<PAGE>
January 17, 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,
[Signature]
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 17, 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 17, 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 17,
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 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. 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, 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 17, 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.
- 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
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 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.
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, 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."
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.
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 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 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 17, 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 January 4, 1996 (i) the Acquired Fund had 2,237,579 shares outstanding
and entitled to vote at the Meeting; (ii) the Acquiring Fund had the following
numbers of shares outstanding: Class A, 21,120,547 shares; Class B, 106,418
shares; Class C, 17,174 shares; and Class H, 369,965 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 5% or more of the outstanding
shares of either Fund, or 5% or more 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* .......... 55%
Marshall & Ilsley Trust Co., Trustee
1000 North Water Street
Milwaukee, Wisconsin 53202-3197
ACQUIRING FUND:
CLASS A
None
CLASS B
Lincoln County Colorado 5%
Employee Retirement Plan*....................
P.O. Box 67
Hugo, Colorado 80821-0067
CLASS C
First Trust National Association C/F/ 12%
Carol S. Atha Rollover IRA...................
R.R. 7, Box 246
Fairmont, West Virginia 26554-8925
Tim J. and Amy L. Kessler .................... 5%
621 6th Avenue S.E.
Aberdeen, South Dakota 57401
</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.
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>
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 , 1996, 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:
(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; 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS/PROXY STATEMENT
JANUARY 17, 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>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 17, 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 17, 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>
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)
<TABLE>
<CAPTION>
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)
<TABLE>
<CAPTION>
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>
<TABLE>
<CAPTION>
SHARES PAR (HISTORICAL) SECURITY MARKET AMOUNT (HISTORICAL)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquired Acquiring Acquired Acquiring
Fund Fund Combined Fund Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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>
<TABLE>
<CAPTION>
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.
