<PAGE>
INTERNATIONAL
ADVANTUS INTERNATIONAL BALANCED FUND
ANNUAL REPORT TO SHAREHOLDERS DATED SEPTEMBER 30, 1999
[ADVANTUS -TM- FAMILY OF FUNDS]
BALANCED
[PHOTO]
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND
LIABILITIES 12
STATEMENT OF OPERATIONS 13
STATEMENTS OF CHANGES IN NET
ASSETS 14
NOTES TO FINANCIAL STATEMENTS 15
INDEPENDENT AUDITORS' REPORT 22
FEDERAL INCOME TAX INFORMATION 23
SHAREHOLDER SERVICES 25
</TABLE>
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
Growth has been the economic story throughout this fiscal year. The domestic
growth story continues, albeit growth is slower than in the past. The Federal
Reserve's proactive stance (i.e., raising rates BEFORE reported inflation)
demonstrates the Fed's continuing resolve to control inflation by reigning in
domestic growth. So far, the Fed has achieved this delicate economic balance.
World growth is slowly accelerating. The global economic picture is vastly
different than it was one year ago. Japan has worked its way back from a
devastating recession and financial crisis. Emerging markets are surging and
international markets, overall, are strong. The world's central banks have
played critical roles in getting their respective countries back on track. Like
the Fed, the world's central banks plotted a course of action, and like the Fed,
these banks espoused an expansionary bias. Relative to conditions, each bank
aggressively used its monetary policy to lower interest rates. These actions
have contributed to global economic recovery, country by country.
As the rest of the world rallies, the conditions in the U.S. will likely put
more pressures on our economic systems. The fixed income market may feel some
pressure too due to higher commodity prices, global economic growth, a weaker
dollar, tight labor market, and a Fed poised to tighten. Conditions may also
bode poorly for the stock market. After several years of good equity markets -
driven by both robust growth and higher valuation levels - investors are acutely
aware that the environment is changing. The markets will continue under pressure
if interest rates move higher and valuations peak, challenging the long-running
bull market. On a brighter note, the loss of price momentum in the U.S. equity
market will allow earnings growth to catch up with multiples, thus building the
base for the next leg up in the secular bull market for equities.
If at any time you have questions about your Advantus mutual fund investments, I
encourage you to contact your financial professional or call Advantus
Shareholders Services at 1-800-665-6005. This number allows you 24-hour access,
seven days a week, to your mutual fund account information via an automated
voice-response system. Or you can speak directly to an Advantus Shareholder
Services Representative during business hours, 8 A.M. to 4:45 P.M. (Central
Time) any day that the New York Stock Exchange is open for business.
We appreciate your continued patronage of Advantus Funds. Helping you move
closer to your investment goals is important to us, and we look forward to
working long-term with you and your financial professional. Thank you for
investing with Advantus.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
PERFORMANCE UPDATE
[PHOTO] [PHOTO]
GARY CLEMONS AND UMRAN DEMIRORS
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 seeks to
achieve its objective by
investing in equity and debt
securities issued by large
and small international
companies and government
agencies. 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 year ended
September 30, 1999 for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.......................... 16.65 PERCENT*
CLASS B.......................... 15.84 PERCENT*
CLASS C.......................... 15.71 PERCENT*
</TABLE>
By comparison, an international equity index, the MSCI EAFE Index,** returned
31.32 percent, and an international bond index, the J.P. Morgan Non-U.S.
Government Bond Index+ returned .87 percent for the same period.
PERFORMANCE ANALYSIS
The fiscal year ended September 30, 1999, began at a time of near panic in
global financial markets. Investor fear had been building since the second half
of 1997 when a number of Asian economies were rocked by currency devaluations
and falling equity markets. Adding fuel to the fire, Russia devalued its
currency and defaulted on its national debt in August of 1998. The yields
available on emerging market bonds skyrocketed to 17 percent over US Treasury
debt from just 6 percent over Treasuries at the start of 1998. Global capital
flows sought out safety and liquidity, exacerbating the declines in securities
perceived to be "high risk". Some highly leveraged financial institutions made
bets that security valuation differentials would revert to more "normal" levels.
Long Term Capital Management, a U.S. hedge fund, announced that it was near
insolvency after such bets went disastrously wrong. Only two months later in
October, the Hong Kong Monetary Authority (HKMA) took the unprecedented step of
using public money to support the Hong Kong stock market, buying about
10 percent of the total shares outstanding in that country. In short, the year
was a scary one from a global investor's point of view.
The Fund's equity performance was initially hurt by higher exposure to cyclical
and emerging market stocks, but benefited by this exposure as the year
progressed, as well as to several companies that are restructuring their
operations in shareholder-friendly ways. From a fixed income perspective, the
difference in return performance was mainly attributable to an overweighting in
European bonds and an underweighting in Japan.
In January, investors maintained a positive outlook for global bond markets
given continued low inflation and weak economic growth for the industrial
economies, and thus had priced-in further interest rate cuts by monetary
policymakers. In February, this perception changed, as a result of stronger than
expected economic data. Investors reduced their expectations of further monetary
policy easing, which resulted in a temporary sell-off in global bond markets. In
March, investors regained their optimism despite the potential negative effect
of higher oil prices on inflation. The positive market outlook resulted from
continued economic weakness in Europe and Japan, and in some sectors of the US
economy. The bond market priced-in further interest rate cuts by the Bank of
England, the European Central Bank (ECB), and the Bank of Canada, further
monetary easing by the Bank of Japan (BOJ), as well as a neutral stance by the
Federal Reserve. The UK and US bond markets also benefited from "flight to
quality" inflows as a result of the crisis in Yugoslavia. However, during the
second quarter, market expectations deteriorated following strong economic data
in the U.S. and the rise in the consumer price
2
<PAGE>
index, as well as improved business surveys in Europe. The bond market began to
price-in a Fed rate hike and no longer expected interest rate cuts by the Bank
of England and the European Central Bank.
At Templeton, we have always tried to buy at the point of "maximum pessimism"
and this cycle was no different. While we bought some stocks too early in
retrospect, we purchased those stocks on the conviction that the underlying
companies were worth much more than what the market was willing to pay at the
time. A year later, that judgment looks much more sound than it did in October
1998. By taking a longer-term view, we were able to buy stocks that had been
driven down to bargain prices by short-term market fear. While there are no
guarantees that this approach will work in any one year, fiscal 1999 provided us
with a good example of how our value-based stock selection ought to work over
time.
During the year, the Fund's holding in YPF, the Argentine oil & gas company,
returned 45 percent* as that company was purchased by Repsol, a Spanish
competitor. HSBC, the Hong Kong based bank, returned 93 percent.* British Steel,
now named Corus Group after the merger with Hoogovens in October, returned
55 percent.* The Fund's holdings in Sony and Philips Electronics returned
116 percent* and 88 percent,* respectively, as positive business momentum
coupled with restructuring moves enticed investors back into those stocks.
The Fund had several investments which did not perform well during the year,
including Somerfield (down 67 percent*), and XL Capital (down 26 percent*).
Somerfield, a British food retailer, suffered from a poorly executed acquisition
of Quik Save, overcapacity in its market, and higher interest rates. XL Capital,
a Bermudan insurance group, underperformed due to higher interest rates and the
threat of poor pricing in certain business areas.
OUTLOOK
As value investors, we are very excited about the outlook for the Fund. Over the
past several years, the best performing global stocks have been those of large
companies with high growth prospects. We have been reducing our holdings in
these stocks as their valuations have become excessive relative to our
assessment of earnings growth prospects. The valuation differential between
large growth stocks and the rest of the market is now as wide as it has been in
recent memory. Despite the high valuation of most market indices, we are finding
value in smaller growth stocks, emerging markets stocks, and select insurance
and cyclical stocks. We feel that global indices, heavily weighted towards the
largest, most overvalued stocks, are becoming riskier just as many investors are
concluding - based on recent performance - that these stocks are "lower risk"
investments.
Our value-based stock selection has steered us clear of problem areas before,
notably keeping us out of Japan in the early and mid 1990's. We do not know when
most of the overvalued stocks of today will fall, but we will not change our
core philosophy to chase short-term performance. We continue to believe that
buying quality stocks at bargain prices is the key to long-term investment
success. The current, two-tiered market environment offers us an excellent
opportunity to take profits in overvalued stocks and to reinvest in attractive
stocks with compelling valuations.
*Historical performance is not an indication of future performance. These
performance results do not reflect the impact of Class A's maximum 5.5 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 MSCI EAFE Index is an unmanaged index of common stocks from European,
Australian, 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>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
ADVANTUS INTERNATIONAL BALANCED FUND, MSCI 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
September 30, 1999.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C> <C> <C> <C>
One year 10.24%
Five year 7.02%
Since inception (9/16/94) 6.55%
(Thousands)
Class A EAFE Index J.P. Morgan Index CPI
9/16/1994 $10,000 $10,000 $10,000 $10,000
9/30/1994 9,274 9,845 10,094 10,054
9/30/1995 9,961 10,460 11,972 10,275
9/30/1996 11,030 11,399 12,605 10,584
9/30/1997 13,576 12,819 12,639 10,818
9/30/1998 11,809 11,782 14,133 10,973
9/30/1999 13,775 15,472 14,256 11,261
</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 10.84%
Since inception (1/31/97) 3.25%
(Thousands)
Class B EAFE Index J.P. Morgan Index CPI
1/31/1997 $10,000 $10,000 $10,000 $10,000
9/30/1997 10,730 11,246 10,027 10,094
9/30/1998 9,264 10,336 11,212 10,238
9/30/1999 10,887 13,573 11,310 10,507
</TABLE>
4
<PAGE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C> <C> <C> <C>
One year 15.71%
Since inception (3/1/95) 8.87%
(Thousands)
Class C EAFE Index J.P. Morgan Index CPI
3/1/1995 $10,000 $10,000 $10,000 $10,000
9/30/1995 11,026 11,175 11,198 10,146
9/30/1996 12,120 12,179 11,791 10,450
9/30/1997 14,780 13,696 11,822 10,682
9/30/1998 12,759 12,588 13,219 10,834
9/30/1999 14,738 16,530 13,335 11,119
</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 5.5 percent front-end sales charge for Class A and the maximum
applicable contingent deferred sales charge for Class B shares. The maximum
initial sales charge for Class A shares was 5.0 percent prior to February 1,
1999. Sales charges pay for your financial professional's investment advice.
Individuals cannot invest in the index itself, nor can they invest in any fund
which seeks to track the performance of the index 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>
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------- -------- ----------- ----------
<S> <C> <C> <C>
Nomura Securities.......................... 85,600 $1,328,817 3.4%
Merita Bank................................ 196,500 1,109,420 2.8%
Sony Corporation........................... 7,300 1,092,699 2.8%
Alcatel ADR................................ 36,700 1,018,425 2.6%
AXA........................................ 8,000 1,016,263 2.5%
---------- ----
$5,565,624 14.1%
========== ====
</TABLE>
FIVE LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------- ------------ ---------
<S> <C> <C>
Government of France 3.500%, 7/12/04............... $ 2,500,781 14.4%
Federal Republic of Germany 4.500%, 7/04/09........ 2,458,666 14.2%
Italian Government, 7.750%, 11/01/06............... 2,164,975 12.5%
Belgium Government, 7.750%, 10/15/04............... 2,129,012 12.3%
United Kingdom, 7.500%, 12/07/06................... 1,909,970 11.0%
----------- ----
$11,163,404 64.4%
=========== ====
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Financial 17.0%
Energy 4.3%
Communication Services 12.6%
Transportation 3.3%
Capital Goods 9.4%
Consumer Cyclical 4.6%
Basic Materials 8.2%
Utilities 4.8%
Health Care 3.2%
Consumer Staples 1.6%
Cash and Other Assets/Liabilities .7%
Foreign Government Bonds 30.3%
</TABLE>
6
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1999
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------ -----------
<C> <S> <C>
COMMON STOCK (65.3%)
ARGENTINA (1.5%)
Telecommunication (1.5%)
22,700 Nortel Invesora SA ADR........................... $ 383,063
17,820 Telefonica de Argentina ADR...................... 470,003
-----------
853,066
-----------
AUSTRALIA (3.8%)
Air Freight (.7%)
148,200 Mayne Nickless, Ltd.............................. 396,412
Banks (1.5%)
131,200 Australia & New Zealand Banking Group, Ltd....... 877,349
Manufacturing (1.6%)
368,812 Pioneer International, Ltd....................... 911,443
-----------
2,185,204
-----------
AUSTRIA (.4%)
Electrical Equipment (.4%)
1,650 EVN.............................................. 211,668
-----------
BERMUDA (1.2%)
Insurance (1.2%)
15,400 XL Capital, Ltd. Class A......................... 693,000
-----------
BRAZIL (1.2%)
Banks (.1%)
1,225,500 Unibanco......................................... 44,369
Telecommunication (1.1%)
38,883,000 Embratel Participacoes........................... 265,184
1,253,300 Telesp Celular Participacoes..................... 6,804
34,777,300 Telesp Participacoes............................. 352,448
-----------
668,805
-----------
CANADA (2.6%)
Mining ( -- )
5,500 Kinross Gold Corporation (b)..................... 15,448
<CAPTION>
MARKET
SHARES VALUE(A)
- -------------------------------------------------------------------------
CANADA--CONTINUED
<C> <S> <C>
Oil & Gas (1.5%)
29,600 Ranger Oil, Ltd. (b)............................. $ 127,650
49,750 Renaissance Energy, Ltd. (b)..................... 712,216
Transport Services (1.1%)
90,830 Laidlaw, Inc..................................... 613,103
-----------
1,468,417
-----------
CHILE (.1%)
Electric Companies (.1%)
3,000 Gener ADR........................................ 45,750
-----------
FINLAND (2.3%)
Investment Bankers/Brokers (1.9%)
196,500 Merita Bank...................................... 1,109,420
Paper and Forest (.4%)
23,500 Metsa-Serla...................................... 212,336
-----------
1,321,756
-----------
FRANCE (6.8%)
Chemicals (3.2%)
5,070 Elf Aquitaine.................................... 889,102
17,935 Rhone-Poulenc.................................... 930,128
Insurance (1.8%)
8,000 AXA.............................................. 1,016,263
Telecommunication (1.8%)
36,700 Alcatel ADR...................................... 1,018,425
-----------
3,853,918
-----------
GERMANY (2.2%)
Chemicals (.8%)
10,000 Hoechst.......................................... 437,344
Electric Companies (1.4%)
14,800 Veba............................................. 814,229
-----------
1,251,573
-----------
HONG KONG (3.1%)
Electric Companies (.1%)
18,000 Hong Kong Electric Holdings...................... 55,848
Houseware (.4%)
102,628 Jardine Strategic Holding........................ 209,361
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- -------------------------------------------------------------------------
HONG KONG--CONTINUED
<C> <S> <C>
Investment Bankers/Brokers (1.0%)
49,200 HSBC Holdings.................................... $ 563,734
28,000 Peregrine Investments Holdings................... 0
Publishing (.1%)
87,000 South China Morning Post......................... 58,243
Telecommunication (1.5%)
128,500 Swire Pacific Class A............................ 608,793
352,400 Swire Pacific Class B............................ 258,601
-----------
1,754,580
-----------
INDONESIA (.6%)
Telecommunication (.6%)
26,500 Indosat ADR...................................... 357,750
-----------
ISRAEL (1.3%)
Drugs (1.3%)
15,400 TEVA Pharmaceutical Industries, Ltd.............. 774,813
-----------
JAPAN (7.2%)
Drugs (.2%)
3,000 Ono Pharmaceutical............................... 111,487
Electrical Equipment (1.9%)
7,300 Sony Corporation................................. 1,092,699
Investment Bankers/Brokers (2.3%)
85,600 Nomura Securities................................ 1,328,817
Retail ( -- )
3,000 Best Denki....................................... 31,188
Telecommunication (1.5%)
70 NTT.............................................. 862,734
Water Utilities (1.3%)
37,000 Kurita Water Industries.......................... 751,905
-----------
4,178,830
-----------
MEXICO (1.0%)
Telecommunication (1.0%)
8,350 Telefonos de Mexico ADR.......................... 594,938
-----------
<CAPTION>
MARKET
SHARES VALUE(A)
- -------------------------------------------------------------------------
NETHERLANDS (2.7%)
<C> <S> <C>
Electrical Equipment (1.0%)
5,500 Philips Electronics.............................. $ 555,769
Investment Bankers/Brokers (1.7%)
17,850 ING Groep........................................ 973,437
-----------
1,529,206
-----------
NORWAY (1.0%)
Aluminum (.4%)
13,000 Elkem............................................ 237,279
Chemicals (.6%)
7,666 Norsk Hydro...................................... 327,816
-----------
565,095
-----------
PERU (.5%)
Telecommunication (.5%)
20,400 Telefonica del Peru ADR.......................... 274,125
-----------
PHILIPPINES (.2%)
Telecommunication (.2%)
5,300 Philippine Long Distance Telephone............... 114,963
-----------
PORTUGAL (.5%)
Telecommunication (.5%)
6,750 Portugal Telecom................................. 282,071
-----------
SOUTH AFRICA (1.1%)
Metal Fabrication (.8%)
17,528 Anglo American Platnium.......................... 464,883
Mining (.3%)
6,300 Anglogold Ltd ADR................................ 198,056
-----------
662,939
-----------
SOUTH KOREA (.5%)
Telecommunication (.5%)
8,700 Korea Telecom ADR (b)............................ 321,900
-----------
SPAIN (2.4%)
Electric Companies (1.3%)
50,072 Iberdrola........................................ 745,304
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- -------------------------------------------------------------------------
SPAIN--CONTINUED
<C> <S> <C>
Oil & Gas (1.1%)
32,400 Repsol........................................... $ 637,127
-----------
1,382,431
-----------
SWEDEN (4.5%)
Banks (2.3%)
36,300 Foreningssparbaken............................... 594,481
50,700 Svenska Handlesbanken............................ 714,814
Trucks and Parts (2.2%)
17,200 Autoliv.......................................... 647,150
20,800 Volvo............................................ 592,917
-----------
2,549,362
-----------
SWITZERLAND (2.8%)
Electrical Equipment (.8%)
4,376 ABB Ltd. (b)..................................... 453,820
Investment Bankers/Brokers (1.5%)
1,575 Zurich Allied.................................... 882,025
Telecommunication (.5%)
975 Swisscom......................................... 305,299
-----------
1,641,144
-----------
UNITED KINGDOM (13.8%)
Airlines (1.5%)
154,400 British Airways PLC.............................. 866,959
Drugs (1.4%)
355,000 Medeva........................................... 789,149
Electrical Equipment (2.6%)
154,970 Invensys PLC..................................... 755,329
137,200 Williams PLC..................................... 730,280
Food (1.6%)
57,100 Sainsbury........................................ 356,346
71,116 Somerfield....................................... 150,476
67,100 Tate & Lyle...................................... 413,229
Houseware (.4%)
138,600 Elementis........................................ 232,788
<CAPTION>
MARKET
SHARES VALUE(A)
- -------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
<C> <S> <C>
Iron and Steel (1.0%)
219,100 British Steel.................................... $ 556,499
Manufacturing (1.1%)
176,000 Rolls-Royce...................................... 610,769
Medical Products/Supplies (.3%)
31,750 Nycomed Amersham................................. 196,619
Oil & Gas (1.7%)
129,600 Shell Transportation & Trading................... 968,852
Retail (1.6%)
101,300 Marks & Spencer.................................. 526,266
270,500 Storehouse....................................... 389,737
Water Utilities (.6%)
23,384 Thames Water..................................... 365,989
-----------
7,909,287
-----------
Total common stock (cost: $34,944,956)........................ 37,446,591
-----------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (3.7%)
BRAZIL (2.4%)
Banks (1.7%)
54,461,000 Banco Bradesco................................... 256,254
13,800,000 Banco Itau....................................... 713,547
Chemicals (.7%)
2,864,000 Petrol Brasileiros............................... 425,009
-----------
1,394,810
-----------
GERMANY (.1%)
Household Products (.1%)
2,650 Moebel Walther................................... 32,587
-----------
ITALY (1.2%)
Telecommunication (1.2%)
131,900 Telecom Italia Spa............................... 665,712
-----------
Total preferred stock (cost: $2,139,328)....................... 2,093,109
-----------
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (30.3%)(C)
AUSTRALIA (.3%)
Government (.3%)
251,000 Australian Government (Australian Dollar)........ 7.500% 07/15/05 $ 175,599
-----------
BELGIUM (3.7%)
Government (3.7%)
1,757,000 Belgium Government (European Currency Unit)...... 7.750% 10/15/04 2,129,012
-----------
CANADA (.8%)
Government (.8%)
328,000 Canadian Government (Canadian Dollar)............ 7.000% 12/01/06 241,553
277,000 Canadian Government (Canadian Dollar)............ 8.750% 12/01/05 218,197
-----------
459,750
-----------
DENMARK (.6%)
Government (.6%)
2,020,000 Kingdom of Denmark (Danish Kroner)............... 7.000% 12/15/04 315,708
-----------
FRANCE (4.4%)
Government (4.4%)
2,437,000 Government of France (European Curreny Unit)..... 3.500% 07/12/04 2,500,781
-----------
GERMANY (6.7%)
Government (6.7%)
1,353,000 Federal Republic of Germany (European Currency
Unit)........................................... 3.250% 02/17/04 1,382,672
2,415,000 Federal Republic of Germany (European Currency
Unit)........................................... 4.500% 07/04/09 2,458,666
-----------
3,841,338
-----------
ITALY (3.8%)
Government (3.8%)
1,757,393 Italian Government (European Currency Unit)...... 7.750% 11/01/06 2,164,975
-----------
JAPAN (1.3%)
Government (1.3%)
71,700,000 International Bank of Reconstruction and
Development (Japanese Yen)...................... 5.250% 03/20/02 757,306
-----------
NETHERLANDS (1.6%)
Government (1.6%)
840,000 Netherlands Government (European Currency
Unit)........................................... 5.750% 02/15/07 935,474
-----------
NEW ZEALAND (.6%)
Government (.6%)
600,000 New Zealand (New Zealand Dollar)................. 7.000% 07/15/09 311,958
-----------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------------------------------------------------------------------------------------------
SPAIN (2.4%)
<C> <S> <C> <C> <C>
Government (2.4%)
377,000 Bonos Y Obligat (European Currency Unit)......... 3.250% 01/31/05 $ 370,715
790,000 Government of Spain (European Currency Unit)..... 7.350% 03/31/07 953,049
30,001 Government of Spain (European Currency Unit)..... 10.900% 08/30/03 39,277
-----------
1,363,041
-----------
SWEDEN (.8%)
Government (.8%)
3,800,000 Sweden Kingdom (Swedish Krona)................... 6.000% 02/09/05 478,907
-----------
UNITED KINGDOM (3.3%)
Government (3.3%)
1,075,000 United Kingdom (British Sterling Pound).......... 7.500% 12/07/06 1,909,970
-----------
Total long-term debt securities (cost: $17,516,621)................. 17,343,819
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.1%)
630,000 US Treasury Bill (United States Dollar).......... 4.022% 12/02/99 623,987
-----------
Total short-term securities (cost: $624,129)....................... 623,987
-----------
Total investments in securities (cost: $55,225,034) (d)............ $57,507,506
===========
</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) At September 30, 1999 the cost of securities for federal income tax purposes
was $55,794,783. The aggregate unrealized appreciation and depreciation of
investments in securities based on their cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $6,897,747
Gross unrealized depreciation.......... (5,185,024)
----------
Net unrealized appreciation............ $1,712,723
==========
</TABLE>
11
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value - see accompanying schedule for
detailed listing
(identified cost: $55,225,034)................................................. $ 57,507,506
Cash in bank on demand deposit (includes $520,977 of foreign currency).......... 1,536,923
Receivable for Fund shares sold................................................. 3,182
Receivable for investment securities sold....................................... 1,956,196
Accrued interest and dividend receivable........................................ 597,625
Receivable for refundable foreign income taxes withheld......................... 70,051
Unrealized appreciation on forward foreign currency contracts held, at value
(note 4)....................................................................... 12,243
Other receivables............................................................... 13,833
-------------
Total assets................................................................ 61,697,559
-------------
LIABILITIES
Payable for investment securities purchased..................................... 4,070,426
Payable for Fund shares redeemed................................................ 59,289
Payable to Adviser.............................................................. 219,678
Other payables.................................................................. 27,287
Unrealized depreciation on forward foreign currency contracts held, at value
(note 4)....................................................................... 15,595
-------------
Total liabilities........................................................... 4,392,275
-------------
Net assets applicable to outstanding capital stock.............................. $ 57,305,284
=============
Represented by:
Capital stock - authorized 10 billion shares (Class A - 2 billion shares,
Class B - 2 billion shares, Class C - 2 billion shares and 4 billion shares
unallocated)
of $.01 par value (note 1).................................................... $ 48,625
Additional paid-in capital.................................................... 52,345,785
Undistributed net investment income........................................... 456,217
Accumulated net realized gains from investments............................... 2,212,583
Unrealized appreciation on investments and translation of assets and
liabilities
in foreign currencies......................................................... 2,242,074
-------------
Total - representing net assets applicable to outstanding capital stock..... $ 57,305,284
=============
Net assets applicable to outstanding Class A shares............................. $ 49,502,238
=============
Net assets applicable to outstanding Class B shares............................. $ 5,293,030
=============
Net assets applicable to outstanding Class C shares............................. $ 2,510,016
=============
Shares outstanding and net asset value per share:
Class A - Shares outstanding 4,193,369........................................ $ 11.80
=============
Class B - Shares outstanding 453,852.......................................... $ 11.66
=============
Class C - Shares outstanding 215,244.......................................... $ 11.66
=============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Investment income:
Interest...................................................................... $ 779,462
Dividends (net of foreign withholding taxes of $123,061)...................... 1,200,201
-------------
Total investment income................................................... 1,979,663
-------------
Expenses (notes 5 and 6):
Investment advisory fee....................................................... 499,749
Rule 12b-1 fees - Class A..................................................... 134,992
Rule 12b-1 fees - Class B..................................................... 53,826
Rule 12b-1 fees - Class C..................................................... 29,733
Administrative services fee................................................... 51,800
Amortization of organizational costs.......................................... 7,584
Custodian fees................................................................ 84,543
Auditing and accounting services.............................................. 77,707
Legal fees.................................................................... 14,134
Directors' fees............................................................... 879
Registration fees............................................................. 34,352
Printing and shareholder reports.............................................. 41,547
Insurance..................................................................... 3,687
Other......................................................................... 18,060
-------------
Total expenses............................................................ 1,052,593
Less fees and expenses waived or absorbed:
Class A Rule 12b-1 fees....................................................... (35,105)
-------------
Total net expenses........................................................ 1,017,488
-------------
Investment income - net................................................... 962,175
-------------
Realized and unrealized gains (losses) on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)........................................................ 3,476,399
Foreign currency transactions............................................... (453,331)
-------------
3,023,068
-------------
Net change in unrealized appreciation or depreciation on:
Investments................................................................. 4,718,136
Translation of other assets and liabilities in foreign currencies........... 103,669
-------------
4,821,805
-------------
Net gains on investments and foreign currencies........................... 7,844,873
-------------
Net increase in net assets resulting from operations.......................... $ 8,807,048
=============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Operations:
Investment income - net....................................... $ 962,175 $ 1,381,446
Net realized gain on investments and foreign currency
transactions................................................ 3,023,068 2,675,187
Net change in unrealized appreciation or depreciation on
investments and translation of assets and liabilities in
foreign currencies.......................................... 4,821,805 (12,184,899)
------------ ------------
Increase (decrease) in net assets resulting from
operations.............................................. 8,807,048 (8,128,266)
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A..................................................... (458,918) (635,669)
Class B..................................................... (27,664) (33,103)
Class C..................................................... (13,418) (31,228)
Net realized gains on investments:
Class A..................................................... (1,647,144) (3,919,060)
Class B..................................................... (184,787) (238,611)
Class C..................................................... (108,873) (291,404)
------------ ------------
Total distributions....................................... (2,440,804) (5,149,075)
------------ ------------
Capital share transactions (notes 5 and 7):
Proceeds from sales:
Class A..................................................... 9,201,903 9,134,250
Class B..................................................... 1,190,985 3,881,046
Class C..................................................... 255,735 1,811,623
Proceeds from issuance of shares as a result of reinvested
dividends:
Class A..................................................... 1,782,694 3,160,078
Class B..................................................... 212,640 271,714
Class C..................................................... 119,179 310,573
Payments for redemption of shares:
Class A..................................................... (12,983,074) (8,890,827)
Class B..................................................... (1,532,470) (631,967)
Class C..................................................... (1,276,785) (2,203,065)
------------ ------------
Increase (decrease) in net assets from capital share
transactions............................................ (3,029,193) 6,843,425
------------ ------------
Total increase (decrease) in net assets................... 3,337,051 (6,433,916)
Net assets at beginning of year................................. 53,968,233 60,402,149
------------ ------------
Net assets at end of year (includes undistributed net investment
income of $456,217 and $14,138, respectively)................. $ 57,305,284 $ 53,968,233
============ ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(1) ORGANIZATION
The Advantus International Balanced Fund, Inc. (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
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 Rule 12b-1 fees charged differs between Class A, Class B and Class C
shares. Income, expenses (other than Rule 12b-1 fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon its
relative net assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. 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, 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. 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,
15
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
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 than 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.
On the statement of assets and liabilities, as a result of permanent
book-to-tax difference, a reclassification adjustment was made to increase
additional paid-in-capital by $62,142, decrease undistributed net investment
income by $20,096 and decrease accumulated net realized gains from investments
by $42,046.
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, 1999, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $42,029,935 and $45,739,646, respectively.
16
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On September 30, 1999, the Fund had entered into forward foreign currency
contracts that obligate the Fund to deliver currencies at specified future
dates. Unrealized appreciation and depreciation on these contracts is included
in the accompanying financial statements. The terms of the open contracts were
as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------------------- ------------------ ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10/1/1999 253,091 US$ 26,298,669 JPY $ - $ 5,667
10/4/1999 160,006 US$ 17,107,808 JPY 1,048 -
10/4/1999 234,073 US$ 342,589 CAD - 507
10/4/1999 2,495,744 US$ 2,343,532 EUR 11,112 -
10/5/1999 516,005 AUD 336,539 US$ - 129
3/14/2000 32,652,000 JPY 306246 US$ - 9,292
3/14/2000 29,374,000 JPY 283,944 US$ 83 -
------- -------
$12,243 $15,595
======= =======
</TABLE>
<TABLE>
<S> <C>
AUD Australian Dollar
CAD Canadian Dollar
EUR European Monetary Unit
JPY Japanese Yen
US$ United States Dollar
</TABLE>
(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
Minnesota Life Insurance Company (Minnesota Life). 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 (First
Data Investor Services Group). Prior to October 26, 1998, the Fund's transfer
agent was Minnesota Life. 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
expenses pursuant to Rule 12b-1 under the Investment Company Act of 1940 (as
amended). The Fund pays fees to Ascend Financial Services, Inc. (Ascend), the
underwriter of the Fund and wholly-owned subsidiary of Advantus Capital, to be
used to pay certain expenses incurred in the distribution, promotion and
servicing of the Fund's shares. The Class A Plan provides for a service fee up
to .25 percent of average daily net assets of Class A shares. Prior to
February 1, 1999, the Class A Plan provided for a distribution fee up to
.30 percent of average daily net assets of Class A shares. The Class B and
Class C
17
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
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 Rule 12b-1 fees which
exceeds, as a percentage of average daily net assets, .20 percent. Ascend waived
Class A Rule 12b-1 fees in the amount of $35,105 for the year ended
September 30, 1999.
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.
Effective October 26, 1998, the Fund entered into a new shareholder and
administrative services agreement with Minnesota Life. Under this agreement the
Fund pays an administrative services fee to Minnesota Life for accounting,
auditing, legal and other administrative services which Minnesota Life provides.
Prior to February 1, 1999, the administrative services fee was $3,100 per month.
For the period from February 1, 1999 to July 31, 1999, the administrative
services fee was $4,800 per month. Effective August 1, 1999, the administrative
services fee is $5,300 per month. In addition, for shareholder services
performed by Minnesota Life, the advisor will pay Minnesota Life an annual
account servicing fee as agreed by the adviser and Minnesota Life.
Advantus Capital directly incurs and pays the above operating expenses and
the Fund in turn reimburses Advantus Capital.
The Fund has an agreement with SEI Investments Mutual Fund Services (SEI)
whereby SEI provides daily fund accounting services. Under this agreement, the
annual fee is equal to the greater of $45,000 or .08 percent of the first $150
million in net assets and .05 percent of net assets in excess of $150 million.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $47,616.
As of September 30, 1999, Minnesota Life and subsidiaries and the directors
and officers of the Fund as a whole owned 2,762,535 shares or 65.9 percent of
the Fund's Class A shares.
During the year ended September 30, 1999, legal fees were paid to a law firm
of which the Fund's secretary is a partner in the amount of $13,424.
(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 Advantus Capital, or any other holder, representing
initial capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion (based on the ratio
that the number of initial shares redeemed bears to the total number of
outstanding initial shares of the Fund at the date of redemption) of the
unamortized organizational cost balance. The amortization of organizational
costs was completed during the year.
18
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(7) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the years ended September 30, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold.................................... 782,370 741,366 105,488 318,630 23,027 146,549
Issued for reinvested distributions..... 160,601 269,372 19,495 23,062 10,820 26,970
Redeemed................................ (1,106,103) (725,179) (136,104) (49,589) (111,811) (184,249)
---------- -------- -------- ------- -------- --------
(163,132) 285,559 (11,121) 292,103 (77,964) (10,730)
========== ======== ======== ======= ======== ========
</TABLE>
(8) YEAR 2000 (UNAUDITED)
In 1995, Minnesota Life began addressing computer system requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Life
plans to spend approximately $12 million through 1999 to modify its computer
information systems, enabling proper processing of transactions relating to the
year 2000 and beyond. The Fund will not be charged for these expenses.
19
<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
-----------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1999 1998 1997 1996 1995(A)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 10.56 $ 13.29 $ 11.42 $ 10.79 $ 10.34
------- ------- ------- ------- -------
Income from investment operations:
Net investment income..................................... .21 .28 .31 .25 .20
Net gains (losses) on securities (both realized and
unrealized)............................................. 1.52 (1.95) 2.24 .87 .56
------- ------- ------- ------- -------
Total from investment operations........................ 1.73 (1.67) 2.55 1.12 .76
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income...................... (.11) (.14) (.40) (.28) (.19)
Distributions from net realized gains..................... (.38) (.92) (.28) (.21) (.12)
------- ------- ------- ------- -------
Total distributions..................................... (.49) (1.06) (.68) (.49) (.31)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 11.80 $ 10.56 $ 13.29 $ 11.42 $ 10.79
======= ======= ======= ======= =======
Total return(c)............................................. 16.65% (13.02)% 23.09% 10.73% 7.41%
Net assets, end of year (in thousands)...................... $49,502 $46,025 $54,090 $40,381 $30,949
Ratio of expenses to average daily net assets(d)(e)......... 1.63% 1.62% 1.51% 1.85% 2.08%
Ratio of net investment income (loss) to average daily net
assets(d)(e).............................................. 1.77% 2.38% 2.58% 2.39% 2.22%
Portfolio turnover rate (excluding short-term securities)... 73.8% 57.0% 73.4% 56.1% 52.0%
</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 assume 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 $162,744,
$114,735 and $56,482 in expenses for the years ended September 30, 1998,
1997 and 1995, respectively. If Class A shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.91%, 1.75% and 2.30%, respectively, and the ratio of net investment
income to average daily net assets would have been 2.09%, 2.34% and 2.00%,
respectively. If Class B shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have been 2.44% and
2.47%, respectively, and the ratio of net investment income to average
daily net assets would have been 1.62% and 3.12%, respectively, for the
years ended September 30, 1998 and the period ended September 30, 1997. If
Class C shares had been charged for these expenses, the ratio of expenses
to average daily net assets would have been 2.64%, 2.45% and 3.00%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.37%, 1.74% and 1.32%, respectively, for the years
ended September 30, 1998 and 1997 and the period ended September 30, 1995.
(e) The Fund's Distributor voluntarily waived $35,105 and $53,123 in Class A
Rule 12b-1 fees for the years ended September 30, 1999 and 1996,
respectively. If Class A shares had been charged for these fees, the ratio
of expenses to average daily net assets would have been 1.70% and 2.00%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.70% and 2.24%, respectively.
(f) Adjusted to an annual basis.
20
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
CLASS B
---------------------------------
PERIOD FROM
YEAR ENDED JANUARY 31,
SEPTEMBER 30, 1997(B) TO
----------------- SEPTEMBER 30,
1999 1998 1997
------- ------- -------------
<S> <C> <C> <C>
Net asset value, beginning of year.......................... $10.47 $13.23 $11.95
------ ------ ------
Income from investment operations:
Net investment income..................................... .12 .19 .18
Net gains (losses) on securities (both realized and
unrealized)............................................. 1.51 (1.93) 1.28
------ ------ ------
Total from investment operations........................ 1.63 (1.74) 1.46
------ ------ ------
Less distributions:
Dividends from net investment income...................... (.06) (.10) (.18)
Distributions from net realized gains..................... (.38) (.92) -
------ ------ ------
Total distributions..................................... (.44) (1.02) (.18)
------ ------ ------
Net asset value, end of year................................ $11.66 $10.47 $13.23
====== ====== ======
Total return(c)............................................. 15.84% (13.63)% 12.30%
Net assets, end of year (in thousands)...................... $5,293 $4,869 $2,287
Ratio of expenses to average daily net assets(d)(e)......... 2.43% 2.29% 2.33%(f)
Ratio of net investment income (loss) to average daily net
assets(d)(e).............................................. .94% 1.77% 3.26%(f)
Portfolio turnover rate (excluding short-term securities)... 73.8% 57.0% 73.4%
<CAPTION>
CLASS C
-------------------------------------------------
PERIOD FROM
MARCH 1,
YEAR ENDED SEPTEMBER 30, 1995(B) TO
--------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $10.48 $13.24 $11.40 $10.77 $ 9.95
------ ------ ------ ------ ------
Income from investment operations:
Net investment income..................................... .10 .18 .23 .15 .11
Net gains (losses) on securities (both realized and
unrealized)............................................. 1.52 (1.92) 2.19 .89 .91
------ ------ ------ ------ ------
Total from investment operations........................ 1.62 (1.74) 2.42 1.04 1.02
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (.06) (.10) (.30) (.20) (.13)
Distributions from net realized gains..................... (.38) (.92) (.28) (.21) (.07)
------ ------ ------ ------ ------
Total distributions..................................... (.44) (1.02) (.58) (.41) (.20)
------ ------ ------ ------ ------
Net asset value, end of year................................ $11.66 $10.48 $13.24 $11.40 $10.77
====== ====== ====== ====== ======
Total return(c)............................................. 15.71% (13.67)% 21.95% 9.93% 10.26%
Net assets, end of year (in thousands)...................... $2,510 $3,074 $4,025 $1,811 $ 330
Ratio of expenses to average daily net assets(d)(e)......... 2.44% 2.49% 2.37% 2.61% 2.93%(f)
Ratio of net investment income (loss) to average daily net
assets(d)(e).............................................. .94% 1.52% 1.82% 1.15% 1.39%(f)
Portfolio turnover rate (excluding short-term securities)... 73.8% 57.0% 73.4% 56.1% 52.0%
</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 assume 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 $162,744,
$114,735 and $56,482 in expenses for the years ended September 30, 1998,
1997 and 1995, respectively. If Class A shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
1.91%, 1.75% and 2.30%, respectively, and the ratio of net investment
income to average daily net assets would have been 2.09%, 2.34% and 2.00%,
respectively. If Class B shares had been charged for these expenses, the
ratio of expenses to average daily net assets would have been 2.44% and
2.47%, respectively, and the ratio of net investment income to average
daily net assets would have been 1.62% and 3.12%, respectively, for the
years ended September 30, 1998 and the period ended September 30, 1997. If
Class C shares had been charged for these expenses, the ratio of expenses
to average daily net assets would have been 2.64%, 2.45% and 3.00%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.37%, 1.74% and 1.32%, respectively, for the years
ended September 30, 1998 and 1997 and the period ended September 30, 1995.
(e) The Fund's Distributor voluntarily waived $35,105 and $53,123 in Class A
Rule 12b-1 fees for the years ended September 30, 1999 and 1996,
respectively. If Class A shares had been charged for these fees, the ratio
of expenses to average daily net assets would have been 1.70% and 2.00%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.70% and 2.24%, respectively.
(f) Adjusted to an annual basis.
21
<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, 1999 and the
related statement of operations for the year then ended, the statements of
changes in net assets for each year in the two year period then ended and the
financial highlights for each of the years in the five year period then ended.
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. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian and brokers. 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, 1999 and the results of its operations,
changes in its net assets and the financial highlights, for the periods stated
in the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG LLP
Minneapolis, Minnesota
November 5, 1999
22
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The following information for federal income tax purposes is presented as an
aid to shareholders in reporting the distributions paid by the Fund in the
fiscal period ended September 30, 1999. Dividends for the 1999 calendar year
will be reported to you on Form 1099-Div in late January 2000. Shareholders
should consult a tax adviser on how to report these distributions for state and
local purposes.
CLASS A
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------ --------
<S> <C>
Income distributions-taxable as dividend income, none
qualifying for deduction by corporations.
June 24, 1999............................................... $.0435
September 23, 1999.......................................... .0649
------
$.1084
======
Capital gains distributions-taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.3721
March 30, 1999.............................................. .0076
------
$.3797
======
</TABLE>
CLASS B
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------ --------
<S> <C>
Income distributions - taxable as dividend income, none
qualifying for deduction by corporations.
June 24, 1999............................................... $.0200
September 23, 1999.......................................... .0412
------
$.0612
======
Capital gains distributions-taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.3721
March 30, 1999.............................................. .0076
------
$.3797
======
</TABLE>
CLASS C
<TABLE>
<CAPTION>
PER
PAYABLE DATE SHARE
- ------------ --------
<S> <C>
Income distributions - taxable as dividend income, none
qualifying for deduction by corporations.
June 24, 1999............................................... $.0196
September 23, 1999.......................................... .0397
------
$.0593
======
Capital gains distributions - taxable as long-term capital
gains, 20% rate.
December 4, 1998............................................ $.3721
March 30, 1999.............................................. .0076
------
$.3797
======
</TABLE>
23
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
FEDERAL INCOME TAX INFORMATION (UNAUDITED) - 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 A CLASS B CLASS B CLASS C CLASS C
FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN
INCOME TAX PAID INCOME TAX PAID INCOME TAX PAID
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
- ------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Argentina....................... $0.005440 $ - $0.003071 $ - $0.002976 $ -
Australia....................... 0.025354 0.002364 0.014314 0.001335 0.013870 0.001293
Austria......................... 0.002026 0.000361 0.001144 0.000204 0.001109 0.000197
Belgium......................... 0.000812 0.000123 0.000459 0.000069 0.000444 0.000067
Bermuda......................... 0.004407 0.000745 0.002488 0.000420 0.002411 0.000407
Brazil.......................... 0.011515 0.000665 0.006501 0.000376 0.006299 0.000364
Canada.......................... 0.003903 0.000531 0.002203 0.000300 0.002135 0.000290
Chile........................... 0.000434 0.000152 0.000245 0.000086 0.000237 0.000083
Finland......................... 0.011121 0.001661 0.006279 0.000938 0.006084 0.000909
France.......................... 0.018185 - 0.010267 - 0.009948 -
Germany......................... 0.009711 0.000927 0.005483 0.000524 0.005312 0.000507
Hong Kong....................... 0.025118 0.000017 0.014181 0.000009 0.013741 0.000009
Indonesia....................... 0.002008 0.000301 0.001134 0.000170 0.001098 0.000165
Israel.......................... 0.000897 0.000180 0.000506 0.000102 0.000491 0.000099
Italy........................... 0.005593 0.003025 0.003158 0.001708 0.003060 0.001655
Japan........................... 0.003038 0.000583 0.001715 0.000329 0.001662 0.000319
Luxembourg...................... 0.001870 - 0.001056 - 0.001023 -
Mexico.......................... 0.008016 0.000119 0.004525 0.000067 0.004385 0.000065
Netherlands..................... 0.008192 0.000584 0.004625 0.000330 0.004482 0.000319
New Zealand..................... 0.003147 0.000521 0.001777 0.000294 0.001722 0.000285
Norway.......................... 0.002800 0.000174 0.001581 0.000098 0.001532 0.000095
Phillipines..................... 0.000123 0.000017 0.000070 0.000010 0.000067 0.000009
Spain........................... 0.009248 0.001622 0.005221 0.000916 0.005059 0.000887
Singapore....................... 0.004055 - 0.002290 - 0.002218 -
South Korea..................... 0.000045 - 0.000026 - 0.000025 -
South Africa.................... 0.002939 - 0.001659 - 0.001608 -
Sweden.......................... 0.017518 0.002017 0.009890 0.001139 0.009583 0.001104
Switzerland..................... 0.006734 0.000534 0.003802 0.000302 0.003684 0.000292
United Kingdom.................. 0.084544 0.009455 0.047732 0.005338 0.046250 0.005172
Venezuela....................... 0.004258 - 0.002404 - 0.002330 -
--------- --------- --------- --------- --------- ---------
TOTAL FOREIGN................... 0.283051 0.026678 0.159806 0.015064 0.154845 0.014592
--------- --------- --------- --------- --------- ---------
United States................... 0.004756 - 0.002685 - 0.002602 -
--------- --------- --------- --------- --------- ---------
TOTAL........................... $0.287817 $0.026678 $0.162491 $0.015064 $0.157446 $0.014592
========= ========= ========= ========= ========= =========
</TABLE>
24
<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 may apply.
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 share 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 twelve 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.
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 a check 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 DIVIDEND 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 may move money from one Advantus account to any other
Advantus account you own (with identical registrations within the same share
class) just by calling our toll-free number. The Telephone Exchange privilege
will automatically be established unless otherwise indicated on the Account
Application. Telephone Exchange may be changed (added/deleted) at any time by
submitting a request in writing.
SYSTEMATIC EXCHANGE: You may move a set amount of money monthly or quarterly
from one Advantus Fund to another Advantus Fund (with identical registrations
within the same share class) to diversify your investment portfolio and take
advantage of "dollar-cost averaging".
AUTOMATIC PAYMENT OF INSURANCE PREMIUMS: You may automatically pay your
Minnesota Life 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, if any.
AUTOMATIC INVESTMENT PLAN: This special purchase plan enables 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 monthly, semi-monthly or quarterly from
your checking or savings account.
IRAS, OTHER QUALIFIED PLANS: You can use the Advantus Family of Funds for your
Traditional, Roth or Education Individual Retirement Account or other qualified
plans including: SEP IRA's, SIMPLE IRA's, Profit Sharing, 401(k) Money Purchase
or Defined Benefit plans.
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. Wire transfers are for
amounts over $500. The prevailing wire charge will be added to the withdrawal
amount. The Telephone Redemption privilege will automatically be established
unless otherwise indicated on the Account Application. Telephone Redemption may
be changed (added/deleted) at any time by submitting a request in writing. To
have the redemption automatically deposited into your checking account, please
send a voided check
25
<PAGE>
from your bank. Depending on the performance of the underlying investment
options, the value may be worth more or less than the original amount invested
upon redemption. Some limitations apply, please refer to the prospectus for
details.
ACCOUNT UPDATES: You'll receive written confirmation of every investment you
initiate 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 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 24 hours,
seven days a week. This system allows you to access current net asset values,
account balances and recent account activity.
HOW TO INVEST
You can invest in one or more of the eleven Advantus Funds through a local
Registered Representative of Ascend Financial Services, Inc., 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 our 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. (For the Advantus International Balanced Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., selects the Fund's
investments.)
Advantus Capital Management, Inc. manages twelve mutual funds containing $3.2
billion in assets in addition to $10.8 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 13 years of
investment experience.
ADVANTUS FAMILY OF FUNDS
Advantus Bond Fund
Advantus Horizon Fund
Advantus Spectrum Fund
Advantus Enterprise Fund
Advantus Cornerstone Fund
Advantus Money Market Fund
Advantus Mortgage Securities Fund
Advantus International Balanced Fund
Advantus Venture Fund
Advantus Index 500 Fund
Advantus Real Estate Securities Fund
26
<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)
<PAGE>
<TABLE>
<S> <C>
ASCEND FINANCIAL SERVICES, INC. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
</TABLE>
F.48651 Rev. 11-1999
