<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS VENTURE FUND
JULY 31, 1997
<PAGE>
ADVANTUS VENTURE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 8
STATEMENT OF OPERATIONS 9
STATEMENT OF CHANGES IN NET ASSETS 10
NOTES TO FINANCIAL STATEMENTS 11
INDEPENDENT AUDITORS' REPORT 15
FEDERAL INCOME TAX INFORMATION 16
SHAREHOLDER SERVICES 17
<PAGE>
September 15, 1997 [PHOTO]
Dear Shareholders:
The last six months have certainly provided first hand evidence of a market in
fluctuation. In the first calendar quarter of 1997, inflation fears linked to a
5.6 percent rise in the GDP caused the Federal Reserve to increase short-term
money rates by 1/4 percent at the end of March. This "preemptive strike"
combined with market expectations of an additional increase by the Federal
Reserve in May caused a strong reaction in the market.
The expected inflation has not materialized. With second calendar quarter GDP
growth expected to come in at around 2 percent, corporate earnings reports
strong, and without an additional increase in interest rates by the Federal
Reserve, the market rebounded sharply in May and has continued strong though
June and July. July provided the best monthly performance since 1991, driving
the year to date performance to 30.22 percent.
However, not all stocks performed equally. The largest 100 stocks in the S&P 500
based on market capitalization continue to lead the index. And at least one
measure of stock price volatility, standard deviation of returns, is up in 1997.
Standard deviation of returns statistically measures the potential range of
future returns given the range of returns for the current time period.
Therefore, a higher number means the statistical potential of future returns is
much wider, both higher and lower. Through the second calendar quarter, the
standard deviation of returns for 1997 was 15.4 percent, up from the average in
1992 through 1996 of 9.8 percent.
In the bond market, investment grade bonds posted low single digit returns
through the first seven months of 1997. As signs of slower economic growth and
low inflation encouraged bond investors, interest rates fell to the lower end of
their recent range.
All indicators point to a continuation of strong market performance through the
remainder of the year. Stable economic growth in the range of 1 to 4 percent is
expected through 1997. Long-term inflation will be contained by cheap global
labor, technology and corporate productivity enhancements. Although market
equity valuations are high, there is additional room for growth as corporations
continue to show increases in earnings and profits.
The market will still find things to worry about: too much economic growth, the
Federal Reserve's next move, monthly inflation indicators, and conflicting
employment data. Occasional scares will translate into continued volatility; in
interest rates in the bond market, and stock prices in the stock market. We view
these possibilities as buying opportunities. We see the corporate bond and
mortgage markets continuing to expand, with the expectation of high single digit
return potential through the end of the year. Stock market growth will likely
slow as corporations find it increasingly difficult to maintain current earnings
and profitability growth rates. Choosing the right securities in a fluctuating
environment, and maintaining a long-term view in the midst of short-term
volatility requires experience and expertise. Advantus Capital Management
provides you with a professional staff of experienced money managers able to
sift through the noise in the marketplace and maintain a stable investment
discipline. We also have the long-term outlook required to develop thoughtful,
well-conceived investment strategies for you. We appreciate your continued
confidence in our ability to provide you with prudent, competitive investment
performance.
Sincerely,
[SIGNATURE]
Paul Gooding, President
Advantus Capital Management, Inc.
<PAGE>
ADVANTUS VENTURE FUND
PERFORMANCE UPDATE
[PHOTO]
MATHEW FINN, CFA
PORTFOLIO MANAGER
The Advantus Venture Fund is a mutual
fund designed for investors seeking
long-term accumulation of capital. The
Fund hopes to achieve its objective by
investing primarily in value common
stocks issued by small companies, defined
in terms of market capitalization.
- Dividends paid quarterly.
- Capital gains distributions paid annually.
PERFORMANCE
For the period from January 31, 1997 (date of inception) to July 31, 1997, the
performance of the Advantus Venture Fund was as follows for each of its three
classes of shares offered:
<TABLE>
<S> <C>
Class A 15.8 percent*
Class B 15.3 percent*
Class C 15.4 percent*
</TABLE>
For the same period, the Russell 2000** returned 12.2 percent and the Russell
2000 Value+ returned 17.8 percent.
PORTFOLIO RECAP
The top five security positions that contributed the most to relative
performance during the fiscal year were led by retail and energy. Michael's
Stores, a retail chain that sells art and craft merchandise was up 80.2 percent
for the year. The position has been trimmed but is still held in the Fund
because operations continue to improve and further price appreciation is
expected. Valero Energy Corp, an oil refinery and gas distribution company,
increased in price by 51.4 percent. Valero Energy has recently divested its gas
distribution operations and the stock continues to be held in the Fund. Fort
Howard Corp., a low-cost manufacturer of tissue paper, returned 97.1 percent.
Fort Howard's stock increased significantly as investors became aware of the
firms improving operations and low valuation culminating in the merger of Fort
Howard with James River Corporation. All Fort Howard stock has been sold from
the Fund because the firm has grown beyond any small company measure. Peoples
Heritage Savings Bank and Sovereign Bancorp returned 44.8 percent and 45.5
percent, respectively. Both companies are savings and loans that have benefited
from continued earnings growth, acquisitions and a favorable banking
environment. Both stocks continue to be held in the Fund.
The worst performing industries on a relative basis were led by business
machines. Control Data, a developer and service provider of computer systems,
was down 8.2 percent due to lackluster operating results despite a generally
strong environment for computer systems. Aerospace was hurt by holdings in Rohr
Industries, an aerospace part manufacturer. Rohr was down 19.9 percent and has
been sold from the Fund. Hudson Foods, a producer of poultry and meat products,
encountered weak poultry prices and problems in it's foreign distribution
system. The net result was a stock that was down 14.9 percent. Hudson Foods
remains in the Fund based on the belief that the stock is inexpensive and that
operations will soon begin to improve. Finally, producer goods were hurt by the
poor stock price performance of Shaw Group, a pipe fabricator. Shaw Group
disappointed investors with a poor backlog announcement during the second
quarter. The stock continues to be held in the Fund because backlog problems are
believed to be short-term and the valuation of the stock is attractive.
2
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1997
OUTLOOK
The balance between a strong economy and low inflation has always been delicate.
Investors, of course, want the earnings growth that often coincides with a
strong economy without having to pay for it with decreased purchasing power. The
recent bull market in stocks is reflecting the best of both worlds, that is, a
strong economy and low inflation levels. When this environment will change,
nobody is certain. However, it can safely be assumed that we will likely see
inflationary pressure, rising interest rates and a slowing economy.
Investors can be assured that the Fund will continue to focus on bottom-up stock
selection based on fundamentals specific to the firm. More specifically, only
companies whose stocks are identified as undervalued and whose operations are
believed to be improving will find a place in the Fund. Predicting the direction
of the economy is not our focus.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5 percent
front-end sales charge or Class B's maximum 5 percent contingent deferred sales
charge.
**The Russell 2000 Index represents the bottom two thirds of the largest 3,000
publicly traded companies domiciled in the United States.
+The Russell 2000 Value Index contains stock from the Russell 2000 with low
price to book ratios. The Russell 2000 are the 2,000 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.
3
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1997
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
Valero Energy Corporation...... 38,700 $1,664,100 5.4%
Peoples Heritage Savings
Bank......................... 36,600 1,459,425 4.8%
Schulman, Incorporated......... 58,500 1,382,062 4.5%
Sovereign Bancorp,
Incorporated................. 86,260 1,366,682 4.4%
Frontier Insurance Group,
Incorporated................. 37,000 1,153,938 3.7%
Earthgrains Company............ 30,000 1,098,750 3.6%
Sierra Pacific Resources,
Incorporated................. 32,400 1,034,775 3.4%
Wicor, Incorporated............ 25,500 1,023,188 3.3%
Hudson Foods, Incorporated..... 63,400 1,022,325 3.3%
Amerus Life Holdings,
Incorporated................. 34,651 961,565 3.1%
---------- ---
$12,166,810 39.5%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 3.5%
Capital Goods 9.3%
Consumer Goods and Services 23.6%
Credit Sensitive 32.6%
Technology 6.4%
Intermediate Goods and
Services 24.6%
</TABLE>
4
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1997
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, 1997.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C> <C>
Class A:
Since inception (1/31/97) 10.0%
Class B:
Since inception (1/31/97) 10.3%
Class C:
Since inception (1/31/97) 15.4%
(Thousands) Class A Class B Class C Russell 2000 Value Index CPI
1/31/97 $10,000 $10,000 $10,000 $10,000 $10,000
2/28/97 9,290 9,774 9,774 10,102 10,025
3/31/97 9,244 9,727 9,732 9,831 10,031
4/30/97 9,366 9,845 9,840 9,976 10,038
5/31/97 9,965 10,475 10,470 10,770 10,044
6/30/97 10,573 11,100 11,095 11,315 10,056
7/31/97 10,995 11,033 11,538 11,790 10,075
</TABLE>
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 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 adviser's investment advice. Individuals cannot buy even an unmanaged
index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS VENTURE FUND
INVESTMENTS IN SECURITIES
JULY 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (96.5%)
CAPITAL GOODS (9.3%)
Machinery (7.1%)
34,300 Shaw Group, Incorporated (b)................. $ 664,562
34,400 Walter Industries (b)........................ 647,150
34,300 United Dominion Industries................... 936,819
------------
2,248,531
------------
Electronics (2.2%)
23,800 Triumph Group, Incorporated (b).............. 708,050
------------
CONSUMER GOODS AND SERVICES (23.6%)
Food (8.7%)
30,000 Earthgrains Company.......................... 1,098,750
63,400 Hudson Foods, Incorporated................... 1,022,325
23,300 International Multifoods Corporation......... 658,225
------------
2,779,300
------------
Retail (4.8%)
41,200 Brown Group, Incorporated.................... 721,000
37,100 Michael's Stores, Incorporated (b)........... 802,288
------------
1,523,288
------------
Consumer Cyclicals (10.1%)
37,000 Frontier Insurance Group, Incorporated....... 1,153,938
38,600 Intermet Corporation......................... 651,375
44,400 Journal Register Corporation (b)............. 788,100
36,500 Quest Diagnostics Inc. (b)................... 634,188
------------
3,227,601
------------
CREDIT SENSITIVE (32.6%)
Finance (21.5%)
19,900 Allied Group, Incorporated................... 931,569
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
34,651 Amerus Life Holdings, Incorporated........... $ 961,565
24,000 Bay View Capital Corporation................. 630,000
19,600 Commercial Federal Corporation............... 781,550
36,600 Peoples Heritage Savings Bank................ 1,459,425
19,600 RLI Corporation.............................. 735,000
86,260 Sovereign Bancorp, Incorporated.............. 1,366,682
------------
6,865,791
------------
Real Estate (11.1%)
10,800 Apartment Investment and Management
Company..................................... 345,600
7,700 Felcor Suite Hotels, Incorporated............ 300,300
20,148 Kilroy Realty Corporation.................... 506,219
22,750 Liberty Property Trust....................... 600,031
24,700 Prentiss Properties Trust.................... 642,200
25,800 Summit Properties Incorporated............... 509,550
45,100 Sunstone Hotel Investors, Incorporated....... 631,400
------------
3,535,300
------------
INTERMEDIATE GOODS AND SERVICES (24.6%)
Energy (13.1%)
17,700 Piedmont Natural Gas Company................. 442,500
32,400 Sierra Pacific Resources, Incorporated....... 1,034,775
38,700 Valero Energy Corporation.................... 1,664,100
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS VENTURE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
25,500 Wicor, Incorporated.......................... $ 1,023,188
------------
4,164,563
------------
Materials (7.9%)
50,400 Century Aluminum Company..................... 806,400
13,800 Gibraltar Steel Corporation (b).............. 334,650
58,500 Schulman, Incorporated....................... 1,382,062
------------
2,523,112
------------
Transportation (3.6%)
23,900 US Freightways Corporation................... 742,393
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES-- CONTINUED
12,100 Teekay Shipping Corporation (c).............. $ 422,744
------------
1,165,137
------------
TECHNOLOGY (6.4%)
31,600 Control Data Systems (b)..................... 637,925
16,100 Dupont Photomasks, Incorporated (b).......... 823,112
23,700 Imation Corporation (b)...................... 582,131
------------
2,043,168
------------
Total common stocks
(cost: $26,923,669)...................................... 30,783,841
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.8%)
$ 260,000 U.S. Treasury Bill................................ 4.979% 08/28/97 259,007
1,620,000 U.S. Treasury Bill................................ 5.150% 10/02/97 1,605,825
-----------
Total short-term securities (cost: $1,865,017)........................... 1,864,832
-----------
Total investments in securities (cost: $28,788,686)(d)................... $32,648,673
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 1.3% of net assets in foreign securities as of July 31, 1997.
(d) At July 31, 1997 the cost of securities for federal income tax purposes was
$28,816,167. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation........... $4,333,644
Gross unrealized depreciation........... (501,138)
----------
Net unrealized appreciation............. $3,832,506
----------
----------
</TABLE>
7
<PAGE>
ADVANTUS VENTURE FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value--see accompanying
schedule for detailed listing
(identified cost: $28,788,686)............................. $ 32,648,673
Cash in bank on demand deposit.............................. 353,613
Receivable for Fund shares sold............................. 73,225
Dividends receivable........................................ 60,822
Organizational costs........................................ 80,515
------------
Total assets............................................ 33,216,848
------------
LIABILITIES
Payable for investment securities purchased................. 1,211,627
Payable for Fund shares redeemed............................ 37
Payable to Adviser.......................................... 116,747
------------
Total liabilities....................................... 1,328,411
------------
Net assets applicable to outstanding capital stock.......... $ 31,888,437
------------
------------
Represented by:
Capital stock--authorized 10 billion shares (Class A--2
billion shares, Class B--2 billion shares, Class C--2
billion shares and 4 billion shares unallocated) of $.01
par value (note 1)....................................... $ 27,177
Additional paid-in capital................................ 27,255,623
Undistributed net investment income....................... 48,272
Accumulated net realized gains from investments........... 697,378
Unrealized appreciation on investments.................... 3,859,987
------------
Total--representing net assets applicable to outstanding
capital stock.......................................... $ 31,888,437
------------
------------
Net assets applicable to outstanding Class A Shares......... $ 30,661,794
------------
------------
Net assets applicable to outstanding Class B Shares......... $ 1,051,755
------------
------------
Net assets applicable to outstanding Class C Shares......... $ 174,888
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,613,034..................... $ 11.73
------------
------------
Class B--Shares outstanding 89,787........................ $ 11.71
------------
------------
Class C--Shares outstanding 14,929........................ $ 11.71
------------
------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ADVANTUS VENTURE FUND
STATEMENT OF OPERATIONS
PERIOD FROM SEPTEMBER 4, 1996, COMMENCEMENT OF OPERATIONS, TO JULY 31, 1997
<TABLE>
<S> <C>
Investment income:
Interest......................................................................... $ 94,912
Dividends........................................................................ 262,541
---------
Total investment income...................................................... 357,453
---------
Expenses (note 4):
Investment advisory fee.......................................................... 125,176
Distribution fees--Class A....................................................... 40,015
Distribution fees--Class B....................................................... 1,877
Distribution fees--Class C....................................................... 425
Administrative services fee...................................................... 39,600
Amortization of organizational costs............................................. 8,946
Custodian fees................................................................... 1,823
Auditing and accounting services................................................. 9,000
Legal fees....................................................................... 5,932
Directors' fees.................................................................. 233
Registration fees................................................................ 3,055
Printing and shareholder reports................................................. 1,280
Insurance........................................................................ 5,835
Other............................................................................ 2,104
---------
Total expenses............................................................... 245,301
Less fees and expenses waived or absorbed:
Class A distribution fees...................................................... (26,677)
Other fund expenses............................................................ (7,397)
---------
Total fees and expenses waived or absorbed................................... (34,074)
---------
Total net expenses........................................................... 211,227
---------
Investment income--net....................................................... 146,226
---------
Realized and unrealized gains on investments:
Net realized gains on investments (note 3)....................................... 697,378
Net change in unrealized appreciation or depreciation on investments............. 3,859,987
---------
Net gains on investments..................................................... 4,557,365
---------
Net increase in net assets resulting from operations............................... $4,703,591
---------
---------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS VENTURE FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM SEPTEMBER 4, 1996, COMMENCEMENT OF OPERATIONS, TO JULY 31, 1997
<TABLE>
<S> <C>
Operations:
Investment income--net.................................... $ 146,226
Net realized gains on investments......................... 697,378
Net change in unrealized appreciation or depreciation on
investments.............................................. 3,859,987
------------
Increase in net assets resulting from operations...... 4,703,591
------------
Distributions to shareholders from net investment income:
Class A................................................. (105,109)
Class B................................................. (1,057)
Class C................................................. (734)
------------
Total distributions................................... (106,900)
------------
Capital share transactions (notes 4 and 6):
Proceeds from sales:
Class A................................................. 26,193,599
Class B................................................. 957,956
Class C................................................. 157,336
Proceeds from issuance of shares as a result of reinvested
dividends:
Class A................................................. 3,158
Class B................................................. 1,057
Class C................................................. 734
Payments for redemption of shares:
Class A................................................. (21,538)
Class B................................................. (556)
------------
Increase in net assets from capital share
transactions.......................................... 27,291,746
------------
Total increase in net assets.......................... 31,888,437
Net assets at beginning of period........................... --
------------
Net assets at end of period (including undistributed net
investment income of $48,272).............................. $ 31,888,437
------------
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(1) ORGANIZATION
Advantus Venture Fund, Inc. (the Fund) was incorporated on July 3, 1996. The
Fund is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Fund is designed for
investors seeking long-term accumulation of capital. The Fund hopes to achieve
its objective by investing primarily in value common stocks issued by small
companies.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses are allocated to each class of shares based upon its relative
net assets.
On September 4, 1996, Advantus Capital Management, Inc. (Advantus Capital or
the Adviser) purchased 5,000 Class A shares, 5,000 Class B shares and 5,000
Class C shares. Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset
Management Company (MIMLIC Management) which is a wholly-owned subsidiary of The
Minnesota Mutual Life Insurance Company (Minnesota Mutual). Inception of the
Fund was January 31, 1997 when the shares became effectively registered under
the Securities Exchange Act of 1933 (1933 Act). Prior to the date of inception,
Minnesota Mutual purchased 2,500,000 Class A shares for $25 million.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
resulting from operations during the period. Actual results could differ from
those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
11
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to increase
undistributed net investment income and decrease additional paid-in capital by
$8,946.
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 period from September 4, 1996 to July 31, 1997, purchases of
securities and proceeds from sales, other than temporary investments in
short-term securities aggregated $36,202,600 and $9,976,309, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital. Under
the agreement, Advantus Capital manages the Fund's assets and provides research,
statistical and advisory services and pays related office rental and executive
expenses and salaries. In addition, as part of the advisory fee, Advantus
Capital pays the expenses of the Fund's transfer, dividend disbursing and
redemption agent (Minnesota Mutual). The fee for investment management and
advisory services is based on the average daily net assets of the Fund at the
annual rate of .80 percent.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to Ascend Financial Services,
Inc. (Ascend), formally known as MIMLIC Sales Corporation, the underwriter of
the Fund and wholly-owned subsidiary of MIMLIC Management, to be used to pay
certain expenses incurred in the distribution, promotion and servicing of the
Fund's shares. The Class A Plan provides for a fee up to .30 percent of average
daily net assets of Class A shares. The Class B and Class C Plans provide for a
fee up to 1.00 percent of average daily net assets of Class B and Class C
shares, respectively. The Class B and Class C
12
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
1.00 percent fee is comprised of a .75 percent distribution fee and a .25
percent service fee. Ascend is currently waiving that portion of Class A
distribution fees which exceeds, as a percentage of average daily net assets,
.10 percent. Ascend waived Class A distribution fees in the amount of $26,677
for the period ended July 31, 1997.
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. The administrative service fee is $3,600 per month.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. During the period ended July 31,
1997, Advantus Capital voluntarily agreed to absorb $7,397 in expenses which
were otherwise payable by the Fund.
As of July 31, 1997, Minnesota Mutual and subsidiaries and the directors and
officers of the Fund as a whole own the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A................................. 2,505,083 95.9%
Class B................................. 5,072 5.7%
Class C................................. 5,069 34.0%
</TABLE>
During the period ended July 31, 1997, legal fees, a portion of which are
included in organizational costs, were paid to a law firm of which the Fund's
secretary is a partner in the amount of $25,765.
(5) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs are being amortized over 60 months on a
straight-line basis beginning with the commencement of operations. If any or all
of the shares held by Advantus Capital, or any other holder, representing
initial capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion (based on the ratio
that the number of initial shares redeemed bears to the total number of
outstanding initial shares of the Fund at the date of redemption) of the
unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period from September 4, 1996 to July 31,
1997 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------- ----------- -----------
<S> <C> <C> <C>
Sold................................................................................ 2,614,604 89,705 14,856
Issued for reinvested distributions................................................. 303 102 73
Redeemed............................................................................ (1,873) (20) --
---------- ----------- -----------
2,613,034 89,787 14,929
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
13
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for the
period from January 31, 1997 (date of inception) to July 31, 1997 are as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period.................................. $ 10.17 $10.17 $10.17
--------- --------- ---------
Income from investment operations:
Net investment income............................................... .05 .01 .01
Net gains or losses on securities (both realized and unrealized).... 1.55 1.54 1.54
--------- --------- ---------
Total from investment operations.................................. 1.60 1.55 1.55
--------- --------- ---------
Less distributions:
Dividends from net investment income................................ (.04) (.01) (.01)
Distributions from capital gains.................................... -- -- --
--------- --------- ---------
Total distributions............................................... (.04) (.01) (.01)
--------- --------- ---------
Net asset value, end of period........................................ $ 11.73 $11.71 $11.71
--------- --------- ---------
--------- --------- ---------
Total return (a) (b).................................................. 15.8% 15.3% 15.4%
Net assets, end of period (in thousands).............................. $30,662 $1,052 $ 175
Ratio of expenses to average daily net assets (d)..................... 1.35%(c) 2.25%(c) 2.25%(c)
Ratio of net investment income to average daily net assets (d)........ .90%(c) .01%(c) .01%(c)
Portfolio turnover rate (excluding short-term securities)............. 39.6% 39.6% 39.6%
Average commission rate on common stock transactions (e).............. $ .0545 $.0545 $.0545
</TABLE>
- ------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect the impact of front-end or contingent deferred sales
charges.
(b) Total return is presented for the period from January 31, 1997, date of
inception, to July 31, 1997.
(c) Adjusted to an annual basis.
(d) The Fund's Distributor voluntarily waived $26,677 in expenses for the period
from January 31, 1997 to July 31, 1997. If Class A shares had been charged
for these expenses, the ratio of expenses to average daily net assets would
have been 1.55% and the ratio of net investment income to average daily net
assets would have been .70%.
(e) Average commission rate is calculated by dividing the total brokerage
commissions paid on applicable purchases and sales of stocks for the period
by the total number of related shares purchased and sold.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Advantus Venture Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus Venture
Fund, Inc. (the Fund) as of July 31, 1997 and the related statements of
operations and changes in net assets for the period from September 14, 1996,
commencement of operations, to July 31, 1997, and the financial highlights for
the period from January 31, 1997 (date of inception) to July 31, 1997. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of July 31, 1997 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 12, 1997
15
<PAGE>
ADVANTUS VENTURE FUND
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal period ended July 31, 1997. Dividends for the 1997 calendar year will be
reported to you on Form 1099-Div in late January 1998. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
Income distribution--taxable as dividend income, 28.6% qualifying for deductions
by corporations
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
December 26, 1996........................................................................................... $ .1267
March 26, 1997.............................................................................................. .0215
June 25, 1997............................................................................................... .0192
---------
$ .1674
---------
---------
</TABLE>
CLASS B
Income distribution--taxable as dividend income, 28.6% qualifying for deductions
by corporations
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
December 26, 1996........................................................................................... $ .1267
March 26, 1997.............................................................................................. .0128
June 25, 1997............................................................................................... .0039
---------
$ .1434
---------
---------
</TABLE>
CLASS C
Income distribution--taxable as dividend income, 28.6% qualifying for deductions
by corporations
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
December 26, 1996......................................................................................... $ .1267
March 26, 1997............................................................................................ .0077
June 25, 1997............................................................................................. .0047
---------
$ .1391
---------
---------
</TABLE>
16
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make four exchanges or telephone transfers between the Funds
each calendar year without incurring a transaction charge. Thereafter, there
will be a $7.50 transaction charge for each additional exchange or transfer
within the calendar year. Systematic Exchange Plans are exempt from this charge.
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 checks at
specified intervals from your fund account--subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE TRANSFER: You may transfer money from one Advantus account to any
other Advantus account you own just by calling our toll free number. Sign up for
telephone exchanges on the Advantus Application or complete the telephone
authorization form.
SYSTEMATIC TRANSFER: If you have an Advantus Money Market account you may
transfer a set amount of money to another Advantus Fund to diversify your
investment portfolio and take advantage of dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Our special purchase plans enable you to open an
Advantus Fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets). One of these plans--The
Automatic Investment Plan--allows you to invest automatically each month from
your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPS, SIMPLE,
profit sharing, money purchase or defined benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account. Amounts
over $1,000 may be wire transferred to your personal bank account. The
prevailing wire charge will be added to the withdrawal amount. Sign up for
17
<PAGE>
telephone redemption on the Advantus Application or complete a Service Request
Form. 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 (monthly statements for your Money Market account) and quarterly
reports to help you track all of your investments in the Advantus Family of
Funds, and annual tax statements. Semiannual 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).
Our voice response system is available from 7 a.m. to 3 a.m. Central Time Monday
through Friday, and 8 a.m. to 5 p.m. on Saturday. This system allows you to
access current net asset values and your account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through your local
registered representative of Ascend Financial Services, Inc. (formerly known as
MIMLIC Sales Corporation), distributor of the Funds. Contact your representative
for information and a prospectus for any of the Advantus Funds you are
interested in.
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use our Systematic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.9 billion in assets in addition to $1.8 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 11 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
18
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS -TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
