses) on securities (both realized and unrealized) 1.02 (3.86) (2.93) 1.25 2.73 ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.05 (3.87) (2.95) 1.19 2.70 ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income (.03) (.01) (.02) - - Distributions from net realized gains - - (.05) (.15) (.07) ---------- ---------- ---------- ---------- ------------ Total distributions (.03) (.01) (.07) (.15) (.07) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 12.80 $ 11.78 $ 15.66 $ 18.68 $ 17.64 ========== ========== ========== ========== ============ Total return (a) 8.94% (24.80)% (15.77)% 6.71% 18.10% Net assets, end of year (in thousands) $ 13,402 $ 14,559 $ 21,931 $ 28,077 $ 24,202 Ratios to average net assets: Expenses 1.60% 1.60% 1.60% 1.60% 1.60% Net investment income (loss) .18% (.08)% (.11)% (.33)% (.21)% Expenses without waivers 2.43% 2.28% 2.18% 2.13% 2.16% Net investment loss without waivers (.65)% (.76)% (.69)% (.86)% (.77)% Portfolio turnover rate (excluding short-term securities) 4.3% 13.6% 17.2% 42.6% 25.3%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. 111
CLASS C ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 11.75 $ 15.63 $ 18.64 $ 17.60 $ 14.97 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment income (loss) .03 (.01) (.03) (.06) (.03) Net gains (losses) on securities (both realized and unrealized) 1.02 (3.86) (2.91) 1.25 2.73 ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.05 (3.87) (2.94) 1.19 2.70 ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income (.03) (.01) (.02) - - Distributions from net realized gains - - (.05) (.15) (.07) ---------- ---------- ---------- ---------- ------------ Total distributions (.03) (.01) (.07) (.15) (.07) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 12.77 $ 11.75 $ 15.63 $ 18.64 $ 17.60 ========== ========== ========== ========== ============ Total return (a) 8.97% (24.80)% (15.80)% 6.73% 18.03% Net assets, end of year (in thousands) $ 1,622 $ 1,605 $ 2,291 $ 3,168 $ 2,910 Ratios to average net assets: Expenses 1.60% 1.60% 1.60% 1.60% 1.60% Net investment income (loss) .18% (.08)% (.11)% (.33)% (.21)% Expenses without waivers 2.43% 2.28% 2.18% 2.13% 2.16% Net investment loss without waivers (.65)% (.76)% (.69)% (.86)% (.77)% Portfolio turnover rate (excluding short-term securities) 4.3% 13.6% 17.2% 42.6% 25.3%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. 112 ADVANTUS REAL ESTATE SECURITIES FUND Per share data for a share of capital stock and selected information for each period are as follows:
CLASS A ------------------------------------------------------------------------ PERIOD FROM FEBRUARY 25, YEAR ENDED JULY 31, 1999 (c) TO ------------------------------------------------------- JULY 31, 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of period $ 11.93 $ 11.67 $ 11.23 $ 10.25 $ 10.02 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment income .48 .32 .51 .43 .18 Net gains on securities (both realized and unrealized) 1.72 1.01 .47 1.00 .31 ---------- ---------- ---------- ---------- ------------ Total from investment operations 2.20 1.33 .98 1.43 .49 ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income (.48) (.28) (.54) (.41) (.18) Distributions from net realized gains (.23) (.79) - (.04) - Excess distributions of net investment income - - - - (.08) ---------- ---------- ---------- ---------- ------------ Total distributions (.71) (1.07) (.54) (.45) (.26) ---------- ---------- ---------- ---------- ------------ Net asset value, end of period $ 13.42 $ 11.93 $ 11.67 $ 11.23 $ 10.25 ========== ========== ========== ========== ============ Total return (a) 19.65% 12.31% 9.10% 14.89% 4.78% Net assets, end of period (in thousands) $ 60,198 $ 32,269 $ 17,336 $ 11,704 $ 6,113 Ratios to average net assets: Expenses 1.46% 1.50% 1.50% 1.50% 1.50%(b) Net investment income 2.95% 2.83% 4.29% 4.26% 4.09%(b) Expenses without waivers 1.46% 1.69% 1.99% 2.72% 3.49%(b) Net investment income without waivers 2.95% 2.64% 3.81% 3.04% 2.10%(b) Portfolio turnover rate (excluding short-term securities) 48.2% 101.2% 173.1% 116.8% 51.5%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. (c) Date shares became effectively registered. 113
CLASS B ------------------------------ PERIOD FROM NOVEMBER 28, YEAR ENDED 2002 (c) TO JULY 31, JULY 31, 2003 2002 ------------ ------------ Net asset value, beginning of period $ 11.89 $ 11.56 ------------ ------------ Income from investment operations: Net investment income .40 .11 Net gains on securities (both realized and unrealized) 1.70 1.23 ------------ ------------ Total from investment operations 2.10 1.34 ------------ ------------ Less distributions: Dividends from net investment income (.40) (.22) Distributions from net realized gains (.23) (.79) ------------ ------------ Total distributions (.63) (1.01) ------------ ------------ Net asset value, end of period $ 13.36 $ 11.89 ============ ============ Total return (a) 18.73% 7.75% Net assets, end of period (in thousands) $ 2,187 $ 1,131 Ratios to average net assets: Expenses 2.21% 2.40%(b) Net investment income 2.20% 1.29%(b) Expenses without waivers 2.21% 2.44%(b) Net investment income without waivers 2.20% 1.25%(b) Portfolio turnover rate (excluding short-term securities) 48.2% 101.2%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. For periods less than one year, total return presented has not been annualized. (b) Adjusted to an annual basis. (c) Inception date of Class B shares. 114 ADVANTUS VENTURE FUND Per share data for a share of capital stock and selected information for each year are as follows:
CLASS A ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 12.25 $ 15.05 $ 11.47 $ 11.20 $ 12.03 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment income (loss) (.09) (.08) (.06) .05 .10 Net gains (losses) on securities (both realized and unrealized) 1.74 (1.84) 4.04 .32 (.59) ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.65 (1.92) 3.98 .37 (.49) ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income -(b) - - (.06) (.09) Distributions from net realized gains (.88) (.88) (.40) - (.23) Dividends in excess of net investment income - - - (.04) - Tax return of capital - - - - (.02) ---------- ---------- ---------- ---------- ------------ Total distributions (.88) (.88) (.40) (.10) (.34) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 13.02 $ 12.25 $ 15.05 $ 11.47 $ 11.20 ========== ========== ========== ========== ============ Total return (a) 14.91% (13.27)% 35.18% 3.74% (3.89)% Net assets, end of year (in thousands) $ 59,141 $ 53,071 $ 54,735 $ 31,371 $ 31,683 Ratios to average net assets: Expenses 1.53% 1.27% 1.40% 1.40% 1.40% Net investment income (loss) (.82)% (.57)% (.56)% .63% .81% Expenses without waivers 1.53% 1.37% 1.51% 1.71% 1.64% Net investment income (loss) without waivers (.82)% (.67)% (.67)% .32% .57% Portfolio turnover rate (excluding short-term securities) 54.2% 37.3% 37.8% 169.0% 103.9%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. (b) Amount is less than $.01. 115
CLASS B ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 11.90 $ 14.77 $ 11.36 $ 11.11 $ 11.94 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment loss (.17) (.17) (.16) (.04) - Net gains (losses) on securities (both realized and unrealized) 1.68 (1.82) 3.97 .32 (.58) ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.51 (1.99) 3.81 .28 (.58) ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income -(b) - - (.02) (.02) Distributions from net realized gains (.88) (.88) (.40) - (.23) Dividends in excess of net investment income - - - (.01) - ---------- ---------- ---------- ---------- ------------ Total distributions (.88) (.88) (.40) (.03) (.25) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 12.53 $ 11.90 $ 14.77 $ 11.36 $ 11.11 ========== ========== ========== ========== ============ Total return (a) 14.13% (14.02)% 34.01% 2.89% (4.77)% Net assets, end of year (in thousands) $ 5,097 $ 4,531 $ 4,114 $ 2,500 $ 3,115 Ratios to average net assets: Expenses 2.28% 2.12% 2.25% 2.24% 2.25% Net investment loss (1.57)% (1.42)% (1.41)% (.24)% (.04)% Expenses without waivers 2.28% 2.12% 2.26% 2.45% 2.36% Net investment loss without waivers (1.57)% (1.42)% (1.42)% (.45)% (.15)% Portfolio turnover rate (excluding short-term securities) 54.2% 37.3% 37.8% 169.0% 103.9%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. (b) Amount is less than $.01. 116
CLASS C ------------------------------------------------------------------------ YEAR ENDED JULY 31, ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year $ 11.96 $ 14.83 $ 11.41 $ 11.15 $ 11.98 ---------- ---------- ---------- ---------- ------------ Income from investment operations: Net investment loss (.19) (.14) (.15) (.03) (.01) Net gains (losses) on securities (both realized and unrealized) 1.71 (1.85) 3.98 .32 (.57) ---------- ---------- ---------- ---------- ------------ Total from investment operations 1.52 (1.99) 3.83 .29 (.58) ---------- ---------- ---------- ---------- ------------ Less distributions: Dividends from net investment income -(b) - - (.02) (.02) Distributions from net realized gains (.88) (.88) (.40) - (.23) Distributions in excess of net investment income - - - (.01) - ---------- ---------- ---------- ---------- ------------ Total distributions (.88) (.88) (.40) (.03) (.25) ---------- ---------- ---------- ---------- ------------ Net asset value, end of year $ 12.60 $ 11.96 $ 14.83 $ 11.41 $ 11.15 ========== ========== ========== ========== ============ Total return (a) 14.15% (13.96)% 33.94% 2.95% (4.81)% Net assets, end of year (in thousands) $ 1,089 $ 1,477 $ 479 $ 273 $ 467 Ratios to average net assets: Expenses 2.28% 2.12% 2.25% 2.24% 2.25% Net investment loss (1.57)% (1.42)% (1.41)% (.24)% (.04)% Expenses without waivers 2.28% 2.12% 2.26% 2.45% 2.36% Net investment loss without waivers (1.57)% (1.42)% (1.42)% (.45)% (.15)% Portfolio turnover rate (excluding short-term securities) 54.2% 37.3% 37.8% 169.0% 103.9%
---------- (a) Total return figures presented for the periods stated above assume reinvestment of distributions and do not include the effects of sales charges. (b) Amount is less than $.01. 117 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Advantus Cornerstone Fund, Inc. Advantus Enterprise Fund, Inc. Advantus Horizon Fund, Inc. Advantus Index 500 Fund, Inc. Advantus Real Estate Securities Fund, Inc. Advantus Venture Fund, Inc. We have audited the accompanying statements of assets and liabilities, including the schedules of investments in securities, of Advantus Cornerstone Fund, Inc., Advantus Enterprise Fund, Inc., Advantus Horizon Fund, Inc., Advantus Index 500 Fund, Inc., Advantus Real Estate Securities Fund, Inc., and Advantus Venture Fund, Inc. as of July 31, 2003, and the related statements of operations and statements of changes in net assets and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds' 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 audit 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 July 31, 2003, by correspondence with the custodian or by 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 financial highlights referred to above present fairly, in all material respects, the financial position of Advantus Cornerstone Fund, Inc., Advantus Enterprise Fund, Inc., Advantus Horizon Fund, Inc., Advantus Index 500 Fund, Inc., Advantus Real Estate Securities Fund, Inc., and Advantus Venture Fund, Inc. as of July 31, 2003, and the results of their operations, changes in their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, MN September 5, 2003 118 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 Funds in the fiscal period ended July 31, 2003. Dividends for the 2003 calendar year will be reported to you on Form 1099-Div in late January 2004. Shareholders should consult a tax adviser on how to report these distributions for state and local purposes. For the fiscal year ended July 31, 2003 certain dividends paid by the funds may be designated as qualified dividend income and subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Complete information will be reported in conjunction with your 2003 Form 1099-DIV. ADVANTUS CORNERSTONE FUND INCOME DISTRIBUTION - TAXABLE AS DIVIDEND INCOME, 100% QUALIFYING FOR DEDUCTION BY CORPORATIONS CLASS A
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0281 December 27, 2002 .0327 March 28, 2003 .0295 June 27, 2003 .0198 ------- $ .1101 =======
CLASS B
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0056 December 27, 2002 .0107 March 28, 2003 .0090 ------- $ .0253 =======
CLASS C
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0065 December 27, 2002 .0107 March 28, 2003 .0095 ------- $ .0267 =======
119 ADVANTUS INDEX 500 FUND INCOME DISTRIBUTION - TAXABLE AS DIVIDEND INCOME, 100% QUALIFYING FOR DEDUCTIONS BY CORPORATIONS CLASS A
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0305 December 27, 2002 .0315 March 28, 2003 .0330 June 27, 2003 .0107 ------- $ .1057 =======
CLASS B
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0066 December 27, 2002 .0097 March 28, 2003 .0123 ------- $ .0286 =======
CLASS C
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .0068 December 27, 2002 .0094 March 28, 2003 .0134 ------- $ .0296 =======
120 ADVANTUS REAL ESTATE SECURITIES FUND INCOME DISTRIBUTION - TAXABLE AS DIVIDEND INCOME, 23.3% QUALIFYING FOR DEDUCTIONS BY CORPORATIONS. CLASS A
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .1318 December 27, 2002 .0948 March 28, 2003 .1461 June 27, 2003 .1098 ------- $ .4825 ======= Capital gains distributions-taxable as long-term capital gains, 20% rate. December 17, 2002* $ .2235 March 28, 2003* .0068 ------- $ .2303 =======
* Includes $.1109 of short-term capital gains (taxable as dividend income). CLASS B
PER PAYABLE DATE SHARE ------------ ------- September 27, 2002 $ .1124 December 27, 2002 .0747 March 28, 2003 .1263 June 21, 2002 .0894 ------- $ .4028 ======= Capital gains distributions-taxable as long-term capital gains, 20% rate. December 17, 2002* $ .2235 March 28, 2003* .0068 ------- $ .2303 =======
* Includes $.1109 of short-term capital gains (taxable as dividend income). 121 ADVANTUS VENTURE FUND INCOME DISTRIBUTION - TAXABLE AS DIVIDEND INCOME, 0.0% QUALIFYING FOR DEDUCTIONS BY CORPORATIONS. CLASS A, CLASS B AND CLASS C
PER PAYABLE DATE SHARE ------------ ------- Capital gains distributions-taxable as long-term capital gains, 20% rate. December 17, 2002* $ .8774 =======
* Includes $.0020 of short-term capital gains (taxable as dividend income). 122 ADVANTUS FUNDS DIRECTORS AND EXECUTIVE OFFICERS Under Minnesota law, the Board of Directors of each Fund has overall responsibility for managing the Fund in good faith and in a manner reasonably believed to be in the best interests of the Fund. The directors meet periodically throughout the year to oversee the Fund's activities, review contractual arrangements with companies that provide services to the Fund, and review the performance of the Fund. Certain of the directors are considered "interested persons" (as defined in the Investment Company Act of 1940) of the Fund primarily by reason of their engagement as officers of the Fund's investment adviser, Advantus Capital Management, Inc. ("Advantus Capital") or Waddell & Reed Ivy Investment Company ("WRIICO"), or as officers of companies affiliated with Advantus Capital or WRIICO, including Minnesota Life Insurance Company ("Minnesota Life"). The remaining directors, because they are not interested persons of the Fund, are considered independent ("Independent Directors") and are not employees or officers of, and have no financial interest in, Advantus Capital, WRIICO, Minnesota Life or their other affiliates. A majority of the Board of Directors is comprised of Independent Directors. The individuals listed in the table below serve as directors and officers of each Fund, and also serve in the same capacity for each of the other six Advantus Funds (the Advantus Funds are the twelve registered investment companies bearing the Advantus name, consisting of 29 portfolios, for which Advantus Capital, WRIICO or an affiliate of WRIICO serves as the investment adviser). Only executive officers and other officers who perform policy-making functions with the Fund are listed. None of the directors is a director of any public company (a company required to file reports under the Securities Exchange Act of 1934) or of any registered investment companies other than the Advantus Funds. Each director serves for an indefinite term, until his or her resignation, death or removal.
POSITION WITH FUND NAME, ADDRESS(1) AND LENGTH OF PRINCIPAL OCCUPATION(S) AND AGE TIME SERVED DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTORS William N. Westhoff Director since Retired since July 2002, prior thereto President, Treasurer and Director, Age: 56 July 23, 1998 Advantus Capital Management, Inc.; Senior Vice President and Treasurer, Minnesota Life Insurance Company since April 1998; Senior Vice President, Global Investments, American Express Financial Corporation, Minneapolis, Minnesota, from August 1994 to October 1997 INDEPENDENT DIRECTORS Ralph D. Ebbott Director since Retired, Vice President and Treasure of Minnesota Mining and Manufacturing Age: 76 February 25, 1985 Company (industrial and consumer products) through June 1989 William C. Melton Director since Founder and President of Melton Research Inc. since 1997; member of the Age: 55 April 25, 2002 Advisory Board of Macroeconomic Advisors LLC since 1998; member, Minneapolis StarTribune Board of Economists since 1986; member, State of Minnesota Council of Economic Advisors from 1988 to 1994; various senior positions at American Express Financial Advisors (formerly Investors Diversified Services and, thereafter, IDS/American Express) from 1982 through 1997, including Chief Economist and, thereafter, Chief International Economist Ellen S. Berscheid Director since Regents' Professor of Psychology at the University of Minnesota Age: 66 October 22, 1985
123 OTHER EXECUTIVE OFFICERS Dianne M. Orbison President since President and Treasurer, Advantus Capital Management, Inc.; Vice President and Age: 51 July 25, 2002 Treasurer, Minnesota Life Insurance Company; Vice President and Treasurer, Minnesota Mutual Companies, Inc.; Vice President and Treasurer, Securian Financial Group, Inc.; Vice President and Treasurer, Securian Holding Company; President and Treasurer, MIMLIC Funding, Inc. (entity holding legal title to bonds beneficially owned by certain clients of Advantus Capital); President and Treasurer, MCM Funding 1997-1, Inc. and MCM Funding 1998-1, Inc. (entities holding legal title to mortgages beneficially owned by certain clients of Advantus Capital) Gary M. Kleist Vice President and Vice President - Chief Operations Officer, Advantus Capital Management, Inc.; Age: 43 Treasurer since Second Vice President, Minnesota Life Insurance Company; Vice President and July 24, 2003 Secretary/Treasurer, MIMLIC Funding, Inc. (entity holding legal title to bonds beneficially owned by certain clients of Advantus Capital); Financial Vice President, MCM Funding 1997-1, Inc. and MCM Funding 1998-1, Inc. (entities holding legal title to mortgages beneficially owned by certain clients of Advantus Capital); Vice President and Secretary, MMLIC Imperial Corporation. Michael J. Radmer Secretary since Partner with the law firm of Dorsey &Whitney LLP Dorsey &Whitney LLP February 25, 1985 50 South Sixth Street Minneapolis, Minnesota 55402 Age: 58
---------- (1) Unless otherwise noted, the address of each director and officer is the address of the Funds: 400 Robert Street North, St. Paul, Minnesota 55101. The Fund's Statement of Additional Information (SAI) includes additional information about Fund directors, and is available, without charge, upon request. You may request a copy of the current SAI by telephoning Advantus Shareholder Services, toll free, at (800) 665-6005. 124 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. 125 AUTOMATIC INVESTMENT PLAN: This special purchase plan enables you to open an Advantus Fund account for as little as $500 when you agree to make investments of not less than $50 under the plan 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 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 Securian Financial Services, Inc., distributor of the 126 Funds. Contact your representative for information and a prospectus containing more complete information including charges and expenses, for any of the Advantus Funds you are interested in. Read the prospectus carefully before investing. To find a Registered Representative near you, call the toll-free service line (1-800-665-6005) or visit www.AdvantusFunds.com. MINIMUM INVESTMENTS: Minimum lump-sum initial investment is $1,000 ($500 for qualified accounts and accounts covered by an automatic investment plan). Minimum subsequent investment is $50. THE FUND'S MANAGER Advantus Capital Management, Inc., investment adviser to each of the Funds except Advantus Cornerstone Fund, Inc., Advantus Horizon Fund, Inc. and Advantus Spectrum Fund, Inc., 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.) WRIICO serves as the investment adviser to each of Advantus Cornerstone Fund, Inc., Advantus Horizon Fund, Inc. and Advantus Spectrum Fund, Inc., and selects and reviews the investments for each of those Funds. Advantus Capital Management, Inc. manages nine mutual funds containing $2.3 billion in assets in addition to $13.5 billion in assets for other clients. Advantus Capital's seasoned portfolio managers average more than 15 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 127 THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY THE CURRENT APPLICABLE MUTUAL FUND PROSPECTUS. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. [ADVANTUS(TM) CAPITAL MANAGEMENT LOGO] Distributed by: SECURIAN FINANCIAL SERVICES, INC. Securities Dealer, Member NASD/SIPC. Registered Investment Advisor 400 Robert Street North, St. Paul, MN 55101-2098 1.888.237.1838 3010-2003-9036 SECURIAN FINANCIAL SERVICES, INC. 400 ROBERT STREET NORTH PRESORTED STANDARD ST. PAUL, MN 55101-2098 U.S. POSTAGE PAID ST. PAUL, MN PERMIT NO. 3547 CHANGE SERVICE REQUESTED F. 58297 Rev. 9-2003