<PAGE>
INTERNATIONAL
ADVANTUS INTERNATIONAL BALANCED FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS DATED MARCH 31, 2000
[LOGO]
[GRAPHIC]
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
TABLE OF CONTENTS
PERFORMANCE UPDATE 2
INVESTMENTS IN SECURITIES 8
STATEMENT OF ASSETS AND LIABILITIES 13
STATEMENT OF OPERATIONS 14
STATEMENTS OF CHANGES IN NET ASSETS 15
NOTES TO FINANCIAL STATEMENTS 16
SHAREHOLDER SERVICES 22
<PAGE>
LETTER FROM THE PRESIDENT [PHOTO]
Dear Shareholder:
Americans are enjoying the longest period of economic expansion in
U.S. history. This period of growth, which began in March of 1992, recorded its
eighth year of uninterrupted growth in March. To date, the Federal Reserve's
actions to slow the nation's growth engine have not dramatically impacted the
upward trend. Despite the run-up in interest rates over the past year, housing
starts and auto sales, indicators of a robust economy, remain strong.
Around the globe we are seeing economic growth accelerate, albeit at a modest
pace. Asia is rapidly recovering from the economic debacle of the late 90s. The
Bank of Japan has kept interest rates near zero to further assist that country's
recovery. In Europe, the Central Bank raised rates to support a weak euro and
guard against inflation. Latin American economies, such as Brazil, are showing
signs of increasing strength (e.g., lower inflation, job creation). No country
comes close to the sustained economic vigor of the U.S., but many of the world's
economies are growing.
Volatility in the stock market was frequent and dramatic throughout the
six-months, with the wildest of the ride coming in early April, shortly after
this reporting period ended. The first calendar quarter of the new millennium
was a time of contrasts. For the first two months, the broad market was slightly
down, with the growth sector of technology rising and the value sectors of the
market falling. March was a reversal, with a strong rally in traditional value
stocks and a pullback in the technology arena, adding to the market tumult.
Technology, however, continues to drive the increased spending in businesses. As
tech spending increases, so does productivity.
Interest rates also showed a mixed picture. The Federal Reserve raised the Fed
Funds rate five times between June 1999 and March 2000. Each time only
.25 percent, a cumulative increase of 1.25 percent over this 10-month period.
However, longer maturity Treasury bond prices rose and their yields declined as
the U.S. Treasury used some of the budget surplus to begin buying back Treasury
bonds. Meanwhile, corporate bond yields increased.
In the pages that follow, your Fund's portfolio manager will give you his
insight on the Fund's performance for this reporting period. Also, we are
pleased to announce that you can now access your Advantus Funds data online
through the Advantus web site: www.advantusfunds.com. To learn how you can
access your Advantus Fund information through our internet site, call Advantus
Shareholder Services at 1-800-665-6005.
We value your business and want to make doing business with us as easy for you
as possible. Thank you for investing with Advantus.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Funds
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
PERFORMANCE UPDATE
[PHOTOS]
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
ended March 31, 2000 for each class of shares offered was as follows:
<TABLE>
<S> <C>
CLASS A.......................... 9.15 PERCENT*
CLASS B.......................... 8.61 PERCENT*
CLASS C.......................... 8.61 PERCENT*
</TABLE>
By comparison, an international equity index, the MSCI EAFE Index,** returned
17.00 percent, and an international bond index, the J.P. Morgan Non-U.S.
Government Bond Index+ returned -3.17 percent for the same period.
PERFORMANCE ANALYSIS
The performance of global equity markets during the six months ending March 31,
2000 continued to distinctly reflect the extreme divergence between the
performance and valuation levels of technology, communication and media stocks
on the one hand and almost every other sector deemed to be "old economy" on the
other. While the former continued to attract investor interest during most of
the period, the final weeks of the period provided a reversal of that seemingly
entrenched pattern and depressed value-style stocks began to improve. The
performance of your Fund was ahead of the blended 60 percent MSCI EAFE Index**
and 40 percent JPMorgan Non-U.S. Government Bond Index+ during the first half of
the Fund's year (a gain of 9.15 percent vs. 8.9 percent).
Given the persistence of the equity market's multi-year trend favoring growth
and technology, the performance of this period is encouraging given the very
favorable valuation characteristics of your Fund. Our relative underweight in
the strongly performing Japanese market hurt returns, although our stock
selection was strong and our holdings in Nomura and Sony outperformed the
Japanese index by a wide margin. Strong stock selection in Hong Kong also added
to our relative performance, as did the Fund's holdings in Latin America.
Specifically, our holdings in Telmex in Mexico and Embratel and Telecomunicacoes
de Sao Paulo in Brazil contributed to performance. Our relative underperformance
in the UK was the primary reason for lagging the benchmarks, as our holdings in
unloved industrial, engineering and retailing companies declined in value, while
the UK market showed a small positive return overall.
We continue to find the prospects in Europe equities the most tantalizing, and
the bulk of your portfolio's assets are positioned there. The virtuous cycle of
improving competitiveness involving the closure of excess capacity, cost cutting
and restructuring, as well as the advent of an equity investment culture in
Europe, has much further to go in our opinion. Just as tax reductions worked to
stimulate the overall economy in the U.S., we think tax reductions currently
proposed in Germany are just as significant. While searching for bargains
selling at fractions of what we believe to be their true
2
<PAGE>
worth, we are paying particular attention to those managers with track records
of creating value for all shareholders, not just a select few. Excess cash flows
that previously were spent on new capacity as a means of supporting the
workforce are now being directed to corporate activity such as paying down debt
and buying back shares. Merger and acquisition activity has also picked up
markedly, and several of our holdings benefited from this recognition of value.
OUTLOOK
Looking forward, we believe that while technology-linked Japanese companies are
showing strong growth, their equity valuations heavily discount the positive
outlook and are not compelling in our view. In addition, these buoyant, newer
elements of Japan's economy are still small in relation to overall output, and
offer no immediate solutions to the large-scale structural problems of excess
capacity, high public debt, and low private consumption which remain pervasive
in Japan. We will continue to invest in companies in Japan when we identify low
valuation in relation to earnings growth as well as management that is actively
incorporating restructuring initiatives. On balance, our investments in the rest
of Asia and in Latin America, made primarily during the financial crisis,
continue to perform well. While valuations have recovered significantly, we
believe that the potential for strong earnings gains is still ahead as economies
continue to rebound.
From a fixed income perspective, early in the period investors continued to be
cautious regarding interest rates partly because of the potential negative
effect of higher oil prices on inflation, but mostly because of upward revisions
of global economic growth forecasts. The cautious approach to global fixed
income resulted from confirmation of an economic recovery in Europe and better
than expected growth in Japan, as well as continued growth in the U.S. The
improved economic outlook was expected to result in higher commodity prices,
capacity utilization rates and employment rates, all of which would add to
inflationary pressures and a tighter monetary policy stance by central banks.
Thus the positive trend in global growth led to the consensus view that the
industrial economies, except for perhaps Japan, had reached the bottom of their
respective interest rate cycles. Later in the period bond supply issues, equity
market volatility and short covering began to offset such concerns as investors
put money back in the global fixed income markets for the first time in quite a
while.
During the period under review, JP Morgan's Non-U.S. Government Bond Index+ (ex.
U.S.) posted a positive return of 2.11 percent measured in local currency terms,
despite tighter monetary policies by major central banks, as a result of an
expected reduction in the supply of government bonds. The reduction in supply is
expected to result from fiscal surpluses in the U.S. and lower deficits in
Europe. A short covering rally of bond positions due to supply concerns and
volatile equity markets led the market higher towards the end of the quarter.
Weakness in most major currencies against the U.S. dollar resulted in lower
returns for the global index in U.S. dollar terms. The
3
<PAGE>
Global Government Bond Index (ex. U.S.) posted a negative return of
-3.17 percent in U.S. dollars. In local currency terms, prices of European bonds
rose, as most European bond markets offered positive returns. The Danish market
outperformed the Euroland countries, up 2.18 percent, while Sweden was up
3.93 percent. Japan remained relatively flat, up 0.24 percent, mostly as a
result of capital flows into the Japanese asset markets on expectations of an
economic recovery, stable interest rates, and a stronger Yen.++
Over the past six months, we continued to adjust fixed income positions within
the European and the dollar-bloc allocations to better reflect our views of the
current and expected market conditions. The fixed income assets of the
International Balanced Fund continue to be predominantly invested in government
bonds issued and guaranteed by the major global industrial countries.
As always, our philosophy and process at Templeton remain consistent and we will
always be very concerned with the price we pay for shares. We very much
appreciate your continued support.
*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. If these charges were reflected, performance would be reduced.
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.
++Investment risks associated with international investing, in addition to other
risks, include currency fluctuations, political and economic instability, and
differences in accounting standards when investing in foreign markets.
4
<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
March 31, 2000.
CLASS A
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
One year 9.78%
Five year 9.12%
Since inception (9/16/94) 7.63%
</TABLE>
<TABLE>
<CAPTION>
CLASS A EAFE INDEX J.P. MORGAN INDEX CPI
<S> <C> <C> <C> <C>
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
3/31/2000 $15,036 $18,102 $13,804 $11,482
</TABLE>
(Thousands)
CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
One year 10.20%
Since inception (1/31/97) 5.82%
</TABLE>
<TABLE>
<CAPTION>
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
9/30/99 $10,887 $13,573 $11,310 $10,507
3/31/00 $11,954 $15,881 $10,951 $10,713
</TABLE>
(Thousands)
5
<PAGE>
CLASS C
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
One year 15.08%
Five year 9.45%
Since inception (3/1/95) 9.73%
</TABLE>
<TABLE>
<CAPTION>
CLASS C EAFE INDEX J.P. MORGAN INDEX CPI
<S> <C> <C> <C> <C>
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 $14,763 $16,530 $13,335 $11,119
3/31/2000 $16,034 $19,340 $12,912 $11,338
</TABLE>
(Thousands)
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. 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.
6
<PAGE>
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
------- -------- ---------- -----------
<S> <C> <C> <C>
Sony Corporation............................. 10,200 $1,439,416 3.9%
Nomura Securities............................ 43,600 1,421,509 3.8%
Celltech Group............................... 71,200 1,288,154 3.4%
TEVA Pharmaceutical Industries, Ltd.......... 30,800 1,149,225 3.1%
Alcatel ADR.................................. 26,200 1,147,888 3.1%
---------- ---------
$6,446,192 17.3%
========== =========
</TABLE>
FIVE LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
------- ----------- -----------
<S> <C> <C>
International Bank of Reconstruction and
Development 5.250%, 3/20/02...................... $ 2,420,781 12.8%
Italian Government 7.750%, 11/01/06................ 2,282,389 12.0%
United Kingdom 7.500%, 12/07/06.................... 1,870,593 9.9%
Government of France 3.500%, 7/12/04............... 1,785,022 9.4%
Federal Republic of Germany 4.500%, 7/04/09........ 1,697,326 8.9%
----------- ---------
$10,056,111 53.0%
=========== =========
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other Assets/Liabilities 4.0%
Foreign Government Bonds 30.7%
Consumer Staples 0.8%
Capital Goods 8.2%
Utilities 4.2%
Consumer Cyclical 1.8%
Communication Services 16.3%
Transportation 2.1%
Basic Materials 6.1%
Health Care 3.5%
Financial 17.6%
Energy 4.7%
</TABLE>
7
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES
MARCH 31, 2000
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------ ---------------
<C> <S> <C>
COMMON STOCK (60.0%)
ARGENTINA (2.0%)
Telecommunication (2.0%)
22,700 Nortel Invesora SA ADR........................... $ 468,188
17,820 Telefonica de Argentina SA ADR................... 699,435
-----------
1,167,623
-----------
AUSTRALIA (3.2%)
Air Freight (.5%)
148,200 Mayne Nickless, Ltd.............................. 302,614
Banks (1.4%)
131,200 Australia & New Zealand Banking Group, Ltd....... 829,219
Manufacturing (1.3%)
288,812 Pioneer International, Ltd....................... 788,068
-----------
1,919,901
-----------
AUSTRIA (.2%)
Electrical Equipment (.2%)
920 EVN.............................................. 100,995
-----------
BERMUDA (1.5%)
Insurance (1.5%)
15,400 XL Capital, Ltd. Class A......................... 852,775
-----------
BRAZIL (2.1%)
Banks (.1%)
1,225,500 Unibanco......................................... 76,991
Telecommunication (2.0%)
38,883,000 Embratel Participacoes........................... 688,016
27,777,300 Telesp Celular Participacoes..................... 486,703
-----------
1,251,710
-----------
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------------
CANADA (1.0%)
<C> <S> <C>
Mining ( - )
5,500 Kinross Gold Corporation (b)..................... $ 8,503
Oil & Gas (.8%)
29,600 Ranger Oil, Ltd.................................. 114,700
49,750 Renaissance Energy, Ltd. (b)..................... 379,417
Transport Services (.2%)
90,830 Laidlaw, Inc..................................... 130,568
-----------
633,188
-----------
FINLAND (2.2%)
Banks (1.8%)
200,430 Nordic Baltic Holdings........................... 1,053,310
Paper and Forest (.4%)
23,500 Metsa-Serla...................................... 208,825
-----------
1,262,135
-----------
FRANCE (6.2%)
Chemicals (1.4%)
14,999 Aventis (b)...................................... 819,764
Insurance (1.9%)
8,000 AXA.............................................. 1,132,076
Oil & Gas (.9%)
3,610 Total Fina Elf................................... 539,824
Telecommunication (2.0%)
26,200 Alcatel ADR...................................... 1,147,888
-----------
3,639,552
-----------
GERMANY (1.3%)
Electric Companies (1.3%)
14,800 Veba............................................. 755,151
-----------
HONG KONG (3.1%)
Electric Companies (.1%)
18,000 Hong Kong Electric Holdings...................... 54,325
Houseware (.4%)
102,628 Jardine Strategic Holding........................ 209,361
</TABLE>
See accompanying notes to investments in securities.
8
<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.................................... $ 574,995
28,000 Peregrine Investments Holdings................... 0
Telecommunication (1.6%)
128,500 Swire Pacific Class A............................ 663,418
352,400 Swire Pacific Class B............................ 244,392
-----------
1,746,491
-----------
INDONESIA (.8%)
Telecommunication (.8%)
26,500 Indostat ADR..................................... 455,469
-----------
ISRAEL (2.0%)
Drugs (2.0%)
30,800 TEVA Pharmaceutical Industries, Ltd.............. 1,149,225
-----------
JAPAN (9.1%)
Drugs (1.1%)
18,000 Ono Pharmaceutical............................... 635,913
Electrical Equipment (2.5%)
10,200 Sony Corporation................................. 1,439,416
Investment Bankers/Brokers (2.4%)
43,600 Nomura Securities................................ 1,421,509
Retail ( - )
3,000 Best Denki....................................... 19,708
Telecommunication (1.9%)
70 NTT.............................................. 1,110,462
Water Utilities (1.2%)
37,000 Kurita Water Industries.......................... 716,594
-----------
5,343,602
-----------
MEXICO (1.9%)
Telecommunication (1.9%)
16,700 Telefonos de Mexico ADR.......................... 1,118,900
-----------
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------------
NETHERLANDS (1.7%)
<C> <S> <C>
Investment Bankers/Brokers (1.7%)
17,850 ING Groep........................................ $ 965,351
-----------
NEW ZEALAND (1.1%)
Telecommunication (1.1%)
141,000 Telecom Corporation of New Zealand............... 636,874
-----------
NORWAY (.5%)
Chemicals (.5%)
7,666 Norsk Hydro...................................... 289,469
-----------
PERU (.6%)
Telecommunication (.6%)
20,400 Telefonica del Peru ADR.......................... 346,800
-----------
PHILIPPINES (.2%)
Telecommunication (.2%)
5,300 Philippine Long Distance Telephone............... 116,200
-----------
PORTUGAL (.7%)
Telecommunication (.7%)
33,750 Portugal Telecom................................. 432,125
-----------
SOUTH AFRICA (.3%)
Mining (.3%)
6,300 Anglogold Ltd. ADR............................... 151,200
-----------
SPAIN (2.3%)
Electric Companies (1.1%)
50,072 Iberdrola........................................ 652,111
Oil & Gas (1.2%)
32,400 Repsol........................................... 709,252
-----------
1,361,363
-----------
SWEDEN (3.7%)
Banks (1.9%)
36,300 Foreningssparbaken............................... 492,944
50,700 Svenska Handlesbanken............................ 624,038
</TABLE>
See accompanying notes to investments in securities.
9
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------------
SWEDEN--CONTINUED
<C> <S> <C>
Trucks and Parts (1.8%)
17,200 Autoliv.......................................... $ 516,000
20,800 Volvo............................................ 560,109
-----------
2,193,091
-----------
SWITZERLAND (1.4%)
Investment Bankers/Brokers (1.4%)
1,575 Zurich Allied Ag................................. 793,227
-----------
UNITED KINGDOM (10.9%)
Airlines (1.4%)
154,400 British Airways PLC.............................. 810,237
Chemicals (2.2%)
71,200 Celltech Group (b)............................... 1,288,154
Electrical Equipment (1.2%)
137,200 Williams PLC..................................... 693,757
Food (.8%)
57,100 Sainsbury........................................ 257,355
67,100 Tate & Lyle...................................... 233,765
Houseware (.4%)
138,600 Elementis........................................ 217,425
Manufacturing (1.2%)
218,600 Rolls-Royce...................................... 707,604
Medical Products/Supplies (.4%)
31,750 Nycomed Amersham................................. 260,790
<CAPTION>
MARKET
SHARES VALUE(A)
-----------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
<C> <S> <C>
Oil & Gas (1.8%)
129,600 Shell $ 1,073,292
Transportation & Trading........................
Retail (1.0%)
101,300 Marks & Spencer.................................. 404,135
270,500 Storehouse....................................... 159,396
Water Utilities (.5%)
23,384 Thames Water..................................... 264,229
-----------
6,370,139
-----------
Total common stock
(cost: $30,487,817)............................................ 35,052,556
-----------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (3.6%)
BRAZIL (2.1%)
Banks (.8%)
54,461,000 Banco Bradesco................................... 453,580
Chemicals (1.3%)
2,864,000 Petrol Brasileiros............................... 779,140
-----------
1,232,720
-----------
ITALY (1.5%)
Telecommunication (1.5%)
131,900 Telecom Italia Spa............................... 897,337
-----------
Total preferred stock
(cost: $1,350,294)............................................. 2,130,057
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
---------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (32.4%) (C)
AUSTRALIA (.9%)
Government (.9%)
600,000 New South Wales Treasury Corporation (Australian
Dollar)......................................... 7.000% 04/01/04 367,015
314,000 Queensland Treasury Corporation (Australian
Dollar)......................................... 6.500% 06/14/05 187,952
----------
554,967
----------
</TABLE>
See accompanying notes to investments in securities.
10
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
----------------------------------------------------------------------------------------------
BELGIUM (1.4%)
<C> <S> <C> <C> <C>
Government (1.4%)
757,000 Belgium Government (European Currency Unit)...... 7.750% 10/15/04 $ 800,563
----------
CANADA (1.9%)
Government (1.9%)
789,000 Canadian Government (Canadian Dollar)............ 7.000% 12/01/06 573,708
671,000 Canadian Government (Canadian Dollar)............ 8.750% 12/01/05 521,730
----------
1,095,438
----------
DENMARK (1.1%)
Government (1.1%)
4,844,000 Kingdom of Denmark (Danish Kroner)............... 7.000% 12/15/04 663,334
----------
FRANCE (3.0%)
Government (3.0%)
1,967,000 Government of France (European Currency Unit).... 3.500% 07/12/04 1,785,022
----------
GERMANY (4.5%)
Government (4.5%)
1,043,000 Federal Republic of Germany (European Currency
Unit)........................................... 3.250% 02/17/04 944,365
1,875,000 Federal Republic of Germany (European Currency
Unit)........................................... 4.500% 07/04/09 1,697,326
----------
2,641,691
----------
ITALY (3.9%)
Government (3.9%)
2,112,393 Italian Government (European Currency Unit)...... 7.750% 11/01/06 2,282,389
----------
JAPAN (6.5%)
Government (6.5%)
125,800,000 International Bank of Reconstruction and
Development (Japanese Yen)...................... 4.500% 03/20/03 1,362,925
227,000,000 International Bank of Reconstruction and
Development (Japanese Yen)...................... 5.250% 03/20/02 2,420,781
----------
3,783,706
----------
NETHERLANDS (1.4%)
Government (1.4%)
840,000 Netherlands Government (European Currency
Unit)........................................... 5.750% 02/15/07 828,977
----------
SPAIN (2.1%)
Government (2.1%)
377,000 Government of Spain (European Currency Unit)..... 3.250% 01/31/05 332,486
790,000 Government of Spain (European Currency Unit)..... 7.350% 03/31/07 846,129
</TABLE>
See accompanying notes to investments in securities.
11
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
INVESTMENTS IN SECURITIES - CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
--------- ----------
SPAIN--CONTINUED
<C> <S> <C> <C> <C>
30,001 Government of Spain (European Currency Unit)..... 10.900% 08/30/03 $ 33,772
----------
1,212,387
----------
SWEDEN (.8%)
Government (.8%)
3,800,000 Sweden Kingdom (Swedish Krona)................... 6.000% 02/09/05 451,549
----------
UNITED KINGDOM (3.2%)
Government (3.2%)
1,075,000 United Kingdom (British Sterling Pound).......... 7.500% 12/07/06 1,870,593
----------
UNITED STATES (1.7%)
Investment Bankers/Brokers (1.7%)
1,043,000 General Motors (European Currency Unit).......... 5.500% 02/02/05 998,081
----------
Total long-term debt securities (cost: $20,403,267)................. 18,968,697
----------
SHORT-TERM SECURITIES (3.5%)
UNITED STATES (3.5%)
2,014,985 Bankers Trust Institutional Liquid Assets,
current rate.................................... 5.677% 2,014,985
----------
Total short-term securities (cost: $2,014,984)...................... 2,014,985
----------
Total investments in securities (cost: $54,256,362) (d)............. $58,166,295
==========
</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) Principle amounts for foreign debt securities are denominated in the
currencies indicated.
(d) At March 31, 2000 the cost of securities for federal income tax purposes was
$54,826,113. The aggregate unrealized appreciation and depreciation of
investments in securities based on their cost were:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation...................................................... $ 9,994,264
Gross unrealized depreciation...................................................... (6,654,082)
--------------
Net unrealized appreciation........................................................ $ 3,340,182
==============
</TABLE>
12
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market
value - see accompanying schedule for
detailed listing
(identified cost: $54,256,362)........ $58,166,295
Receivable for Fund shares sold........ 7,968
Accrued interest and dividend
receivable............................ 461,051
Other receivable....................... 2,151
Receivable for refundable foreign
income taxes withheld................. 40,384
----------
Total assets....................... 58,677,849
----------
LIABILITIES
Payable for Fund shares redeemed....... 40,972
Payable to Adviser..................... 89,243
Other payables......................... 5,301
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)........................ 72,085
----------
Total liabilities.................. 207,601
----------
Net assets applicable to outstanding
capital stock......................... $58,470,248
==========
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................................ $ 48,466
Additional paid-in capital........... 52,093,803
Undistributed net investment
income............................... 26,768
Accumulated net realized gains from
investments.......................... 2,522,586
Unrealized appreciation on
investments and translation of assets
and liabilities in foreign
currencies........................... 3,778,625
----------
Total - representing net assets
applicable to outstanding capital
stock.............................. $58,470,248
==========
Net assets applicable to outstanding
Class A shares........................ $51,017,213
==========
Net assets applicable to outstanding
Class B shares........................ $5,412,385
==========
Net assets applicable to outstanding
Class C shares........................ $2,040,650
==========
Shares outstanding and net asset value
per share:
==========
Class A - Shares outstanding
4,221,331............................ $ 12.09
==========
Class B - Shares outstanding
454,206.............................. $ 11.92
==========
Class C - Shares outstanding
171,012.............................. $ 11.93
==========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest............................. $ 427,759
Dividends (net of foreign witholding
taxes of $28,798).................. 509,850
---------
Total investment income............ 937,609
---------
Expenses (note 5):
Investment advisory fee.............. 249,495
Rule 12b-1 - Class A................. 63,313
Rule 12b-1 - Class B................. 26,872
Rule 12b-1 - Class C................. 10,812
Administrative services fee.......... 31,800
Custodian fees....................... 26,116
Auditing and accounting services..... 44,575
Legal fees........................... 4,000
Directors' fees...................... 1,740
Registration fees.................... 16,750
Printing and shareholder reports..... 34,050
Insurance............................ 1,817
Other................................ 15,381
---------
Total expenses..................... 526,721
Less fees and expenses waived or
absorbed by the Distributor:
Class A Rule 12b-1 fees.............. (12,663)
---------
Total net expenses................. 514,058
---------
Investment income - net............ 423,551
---------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)............... 3,365,963
Foreign currency transactions...... (296,475)
---------
3,069,488
---------
Net change in unrealized appreciation
or depreciation on:
Investments........................ 1,669,007
Translation of other assets and
liabilities in foreign
currencies........................ (132,456)
---------
1,536,551
---------
Net gains on investments........... 4,606,039
---------
Net increase in net assets resulting
from operations...................... $5,029,590
=========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 AND YEAR ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------- ------------
<S> <C> <C>
Operations:
Investment income - net.............. $ 423,551 $ 962,175
Net realized gain on investments and
foreign currency translations...... 3,069,488 3,023,068
Net change in unrealized appreciation
or depreciation on investments and
translation of assets and
liabilities in foreign
currencies......................... 1,536,551 4,821,805
----------- ------------
Increase in net assets resulting
from operations.................. 5,029,590 8,807,048
----------- ------------
Distributions to shareholders from:
Investment income - net:
Class A............................ (768,478) (458,918)
Class B............................ (61,759) (27,664)
Class C............................ (22,763) (13,418)
Net realized gains on investments:
Class A............................ (2,403,909) (1,647,144)
Class B............................ (253,578) (184,787)
Class C............................ (101,998) (108,873)
----------- ------------
Total distributions................ (3,612,485) (2,440,804)
----------- ------------
Capital share transactions (notes 5 and
6):
Proceeds from sales:
Class A............................ 719,081 9,201,903
Class B............................ 450,565 1,190,985
Class C............................ 98,814 255,735
Proceeds from issuance of shares as a
result of reinvested dividends:
Class A............................ 2,634,720 1,782,694
Class B............................ 302,683 212,640
Class C............................ 124,485 119,179
Payments for redemption of shares:
Class A............................ (3,070,280) (12,983,074)
Class B............................ (763,310) (1,532,470)
Class C............................ (748,899) (1,276,785)
----------- ------------
Decrease in net assets from
capital share transactions... (252,141) (3,029,193)
----------- ------------
Total increase in net assets... 1,164,964 3,337,051
Net assets at beginning of period.... 57,305,284 53,968,233
----------- ------------
Net assets at end of period (includes
undistributed net investment income
of $26,768 and $456,217,
respectively)...................... $58,470,248 $ 57,305,284
=========== ============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(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.
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, 2000, purchases of securities and proceeds
from sales, other than temporary investments in short-term securities,
aggregated $7,956,537 and $13,395,155, respectively.
17
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On March 31, 2000, the Fund had entered into forward foreign currency
contracts that obligate the Fund to deliver currencies at specified future
dates. Unrealized depreciation on these contracts is included in the
accompanying financial statements. The terms of the open contracts were as
follows:
<TABLE>
<CAPTION>
CURRENCY TO CURRENCY TO UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED DEPRECIATION
------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
4/6/2000........................ 27,821,000 JPY 257,435 US$ $13,639
4/17/2000....................... 166,928,000 JPY 1,589,034 US$ 40,841
4/18/2000....................... 27,821,000 JPY 264,962 US$ 6,732
4/28/2000....................... 27,821,000 JPY 261,338 US$ 10,873
-------
$72,085
=======
</TABLE>
---------
JPY Japanese Yen
US$ 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). 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 (PFPC
Global Fund Services, formerly First Data Investor Services Group). 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 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, .15 percent. Ascend waived
Class A Rule 12b-1 fees in the amount of $12,663 for the period ended March 31,
2000.
18
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS - (CONTINUED)
The Fund also bears certain other operating expenses including outside
directors' fees, custodian fees, registration fees, printing and shareholder
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 also pays an administrative services fee to Minnesota Life for accounting,
auditing, legal and other administrative services which Minnesota Life provides.
Effective August 1, 1999, the administrative services fee was $5,300 per month.
For the period from February 1, 1999 to July 31, 1999, the administrative
services fee was $4,800 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 Fund's 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 $23,350.
As of March 31, 2000, Minnesota Life and subsidiaries and the directors and
officers of the Fund as a whole owned 2,900,901 shares or 68.7 percent of the
Funds Class A shares.
During the period ended March 31, 2000, legal fees were paid to a law firm
of which the Fund's secretary is a partner in the amount of $2,825.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares for the period ended March 31, 2000 and the year
ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
-------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sold...................................... 60,692 782,370 38,634 105,488 8,392 23,027
Issued for reinvested distributions....... 224,847 160,601 26,176 19,495 10,772 10,820
Redeemed.................................. (257,577) (1,106,103) (64,456) (136,104) (63,396) (111,811)
-------- ---------- ------- -------- ------- --------
27,962 (163,132) 354 (11,121) (44,232) (77,964)
======== ========== ======= ======== ======= ========
</TABLE>
19
<PAGE>
ADVANTUS INTERNATIONAL BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(7) FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock and selected information for
each period are as follows:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
PERIOD FROM
OCTOBER 1,
1999 TO
MARCH 31, YEAR ENDED SEPTEMBER 30,
2000 --------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995(A)
----------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 11.80 $ 10.56 $ 13.29 $ 11.42 $ 10.79 $ 10.34
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ .08 .21 .28 .31 .25 .20
Net gains (losses) on securities
(both realized and unrealized)..... .97 1.52 (1.95) 2.24 .87 .56
------- ------- ------- ------- ------- -------
Total from investment operations... 1.05 1.73 (1.67) 2.55 1.12 .76
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (.18) (.11) (.14) (.40) (.28) (.19)
Distributions from net realized
gains.............................. (.58) (.38) (.92) (.28) (.21) (.12)
------- ------- ------- ------- ------- -------
Total distributions................ (.76) (.49) (1.06) (.68) (.49) (.31)
------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 12.09 $ 11.80 $ 10.56 $ 13.29 $ 11.42 $ 10.79
======= ======= ======= ======= ======= =======
Total return(c)........................ 9.15% 16.65% (13.02)% 23.09% 10.73% 7.41%
Net assets, end of period (in
thousands)........................... $51,017 $49,502 $46,025 $54,090 $40,381 $30,949
Ratio of expenses to average daily net
assets(d)(e)......................... 1.66%(f) 1.63% 1.62% 1.51% 1.85% 2.08%
Ratio of net investment income (loss)
to average daily net assets(d)(e).... 1.56%(f) 1.77% 2.38% 2.58% 2.39% 2.22%
Portfolio turnover rate (excluding
short-term securities)............... 14.1% 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, $53,123 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 year ended September 30, 1998 and for 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, 1997, and the period ended
September 30, 1995.
(e) The Fund's Distributor voluntarily waived $12,663, $35,105 and $53,123 in
class A Rule 12b-1 fees for the period ended March 31, 2000, and 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 1.71%, 1.70% and 2.00%, respectively, and the ratio of net
investment income to average daily net assets would have been 1.51%, 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 CLASS C
---------------------------------------------- -----------
PERIOD FROM PERIOD FROM
OCTOBER 1, PERIOD FROM OCTOBER 1,
1999 TO YEAR ENDED JANUARY 31, 1999 TO
MARCH 31, SEPTEMBER 30, 1997(B) TO MARCH 31,
2000 ------------------ SEPTEMBER 30, 2000
(UNAUDITED) 1999 1998 1997 (UNAUDITED)
----------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $11.66 $10.47 $13.23 $11.95 $11.66
------ ------ ------ ------ ------
Income from investment operations:
Net investment income................ .08 .12 .19 .18 .08
Net gains (losses) on securities
(both realized and unrealized)..... .89 1.51 (1.93) 1.28 .89
------ ------ ------ ------ ------
Total from investment operations... .97 1.63 (1.74) 1.46 .97
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income............................. (.13) (.06) (.10) (.18) (.12)
Distributions from net realized
gains.............................. (.58) (.38) (.92) -- (.58)
------ ------ ------ ------ ------
Total distributions................ (.71) (.44) (1.02) (.18) (.70)
------ ------ ------ ------ ------
Net asset value, end of period......... $11.92 $11.66 $10.47 $13.23 $11.93
====== ====== ====== ====== ======
Total return(c)........................ 8.61% 15.84% (13.63)% 12.30% 8.61%
Net assets, end of period (in
thousands)........................... $5,412 $5,293 $4,869 $2,287 $2,041
Ratio of expenses to average daily net
assets(d)(e)......................... 2.46%(f) 2.43% 2.29% 2.33%(f) 2.46%(f)
Ratio of net investment income (loss)
to average daily net assets(d)(e).... .75%(f) .94% 1.77% 3.26%(f) .75%(f)
Portfolio turnover rate (excluding
short-term securities)............... 14.1% 73.8% 57.0% 73.4% 14.1%
<CAPTION>
CLASS C
-----------------------------------------------------
PERIOD FROM
MARCH 01,
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 period... $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 period......... $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 period (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>
------------
21
<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
22
<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 7:30
a.m. to 5:15 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.
INTERNET ADDRESS: www.AdvantusFunds.com
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) or visit
www.AdvantusFunds.com.
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 $3.7
billion in assets in addition to $10.9 billion in assets for other clients.
Advantus Capital's seasoned portfolio managers average more than 14 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
23
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS. THIS MAY BE USED AS SALES
LITERATURE IN
CONNECTION WITH THE OFFER OR SALE OF THE ADVANTUS INTERNATIONAL BALANCED FUND
IF PRECEDED OR ACCOMPANIED BY (A) THE CURRENT PROSPECTUS FOR THE
ADVANTUS INTERNATIONAL BALANCED FUND, AND (B) THE CURRENT
ADVANTUS MUTUAL FUND PERFORMANCE REPORT.
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
[LOGO]
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. PRESORTED STANDARD
400 ROBERT STREET NORTH U.S. POSTAGE PAID
ST. PAUL, MN 55101-2098 ST. PAUL, MN
PERMIT NO. 3547
ADDRESS SERVICE REQUESTED
F.48650 Rev. 5-2000
