<PAGE>
[LOGO]
SEMI-ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS BOND FUND
MARCH 31, 1996
<PAGE>
ADVANTUS BOND FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND
LIABILITIES 10
STATEMENT OF OPERATIONS 11
STATEMENT OF CHANGES IN
NET ASSETS 12
NOTES TO FINANCIAL
STATEMENTS 13
SHAREHOLDER SERVICES 19
<PAGE>
May 15, 1996
[PHOTO]
Dear Shareholders:
The stock market continued making impressive gains in the first quarter of
1996--up 5.4 percent, as measured by the S&P 500, after finishing 1995 at record
levels. The bond market, however, retreated from year-end highs, yielding a
negative 2.6 percent return according to the Lehman Corporate Bond Index.
Concerns about strong economic growth and full employment were the primary
factors in the bond market's slump, while strong corporate earnings and profits
led the stock market's charge. Retail stocks helped pace the market's first
quarter performance while technology companies returned widely fluctuating
results.
In the near-term, we believe that many large company earnings expectations will
be revised downward. This downward pressure should benefit higher quality
securities. Many small cap companies continue to demonstrate strong earnings
growth and their relative valuations maintain significant upside potential.
While growth in the U.S. market may slow, we maintain confidence that the equity
market holds opportunity for investors.
Improving economic growth and increased inflation have bond investors concerned
about the course of future interest rates. Higher commodity prices and strong
employment caused rates to jump in recent months. Rising interest rates offer
investors the chance to buy fixed income investments at attractive levels but
will keep the bond market in check until rates stabilize.
Diversification across industries and geographic regions remains a key element
of our success. However, determining which investments will perform well in both
the near and long-term requires professional experience. Advantus Capital
Management, Inc. offers a family of eight funds designed to help you reach your
financial goals with a thoughtful, well conceived investment strategy.
Sincerely,
[SIGNATURE]
Paul Gooding, President
Advantus Capital Management, Inc.
<PAGE>
ADVANTUS BOND FUND
PERFORMANCE UPDATE
[PHOTO]
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
The Advantus Bond Fund is a mutual fund
designed for investors seeking a high
level of current income consistent with
prudent investment risk. The Fund plans
to achieve its objective primarily by
investing in a diversified portfolio of
investment grade short, intermediate and
long-term debt securities. The Fund
manager varies the proportion of assets
invested in each maturity category
depending upon the evaluation of market
patterns and economic trends by the
Fund's investment adviser.
-Dividends declared daily and paid monthly.
-Capital gains distributions paid annually.
PERFORMANCE
The Advantus Bond Fund's performance for the period from October 1, 1995 to
March 31, 1996, for each class of shares offered was as follows:
<TABLE>
<S> <C>
Class A 1.7 percent*
Class B 1.3 percent*
Class C 1.3 percent*
</TABLE>
The Lehman Brothers Corporate Bond Index** returned 2.23 percent for the period
from October 1, 1995 to March 31, 1996. The six month returns mask the market
volatility during the period. The bond market enjoyed an excellent fourth
quarter, capping one of the best calendar years on record. The new year started
strong, but quickly gave way to higher interest rates and lower bond prices.
For the entire period the absolute change in the interest rate curve was
minimal. The rate on the two year U.S. Treasury Note declined 10 basis points to
yield 5.75 percent, while the thirty year U.S. Treasury Bond increased 16 basis
points to yield 6.67 percent. What the numbers neglect to show is the volatility
endured by the bond market. Yields for the two and thirty year Treasury
securities reached lows of 4.79 and 5.95 percent respectively during the period.
The violent reversal in interest rates was initiated by Alan Greenspan's semi-
annual testimony to Congress in early February and exasperated by very strong
employment numbers reported in March. The absence of a budget deal in
Washington, coupled with higher gold and commodity prices helped to propel
interest rates upward. Prior to the backup in interest rates, the Federal
Reserve lowered key short term interest rates by 25 basis points in both
December and January. The Fed's moves, coupled with moderate economic growth and
low inflation, provided the bond market with a positive tone through January.
All of the damage (the one percent increase in interest rates) occurred in the
last two months of the period.
PORTFOLIO RECAP
Key factors contributing to the Fund's performance were: holding corporate
bonds, owning enough duration (i.e., longer maturity bonds), and minimizing
exposure to cash. This strategy benefited shareholders in the declining rate
environment of 1995, but has hindered performance during the past two months.
2
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1996
Portfolio duration has been the performance driver over the past six months.
Entering February, the Fund had a duration of 6.8 years and by the end of March
it was cut to 5.9 years as a defensive measure and to preserve capital. As
interest rates began to rise, duration was cut by selling longer maturity U.S.
Treasury Bonds and replacing them with shorter maturity corporate bonds and
cash. The cash position was increased to 8.2 percent of the portfolio. The
portfolio is overweighted in cash and five to ten year bonds and underweighted
in short maturities and thirty year bonds when compared against the Lehman
Corporate Bond Index.
Corporate bonds were the best performing fixed income sector in 1995 and on a
duration adjusted basis, continue to perform well in 1996. The fund's core
corporate positions include bonds of American Home Products, AT&T Corp,
Commercial Credit, Fisher Scientific, Ford Motor Credit, Georgia Pacific, and
Time Warner.
In keeping with the emphasis on quality, the fund maintained its average quality
rating of single A. At the end of the semi-annual period, 69 percent of the fund
was invested in investment grade corporate bonds, 15 percent in mortgage backed
securities, 8 percent in U.S. Government securities and the remaining 8 percent
was invested in money market instruments.
OUTLOOK
Interest rates for the remainder of 1996 will be a function of inflation and
economic growth. Inflation has been very moderate over the past few years and
1996 should not be very different. The key inflation driver is wages. Wages have
been very stable in the 90's as corporate America downsized and improved
productivity through the use of technology. Commodity prices, a secondary
inflation driver, are beginning to concern bond investors and will need to be
monitored closely. With wages contained, the inflation rate will likely run
between 2.5 percent and 3.0 percent, making bonds fairly valued at these levels.
Economic growth, as measured by GDP, should be near the Federal Reserve's target
growth rate of 2.5 percent. Given the expectation of moderate growth and
contained inflation, the Fed should hold the line on monetary policy in this
election year.
We are optimistic that the low inflation and moderate economic growth
environment will lead to a more stable interest rate environment. As the market
finds its trading range, we will look for opportunities to buy cheap bonds on
market weakness and sell overvalued securities during periods of market
strength.
*Historical results are 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 Lehman Brother's Corporate Bond Index includes all publicly issued, fixed
rate, nonconvertible investment grade dollar-denominated, SEC registered
corporate debt.
3
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1996
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$10,000 INVESTMENT IN ADVANTUS BOND FUND, LEHMAN BROTHER'S
CORPORATE BOND INDEX AND CONSUMER PRICE INDEX
On the three charts below you can see how the total return for each of the three
classes of shares of the Advantus Bond Fund compared to the Lehman Brother's
Corporate Bond Index and the Consumer Price Index. The three lines in each graph
represent the cumulative total return of a hypothetical $10,000 investment made
on the inception date of each class of shares of the Advantus Bond Fund (August
14, 1987, August 19, 1994 and March 1, 1995 for Class A, B, and C, respectively)
through March 31, 1996.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 5.9%
Five year 7.3%
Since inception (8/14/87) 7.6%
Class A Lehman Brother's Index CPI
8/14/87 10,000 10,000 10,000
10/31/87 9,618 10,014 10,083
10/31/88 10,243 11,343 10,512
10/31/89 11,355 12,751 10,994
10/31/90 11,861 13,295 11,686
10/31/91 13,598 15,639 12,028
10/31/92 15,060 17,376 12,413
10/31/93 17,175 20,011 12,746
9/30/94 16,028 19,020 13,132
9/30/95 18,441 22,252 13,421
3/31/96 18,756 22,748 13,631
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 5.5%
Since inception (8/19/94) 5.7%
Class B Lehman Brother's Index CPI
8/19/94 10,000 10,000 10,000
9/30/94 9,876 9,819 10,067
9/30/95 10,801 11,488 10,289
3/31/96 10,945 11,744 10,450
</TABLE>
4
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1996
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 10.5%
Since inception (3/1/95) 9.8%
Class C Lehman Brother's Index CPI
3/01/95 10,000 10,000 10,000
9/30/95 10,925 11,087 10,146
3/31/96 11,064 11,334 10,305
</TABLE>
The above charts are useful because they provide you with more information about
your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum applicable
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial adviser's investment advice. Individuals cannot buy even an unmanaged
index fund without incurring some charges and expenses.
Historical results are 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 BOND FUND
MARCH 31, 1996
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- -------------------------------------------------- ---------- ---------
<S> <C> <C> <C>
U.S. Treasury Bond--8.00%, 11/15/21............... $1,020,375 6.1%
Commercial Credit Company--7.375%, 03/15/02....... 621,788 3.7%
Reynolds Metals Company--9.375%, 06/15/99......... 573,464 3.4%
Joy Technologies Incorporated--10.25%, 09/01/03... 557,767 3.3%
Delta Airlines--9.20%, 09/23/14................... 544,525 3.3%
Quebec Province of Canada--9.375%, 04/01/99....... 540,720 3.2%
Consolidated Natural Gas Company--8.75%,
10/01/19........................................ 533,905 3.2%
Georgia Pacific Corporation--9.625%, 03/15/22..... 533,509 3.2%
GTE North--8.50%, 12/15/31........................ 517,448 3.1%
Lehman Brothers Holdings--7.375%, 05/15/07........ 513,356 3.1%
---------- ---
$5,956,857 35.6%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 5.50%
U.S. Government Agencies 13.00%
AA Rated 12.90%
A Rated 25.90%
BBB Rated 32.80%
Cash and Other
Assets/Liabilities 9.90%
</TABLE>
6
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (90.0%)
GOVERNMENT OBLIGATIONS (23.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (18.5%)
$ 500,000 Federal Home Loan Mortgage....................... 7.030% 04/05/04 $ 495,333
442,644 Federal National Mortgage Association............ 7.000% 09/01/17 432,166
499,598 Federal National Mortgage Association............ 6.500% 03/01/26 474,148
243,754 Government National Mortgage Association......... 7.000% 03/15/23 237,804
310,058 Government National Mortgage Association......... 7.000% 04/15/22 302,759
461,600 Government National Mortgage Association......... 8.000% 04/15/25 470,702
900,000 U.S. Treasury Bond............................... 8.000% 11/15/21 1,020,375
------------
3,433,287
------------
OTHER GOVERNMENT (2.9%)
500,000 Quebec Province of Canada(b)..................... 9.375% 04/01/99 540,720
------------
LOCAL AND STATE GOVERNMENT OBLIGATIONS (2.0%)
382,000 Wyoming Community Development Authority.......... 6.850% 06/01/10 374,360
------------
Total government obligations (cost: $4,414,749)........................ 4,348,367
------------
CORPORATE OBLIGATIONS (66.6%)
CAPITAL GOODS (6.2%)
Aerospace/Defense (1.6%)
300,000 Rockwell International........................... 6.750% 09/15/02 301,843
------------
Machinery (3.0%)
500,000 Joy Technologies Incorporated.................... 10.250% 09/01/03 557,767
------------
Telecommunications (1.6%)
300,000 Telekom Malaysia(b)(c)........................... 7.125% 08/01/05 302,292
------------
BASIC INDUSTRIES (7.3%)
Paper and Forest Products (4.2%)
500,000 Georgia Pacific Corporation...................... 9.625% 03/15/22 533,509
250,000 Jefferson Smurfit Group PLC(b)................... 6.750% 11/20/05 242,589
------------
776,098
------------
Primary Metals (3.1%)
530,000 Reynolds Metals Company.......................... 9.375% 06/15/99 573,464
------------
CONSUMER STAPLES (17.6%)
Drugs (2.6%)
500,000 American Home Products Corporation............... 6.500% 10/15/02 495,172
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Entertainment (1.4%)
$ 250,000 Royal Caribbean Cruises.......................... 8.250% 04/01/05 $ 259,902
------------
Food (1.5%)
273,214 General Mills Inc................................ 6.235% 03/15/97 275,113
------------
Household Products (1.8%)
300,000 Premark International Inc........................ 10.500% 09/15/00 341,293
------------
Media (9.0%)
500,000 Fisher Scientific International.................. 7.125 12/15/05 480,614
300,000 News America Holdings Inc........................ 7.750% 12/01/45 274,219
300,000 TCI Communications Inc........................... 8.650% 09/15/04 321,480
250,000 Time Warner...................................... 9.625% 05/01/02 280,117
300,000 Time Warner...................................... 7.950% 02/01/00 310,865
------------
1,667,295
------------
Retail (1.3%)
250,000 Dayton Hudson Corporation........................ 6.400% 02/15/03 240,122
------------
CREDIT SENSITIVE (2.3%)
Building Materials (2.3%)
450,000 Masco Corporation................................ 6.125% 09/15/03 427,192
------------
ENERGY (2.9%)
Natural Gas Distribution (2.9%)
500,000 Consolidated Natural Gas Company................. 8.750% 10/01/19 533,905
------------
FINANCIAL (21.0%)
Consumer Finance (10.2%)
600,000 Commercial Credit Company........................ 7.375% 03/15/02 621,788
500,000 Lehman Brothers Holdings......................... 7.375% 05/15/07 513,356
300,000 Chrysler Financial Corporation................... 6.180% 12/15/00 294,630
500,000 Ford Motor Credit Company........................ 6.250% 12/08/05 471,875
------------
1,901,649
------------
Real Estate (10.8%)
500,000 Franchise Finance Corporation of America......... 7.020% 02/20/03 475,655
383,327 Chase 1994-1 B2(c)............................... 6.640% 03/28/25 351,822
208,063 Green Tree Financial, Net Interest Margin, Series
1995-A, Class A................................. 7.250% 07/15/05 208,758
500,000 Security Capital Industrial Trust................ 7.875% 05/15/09 504,452
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
$ 500,000 Security Captial Pacific Trust................... 7.500% 02/15/14 $ 471,277
------------
2,011,964
------------
UTILITIES (6.4%)
Electric (1.6%)
300,000 Korea Electric Power Company(b).................. 7.750% 04/01/13 299,157
------------
Telephones (4.8%)
350,000 AT&T Corporation................................. 8.350% 01/15/25 371,589
500,000 GTE North........................................ 8.500% 12/15/31 517,448
------------
889,037
------------
TRANSPORTATION (2.9%)
Air Transportation (2.9%)
500,000 Delta Airlines Inc............................... 9.200% 09/23/14 544,525
------------
Total corporate obligations (cost: $12,720,548)........................ 12,397,790
------------
Total long-term debt securities (cost: $17,135,297).................... 16,746,157
------------
SHORT-TERM SECURITIES (7.0%)
1,010,000 U.S. Treasury Bills..............................4.94%-5.07% 05/16/96 1,003,213
150,000 U.S. Treasury Bill............................... 5.140% 06/13/96 148,404
150,000 MidAmerica Energy CP............................. 5.460% 05/17/96 148,908
------------
Total short-term securities (cost: $1,301,033)......................... 1,300,525
------------
Total investments in securities (cost: $18,436,330)(d)................. $ 18,046,682
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 7.4% of net assets in foreign securities as of March 31,
1996.
(c) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 6 to the financial statements). Information concerning the
illiquid securities held at March 31, 1996, which includes acquisition date
and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
-------------------------------------------------- ---------- ---------
<S> <C> <C>
Telekom Malaysia.................................. 01/04/96 $ 315,892
Chase 1994-1 B2................................... 03/06/96 359,095
---------
$ 674,987
---------
---------
</TABLE>
(d) At March 31, 1996 the cost of securities for federal income tax purposes
was $18,457,758. The aggregate
unrealized appreciation and depreciation of investments in securities based
on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation................ $ 89,356
Gross unrealized depreciation................ (500,432)
----------
Net unrealized depreciation.................. $ (411,076)
----------
----------
</TABLE>
9
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for
detailed listing (identified cost: $18,436,330)................................ $18,046,682
Cash in bank on demand deposit.................................................. 9,748
Receivable for Fund shares sold................................................. 100,986
Receivable for investment securities sold....................................... 328,718
Accrued interest receivable..................................................... 293,074
-----------
Total assets................................................................ 18,779,208
-----------
LIABILITIES
Payable for Fund shares repurchased............................................. 47,163
Payable for investment securities purchased..................................... 108,069
Payable to Adviser.............................................................. 17,716
Dividends payable to shareholders............................................... 4,803
-----------
Total liabilities........................................................... 177,751
-----------
Net assets applicable to outstanding capital stock.............................. $18,601,457
-----------
-----------
Represented by:
Capital stock--$.01 par value (note 1)........................................ $ 18,400
Additional paid-in capital.................................................... 19,051,645
Undistributed net investment income........................................... 9,428
Accumulated net realized losses from investments.............................. (88,368)
Unrealized depreciation of investments........................................ (389,648)
-----------
Total--representing net assets applicable to outstanding capital stock...... $18,601,457
-----------
-----------
Net assets applicable to outstanding Class A Shares............................. $15,996,804
-----------
-----------
Net assets applicable to outstanding Class B Shares............................. $ 2,317,395
-----------
-----------
Net assets applicable to outstanding Class C Shares............................. $ 287,258
-----------
-----------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 1,582,256......................................... $ 10.11
-----------
-----------
Class B--Shares outstanding 229,353........................................... $ 10.10
-----------
-----------
Class C--Shares outstanding 28,437............................................ $ 10.10
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1995 TO MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest........................................................................... $ 620,647
------------
Expenses (note 4):
Investment advisory fee............................................................ 61,946
Distribution fees--Class A......................................................... 23,738
Distribution fees--Class B......................................................... 8,296
Distribution fees--Class C......................................................... 1,071
Administrative services fee........................................................ 19,600
Custodian fees..................................................................... 3,869
Auditing and accounting services................................................... 4,992
Legal fees......................................................................... 1,281
Directors' fees.................................................................... 142
Registration fees.................................................................. 16,922
Printing and shareholder reports................................................... 14,094
Insurance.......................................................................... 2,710
Other.............................................................................. 3,180
------------
Total expenses................................................................. 161,841
Less fees and expenses waived or absorbed:
Class A distribution fees........................................................ (15,825)
Other fund expenses.............................................................. (49,091)
------------
Total fees and expenses waived or absorbed..................................... (64,916)
------------
Total net expenses............................................................. 96,925
------------
Investment income--net......................................................... 523,722
------------
Realized and unrealized gains (losses) on investments:
Net realized gains on investments (note 3)......................................... 306,287
Net change in unrealized appreciation or depreciation on investments............... (578,557)
------------
Net losses on investments...................................................... (272,270)
------------
Net increase in net assets resulting from operations................................. $ 251,452
------------
------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1995 TO MARCH 31, 1996
AND YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Operations:
Investment income--net........................................................ $ 523,722 $ 974,533
Net realized gains (losses) on investments.................................... 306,287 (56,377)
Net change in unrealized appreciation or depreciation on investments.......... (578,557) 1,185,953
----------- -----------
Increase in net assets resulting from operations............................ 251,452 2,104,109
----------- -----------
Distributions to shareholders from:
Investment income--net:
Class A..................................................................... (473,338) (939,133)
Class B..................................................................... (42,258) (28,946)
Class C..................................................................... (5,404) (1,889)
----------- -----------
Total distributions......................................................... (521,000) (969,968)
----------- -----------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A..................................................................... 1,655,639 1,777,559
Class B..................................................................... 1,276,462 1,038,123
Class C..................................................................... 208,972 116,675
Shares issued as a result of reinvested dividends:
Class A..................................................................... 268,484 544,661
Class B..................................................................... 37,236 26,134
Class C..................................................................... 5,304 1,908
Payments for redemption of shares:
Class A..................................................................... (1,026,037) (1,973,311)
Class B..................................................................... (91,475) (16,414)
Class C..................................................................... (32,872) (9,920)
----------- -----------
Increase in net assets from capital share transactions...................... 2,301,713 1,505,415
----------- -----------
Total increase in net assets................................................ 2,032,165 2,639,556
Net assets at beginning of period............................................... 16,569,292 13,929,736
----------- -----------
Net assets at end of period (including undistributed net investment income of
$9,428 and $6,706, respectively)............................................... $18,601,457 $16,569,292
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) ORGANIZATION
The Advantus Bond Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. On February 14, 1995 shareholders of the Fund approved a
name change to Advantus Bond Fund, Inc. (effective March 1, 1995). Prior to
March 1, 1995 the Fund was known as MIMLIC Fixed Income Securities Fund, Inc.
The Fund currently issues three classes of shares: Class A, Class B and
Class C shares. Class A shares are sold subject to a front-end sales charge.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption if redeemed within six years of purchase. Class C shares are
sold without either a front-end sales charge or a contingent deferred sales
charge. Both Class B and Class C are subject to a higher Rule 12b-1 fee than
Class A shares. Both Class B and Class C shares automatically convert to Class A
shares at net asset value after a specified holding period. Such holding periods
decline as the amount of the purchase increases and range from 28 to 84 months
after purchase for Class B shares and 40 to 96 months after purchase for Class C
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between Class A, Class B and Class C shares.
Income, expenses (other than distribution fees) and realized and unrealized
gains or losses are allocated to each class of shares based upon its relative
net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets 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.
13
<PAGE>
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. 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.
For federal income tax purposes, the Fund had a capital loss carryover at
March 31, 1996 of $66,940, which, if not offset by subsequent capital gains,
will expire from September 30, 2003 to September 30, 2004. It is unlikely the
board of directors will authorize a distribution of any net realized capital
gains until the available capital loss carryover has been offset or expired.
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.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly in
cash or reinvested in additional shares. Realized gains, if any, are paid
annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the period from October 1, 1995 to March 31, 1996, purchases of
securities and proceeds from sales, other than temporary investments in
short-term securities aggregated $25,894,854 and $24,151,907, respectively.
(4) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital or
the Adviser). Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset
Management Company (MIMLIC Management) which, prior to March 1, 1995, served as
investment adviser to the Fund. 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 (The Minnesota Mutual Life
Insurance Company (Minnesota Mutual), the parent of MIMLIC Management). The fee
for investment management and advisory services is based on the average daily
net assets of the Fund at the annual rate of .70 percent, which is the same as
under the old agreement with MIMLIC Management.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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 MIMLIC Sales Corporation
(MIMLIC Sales), 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 1.00 percent fees are comprised of a .75 percent distribution fee
and a .25 percent service fee. MIMLIC Sales is currently waiving that portion of
Class A distribution fees which exceeds, as a percentage of average daily net
assets, .10 percent. MIMLIC Sales waived Class A distribution fees in the amount
of $15,825 for the period from October 1, 1995 to March 31, 1996.
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 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. Prior to February 1, 1996, the administrative service fee was
$3,100 per month. Effective February 1, 1996, the administrative services 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 from October 1,
1995 to March 31, 1996, Advantus Capital voluntarily agreed to absorb $49,091 in
expenses that were otherwise payable by the Fund.
Sales charges received by MIMLIC Sales for distributing the Fund's three
classes of shares amounted to $66,813.
As of March 31, 1996, Minnesota Mutual Life 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..................................................................... 372,151 23.5%
Class B..................................................................... 5,636 2.5%
Class C..................................................................... 1,096 3.9%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $1,281.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period from October 1, 1995 to March 31, 1996
and the year ended September 30, 1995 for Class A and Class B shares and the
period from October 1, 1995 to March 31, 1996 and the period from March 1, 1995
to September 30, 1995 for Class C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
--------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold....................................... 159,103 181,987 123,000 105,047 20,175 11,740
Issued for reinvested distributions........ 25,859 55,696 3,594 2,629 508 189
Redeemed................................... (99,032) (203,125) (8,833) (1,427) (3,201) (974)
--------- ---------- --------- --------- --------- ---------
85,930 34,558 117,761 106,249 17,482 10,955
--------- ---------- --------- --------- --------- ---------
--------- ---------- --------- --------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At March 31, 1996, investments in securities includes issues which generally
cannot be offered for sale to the public without first being registered under
the Securities Act of 1933 (restricted security). In the event the securities
are registered, those carrying registration rights allow for the issuer to bear
all the related costs; for issues without rights, the Fund may incur such costs.
The Fund currently limits investments in securities that are not readily
marketable, including restricted securities, to 10% of net assets at the time of
the purchase. Securities are valued by procedures described in note 2. The
aggregate value of restricted securities held by the Fund at March 31, 1996 was
$654,114 which represents 3.5% of net assets.
16
<PAGE>
Notes to Financial Statements--continued
(7) Financial Highlights
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, NOVEMBER 1,
1995 TO YEAR ENDED 1993 TO YEAR ENDED OCTOBER 31,
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, -------------------------
1996 1995(A) 1994(G) 1993 1992 1991
----------- --------------- ---------------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.24 $ 9.50 $ 11.21 $ 10.72 $10.38 $ 9.79
----------- ------- ------- ------- ------ ------
Income from investment
operations:
Net investment income....... .31 .64 .53 .63 .73 .79
Net gains or losses on
securities (both realized
and unrealized)............ (.13) .74 (1.24) .78 .36 .59
Total from investment
operations............... .18 1.38 (.71) 1.41 1.09 1.38
----------- ------- ------- ------- ------ ------
Less distributions:
Dividends from net
investment income.......... (.31) (.64) (.53) (.63) (.73) (.79)
Distributions from capital
gains...................... -- -- (.47) (.29) (.02) --
----------- ------- ------- ------- ------ ------
Total distributions....... (.31) (.64) (1.00) (.92) (.75) (.79)
----------- ------- ------- ------- ------ ------
Net asset value, end of
period....................... $ 10.11 $ 10.24 $ 9.50 $ 11.21 $10.72 $10.38
----------- ------- ------- ------- ------ ------
----------- ------- ------- ------- ------ ------
Total return (b).............. 1.7%(c) 15.1% (6.7)%(d) 14.0% 10.8% 14.7%
Net assets, end of period (in
thousands)................... $15,997 $15,315 $13,879 $14,494 $9,415 $5,967
Ratio of expenses to average
daily net assets (f)......... 1.00%(e) 1.00% 1.00%(e) 1.00% 1.00% .97%
Ratio of net investment income
to average daily net assets
(f).......................... 6.02%(e) 6.58% 5.79%(e) 5.78% 6.88% 7.91%
Portfolio turnover rate
(excluding short-term
securities).................. 144.1% 270.7% 163.5% 139.5% 115.6% 92.7%
</TABLE>
- ----------
(a) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995, the
Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(b) 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.
(c) Total return is presented for the period from October 1, 1995 to March 31,
1996.
(d) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(e) Adjusted to an annual basis.
(f) The Fund's Adviser and Distributor voluntarily absorbed or waived $96,925,
$129,155, $107,448, $86,877, 78,626 and $66,537 in expenses for the period
ended March 31, 1996, the year ended September 30, 1995, the period ended
September 30, 1994 and the years ended October 31, 1993, 1992 and 1991,
respectively. If Class A shares has been charged for these expenses, the
ratio of expenses to average daily net assets would have been 1.76%, 1.88%,
1.83%, 1.70%, 2.10% and 2.35%, respectively, and the ratio of net investment
income to average daily net assets would have been 5.26%, 5.70%, 4.95%,
5.08%, 5.78% and 6.53%, respectively.
(g) During 1994, the Fund changed its fiscal year end from October 31 to
September 30.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------- -----------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, YEAR ENDED AUGUST 19, OCTOBER 1, MARCH 1,
1995 TO SEPTEMBER 1994(A) TO 1995 TO 1995(A) TO
MARCH 31, 30, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1996 1995(D) 1994 1996 1995
----------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.23 $ 9.50 $ 9.68 $ 10.23 $ 9.67
----------- ----------- ------ ----------- ------
Income from investment
operations:
Net investment income....... .26 .55 .06 .26 .33
Net gains or losses on
securities (both realized
and unrealized)............ (.13) .73 (.18) (.13) .55
Total from investment
operations............... .13 1.28 (.12) .13 .88
----------- ----------- ------ ----------- ------
Less distributions:
Dividends from net
investment income.......... (.26) (.55) (.06) (.26) (.32)
Distributions from capital
gains...................... -- -- -- -- --
----------- ----------- ------ ----------- ------
Total distributions....... (.26) (.55) (.06) (.26) (.32)
----------- ----------- ------ ----------- ------
Net asset value, end of
period....................... $ 10.10 $ 10.23 $ 9.50 $ 10.10 $ 10.23
----------- ----------- ------ ----------- ------
----------- ----------- ------ ----------- ------
Total return (b).............. 1.3%(c) 13.9% (1.2)%(e) 1.3%(c) 9.3%(f)
Net assets, end of period (in
thousands)................... $ 2,317 $ 1,142 $ 51 $ 287 $ 112
Ratio of expenses to average
daily net assets (f)......... 1.90%(g) 1.90% .22%(i) 1.90%(g) 1.90%(g)
Ratio of net investment income
to average daily net assets
(f).......................... 5.09%(g) 5.61% .69%(i) 5.08%(g) 5.54%(g)
Portfolio turnover rate
(excluding short-term
securities).................. 144.1% 270.7% 163.5% 144.1% 270.7%
</TABLE>
- ----------
(a) Commencement of operations.
(b) 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.
(c) Total return is presented for the period from October 1, 1995 to March 31,
1996.
(d) Effective March 1, 1995, the Fund entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to March 1, 1995, the
Fund had an investment advisory agreement with MIMLIC Asset Management
Company.
(e) Total return is presented for the period from August 19, 1994, commencement
of operations, to September 30, 1994.
(f) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(g) Adjusted to an annual basis.
(h) The Fund's Adviser and Distributor voluntarily absorbed or waived $96,925,
$129,155, $107,448 for the period ended March 31, 1996, the year ended
September 30, 1995, the period ended September 30, 1994. If Class B shares
had been charged for these expenses, the ratio of expenses to average daily
net assets would have been 2.45%, 2.56% and .35%, respectively, and the
ratio of net investment income to average daily net assets would have been
4.54%, 4.95% and .56%, respectively. If Class C shares had been charged for
these expenses, the ratio of expenses of average daily net assets would have
been 2.45% and 2.56%, respectively, and the ratio of net investment income
to average daily net assets would have been 4.53% and 4.88%, respectively,
for the period ended March 31, 1996 and the year ended September 30, 1995.
18
<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 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 saving account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPs, profit
sharing, money purchase or defined benefit plans.
19
<PAGE>
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. To set this up,
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.
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 MIMLIC Sales Corporation, call 1-800-443-3677. Our
voice response system is available from 7 a.m. to 3 a.m. 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 eight Advantus Funds through your local
registered representative of 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 eight mutual funds containing $301
million in assets in addition to $1.2 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
20
<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]
MIMLIC SALES CORPORATION
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-443-3677
<PAGE>
MIMLIC SALES CORPORATION BULK RATE
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
FORWARDING AND RETURN POSTAGE GUARANTEED,
ADDRESS CORRECTION REQUESTED
F. 48644 5/96
