FORTIS GROWTH FUND INC, N14AE24, 1995-12-13

FORTIS GROWTH FUND INC
N14AE24, 1995-12-13

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<PAGE>

Registration No. 33- .

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 1995

===============================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. _______ / /
Post-Effective Amendment No. _______ / /
(Check appropriate box or boxes)

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

Exact name of Registrant as Specified in Charter:

FORTIS GROWTH FUND, INC.

Area Code and Telephone Number:

(612) 738-4000

Address of Principal Executive Offices:

500 Bielenberg Drive
Woodbury, Minnesota 55125

Name and Address of Agent for Service:

Scott R. Plummer, Esq., Assistant Secretary
Fortis Growth Fund, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

COPY TO:

Michael J. Radmer, Esq.
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402

Approximate Date of Proposed Public Offering:
As soon as possible following the effective date of this Registration
Statement.
It is proposed that this filing become effective on
January 12, 1996 (30 days after filing) pursuant to Rule 488.

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

No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant is filing as an exhibit to this Registration Statement a copy of its
earlier declaration under Rule 24f-2. Registrant filed its Rule 24f-2 Notice on
October 30, 1995 for its most recent fiscal year ended August 31, 1995.

===============================================================================

<PAGE>

FORTIS GROWTH FUND, INC.

REGISTRATION STATEMENT ON FORM N-14

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))

<TABLE>
<CAPTION>
PART A OF FORM N-14 PROSPECTUS/PROXY STATEMENT CAPTION
- ------------------- ----------------------------------------------
<S> <C> <C>
1. Beginning of Registration Statement
and Outside Front Cover Page of Prospectus....... Cross Reference Sheet and Cover Page

2. Beginning and Outside Back Cover Page
of Prospectus.................................... Table of Contents

3. Synopsis Information and Risk Factors............ Summary; Risk Factors

4. Information about the Transaction................ Summary; Information About the Reorganization;
Voting Information

5. Information about the Registrant................. Inside Front Cover; Incorporation by Reference;
Summary; Information About the Acquired Fund and
the Acquiring Fund

6. Information about the Company being Acquired..... Incorporation by Reference; Summary; Information
About the Acquired Fund and the Acquiring Fund

7. Voting Information............................... Summary; Information About the Reorganization;
Voting Information

8. Interest of Certain Persons and Experts.......... Voting Information

9. Additional Information........................... Not Applicable

<CAPTION>
PART B OF FORM N-14 STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------------------- ----------------------------------------------
<S> <C> <C>
10. Cover Page....................................... Cover Page

11. Table of Contents................................ Not Applicable

12. Additional Information about the Registrant...... Cover Page (Incorporation by Reference)

13. Additional Information about the Company
Being Acquired................................... Cover Page (Incorporation by Reference)

14. Financial Statements............................. Financial Statements

<CAPTION>
PART C OF FORM N-14
- -------------------
<S> <C> <C>
Information required to be included in Part C is set forth under the appropriate item in Part C of
this Registration Statement.
</TABLE>

<PAGE>

FORTIS GROWTH FUND, INC.
REGISTRATION STATEMENT ON FORM N-14

PART A

PRESIDENT'S LETTER

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

PROSPECTUS/PROXY STATEMENT

PROSPECTUS DATED JANUARY 1, 1996 OF FORTIS GROWTH FUND, INC.
[TO BE DELIVERED WITH PROSPECTUS/PROXY STATEMENT]

ANNUAL REPORT OF FORTIS GROWTH FUND, INC.
FOR THE FISCAL YEAR ENDED AUGUST 31, 1995
[TO BE DELIVERED WITH PROSPECTUS/PROXY STATEMENT]

PROSPECTUS DATED MARCH 1, 1995 OF SPECIAL PORTFOLIOS, INC.
[INCORPORATED BY REFERENCE INTO PROSPECTUS/PROXY STATEMENT]

<PAGE>
January 22, 1996
SPECIAL PORTFOLIOS, INC.

To the Shareholders of the Stock Portfolio:

Enclosed with this letter is a proxy voting ballot, a Prospectus/Proxy
Statement and related information concerning a special meeting of shareholders
of the Stock Portfolio (the "Acquired Fund") of Special Portfolios, Inc. to be
held on Thursday, February 22, 1996. The purpose of this special meeting is to
submit to shareholders of the Acquired Fund a proposal to combine that Fund with
and into Fortis Growth Fund, Inc. (the "Acquiring Fund") by means of the
reorganization described in the Prospectus/Proxy Statement.

If the proposed combination of Funds is approved, you will receive Class Z
shares of the Acquiring Fund in exchange for your shares of the Acquired Fund.
These Class Z shares, like the Acquired Fund shares you now hold, will not be
subject to any sales charges or Rule 12b-1 fees. You will receive Acquiring Fund
shares having an aggregate net asset value equal to the aggregate net asset
value of your Acquired Fund shares at the effective time of the reorganization.

Fortis Advisers, Inc. acts as the investment adviser, transfer agent, and
dividend disbursing agent for both the Acquired Fund and the Acquiring Fund. In
addition, the same individuals at Fortis Advisers manage both Funds. As
described in the Prospectus/Proxy Statement, the investment advisory and
management fee schedule of the Acquiring Fund is the same as that of the
Acquired Fund. However, as a result of the larger size of the Acquiring Fund
relative to the Acquired Fund, the Acquiring Fund currently pays, and after the
reorganization will pay, a lower investment advisory and management fee than the
Acquired Fund currently pays.

At October 31, 1995, the Acquired Fund had net assets of approximately $93
million, while the Acquiring Fund had net assets of approximately $655 million.
The Acquired Fund's Board of Directors believes that the proposed combination of
Funds is in the best interests of Acquired Fund shareholders because, among
other things, it is expected to significantly lower the total expense ratio
experienced by such shareholders due to the economies of scale associated with
becoming part of a larger Fund, as described at pages 5-7 of the
Prospectus/Proxy Statement.

The Funds have similar investment objectives which seek to provide
shareholders with capital appreciation, and substantially similar investment
policies and restrictions. The investment objectives, policies and restrictions
of the Funds, as well as other important information concerning the proposed
combination of the Funds, are described in detail in the Prospectus/Proxy
Statement, which you are encouraged to review carefully. If you have any
additional questions, please call your registered representative, or the
Acquired Fund directly at 1-800-800-2638, Ext. 3012.

The Acquired Fund's Board of Directors has approved the proposed combination
of Funds and recommends it for your approval. I encourage you to vote "FOR" the
proposal, and ask that you please send your completed proxy ballot in as soon as
possible to help save the cost of additional solicitations. As always, we thank
you for your confidence and support.

Sincerely,
Dean C. Kopperud
PRESIDENT
<PAGE>
STOCK PORTFOLIO
A SEPARATELY MANAGED SERIES OF
SPECIAL PORTFOLIOS, INC.
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164
(800) 738-4000
------------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 22, 1996
---------------------

January 22, 1996
To the Shareholders of Stock Portfolio:

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Stock
Portfolio (the "Acquired Fund"), a separately managed series of Special
Portfolios, Inc. ("Special Portfolios"), will be held at 10:00 a.m., Central
time, on Thursday, February 22, 1996, at the offices of Fortis Advisers, Inc.,
500 Bielenberg Drive, Woodbury, Minnesota. The purpose of the special meeting is
as follows:

1. To consider and vote on a proposed Agreement and Plan of Reorganization
(the "Plan") providing for (a) the acquisition of substantially all of
the assets and the assumption of all liabilities of the Acquired Fund by
Fortis Growth Fund, Inc. (the "Acquiring Fund"), in exchange for shares
of common stock of the Acquiring Fund having an aggregate net asset value
equal to the aggregate value of the assets acquired (less the liabilities
assumed) of the Acquired Fund and (b) the liquidation of the Acquired
Fund and the pro rata distribution of the Acquiring Fund shares to
Acquired Fund shareholders. Under the Plan, Acquired Fund shareholders
will receive Class Z shares of the Acquiring Fund having a net asset
value equal as of the effective time of the Plan to the net asset value
of their Acquired Fund shares. A vote in favor of the Plan will be
considered a vote in favor of an amendment to the articles of
incorporation of Special Portfolios required to effect the reorganization
contemplated by the Plan.

2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.

Even if Acquired Fund shareholders vote to approve the Plan, consummation of
the Plan is subject to certain other conditions. See "Information About the
Reorganization -- Plan of Reorganization" in the attached Prospectus/Proxy
Statement.

THE BOARD OF DIRECTORS OF THE ACQUIRED FUND RECOMMENDS APPROVAL OF THE PLAN.

The close of business on January 4, 1996 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE RESPECTFULLY ASK FOR
YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY. If you are present at the
meeting, you may then revoke your proxy and vote in person, as explained in the
Prospectus/Proxy Statement in the section entitled "Voting Information."

By Order of the Board of Directors,
MICHAEL J. RADMER
SECRETARY
<PAGE>
PROSPECTUS/PROXY STATEMENT
DATED JANUARY 22, 1996

ACQUISITION OF THE ASSETS OF

STOCK PORTFOLIO
A SEPARATELY MANAGED SERIES OF
SPECIAL PORTFOLIOS, INC.
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164
(800) 738-4000

BY AND IN EXCHANGE FOR SHARES OF

FORTIS GROWTH FUND, INC.
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164
(800) 738-4000

This Prospectus/Proxy Statement is being furnished to the shareholders of
Stock Portfolio (the "Acquired Fund"), a separately managed series of Special
Portfolios, Inc. ("Special Portfolios"), in connection with a special meeting
(the "Meeting") of the shareholders of the Acquired Fund to be held at the
offices of Fortis Advisers, Inc., 500 Bielenberg Drive, Woodbury, Minnesota, on
Thursday, February 22, 1996, for the purposes set forth in the accompanying
Notice of Special Meeting of Shareholders. This Prospectus/Proxy Statement is
first being mailed to shareholders of the Acquired Fund on or about January 22,
1996. Information concerning the voting rights of each Acquired Fund shareholder
is set forth under "Voting Information" below. Representatives of Fortis
Advisers, Inc., the investment adviser and manager of the Acquired Fund, or of
its affiliates, may, without cost to the Acquired Fund, solicit proxies for
management of the Acquired Fund by means of mail, telephone, or personal calls.
Persons holding shares as nominees will, upon request, be reimbursed for their
reasonable expenses incurred in sending proxy soliciting materials on behalf of
the Board of Directors to their principals.

As set forth in the Notice of Special Meeting of Shareholders, this
Prospectus/Proxy Statement relates to a proposed Agreement and Plan of
Reorganization (the "Plan") providing for (i) the acquisition of substantially
all the assets and the assumption of all liabilities of the Acquired Fund by
Fortis Growth Fund, Inc. (the "Acquiring Fund"), in exchange for shares of
common stock of the Acquiring Fund having an aggregate net asset value equal to
the aggregate value of the assets acquired (less liabilities assumed) of the
Acquired Fund, and (ii) the liquidation of the Acquired Fund and the pro rata
distribution of its holdings of Acquiring Fund shares to Acquired Fund
shareholders. The Acquired Fund and the Acquiring Fund are sometimes referred to
herein, individually, as a "Fund," or together, as the "Funds." A vote in favor
of the Plan will be considered a vote in favor of an amendment to the articles
of incorporation of Special Portfolios required to effect the reorganization
contemplated by the Plan.

As a result of the transactions contemplated by the Plan (collectively, the
"Reorganization"), each shareholder of the Acquired Fund will receive Class Z
shares of the Acquiring Fund having a net asset value equal as of the effective
time of the Plan to the net asset value of their Acquired Fund shares. The
Reorganization is being structured as a tax-free reorganization so that no
income, gain or loss will be recognized by the Acquired Fund or its shareholders
as a result thereof (except that the Acquired Fund contemplates that it will
make a distribution, immediately prior to the Reorganization, of all of its
current year net income and net realized capital gains, if any, not previously
distributed, and this distribution will be taxable to Acquired Fund shareholders
subject to taxation). The shareholders of the Acquired Fund are being asked to
vote on the proposed Plan and Reorganization at the Meeting.

1
<PAGE>
In addition to the approval of the Plan and Reorganization by Acquired Fund
shareholders, the consummation of the Reorganization is subject to certain other
conditions. See "Information About the Reorganization -- Plan of
Reorganization."

The Acquired Fund and the Acquiring Fund are both diversified, open-end
funds with investment objectives which are similar, in that both seek to provide
shareholders with capital appreciation.

- The primary investment objectives of the Acquired Fund are appreciation of
capital and the realization of both long and short-term capital gains.
Consistent with such objectives, the Acquired Fund invests in so-called
"growth" companies (companies which appear to possess superior potential
for appreciation in value). The Acquired Fund may also invest in the
securities of companies in cyclical industries when substantial increases
in the market value of their securities are foreseen.

The similarity of these objectives is reflected in the median market
capitalizations of the Funds. On October 31, 1995, each Fund had a median market
capitalization of approximately $2.7 billion.

The investment policies of the Acquired Fund and the Acquiring Fund also are
substantially similar.

- Each Fund invests primarily in common stocks or securities convertible
into common stocks. Occasionally, however, each Fund may invest limited
amounts in other types of securities (such as nonconvertible preferred and
debt securities).

- Each Fund may invest up to 10% of its assets in foreign securities.

- Neither Fund may borrow money.

In addition, both Funds may invest in repurchase agreements and variable amount
master demand notes, and may invest up to 5% of total assets in certain illiquid
securities. Neither Fund may enter into options, futures or forward contracts.
The Funds' investment objectives, policies and restrictions are described and
compared in further detail herein under "Information About the Acquired Fund and
the Acquiring Fund -- Comparison of Investment Objectives, Policies and
Restrictions."

Fortis Advisers, Inc. ("Advisers") serves as the investment adviser,
transfer agent and dividend agent to both the Acquired Fund and the Acquiring
Fund. In addition, the same individuals at Advisers manage both Funds.

This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the proposed Plan and
Reorganization and about the Acquiring Fund and its affiliates that each
Acquired Fund shareholder should know prior to voting on the proposed Plan and
Reorganization.

2
<PAGE>
INCORPORATION BY REFERENCE

The documents listed in items 1, 2 and 4 below, which have been filed with
the Securities and Exchange Commission (the "Commission"), are incorporated
herein by reference to the extent noted below. A Statement of Additional
Information dated January 22, 1996 relating to this Prospectus/ Proxy Statement
has been filed with the Commission and is also incorporated by reference into
this Prospectus/Proxy Statement. A copy of the Statement of Additional
Information, and of each of the documents listed in items 3 through 6 below, is
available upon request and without charge by writing to the Acquiring Fund at
P.O. Box 64284, St. Paul, Minnesota 55164, or by calling (800) 800-2638, Ext.
3012 or 3014. The documents listed in items 2, 3, 5 and 6 below are incorporated
by reference into the Statement of Additional Information and will be provided
with any copy of the Statement of Additional Information which is requested. Any
documents requested will be sent within one business day of receipt of the
request by first class mail or other means designed to ensure equally prompt
delivery.

1. The Prospectus dated January 1, 1996 of the Acquiring Fund is
incorporated herein in its entirety by reference, and a copy thereof
accompanies this Prospectus/Proxy Statement.

2. The "Letter to Shareholders" set forth at pages 2-6 of the Acquiring
Fund's Annual Report for the fiscal year ended August 31, 1995 is
incorporated herein by reference, and a copy of such Annual Report
accompanies this Prospectus/Proxy Statement. The entire Annual Report is
incorporated by reference in the Statement of Additional Information
relating to this Prospectus/Proxy Statement.

3. The Statement of Additional Information dated January 1, 1996 of the
Acquiring Fund is incorporated by reference in its entirety in the
Statement of Additional Information relating to this Prospectus/Proxy
Statement.

4. The Prospectus dated March 1, 1995 of the Acquired Fund is incorporated
herein in its entirety by reference.

5. The Statement of Additional Information dated March 1, 1995 of the
Acquired Fund is incorporated by reference in its entirety in the
Statement of Additional Information relating to this Prospectus/Proxy
Statement.

6. The Annual Report of the Acquired Fund for the fiscal year ended October
31, 1995 is incorporated by reference in its entirety in the Statement of
Additional Information relating to this Prospectus/Proxy Statement.

Also accompanying and attached to this Prospectus/Proxy Statement as Exhibit A
is a copy of the Plan for the proposed Reorganization.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

3
<PAGE>
SUMMARY

This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement and in the
documents incorporated by reference herein, and by reference to the Plan, a copy
of which is attached to this Prospectus/Proxy Statement as Exhibit A. Acquired
Fund shareholders should review the accompanying documents carefully in
connection with their review of this Prospectus/Proxy Statement.

PROPOSED REORGANIZATION

The Plan provides for (i) the acquisition of substantially all of the assets
and the assumption of all liabilities of the Acquired Fund by the Acquiring Fund
in exchange for shares of common stock of the Acquiring Fund having an aggregate
net asset value equal to the aggregate value of the assets acquired (less
liabilities assumed) of the Acquired Fund and (ii) the liquidation of the
Acquired Fund and the pro rata distribution of its holdings of Acquiring Fund
shares to Acquired Fund shareholders as of the effective time of the
Reorganization (the close of normal trading on the New York Stock Exchange,
currently 4:00 p.m. Eastern Time, on March 1, 1996, or such later date as
provided for in the Plan) (such time and date, the "Effective Time"). As a
result of the Reorganization, each shareholder of the Acquired Fund will receive
Class Z shares of the Acquiring Fund with a net asset value equal to the net
asset value of the shareholder's Acquired Fund shares as of the Effective Time.
See "Information About the Reorganization."

For the reasons set forth below under "Information About the Reorganization
- -- Reasons for the Reorganization," the Board of Directors of the Acquired Fund,
including all of the "non-interested" Directors, as that term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), has
concluded that the Reorganization would be in the best interests of the
shareholders of the Acquired Fund and that the interests of the Acquired Fund's
existing shareholders would not be diluted as a result of the transactions
contemplated by the Reorganization. Therefore, the Board of Directors has
approved the Reorganization and has submitted the Plan for approval by Acquired
Fund shareholders.

The Board of Directors of the Acquiring Fund has also concluded that the
Reorganization would be in the best interests of the Acquiring Fund's existing
shareholders and has therefore approved the Reorganization on behalf of the
Acquiring Fund.

Approval of the Plan and Reorganization will require the affirmative vote of
a majority of the outstanding shares of the Acquired Fund.

TAX CONSEQUENCES

Prior to completion of the Reorganization, the Acquired Fund will have
received from counsel an opinion that, upon the Reorganization, no gain or loss
will be recognized by the Acquired Fund or its shareholders for federal income
tax purposes. The holding period and aggregate tax basis of Acquiring Fund
shares that are received by each Acquired Fund shareholder will be the same as
the holding period and aggregate tax basis of the Acquired Fund shares
previously held by such shareholders. In addition, the holding period and tax
basis of the assets of the Acquired Fund in the hands of the Acquiring Fund as a
result of the Reorganization will be the same as in the hands of the Acquired
Fund immediately prior to the Reorganization. See "Information About the
Reorganization -- Federal Income Tax Consequences."

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

The Acquired Fund and the Acquiring Fund are both diversified, open-end
funds with investment objectives which are similar, in that both seek to provide
shareholders with capital appreciation.

4
<PAGE>
superior potential for appreciation in value). The Acquired Fund may also
invest in the securities of companies in cyclical industries when
substantial increases in the market value of their securities are
foreseen.

The similarity of these objectives is reflected in the median market
capitalizations of the Funds. On October 31, 1995, each Fund had a median market
capitalization of approximately $2.7 billion.

The investment policies of the Acquired Fund and the Acquiring Fund also are
substantially similar.

- Each Fund may invest up to 10% of its assets in foreign securities.

- Neither Fund may borrow money.

The Annual Report of the Acquiring Fund for the fiscal year ended August 31,
1995 and of the Acquired Fund for the fiscal year ended October 31, 1995,
referred to on the cover page hereof under "Incorporation by Reference," provide
additional information concerning the composition of the respective Funds'
assets at the applicable dates.

FEES AND EXPENSES

ADVISORY FEES. The Acquired Fund and the Acquiring Fund have separate
agreements with Advisers pursuant to which they pay Advisers investment advisory
and management fees for managing their respective investment portfolios. The
investment advisory fees for the two Funds are calculated as a percentage of
Fund net assets pursuant to the same schedule, as follows:

<TABLE>
<CAPTION>
ANNUAL INVESTMENT
ADVISORY AND
AVERAGE NET ASSETS MANAGEMENT FEE
- --------------------------------- ---------------------
<S> <C>
For the first $100 million 1.0%
For the next $150 million .8%
For assets over $250 million .7%
</TABLE>

At October 31, 1995, the Acquired Fund had net assets of approximately $93
million, while the Acquiring Fund had net assets of approximately $655 million.
Thus, due to "breakpoints" in the advisory fee schedule and the greater size of
the Acquiring Fund, it is anticipated that Acquired Fund shareholders will
experience lower advisory fees as a percentage of net assets as a result of the
proposed Reorganization. See "Pro Forma Fees and Expenses" below.

NO SALES CHARGES OR RULE 12B-1 FEES. Acquired Fund shareholders will
receive Class Z shares of the Acquiring Fund in the Reorganization. These Class
Z shares, like Acquired Fund shares, will not be subject to any front-end or
contingent deferred sales charges or to any Rule 12b-1 fees.

5
<PAGE>
Shares of the Acquired Fund are available to (a) officers, directors,
employees, retirees, sales representatives, agents, shareholders, and certain
other persons closely identified with Fortis, Inc., Jostens, Inc., The St. Paul
Companies, Inc., or the affiliates of any of the foregoing companies; (b)
officers and directors of Special Portfolios, and (c) pension, profit sharing,
and other retirement plans created for the benefit of any of the foregoing
persons. Class Z shares of the Acquiring Fund will be available for investment
to (a) officers, directors, employees, retirees, sales representatives, agents,
shareholders, and certain other persons closely identified with Fortis, Inc. or
its affiliates, (2) officers and directors of the Acquiring Fund, (c) pension,
profit sharing, and other retirement plans created for the benefit of any of the
foregoing persons, and (d) shareholders of the Acquired Fund on the effective
date of the Reorganization. All classes of shares of the Acquiring Fund are
subject to certain special purchase plans as described in the accompanying
Acquiring Fund Prospectus under the caption "How to Buy Fund Shares -- Special
Purchase Plans for all Classes." These include the availability of tax sheltered
retirement plans, gifts or transfers to minor children, systematic investment
plans, and exchange privileges with other funds managed by Advisers. Shares of
the Acquired Fund are subject to substantially similar special purchase plans.

The Acquiring Fund also offers Class A, B, C and H shares. Information on
sales charges and Rule 12b- fees for these share classes is set forth in the
accompanying Acquiring Fund prospectus under the caption "How to Buy Fund
Shares."

PRO FORMA FEES AND EXPENSES

The following table is intended to assist Acquired Fund shareholders in
understanding the various costs and expenses (expressed as a percentage of
average net assets) (i) that such shareholders currently bear as Acquired Fund
shareholders (under the "Acquired Fund" column); (ii) that Class Z shareholders
of the Acquiring Fund would currently bear were any such shares outstanding
(under the "Acquiring Fund" column); and (iii) that such shareholders can expect
to bear as Acquiring Fund shareholders after the Reorganization is consummated
(under the "Pro Forma" column). The examples set forth below should not be
considered representations of past or future expenses or performance, and actual
expenses may be greater or less than those shown. The following table reflects
actual expenses for the Acquired Fund's fiscal year ended October 31, 1995.
Management Fees and Other Expenses for Class Z shares of the Acquiring Fund are
based upon the actual expenses of the Acquiring Fund's Class A shares for the
fiscal year ended August 31, 1995.

FEES AND EXPENSES

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING FUND
FUND CLASS Z SHARES PRO FORMA
-------- -------------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................. None None None
Maximum Deferred Sales Charge........... None None None
ANNUAL FUND OPERATING EXPENSES (AS A %
OF AVERAGE NET ASSETS)
Management Fees......................... 1.00% 0.78% 0.77%
Rule 12b-1 Fees......................... 0.00% 0.00% 0.00%
Other Expenses.......................... 0.11% 0.10% 0.09%
-------- ----- ---------
Total Fund Operating Expenses........... 1.11% 0.88% 0.86%
EXAMPLE
You would pay the following expenses on a $1,000 investment over various time
periods assuming: (1) 5% annual return; and (2) redemption at the end of each
time period:
1 year.................................. $ 11 $ 9 $ 9
3 years................................. $ 35 $ 28 $ 27
5 years................................. $ 61 $ 49 $ 48
10 years................................ $ 135 $ 108 $ 106
</TABLE>

6
<PAGE>
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES

Class Z shares of the Acquiring Fund received by Acquired Fund shareholders
in the Reorganization will be subject to substantially the same purchase,
exchange and redemption procedures that currently apply to Acquired Fund shares.
These procedures include the following:

MINIMUM AND MAXIMUM INVESTMENTS. A minimum initial investment of $500
normally is required. An exception to this minimum (except on telephone or wire
orders) is the "Systematic Investment Plan" ($25 per month by "Preauthorized
Check Plan" or $50 per month on any other basis). The minimum subsequent
investment normally is $50, again subject to the above exceptions.

INVESTING BY TELEPHONE. An investor's registered representative may make a
purchase on behalf of the investor ($500 minimum) by telephoning (612) 738-4000
or (800) 800-2638, Extension 3012. The investor's check and account application
must be promptly forwarded so as to be received within three business days. If
an investor has a bank account authorization form on file, he or she may
purchase $100 - $10,000 worth of shares via telephone through the automated
Fortis Information Line.

INVESTING BY WIRE. A shareholder having an account with a commercial bank
that is a member of the Federal Reserve System may purchase shares ($500
minimum) by requesting their bank to transmit immediately available funds
(Federal Funds) in the manner described in the accompanying Acquiring Fund
Prospectus under the caption "How to Buy Fund Shares -- General Purchase
Information."

INVESTING BY MAIL. In order to invest by mail, an account application must
be completed, signed, and sent with a check or other negotiable bank draft,
payable to "Fortis Funds," to the address set forth in the applicable
Prospectus. Additional purchases may be made at any time by mailing a check or
other negotiable bank draft along with a confirmation stub.

EXCHANGE PRIVILEGE. Except for participants in the Fortis, Inc. 401(k)
Plan, shares of both Funds may be exchanged among other funds of the same class
managed by Advisers without payment of an exchange fee or additional sales
charge. Similarly, shareholders of other Fortis funds may exchange their shares
for Fund shares of the same class (at net asset value if the shares to be
exchanged have already been subject to a sales charge). A shareholder initiates
an exchange by writing to or telephoning his or her broker-dealer, sales
representative, or the applicable Fund regarding the shares to be exchanged.
Advisers reserves the right to restrict the frequency of -- or otherwise modify,
condition, terminate, or impose charges upon -- the exchange privilege, all with
30 days notice to shareholders.

REDEMPTION. Registered holders of Acquired Fund shares and Class Z
Acquiring Fund shares may redeem their shares without any charge at the per
share net asset value next determined following receipt by the applicable Fund
of a written redemption request in proper form (and a properly endorsed stock
certificate if one has been issued). An investor may redeem shares registered in
broker-dealer "street name accounts" by contacting the broker-dealer, who must
follow the procedures set forth in the applicable Prospectus. An individual
shareholder (or, in the case of multiple owners, any shareholder) may orally
redeem up to $25,000 worth of their shares, subject to the procedures set forth
in the applicable Prospectus. Payment for redeemed shares will be made as soon
as possible, but not later than three business days after receipt of a proper
redemption request (except in the case of shares recently purchased with
non-guaranteed funds, with respect to which mailing of a redemption check may be
delayed by fifteen days).

For additional information concerning purchase, exchange and redemption
procedures, see the accompanying Acquiring Fund Prospectus under the captions
"How to Buy Fund Shares" and "Redemption."

DIVIDENDS AND DISTRIBUTIONS

Each Fund pays annual dividends from net investment income and distributes
any realized capital gains annually. Dividends and capital gains distributions
for each Fund are made in the form of

7
<PAGE>
additional shares of the same Fund and, if applicable, the same class (at net
asset value) unless the shareholder sends the Fund a written request that either
or both be sent to the shareholder. In the case of the Acquiring Fund only,
shareholders may also request that dividends and/or capital gains distributions
be reinvested (at net asset value) in the same class of another Fortis fund.
However, no other Fortis fund currently offers Class Z shares.

CAPITAL STOCK; SHAREHOLDER VOTING RIGHTS

The Acquired Fund issues a single class of shares. The Acquiring Fund
currently offers Class A, Class B, Class C and Class H shares. Class Z shares of
the Acquiring Fund will be issued in the Reorganization. No such shares are
currently outstanding. Each share of the Acquired Fund and each class of shares
of the Acquiring Fund represents interests in the assets of the applicable Fund
and has identical voting, dividend, liquidation, and other rights on the same
terms and conditions except that expenses related to the distribution of each
class of Acquiring Fund shares are borne solely by such class and that each
class of Acquiring Fund shares has exclusive voting rights with respect the
provisions of such Fund's Rule 12b-1 plan which pertain to that particular class
and other matters for which separate class voting is appropriate under
applicable law. The Acquiring Fund may offer additional series or classes of
shares in the future.

RISK FACTORS

Because the investment objectives, policies and restrictions of the Acquired
Fund and the Acquiring Fund are similar (see "Information About the Acquired
Fund and the Acquiring Fund -- Comparison of Investment Objectives, Policies and
Restrictions" below), the risks associated with investing in both Funds are
similar. Because both Funds invest primarily in common stocks and securities
convertible into common stocks, both Funds are subject to market risk -- I.E.,
the possibility that stock prices in general will decline over short or even
extended periods. The stock market tends to be cyclical, with periods when stock
prices generally rise and periods when stock prices generally decline.

Each Fund may invest up to 10% of its total assets (at the time of
investment) in foreign securities. Investing in foreign companies involves
certain risks which are not typically associated with investing in the
securities of United States 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. Moreover, there may be less publicly available
information about foreign issuers than about domestic issuers , and foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of domestic issuers. In addition,
with respect to some foreign countries, there is the possibility of
expropriation or confiscatory taxation, limitations on 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.
Securities of some foreign companies are less liquid and their prices are more
volatile than securities of comparable domestic companies. Moreover, certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased and sold. The risk of investing in
foreign securities are discussed more fully in the accompanying Acquiring Fund
Prospectus under the caption "Investment Objectives and Policies -- Other
Investment Practices of the Funds -- Foreign Securities."

Both Funds also may invest in repurchase agreements and, to a limited
extent, in illiquid securities, which involve certain risks as described below
under "Information About the Acquired Fund and the Acquiring Fund -- Comparison
of Investment Objectives, Policies and Restrictions."

8
<PAGE>
INFORMATION ABOUT THE REORGANIZATION

REASONS FOR THE REORGANIZATION

The Board of Directors of both the Acquired Fund and the Acquiring Fund,
including all of the "non-interested" directors, has determined that it is
advantageous to the respective Funds to combine the Acquired Fund with the
Acquiring Fund. As discussed in detail below under "Information About the
Acquired Fund and the Acquiring Fund," the Funds have similar investment
objectives, policies and restrictions. The Funds also have the same investment
adviser (with the same individuals managing both Funds) and the same
underwriter, auditors, legal counsel and custodian.

The Board of Directors of each Fund has determined that the Reorganization
is expected to provide certain benefits to its Fund and is in the best interests
of such Fund and its shareholders. The Board of Directors of each Fund has also
determined that the interests of the existing shareholders of its Fund will not
be diluted as a result of the Reorganization. The Boards considered, among other
things, the following factors in making such determinations:

(i) the advantages which may be realized by the Acquired Fund and the
Acquiring Fund, consisting of a potentially reduced expense ratio, economies
of scale resulting from Fund growth, and facilitation of portfolio
management. The Boards noted in this regard that the Acquiring Fund, with
its much larger asset base and resulting economies of scale, has a
significantly lower expense ratio than does the smaller Acquired Fund, and
it is expected that holders of the Acquired Fund will benefit from this
lower expense ratio;

(ii) the tax-free nature of the proposed Reorganization;

(iii) the terms and conditions of the Plan, including that (a) the
exchange of Acquired Fund shares for Acquiring Fund shares will take place
on a net asset value basis; and (b) no sales charge will be incurred by
Acquired Fund shareholders in connection with their acquisition of Acquiring
Fund shares in the Reorganization;

(iv) the provision of the Plan that expenses of the Reorganization will
be allocated between the Acquired Fund and the Acquiring Fund in proportion
to their relative net assets at the Effective Time; and

(v) the fact that Acquired Fund shareholders would continue to have no
Rule 12b-1 fees or sales charges and that advisory fees for Acquired Fund
shareholders should be reduced as a result of "breakpoints" in the advisory
fee schedule and the larger asset base of the Acquiring Fund.

The Board concluded that the factors noted in (i) through (v) above render
the proposed Reorganization fair to and in the best interests of shareholders of
the Acquired Fund and the Acquiring Fund.

PLAN OF REORGANIZATION

The following summary of the proposed Plan and the Reorganization is
qualified in its entirety by reference to the Plan attached to this
Prospectus/Proxy Statement as Exhibit A. The Plan provides that, as of the
Effective Time, the Acquiring Fund will acquire all or substantially all of the
assets and assume all liabilities of the Acquired Fund in exchange for Acquiring
Fund shares having an aggregate net asset value equal to the aggregate value of
the assets acquired (less liabilities assumed) from the Acquired Fund. Because
the Acquired Fund is a separate series within Special Portfolios, for corporate
law purposes the transaction is structured as a sale of the assets and
assumption of the liabilities allocated to the Acquired Fund in exchange for the
issuance of Acquiring Fund shares to the Acquired Fund, followed immediately by
the distribution of such Acquiring Fund shares to Acquired Fund shareholders and
the cancellation and retirement of outstanding Acquired Fund shares. This
distribution of Acquiring Fund shares and cancellation and retirement of
outstanding Acquired Fund shares is to be accomplished under the Plan by
amending the articles of incorporation of Special Portfolios in the manner
provided in the amendment set forth in Exhibit 1 to the Plan attached hereto as
Exhibit A.

9
<PAGE>
Pursuant to the Plan, each holder of shares of the Acquired Fund will
receive, at the Effective Time, Class Z shares of the Acquiring Fund with an
aggregate net asset value equal to the aggregate net asset value of the Acquired
Fund shares owned by such shareholder immediately prior to the Effective Time.
The net asset value per Acquired Fund share will be computed as of the Effective
Time using the valuation procedures set forth in the Fund's articles of
incorporation and bylaws and then-current Prospectus and Statement of Additional
Information and as may be required by the Investment Company Act. No Class Z
Acquiring Fund shares will be outstanding prior to the Reorganization.

At the Effective Time, the Acquiring Fund will issue to the Acquired Fund,
and the Acquired Fund will distribute to the Acquired Fund's shareholders of
record, determined as of the Effective Time, the Acquiring Fund Shares issued in
exchange for the Acquired Fund assets as described above. All outstanding shares
of the Acquired Fund thereupon will be canceled and retired and no additional
shares representing interests in the Acquired Fund will be issued thereafter,
and the Acquired Fund will be deemed to be liquidated. The distribution of
Acquiring Fund shares to former Acquired Fund shareholders will be accomplished
by the establishment of accounts on the share records of the Acquiring Fund in
the names of Acquired Fund shareholders, each representing the numbers of full
and fractional Acquiring Fund Class Z shares due such shareholders.

The Plan provides that the Class Z Acquiring Fund shares issued in the
Reorganization will not be subject to any front-end or deferred sales charges,
any Rule 12b-1 distribution fees, or any shareholder servicing fees.

The Acquired Fund contemplates that it will make a distribution, immediately
prior to the Effective Time, of all of its current year net income and net
realized capital gains, if any, not previously distributed. This distribution
will be taxable to Acquired Fund shareholders subject to taxation.

The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including, among others: (i) approval of the Plan, which
includes the related amendment of Special Portfolios' articles of incorporation
attached to the Plan, by the shareholders of the Acquired Fund; (ii) the
delivery of the opinion of counsel described below under "-- Federal Income Tax
Consequences;" (iii) the accuracy as of the Effective Time of the
representations and warranties made by the Acquired Fund and the Acquiring Fund
in the Plan; and (iv) the delivery of customary closing certificates. See the
Plan attached hereto as Exhibit A for a complete listing of the conditions to
the consummation of the Reorganization. The Plan may be terminated and the
Reorganization abandoned at any time prior to the Effective Time, before or
after approval by shareholders of the Acquired Fund, by resolution of the Board
of Directors of either the Acquired Fund or the Acquiring Fund, if circumstances
should develop that, in the opinion of such Board, make proceeding with the
consummation of the Plan and Reorganization not in the best interests of such
Fund's shareholders.

The Plan provides that all expenses incurred in connection with the
Reorganization shall be allocated between and borne by the Acquired Fund and the
Acquiring Fund in proportion to their relative net assets at the Effective Time
and that such expenses, and the allocation thereof, shall be reflected in the
calculations of net asset value of the Acquired Fund for purposes of determining
the numbers of Acquiring Fund shares to be issued in the Reorganization. The
Plan also provides that at or prior to the Effective Time, Advisers or an
affiliate of Advisers shall reimburse the Acquired Fund by the amount, if any,
that the expenses incurred by the Acquired Fund (or accrued up to the Effective
Time) exceed any applicable state-imposed expense limitations.

Approval of the Plan will require the affirmative vote of a majority of the
outstanding shares of the Acquired Fund. Approval of the Plan by Acquired Fund
shareholders will be deemed approval of the amendment to the articles of
incorporation of Special Portfolios attached to the Plan. If the Plan is not
approved, the Boards of Directors of the respective Funds will consider other
possible courses of action. Acquired Fund shareholders are not entitled to
assert dissenters' rights of appraisal in connection with the Plan or
Reorganization. See "Voting Information -- No Dissenters' Rights of Appraisal"
below.

10
<PAGE>
DESCRIPTION OF ACQUIRING FUND SHARES

For information concerning the shares of capital stock of the Acquiring
Fund, including voting rights, see "Summary -- Capital Stock; Shareholder Voting
Rights" above. All Acquiring Fund shares issued in the Reorganization will by
fully paid and non-assessable and will not be entitled to pre-emptive or
cumulative voting rights.

FEDERAL INCOME TAX CONSEQUENCES

It is intended that the exchange of Acquiring Fund shares for the Acquired
Fund's net assets and the distribution of such shares to the Acquired Fund's
shareholders upon liquidation of the Acquired Fund will be treated as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code"),
and that, for federal income tax purposes, no income, gain or loss will be
recognized by the Acquired Fund's shareholders (except that the Acquired Fund
contemplates that it will make a distribution, immediately prior to the
Effective Time, of all of its current year net income and net realized capital
gains, if any, not previously distributed, and this distribution will be taxable
to Acquired Fund shareholders subject to taxation). The Acquired Fund has not
asked, nor does it plan to ask, the Internal Revenue Service to rule on the tax
consequences of the Reorganization.

As a condition to the closing of the Reorganization, the two Funds will
receive an opinion from Dorsey & Whitney P.L.L.P., counsel to the Funds, based
in part on certain representations to be furnished by each Fund and by Fortis,
Inc., substantially to the effect that the federal income tax consequences of
the Reorganization will be as follows:

(i) the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and the Acquiring Fund and the
Acquired Fund each will qualify as a party to the Reorganization under
Section 368(b) of the Code;

(ii) the Acquired Fund shareholders will recognize no income, gain or
loss upon receipt, pursuant to the Reorganization, of the Acquiring Fund
shares. Acquired Fund shareholders subject to taxation will recognize income
upon receipt of any net investment income or net capital gains of the
Acquired Fund which are distributed by the Acquired Fund prior to the
Effective Time;

(iii) the tax basis of the Acquiring Fund shares received by each
Acquired Fund Shareholder pursuant to the Reorganization will be equal to
the tax basis of the Acquired Fund shares exchanged therefor;

(iv) the holding period of the Acquiring Fund shares received by each
Acquired Fund shareholder pursuant to the Reorganization will include the
period during which the Acquired Fund shareholder held the Acquired Fund
shares exchanged therefor, provided that the Acquired Fund shares were held
as a capital asset at the Effective Time;

(v) the Acquired Fund will recognize no income, gain or loss by reason
of the Reorganization;

(vi) the Acquiring Fund will recognize no income, gain or loss by reason
of the Reorganization;

(vii) the tax basis of the assets received by the Acquiring Fund pursuant
to the Reorganization will be the same as the basis of those assets in the
hands of the Acquired Fund as of the Effective Time;

(viii) the holding period of the assets received by the Acquiring Fund
pursuant to the Reorganization will include the period during which such
assets were held by the Acquired Fund; and

(ix) the Acquiring Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of the Acquired
Fund as of the Effective Time.

11
<PAGE>
The foregoing advice is based in part upon certain representations furnished
by the Acquired Fund and Advisers, of which two principal ones are: (a) that
assets representing at least 90% of the fair market value of the Acquired Fund's
net assets and at least 70% of the fair market value of the Acquired Fund's
gross assets at the Effective Time are exchanged solely for Acquiring Fund
shares with unrestricted voting rights, and (b) that there are no owners of the
shares of the Acquired Fund who own 5% or more of the Acquired Fund shares with
the sole exception of the Fortis Holdings Profit Sharing Trust, and there is no
present plan or intention on the part of the Investment Committee for the Fortis
Holdings Profit Sharing Trust to sell or exchange the shares of the Acquiring
Fund received pursuant to the Reorganization, or to eliminate the Acquiring Fund
as an investment option available to participants in the Fortis Holdings Profit
Sharing Trust; and furthermore, that, to the best knowledge of management of the
Acquired Fund, there is no plan or intention on the part of the remaining
Acquired Fund shareholders to sell, exchange or otherwise dispose of a number of
Acquiring Fund shares to be received pursuant to the Reorganization that would
reduce such shareholders' interest to a number of Acquiring Fund shares having,
in the aggregate, a value as of the Effective Time of less than 50% of the total
value of the Acquired Fund shares outstanding immediately prior to the
consummation of the Reorganization.

Shareholders of the Acquired Fund should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of their
individual circumstances. Since the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, shareholders of the
Acquired Fund should consult their tax advisors as to state and local tax
consequences, if any, of the Reorganization.

RECOMMENDATION AND VOTE REQUIRED

The Board of Directors of the Acquired Fund, including the "non-interested"
directors, recommends that shareholders of the Acquired Fund approve the Plan.
Approval of the Plan will require the affirmative vote of a majority of the
outstanding shares of the Acquired Fund. Approval of the Plan by Acquired Fund
shareholders will be deemed approval of the amendment to the articles of
incorporation of Special Portfolios attached to the Plan.

INFORMATION ABOUT THE ACQUIRED FUND AND THE ACQUIRING FUND

Information concerning the Acquiring Fund and the Acquired Fund is
incorporated herein by reference from their current Prospectuses dated January
1, 1996 and March 1, 1995, respectively. The Prospectus of the Acquiring Fund
accompanies this Prospectus/Proxy Statement and forms part of the Registration
Statement of the Acquiring Fund on Form N-1A which has been filed with the
Commission. The Prospectus of the Acquired Fund may be obtained in the manner
described under "Incorporation by Reference" and forms part of the Registration
Statement of the Acquired Fund on Form N-1A which has been filed with the
Commission.

The Acquiring Fund and the Acquired Fund are subject to the informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in
accordance therewith file reports and other information including proxy
materials, reports and charter documents with the Commission. These proxy
materials, reports and other information filed by the Acquiring Fund and the
Acquired Fund can be inspected and copies obtained at the Public Reference
Facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the New York Regional Office of the Commission at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549 at prescribed rates.

12
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

GENERAL. The Acquired Fund and the Acquiring Fund are both diversified,
open-end funds with investment objectives which are similar, in that both seek
to provide shareholders with capital appreciation.

- The Acquiring Fund's investment objective is short and long-term capital
appreciation. Current income is only a secondary objective. The Acquiring
Fund uses a "growth" philosophy, i.e., it seeks to identify companies
whose earnings and revenue growth potential exceed industry averages. In
addition to superior earnings growth potential, the Acquiring Fund 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. Under normal market conditions, it is the
intention of this Fund to maintain a median market capitalization for its
portfolio of from $1 billion to $5 billion, making it a "mid cap growth
fund."

The similarity of these objectives is reflected in the median market
capitalizations of the Funds. On October 31, 1995, each Fund had a median market
capitalization of approximately $2.7 billion.

The investment policies of the Acquired Fund and the Acquiring Fund also are
substantially similar.

- Each Fund invests primarily in common stocks or securities convertible
into common stocks. Occasionally, however, limited amounts may be invested
in other types of securities (such as nonconvertible preferred and debt
securities).

- Each Fund may invest up to 10% of its assets in foreign securities.

- Neither Fund may borrow money.

In addition, both Funds may invest in repurchase agreements and variable amount
master demand notes, and may invest up to 5% of total assets in certain illiquid
securities. The similarities and differences in the respective Funds' investment
policies and restrictions with respect to particular types of instruments are
discussed in further detail under the following captions.

ILLIQUID SECURITIES. With respect to the Acquiring Fund, as a fundamental
policy that may not be changed without shareholder approval, the Fund may invest
up to 5% of its assets (at the time of investment) in each of the following: (a)
securities which it might not be free to sell to the public without registration
of such securities under the Securities Act of 1933; and (b) bonds, debentures
or other debt securities which are not publicly distributed. However, this
policy is further restricted by a nonfundamental policy that may be changed
without shareholder approval, which prohibits more than an aggregate of 5% of
the Fund's total assets from being invested in: (a) restricted securities (both
debt and equity); (b) equity securities of any issuer which are not readily
marketable; and (c) companies which have been in business for less than three
years. The Acquired Fund's policies with respect to illiquid securities are
similar. As a fundamental policy, the Acquired Fund may not invest more than an
aggregate of 5% of the value of its total assets in securities (both debt and
equity) which are not readily marketable. In addition, as a nonfundamental
policy that may be changed without shareholder approval, the Acquired Fund may
not invest more than an aggregate of 5% of the value of its total assets in (a)
securities (both debt and equity) which are not readily marketable, such

13
<PAGE>
as thinly traded common stock; and (b) companies which have been in business for
less than three years. Under the Acquired Fund's policies, "restricted"
securities that are eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and that have been determined to be liquid by the Board
of Directors of Special Portfolios or by Advisers subject to the oversight of
such Board of Directors will not be considered securities that "are not readily
marketable." Thus, the Acquired Fund's policies regarding investments in
illiquid securities are somewhat less restrictive than the policies of the
Acquiring Fund.

The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and 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 be restricted in its
ability to sell such securities at a time when Advisers deems it advisable to do
so. In addition, in order to meet redemption requests, a Fund may have to sell
other assets, rather than such illiquid securities, at a time which is not
advantageous.

REPURCHASE AGREEMENTS. Both Funds may invest in repurchase agreements.
Repurchase agreements are short-term instruments under which securities are
purchased from a bank or a securities dealer with an agreement by the seller to
repurchase the securities at a mutually agreeable date, interest rate, and
price. In investing in repurchase agreements, the Funds' risk is limited to the
ability of such seller to pay the agreed upon amount at the maturity of the
repurchase agreement. In the opinion of Advisers, such risk is not material,
since in the event of default, barring extraordinary circumstances, a Fund would
be entitled to sell the underlying securities or otherwise receive adequate
protection under Federal bankruptcy laws for its interest in such securities.
However, to the extent that proceeds from any sale upon a default were less than
the repurchase price, the Fund could suffer a loss.

VARIABLE AMOUNT MASTER DEMAND NOTES. Both Funds may invest in variable
amount master demand notes. Variable amount master demand notes allow the
investment of fluctuating amounts by the Funds at varying market rates of
interest pursuant to arrangements between the Funds and a financial institution.
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.

FOREIGN SECURITIES. Each Fund is permitted to invest up to 10% of its total
assets (at the time of investment) in foreign securities. The risks of investing
in foreign securities are discussed above under "Risk Factors" and in the
accompanying Acquiring Fund Prospectus under the caption "Investment Objectives
and Policies -- Other Investment Practices of the Funds -- Foreign Securities."

SHORT-TERM MONEY MARKET INSTRUMENTS. In periods when a more defensive
position is deemed warranted, the Acquired Fund may invest in high-grade
preferred stocks, bonds, and other fixed income securities (whether or not
convertible into or carrying rights to purchase common stocks), or retain cash,
all without limitation. Similarly, the Acquiring Fund may at any time invest
funds awaiting investment or held as reserves for the purposes of satisfying
redemption requests, payment of dividends or making other distributions to
shareholders, in cash and short-term money market instruments. Short-term money
market instruments are described in the accompanying Acquiring Fund Prospectus
under the caption "Investment Objectives and Policies -- Other Investment
Practices of the Funds -- Short-Term Money Market Instruments."

OTHER. Neither Fund may borrow money. In addition, neither Fund may enter
into options, futures or forward contracts, lend its portfolio securities, enter
into delayed delivery transactions or sell securities short "against the box."

14
<PAGE>
The foregoing comparison does not purport to be a complete summary of the
investment policies and restrictions of the Acquired Fund or the Acquiring Fund.
For complete discussions of the investment policies and restrictions of the
respective Funds, see the Acquiring Fund's Prospectus accompanying this
Prospectus/Proxy Statement; the Acquired Fund's Prospectus referred to under
"Incorporation by Reference;" and the Statements of Additional Information of
the Acquired Fund and the Acquiring Fund, also referred to under such caption.

CAPITALIZATION

The following table shows the capitalization of the Acquired Fund and of the
Acquiring Fund as of October 31, 1995 and on a pro forma basis as of that date,
giving effect to the proposed Reorganization:

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING
FUND* FUND PRO FORMA
--------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
VALUES)
<S> <C> <C> <C>
CLASS A SHARES
Net assets............................................ -- $ 642,773 $ 642,773
Net asset value per share............................. -- $ 32.56 $ 32.56
Shares outstanding.................................... -- 19,743 19,743

CLASS B SHARES
Net assets............................................ -- $ 2,466 $ 2,466
Net asset value per share............................. -- $ 32.56 $ 32.56
Shares outstanding.................................... -- 76 76

CLASS C SHARES
Net assets............................................ -- $ 415 $ 415
Net asset value per share............................. -- $ 32.37 $ 32.37
Shares outstanding.................................... -- 13 13
CLASS H SHARES
Net assets............................................ -- $ 9,107 $ 9,107
Net asset value per share............................. -- $ 32.37 $ 32.37
Shares outstanding.................................... -- 281 281
CLASS Z SHARES
Net assets............................................ $ 92,634 -- $ 92,634
Net asset value per share............................. $ 42.32 -- $ 32.55
Shares outstanding.................................... 2,189 -- 2,846
<FN>
- ------------------------
* Acquired Fund shares are currently offered in a single class. Current
shares of Acquired Fund are shown as Class Z shares, since Acquired Fund
shares will be exchanged for Class Z Acquiring Fund shares in the
Reorganization.
</TABLE>

VOTING INFORMATION

GENERAL

This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of the Acquired Fund to be
used at the Special Meeting of Acquired Fund shareholders to be held at 10:00
a.m., Central time, on February 22, 1996, at the offices of Fortis Advisers,
Inc., 500 Bielenberg Drive, Woodbury, Minnesota and at any adjournments thereof.
This Prospectus/Proxy Statement, along with a Notice of Special Meeting and a
proxy card, is first being mailed to shareholders of the Acquired Fund on or
about January 22, 1996. Only shareholders of record as of the close of business
on January 4, 1996 (the "Record Date") will be entitled to notice of, and to
vote at, the Meeting or any adjournment thereof. If the enclosed form of proxy
is properly executed and returned on time to be voted at the Meeting, the
proxies named therein will vote the shares represented by the proxy in
accordance with the instructions marked thereon. Unmarked proxies will be voted
"for" the proposed Plan and Reorganization. A proxy may be revoked by giving
written notice, in person or by mail, of revocation before the Meeting to the
Acquired Fund at its

15
<PAGE>
principal executive offices, 500 Bielenberg Drive, Woodbury, Minnesota (mailing
address: P.O. Box 64284, St. Paul, Minnesota 55164) or by properly executing and
submitting a later-dated proxy, or by voting in person at the Meeting.

If a shareholder executes and returns a proxy but abstains from voting, the
shares held by such shareholder will be deemed present at the Meeting for
purposes of determining a quorum and will be included in determining the total
number of votes cast. If a proxy is received from a broker or nominee indicating
that such person has not received instructions from the beneficial owner or
other person entitled to vote Acquired Fund shares (I.E., a broker "non-vote"),
the shares represented by such proxy will not be considered present at the
Meeting for purposes of determining a quorum and will not be included in
determining the number of votes cast. Brokers and nominees will not have
discretionary authority to vote shares for which instructions are not received
from the beneficial owner.

Approval of the Plan and Reorganization will require the affirmative vote
described above under "Information About the Reorganization -- Recommendation
and Vote Required."

As of November 30, 1995 (i) the Acquired Fund had 2,196,152 shares
outstanding and entitled to vote at the Meeting; (ii) the Acquiring Fund had the
following numbers of shares outstanding: Class A, 19,739,398 shares; Class B,
88,958 shares; Class C, 14,629 shares; and Class H, 304,499 shares; and (iii)
the directors and officers of the respective Funds as a group owned less than
one percent of the outstanding shares of each Fund or any class thereof. The
following table sets forth information concerning those persons known by the
respective Funds to own of record or beneficially more than 5% of the
outstanding shares of either Fund, or more than 5% of the outstanding shares of
any class of the Acquiring Fund, as indicated, as of such date, including
persons and entities who beneficially own more than 25% of either Fund or any
class thereof. Unless otherwise indicated, the persons named below have both
record and beneficial ownership:

<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF RECORD HOLDER OWNERSHIP
- -------------------------------------------------- ---------
<S> <C>

ACQUIRED FUND
Fortis Holdings Profit Sharing Trust* .......... 56%
Marshall & Ilsley Trust Co., Trustee
1000 North Water Street
Milwaukee, Wisconsin 53202-3197

ACQUIRING FUND:
CLASS A
None

CLASS B
First Trust National Association C/F 5%
Terrance L. Twedt IRA........................
P.O. Box 309
Pacific City, Oregon 97135-0309
Lincoln County Colorado 7%
Employee Retirement Plan*....................
P.O. Box 67
Hugo, Colorado 80821-0067

CLASS C
First Trust National Association C/F/ 13%
Carol S. Atha Rollover IRA...................
R.R. 7, Box 246
Fairmont, West Virginia 26554-8925
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF RECORD HOLDER OWNERSHIP
- -------------------------------------------------- ---------
<S> <C>

ACQUIRING FUND (CONTINUED):
CLASS H
None
</TABLE>

- ------------------------
* Record ownership only.

Proxies are solicited by mail. Additional solicitations may be made by
telephone or personal contact by officers or employees of Advisers and its
affiliates without cost to the Funds. In addition, the services of a third-party
proxy solicitation firm may be utilized, with such firm's fees and expenses
allocated between and borne by the Acquired Fund and the Acquiring Fund as
described under "Information About the Reorganization -- Plan of Reorganization"
above.

In the event that sufficient votes to approve the Plan and Reorganization
are not received by the date set for the Meeting, the persons named as proxies
may propose one or more adjournments of the Meeting for up to 120 days to permit
further solicitation of proxies. In determining whether to adjourn the Meeting,
the following factors may be considered: the percentage of votes actually cast,
the percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote at the Meeting. The persons named as proxies will vote upon
such adjournment after consideration of the best interests of all shareholders.

INTERESTS OF CERTAIN PERSONS

The following persons affiliated with the Funds receive payments from the
Acquired Fund and the Acquiring Fund for services rendered pursuant to
contractual arrangements with the Funds: Fortis Advisers, Inc. as the investment
adviser, transfer agent and dividend agent to each Fund, receives payments for
its investment advisory and management services; and Fortis Investors, Inc., a
subsidiary of Advisers, receives payments for providing distribution services to
the Acquiring Fund.

NO DISSENTERS' RIGHTS OF APPRAISAL

Under the Investment Company Act, Acquired Fund shareholders are not
entitled to assert dissenters' rights of appraisal in connection with the Plan
or Reorganization.

FINANCIAL STATEMENTS AND EXPERTS

The audited statements of assets and liabilities, including the schedules of
investments in securities, of the Acquired Fund as of October 31, 1995, and of
the Acquiring Fund as of August 31, 1995, and the related statements of
operations for the years then ended, the statements of changes in net assets for
each of the periods indicated therein, and the financial highlights for the
periods indicated therein, as included in the Annual Reports of the Acquired
Fund for the fiscal year ended October 31, 1995 and the Acquiring Fund for the
fiscal year ended August 31, 1995, respectively, have been incorporated by
reference into this Prospectus/Proxy Statement in reliance on the reports of
KPMG Peat Marwick LLP, independent auditors for the Funds, given on the
authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters concerning the issuance of the shares of the Acquiring
Fund to be issued in the Reorganization will be passed upon by Dorsey & Whitney
P.L.L.P., 220 South Sixth Street, Minneapolis, Minnesota 55402.

17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PROSPECTUS/PROXY STATEMENT
JANUARY 22, 1996
PROPOSED ACQUISITION OF ASSETS OF
STOCK PORTFOLIO
A SEPARATELY MANAGED SERIES OF
SPECIAL PORTFOLIOS, INC.
BY AND IN EXCHANGE FOR SHARES OF
FORTIS GROWTH FUND, INC.

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

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

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation by Reference..................... 3
Summary........................................ 4
Risk Factors................................... 8
Information About the Reorganization........... 9
Information About the Acquired Fund and the
Acquiring Fund................................ 12
Voting Information............................. 15
Financial Statements and Experts............... 17
Legal Matters.................................. 17
Exhibit A -- Agreement and Plan of
Reorganization................................
</TABLE>

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

The following documents accompany this Prospectus/Proxy Statement:

Prospectus dated January 1, 1996 of Fortis Growth Fund, Inc.

Annual Report of Fortis Growth Fund, Inc. for the fiscal year ended August 31,
1995.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A TO PROSPECTUS/PROXY STATEMENT

AGREEMENT AND PLAN OF REORGANIZATION
STOCK PORTFOLIO AND FORTIS GROWTH FUND, INC.

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made as of
this day of , 1995, by and between Special Portfolios, Inc. ("SPECIAL
PORTFOLIOS"), a Minnesota corporation, on behalf of Stock Portfolio (the
"ACQUIRED FUND"), a series of Special Portfolios, and Fortis Growth Fund, Inc.,
a Minnesota corporation (the "ACQUIRING FUND"). The shares of the Acquired Fund
designated in the amended and restated articles of incorporation of Special
Portfolios are referred to herein by the name set forth in the bylaws of Special
Portfolios, as follows:

<TABLE>
<CAPTION>
DESIGNATION IN ARTICLES
OF SPECIAL PORTFOLIOS NAME ASSIGNED IN BYLAWS
- ------------------------------------ -----------------------
<S> <C>
Series A............................ Stock Portfolio
</TABLE>

This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation pursuant to Sections 368(a)(1)(C) and 368(a)(2)(G) of the United
States Internal Revenue Code of 1986, as amended (the "CODE"). The
reorganization (the "REORGANIZATION") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund to the Acquiring Fund and
the assumption by the Acquiring Fund of all of the liabilities of the Acquired
Fund in exchange solely for full and fractional shares of common stock, par
value $.01 per share, of the Acquiring Fund (the "ACQUIRING FUND SHARES"),
having an aggregate net asset value equal to the aggregate value of the assets
acquired (less liabilities assumed) of the Acquired Fund, and the distribution
of the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth. The distribution of Acquiring Fund Shares to
Acquired Fund shareholders and the retirement and cancellation of the Acquired
Fund's shares will be effected pursuant to an amendment to the articles of
incorporation of Special Portfolios in the form attached hereto as Exhibit 1
(the "AMENDMENT") to be adopted by Special Portfolios in accordance with the
Minnesota Business Corporation Act.

WITNESSETH:

WHEREAS, each of Special Portfolios and the Acquiring Fund is a registered,
open end management investment company, with Special Portfolios offering its
shares of common stock in multiple series (each of which series represents a
separate and distinct portfolio of assets and liabilities) and the Acquiring
Fund offering its shares of common stock in a single series;

WHEREAS, Special Portfolios offers shares of the Acquired Fund in a single
class and the Acquiring Fund offers shares in multiple classes which will, at
the time the transactions contemplated hereby are consummated, include Class Z
shares;

WHEREAS, the Acquired Fund owns securities which generally are assets of the
character in which the Acquiring Fund is permitted to invest; and

WHEREAS, the Board of Directors of each of the Acquired Fund and the
Acquiring Fund has determined that the exchange of all or substantially all of
the assets of the Acquired Fund for Acquiring Fund Shares and the assumption of
all of the liabilities of the Acquired Fund by the Acquiring Fund is in the best
interests of the shareholders of the Acquired Fund and the Acquiring Fund,
respectively.

1
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:

1. TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE ACQUIRED FUND TO
THE ACQUIRING FUND SOLELY IN EXCHANGE FOR ACQUIRING FUND SHARES, THE
ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE
ACQUIRED FUND

1.1 Subject to the requisite approval by Acquired Fund shareholders and to
the other terms and conditions set forth herein and in the Amendment and on the
basis of the representations and warranties contained herein, the Acquired Fund
agrees to transfer all or substantially all of the Acquired Fund's assets as set
forth in Section 1.2 to the Acquiring Fund, and the Acquiring Fund agrees in
exchange therefor (a) to deliver to the Acquired Fund that number of full and
fractional Class Z Acquiring Fund Shares determined in accordance with Article
2, and (b) to assume all of the liabilities of the Acquired Fund, as set forth
in Section 1.3. Such transactions shall take place as of the effective time
provided for in Section 3.1 (the "EFFECTIVE TIME").

1.2(a) The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all or substantially all of Acquired Fund's property,
including, but not limited to, all cash, securities, commodities, futures, and
interest and dividends receivable which are owned by the Acquired Fund as of the
Effective Time. All of said assets shall be set forth in detail in an unaudited
statement of assets and liabilities of the Acquired Fund as of the Effective
Time (the "EFFECTIVE TIME STATEMENT"). The Effective Time Statement shall, with
respect to the listing of the Acquired Fund's portfolio securities, detail the
adjusted tax basis of such securities by lot, the respective holding periods of
such securities and the current and accumulated earnings and profits of the
Acquired Fund. The Effective Time Statement shall be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied from the prior audited period.

(b) The Acquired Fund has provided the Acquiring Fund with a list of all
of the Acquired Fund's assets as of the date of execution of this Agreement. The
Acquired Fund reserves the right to sell any of these securities in the ordinary
course of its business and, subject to Section 5.1, to acquire additional
securities in the ordinary course of its business.

1.3 The Acquiring Fund shall assume all of the liabilities, expenses, costs,
charges and reserves (including, but not limited to, expenses incurred in the
ordinary course of the Acquired Fund's operations, such as accounts payable
relating to custodian fees, investment management and administrative fees, legal
and audit fees, and expenses of state securities registration of the Acquired
Fund's shares), including those reflected in the Effective Time Statement.

1.4 Immediately after the transfer of assets provided for in Section 1.1 and
the assumption of liabilities provided for in Section 1.3, and pursuant to the
plan of reorganization adopted herein and in the Amendment, the Acquired Fund
will distribute pro rata (as provided in Article 2) to the Acquired Fund's
shareholders of record, determined as of the Effective Time (the "ACQUIRED FUND
SHAREHOLDERS"), the Class Z Acquiring Fund Shares received by the Acquired Fund
pursuant to Section 1.1, and all other assets of the Acquired Fund, if any.
Thereafter, no additional shares representing interests in the Acquired Fund
shall be issued. Such distribution will be accomplished by the transfer of the
Class Z Acquiring Fund Shares then credited to the account of the Acquired Fund
on the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund shareholders representing the
numbers of Class Z Acquiring Fund Shares due each such shareholder. All issued
and outstanding shares of the Acquired Fund will simultaneously be canceled on
the books of the Acquired Fund, although share certificates representing
interests in the Acquired Fund will represent those numbers of Class Z Acquiring
Fund Shares after the Effective Time as determined in accordance with Article 2.
Unless requested by Acquired Fund shareholders, the Acquiring Fund will not
issue certificates representing the Acquiring Fund Shares issued in connection
with such exchange.

2
<PAGE>
1.5 Ownership of Class Z Acquiring Fund Shares will be shown on the books of
the Acquiring Fund. Class Z Acquiring Fund Shares will be issued in the manner
described in the Acquiring Fund's Prospectus and Statement of Additional
Information as in effect as of the Effective Time. Accordingly, such Class Z
Acquiring Fund Shares will not be subject to any front-end or deferred sales
charges, any Rule 12b-1 distribution fees, or any shareholder servicing fees.

1.6 Any reporting responsibility of the Acquired Fund, including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "COMMISSION"),
any state securities commissions, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.

2. VALUATION; ISSUANCE OF ACQUIRING FUND SHARES

2.1 The net asset value per share of the Acquired Fund's shares shall be
computed as of the Effective Time using the valuation procedures set forth in
its articles of incorporation and bylaws, its then-current Prospectus and
Statement of Additional Information, and as may be required by the Investment
Company Act of 1940, as amended (the "1940 ACT").

2.2 The total number of Class Z Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the assets and liabilities
of the Acquired Fund shall have an aggregate net asset value equal to the
aggregate net asset value of the Acquired Fund's shares immediately prior to the
Effective Time, as determined pursuant to Section 2.1.

2.3 Immediately after the Effective Time, the Acquired Fund shall distribute
to the Acquired Fund shareholders in liquidation of the Acquired Fund pro rata
(based upon the ratio that the number of Acquired Fund shares owned by each
Acquired Fund shareholder immediately prior to the Effective Time bears to the
total number of issued and outstanding Acquired Fund shares immediately prior to
the Effective Time) the full and fractional Class Z Acquiring Fund Shares
received by the Acquired Fund pursuant to Section 2.2. Accordingly, each
Acquired Fund shareholder shall receive, immediately after the Effective Time,
Class Z Acquiring Fund Shares with an aggregate net asset value equal to the
aggregate net asset value of the Acquired Fund shares owned by such Acquired
Fund shareholder immediately prior to the Effective Time.

3. EFFECTIVE TIME; CLOSING

3.1 The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall occur as of the close of normal trading on the New York Stock
Exchange (the "EXCHANGE") (currently, 4:00 p.m. Eastern time) on the first day
upon which the conditions to closing shall have been satisfied (but not prior to
March 1, 1996), or at such time on such later date as provided herein or as the
parties otherwise may agree in writing (such time and date being referred to
herein as the "EFFECTIVE TIME"). All acts taking place at the Closing shall be
deemed to take place simultaneously as of the Effective Time unless otherwise
agreed to by the parties. The Closing shall be held at the offices of Dorsey &
Whitney P.L.L.P., 220 South Sixth Street, Minneapolis, Minnesota 55402, or at
such other place as the parties may agree.

3.2 The Acquired Fund shall deliver at the Closing its written instructions
to the custodian for the Acquired Fund, acknowledged and agreed to in writing by
such custodian, irrevocably instructing such custodian to transfer to the
Acquiring Fund all of the Acquired Fund's portfolio securities, cash, and any
other assets to be acquired by the Acquiring Fund pursuant to this Agreement.

3.3 In the event that the Effective Time occurs on a day on which (a) the
Exchange or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to trading or trading
thereon shall be restricted, or (b) trading or the reporting of trading on the
Exchange or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of

3
<PAGE>
the Acquiring Fund or the Acquired Fund is impracticable, the Effective Time
shall be postponed until the close of normal trading on the Exchange on the
first business day when trading shall have been fully resumed and reporting
shall have been restored.

3.4 The Acquired Fund shall deliver at the Closing its certificate stating
that the records maintained by its transfer agent (which shall be made available
to the Acquiring Fund) contain the names and addresses of the Acquired Fund
shareholders and the number of outstanding Acquired Fund shares owned by each
such shareholder as of the Effective Time. The Acquiring Fund shall certify at
the Closing that the Acquiring Fund Shares required to be issued by it pursuant
to this Agreement have been issued and delivered as required herein. At the
Closing, each party shall deliver to the other such bills of sale, liability
assumption agreements, checks, assignments, share certificates, if any, receipts
or other documents as such other party or its counsel may reasonably request.

4. REPRESENTATIONS, WARRANTIES AND COVENANTS

4.1 The Acquired Fund represents, warrants and covenants to the Acquiring
Fund as follows:

(a) Special Portfolios is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota;

(b) Special Portfolios is a registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of each series
of shares offered by Special Portfolios under the Securities Act of 1933, as
amended (the "1933 ACT"), is in full force and effect;

(c) Shares of the Acquired Fund are registered in all jurisdictions in
which they are required to be registered under state securities laws and any
other applicable laws; said registrations, including any periodic reports or
supplemental filings, are complete and current; all fees required to be paid
in connection with such registrations have been paid; and the Acquired Fund
is in good standing, is not subject to any stop orders, and is fully
qualified to sell its shares in any state in which its shares have been
registered;

(d) The Prospectus and Statement of Additional Information of the
Acquired Fund, as of the date hereof and up to and including the Effective
Time, conform and will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not and will not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;

(e) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of Special
Portfolios' articles of incorporation or bylaws or of any material
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquired Fund is a party or by which it is bound;

(f) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to the
best of the Acquired Fund's knowledge, threatened against the Acquired Fund
or any of its properties or assets. The Acquired Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;

(g) The Statement of Assets and Liabilities of the Acquired Fund as of
the end of its most recently concluded fiscal year has been audited by KPMG
Peat Marwick LLP, independent accountants, and is in accordance with
generally accepted accounting principles consistently applied, and such
statement (a copy of which has been furnished to the Acquiring Fund)
presents

4
<PAGE>
fairly, in all material respects, the financial position of the Acquired
Fund as of such date, and there are no known material contingent liabilities
of the Acquired Fund as of such date not disclosed therein;

(h) Since the end of the Acquired Fund's most recently concluded fiscal
year, there has not been any material adverse change in the Acquired Fund's
financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of business, except as otherwise disclosed
to the Acquiring Fund. For the purposes of this paragraph (h), a decline in
net asset value per share of the Acquired Fund, the discharge or incurrence
of Acquired Fund liabilities in the ordinary course of business, or the
redemption of Acquired Fund shares by Acquired Fund shareholders, shall not
constitute such a material adverse change;

(i) All material federal and other tax returns and reports of the
Acquired Fund required by law to have been filed prior to the Effective Time
shall have been filed and shall be correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquired Fund's knowledge, no such return
is currently under audit and no assessment shall have been asserted with
respect to such returns;

(j) For each taxable year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company, and the Acquired Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company for its final, partial taxable year;

(k) All issued and outstanding shares of the Acquired Fund are, and at
the Effective Time will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the Effective Time, be held by the persons and in the
amounts set forth in the records of the Acquired Fund, as provided in
Section 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquired Fund
shares, and there is not outstanding any security convertible into any
Acquired Fund shares;

(l) At the Effective Time, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to Section 1.2 and full right, power, and authority
to sell, assign, transfer and deliver such assets hereunder, and upon
delivery of and payment for such assets, the Acquiring Fund will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933
Act other than as disclosed to the Acquiring Fund in the Effective Time
Statement;

(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on
the part of the Acquired Fund's Board of Directors, and, subject to the
approval of the Acquired Fund shareholders, this Agreement will constitute a
valid and binding obligation of the Acquired Fund, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws relating to
or affecting creditors' rights and to the application of equitable
principles in any proceeding, whether at law or in equity;

(n) The information to be furnished by and on behalf of the Acquired
Fund for use in registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects;

(o) All information pertaining to the Acquired Fund, its agents and
affiliates and Special Portfolios and included in the Registration Statement
referred to in Section 5.5 (or supplied by the Acquired Fund or its agents
or affiliates for inclusion in said Registration Statement), on the
effective date of said Registration Statement and up to and including the
Effective Time, will not

5
<PAGE>
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements are made,
not materially misleading (other than as may timely be remedied by further
appropriate disclosure);

(p) Since the end of the Acquired Fund's most recently concluded fiscal
year, there have been no material changes by the Acquired Fund in accounting
methods, principles or practices, including those required by generally
accepted accounting principles, except as disclosed in writing to the
Acquiring Fund; and

(q) The Effective Time Statement will be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied and will present accurately the assets and liabilities of the
Acquired Fund as of the Effective Time, and the values of the Acquired
Fund's assets and liabilities to be set forth in the Effective Time
Statement will be computed as of the Effective Time using the valuation
procedures set forth in the Acquired Fund's articles of incorporation and
bylaws, its then-current Prospectus and Statement of Additional Information,
and as may be required by the 1940 Act. At the Effective Time, the Acquired
Fund will have no liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued, which are not reflected in the Effective Time
Statement.

4.2 The Acquiring Fund represents, warrants and covenants to the Acquired
Fund as follows:

(a) The Acquiring Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota;

(b) The Acquiring Fund is a registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of its shares
offered under the 1933 Act, is in full force and effect;

(c) Shares of the Acquiring Fund are registered in all jurisdictions in
which they are required to be registered under state securities laws and any
other applicable laws; said registrations, including any periodic reports or
supplemental filings, are complete and current; all fees required to be paid
in connection with such registrations have been paid; and the Acquiring Fund
is in good standing, is not subject to any stop orders, and is fully
qualified to sell its shares in any state in which its shares have been
registered;

(d) The Prospectus and Statement of Additional Information of the
Acquiring Fund, as of the date hereof and up to and including the Effective
Time, conform and will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not and will not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;

(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its
articles of incorporation or bylaws or of any material agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring Fund
is a party or by which it is bound;

(f) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to the
best of the Acquiring Fund's knowledge, threatened against the Acquiring
Fund or any of its properties or assets. The Acquiring Fund is not a party
to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated;

6
<PAGE>
(g) The Statement of Assets and Liabilities of the Acquiring Fund as of
the end of its most recently concluded fiscal year has been audited by KPMG
Peat Marwick LLP, independent accountants, and is in accordance with
generally accepted accounting principles consistently applied, and such
statement (a copy of which has been furnished to the Acquired Fund) presents
fairly, in all material respects, the financial position of the Acquiring
Fund as of such date, and there are no known material contingent liabilities
of the Acquiring Fund as of such date not disclosed therein;

(h) Since the end of the Acquiring Fund's most recently concluded fiscal
year, there has not been any material adverse change in the Acquiring Fund's
financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of business, except as otherwise disclosed
to the Acquired Fund. For the purposes of this paragraph (h), a decline in
net asset value per share of the Acquiring Fund, the discharge or incurrence
of Acquiring Fund liabilities in the ordinary course of business, or the
redemption of Acquiring Fund shares by Acquiring Fund shareholders, shall
not constitute such a material adverse change;

(i) All material federal and other tax returns and reports of the
Acquiring Fund required by law to have been filed prior to the Effective
Time shall have been filed and shall be correct, and all federal and other
taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Acquiring Fund's knowledge, no such
return is currently under audit and no assessment shall have been asserted
with respect to such returns;

(j) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company, and the Acquiring Fund intends to meet
the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company in the current and future years;

(k) All issued and outstanding shares of the Acquiring Fund are, and at
the Effective Time will be, duly and validly issued and outstanding, fully
paid and non-assessable. The Acquiring Fund Shares to be issued and
delivered to the Acquired Fund for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, at the Effective Time
will have been duly authorized and, when so issued and delivered, will be
duly and validly issued and outstanding, fully paid and non-assessable. The
Acquiring Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any Acquiring Fund shares, and there is
not outstanding any security convertible into any Acquiring Fund shares
(other than Class B and Class H shares which automatically convert to Class
A shares after a specified period);

(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on
the part of the Acquiring Fund's Board of Directors, and at the Effective
Time this Agreement will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws relating to or affecting creditors'
rights and to the application of equitable principles in any proceeding,
whether at law or in equity. Consummation of the transactions contemplated
by this Agreement does not require the approval of the Acquiring Fund's
shareholders;

(m) The information to be furnished by and on behalf of the Acquiring
Fund for use in registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects;

(n) Since the end of the Acquiring Fund's most recently concluded fiscal
year, there have been no material changes by the Acquiring Fund in
accounting methods, principles or practices, including those required by
generally accepted accounting principles, except as disclosed in writing to
the Acquired Fund; and

7
<PAGE>
(o) The Registration Statement referred to in Section 5.5, on its
effective date and up to and including the Effective Time, will (i) conform
in all material respects to the applicable requirements of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the 1940
Act and the rules and regulations of the Commission thereunder, and (ii) not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were
made, not materially misleading (other than as may timely be remedied by
further appropriate disclosure); provided, however, that the representations
and warranties in clause (ii) of this paragraph shall not apply to
statements in (or omissions from) the Registration Statement concerning the
Acquired Fund, its agents and affiliates and Fortis Advisers (or supplied by
the Acquired Fund, its agents or affiliates for inclusion in said
Registration Statement).

5. FURTHER COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND

5.1 Each of the Acquired Fund and the Acquiring Fund will operate its
business in the ordinary course between the date hereof and the Effective Time,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, and any other
distributions that may be advisable (which may include distributions prior to
the Effective Time of net income and/or net realized capital gains not
previously distributed). The Acquired Fund agrees that through the Effective
Time, it will not acquire any securities which are not permissible investments
for the Acquiring Fund.

5.2 The Acquired Fund will call a meeting of its shareholders to consider
and act upon this Agreement and the Amendment and to take all other action
necessary to obtain approval of the transactions contemplated herein.

5.3 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.

5.4 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all actions, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.

5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary with respect to the Acquired Fund and its agents and
affiliates for the preparation of the Registration Statement on Form N-14 of the
Acquiring Fund (the "REGISTRATION STATEMENT"), in compliance with the 1933 Act,
the 1934 Act and the 1940 Act.

5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
state blue sky or securities laws as may be necessary in order to conduct its
operations after the Effective Time.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND

The obligations of the Acquired Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder at or
before the Effective Time, and, in addition thereto, the following further
conditions (any of which may be waived by the Acquired Fund, in its sole and
absolute discretion):

6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time;

8
<PAGE>
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or a Vice President, in a form
reasonably satisfactory to the Acquired Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquiring
Fund made in this Agreement are true and correct at the Effective Time, except
as they may be affected by the transactions contemplated by this Agreement, and
as to such other matters as the Acquired Fund shall reasonably request; and

6.3 The Acquiring Fund shall have delivered to the Acquired Fund the
certificate as to the issuance of Acquiring Fund Shares contemplated by the
second sentence of Section 3.4.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND

The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder at or
before the Effective Time and, in addition thereto, the following conditions
(any of which may be waived by the Acquiring Fund, in its sole and absolute
discretion):

7.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time;

7.2 The Acquiring Fund shall have received, and certified as to its receipt
of, the Effective Time Statement;

7.3 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by its President or a Vice President, in a form
reasonably satisfactory to the Acquiring Fund and dated as of the date of the
Closing, to the effect that the representations and warranties of the Acquired
Fund made in this Agreement are true and correct at the Effective Time, except
as they may be affected by the transactions contemplated by this Agreement, and
as to such other matters as the Acquiring Fund shall reasonably request;

7.4 The Acquired Fund shall have delivered to the Acquiring Fund the written
instructions to the custodian for the Acquired Fund contemplated by Section 3.2;

7.5 The Acquired Fund shall have delivered to the Acquiring Fund the
certificate as to its shareholder records contemplated by the first sentence of
Section 3.4;

7.6 At or prior to the Effective Time, the Acquired Fund's investment
adviser, or an affiliate thereof, shall have reimbursed the Acquired Fund by the
amount, if any, that the expenses incurred by the Acquired Fund (or accrued up
to the Effective Time) exceed any applicable contractual or state-imposed
expense limitations; and

7.7 Immediately prior to the Effective Time, the Acquired Fund shall not
hold any securities which are not permissible investments for the Acquiring
Fund.

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND

The following shall constitute further conditions precedent to the
consummation of the Reorganization:

8.1 This Agreement, the Amendment and the transactions contemplated herein
and therein shall have been approved by the requisite vote of the holders of the
outstanding shares of the Acquired Fund in accordance with the provisions of its
articles of incorporation and bylaws and applicable law, and certified copies of
the resolutions evidencing such approval shall have been delivered to the
Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this
Section 8.1;

9
<PAGE>
8.2 As of the Effective Time, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;

8.3 All consents of other parties and all other consents, orders and permits
of federal, state and local regulatory authorities deemed necessary by the
Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;

8.4 The Registration Statement shall have become effective under the 1933
Act, and no stop order suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;

8.5 The parties shall have received the opinion of Dorsey & Whitney P.L.L.P.
addressed to the Acquired Fund and the Acquiring Fund, dated as of the date of
the Closing, and based in part on certain representations to be furnished by the
Acquired Fund, the Acquiring Fund, and their investment adviser and other
service providers, substantially to the effect that:

(ii) the Acquired Fund shareholders will recognize no income, gain or
loss upon receipt, pursuant to the Reorganization, of the Acquiring Fund
Shares. Acquired Fund shareholders subject to taxation will recognize income
upon receipt of any net investment income or net capital gains of the
Acquired Fund which are distributed by the Acquired Fund prior to the
Effective Time;

(iii) the tax basis of the Acquiring Fund Shares received by each
Acquired Fund shareholder pursuant to the Reorganization will be equal to
the tax basis of the Acquired Fund shares exchanged therefor;

(iv) the holding period of the Acquiring Fund Shares received by each
Acquired Fund shareholder pursuant to the Reorganization will include the
period during which the Acquired Fund shareholder held the Acquired Fund
shares exchanged therefor, provided that the Acquired Fund shares were held
as a capital asset at the Effective Time;

(v) the Acquired Fund will recognize no income, gain or loss by reason
of the Reorganization;

(vi) the Acquiring Fund will recognize no income, gain or loss by reason
of the Reorganization;

(viii) the holding period of the assets received by the Acquiring Fund
pursuant to the Reorganization will include the period during which such
assets were held by the Acquired Fund; and

(ix) the Acquiring Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of the Acquired
Fund as of the Effective Time; and

8.6 The Amendment shall have been filed in accordance with the applicable
provisions of Minnesota law.

10
<PAGE>
8.7 A certificate of designation establishing and setting forth the terms of
the Class Z Acquiring Fund Shares shall have been filed in accordance with the
applicable provisions of Minnesota law.

9. EXPENSES; INDEMNIFICATION

9.1 All expenses incurred by the parties hereto in connection with the
transactions contemplated hereby (including, without limitation, the fees and
expenses associated with the preparation and filing of the Registration
Statement referred to in Section 5.5 above and the expenses of printing and
mailing the prospectus/proxy statement, soliciting proxies and holding the
Acquired Fund shareholders meeting required to approve the transactions
contemplated hereby) shall be allocated between and borne by the Acquired Fund
and the Acquiring Fund in proportion to their relative net assets at the
Effective Time. Such expenses, and the allocation thereof, shall be reflected in
the calculation of the Aquired Fund's net asset value pursuant to Section 2.1.

9.2 The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's directors and officers from and against any
and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which, jointly or severally, the Acquired Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquiring Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.

9.3 The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's directors and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which, jointly or severally, the Acquiring Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.

10. ENTIRE AGREEMENT; SURVIVAL OF REPRESENTATIONS AND WARRANTIES

10.1 The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty, covenant or agreement not set forth herein
and that this Agreement constitutes the entire agreement between the parties.

10.2 The representations and warranties contained in this Agreement or in
any document delivered pursuant hereto or in connection herewith shall survive
the consummation of the transactions contemplated hereby.

11. TERMINATION

This Agreement and the transactions contemplated hereby may be terminated
and abandoned by either party by resolution of the party's board of directors at
any time prior to the Effective Time, if circumstances should develop that, in
the good faith opinion of such board, make proceeding with this Agreement and
such transactions not in the best interest of the applicable party's
shareholders.

12. AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund shareholders called by the Acquired Fund pursuant
to Section 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Acquiring Fund Shares to
be issued to Acquired Fund shareholders under this Agreement to the detriment of
such shareholders without their further approval.

11
<PAGE>
13. NOTICES

Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered or mailed by registered mail, postage prepaid, addressed to the
Acquiring Fund or the Acquired Fund, 500 Bielenberg Drive, Woodbury, Minnesota
55125.

14. HEADINGS; COUNTERPARTS; ASSIGNMENT; MISCELLANEOUS

14.1 The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same agreement.

14.3 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the prior written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.

14.4 The validity, interpretation and effect of this Agreement shall be
governed exclusively by the laws of the State of Minnesota, without giving
effect to the principles of conflict of laws thereof.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President.

SPECIAL PORTFOLIOS, INC.
on behalf of its
STOCK PORTFOLIO

By ___________________________________

Its __________________________________

FORTIS GROWTH FUND, INC.

By ___________________________________

Its __________________________________

12
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SPECIAL PORTFOLIOS, INC.

The undersigned officer of Special Portfolios, Inc. (the "Corporation"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that the Corporation's Board of Directors and shareholders, at
meetings held December 7, 1995 and , 1996, respectively, adopted the
resolutions hereinafter set forth; and such officer further certifies that the
amendments to the Corporation's Amended and Restated Articles of Incorporation
set forth in such resolutions were adopted pursuant to said Chapter 302A.

WHEREAS, the Corporation is registered as an open end management investment
company (i.e., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in several series, each of which represents
a separate and distinct portfolio of assets; and

WHEREAS, it is desirable and in the best interests of the holders of the
Series A shares of the Corporation (also known as the "Stock Portfolio")
that the assets belonging to such series be sold to Fortis Growth Fund, Inc.
("Fortis Growth"), a Minnesota corporation and an open end management
investment company registered under the Investment Company Act of 1940, in
exchange for shares of Fortis Growth; and

WHEREAS, the Corporation wishes to provide for the pro rata distribution of
such shares of Fortis Growth received by it to holders of shares of the
Corporation's Stock Portfolio and the simultaneous cancellation and
retirement of the outstanding shares of the Corporation's Stock Portfolio;
and

WHEREAS, the Corporation and Fortis Growth have entered into an Agreement
and Plan of Reorganization providing for the foregoing transactions; and

WHEREAS, the Agreement and Plan of Reorganization requires that, in order to
bind all holders of shares of the Corporation's Stock Portfolio to the
foregoing transactions, and in particular to bind such holders to the
cancellation and retirement of the outstanding shares of the Corporation's
Stock Portfolio, it is necessary to adopt an amendment to the Corporation's
Amended and Restated Articles of Incorporation.

NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Amended and Restated
Articles of Incorporation be, and the same hereby are, amended to add the
following Article 5A immediately following Article 5 thereof:

5A. (a) For purposes of this Article 5A, the following terms shall have
the following meanings:

"CORPORATION" means this corporation.

"FORTIS GROWTH" means Fortis Growth Fund, Inc., a Minnesota corporation.

"ACQUIRED FUND" means the Corporation's Stock Portfolio, which is
represented by the Corporation's Series A shares.

"ACQUIRED FUND SHARES" means the Corporation's Series A shares.

"ACQUIRING FUND" means Fortis Growth.

"CLASS Z ACQUIRING FUND SHARES" means Fortis Growth's Class Z shares.

"EFFECTIVE TIME" means 4:00 p.m. Eastern time on the date upon which
these Articles of Amendment are filed with the Minnesota Secretary of
State.

(b) At the Effective Time, the assets belonging to the Acquired Fund,
the Special Liabilities associated with such assets, and the General Assets
and General Liabilities allocated to the
<PAGE>
Acquired Fund, shall be sold to and assumed by the Acquiring Fund in return
for Class Z Acquiring Fund Shares, all pursuant to the Agreement and Plan of
Reorganization between the Corporation and Fortis Growth relating thereto.
For purposes of the foregoing, the terms "assets belonging to," "Special
Liabilities," "General Assets" and "General Liabilities" have the meanings
assigned to them in Article 7(b), (c) and (d) of the Corporation's Amended
and Restated Articles of Incorporation.

(c) The numbers of Class Z Acquiring Fund Shares to be received by the
Acquired Fund and distributed by it to the respective Acquired Fund
shareholders shall be determined as follows:

(i) The net asset value per share of the Acquired Fund Shares shall
be computed as of the Effective Time using the valuation procedures set
forth in its articles of incorporation and bylaws, its then-current
Prospectus and Statement of Additional Information, and as may be
required by the Investment Company Act of 1940, as amended.

(ii) The total number of Class Z Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the assets and
liabilities of the Acquired Fund shall have an aggregate net asset value
equal to the aggregate net asset value of the Acquired Fund Shares
immediately prior to the Effective Time, as determined pursuant to (i)
above.

(iii) Immediately after the Effective Time, the Acquired Fund shall
distribute to the Acquired Fund shareholders in liquidation of the
Acquired Fund pro rata (based upon the ratio that the number of Acquired
Fund Shares owned by each Acquired Fund shareholder immediately prior to
the Effective Time bears to the total number of issued and outstanding
Acquired Fund Shares immediately prior to the Effective Time) the full
and fractional Class Z Acquiring Fund Shares received by the Acquired
Fund pursuant to (i) and (ii) above. Accordingly, each Acquired Fund
shareholder shall receive, immediately after the Effective Time, Class Z
Acquiring Fund Shares with an aggregate net asset value equal to the
aggregate net asset value of the Acquired Fund Shares owned by such
Acquired Fund shareholder immediately prior to the Effective Time.

(d) The distribution of Class Z Acquiring Fund Shares to Acquired Fund
shareholders provided for in paragraph (c) above shall be accomplished by
the issuance of such Class Z Acquiring Fund Shares to open accounts on the
share records of the Acquiring Fund in the names of the Acquired Fund
shareholders representing the numbers of Class Z Acquiring Fund Shares due
each such shareholder pursuant to the foregoing provisions. All issued and
outstanding Acquired Fund Shares shall simultaneously be canceled on the
books of the Acquired Fund and retired. From and after the Effective Time,
share certificates formerly representing Acquired Fund Shares shall
represent the numbers of Class Z Acquiring Fund Shares determined in
accordance with the foregoing provisions.

(e) From and after the Effective Time, the Acquired Fund Shares canceled
and retired pursuant to paragraph (d) above shall have the status of
authorized and unissued Series A shares of the Corporation.

IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed
these Articles of Amendment on behalf of the Corporation on , 1996.

SPECIAL PORTFOLIOS, INC.
By ___________________________________
Its __________________________________

2
<PAGE>
[LOGO]
SOLID ANSWERS FOR A CHANGING WORLD-REGISTERED TRADEMARK-

FORTIS STOCK FUNDS
PROSPECTUS
Dated January 1, 1996

Mailing Address:

P.O. Box 64284
St. Paul
Minnesota 55164
Street Address:

500 Bielenberg Drive
Woodbury
Minnesota 55125
Telephone: (612) 738-4000
Toll Free: 1-(800) 800-2638 Ext. 3012

This Prospectus concisely sets forth the information a prospective investor
should know about the Funds before investing. Investors should retain this
Prospectus for future reference. The Funds have filed a Statement of Additional
Information (also dated January 1, 1996) with the Securities and Exchange
Commission. The Statement of Additional Information is available free of charge
from Fortis Investors, Inc. ("Investors") at the above mailing address of the
Funds, and is incorporated by reference into this Prospectus in accordance with
the Commission's rules.

SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK: ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY: AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C>
ASSET ALLOCATION

VALUE

GROWTH & INCOME

CAPITAL

FIDUCIARY

GROWTH

CAPITAL APPRECIATION
</TABLE>

<PAGE>
The investment objectives of the Funds offered in this Prospectus are as
follows:

The ASSET ALLOCATION PORTFOLIO'S investment objective is maximum total return on
invested capital, to be derived mainly from capital appreciation, dividends and
interest. The Fund follows a flexible asset allocation strategy and invests in
equity securities, debt securities and money market instruments. ("ASSET
ALLOCATION")

The VALUE FUND'S investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund invests
primarily in equity securities and selects stocks based on a concept of
fundamental value. Under normal market conditions, it is the intention of this
Fund to maintain a median market capitalization for its portfolio of over $1
billion. ("MID TO LARGE CAP VALUE")

The GROWTH & INCOME FUND'S investment objectives are capital appreciation and
current income. The Fund invests primarily in equity securities that provide an
income component. Under normal market condtions, it is the intention of this
Fund to maintain a median market capitalization for its portfolio of greater
than $5 billion ("LARGE CAP GROWTH & INCOME")

The CAPITAL FUND'S investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund invests
primarily in equity securities and selects stocks based upon their growth
potential. Under normal market conditions, it is the intention of this Fund to
maintain a median market capitalization for its portfolio of greater than $5
billion. ("LARGE CAP GROWTH")

The FIDUCIARY FUND'S investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund invests
primarily in equity securities and selects stocks based upon their growth
potential. Under normal market conditions, it is the intention of this Fund to
maintain a median market capitalization for its portfolio of over $1 billion.
("MID TO LARGE CAP GROWTH")

The GROWTH FUND'S investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund invests
primarily in equity securities and selects stocks based upon their growth
potential. Under normal market conditions, it is the intention of this Fund to
maintain a median market capitalization for its portfolio of from $1 billion to
$5 billion ("MID CAP GROWTH")

The CAPITAL APPRECIATION PORTFOLIO'S investment objective is maximum long term
capital appreciation. Dividend and interest income from investments, if any, is
incidental. The Fund invests primarily in equity securities and selects stocks
based upon their growth potential. Under normal market conditions, it is the
intention of this Fund to maintain a median market capitalization for its
portfolio of less than $1 billion ("SMALL CAP GROWTH")

For information on "growth" and "value" investing as well as "median market
capitalization" see "Investment Objectives and Policies".

TABLE OF CONTENTS

PAGE
Class Shares.............................................................. 3
Summary of Fund Expenses.................................................. 4
Financial Highlights...................................................... 7
Organization and Classification........................................... 11
Investment Objectives and Policies........................................ 12
Management................................................................ 19
- Board of Directors.................................................. 19
- The Investment Adviser/Transfer Agent/Dividend Agent................ 19
- The Underwriter and Distribution Expenses........................... 19
- Fund Expenses....................................................... 20
- Brokerage Allocation................................................ 20
Valuation of Securities................................................... 20
Capital Stock............................................................. 21
Dividends and Capital Gains Distributions................................. 21
Taxation.................................................................. 21
How To Buy Fund Shares.................................................... 21
- General Purchase Information........................................ 21
- Alternative Purchase Arrangements................................... 22
- Class A Shares--Initial Sales Charge Alternative.................... 22
- Class B and H Shares--Contingent Deferred Sales Charge
Alternatives...................................................... 24
- Class C Shares--Level Sales Charge Alternative...................... 24
- Class Z Shares (Effective March 1, 1996 for Growth Fund only)....... 25
- Special Purchase Plans for all Classes.............................. 25
Redemption................................................................ 25
- Contingent Deferred Sales Charge.................................... 26
Shareholder Inquiries..................................................... 27
ACH Authorization Agreement............................................... 28
Application............................................................... 29

No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus, and if given or made, such information or representations
must not be relied upon as having been authorized by the Funds or Investors.
This Prospectus does not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized, or in which the
person making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation.

2
<PAGE>
CLASS SHARES

Each Fund offers investors the choice of four classes of shares with different
sales charges and expenses. These alternatives permit choosing the most
beneficial method of purchasing shares given the amount of the purchase, the
length of time the investor expects to hold the shares, and other circumstances.

CLASS A SHARES. Generally, an investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed (except for sales at net asset value in
excess of $1 million which may be subject to a contingent deferred sales
charge). The initial sales charge may be reduced or waived for certain
purchases. Class A shares are subject to an annual Rule 12b-1 fee of .25% of
average daily net assets attributable to Class A shares (.45% on Class A shares
of the Asset Allocation and Capital Appreciation Portfolios.) This fee is lower
than the other classes and therefore Class A shares have lower expenses and pay
higher dividends. See "How to Buy Fund Shares--Class A Shares."

CLASS B AND H SHARES. The only difference between Class B and H shares is the
percentage of dealer concession paid to dealers. This difference does not in any
way affect the charges on an investor's shares. Class B and H shares both are
sold without an initial sales charge, but are subject to a contingent deferred
sales charge of 4% if redeemed within two years of purchase, with declining
charges for redemptions thereafter up to six years after purchase. Class B and H
shares are also subject to a higher annual Rule 12b-1 fee than Class A
shares--1.00% of the applicable Fund's average daily net assets attributable to
Class B or H shares, as applicable. However, after eight years, Class B and H
shares automatically will be converted to Class A shares at no charge to the
investor, resulting in a lower Rule 12b-1 fee thereafter. Class B and H shares
provide the benefit of putting all dollars to work from the time of investment,
but will have a higher expense ratio and pay lower dividends than Class A shares
due to the higher Rule 12b-1 fee and any other class specific expenses. See "How
to Buy Fund Shares--Class B and H Shares."

CLASS C SHARES. As with Class B and H shares, Class C shares: 1) are sold
without an initial sales charge, but are subject to a contingent deferred sales
charge; 2) are subject to the higher annual Rule 12b-1 fee of 1.00% of the
applicable Fund's average daily net assets attributable to Class C shares; and
3) provide the benefit of putting all dollars to work from the time of
investment, but will have a higher expense ratio and pay lower dividends than
Class A shares due to the higher Rule 12b-1 fee and any other class specific
expenses. While Class C shares, unlike Classes B and H, do not convert to Class
A shares, they are subject to a lower contingent deferred sales charge (1%) than
Class B or H shares and do not have to be held for as long a time (one year) to
avoid paying the contingent deferred sales charge. See "How to Buy Fund
Shares--Class C Shares."

CLASS Z SHARES. Beginning March 1, 1996, Growth Fund will also have Class Z
shares, which will not be subject to a Rule 12b-1 fee and therefore will have
the lowest expenses and pay the highest dividends. However, Class Z shares will
only be available for investment to shareholders of Special Portfolios, Inc.'s
Stock Portfolio on that date, when their Stock Portfolio shares will be
exchanged for Class Z shares of Growth Fund, and to the following:

1) officers, directors, employees, retirees, sales representatives, agents,
shareholders, and certain other persons closely identified with Fortis, Inc.
or its affiliates;

2) officers and directors of the Fund; or

3) pension, profit sharing, and other retirement plans created for the
benefit of any of the above persons.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER THINGS,
(1) the length of time you expect to hold your investment, (2) the amount of any
applicable sales charge (whether imposed at the time of purchase or redemption)
and Rule 12b-1 fees, as noted above, (3) whether you qualify for any reduction
or waiver of any applicable sales charge--if you are exempt from the sales
charge, you must invest in Class A shares (or, where applicable, Class Z
shares), (4) the various exchange privileges among the different classes of
shares and (5) the fact that Class B and H shares automatically convert to Class
A shares eight years after purchase.

3
<PAGE>
SUMMARY OF FUND EXPENSES

The Funds' front-end and asset-based sales charges are within the limitations
imposed by the NASD. Such charges are shown below:

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
CLASS A CLASS B AND H CLASS C CLASS Z
SHARES SHARES SHARES SHARES ****
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)................................................................ 4.75%* 0.00%** 0.00%** 0.00%
Maximum Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable).......................... *** 4.00% 1.00% 0.00%
</TABLE>

- ------------------------
*Since the Funds also pay an asset based sales charge, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by NASD rules.
**Class B, H, and C shares are sold without a front end sales charge, but
their contingent deferred sales charge and Rule 12b-1 fees may cause
long-term shareholders to pay more than the economic equivalent of the
maximum permitted front end sales charges.
***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 "How to Buy Fund
Shares--Class A Shares."
****Only available for Growth Fund.

The purpose of the tables set forth below is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear, whether directly or indirectly. For a more complete description of the
various costs and expenses, see "Management" and "How to Buy Fund Shares".

ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
CLASS A CLASS B, H
ASSET ALLOCATION PORTFOLIO SHARES AND C SHARES
- -------------------------- ------- -------------
<S> <C> <C>
Management Fees..................................................... .96% .96%
12b-1 fees.......................................................... .45% 1.00%
Other Expenses...................................................... .16% .16%
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.57% 2.12%
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H
VALUE FUND SHARES AND C SHARES
- ----------- ------- -------------
<S> <C> <C>
Management Fees..................................................... 1.00% 1.00%
12b-1 fees.......................................................... .25% 1.00%
Other Expenses...................................................... .12%* .12%*
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.37% 2.12%
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H
GROWTH & INCOME FUND SHARES AND C SHARES
- ----------------------- ------- -------------
<S> <C> <C>
Management Fees..................................................... 1.00% 1.00%
12b-1 fees.......................................................... .25% 1.00%
Other Expenses...................................................... .12%* .12%*
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.37% 2.12%
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H
CAPITAL FUND SHARES AND C SHARES
- ------------ ------- -------------
<S> <C> <C>
Management Fees..................................................... .87% .87%
12b-1 fees.......................................................... .25% 1.00%
Other Expenses...................................................... .12% .12%
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.24% 1.99%
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H
FIDUCIARY FUND SHARES AND C SHARES
- --------------- ------- -------------
<S> <C> <C>
Management Fees..................................................... 1.00% 1.00%
12b-1 fees.......................................................... .25% 1.00%
Other Expenses...................................................... .37% .37%
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.62% 2.37%
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H CLASS Z
GROWTH FUND SHARES AND C SHARES SHARES**
- ------------ ------- ------------- -------
<S> <C> <C> <C>
Management Fees..................................................... .78% .78% .78%
12b-1 fees.......................................................... .25% 1.00% .00%
Other Expenses...................................................... .10% .10% .10%
------- --- -------
TOTAL FUND OPERATING EXPENSES..................................... 1.13% 1.88% .88%
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B, H
CAPITAL APPRECIATION PORTFOLIO SHARES AND C SHARES
- ------------------------------- ------- -------------
<S> <C> <C>
Management Fees..................................................... 1.00% 1.00%
12b-1 fees.......................................................... .45% 1.00%
Other Expenses...................................................... .24% .24%
------- ---
TOTAL FUND OPERATING EXPENSES..................................... 1.69% 2.24%
</TABLE>

- ------------------------
*The "other expenses" for these Funds, which commence operations on January 1,
1996, are based on Capital Fund's actual "other expenses" for fiscal year
1995. Since Capital Fund, Value Fund and Growth & Income Fund are all part of
Fortis Equity Portfolios, Inc., the expectation is that the "other expenses"
for all three Funds will be similar.
**This information is based upon Class A's actual expenses for fiscal year 1995.

EXAMPLE

You would pay the following expenses on a $1,000 investment over various time
periods assuming: (1) 5% annual return; and (2) redemption at the end of each
time period. This example includes conversion of Class B and H shares to Class A
shares after eight years and a waiver of deferred sales charges on Class B and H
shares of 10% of the amount invested. See "Contingent Deferred Sales
Charge--Class B, H, and C Shares."

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $63 $95 $129 $225
Class B and H Shares.................. $58 $93 $132 $231
Class C Shares........................ $32 $66 $114 $245
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $22 $66 $114 $231
Class C Shares........................ $22 $66 $114 $245
</TABLE>

<TABLE>
<CAPTION>
VALUE FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $61 $89 $119 $204
Class B and H Shares.................. $58 $93 $132 $226
Class C Shares........................ $32 $66 $114 $245
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $22 $66 $114 $226
Class C Shares........................ $22 $66 $114 $245
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
GROWTH & INCOME FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $61 $89 $119 $204
Class B and H Shares.................. $58 $93 $132 $226
Class C Shares........................ $32 $66 $114 $245
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
CAPITAL FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $60 $85 $112 $190
Class B and H Shares.................. $56 $89 $125 $212
Class C Shares........................ $30 $62 $107 $232
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $20 $62 $107 $212
Class C Shares........................ $20 $62 $107 $232
</TABLE>

<TABLE>
<CAPTION>
FIDUCIARY FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $63 $ 96 $131 $231
Class B and H Shares.................. $60 $101 $145 $252
Class C Shares........................ $34 $ 74 $127 $271
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $24 $74 $127 $252
Class C Shares........................ $24 $74 $127 $271
</TABLE>

<TABLE>
<CAPTION>
GROWTH FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $58 $82 $107 $178
Class B and H Shares.................. $55 $86 $120 $201
Class C Shares........................ $29 $59 $102 $220
Class Z Shares........................ $ 9 $28 $ 49 $108
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $19 $59 $102 $201
Class C Shares........................ $19 $59 $102 $220
</TABLE>

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares........................ $64 $98 $135 $238
Class B and H Shares.................. $59 $97 $138 $244
Class C Shares........................ $33 $70 $120 $257
</TABLE>

Assuming no redemption, the Class B, H, and C expenses on the same investment
would be as follows:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares.................. $23 $70 $120 $244
Class C Shares........................ $23 $70 $120 $257
</TABLE>

The above examples use 1995 historical data as a basis for the estimated
expenses of the time periods indicated and should not be considered a
representation of past or future expenses or performance. Actual expenses may be
greater or less than those shown.

6
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

The information below has been derived from audited financial statements and
should be read in conjunction with the financial statements of the applicable
Fund and the independent auditor's report of KPMG Peat Marwick LLP found in the
Funds' 1995 Annual Report to Shareholders which may be obtained without charge.
No information is presented for the Value and Growth & Income Funds since they
did not commence operations until January 1, 1996.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEN MONTHS
ENDED YEAR ENDED OCTOBER 31,
ASSET ALLOCATION AUGUST 31, ------------------------------------------------------------------
PORTFOLIO--CLASS A SHARES 1995 1994 1993 1992 1991 1990 1989 1988***
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $14.44 $15.43 $14.00 $13.34 $10.72 $11.91 $10.37 $10.00
- ----------------------------------------------------------------------------------------------------------------------
Operations:
Investment
income--net........... .43 .37 .42 .53 .50 .42 .45 .32
Net realized and
unrealized gain (loss)
on investments........ 2.14 (.31) 1.52 .96 2.37 (1.00) 1.54 .05
- ----------------------------------------------------------------------------------------------------------------------
Total from operations.... 2.57 .06 1.94 1.49 2.87 (.58) 1.99 .37
- ----------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income--net........... (.40) (.33) (.51) (.82) (.25) (.61) (.45) --
From net realized
gains................. (.09) (.72) -- -- -- -- -- --
Excess distributions of
net realized gains.... -- -- -- (.01) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders............ (.49) (1.05) (.51) (.83) (.25) (.61) (.45) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period.................. $16.52 $14.44 $15.43 $14.00 $13.34 $10.72 $11.91 $10.37
- ----------------------------------------------------------------------------------------------------------------------
Total return**........... 18.25% 0.48% 14.20% 11.55% 27.25% (5.27%) 20.10% 3.80%
Net assets at end of
period (000's
omitted)................ $132,939 $119,395 $108,488 $89,674 $27,270 $21,691 $8,820 $6,889
Ratio of expenses to
average daily net
assets.................. 1.57%* 1.55% 1.58% 1.58% 1.83% 1.98% 1.95% 1.95%*
Ratio of net investment
income to average daily
net assets.............. 3.31%* 2.60% 2.90% 4.05% 4.11% 3.89% 4.62% 5.55%*
Portfolio turnover
rate.................... 94% 94% 103% 45% 64% 112% 67% 52%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
NINE AND ONE-HALF MONTH PERIOD
FROM
NOVEMBER 14, 1994 THROUGH
AUGUST 31, 1995
CLASS B CLASS H CLASS C
ASSET ALLOCATION PORTFOLIO SHARES SHARES SHARES
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $14.27 $14.27 $14.27
- ----------------------------------------------------------------------------------
Operations:
Investment income--net.......................... .39 .39 .39
Net realized and unrealized gains (losses) on
investments.................................... 2.26 2.24 2.21
- ----------------------------------------------------------------------------------
Total from operations............................. 2.65 2.63 2.60
- ----------------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net..................... (.37) (.37) (.37)
From net realized gains......................... (.09) (.09) (.09)
- ----------------------------------------------------------------------------------
Total distributions to shareholders............... (.46) (.46) (.46)
- ----------------------------------------------------------------------------------
Net asset value, end of period.................... $16.46 $16.44 $16.41
- ----------------------------------------------------------------------------------
Total Return*..................................... 19.00% 18.86% 18.64%
Net assets at end of period (000's omitted) $692 $4,676 $777
Ratio of expenses to average daily net assets..... 2.12%* 2.12%* 2.12%*
Ratio of net investment income to average daily
net assets....................................... 2.52%* 2.54%* 2.52%*
Portfolio turnover rate........................... 94%+ 94%+ 94%+
- ----------------------------------------------------------------------------------
</TABLE>

* Annualized.
** These are total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
*** January 4, 1988 to October 31, 1988.
+ For the period ended August 31, 1995. Portfolio turnover is computed at the
fund level.

7
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NINE-MONTH
PERIOD ENDED
CAPITAL FUND-- YEAR ENDED AUGUST 31, AUGUST 31, YEAR ENDED NOVEMBER 30,
CLASS A SHARES 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $18.36 $18.12 $17.86 $16.50 $13.55 $16.30 $11.63 $12.24 $14.04 $11.87
- ------------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment
income--net.... .08 .07 .14 .13 .13 .23 .21 .19 .13 .12
Net realized and
unrealized
gains (losses)
on
investments.... 3.62 1.73 1.25 1.63 4.03 (1.92) 4.69 1.04 (.93) 3.30
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
operations....... 3.70 1.80 1.39 1.76 4.16 (1.69) 4.90 1.23 (.80) 3.42
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income--net.... (.08) (.12) (.09) (.11) (.18) (.25) (.23) (.17) (.10) (.19)
From net
realized
gains.......... (.76) (1.44) (1.04) (.29) (1.03) (.81) -- (1.67) (.90) (1.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total
distributions to
shareholders..... (.84) (1.56) (1.13) (.40) (1.21) (1.06) (.23) (1.84) (1.00) (1.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period.... $21.22 $18.36 $18.12 $17.86 $16.50 $13.55 $16.30 $11.63 $12.24 $14.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total return**.... 21.49% 10.56% 7.88% 10.77% 33.36% (10.99%) 42.53% 11.36% (7.31%) 29.63%
Net assets end of
period (000's
omitted)......... $291,263 $245,776 $246,369 $223,865 $191,390 $143,367 $142,459 $110,168 $116,303 $106,745
Ratio of expenses
to average daily
net assets....... 1.24% 1.21% 1.22% 1.23% 1.28%* 1.25% 1.09% 1.11% 1.07% 1.06%
Ratio of net
investment income
to average daily
net assets....... .42% .41% .77% .72% 1.19%* 1.66% 1.42% 1.59% .91% .93%
Portfolio turnover
rate............. 14% 41% 68% 18% 34% 62% 42% 92% 76% 80%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
NINE AND ONE-HALF MONTH PERIOD
FROM
NOVEMBER 14, 1994 THROUGH
AUGUST 31, 1995
CLASS B CLASS H CLASS C
CAPITAL FUND SHARES SHARES SHARES
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $18.35 $18.35 $18.35
- ----------------------------------------------------------------------------------
Operations:
Investment income--net.......................... -- -- --
Net realized and unrealized gains (losses) on
investments.................................... 3.58 3.58 3.57
- ----------------------------------------------------------------------------------
Total from operations............................. 3.58 3.58 3.57
- ----------------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net..................... (.03) (.03) (.03)
From realized gains............................. (.76) (.76) (.76)
- ----------------------------------------------------------------------------------
Total distributions to shareholders............... (.79) (.79) (.79)
- ----------------------------------------------------------------------------------
Net asset value, end of period.................... $21.14 $21.14 $21.13
- ----------------------------------------------------------------------------------
Total Return**.................................... 20.74% 20.74% 20.68%
Net assets end of period (000's omitted).......... $1,527 $4,052 $344
Ratio of expenses to average daily net assets..... 1.99%* 1.99%* 1.99%*
Ratio of net investment income (loss) to average
daily net assets................................. (.36%)* (.37%)* (.36%)*
Portfolio turnover rate........................... 14%+ 14%+ 14%+
- ----------------------------------------------------------------------------------
</TABLE>

* Annualized.
** These are total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
+ For the period ended August 31, 1995. Portfolio turnover is calculated at the
fund level.

8
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EIGHT-MONTH
FIDUCIARY PERIOD ENDED
FUND--CLASS A YEAR ENDED AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31,
SHARES 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
beginning of
period............ $30.23 $30.07 $28.74 $26.77 $20.27 $25.96 $18.67 $17.57 $18.82 $17.80
- -------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income
(loss)--net..... (.16) (.14) (.09) .04 .06 .22 .18 .14 .03 --
Net realized and
unrealized gains
(losses)
on
investments..... 6.68 2.99 3.11 2.68 6.48 (3.09) 7.32 1.09 .11 3.29
- -------------------------------------------------------------------------------------------------------------------------
Total from
operations........ 6.52 2.85 3.02 2.72 6.54 (2.87) 7.50 1.23 .14 3.29
- -------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income--net..... -- -- -- (.11) (.02) (.24) (.18) (.12) (.06) (.17)
From net realized
gains........... (1.21) (2.69) (1.69) (.64) (.02) (2.58) (.03) (.01) (1.33) (2.10)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders... (1.21) (2.69) (1.69) (.75) (.04) (2.82) (.21) (.13) (1.39) (2.27)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period..... $35.54 $30.23 $30.07 $28.74 $26.77 $20.27 $25.96 $18.67 $17.57 $18.82
- -------------------------------------------------------------------------------------------------------------------------
Total return**..... 22.71% 10.17% 10.58% 10.28% 32.23% (11.07%) 40.30% 7.01% .38% 19.93%
Net assets end of
period (000's
omitted).......... $63,195 $48,833 $47,543 $43,504 $39,367 $30,517 $33,647 $29,720 $33,151 $20,918
Ratio of expenses
to average daily
net assets........ 1.62% 1.45% 1.45% 1.47% 1.46%* 1.44% 1.42% 1.55% 1.39% 1.50%
Ratio of net
investment income
(loss) to average
daily net
assets............ (.53%) (.45%) (.31%) .14% .42%* 1.00% .67% .69% .23% .21%
Portfolio turnover
rate.............. 12% 25% 53% 26% 34% 68% 41% 97% 79% 82%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NINE AND ONE-HALF MONTH
PERIOD FROM
NOVEMBER 14, 1994 THROUGH
AUGUST 31, 1995
CLASS B CLASS H CLASS C
FIDUCIARY FUND SHARES SHARES SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $30.15 $30.15 $30.15
- --------------------------------------------------------------------------------
Operations:
Investment income (loss)--net................... (.13) (.17) (.12)
Net realized and unrealized gains (losses) on
investments.................................... 6.54 6.58 6.58
- --------------------------------------------------------------------------------
Total from operations............................. 6.41 6.41 6.46
- --------------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net..................... -- -- --
From net realized gains......................... (1.21) (1.21) (1.21)
- --------------------------------------------------------------------------------
Total distributions to shareholders............... (1.21) (1.21) (1.21)
- --------------------------------------------------------------------------------
Net asset value, end of period.................... $35.35 $35.35 $35.40
- --------------------------------------------------------------------------------
Total Return**.................................... 22.38% 22.38% 22.55%
Net assets at end of period (000's omitted)....... $473 $1,481 $272
Ratio of expenses to average daily net assets..... 2.37%* 2.37%* 2.37%*
Ratio of net investment income (loss) to average
daily net assets................................. (1.31%)* (1.29%)* (1.31%)*
Portfolio turnover rate........................... 12%+ 12%+ 12%+
- --------------------------------------------------------------------------------
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EIGHT-MONTH
GROWTH FUND-- PERIOD ENDED
CLASS A YEAR ENDED AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31,
SHARES 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
period...... $26.25 $29.09 $24.31 $24.40 $17.47 $20.92 $15.04 $14.07 $16.37 $14.37
- -----------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment
income
(loss)--net... (.04) (.10) (.06) .05 -- .24 .05 .10 .07 .03
Net
realized
and
unrealized
gain
(losses)
on
investments... 6.95 (.88) 5.52 1.16 6.93 (1.55) 6.36 .99 .05 2.71
- -----------------------------------------------------------------------------------------------------------------------------------
Total from
operations... 6.91 (.98) 5.46 1.21 6.93 (1.31) 6.41 1.09 .12 2.74
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions
to
shareholders:
From
investment
income--net... -- -- (.04) (.02) -- (.24) (.05) (.09) (.12) (.15)
From net
realized
gains..... (.50) (1.86) (.64) (1.28) -- (1.90) (.48) (.03) (2.30) (.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (.50) (1.86) (.68) (1.30) -- (2.14) (.53) (.12) (2.42) (.74)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset
value, end
of period... $32.66 $26.25 $29.09 $24.31 $24.40 $17.47 $20.92 $15.04 $14.07 $16.37
- -----------------------------------------------------------------------------------------------------------------------------------
Total
return**.... 26.92% (3.77%) 22.69% 4.72% 39.67% (6.31%) 42.76% 7.76% (.30%) 19.80%
Net assets
end of
period
(000's
omitted).... $670,753 $558,589 $585,117 $473,258 $325,901 $237,182 $232,005 $189,810 $196,772 $160,974
Ratio of
expenses to
average
daily net
assets...... 1.13% 1.09% 1.10% 1.13% 1.20%* 1.21% 1.01% 1.05% .99% 1.00%
Ratio of net
investment
income
(loss) to
average
daily net
assets...... (.13%) (.36%) (.20%) .24% (.03%)* 1.30% .23% .64% .43% .29%
Portfolio
turnover
rate........ 27% 23% 49% 33% 33% 58% 43% 102% 80% 72%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
NINE AND ONE-HALF MONTH
PERIOD FROM
NOVEMBER 14, 1994 THROUGH
AUGUST 31, 1995
CLASS B CLASS H CLASS C
GROWTH FUND SHARES SHARES SHARES
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $25.85 $25.85 $25.85
- ----------------------------------------------------------------------
Operations:
Investment income (loss)--net......... (.13) (.11) (.10)
Net realized and unrealized gains
(losses) on investments.............. 7.26 7.25 7.24
- ----------------------------------------------------------------------
Total from operations................... 7.13 7.14 7.14
- ----------------------------------------------------------------------
Distributions to shareholders:
From investment income--net........... -- -- --
From net realized gains............... (.50) (.50) (.50)
- ----------------------------------------------------------------------
Total distributions to shareholders..... (.50) (.50) (.50)
- ----------------------------------------------------------------------
Net asset value, end of period.......... $32.48 $32.49 $32.49
- ----------------------------------------------------------------------
Total Return**.......................... 28.17% 28.21% 28.21%
Net assets at end of period (000's
omitted)............................... $2,179 $6,867 $264
Ratio of expenses to average daily net
assets................................. 1.88%* 1.88%* 1.88%*
Ratio of net investment income (loss) to
average daily net assets............... (1.09%)* (1.10%)* (1.10%)*
Portfolio turnover rate................. 27%+ 27%+ 27%+
- ----------------------------------------------------------------------
</TABLE>

* Annualized.

** These are total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.

+ For the period ended August 31, 1995. Portfolio turnover is calculated at the
fund level.

10
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEN
MONTHS
CAPITAL APPRECIATION ENDED YEAR ENDED OCTOBER 31,
PORTFOLIO-- AUGUST -----------------------------------------------------------------
CLASS A SHARES 31, 1995 1994 1993 1992 1991 1990 1989 1988****
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $23.05 $27.38 $19.85 $19.80 $11.58 $15.44 $10.80 $10.00
- ----------------------------------------------------------------------------------------------------------------------
Operations:
Investment income
(loss)-net***......... (.17) (.12) (.30) (.17) (.14) (.07) .05 .06
Net realized and
unrealized gain (loss)
on investments........ 7.79 (2.45) 7.83 .22 8.36 (3.06) 4.70 .74
- ----------------------------------------------------------------------------------------------------------------------
Total from operations.... 7.62 (2.57) 7.53 .05 8.22 (3.13) 4.75 .80
- ----------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income-net............ -- -- -- -- -- (.02) (.11) --
From net realized
gains................. -- (1.76) -- -- -- (.71) -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders............ -- (1.76) -- -- -- (.73) (.11) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period.................. $30.67 $23.05 $27.38 $19.85 $19.80 $11.58 $15.44 $10.80
- ----------------------------------------------------------------------------------------------------------------------
Total return**........... 33.06% (9.56%) 37.93% .25% 70.98% (21.21%) 44.38% 8.00%
Net assets at end of
period (000's
omitted)................ $90,918 $68,352 $58,434 $43,207 $29,992 $15,194 $13,046 $4,144
Ratio of expenses to
average daily net
assets.................. 1.69%* 1.62% 1.62% 1.68% 1.82% 1.88% 1.97% 1.95%*
Ratio of net investment
income (loss) to average
daily net assets........ (.82%)* (.61%) (1.23%) (.88%) (.97%) (.56%) .29% 1.54%*
Portfolio turnover
rate.................... 21% 36% 60% 43% 93% 62% 69% 65%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
NINE AND ONE-HALF MONTH PERIOD
FROM
NOVEMBER 14, 1994 THROUGH AUGUST
31, 1995
CLASS B CLASS H CLASS C
CAPITAL APPRECIATION PORTFOLIO SHARES SHARES SHARES
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $22.45 $22.45 $22.45
- --------------------------------------------------------------------------
Operations:
Investment income (loss)--net***...... (.35) (.36) (.36)
Net realized and unrealized gains
(losses) on investments.............. 8.47 8.49 8.49
- --------------------------------------------------------------------------
Total from operations................... 8.12 8.13 8.13
- --------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net........... -- -- --
From realized gains................... -- -- --
- --------------------------------------------------------------------------
Total distributions to shareholders..... -- -- --
- --------------------------------------------------------------------------
Net asset value, end of period.......... $30.57 $30.58 $30.58
- --------------------------------------------------------------------------
Total Return**.......................... 36.17% 36.21% 36.21%
Net assets end of period (000's
omitted)............................... $841 $2,115 $227
Ratio of expenses to average daily net
assets................................. 2.24%* 2.24%* 2.24%*
Ratio of net investment income (loss) to
average daily net assets............... (1.61%)* (1.62%)* (1.62%)*
Portfolio turnover rate................. 21%+ 21%+ 21%+
- --------------------------------------------------------------------------
</TABLE>

* Annualized.
** These are total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
*** Per share amounts compiled based upon average shares outstanding during the
period.
**** January 4, 1988 to October 31, 1988.
+ Period ended August 31, 1995. Portfolio turnover is computed at fund level.

Each Fund may advertise its "cumulative total return," "average annual total
return," "systematic investment plan cumulative total return," and "systematic
investment plan average annual total return," and may compare such figures to
recognized indices. Performance figures are calculated separately for each class
of shares, and figures for each class will be presented. Each Fund may advertise
its relative performance as compiled by outside organizations such as Lipper
Analytical or Wiesenberger, or refer to publications which have mentioned the
Fund, Advisers, or their personnel, and also may advertise other performance
items as set forth in the Statement of Additional Information. The performance
discussion required by the SEC is found in the applicable Fund's Annual Report
to Shareholders and will be made available without charge upon request.

ORGANIZATION AND CLASSIFICATION

Fortis Asset Allocation Portfolio ("Asset Allocation Portfolio") and Fortis
Capital Appreciation Portfolio ("Capital Appreciation Portfolio") are portfolios
of Fortis Advantage Portfolios, Inc. ("Fortis Advantage"). Fortis Value Fund
("Value Fund"), Fortis Growth & Income Fund ("Growth & Income Fund"), and Fortis
Capital Fund ("Capital

11
<PAGE>
Fund") are the three portfolios of Fortis Equity Portfolios, Inc. ("Fortis
Equity"). Fortis Fiduciary Fund, Inc. ("Fiduciary Fund") and Fortis Growth Fund,
Inc. ("Growth Fund") are single portfolio funds. The shares of each of these
seven portfolios/funds (collectively, the "Funds") currently are of four classes
(A, B, H, and C), each with different sales arrangements and expenses.

Fortis Advantage, Growth Fund, Fiduciary Fund, and Fortis Equity were each
incorporated under Minnesota law in 1987, 1958, 1981, and 1949, respectively,
and each is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the "1940 Act") as an "open-end diversified
management investment company".

While Fortis Advantage is currently comprised of four Portfolios-- Capital
Appreciation Portfolio, High Yield Portfolio, Asset Allocation Portfolio, and
Government Total Return Portfolio, only Asset Allocation Portfolio and Capital
Appreciation Portfolio are offered through this Prospectus.

Regarding Fortis Advantage and Fortis Equity, each portfolio is (with respect to
the other portfolio(s) in its investment company) for investment purposes, in
effect a separate investment fund. A separate series of capital shares is issued
for each portfolio. Each share issued with respect to a portfolio has a pro-rata
interest in the assets of that portfolio and has no interest in the assets of
any other portfolio. Each portfolio bears its own liabilities and also its
proportionate share of the general liabilities of its respective fund. In other
respects, each respective fund is treated as one entity.

INVESTMENT OBJECTIVES AND POLICIES

Through careful selection, broad diversification, and constant supervision, the
management of each Fund aims to limit and counteract various types of risk that
are inherent in all securities, and advance the value of the Funds' assets.
There is risk in all investments and fulfillment of the Funds' objectives cannot
be assured.

The Funds' investment objectives, which are set forth on page 2 and restated
below, could be changed without shareholder approval. While no such change is
contemplated, such a change could result in the Funds' objectives differing from
those deemed appropriate by an investor at the time of investment.

Any investment restriction or limitation, fundamental or otherwise, that
involves a maximum percentage of securities or assets 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.

In seeking to obtain their investment objectives, each Fund, except Asset
Allocation Portfolio, will invest primarily in common stock or securities
convertible into common stocks. Occasionally, however, limited amounts may be
invested in other types of securities (such as nonconvertible preferred and debt
securities). In periods when a more defensive position is deemed warranted, the
Funds may invest in high grade preferred stocks, bonds, other fixed income
securities (whether or not convertible into or carrying rights to purchase
common stock), short-term money market instruments, commercial paper,
obligations of banks or the United States Government, other high quality
short-term debt instruments, or cash, all without limitation. The Funds may
invest in both listed and unlisted securities.

Asset Allocation Portfolio, as more fully explained in "Investment Objectives
and Policies--Asset Allocation Portfolio", invests in a combination of equity
securities, debt securities and money market instruments.

It is expected that even when a Fund is "fully invested," generally a small
percentage of the Fund's assets will be held in short-term money market
instruments or cash, to pay redemption requests and Fund expenses.

INVESTMENT PHILOSOPHIES. In selecting equity securities for the Funds'
portfolios, Fortis Advisers, Inc. ("Advisers"), the investment adviser of the
Funds, uses two distinct equity investment philosophies. Specifically, Asset
Allocation Portfolio, Capital Fund, Fiduciary 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

12
<PAGE>
"value" stocks are 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.

MEDIAN MARKET CAPITALIZATION. "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 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
respective 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." For purposes of
this Prospectus, 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 to $5 billion and "large cap" portfolios to have
median market capitalizations of more than $5 billion.

As discussed on page 2 and in the "Investment Objective and Policies" for each
Fund, each Fund, except Asset Allocation Portfolio, intends to maintain its
median market capitalization within a certain range. There is, however, no
assurance that the Funds' median market capitalizations will always remain
within the designated ranges in light of constantly fluctuating market
conditions and the performance of the stocks held in the Funds' portfolios.

ASSET ALLOCATION PORTFOLIO

The Asset Allocation Portfolio's investment objective is maximum total return on
invested capital, to be derived mainly from capital appreciation, dividends and
interest.

Asset Allocation Portfolio will endeavor to achieve its investment objective by
following a flexible asset allocation strategy that contemplates shifts, which
may be frequent, among a wide range of investments and markets. Asset Allocation
Portfolio will invest in equity securities of domestic and foreign issuers,
including common stocks, preferred stocks, convertible securities, and warrants;
debt securities of domestic and foreign issuers, including bonds, debentures,
and notes; and money market instruments.

Advisers has broad latitude in selecting the class of investments and market
sectors in which the Portfolio will invest. Asset Allocation Portfolio will not
be a "balanced" fund and, therefore, will not be required continually to
maintain a portion of its investments in each of its permitted investment types.

Depending upon prevailing economic and market conditions, Asset Allocation
Portfolio may at any given time be primarily comprised of equity securities
(including debt securities convertible into equity securities), short-term money
market securities, investment grade bonds and other debt securities, or any
combination thereof. For example, during periods when Advisers believes that the
overall return on equity securities will exceed the return on debt securities,
Asset Allocation Portfolio may be fully or substantially invested in equity
securities. In contrast, Asset Allocation Portfolio normally would be invested
primarily in debt securities during periods when Advisers believes that the
total return from investing in debt securities will exceed the return on equity
securities. Finally, during periods when Advisers believes interest rates will
rise, Asset Allocation Portfolio may be primarily invested in short-term money
market securities.

Unlike shareholders of other funds, a shareholder of Asset Allocation Portfolio
confers substantially more investment discretion on the investment adviser,
enabling the investment adviser to invest in a wide variety of investment
securities.

EQUITY SECURITIES. Asset Allocation Portfolio may invest, without limitation, in
equity securities, including common stocks, preferred stocks, and securities
convertible into equity securities. In selecting investments in equity
securities for the Portfolio, Advisers uses a "growth" philosophy and primarily
looks for the potential for capital appreciation. The Portfolio generally
invests in equity securities of companies which, in Adviser's judgment, are
undervalued and show promise of substantial capital appreciation because of new
management, products, services, markets, or other factors.

CMOS AND MULTI-CLASS PASS-THROUGH SECURITIES. CMOs are debt instruments issued
by special purpose entities which are secured by pools of mortgage loans or
other mortgage-backed Securities. Multi-class pass-through securities 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 pay debt service on the CMO or make scheduled distributions on the
multi-class pass-through security. 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

13
<PAGE>
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.

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 such Portfolio shall apply equally to the Portfolio's investments
in zero coupon securities (including, for example, minimum corporate bond
ratings and percentage limitations).

MUNICIPAL SECURITIES. Asset Allocation Portfolio may invest not more than 20% of
its total assets in municipal securities during periods when such securities
appear to offer more attractive returns than taxable securities.

OTHER DEBT AND MONEY MARKET SECURITIES. In addition to its investments in equity
securities and in obligations of the United States Government, its agencies, and
instrumentalities, Asset Allocation Portfolio may invest in a variety of long,
intermediate, and short-term debt securities. Such instruments may include the
following:

(a) CORPORATE BONDS. Asset Allocation Portfolio may invest, without
limitation, in corporate bonds rated within the four highest rating grades
assigned by Moody's or S&P, or comparably rated by another nationally
recognized rating agency, and may invest up to 30% of its assets in lower
rated bonds; however, the Portfolio 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;

(b) BANK OBLIGATIONS. Asset Allocation Portfolio may invest in: (i)
obligations (including certificates of deposit and bankers acceptances) of
United States 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 United States banks, and United States 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; and

(c) COMMERCIAL PAPER. Asset Allocation Portfolio may invest, without
limitation, in commercial paper issued by United States 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 Portfolio's net assets) is U.S. dollar denominated and
not subject at the time of purchase to foreign tax withholding.

RISKS OF TRANSACTIONS IN HIGH-YIELDING SECURITIES. 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. Also, 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, Asset Allocation Portfolio may incur
additional expenses to seek recovery. In addition, periods of economic

14
<PAGE>
uncertainty and changes can be expected to result in increased volatility of
market prices of high-yielding securities and the Portfolio's asset value.
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 Portfolio's assets. If Asset Allocation Portfolio
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 such Portfolio'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
Fortis Advantage's Board of Directors to accurately value high-yielding
securities and Asset Allocation Portfolio's assets and the Portfolio'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 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 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 Asset Allocation Portfolio can meet redemption requests. The
achievement of the investment objective of Asset Allocation Portfolio may be
more dependent upon Advisers' own credit analysis than is the case for higher
quality bonds. Also, Asset Allocation Portfolio may retain a portfolio security
whose rating has been changed if the security otherwise meets the Portfolio's
investment objective and investment criteria.

As noted above, the Asset Allocation Portfolio may invest up to 30% of its
assets in lower rated bonds. The Asset Allocation Portfolio may retain a
portfolio security whose rating has been changed if the security otherwise meets
the Portfolio's investment objective and investment criteria. Lower rated bonds
in which the Asset Allocation Portfolio may invest include high yield
securities. For the fiscal period ended August 31, 1995, the weighted average
percentage of Asset Allocation Portfolio's long-term bond investments
represented by certain securities is set forth in the following table:

<TABLE>
<CAPTION>
STANDARD & POOR'S RATING PERCENT OF TOTAL
(OR EQUIVALENT) INVESTMENTS
- ---------------------------------------------- ------------------
<S> <C>
AAA........................................... 60.7%
AA............................................ 6.3%
A............................................. 4.2%
BBB........................................... 6.2%
BB............................................ 3.9%
B............................................. 15.0%
CCC........................................... 1.3%
Below CCC..................................... 0%
All unrated bonds as a group.................. 2.4%
-----
100.0%
</TABLE>

VALUE FUND

The Value Fund's investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund invests
primarily in equity securities and selects stocks based on the "value"
philosophy. Under normal market conditions, it is the intention of this Fund to
maintain a median market capitalization of over $1 billion, making it a "mid to
large cap value fund."

GROWTH & INCOME FUND

The Growth & Income Fund's investment objectives are capital appreciation and
current income. Under normal market conditions, it is the intention of the Fund
to maintain a median market capitalization of over $5 billion, making it a
"large cap fund."

Growth & Income Fund will pursue its investment objectives by investing in a
broadly diversified portfolio of primarily equity securities, with an emphasis
on securities of companies that have a history of dividend payments. Companies
will be selected on the basis of both historical and potential long-term growth
and continued dividend payments.

CAPITAL FUND

The Capital Fund's investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund uses a
"growth" philosophy and invests primarily in equity securities. Under normal
market conditions, it is the intention of this Fund to maintain a median market
capitalization for its portfolio of greater than $5 billion, making it a "large
cap growth fund." On September 30, 1995, the Fund's median market capitalization
was $6.2 billion.

15
<PAGE>
FIDUCIARY FUND

The Fiduciary Fund's investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund uses a
"growth" philosophy and invests primarily in equity securities. Under normal
market conditions, it is the intention of this Fund to maintain a median market
capitalization for its portfolio of over $1 billion, making it a "mid to large
cap growth fund." On September 30, 1995, the Fund's median market capitalization
was $6.2 billion.

GROWTH FUND

The Growth Fund's investment objective is short and long term capital
appreciation. Current income is only a secondary objective. The Fund uses a
"growth" philosophy and invests primarily in equity securities. Under normal
market conditions, it is the intention of this Fund to maintain a median market
capitalization for its portfolio of from $1 billion to $5 billion, making it a
"mid cap growth fund." On September 30, 1995, the Fund's median market
capitalization was $2.8 billion.

CAPITAL APPRECIATION PORTFOLIO

The Capital Appreciation Portfolio's investment objective is maximum long term
capital appreciation. Dividend and interest income from investments, if any, is
incidental. The Fund uses a "growth" philosophy and invests primarily in equity
securities. Under normal market conditions, it is the intention of this Fund to
maintain a median market capitalization for its portfolio of less than $1
billion, making it a "small cap growth fund." On September 30, 1995, the Fund's
median market capitalization was $0.85 billion.

Capital Appreciation Portfolio's policy is to invest, under normal
circumstances, at least 65% of its assets (exclusive of collateral in connection
with securities lending) in: (a) common stocks of small and medium-sized
companies that are early in their life cycles, but which have the potential to
become major enterprises ("emerging growth companies"); and (b) equity
securities of some 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. Emerging growth companies generally have annual gross
revenues ranging from $50 million to $300 million, would be expected to show
earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation, and would have products, management, and
market opportunities which are usually necessary to become more widely
recognized as growth companies.

While Capital Appreciation Portfolio will invest primarily in common stocks, the
Portfolio may, to a limited extent, seek appreciation in other types of
securities such as foreign or convertible securities and warrants when relative
values make such purchases appear attractive either as individual issues or as
types of securities in certain economic environments. The Portfolio may also
write covered call and secured put options and purchase call and put options on
securities and stock indexes in an effort to increase total return and for
hedging purposes, and may purchase and sell stock index futures contracts and
options thereon for hedging purposes.

The nature of investing in emerging growth companies involves greater risk than
is customarily associated with investments in more established companies.
Emerging growth companies often have limited product lines, markets, or
financial resources, and they may be dependent on one-person management. The
securities of emerging growth companies may have limited market stability and
may be subject to more abrupt or erratic market movements than securities of
larger, more established growth companies or the market averages in general.
Shares of Capital Appreciation Portfolio, therefore, are subject to greater
fluctuation in value than shares of a conservative equity fund or of a growth
fund which invests entirely in more established growth stocks.

OTHER INVESTMENT PRACTICES OF THE FUNDS

ILLIQUID SECURITIES. Policies which could be changed without shareholder
approval prohibit each Fund except Growth Fund from investing more than 5% of
its assets in securities of unseasoned issuers, including their predecessors,
which have been in operation for less than three years and each Fund, except
Growth Fund, from investing more than 15% of its net assets in all forms of
illiquid investments, as determined pursuant to applicable Securities and
Exchange Commission rules and interpretations. Securities that have been
determined to be liquid by the applicable Board of Directors, or by Advisers
subject to the oversight of such Board of Directors, will not be subject to this
limitation. Commercial paper issued pursuant to the private placement exemption
of Section 4(2) of the 1933 Act and securities that are eligible for resale
under Rule 144A under the 1933 Act that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid securities
for this purpose.

With respect to Growth Fund, a policy which may not be changed without
shareholder approval is that the Fund may invest up to 5% of its assets (at the
time of investment) in each of the following: (a) securities which it might not
be free to sell to the public without registration of such securities under the
Securities Act of 1933; and (b) in bonds, debentures or other debt securities
which are not publicly distributed. However, this policy is further restricted
by a policy which could be changed without shareholder approval, which:
prohibits more than an aggregate of 5% of the Fund's assets from being invested
in: (a) restricted securities (both debt and equity); (b) equity securities of
any issuer which are not readily marketable; and (c) companies which have been
in business for less than three years.

16
<PAGE>
MORTGAGE-RELATED SECURITIES. Asset Allocation Portfolio and Growth & Income Fund
may invest in certain types of mortgage-related
securities. Mortgage-related securities are securities that, directly or
indirectly, represent a participation in (or are secured by and payable from)
mortgage loans on real property. Mortgage-related securities may represent the
right to receive both principal and interest payments on underlying mortgages or
may represent the right to receive varying proportions of such payments. One
type of mortgage-related security includes certificates which represent pools of
mortgage loans assembled for sale to investors by various governmental and
private organizations. Another type of mortgage-related security includes debt
securities which are secured, directly or indirectly, by mortgages on commercial
or residential real estate. Such Funds may invest to a limited extent in
collateralized mortgage obligations.

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 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. The ability of the issuer of mortgage-related securities to reinvest
favorably in underlying mortgages may be limited by prevailing economic
conditions or by government regulation. Additionally, although mortgages and
mortgage-related securities are generally supported by some form of government
or private guarantee and/or insurance, there is no assurance that private
guarantors or insurers will be able to meet their obligations.

TRANSACTIONS IN OPTIONS, FUTURES, AND FORWARD CONTRACTS. Each Fund, except
Growth Fund, may, to a limited extent, enter into options, futures, and forward
contracts on a variety of investments and indexes, in order to protect against
declines in the value of Portfolio securities or increases in the cost of
securities to be acquired ("hedging") and, in the case of options on securities
or indexes of securities, to increase a Portfolio's gross income.

REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements.

BORROWINGS. Each Fund, except Growth Fund, may borrow money from banks as a
temporary measure to facilitate redemptions.

FOREIGN SECURITIES. Each Fund except Asset Allocation Portfolio may invest up to
10%, and Asset Allocation Portfolio may invest up to 20%, of its total assets
(at the time of investment) in foreign securities.

Investors should recognize that investing in foreign companies involves certain
considerations, including those discussed below, which are not typically
associated with investing in the United States issuers. Since the indicated
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 indicated 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 indicated 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 be 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 United States 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 material portion of
the Fund's investment securities may be listed on foreign stock exchanges which
may trade

17
<PAGE>
on other days (such as a Saturday). As a result, the Fund's net asset values may
be materially affected by such trading on days when a shareholder has no access
to the Funds.

VARIABLE AMOUNT MASTER DEMAND NOTES. Each Fund may invest in variable amount
master demand notes.

DELAYED DELIVERY TRANSACTIONS. Each of the Funds, except Growth Fund, may
purchase securities on a "when issued" or delayed delivery basis and purchase or
sell securities on a "forward commitment" basis.

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 equal to no less than the market value,
determined daily, of the securities loaned. Such Funds will receive amounts
equal to dividends or interest on the securities loaned. The Funds will also
earn income for having made the loan. Any cash collateral pursuant to these
loans will be invested in short-term money market instruments. Management will
limit such lending to not more than 33 1/3% percent of the value of each Fund's
total assets. ("Total assets" of a Fund includes 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. Apart from lending its
securities, investing in repurchase agreements, and acquiring debt securities,
as described in the Prospectus and Statement of Additional Information, the
Funds will not make loans to other persons.

INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE INVESTMENT TRUSTS. Each
of the Funds, except Growth Fund, may invest in equity or debt real estate
investment trusts ("REITs"), real estate development and real estate operating
companies, and other real estate related businesses. The Funds intend to invest
the REIT portion of its portfolio primarily in equity REITs, which are trusts
that sell shares to investors and use the proceeds to invest in real estate or
interest 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 REITs 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, equity REITs may be dependent upon management skill and may be
subject to the risks of obtaining adequate financing for projects on favorable
terms. With the exception of Growth & Income Fund, the Funds will limit their
investment in REITs to 10% of their total assets and to publicly distributed
REITs.

SHORT SALES AGAINST THE BOX. Each of the Funds, except Growth Fund, may sell a
security short to the extent the Fund contemporaneously owns or has the right to
obtain equivalent securities. Such a short sale is referred to as a short sale
"against the box."

SHORT-TERM MONEY MARKET INSTRUMENTS. Each of the Funds may at any time invest
funds awaiting investment or held as reserves for the purposes of satisfying
redemption requests, payment of dividends or making other distributions to
shareholders, in cash and short-term money market instruments. Short-term money
market 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,
United States and foreign banks, (iii) commercial paper of U.S. or foreign
issuers rated A-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.

U.S. GOVERNMENT SECURITIES. Each of the Funds may invest in U.S. government
securities, which include: (i) 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; and (ii) obligations issued or
guaranteed by U.S. government agencies or instrumentalities, including
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 generally considered to be 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.

18
<PAGE>
MANAGEMENT

BOARD OF DIRECTORS

Under Minnesota law, the Board of Directors of each Fund (the "Board of
Directors") has overall responsibility for managing it in good faith, in a
manner reasonably believed to be in the best interests of such Fund, and with
the care an ordinarily prudent person would exercise in similar circumstances.
However, this management may be delegated.

The Articles of Incorporation of each Fund limit the liability of directors to
the fullest extent permitted by law.

THE INVESTMENT ADVISER/TRANSFER AGENT/
DIVIDEND AGENT
Fortis Advisers, Inc. ("Advisers") is the investment adviser, transfer agent,
and dividend agent for the Funds. Advisers has been managing investment company
portfolios since 1949, and is indirectly owned 50% by Fortis AMEV and 50% by
Fortis AG, diversified financial services companies. In addition to providing
investment advice, Advisers is responsible for management of each Fund's
business affairs, subject to the overall authority of the applicable Board of
Directors. Advisers' address is that of the Fund. Stephen M. Poling, James S.
Byrd, and Keith R. Thomson have managed each Fund (except the Value and Growth &
Income Funds), along with other equity portfolios of Advisers, since 1983, 1991,
and 1988, respectively. Asset Allocation Portfolio is also managed by Howard
Hudson, Charles J. Dudley, Maroun M. Hayek, Christopher J. Woods, and Dennis M.
Ott. Messrs. Hudson, Dudley, Hayek, and Woods began managing Asset Allocation
Portfolio in 1995, while Mr. Ott has been managing it since 1988. Prior to
August, 1995, Mr. Hudson has been managing debt securities for Fortis, Inc.
since 1991; Mr. Dudley was a Senior Vice President and Senior Portfolio Manager
for SunAmerica Asset Management, New York, NY.; Mr. Hayek has been managing debt
securities for Fortis, Inc. since 1987; and Mr. Woods has been managing debt
securities for Fortis, Inc. since 1993. Prior to that, Mr. Woods was the head of
fixed income for The Police and Firemen's Disability and Pension Fund of Ohio in
Columbus, OH. All of the above managers are Vice Presidents of Advisers except
Messrs. Poling and Hudson (Executive Vice Presidents) and Ott (Senior Vice
President). Growth & Income Fund will be managed by Messrs. Poling, Byrd, &
Thomson. Value Fund will be managed by Mr. Byrd, Fred Obser and Nicholas L.M.
DePeyster. Mr. Obser has managed equity portfolios for Fortis, Inc. for at least
the past five years. Mr. DePeyster has done so since July, 1991, and prior
thereto was a Research Associate with Smith Barney, Inc., New York, N.Y.

THE UNDERWRITER AND DISTRIBUTION EXPENSES

Fortis Investors, Inc. ("Investors"), a subsidiary of Advisers, is the Funds'
underwriter. Investors' address is that of the Funds. Investors reserves the
right to reject any purchase order. The following persons are affiliated with
both Investors and each Fund: Dean C. Kopperud is a director and officer of
both; Stephen M. Poling and Jon H. Nicholson are directors of Investors and
officers of both; and Dennis M. Ott, James S. Byrd, Robert C. Lindberg, Keith R.
Thomson, Larry A. Medin, John W. Norton, Anthony J. Rotondi, Robert W. Beltz,
Jr., Thomas D. Gualdoni, Richard P. Roche, John E. Hite, Carol M. Houghtby,
Tamara L. Fagely and Thomas E. Erickson are officers of both.

Pursuant to Plans of Distribution adopted by each Fund under Rule 12b-1 under
the 1940 Act, each Fund is obligated to pay Investors an annual fee. This fee is
a percentage of average net assets attributable to the various classes of each
Fund's shares as follows:

<TABLE>
<CAPTION>
CLASSES
CLASS A B, H, & C CLASS Z
------- --------- -------
<S> <C> <C> <C>
Asset Allocation Portfolio .45% 1.00% N/A
Value Fund .25% 1.00% N/A
Growth & Income Fund .25% 1.00% N/A
Capital Fund .25% 1.00% N/A
Fiduciary Fund .25% 1.00% N/A
Growth Fund .25% 1.00% 0.00%
Capital Appreciation Portfolio .45% 1.00% N/A
</TABLE>

For Asset Allocation Portfolio and Capital Appreciation Portfolio, the standard
payout to broker-dealers not affiliated with Investors for selling each
Portfolio's shares is equal to an annual rate of .25 of 1% of the net asset
value of the shares sold (the "Base Fee"). However, should any of such
broker-dealers have sold currently outstanding shares of a Portfolio that,
coupled with the shares of the same Portfolio currently being sold and computed
at the time of each individual sale, have an aggregate net asset value of
greater than $1,000,000 (this $1,000,000 to be calculated separately for each
Portfolio), then with respect to such Portfolio, the broker-dealer would be
entitled to an additional fee of .20 of 1% of the net asset value of Portfolio
shares sold (the "Service Fee"). While all of Class A's Rule 12b-1 fee
constitutes a "distribution fee", only 75% of Class B, H, and C's fees
constitute distribution fees.

The higher distribution fee attributable to Class B, H, and C shares is designed
to permit an investor to purchase such shares through registered representatives
of Investors and other broker-dealers without the assessment of an initial sales
charge and at the same time to permit Investors to compensate its registered
representatives and other broker-dealers in connection with the sale of such
shares. The distribution fee for all classes may be used by Investors for the
purpose of financing any activity which is primarily intended to result in the
sale of shares of the applicable Fund. For example, such distribution fee may be
used by Investors: (a) to compensate broker-dealers, including Investors and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other

19
<PAGE>
financial institutions, and (b) to pay other advertising and promotional
expenses in connection with the distribution of Fund shares. These advertising
and promotional expenses include, by way of example but not by way of
limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by Investors and affiliated
insurance companies; and compensation paid to and expenses incurred by officers,
employees or representatives of Investors or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses.

A portion of the Rule 12b-1 fee equal to .25% of the average net assets of each
Fund attributable to its Class B, H, and C shares constitutes a shareholder
servicing fee designed to compensate Investors for the provision of certain
services to shareholders. The services provided may include personal services
provided to shareholders, such as answering shareholder inquiries regarding the
Funds and providing reports and other information, and services related to the
maintenance of shareholder accounts. Investors may use the Rule 12b-1 fee to
make payments to qualifying broker-dealers and financial institutions that
provide such services.

Investors may also enter into sales or servicing agreements with certain
institutions such as banks ("Service Organizations") which have purchased shares
of the Funds for the accounts of their clients, or which have made Fund shares
available for purchase by their clients, and/or which provide continuing service
to such clients. The Glass-Steagall Act and other applicable laws prohibit
certain banks from engaging in the business of underwriting securities. In such
circumstances, Investors, if so requested, will engage such banks as Service
Organizations only to perform administrative and shareholder servicing
functions, but at the same fees and other terms applicable to dealers. (If a
bank were later prohibited from acting as a Service Organization, its
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing servicing of such shareholders would be
sought.) In such event changes in the operation of the Funds might occur and a
shareholder serviced by such bank might no longer be able to avail itself of any
automatic investment or other services then being provided by the Bank. (State
securities laws on this issue may differ from the interpretations of Federal law
expressed above and banks and other financial institutions may be required to
register as dealers pursuant to state law.)

FUND EXPENSES

For the most recent fiscal year, the ratio of the Funds' total operating
expenses (including the distribution fees referred to under "Distribution
Expenses"), and their advisory fees (which are included in operating expenses)
both as a percentage of average daily net assets were as follows:

<TABLE>
<CAPTION>
TOTAL OPERATING EXPENSES
-------------------------------
CLASSES B, ADVISORY
CLASS A H, & C FEE
------- ---------- --------
<S> <C> <C> <C>
Asset Allocation Portfolio.............. 1.57% 2.12% .96%
Capital Fund............................ 1.24% 1.99% .87%
Fiduciary Fund.......................... 1.62% 2.37% 1.00%
Growth Fund............................. 1.13% 1.88% .78%
Capital Appreciation Portfolio.......... 1.69% 2.24% 1.00%
</TABLE>

The investment advisory and management agreements for Value Fund, Growth &
Income Fund, and Growth Fund (with regard to Class Z shares commencing March 1,
1996) all provide for investment advisory and management fees calculated as
described in the following table. As you can see from the table, this fee
decreases (as a percentage of Fund net assets) as the applicable Fund grows.

<TABLE>
<CAPTION>
ANNUAL
INVESTMENT
ADVISORY
AVERAGE NET ASSETS AND MANAGEMENT FEE
------------------
<S> <C>
For the first $100,000,000..................... 1.0%
For the next $150,000,000...................... .8%
For assets over $250,000,000................... .7%
</TABLE>

While these advisory fees are higher than those paid by many other investment
companies, they are partially offset by the added costs which Advisers pays
(which other investment companies pay), such as acting as the Funds' registrar,
transfer agent, and dividend agent.

BROKERAGE ALLOCATION

Advisers may consider sales of shares of the Fund, and of other funds advised by
Advisers, as a factor in the selection of broker-dealers to execute Fund
securities transactions when it is believed that this can be done without
causing the applicable Fund to pay more in brokerage commissions than it would
otherwise.

VALUATION OF SECURITIES

Each Fund's net asset value per share is determined by dividing the value of the
securities owned by the Fund, plus any cash or other assets, less all
liabilities, by the number of the Fund's shares outstanding. The portfolio
securities in which the Funds invest fluctuate in value, and hence the net asset
value per share of the Funds also fluctuate. The net asset value of the Funds'
shares is determined as of the primary closing time for business on the New York
Stock Exchange (the "Exchange") on each day on which the Exchange is open. If
shares are purchased through another broker-dealer who receives the order prior
to the close of the Exchange, then Investors will apply that day's price to the
order as long as the broker-dealer places the order with Investors by the end of
the day.

Securities are generally valued at market value. A security listed or traded on
the exchange is valued at its last sale price on the exchange where it is
principally traded on the day of valuation. Lacking any sales on the exchange
where it is principally traded on the day of valuation, prior to the time as of
which assets are valued, the security generally is valued at the previous day's
last sale price on that exchange. A security listed or traded on the NASDAQ
National Market System is valued at its last sale price that day, and lacking
any sales that day on the NASDAQ National Market System, the security generally
is valued at the last bid price.

When market quotations are not readily available, or when illiquid securities or
other assets are being valued, such securities or other assets are valued at
fair value as determined in good faith by management under supervision of the
applicable Fund's Board of Directors.

20
<PAGE>
However, debt securities may be valued on the basis of valuations furnished by a
pricing service which utilizes electronic data processing techniques to
determine valuations for normal institutional-size trading units of debt
securities when such valuations are believed to more accurately reflect the fair
market value of such securities. Short-term investments in debt securities with
maturities of less than 60 days when acquired, or which subsequently are within
60 days of maturity, are valued at amortized cost. Purchases and sales by a Fund
after 2:00 P.M. Central Time normally are not recorded until the following day.

CAPITAL STOCK

Each Fund currently offers its shares in four classes, each with different sales
arrangements and bearing differing expenses. Class A, B, H, and C shares each
represent interests in the assets of the applicable Fund and have identical
voting, dividend, liquidation, and other rights on the same terms and conditions
except that expenses related to the distribution of each class are borne solely
by such class and each class of shares has exclusive voting rights with respect
to provisions of the Fund's Rule 12b-1 distribution plan which pertain to that
particular class and other matters for which separate class voting is
appropriate under applicable law. The Funds may offer additional classes of
shares. Effective March 1, 1996, Growth Fund will also have Class Z shares.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Each Fund other than Asset Allocation Portfolio and Growth & Income Fund pays
annual dividends from net investment income and each Fund distributes any
realized capital gains annually. Asset Allocation Portfolio and Growth & Income
Fund pay quarterly dividends. Distributions paid by the Funds with respect to
all classes of shares will be calculated in the same manner, at the same time,
on the same day, and will be in the same amount, except that the higher Rule
12b-1 fees applicable to Class B, H, and C shares will be borne exclusively by
such shares. The per share dividends on Class B, H, and C shares will be lower
than those on Class A or Z shares as a result of the higher Rule 12b-1 fees
applicable to Class B, H, and C shares.

Such dividends and capital gains distributions will be made in the form of
additional Fund shares of the same class (at net asset value) unless the
shareholder sends the applicable Fund a written request that either or both be
sent to the shareholder or reinvested (at net asset value) in shares of the same
class of another Fortis fund. If dividends and capital gains are automatically
reinvested in a Fund, such reinvestment takes place on the dividend record date.
If they are to be reinvested in the other funds, processing normally takes up to
one business day.

TAXATION

Each Fund will distribute substantially all of its net income and capital gains
to its shareholders. Distributions are taxable to shareholders, whether paid in
cash or reinvested. Dividends paid from the net income of a Fund must be treated
as ordinary income by its shareholders. Dividends paid from a Fund's net capital
gains and designated in the shareholder's Annual Account Summary as long-term
capital gain distributions are treated as long-term capital gains by
shareholders, regardless of the length of time for which they have held their
shares in the Fund.

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

Prior to purchasing shares of a Fund, prospective shareholders (except for tax
qualified retirement plans) should consider the impact of dividends or capital
gains distributions which are expected to be announced, or have been announced
but not paid. Any such dividends or capital gains distributions paid shortly
after a purchase of shares by an investor prior to the record date will have the
effect of reducing the per share net asset value by the amount of the dividends
or distributions. All or a portion of such dividends or distributions, although
in effect a return of capital, is subject to taxation. As of August 31, 1995,
the following approximate percentages of the Funds' net assets represented
unrealized appreciation, undistributed net investment income, and accumulated
net realized gains or losses:

<TABLE>
<S> <C>
Asset Allocation Portfolio................................ 23.8%
Capital Fund.............................................. 41.9%
Fiduciary Fund............................................ 42.3%
Growth Fund............................................... 48.2%
Capital Appreciation Portfolio............................ 44.9%
</TABLE>

HOW TO BUY FUND SHARES

GENERAL PURCHASE INFORMATION

MINIMUM AND MAXIMUM INVESTMENTS

A minimum initial investment of $500 normally is required. An exception to this
minimum (except on telephone or wire orders) is the "Systematic Investment Plan"
($25 per month by "Pre-authorized Check Plan" or $50 per month on any other
basis). The minimum subsequent investment normally is $50, again subject to the
above exceptions.

While Class A and Z shares have no maximum order, Class B and H shares have a
$500,000 maximum and Class C shares have a $1,000,000 maximum. Orders greater
than these limits will be treated as orders for Class A shares.

21
<PAGE>
INVESTING BY TELEPHONE

Your registered representative may make your purchase ($500 minimum) by
telephoning the number on the cover page of this Prospectus. In addition, your
check and the Account Application which accompanies this Prospectus must be
promptly forwarded, so that Investors receives your check 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 purchase $100 - $10,000 worth of
Fund shares via telephone through the automated Fortis Information Line.

INVESTING BY WIRE

A shareholder having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares ($500 minimum) by requesting their
banks to transmit immediately available funds (Federal Funds) by wire to:

First Bank National Association
ABA #091000022, credit account no: 1-702-2514-1341
Fortis Funds Purchase Account
For further credit to __________________________________________________________
(name of client)
Fortis Account NBR _____________________________________________________________

Before making an initial investment by wire, your broker-dealer must first
telephone Investors at the number on the cover page of this Prospectus to open
your account and obtain your account number. In addition, the Account
Application which accompanies this Prospectus must be promptly forwarded to
Investors at the mailing address in the "Investing by Mail" section of this
Prospectus. Additional investments may be made at any time by having your bank
wire Federal Funds to the above address for credit to your account. Such
investments may be made by wire even if the initial investment was by mail.

INVESTING BY MAIL (ADDRESS: CM-9614, ST. PAUL, MN 55170-9614)

The Account Application which accompanies this Prospectus must be completed,
signed, and sent with a check or other negotiable bank draft, payable to "Fortis
Funds." Additional purchases may be made at any time by mailing a check or other
negotiable bank draft along with your confirmation stub. The account to which
the subsequent purchase is to be credited should be identified as to the name(s)
of the registered owner(s) and by account number.

ALTERNATIVE PURCHASE ARRANGEMENTS

Each Fund currently offers investors the choice between four classes of shares
which offer differing sales charges and bear different expenses. These
alternatives permit an investor to choose the more beneficial method of
purchasing shares given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances. Page 3 of the
Prospectus contains a summary of these alternative purchase arrangements. A
broker-dealer may receive different levels of compensation depending on which
class of shares is sold. Investors may also provide additional financial
assistance not to exceed .5% of estimated sales for a particular period to
dealers in connection with seminars for the public, advertising, sales campaigns
and/or shareholder services and programs regarding one or more of the Fortis
Funds, and other dealer-sponsored programs or events. Non-cash compensation will
be provided to dealers and includes payment or reimbursement for conferences,
sales or training programs for their employees, and travel expenses incurred in
connection with trips taken by registered representatives to locations within or
outside of the United States for meetings or seminars of a business nature. None
of the aforementioned additional compensation is paid for by the applicable Fund
or its shareholders.

CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE

The public offering price of Class A shares is determined once daily, by adding
a sales charge to the net asset value per share of the shares next calculated
after receipt of the purchase order. The sales charges and broker-dealer
concessions, which vary with the size of the purchase, are shown in the
following table. Additional compensation (as a percentage of sales charge) will
be paid to a broker-dealer 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 SALES CHARGE
AS PERCENTAGE AS PERCENTAGE
OF THE OF THE NET
OFFERING AMOUNT BROKER- DEALER
AMOUNT OF SALE PRICE 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>

- ------------------------
* Each Fund imposes a contingent deferred sales charge in connection with
certain purchases of Class A shares of $1,000,000 or more. See
"Redemption--Contingent Deferred Sales Charge."

The above scale applies to purchases of Class A shares by the following:

(1) Any individual, his or her spouse, and their children under the age of
21, and any of such persons' tax-qualified plans (provided there is only one
participant);

(2) A trustee or fiduciary of a single trust estate or single fiduciary
account; and

(3) Any organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company, and provided that
the purchase is made by means which result in economy of sales effort or
expense, whether the purchase is made through a central administration,
through a

22
<PAGE>
single broker-dealer, or by other means. An organized group does not include
a group of individuals whose sole organizational connection is participation
as credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer, or clients of an investment adviser.

SPECIAL PURCHASE PLANS FOR CLASS A SHARES

For information on any of the following special purchase or exchange plans
applicable to Class A shares, see the Statement of Additional Information or
contact your broker-dealer or sales representative. It is the purchaser's
obligation to notify his or her broker-dealer or sales representative about the
purchaser's eligibility for any of the following special purchase or exchange
plans.

- RIGHT OF ACCUMULATION The preceding table's sales charge discount
applies to the current purchase plus the net asset value of shares
already owned of any Fortis fund having a sales charge;

- STATEMENT OF INTENTION The preceding table's sales charge discount
applies to an initial purchase of at least $1,000, with an intention to
purchase the balance needed to qualify within 13 months--excluding
shares purchased by reinvesting dividends or capital gains;

- REINVESTED DIVIDEND/CAPITAL GAINS DISTRIBUTIONS BETWEEN THE FORTIS
FUNDS Shareholders of any fund may reinvest their dividend and/or
capital gains distributions in any of such funds at net asset value;

- CONVERSION FROM CLASS B OR H SHARES Class B or H shares will
automatically be converted to Class A shares (at net asset value) after
eight years.

EXEMPTIONS FROM 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 of any such
persons; or (4) any of such persons' children, grandchildren, parents,
grandparents, or siblings--or spouses 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 (or such persons' children,
grandchildren, parents, or grandparents--or spouses 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;

- 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;

- (Fiduciary Fund only) Shareholders having an open Fiduciary Fund
account before May 1, 1986, when its sales charge was implemented;

- 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

23
<PAGE>
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 a 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.

RULE 12B-1 FEES

For each Fund, Class A shares are subject to a Rule 12b-1 fee payable at an
annual percentage of the average daily net assets of the Fund attributable to
such shares. For additional information, see "Management--The Underwriter and
Distribution Expenses."

DEFERRED SALES CHARGES Although there is no initial sales charge on purchases of
Class A shares of $1,000,000 or more, Investors pays broker-dealers out of its
own assets, a fee of up to 1% of the offering price of such shares. If these
shares are redeemed within two years, the redemption proceeds will be reduced by
1%. For additional information, see "Redemption--Contingent Deferred Sales
Charge."

CLASS B AND H SHARES--CONTINGENT DEFERRED SALES CHARGE ALTERNATIVES

The public offering price of Class B and H shares is the net asset value of
applicable Fund's shares. Such shares are sold without an initial sales charge
so that the Fund receives the full amount of the investor's purchase. However, a
contingent deferred sales charge ("CDSC") of 4% will be imposed if shares are
redeemed within two years of purchase, with lower CDSCs as follows if
redemptions occur later:

<TABLE>
<S> <C> <C>
3 years -- 3%
4 years -- 3%
5 years -- 2%
6 years -- 1%
</TABLE>

For additional information, see "Redemption--Contingent Deferred Sales Charge."
In addition, Class B and H shares are subject to higher annual Rule 12b-1 fees
as described below.

Proceeds from the CDSC are paid to Investors and are used to defray its expenses
related to providing distribution-related services to the applicable Fund in
connection with the sale of Class B and H shares, such as the payment of
compensation to selected broker-dealers, and for selling such shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell such
shares without deduction of a sales charge at the time of purchase. Although
such shares are sold without an initial sales charge, Investors pays a dealer
concession equal to: (1) 4.00% of the amount invested to broker-dealers who sell
Class B shares at the time the shares are sold and an annual fee of .25% of the
average daily net assets of the Fund attributable to such shares; or (2) 5.25%
of the amount invested to broker-dealers who sell Class H shares at the time the
shares are sold (with no annual fee). Under alternative (2), from time to time
the dealer concession paid to broker-dealers who sell Class H shares may be
increased up to 5.50%.

RULE 12B-1 FEES. For each Fund, Class B and H shares are subject to a Rule 12b-1
fee payable at an annual rate of 1.00% of the average daily net assets of the
Fund attributable to such shares. The higher Rule 12b-1 fee will cause Class B
and H shares to have a higher expense ratio and to pay lower dividends than
Class A shares. For additional information about this fee, see "Management--The
Underwriter and Distribution Expenses."

CONVERSION TO CLASS A SHARES. Class B and H shares (except for those purchased
by reinvestment of dividends and other distributions) will automatically convert
to Class A shares after eight years. Each time any such shares in the
shareholder's account convert to Class A, a proportionate amount of the Class B
and H shares purchased through the reinvestment of dividends and other
distributions paid on such shares will also convert to Class A.

CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE

The public offering price of Class C shares is the net asset value of such
shares. Class C shares are sold without an initial sales charge so that the
applicable Fund receives the full amount of the investor's purchase. However, a
CDSC of 1% will be imposed if shares are redeemed within one year of purchase.
For additional information, see "Redemption--Contingent Deferred Sales Charge."
In addition, Class C shares are subject to higher annual Rule 12b-1 fees as
described below.

24
<PAGE>
who sell Class C shares at the time the shares are sold and an annual fee of
1.00% of the amount invested that begins to accrue one year after the shares are
sold.

RULE 12B-1 FEES. For each Fund, Class C shares are subject to a Rule 12b-1 fee
payable at an annual rate of 1.00% of the average daily net assets of the Fund
attributable to such shares. The higher Rule 12b-1 fee will cause Class C shares
to have a higher expense ratio and to pay lower dividends than Class A shares.
For additional information about this fee, see "Management--The Underwriter and
Distribution Expenses."

CLASS Z SHARES (EFFECTIVE MARCH 1, 1996 FOR GROWTH FUND ONLY)

(See "Class Shares--Class Z Shares")

SPECIAL PURCHASE PLANS FOR ALL CLASSES

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

- GIFTS OR TRANSFERS TO MINOR CHILDREN Adults can make an irrevocable
gift or transfer of up to $10,000 annually per child ($20,000 for
married couples) to as many children as they choose without having to
file a Federal gift tax return.

- SYSTEMATIC INVESTMENT PLAN Voluntary $25 or more per month purchases
by automatic financial institution transfers (see Systematic Investment
Plan Authorization Agreement in this Prospectus) or $50 or more per
month by any other means enable an investor to lower his or her average
cost per share through the principle of "dollar cost averaging." Any
plan involving systematic purchases may, at Advisers' option, result in
transactions under such plan being confirmed to the investor quarterly,
rather than as a separate notice following the transaction;

- EXCHANGE PRIVILEGE Except for participants in the Fortis, Inc. 401(k)
Plan, Fund shares may be exchanged among other funds of the same class
managed by Advisers without payment of an exchange fee or additional
sales charge. Similarly, shareholders of other Fortis funds may ex
shares for Fund shares of the same class (at net asset value if the
shares to be exchanged have already been subject to a sales charge).
Also, holders of Class E shares of Fortis Tax-Free Portfolios, Inc. and
Fortis Income Portfolios, Inc. (which also have a front-end sales
charge) may exchange their shares for Class A Fund shares and holders
of Fortis Money Fund Class A shares may exchange their shares for any
class of Fund shares (at net asset value and only into Class A if the
shares have already incurred a sales charge). A shareholder initiates
an exchange by writing to or telephoning his or her broker-dealer,
sales representative, or the applicable Fund regarding the shares to be
exchanged. Telephone exchanges will be permitted only if the
shareholder completes and returns the Telephone Exchange section of the
Account Application. During times of chaotic economic or market
circumstances, a shareholder may have difficulty reaching his or her
broker-dealer, sales representative, or the Fund by telephone.
Consequently, a telephone exchange may be difficult to implement at
those times. (See "Redemption".) Shareholders may also use the
automated Fortis Information Line for exchanges of $100 - $100,000
worth of shares.

Advisers reserves the right to restrict the frequency of--or otherwise modify,
condition, terminate, or impose charges upon--the exchange and/or telephone
transfer privileges, all with 30 days notice to shareholders.

REDEMPTION

Registered holders of each Fund's shares may redeem their shares without any
charge (except any applicable contingent deferred sales charge) at the per share
net asset value next determined following receipt by the Fund of a written
redemption request in proper form (and a properly endorsed stock certificate if
one has been issued). However, if shares are redeemed through another
broker-dealer who receives the order prior to the close of the Exchange, then
Investors will apply that day's price to the order as long as the broker-dealer
places the order with Investors by the end of the day. Some broker-dealers may
charge a fee to process redemptions.

Any certificates should be sent to the applicable Fund by certified mail. Share
certificates and/or stock powers, if any, tendered in redemption must be
endorsed and executed exactly as the Fund shares are registered. If the
redemption proceeds are to be paid to the registered holder and sent to the
address of record, normally no signature guarantee is required unless Advisers
does not have the shareholder's signature on file and the redemption proceeds
are greater than $25,000. However, for example, if the redemption proceeds are
to be paid to someone other than the registered holder, sent to a different
address, or the shares are to be transferred, the owner's signature must be
guaranteed by a bank, broker (including government or municipal), dealer
(including government or municipal), credit union, national securities exchange,
registered securities association, clearing agency, or savings association.

Class A shares may be registered in broker-dealer "street name accounts" only if
the broker-dealer has a selling agreement with Investors. In such cases,
instructions from the broker-dealer are required to redeem shares or transfer
ownership and transfer to another broker-dealer requires the new broker-dealer
to also have a selling agreement with Investors. If the proposed new
broker-dealer

25
<PAGE>
does not have a selling agreement with Investors, the shareholder can, of
course, leave the shares under the original street name account or have the
broker-dealer transfer ownership to the shareholder's name.

Broker-dealers having a sales agreement with Investors may orally place a
redemption order, but proceeds will not be released until the appropriate
written materials are received.

An individual shareholder (or in the case of multiple owners, any shareholder)
may orally redeem up to $25,000 worth of their shares, provided that the account
is not a tax-qualified plan, the check will be sent to the address of record,
and the address of record has not changed for at least 30 days. During times of
chaotic economic or market circumstances, a shareholder may have difficulty
reaching his or her broker-dealer, sales representative, or the Funds by
telephone. Consequently, a telephone redemption may be difficult to implement at
those times. If a shareholder is unable to reach the applicable Fund by
telephone, written instructions should be sent. Advisers reserves the right to
modify, condition, terminate, or impose charges upon this telephone redemption
privilege, with 30 days notice to shareholders. Advisers, Investors, and the
Funds will not be responsible for, and the shareholder will bear the risk of
loss from, oral instructions, including fraudulent instructions, which are
reasonably believed to be genuine. The telephone redemption procedure is
automatically available to shareholders. The Funds will employ reasonable
procedures to confirm that telephone instructions are genuine, but if such
procedures are not deemed reasonable, it may be liable for any losses due to
unauthorized or fraudulent instructions. The Funds' procedures are to verify
address and social security number, tape record the telephone call, and provide
written confirmation of the transaction. Shareholders may also use the automated
Fortis Information Line for redemptions of $500 - $25,000 on non-tax qualified
accounts. The security measures for automated telephone redemptions involve use
of a personal identification number and providing written confirmation of the
transaction.

Payment will be made as soon as possible, but not later than three business days
after receipt of a proper redemption request. However, if shares subject to the
redemption request were recently purchased with non-guaranteed funds (e.g.,
personal check), the mailing of your redemption check may be delayed by fifteen
days. A shareholder wishing to avoid these delays should consider the wire
purchase method described under "How to Buy Fund Shares."

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.

Each Fund has the right to redeem accounts with a current value of less than
$500 unless the original purchase price of the remaining shares (including sales
commissions) was at least $500. Fund shareholders actively participating in the
Fund's Systematic Investment Plan or Group Systematic Investment Plan will not
have their accounts redeemed. Before redeeming an account, the Fund will mail to
the shareholder a notice of its intention to redeem, which will give the
shareholder an opportunity to make an additional investment. If no additional
investment is received by the Fund within 60 days of the date the notice was
mailed, the shareholder's account will be redeemed. Any redemption in an account
established with the minimum initial investment of $500 may trigger this
redemption procedure.

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. Such Plans
may, at Advisers' option, result in transactions being confirmed to the investor
quarterly, rather than as a separate notice following the transaction.

There is also a "Reinvestment Privilege," which is a one-time opportunity to
reinvest sums redeemed within the prior 60 days without payment of an additional
sales charge. For further information about these plans, contact your
broker-dealer or sales representative.

CONTINGENT DEFERRED SALES CHARGE

CLASS A SHARES

Each Fund imposes a contingent deferred sales charge ("CDSC") on Class A shares
in certain circumstances. Under the CDSC arrangement, for sales of shares of
$1,000,000 or more (including right of accumulation and statements of intention
(see "How to Buy Fund Shares--Special Purchase Plans")), the front-end sales
charge ("FESC"), will no longer be imposed (although Investors intends to pay
its registered representatives and other dealers that sell Fund shares, out of
its own assets, a fee of up to 1% of the offering price of such sales except on
purchases exempt from the FESC). However, if such shares are redeemed within two
years after their purchase date (the "CDSC Period"), the redemption proceeds
will be reduced by the 1.00% CDSC.

The CDSC will be applied to the lesser of (a) the net asset value of shares
subject to the CDSC at the time of purchase, or (b) the net asset value of such
shares at the time of redemption. No charge will be imposed on amounts
representing an increase in share value due to capital appreciation. The CDSC
will not be applied to shares acquired through reinvestment of income dividends
or capital gain distributions or shares held for longer than the applicable CDSC
Period. In determining which shares to redeem, unless instructed otherwise,
shares that are not subject to the CDSC and having a higher Rule 12b-1 fee will
be redeemed first, shares not subject to the CDSC having a lower Rule 12b-1 fee
will be redeemed next, and shares subject to the CDSC then will be redeemed in
the order purchased.

26
<PAGE>
Each Fund will waive the CDSC in the event of a shareholder's death or
disability, as defined in Section 72(m)(7) of the Code (if satisfactory evidence
is provided to the Fund) and for tax-qualified retirement plans (excluding IRAs,
SEPS, 403(b) plans, and 457 plans). Shares of the Fund that are acquired in
exchange for shares of another Fortis fund that were subject to a CDSC will
remain subject to the CDSC that applied to the shares of the other Fortis fund.
Additionally, the CDSC will not be imposed at the time that Fund shares subject
to the CDSC are exchanged for shares of Fortis Money Fund or at the time such
Fortis Money Fund shares are reexchanged for shares of any Fortis fund subject
to a CDSC; provided, however, that, in each such case, the shares acquired will
remain subject to the CDSC if redeemed within the CDSC Period.

Investors, upon notification, will provide a PRO RATA refund of any CDSC paid in
connection with a redemption of shares of any Fortis fund having a sales charge
("Fortis Load Fund") (by crediting such refunded CDSC to such shareholder's
account) if, within 60 days of such redemption, all or any portion of the
redemption proceeds are reinvested in shares of one or more Fortis Load Funds.
Any reinvestment within 60 days of a redemption on which the CDSC was paid will
be made without the imposition of a FESC but will be subject to the same CDSC to
which such amount was subject prior to the redemption; provided, however, that
the CDSC Period will run from the original investment date.

CLASS B, H, AND C SHARES

The CDSC on Class B, H, and C shares will be calculated on an amount equal to
the lesser of the net asset value of the shares at the time of purchase or their
net asset value at the time of redemption. No charge will be imposed on amounts
representing an increase in share value due to capital appreciation. In
addition, no charge will be assessed on shares derived from reinvestment of
dividends or capital gains distributions or on shares held for longer than the
applicable CDSC Period.

Upon any request for redemption of shares of any class of shares that imposes a
CDSC, it will be assumed, unless otherwise requested, that shares subject to no
CDSC will be redeemed first in the order purchased and all remaining shares that
are subject to a CDSC will be redeemed in the order purchased. With respect to
the redemption of shares subject to no CDSC where the shareholder owns more than
one class of shares, those shares with the highest Rule 12b-1 fee will be
redeemed in full prior to any redemption of shares with a lower Rule 12b-1 fee.

The CDSC does not apply to: (1) redemption of shares when a Fund exercises its
right to liquidate accounts which are less than the minimum account size; (2)
death or disability of any owner, as defined in Section 72(m)(7) of the Code (if
satisfactory evidence is provided to the Fund); (3) with respect to Class B and
H shares only, 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; and (4) with respect to Class B, H, and C shares, qualified plan
benefit distributions due to 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.

As an illustration of CDSC calculations, assume that Shareholder X purchases on
Year 1/Day 1 100 shares at $10 per share. Assume further that, on Year 2/Day 1,
Shareholder X purchased an additional 100 shares at $12 per share. Finally,
assume that, on Year 3/Day 1, Shareholder X wishes to redeem shares worth
$1,300, and that the net asset value per share as of the close of business on
such day is $13. To effect Shareholder X's redemption request, 100 shares at $13
per share (totaling $1,300) would be redeemed. The CDSC would be waived in
connection with the redemption of that number of shares equal in value (at the
time of redemption) to $220 (10% of $1,000-- the purchase amount of the shares
purchased by Shareholder X on Year 1/Day 1--plus 10% of $1200--the purchase
amount of the shares purchased by Shareholder X on Year 2/Day 1.) In addition,
no CDSC would apply to the $400 in capital appreciation on Shareholder X's
shares ($2,600 Year 3 value minus $2,200 purchase cost of shares).

If a shareholder exchanges shares subject to a CDSC for Class B, H, or C shares
of a different Fortis Fund, the transaction will not be subject to a CDSC.
However, when shares acquired through the exchange are redeemed, the shareholder
will be treated as if no exchange took place for the purpose of determining the
CDSC Period and applying the CDSC.

Investors, upon notification, will provide, out of its own assets, a PRO RATA
refund of any CDSC paid in connection with a redemption of Class B, H, or C
shares of any Fund (by crediting such refunded CDSC to such shareholder's
account) if, within 60 days of such redemption, all or any portion of the
redemption proceeds are reinvested in shares of the same class in any of the
Fortis Funds. Any reinvestment within 60 days of a redemption to which the CDSC
was paid will be made without the imposition of a front-end sales charge but
will be subject to the same CDSC to which such amount was subject prior to the
redemption. The CDSC Period will run from the original investment date.

SHAREHOLDER INQUIRIES

Inquiries should be directed 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.

27
<PAGE>

FORTIS-Registered Trademark-
FORTIS MUTUAL FUND Mail to:
AUTOMATED CLEARING HOUSE (ACH) FORTIS MUTUAL FUNDS
AUTHORIZATION AGREEMENT P.O. Box 64284
St. Paul, MN 55164

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) 800-2638, Ext. 3012.

________________________________________________________________________________
1 FORTIS ACCOUNT INFORMATION
________________________________________________________________________________

Account Registration:
________________________________________________________________________________
Owner (Individual, 1st Joint Tenant, Custodian, Trustee)
________________________________________________________________________________
Owner (2nd Joint Tenant, Minor, Trust Name)
________________________________________________________________________________
Additional Information, if needed
________________________________________________________________________________
Street address
________________________________________________________________________________
City State Zip
________________________________________________________________________________
Social Security number (Taxpayer I.D.)
Account # ______________________________________________________________________

Fund: Class:
1)
Fund Name / / A / / B / / C / / H
2)
Fund Name / / A / / B / / C / / H
3)
Fund Name / / A / / B / / C / / H
4)
Fund Name / / A / / B / / C / / H
5)
Fund Name / / A / / B / / C / / H

________________________________________________________________________________
2 BANK/FINANCIAL INSTITUTION INFORMATION
________________________________________________________________________________

PLAN TYPE: / / New Plan / / Bank Change

ACCOUNT TYPE: / /Checking / /Savings
(must attach a (must attach a
voided check) deposit slip)

________________________________________________________________________________
Transit Number

________________________________________________________________________________
Bank Account Number

________________________________________________________________________________
Account Owner (if other than name of Depositor)

________________________________________________________________________________
Depositor's Daytime Phone Number

CLEARLY PRINT THE BANK/FINANCIAL INSTITUTION'S NAME AND ADDRESS BELOW:

________________________________________________________________________________

________________________________________________________________________________
Signature of Depositor Date

________________________________________________________________________________
Signature of Joint-Depositor Date

28
<PAGE>
________________________________________________________________________________
3 SELECT OPTION
________________________________________________________________________________

I. INVESTMENT OPTION(S)
A. / / Invest via FORTIS INFORMATION LINE by
phone (minimum $25, maximum $10,000)
Please allow up to four business days for deposit
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
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.
Draft Date (1-26 only): ----------------------------

Amount per Fund (Min. $25): ----------------------

Beginning Draft Month: ----------------------------

II. WITHDRAWAL OPTION(S)
(Please consult your financial or tax adviser before electing
a systematic withdrawal plan. For tax qualified accounts,
additional forms are required for distribution.)
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
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 Date (1-26 only): -----------------------

Amount per Fund (Min. $25): ----------------------
Beginning Withdrawal Month: ----------------------

________________________________________________________________________________
4 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

FORTIS-Registered Trademark-
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc. (fund management since 1949)
Fortis Investors, Inc. (principal underwriter; (member SIPC)
P.O. Box 64284
St. Paul, MN 55164

(800) 800-2638

Attach additional information if more space is needed.
98049 (7/95)

29
<PAGE>
PROSPECTUS
JANUARY 1, 1996

FORTIS ASSET ALLOCATION PORTFOLIO
FORTIS VALUE FUND
FORTIS GROWTH & INCOME FUND
FORTIS CAPITAL FUND
FORTIS FIDUCIARY FUND
FORTIS GROWTH FUND
FORTIS CAPITAL APPRECIATION PORTFOLIO

95199 (REV. 1/96)

[LOGO]-Registered Trademark-

FORTIS FINANCIAL GROUP
P.O. BOX 64284
ST. PAUL, MN 55164

BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 3794
MINNEAPOLIS, MN
<PAGE>

[FORTIS LOGO]

[LOGO] [LOGO]
FORTIS ADVANTAGE FORTIS CAPITAL FUND
ASSET ALLOCATION PORTFOLIO

[LOGO] [LOGO] [LOGO]
FORTIS FIDUCIARY FUND FORTIS GROWTH FUND FORTIS ADVANTAGE
CAPITAL APPRECIATION PORTFOLIO

FORTIS
STOCK FUNDS

ANNUAL REPORT

AUGUST 31, 1995

<PAGE>

CONTENTS

LETTER TO SHAREHOLDERS 2

SCHEDULE OF INVESTMENTS
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO 8
FORTIS CAPITAL FUND 12
FORTIS FIDUCIARY FUND 14
FORTIS GROWTH FUND 16
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO 18

STATEMENTS OF ASSETS AND LIABILITIES 20

STATEMENTS OF OPERATIONS 21

STATEMENTS OF CHANGES IN NET ASSETS
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO 22
FORTIS CAPITAL FUND 23
FORTIS FIDUCIARY FUND 24
FORTIS GROWTH FUND 25
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO 26

NOTES TO FINANCIAL STATEMENTS 27

INDEPENDENT AUDITORS' REPORT 34

FEDERAL INCOME TAX INFORMATION 35

BOARD OF DIRECTORS AND OFFICERS 36

- - TOLL-FREE PERSONAL ASSISTANCE

- Shareholder Services

- (800) 800-2638, Ext. 3012

- 7:30 a.m. to 5:30 p.m. CST, M-Th

- 7:30 a.m. to 5:00 p.m. CST, F

- - TOLL-FREE INFORMATION LINE

- For daily account balances,
transaction activity or net asset
value information

- (800) 800-2638, Ext. 4344

- 24 hours a day

FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2638.

TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800)
800-2638, EXT. 4579.

HIGHLIGHTS

FOR THE YEAR ENDED AUGUST 31, 1995

<TABLE>
<CAPTION>
CLASS A CLASS B* CLASS C* CLASS H*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO**
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 14.44 $ 14.27 $ 14.27 $ 14.27
End of period................................... $ 16.52 $ 16.46 $ 16.41 $ 16.44
TOTAL RETURN@ 18.25% 19.00% 18.64% 18.86%
DISTRIBUTIONS PER SHARE:
From net investment income...................... $0.3950 $0.3650 $0.3650 $0.3650
From net realized gains on investments.......... $0.0896 $0.0896 $0.0896 $0.0896
FORTIS CAPITAL FUND
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 18.36 $ 18.35 $ 18.35 $ 18.35
End of period................................... $ 21.22 $ 21.14 $ 21.13 $ 21.14
TOTAL RETURN@ 21.49% 20.74% 20.68% 20.74%
DISTRIBUTIONS PER SHARE:
From net investment income...................... $ 0.079 $ 0.025 $ 0.025 $ 0.025
From net realized gains on investments.......... $ 0.764 $ 0.764 $ 0.764 $ 0.764
FORTIS FIDUCIARY FUND
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 30.23 $ 30.15 $ 30.15 $ 30.15
End of period................................... $ 35.54 $ 35.35 $ 35.40 $ 35.35
TOTAL RETURN@ 22.71% 22.38% 22.55% 22.38%
DISTRIBUTIONS PER SHARE:
From net realized gains on investments.......... $ 1.21 $ 1.21 $ 1.21 $ 1.21
FORTIS GROWTH FUND
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 26.25 $ 25.85 $ 25.85 $ 25.85
End of period................................... $ 32.66 $ 32.48 $ 32.49 $ 32.49
TOTAL RETURN@ 26.92% 28.17% 28.21% 28.21%
DISTRIBUTIONS PER SHARE:
From net realized gains on investments.......... $ 0.495 $ 0.495 $ 0.495 $ 0.495
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO**
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 23.05 $ 22.45 $ 22.45 $ 22.45
End of period................................... $ 30.67 $ 30.57 $ 30.58 $ 30.58
TOTAL RETURN@ 33.06% 36.17% 36.21% 36.21%
DISTRIBUTIONS PER SHARE:
From net investment income...................... -- -- -- --
From net realized gains on investments.......... -- -- -- --

<FN>

* Period from November 14, 1994 (initial offering of shares) to August 31,
1995.
** Ten-month period ended August 31, 1995.
@ These are the fund's total returns during the period, including reinvestment
of all dividend and capital gains distributions, without adjustments for
sales charges.
</TABLE>
<PAGE>
HOW TO USE THIS REPORT

For a quick overview of the fund's performance during the past year, refer to
the Highlights box. The letter from the portfolio manager and president provides
a more detailed analysis of the fund and financial markets.

The charts alongside the letter are useful because they provide more information
about your investments. The top holdings chart shows the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by sector. The portfolio changes show the investment decisions your fund manager
has made over the period in response to changing market conditions.

The performance chart graphically compares the funds' total return performance
with a selected investment index. Remember, however, that an index may reflect
the performance of securities the fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your fund does. Individuals cannot buy an unmanaged index fund without incurring
some charges and expenses. Sales charges pay for your investment
representative's advice.

This report is just one of several tools you can use to learn more about your
investment in the Fortis Family of Mutual Funds. Your investment representative,
who understands your personal financial situation, can best explain the features
of your investment and how it's designed to help you meet your financial goals.

<TABLE>
<S> <C> <C> <C>
[PHOTO] [PHOTO] [PHOTO]

"I want to spend time enjoying "I still can't believe it. I was "Life has shown me just how much
my family and building my going to put that money in the lies ahead for these
career--not managing my bank. When my registered grandchildren of ours. It's good
investments. With the Asset representative told me I should to know that we'll be able to
Allocation Portfolio, I can do invest it in the Fortis Capital help them along the way because
the things that are important Fund, I just laughed. I'm glad I our investment in the Fortis
today knowing that my money is took his advice." Fiduciary Fund is working to
hard at work for tomorrow." help provide for our
tomorrows...and theirs."

[PHOTO] [PHOTO]

"The thought of putting four "The entrepreneurial spirit
kids through college in 10 years still thrives in America. For
is more than a little people willing to work hard and
overwhelming. But our investment take some risks, opportunities
in the Fortis Growth Fund gives are unlimited. Young, growing
us the opportunity to put our companies are bringing new
money to work today so that all products and new ideas to the
of us can look forward to marketplace every day. The
tomorrow." Capital Appreciation Portfolio
lets us invest in these
companies."
</TABLE>

1
<PAGE>
FORTIS ADVANTAGE
ASSET ALLOCATION PORTFOLIO
TOP HOLDINGS AS OF 8/31/95
<TABLE>
<CAPTION>
Percent of
Stocks Net Assets
- -----------------------------------------------------------------------------
<C> <S> <C>
1. Applied Materials 1.8%
2. 3Com Corp. 1.7%
3. Green Tree Financial 1.7%
4. Microsoft Corp. 1.6%
5. CUC International, Inc. 1.5%

<CAPTION>
Bonds
- -----------------------------------------------------------------------------
<C> <S> <C>
1. U.S. Treasury Bond (8.125%) 2021 4.4%
2. FNMA (7.00%) 2025 2.3%
3. Dean Witter Discover (6.75%) 2000 2.2%
4. GNMA (9.00%) 2023 2.0%
5. U.S. Treasury Bond (7.625%) 2025 1.9%
</TABLE>

PORTFOLIO CHANGES FOR THE TEN-MONTH PERIOD ENDED 8/31/95

STOCK ADDITIONS:
Ceridian Corp.
Computer Associates International, Inc.
Disney (Walt) Co.

STOCK ELIMINATIONS:
ALC Communications Corp.
Brinker International, Inc.
Grupo Televisa, S.A. de C.V. ADR
Lotus Development Corp.
Telefonos de Mexico, S.A. de C.V. ADR
Telephone & Data Systems, Inc.
Toys 'R' Us, Inc.
Viacom, Inc. Non-Voting Class B
DEAR SHAREHOLDER:

We're pleased to present the annual report for the Fortis Advantage Asset
Allocation Portfolio, Capital Fund, Fiduciary Fund, Growth Fund and Advantage
Capital Appreciation Portfolio for the period ended August 31, 1995.

MARKET REVIEW AND OUTLOOK

The stock market moved sharply higher for most of the fiscal year of the funds
discussed in this report. The major factors behind this gain have been
relatively low and declining inflation, stable to lower interest rates and
surprisingly strong corporate profits. Another positive influence has been the
perception of a sincere and potentially successful effort to address our budget
and trade deficits, as well as our income tax structure. Also, a supporting
factor may have been the growing understanding that U.S. corporations have
become the world's lowest cost producers and technological leaders in many, if
not most, industries.

Looking ahead, these forces are still in place, with one exception. As economic
activity slows, it will be difficult to
FORTIS ADVANTAGE
ASSET ALLOCATION PORTFOLIO
ALLOCATION AS OF 8/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Equity Investments 44.8%
Long-Term Debt Securities 50.0%
Cash
Equivalents/Receivables 5.2%
100.0%
</TABLE>

maintain the recent pace of corporate profit growth. This could impede the
progress of the stock market unless it gets some reassurance in the form of
lower interest rates. With only moderate growth of the economy and very low
rates of inflation, our view is that interest rates should stay at their recent
low levels or go somewhat lower. Nevertheless, it will be incumbent on us as
portfolio managers to make certain that the companies we select can keep growing
earnings at expected rates throughout the period ahead.

FORTIS ADVANTAGE
ASSET ALLOCATION PORTFOLIO
CLASS B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares+ +19.00 % +15.40 %
Class C shares+ +18.64 % +17.64 %
Class H shares+ +18.86 % +15.26 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.50%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase
+ Since November 14, 1994--Date shares were first offered to the public
++ Assumes redemption on August 31, 1995.
</TABLE>

FORTIS ADVANTAGE
ASSET ALLOCATION PORTFOLIO CLASS A

Value of $10,000 invested January 4, 1988

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
FORTIS ASSET
ALLOCATION
LEHMAN BROTHERS PORTFOLIO
<S> <C> <C> <C>
Aggregate Bond
Index# S&P 500## Class A
01/04/88 10,000 10,000 9,550
88 10,470 10,868 9,579
89 11,853 15,109 11,916
90 12,710 14,356 11,595
91 14,569 18,216 14,116
92 16,533 19,663 15,784
93 18,348 22,640 17,572
94 18,070 23,875 18,230
95 20,131 28,994 21,723
FORTIS ADVANTAGE ASSET
ALLOCATION PORTFOLIO
AVERAGE ANNUAL TOTAL
RETURN
SINCE
1 YEAR 5 YEAR JANUARY 4, 1988@
CLASS A* 13.80% 12.34% 10.66%
CLASS A** 19.16% 13.38% 11.33%
<FN>
Annual period ended August 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
# An unmanaged index of government, corporate, and mortgage-backed securities
with an average maturity of approximately nine years.
## This is an unmanaged index of 500 common stocks.
@ Date shares were first offered to the public.
</TABLE>

2
<PAGE>
PORTFOLIO STRATEGIES

FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO invests its assets among stocks,
bonds and cash equivalents in a proportion determined by Fortis fixed income and
equity managers based on their judgment of expected returns from these asset
classes. The fund produced a total return of 18.3 percent (Class A shares
without sales charge) for the ten-month period ended August 31, 1995. During the
year, the asset mix ranged between 40 percent equities and 60 percent bonds.
Currently it is evenly divided between the two categories at 50/50. Early in the
year, the fund benefited from a move into municipal bonds, which have been
eliminated, and a commitment of roughly 20 percent of the fixed income component
in high yield bonds. More recently, we have reduced our exposure to lower-rated
corporate securities as the economy weakened. We also extended the duration of
the fixed income portion of the portfolio from 4.75 years to 5.2 years,
primarily by increasing the holdings of long-term Treasury bonds. The overall
portfolio benefited, as well, from the strength of the stock market in general
and from our growth stock holdings in particular.

FORTIS CAPITAL FUND holdings consist of large-size companies that are growing
their revenues and earnings at well

FORTIS CAPITAL FUND
TOP TEN HOLDINGS AS OF 8/31/95

<TABLE>
<CAPTION>
Percent
of
Net
Stocks Assets
- ------------------------------------------------------------------------------
<C> <S> <C>
1. Silicon Graphics, Inc. 5.0%
2. Oracle Corp. 4.6%
3. Mattel, Inc. 4.3%
4. Motorola, Inc. 4.1%
5. Microsoft Corp. 3.4%
6. Applied Materials, Inc. 3.1%
7. Green Tree Financial Corp. 2.6%
8. General Instrument Corp. 2.5%
9. CUC International, Inc. 2.5%
10. Worldcom, Inc. 2.5%
Note: Excludes holdings in U.S. Government Securities representing 8.5%
of net assets.
</TABLE>

PORTFOLIO CHANGES FOR THE
YEAR ENDED 8/31/95

ADDITIONS:
Ceridian Corp.
Computer Associates International, Inc.
Disney, Walt Co.
Tellabs, Inc.

ELIMINATIONS:
ALC Communications Corp.
Blockbuster Entertainment Corp.
Brinker International, Inc.
Grupo Televisa, S.A. de C.V. ADR
H & R Block, Inc.
Lotus Development Corp.
MCI Communications Corp.
Shaw Industries, Inc.
Telefonos de Mexico, S.A. de C.V. ADR
Telephone & Data Systems, Inc.
Toys 'R' Us, Inc.
WMX Technologies, Inc.

FORTIS CAPITAL FUND PORTFOLIO
COMPOSITION BY INDUSTRY AS OF 8/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Other 20.8%
Telecommunications 14.4%
Retail-Miscellaneous 10.0%
Computer-Software 9.6%
U.S. Treasury Securities 8.5%
Cash
Equivalents/Receivables 7.0%
Office Equipment and
Supplies 6.9%
Business Services and
Supplies 5.8%
Health Care Services 4.9%
Finance Companies 4.7%
Toys 4.3%
Electronic-Controls and
Equipment 3.1%
100.0%
</TABLE>

FORTIS CAPITAL FUND
CLASS B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares+ +20.74 % +17.14 %
Class C shares+ +20.68 % +19.68 %
Class H shares+ +20.74 % +17.14 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.75%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase.
+ Since November 14, 1994--Date shares were first offered to the public
++ Assumes redemption on August 31, 1995.
</TABLE>

FORTIS CAPITAL FUND CLASS A

Value of $10,000 invested September 1, 1970

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
FORTIS CAPITAL
S&P 500*** FUND
<S> <C> <C> <C> <C>
09/01/70 10,000 9,525
71 12,550 12,588
72 14,499 14,746
73 14,016 13,202
74 10,096 10,003
75 12,732 11,598
76 15,678 13,462
77 15,398 12,934
78 17,321 16,381
79 19,334 18,105
80 22,839 25,802
81 24,046 29,122
82 24,842 34,486
83 35,742 53,449
84 37,955 51,657
85 45,014 59,641
86 62,521 85,598
87 84,113 108,876
88 69,174 83,916
89 96,164 120,715
90 91,374 113,664
91 115,939 145,994
92 125,148 161,707
93 144,098 174,451
94 151,954 192,866
95 184,535 234,322
FORTIS CAPITAL FUND
AVERAGE ANNUAL TOTAL
RETURN
1 YEAR 5 YEAR 10 YEAR 25 YEARS
CLASS A* +15.72% +14.45% +14.11% +13.45%
CLASS A** +21.49% +15.57% +14.66% +13.67%
<FN>
Annual period ended August 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.75%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of 500 common stocks.
</TABLE>

3
<PAGE>
above the average rate for U.S. corporations. Early in the markets' upward move,
some of the companies benefited from their relatively large exposure to foreign
markets and the doubly positive impact of weakness in the U.S. dollar. Later,
leadership in the portfolio was assumed by stocks of financially related
companies that were benefiting from declining interest rates. Finally, the most
significant contribution came from the relatively large portion devoted to
technology stocks. For the fiscal year ended August 31, 1995, the fund was up
21.5 percent (Class A shares without sales charge), which compares with the S&P
500 total return of 21.4 percent.

FORTIS FIDUCIARY FUND
TOP TEN HOLDINGS AS OF 8/31/95

<TABLE>
<CAPTION>
Percent of
Stocks Net Assets
- --------------------------------------------------------------------------------
<C> <S> <C>
1. Silicon Graphics, Inc. 4.4%
2. Motorola, Inc. 4.3%
3. Oracle Corp. 4.2%
4. Mattel, Inc. 4.1%
5. Microsoft Corp. 3.5%
6. Applied Materials, Inc. 2.7%
7. Worldcom, Inc. 2.6%
8. General Instrument Corp. 2.4%
9. Sterling Software, Inc. 2.4%
10. Green Tree Financial Corp. 2.3%
</TABLE>

PORTFOLIO CHANGES FOR THE YEAR ENDED 8/31/95

ADDITIONS:
Ceridian Corp.
Compaq Computer Corp.
Computer Associates International, Inc.
Disney (Walt) Co.
EMC Corp.
Harrah's Entertainment, Inc.
Tellabs, Inc.

ELIMINATIONS:
ALC Communications Corp.
Blockbuster Entertainment Corp.
Brinker International, Inc.
Grupo Televisa, S.A. de C.V. ADR
Lotus Development Corp.
Telephone & Data Systems, Inc.
Toys 'R' Us, Inc.
Value Health, Inc.

FORTIS FIDUCIARY FUND invests in growth companies along the spectrum from
midsize to large companies. It represents a risk level that is between Fortis'
Capital and Growth Funds, but has actually been managed toward the less
aggressive end of that range. In the fiscal year ended August 31, 1995, the
Fiduciary Fund was up 22.7 percent (Class A shares without sales charge). Its
technology exposure has been in the high 30s in terms of a percent of the
portfolio and has been concentrated in the larger companies in that group.
Performance also has benefited from selected holdings in financial services,
health care and telecommunications.

FORTIS FIDUCIARY FUND PORTFOLIO COMPOSITION BY INDUSTRY AS OF 8/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Other 16.0%
Cash
Equivalents/Receivables 15.5%
Telecommunications 14.2%
Computer-Software 12.4%
Office Equipment and
Supplies 9.5%
Retail-Miscellaneous 9.2%
Business Services and
Supplies 5.6%
Finance Companies 4.4%
Toys 4.1%
Health Care Services 3.8%
Electronic-Controls and
Equipment 2.7%
Telephone Services 2.6%
100.0%
</TABLE>

FORTIS FIDUCIARY FUND
CLASS B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
<S> <C> <C>
- ------------------------------------------------------------
Class B shares+ +22.38 % +18.78 %
Class C shares+ +22.55 % +21.55 %
Class H shares+ +22.38 % +18.78 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.75%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase.
+ Since November 14, 1994--Date shares were first offered to the public
++ Assumes redemption on August 31, 1995.
</TABLE>

FORTIS FIDUCIARY FUND CLASS A

Value of $10,000 invested January 2, 1982

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
FORTIS FIDUCIARY
S&P 500*** FUND
<S> <C> <C> <C> <C>
1/2/82 10,000 9,525
82 10,165 10,328
83 14,625 16,236
84 15,530 16,073
85 18,418 19,081
86 25,582 28,211
87 34,417 35,819
88 28,304 27,359
89 39,348 39,138
90 37,388 36,786
91 47,439 47,291
92 51,208 52,151
93 58,961 57,667
94 62,176 63,529
95 75,507 77,956
FORTIS FIDUCIARY FUND
AVERAGE ANNUAL TOTAL
RETURN
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
Class A* 16.88% 15.08% 14.55% 16.22%
Class A** 22.71% 16.21% 15.11% 16.63%
<FN>
Annual period ended August 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.75%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of 500 common stocks.
</TABLE>

4
<PAGE>
FORTIS GROWTH FUND
TOP TEN HOLDINGS AS OF 8/31/95

<TABLE>
<CAPTION>
Percent of
Stocks Net Assets
- --------------------------------------------------------------------------------
<C> <S> <C>
1. 3Com Corp. 5.5%
2. Tellabs, Inc. 5.0%
3. Oracle Corp. 4.6%
4. Cisco Systems, Inc. 4.4%
5. Informix Corp. 3.9%
6. Microsoft Corp. 3.7%
7. DSC Communications Corp. 2.9%
8. Lone Star Steakhouse & Saloon, Inc. 2.6%
9. Micron Technology, Inc. 2.4%
10. Office Depot, Inc. 2.3%
</TABLE>

PORTFOLIO CHANGES FOR THE YEAR ENDED 8/31/95

ADDITIONS:
ADC Telecommunications, Inc.
America Online, Inc.
Applied Materials, Inc.
Biogen, Inc.
Cypress Semiconductor Corp.
EMC Corp.
HBO & Co.
Harrah's Entertainment, Inc.
Lowe's Companies, Inc.
Medaphis Corp.
Micron Technology, Inc.
Mobile Telecommunications Technologies Corp.
Motorola, Inc.
Nokia Corp. ADR
Oxford Health Plans, Inc.
Paging Network, Inc.
Petroleum Geo Services A/S ADS
Qualcomm, Inc.
Sensormatic Electronics Corp.
Staples, Inc.
Tommy Hilfiger Corp.
Vencor, Inc.
Worldcom, Inc.

ELIMINATIONS:
Acclaim Entertainment, Inc.
ALZA Corp. Class A
Brinker International, Inc.
Buffets, Inc.
Compuware Corp.
Cracker Barrel Old Country Store, Inc.
Grupo Televisa, S.A. de C.V. ADR
International Game Technology
Landmark Graphics Corp.
Newbridge Networks Corp.
Price/Costco, Inc.
Quantum Health Resources, Inc.
Sybase, Inc.
Value Health, Inc.
Wellfleet Communications, Inc.

FORTIS GROWTH FUND
CLASS B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
<S> <C> <C>
- ------------------------------------------------------------
Class B shares+ +28.17 % +24.57 %
Class C shares+ +28.21 % +27.21 %
Class H shares+ +28.21 % +24.61 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.75%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase.
+ Since November 14, 1994--Date shares were first offered to the public
++ Assumes redemption on August 31, 1995.
</TABLE>

FORTIS GROWTH FUND PORTFOLIO
COMPOSITION BY INDUSTRY AS OF 8/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Telecommunications 20.5%
Computer-Software 17.8%
Other 11.6%
Cash
Equivalents/Receivables 11.4%
Retail-Miscellaneous 7.3%
Electronic-Controls and
Equipment 6.4%
Electronic-Semiconductor
and Capacitor 5.4%
Health Care Services 4.6%
Telephone Services 4.9%
Restaurants and
Franchising 3.9%
Finance Companies 3.5%
Electronic-Communication
Security 2.7%
100.0%
</TABLE>

FORTIS GROWTH FUND invests primarily in medium-size companies that are growing
their revenues and earnings at significantly above average rates. The 26.9
percent (Class A shares without a sales charge) return for the year ended August
31, 1995, can be mainly attributed to the sizeable holding of technology stocks.
Approximately half of the portfolio is diversified across a wide range of
technology-based businesses. Their common denominator is that they are
benefiting from U.S. corporations looking to improve productivity, as well as
compete more effectively in highly competitive global markets. More recently,
consumer markets have begun to grow rapidly as individuals seek to moderate the
complexity of modern life. We believe these trends are secular and not just
cyclical in nature, a condition that will be evidenced worldwide over time.

FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO invests in smaller companies
that are growing at very high rates; specifically, at least 25 percent to 30
percent annually in both revenues and earnings. By definition, these companies
are in businesses that are experiencing rapid unit growth. Typically they are
leaders in their industries or industry niches because of the proprietary nature
of their products or services and/or

FORTIS GROWTH FUND CLASS A

Value of $10,000 invested March 31, 1963

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
S&P 500*** FORTIS GROWTH FUND
<S> <C> <C> <C> <C>
Apr-63 10,000 9,525
63 11,040 10,099
64 12,856 10,931
65 14,121 13,119
66 12,907 14,479
67 16,213 22,377
68 17,667 26,486
69 17,607 23,742
70 15,601 18,352
71 19,578 25,413
72 22,619 30,209
73 21,866 24,494
74 15,750 18,759
75 19,863 23,097
76 24,459 26,701
77 24,022 28,161
78 27,021 41,128
79 30,162 48,772
80 35,630 70,320
81 37,512 84,142
82 38,755 95,822
83 55,759 150,914
84 59,211 144,130
85 70,223 161,092
86 97,536 234,978
87 131,220 302,503
88 107,914 220,640
89 150,021 336,834
90 142,548 311,778
91 180,870 441,372
92 195,238 462,216
93 224,800 567,067
94 237,057 545,679
95 287,884 692,573
FORTIS GROWTH FUND
AVERAGE ANNUAL TOTAL
RETURN
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
CLASS A* 20.89% 16.17% 15.14% 13.96%
CLASS A** 26.92% 17.31% 15.70% 14.13%
<FN>
Annual period ended August 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.75%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of 500 common stocks.
</TABLE>

5
<PAGE>
FORTIS ADVANTAGE
CAPITAL APPRECIATION PORTFOLIO
TOP TEN HOLDINGS AS OF 8/31/95

<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------------------------------
<C> <S> <C>
1. Xilinx, Inc. 4.5%
2. Input/Output, Inc. 4.0%
3. Lone Star Steakhouse & Saloon, Inc. 3.5%
4. Acxiom Corp. 3.4%
5. Informix Corp. 3.1%
6. Ultratech Stepper, Inc. 2.9%
7. Cisco Systems, Inc. 2.7%
8. Micro Warehouse, Inc. 2.5%
9. LCI International, Inc. 2.3%
10. Applebees International, Inc. 2.1%
</TABLE>

PORTFOLIO CHANGES FOR THE TEN-MONTH PERIOD ENDED 8/31/95

ADDITIONS:
ADC Telecommunications, Inc.
Alliance Semiconductor Corp.
American Oncology Resources, Inc.
Cerner Corp.
Cheesecake Factory, Inc.
FSI International, Inc.
FTP Software, Inc.
Franklin Electronic Publishers, Inc.
Hollywood Entertainment Corp.
Indigo NV
Integrated Device Technology, Inc.
Integrated Silicon Solutions, Inc.
Legato Systems, Inc.
Macromedia, Inc.
Medaphis Corp.
Medic Computer Systems, Inc.
Medpartners, Inc.
MIDCOM Communications, Inc.
Network General Corp.
Omnicare, Inc.
Papa John's International, Inc.
Paradigm Technology, Inc.
Steris Corp.
Summit Medical Systems, Inc.
Sunglass Hut International, Inc.
System Software Associates, Inc.
Trimble Navigation Limited

ELIMINATIONS:
Centocor, Inc.
Cygne Designs, Inc.
DOVatron International, Inc.
ECI Telecom Ltd.
Franklin Quest Co.
Mid Atlantic Medical Services, Inc.
Newbridge Networks Corp.
Powersoft Corp.
Resound Corp.
Rio Hotel & Casino, Inc.
Silver King Communications, Inc.
Starbucks Corp.
Stein Mart, Inc.
Sybase, Inc.
Wall Data

FORTIS ADVANTAGE
CAPITAL APPRECIATION PORTFOLIO
CLASS B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares+ +36.17 % +32.57 %
Class C shares+ +36.21 % +35.21 %
Class H shares+ +36.21 % +32.61 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.50%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase.
+ Since November 14, 1994--Date shares were first offered to the public
++ Assumes redemption on August 31, 1995.
</TABLE>

superior management skills, including an ability to anticipate change in their
markets. The fund appreciated 33.1 percent (Class A shares without a sale
charge) for the ten-month period ended August 31, 1995. Important contributors
to that performance included a wide range of technology stocks, which accounted
for roughly one-third of total holdings. Other contributors included selected
holdings in the areas of retail, health care, telecommunications and energy
services.

IN CLOSING
We'd like to point out that we're now combining the annual reports for the funds
reviewed here (Fortis Stock Funds) as we continue in our efforts to provide
convenient investment products and services. We appreciate your investment with
us, and ask that you talk with your financial professional or us if you have any
questions.

Sincerely,

/s/ DEAN C. KOPPERUD
Dean C. Kopperud
President

/s/ STEPHEN M. POLING
Stephen M. Poling
Vice President

September 25, 1995
FORTIS ADVANTAGE
CAPITAL APPRECIATION PORTFOLIO
COMPOSITION BY INDUSTRY AS OF 8/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Computer-Software 17.7%
Other 15.5%
Retail-Miscellaneous 12.4%
Electronic-Semiconductor
and Capacitor 10.9%
Restaurants and
Franchising 7.9%
Health Care Services 7.1%
Cash
Equivalents/Receivables 6.0%
Electronics-Controls and
Equipment 5.8%
Business Services and
Supplies 4.7%
Office Equipment and
Supplies 4.1%
Telecommunications 4.0%
Utilities-Telephone 3.9%
100.0%
</TABLE>

FORTIS ADVANTAGE
CAPITAL APPRECIATION PORTFOLIO CLASS A

Value of $10,000 invested January 4, 1988

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
FORTIS CAPITAL
APPRECIATION
S&P 500*** PORTFOLIO
<S> <C> <C> <C>
1/4/88 10,000 9,550
88 10,868 10,400
89 15,109 14,892
90 14,356 14,367
91 18,216 18,683
92 19,663 18,734
93 22,640 25,481
94 23,875 23,792
95 28,994 33,381
FORTIS ADVANTAGE CAPITAL
APPRECIATION PORTFOLIO
AVERAGE ANNUAL TOTAL
RETURN
SINCE
1 YEAR 5 YEAR JANUARY 4, 1988@
CLASS A* 33.99% 17.28% 17.05%
CLASS A** 40.30% 18.37% 17.75%
<FN>
Annual period ended August 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of 500 common stocks.
@ Date shares were first offered to the public.
</TABLE>

6
<PAGE>
FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES

MUTUAL FUNDS/PORTFOLIOS

Fortis Advantage Portfolios, Inc.
ASSET ALLOCATION PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
GOVERNMENT TOTAL RETURN PORTFOLIO
HIGH YIELD PORTFOLIO

Fortis Capital Fund

Fortis Fiduciary Fund, Inc.

Fortis Global Growth Portfolio

Fortis Growth Fund, Inc.

Fortis Money Fund

Fortis Tax-Free Portfolios, Inc.
MINNESOTA PORTFOLIO
NATIONAL PORTFOLIO
NEW YORK PORTFOLIO

Fortis U.S. Government
Securities Fund

FIXED AND VARIABLE ANNUITIES

Fortis Opportunity Fixed
& Variable Annuity
Masters Variable Annuity
FIXED ACCOUNT
MONEY MARKET
U.S. GOVERNMENT SECURITIES
DIVERSIFIED INCOME
GLOBAL BOND
HIGH YIELD
ASSET ALLOCATION
GLOBAL ASSET ALLOCATION
GROWTH & INCOME
GROWTH STOCK
GLOBAL GROWTH
INTERNATIONAL STOCK
AGGRESSIVE GROWTH

Fortune Fixed Annuities
SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY

Income Annuities
GUARANTEED FOR LIFE
GUARANTEED FOR A SPECIFIC PERIOD

LIFE AND DISABILITY

WALL STREET SERIES VUL 220 & VUL 500

FIXED ACCOUNT
MONEY MARKET
U.S. GOVERNMENT SECURITIES
DIVERSIFIED INCOME
GLOBAL BOND
HIGH YIELD
ASSET ALLOCATION
GLOBAL ASSET ALLOCATION
GROWTH & INCOME
GROWTH STOCK
GLOBAL GROWTH
INTERNATIONAL STOCK
AGGRESSIVE GROWTH

Adaptable Life
Universal Life
Disability

FOR MORE COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES, SEND FOR A
PROSPECTUS. WRITE TO: FORTIS INVESTORS, INC., P.O. BOX 64284, ST. PAUL, MN
55164. READ IT CAREFULLY BEFORE INVESTING OR SENDING MONEY.

7
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments
August 31, 1995

COMMON STOCKS-44.58%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ----------- ----------- -----------
<C> <S> <C> <C>
BROADCASTING-0.56%
34,000 News Corp., Ltd. ADR (The) (e).............................. $ 584,292 $ 773,500
----------- -----------
BUSINESS SERVICES AND SUPPLIES-3.99%
30,400 First Data Corp. (e)........................................ 988,244 1,774,600
16,500 First Financial Management Corp............................. 1,129,338 1,487,062
48,000 MBNA Corp................................................... 1,033,494 1,704,000
27,950 Sensormatic Electronics Corp. (e)........................... 810,153 586,950
----------- -----------
3,961,229 5,552,612
----------- -----------
COMPUTER-HARDWARE-0.72%
23,000 Ceridian Corp. (a).......................................... 1,042,562 1,006,250
----------- -----------
COMPUTER-SOFTWARE-3.81%
18,000 Computer Associates International, Inc...................... 976,006 1,251,000
23,600 Microsoft Corp. (a)......................................... 1,005,434 2,183,000
46,500 Oracle Corp. (a)............................................ 344,821 1,865,812
----------- -----------
2,326,261 5,299,812
----------- -----------
ELECTRONIC-CONTROLS AND EQUIPMENT-1.76%
23,500 Applied Materials, Inc. (a)................................. 918,164 2,444,000
----------- -----------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-0.89%
20,200 Intel Corp.................................................. 384,951 1,239,775
----------- -----------
FINANCE COMPANIES-3.40%
10,500 Federal National Mortgage Association....................... 860,212 1,001,437
24,100 Franklin Resources, Inc..................................... 283,777 1,325,500
41,192 Green Tree Financial Corp................................... 1,036,226 2,399,434
----------- -----------
2,180,215 4,726,371
----------- -----------
HEALTH CARE SERVICES-2.68%
25,000 Columbia/HCA Healthcare Corp................................ 929,927 1,175,000
12,500 PacifiCare Health Systems, Inc. Class B (a)(e).............. 594,808 715,625
35,500 U.S. HealthCare, Inc........................................ 1,074,317 1,136,000
16,600 United Healthcare Corp...................................... 504,429 701,350
----------- -----------
3,103,481 3,727,975
----------- -----------
HOTEL AND MOTEL-1.22%
49,500 Mirage Resorts, Inc. (a).................................... 1,115,820 1,701,563
----------- -----------
LEISURE TIME-AMUSEMENTS-0.67%
16,500 Disney (Walt) Co............................................ 910,134 926,063
----------- -----------
MEDICAL SUPPLIES-0.81%
12,000 Medtronic, Inc. (and rights)................................ 293,844 1,132,500
----------- -----------

<CAPTION>
Market
Shares Cost (b) Value (c)
- ----------- ----------- -----------
<C> <S> <C> <C>
MISCELLANEOUS-1.53%
62,250 CUC International, Inc. (a)................................. $ 1,019,365 $ 2,124,281
----------- -----------
OFFICE EQUIPMENT AND SUPPLIES-3.85%
46,000 Silicon Graphics, Inc. (a).................................. 591,093 1,943,500
40,000 Sterling Software, Inc. (a)................................. 772,400 1,785,000
26,100 Tandy Corp.................................................. 1,182,405 1,621,463
----------- -----------
2,545,898 5,349,963
----------- -----------
PUBLISHING-0.69%
15,700 Scholastic Corp. (a)(e)..................................... 810,604 961,625
----------- -----------
RETAIL-DEPARTMENT STORES-1.61%
24,500 Kohl's Corp. (a)............................................ 957,074 1,151,500
44,000 Wal-Mart Stores, Inc........................................ 991,910 1,083,500
----------- -----------
1,948,984 2,235,000
----------- -----------
RETAIL-MISCELLANEOUS-4.08%
40,800 AutoZone, Inc. (a)(e)....................................... 783,087 1,096,500
19,200 Home Depot, Inc............................................. 222,400 765,600
39,000 Lowe's Companies, Inc....................................... 791,743 1,296,750
50,700 Office Depot, Inc. (a)...................................... 477,429 1,578,038
27,400 Pep Boys Manny Moe & Jack................................... 608,270 753,500
5,300 Talbots (The), Inc.......................................... 106,104 182,850
----------- -----------
2,989,033 5,673,238
----------- -----------
TELECOMMUNICATIONS-8.44%
62,000 3Com Corp. (a)(e)........................................... 488,696 2,418,000
27,900 Cisco Systems, Inc. (a)..................................... 698,222 1,830,938
94,400 Ericsson (L.M.) Telephone Co. Class B ADR................... 1,146,993 2,017,800
46,400 General Instrument Corp. (a)(e)............................. 1,278,464 1,693,600
24,000 Motorola, Inc............................................... 578,050 1,794,000
28,600 Nokia Corp. ADR............................................. 584,679 1,984,125
----------- -----------
4,775,104 11,738,463
----------- -----------
TELEPHONE SERVICES-1.46%
60,508 Worldcom, Inc. (a)(e)....................................... 657,407 2,038,363
----------- -----------
TOYS-1.31%
62,791 Mattel, Inc................................................. 694,622 1,820,939
----------- -----------
UTILITIES-TELEPHONE-1.10%
47,000 Air Touch Communications, Inc. (a).......................... 1,186,660 1,527,500
----------- -----------
TOTAL COMMON STOCKS......................................... $33,448,630 $61,999,793
----------- -----------
----------- -----------
</TABLE>

PREFERRED STOCKS-0.25%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Value
Shares Cost (b) (c)
- ----------- -------- --------
<C> <S> <C> <C>
BROADCASTING-0.25%
17,000 News Corp., Ltd. (The) Preferred ADR (e).................... $252,414 $344,250
-------- --------
</TABLE>

8
<PAGE>
ASSET BACKED SECURITIES-5.45%

CORPORATE BONDS-INVESTMENT GRADE-11.00%

CORPORATE BONDS-NON-INVESTMENT GRADE-9.86%

9
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments
August 31, 1995

CORPORATE BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
- ----------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
BUILDING MATERIALS-0.96%
$ 500,000 Associated Materials, Inc., 11.50% Sr Sub Note 8-15-2003.... B- $ 462,500 $ 430,000
500,000 Essex Group, 10.00% Sr Note 5-1-2003........................ B+ 503,125 486,875
500,000 Wickes Lumber Co., 11.625% Sr Sub Note 12-15-2003 (e)....... B- 502,500 421,250
----------- -----------
1,468,125 1,338,125
----------- -----------
CHEMICALS-1.17%
500,000 Arcadian Partners L.P., 10.75% Sr Note Ser B 5-1-2005....... BB- 493,304 522,500
900,000 Indspec Chemical Corp., 11.50% Sr Sub Disc Note Ser B
12-1-2003 (Zero coupon until 12-1-1998)................... B- 563,753 585,000
500,000 NL Industries, Inc., 11.75% Sr Secured Note 10-15-2003...... B 475,000 525,000
----------- -----------
1,532,057 1,632,500
----------- -----------
CONSUMER GOODS-0.32%
500,000 Plastic Specialty & Technologies, Inc., 11.25% Sr Secured
Note 12-1-2003............................................ B- 443,125 451,250
----------- -----------
CONTAINERS AND PACKAGING-0.73%
500,000 Domtar, Inc., 11.25% Sinking Fund Deb 9-15-2017............. BB- 485,000 530,000
500,000 Mail-Well Corp., 10.50% Sr Sub Note 2-15-2004............... B- 443,750 482,500
----------- -----------
928,750 1,012,500
----------- -----------
ENERGY-0.33%
432,916 Midland Cogeneration Venture, L.P., 10.33% MidlandFunding Sr
Secured Lease Obligation Bond Ser C 7-23-2002............. BB- 429,669 447,376
----------- -----------
FOOD-GROCERY, MISCELLANEOUS-0.70%
500,000 Envirodyne Industries, 12.00% First Priority SeniorSecured
Note 6-15-2000 (f)........................................ NR 500,000 495,000
500,000 Specialty Foods Corp., 10.25% Sr Note Ser B 8-15-2001....... B 482,500 483,750
----------- -----------
982,500 978,750
----------- -----------
LEISURE TIME-AMUSEMENTS-0.65%
500,000 Bally's Park Place, 9.25% First Mtg Bond 3-15-2004.......... BB 472,514 470,000
500,000 G B Property Funding, 10.875% First Mtg Bond 1-15-2004...... B+ 435,000 435,000
----------- -----------
907,514 905,000
----------- -----------
MACHINERY-0.63%
500,000 Spreckels Industries, Inc., 11.50% Sr Secured Note
9-1-2000.................................................. B 485,625 495,000
500,000 Terex Corp., 13.75% Sr Secured Note 5-15-2002 (and rights)
(e)(f).................................................... B 490,000 387,500
----------- -----------
975,625 882,500
----------- -----------
MEDIA-0.37%
556,513 Falcon Holding Group, L.P. 11.00% Sr Sub Note Ser B
9-15-2003 (Interest is Payable-in-Kind) (e)............... NR 451,307 508,143
----------- -----------
RESTAURANTS AND FRANCHISING-0.63%
500,000 Carrols Corp., 11.50% Sr Note 8-15-2003..................... B+ 478,750 490,000
500,000 Flagstar Corp., 11.25% Sr Sub Deb 11-1-2004................. CCC+ 521,250 380,000
----------- -----------
1,000,000 870,000
----------- -----------
RETAIL-MISCELLANEOUS-1.43%
600,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000 (e).............. B- 600,000 526,500
500,000 Grand Union Co., 12.00% Sr Note 9-1-2004 (e)................ B- 473,750 474,375
500,000 Pantry (The), Inc., 12.00% Sr Note Ser B 11-15-2000......... B+ 490,000 492,500
500,000 Stater Brothers, Inc., 11.00% Sr Note 3-1-2001.............. B+ 475,000 492,500
----------- -----------
2,038,750 1,985,875
----------- -----------
TECHNOLOGY-0.66%
500,000 Computervision Corp., 10.875% Sr Note 8-15-1997............. B 466,875 513,750
500,000 U.S. Banknote Corp., 10.375% Sr Note 6-1-2002............... B+ 452,500 405,000
----------- -----------
919,375 918,750
----------- -----------
TELECOMMUNICATIONS-0.18%
250,000 Paging Network, 10.125% Sr Sub Note 8-1-2007................ B 252,812 253,125
----------- -----------
TEXTILE MANUFACTURING-0.12%
200,000 U.S. Leather, Inc., 10.25% Sr Note 7-31-2003................ B+ 196,813 164,000
----------- -----------
</TABLE>

10
<PAGE>
CORPORATE BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
- ----------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
TOBACCO-0.26%
$ 500,000 Liggett Group, Inc., 11.50% Ser B Secured Note 2-1-1999..... NR* $ 361,250 $ 360,000
----------- -----------
TRANSPORTATION-0.36%
500,000 Petro PSC Properties, L.P., 12.50% Sr Note 6-1-2002......... B 479,215 502,500
----------- -----------
TOTAL CORPORATE BONDS - NON-INVESTMENT GRADE................ 13,866,887 13,712,894
----------- -----------
TOTAL ASSET BACKED & CORPORATE DEBT SECURITIES.............. $36,181,553 $36,596,063
----------- -----------
----------- -----------
</TABLE>

U.S. GOVERNMENT SECURITIES-23.69%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (b) Value (c)
- ---------- ------------ ------------
<C> <S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION-10.81%
MORTGAGE BACKED SECURITIES:
$4,080,000 7.00% 2025................................... $ 4,014,656 $ 4,008,600
2,039,998 8.00% 2025................................... 2,070,917 2,081,435
290,922 9.00% 2016-2021.............................. 287,368 303,105
------------ ------------
6,372,941 6,393,140
------------ ------------
NOTES:
2,000,000 6.85% 2000................................... 2,000,000 2,017,356
2,000,000 7.40% 2004 (e)............................... 2,111,050 2,115,142
2,500,000 7.84% 1998................................... 2,516,775 2,524,847
------------ ------------
6,627,825 6,657,345
------------ ------------
REMIC-PAC'S:
2,000,000 7.00% 2020................................... 1,937,969 1,989,238
------------ ------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION................................ 14,938,735 15,039,723
------------ ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-3.43%
MORTGAGE BACKED SECURITIES:
1,906,695 7.50% 2022................................... 1,910,270 1,916,823
2,642,724 9.00% 2023................................... 2,728,612 2,771,556

<CAPTION>
Principal Market
Amount Cost (b) Value (c)
- ---------- ------------ ------------
<C> <S> <C> <C>
$ 75,930 9.50% 2019................................... $ 75,313 $ 80,510
------------ ------------
4,714,195 4,768,889
------------ ------------
OTHER DIRECT FEDERAL OBLIGATIONS-3.15%
FEDERAL HOME LOAN BANK:
1,750,000 6.125% 1996.................................. 1,747,813 1,753,405
2,500,000 7.31% 2004................................... 2,508,985 2,628,523
------------ ------------
4,256,798 4,381,928
------------ ------------
U.S. TREASURY SECURITIES-6.30%
BONDS:
2,400,000 7.625% 2025.................................. 2,658,000 2,676,746
5,250,000 8.125% 2021 (e).............................. 5,880,469 6,088,352
------------ ------------
8,538,469 8,765,098
------------ ------------
TOTAL U.S. GOVERNMENT SECURITIES............. 32,448,197 32,955,638
------------ ------------
TOTAL LONG-TERM DEBT SECURITIES.............. 68,629,750 69,551,701
------------ ------------
TOTAL LONG-TERM INVESTMENTS.................. $102,330,794 $131,895,744
------------ ------------
------------ ------------
</TABLE>

SHORT-TERM INVESTMENTS-4.80%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ---------- ------------
<C> <S> <C>
BANKS-0.48%
$ 672,000 First Trust Money Market Variable Rate Time
Deposit, Current rate -- 5.66%............. $ 672,000
------------
DIVERSIFIED FINANCE-2.02%
2,807,000 Associates Corp. Master Variable Rate Note,
Current rate -- 5.79%...................... 2,807,000
------------
U.S. OTHER DIRECT FEDERAL OBLIGATIONS-2.30%
3,200,000 Federal Home Loan Bank, 5.74%, 9-18-1995..... 3,190,976
------------
TOTAL SHORT-TERM INVESTMENTS................. 6,669,976
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$109,000,770) (B).......................... $138,565,720
------------
------------
</TABLE>

(a) Presently not paying dividend income.
(b) At August 31, 1995, the cost of securities for federal income tax purposes
was $109,000,770 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation..................................... $30,575,015
Unrealized depreciation..................................... (1,010,065)
- -------------------------------------------------------------------------
Net unrealized appreciation................................. $29,564,950
- -------------------------------------------------------------------------
</TABLE>

(c) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities
(d) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets. Market value of investments in foreign
securities represents 5.17% of net assets as of August 31, 1995.
(e) Security is fully or partially on loan at August 31, 1995. See Note A of
accompanying Notes to Financial Statements.
(f) Securities sold within terms of a private placement memorandum, exempt from
registration under Section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or to other "accredited
investors". These investments have been identified by portfolio management
as illiquid securities. The value of these securities at August 31, 1995 is
$882,500 which represents .63% of net assets.
* Moody's Rating

11
<PAGE>
FORTIS CAPITAL FUND
Schedule of Investments
August 31, 1995

COMMON STOCKS-84.15%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- -------- ------------ ------------
<C> <S> <C> <C>
BROADCASTING-1.09%
142,100 News Corp., Ltd. ADR (The) (e).............................. $ 2,524,632 $ 3,232,775
------------ ------------
BUSINESS SERVICES AND SUPPLIES-5.83%
97,900 First Data Corp. (e)........................................ 3,275,890 5,714,912
35,000 First Financial Management Corp............................. 2,262,188 3,154,375
168,000 MBNA Corp................................................... 3,617,255 5,964,000
119,300 Sensormatic Electronics Corp. (e)........................... 3,492,879 2,505,300
------------ ------------
12,648,212 17,338,587
------------ ------------
COMPUTER-HARDWARE-0.74%
50,000 Ceridian Corp. (a).......................................... 2,267,085 2,187,500
------------ ------------
COMPUTER-SOFTWARE-9.57%
68,000 Computer Associates International, Inc...................... 3,960,381 4,726,000
109,600 Microsoft Corp. (a)......................................... 1,300,789 10,138,000
338,000 Oracle Corp. (a)............................................ 2,486,952 13,562,250
------------ ------------
7,748,122 28,426,250
------------ ------------
ELECTRONIC-CONTROLS AND EQUIPMENT-3.07%
87,700 Applied Materials, Inc. (a)................................. 3,590,291 9,120,800
------------ ------------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-1.77%
85,600 Intel Corp.................................................. 1,720,099 5,253,700
------------ ------------
FINANCE COMPANIES-4.73%
66,500 Federal National Mortgage Association....................... 2,327,500 6,342,437
132,288 Green Tree Financial Corp................................... 3,472,611 7,705,776
------------ ------------
5,800,111 14,048,213
------------ ------------
HEALTH CARE SERVICES-4.92%
87,400 Columbia/HCA Healthcare
Corp. (e)................................................. 3,383,784 4,107,800
45,700 PacifiCare Health Systems, Inc. Class B (a)(e).............. 2,200,047 2,616,325
169,000 U.S. HealthCare, Inc........................................ 5,770,188 5,408,000
58,600 United Healthcare Corp...................................... 2,063,033 2,475,850
------------ ------------
13,417,052 14,607,975
------------ ------------
HOTEL AND MOTEL-1.34%
115,500 Mirage Resorts, Inc. (a).................................... 2,603,580 3,970,313
------------ ------------
LEISURE TIME-AMUSEMENTS-1.30%
69,000 Disney (Walt) Co............................................ 3,808,155 3,872,625
------------ ------------
MEDICAL SUPPLIES-2.32%
73,200 Medtronic, Inc. (and rights)................................ 1,699,325 6,908,250
------------ ------------

<CAPTION>
Market
Shares Cost (b) Value (c)
- -------- ------------ ------------
<C> <S> <C> <C>
MISCELLANEOUS-2.54%
221,100 CUC International, Inc. (a)................................. $ 3,676,989 $ 7,545,038
------------ ------------
OFFICE EQUIPMENT AND SUPPLIES-6.94%
355,000 Silicon Graphics, Inc. (a)(e)............................... 4,616,121 14,998,750
90,400 Tandy Corp.................................................. 3,906,654 5,616,100
------------ ------------
8,522,775 20,614,850
------------ ------------
PUBLISHING-1.03%
49,800 Scholastic Corp. (a)(e)..................................... 2,539,082 3,050,250
------------ ------------
RETAIL-DEPARTMENT STORES-2.66%
95,200 Kohl's Corp. (a)............................................ 3,718,455 4,474,400
139,600 Wal-Mart Stores, Inc........................................ 978,984 3,437,650
------------ ------------
4,697,439 7,912,050
------------ ------------
RETAIL-MISCELLANEOUS-10.03%
128,200 AutoZone, Inc. (a)(e)....................................... 2,473,408 3,445,375
167,166 Home Depot, Inc............................................. 2,307,584 6,665,744
86,000 Lowe's Companies, Inc. (e).................................. 1,719,275 2,859,500
236,025 Office Depot, Inc. (a)(e)................................... 1,806,806 7,346,278
141,000 Pep Boys Manny Moe & Jack................................... 2,606,629 3,877,500
148,000 Price/Costco, Inc. (a)...................................... 2,840,050 2,497,500
90,700 Talbots (The), Inc.......................................... 2,322,008 3,129,150
------------ ------------
16,075,760 29,821,047
------------ ------------
TELECOMMUNICATIONS-14.43%
96,300 Cisco Systems, Inc. (a)..................................... 2,387,013 6,319,688
284,000 Ericsson (L.M.) Telephone Co. Class B ADR (e)............... 3,485,342 6,070,500
207,400 General Instrument Corp. (a)(e)............................. 5,296,662 7,570,100
164,000 Motorola, Inc............................................... 3,982,540 12,259,000
77,400 Nokia Corp. ADR (e)......................................... 1,582,311 5,369,625
114,000 Tellabs, Inc. (a)........................................... 3,071,808 5,329,500
------------ ------------
19,805,676 42,918,413
------------ ------------
TELEPHONE SERVICES-2.50%
220,450 Worldcom, Inc. (a)(e)....................................... 2,346,825 7,426,409
------------ ------------
TOYS-4.32%
442,675 Mattel, Inc................................................. 3,496,886 12,837,575
------------ ------------
UTILITIES-TELEPHONE-3.02%
128,000 Air Touch Communications, Inc. (a).......................... 3,299,050 4,160,000
115,000 Vodafone Group plc ADR (e).................................. 3,649,723 4,815,625
------------ ------------
6,948,773 8,975,625
------------ ------------
TOTAL COMMON STOCKS......................................... $125,936,869 $250,068,245
------------ ------------
------------ ------------
</TABLE>

PREFERRED STOCKS-0.44%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------- -------- ----------
<C> <S> <C> <C>
BROADCASTING-0.44%
64,800 News Corp., Ltd. (The) Preferred ADR (e).................... $989,913 $1,312,200
-------- ----------
</TABLE>

12
<PAGE>
U.S. GOVERNMENT SECURITIES-8.48%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (b) Value (c)
- ------------ ------------ ------------
<C> <S> <C> <C>
U.S. TREASURY SECURITIES-8.48%
NOTES:
$25,000,000 9.50% 1995 (e).............................................. $ 25,507,812 $ 25,195,300
------------ ------------
TOTAL LONG-TERM INVESTMENTS................................. $152,434,594 $276,575,745
------------ ------------
------------ ------------
</TABLE>

SHORT-TERM INVESTMENTS-6.72%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ------------ ------------
<C> <S> <C>
BANKS-3.85%
$11,430,802 First Trust Money Market Variable Rate Time Deposit, Current
rate -- 5.66%............................................. $ 11,430,802
------------
DIVERSIFIED FINANCE-0.52%
1,551,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. 1,551,000
------------
U.S. OTHER DIRECT FEDERAL OBLIGATIONS-2.35%
7,000,000 Federal Home Loan Bank, 5.72%, 9-6-1995..................... 6,993,432
------------
TOTAL SHORT-TERM INVESTMENTS................................ 19,975,234
------------
TOTAL INVESTMENTS IN SECURITIES (COST: $172,409,828) (B).... $296,550,979
------------
------------
</TABLE>

(a) Presently not paying dividend income.
(b) At August 31, 1995, the cost of securities for federal income tax purposes
was $172,409,828 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation..................................... $126,528,996
Unrealized depreciation..................................... (2,387,845)
- --------------------------------------------------------------------------
Net unrealized appreciation................................. $124,141,151
- --------------------------------------------------------------------------
</TABLE>

13
<PAGE>
FORTIS FIDUCIARY FUND, INC.
Schedule of Investments
August 31, 1995

COMMON STOCKS-83.94%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------- ----------- -----------
<C> <S> <C> <C>
BROADCASTING-1.04%
30,000 News Corp., Ltd. ADR (The) (d).............................. $ 568,584 $ 682,500
----------- -----------
BUSINESS SERVICES AND SUPPLIES-5.62%
19,200 First Data Corp. (d)........................................ 642,885 1,120,800
7,700 First Financial Management Corp............................. 500,089 693,963
37,000 MBNA Corp................................................... 805,564 1,313,500
26,300 Sensormatic Electronics Corp................................ 772,579 552,300
----------- -----------
2,721,117 3,680,563
----------- -----------
COMPUTER-HARDWARE-0.67%
10,000 Ceridian Corp. (a).......................................... 453,552 437,500
----------- -----------
COMPUTER-SOFTWARE-12.44%
31,800 BMC Software, Inc. (a)...................................... 877,274 1,355,475
14,300 Computer Associates International, Inc...................... 838,898 993,850
35,000 EMC Corp. (a)............................................... 702,100 717,500
24,900 Microsoft Corp. (a)......................................... 315,565 2,303,250
69,000 Oracle Corp. (a)............................................ 369,400 2,768,625
----------- -----------
3,103,237 8,138,700
----------- -----------
ELECTRONIC-CONTROLS AND EQUIPMENT-2.65%
16,700 Applied Materials, Inc. (a)................................. 665,585 1,736,800
----------- -----------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-1.59%
17,000 Intel Corp.................................................. 169,647 1,043,375
----------- -----------
FINANCE COMPANIES-4.43%
14,800 Federal National Mortgage Association....................... 518,000 1,411,550
25,472 Green Tree Financial Corp................................... 669,081 1,483,744
----------- -----------
1,187,081 2,895,294
----------- -----------
HEALTH CARE SERVICES-3.76%
18,200 Columbia/HCA Healthcare Corp. (d)........................... 693,906 855,400
9,300 PacifiCare Health Systems, Inc. Class B (a)(d).............. 437,120 532,425
18,000 U.S. HealthCare, Inc........................................ 662,892 576,000
11,800 United Healthcare Corp...................................... 366,076 498,550
----------- -----------
2,159,994 2,462,375
----------- -----------
HOTEL AND MOTEL-2.18%
14,000 Harrah's Entertainment, Inc. (a)............................ 490,295 446,250
24,250 Mirage Resorts, Inc. (a).................................... 546,510 833,594
7,000 Promus Hotel Corp. (a)...................................... 204,105 144,375
----------- -----------
1,240,910 1,424,219
----------- -----------
LEISURE TIME-AMUSEMENTS-1.24%
14,500 Disney (Walt) Co............................................ 800,040 813,812
----------- -----------
MEDICAL SUPPLIES-2.02%
14,000 Medtronic, Inc. (and rights)................................ 334,290 1,321,250
----------- -----------

<CAPTION>
Market
Shares Cost (b) Value (c)
- ------- ----------- -----------
<C> <S> <C> <C>
MISCELLANEOUS-2.25%
43,050 CUC International, Inc. (a)................................. $ 715,911 $ 1,469,081
----------- -----------
OFFICE EQUIPMENT AND SUPPLIES-9.47%
14,000 Compaq Computer Corp. (a)................................... 540,120 668,500
68,000 Silicon Graphics, Inc. (a)(d)............................... 883,616 2,873,000
35,600 Sterling Software, Inc. (a)................................. 650,231 1,588,650
17,100 Tandy Corp.................................................. 745,927 1,062,338
----------- -----------
2,819,894 6,192,488
----------- -----------
PUBLISHING-0.90%
9,600 Scholastic Corp. (a)........................................ 489,198 588,000
----------- -----------
RETAIL-DEPARTMENT STORES-2.35%
18,500 Kohl's Corp. (a)............................................ 722,598 869,500
27,200 Wal-Mart Stores, Inc........................................ 206,975 669,800
----------- -----------
929,573 1,539,300
----------- -----------
RETAIL-MISCELLANEOUS-9.19%
25,000 AutoZone, Inc. (a)(d)....................................... 482,350 671,875
30,833 Home Depot, Inc............................................. 436,457 1,229,466
18,000 Lowe's Companies, Inc. (d).................................. 360,214 598,500
46,350 Office Depot, Inc. (a)(d)................................... 351,521 1,442,644
31,900 Pep Boys Manny Moe & Jack................................... 589,736 877,250
28,000 Price/Costco, Inc. (a)...................................... 560,434 472,500
20,800 Talbots (The), Inc.......................................... 533,296 717,600
----------- -----------
3,314,008 6,009,835
----------- -----------
TELECOMMUNICATIONS-14.19%
21,600 Cisco Systems, Inc. (a)..................................... 535,865 1,417,500
64,000 Ericsson (L.M.) Telephone Co. Class B ADR (d)............... 765,326 1,368,000
43,800 General Instrument Corp. (a)(d)............................. 1,122,803 1,598,700
38,000 Motorola, Inc............................................... 921,452 2,840,500
16,200 Nokia Corp. ADR............................................. 331,126 1,123,875
20,000 Tellabs, Inc. (a)........................................... 536,591 935,000
----------- -----------
4,213,163 9,283,575
----------- -----------
TELEPHONE SERVICES-2.58%
50,054 Worldcom, Inc. (a)(d)....................................... 526,188 1,686,194
----------- -----------
TOYS-4.05%
91,406 Mattel, Inc................................................. 734,778 2,650,774
----------- -----------
UTILITIES-TELEPHONE-1.32%
26,500 Air Touch Communications, Inc. (a).......................... 678,290 861,250
----------- -----------
TOTAL COMMON STOCKS......................................... $27,825,040 $54,916,885
----------- -----------
----------- -----------
</TABLE>

PREFERRED STOCKS-0.46%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------- ----------- -----------
<C> <S> <C> <C>
BROADCASTING-0.46%
15,000 News Corp., Ltd. (The) Preferred ADR........................ $ 246,006 $ 303,750
----------- -----------
TOTAL LONG-TERM INVESTMENTS................................. $28,071,046 $55,220,635
----------- -----------
----------- -----------
</TABLE>

14
<PAGE>
SHORT-TERM INVESTMENTS-15.63%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ---------- -----------
<C> <S> <C>
BANKS-4.47%
$2,925,941 First Trust Money Market Variable Rate Time Deposit, Current
rate -- 5.66%............................................. $2,925,941
-----------
DIVERSIFIED FINANCE-2.16%
1,410,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. 1,410,000
-----------
U.S. OTHER DIRECT FEDERAL OBLIGATIONS-9.00%
5,900,000 Federal Home Loan Bank, 5.74%, 9-12-1995.................... 5,888,888
-----------
TOTAL SHORT-TERM INVESTMENTS................................ 10,224,829
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $38,295,875) (B)..... $65,445,464
-----------
-----------
</TABLE>

(a) Presently not paying dividend income.
(b) At August 31, 1995, the cost of securities for federal income tax purposes
was $38,295,875 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation..................................... $27,690,232
Unrealized depreciation..................................... (540,643)
- -------------------------------------------------------------------------
Net unrealized appreciation................................. $27,149,589
- -------------------------------------------------------------------------
</TABLE>

(c) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities
(d) Security is fully or partially on loan at August 31, 1995. See Note A of
accompanying Notes to Financial Statements.
(e) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets. Market value of investments in foreign
securities represents 5.32% of net assets as of August 31, 1995.

15
<PAGE>
FORTIS GROWTH FUND, INC.
Schedule of Investments
August 31, 1995

COMMON STOCKS-88.49%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- -------- ------------ ------------
<C> <S> <C> <C>
APPAREL-0.24%
49,000 Tommy Hilfiger Corp. (a).................................... $ 992,250 $ 1,641,500
------------ ------------
BIOMEDICS, GENETICS RESEARCH AND DEVELOPMENT-0.98%
121,000 Biogen, Inc. (a)............................................ 6,468,954 6,624,750
------------ ------------
BROADCASTING-0.31%
32,000 America Online, Inc. (a).................................... 1,342,350 2,108,000
------------ ------------
BUSINESS SERVICES AND SUPPLIES-1.67%
79,000 First Financial Management Corp............................. 5,072,958 7,119,875
202,800 Sensormatic Electronics Corp................................ 6,477,106 4,258,800
------------ ------------
11,550,064 11,378,675
------------ ------------
COMPUTER-SOFTWARE-17.84%
337,600 BMC Software, Inc. (a)...................................... 6,110,120 14,390,200
405,000 EMC Corp. (a)............................................... 8,354,557 8,302,500
74,000 HBO & Co.................................................... 2,726,840 4,070,000
954,000 Informix Corp. (a).......................................... 10,102,124 26,712,000
269,650 Microsoft Corp. (a)......................................... 7,934,830 24,942,625
771,400 Oracle Corp. (a)............................................ 4,227,686 30,952,425
216,500 Parametric Technology Corp. (a)............................. 6,327,022 11,961,625
------------ ------------
45,783,179 121,331,375
------------ ------------
DRUGS-0.19%
28,400 Forest Laboratories, Inc. (a)............................... 1,247,867 1,270,900
------------ ------------
ELECTRONIC-COMMUNICATION SECURITY-2.67%
204,000 ADC Telecommunications, Inc. (a)............................ 6,637,777 7,905,000
210,000 Qualcomm, Inc. (a).......................................... 8,068,746 10,237,500
------------ ------------
14,706,523 18,142,500
------------ ------------
ELECTRONIC-CONTROLS AND EQUIPMENT-6.38%
540,000 American Power Conversion Corp. (a) 7,868,504 9,045,000
53,000 Applied Materials, Inc. (a)................................. 5,503,732 5,512,000
230,900 Lam Research Corp. (a)...................................... 7,814,131 13,911,725
420,600 Solectron Corp. (a)......................................... 11,676,729 14,931,300
------------ ------------
32,863,096 43,400,025
------------ ------------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-5.37%
190,000 Cypress Semiconductor Corp. (a)............................. 5,570,112 8,668,750
191,000 Intel Corp.................................................. 4,058,639 11,722,625
210,000 Micron Technology, Inc...................................... 5,814,005 16,143,750
------------ ------------
15,442,756 36,535,125
------------ ------------
FINANCE COMPANIES-3.49%
213,000 Franklin Resources, Inc..................................... 2,787,446 11,715,000
523,700 Mercury Finance Co.......................................... 8,620,416 11,979,637
------------ ------------
11,407,862 23,694,637
------------ ------------
HEALTH CARE SERVICES-4.56%
116,000 Medaphis Corp. (a).......................................... 3,306,728 2,682,500
130,000 Oxford Health Plans, Inc. (a)............................... 5,739,244 6,370,000
104,900 PacifiCare Health Systems, Inc. Class B (a)................. 4,548,720 6,005,525
188,000 U.S. HealthCare, Inc........................................ 6,731,514 6,016,000
142,000 United Healthcare Corp...................................... 5,157,262 5,999,500

<CAPTION>
Market
Shares Cost (b) Value (c)
- -------- ------------ ------------
<C> <S> <C> <C>
134,000 Vencor, Inc. (a)............................................ $ 4,199,635 $ 3,969,750
------------ ------------
29,683,103 31,043,275
------------ ------------
HOTEL AND MOTEL-0.89%
144,200 Harrah's Entertainment, Inc. (a)............................ 3,025,850 4,596,375
72,100 Promus Hotel Corp. (a)...................................... 1,259,630 1,487,062
------------ ------------
4,285,480 6,083,437
------------ ------------
MACHINERY-OIL AND WELL-1.09%
290,000 Petroleum Geo Services A/S ADS (a) 6,961,011 7,431,250
------------ ------------
MISCELLANEOUS-2.27%
452,100 CUC International, Inc. (a)................................. 7,844,614 15,427,913
------------ ------------
OFFICE EQUIPMENT AND SUPPLIES-1.30%
185,000 Compaq Computer Corp. (a)................................... 6,907,330 8,833,750
------------ ------------
PUBLISHING-1.07%
118,800 Scholastic Corp. (a)........................................ 6,053,565 7,276,500
------------ ------------
RESTAURANTS AND FRANCHISING-3.93%
443,300 Lone Star Steakhouse & Saloon, Inc. (a)..................... 6,776,715 17,787,413
277,800 Outback Steakhouse, Inc. (a)................................ 4,236,044 8,959,050
------------ ------------
11,012,759 26,746,463
------------ ------------
RETAIL-DEPARTMENT STORES-1.58%
117,600 Kohl's Corp. (a)............................................ 3,779,664 5,527,200
210,800 Wal-Mart Stores, Inc........................................ 1,494,008 5,190,950
------------ ------------
5,273,672 10,718,150
------------ ------------
RETAIL-MISCELLANEOUS-7.32%
197,300 Barnes & Noble, Inc. (a).................................... 4,940,859 7,719,363
273,749 Home Depot, Inc............................................. 1,678,473 10,915,741
190,000 Lowe's Companies, Inc....................................... 7,121,922 6,317,500
497,850 Office Depot, Inc. (a)...................................... 4,497,152 15,495,581
363,000 Staples, Inc. (a)........................................... 6,644,860 9,301,875
------------ ------------
24,883,266 49,750,060
------------ ------------
TELECOMMUNICATIONS-20.48%
967,200 3Com Corp. (a).............................................. 3,915,191 37,720,800
454,000 Cisco Systems, Inc. (a)..................................... 1,600,855 29,793,750
373,600 DSC Communications Corp. (a)................................ 11,883,884 19,614,000
107,000 MFS Communications Co. (a).................................. 4,581,250 4,734,750
131,000 Motorola, Inc............................................... 7,164,790 9,792,250
50,000 Nokia Corp. ADR............................................. 3,485,635 3,468,750
730,000 Tellabs, Inc. (a)........................................... 8,326,156 34,127,500
------------ ------------
40,957,761 139,251,800
------------ ------------
TELEPHONE SERVICES-4.86%
353,000 Mobile Telecommunications Technologies Corp. (a)............ 7,662,202 10,854,750
187,000 Paging Network, Inc. (a).................................... 5,656,750 7,386,500
440,000 Worldcom, Inc. (a).......................................... 10,109,381 14,822,500
------------ ------------
23,428,333 33,063,750
------------ ------------
TOTAL COMMON STOCKS......................................... $309,095,795 $601,753,835
------------ ------------
------------ ------------
</TABLE>

16
<PAGE>
SHORT-TERM INVESTMENTS-11.43%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ----------- ------------
<C> <S> <C>
BANKS-4.64%
$31,546,000 First Trust Money Market Variable Rate Time Deposit, Current
rate -- 5.66%............................................. $ 31,546,000
------------
DIVERSIFIED FINANCE-0.18%
1,242,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. 1,242,000
------------
U.S. OTHER DIRECT FEDERAL OBLIGATIONS-6.61%
9,000,000 Federal Farm Credit Bank, 5.72%, 9-7-1995................... 8,990,148
16,000,000 Federal Home Loan Bank, 5.72%, 9-7-1995..................... 15,982,484
20,000,000 Federal Farm Credit Bank, 5.76%, 9-5-1995................... 19,984,278
------------
44,956,910
------------
TOTAL SHORT-TERM INVESTMENTS................................ 77,744,910
------------
TOTAL INVESTMENTS IN SECURITIES (COST: $386,840,705) (B).... $679,498,745
------------
------------
</TABLE>

(a) Presently not paying dividend income.
(b) At August 31, 1995, the cost of securities for federal income tax purposes
was $386,840,705 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation..................................... $298,996,874
Unrealized depreciation..................................... (6,338,834)
- --------------------------------------------------------------------------
Net unrealized appreciation................................. $292,658,040
- --------------------------------------------------------------------------
</TABLE>

17
<PAGE>
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO
Schedule of Investments
August 31, 1995

COMMON STOCKS-93.79%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- -------- ----------- -----------
<C> <S> <C> <C>
BROADCASTING-1.75%
25,000 America Online, Inc. (a)(e)................................. $ 214,061 $ 1,646,875
----------- -----------
BUSINESS SERVICES AND SUPPLIES-4.66%
120,000 Acxiom Corp. (a)............................................ 738,750 3,225,000
45,500 Landmark Graphics Corp. (a)................................. 1,282,606 1,160,250
----------- -----------
2,021,356 4,385,250
----------- -----------
COMPUTER-SOFTWARE-17.65%
16,000 Cerner Corp. (a)(e)......................................... 378,000 548,000
30,000 FSI International, Inc. (a)................................. 854,166 1,057,500
23,000 FTP Software, Inc. (a)(e)................................... 720,843 534,750
104,000 Informix Corp. (a)(e)....................................... 604,875 2,912,000
100,000 Input/Output, Inc. (a)...................................... 556,250 3,725,000
36,000 Legato Systems, Inc. (a).................................... 898,500 846,000
20,000 Macromedia, Inc. (a)........................................ 768,798 995,000
15,000 Medic Computer Systems, Inc. (a)............................ 721,680 660,000
25,000 Network General Corp. (a)................................... 730,268 879,687
31,000 Parametric Technology Corp. (a)............................. 304,238 1,712,750
24,900 Synopsys, Inc. (a)(e)....................................... 857,600 1,444,200
41,000 System Software Associates, Inc............................. 807,700 1,294,062
----------- -----------
8,202,918 16,608,949
----------- -----------
CONSTRUCTION-2.10%
60,000 Fastenal Co. (e)............................................ 356,875 1,980,000
----------- -----------
ELECTRONIC-COMMUNICATION SECURITY-1.26%
30,500 ADC Telecommunications, Inc. (a)............................ 980,237 1,181,875
----------- -----------
ELECTRONIC-CONTROLS AND EQUIPMENT-5.82%
41,700 Benchmark Electronics, Inc. (a)............................. 1,009,517 1,172,812
33,000 StrataCom, Inc. (a)(e)...................................... 820,875 1,617,000
68,000 Ultratech Stepper, Inc. (a)................................. 901,875 2,686,000
----------- -----------
2,732,267 5,475,812
----------- -----------
ELECTRONIC-DEFENSE-1.02%
30,000 Trimble Navigation Limited (a).............................. 876,000 963,750
----------- -----------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-10.90%
18,750 Alliance Semiconductor, Corp. (a)(e)........................ 606,465 733,594
23,500 Integrated Device Technology, Inc. (a)...................... 949,500 1,354,188
23,500 Integrated Silicon
Solutions, Inc. (a)(e).................................... 981,408 1,169,125
30,000 Paradigm Technology, Inc. (a)(e)............................ 964,170 990,000
59,000 Unitrode Corp. (a).......................................... 1,129,256 1,770,000
99,000 Xilinx, Inc. (a)............................................ 1,285,926 4,244,625
----------- -----------
5,916,725 10,261,532
----------- -----------
HEALTH CARE SERVICES-7.05%
7,000 American Oncology
Resources, Inc. (a)....................................... 147,000 264,250
43,000 Genesis Health Ventures, Inc. (a)(e)........................ 773,603 1,359,875
40,000 Health Care & Retirement Corp. (a).......................... 340,000 1,260,000
17,400 Healthsource, Inc. (a)...................................... 698,436 696,000
14,000 Medaphis Corp. (a)(e)....................................... 399,324 323,750
53,000 Medpartners, Inc. (a)(e).................................... 1,109,284 1,470,750
30,000 Omnicare, Inc. (e).......................................... 592,500 997,500

<CAPTION>
Market
Shares Cost (b) Value (c)
- -------- ----------- -----------
<C> <S> <C> <C>
17,000 Summit Medical Systems, Inc. (a)(e)......................... $ 153,000 $ 263,500
----------- -----------
4,213,147 6,635,625
----------- -----------
LEISURE TIME-AMUSEMENTS-1.36%
45,000 Hollywood Entertainment Corp. (a)(e)........................ 763,275 1,282,500
----------- -----------
MACHINERY-OIL AND WELL-1.63%
60,000 Petroleum Geo Services A/S ADS (a).......................... 1,003,250 1,537,500
----------- -----------
MEDICAL SUPPLIES-1.87%
60,000 Steris Corp. (a)............................................ 1,067,130 1,762,500
----------- -----------
OFFICE EQUIPMENT AND SUPPLIES-4.12%
31,000 Avid Technology, Inc. (a)(e)................................ 692,825 1,232,250
40,000 Franklin Electronic Publishers, Inc. (a).................... 977,760 1,205,000
32,200 Sterling Software, Inc. (a)................................. 604,985 1,436,925
----------- -----------
2,275,570 3,874,175
----------- -----------
PRINTING-0.46%
14,000 Indigo NV (a)(e)............................................ 540,946 430,500
----------- -----------
RECREATION EQUIPMENT-1.45%
87,800 Callaway Golf Co. (e)....................................... 793,888 1,360,900
----------- -----------
RESTAURANTS AND FRANCHISING-7.86%
67,300 Applebees International, Inc. (e)........................... 1,201,960 2,019,000
39,000 Cheesecake Factory, Inc. (a)................................ 1,076,184 1,116,375
81,200 Lone Star Steakhouse & Saloon, Inc. (a)(e).................. 356,925 3,258,150
25,000 Papa John's International, Inc. (a)(e)...................... 720,625 1,000,000
----------- -----------
3,355,694 7,393,525
----------- -----------
RETAIL-MISCELLANEOUS-12.38%
73,000 Authentic Fitness Corp...................................... 862,723 1,615,125
40,000 Bed, Bath & Beyond, Inc. (a)(e)............................. 455,000 1,092,500
72,000 Books-A-Million, Inc. (a)(e)................................ 991,814 1,197,000
72,900 Corporate Express, Inc. (a)(e).............................. 777,600 1,704,038
42,000 Gymboree Corp. (a)(e)....................................... 993,000 1,249,500
50,000 Micro Warehouse, Inc. (a)(e)................................ 512,500 2,387,500
33,000 Sunglass Hut International, Inc. (a)(e)..................... 941,203 1,402,500
38,000 West Marine, Inc. (a)....................................... 732,813 997,500
----------- -----------
6,266,653 11,645,663
----------- -----------
TELECOMMUNICATIONS-3.95%
38,800 Cisco Systems, Inc. (a)..................................... 327,552 2,546,250
26,500 MFS Communications Co. (a).................................. 1,039,978 1,172,625
----------- -----------
1,367,530 3,718,875
----------- -----------
TRANSPORTATION-0.51%
25,000 American Freightways Corp. (a).............................. 385,938 484,375
----------- -----------
UTILITIES-TELEPHONE-3.86%
45,000 IntelCom Group, Inc. (a).................................... 644,000 585,000
55,000 LCI International, Inc. (a)(e).............................. 894,300 2,193,125
54,000 MIDCOM Communications, Inc. (a)............................. 712,125 850,500
----------- -----------
2,250,425 3,628,625
----------- -----------
WASTE DISPOSAL-2.13%
51,700 United Waste System, Inc. (a)............................... 1,158,950 2,003,375
----------- -----------
TOTAL COMMON STOCKS......................................... $46,742,835 $88,262,181
----------- -----------
----------- -----------
</TABLE>

18
<PAGE>
SHORT-TERM INVESTMENTS-6.16%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ---------- -----------
<C> <S> <C>
BANKS-2.61%
$2,453,064 First Trust Money Market Variable Rate Time Deposit, Current
rate -- 5.66%............................................. $2,453,064
-----------
DIVERSIFIED FINANCE-0.16%
154,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. 154,000
-----------
U.S. OTHER DIRECT FEDERAL OBLIGATIONS-3.39%
3,200,000 Federal Home Loan Bank, 5.74%, 9-18-1995.................... 3,190,976
-----------
TOTAL SHORT-TERM INVESTMENTS................................ 5,798,040
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $52,540,875) (B)..... $94,060,221
-----------
-----------
</TABLE>

(a) Presently not paying dividend income.
(b) At August 31, 1995, the cost of securities for federal income tax purposes
was $52,540,875 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation..................................... $42,295,250
Unrealized depreciation..................................... (775,904)
- -------------------------------------------------------------------------
Net unrealized appreciation................................. $41,519,346
- -------------------------------------------------------------------------
</TABLE>

19
<PAGE>
Statements of Assets and Liabilities

August 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FORTIS FORTIS
ADVANTAGE ADVANTAGE
ASSET FORTIS FORTIS FORTIS CAPITAL
ALLOCATION CAPITAL FIDUCIARY GROWTH APPRECIATION
PORTFOLIO FUND FUND FUND PORTFOLIO
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, as detailed in the
accompanying schedules, at market (cost
$109,000,770; $172,409,828; $38,295,875;
$386,840,705; and$52,540,875; respectively)
(Note A)...................................... $138,565,720 $296,550,979 $65,445,464 $679,498,745 $ 94,060,221
Cash on deposit with custodian.................. -- 799 289 761 19,950
Collateral for securities lending transactions
(Note A)...................................... 25,403,427 77,200,014 11,098,986 -- 33,008,900
Receivables
Investment securities sold.................... 3,095,760 -- -- 756,583 --
Interest and dividends........................ 856,090 790,493 29,278 184,367 16,952
Subscriptions of capital stock................ 21,484 50,853 2,429 117,181 96,480
Deferred registration costs (Note A)............ 25,187 29,297 21,952 38,598 23,729
Prepaid expenses................................ 294 566 8 2,161 --
------------ ------------ ----------- ------------ ------------
TOTAL ASSETS...................................... 167,967,962 374,623,001 76,598,406 680,598,396 127,226,232
------------ ------------ ----------- ------------ ------------
LIABILITIES:
Bank overdraft.................................. 72,113 -- -- -- --
Payable upon return of securities loaned (Note
A)............................................ 25,403,427 77,200,014 11,098,986 -- 33,008,900
Payable for investment securities purchased..... 3,252,813 -- -- -- --
Redemptions of capital stock.................... 31,306 -- -- 58,579 25,350
Payable for investment advisory and management
fees.......................................... 110,491 214,675 55,338 437,929 78,547
Payable for distribution fees................... 3,600 4,295 983 9,558 2,365
Accounts payable and accrued expenses........... 10,293 18,052 22,451 30,326 9,434
------------ ------------ ----------- ------------ ------------
TOTAL LIABILITIES................................. 28,884,043 77,437,036 11,177,758 536,392 33,124,596
------------ ------------ ----------- ------------ ------------
NET ASSETS:
Net proceeds of capital stock, par value $.01
per share*.................................... 105,935,333 172,763,353 37,762,476 352,523,835 51,860,897
Unrealized appreciation of investments.......... 29,564,950 124,141,151 27,149,589 292,658,040 41,519,346
Undistributed net investment income............. 772,587 281,461 -- -- --
Accumulated net realized gain (loss) from the
sale of investments........................... 2,811,049 -- 508,584 34,880,129 721,393
------------ ------------ ----------- ------------ ------------
TOTAL NET ASSETS.................................. $139,083,919 $297,185,965 $65,420,649 $680,062,004 $ 94,101,636
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A shares (based on net assets of
$132,938,523; $291,262,852; $63,194,913;
$670,752,599; and $90,918,223; respectively
and 8,049,167; 13,728,864; 1,777,926;
20,537,904; 2,964,190 shares outstanding;
respectively)................................. $16.52 $21.22 $35.54 $32.66 $30.67
------------ ------------ ----------- ------------ ------------
Class B shares (based on net assets of $692,449;
$1,527,021; $473,005; $2,178,800; and
$841,251; respectively and 42,077; 72,226;
13,381; 67,079; and 27,522 shares outstanding;
respectively)................................. $16.46 $21.14 $35.35 $32.48 $30.57
------------ ------------ ----------- ------------ ------------
Class C shares (based on net assets of $777,170;
$343,811; $272,033; $263,798; and $227,203;
respectively and 47,355; 16,271; 7,684; 8,120;
and 7,431 shares outstanding; respectively)... $16.41 $21.13 $35.40 $32.49 $30.58
------------ ------------ ----------- ------------ ------------
Class H shares (based on net assets of
$4,675,777; $4,052,281; $1,480,698;
$6,866,807; and $2,114,959; respectively and
284,416; 191,696; 41,886; 211,359; and 69,156
shares outstanding; respectively)............. $16.44 $21.14 $35.35 $32.49 $30.58
------------ ------------ ----------- ------------ ------------

*Authorized 10,000,000,000; 10,000,000,000; 100,000,000,000; 100,000,000,000; and 10,000,000,000 shares; respectively
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

20
<PAGE>
STATEMENTS OF OPERATIONS

For the Year Ended August 31, 1995

*For the period November 1, 1994 through August 31, 1995 (Note C).
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

21
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
TEN-MONTH
PERIOD ENDED FOR THE
AUGUST 31, YEAR ENDED
1995 OCTOBER 31,
(NOTE C) 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 3,425,089 $ 2,930,871
Net realized gain from security transactions.... 2,925,495 788,635
Net change in unrealized appreciation
(depreciation) of investments in securities... 14,902,688 (2,994,032)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... 21,253,272 725,474
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A....................................... (3,216,965) (2,556,356)
Class B....................................... (4,269) --
Class C....................................... (6,010) --
Class H....................................... (32,044) --
From net realized gains on investments
Class A....................................... (736,358) (5,171,318)
Class B....................................... (258) --
Class C....................................... (158) --
Class H....................................... (1,337) --
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... (3,997,399) (7,727,674)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (934,550 and 2,102,540 shares)........ 14,063,680 30,350,907
Class B (42,825 shares)....................... 660,329 --
Class C (50,730 shares)....................... 771,696 --
Class H (290,527 shares)...................... 4,432,310 --
Proceeds from shares issued as a result of
reinvested dividends
Class A (247,207 and 485,931 shares).......... 3,599,514 6,992,258
Class B (292 shares).......................... 4,448 --
Class C (402 shares).......................... 6,160 --
Class H (1,905 shares)........................ 29,064 --
Less cost of repurchase of shares
Class A (1,398,564 and 1,354,658 shares)...... (20,935,112) (19,434,221)
Class B (1,040 shares)........................ (15,962) --
Class C (3,777 shares)........................ (59,287) --
Class H (8,016 shares)........................ (123,666) --
------------ ------------
NET INCREASE IN NET ASSETS FROM SHARE
TRANSACTIONS.................................... 2,433,174 17,908,944
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 19,689,047 10,906,744
NET ASSETS:
Beginning of period............................. 119,394,872 108,488,128
------------ ------------
End of period (includes undistributed net
investment income of $772,587 and $492,397,
respectively)................................. $139,083,919 $119,394,872
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

22
<PAGE>
FORTIS CAPITAL FUND

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 1,067,881 $ 982,470
Net realized gain from security transactions.... 24,924 10,237,114
Net change in unrealized appreciation of
investments in securities..................... 51,715,498 12,923,960
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... 52,808,303 24,143,544
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A....................................... (1,091,491) (1,645,959)
Class B....................................... (147) --
Class C....................................... (24) --
Class H....................................... (324) --
From net realized gains on investments
Class A....................................... (10,244,029) (18,967,588)
Class B....................................... (2,531) --
Class C....................................... (68) --
Class H....................................... (2,368) --
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... (11,340,982) (20,613,547)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (1,643,037 and 1,232,755 shares)...... 30,014,520 21,693,806
Class B (75,949 shares)....................... 1,426,190 --
Class C (16,667 shares)....................... 315,873 --
Class H (194,028 shares)...................... 3,659,178 --
Proceeds from shares issued as a result of
reinvested dividends
Class A (639,451 and 1,112,749 shares)........ 10,561,400 19,145,433
Class B (163 shares).......................... 2,678 --
Class C (6 shares)............................ 91 --
Class H (138 shares).......................... 2,724 --
Less cost of repurchase of shares
Class A (1,940,448 and 2,551,486 shares)...... (35,907,590) (44,961,545)
Class B (3,886 shares)........................ (77,466) --
Class C (402 shares).......................... (8,239) --
Class H (2,470 shares)........................ (47,144) --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS.................................... 9,942,215 (4,122,306)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 51,409,536 (592,309)
NET ASSETS:
Beginning of year............................... 245,776,429 246,368,738
------------ ------------
End of year (includes undistributed net
investment income of $285,111 and $305,566,
respectively)................................. $297,185,965 $245,776,429
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

23
<PAGE>
FORTIS FIDUCIARY FUND

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss............................. $ (288,486) $ (230,294)
Net realized gain from security transactions.... 928,972 1,569,831
Net change in unrealized appreciation of
investments in securities..................... 11,231,862 2,723,976
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... 11,872,348 4,063,513
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments
Class A....................................... (1,980,907) (4,856,194)
Class B....................................... (1,202) --
Class C....................................... (214) --
Class H....................................... (4,499) --
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... (1,986,822) (4,856,194)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (429,389 and 515,441 shares).......... 13,255,649 15,607,235
Class B (13,622 shares)....................... 435,257 --
Class C (8,195 shares)........................ 261,396 --
Class H (46,909 shares)....................... 1,433,120 --
Proceeds from shares issued as a result of
reinvested dividends
Class A (69,865 and 168,978 shares)........... 1,932,493 4,743,211
Class B (44 shares)........................... 1,202 --
Class C (8 shares)............................ 215 --
Class H (163 shares).......................... 4,499 --
Less cost of repurchase of shares
Class A (336,667 and 650,116 shares).......... (10,434,831) (18,268,198)
Class B (285 shares).......................... (9,491) --
Class C (519 shares).......................... (16,128) --
Class H (5,186 shares)........................ (160,979) --
------------- -------------
NET INCREASE IN NET ASSETS FROM SHARE
TRANSACTIONS.................................... 6,702,402 2,082,248
------------- -------------
TOTAL INCREASE IN NET ASSETS...................... 16,587,928 1,289,567
NET ASSETS:
Beginning of year............................... 48,832,721 47,543,154
------------- -------------
End of year..................................... $ 65,420,649 $ 48,832,721
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

24
<PAGE>
FORTIS GROWTH FUND

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss............................. $ (811,913) $ (2,037,846)
Net realized gain from security transactions.... 38,024,044 7,321,947
Net change in unrealized appreciation
(depreciation) of investments in securities... 108,759,948 (24,780,117)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. 145,972,079 (19,496,016)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments
Class A....................................... (10,376,803) (36,528,832)
Class B....................................... (2,186) --
Class C....................................... (227) --
Class H....................................... (4,517) --
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... (10,383,733) (36,528,832)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (3,595,502 and 4,390,426 shares)...... 97,595,401 120,052,496
Class B (69,263 shares)....................... 1,891,029 --
Class C (8,239 shares)........................ 233,665 --
Class H (221,567 shares)...................... 6,230,792 --
Proceeds from shares issued as a result of
reinvested dividends
Class A (401,424 and 1,248,862 shares)........ 9,887,238 34,930,672
Class B (89 shares)........................... 2,186 --
Class C (9 shares)............................ 227 --
Class H (174 shares).......................... 4,276 --
Less cost of repurchase of shares
Class A (4,738,197 and 4,474,493 shares)...... (129,577,320) (125,486,181)
Class B (2,273 shares)........................ (70,358) --
Class C (128 shares).......................... (3,645) --
Class H (10,382 shares)....................... (309,141) --
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS.................................... (14,115,650) 29,496,987
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 121,472,696 (26,527,861)
NET ASSETS:
Beginning of year............................... 558,589,308 585,117,169
------------- -------------
End of year..................................... $ 680,062,004 $ 558,589,308
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

25
<PAGE>
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
TEN-MONTH
PERIOD ENDED FOR THE
AUGUST 31, YEAR ENDED
1995 OCTOBER 31,
(NOTE C) 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss............................. $ (521,120) $ (367,981)
Net realized gain (loss) from security
transactions.................................. 1,148,184 (426,791)
Net change in unrealized appreciation
(depreciation) of investments in securities... 22,420,087 (4,853,816)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. 23,047,151 (5,648,588)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments
Class A....................................... -- (3,890,570)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... -- (3,890,570)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (695,629 and 1,429,148 shares)........ 17,177,636 33,401,050
Class B (27,699 shares)....................... 727,381 --
Class C (7,466 shares)........................ 195,229 --
Class H (74,376 shares)....................... 1,892,069 --
Proceeds from shares issued as a result of
reinvested dividends
Class A (0 and 160,390 shares)................ -- 3,804,448
Less cost of repurchase of shares
Class A (696,664 and 758,288 shares).......... (17,143,294) (17,748,768)
Class B (177 shares).......................... (4,692) --
Class C (35 shares)........................... (959) --
Class H (5,220 shares)........................ (140,589) --
------------ ------------
NET INCREASE IN NET ASSETS FROM SHARE
TRANSACTIONS.................................... 2,702,781 19,456,730
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 25,749,932 9,917,572
NET ASSETS:
Beginning of period............................. 68,351,704 58,434,132
------------ ------------
End of period................................... $94,101,636 $68,351,704
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

26
<PAGE>
FORTIS STOCK FUNDS

Notes to Financial Statements

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

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The funds are open-end, diversified management investment companies, each of
which has different investment objectives and their own investment portfolios
and net asset values. Asset Allocation and Capital Appreciation Portfolios
are a series of Fortis Advantage Portfolios, Inc. ("Fortis Advantage") and
Fortis Capital Fund is a series of Fortis Equity Portfolios, Inc. ("Fortis
Equity"). The Articles of Incorporation of Fortis Advantage and Fortis Equity
permits the Board of Directors to create additional portfolios in the future.
The Advantage Funds, Fortis Capital Fund, Fortis Growth Fund and Fortis
Fiduciary Fund offer Class A, Class B, Class C and Class H shares. The funds
began to issue multiple class shares effective November 14, 1994. Class A
shares are sold with a front-end sales charge. Class B and H shares are sold
without a front-end sales charge and may be subject to a contingent deferred
sales charge for six years, and such shares automatically convert to Class A
after eight years. Class C shares are sold without a front-end sales charge
and may be subject to contingent deferred sales charge for one year. All
classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that the level of
distribution fees charged differs between classes. Income, expenses (other
than expenses incurred under each class's distribution agreement) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based on its relative net assets.

The significant accounting policies followed by the Funds are summarized as
follows:

SECURITY VALUATION: Investments in securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sales price; listed securities and over-the-counter securities for
which no sale was reported are valued at the last reported bid price.
Long-term debt securities are valued at current market prices on the basis of
valuations furnished by an independent pricing service. Short-term
investments, with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued at amortized cost.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Realized
security gains and losses are determined using the identified cost method.
For financial reporting purposes, except for original issue discount, the
Advantage Asset Allocation portfolio does not amortize bond premium and
discount.

For the year ended August 31, 1995 for Fortis Capital Fund, Fortis Fiduciary
Fund, and Fortis Growth Fund, and the ten-month period

for Fortis Advantage Asset Allocation Portfolio and Capital Appreciation
Portfolio, the cost of purchases and proceeds from sales of securities (other
than short-term securities) were as follows:

<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
<S> <C> <C>
- -------------------------------------------------------------------------------
Advantage Asset Allocation Portfolio............... $110,235,955 $112,520,328
Fortis Capital Fund................................ 80,274,156 94,848,071
Fortis Fiduciary Fund.............................. 5,708,174 7,722,661
Fortis Growth Fund................................. 172,834,223 133,756,294
Advantage Capital Appreciation Portfolio........... 23,715,058 13,862,186
</TABLE>

LENDING OF PORTFOLIO SECURITIES: At August 31, 1995 securities were on loan
to brokers from the Funds. For collateral, the Funds' custodian received cash
which is maintained in a separate account and invested by the custodian in
short term investment vehicles. The risks to the Funds in security lending
transactions are that the borrower may not provide additional collateral when
required or return the securities when due and that the proceeds from the
sale of investments made with cash collateral received will be less than
amounts required to be returned to the borrowers. Value of securities on loan
at August 31, 1995 and fee income from securities lending was as follows for
the year ended August 31, 1995 for Fortis Capital Fund, Fortis Fiduciary
Fund, and for the ten-month period for Fortis Advantage Asset Allocation
Portfolio and Capital Appreciation Portfolio:

<TABLE>
<CAPTION>
Fee Income
For Period
Ended
Securities August 31,
On Loan Collateral 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------
Advantage Asset Allocation
Portfolio.................. $23,593,162 $25,403,427 $ 14,486
Fortis Capital Fund......... 75,571,667 77,200,014 23,444
Fortis Fiduciary Fund....... 10,893,488 11,098,986 5,525
Advantage Capital
Appreciation Portfolio..... 32,624,134 33,008,900 105,994
</TABLE>

On a calendar year basis, each portfolio intends to distribute substantially
all of its net investment income and realized gains, if any, to avoid payment
of federal excise taxes.

27
<PAGE>
(continued)

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

Net investment income and net realized gains may differ for financial
statement and tax purposes primarily because of the recognition of market
discount as ordinary income for tax purposes for Advantage Asset Allocation
Portfolio and wash sale transactions. The character of distributions made
during the year from net investment income or net realized gains may,
therefore, differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the fiscal year
in which amounts are distributed may differ from the year that the income or
realized gains (losses) were recorded by the fund.

On the Statement of Assets and Liabilities, due to permanent book-to-tax
differences, including net operating losses of certain funds, accumulated net
realized gain (loss) and undistributed net investment income have been
increased (decreased), resulting in a net reclassification adjustment to
reduce paid-in-capital by the following:

<TABLE>
<CAPTION>
Advantage Advantage
Asset Capital
Allocation Fiduciary Growth Appreciation
Portfolio Fund Fund Portfolio
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Accumulated Net
Realized Gain
(Loss).............. $(114,389) $ 0 $ 0 $ 0
Undistributed Net
Investment Income... 114,389 288,486 811,913 521,120
----------- --------- --------- ------------
Paid-in-Capital...... $ 0 $(288,486) $(811,913) $ (521,120)
----------- --------- --------- ------------
</TABLE>

DEFERRED COSTS: Registration costs are deferred and charged to income over
the registration period.

INCOME AND CAPITAL GAINS DISTRIBUTIONS: It is the policy of Advantage Asset
Allocation Portfolio and Fortis Capital Fund to pay quarterly distributions
from net investment income; Advantage Capital Appreciation Portfolio, Fortis
Fiduciary Fund and Fortis Growth Fund to pay annual distributions from net
investment income. Distributions of net realized capital gains, if any, are
made annually by each Fund. The distributions are recorded on the record date
and are payable in cash or reinvested in additional shares of the portfolio
at net asset value without any charge to the shareholder.

ILLIQUID SECURITIES: At August 31, 1995, investments in securities for the
Asset Allocation Portfolio included issues that are illiquid. The fund
currently limits investments in illiquid securities to 15% of net assets, at
market value, at the date of purchase. The aggregate value of such securities
at August 31, 1995, was $882,500 which represents .63% of net assets.
Pursuant to guidelines adopted by the Board of Directors, certain
unregistered securities are determined to be liquid and are not included
within the 15% limitation specified above.

B. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment adviser
for each Fund. Investment advisory and management fees are computed for
Fortis Advantage Asset Allocation, Fortis Capital Fund, Fortis Fiduciary
Fund, Fortis Growth Fund and Fortis Advantage Capital Appreciation Portfolios
at an annual rate of 1% of the first $100 million of average daily net
assets, .80% for the next $150 million, and .70% for average assets over $250
million of each portfolio.

In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the funds' principal underwriter)
distribution fees equal to .45% of average daily net assets for Class A for
each of Asset Allocation and Capital appreciation Portfolios and .25% of
average daily net assets for Class A for each of Capital Fund, Fiduciary Fund
and Growth Fund and 1.00% of average daily net assets for Classes B, C and H
for each fund on an annual basis, to be used to compensate those who sell
shares of the fund and to pay certain other expenses of selling fund shares.
Fortis Investors, Inc. also received sales charges (paid by purchasers or
redeemers of the funds' shares) as follows:

<TABLE>
<CAPTION>
Class A Class B Class C Class H
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Advantage Asset Allocation
Portfolio................... $ 317,417 $ 234 $ 386 $ 106
Capital Fund................. $ 490,909 $ 44 $ 6 $ 377
Fiduciary Fund............... $ 148,813 $ 44 $ 104 $ 180
Growth Fund.................. $1,596,267 $ 802 $ 32 $ 1,890
Advantage Capital
Appreciation Portfolio...... $ 268,653 $ 109 $ 2 $ 332
</TABLE>

Legal fees and expenses aggregating $9,601; $49,497; $40,000; $59,000 and
$6,172 for Advantage Asset Allocation Portfolio, Fortis Capital Fund, Fortis
Fiduciary Fund, Fortis Growth Fund, and Advantage Capital Appreciation
Portfolio, respectively, for the year ended August 31, 1995 for Fortis
Capital Fund, Fortis Fiduciary Fund, and Fortis Growth Fund, and for the
ten-month period ended for Fortis Advantage Asset Allocation Portfolio and
Capital Appreciation Portfolio, were paid to a law firm of which the
secretary of the funds is a partner.

C. Effective August 31, 1995, Fortis Advantage Asset Allocation and Capital
Appreciation Portfolios changed their fiscal accounting and tax year-end to
August 31 (previously October 31).

28
<PAGE>
(continued)

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

D. FINANCIAL HIGHLIGHTS: Selected per share historical data was as follows:

<TABLE>
<CAPTION>
Class A
For the Year Ended October 31,
---------------------------------------------
ASSET ALLOCATION PORTFOLIO 1995** 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 14.44 $ 15.43 $ 14.00 $ 13.34 $ 10.72
----------- --------- --------- --------- ---------
Operations:
Investment income-net........................... .43 .37 .42 .53 .50
Net realized and unrealized gain (loss) on
investments................................... 2.14 (.31) 1.52 .96 2.37
----------- --------- --------- --------- ---------
Total from operations............................. 2.57 .06 1.94 1.49 2.87
----------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...................... (.40) (.33) (.51) (.82) (.25)
From net realized gains......................... (.09) (.72) -- -- --
Excess distributions of net realized gains...... -- -- -- (.01) --
----------- --------- --------- --------- ---------
Total Distributions to Shareholders............... (.49) (1.05) (.51) (.83) (.25)
----------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 16.52 $ 14.44 $ 15.43 $ 14.00 $ 13.34
----------- --------- --------- --------- ---------
Total return@..................................... 18.25% .48% 14.20% 11.55% 27.25%
Net assets at end of period (000's omitted)....... $ 132,939 $ 119,395 $ 108,488 $ 89,674 $ 27,270
Ratio of expenses to average daily net assets..... 1.57%* 1.55% 1.58% 1.58% 1.83%
Ratio of net investment income to average daily
net assets....................................... 3.31%* 2.60% 2.90% 4.05% 4.11%
Portfolio turnover rate........................... %94 94% 103% 45% 64%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
ASSET ALLOCATION PORTFOLIO 1995+ 1995+ 1995+
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 14.27 $ 14.27 $ 14.27
--------- --------- ---------
Operations:
Investment income-net........................... .39 .39 .39
Net realized and unrealized gains (losses) on
investments................................... 2.26 2.21 2.24
--------- --------- ---------
Total from operations............................. 2.65 2.60 2.63
--------- --------- ---------
Distribution to shareholders:
From investment income-net...................... (.37) (.37) (.37)
From net realized gains......................... (.09) (.09) (.09)
Excess distributions of net realized gains...... -- -- --
--------- --------- ---------
Total distributions to shareholders............... (.46) (.46) (.46)
--------- --------- ---------
Net asset value, end of period.................... $ 16.46 $ 16.41 $ 16.44
--------- --------- ---------
Total Return@..................................... 19.00% 18.64% 18.86%
Net assets end of period (000s omitted)........... $ 692 $ 777 $ 4,676
Ratio of expenses to average daily net assets..... 2.12%* 2.12%* 2.12%*
Ratio of net investment income to average daily
net assets....................................... 2.51%* 2.52%* 2.54%*
Portfolio turnover rate........................... 94%*** 94%*** 94%***
</TABLE>

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

29
<PAGE>
(continued)

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

<TABLE>
<CAPTION>
Class A August
Year Ended August 31, 31,
----------------------------------------------- ---------
CAPITAL FUND 1995 1994 1993 1992 1991***
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 18.36 $ 18.12 $ 17.86 $ 16.50 $ 13.55
----------- --------- --------- --------- ---------
Operations:
Investment income-net........................... .08 .07 .14 .13 .13
Net realized and unrealized gains (losses) on
investments................................... 3.62 1.73 1.25 1.63 4.03
----------- --------- --------- --------- ---------
Total from operations............................. 3.70 1.80 1.39 1.76 4.16
----------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...................... (.08) (.12) (.09) (.11) (.18)
From net realized gains......................... (.76) (1.44) (1.04) (.29) (1.03)
----------- --------- --------- --------- ---------
Total distributions to shareholders............... (.84) (1.56) (1.13) (.40) (1.21)
----------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 21.22 $ 18.36 $ 18.12 $ 17.86 $ 16.50
----------- --------- --------- --------- ---------
Total return@..................................... 21.49% 10.56% 7.88% 10.77% 33.36%
Net assets end of period (000's omitted).......... $ 291,263 $ 245,776 $ 246,369 $ 223,865 $191,390
Ratio of expenses to average daily net assets..... 1.24% 1.21% 1.22% 1.23% 1.28%*
Ratio of net investment income to average daily
net assets....................................... .42% .41% .77% .72% 1.19%*
Portfolio turnover rate........................... %14 41% 68% 18% 34%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
CAPITAL FUND 1995+ 1995+ 1995+
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 18.35 $ 18.35 $ 18.35
--------- --------- ---------
Operations:
Investment income-net........................... -- -- --
Net realized and unrealized gains (losses) on
investments................................... 3.58 3.57 3.58
--------- --------- ---------
Total from operations............................. 3.58 3.57 3.58
--------- --------- ---------
Distribution to shareholders:
From investment income-net...................... (.03) (.03) (.03)
From net realized gains......................... (.76) (.76) (.76)
--------- --------- ---------
Total distributions to shareholders............... (.79) (.79) (.79)
--------- --------- ---------
Net asset value, end of period.................... $ 21.14 $ 21.13 $ 21.14
--------- --------- ---------
Total Return@..................................... 20.74% 20.68% 20.74%
Net assets end of period (000s omitted)........... $ 1,527 $ 344 $ 4,052
Ratio of expenses to average daily net assets..... 1.99%* 1.99%* 1.99%*
Ratio of net investment income to average daily
net assets....................................... (.36%)* (.36%)* (.37%)*
Portfolio turnover rate........................... 14%** 14%** 14%**
</TABLE>

@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
* Annualized.
** For the period ended August 31, 1995. Portfolio turnover computed at fund
level.
*** Nine-month period ended August 31, 1991.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.

30
<PAGE>
(continued)

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

<TABLE>
<CAPTION>
Class A August
Year Ended August 31, 31,
----------------------------------------------- ---------
FORTIS FIDUCIARY FUND 1995 1994 1993 1992 1991***
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 30.23 $ 30.07 $ 28.74 $ 26.77 $ 20.27
----------- --------- --------- --------- ---------
Operations:
Investment income (loss)-net.................... (.16) (.14) (.09) .04 .06
Net realized and unrealized gains (losses) on
investments................................... 6.68 2.99 3.11 2.68 6.48
----------- --------- --------- --------- ---------
Total from operations............................. 6.52 2.85 3.02 2.72 6.54
----------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...................... -- -- -- (.11) (.02)
From net realized gains......................... (1.21) (2.69) (1.69) (.64) (.02)
----------- --------- --------- --------- ---------
Total distributions to shareholders............... (1.21) (2.69) (1.69) (.75) (.04)
----------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 35.54 $ 30.23 $ 30.07 $ 28.74 $ 26.77
----------- --------- --------- --------- ---------
Total return@..................................... 22.71% 10.17% 10.58% 10.28% 32.23%
Net assets end of period (000's omitted).......... $ 63,195 $ 48,833 $ 47,543 $ 43,504 $39,367
Ratio of expenses to average daily net assets..... 1.62% 1.45% 1.45% 1.47% 1.46%*
Ratio of net investment income (loss) to average
daily net assets................................. (.53%) (.45%) (.31%) .14% .42%*
Portfolio turnover rate........................... %12 25% 53% 26% 34%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
FORTIS FIDUCIARY FUND 1995+ 1995+ 1995+
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 30.15 $ 30.15 $ 30.15
--------- --------- ---------
Operations:
Investment income (loss)-net.................... (.13) (.12) (.17)
Net realized and unrealized gains (losses) on
investments................................... 6.54 6.58 6.58
--------- --------- ---------
Total from operations............................. 6.41 6.46 6.41
--------- --------- ---------
Distribution to shareholders:
From investment income-net...................... -- -- --
From net realized gains......................... (1.21) (1.21) (1.21)
--------- --------- ---------
Total distributions to shareholders............... (1.21) (1.21) (1.21)
--------- --------- ---------
Net asset value, end of period.................... $ 35.35 $ 35.40 $ 35.35
--------- --------- ---------
Total Return@..................................... 22.38% 22.55% 22.38%
Net assets end of period (000s omitted)........... $ 473 $ 272 $ 1,481
Ratio of expenses to average daily net assets..... 2.37%* 2.37%* 2.37%*
Ratio of net investment loss to average daily net
assets........................................... (1.31%)* (1.31%)* (1.29%)*
Portfolio turnover rate........................... 12%** 12%** 12%**
</TABLE>

@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
* Annualized.
** For the period ended August 31, 1995. Portfolio turnover computed at fund
level.
*** Eight-month period ended August 31, 1991.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.

31
<PAGE>
(continued)

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

<TABLE>
<CAPTION>
Class A
Year Ended August 31,
------------------------------------------------- August 31,
GROWTH FUND 1995 1994 1993 1992 1991***
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 26.25 $ 29.09 $ 24.31 $ 24.40 $ 17.47
---------- ---------- ---------- ---------- -----------
Operations:
Investment income (loss)-net.................... (.04) (.10) (.06) .05 --
Net realized and unrealized gains (losses) on
investments................................... 6.95 (.88) 5.52 1.16 6.93
---------- ---------- ---------- ---------- -----------
Total from operations............................. 6.91 (.98) 5.46 1.21 6.93
---------- ---------- ---------- ---------- -----------
Distributions to shareholders:
From investment income-net...................... -- -- (.04) (.02) --
From net realized gains......................... (.50) (1.86) (.64) (1.28) --
---------- ---------- ---------- ---------- -----------
Total distributions to shareholders............... (.50) (1.86) (.68) (1.30) --
---------- ---------- ---------- ---------- -----------
Net asset value, end of period.................... $ 32.66 $ 26.25 $ 29.09 $ 24.31 $ 24.40
---------- ---------- ---------- ---------- -----------
Total return@..................................... 26.92% (3.77%) 22.69% 4.72% 39.67%
Net assets end of period (000's omitted).......... $ 670,753 $ 558,589 $ 585,117 $ 473,258 $325,901
Ratio of expenses to average daily net assets..... 1.13% 1.09% 1.10% 1.13% 1.20%*
Ratio of net investment income (loss) to average
daily net assets................................. (.13%) (.36%) (.20%) .24% (.03%)*
Portfolio turnover rate........................... 27% 23% 49% 33% 33%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
GROWTH FUND 1995+ 1995+ 1995+
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 25.85 $ 25.85 $ 25.85
---------- ---------- ----------
Operations:
Investment income (loss)-net.................... (.13) (.10) (.11)
Net realized and unrealized gains (losses) on
investments................................... 7.26 7.24 7.25
---------- ---------- ----------
Total from operations............................. 7.13 7.14 7.14
---------- ---------- ----------
Distribution to shareholders:
From investment income-net...................... -- -- --
From net realized gains......................... (.50) (.50) (.50)
---------- ---------- ----------
Total distributions to shareholders............... (.50) (.50) (.50)
---------- ---------- ----------
Net asset value, end of period.................... $ 32.48 $ 32.49 $ 32.49
---------- ---------- ----------
Total Return@..................................... 28.17% 28.21% 28.21%
Net assets end of period (000s omitted)........... $ 2,179 $ 264 $ 6,867
Ratio of expenses to average daily net assets..... 1.88%* 1.88%* 1.88%*
Ratio of net investment loss to average daily net
assets........................................... (1.09%)* (1.10%)* (1.10%)*
Portfolio turnover rate........................... 27%** 27%** 27%**
</TABLE>

@ These are the total returns during the periods, including reinvestment of all
dividend and capital gains distributions without adjustments for sales
charge.
* Annualized.
** For the period ended August 31, 1995. Portfolio turnover computed at fund
level.
*** Eight-month period ended August 31, 1991.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.

32
<PAGE>
(continued)

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

<TABLE>
<CAPTION>
Class A
For the Year Ended October 31,
---------------------------------------------
CAPITAL APPRECIATION PORTFOLIO 1995# 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 23.05 $ 27.38 $ 19.85 $ 19.80 $ 11.58
----------- --------- --------- --------- ---------
Operations:
Investment income (loss)-net***................. (.17) (.12) (.30) (.17) (.14)
Net realized and unrealized gain (loss) on
investments................................... 7.79 (2.45) 7.83 .22 8.36
----------- --------- --------- --------- ---------
Total from operations............................. 7.62 (2.57) 7.53 .05 8.22
----------- --------- --------- --------- ---------
Distributions to shareholders:
From net realized gains......................... -- (1.76) -- -- --
----------- --------- --------- --------- ---------
Net asset value, end of period.................. $ 30.67 $ 23.05 $ 27.38 $ 19.85 $ 19.80
----------- --------- --------- --------- ---------
Total return@..................................... 33.06% (9.56%) 37.93% .25% 70.98%
Net assets at end of period (000's omitted)....... $ 90,918 $ 68,352 $ 58,434 $ 43,207 $ 29,992
Ratio of expenses to average daily net assets..... 1.69%* 1.62% 1.62% 1.68% 1.82%
Ratio of net investment income (loss) to average
daily net assets................................. (.82%)* (.61%) (1.23%) (.88%) (.97%)
Portfolio turnover rate........................... %21 36% 60% 43% 93%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
CAPITAL APPRECIATION PORTFOLIO 1995+ 1995+ 1995+
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 22.45 $ 22.45 $ 22.45
--------- --------- ---------
Operations:
Investment income (loss)-net***................. (.35) (.36) (.36)
Net realized and unrealized gains (losses) on
investments................................... 8.47 8.49 8.49
--------- --------- ---------
Total from operations............................. 8.12 8.13 8.13
--------- --------- ---------
Net asset value, end of period.................... $ 30.57 $ 30.58 $ 30.58
--------- --------- ---------
Total Return@..................................... 36.17% 36.21% 36.21%
Net assets end of period (000s omitted)........... $ 841 $ 227 $ 2,115
Ratio of expenses to average daily net assets..... 2.24%* 2.24%* 2.24%*
Ratio of net investment income (loss) to average
daily net assets................................. (1.61%)* (1.62%)* (1.62%)*
Portfolio turnover rate........................... 21%** 21%** 21%**
</TABLE>

* Annualized.
** For the period ended August 31, 1995. Portfolio turnover computed at the
fund level.
*** Per share amounts compiled based upon average shares outstanding for the
period.
# Ten-month period ended 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.
+ For the period from November 14, 1994 (initial offering of shares) to August
31, 1995.

33
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders

Fortis Advantage Portfolios, Inc.

Fortis Equity Portfolios, Inc.

Fortis Fiduciary Fund, Inc.

Fortis Growth Fund, Inc.:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of Asset Allocation Portfolio and
Capital Appreciation Portfolio (portfolios within Fortis Advantage Portfolios,
Inc.), Fortis Capital Fund (a portfolio within Fortis Equity Portfolios, Inc.),
Fortis Fiduciary Fund, Inc., and Fortis Growth Fund, Inc. as of August 31, 1995
and the related statements of operations for the year then ended (period from
November 1, 1994 to August 31, 1995 for Asset Allocation Portfolio and Capital
Appreciation Portfolio), the statements of changes in net assets for each of the
years in the two-year period then ended (period from November 1, 1994 to August
31, 1995 and the year ended October 31, 1994 for Asset Allocation Portfolio and
Capital Appreciation Portfolio), and the financial highlights presented in
footnote D to the financial statements. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Asset Allocation Portfolio, Capital Appreciation Portfolio, Fortis Capital Fund,
Fortis Fiduciary Fund, Inc., and Fortis Growth Fund, Inc. as of August 31, 1995
and the results of their operations, changes in their net assets and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
October 6, 1995

34
<PAGE>
FEDERAL INCOME TAX INFORMATION

The information set forth below is for the fund's fiscal year as required by
federal tax law. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes which may include distributions for portions
of two fiscal years of the fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 1996.
Shareholders may wish to consult a tax advisor on how to report distributions
for state and local purposes.

Fortis Advantage Asset Allocation Portfolio and Fortis Capital Fund paid income
distributions, taxable as dividend income, of which 4.41% and 91.44% qualified
for deduction by corporations. Detailed below are the per share distributions
made for the fiscal period ended August 31, 1995. All of the capital gains
distributions per share were from long term capital gains.

FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO

Ordinary Income Per Share

<TABLE>
<CAPTION>
RECORD DATE CLASS A CLASS B* CLASS C* CLASS H*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
December 16, 1994 $0.145 $0.140 $0.140 $0.140
March 20, 1995 0.120 0.110 0.110 0.110
June 19, 1995 0.130 0.115 0.115 0.115
- -------------------------------------------------------------------------------------------
Total Distributions $0.395 $0.365 $0.365 $0.365
- -------------------------------------------------------------------------------------------

Long-Term Capital Gain Per Share

December 16, 1994 $0.0896 $0.0896 $0.0896 $0.0896
- -------------------------------------------------------------------------------------------
</TABLE>

FORTIS CAPITAL FUND

Ordinary Income Per Share

<TABLE>
<CAPTION>
RECORD DATE CLASS A CLASS B* CLASS C* CLASS H*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
September 12, 1994 $0.010 $ -- $ -- $ --
December 12, 1994 0.029 0.020 0.020 0.020
March 13, 1995 0.025 0.005 0.005 0.005
June 13, 1995 0.015 -- -- --
- -------------------------------------------------------------------------------------------
Total Distributions $0.079 $0.025 $0.025 $0.025
- -------------------------------------------------------------------------------------------

Long-Term Capital Gain Per Share

December 12, 1994 $0.7637 $0.7637 $0.7637 $0.7637
- -------------------------------------------------------------------------------------------
</TABLE>

FORTIS FIDUCIARY FUND

Long-Term Capital Gain Per Share

<TABLE>
<CAPTION>
RECORD DATE CLASS A CLASS B* CLASS C* CLASS H*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
December 16, 1994 $1.2110 $1.2110 $1.2110 $1.2110
- -------------------------------------------------------------------------------------------
</TABLE>

FORTIS GROWTH FUND

Long-Term Capital Gain Per Share

<TABLE>
<CAPTION>
RECORD DATE CLASS A CLASS B* CLASS C* CLASS H*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
December 16, 1994 $0.4951 $0.4951 $0.4951 $0.4951
- -------------------------------------------------------------------------------------------
</TABLE>

* Period from November 14, 1994 (initial offering of shares) to August 31, 1995.

35
<PAGE>

<TABLE>
<CAPTION>
DIRECTORS

<S> <C>
RICHARD W. CUTTING EDWARD M. MAHONEY
CPA and Financial Prior to January, 1995,
Consultant Chairman and Chief
ALLEN R. FREEDMAN Executive Officer
Chairman and Chief Fortis Advisers, Inc.
Executive Officer Fortis Investors, Inc.
Fortis, Inc.; THOMAS R. PELLETT
Managing Director of Prior to January, 1991,
Fortis International, N.V. Senior Vice
DR. ROBERT M. GAVIN President-Administration
President and Corporate Affairs
Macalester College and Director
BENJAMIN S. JAFFRAY Pet, Inc.
Chairman ROBB L. PRINCE
Sheffield Group, Ltd. Prior to July, 1995,
JEAN L. KING Vice President and
President Treasurer
Communi-King Jostens, Inc.
DEAN C. KOPPERUD LEONARD J. SANTOW
Chief Executive Officer Principal
and Director Griggs & Santow, Inc.
Fortis Advisers, Inc. JOSEPH M. WIKLER
President and Director Investment Consultant and
Fortis Investors, Inc. Private Investor
Senior Vice President and Prior to January, 1994,
Director of Fortis Benefits Director of Research,
Insurance Company Chief Investment Officer,
Senior Vice President of Principal, and Director
Time Insurance The Rothschild Co.
Company
</TABLE>

<TABLE>
<S> <C>
OFFICERS

DEAN C. KOPPERUD DENNIS M. OTT
President and Director Vice President
ROBERT W. BELTZ, JR. DAVID A. PETERSON
Vice President Vice President
JAMES S. BYRD NICHOLAS L. M. DE PEYSTER
Vice President Vice President
CHARLES J. DUDLEY STEPHEN M. POLING
Vice President Vice President
THOMAS D. GUALDONI STEPHEN M. RICKERT
Vice President Vice President
MAROUN M. HAYEK RICHARD P. ROCHE
Vice President Vice President
HOWARD G. HUDSON ANTHONY J. ROTONDI
Vice President Vice President
ROBERT C. LINDBERG KEITH R. THOMSON
Vice President Vice President
LARRY A. MEDIN CHRISTOPHER J. WOODS
Vice President Vice President
KEVIN J. MICHELS GARY N. YALEN
Vice President Vice President
JON H. NICHOLSON MICHAEL J. RADMER
Vice President Secretary
JOHN W. NORTON TAMARA L. FAGELY
Vice President Treasurer
FRED OBSER
Vice President
</TABLE>

<TABLE>
<S> <C> <C> <C>
INVESTMENT MANAGER, CUSTODIAN
REGISTRAR AND Norwest Bank
TRANSFER AGENT Minnesota, N.A.
Fortis Advisers, Inc. Minneapolis, Minnesota
Box 64284 GENERAL COUNSEL
St. Paul, Minnesota 55164 Dorsey & Whitney P.L.L.P.
PRINCIPAL UNDERWRITER Minneapolis, Minnesota
Fortis Investors, Inc. INDEPENDENT AUDITORS
Box 64284 KPMG Peat Marwick LLP
St. Paul, Minnesota 55164 Minneapolis, Minnesota
</TABLE>

THE USE OF THIS MATERIAL IS AUTHORIZED ONLY WHEN PRECEDED OR ACCOMPANIED BY A
PROSPECTUS.

36
<PAGE>
FORTIS FINANCIAL GROUP

Fortis Financial Group (FFG) is a premier provider of insurance and
investment portfolios whose fund manager, Fortis Advisers, Inc. has established
a nation wide reputation for money management. Through Fortis Investors, Inc.,
FFG offers mutual funds, annuities and variable universal life insurance. Life
and disability products are issued and underwritten by Time Insurance Company
and Fortis Benefits Insurance Company.

With more than $5 billion assets under management, FFG is part of
Fortis, a $100 billion worldwide financial services and insurance organization
represented in 11 countries.

Like the Fortis name, which comes from the Latin for steadfast, our focus
is on the long-term in all we do: the relationships we build, the performance we
seek, the service we provide and the products we offer.

[LOGO]
----------------
Bulk Rate
FORTIS FINANCIAL GROUP US Postage
P.O. Box 64284
St. Paul, MN 55164 PAID

Permit No. 3794
Minneapolis, MN
------------------

[LOGO]
PRINTED ON RECYCLED PAPER WITH
40% PRECONSUMER WASTE AND
10% POST CONSUMER WASTE.
PLEASE RECYCLE.

98144 (Ed. 10/95)
<PAGE>
SPECIAL
PORTFOLIOS,
INC.

(A series fund with two separate
portfolios, each with different
goals and investment policies:
Stock Portfolio and Cash
Portfolio)
PROSPECTUS DATED
March 1, 1995

<TABLE>
<S> <C> <C>
MAILING STREET ADDRESS: TELEPHONE: (612)
ADDRESS: 500 BIELENBERG 738-4000
P.O. BOX 64284 DRIVE TOLL FREE
ST. PAUL WOODBURY 1-(800) 800-2638
MINNESOTA MINNESOTA 55125 (X 3012 OR 3014)
55164
</TABLE>

Special Portfolios, Inc. ("Special") is a diversified, open-end management
investment company that is intended to provide a range of investment
alternatives through its two separate investment portfolios (the "Portfolios"),
each of which is, for investment purposes, in effect a separate fund with its
own separate goals and investment policies. A separate series of capital shares
is issued for each Portfolio.

"Stock Portfolio" has primary investment objectives of capital appreciation and
the realization of long and short-term capital gains. Stock Portfolio invests
primarily in equity securities of companies which appear to possess superior
potential for appreciation in value ("growth companies").

"Cash Portfolio" has primary investment objectives of high levels of capital
stability and liquidity and, to the extent consistent with these primary
objectives, a high level of current income. Cash Portfolio will invest in a
diversified portfolio of investment grade bonds and other debt securities which
management considers to be of similar quality maturing in 25 months or less.

Special is designed to serve as an investment vehicle for:

1) officers, directors, employees, retirees, sales representatives, agents,
shareholders, and certain other persons closely identified with Fortis,
Inc.; Jostens, Inc.; The St. Paul Companies, Inc.; or the affiliates of any
of the above companies;

2) officers and directors of Special; or

3) pension, profit sharing, and other retirement plans created for the benefit
of any of the above persons.

This Prospectus concisely sets forth the information a prospective investor
should know about Special before investing. Investors should retain this
Prospectus for future reference. Special has filed a Statement of Additional
Information (also dated March 1, 1995) with the Securities and Exchange
Commission. The Statement of Additional Information is available free of charge
from Fortis Investors, Inc. ("Investors") at the above mailing address of
Special, and is incorporated by reference into this Prospectus in accordance
with the Commission's rules. SHARES IN SPECIAL ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK; ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY; AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

LOGO
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary of Portfolio Expenses..... 2
Financial Highlights.............. 2
Organization and Classification... 3
Investment Objectives and
Policies......................... 3
- Stock Portfolio............. 3
- Cash Portfolio.............. 4
- Other Investment Practices
of the Portfolios......... 5
Management........................ 5
- Board of Directors.......... 5
- The Investment Adviser/
Transfer Agent/Dividend
Agent....................... 5
- Expenses and Allocations
Between Portfolios.......... 5
- Brokerage Allocation........ 6

<CAPTION>
PAGE
<S> <C>
Capital Stock..................... 6
Shareholder Inquiries............. 6
Dividends and Capital Gains
Distributions.................... 6
Taxation.......................... 6
How to Buy Portfolio Shares....... 6
- Minimum Investments......... 6
- Investing by Telephone...... 6
- Investing by Wire........... 7
- Investing by Mail........... 7
- Public Offering Price....... 7
- Special Purchase Plans...... 7
- The Underwriter............. 8
Redemption........................ 8
Systematic Investment Plan
Authorization Agreement.......... 9
</TABLE>
<PAGE>
No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus, and if given or made, such information or representations
must not be relied upon as having been authorized by Special or Investors. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation.

SUMMARY OF PORTFOLIO EXPENSES

ANNUAL PORTFOLIO OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
STOCK CASH
PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
Investment Advisory and
Management Fees (after fee
waiver)..................... 1.00% .20%
Other Expenses............... .15% .22%
--- ---
TOTAL PORTFOLIO OPERATING
EXPENSES................ 1.15% .42%
</TABLE>

EXAMPLE

You would pay the following cumulative expenses on a $1,000 investment over
various time periods assuming:(1) a 5% annual return; and (2) redemption at the
end of each time period. As noted above, Special charges no redemption fee of
any kind.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Stock Portfolio.... $ 12 $ 37 $ 63 $ 140
Cash Portfolio..... $ 4 $ 13 $ 24 $ 53
</TABLE>

The above example used 1994 historical data as a basis for the estimated
expenses of the time periods indicated and should not be considered a
representation of past or future expenses or performance. Actual expenses may be
greater or less than those shown.

The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in Special will bear, whether
directly or indirectly. For Cash Portfolio, the Annual Portfolio Operating
Expenses table takes into account the voluntary .1 of 1% investment advisory and
management fee waiver (see "Expenses and Allocation Between Portfolios"). Had
this waiver not been taken into account, the Investment Advisory and Management
Fees would be .30%, resulting in Total Portfolio Operating Expenses of .52%. For
a more complete description of the various costs and expenses, see "Management"
and "How to Buy Portfolio Shares".

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

The information below has been derived from audited financial statements and
should be read in conjunction with the financial statements of Special found in
its 1994 Annual Report to Shareholders.

STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER
YEAR ENDED OCTOBER 31, 31,
----------------------------------------------------------------------- ----------
1994 1993 1992 1991 1990 1989*** 1988
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period...... $ 38.59 $ 33.22 $ 31.51 $ 20.65 $ 25.89 $ 18.67 $ 17.37
Operations:
Investment income (loss)--net........... (.12) (.15) .04 .06 .33 .02 --
Net realized and unrealized gain (loss)
on investments......................... (2.44) 6.97 2.48 12.75 (3.83) 7.20 1.35

<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total from operations..................... (2.56) 6.82 2.52 12.81 (3.50) 7.22 1.35
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Distributions to shareholders:
From investment income--net............. -- (.03) (.03) (.34) (.04) -- (.02)
From net realized gains................. (2.09) (1.42) (.78) (1.61) (1.70) -- (.03)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total distributions to shareholders....... (2.09) (1.45) (.81) (1.95) (1.74) -- (.05)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, end of period............ $ 33.94 $ 38.59 $ 33.22 $ 31.51 $ 20.65 $ 25.89 $ 18.67
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total return**............................ (6.88%) 21.15% 8.05% 66.55% (14.31 %) 38.67% 7.77%
Net assets at end of period (000's
omitted)................................. $ 75,465 $ 76,492 $ 61,586 $ 53,201 $ 29,862 $ 27,023 $ 21,695
Ratio of expenses to average daily net
assets................................... 1.15% 1.13% 1.13% 1.21% 1.25 % 1.33%* 1.37%
Ratio of net investment income (loss) to
average daily net assets................. (.36 %) (.41 %) .13% .19% 1.34 % .07%* .02%
Portfolio turnover rate................... 26% 37% 38% 45% 63 % 38% 96%
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------

1987 1986 1985
<S> <C> <C> <C>
- ------------------------------------------
Net asset value, beginning of period...... $ 24.80 $ 21.88 $ 15.90
Operations:
Investment income (loss)--net........... (.06) (.03) .16
Net realized and unrealized gain (loss)
on investments......................... (.71) 4.32 6.03
- ------------------------------------------
<S> <C> <C> <C>
Total from operations..................... (.77) 4.29 6.19
- ------------------------------------------
<S> <C> <C> <C>
Distributions to shareholders:
From investment income--net............. -- (.14) (.21)
From net realized gains................. (6.66) (1.23) --
- ------------------------------------------
<S> <C> <C> <C>
Total distributions to shareholders....... (6.66) (1.37) (.21)
- ------------------------------------------
<S> <C> <C> <C>
Net asset value, end of period............ $ 17.37 $ 24.80 $ 21.88
- ------------------------------------------
<S> <C> <C> <C>
Total return**............................ (5.11 )% 20.40% 39.22%
Net assets at end of period (000's
omitted)................................. $ 20,730 $ 23,499 $ 21,158
Ratio of expenses to average daily net
assets................................... 1.22% 1.25% 1.10%
Ratio of net investment income (loss) to
average daily net assets................. (.22 %) (.14 %) .79%
Portfolio turnover rate................... 92% 79% 132%
- ------------------------------------------
</TABLE>

* Annualized.

** These are Stock Portfolio's total returns during the periods, including
reinvestment of all dividend capital gains distributions.

*** For the ten month period ended October 31, 1989.

2
<PAGE>
CASH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Net asset value,
beginning of
year............ $ 9.79 $ 10.03 $ 10.20 $ 10.09 $ 10.00
Operations:
Investment
income--net... .56 .70 .81 .72 .77
Net realized
and unrealized
gain (loss) on
investments... (.29) (.24) (.15) .09 --

<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total from
operations...... .27 .46 .66 .81 .77
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distributions to
shareholders:
From investment
income--net... (.60) (.70) (.83) (.70) (.68)
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
end of year..... $ 9.46 $ 9.79 $ 10.03 $ 10.20 $ 10.09
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total return**... 2.85% 4.74% 6.73% 8.28% 7.91%
Net assets at end
of year (000's
omitted)........ $ 27,571 $ 25,604 $ 21,901 $ 20,326 $ 18,739
Ratio of expenses
to average daily
net assets...... .42%* .39%* .40%* .52% .52%
Ratio of net
investment
income to
average daily
net assets...... 5.90%* 7.04%* 7.55%* 7.36% 8.03%
Portfolio
turnover rate... 58% 29% 69% 66% 34%
<CAPTION>
- --------------------------------------------------------------------------------
</TABLE>

* For the years ended October 31, 1994, 1993, and 1992, the advisor voluntarily
waived a portion of the investment advisory and management fee. Had Cash
Portfolio paid all the advisory fee, the ratios of expenses and net
investment income to total net assets would have been .52% and 5.80%; .49%
and 6.94%; and .50% and 7.45% for 1994, 1993, and 1992, respectively.

** These are Cash Portfolio's total returns during the periods, including
reinvestment of all dividend and capital gains distributions.

Each Portfolio may advertise its "cumulative total return," "average annual
total return," "systematic investment plan cumulative total return," and
"systematic investment plan average annual total return," and may compare such
figures to recognized indices. Each Portfolio may advertise its relative
performance as compiled by outside organizations such as Lipper Analytical or
Wiesenberger, or refer to publications which have mentioned Special, Fortis
Advisers, Inc., or their personnel, and also may advertise other performance
items as set forth in the Statement of Additional Information. The performance
discussion required by the Securities and Exchange Commission is found in
Special's Annual Report to Shareholders and will be made available without
charge upon request.

ORGANIZATION AND CLASSIFICATION

Special was incorporated under Minnesota law in 1965 and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 (the
"1940 Act") as an "open-end diversified management investment company". Special
is currently comprised of two separate Portfolios--the Stock Portfolio and the
Cash Portfolio. Each Portfolio is, for investment purposes, in effect a separate
investment fund. A separate series of capital shares is issued for each
Portfolio. Each share issued with respect to a Portfolio has a pro-rata interest
in the assets of that Portfolio and has no interest in the assets of any other
Portfolio. Each Portfolio bears its own liabilities and also its proportionate
share of the general liabilities of Special. In other respects, Special is
treated as one entity.

INVESTMENT OBJECTIVES AND POLICIES

Through careful selection, broad diversification, and constant supervision, the
management of Special aims to limit and counteract various types of risk that
are inherent in all securities, and advance the value of Special's assets. There
is risk in all investments and fulfillment of Special's objectives cannot be
assured.

Since each Portfolio has different investment objectives, each can be expected
to have different investment results and incur different market and financial
risks. There can be no assurance that any of these objectives will be met.
Special may establish other Portfolios with different investment objectives,
without the approval of the shareholders of the existing Portfolios.

The investment objectives of the Portfolios and, except as otherwise noted,
their investment policies could be changed without shareholder approval.

STOCK PORTFOLIO

The primary investment objectives of Stock Portfolio are appreciation of capital
and the realization of both long and short-term capital gains. Consistent with
such objectives, Stock Portfolio invests in so-called "growth" companies
(companies which appear to possess superior potential for appreciation in
value). Stock Portfolio may also invest in the securities of companies in
cyclical industries when substantial increases in the market value of their
securities are foreseen. Stock Portfolio will, to the extent feasible, keep its
assets fully invested, but may maintain a moderate reserve of cash and
high-grade, short-term debt securities (a) pending investment in accordance with
its policies, and (b) to the extent necessary to make redemptions. These
policies may not be changed without shareholder approval.

In seeking to attain its investment objectives, Stock Portfolio will invest
primarily in common stocks or securities convertible into common stocks.
Occasionally, however, limited amounts may be invested in other types of
securities (such as nonconvertible preferred and debt securities). In periods
when a more defensive position is deemed warranted, Stock Portfolio may invest
in

3
<PAGE>
high-grade preferred stocks, bonds, and other fixed income securities (whether
or not convertible into or carrying rights to purchase common stocks), or retain
cash, all without limitation. Stock Portfolio also may invest in repurchase
agreements. Stock Portfolio may invest in both listed and unlisted securities,
and in foreign as well as domestic securities.

CASH PORTFOLIO

The objectives of Cash Portfolio are high levels of capital stability and
liquidity and, to the extent consistent with these primary objectives, a high
level of current income. The Portfolio intends to achieve these objectives
through investment in a diversified portfolio of investment grade bonds and
other debt securities which management considers to be of similar quality.

Cash Portfolio is different from a money market mutual fund in that Cash
Portfolio does not attempt to maintain its net asset value at any set price, its
average portfolio maturity tends to be longer, and, as a result, the net asset
value per share can fluctuate. The Portfolio will not purchase any security that
has a maturity date (as defined herein) more than 25 months from the date of
acquisition.

Cash Portfolio pursues its objectives by investing exclusively in the following:

1. Corporate debt obligations rated at the time of purchase within the
four highest investment grades assigned by Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, A or Baa) or Standard & Poor's Corporation ("S&P")
(AAA, AA, A or BBB), or comparably rated by another nationally recognized
rating agency, or nonrated corporate debt obligations which Advisers
considers to be of similar quality; provided, however, that investments in
nonrated corporate debt obligations will not exceed 25% of the Portfolio's
total assets. Investments rated Baa by Moody's or BBB by S&P are generally
regarded as having been issued by corporations with an adequate capacity to
pay principal and interest when they come due. Unlike the higher rated
categories in both Moody's and S&P, however, bonds rated Baa and BBB are
regarded as somewhat more speculative in nature. See the Statement of
Additional Information for a discussion of S&P and Moody's ratings.

2. Securities of, or guaranteed by, the United States Government, its
agencies, or instrumentalities.

3. Securities (payable in United States dollars) of, or guaranteed by,
the Government of Canada or of a province of Canada or any instrumentality
or political subdivision thereof, such securities not to exceed 25% of the
Portfolio's total assets, and securities of foreign companies (which do not
include domestic branches of foreign banks and foreign branches of domestic
banks), such securities not to exceed 15% of the Portfolio's total assets.

There may be certain risks connected with investing in such securities,
including risks of adverse political and economic developments, the possible
imposition of exchange controls or other governmental restrictions, and the
possibility that there will be less information on such securities and their
issuers available to the public.

4. Obligations of: (a) domestic or Canadian-chartered banks having
total assets in excess of one billion dollars; and (b) foreign branches of
domestic banks, and domestic branches of foreign banks, where the parent
bank has total assets in excess of one billion dollars; provided, that no
more than 49% of Cash Portfolio's total assets may be invested in foreign
branches of domestic banks and domestic branches of foreign banks,
collectively. Such obligations of domestic, Canadian, and foreign banks may
include, but are not limited to, certificates of deposit ("C/Ds"), letters
of credit, and bankers' acceptances ("B/ As"). For this purpose, "bank"
includes commercial banks, savings banks, and savings and loan associations.

Overall, with respect to investments set forth in this paragraph and in
paragraph 3 above, in addition to the other limitations set forth in this
Prospectus, Cash Portfolio may not invest more than 49% of the value of its
total assets collectively in: (i) securities of, or guaranteed by, the
Government of Canada, a Province of Canada, or any instrumentality or political
subdivision thereof; (ii) securities of foreign companies; and (iii) securities
of domestic branches of foreign banks and foreign branches of domestic banks.

5. Commercial paper obligations rated A-2 or better by S&P or Prime-2
or better by Moody's, or comparably rated by another nationally recognized
rating agency or, if not rated, issued or guaranteed by companies with an
outstanding unsecured debt issue currently rated Baa or better by Moody's or
BBB or better by S&P, or comparably rated by another nationally recognized
rating agency. For a discussion of commercial paper ratings by S&P and
Moody's, see Appendix A to the Statement of Additional Information.

6. Mortgage-backed securities, including, for example, mortgage
pass-through securities (such as those issued by the Government National
Mortgage Association, the Federal National Mortgage Association, and various
private organizations), mortgage-backed bonds, and collateralized mortgage
obligations, which are rated A or better at the time of purchase by Moody's
or S&P, or comparably rated by another nationally recognized rating agency,
or, if not rated, which are of comparable investment quality as determined
by Advisers, subject to review by the Board of Directors. For a discussion
of investment risks associated with mortgage-backed securities, see the
Statement of Additional Information.

7. Extendible notes that provide for an optional maturity date, at Cash
Portfolio's option, of 25 months or less from the

4
<PAGE>
date of acquisition. Extendible notes issued with maturity dates in excess
of 25 months from the date of issuance that provide for optional maturity
dates, at the holder's option, of 25 months or less shall be deemed by the
Portfolio to have been issued with the shorter optional maturity dates. Such
extendible notes must bear ratings by Moody's or S&P, or comparably rated by
another nationally recognized rating agency, that are acceptable to the
Portfolio with respect to other forms of investments (see paragraph 1,
above) and may not account for greater than 25% of the total assets of the
Portfolio.

An investment in an extendible note is liquid, and the note may be resold to
another investor prior to its optional maturity date at its market value. The
market value of an extendible note with a given optional maturity date is
determined and fluctuates in a similar manner as the market value of a fixed
maturity note with a maturity equivalent to the optional maturity of the
extendible note. Compared to fixed-term notes of the same issuer, however,
extendible notes with equivalent optional maturities generally yield higher
returns and, in the opinion of Special's investment adviser, do not represent a
material increase in risk to the Portfolio.

8. Repurchase agreements in connection with obligations which are
suitable for investment under the categories set forth above.

9. Cash Portfolio may purchase obligations other than those listed
above if the obligation is accompanied by a guarantee of principal and
interest, provided that the guarantee is that of a bank or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by
Cash Portfolio.

OTHER INVESTMENT PRACTICES OF THE PORTFOLIOS

RESTRICTED AND ILLIQUID SECURITIES. Cash Portfolio may invest up to 5% of the
value of its total assets (at the time of investment) in securities which it
might not be free to sell to the public without registration of such securities
under the Securities Act of 1933. Stock Portfolio may invest up to 5% of its
total assets in securities (both debt and equity) of any issuer which are not
readily marketable. These fundamental policies are restricted further by
nonfundamental policies that prohibit each Portfolio from investing more than an
aggregate of 5% of the value of its respective total assets in companies which
have been in business for less than three years.

The Portfolios may invest in variable amount master demand notes. These
instruments are short-term, unsecured promissory notes issued by corporations to
finance short-term credit needs.

BORROWING OF MONEY. Cash Portfolio may borrow money from banks as a temporary
measure to facilitate redemptions. As a fundamental policy, however, borrowings
may not exceed 10% of the value of such Portfolio's total assets and no
additional investment securities may be purchased by Cash Portfolio while
outstanding bank borrowings exceed 5% of the value of such Portfolio's total
assets. Interest paid on borrowings will not be available for investment. Stock
Portfolio may not borrow money as a fundamental policy.

MANAGEMENT

BOARD OF DIRECTORS

Under Minnesota law, the Board of Directors of Special (the "Board of
Directors") has overall responsibility for managing Special in good faith, in a
manner reasonably believed to be in the best interests of Special, and with the
care an ordinarily prudent person would exercise in similar circumstances.
However, this management may be delegated.

The Articles of Incorporation of Special limit the liability of directors to the
fullest extent permitted by law.

THE INVESTMENT ADVISER/TRANSFER AGENT/DIVIDEND AGENT

Fortis Advisers, Inc. ("Advisers") is the investment adviser, transfer agent,
and dividend agent for each Portfolio. Advisers has been managing investment
company portfolios since 1949, and is indirectly owned 50% by Fortis AMEV and
50% by Fortis AG, diversified financial services companies. In addition to
providing investment advice, Advisers is responsible for management of Special's
business affairs, subject to the overall authority of the Board of Directors.
Advisers' address is that of Special.

Stephen M. Poling (Executive Vice President of Advisers), James S. Byrd (Vice
President of Advisers), and Keith R. Thomson (Vice President of Advisers) have
managed Stock Portfolio, along with other equity portfolios of Advisers, since
1983, 1991, and 1988, respectively. For at least the remainder of the five years
prior to the date of this Prospectus, Mr. Byrd was Senior Vice President of
Templeton Investment Counsel, Inc., Ft. Lauderdale, Florida.

Dennis M. Ott (Senior Vice President of Advisers) and Diane M. Gotham (Fixed
Income Analyst of Advisers) have managed Cash Portfolio since 1989 and 1994,
respectively. Prior to August, 1994, graduate student, University of Minnesota;
prior to July, 1993, Advisory Systems Engineer, IBM Corp., Minneapolis,
Minnesota, for at least the remainder of the five years prior to the date of
this Prospectus.

EXPENSES AND ALLOCATIONS BETWEEN PORTFOLIOS

For the most recent fiscal year, the ratio of Stock Portfolio's and Cash
Portfolio's total operating expenses as a percentage of average daily net assets
were 1.15% and .42%, respectively.

5
<PAGE>
Included in these totals were the advisory fees paid to Advisers, which equaled
1.00% and .20% (after fee waiver), respectively. While Stock Portfolio's fee is
higher than that paid by many other investment companies, it is partially offset
by the added costs which Advisers pays (which other investment companies pay),
such as acting as registrar, transfer agent, and dividend agent.

Advisers has voluntarily agreed to waive a portion of the advisory fee equal to
.1 of 1% of average net assets otherwise payable by Cash Portfolio until Cash
Portfolio's net assets first reach $50 million.

BROKERAGE ALLOCATION

Advisers may consider sales of shares of Special, and of other funds advised by
Advisers, as a factor in the selection of broker-dealers to execute Special
securities transactions when it is believed that this can be done without
causing Special to pay more in brokerage commissions than it would otherwise.

CAPITAL STOCK

Special has only common shares with equal voting rights.

SHAREHOLDER INQUIRIES

Inquiries should be directed to your broker-dealer or sales representative, or
to Special 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.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Cash Portfolio's policy is to pay quarterly dividends from net investment
income. Stock Portfolio pays dividends annually. Both Portfolios make
distributions of any realized capital gains annually. These dividends and
capital gains are distributed on the record date. Such dividends and capital
gains distributions will be made in the form of additional shares of the same
Portfolio unless the shareholder sends Special a written request that either or
both be sent to the shareholder.

TAXATION

Each Portfolio will distribute substantially all of its net income and capital
gains to its shareholders. Distributions from each Portfolio are taxable to
shareholders, whether paid in cash or reinvested. Dividends paid from the net
income of the Portfolios must be treated as ordinary income by its shareholders.
Dividends paid from the Portfolios' net capital gains and designated in the
shareholder's Annual Account Summary as long-term capital gain distributions are
treated as long-term capital gains by shareholders, regardless of the length of
time for which they have held their shares in a Portfolio.

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

Prior to purchasing shares of a Portfolio, prospective shareholders (except for
tax qualified retirement plans) should consider the impact of dividends or
capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or capital gains distributions paid
shortly after a purchase of shares by an investor prior to the record date will
have the effect of reducing the per share net asset value by the amount of the
dividends or distributions. All or a portion of such dividends or distributions,
although in effect a return of capital, is subject to taxation. As of October
31, 1994, approximately 34% of Stock Portfolio's net assets represented
unrealized appreciation, undistributed net investment income, and accumulated
net realized gains or losses.

HOW TO BUY PORTFOLIO SHARES

MINIMUM INVESTMENTS

INVESTING BY TELEPHONE

Your registered representative may make your purchase ($500 minimum) by
telephoning the number on the cover page of this Prospectus. In addition, the
Account Application which accompanies this Prospectus must be promptly
forwarded. If you have a Fortis registered representative, 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 another broker-dealer, please
make your check payable to Fortis Funds and mail it with your Application to
"CM-9614, St. Paul, MN 55170-9614." Shareholders may not place telephone orders
themselves.

6
<PAGE>
INVESTING BY WIRE

INVESTING BY MAIL (ADDRESS: CM-9614, ST. PAUL, MN 55170-9614)

PUBLIC OFFERING PRICE

The public offering prices of the Portfolios' shares are determined once daily,
and are equal to the net asset values per share of the shares next calculated
after receipt of the purchase order. The Portfolios' net asset values per share
are determined by dividing the value of the securities owned by the Portfolio,
plus any cash or other assets, less all liabilities, by the number of the
Portfolio's shares outstanding. The portfolio securities in which the Portfolios
invest fluctuate in value, and hence the net asset values per share of the
Portfolios also fluctuate. The net asset values of the Portfolios' shares are
determined as of the primary closing time for business on the New York Stock
Exchange (the "Exchange") on each day on which the Exchange is open. If shares
are purchased through another broker-dealer who receives the order prior to the
close of the Exchange, then Investors will apply that day's price to the order
as long as the broker-dealer places the order with Investors by the end of the
day.

Securities are generally valued at market value. A security listed or traded on
the exchange is valued at its last sale price on the exchange where it is
principally traded on the day of valuation. Lacking any sales on the exchange
where it is principally traded on the day of valuation, prior to the time as of
which assets are valued, the security generally is valued at the previous day's
last sale price on that exchange. A security listed or traded on the Nasdaq
National Market is valued at its last sale price that day, and lacking any sales
that day on the Nasdaq National Market, the security generally is valued at the
last bid price.

When market quotations are not readily available, or when restricted securities
or other assets are being valued, such securities or other assets are valued at
fair value as determined in good faith by management under supervision of the
Board of Directors. However, debt securities may be valued on the basis of
valuations furnished by a pricing service which utilizes electronic data
processing techniques to determine valuations for normal institutional-size
trading units of debt securities when such valuations are believed to more
accurately reflect the fair market value of such securities. Short-term
investments in debt securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued at
amortized cost. Purchases and sales by the Portfolios after 2:00 P.M. Central
Time normally are not recorded until the following day.

SPECIAL PURCHASE PLANS

For information on any of the following special purchase or transfer plans, see
the Statement of Additional Information or contact your broker-dealer or sales
representative. Any plan involving systematic purchases may, at Advisers'
option, result in transactions under such plan being confirmed to the investor
quarterly, rather than as a separate notice following the transaction.

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

GIFTS OR TRANSFERS TO MINOR CHILDREN Adults can make an irrevocable gift or
transfer of up to $10,000 annually per child ($20,000 for married couples) to as
many children as they choose without having to file a Federal gift tax return.

SYSTEMATIC INVESTMENT PLAN Voluntary $25 or more per month purchases by
"Pre-authorized Check Plan" (see form in this

7
<PAGE>
Prospectus) or $50 or more per month by any other means enable an investor to
lower his or her average cost per share through the principle of "dollar cost
averaging;"

TELEPHONE TRANSFER PRIVILEGE Except for participants in the Fortis, Inc. 401(k)
Plan, shareholders who have given written pre-authorization may by means of a
telephone call to Special transfer part or all of their investment in either of
the Portfolios of Special to the other Portfolio of Special or to one of the
other funds managed by Advisers. However, any applicable sales charges must be
paid if the money is transferred from either Portfolio of Special to any load
fund. A shareholder initiates a transfer by writing to or telephoning his or her
broker-dealer, sales representative, or Special regarding the shares to be
exchanged. Telephone exchanges will be permitted only if the shareholder
completes and returns the Telephone Transfer Authorization Form. During times of
chaotic economic or market circumstances, a shareholder may have difficulty
reaching his or her broker-dealer, sales representative, or Special by
telephone. Consequently, a telephone exchange may be difficult to implement at
those times. (See "Redemption".)

Advisers reserves the right to restrict the frequency of--or otherwise modify,
condition, terminate, or impose charges upon--the transfer privilege, all with
30 days notice to shareholders.

THE UNDERWRITER

Fortis Investors, Inc. ("Investors"), a subsidiary of Advisers, is Special's
underwriter. Investors' address is that of Special. Investors reserves the right
to reject any purchase order. The following persons are affiliated with both
Investors and Special: Dean C. Kopperud is a director and officer of both;
Stephen M. Poling and Robert J. Clancy are directors of Investors and officers
of both; and Dennis M. Ott, James S. Byrd, Robert C. Lindberg, Keith R. Thomson,
Robert W. Beltz, Jr., Thomas D. Gualdoni, Larry A. Medin, John W. Norton, David
G. Carroll, Chris J. Neuharth, Carol M. Houghtby, Tamara L. Fagely, John E.
Hite, Thomas E. Erickson, and Gregory S. Swenson are officers of both.

REDEMPTION

Registered holders of Special shares may redeem their shares without any charge
at the per share net asset value next determined following receipt by Special of
a written redemption request in proper form (and a properly endorsed stock
certificate if one has been issued). However, if shares are redeemed through
another broker-dealer who receives the order prior to the close of the Exchange,
then Investors will apply that day's price to the order as long as the
broker-dealer places the order with Investors by the end of the day. Some
broker-dealers may charge a fee to process redemptions.

Any certificates should be sent to Special by certified mail. Share certificates
and/or stock powers, if any, tendered in redemption must be endorsed and
executed exactly as the shares are registered. If the redemption proceeds are to
be paid to the registered holder and sent to the address of record, normally no
signature guarantee is required unless Advisers does not have the shareholder's
signature on file and the redemption proceeds are greater than $25,000. However,
for example, if the redemption proceeds are to be paid to someone other than the
registered holder, sent to a different address, or the shares are to be
transferred, the owner's signature must be guaranteed by a bank, broker
(including government or municipal), dealer (including government or municipal),
credit union, national securities exchange, registered securities association,
clearing agency, or savings association.

Shares may be registered in broker-dealer "street name accounts" only if the
broker-dealer has a selling agreement with Investors. In such cases,
instructions from the broker-dealer are required to redeem shares or transfer
ownership and transfer to another broker-dealer requires the new broker-dealer
to also have a selling agreement with Investors. If the proposed new
broker-dealer does not have a selling agreement with Investors, the shareholder
can, of course, leave the shares under the original street name account or have
the broker-dealer transfer ownership to the shareholder's name.

Broker-dealers having a sales agreement with Investors may orally place a
redemption order, but proceeds will not be released until the appropriate
written materials are received.

An individual shareholder (or in the case of multiple owners, any shareholder)
may orally redeem up to $25,000 worth of their shares, provided that the account
is not a tax-qualified plan, the check will be sent to the address of record,
and the address of record has not changed for at least 30 days. During times of
chaotic economic or market circumstances, a shareholder may have difficulty
reaching his or her broker-dealer, sales representative, or Special by
telephone. Consequently, a telephone redemption may be difficult to implement at
those times. If a shareholder is unable to reach Special by telephone, written
instructions should be sent. Advisers reserves the right to modify, condition,
terminate, or impose charges upon this telephone redemption privilege, with 30
days notice to shareholders. Advisers, Investors, and Special will not be
responsible for, and the shareholder will bear the risk of loss from, oral
instructions, including fraudulent instructions, which are reasonably believed
to be genuine. The telephone redemption procedure is automatically available to
shareholders. Special will employ reasonable procedures to confirm that
telephone instructions are genuine, but if such procedures are not deemed
reasonable, it may be liable for any losses due to unauthorized or fraudulent

8
<PAGE>
instructions. Special's procedures are to verify address and social security
number, tape record the telephone call, and provide written confirmation of the
transaction.

Payment will be made as soon as possible, but not later than seven days after
receipt of a proper redemption request. However, if shares subject to the
redemption request were recently purchased with non-guaranteed funds (e.g.,
personal check), the mailing of your redemption check may be delayed by fifteen
days. A shareholder wishing to avoid these delays should consider the wire
purchase method described under "How to Buy Portfolio Shares."
Employees of certain Texas public educational institutions who direct investment
in Special 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.

Special has the right to redeem accounts with a current value of less than $500
unless the original purchase price of the remaining shares was at least $500.
Special shareholders actively participating in Special's Systematic Investment
Plan or Group Systematic Investment Plan will not have their accounts redeemed.
Before redeeming an account, Special will mail to the shareholder a notice of
its intention to redeem, which will give the shareholder an opportunity to make
an additional investment. If no additional investment is received by Special
within 60 days of the date the notice was mailed, the shareholder's account will
be redeemed. Any redemption in an account established with the minimum initial
investment of $500 may trigger this redemption procedure.
Special has a "Systematic Withdrawal Plan," which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semiannually, or
annually.

SYSTEMATIC INVESTMENT PLAN
AUTHORIZATION AGREEMENT

I request Fortis Financial Group ("FFG") to obtain payment of sums becoming due
FFG by charging my account in the form of checks, drafts, or electronic debit
entries. I request and authorize the financial institution named to accept,
honor, and charge those entries to my account. This Authorization will remain in
effect until I notify FFG. I understand that any returned item or redemption of
the entire account may result in termination of my Systematic Investment Plan.
This Authorization will become effective only upon acceptance by FFG at its home
office.

BANK/FINANCIAL INSTITUTION INFORMATION
(please print clearly)

Please check one:

/ / CHECKING

/ / SAVINGS

_________________________ ________________________________________
TRANSIT NUMBER BANK ACCOUNT NUMBER

_________________________ ________________________________________
ACCOUNT NAME DATE
if other than name of Depositor

(_____)_________________________________________________________________________
DEPOSITOR'S DAYTIME TELEPHONE

CLEARLY PRINT THE BANK/FINANCIAL INSTITUTION NAME AND ADDRESS ON THE LINES
BELOW.

________________________________________________________________________________

________________________________________________________________________________
SIGNATURE OF DEPOSITOR

________________________________________________________________________________
SIGNATURE OF JOINT DEPOSITOR

/ / START A NEW SYSTEMATIC INVESTMENT PLAN

/ / CHANGE AMOUNT OF EXISTING PLAN

/ / ADD NEW PRODUCT TO EXISTING PLAN

/ / CHANGE OF BANK ACCOUNT

/ / CHANGE OF FUND FROM _____________________________________________________ TO
______________________________.

/ / CHANGE DATE

PLEASE COMPLETE 1 THROUGH 6 BELOW

1. Requested Date ______________________________________________________________

2. Beginning Payment Month _____________________________________________________

3. Account/Contract Numbers ____________________________________________________

4. Name of Account/Contract Owner ______________________________________________

5. Address _____________________________________________________________________

________________________________________________________________________________

6. Social Security # ___________________________________________________________

ATTACH ADDITIONAL INFORMATION IF MORE SPACE IS NEEDED.
ALWAYS ATTACH A VOIDED CHECK (NOT A DEPOSIT SLIP)

9
<PAGE>
PROSPECTUS
MARCH 1, 1995

SPECIAL PORTFOLIOS, INC.
(A SERIES FUND WITH TWO SEPARATE PORTFOLIOS, EACH WITH DIFFERENT GOALS
AND INVESTMENT POLICIES: STOCK PORTFOLIO AND CASH PORTFOLIO)

95178 (REV. 3/95)

<TABLE>
<S> <C>
BULK RATE
U.S. POSTAGE
</TABLE>

LOGO
<TABLE>
<S> <C>
PAID
</TABLE>

FORTIS FINANCIAL GROUP
<TABLE>
<S> <C>
PERMIT NO. 3794
MINNEAPOLIS, MN
</TABLE>

P.O. BOX 64284
ST. PAUL, MN 55164
<PAGE>

PART B

STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 22, 1996

ACQUISITION OF THE ASSETS OF

STOCK PORTFOLIO
A SEPARATELY MANAGED SERIES OF
SPECIAL PORTFOLIOS, INC.
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164
(800) 738-4000

BY AND IN EXCHANGE FOR SHARES OF

FORTIS GROWTH FUND, INC.
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164
(800) 738-4000

This Statement of Additional Information relates to the proposed
Agreement and Plan of Reorganization providing for (a) the acquisition of
substantially all of the assets and the assumption of all liabilities of
Stock Portfolio (the "Acquired Fund"), a separately managed series of Special
Portfolios, Inc. ("Special") by Fortis Growth Fund, Inc. (the "Acquiring
Fund"), in exchange for shares of common stock of the Acquiring Fund having
an aggregate net asset value equal to the aggregate value of the assets
acquired (less the liabilities assumed) of the Acquired Fund and (b) the
liquidation of the Acquired Fund and the pro rata distribution of the
Acquiring Fund shares to Acquired Fund shareholders.

This Statement of Additional Information consists of this cover page and
the following documents, of which items 1 through 4 are incorporated by
reference herein:

1. The Statement of Additional Information dated January 1, 1996 of the
Acquiring Fund.

2. The Annual Report of the Acquiring Fund for the fiscal year ended
August 31, 1995.

3. The Statement of Additional Information dated March 1, 1995 of the
Acquired Fund.

4. The Annual Report of the Acquired Fund for the fiscal year ended
October 31, 1995.

5. Financial Statements required by Form N-14, Item 14 (to the extent
not included in items 2 and 4 above).

This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated January 22, 1996 relating to the
above-referenced transaction may be obtained without charge by writing or
calling the Acquired Fund or the Acquiring Fund at the addresses or telephone
numbers noted above. This Statement of Additional Information relates to,
and should be read in conjunction with, such Prospectus/Proxy Statement.

[NOTE: In the SEC filing package, Item No. 2 referred to above is included
in Part A as materials to be delivered with the Prospectus/Proxy Statement. A
copy of Item No. 2 also will be delivered to any person requesting the Statement
of Additional Information.]

<PAGE>
FORTIS ASSET ALLOCATION PORTFOLIO
FORTIS VALUE FUND
FORTIS GROWTH & INCOME FUND
FORTIS CAPITAL FUND
FORTIS FIDUCIARY FUND
FORTIS GROWTH FUND
FORTIS CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 1, 1996

Fortis Asset Allocation Portfolio ("Asset Allocation Portfolio") is a portfolio
of Fortis Advantage. Fortis Value Fund, Fortis Growth & Income Fund and Fortis
Capital Fund are the three portfolios of Fortis Equity Portfolios, Inc. ("Fortis
Equity"). Fortis Fiduciary Fund, Inc. ("Fiduciary Fund") and Fortis Growth Fund,
Inc. ("Growth Fund") are single portfolio funds. Fortis Capital Appreciation
Portfolio ("Capital Appreciation Portfolio") is a portfolio of Fortis Advantage
Portfolios, Inc. ("Fortis Advantage"). These seven portfolios/funds are
collectively referred to as the "Funds". This Statement of Additional
Information is NOT a prospectus, but should be read in conjunction with the
Funds' Prospectus dated January 1, 1996. A copy of that prospectus may be
obtained from your broker-dealer or sales representative. The address of Fortis
Investors, Inc. ("Investors") is P.O. Box 64284, St. Paul, Minnesota 55164.
Telephone: (612) 738-4000. Toll Free 1-(800) 800-2638 (x3012).

No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Statement of Additional Information, and if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or Investors. This Statement of Additional Information does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation.

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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ORGANIZATION AND CLASSIFICATION........................ 33
INVESTMENT OBJECTIVES AND POLICIES..................... 33
- General.......................................... 33
ASSET ALLOCATION & CAPITAL APPRECIATION PORTFOLIOS..... 33
- Mortgage-Related Securities...................... 33
- Foreign Securities............................... 36
- Options.......................................... 36
- Futures Contracts and Options on Futures
Contracts........................................ 37
- Forward Foreign Currency Exchange Contracts...... 38
- Risks of Transactions in Options, Futures
Contracts, and Forward Contracts................. 38
- Regulatory Restrictions.......................... 38
- Borrowing Money.................................. 39
- Repurchase Agreements............................ 39
- Variable Amount Master Demand Notes.............. 39
- Illiquid Securities.............................. 39
- Delayed Delivery Transactions.................... 40
- Investment Restrictions.......................... 40
VALUE, CAPITAL, FIDUCIARY AND GROWTH FUNDS............. 42
- Lending of Portfolio Securities.................. 43
- Illiquid Securities.............................. 43
- Real Estate or Real Estate Investment Trusts..... 44
- Options.......................................... 44
- Delayed Delivery Transactions.................... 45
- Investment Restrictions.......................... 45
GROWTH & INCOME FUND................................... 48
- Certificates of Deposit and Bankers'
Acceptance....................................... 48
- Mortgage-Related Securities...................... 48
- Securities of Foreign Companies.................. 50
- Repurchase Agreements............................ 50
- Delayed Delivery Transactions.................... 50
- Dollar Rolls..................................... 51
- Lending of Portfolio Securities.................. 51
- Restricted or Illiquid Securities................ 52
- Short Sales Against the Box...................... 52
DIRECTORS AND EXECUTIVE OFFICERS....................... 54
INVESTMENT ADVISORY AND OTHER SERVICES................. 57
- General.......................................... 57
- Control and Management of Advisers and
Investors........................................ 58
- Investment Advisory and Management Agreement..... 58
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE..... 59

<CAPTION>
PAGE
<S> <C>
CAPITAL STOCK.......................................... 61
COMPUTATION OF NET ASSET VALUE AND PRICING............. 62
SPECIAL PURCHASE PLANS................................. 63
- Statement of Intention........................... 63
- Tax Sheltered Retirement Plans................... 63
- Gifts or Transfers to Minor Children............. 65
- Systematic Investment Plan....................... 65
- Exchange Privilege............................... 66
- Reinvested Dividend/Capital Gains Distributions
between Fortis Funds............................. 66
- Purchases by Fortis, Inc. (or its Subsidiaries)
or Associated Persons............................ 66
- Purchases by Fund Directors or Officers.......... 66
- Purchases by Representatives or Employees of
Broker-Dealers................................... 66
- Purchases by Certain Retirement
Plans............................................ 66
- Purchases by Registered Investment Companies..... 66
- Purchases with Proceeds from Redemption of
Unrelated Mutual Fund Shares or Surrender of
Certain Fixed Annuity Contracts.................. 66
- Purchases by Employees of Certain Banks and Other
Financial Services Firms......................... 66
- Purchases by Commercial Banks Offering Self-
Directed 401(k) Programs Containing both Pooled
and Individual Investment Options................ 67
- Purchases by Investment Advisers, Trust
Companies, and Bank Trust Departments Exercising
Discretionary Investment Authority or Using a
Money Management Mutual Fund "Wrap" Program...... 67
REDEMPTION............................................. 67
- Systematic Withdrawal Plan....................... 67
- Reinvestment Privilege........................... 67
TAXATION............................................... 68
UNDERWRITER............................................ 68
PLAN OF DISTRIBUTION................................... 69
PERFORMANCE............................................ 70
FINANCIAL STATEMENTS................................... 97
CUSTODIAN; COUNSEL; ACCOUNTANTS........................ 97
LIMITATION OF DIRECTOR LIABILITY....................... 97
ADDITIONAL INFORMATION................................. 97
</TABLE>

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ORGANIZATION AND CLASSIFICATION

Fortis Advantage includes two separate portfolios included in this Statement of
Additional Information: Asset Allocation Portfolio and Capital Appreciation
Portfolio.

Fortis Equity was originally organized as a "non-series" investment company. On
January 31, 1992, the Fund was reorganized as a "series" fund and its name was
changed from AMEV Capital Fund, Inc. to Fortis Equity Portfolios, Inc. ("Fortis
Equity"). The Fund became a portfolio of Fortis Equity. On January 1, 1996,
Value Fund and Growth & Income Fund became portfolios of Fortis Equity. Fortis
Equity may establish other portfolios, each corresponding to a distinct
investment portfolio and a distinct series of Fortis Equity's common stock.

An investment company is an arrangement by which a number of persons invest in a
company that in turn invests in securities of other companies. Each Fund
operates as an "open-end" investment company because it generally must redeem an
investor's shares upon request. Each Fund operates as a "diversified" investment
company because it offers investors an opportunity to minimize the risk inherent
in all investments in securities by spreading their investment over a number of
companies in various industries. However, diversification cannot eliminate such
risks.

INVESTMENT OBJECTIVES AND POLICIES

GENERAL

Each Fund will operate as a "diversified" investment company as defined under
the Investment Company Act of 1940 (the "1940 Act"), which means that it must
meet the following requirements:

At least 75% of the value of its 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.

In implementing the objectives of each of these Funds set forth in the
Prospectus under "Investment Objectives and Policies," the proportion of its
assets invested in common stocks, preferred stocks and bonds, short-term
investments such as repurchase agreements or retained in cash may vary from time
to time as economic and financial conditions change. As of August 31, 1995, the
following percentages of the Funds' net assets were invested in common stock:
Asset Allocation Portfolio--45%; Capital Fund--84%; Fiduciary Fund-- 84%; Growth
Fund--88%; and Capital Appreciation Portfolio--94%.

Each of these Funds will not concentrate its investments in any particular
industry, nor will it purchase a security if as a result of such purchase more
than 25% of its assets will be invested in a particular industry. This policy
may not be changed without shareholder approval. (See "Investment
Restrictions.")

Consistent with its investment objectives, each of the Funds intends to purchase
securities primarily for investment, but also may seek short-term capital
appreciation. They reserve freedom of action, however, to sell portfolio
securities whenever management believes more favorable investment opportunities
are available, regardless of any additional brokerage costs which may be
incurred, and regardless of any income tax consequences.

Portfolio turnover, as described in the Prospectus, is the ratio of the lesser
of annual purchases or sales of portfolio securities to average monthly
portfolio value, not including short-term securities. A 100% portfolio turnover
rate would occur, for example, if all of the Fund's portfolio securities were
replaced within one year. These Funds' portfolio turnover rates for the fiscal
years ended August 31, 1995 and 1994 were as follows: Asset Allocation
Portfolio--94% and 94%, respectively; Capital Fund--14% and 41%, respectively;
Fiduciary Fund--12% and 25%, respectively; Growth Fund--27% and 23%,
respectively; and Capital Appreciation Portfolio--21% and 36%, respectively.

ASSET ALLOCATION AND CAPITAL APPRECIATION PORTFOLIOS

Asset Allocation Portfolio's investment objective is maximum total return on
invested capital, to be derived primarily from capital appreciation, dividends,
and interest.

Capital Appreciation Portfolio's investment objective is maximum long-term
capital appreciation. Dividend and interest income from securities, if any, is
incidental.

MORTGAGE-RELATED SECURITIES

Consistent with the investment objectives and policies of Asset Allocation
Portfolio as set forth in the Prospectus, and the investment restrictions set
forth below, such Portfolio may invest in certain types of mortgage-related
securities. One type of mortgage-related security includes certificates which
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

33
<PAGE>
fees or costs which 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 United States 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. The GNMA Certificates that the Government Total Return Portfolio
purchases are the "modified pass-through" type. "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 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 which 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 which 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 Government Total Return Portfolio 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

34
<PAGE>
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.

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.

Fortis Advantage 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 Asset Allocation Portfolio's
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 (CMO's).
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. CMO's have
characteristics of both pass-through securities and mortgage-backed bonds. CMO's
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. CMO's 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.

CMO's are issued by entities that operate under orders from the Securities and
Exchange Commission (the SEC) exempting such issuers from the provisions of the
Investment Company Act of 1940 (the 1940 Act). Until recently, the staff of the
SEC had taken the position that such issuers were investment companies and that,
accordingly, an investment by an investment company (such as the Portfolios) in
the securities of such issuers was subject to limitations imposed by Section 12
of the 1940 Act. However, in reliance on a recent SEC staff interpretation, the
Portfolios may invest in securities issued by certain "exempted issuers" without
regard to the limitations of Section 12 of the 1940 Act. In its interpretation,
the SEC staff defined "exempted issuers" as unmanaged, fixed asset issuers that
(a) invest primarily in mortgage-backed securities, (b) do not issue redeemable
securities as defined in Section 2(a)(32) of the 1940 Act, (c) operate under
general exemptive orders exempting them from "all provisions of the [1940] Act"
and (d) are not registered or regulated under the 1940 Act as investment
companies.

There are many classes of CMOs. There are 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 "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 the
Portfolio'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 the Portfolio 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

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<PAGE>
would be purchased by the Portfolio to attempt to protect against a reduction in
the income earned on the Portfolio investments due to a decline in interest
rates. The Portfolio 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 underlying
pool of mortgage loans or mortgage-backed securities ("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.

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
Asset Allocation Portfolio. 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.

FOREIGN SECURITIES

Capital Appreciation Portfolio may invest up to 10%, and Asset Allocation
Portfolio may invest up to 20%, of its total assets in securities of foreign
governments and companies (provided that no more than 15% of 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 Fortis Advantage 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 United States 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.

OPTIONS

As provided below, the Portfolios may enter into transactions in options on a
variety of instruments and indexes, in order to protect against declines in the
value of portfolio securities or increases in the costs of securities to be
acquired and in order to increase the gross income of the Portfolios. The types
of instruments to be purchased and sold are further described in the Appendix of
this Statement of Additional Information, which should be read in conjunction
with the following sections.

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It is currently the intention of Fortis Advantage Portfolios to limit the
investment in options by each Portfolio so that such investments do not expose
more than 5% of such Portfolio's assets to risk of loss.

OPTIONS ON SECURITIES. Both Portfolios may write (sell) covered call and 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). Where a Portfolio writes an option which expires unexercised or is
closed out by the Portfolio 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 Portfolio 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 Portfolio's position, the option may be exercised and the Portfolio 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
Portfolios 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.

Both Portfolios may also purchase put or call options in anticipation of market
fluctuations which may adversely affect the value of its portfolio or the prices
of securities that the Portfolio wants to purchase at a later date. In the event
that the expected market fluctuations occur, the Portfolio 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 Portfolio
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 Portfolio.

OPTIONS ON STOCK INDEXES. Both Portfolios may write (sell) covered call and
secured put options and purchase call and put options on stock indexes. When a
Portfolio 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
Portfolio will either close out the option at a profit or allow it to expire
unexercised. The Portfolio will thereby 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 Portfolio for the writing of the option. In
addition, if the value of an underlying index moves adversely to a Portfolio's
option position, the option may be exercised, and the Portfolio will experience
a loss which may only be partially offset by the amount of the premium received.

A Portfolio may also purchase put or call options on stock indexes in order
either to hedge its investments against a decline in value or to attempt to
reduce the risk of missing a market or industry segment advance. The Portfolio's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

FUTURES CONTRACTS. Asset Allocation Portfolio may enter into interest rate
futures contracts for hedging purposes. In addition, Capital Appreciation
Portfolio and Asset Allocation Portfolio may enter into stock index futures
contracts for hedging purposes. Both Portfolios may also enter into foreign
currency futures contracts. (Unless otherwise specified, 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 Portfolio'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 Portfolio'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 Portfolio. A Portfolio 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. Asset Allocation Portfolio may purchase and write
options to buy or sell interest rate futures contracts. In addition, Capital
Appreciation Portfolio and Asset Allocation Portfolio may purchase and write
options on stock index futures contracts, and both Portfolios may purchase and
write options on foreign currency futures contracts. (Unless otherwise
specified, 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.") Such investment
strategies will be used as a hedge and not for speculation.

Put and call options on Futures Contracts may be traded by the Portfolios in
order to protect against declines in the values of portfolio securities or
against increases in the cost of securities to be acquired. Purchases of options
on Futures Contracts may present less risk in hedging the portfolios of the
Portfolios than the purchase or sale of

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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 Portfolio may suffer a loss
on the transaction.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Both Portfolios 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"). The Portfolios will enter into Currency Contracts for
hedging purposes only, in a manner similar to the Portfolios' use of foreign
currency futures contracts. 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, the Portfolio 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. Both Portfolios 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, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and a portfolio 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 Portfolio'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 which may not be present in the case of exchange-traded instruments.

RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS, AND FORWARD CONTRACTS

Although the indicated Portfolios will enter into transaction in Futures
Contracts, Options on Futures Contracts, Currency Contracts, and certain options
solely for hedging purposes, their use does involve certain risks. 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 Portfolio's hedging strategy unsuccessful and could
result in losses. The indicated Portfolios also may enter into transactions in
options on securities and indexes of securities for other than hedging purposes,
which involves greater risk. In addition, there can be no assurance that a
liquid secondary market will exist for any contract purchased or sold, and a
Portfolio may be required to maintain a position until exercise or expiration,
which could result in losses.

Transactions in options, Futures Contracts, Options on Futures Contracts, and
Currency Contracts may be entered into on United States 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 Portfolios 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. See "Other
Investment Practices of the Portfolios--Foreign Securities" in the Prospectus.

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 Portfolios will each maintain in a
segregated account cash or liquid high-grade securities equal to the value of
such contracts.

To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, none of the
Portfolios will enter into a futures contract or purchase an option thereon if
immediately thereafter the initial margin deposits for futures contracts held by
the Portfolio, plus premiums paid by it for open options on futures (less the
amount by which the value of the underlying futures contract exceeds the
exercise price at the time of purchase), would exceed 5% of the Portfolio's
total assets. The Portfolios 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 the Portfolios hold or intend 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.

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BORROWING MONEY

Both Portfolios may borrow money from banks as a temporary measure to facilitate
redemptions. As a fundamental policy, however, borrowings may not exceed 10% of
the value of such Portfolio's total assets and no additional investment
securities may be purchased by a Portfolio while outstanding bank borrowings
exceed 5% of the value of such Portfolio's total assets. Interest paid on
borrowings will not be available for investment.

REPURCHASE AGREEMENTS

A repurchase agreement is an 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. Each Portfolio will limit its
investment in repurchase agreements with a maturity of more than seven days to
15% of its net assets.

In investing in repurchase agreements, a Portfolio'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 Portfolio 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 Portfolio 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 Portfolio
could suffer a loss. If the Portfolio owns underlying securities following a
default on the repurchase agreement, the Portfolio will be subject to risk
associated with changes in the market value of such securities. The Portfolios'
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 Portfolio 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

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 the Portfolio at varying market rates of
interest pursuant to arrangements between the Portfolio and a financial
institution which 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 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 Portfolio 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

Both Portfolios 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.) However, each Portfolio will not invest more than
15% of the value of its net assets in illiquid securities, as determined
pursuant to applicable Commission rules and interpretations.

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 Board of Directors of Fortis Advantage has 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

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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 Portfolio.

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 Portfolio
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.

DELAYED DELIVERY TRANSACTIONS

The Portfolios 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. At the time the
Fund enters into a transaction on a when-issued or forward commitment basis, a
segregated account consisting of cash, U.S. Government securities or liquid
high-grade debt securities 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 Fund to hedge
against anticipated changes in interest rates and prices. The Fund 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, the Funds 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 Fund 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 the 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. 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 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).

INVESTMENT RESTRICTIONS

Certain investment restrictions are fundamental to the operation of the
Portfolios and may not be changed except with the approval of the holders of a
majority of the outstanding shares of the Portfolio(s) affected. For this
purpose, "majority of the outstanding voting securities" means the lesser of (i)
67% of the outstanding shares of the affected Portfolio(s) present at the
meeting of shareholders if more than 50% of the outstanding shares of the
affected Portfolio(s) are present in person or by proxy, or (ii) more than 50%
of the outstanding shares of the affected Portfolio(s).

As a result of these fundamental investment restrictions, except as set forth
below, neither of the Portfolios will:

1. Purchase securities on margin or otherwise borrow money or issue senior
securities, except that the Portfolios, 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 a bank, for the account of any Portfolio, 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 Portfolio's total assets. Investment
securities will not be purchased for a Portfolio while outstanding bank
borrowings exceed 5% of the value of such Portfolio'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.

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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 Portfolio 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 United States 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 its adviser or underwriter, 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 Portfolio does not own, a short sale is
"against the box" to the extent that the Portfolio 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 of the Portfolios, unless otherwise noted, 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. (Due to restrictions imposed by the California
Department of Corporations, the Portfolios do not currently invest in other
investment companies.)

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 investments.

4. Invest in interests (including partnership interests or leases) in oil,
gas, or other mineral exploration or development programs, except it may
purchase or sell securities issued by corporations engaging in oil, gas, or
other mineral exploration or development business.

5. Purchase or retain the securities of any issuer if those officers and
directors of Fortis Advantage or its investment adviser owning (including
beneficial ownership) individually more than 1/2 of 1% of the securities of such
issuer together own (including beneficial ownership) more than 5% of the
securities of such issuer.

6. Invest more than 5% of its total assets in companies which have been in
business for less than three years (except that a company will be deemed to have
been in business for more than three years if such company is the subsidiary of
another company which has been in business for more than three years).

7. Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations. (Securities that have been determined to
be liquid by the Board of Directors of Fortis Advantage or Advisers subject to
the oversight of such Board of Directors will not be subject to this
limitation.)

8. Invest more than 5% of its total assets in warrants, nor invest more than
2% of its total assets in warrants not traded on the New York Stock Exchange or
the American Stock Exchange.

9. Invest in real estate limited partnership interests.

10. 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).

ADDITIONAL LIMITATIONS
ASSET ALLOCATION PORTFOLIO

OTHER DEBT AND MONEY MARKET SECURITIES. In addition to its investments in equity
securities and in obligations of the United States

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Government, its agencies, and instrumentalities, Asset Allocation Portfolio may
invest in a variety of long, intermediate, and short-term debt securities. Such
instruments may include the following:

CAPITAL APPRECIATION PORTFOLIO

Capital Appreciation Portfolio's policy is to invest, under normal
circumstances, at least 65% of its assets (exclusive of collateral in connection
with securities lending) in: (a) common stocks of small and medium-sized
companies that are early in their life cycles, but which have the potential to
become major enterprises ("emerging growth companies"); and (b) equity
securities of some more established companies whose rates of earnings growth are
expected to accelerate because of special factors such as new products, changes
in consumer demand, basic changes in the economic environment, or rejuvenated
management. However, when Fortis Advisers, Inc. ("Advisers") considers a more
defensive posture appropriate, the Portfolio temporarily can be 100% invested in
commercial paper, obligations of banks or the United States Government, and
other high quality, short-term debt instruments.

OTHER INVESTMENT PRACTICES OF ASSET ALLOCATION AND CAPITAL APPRECIATION
PORTFOLIOS

It is currently the intention of Fortis Advantage Portfolios to limit the
investment in options by each Portfolio so that such investments do not expose
more than 5% of such Portfolio's assets to risk of loss.

FOREIGN SECURITIES. Asset Allocation Portfolio may invest up to 20%, and Capital
Appreciation Portfolio may invest up to 10%, of its total assets (at the time of
investment) in foreign securities.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolios may lend their portfolio securities (principally to
broker-dealers) where such loans are callable at any time and are continuously
secured by collateral equal to no less than the market value, determined daily,
of the securities loaned. The Fund will receive amounts equal to dividends or
interest on the securities loaned. The Portfolios will also earn income for
having made the loan. Any cash collateral pursuant to these loans will be
invested in short-term money market instruments. Management will limit such
lending to not more than 33 1/3% percent of the value of each Portfolio's total
assets. ("Total assets" of a Portfolio includes the amount lent as well as the
collateral securing such loans.)

Any investment policy or restriction which involves a maximum percentage of
securities or assets 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.

VALUE, CAPITAL, FIDUCIARY AND GROWTH FUNDS

Value Fund's investment objective is short and long term capital appreciation.
Current income is only a secondary objective.

Capital Fund's primary investment objective is short and long-term capital
appreciation. Current income is only a secondary objective.

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Fiduciary Fund's primary investment objective is short and long-term capital
appreciation. Current income is only a secondary objective.

Growth Fund's investment objective is short and long-term capital appreciation.
Current income is only a secondary objective.

REPURCHASE AGREEMENTS

As noted in the Prospectus, these Funds may invest in repurchase agreements
("repos") and variable amount master demand notes.

Repos are short-term instruments under which securities are purchased from a
bank or a securities dealer with an agreement by the seller to repurchase the
securities at a mutually agreeable date, interest rate, and price. In investing
in repos, the Funds' risk is limited to the ability of such seller to pay the
agreed upon amount at the maturity of the repo. In the opinion of Advisers, such
risk is not material, since in the event of default, barring extraordinary
circumstances, the Funds would be entitled to sell the underlying securities or
otherwise receive adequate protection under Federal bankruptcy laws for its
interest in such securities. However, to the extent that proceeds from any sale
upon a default were less than the repurchase price, the Funds could suffer a
loss.

VARIABLE AMOUNT MASTER DEMAND NOTES

Variable amount master demand notes allow the investment of fluctuating amounts
by the Funds at varying market rates of interest pursuant to arrangements
between the Funds and a financial institution which 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 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.

LENDING OF PORTFOLIO SECURITIES

Consistent with applicable regulatory requirements, Value, Capital, and
Fiduciary Funds each 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. The Funds will receive amounts equal
to dividends or interest on the securities loaned. The Funds 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. The
Funds 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 Funds' investment in
the securities loaned. Apart from lending its securities, investing in
repurchase agreements and acquiring debt securities, as described in the
Prospectus and Statement of Additional Information, the Funds will not make
loans to other persons.

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 Fortis
Advisers, Inc. ("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.

ILLIQUID SECURITIES

Value, Capital, and Fiduciary Funds each 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.) However, the Fund will not invest more than 15% of
the value of its net assets in illiquid securities, as determined pursuant to
applicable Commission rules and interpretations.

The Boards of Directors of Fortis Equity and Fiduciary Fund each 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

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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 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. The 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.

REAL ESTATE OR REAL ESTATE INVESTMENT TRUSTS

Value, Capital, and Fiduciary Funds each are authorized to invest in real estate
investment trusts ("REITs"), real estate development and real estate operating
companies and other real estate related businesses. Each Fund presently intends
to invest the REIT portion of its portfolio 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.

These Funds have adopted a nonfundamental investment restriction that they will
not invest more than 10% of their respective total assets in REITs and will
invest only in REITs that are publicly distributed.

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.

OPTIONS

Value, Capital, and Fiduciary Funds each may use options and futures strategies
to attempt to increase return and to hedge its portfolio, i.e., reduce the
overall level of investment risk normally associated with the Fund. The Fund may
use stock index futures contracts and options thereon to hedge all or part of
the equity portion of its portfolio against negative stock market movements.
Similarly, the Fund may use interest rate futures contracts and options thereon
to hedge the debt portion of its portfolio against changes in the general level
of interest rates.

The Funds' use of options and futures strategies would involve certain
investment risks and transaction costs. These 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" under the Code.

As noted above, it is the Funds' present intention to only write "covered" call
options.

The Funds would attempt to reduce the risk associated with the use of options
and futures strategies by writing only "covered" call options as described below
and through the adoption of a nonfundamental investment restriction on the use
of options, futures, and forward contracts. This nonfundamental investment
restriction provides that the Fund will not 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.

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 price for 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 price for a stated period or on a stated date. A person who
sells (writes) a put option

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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 which 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 manager owns
in order to realize additional income with respect to his portfolio, 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 his gain to the exercise
price of the options plus the premium.

As noted above, these Funds have adopted a nonfundamental policy to the effect
that the Fund will not write, purchase or sell put or call options except that
it may write covered call options. Although the writing of covered call options
can have the effect of limiting a Fund's gains on the securities or other
instruments covered thereby, Advisers believes that this technique represents a
relatively low-risk way for a portfolio manager to attempt to enhance a
portfolio's return.

DELAYED DELIVERY TRANSACTIONS.

Each of these Funds, 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. At the time the Fund enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash, U.S.
Government securities or liquid high-grade debt securities 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 Fund to hedge against anticipated changes in interest
rates and prices. The Fund 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, the Funds 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 Fund 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 the 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. 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 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).

INVESTMENT RESTRICTIONS

The following investment restrictions are deemed fundamental policies. They may
be changed only by the vote of a "majority" of the

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applicable Fund's outstanding shares, which as used in this Statement of
Additional Information, means the lesser of (i) 67% of the applicable 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 applicable Fund's outstanding shares.

Value, Capital, and Fiduciary Funds each will not:

(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 bank 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.)

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.

(9) Borrow money or issue debt securities.

The following investment restrictions may be changed without shareholder
approval.

Value, Capital, and Fiduciary Funds each 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. (Due to restrictions imposed by the California
Department of Corporations, the Fund does not currently invest in other
investment companies.)

(2) Invest in a company for the purposes of exercising control or management.

(3) Buy or sell foreign exchange.

(4) Invest in securities which would expose the Fund to liabilities exceeding
the amount invested.

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(5) Invest in interests (including partnership interests or leases) in oil,
gas, or other mineral exploration or development programs, except the Fund may
purchase or sell securities issued by corporations engaging in oil, gas, or
other mineral exploration or development business.

(6) Purchase or retain the securities of any issuer if those officers and
directors of the Fund or its investment adviser owning (including beneficial
ownership) individually more than 1/2 of 1% of the securities of such issuer
together own (including beneficial ownership) more than 5% of the securities of
such issuer.

(7) Invest more than 5% of its total assets in securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years.

(8) Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations. Securities that have been determined to be
liquid by the Board of Directors of the Fund or Advisers subject to the
oversight of such Board of Directors will not be subject to this limitation.

(9) Make short sales, except for sales "against the box."

(10) Mortgage, pledge, or hypothecate its assets except to the extent
necessary to secure permitted borrowings.

(11) Invest in real estate limited partnership interests.

(12) 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.

(13) Invest more than 5% of its net assets, valued at the lower of cost or
market, in warrants; nor, within such amount, invest more than 2% of such net
assets in warrants not listed on the New York Stock Exchange or American Stock
Exchange. Warrants attached to securities or acquired in units are excepted from
the above limitations.

(14) 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.

(15) 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.)

(16) Write, purchase, or sell put or call options, except that it may write
covered call options.

(17) Invest more than 10% of its assets in foreign securities.

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. (Due to restrictions imposed by the California
Department of Corporations, the Fund does not currently invest in other
investment companies.)

(2) Invest in a company for the purposes of exercising control or management.

(3) Buy or sell foreign exchange.

(4) Invest in securities which would expose the Fund to liabilities exceeding
the amount invested.

(5) Invest in interests (including partnership interests) in oil, gas, or
other mineral exploration or development programs, except the Fund may purchase
or sell securities issued by corporations engaging in oil, gas, or other mineral
exploration or development business.

(7) Invest more than an aggregate of 5% of the value of its total assets in
(a) restricted securities (both debt and equity) or in equity securities of any
issuer which are not readily marketable; and (b) companies which have been in
business for less than three years. Securities sold under Section 4(2) of the
Securities Act of 1933 that are eligible for resale pursuant to Rule 144A under
the 1933 Act that have been determined to be liquid by the Board of Directors of
the Fund or Advisers subject to the oversight of such Board of Directors will
not be considered to be "restricted securities" and will not be subject to this
limitation on investing in restricted or non-readily marketable securities.

(8) Invest more than 5% of its net assets in warrants, not more than 2% of
net assets in warrants not listed on the New York Stock Exchange or American
Stock Exchange.

In seeking to attain its investment objective, the Fund will invest primarily in
common stocks or securities convertible into common stocks. In periods when a
more defensive position is deemed warranted, the Fund may invest all or a
portion of its assets in short-term money market securities. A policy which
could be changed without

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shareholder approval prohibits more than an aggregate of 5% of the Fund's assets
from being invested in: (a) restricted securities (both debt and equity); (b)
equity securities of any issuer which are not readily marketable; and (c)
companies which have been in business for less than three years. An additional
policy which could be changed without shareholder approval is that the Fund may
invest no more than 10% of its assets (at the time of investment) in foreign
securities.

GROWTH & INCOME FUND

The investment objectives of Growth & Income Fund are capital appreciation and
current income, which it seeks by investing primarily in equity securities that
provide an income component and the potential for growth.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES

As noted in the Prospectus, the 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.

MORTGAGE-RELATED SECURITIES

Consistent with the investment objectives and policies as set forth in the
Prospectus, and the investment restrictions set forth below, the Fund may invest
in certain types of mortgage-related securities. One type of mortgage-related
security includes certificates which 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 which
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 United States 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 and 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.

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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 which prepay fully in the
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.

The Fund 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 Fund's investment objectives, policies, and
restrictions, consider making investments in such new types of securities.

Securities in this investment category include, among others, standard
mortgage-backed bonds and newer collateralized mortgage obligations (CMO's).
Mortgage-related 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
monthly and principal payable on the stated date of maturity. CMO's have
characteristics of both pass-through securities and mortgage-related bonds.
CMO's 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. CMO's are structured into
multiple classes, each bearing a different date of maturity. Monthly payments of
principal received

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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.

CMO's are issued by entities that operate under orders from the Securities and
Exchange Commission (the SEC) exempting such issuers from the provisions of the
Investment Company Act of 1940 (the 1940 Act). Until recently, the staff of the
SEC had taken the position that such issuers were investment companies and that,
accordingly, an investment by an investment company (such as the Fund) in the
securities of such issuers was subject to limitations imposed by Section 12 of
the 1940 Act. However, in reliance on a recent SEC staff interpretation, the
Fund may invest in securities issued by certain "exempted issuers" without
regard to the limitations of Section 12 of the 1940 Act. In its interpretation,
the SEC staff defined "exempted issuers" as unmanaged, fixed asset issuers that
(a) invest primarily in mortgage-backed securities, (b) do not issue redeemable
securities as defined in Section 2(a)(32) of the 1940 Act, (c) operate under
general exemptive orders exempting them from "all provisions of the [1940] Act"
and (d) are not registered or regulated under the 1940 Act as investment
companies.

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
Fund. Because investments in mortgage-related securities are interest sensitive,
the ability of the issuer to reinvest or 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.

SECURITIES OF FOREIGN COMPANIES

The Fund may invest up to 10% of its total assets in securities of foreign
governments and companies.

Investing in foreign securities may result in greater risk than that incurred by
investing in domestic securities. See "Risk Factors."

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. A repurchase agreement is an
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.
In investing in repurchase agreements, the 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, 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). The Board of Directors evaluates
the creditworthiness of issuers which are securities dealers.

DELAYED DELIVERY TRANSACTIONS

The 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. At the time the
Fund enters into a transaction on a when-issued or forward commitment basis, a
segregated account consisting of cash, U.S. Government securities or liquid
high-grade debt securities 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

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forward commitment, it can incur a gain or loss due to market fluctuation. The
use of when-issued transactions and forward commitments enables the Fund to
hedge against anticipated changes in interest rates and prices. The Fund 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, the Funds 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 Fund 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 the 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. 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 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).

DOLLAR ROLLS

In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the 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. The 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 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 the 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.

LENDING OF PORTFOLIO SECURITIES

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities (principally to broker-dealers) where such loans are
callable at any time and are continuously secured by collateral (as, U.S.
government securities, certificates of deposit, or other high-grade, short-term
obligations or interest-bearing cash equivalents) equal to no less than the
market value, determined daily, of the securities loaned. The Fund will receive
amounts equal to dividends or interest on the securities loaned. The Fund will
also earn income for having made the loan. The Fund will limit such lending to
not more than 33 1/3% of the value of the Fund's 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. Apart from lending its securities, investing in repurchase
agreements, and acquiring debt securities, as described in the Prospectus and
Statement of Additional Information, the Fund will not make loans to other
persons.

Borrowings by the Fund through banks and "roll" transactions will not exceed
33 1/3% of the total assets of the Fund; however, an investment policy
changeable without shareholder approval further restricts the Fund's borrowings
to 10% of its total assets. No additional investment securities may be purchased
by the Fund when outstanding borrowings, (including "roll" transactions) exceed
5% of the value of its total assets. If market fluctuations in the value of the
portfolio holdings or other factors cause the ratio of total assets to
outstanding borrowings to fall below 300%, within three days (excluding Sundays
and holidays) of such event the Fund may be required to sell portfolio
securities to restore the 300% asset coverage, even

51
<PAGE>
though from an investment standpoint such sales might be disadvantageous.
Interest paid on borrowings will not be available for investment.

RESTRICTED OR ILLIQUID SECURITIES

The Fund has a nonfundamental policy prohibiting investment of more than 15% of
its net assets in illiquid securities. This restriction does not include
securities which may be resold to qualified institutional buyers in accordance
with the provisions of Rule 144A under the Securities Act of 1933 ("Rule 144A
securities"). The staff of the Securities and Exchange Commission has taken the
position that the liquidity of Rule 144A 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, if may delegate this function to the fund's investment adviser.
At the present time, it is not possible to predict with assurance exactly how
the market for Rule 144A securities will develop. A Rule 144A security which
when purchased enjoyed a fair degree of marketability may subsequently become
illiquid, thereby adversely affecting the liquidity of the Fund's portfolio.

SHORT SALES AGAINST THE BOX

The Fund may sell a security to the extent the Fund contemporaneously owns or
has the right to obtain securities identical to those sold short without payment
of any additional consideration. Such a short sale is referred to as a short
sale "against the box." The aggregate market value of the underlying securities
subject to all outstanding short sales may not exceed 5% of the net assets of
the Fund.

INVESTMENT RESTRICTIONS OF GROWTH & INCOME FUND. As a result of the following
fundamental investment restrictions, except as otherwise noted below, 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 United States 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, it may purchase or sell any
forms of financial instruments or contracts that might be deemed commodities.

(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.

(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

52
<PAGE>
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 by the Board of Directors
without shareholder approval.

The 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. (Since the Fund indirectly absorbs its pro rata share
of the other investment companies' expenses through the return received on these
securities, "double" investment advisory fees in effect are paid on those
portfolio assets invested in shares of other investment companies. However,
management believes that at times the return and liquidity features of these
securities will be more beneficial to the Fund than other types of securities,
and that the indirect absorption of these expenses has a de minimis effect on
the Fund's return.)

(2) Invest in a company for the purpose of exercising control or management.

(3) Invest in interests (including partnership interests or leases) in oil,
gas, or other mineral exploration or development programs, except the Fund may
purchase or sell securities issued by corporations engaging in oil, gas, or
other mineral exploration or development business.

(4) Purchase or retain the securities of any issuer if those officers and
directors of the Fund or its investment adviser owning (including beneficial
ownership) individually more than 1/2 of 1% of the securities of such issuer
together own (including beneficial ownership) more than 5% of the securities of
such issuer.

(5) Invest more than 5% of its total assets in securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years.

(6) Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations.

(7) 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.)

(8) Invest in real estate limited partnership interests.

(9) 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.

(10) 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).

In seeking to attain its investment objectives, the Fund will invest primarily
in common stocks or securities convertible into common stocks. Occasionally,
however, limited amounts may be invested in other types of securities (such as
nonconvertible preferred and debt securities). In periods when a more defensive
position is deemed warranted, the Fund may invest in high grade preferred
stocks, bonds, and other fixed income securities (whether or not convertible
into or carrying rights to purchase common stock) or retain cash, all without
limitation. The Fund may invest in repurchase agreements and in both listed and
unlisted securities.

The Fund may also invest up to 10% of its total assets (at the time in
investment) in foreign securities.

No more than 20% of the Fund's net assets may be invested to 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).

53
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS

The names, addresses, principal occupations, and other affiliations of directors
and executive officers of each Fund are given below:

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- -------------------- --------------- -------------------------------------------------------------------------------------
<S> <C> <C>
Richard W. Cutting Director Certified public accountant and financial consultant.
137 Chapin Parkway
Buffalo, New York
Allen R. Freedman* Director Chairman and Chief Executive Officer of Fortis, Inc.; a Managing Director of Fortis
One Chase Manhattan International, N. V.
Plaza
New York, New York
Dr. Robert M. Gavin Director President, Macalester College.
1600 Grand Avenue
St. Paul, Minnesota
Benjamin S. Jaffray Director Chairman of the Sheffield Group, Ltd., a financial consulting group.
4040 IDS Center
Minneapolis,
Minnesota
Jean L. King Director President, Communi-King, a communications consulting firm.
12 Evergreen Lane
St. Paul, Minnesota
Dean C. Kopperud* President and Chief Executive Officer and a Director of Advisers, President and a Director of
500 Bielenberg Drive Director Investors, and Senior Vice President and a Director of Fortis Benefits Insurance
Woodbury, Minnesota Company and Time Insurance Company.
Edward M. Mahoney Director Retired; prior to December, 1994, Chairman and Chief Executive Officer and a Director
2760 Pheasant Road of Advisers and Investors, Senior Vice President and a Director of Fortis Benefits
Excelsior, Minnesota Insurance Company, and Senior Vice President of Time Insurance Company.
Robb L. Prince Director Retired; prior to June, 1995, Vice President and Treasurer, Jostens, Inc., a producer
5108 Duggan Plaza of products and services for the youth, education, sports award, and recognition
Edina, Minnesota markets.
Leonard J. Santow Director Principal, Griggs & Santow, Incorporated, economic and financial consultant.
75 Wall Street
21st Floor
New York, New York
Joseph M. Wikler Director Investment consultant and private investor; prior to January, 1994, Director of
12520 Davan Drive Research, Chief Investment Officer, Principal, and a Director, the Rothschild Co.,
Silver Spring, Baltimore, Maryland. The Rothschild Co. is an investment advisory firm.
Maryland
Gary N. Yalen Vice President President and Chief Investment Officer of Advisers (since August, 1995) and Fortis
One Chase Manhattan Asset Management, a division of Fortis, Inc., New York, NY, and Senior Vice
Plaza President, Investments, Fortis, Inc.
New York, New York
Howard G. Hudson Vice President Executive Vice President of Advisers (since August, 1995) and Senior Vice President,
One Chase Manhattan Fixed Income, Fortis Asset Management; prior to February, 1991, Senior Vice
Plaza President, Fairfield Research, New Canaan, CT.
New York, New York
Stephen M. Poling Vice President Executive Vice President and Director of Advisers and Investors.
5500 Wayzata
Boulevard
Golden Valley,
Minnesota
</TABLE>

54
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- -------------------- --------------- -------------------------------------------------------------------------------------
<S> <C> <C>
Fred Obser Vice President Senior Vice President of Advisers (since August, 1995) and Senior Vice President,
One Chase Manhattan Equities, Fortis Asset Management.
Plaza
New York, New York
Dennis M. Ott Vice President Senior Vice President of Advisers and Investors.
5500 Wayzata
Boulevard
Golden Valley,
Minnesota
James S. Byrd Vice President Vice President of Advisers and Investors; prior to March, 1991, Senior Vice
5500 Wayzata President, Templeton Investment Counsel, Inc., Fort Lauderdale, Florida.
Boulevard
Golden Valley,
Minnesota
Nicholas L. M. Vice President Vice President of Advisers (since August, 1995) and Vice President, Equities, Fortis
dePeyster Asset Management; prior to July, 1991, Research Associate, Smith Barney, Inc., New
41st Floor York, NY.
One Chase Manhattan
Plaza
New York, New York
Charles J. Dudley Vice President Vice President of Advisers and Fortis Asset Management; prior to August, 1995, Senior
One Chase Manhattan Vice President, Sun America Asset Management, Los Angeles, CA
Plaza
New York, New York
Maroun M. Hayek Vice President Vice President of Advisers (since August, 1995) and Vice President, Fixed Income,
One Chase Manhattan Fortis Asset Management.
Plaza
New York, New York
Robert C. Lindberg Vice President Vice President of Advisers and Investors; prior to July, 1993, Vice President,
One Chase Manhattan Portfolio Manager, and Chief Securities Trader, COMERICA, Inc., Detroit, Michigan.
Plaza COMERICA, Inc. is a bank.
New York, New York
Kevin J. Michels Vice President Vice President of Advisers (since August, 1995) and Vice President, Administration,
One Chase Manhattan Fortis Asset Management.
Plaza
New York, New York
Stephen M. Rickert Vice President Vice President of Advisers (since August, 1995) and Corporate Bond Analyst, Fortis
One Chase Manhattan Asset Management; from August, 1993 to April, 1994, Corporate Bond Analyst, Dillon,
Plaza Read & Co., Inc., New York, NY; prior to June, 1992, Corporate Bond Analyst, Western
New York, New York Asset Management, Los Angeles, CA.
Keith R. Thomson Vice President Vice President of Advisers and Investors.
5500 Wayzata
Boulevard
Golden Valley,
Minnesota
Christopher J. Woods Vice President Vice President of Advisers (since August, 1995) and Vice President, Fixed Income,
One Chase Manhattan Fortis Asset Management; prior to November, 1992, Head of Fixed Income, The Police
Plaza and Firemen's Disability and Pension Fund of Ohio, Columbus, OH.
New York, New York
Robert W. Beltz, Jr. Vice President Vice President--Mutual Fund Operations of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
Thomas D. Gualdoni Vice President Vice President of Advisers, Investors, and Fortis Benefits Insurance Company.
500 Bielenberg Drive
Woodbury, Minnesota
</TABLE>

55
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- -------------------- --------------- -------------------------------------------------------------------------------------
<S> <C> <C>
Larry A. Medin Vice President Senior Vice President--Sales of Advisers and Investors; from August 1992 to November
500 Bielenberg Drive 1994, Senior Vice President, Western Divisional Officer of Colonial Investment
Woodbury, Minnesota Services, Inc., Boston, Massachusetts; from June 1991 to August 1992, Regional Vice
President, Western Divisional Officer of Alliance Capital Management, New York, New
York; prior to June 1991, Senior Vice President, National Sales Director, Met Life
State Street Investment Services, Inc.
Jon H. Nicholson Vice President Vice President--Marketing and Product Development of Fortis Benefits Insurance
500 Bielenberg Drive Company.
Woodbury, Minnesota
John W. Norton Vice President Senior Vice President, General Counsel, and Secretary of Advisers and Investors;
500 Bielenberg Drive since January, 1993, Senior Vice President and General Counsel--Life and Investment
Woodbury, Minnesota Products, Fortis Benefits Insurance Company and Vice President and General Counsel,
Life and Investment Products, Time Insurance Company.
David A. Peterson Vice President Vice President and Assistant General Counsel, Fortis Benefits Insurance Company,
500 Bielenberg Drive prior to January, 1991, Senior Vice President--Law, State Bond and Mortgage Company,
Woodbury, Minnesota Minneapolis, Minnesota.
Richard P. Roche Vice President Vice President of Advisers and Investors; prior to August, 1995, President of
500 Bielenberg Drive Prospecting By Seminars, Inc., Guttenberg, NJ.
Woodbury, Minnesota
Anthony J. Rotondi Vice President Senior Vice President of Advisers; from January, 1993 to August, 1995, Senior Vice
500 Bielenberg Drive President, Operations, Fortis Benefits Insurance Company; prior to January, 1993,
Woodbury, Minnesota Senior Vice President, Information Technology, Fortis, Inc.
Michael J. Radmer Secretary Partner, Dorsey & Whitney P.L.L.P., the Fund's General Counsel.
220 South Sixth
Street
Minneapolis,
Minnesota
Tamara L. Fagely Treasurer Fund Accounting Officer of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
</TABLE>

- -------------------------------------------
* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
Fortis Equity, Advisers, and Investors primarily because he is an officer and
a director of each. Mr. Freedman is an "interested person" of Fortis Equity,
Advisers, and Investors because he is Chairman and Chief Executive Officer of
Fortis, Inc. ("Fortis"), the parent company of Advisers and indirect parent
company of Investors, and a Managing Director of Fortis International, N. V.,
the parent company of Fortis.
- -------------------------------------------

56
<PAGE>
All of the above officers and directors also are officers and/or directors of
other investment companies of which Advisers is the investment adviser. No
compensation is paid by the Funds to any officers or directors except as follows
(plus reimbursement of travel expenses to attend meetings) to each director not
affiliated with Advisers or Investors:

<TABLE>
<CAPTION>
ASSET GROWTH & CAPITAL
ALLOCATION VALUE INCOME CAPITAL FIDUCIARY GROWTH APPRECIATION
PORTFOLIO FUND FUND FUND FUND FUND PORTFOLIO
---------- ----- -------- ------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly............................ $200 $ 200 $200 $200 $100 $350 $200
Per meeting attended............... $100 $ 100 $100 $100 $100 $100 $100
Per committee meeting attended..... $100 $ 100 $100 $100 $100 $100 $100
</TABLE>

During the fiscal periods ended August 31, 1995, the Funds paid the following
fees:

<TABLE>
<CAPTION>
ASSET CAPITAL
ALLOCATION CAPITAL FIDUCIARY GROWTH APPRECIATION
PORTFOLIO FUND FUND FUND PORTFOLIO
---------- ------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
Directors' fees*................... $5,116 $25,029 $16,000 $41,500 $5,608
Directors' travel expenses**....... $ 652 $ 1,481 $ 210 $ 3,500 $ 190
Legal fees***...................... $9,601 $49,497 $40,000 $59,000 $6,172
</TABLE>

- ------------------------
*Paid only to directors not affiliated with Advisers or Investors.
**Paid only for expenses incurred in attending directors' meetings.
***Paid to a law firm of which each Fund's secretary is a partner.

As of September 30, 1995, the directors and executive officers of each Fund
beneficially owned less than 1% of the outstanding shares of their respective
Fund. Directors Kopperud, Prince, King, and Jaffray are members of the Executive
Committee of each Fund's Board of Directors. While each 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 Committees will act only infrequently.

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and manager
of each Fund since inception. Investors acts as the Funds' underwriter. Both act
as such pursuant to written agreements periodically approved by the directors or
shareholders of each Fund. The address of both is that of the Funds.
As of September 30, 1995, Advisers managed twenty-eight investment company
portfolios with combined net assets of approximately $4,068,451,000 and one
private account with net assets of approximately $17,770,000. Fortis Financial
Group also has approximately $1.9 billion in insurance reserves. As of the same
date, the investment company portfolios had an aggregate of 222,175
shareholders.

During the past three fiscal periods the following amounts were paid to Advisers
(as its compensation for acting as the investment adviser and manager of the
Fund), Investors (for underwriting the Fund's shares), and sales representatives
and dealers (by Investors as commissions):
<TABLE>
<CAPTION>
ASSET ALLOCATION CAPITAL FIDUCIARY
PORTFOLIO FUND FUND
----------------------------------- ---------------------------------- ----------------------------
AUGUST 31, OCTOBER 31, AUGUST 31, AUGUST 31,
FISCAL PERIOD ENDED: 1995 1994 1993 1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount Paid to:
Advisers.............. $997,289 $1,103,566 $ 980,482 $2,246,268 $2,126,932 $2,135,662 $537,646 $513,427 $471,354
---------- ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Investors............. $318,143 $ 682,089 $ 712,769 $ 491,336 $ 545,968 $1,107,253 $149,141 $128,808 $226,489
---------- ---------- ---------- ---------- ---------- ---------- -------- -------- --------
Sales Representatives
and Dealers.......... $255,056 $ 571,020 $ 608,236 $ 400,273 $ 446,139 $ 905,731 $115,197 $104,264 $184,484
---------- ---------- ---------- ---------- ---------- ---------- -------- -------- --------

<CAPTION>
GROWTH CAPITAL APPRECIATION
FUND PORTFOLIO
---------------------------------- -------------------------------
AUGUST 31, AUGUST 31, OCTOBER 31,
FISCAL PERIOD ENDED: 1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Amount Paid to:
Advisers.............. $4,517,570 $4,414,287 $4,219,964 $627,249 $607,491 $497,620
---------- ---------- ---------- ---------- -------- --------
Investors............. $1,598,991 $2,478,553 $2,658,025 $269,096 $533,938 $337,851
---------- ---------- ---------- ---------- -------- --------
Sales Representatives
and Dealers.......... $1,309,566 $2,011,210 $2,162,048 $217,531 $435,291 $285,774
---------- ---------- ---------- ---------- -------- --------
</TABLE>

57
<PAGE>
During the fiscal periods ended August 31, 1995, Investors received the
following amounts pursuant to the Plan of Distribution (see "Plan of
Distribution"), paid the following amounts to broker-dealers and
registered representatives, and in addition to such amount (along with Advisers)
spent the following amounts on activities related to the distribution of the
Fund's shares:

<TABLE>
<CAPTION>
ASSET ALLOCATION CAPITAL FIDUCIARY GROWTH CAPITAL APPRECIATION
PORTFOLIO FUND FUND FUND PORTFOLIO
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
FISCAL PERIOD ENDED: 1995 1995 1995 1995 1995
---------------- ---------- ---------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Amount received.......... $477,319 $656,771 $140,132 $1,474,287 $287,542
------- ---------- ---------- ---------- -------
Amount paid.............. $528,521 $661,540 $181,903 $1,443,698 $265,591
------- ---------- ---------- ---------- -------
Additional Expenses
paid.................... $195,098 $908,470 $277,215 $2,045,409 $108,727
------- ---------- ---------- ---------- -------
</TABLE>

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

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

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 wholly owned subsidiary of Fortis
International, N.V., which has approximately $100 billion in assets worldwide
and is in turn an indirect wholly owned subsidiary of AMEV/VSB 1990 N.V.
("AMEV/VSB 1990").

AMEV/VSB 1990 is a corporation organized under the laws of The Netherlands to
serve as the holding company for all U.S. operations and is owned 50% by Fortis
AMEV and 50% by Fortis AG ("Group AG"). AMEV/VSB 1990 owns a group of companies
active in insurance, banking and financial services, and real estate development
in The Netherlands, the United States, Western Europe, Australia, and New
Zealand.

Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis AG
own a group of companies (of which AMEV/VSB 1990 is one) active in insurance,
banking and financial services, and real estate development in The Netherlands,
Belgium, the United States, Western Europe, and the Pacific Rim.

Dean C. Kopperud is Chief Executive Officer of Advisers and President of
Investors; Gary N. Yalen is President and Chief Investment Officer of Advisers;
Stephen M. Poling is Executive Vice President of Advisers and Investors; Howard
G. Hudson is Executive Vice President of Advisers; Dennis M. Ott, Larry A.
Medin, and Anthony J. Rotondi are Senior Vice Presidents of Advisers and
Investors; John W. Norton is Senior Vice President, General Counsel, and
Secretary of Advisers and Investors; Fred Obser is Senior Vice President of
Advisers; Robert W. Beltz, Jr., James S. Byrd, Thomas D. Gualdoni, Robert C.
Lindberg, Jon H. Nicholson, Richard P. Roche, and Keith R. Thomson are Vice
Presidents of Advisers and Investors; Nicholas L. M. De Peyster, Charles J.
Dudley, Maroun M. Hayek, Kevin J. Michels, Stephen M. Rickert, and Christopher
J. Woods are Vice Presidents of Advisers; John E. Hite is 2nd Vice President and
Assistant Secretary of Advisers and Investors; Carol M. Houghtby is 2nd Vice
President and Treasurer of Advisers and Investors; Barbara W. Kirby is 2nd Vice
President of Advisers and Investors; Tamara L. Fagely is Fund Accounting Officer
of Advisers and Investors; David C. Greenzang is Money Market Portfolio Officer
of Advisers; Michael D. O'Connor is Qualified Plan Officer of Advisers and
Investors; Barbara J. Wolf is Trading Officer of Advisers; Thomas E. Erickson is
Assistant Secretary of Advisers and Investors; Joanne M. Herron is Assistant
Treasurer of Advisers and Investors and Sharon R. Jibben is Assistant Secretary
of Advisers.

Messrs. Kopperud, Yalen, and Poling are the Directors of Advisers.

All of the above persons reside or have offices in the Minneapolis/ St. Paul
area, except Messrs. Yalen, Hudson, De Peyster, Dudley, Hayek, Lindberg,
Michels, Obser, Rickert, Woods and Greenzang, who all are located in New York
City.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

Advisers acts as investment adviser and manager of each Fund, except Value Fund
and Growth & Income Fund, under a separate Investment Advisory and Management
Agreement (the "Agreement") dated January 31, 1992, which became effective the
same date following shareholder approval on January 28, 1992. Advisers also acts
as investment adviser and manager of Value Fund and Growth & Income Fund under
an Investment Advisory and Management Agreement dated December 7, 1995 that
became effective following approval by their then sole shareholder. Each
Agreement was last approved by the applicable Board of Directors (including a
majority of the directors who are not parties to the contract, or interested
persons of any such party) on December 7, 1995. Each Agreement will terminate
automatically in the event of its assignment. In addition, each Agreement is
terminable at any time, without penalty, by the applicable Board of Directors
or, with respect to any particular portfolio, by vote of a majority of the
outstanding voting securities of the applicable portfolio, on not more than 60
days' written notice to Advisers, and by Advisers on 60 days' notice to the
applicable Fund. Unless sooner terminated, each Agreement shall continue in
effect for more than

58
<PAGE>
two years after its execution only so long as such continuance is specifically
approved at least annually by either the applicable Board of Directors or, with
respect to any particular portfolio, by vote of a majority of the outstanding
voting securities of the applicable portfolio, provided that in either event
such continuance is also approved by the vote of a majority of the directors who
are not parties to such Agreement, 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 calculated
as described in the following table. As you can see from the table, this fee
decreases (as a percentage of Fund net assets) as the applicable Fund grows. As
of September 30, 1995, the Funds had approximate net assets as follows:

<TABLE>
<S> <C>
Asset Allocation Portfolio......... $ 141,749,000
Capital Fund....................... $ 295,232,000
Fiduciary Fund..................... $ 68,161,000
Growth Fund........................ $ 691,397,000
Capital Appreciation Portfolio..... $ 99,993,000
</TABLE>

<TABLE>
<CAPTION>
ANNUAL
INVESTMENT ADVISORY
AVERAGE NET ASSETS AND MANAGEMENT FEE
- ---------------------------------------- -------------------
<S> <C>
For the first $100,000,000 1.0%
For the next $150,000,000 .8%
For assets over $250,000,000 .7%
</TABLE>

Each Agreement requires the Fund to pay all its expenses which are not assumed
by Advisers and/or Investors. These Fund expenses include, by way of example,
but not by way of limitation, the fees and expenses of directors and officers of
the Fund who are not "affiliated persons" of Advisers, interest expenses, taxes,
brokerage fees and commissions, fees and expenses of registering and qualifying
the Fund and its 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.

Advisers bears the costs of acting as each Fund's transfer agent, registrar, and
dividend disbursing agent.

Pursuant to an undertaking given to the State of California, Advisers has agreed
to reimburse each Fund monthly for any amount by which the Fund's aggregate
annual expenses, exclusive of taxes, brokerage commissions, and interest on
borrowing exceeds 2 1/2% on the first $30,000,000 of average net assets, 2% on
the next $70,000,000, and 1 1/2% on the balance. The Fund's distribution fee is
excluded from these limits. Advisers reserves the right to agree to lesser
expense limitations from time to time. In the fiscal periods ended August 31,
1995, Advisers was not required to make any reimbursement to the Funds pursuant
to this limitation.

Advisers reserves the right, but shall not be obligated, to institute voluntary
expense reimbursement programs which, if instituted, shall be in such amounts
and based on such terms and conditions as Advisers, in its sole and absolute
discretion, determines. Furthermore, Advisers reserves the absolute right to
discontinue any of such reimbursement programs at any time without notice to the
applicable Fund.

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

Under each Agreement, Advisers, as investment adviser to the Fund, has the sole
authority and responsibility to make and execute investment decisions for the
Fund within the framework of the Fund's investment policies, subject to review
by the Board of Directors. Advisers also furnishes the Fund with all required
management services, facilities, equipment, and personnel.

Although investment decisions for each Fund 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 the Fund and other funds or accounts may have a
detrimental effect on the Fund, as this may affect the price paid or received by
the Fund or the size of the position obtainable by the Fund.

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

In a number of security transactions, it is possible for the Funds to deal in
the over-the-counter security markets (including the so-called "third market"
which is the "over-the-counter" market for securities listed on the New York
Stock Exchange) without the payment of brokerage commissions, but at net prices
including a spread or markup. The Funds will continue to trade in this manner
whenever the net price appears advantageous. During the fiscal periods ended
August 31, 1995, transactions having an aggregate dollar value (excluding
short-term securities) of approximately $205,454,000 for Asset Allocation
Portfolio, $126,448,000 for Capital Fund, $4,067,000 for Fiduciary Fund,
$188,895,000 for Growth Fund, and $32,059,000 for Capital Appreciation Portfolio
were traded in this manner. Generally, the Funds must deal through brokers, and
for the fiscal periods

59
<PAGE>
ended August 31, 1995, 1994, and 1993, they paid brokerage commissions as
follows:
<TABLE>
<CAPTION>
ASSET ALLOCATION CAPITAL FUND
PORTFOLIO ------------------------------
--------------------------------
AUGUST 31, OCTOBER 31, AUGUST 31,
FISCAL PERIOD ENDED: 1995 1994 1993 1995 1994 1993
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brokerage Commissions...................... $ 29,635 $104,452 $ 49,981 $109,933 $140,850 $355,655
---------- -------- -------- -------- -------- --------
Percentage of Average Net Assets........... .03% .11% .09% .04% .06% .15%
---------- -------- -------- -------- -------- --------

<CAPTION>
FIDUCIARY FUND GROWTH FUND
------------------------------ ------------------------------

AUGUST 31, AUGUST 31,
FISCAL PERIOD ENDED: 1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C>
Brokerage Commissions...................... $ 20,327 $ 30,444 $ 59,421 $283,153 $159,575 $445,024
-------- -------- -------- -------- -------- --------
Percentage of Average Net Assets........... .04% .06% .13% .05% .03% .08%
-------- -------- -------- -------- -------- --------

<CAPTION>
CAPITAL APPRECIATION
PORTFOLIO
--------------------------------
AUGUST 31, OCTOBER 31,
FISCAL PERIOD ENDED: 1995 1994 1993
---------- -------- --------
Brokerage Commissions...................... $ 13,428 $ 22,936 $ 33,386
---------- -------- --------
Percentage of Average Net Assets........... .02% .05% .10%
---------- -------- --------
</TABLE>

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

The average commission rates (calculated by dividing the total dollar amount of
transactions into the total dollar amount of commissions paid) paid by the Funds
for the fiscal periods ended August 31, 1995, were .17% for Asset Allocation
Portfolio, .23% for Capital Fund, .22% for Fiduciary Fund, .24% for Growth Fund,
and .24% for Capital Appreciation Portfolio.

Advisers selects and (where applicable) negotiates commissions with the
broker-dealers who execute the transactions for each Fund. The primary criterion
for the selection of a broker-dealer is the ability of the broker-dealer, in the
opinion of Advisers, to secure prompt execution of the transactions on favorable
terms, including the reasonableness of the commission and considering the state
of the market at the time. When consistent with these objectives, business may
be placed with broker-dealers who furnish investment research services to
Advisers. Such research services include advice, both directly and in writing,
as to the value of securities; the advisability of investing in, purchasing, or
selling securities; and the availability of securities, or purchasers or sellers
of securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts. This allows Advisers to supplement its own investment research
activities and enables Advisers to obtain the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for the Fund. To the extent such
commissions are directed to these other broker-dealers who furnish research
services to Advisers, Advisers receives a benefit, not capable of evaluation in
dollar amounts, without providing any direct monetary benefit to the Fund from
these commissions. Advisers believes that most research services obtained by it
generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account. Research services obtained through commissions paid by the Fund
may be used by Advisers in servicing all of its accounts, and not all such
services would necessarily be used by Advisers in connection with the Fund.

Advisers has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of Fund portfolio transactions in exchange for
research services provided Advisers, except as noted below. However, Advisers
does maintain an informal list of broker-dealers, which is used from time to
time as a general guide in the placement of Fund business, in order to encourage
certain broker-dealers to provide Advisers with research services which Advisers
anticipates will be useful to it. Because the list is merely a general guide,
which is to be used only after the primary criterion for the selection of
broker-dealers (discussed above) has been met, substantial deviations from the
list are permissible and may be expected to occur. 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 Advisers' overall responsibilities with respect to the accounts
as to which Advisers exercises investment discretion. Generally, the Fund pays
higher commissions than the lowest rates available.

During the fiscal periods ended August 31, 1995, the Funds paid virtually all
commissions to broker-dealers who furnished investment research to Advisers, as
outlined above.

Each Fund will not effect any brokerage transactions in its 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 Fund. No commissions were paid to any affiliate of Advisers
by any of the Funds during the fiscal periods ended August 31, 1995, 1994, and
1993.

60
<PAGE>
The Fund's acquisition during the fiscal period ended August 31, 1995, of
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derive more than fifteen percent of their gross revenue from
securities-related activities is presented below:

<TABLE>
<CAPTION>
VALUE OF
SECURITIES
OWNED AT
NAME OF ISSUER END OF PERIOD
- ----------------------------------------------- ----------------
<S> <C>
ASSET ALLOCATION PORTFOLIO
Bear Stearns & Co. .......................... $ 2,499,595
DLJ Mtg. Acceptance Corp. ................... $ 1,022,393
First Bank N.A. ............................. $ 672,000
CAPITAL FUND
First Bank N.A. ............................. $ 11,430,802
FIDUCIARY FUND
First Bank N.A. ............................. $ 2,925,941
GROWTH FUND
First Bank N.A. ............................. $ 31,546,000
CAPITAL APPRECIATION PORTFOLIO
First Bank N.A. ............................. $ 2,453,064
</TABLE>

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.

On September 30, 1995, the Funds had the following number of shares outstanding:
Asset Allocation Portfolio--8,551,374; Capital Fund--13,908,908; Fiduciary
Fund--1,912,216; Growth Fund-- 20,513,559; and Capital Appreciation
Portfolio--3,095,369. On that date, no person owned of record or, to the Funds'
knowledge, beneficially as much as 5% of the outstanding shares of the Funds,
except as follows:

Asset Allocation Portfolio: Class B--32% Norman P. Marraccini, 13603 Post Oak
Ct., Chantilly, VA 22021-2529; 5% Gene Edmonds, 7740 Dunvegan Close, Atlanta, GA
30350-5504; Class C--18% BVR Enterprises Inc., 330 I Street, Penrose, CO
81240-9251; 7% Neal P. King, 801 N. Main Street, McAllen, TX 78501-4324; Class
H--6% Marvin Pheffer, 7103 S. Revere Pky, Suite 7000, Englewood, CO 80112-3936;
5% Walter Danielson, 37627 WCR 39, Eaton, CO 80615.

Capital Fund: Class B--11% Lincoln County Colorado Employees Retirement Plan,
P.O. Box 67, Hugo, CO 80821-0067; 9% Terrance L. Twedt, P.O. Box 309, Pacific
City, OR 97135-0309; 6% Margaret Oliver, P.O. Box 246, Isabel, SD 57633-0246;
Class C--29% Carol S. Atha, RR 7 Box 246, Fairmont, WV 26554-8925; 13% St. John
Hardware & Implement Co., 3 Front Street, P.O. Box 8, St. John, WA 99171-0008;
5% Christopher L. Chapman, 4154 Knollwood Drive, Grand Blanc, MI 48439-2025;
Class H--7% Charles A. Brokaw, 6208 Quail Hollow, Austin, TX 78750-8229; 5%
Perry County Stone Co., RR 3, Perrysville, MO 63775-9803.

Fiduciary Fund: Class B--20% Meyers Printing Co., 7277 Boone Ave. North,
Brooklyn Park, MN 55428-1539; 7% Mark D. Kayne MD, 23928 Lyons Ave. Suite 110,
Newhall, CA 91321-2454; 7% Deborah J. Mccune, 3973 Breechwood Drive, Bellbrook,
OH 45305-1602; 5% Terry P. and Jeannette E. Perkins, RR 1 Box 306, Orleans, VT
05860-9502; 5% Richard W and Rachael A Lafont, RR 3 Box 86, Barton, VT
05875-9010; Class C--32% Carol S. Atha, RR 7 Box 246, Farimont, WV 26554-8925;
20% St. John Hardware & Implement Co., 3 Front Street, P.O. Box 8, St. John, WA
99171-0008; 17% Stephanie A. Shunick, 115 Meadow Woods Drive, Kyle, TX
78640-8832.

Growth Fund: Class B--8% Lincoln County Colorado Employees Retirement Plan, P.O.
Box 67, Hugo, CO 80821-0067; 6% Terrance L. Twedt, P.O. Box, 309, Pacific City,
OR 97135-0309; Class C--16% Carol S. Atha, RR 7 Box 246, Farimont, WV
26554-8925; 5% Tim J and Amy L Kessler, 621 6th Avenue South East, Aberdeen, SD
57401.

Capital Appreciation Portfolio: Class B--14% Meyers Printing Co., 7277 Boone
Ave. North, Brooklyn Park, MN 55428-1539; 6% Gene Edmonds, 7740 Dunvegan Close,
Atlanta, GA 30350-5504; 5% J D Adams Culvert Co., P.O. Box 5218, Colorado
Springs, CO 80931-5218; Class C--8% J A Hall, RR 5 Box 808, Duncan, OK
73533-9351; 7% Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-2052; 5% Kurt Becks, 9 Suncrest Dr., St. Peters, MO
63376-4432; 5% Keris M. Sirek, 2625 Evergreen Dr., Burlington, IA 52601-2422; 5%
Valerie J. Sirek, 2625 Evergreen Dr., Burlington, IA 52601-2422; Class H--8%
Perry County Stone Co., RR 3, Perrysville, MO 63775-9803; 5% Jeffrey A. Justus,
1912 Wildwood Dr., Greencastle, IN 46135-9255.

Each Fund currently offers it shares in four classes, each with different sales
arrangements and bearing different expenses. Under Fortis Advantage and Fortis
Equity's Articles of Incorporation, the Board of Directors is authorized to
create new portfolios without the approval of the shareholders of the Fund. Each
share will have a pro rata interest in the assets of the portfolio to which the
shares of that series relates, and will have no interest in the assets of any
other portfolio. In the event of liquidation, each share of a portfolio would
have the same rights to dividends and assets as every other share of that
portfolio, except that, in the case of a series with more than one class of
shares, such distributions will be adjusted to appropriately reflect any charges
and expenses borne by each individual class. Each Fund's Board of Directors is
also authorized to create new classes without shareholder approval.

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

61
<PAGE>
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.

COMPUTATION OF NET ASSET VALUE AND PRICING

On August 31, 1995, the Funds' net asset values per share were calculated as
follows:

<TABLE>
<S> <C>
ASSET ALLOCATION PORTFOLIO

CLASS A
Net Assets ($132,938,523)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (8,049,167) ($16.52)

CLASS B
Net Assets ($692,449)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (42,077) ($16.46)

CLASS H
Net Assets ($4,675,777)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (284,416) ($16.44)

CLASS C
Net Assets ($777,170)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (47,355) ($16.41)

CAPITAL FUND

CLASS A
Net Assets ($291,262,852)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (13,728,864) ($21.22)

CLASS B
Net Assets ($1,527,021)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (72,226) ($21.14)

CLASS H
Net Assets ($4,052,281)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (191,696) ($21.14)

CLASS C
Net Assets ($343,811)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (16,271) ($21.13)

FIDUCIARY FUND

CLASS A
Net Assets ($63,194,913)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (1,777,926) ($35.54)

CLASS B
Net Assets ($473,005)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (13,381) ($35.35)

CLASS H
Net Assets ($1,480,698)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (41,886) ($35.35)

CLASS C
Net Assets ($272,033)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (7,684) ($35.40)

GROWTH FUND

CLASS A
Net Assets ($670,752,599)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (20,537,904) ($32.66)

CLASS B
Net Assets ($2,178,800)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (67,079) ($32.48)

CLASS H
Net Assets ($6,866,807)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (211,359) ($32.49)

CLASS C
Net Assets ($263,798)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (8,120) ($32.49)

CAPITAL APPRECIATION PORTFOLIO

CLASS A
Net Assets ($90,918,223)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (2,964,190) ($30.67)

CLASS B
Net Assets ($841,251)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (27,522) ($30.57)

CLASS H
Net Assets ($2,114,959)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (69,156) ($30.58)

CLASS C
Net Assets ($227,203)
- ------------------------- = Net Asset Value Per Share
Shares Outstanding (7,431) ($30.58)
</TABLE>

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

62
<PAGE>
ASSET ALLOCATION PORTFOLIO*

CLASS A
$16.52
---- = Public Offering Price Per Share
.9525 ($17.34)

CAPITAL FUND

CLASS A
$21.22
---- = Public Offering Price Per Share
.9525 ($22.28)

FIDUCIARY FUND

CLASS A
$35.54
---- = Public Offering Price Per Share
.9525 ($37.31)

GROWTH FUND

CLASS A
$32.66
---- = Public Offering Price Per Share
.9525 ($34.29)

CAPITAL APPRECIATION PORTFOLIO*

CLASS A

$30.67
---- = Public Offering Price Per Share
.9525 ($32.20)

- ------------------------------
*Until January 1, 1996 these Funds had a 4.5% sales charge.

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.

Generally, the net asset value of each Fund's 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 (nor on the nearest Monday or Friday if the
holiday falls on a weekend): New Year's 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 Fund's portfolio securities will not materially
affect the current net asset value of the Fund's 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 Fund.

SPECIAL PURCHASE PLANS

Each Fund offers several special purchase plans, described in the Prospectus,
which allow reduction or elimination of the sales charge on Class A shares under
certain circumstances. Additional information regarding some of the plans is as
follows:

STATEMENT OF INTENTION

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. The Statement of Intention is not a binding obligation on
the part of the investor to purchase, or the Fund to sell, the full amount
indicated. Nevertheless, the Statement of Intention should be read carefully
before it is signed.

TAX SHELTERED RETIREMENT PLANS

IRAS AND KEOGH PLANS. Individual taxpayers can defer taxes on current income by
investing in Keogh Plans or Individual Retirement Accounts (IRAs) for
retirement. You can qualify for a Keogh Plan if you are self-employed. lRAs may
be opened by anyone who has earned compensation for services rendered. Certain
reductions in sales

63
<PAGE>
charges set forth under "How to Buy Fund Shares" in the Funds' Prospectus are
available to any organized group of individuals desiring to establish IRAs for
the benefit of its members. If you are interested in one of these accounts,
contact Investors for copies of our plans. You should check with your tax
adviser before investing.

Under current Federal tax law, IRA depositors generally may contribute 100% of
their earned income up to a maximum of $2,000 (including sales charge).
Contributions up to $2,250 (including sales charge) can be made to IRA accounts
for an individual and a nonemployed spouse. All shareholders who, along with
their spouse, are not active participants in an employer sponsored retirement
plan or who have adjusted gross income below a specified level can deduct such
contributions (there is a partial deduction for higher income levels up to a
specified amount) from taxable income so that taxes are put off until
retirement, when reduced overall income and added deductions may result in a
lower tax rate. There are penalty taxes for withdrawing this retirement money
before reaching age 59 1/2 (unless the investor dies, is disabled, or withdraws
equal installments over a lifetime). In addition, there are penalties on
insufficient payouts after age 70 1/2, excess contributions, and excess
distributions.

Each Fund may advertise the number or percentage of its shareholders, or the
amount or percentage of its assets, which are invested in retirement accounts or
in any particular type of retirement account. Such figures also may be given on
an aggregate basis for all of the funds managed by Advisers. Any retirement plan
numbers may be compared to appropriate industry averages.

TAX SAVINGS AND YOUR IRA--A FULLY TAXABLE INVESTMENT COMPARED TO AN INVESTMENT
THROUGH AN IRA

The following table shows the yield on an investment of $2,000 made at the
beginning of each year for a period of 10 years and a period of 20 years. For
illustrative purposes only, the table assumes an annual rate of return of 8%.
<TABLE>
<CAPTION>
FULLY FULLY PARTIALLY NON-
TAXABLE DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
10 years - 15% Federal tax $24,799 $31,291 $28,944 $26,597
bracket

10 years - 28% Federal tax $19,785 $31,291 $26,910 $22,530
bracket

10 years - 31% Federal tax $18,702 $31,291 $26,441 $21,591
bracket

10 years - 36% Federal tax $16,957 $31,291 $25,659 $20,026
bracket

10 years - 39.6% Federal tax $15,744 $31,291 $25,095 $18,900
bracket

20 years - 15% Federal tax $72,515 $98,846 $91,432 $84,019
bracket

<CAPTION>
FULLY FULLY PARTIALLY NON-
TAXABLE DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>

20 years - 28% Federal tax $54,236 $98,846 $85,007 $71,169
bracket

20 years - 31% Federal tax $50,526 $98,846 $83,525 $68,204
bracket

20 years - 36% Federal tax $44,722 $98,846 $81,054 $63,261
bracket

20 years - 39.6% Federal tax $40,820 $98,846 $79,274 $59,703
bracket
</TABLE>

- ------------------------
* This column assumes that the entire $2,000 contribution each year is tax
deductible. Tax on income earned on the IRA is deferred.
** This column assumes that only $1,000 of the $2,000 contribution each year is
tax deductible. Tax on income earned in the IRA is deferred.
*** This column assumes that none of the $2,000 contribution each year is tax
deductible. Tax on income earned in the IRA is deferred.

The 15% Federal income tax rate applies to taxable income up to and including
$38,000 for married couples filing jointly and $22,750 for unmarried
individuals. The 28% Federal income tax rate applies to taxable income from
$38,000 to $91,850 for married couples filing jointly and to taxable income from
$22,750 to $55,100 for unmarried individuals. The 31% Federal income tax rate
applies to taxable income from $91,850 to $140,000 for married couples filing
jointly and to taxable income from $55,100 to $115,000 for unmarried
individuals. The 36% Federal income tax rate applies to taxable income from
$140,000 to $250,000 for married couples filing jointly and to taxable income
from $115,000 to $250,000 for unmarried individuals. The 39.6% Federal income
tax rate applies to taxable income above $250,000 for married couples filing
jointly and to taxable income above $250,000 for unmarried individuals.
(Although the above table reflects the nominal Federal tax rates, the effective
Federal tax rates exceed those rates for certain taxpayers because of the
phase-out of personal exemptions and the partial disallowance of itemized
deductions for taxpayers above certain income levels.)

The table reflects only Federal income tax rates, and not any state or local
income taxes.

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

64
<PAGE>
Fund will be returned to you, together with any sales charge. If your investment
has declined, Investors will make up the difference so that you receive the full
amount invested.

PENSION; PROFIT-SHARING; IRA; 403(B). Tax qualified retirement plans also are
available, including pension and profit-sharing plans, IRA's, and Section 403(b)
salary reduction arrangements. The Section 403(b) salary reduction arrangement
is principally for employees of state and municipal school systems and employees
of many types of tax-exempt or nonprofit organizations. Persons desiring
information about such Plans, including their availability, should contact
Investors. All the Retirement Plans summarized above involve a long-term
commitment of assets and are subject to various legal requirements and
restrictions. The legal and tax implications may vary according to the
circumstances of the individual investor. Therefore, the investor is urged to
consult with an attorney or tax adviser prior to establishing such a plan.

TAX-QUALIFIED PLAN CUSTODIANS AND TRUSTEES. Current fees: IRA and 403(b)--$10
annually; Keogh or small group corporate plan--$15 initial fee plus $30 annually
(plus $5 annually per participant account and a per participant account
termination fee of $25). First Trust National Association is the Custodian under
the IRA and 403(b) plans. If a shareholder pays custodial fees by separate
check, they will not be deducted from his or her account and will not constitute
excess contributions. First Trust National Association also acts as Trustee
under the Keogh and small group corporate plans. The bank reserves the right to
change its fees on 30 days' prior written notice.

WITHHOLDING. Distributions from accounts for tax qualified plans are subject to
tax withholding unless: (a) the payee elects to have no withholding and is
permitted to do so under Federal law; or (b) payment is made to an exempt person
(normally the plan trustee in his or her capacity as plan trustee). Any payee
electing to have no withholding must do so in writing, and must do so at or
before the time that payment is made. A payee is not permitted to elect no
withholding if he or she is subject to mandatory backup withholding under
Federal law for failure to provide his or her tax identification number or for
failure to report all dividend or interest payments. Payees from 403(b) and
corporate or Keogh accounts also are not permitted to elect out of withholding
except as regards systematic partial withdrawals extending over 10 or more
years.

For IRAs, the withholding amount is 10% of the amount withdrawn. For corporate,
Keogh, and 403(b) plans, the withholding amount is as follows:

Total withdrawals or
unscheduled partial
withdrawals or systematic
partial withdrawals for less
than a 10 year period-- 20% of the amount withdrawn;

Other systematic partial
withdrawals-- amount determined by wage
withholding tables and your
completed withholding allowance
election (or if none, is submitted
based on the presumption that you
are a married individual claiming
three withholding allowances (no
withholding if withdrawals do not
exceed $10,600 per year);

Withholding for non-resident aliens is subject to special rules. When payment is
made to a plan trustee, Advisers assumes no responsibility for withholding.
Subsequent payment by the trustee to other payees may require withholding. Such
withholding is the responsibility of the plan trustee or of the plan
administrator.

Any amounts withheld may be applied as a credit against Federal tax subsequently
due.

GIFTS OR TRANSFERS TO MINOR CHILDREN

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). Dividends or capital gains distributions are taxed to the child,
whose tax bracket is usually lower than the adult's. However, if the child is
under 14 years old and his or her unearned income is more than $1,300 per year,
then that portion of the child's income which exceeds $1,300 per year will be
taxed to the child's income which exceeds $1,300 per year will be taxed to the
child at the parents' top rate. Control of the Fund shares passes to the child
upon reaching a specified adult age (either 18 or 21 years in most states).

SYSTEMATIC INVESTMENT PLAN

Each Fund provides a convenient, voluntary method of purchasing shares in the
Fund through its "Systematic Investment Plan."

The principal purposes of the Plan are to encourage thrift by enabling you to
make regular purchases in amounts less than normally required, and to employ the
principle of dollar cost averaging, described below.

65
<PAGE>
By acquiring Fund shares on a regular basis pursuant to a Systematic Investment
Plan, or investing regularly on any other systematic plan, the investor takes
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. 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. It
is essential that the investor consider his or her financial ability to continue
this investment program during times of market decline as well as market rise.
The principle of dollar cost averaging will not protect against loss in a
declining market, as a loss will result if the plan is discontinued when the
market value is less than cost.

An investor has no obligation to invest regularly or to continue the Plan, which
may be terminated by the investor 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 a shareholder instructs Investors in
writing to pay them 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

The amount to be exchanged must meet the minimum purchase amount of the fund
being purchased.

Shareholders should consider the differing investment objectives and policies of
these other funds prior to making such exchange.

For Federal tax purposes, except where the transferring shareholder is a tax
qualified plan, a transfer between funds is a taxable event that probably will
give rise to a capital gain or loss. Furthermore, if a shareholder carries out
the exchange within 90 days of purchasing the shares in a Fund, the sales charge
incurred on that purchase cannot be taken into account for determining the
shareholder's 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 the shareholder's 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.

REINVESTED DIVIDEND/CAPITAL GAINS DISTRIBUTIONS
BETWEEN FORTIS FUNDS

This privilege is based upon the fact that such orders are generally unsolicited
and the resulting lack of sales effort and expense.

PURCHASES BY FORTIS, INC. (OR ITS SUBSIDIARIES) OR ASSOCIATED PERSONS

This privilege is based upon the relationship of such persons to the Funds and
the resulting economies of sales effort and expense.

PURCHASES BY FUND DIRECTORS OR OFFICERS

This privilege is based upon their familiarity with the Fund and the resulting
lack of sales effort and expense.

PURCHASES BY REPRESENTATIVES OR EMPLOYEES OF
BROKER-DEALERS

This privilege is based upon the presumed knowledge such persons have about the
Funds as a result of their working for a company selling the Funds' shares and
resulting economies of sales effort and expense.

PURCHASES BY CERTAIN RETIREMENT PLANS

This privilege is based upon the familiarity of such investors with the Fund and
the resulting lack of sales effort and expense.

PURCHASES BY REGISTERED INVESTMENT COMPANIES

This privilege is based upon the generally unsolicited nature of such purchases
and the resulting lack of sales effort and expense.

PURCHASES WITH PROCEEDS FROM REDEMPTION OF UNRELATED MUTUAL FUND SHARES OR
SURRENDER OF CERTAIN FIXED ANNUITY CONTRACTS

SHAREHOLDERS OF UNRELATED MUTUAL FUNDS WITH SALES LOADS--This privilege is based
upon the existing relationship of such persons with their broker-dealer or
registered representative and/or the familiarity of such shareholders with
mutual funds as an investment concept, with resulting economies of sales effort
and expense.

OWNERS OF A FIXED ANNUITY CONTRACT NOT DEEMED A SECURITY UNDER THE SECURITIES
LAWS--This privilege is based upon the existing relationship of such persons
with their broker-dealer or registered representative and/or the lower
acquisition costs associated with such sale, with resulting economies of sales
effort and expense.

PURCHASES BY EMPLOYEES OF CERTAIN BANKS AND OTHER FINANCIAL SERVICES FIRMS

This privilege is based upon the familiarity of such investors with the Funds
and the resulting lack of sales effort and expense.

66
<PAGE>
PURCHASES BY COMMERCIAL BANKS OFFERING SELF DIRECTED 401(k) Programs Containing
both Pooled and Individual Investment Options

This privilege is based upon the existing relationship of such persons with
their broker-dealer or registered representative and/or the lower acquisition
costs associated with such sale, with resulting economies of sales effort and
expense.

PURCHASES BY INVESTMENT ADVISERS, TRUST COMPANIES, AND BANK TRUST DEPARTMENTS
EXERCISING DISCRETIONARY INVESTMENT AUTHORITY OR USING A MONEY MANAGEMENT MUTUAL
FUND "WRAP" PROGRAM

This privilege is based upon the familiarity of such investors with the Funds
and the resulting lack of sales effort and expense.

REDEMPTION

The obligation of each Fund to redeem its shares when called upon to do so by
the shareholder is mandatory with certain exceptions. The Fund will pay in cash
all redemption requests by any shareholder of record, 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. When redemption requests exceed such
amount, however, 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 emergency, such as in those
situations enumerated in the following paragraph, or at any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. Any securities being so distributed would be valued in
the same manner as the portfolio of the Fund is valued. If the recipient sold
such securities, he or she 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 said 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
Securities and Exchange Commission, by order, so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. The Exchange
is not open for business on the following holidays (nor on the nearest Monday or
Friday if the holiday falls on a weekend), on which the Fund will not redeem
shares: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.

There is no charge for redemption, nor does the Fund contemplate establishing a
charge, although it has the right to do so. In the event a charge were
established, it would apply only to persons who became shareholders after such
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 Fund 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

An investor may open a "Systematic Withdrawal Plan" providing for withdrawals of
$50 or more per quarter, semiannually, or annually. The minimum amount which may
be withdrawn of $50 per month is a minimum only, and should not be considered a
recommendation.

These payments may constitute return of capital, and it should be understood
that they do not represent a yield or return on investment and that they may
deplete or eliminate the investment. The shareholder cannot be assured 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 of each payment, the frequency of each payment, and the increase (or
decrease) in value of the remaining shares.

Under this Plan, any distributions of income and realized capital gains are
reinvested at net asset value. If a shareholder wishes to purchase additional
shares of the Fund under this Plan, other than by reinvestment of distributions,
it should be understood that he or she would be paying a sales commission on
such purchases, while liquidations effected under the Plan would be at net asset
value. Purchases of additional shares concurrent with withdrawals are ordinarily
disadvantageous to the shareholder because of sales charges and tax liabilities.
Additions to a shareholder account in which an election has been made to receive
systematic withdrawals will be accepted only if each such addition is equal to
at least one year's scheduled withdrawals or $1,200, whichever is greater. A
shareholder may not have a "Systematic Withdrawal Plan" and a "Systematic
Investment Plan" in effect simultaneously, as it is not, as explained above,
advantageous to do so.

The Plan is voluntary, flexible, and under the shareholder's control and
direction at all times, and does not limit or alter his or her right to redeem
shares. The Plan may be terminated in writing at any time by either the
shareholder or a Fund. The cost of operating the Plan is borne by Advisers. The
redemption of Fund shares pursuant to the Plan is a taxable event to the
shareholder.

REINVESTMENT PRIVILEGE

In order to allow investors who have redeemed a Fund's shares an opportunity to
reinvest, without additional cost, a one-time privilege is offered whereby an
investor may reinvest in the Fund, or in any other fund underwritten by
Investors and available to the public,

67
<PAGE>
without a sales charge. The reinvestment privilege must be exercised in an
amount not exceeding the proceeds of redemption; must be exercised within 60
days of redemption; and only may be exercised once with respect to the Fund.

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
an investor utilize the reinvestment privilege within 30 days following a
redemption which 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 alter any capital gains taxes payable on a
realized gain. Furthermore, if a shareholder redeems within 90 days of
purchasing the shares in a Fund, the sales charge incurred on that purchase
cannot be taken into account for determining the shareholder's gain or loss on
the sale of those shares.

TAXATION

Each Fund qualified in the tax year ended August 31, 1995, and intends to
continue to qualify, as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). As long as a Fund so qualifies,
it is not taxed on the income it distributes to its shareholders.

For individuals in taxable year 1995, long-term capital gains are subject to a
maximum Federal Income tax rate of 28% while ordinary income is subject to a
maximum rate of 39.6% (for taxable income in excess of $256,500). (The maximum
effective tax rate may be in excess of 39.6%, resulting from a combination of
the nominal tax rate and a phase-out of personal exemptions and a partial
disallowance of itemized deductions for individuals with taxable incomes above
certain levels.)

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. Such gain or loss will be long-term capital gain
or loss if the shares were held for more than one year.

Under the Code, each Fund is subject to a nondeductible excise tax for each
calendar year equal to 4 percent 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 the Fund pays income tax. In order to avoid the
imposition of the excise tax, the 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.

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.

To the extent paid from "qualifying dividends" paid by a domestic corporation,
distributions to corporate shareholders will qualify for the 70% dividends
received deduction.

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 from net investment income and from net realized
capital gains may also be subject to state and local taxes. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state, or local taxes.

UNDERWRITER

On December 7, 1995, the Board of Directors of each Fund, except Value Fund and
Growth & Income Fund, (including a majority of the directors who are not parties
to the contract, or interested persons of any such party) last approved the
Underwriting Agreement with Investors dated November 14, 1994, which became
effective November 14, 1994. On the same date, the Board of Directors of Fortis
Equity Portfolios approved Value Fund's and Growth & Income Fund's Underwriting
Agreement with Investors dated December 7, 1995. Underwriting Agreements may be
terminated by a Fund or Investors at any time by the giving of 60 days' written
notice, and terminates automatically in the event of its assignment. Unless
sooner terminated, the Underwriting Agreement shall continue in effect for more
than two years after its execution only so long as such continuance is also
approved by the vote of a majority of the directors who are not parties to such
Underwriting Agreement, or interested persons of such parties, cast in person at
a meeting called for the purpose of voting on such approval.

Each Underwriting Agreement requires Investors or Advisers to pay all
promotional expenses in connection with the distribution of the Fund's shares,
including paying for printing and distributing prospectuses and shareholder
reports to new shareholders, and the

68
<PAGE>
costs of sales literature. See "Plan of Distribution," below, regarding fees
paid to Investors to be used to compensate those who sell Fund shares and to pay
certain other expenses of selling Fund shares.

In each Underwriting Agreement, Investors undertakes to indemnify the Fund
against all costs of litigation and other legal proceedings, and against any
liability incurred by or imposed upon the Fund in any way arising out of or in
connection with the sale or distribution of the Fund's shares, except to the
extent that such liability is the result of information which was obtainable by
Investors only from persons affiliated with the Fund but not with Investors.

PLAN OF DISTRIBUTION

The policy of having the Funds compensate those who sell Fund shares has been
adopted 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) 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 paragraph
(b)(2) 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 the Fund may rely on Rule 12b-1(b) only if the
selection and nomination of the disinterested directors of the Fund are
committed to the discretion of such disinterested directors. Rule 12b-1(e)
provides that the 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 Section 36(a) and (b)
of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Fund and its shareholders.

Each Fund's (except Value Fund and Growth & Income Fund) Board of Directors last
approved the plan on December 7, 1995. The Board of Directors of Fortis Equity
Portfolios approved the plan on behalf of Value Fund and Growth & Income Fund on
December 7, 1995.

69
<PAGE>
PERFORMANCE

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The tables set forth
below each include reduction due to the maximum 4.75% sales charge and assume
quarterly reinvestment of all dividend and capital gains distributions (for the
Standard & Poor's 500 Stock Index ("S&P 500") and Dow Jones Industrial Average
("DJIA") as well as the Fund). Both indices consist of unmanaged groups of
common stocks. All figures are based upon historical earnings and are not
intended to indicate future performance. Investment return and share value
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. No adjustment has been made for a shareholder's income
tax liability on dividends or capital gains.

$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS A)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
88* 981 0 0 981 (1.9)%
89 1,152 0 53 1,205 22.8%
90 1,028 0 103 1,131 (6.1)%
91 1,254 0 157 1,411 24.8%
92 1,337 0 262 1,599 13.3%
93 1,449 0 347 1,796 12.3%
94 1,354 84 364 1,802 (0.3)%
95 1,581 111 499 2,191 21.6%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 84.5%
Life of
Portfolio 119.1%

<CAPTION>
S&P 500 DJIA
TOTAL TOTAL
YEAR ENDED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
DECEMBER 31, VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C>
88* 1,133 13.3% 1,121 12.1%
89 1,505 32.8% 1,490 32.9%
90 1,365 (9.3)% 1,405 (5.7)%
91 1,792 31.3% 1,795 27.8%
92 1,989 11.0% 2,005 11.7%
93 2,247 13.0% 2,245 12.0%
94 2,330 3.7% 2,492 11.0%
95 3,021 29.7% 3,198 28.3%
121.3% 127.6%
------ ------
202.1% 219.8%
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio (Class A) 15.85% 7.80% 9.28% 10.28% 13.03% 9.60% 11.39% 10.64%
S&P 500 29.67% 15.95% 14.95% 13.95% 17.22% 12.32% 15.04% 15.36%
DJIA 28.30% 19.35% 16.83% 15.52% 17.88% 13.57% 16.15% 16.21%
</TABLE>

* = January 4, 1988 through September 30, 1988.
$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS A) S&P 500 DJIA
VALUE OF REINVESTED TOTAL TOTAL TOTAL
YEAR ENDED CUMULATIVE ANNUAL $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
DECEMBER 31, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
88* 2,000 1,962 0 0 1,962 2,266 2,243
89 4,000 4,540 0 208 4,748 5,667 5,637
90 6,000 5,751 0 497 6,248 6,954 7,202
91 8,000 9,340 0 831 10,171 11,753 11,758
92 10,000 11,989 0 1,696 13,685 15,266 15,369
93 12,000 15,063 0 2,449 17,512 19,509 19,441
94 14,000 15,852 905 2,719 19,476 22,300 23,806
95 16,000 20,733 1,218 4,053 26,004 31,510 33,108
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio (Class A) 15.85% 10.33% 9.77% 10.00% 11.19% 10.66% 10.89% 10.83%
S&P 500 29.67% 20.03% 17.26% 15.77% 16.36% 15.00% 15.01% 15.11%
DJIA 28.30% 21.97% 19.14% 17.49% 17.65% 16.26% 16.22% 16.22%
</TABLE>

* = January 4, 1988 through September 30 , 1988.
In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $77 for capital gains distributions and
$333 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,581.

70
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS B)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,158 7 38 1,203 20.3%
Life of
CUMULATIVE TOTAL RETURN Class

<CAPTION>
S&P 500 DJIA
TOTAL TOTAL
YEAR ENDED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C>
95* 1,268 26.8% 1,259 25.9%
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class B) 20.29%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cumulative total return from November 14, 994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS B)
YEAR ENDED VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
SEPTEMBER CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
95 2,000 2,317 15 74 2,406 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class B) 20.29%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cummulative total return from November 14, 1994 to
September 30, 1995

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $6 for capital gains distributions and
$33 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,158.

71
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS H)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,158 7 37 1,202 20.2%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class H) 20.22%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cummulative total return from November 14, 1994 to
September 30, 1995

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS H)
VALUE OF REINVESTED
ANNUAL CAPITAL
$2,000 GAINS
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) =
<S> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,315 15 74

<CAPTION>
S&P 500
TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C>
95* 2,404 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class H) 20.22%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cummulative total return from November 14, 1994 to
September 30, 1995

72
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS C)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,155 8 36 1,199 19.9%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class C) 19.94%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cummulative total return from November 14, 1994 to
September 30, 1995

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO (CLASS C)
VALUE OF REINVESTED
ANNUAL CAPITAL
$2,000 GAINS TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95 2,000 2,310 15 74 2,399

<CAPTION>
S&P 500
TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE CUMULATIVE
SEPTEMBER 30, VALUE($) VALUE($)
<S> <C> <C>
95 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
(Class C) 19.94%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cummulative total return from November 14, 1994 to
September 30, 1995

l]In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $6 for capital gains distributions and
$33 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,155.

73
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL FUND (CLASS A)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
86 1,198 97 18 1,313 31.3%
87 1,475 212 32 1,719 30.9%
88 1,077 350 44 1,471 (14.4)%
89 1,484 482 95 2,061 40.1%
90 1,205 481 106 1,792 (13.1)%
91 1,479 770 165 2,414 34.7%
92 1,668 915 202 2,785 15.4%
93 1,689 1,090 227 3,006 7.9%
94 1,635 1,298 231 3,164 5.3%
95 1,919 1,696 289 3,904 23.4%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 107.5%
Last 10 Yrs. 290.4%

<CAPTION>
S&P 500 DJIA
TOTAL TOTAL
YEAR ENDED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C>
86 1,317 31.7% 1,383 38.3%
87 1,888 43.4% 2,096 51.6%
88 1,655 (12.3)% 1,771 (15.5)%
89 2,199 32.9% 2,353 32.9%
90 1,994 (9.3)% 2,219 (5.7)%
91 2,617 31.2% 2,836 27.8%
92 2,905 11.0% 3,167 11.7%
93 3,283 13.0% 3,545 11.9%
94 3,404 3.7% 3,936 11.0%
95 4,413 29.6% 5,050 28.3%
121.3% 127.6%
------ ------
341.3% 405.0%
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class A) 17.52% 11.22% 10.11% 11.40% 15.72% 10.33% 14.16% 10.13% 12.26% 14.59%
S&P 500 29.67% 15.95% 14.95% 13.95% 17.22% 12.32% 15.04% 11.20% 14.38% 16.01%
DJIA 28.30% 19.35% 16.83% 15.52% 17.88% 13.57% 16.15% 11.62% 15.48% 17.58%
</TABLE>

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL FUND (CLASS A)
YEAR ENDED VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
SEPTEMBER CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
86 2,000 2,397 195 35 2,627 2,634 2,766
87 4,000 5,294 557 78 5,929 6,643 7,222
88 6,000 5,258 1,296 152 6,706 7,576 7,793
89 8,000 9,868 1,786 410 12,064 12,722 13,012
90 10,000 9,557 2,059 527 12,143 13,352 14,158
91 12,000 14,076 3,934 919 18,929 20,151 20,645
92 14,000 18,022 4,832 1,176 24,030 24,589 25,296
93 16,000 20,175 6,418 1,398 27,991 30,043 30,553
94 18,000 21,371 8,635 1,461 31,467 33,222 36,144
95 20,000 27,316 11,958 1,902 41,176 45,671 48,937
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class A) 17.52% 13.16% 11.54% 11.48% 13.19% 12.25% 12.86% 12.13% 12.16% 12.81%
S&P 500 29.67% 20.03% 17.26% 15.77% 16.36% 15.00% 15.01% 13.98% 14.09% 14.61%
DJIA 28.30% 21.97% 19.14% 17.49% 17.65% 16.26% 16.22% 14.97% 15.11% 15.81%
</TABLE>

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $814 for capital gains distributions and
$137 for income dividends, and the value of the shares as of September 30, 1994,
would have been $1,919.

74
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL FUND (CLASS B)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,153 54 2 1,209 20.9%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class B) 20.86%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cumulative total return from November 14, 1994 to
September 30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL FUND (CLASS B)
VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,306 107 4 2,417 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class B) 20.86%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cumulative total return from November 14, 1994 to
September 30, 1995
In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $42 for capital gains distributions and
$1 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,153.

75
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL FUND (CLASS H)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,153 54 1 1,208 20.8%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class H) 20.80%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cumulative total return from November 14, 1994 to
September 30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL FUND (CLASS H)
VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,305 107 4 2,416 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class H) 20.80%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

76
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL FUND (CLASS C)
VALUE OF REINVESTED
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,152 54 2 1,208 20.8%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class C) 20.74%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* = This reflects the cumulative total return from November 14, 1994 to
September 30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL FUND (CLASS C)
VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,304 107 4 2,415 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Fund (Class C) 20.74%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

77
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS A)
VALUE OF REINVESTED TOTAL
YEAR ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
86 1,191 148 12 1,351 35.1%
87 1,514 244 17 1,775 31.4%
88 1,227 254 17 1,498 (15.6)%
89 1,699 352 38 2,089 39.5%
90 1,422 330 44 1,796 (14.0)%
91 1,726 633 80 2,439 35.8%
92 1,929 769 102 2,800 14.8%
93 2,025 974 107 3,106 10.9%
94 1,936 1,216 102 3,254 4.8%
95 2,316 1,625 122 4,063 24.9%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 115.5%
Last 10 Yrs. 306.3%

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class A) 18.94% 11.64% 11.40% 12.24% 16.60% 10.83% 14.53% 10.23% 12.41% 15.05%
S&P 500 29.67% 15.95% 14.95% 13.95% 17.22% 12.32% 15.04% 11.20% 14.38% 16.01%
DJIA 28.30% 19.35% 16.83% 15.52% 17.88% 13.57% 16.15% 11.62% 15.48% 17.58%
</TABLE>

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS A) S&P 500
VALUE OF ANNUAL REINVESTED TOTAL TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
86 2,000 2,382 296 24 2,702 2,634
87 4,000 5,449 567 37 6,053 6,643
88 6,000 5,959 711 45 6,715 7,576
89 8,000 10,892 985 144 12,021 12,722
90 10,000 10,713 1,059 202 11,974 13,352
91 12,000 15,315 3,084 450 18,849 20,151
92 14,000 19,242 3,969 610 23,821 24,589
93 16,000 22,194 5,701 640 28,535 30,043
94 18,000 23,047 8,242 612 31,901 33,222
95 20,000 29,851 11,629 732 42,212 45,671

<CAPTION>
DJIA TOTAL
YEAR ENDED CUMULATIVE
SEPTEMBER 30, VALUE($)
<S> <C>
86 2,766
87 7,222
88 7,793
89 13,012
90 14,158
91 20,645
92 25,296
93 30,553
94 36,144
95 48,937
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class A) 18.94% 13.89% 12.56% 12.42% 14.12% 13.03% 13.51% 12.63% 12.57% 13.24%
S&P 500 29.67% 20.03% 17.26% 15.77% 16.36% 15.00% 15.01% 13.98% 14.09% 14.61%
DJIA 28.30% 21.97% 19.14% 17.49% 17.65% 16.26% 16.22% 14.97% 15.11% 15.81%
</TABLE>

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $798 for capital gains distributions and
$59 for income dividends, and the value of the shares as of September 30, 1995,
would have been $2,316.

78
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS B)
VALUE OF REINVESTED TOTAL
YEAR ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,175 51 0 1,226 22.6%
Life of
CUMULATIVE TOTAL RETURN Class

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class B) 22.65%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS B) S&P 500
VALUE OF ANNUAL REINVESTED TOTAL TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95 2,000 2,350 103 0 2,453 2,535

<CAPTION>
DJIA TOTAL
YEAR ENDED CUMULATIVE
SEPTEMBER 30, VALUE($)
<S> <C>
95 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class
B) 22.65%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $40 for capital gains distributions and
$0 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,175.

79
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS H)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500
$1,000 GAINS TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,175 52 0 1,227 22.7% 1,268 26.8%
Life of
CUMULATIVE TOTAL RETURN Class
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE
<S> <C> <C>
95* 1,259 25.9%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class H) 22.69%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS H) S&P 500
VALUE OF ANNUAL REINVESTED TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,351 103 0 2,454 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class
H) 22.69%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $40 for capital gains distributions and
$0 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,175.

80
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS C)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500
$1,000 GAINS TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,177 52 0 1,229 22.9% 1,268 26.8%
Life of
CUMULATIVE TOTAL RETURN Class
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE
<S> <C> <C>
95* 1,259 25.9%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class C) 22.86%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
FIDUCIARY FUND (CLASS C)
VALUE OF ANNUAL REINVESTED TOTAL S&P 500 TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE $2,000 CAPITAL GAINS REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) INVESTMENTS($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95 2,000 2,354 103 0 2,457 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiduciary Fund (Class
C) 22.86%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

* =This reflects the cumulative total return from November 14, 1994 to September
30, 1995

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $40 for capital gains distributions and
$0 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,177.

81
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
GROWTH FUND (CLASS A) S&P 500
VALUE OF INITIAL REINVESTED TOTAL TOTAL
YEAR ENDED $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
86 1,276 52 14 1,342 34.2% 1,317 31.7%
87 1,631 151 21 1,803 34.4% 1,888 43.4%
88 1,193 242 23 1,458 (19.1)% 1,655 (12.3)%
89 1,754 356 47 2,157 47.9% 2,199 32.9%
90 1,388 381 42 1,811 (16.0)% 1,994 (9.3)%
91 1,927 709 93 2,729 50.7% 2,617 31.2%
92 1,974 866 97 2,937 7.6% 2,905 11.0%
93 2,424 1,150 124 3,698 25.9% 3,283 13.0%
94 2,110 1,216 108 3,434 (7.1)% 3,404 3.7%
95 2,694 1,640 138 4,472 30.2)% 4,413 29.6%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 135.2% 121.3%
------
Last 10 Yrs. 347.2% 341.3%
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE
<S> <C> <C>
86 1,383 38.3%
87 2,096 51.6%
88 1,771 (15.5)%
89 2,353 32.9%
90 2,219 (5.7)%
91 2,836 27.8%
92 3,167 11.7%
93 3,545 11.9%
94 3,936 11.0%
95 5,050 28.3%
127.6%
------
405.0%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Fund (Class A) 24.02% 7.31% 13.18% 11.77% 18.66% 12.01% 16.55% 11.35% 13.69% 16.16%
S&P 500 29.67% 15.95% 14.95% 13.95% 17.22% 12.32% 15.04% 11.20% 14.38% 16.01%
DJIA 28.30% 19.35% 16.83% 15.52% 17.88% 13.57% 16.15% 11.62% 15.48% 17.58%
</TABLE>

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
GROWTH FUND (CLASS A)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
86 2,000 2,552 105 27 2,684 2,634 2,766
87 4,000 5,696 421 48 6,165 6,643 7,222
88 6,000 5,561 897 69 6,527 7,576 7,793
89 8,000 10,976 1,319 178 12,473 12,722 13,012
90 10,000 10,193 1,707 168 12,068 13,352 14,158
91 12,000 16,799 3,757 506 21,062 20,151 20,645
92 14,000 19,154 5,033 535 24,722 24,589 25,296
93 16,000 25,859 6,962 700 33,521 30,043 30,553
94 18,000 24,176 8,111 610 32,897 33,222 36,144
95 20,000 33,290 11,245 778 45,313 45,671 48,937
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Fund (Class A) 24.02% 12.54% 12.88% 12.39% 15.00% 14.00% 14.85% 13.89% 13.84% 14.48%
S&P 500 29.67% 20.03% 17.26% 15.77% 16.36% 15.00% 15.01% 13.98% 14.09% 14.61%
DJIA 28.30% 21.97% 19.14% 17.49% 17.65% 16.26% 16.22% 14.97% 15.11% 15.81%
</TABLE>

In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $765 for capital gains distributions and
$57 for income dividends, and the value of the shares as of September 30, 1995,
would have been $2,694.

82
<PAGE>
$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
GROWTH FUND (CLASS B)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500 DJIA
$1,000 GAINS TOTAL TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*95 1,296 26 0 1,322 32.2% 1,268 26.8% 1,259 25.9%
Life of
CUMULATIVE TOTAL RETURN Class
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class B) 32.20%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
GROWTH FUND (CLASS B)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
*95 2,000 2,592 52 0 2,644 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class B) 32.20%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cumulative total return from November 14, 1994 to September
30, 1995
In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $19 for capital gains distributions and
$0 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,296.

83
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
GROWTH FUND (CLASS H) S&P 500
VALUE OF REINVESTED TOTAL TOTAL
YEAR ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*95 1,296 26 0 1,322 32.2% 1,268 26.8%
Life of
CUMULATIVE TOTAL RETURN Class
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE
<S> <C> <C>
*95 1,259 25.9%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class H) 32.24%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
GROWTH FUND (CLASS H)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*95 2,000 2,593 52 0 2,645 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class H) 32.24%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

84
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
GROWTH FUND (CLASS C) S&P 500
VALUE OF REINVESTED TOTAL TOTAL
YEAR ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*95 1,296 26 0 1,322 32.2% 1,268 26.8%
Life of
CUMULATIVE TOTAL RETURN Class
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
SEPTEMBER 30, VALUE($) CHANGE
<S> <C> <C>
*95 1,259 25.9%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class C) 32.24%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cumulative total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
GROWTH FUND (CLASS C)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
*95 2,000 2,593 52 0 2,645 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Growth Fund (Class C) 32.24%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

85
<PAGE>
$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS A)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500
$1,000 GAINS TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
88* 1,053 0 0 1,053 5.3% 1,133 13.3%
89 1,525 0 15 1,540 46.2% 1,505 32.8%
90 1,185 59 13 1,257 (18.4)% 1,365 (9.3)%
91 1,739 87 19 1,845 46.8% 1,792 31.3%
92 1,809 90 20 1,919 4.0% 1,989 11.0%
93 2,579 128 29 2,736 42.6% 2,247 13.0%
94 2,140 275 24 2,439 (10.9)% 2,330 3.7%
95 3,078 395 34 3,507 43.8% 3,021 29.7%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 165.7% 121.3%
------
Last 10 Yrs. 250.7% 202.1%
------

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
DECEMBER 31, VALUE($) CHANGE
<S> <C> <C>
88* 1,121 12.1%
89 1,490 32.9%
90 1,405 (5.7)%
91 1,795 27.8%
92 2,005 11.7%
93 2,245 12.0%
94 2,492 11.0%
95 3,198 28.3%
127.6%
------
219.8%
------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
1 2 3 4 5 6 7 LIFE OF
MOST RECENT: YEAR YEARS YEARS YEARS YEARS YEARS YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Portfolio (Class A) 36.96% 10.49 % 20.30 % 16.00 % 21.59 % 13.77 % 17.94 % 17.61 %
S&P 500 29.67% 15.95 % 14.95 % 13.95 % 17.22 % 12.32 % 15.04 % 15.36 %
DJIA 28.30% 19.35 % 16.83 % 15.52 % 17.88 % 13.57 % 16.15 % 16.21 %
</TABLE>

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS A)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
DECEMBER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
88* 2,000 2,105 0 0 2,105 2,266 2,243
89 4,000 5,810 0 58 5,868 5,667 5,637
90 6,000 5,995 298 52 6,345 6,954 7,202
91 8,000 11,595 437 76 12,108 11,753 11,758
92 10,000 14,040 455 79 14,574 15,266 15,369
93 12,000 22,738 648 113 23,499 19,509 19,441
94 14,000 20,448 2,103 94 22,645 22,300 23,806
95 16,000 32,142 3,024 135 35,301 31,510 33,108
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)
<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Portfolio
(Class A) 36.96% 18.54% 19.53% 17.91% 19.47% 17.54% 17.67%
S&P 500 29.67% 20.03% 17.26% 15.77% 16.36% 15.00% 15.01%
DJIA 28.30% 21.97% 19.14% 17.49% 17.65% 16.26% 16.22%

<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO
<S> <C>
Capital Appreciation Portfolio
(Class A) 17.65%
S&P 500 15.11%
DJIA 16.22%
</TABLE>

In the first two tables, had dividends and
capital gains distributions been taken in
cash, with no shares being acquired through
reinvestment, the cash payments for the period
would have been $235 for capital gains
distributions and $12 for income dividends,
and the value of the shares as of September
30, 1995, would have been $3,078.

86
<PAGE>
$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS B)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500 DJIA
$1,000 GAINS TOTAL TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,433 0 0 1,433 43.3% 1,268 26.8% 1,259 25.9%
Life of
CUMULATIVE TOTAL RETURN Class
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class B) 43.34%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cummalitive total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS B)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,867 0 0 2,867 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class B) 43.34%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cummalitive total return from November 14, 1994 to September
30, 1995
In the first two tables, had dividends and capital gains distributions been
taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $0 for capital gains distributions and
$0 for income dividends, and the value of the shares as of September 30, 1995,
would have been $1,433.

87
<PAGE>
$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS H)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500 DJIA
$1,000 GAINS TOTAL TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,434 0 0 1,434 43.4% 1,268 26.8% 1,259 25.9%
Life of
CUMULATIVE TOTAL RETURN Class
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class H) 43.43%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cummalitive total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS H)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,869 0 0 2,869 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class H) 43.43%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

88
<PAGE>
$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS C)
VALUE OF REINVESTED
INITIAL CAPITAL S&P 500 DJIA
$1,000 GAINS TOTAL TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY CUMULATIVE % YEARLY
SEPTEMBER 30, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95* 1,434 0 0 1,434 43.4% 1,268 26.8% 1,259 25.9%
Life of
CUMULATIVE TOTAL RETURN Class
------ ------
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class C) 43.39%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

*This reflects the cummalitive total return from November 14, 1994 to September
30, 1995

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO (CLASS C)
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C>
95* 2,000 2,868 0 0 2,868 2,535 2,518
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: PORTFOLIO*
<S> <C>
Capital Appreciation Portfolio (Class C) 43.39%
S&P 500 26.76%
DJIA 25.88%
</TABLE>

89
<PAGE>
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:

ERV-P
CTR = ( ----- ) 100
P

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.

Average annual total return figures are computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:

P(1+T)n = 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 as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The systematic investment plan average annual total return (for hypothetical
investments of $2,000 at the beginning of each year) is computed by finding the
average annual compounded rate of return over the periods indicated in the
advertisement that would equate the periodic payment amount invested to the
ending redeemable value according to the following formula:

(1+T)n - 1
ERV = PMT (1+T) ( ----------)
T

Where: ERV = ending redeemable value at the
end of the period of
hypothetical investments of
$2,000 made at the beginning
of each year;
PMT = Periodic payment ($2,000);
T = Average annual total return;
and
n = number of years.

This calculation deducts the applicable sales charge from each hypothetical
$2,000 investment, assumes all dividends and capital gains 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.

As noted in the Prospectus, each Fund may advertise its relative performance as
compiled by outside organizations or refer to publications which have mentioned
its performance.

Following is a list of ratings services which may be referred to, along with the
category in which the applicable Fund is included. Because some of these
services do not take into account sales charges, their ratings may sometimes be
different than had they done so:

<TABLE>
<CAPTION>
ASSET ALLOCATION CAPITAL
PORTFOLIO CAPITAL FUND FIDUCIARY FUND GROWTH FUND APPRECIATION
RATINGS SERVICE CATEGORY CATEGORY CATEGORY CATEGORY PORTFOLIO CATEGORY
- ------------------------- ---------------- ---------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Lipper Analytical flexible growth and growth capital small company
Services, Inc. portfolio income appreciation growth
Wiesenberger Investment flexible growth and long term long term small company
Companies Services portfolio current income growth/ growth/ growth
income income
secondary secondary
Morningstar Publications, asset allocation growth growth growth small company
Inc. growth
Johnson's Charts total return growth and long term long term growth long term growth
income growth
CDA Technologies, Inc. balanced growth growth growth growth
</TABLE>

90
<PAGE>
Following is a list of the publications whose articles may be referred to:

AMERICAN BANKER (The)
AP-DOW Jones News Service
ASSOCIATED PRESS (The)
BARRON'S
BETTER INVESTING
BOARDROOM REPORTS
BOND BUYER & CREDIT MARKETS (The)
BOND BUYER (The)
BONDWEEK
BUSINESS MONTH
BUSINESS WEEK
CABLE NEWS NETWORK
CASHFLOW MAGAZINE
CFO
CHICAGO TRIBUNE (The)
CHRISTIAN SCIENCE MONITOR
CITY BUSINESS/CORPORATE REPORT
CITYBUSINESS PUBLICATIONS
COMMERCIAL & FINANCIAL CHRONICLE
CONSUMER GUIDE
CORPORATE FINANCE
DALLAS MORNING NEWS
DOLLARS & SENSE
DOW-JONES NEWS SERVICE
ECONOMIST (The)
EQUITY INTERNATIONAL
EUROMONEY
FINANCIAL EXECUTIVE
FINANCIAL PLANNING
FINANCIAL SERVICES WEEK
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
FUTURES
GLOBAL FINANCE
GLOBAL INVESTOR
INDUSTRY WEEK
INSTITUTIONAL INVESTOR
INTERNATIONAL HERALD TRIBUNE
INVESTMENT DEALER'S DIGEST
INVESTOR'S BUSINESS DAILY
KIPLINGER PERSONAL FINANCE
KIPLINGER CALIF. LETTER (The)
KIPLINGER FLORIDA LETTER
KIPLINGER TEXAS LETTER
KIPLINGER WASHINGTON LETTER (The)
KNIGHT/RIDDER FINANCIAL
LA TIMES
LIPPER ANALYTICAL SERVICES
MARKET CHRONICLE
MINNEAPOLIS STAR TRIBUNE
MONEY
MONEY MANAGEMENT LETTER
MOODY'S INVESTORS SERVICE, INC.
NATIONAL THRIFT NEWS
NATIONAL UNDERWRITER
NELSON'S RESEARCH MONTHLY
NEW YORK DAILY NEWS
NEW YORK NEWSDAY
NEW YORK TIMES (The)
NEWSWEEK
NIGHTLY BUSINESS REPORT (The)
PENSION WORLD
PENSIONS & INVESTMENT AGE
PERSONAL INVESTOR
PORTFOLIO LETTER
REGISTERED REPRESENTATIVE
RUETERS
SECURITIES PRODUCT NEWS
SECURITIES WEEK
SECURITY TRADERS HANDBOOK
SAINT PAUL PIONEER PRESS
STANDARD & POOR'S CORPORATION
STANGER'S INVESTMENT ADVISOR
STANGER'S SELLING MUTUAL FUNDS
STOCK MARKET MAGAZINE (The)
TIME
TRUSTS & ESTATES
U.S. NEWS & WORLD REPORT
UNITED PRESS INTERNATIONAL
USA TODAY
WALL STREET JOURNAL (The)
WASHINGTON POST (The)
FORTIS BENEFITS INSURANCE COMPANY
WOODBURY BULLETIN
WIESENBERGER INVESTMENT COMPANIES
SERVICES

91
<PAGE>
THE MORE WE MAKE, THE MORE WE SPEND

Unless we budget for an investment program, many of us won't invest at all.

When they were married in 1971, 20 years seemed like a long time to 19-year-old
Mary and Paul. As parents often do, Mary's dad had a bit of advice for the
newlyweds: Start a regular investment program, because no matter how much you
earn, you'll find a way to spend it if you don't have an automatic investment
plan.

In October, 1971, Mary and Paul arranged to have $50 a month moved automatically
from their checking account to Growth Fund's Class A shares. They continued
their $50 monthly investment until March, 1991, when they increased their
regular investment to $100 a month.

Over the years, they withdrew a total of $48,084 from their Growth Fund account
to fund IRAs for retirement, to pay taxes and to cover unexpected medical bills.
Even so, as of September 30, 1995, the account was worth $ -- not bad for a
nest egg that began with $50.

For Mary and Paul, dollar cost averaging and Growth Fund helped secure their
financial future. Thanks, Dad.

FINANCIAL SUMMARY

Amount Invested in Growth Fund: $13,600

Amount Withdrawn from Growth Fund: $48,084

Account Value: $ (as of 9/30/95).

The figures above reflect deductions of the applicable 4.75% sales charge. They
do not reflect taxes or inflation. Investment/redemption dates and amount
available upon request.

Mary and Paul are actual shareholders who agreed to share their story.

IS DOLLAR COST AVERAGING SAFE?

While no investment program can guarantee success, dollar cost averaging is
considered a conservative approach to investing. To illustrate, note how results
of a dollar cost averaging program could have performed through the Great
Depression.

Let's assume you started to buy shares in the stocks listed on the Dow Jones
Industrial Average at market high prices in 1929 and continue to invest $100 a
month for the next 10 years. At the end of 10 years, the market has lost 57% of
its original value, but your dollar cost averaging program would have resulted
in a return of about 7.27%.

DOLLAR COST AVERAGING THROUGH THE GREAT DEPRESSION
JANUARY 1929 TO DECEMBER 1938

[CHART]

92
<PAGE>
CORNERSTONE:
A SOLID APPROACH TO YOUR FINANCIAL FUTURE.

A FINANCIAL APPROACH THAT OFFERS YOU GUARANTEED RETURN OF PRINCIPAL AND
OPPORTUNITY FOR GROWTH.

With this special approach, you purchase two separate investments: an insured
certificate of deposit and the Fund. Cornerstone helps you create a solid
foundation for your financial portfolio.

HERE'S AN EXAMPLE:

Assume that you have $50,000 to invest and the five-year CD rate is %. If you
purchase a five-year $ CD at %, you will receive $50,000 at maturity --
guaranteed. You invest your remaining $12,760 in the Fund to take advantage of
greater growth potential.

<TABLE>
<S> <C> <C>
$50,000

5-YEAR CD CAPITAL FUND
$ AT % $
$50,000 + VALUE OF THE
GUARANTEED VALUE FUND AT END OF
OF CD AFTER FIVE YEARS
FIVE YEARS
</TABLE>

CREATE A SOLID FINANCIAL FOUNDATION

The following example uses the average five-year CD rate* from October, 1990 and
the performance of the Fund's Class A shares from October 1, 1990 through
September, 1995. It shows how an investment of $50,000 would have grown using
the Cornerstone approach.

The five-year CD rate on October 1, 1990 was %. At that interest rate, a CD
investment of $ with interest reinvested would guarantee a return of
$50,000.

The rest of your $50,000 -- $ would have been invested in the Fund. At the
end of September, 1995, your Fund investment would have been worth $ .

Your initial $50,000 investment would have been worth a total of $ : $50,000
from the insured certificate of deposit and $ from the Fund.**

93
<PAGE>
HISTORICAL FIVE-YEAR RESULTS

[CHART]

*CD RATE SOURCE: BANXQUOTE MONEY MARKETS TABLE POSTED WEEKLY IN THE WALL STREET
JOURNAL. A WEEKLY AVERAGE USING CD RATES OF BANKS, SAVINGS INSTITUTIONS, AND
BROKER DEALERS IN SIX MAJOR STATES.

**THE EXAMPLE ASSUMES CD INTEREST IS COMPOUNDED ANNUALLY. FUND RETURNS ARE BASED
ON HISTORICAL EARNINGS, WITH CAPITAL GAIN DISTRIBUTIONS AND INCOME DIVIDENDS
REINVESTED, AND REFLECT THE 4.75% SALES CHARGE, WHERE APPLICABLE. OF COURSE,
INVESTMENT RETURN AND SHARE VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH LESS THAN THEIR ORIGINAL COST.

CORNERSTONE: YOUR OPPORTUNITY TO CREATE A SOLID FOUNDATION FOR YOUR FINANCIAL
PORTFOLIO

A secure approach that offers safety plus growth potential by investing in one
of the nation's top performing mutual funds and a guaranteed certificate of
deposit. This dynamic combination assures you that -- at a minimum -- you will
receive your total initial investment at maturity. Plus, an ideal way to build
on the foundation of your success.

THE CORNERSTONE APPROACH GIVES YOU:

- A safety guarantee from purchasing a certificate of deposit, which is
FDIC/FSLIC insured up to specified limits.

- Growth potential by investing in the Fund. (?)

- The security of having a certificate of deposit that guarantees return
of your initial investment, and the confidence of knowing your Fund
offers you a diversified, professionally managed investment portfolio.

94
<PAGE>
FORTIS FINANCIAL GROUP:
WORKING WITH YOUR BANK AND BROKER-DEALER TO OFFER YOU THE CORNERSTONE
OPPORTUNITY

Based in St. Paul, Minnesota, Fortis Financial Group (FFG) has more than 40
years of experience in professional money management. FFG offers a family of
mutual funds, fixed and variable annuities and variable universal life insurance
through its triad of companies: Fortis Advisers, Inc. (fund management); Fortis
Investors, Inc. (broker/dealer; member SIPC); and Fortis Benefits Insurance
Company (issuer of insurance products; rated A+ by A.M. Best Co.) Today FFG
manages more than $3 billion in private pensions, insurance plans, and mutual
fund portfolios.

FFG is a wholly-owned subsidiary of Fortis, Inc., the U.S. operating arm of a
worldwide financial service company.

ONE COUPLE'S PATH TOWARD A QUARTER MILLION DOLLARS VIA THE FUND

"This will never amount to anything," a skeptical Ed muttered to his wife,
Ethel, as he signed an agreement to invest $50 in the Fund's Class A shares in
1957. Today, Ed and Ethel are smiling. After additional investments and the
reinvestment of capital gains and dividends, their account was approaching a
quarter million dollars at the end of 1990.

In May 1957, Ed and Ethel, former southern Minnesota farmers, sat with their
registered representative to work out an affordable investment plan. They
decided on an initial investment of $50* to go into the Fund. They then added
another $1,250* to the account by the end of the year, and another $1,227* in
January 1958.

In April 1958, they decided to invest the monthly $80.84* contract for deed
income from the sale of their farm in their Fund account.

In mid-1968, they discontinued these monthly investments, but added another
$5,000* to the account in 1971, after the sale of their business. That brought
their total Fund investment to $17,227.80.

In 1988, they withdrew money from their account for the first time when they
redeemed $20,000* to buy a car and pay taxes. In September 1989, they redeemed
$30,000 to purchase a mobile home, and in 1991, they began a systematic
withdrawal program of $700 a month.

As of September 30, 1995, the account was worth over a quarter million dollars!
$356,298.41 to be exact.

Ed is no longer skeptical.

*INVESTMENT/REDEMPTION DATES AVAILABLE UPON REQUEST.
**THESE NUMBERS DO NOT REFLECT TAXES OR INFLATION.

95
<PAGE>
Want to be a millionaire?
You could have been one today with Capital Fund's Class A shares!

With just $150 invested on the first day of each month beginning back in June
1949, your net investment would be $ as of September 30, 1995. Below, you
can see the total value of your Fund account on September 30, 1995 -- you'd be a
millionaire! $ for you to use for your financial security!

[CHART]

96
<PAGE>
FINANCIAL STATEMENTS

The financial statements included as part of the Funds' 1995 Annual Report to
Shareholders, filed with the Securities and Exchange Commission in October,
1995, are incorporated herein by reference. The Annual Report accompanies this
Statement of Additional Information.

CUSTODIAN; COUNSEL; ACCOUNTANTS

Norwest Bank Minnesota N.A., Norwest Center, Sixth and Marquette, Minneapolis,
MN 55479 acts as custodian of the Funds' assets and portfolio securities; Dorsey
& Whitney P.L.L.P., 220 South Sixth Street, Minneapolis, MN 55402, is the
independent General Counsel for the Funds; and KPMG Peat Marwick LLP, 4200
Norwest Center, Minneapolis, MN 55402, acts as the Funds' independent auditors.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of each Fund owes certain fiduciary duties to
it 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 each Fund 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.

97
<PAGE>
APPENDIX
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 Portfolio is "covered" if the Portfolio 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 Portfolio
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 Portfolio in cash and
high grade government securities in a segregated account with its custodian. A
put option written by a Portfolio is "covered" if the Portfolio 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 which 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 SEC. 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.

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 stock 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 stock 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 Portfolio will cover all options on stock 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 Portfolio covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index. In that event, the Portfolio 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 Portfolio will secure put options on stock 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 a stock 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

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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. A stock
index assigns relative values to the stocks included in the index and the index
fluctuates with changes in the market values of the stocks 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 the 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 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.

A stock index or Eurodollar futures contract provides for the making and
acceptance of a cash settlement in much the same manner as the settlement of an
option on a stock index. The types of indexes underlying stock index futures
contracts are essentially the same as those underlying stock index options, as
described above. The index underlying a municipal bond index futures contract is
a broad based index of municipal securities designed to reflect movements in the
municipal securities market as a whole. The index assigns weighted values to the
securities included in the index and its composition is changed periodically.

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 Portfolio on
United States exchanges are traded on the same contract

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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.

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 opinion,
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 which 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 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 Portfolio's
position unless the institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Portfolio. Where no
such counterparty 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 Portfolio could be required to retain options
purchased or written until exercise, expiration or maturity. This in turn could
limit the Portfolio'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 Portfolio will therefore be subject to the risk
of default by, or the bankruptcy of, the financial institution serving as its
counterparty. 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 Portfolio's ability to enter into desired hedging transactions.
A Portfolio will enter into an over-the-counter transaction only with parties
whose creditworthiness has been reviewed and found satisfactory by Advisers.

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95324 (Rev. 1/96)
<PAGE>
SPECIAL PORTFOLIOS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 1, 1995

This Statement of Additional Information is NOT a prospectus, but should be read
in conjunction with the Special Portfolios, Inc. ("Special") Prospectus dated
March 1, 1995. A copy of that prospectus may be obtained from your broker-dealer
or sales representative. The address of Fortis Investors, Inc. ("Investors") is
P.O. Box 64284, St. Paul, Minnesota 55164. Telephone: (612) 738-4000. Toll Free
1-(800) 800-2638.

No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Statement of Additional Information, and if given or made, such
information or representations must not be relied upon as having been authorized
by Special or Investors. This Statement of Additional Information does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation.

10
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ORGANIZATION AND CLASSIFICATION... 12
INVESTMENT OBJECTIVES AND
POLICIES......................... 12
- U.S. Government
Securities................... 12
- Securities of Foreign
Companies.................... 12
- Extendible Notes............ 13
- Borrowing Money............. 13
- Portfolio Turnover.......... 14
- Miscellaneous............... 14
- Investment Restrictions..... 14
DIRECTORS AND EXECUTIVE
OFFICERS......................... 17
INVESTMENT ADVISORY AND OTHER
SERVICES......................... 19
- General..................... 19
- Control and Management of
Advisers and Investors...... 19
- Investment Advisory and
Management Agreement........ 20
PORTFOLIO TRANSACTIONS AND
ALLOCATION OF BROKERAGE.......... 21
CAPITAL STOCK..................... 22

COMPUTATION OF NET ASSET VALUE AND
PRICING.......................... 23
SPECIAL PURCHASE PLANS............ 23
- Tax Sheltered Retirement
Plans........................ 23
- Gifts or Transfers to Minor
Children.................... 26
- Systematic Investment
Plan......................... 26
REDEMPTION........................ 26
- Systematic Withdrawal
Plan......................... 27
TAXATION.......................... 27
UNDERWRITER....................... 28
PERFORMANCE....................... 29
FINANCIAL STATEMENTS.............. 32
CUSTODIAN; COUNSEL; ACCOUNTANTS... 32
LIMITATION OF DIRECTOR
LIABILITY........................ 32
ADDITIONAL INFORMATION............ 32
CORPORATE BOND AND COMMERCIAL
PAPER RATINGS.................... Appendix
</TABLE>

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ORGANIZATION AND CLASSIFICATION

Special is currently comprised of two separate Portfolios--the Stock Portfolio
and the Cash Portfolio. Each Portfolio is, for investment purposes, in effect a
separate investment fund. A separate series of capital shares is issued for each
Portfolio.

An investment company is an arrangement by which a number of persons invest in a
company that in turn invests in securities of other companies. Special is an
"open-end" investment company because it generally must redeem an investor's
shares upon request. Special is a "diversified" investment company because it
offers investors an opportunity to minimize the risk inherent in all investments
in securities by spreading their investment over a number of companies in
various industries. However, diversification cannot eliminate such risks.

INVESTMENT OBJECTIVES AND POLICIES

Special operates as a "diversified" investment company as defined under the
Investment Company Act of 1940 (the "1940 Act"), which means that each Portfolio
must meet the following requirements:

At least 75% of the value of its 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 Portfolio
and to not more than 10% of the outstanding voting securities of
such issuer.

U.S. GOVERNMENT SECURITIES

United States Government securities include a variety of U.S. Treasury
securities, which differ in their interest rates, maturities, and times of
issuance. Treasury Bills have maturities of one year or less; Treasury Notes
have maturities of one to ten years; and Treasury Bonds generally have
maturities of greater than ten years. Some obligations issued or guaranteed by
U.S. Government agencies and instrumentalities, such as Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury; others, such as those issued by the Federal
National Mortgage Association, are supported by discretionary authority of the
U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality.
While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies and instrumentalities, no assurance can be given
that it will always do so since it is not so obligated by law. Cash Portfolio
will invest in such securities only when it is satisfied that the credit risk
with respect to the issuer is acceptable.

SECURITIES OF FOREIGN COMPANIES

Stock Portfolio may invest 10% of its total assets in securities of foreign
governments and companies. Cash Portfolio may invest up to 25% of the value of
its total assets in securities of, or guaranteed by, the Government of Canada, a
Province of Canada, or any instrumentality or political subdivision thereof.
Cash Portfolio may invest up to an additional 15% of its total assets in
securities of foreign companies (which does not include domestic branches of
foreign banks and foreign branches of domestic banks). However, Cash Portfolio
may not invest more than 49% of the value of its total assets collectively in:
(i) securities of, or guaranteed by, the Government of Canada, a Province of
Canada, or any instrumentality or political subdivision thereof; (ii) securities
of foreign companies; and (iii) securities of domestic branches of foreign banks
and foreign branches of domestic banks. Domestic branches of foreign banks and
foreign branches of domestic banks are deemed by Special 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 United States 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.

The only obligations of foreign branches of domestic banks which Cash Portfolio
will purchase are certificates of deposit (Eurodollar C/Ds). The only
obligations of domestic branches of foreign banks which the Portfolio will
purchase are certificates of deposit (Yankee C/Ds) and bankers' acceptances
(Yankee B/As). 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

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<PAGE>
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.

There are risks associated with investments in obligations of foreign branches
of domestic banks and domestic branches of foreign banks that do not accompany
investments in obligations of domestic banks generally. Domestic banks are
required to maintain specified levels of reserves, are limited in the amounts
they can loan to a single borrower, and are subject to other regulations
designed to promote financial soundness. Not all of such laws and regulations
apply to foreign branches of domestic banks. Cash Portfolio may also be subject
to additional investment risks from investing in the obligations of foreign
branches of domestic banks. Such risks include future political and economic
developments, the possible imposition of foreign withholding taxes on interest
income payable on securities, the possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on such obligations. The obligations of domestic
branches of foreign banks may also be subject to other risks, including
political and economic developments in the country in which the foreign bank has
its main office. There may be less publicly available information about a
domestic branch of a foreign bank than about a domestic bank. In addition,
obligations of foreign branches of domestic banks and domestic branches of
foreign banks are not insured by the Federal Deposit Insurance Corporation.

EXTENDIBLE NOTES

Cash Portfolio is permitted to invest up to 25% of the value of its total assets
in extendible notes. An extendible note is a debt arrangement under which the
holder, at its option, may require the issuer, typically a financial or an
industrial concern, to repurchase the note for a predetermined fixed price at
one or more times prior to the ultimate maturity date of the note. Typically, an
extendible note is issued at an interest rate that can be adjusted at fixed
times throughout its term. At the same times as the interest rate is adjusted by
the issuer, the holder of the note is typically given the option to "put" the
note back to the issuer at a predetermined price (e.g., at 100% of the
outstanding principal amount plus unpaid accrued interest) if the extended
interest rate is undesirable to the holder. This option to put the note back to
the issuer (i.e., to require the issuer to repurchase the note) provides the
holder with an optional maturity date that is shorter than the actual maturity
date of the note.

Extendible notes are typically issued with maturity dates in excess of 25 months
from the date of issuance. If such extendible notes provide for an optional
maturity date of 25 months or less, however, then such notes are deemed by Cash
Portfolio to have been issued for the shorter optional maturity date.
Accordingly, investment in such extendible notes would not be in contravention
of the investment policy of the Portfolio not to invest in securities having a
maturity date in excess of 25 months from the date of acquisition. Investment in
extendible notes is not expected to have a material impact on the effective
portfolio maturity of Cash Portfolio.

An investment in an extendible note is liquid, and the note may be resold to
another investor prior to its optional maturity date at its market value. The
market value of an extendible note with a given optional maturity date is
determined and fluctuates in a similar manner to the market value of a fixed
maturity note with a maturity equivalent to the optional maturity of the
extendible note. Compared to fixed-term notes of the same issuer, however,
extendible notes with equivalent optional maturities generally yield higher
returns without a material increase in risk to Cash Portfolio.

The creditworthiness of the issuers of the extendible notes is monitored and
rated by Moody's Investors Service, Inc. ("Moody's") and by Standard & Poor's
Corporation ("S&P"), and investments by Cash Portfolio in such extendible notes
are restricted to notes with the same investment ratings as are acceptable to
the Portfolio with respect to other forms of investment. The creditworthiness of
such issuers is also monitored by Advisers.

BORROWING MONEY

Cash Portfolio may obtain such short-term credit as it needs for clearance of
securities transactions and may borrow money from banks as a temporary measure
to facilitate redemptions. As a fundamental policy, however, borrowings may not
exceed 10% of the value of such

13
<PAGE>
Portfolio's total assets and no additional investment securities may be
purchased by Cash Portfolio while outstanding bank borrowings exceed 5% of the
value of such Portfolio's total assets. Interest paid on borrowings will not be
available for investment. Stock Portfolio may not borrow money as a fundamental
policy.

PORTFOLIO TURNOVER

Portfolio turnover, as described in the Prospectus, is the ratio of the lesser
of annual purchases or sales of portfolio securities to average monthly
portfolio value, not including short-term securities. A 100% portfolio turnover
rate would occur, for example, if all of the portfolio securities were replaced
within one year. Stock Portfolio's portfolio turnover rates for the fiscal years
ended October 31, 1994 and 1993, were 26% and 37%, respectively. Cash
Portfolio's portfolio turnover rates for the fiscal years ended October 31, 1994
and 1993, were 58% and 29%, respectively. The portfolio turnover will generally
have no correlation with the amount of spreads or markups paid by Cash
Portfolio.

MISCELLANEOUS

As noted in the Prospectus, the Portfolios may invest in repurchase agreements
("repos") and variable amount master demand notes.

Repos are short-term instruments under which securities are purchased from a
bank or a securities dealer with an agreement by the seller to repurchase the
securities at a mutually agreeable date, interest rate, and price. In investing
in repos, Special's risk is limited to the ability of such seller to pay the
agreed upon amount at the maturity of the repo. In the opinion of Advisers, such
risk is not material, since in the event of default, barring extraordinary
circumstances, Special would be entitled to sell the underlying securities or
otherwise receive adequate protection under Federal bankruptcy laws for its
interest in such securities. However, to the extent that proceeds from any sale
upon a default were less than the repurchase price, Special could suffer a loss.

Variable amount master demand notes allow the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangements between Special and
a financial institution which 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 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 Special 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.

INVESTMENT RESTRICTIONS

The following investment restrictions are deemed fundamental policies. They may
be changed only by the vote of a "majority" of the affected Portfolio(s)'
outstanding shares, which as used in this Statement of Additional Information,
means the lesser of (i) 67% of the affected Portfolio(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 affected
Portfolio(s)' outstanding shares.

STOCK PORTFOLIO INVESTMENT RESTRICTIONS. As a result of its fundamental
investment restrictions, except as set forth below, Stock Portfolio will not:

1. Invest more than an aggregate of 5% of the value of its total assets
in securities (both debt and equity) which are not readily marketable.

2. Concentrate its investments, that is, invest more than 25% of the
value of its assets in any particular industry.

3. Buy or sell commodities or commodity contracts.

4. Purchase or sell real estate or other interests in real estate, or
interests in real estate investment trusts, but reserves freedom of action
to invest in readily marketable notes or other evidences of indebtedness
secured by mortgage liens or deeds of trust relating to real property in an
amount not to exceed 10% of the value of its total assets.

5. Mortgage, pledge, hypothecate, or in any manner transfer, as
security for indebtedness, any securities owned or held by Stock Portfolio.

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<PAGE>
6. Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
Stock Portfolio may be deemed an underwriter under applicable laws.

7. Write, purchase, or sell puts, calls or combinations thereof.

8. Purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, or sell short.

9. Engage in the making of loans as a principal activity, but it may
make loans not to exceed 10% of the value of its total assets, taken at
market value at the time of such loan, to other companies and firms in which
Stock Portfolio has, or plans to acquire, an equity interest. Such loans, if
and when made, will be made with the object of financing the growth and
development of such companies or firms.

Loans shall not be deemed to include the purchase or acquisition of a portion of
an issue of publicly distributed notes, bonds, debentures, or other evidence of
indebtedness, whether or not such purchase or acquisition is made upon the
original issuance of the securities.

10. Borrow money.

The following investment restrictions may be changed by the Board of Directors
of Special without shareholder approval.

Stock Portfolio 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. (Due to restrictions imposed
by the California Department of Corporations, Stock Portfolio does not
currently invest in other investment companies.)

2. Invest in a company for the purposes of exercising control or
management.

3. Buy or sell foreign exchange.

4. Invest in securities which would expose Stock Portfolio to
liabilities exceeding the amount invested.

5. Participate on a joint or a joint and several basis in any trading
account in securities.

6. Invest in interests (including partnership interests) in oil, gas,
or other mineral exploration or development programs, except Stock Portfolio
may purchase or sell securities issued by corporations engaging in oil, gas,
or other mineral exploration or development business.

7. Purchase or retain the securities of any issuer if those officers
and directors of Special or its investment adviser owning (including
beneficial ownership) individually more than 1/2 of 1% of the securities of
such issuer together own (including beneficial ownership) more than 5% of
the securities of such issuer.

8. Invest more than an aggregate of 5% of the value of its total assets
in (a) securities (both debt and equity) which are not readily marketable,
such as thinly traded common stock; and (b) companies which have been in
business for less than three years. (Securities sold under Section 4(2) of
the Securities Act of 1933 that are eligible for resale pursuant to Rule
144A under the 1993 Act that have been determined to be liquid by the Board
of Directors of Special or Advisers subject to the oversight of such Board
of Directors will not be considered to be "not-readily marketable
securities" and will not be subject to this limitation.)

9. Invest more than 5% of its net assets in warrants, nor more than 2%
of net assets in warrants not listed on the New York Stock Exchange or
American Stock Exchange.

CASH PORTFOLIO INVESTMENT RESTRICTIONS. As a result of its fundamental
investment restrictions, except as set forth below, Cash Portfolio will not:

1. Purchase securities on margin or otherwise borrow money or issue
senior securities. Special may obtain such short-term credit as it needs for
the clearance of securities transactions, and may borrow from a bank, for
the account of Cash Portfolio, as a temporary measure to facilitate
redemptions (but not for leveraging or investment) an amount that does not
exceed 10% of the value of Cash Portfolio's total assets. Investment
securities will not be purchased for Cash Portfolio while outstanding bank
borrowings exceed 5% of the value of such Portfolio's total assets.

2. Write, purchase or sell puts, calls or combinations thereof.

3. Mortgage, pledge or hypothecate its assets, except in an amount not
exceeding 10% of the value of its total assets to secure temporary
borrowing.

4. Invest in commodities or commodity futures contracts.

15
<PAGE>
5. Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
Special may be deemed an underwriter under applicable laws.

6. Participate on a joint or a joint and several basis in any
securities trading account.

7. Invest in real estate, except Cash Portfolio may invest in
securities issued by companies owning real estate or interests therein.

8. Make loans to other persons. The entering into of repurchase
agreements and purchasing debt obligations is not considered to be making
"loans" for this purpose and may be entered into or purchased by the
Portfolio in accordance with its investment objectives and policies.

9. 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 United States
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 companies, 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.

10. Purchase from or sell to any officer, director, or employee of
Special, or its adviser or underwriter, or any of their officers or
directors, any securities other than shares of Special's common stock.

11. Make short sales, except for sales "against the box". While a short
sale is made by selling a security the Portfolio does not own, a short sale
is "against the box" to the extent that Cash Portfolio contemporaneously
owns or has the right to obtain securities identical to those sold short at
no added cost.

12. Invest more than 5% of the value of its assets in restricted
securities.

The following Cash Portfolio investment restrictions may be changed by the Board
of Directors of Special (the "Board of Directors") without shareholder approval.

Cash Portfolio 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. (Due to restrictions imposed
by the California Department of Corporations, Cash Portfolio does not
currently invest in other investment companies.)

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 investments.

4. Invest in securities which would expose such Portfolio to
liabilities exceeding the amount invested.

5. Invest in interests (including partnership interests) in oil, gas,
or other mineral exploration or development programs, except it may purchase
or sell securities issued by corporations engaging in oil, gas, or other
mineral exploration or development business.

6. Purchase or retain the securities of any issuer if those officers
and directors of Special or its investment adviser owning (including
beneficial ownership) individually more than 1/2 of 1% of the securities of
such issuer together own (including beneficial ownership) more than 5% of
the securities of such issuer.

7. Invest more than an aggregate of 5% of the value of its total assets
in (a) restricted securities or in securities of any issuer which are not
readily marketable; and (b) companies which have been in business for less
than three years (except that a company will be deemed to have been in
business for more than three years if such company is the subsidiary of
another company which has been in business for more than three years).
(Securities sold under Section 4(2) of the Securities Act of 1933 that are
eligible for resale pursuant to Rule 144A under the 1933 Act that have been
determined to be liquid by the Board of Directors of Special or Advisers
subject to the oversight of such Board of Directors will not be considered
to be "not readily marketable securities" and will not be subject to this
limitation.)

8. Invest more than 5% of its net assets in warrants, nor more than 2%
of net assets in warrants not listed on the New York Stock Exchange or
American Stock Exchange.

16
<PAGE>
Any investment policy or restriction which involves a maximum percentage of
securities or assets 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 results therefrom. Both Portfolios' loans of portfolio
securities will comply with Texas law.

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

DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of directors
and executive officers of Special are given below:

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS SPECIAL "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
James J. Cashman Director Sales Representative, Jostens, Inc., a producer of products and
117 Hawthorne Road services for the youth, education, sports award, and recognition
Hopkins, Minnesota markets.

Richard W. Cutting Director Certified public accountant and financial consultant.
137 Chapin Parkway
Buffalo, New York

Allen R. Freedman* Director Chairman and Chief Executive Officer of Fortis, Inc.; a Managing
Suite 5001 Director of Fortis International, N. V.
One World Trade Center
New York, New York

Dr. Robert M. Gavin Director President, Macalester College.
1600 Grand Avenue
St. Paul, Minnesota

Benjamin S. Jaffray Director Chairman of the Sheffield Group, Ltd., a financial consulting
4040 IDS Center group.
Minneapolis, Minnesota

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

Dean C. Kopperud* President and President and a Director of Advisers and Investors and Senior Vice
500 Bielenberg Drive Director President of Fortis Benefits Insurance Company and Time Insurance
Woodbury, Minnesota Company.

Edward M. Mahoney Director Retired; prior to December, 1994, Chairman and Chief Executive
2760 Pheasant Drive Officer and a Director of Advisers and Investors, Senior Vice
Excelsior, Minnesota President and a Director of Fortis Benefits Insurance Company, and
Senior Vice President of Time Insurance Company.

Thomas R. Pellett Director Retired; prior to January, 1991, Senior Vice President--
731 Havenwood Circle Drive Administration and Corporate Affairs, Pet Incorporated, which is
Warson Woods, Missouri in the food products business.

Robb L. Prince Director Vice President and Treasurer, Jostens, Inc., a producer of
5501 Norman Center Dr. products and services for the youth, education, sports award, and
Minneapolis, Minnesota recognition markets.

Leonard J. Santow Director Principal, Griggs & Santow, lncorporated, economic and financial
75 Wall Street consultants.
21st Floor
New York, New York
</TABLE>

17
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS SPECIAL "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Joseph M. Wikler Director Investment consultant and private investor; prior to January,
12520 Davan Drive 1994, Director of Research, Chief Investment Officer, Principal,
Silver Spring, Maryland and a Director, the Rothschild Co., Baltimore, Maryland. The
Rothschild Co. is an investment advisory firm.

Stephen M. Poling Vice President Executive Vice President and Director of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

Dennis M. Ott Vice President Senior Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

James S. Byrd Vice President Vice President of Advisers and Investors; prior to March, 1991,
5500 Wayzata Boulevard Senior Vice President, Templeton Investment Counsel, Inc., Fort
Golden Valley, Minnesota Lauderdale, Florida.

Robert C. Lindberg Vice President Vice President of Advisers and Investors; prior to July, 1993,
5500 Wayzata Boulevard Vice President, Portfolio Manager, and Chief Securities Trader,
Golden Valley, Minnesota COMERICA, Inc., Detroit, Michigan. COMERICA, Inc. is a bank.

Keith R. Thomson Vice President Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

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

Robert J. Clancy Vice President Senior Vice President and a Director of Advisers and Investors and
500 Bielenberg Drive Senior Vice President, Investment Products of Fortis Benefits
Woodbury, Minnesota Insurance Company.

Thomas D. Gualdoni Vice President Vice President of Advisers, Investors, and Fortis Benefits
500 Bielenberg Drive Insurance Company.
Woodbury, Minnesota

Larry A. Medin Vice President Senior Vice President--Sales of Advisers and Investors; from
500 Bielenberg Drive August 1992 to November 1994, Senior Vice President, Western
Woodbury, Minnesota Divisional Officer of Colonial Investment Services, Inc., Boston,
Massachusetts; from June 1991 to August 1992, Regional Vice
President, Western Divisional Officer of Alliance Capital
Management, New York, New York; prior to June 1991, Senior Vice
President, National Sales Director, Met Life State Street
Investment Services, Inc.

Jon H. Nicholson Vice President Vice President--Marketing and Product Development of Fortis
500 Bielenberg Drive Benefits Insurance Company.
Woodbury, Minnesota

John W. Norton Vice President Senior Vice President, General Counsel, and Secretary of Advisers
500 Bielenberg Drive and Investors; since January, 1993, Senior Vice President and
Woodbury, Minnesota General Counsel, Life and Investment Products, Fortis Benefits
Insurance Company and Vice President and General Counsel, Life and
Investment Products, Time Insurance Company.
</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS SPECIAL "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
David A. Peterson Vice President Vice President and Assistant General Counsel, Fortis Benefits
500 Bielenberg Drive Insurance Company; prior to January, 1991, Senior Vice
Woodbury, Minnesota President--Law, State Bond and Mortgage Company, Minneapolis,
Minnesota.

Michael J. Radmer Secretary Partner, Dorsey & Whitney P.L.L.P., the Fund's General Counsel.
220 South Sixth Street
Minneapolis, Minnesota

Tamara L. Fagely Treasurer Fund Accounting Officer of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
</TABLE>

- -------------------------------------------
* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
each Fortis fund, Advisers, and Investors primarily because he is an officer
of each. Mr. Freedman is an "interested person" of each Fortis fund,
Advisers, and Investors because he is Chairman and Chief Executive Officer
of Fortis, Inc. ("Fortis"), the parent company of Advisers and indirect
parent company of Investors, and a Managing Director of Fortis
International, N. V., the parent company of Fortis.
- -------------------------------------------

All of the above officers and directors, except Mr. Cashman, also are officers
and/or directors of other investment companies of which Advisers is the
investment adviser. No compensation is paid by the Portfolios to any of
Special's officers or directors except for a fee of $100 per month, $100 per
meeting attended, and $100 per applicable committee meeting attended (and
reimbursement of travel expenses to attend meetings) to each director not
affiliated with Advisers or Jostens. During the fiscal year ended October 31,
1994, Stock Portfolio and Cash Portfolio paid $9,900 and $4,800, respectively,
to directors who were not affiliated with Advisers, Investors, or Jostens and
reimbursed two such directors a total of $300 and $100, respectively, for travel
expenses incurred in attending directors' meetings. Legal fees and expenses of
$8,700 and $3,300, respectively, also were paid to a law firm of which Special's
Secretary is a partner. As of January 31, 1995, the directors and executive
officers as a group beneficially owned 1.5% and less than 1% of the outstanding
shares of Stock Portfolio and Cash Portfolio, respectively. Directors Kopperud,
Mahoney, Prince, King, and Jaffray 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 act only infrequently.

INVESTMENT ADVISORY AND OTHER
SERVICES

GENERAL

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and manager
of Special since Special began business in 1966. Investors acts as Special's
underwriter. Both act as such pursuant to written agreements periodically
approved by the directors or shareholders of Special. The address of both is
that of Special.

As of January 31, 1995, Advisers managed twenty-eight investment company
portfolios with combined net assets of approximately $3,349,326,000, and one
private account with net assets of approximately $15,389,000. Fortis Financial
Group also has approximately $1.7 billion in insurance reserves. As of the same
date, the investment company portfolios had an aggregate of 210,844
shareholders, including 1,495 shareholders of Special.

During the past three fiscal years ended October 31, 1994, 1993, and 1992, Stock
Portfolio paid to Advisers advisory and management fees of $748,760, $699,673,
and $591,243, respectively, while Cash Portfolio paid Advisers $53,979 (after
$26,600 advisory fee waiver), $49,792 (after $24,896 similarly waived), and
$40,939 (after $20,324 similarly waived), respectively.

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

Fortis owns 100% of the outstanding voting securities of Advisers, and Advisers
owns all of the outstanding voting securities of Investors.

19
<PAGE>
Fortis, located in New York, New York, is a wholly owned subsidiary of Fortis
International, N.V., which has approximately $100 billion in assets worldwide
and is in turn a wholly owned subsidiary of AMEV/VSB 1990 N.V. ("AMEV/ VSB
1990").

AMEV/VSB 1990 is a corporation organized under the laws of The Netherlands to
serve as the holding company for all U.S. operations and is owned 50% by Fortis
AMEV and 50% by Fortis AG. AMEV/VSB 1990 owns a group of companies active in
insurance, banking and financial services, and real estate development in The
Netherlands, the United States, Western Europe, Australia, and New Zealand.

Dean C. Kopperud is President of Advisers and Investors; Stephen M. Poling is
Executive Vice President of Advisers and Investors; Robert J. Clancy, Larry A.
Medin, and Dennis M. Ott are Senior Vice Presidents of Advisers and Investors;
John W. Norton is Senior Vice President, General Counsel, and Secretary of
Advisers and Investors; Robert W. Beltz, Jr., James S. Byrd, Thomas D. Gualdoni,
Robert C. Lindberg, Lee V. Rosenblum, Kyle R. Selberg, Keith R. Thomson, and
Sylvia R. Wagner are Vice Presidents of Advisers and Investors; Barbara W.
Kirby, David G. Carroll, Carol M. Houghtby, and Chris J. Neuharth are 2nd Vice
Presidents of Advisers and Investors; Michael D. O'Connor is Qualified Plan
Officer of Advisers and Investors; Tamara L. Fagely is Fund Accounting Officer
of Advisers and Investors; John E. Hite is Corporate Counsel and Assistant
Secretary of Advisers and Investors; Gregory S. Swenson and Thomas E. Erickson
are Assistant Secretaries of Advisers and Investors; Sharon R. Jibben is
Assistant Secretary of Advisers; and Barbara J. Wolf is Trading Officer of
Advisers.

Messrs. Kopperud, Clancy, and Poling are the Directors of Advisers.

All of the above persons reside or have offices in the Minneapolis/St. Paul
area.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

Advisers acts as investment adviser and manager of the Fund under an Investment
Advisory and Management Agreement (the "Agreement") dated January 31, 1992,
which became effective the same date following shareholder approval on January
28, 1992. This Agreement was last approved by the Board of Directors (including
a majority of the directors who are not parties to the contract, or interested
persons of any such party) on December 8, 1994. The Agreement will terminate
automatically in the event of its assignment. In addition, the Agreement is
terminable at any time, without penalty, by the Board of Directors or, with
respect to any particular portfolio, by vote of a majority of the outstanding
voting securities of the applicable portfolio, on not more than 60 days' written
notice to Advisers, and by Advisers on 60 days' notice to Special. Unless sooner
terminated, the Agreement shall continue in effect for more than two years after
its execution only so long as such continuance is specifically approved at least
annually by either the Board of Directors or, with respect to any particular
portfolio, by vote of a majority of the outstanding voting securities of the
applicable portfolio, provided that in either event such continuance is also
approved by the vote of a majority of the directors who are not parties to such
Agreement, or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval.

The Agreement provides for an investment advisory and management fee calculated
as described in the following table. As you can see from the table, this fee
decreases (as a percentage of each Portfolio's net assets) as the Portfolio
grows. As of January 31, 1995, Stock Portfolio and Cash Portfolio had net assets
of approximately $76,971,000 and $31,249,000, respectively.

<TABLE>
<CAPTION>
ANNUAL
INVESTMENT
ADVISORY AND
AVERAGE NET ASSETS MANAGEMENT FEE

<S> <C> <C>
Stock Portfolio For the first $100
million 1.0%
For the next $150
million .8%
For assets over $250
million .7%

Cash Portfolio For the first $500
million .3%
For assets over $500
million .25%
</TABLE>

The Agreement requires each Portfolio of Special to pay all of its expenses that
are not expressly assumed by Advisers and/or Investors. These expenses include,
among others, the investment advisory and management fee, the fees and expenses
of directors and officers of Special who are not "affiliated persons" of
Advisers, interest expenses, taxes, brokerage fees and commissions, fees and
expenses of registering and qualifying

20
<PAGE>
Special and its 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.

Advisers bears the costs of acting as Special's transfer agent, registrar, and
dividend agent. Advisers or Investors also shall bear all promotional expenses
in connection with the distribution of the Portfolios' shares, including paying
for prospectuses and shareholder reports for new shareholders, and the costs of
sales literature.

Pursuant to an undertaking given to the State of California, Advisers has agreed
to reimburse Special monthly for any amount by which each Portfolio's aggregate
annual expenses, exclusive of taxes, brokerage commissions, and interest on
borrowing exceeds 2 1/2% on the first $30,000,000 of average net assets, 2% on
the next $70,000,000, and 1 1/2% on the balance. Advisers reserves the right to
agree to lesser expense limitations from time to time. In the fiscal year ended
October 31, 1994, Advisers was not required to make any reimbursement to Special
pursuant to this limitation.

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

Under the Agreement, Advisers, as investment adviser to each Portfolio of
Special, has the sole authority and responsibility to make and execute
investment decisions for each Portfolio within the framework of Special's
investment policies, subject to review by the Board of Directors. Advisers also
furnishes Special with all required management services, facilities, equipment,
and personnel.

Although investment decisions for each Portfolio are made independently from
those of the other Portfolio or those of 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 Portfolio and another
Portfolio, funds, or accounts may have a detrimental effect on the Portfolio, as
this may affect the price paid or received by the Portfolio or the size of the
position obtainable by the Portfolio.

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

In the case of Stock Portfolio, transactions on a stock exchange in equity
securities will be executed primarily through brokers that will receive a
commission paid by such Portfolio. Cash Portfolio, on the other hand, will not
normally incur any brokerage commissions. Fixed income securities, as well as
equity securities traded in the over-the-counter market, are generally traded on
a "net" basis with dealers acting as principals for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. During the fiscal year ended October 31, 1994, Stock Portfolio
and Cash Portfolio transactions having an aggregate dollar value of
approximately $23,840,000 and $32,362,000, respectively (excluding short-term
securities), were traded in this manner. For the fiscal years ended October 31,
1994, 1993, and 1992, Stock Portfolio paid brokerage commissions of $27,921,
$42,816, and $39,971, respectively. Such brokerage commissions amounted to .04%,
.06%, and .07%, respectively, of Stock Portfolio's average net assets during
such three years. The average commission rate (calculated by dividing the total
dollar amount of transactions into the total dollar amount of commissions paid)
paid by Stock Portfolio for the fiscal year ended October 31, 1994 was .28%.

Advisers selects and (where applicable) negotiates commissions with the
broker-dealers who execute the transactions for Portfolios. The primary
criterion for the selection of a broker-dealer is the ability of the broker-
dealer, in the opinion of Advisers, to secure prompt execution of the
transactions on favorable terms, including the reasonableness of the commission
and considering the state of the market at the time. When consistent with these
objectives, business may be placed with broker-dealers who furnish investment
research services to

21
<PAGE>
Advisers. Such research services include advice, both directly and in writing,
as to the value of securities; the advisability of investing in, purchasing, or
selling securities; and the availability of securities, or purchasers or sellers
of securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts. This allows Advisers to supplement its own investment research
activities and enables Advisers to obtain the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for the Portfolios. To the extent such
commissions are directed to these other broker-dealers who furnish research
services to Advisers, Advisers receives a benefit, not capable of evaluation in
dollar amounts, without providing any direct monetary benefit to the Portfolios
from these commissions. Advisers believes that most research services obtained
by it generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account. Normally, research services obtained through managed funds or
accounts investing in common stocks would primarily benefit the managed funds or
accounts which invest in common stock; similarly, services obtained from
transactions in fixed income securities would normally be of greater benefit to
the managed funds or accounts which invest in debt securities.

Advisers has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of Special Portfolio transactions in exchange for
research services provided Advisers, except as noted below. However, Advisers
does maintain an informal list of broker-dealers, which is used from time to
time as a general guide in the placement of Special Portfolio business, in order
to encourage certain broker-dealers to provide Advisers with research services
which Advisers anticipates will be useful to it. Because the list is merely a
general guide, which is to be used only after the primary criterion for the
selection of broker-dealers (discussed above) has been met, substantial
deviations from the list are permissible and may be expected to occur. Advisers
will authorize Special 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 Advisers' overall responsibilities with respect to the
accounts as to which Advisers exercises investment discretion. Generally,
Special pays higher commissions than the lowest rates available.

Stock Portfolio paid $27,921 in commissions (in connection with transactions
having an aggregate value of approximately $10,043,162) during the fiscal year
ended October 31, 1994. Of this amount, virtually all was paid to broker-dealers
who furnished investment research to Advisers, as outlined above.

Special will not effect any brokerage transactions in its 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 Portfolios. No commissions were paid to any affiliate of
Advisers during the fiscal years ended October 31, 1994, 1993, and 1992.

The Portfolios' acquisition during the fiscal year ended October 31, 1994, of
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derive more than fifteen percent of their gross revenue from
securities-related activities is presented below:

STOCK PORTFOLIO

<TABLE>
<CAPTION>
VALUE OF
SECURITIES OWNED
NAME OF ISSUER AT END OF PERIOD
- ------------------------------------ ----------------
<S> <C>
First Bank (N.A.) $ 3,304,000
Goldman Sachs & Co. 706,000
</TABLE>

CASH PORTFOLIO

<TABLE>
<CAPTION>
VALUE OF
SECURITIES OWNED
NAME OF ISSUER AT END OF PERIOD
- ------------------------------------ ----------------
<S> <C>
Ford Motor Credit Corp. $ 976,109
Merrill Lynch & Co. $ 750,000
Morgan Stanley & Co., Inc. 501,340
Goldman, Sachs & Co. 496,000
First Bank (N.A.) 181,000
</TABLE>

CAPITAL STOCK

Each Portfolio'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.

On January 31, 1995, Special had 5,648,251 shares outstanding. 2,340,564 of such
shares were shares of Stock Portfolio, and 3,307,687 were shares of Cash
Portfolio. On that date, no person owned of record or, to Special's

22
<PAGE>
knowledge, beneficially, as much as 5% of the outstanding shares of either
Portfolio, except Fortis, Inc. Profit Sharing Trust, Suite 501, One World Trade
Center, New York, N.Y., which was the record owner of 58.0% and 97.4% of the
outstanding shares of Stock Portfolio and Cash Portfolio, respectively.

Under Special's Articles of Incorporation, the Board of Directors is authorized
to create new portfolios, each issuing its own series of shares, in addition to
the Portfolios without the approval of the shareholders of the Portfolios. Each
share will have a pro rata interest in the assets of the portfolios to which the
shares of that series relates, and will have no interest in the assets of any
other Special portfolio. In the event of liquidation, each share of a Special
portfolio would have the same rights to dividends and assets as every other
share of that portfolio.

Each share of a Portfolio has one vote (with proportionate voting for fractional
shares) irrespective of the relative net asset value of the Portfolios' shares.
On some issues, such as the election of directors, all shares of Special vote
together as one series. 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.

On an issue affecting only a particular Portfolio, the shares of the affected
Portfolio vote as a separate series. An example of such an issue would be a
fundamental investment restriction pertaining to only one Portfolio. In voting
on the Agreement, approval of the Agreement by the shareholders of a particular
Portfolio would make the Agreement effective as to that Portfolio whether or not
it had been approved by the shareholders of the other Portfolio.

Special is not 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 of Special may demand a
regular meeting of shareholders by written notice of demand given to the chief
executive officer or the chief financial officer of Special. Within ninety days
after receipt of the demand, a regular meeting of shareholders must be held at
Special'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.

COMPUTATION OF NET ASSET VALUE AND PRICING

On October 31, 1994, the Portfolios' net asset values per share was calculated
as follows:

<TABLE>
<CAPTION>
STOCK PORTFOLIO
<S> <C> <C>
Net Assets ($75,465,072)
Shares Outstanding = Net Asset Value Per Share
(2,223,555) ($33.94)

CASH PORTFOLIO
Net Assets ($27,570,518)
Shares Outstanding = Net Asset Value Per Share
(2,913,263) ($9.46)
</TABLE>

The primary close of trading of the New York Stock Exchange (the "Exchange") is
3:00 P.M. (Central Time), but this time may be changed. The offering price for
purchase orders received in the office of Special 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.

Generally, the net asset value of each Portfolio's 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 (nor on the nearest Monday or Friday if the
holiday falls on a weekend): New Year's 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 portfolio securities will not materially affect the
current net asset value of the Portfolio's shares; or (ii) on days during which
no such Portfolio's shares are tendered for redemption and no orders to purchase
or sell such Portfolio's shares are received by Special.

SPECIAL PURCHASE PLANS

Special offers several special purchase plans. Additional information regarding
the plans is as follows:

TAX SHELTERED RETIREMENT PLANS

IRAS AND KEOGH PLANS. Individual taxpayers can defer taxes on current income by
investing in Keogh Plans or

23
<PAGE>
Individual Retirement Accounts (IRAs) for retirement. You can qualify for a
Keogh Plan if you are self-employed. lRAs may be opened by anyone who has earned
compensation for services rendered. If you are interested in one of these
accounts, contact Investors for copies of our plans. You should check with your
tax adviser before investing.

Special may advertise the number or percentage of its shareholders, or the
amount or percentage of its assets, which are invested in retirement accounts or
in any particular type of retirement account. Such figures also may be given on
an aggregate basis for all of the funds managed by Advisers. Any retirement plan
numbers may be compared to appropriate industry averages.

TAX SAVINGS AND YOUR IRA--A FULLY TAXABLE INVESTMENT COMPARED TO AN INVESTMENT
THROUGH AN IRA

<TABLE>
<CAPTION>
FULLY FULLY PARTIALLY
TAXABLE DEDUCTIBLE DEDUCTIBLE NON-DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
10 years - $ 24,799 $ 31,291 $ 28,944 $ 26,597
15%
Federal
tax
bracket

10 years - $ 19,785 $ 31,291 $ 26,910 $ 22,530
28%
Federal
tax
bracket

10 years - $ 18,702 $ 31,291 $ 26,441 $ 21,591
31%
Federal
tax
bracket

10 years - $ 16,957 $ 31,291 $ 25,659 $ 20,026
36%
Federal
tax
bracket

10 years - $ 15,744 $ 31,291 $ 25,095 $ 18,900
39.6%
Federal
tax
bracket

20 years - $ 72,515 $ 98,846 $ 91,432 $ 84,019
15%
Federal
tax
bracket

20 years - $ 54,236 $ 98,846 $ 85,007 $ 71,169
28%
Federal
tax
bracket

20 years - $ 50,526 $ 98,846 $ 83,525 $ 68,204
31%
Federal
tax
bracket

20 years - $ 44,722 $ 98,846 $ 81,054 $ 63,261
36%
Federal
tax
bracket

20 years - $ 40,820 $ 98,846 $ 79,274 $ 59,703
39.6%
Federal
tax
bracket
</TABLE>

24
<PAGE>
The 15% Federal income tax rate applies to taxable income up to and including
$39,000 for married couples filing jointly and $23,350 for unmarried
individuals. The 28% Federal income tax rate applies to taxable income from
$39,000 to $94,250 for married couples filing jointly and to taxable income from
$23,250 to $56,550 for unmarried individuals. The 31% Federal income tax rate
applies to taxable income from $94,250 to $143,600 for married couples filing
jointly and to taxable income from $56,550 to $117,950 for unmarried
individuals. The 36% Federal income tax rate applies to taxable income from
$143,600 to $256,500 for married couples filing jointly and to taxable income
from $117,950 to $256,500 for unmarried individuals. The 39.6% Federal income
tax rate applies to taxable income above $256,500 for married couples filing
jointly and to taxable income above $256,500 for unmarried individuals.
(Although the above table reflects the nominal Federal tax rates, the effective
Federal tax rates exceed those rates for certain taxpayers because of the
phase-out of personal exemptions and the partial disallowance of itemized
deductions for taxpayers above certain income levels.)

The table reflects only Federal income tax rates, and not any state or local
income taxes.

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

If you change your mind about opening your IRA, you generally have seven days
after receipt of notification within which to cancel your account. To do this,
you must send a written cancellation to Investors (at its mailing address listed
on the cover page) within that seven day period. If you cancel within seven
days, any amounts invested will be returned to you, together with any sales
charge. If your investment has declined, Investors will make up the difference
so that you receive the full amount invested.

For IRAs, the withholding amount is 10% of the amount withdrawn. For corporate,
Keogh, and 403(b) plans, the withholding amount is as follows:

<TABLE>
<S> <C>
Total withdrawals 20% of the amount
or unscheduled withdrawn;
partial
withdrawals or
systematic
partial with-
drawals for less
than a 10 year
period--
</TABLE>

25
<PAGE>
<TABLE>
<S> <C>
Other systematic amount determined by
partial wage withholding tables
withdrawals-- and your completed
withholding allowance
election (or if none, is
submitted based on the
presumption that you are
a married individual
claiming three withhold-
ing allowances (no
withholding if
withdrawals do not
exceed $10,600 per
year);
</TABLE>

Any amounts withheld may be applied as a credit against Federal tax subsequently
due.

GIFTS OR TRANSFERS TO MINOR CHILDREN

This gift or transfer is registered in the name of the custodian for a minor
under the Uniform Gifts to Minors Act (in some states the Uniform Transfers to
Minors Act). Dividends or capital gains distributions are taxed to the child,
whose tax bracket is usually lower than the adult's. However, if the child is
under 14 years old and his or her unearned income is more than $1,200 per year,
then that portion of the child's income which exceeds $1,200 per year will be
taxed to the child at the parents' top rate. Control of the shares passes to the
child upon reaching a specified adult age (either 18 or 21 years in most
states).

SYSTEMATIC INVESTMENT PLAN

Special provides a convenient, voluntary method of purchasing shares in the Fund
through its "Systematic Investment Plan."

By acquiring shares on a regular basis pursuant to a Systematic Investment Plan,
or investing regularly on any other systematic plan, the investor takes
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. 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. It
is essential that the investor consider his or her financial ability to continue
this investment program during times of market decline as well as market rise.
The principle of dollar cost averaging will not protect against loss in a
declining market, as a loss will result if the plan is discontinued when the
market value is less than cost.

REDEMPTION

The obligation of Special to redeem its shares when called upon to do so by the
shareholder is mandatory with certain exceptions. Special will pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net asset value of the
Portfolio at the beginning of such period. When redemption requests exceed such
amount, however, Special reserves the right to make part or all of the payment
in the form of securities or other assets of the Portfolio. An example of when
this might be done is in case of emergency, such as in those situations
enumerated in the following paragraph, or at any time a cash distribution would
impair the liquidity of the Portfolio to the detriment of the existing
shareholders. Any securities being so distributed would be valued in the same
manner as the portfolio of the Portfolio is valued. If the recipient sold such
securities, he or she probably would incur brokerage charges.

26
<PAGE>
The Exchange is not open for business on the following holidays (nor on the
nearest Monday or Friday if the holiday falls on a weekend), on which the Fund
will not redeem shares: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

There is no charge for redemption, nor does Special contemplate establishing a
charge, although it has the right to do so. In the event a charge were
established, it would apply only to persons who became shareholders after such
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, Special 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

An investor may open a "Systematic Withdrawal Plan" providing for withdrawals of
$50 or more per quarter, semiannually, or annually if he or she has made a
minimum investment in Special shares of $4,000 ($50 or more per month if at
least $10,000 has been invested), or has acquired and deposited shares having
either an original cost, or current value equal to the appropriate amount. The
minimum amount which may be withdrawn of $50 per month is a minimum only, and
should not be considered a recommendation.

The Plan is voluntary, flexible, and under the shareholder's control and
direction at all times, and does not limit or alter his or her right to redeem
shares. The Plan may be terminated in writing at any time by either the
shareholder or Special. The cost of operating the Plan is borne by Advisers. The
redemption of Fund shares pursuant to the Plan is a taxable event to the
shareholder.

TAXATION

Under the Internal Revenue Code of 1986, as amended (the "Code"), each Portfolio
offered through Special is treated as a separate entity for federal tax
purposes. Therefore, each Portfolio is treated separately in determining whether
it qualifies as a regulated investment company and for purposes of determining
the net ordinary income (or loss), net realized capital gains (or losses), and
distributions necessary to relieve each Portfolio of any federal income tax
liability.

Each Portfolio qualified in the fiscal year ended October 31, 1994, and intends
to continue to qualify, as a regulated investment company under the Code. As
long as each Portfolio so qualifies, the Portfolio is not taxed on the income it
distributes to its shareholders.

For individuals in taxable year 1995, long-term capital gains are subject to a
maximum tax rate of 28%, while ordinary income is subject to a maximum rate of
39.6% (for taxable income in excess of $256,500). (The maximum effective tax
rate may be in excess of 39.6%, resulting from a combination of the nominal tax
rate and a phase-out of personal exemptions and a partial disallowance of
itemized deductions for individuals with taxable incomes above certain levels.)

Gain or loss realized upon the sale of shares in Special will be treated as
capital gain or loss, provided that the shares represented a capital asset in
the hands of the shareholder. Such gain or loss will be long-term capital gain
or loss if the shares were held for more than one year.

Under the Code, each Portfolio is subject to a nondeductible excise tax for each
calendar year equal to 4 percent 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 Special pays income tax. In order to avoid the
imposition of the excise tax, each Portfolio generally must declare dividends by
the end of a calendar year representing at least 98 percent of the Portfolio'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.

As a result of their foreign investments, the Portfolios may incur foreign tax
liability, which will reduce the amount of income available for distribution.
The Portfolios' shareholders will not be able to claim a foreign tax credit for
the foreign taxes paid by the Portfolios.

27
<PAGE>
Pursuant to a special provision in the Code, if Portfolio 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.

To the extent paid from "qualifying dividends" paid by a domestic corporation,
distributions made by Stock Portfolio to corporate shareholders will qualify for
the 70% dividends received deduction.

Under the Code, Special 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.

For Federal income tax purposes Cash Portfolio had a capital loss carryover of
$1,062,702 at October 31, 1994, which if not offset by subsequent capital gains
will expire as follows:

It is unlikely the Board of Directors will authorize a distribution of any
realized gains until the available capital loss carryover has been offset or
expires.

The foregoing is a general discussion of the Federal income tax consequences of
an investment in Special as of the date of this Statement of Additional
Information. Distributions from net investment income and from net realized
capital gains may also be subject to state and local taxes. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state, or local taxes.

UNDERWRITER

On December 8, 1994, the Board of Directors (including a majority of the
directors who are not parties to the contract, or interested persons of any such
party) last approved the Underwriting Agreement with Investors dated January 31,
1992, which became effective January 31, 1992. This Underwriting Agreement may
be terminated by Special or Investors at any time by the giving of 60 days'
written notice, and terminates automatically in the event of its assignment.
Unless sooner terminated, the Underwriting Agreement shall continue in effect
for more than two years after its execution only so long as such continuance is
also approved by the vote of a majority of the directors who are not parties to
such Underwriting Agreement, or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval.

The Underwriting Agreement requires Investors or Advisers to pay all promotional
expenses in connection with the distribution of the Portfolios' shares,
including paying for printing and distributing prospectuses and shareholder
reports to new shareholders, and the costs of sales literature.

In the Underwriting Agreement, Investors undertakes to indemnify Special against
all costs of litigation and other legal proceedings, and against any liability
incurred by or imposed upon Special in any way arising out of or in connection
with the sale or distribution of the Portfolios' shares, except to the extent
that such liability is the result of information which was obtainable by
Investors only from persons affiliated with Special but not with Investors.

28
<PAGE>

PERFORMANCE

$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
VALUE OF STOCK PORTFOLIO
INITIAL REINVESTED
YEAR ENDED $1,000 CAPITAL GAINS TOTAL
DECEM- INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
BER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
85 1,376 0 16 1,392 +39.2
86 1,560 88 28 1,676 +20.4
87 1,092 478 20 1,590 -5.1
88 1,174 517 23 1,714 +7.8
89 1,545 844 34 2,423 +41.4
90 1,356 901 64 2,321 -4.2
91 2,219 1,566 108 3,893 +67.7
92 2,184 1,702 110 3,996 +2.6
93 2,274 2,016 114 4,404 +10.2
94 2,098 1,884 105 4,087 -7.2
CUMULATIVE TOTAL RETURN Last 5 Years +68.7
Last 10 Years +308.7

<CAPTION>
S&P 500 DJIA
YEAR ENDED TOTAL TOTAL
DECEM- CUMULATIVE % YEARLY CUMULATIVE % YEARLY
BER 31, VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C>
85 1,322 +32.2 1,335 +33.5
86 1,566 +18.5 1,698 +27.2
87 1,648 +5.2 1,792 +5.5
88 1,925 +16.8 2,083 +16.2
89 2,531 +31.5 2,754 +32.2
90 2,450 -3.2 2,739 -0.5
91 3,199 +30.6 3,405 +24.3
92 3,444 +7.7 3,656 +7.4
93 3,788 +10.0 4,277 +17.0
94 3,836 +1.3 4,496 +5.1
-- -- -- +51.6 -- -- -- +63.3
-- -- -- +283.6 -- -- -- +349.6
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)
<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Portfolio -7.19 1.14 1.64 15.20 11.02 15.59 14.44
S&P 500 1.25 5.53 6.24 11.85 8.67 12.18 12.83
DJIA 5.12 10.90 9.70 13.19 10.30 13.68 14.04

<CAPTION>
MOST RECENT: 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C>
Stock Portfolio 11.79 12.71 15.12
S&P 500 11.85 12.57 14.39
DJIA 12.94 14.44 16.22
</TABLE>

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
VALUE OF STOCK PORTFOLIO
ANNUAL REINVESTED
YEAR ENDED $2,000 CAPITAL GAINS
DECEM- CUMULATIVE INVEST- DISTRI- REINVESTED
BER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) =
<S> <C> <C> <C> <C> <C> <C> <C>
85 $ 2,000 2,752 0 32
86 4,000 5,386 303 71
87 6,000 5,173 2,141 50
88 8,000 7,710 2,318 63
89 10,000 12,779 4,208 108
90 12,000 12,968 4,958 362
91 14,000 24,494 8,906 628
92 16,000 26,081 10,256 651
93 18,000 29,229 13,062 677
94 20,000 28,819 12,294 625

<CAPTION>
YEAR ENDED TOTAL S&P 500 TOTAL DJIA TOTAL
DECEM- CUMULATIVE CUMULATIVE CUMULATIVE
BER 31, VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C>
85 2,784 2,643 2,670
86 5,760 5,501 5,939
87 7,364 7,893 8,380
88 10,091 11,556 12,063
89 17,095 17,825 18,594
90 18,288 19,196 20,483
91 34,028 27,671 27,953
92 36,988 31,946 32,155
93 42,968 37,339 39,959
94 41,738 39,829 44,108
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)
<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Portfolio -7.19 -1.64 0.02 7.10 8.61 11.17 12.23
S&P 500 1.25 4.14 5.23 8.20 8.38 9.70 10.69
DJIA 5.12 9.09 9.42 11.12 10.81 11.82 12.54

<CAPTION>
MOST RECENT: 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C>
Stock Portfolio 12.11 12.27 13.05
S&P 500 11.02 11.44 12.23
DJIA 12.65 13.15 14.01
</TABLE>

mon stocks. In the first two tables, had dividends and capital gains
distributions been taken in cash, with no shares being acquired through
reinvestment, the cash payments for the period would have been $988 for capital
gains distributions and $51 for income dividends, and the value of the shares as
of December 31, 1994, would have been $2,098. All figures are based upon
historical earnings and are not intended to indicate future performance.
Investment return and share value fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. No adjustment has
been made for a shareholder's income tax liability on dividends or capital
gains.

29
<PAGE>
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:

<TABLE>
<S> <C> <C> <C>
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
</TABLE>

This calculation assumes all dividends and capital gain distributions are
reinvested 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.

<TABLE>
<S> <C> <C> <C>
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.
</TABLE>

This calculation assumes all dividends and capital gains distributions are
reinvested 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.

<TABLE>
<S> <C> <C> <C>
Where: ERV = ending redeemable
value at the end of
the period of
hypothetical
investments of
$2,000 made at the
beginning of each
year;
PMT = Periodic payment
($2,000);
T = Average annual
total return; and
n = number of years.
</TABLE>

As noted in the Prospectus, the Fund may advertise its relative performance as
compiled by outside organizations or refer to publications which have mentioned
its performance.

Following is a list of ratings services which may be referred to, along with the
category in which the Fund is included.

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- ------------------------- ----------------------
<S> <C>
Lipper Analytical
Services, Inc. capital appreciation
long term
Wiesenberger Investment growth/income
Companies Services secondary
Johnson's Charts long term growth
CDA Technologies, Inc. aggressive growth
Morningstar Publications,
Inc. growth
</TABLE>

30
<PAGE>
Following is a list of the publications whose articles may be referred to:

31
<PAGE>
FINANCIAL STATEMENTS

The financial statements included as part of Special's 1994 Annual Report to
Shareholders, filed with the Securities and Exchange Commission in December,
1994, are incorporated herein by reference. The Annual Report accompanies this
Statement of Additional Information.

CUSTODIAN; COUNSEL; ACCOUNTANTS

Norwest Bank Minnesota N.A., Norwest Center, Sixth and Marquette, Minneapolis,
MN 55479 acts as custodian of Special's assets and portfolio securities; Dorsey
& Whitney P.L.L.P., 200 South Sixth Street, Minneapolis, MN 55402, is the
independent General Counsel for Special; and KPMG Peat Marwick LLP, 4200 Norwest
Center, Minneapolis, MN 55402, acts as Special's independent auditors.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of Special owes certain fiduciary duties to
it 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). In
February 1987, Minnesota enacted legislation which 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 Special 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).

ADDITIONAL INFORMATION

Special has 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 shares 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.

32
<PAGE>
96681 (Rev. 3/95)

33
<PAGE>

FORTIS-Registered Trademark-

SPECIAL
PORTFOLIOS, INC.

ANNUAL REPORT
OCTOBER 31, 1995

<PAGE>
SPECIAL PORTFOLIOS, INC. ANNUAL REPORT

CONTENTS

LETTER TO SHAREHOLDERS 1

SCHEDULES OF INVESTMENTS
CASH PORTFOLIO 4
STOCK PORTFOLIO 6

STATEMENTS OF ASSETS AND LIABILITIES 9

STATEMENTS OF OPERATIONS 10

STATEMENTS OF CHANGES IN NET ASSETS
CASH PORTFOLIO 11
STOCK PORTFOLIO 12

NOTES TO FINANCIAL STATEMENTS 13

INDEPENDENT AUDITORS' REPORT 15

BOARD OF DIRECTORS AND OFFICERS 16

- - TOLL-FREE PERSONAL ASSISTANCE

- Shareholder Services

- (800) 800-2638, Ext. 3012

- 7:30 a.m. to 5:30 p.m. CST, M-Th

- 7:30 a.m. to 5:00 p.m. CST, F

- - TOLL-FREE INFORMATION LINE

- For daily account balances,
transaction activity or net asset
value information

- (800) 800-2638, Ext. 4344

- 24 hours a day

FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2638.

TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800)
800-2638, EXT. 4579.
<PAGE>
HIGHLIGHTS

FOR THE YEAR ENDED OCTOBER 31, 1995

<TABLE>
<CAPTION>
STANDARD &
CASH STOCK POOR'S 500
PORTFOLIO PORTFOLIO STOCK INDEX
---------- ---------- ------------
<S> <C> <C> <C>
NET ASSET VALUE PER SHARE:
Beginning of year...................... $ 9.46 $ 33.94 472.35
End of year............................ $ 9.57 $ 42.32 581.50
Total Return*.......................... 7.18% 25.41% 26.40%

DISTRIBUTIONS PER SHARE:
From net investment income............. $ 0.55 -- --
From net realized gains................ -- $0.186 --

* These are the fund's total returns during the year, including reinvestment of all
dividend and capital gains distributions.
</TABLE>

HOW TO USE THIS REPORT

For a quick overview of the portfolios' performance during the past twelve
months, refer to the Highlights box below. The letter from the portfolio manager
and president provides a more detailed analysis of the portfolio's and financial
markets.

The charts alongside the letter are useful because they provide more information
about your investments. The top holdings chart shows the types of securities in
which the portfolio's invests, and the pie chart shows a breakdown of the
portfolios' assets by industry. The portfolio changes show the investment
decisions your portfolio manager has made over the period in response to
changing market conditions.

The performance chart graphically compares the portfolios' total return
performance with a selected investment index. Remember, however, that an index
may reflect the performance of securities the portfolio may not hold. Also, the
index does not deduct investment advisory fees and other fund expenses, whereas
your portfolio does. Individuals cannot buy an unmanaged index fund without
incurring some charges and expenses.

FEDERAL INCOME TAX INFORMATION

The information set forth below is for the portfolio's fiscal year as required
by federal tax law. Shareholders, however, must report distributions on a
calendar year basis for income tax purposes which may include distributions for
portions of two fiscal years of the portfolios. Accordingly, the information
needed by shareholders for income tax purposes will be sent to them in early
1996. Shareholders may wish to consult a tax advisor on how to report
distributions for state and local purposes.

Special Cash Portfolio paid income distributions, taxable as dividend income, of
which none qualified for deduction by corporations. Detailed below are the per
share distributions made for the year ended October 31, 1995.

SPECIAL PORTFOLIOS -- CASH PORFOLIO

<TABLE>
<CAPTION>
Ordinary Income
Per Share
<S> <C>
- ------------------------------------------------

December 23, 1994 $ 0.13
March 24, 1995 0.14
June 23, 1995 0.14
September 25, 1995 0.14
- ------------------------------------------------
Total Distributions $ 0.55
- ------------------------------------------------
</TABLE>

SPECIAL PORTFOLIOS -- STOCK PORTFOLIO

<TABLE>
<CAPTION>
Long-Term
Capital Gain
Per Share
<S> <C>
- ----------------------------------------------
December 16, 1994 $ 0.186
- ----------------------------------------------
</TABLE>
<PAGE>
SPECIAL PORTFOLIOS, INC.
DEAR SHAREHOLDER,

We're pleased to present the Special Portfolios annual report for the period
ended October 31, 1995.

ECONOMIC REVIEW AND INVESTMENT STRATEGIES

The stock market moved sharply higher for most of the fiscal year under review.
The major factors behind this gain have been relatively low and declining
inflation, stable to lower interest rates and surprisingly strong corporate
profits. Another positive influence was the perception of a sincere and
potentially successful effort to address the U.S. budget and trade deficits, as
well as its income tax structure. Also, a supporting factor may have been the
growing understanding that U.S. corporations have become the world's lowest cost
producers and technological leaders in many, if not most, industries.

Looking ahead these forces remain in place, with one exception. As economic
activity slows, it will be difficult to maintain the recent pace of corporate
profit growth. This could impede the progress of the stock market unless it gets
some reassurance in the form of lower interest rates. With only moderate growth
of the economy and very low rates of inflation, our view is that interest rates
should stay at their recent low levels, or possibly go somewhat lower.
Nevertheless, it will be incumbent on us as portfolio managers to make certain
that the companies we select can keep growing earnings at expected rates
throughout the period ahead.

PORTFOLIO STRATEGIES
SPECIAL CASH

Our primary concerns in managing the Special Cash Fund are quality, safety and
liquidity. Our approved list of eligible investments continues to emphasize high
quality domestic issuers. With short-term rates relatively stable recently, our
strategy has been to maintain an average maturity of less than 300 days.

CASH PORTFOLIO
TOP TEN HOLDINGS AS OF 10/31/95

<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
<C> <S> <C>
- -------------------------------------------------------------------------------
1. U.S. Treasury Note (6.00%) 1996 5.9%
2. U.S. West Capital Funding (8.00%) 1996 5.0%
3. Federal Home Loan Bank (6.125%) 1996 4.9%
4. Xerox Credit Corp. (6.25%) 1996 4.9%
5. CIT Group Holdings, Inc. (5.65%) 1995 4.7%
6. Texaco Capital Corp. (9.00%) 1996 4.4%
7. Phillip Morris Companies, Inc. (8.875%) 1996 4.4%
8. General Electric Capital Corp. (8.00%) 1997 4.0%
9. Carolina Power & Light Co. (7.90%) 1996 4.0%
10. Nordstrom Credit Corp. (8.35%) 1996 4.0%
</TABLE>

CASH PORTFOLIO
PORTFOLIO COMPOSITION BY INDUSTRY AS OF 10/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Consumer Finance 15.6%
Banks 11.8%
Cash Equivalents/Receivables 11.6%
U.S. Treasury Securities 9.8%
Captive Equipment Finance 7.9%
Utilities-Electric 7.9%
Captive Auto Finance 7.8%
Utilities-Telephone 5.0%
Finance Companies 4.9%
Other Direct Federal Obligations 4.9%
Captive Oil Finance 4.4%
Tobacco 4.4%
Retail-Miscellaneous 4.0%
</TABLE>

1
<PAGE>
STOCK PORTFOLIO
TOP TEN HOLDINGS AS OF 10/31/95

<TABLE>
<CAPTION>
Percent of
Stocks Net Assets
<C> <S> <C>
- --------------------------------------------------------------------------
1. 3Com Corp. 6.9%
2. Cisco Systems, Inc. 5.3%
3. Oracle Corp. 5.0%
4. Informix Corp. 4.1%
5. Microsoft Corp. 3.9%
6. Tellabs, Inc. 3.5%
7. Lone Star Steakhouse and Saloon, Inc. 2.7%
8. Solectron Corp. 2.5%
9. Sterling Software, Inc. 2.4%
10. Worldcom, Inc. 2.3%
</TABLE>

CASH PORTFOLIO
Value of $10,000 invested November 1, 1989

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
LEHMAN BROTHERS
INTERMEDIATE GOV'T LEHMAN BROTHERS 1-3 YR
INDEX*** GOV'T BOND INDEX** CASH PORTFOLIO
<S> <C> <C> <C>
11/1/89 10,000 10,000 10,000
90 10,782 10,884 10,791
91 12,218 12,106 11,684
92 13,422 13,089 12,469
93 14,658 13,845 13,061
94 14,424 14,005 13,434
95 16,138 15,266 14,398
</TABLE>

Annual period ended October 31

Past performance is not indicative of future performance. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend
and capital gains distributions. Cash Portfolio does not have a
sales charge.
** An unmanaged index of government bonds with maturities of one to
three years.
*** An unmanaged index of government bonds with an average maturity of
three to four years.
@ Date shares were first offered to the public.

SPECIAL STOCK

The Special Stock Portfolio invests primarily in medium-size companies that are
growing their revenues and earnings at significantly above average rates. The
25.4 percent return for the year ended October 31, 1995, can be mainly
attributed to the sizeable holding of technology stocks.

Approximately one-half of the portfolio is diversified across a wide range of
technology-based businesses. The common denominator is that they are all
benefiting from U.S. corporations looking to improve productivity, as well as
compete more effectively in highly competitive global markets.

More recently, consumer markets have begun to grow rapidly, as individuals seek
to moderate the complexity of modern life. We believe these trends are secular
and not just cyclical in nature; a condition that will be evidenced worldwide
over time.

IN CLOSING

We appreciate your investment in the Special Portfolios. If you have any
questions, please call us or talk with your investment professional.

Sincerely,

[SIG]
Dean C. Kopperud
President

[SIG]
Howard G. Hudson
Vice President

[SIG]
Stephen M. Poling
Vice President

November 21, 1995

2
<PAGE>
STOCK PORTFOLIO

PORTFOLIO COMPOSITION BY INDUSTRY AS OF 10/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Telecommunications 20.5%
Computer-Software 17.7%
Other 12.0%
Retail-Miscellaneous 6.9%
Electronic-Semiconductor and
Capacitor 6.4%
Cash Equivalents/Receivables 6.3%
Health Care Services 6.1%
Electronic-Controls and Equipment 6.0%
Telephone Services 5.2%
Electronic-Communication Security 5.0%
Office Equipment and Supplies 4.0%
Restaurants and Franchising 3.9%
</TABLE>

STOCK PORTFOLIO

Value of $10,000 invested January 2, 1966

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
S&P 500*** STOCK PORTFOLIO
<S> <C> <C>
1/2/66 10,000 10,000
10/31/66 8,907 8,020
10/31/67 10,779 13,825
10/31/68 12,252 16,323
10/31/69 11,888 14,130
10/31/70 10,568 12,065
10/31/71 12,352 14,489
10/31/72 15,060 19,140
10/31/73 15,061 17,731
10/31/74 10,719 13,062
10/31/75 13,510 14,525
10/31/76 16,228 15,889
10/31/77 15,222 15,286
10/31/78 16,195 17,660
10/31/79 18,680 23,302
10/31/80 24,668 39,639
10/31/81 24,799 41,866
10/31/82 28,820 51,162
10/31/83 36,864 67,529
10/31/84 39,256 64,995
10/31/85 46,945 75,644
10/31/86 62,474 108,840
10/31/87 66,586 97,642
10/31/88 76,400 104,996
10/31/89 96,494 149,516
10/31/90 89,274 128,116
10/31/91 119,193 213,378
10/31/92 131,031 230,570
10/31/93 150,516 279,329
10/31/94 156,450 260,118
10/31/95 197,748 326,219
</TABLE>

Annual period ended October 31
Past performance is not indicative of future performance. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions. Stock Portfolio does not have a sales
charge.
** An unmanaged index of 500 common stocks.
@ Date shares were first offered to the public.
STOCK PORTFOLIO
PORTFOLIO CHANGES FOR THE YEAR ENDED 10/31/95

ADDITIONS:
ADC Telecommunications, Inc.
America Online, Inc.
Andrew Corp.
Applied Materials, Inc.
Bay Networks, Inc.
Cypress Semiconductor Corp.
First Data Corp.
HBO & Co.
Harrah's Entertainment, Inc.
LSI Logic Corp.
Medaphis Corp.
Micron Technology, Inc.
Motorola, Inc.
Nokia Corp. ADR
Oxford Health Plans, Inc.
Petroleum Geo-Services ADS
Promus Hotel Corp.
Qualcomm, Inc.
Staples, Inc.
Tommy Hilfiger Corp.
Vencor, Inc.

ELIMINATIONS:
Acclaim Entertainment, Inc.
Brinker International, Inc.
Buffets, Inc.
Centocor, Inc.
Compuware Corp.
E M C Corp.
First Financial Management Corp.
Forest Laboratories, Inc.
Grupo Televisa, S.A. de C.V. ADR
International Game Technology
Landmark Graphics Corp.
Newbridge Networks Corp.
Price/Costco, Inc.
Promus Companies, Inc.
Quantum Health Resources, Inc.
Sensormatic Electronics Corp.
Sybase, Inc.
Value Health, Inc.

3
<PAGE>
SPECIAL PORTFOLIOS, INC.
Cash Portfolio
Schedule of Investments
October 31, 1995

CORPORATE BONDS AND NOTES-INVESTMENT GRADE-73.72%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
- ------------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
BANKS-11.80%
$ 1,000,000 Bankamerica Corp., 6.00% Note 7-15-1997..................... A+ $ 1,002,600 $ 1,000,590
1,000,000 Barnett Bank, Inc., 7.10% Medium Term Note 4-1-1997......... A 1,017,070 1,014,319
1,000,000 Nationsbank Corp., 5.375% Sr Note 12-1-1995................. A 1,016,120 999,573
------------- -------------
3,035,790 3,014,482
------------- -------------
CAPTIVE AUTO FINANCE-7.82%
1,000,000 Ford Motor Credit Corp., 5.05% Medium Term Note 3-25-1996... A+ 984,860 997,061
1,000,000 General Motors Acceptance Corp., 4.75% Medium Term Note
11-15-1995................................................ A- 998,210 999,529
------------- -------------
1,983,070 1,996,590
------------- -------------
CAPTIVE EQUIPMENT FINANCE-7.89%
1,000,000 AT&T Capital Corp., 5.125% Medium Term Note 2-21-1997....... A 947,470 989,539
1,000,000 General Electric Capital Corp., 8.00% Medium Term Note
2-1-1997.................................................. AAA 1,003,640 1,024,858
------------- -------------
1,951,110 2,014,397
------------- -------------
CAPTIVE OIL FINANCE-4.44%
1,100,000 Texaco Capital Corp., 9.00% 11-15-1996...................... A+ 1,139,952 1,133,222
------------- -------------
CONSUMER FINANCE-15.57%
1,000,000 American General Finance, 6.53% Note 5-30-1997.............. A+ 1,000,000 1,008,329
1,200,000 CIT Group Holdings, Inc., 5.65% Note 11-15-1995............. A+ 1,226,880 1,199,915
750,000 Commercial Credit Co., 6.375% Note 1-1-1996................. A+ 776,678 750,518
1,000,000 Household Finance Co., 7.80% Sr Note 11-1-1996.............. A 1,001,620 1,017,745
------------- -------------
4,005,178 3,976,507
------------- -------------
FINANCE COMPANIES-4.90%
1,250,000 Xerox Credit Corp., 6.25% Note 1-15-1996.................... A 1,255,675 1,250,738
------------- -------------
RETAIL-MISCELLANEOUS-3.99%
1,000,000 Nordstrom Credit Corp., 8.35% Medium Term Note 8-15-1996.... A+ 1,028,300 1,018,149
------------- -------------
TOBACCO-4.39%
1,100,000 Phillip Morris Companies, Inc., 8.875% Medium Term Note
7-1-1996.................................................. A 1,132,758 1,119,655
------------- -------------
UTILITIES-ELECTRIC-7.93%
1,000,000 Carolina Power & Light Co., 7.90% Medium Term Note
12-27-1996................................................ A 1,000,537 1,020,739
1,000,000 Texas Utilities, 6.375% First Mtg Note 8-1-1997............. BBB+ 1,001,710 1,003,661
------------- -------------
2,002,247 2,024,400
------------- -------------
UTILITIES-TELEPHONE-4.99%
1,250,000 U.S. West Capital Funding, Inc., 8.00% Deb 10-15-1996....... A+ 1,259,400 1,274,046
------------- -------------
TOTAL CORPORATE BONDS AND NOTES - INVESTMENT GRADE.......... $ 18,793,480 $ 18,822,186
------------- -------------
------------- -------------
</TABLE>

U.S. GOVERNMENT SECURITIES-14.70%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (a) Value (b)
- ------------- ------------- -------------
<C> <S> <C> <C>
OTHER DIRECT FEDERAL OBLIGATIONS-4.91%
FEDERAL HOME LOAN BANK:
$ 1,250,000 6.125% Global Registered Note 1996.......................... $ 1,247,325 $ 1,253,766
------------- -------------
U.S. TREASURY SECURITIES-9.79%
NOTES:
1,000,000 4.00% 1996.................................................. 992,500 995,936
1,500,000 6.00% 1996.................................................. 1,494,609 1,504,217
------------- -------------
TOTAL U.S. TREASURY SECURITIES.............................. 2,487,109 2,500,153
------------- -------------
TOTAL U.S. GOVERNMENT SECURITIES............................ 3,734,434 3,753,919
------------- -------------
TOTAL DEBT SECURITIES....................................... $ 22,527,914 $ 22,576,105
------------- -------------
------------- -------------
</TABLE>

4
<PAGE>
SHORT-TERM INVESTMENTS-9.96%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
- ------------- -------------
<C> <S> <C>
BANKS-2.14%
$ 546,000 First Trust Money Market Variable Rate Time Deposit, Current
rate -- 5.62%............................................. $ 546,000
-------------
BROKERAGE AND INVESTMENT-0.69%
178,000 Goldman Sachs Master Variable Rate Note, Current
rate -- 5.91%............................................. 178,000
-------------
CONSUMER FINANCING-4.23%
1,100,000 American Express Credit Corp., 5.87% 2-27-1996.............. 1,079,347
-------------
DIVERSIFIED FINANCE-2.90%
741,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. 741,000
-------------
TOTAL SHORT-TERM INVESTMENTS................................ 2,544,347
-------------
TOTAL INVESTMENTS IN SECURITIES (COST: $25,072,261)(A)...... $ 25,120,452
-------------
-------------
<FN>

(a) At October 31, 1995, the cost of securities for federal
income tax purposes was $25,072,261 and the aggregate gross
unrealized appreciation and depreciation based on that cost
was:
Unrealized appreciation......................... $ 157,545
Unrealized depreciation......................... (109,354)
-----------
Net unrealized appreciation..................... $ 48,191
-----------
(b) See Note 1 of accompanying Notes to Financial Statements
regarding valuation of securities.
(c) Note: Percentage of investments as shown is the ratio of
the total market value to total net assets.
</TABLE>

5
<PAGE>
SPECIAL PORTFOLIOS, INC.
Stock Portfolio
Schedule of Investments
October 31, 1995

COMMON STOCKS-93.72%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------------- ------------- -------------
<C> <S> <C> <C>
APPAREL-0.25%
6,000 Tommy Hilfiger Corp. (a).................................... $ 121,500 $ 228,750
------------- -------------
BIOMEDICS, GENETICS RESEARCH AND DEVELOPMENT-1.09%
16,500 Biogen, Inc. (a)............................................ 878,609 1,010,625
------------- -------------
BROADCASTING-0.43%
5,000 America Online, Inc. (a).................................... 209,775 400,000
------------- -------------
BUSINESS SERVICES AND SUPPLIES-1.25%
17,445 First Data Corp............................................. 715,454 1,153,544
------------- -------------
COMPUTER-SOFTWARE-17.69%
45,200 BMC Software, Inc. (a)...................................... 829,327 1,610,250
10,000 HBO & Co.................................................... 368,412 707,500
130,000 Informix Corp. (a).......................................... 1,374,610 3,786,250
36,050 Microsoft Corp. (a)......................................... 1,040,321 3,605,000
107,100 Oracle Corp. (a)............................................ 566,678 4,672,237
30,000 Parametric Technology Corp. (a)............................. 870,340 2,006,250
------------- -------------
5,049,688 16,387,487
------------- -------------
ELECTRONIC-COMMUNICATION SECURITY-4.98%
29,000 ADC Telecommunications, Inc. (a)............................ 943,938 1,160,000
15,800 Andrew Corp. (a)............................................ 763,817 667,550
13,000 Bay Networks, Inc. (a)...................................... 720,969 861,250
50,000 Qualcomm, Inc. (a).......................................... 2,025,517 1,925,000
------------- -------------
4,454,241 4,613,800
------------- -------------
ELECTRONIC-CONTROLS AND EQUIPMENT-5.99%
59,000 American Power Conversion Corp. (a)......................... 943,526 604,750
14,000 Applied Materials, Inc. (a)................................. 726,908 701,750
31,500 Lam Research Corp. (a)...................................... 1,057,222 1,917,562
57,800 Solectron Corp. (a)......................................... 1,600,666 2,326,450
------------- -------------
4,328,322 5,550,512
------------- -------------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR-6.37%
27,000 Cypress Semiconductor Corp. (a)............................. 791,318 951,750
27,000 Intel Corp.................................................. 605,205 1,886,625
20,000 LSI Logic Corp. (a)......................................... 1,089,960 942,500
30,000 Micron Technology, Inc...................................... 830,841 2,118,750
------------- -------------
3,317,324 5,899,625
------------- -------------
FINANCE COMPANIES-2.91%
25,000 Franklin Resources, Inc..................................... 780,125 1,268,750
74,000 Mercury Finance Co.......................................... 1,213,738 1,424,500
------------- -------------
1,993,863 2,693,250
------------- -------------
HEALTH CARE SERVICES-6.09%
15,000 Medaphis Corp. (a).......................................... 428,802 476,250
19,000 Oxford Health Plans, Inc. (a)............................... 839,345 1,486,750
14,100 PacifiCare Health Systems, Inc. Class B (a)................. 644,201 1,025,775
27,000 U.S. HealthCare, Inc........................................ 957,245 1,039,500
20,500 United Healthcare Corp...................................... 797,731 1,089,062
19,000 Vencor, Inc. (a)............................................ 595,218 527,250
------------- -------------
4,262,542 5,644,587
------------- -------------
HOTEL AND MOTEL-0.80%
20,800 Harrah's Entertainment, Inc. (a)............................ 455,927 514,800
10,400 Promus Hotel Corp. (a)...................................... 189,798 228,800
------------- -------------
645,725 743,600
------------- -------------
MACHINERY-OIL AND WELL-0.84%
40,000 Petroleum Geo-Services A/S ADS (a).......................... 959,892 775,000
------------- -------------
</TABLE>

6
<PAGE>
COMMON STOCKS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Cost (b) Value (c)
- ------------- ------------- -------------
<C> <S> <C> <C>
MISCELLANEOUS-2.18%
58,350 CUC International, Inc. (a)................................. $ 1,012,449 $ 2,020,369
------------- -------------
OFFICE EQUIPMENT AND SUPPLIES-4.01%
27,000 Compaq Computer Corp. (a)................................... 1,009,940 1,505,250
47,900 Sterling Software, Inc. (a)................................. 875,723 2,209,387
------------- -------------
1,885,663 3,714,637
------------- -------------
PUBLISHING-0.97%
14,600 Scholastic Corp. (a)........................................ 743,383 901,550
------------- -------------
RESTAURANTS AND FRANCHISING-3.93%
64,300 Lone Star Steakhouse & Saloon, Inc. (a)..................... 1,085,535 2,483,588
36,900 Outback Steakhouse, Inc. (a)................................ 590,369 1,157,738
------------- -------------
1,675,904 3,641,326
------------- -------------
RETAIL-DEPARTMENT STORES-1.40%
14,700 Kohl's Corp. (a)............................................ 472,458 667,013
29,000 Wal-Mart Stores, Inc........................................ 283,669 627,125
------------- -------------
756,127 1,294,138
------------- -------------
RETAIL-MISCELLANEOUS-6.91%
26,200 Barnes & Noble, Inc. (a).................................... 658,732 956,300
34,966 Home Depot, Inc............................................. 340,449 1,302,484
27,000 Lowe's Companies, Inc....................................... 1,010,234 729,000
69,525 Office Depot, Inc. (a)...................................... 586,500 1,990,153
53,250 Staples, Inc. (a)........................................... 971,085 1,417,781
------------- -------------
3,567,000 6,395,718
------------- -------------
TELECOMMUNICATIONS-20.48%
135,200 3Com Corp. (a).............................................. 538,095 6,354,400
63,800 Cisco Systems, Inc. (a)..................................... 225,216 4,944,500
50,400 DSC Communications Corp. (a)................................ 1,582,612 1,864,800
14,500 MFS Communications Co. (a).................................. 609,687 585,438
19,000 Motorola, Inc............................................... 1,038,710 1,246,875
14,000 Nokia Corp. ADR............................................. 922,256 780,500
94,000 Tellabs, Inc.(a)............................................ 1,073,247 3,196,000
------------- -------------
5,989,823 18,972,513
------------- -------------
TELEPHONE SERVICES-5.15%
53,000 Mobile Telecommunications Technologies Corp. (a)............ 1,152,141 1,503,875
50,000 Paging Network, Inc. (a).................................... 756,250 1,150,000
65,000 Worldcom, Inc. (a).......................................... 1,502,463 2,120,625
------------- -------------
3,410,854 4,774,500
------------- -------------
TOTAL COMMON STOCKS......................................... $ 45,978,138 $ 86,815,531
------------- -------------
------------- -------------
</TABLE>

SHORT-TERM INVESTMENTS-6.13%

7
<PAGE>
SPECIAL PORTFOLIOS, INC.
Stock Portfolio (continued)
Schedule of Investments
October 31, 1995

SHORT-TERM INVESTMENTS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value (c)
- ------------- -------------
<C> <S> <C>
DIVERSIFIED FINANCE-0.40%
$ 366,000 Associates Corp. Master Variable Rate Note, Current
rate -- 5.79%............................................. $ 366,000
-------------
TOTAL SHORT-TERM INVESTMENTS................................ 5,674,000
-------------
TOTAL INVESTMENTS IN SECURITIES (COST: $51,652,138)(B)...... $ 92,489,531
-------------
-------------
<FN>
(a) Presently not paying dividend income.
(b) At October 31, 1995, the cost of securities for federal income tax purposes was
$51,652,138 and the aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation........................................ $42,245,672
Unrealized depreciation........................................ (1,408,279)
-----------
Net unrealized appreciation.................................... $40,837,393
-----------
(c) See Note 1 of accompanying Notes to Financial Statements regarding valuation of
securities.
(d) Note: Percentage of investments as shown is the ratio of the total market value to
total net assets. Market value of investments in foreign securities represents 1.68%
of net assets as of October 31, 1995.
</TABLE>

8
<PAGE>
SPECIAL PORTFOLIOS, INC.

Statements of Assets and Liabilities

October 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CASH STOCK
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities, as detailed in the accompanying
schedules, at market (cost $25,072,261 and $51,652,138;
respectively) (Note 1).................................. $ 25,120,452 $ 92,489,531
Cash on deposit with custodian............................ -- 747
Receivables:
Investment securities sold.............................. -- 210,043
Interest and dividends.................................. 430,698 15,889
Deferred registration costs (Note 1).................... 7,996 9,076
Prepaid expenses........................................ 1,733 153
------------- -------------
TOTAL ASSETS................................................ 25,560,879 92,725,439
------------- -------------
LIABILITIES:
Bank overdraft.......................................... 15,834 --
Payable for investment advisory and management fees
(Note 2)............................................... 6,473 79,034
Accounts payable and accrued expenses................... 5,645 12,541
------------- -------------
TOTAL LIABILITIES........................................... 27,952 91,575
------------- -------------
NET ASSETS:
Net proceeds of capital stock, par value $.01 per
share-authorized 15,000,000,000; outstanding
2,669,309;and 2,188,704 shares, respectively........... 26,756,673 47,513,839
Unrealized appreciation of investments.................. 48,191 40,837,393
Undistributed net investment income..................... 171,206 --
Accumulated net realized gain (loss) from sale of
investments............................................ (1,443,143) 4,282,632
------------- -------------
TOTAL NET ASSETS............................................ $ 25,532,927 $ 92,633,864
------------- -------------
NET ASSET VALUE PER SHARE................................... $ 9.57 $ 42.32
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

9
<PAGE>
SPECIAL PORTFOLIOS, INC.

Statements of Operations

For the Year Ended October 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CASH STOCK
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS):
Income:
Interest income......................................... $ 1,707,519 $ 690,632
Dividend Income......................................... -- 97,350
------------- -------------
Total income.............................................. 1,707,519 787,982
------------- -------------
Expenses:
Investment advisory and management fees (Note 2)........ 81,479 848,470
Registration fees....................................... 16,170 15,123
Custodian fees.......................................... 9,800 22,000
Directors' fees and expenses............................ 4,001 14,600
Legal and auditing fees (Note 2)........................ 15,300 26,200
Shareholders' notices and reports....................... 920 11,701
Other................................................... 3,250 6,985
------------- -------------
Total expenses............................................ 130,920 945,079
Less fees waived by the advisor (Note 2).................. (26,600) --
------------- -------------
Net Expenses.............................................. 104,320 945,079
------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 1,603,199 (157,097)
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1):
Net realized gain (loss) from security transactions....... (380,441) 4,286,398
Net change in unrealized appreciation of investments...... 647,983 15,893,140
------------- -------------
NET GAIN ON INVESTMENTS..................................... 267,542 20,179,538
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,870,741 $ 20,022,441
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

10
<PAGE>
SPECIAL PORTFOLIOS, INC.

Statements of Changes in Net Assets

CASH PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income..................................... $ 1,603,199 $ 1,584,251
Net realized loss from security transactions.............. (380,441) (729,995)
Net change in unrealized appreciation (depreciation) of
investments in securities............................... 647,983 (84,737)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 1,870,741 769,519
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................ (1,556,690) (1,673,229)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of 670,321 and 816,726 shares,
respectively............................................ 6,334,839 7,847,847
Proceeds from 163,965 and 175,284 shares issued as a
result of reinvested dividends.......................... 1,555,005 1,671,529
Less cost of repurchase of 1,078,240 and 694,362 shares,
respectively............................................ (10,241,486) (6,648,707)
------------- -------------
NET INCREASE (DECREASE) OF (243,954) AND 297,648 SHARES,
RESPECTIVELY.............................................. (2,351,642) 2,870,669
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (2,037,591) 1,966,959
NET ASSETS:
Beginning of year......................................... 27,570,518 25,603,559
------------- -------------
End of year (includes undistributed net investment income
of $171,206 and $124,697, respectively)................. $ 25,532,927 $ 27,570,518
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

11
<PAGE>
SPECIAL PORTFOLIOS, INC.

Statement of Changes in Net Assets

STOCK PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss....................................... $ (157,097) $ (267,886)
Net realized gain from security transactions.............. 4,286,398 418,002
Net change in unrealized appreciation (depreciation) of
investments in securities............................... 15,893,140 (5,570,821)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ 20,022,441 (5,420,705)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments........................ (420,000) (4,190,750)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of 308,505 and 322,972 shares,
respectively............................................ 10,904,778 11,339,474
Proceeds from 12,916 and 116,261 shares issued as a result
of reinvested dividends................................. 415,237 4,137,735
Less cost of repurchase of 356,272 and 197,871 shares,
respectively............................................ (13,753,664) (6,892,184)
------------- -------------
NET INCREASE (DECREASE) OF (34,851) AND 241,362 SHARES,
RESPECTIVELY.............................................. (2,433,649) 8,585,025
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 17,168,792 (1,026,430)
NET ASSETS:
Beginning of year......................................... 75,465,072 76,491,502
------------- -------------
End of year............................................... $ 92,633,864 $ 75,465,072
------------- -------------
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

12
<PAGE>
SPECIAL PORTFOLIOS, INC.

Notes to Financial Statements

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Special Portfolios, Inc. is registered under the Investment Company Act of
1940 (as amended) as an open-end diversified management investment company.
Special Portfolios, Inc. currently consists of a series of two separate
portfolios, the Cash Portfolio and the Stock Portfolio. The primary
objectives of the Cash Portfolio are high levels of capital stability and
liquidity, and a high level of current income. The primary objectives of the
Stock Portfolio are appreciation of capital and realization of both long and
short-term capital gains.

SECURITY VALUATION: Investments in securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sales price; listed securities for which no sale was reported are
valued at the previous day's last sale price on that exchange; and
over-the-counter securities for which no sale was reported are valued at the
last reported bid price. Long-term debt securities are valued at current
market prices on the basis of valuations furnished by an independent pricing
service. Short-term investments with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued at
amortized cost.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Realized
security gains and losses are determined using the identified cost method.
For financial reporting purposes, except for original issue discount, long
term bond discount and premiums are not amortized.

For the year ended October 31, 1995, the cost of purchases and proceeds from
sales of securities (other than short-term securities) aggregated $9,234,048
and $12,346,980 for Cash Portfolio, and $21,786,945 and $17,952,763 for Stock
Portfolio, respectively.

INCOME TAXES: The portfolios intend to qualify, under the Internal Revenue
Code, as regulated investment companies and if so qualified, will not have to
pay federal income taxes to the extent their taxable net income is
distributed. On a calendar year basis, the portfolios intend to distribute
substantially all of their net investment income and realized gains, if any,
to avoid the payment of federal excise taxes. For federal income tax purposes
Cash Portfolio had a capital loss carryover of $1,443,143 at October 31,
1995, which if not offset by subsequent capital gains will expire as follows:

It is unlikely the Board of Directors will authorize a distribution of any
realized gains until the available capital loss carryover has been offset or
expires.

Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes because of wash sale transactions and
other book-to-tax differences. The character of distributions made during the
year from net investment income or net realized gains may therefore differ
from their ultimate characterization for federal income tax purposes. Also,
due to the timing of dividend distributions, the fiscal year in which amounts
are distributed may differ from the year that the income or realized gains
(losses) were recorded by the fund.

On the Statement of Assets & Liabilities, for Stock Portfolio, due to
permanent book-to-tax differences, accumulated net investment loss decreased
by $157,097, resulting in a net reclassification adjustment to reduce paid-in
capital by $157,097.

DEFERRED COSTS: Registration fees are deferred and charged to income over the
registration period.

INCOME AND CAPITAL GAINS DISTRIBUTIONS: It is the policy of Stock Portfolio
to pay annual distributions and Cash Portfolio to pay quarterly distributions
from net investment income and make distributions of any realized capital
gains as required by law. These distributions are recorded on the record date
and are reinvested in additional shares of the portfolio at net asset value
or payable in cash without any charge to the shareholder.

2. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment adviser
for the portfolios. Investment advisory and management fees for the Cash
Portfolio are computed at an annual rate of .3% of the first $500 million of
average daily net assets, and .25% of net assets in excess of $500 million.
Investment advisory and management fees for the Stock Portfolio are computed
at an annual rate of 1% of the first $100 million of average daily net
assets, .8% for the next $150 million, and .7% of net assets in excess of
$250 million.

Legal fees and expenses aggregating $3,600 and $9,500 for Cash Portfolio and
Stock Portfolio, respectively, for the year ended October 31, 1995, were paid
to a law firm of which the secretary of the fund is a partner.

Effective November 1, 1991, Advisers has voluntarily agreed to waive a
portion of the advisory fee equal to .1 of 1% of average net assets otherwise
payable by Cash Portfolio until Cash Portfolio's net assets first reach $50
million.

13
<PAGE>
SPECIAL PORTFOLIOS, INC.

Notes to Financial Statements (continued)

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

3. FINANCIAL HIGHLIGHTS: Selected per share and other historical data was as
follows:

<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended October 31,
---------------------------------------------------------
CASH PORTFOLIO 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year..................... $ 9.46 $ 9.79 $ 10.03 $ 10.20 $ 10.09
--------- --------- --------- --------- ---------
Operations:
Investment income-net................................ .57 .56 .70 .81 .72
Net realized and unrealized gain (loss) on
investments........................................ .09 (.29) (.24) (.15) .09
--------- --------- --------- --------- ---------
Total from operations.................................. .66 .27 .46 .66 .81
--------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net........................... (.55) (.60) (.70) (.83) (.70)
--------- --------- --------- --------- ---------
Net asset value, end of year........................... $ 9.57 $ 9.46 $ 9.79 $ 10.03 $ 10.20
--------- --------- --------- --------- ---------
Total return@.......................................... 7.18% 2.85% 4.74% 6.73% 8.28%
Net assets at end of period (000's omitted)............ $ 25,533 $ 27,571 $ 25,604 $ 21,901 $ 20,326
Ratio of expenses to average daily net assets.......... .38%* .42%* .39%* .40%* .52%
Ratio of net investment income to average daily net
assets................................................ 5.90%* 5.90%* 7.04%* 7.55%* 7.36%
Portfolio turnover rate................................ 37% 58% 29% 69% 66%
</TABLE>

*For the years ended October 31, 1995, 1994, 1993 and 1992, the advisor
voluntarily waived a portion of the investment advisory and management fee.
Had the fund paid all the advisory fee, the ratios of expenses and net
investment income to total net assets would have been .48% and 5.80%; .52%
and 5.80%; .49% and 6.94%; .50% and 7.45% for 1995, 1994, 1993 and 1992,
respectively.
@These are the Fund's total returns during the years, including reinvestment of
all dividend and capital gains distributions.

<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended October 31,
---------------------------------------------------------
STOCK PORTFOLIO 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year..................... $ 33.94 $ 38.59 $ 33.22 $ 31.51 $ 20.65
--------- --------- --------- --------- ---------
Operations:
Investment income (loss)-net......................... (.07) (.12) (.15) .04 .06
Net realized and unrealized gains (losses) on
investments........................................ 8.64 (2.44) 6.97 2.48 12.75
--------- --------- --------- --------- ---------
Total from operations.................................. 8.57 (2.56) 6.82 2.52 12.81
--------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net........................... -- -- (.03) (.03) (.34)
From net realized gains.............................. (.19) (2.09) (1.42) (.78) (1.61)
--------- --------- --------- --------- ---------
Total distributions to shareholders.................... (.19) (2.09) (1.45) (.81) (1.95)
--------- --------- --------- --------- ---------
Net asset value, end of year........................... $ 42.32 $ 33.94 $ 38.59 $ 33.22 $ 31.51
--------- --------- --------- --------- ---------
Total return@.......................................... 25.41% (6.88%) 21.15% 8.05% 66.55%
Net assets at end of period (000's omitted)............ $ 92,634 $ 75,465 $ 76,492 $ 61,586 $ 53,201
Ratio of expenses to average daily net assets.......... 1.11% 1.15% 1.13% 1.13% 1.21%
Ratio of net investment income (loss) to average daily
net assets............................................ (.19%) (.36%) (.41%) .13% .19%
Portfolio turnover rate................................ 25% 26% 37% 38% 45%
</TABLE>

@These are the Fund's total returns during the years, including reinvestment of
all dividend and capital gains distributions.

14
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders

Special Portfolios, Inc.:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of Cash Portfolio and Stock
Portfolio (portfolios within Special Portfolios, Inc.) as of October 31, 1995
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period ended
October 31, 1995, and the financial highlights presented in footnote 3 to the
financial statements. These financial statements and the financial highlights
are the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities sold but not delivered, we request confirmations
from brokers, and where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Cash Portfolio and Stock Portfolio at October 31, 1995, and the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period ended October 31, 1995, and the financial
highlights presented in footnote 3 to the financial statements, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
December 1, 1995

15
<PAGE>
DIRECTORS

RICHARD W. CUTTING
CPA and Financial Consultant

ALLEN R. FREEDMAN
Chairman and Chief Executive Officer
Fortis, Inc.;
Managing Director of
Fortis International, N.V.

DR. ROBERT M. GAVIN
President
Macalester College

BENJAMIN S. JAFFRAY
Chairman
Sheffield Group, Ltd.

JEAN L. KING
President
Communi-King

DEAN C. KOPPERUD
Chief Executive Officer and Director
Fortis Advisers, Inc.
President and Director
Fortis Investors, Inc.
Senior Vice President and
Director of
Fortis Benefits Insurance
Company and
Time Insurance
Company

EDWARD M. MAHONEY
Prior to January, 1995, Chairman and Chief Executive Officer
Fortis Advisers, Inc.
Fortis Investors, Inc.

ROBB L. PRINCE
Prior to July, 1995,
Vice President and Treasurer
Jostens, Inc.

LEONARD J. SANTOW
Principal
Griggs & Santow, Inc.

JOSEPH M. WIKLER
Investment Consultant and Private Investor
Prior to January, 1994, Director of Research, Chief Investment Officer,
Principal, and Director
The Rothschild Co.

DEAN C. KOPPERUD
President and Director

ROBERT W. BELTZ, JR.
Vice President

JAMES S. BYRD
Vice President

CHARLES J. DUDLEY
Vice President

THOMAS D. GUALDONI
Vice President

MAROUN M. HAYEK
Vice President

HOWARD G. HUDSON
Vice President

ROBERT C. LINDBERG
Vice President

LARRY A. MEDIN
Vice President

KEVIN J. MICHELS
Vice President

JON H. NICHOLSON
Vice President

JOHN W. NORTON
Vice President

FRED OBSER
Vice President

DENNIS M. OTT
Vice President

DAVID A. PETERSON
Vice President

NICHOLAS L. M. DE PEYSTER
Vice President

STEPHEN M. POLING
Vice President

STEPHEN M. RICKERT
Vice President

RICHARD P. ROCHE
Vice President

ANTHONY J. ROTONDI
Vice President

KEITH R. THOMSON
Vice President

CHRISTOPHER J. WOODS
Vice President

GARY N. YALEN
Vice President

MICHAEL J. RADMER
Secretary

TAMARA L. FAGELY
Treasurer

INVESTMENT MANAGER, REGISTRAR AND
TRANSFER AGENT
Fortis Advisers, Inc.
Box 64284
St. Paul, Minnesota 55164

PRINCIPAL UNDERWRITER
Fortis Investors, Inc.
Box 64284
St. Paul, Minnesota 55164

CUSTODIAN
Norwest Bank
Minnesota, N.A.
Minneapolis, Minnesota

GENERAL COUNSEL
Dorsey & Whitney P.L.L.P.
Minneapolis, Minnesota

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Minneapolis, Minnesota
THE USE OF THIS MATERIAL IS AUTHORIZED ONLY WHEN PRECEDED OR ACCOMPANIED BY A
PROSPECTUS.

16
<PAGE>

FORTIS FINANCIAL GROUP

Fortis Financial Group (FFG) is a premier provider of insurance and
investment portfolios whose fund manager, Fortis Advisers, Inc., has
established a nationwide reputation for money management. Through Fortis
Investors, Inc., FFG offers mutual funds, annuities and variable universal
life insurance. Traditional life insurance products are issued and
underwritten by Time Insurance Company and Fortis Benefits Insurance Company.

FFG is part of Fortis, Inc., a financial services company which owns or
manages approximately $10 billion in assets. Fortis, Inc., is an affiliate of
Fortis, a worldwide, diversified financial services group jointly owned by
Fortis AMEV of the Netherlands and Fortis AG of Belgium with worldwide assets
in excess of $125 billion.

Like the Fortis name, which comes from the Latin for STEADFAST, our focus
is on the long term in all we do: the relationships we build, the performance
we seek, the service we provide and the products we offer.

FORTIS-Registered Trademark- BULK RATE
FORTIS FINANCIAL GROUP US POSTAGE
P.O. BOX 64284 PAID
ST. PAUL, MN 55164 PERMIT NO. 3794
MINNEAPOLIS, MN

SPECIAL PORTFOLIOS

[LOGO]
PRINTED ON RECYCLED PAPER WITH
40% PRECONSUMER WASTE AND
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PLEASE RECYCLE.

95169 (ED. 12/95)
<PAGE>

COMBINATION OF
STOCK PORTFOLIO OF SPECIAL PORTFOLIOS, INC.
WITH AND INTO
FORTIS GROWTH FUND, INC.

INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS

The accompanying unaudited pro forma combining statement of assets and
liabilities, statement of operations and schedule of investments of the Stock
Portfolio of Special Portfolios, Inc. (the "Acquired Fund") and the Fortis
Growth Fund, Inc. (the "Acquiring Fund") reflect the accounts of the two
Funds at and for the 12-month period ended August 31, 1995. These statements
have been derived from the annual report for the Acquiring Fund as of August
31, 1995, and the underlying accounting records used in calculating daily net
asset values for the 12-month period ended August 31, 1995 for the Acquired
Fund. The pro forma combining statements have been prepared based on the
various fee structures of the Funds in existence as of August 31, 1995.

<PAGE>

PROFORMA STATEMENT OF ASSETS AND LIABILITIES
At August 31, 1995 ( Unaudited)

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING
FUND FUND
8/31/95 8/31/95 PROFORMA PROFORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
-------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Investments , at value $96,078,433 $679,498,745 $775,577,178
Cash 9,572 761 10,333
Receivables:
Investment securities sold 76,621 756,583 833,204
Interest and dividends 37,083 184,367 221,450
Subscriptions of capital stock 0 117,181 117,181
Deferred registration costs 4,993 38,598 43,591
Prepaid expenses 3,091 2,161 5,252
-------------- -------------- ------------ -------------
TOTAL ASSETS 96,209,793 680,598,396 0 776,808,189
-------------- -------------- ------------ -------------
LIABILITIES
Redemptions of capital stock 0 58,579 58,579
Payable for investment advisory and management fees 80,761 437,929 518,690
Payable for distribution fees 0 9,558 9,558
Accounts payable and accrued expenses 18,647 30,326 48,973
-------------- -------------- ------------ -------------
TOTAL LIABILITIES 99,408 536,392 0 635,800
-------------- -------------- ------------ -------------
NET ASSETS
Net proceeds of capital stock, par value $.01 per share 50,845,113 352,523,835 403,368,948
Unrealized appreciation of investments 40,614,384 292,658,040 333,272,424
Net investment loss (82,322) 0 (82,322)
Accumulated net realized gain from sale of investments 4,733,210 34,880,129 39,613,339
-------------- -------------- ------------ -------------
TOTAL NET ASSETS $96,110,385 $680,062,004 0 $776,172,389
============== ============== ============ =============

OUTSTANDING SHARES
Class A 0 20,537,904 20,537,904
Class B 0 67,079 67,079
Class C 0 8,120 8,120
Class H 0 211,359 211,359
Class Z 2,261,190 0 681,805 (a) 2,942,995

NET ASSET VALUE
Class A N/A $32.66 $32.66
Class B N/A $32.48 $32.48
Class C N/A $32.49 $32.49
Class H N/A $32.49 $32.49
Class Z $42.50 N/A $32.66

</TABLE>

See accompanying notes to proforma financial statements.

(a) Reflects increase in shares due to differences in the net asset values of
the funds.

<PAGE>

PROFORMA STATEMENT OF OPERATIONS
For the year ended August 31, 1995 (Unaudited)

ACQUIRED ACQUIRING
FUND FUND
08/31/95 08/31/95 PROFORMA PROFORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income
Interest Income $741,898 $5,043,537 $5,785,435
Dividend Income 96,085 706,607 802,692
------------- ------------- ------------ -------------
Total Income 837,982 5,750,144 0 6,588,126
------------- ------------- ------------ -------------
Expenses:
Investment advisory and management fees 813,552 4,517,570 (244,062) (a) 5,087,060
Distribution fees 0 1,474,287 0 1,474,287
Shareholders' notices and reports 23,093 200,000 (19,093) (a) 204,000
Legal and auditing fees 26,522 81,200 (25,000) (a) 82,722
Registration fees 26,917 107,000 (25,500) (a) 108,417
Custodian fees 22,497 90,000 (14,361) (a) 98,136
Directors' fees and expenses 15,442 45,000 (15,442) (a) 45,000
Other 8,440 47,000 (2,050) (a) 53,390
------------- ------------- ------------ -------------
Total Expenses 936,463 6,562,057 (345,508) 7,153,012
------------- ------------- ------------ -------------
NET INVESTMENT INCOME (98,481) (811,913) 345,508 (564,886)
------------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions 4,974,407 38,024,044 42,998,451
Net change in unrealized appreciation of investments
in securities 16,047,198 108,759,948 124,807,146
------------- ------------- ------------ -------------
NET GAIN ON INVESTMENTS 21,021,605 146,783,992 0 167,805,597
------------- ------------- ------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $20,923,124 $145,972,079 $345,508 $167,240,711
============= ============= ============ =============

</TABLE>

See accompanying notes to pro forma financial statements.

(a) Reflects reduction in expenses due to elimination of duplicate services.

<PAGE>

PROFORMA SCHEDULE OF INVESTMENTS
At August 31, 1995 (Unaudited)

SHARES PAR (HISTORICAL) SECURITY MARKET AMOUNT (HISTORICAL)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquired Acquiring Acquired Acquiring
Fund Fund Combined Fund Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Apparel
6,000 49,000 55,000 Tommy Hilfiger Corp. $ 201,000 $ 1,641,500 $ 1,842,500

Biomedics, Genetics Research & Development
16,500 121,000 137,500 Biogen, Inc. 903,375 6,624,750 7,528,125

Broadcasting
5,000 32,000 37,000 America Online, Inc. 329,375 2,108,000 2,437,375

Business Services and Supplies
11,000 79,000 90,000 First Financial Management Corp. 991,375 7,119,875 8,111,250
28,600 202,800 231,400 Sensormatic Electronics Corp. 600,600 4,258,800 4,859,400
------------- -------------- --------------
1,591,975 11,378,675 12,970,650

Computer-Software
45,200 337,600 382,800 BMC Software, Inc. 1,926,650 14,390,200 16,316,850
55,000 405,000 460,000 EMC Corp. 1,127,500 8,302,500 9,430,000
10,000 74,000 84,000 HBO & Co. 550,000 4,070,000 4,620,000
130,000 954,000 1,084,000 Informix Corp. 3,640,000 26,712,000 30,352,000
36,050 269,650 305,700 Microsoft Corp. 3,334,625 24,942,625 28,277,250
107,100 771,400 878,500 Oracle Corp. 4,297,388 30,952,425 35,249,813
30,000 216,500 246,500 Parametric Technology Corp. 1,657,500 11,961,625 13,619,125
------------- -------------- --------------
16,533,663 121,331,375 137,865,038

Drugs
4,300 28,400 32,700 Forest Laboratories, Inc. 192,425 1,270,900 1,463,325

Electronic-Communication Security
29,000 204,000 233,000 ADC Telecommunications, Inc. 1,123,750 7,905,000 9,028,750
50,000 210,000 260,000 Qualcomm, Inc. 2,437,500 10,237,500 12,675,000
------------- -------------- --------------
3,561,250 18,142,500 21,703,750

Electronic-Controls and Equipment
77,600 540,000 617,600 American Power Conversion Corp. 1,299,800 9,045,000 10,344,800
7,000 53,000 60,000 Applied Materials, Inc. 728,000 5,512,000 6,240,000
31,500 230,900 262,400 Lam Research Corp. 1,897,875 13,911,725 15,809,600
57,800 420,600 478,400 Solectron Corp. 2,051,900 14,931,300 16,983,200
------------- -------------- --------------
5,977,575 43,400,025 49,377,600

Electronic-Semiconductor and Capacitor
27,000 190,000 217,000 Cypress Semiconductor Corp. 1,231,875 8,668,750 9,900,625
27,000 191,000 218,000 Intel Corp. 1,657,125 11,722,625 13,379,750
30,000 210,000 240,000 Micron Technology, Inc. 2,306,250 16,143,750 18,450,000
------------- -------------- --------------
5,195,250 36,535,125 41,730,375

Finance Companies Miscellaneous
25,000 213,000 238,000 Franklin Resources, Inc. 1,375,000 11,715,000 13,090,000
74,000 523,700 597,700 Mercury Finance Co. 1,692,750 11,979,637 13,672,387
------------- -------------- --------------
3,067,750 23,694,637 26,762,387

Health Care Services
15,000 116,000 131,000 Medaphis Corp. 346,875 2,682,500 3,029,375
19,000 130,000 149,000 Oxford Health Plans, Inc. 931,000 6,370,000 7,301,000
14,100 104,900 119,000 PacifiCare Health Systems, Inc. Class B 807,225 6,005,525 6,812,750
27,000 188,000 215,000 U.S. Healthcare, Inc. 864,000 6,016,000 6,880,000
20,500 142,000 162,500 United Healthcare Corp. 866,125 5,999,500 6,865,625
19,000 134,000 153,000 Vencor, Inc. 562,875 3,969,750 4,532,625
------------- -------------- --------------
4,378,100 31,043,275 35,421,375
</TABLE>

<PAGE>

Hotel and Motel
20,800 144,200 165,000 Harrah's Entertainment, Inc. $ 663,000 $ 4,596,375 $ 5,259,375
10,400 72,100 82,500 Promus Hotel Corp. 214,500 1,487,062 1,701,562
------------- -------------- --------------
877,500 6,083,437 6,960,937

Machinery-Oil and Well
40,000 290,000 330,000 Petroleum Geo-Services A/S ADS 1,025,000 7,431,250 8,456,250

Miscellaneous
58,350 452,100 510,450 CUC International, Inc. 1,991,194 15,427,913 17,419,107

Office Equipment and Supplies
27,000 185,000 212,000 Compaq Computer Corp. 1,289,250 8,833,750 10,123,000
47,900 0 47,900 Sterling Software, Inc. 2,137,538 0 2,137,538
------------- -------------- --------------
3,426,788 8,833,750 12,260,538

Publishing
14,600 118,800 133,400 Scholastic Corp. 894,250 7,276,500 8,170,750

Restaurants and Franchising
64,300 443,300 507,600 Lone Star Steakhouse & Saloon, Inc. 2,580,038 17,787,413 20,367,451
36,900 277,800 314,700 Outback Steakhouse, Inc. 1,190,025 8,959,050 10,149,075
------------- -------------- --------------
3,770,063 26,746,463 30,516,526

Retail-Department Stores
14,700 117,600 132,300 Kohl's Corp. 690,900 5,527,200 6,218,100
29,000 210,800 239,800 Wal-Mart Stores, Inc. 714,125 5,190,950 5,905,075
------------- -------------- --------------
1,405,025 10,718,150 12,123,175

Retail-Miscellaneous
26,200 197,300 223,500 Barnes & Noble, Inc. 1,025,075 7,719,363 8,744,438
34,966 273,749 308,715 Home Depot, Inc. 1,394,269 10,915,741 12,310,010
27,000 190,000 217,000 Lowes Companies, Inc. 897,750 6,317,500 7,215,250
69,525 497,850 567,375 Office Depot, Inc. 2,163,966 15,495,581 17,659,547
53,250 363,000 416,250 Staples, Inc. 1,364,531 9,301,875 10,666,406
------------- -------------- --------------
6,845,591 49,750,060 56,595,651

Telecommunications
135,200 967,200 1,102,400 3Com Corp. 5,272,800 37,720,800 42,993,600
63,800 454,000 517,800 Cisco Systems, Inc. 4,186,875 29,793,750 33,980,625
50,400 373,600 424,000 DSC Communications Corp. 2,646,000 19,614,000 22,260,000
14,500 107,000 121,500 MFS Communications Co. 641,625 4,734,750 5,376,375
19,000 131,000 150,000 Motorola, Inc. 1,420,250 9,792,250 11,212,500
7,000 50,000 57,000 Nokia Corp. ADR 485,625 3,468,750 3,954,375
94,000 730,000 824,000 Tellabs, Inc. 4,394,500 34,127,500 38,522,000
------------- -------------- --------------
19,047,675 139,251,800 158,299,475

Telephone Services
53,000 353,000 406,000 Mobile Tele. Technologies Corp. 1,629,750 10,854,750 12,484,500
50,000 374,000 424,000 Paging Network, Inc. 987,500 7,386,500 8,374,000
65,000 440,000 505,000 Worldcom, Inc. 2,189,688 14,822,500 17,012,188
------------- -------------- --------------
4,806,938 33,063,750 37,870,688
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS $86,021,760 $601,753,835 $687,775,595
- -----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

FACE AMOUNT (HISTORICAL) SECURITY MARKET AMOUNT (HISTORICAL)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquired Acquiring Acquired Acquiring
Fund Fund Combined Fund Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

SHORT-TERM INVESTMENTS
Banks
$3,751,000 $31,546,000 $35,297,000 First Trust Money Market Variable Rate $ 3,751,000 $ 31,546,000 $ 35,297,000
Time Deposit Account 0
0
Brokerage and Investment 0
1,161,000 0 1,161,000 Goldman Sachs Master Variable Rate Note 1,161,000 0 1,161,000
0
Diversified Finance 0
455,000 1,242,000 1,697,000 Associates Corp. Master Variable Rate Note 455,000 1,242,000 1,697,000
0
U.S. Other Direct Federal Obligations 0
4,700,000 0 4,700,000 Federal Home Loan Bank, 5.65%, 09-12-95 4,689,673 0 0
0 16,000,000 16,000,000 Federal Home Loan Bank, 5.72%, 09-07-95 0 15,982,484 15,982,484
0 9,000,000 9,000,000 Federal Farm Credit Bank, 5.72%, 09-07-95 0 8,990,148 8,990,148
0 20,000,000 20,000,000 Federal Farm Credit Bank, 5.76%, 09-05-95 0 19,984,278 19,984,278
------------- -------------- --------------
4,689,673 44,956,910 49,646,583
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 10,056,673 77,744,910 87,801,583
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $96,078,433 $679,498,745 $775,577,178
- -----------------------------------------------------------------------------------------------------------------------------------
COST $55,464,049 $386,840,705 $442,304,754
- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

PRO FORMA FOOTNOTES OF MERGER BETWEEN ACQUIRED FUND AND ACQUIRING FUND
August 31, 1995 (Unaudited)

1. GENERAL

The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Special Portfolios - Stock Portfolio (Acquired
Fund) by Fortis Growth Fund, Inc. (Acquiring Fund) as if such acquisition had
taken place as of the close of business on August 31, 1994.

Under the terms of the Agreement and Plan of Reorganization, the combination of
the Acquired Fund and the Acquiring Fund will be taxed as a tax-free business
combination and accordingly will be accounted for by a method of accounting for
tax-free mergers of investment companies (sometimes referred to as the pooling
without restatement method). The acquisition would be accomplished by an
acquisition of the net assets of the Acquired Fund in exchange for shares of the
Acquiring Fund at net asset value. The statements of assets and liabilities and
the related statements of operations of the Acquired Fund and the Acquiring Fund
have been combined as of and for the year ended August 31, 1995.

The accompanying pro forma financial statements should be read in conjunction
with the financial statements and schedule of investments of the Acquiring Fund
which are included in its annual report dated August 31, 1995. The information
included in the pro forma financial statements for the Acquired Fund are from a
non-fiscal report date of the fund; however, significant accounting information
can be found in the Fund's annual report dated October 31, 1995.

The following notes refer to the accompanying pro forma financial statements as
if the above mentioned acquisition of the Acquired Fund and the Acquiring Fund
had taken place as of the close of business on August 31, 1994.

2. SIGNIFICANT ACCOUNTING POLICIES

The Acquiring Fund is a Minnesota corporation, registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company.

The significant accounting policies consistently followed by the Acquiring Fund
are (a) investments in securities traded on a national securities exchange or on
the Nasdaq National Market System are valued at the last reported sales price;
listed securities and over-the-counter securities for which no sale was reported
are valued at the last reported bid price; short-term investments that have a
maturity of 60 days or less are valued at amortized cost, (b) interest income is
recorded on the accrual basis, (c) gains or losses on the sale of securities are
calculated by using the identified cost method, (d) securities transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date, (e) direct expenses are charged to each portfolio and each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; registration costs are deferred and charged to income over
the registration period, (f) on a calendar year basis the Fund will generally
distribute all of its net investment income and any realized capital gains as
required by law, (g) the Acquiring Fund intends to qualify under the Internal
Revenue Code as a regulated investment company and, if so qualified, will not
have to pay federal income taxes to the extent its taxable net income is
distributed.

3. PRO FORMA ADJUSTMENTS

The accompanying pro forma financial statements reflect changes in fund shares
as if the merger had taken place on August 31, 1995, and adjustments made to
expenses for duplicated services that would not have been incurred if the merger
had taken place as of the close of business on August 31, 1994.

<PAGE>

PRO FORMA FOOTNOTES OF MERGER BETWEEN ACQUIRED FUND AND ACQUIRING FUND
August 31, 1995 (Unaudited) (continued)

4. PAYMENTS TO RELATED PARTIES

Fortis Advisers, Inc. is the investment adviser of the Acquiring Fund.
Investment advisory and management fees are computed at an annual rate of 1.00%
on the first $100 million of average daily net assets, .80% on the next $150
million and .70% of net assets in excess of $250 million. All fees are
calculated daily and paid monthly. In addition to the investment advisory and
management fee, Classes A, B, C and H pay Fortis Investors, Inc. (Acquiring
Fund's principal underwriter) distribution fees equal to .25% (Class A) and
1.00% (Classes B, C and H) of average daily net assets (of the respective
classes) on an annual basis, to be used to compensate those who sell shares of
the fund and to pay certain other expenses of selling fund shares.

<PAGE>

PART C

OTHER INFORMATION

ITEM 15. INDEMNIFICATION.

Incorporated by reference to Post-Effective Amendment No. 47 to the
Registrant's Registration Statement on Form N-1A, File No. 2-14784, filed in
March 1988.

ITEM 16. EXHIBITS.

1(a) Amended and Restated Articles of Incorporation. (Incorporated by
reference to Post-Effective Amendment No. 55 to the Registrant's
Registration Statement on Form N-1A, File No. 2-14784, filed in
November 1994.)

* 1(b) Certificate of Designation of Class Z Shares of Growth Fund Inc.

2 Bylaws. (Incorporated by reference to Post-Effective Amendment No.
52 to the Registrant's Registration Statement on Form N-1A, File
No. 2-14784, filed in October 1992.)

3 Not Applicable.

4 Agreement and Plan of Reorganization is attached as Exhibit A to the
Prospectus/Proxy Statement included in Part A of this Registration
Statement on Form N-14.

5 See 1(a) and 1(b) above.

6 Investment Advisory Agreement. (Incorporated by reference to
Post-Effective Amendment No. 52 to the Registrant's Registration
Statement on Form N-1A, File No. 2-14784, filed in October 1992.)

7 Underwriting Agreement and Dealer Agreement. (Incorporated by
reference to Post-Effective Amendment No. 55 to the Registrant's
Registration Statement on Form N-1A, File No. 2-14784, filed in
November 1994, and Post-Effective Amendment No. 57, filed in
October 1995.)

8 Not Applicable.

9 Custodian Agreement. (Incorporated by reference to Post-Effective
Amendment No. 52 to the Registrant's Registration Statement on
Form N-1A, File No. 2-14784, filed in October 1992.)

(10)(a) Rule 12b-1 Plan. (Incorporated by reference to Post-Effective
Amendment No. 55 to the Registrant's Registration Statement on
Form N-1A, File No. 2-14784, filed in November 1994.)

C-1
<PAGE>

(10)(b) Multiple Class Plan Pursuant to Rule 18f-3. (Incorporated by
reference to Post-Effective Amendment No. 57 to the Registrant's
Registration Statement on Form N-1A, File No. 2-14784, filed in
October 1995.)

* 11 Opinion and Consent of Dorsey & Whitney P.L.L.P. with respect to
the legality of the securities being registered.

* 12 Opinion and Consent of Dorsey & Whitney P.L.L.P. with respect to
tax matters.

13 Not Applicable.

* 14 Consent of KPMG Peat Marwick LLP.

15 Not Applicable.

16 Not Applicable.

* 17(a) Rule 24f-2 Election of Registrant.

* 17(b) Form of Proxy Card.

- ---------------------
* Filed herewith.

ITEM 17. UNDERTAKINGS.

(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.

C-2
<PAGE>

SIGNATURES

As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of Woodbury, State
of Minnesota, on the 11th day of December, 1995.

FORTIS GROWTH FUND, INC.

By: /s/ Dean C. Kopperud
--------------------------------
Dean C. Kopperud, President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacity and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Tamara L. Fagely Treasurer (Principal December 11, 1995
- ----------------------------- Financial and Accounting
Tamara L. Fagely Officer)

/s/ Richard W. Cutting
- ----------------------------- Director December 11, 1995
Richard W. Cutting

- ----------------------------- Director
Allen R. Freedman

/s/ Robert M. Gavin
- ----------------------------- Director December 11, 1995
Dr. Robert M. Gavin

/s/ Benjamin S. Jaffray
- ----------------------------- Director December 11, 1995
Benjamin S. Jaffray

- ----------------------------- Director
Jean L. King

/s/ Dean C. Kopperud
- ----------------------------- Director December 11, 1995
Dean C. Kopperud

/s/ Edward M. Mahoney
- ----------------------------- Director December 11, 1995
Edward M. Mahoney

- ----------------------------- Director
Robb L. Prince

/s/ Leonard J. Santow
- ----------------------------- Director December 11, 1995
Leonard J. Santow

/s/ Joseph M. Wikler
- ----------------------------- Director December 11, 1995
Joseph M. Wikler

C-3

<PAGE>
EXHIBIT 1(b)

CERTIFICATE OF DESIGNATION
of
CLASS Z SHARES
of
FORTIS GROWTH FUND, INC.

The undersigned duly elected Secretary of Fortis Growth Fund, Inc.,
a Minnesota corporation (the "Fund"), hereby certifies that the following is
a true, complete and correct copy of resolutions duly adopted by a majority
of the directors of the Board of Directors of the Fund on December 7, 1995.

APPROVAL OF CREATION AND DESIGNATION OF
CLASS Z SHARES

WHEREAS, the total authorized number of shares of the Fund is 100,000,000,000
(one hundred billion), all of which shares are common shares, par value $.01 per
share, as set forth in the Fund's Amended and Restated Articles of
Incorporation (the "Articles"); and

WHEREAS, of such 100,000,000,000 common shares, the Board of Directors
previously has designated 1,000,000,000 (one billion) as Class A Common Shares,
1,000,000,000 (one billion) as Class B Common Shares, 1,000,000,000 (one
billion) as Class C Common Shares and 1,000,000,000 (one billion) as Class H
Common Shares; and

WHEREAS, the Articles provide that the authorized shares of the Fund may be
issued in such Classes and with such relative rights and preferences as shall be
stated or expressed in a resolution or resolutions providing for the issue of
any such Class or Classes of common shares as may be adopted from time to time
by the Board of Directors.

NOW, THEREFORE, BE IT RESOLVED, that of the 96,000,000,000 authorized common
shares of the Fund remaining undesignated as to class, 1,000,000,000 (one
billion) are hereby designated as Class Z Common Shares.

FURTHER RESOLVED, that the Class Z Common Shares designated by these
resolutions shall have the relative rights and preferences set forth in the
Articles. As provided in Article 5(b) of such Articles, the Class Z Common
Shares designated by these resolutions may be subject to such charges and
expenses (including by way of example, but not by way of limitation, such
front-end and deferred sales charges as may be permitted under the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules of the
National Association of Securities Dealers, Inc., and expenses under Rule
12b-1 plans, administration plans, service plans, or other plans or
arrangements, however designated) as may be adopted from time to time by the
Board of Directors of the Fund in accordance, to the extent applicable, with
the 1940 Act, which charges and expenses may differ from those applicable to
another Class, and all of the charges and expenses to which a Class is
subject shall be borne by such Class and shall be appropriately reflected in
determining the net asset value and the amounts payable with respect to
dividends and distributions on, and redemptions or liquidations of, such
Class.

IN WITNESS WHEREOF, the undersigned has signed this Certificate
of Designation on behalf of Fortis Growth Fund, Inc. this 8th day of December,
1995.

/s/ Michael J. Radmer
------------------------------------
Michael J. Radmer, Secretary

<PAGE>

EXHIBIT 11

DORSEY & WHITNEY P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

December 12, 1995

Fortis Growth Fund, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Re: Fortis Growth Fund, Inc.
Shares to be Issued Pursuant to Agreement and Plan of Reorganization

Ladies and Gentlemen:

We have acted as counsel to Fortis Growth Fund, Inc., a Minnesota
corporation ("Fortis Growth"), in connection with its authorization and
proposed issuance of its Class Z common shares, par value $.01 per share (the
"Shares"). The Shares are to be issued pursuant to an Agreement and Plan of
Reorganization (the "Agreement"), by and between Fortis Growth and Stock
Portfolio, a series of Special Portfolios, Inc., a Minnesota corporation (the
"Acquired Fund"), the form of which Agreement is included as Exhibit As to
the Prospectus/Proxy Statement relating to the transactions contemplated by
the Agreement included in the Fortis Growth's Registration Statement on Form
N-14 filed with the Securities and Exchange Commission (the "Registration
Statement").

In rendering the opinions hereinafter expressed, we have reviewed
the corporate proceedings taken by Fortis Growth in connection with the
authorization and issuance of the Shares, and we have reviewed such questions
of law and examined copies of such corporate records of Fortis Growth,
certificates of public officials and of responsible officers of Fortis
Growth, and other documents as we have deemed necessary as a basis for such
opinions. As to the various matters of fact material to such opinions, we
have, when such facts were not independently established, relied to the
extent we deem proper on certificates of public officials and of responsible
officers of Fortis Growth. In connection with such review and examination, we
have assumed that all copies of documents provided to us conform to the
originals; that all signatures are genuine; and that prior to the
consummation of the transactions contemplated thereby, the Agreement will
have been duly and validly executed and delivered on behalf of each of the
parties thereto in substantially the form included in the Registration
Statement.

<PAGE>

Based on the foregoing, it is our opinion that:

1. Fortis Growth is validly existing as a corporation in good
standing under the laws of the State of Minnesota.

2. The Shares, when issued and delivered by Fortis Growth pursuant
to, and upon satisfaction of the conditions contained in, the Agreement,
will be duly authorized, validly issued, fully paid and non-assessable.

In rendering the foregoing opinions (a) we express no opinion as
to the laws of any jurisdiction other than the State of Minnesota; and (b) we
have assumed, with your concurrence, that the conditions to closing set forth
in the Agreement will have been satisfied.

We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in Fortis Growth's final Prospectus/Proxy Statement
relating to the Shares included in the Registration Statement.

Very truly yours,

KLP /s/ Dorsey & Whitney P.L.L.P.

<PAGE>

EXHIBIT 12

DORSEY & WHITNEY P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

December 12, 1995

Fortis Growth Fund, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Special Portfolios, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Ladies and Gentlemen:

We have acted as counsel to Fortis Growth Fund, Inc. ("Acquiring
Fund") and Special Portfolios, Inc. ("Special Portfolios") in connection
with the proposed acquisition of all or substantially all of the assets and
all of the liabilities of Stock Fund ("Acquired Fund"), a series of Special
Portfolios, by Acquiring Fund, pursuant to an Agreement and Plan of
Reorganization to be executed by and between Special Portfolios on behalf of
Acquired Fund and Acquiring Fund (the "Agreement").

You have asked for our opinion concerning certain federal income
tax consequences of the transfer of substantially all of the assets of the
Acquired Fund to the Acquiring Fund and the assumption by the Acquiring Fund
of all of the liabilities of the Acquired Fund in exchange solely for
Acquiring Fund Shares and the distribution of such shares to the shareholders
of the Acquired Fund upon complete liquidation of Acquired Fund and
cancellation of the Acquired Fund Shares, all pursuant to the Agreement (the
"Reorganization"). In this regard we have examined (1) the form of the
Agreement included in the Registration Statement on Form N-14 to be filed
with the Securities and Exchange Commission on or about December 12, 1995,
(the "Registration Statement"), (2) the Registration Statement (including,
but not limited to, the Prospectus and Proxy Statement included therein) and
such other documents and records as we consider necessary in order to render
this opinion. Unless otherwise provided herein, capitalized terms used in
this opinion shall have the same meaning as set forth in the Prospectus and
Proxy Statement or the Agreement, as the case may be.

<PAGE>

December 12, 1995
Page 2

Pursuant to the Agreement, all or substantially all of the assets
and all of the liabilities of the Acquired Fund immediately prior to the
Effective Time shall be exchanged for that number of Acquiring Fund Class Z
Shares having an aggregate value immediately prior to the Effective Time
equal to the net value of assets of the Acquired Fund immediately prior to
the Effective Time. All of the Acquiring Fund Class Z Shares then held by the
Acquired Fund, representing all of the assets of Acquired Fund, will be
distributed to Acquired Fund shareholders pursuant to the Agreement (which
includes the cancellation and retirement of all the shares of the Acquired
Fund ).

The Boards of Directors of both the Acquired Fund and the
Acquiring Fund, including all of the "non-interested" directors, have
determined that the Reorganization is advantageous to both funds and is in
the best interests of each fund's respective shareholders. In approving the
Reorganization, the Boards considered, among other things, the following
factors: (i) the advantages which may be realized by the Acquired Fund and
the Acquiring Fund, consisting of a potentially reduced expense ratio,
economies of scale resulting from fund growth, and facilitation of portfolio
management. The Boards noted in this regard that the Acquiring Fund, with its
much larger asset base and resulting economies of scale, has a significantly
lower expense ratio than does the smaller Acquired Fund, and it is expected
that holders of the Acquired Fund will benefit from this lower expense ratio;
(ii) the terms and conditions of the Plan, including that (a) the exchange of
Acquired Fund shares for Acquiring Fund shares will take place on a net asset
value basis; and (b) no sales charge will be incurred by Acquired Fund
shareholders in connection with their acquisition of Acquiring Fund shares in
the Reorganization; (iii) the provision of the Plan that expenses of the
Reorganization will be allocated between the Acquired Fund and the Acquiring
Fund in proportion to their relative net assets at the Effective Time; and
(iv) the fact that Acquired Fund shareholders would continue to have no Rule
12b-1 fees or sales charges and that advisory fees for Acquired Fund
shareholders should be reduced as a result of "breakpoints" in the advisory
fee schedule and the larger asset base of the Acquiring Fund.

Our opinion is based upon existing law and currently applicable
Treasury Regulations, currently published administrative positions of the
Internal Revenue Service contained in Revenue Rulings and Revenue Procedures
and judicial decisions, all of which are subject to change prospectively and
retroactively. It is not a guarantee of the current status of the law and
should not be accepted as a guarantee that a court of law or an
administrative agency will concur in the opinion.

<PAGE>

December 12, 1995
Page 3

Based on the Agreement, the other documents referred to herein,
the facts and assumptions stated above, as well as representations made by
Acquiring Fund in a Certificate dated December 12, 1995, representations made
by Special Portfolios in a Certificate dated December 12, 1995,
representations made by Fortis, Inc. in a Certificate dated December 12, 1995,
the provisions of the Code and judicial and administrative interpretations as
in existence on the date hereof, and on the assumption that the Agreement will
be executed and the Reorganization will be carried out pursuant to the
Agreement, it is our opinion that the Reorganization will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
that the Acquiring Fund and the Acquired Fund will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.

On the basis of the foregoing opinion that the Reorganization will
constitute a reorganization within the meaning of Section 368 of the Code, it
is further our opinion that:

(i) the Acquired Fund Shareholders will recognize no
income, gain or loss upon receipt, pursuant to the Reorganization, of
Acquiring Fund Shares. Acquired Fund Shareholders subject to taxation will
recognize income upon receipt of any net investment income or net capital
gains of the Acquired Fund which are distributed by the Acquired Fund prior
to the Effective Time;

(ii) the tax basis of the Acquiring Fund Shares
received by each Acquired Fund Shareholder pursuant to the Reorganization
will be equal to the tax basis of Acquired Fund Shares exchanged therefor;

(iii) the holding period of the Acquiring Fund
Shares received by each Acquired Fund Shareholder pursuant to the
Reorganization will include the period during which the Acquired Fund
Shareholder held the Acquired Fund Shares exchanged therefor, provided that
the Acquired Fund Shares were held as a capital asset at the Effective Time;

(iv) the Acquired Fund will recognize no income,
gain or loss by reason of the Reorganization;

<PAGE>

December 12, 1995
Page 4

(v) the Acquiring Fund will recognize no income,
gain or loss by reason of the Reorganization;

(vi) the tax basis of the assets received by the
Acquiring Fund pursuant to the Reorganization will be the same as the basis
of those assets in the hands of the Acquired Fund as of the Effective Time;

(vii) the holding period of the assets received by
the Acquiring Fund pursuant to the Reorganization will include the period
during which such assets were held by the Acquired Fund; and

(viii) the Acquiring Fund will succeed to and take
into account the earnings and profits, or deficit in earning and profits, of
the Acquired Fund as of the Effective Time.

We consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this firm
under the caption "Information About the Reorganization -- Federal Income Tax
Consequences" in the Prospectus/Proxy Statement included in Part A of the
Registration Statement.

Very truly yours,

/s/ Dorsey & Whitnery P.L.L.P.

<PAGE>

EXHIBIT 14

KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Fortis Growth Fund, Inc.
Special Portfolios, Inc.:

We consent to the use of our reports and references to our Firm included in
or incorporated by reference in the 1995 Annual Reports, the Prospectuses and
the Statements of Additional Information of Fortis Growth Fund, Inc. and
Special Portfolios, Inc., and the reference to our Firm under the heading
"FINANCIAL STATEMENTS AND EXPERTS" in Part A of this Registration Statement.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Minneapolis, Minnesota
December 11, 1995

<PAGE>

EXHIBIT 17(a)

RULE 24f-2 NOTICE

FOR

Fortis Growth Fund, Inc.
2-24652

For Fiscal Year Ended
August 31, 1995

Shares registered under the Securities Act
of 1933, other than shares registered
pursuant to this section, which remained
unsold at the beginning of the above
fiscal year. 0
-----------

Number of shares registered during the
above fiscal year other than pursuant to
this rule. 0
-----------

Net shares sold during the above fiscal
year. -454,713
-------------

Shares registered under the Securities Act
of 1933, other than shares registered
pursuant to this section, which remained
unsold at the end of the above fiscal year.
0
-----------

Net aggregate amount sold during the
above year in reliance upon registration
pursuant to this rule. -$14,115,650
----------------

Sales Proceeds 115,855,814
Redeemed Value -129,960,464
Redeemed Value Used -14,115,650
Divided by 2900 += - 0 -

Dated: October 26, 1995
----------------

/s/ Tamara L. Fagely
- ----------------------------------
Tamara L. Fagely
Treasurer

<PAGE>

EXHIBIT 17(b)

PROXY

STOCK PORTFOLIO
(A SERIES OF SPECIAL PORTFOLIOS, INC.)
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SPECIAL
PORTFOLIOS, INC.

The undersigned hereby appoints Michael J. Radmer, Robert W. Beltz, Jr.,
Tamara L. Fagely and Scott R. Plummer, and each of them, with power to act
without the other and with the right of substitution in each, as proxies of
the undersigned and hereby authorizes each of them to represent and to vote,
as designated below, all the shares of Stock Portfolio (the "Acquired Fund"), a
series of Special Portfolios, Inc. ("Special"), held of record by the
undersigned on January 4, 1996, at the Special Meeting of shareholders of the
Acquired Fund to be held on February 22, 1996, or any adjournments or
postponements thereof, with all powers the undersigned would possess if
present in person. All previous proxies given with respect to the Special
Meeting hereby are revoked.

THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:

1. PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION (the
"Plan") providing for (a) the acquisition of substantially all of the
assets and the assumption of all liabilities of the Acquired Fund by
Fortis Growth Fund, Inc. (the "Acquiring Fund"), in exchange for shares
of common stock of the Acquiring Fund having an aggregate net asset
value equal to the aggregate value of the assets acquired (less the
liabilities assumed) of the Acquired Fund and (b) the liquidation of the
Acquired Fund and the pro rata distribution of the Acquiring Fund shares
to Acquired Fund shareholders. Under the Plan, Acquired Fund
shareholders will receive Class Z shares of the Acquiring Fund having a
net asset value equal as of the effective time of the Plan to the net
asset value of their Acquired Fund shares. A vote in favor of the Plan
will be considered a vote in favor of an amendment to the articles of
incorporation of Special required to effect the reorganization
contemplated by the Plan.

/ / FOR / / AGAINST / / ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1 ABOVE. RECEIPT OF THE NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY.

PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
PARTNER OR OTHER AUTHORIZED PERSON.

DATED: , 1996
------------------
-----------------------------------
Signature
[SHAREHOLDER INFORMATION]

-----------------------------------
Signature if held jointly

TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.