<PAGE>
[LOGO]
ADVANTUS
FAMILY OF FUNDS
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS VENTURE FUND
JULY 31, 1998
<PAGE>
ADVANTUS VENTURE FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 6
STATEMENT OF ASSETS AND LIABILITIES 9
STATEMENT OF OPERATIONS 10
STATEMENTS OF CHANGES IN NET ASSETS 11
NOTES TO FINANCIAL STATEMENTS 12
INDEPENDENT AUDITORS' REPORT 16
FEDERAL INCOME TAX INFORMATION 17
SHAREHOLDER SERVICES 18
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
Over the past fiscal year (August 1, 1997 through July 31, 1998), the U.S.
economy continued to expand at a robust pace, despite signs of slowing. The
economic expansion is broad based which illustrates the overall strength of our
economy.
From a global perspective, the Asian financial crisis, which has been unfolding
throughout the reporting period, has had a dampening effect on interest rates
and corporate earnings. Ironically, this situation could have an overall
positive impact on the U.S. stock market. Equities continue to benefit from the
relatively low level of interest rates, with expansion capital available to
companies at a low cost. Also, money continues to flow into the U.S. markets at
record levels. A "flight to quality" has brought foreign investors to the
shelter of the U.S stock market and to Treasury securities.
Asian demand for U.S. goods has been shrinking, as evidenced by the significant
trade drag on U.S. output growth during the second quarter, 1998. The fallout
from the Asian financial situation is underway, and the effects will intensify.
The result will be declining U.S. growth through the remainder of 1998 and
increased competition from cheaper imports. Slower economic growth and increased
price competition will reduce profit growth, which has been a key factor
supporting the stock market. We anticipate greater volatility in the stock
market in the coming months. Keep in mind, however, that the United States has
the broadest, strongest economy in the world. Even though we anticipate our
economic growth will slow, our country's economy will remain healthy, and we
will continue to enjoy low levels of inflation.
Cash flows into the U.S. stock market have dominated valuations and pricing. The
stock market has benefited from both the flight to quality (from abroad) and
from the huge and continuing cash flows from the funding of retirement assets.
Equity valuations are on the high side of almost any historical comparisons,
with large cap (and consistent) growth stocks leading the valuation parade. A
strong and steady bond market has propped up stock prices. This continues even
within an environment of slightly slower growth expectations.
In the report that follows, the portfolio manager provides insightful
information about your fund's performance over the last year. As always, we
appreciate your continued support of the Advantus family of mutual funds and
thank you for investing with Advantus.
Sincerely,
[SIGNATURE]
William Westhoff, President
Advantus Venture Fund, Inc.
<PAGE>
ADVANTUS VENTURE FUND
PERFORMANCE UPDATE
[GARY ASTER PHOTO]
GARY ASTER, 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 year ended July 31, 1998, the Advantus Venture Fund returned the
following for each class of shares currently offered:
<TABLE>
<S> <C>
Class A.......................... 8.9 percent*
Class B.......................... 7.7 percent*
Class C.......................... 7.9 percent*
</TABLE>
The Russell 2000 Value Index** returned 6.0 percent over the same reporting
period.
PORTFOLIO ANALYSIS
The best performing sectors in the Advantus Venture Fund for the fiscal year
ended July 31, 1998 were consumer staples and utilities. Stocks of companies
that are able to generate a consistent stream of earnings growth have been in
favor this past year.
Some outstanding highlights for the year include the Learning Company, Inc., up
105 percent* since it was purchased in September 1997. This phenomenal return
resulted from the Learning Company's consolidation of the educational software
market and acquisitions made at very attractive valuations. The Learning Company
learned its lesson about acquiring other companies through a few negative
experiences, but as its performance shows, the company is now soundly on track.
Allied Group Incorporated, another peak performer, was up 51 percent* for the
year. It has announced that it is being acquired by Nationwide Mutual Insurance
Company.
Conversely, Gibralter Steel Corporation was down 25 percent* at the end of the
reporting period. Like many commodity-rated companies, Gibralter Steel has been
affected by Asian weakness. We held the stock with the expectation that the
price would rise; it did not, so we will most likely sell this security.
The turmoil in Asia, which began to hamper Fund performance in the latter stages
of 1997, continues. Holdings in the more economically sensitive sectors such as
basic materials and energy were the most affected as commodity prices dropped
due to decreased demand from Asia. The concerns associated with falling
commodities are largely reflected in the market. Any sign of progress out of
Asia will likely cause renewed confidence in the worldwide economy and solid
performance from what are now inexpensive, economically sensitive stocks. We
will continue to monitor the progress of the Asian economies and determine the
affect on stocks held in the Fund.
2
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1998
OUTLOOK
The recent underperformance of small capitalization stocks relative to large
stocks has acted to widen the valuation gap that already existed at the
beginning of the year. We feel that the near-term and long-term outlook for
small capitalization stocks is very good.
We continue to believe that the Fund's composition is positioned well. The
current holdings have solid fundamentals and are selling at reasonable
valuations.
*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 Value Index contains stock 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.
3
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1998
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------ -------- ----------- -----------
<S> <C> <C> <C>
RLI Corporation............... 34,250 $ 1,449,203 3.8%
Amerus Life Holdings.......... 43,851 1,367,603 3.6%
Learning Company, Inc......... 51,100 1,360,538 3.6%
Wicor, Inc.................... 63,300 1,356,994 3.6%
Sovereign Bancorp
Incorporated................ 84,052 1,347,463 3.6%
Sierra Pacific Resources...... 38,000 1,344,250 3.5%
Peoples Heritage Financial
Group, Inc.................. 59,400 1,343,925 3.5%
Earthgrains Company........... 39,000 1,335,750 3.5%
Michaels Stores
Incorporated................ 39,900 1,306,725 3.4%
United Dominion Industries.... 41,699 1,290,063 3.4%
----------- ---
$13,502,514 35.5%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 2.2%
Health Care .5%
Energy 2.4%
Transportation 3.5%
Basic Materials 5.7%
Technology 6.0%
Consumer Staples 8.9%
Utilities 11.2%
Capital Goods 11.9%
Consumer Cyclical 12.3%
Financial 35.4%
</TABLE>
4
<PAGE>
ADVANTUS VENTURE
FUND
JULY 31, 1998
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, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C RUSSELL 2000 VALUE INDEX CPI
<S> <C> <C> <C> <C> <C>
1/31/97 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
7/31/97 $10,995.00 $11,533.00 $11,533.00 $11,790.00 $10,075.00
1/31/98 $11,966.00 $12,015.00 $12,486.00 $12,754.00 $10,157.00
7/31/98 $11,975.00 $11,965.00 $12,444.00 $12,503.00 $10,245.00
Average annual total
return:
Class A:
One year 3.5%
Since inception (1/31/97) 12.8%
Class B:
One year 2.7%
Since inception (1/31/97) 12.7%
Class C:
One year 7.9%
Since inception (1/31/97) 15.7%
</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 professional's investment advice. Individuals cannot buy even an
unmanaged index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS VENTURE FUND
INVESTMENTS IN SECURITIES
JULY 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCK (97.8%)
BASIC MATERIALS (5.7%)
Aluminum (1.8%)
59,000 Century Aluminum Company.................................... $ 708,000
------------
Chemicals (3.9%)
34,300 A. Schulman, Inc............................................ 615,256
44,300 Quest Diagnostic, Inc. (b).................................. 908,150
------------
1,523,406
------------
CAPITAL GOODS (11.9%)
Manufacturing (6.2%)
6,500 A.O. Smith Corporation...................................... 268,531
41,699 United Dominion Industries.................................. 1,290,063
49,700 Walter Industries Incorporated (b).......................... 844,900
------------
2,403,494
------------
Metal Fabrication (5.7%)
25,700 Gibraltar Steel Corporation (b)............................. 481,875
45,300 Shaw Group Incorporated (b)................................. 934,312
20,800 Triumph Group Incorporated (b).............................. 816,400
------------
2,232,587
------------
CONSUMER CYCLICAL (12.3%)
Auto (3.1%)
62,200 Intermet Corporation........................................ 1,205,125
------------
Publishing (2.6%)
60,800 Journal Register Company (b)................................ 995,600
------------
Retail (3.4%)
39,900 Michaels Stores Incorporated (b)............................ 1,306,725
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Textiles (3.2%)
7,500 Pillowtex Corporation....................................... $ 243,750
45,500 Tropical Sportswear International (b)....................... 983,937
------------
1,227,687
------------
CONSUMER STAPLES (8.9%)
Food (4.9%)
49,200 Chiquita Brands International............................... 587,325
39,000 Earthgrains Company......................................... 1,335,750
------------
1,923,075
------------
Food & Health (1.4%)
25,500 International Multifoods Corporation........................ 535,500
------------
Household Products (2.6%)
42,500 First Brands Corporation.................................... 996,094
------------
ENERGY (2.4%)
Oil & Gas (2.4%)
9,500 Houston Exploration Company (b)............................. 199,500
45,700 Tesoro Petroleum Corporation (b)............................ 728,344 (b)
------------
927,844
------------
FINANCIAL (35.4%)
Banks (6.2%)
37,600 Commercial Federal Corporation.............................. 1,057,500
59,400 Peoples Heritage Financial Group, Inc....................... 1,343,925
------------
2,401,425
------------
Insurance (11.0%)
21,200 Allied Group Incorporated................................... 999,050
43,851 Amerus Life Holdings........................................ 1,367,603
</TABLE>
See accompanying notes to investments in securities.
6
<PAGE>
ADVANTUS VENTURE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
FINANCIAL--CONTINUED
<C> <S> <C>
25,850 Frontier Insurance Group, Inc............................... $ 458,837
34,250 RLI Corporation............................................. 1,449,203
------------
4,274,693
------------
Real Estate Investment Trust (11.6%)
13,000 Apartment Investment & Management Company................... 494,000
17,600 Camden Property Trust....................................... 507,100
7,900 Franchise Finance Corporation of America.................... 196,512
24,300 Glenborough Realty Trust, Inc............................... 598,387
15,048 Kilroy Realty............................................... 341,401
33,400 Pacific Gulf Properties, Inc................................ 695,137
9,700 Pan Pacific Retail Properties............................... 200,063
12,500 Reckson Associates Realty Corporation....................... 283,594
8,300 Regency Realty Corporation.................................. 197,125
22,400 Storage Trust Realty........................................ 498,400
45,500 Sunstone Hotel Investors.................................... 506,188
------------
4,517,907
------------
Savings and Loans (6.6%)
44,300 Bay View Capital Corporation................................ 1,226,556
84,052 Sovereign Bancorp Incorporated.............................. 1,347,463
------------
2,574,019
------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
HEALTH CARE (.5%)
Special Services (.5%)
9,600 Equity Corporation (b)...................................... $ 208,200
------------
TECHNOLOGY (6.0%)
Technology (6.0%)
16,200 DuPont Photomasks Incorporated (b).......................... 522,450
51,100 Learning Company, Inc. (b).................................. 1,360,538
23,900 Photronics Incorporated (b)................................. 433,188
------------
2,316,176
------------
TRANSPORTATION (3.5%)
Shipping (1.6%)
29,200 Teekay Shipping Corporation (c)............................. 627,800
------------
Trucking (1.9%)
29,400 USFreightways Corporation................................... 735,000
------------
UTILITIES (11.2%)
Electric Companies (5.8%)
38,000 Sierra Pacific Resources.................................... 1,344,250
28,000 WPS Resources Corporation................................... 906,500
------------
2,250,750
------------
Natural Gas (5.4%)
25,700 Piedmont Natural Gas Company................................ 748,513
63,300 Wicor, Inc.................................................. 1,356,994
------------
2,105,507
------------
Total common stocks
(cost: $33,527,795)...................................................... 37,996,614
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS VENTURE FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------
<C> <S> <C>
SHORT-TERM SECURITIES (2.8%)
$ 1,080,272 Federated Prime Obligation Fund, current rate 5.500%........ $ 1,080,272
------------
Total short-term securities (cost: $1,080,272).............. 1,080,272
------------
Total investments in securities (cost: $34,608,067) (d)..... $ 39,076,886
------------
------------
</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 1.6% of net assets in foreign securities as of July 31, 1998.
(d) At July 31, 1998 the cost of securities for federal income tax purposes was
$34,696,728. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 6,641,295
Gross unrealized depreciation............................... (2,261,137)
-----------
Net unrealized appreciation................................. $ 4,380,158
-----------
-----------
</TABLE>
8
<PAGE>
ADVANTUS VENTURE FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying
schedule for detailed listing
(identified cost: $34,608,067)............................. $ 39,076,886
Cash in bank on demand deposit.............................. 79
Receivable for Fund shares sold............................. 20,180
Receivable for investment securities sold................... 97,131
Accrued interest receivable................................. 5,126
Dividends receivable........................................ 30,488
Organizational costs (note 5)............................... 62,623
------------
Total assets............................................ 39,292,513
------------
LIABILITIES
Payable for investment securities purchased................. 299,214
Payable for Fund shares redeemed............................ 16,937
Payable to Adviser.......................................... 115,150
------------
Total liabilities....................................... 431,301
------------
Net assets applicable to outstanding capital stock.......... $ 38,861,212
------------
------------
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)....................................... $ 32,323
Additional paid-in capital................................ 33,675,158
Undistributed net investment income....................... 17,242
Accumulated net realized gains from investments........... 667,670
Unrealized appreciation on investments.................... 4,468,819
------------
Total--representing net assets applicable to outstanding
capital stock.......................................... $ 38,861,212
------------
------------
Net assets applicable to outstanding Class A shares......... $ 34,629,853
------------
------------
Net assets applicable to outstanding Class B shares......... $ 3,528,992
------------
------------
Net assets applicable to outstanding Class C shares......... $ 702,367
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 2,878,026..................... $ 12.03
------------
------------
Class B--Shares outstanding 295,649....................... $ 11.94
------------
------------
Class C--Shares outstanding 58,650........................ $ 11.98
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
ADVANTUS VENTURE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 105,698
Dividends............................ 648,879
----------
Total investment income.......... 754,577
----------
Expenses (note 4):
Investment advisory fee.............. 311,606
Distribution fees--Class A........... 107,769
Distribution fees--Class B........... 25,348
Distribution fees--Class C........... 4,930
Administrative services fee.......... 43,800
Amortization of organizational
costs............................... 17,892
Custodian fees....................... 3,284
Auditing and accounting services..... 15,425
Legal fees........................... 5,192
Directors' fees...................... 597
Registration fees.................... 44,219
Printing and shareholder reports..... 26,567
Insurance............................ 6,217
Other................................ 12,085
----------
Total expenses................... 624,931
Less fees and expenses waived by
Distributor:
Class A distribution fees.......... (59,431)
----------
Total net expenses............... 565,500
----------
Investment income--net........... 189,077
----------
Realized and unrealized gains on
investments:
Net realized gains on investments
(note 3)............................ 1,979,485
Net change in unrealized appreciation
or depreciation on investments...... 608,832
----------
Net gains on investments........... 2,588,317
----------
Net increase in net assets resulting
from operations....................... $2,777,394
----------
----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS VENTURE FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JULY 31, 1998 AND THE PERIOD FROM SEPTEMBER 4, 1996,
COMMENCEMENT OF OPERATIONS, TO JULY 31, 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Operations:
Investment income--net............... $ 189,077 $ 146,226
Net realized gain on investements.... 1,979,485 697,378
Net change in unrealized appreciation
or depreciation on investments...... 608,832 3,859,987
----------- -----------
Increase in net assets resulting
from operations................. 2,777,394 4,703,591
----------- -----------
Distributions to shareholders from:
Investment income--net:
Class A............................ (236,788) (105,109)
Class B............................ (931) (1,057)
Class C............................ (280) (734)
Net realized gains on investments:...
Class A............................ (1,876,127) --
Class B............................ (116,012) --
Class C............................ (17,054) --
----------- -----------
Total distributions.............. (2,247,192) (106,900)
----------- -----------
Capital share transactions (notes 4 and
6):
Proceeds from sales:
Class A............................ 6,963,558 26,193,599
Class B............................ 2,972,512 957,956
Class C............................ 879,498 157,336
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 231,086 3,158
Class B............................ 116,943 1,057
Class C............................ 15,498 734
Payments for redemption of shares:
Class A............................ (3,887,372) (21,538)
Class B............................ (493,941) (556)
Class C............................ (355,209) --
----------- -----------
Increase in net assets from
capital share transactions...... 6,442,573 27,291,746
----------- -----------
Total increase in net assets..... 6,972,775 31,888,437
Net assets at beginning of period...... 31,888,437 --
----------- -----------
Net assets at end of period (including
undistributed net investment income
$17,242 and $48,272, respectively).... $38,861,212 $31,888,437
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
(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's investment
objective is to seek long-term accumulation of capital.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses are allocated to each class of shares based upon its relative
net assets.
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 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. 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 in the financial statements. Actual
results could differ from those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price, by an independent pricing service or at a price deemed best to
reflect fair value as quoted by dealers who make markets in these securities.
When market quotations are not readily available, securities are valued at fair
value as determined in good faith under procedures adopted by the Board of
Directors. Short-term securities are valued at market.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
12
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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
$17,892.
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, 1998, purchases of securities and proceeds from
sales, other than temporary investments in short-term securities aggregated
$21,202,401 and $16,577,760, 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), formerly known as MIMLIC Sales Corporation, the underwriter of
the Fund and wholly-owned subsidiary of Advantus Capital, to be used to pay
certain expenses incurred in the distribution, promotion and servicing of the
Fund's shares. The Class A Plan provides for a fee up to .30 percent of average
daily net assets of Class A shares. The Class B and Class C Plans provide for a
fee up to 1.00 percent of average daily net assets of Class B and Class C
shares, respectively. The Class B and Class C 1.00 percent fee is comprised of a
.75 percent distribution fee and a .25 percent service fee. Ascend is currently
waiving that portion of Class A distribution fees which exceeds, as a percentage
of average daily net assets, .15 percent. Prior to December 1, 1997 the portion
exceeding .10 percent of average daily net assets was waived. Ascend waived
Class A distribution fees in the amount of $59,431 for the year ended July 31,
1998.
13
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
reports, legal, auditing and accounting services, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee, equal to $3,700 per month, to
Minnesota Mutual for accounting, auditing, legal and other administrative
services which Minnesota Mutual provides. Prior to February 1, 1998, the
administrative services fee was $3,600 per month.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $174,716.
As of July 31, 1998, Minnesota Mutual and subsidiaries and the directors and
officers of the Fund as a whole own the following shares:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OWNED
----------- -------------
<S> <C> <C>
Class A......................................................................... 2,500,000 86.9%
Class B......................................................................... 5,354 1.8%
Class C......................................................................... 5,352 9.1%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $5,171.
(5) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs will be amortized over 60 months on a
straight-line basis beginning with the commencement of operations. If any or all
of the shares held by Advantus Capital, or any other holder, representing
initial capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion (based on the ratio
that the number of initial shares redeemed bears to the total number of
outstanding initial shares of the Fund at the date of redemption) of the
unamortized organizational cost balance.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the year ended July 31, 1998 and the period from
September 4, 1996 (commencement of operations) to July 31, 1997 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- --------------------- ---------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold.......................................... 548,786 2,614,604 234,238 89,705 69,307 14,856
Issued for reinvested distributions........... 18,877 303 9,780 102 1,427 73
Redeemed...................................... (302,671) (1,873) (38,156) (20) (27,013) --
---------- ---------- ---------- --------- ---------- ---------
264,992 2,613,034 205,862 89,787 43,721 14,929
---------- ---------- ---------- --------- ---------- ---------
---------- ---------- ---------- --------- ---------- ---------
</TABLE>
(7) YEAR 2000
In 1995, Minnesota Mutual began addressing computer systems requirements and
applications to be Year 2000 compliant. Based on a current study, Minnesota
Mutual plans to spend approximately $14 million through 1999 to modify its
computer information systems, enabling proper processing of transactions
relating to the year 2000 and beyond. The Fund will not be charged for these
expenses.
14
<PAGE>
ADVANTUS VENTURE FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ------------------------- -------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 31, JANUARY 31, JANUARY 31,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO YEAR ENDED 1997 TO
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 11.73 $ 10.17 $11.71 $10.17 $11.71 $10.17
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income................. .06 .05 (.02) .01 (.03) .01
Net gains or losses on securities
(both realized and unrealized)...... .98 1.55 .92 1.54 .97 1.54
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations.... 1.04 1.60 .90 1.55 .94 1.55
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment
income.............................. (.08) (.04) (.01) (.01) (.01) (.01)
Distributions from capital gains...... (.66) -- (.66) -- (.66) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................. (.74) (.04) (.67) (.01) (.67) (0.1)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period.......... $ 12.03 $ 11.73 $11.94 $11.71 $11.98 $11.71
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total return (a)........................ 8.9% 15.8% 7.7% 15.3% 7.9% 15.4%
Net assets, end of period (in
thousands)............................ $34,630 $30,662 $3,529 $1,052 $ 702 $ 175
Ratio of expenses to average daily net
assets (c)............................ 1.38% 1.35%(b) 2.25% 2.25%(b) 2.25% 2.25%(b)
Ratio of net investment income to
average daily net assets (c).......... .55% .90%(b) (.26)% .01%(b) (.26)% .01%(b)
Portfolio turnover rate (excluding
short-term securities)................ 45.0% 39.6% 45.0% 39.6% 45.0% 39.6%
Average commission rate on common stock
transactions (d)...................... $ .0506 $ .0545 $.0506 $.0545 $.0506 $.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. For periods less than one year, total return presented has not
been annualized.
(b) Adjusted to an annual basis.
(c) The Fund's Distributor voluntarily waived $59,431 and $26,677 in Class A
distribution fees for the year ended July 31, 1998 and the period from
January 31, 1997 (date of inception) to July 31, 1997, respectively. 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 1.55%, respectively,
and the ratio of net investment income to average daily net assets would
have been .38% and .70%, respectively.
(d) Average commission rate is calculated by dividing the total brokerage
commissions paid on applicable purchases and sales of common stocks for the
period by the total number of related shares purchased and sold.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
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. as of July 31, 1998 and the related statement of operations for the
year then ended, the statements of changes in net assets for the year ended July
31, 1998, and the period from September 4, 1996, commencement of operations, to
July 31, 1997 and the financial highlights for the year ended July 31, 1998 and
the period from Janurary 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Advantus Venture Fund, Inc. as of July 31, 1998 and the results
of its operations, changes in its net assets and financial highlights, for the
periods stated in the first paragraph above, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 4, 1998
16
<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, 1998. Dividends for the 1998 calendar year will be
reported to you on Form 1099-Div in late January 1999. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distribution--taxable as dividend income, 28.2% qualifying for deductions by corporations
September 24, 1997.......................................................................................... $ .0238
December 23, 1997........................................................................................... .6829
March 25, 1998.............................................................................................. .0255
June 25, 1998............................................................................................... .0159
---------
$ .7481
---------
---------
</TABLE>
The distribution of $.6829 payable on December 23, 1997 represents $.6645 of
short term capital gains (taxable as dividend income) and $.0184 from net
investment income.
CLASS B
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distribution--taxable as dividend income, 28.2% qualifying for deductions by corporations
September 24, 1997.......................................................................................... $ .0030
December 23, 1997........................................................................................... .6645
March 25, 1998.............................................................................................. .0024
---------
$ .6699
---------
---------
</TABLE>
The distribution of $.6645 payable on December 23, 1997 represents $.6645 of
short term capital gains (taxable as dividend income).
CLASS C
<TABLE>
<CAPTION>
PAYABLE DATE PER SHARE
- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Income distribution--taxable as dividend income, 28.2% qualifying for deductions by corporations
December 23, 1997........................................................................................... $ .6645
March 25, 1998.............................................................................................. .0051
---------
$ .6696
---------
---------
</TABLE>
The distribution of $.6645 payable on December 23, 1997 represents $.6645 of
short term capital gains (taxable as dividend income).
17
<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 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. 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 EXCHANGE: You can move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same class)
just by calling our toll free number. The Telephone Exchange and Telephone
Redemption privilege will automatically be established unless otherwise
indicated on the Account Application. Telephone Exchange and Redemption may be
changed (added/deleted) at any time by submitting a request in writing or by
completing a Service Request Form.
SYSTEMATIC EXCHANGE: You can move a set amount of money monthly from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) to diversify your investment portfolio and take advantage of
dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual 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 on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Special purchase plans enable you to open an Advantus
Fund account for as little as $25 and lower your average share cost through
"dollar-cost averaging." (Dollar-cost averaging does not assure a profit, nor
does it prevent loss in declining markets.) The Automatic Investment Plan allows
you to invest automatically each month from your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA's, SIMPLE IRA's, profit sharing, money purchase or defined
benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account or wire
transferred to your bank of record for the account.
18
<PAGE>
Wire transfers are for amounts over $500. The prevailing wire charge will be
added to the withdrawal amount. The Telephone Exchange and Telephone Redemption
privilege will automatically be established unless otherwise indicated on the
Account Application. Telephone Exchange and Redemption may be changed
(added/deleted) at any time by submitting a request in writing or by completing
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 will receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) 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 personal information
and assistance directly from Advantus Shareholder Services, call
(1-800-665-6005). Advantus Account Representatives are available Monday through
Friday from 8 a.m. to 4:45 p.m. Central Time. Our voice response system is
available 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 account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc. (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. To find a Registered Representative near you, call the toll-free
service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use the Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.9 billion in assets in addition to $2.0 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 13 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
19
<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 LOGO]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
<PAGE>
ASCEND FINANCIAL SERVICES BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
F.51519 Rev. 9-1998
