<PAGE>
[LOGO]
ANNUAL REPORT TO SHAREHOLDERS
ADVANTUS INTERNATIONAL BALANCED FUND
SEPTEMBER 30, 1996
[GRAPHIC]
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND
LIABILITIES 17
STATEMENT OF OPERATIONS 18
STATEMENT OF CHANGES IN
NET ASSETS 19
NOTES TO FINANCIAL
STATEMENTS 20
INDEPENDENT AUDITORS'
REPORT 28
FEDERAL INCOME TAX
INFORMATION 29
SHAREHOLDER SERVICES 31
<PAGE>
October 31, 1996 [PHOTO]
Dear Shareholders:
The nation's economic expansion, noted for its longevity, breadth and strength,
pressed forward in the third quarter of 1996. The Federal Reserve's decision not
to raise interest rates, coupled with the long awaited upswing of several key
foreign economies, offers new signs that the expansion, currently in its 23rd
quarter, will extend well into next year.
The financial markets shrugged off concerns about an overheated economy to post
record highs for both the Dow Jones Industrial Average and the NASDAQ. The
current optimism is based partly on a relatively unique phenomenon of this
expansion; industrial production, a harbinger of future economic activity, is
actually rebuilding depleted inventories. Normally associated with the early
stages of an economic recovery, this activity is unusual for a mature expansion
and indicates continued economic strength.
Gross Domestic Product (GDP), clipping along at 2.5 - 3.0 percent annually, is
hovering above the Fed's comfort level. However, consumer confidence is very
high and plays a definite role in our forecast. After experiencing the lowest
unemployment rates in nearly seven years, consumers today are employed,
confident and spending money which bodes well for continued growth. This higher
level of consumer spending is capable of sustaining a strong GDP without risk of
exhausting the recovery.
Inflation, a primary concern of a heated up economy, is playing only a minor
role in the current recovery. The abundance of material resources supplied from
the former communist countries in Eastern Europe and the Soviet Union has
mitigated the resource demands of the U.S. economy's strength. In addition, the
increase of the world's labor force, in China and elsewhere, provides lower cost
production options for many manufacturers, eliminating the need to raise prices.
Consequently, we can envision a scenario in which inflation and interest rates
actually edge lower in the coming months.
The Advantus Funds took full advantage of the extended expansion and recorded
impressive gains across broad industrial segments this year. While mandated wage
accelerations will affect many service related industries in the months ahead,
we remain cautiously optimistic that most sectors will experience strong growth
well into 1997. Further buttressing this report is the fact that in the first
year of every Presidential term since 1948, the markets have returned positive
performance.
The Advantus family of mutual funds offers a wide array of investment objectives
to capture growth potential in many different market segments. Our experienced
and dedicated portfolio managers will make the most of each opportunity.
Sincerely,
[SIGNATURE]
Paul Gooding, President
Advantus Capital Management, Inc.
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
PERFORMANCE UPDATE
[PHOTO]
MARC JOSEPH AND
NEIL DEVLIN
TEMPLETON INVESTMENT COUNSEL, INC.
PORTFOLIO MANAGERS
The Advantus International Balanced Fund
is a mutual fund designed for investors
seeking a high level of total return. The
Fund hopes to achieve its objective by
investing in both stocks and debt
securities issued by companies, large and
small, outside the United States and in
debt securities of governments outside
the United States. While Advantus Capital
Management, Inc. acts as investment
adviser for the Fund, Templeton
Investment Counsel, Inc. provides
investment advice to the International
Balanced Fund under a subadvisory
agreement.
PERFORMANCE
For the year ended September 30, 1996, your Fund posted the following returns
for each of the classes of shares currently offered:
<TABLE>
<S> <C>
Class A 10.7 percent*
Class C 9.9 percent*
</TABLE>
By comparison, an international equity index (the MSCI EAFE Index)** posted a
gain of 8.9 percent and an international bond index (the J.P. Morgan Non-U.S.
Government Bond Index)+ returned 5.3 percent over the same period.
The Fund's strong relative performance resulted from its 70 percent stock
weighting, an underweighting in Japanese stocks, and good results from the
equity markets in Spain, Hong Kong, the Netherlands, and certain emerging
markets. The Spanish market returned over 25 percent and the Dutch market over
32 percent in local currencies. The Fund also benefited from fixed income
holdings in Australia, Canada and in peripheral European markets such as Italy,
Spain and Sweden. Bond returns were strong in these markets and more than offset
the depreciation of the respective currencies relative to the U.S. dollar.
PORTFOLIO RECAP
Major stock markets around the world generally performed well during fiscal
1996. In local currencies, most European exchanges were up over 15 percent.
However, because the U.S. dollar strengthened during the period, dollar-based
returns were significantly lower. European stock markets performed well because
investors became more convinced that the struggling European economies would
strengthen in 1997, boosting corporate earnings.
One of the markets where we have found significant bargains is Hong Kong.
Concern over Hong Kong's reversion to China next July has depressed some equity
valuations to levels we feel are unjustifiably low. Although the outcome in Hong
Kong is uncertain, knowledge of the situation is widespread and we believe that
the uncertainty has been more than reflected in stock prices. Considering the
large amount of investment capital that flows from Hong Kong to China, the
sharing of technical expertise between the two economies, and the magnitude of
Chinese investments in Hong Kong, China has a significant incentive to make the
transition go smoothly. The Hong Kong market was up 21 percent over the past
year, in both U.S. and Hong Kong dollars (the HK dollar is pegged to the U.S.
dollar).
2
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
SEPTEMBER 30, 1996
Some of the best performers in the global fixed income markets were the
peripheral markets in Europe, particularly Italy, Spain and Sweden. These
markets have made dramatic reforms to domestic fiscal policies in recent years
and their high yields have attracted foreign investors. Despite the rising
dollar, Italian bonds returned 17.96 percent through the end of August, 1996.
OUTLOOK
Based on current valuations, it is our expectation that international stock
markets will continue to perform as well as or better than the U.S. market.
Despite the inevitable volatility of returns, we remain optimistic about future
prospects for our current holdings. We anticipate that the Fund will continue to
hold 65-70 percent of its assets in stocks, with the remainder in bonds.
*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. Investment returns and principal values will fluctuate
so that shares upon redemption may be worth more or less than their original
cost.
**The MSCI EAFE Index is an unmanaged index of common stocks from European,
Asian and Far Eastern markets.
+The J.P. Morgan Non-U.S. Government Bond Index includes all liquid foreign
government issues of Australia, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, Netherlands, Spain, Sweden and United Kingdom.
3
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
SEPTEMBER 30, 1996
FIVE LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- -------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
Deutsche Bank................... 16,250 $ 764,416 2.8%
Volvo........................... 29,200 628,168 2.3%
Pioneer International........... 212,995 581,424 2.2%
Rhone-Poulenc................... 20,535 572,931 2.1%
Svenska Handelsbanken........... 22,500 553,666 2.0%
---------- ---
$3,100,605 11.4%
---------- ---
---------- ---
</TABLE>
FIVE LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- --------------------------------------------- ---------- -----------
<S> <C> <C>
Kingdom of Denmark, 9.0%, 11/15/00........... $1,462,208 12.3%
Australian Government, 12.0%, 11/15/01....... 1,011,475 8.5%
Canadian Government, 10.5%, 10/01/04......... 872,483 7.3%
United Kingdom Treasury, 10.0%, 09/08/03..... 757,882 6.3%
Canadian Government, 10.5%, 03/01/01......... 692,570 5.8%
---------- ---
$4,796,618 40.2%
---------- ---
---------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Goods and Services 15.2%
Credit Sensitive 30.8%
Intermediate Goods and
Services 14.5%
Technology 9.2%
Foreign Government Debt 25.9%
Cash and Other
Assets/Liabilities 4.4%
100.0%
</TABLE>
4
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
SEPTEMBER 30, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
ADVANTUS INTERNATIONAL BALANCED FUND, EAFE INDEX,
J.P. MORGAN NON-U.S. GOVERNMENT BOND INDEX AND
CONSUMER PRICE INDEX
On the following charts you can see how the total return for each of the two
classes of shares of the Advantus International Balanced Fund compared to the
EAFE Index, the J.P. Morgan Non-U.S. Government Bond Index and the Consumer
Price Index. The four 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 International Balanced Fund (September 16, 1994 for Class
A and March 1, 1995 for Class C) through September 30, 1996.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 5.2%
Since inception (9/16/94) 5.2%
Class A EAFE Index J.P. Morgan Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000
9/30/94 $10,054 $9,845 $10,094 $10,054
9/30/95 $10,014 $10,460 $11,972 $10,275
9/30/96 $11,089 $11,399 $12,605 $10,584
</TABLE>
5
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
SEPTEMBER 30, 1996
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 9.9%
Since inception (3/1/95) 12.9%
Class C EAFE Index J.P. Morgan Index CPI
3/01/95 $10,000 $10,000 $10,000 $10,000
9/30/95 $11,026 $11,175 $11,198 $10,146
9/30/96 $12,120 $12,179 $11,791 $10,450
</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 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.
6
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (64.3%)
AUSTRALIA (2.5%)
Banking (1.1%)
20,240 National Australia Bank........................................... $ 212,993
46,000 Westpac Banking................................................... 238,034
Building Materials and Components (1.4%)
212,995 Pioneer International............................................. 581,424
------------
1,032,451
------------
AUSTRIA (1.7%)
Electrical and Electronics (.8%)
2,500 VA Technologie (b) (f)............................................ 326,126
Utilities--Gas and Electric (.9%)
2,880 EVN Energie-Versorung............................................. 375,496
------------
701,622
------------
BELGIUM (1.6%)
Chemicals (1.6%)
590 Solvay............................................................ 355,240
4,300 Union Miniere NPV (b)............................................. 317,808
------------
673,048
------------
BRAZIL (1.1%)
Telecommunications (1.1%)
5,900 Telecomunicacoes Brasileiras ADR.................................. 463,150
------------
CANADA (1.6%)
Banking (1.0%)
12,000 Canadian Imperial Bank of Commerce................................ 435,151
Mining and Metals--Container (.6%)
32,000 Inmet Mining Corporation (b)...................................... 230,201
------------
665,352
------------
CHILE (.8%)
Telecommunications (.8%)
3,300 Compania de Telefonos de Chile ADR................................ 318,863
------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
CHINA (.2%)
Chemicals (.2%)
350,000 Yizheng Chemical Fibre Company, Ltd............................... $ 85,090
------------
CZECH REPUBLIC (2.4%)
Banking (.6%)
8,000 Komercni Banka 144A (f)........................................... 232,098
Energy Services (1.8%)
9,465 Ceske Energeticke (b)............................................. 368,452
3,200 SPT Telecom (b)................................................... 395,062
------------
995,612
------------
FINLAND (2.5%)
Banking (.6%)
118,000 Merita, Ltd (b)................................................... 257,569
Telecommunications (.7%)
6,800 Nokia............................................................. 303,559
Wholesale and International Trade (1.2%)
15,000 Amer Group........................................................ 338,256
23,500 Metsa-Serla....................................................... 154,350
------------
1,053,734
------------
FRANCE (6.7%)
Banking (1.2%)
9,500 Banque Nationale de Paris......................................... 360,029
3,487 Banque Nationale de Paris ADR 144A (f)............................ 132,149
Electrical and Electronics (.6%)
3,205 Alcatel Alsthom................................................... 270,434
Multi-Industry (.3%)
1,000 Marine Wendel..................................................... 83,894
1,242 Pechiney SA....................................................... 52,820
Energy Sources (1.2%)
6,470 Societe Nationale Elf Aquitaine................................... 506,318
Health and Personal Care (1.4%)
20,535 Rhone-Poulenc..................................................... 572,931
Insurance (1.0%)
6,965 Axa............................................................... 417,529
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
FRANCE--CONTINUED
Transportation (1.0%)
18,153 Regie Nationale Des Usines Renault................................ $ 432,964
------------
2,829,068
------------
GERMANY (2.4%)
Banking (1.8%)
16,250 Deutsche Bank..................................................... 764,416
Chemicals (.6%)
7,100 Bayer............................................................. 259,373
------------
1,023,789
------------
HONG KONG (4.8%)
Banking (1.1%)
24,250 HSBC Holdings..................................................... 450,002
Multi-Industry (1.5%)
61,000 Hutchison Whampoa................................................. 410,189
199,000 C. P. Pokphand Co., Ltd........................................... 63,048
25,000 Jardine Matheson.................................................. 156,250
Electrical and Electronics (.1%)
26,100 Consolidated Electric Power Asia, Ltd............................. 55,184
Transportation (2.1%)
45,000 Swire Pacific Class A............................................. 402,980
124,400 Swire Pacific Class B............................................. 176,151
102,628 Jardine Strategic Holdings........................................ 326,357
------------
2,040,161
------------
INDIA (.3%)
Financial Services (.3%)
90,600 India Fund (b).................................................... 138,103
------------
INDONESIA (.7%)
Financial Services (.5%)
200,000 J.F. Indonesia Fund (b)........................................... 225,009
Forest Products and Paper (.2%)
151,500 P.T. Barito Pacific Timber........................................ 92,995
------------
318,004
------------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
ITALY (.9%)
Telecommunications (.9%)
63,000 Sirti Spa......................................................... $ 382,872
------------
KOREA (.4%)
Financial Services (.4%)
4 Korea International Trust......................................... 170,000
------------
MEXICO (.4%)
Chemicals (.2%)
48,000 Vitro............................................................. 100,832
Telecommunications (.2%)
2,800 Telefonos de Mexico ADR........................................... 89,950
------------
190,782
------------
NETHERLANDS (3.3%)
Broadcasting, Advertising and Publishing (1.1%)
14,500 International Nederlanden Group................................... 452,556
Building Materials and Components (.5%)
6,850 European Vinyls................................................... 219,799
Insurance (.9%)
8,211 Aegon............................................................. 405,523
Merchandising (.8%)
4,320 Koninklijke Bijenkorf Beheer...................................... 333,289
------------
1,411,167
------------
NEW ZEALAND (2.0%)
Building Materials and Components (.1%)
27,000 Fletcher Challenge Building (b)................................... 60,046
Energy Services (.2%)
27,000 Fletcher Challenge Energy (b)..................................... 64,578
Forest Products and Paper (.7%)
54,000 Fletcher Challenge Paper (b)...................................... 107,253
15,323 Fletcher Challenge Forestry (b)................................... 22,397
69,000 Carter Holt Harvey, Ltd........................................... 152,004
Wholesale and International Trade (1.0%)
438,750 Brierley Investments.............................................. 423,440
------------
829,718
------------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
NORWAY (2.4%)
Energy Sources (.9%)
23,000 Saga Petroleum.................................................... $ 371,451
Health and Personal Care (1.1%)
44,600 Hafslund Nycomed (b).............................................. 455,193
Mining and Metals--Container (.4%)
13,000 Elkem............................................................. 175,958
------------
1,002,602
------------
PHILIPPINES (.6%)
Telecommunications (.6%)
4,100 Philippine Long Distance Telephone................................ 254,736
------------
PERU (.5%)
Telecommunications (.5%)
10,000 CPT Telefonica Del Peru ADR....................................... 228,750
------------
PORTUGAL (.7%)
Banking (.2%)
7,000 Banco Portugues de Investimento................................... 81,687
Financial Services (.5%)
2,200 Capital Portugal Fund (b)......................................... 228,290
------------
309,977
------------
SOUTH AFRICA (.6%)
Forest Products and Paper (.6%)
27,000 Sappi, Ltd........................................................ 235,092
------------
SPAIN (6.4%)
Banking (2.3%)
19,600 Argentaria Corporacion Bancaria de Espanol ADR.................... 409,150
12,000 Banco Bilbao Vizcaya.............................................. 553,249
Energy Sources (.8%)
10,800 Repsol............................................................ 354,939
Telecommunications (1.2%)
27,000 Telefonica de Espana.............................................. 501,499
Utilities--Gas and Electric (2.1%)
6,600 Empresa Nacional de Electricidad.................................. 388,583
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
SPAIN--CONTINUED
50,072 Iberdrola......................................................... $ 485,492
------------
2,692,912
------------
SWEDEN (7.2%)
Banking (.6%)
9,600 Stadshypotek (f).................................................. 244,202
Business and Public Service (1.3%)
24,000 Esselte........................................................... 523,549
2,250 Naeckebro (b)..................................................... 33,288
Forest Products and Paper (.8%)
27,000 Stora Kopparbergs Bergslags....................................... 344,428
Health and Personal Care (3.0%)
11,000 Astra............................................................. 452,519
22,500 Svenska Handelsbanken............................................. 553,666
4,600 Electrolux........................................................ 258,680
Transportation (1.5%)
29,200 Volvo............................................................. 628,168
------------
3,038,500
------------
SWITZERLAND (1.5%)
Electrical and Electronics (1.0%)
340 BBC Brown Boveri & Cie............................................ 416,067
Health and Personal Care (.3%)
51 Societe Generale de Surveillance.................................. 115,340
Insurance (.2%)
300 Zuerich Versicherung.............................................. 83,044
------------
614,451
------------
THAILAND (.6%)
Financial Services (.6%)
11,839 Thai Fund......................................................... 260,458
------------
TURKEY (.1%)
Financial Services (.1%)
3,100 Turkish Growth Fund (b)........................................... 38,363
------------
</TABLE>
See accompanying notes to investments in securities.
12
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
UNITED KINGDOM (7.4%)
Banking (1.0%)
27,281 Barclays Bank..................................................... $ 400,494
Building Materials and Components (.9%)
78,000 BICC (b).......................................................... 359,738
Electrical and Electronics (.3%)
15,500 Waste Management International ADR (b)............................ 139,500
Energy Services (2.5%)
127,500 British Gas....................................................... 397,670
25,833 Hyder............................................................. 290,788
42,000 British Telecommunications........................................ 233,759
15,000 Thames Water Group................................................ 126,284
Food and Household Products (1.6%)
507,774 Albert Fisher Group............................................... 319,526
128,429 Hillsdown Holdings................................................ 360,410
Merchandising (.3%)
30,100 Kwik Save Group................................................... 145,410
Transportation (.8%)
61,700 BTR............................................................... 260,447
17,050 BTR Nylex......................................................... 72,174
------------
3,106,200
------------
Total common stocks (cost: $23,960,853)........................... 27,104,627
------------
PREFERRED STOCKS (2.4%)
ARGENTINA (.6%)
Multi-Industry (.6%)
5,010 Compania de Inversiones en Telecomunications convertible
preferred--
7.00% (e)........................................................ 258,015
------------
ITALY (1.2%)
Telecommunications (1.2%)
193,000 Stet Spa di Risp.................................................. 522,427
------------
MEXICO (.5%)
Financial (.5%)
5,550 Nacional Financiera ADR--11.25% (e)............................... 191,475
------------
</TABLE>
See accompanying notes to investments in securities.
13
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ------------
<C> <S> <C>
UNITED KINGDOM (.1%)
Energy Services (.1%)
27,900 Hyder............................................................. $ 44,709
------------
Total preferred stocks (cost: $915,630)........................... 1,016,626
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (28.3%)
ARGENTINA (.2%)
Government (.2%)
150,000 Republic of Argentina (U.S. Dollar) (c)................ 5.000% 03/31/23 87,750
------------
AUSTRALIA (2.4%)
Government (2.4%)
1,070,000 Australian Government (Australian Dollar) (c) (g)...... 12.000% 11/15/01 1,011,475
------------
CANADA (6.0%)
Government (6.0%)
975,000 Canadian Government (Canadian Dollar) (c).............. 10.500% 10/01/04 872,483
810,000 Canadian Government (Canadian Dollar) (c).............. 10.500% 03/01/01 692,570
520,000 Canadian Government (Canadian Dollar) (c).............. 8.750% 12/05/05 424,844
484,000 Canadian Government (Canadian Dollar) (c).............. 7.500% 09/01/00 373,181
230,000 Canadian Government (Canadian Dollar) (c).............. 5.750% 03/01/99 170,201
------------
2,533,279
------------
DENMARK (3.5%)
Government (3.5%)
7,585,000 Kingdom of Denmark (Danish Krone) (c).................. 9.000% 11/15/00 1,462,208
------------
GERMANY (.9%)
Government (.9%)
555,000 Treuhandanstalt (Deutsch Mark) (c)..................... 7.125% 01/29/03 393,490
------------
HONG KONG (.8%)
Finance (.8%)
400,000 PIV Investment Finance (U.S. Dollar) (c)............... 4.500% 12/01/00 341,000
------------
INDIA (.6%)
Finance (.6%)
250,000 Essar Gujarat (U.S. Dollar) (c) (d) (f)................ 7.900% 07/15/99 243,438
------------
</TABLE>
See accompanying notes to investments in securities.
14
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------
<C> <S> <C> <C> <C>
IRELAND (.5%)
Government (.5%)
150,000 Republic of Ireland (Irish Punt) (c)................... 6.250% 10/18/04 $ 232,540
------------
ITALY (3.9%)
Government (3.9%)
605,000,000 Italy Government (Italian Lira) (c).................... 10.500% 07/15/00 431,476
180,000,000 Buoni Poliennali Del Tes (Italian Lira) (c)............ 10.500% 08/01/99 120,426
875,000,000 Buoni Poliennali Del Tes (Italian Lira) (c)............ 10.500% 09/01/05 646,110
620,000,000 Buoni Poliennali Del Tes (Italian Lira) (c)............ 10.500% 11/01/00 442,683
------------
1,640,695
------------
JAPAN (1.0%)
Finance (1.0%)
18,000,000 Japan Development Bank (Japanese Yen) (c).............. 6.500% 09/20/01 195,354
22,000,000 European Investment Bank (Japanese Yen) (c)............ 5.875% 11/26/99 223,951
------------
419,305
------------
MEXICO (.4%)
Financial (.4%)
165,000 United Mexican States (U.S. Dollar) (c)................ 9.750% 02/06/96 169,125
------------
SPAIN (2.3%)
Government (2.3%)
36,460,000 Government of Spain (Spanish Peseta) (c)............... 12.250% 03/25/00 324,237
72,790,000 Government of Spain (Spanish Peseta) (c)............... 11.300% 01/15/02 656,734
------------
980,971
------------
SWEDEN (1.5%)
Government (1.5%)
2,100,000 Sweden Kingdom (Swedish Krona) (c)..................... 13.000% 06/15/01 395,689
1,300,000 Sweden Kingdom (Swedish Krona) (c)..................... 10.250% 05/05/03 228,206
------------
623,895
------------
UNITED KINGDOM (3.8%)
Government (3.8%)
355,000 United Kingdom (British Sterling Pound) (c)............ 10.250% 11/22/99 608,773
130,000 United Kingdom (British Sterling Pound) (c)............ 12.000% 11/20/98 225,217
</TABLE>
See accompanying notes to investments in securities.
15
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------
<C> <S> <C> <C> <C>
UNITED KINGDOM--CONTINUED
425,000 United Kingdom Treasury (British Sterling Pound) (c)... 10.000% 09/08/03 $ 757,882
------------
1,591,872
------------
UNITED STATES (.5%)
Government (.5%)
192,000 U.S. Treasury Note (U.S. Dollar) (c)................... 5.125% 04/30/98 189,480
------------
Total long-term debt securities (cost: $11,710,367).......................... 11,920,523
------------
SHORT-TERM SECURITIES (1.8%)
NEW ZEALAND (.8%)
516,000 New Zealand Treasury Bill (New Zealand Dollar) (c)..... 9.720% 10/02/96 360,698
------------
UNITED STATES (1.0%)
405,000 U.S. Treasury Bill (U.S. Dollar)(c).................... 5.020% 12/12/96 400,877
------------
Total short-term securities (cost: $759,738)................................. 761,575
------------
Total investments in securities (cost: $37,346,588) (h)...................... $ 40,803,351
------------
------------
<FN>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) Principal amounts for foreign debt securities are denominated in the
currencies indicated.
(d) Represents a debt security with a variable rate. The interest rate
disclosed is the rate in effect at September 30, 1996.
(e) PRIDES-Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred secuities issued by a company.
Investors receive an enhanced yield but based upon a specific formula,
potential appreciation is limited. PRIDES pay dividends, have voting
rights, are noncallable for three years and upon maturity, convert into
shares of common stock.
(f) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See note 8 to
the financial statements.) Information concerning the illiquid securities
held at September 30, 1996, which includes acquisition date and cost, is as
follows:
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
-------------------------------------------------- ------------ ---------
<S> <C> <C> <C>
Banque Nationale de Paris ADR..................... Various $ 138,607
Komercni Banka.................................... Various 210,890
Stadshypotek...................................... Various 126,863
VA Technologie.................................... Various 233,012
Essar Gujarat..................................... Various 250,000
---------
$959,372
---------
---------
</TABLE>
(g) Interest rate varies according to predetermined rates established in
advance. The rate disclosed is the rate in effect at September 30, 1996.
(h) At September 30, 1996 the cost of securities for federal income tax purposes
was $37,834,330. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation..................... $ 5,122,210
Gross unrealized depreciation..................... (2,153,189)
-----------
Net unrealized appreciation....................... $ 2,969,021
-----------
-----------
</TABLE>
16
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule for detailed
listing (identified cost: $37,346,588)........................................... $40,803,351
Cash in bank on demand deposit.................................................... 858,196
Receivable for investment securities sold......................................... 1,586,334
Accrued interest and dividends receivable......................................... 444,554
Unrealized appreciation on forward foreign currency contracts held, at value (note
4)............................................................................... 66,880
Receivable for fund shares sold................................................... 51,392
Receivable for refundable foreign income taxes withheld........................... 48,472
Organizational costs (note 6)..................................................... 24,130
----------
Total assets.................................................................. 43,883,309
----------
LIABILITIES
Payable for investment securities purchased....................................... 1,584,199
Payable to Adviser................................................................ 74,505
Payable for Fund shares repurchased............................................... 562
Unrealized depreciation on forward foreign currency contracts held, at value (note
4)............................................................................... 32,241
----------
Total liabilities............................................................. 1,691,507
----------
Net assets applicable to outstanding capital stock................................ $42,191,802
----------
----------
Represented by:
Capital stock--authorized 10 billion shares (Class A--2 billion shares and Class
C--2 billion shares and 6 billion unallocated) of $.01 par value (note 1)...... $ 36,943
Additional paid-in capital...................................................... 38,107,882
Undistributed net investment income............................................. 348,350
Accumulated net realized gains from investments................................. 219,348
Unrealized appreciation of investments and translation of assets and liabilities
in foreign currencies.......................................................... 3,479,279
----------
Total--representing net assets applicable to outstanding capital stock........ $42,191,802
----------
----------
Net assets applicable to outstanding Class A shares............................... $40,380,900
----------
----------
Net assets applicable to outstanding Class C shares............................... $1,810,902
----------
----------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 3,535,447........................................... $ 11.42
----------
----------
Class C--Shares outstanding 158,872............................................. $ 11.40
----------
----------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C>
Investment income:
Interest......................................................................... $ 781,581
Dividends (net of foreign withholding taxes of $111,387)......................... 755,311
---------
Total investment income...................................................... 1,536,892
---------
Expenses (note 5):
Investment advisory fee.......................................................... 327,858
Distribution fees--Class A....................................................... 106,247
Distribution fees--Class C....................................................... 8,761
Administrative services fee...................................................... 28,200
Custodian fees................................................................... 87,175
Accounting services.............................................................. 66,106
Legal and auditing fees.......................................................... 20,173
Amortization of organizational costs............................................. 8,273
Directors' fees.................................................................. 584
Registration fees................................................................ 35,833
Printing and shareholder reports................................................. 30,080
Insurance........................................................................ 5,844
Other............................................................................ 7,388
---------
Total expenses............................................................... 732,522
Less fees and expenses waived or absorbed:
Class A distribution fees...................................................... (53,123)
---------
Total net expenses........................................................... 679,399
---------
Investment income--net....................................................... 857,493
---------
Realized and unrealized gains (losses) on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)........................................................... 929,903
Foreign currency transactions.................................................. (80,658)
---------
849,245
---------
Net change in unrealized appreciation or depreciation on:
Investments.................................................................... 1,925,761
Translation of assets and liabilities in foreign currencies.................... 69,325
---------
1,995,086
---------
Net gains on investments and foreign currencies.............................. 2,844,331
---------
Net increase in net assets resulting from operations............................... $3,701,824
---------
---------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Operations:
Investment income--net............................................. $ 857,493 $ 576,072
Net realized gains on investments and foreign currency
transactions...................................................... 849,245 668,642
Net change in unrealized appreciation or depreciation of
investments and translation of assets and liabilities in foreign
currencies........................................................ 1,995,086 1,212,767
---------- ----------
Increase in net assets resulting from operations............... 3,701,824 2,457,481
---------- ----------
Distributions to shareholders from:
Investment income--net:
Class A.......................................................... (902,736) (530,846)
Class C.......................................................... (19,264) (2,174)
Net realized gains on investments:
Class A.......................................................... (634,933) (310,236)
Class C.......................................................... (8,696) (925)
---------- ----------
Total distributions............................................ (1,565,629) (844,181)
---------- ----------
Capital share transactions (notes 5 and 7):
Proceeds from sales:
Class A.......................................................... 7,982,293 14,280,071
Class C.......................................................... 1,560,752 384,909
Shares issued as a result of reinvested dividends:
Class A.......................................................... 396,003 75,357
Class C.......................................................... 26,804 5,108
Payments for redemption of shares:
Class A.......................................................... (1,025,826) (443,874)
Class C.......................................................... (163,009) (66,528)
---------- ----------
Increase in net assets from capital share transactions......... 8,777,017 14,235,043
---------- ----------
Total increase in net assets................................... 10,913,212 15,848,343
Net assets at beginning of year...................................... 31,278,590 15,430,247
---------- ----------
Net assets at end of year (including undistributed net investment
income of $348,350 and $92,247, respectively)....................... $42,191,802 $31,278,590
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) ORGANIZATION
The Advantus International Balanced Fund, Inc. (the Fund) was incorporated
on January 27, 1994. 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
International Balanced Fund, Inc. (effective March 1, 1995). Prior to March 1,
1995 the Fund was known as MIMLIC International Balanced Fund, Inc.
The Fund currently issues two classes of shares: Class A and Class C shares.
Class A shares are sold subject to a front-end sales charge. Class C shares are
sold without a front-end sales charge, but are subject to a higher Rule 12b-1
fee than Class A shares. Class C shares automatically convert to Class A shares
at net asset value after a specified holding period. Such holding period
declines as the amount of the purchase increases and ranges from 40 to 96 months
after purchase for Class C shares. Both 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 and Class C
shares. Income, expenses (other than distribution fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
On June 20, 1994, MIMLIC Asset Management Company (MIMLIC Management)
purchased 15,000 Class A shares for $150,000. Operations of the Fund did not
formally commence until September 16, 1994 when the shares became effectively
registered under the Securities Exchange Act of 1933. The Minnesota Mutual Life
Insurance Company (Minnesota Mutual), the parent of MIMLIC Management, purchased
1,476,997 Class A shares for $15 million prior to commencement of operations.
(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 U.S. or foreign securities 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
20
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
good faith by the Board of Directors. Such fair values are determined using
pricing services or prices quoted by independent brokers. Short-term securities
with maturities of less than 60 days when acquired, or which subsequently are
within 60 days of maturity, are valued at amortized cost which approximates
market value.
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities, income and expenses are translated at the exchange rate on the
transaction date. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with net realized and unrealized gains or losses from
investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, other then investments in securities, resulting from changes in the
exchange rate.
The Fund also may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuations.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation and
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete the obligations of the contract.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
The Fund's policy is to make required minimum distributions prior to December
31, in order to avoid federal excise tax.
Net investment income (loss) 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
21
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 (loss) or realized gains
(losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, a reclassification adjustment was made to decrease
additional paid-in capital in the amount of $8,273, increase undistributed net
investment income by $320,610 and decrease accumulated realized gains in the
amount of $312,337.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid quarterly in cash
or reinvested in additional shares. Realized gains, if any, are paid annually.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended September 30, 1996, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $27,439,146 and $19,697,826, respectively.
22
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On September 30, 1996, the Fund had entered into forward foreign currency
contracts that obligate the Fund to deliver currencies at specified future
dates. Unrealized appreciation and depreciation on these contracts is included
in the accompanying financial statements. The terms of the open contracts were
as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ---------- ----------------------- ------------------------ ------------- -------------
<C> <C> <S> <C> <C> <C> <C>
10/07/96 270,606 US$ 403,000 DEM $ -- $ 6,390
10/09/96 540,995 US$ 805,000 DEM -- 13,217
10/16/96 533,090 US$ 805,000 DEM -- 5,312
10/01/96 458,290 US$ 695,042,630 ITL -- 1,641
10/24/96 582,454 US$ 886,000 DEM -- 1,571
10/01/96 234,606 US$ 1,562,430 SEK 1,267 --
10/03/96 202,031 US$ 25,893,765 ESP -- 375
10/09/96 805,000 DEM 545,393 US$ 17,616 --
10/07/96 403,000 DEM 273,017 US$ 8,800 --
10/15/96 508,000 NZD 351,536 US$ -- 3,735
10/16/96 805,000 DEM 534,813 US$ 7,036 --
10/18/96 27,200,000 JPY 247,321 US$ 3,101 --
10/21/96 18,500,000 JPY 168,335 US$ 2,229 --
10/21/96 1,610,000 DEM 1,067,728 US$ 12,174 --
10/24/96 886,000 DEM 585,777 US$ 4,895 --
10/28/96 814,000 DEM 542,269 US$ 8,591 --
10/02/96 453,031 ITL 298 US$ -- --
10/01/96 360,591 DEM 236,686 US$ 274 --
10/02/96 1,005,160 DEM 659,251 US$ 244 --
10/21/96 814,000 DEM 534,331 US$ 653 --
------------- -------------
$ 66,880 $ 32,241
------------- -------------
------------- -------------
</TABLE>
ITL Italian Lira
JPY Japanese Yen
DEM German Deutch Mark
ESP Spanish Peseta
NZD New Zealand Dollar
SEK Swedish Kroner
US$ United States Dollar
23
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
On February 14, 1995 shareholders of the Fund approved a new investment
advisory agreement, effective March 1, 1995, with Advantus Capital Management,
Inc. (Advantus Capital or the Adviser). Advantus Capital is a wholly-owned
subsidiary of 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 Minnesota Mutual. The fee for
investment management and advisory services is based on the average daily net
assets of the Fund at the annual rate of .95 percent on the first $25 million in
net assets, .80 percent on the next $25 million, .75 percent on the next $50
million and .65 percent on net assets in excess of $100 million. Fees under the
new agreement with Advantus Capital are the same as under the old agreement with
MIMLIC Management.
On February 14, 1995 shareholders of the Fund also approved a new
sub-advisory agreement between Advantus Capital and Templeton Investment
Counsel, Inc. (Templeton). From its advisory fee, Advantus Capital pays
Templeton a fee equal to an annual rate of .70 percent on the first $25 million
in net assets, .55 percent on the next $25 million, .50 percent on the next $50
million and .40 percent on net assets in excess of $100 million. Fees under the
new sub-advisory agreement between Advantus Capital and Templeton are the same
as the old agreement between MIMLIC Management and Templeton.
The Fund has adopted separate Plans of Distribution applicable to Class A
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 C Plan provides for a fee of up to 1.00 percent of average
daily net assets of Class C shares. The Class C 1.00 percent fee is 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, .15 percent. MIMLIC Sales waived Class A
distribution fees in the amount of $53,123 for the year ended September 30,
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, organizational costs and other
miscellaneous expenses.
The Fund pays an administrative services fee to Minnesota Mutual for
accounting, auditing, legal and other administrative services which Minnesota
Mutual provides. Prior to February 1, 1996 the administrative services fee for
the Fund was $2,050 per month. Effective February 1, 1996 the administrative
services fee is $2,500 per month.
24
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by MIMLIC Sales for distributing the Fund's two
classes of shares amounted to $158,726.
As of September 30, 1996, Minnesota Mutual and subsidiaries and the
directors and officers of the Fund as a whole owned the following shares:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OWNED
------------------ -------------------
<S> <C> <C>
Class A................................. 2,499,423 70.7%
Class C................................. 1,063 .7%
</TABLE>
During the year ended September 30, 1996, legal fees were paid to a law firm
of which the Fund's secretary is a partner in the amount of $3,694.
(6) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs will be amortized over 60 months on a
straight-line basis beginning with the commencement of operations. If any or all
of the shares held by MIMLIC Management, or any other holder, representing
initial capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion (based on the ratio
that the number of initial shares redeemed bears to the total number of
outstanding initial shares of the Fund at the date of redemption) of the
unamortized organizational cost balance.
(7) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 1996 and 1995 for
Class A shares and year ended September 30, 1996 and the period from March 1,
1995 to September 30, 1995 for Class C shares were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------- --------------------
1996 1995 1996 1995
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Sold.................................................................... 724,776 1,411,085 140,775 36,260
Issued for reinvested distributions..................................... 36,110 7,265 2,460 481
Redeemed................................................................ (93,685) (42,101) (14,985) (6,119)
--------- ---------- --------- ---------
667,201 1,376,249 128,250 30,622
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
25
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) ILLIQUID SECURITIES
At September 30, 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 (illiquid 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 illiquid 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 illiquid securities held
by the Fund at September 30, 1996 was $1,178,013 which represents 2.8% of net
assets.
26
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------- CLASS C
PERIOD FROM ------------------------------------
YEAR ENDED SEPTEMBER SEPTEMBER 16, PERIOD FROM MARCH
30, 1994(B) TO YEAR ENDED 1, 1995(B) TO
---------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995(A) 1994 1996 1995
--------- ----------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.79 $ 10.34 $ 10.54 $ 10.77 $ 9.95
--------- ----------- ------- ------ ------
Income from investment operations:
Net investment income...................... .25 .20 .01 .15 .11
Net gains or losses on securities (both
realized and unrealized).................. .87 .56 (.21) .89 .91
--------- ----------- ------- ------ ------
Total from investment operations......... 1.12 .76 (.20) 1.04 1.02
--------- ----------- ------- ------ ------
Less distributions:
Dividends from net investment income....... (.28) (.19) -- (.20) (.13)
Distributions from capital gains........... (.21) (.12) -- (.21) (.07)
--------- ----------- ------- ------ ------
Total distributions...................... (.49) (.31) -- (.41) (.20)
--------- ----------- ------- ------ ------
Net asset value, end of period............... $ 11.42 $ 10.79 $ 10.34 $ 11.40 $ 10.77
--------- ----------- ------- ------ ------
--------- ----------- ------- ------ ------
Total return (c)............................. 10.7% 7.4% (1.9)%(d) 9.9% 10.3%(e)
Net assets, end of period (in thousands)..... $ 40,381 $ 30,949 $ 15,430 $ 1,811 $ 330
Ratio of expenses to average daily net assets
(f)......................................... 1.85% 2.08% .47%(g) 2.61% 2.93%(h)
Ratio of net investment income to average
daily net assets (f)........................ 2.39% 2.22% .14%(g) 1.15% 1.39%(h)
Portfolio turnover rate (excluding short-term
securities)................................. 56.1% 52.0% 12.1% 56.1% 52.0%
Average commission rate on common stock
transactions (i)............................ $ .0189 N/A N/A $ .0189 N/A
</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) Commencement of operations.
(c) 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 sales charges.
(d) Total return is presented for the period from September 16, 1994,
commencement of operations, to September 30, 1994.
(e) Total return is presented for the period from March 1, 1995, commencement of
operations, to September 30, 1995.
(f) The Fund's Distributor and Adviser voluntarily waived or absorbed $53,123,
$56,482 and $4,034 in expenses for the years ended September 30, 1996 and
1995 and the period ended September 30, 1994, respectively. If Class A
shares had been charged for these expenses, the ratio of expenses to average
daily net assets would have been 2.00%, 2.30% and .49%, respectively, and
the ratio of net investment income to average daily net assets would have
been 2.24%, 2.00% and .12%, respectively. If Class C shares had been charged
for these expenses, the ratio of expenses to average daily net assets would
have been 2.61% and 3.00%, respectively, and the ratio of net investment
income to average daily net assets would have been 1.15% and 1.32% shares,
respectively for the year ended September 30, 1996 and the period ended
September 30, 1995.
(g) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(h) Adjusted to an annual basis.
(i) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. The rate is calculated by dividing total
brokerage commissions paid on purchases and sales of common stocks by the
total number of related shares purchased and sold. The comparability of this
information may be effected by the fact that commission rates per share vary
significantly among foreign countries.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus International Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of the Advantus
International Balanced Fund, Inc. (the Fund) as of September 30, 1996 and the
related statement of operations for the year then ended, the statement of
changes in net assets for the two years then ended and the financial highlights
for the two years then ended and the period from September 16, 1994 to September
30, 1994. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased or sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of September 30, 1996 and the results of its operations,
changes in its net assets and financial highlights, for the periods stated in
the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 11, 1996
28
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
FEDERAL INCOME TAX INFORMATION
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal year ended September 30, 1996. Dividends for the 1996 calendar year will
be reported to you on Form 1099-Div in late January 1997. Shareholders should
consult a tax adviser on how to report these distributions for state and local
purposes.
CLASS A
Income distributions--taxable as dividend income, none qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE
- ------------------------------------------------------------------------------------------------------------
<S> <C>
December 28, 1995........................................................................................... $ .2689
March 27, 1996.............................................................................................. .0137
June 26, 1996............................................................................................... .1049
September 25, 1996.......................................................................................... .0662
---------
$ .4537
---------
---------
Capital gains distribution--taxable as long-term capital gains
December 19, 1995........................................................................................... $ .0335
---------
---------
</TABLE>
The distribution of $.2689 payable on December 28, 1995 consisted of $.1785
from short-term capital gains (taxable as dividend income) and $.0904 from net
investment income.
CLASS C
Income distributions--taxable as dividend income, none qualifying for deduction
by corporations
<TABLE>
<CAPTION>
PAYABLE DATE
- ------------------------------------------------------------------------------------------------------------
<S> <C>
December 28, 1995........................................................................................... $ .2481
June 26, 1996............................................................................................... .0869
September 25, 1996.......................................................................................... .0453
---------
$ .3803
---------
---------
Capital gains distribution--taxable as long-term capital gains
December 19, 1995........................................................................................... $ .0335
---------
---------
</TABLE>
The distribution of $.2481 payable on December 28, 1995 consisted of $.1785
from short-term capital gains (taxable as dividend income) and $.0696 from net
investment income.
29
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
FEDERAL INCOME TAX INFORMATION--CONTINUED
The Fund has elected to pass-through foreign tax credits to its
shareholders. The following information will aid you in filing for your foreign
tax credit.
<TABLE>
<CAPTION>
CLASS A CLASS C
CLASS A FOREIGN FOREIGN TAX CLASS C FOREIGN FOREIGN TAX
COUNTRY INCOME PER SHARE PAID PER SHARE INCOME PER SHARE PAID PER SHARE
- ------------------------------------------ ------------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
Argentina................................. $ .013027 $ .000827 $ .009561 $ .000607
Australia................................. .023257 .002790 .017069 .002047
Austria................................... .003416 .000398 .002507 .000292
Belgium................................... .004147 .000622 .003044 .000456
Brazil.................................... .002408 .000000 .001767 .000000
Canada.................................... .005003 .000750 .003672 .000551
Chile..................................... .002009 .000000 .001474 .000000
Czech Republic............................ .000267 .000067 .000196 .000049
Finland................................... .005011 .000752 .003677 .000552
France.................................... .024802 .004940 .018203 .003625
Germany................................... .006379 .001121 .004681 .000823
Hong Kong................................. .012259 .000622 .008997 .000456
Indonesia................................. .000970 .000045 .000712 .000033
Italy..................................... .005607 .000841 .004115 .000617
Japan..................................... .002913 .000437 .002138 .000321
Mexico.................................... .006344 .000175 .004656 .000129
Netherlands............................... .014661 .002059 .010760 .001511
New Zealand............................... .013817 .002072 .010140 .001521
Norway.................................... .008381 .001257 .006151 .000923
Peru...................................... .001036 .000000 .000760 .000000
Phillipines............................... .000347 .000000 .000255 .000000
Portugal.................................. .001344 .000237 .000987 .000174
Spain..................................... .026508 .004070 .019455 .002987
Sweden.................................... .020879 .003132 .015323 .002298
Switzerland............................... .003721 .000201 .002731 .000148
Thailand.................................. .011730 .000000 .008609 .000000
United Kingdom............................ .038356 .005820 .028150 .004271
-------- -------------- -------- --------------
$ .258599 $ .033235 $ .189790 $ .024391
-------- -------------- -------- --------------
-------- -------------- -------- --------------
</TABLE>
30
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make four exchanges or telephone transfers between the Funds
each calendar year without incurring a transaction charge. Thereafter, there
will be a $7.50 transaction charge for each additional exchange or transfer
within the calendar year. Systematic Exchange Plans are exempt from this charge.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive checks at
specified intervals from your fund account-subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE TRANSFER: You may transfer money from one Advantus account to any
other Advantus account you own just by calling our toll free number. Sign up for
telephone exchanges on the Advantus Application or complete the telephone
authorization form.
SYSTEMATIC TRANSFER: If you have an Advantus Money Market account you may
transfer a set amount of money to another Advantus Fund to diversify your
investment portfolio and take advantage of dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual insurance premiums out of your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Our special purchase plans enable you to open an
Advantus Fund account for as little as $25 and lower your average share cost
through "dollar-cost averaging." (Dollar-cost averaging does not assure a
profit, nor does it prevent loss in declining markets). One of these plans--The
Automatic Investment Plan--allows you to invest automatically each month from
your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Individual Retirement Account or other qualified plan including SEPS, profit
sharing, money purchase or defined benefit plans.
31
<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 $346
million in assets in addition to $1.3 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
32
<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.48651 11-96
