FORTIS EQUITY PORTFOLIOS INC, 485BPOS, 1999-12-30

FORTIS EQUITY PORTFOLIOS INC
485BPOS, 1999-12-30

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<PAGE> 1
1933 Act Registration No. 002-11387
1940 Act Registration No. 811-00558

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
------
Post-Effective Amendment No. 82
------
AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. ______

(Check appropriate box or boxes)

FORTIS EQUITY PORTFOLIOS, INC.
(Exact Name of Registrant as Specified in Charter)

500 Bielenberg Drive
Woodbury, Minnesota 55125
(Address of Principal Executive Offices, Zip Code)

(651) 738-4000
(Registrant's Telephone Number, including Area Code)

Scott R. Plummer, Esq.
500 Bielenberg Drive
Woodbury, Minnesota 55125
(Name and Address of Agent for Service)

COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

It is proposed that this filing will become effective (check appropriate box):

immediately upon filing pursuant to paragraph (b) of Rule 485
- -----
x on January 1, 2000 pursuant to paragraph (b) of Rule 485
- -----
75 days after filing pursuant to paragraph (a) of Rule 485
- -----
on (specify date) pursuant to paragraph (a) of Rule 485
- -----
60 days after filing pursuant to paragraph (a) of Rule 485
- -----
<PAGE> 2

[FORTIS SOLID PARTNERS, FLEXIBLE SOLUTIONS(SM) LOGO]

Fortis Stock Funds Prospectus

January 1, 2000

- - Asset Allocation Portfolio

- - Value Fund

- - Growth & Income Fund

- - Capital Fund
- - Growth Fund
- - Capital Appreciation Portfolio

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any statement to the contrary is a criminal offense.

Mailing address:
P.O. Box 64284
St. Paul, Minnesota 55164-0284

Street address:
500 Bielenberg Drive
Woodbury, Minnesota 55125-1400

Telephone: (651) 738-4000
Toll free: (800) 800-2000, extension 3012
<PAGE> 3

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PAGE
<S> <C>
The Funds
Asset Allocation Portfolio................................ 1
Value Fund................................................ 5
Growth & Income Fund...................................... 8
Capital Fund.............................................. 10
Growth Fund............................................... 12
Capital Appreciation Portfolio............................ 15

Shareholder Information
Choosing a Share Class.................................... 18
Determining Your Purchase Price........................... 19
How to Buy Shares......................................... 22
How to Sell Shares........................................ 23
Dividend and Capital Gains Distributions.................. 25
Tax Considerations........................................ 26
Shareholder Inquiries..................................... 26

Fund Management
Investment Adviser........................................ 27
Portfolio Managers........................................ 27

More Information on Fund Objectives, Investment Strategies
and Risks
Fund Objectives........................................... 29
Investment Strategies..................................... 29
Principal Risks........................................... 30

Financial Highlights
Asset Allocation Portfolio................................ 33
Value Fund................................................ 35
Growth & Income Fund...................................... 36
Capital Fund.............................................. 37
Growth Fund............................................... 38
Capital Appreciation Portfolio............................ 39
</TABLE>
<PAGE> 4

THE FUNDS
- --------------------------------------------------------------------------------

This section describes the objectives, principal investment strategies and
principal risks of Asset Allocation Portfolio, Value Fund, Growth & Income Fund,
Capital Fund, Growth Fund and Capital Appreciation Portfolio (the "Funds"). It
also provides you with information on how the Funds have performed and on Fund
expenses. For more information, please read the section entitled "More
Information on Fund Objectives, Investment Strategies and Risks."

An investment in any of the Funds is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

ASSET ALLOCATION PORTFOLIO

OBJECTIVE

Asset Allocation Portfolio has an objective of maximizing total return on
invested capital, mainly from capital appreciation, dividends and interest.

PRINCIPAL INVESTMENT STRATEGIES

Asset Allocation Portfolio pursues its objective by following a flexible asset
allocation strategy that contemplates shifts among a wide range of investments
and markets. The Fund invests in equity and debt securities of domestic and
foreign issuers and in money market instruments. Depending on prevailing
economic and market conditions, the Fund may at any given time be primarily
comprised of equity securities, debt securities, short-term money market
securities or any combination of these securities. In managing the equity
portion of the Fund's portfolio, the adviser uses a "bottom up" investment style
in which stock selection is driven primarily by the merits of the company
itself. The Fund will attempt to maintain an average effective duration of three
to seven years for the debt securities portion of its portfolio. The Fund may
invest up to 20% of its net assets in securities of foreign governments and
companies. The Fund's investments may include the following:

- EQUITY SECURITIES. The Fund's equity security investments may include
common stocks, preferred stocks and securities convertible into common
stocks. The Fund generally invests in equity securities which, in the
judgment of the Fund's adviser, have above average growth potential.

- U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities.

- MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities, including pass-through certificates issued by the Government
National Mortgage Association ("GNMA") and the Federal National Mortgage
Association ("FNMA") and collateralized mortgage obligations ("CMOs"). CMOs
are debt instruments issued by special purpose entities which are secured
by pools of mortgage loans or other mortgage-backed securities.

- ZERO COUPON OBLIGATIONS. The Fund may invest in zero coupon obligations
issued by the U.S. Government and its agencies and by corporate issuers.
Because these obligations do not pay interest currently, their prices can
be highly volatile as interest rates rise and fall.

- MUNICIPAL OBLIGATIONS. The Fund may invest up to 20% of its total assets
in municipal securities during periods when these securities appear to
offer more attractive returns than taxable securities.

- CORPORATE BONDS. The Fund may invest without limitation in corporate
bonds rated within the four highest grades at the time of purchase by
either Moody's Investors Service, Inc. or Standard & Poor's Ratings
Services, or comparably rated by another nationally recognized rating
organization. These are commonly referred to as "investment grade"
securities. In addition, the Fund may invest up to 30% of its total assets
in securities rated lower than investment grade, commonly known as "junk
bonds." The Fund will not invest in bonds rated below Caa by Moody's or CCC
by Standard & Poor's, or comparably rated by another nationally recognized
rating organization.

- BANK OBLIGATIONS. The Fund may invest in obligations of United States
banks, and in U.S. dollar denominated obligations of Canadian chartered
banks and United States branches or agencies of foreign banks.

1
<PAGE> 5

- COMMERCIAL PAPER. The Fund may invest in commercial paper rated at the
time of purchase Prime-2 or higher by Moody's, A-2 or higher by Standard &
Poor's, comparably rated by another nationally recognized rating
organization, or unrated and issued by a corporation with an outstanding
debt issue rated A or better by Moody's or Standard & Poor's or comparably
rated by another nationally recognized rating organization.

PRINCIPAL RISKS

As with any non-money market mutual fund, Asset Allocation Portfolio's share
price and yield will change daily because of changes in stock prices, interest
rates and other factors. You may lose money if you invest in the Fund. The
principal risks of investing in Asset Allocation Portfolio include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Fund's portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. As you consider an investment in the
Fund, you should take into account your personal tolerance for daily
fluctuations of the stock market.

- RISKS OF SHORT-TERM TRADING. Due to many factors, the Fund may trade
securities frequently and hold securities in its portfolio for one year or
less. Frequent trading of securities may generate capital gains, which are
taxable to you when distributed. Any gains from sales of securities held
for one year or less will be treated as short-term capital gains, and net
short-term capital gains will be taxable to you as ordinary income. In
addition, frequent purchases and sales of portfolio securities will
increase the Fund's transaction costs. Factors that can lead to short-term
trading include market volatility; a significant positive or negative
development concerning a security; an attempt to maintain the Fund's market
capitalization target; and the need to sell a security to meet redemption
activity in the Fund.

- INTEREST RATE RISK. Debt securities in the Fund will fluctuate in value
with changes in interest rates. In general, debt securities will increase
in value when interest rates fall and decrease in value when interest rates
rise. One measure of interest rate risk is duration, explained on page 28
under "More Information on Fund Objectives, Investment Strategies and
Risks -- Investment Strategies."

- CREDIT OR DEFAULT RISK. If a bond issuer's credit quality declines or
its agency ratings are downgraded, there may be a resulting decline in the
bond's price. If credit quality deteriorates to the point of possible or
actual default (inability to pay interest or repay principal on a timely
basis), the bond's market value could decline precipitously.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. A significant portion of the
Fund's portfolio may consist of non-investment grade debt securities,
commonly referred to as "high yield" securities or "junk bonds." These
securities generally have more volatile prices and carry more risk to
principal than investment grade securities.

- CALL RISK. The Fund is subject to the possibility that, under certain
conditions, especially during periods of falling interest rates, a bond
issuer will "call"--or repay--its bonds before their maturity date. The
Fund may then be forced to invest the unanticipated proceeds at lower
interest rates, resulting in a decline in the Fund's income.

- RISKS OF MORTGAGE-RELATED SECURITIES. The Fund's investments in debt
securities include mortgage-related securities, which are subject to
prepayment and extension risk. Similar to call risk, prepayment risk is the
risk that falling interest rates could cause faster than expected
prepayments of mortgages underlying the Fund's mortgage-related securities.
These prepayments are passed through to the Fund, which must reinvest them
at a time when interest rates on new mortgage investments are falling,
reducing the Fund's income. Extension risk is the risk that rising interest
rates could cause mortgage prepayments to slow, which would lengthen the
duration of the Fund's mortgage-related securities and cause their prices
to decline.

- RISKS OF FOREIGN INVESTMENT. Investing in foreign securities involves
risks not typically associated with U.S. investing. These investments may
involve increased political and economic risk. In addition, the Fund may
experience a decline in net asset value resulting from changes in exchange
rates between the United States dollar and foreign currencies.

- RISKS OF ACTIVE MANAGEMENT. Because the Fund may invest in a wide range
of investments and markets, the Fund's investment adviser has substantially
more investment discretion than the advisers of most mutual funds. The
performance of the Fund will reflect in part the adviser's ability to
effectively allocate the Fund's assets among these investments and markets.

2
<PAGE> 6

FUND PERFORMANCE

The bar chart and table below provide you with information on Asset Allocation
Portfolio's volatility and performance. The bar chart shows you how performance
of the Fund's Class A shares has varied from year to year. The performance of
other classes of shares will differ due to differences in expenses. Sales loads
are not reflected in the bar chart; if they had been, returns would be lower.
The table, which does reflect sales loads, compares the Fund's performance over
different time periods to that of a broad measure of market performance.
Performance information is not presented for the Fund's Class Z shares, which
have not been offered for a full calendar year. Remember, how the Fund has
performed in the past is not necessarily an indication of how it will perform in
the future.

ANNUAL TOTAL RETURNS as of December 31 each year*

[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was 0.64%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 14.96% (quarter ended December 31, 1998)
WORST QUARTER: -8.95% (quarter ended September 30, 1990)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
TEN YEARS SINCE INCEPTION+
ONE YEAR FIVE YEARS CLASS A CLASS B, H, C
-------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Class A shares..................................... 13.63% 12.92% 13.05% N/A
Class B shares*.................................... 15.05% N/A N/A 16.49%
Class H shares*.................................... 15.05% N/A N/A 16.48%
Class C shares*.................................... 17.60% N/A N/A 16.67%
S&P 500 Index**.................................... 28.58% 24.03% 19.17% 28.39%
Lehman Brothers Aggregate Bond Index***............ 8.69% 7.27% 9.26% 9.78%
</TABLE>

-------------------------------------

* With CDSC. Assumes redemption on December 31, 1998.

** An unmanaged index of 500 common stocks.

*** An unmanaged index of government, corporate and mortgage-backed
securities with an average maturity of approximately nine years.

+ Inception date: November 14, 1994.

3
<PAGE> 7

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Asset Allocation Portfolio. Shareholder fees are fees paid directly from your
investment. Annual fund operating expenses are deducted from Fund assets. The
figures below are based on expenses during the fiscal year ended August 31,
1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C CLASS Z
SHARES SHARES SHARES SHARES
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)........................ 4.75% none none none
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds,
whichever is less)................................... none* 4.00% 1.00% none
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees......................................... 0.89% 0.89% 0.89% 0.89%
Distribution and/or service (12b-1) fees................ 0.45% 1.00% 1.00% none
Other expenses.......................................... 0.08% 0.08% 0.08% 0.08%
Total annual fund operating expenses.................... 1.42% 1.97% 1.97% 0.97%
</TABLE>

- ------------------------------
* A contingent deferred sales charge of 1.00% is imposed on certain redemptions
of Class A shares that were purchased without an initial sales charge as part
of an investment of $1 million or more. See "Shareholder Information."

EXAMPLE. This example is intended to help you compare the cost of investing in
the different share classes of Asset Allocation Portfolio with the cost of
investing in other mutual funds. It assumes that you invest $10,000 in the Fund
for the time periods indicated, that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES CLASS B/H SHARES CLASS C
ASSUMING SHARES ASSUMING SHARES
REDEMPTION ASSUMING REDEMPTION ASSUMING
CLASS A AT END OF NO AT END OF NO CLASS Z
SHARES EACH PERIOD REDEMPTION EACH PERIOD REDEMPTION SHARES
------- ----------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1 year.............................. $ 613 $ 560 $ 200 $ 300 $ 200 $ 99
3 years............................. 903 888 618 618 618 309
5 years............................. 1,214 1,242 1,062 1,062 1,062 536
10 years............................ 2,096 2,154 2,154 2,296 2,296 1,190
</TABLE>

4
<PAGE> 8

VALUE FUND

OBJECTIVE

Value Fund's objective is short and long term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Value Fund invests primarily in common stocks and securities convertible into
common stocks. The Fund selects stocks based on a concept of fundamental value,
where stocks appear inexpensive relative to anticipated profit and revenue
growth. The Fund's adviser uses a "bottom up" investment style in which stock
selection is driven primarily by the merits of the company itself. Under normal
market conditions, the Fund intends to maintain a median market capitalization
for its portfolio of greater than $1 billion--making the Fund a "mid to large
cap value fund." The Fund's median market capitalization was $10.2 billion as of
September 30, 1999.

PRINCIPAL RISKS

As with any non-money market mutual fund, Value Fund's share price will change
daily because of changes in stock prices and other factors. You may lose money
if you invest in the Fund. The principal risks of investing in Value Fund
include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Fund's portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, value stocks and/or stocks
of mid and large capitalization companies may underperform the market as a
whole. As you consider an investment in the Fund, you should take into
account your personal tolerance for daily fluctuations of the stock market.

- RISKS OF MID CAP COMPANIES. Mid-sized companies may have somewhat
limited product lines, markets and financial resources and may depend upon
a relatively small management group. Stocks of these companies may
therefore be more vulnerable to adverse developments than those of larger
companies.

5
<PAGE> 9

FUND PERFORMANCE

The bar chart and table below provide you with information on Value Fund's
volatility and performance. The bar chart shows you how performance of the
Fund's Class A shares has varied from year to year. The performance of other
classes of shares will differ due to differences in expenses. Sales loads are
not reflected in the bar chart; if they had been, returns would be lower. The
table, which does reflect sales loads, compares the Fund's performance over
different time periods to that of a broad measure of market performance.
Remember, how the Fund has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURNS as of December 31 each year*

[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was -1.09%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 15.78% (quarter ended December 31, 1998)
WORST QUARTER: -14.75% (quarter ended September 30, 1998)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
-------- ----------
<S> <C> <C>
Class A shares.............................................. 3.23% 15.59%
Class B shares**............................................ 4.08% 15.99%
Class H shares**............................................ 3.98% 15.99%
Class C shares**............................................ 6.58% 16.64%
S&P 500 Index***............................................ 28.58% 28.13%
</TABLE>

-------------------------------------
* Inception date was January 2, 1996 for all classes of shares.

** With CDSC. Assumes redemption on December 31, 1998.

*** An unmanaged index of 500 common stocks.

6
<PAGE> 10

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Value Fund. Shareholder fees are fees paid directly from your investment. Annual
fund operating expenses are deducted from Fund assets. The figures below are
based on expenses during the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price).......................... 4.75% none none
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds,
whichever is less)..................................... none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees........................................... 1.00% 1.00% 1.00%
Distribution and/or service (12b-1) fees.................. 0.25% 1.00% 1.00%
Other expenses............................................ 0.23% 0.23% 0.23%
Total annual fund operating expenses...................... 1.48% 2.23% 2.23%
</TABLE>

EXAMPLE This example is intended to help you compare the cost of investing in
the different share classes of Value Fund with the cost of investing in other
mutual funds. It assumes that you invest $10,000 in the Fund for the time
periods indicated, that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES SHARES
ASSUMING CLASS B/H ASSUMING
REDEMPTION SHARES REDEMPTION CLASS C SHARES
CLASS A AT END OF ASSUMING AT END OF ASSUMING
SHARES EACH PERIOD NO REDEMPTION EACH PERIOD NO REDEMPTION
------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1 year............................... $ 618 $ 586 $ 226 $ 326 $ 226
3 years.............................. 921 967 697 697 697
5 years.............................. 1,245 1,375 1,195 1,195 1,195
10 years............................. 2,159 2,376 2,376 2,565 2,565
</TABLE>

7
<PAGE> 11

GROWTH & INCOME FUND

OBJECTIVE

Growth & Income Fund's objectives are capital appreciation and current income.

PRINCIPAL INVESTMENT STRATEGIES

Growth & Income Fund invests primarily in common stocks and securities
convertible into common stocks with an emphasis on stocks of companies that have
a history of dividend payments. The Fund's adviser uses a "bottom up" investment
style in which stock selection is driven primarily by the merits of the company
itself. Under normal market conditions, the Fund intends to maintain a median
market capitalization for its portfolio of greater than $8 billion--making it a
"large cap fund." The Fund's median market capitalization was $25.7 billion as
of September 30, 1999.

PRINCIPAL RISKS

As with any non-money market mutual fund, Growth & Income Fund's share price
will change daily because of changes in stock prices and other factors. You may
lose money if you invest in the Fund.

The principal risk of investing in Growth & Income Fund is the risk that prices
of stocks in the Fund's portfolio will decline over short or extended periods of
time. Price changes may occur in the market as a whole, or they may occur in
only a particular company, industry or sector of the market. In addition, stocks
of large capitalization companies may underperform the market as a whole. As you
consider an investment in the Fund, you should take into account your personal
tolerance for daily fluctuations of the stock market.

FUND PERFORMANCE

The bar chart and table below provide you with information on Growth & Income
Fund's volatility and performance. The bar chart shows you how performance of
the Fund's Class A shares has varied from year to year. The performance of other
classes of shares will differ due to differences in expenses. Sales loads are
not reflected in the bar chart; if they had been, returns would be lower. The
table, which does reflect sales loads, compares the Fund's performance over
different time periods to that of a broad measure of market performance.
Remember, how the Fund has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURNS as of December 31 each year*
[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was -2.94%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 11.50% (quarter ended December 31, 1998)
WORST QUARTER: -9.38% (quarter ended September 30, 1999)
</TABLE>

8
<PAGE> 12

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
-------- ----------
<S> <C> <C>
Class A shares.............................................. 6.26% 15.51%
Class B shares**............................................ 7.08% 15.86%
Class H shares**............................................ 7.08% 15.86%
Class C shares**............................................ 9.68% 16.52%
S&P 500 Index***............................................ 28.58% 28.13%
</TABLE>

-------------------------------------
* Inception date was January 2, 1996 for all classes of shares.

** With CDSC. Assumes redemption on December 31, 1998.

*** An unmanaged index of 500 common stocks.

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Growth & Income Fund. Shareholder fees are fees paid directly from your
investment. Annual fund operating expenses are deducted from Fund assets. The
figures below are based on expenses during the fiscal year ended August 31,
1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price).......................... 4.75% none none
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds,
whichever is less)..................................... none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees........................................... 1.00% 1.00% 1.00%
Distribution and/or service (12b-1) fees.................. 0.25% 1.00% 1.00%
Other expenses............................................ 0.19% 0.19% 0.19%
Total annual fund operating expenses...................... 1.44% 2.19% 2.19%
</TABLE>

EXAMPLE. This example is intended to help you compare the cost of investing in
the different share classes of Growth & Income Fund with the cost of investing
in other mutual funds. It assumes that you invest $10,000 in the Fund for the
time periods indicated, that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES CLASS B/H SHARES CLASS C
ASSUMING SHARES ASSUMING SHARES
REDEMPTION ASSUMING REDEMPTION ASSUMING
CLASS A AT END OF NO AT END OF NO
SHARES EACH PERIOD REDEMPTION EACH PERIOD REDEMPTION
------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 year...................................... $ 615 $ 582 $ 222 $ 322 $ 222
3 years..................................... 909 955 685 685 685
5 years..................................... 1,225 1,355 1,175 1,175 1,175
10 years.................................... 2,117 2,334 2,334 2,524 2,524
</TABLE>

9
<PAGE> 13

CAPITAL FUND

OBJECTIVE

Capital Fund's objective is short and long term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Capital Fund invests primarily in common stocks and securities convertible into
common stocks. The Fund selects stocks based upon their growth potential. The
Fund's adviser uses a "bottom up" investment style in which stock selection is
driven primarily by the merits of the company itself. Under normal market
conditions, the Fund intends to maintain a median market capitalization for its
portfolio of greater than $8 billion--making it a "large cap growth fund." The
Fund's median market capitalization was $23.2 billion as of September 30, 1999.

PRINCIPAL RISKS

As with any non-money market mutual fund, Capital Fund's share price will change
daily because of changes in stock prices and other factors. You may lose money
if you invest in the Fund. The principal risks of investing in Capital Fund
include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Fund's portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks and/or stocks
of large capitalization companies may underperform the market as a whole.
As you consider an investment in the Fund, you should take into account
your personal tolerance for daily fluctuations of the stock market.

FUND PERFORMANCE

The bar chart and table below provide you with information on Capital Fund's
volatility and performance. The bar chart shows you how performance of the
Fund's Class A shares has varied from year to year. The performance of other
classes of shares will differ due to differences in expenses. Sales loads are
not reflected in the bar chart; if they had been, returns would be lower. The
table, which does reflect sales loads, compares the Fund's performance over
different time periods to that of a broad measure of market performance.
Remember, how the Fund has performed in the past is not necessarily an
indication of how it will perform in the future.
ANNUAL TOTAL RETURNS as of December 31 each year*
[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was 3.75%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 22.00% (quarter ended December 31, 1998)
WORST QUARTER: -15.96% (quarter ended September 30, 1990)
</TABLE>

10
<PAGE> 14

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
TEN YEARS SINCE INCEPTION+
ONE YEAR FIVE YEARS CLASS A CLASS B, H, C
-------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Class A shares..................................... 23.48% 17.70% 16.56% N/A
Class B shares*.................................... 25.07% N/A N/A 20.40%
Class H shares*.................................... 25.11% N/A N/A 20.42%
Class C shares*.................................... 27.67% N/A N/A 20.65%
S&P 500 Index**.................................... 28.58% 24.03% 19.17% 28.39%
</TABLE>

-------------------------------------

* With CDSC. Assumes redemption on December 31, 1998.

** An unmanaged index of 500 common stocks.

+ Inception date: November 14, 1994.

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Capital Fund. Shareholder fees are fees paid directly from your investment.
Annual fund operating expenses are deducted from Fund assets. The figures below
are based on expenses during the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price).......................... 4.75% none none
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds,
whichever is less)..................................... none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees........................................... 0.78% 0.78% 0.78%
Distribution and/or service (12b-1) fees.................. 0.25% 1.00% 1.00%
Other expenses............................................ 0.07% 0.07% 0.07%
Total annual fund operating expenses...................... 1.10% 1.85% 1.85%
</TABLE>

EXAMPLE. This example is intended to help you compare the cost of investing in
the different share classes of Capital Fund with the cost of investing in other
mutual funds. It assumes that you invest $10,000 in the Fund for the time
periods indicated, that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES CLASS B/H SHARES CLASS C
ASSUMING SHARES ASSUMING SHARES
REDEMPTION ASSUMING REDEMPTION ASSUMING
CLASS A AT END OF NO AT END OF NO
SHARES EACH PERIOD REDEMPTION EACH PERIOD REDEMPTION
------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 year...................................... $ 582 $ 548 $ 188 $ 288 $ 188
3 years..................................... 808 852 582 582 582
5 years..................................... 1,052 1,181 1,001 1,001 1,001
10 years.................................... 1,752 1,973 1,973 2,169 2,169
</TABLE>

11
<PAGE> 15

GROWTH FUND

OBJECTIVE

Growth Fund's objective is short and long term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Growth Fund invests primarily in common stocks and securities convertible into
common stocks. The Fund selects stocks based upon their growth potential. The
Fund's adviser uses a "bottom up" investment style in which stock selection is
driven primarily by the merits of the company itself. Under normal market
conditions, the Fund intends to maintain a median market capitalization for its
portfolio of $1 billion to $8 billion--making it a "mid cap growth fund." The
Fund's median market capitalization was $3.2 billion as of September 30, 1999.

PRINCIPAL RISKS

As with any non-money market mutual fund, Growth Fund's share price will change
daily because of changes in stock prices and other factors. You may lose money
if you invest in the Fund. The principal risks of investing in Growth Fund
include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Fund's portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks and/or stocks
of mid capitalization companies may underperform the market as a whole. As
you consider an investment in the Fund, you should take into account your
personal tolerance for daily fluctuations of the stock market.

12
<PAGE> 16

FUND PERFORMANCE

The bar chart and table below provide you with information on Growth Fund's
volatility and performance. The bar chart shows you how performance of the
Fund's Class A shares has varied from year to year. The performance of other
classes of shares will differ due to differences in expenses. Sales loads are
not reflected in the bar chart; if they had been, returns would be lower. The
table, which does reflect sales loads, compares the Fund's performance over
different time periods to that of a broad measure of market performance.
Remember, how the Fund has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURNS as of December 31 each year*
[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was 6.77%.

<TABLE>
<S> <C> <C>
BEST
QUARTER:...... 26.62% (quarter ended March 31, 1991)
WORST
QUARTER:.... -19.88% (quarter ended September 30, 1990)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
TEN YEARS SINCE INCEPTION+ SINCE INCEPTION++
ONE YEAR FIVE YEARS CLASS A CLASS B, H, C CLASS Z
-------- ---------- --------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Class A shares....................... 13.32% 11.71% 15.82% N/A N/A
Class B shares*...................... 14.47% N/A N/A 17.24% N/A
Class H shares*...................... 14.50% N/A N/A 17.26% N/A
Class C shares*...................... 17.11% N/A N/A 17.51% N/A
Class Z shares....................... 19.28% N/A N/A N/A 16.23%
S&P 500 Index**...................... 28.58% 24.03% 19.17% 28.39% 28.11%
</TABLE>

- -------------------------------------
* With CDSC. Assumes redemption on December 31, 1998.
** An unmanaged index of 500 common stocks.
+ Inception date: November 14, 1994.
++ Inception date: March 1, 1996.

13
<PAGE> 17

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Growth Fund. Shareholder fees are fees paid directly from your investment.
Annual fund operating expenses are deducted from Fund assets. The figures below
are based on expenses during the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C CLASS Z
SHARES SHARES SHARES SHARES
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of
offering price)........................................ 4.75% none none none
Maximum deferred sales charge (load) (as a percentage of
original
purchase price or redemption proceeds, whichever is
less).................................................. none* 4.00% 1.00% none
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees........................................... 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees..................... 0.25% 1.00% 1.00% none
Other expenses............................................ 0.06% 0.06% 0.06% 0.06%
Total annual fund operating expenses...................... 1.06% 1.81% 1.81% 0.81%
</TABLE>

EXAMPLE This example is intended to help you compare the cost of investing in
the different share classes of Growth Fund with the cost of investing in other
mutual funds. It assumes that you invest $10,000 in the Fund for the time
periods indicated, that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES CLASS B/H SHARES CLASS C
ASSUMING SHARES ASSUMING SHARES
REDEMPTION ASSUMING REDEMPTION ASSUMING
CLASS A AT END OF NO AT END OF NO
SHARES EACH PERIOD REDEMPTION EACH PERIOD REDEMPTION CLASS Z
------- ----------- ---------- ----------- ---------- SHARES-
<S> <C> <C> <C> <C> <C> <C>
1 year.............................. $ 578 $ 544 $ 184 $ 284 $ 184 $ 83
3 years............................. 796 839 569 569 569 259
5 years............................. 1,032 1,160 980 980 980 450
10 years............................ 1,708 1,930 1,930 2,127 2,127 1,002
</TABLE>

14
<PAGE> 18

CAPITAL APPRECIATION PORTFOLIO

OBJECTIVE

Capital Appreciation Portfolio's objective is maximizing short and long term
capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Capital Appreciation Portfolio invests primarily in common stocks and securities
convertible into common stocks. The Fund focuses on:

- common stocks of small and medium sized companies that are early in their
life cycles, but which the Fund's adviser believes have the potential to
become major enterprises (emerging growth companies); and

- common stocks of more established companies whose rates of earnings
growth are expected to accelerate because of special factors such as new
products or services, changes in demand factors, basic changes in the
economic environment or rejuvenated management.

The Fund's investments include common stocks purchased in initial public
offerings (IPOs).

The Fund selects stocks based upon their growth potential. The Fund's adviser
uses a "bottom up" investment style in which stock selection is driven primarily
by the merits of the company itself. Under normal market conditions, the Fund
intends to maintain a median market capitalization for its portfolio of less
than $1.5 billion--making it a "small cap growth fund." The Fund's median market
capitalization was $890 million as of September 30, 1999.

PRINCIPAL RISKS

As with any non-money market mutual fund, Capital Appreciation Portfolio's share
price will change daily because of changes in stock prices and other factors.
You may lose money if you invest in the Fund. The principal risks of investing
in Capital Appreciation Portfolio include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Fund's portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks and/or stocks
of small capitalization companies may underperform the market as a whole.
As you consider an investment in the Fund, you should take into account
your personal tolerance for daily fluctuations of the stock market.

- RISKS OF SMALL CAPITALIZATION COMPANIES. The securities of small
capitalization companies involve greater risk than is customarily
associated with investments in larger companies. Small capitalization
companies often have limited product lines, markets or financial resources
and may be dependent on a small, inexperienced management group. The
securities of small capitalization companies may have limited market
stability and may be subject to more abrupt or erratic market movements
than securities of larger, more established companies or the market
averages in general.

- RISKS OF INITIAL PUBLIC OFFERINGS. Companies making initial public
offerings of their stock generally have limited operating histories and
prospects for future profitability may be uncertain. Prices of IPOs may
also be unstable due to the absence of a prior public market and the small
number of shares available for trading.

Approximately one-fifth of the Fund's total return during fiscal 1999 was
attributable to its investments in IPOs. The effect of IPOs on the Fund's
total returns going forward may not be as significant, either as a result
of changes in the IPO market or growth of the Fund's assets which may
reduce the Fund's total return.

15
<PAGE> 19

FUND PERFORMANCE

The bar chart and table below provide you with information on Capital
Appreciation Portfolio's volatility and performance. The bar chart shows you how
performance of the Fund's Class A shares has varied from year to year. The
performance of other classes of shares will differ due to differences in
expenses. Sales loads are not reflected in the bar chart; if they had been,
returns would be lower. The table, which does reflect sales loads, compares the
Fund's performance over different time periods to that of a broad measure of
market performance. Remember, how the Fund has performed in the past is not
necessarily an indication of how it will perform in the future.

ANNUAL TOTAL RETURNS as of December 31 each year*
[BAR GRAPH]

* The Fund's total return for the period from January 1, 1999 through
September 30, 1999 was 29.48%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 36.31% (quarter ended December 31, 1998)
WORST QUARTER: -30.58% (quarter ended September 30, 1990)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1998

<TABLE>
<CAPTION>
TEN YEARS SINCE INCEPTION+
ONE YEAR FIVE YEARS CLASS A CLASS B, H, C
-------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Class A shares..................................... 14.16% 9.42% 14.79% N/A
Class B shares*.................................... 15.65% N/A N/A 14.56%
Class H shares*.................................... 15.68% N/A N/A 14.58%
Class C shares*.................................... 18.03% N/A N/A 14.81%
S&P 500 Index**.................................... 28.58% 24.03% 19.17% 28.39%
</TABLE>

- -------------------------------------
* With CDSC. Assumes redemption on December 31, 1998.
** An unmanaged index of 500 common stocks.
+ Inception date: November 14, 1994.

16
<PAGE> 20

FEES AND EXPENSES

As an investor, you pay certain fees and expenses if you buy and hold shares of
Capital Appreciation Portfolio. Shareholder fees are fees paid directly from
your investment. Annual fund operating expenses are deducted from Fund assets.
The figures below are based on expenses during the fiscal year ended August 31,
1999.

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on purchases (as a
percentage of offering
price)................................................. 4.75% none none
Maximum deferred sales charge (load) (as a percentage of
original purchase price
or redemption proceeds, whichever is less)............. none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management fees........................................... 0.94% 0.94% 0.94%
Distribution and service (12b-1) fees..................... 0.45% 1.00% 1.00%
Other expenses............................................ 0.11% 0.11% 0.11%
Total annual fund operating expenses...................... 1.50% 2.05% 2.05%
</TABLE>

EXAMPLE This example is intended to help you compare the cost of investing in
the different share classes of Capital Appreciation Portfolio with the cost of
investing in other mutual funds. It assumes that you invest $10,000 in the Fund
for the time periods indicated, that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
CLASS B/H CLASS C
SHARES CLASS B/H SHARES CLASS C
ASSUMING SHARES ASSUMING SHARES
REDEMPTION ASSUMING REDEMPTION ASSUMING
CLASS A AT END OF NO AT END OF NO
SHARES EACH PERIOD REDEMPTION EACH PERIOD REDEMPTION
------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 year...................................... $ 620 $ 568 $ 208 $ 308 $ 208
3 years..................................... 927 913 643 643 643
5 years..................................... 1,255 1,283 1,103 1,103 1,103
10 years.................................... 2,180 2,238 2,238 2,379 2,379
</TABLE>

17
<PAGE> 21

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

CHOOSING A SHARE CLASS

The Funds offer you a choice among multiple classes of shares with different
sales charges and expenses. These alternatives enable you to choose the best
method of purchasing shares, given the amount of your purchase, the length of
time you expect to hold your shares, and other factors. Here is a brief summary
of the different share classes offered by the Funds:

CLASS A SHARES

- You pay a sales charge at the time of purchase. (This charge may be
reduced or waived for certain purchases.)

- There is no sales charge when you redeem your shares. (Sales in excess of
$1 million that were not subject to an initial sales charge may be
subject to a contingent deferred sales charge.)

- There is an annual Rule 12b-1 fee equal to .25% of a Fund's average daily
net assets (.45% for Asset Allocation Portfolio and Capital Appreciation
Portfolio).

- Because Rule 12b-1 fees are lower, Class A shares have lower expenses and
pay higher dividends than Class B, Class H or Class C shares.

CLASS B AND CLASS H SHARES

- You do not pay any sales charge at the time of purchase.

- There is a contingent deferred sales charge (CDSC) if you redeem within
six years of purchase. The CDSC is 4% during the first two years after
purchase, and declines thereafter to as low as 1% during the sixth year
after purchase. There is no CDSC after the sixth year.

- There is an annual Rule 12b-1 fee equal to 1.00% of a Fund's average
daily net assets.

- After eight years, shares automatically convert to Class A shares at no
charge to you, resulting in a lower Rule 12b-1 fee thereafter.

- Class B and Class H shares provide the benefit of putting your entire
investment to work immediately.

- Shares in these classes will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher Rule 12b-1 fee.

- The only difference between Class B and Class H shares is the amount of
the concession paid to dealers. This difference does not affect you in
any way.

CLASS C SHARES

- You do not pay any sales charge at the time of purchase.

- There is a contingent deferred sales charge of 1.00% if you redeem within
one year of purchase.

- There is an annual Rule 12b-1 fee of 1.00% of a Fund's average daily net
assets.

- Shares do not convert to Class A shares. However, they are subject to a
lower contingent deferred sales charge than Class B or Class H shares and
do not have to be held for as long a time (one year vs. six years) to
avoid paying a contingent deferred sales charge.

- Class C shares provide the benefit of putting your entire investment to
work for you immediately.

- Shares in this class will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher Rule 12b-1 fee.

CLASS Z SHARES

- These shares are available only in Asset Allocation Portfolio and Growth
Fund, and only for investment by:

(1) Fortis, Inc. or its subsidiaries, and the following persons
associated with these companies: (a) officers, directors, employees
or sales representatives; (b) their children, grandchildren, parents,
grandparents or siblings; and (c) spouses/domestic partners of any of
such persons;

18
<PAGE> 22

(2) Fund directors and officers or their spouses/domestic partners; or
such persons' children, grandchildren, parents, grandparents, or
spouses/domestic partners of the preceding;

(3) Representatives of Fortis Investors (including agencies) or their
spouses; or such persons' children, grandchildren, parents,
grandparents, or spouses of any such persons;

(4) Pension, profit sharing and other retirement plans created for the
benefit of any of the above persons; and

(5) Accounts which were exchanged from Special Portfolios, Inc., Stock
Portfolio.

- You do not pay any sales charge either at the time of purchase or when
you redeem your shares.

- Your shares are not subject to annual Rule 12b-1 fees.

- Shares in this Class will have the lowest expenses and pay the highest
dividends of any available class.

DECIDING WHICH CLASS TO PURCHASE

In deciding which class of shares to purchase, you should consider, among other
things:

- The length of time you expect to hold your investment.

- The amount of any sales charge (whether imposed at the time of purchase
or redemption) and Rule 12b-1 fees.

- Whether you qualify for any reduction or waiver of sales charges (e.g.,
if you are exempt from the sales charge, you must invest in Class A
shares, unless, in the case of Asset Allocation Portfolio and Growth
Fund, you qualify to invest in Class Z shares).

- The various exchange privileges among the different classes of shares.

- The fact that Class B and Class H shares automatically convert to Class A
shares after eight years.

Class A shares may be a better choice if your investment qualifies for a reduced
sales charge. Class B and Class H share orders for more than $500,000 and Class
C share orders for more than $1,000,000 will be treated as orders for Class A
shares.

DETERMINING YOUR PURCHASE PRICE

NET ASSET VALUE OF FUND SHARES

Your purchase price is equal to a Fund's net asset value per share plus any
initial sales charge. The net asset value per share is determined as of the
primary closing time for business on the New York Stock Exchange (the
"Exchange") on each day the Exchange is open.

Your purchase price will be the next net asset value per share of the Fund
calculated after your purchase order is accepted by Fortis Investors
("Investors"), the Funds' underwriter. Orders generally must be received by
Investors prior to the close of the Exchange to receive that day's price. If you
purchase Fund shares through a broker-dealer other than Investors, your order
must be received by your broker-dealer prior to the close of the Exchange.
Investors will apply that day's price to the order if the broker-dealer places
the order with Investors by the end of Investors' business day.

19
<PAGE> 23

Each Fund's net asset value per share is determined by dividing the value of the
securities and other assets owned by the Fund, less all liabilities, by the
number of the Fund's shares outstanding. The securities owned by the Fund are
generally valued at market value. However, there are times when market values
are not readily available. In these cases, securities are valued at fair value
as determined in good faith by Advisers under supervision of the Funds' Board of
Directors.

PURCHASE PRICE OF CLASS A SHARES

The purchase price of Class A shares is the next net asset value per share
calculated after receipt of your purchase order, plus a sales charge. Sales
charges and broker-dealer concessions, which vary with the size of your
purchase, are shown in the following table. A broker-dealer receives additional
compensation (as a percentage of sales charge) when its annual sales of Fortis
Funds having a sales charge exceed $10,000,000 (2%), $25,000,000 (4%), and
$50,000,000 (5%).

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
PERCENTAGE OF PERCENTAGE OF THE NET BROKER-DEALER
AMOUNT OF SALE PURCHASE PRICE AMOUNT INVESTED CONCESSION
-------------- --------------- --------------------- -------------
<S> <C> <C> <C>
Less than $100,000................................ 4.750% 4.987% 4.00%
$100,000 but less than $250,000................... 3.500% 3.627% 3.00%
$250,000 but less than $500,000................... 2.500% 2.564% 2.25%
$500,000 but less than $1,000,000................. 2.000% 2.041% 1.75%
$1,000,000 or more*............................... -0- -0- 1.00%
</TABLE>

- ------------------------------
* You will pay a contingent deferred sales charge if you redeem these shares
within two years of purchase.

In determining your sales charge above, purchases by you, your spouse, your
children under the age or 21, and purchases by any tax-qualified plan of any of
the foregoing (provided there is only one participant) will be combined. The
above schedule also applies to (1) purchases by a trustee or fiduciary of a
single trust estate or single fiduciary account, and (2) purchases by any
organized group with a tax identification number, if these purchases result in
economy of sales effort or expense. An organized group does not include clients
of an investment advisor.

REDUCING YOUR SALES CHARGE FOR CLASS A SHARES. As shown above, larger purchases
of Class A shares have a reduced sales charge. You also may reduce your sales
charge through one of the special purchase plans listed below. For more
information on these plans, see the Statement of Additional Information or
contact your broker-dealer or sales representative. It is your obligation to
notify your broker-dealer or sales representative about your eligibility for
either of the following plans.

- RIGHT OF ACCUMULATION. The sales charge discounts apply to your current
purchase plus the net asset value of shares you already own in any Fortis
Fund which has a sales charge.

- STATEMENT OF INTENTION. The sales charge discounts apply to an initial
purchase of at least $1,000 if you intend to purchase the balance needed to
qualify within 13 months (excluding shares purchased by reinvesting
dividends or capital gains).

EXEMPTIONS FROM SALES CHARGES ON CLASS A SHARES. The Statement of Additional
Information contains information on investors who are eligible to purchase Class
A shares without a sales charge.

CONTINGENT DEFERRED SALES CHARGES. You pay no initial sales charge on purchases
of Class A shares of $1,000,000 or more. Out of its own assets, however,
Investors pays broker-dealers a fee of up to 1.00% of the offering price of
these shares. If you redeem shares within two years, you will pay a contingent
deferred sales charge of 1.00%. For more information, see "How to Sell Shares--
Contingent deferred sales charge."

PURCHASE PRICE OF CLASS B AND CLASS H SHARES

The purchase price of Class B and Class H shares is their net asset value.
Because you pay no initial sales charge, the Fund receives the full amount of
your investment. However, if you redeem shares within six years of purchase, you
will pay a contingent

20
<PAGE> 24

deferred sales charge ("CDSC") at the following rates. For additional
information, see "How to Sell Shares--Contingent deferred sales charge."

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE PURCHASE SALES CHARGE
- ------------------------------------------- -------------------
<S> <C>
First...................................... 4.00%
Second..................................... 4.00%
Third...................................... 3.00%
Fourth..................................... 3.00%
Fifth...................................... 2.00%
Sixth...................................... 1.00%
Seventh.................................... None
Eighth..................................... None
</TABLE>

Investors receives the CDSC, in part to defray expenses incurred in selling
Class B and Class H shares. Investors pays broker-dealers who sell Class B
shares a concession equal to 4.00% of the amount invested and an annual fee of
.25% of the average daily net assets of the Fund attributable to such shares.
Broker-dealers who sell Class H shares are paid a concession of between 5.25%
and 5.50% of the amount invested.

CONVERSION TO CLASS A SHARES. Class B and Class H shares (except for those
purchased by reinvestment of dividends and other distributions) will
automatically convert to Class A shares after eight years. When these shares
convert to Class A, a proportionate amount of Class B and Class H shares in your
account that were purchased through the reinvestment of dividends and other
distributions will also convert to Class A.

PURCHASE PRICE OF CLASS C SHARES

The purchase price of Class C shares is their net asset value. Because you pay
no initial sales charge, the Fund receives the full amount of your investment.
However, if you redeem your shares within one year of purchase, you will pay a
CDSC of 1.00%. For additional information, see "How to Sell Shares--Contingent
deferred sales charge."

Investors receives the CDSC, in part to defray expenses incurred in selling
Class C shares. Investors pays broker-dealers who sell Class C shares a
concession equal to 1.00% of the amount invested and an annual fee of 1.00% of
the amount invested that begins to accrue one year after the shares are sold.

PURCHASE PRICE OF CLASS Z SHARES

The purchase price of Class Z shares is their net asset value. These shares are
sold without an initial or contingent deferred sales charge. Class Z shares,
which are available only in Asset Allocation Portfolio and Growth Fund, are
available for investment only by the persons and entities listed above under
"Choosing a Share Class--Class Z shares."

RULE 12B-1 FEES

Each Fund pays Investors Rule 12b-1 fees for the distribution and sale of its
shares and for services provided to shareholders. These fees differ by class, as
follows:

<TABLE>
<CAPTION>
RULE 12B-1 FEE
SHARE CLASS (AS A % OF AVERAGE NET ASSETS)
----------- ------------------------------
<S> <C>
Class A.............................. 0.25% (0.45% for Asset Allocation
Portfolio and Capital Appreciation
Portfolio)
Class B and Class H.................. 1.00%
Class C.............................. 1.00%
Class Z.............................. none
</TABLE>

These fees are paid out of a Fund's assets on an ongoing basis. Rule 12b-1 fees
will increase the cost of your investment and over time may cost you more than
other types of sales charges.

21
<PAGE> 25

HOW TO BUY SHARES

You may become a shareholder in any of the Funds with an initial investment of
$500 or more. If you invest under the Systematic Investment Plan, the minimum
initial investment is $25 for the Pre-Authorized Check Plan and $50 for any
other Systematic Investment Plan (except for telephone or wire orders).

The minimum subsequent investment is $50 for investments by mail ($25 for the
Pre-Authorized Check Plan), $100 for investments by telephone through the
automated Fortis Information Line and $500 for investments by telephone or
investments by wire.

The Funds may reject any purchase order or restrict purchases at any time.

INVESTING BY TELEPHONE

Your registered representative may make your purchase ($500 minimum) by
telephoning the number on the cover page of this Prospectus. You must promptly
send your check and the Account Application which accompanies this Prospectus so
that Investors receives it within three business days. Please make your check
payable to Fortis Investors, Inc. and mail it with your Application to "CM-9651,
St. Paul, MN 55170-9651."

If you have a bank account authorization form on file, you may invest
$100-$10,000 by telephone through the automated Fortis Information Line.

INVESTING BY WIRE

If you have an account with a commercial bank that is a member of the Federal
Reserve System, you may purchase shares ($500 minimum) by requesting your bank
to transmit immediately available funds (Federal Funds) by wire to:

U.S. Bank National Association

ABA #091000022, credit account no: 1-702-2514-1341

Fortis Funds Purchase Account

For further credit to: (your name)

Fortis Account NBR (your account number)

Before making an initial investment by wire, your broker-dealer must telephone
Investors at the number on the cover page of this Prospectus to open your
account and obtain your account number. You must promptly send your Account
Application which accompanies this Prospectus to Investors at "CM-9614, St.
Paul, MN 55170-9614." You may make additional investments at any time even if
your initial investment was by mail. Your bank should transmit Federal Funds
using the instructions above.

INVESTING BY MAIL

You should complete and sign the Account Application which accompanies this
Prospectus. Please make your check or other negotiable bank draft payable to
Fortis Funds and mail it with your Application to "CM-9614, St. Paul, MN
55170-9614."

You may make additional purchases at any time by mailing a check or other
negotiable bank draft along with your confirmation stub. Be sure to identify the
account to which any such purchase is to be credited by specifying the name(s)
of the registered owner(s) and the account number.

SPECIAL PURCHASE PLANS

TAX SHELTERED RETIREMENT PLANS. Individual Retirement Accounts ("IRAs"),
Self-Employed, Pension, Profit Sharing, and 403(b) accounts are available.

GIFTS OR TRANSFERS TO MINOR CHILDREN. Adults can make an irrevocable gift or
transfer of Fund shares in an account established for a minor.

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<PAGE> 26

SYSTEMATIC INVESTMENT PLAN. You may have $25 or more automatically withdrawn
each month from your checking account (see the Systematic Investment Plan
Authorization Agreement in the Account Application). A systematic investment
plan may lower your average cost per share through the principle of "dollar cost
averaging." Advisers may elect to send you confirmations for purchases made
under the Systematic Investment Plan quarterly, rather than following each
transaction.

EXCHANGE PRIVILEGE

Except for Class Z shares, you may exchange your Fund shares for the same class
of shares in another Fortis Fund. You may exchange Class Z shares of either
Asset Allocation Portfolio or Growth Fund for Class Z shares of the other Fund,
or for Class A shares of any other Fortis Fund. You pay no exchange fee or
additional sales charge for exchanges.

If you own shares of another Fortis Fund, you may exchange those shares for Fund
shares of the same class. You pay no sales charge if the shares to be exchanged
have already been subject to a sales charge. If you own Class E shares of
another Fortis Fund you may exchange those shares for Class A Fund shares. If
you own Fortis Money Fund Class A shares you may exchange those shares for any
class of Fund shares. However, if the Fortis Money Fund Class A shares have
already incurred a sales charge, exchanges will be made at net asset value and
may be made only into Class A Fund shares or into Class Z shares if the Fund
offers those shares and you are eligible to purchase them.

You may initiate an exchange by writing to or telephoning your broker-dealer,
sales representative or the Fund. You may also use the automated Fortis
Information Line for exchanges of $100-$100,000. You may make a telephone
exchange only if you have completed and returned the Telephone Exchange section
of the Account Application. During times of chaotic economic or market
circumstances, you may have difficulty reaching your broker-dealer, sales
representative or the Fund by telephone. A telephone exchange may be difficult
to implement at those times. (See "How to Sell Shares--By Phone").

An exchange of shares is a sale for federal income tax purposes and you may have
a taxable capital gain or loss.

Advisers has the right to change, terminate, impose charges on or restrict the
frequency of exchanges. You will receive at least 30 days notice before any such
change is made.

HOW TO SELL SHARES

You may sell your shares on any day when the New York Stock Exchange is open.
Your redemption price will be the net asset value of your shares, less any
contingent deferred sales charge.

Employees of certain Texas public educational institutions who direct investment
in Fund shares under their State of Texas Optional Retirement Plan generally
must obtain the prior written consent of their authorized employer
representative in order to redeem.

BY MAIL

If you redeem by mail, your redemption price will be the next net asset value of
your shares which is determined after the Fund receives your written redemption
request in proper form (and a properly endorsed stock certificate if one has
been issued).

To redeem by mail, send a written request to Fortis Funds, P.O. Box 64284, St.
Paul, MN 55164.

Your request should include the following information:

- Name of Fund

- Account number

- Dollar amount or number of shares to be redeemed

- Name on the account

- Signatures of all registered account owners

If you hold certificates for your shares, you must include them with your
request. You should send certificates by certified mail. These certificates (and
any stock powers included with your redemption request) must be endorsed and
executed exactly as the Fund shares are registered.

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<PAGE> 27

No signature guarantee is required if you are the registered holder and the
redemption proceeds are sent to your address on the Fund's records. A written
redemption request requires a signature guarantee if:

- The Funds do not have the signature of the registered holder on file and
the redemption proceeds are greater than $25,000.

- The redemption proceeds are paid to someone other than the registered
holder.

- The redemption proceeds are sent to an address other than the address on
the Fund's records.

You may obtain a signature guarantee from a bank, broker-dealer, credit union,
national securities exchange, registered securities association, clearing agency
or savings association. A signature guarantee assures that a signature is
genuine and protects you from unauthorized account transfers.

BY PHONE

Your broker-dealer may place a redemption order by phone if it has a selling
agreement with Investors. The proceeds will be released after the Fund receives
appropriate written materials. If your broker-dealer receives your order prior
to the close of the Exchange and places the order with Investors by the end of
the business day, you will receive that day's price on the order. Some
broker-dealers may charge a fee to process redemptions.

You may also redeem up to $25,000 by calling the Funds at (800) 800-2000, ext.
3012, provided that:

- Your account is not a tax-qualified plan,

- The check is sent to the address on the Fund's records, and

- You have not changed your address on the Fund's records for at least 30
days.

In addition, you may use the automated Fortis Information Line for redemptions
of $500-$25,000 on non-tax qualified accounts.

The telephone redemption procedure is automatically available. The Funds will
employ reasonable procedures to confirm that telephone instructions are genuine.
The Funds will not be responsible for any losses that may result from acting on
telephone instructions that they reasonably believe to be genuine. The Funds'
procedures will verify your address and social security number, tape record the
telephone call and provide written confirmation of the transaction. The security
measures for automated telephone redemptions using the Fortis Information Line
involve using a personal identification number and providing written
confirmation of the transaction.

You may have difficulty reaching your broker-dealer, sales representative or the
Funds by telephone during times of chaotic economic or market circumstances. If
you are unable to reach the Funds or their agents by telephone, written
instructions should be sent.

Advisers has the right to change, terminate or impose charges on the telephone
redemption privilege. You will receive at least 30 days notice before any such
change is made.

PAYMENT OF REDEMPTION PROCEEDS

Your redemption proceeds generally will be paid as soon as possible, but not
later than three business days after receipt of a proper redemption request.
However, if your shares were recently purchased with non-guaranteed funds, such
as a personal check, the mailing of your redemption check may be delayed by up
to fifteen days. If you wish to avoid this delay, you should consider the wire
purchase method described under "How to Buy Shares."

INVOLUNTARY REDEMPTIONS

Each Fund has the right to redeem accounts that fall below $500 as a result of
selling or exchanging shares. If you actively participate in the Funds'
Systematic Investment Plan your account will not be redeemed. Before redeeming
your account, the Fund will mail you a notice of its intention to redeem and
give you an opportunity to make an additional investment. If you do not make an
additional investment within 60 days from the date the notice was mailed, your
account will be redeemed.

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<PAGE> 28

SYSTEMATIC WITHDRAWAL PLAN

Each Fund has a Systematic Withdrawal Plan, which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semiannually or
annually. Deferred sales charges may apply to monthly redemptions. Confirmations
for redemptions made under the Systematic Withdrawal Plan may be sent to you
quarterly, rather than following each transaction. For further information about
the Systematic Withdrawal Plan, contact your broker-dealer or sales
representative.

REINVESTMENT PRIVILEGE

If you redeem your shares, you may reinvest the proceeds within 60 days without
payment of an additional sales charge. If the shares you redeemed were subject
to a CDSC, that charge will be credited to your account. The reinvested shares
will be subject to the same CDSC that would have applied to the original shares.
For further information, contact your broker-dealer or sales representative.

CONTINGENT DEFERRED SALES CHARGES

If you redeem shares subject to a CDSC, your CDSC will be based on the value of
the shares at the time of purchase or at the time of sale, whichever is less.
The CDSC does not apply to shares acquired by reinvesting income dividends or
capital gain distributions.

Unless instructed otherwise, the Funds will redeem shares in the following
order:

- Shares not subject to a CDSC and having a higher Rule 12b-1 fee will be
redeemed first.

- Shares not subject to a CDSC and having a lower Rule 12b-1 fee will be
redeemed next.

- Shares subject to a CDSC then will be redeemed in the order purchased.

A CDSC is not imposed:

- When a Fund exercises its right to liquidate accounts which are less than
the minimum account size.

- When shares are redeemed because of a shareholder's death or disability,
as defined in Section 72(m)(7) of the Internal Revenue Code (if
satisfactory evidence is provided to the Fund).

- With respect to Class B and H shares only, to an amount that represents,
on an annual (non-cumulative) basis, up to 10% of the amount (at the time
of the investment) of the shareholder's purchases.

- With respect to Class B, H and C shares, to qualified plan benefit
distributions due to the participant's separation from service, loans or
financial hardship (excluding IRAs, SEPs, and 403(b), 457, and Fortis KEY
plans) upon a Fund's receipt from the plan's administrator or trustee of
written instructions detailing the reason for the distribution.

If you exchange shares subject to a CDSC for shares of a different Fortis Fund,
the transaction is not subject to a CDSC. However, when you redeem the shares
acquired through the exchange, you will be treated as if no exchange took place
for the purpose of determining the CDSC. In addition, a CDSC is not imposed at
the time that Fund shares subject to a CDSC are exchanged for shares of Fortis
Money Fund or at the time those Fortis Money Fund shares are re-exchanged for
shares of any Fortis Fund subject to a CDSC. In each case, however, the shares
acquired will remain subject to the CDSC that would have applied to the original
Fund shares.

DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS

Each Fund, other than Asset Allocation Portfolio and Growth & Income Fund, pays
dividends from any net investment income annually. Asset Allocation Portfolio
pays such dividends quarterly and Growth & Income Fund pays such dividends
semi-annually. Each fund makes annual distributions of any realized capital
gains.

Dividend and capital gains distributions will be reinvested in additional Fund
shares of the same class (at net asset value). However, you may request that
dividends and/or capital gain distributions be sent to you in cash or reinvested
(at net asset value) in shares of the same class of another Fortis Fund. If
dividends and capital gains distributions are reinvested in the same Fund, the
reinvestment takes place on the dividend record date. If they are reinvested in
another Fortis Fund, processing normally takes one business day. If you elect
cash payment, a check will be mailed within three business days after the
dividend record date.

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<PAGE> 29

Prior to purchasing shares of a Fund, you should consider the impact of dividend
or capital gains distributions which are expected to be announced or which have
been announced but not paid. If you purchase shares shortly before the record
date for such a distribution, you will pay the full price for the shares and
then receive a portion of that price back as a taxable distribution.

TAX CONSIDERATIONS

Some of the common tax consequences of investing in the Funds are discussed
below. However, because everyone's tax situation is unique, be sure to consult
your tax adviser.

TAXES ON DISTRIBUTIONS

Each Fund will distribute substantially all of its net income and capital gains
to its shareholders. For most investors, these distributions will be taxable,
whether paid in cash or reinvested.

Distributions paid from a Fund's net investment income are taxable as ordinary
income. Distributions paid from a Fund's long-term capital gains are taxable as
long-term gains, regardless of how long you have held your shares. The Funds,
other than Asset Allocation Portfolio, expect that their distributions will
consist primarily of capital gains. However, a significant portion of Capital
Appreciation Portfolio's distributions may consist of short-term capital gains
that are taxed at the same rates as ordinary income.

TAXES ON TRANSACTIONS

If you sell or exchange your Fund shares you will have a taxable event that may
result in a capital gain or loss. The gain or loss will be considered long-term
if you have held your shares for more than one year. A gain or loss on shares
held for one year or less is considered short-term and is taxed at the same
rates as ordinary income.

Information about the tax status of each year's distributions will be mailed
annually.

SHAREHOLDER INQUIRIES

You should direct your inquiries to your broker-dealer or sales representative
or to the Funds at the telephone number or mailing address listed on the cover
of this Prospectus. A $10 fee will be charged for copies of Annual Account
Summaries older than the preceding year.

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<PAGE> 30

FUND MANAGEMENT
- --------------------------------------------------------------------------------

INVESTMENT ADVISER

Fortis Advisers, Inc. ("Advisers") is the investment adviser for the Funds.
Advisers also serves as the Funds' transfer agent and dividend agent. Advisers
has been managing investment company portfolios since 1949. In addition to
providing investment advice, Advisers is responsible for managing each Fund's
business affairs, subject to the overall authority of the Board of Directors.
Advisers' address is that of the Funds.

Each Fund pays Advisers a monthly fee for providing investment advisory
services. During their most recent fiscal years, the Funds paid the following
investment advisory fees to Advisers:

<TABLE>
<CAPTION>
ADVISORY FEE
AS A % OF
AVERAGE DAILY NET ASSETS
------------------------
<S> <C>
Asset Allocation Portfolio.............. 0.89%
Value Fund.............................. 1.00%
Growth & Income Fund.................... 1.00%
Capital Fund............................ 0.78%
Growth Fund............................. 0.75%
Capital Appreciation Portfolio.......... 0.94%
</TABLE>

PORTFOLIO MANAGERS

Howard G. Hudson supervises the portfolio management of the fixed-income portion
of Asset Allocation Portfolio. Lucinda S. Mezey supervises the portfolio
management of the equity portion of Asset Allocation Portfolio and each of the
other Funds. The individuals responsible for the day-to-day management of the
Funds are listed below.

ASSET ALLOCATION PORTFOLIO. Charles L. Mehlhouse has been primarily responsible
for the day-to-day management of the equity portion of the Fund since 1996.
Maroun M. Hayek, Robert C. Lindberg, Christopher J. Pagano, Kendall C. Peterson
and Christopher J. Woods are primarily responsible for the day-to-day management
of the fixed income portion of the Fund. Mr. Hayek has managed the Fund since
1995, Mr. Lindberg since 1993, Mr. Pagano since 1996, Mr. Peterson since 1999,
and Mr. Woods since 1995.

VALUE FUND. Nicholas M. De Peyster has been primarily responsible for the
day-to-day management of the Fund since its inception in 1996.

GROWTH & INCOME FUND. Charles L. Mehlhouse has been primarily responsible for
the day-to-day management of the Fund since May 1996.

CAPITAL FUND. Charles L. Mehlhouse has been primarily responsible for the
day-to-day management of the Fund since May 1996.

GROWTH FUND. Michael J. Romanowski has been primarily responsible for the
day-to-day management of the Fund since March 1998.

CAPITAL APPRECIATION PORTFOLIO. Laura E. Granger has been primarily responsible
for the day-to-day management of the Fund since July 1998.

Additional information about the Funds' investment supervisors and portfolio
managers is set forth below.

- Mr. Hudson, an Executive Vice President of Advisers and Head of Fixed
Income Investments of Advisers since 1991, has been managing debt
securities for Fortis, Inc. since 1991.

- Ms. Mezey, an Executive Vice President and Head of Equity Investments of
Advisers since October 1997, manages equity securities for Advisers. From
1995 to October 1997, she was Chief Investment Officer, Alex Brown
Capital Advisory and Trust Co., Baltimore, MD. From 1970 to 1995 she was
employed by PNC Bank, Philadelphia, Pennsylvania with her last position
being Senior Vice President and Head of Equity Investments.

- Mr. Lindberg, a Vice President of Advisers since 1993, has been managing
debt securities for Advisers since that time.

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<PAGE> 31

- Mr. Hayek, a Vice President of Advisers, has been managing debt
securities for Fortis, Inc. since 1987.

- Mr. Pagano, a Vice President of Advisers since 1996, has been involved in
management of debt securities for Advisers since March 1996. Prior to
that, Mr. Pagano was a Government Strategist for Merrill Lynch in New
York, New York.

- Mr. Peterson, a Vice President of Advisers since 1999, has been managing
non-investment grade fixed income securities since July 1999. Prior to
that, Mr. Peterson was a Vice President and portfolio manager at
Prudential Insurance Company of America in Newark, New Jersey.

- Mr. Woods, a Vice President of Advisers since 1995, has been managing
debt securities for Fortis, Inc. since 1993.

- Mr. Mehlhouse, a Vice President of Advisers since 1996, manages equity
securities for Advisers. From 1993 to May 1996, Mr. Mehlhouse was a
portfolio manager for Marshall & Ilsley Bank Corporation in Milwaukee,
Wisconsin.

- Ms. Granger, a Vice President of Advisers since 1998, manages equity
securities for Advisers. From July 1993 to July 1998, Ms. Granger was
portfolio manager for General Motors Investment Management in New York,
New York.

- Mr. de Peyster, a Vice President of Advisers since 1995, has managed
equity securities for Fortis since 1991.

- Mr. Romanowski, a Vice President of Advisers since 1998, has managed
equity securities for Fortis since March 1998. From October 1995 to March
1998, he was a portfolio manager for Value Line in New York, New York.
From 1992 to October 1995, he was a securities analyst for Conning & Co.
in Hartford, Connecticut.

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<PAGE> 32

MORE INFORMATION ON FUND OBJECTIVES, INVESTMENT

STRATEGIES AND RISKS
- --------------------------------------------------------------------------------

FUND OBJECTIVES

The Funds' objectives, which are described above under "The Funds," may be
changed without shareholder approval.

INVESTMENT STRATEGIES

The principal investment strategies of the Funds are described above under "The
Funds," and in more detail below. These are the strategies that Advisers
believes are most likely to be important in trying to achieve the Funds' goals.
Of course, there is no guarantee that any Fund will achieve its goal. You should
be aware that each Fund may also use strategies and invest in securities that
are not described below, but are described in the Statement of Additional
Information.

Each Fund other than Asset Allocation Portfolio invests primarily in common
stocks. The Funds also may invest in other equity securities, including
preferred stocks and securities convertible into common stocks.

In selecting equity securities for the Funds' portfolios, Advisers uses two
distinct equity investment philosophies. Specifically, Asset Allocation
Portfolio, Capital Fund, Growth Fund and Capital Appreciation Portfolio use a
"growth" philosophy and Value Fund uses a "value" philosophy. Growth & Income
Fund may at times use either or both philosophies. Under both philosophies,
Advisers uses a "bottom up" investment style in which stock selection is driven
primarily by the merits of the company itself.

In managing "growth" portfolios, Advisers invests based on a concept of growth
potential, seeking to identify companies whose earnings and revenue growth
potential exceed industry averages. In addition to superior earnings growth
potential, Advisers seeks companies which it believes to be well managed with
above average returns on equity and invested capital, healthy balance sheets and
the potential to gain market share. Companies of this nature typically have
above average growth potential and a correspondingly higher than average
valuation level as measured by price to earnings, price to cash flow and price
to book value ratios. Depending upon the market capitalization goals of a growth
portfolio, the manager will select stocks of small, mid or large capitalization
companies or a combination of all three.

In managing "value" portfolios, Advisers invests based on a concept of
fundamental value, seeking to identify companies whose shares appear inexpensive
relative to anticipated profit and dividend growth. The primary emphasis is
placed on companies expected to experience a significant acceleration in
earnings over the next three to five years. The prices of these stocks typically
do not fully reflect such improvement. Often such a stock is "out of favor" and
priced low relative to the company's earnings, cash flow and book value. A
second source of "value" stocks is provided by companies expected to sustain
their historic rate of growth but which are selling at a low price to earnings
ratio in relation to this anticipated growth.

In an attempt to respond to adverse market, economic, political or other
conditions, each Fund may invest, for temporary defensive purposes, without
limit in high grade preferred stocks, bonds, other fixed income securities,
short-term money market instruments, commercial paper, obligations of banks or
the U.S. Government, other high quality short-term debt instruments, or cash.
Being invested in these securities may keep a Fund from participating in a
market upswing and prevent the Fund from achieving its investment objectives.

DURATION

Asset Allocation Portfolio will attempt to maintain an average effective
duration of three to seven years for the debt securities portion of its
portfolio. Effective duration, one measure of interest rate risk, measures how
much the value of a security is expected to change with a given change in
interest rates. The longer a security's effective duration, the more sensitive
its price to changes in interest rates. For example, if interest rates were to
increase by one percentage point, the market value of a bond with an effective
duration of five years would decrease by 5%, with all other factors being
constant. Effective duration is based on assumptions and subject to a number of
limitations. It is most useful when interest rate changes are small, rapid and
occur equally in short-term and long-term securities. In addition, it is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage-related securities, because the calculation requires assumptions about
prepayment rates.

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<PAGE> 33

PORTFOLIO TURNOVER

Before investing in any mutual fund you should review its portfolio turnover
rate for an indication of the potential effect of transaction costs on the
fund's future returns. In general, the greater the volume of buying and selling
by the fund, the greater the impact that brokerage commissions and other
transaction costs will have on its return. Also, funds with high portfolio
turnover rates may be more likely than low-turnover funds to generate capital
gains that are taxable to shareholders when distributed. Any gains from sales of
securities held for one year or less will be treated as short-term capital gains
and will be taxable to shareholders as ordinary income.

Each Fund other than Growth and Income Fund may trade securities frequently,
resulting in annual portfolio turnover rates in excess of 100%. Factors
contributing to a Fund's higher portfolio turnover rate may include general
market volatility, significant positive or negative developments concerning
particular security holdings, an attempt to maintain the Fund's market
capitalization target and the need to sell holdings to meet redemption activity
in the Fund. Each Fund, with the exception of Growth & Income Fund, had
portfolio turnover rates in excess of 100% during the fiscal year ended August
31, 1999, and Capital Appreciation Portfolio and Value Fund had portfolio
turnover rates in excess of 200% (271% and 266%, respectively). While higher
turnover rates may result in increased capital gains and transaction costs, the
Funds' managers attempt to have the benefits of these transactions outweigh the
costs, although this cannot be assured. The "Financial Highlights" section of
this Prospectus shows each Fund's historical portfolio turnover rates.

PRINCIPAL RISKS

The principal risks of investing in the Funds, are summarized above under "The
Funds." More information about Fund risks is presented below. Please remember,
you may lose money if you invest in the Funds.

RISKS APPLICABLE TO THE FUNDS

- MARKET RISK. All stocks are subject to price movements due to changes in
general economic conditions, changes in the level of prevailing interest
rates, changes in investor perceptions of the market, or the outlook for
overall corporate profitability.

- COMPANY RISK. Individual stocks can perform differently than the overall
market. This may be a result of specific factors such as changes in
corporate profitability due to the success or failure of specific products
or management strategies, or it may be due to changes in investor
perceptions regarding a company.

- SECTOR RISK. The stocks of companies within specific industries or
sectors of the economy can periodically perform differently than the
overall stock market. This can be due to changes in such things as the
regulatory or competitive environment or to changes in investor perceptions
of a particular industry or sector.

- RISKS OF GROWTH STOCKS. Asset Allocation Portfolio, Capital Fund, Growth
Fund and Capital Appreciation Portfolio focus on stocks which Advisers
believe have earnings and revenue growth potential that exceed industry
averages. Growth & Income Fund may also use this approach. These "growth
stocks" typically trade at higher multiples of current earnings than other
stocks. Therefore, their prices may be more sensitive to changes in current
or expected earnings than the prices of other stocks. If Advisers'
assessment of the prospects for the company's earning growth is wrong, or
its judgment about how other investors will value the company's earnings
growth is wrong, then the price of the company's stock may fall or not
approach the value that Advisers has placed on it.

- RISKS OF VALUE STOCKS. Value Fund focuses on stocks of companies whose
shares appear inexpensive relative to anticipated profit and dividend
growth. Growth & Income Fund may also use this approach. These "value
stocks" can remain undervalued for years. There is the risk that a value
stock may never reach what Advisers believes is its full value, or may even
go down in value.

- RISKS OF FOREIGN SECURITIES. Asset Allocation Portfolio may invest up to
20%, and each other Fund may invest up to 10%, of its assets in foreign
securities. Foreign investing involves risks not typically associated with
U.S. investing. A Fund may experience a decline in net asset value
resulting from changes in exchange rates between the United States dollar
and foreign currencies. Other risks of foreign investing include limited
liquidity and volatile prices of non-U.S. securities, limited availability
of information regarding non-U.S. companies, investment and repatriation
restrictions, and foreign taxation.

- RISKS OF SECURITIES LENDING. Each Fund, except Growth Fund, may lend its
portfolio securities. When a Fund loans its portfolio securities, it will
receive collateral equal to at least 100% of the value of the loaned
securities. Nevertheless, the

30
<PAGE> 34

Fund risks a delay in the recovery of the loaned securities, or even the
loss of rights in the collateral deposited by the borrower, if the borrower
should fail financially.

- MANAGEMENT RISK. The Funds are actively managed by professionals with
extensive money management experience and expertise. The performance of the
Funds will reflect in part the ability of Advisers to select securities
which are suited to achieving the Funds' investment objectives. Due to
their active management, the Funds could underperform other mutual funds
with similar investment objectives or the market generally.

ADDITIONAL RISKS OF CAPITAL APPRECIATION PORTFOLIO

- RISKS OF INITIAL PUBLIC OFFERINGS. Most IPOs involve a high degree of
risk not normally associated with offerings of more seasoned companies.
Companies involved in IPOs generally have limited operating histories, and
their prospects for future profitability may be uncertain. These companies
are often engaged in new and evolving businesses and are particularly
vulnerable to competition and to changes in technology, markets and
economic conditions. They may be dependent on certain key managers and
third parties, need more personnel and other resources to manage growth and
require significant additional capital. They may also be dependent on
limited product lines and uncertain property rights and they may need
regulatory approvals. Investors in IPOs can be affected by substantial
dilution in the value of their shares due to sales of additional shares,
and by concentration of control in existing management and principal
shareholders. Stock prices of IPOs can also be highly unstable due to the
absence of a prior public market and the small number of shares available
for trading. Approximately one-fifth of the Fund's total return during
fiscal 1999 was attributable to its investments in IPOs. The effect of IPOs
on the Fund's total returns going forward may not be as significant, either
as a result of changes in the IPO market or growth of the Fund's assets,
which may reduce the Fund's total return.

ADDITIONAL RISKS OF ASSET ALLOCATION PORTFOLIO

- INTEREST RATE RISK. Debt securities in Asset Allocation Portfolio will
fluctuate in value with changes in interest rates. In general, debt
securities will increase in value when interest rates fall and decrease in
value when interest rates rise. Longer term debt securities are generally
more sensitive to interest rate changes. In addition, the Fund's
investments in zero coupon obligations may be highly volatile in response
to changing interest rates.

- CREDIT OR DEFAULT RISK. Asset Allocation Portfolio is subject to the
risk that the issuers of debt securities held by the Fund will not make
payments on the securities or that the other party to the contract (such as
a securities lending agreement) will default on its obligations. There is
also the risk that an issuer could suffer adverse changes in financial
condition that could lower the credit quality of a security. This could
lead to greater volatility in the price of the security and in shares of
the Fund. Also, a change in the credit quality rating of a bond can affect
the bond's liquidity and make it more difficult for the Fund to sell.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. Asset Allocation Portfolio's
investment in corporate bonds may consist of non-investment grade
fixed-income obligations. Non-investment grade obligations are commonly
referred to as "high yield" securities or "junk bonds." Although these
securities usually offer higher yields than investment grade securities,
they also involve more risk. High yield bonds may be more susceptible to
real or perceived adverse economic conditions than investment grade bonds.
In addition, the secondary trading market may be less liquid. High yield
securities generally have more volatile prices and carry more risk to
principal than investment grade securities. Asset Allocation Portfolio may
invest up to 30% of its total assets in securities rated as low as Caa by
Moody's, CCC by Standard & Poor's or comparably rated by another rating
agency. Securities in the Caa/CCC rating category are considered to be of
poor standing and are predominantly speculative. These securities may be in
default, or there may be present elements of danger with respect to the
payment of principal or interest.

- CALL RISK. Many corporate bonds may be redeemed ("called") at the option
of the issuer before their stated maturity date. In general, an issuer will
call its bonds if they can be refinanced by issuing new bonds which bear a
lower interest rate. Asset Allocation Portfolio is subject to the
possibility that during periods of falling interest rates, a bond issuer
will call its bonds. The Fund would then be forced to invest the
unanticipated proceeds at lower interest rates, resulting in a decline in
the Fund's income.

- PREPAYMENT RISK. Because Asset Allocation Portfolio may invest in
mortgage-related securities, it may be subject to prepayment risk.
Prepayment risk is the risk that falling interest rates could cause
prepayments of mortgage-related securities to occur more quickly than
expected. This occurs because, as interest rates fall, more homeowners
refinance the mortgages underlying these securities. The Fund must reinvest
the prepayments at a time when interest rates on new mortgage

31
<PAGE> 35

investments are falling, reducing the income of the Fund. In addition, when
interest rates fall, prices on mortgage-related securities may not rise as
much as for other types of comparable debt securities because investors may
anticipate an increase in mortgage prepayments.

- EXTENSION RISK. Mortgage-related securities also are subject to
extension risk, which is the risk that rising interest rates could cause
homeowners to prepay their mortgages more slowly than expected, resulting
in slower prepayments of mortgage-related securities. This would, in
effect, convert a short- or medium-duration mortgage-related security into
a longer-duration security, increasing its sensitivity to interest rate
changes and causing its price to decline.

32
<PAGE> 36

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The tables that follow present performance information about each class of
shares of the Funds. This information is intended to help you understand each
Fund's financial performance for the past five years or, if shorter, the period
of the Fund's operations. Some of this information reflects financial results
for a single Fund share. The total returns in the tables represent the rate that
you would have earned or lost on an investment in a Fund, assuming you
reinvested all of your dividends and distributions.

This information has been audited by KPMG LLP, independent auditors, whose
report, along with the Funds' financial statements, is included in the Funds'
annual report, which is available upon request.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------------------
ASSET ALLOCATION 1999 1998 1997 1996 1995++ 1994+++
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $16.91 $18.98 $16.48 $16.52 $14.44 $15.43
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net.................... .30 .39 .39 .47 .43 .37
Net realized and unrealized gain on
investments.............................. 3.47 .13 3.47 .29 2.14 (.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations........................ 3.77 .52 3.86 .76 2.57 .06
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net............... (.29) (.41) (.41) (.47) (.40) (.33)
From net realized gains.................... (1.96) (2.18) (.95) (.32) (.09) (.72)
Excess distributions of net realized
gains.................................... -- -- -- (.01) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders.......... (2.25) (2.59) (1.36) (.80) (.49) (1.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................. $18.43 $16.91 $18.98 $16.48 $16.52 $14.44
- ---------------------------------------------------------------------------------------------------------------------------------
Total return@................................ 22.96% 2.71% 24.62% 4.73% 18.25% .48%
Net assets end of year (000s omitted)........ $177,794 $151,920 $156,734 $136,656 $132,939 $119,395
Ratio of expenses to average daily net
assets..................................... 1.42% 1.44% 1.48% 1.50% 1.57%* 1.55%
Ratio of net investment income to average
daily net assets........................... 1.60% 2.07% 2.22% 2.85% 3.31%* 2.60%
Portfolio turnover rate...................... 159% 104% 109% 89% 94% 94%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------------------------- -------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
------------------------------------------------------- -------------------
ASSET ALLOCATION 1999 1998 1997 1996 1995+ 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $16.80 $18.87 $16.40 $16.46 $14.27 $16.74 $18.81
- -----------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net......... .19 .29 .27 .37 .39 .19 .29
Net realized and unrealized gain
on investments................ 3.46 .13 3.47 .29 2.26 3.44 .13
- -----------------------------------------------------------------------------------------------------------------------
Total from operations............. 3.65 .42 3.74 .66 2.65 3.63 .42
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.... (.19) (.31) (.32) (.39) (.37) (.19) (.31)
From net realized gains......... (1.96) (2.18) (.95) (.32) (.09) (1.96) (2.18)
Excess distributions of net
realized gains................ -- -- -- (.01) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders.................... (2.15) (2.49) (1.27) (.72) (.46) (2.15) (2.49)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year...... $18.30 $16.80 $18.87 $16.40 $16.46 $18.22 $16.74
- -----------------------------------------------------------------------------------------------------------------------
Total return@..................... 22.32% 2.14% 23.92% 4.12% 19.00% 22.27% 2.15%
Net assets end of year (000s
omitted)........................ $17,408 $9,928 $7,462 $4,411 $692 $10,259 $5,831
Ratio of expenses to average daily
net assets...................... 1.97% 1.99% 2.03% 2.05% 2.12%* 1.97% 1.99%
Ratio of net investment income to
average daily net assets........ 1.05% 1.50% 1.67% 2.34% 2.51%* 1.05% 1.51%
Portfolio turnover rate........... 159% 104% 109% 89% 94% 159% 104%
- -----------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------- ----------------------------------
CLASS C
----------------------------------
YEAR ENDED AUGUST 31,
------------------------------
ASSET ALLOCATION 1997 1996 1995+
- ---------------------------------- ----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
year.............................. $16.35 $16.41 $14.27
- ----------------------------------
Operations:
Investment income - net......... .26 .37 .39
Net realized and unrealized gain
on investments................ 3.47 .29 2.21
- ----------------------------------
Total from operations............. 3.73 .66 2.60
- ----------------------------------
Distributions to shareholders:
From investment income - net.... (.32) (.39) (.37)
From net realized gains......... (.95) (.32) (.09)
Excess distributions of net
realized gains................ -- (.01) --
- ----------------------------------
Total distributions to
shareholders.................... (1.27) (.72) (.46)
- ----------------------------------
Net asset value, end of year...... $18.81 $16.35 $16.41
- ----------------------------------
Total return@..................... 23.93% 4.13% 18.64 %
Net assets end of year (000s
omitted)........................ $4,789 $2,641 $777
Ratio of expenses to average daily
net assets...................... 2.03% 2.05% 2.12 %*
Ratio of net investment income to
average daily net assets........ 1.67% 2.33% 2.52 %*
Portfolio turnover rate........... 109% 89% 94 %
- ----------------------------------
</TABLE>

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.
++ Ten-month period ended August 31, 1995.
+++ For the year ended October 31, 1994.
@ These are the total returns during the periods, including reinvestment of
all dividend and capital gains distributions without adjustments for sales
charge.

33
<PAGE> 37

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to
August 31, 1995.
++++ For the period from July 27, 1999 (initial offering of shares) to August
31, 1999.
@ These are the total returns during the periods, including reinvestment of
all dividend and capital gains distributions without adjustments for sales
charge.

34
<PAGE> 38

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------
VALUE 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $11.85 $13.51 $10.75 $10.00
- ------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net............................ .05 .09 .09 .05
Net realized and unrealized gain (loss) on investments.... 2.73 (.30) 2.94 .70
- ------------------------------------------------------------------------------------------------------------------
Total from operations....................................... 2.78 (.21) 3.03 .75
- ------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. (.05) (.09) (.06) --
From net realized gains on investments.................... (1.30) (1.36) (.21) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders......................... (1.35) (1.45) (.27) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $13.28 $11.85 $13.51 $10.75
- ------------------------------------------------------------------------------------------------------------------
Total return@............................................... 24.10% (2.52%) 28.66% 7.50%
Net assets end of year (000s omitted)....................... $34,302 $22,449 $21,855 $9,847
Ratio of expenses to average daily net assets............... 1.48% 1.52% 1.59% 1.65%*
Ratio of net investment income (loss) to average daily net
assets.................................................... .32% .55% .72% .75%*
Portfolio turnover rate..................................... 266% 260% 93% 41%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CLASS H
-------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------
VALUE 1999 1998 1997 1996+
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $11.72 $13.39 $10.70 $10.00
- ---------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net............................ (.08) (.01) (.01) --
Net realized and unrealized gain (loss) on investments.... 2.73 (.30) 2.94 .70
- ---------------------------------------------------------------------------------------------------------------
Total from operations....................................... 2.65 (.31) 2.93 .70
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. -- -- (.03) --
From net realized gains on investments.................... (1.30) (1.36) (.21) --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to shareholders......................... (1.30) (1.36) (.24) --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $13.07 $11.72 $13.39 $10.70
- ---------------------------------------------------------------------------------------------------------------
Total return@............................................... 23.18% (3.24%) 27.75% 7.00%
Net assets end of year (000s omitted)....................... $8,045 $7,016 $4,896 $1,605
Ratio of expenses to average daily net assets............... 2.23% 2.27% 2.34% 2.40%*
Ratio of net investment income (loss) to average daily net
assets.................................................... (.43%) (.20%) (.04%) --
Portfolio turnover rate..................................... 266% 260% 93% 41%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period from January 2, 1996 (commencement of operations) to August
31, 1996.
@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustment for sales charge.

35
<PAGE> 39

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------
GROWTH & INCOME 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $13.20 $13.06 $10.35 $10.00
- ------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net................................... .17 .32 .20 .07
Net realized and unrealized gain on investments........... 2.03 .07 2.77 .34
- ------------------------------------------------------------------------------------------------------------------
Total from operations....................................... 2.20 .39 2.97 .41
- ------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. (.18) (.24) (.16) (.06)
From net realized gains on investments.................... (.39) (.01) (.10) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders......................... (.57) (.25) (.26) (.06)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $14.83 $13.20 $13.06 $10.35
- ------------------------------------------------------------------------------------------------------------------
Total return@............................................... 16.84% 2.81% 29.00% 4.11%
Net assets end of year (000s omitted)....................... $26,100 $20,994 $13,907 $3,117
Ratio of expenses to average daily net assets............... 1.44% 1.55% 1.75% 2.33%*
Ratio of net investment income to average daily net
assets.................................................... 1.18% 1.71% 1.68% 1.16%*
Portfolio turnover rate..................................... 65% 20% 15% 5%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CLASS H
-------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------
GROWTH & INCOME 1999 1998 1997 1996+
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $13.16 $13.03 $10.33 $10.00
- ---------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net................................... .06 .20 .10 .03
Net realized and unrealized gain on investments........... 2.03 .07 2.77 .34
- ---------------------------------------------------------------------------------------------------------------
Total from operations....................................... 2.09 .27 2.87 .37
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. (.10) (.13) (.07) (.04)
From net realized gains on investments.................... (.39) (.01) (.10) --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to shareholders......................... (.49) (.14) (.17) (.04)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $14.76 $13.16 $13.03 $10.33
- ---------------------------------------------------------------------------------------------------------------
Total return@............................................... 16.00% 1.99% 28.03% 3.65%
Net assets end of year (000s omitted)....................... $7,245 $6,306 $5,085 $1,286
Ratio of expenses to average daily net assets............... 2.19% 2.30% 2.50% 3.08%*
Ratio of net investment income to average daily net
assets.................................................... .41% .96% .93% .44%*
Portfolio turnover rate..................................... 65% 20% 15% 5%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

36
<PAGE> 40

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------
CAPITAL 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $22.37 $26.13 $21.89 $21.22 $18.36
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net....................... (.03) (.08) (.08) .04 .08
Net realized and unrealized gain on investments...... 6.73 .38 7.06 .67 3.62
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations.................................. 6.70 .30 6.98 .71 3.70
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net......................... -- -- (.01) (.04) (.08)
From net realized gains on investments............... (6.26) (4.06) (2.73) -- (.76)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders.................... (6.26) (4.06) (2.74) (.04) (.84)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year........................... $22.81 $22.37 $26.13 $21.89 $21.22
- ---------------------------------------------------------------------------------------------------------------------------------
Total return@.......................................... 37.88% 1.56% 34.57% 3.36% 21.49%
Net assets end of year (000s omitted).................. $551,551 $312,582 $340,949 $277,587 $291,263
Ratio of expenses to average daily net assets.......... 1.10% 1.13% 1.18% 1.21% 1.24%
Ratio of net investment income (loss) to average daily
net assets........................................... (.08%) (.28%) (.33%) .17% .42%
Portfolio turnover rate................................ 177% 71% 43% 28% 14%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------------------------- ---------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
------------------------------------------------------- ---------------------
CAPITAL 1999 1998 1997 1996 1995+ 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year................................ $21.73 $25.67 $21.69 $21.14 $18.35 $21.73 $25.68
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net.... (.43) (.26) (.35) (.12) -- (.44) (.27)
Net realized and unrealized gain
on investments.................. 6.73 .38 7.06 .67 3.58 6.73 .38
- ---------------------------------------------------------------------------------------------------------------------------
Total from operations............... 6.30 .12 6.71 .55 3.58 6.29 .11
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net...... -- -- -- -- (.03) -- --
From net realized gains on
investments..................... (6.26) (4.06) (2.73) -- (.76) (6.26) (4.06)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders...................... (6.26) (4.06) (2.73) -- (.79) (6.26) (4.06)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year........ $21.77 $21.73 $25.67 $21.69 $21.14 $21.76 $21.73
- ---------------------------------------------------------------------------------------------------------------------------
Total return@....................... 36.94% .80% 33.55% 2.60% 20.74% 36.87% .76%
Net assets end of year (000s
omitted).......................... $24,847 $9,339 $7,284 $4,097 $1,527 $5,715 $2,453
Ratio of expenses to average daily
net assets........................ 1.85% 1.88% 1.93% 1.96% 1.99%* 1.85% 1.88%
Ratio of net investment income
(loss) to average daily net
assets............................ (.83%) (1.03%) (1.08%) (.60%) (.36%)* (.83%) (1.03%)
Portfolio turnover rate............. 177% 71% 43% 28% 14% 177% 71%
- ---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ------------------------------------ ----------------------------------
CLASS C
----------------------------------
YEAR ENDED AUGUST 31,
------------------------------
CAPITAL 1997 1996 1995+
- ------------------------------------ ----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
year................................ $21.68 $21.13 $18.35
- ------------------------------------------------------------------------
Operations:
Investment income (loss) - net.... (.33) (.12) --
Net realized and unrealized gain
on investments.................. 7.06 .67 3.57
- ------------------------------------------------------------------------
Total from operations............... 6.73 .55 3.57
- ------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net...... -- -- (.03)
From net realized gains on
investments..................... (2.73) -- (.76)
- ------------------------------------------------------------------------
Total distributions to
shareholders...................... (2.73) -- (.79)
- ------------------------------------------------------------------------
Net asset value, end of year........ $25.68 $21.68 $21.13
- ------------------------------------------------------------------------
Total return@....................... 33.68% 2.60% 20.68%
Net assets end of year (000s
omitted).......................... $1,432 $824 $344
Ratio of expenses to average daily
net assets........................ 1.93% 1.96% 1.99%*
Ratio of net investment income
(loss) to average daily net
assets............................ (1.08%) (.60%) (.36%)*
Portfolio turnover rate............. 43% 28% 14%
- ------------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.
@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales charge.

37
<PAGE> 41

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------
GROWTH 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $29.78 $37.32 $32.14 $32.66 $26.25
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net....................... (.13) (.11) (.16) (.11) (.04)
Net realized and unrealized gain (losses) on
investments........................................ 10.72 (3.59) 8.41 1.30 6.95
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations.................................. 10.59 (3.70) 8.25 1.19 6.91
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains.............................. (9.57) (3.84) (3.07) (1.71) (.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period......................... $30.80 $29.78 $37.32 $32.14 $32.66
- ---------------------------------------------------------------------------------------------------------------------------------
Total return@.......................................... 40.00% (10.59%) 27.01% 4.09% 26.92%
Net assets end of period (000s omitted)................ $734,282 $581,819 $734,654 $641,061 $670,753
Ratio of expenses to average daily net assets.......... 1.06% 1.05% 1.07% 1.09% 1.13%
Ratio of net investment income (loss) to average daily
net assets........................................... (.44%) (.29%) (.45%) (.33%) (.13%)
Portfolio turnover rate................................ 166% 61% 28% 32% 27%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
--------------------------------------------------------- --------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
--------------------------------------------------------- --------------------
GROWTH 1999 1998 1997 1996 1995+ 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................. $28.85 $36.53 $31.75 $32.48 $25.85 $28.85 $36.52
- -------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income
(loss) - net................. (.74) (.25) (.56) (.32) (.13) (.74) (.24)
Net realized and unrealized
gain (losses) on
investments.................. 10.72 (3.59) 8.41 1.30 7.26 10.72 (3.59)
- -------------------------------------------------------------------------------------------------------------------------
Total from operations............ 9.98 (3.84) 7.85 .98 7.13 9.98 (3.83)
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains........ (9.57) (3.84) (3.07) (1.71) (.50) (9.57) (3.84)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period... $29.26 $28.85 $36.53 $31.75 $32.48 $29.26 $28.85
- -------------------------------------------------------------------------------------------------------------------------
Total return@.................... 38.98% (11.25%) 26.02% 3.45% 28.17% 38.98% (11.22%)
Net assets end of period
(000s omitted)................. $20,236 $12,417 $12,149 $6,710 $2,179 $4,629 $2,738
Ratio of expenses to average
daily net assets............... 1.81% 1.80% 1.82% 1.84% 1.88%* 1.81% 1.80%
Ratio of net investment income
(loss) to average daily net
assets......................... (1.19%) (1.04%) (1.19%) (1.07%) (1.09%)* (1.19%) (1.04%)
Portfolio turnover rate.......... 166% 61% 28% 32% 27% 166% 61%
- -------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- --------------------------------- ------------------------------------
CLASS C
------------------------------------
YEAR ENDED AUGUST 31,
--------------------------------
GROWTH 1997 1996 1995+
- --------------------------------- ------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
year............................. $31.75 $32.49 $25.85
- -----------------------------------------------------------------------
Operations:
Investment income
(loss) - net................. (.57) (.33) (.10)
Net realized and unrealized
gain (losses) on
investments.................. 8.41 1.30 7.24
- -----------------------------------------------------------------------
Total from operations............ 7.84 .97 7.14
- -----------------------------------------------------------------------
Distributions to shareholders:
From net realized gains........ (3.07) (1.71) (.50)
- -----------------------------------------------------------------------
Net asset value, end of period... $36.52 $31.75 $32.49
- -----------------------------------------------------------------------
Total return@.................... 25.98% 3.41% 28.21%
Net assets end of period
(000s omitted)................. $2,367 $1,077 $264
Ratio of expenses to average
daily net assets............... 1.82% 1.84% 1.88%*
Ratio of net investment income
(loss) to average daily net
assets......................... (1.19%) (1.07%) (1.10%)*
Portfolio turnover rate.......... 28% 32% 27%
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CLASS H CLASS Z
---------------------------------------------------------- ---------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
---------------------------------------------------------- ---------------------
GROWTH 1999 1998 1997 1996 1995+ 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $28.86 $36.54 $31.75 $32.49 $25.85 $30.00 $37.47
- -----------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net... (.73) (.25) (.55) (.33) (.11) (.06) (.04)
Net realized and unrealized gain
(losses) on investments........ 10.72 (3.59) 8.41 1.30 7.25 10.86 (3.59)
- -----------------------------------------------------------------------------------------------------------------------------
Total from operations.............. 9.99 (3.84) 7.86 .97 7.14 10.80 (3.63)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains.......... (9.57) (3.84) (3.07) (1.71) (.50) (9.57) (3.84)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period..... $29.28 $28.86 $36.54 $31.75 $32.49 $31.23 $30.00
- -----------------------------------------------------------------------------------------------------------------------------
Total return@...................... 39.00% (11.25%) 26.05% 3.41% 28.21% 40.49% (10.34%)
Net assets end of period
(000s omitted)................... $50,547 $34,453 $34,941 $21,176 $6,867 $119,548 $95,370
Ratio of expenses to average daily
net assets....................... 1.81% 1.80% 1.82% 1.84% 1.88%* .81% .80%
Ratio of net investment income
(loss) to average daily net
assets........................... (1.19%) (1.04%) (1.19%) (1.07%) (1.10%)* (.19%) (.04%)
Portfolio turnover rate............ 166% 61% 28% 32% 27% 166% 61%
- -----------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------- -------------------------
CLASS Z
-------------------------
YEAR ENDED AUGUST 31,
-------------------------
GROWTH 1997 1996++
- ----------------------------------- -------------------------
<S> <C> <C>
Net asset value, beginning of
year............................... $32.18 $31.61
- --------------------------------------------------------------
Operations:
Investment income (loss) - net... (.05) --
Net realized and unrealized gain
(losses) on investments........ 8.41 .57
- --------------------------------------------------------------
Total from operations.............. 8.36 .57
- --------------------------------------------------------------
Distributions to shareholders:
From net realized gains.......... (3.07) --
- --------------------------------------------------------------
Net asset value, end of period..... $37.47 $32.18
- --------------------------------------------------------------
Total return@...................... 27.34% 1.80%
Net assets end of period
(000s omitted)................... $112,356 $93,006
Ratio of expenses to average daily
net assets....................... .82% .84%*
Ratio of net investment income
(loss) to average daily net
assets........................... (.20%) .01%*
Portfolio turnover rate............ 28% 32%
- --------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.
++ For the period from March 1, 1996 (commencement of operations) to August 31,
1996.
@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.

38
<PAGE> 42

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
CAPITAL APPRECIATION 1999 1998 1997 1996 1995++ 1994+++
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $26.42 $30.60 $34.76 $30.67 $23.05 $27.38
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net................ (.30) (.35) (.26) (.29) (.17) (.12)
Net realized and unrealized gain (loss) on
investments................................. 18.42 (3.83) (2.45) 4.61 7.79 (2.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations........................... 18.12 (4.18) (2.71) 4.32 7.62 (2.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains on investments........ (8.50) -- (1.18) (.23) -- (1.76)
Tax return of capital......................... -- -- (.27) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............. (8.50) -- (1.45) (.23) -- (1.76)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year.................... $36.04 $26.42 $30.60 $34.76 $30.67 $23.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total return@................................... 80.27% (13.66%) (7.89%) 14.21% 33.06% (9.56%)
Net assets end of year (000s omitted)........... $147,346 $79,813 $105,422 $114,310 $90,918 $68,352
Ratio of expenses to average daily net assets... 1.50% 1.52% 1.55% 1.56% 1.69%* 1.62%
Ratio of net investment income (loss) to average
daily net assets.............................. (1.08%) (.97%) (.84%) (.96%) (.82%)* (.61%)
Portfolio turnover rate......................... 271% 47% 25% 34% 21% 36%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------------------------- ------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
------------------------------------------------------- ---------------------
CAPITAL APPRECIATION 1999 1998 1997 1996 1995+ 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $25.90 $30.16 $34.46 $30.57 $22.45 $25.92 $30.18
- ----------------------------------------------------------------------------------------------------------------------
Operations:
Investment income
(loss) - net.................. (.91) (.43) (.40) (.49) (.35) (.90) (.43)
Net realized and unrealized gain
(loss) on investments......... 18.42 (3.83) (2.45) 4.61 8.47 18.42 (3.83)
- ----------------------------------------------------------------------------------------------------------------------
Total from operations............. 17.51 (4.26) (2.85) 4.12 8.12 17.52 (4.26)
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains on
investments................... (8.50) -- (1.18) (.23) -- (8.50) --
Tax return of capital........... -- -- (.27) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders.................... (8.50) -- (1.45) (.23) -- (8.50) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year...... $34.91 $25.90 $30.16 $34.46 $30.57 $34.94 $25.92
- ----------------------------------------------------------------------------------------------------------------------
Total return@..................... 79.35% (14.12%) (8.38%) 13.60% 36.17% 79.33% (14.12%)
Net assets end of year
(000s omitted).................. $11,426 $5,849 $6,561 $4,522 $841 $3,612 $1,794
Ratio of expenses to average daily
net assets...................... 2.05% 2.07% 2.10% 2.11% 2.24%* 2.05% 2.07%
Ratio of net investment income
(loss) to average daily net
assets.......................... (1.63%) (1.52%) (1.39%) (1.47%) (1.61%)* (1.63%) (1.52%)
Portfolio turnover rate........... 271% 47% 25% 34% 21% 271% 47%
- ----------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------- ----------------------------------
CLASS C
----------------------------------
YEAR ENDED AUGUST 31,
------------------------------
CAPITAL APPRECIATION 1997 1996 1995+
- ---------------------------------- ----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
year.............................. $34.48 $30.58 $22.45
- ----------------------------------------------------------------------
Operations:
Investment income
(loss) - net.................. (.40) (.48) (.36)
Net realized and unrealized gain
(loss) on investments......... (2.45) 4.61 8.49
- ----------------------------------------------------------------------
Total from operations............. (2.85) 4.13 8.13
- ----------------------------------------------------------------------
Distributions to shareholders:
From net realized gains on
investments................... (1.18) (.23) --
Tax return of capital........... (.27) -- --
- ----------------------------------------------------------------------
Total distributions to
shareholders.................... (1.45) (.23) --
- ----------------------------------------------------------------------
Net asset value, end of year...... $30.18 $34.48 $30.58
- ----------------------------------------------------------------------
Total return@..................... (8.38%) 13.62% 36.21%
Net assets end of year
(000s omitted).................. $1,875 $1,004 $227
Ratio of expenses to average daily
net assets...................... 2.10% 2.11% 2.24%*
Ratio of net investment income
(loss) to average daily net
assets.......................... (1.39%) (1.46%) (1.62%)*
Portfolio turnover rate........... 25% 34% 21%
- ----------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to
August 31, 1995.
++ Ten-month period ended August 31, 1995.
+++ For the year ended October 31, 1994.
@ These are the total returns during the periods, including reinvestment of
all dividend and capital gains distributions without adjustments for sales
charge.

39
<PAGE> 43

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
CLASS H
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
CAPITAL APPRECIATION 1999 1998 1997 1996 1995+
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $25.92 $30.18 $34.48 $30.58 $22.45
- -------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net............................ (.90) (.43) (.40) (.48) (.36 )
Net realized and unrealized gain (loss) on investments.... 18.42 (3.83) (2.45) 4.61 8.49
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations....................................... 17.52 (4.26) (2.85) 4.13 8.13
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gains on investments.................... (8.50) -- (1.18) (.23) --
Tax return of capital..................................... -- -- (.27) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distribution to shareholders.......................... (8.50) -- (1.45) (.23) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $34.94 $25.92 $30.18 $34.48 $30.58
- -------------------------------------------------------------------------------------------------------------------------------
Total return@............................................... 79.33% (14.12%) (8.38%) 13.62% 36.21 %
Net assets end of year (000s omitted)....................... $20,755 $11,933 $13,379 $9,575 $2,115
Ratio of expenses to average daily net assets............... 2.05% 2.07% 2.10% 2.11% 2.24 %*
Ratio of net investment income (loss) to average daily net
assets.................................................... (1.63%) (1.52%) (1.39%) (1.46%) (1.62 %)*
Portfolio turnover rate..................................... 271% 47% 25% 34% 21 %
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.
@ These are the total returns during the period, including reinvestment of all
dividend and capital gains distributions without adjustments for sales charge.

40
<PAGE> 44

(This page has been left blank intentionally.)
<PAGE> 45

FORTIS FINANCIAL GROUP
Fund management offered through Fortis Advisers, Inc. since 1949
Securities offered through Fortis Investors, Inc. member NASD, SIPC
Insurance products offered through Fortis Benefits Insurance
Company & Fortis Insurance Company
P.O. Box 64284, St. Paul, MN 55164-0284 (800) 800-2000
http://www.ffg.us.fortis.com

[FORTIS(SM) LOGO]

ACCOUNT APPLICATION Complete this application to open a new Fortis account or to
add services to an existing Fortis account. DO NOT USE TO OPEN A FORTIS IRA,
SEP, 403(B) OR FORTIS MONEY FUND ACCOUNT. If you have questions, please call
your Investment professional or Fortis customer service at 1-800-800-2000,
extension 3012. Please complete all sections, as submission of an incomplete
application may cause processing delays.

Mail to: FORTIS MUTUAL FUNDS, CM-9614, St. Paul, MN 55170-9614

1. ACCOUNT INFORMATION
Please provide the information requested below:

[ ] INDIVIDUAL: Please print your name, social security
number, U.S. citizen status.

[ ] JOINT TENANT: List all names, one social security number, one U.S. citizen
status. (When one joint tenant dies, the other takes full ownership.)

[ ] UNIFORM GIFT/TRANSFER TO MINORS: Provide name of custodian (only one) and
minor, minor's social security number, minor's U.S. citizen status and
birthdate of minor.

[ ] TRUST: List trustees and trust title, including trust date, trust's
taxpayer ID number and include a photocopy of the first and last page of
the trust agreement.

[ ] CORPORATION, ASSOCIATION, PARTNERSHIP: Include full name, taxpayer ID
number. Also include a photocopy of articles of incorporation, partnership
agreements, etc.

[ ] FORTIS KEY PLAN: Include social security number.

[ ] QUALIFIED PLAN: For pooled 401(k) plans, trusts and pensions, include name
of plan, trustee, and plan's taxpayer ID number. (Do not use this
application for a Fortis IRA.)

[ ] OTHER:
---------------------------------------------------------------------

- --------------------------------------------------------------------------------
Owner (individual, first joint tenant, custodian, trustee) (Please print.)

- --------------------------------------------------------------------------------
Owner (second joint tenant, minor, trust name) (Please print.)

- --------------------------------------------------------------------------------
Additional information, If needed

- --------------------------------------------------------------------------------
Street address

- --------------------------------------------------------------------------------
City State Zip

- --------------------------------------------------------------------------------
Social security number (taxpayer ID)

- --------------------------------------------------------------------------------
Joint tenant social security number (taxpayer ID)

- ------------------------- ----------------------------------------------------
Daytime phone Date of birth
(Uniform gift/transfer to minors)

Date of trust (if applicable)
---------------------------------------------------

Are you a U.S. citizen? [ ] yes [ ] no
If no, country of permanent residence
-------------------------------------------

2. INVESTMENT ACCOUNT

A. PHONE ORDERS
Was order previously phoned in? If yes, date
------------------------------------

Confirmation no. Account no.
----------------------------- ------------------------

FOR PHONE ORDERS, CHECK MUST BE MADE PAYABLE TO FORTIS INVESTORS

B. MAIL-IN ORDERS
Check enclosed for $ . (MADE PAYABLE to FORTIS FUNDS)
---------------------
MUST INDICATE CLASS

1) $
--------------------------- -------------------- A [ ] B [ ] C [ ] H [ ]
FUND NAME AMOUNT OR PERCENT CLASS

2) $
--------------------------- -------------------- A [ ] B [ ] C [ ] H [ ]
FUND NAME AMOUNT OR PERCENT CLASS

3) $
--------------------------- -------------------- A [ ] B [ ] C [ ] H [ ]
FUND NAME AMOUNT OR PERCENT CLASS

4) $
--------------------------- -------------------- A [ ] B [ ] C [ ] H [ ]
FUND NAME AMOUNT OR PERCENT CLASS

5) $
--------------------------- -------------------- A [ ] B [ ] C [ ] H [ ]
FUND NAME AMOUNT OR PERCENT CLASS

3. SUITABILITY

NOTE: MUST BE COMPLETED WITH EACH FUND APPLICATION UNLESS YOU PROVIDE
SUITABILITY INFORMATION TO YOUR BROKER/DEALER ON A DIFFERENT FORM.

- --------------------------------------------------------------------------------
Employer State in which application was signed

- --------------------------------------------------------------------------------
Business address

- --------------------------------------------------------------------------------
City, state, zip

- -------------------------------------------------------- ----------------------
Occupation Age (optional)

Is customer associated with or employed by another NASD member?
[ ] yes [ ]no

ESTIMATED ANNUAL INCOME $ [ ] declined
(all sources) ---------------

ESTIMATED NET WORTH $ [ ] declined
(exclusive of family residence) ---------------

ESTIMATED TAX BRACKET % [ ] declined
---------------
SOURCE OF FUNDS
-----------------------------------------------------------------

INVESTMENT OBJECTIVES:

[ ] Growth (long-term capital appreciation)

[ ] Income (cash generating)

[ ] Tax-free Income

[ ] Diversification

[ ] Other (please specify)
----------------------------------------------------

Did you use a Fortis Asset Allocation model?
[ ] yes [ ] no

95749 (c) Fortis, Inc. 12/99

The Fortis brandmark and Fortis(R) are servicemarks of Fortis (B) and Fortis
(NL).

<PAGE> 46

ACCOUNT APPLICATION continued

4. TRANSFER ON DEATH

Please indicate the primary beneficiary with "PB" after the beneficiary(ies)
name(s). Indicate contingent beneficiary with "CB." Indicate lineal descendant
per stirpes with "LDPS" if you want ownership to pass to the legal heirs of the
primary beneficiary in the event a designated beneficiary dies before the
account owner.

TOD IS ONLY AVAILABLE FOR INDIVIDUAL AND JOINT TENANTS (JTWROS) ACCOUNTS.

BENEFICIARY(IES):

Name SS no.
-------------------------------------- --------------------------------
Name SS no.
-------------------------------------- --------------------------------
Name SS no.
-------------------------------------- --------------------------------

5. EXEMPTION FROM SALES CHARGE

CHECK IF APPLICABLE (for net asset value purchases):

[ ] I am a member of one of the categories of persons listed under "Exemptions
from sales charge" in the prospectus. I qualify for exemption from the sales
charge because .
----------------------------------------------------

[ ] I was, within the past sixty days, the owner of a fixed annuity contract not
deemed a security or a shareholder of an unrelated mutual fund with a
front-end and/or deferred sales charge. I have attached the mutual
fund/insurance check or copy of the redemption confirmation/surrender form.

6. DISTRIBUTION OPTIONS

If no option is selected, all distributions will be reinvested in the same
Fortis fund(s) selected above. Please note that distributions can only be
reinvested in the SAME CLASS.

[ ] Reinvest dividends and capital gains

[ ] Dividends in cash and reinvest capital gains (See section 7 for payment
options.)

[ ] Dividends and capital gains in cash (See section 7 for payment options.)

[ ] Distributions into another Fortis fund (MUST BE SAME CLASS).

- --------------------------- --------------------------------------------------
Fund name Fund/account no. (if existing account)

7. WITHDRAWAL OPTIONS
A. CASH DIVIDENDS

PLEASE FORWARD THE PAYMENT TO:

[ ] My bank. Please complete bank information in Section D, and choose one
option below. Payment will be sent via U.S. Mail if neither option is
checked.

[ ] Via U.S. mail
[ ] Via ACH (electronic transfer)

[ ] My address of record.

7. WITHDRAWAL OPTIONS continued
B. SYSTEMATIC WITHDRAWAL PLAN

Please consult your financial or tax adviser before electing a Systematic
Withdrawal Plan.
Please redeem shares from my Fortis Fund,
----------------------------------------
account number in the amount of $
-------------------- -----------------------

Effective withdrawal date
------------------------------------------------------

FREQUENCY: [ ] monthly [ ] semiannually
[ ] quarterly [ ] annually

PLEASE FORWARD THE PAYMENT TO:

[ ] My bank. (Please complete bank information in Section D, and choose one
option below. Payment will be sent via U.S. mail if neither option is
checked. Signature guarantee is required to send to any place other than
address of record.)

[ ] via U.S. mail
[ ] via ACH (electronic transfer)

[ ] My address of record.

C. TELEPHONE OPTIONS

1. TELEPHONE EXCHANGE. All exchanges must be into accounts that have the
identical registration-ownership. All authorized signatures listed in
section 14 (or your registered representative with shareholder consent) can
make telephone transfers. A new application is required for investment in a
new fund.

2. TELEPHONE REDEMPTION ($25,000 LIMIT AND NOT AVAILABLE FOR QUALIFIED PLANS)
If you have not changed your address in the past sixty days, you are
eligible for this service. This option allows all authorized signatures in
section 14 (or your registered representative with shareholder consent) to
redeem up to $25,000 from your Fortis account.

PLEASE FORWARD THE PAYMENT TO:

[ ] My bank.(Please complete bank information in section D, and choose one
option below. Payment will be sent via U.S. mail if neither option is
checked.)

[ ] Via U.S. mail
[ ] Via ACH (electronic transfer)

[ ] My address of record.

D. BANK INFORMATION

I request Fortis Financial Group (FFG) to pay sums due me by crediting my bank
account in the form of electronic entries. This authorization will remain in
effect until I notify FFG.

TYPE OF ACCOUNT: [ ] Checking [ ] Savings

Bank name
----------------------------------------------------------------------

Address
-------------------------------------------------------------------------

City, State, Zip
----------------------------------------------------------------

Name of bank account
------------------------------------------------------------

Bank account number
-------------------------------------------------------------

Bank transit number
-------------------------------------------------------------

Bank phone number
---------------------------------------------------------------

ATTACH A VOIDED CHECK FROM YOUR BANK CHECKING ACCOUNT

95749 (C) Fortis, Inc. 12/99

<PAGE> 47

ACCOUNT APPLICATION continued

8. REDUCED FRONT-END SALES CHARGES
A. RIGHT OF ACCUMULATION

[ ] I own shares of more than one fund in the Fortis Family of Funds, which may
entitle me to a reduced sales charge.

- ---------------------------- --------------------------------------------------
Name on account Account number

B. STATEMENT OF INTENT

I agree to invest $ over a thirteen-month period
--------------------------------
beginning (not more than ninety days prior
------------------------------------
to this application). I understand that an additional sales charge must be paid
if I do not complete my purchase.

9. PRIVILEGED ACCOUNT SERVICE

Fortis' Privileged Account Service systematically rebalances your funds back to
your original specifications ($10,000 minimum per account). All funds must be
within the SAME CLASS.

Frequency: [ ] quarterly [ ] semiannually [ ] annually

Fund selected Percentage
(up to five) (whole percent)

1)
------------------------------------------- --------------------------
2)
------------------------------------------- --------------------------
3)
------------------------------------------- --------------------------
4)
------------------------------------------- --------------------------
5)
------------------------------------------- --------------------------

10. SYSTEMATIC EXCHANGE PROGRAM
Fortis' Systematic Transfer Program allows you to transfer money from any Fortis
fund, in which you have a current balance of at least $1,000, into any other
Fortis fund (maximum of three), on a monthly basis. The minimum amount for each
transfer is $50. Generally, transfers between funds must be made within the SAME
CLASS. See prospectus for details.

- ------------------------------------------- ----------------------------------
Fund from which shares will be exchanged: Effective date

FUND(S) TO RECEIVE INVESTMENT(S):

Fund Amount to invest monthly
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------

11. SYSTEMATIC INVESTMENT PLAN [ ] yes [ ] no

These plans may be established with automatic withdrawals of $25 or more each
month.

Complete the automated clearing house (ACH) authorization agreement Form in the
prospectus and attach a VOIDED check from your bank checking account.

12. OTHER SPECIAL INSTRUCTIONS

- --------------------------------------------------------------------------------

13. DEALER/REPRESENTATIVE INFORMATION

- --------------------------------------------------------------------------------
Representative's name (please print)

- --------------------------------------------------------------------------------
Name of broker/dealer

- --------------------------------------------------------------------------------
Branch office address

- --------------------------------------------------------------------------------
Representative's signature

- ---------------------------------------- --------------------------------------
Representative's number Representative's phone number

- --------------------------------------------------------------------------------
Authorized signature of broker/dealer

14. SIGNATURE AND CERTIFICATION
I/WE HAVE RECEIVED AND READ EACH APPROPRIATE FUND PROSPECTUS AND UNDERSTAND THAT
ITS TERMS ARE INCORPORATED BY REFERENCE INTO THIS APPLICATION. I AM/WE ARE OF
LEGAL AGE AND LEGAL CAPACITY.

I/We understand that this application is subject to acceptance by Fortis
Investors, Inc.

I/WE CERTIFY, UNDER PENALTIES OF PERJURY, THAT:

(1) THE SOCIAL SECURITY NUMBER OR TAXPAYER ID NUMBER PROVIDED IS CORRECT; AND
(CROSS OUT THE FOLLOWING IF NOT TRUE)

(2) THAT THE IRS HAS NEVER NOTIFIED ME THAT I AM SUBJECT TO THIRTY-ONE PERCENT
BACKUP WITHHOLDING, OR HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO SUCH
BACKUP WITHHOLDING.

Each person signing on behalf of any entity represents that his or her actions
are authorized. It is agreed that all Fortis Funds, Fortis Investors, Fortis
Advisers and their officers, directors, agents and employees will not be liable
for any loss, liability, damage or expense for relying upon this application or
any instruction believed genuine.

If you are not signing as an individual, state your title or capacity (include
appropriate documents verifying your capacity).

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.

AUTHORIZED SIGNATURE(S)

X
- --------------------------------------------------------------------------------
Owner, custodian, trustee Date

X
- --------------------------------------------------------------------------------
Joint owner, trustee Date

95749 (C) Fortis, Inc. 12/99

<PAGE> 48

(This page has been left blank intentionally.)
<PAGE> 49

FORTIS FINANCIAL GROUP

Fortis Advisers, Inc. (fund management since 1949)

Fortis Investors, Inc. (principal underwriter, member NASD, SIPC)

Fortis Benefits Insurance Company & Fortis Insurance Company

P.O. Box 64284 St. Paul, MN 55164-0284 (800) 800-2000

http://www.ffg.us.fortis.com
FORTIS MUTUAL FUND
AUTOMATED CLEARING HOUSE (ACH) AUTHORIZATION AGREEMENT [FORTIS LOGO]
Please complete each section below to establish ACH capability to your Fortis
Mutual Fund Account.
For personal service, please call your investment professional or Fortis at
(800) 800-2000, extension 3012.
For investment options, complete sections 1, 2, 3. For withdrawal, complete
sections 1, 2, 4, 5.

1 FORTIS ACCOUNT INFORMATION

ACCOUNT REGISTRATION:

- ------------------------------------------------------------------------
OWNER (INDIVIDUAL, FIRST JOINT TENANT, CUSTODIAN, TRUSTEE)

- ------------------------------------------------------------------------
OWNER (SECOND JOINT TENANT, MINOR, TRUST NAME)

- ------------------------------------------------------------------------
ADDITIONAL INFORMATION, IF NEEDED

- ------------------------------------------------------------------------
STREET ADDRESS

- ------------------------------------------------------------------------
CITY STATE ZIP

- -------------------------------- --------------------------------
SOCIAL SECURITY NUMBER (TAXPAYER I.D.) DAYTIME PHONE

2 BANK/FINANCIAL INSTITUTION INFORMATION

<TABLE>
<S> <C> <C>
Plan type: [ ] NEW PLAN [ ] BANK CHANGE
Account type: [ ] CHECKING [ ] SAVINGS
(MUST ATTACH A VOIDED (MUST ATTACH A DEPOSIT
CHECK) SLIP)
</TABLE>

- ------------------------------------------------------------------------
Transit number

- ------------------------------------------------------------------------
Bank account number

- ------------------------------------------------------------------------
Account owner(s) (please print)

- ------------------------------------------------------------------------
Depositor's daytime phone

Clearly print the bank/financial institution's name and address below:

- ------------------------------------------------------------------------

- ------------------------------------------------------------------------
SIGNATURE OF DEPOSITOR DATE

- ------------------------------------------------------------------
SIGNATURE OF JOINT-DEPOSITOR DATE

3 INVESTMENT OPTION(S)

I REQUEST FORTIS FINANCIAL GROUP (FFG) TO OBTAIN PAYMENT OF SUMS BECOMING DUE
THE COMPANY BY CHARGING MY ACCOUNT IN THE FORM OF ELECTRONIC DEBIT ENTRIES. I
REQUEST AND AUTHORIZE THE FINANCIAL INSTITUTION NAMED TO ACCEPT, HONOR AND
CHARGE THOSE ENTRIES TO MY ACCOUNT. PLEASE ALLOW 30 DAYS FOR COLLECTED FUNDS TO
BE AVAILABLE IN YOUR FORTIS ACCOUNT.

<TABLE>
<S> <C> <C>
A. [ ] INVEST BY FORTIS INFORMATION LINE BY PHONE
(MINIMUM $25, MAXIMUM $10,000)
PLEASE ALLOW UP TO FOUR BUSINESS DAYS FOR DEPOSITS INTO
FORTIS FUNDS. TRANSACTIONS AFTER 3:00 P.M. (CST) WILL BE
PROCESSED THE FOLLOWING BUSINESS DAY.
*NOT AVAILABLE ON TAX-QUALIFIED ACCOUNTS SUCH AS IRA, SEP,
SARSEP AND KEY PLANS.
B. [ ] SYSTEMATIC INVESTMENT PLAN: [ ] NEW PLAN [ ] CHANGE
PLAN
BEGINNING DRAFT DATE:
-----------------------------------------
ACCOUNT NUMBER:
-----------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS AMOUNT
FUND A B C H $25.00 PER FUND MINIMUM
<S> <C> <C>
[ ] N N N
- --------------------------------- --------------------
[ ] N N N
- --------------------------------- --------------------
[ ] N N N
- --------------------------------- --------------------
[ ] N N N
- --------------------------------- --------------------
</TABLE>

4 WITHDRAWAL OPTION(S)

I REQUEST FORTIS FINANCIAL GROUP (FFG) TO PAY SUMS DUE ME BY CREDITING MY BANK
ACCOUNT IN THE FORM OF ELECTRONIC ENTRIES. I REQUEST AND AUTHORIZE THE FINANCIAL
INSTITUTION TO ACCEPT, HONOR AND CREDIT THOSE ENTRIES TO MY ACCOUNT. WITHDRAWAL
FROM FORTIS FUND(S) REQUIRES ACCOUNT OWNER(S) SIGNATURE(S) -- SEE SECTION 5

(PLEASE CONSULT YOUR FINANCIAL OR TAX ADVISER BEFORE ELECTING A SYSTEMATIC
WITHDRAWAL PLAN. FOR TAX QUALIFIED ACCOUNTS, ADDITIONAL FORMS ARE REQUIRED FOR
DISTRIBUTION.)

<TABLE>
<S> <C> <C>
A. [ ] CASH DIVIDENDS
B. [ ] REDEEM VIA FORTIS INFORMATION LINE BY PHONE
(MINIMUM $100, MAXIMUM $25,000)
PLEASE ALLOW UP TO FOUR BUSINESS DAYS FOR WITHDRAWAL TO
CREDIT YOUR BANK ACCOUNT. TRANSACTIONS AFTER 3:00 P.M. (CST)
WILL BE PROCESSED THE FOLLOWING BUSINESS DAY.
*NOT AVAILABLE ON TAX QUALIFIED ACCOUNTS SUCH AS IRA, SEP,
SARSEP AND KEY PLANS.
C. [ ] SYSTEMATIC WITHDRAWAL PLAN: [ ] NEW PLAN [ ] CHANGE
PLAN
BEGINNING WITHDRAWAL DATE: ---------------------------------
ACCOUNT NUMBER: ------------------------------------------
</TABLE>

5 SIGNATURES

EACH PERSON SIGNING ON BEHALF OF ANY ENTITY REPRESENTS THAT HIS OR HER ACTIONS
ARE AUTHORIZED. IT IS AGREED THAT ALL FORTIS FUNDS, FORTIS INVESTORS, FORTIS
ADVISERS AND THEIR OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES WILL NOT BE LIABLE
FOR ANY LOSS, LIABILITY, DAMAGE OR EXPENSE FOR RELYING UPON THIS APPLICATION OR
ANY INSTRUCTION BELIEVED GENUINE.

THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I NOTIFY FFG. I HEREBY TERMINATE
ANY PRIOR AUTHORIZATION OF FFG TO INITIATE CHARGES TO THIS ACCOUNT. I UNDERSTAND
THAT ANY RETURNED ITEM OR REDEMPTION OF THE ENTIRE ACCOUNT MAY RESULT IN
TERMINATION OF MY AUTOMATED CLEARING HOUSE AGREEMENT. THIS AUTHORIZATION WILL
BECOME EFFECTIVE UPON ACCEPTANCE BY FFG AT ITS HOME OFFICE.

AUTHORIZED SIGNATURE(S)

X
-----------------------------------------------------------------------
OWNER, CUSTODIAN, TRUSTEE DATE

X
-----------------------------------------------------------------------
JOINT OWNER, TRUSTEE DATE

THE FORTIS LOGO AND FORTIS(SM) ARE SERVICEMARKS OF FORTIS (NL)N.V. AND FORTIS
(B)

98049 (11/99)
<PAGE> 50

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[FORTIS(SM) LOGO]

FORTIS FINANCIAL GROUP
P.O. Box 64284
St. Paul, Minnesota 55164-0284
BULK RATE
U.S. POSTAGE
PAID
Permit No, 3794
Minneapolis, MN

Prospectus

January 1, 2000

- - Asset Allocation Portfolio

- - Value Fund

- - Growth & Income Fund

- - Capital Fund

- - Growth Fund

- - Capital Appreciation Portfolio

SEC file numbers: 811-05355, 811-00558, 811-00848

[FORTIS(SM) LOGO]
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc. (fund management since 1949)
Fortis Investors, Inc. (principal underwriter; member NASD, SIPC)
Fortis Benefits Insurance Company & Fortis Insurance Company
(issuers of FFG's insurance products)
P.O. Box 64284 - St. Paul, MN 55164-0284 - (800) 800-2000
http://www.ffg.us.fortis.com

98225 (C)Fortis 1/00

More information about the Funds is available in the Funds' Statement of
Additional Information (SAI) and annual and semiannual reports.

- - STATEMENT OF ADDITIONAL INFORMATION. The SAI provides more details about the
Funds and their policies. A current SAI is on file with the Securities and
Exchange Commission (SEC) and is incorporated into this Prospectus by
reference, which means that it is legally considered part of this Prospectus.

- - ANNUAL AND SEMIANNUAL REPORTS. Additional information about Funds' investments
is available in the Funds' annual and semiannual reports to shareholders. In
the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performance
during their last fiscal year.

You can obtain a free copy of the Funds' SAI and/or free copies of the Funds'
most recent annual or semiannual reports by calling (800) 800-2000, extension
3012. The material you request will be sent by first-class mail, or other means
designed to ensure equally prompt delivery, within three business days of
receipt of request.

You can also obtain copies by visiting the SEC's public reference room in
Washington DC, or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington DC 20549-6009. For more information, call
(800) SEC-0330.

Information about the Funds is available on the Internet. Text-only versions of
the Fund documents can be viewed online or downloaded from the SEC's Internet
site at http://www.sec.gov.

The Fortis logo and Fortis(SM) are servicemarks of Fortis (NL)N.V. and Fortis
(B).
<PAGE> 52

ASSET ALLOCATION PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
each a series of FORTIS ADVANTAGE PORTFOLIOS, INC.

FORTIS VALUE FUND
FORTIS GROWTH & INCOME FUND
FORTIS CAPITAL FUND
each a series of FORTIS EQUITY PORTFOLIOS, INC.

FORTIS GROWTH FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

DATED JANUARY 1, 2000

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to a prospectus for Asset Allocation
Portfolio, Capital Appreciation Portfolio, Value Fund, Growth & Income Fund,
Capital Fund and Growth Fund (the "Funds") dated January 1, 2000, and should be
read in conjunction therewith. The financial statements included as a part of
the Funds' Annual Report to Shareholders for the fiscal year ended August 31,
1999 are incorporated by reference into this Statement of Additional
Information. Copies of the Funds' Prospectus and/or Annual Report are available,
without charge, by writing or calling Fortis Investors, Inc. ("Investors"), P.O.
Box 64284, St. Paul, Minnesota 55164. Telephone: (651) 738-4000. Toll Free:
(800) 800-2000.

<PAGE> 53

TABLE OF CONTENTS

Page

Fund History . . . . . . . . . . . . . . . . . . . . . . 1

Description of the Funds . . . . . . . . . . . . . . . . 1

Investment Strategies and Risk Considerations . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . 18

Management of the Funds . . . . . . . . . . . . . . . . . 23

Principal Holders of Securities . . . . . . . . . . . . . 28

Investment Advisory and Other Services . . . . . . . . . 28

Brokerage Allocation and Other Practices . . . . . . . . 32

Capital Stock . . . . . . . . . . . . . . . . . . . . . . 36

Pricing of Shares . . . . . . . . . . . . . . . . . . . . 37

Purchase of Shares . . . . . . . . . . . . . . . . . . . 41

Redemption of Shares . . . . . . . . . . . . . . . . . . 44

Taxation . . . . . . . . . . . . . . . . . . . . . . . . 46

Underwriter and Distribution of Shares . . . . . . . . . 47

Performance Information . . . . . . . . . . . . . . . . . 48

Financial Statements . . . . . . . . . . . . . . . . . . 52

Other Service Providers . . . . . . . . . . . . . . . . . 52

Limitation of Director Liability . . . . . . . . . . . . 52

Additional Information . . . . . . . . . . . . . . . . . 53

Appendix A

Description of Futures, Options and Forward Contracts 54

Appendix B

Corporate Bond and Commercial Paper Ratings 59
<PAGE> 54

FUND HISTORY

Asset Allocation Portfolio and Capital Appreciation Portfolio are
portfolios of Fortis Advantage Portfolios, Inc. ("Fortis Advantage") which was
incorporated in Minnesota in 1987. Asset Allocation Portfolio and Capital
Appreciation Portfolio commenced operations on January 4, 1988. Value Fund,
Growth & Income Fund and Capital Fund are the three portfolios of Fortis Equity
Portfolios, Inc. ("Fortis Equity") which was incorporated in Minnesota in 1949.
Value Fund and Growth & Income Fund commenced operations on January 2, 1996 and
Capital Fund commenced operations on June 8, 1949. Fortis Growth Fund, Inc.
("Fortis Growth") was incorporated in Minnesota in 1958 and its single portfolio
commenced operations on March 31, 1963.

DESCRIPTION OF THE FUNDS

Fortis Advantage, Fortis Equity and Fortis Growth are registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
(the "1940 Act") as open-end management investment companies. Fortis Advantage
currently has three investment portfolios (only two of which are offered through
the prospectus) and Fortis Equity has three investment portfolios; Growth Fund
has a single portfolio. As a fundamental policy, each Fund operates as an
open-end, diversified investment company as defined under the 1940 Act. Open-end
means that it generally must redeem an investor's shares upon request. In order
to be diversified, each Fund must meet the following requirements:

At least 75% of the value of the Fund's total assets will be
represented by cash and cash items (including receivables), Government
securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of
any one issuer to an amount not greater in value than 5% of the value
of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer.

Fortis Advantage, Fortis Equity and Fortis Growth may establish other
portfolios, each corresponding to a distinct investment portfolio and a distinct
series of their common stock.

Fortis Advisers, Inc. (Advisers) acts as each Fund's investment
adviser.

INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

This section of the Statement of Additional Information contains more
information on the types of securities in which the Funds may invest and the
investment strategies that the Funds may use, including securities and
strategies not discussed in the Prospectus. Unless, otherwise noted, investment
strategies used by the Fund may be changed without the approval of shareholders.

MEDIAN MARKET CAPITALIZATION

As discussed in the prospectus, each Fund, except Asset Allocation
Portfolio, intends to maintain its median market capitalization within a certain
range or above or below a specified amount. There is no assurance that the
Funds' median market capitalizations will always remain within the designated
ranges (or above or below the specified amount) in light of constantly
fluctuating market conditions and the performance of the stocks held in the
Funds' portfolios.

Market capitalization is a measure of a company's relative size and is
calculated by multiplying the number of outstanding shares of a company by the
market price of those shares. Half of a portfolio's

<PAGE> 55

assets are invested in securities of companies with market capitalizations
larger than the median market capitalization of the portfolio, and half are
invested in the securities of companies with market capitalizations smaller than
the median. For example, in a portfolio of nine securities with market
capitalizations of $1 billion, $1.5 billion, $2 billion, $3 billion, $5 billion,
$8 billion, $8 billion, $8.75 billion and $9 billion, the median market
capitalization of this portfolio would be $5 billion because half of the
portfolio securities have market capitalizations that are smaller than the
median and half have market capitalizations that are larger than the median.
Median market capitalization is used as a measure of the average market
capitalization of a portfolio and is sometimes used in the mutual fund industry
to categorize a fund as "small cap," "mid cap" or "large cap." The Funds
consider small cap portfolios to have median market capitalizations of less than
$1 billion, mid cap portfolios to have median market capitalizations of $1
billion to $8 billion and large cap portfolios to have median market
capitalizations of more than $8 billion.

BANK OBLIGATIONS

The bank obligations in which Asset Allocation Portfolio may invest
are: (i) obligations (including certificates of deposit and bankers acceptances)
of U.S. banks, savings and loan associations, and savings banks, which
institutions have total assets (as of the date of their most recent annual
financial statements at the time of investment) of not less than $1 billion;
(ii) U.S. dollar denominated obligations of Canadian chartered banks, London
branches of U.S. banks, and U.S. branches or agencies of foreign banks which
meet the asset size referred to in (i) above; and (iii) obligations of the
institutions referred to in (i) above which have total assets of less than $1
billion, provided that the amount of the obligations purchased does not exceed
$100,000 for any one such institution, and the payment of the principal is
insured by the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation.

COMMERCIAL PAPER

Asset Allocation Portfolio may invest without limitation in commercial
paper issued by U.S. corporations or affiliated foreign corporations and rated
(or guaranteed by a company whose commercial paper is rated) at the date of
investment Prime-2 or higher by Moody's or A-2 or higher by S&P, or comparably
rated by another nationally recognized rating agency, or, if not rated, issued
by a corporation having an outstanding debt issue rated A or better by Moody's
or S&P, or comparably rated by another nationally recognized rating agency, and,
if issued by an affiliated foreign corporation, such commercial paper (not to
exceed in the aggregate 20% of the Fund's net assets) is U.S. dollar denominated
and not subject at the time of purchase to foreign tax withholding.

U.S. GOVERNMENT SECURITIES

Each Fund may invest in U.S. government securities, which include the
following U.S. Treasury obligations: U.S. Treasury bills (initial maturities of
one year or less), U.S. Treasury notes (initial maturities of one to 10 years),
and U.S. Treasury bonds (generally initial maturities of greater than 10 years),
all of which are backed by the full faith and credit of the United States. The
Funds may also invest in obligations issued or guaranteed by U.S. government
agencies or instrumentalities. For Asset Allocation Portfolio and Growth &
Income Fund, these include government guaranteed mortgage-related securities,
some of which are backed by the full faith and credit of the U.S. Treasury,
e.g., direct pass-through certificates of the Government National Mortgage
Association; some of which are supported by the right of the issuer to borrow
from the U.S. government, e.g., obligations of Federal Home Loan Banks; and some
of which are backed only by the credit of the issuer itself, e.g., obligations
of the Student Loan Marketing Association. U.S. government securities are backed
by the full faith and credit of the U.S. government or guaranteed by the issuing
agency or instrumentality and, therefore, there is

<PAGE> 56

generally considered to be little or no risk as to the issuer's capacity to pay
interest and repay principal. Nevertheless, due to fluctuations in interest
rates, there is no guarantee as to the market value of U.S. government
securities.

MORTGAGE-RELATED SECURITIES

Asset Allocation Portfolio and Growth & Income Fund may invest in
certain types of mortgage-related securities. One type of mortgage-related
security includes certificates that represent pools of mortgage loans assembled
for sale to investors by various governmental and private organizations. These
securities provide a monthly payment, which consists of both an interest and a
principal payment, which is in effect a "pass-through" of the monthly payment
made by each individual borrower on his or her residential mortgage loan, net of
any fees paid to the issuer or guarantor of such securities. Additional payments
are caused by repayments of principal resulting from the sale of the underlying
residential property, refinancing, or foreclosure, net of fees or costs that may
be incurred. Some certificates (such as those issued by the Government National
Mortgage Association) are described as "modified pass-through." These securities
entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, regardless of whether the mortgagor actually
makes the payment.

A major governmental guarantor of pass-through certificates is the
Government National Mortgage Association ("GNMA"). GNMA guarantees, with the
full faith and credit of the U.S. government, the timely payments of principal
and interest on securities issued by institutions approved by GNMA (such as
savings and loan institutions, commercial banks, and mortgage bankers) and
backed by pools of FHA-insured or VA-guaranteed mortgages. Other governmental
guarantors (but not backed by the full faith and credit of the United States
Government) include the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA purchases residential
mortgages from a list of approved seller/servicers which include state and
federally chartered savings and loan associations, mutual savings banks,
commercial banks, credit unions, and mortgage bankers.

(i) GNMA CERTIFICATES. Certificates of the GNMA ("GNMA Certificates")
evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly
as payments of principal, including prepayments, on the mortgages in
the underlying pool are passed through to holders of the GNMA
Certificates representing interests in the pool, rather than returned
in a lump sum at maturity. "Modified pass-through" GNMA Certificates
entitle the holder to receive a share of all interest and principal
payments paid or owed to the mortgage pool, net of fees paid or due to
the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment.

(ii) GNMA GUARANTEE. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal and interest on securities
backed by a pool of mortgages insured by the Federal Housing
Administration ("FHA") or the Farmers' Home Administration ("FmHA"), or
guaranteed by the Veterans Administration ("VA"). GNMA is also
empowered to borrow without limitation from the U.S. Treasury, if
necessary, to make any payments required under its guarantee.

(iii) LIFE OF GNMA CERTIFICATES. The average life of a GNMA Certificate
is likely to be substantially less than the stated maturity of the
mortgages underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures will usually result in the return
of the greater part of principal investment long before the maturity of
the mortgages in the pool. Foreclosures impose no risk of loss of the
principal balance of a Certificate, because of the

<PAGE> 57

GNMA guarantee, but foreclosure may impact the yield to shareholders
because of the need to reinvest proceeds of foreclosure.

As prepayment rates of individual mortgage pools vary widely, it is not
possible to predict accurately the average life of a particular issue
of GNMA Certificates. However, statistics published by the FHA indicate
that the average life of single family dwelling mortgages with 25 to
30-year maturities, the type of mortgages backing the vast majority of
GNMA Certificates, is approximately 12 years. Prepayments are likely to
increase in periods of falling interest rates. It is customary to treat
GNMA Certificates as 30-year mortgage-backed securities that prepay
fully in the twelfth year.

(iv) YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of
interest of GNMA Certificates is lower than the interest rate paid on
the VA-guaranteed or FHA-insured mortgages underlying the certificates,
by the amount of the fees paid to GNMA and the issuer.

The coupon rate by itself, however, does not indicate the yield that
will be earned on GNMA Certificates. First, GNMA Certificates may be
issued at a premium or discount, rather than at par, and, after
issuance, GNMA Certificates may trade in the secondary market at a
premium or discount. Second, interest is earned monthly, rather than
semi-annually as with traditional bonds; monthly compounding raises the
effective yield earned. Finally, the actual yield of a GNMA Certificate
is influenced by the prepayment experience of the mortgage pool
underlying it. For example, if interest rates decline, prepayments may
occur faster than had been originally projected and the yield to
maturity and the investment income of the Fund would be reduced.

(v) FHLMC SECURITIES. "FHLMC" is a federally chartered corporation
created in 1970 through enactment of Title III of the Emergency Home
Finance Act of 1970. Its purpose is to promote development of a
nationwide secondary market in conventional residential mortgages.

The FHLMC issues two types of mortgage pass-through securities,
mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made
or owed on the underlying pool. The FHLMC guarantees timely payment of
interest on PCs and the ultimate payment of principal. Like GNMA
Certificates, PCs are assumed to be prepaid fully in their twelfth
year.

GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected
average life of these securities is approximately ten years.

(vi) FNMA SECURITIES. "FNMA" is a federally chartered and privately
owned corporation which was established in 1938 to create a secondary
market in mortgages insured by the FHA. It was originally established
as a government agency and was transformed into a private corporation
in 1968.

FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that
each FNMA Certificate represents a pro rata share of all interest and
principal payments made or owed on the underlying pool. FNMA guarantees
timely payment of interest on FNMA certificates and the full return of
principal. Like GNMA Certificates, FNMA Certificates are assumed to be
prepaid fully in their twelfth year.

<PAGE> 58

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may in addition be the originators of the underlying mortgage loans as
well as the guarantors of the pass-through certificates. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
governmental pools because there are no direct or indirect governmental
guarantees of payments in the former pools. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool, and hazard insurance. The
insurance and guarantees are issued by government entities, private insurers,
and the mortgage poolers.

The Funds' investments in pass-through securities may include
multi-class pass-through securities, which are interests in a trust composed of
mortgage loans or other mortgage-backed securities. Payments of principal and
interest on underlying collateral provide the funds to make scheduled
distributions on the multi-class pass-through security.

Advisers expects that governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. As new types of pass-through securities are developed and
offered to investors, Advisers may, consistent with the Funds' investment
objectives, policies, and restrictions, consider making investments in such new
types of securities.

Other types of mortgage-related securities include debt securities
which are secured, directly or indirectly, by mortgages on commercial real
estate or residential rental properties, or by first liens on residential
manufactured homes (as defined in section 603(6) of the National Manufactured
Housing Construction and Safety Standards Act of 1974), whether such
manufactured homes are considered real or personal property under the laws of
the states in which they are located. Securities in this investment category
include, among others, standard mortgage-backed bonds and newer collateralized
mortgage obligations (CMOs).

Mortgage-backed bonds are secured by pools of mortgages, but, unlike
pass-through securities, payments to bondholders are not determined by payments
on the mortgages. The bonds consist of a single class, with interest payable
periodically and principal payable on the stated date of maturity. CMOs have
characteristics of both pass-through securities and mortgage-backed bonds. CMOs
are secured by pools of mortgages, typically in the form of "guaranteed"
pass-through certificates such as GNMA, FNMA, or FHLMC securities. The payments
on the collateral securities determine the payments to the bondholders, but
there is not a direct "pass-through" of payments. CMOs are structured into
multiple classes, each bearing a different date of maturity. Monthly payments of
principal received from the pool of underlying mortgages, including prepayments,
is first returned to investors holding the shortest maturity class. Investors
holding the longest maturity classes receive principal only after the shorter
maturity classes have been retired. Multi-class pass-through securities, CMOs,
and classes thereof (including those discussed below) are examples of the types
of financial instruments commonly referred to as "derivatives".

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specified coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO on a monthly, quarterly or
semi-annual basis. The principal and interest on the underlying mortgages may be
allocated among the several classes of a series of a CMO in many ways. In a
common structure, payments of principal, including any principal prepayments, on
the underlying mortgages are applied according to scheduled cash flow priorities
to classes of the series of a CMO.

<PAGE> 59

There are many classes of CMOs in which Asset Allocation Portfolio and
Growth & Income Fund may invest. There are interest-only classes ("IOs"), which
entitle the holder to receive distributions consisting solely or primarily of
all or a portion of the interest in an underlying pool of mortgage loans or
mortgage-backed securities, ("Mortgage Assets"). There are also principal-only
classes ("POs"), which entitle the holder to receive distributions consisting
solely or primarily of all or a portion of the principal of the underlying pool
of Mortgage Assets. In addition, there are "inverse floaters", which have a
coupon rate that moves in the reverse direction to an applicable index, and
accrual (or "Z") bonds, which are described below.

As to IOs, POs, inverse floaters, and accrual bonds, not more than 7.5%
of Asset Allocation Portfolio's or Growth & Income Fund's net assets will be
invested in any one of these items at any one time, and no more than 15% of the
net assets of either Fund will be invested in all such obligations at any one
time.

Inverse floating CMOs are typically more volatile than fixed or
adjustable rate tranches of CMOs. Investments in inverse floating CMOs would be
purchased by a Fund to attempt to protect against a reduction in the income
earned on the Fund's investments due to a decline in interest rates. The Fund
would be adversely affected by the purchase of such CMOs in the event of an
increase in interest rates since the coupon rate thereon will decrease as
interest rates increase, and, like other mortgage-backed securities, the value
will decrease as interest rates increase.

The cash flows and yields on IO and PO classes are extremely sensitive
to the rate of principal payments (including prepayments) on the related
Mortgage Assets. For example, a rapid or slow rate of principal payments may
have a material adverse effect on the yield to maturity of IOs or POs,
respectively. If the underlying Mortgage Assets experience greater than
anticipated prepayments of principal, the holder of an IO may incur substantial
losses, even if the IO class is rated AAA. Conversely, if the underlying
Mortgage Assets experience slower than anticipated prepayments of principal, the
yield and market value for the holder of a PO will be affected more severely
than would be the case with a traditional Mortgage Backed Security. However, if
interest rates were expected to rise, the value of an IO might increase and may
partially offset other bond value declines, and if rates were expected to fall,
the inclusion of POs could balance lower reinvestment rates.

An accrual or "Z" bond holder is not entitled to receive cash payments
until one or more other classes of the CMO have been paid in full from payments
on the mortgage loans underlying the CMO. During the period in which cash
payments are not being made on the Z tranche, interest accrues on the Z tranche
at a stated rate, and this accrued interest is added to the amount of principal
which is due to the holder of the Z tranche. After the other classes have been
paid in full, cash payments are made on the Z tranche until its principal
(including previously accrued interest which was added to principal, as
described above) and accrued interest at the stated rate have been paid in full.
Generally, the date upon which cash payments begin to be made on a Z tranche
depends on the rate at which the mortgage loans underlying the CMO are prepaid,
with a faster prepayment rate resulting in an earlier commencement of cash
payments on the Z tranche. Like a zero coupon bond, during its accrual period
the Z tranche of a CMO has the advantage of eliminating the risk of reinvesting
interest payments at lower rates during a period of declining market interest
rates. At the same time, however, and also like a zero coupon bond, the market
value of a Z tranche can be expected to fluctuate more widely with changes in
market interest rates than would the market value of a tranche which pays
interest currently. Changes in market interest rates also can be expected to
influence prepayment rates on the mortgage loans underlying the CMO of which a Z
tranche is a part. As noted above, such changes in prepayment rates will affect
the date at which cash payments begin to be made on a Z tranche, and therefore
also will influence its market value.

<PAGE> 60

Investments in mortgage-related securities involve certain risks. In
periods of declining interest rates, prices of fixed income securities tend to
rise. However, during such periods, the rate of prepayment of mortgages
underlying mortgage-related securities tends to increase, with the result that
such prepayments must be reinvested by the issuer at lower rates. In addition,
the value of such securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers of mortgage-related securities
owned by the Funds. Because investments in mortgage-related securities are
interest sensitive, the ability of the issuer to reinvest favorably in
underlying mortgages may be limited by government regulation or tax policy. For
example, action by the Board of Governors of the Federal Reserve System to limit
the growth of the nation's money supply may cause interest rates to rise and
thereby reduce the volume of new residential mortgages. Additionally, although
mortgages and mortgage-related securities are generally supported by some form
of government or private guarantees and/or insurance, there is no assurance that
private guarantors or insurers will be able to meet their obligations.

ZERO COUPON OBLIGATIONS

Asset Allocation Portfolio may invest in zero coupon obligations of the
U.S. Government, U.S. Government agencies, and corporate issuers, including
rights to "stripped" coupon and principal payments. Certain U.S. Government
obligations (principally, Treasury notes and Treasury bonds) and corporate
obligations are "stripped" of their coupons, and the rights to receive each
coupon payment and the principal payment are sold as separate securities. Once
separated, each coupon as well as the principal amount represents a different
single-payment claim due from the issuer of the security. Each single-payment
claim (coupon or principal) is equivalent to a zero coupon bond. A zero coupon
security pays no interest to its holder during its life, and its value consists
of the difference between its face value at maturity (the coupon or principal
amount), if held to maturity, or its market price on the date of sale, if sold
prior to maturity, and its acquisition price (the discounted "present value" of
the payment to be received).

Certain zero coupon obligations represent direct obligations of the
issuer of the "stripped" coupon and principal payments. Other zero coupon
obligations are securities issued by financial institutions which constitute a
proportionate ownership of an underlying pool of stripped coupon or principal
payments. Asset Allocation Portfolio may invest in either type of zero coupon
obligation. The investment policies and restrictions applicable to corporate and
government securities in the Fund shall apply to the Fund's investments in zero
coupon securities (including, for example, minimum corporate bond ratings and
percentage limitations).

MUNICIPAL SECURITIES

Asset Allocation Portfolio may invest up to 20% of its total assets in
municipal securities such as municipal bonds and other debt obligations. These
municipal bonds and debt obligations are issued by the states and by their local
special-purpose political subdivisions. The term "municipal bonds" includes
short-term municipal notes and other commercial paper issued by the states and
their political subdivisions. The two general classifications of municipal bonds
are "general obligation" bonds and "revenue" bonds. General obligation bonds are
secured by the governmental issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds ordinarily are
not backed by the faith, credit or general taxing power of the issuing
governmental entity. The principal and interest on revenue bonds for private
facilities are typically paid out of rents or other specified payments made to
the issuing governmental entity by a private company that uses or operates the
facilities.

HIGH YIELD/HIGH RISK SECURITIES

<PAGE> 61

Asset Allocation Portfolio may invest up to 30% of its total assets in
lower rated, high-yielding corporate bonds commonly known as "junk bonds." The
Fund may also invest up to 10% of its total assets in corporate bonds that are
rated in one of the four highest rating categories (such as BBB or above), and
at the same time are rated below such categories by another nationally
recognized agency (or in the alternative, any such bonds may be included with
those subject to the 30% limitation on lower rated bonds). The Fund may retain a
security whose rating has changed if the security otherwise meets the Fund's
criteria. The Fund will not invest in bonds rated below Caa by Moody's or CCC by
S&P, or comparably rated by another nationally recognized rating agency.
Securities in the Caa/CCC rating categories are considered to be of poor
standing and are predominantly speculative. Lower ratings may reflect a greater
possibility that the financial condition of the issuer, or adverse changes in
general economic conditions, or both, may impair the ability of the issuer to
make payments of interest and principal. Additionally, investments in securities
rated Caa or CCC involve significant risk exposure to adverse conditions. Such
securities may be in default, or there may be present elements of danger with
respect to the payment of principal or interest. For a description of ratings
assigned by both Moody's and S&P, see the Appendix.

Participation in high-yielding securities transactions generally
involves greater returns in the form of higher average yields. However,
participation in such transactions involves greater risks, often related to
sensitivity to interest rates, economic changes, solvency, and relative
liquidity in the secondary trading market. Yields on high yield securities will
fluctuate over time. The prices of high-yielding securities have been found to
be less sensitive to interest rate changes than higher-rated investments, but
more sensitive to adverse economic changes or individual corporate developments.

During an economic downturn or substantial period of rising interest
rates highly leveraged issuers may experience financial stress which would
adversely affect their ability to serve their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a security held by Asset Allocation Portfolio
defaulted, the Fund might incur additional expenses to seek recovery. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yielding securities and the
Fund's assets. Furthermore, in the case of high-yielding securities structured
as zero coupon or debentures the interest on which may be paid in other
securities rather than cash ("PIKs"), their market prices are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash.

High-yielding securities present risks based on payment expectations.
For example, high-yielding securities may contain redemption or call provisions.
If an issuer exercises these provisions in a declining interest rate market,
Asset Allocation Portfolio would have to replace the security with a
lower-yielding security, resulting in a decreased return for investors.
Conversely, a high-yielding security's value will decrease in a rising interest
rate market, as will the value of such Fund's assets. If the Fund experiences
unexpected net redemptions, this may force it to sell its high-yielding
securities, without regard to their investment merits, thereby decreasing the
asset base upon which the Fund's expenses can be spread and possibly reducing
the rate of return.

To the extent that there is no established secondary market, there may
be thin trading of high-yielding securities. This may adversely affect the
ability of the Fund's Board of Directors to accurately value high-yielding
securities and the Fund's assets and the Fund's ability to dispose of the
securities. Securities valuation becomes more difficult and judgment plays a
greater role in valuation because there is less reliable, objective data
available. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high-yielding
securities, especially in a thinly traded market. Illiquid or restricted
high-yielding securities purchased by Asset Allocation

<PAGE> 62

Portfolio may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.

Certain risks are associated with applying credit ratings as a method
of evaluating high-yielding securities. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of
high-yielding securities. Since credit rating agencies may fail to timely change
the credit ratings to reflect subsequent events, Advisers continuously monitors
the issuers of high-yielding securities held by Asset Allocation Portfolio to
determine if the issuers will have sufficient cash flow and profits to meet
required principal and interest payments, and to assure the securities'
liquidity so the Fund can meet redemption requests. Achieving the Fund's
investment objective may be more dependent upon Advisers' own credit analysis
than is the case for higher quality bonds. Also, the Fund may retain a portfolio
security whose rating has been changed if the security otherwise meets the
Fund's investment objective and investment criteria.

REPURCHASE AGREEMENTS

Each Fund may invest in repurchase agreements. A repurchase agreement
is a short-term instrument under which securities are purchased from a bank or
securities dealer with an agreement by the seller to repurchase the securities
at a mutually agreed upon date, interest rate, and price. Generally, repurchase
agreements are of short duration, usually less than a week, but on occasion for
longer periods of time.

In investing in repurchase agreements, a Fund's risk is limited to the
ability of such bank or securities dealer to pay the agreed upon amount at the
maturity of the repurchase agreement. In the opinion of management, such risk is
not material; if the other party defaults, the underlying security constitutes
collateral for the obligation to pay--although the Fund may incur certain delays
in obtaining direct ownership of the collateral, plus costs in liquidating the
collateral. In the event a bank or securities dealer defaults on the repurchase
agreement, management believes that, barring extraordinary circumstances, the
Fund will be entitled to sell the underlying securities or otherwise receive
adequate protection (as defined in the federal Bankruptcy Code) for its interest
in such securities. To the extent that proceeds from any sale upon a default
were less than the repurchase price, however, the Fund could suffer a loss. If
the Fund owns underlying securities following a default on the repurchase
agreement, the Fund will be subject to risk associated with changes in the
market value of such securities. The Fund's custodian will hold the securities
underlying any repurchase agreement or such securities may be part of the
Federal Reserve Book Entry System. The market value of the collateral underlying
the repurchase agreement will be determined on each business day. If at any time
the market value of the collateral falls below the repurchase price of the
repurchase agreement (including any accrued interest), the Fund will promptly
receive additional collateral (so the total collateral is in an amount at least
equal to the repurchase price plus accrued interest).

VARIABLE AMOUNT MASTER DEMAND NOTES

Each Fund may invest in variable amount master demand notes. Variable
amount master demand notes are short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. They allow the investment of
fluctuating amounts by a Fund at varying market rates of interest pursuant to
arrangements between the Fund and a financial institution that has lent money to
a borrower. Variable amount master demand notes permit a series of short-term
borrowings under a single note. Both the lender and the borrower have the right
to reduce the amount of outstanding indebtedness at any time. Such notes provide
that the interest rate on the amount outstanding varies on a daily basis
depending upon a stated short-term interest rate barometer. Advisers will
monitor the creditworthiness of the borrower throughout the term of the variable
master demand note. It is not generally contemplated that such

<PAGE> 63

instruments will be traded and there is no secondary market for the notes.
Typically, agreements relating to such notes provide that the lender shall not
sell or otherwise transfer the note without the borrower's consent. Thus,
variable amount master demand notes may under certain circumstances be deemed
illiquid assets. However, such notes will not be considered illiquid where the
Fund has a same day withdrawal option, i.e., where it has the unconditional
right to demand and receive payment in full of the principal amount then
outstanding together with interest to the date of payment.

ILLIQUID SECURITIES

Each Fund may invest in illiquid securities, including "restricted"
securities. A restricted security is one which was originally sold in a private
placement and was not registered with the Commission under the Securities Act of
1933 (the "1933 Act") and which is not free to be resold unless it is registered
with the Commission or its sale is exempt from registration. For this purpose
illiquid securities include, among others, (i) securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale, (ii) options purchased over-the-counter and the cover
for options written over-the-counter, and (iii) repurchase agreements not
terminable within seven days. Each Fund has a nonfundamental investment
restriction that it will invest no more than 15% of the value of its net assets
in illiquid securities, as determined pursuant to applicable Commission rules
and interpretations. In addition, Growth Fund has a fundamental investment
restriction that it will not invest more than 5% of its net assets in each of i)
restricted securities and ii) bonds, debentures or other debt securities which
are not publicly distributed.

The staff of the Securities and Exchange Commission has taken the
position that the liquidity of securities in the portfolio of a fund offering
redeemable securities is a question of fact for a board of directors of such a
fund to determine, based upon a consideration by such board of the readily
available trading markets and a review of any contractual restrictions. The SEC
staff also acknowledges that, while such a board retains ultimate
responsibility, it may delegate this function to the fund's investment adviser.

The Funds' Boards of Directors have adopted procedures to determine the
liquidity of certain securities, including commercial paper issued pursuant to
the private placement exemption of Section 4(2) of the 1933 Act and securities
that are eligible for resale to qualified institutional buyers pursuant to Rule
144A under the 1933 Act. Under these procedures, factors taken into account in
determining the liquidity of a security include (a) the frequency of trades and
quotes for the security, (b) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, (c) dealer
undertakings to make a market in the security, and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). Section 4(2) commercial paper or a Rule 144A security that when
purchased enjoyed a fair degree of marketability may subsequently become
illiquid, thereby adversely affecting the liquidity of the applicable Fund.

Illiquid securities may offer a higher yield than securities that are
more readily marketable. The sale of illiquid securities, however, often
requires more time and results in higher brokerage charges or dealer discounts
or other selling expenses than does the sale of securities eligible for trading
on national securities exchanges or in the over-the-counter markets. A Fund may
also be restricted in its ability to sell such securities at a time when it is
advisable to do so. Illiquid securities often sell at a price lower than similar
securities that are not subject to restrictions on resale.

FOREIGN SECURITIES

Each Fund may invest up to 10% of total assets (except that Asset
Allocation Portfolio may invest up to 20% of total assets) in securities of
foreign governments and companies. No more than 15% of

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Asset Allocation Portfolio's total assets may be invested in foreign securities
that are not traded on national foreign securities exchanges or traded in the
United States. Domestic branches of foreign banks and foreign branches of
domestic banks are deemed by Advisers to be domestic, not foreign, companies.
Investing in foreign securities may result in greater risk than that incurred by
investing in domestic securities. The obligations of foreign issuers may be
affected by political or economic instabilities. Financial information published
by foreign companies may be less reliable or complete than information disclosed
by domestic companies pursuant to U.S. Government securities laws, and may not
have been prepared in accordance with generally accepted accounting principles.
Fluctuations in exchange rates may affect the value of foreign securities not
denominated in United States currency.

Investing in foreign companies involves certain considerations,
including those discussed below, which are not typically associated with
investing in U.S. issuers. Since the Funds may invest in securities denominated
in currencies other than U.S. dollars, and since they may temporarily hold funds
in bank deposits or other money market investments denominated in foreign
currencies, they may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. A change in the value of a foreign currency relative to the U.S. dollar
will result in a corresponding change in the dollar value of the Fund's assets
denominated in that foreign currency. Changes in foreign currency exchange rates
may also affect the value of dividends and interest earned, gains and losses
realized in the sale of securities, and net investment income and gains, if any,
to be distributed to shareholders by the Funds. The rate of exchange between the
U.S. dollar and other currencies is determined by the forces of supply and
demand in the foreign exchange markets. These forces are affected by the
international balances of payments and other economic and financial conditions,
government intervention, speculation, and other factors.

Foreign securities held by the Funds may not be registered with, nor
the issuers thereof subject to, reporting requirements of the U.S. Securities
and Exchange Commission. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally not subject to uniform financial reporting
standards, practices, and requirements comparable to those applicable to
domestic companies. In addition, with respect to some foreign countries, there
is the possibility of expropriation or confiscatory taxation, limitations of the
removal of funds or other assets of the Funds, political or social instability,
or domestic developments which could affect United States investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of Gross National
Product, rate of inflation, capital reinvestment, resource self-sufficiency, and
balance of payment positions.

Securities of some foreign companies are less liquid and their prices
are more volatile than securities of comparable domestic companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
to the Funds of market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on liquidity, the Funds
will avoid investing in countries which are known to experience settlement
delays which may expose the Funds to unreasonable risk of loss.

The Funds will calculate their net asset values to complete orders to
purchase, exchange, or redeem shares only on a Monday through Friday basis
(excluding holidays on which the New York Stock Exchange is closed). A portion
of a Fund's investment securities may be listed on foreign stock exchanges that
may trade on other days (such as a Saturday). As a result, the Fund's net asset
values may be affected by trading on days when a shareholder has no access to
the Funds.

DELAYED DELIVERY TRANSACTIONS

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Each Fund, except Growth Fund, may purchase securities on a "when
issued" or delayed delivery basis and purchase or sell securities on a "forward
commitment" basis. When such transactions are negotiated, the price is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. Normally, the settlement date occurs within two
months after the transaction, but delayed settlements beyond two months may be
negotiated. As to each such Fund, no more than 20% of its net assets may be
invested in when-issued, delayed delivery or forward commitment transactions,
and of such 20%, no more than 10% of net assets may be invested in such
transactions without the intention of actually acquiring securities, i.e.,
dollar rolls. At the time a Fund enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash, U.S.
Government securities or any security that is not considered restricted or
illiquid at least equal to the value of the when-issued or forward commitment
securities will be established and maintained with the custodian and will be
marked to the market daily. During the period between a commitment and
settlement, no payment is made for the securities purchased by the purchaser
and, thus, no interest accrues to the purchaser from the transaction. If the
Fund disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss due to market fluctuation.

The use of when-issued transactions and forward commitments enables the
Funds to hedge against anticipated changes in interest rates and prices. The
Funds may also enter into such transactions to generate incremental income. In
some instances, the third-party seller of when-issued or forward commitment
securities may determine prior to the settlement date that it will be unable or
unwilling to meet its existing transaction commitments without borrowing
securities. If advantageous from a yield perspective, a Fund may, in that event,
agree to resell its purchase commitment to the third-party seller at the current
market price on the date of sale and concurrently enter into another purchase
commitment for such securities at a later date. As an inducement for the Fund to
"roll over" its purchase commitment, the Fund may receive a negotiated fee.

The purchase of securities on a when-issued, delayed delivery, or
forward commitment basis exposes the Funds to risk because the securities may
decrease in value prior to their delivery. Purchasing securities on a
when-issued, delayed delivery, or forward commitment basis involves the
additional risk that the return available in the market when the delivery takes
place will be higher than that obtained in the transaction itself. These risks
could result in increased volatility of a Fund's net asset value to the extent
that the Fund purchases securities on a when-issued, delayed delivery, or
forward commitment basis while remaining substantially fully invested. There is
also a risk that the securities may not be delivered or that a Fund may incur a
loss or will have lost the opportunity to invest the amount set aside for such
transaction in the segregated asset account.

DOLLAR ROLLS

In connection with their ability to purchase securities on a
when-issued or forward commitment basis, each Fund, except Growth Fund, may
enter into "dollar rolls" in which the Fund sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Fund gives up the right to receive principal and
interest paid on the securities sold. However, the Fund would benefit to the
extent of any difference between the price received for the securities sold and
the lower forward price for the future purchase plus any fee income received.
Unless such benefits exceed the income and capital appreciation that would have
been realized on the securities sold as part of the dollar roll, the use of this
technique will diminish the investment performance of the Fund compared with
what such performance would have been without the use of dollar rolls. Each Fund
will hold and maintain in a segregated account until the settlement date cash,
government securities or liquid high-grade debt securities in an amount equal to
the value of the when-issued or forward commitment securities. The

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<PAGE> 66

benefits derived from the use of dollar rolls may depend, among other things,
upon Advisers ability to predict interest rates correctly. There is no assurance
that dollar rolls can be successfully employed. In addition, the use of dollar
rolls by a Fund while remaining substantially fully invested increases the
amount of the Fund's assets that are subject to market risk to an amount that is
greater than the Fund's net asset value, which could result in increased
volatility of the price of the Fund's shares.

REAL ESTATE OR REAL ESTATE INVESTMENT TRUSTS

Each Fund, except Growth Fund, is authorized to invest in real estate
investment trusts ("REITs"), real estate development and real estate operating
companies and other real estate related businesses. The Funds presently intend
that any REIT investments will be primarily in equity REITs, which are trusts
that sell shares to investors and use the proceeds to invest in real estate or
interests in real estate. A REIT may focus on particular projects, such as
apartment complexes or shopping centers, or geographic regions, such as the
Southeastern United States, or both. Debt REITs invest in obligations secured by
mortgages on real property or interests in real property.

The Funds' investments in real estate securities may be subject to
certain of the same risks associated with the direct ownership of real estate.
These risks include: declines in the value of real estate; risks related to
general and local economic conditions, overbuilding and competition; increases
in property taxes and operating expenses; and variations in rental income. In
addition, REITs may not be diversified. REITs are subject to the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code and failing to maintain exemption from the 1940 Act. Also, REITs
may be dependent upon management skill and may be subject to the risks of
obtaining adequate financing for projects on favorable terms.

LENDING OF PORTFOLIO SECURITIES

Consistent with applicable regulatory requirements, each Fund, except
Growth Fund, may lend its portfolio securities (principally to broker-dealers)
where such loans are callable at any time and are continuously secured by
collateral securities equal to no less than the market value, determined daily,
of the securities loaned. A Fund will receive amounts equal to dividends or
interest on the securities loaned. A Fund will also earn income for having made
the loan. Any cash collateral pursuant to these loans will be invested in
government securities, certificates of deposit or other high-grade, short-term
obligations or interest-bearing cash equivalents. Each Fund will limit such
lending to not more than 33 1/3% of the value of its total assets (including the
amount lent as well as the collateral securing such loans). Where voting or
consent rights with respect to loaned securities pass to the borrower,
management will follow the policy of calling the loan, in whole or in part as
may be appropriate, to permit the exercise of such voting or consent rights if
the issues involved have a material effect on the Fund's investment in the
securities loaned.

The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will only be made to firms deemed by
Advisers to be of good standing and will not be made unless, in the judgment of
Advisers, the consideration to be earned from such loans would justify the risk.

OPTIONS

Each Fund, except Growth Fund, may use options in order to increase
return and to hedge its portfolio. In addition, Value Fund and Capital Fund have
a nonfundamental investment policy that they will only write covered call
options. It is the current intent of Advisers to limit the investment in options

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by each Fund so that such investments do not expose more than 5% of each Fund's
total assets to risk of loss. The writing of covered call options can have the
effect of limiting a Fund's gains on the securities or other instruments covered
thereby; however, Advisers believes that this technique is a relatively low-risk
way to enhance a portfolio's return. Additional information about options is
contained in Appendix A.

A put option gives the purchaser (holder) of the option the right to
sell (put) a security or other instrument to a third party at a stated period or
on a stated date. A call option gives the purchaser (holder) of the option the
right to purchase (call) a security or other instrument from a third party at a
stated period or on a stated date. A person who sells (writes) a put option
gives a third party the right to require the writer to purchase a security or
other instrument at a stated price for a stated period or on a stated date,
while a person who sells (writes) a call option gives a third party the right to
require the writer to sell a security or other instrument at a stated price for
a stated period or on a stated date. A person who writes a call option may do so
either on a "covered" basis, in which case the writer already owns or has the
right to acquire the security or other instrument which the writer agrees may be
called away from such writer, or on an "uncovered" basis, in which case the
writer does not own or have the right to acquire such security or instrument. In
the case of an uncovered call option, the writer bears the risk that the writer
will have to purchase the security or instrument subject to the option in the
open market at an increased price if the purchaser of the call option exercises
it.

Put and call options may be used for a variety of purposes. For
example, if a portfolio manager wishes to hedge a security that the manager owns
against a decline in price, the manager may purchase a put option on the
underlying security, i.e., purchase the right to sell the security to a third
party at a stated price. If the underlying security then declines in price, the
manager can exercise the put option, thus limiting the amount of the manager's
loss resulting from the decline in price. Similarly, if the manager intends to
purchase a security at some date in the future, the manager may purchase a call
option on the security today in order to hedge against an increase in its price
before the intended purchase date. On the other hand, put and call options also
can be used for speculative purposes. For example, if a portfolio manager
believes that the price of stocks generally is going to rise, the manager may
purchase a call option on a stock index, the components of which are unrelated
to the stocks the manager holds in portfolio or intends to purchase. Finally, a
portfolio manager may write covered call options on securities the portfolio
owns in order to realize additional income, or the manager may write put options
for similar income-producing purposes. If the options expire unexercised, the
manager has increased the portfolio's income by the amount of the price
(premium) received upon sale of the option. On the other hand, if a covered call
option is exercised and the underlying security is "called" away, the manager
has limited the amount of the portfolio's gain to the exercise price of the
options plus the premium.

OPTIONS ON SECURITIES. Each Fund, except Growth Fund, may write (sell)
covered call options. In addition, Asset Allocation Portfolio, Growth & Income
Fund and Capital Appreciation Portfolio may write secured put options and
purchase call and put options on securities (provided that Capital Appreciation
Portfolio will write and purchase options only on equity securities). If a Fund
writes an option which expires unexercised or is closed out by the Fund at a
profit, it will retain all or a portion of the premium received for the option,
which will increase its gross income and will offset in part the reduced value
of the Fund security underlying the option, or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the underlying
security moves adversely to the Fund's position, the option may be exercised and
the Fund will be required to purchase or sell the underlying security at a
disadvantageous price, which may only be partially offset by the amount of the
premium, if at all. The Funds may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.

Asset Allocation Portfolio, Growth & Income Fund and Capital
Appreciation Portfolio may also purchase put or call options in anticipation of
market fluctuations which may adversely affect the value of

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a Fund's portfolio or the prices of securities that the Fund wants to purchase
at a later date. In the event that the expected market fluctuations occur, the
Fund may be able to offset the resulting adverse effect on its portfolio, in
whole or in part, through the options purchased. The premium paid for a put or
call option plus any transaction costs will reduce the benefit, if any, realized
by the Fund upon exercise or liquidation of the option, and, unless the price of
the underlying security changes sufficiently, the option may expire without
value to the Fund.

OPTIONS ON STOCK INDEXES. Each Fund, except Growth Fund, may write
(sell) covered call options on stock indexes. In addition, Asset Allocation
Portfolio, Growth & Income Fund and Capital Appreciation Portfolio may write
secured put options on stock indexes and purchase call and put options on stock
indexes. If a Fund writes an option on a stock index and the value of the index
moves adversely to the holder's position, the option will not be exercised, and
the Fund will either close out the option at a profit or allow it to expire
unexercised. The Fund will retain the amount of the premium, which will increase
its gross income and offset part of the reduced value of portfolio securities or
the increased cost of securities to be acquired. Such transactions, however,
will constitute only partial hedges against adverse price fluctuations, since
any such fluctuations will be offset only to the extent of the premium received
by the Fund for the writing of the option. In addition, if the value of an
underlying index moves adversely to a Fund's option position, the option may be
exercised, and the Fund will experience a loss that may only be partially offset
by the amount of the premium received.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

FUTURES CONTRACTS. Each Fund, except Growth Fund, may enter into stock
index futures contracts for hedging purposes. Each Fund, except Capital
Appreciation Portfolio and Growth Fund, may enter into interest rate futures
contracts for hedging purposes. Asset Allocation Portfolio, Capital Appreciation
Portfolio and Growth & Income Fund may also enter into foreign currency futures
contracts. Interest rate futures contracts, stock index futures contracts and
foreign currency futures contracts are collectively referred to as "Futures
Contracts."

Purchases or sales of stock index futures contracts are used to attempt
to protect a Fund's current or intended stock investments from broad
fluctuations in stock prices, and interest rate and foreign currency futures
contracts are purchased or sold to attempt to hedge against the effects of
interest or exchange rate changes on a Fund's current or intended investments in
fixed income or foreign securities. In the event that an anticipated decrease in
the value of portfolio securities occurs as a result of a general stock market
decline, a general increase in interest rates, or a decline in the dollar value
of foreign currencies in which portfolio securities are denominated, the adverse
effects of such changes may be offset, in whole or in part, by gains on the sale
of Futures Contracts. Conversely, the increased cost of portfolio securities to
be acquired, caused by a general rise in the stock market, a general decline in
interest rates, or a rise in the dollar value of foreign currencies, may be
offset, in whole or in part, by gains on Futures Contracts purchased by a Fund.
A Fund will incur brokerage fees when it purchases and sells Futures Contracts,
and it will be required to make and maintain margin deposits.

OPTIONS ON FUTURES CONTRACTS. Each Fund, except Capital Appreciation
Portfolio and Growth Fund, may purchase and write options on interest rate
futures contracts for hedging purposes. Each Fund, except Growth Fund, may
purchase and write options on stock index futures contracts and may purchase and
write options on foreign currency futures contracts for hedging purposes.
Options on interest rate futures contracts, options on stock index futures
contracts, and options on foreign currency futures contracts are collectively
referred to as "Options on Futures Contracts."

Put and call options on Futures Contracts may be traded by the Funds in
order to protect against declines in the values of portfolio securities or
against increases in the cost of securities to be acquired.

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Purchases of Options on Futures Contracts may present less risk in hedging the
portfolios of the Funds than the purchase or sale of the underlying Futures
Contracts since the potential loss is limited to the amount of the premium plus
related transaction costs. The writing of such options, however, does not
present less risk than the trading of futures contracts and will constitute only
a partial hedge, up to the amount of the premium received, and, if an option is
exercised, a Fund may suffer a loss on the transaction.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Each Fund, except Growth Fund, may enter into contracts for the
purchase or sale of a specific currency at a future date at a price set at the
time of the contract (a "Currency Contract") for hedging purposes only. These
transactions will include forward purchases or sales of foreign currencies for
the purpose of protecting the dollar value of securities denominated in a
foreign currency or protecting the dollar equivalent of interest or dividends to
be paid on such securities. By entering into such transactions, however, a Fund
may be required to forego the benefits of advantageous changes in exchange
rates. Currency Contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in the futures and option
contracts described above.

OPTIONS ON FOREIGN CURRENCIES. Each Fund, except Growth Fund, may
purchase and write put and call options on foreign currencies for the purpose of
protecting against declines in the dollar value of foreign portfolio securities
and against increases in the dollar cost of foreign securities to be acquired.
As in the case of other types of options, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and a Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates, although, in the event of rate movements adverse
to a Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. As in the case of Currency Contracts, certain options
on foreign currencies are traded over-the-counter and involve risks that may not
be present in the case of exchange-traded instruments.

ADDITIONAL RISKS OF OPTIONS, FUTURES AND CURRENCY CONTRACTS

Options and futures involve certain risks and transaction costs. For
example, a lack of correlation between the index or instrument underlying an
option or futures contract and the assets being hedged, or unexpected adverse
price movements, could render a Fund's hedging strategy unsuccessful and could
result in losses. A Fund also may enter into transactions in options on
securities and indexes of securities for other than hedging purposes, which
involves greater risk. There can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and a Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
Other risks include dependence on Advisers' ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets,
and movements in interest rates; imperfect correlation between movements in the
price of options, futures contracts, or options thereon and movements in the
price of the security hedged or used for cover; the fact that skills and
techniques needed to trade options, futures contracts and options thereon are
different from those needed to select the securities in which the Fund invests;
lack of assurance that a liquid secondary market will exist for any particular
option, futures contract or option thereon at any particular time; and the
possible need to defer closing out certain options, futures contracts, and
options thereon in order to continue to qualify for the beneficial tax treatment
afforded regulated investment companies.

16
<PAGE> 70

Transactions in options, futures and currency contracts may be entered
into on U. S. exchanges regulated by the SEC or the Commodity Futures Trading
Commission (the "CFTC"), as well as in the over-the-counter market and on
foreign exchanges. In addition, the securities underlying options and futures
contracts traded by the Funds may include domestic as well as foreign
securities. Investors should recognize that transactions involving foreign
securities or foreign currencies, and transactions entered into in foreign
countries, may involve considerations and risks not typically associated with
investing in U.S. markets.

REGULATORY RESTRICTIONS

To the extent required to comply with Securities and Exchange
Commission Release No. 10666, when purchasing a futures contract, writing a put
option, or entering into a delayed delivery purchase, the Funds will each
maintain in a segregated account cash or any security that is not considered
restricted or illiquid equal to the value of such contracts.

To the extent required to comply with CFTC Regulation 4.5 and thereby
avoid "commodity pool operator" status, the Funds will enter into futures
contracts options thereon only (a) for "bona fide hedging purposes" (as defined
in CFTC regulations) or (b) for other purposes so long as aggregate initial
margins and premiums required in connection with non-hedging positions do not
exceed 5% of the liquidation value of the Fund's portfolio. The Funds will not
engage in transactions in financial futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market conditions
affecting the values of securities which each Fund holds or intends to purchase.
When futures contracts or options thereon are purchased to protect against a
price increase on securities intended to be purchased later, it is anticipated
that at least 75% of such intended purchases will be completed. When other
futures contracts or options thereon are purchased, the underlying value of such
contracts will at all times not exceed the sum of: (1) accrued profit on such
contracts held by the broker; (2) cash or high quality money market instruments
set aside in an identifiable manner; and (3) cash proceeds from investments due
in 30 days.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES

Each Fund may invest in certificates of deposits. Certificates of
deposit are receipts issued by a bank in exchange for the deposit of funds. The
issuer agrees to pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The certificate usually can be
traded in the secondary market prior to maturity. Bankers' acceptances typically
arise from short-term credit arrangements designed to enable businesses to
obtain funds to finance commercial transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then "accepted" by a bank
that, in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an earning asset or it may be sold in the secondary market at
the going rate of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have maturities of six
months or less.

SHORT-TERM MONEY MARKET INSTRUMENTS

Each Fund may invest funds awaiting investment or held as reserves, or
for temporary defensive purposes, in commercial paper, obligations of banks or
the U.S. Government and other high quality, short-term debt instruments.
Short-term debt instruments in which the Funds may invest include (i) short-term
U.S. Government securities and short-term obligations of foreign sovereign
governments and their agencies and instrumentalities, (ii) interest bearing
savings deposits on, and certificates of deposit and bankers' acceptances of,
U.S. and foreign banks, (iii) commercial paper of U.S. or foreign issuers rated
A-

17
<PAGE> 71

1 or higher by S&P or Prime-1 by Moody's or comparably rated by another
nationally recognized rating agency, or, if not rated, determined by Advisers to
be of comparable quality and (iv) repurchase agreements relating to the
foregoing.

PAYMENT-IN-KIND DEBENTURES

Asset Allocation Portfolio may invest in debentures the interest on
which may be paid in other securities rather than cash ("PIKs"). Typically,
during a specified term prior to the debenture's maturity, the issuer of a PIK
may provide for the option or the obligation to make interest payments in
debentures, common stock, or other instruments (i.e., "in kind" rather than in
cash). The type of instrument in which interest may or will be paid would be
known by the Fund at the time of the investment. While PIKs generate income for
generally accepted accounting standards purposes, they do not generate cash flow
and thus could cause the Fund to be forced to liquidate securities at an
inopportune time in order to distribute cash, as required by the Internal
Revenue Code.

PORTFOLIO TURNOVER

The portfolio turnover rate for a Fund is calculated by dividing the
lesser of purchases or sales by such Fund of investment securities for the
particular fiscal year by the monthly average value of investment securities
owned by the Fund during the same fiscal year. Investment securities for
purposes of this calculation do not include securities with a maturity date less
than twelve months from the date of investment. A 100% portfolio turnover rate
would occur, for example, if the lesser of the value of purchases or sales of
investment securities for a particular year were equal to the average monthly
value of the investment securities owned during such year.

Each Fund, with the exception of Growth & Income Fund, had portfolio
turnover rates in excess of 100% during the fiscal year ended August 31, 1999.
This represented a significant increase in portfolio turnover from the fiscal
year ended August 31, 1998 for Asset Allocation Portfolio, Capital Fund, Growth
Fund and Capital Appreciation Portfolio. The portfolio turnover rates of
Capital Fund and Growth Fund increased by over 100% and the portfolio turnover
rate of Capital Appreciation Portfolio increased by over 200%. Factors
contributing to the increased portfolio turnover rates included general market
volatility, repositioning of the Funds' portfolios by new management, attempts
to maintain the Funds' market capitalization targets and the need to sell
holdings to meet redemption activity in the Funds. While higher turnover rates
(100% or more) may result in increased capital gains and transaction costs,
the Funds' managers attempt to have the benefits of these transactions outweigh
the costs, although this cannot be assured.

INVESTMENT RESTRICTIONS

Each Fund is subject to certain investment restrictions, which are set
forth below. Any investment restriction that is denoted as "fundamental" may be
changed only by the approval of a majority of a Fund's shareholders. In this
situation, majority means the lesser of (i) 67% of the Fund's outstanding shares
present at a meeting of the holders if more than 50% of the outstanding shares
are present in person or by proxy or (ii) more than 50% of the Fund's
outstanding shares.

Any investment policy or restriction in the Prospectus or this
Statement of Additional Information which involves a maximum percentage of
securities or assets, except those dealing with borrowing, shall not be
considered to be violated unless an excess over the percentage occurs
immediately after an acquisition of securities or utilization of assets and such
excess results therefrom.

ASSET ALLOCATION PORTFOLIO AND CAPITAL APPRECIATION PORTFOLIO

18
<PAGE> 72

The following investment restrictions are fundamental and may be
changed only by the approval of shareholders. Neither Fund will:

(1) Purchase securities on margin or otherwise borrow money or issue
senior securities, except that the Funds, in accordance with their
investment objectives and policies, may purchase securities on a
when-issued and delayed delivery basis, within the limitations set
forth in the Prospectus and Statement of Additional Information.
Fortis Advantage may also obtain such short-term credit as it
needs for the clearance of securities transactions, and may borrow
from banks, for the account of either Fund, as a temporary measure
to facilitate redemptions (but not for leveraging or investment)
an amount that does not exceed 10% of the value of a Fund's total
assets. No additional investment securities may be purchased by a
Fund while outstanding borrowings exceed 5% of the value of such
Fund's total assets.
(2) Mortgage, pledge or hypothecate its assets, except in an amount
not exceeding 10% of the value of its total assets to secure
temporary or emergency borrowing.
(3) Invest in commodities or commodity contracts, other than for
hedging purposes only.
(4) Act as an underwriter of securities of other issuers, except to
the extent that, in connection with the disposition of portfolio
securities, Fortis Advantage may be deemed an underwriter under
applicable laws.
(5) Participate on a joint or a joint and several basis in any
securities trading account.
(6) Invest in real estate, except a Fund may invest in securities
issued by companies owning real estate or interests therein.
(7) Make loans to other persons. Repurchase agreements, the lending of
securities and the acquiring of debt securities in accordance with
the Prospectus and Statement of Additional Information are not
considered to be "loans" for this purpose.
(8) Concentrate its investments in any particular industry, except
that (i) it may invest up to 25% of the value of its total assets
in any particular industry, and (ii) there is no limitation with
respect to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities, or
obligations of domestic commercial banks. As to utility companies,
gas, electric, water and telephone companies will be considered as
separate industries. As to finance companies, the following
categories will be considered as separate industries: (a) captive
automobile finance, such as General Motors Acceptance Corp. and
Ford Motor Credit Corp.; (b) captive equipment finance companies,
such as Honeywell Finance Corporation and General Electric Credit
Corp.; (c) captive retail finance companies, such as Macy Credit
Corp. and Sears Roebuck Acceptance Corp.; (d) consumer loan
companies, such as Beneficial Finance Corporation and Household
Finance Corporation; (e) diversified finance companies such as CIT
Financial Corp., Commercial Credit Corporation and Borg Warner
Acceptance Corp.; and (f) captive oil finance companies, such as
Shell Credit, Inc., Mobil Oil Credit Corp. and Texaco Financial
Services, Inc.
(9) Purchase from or sell to any officer, director, or employee of
Fortis Advantage, or Advisers or Investors, or any of their
officers or directors, any securities other than shares of Fortis
Advantage's common stock.
(10) Make short sales, except for sales "against the box." While a
short sale is made by selling a security the Fund does not own, a
short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain securities
identical to those sold short at no added cost.

The following investment restrictions may be changed without
shareholder approval. Neither Fund will:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization.

19
<PAGE> 73

(2) Invest in a company for the purposes of exercising control or
management.
(3) Buy or sell foreign exchange, except as incidental to the purchase
or sale of permissible foreign investment.
(4) Invest more than 15% of its net assets in illiquid securities.
(5) Invest more than 20% of its net assets in when-issued, delayed
delivery or forward commitment transactions, and of such 20%, no
more than one-half (i.e., 10% of its net assets) may be invested
in when-issued, delayed delivery or forward commitment
transactions without the intention of actually acquiring
securities (i.e., dollar rolls).

VALUE FUND AND CAPITAL FUND

The following investment restrictions are fundamental and may be
changed only by the approval of shareholders. Neither Fund will:

(1) Concentrate its investments, that is, invest more than 25% of the
value of its assets in any particular industry.
(2) Purchase or sell physical commodities (such as grains, livestock,
etc.) or futures or options contracts thereon; however, it may
purchase or sell any forms of financial instruments or contracts
that might be deemed commodities.
(3) Invest directly in real estate or interests in real estate;
however, the Fund may invest in interests in real estate
investment trusts, debt securities secured by real estate or
interests therein, or debt or equity securities issued by
companies which invest in real estate or interests therein.
(4) Act as an underwriter of securities of other issuers, except to
the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under applicable
laws.
(5) Purchase securities on margin or otherwise borrow money, except
that the Fund, in accordance with its investment objectives and
policies, may purchase securities on a when-issued, delayed
delivery, or forward commitment basis, and may make margin
deposits in connection with dealing in commodities or options
thereon. The Fund may also obtain such short-term credit as it
needs for the clearance of securities transactions, and may borrow
from a bank as a temporary measure to facilitate redemptions (but
not for leveraging or investment) an amount that does not exceed
10% of the value of the Fund's total assets. Investment securities
will not be purchased while outstanding borrowings (including
"roll" transactions) exceed 5% of the value of the Fund's total
assets.
(6) Issue senior securities (as defined in the 1940 Act) other than as
set forth in restriction #5 above concerning borrowing and except
to the extent that using options and futures contracts or
purchasing or selling securities on a when issued, delayed
delivery, or forward commitment basis (including the entering into
of roll transactions) may be deemed to constitute issuing a senior
security.
(7) Make loans to other persons, except that it may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of the
Fund's total assets (including the amount lent) if such loans are
secured by collateral at least equal to the market value of the
securities lent, provided that such collateral shall be limited to
cash, securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, certificates of deposit or
other high-grade, short term obligations or interest-bearing cash
equivalents. Loans shall not be deemed to include repurchase
agreements or the purchase or acquisition of a portion of an issue
of notes, bonds, debentures, or other debt securities, whether or
not such purchase or acquisition is made upon the original
issuance of the securities. ("Total assets" of the Fund includes
the amount lent as well as the collateral securing such loans.)

<PAGE> 74

The following investment restrictions may be changed without
shareholder approval. Neither Fund will:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization; provided that the
Fund shall not purchase or otherwise acquire more than 3% of the
total outstanding voting stock of any other investment company.
(2) Invest in a company for the purposes of exercising control or
management.
(3) Buy or sell foreign exchange.
(4) Invest in securities that would expose the Fund to liabilities
exceeding the amount invested.
(5) Invest more than 15% of its net assets in illiquid securities.
(6) Make short sales, except for sales "against the box."
(7) Mortgage, pledge, or hypothecate its assets except to the extent
necessary to secure permitted borrowings.
(8) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any
issuer to be held by the Fund.
(9) Invest more than 10% of its total assets in real estate investment
trusts or invest in real estate investment trusts that are not
publicly distributed.
(10) Enter into any options, futures, or forward contract transactions
if immediately thereafter (a) the amount of premiums paid for all
options, initial margin deposits on all futures contracts and/or
options on futures contracts, and collateral deposited with
respect to forward contracts held by or entered into by the Fund
would exceed 5% of the value of the total assets of the Fund or
(b) the Fund's assets covering, subject to, or committed to all
options, futures, and forward contracts would exceed 20% of the
value of the total assets of the Fund. (This restriction does not
apply to securities purchased on a when-issued, delayed delivery,
or forward commitment basis.)
(11) Write, purchase, or sell put or call options, except that it may
write covered call options.
(12) Invest more than 10% of its assets in foreign securities.

GROWTH FUND

The following investment restrictions are fundamental and may be
changed only by the approval of shareholders. Growth Fund will not:

(1) Concentrate its investments, that is, invest more than 25% of the
value of its assets, in any particular industry.
(2) Buy or sell commodities or commodity contracts.
(3) Purchase or sell real estate or other interests in real estate, or
interests in real estate investment trusts.
(4) Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Fund.
(5) Act as an underwriter of securities of other issuers, except that
the Fund may invest up to 5% of the value of its assets (at time
of investment) in portfolio securities which the Fund might not be
free to sell to the public without registration of such securities
under the Securities Act of 1933.
(6) Write, purchase, or sell puts, calls, or combinations thereof.
(7) Purchase or sell securities on margin or sell short.
(8) Make loans to other persons, except that it may purchase bonds,
debentures, or other debt securities, which are not publicly
distributed in an amount not to exceed 5% of the value of its
total assets. The purchase of a portion of an issue of publicly
distributed bonds, debentures, or other debt securities, does not
constitute the making of a loan.

21
<PAGE> 75

(9) Borrow money or issue debt securities.
(10) Invest more than 5% of its net assets in each of i) restricted
securities and ii) bonds, debentures or other debt securities that
are not publicly distributed.

The following investment restrictions may be changed without
shareholder approval. Growth Fund will not:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization.
(2) Invest in a company for the purposes of exercising control or
management.
(3) Buy or sell foreign exchange.
(4) Invest in securities that would expose the Fund to liabilities
exceeding the amount invested.
(5) Invest more than 10% of its assets in foreign securities.
(6) Invest more than 15% of its net assets in illiquid securities.
(7) Issue senior securities (as defined in the 1940 Act), except as
set forth herein and in the prospectus.

GROWTH & INCOME FUND

The following investment restrictions are fundamental and may be
changed only by the approval of shareholders. Growth & Income Fund will not:

(1) Concentrate its investments in any particular industry, except
that (i) it may invest up to 25% of the value of its total assets
in any particular industry, and (ii) there is no limitation with
respect to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities, or
obligations of domestic commercial banks. As to utility companies,
gas, electric, water and telephone companies will be considered as
separate industries. As to finance companies, the following
categories will be considered as separate industries: (a) captive
automobile finance, such as General Motors Acceptance Corp. and
Ford Motor Credit Corp.; (b) captive equipment finance companies,
such as Honeywell Finance Corporation and General Electric Credit
Corp.; (c) captive retail finance companies, such as Macy Credit
Corp. and Sears Roebuck Acceptance Corp.; (d) consumer loan
companies, such as Beneficial Finance Corporation and Household
Finance Corporation; (e) diversified finance companies such as CIT
Financial Corp., Commercial Credit Corporation and Borg Warner
Acceptance Corp.; and (f) captive oil finance companies, such as
Shell Credit, Inc., Mobile Oil Credit Corp. and Texaco Financial
Services, Inc.
(2) Purchase or sell physical commodities (such as grains, livestock,
etc.) or futures or options contracts thereon. However, the Fund
may purchase or sell any forms of financial instruments or
contracts that might be deemed commodities.
(3) Invest directly in real estate or interests in real estate;
however, the Fund may invest in interests in real estate
investment trusts, debt securities secured by real estate or
interests therein, or debt or equity securities issued by
companies which invest in real estate or interests therein.
(4) Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Fund, provided that this restriction shall not apply to the
transfer of securities in connection with any permissible
borrowing or the collateral arrangements in connection with
permissible activities.
(5) Act as an underwriter of securities of other issuers, except to
the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under applicable
laws.

22
<PAGE> 76

(6) Purchase securities on margin, except that the Fund, in accordance
with its investment objectives and policies, may purchase
securities on a when-issued, delayed delivery or forward
commitment basis. The Fund may also obtain such short-term credit
as it needs for the clearance of securities transactions and may
make margin deposits in connection with futures contracts.
(7) Make short sales, except for sales "against the box." While a
short sale is made by selling a security the Fund does not own, a
short sale is "against the box" to the extent the Fund
contemporaneously owns or has the right to obtain securities
identical to those sold without payment of any additional
consideration.
(8) Make loans to other persons, except (i) the Fund may lend its
portfolio securities in an amount not to exceed 33 1/3% of the
value of its total assets if such loans are secured by collateral
equal to at least the market value of the securities lent,
provided that such collateral shall be limited to cash, securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit or other high-grade,
short-term obligations or interest-bearing cash equivalents; and
(ii) it may purchase debt securities through private placements
(restricted securities) in accordance with its investment
objectives and policies.
(9) Issue senior securities (as defined in the 1940 Act) other than as
set forth in restriction #10 below and except to the extent that
using options and futures contracts or purchasing or selling
securities on a when issued, delayed delivery or forward
commitment basis (including the entering into of roll
transactions) may be deemed to constitute issuing a senior
security.
(10) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets.
The Fund will not purchase securities while borrowings (including
"roll" transactions) in excess of 5% of total assets are
outstanding. In the event that the asset coverage for the Fund's
borrowings falls below 300%, the Fund will reduce, within three
days (excluding Sundays and holidays), the amount of its
borrowings in order to provide for 300% asset coverage.

The following investment restrictions may be changed without
shareholder approval. Growth & Income Fund will not:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition, or reorganization; provided that the
Fund shall not purchase or otherwise acquire more than 3% of the
total outstanding voting stock of any other investment company.
(2) Invest in a company for the purpose of exercising control or
management.
(3) Invest more than 15% of its net assets in illiquid securities.
(4) Enter into any options, futures, or forward contract transactions
if immediately thereafter (a) the amount of premiums paid for all
options, initial margin deposits on all futures contracts and/or
options on futures contracts, and collateral deposited with
respect to forward contracts held by or entered into by the Fund
would exceed 5% of the value of the total assets of the Fund or
(b) the Fund's assets covering, subject to, or committed to all
options, futures, and forward contracts would exceed 20% of the
value of the total assets of the Fund. (This restriction does not
apply to securities purchased on a when-issued, delayed delivery,
or forward commitment basis.)
(5) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any
issuer to be held by the Fund.
(6) Borrow money in excess of 10% of its total assets, except as a
temporary or emergency measure. ("Roll" transactions will not be
considered borrowing for purposes of this restriction).

23
<PAGE> 77

MANAGEMENT OF THE FUNDS

Under Minnesota law, the Board of Directors of Fortis Advantage, Fortis
Equity and Fortis Growth has overall responsibility for managing each company in
good faith, in a manner reasonably believed to be in the best interests of such
company and with the care an ordinarily prudent person would exercise in similar
circumstances. This management may not be delegated. The Articles of
Incorporation limit the liability of directors to the fullest extent permitted
by law.

The names, addresses, principal occupations and other affiliations of
directors and executive officers of Fortis Advantage, Fortis Equity and Fortis
Growth are listed below. Unless stated otherwise, all positions have been held
at least five years. Each director and officer also serves as a director or
officer of all investment companies managed by Advisers (the "Fund Complex").
The Fund Complex currently consists of one closed-end and eight open-end
investment companies.

NAME AND ADDRESS AGE POSITION WITH THE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------- --- ------------------ -----------------------------------------
FUNDS
-----
<S> <C> <C> <C>
Richard W. Cutting 68 Director Certified public accountant and financial consultant.
137 Chapin Parkway
Buffalo, New York

Allen R. Freedman* 59 Director Chairman and Chief Executive Officer of Fortis, Inc.;
One Chase Manhattan Plaza a Managing Director of Fortis International, N.V.;
New York, New York director of Systems and Computer Technology
Corporation.

Dr. Robert M. Gavin 59 Director President, Cranbrook Education Community; prior to
380 Lone Pine Road July 1996, President, Macalester College, St. Paul,
Bloomfield, Michigan MN.

Jean L. King 55 Director President, Communi-King, a communications consulting
12 Evergreen Lane firm, St. Paul, MN.
St. Paul, Minnesota

Dean C. Kopperud* 47 President and Chief Executive Officer and a Director of Advisers;
500 Bielenberg Drive Director President and a Director of Investors; President of
Woodbury, Minnesota Fortis Financial Group; a Director of Fortis Benefits
Insurance Company and Senior Vice President of Fortis
Insurance Company.

Robb L. Prince 58 Director Financial and employee benefit consultant; prior to
5108 Duggan Plaza July 1995, Vice President and Treasurer, Jostens,
Edina, Minnesota Inc., a producer of products and services for youth,
education, sports award, and recognition markets;
director of Analysts International Corporation.

Leonard J. Santow 63 Director Principal, Griggs & Santow, Inc., economic and
75 Wall Street 21st Floor financial consultants
New York, New York

Noel Schenker Shadko 45 Director Marketing consultant; prior to 1996, Senior Vice
1908 W. 49th Street President, Marketing and Strategic Planning,
Minneapolis, Minnesota Rollerblade, Inc.
</TABLE>

24
<PAGE> 78

NAME AND ADDRESS AGE POSITION WITH THE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------- --- ------------------ -----------------------------------------
FUNDS
-----
<S> <C> <C> <C>
Joseph M. Wikler 57 Director Investment consultant and private investor; prior to
12520 Davan Drive 1994, Director of Research, Chief Investment Officer,
Silver Spring, Maryland Principal and a Director, The Rothschild Co., and
investment adviser, Baltimore, MD.

Gary N. Yalen 57 Vice President President and Chief Investment Officer of Advisers
One Chase Manhattan Plaza (since 1995) and Senior Vice President, Investments,
New York, New York of Fortis, Inc.; prior to 1996, President and Chief
Investment Officer, Fortis Asset Management, a former
division of Fortis, Inc.

Howard G. Hudson 62 Vice President Executive Vice President and Head of Fixed Income
One Chase Manhattan Plaza Investments of Advisers since 1995; prior to 1996,
New York, New York Senior Vice President, Fixed Income, Fortis Asset
Management.

Lucinda S. Mezey 52 Vice President Executive Vice President and Head of Equity
One Chase Manhattan Plaza Investments of Advisers since October 1997; from 1995
New York, New York to October 1997, Chief Investment Officer, Alex Brown
Capital Advisory and Trust Co., Baltimore, MD; prior
to 1995, Senior Vice President and Head of Equity
Investments, PNC Bank, Philadelphia, PA.

James S. Byrd 48 Vice President Executive Vice President of Advisers since 1995;
90 South 7th Street prior to 1995, Vice President of Advisers and of
Minneapolis, Minnesota Investors.

Nicholas L.M. de Peyster 33 Vice President Vice President of Advisers since 1995; prior to 1995,
One Chase Manhattan Plaza Vice President, Equities, Fortis Asset Management.
New York, New York

Diane M. Gotham 41 Vice President Vice President of Advisers since 1998; from 1994 to
90 South 7th Street 1998, securities analyst for Advisers.
Minneapolis, Minnesota

Laura E. Granger 38 Vice President Vice President of Advisers since 1998; from
One Chase Manhattan Plaza 1993-1998, portfolio manager, General Motors
New York, New York Investment Management, New York, NY.

Maroun M. Hayek 51 Vice President Vice President of Advisers since 1995; prior to 1996,
One Chase Manhattan Plaza Vice President, Fixed Income, Fortis Asset Management.
New York, New York

Robert C. Lindberg 43 Vice President Vice President of Advisers since 1993.
One Chase Manhattan Plaza
New York, New York

Charles L. Mehlhouse 57 Vice President Vice President of Advisers; prior to March 1996,
One Chase Manhattan Plaza portfolio manager, Marshall & Ilsley Bank
New York, New York Corporation, Milwaukee, WI.
</TABLE>

25
<PAGE> 79

NAME AND ADDRESS AGE POSITION WITH THE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------- --- ------------------ -----------------------------------------
FUNDS
-----
<S> <C> <C> <C>
Kevin J. Michels 48 Vice President Vice President of Advisers since 1995; prior to 1996,
One Chase Manhattan Plaza Vice President, Administration, Fortis Asset
New York, New York Management.

Christopher J. Pagano 36 Vice President Vice President of Advisers since 1996; prior to March
One Chase Manhattan Plaza 1996, government strategist, Merrill Lynch, New York,
New York, New York NY.

Kendall C. Peterson 43 Vice President Vice President of Advisers since August 1999; prior
One Chase Manhattan Plaza to August 1999, Vice President and portfolio manager
New York, New York at Prudential Insurance Company of America, Newark,
NJ.

Stephen M. Rickert 56 Vice President Vice President of Advisers since 1995; from 1994 to
One Chase Manhattan Plaza 1996, Corporate Bond Analyst, Fortis Asset Management.
New York, New York

Michael J. Romanowski 48 Vice President Vice President of Advisers since 1998; from October
One Chase Manhattan Plaza 1995 to March 1998, portfolio manager, Value Line,
New York, New York New York, NY; prior to October 1995, securities
analyst, Conning & Co., Hartford, CT.

Christopher J. Woods 39 Vice President Vice President of Advisers since 1995; prior to 1996
One Chase Manhattan Plaza Vice President, Fixed Income, Fortis Asset Management.
New York, New York

Robert W. Beltz, Jr. 50 Vice President Vice President--Securities Operations of Advisers and
500 Bielenberg Drive of Investors.
Woodbury, Minnesota

Peggy L. Ettestad 42 Vice President Senior Vice President, Operations of Advisers since
500 Bielenberg Drive March 1997; prior to March 1997, Vice President, G.E.
Woodbury, Minnesota Capital Fleet Services, Minneapolis, MN.

Tamara L. Fagely 41 Vice President Vice President of Advisers and of Investors since
500 Bielenberg Drive and Treasurer 1998; prior to 1998, Second Vice President of
Woodbury, Minnesota Advisers and Investors.

Dickson W. Lewis 50 Vice President Senior Vice President, Marketing and Sales of
500 Bielenberg Drive Advisers and of Investors since July 1997; from 1993
Woodbury, Minnesota to July 1997, President and Chief Executive Officer,
Hedstrom/Blessing, Inc., Minneapolis, MN.

David A. Peterson 57 Vice President Vice President and Assistant General Counsel, Fortis
500 Bielenberg Drive Benefits Insurance Company.
Woodbury, Minnesota
</TABLE>

26
<PAGE> 80

NAME AND ADDRESS AGE POSITION WITH THE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------- --- ------------------ -----------------------------------------
FUNDS
-----
<S> <C> <C> <C>
Scott R. Plummer 40 Vice President Vice President, Associate General Counsel and
500 Bielenberg Drive Assistant Secretary of Advisers.
Woodbury, Minnesota

Rhonda J. Schwartz 41 Vice President Since January 1996, Senior Vice President and General
500 Bielenberg Drive Counsel of Advisers, Vice President and General
Woodbury, Minnesota Counsel, Life and Investment Products of Fortis
Insurance Company and Senior Vice President and
General Counsel of Fortis Benefits Insurance Company,
FFG Division; from 1994 to January 1996, Vice
President, General Counsel and Secretary of Fortis,
Inc.

Melinda S. Urion 46 Vice President Senior Vice President and Chief Financial Officer of
500 Bielenberg Drive Advisers since 1997; from 1995 to 1997, Senior Vice
Woodbury, Minnesota President of Finance and Chief Financial Officer,
American Express Financial Corporation; prior to
March 1995, corporate controller, American Express
Financial Corporation and prior to 1994, controller
and treasurer, IDS Life Insurance Company,
Minneapolis, MN.

Michael J. Radmer 54 Secretary Partner, Dorsey & Whitney LLP, the Company's General
220 South Sixth Street Counsel.
Minneapolis, Minnesota
</TABLE>

* Denotes directors who are interested persons, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the
Company and Advisers. Mr. Kopperud is an "interested person" of
Advisers and the Company primarily because he holds certain positions,
including serving as Chief Executive Officer and a director of
Advisers. Mr. Freedman is an "interested person" of Advisers and the
Company primarily because he holds certain positions, including serving
as Chairman and Chief Executive Officer of Fortis, Inc., the parent
company of Advisers, and as a Managing Director of Fortis
International, N.V., the parent company of Fortis, Inc.

Each director who is not affiliated with Advisers or Investors receives a
monthly fee ($200 per month from each of Value Fund, Growth & Income Fund and
Capital Fund; $350 per month from Growth Fund and $200 per month from each of
Asset Allocation Portfolio and Capital Appreciation Portfolio), $100 per meeting
attended from each Fund, and $100 per committee meeting attended from each Fund
(and reimbursement of travel expenses to attend meetings). Each such director
also receives a monthly fee, a meeting fee and a committee meeting fee from each
fund in the Fund Complex for which they are a director. The following table sets
forth the aggregate compensation received by each director from Fortis
Advantage, Fortis Equity and Fortis Growth during the fiscal year ended August
31, 1999, as well as the total compensation received by each director from the
Fund Complex during the calendar year ended December 31, 1998. Mr. Freedman and
Mr. Kopperud, who are affiliated with Advisers and Investors, did not receive
any compensation. No executive officer receives any compensation from the Funds.

<TABLE>
<CAPTION>
Aggregate compensation Aggregate compensation Aggregate compensation Total compensation
from from from from
Director Fortis Advantage Fortis Equity Fortis Growth Fund Complex*
- -------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Richard W. Cutting $3,050 $2,700 $4,600 $31,200
</TABLE>

<PAGE> 81

<TABLE>

<S> <C> <C> <C> <C>
Dr. Robert M. Gavin $3,050 $2,700 $4,600 $31,200
Benjamin S. Jaffray** $3,050 $2,700 $4,600 $22,200
Jean L. King $2,850 $2,500 $4,400 $31,200
Edward M. Mahoney** $3,050 $2,700 $4,600 $31,200
Robb L. Prince $3,050 $2,700 $4,600 $31,200
Leonard J. Santow $2,928 $2,578 $4,478 $30,300
Noel Schenker Shadko $3,050 $2,700 $4,600 $22,200
Joseph M. Wikler $3,050 $2,700 $4,600 $31,300
</TABLE>

- -----------------------------------
* The Fund Complex consists of one closed-end and eight open-end investment
companies managed by Advisers.

** Messrs. Jaffray and Mahoney retired from the Board of Directors effective
January 1, 2000.

During the fiscal year ended August 31, 1999, the Funds paid legal fees
and expenses as set forth below to a law firm of which the Funds' Secretary is a
partner.

<TABLE>
<CAPTION>
<S> <C>
Asset Allocation Portfolio $ 9,362
Value Fund $ 1,986
Growth & Income Fund $ 1,837
Capital Fund $ 28,000
Growth Fund $ 43,861
Capital Appreciation Portfolio $ 5,651
</TABLE>

Directors Gavin, Kopperud, Prince and Schenker Shadko are members of
the Executive Committee of the Board of Directors. While the Executive Committee
is authorized to act in the intervals between regular board meetings with full
capacity and authority of the full Board of Directors, except as limited by law,
it is expected that the Committee will meet at least twice a year.

Directors, officers and other persons affiliated with the Funds are
eligible to purchase shares of the Funds without a sales charge. For more
complete information about these arrangements, refer to "Purchase of
Shares--Exemptions from the Sales Charge."

PRINCIPAL HOLDERS OF SECURITIES

As of December 20, 1999, no person owned of record or, to a Fund's
knowledge, beneficially as much as 5% of the outstanding shares of any Class of
Fund shares, except as follows: Asset Allocation Portfolio--Class C: KCB
Services and Co., C/F Mary M. Wilson IRA, P.O. Box 4310, Frederick, MD 21705
(10%). Asset Allocation Portfolio--Class Z: First Trust, N.A., C/F for James R.
Wettengel IRA, 2957 Granada Lane North, Oakdale, MN 55128. Value Fund--Class A:
John Alden Life Ins. Co., c/o Kevin Michels, Fortis Advisers, 1 Chase Manhattan
Plaza, New York, NY 10005 (7%); Fortis Insurance Company, c/o Kevin Michels,
Fortis Advisers, 1 Chase Manhattan Plaza, New York, NY 10005 (5%); Fortis
Benefits Ins. Co., c/o Fortis Inc., Fortis Advisers, 1 Chase Manhattan Plaza,
New York, NY 10005 (5%); Fortis Benefits Ins. Co., c/o Kevin Michels, Fortis
Advisers, 1 Chase Manhattan Plaza, New York, NY 10005 (5%). Growth Fund--Class
Z: Mitra & Co., 1000 N. Water St., Milwaukee, WI 53202 (58%).

As of December 20, 1999, the directors and executive officers as a
group beneficially owned less than 1% of the outstanding shares of each class of
each Fund.

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL

28
<PAGE> 82

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and
manager of each Fund since inception. Fortis Investors, Inc. ("Investors") acts
as the Funds underwriter. Each acts pursuant to written agreements periodically
approved by the directors or shareholders. The address of each is that of the
Funds. As of October 31, 1999, Advisers managed thirty-three investment company
portfolios with combined net assets of approximately $7.1 billion.

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

Fortis, Inc. ("Fortis") owns 100% of the outstanding voting securities
of Advisers, and Advisers owns all of the outstanding voting securities of
Investors.

Fortis, located in New York, New York, is a financial services company
that provides specialty insurance and investment products to individuals,
businesses, associations and other financial services organizations in the
United States. Fortis is a part of a worldwide group of companies active in the
fields of insurance, banking and investments. Fortis is jointly owned by Fortis
(NL) N.V. of The Netherlands and Fortis (B) of Belgium.

Fortis (NL) N.V. is a diversified financial services company
headquartered in Utrecht, The Netherlands, where its insurance operations began
in 1847. Fortis (B) is a diversified financial services company headquartered in
Brussels, Belgium, where it insurance operations began in 1824. Fortis (NL) N.V.
and Fortis (B) own a group of companies active in insurance, banking and
financial services, and real estate development in The Netherlands, Belgium, the
United States, Western Europe, and the Pacific Rim.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENTS

Advisers act as investment adviser and manager of each Fund under
separate Investment Advisory and Management Agreements. These agreements are
individually referred to as an "Agreement" and collectively referred to as the
"Agreements." Each Agreement will terminate automatically in the event of its
assignment. In addition, the Agreements are terminable at any time, without
penalty, by the Board of Directors or, with respect to any particular Fund, by
vote of a majority of the Fund's outstanding voting securities, on not more than
60 days' written notice to Advisers, and by Advisers on 60 days' notice to the
Funds. Unless sooner terminated, the Agreements continue in effect for more than
two years after their execution only so long as such continuance is specifically
approved at least annually by either the board of Directors or, with respect to
any Fund, by a vote of a majority of the outstanding voting securities of the
applicable Fund; provided that, in either event, such continuance is also
approved by the vote of the majority of the directors who are not parties to
such Agreements, or interested persons of such parties, cast in person at a
meeting called for the purpose of voting on such approval.

Each Agreement provides for an investment advisory and management fee
to be paid by each Fund calculated as set forth below:

Annual investment advisory
Average net assets of each Fund and management fee
------------------------------- ------------------
For the first $100,000,000 1.00%
For the next $150,000,000 0.80%
For assets over $250,000,000 0.70%

Each Agreement requires each Fund to pay all its expenses that are not
assumed by Advisers and/or Investors. These expenses include, by way of example,
but not by way of limitation, the fees and

29
<PAGE> 83

expenses of directors and officers who are not "affiliated persons" of Advisers,
interest expenses, taxes, brokerage fees and commissions, fees and expenses of
registering and qualifying the Funds and their shares for distribution under
Federal and state securities laws, expenses of preparing prospectuses and of
printing and distributing prospectuses annually to existing shareholders,
custodian charges, auditing and legal expenses, insurance expenses, association
membership dues, and the expense of reports to shareholders, shareholders'
meetings and proxy solicitations.

Although investment decisions for the Funds are made independently from
those of the other funds or private accounts managed by Advisers, sometimes the
same security is suitable for more than one fund or account. If and when two or
more funds or accounts simultaneously purchase or sell the same security, the
transactions will be allocated as to price and amount in accordance with
arrangements equitable to each fund or account. The simultaneous purchase or
sale of the same securities by a Fund and other funds or accounts may have a
detrimental effect on a Fund, as this may affect the price paid or received by a
Fund or the size of the position obtainable by a Fund.

During various fiscal periods, the Funds paid advisory and management
fees as follows:

Advisory Fees Paid During:
-------------------------

Fiscal year Fiscal year Fiscal year
Ended Ended Ended
August 31, 1997 August 31, 1998 August 31, 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Asset Allocation Portfolio $ 1,577,254 $ 1,811,123 $ 2,027,378
Value Fund $ 207,623 $ 366,680 $ 458,155
Growth & Income Fund $ 125,226 $ 318,842 $ 422,452
Capital Fund $ 2,735,421 $ 3,140,323 $ 4,317,951
Growth Fund $ 6,323,998 $ 6,792,000 $ 6,608,804
Capital Appreciation Portfolio $ 1,190,025 $ 1,261,410 $ 1,342,008

</TABLE>

EXPENSES

Advisers bears the costs of acting as each Fund's transfer agent,
registrar and dividend agent. Advisers also furnishes each Fund with all
required management services, facilities, equipment, and personnel. Advisers or
Investors also shall bear all promotional expenses in connection with the
distribution of Fund shares, including paying for prospectuses and shareholder
reports for new shareholders and the costs of sales literature.

Expenses that relate exclusively to a particular Fund, such as
custodian charges and registration fees for shares, are charged to that Fund.
Other expenses are allocated pro rata among the Funds in an equitable manner as
determined by officers of the Funds under the supervision of the Board of
Directors, usually on the basis of net assets or number of accounts.

PLAN OF DISTRIBUTION

Fortis Advantage, Fortis Equity and Fortis Growth, on behalf of each Fund, have
each adopted a plan pursuant to Rule 12b-1 under the 1940 Act. Rule 12b-1(b)
provides that any payments made by the Fund in connection with financing the
distribution of its shares may only be made pursuant to a written plan
describing all aspects of the proposed financing of distribution, and also
requires that all agreements with any person relating to the implementation of
the plan must be in writing. In addition, Rule 12b-1(b)(1)

30
<PAGE> 84

requires that such plan be approved by a majority of the Fund's outstanding
shares, and Rule 12b-1(b)(1) requires that such plan, together with any related
agreements, be approved by a vote of the Board of Directors who are not
interested persons of the Fund and have no direct or indirect interest in the
operation of the plan or in the agreements related to the plan, cast in person
at a meeting called for the purpose of voting on such plan or agreement. Rule
12b-1(b)(3) requires that the plan or agreement provide in substance:

(i) That it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long
as such continuance is specifically approved at least annually
in the manner described in a paragraph (b)(3) of Rule 12b-1;
(ii) That any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to the plan or any
related agreement shall provide to the Board of Directors, and
the directors shall review, at least quarterly, a written
report of the amounts so expended and the purpose for which
such expenditures were made; and
(iii) In the case of a plan, that it may be terminated at any time
by vote of a majority of the members of the Board of Directors
who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the plan or
in any agreements related to the plan or by vote of a majority
of the outstanding voting securities of the Fund.

Rule 12b-1(b)(4) requires that such plans may not be amended to
increase materially the amount to be spent for distribution without shareholder
approval and that all material amendments of the plan must be approved in the
manner described in paragraph (b)(2) of Rule 12b-1.

Rule 12b-1(c) provides that a Fund may rely on Rule 12b-1(b) only if
the selection and nomination of the Fund's disinterested directors is committed
to discretion of such disinterested directors. Rule 12b-1(e) provides that a
Fund may implement or continue a plan pursuant to Rule 12b-1(b) only if the
directors who vote to approve such implementation or continuation conclude, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law, and under Sections 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that the plan will benefit the Fund and its
shareholders.

Pursuant to the provisions of the Distribution Plan each Fund pays
Investors an annual fee of .25% (.45% for Asset Allocation Portfolio and Capital
Appreciation Portfolio) of the average daily net assets attributable to that
Fund's Class A shares and 1.00% attributable to that Fund's Class B, Class C and
Class H shares. Such fees are paid in connection with servicing of the Fund's
shareholder accounts and in connection with distribution-related services
provided with respect to the Fund. Class Z shares of Growth Fund do not pay any
distribution fees. Investors will be paid under the Distribution Plan regardless
of Investors' actual expenses.

A portion of each Fund's total fee is paid as a distribution fee and
will be used by Investors to cover expenses that are primarily intended to
result in, or that are primarily attributable to, the sale of shares of the Fund
("Distribution Fees"), and the remaining portion of the fee is paid as a
shareholder servicing fee and will be used by Investors to provide compensation
for ongoing servicing and/or maintenance of shareholder accounts ("Shareholder
Servicing Fees"). For the Class A shares, the entire fee is designated as a
Distribution Fee. For the Class B, Class C and Class H shares, Investors
receives a total fee of 1.00% of the average daily net assets of each such
class, of which .75% is designated as a Distribution Fee and .25% is designated
as a Shareholder Servicing Fee.

Distribution Fees under the Plan include, but are not limited to,
initial and ongoing sales compensation (in addition to sales charges) paid to
registered representatives of Investors and to other

31
<PAGE> 85

broker-dealers; expenses incurred in the printing of prospectuses, statements of
additional information and reports used for sales purposes; expenses of
preparation and distribution of sales literature; expenses of advertising of any
type; an allocation of Investors' overhead; and payments to and expenses of
persons who provide support services in connection with the distribution of Fund
shares. Shareholder Servicing Fees include all expenses of Investors incurred in
connection with providing administrative or accounting services to shareholders,
including, but not limited to, an allocation of Investors' overhead and payments
made to persons, including employees of Investors, who respond to inquiries of
shareholders of the Funds regarding their ownership of shares or their accounts
with the Funds, or who provide other administrative or accounting services not
otherwise required to be provided by Advisers.

Listed below are the total distribution fees paid by the Funds and how
Investors used those fees for the fiscal period ended August 31, 1999.

Asset Growth Capital
Allocation Value & Income Capital Growth Appreciation
Portfolio Fund Fund Fund Fund Portfolio
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Printing and mailing of
prospectuses to other than
current shareholders $ 46,037 $ 11,513 $ 6,234 $ 73,694 $ 48,477 $ 20,785
Compensation to underwriters $1,302,358 $174,969 $210,308 $1,558,340 $1,976,035 $564,956
Compensation to dealers $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Compensation to sales $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
personnel
Interest, carrying or other
financing charges $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other (distribution-related
compensation, sales
literature, supplies,postage,
toll-free phone) $ 136,462 $ 60,417 $ 18,635 $ 459,334 $ 272,733 $ 85,525
- -------------------------------------------------------------------------------------------------------------------------
Total $1,484,857 $246,899 $235,177 $2,091,368 $2,297,245 $671,266

</TABLE>

BROKERAGE ALLOCATION AND OTHER PRACTICES

Advisers selects and (where applicable) negotiates commissions with
broker-dealers who execute trades for each Fund. In selecting a broker-dealer to
execute an equity trade, Advisers primarily considers whether the broker-dealer
can provide best execution on the trade including best price for a security.
Other factors that Advisers considers when selecting a broker-dealer for an
equity trade include:

- - competitive commissions commensurate with the value of research
products and services provided to Advisers;
- - consistently good service quality;
- - adequate capital position;
- - broad market coverage;
- - continuous flow of information concerning bids and offers;
- - the ability to complete, clear and settle trades in a timely and
efficient manner;
- - capital usage;
- - specialized expertise;
- - access to new issues; and
- - the ability to handle large blocks of stock discreetly.

32
<PAGE> 86

Portfolio transactions involving debt securities are effected with dealers
without the payment of brokerage commissions, but at net prices which usually
include a spread or markup. The volume of business done with a broker-dealer for
fixed income trades is based to a large extent on the availability and
competitive price of the fixed income securities that fit the strategy of the
fixed income portfolio. Best execution, the quality of research, making of
secondary markets and other services are also determining factors for the
allocation of business when buying and selling fixed income securities. If a
broker-dealer charging a higher commission or offering a larger spread is more
reliable or provides better execution than a broker-dealer charging a lower
commission or offering a smaller spread, then Advisers may select the
broker-dealer charging a higher commission or offering a larger spread for a
particular equity or fixed income trade.

Advisers may direct orders to broker-dealers who furnish research products
and services to Advisers as long as the broker-dealers meet the selection
criteria outlined above. The research products and services supplement Advisers'
own research and enable Advisers to obtain the views and information of others
prior to making investment decisions for the Funds. Advisers has not entered and
will not enter into any agreement with a broker-dealer that would prevent
Advisers from obtaining best execution on a trade. During fiscal year ended
August 31, 1999, the Funds directed brokerage commissions to broker-dealers
providing research services to Advisers as follows:

<TABLE>
<CAPTION>
Commission Paid by Fund
-----------------------

Asset Allocation Portfolio
- --------------------------
<S> <C>
Autranet, Inc. $ 9,840
Bear, Stearns & Co., Inc. $ 8,016
CSC Securities, Ltd. $ 4,242
Lipper $ 4,482
Standard & Poor's Sec. $ 9,077
William O'Neil & Co., Inc. $10,200
Paine Webber, Inc. $ 300
Instinet, Inc. $ 738

Value Fund
- ----------
Autranet, Inc. $17,442
Bear, Stearns & Co., Inc. $10,512
CSC Securities, Ltd. $ 1,320
Lipper $ 2,040
Standard & Poor's Sec. $13,326
William O'Neil & Co., Inc. $ 2,358
Paine Webber, Inc. $ 3,750

Growth & Income Fund
- --------------------
Autranet, Inc. $ 2,730
Bear, Stearns & Co., Inc. $ 90
CSC Securities, Ltd. $ 900
Lipper $ 1,176
Standard & Poor's Sec. $ 1,308
William O'Neil & Co., Inc. $ 2,952

Capital Fund
- ------------
Autranet, Inc. $43,446
Bear, Stearns & Co., Inc. $41,682
CSC Securities, Ltd. $15,210
Lipper $19,056
Standard & Poor's Sec. $31,872
William O'Neil & Co., Inc. $36,798
Paine Webber, Inc. $ 9,132
Instinet, Inc. $ 4,277

Growth Fund
- -----------
Autranet, Inc. $24,180
Bear, Stearns & Co., Inc. $45,330
CSC Securities, Ltd. $34,086
Lipper $ 2,958
Standard & Poor's Sec. $10,890
Paine Webber, Inc. $12,288
Instinet, Inc. $20,241
Investment Tech. Group $ 7,782

Capital Appreciation Portfolio
- ------------------------------
Autranet, Inc. $ 7,890
Standard & Poor's Sec. $ 1,008
Instinet, Inc. $ 536
Investment Tech. Group $ 164
</TABLE>

Advisers will authorize each Fund to pay an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker-dealer would have charged only if Advisers determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or Adviser's overall responsibilities with
respect to the accounts to which Advisers exercises investment discretion. In
1999, the Funds generally paid higher commissions than those obtainable from
other brokers-dealers in return for research products and services.

Advisers believes that most research services obtained by it generally
benefit several or all of the investment companies, insurance company accounts
and private accounts which it manages, as opposed to solely benefiting one
specific managed fund or account. Such research services include advice, both
directly and in writing, as to the value of the securities; the advisability of
investing in, purchasing, or selling securities; the availability of securities,
or purchasers or sellers of securities; and analysis and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. Examples of some of the research products and
services that were furnished to Advisers in 1999 include:

- - hard copy securities research services;
- - securities research software database services;
- - electronic securities trading networks; and
- - statistical services useful to mutual fund directors and account
representatives in evaluating the relative performance of mutual fund
portfolios.

If a broker-dealer furnishes Advisers with non-research products and
services, Advisers will pay the broker-dealer for such products and services. No
client brokerage will be used to pay for non-research products and services.

The Funds contemplate purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in

33
<PAGE> 87

connection with most such foreign stock transactions generally are higher than
negotiated commissions on United States transactions. There generally is less
government supervision and regulation of foreign stock exchanges and brokers
than in the United States. Foreign security settlements may in some instances be
subject to delays and related administrative uncertainties.

Foreign equity securities may be held by a Fund in the form of American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs," which are
sometimes referred to as Continental Depository Receipts or "CDRs"), or
securities convertible into foreign equity securities. ADRs or EDRs may be
listed on stock exchanges, or traded in the over-the-counter markets in the
United States or Europe, as the case may be. ADRs, like other securities traded
in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Funds may invest are generally traded in the over-the-counter markets.

The Funds paid the following brokerage commissions for the periods
indicated:

Fiscal year Fiscal year Fiscal year
Ended ended ended
July 31, 1997 July 31, 1998 July 31, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Asset Allocation Portfolio $ 131,066 $ 207,470 $ 463,625

Value Fund $ 67,046 $ 188,814 $ 245,918

Growth & Income Fund $ 17,192 $ 24,624 $ 68,069

Capital Fund $ 360,210 $ 684,684 $ 1,807,889

Growth Fund $ 421,163 $ 1,120,063 $ 2,046,958

Capital Appreciation Portfolio $ 36,593 $ 90,781 $ 263,144

</TABLE>

The Funds will not effect any brokerage transactions in their portfolio
securities with any broker-dealer affiliated directly or indirectly with
Advisers, unless such transactions, including the frequency thereof, the receipt
of commissions payable in connection therewith, and the selection of the
affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the applicable Fund. No commissions were
paid to any affiliate of Advisers during the fiscal years ended August 31, 1997,
1998 and 1999.

From time to time, the Funds may acquire the securities of their
regular brokers or dealers or parent companies of such brokers or dealers. The
Funds acquired the following securities of its regular brokers or dealers or
parent companies of such brokers or dealers during the fiscal period ended
August 31, 1999:
Value of securities
owned at end of period
----------------------
Asset Allocation Portfolio
- --------------------------
Bear Stearns Capital Trust $ 493,802
J.P. Morgan Commercial Mortgage $ 736,369
Lehman Brothers Holding $ 745,027
Merrill Lynch Mortgage $ 3,523,402
Norwest Investment Services $ 4,051,637
U.S. Bank, N.A. $ 7,234
Goldman Sachs & Co. $ 703,664
Donaldson, Lufkin & Jenrette Securities $ 997,780

Value Fund
- ----------
J.P. Morgan Commercial Mortgage $ 452,156
Norwest Investment Services $ 923,642
U.S. Bank, N.A. $ 1,158
Morgan Stanley/Dean Witter Reynolds, Inc. $ 300,344

34
<PAGE> 88

Value of securities
owned at end of period
----------------------
Growth & Income Fund
- --------------------
Norwest Investment Services $ 727,997
U.S. Bank, N.A. $ 1,028
Merrill Lynch $ 335,813
J.P. Morgan & Co., Inc. $ 710,531

Capital Fund
- ------------
Norwest Investment Services $ 14,729,038
U.S. Bank, N.A. $ 16,975
Merrill Lynch, Pierce, Fenner and Smith, Inc. $ 10,447,500
J.P. Morgan & Co., Inc. $ 3,229,687

Growth Fund
- -----------
Norwest Investment Services $ 27,206,333
U.S. Bank, N.A. $ 32,512
Donaldson, Lufkin & Jenrette Securities $ 923,081

Capital Appreciation Portfolio
- ------------------------------
Norwest Investment Services $ 6,413,036
U.S. Bank, N.A. $ 4,876
Hambrecht & Quist LLC $ 1,260,187

Advisers has developed written trade allocation procedures for its
management of the securities trading activities of its clients. Advisers manages
multiple funds, both public (mutual funds) and private. The purpose of the trade
allocation procedures is to treat the Funds fairly and reasonably in situations
where the amount of a security that is available is insufficient to satisfy the
volume or price requirements of each Fund that is interested in purchasing that
security. Generally, when the amount of securities available in a public
offering or the secondary market is insufficient to satisfy the requirements for
the interested Funds, the procedures require a pro rata allocation based upon
the amounts initially requested by each Fund manager. In allocating trades made
on combined basis, Advisers seeks to achieve the average price of the securities
for each participating Fund.

Because a pro rata allocation may not always adequately accommodate all
facts and circumstances, the procedures provide for exceptions to allocate
trades on a basis other than pro rata. Examples of where adjustments may be made
include: (i) the cash position of the Funds involved in the transaction; and
(ii) the relative importance of the security to a Fund in seeking to achieve its
investment objective.

CAPITAL STOCK

Each Fund's shares have a par value of $.01 per share and equal rights
to share in dividends and assets. The shares possess no preemptive or conversion
rights.

Each Fund currently offers it shares in multiple classes, each with
different sales arrangements and bearing different expenses. Under the Funds'
Articles of Incorporation, the Board of Directors is authorized to create new
series or classes without the approval of the shareholders of a Fund. Each share
will have a pro rata interest in the assets of the series to which the shares
relate, and will have no interest in the assets of any other series. In the
event of liquidation, each share of a series would have the same rights to
dividends and assets as every other share of that series, except that, in the
case of a series with

35
<PAGE> 89

more than one class of shares, such distributions will be adjusted to
appropriately reflect any charges and expenses borne by each individual class.

None of the Funds are required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders. Minnesota corporation
law provides for the Board of Directors to convene shareholder meetings when it
deems appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding three percent or more of the voting shares may demand a
regular meeting of shareholders by written notice of demand given to the chief
executive officer or the chief financial officer. Within ninety days after
receipt of the demand, a regular meeting of shareholders must be held at the
Fund's expense. Additionally, the 1940 Act requires shareholder votes for all
amendments to fundamental investment policies and restrictions and for all
investment advisory contracts and amendments thereto.

Cumulative voting is not authorized. This means that the holders of
more than 50% of the shares voting for the election of directors can elect 100%
of the directors if they choose to do so, and in such event the holders of the
remaining shares will be unable to elect any directors.

PRICING OF SHARES
ASSET ALLOCATION PORTFOLIO

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

CLASS A
<TABLE>
<CAPTION>

<S> <C>
Net assets ($177,793,667) = Net asset value per share ($18.43)
-------------------------
Shares outstanding (9,646,484)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:

<TABLE>
<S> <C>
$18.43 = Public Offering Price per Share ($19.35)
------
0.9525
</TABLE>

CLASS B
<TABLE>
<S> <C>
Net assets ($17,408,201) = Net asset value per share ($18.30)
------------------------
Shares outstanding (951,327)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($10,259,001) = Net asset value per share ($18.22)
------------------------
Shares outstanding (563,035)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($34,207,453) = Net asset value per share ($18.29)
------------------------
Shares outstanding (1,870,147)

</TABLE>

36
<PAGE> 90

CLASS Z
<TABLE>
<CAPTION>

<S> <C>
Net assets ($816,605) = Net asset value per share ($18.44)
---------------------------
Shares outstanding (44,279)
</TABLE>

VALUE FUND

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

CLASS A
<TABLE>
<S> <C>
Net assets ($34,302,089) = Net asset value per share ($13.28)
------------------------
Shares outstanding (2,583,378)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:
<TABLE>
<S> <C>
$13.28 = Public Offering Price per Share ($13.94)
------
0.9525
</TABLE>

CLASS B
<TABLE>
<S> <C>
Net assets ($6,662,167) = Net asset value per share ($13.06)
-----------------------
Shares outstanding (509,979)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($2,486,439) = Net asset value per share ($13.07)
-----------------------
Shares outstanding (190,251)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($8,045,237) = Net asset value per share ($13.07)
-----------------------
Shares outstanding (615,495)
</TABLE>

GROWTH & INCOME FUND

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

CLASS A
<TABLE>
<CAPTION>

<S> <C>
Net assets ($26,099,776) = Net asset value per share ($14.83)
------------------------
Shares outstanding (1,759,385)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:
<TABLE>
<S> <C>
$14.83 = Public Offering Price per Share ($15.57)
------
0.9525

</TABLE>

37
<PAGE> 91

CLASS B
<TABLE>
<CAPTION>

<S> <C>
Net assets ($7,167,954) = Net asset value per share ($14.77)
-----------------------
Shares outstanding (485,448)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($2,444,686) = Net asset value per share ($14.76)
-----------------------
Shares outstanding (165,576)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($7,245,386) = Net asset value per share ($14.76)
-----------------------
Shares outstanding (490,737)
</TABLE>

CAPITAL FUND

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

CLASS A
<TABLE>
<S> <C>
Net assets ($551,550,800) = Net asset value per share ($22.81)
-------------------------
Shares outstanding (24,175,177)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:
<TABLE>
<S> <C>
$22.81 = Public Offering Price per Share ($23.95)
------
0.9525
</TABLE>

CLASS B
<TABLE>
<S> <C>
Net assets ($24,847,124) = Net asset value per share ($21.77)
------------------------
Shares outstanding (1,141,604)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($5,714,566) = Net asset value per share ($21.76)
-----------------------
Shares outstanding (262,599)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($40,759,521) = Net asset value per share ($21.78)
------------------------
Shares outstanding (1,871,406)
</TABLE>

GROWTH FUND

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

38
<PAGE> 92

CLASS A
<TABLE>
<CAPTION>

<S> <C>
Net assets ($734,282,117) = Net asset value per share ($30.80)
-------------------------
Shares outstanding (23,836,754)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:
<TABLE>
<S> <C>
$30.80 = Public Offering Price per Share ($32.34)
------
0.9525
</TABLE>

CLASS B
<TABLE>
<S> <C>
Net assets ($20,235,687) = Net asset value per share ($29.26)
------------------------
Shares outstanding (691,524)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($4,629,236) = Net asset value per share ($29.26)
-----------------------
Shares outstanding (158,203)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($50,546,890) = Net asset value per share ($29.28)
------------------------
Shares outstanding (1,726,138)
</TABLE>

CLASS Z
<TABLE>
<S> <C>
Net assets ($119,547,976) = Net asset value per share ($31.23)
-------------------------
Shares outstanding (3,828,249)
</TABLE>

CAPITAL APPRECIATION PORTFOLIO

On August 31, 1999, the Fund's net asset values per share were
calculated as follows:

CLASS A
<TABLE>
<S> <C>
Net assets ($147,345,824) = Net asset value per share ($36.04)
-------------------------
Shares outstanding (4,088,006)
</TABLE>

To obtain the public offering price per share, the 4.75% sales charge
must be added to the net asset value obtained above:
<TABLE>
<S> <C>
$36.04 = Public Offering Price per Share ($37.84)
------
0.9525
</TABLE>

39
<PAGE> 93

CLASS B
<S> <C>
Net assets ($11,425,718) = Net asset value per share ($34.91)
------------------------
Shares outstanding (327,326)
</TABLE>

CLASS C
<TABLE>
<S> <C>
Net assets ($3,611,646) = Net asset value per share ($34.94)
-----------------------
Shares outstanding (103,370)
</TABLE>

CLASS H
<TABLE>
<S> <C>
Net assets ($20,754,718) = Net asset value per share ($34.94)
------------------------
Shares outstanding (594,017)
</TABLE>

The primary close of trading of the New York Stock Exchange (the
"Exchange") currently is 3:00 p.m. (Central Time), but this time may be changed.
The offering price for purchase orders received in the office of the Funds after
the beginning of each day the Exchange is open for trading is based on net asset
value determined as of the primary closing time for business on the Exchange
that day; the price in effect for orders received after such close is based on
the net asset value as of such close of the Exchange on the next day the
Exchange is open for trading. Net asset value is the value of the securities
owned by the Fund, plus cash or other assets, less liabilities, divided by the
number of Fund shares outstanding.

Generally, the net asset value of the Funds' shares is determined on
each day on which the Exchange is open for business. The Exchange is not open
for business on the following holidays (or on the nearest Monday or Friday if
the holiday falls on a weekend): New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Additionally, net asset value need not be
determined (i) on days on which changes in the value of the Funds' portfolio
securities will not materially affect the current net asset value of the Funds'
shares; or (ii) on days during which no Fund shares are tendered for redemption
and no orders to purchase or sell Fund shares are received by the Funds.

PURCHASE OF SHARES

EXEMPTIONS FROM SALES CHARGE

Purchases of Class A shares made by the following are exempt from the
sales charge:

- - Fortis, Inc. or its subsidiaries and the following persons associated with
such companies, if all account owners fit this description: (1) officers
and directors; (2) employees or sales representatives (including agencies
and their employees); (3) spouses/domestic partners of any such persons; or
(4) any of such persons' children, grandchildren, parents, grandparents, or
siblings or spouses/domestic partners of any of these persons. (All such
persons may continue to add to their account even after their company
relationships have ended);
- - Fund directors, officers, or their spouses/domestic partners (or such
persons' children, grandchildren, parents, or grandparents--or
spouses/domestic partners of any such persons), if all account owners fit
this description;
- - Representatives or employees (or their spouses) of Investors (including
agencies) or of other broker-dealers having a sales agreement with
Investors (or such persons' children, grandchildren, parents, or
grandparents--or spouses of any such persons), if all account owners fit
this description;

40
<PAGE> 94

- - Pension, profit-sharing, and other retirement plans of directors, officers,
employees, representatives, and other relatives and affiliates (as set
forth in the preceding three paragraphs) of the Fund, Fortis, Inc., and
broker-dealers (and certain affiliated companies) having a sales agreement
with Investors and purchases with the proceeds from such plans upon the
retirement or employment termination of such persons;
- - Registered investment companies;
- - Shareholders of unrelated mutual funds with front-end and/or deferred sales
loads, to the extent that the purchase price of such Fund shares is funded
by the proceeds from the redemption of shares of any such unrelated mutual
fund (within 60 days of the purchase of Fund shares), provided that the
shareholder's application so specifies and is accompanied either by the
redemption check of such unrelated mutual fund (or a copy of the check) or
a copy of the confirmation statement showing the redemption. Similarly,
anyone who is or has been the owner of a fixed annuity contract not deemed
a security under the securities laws who wishes to surrender such contract
and invest the proceeds in a Fund, to the extent that the purchase price of
such Fund shares is funded by the proceeds from the surrender of the
contract (within 60 days of the purchase of Fund shares), provided that
such owner's application so specifies and is accompanied either by the
insurance company's check (or a copy of the check) or a copy of the
insurance company surrender form. From time to time, Investors may pay
commissions to broker-dealers and registered representatives on transfers
from mutual funds or annuities as described above;
- - Purchases by employees (including their spouses and dependent children) of
banks and other financial institutions that provide referral and
administrative services related to order placement and payment to
facilitate transactions in shares of the Fund for their clients pursuant to
a sales or servicing agreement with Investors; provided, however, that only
those employees of such banks and other firms who as a part of their usual
duties provide such services related to such transactions in Fund shares
shall qualify;
- - Commercial banks offering self directed 401(k) programs containing both
pooled and individual investment options may purchase Fund shares for such
programs at a reduced sales charge of 2.5% on sales of less than $500,000.
For sales of $500,000 or more, normal sales charges apply;
- - Registered investment advisers, trust companies, and bank trust departments
exercising discretionary investment authority or using a money
management/mutual fund "wrap" program with respect to the money to be
invested in the Fund, provided that the investment adviser, trust company
or trust department provides Advisers with evidence of such authority or
the existence of such a wrap program with respect to the money invested;
- - Accounts which were in existence and entitled to purchase shares of the
applicable Carnegie Series without a sales charge at the time of the
effectiveness of the acquisition of its assets by the applicable Fund;
- - Purchasers of Medical Savings Accounts ("MSAs") from Fortis Insurance
Company who maintain certain minimum balances in their MSA accounts may
invest a portion of their MSA account balances in Asset Allocation
Portfolio, Value Fund, Growth & Income Fund and Capital Fund.

In addition, purchases of Class Z shares of both Asset Allocation Portfolio
and Growth Fund made by the following are exempt from the sales charge:

41
<PAGE> 95

- - Fund directors, officers, or their spouses/domestic partners (or such
persons' children, grandchildren, parents, or grandparents--or
spouses/domestic partners of any such persons), if all account owners
fit this description;
- - Representatives of Investors (including agencies) or their spouses; or
such persons' children, grandchildren, parents or grandparents, or
spouses of any such persons), if all account owners fit this
description;
- - Pension, profit-sharing and other retirement plans created for the
benefit of any of the above persons;
- - Accounts which were exchanged from Special Portfolios, Inc., Stock
Portfolio.

SPECIAL PURCHASE PLANS

STATEMENT OF INTENTION. Your sales charge may be reduced or eliminated
by signing a non-binding Statement of Intention to purchase at least $100,000 of
shares which are sold with a sales charge over a 13-month period. The 13-month
period is measured from the date the letter of intent is approved by Investors,
or at the purchaser's option it may be made retroactive 90 days, in which case
Investors will make appropriate adjustments on purchases during the 90-day
period.

In computing the total amount purchased for purposes of determining
the applicable sales commission, the public offering price (at the time they
were purchased) of shares currently held in the Fortis Funds having a sales
charge and purchased within the past 90 days may be used as a credit toward Fund
shares to be purchased under the Statement of Intention. Any such fund shares
purchased during the remainder of the 13-month period also may be included as
purchases made under the Statement of Intention.

The Statement of Intention includes a provision for payment of
additional applicable sales charges at the end of the period in the event the
investor fails to purchase the amount indicated. This is accomplished by holding
in escrow the number of shares represented by the sales charge discount. If the
investor's purchases equal those specified in the Statement of Intention, the
escrow is released. If the purchases do not equal those specified in the
Statement of Intention, the shareholder may remit to Investors an amount equal
to the difference between the dollar amount of sales charges actually paid and
the amount of sales charges that would have been paid on the aggregate purchases
if the total of such purchases had been made at a single time. If the purchaser
does not remit this sum to Investors on a timely basis, Investors will redeem
the escrowed shares.

RETIREMENT PLANS. Individual taxpayers can defer taxes on current
income by investing in tax qualified retirement plans established by their
employer, such as pension plans, profit-sharing plans and Section 403(b) plans,
or in Individual Retirement Accounts (IRAs), including a traditional IRA, Roth
IRA and Education IRA. If you are interested in a retirement plan account, you
should contact Investors. Investing in a retirement plan involves a long-term
commitment of assets and is subject to legal and tax requirements and
restrictions. You should consult with your attorney or tax adviser prior to
establishing such a plan.

SYSTEMATIC INVESTMENT PLAN. The Systematic Investment Plan enables you
to make regular purchases in amounts less than normally required and employs the
principle of dollar cost averaging, described below.

By acquiring Fund shares on a regular or systematic basis, you take
advantage of the principle of dollar cost averaging. Under dollar cost
averaging, if a constant amount is invested at regular intervals at varying
price levels, the average cost of all the shares will be lower than the average
of the price levels.

42
<PAGE> 96

This is because the same fixed number of dollars buys more shares when price
levels are low and fewer shares when price levels are high. The principle of
dollar cost averaging will not protect against loss in a declining market and a
loss will result if the plan is discontinued when the market value is less than
cost.

You have no obligation to invest regularly or to continue the Plan,
which you may terminate at any time without penalty. Under the Plan, any
distributions of income and realized capital gains will be reinvested in
additional shares at net asset value unless you instruct Investors in writing to
pay distributions in cash. Investors reserves the right to increase or decrease
the amount required to open and continue a Plan, and to terminate any Plan after
one year if the value of the amount invested is less than the amount indicated.

EXCHANGE PRIVILEGE. You may exchange your shares for the same class of
shares in another Fortis Fund without payment of an exchange fee or additional
sales charge. The amount exchanged must meet the minimum purchase amount of the
Fund being purchased. You should consider the investment objectives and policies
of the other fund prior to making such exchange.

For Federal tax purposes, except where the transferring shareholder is
a tax-qualified plan, an exchange between funds is a taxable event that will
result in a capital gain or loss. If you exchange your shares within 90 days of
purchase, the sales charge on that purchase cannot be taken into account for
determining your gain or loss on the sale of those shares to the extent that the
sales charge that would have been applicable to the purchase of the
later-acquired shares in the other fund is reduced because of the exchange
privilege. However, the amount of the sales charge that may not be taken into
account in determining your gain or loss on the sale of the first-acquired
shares may be taken into account in determining gain or loss on the eventual
sale or exchange of the later-acquired shares.

GIFTS OR TRANSFERS TO MINOR CHILDREN. You may purchase Fund shares in
an account established for a minor. This gift or transfer is registered in the
name of the custodian for a minor under the Uniform Transfers to Minors Act (in
some states the Uniform Gifts to Minors Act). Control of the Fund shares passes
to the child upon reaching a specified age (either 18 or 21 years in most
states).

REDEMPTION OF SHARES

GENERAL

If you request a redemption, the Fund is required to redeem your
shares, with certain exceptions. The Fund will pay all redemption requests in
cash, limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the net asset value of the Fund at the beginning of such period. If your
redemption request exceeds such amount, the Fund reserves the right to make part
or all of the payment in the form of readily marketable securities or other
assets of the Fund. An example of when this might be done is in case of an
emergency, such as in those situations listed in the following paragraph, or at
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the remaining shareholders. Any securities being so distributed
would be valued in the same manner as the portfolio of the Fund is valued. If
you received securities which you later sold, you probably would incur brokerage
charges.

Redemption of shares or payment may be suspended at times (a) when the
Exchange is closed for other than customary weekend or holiday closings, (b)
when trading on the Exchange is restricted, (c) when an emergency exists, as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable, or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other period when the
Commission, by order, so permits; provided that

43
<PAGE> 97
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist.

There is no charge for redeeming shares. In the event a charge is
established, it would apply only to persons who became shareholders after the
charge was implemented, and it would not, in any event, exceed 1% of the net
asset value of the shares redeemed. Should further public sales ever be
discontinued, the Funds may deduct a proportionate share of the cost of
liquidating assets from the asset value of the shares being redeemed, in order
to protect the equity of the other shareholders.

SYSTEMATIC WITHDRAWAL PLAN

You may open a "Systematic Withdrawal Plan" providing for withdrawals
of $50 or more monthly, quarterly, semiannually or annually if the value of your
shares is at least $4,000 ($10,000 if you elect monthly withdrawals).

These withdrawals may constitute a return of capital. The redemption of
Fund shares pursuant to the Plan is a taxable event to you. The withdrawals do
not represent a yield or a return on your investment and they may deplete or
eliminate your investment. You have no assurance of receiving payment for any
specific period because payments will terminate when all shares have been
redeemed. The number of such payments will depend on the amount and frequency of
each payment and the increase (or decrease) in value of the remaining shares.

Distributions of income and realized capital gains will continue to be
reinvested at net asset value. If you purchase additional shares of the Fund
(other than by reinvestment of distributions), when you have elected a
Systematic Withdrawal Plan, you will pay a sales charge on your purchases at the
same time that withdrawals are made at net asset value. Purchases of additional
shares concurrent with withdrawals are ordinarily disadvantageous to you because
of sales charges and tax liabilities. Additions to your account in which an
election has been made to receive systematic withdrawals will be accepted only
if each additional purchase is equal to at least one year's scheduled
withdrawals or $1,200, whichever is greater. You may not have a "Systematic
Withdrawal Plan" and a "Systematic Investment Plan" in effect at the same time.

The Systematic Withdrawal Plan is voluntary, flexible and under your
control and direction at all times, and does not limit or alter your right to
redeem shares. You or the Fund may terminate the Plan at any time by written
notification. Advisers bears the cost of operating the Plan.

REINVESTMENT PRIVILEGE

If you redeem Fund shares, you have a one-time privilege to reinvest in
the Fund or in any other fund underwritten by Investors and available to the
public, without a sales charge. The reinvestment privilege must be exercised
within 60 days of the redemption and for an amount which does not exceed the
redemption proceeds.

The purchase price for Fund shares will be based upon net asset value
at the time of reinvestment, and may be more or less than the redemption value.
Should you utilize the reinvestment privilege within 30 days following a
redemption that resulted in a loss, all or a portion of that loss may not be
currently deductible for Federal income tax purposes. Exercising the
reinvestment privilege would not defer any capital gains taxes payable on a
realized gain. Furthermore, if you redeem within 90 days of purchasing your
shares and subsequently exercise the reinvestment privilege, the sales charge
incurred on the original purchase cannot be taken into account for determining
your gain or loss on the redemption of those shares.

44
<PAGE> 98

TAXATION

Each Fund has qualified, and intends to continue to qualify, as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). If a Fund so qualifies, it is not taxed on the income it
distributes to its shareholders.

Gain or loss realized upon the sale of shares in a Fund will be treated
as capital gain or loss, provided that the shares represented a capital asset in
the hands of the shareholder. For individuals, estates, and trusts, long-term
capital gains, which are realized on the sale or exchange of capital assets held
for more than one year, are subject to a maximum federal income tax rate of 20%,
while ordinary income is subject to a maximum rate of 39.6%. Short-term capital
gains, which are realized on the sale or exchange of capital assets held one
year or less, are taxed at the same rates as ordinary income.

Pursuant to a special provision in the Code, if Fund shares with
respect to which a long-term capital gain distribution has been made are held
for six months or less, any loss on the sale or other disposition of such shares
will be a long-term capital loss to the extent of such long-term capital gain
distribution, unless such sale or other disposition is pursuant to a Systematic
Withdrawal Plan.

Under the Code, each Fund is subject to a nondeductible excise tax for
each calendar year equal to 4% of the excess, if any, of the amount required to
be distributed over the amount distributed. However, the excise tax does not
apply to any income on which a Fund pays income tax. In order to avoid the
imposition of the excise tax, each Fund generally must declare dividends by the
end of a calendar year representing at least 98 percent of the Fund's ordinary
income for the calendar year and 98 percent of its capital gain net income (both
long-term and short-term capital gains) for the 12-month period ending October
31 of the calendar year.

Asset Allocation Portfolio may invest in zero coupon obligations. If it
invests in such obligations upon their issuance, the obligations will have
original issue discount in the hands of the Fund. Generally, the original issue
discount equals the difference between the "stated redemption price at maturity"
of the obligation and its "issue price," as those terms are defined in the Code.
If the Fund acquires an already issued zero coupon bond from another holder, the
bond will have original issue discount in the Fund's hands, equal to the
difference between the "adjusted issue price" of the bond at the time the Fund
acquires it (that is, the original issue price of the bond plus the amount of
original issue discount accrued to date) and its stated redemption price at
maturity. In each case, the Fund is required to accrue as ordinary interest
income a portion of such original issue discount even though it receives no cash
currently as interest payment on the obligation. Similarly, if Asset Allocation
Portfolio invests in PIKs, it is required to recognize interest income in the
amount of the fair market value of the securities received as interest payments
on the PIKs, even though it receives no cash.

Because each Fund is required to distribute substantially all of its
net investment income (including accrued original issue discount and interest
income attributable to PIKs) in order to be taxed as a regulated investment
company, Asset Allocation Portfolio may be required to distribute an amount
greater than the total cash income the Fund actually receives. Accordingly, in
order to make the required distribution, the Fund may be required to borrow or
to liquidate securities.

If any Fund invests in options and futures, it may be obliged to
recognize gains and losses on certain options and futures it holds at the end of
the fiscal year. Under the marked-to-market rules, 60% of any net capital gain
or loss recognized is treated as long-term and 40% as short-term. In addition,
the straddle rules of the Code would require deferral of certain losses realized
on positions of a straddle to the extent that a Fund has unrealized gains in
offsetting positions at year-end.

45
<PAGE> 99

Under the Code, each Fund is required to withhold and remit to the U.S.
Treasury 31% of dividend and capital gain income on the accounts of certain
shareholders who fail to provide a correct tax identification number, fail to
certify that they are not subject to backup withholding, or are subject to
backup withholding for some other reason.

The foregoing is a general discussion of the Federal income tax
consequences of an investment in the Funds as of the date of this Statement of
Additional Information. Distributions may also be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, state, or local taxes.

UNDERWRITER AND DISTRIBUTION OF SHARES

Pursuant to the Underwriting and Distribution Agreement, Investors has
agreed to act as the principal underwriter for the Funds in the sale and
distribution to the public of shares of the Funds, either through dealers or
otherwise. Investors has agreed to offer such shares for sale at all times when
such shares are available for sale and may lawfully be offered for sale and
sold. As compensation for its services, in addition to receiving its
distribution fees pursuant to the Distribution Plan discussed above, Investors
receives the initial sales charges on sales of Class A shares of the Funds and
any contingent deferred sales charges on redemptions of Class B, H and C shares
of the Funds and certain Class A shares of the Funds that were not subject to an
initial sales charge, as set forth in the Prospectus. The following tables set
forth the amount of underwriting commissions paid by each Fund and the amount of
such commissions retained by Investors.

TOTAL UNDERWRITING COMMISSIONS
-------------------------------------------------------------

Fiscal year ended Fiscal year ended Fiscal year ended
August 31, 1997 August 31, 1998 August 31, 1999
-------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Portfolio $ 438,308 $ 500,107 $ 666,305
Value Fund $ 149,014 $ 236,426 $ 167,858
Growth & Income Fund $ 145,005 $ 246,685 $ 214,521
Capital Fund $ 461,654 $ 530,929 $ 967,000
Growth Fund $ 1,439,303 $ 1,256,346 $ 1,148,222
Capital Appreciation Portfolio $ 526,432 $ 367,109 $ 416,109
</TABLE>

UNDERWRITING COMMISSIONS RETAINED BY INVESTORS
-------------------------------------------------------------

Fiscal year ended Fiscal year ended Fiscal year ended
August 31, 1997 August 31, 1998 August 31, 1999
-------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Portfolio $ 70,416 $ 65,123 $ 124,180
Value Fund $ 28,996 $ 32,703 $ 28,945
Growth & Income Fund $ 8,377 $ 29,523 $ 47,116
Capital Fund $ 94,167 $ 66,201 $ 170,821
Growth Fund $ 254,436 $ 139,000 $ 189,275
Capital Appreciation Portfolio $ 101,781 $ 39,408 $ 58,808

</TABLE>

Investors received the following compensation from each Fund during its
most recent fiscal year.

46
<PAGE> 100

Net Underwriting Compensation on Brokerage Other
Discounts and Redemptions and Commissions Compensation
Commissions Repurchases
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Fund $ 119,797 $ 48,061 $ 0 $ 0
Growth & Income Fund $ 154,643 $ 59,878 $ 0 $ 0
Capital Fund $ 817,382 $ 149,618 $ 0 $ 0
Growth Fund $ 977,891 $ 170,331 $ 0 $ 0
Capital Appreciation Portfolio $ 317,396 $ 98,713 $ 0 $ 0
</TABLE>

PERFORMANCE INFORMATION

Advertisements and other sales literature for the Funds may refer to
"average annual total return," "cumulative total return" and "yield." All such
yield and total return quotations are based on historical earnings and are not
intended to indicate future performance.

Average annual total return is the average annual compounded rate of
return on a hypothetical $1,000 investment made at the beginning of the
advertised period. Average annual total return figures are computed according to
the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of
a hypothetical $1,000 payment made at the beginning
of such period.

This calculation deducts the maximum sales charge from the initial
hypothetical $1,000 investment, assumes all dividends and capital gains
distributions are reinvested at net asset value on the appropriate reinvestment
dates, and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts. Average annual total
return quotations may be accompanied by quotations which do not reflect the
reduction in value of the initial investment due to the sales charge, and which
thus will be higher.

The following tables set forth the average annual total returns, with
the sales charge reflected, for each Class of shares of each Fund for one year,
five years and since inception (10 years with respect to Class A shares of Asset
Allocation Portfolio, Capital Fund, Growth Fund and Capital Appreciation
Portfolio) for the period ending August 31, 1999.

AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------

1 YEAR 5 YEARS 10 YEARS/SINCE
------ ------- INCEPTION
---------
<S> <C> <C> <C>
ASSET ALLOCATION PORTFOLIO
Class A Shares 17.12% 13.35% 11.09%
Class B Shares* 18.72% -- 14.32%
Class C Shares* 21.27% -- 14.47%
Class H Shares* 18.72% -- 14.31%
Class Z Shares** -- -- (3.20%)
</TABLE>

47
<PAGE> 101

<TABLE>
<S> <C> <C> <C>
VALUE FUND
Class A Shares+ 18.21% -- 13.56%
Class B Shares+ 19.60% -- 13.71%
Class C Shares+ 22.18% -- 14.24%
Class H Shares+ 19.58% -- 13.73%

GROWTH & INCOME FUND
Class A Shares+ 11.29% -- 12.43%
Class B Shares+ 12.48% -- 12.59%
Class C Shares+ 15.00% -- 13.10%
Class H Shares+ 12.40% -- 12.57%

CAPITAL FUND
Class A Shares 31.33% 17.65% 13.67%
Class B Shares* 33.34% -- 18.59%
Class C Shares* 35.87% -- 18.77%
Class H Shares* 33.31% -- 18.60%

GROWTH FUND
Class A Shares 33.35% 14.88% 12.48%
Class B Shares* 35.38% -- 16.06%
Class C Shares* 37.98% -- 16.27%
Class H Shares* 35.40% -- 16.07%
Class Z Shares++ 40.49% -- 15.03%

CAPITAL APPRECIATION PORTFOLIO
Class A Shares 71.70% 16.95% 13.33%
Class B Shares* 75.75% -- 17.47%
Class C Shares* 78.33% -- 17.69%
Class H Shares* 75.73% -- 17.48%
</TABLE>

* Inception date: November 14, 1994.
** Inception date: July 27, 1999.
+ Inception date: January 2, 1996.
++ Inception date: March 1, 1996.

Cumulative total return is computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:

CTR = ( ERV -P) 10

Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of
a hypothetical $1,000 payment made at the beginning
of such period; and
P = initial payment of $1,000.

This calculation assumes all dividends and capital gain distributions
are reinvested at net asset value on the appropriate reinvestment dates as
described in the Prospectus and includes all recurring fees, such as investment
advisory and management fees, charged to all shareholder accounts.

48
<PAGE> 102
The following table sets forth the cumulative total returns of each
Class of shares of each Fund for the period from inception through August 31,
1999:
<TABLE>
<CAPTION>

CUMULATIVE TOTAL RETURN
------------------------------------

<S> <C>
ASSET ALLOCATION PORTFOLIO
Class A Shares(1) 257.13%
Class B Shares(2) 90.02%
Class C Shares(2) 91.24%
Class H Shares(2) 89.96%
Class Z Shares(3) (3.20%)

VALUE FUND
Class A Shares(4) 59.38%
Class B Shares(4) 60.11%
Class C Shares(4) 62.92%
Class H Shares(4) 60.22%

GROWTH & INCOME FUND
Class A Shares(4) 53.66%
Class B Shares(4) 54.42%
Class C Shares(4) 57.01%
Class H Shares(4) 54.31%

CAPITAL FUND
Class A Shares(5) 32,001.94%
Class B Shares(2) 126.56%
Class C Shares(2) 128.28%
Class H Shares(2) 126.63%

GROWTH FUND
Class A Shares(6) 11,354.07%
Class B Shares(2) 104.15%
Class C Shares(2) 105.95%
Class H Shares(2) 104.24%
Class Z Shares(7) 63.17%

CAPITAL APPRECIATION PORTFOLIO
Class A Shares(1) 445.10%
Class B Shares(2) 116.47%
Class C Shares(2) 118.41%
Class H Shares(2) 116.61%
</TABLE>

(1) Inception date: January 4, 1988.
(2) Inception date: November 14, 1994.
(3) Inception date: July 27, 1999.
(4) Inception date: January 2, 1996.
(5) Inception date: June 8, 1949.
(6) Inception date: March 31, 1963.
(7) Inception date: March 1, 1996.

The "yield" refers to the income generated by an investment over a
30-day (or one month) period (which period will be stated in the advertisement).
It is calculated by dividing the net investment income

49
<PAGE> 103

per share (as defined under Securities and Exchange Commission rules)
earned during the computation period by the maximum offering price per share on
the last day of the period, according to the following formula. The result is
then annualized using a formula that provides for semiannual compounding of
income.

Yield = 2 [(A-B + 1) - 1]
---
cd

Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.

None of the Funds currently provide yield information.

The Funds may advertise relative performance as compiled by outside
organizations or refer to publications that have mentioned their performance or
track the performance of investment companies. Following is a list of ratings
services that may be referred to, along with the category in which the Funds are
included. Because some of these organizations do not take into account sales
charges, their ratings may sometimes be different than had they done so.

<TABLE>

<S> <C>
ASSET ALLOCATION PORTFOLIO

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. flexible portfolio
CDA/Wiesenberger asset allocation -- domestic
Morningstar Publications, Inc. asset allocation
Johnson's Charts total return

VALUE FUND

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. growth and income
CDA/Wiesenberger growth - domestic
Morningstar Publications, Inc. large value
Johnson's Charts long term growth

GROWTH & INCOME FUND

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. growth and income
CDA/Wiesenberger growth and income
Morningstar Publications, Inc. large blend
Johnson's Charts growth and income

CAPITAL FUND

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. growth and income-multisector income
CDA/Wiesenberger growth-domestic
</TABLE>

Morningstar Publications, Inc. growth
Johnson's Charts growth and income

GROWTH FUND

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. capital appreciation
CDA/Wiesenberger growth - domestic
Morningstar Publications, Inc. small company growth
Johnson's Charts long term growth

CAPITAL APPRECIATION PORTFOLIO

RATINGS SERVICE CATEGORY
--------------- --------
Lipper Analytical Services, Inc. small company growth
CDA/Wiesenberger aggressive growth
Morningstar Publications, Inc. small company growth
Johnson's Charts long term growth
</TABLE>

FINANCIAL STATEMENTS

The audited financial statements as of August 31, 1999, as set forth in
the Funds' Annual Report to Shareholders, are incorporated herein by reference.
The audited financial statements are provided in reliance on the report of KPMG
LLP, 4200 Norwest Center, Minneapolis, MN 55402, independent auditors of the
Funds, and given on the authority of such firm as experts in accounting and
auditing.

OTHER SERVICE PROVIDERS

Norwest Bank Minnesota N.A., Minneapolis, MN acts as custodian of each
Fund's assets and portfolio securities. Dorsey & Whitney LLP, 220 South Sixth
Street, Minneapolis, MN 55402, is the independent General Counsel for the Funds.
Advisers bears the costs of serving as the transfer agent and dividend-paying
agent for each Fund.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of Fortis Advantage, Fortis Equity
and Fortis Growth owes certain fiduciary duties to the Corporation and to its
shareholders. Minnesota law provides that a director "shall discharge the duties
of the position of director in good faith, in a manner the director reasonably
believes to be in the best interest of the corporation, and with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances." Fiduciary duties of a director of a Minnesota corporation
include, therefore, both a duty of "loyalty" (to act in good faith and act in a
manner reasonably believed to be in the best interests of the corporation) and a
duty of "care" (to act with the care an ordinarily prudent person in a like
position would exercise under similar circumstances). Minnesota law authorizes
corporations to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of the fiduciary
duty of "care." Minnesota law does not, however, permit a corporation to
eliminate or limit the liability of a director (i) for any breach of the
director's duty of "loyalty" to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for authorizing a dividend, stock repurchase or
redemption or other distribution in violation of Minnesota law or for violation
of certain provisions of Minnesota securities laws, or (iv) for any transaction
from which the director derived an improper personal benefit. The Articles of
Incorporation of Fortis Advantage, Fortis Equity

51
<PAGE> 105

and Fortis Growth limit the liability of directors to the fullest extent
permitted by Minnesota statutes, except to the extent that such a liability
cannot be limited as provided in the 1940 Act (which act prohibits any
provisions which purport to limit the liability of directors arising from such
directors' willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their role as directors).

Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers (including the liability of directors who serve as officers
for breach of their duties as officers). Minnesota law does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or rescissionary relief. Further, Minnesota law does not permit
elimination or limitation of a director's liability under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is uncertain whether and to
what extent the elimination of monetary liability would extend to violations of
duties imposed on directors by the 1940 Act and the rules and regulations
adopted under such act.

ADDITIONAL INFORMATION
The Funds have filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the common stock offered hereby. The
Prospectus and this Statement of Additional Information do not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with Rules and Regulations of the Commission. The
Registration Statement may be inspected at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C., and copies thereof may
be obtained from the Commission at prescribed rates.

52
<PAGE> 106

APPENDIX A

DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS

OPTIONS ON SECURITIES

An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date or, in the
case of certain options, on such date. The holder pays a non-refundable purchase
price for the option, known as the "premium." The maximum amount of risk the
purchaser of the option assumes is equal to the premium plus related transaction
costs, although this entire amount may be lost. The risk of the seller, or
"writer," however, is potentially unlimited, unless the option is "covered."
A call option written by a Fund is "covered" if the Fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if a Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash and high grade government securities in a segregated account
with its custodian. A put option written by a Fund is "covered" if the Fund
maintains cash and high grade government securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security and in the same principal amount as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written. If the writer's obligation is not so covered, it is
subject to the risk of the full change in value of the underlying security from
the time the option is written until exercise.

Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities that have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.

Options on securities and options on indexes of securities, discussed
below, are traded on national securities exchanges, such as the Chicago Board
Options Exchange and the New York Stock Exchange, which are regulated by the
Commission. The Options Clearing Corporation guarantees the performance of each
party to an exchange-traded option, by in effect taking the opposite side of
each such option. A holder or writer may engage in transactions in
exchange-traded options on securities and options on indexes of securities only
through a registered broker-dealer which is a member of the exchange on which
the option is traded.

In addition, options on securities and options on indexes of securities
may be traded on exchanges located outside the United States and
over-the-counter through financial institutions dealing in such options as well
as the underlying instruments. The particular risks of transactions on foreign
exchanges and over-the-counter transactions are set forth more fully in the
Statement of Additional Information.

<PAGE> 107

OPTIONS ON STOCK INDEXES

In contrast to an option on a security, an option on a stock index
provides the holder with the right to make or receive a cash settlement upon
exercise of the option, rather than the right to purchase or sell a security.
The amount of this settlement is equal to (i) the amount, if any, by which the
fixed exercise price of the option exceeds (in the case of a call) or is below
(in the case of a put) the closing value of the underlying index on the date of
exercise, multiplied by (ii) a fixed "index multiplier." The purchaser of the
option receives this cash settlement amount if the closing level of the index on
the day of exercise is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount
if the option is exercised. As in the case of options on securities, the writer
or holder may liquidate positions in index options prior to exercise or
expiration by entering into closing transactions on the exchange on which such
positions were established, subject to the availability of a liquid secondary
market.

A Fund will cover all options on indexes by owning securities whose
price changes, in the opinion of Advisers, are expected to be similar to those
of the index, or in such other manner as may be in accordance with the rules of
the exchange on which the option is traded and applicable laws and regulations.
Nevertheless, where a Fund covers a call option on an index through ownership of
securities, such securities may not match the composition of the index. In that
event, the Fund will not be fully covered and could be subject to risk of loss
in the event of adverse changes in the value of the index. A Fund will secure
put options on indexes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.

The index underlying an index option may be a "broad-based" index, such
as the Standard & Poor's 500 Index or the New York Stock Exchange Composite
index, the changes in value of which ordinarily will reflect movements in the
stock market in general. In contrast, certain options may be based on narrower
market indexes, such as the Standard & Poor's 100 Index, or on indexes of
securities of particular industry groups, such as those of oil and gas or
technology companies. An index assigns relative values to the securities
included in the index and the index fluctuates with changes in the market values
of the securities so included.

FUTURES CONTRACTS ON FIXED INCOME SECURITIES, STOCK INDEXES AND FOREIGN
CURRENCIES

A Futures Contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. Futures Contracts call for settlement only on the expiration date,
and cannot be "exercised" at any other time during their term.

The purchase or sale of a Futures Contract differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of

<PAGE> 108

cash or cash equivalents, which varies but may be as low as 5% or less of
the value of the contract, must be deposited with the broker as "initial
margin." Subsequent payments to and from the broker, referred to as "variation
margin," are made on a daily basis as the value of the index or instrument
underlying the Futures Contract fluctuates, making positions in the Futures
Contracts more or less valuable, a process known as "marking to the market."

U.S. Futures Contracts may be purchased or sold only on an exchange,
known as a "contract market," designated by the CFTC for the trading of such
contract, and only through a registered futures commission merchant which is a
member of such contract market. A commission must be paid on each completed
purchase and sale transaction. The contract market clearing house guarantees the
performance of each party to a Futures Contract, by in effect taking the
opposite side of such contract. At any time prior to the expiration of a Futures
Contract, a trader may elect to close out its position by taking an opposite
position on the contract market on which the position was entered into, subject
to the availability of a secondary market, which will operate to terminate the
initial position. At that time, a final determination of variation margin is
made and any loss experienced by the trader is required to be paid to the
contract market clearing house while any profit due to the trader must be
delivered to it. Futures Contracts may also be traded on foreign exchanges.

Interest rate futures contracts currently are traded on a variety of
fixed income securities, including long-term U.S. Treasury Bonds, Treasury
Notes, Government National Mortgage Association modified pass-through
mortgage-backed securities and U.S. Treasury Bills. In addition, interest rate
futures contracts include contracts on indexes of municipal securities. Foreign
currency futures contracts currently are traded on the British pound, Canadian
dollar, Japanese yen, Swiss franc, West German mark and on Eurodollar deposits.

OPTIONS ON FUTURES CONTRACTS

An Option on a Futures Contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying Futures Contract, in the
case of a put option, at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Upon exercise of the option by
the holder, the contract market clearing house establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of Futures Contracts, such as payment of variation margin
deposits. In addition, the writer of an Option on a Futures Contract, unlike the
holder, is subject to initial and variation margin requirements on the option
position.

A position in an Option on a Futures Contract may be terminated by the
purchaser or seller prior to expiration by affecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.

Options on Futures Contracts that are written or purchased by a Fund on
United States exchanges are traded on the same contract market as the underlying
Futures Contract, and, like Futures Contracts, are subject to regulation by the
CFTC and the performance guarantee of the exchange clearing house. In addition,
Options on Futures Contracts may be traded on foreign exchanges.

<PAGE> 109

An option, whether based on a Futures Contract, a stock index or
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers that have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
timing of such exercise.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A Currency Contract is a contractual obligation to purchase or sell a
specific quantity of a given foreign currency for a fixed exchange rate at a
future date. Currency Contracts are individually negotiated and are traded
through the "interbank currency market," an informal network of banks and
brokerage firms which operates around the clock and throughout the world.
Transactions in the interbank market may be executed only through financial
institutions acting as market-makers in the interbank market, or through brokers
executing purchases and sales through such institutions. Market-makers in the
interbank market generally act as principals in taking the opposite side of
their customers' positions in Currency Contracts, and ordinarily charge a
mark-up commission which may be included in the cost of the Contract. In
addition, market-makers may require their customers to deposit collateral upon
entering into a Currency Contract, as security for the customer's obligation to
make or receive delivery of currency, and to deposit additional collateral if
exchange rates move adversely to the customer's position. Such deposits may
function in a manner similar to the margining of Futures Contracts, described
above.

Prior to the stated maturity date of a Currency Contract, it may be
possible to liquidate the transaction by entering into an offsetting contract.
In order to do so, however, a customer may be required to maintain both
contracts as open positions until maturity and to make or receive a settlement
of the difference owed to or from the market-maker or broker at that time.

OPTIONS ON FOREIGN CURRENCIES

Options on foreign currencies are traded in a manner substantially
similar to options on securities. In particular, an option on foreign currency
provides the holder with the right to purchase, in the case of a call option, or
to sell, in the case of a put option, a stated quantity of a particular currency
for a fixed price up to a stated expiration date or, in the case of certain
options, on such date. The writer of the option undertakes the obligation to
deliver, in the case of a call option, or to purchase in the case of a put
option, the quantity of the currency called for in the option, upon exercise of
the option by the holder.

As in the case of other types of options, the holder of an option on
foreign currency is required to pay a one-time, non-refundable premium, which
represents the cost of purchasing the option. The holder can lose the entire
amount of this premium, as well as related transaction costs, but not more than
this amount. The writer of the option, in contrast, generally is required to
make initial and variation margin payments, similar to margin deposits required
in the trading of Futures Contracts and the writing of other types of options.
The writer is therefore subject to risk of loss beyond the amount originally
invested and above the value of the option at the time it is entered into.

Certain options on foreign currencies, like Currency Contracts, are
traded over-the-counter through financial institutions acting as market-makers
in such options and the underlying

<PAGE> 110

currencies. Such transactions therefore involve risks not generally associated
with exchange-traded instruments, which are discussed below. Options on foreign
currencies may also be traded on national securities exchanges regulated by the
SEC and on exchanges located in foreign countries.

Over-the-counter transactions can only be entered into with a financial
institution willing to take the opposite side, as principal, of a Fund's
position unless the institution acts as broker and is able to find another
counterpart willing to enter into the transaction with the Fund. Where no such
counterpart is available, it will not be possible to enter into a desired
transaction. There also may be no liquid secondary market in the trading of
over-the-counter contracts, and a Fund could be required to retain options
purchased or written until exercise, expiration or maturity. This in turn could
limit the Fund's ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.

Further, over-the-counter transactions are not subject to the guarantee
of an exchange clearing house, and a Fund will therefore be subject to the risk
of default by, or the bankruptcy of, the financial institution serving as its
counterpart. One or more of such institutions also may decide to discontinue
their role as market-makers in a particular currency or security, thereby
restricting the Fund's ability to enter into desired hedging transactions. A
Fund will enter into an over-the-counter transaction only with parties whose
creditworthiness has been reviewed and found satisfactory by Advisers.

<PAGE> 111

APPENDIX B

CORPORATE BOND AND COMMERCIAL PAPER RATINGS

COMMERCIAL PAPER RATINGS

STANDARD & POOR's RATINGS SERVICES. Commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues assigned the A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with designation 1, 2, and 3 to indicate the relative degree of safety.
The "A-1" designation indicates that the degree of safety regarding timely
payment is very strong.

MOODY's INVESTORS SERVICE, INC. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

PRIME-1--Superior capacity for repayment of short-term promissory
obligations.

PRIME-2--Strong capacity for repayment of short-term promissory
obligations.

PRIME-3--Acceptable capacity for repayment of short-term promissory
obligations.

CORPORATE BOND RATINGS

STANDARD & POOR's RATING SERVICES. Its ratings for corporate bonds have
the following definitions:

Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.

Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in high rated
categories.

Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective

<PAGE> 112

characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB+" rating.

Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB+" rating.

Debt rated "CCC" has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B+" rating.

The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

The rating "C" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC+" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

The rating "C1" is reserved for income bonds on which no interest is
being paid.

"NR" indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.

BOND INVESTMENT QUALITY STANDARDS. Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies and fiduciaries generally.

MOODY's INVESTORS SERVICE, INC. Its ratings for corporate bonds
include the following:

59
<PAGE> 113

Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risk appear somewhat larger than in Aaa securities.

Bonds that are rated "A" possess many favorable attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest arc considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

Bonds that are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Bonds that are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Bonds that are rated "Ca" represent obligations that are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

Bonds that are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

<PAGE> 114

PART C

Value Fund
Growth & Income Fund
and
Capital Fund
series of
Fortis Equity Portfolios, Inc.

Other Information

ITEM 23. EXHIBITS

THE FUND IS FILING OR INCORPORATING BY REFERENCE THE FOLLOWING
EXHIBITS:

(a).1 Articles of Amendment dated 9/8/94 and Amended and Restated
Articles of Incorporation dated as of 9/9/94 *
(a).2 Certification of Designation of Classes A, B, C & H dated
10/31/94 *
(a).3 Certification of Designation of Series B and Series C
dated 12/19/95 *
(b) Amended and Restated Bylaws effective 12/7/95 (3)
(c) Instruments Defining Rights of Security Holders-not applicable
(d) Investment Advisory and Management Agreement dated 12/7/95 (3)
(e).1 Underwriting and Distribution Agreement dated 12/7/95 (3)
(e).2 Dealer Sales Agreement (1)
(e).3 Mutual Fund Supplement to Dealer Sales Agreement (1)
(f) Bonus or Profit Sharing Contracts - not applicable
(g) Custody Agreement dated 3/21/92 *
(h) Other Material Contracts - not applicable
(i) Legal Opinion - not applicable
(j) Consent of KPMG LLP *
(k) Omitted Financial Statements - not applicable
(l) Initial Capital Agreements - not applicable
(m) Rule 12b-1 Plan (2)
(n) Financial Data Schedule - not applicable
(o) Rule 18f-3 Plan (3)
- -----------------
(1) Incorporated by reference to Post-Effective Amendment No. 45 to the
Registration Statement of Fortis Income Portfolios, Inc. on Form N-1A
filed with the Commission on December 1, 1998.
(2) Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement of Fortis Worldwide Portfolios, Inc. on Form
N-1A filed with the Commission on February 27, 1998.
(3) Incorporated by reference to Post-Effective Amendment No. 76 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 18, 1995.
* Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.

THE FOLLOWING IS A LIST OF ALL PERSONS DIRECTLY OR INDIRECTLY
CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:

<PAGE> 115

No person is directly or indirectly controlled by or under common
control with the Registrant.

ITEM 25. INDEMNIFICATION.

STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS OR STATUTE UNDER
WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON OF THE FUND IS
INSURED OR INDEMNIFIED AGAINST ANY LIABILITY INCURRED IN THEIR OFFICIAL
CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR, OFFICER, AFFILIATED
PERSON, OR UNDERWRITER FOR THEIR OWN PROTECTION.

Paragraph 8(d) of the Registrant's Articles of Incorporation provides
that the Registrant shall indemnify such person for such expenses and
liabilities, in such manner, under such circumstances, and to the full extent
permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or
hereafter amended; provided, however, that no such indemnification may be made
if it would be in violation of Section 17(h) of the Investment Company Act of
1940, as now enacted or hereinafter amended, and any rules, regulations, or
releases promulgated thereunder.

The Registrant may indemnify its officers and directors and other
"persons" acting in an "official capacity" (as such terms are defined in Section
302A.521) pursuant to a determination by the board of directors or shareholders
of the Registrant as set forth in Section 302A.521, by special legal counsel
selected by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purposes of determining either the presence of a
quorum or such director's eligibility to be indemnified.

In any case, indemnification is proper only if the eligibility
determining body decides that the person seeking indemnification:
(a) has not received indemnification for the same conduct from any
other party or organization;
(b) acted in good faith;
(c) received no improper personal benefit;
(d) in the case of criminal proceedings, has no reasonable cause to
believe the conduct was unlawful;
(e) reasonably believed that the conduct was in the best interest of
the Registrant, or in certain contexts, was not opposed to the best
interest of the Registrant; and
(f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or Federal law (including,
without limitation, conduct constituting willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as set
forth in Section 17(h) and (i) of the Investment Company Act of
1940).

ADVANCES. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the Registrant of reasonable expenses, including
attorneys fees and disbursements, incurred by the person in advance of the final
disposition of the proceeding, (a) upon receipt by the Registrant of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have been satisfied, and (b) after a determination that the facts then known to
those making the determination would not preclude indemnification under
302A.521. The written undertaking required by clause (a) is an unlimited general
obligation of the person making

2
<PAGE> 116

it, but need not be secured and shall be accepted without reference to
financial ability to make the repayment.

UNDERTAKING. The Registrant undertakes that insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provision, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless, in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

DESCRIBE ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT OF A
SUBSTANTIAL NATURE THAT EACH INVESTMENT ADVISER, AND EACH DIRECTOR, OFFICER OR
PARTNER OF THE ADVISER, IS OR HAS BEEN ENGAGED WITHIN THE LAST TWO FISCAL YEARS
FOR HIS OR HER OWN ACCOUNT OR IN THE CAPACITY OF DIRECTOR, OFFICER, EMPLOYEE,
PARTNER OR TRUSTEE.

Information on the business of the Adviser, its directors and officers
is described in the Statement of Additional Information. The following officers
are not listed in the Statement of Additional Information:

OTHER BUSINESS/EMPLOYMENT DURING
NAME POSITION WITH ADVISER PAST TWO YEARS
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Michael D. O'Connor Qualified Plan Officer Qualified Plan Officer of Fortis
Benefits Insurance Company

David C. Greenzang Money Market Portfolio Officer Debt securities manager with
Fortis, Inc.

</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS.

(A) STATE THE NAME OF EACH INVESTMENT COMPANY (OTHER THAN THE FUND) FOR WHICH
EACH PRINCIPAL UNDERWRITER CURRENTLY DISTRIBUTING THE FUND'S SECURITIES ALSO
ACTS AS A PRINCIPAL UNDERWRITER, DEPOSITOR, OR INVESTMENT ADVISER.

Investors also acts as the principal underwriter for: Fortis Advantage
Portfolios, Inc., Fortis Income Portfolios, Inc., Fortis Money Portfolios, Inc.,
Fortis Tax Free Portfolios, Inc., Fortis Securities, Inc., Fortis Series Fund,
Inc., Fortis Worldwide Portfolios, Inc., Fortis Growth Fund, Inc., Variable
Account C of Fortis Benefits Insurance Company and Variable Account D of Fortis
Benefits Insurance Company.

(B) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR EACH DIRECTOR,
OFFICER, OR PARTNER OF EACH PRINCIPAL UNDERWRITER NAMED IN RESPONSE TO ITEM 20.

<PAGE> 117

In addition to those listed in the Statement of Additional Information with
respect to Investors, the following are also officers of Investors. The
principal business address of each individual is 500 Bielenberg Drive, Woodbury,
Minnesota 55125.

NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH THE
UNDERWRITER POSITIONS AND OFFICES WITH FUND
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Carol M. Houghtby Director, Vice President & None
500 Bielenberg Drive Treasurer
Woodbury, Minnesota 55125

Roger W. Arnold Senior Vice President None
500 Bielenberg Drive
Woodbury, Minnesota 55125

John E. Hite Vice President & Secretary None
500 Bielenberg Drive
Woodbury, Minnesota 55125

</TABLE>

(C) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR ALL COMMISSIONS
AND OTHER COMPENSATION RECEIVED, DIRECTLY OR INDIRECTLY, FROM THE FUND DURING
THE LAST FISCAL YEAR BY EACH PRINCIPAL UNDERWRITER WHO IS NOT AN AFFILIATED
PERSON OF THE FUND OR ANY AFFILIATED PERSON OF AN AFFILIATED PERSON.

Not applicable.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

STATE THE NAME AND ADDRESS OF EACH PERSON MAINTAINING PHYSICAL
POSSESSION OF EACH ACCOUNT, BOOK, OR OTHER DOCUMENT REQUIRED TO BE MAINTAINED BY
SECTION 31(A) AND THE RULES UNDER THAT SECTION.

The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Fortis Advisers, Inc., 500 Bielenberg Drive, Woodbury, MN 55125.

ITEM 29. MANAGEMENT SERVICES

PROVIDE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF ANY MANAGEMENT-
RELATED CONTRACT NOT DISCUSSED IN PART A OR B, DISCLOSING THE PARTIES TO THE
CONTRACT AND THE TOTAL AMOUNT PAID AND BY WHOM FOR THE FUND FOR THE LAST THREE
FISCAL YEARS.

All contracts were discussed in Part A or B.

ITEM 30. UNDERTAKINGS

(A) IN INITIAL REGISTRATION STATEMENTS FILED UNDER THE SECURITIES ACT, PROVIDE
AN UNDERTAKING TO FILE AN AMENDMENT TO THE REGISTRATION STATEMENT WITH
CERTIFIED FINANCIAL STATEMENTS SHOWING THE INITIAL CAPITAL RECEIVED BEFORE
ACCEPTING SUBSCRIPTIONS FROM MORE THAN 25 PERSONS IF THE FUND INTENDS TO
RAISE ITS INITIAL CAPITAL UNDER SECTION (14)(A)(3).

<PAGE> 118

Not applicable.

(b) Each recipient of a prospectus of any series of the Registrant may request
the latest Annual Report of such series, and the Registrant without charge
will furnish such Annual Report.

(c) Registrant represents that it is relying on a No-Action Letter (IDS
Financial Services, June 20, 1986) and that it has complied with the
provisions of paragraphs (a) - (d) of such No-Action Letter.

<PAGE> 119

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement on Form N-1A
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Woodbury and State of Minnesota on the
30th day of December 1999.

FORTIS EQUITY PORTFOLIOS, INC.
(Registrant)

By /s/ Dean C. Kopperud
-------------------------
Dean C. Kopperud, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>

/s/ Dean C. Kopperud President (principal executive officer) December 30, 1999
- -------------------------
Dean C. Kopperud

/s/ Tamara L. Fagely Treasurer (principal financial and December 30, 1999
- ------------------------- accounting officer)
Tamara L. Fagely

Richard D. Cutting* Director

Allen R. Freedman* Director

Robert M. Gavin* Director

Jean L. King* Director

Robb L. Prince* Director

Leonard J. Santow* Director

Noel Schenker Shadko* Director

Joseph M. Wikler* Director
</TABLE>
*By /s/ Dean C. Kopperud December 30, 1999
-------------------------
Dean C. Kopperud, Attorney-in-Fact
(Pursuant to a Power of Attorney dated October 1, 1998)

<PAGE> 1

EXHIBIT (j)

[KPMG letterhead]

Independent Auditors' Consent
-----------------------------

The Board of Directors
Fortis Advantage Portfolios, Inc.
Fortis Growth Fund, Inc.
Fortis Equity Portfolios, Inc.

We consent to the use of our report incorporated herein by reference and the
references to our Firm under the headings "Financial Highlights" in Part A and
"Financial Statements" in Part B of the Registration Statement.

/s/ KPMG LLP

KPMG LLP

Minneapolis, Minnesota
December 30, 1999