<PAGE>
INTERNATIONAL
ADVANTUS INTERNATIONAL BALANCED FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED MARCH 31, 1999
ADVANTUS-TM-
FAMILY OF FUNDS
[PHOTO]
BALANCED
<PAGE>
ADVANTUS International Balanced Fund
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 7
STATEMENT OF ASSETS AND LIABILITIES 13
STATEMENT OF OPERATIONS 14
STATEMENTS OF CHANGES IN NET ASSETS 15
NOTES TO FINANCIAL STATEMENTS 16
SHAREHOLDER SERVICES 24
<PAGE>
Letter from the President [PHOTO]
Dear Shareholders:
U.S. economic expansion, in its longevity and in vigor, is the envy of the rest
of the world. While growth in Europe and the United Kingdom is falling, we are
finally seeing some small improvements in Asia's economic angst; it also appears
that Japan's economic free fall has stopped. However, a working plan for a
sustainable recovery in Japan is still forthcoming. As you can see, growth
patterns around the globe are mixed, but overall, world growth is forecasted to
decline by about one percent over the course of 1999. (World growth is
forecasted to be two percent in 1999.)
In this six-month reporting period, U.S. Gross domestic Product (GDP) in the
fourth quarter 1998 was 6.0 percent. This phenomenal result was fueled by strong
consumer demand and spending. GDP figures for the first quarter 1999 are
estimated at a respectable 4 percent. This economic growth was very broad based,
despite some export difficulties. Above-trend growth is expected for the
remainder of the year.
Will inflation spoil the party? It's unlikely. Weak commodity prices coupled
with excess global capital and labor has created an inflation-benign
environment. The inflation outlook in the U.S. continues to be positive, as
well.
The strong momentum in top-tier large cap growth stocks continues to drive the
equity market. Some trends have continued, such as large cap stocks
outperforming small caps and growth stocks outperforming value stocks. The
breadth of leadership of the equity market has continued to narrow, with only
26.3 percent of the issues in the S&P 500* able to outperform their index over
the last twelve months. The average equity mutual fund has lagged the market
unless it has been overweighted in growth and technology investments. Valuations
in the marketplace continue to be high, particularly in the large cap growth
weighted indices.
Stronger economic growth increased investors' comfort with corporate bonds and
thus the spread to Treasury bonds narrowed. In the fixed-income market,
mortgage-backed securities were the star performers this period, followed by
corporate bonds, and then Treasuries.
The economic and market outlook for the U.S. remains strong. Looking ahead, we
are cautiously optimistic for stock and bond prices, but valuations for
large-cap growth issues are high. Economic growth is forecasted, albeit slower
than in the past. With much of the world still in recession, commodity prices
low, and rapid increases in technology and productivity, high inflation is
unlikely. The Federal Reserve and other central banks stand ready to intervene
if necessary. We are watchful of Y2K issues. Certain countries that are mired in
prolonged recessions lack the money to solve these technology-related problems.
We are - along with the rest of the world - watching the political strife in the
Balkans. The military action in Kosovo has commanded world attention. Escalation
will prove costly in money and human resources.
In the pages that follow, the Fund's manager will update you on how the economy
and the market affected the Fund during this reporting period. The manager will
discuss the Fund's performance and some strategies used to maximize performance.
As always, we thank you for investing with Advantus. We encourage you to
maintain a long-range view of investing; we believe you will derive the greatest
benefit by doing so.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
<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 six-month period
ending March 31, 1999 for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.......................... 9.61 PERCENT*
CLASS B.......................... 9.21 PERCENT*
CLASS C.......................... 9.20 PERCENT*
</TABLE>
By comparison, an international equity index, the MSCI EAFE Index,** returned
22.51 percent and an international bond index, the J.P. Morgan Non-U.S.
Government Bond Index+ returned -.41 percent.
PERFORMANCE ANALYSIS
International equity markets fared well during the period ending March 31, 1999.
The Asian markets posted strong gains as the region seems to have passed the
point of "maximum pessimism" and investors showed confidence in the area's
progress toward restructuring and the opening of economies. Latin America
followed Asia's lead, while Europe remained steady.
European equities, which accounted for 40 percent of the equity portion of the
Fund, continued to be buoyant through the end of 1998, but slowed into 1999 as
investors took profits. Led by lower interest rates, European Financials
continued to post strong gains, and our holdings in AXA-UAP and Banque Nationale
de Paris were among the Fund's top performers for the period. Looking on a
country to country basis, however, we have found that value ideas are becoming
more difficult to find within Europe. One of the areas of opportunity has been
the stock market in the United Kingdom, which has been trading at 22.9 times
earnings, vs. 31.5 for the MSCI EAFE Index.** We have been adding to the UK, in
stocks such as British Airways PLC, and the UK currently represents 10 percent
of the Fund's total assets.
The Asian region, representing approximately 11 percent of equity investments,
is finally showing signs of economic recovery. Our largest country weighting
within Asia remains Hong Kong, where we continue to find quality companies
trading at depressed valuations. We were rewarded in certain Hong Kong names
over the period, such as Hong Kong and Shanghai Banking Corporation and Swire
Pacific, which posted impressive gains over the period of 74 percent* and 48
percent,* respectively. The Fund also benefited from its increased exposure to
Japan, which now accounts for 4 percent of the Fund. Announcements of corporate
restructuring led many investors to put more confidence in the future of
Japanese corporate earnings, and thus, Japanese equities rose over 40 percent
over the period. We continue to move cautiously on a stock-by-stock basis in
Japan, as many of Japanese companies still appear expensive, relative to
earnings.
Latin American equity markets, which currently represent approximately 9 percent
of the Fund's total assets, posted bullish runs in early 1999 as investors
warmed up to the area's attempts at economic recovery. The Fund's
2
<PAGE>
largest position, Telefonos de Mexico SA, was strong contributor to the Fund's
performance, posting a 52 percent gain* over the period. We will continue to
search in Latin America for companies that we feel are quality companies that
are trading at a fraction of their future earnings potential.
OUTLOOK
Over the period, we have witnessed signs of improvement in many of the Asian and
Latin American nations, and we feel that the international equity environment
overall has improved. Going forward, we will continue to focus on quality,
liquid names with strong balance sheets and managements in these regions. We
will be more selective within certain European markets that have enjoyed a
recent rally and now reflect full value. Overall, our investment strategy is
likely to continue focusing on defensive equity names in Europe and recovery
stocks in Asia and Latin America.
With a median price-to-earnings ratio of 15.2 (vs. 22.2 for the passive equity
alternative), a median price-to-cash flow multiple of 7.4 (vs. 9.9 for the
passive equity alternative), and median dividend yield of 2.8 percent (vs. 1.9
percent for the passive alternative), we feel that the Fund is well positioned
and anticipate that the Fund will continue to hold its current mix of equity and
fixed income investments.
*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,
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>
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, 1999.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
(THOUSANDS) CLASS A EAFE INDEX J.P. MORGAN INDEX CPI
<S> <C> <C> <C> <C>
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
9/30/98 11,873 11,782 14,133 10,973
3/31/99 12,944 14,434 14,075 11,066
AVERAGE ANNUAL TOTAL RETURN:
Class A:
One year -11.00%
Since inception (9/16/94) 5.84%
</TABLE>
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
(THOUSANDS) CLASS B EAFE INDEX J. P. MORGAN INDEX CPI
<S> <C> <C> <C> <C>
1/31/97 $10,000 $10,000 $10,000 $10,000
9/30/97 10,730 11,246 10,027 10,094
9/30/98 9,264 10,336 11,212 10,238
3/31/99 10,243 12,663 11,166 10,325
AVERAGE ANNUAL TOTAL RETURN:
Class B:
One year -11.11%
Since inception (1/31/97) 1.12%
</TABLE>
4
<PAGE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
(THOUSANDS) CLASS C EAFE INDEX J. P. MORGAN INDEX CPI
<S> <C> <C> <C> <C>
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
9/30/98 $12,759 $12,588 $13,219 $10,834
3/31/99 $13,933 $15,421 $13,165 $10,927
AVERAGE ANNUAL TOTAL RETURN:
Class C:
One year -6.50%
Since inception (3/1/95) 8.46%
</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>
YPF Sociedad Anonima ADS................... 35,200 $1,111,000 2.8%
AXA-UAP.................................... 8,000 1,058,536 2.7%
Philips Electronics........................ 12,950 1,052,801 2.7%
Merita, Ltd. .............................. 196,500 1,050,175 2.7%
Hong Kong Telecommunications............... 520,000 1,026,713 2.6%
---------- -----------
$5,299,225 13.5%
---------- -----------
---------- -----------
</TABLE>
FIVE LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ---------------------------------------------------- ---------- -----------
<S> <C> <C>
British Treasury 6.500% 12/7/03..................... $2,073,151 13.6%
Belgium Government 6.250% 03/28/07.................. 2,072,261 13.6%
Netherlands 6.000% 01/15/06......................... 1,490,336 9.8%
Australian Government 6.750% 11/15/06............... 1,438,572 9.5%
Hypothekenbank 5.250% 01/22/08...................... 1,423,755 9.4%
---------- -----------
$8,498,075 55.9%
---------- -----------
---------- -----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Health Care 0.6%
Technology 1.5%
Consumer Staples 2.9%
Cash and Other
Assets/Liabilities 5.1%
Utilities 8.9%
Basic Materials 9.8%
Consumer Cyclical 4.6%
Capital Goods 1.9%
Transportation 3.2%
Communication Services 14.2%
Foreign Government Bonds 26.7%
Financial 16.6%
Energy 4.0%
</TABLE>
6
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities
MARCH 31, 1999
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (65.1%)
ARGENTINA (3.0%)
Investment Bankers/Brokers (.6%)
22,700 Nortel Inversora SA ADR.......................... $ 320,637
Oil-Gas (1.9%)
35,200 YPF Sociedad Anonima ADS......................... 1,111,000
Telephone (.5%)
10,020 Telefonica de Argentina ADR...................... 303,105
----------------
1,734,742
----------------
AUSTRALIA (3.2%)
Air Freight (.9%)
148,200 Mayne Nickless, Ltd.............................. 488,737
Insurance (.4%)
204,200 Reinsurance Australia Corporation, Ltd. (b)...... 240,875
Manufacturing (.9%)
248,995 Pioneer International............................ 494,263
Telephone (1.0%)
237,120 Cable and Wireless Optus, Ltd. 144A Issue (d).... 551,896
----------------
1,775,771
----------------
AUSTRIA (.6%)
Electrical Equipment (.4%)
1,650 EVN Energie-Versorung............................ 214,145
Service (.2%)
1,900 VA Technologie 144A Issue (d).................... 136,449
----------------
350,594
----------------
BELGIUM (.3%)
Mining (.3%)
4,300 Union Miniere NPV (b)............................ 148,542
----------------
BERMUDA (.8%)
Insurance (.8%)
7,700 Excel Limited.................................... 467,775
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
BRAZIL (1.2%)
Banks (.1%)
1,225,500 Unibanco......................................... $ 49,327
Telecommunication (1.1%)
1,253,300 Tele Leste Celular (b)........................... 775
1,253,300 Tele Sudeste Celular (b)......................... 4,458
7,100 Telecomunicacoes Brasileiras ADR................. 572,437
1,253,300 Telecomunicacoes Brasileiras (b)................. 153
1,253,300 Telesp Celular (b)............................... 7,081
1,253,300 Telesp Participacoes (b)......................... 16,443
----------------
650,674
----------------
CANADA (1.4%)
Chemicals (.3%)
18,100 Agrium, Inc...................................... 166,294
Oil-Gas (.2%)
29,600 Ranger Oil, Ltd.................................. 118,400
Transport Services (.9%)
90,830 Laidlaw, Inc..................................... 527,949
----------------
812,643
----------------
CHILE (.1%)
Electric Companies (.1%)
3,000 Gener SA ADR..................................... 55,125
----------------
CHINA (.2%)
Textiles (.2%)
1,150,000 Yizheng Chemical................................. 118,725
----------------
FINLAND (3.1%)
Banks (1.8%)
196,500 Merita, Ltd...................................... 1,050,175
Paper and Forest (1.0%)
39,188 Stora Enso....................................... 392,075
23,500 Metsa-Serla...................................... 174,717
Houseware (.3%)
15,000 Amer Group....................................... 200,415
----------------
1,817,382
----------------
</TABLE>
See accompanying notes to investments in securities.
7
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities - continued
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
FRANCE (6.1%)
<C> <S> <C>
Chemicals (2.6%)
17,935 Rhone-Poulenc.................................... $ 809,716
5,070 Societe Nationale Elf Aquitaine.................. 687,236
Investment Bankers/Brokers (1.9%)
8,000 AXA-UAP.......................................... 1,058,536
Mining (.1%)
2,000 Pechiney (b)..................................... 72,192
Technology (1.5%)
36,700 Alcatel ADR...................................... 837,219
----------------
3,464,899
----------------
GERMANY (3.0%)
Banks (1.6%)
17,950 Deutsche Bank (b)................................ 921,605
Electric Companies (1.4%)
14,800 Veba............................................. 776,619
----------------
1,698,224
----------------
HONG KONG (5.8%)
Banks (1.4%)
26,000 Hong Kong and Shanghai Banking Corporation (b)... 815,331
Electric Companies (.1%)
18,000 Hong Kong Electrical Holdings.................... 54,472
Houseware (.3%)
102,628 Jardine Strategic Holdings....................... 173,441
Investment Bankers/Brokers (.5%)
86,600 Jardine Matheson Holdings........................ 261,532
Publishing (.2%)
246,000 South China Morning Post Holdings LTD............ 136,508
Telecommunication (3.3%)
520,000 Hong Kong Telecommunications..................... 1,026,713
128,500 Swire Pacific Class A............................ 596,980
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
HONG KONG--CONTINUED
352,400 Swire Pacific Class B............................ $ 241,027
----------------
3,306,004
----------------
INDONESIA (.3%)
Broadcasting (.3%)
14,200 PT Indosat ADR................................... 183,713
Telecommunication ( - )
400 Indosat ADS...................................... 5,175
----------------
188,888
----------------
ISRAEL (1.3%)
Chemicals (1.3%)
15,400 TEVA Pharmaceutical.............................. 730,538
----------------
JAPAN (3.9%)
Chemicals (.2%)
3,000 Ono Pharmaceutical............................... 120,707
Electrical Equipment (1.2%)
7,300 Sony Corporation................................. 672,854
Investment Bankers/Brokers (1.3%)
73,000 Nomura Securities................................ 761,953
Telecommunication (1.2%)
70 NTT.............................................. 683,502
----------------
2,239,016
----------------
MEXICO (1.2%)
Electrical Equipment (.2%)
48,000 Vitro............................................ 96,303
Telecommunication (1.0%)
8,350 Telefonos de Mexico ADR.......................... 546,925
----------------
643,228
----------------
NETHERLANDS (3.8%)
Chemicals (.1%)
6,250 European Vinyls.................................. 45,120
Electrical Equipment (1.8%)
12,950 Philips Electronics.............................. 1,052,801
Investment Bankers/Brokers (1.7%)
17,850 ING Groep........................................ 981,864
</TABLE>
See accompanying notes to investments in securities.
8
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities - continued
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
NETHERLANDS--CONTINUED
<C> <S> <C>
Retail (.2%)
3,881 Vendex........................................... $ 93,463
----------------
2,173,248
----------------
NEW ZEALAND (.6%)
Airlines (.3%)
100,000 Air New Zealand, Ltd............................. 173,806
Health Care-Diversified (.3%)
171,400 Carter Holt Harvey, Ltd.......................... 161,326
----------------
335,132
----------------
NORWAY (.7%)
Aluminum (.3%)
13,000 Elkem (b)........................................ 191,362
Oil & Gas (.4%)
23,000 Saga Petroleum................................... 250,952
----------------
442,314
----------------
PHILIPPINES (.2%)
Telecommunication (.2%)
5,300 Philippine Long Distance Telephone............... 140,052
----------------
SOUTH AFRICA (.5%)
Metal Fabrication (.5%)
17,528 Anglo American Platinum.......................... 279,240
----------------
SPAIN (3.3%)
Electric Companies (1.3%)
50,072 Iberdrola........................................ 740,229
Oil & Gas (1.0%)
10,800 Repsol........................................... 555,085
Telecommunication (1.0%)
13,386 Telefonica de Espana............................. 566,696
----------------
1,862,010
----------------
SWEDEN (5.0%)
Aluminum (.4%)
16,900 Granges.......................................... 254,138
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
SWEDEN--CONTINUED
Banks (1.0%)
16,900 Svenska Handlesbanken (b)........................ $ 587,183
Publishing (.7%)
24,000 Esselte.......................................... 384,191
Trucks and Parts (2.9%)
17,200 Autoliv.......................................... 646,075
11,700 Autoliv, Inc. (b)................................ 444,112
20,800 Volvo............................................ 543,591
----------------
2,859,290
----------------
SWITZERLAND (3.1%)
Electrical Equipment (.6%)
270 Asea Brown Boveri................................ 356,841
Investment Bankers/Brokers (1.8%)
1,575 Zurich Allied.................................... 1,006,767
Telecommunication (.7%)
975 Swisscom......................................... 380,392
----------------
1,744,000
----------------
THAILAND (1.0%)
Banks (1.0%)
272,600 Bangkok Bank 144A Issue (d)...................... 558,993
----------------
UNITED KINGDOM (10.4%)
Airlines (1.1%)
94,200 British Airways PLC.............................. 652,037
Chemicals (1.7%)
355,000 Medeva........................................... 706,567
31,750 Nycomed Amersham PLC............................. 270,579
Construction (.3%)
54,900 Hepworth PLC..................................... 148,199
Electrical Equipment (1.2%)
154,970 BTR Siebe........................................ 682,442
460,493 Albert Fisher Group.............................. 37,107
Engineering/Construction (.1%)
32,107 Fairview Holdings................................ 62,610
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities - continued
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
UNITED KINGDOM--CONTINUED
<C> <S> <C>
Food (1.7%)
64,214 Hillsdown Holdings............................... $ 85,895
71,116 Somerfield PLC................................... 363,889
67,100 Tate & Lyle...................................... 448,234
32,107 Terranova Foods.................................. 69,854
Houseware (.4%)
138,600 Elementis........................................ 207,732
Iron and Steel (1.7%)
459,700 British Steel PLC................................ 946,441
Manufacturing (.2%)
32,000 Rolls Royce...................................... 135,117
Natural Gas (.5%)
152,500 Centrica PLC..................................... 267,889
Telecommunication (.8%)
28,500 British Telecommunications....................... 464,359
Water Utilities (.6%)
23,384 Thames Water Group............................... 354,246
----------------
5,903,197
----------------
VENEZUELA (1.0%)
Telecommunication (1.0%)
30,200 Cia Anonima Telefonos de Venezuela............... 549,263
----------------
Total common stock
(cost: $37,541,968).......................................... 37,049,509
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (3.9%)
BRAZIL (1.4%)
Banks (.7%)
54,461,000 Banco Bradesco................................... 293,740
182,000 Banco ITAU....................................... 92,328
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
BRAZIL--CONTINUED
Chemicals (.7%)
2,864,000 Petroleo Brasileiros SA.......................... $ 398,956
----------------
785,024
----------------
GERMANY (.1%)
Household Products (.1%)
2,650 Moebel Walther................................... 45,686
----------------
ITALY (1.4%)
Telecommunication (1.4%)
131,900 Telecom Italia SPA............................... 781,672
----------------
MEXICO (1.0%)
Telecommunication (1.0%)
10,300 SBC Communications, Inc. 7.75%................... 597,400
----------------
Total preferred stock
(cost: $2,074,970)........................................... 2,209,782
----------------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities - continued
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (26.7%) (C)
AUSTRALIA (2.5%)
Government (2.5%)
2,090,000 Australian Government (Australian Dollar)........ 6.750% 11/15/06 $ 1,438,572
----------------
BELGIUM (4.3%)
Government (4.3%)
326,724 Belgium Government (Belgium Franc)............... 5.000% 03/28/01 365,388
1,670,554 Belgium Government (Belgium Franc)............... 6.250% 03/28/07 2,072,261
----------------
2,437,649
----------------
CANADA (.7%)
Government (.7%)
315,000 Canadian Government Bond (Canadian Dollar)....... 7.000% 12/01/06 234,203
150,000 Canadian Government Bond (Canadian Dollar)....... 9.000% 06/01/25 149,783
----------------
383,986
----------------
DENMARK (1.1%)
Government (1.1%)
550,000 Kingdom of Denmark (Danish Kroner)............... 8.000% 05/15/03 92,811
3,445,000 Kingdom of Denmark (Danish Kroner)............... 9.000% 11/15/00 543,492
----------------
636,303
----------------
FRANCE (1.3%)
Government (1.3%)
597,600 Government of France (French Franc).............. 5.500% 04/25/07 712,568
----------------
GERMANY (5.3%)
Government (5.3%)
1,232,213 Hypothekenbank (Deutsch Mark).................... 5.250% 01/22/08 1,423,755
219,856 Federal Republic of Germany (Deutsch Mark)....... 5.250% 01/04/08 260,428
1,022,584 Treuhandanstalt (Deutsch Mark)................... 7.500% 09/09/04 1,317,716
----------------
1,578,144
----------------
ITALY (1.6%)
Government (1.6%)
671,394 Italian Government (Italian Lira)................ 7.750% 11/01/06 898,300
----------------
NETHERLANDS (3.8%)
Government (3.8%)
1,222,938 Netherlands (Dutch Guilder)...................... 6.000% 01/15/06 1,490,336
560,419 Netherlands (Dutch Guilder)...................... 8.250% 02/15/02 687,653
----------------
2,177,989
----------------
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS International Balanced Fund
Investments in Securities - continued
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
NEW ZEALAND (.6%)
<C> <S> <C> <C> <C>
Government (.6%)
600,000 New Zealand (New Zealand Dollar)................. 7.000% 07/15/09 $ 349,834
----------------
SPAIN (.8%)
Government (.8%)
330,557 Government of Spain (Spanish Peseta)............. 10.900% 08/30/03 466,211
----------------
SWEDEN (.5%)
Government (.5%)
2,000,000 Sweden Kingdom (Swedish Krona)................... 10.250% 05/05/03 304,512
----------------
UNITED KINGDOM (4.2%)
Government (4.2%)
1,190,000 United Kingdom (British Sterling Pound).......... 6.500% 12/07/03 2,073,151
165,000 United Kingdom (British Sterling Pound).......... 7.500% 12/07/06 314,444
----------------
2,387,595
----------------
Total long-term debt securities (cost: $14,554,016)................. 15,195,418
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.4%)(c)
875,000 New Zealand (New Zealand Dollar)................. 6.500% 02/15/00 477,283
300,506 Government of Spain (Spanish Peseta)............. 12.250% 03/25/00 352,331
----------------
Total short-term securities (cost: $898,063).......................... 829,614
----------------
Total investments in securities (cost: $55,069,017)(e)................ $ 55,284,323
----------------
----------------
</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) 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, 1999, which includes acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY: DATE COST
- --------------------------------------- ----------- ----------
<S> <C> <C>
Bangkok Bank........................... Various $ 664,296
VA Technologies........................ Various 180,320
Cable and Wireless Optus, Ltd. ........ Various 277,920
----------
$1,122,536
----------
----------
</TABLE>
(e) At March 31, 1999 the cost of securities for federal income tax purposes was
$55,069,017. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 7,513,431
Gross unrealized depreciation.......... (7,298,125)
------------
Net unrealized appreciation............ $ 215,306
------------
------------
</TABLE>
12
<PAGE>
ADVANTUS International Balanced Fund
Statement of Assets and Liabilities
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at market
value - see accompanying schedule for
detailed listing
(identified cost: $55,069,017)........ $55,284,323
Cash in bank on demand deposit......... 756,917
Receivable for Fund shares sold........ 11,688
Receivable for investment securities
sold.................................. 880,086
Accrued interest and dividends
receivable............................ 522,202
Receivable for refundable foreign
income taxes withheld................. 74,581
Organizational costs (note 6).......... 3,447
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)........................ 32,376
Other assets........................... 24,243
-----------
Total assets....................... 57,589,863
-----------
<CAPTION>
LIABILITIES
<S> <C>
Payable for investment securities
purchased............................. 233,785
Payable for Fund shares redeemed....... 150,688
Payable to Adviser..................... 245,431
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)........................ 15,251
Other payables......................... 30,098
-----------
Total liabilities.................. 675,253
-----------
Net assets applicable to outstanding
capital stock......................... $56,914,610
-----------
-----------
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)............................. $ 50,955
Additional paid-in capital........... 55,084,143
Undistributed net investment
income............................... 351,157
Accumulated net realized gains from
investments.......................... 1,242,444
Unrealized appreciation on
investments and translation of assets
and liabilities in foreign
currencies........................... 185,911
-----------
Total - representing net assets
applicable to outstanding capital
stock.............................. $56,914,610
-----------
-----------
Net assets applicable to outstanding
Class A shares........................ $48,788,016
-----------
-----------
Net assets applicable to outstanding
Class B shares........................ $ 5,217,516
-----------
-----------
Net assets applicable to outstanding
Class C shares........................ $ 2,909,078
-----------
-----------
Shares outstanding and net asset value
per share:
Class A - Shares outstanding
4,360,008............................ $ 11.19
-----------
-----------
Class B - Shares outstanding
472,355.............................. $ 11.05
-----------
-----------
Class C - Shares outstanding
263,120.............................. $ 11.06
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS International Balanced Fund
Statement of Operations
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 426,384
Dividends (net of foreign withholding
taxes of $7,103)................... 431,959
----------
Total investment income.......... 858,343
----------
Expenses (note 5):
Investment advisory fee.............. 246,124
Rule 12b-1 fees - Class A............ 71,124
Rule 12b-1 fees - Class B............ 27,083
Rule 12b-1 fees - Class C............ 15,567
Administrative services fee.......... 22,000
Amortization of organizational
costs.............................. 4,137
Custodian fees....................... 58,000
Auditing and accounting services..... 37,962
Legal fees........................... 5,750
Directors' fees...................... 371
Registration fees.................... 21,340
Printing and shareholder reports..... 28,294
Insurance............................ 1,844
Other................................ 8,196
----------
Total expenses................... 547,792
----------
Less fees and expenses waived or
absorbed:
Rule 12b-1 fees.................... (22,331)
----------
Total net expenses............... 525,461
----------
Investment income - net.......... 332,882
----------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)............... 2,237,395
Foreign currency transactions...... (226,512)
----------
2,010,883
----------
Net change in unrealized appreciation
or depreciation on:
Investments........................ 2,650,969
Translation of assets and
liabilities in foreign
currencies........................ 114,673
----------
2,765,642
----------
Net gains on investments and
foreign currencies.......... 4,776,525
----------
Net increase in net assets resulting
from operations.................... $5,109,407
----------
----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS International Balanced Fund
Statements of Changes in Net Assets
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999 AND YEAR ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Operations:
Investment income - net.............. $ 332,882 $ 1,381,446
Net realized gain on investments and
foreign currency transactions...... 2,010,883 2,675,187
Net change in unrealized appreciation
or depreciation on investments and
translation of assets and
liabilities in foreign
currencies......................... 2,765,642 (12,184,899)
----------- ------------
Increase (decrease) in net assets
resulting from operations...... 5,109,407 (8,128,266)
----------- ------------
Distributions to shareholders from:
Investment income - net:
Class A............................ -- (635,669)
Class B............................ -- (33,103)
Class C............................ -- (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.............. (1,940,804) (5,149,075)
----------- ------------
Capital share transactions (notes 5 and
7):
Proceeds from sales:
Class A............................ 1,130,707 9,134,250
Class B............................ 837,348 3,881,046
Class C............................ 166,554 1,811,623
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 1,627,516 3,160,078
Class B............................ 181,424 271,714
Class C............................ 106,072 310,573
Payments for redemption of shares:
Class A............................ (2,726,000) (8,890,827)
Class B............................ (936,766) (631,967)
Class C............................ (609,081) (2,203,065)
----------- ------------
Increase (decrease) in net assets
from capital share
transactions................... (222,226) 6,843,425
----------- ------------
Total increase (decrease) in net
assets......................... 2,946,377 (6,433,916)
Net assets at beginning of period...... 53,968,233 60,402,149
----------- ------------
Net assets at end of period (including
undistributed net investment income
of $351,157 and $14,138,
respectively)........................ $56,914,610 $ 53,968,233
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements
MARCH 31, 1999
(UNAUDITED)
(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.
16
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
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 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 adjustments, a reclassification adjustment was made to decrease
paid-in-capital and increase undistributed net investment income by $4,137.
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, 1999, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $9,935,682 and $11,991,268, respectively.
17
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On March 31, 1999, the Fund had entered into forward foreign currency
contracts that obligate the Fund to deliver currencies at specified future
dates. Unrealized appreciation and depreciation on these contracts is included
in the accompanying financial statements. The terms of the open contracts were
as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------- ---------------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
3/1/1999 371,008 US$ 340,000 EURO $ -- $ 4,658
3/11/1999 245,436 US$ 226,000 EURO -- 1,732
3/11/1999 122,768 US$ 113,000 EURO -- 860
3/16/1999 124,123 US$ 114,000 EURO -- 1,113
3/22/1999 124,015 US$ 114,000 EURO -- 1,061
3/22/1999 124,157 US$ 114,000 EURO -- 1,171
3/26/1999 491,326 US$ 454,000 EURO -- 1,855
3/26/1999 265,605 US$ 164,000 GBP -- 1,408
3/26/1999 132,696 US$ 82,000 GBP -- 587
3/26/1999 132,889 US$ 82,000 GBP -- 806
2/26/1999 340,000 EURO 374,959 US$ 8,609 --
3/5/1999 454,000 EURO 493,339 US$ 3,869 --
3/10/1999 226,000 EURO 247,624 US$ 3,919 --
3/10/1999 113,000 EURO 124,085 US$ 2,178 --
3/10/1999 114,000 EURO 125,753 US$ 2,743 --
3/10/1999 114,000 EURO 125,765 US$ 2,810 --
3/11/1999 114,000 EURO 125,605 US$ 2,619 --
3/11/1999 82,000 GBP 133,184 US$ 1,075 --
3/12/1999 82,000 GBP 132,963 US$ 879 --
3/16/1999 164,000 GBP 267,869 US$ 3,675 --
----------- -----------
$ 32,376 $ 15,251
----------- -----------
----------- -----------
</TABLE>
EURO European Monetary Unit
GBP British Sterling Pound
US$ United States Dollar
(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), formerly known as The
Minnesota Mutual Life Insurance Company. 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.
18
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(5) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
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 Rule 12b-1 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 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 $22,331 for the period ended March 31,
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 equal to $4,800 per month 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. In addition, for shareholder services performed by Minnesota
Life, the Adviser 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.
Sales charges received by Ascend for distributing the Fund's three classes
of shares amounted to $29,180.
As of March 31, 1999, Minnesota Life and subsidiaries and the directors and
officers of the Fund as a whole owned 2,765,535 shares or 63.4 percent of the
Fund's Class A shares.
During the period ended March 31, 1999, legal fees were paid to a law firm
of which the Fund's secretary is a partner in the amount of $4,750.
(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
19
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(6) ORGANIZATIONAL COSTS - (CONTINUED)
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 ended March 31, 1999 and the year
ended September 30, 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.................................... 100,901 741,366 75,836 318,630 15,314 146,549
Issued for reinvested distributions..... 147,451 269,372 16,595 23,062 9,696 26,970
Redeemed................................ (244,845) (725,179) (85,049) (49,589) (55,098) (184,249)
--------- --------- --------- --------- --------- ---------
3,507 285,559 7,382 292,103 (30,088) (10,730)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
(8) ILLIQUID SECURITIES
At March 31, 1999, 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 percent 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, 1999 was $1,247,338 which represents 2.2 percent of net assets.
(9) YEAR 2000
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 $14 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.
20
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(10) 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
OCTOBER 1, PERIOD FROM
1998 TO YEAR ENDED SEPTEMBER 30, SEPTEMBER 16,
MARCH 31, ---------------------------------------------------- 1994(b) TO
1999 1998 1997 1996 1995(a) 1994
------------ --------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 10.56 $ 13.29 $ 11.42 $ 10.79 $ 10.34 $ 10.54
------------ --------- --------- --------- -------- --------------
Income from investment operations:
Net investment income................ .06 .25 .30 .25 .20 .01
Net gains (losses) on securities
(both realized and unrealized)..... .95 (1.92) 2.25 .87 .56 (.21)
------------ --------- --------- --------- -------- --------------
Total from investment operations... 1.01 (1.67) 2.55 1.12 .76 (.20)
------------ --------- --------- --------- -------- --------------
Less distributions:
Dividends from net investment
income............................. -- (.14) (.40) (.28) (.19) --
Distributions from capital gains..... (.38) (.92) (.28) (.21) (.12) --
------------ --------- --------- --------- -------- --------------
Total distributions................ (.38) (1.06) (.68) (.49) (.31) --
------------ --------- --------- --------- -------- --------------
Net asset value, end of period......... $ 11.19 $ 10.56 $ 13.29 $ 11.42 $ 10.79 $ 10.34
------------ --------- --------- --------- -------- --------------
------------ --------- --------- --------- -------- --------------
Total return(c)........................ 9.61% (13.02)% 23.09% 10.73% 7.41% (1.90)%
Net assets, end of period (in
thousands)........................... $48,788 $ 46,025 $ 54,090 $ 40,381 $ 30,949 $15,430
Ratio of expenses to average daily net
assets(d)............................ 1.71%(f) 1.58% 1.51% 1.85% 2.08% .47%(e)
Ratio of net investment income (loss)
to average daily net assets(d)....... 1.12%(f) 2.18% 2.54% 2.39% 2.22% .14%(e)
Portfolio turnover rate (excluding
short-term securities)............... 17.8% 57.0% 73.4% 56.1% 52.0% 12.1%
</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 $22,321,
$162,744, $114,735, $53,123, $56,482 and $4,034 in expenses for the period
ended March 31, 1999 and the years ended September 30, 1998, 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 1.81%, 1.87%, 1.75%, 2.00%, 2.30%
and .49%, respectively, and the ratio of net investment income to average
daily net assets would have been 1.02%, 1.89%, 2.30%, 2.24%, 2.00% and
.12%, respectively.
(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.
21
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
(10) FINANCIAL HIGHLIGHTS - (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, JANUARY 31,
1998 TO YEAR ENDED 1997(a) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period... $10.47 $ 13.23 $11.95
------------ -------------- -------
Income from investment operations:
Net investment income................ .09 .39 .16
Net gains (losses) on securities
(both realized and unrealized)..... .87 (2.13) 1.30
------------ -------------- -------
Total from investment operations... .96 (1.74) 1.46
------------ -------------- -------
Less distributions:
Dividends from net investment
income............................. -- (.10) (.18)
Distributions from capital gains..... (.38) (.92) --
------------ -------------- -------
Total distributions................ (.38) (1.02) (.18)
------------ -------------- -------
Net asset value, end of period......... $11.05 $ 10.47 $13.23
------------ -------------- -------
------------ -------------- -------
Total return(b)........................ 9.21% (13.63)% 12.30%
Net assets, end of period (in
thousands)........................... $5,218 $ 4,869 $2,287
Ratio of expenses to average daily net
assets(c)............................ 2.51%(d) 2.77% 2.33%(d)
Ratio of net investment income (loss)
to average daily net assets(c)....... 1.42%(d) 3.12% 2.64%(d)
Portfolio turnover rate (excluding
short-term securities)............... 17.8% 57.0% 73.4%
</TABLE>
- ------------
(a) Commencement of operations.
(b) 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.
(c) 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 B shares had been charged for these
expenses, the ratio of expenses to average daily net assets would have been
2.92% and 2.47%, respectively, and the ratio of net investment income to
average daily net assets would have been 2.97% and 2.50%, 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 2.96%, 2.45% and
3.00%, respectively, and the ratio of net investment income to average
daily net assets would have been 2.99%, 2.41% and 1.32%, respectively, for
the years ended September 30, 1998 and 1997 and the period ended September
30, 1995.
(d) Adjusted to an annual basis.
22
<PAGE>
ADVANTUS International Balanced Fund
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, MARCH 1,
1998 TO YEAR ENDED SEPTEMBER 30, 1995(a) TO
MARCH 31, ---------------------------------- SEPTEMBER 30,
1999 1998 1997 1996 1995
------------ ---------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $10.48 $ 13.24 $ 11.40 $ 10.77 $ 9.95
------------ ---------- --------- --------- -------
Income from investment operations:
Net investment income................ .09 .39 .26 .15 .11
Net gains (losses) on securities
(both realized and unrealized)..... .87 (2.13) 2.16 .89 .91
------------ ---------- --------- --------- -------
Total from investment operations... .96 (1.74) 2.42 1.04 1.02
------------ ---------- --------- --------- -------
Less distributions:
Dividends from net investment
income............................. -- (.10) (.30) (.20) (.13)
Distributions from capital gains..... (.38) (.92) (.28) (.21) (.07)
------------ ---------- --------- --------- -------
Total distributions................ (.38) (1.02) (.58) (.41) (.20)
------------ ---------- --------- --------- -------
Net asset value, end of period......... $11.06 $ 10.48 $ 13.24 $ 11.40 $10.77
------------ ---------- --------- --------- -------
------------ ---------- --------- --------- -------
Total return(b)........................ 9.20% (13.67)% 21.95% 9.93% 10.26%
Net assets, end of period (in
thousands)........................... $2,909 $ 3,074 $ 4,025 $ 1,811 $ 330
Ratio of expenses to average daily net
assets(c)............................ 2.52%(d) 2.80% 2.37% 2.61% 2.93%(d)
Ratio of net investment income (loss)
to average daily net assets(c)....... 1.43%(d) 3.15% 2.50% 1.15% 1.39%(d)
Portfolio turnover rate (excluding
short-term securities)............... 17.8% 57.0% 73.4% 56.1% 52.0%
</TABLE>
- ------------
23
<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 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.
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 monthly, semi-monthly or quarterly 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, 401(k) 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. 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
24
<PAGE>
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 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 Systematic Investment Plan. Minimum lump-sum
initial investment is $250. Minimum subsequent investment is $25.
THE FUND'S MANAGER
Advantus Capital Management, Inc., investment adviser to the Fund, selects and
reviews the Fund's investments and provides executive and other personnel for
the Fund's management. (For the Advantus International Balanced Fund, Inc., the
sub-adviser, Templeton Investment Counsel, Inc., selects the Fund's
investments.)
Advantus Capital Management, Inc. manages thirteen mutual funds containing $3.2
billion in assets in addition to $11.0 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
25
<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>
ASCEND FINANCIAL SERVICES, INC.
400 ROBERT STREET NORTH [POSTAGE]
ST. PAUL, MN 55101-2098
ADDRESS SERVICE REQUESTED
F.48650 Rev. 5-1999
