Advantus Capital Management

As of December 31, 2008

Historically, Advantus Capital Management’s value-oriented investment style has produced strong, long-term results. In 2008, amid the worst investment environment in decades, Securian’s asset management affiliate posted mixed results.

Management of the Minnesota Life Insurance Company General Account allowed the enterprise to maintain a strong balance sheet. Advantus’ bottom-up fundamental investment style helped avoid many of the securities that caused problems throughout the industry. The performance of the hedging program, that allows Securian to offer certain living-benefit guarantees and indexed life and annuity products through its life insurance affiliates, helped counter some of the effects of the year’s difficult investment environment.

Despite the market turmoil, the Advantus real estate strategy and portfolios targeted to insurance clients performed strongly. The Real Estate Securities composite exceeded its benchmark¹ returns on a gross basis over one-, three-, five- and 10-year periods.

Investment performance for insurance company clients also compared favorably to benchmarks. Advantus was underweight in distressed sectors and issuers such as financial companies, collateralized debt obligations, structured investment vehicles, and lower-rated structured securities.

Due to extraordinary problems in the credit market and an investment style that was out of favor, 2008 was a difficult year for total return fixed income portfolios. The Advantus Full Duration,² Intermediate Duration,³ Short Duration⁴ and Mortgage Securities⁵ composites all underperformed their benchmarks.

Given the tough environment and Advantus’ strong focus on client retention, sales results were mixed. Advantus posted sales of $424 million in the defined benefits market, and sales to insurance advisory clients were $275 million. Subadvisory sales through Waddell & Reed’s Ivy funds were $54 million. Overall, Advantus sales reached $753 million.

The difficult credit market experienced in 2008, provided the opportunity to launch a distressed mortgage strategy. With a new portfolio manager dedicated to this strategy, Advantus is laying the foundation for new asset management clients in this highly attractive sector.

1. The Dow Jones Wilshire Real Estate Securities Index is a market capitalization-weighted index of equity securities whose primary business is equity ownership of commercial real estate (REITs). The index contains equity and hybrid REITs and real estate operating companies.

2. The Barclays Capital Aggregate Bond Index is a market-weighted index that covers the U.S. investment-grade fixed rate bond market. The index includes government and corporate securities, agency mortgage pass-through securities and asset-backed securities.

3. The Barclays Capital Intermediate U.S. Government/Credit Index is an unmanaged list of investment-grade fixed income securities from two major sectors: U.S. government bonds and corporate bonds.

4. The Barclays Capital Short Treasury 9-12 Month Index includes U.S. Treasury securities with maturities of nine to 12 months.

5. The Barclays Capital Mortgage-backed Securities Index includes all fixed rate securities backed by mortgage pools of the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.