<PAGE>
[LOGO]
Semi-Annual Report to Shareholders
Advantus International Balanced Fund
March 31, 1998
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 16
STATEMENT OF OPERATIONS 17
STATEMENTS OF CHANGES IN NET ASSETS 18
NOTES TO FINANCIAL STATEMENTS 19
SHAREHOLDER SERVICES 26
</TABLE>
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholders:
World markets continued to demonstrate a wide disparity during this six-month
reporting period. The Asian arena, severely affected by a currency crisis over
many months, has shown signs of economic recovery in certain countries due to
reforms within those countries. Latin American markets were relatively weak this
period; while European markets fared quite well and are poised for continued
growth.
The report that follows will give you more information about the Fund's
performance and geographic diversification. The portfolio managers, Gary Clemons
and Neil Devlin from Templeton Investment Counsel, Inc., also share their
insights and outlook about the international markets.
As international investors, we enjoy "global market watching." We have witnessed
the world's financial markets change, sometimes significantly, because of actual
events or because of mere perceptions in those markets. Keeping a long-range
view of investing is important because it smoothes out the highs and lows. We
believe that investors derive the greatest benefit by maintaining a long-range
perspective on investing.
Thank-you for investing with Advantus.
Sincerely,
/s/ Robert E. Hunstad
Robert E. Hunstad, President
Advantus Funds
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
PERFORMANCE UPDATE
[GARY CLEMONS PHOTO]
[NEIL DEVLIN PHOTO]
GARY CLEMONS 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, primarily 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 Fund under a
subadvisory agreement.
-Dividends paid quarterly.
-Capital gains distributions paid annually.
PERFORMANCE
The Advantus International Balanced Fund's performance for the six month period
ending March 31, 1998 is as follows:
<TABLE>
<S> <C>
Class A.......................... 1.2 percent*
Class B.......................... .8 percent*
Class C.......................... .8 percent*
</TABLE>
By comparison, an international equity index, the MSCI EAFE Index** posted a
gain of 5.9 percent and an international bond index, the J.P. Morgan Non-U.S.
Government Bond Index+ returned -.7 percent for the six month period ended March
31, 1998.
Its 70 percent stock weighting, relatively low exposure to the Asian and Latin
American markets, and a high exposure to the strong European markets enhanced
the Fund's performance over the first half of fiscal year 1998.
PORTFOLIO ANALYSIS
Major stock markets posted mixed results during the first half of fiscal year
1998. European markets surged as the countries continue their journey toward
Economic Monetary Union (EMU), and implement the economic reforms that accompany
it, while Asian markets steadied following last years economic and market
calamity. Meanwhile, Latin American markets suffered due to economic worries
over lower oil and export prices.
The Fund's largest regional exposure continues to be in Europe, with
approximately 54 percent of the Fund's total assets invested in European
equities. This high exposure fared well, as some of the Fund's strongest
contributors were European names, including Banque Nationale de Paris, Renault,
and Axa-UAP, which posted 61.1 percent*, 56.9 percent*, and 60.3 percent*
returns for the period, respectively. As the European economies continue the
journey toward EMU, investors have rewarded government policies of lowered
interest rates, and improved corporate efficiency. However, with the recent
surge in stock prices throughout Europe, we feel that some markets are now
reflecting full value and we will implement a more selective strategy within the
region. For example, two of our best performers, Telefonica De Espana and
Telecom Italia, have been beneficiaries of lower interest rates and tax reforms
within the Spanish and Italian economies. While contributing largely to the
historical success of the Fund, we feel that these stocks are nearing full
value, and we have begun to reduce our positions in these holdings. However, we
continue to find numerous value opportunities in Europe, as we anticipate
increased profitability and shareholder returns in the future due to corporate
restructuring. Recent additions to the portfolio include Medeva and Autoliv Inc.
2
<PAGE>
ADVANTUS INTERNATIONAL
BALANCED FUND
MARCH 31, 1998
Within the Asian region, which represents approximately 4 percent of the Fund's
total assets, stock market results were mixed over the first half of fiscal year
1998. Select markets, such as South Korea and Thailand, have enjoyed significant
rallies over the period (notwithstanding a low base), as investors applauded
recent attempts at economic reforms within these countries. Our largest country
exposure in the region is Hong Kong, which we maintain to be among the strongest
economies within the region. Certain names that were added include Hong Kong
Electrical Holdings and South China Morning Post Holdings. The Fund continues to
have limited Japanese exposure. However, we are starting to see the first signs
of beneficial economic reforms, which has positive implications for equity
investors. We have identified a list of potential investments within the
Japanese market and anticipate an increasing exposure to the country.
Latin American equity markets, which currently represent approximately 9 percent
of the Fund's total assets, were relatively weak during the first half of fiscal
year 1998 as the negative implications of lower oil prices and the Asian
currency crisis spread fear among investors. We continue to monitor economic
developments within Latin America and view the recent weakness as an opportunity
to discover undervalued securities, and will continue to focus our attention in
the area.
OUTLOOK
At a time when the U.S. market is trading at a historically high valuation, we
feel confident that the international equity markets offer a relatively abundant
set of investment opportunities that will likely perform as well or better than
U.S. equities. Going forward, we will implement increased selectivity within
certain European markets that have enjoyed a recent rally and now reflect full
value. However, we feel that as European corporations continue down the
restructuring path, they will reap the rewards of increased efficiency and
profitability, leading to higher stock prices. Within the Asian region, we will
continue to proceed with caution, focusing our attention on companies with
strong balance sheets, entrepreneurial management teams, and strong long-term
fundamentals.
We anticipate that the Fund will continue to hold its current mix of stocks and
bonds, maintaining a balance that we feel confident will lead to strong
long-term performance for the Fund.
*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. Investment returns and principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
**The 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
MARCH 31, 1998
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 three
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, January 31, 1997 for Class B, and March 1, 1995 for Class C) through March
31, 1998.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 7.4%
Since inception (9/16/94) 9.6%
Class A EAFE Index J.P. Morgan Index CPI
9/16/94 $10,000 $10,000 $10,000 $10,000
9/30/94 9,324 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
9/30/97 13,650 12,819 12,639 10,818
3/31/98 13,818 13,572 12,550 10,865
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 7.0%
Since inception (1/31/97) 7.5%
Class B EAFE Index J.P. Morgan Index CPI
1/31/97 $10,000 $10,000 $10,000 $10,000
9/30/97 $10,730 $11,246 $10,027 $10,094
3/31/98 $10,872 $11,906 $9,956 $10,138
</TABLE>
4
<PAGE>
ADVANTUS INTERNATIONAL
BALANCED FUND
MARCH 31, 1998
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 12.0%
Since inception (3/1/95) 13.8%
Class C EAFE Index J.P. Morgan Index CPI
3/1/95 $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
9/30/97 14,780 13,696 11,822 10,682
3/31/98 14,902 14,500 11,739 10,728
</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 professional's investment advice. Individuals cannot buy even
an unmanaged index fund without incurring some charges and expenses.
Historical performance is not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost.
5
<PAGE>
ADVANTUS INTERNATIONAL
BALANCED FUND
MARCH 31, 1998
FIVE LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- -------------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
Axa--UAP.............................. 17,465 $1,798,307 4.2%
Banque Nationale de Paris............. 20,587 1,599,794 3.8%
Regie Nationale Des Usines Renault.... 34,053 1,516,837 3.6%
Deutsche Bank......................... 17,950 1,350,642 3.2%
YPF Sociedad Anonima ADS.............. 35,200 1,196,800 2.8%
---------- ---
$7,462,380 17.6%
---------- ---
---------- ---
</TABLE>
FIVE LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
% OF
LONG-TERM
MARKET BOND
COMPANY VALUE PORTFOLIO
- ----------------------------------- ---------- -----------
<S> <C> <C> <C>
Truehandanstalt--7.500%, 09/09/04............ $1,869,790 12.2%
United Kingdom--8.000%, 12/07/00............. 1,229,463 8.0%
Federal Republic of Germany--8.750%,
08/20/01................................... 1,203,531 7.9%
Sweden Kingdom--10.250%, 05/05/03............ 1,075,319 7.0%
Australian Government--9.500%, 08/15/03...... 1,046,522 6.8%
---------- ---
$6,424,625 41.9%
---------- ---
---------- ---
</TABLE>
6
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES
MARCH 31, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------------- ------------
<C> <S> <C>
COMMON STOCKS (66.6%)
ARGENTINA (2.9%)
Oil and Energy (1.9%)
35,200 YPF Sociedad Anonima ADS................................................................ $ 1,196,800
Financial Services (1.0%)
21,600 Nortel Inversora SA ADR................................................................. 623,700
------------
1,820,500
------------
AUSTRALIA (2.3%)
Building Materials and Components (1.3%)
248,995 Pioneer International................................................................... 716,071
98,500 David Jones, Ltd........................................................................ 113,959
Transportation (1.0%)
118,100 Mayne Nickless Ltd...................................................................... 609,004
------------
1,439,034
------------
AUSTRIA (.9%)
Electrical and Electronics (.5%)
1,900 VA Technologie(e)....................................................................... 299,385
Utilities--Gas and Electric (.4%)
1,650 EVN Energie-Versorung................................................................... 242,998
------------
542,383
------------
BELGIUM (.5%)
Chemicals (.5%)
4,300 Union Miniere NPV (b)................................................................... 299,856
------------
BERMUDA (.7%)
Mining and Metals (.7%)
28,750 Minorco SA ADR.......................................................................... 473,926
------------
BRAZIL (1.8%)
Financial Services (.2%)
182,000 Banco ITAU.............................................................................. 116,851
Telecommunications (1.6%)
1,253,300 Telecomunicacoes Brasileiras............................................................ 130,059
7,100 Telecomunicacoes Brasileiras ADR........................................................ 921,669
------------
1,168,579
------------
CANADA (.5%)
Merchandising (.5%)
16,300 Oshawa Group, Ltd....................................................................... 296,416
------------
</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 (.3%)
Chemicals (.3%)
1,150,000 Yizheng Chemical Fibre Company.......................................................... $ 188,493
------------
CZECH REPUBLIC (.5%)
Energy Services (.5%)
9,465 Ceske Energeticke....................................................................... 284,739
------------
FINLAND (2.4%)
Telecommunications (.5%)
3,000 Nokia................................................................................... 322,152
Banking (1.1%)
118,000 Merita, Ltd............................................................................. 710,856
Wholesale and International Trade (.8%)
15,000 Amer Group (b).......................................................................... 289,001
23,500 Metsa-Serla............................................................................. 209,421
------------
1,531,430
------------
FRANCE (11.2%)
Banking (2.9%)
20,587 Banque Nationale de Paris............................................................... 1,599,794
3,300 Banque Nationale de Paris ADR 144A (e).................................................. 256,460
Financial Services (.3%)
2,200 Credit Commercial France................................................................ 180,724
Multi-Industry (.4%)
1,000 Marine Wendel........................................................................... 181,402
2,000 Pechiney SA............................................................................. 91,992
Energy Sources (1.0%)
5,070 Societe Nationale Elf Aquitaine......................................................... 664,414
Health and Personal Care (1.4%)
17,935 Rhone-Poulenc........................................................................... 911,483
Insurance (2.8%)
17,465 Axa--UAP................................................................................ 1,798,307
Transportation (2.4%)
34,053 Regie Nationale Des Usines Renault...................................................... 1,516,837
------------
7,201,413
------------
GERMANY (2.1%)
Banking (2.1%)
17,950 Deutsche Bank........................................................................... 1,350,642
------------
HONG KONG (3.2%)
Financial Services (0%)
28,000 Peregrine Investment Holdings........................................................... --
</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>
HONG KONG--CONTINUED
Multi-Industry (1.3%)
61,000 Hutchison Whampoa....................................................................... $ 429,062
245,600 C. P. Pokphand Co., Ltd................................................................. 32,965
86,600 Jardine Matheson Holdings............................................................... 393,164
Electrical and Electronics (.2%)
73,900 Hong Kong Aircraft Engineering Co. Ltd.................................................. 143,064
Transportation (1.3%)
45,000 Swire Pacific Class A................................................................... 238,117
352,400 Swire Pacific Class B................................................................... 338,833
102,628 Jardine Strategic Holdings.............................................................. 281,201
Utilities, Gas, and Electric (.1%)
18,000 Hong Kong Electrical Holdings........................................................... 61,794
Financial Services (.3%)
246,000 South China Morning Post Hldg LTD....................................................... 165,094
------------
2,083,294
------------
INDONESIA (.4%)
Forest Products and Paper (.1%)
151,500 P.T. Barito Pacific Timber.............................................................. 33,031
Utilities (.3%)
14,600 P.T. Indostat ADR....................................................................... 225,388
------------
258,419
------------
ISRAEL (.2%)
Medical (.2%)
3,600 TEVA Pharmaceutical Industries ADR...................................................... 153,900
------------
ITALY (1.6%)
Telecommunications (.7%)
63,000 Sirti................................................................................... 432,319
Transportation (.9%)
139,370 Fiat.................................................................................... 581,400
------------
1,013,719
------------
MEXICO (1.2%)
Chemicals (.3%)
48,000 Vitro................................................................................... 192,316
Mining and Metals (.6%)
120,000 Grupo Mexico............................................................................ 387,734
Utilities--Gas and Electric (.3%)
2,800 Telefonos de Mexico ADR................................................................. 157,850
------------
737,900
------------
</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>
NETHERLANDS (2.8%)
Broadcasting, Advertising and Publishing (.7%)
7,250 International Nederlanden Group......................................................... $ 411,552
Building Materials and Components (.2%)
6,850 European Vinyls......................................................................... 141,339
Electrical and Electronics (1.4%)
12,200 Philips Electronics..................................................................... 895,681
Merchandising (.5%)
4,320 Koninklijke Bijenkorf Beheer............................................................ 303,685
------------
1,752,257
------------
NEW ZEALAND (1.3%)
Building Materials and Components (.1%)
27,000 Fletcher Challenge Building............................................................. 53,991
Energy Services (.2%)
27,000 Fletcher Challenge Energy............................................................... 92,918
Forest Products and Paper (.4%)
19,643 Fletcher Challenge Forestry............................................................. 13,672
171,400 Carter Holt Harvey, Ltd................................................................. 233,861
Transportation (.2%)
100,000 Air New Zealand Ltd..................................................................... 138,099
Wholesale and International Trade (.4%)
438,750 Brierley Investments.................................................................... 252,058
------------
784,599
------------
NORWAY (1.3%)
Energy Sources (.6%)
23,000 Saga Petroleum.......................................................................... 408,775
Health and Personal Care (.4%)
7,612 Nycomed Amershan PLC.................................................................... 285,550
Mining and Metals--Container (.3%)
13,000 Elkem................................................................................... 187,566
------------
881,891
------------
PHILIPPINES (.2%)
Telecommunications (.2%)
5,300 Philippine Long Distance Telephone...................................................... 148,119
------------
PORTUGAL (.6%)
Banking (.6%)
9,660 Banco Portugues de Investimento......................................................... 371,558
------------
</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>
SOUTH AFRICA (.4%)
Mining and Metals (.4%)
17,528 Anglo American Platinum................................................................. $ 269,501
------------
SPAIN (4.2%)
Energy Sources (.8%)
10,800 Repsol.................................................................................. 551,147
Telecommunications (1.6%)
23,000 Telefonica de Espana.................................................................... 1,014,016
Utilities--Gas and Electric (1.8%)
15,200 Empresa Nacional de Electricidad........................................................ 365,571
50,072 Iberdrola............................................................................... 760,842
------------
2,691,576
------------
SWEDEN (6.3%)
Broadcasting, Advertising and Publishing (.2%)
3,300 Marieberg Tidnings...................................................................... 100,344
Business and Public Service (.8%)
24,000 Esselte................................................................................. 516,549
Forest Products and Paper (.7%)
27,000 Stora Kopparbergs Bergslags............................................................. 415,567
Health and Personal Care (1.8%)
18,933 Astra................................................................................... 376,694
16,900 Svenska Handelsbanken................................................................... 782,456
Metals and Mining (.4%)
16,900 Granges................................................................................. 293,950
Transportation (2.4%)
17,200 Autoliv................................................................................. 534,275
11,700 Autoliv Inc SDR......................................................................... 363,086
20,800 Volvo................................................................................... 662,404
------------
4,045,325
------------
SWITZERLAND (.8%)
Electrical and Electronics (.6%)
270 BBC Brown Boveri Ltd.................................................................... 403,583
Health and Personal Care (.2%)
51 Societe Generale de Surveillance........................................................ 91,693
------------
495,276
------------
THAILAND (.1%)
Building Materials and Components (.1%)
22,301 Siam City Cement Public Co. Ltd......................................................... 59,735
------------
</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>
UNITED KINGDOM (15.9%)
Chemicals (1.8%)
98,900 Courtaulds PLC.......................................................................... $ 597,338
138,600 Elementis............................................................................... 321,166
71,117 Somerfield PLC.......................................................................... 215,325
Financial Services (.9%)
67,100 Tate & Lyle............................................................................. 589,384
Banking (.3%)
5,681 Barclays Bank........................................................................... 170,135
Building Materials and Components (.8%)
114,781 BICC.................................................................................... 286,136
54,900 Hepworth PLC............................................................................ 237,897
Drugs (1.5%)
355,000 Medeva.................................................................................. 985,946
Energy Services (3.8%)
132,135 BG PLC.................................................................................. 680,143
152,500 Centrica PLC (b)........................................................................ 287,038
57,000 British Telecommunications.............................................................. 619,876
25,833 Hyder................................................................................... 422,482
25,510 Thames Water Group...................................................................... 403,969
Food and Household Products (1.0%)
531,893 Albert Fisher Group..................................................................... 273,644
128,429 Hillsdown Holdings...................................................................... 381,398
Health and Personal Care (1.0%)
16,850 Hafslund Nycomed........................................................................ 612,205
Merchandising (.3%)
30,100 Kwik Save Group......................................................................... 209,748
Mining and Metals (1.7%)
459,700 British Steel PLC....................................................................... 1,092,143
Sanitary Services (.4%)
15,500 Waste Management International ADR (b).................................................. 114,313
38,000 Waste Management Inernational PLC....................................................... 144,638
Transportation (2.4%)
17,050 BTR PLC................................................................................. 56,585
340,800 BTR..................................................................................... 1,117,560
128,200 Thorn PLC............................................................................... 324,948
------------
10,144,017
------------
Total common stocks (cost: $33,786,384)................................................. 42,488,497
------------
</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>
PREFERRED STOCKS (5.5%)
ARGENTINA (.6%)
Multi-Industry (.6 %)
10,020 Compania de Inversiones en Telecomunications convertible preferred-7.00% (d)............ $ 381,391
------------
BRAZIL (2.1%)
Banking (1.0%)
1,225,500 Unibanco................................................................................ 88,178
54,461,000 Banco Bradesco.......................................................................... 565,207
Oil and Energy (1.1%)
2,864,000 Petroleo Brasileiro SA.................................................................. 682,624
------------
1,336,009
------------
ITALY (1.6%)
Telecommunications (1.6%)
167,000 Telecom Italia.......................................................................... 1,023,236
------------
MEXICO (.5%)
Utilities--Gas and Electric (.5%)
5,550 Nacional Financiera..................................................................... 305,250
------------
SPAIN (.6%)
Banks (.6%)
9,700 Argentaria Bancaria ADR................................................................. 398,913
------------
UNITED KINGDOM (.1%)
Energy Services (.1%)
27,900 Hyder................................................................................... 57,182
------------
Total preferred stocks (cost: $2,149,495)............................................... 3,501,981
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (24.0%) (C)
AUSTRALIA (1.6%)
Government (1.6%)
1,335,000 Australian Government (Australian Dollar)......................... 9.500% 08/15/03 1,046,522
------------
BELGIUM(2.3%)
Government (2.3%)
26,670,000 Belgium Government (Belgium Franc)................................ 5.000% 03/28/01 711,530
26,670,000 Belgium Government (Belgium Franc)................................ 6.250% 03/28/07 760,962
------------
1,472,492
------------
</TABLE>
See accompanying notes to investments in securities.
13
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ------------- ------------
<C> <S> <C> <C> <C>
CANADA (3.7%)
Government (3.7%)
823,000 Canadian Government Bond (Canadian Dollar)........................ 10.500% 07/01/00 $ 647,217
821,000 Canadian Government Bond (Canadian Dollar)........................ 10.500% 03/01/01 662,668
1,230,000 Canadian Government Bond (Canadian Dollar)........................ 10.000% 05/01/02 1,020,457
------------
2,330,342
------------
DENMARK (1.0%)
Government (1.0%)
3,445,000 Kingdom of Denmark (Danish Krone)................................. 9.000% 11/15/00 549,318
550,000 Kingdom of Denmark (Danish Krone)................................. 8.000% 05/15/03 89,337
------------
638,655
------------
GERMANY (4.8%)
Government (4.8%)
1,960,000 Federal Republic of Germany (Deutsch Mark)........................ 8.750% 08/20/01 1,203,531
3,000,000 Treuhandanstalt (Deutsch Mark).................................... 7.500% 09/09/04 1,869,790
------------
3,073,321
------------
NETHERLANDS (2.4%)
Government (2.4%)
1,460,000 Netherlands (Dutch Guilder)....................................... 6.000% 01/15/06 752,589
1,460,000 Netherlands (Dutch Guilder)....................................... 8.250% 02/15/02 793,157
------------
1,545,746
------------
NEW ZEALAND (.7%)
Government (.7%)
875,000 New Zealand (New Zealand Dollar).................................. 6.500% 02/15/00 471,880
------------
UNITED KINGDOM (2.0%)
Government (2.0%)
710,000 United Kingdom (British Sterling Pound)........................... 8.000% 12/07/00 1,229,463
20,000 United Kingdom (British Sterling Pound)........................... 7.000% 11/06/01 34,173
------------
1,263,636
------------
HONG KONG (.1%)
Finance (.1%)
400,000 PIV Investment Finance (U.S. Dollar).............................. 4.500% 12/01/00 30,333
------------
ITALY (1.8%)
Government (1.8%)
535,000,000 Italy Government (Italian Lira)................................... 10.500% 07/15/00 329,711
1,300,000,000 Buoni Poliennali Del Tes (Italian Lira)........................... 7.750% 11/01/06 843,541
------------
1,173,252
------------
</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>
SPAIN (1.9%)
Government (1.9%)
100,000,000 Government of Spain (Spanish Peseta).............................. 12.250% 03/25/00 $ 731,201
55,000,000 Government of Spain (Spanish Peseta).............................. 10.900% 08/30/03 451,475
------------
1,182,676
------------
SWEDEN (1.7%)
Government (1.7%)
7,000,000 Sweden Kingdom (Swedish Krona).................................... 10.250% 05/05/03 1,075,319
------------
Total long-term debt securities (cost: $15,838,920)..................................... 15,304,174
------------
SHORT-TERM SECURITIES (3.2%) (C)
UNITED STATES (3.2%)
Government (3.2%)
255,000 U.S. Treasury Note (U.S. Dollar).................................. 5.510% 04/30/98 253,924
505,000 U.S. Treasury Note (U.S. Dollar).................................. 5.055% 05/28/98 501,010
750,000 U.S. Treasury Note (U.S. Dollar).................................. 5.523% 04/16/98 748,223
70,000,000 Federal National Mortgage Association (Japanese Yen).............. 2.125% 10/09/07 537,225
------------
Total short-term securities (cost: $2,080,690).......................................... 2,040,382
------------
Total investments in securities (cost: $53,855,489) (f)................................. $ 63,335,034
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) Principal amounts for foreign debt securities are denominated in the
currencies indicated.
(d) PRIDES--Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred securities 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.
(e) 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 March 31, 1998, which includes acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
SECURITY: DATE COST
-------------------------------------------------- ---------- ---------
<S> <C> <C>
Banque Nationale de Paris ADR..................... Various $ 131,337
VA Technologies................................... Various 180,320
---------
$ 311,657
---------
---------
</TABLE>
(f) At March 31, 1998 the cost of securities for federal income tax purposes was
$53,855,489. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $13,333,372
Gross unrealized depreciation................................. (3,853,827)
----------
Net unrealized appreciation................................... $9,479,545
----------
----------
</TABLE>
15
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value--see accompanying schedule
for detailed listing (identified cost: $53,855,489).................. $ 63,335,034
Cash in bank on demand deposit........................................ 693,161
Receivable for investment securities sold............................. 2,399,136
Accrued interest and dividends receivable............................. 753,589
Unrealized appreciation on forward foreign currency contracts held, at
value (note 4)....................................................... 107,632
Receivable for fund shares sold....................................... 34,307
Receivable for refundable foreign income taxes withheld............... 64,661
Organizational costs (note 6)......................................... 11,720
------------
Total assets...................................................... 67,399,240
------------
LIABILITIES
Payable for investment securities purchased........................... 3,032,457
Payable for fund shares repurchased................................... 1,343
Payable to Adviser.................................................... 389,333
Unrealized depreciation on forward foreign currency contracts held, at
value (note 4)....................................................... 31,917
Other Payables........................................................ 161,488
------------
Total liabilities................................................. 3,616,538
------------
Net assets applicable to outstanding capital stock.................... $ 63,782,702
------------
------------
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 unallocated) of $.01 par value (note 1).................... $ 51,942
Additional paid-in capital.......................................... 56,280,758
Undistributed net investment income................................. 207,310
Distributions in excess of net realized gains from investments...... (2,253,593)
Unrealized appreciation of investments and translation of assets and
liabilities in foreign currencies.................................. 9,496,285
------------
Total--representing net assets applicable to outstanding capital
stock............................................................ $ 63,782,702
------------
------------
Net assets applicable to outstanding Class A shares................... $ 55,239,392
------------
------------
Net assets applicable to outstanding Class B shares................... $ 4,394,482
------------
------------
Net assets applicable to outstanding Class C shares................... $ 4,148,828
------------
------------
Shares outstanding and net asset value per share:
Class A--Shares outstanding 4,495,460............................... $ 12.29
------------
------------
Class B--Shares outstanding 359,538................................. $ 12.22
------------
------------
Class C--Shares outstanding 338,876................................. $ 12.24
------------
------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1997 TO MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................................................ $ 473,634
Dividends (net of foreign withholding taxes of $44,077)............. 680,709
-----------
Total investment income......................................... 1,154,343
-----------
Expenses (note 5):
Investment advisory fee............................................. 251,786
Distribution fees--Class A.......................................... 77,611
Distribution fees--Class B.......................................... 14,469
Distribution fees--Class C.......................................... 12,126
Administrative services fee......................................... 16,200
Custodian fees...................................................... 109,262
Auditing and accounting services.................................... 63,481
Legal fees.......................................................... 6,221
Amortization of organizational costs................................ 4,137
Registration fees................................................... 30,898
Printing and shareholder reports.................................... 33,625
Other............................................................... 18,777
-----------
Total expenses.................................................. 638,593
Less fees and expenses waived or absorbed:
Class A distribution fees......................................... (34,402)
-----------
Total net expenses.............................................. 604,191
-----------
Investment income--net.......................................... 550,152
-----------
Realized and unrealized gains (losses) on investments and foreign
currencies:
Net realized gains from:
Investments (note 3).............................................. 135,193
Foreign currency transactions..................................... 216,501
-----------
351,694
-----------
Net change in unrealized appreciation or depreciation on:
Investments....................................................... (316,999)
Translation of assets and liabilities in foreign currencies....... 208,116
-----------
(108,883)
-----------
Net gains on investments and foreign currencies................. 242,811
-----------
Net increase in net assets resulting from operations.................. $ 792,963
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1997 TO MARCH 31, 1998 AND YEAR ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Investment income--net.......................... $ 550,152 $ 1,272,340
Net realized gains on investments and foreign
currency transactions.......................... 351,694 2,995,427
Net change in unrealized appreciation or
depreciation on investments and translation of
assets and liabilities in foreign currencies... (108,883) 6,125,889
------------ ------------
Increase in net assets resulting from
operations................................. 792,963 10,393,656
------------ ------------
Distributions to shareholders from:
Investment income--net:
Class A....................................... (635,669) (1,495,458)
Class B....................................... (31,228) (11,375)
Class C....................................... (33,103) (75,167)
Net realized gains on investments:
Class A....................................... (3,919,060) (1,004,915)
Class B....................................... (291,404) --
Class C....................................... (238,611) (55,877)
------------ ------------
Total distributions......................... (5,149,075) (2,642,792)
------------ ------------
Capital share transactions (notes 5 and 7):
Proceeds from sales:
Class A....................................... 5,518,390 9,097,887
Class B....................................... 2,110,050 2,167,154
Class C....................................... 987,385 2,195,751
Proceeds from shares issued as a result of
reinvested dividends:
Class A....................................... 3,160,077 1,286,463
Class B....................................... 280,590 11,206
Class C....................................... 310,573 139,181
Payments for redemption of shares:
Class A....................................... (3,613,581) (3,815,092)
Class B....................................... (139,388) (38,976)
Class C....................................... (877,431) (584,091)
------------ ------------
Increase in net assets from capital share
transactions............................... 7,736,665 10,459,483
------------ ------------
Total increase in net assets................ 3,380,553 18,210,347
Net assets at beginning of period................. 60,402,149 42,191,802
------------ ------------
Net assets at end of period (including
undistributed net investment income of $207,310
and $357,158, respectively)...................... $ 63,782,702 $ 60,402,149
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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. The
Fund is designed for investors seeking a high level of total return through
investing in both stocks and debt securities primarily outside the United
States.
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 shares 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 declines as the amount of the purchase increases and range from 28 to 84
months after purchase for Class B shares and from 40 to 96 months after purchase
for Class C shares. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than distribution fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
On 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 or by an independent pricing service or at a price
deemed best to reflect fair value as quoted by dealers who make markets in these
securities. When market quotations are not readily available, securities are
valued at fair value as determined in good faith under procedures adopted by the
Board of Directors. Short-term securities 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.
19
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
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 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.
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 period ended March 31, 1998 purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $12,908,434 and $11,569,098, respectively.
20
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On March 31, 1998, the Fund had entered into forward foreign currency
contracts that obligate the Fund to deliver currencies at specified future
dates. Unrealized appreciation and depreciation on these contracts is included
in the accompanying financial statements. The terms of the open contracts were
as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ----------- ------------------------ --------------------- ------------- -------------
<C> <C> <S> <C> <C> <C> <C>
5/18/1998 79,054 US$ 78,411 AUD $ -- $ 642
4/2/1998 353,722 US$ 353,035 AUD -- 687
4/2/1998 1,474,034 US$ 1,472,321 BEF -- 1,713
4/20/1998 168,265 US$ 168,871 CAD 606 --
4/7/1998 357,196 US$ 357,345 CAD 149 --
4/6/1998 805,087 US$ 797,943 DEM -- 7,144
4/6/1998 404,753 US$ 398,947 DEM -- 5,806
4/27/1998 1,562,218 US$ 1,561,401 DEM -- 817
4/6/1998 33,433 US$ 33,120 NZD -- 313
5/18/1998 118,500 AUD 79,812 US$ 1,401 --
4/16/1998 120,000 AUD 81,396 US$ 2,054 --
4/2/1998 534,000 AUD 355,804 US$ 2,769 --
5/4/1998 534,000 AUD 393,895 US$ 646 --
4/3/1998 120,000 CAD 82,913 US$ -- 1,839
4/20/1998 239,000 CAD 168,547 US$ -- 324
4/2/1998 506,000 CAD 348,020 US$ -- 9,325
5/4/1998 506,000 CAD 357,471 US$ -- 181
4/27/1998 737,500 DEM 408,135 US$ 9,188 --
4/27/1998 1,275,298 DEM 689,835 US$ 96 --
4/24/1998 1,444,000 DEM 790,323 US$ 8,332 --
4/24/1998 1,444,000 DEM 790,800 US$ 8,808 --
4/7/1998 1,475,000 DEM 816,360 US$ 18,417 --
4/27/1998 2,888,000 DEM 1,582,726 US$ 18,454 --
4/27/1998 2,888,000 DEM 1,566,016 US$ 1,031 --
5/4/1998 66,160,603 ESP 421,405 US$ -- 145
5/4/1998 917,633,360 ITL 503,494 US$ 135 --
5/13/1998 70,000,000 JPY 546,022 US$ 17,256 --
4/6/1998 60,000 NZD 35,094 US$ 1,974 --
5/26/1998 120,000 NZD 67,164 US$ 1,293 --
5/12/1998 240,000 NZD 139,584 US$ 7,649 --
5/18/1998 249,000 NZD 144,171 US$ 7,374 --
6,512,820 SEK 812,073 US$ -- 2,981
------------- -------------
$ 107,632 $ 31,917
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<S> <C>
AUD Australian Dollar
JPY Japanese Yen
DEM German Deutch Mark
NZD New Zealand Dollar
CAD Canadian Dollar
ITL Italian Lira
ESP Spanish Peseta
SEK Swedish Krona
BEF Belgian Franc
US$ United States Dollar
</TABLE>
21
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital or the Adviser), a wholly-owned subsidiary of
MIMLIC Management. 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.
Advantus Capital has a sub-advisory agreement with 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.
The Fund has adopted separate Plans of Distribution applicable to Class A,
Class B and Class C shares, respectively, relating to the payment of certain
distribution expenses pursuant to Rule 12b-1 under the Investment Company Act of
1940 (as amended). The Fund pays distribution fees to Ascend Financial Services,
Inc. (Ascend), formerly known as MIMLIC Sales Corporation, the underwriter of
the Fund and wholly-owned subsidiary of 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 of up to 1.00 percent of average daily net assets of Class B and Class C
shares. The Class B and Class C 1.00 percent fee is comprised of a .75 percent
distribution fee and a .25 percent service fee. Ascend is currently waiving that
portion of Class A distribution fees which exceeds, as a percentage of average
daily net assets, .20 percent. Prior to January 30, 1998 the portion exceeding
.15 percent of average daily net assets was waived. Ascend waived Class A
distribution fees in the amount of $34,402 for the period ended March 31, 1998.
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, 1998 the administrative services fee for
the Fund was $3,000 per month. Effective February 1, 1998 the administrative
services fee is $3,100 per month.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $137,375.
As of March 31, 1998, Minnesota Mutual and subsidiaries and the directors
and officers of the Fund as a whole owned 2,669,092 shares or 59.4% of the
Fund's Class A shares.
During the year ended March 31, 1998, legal fees were paid to a law firm of
which the Fund's secretary is a partner in the amount of $6,221.
22
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) ORGANIZATIONAL COSTS
The Fund incurred organizational expenses in connection with the start-up
and initial registration. These costs wilt 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 period from October 1, 1997 to March 31, 1998
and the year ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- --------------------- ---------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sold........................................... 448,550 738,147 175,182 175,607 78,814 181,585
Issued for reinvested
distributions................................. 269,394 107,948 23,072 896 26,934 11,492
Redeemed....................................... (293,426) (310,600) (11,586) (3,633) (70,810) (48,011)
---------- ---------- ---------- --------- --------- ----------
424,518 535,495 186,668 172,870 34,938 145,066
---------- ---------- ---------- --------- --------- ----------
---------- ---------- ---------- --------- --------- ----------
</TABLE>
(8) ILLIQUID SECURITIES
At March 31, 1998, investments in securities include 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 March 31, 1998
was $555,845 which represents 1.0% of net assets.
23
<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
--------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, YEAR ENDED SEPTEMBER 16,
1997 TO SEPTEMBER 30, 1994(b) TO
MARCH 31, ------------------------------- SEPTEMBER 30,
1998 1997 1996 1995(a) 1994
------------ --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 13.29 $ 11.42 $ 10.79 $ 10.34 $ 10.54
------------ --------- --------- --------- -------
Income from investment
operations:
Net investment income....... .18 .30 .25 .20 .01
Net gains or losses on
securities (both
realized and unrealized)..... (.12) 2.25 .87 .56 (.21)
------------ --------- --------- --------- -------
Total from investment
operations............... .06 2.55 1.12 .76 (.20)
------------ --------- --------- --------- -------
Less distributions:
Dividends from net
investment income.......... (.14) (.40) (.28) (.19) --
Distributions from capital
gains...................... (.92) (.28) (.21) (.12) --
------------ --------- --------- --------- -------
Total distributions....... (1.06) (.68) (.49) (.31) --
------------ --------- --------- --------- -------
Net asset value, end of
period....................... $ 12.29 $ 13.29 $ 11.42 $ 10.79 $ 10.34
------------ --------- --------- --------- -------
------------ --------- --------- --------- -------
Total return (c).............. 1.2% 23.1% 10.7% 7.4% (1.9)%
Net assets, end of period (in
thousands)................... $ 55,239 $ 54,090 $ 40,381 $ 30,949 $ 15,430
Ratio of expenses to average
daily
net assets (d)............... 1.99%(f) 1.51% 1.85% 2.08% .47%(e)
Ratio of net investment income
to
average daily net assets
(d).......................... 1.99%(f) 2.54% 2.39% 2.22% .14%(e)
Portfolio turnover rate
(excluding
short-term securities)....... 19.9% 73.4% 56.1% 52.0% 12.1%
Average commission rate on
common stock transactions
(g).......................... $ .0177 $ .0110 $ .0189 N/A 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 or contingent deferred sales
charges. For periods less than one year, total return presented has not been
annualized.
(d) The Fund's Distributor and Adviser voluntarily waived or absorbed $34,402,
$114,735, $53,123, $56,482 and $4,034 in expenses for the period ended March
31, 1998, the years ended September 30, 1997, 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 2.12%, 1.75%, 2.00%, 2.30% and .49%, respectively, and the ratio
of net investment income to average daily net assets would have been 1.86%,
2.30%, 2.24%, 2.00% and .12%, respectively. If Class B shares had been
charged for these expenses, the ratio of expenses
24
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- ---------------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, JANUARY 31, OCTOBER 1, YEAR ENDED MARCH 1,
1997 TO 1997(b) TO 1997 TO SEPTEMBER 30, 1995(b) TO
MARCH 31, SEPTEMBER 30, MARCH 31, -------------------- SEPTEMBER 30,
1998 1997 1998 1997 1996 1995
------------ --------------- ------------ --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 13.23 $ 11.95 $ 13.24 $ 11.40 $ 10.77 $ 9.95
------------ ------- ------------ --------- --------- ------
Income from investment
operations:
Net investment income....... .16 .16 .16 .26 .15 .11
Net gains or losses on
securities (both
realized and unrealized)..... (.16) 1.30 (.15) 2.16 .89 .91
------------ ------- ------------ --------- --------- ------
Total from investment
operations............... -- 1.46 .01 2.42 1.04 1.02
------------ ------- ------------ --------- --------- ------
Less distributions:
Dividends from net
investment income.......... (.09) (.18) (.09) (.30) (.20) (.13)
Distributions from capital
gains...................... (.92) -- (.92) (.28) (.21) (.07)
------------ ------- ------------ --------- --------- ------
Total distributions....... (1.01) (.18) (1.01) (.58) (.41) (.20)
------------ ------- ------------ --------- --------- ------
Net asset value, end of
period....................... $ 12.22 $ 13.23 $ 12.24 $ 13.24 $ 11.40 $ 10.77
------------ ------- ------------ --------- --------- ------
------------ ------- ------------ --------- --------- ------
Total return (c).............. .8% 12.3% .8% 22.0% 9.9% 10.3%
Net assets, end of period (in
thousands)................... $ 4,394 $ 2,287 $ 4,149 $ 4,025 $ 1,811 $ 330
Ratio of expenses to average
daily
net assets (d)............... 2.84%(f) 2.33%(f) 2.84%(f) 2.37% 2.61% 2.93%(f)
Ratio of net investment income
to
average daily net assets
(d).......................... 1.34%(f) 2.64%(f) 1.15%(f) 2.50% 1.15% 1.39%(f)
Portfolio turnover rate
(excluding
short-term securities)....... 19.9% 73.4% 19.9% 73.4% 56.1% 52.0%
Average commission rate on
common stock transactions
(g).......................... $ .0177 $ .0110 $ .0177 $ .0110 $ .0189 N/A
</TABLE>
- ------------
to average daily net assets would have been 2.47% and the ratio of net
investment income to average daily net assets would have been 2.50% for the
period ended September 30, 1997, respectively. If Class C shares had been
charged for these expenses, the ratio of expenses to average daily net
assets would have been 2.45%, 2.61% and 3.00%, respectively and the ratio of
net investment income to average daily net assets would have been 2.41%,
1.15% and 1.32% shares, respectively for the years ended September 30, 1997
and 1996 and the period ended September 30, 1995.
(e) Ratios presented for the periods from September 16, 1994 to September 30,
1994 are not annualized as they are not indicative of anticipated results.
(f) Adjusted to an annual basis.
(g) 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.
25
<PAGE>
SHAREHOLDER SERVICES
The Advantus Family of Funds offers a variety of services that enhance your
ability to manage your assets. Check each Fund's prospectus for the details of
the services and any limitations that apply to a particular Fund.
EXCHANGE PRIVILEGES: You can move all or part of your investment dollars from
one fund to any other Advantus Fund you own (for identical registrations within
the same class) at any time as your needs change. Exchanges are at the then
current net asset value (exchanges from the Advantus Money Market Fund will
incur the applicable sales charge, if not previously subjected to the charge).
Shareholders may make four exchanges each calendar year without incurring a
transaction charge. Thereafter, there will be a $7.50 transaction charge for
each additional exchange within the calendar year. Systematic Exchange Plans are
exempt from this charge.
INCOME DISTRIBUTION FLEXIBILITY: You can have your fund dividends and other
distributions automatically reinvested with no sales charge, direct them from
one Advantus Fund to any other you own within the Fund family or, if you desire,
we'll pay you in cash.
SYSTEMATIC WITHDRAWAL PLAN: You can set up a plan to receive checks at
specified intervals from your fund account-subject to minimum guidelines.
Depending upon the performance of the underlying investment options, the value
may be worth more or less than the original amount invested when withdrawn.
DIRECT DEPOSITS: At your request we will deposit your dividends or systematic
withdrawals directly into your checking or savings account instead of sending
you a check.
TELEPHONE EXCHANGE: You can move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same class)
just by calling our toll free number. The Telephone Exchange and Telephone
Redemption privilege will automatically be established unless otherwise
indicated on the Account Application. Telephone Exchange and Redemption may be
changed (added/deleted) at any time by submitting a request in writing or by
completing a Service Request Form.
SYSTEMATIC EXCHANGE: You can move a set amount of money monthly from one
Advantus Fund to another Advantus Fund (with identical registrations within the
same class) to diversify your investment portfolio and take advantage of
dollar-cost averaging.
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Mutual insurance premiums from your Advantus Money Market account.
REDUCED SALES CHARGES: Letter of Intent, combined purchases with spouse,
children or single trust estates, and the Right of Accumulation make it possible
for you to reduce the sales charge on Advantus's non-money market funds.
SPECIAL PURCHASE PLANS: Special purchase plans enable you to open an Advantus
Fund account for as little as $25 and lower your average share cost through
"dollar-cost averaging." (Dollar-cost averaging does not assure a profit, nor
does it prevent loss in declining markets.) The Automatic Investment Plan allows
you to invest automatically each month from your checking or savings account.
IRAS, OTHER QUALIFIED PLAN: You can use the Advantus Family of Funds for your
Traditional or Roth Individual Retirement Account or other qualified plan
including: SEP IRA's, SIMPLE IRA's, profit sharing, money purchase or defined
benefit plans.
GROUP INVESTMENT PLAN: This plan provides employers and employees with a
convenient means for investing in the funds through payroll deduction.
TELEPHONE REDEMPTION: You may call us and redeem shares over the phone. The
proceeds will be sent by check to the address of record for the account or wire
transferred to your bank of record for the account.
26
<PAGE>
Wire transfers are for amounts over $500. The prevailing wire charge will be
added to the withdrawal amount. The Telephone Exchange and Telephone Redemption
privilege will automatically be established unless otherwise indicated on the
Account Application. Telephone Exchange and Redemption may be changed
(added/deleted) at any time by submitting a request in writing or by completing
a Service Request Form. To have the redemption automatically deposited into your
checking account, please send a voided check from your bank. Depending on the
performance of the underlying investment options, the value may be worth more or
less than the original amount invested upon redemption. Some limitations apply,
please refer to the prospectus for details.
ACCOUNT UPDATES: You will receive written confirmation of every investment you
initiate (monthly statements for your Money Market account) and quarterly
statements to help you track all of your Advantus Fund investments and annual
tax statements. Semi-annual and annual reports will provide you with portfolio
information, fund performance data and the current investment outlook.
TOLL-FREE SERVICE LINE: For your convenience in obtaining personal information
and assistance directly from Advantus Shareholder Services, call
(1-800-665-6005). Advantus Account Representatives are available Monday through
Friday from 8 a.m. to 4:45 p.m. Central Time. Our voice response system is
available from 7 a.m. to 3 a.m. Central Time Monday through Friday, and 8 a.m.
to 5 p.m. on Saturday. This system allows you to access current net asset values
and account balances.
HOW TO INVEST
You can invest in one or more of the ten Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc. (formerly known as
MIMLIC Sales Corporation), distributor of the Funds. Contact your representative
for information and a prospectus for any of the Advantus Funds you are
interested in. To find a Registered Representative near you, call the toll-free
service line (1-800-665-6005).
MINIMUM INVESTMENTS: Your initial investment in any of the Advantus Funds can
be as small as $25 when you use the Automatic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects
and reviews the Fund's investments and provides executive and other personnel
for the Fund's management.
Advantus Capital Management, Inc. manages twelve mutual funds containing
$2.7 billion in assets in addition to $2.1 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
27
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[ADVANTUS-TM- FAMILY OF FUNDS]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-AFS-1838
(1-800-237-1838)
