<PAGE>
[LOGO]
SEMI-ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS BOND FUND
MARCH 31, 1997
[GRAPHIC]
<PAGE>
ADVANTUS BOND FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 10
STATEMENT OF OPERATIONS 11
STATEMENTS OF CHANGES IN NET ASSETS 12
NOTES TO FINANCIAL STATEMENTS 13
SHAREHOLDER SERVICES 18
<PAGE>
April 30, 1997 [PHOTO]
Dear Shareholders:
The last six months have provided investors with some high points and some low.
At year end 1996, the stock market exceeded nearly all expectations. Driven by
ideal fundamentals, combined with unprecedented levels of money flowing into the
market, S&P 500 operating earnings grew by nine percent, while the total return
for the S&P 500 Index was over 20 percent. This trend continued into the first
quarter 1997.
Investors started reacting to possible Federal Reserve action to curb the
economy in the second half of February. Even before short-term money rates were
raised by 1/4 percent at the end of March, the stock market started to drop.
After reaching a high on February 19, the S&P 500 declined by 7.3 percent
resulting in a 2.7 percent increase for the quarter. The largest companies in
the S&P 500 outperformed all other companies and were the driving force behind
the Index.
The investment grade bond market posted low single digit returns at the end of
1997. The Fed's increase in money rates had a negative impact on bond prices. At
the end of the first quarter 1997, the interest rate on the two year Treasury
note increased 54 basis points to yield 6.41 percent. The 30-year U.S. Treasury
Bond closed the period yielding 7.10 percent, 46 basis points higher for the
quarter.
The long-term outlook continues to be favorable. We expect economic growth to
slow to around 2.5 percent from 3.2 percent last year as the result of the
tighter money policy. In this environment, the current level of interest rates
should reward bond investors with historically higher real rates of return which
may eventually translate into bond price appreciation. For 1997, we still
believe investors may see high single digit bond returns. The growth in equity
values should slow as corporate profits decline during the year, to
approximately half the rate of 1996.
Moderate economic growth, low inflation, rising corporate profits, a declining
Federal deficit and strong corporate cash flow provide the catalyst for what we
believe will be a positive financial environment for the balance of the year.
Determining which investments will perform well in both the near and long-term
requires professional experience. Advantus Capital Management, Inc. offers a
family of ten funds designed to help you reach your financial goals with a
thoughtful, well-conceived investment strategy.
Sincerely,
/s/ Paul Gooding
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 six months ended March 31, 1997,
for each class of shares offered was as follows:
<TABLE>
<S> <C>
Class A.......................... 2.6 percent*
Class B.......................... 2.2 percent*
Class C.......................... 2.1 percent*
</TABLE>
The Lehman Brother's Corporate Bond Index** returned 2.4 percent over the same
period. The Fund's peer group (Lipper A-rated Bond Funds+), generated a 2.2
percent return. The past six months has proved to be another volatile period for
fixed income investors as interest rates fluctuated in a 100 basis point range.
Interest rates, range bound for most of the period, began to test the higher end
as the Federal Reserve raised a key short-term interest rate late in March. When
the semi-annual period ended, the interest rate on the two year U.S. Treasury
Note increased 32 basis points to yield 6.41 percent. The thirty-year U.S.
Treasury Bond closed the period yielding 7.10 percent, 18 basis points higher.
PORTFOLIO RECAP
The two main themes for the period were active interest rate management and
upgrading the credit quality of the Fund's holdings. As interest rates declined
into mid-February, the Fund's maturity was shortened as a defensive measure.
This was accomplished by selling ten and thirty year corporate bonds and buying
short U.S. Treasury securities and money market instruments. This move benefited
the Fund as interest rates began to move higher and bond prices declined. As
yields on long U.S. Treasury Bonds approached and eventually moved through seven
percent, 30-year U.S. Treasury Bonds were added to the portfolio at lower
prices.
The credit quality of the Fund was improved to AA3 by increasing the exposure to
U.S. Government bonds and reducing holdings in BBB rated corporate bonds. At
March 31, 65 percent of the Fund's assets were invested in investment grade
corporate bonds, 18 percent in mortgaged-backed securities, 9 percent in U.S.
Government bonds, and 8 percent in money market instruments.
2
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1997
OUTLOOK
In many respects, this year's bond market will be very similar to last year's.
Quarterly economic growth will likely fluctuate between one percent and four
percent. Long-term inflation will be contained by the forces of cheap global
labor, technology and productivity enhancements; but the bond market is likely
to still worry about too much economic growth, the Federal Reserve's next move,
the monthly inflation indicators and the employment data. Investor concern could
then translate into continued interest rate volatility and thus, the opportunity
to benefit from investor over-reaction.
The interest rate ranges established in 1996 seem realistic for 1997. During
1996, the 30-year U.S. Treasury Bond traded in a range of 5.95 to 7.19 percent,
while the 10-year U.S. Treasury Note yielded between 5.52 and 7.02 percent. In a
range bound market with tight credit spreads, active duration management will be
an even more important component of success for the remainder of the year. We
will take advantage of opportunities to buy undervalued securities and extend
duration during periods of market weakness and reduce the Fund's exposure to
interest rate risk during periods of market strength.
*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 Lehman Brother's Corporate Bond Index includes all publicly issued, fixed
rate, nonconvertible investment grade dollar-denominated, SEC registered
corporate debt.
+ Average return of 113 A-rated bond funds according to Lipper Analytical
Services, Inc.
3
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1997
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 following charts 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, 1997.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS A LEHMAN BROTHER'S INDEX CPI
<S> <C> <C> <C>
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
9/30/96 19,183 23,308 13,824
3/31/97 19,682 23,877 14,008
Average annual total
return:
One year -0.3%
Five year 5.9%
Since inception (8/14/87) 7.3%
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS B LEHMAN BROTHER'S INDEX CPI
<S> <C> <C> <C>
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
9/30/96 11,252 12,033 10,598
3/31/97 11,862 12,327 10,739
Average annual total
return:
One year -0.9%
Since inception (8/19/94) 5.5%
</TABLE>
4
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1997
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CLASS C LEHMAN BROTHER'S INDEX CPI
<S> <C> <C> <C>
3/1/95 $10,000 $10,000 $10,000
9/30/95 10,925 11,087 10,146
9/30/96 11,265 11,613 10,450
3/31/97 11,506 11,897 10,589
Average annual total
return:
One year 4.0%
Since inception (3/1/95) 7.0%
</TABLE>
The preceding charts are useful because they provide you with more information
about your investments. There are limitations, however. An index may reflect the
performance of securities that the Fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your Fund does. Performance presented for the Fund reflects the deduction of the
maximum 5 percent front-end sales charge for Class A and the maximum applicable
contingent deferred sales charge for Class B shares. Sales charges pay for your
financial adviser's investment advice. Individuals cannot buy even an unmanaged
index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS BOND FUND
MARCH 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 10.2%
U.S. Government Agencies 11.6%
AAA Rated 12.9%
AA Rated 6.1%
A Rated 28.8%
BBB Rated 20.3%
Cash and Other
Assets/Liabilities 10.1%
</TABLE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------ ----------- -----------
<S> <C> <C>
Quebec Province of Canada
Debentures-- 7.500%,
07/15/23..................... $ 947,890 4.9%
U.S. Treasury Bond--5.250%,
12/31/97..................... 895,218 4.6%
U.S. Treasury Bond--6.500%,
11/15/26..................... 874,000 4.5%
Joy Technologies
Incorporated--10.250%,
09/01/03..................... 816,467 4.2%
Lehman Brothers
Incorporated--7.360%,
12/15/03..................... 796,956 4.1%
General Electric Capital
Corporation--6.660%,
05/01/18..................... 745,640 3.8%
Wisconsin Electric Power First
Mortgage Bond-- 5.125%,
09/15/98..................... 735,436 3.8%
Morgan Stanley Group--6.875%,
03/01/07..................... 716,182 3.7%
Enersis S.A.--6.900%,
12/01/06..................... 712,455 3.7%
Xerox Capital--8.000%,
02/01/27..................... 674,570 3.5%
----------- ---
$ 7,914,814 40.8%
----------- ---
----------- ---
</TABLE>
6
<PAGE>
ADVANTUS BOND FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1997
(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 (89.9%)
GOVERNMENT OBLIGATIONS (31.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (21.8%)
$ 272,000 Federal Home Loan Mortgage Corporation........... 5.000% 04/15/23 $ 254,090
390,792 Federal National Mortgage Association............ 7.000% 09/01/17 380,267
493,634 Federal National Mortgage Association............ 6.500% 03/01/26 459,168
500,000 Federal National Mortgage Association............ 7.030% 04/05/04 488,452
221,987 Government National Mortgage Association......... 7.000% 03/15/23 213,265
271,371 Government National Mortgage Association......... 7.000% 04/15/22 260,939
433,482 Government National Mortgage Association......... 8.000% 04/15/25 436,407
950,000 U.S. Treasury Bond............................... 6.500% 11/15/26 874,000
450,000 U.S. Treasury Bond............................... 6.500% 08/15/05 437,344
900,000 U.S. Treasury Bond............................... 5.250% 12/31/97 895,218
------------
4,699,150
------------
OTHER GOVERNMENT OBLIGATIONS (4.4%)
1,000,000 Quebec Province of Canada (b).................... 7.500% 07/15/23 947,890
------------
LOCAL AND STATE GOVERNMENT OBLIGATIONS (5.4%)
500,000 California Housing Finance Agency................ 8.160% 02/01/28 503,906
400,000 California Housing Finance Agency (c)............ 7.760% 08/01/25 395,000
282,000 Wyoming Community Development Authority.......... 6.850% 06/01/10 276,448
------------
1,175,354
------------
Total government obligations (cost: $6,912,208)........................ 6,822,394
------------
CORPORATE OBLIGATIONS (58.3%)
CAPITAL GOODS (9.2%)
Electronics (3.1%)
700,000 Xerox Capital I 144A Issue (d)................... 8.000% 02/01/27 674,570
------------
Machinery (3.8%)
750,000 Joy Technologies Incorporated.................... 10.250% 09/01/03 816,467
------------
Telecommunications (2.3%)
500,000 Total Access Communications 144A Issue (b) (d)... 8.370% 11/04/06 487,305
------------
CONSUMER CYCLICAL (2.0%)
Textiles (2.0%)
400,000 Reliance Industries Limited 144A Issue (b) (d)... 10.375% 06/24/16 427,949
------------
CONSUMER STAPLES (9.1%)
Drugs (2.2%)
500,503 Ciba-Geigy Corporation Secured Note 144A Issue
(d)............................................. 7.240% 01/02/16 478,420
------------
Household Products (3.1%)
600,000 Premark International Incorporated............... 10.500% 09/15/00 660,902
------------
</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
Media (3.8%)
$ 350,000 News America Holdings............................ 9.250% 02/01/13 $ 383,939
450,000 News America Holdings............................ 8.150% 10/17/36 431,347
------------
815,286
------------
CREDIT SENSITIVE (2.0%)
Building Materials (2.0%)
450,000 Masco Corporation................................ 6.125% 09/15/03 421,432
------------
ENERGY (5.1%)
Oilfield Services (5.1%)
500,000 Baroid Corporation............................... 8.000% 04/15/03 518,433
600,000 Petroleum Geo-Services (b)....................... 7.500% 03/31/07 589,691
------------
1,108,124
------------
FINANCIAL (21.1%)
Auto Finance (2.1%)
500,000 Ford Motor Credit Company........................ 6.250% 12/08/05 460,821
------------
Banks/Savings and Loan (4.2%)
600,000 Midland Bank PLC (b)............................. 7.625% 06/15/06 603,666
300,000 Norwest Corporation.............................. 7.680% 05/10/02 301,650
------------
905,316
------------
Collateralized Mortgage Obligations/Asset Backed (2.1%)
300,000 CSFCL 1995-A, Class A 144A Issue (d)............. 7.542% 11/15/05 291,000
159,050 Green Tree Financial, Net Interest Margin, Series
1995-A.......................................... 7.250% 07/15/05 159,004
------------
450,004
------------
Commercial Finance (3.5%)
750,000 General Electric Capital Corporation............. 6.660% 05/01/18 745,640
------------
Real Estate (2.2%)
500,000 Security Capital Pacific Trust................... 7.500% 02/15/14 482,614
------------
Security Brokers (7.0%)
800,000 Lehman Brothers Incorporated..................... 7.360% 12/15/03 796,956
750,000 Morgan Stanley Group............................. 6.875% 03/01/07 716,182
------------
1,513,138
------------
UTILITIES (9.8%)
Electric (6.7%)
750,000 Enersis S.A. (b)................................. 6.900% 12/01/06 712,455
750,000 Wisconsin Electric Power First Mortgage Bond..... 5.125% 09/15/98 735,436
------------
1,447,891
------------
</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>
UTILITIES--CONTINUED
Telephones (3.1%)
$ 700,000 Bellsouth Telecommunications Incorporated........ 6.250% 05/15/03 $ 670,454
------------
Total corporate obligations (cost: $12,827,251)........................ 12,566,333
------------
Total long-term debt securities (cost: $19,739,459).................... 19,388,727
------------
<CAPTION>
SHARES
- ---------
<C> <S> <C> <C> <C>
PREFERRED STOCKS (2.2%)
FINANCIAL (2.2%)
Real Estate Investment Trust (2.2%)
10,000 Security Capital Industrial, Series C--8.54%........................... 477,100
------------
Total preferred stock (cost: $500,000)................................. 477,100
------------
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (7.5%)
$ 560,000 U.S. Treasury Bill............................... 5.17% 05/22/97 555,818
55,000 U.S. Treasury Bill............................... 5.10% 04/24/97 54,835
500,000 Bellsouth Telephone CP........................... 5.37% 04/21/97 498,381
100,000 Carolina Power and Light CP...................... 5.39% 04/09/97 99,859
400,000 Pepsico, Incorporated CP......................... 5.36% 04/03/97 399,810
------------
Total short-term securities (cost: $1,608,892)......................... 1,608,703
------------
Total investments in securities (cost: $21,848,351) (e)................ $ 21,474,530
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Fund held 15.3% of net assets in foreign securities as of March 31,
1997.
(c) At March 31, 1997 the total cost of investments issued on a when-issued or
forward commitment basis is $400,000.
(d) Represents ownership in a restricted 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
restricted securities held at March 31, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
-------------------------------------------------- ------------ -----------
<S> <C> <C> <C>
Xerox Capital I 144A Issue........................ 01/30/97 $ 693,707
Total Access Communications 144A Issue............ Various 498,897
Reliance Industries Limited 144A Issue............ 06/17/96 399,175
Ciba-Geigy Corporation Secured Note 144A Issue.... 12/24/96 500,503
CSFCL 1995-A, ClassA 144A Issue................... 05/15/96 292,369
-----------
$ 2,384,651
-----------
-----------
</TABLE>
(e) At March 31, 1997 the cost of securities for federal income tax purposes was
$21,882,097. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 69,565
Gross unrealized depreciation..................... (477,132)
----------
Net unrealized depreciation....................... $ (407,567)
----------
----------
</TABLE>
9
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying
schedule for detailed listing (identified cost:
$21,848,351)............................................... $ 21,474,530
Receivable for Fund shares sold............................. 241,315
Receivable for investment securities sold................... 2,359
Accrued interest receivable................................. 322,970
------------
Total assets............................................ 22,041,174
------------
LIABILITIES
Bank overdraft.............................................. 7,835
Payable for Fund shares redeemed............................ 37,740
Payable for investment securities purchased................. 400,000
Payable to Adviser.......................................... 22,180
------------
Total liabilities....................................... 467,755
------------
Net assets applicable to outstanding capital stock.......... $ 21,573,419
------------
------------
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)....................................... $ 21,614
Additional paid-in capital................................ 22,263,260
Undistributed net investment income....................... 11,104
Accumulated net realized losses from investments.......... (348,738)
Unrealized depreciation on investments.................... (373,821)
------------
Total--representing net assets applicable to outstanding
capital stock.......................................... $ 21,573,419
------------
------------
Net assets applicable to outstanding Class A Shares......... $ 16,094,302
------------
------------
Net assets applicable to outstanding Class B Shares......... $ 4,674,067
------------
------------
Net assets applicable to outstanding Class C Shares......... $ 805,050
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 1,612,325..................... $ 9.98
------------
------------
Class B--Shares outstanding 468,370....................... $ 9.98
------------
------------
Class C--Shares outstanding 80,718........................ $ 9.97
------------
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
ADVANTUS BOND FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1996 TO MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest.................................................. $ 759,277
----------
Expenses (note 4):
Investment advisory fee................................... 74,422
Distribution fees--Class A................................ 24,856
Distribution fees--Class B................................ 19,551
Distribution fees--Class C................................ 3,915
Administrative services fee............................... 21,600
Custodian fees............................................ 4,489
Auditing and accounting services.......................... 5,334
Legal fees................................................ 1,735
Directors' fees........................................... 198
Registration fees......................................... 17,376
Printing and shareholder reports.......................... 18,943
Insurance................................................. 2,924
Other..................................................... 3,976
----------
Total expenses........................................ 199,319
Less fees and expenses waived or absorbed:
Class A distribution fees............................... (16,570)
Other fund expenses..................................... (55,312)
----------
Total fees and expenses waived or absorbed............ (71,882)
----------
Total net expenses.................................... 127,437
----------
Investment income--net................................ 631,840
----------
Realized and unrealized gains (losses) on investments:
Net realized gains on investments (note 3)................ 69,689
Net change in unrealized appreciation or depreciation on
investments.............................................. (187,546)
----------
Net losses on investments............................. (117,857)
----------
Net increase in net assets resulting from operations........ $ 513,983
----------
----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
ADVANTUS BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1996 TO MARCH 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Investment income--net.......................... $ 631,840 $ 1,109,617
Net realized gains (losses) on investments...... 69,689 (23,772)
Net change in unrealized appreciation or
depreciation on investments.................... (187,546) (375,184)
------------ ------------
Increase in net assets resulting from
operations................................. 513,983 710,661
------------ ------------
Distributions to shareholders from investment
income--net:
Class A....................................... (510,021) (965,303)
Class B....................................... (102,882) (120,874)
Class C....................................... (20,614) (17,365)
------------ ------------
Total distributions......................... (633,517) (1,103,542)
------------ ------------
Capital share transactions (notes 4 and 5):
Proceeds from sales:
Class A....................................... 1,148,709 3,513,269
Class B....................................... 1,626,528 2,681,828
Class C....................................... 286,227 678,300
Proceeds from issuance of shares as a result of
reinvested dividends:
Class A....................................... 325,555 569,404
Class B....................................... 90,515 108,590
Class C....................................... 17,684 16,513
Payments for redemption of shares:
Class A....................................... (1,828,930) (2,541,805)
Class B....................................... (540,647) (342,179)
Class C....................................... (156,719) (136,300)
------------ ------------
Increase in net assets from capital share
transactions............................... 968,922 4,547,620
------------ ------------
Total increase in net assets................ 849,388 4,154,739
Net assets at beginning of period................. 20,724,031 16,569,292
------------ ------------
Net assets at end of period (including
undistributed net investment income of $11,104
and $12,781, respectively)....................... $ 21,573,419 $ 20,724,031
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(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 increases and decreases in net assets
resulting from operations during the period. Actual results could differ from
those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a national exchange are valued at the
last sales price on that exchange prior to the time when assets are valued;
securities traded in the over-the-counter market and listed securities for which
no sale was reported on that date are valued on the basis of the last current
bid price. When market quotations are not readily available, securities are
valued at fair value as determined in good faith by the Board of Directors. Such
fair values are determined using pricing services or prices quoted by
independent brokers. Short-term securities are valued at market.
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.
13
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
For federal income tax purposes, the Fund had a capital loss carryover at
March 31, 1997 of $309,700, which, if not offset by subsequent capital gains,
will expire from September 30, 2003 to September 30, 2005. 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 ended March 31, 1997, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $20,170,212 and $19,251,416, 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.
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 $16,570 for the period ended March 31, 1997.
14
<PAGE>
ADVANTUS BOND 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
reporting fees, legal, auditing and accounting services fees and other
miscellaneous expenses.
The Fund pays an administrative services fee, equal to $3,600 per month, to
Minnesota Mutual for accounting, auditing, legal and other administrative
services which Minnesota Mutual provides.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital. During the period ended March 31,
1997, Advantus Capital voluntarily agreed to absorb $55,312 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 $55,967.
As of March 31, 1997, Minnesota Mutual and subsidiaries and the directors
and officers of the Fund as a whole own the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A..................................................................... 379,673 23.6%
Class C..................................................................... 1,155 1.4%
</TABLE>
Legal fees were paid to a law firm of which the Fund's secretary is a
partner in the amount of $1,735.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period from October 1, 1996 to March 31, 1997
and the year ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold............................................. 112,572 345,079 160,290 263,964 28,132 67,269
Issued for reinvested distributions.............. 31,957 56,247 8,895 10,745 1,740 1,636
Redeemed......................................... (180,196) (249,660) (53,128) (33,988) (15,474) (13,540)
---------- ---------- --------- --------- --------- ---------
(35,667) 151,666 116,057 240,721 14,398 55,365
---------- ---------- --------- --------- --------- ---------
---------- ---------- --------- --------- --------- ---------
</TABLE>
(6) RESTRICTED SECURITIES
At March 31, 1997, 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 percent 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, 1997
was $2,359,244 which represents 10.9 percent of net assets.
15
<PAGE>
ADVANTUS BOND FUND
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, YEAR ENDED SEPTEMBER NOVEMBER 1, YEAR ENDED OCTOBER
1996 TO 30, 1993 TO 30,
MARCH 31, ---------------------- SEPTEMBER 30, --------------------
1997 1996 1995(A) 1994(B) 1993 1992
--------------- --------- ----------- ------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.03 $ 10.24 $ 9.50 $ 11.21 $ 10.72 $ 10.38
------- --------- ----------- ------- --------- ---------
Income from investment
operations:
Net investment income....... .31 .62 .64 .53 .63 .73
Net gains or losses on
securities (both realized
and unrealized)............ (.05) (.22) .74 (1.24) .78 .36
------- --------- ----------- ------- --------- ---------
Total from investment
operations............... .26 .40 1.38 (.71) 1.41 1.09
------- --------- ----------- ------- --------- ---------
Less distributions:
Dividends from net
investment income.......... (.31) (.61) (.64) (.53) (.63) (.73)
Distributions from capital
gains...................... -- -- -- (.47) (.29) (.02)
------- --------- ----------- ------- --------- ---------
Total distributions....... (.31) (.61) (.64) (1.00) (.92) (.75)
------- --------- ----------- ------- --------- ---------
Net asset value, end of
period....................... $ 9.98 $ 10.03 $ 10.24 $ 9.50 $ 11.21 $ 10.72
------- --------- ----------- ------- --------- ---------
------- --------- ----------- ------- --------- ---------
Total return (d).............. 2.6%(h) 4.0% 15.1% (6.7)%(e) 14.0% 10.8%
Net assets, end of period (in
thousands)................... $ 16,094 $ 16,528 $ 15,315 $ 13,879 $ 14,494 $ 9,415
Ratio of expenses to average
daily net assets (i)......... 1.00%(j) 1.00% 1.00% 1.00%(j) 1.00% 1.00%
Ratio of net investment income
to average daily net assets
(i).......................... 6.15%(j) 6.08% 6.58% 5.79%(j) 5.78% 6.88%
Portfolio turnover rate
(excluding short-term
securities).................. 99.8% 222.6% 270.7% 163.5% 139.5% 115.6%
</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) During 1994, the Fund changed its fiscal year end from October 31 to
September 30.
(c) Commencement of operations.
(d) 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.
(e) Total return is presented for the period from November 1, 1993 to September
30, 1994.
(f) Total return is presented for the period from August 19, 1994, commencement
of operations, to September 30, 1994.
16
<PAGE>
ADVANTUS BOND FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, YEAR ENDED SEPTEMBER AUGUST 19,
1996 TO 30, 1994(C) TO
MARCH 31, ---------------------- SEPTEMBER 30,
1997 1996 1995(A) 1994
----------------- --------- ----------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.02 $ 10.23 $ 9.50 $ 9.68
------ --------- ----------- ------
Income from investment
operations:
Net investment income....... .27 .53 .55 .06
Net gains or losses on
securities (both realized
and unrealized)............ (.04) (.21) .73 (.18)
------ --------- ----------- ------
Total from investment
operations............... .23 .32 1.28 (.12)
------ --------- ----------- ------
Less distributions:
Dividends from net
investment income.......... (.27) (.53) (.55) (.06)
Distributions from capital
gains...................... -- -- -- --
------ --------- ----------- ------
Total distributions....... (.27) (.53) (.55) (.06)
------ --------- ----------- ------
Net asset value, end of
period....................... $ 9.98 $ 10.02 $ 10.23 $ 9.50
------ --------- ----------- ------
------ --------- ----------- ------
Total return (d).............. 2.2%(h) 3.1% 13.9% (1.2)%(f)
Net assets, end of period (in
thousands)................... $ 4,674 $ 3,532 $ 1,142 $ 51
Ratio of expenses to average
daily net assets (i)......... 1.90%(j) 1.90% 1.90% .22%(k)
Ratio of net investment income
to average daily net assets
(i).......................... 5.25%(j) 5.19% 5.61% .69%(k)
Portfolio turnover rate
(excluding short-term
securities).................. 99.8% 222.6% 270.7% 163.5%
<CAPTION>
CLASS C
------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, MARCH 1,
1996 TO YEAR ENDED 1995(C) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
----------- ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $10.02 $ 10.23 $ 9.67
----------- ------ ------
Income from investment
operations:
Net investment income....... .27 .52 .33
Net gains or losses on
securities (both realized
and unrealized)............ (.05) (.21) .55
----------- ------ ------
Total from investment
operations............... .22 .31 .88
----------- ------ ------
Less distributions:
Dividends from net
investment income.......... (.27) (.52) (.32)
Distributions from capital
gains...................... -- -- --
----------- ------ ------
Total distributions....... (.27) (.52) (.32)
----------- ------ ------
Net asset value, end of
period....................... $ 9.97 $ 10.02 $ 10.23
----------- ------ ------
----------- ------ ------
Total return (d).............. 2.1%(h) 3.1% 9.3%(g)
Net assets, end of period (in
thousands)................... $ 805 $ 665 $ 112
Ratio of expenses to average
daily net assets (i)......... 1.90%(j) 1.90% 1.90%(j)
Ratio of net investment income
to average daily net assets
(i).......................... 5.25%(j) 5.20% 5.54%(j)
Portfolio turnover rate
(excluding short-term
securities).................. 99.8% 222.6% 270.7%
</TABLE>
- ----------
(g) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(h) Total return is presented for the period from October 1, 1996 to March 31,
1997.
(i) The Fund's Adviser and Distributor voluntarily absorbed or waived $71,882,
$120,750, $129,155, $107,448, $86,877 and $78,626 in expenses for the period
ended March 31, 1997, the years ended September 30, 1996 and 1995, the
period ended September 30, 1994 and the years ended October 31, 1993, and
1992, respectively. If Class A shares had been charged for these expenses,
the ratio of expenses to average daily net assets would have been 1.72%,
1.68%, 1.88%, 1.83%, 1.70% and 2.10%, respectively, and the ratio of net
investment income to average daily net assets would have been 5.43%, 5.40%,
5.70%, 4.95%, 5.08% and 5.78%, respectively. If Class B shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 2.42%, 2.38%, 2.56% and .35%, respectively, and the
ratio of net investment income to average daily net assets would have been
4.73%, 4.71%, 4.95% and .56%, respectively, for the period ended March 31,
1997, the years ended September 30, 1996 and 1995 and the period ended
September 30, 1994. If Class C shares had been charged for these expenses,
the ratio of expenses to average daily net assets would have been 2.42%,
2.38% and 2.56%, respectively, and the ratio of net investment income to
average daily net assets would have been 4.73%, 4.72% and 4.88%,
respectively, for the period ended March 31, 1997, the year ended September
30, 1996 and the period ended September 30, 1995.
(j) Adjusted to an annual basis.
(k) Ratios presented for the period from August 19, 1994 to September 30, 1994
are not annualized as they are not indicative of anticipated results.
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 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' non-money market funds.
SPECIAL PURCHASE PLANS: Our special purchase plans enable you to open an
Advantus Fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets). One of these plans--The
Automatic Investment Plan--allows you to invest automatically each month from
your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPS, SIMPLE,
profit sharing, money purchase or defined benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account. Amounts
over $1,000 may be wire transferred to your personal bank account. The
prevailing wire charge will be added to the withdrawal amount. Sign up for
18
<PAGE>
telephone redemption on the Advantus Application or complete a Service Request
Form. To have the redemption automatically deposited into your checking account,
please send a voided check from your bank. Depending on the performance of the
underlying investment options, the value may be worth more or less than the
original amount invested upon redemption. Some limitations apply, please refer
to the prospectus for details.
ACCOUNT UPDATES: You'll receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
reports to help you track all of your investments in the Advantus Family of
Funds, and annual tax statements. Semiannual and annual reports will provide you
with portfolio information, fund performance data and the current investment
outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining information and
assistance directly from Advantus Shareholder Services, call 1-800-665-6005. Our
voice response system is available from 7 a.m. to 3 a.m. Central Time Monday
through Friday, and 8 a.m. to 5 p.m. Central Time on Saturday. This system
allows you to access current net asset values and your account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through your local
registered representative of 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 eleven mutual funds containing
$2.3 billion in assets in addition to $1.4 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 11 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
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]
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 5-97
