FORTIS INCOME PORTFOLIOS INC, N14AE24, 1995-11-15

FORTIS INCOME PORTFOLIOS INC
N14AE24, 1995-11-15

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<PAGE>
As filed with the Securities and Exchange Commission on November 15, 1995

Registration No. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-14

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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

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

Exact name of Registrant as Specified in Charter:

FORTIS INCOME PORTFOLIOS, INC.

Area Code and Telephone Number:

(612) 738-4000

Address of Principal Executive Offices:

500 Bielenberg Drive
Woodbury, Minnesota 55125

Name and Address of Agent for Service:

John E. Hite, Esq., Assistant Secretary
Fortis Income Portfolios, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

COPY TO:

Michael J. Radmer, Esq.
James D. Alt, Esq.
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402

Approximate Date of Proposed Public Offering:
As soon as possible following the effective date of this Registration Statement.
It is proposed that this filing become effective on
December 15, 1995 (30 days after filing) pursuant to Rule 488.

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

No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant is filing as an exhibit to this Registration Statement a copy of its
earlier declaration under Rule 24f-2. Registrant filed its Rule 24f-2 Notice on
September 29, 1995 for its most recent fiscal year ended July 31, 1995.

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<PAGE>
FORTIS INCOME PORTFOLIOS, INC.
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
<TABLE>
<CAPTION>
PART A OF FORM N-14 PROSPECTUS/PROXY STATEMENT CAPTION
- ------------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus.... Cross Reference Sheet and Cover Page
2. Beginning and Outside Back Cover Page of
Prospectus................................ Table of Contents
3. Synopsis Information and Risk Factors..... Summary; Risk Factors
4. Information about the Transaction......... Summary; Information About the
Reorganization; Voting Information
5. Information about the Registrant.......... Inside Front Cover; Incorporation by
Reference; Summary; Information About the
Acquired Fund and the Acquiring Fund
6. Information about the Company being
Acquired.................................. Incorporation by Reference; Summary;
Information About the Acquired Fund and
the Acquiring Fund
7. Voting Information........................ Summary; Information About the
Reorganization; Voting Information
8. Interest of Certain Persons and Experts... Voting Information
9. Additional Information.................... Not Applicable

STATEMENT OF ADDITIONAL INFORMATION
PART B OF FORM N-14 CAPTION
- ------------------------------------------------ ------------------------------------------
<C> <S> <C>
10. Cover Page................................ Cover Page
11. Table of Contents......................... Not Applicable
12. Additional Information about the
Registrant................................ Cover Page (Incorporation by Reference)
13. Additional Information about the Company
Being Acquired............................ Cover Page (Incorporation of Documents by
Reference)
14. Financial Statements...................... Financial Statements
</TABLE>

PART C OF FORM N-14
Information required to be included in Part C is set forth under the appropriate
item in Part C of this Registration Statement.
<PAGE>
FORTIS INCOME PORTFOLIOS, INC.
REGISTRATION STATEMENT ON FORM N-14

PART A

PRESIDENT'S LETTER

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

PROSPECTUS/PROXY STATEMENT

PROSPECTUS DATED DECEMBER 1, 1995 OF FORTIS U.S. GOVERNMENT SECURITIES FUND
[TO BE DELIVERED WITH PROSPECTUS/PROXY STATEMENT]

ANNUAL REPORT OF FORTIS U.S. GOVERNMENT SECURITIES FUND
FOR THE FISCAL YEAR ENDED JULY 31, 1995
[TO BE DELIVERED WITH PROSPECTUS/PROXY STATEMENT]

PROSPECTUS DATED MARCH 1, 1995 OF FORTIS ADVANTAGE PORTFOLIOS, INC.
[INCORPORATED BY REFERENCE INTO THE PROSPECTUS/PROXY STATEMENT]
<PAGE>
December 27, 1995
FORTIS ADVANTAGE PORTFOLIOS, INC.

To the Shareholders of the Government Total Return 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 Government Total Return Portfolio (the "Acquired Fund") of Fortis
Advantage Portfolios, Inc. to be held on Friday, February 9, 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 the Fortis U.S. Government
Securities Fund portfolio (the "Acquiring Fund") of Fortis Income Portfolios,
Inc. by means of the reorganization described in the Prospectus/Proxy Statement.

If the proposed combination of Funds is approved, you will receive the same
class of shares in the Acquiring Fund that you currently hold in the Acquired
Fund. The exchange of shares will take place on the basis of the relative net
asset values per share of the respective classes of the two Funds. As described
in the Prospectus/Proxy Statement, sales charges and Rule 12b-1 fees will remain
unchanged as a result of the proposed combination of Funds, EXCEPT that Class A
shares of the Acquiring Fund are subject to LOWER Rule 12b-1 fees than Class A
shares of the Acquired Fund.

Fortis Advisers, Inc. acts as the investment adviser, transfer agent, and
dividend disbursing agent for both the Acquired Fund and the Acquiring Fund. As
described in the Prospectus/Proxy Statement, the investment advisory and
management fee schedule of the Acquiring Fund is slightly more favorable to
shareholders than that of the Acquired Fund. As a result of the favorable fee
schedule and 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 July 31, 1995, the Acquired Fund had net assets of only approximately
$64.5 million, while the Acquiring Fund had net assets of approximately $481.1
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 8 - 10 of
the Prospectus/Proxy Statement.

Although the investment objectives of the two Funds are similar in that both
seek to provide shareholders with a high level of current income and with
capital appreciation, shareholders should carefully consider both the
similarities and the differences between the investment objectives, policies and
restrictions of the two Funds. These similarities and differences, as well as
other important information concerning the proposed combination of 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 or 3014.

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

Sincerely,

Dean C. Kopperud
PRESIDENT
<PAGE>
GOVERNMENT TOTAL RETURN PORTFOLIO
A SEPARATELY MANAGED SERIES OF
FORTIS ADVANTAGE 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 9, 1996
---------------------

December 27, 1995
To the Shareholders of Government Total Return Portfolio:

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Government
Total Return Portfolio (the "Acquired Fund"), a separately managed series of
Fortis Advantage Portfolios, Inc. ("Fortis Advantage"), will be held at 10:00
a.m., Central time, on Friday, February 9, 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 U.S. Government Securities Fund (the "Acquiring Fund"), a
separately managed series of Fortis Income Portfolios, Inc., 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 the same class of shares of the Acquiring Fund that they
held in the Acquired 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 Fortis Advantage
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 December 15, 1995 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 DECEMBER 27, 1995

ACQUISITION OF THE ASSETS OF

GOVERNMENT TOTAL RETURN PORTFOLIO
A SEPARATELY MANAGED SERIES OF
FORTIS ADVANTAGE 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 U.S. GOVERNMENT SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FORTIS INCOME PORTFOLIOS, 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
Government Total Return Portfolio (the "Acquired Fund"), a separately managed
series of Fortis Advantage Portfolios, Inc. ("Fortis Advantage"), 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 Friday, February 9, 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 December 27, 1995. 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. 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" below. 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 U.S. Government Securities Fund (the "Acquiring Fund"), a separately
managed series of Fortis Income Portfolios, Inc., 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 Fortis Advantage 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 Acquiring
Fund shares of the same class that he or she held in the Acquired Fund, with a
net asset value equal at the effective time of the Reorganization to

1
<PAGE>
the net asset value of the shareholder's Acquired Fund shares at such time. 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.

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 a high level of current income and with capital appreciation.
Specifically:

- The investment objective of the Acquired Fund is to provide investors with
a high level of current income consistent with liquidity and the
preservation of principal. In addition, the Acquired Fund will, when
market conditions permit and consistent with the overall goal of
preserving capital, seek capital appreciation.

- The investment objective of the Acquiring Fund is to maximize total return
(from current income and capital appreciation), while providing
shareholders with a high level of current income consistent with prudent
investment risk.

The investment policies of the Acquired Fund and the Acquiring Fund are similar
but not identical. Specifically:

- Under normal market conditions, the Acquired Fund invests at least 80% of
its net assets in obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities (whether or not backed by
the "full faith and credit" pledge of the United States Government), cash,
and receivables. In addition, the Acquired Fund may invest up to 20% of
its net assets in certain types of debt securities which are not issued or
guaranteed by the United States Government or its agencies or
instrumentalities.

- The Acquiring Fund invests in securities issued, guaranteed, insured, or
collateralized by the United States Government or its agencies or
instrumentalities (whether or not backed by the "full faith and credit"
pledge of the United States Government). Unlike the Acquired Fund, the
Acquiring Fund is not permitted to invest any portion of its assets in
debt securities which are not issued or guaranteed by the United States
Government or its agencies or instrumentalities. At the present time, the
Acquired Fund does not hold any assets which would not be permitted
investments for the Acquiring Fund.

In addition, both Funds may engage in certain repurchase agreement, delayed
delivery, securities lending, and other transactions and may, to the extent
consistent with the investment policies described above, invest in certain types
of mortgage-backed securities and collateralized mortgage obligations. 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."

For certain comparative information concerning the respective Funds'
portfolio compositions and overall durations, see "Summary -- Investment
Objectives, Policies and Restrictions" herein.

Fortis Advisers, Inc. ("Advisers") serves as the investment adviser,
transfer agent and dividend agent to both the Acquired Fund and the Acquiring
Fund.

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 December 27, 1995 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 7 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, and 5 through 7 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 December 1, 1995 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 2-3 of the Acquiring
Fund's Annual Report for the fiscal year ended July 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 December 1, 1995 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, 1994 is incorporated by reference in its entirety in the Statement of
Additional Information relating to this Prospectus/Proxy Statement.

7. The Semi-Annual Report of the Acquired Fund for the six months ended
April 30, 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"). The value
of the Acquired Fund assets and liabilities to be acquired by the Acquiring
Fund, and the value of the Acquiring Fund shares to be exchanged therefor, will
be computed as of the Effective Time. As a result of the Reorganization, each
shareholder of the Acquired Fund will receive Acquiring Fund shares of the same
class that he or she held in the Acquired 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 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 each class of the Acquired Fund, voting
as separate classes.

TAX CONSEQUENCES

Prior to completion of the Reorganization, the Acquired Fund will have
received from counsel an opinion that, upon the Reorganization and the transfer
of the assets of the Acquired Fund, 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."

4
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

The investment policies of the Acquired Fund and the Acquiring Fund are similar
but not identical. Specifically:

- The Acquiring Fund invests in securities issued, guaranteed, insured, or
collateralized by the United States Government or its agencies or
instrumentalities (whether or not backed by the "full faith and credit"
pledge of the United States Government). Unlike the Acquired Fund, the
Acquiring Fund is not permitted to invest any portion of its assets in
debt securities which are not issued or guaranteed by the United States
Government or its agencies or instrumentalities. At the date of this
Prospectus/Proxy Statement, the Acquired Fund does not hold any assets
which would not be permitted investments for the Acquiring Fund.

Based on the historical performance and current portfolio composition of the
respective Funds, the Funds' investment adviser expects that the level of net
investment income of the respective classes of Acquiring Fund shares issued in
the Reorganization will be somewhat higher than the historical level of net
investment income on the respective classes of Acquired Fund shares. As of July
31, 1995, the Acquired Fund held approximately 40.2% of its net assets in
mortgage-backed securities and approximately 57.8% in treasury and agency bonds,
while the Acquiring Fund held approximately 38.7% and 60.8%, respectively, of
its net assets in these two types of securities. At September 30, 1995, the
Acquired Fund's overall duration was approximately 4.4 years and the Acquiring
Fund's was approximately 4.4 years.

The Annual Report of the Acquiring Fund for the fiscal year ended July 31,
1995 and the Semi-Annual Report of the Acquired Fund for the six months ended
April 30, 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. As noted above, at the date of
this Prospectus/Proxy Statement, the Acquired Fund does not hold any assets
which would not be permitted investments for the Acquiring Fund.

5
<PAGE>
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 following schedules:

<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
- -------------------------------------------------- -------------------------------------------------
ANNUAL ANNUAL
INVESTMENT ADVISORY INVESTMENT ADVISORY
AVERAGE NET ASSETS AND MANAGEMENT FEE AVERAGE NET ASSETS AND MANAGEMENT FEE
- ---------------------------- -------------------- --------------------------- --------------------
<S> <C> <C> <C>
For the first $50 million .80% For the first $50 million .80%
For the next $450 million .75% For assets over $50 million .70%
For assets over $500 million .70%
</TABLE>

At July 31, 1995, the Acquired Fund had net assets of approximately $64.5
million, while the Acquiring Fund had net assets of approximately $481.1
million. Thus, due to the additional "breakpoint" in the advisory fee schedule
for the Acquired Fund and the greater size of the Acquiring Fund, it is
anticipated that Acquired Fund shareholders will experience slightly lower
advisory fees as a percentage of net assets as a result of the proposed
Reorganization.

SALES CHARGES AND RULE 12B-1 FEES. The Acquired Fund and the Acquiring Fund
both offer Class A, Class B, Class C and Class H shares. With respect to both
Funds, these classes are subject to the following charges (with differences in
bold-face type):

- Class A shares of both the Acquired Fund and the Acquiring Fund are
subject to a front-end sales charge of 4.5% on purchases of less than
$100,000, 3.5% on purchases of from $100,000 but less than $250,000, 2.5%
on purchases of from $250,000 but less than $500,000, and 2.0% on
purchases of from $500,000 but less than $1 million. The front-end sales
charge on Class A shares of both Funds is waived in full on purchases of
$1 million or more, but a 1% deferred sales charge is collected if shares
subject to such a waiver are sold within 24 months after purchase. No
Class A shares of either Fund are subject to any other contingent deferred
sales charge or other sales charges or to any redemption fee. CLASS A
SHARES OF THE ACQUIRED FUND ARE SUBJECT TO RULE 12B-1 FEES EQUALING 0.35%
PER ANNUM OF AVERAGE DAILY NET ASSETS, WHILE CLASS A SHARES OF THE
ACQUIRING FUND ARE SUBJECT TO RULE 12B-1 FEES EQUALING 0.25% OF AVERAGE
DAILY NET ASSETS. THUS, IF THE PROPOSED REORGANIZATION IS COMPLETED, CLASS
A SHAREHOLDERS OF THE ACQUIRED FUND WILL BECOME SUBJECT TO LOWER RULE
12B-1 FEES.

- Class B and Class H shares of both the Acquired Fund and the Acquiring
Fund are subject to no front-end sales charge. Class B and Class H shares
of both Funds are subject to a contingent deferred sales charge declining
from 4% in the first two years following purchase to 0% after six years
and to Rule 12b-1 fees of 1.00% per annum of average daily net assets.
After eight years, Class B and Class H shares of both Funds automatically
convert to Class A shares. Class B and Class H shares of the respective
Funds differ only with respect to dealer concessions.

- Class C shares of both the Acquired Fund and the Acquiring Fund are
subject to no front-end sales charge. Class C shares of both Funds are
subject to a contingent deferred sales charge of 1% if shares are redeemed
within one year after purchase and to Rule 12b-1 fees of 1.00% per annum
of average daily net assets. Unlike Class B and Class H shares, Class C
shares of the two Funds do not convert to Class A shares after any period
of time.

As described below, in the Reorganization Class A shares of the Acquired Fund
will be exchanged for Class A shares of the Acquiring Fund, Class B shares will
be exchanged for Class B shares, Class C shares will be exchanged for Class C
shares, and Class H shares will be exchanged for Class H shares. Therefore,
sales charges and Rule 12b-1 fees will remain unchanged as a result of the
Reorganization, except that Class A shareholders will become subject to lower
Rule 12b-1 fees as described above.

6
<PAGE>
The Plan provides that former holders of Acquired Fund Class B and Class H
shares who receive Acquiring Fund Class B or Class H shares in the
Reorganization will receive credit for the period they held Acquired Fund Class
B or Class H shares in applying the six-year step-down of the contingent
deferred sales charge on Acquiring Fund Class B and Class H shares and in
determining the date upon which such shares convert to Acquiring Fund Class A
shares. It also provides that former holders of Acquired Fund Class C shares who
receive Acquiring Fund Class C shares in the Reorganization will receive credit
for the period they held Acquired Fund Class C shares in applying the one-year
contingent deferred sales charge on Acquiring Fund Class C shares. Similarly,
the Plan provides that in applying the 24-month 1% deferred sales charge on
purchases of Class A shares with respect to which the front-end sales charge was
waived, credit will be given for the period a former Acquired Fund shareholder
who is subject to such a deferred sales charge held his or her shares.

Class A 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 -- Class A and Class E Shares-Initial Sales
Charge Alternative -- Special Purchase Plans for Class A and E Shares." These
include a right of accumulation in calculating sales charges and certain classes
of persons and entities which are exempt from sales charges. Class A shares of
the Acquired Fund are subject to substantially similar special purchase plans.
In addition, all classes of shares of the Acquiring Fund are subject to certain
other 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. All classes of shares
of the Acquired Fund are subject to substantially similar special purchase
plans.

DEALER COMPENSATION. Dealer compensation arrangements are substantially
similar for the respective classes of the two Funds, except that the lower Rule
12b-1 fees charged on Class A shares of the Acquiring Fund result in a lesser
amount being available for dealer compensation with respect to such Fund than
with respect to the Acquired Fund.

7
<PAGE>
PRO FORMA FEES AND EXPENSES

The following tables are intended to assist Acquired Fund shareholders of
the respective classes 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 shareholders of the Acquiring Fund currently bear (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 tables are as of July 31,
1995.

CLASS A SHARES FEES AND EXPENSES

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING
FUND FUND PRO FORMA
-------- ---------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................... 4.50%* 4.50%* 4.50%*
Maximum Deferred Sales Charge..................... ** ** **

ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fees................................... 0.79% 0.71% 0.71%
Rule 12b-1 Fees................................... 0.35% 0.25% 0.25%
Other Expenses.................................... 0.21% 0.08% 0.07%
Total Fund Operating Expenses..................... 1.35% 1.04% 1.03%
-------- ----- ---------
Less Reimbursed Expenses.......................... 0% (0.02%)*** 0%
-------- ----- ---------
Total Fund Operating Expenses..................... 1.35% 1.02% 1.03%

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............................................ $ 58 $ 55 $ 55
3 years........................................... $ 86 $ 77 $ 76
5 years........................................... $116 $ 100 $ 99
10 years.......................................... $200 $ 166 $165
</TABLE>

- ------------------------
* Since the Funds also pay an asset based sales charge, long-term shareholders
may pay more than the economic equivalent of the maximum front end sales
charge permitted by NASD rules.

** A contingent deferred sales charge of 1.00% is imposed on certain redemptions
of Class A shares that were purchased without an initial sales charge as part
of an investment of $1 million or more. See "-- Sales Charges and Rule 12b-1
Fees" above.

*** The expense limit, which resulted in reimbursement to this class of the
Acquiring Fund, expired June 1, 1995.

8
<PAGE>
CLASS B AND CLASS H SHARES FEES AND EXPENSES

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING
FUND FUND PRO FORMA
-------- ---------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................... 0.00%* 0.00%* 0.00%*
Maximum Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable)................................... 4.00% 4.00% 4.00%

ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fees................................... 0.79% 0.71% 0.71%
Rule 12b-1 Fees................................... 1.00% 1.00% 1.00%
Other Expenses.................................... 0.21% 0.08% 0.07%
Total Fund Operating Expenses..................... 2.00% 1.79% 1.78%
-------- ----- ---------
Less Reimbursed Expenses.......................... 0% (0.02%)** 0%
-------- ----- ---------
Total Fund Operating Expenses..................... 2.00% 1.77% 1.78%

EXAMPLE
You would pay the following expenses on a $1,000 investment over various time periods
assuming: (1) 5% annual return; and (2) redemption at the end of each time period.
This example includes conversion of Class B and Class H shares to Class A shares
after eight years and a waiver of deferred sales charges on Class B and Class H
shares of 10% of the amount invested. See "-- Sales Charges and Rule 12b-1 Fees"
above.
1 year............................................ $ 56 $ 54 $ 54
3 years........................................... $ 90 $ 83 $ 83
5 years........................................... $126 $ 115 $114
10 years.......................................... $216 $ 191 $190

Assuming no redemption, the expenses on the same investment would be as follows:
1 year............................................ $ 20 $ 18 $ 18
3 years........................................... $ 63 $ 56 $ 56
5 years........................................... $108 $ 97 $ 96
10 years.......................................... $216 $ 191 $190
</TABLE>

- ------------------------
* Class B and Class H shares are sold without a front end sales charge, but
their contingent deferred sales charge and Rule 12b-1 fees may cause long-term
shareholders to pay more than the economic equivalent of the maximum permitted
front end sales charge.

** The expense limit, which resulted in reimbursement to these classes of the
Acquiring Fund, expired June 1, 1995.

9
<PAGE>
CLASS C SHARES FEES AND EXPENSES

<TABLE>
<CAPTION>
ACQUIRED ACQUIRING
FUND FUND PRO FORMA
-------- ---------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................... 0.00%* 0.00%* 0.00%*
Maximum Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable)................................... 1.00% 1.00% 1.00%

ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fees................................... 0.79% 0.71% 0.71%
Rule 12b-1 Fees................................... 1.00% 1.00% 1.00%
Other Expenses.................................... 0.21% 0.08% 0.07%
Total Fund Operating Expenses..................... 2.00% 1.79% 1.78%
-------- ----- ---------
Less Reimbursed Expenses.......................... 0% (0.02%)** 0%
-------- ----- ---------
Total Fund Operating Expenses..................... 2.00% 1.77% 1.78%

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............................................ $ 30 $ 28 $ 28
3 years........................................... $ 63 $ 56 $ 56
5 years........................................... $108 $ 97 $ 96
10 years.......................................... $233 $ 211 $209

- ------------------------
* Class C shares are sold without a front end sales charge, but their contingent
deferred sales charge and Rule 12b-1 fees may cause long-term shareholders to
pay more than the economic equivalent of the maximum permitted front end sales
charge.

** The expense limit, which resulted in reimbursement to this class of the
Acquiring Fund, expired June 1, 1995.

PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES

Class A, Class B, Class C and Class H 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 Class A, Class B, Class C and Class H shares of the Acquired
Fund. These procedures are discussed in the accompanying Acquiring Fund
Prospectus under the captions "How to Buy Fund Shares" and "Redemption."

DIVIDENDS AND DISTRIBUTIONS

Each of the Funds declares dividends from net investment income on each day
the New York Stock Exchange is open (to shareholders of record as of 3:00 p.m.,
Central time, the preceding business day) and pays dividends monthly.
Distributions of net realized capital gains are made by both Funds annually.
Such dividends and capital gains distributions are made in the form of
additional Fund shares of 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 or reinvested (at net asset value) in the same class of another
Fortis fund.

10
<PAGE>
CAPITAL STOCK; SHAREHOLDER VOTING RIGHTS

Each class of shares of the respective Funds 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 are borne solely by such class and that each
class of shares has exclusive voting rights with respect to provisions of the
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. In addition
to the Class A, Class B, Class C and Class H shares of the Acquiring Fund
described herein, the Acquiring Fund also offers Class E shares. Class E shares
are subject to the same sales charges as Class A shares but are not subject to
Rule 12b-1 fees, and they are only available to existing shareholders on
November 13, 1994. 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 in fixed-rate debt instruments, both are
subject to "interest rate risk." Interest rate risk is the risk that the value
of a fixed-rate debt security will decline due to changes in market interest
rates. In general, when interest rates rise, the value of a fixed-rate debt
security declines. Conversely, when interest rates decline, the value of a
fixed-rate debt security generally increases. Thus, shareholders of both the
Acquired Fund and the Acquiring Fund bear the risk that increases in market
interest rates will cause the value of their Fund's portfolio investments to
decline.

In general, the value of fixed-rate debt securities with longer durations is
more sensitive to changes in market interest rates than the value of such
securities with shorter durations. Thus, the net asset value of a Fund which has
an overall longer duration should be expected to have greater volatility in
periods of changing market interest rates than that of a Fund which has a
shorter overall duration. As noted above under "Summary -- Investment
Objectives, Policies and Restrictions," at September 30, 1995, the overall
duration of both the Acquired Fund and the Acquiring Fund was approximately 4.4
years.

Both Funds are intended to have a low exposure to "credit risk," that is,
the risk that the issuer of a debt security will fail to make payments on the
security when due. As described elsewhere herein, both Funds invest primarily in
obligations issued or guaranteed by the United States Government or its agencies
or instrumentalities (whether or not backed by the "full faith and credit"
pledge of the United States Government). However, the Acquired Fund may invest
up to 20% of its net assets in certain types of debt securities which are not
issued or guaranteed by the United States Government or its agencies or
instrumentalities, subject to the credit quality standards described below under
"Information About the Acquired Fund and the Acquiring Fund -- Comparison of
Investment Objectives, Policies and Restrictions." To the extent that the
Acquired Fund can invest in such securities, it could have somewhat higher
credit risk than the Acquiring Fund.

Both Funds also can invest in certain types of mortgage-backed securities
and use certain other investment techniques which entail investment risk. These
types of mortgage-backed securities and investment techniques are described or
referred to below under "Information About the Acquired Fund and the Acquiring
Fund -- Comparison of Investment Objectives, Policies and Restrictions," and are
similar with respect to both Funds.

11
<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 and the same underwriter and auditors. Norwest Bank Minnesota, N.A. acts
as custodian for the Acquired Fund, while First Bank National Association acts
as custodian for the Acquiring Fund.

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;

(v) the fact that advisory fees, Rule 12b-1 fees and sales charges would
remain constant or, in some instances, be reduced for Acquired Fund
shareholders; and

(vi) the Acquiring Fund's agreements that (a) former holders of Acquired
Fund Class B and Class H shares who receive Acquiring Fund Class B or Class
H shares in the Reorganization will receive credit for the period they held
Acquired Fund Class B or Class H shares in applying the six-year step-down
of the contingent deferred sales charge on Acquiring Fund Class B and Class
H shares and in determining the date upon which such shares convert to
Acquiring Fund Class A shares; (b) former holders of Acquired Fund Class C
shares who receive Acquiring Fund Class C shares in the Reorganization will
receive credit for the period they held Acquired Fund Class C shares in
applying the one-year contingent deferred sales charge on Acquiring Fund
Class C shares; and (c) in applying the 24-month 1% deferred sales charge on
purchases of Class A shares with respect to which the front-end sales charge
was waived, credit will be given for the period a former Acquired Fund
shareholder who is subject to such a deferred sales charge held his or her
shares.

The Boards also considered the potential benefits to Advisers which could result
from the proposed Reorganization. The Boards recognized that if Advisers
determines to waive advisory fees in the future, to the extent that the proposed
Reorganization results in lower overall expense ratios before fee waivers, the
combination of Funds would have the effect of decreasing the cost to Advisers of
providing such waivers. The Boards also noted, however, that Advisers is not
obligated to make any such waivers and that if such waivers are not made, former
shareholders of the Acquired Fund

12
<PAGE>
and shareholders of the Acquiring Fund would benefit directly from any decreases
in overall expense ratios and that, in any event, the proposed Reorganization is
expected to provide other benefits to shareholders. The Board thus concluded
that, despite these potential benefits to Advisers, the factors noted in (i)
through (vi) 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 Fortis Advantage, 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 Fortis Advantage in the manner
provided in the amendment set forth in Exhibit 1 to the Plan attached hereto as
Exhibit A.

Pursuant to the Plan, each holder of Class A, Class B, Class C or Class H
shares of the Acquired Fund will receive, at the Effective Time, Class A, Class
B, Class C or Class H shares of the Acquiring Fund, as applicable, 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.
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 cancelled and retired and thereafter, no
additional shares representing interests in the Acquired Fund will be issued,
and the Acquired Fund will be deemed to be liquidated.

Under the Plan, the net asset value per share of the Acquired Fund's and the
Acquiring Fund's Class A, Class B, Class C and Class H shares will be computed
as of the Effective Time using the valuation procedures set forth in the
respective Funds' articles of incorporation and bylaws and then-current
Prospectuses and Statements of Additional Information and as may be required by
the Investment Company Act. The distribution of Acquiring Fund shares to former
Acquired Fund shareholders described above 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 respective classes
and numbers of full and fractional Acquiring Fund shares due such shareholders.

The Plan provides that no sales charges will be incurred by Acquired Fund
shareholders in connection with the acquisition by them of Acquiring Fund shares
pursuant thereto. The Plan also provides that former holders of Acquired Fund
Class B and Class H shares who receive Acquiring Fund Class B or Class H shares
in the Reorganization will receive credit for the period they held Acquired Fund
Class B or Class H shares in applying the six-year step-down of the contingent
deferred sales charge on Acquiring Fund Class B and Class H shares and in
determining the date upon which such shares convert to Acquiring Fund Class A
shares. In addition, the Plan provides that former holders of Acquired Fund
Class C shares who receive Acquiring Fund Class C shares in the Reorganization
will receive credit for the period they held Acquired Fund Class C shares in
applying the one-year contingent deferred sales charge on Acquiring Fund Class C
shares. Similarly, the Plan provides

13
<PAGE>
that in applying the 24-month 1% deferred sales charge on purchases of Class A
shares with respect to which the front-end sales charge was waived, credit will
be given for the period a former Acquired Fund shareholder who is subject to
such a deferred sales charge held his or her shares.

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 Fortis Advantage's 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 values of the respective Funds 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.

Under the Plan, the Acquired Fund has agreed not to acquire any securities
which are not permissible investments for the Acquiring Fund prior to the
Effective Time, and it is a condition to closing that the Acquired Fund not hold
any such securities immediately prior to the Effective Time. See "Summary --
Investment Objectives, Policies and Restrictions" and "Information About the
Acquired Fund and the Acquiring Fund -- Comparison of Investment Objectives,
Policies and Restrictions." As previously noted, the Acquired Fund does not hold
any such securities at the date of this Prospectus/Proxy Statement.

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

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 Code and that, for federal income tax

14
<PAGE>
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, 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.

15
<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's shares
and, 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
shares of each class of the Acquired Fund present at the Special Meeting, voting
as separate classes. Approval of the Plan by Acquired Fund shareholders will be
deemed approval of the amendment to the articles of incorporation of Fortis
Advantage 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 December
1, 1995 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.

16
<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 a high level of current income and with capital
appreciation. Specifically:

- The investment objective of the Acquired Fund is to provide investors with
a high level of current ncome consistent with liquidity and the
preservation of principal. In addition, the Acquired Fund will, when
market conditions permit and consistent with the overall goal of
preserving capital, seek capital appreciation.

The investment policies of the Acquired Fund and the Acquiring Fund are similar
but not identical. Specifically:

The Acquiring Fund invests in securities issued, guaranteed, insured, or
collateralized by the United States Government or its agencies or
instrumentalities (whether or not backed by the "full faith and credit" pledge
of the United States Government). Unlike the Acquired Fund, the Acquiring Fund
is not permitted to invest any portion of its assets in debt securities which
are not issued or guaranteed by the United States Government or its agencies or
instrumentalities. At the date of this Prospectus/Proxy Statement, the Acquired
Fund does not hold any assets which would not be permitted investments for the
Acquiring Fund.

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. For certain
comparative information concerning the respective Funds' portfolio compositions
and overall durations, see "Summary -- Investment Objectives, Policies and
Restrictions."

DEBT SECURITIES WHICH ARE PERMISSIBLE INVESTMENTS FOR THE ACQUIRED FUND BUT
NOT THE ACQUIRING FUND. As noted above, the Acquired Fund (but not the
Acquiring Fund) may invest up to 20% of its net assets in certain types of debt
securities which are not issued or guaranteed by the United States Government or
its agencies or instrumentalities. These include (i) negotiable certificates of
deposit, bankers acceptances and fixed time deposits of United States banks
(including foreign branches) and of foreign banks; (ii) commercial paper
consisting of direct obligations of domestic and foreign issuers; and (iii)
corporate debt securities (including variable amount master demand notes) and
debt securities of foreign government issuers denominated and payable in United
States dollars. The bank obligations and commercial paper in which the Acquired
Fund may invest must be obligations which at the time of investment are rated in
one of the two highest short-term rating categories by a nationally recognized
rating agency, or are issued or guaranteed as to principal and interest by
issuers having an existing long-term debt rating in one of the two highest
rating categories by a nationally recognized rating agency, or which are of
comparable investment quality in the opinion of Advisers. The corporate debt
securities and debt securities of foreign government issuers in which the
Acquired Fund may invest must be rated in one of the two highest short-term
rating categories by a nationally

17
<PAGE>
recognized rating agency at the time of investment. In addition, the Acquired
Fund may invest up to 20% of its total assets in municipal securities when such
securities appear to offer more attractive returns than taxable securities.

To the extent that the Acquired Fund can invest in the foregoing types of
securities, it could have somewhat higher credit risk than the Acquiring Fund.
However, such securities also have the potential to produce higher interest
income. As previously noted, at the date of this Prospectus/Proxy Statement, the
Acquired Fund does not hold any of these types of securities.

MORTGAGE-BACKED SECURITIES. Both Funds may invest in mortgage-backed
securities backed by the full faith and credit of the United States or by the
credit of agencies or instrumentalities of the United States Government, such as
GNMA certificates, FNMA certificates, and FHLMC certificates. These
mortgage-backed securities may include collateralized mortgage obligations, or
"CMOs," and multi-class pass-through securities. These types of securities are
described in detail in the accompanying Prospectus of the Acquiring Fund under
the caption "Investment Objectives and Policies -- CMOs and Multi-Class
Pass-Through Securities." As described therein, these types of securities
include interest-only securities ("IOs"), principal-only securities ("POs"),
inverse floating rate securities ("inverse floaters"), and accrual bonds. As is
also described therein, these types of securities are subject to potentially
high price and yield volatility.

The Acquired Fund and the Acquiring Fund are subject to slightly different
restrictions on their investments in the latter four types of securities. The
Acquired Fund cannot invest more than 7.5% of its net assets in any one of these
types of securities at any one time or more than 15% of its net assets in all
such obligations at any one time. By contrast, the Acquiring Fund cannot invest
more than 5% of its net assets in any one of these types of securities at any
one time or more than 10% of its net assets in all such obligations at any one
time. Thus, the Acquiring Fund's permitted exposure to the risks associated with
these types of securities is somewhat lower than the Acquired Fund's permitted
exposure.

REPURCHASE AGREEMENTS. Both Funds may invest in repurchase agreements. The
Acquired Fund is permitted to invest up to 15% of its net assets in repurchase
agreements with a maturity of more than seven days, while the Acquiring Fund is
permitted to invest only up to 10% of its net assets in such repurchase
agreements. This policy is a "fundamental policy" as to the Acquiring Fund
(requiring shareholder vote to change), but not as to the Acquired Fund.

DELAYED DELIVERY TRANSACTIONS. Both Funds may purchase securities on a
"when issued" or delayed delivery basis and purchase or sell securities on a
"forward commitment" basis. These types of transactions, and the risks
associated therewith, are described in the accompanying Prospectus of the
Acquiring Fund under the caption "Investment Objectives and Policies -- Delayed
Delivery Transactions." The Acquired Fund is permitted to invest up to 20% of
its net assets in when-issued, delayed delivery or forward commitment
transactions, no more than half of which (i.e., 10% of net assets) may be
invested in such transactions without the intention of actually acquiring
securities (i.e., dollar rolls). There is no limitation on the proportion of the
Acquiring Fund's net assets which may be invested in when-issued, delayed
delivery or forward commitment transactions, but no more than 20% of its net
assets may be invested in such transactions without the intention of actually
acquiring securities (i.e., dollar rolls).

LENDING OF PORTFOLIO SECURITIES. Both Funds may engage in securities
lending subject to applicable regulatory requirements. These types of
transactions are described in the accompanying Prospectus of the Acquiring Fund
under the caption "Investment Objectives and Policies -- Lending of Portfolio
Securities." Each Fund limits such securities lending to not more than 33 1/3%
of the value of its total assets, with "total assets" including the amount lent
as well as the collateral securing such loans. The Acquiring Fund is subject to
an additional limitation, not applicable to the Acquired Fund, which provides
that cash collateral received in connection with these loans may be invested in
short-term (one year or less) high-grade securities, but not in excess of 35% of
the Acquiring Fund's total assets.

18
<PAGE>
TRANSACTIONS IN OPTIONS, FUTURES, AND FORWARD CONTRACTS. Subject to certain
restrictions, the Acquired Fund is permitted to enter into options, futures, and
forward contracts on a variety of investments and indexes, in order to protect
against declines in the value of portfolio securities or increase in the cost of
securities to be acquired and, in the case of options on securities or indexes
of securities, to increase its gross income. The Acquiring Fund is not permitted
to engage in such transactions.

OTHER. Each Fund is permitted to invest up to 15% of its net assets in all
forms of illiquid securities, as determined pursuant to applicable Commission
regulations. The Acquired Fund may borrow from a bank for temporary purposes
(i.e., to facilitate redemptions) in an amount that does not exceed 10% of its
total assets, while the Acquiring Fund may borrow for such purposes in an amount
not to exceed 5% of its total assets.

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 July 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................................. $ 64,033 $ 4,909 $ 68,942
Net asset value per share.................. $ 8.03 $ 9.02 $ 9.02
Shares outstanding......................... 7,979 544 7,643

CLASS B SHARES
Net assets................................. $ 47 $ 483 $ 529
Net asset value per share.................. $ 8.00 $ 9.02 $ 9.02
Shares outstanding......................... 6 54 59

CLASS C SHARES
Net assets................................. $ 19 $ 326 $ 345
Net asset value per share.................. $ 8.01 $ 9.01 $ 9.01
Shares outstanding......................... 2 36 38

CLASS H SHARES
Net assets................................. $ 385 $ 4,823 $ 5,208
Net asset value per share.................. $ 7.99 $ 9.02 $ 9.02
Shares outstanding......................... 48 535 577

CLASS E SHARES*
Net assets................................. -- $ 470,597 $ 470,597
Net asset value per share.................. -- $ 9.02 $ 9.02
Shares outstanding......................... -- 52,150 52,150
</TABLE>

- ------------------------
* As described under "Summary -- Capital Stock; Shareholder Voting Rights," the
Acquiring Fund, but not the Acquired Fund, offers Class E shares.

19
<PAGE>
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 9, 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 December 27, 1995. Only shareholders of record as of the close of business
on December 15, 1995 (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 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 September 30, 1995 (i) the Acquired Fund had the following numbers of
shares outstanding and entitled to vote at the Meeting: Class A, 7,764,928
shares; Class B, 7,815 shares; Class C, 3,797 shares; and Class H, 84,538
shares; (ii) the Acquiring Fund had the following numbers of shares outstanding:
Class A, 792,823 shares; Class B, 81,565 shares; Class C, 48,601 shares; and
Class H, 675,211 shares; and (iii) the directors and officers of the respective
Funds as a group owned less than one percent of the outstanding shares of either
Fund or any class thereof. The following table sets forth information concerning
those persons known by the respective Funds to own of record or beneficially
more than 5% of the outstanding shares of any class of either Fund as of such
date, including persons and entities who beneficially own more than 25% of any
class. No person is known to the Acquired Fund or the Acquiring Fund to own 5%
or more of the outstanding shares of either Fund as a whole. Unless otherwise
indicated, the persons named below have both record and beneficial ownership:

<TABLE>
<CAPTION>
CLASS OF PERCENTAGE
SHARES OWNERSHIP
NAME AND ADDRESS OF HOLDER OWNED OF CLASS
- -------------------------------------------------- -------- ---------
<S> <C> <C>

ACQUIRED FUND:
Paul E. and Bernice L. Linell .................. Class B 5%
4821 Grenwich Way N.
Oakdale, MN 55128-2036
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
CLASS OF PERCENTAGE
SHARES OWNERSHIP
NAME AND ADDRESS OF HOLDER OWNED OF CLASS
- -------------------------------------------------- -------- ---------
<S> <C> <C>

ACQUIRED FUND (CONTINUED):
First Trust National Association C/F
Louis H. Tomschin IRA ....................... Class B 6%
RR 2, Box 173E
Alden, MN 56009-9561
Arnold M. and Linda J. Reig .................... Class B 7%
5355 SW 119th Ave.
Cooper City, FL 33330-4262
Colorado National Bank CUST IRA of
Ray R. Gonzales ............................. Class B 8%
8321 Sheridan Court
Arvada, CO 80003-1441
First Trust National Association C/F
Robert Harbo IRA ............................ Class B 15%
428 E. 11th
Fairmont, MN 56031-3754
First Trust National Association C/F
Richard L. Overgaard IRA .................... Class B 16%
2017 Highland Ave.
Albert Lea, MN 56007-2034
Harry Buck, Jr ................................. Class B 31%
P.O. Box 298
Upper Marlboro, MD 20773-0298
Harvey Lou Dillard, Trustee FBO Dillard
Family Trust ................................ Class H 9%
118 N. Main Street
Cedar Hill, TX 75104-2003
Harvey Lou Dillard ............................. Class H 12%
118 N. Main Street
Cedar Hill, TX 75104-2003
Robert S. Kaper, Trustee FBO Kapers
Building Materials, Inc. .................... Class H 28%
U.S. Route 231, P.O. Box 310
Demotte, IN 46310
Shirley K. Levitan ............................. Class H 34%
218 Westmoreland Drive
Wilmette, IL 60091-3060
Bruce N. and Sherri L. Gorrell ................. Class C 6%
11512 Woody Lane
W. Burlington, IA 52655-8523
Robert S. Roesler and Rachael J. Springola ..... Class C 6%
W165N11478 Royal Court
Germantown, WI 53011-3251
Kim A. Luttenegger ............................. Class C 36%
11656 Highway 99
Burlington, IA 52601-8516
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
CLASS OF PERCENTAGE
SHARES OWNERSHIP
NAME AND ADDRESS OF HOLDER OWNED OF CLASS
- -------------------------------------------------- -------- ---------
<S> <C> <C>

ACQUIRED FUND (CONTINUED):
First Trust National Association C/F
Kurt Becks IRA .............................. Class C 39%
9 Suncrest Drive
Saint Peters, MO 63376-4432

ACQUIRING FUND:
John H. Gaughn, Trustee FBO John Gaughn &
Assoc. Inc. Pen PS Trust .................... Class B 5%
5223 W. San Fernando Road
Los Angelas, CA 90039-1012
Donna L. Iglehart .............................. Class B 6%
532 Beech Drive
Lusby, MD 20657-3217
Trujillo Steel Erectors PS Key Plan, Acct.
of Anthony R. Solano ........................ Class B 6%
1800 S. 120th Street
Lafayette, CO 80026-9512
Esther Sachs ................................... Class B 7%
P.O. Box 1489
Aspen, CO 81612-1489
Mark D. Kayne MD, FBO Mark D. Kayne
Profit Sharing Plan ......................... Class B 12%
23928 Lyons Ave., Ste. 110
Newhall, CA 91321-2454
Vivian C. Gilbertson ........................... Class C 5%
1717 S. Main Street
Burlington, IA 52601-6126
Alvina Den Ouden ............................... Class C 5%
1501 Leisure World
Mesa, AZ 85206-2308
Roma Rosetta Klover Ewing ...................... Class C 6%
14982 County Ridge Drive
Chesterfield, MO 63017-7601
Joan A. Foreman ................................ Class C 6%
625 Black Rood Road
Hanover, PA 17331-8310
First Trust National Association C/F
Thomas H. Rykhus IRA ........................ Class C 6%
423 N. Wheeler Ave.
North Mankato, MN 56003-3737
American Chemical Systems, Inc. ................ Class C 8%
320 Burning Oaks Drive
Irwin, PA 15652-5906
</TABLE>

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.

22
<PAGE>
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, as the underwriter for each Fund, receives payments for
providing distribution services.

NO DISSENTERS' RIGHTS OF APPRAISAL

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

FINANCIAL STATEMENTS AND EXPERTS

The audited statements of net assets of the Acquired Fund as of October 31,
1994, and of the Acquiring Fund as of July 31, 1995 and the related statements
of operations for the years then ended, changes in net assets for each of the
periods indicated therein and the financial highlights for the periods indicated
therein, as included or incorporated by reference in the Statement of Additional
Information of the Acquired Fund dated March 31, 1995 and the Statement of
Additional Information of the Acquiring Fund dated December 1, 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. In addition, the unaudited financial statements for the
Acquired Fund for the six-month period ended April 30, 1995, as included in the
Semi-Annual Report of Fortis Advantage for the six-month period ended April 30,
1995, are incorporated herein by reference.

LEGAL MATTERS

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

23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PROSPECTUS/PROXY STATEMENT
DECEMBER 27, 1995

PROPOSED ACQUISITION OF ASSETS OF

GOVERNMENT TOTAL RETURN PORTFOLIO
A SEPARATELY MANAGED SERIES OF
FORTIS ADVANTAGE PORTFOLIOS, INC.

BY AND IN EXCHANGE FOR SHARES OF
FORTIS U.S. GOVERNMENT SECURITIES FUND
A SEPARATELY MANAGED SERIES OF
FORTIS INCOME PORTFOLIOS, INC.

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

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

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation by Reference..................... 3
Summary........................................ 4
Risk Factors................................... 11
Information About the Reorganization........... 12
Information About the Acquired Fund and the
Acquiring Fund................................ 16
Voting Information............................. 20
Financial Statements and Experts............... 23
Legal Matters.................................. 23
Exhibit A -- Agreement and Plan of
Reorganization
</TABLE>

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

The following documents accompany this Prospectus/Proxy Statement:

Prospectus dated December 1, 1995, of Fortis U.S. Government Securities Fund.

Annual Report of Fortis U.S. Government Securities Fund for the fiscal year
ended July 31, 1995.

AGREEMENT AND PLAN OF REORGANIZATION
GOVERNMENT TOTAL RETURN PORTFOLIO AND FORTIS U.S. GOVERNMENT SECURITIES FUND

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made as of
this day of , 1995, by and between Fortis Advantage Portfolios, Inc.
("FORTIS ADVANTAGE"), a Minnesota corporation, on behalf of Government Total
Return Portfolio (the "ACQUIRED FUND"), a series of Fortis Advantage, and Fortis
Income Portfolios, Inc. ("FORTIS INCOME"), a Minnesota corporation, on behalf of
Fortis U.S. Government Securities Fund (the "ACQUIRING FUND"), a series of
Fortis Income. The shares of the Acquired Fund and the Acquiring Fund designated
in the respective amended and restated articles of incorporation of Fortis
Advantage and Fortis Income are referred to herein by the names set forth in the
respective corporations' bylaws, as follows:

<TABLE>
<CAPTION>
DESIGNATION IN ARTICLES NAME ASSIGNED IN BYLAWS
- ------------------------------ --------------------------------------------------
<S> <C>
Fortis Advantage:
Series D, Class A........... Government Total Return Portfolio, Class A
Series D, Class B........... Government Total Return Portfolio, Class B
Series D, Class C........... Government Total Return Portfolio, Class C
Series D, Class H........... Government Total Return Portfolio, Class H
Fortis Income:
Series A, Class A........... Fortis U.S. Government Securities Fund, Class A
Series A, Class B........... Fortis U.S. Government Securities Fund, Class B
Series A, Class C........... Fortis U.S. Government Securities Fund, Class C
Series A, Class H........... Fortis U.S. Government Securities Fund, Class H
</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 Acquired Fund
Shares will be effected pursuant to an amendment to the articles of
incorporation of Fortis Advantage in the form attached hereto as Exhibit 1 (the
"AMENDMENT") to be adopted by Fortis Advantage in accordance with the Minnesota
Business Corporation Act.

WITNESSETH:

WHEREAS, each of Fortis Advantage and Fortis Income is a registered,
open-end management investment company, with Fortis Advantage offering its
shares of common stock in multiple series (each of which series represents a
separate and distinct portfolio of assets and liabilities) and Fortis Income
offering its shares of common stock in a single series at the current time;

WHEREAS, each of Fortis Advantage and Fortis Income offers Class A, Class B,
Class C and Class H shares of each of its series;

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

1
<PAGE>
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.

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 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 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 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 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 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 and
classes of 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 and classes of Acquiring Fund
Shares after the Effective Time as

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<PAGE>
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.

1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund 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, except that no front-end
sales charges will be incurred by Acquired Fund Shareholders in connection with
their acquisition of Acquiring Fund Shares pursuant to this Agreement.

1.6 The Acquiring Fund agrees that in determining contingent deferred sales
charges applicable to Class B, Class C and Class H shares distributed by it in
the Reorganization and the date upon which Class B and Class H shares
distributed by it in the Reorganization convert to Class A shares, it shall give
credit for the period during which the holders thereof held the shares of the
Acquired Fund in exchange for which such Acquiring Fund shares were issued. In
the event that Class A shares of the Acquiring Fund are distributed in the
Reorganization to former holders of Class A shares of the Acquired Fund with
respect to which the front-end sales charge was waived due to a purchase of $1
million or more, the Acquiring Fund agrees that in determining whether a
deferred sales charge is payable upon the sale of such Class A shares of the
Acquiring Fund it shall give credit for the period during which the holder
thereof held such Acquired Fund shares.

1.7 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 and the Acquiring
Fund's Class A shares, Class B shares, Class C shares and Class H shares shall
be computed as of the Effective Time using the valuation procedures set forth in
their respective articles of incorporation and bylaws, their respective
then-current Prospectuses and Statements of Additional Information, and as may
be required by the Investment Company Act of 1940, as amended (the "1940 ACT").

2.2(a) The total number of Class A Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and liabilities
of the Acquired Fund which are allocable to the Acquired Fund's Class A shares
shall be determined as of the Effective Time by multiplying the number of Class
A Acquired Fund shares outstanding immediately prior to the Effective Time times
a fraction, the numerator of which is the net asset value per share of the
Acquired Fund's Class A shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the Acquiring Fund's
Class A shares immediately prior to the Effective Time, each as determined
pursuant to Section 2.1.

(b) The total number of Class B Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and liabilities
of the Acquired Fund which are allocable to the Acquired Fund's Class B shares
shall be determined as of the Effective Time by multiplying the number of Class
B Acquired Fund shares outstanding immediately prior to the Effective Time times
a fraction, the numerator of which is the net asset value per share of the
Acquired Fund's Class B shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the Acquiring Fund's
Class B shares immediately prior to the Effective Time, each as determined
pursuant to Section 2.1.

(c) The total number of Class C Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and liabilities
of the Acquired Fund which are allocable to the Acquired Fund's Class C shares
shall be determined as of the Effective Time by multiplying the number of Class
C Acquired Fund shares outstanding immediately prior to the Effective Time times
a

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<PAGE>
fraction, the numerator of which is the net asset value per share of the
Acquired Fund's Class C shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the Acquiring Fund's
Class C shares immediately prior to the Effective Time, each as determined
pursuant to Section 2.1.

(d) The total number of Class H Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and liabilities
of the Acquired Fund which are allocable to the Acquired Fund's Class H shares
shall be determined as of the Effective Time by multiplying the number of Class
H Acquired Fund shares outstanding immediately prior to the Effective Time times
a fraction, the numerator of which is the net asset value per share of the
Acquired Fund's Class H shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of the Acquiring Fund's
Class H shares immediately prior to the Effective Time, each as determined
pursuant to Section 2.1.

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

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<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) Fortis Advantage is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota;

(b) Fortis Advantage 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 Fortis Advantage 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 Fortis
Advantage's 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

5
<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 (other than Class B and Class H shares which
automatically convert to Class A shares after a specified period);

(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 Fortis Advantage 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

6
<PAGE>
effective date of said Registration Statement and up to and including the
Effective Time, will 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 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) Fortis Income is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota;

(b) Fortis Income 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 Fortis Income 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 Fortis
Income's 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;

7
<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

8
<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;

9
<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;

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

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

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

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

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

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

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

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

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

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

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

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

11
<PAGE>
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 calculations of net asset values 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.

12
<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.

FORTIS ADVANTAGE PORTFOLIOS, INC.
on behalf of its
GOVERNMENT TOTAL RETURN
PORTFOLIO

By ___________________________________

Its __________________________________

FORTIS INCOME PORTFOLIOS, INC.
on behalf of its
FORTIS U.S. GOVERNMENT
SECURITIES FUND

By ___________________________________

Its __________________________________

13
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FORTIS ADVANTAGE PORTFOLIOS, INC.

The undersigned officer of Fortis Advantage 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 , 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 D shares of the Corporation (also known as the "Government Total
Return Portfolio") that the assets belonging to such series be sold to
Fortis U.S. Government Securities Fund, a series of Fortis Income
Portfolios, Inc., a Minnesota corporation and an open end management
investment company registered under the Investment Company Act of 1940, in
exchange for shares of Fortis U.S. Government Securities Fund; and

WHEREAS, the Corporation wishes to provide for the pro rata distribution of
such shares of Fortis U.S. Government Securities Fund received by it to
holders of shares of the Corporation's Government Total Return Portfolio and
the simultaneous cancellation and retirement of the outstanding shares of
the Corporation's Government Total Return Portfolio; and

WHEREAS, the Corporation and Fortis Income Portfolios, Inc. 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 Government Total Return
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 Government Total Return 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 INCOME" means Fortis Income Portfolios, Inc., a Minnesota
corporation.

"ACQUIRED FUND" means the Corporation's Government Total Return
Portfolio, which is represented by the Corporation's Series D
shares.

"CLASS A ACQUIRED FUND SHARES" means the Corporation's Series D,
Class A shares.

"CLASS B ACQUIRED FUND SHARES" means the Corporation's Series D,
Class B shares.

"CLASS C ACQUIRED FUND SHARES" means the Corporation's Series D,
Class C shares.

"CLASS H ACQUIRED FUND SHARES" means the Corporation's Series D,
Class H shares.

"ACQUIRING FUND" means Fortis Income's U.S. Government Securities
Fund, which is represented by Fortis Income's Series A shares.
<PAGE>
"CLASS A ACQUIRING FUND SHARES" means Fortis Income's Series A,
Class A shares.

"CLASS B ACQUIRING FUND SHARES" means Fortis Income's Series A,
Class B shares.

"CLASS C ACQUIRING FUND SHARES" means Fortis Income's Series A,
Class C shares.

"CLASS H ACQUIRING FUND SHARES" means Fortis Income's Series A,
Class H 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 Acquired Fund, shall be sold to and
assumed by the Acquiring Fund in return for Class A, Class B, Class C and
Class H Acquiring Fund shares, all pursuant to the Agreement and Plan of
Reorganization. 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 A, Class B, Class C and Class H 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's and the
Acquiring Fund's Class A shares, Class B shares, Class C shares and Class
H shares shall be computed as of the Effective Time using the valuation
procedures set forth in their respective articles of incorporation and
bylaws, their respective then-current Prospectuses and Statements of
Additional Information, and as may be required by the Investment Company
Act of 1940, as amended (the "1940 ACT").

(ii) The total number of Class A Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and
liabilities of the Acquired Fund which are allocable to the Acquired
Fund's Class A shares shall be determined as of the Effective Time by
multiplying the number of Class A Acquired Fund shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of the Acquired Fund's Class A
shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Acquiring Fund's Class A
shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.

(iii) The total number of Class B Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and
liabilities of the Acquired Fund which are allocable to the Acquired
Fund's Class B shares shall be determined as of the Effective Time by
multiplying the number of Class B Acquired Fund shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of the Acquired Fund's Class B
shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Acquiring Fund's Class B
shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.

(iv) The total number of Class C Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and
liabilities of the Acquired Fund which are allocable to the Acquired
Fund's Class C shares shall be determined as of the Effective Time by
multiplying the number of Class C Acquired Fund shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of the Acquired Fund's Class C
shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Acquiring Fund's Class C
shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.

2
<PAGE>
(v) The total number of Class H Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for the assets and
liabilities of the Acquired Fund which are allocable to the Acquired
Fund's Class H shares shall be determined as of the Effective Time by
multiplying the number of Class H Acquired Fund shares outstanding
immediately prior to the Effective Time times a fraction, the numerator
of which is the net asset value per share of the Acquired Fund's Class H
shares immediately prior to the Effective Time, and the denominator of
which is the net asset value per share of the Acquiring Fund's Class H
shares immediately prior to the Effective Time, each as determined
pursuant to (i) above.

(vi) Immediately after the Effective Time, the Acquired Fund shall
distribute to the Acquired Fund shareholders of the respective classes in
liquidation of the Acquired Fund pro rata within classes (based upon the
ratio that the number of Acquired Fund shares of the respective classes
owned by each Acquired Fund shareholder immediately prior to the
Effective Time bears to the total number of issued and outstanding
Acquired Fund shares of such classes immediately prior to the Effective
Time) the full and fractional Acquiring Fund shares of the respective
classes received by the Acquired Fund pursuant to (ii) through (v) above.
Accordingly, each Class A Acquired Fund shareholder shall receive,
immediately after the Effective Time, Class A Acquiring Fund Shares with
an aggregate net asset value equal to the aggregate net asset value of
the Class A Acquired Fund Shares owned by such Acquired Fund shareholder
immediately prior to the Effective Time; each Class B Acquired Fund
shareholder shall receive, immediately after the Effective Time, Class B
Acquiring Fund Shares with an aggregate net asset value equal to the
aggregate net asset value of the Class B Acquired Fund Shares owned by
such Acquired Fund shareholder immediately prior to the Effective Time;
each Class C Acquired Fund shareholder shall receive, immediately after
the Effective Time, Class C Acquiring Fund Shares with an aggregate net
asset value equal to the aggregate net asset value of the Class C
Acquired Fund Shares owned by such Acquired Fund shareholder immediately
prior to the Effective Time; and each Class H Acquired Fund shareholder
shall receive, immediately after the Effective Time, Class H Acquiring
Fund Shares with an aggregate net asset value equal to the aggregate net
asset value of the Class H Acquired Fund Shares owned by such Acquired
Fund shareholder immediately prior to the Effective Time.

(d) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraph (c) above shall be accomplished by
the issuance of such 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 and classes of Acquiring Fund shares due each such
shareholder pursuant to the foregoing provisions. All issued and outstanding
shares of the Acquired Fund shall simultaneously be cancelled 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 and classes of Acquiring Fund shares determined in accordance with
the foregoing provisions.

(e) From and after the Effective Time, the Acquired Fund shares
cancelled and retired pursuant to paragraph (d) above shall have the status
of authorized and unissued Series D shares of the Corporation, without
designation as to class.

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

FORTIS ADVANTAGE PORTFOLIOS, INC

By ___________________________________

Its __________________________________

3
<PAGE>
FORTIS
U.S. GOVERNMENT
SECURITIES
FUND

(An income fund
investing in
U.S. Government securities)

PROSPECTUS DATED
December 1, 1995

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

Fortis U.S. Government Securities Fund (the "Fund") is a portfolio of Fortis
Income Portfolios, Inc. ("Fortis Income"). The Fund's shares are of five classes
(A, B, H, C, and E), each with different sales arrangements and expenses. This
Prospectus concisely sets forth the information a prospective investor should
know about the Fund before investing. Investors should retain this Prospectus
for future reference. The Fund has filed a Statement of Additional Information
(also dated December 1, 1995) with the Securities and Exchange Commission. The
Statement of Additional Information is available free of charge from Fortis
Investors, Inc. ("Investors") at the above mailing address of the Fund, and is
incorporated by reference into this Prospectus in accordance with the
Commission's rules. SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK; ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY;
AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Class Shares............................................................ 2
Summary of Fund Expenses................................................ 3
Financial Highlights.................................................... 4
Organization and Classification......................................... 5
Investment Objectives and Policies...................................... 5
- Short-Term Trading................................................ 7
Management.............................................................. 7
- Board of Directors................................................ 7
- The Investment Adviser/Transfer Agent/Dividend Agent.............. 7
- The Underwriter and Distribution Expenses......................... 8
- Fund Expenses..................................................... 8
- Brokerage Allocation.............................................. 8
Valuation of Securities................................................. 8
Capital Stock........................................................... 9
Dividends and Capital Gains Distributions............................... 9
Taxation................................................................ 9
How To Buy Fund Shares.................................................. 9
- General Purchase Information...................................... 9
- Alternative Purchase Arrangements................................. 10
- Class A and E Shares--Initial Sales Charge Alternative............ 10
- Class B and H Shares--Contingent Deferred Sales Charge
Alternatives..................................................... 12
- Class C Shares--Level Sales Charge Alternative.................... 12
- Special Purchase Plans for all Classes............................ 13
Redemption.............................................................. 13
- Contingent Deferred Sales Charge.................................. 14
Shareholder Inquiries................................................... 15
Systematic Investment Plan Authorization Agreement...................... 16
</TABLE>

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

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

CLASS A AND E SHARES. Generally, an investor who purchases Class A and E shares
pays a sales charge at the time of purchase. As a result, Class A and E shares
are not subject to any charges when they are redeemed (except for sales at net
asset value in excess of $1 million which may be subject to a contingent
deferred sales charge). The initial sales charge may be reduced or waived for
certain purchases. Class A shares are also subject to an annual Rule 12b-1 fee
of .25% of average daily net assets attributable to Class A shares. This fee is
lower than the other classes having Rule 12b-1 fees (all but Class E) and
therefore Class A shares have lower expenses and pay higher dividends. See "How
to Buy Fund Shares--Class A Shares." Class E shares are not subject to a Rule
12b-1 fee and therefore have the lowest expenses and pay the highest dividends,
but are only available to existing shareholders on November 13, 1994.

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

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

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

2
<PAGE>
SUMMARY OF FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
CLASS A CLASS B AND H CLASS C CLASS E
SHARES SHARES SHARES SHARES
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price)................................................ 4.50%* 0.00%** 0.00%** 4.50%
Maximum Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable).......... *** 4.00% 1.00% ***
<FN>
- ------------------------------
*Since the Fund also pays an asset based sales charge, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by NASD rules.
**Class B, H and C shares are sold without a front end sales charge, but their
contingent deferred sales charge and Rule 12b-1 fees may cause long-term
shareholders to pay more than the economic equivalent of the maximum
permitted front end sales charges.
***A contingent deferred sales charge of 1.00% is imposed on certain redemptions
of Class A and E shares that were purchased without an initial sales charge
as part of an investment of $1 million or more. See "How to Buy Fund
Shares--Class A and E Shares."
</TABLE>

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

<TABLE>
<CAPTION>
CLASS B
CLASS A AND H CLASS C CLASS E
SHARES SHARES SHARES SHARES
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees............................................................................. .71% .71% .71% .71%
12b-1 fees.................................................................................. .25% 1.00% 1.00% --%
Other Expenses.............................................................................. .08% .08% .08% .08%
------- ------- ------- -------
TOTAL FUND OPERATING EXPENSES*.......................................................... 1.04% 1.79% 1.79% .79%
<FN>
- ------------------------
*Total Fund Operating Expenses does not reflect the expense reimbursement of
.02% (which expired June 1, 1995) for the fiscal year ended June 30, 1995.
</TABLE>

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

EXAMPLE

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares.............................................................................. $55 $77 $100 $166
Class B and H Shares........................................................................ $54 $83 $115 $191
Class C Shares.............................................................................. $28 $56 $ 97 $211
Class E Shares.............................................................................. $53 $69 $ 87 $138
</TABLE>

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B and H Shares........................................................................ $18 $56 $ 97 $191
Class C Shares.............................................................................. $18 $56 $ 97 $211
</TABLE>

The above example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.

3
<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

The information below has been derived from audited financial statements and
should be read in conjunction with the financial statements of the Fund and
independent auditors' report of KPMG Peat Marwick LLP found in its 1995 Annual
Report to Shareholders.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
CLASS E SHARES
SEVEN-MONTH
YEAR PERIOD
ENDED ENDED YEAR ENDED DECEMBER 31,
JULY 31, JULY 31,
1995 1994*** 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 9.03 $ 9.87 $ 9.86 $ 10.16 $ 9.76
- -----------------------------------------------------------------------------------------------------
Operations:
Investment income--net................ .67 .42 .75 .84 .88
Net realized and unrealized gains
(losses) on investments.............. (.01) (.84) .05 (.30) .41
- -----------------------------------------------------------------------------------------------------
Total from operations................... .66 (.42) .80 .54 1.29
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net........... (.67) (.42) (.75) (.84) (.89)
From realized gains................... -- -- (.04) -- --
- -----------------------------------------------------------------------------------------------------
Total distributions to shareholders..... (.67) (.42) (.79) (.84) (.89)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period.......... $ 9.02 $ 9.03 $ 9.87 $ 9.86 $ 10.16
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Total Return*........................... 7.71% (4.29%) 8.31% 5.60% 13.90%
Net assets end of period (000s
omitted)............................... $470,597 $555,275 $641,977 $587,996 $452,222
Ratio of expenses to average daily net
assets................................. .77% .77%** .76% .72% .72%
Ratio of net investment income to
average daily net assets............... 7.51% 7.72%** 7.43% 8.48% 8.88%
Portfolio turnover rate................. 76% 85% 157% 128% 95%
- -----------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------------

YEAR ENDED DECEMBER 31,
1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
- ----------------------------------------
Net asset value, beginning of period.... $ 9.72 $ 9.51 $ 9.72 $ 10.36 $ 10.16
- ----------------------------------------
Operations:
Investment income--net................ .89 .92 .92 .89 .91
Net realized and unrealized gains
(losses) on investments.............. .06 .21 (.23) (.54) .29
- ----------------------------------------
Total from operations................... .95 1.13 .69 .35 1.20
- ----------------------------------------
Distributions to shareholders:
From investment income--net........... (.91) (.92) (.90) (.92) (1.00)
From realized gains................... -- -- -- (.07) --
- ----------------------------------------
Total distributions to shareholders..... (.91) (.92) (.90) (.99) (1.00)
- ----------------------------------------
Net asset value, end of period.......... $ 9.76 $ 9.72 $ 9.51 $ 9.72 $ 10.36
- ----------------------------------------
- ----------------------------------------
Total Return*........................... 10.43% 12.48% 7.33% 3.69% 12.36%
Net assets end of period (000s
omitted)............................... $208,054 $121,271 $108,370 $106,259 $86,678
Ratio of expenses to average daily net
assets................................. .81% .83% .87% .90% 1.00%
Ratio of net investment income to
average daily net assets............... 9.37% 9.55% 9.39% 8.99% 8.70%
Portfolio turnover rate................. 118% 118% 109% 178% 147%
- ----------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
EIGHT AND ONE-HALF MONTH PERIOD FROM INCEPTION
OF
CLASS (NOVEMBER 14, 1994) THROUGH JULY 31, 1995
CLASS A CLASS B CLASS H CLASS C
SHARES SHARES SHARES SHARES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 8.63 $ 8.63 $ 8.63 $ 8.63
- ---------------------------------------------------------------------------------------------------------
Operations:
Investment income--net............................... .46 .41 .41 .41
Net realized and unrealized gains (losses)
on investments...................................... .39 .39 .39 .38
- ---------------------------------------------------------------------------------------------------------
Total from operations.................................. .85 .80 .80 .79
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income--net.......................... (.46) (.41) (.41) (.41)
From realized gains.................................. -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Total distributions to shareholders.................... (.46) (.41) (.41) (.41)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period......................... $ 9.02 $ 9.02 $ 9.02 $ 9.01
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Total Return*.......................................... 10.07% 9.47% 9.47% 9.35%
Net assets end of period (000s omitted)................ $ 4,909 $ 483 $ 4,823 $ 326
Ratio of expenses to average daily net assets.......... 1.02%** 1.77%** 1.77%** 1.77%**
Ratio of net investment income to average daily net
assets................................................ 7.01%** 6.24%** 6.24%** 6.24%**
Portfolio turnover rate................................ 76%+ 76%+ 76%+ 76%+
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>

* These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
** Annualized.
*** Effective July 31, 1994, the Fund changed its fiscal accounting and tax
year-end to July 31 (previously December 31).

+ For the year ended July 31, 1995. Portfolio turnover is computed at the Fund
level.

4
<PAGE>
The Fund may advertise its "cumulative total return," "average annual total
return," "systematic investment plan cumulative total return," and "systematic
investment plan average annual total return." The Fund may advertise its
"yield." When the Fund advertises its yield, it will also advertise its "average
annual total return" for the most recent one, five, and ten year periods, along
with other performance data. Performance figures are calculated separately for
each class of shares, and figures for each class will be presented. The Fund may
advertise its relative performance as compiled by outside organizations such as
Lipper Analytical or Wiesenberger, or refer to publications which have mentioned
the Fund, Advisers, or their personnel, and also may advertise other performance
items as set forth in the Statement of Additional Information. The performance
discussion required by the Securities and Exchange Commission is found in the
Fund's Annual Report to Shareholders and will be made available without charge
upon request.

ORGANIZATION AND CLASSIFICATION

The Fund is the only established series of Fortis Income. Fortis Income was
incorporated under Minnesota law in 1972, and is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 as an "open-end
diversified management investment company".

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Fund is to maximize total return (from current
income and capital appreciation), while providing shareholders with a high level
of current income consistent with prudent investment risk. The Fund's investment
objective and, except as otherwise noted, its investment policies, could be
changed without shareholder approval. While no such change is contemplated, such
a change could, of course, result in the Fund's objectives differing from those
deemed appropriate by an investor at the time of his or her investment.

In pursuing its objective, the Fund's assets will be invested in securities
issued, guaranteed, insured, or collateralized by the United States Government,
its agencies, or instrumentalities (whether or not backed by the "full faith and
credit" pledge of the United States Government), in repurchase agreements
pertaining to such securities, and, with respect to no more than 5% of its
assets, in other investment companies which invest in such securities.

Securities issued or guaranteed as to principal and interest by the United
States Government include a variety of securities, which differ in their
interest rates, maturities, and dates of issuance. In addition to Treasury
obligations, the Fund may invest in the following such securities: (1)
obligations of United States government agencies and instrumentalities which are
secured by the full faith and credit of the United States Treasury, such as
Government National Mortgage Association pass-through certificates; (2)
obligations which are secured by the right of the issuer to borrow from the
Treasury, such as securities issued by the Federal Financing Bank or the United
States Postal Service; (3) obligations which are supported by the credit of the
government agency or instrumentality itself, such as securities of the Federal
Home Loan Bank or the Federal National Mortgage Association; and (4)
collateralized mortgage obligations ("CMOs") and multi-class pass-through
securities. The Fund will invest in such securities which are not backed by the
full faith and credit of the United States Treasury only when the credit risk
with respect to the instrumentality or agency issuing such securities does not
make the securities, in the judgment of the Fund's investment adviser,
unsuitable investments for the Fund.

The Fund may invest up to 10% of its total assets (at the time of investment) in
repurchase agreements maturing in more than seven days. This policy may not be
changed without shareholder approval.

Market prices of the securities in which the Fund invests will fluctuate and
will tend to vary inversely with changes in prevailing interest rates. If
interest rates increase from the time a security is purchased, such security, if
sold, might be sold at a price less than its purchase cost. Conversely, if
interest rates decline from the time a security is purchased, such security, if
sold, might be sold at a price greater than its purchase cost.

CMOS AND MULTI-CLASS PASS-THROUGH SECURITIES. CMOs are debt instruments issued
by special purpose entities which are secured by pools of mortgage loans or
other mortgage-backed securities. Multi-class pass-through securities are
interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the CMO or make scheduled distributions on the
multi-class pass-through security. Multi-class pass-through securities, CMOs,
and classes thereof (including those discussed below) are examples of the types
of financial instruments commonly referred to as "derivatives".

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

5
<PAGE>
There are many classes of CMOs. There are IOs, which entitle the holder to
receive distributions consisting solely or primarily of all or a portion of the
interest in an underlying pool of mortgage loans or mortgage-backed securities),
("Mortgage Assets"). There are also "POs", which entitle the holder to receive
distributions consisting solely or primarily of all or a portion of the
principal of the underlying pool of Mortgage Assets. In addition, there are
"inverse floaters", which have a coupon rate that moves in the reverse direction
to an applicable index, and accrual (or "Z") bonds, which are described below.

As to IOs, POs, inverse floaters, and accrual bonds, not more than 5% of the
Fund's net assets will be invested in any one of these items at any one time,
and no more than 10% of the net assets of the Fund will be invested in all such
obligations at any one time.

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

The cash flows and yields on IO and PO classes are extremely sensitive to the
rate of principal payments (including prepayments) on the related underlying
pool of mortgage loans or mortgage-backed securities ("Mortgage Assets"). For
example, a rapid or slow rate of principal payments may have a material adverse
effect on the yield to maturity of IOs or POs, respectively. If the underlying
Mortgage Assets experience greater than anticipated prepayments of principal,
the holder of an IO may incur substantial losses, even if the IO class is rated
AAA. Conversely, if the underlying Mortgage Assets experience slower than
anticipated prepayments of principal, the yield and market value for the holder
of a PO will be affected more severely than would be the case with a traditional
Mortgage-Backed Security.

However, if interest rates were expected to rise, the value of an IO might
increase and may partially offset other bond value declines, and if rates were
expected to fall, the inclusion of POs could balance lower reinvestment rates.

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

DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities on a "when
issued" or delayed delivery basis and purchase or sell securities on a "forward
commitment" basis. When such transactions are negotiated, the price is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. Normally, the settlement date occurs within two
months after the transaction, but delayed settlements beyond two months may be
negotiated. (The settlement date for transactions made on a when-issued or
delayed delivery basis will be within 120 days of the trade date.) At the time
the Fund enters into a transaction on a when-issued or forward commitment basis,
a segregated account consisting of cash, U.S. Government securities or liquid
high-grade debt securities equal to the value of the when-issued or forward
commitment securities will be established and maintained with the custodian and
will be marked to the market daily. During the period between a commitment and
settlement, no payment is made for the securities purchased by the purchaser
and, thus, no interest accrues to the purchaser from the transaction. If the
Fund disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss due to market fluctuation. The use of
when-issued transactions and forward commitments enables the Fund to hedge
against anticipated changes in interest rates and prices. The Fund may also
enter into such transactions to generate incremental income. In some instances,
the third-party seller of when-issued or forward commitment securities may
determine prior to the settlement date that it will be unable or unwilling to
meet its existing transaction commitments without borrowing securities. If
advantageous from a yield perspective, the Fund may, in that event, agree to
resell its purchase commitment to the third-party seller at the current market
price on the date of sale and concurrently enter into another purchase
commitment for such

6
<PAGE>
securities at a later date. As an inducement for the Fund to "roll over" its
purchase commitment, the Fund may receive a negotiated fee. The purchase of
securities on a when-issued, delayed delivery or forward commitment basis
exposes the Fund to risk because the securities may decrease in value prior to
their delivery. Purchasing securities on a when-issued, delayed delivery or
forward commitment basis involves the additional risk that the return available
in the market when the delivery takes place will be higher than that obtained in
the transaction itself. These risks could result in increased volatility of the
Fund's net asset value to the extent that the Fund purchases securities on a
whenissued, delayed delivery or forward commitment basis while remaining
substantially fully invested. No more than 20% of the Fund's net assets may be
invested in when-issued, delayed delivery or forward commitment transactions
without the intention of actually acquiring securities (i.e., dollar rolls).

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities (principally to
broker-dealers) where such loans are callable at any time and are continuously
secured by collateral (cash, government securities, short-term (one year or
less) high-grade securities, or interest-bearing cash equivalents) equal to no
less than the market value, determined daily, of the securities loaned. The Fund
will receive amounts equal to dividends or interest on the securities loaned.
The Fund will also earn income for having made the loan. Cash collateral
pursuant to these loans may be invested in short-term (one year or less)
high-grade securities or interest-bearing cash equivalents, but not in excess of
35% of the Fund's total assets. The Fund will limit its loans of portfolio
securities to an aggregate of 33 1/3% of the value of its total assets, measured
at the time such loan is made. ("Total assets" of the Fund includes the amount
lent as well as the collateral securing such loans.) Where voting or consent
rights with respect to loaned securities pass to the borrower, management will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
issues involved have a material effect on the Fund's investment in the
securities loaned.

SHORT-TERM TRADING

The Fund intends to use short-term trading of its securities as a means of
managing its portfolio to achieve its investment objectives. As used herein,
"short-term trading" means selling securities held for a relatively brief period
of time, usually less than three months. Short-term trading will be used by the
Fund primarily in two situations:

(a) MARKET DEVELOPMENTS. A security may be sold to avoid depreciation in
what the Fund anticipates will be a market decline (a rise in interest
rates), or a security may be purchased in anticipation of a market rise (a
decline in interest rates) and later sold; and

(b) YIELD DISPARITIES. A security may be sold and another of comparable
quality purchased at approximately the same time, in order to take advantage
of what the Fund believes is a temporary disparity in the normal yield
relationship between the two securities (a yield disparity).

The Fund will engage in short-term trading if it believes the transactions, net
of costs (including commission, if any), will result in improving the
appreciation potential or income of its portfolio. Whether any improvement will
be realized by short-term trading will depend upon the ability of the Fund to
evaluate particular securities and anticipate relevant market factors, including
interest rate trends and variations from such trends. Short-term trading such as
that contemplated by the Fund places a premium upon the ability of the Fund to
obtain relevant information, evaluate it promptly, and take advantage of its
evaluations by completing transactions on a favorable basis.

MANAGEMENT

BOARD OF DIRECTORS

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

The Articles of Incorporation of Fortis Income limit the liability of directors
to the fullest extent permitted by law.

THE INVESTMENT ADVISER/TRANSFER AGENT/DIVIDEND AGENT

Fortis Advisers, Inc. ("Advisers") is the investment adviser, transfer agent,
and dividend agent for the Fund. Advisers has been managing investment company
portfolios since 1949, and is indirectly owned 50% by Fortis AMEV and 50% by
Fortis AG, diversified financial services companies. In addition to providing
investment advice, Advisers is responsible for management of Fortis Income's
business affairs, subject to the overall authority of the Board of Directors.
Advisers' address is that of the Fund.

Howard G. Hudson, Christopher J. Woods and Maroun M. Hayek (all since August,
1995) manage the Fund.

Mr. Hudson, an Executive Vice President of Advisers and the head of Advisers'
fixed income department, has been managing debt securities for Fortis, Inc.
since 1991. Mr. Woods, a Vice President of Advisers, has been managing debt
securities for Fortis, Inc. since 1993. Prior to that, Mr. Woods was the head of
fixed income for The Police and Firemen's Disability and Pension Fund of Ohio in
Columbus, OH. Mr. Hayek, a Vice President of Advisers, has been managing debt
securities for Fortis, Inc. since 1987. Messrs. Hudson, Woods, and Hayek are
located at One Chase Manhattan Plaza, New York, NY 10005.

7
<PAGE>
THE UNDERWRITER AND DISTRIBUTION EXPENSES

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

Pursuant to a Plan of Distribution adopted by the Fund under Rule 12b-1 under
the 1940 Act, the Fund is obligated to pay Investors an annual fee of .25% of
average net assets attributable to the Fund's Class A shares and 1.00% of
average net assets attributable to Class B, H, and C shares. While all of Class
A's Rule 12b-1 fee constitutes a "distribution fee", only 75% of Class B, H, and
C's fees constitute distribution fees.

The higher distribution fee attributable to Class B, H, and C shares is designed
to permit an investor to purchase such shares through registered representatives
of Investors and other broker-dealers without the assessment of an initial sales
charge and at the same time to permit Investors to compensate its registered
representatives and other broker-dealers in connection with the sale of such
shares. The distribution fee for all classes may be used by Investors for the
purpose of financing any activity which is primarily intended to result in the
sale of shares of the Fund. For example, such distribution fee may be used by
Investors: (a) to compensate broker-dealers, including Investors and its
registered representatives, for their sale of Fund shares, including the
implementation of various incentive programs with respect to broker-dealers,
banks, and other financial institutions, and (b) to pay other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of prospectuses for other than current shareholders;
preparation and distribution of sales literature; advertising of any type;
expenses of branch offices provided jointly by Investors and affiliated
insurance companies; and compensation paid to and expenses incurred by officers,
employees or representatives of Investors or of other broker-dealers, banks, or
other financial institutions, including travel, entertainment, and telephone
expenses.

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

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

FUND EXPENSES

For the most recent fiscal period, the annualized ratio of the Fund's total
operating expenses as a percentage of average daily net assets was as follows:

Class A -- 1.02%
Class B -- 1.77%
Class H -- 1.77%
Class C -- 1.77%
Class E -- 0.77%

Included in this total (for each Class) was the advisory fee paid to Advisers,
which equaled .71% of the Fund's average daily net assets.

BROKERAGE ALLOCATION

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

VALUATION OF SECURITIES

The Fund's net asset value per share is determined by dividing the value of the
securities owned by the Fund, plus any cash or other assets, less all
liabilities, by the number of the Fund's shares outstanding. The portfolio
securities in which the Fund

8
<PAGE>

invests fluctuate in value, and hence the net asset value per share of the Fund
also fluctuates. The net asset value of the Fund's shares is determined as of
the primary closing time for business on the New York Stock Exchange (the
"Exchange") on each day on which the Exchange is open. If shares are purchased
through another broker-dealer who receives the order prior to the close of the
Exchange, then Investors will apply that day's price to the order as long as the
broker-dealer places the order with Investors by the end of the day.

Securities are generally valued at market value. Securities for which
over-the-counter market quotations are readily available are valued on the basis
of the last current bid price. When market quotations are not readily available,
or when restricted securities or other assets are being valued, such securities
or other assets are valued at fair value as determined in good faith by
management under supervision of the Board of Directors. However, debt securities
may be valued on the basis of valuations furnished by a pricing service which
utilizes electronic data processing techniques to determine valuations for
normal institutional-size trading units of debt securities when such valuations
are believed to more accurately reflect the fair market value of such
securities. Short-term investments in debt securities with maturities of less
than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued at amortized cost. Purchases and sales by the Fund after
2:00 P.M. Central Time normally are not recorded until the following day.

CAPITAL STOCK

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

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund currently declares dividends from net investment income on each day the
Exchange is open (to shareholders of record as of 3:00 p.m., Central Time, the
preceding business day) and pays dividends monthly. A shareholder will not be
credited with a dividend until payment is received for the shares. Distributions
of net realized capital gains are made annually. Distributions paid by the Fund
with respect to all classes of shares will be calculated in the same manner, at
the same time, on the same day, and will be in the same amount, except that the
per share dividends on Class B, H, and C shares will be lower than those on
Class A (which have lower Rule 12b-1 fees) and Class E shares (which do not have
Rule 12b-1 fees and will therefore have the highest dividends).

Such dividends and capital gains distributions will be made in the form of
additional Fund shares of the same class (at net asset value) unless the
shareholder sends the Fund a written request that either or both be sent to the
shareholder or reinvested (at net asset value) in shares of the same class of
another Fortis fund.

Dividends will be reinvested monthly, on the last business day of each month, at
the net asset value on that date. If they are to be reinvested in other Fortis
funds, processing normally takes one business day.

TAXATION

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

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

Prior to purchasing shares of the Fund, prospective shareholders (except for tax
qualified retirement plans) should consider the impact of dividends or capital
gains distributions which are expected to be announced, or have been announced
but not paid. Any such dividends or capital gains distributions paid shortly
after a purchase of shares by an investor prior to the record date will have the
effect of reducing the per share net asset value by the amount of the dividends
or distributions. All or a portion of such dividends or distributions, although
in effect a return of capital, is subject to taxation.

HOW TO BUY FUND SHARES

GENERAL PURCHASE INFORMATION

MINIMUM AND MAXIMUM INVESTMENTS

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

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

INVESTING BY TELEPHONE

Your registered representative may make your purchase ($500 minimum) by
telephoning the number on the cover page of this Prospectus. In addition, your
check and the Account Application which accompanies this Prospectus must be
promptly forwarded, so that Investors receives your check within three business
days. Please make your check payable to Fortis Investors, Inc. and mail it with
your Application to "CM-9651, St. Paul, MN 55170-9651". If you have a bank
account authorization form on file, you may purchase $100 - $10,000 worth of
Fund shares via telephone through the automated Fortis Information Line.

INVESTING BY WIRE

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

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

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

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

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

ALTERNATIVE PURCHASE ARRANGEMENTS

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

CLASS A AND E SHARES--INITIAL SALES CHARGE ALTERNATIVE

(Note: Class E shares are only available to existing shareholders on November
13, 1994.)

The public offering price of Class A and E Fund shares is determined once daily,
by adding a sales charge to the net asset value per share of the shares next
calculated after receipt of the purchase order. The sales charges and
broker-dealer concessions, which vary with the size of the purchase, are shown
in the following table. Additional compensation (as a percentage of sales
charge) will be paid to a broker-dealer when its annual sales of Fortis funds
having a sales charge exceed $10,000,000 (2%), $25,000,000 (4%), and $50,000,000
(5%).

<TABLE>
<CAPTION>
SALES SALES
CHARGE AS CHARGE AS
PERCENTAGE PERCENTAGE
OF THE OF THE NET BROKER-
OFFERING AMOUNT DEALER
AMOUNT OF SALE PRICE INVESTED CONCESSION
<S> <C> <C> <C>
Less than $100,000...................... 4.500% 4.712% 4.00%
$100,000 but less than $250,000......... 3.500% 3.627% 3.00%
$250,000 but less than $500,000......... 2.500% 2.564% 2.25%
$500,000 but less than $1,000,000....... 2.000% 2.041% 1.75%
$1,000,000 or more...................... -0- -0- 1.00%
<FN>
- ------------------------------
* The Fund imposes a contingent deferred sales charge in connection with certain
purchases of Class A and E shares of $1,000,000 or more. See
"Redemption--Contingent Deferred Sales Charge."
</TABLE>

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

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

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

(3) Any organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company, and provided that
the purchase is made by means which result in economy of sales effort or
expense, whether the purchase is made through a central administration,
through a single broker-dealer, or by other means. An organized group does
not include a group of individuals whose sole organizational connection is
participation as credit cardholders of a company, policyholders of an
insurance company, customers of either a bank or broker-dealer, or clients
of an investment adviser.

SPECIAL PURCHASE PLANS FOR CLASS A AND E SHARES

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

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

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

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

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

EXEMPTIONS FROM SALES CHARGE:

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

- Fund directors, officers, or their spouses (or such
persons' children, grandchildren, parents, or grandparents--or spouses
of any such persons), if all account owners fit this description;

- Representatives or employees (or their spouses)
of Investors (including agencies) or of other broker-dealers having a
sales agreement with Investors (or such persons' children,
grandchildren, parents, or grandparents--or spouses of any such
persons), if all account owners fit this description;

- Pension, profit-sharing, and other retirement
plans of directors, officers, employees, representatives, and other
relatives and affiliates (as set forth in the preceding three
paragraphs) of the Fund, Fortis, Inc., and broker-dealers (and certain
affiliated companies) having a sales agreement with Investors and
purchases with the proceeds from such plans upon the retirement or
employment termination of such persons;

- Registered investment companies;

- Shareholders of unrelated mutual funds with
front-end and/or deferred sales loads, to the extent that the purchase
price of such Fund shares is funded by the proceeds from the
redemption of shares of any such unrelated mutual fund (within 60 days
of the purchase of Fund shares), provided that the shareholder's
application so specifies and is accompanied either by the redemption
check of such unrelated mutual fund (or a copy of the check) or a copy
of the confirmation statement showing the redemption. Similarly,
anyone who is or has been the owner of a fixed annuity contract not
deemed a security under the securities laws who wishes to surrender
such contract and invest the proceeds in a Fund, to the extent that
the purchase price of such Fund shares is funded by the proceeds from
the surrender of the contract (within 60 days of the purchase of Fund
shares), provided that such owner's application so specifies and is
accompanied either by the insurance company's check (or a copy of the
check) or a copy of the insurance company surrender form. From time to
time, Investors may pay commissions to broker-dealers and registered
representatives on transfers from mutual funds or annuities as
described above;

- Purchases by employees (including their spouses
and dependent children) of banks and other financial institutions that
provide referral and

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administrative services related to order placement and payment to
facilitate transactions in shares of the Fund for their clients
pursuant to a sales or servicing agreement with Investors; provided,
however, that only those employees of such banks and other firms who
as a part of their usual duties provide such services related to such
transactions in Fund shares shall qualify;

- Commercial banks offering self directed 401(k)
programs containing both pooled and individual investment options may
purchase Fund shares for such programs at a reduced sales charge of
2.5% on sales of less than $500,000. For sales of $500,000 or more,
normal sales charges apply;

- Registered investment advisers, trust companies,
and bank trust departments exercising discretionary investment
authority or using a money management/mutual fund "wrap" program with
respect to the money to be invested in the Fund, provided that the
investment adviser, trust company or trust department provides
Advisers with evidence of such authority or the existence of such a
wrap program with respect to the money invested;

- (1) officers, directors, and employees of Empire of
America Advisory Services, Inc., the investment advisor of Pathfinder
Fund; and (2) accounts which were in existence and entitled to
purchase shares of the Pathfinder Fund without a sales charge at the
time of the effectiveness of the acquisition of its assets by the
Fund;

- Accounts which were in existence and entitled to
purchase shares of Carnegie Government Securities Trust without a
sales charge at the time of the effectiveness of the acquisition of
its assets by the Fund.

RULE 12B-1 FEES (FOR CLASS A SHARES ONLY)

Class A shares are subject to a Rule 12b-1 fee payable at an annual rate of .25%
of the average daily net assets of the Fund attributable to such shares. The
Rule 12b-1 fee will cause Class A shares to have a higher expense ratio and to
pay lower dividends than Class E shares. For additional information, see
"Management--The Underwriter and Distribution Expenses."

DEFERRED SALES CHARGES Although there is no initial sales charge on purchases of
Class A and E shares of $1,000,000 or more, Investors pays broker-dealers out of
its own assets, a fee of up to 1% of the offering price of such shares. If these
shares are redeemed within two years, the redemption proceeds will be reduced by
1.00%. For additional information, see "Redemption--Contingent Deferred Sales
Charge."

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

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

3 years -- 3%
4 years -- 3%
5 years -- 2%
6 years -- 1%

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

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

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

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

CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE

The public offering price of Class C shares is the net asset value of such
shares. Class C shares are sold without an initial

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sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC of 1% will be imposed if shares are redeemed within
one year of purchase. For additional information, see "Redemption--Contingent
Deferred Sales Charge." In addition, Class C shares are subject to higher annual
Rule 12b-1 fees as described below.

Proceeds from the CDSC are paid to Investors and are used to defray its expenses
related to providing distribution-related services to the Fund in connection
with the sale of Class C shares, such as the payment of compensation to selected
broker-dealers, and for selling Class C shares. The combination of the CDSC and
the Rule 12b-1 fee enables the Fund to sell the Class C shares without deduction
of a sales charge at the time of purchase. Although Class C shares are sold
without an initial sales charge, Investors pays a dealer concession equal to
1.00% of the amount invested to broker-dealers who sell Class C shares at the
time the shares are sold and an annual fee of 1.00% of the amount invested that
begins to accrue one year after the shares are sold.

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

SPECIAL PURCHASE PLANS FOR ALL CLASSES

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

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

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

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

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

REDEMPTION

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

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

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Class A shares may be registered in broker-dealer "street name accounts" only if
the broker-dealer has a selling agreement with Investors. In such cases,
instructions from the broker-dealer are required to redeem shares or transfer
ownership and transfer to another broker-dealer requires the new broker-dealer
to also have a selling agreement with Investors. If the proposed new
broker-dealer does not have a selling agreement with Investors, the shareholder
can, of course, leave the shares under the original street name account or have
the broker-dealer transfer ownership to the shareholder's name.

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

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

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

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

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

The Fund has a "Systematic Withdrawal Plan," which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semiannually, or
annually. Deferred sales charges may apply to monthly redemptions. Such plans
may, at Advisers' option, result in transactions being confirmed to the investor
quarterly, rather than as a separate notice following the transaction.

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

CONTINGENT DEFERRED SALES CHARGE

CLASS A AND E SHARES

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

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which shares to redeem, unless instructed otherwise, shares that are not subject
to the CDSC and having a higher Rule 12b-1 fee will be redeemed first, shares
not subject to the CDSC having a lower Rule 12b-1 fee will be redeemed next, and
shares subject to the CDSC then will be redeemed in the order purchased.

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

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

CLASS B, H, AND C SHARES

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

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

The CDSC does not apply to: (1) redemption of shares when a Fund exercises its
right to liquidate accounts which are less than the minimum account size; (2)
death or disability, as defined in Section 72(m)(7) of the Code (if satisfactory
evidence is provided to the Fund); (3) with respect to Class B and H shares
only, an amount that represents, on an annual (non-cumulative) basis, up to 10%
of the amount (at the time of the investment) of the shareholder's purchases;
and (4) with respect to Class B, H, and C shares, qualified plan benefit
distributions due to participant's separation from service, loans or financial
hardship (excluding IRAs, SEPs, and 403(b), 457, and Fortis KEY plans) upon the
Fund's receipt from the plan's administrator or trustee of written instructions
detailing the reason for the distribution.

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

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

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

SHAREHOLDER INQUIRIES

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

15
<PAGE>

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

Please complete each section below to establish ACH capability to your Fortis
Mutual Fund Account. For personal service, please call your investment
professional or Fortis at (800) 800-2638, Ext. 3012.

________________________________________________________________________________

1 FORTIS ACCOUNT INFORMATION

________________________________________________________________________________

Account Registration:

________________________________________________________________________________
Owner (Individual, 1st Joint Tenant, Custodian, Trustee)

________________________________________________________________________________
Owner (2nd Joint Tenant, Minor, Trust Name)

________________________________________________________________________________
Additional Information, if needed

________________________________________________________________________________
Street address

________________________________________________________________________________
City State Zip

________________________________________________________________________________
Social Security number (Taxpayer I.D.)

Account # ______________________________________________________________________

Fund: Class:
Advantage Asset Allocation / / A / / B / / C / / H
Advantage Capital Appreciation / / A / / B / / C / / H
Advantage Gov't Total Return / / A / / B / / C / / H
Advantage High Yield / / A / / B / / C / / H
Capital / / A / / B / / C / / H
Fiduciary / / A / / B / / C / / H
Global Growth / / A / / B / / C / / H
Growth / / A / / B / / C / / H
Money / / A / / B / / C / / H
Tax-Free Minnesota / / A / / B / / C / / H
Tax-Free National / / A / / B / / C / / H
Tax-Free New York / / A / / B / / C / / H
U.S. Government Securities / / A / / B / / C / / H
Other / / A / / B / / C / / H

________________________________________________________________________________

2 BANK/FINANCIAL INSTITUTION INFORMATION

________________________________________________________________________________

PLAN TYPE: / / New Plan / / Bank Change

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

________________________________________________________________________________
Transit Number

________________________________________________________________________________
Bank Account Number

________________________________________________________________________________
Account Owner (if other than name of Depositor)

________________________________________________________________________________
Depositor's Daytime Phone Number

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

________________________________________________________________________________

________________________________________________________________________________
Signature of Depositor Date

________________________________________________________________________________
Signature of Joint-Depositor Date

16
<PAGE>
________________________________________________________________________________

3 SELECT OPTION

________________________________________________________________________________

I. INVESTMENT OPTION(S)
A. / / Invest via FORTIS INFORMATION LINE by
phone (minimum $25, maximum $10,000)
Please allow up to four business days for deposit
into Fortis Funds. Transactions after 3:00 p.m.
(CST) will be processed the following business
day.
B. / / Systematic Investment Plan
/ / New Plan
/ / Change Plan
I request Fortis Financial Group (FFG) to obtain payment of
sums becoming due the company by charging my account in the
form of electronic debit entries. I request and authorize the
financial institution named to accept, honor and charge those
entries to my account. Please allow 30 days for collected
funds to be available in your Fortis account.
Draft Date (1-26 only):
Amount per Fund (Min. $25):
Beginning Draft Month:

II. WITHDRAWAL OPTION(S)
(Please consult your financial or tax adviser before electing
a systematic withdrawal plan)
A. / / Cash Dividends
B. / / Redeem via FORTIS INFORMATION LINE by
phone (minimum $100, maximum $25,000)
Please allow up to four business days for withdrawal to credit
your bank account. Transactions after 3:00 p.m. (CST) will be
processed the following business day.
C. / / Systematic Withdrawal Plan
/ / New Plan
/ / Change Plan
I request Fortis Financial Group (FFG) to pay sums due me by
crediting my bank account in the form of electronic entries.
I request and authorize the financial institution to accept,
honor and credit those entries to my account.
Withdrawal Date (1-26 only):
Amount per Fund (Min. $25):
Beginning Withdrawal Month:

________________________________________________________________________________

4 SIGNATURES

________________________________________________________________________________

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

This authorization will remain in effect until I notify FFG. I hereby terminate
any prior Authorization of FFG to initiate charges to this account. I understand
that any returned item or redemption of the entire account may result in
termination of my Automated Clearing House agreement. This authorization will
become effective upon acceptance by FFG at its home office.

Authorized Signature(s)

X ______________________________________________________________________________

Owner, Custodian, Trustee Date

X ______________________________________________________________________________

Joint Owner, Trustee Date

FORTIS-Registered Trademark-
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc. (fund management since 1949)
Fortis Investors, Inc. (principal underwriter; (member SIPC)
P.O. Box 64284
St. Paul, MN 55164
(800) 800-2638

Attach additional information if more space is needed.

98049 (7/95)

17
<PAGE>

PROSPECTUS

DECEMBER 1, 1995

FORTIS U.S. GOVERNMENT
SECURITIES FUND

MAXIMUM TOTAL RETURN (FROM CURRENT
INCOME AND CAPITAL APPRECIATION), WHILE
PROVIDING HIGH CURRENT INCOME CONSISTENT
WITH PRUDENT INVESTMENT RISK

95230 (REV. 12/95)

FORTIS-Registered Trademark-

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

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

[LOGO]

FORTIS
U.S. GOVERNMENT
SECURITIES FUND

Annual Report
July 31, 1995
[LOGO]
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES ANNUAL REPORT

CONTENTS

LETTER TO SHAREHOLDERS 1

SCHEDULE OF INVESTMENTS 4

STATEMENT OF ASSETS AND LIABILITIES 6

STATEMENT OF OPERATIONS 7

STATEMENTS OF CHANGES IN NET ASSETS 8

NOTES TO FINANCIAL STATEMENTS 9

FEDERAL INCOME TAX INFORMATION 11

INDEPENDENT AUDITORS' REPORT 12

BOARD OF DIRECTORS AND OFFICERS 13

- - TOLL-FREE PERSONAL ASSISTANCE

- Shareholder Services

- (800) 800-2638, Ext. 3012

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

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

- - TOLL-FREE INFORMATION LINE

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

- (800) 800-2638, Ext. 4344

- 24 hours a day

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

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

HIGHLIGHTS

FOR THE YEAR ENDED JULY 31, 1995:

<TABLE>
<CAPTION>
CLASS A* CLASS B* CLASS C* CLASS E CLASS H*
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE:
Beginning of year...................... $ 8.63 $ 8.63 $ 8.63 $ 9.03 $ 8.63
End of year............................ $ 9.02 $ 9.02 $ 9.01 $ 9.02 $ 9.02

DISTRIBUTIONS PER SHARE:
From net investment income............. $ 0.460 $ 0.411 $ 0.411 $ 0.669 $ 0.411

* Period from November 14, 1994 (commencement of operations) to July 31, 1995.
</TABLE>

HOW TO USE THIS REPORT

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

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

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

[PHOTO]

"Thirty years ago, a 'diversified portfolio' meant a few blue chip
stocks and some U.S. government bonds. That was a good strategy then.
But the world has changed."

DEAR SHAREHOLDER,
We're pleased to present the Fortis U.S. Government Securities Fund annual
report for the period ended July 31, 1995.

ECONOMIC REVIEW AND
INVESTMENT STRATEGIES

Over the past year, fixed income markets performed well. Even though short-term
rates rose due to Federal Reserve tightening, longer-term rates declined about
1/2 of 1 percent. This rally in bond prices was caused by signs of an economic
slowdown, combined with subdued inflation. In fact, the Federal Reserve

confirmed the bond market's recognition of a slowdown by lowering short term
rates in July.

The current pause may be the economic response to the doubling of short-term
interest rates, which the Federal Reserve engineered during 1994. With the cost
of money now moderately lower, we feel economic growth should continue through
the balance of this year and into 1996. As long as productivity continues to
rise and labor cost increases remain small, the expectation for inflation should
remain in the current range of about 2.5 percent to 3 percent.

PORTFOLIO COMPOSITION BY INDUSTRY AS OF 7/31/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
U.S. Treasury Securities 44
FNMA's 28.8
GNMA's 11.5
FHLMC's 9.1
Other Direct Federal Obligations 5.4
Receivables/Cash Equivalents 0.4
Other Government Agencies 0.8
100
</TABLE>

1
<PAGE>
TOP TEN HOLDINGS AS OF 7/31/95

<TABLE>
<CAPTION>
Percent of
Bonds net assets
- -----------------------------------------------------------------------------
<C> <S> <C>
1. U.S. Treasury Bond (8.125%) 2021 7.9%
2. U.S. Treasury Note (9.00%) 1998 7.4%
3. U.S. Treasury Bond (6.75%) 2000 7.3%
4. U.S. Treasury Note (8.75%) 1997 5.5%
5. FHLB Note (7.31%) 2004 5.4%
6. U.S. Treasury Note (8.875%) 1998 4.5%
7. U.S. Treasury Note (8.25%) 1998 4.4%
8. GNMA (9.50%) 2019 3.8%
9. FNMA Note (7.65%) 2005 3.7%
10. FNMA (8.00%) 2024 3.2%
</TABLE>

PORTFOLIO REVIEW

Changes in this portfolio have been very modest over the past year. Average
duration, which was nearly five years when the fiscal year began, was gradually
reduced to slightly less than four years by the end of July. We have increased
our investment position in mortgage-backed securities by about 5 percent during
the past two months. Currently, there is a nearly 50/50 balance between
government agency mortgage-backed securities and non-mortgage government debt
securities. The shortening of the average duration earlier this year was based
on the belief that rates had declined prematurely. This strategy proved correct
as interest rates did increase in July and August. Recently, with rates up, we
have extended maturities in the portfolio.

IN CLOSING

We appreciate your investment in the Fortis U.S. Government Securities Fund. If
you have any questions, please call us or talk with your investment
professional.

Sincerely,

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

/s/ DENNIS M. OTT
Dennis M. Ott
Vice President

Dated: July 19, 1995

FORTIS U.S. GOVERNMENT SECURITIES FUND
CLASS A, B, C AND H TOTAL RETURNS

<TABLE>
<CAPTION>
WITHOUT WITH
SALES SALES
CHARGE CHARGE
<S> <C> <C>
Class A shares+ +10.07 % +5.12 %

WITHOUT WITH
CDSC CDSC++
Class B shares+ +9.47 % +5.87 %
Class C shares+ +9.35 % +8.35 %
Class H shares+ +9.47 % +5.87 %
<FN>
Past performance is not indicative of future performance. Total returns include
investment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, E and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A and E have a maximum sales charge of 4.50%, Class B
and H have a CDSC of 4.00% if redeemed within two years of purchase, and Class C
has a CDSC of 1.00% if redeemed within one year of purchase.
+ Since November 14, 1994 -- Date shares were first offered to the public
++ Assumes redemption on July 31, 1995.
</TABLE>

FORTIS U.S. GOVERNMENT SECURITIES FUND CLASS E SHARES

Value of $10,000 invested August 1, 1985

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
FORTIS U.S. GOVERNMENT SECURITIES
FUND
<S> <C> <C> <C>
Average Annual Total Return
1 Year 5 Year 10 Year
Class E* +2.86% +6.22% +8.26%
Class E** +7.71% +7.20% +8.76%
Lehman Bros. U.S. Government
Intermediate Securities
Gov't Index*** Fund Class E
08/01/85 10000 9550
86 11759 11397
87 12286 12017
88 13141 12941
89 14805 14523
90 15849 15625
91 17465 17294
92 19874 19406
93 21500 21107
94 21724 20535
95 23561 22119
<FN>
Annual period ended July 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of government bonds with an average maturity of three to
four years.
</TABLE>

2
<PAGE>
FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES

MUTUAL FUNDS/PORTFOLIOS

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

Fortis Capital Fund

Fortis Fiduciary Fund, Inc.

Fortis Global Growth Portfolio

Fortis Growth Fund, Inc.

Fortis Money Fund

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

Fortis U.S. Government
Securities Fund

FIXED AND VARIABLE ANNUITIES

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

Fortune Fixed Annuities
SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY

Income Annuities
GUARANTEED FOR LIFE
GUARANTEED FOR A SPECIFIC PERIOD

LIFE AND DISABILITY

WALL STREET SERIES VUL 220 & VUL 500

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

Adaptable Life
Universal Life
Disability

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

3
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES FUND
Schedule of Investments
July 31, 1995

U.S. GOVERNMENT SECURITIES-99.56%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (a) Value (b)
- ----------- ------------- -------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION-9.09%
MORTGAGE BACKED SECURITIES:
$18,656,985 8.00% 2001-2002................ $ 19,123,409 $ 19,094,248
5,933,756 9.00% 2022..................... 6,310,178 6,174,814
10,546,129 9.50% 2016..................... 11,348,624 11,066,844
426,504 10.50% 2015.................... 458,626 463,690
248,872 11.25% 2013.................... 270,026 274,537
1,044,017 11.50% 2015-2019............... 1,136,684 1,155,269
1,265,083 11.75% 2010-2015............... 1,383,795 1,405,033
------------- -------------
40,031,342 39,634,435
------------- -------------
REMICS:
2,404,831 9.00% Trust #136-D PAC 2020.... 2,416,855 2,459,467
108,257 100.00% Trust #1364-L Interest
only strip I/O-ette 2005
(e).......................... 489,148 1,623,856
------------- -------------
2,906,003 4,083,323
------------- -------------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION......... 42,937,345 43,717,758
------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION-28.80%
MORTGAGE BACKED SECURITIES:
15,000,000 7.00% 2025 (g)................. 14,771,875 14,625,000
21,227,505 7.50% 2022-2024................ 21,085,186 21,161,169
15,080,429 8.00% 2024..................... 14,434,798 15,311,340
11,963,741 8.00% 2024-2025................ 11,754,656 12,146,930
226,337 9.00% 2020..................... 224,145 235,391
2,315,203 9.75% 2020..................... 2,497,526 2,471,838
1,882,841 10.00% 2020.................... 2,054,062 2,045,236
1,517,640 10.50% 2012-2018............... 1,612,790 1,663,238
404,443 10.75% 2013.................... 416,576 445,772
4,561,957 11.00% 2015-2020............... 4,901,940 5,056,641
588,197 11.25% 2013.................... 617,607 654,002
417,628 12.00% 2014-2016............... 444,651 469,179
789,482 12.50% 2015.................... 891,621 892,361
------------- -------------
75,707,433 77,178,097
------------- -------------
NOTES:
10,000,000 6.85% 2000 (f)................. 10,000,000 10,014,870
9,000,000 7.40% 2004 (f)................. 9,476,700 9,404,775
16,750,000 7.65% 2005 (f)................. 16,879,211 17,850,106
13,000,000 8.50% 2005 (f)................. 13,453,900 13,911,833
------------- -------------
49,809,811 51,181,584
------------- -------------
REMIC-PAC'S:
3,161,624 7.50% Trust #1991-136G 2019.... 3,278,703 3,174,046
6,500,000 9.00% Trust #1991-39J 2021..... 6,638,125 6,846,899
158,899 13.50% Trust #1989-98G 2017.... 184,522 162,149
------------- -------------
10,101,350 10,183,094
------------- -------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION.................. 135,618,594 138,542,775
------------- -------------

<CAPTION>
Principal Market
Amount Cost (a) Value (b)
- ----------- ------------- -------------
<C> <S> <C> <C>

GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION-11.49%
MORTGAGE BACKED SECURITIES:
$ 8,332,978 7.50% 2022..................... $ 8,348,603 $ 8,319,954
18,622,484 9.00% 2016-2022................ 19,560,292 19,504,064
7,721,670 9.50% 2017-2019................ 8,136,895 8,194,622
17,186,184 9.50% 2019..................... 17,865,576 18,045,494
1,066,600 11.00% 2015-2018............... 1,149,150 1,167,927
66,368 11.25% 2015.................... 70,477 73,720
------------- -------------
55,130,993 55,305,781
------------- -------------
OTHER DIRECT FEDERAL
OBLIGATIONS-5.42%
FEDERAL HOME LOAN BANK:
25,150,000 7.31% 2004..................... 25,062,544 26,076,048
------------- -------------
OTHER GOVERNMENT AGENCIES-0.80%
RESOLUTION FUNDING CORPORATION:
15,000,000 7.42% Zero Coupon Strip 2014
(c) 3,772,245 3,849,135
------------- -------------
U.S. TREASURY SECURITIES-43.96%
BOND:
33,500,000 8.125% 2021 (f)................ 35,000,234 38,190,000
------------- -------------
NOTES:
34,500,000 6.75% 2000 (f)................. 35,346,875 35,254,688
4,400,000 7.25% 1996 (f)................. 4,424,063 4,466,000
15,000,000 7.875% 1996 (f)................ 15,189,844 15,173,415
20,000,000 8.25% 1998 (f)................. 22,813,281 21,181,220
25,000,000 8.75% 1997 (f)................. 27,978,516 26,429,650
20,000,000 8.875% 1998 (f)................ 21,665,625 21,643,720
33,000,000 9.00% 1998 (f)................. 35,873,438 35,485,263
13,350,000 9.375% 1996 (f)................ 14,317,977 13,683,750
------------- -------------
177,609,619 173,317,706
------------- -------------
TOTAL U.S. TREASURY
SECURITIES................... 212,609,853 211,507,706
------------- -------------
TOTAL U.S. GOVERNMENT
SECURITIES................... $ 475,131,574 $ 478,999,203
------------- -------------
------------- -------------
</TABLE>

4
<PAGE>
SHORT-TERM INVESTMENTS-0.10%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
- --------- -------------
<C> <S> <C>
MASTER NOTE:
$ 505,350 Federated Treasury Obligation Fund, Current
rate -- 5.70%................................. $ 505,350
-------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $475,636,924) (A).................... $ 479,504,553
-------------
-------------
</TABLE>

(a) At July 31, 1995, the cost of securities for federal income tax purposes
was $476,309,686 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

Unrealized appreciation........................... $ 8,872,246
Unrealized depreciation........................... (5,677,379)
-----------------------------------------------------------------
Net unrealized appreciation....................... $ 3,194,867
-----------------------------------------------------------------

(b) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities
(c) The interest rate disclosed for these securities represents the original
issue discount yields on the date of acquisition.
(d) Note:Percentage of investments as shown is the ratio of the total market
value to total net assets.
(e) The interest rate disclosed for the interest only strip represents the
effective yield at July 31, 1995 based upon the estimated timing and amount
of future cash flows. This investment has been identified by portfolio
management as an illiquid security. The aggregate value of this security at
July 31, 1995 is $1,623,856 which represents .34% of total net assets.
(f) Security is fully or partially on loan at July 31, 1995. See Note A of
accompanying Notes to Financial Statements.
(g) The cost of securities purchased on a when-issued basis at July 31, 1995 is
$14,771,875.

5
<PAGE>
Fortis U.S. Government Securities Fund

Statement of Assets and Liabilities

July 31, 1995

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

<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, as detailed in the accompanying schedule, at market (cost $475,636,924) (Note A).... $ 479,504,553
Collateral for securities lending transactions (Note A)........................................................ 252,179,800
Receivables:
Investment securities sold................................................................................... 10,866,864
Interest and dividends....................................................................................... 6,767,642
Subscriptions of capital stock............................................................................... 105,824
Deferred registration costs (Note A)........................................................................... 43,544
-------------
TOTAL ASSETS..................................................................................................... 749,468,227
-------------
LIABILITIES
Cash portion of dividends payable.............................................................................. 924,673
Payable upon return of securities loaned (Note A).............................................................. 252,179,800
Payable for investment securities purchased.................................................................... 14,771,875
Redemptions of capital stock................................................................................... 129,849
Payable for investment advisory and management fees............................................................ 293,744
Payable for distribution fees.................................................................................. 745
Accounts payable and accrued expenses.......................................................................... 30,751
-------------
TOTAL LIABILITIES................................................................................................ 268,331,437
-------------
NET ASSETS
Net proceeds of capital stock, par value $.01 per share - authorized 10,000,000,000 shares..................... 537,043,809
Unrealized appreciation of investments......................................................................... 3,867,629
Excess of distributions over net investment income............................................................. (17,686)
Accumulated net realized loss from sale of investments......................................................... (59,756,962)
-------------
TOTAL NET ASSETS................................................................................................. $ 481,136,790
-------------
-------------
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A shares (based on net assets of $4,908,726 and 544,097 shares outstanding).............................. $9.02
-------------
Class B shares (based on net assets of $482,701 and 53,530 shares outstanding)................................. $9.02
-------------
Class C shares (based on net assets of $326,166 and 36,194 shares outstanding)................................. $9.01
-------------
Class E shares (based on net assets of $470,596,689 and 52,149,917 shares outstanding)......................... $9.02
-------------
Class H shares (based on net assets of $4,822,508 and 534,676 shares outstanding).............................. $9.02
-------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

6
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES FUND

Statement of Operations

For the Year Ended July 31, 1995

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

<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
Income
Interest income.............................................................................................. $41,392,499
Fee income (Note A).......................................................................................... 321,417
------------
Total Income................................................................................................... 41,713,916
------------
Expenses:
Investment advisory and management fees (Note B)............................................................. 3,576,719
Distribution fees (Class A) (Note B)......................................................................... 4,306
Distribution fees (Class B) (Note B)......................................................................... 1,773
Distribution fees (Class C) (Note B)......................................................................... 1,062
Distribution fees (Class H) (Note B)......................................................................... 16,010
Legal and auditing fees (Note B)............................................................................. 72,056
Custodian fees............................................................................................... 62,744
Shareholders' notices and reports............................................................................ 112,706
Registration fees............................................................................................ 67,862
Directors' fees and expenses................................................................................. 46,526
Other........................................................................................................ 46,734
------------
Total Expenses................................................................................................. 4,008,498
Less reimbursable expenses (Note B)............................................................................ (84,896)
------------
Net Expenses................................................................................................... 3,923,602
------------
NET INVESTMENT INCOME............................................................................................ 37,790,314
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A):
Net realized loss from security transactions................................................................... (33,680,898)
Net change in unrealized appreciation (depreciation) of investments in securities.............................. 31,855,826
------------
NET LOSS ON INVESTMENTS.......................................................................................... (1,825,072)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................................. $35,965,242
------------
------------
</TABLE>

7
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES FUND

Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
YEAR ENDED
JULY 31, 1995
---------------
<S> <C>
OPERATIONS
Net investment income..................................................................................... $ 37,790,314
Net realized loss from security transactions.............................................................. (33,680,898)
Net change in unrealized appreciation (depreciation) of investments....................................... 31,855,826
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. 35,965,242
---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A................................................................................................. (123,171)
Class B................................................................................................. (11,070)
Class C................................................................................................. (6,511)
Class E................................................................................................. (37,768,650)
Class H................................................................................................. (101,319)
Excess distributions of net realized gains
Class E................................................................................................. (56,382)
---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS......................................................................... (38,067,103)
---------------
CAPITAL STOCK TRANSACTIONS (NOTE B):
Proceeds from sale of shares
Class A (656,757 shares)................................................................................ 5,829,103
Class B (55,065 shares)................................................................................. 487,212
Class C (36,045 shares)................................................................................. 318,057
Class E (3,223,444 and 5,018,611 shares)................................................................ 28,470,321
Class H (588,648 shares)................................................................................ 5,220,767
Proceeds from shares issued as a result of reinvested dividends
Class A (10,355 shares)................................................................................. 92,733
Class B (701 shares).................................................................................... 6,291
Class C (507 shares).................................................................................... 4,548
Class E (2,842,973 and 1,871,208 shares)................................................................ 25,132,842
Class H (8,959 shares).................................................................................. 80,178
Less cost of repurchase of shares
Class A (123,015 shares)................................................................................ (1,099,885)
Class B (2,236 shares).................................................................................. (20,025)
Class C (358 shares).................................................................................... (3,216)
Class E (15,398,667 and 10,418,385 shares).............................................................. (135,996,432)
Class H (62,931 shares)................................................................................. (558,515)
---------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS.......................................................... (72,036,021)
---------------
TOTAL DECREASE IN NET ASSETS................................................................................ (74,137,882)
NET ASSETS:
Beginning of period....................................................................................... 555,274,672
---------------
End of period (includes undistributed (excess of distributions over) net investment income of ($17,686)
and $202,721, respectively)............................................................................. $ 481,136,790
---------------
---------------

FOR THE
SEVEN-MONTH
PERIOD ENDED
JULY 31, 1994
(NOTE C)
--------------
<S> <C>
OPERATIONS
Net investment income..................................................................................... $ 26,704,011
Net realized loss from security transactions.............................................................. (25,969,017)
Net change in unrealized appreciation (depreciation) of investments....................................... (28,114,831)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. (27,379,837)
--------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A................................................................................................. --
Class B................................................................................................. --
Class C................................................................................................. --
Class E................................................................................................. (26,606,994)
Class H................................................................................................. --
Excess distributions of net realized gains
Class E................................................................................................. --
--------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS......................................................................... (26,606,994)
--------------
CAPITAL STOCK TRANSACTIONS (NOTE B):
Proceeds from sale of shares
Class A (656,757 shares)................................................................................ --
Class B (55,065 shares)................................................................................. --
Class C (36,045 shares)................................................................................. --
Class E (3,223,444 and 5,018,611 shares)................................................................ 47,438,736
Class H (588,648 shares)................................................................................ --
Proceeds from shares issued as a result of reinvested dividends
Class A (10,355 shares)................................................................................. --
Class B (701 shares).................................................................................... --
Class C (507 shares).................................................................................... --
Class E (2,842,973 and 1,871,208 shares)................................................................ 17,392,603
Class H (8,959 shares).................................................................................. --
Less cost of repurchase of shares
Class A (123,015 shares)................................................................................ --
Class B (2,236 shares).................................................................................. --
Class C (358 shares).................................................................................... --
Class E (15,398,667 and 10,418,385 shares).............................................................. (97,546,638)
Class H (62,931 shares)................................................................................. --
--------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS.......................................................... (32,715,299)
--------------
TOTAL DECREASE IN NET ASSETS................................................................................ (86,702,130)
NET ASSETS:
Beginning of period....................................................................................... 641,976,802
--------------
End of period (includes undistributed (excess of distributions over) net investment income of ($17,686)
and $202,721, respectively)............................................................................. $ 555,274,672
--------------
--------------

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

8
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES FUND

Notes to Financial Statements

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

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The fund is a diversified series
of Fortis Income Portfolios, Inc., an open-end management investment company.
The primary investment objective of the fund is a high level of current
income consistent with prudent investment risk. This objective is sought
principally by investment in debt securities issued, guaranteed, insured or
collateralized by the U.S. Government, its agencies, or its
instrumentalities. The Articles of Incorporation of Fortis Income Portfolio
permit the Board of Directors to create additional portfolios in the future.

The fund offers Class A, Class B, Class C, Class E and Class H shares. Class
E shares are only available to existing shareholders on November 14, 1994.
Class A and E shares are sold with a front-end sales charge. Class B and H
shares are sold without a front-end sales charge and may be subject to a
contingent deferred sales charge for six years, and such shares automatically
convert to Class A after eight years. Class C shares are sold without a
front-end sales charge and may be subject to a contingent deferred sales
charge for one year. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
the level of distribution fees charged differs between classes. Income,
expenses (other than expenses incurred under each class's distribution
agreement) and realized and unrealized gains or losses on investments are
allocated to each class of shares based on its relative net assets.

SECURITY VALUATION: Long-term debt securities are valued at current market
prices on the basis of valuations furnished by an independent pricing service.
Short-term investments with maturities of less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued at amortized
cost.

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for
securities that have been purchased by the fund on a forward commitment or
when-issued basis can take place a month or more after the transaction date.
During this period, such securities are subject to market fluctuations and the
portfolio maintains, in a segregated account with its custodian, assets with a
market value equal to the amount of its purchase commitments. At July 31,
1995, the fund had entered into outstanding when-issued or forward commitments
of $14,771,875.

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

For the fiscal year ended July 31, 1995, the cost of purchases and proceeds
from sales of securities (other than short-term securities) aggregated
$375,090,148 and $423,132,157, respectively.

LENDING OF PORTFOLIO SECURITIES: At July 31, 1995, securities valued at
$242,279,288 were on loan to brokers from the Fund. For collateral, the Fund's
custodian received $252,179,800 in cash which is maintained in a separate
account and invested by the custodian in short term investment vehicles. Fee
income from securities lending amounted to $321,417 for the fiscal year ended
July 31, 1995. The risks to the Fund in security lending transactions are that
the borrower may not provide additional collateral when required or return the
securities when due and that the proceeds from the sale of investments made
with cash collateral received will be less than amounts required to be
returned to the borrowers.

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

FEDERAL TAXES: The 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. On a
calendar year basis, the fund intends to distribute substantially all of its
net investment income and realized gains, if any, to avoid the payment of
federal excise taxes.

Net investment income and net realized gains differ for financial statement
and tax purposes primarily because of the recognition of market discount as
ordinary income and the deferral of "wash sale" losses for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may, therefore, differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded
by the fund. The effect on dividend distributions of certain current year
permanent book-to-tax differences is reflected as excess distributions of net
realized gains in the statements of changes in net assets.

For federal income tax purposes the fund had a capital loss carryover of
$59,084,201 at July 31, 1995, which, if not offset by subsequent capital
gains, will expire in 2002 through 2004. It is unlikely the Board of
Directors will authorize a distribution of any net realized gains until the
available capital loss carryover has been offset or expired.

INCOME AND CAPITAL GAINS DISTRIBUTIONS: Distributions from net investment
income are declared daily and paid monthly. The fund will generally make
annual distributions of any realized capital gains as required by law. These
income and capital gains distributions may be reinvested in additional shares
of the fund at net asset value without any charge to the shareholder or
payable in cash.

B. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment adviser
for the fund. Investment advisory and management fees are computed at an
annual rate of .8% of the first $50 million of average daily net assets and
.7% of net assets in excess of $50 million. In addition, effective June 1,
1993, if fees and other operating expenses (excluding interest expense,
taxes, brokerage fees and commmissions) exceed .77% of the average daily net
assets, for the two-year period commencing June 1, 1993, such excess will be
reimbursed by Fortis Advisers, Inc. During the ten-month period ended May 31,
1995, Advisers waived $84,896 of its advisory fee in accordance with these
limits.

In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the fund's principal underwriter)
distribution fees equal to .25% (Class A) and 1.00% (Class 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. Fortis Investors, Inc., also received
sales charges (paid by purchasers or redeemers of the fund's shares)
aggregating $160,575 for Class A, $289 for Class B, $4 for Class C, $2,477
for Class H, and $639,641 for Class E for the year ended July 31, 1995.

Legal fees and expenses aggregating $47,156 for the fiscal year ended July
31, 1995, were paid to a law firm of which the secretary of the fund is a
partner.

9
<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES FUND

Notes to Financial Statements (continued)

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

C. CHANGE IN ACCOUNTING PERIOD: Effective July 31, 1994, Fortis U.S. Government
Securities Fund changed its Fiscal accounting and tax year-end to July 31
(previously December 31).

D. At the special shareholders' meeting of August 23, 1994, the Amended and
Restated Articles of Incorporation were approved which allows the Fund to
issue multiple class shares effective November 14, 1994.

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

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

<TABLE>
<CAPTION>
Class E
----------------------------------------------------------
Year Ended July 31, Year Ended December 31,
---------------------- ---------------------------------
1995 1994** 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 9.03 $ 9.87 $ 9.86 $ 10.16 $ 9.76
---------- --------- --------- --------- ---------
Operations:
Investment income-net........................... .67 .42 .75 .84 .88
Net realized and unrealized gains (losses) on
investments................................... (.01) (.84) .05 (.30) .41
---------- --------- --------- --------- ---------
Total from operations............................. .66 (.42) .80 .54 1.29
---------- --------- --------- --------- ---------
Distribution to shareholders:
From investment income-net...................... (.67) (.42) (.75) (.84) (.89)
From realized gains............................. -- -- (.04) -- --
---------- --------- --------- --------- ---------
Total distributions to shareholders............... (.67) (.42) (.79) (.84) (.89)
---------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 9.02 $ 9.03 $ 9.87 $ 9.86 $ 10.16
---------- --------- --------- --------- ---------
Total Return@..................................... 7.71% (4.29%) 8.31% 5.60% 13.90%
Net assets end of period (000s omitted)........... $470,597 $ 555,275 $ 641,977 $ 587,996 $ 452,222
Ratio of expenses to average daily net assets..... .77% .77%* .76% .72% .72%
Ratio of net investment income to average daily
net assets....................................... 7.51% 7.72%* 7.43% 8.48% 8.88%
Portfolio turnover rate........................... 76% 85% 157% 128% 95%
@These are the total returns during the periods, including reinvestment of all dividend and capital gains
distributions without adjustments for sales charge.
*Annualized.
**For the seven-month period ended July 31, 1994.
</TABLE>

<TABLE>
<CAPTION>
Class A Class B Class C Class H
1995+ 1995+ 1995+ 1995+
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 8.63 $ 8.63 $ 8.63 $ 8.63
--------- --------- --------- ---------
Operations:
Investment income-net........................... .46 .41 .41 .41
Net realized and unrealized gains (losses) on
investments................................... .39 .39 .38 .39
--------- --------- --------- ---------
Total from operations............................. .85 .80 .79 .80
--------- --------- --------- ---------
Distribution to shareholders:
From investment income-net...................... (.46) (.41) (.41) (.41)
From realized gains............................. -- -- -- --
--------- --------- --------- ---------
Total distributions to shareholders............... (.46) (.41) (.41) (.41)
--------- --------- --------- ---------
Net asset value, end of period.................... $ 9.02 $ 9.02 $ 9.01 $ 9.02
--------- --------- --------- ---------
Total Return@..................................... 10.07% 9.47% 9.35% 9.47%
Net assets end of period (000s omitted)........... $ 4,909 $ 483 $ 326 $ 4,823
Ratio of expenses to average daily net assets..... 1.02%* 1.77%* 1.77%* 1.77%*
Ratio of net investment income to average daily
net assets....................................... 7.01%* 6.24%* 6.24%* 6.24%*
Portfolio turnover rate........................... 76%** 76%** 76%** 76%**
@These are the total returns during the periods, including reinvestment of all dividend and
capital gains distributions without adjustments for sales charge.
*Annualized.
**For the year ended July 31, 1995. Portfolio turnover computed at fund level.
+For the period from November 14, 1994 (commencement of operations) to July 31, 1995.
</TABLE>

10
<PAGE>
FEDERAL INCOME TAX INFORMATION:

For the fiscal year ended July 31, 1995:

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

INCOME DISTRIBUTIONS -- taxable as income, 0% qualifying for deduction by
corporations. Distributions from net investment income were paid monthly through
July, 1995, see totals below. Under certain state laws, dividends paid by a
regulated investment company, which are derived from interest on federal
obligations, may not be taxable to residents of that state. Please consult your
tax advisor for the reporting of these amounts. The source of dividends paid by
the fund through July, 1995, was as follows:

<TABLE>
<S> <C>
Direct Federal Obligations:
U.S. Treasury................................................ 3.47%
Other........................................................ 4.57
---------
Total Direct Federal Obligations........................... 8.04
Other Securities......................................... 91.96
---------
100.00%
---------
</TABLE>

Detailed below are the per share distributions made for the fiscal year ended
July 31, 1995.

<TABLE>
<CAPTION>
Fortis U.S. Government Securities
---------------------------------------------
Per Share
---------------------------------------------
Payable Date Class E Class A* Class B, C and H*
<S> <C> <C> <C>
- ---------------------------------------------------------------------
August 31, 1994....... $ 0.057 $ N/A $ N/A
September 30, 1994.... 0.057 N/A N/A
October 31, 1994...... 0.057 N/A N/A
November 30, 1994..... 0.056 0.034 0.030
December 30, 1994..... 0.056 0.054 0.048
January 31, 1995...... 0.056 0.054 0.048
February 28, 1995..... 0.056 0.054 0.048
March 31, 1995........ 0.056 0.054 0.048
April 28, 1995........ 0.056 0.054 0.048
May 31, 1995.......... 0.054 0.052 0.047
June 30, 1995......... 0.054 0.052 0.047
July 31, 1995......... 0.054 0.052 0.047
----------- ----------- -------
$ 0.669 $ 0.460 $ 0.411
----------- ----------- -------
*Period from November 14, 1994 (Date shares were first offered to the
public) to July 31, 1995.
</TABLE>

11
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders

Fortis Income Portfolios, Inc.:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Fortis U.S. Government Securities
Fund (a fund within Fortis Income Portfolios, Inc.) as of July 31, 1995 and the
related statement of operations for the year then ended, the statements of
changes in net assets for the year ended July 31, 1995 and the seven-month
period ended July 31, 1994 and the financial highlights for the year ended July
31, 1995, the seven-month period ended July 31, 1994 and each of the years in
the three-year period ended December 31, 1993. These financial statements and
the financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.

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

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Fortis U.S. Government Securities Fund at July 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for the year
ended July 31, 1995 and the seven-month period ended July 31, 1994 and the
financial highlights for the year ended July 31, 1995, the seven-month period
ended July 31, 1994 and each of the years in the three-year period ended
December 31, 1993, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
September 8, 1995

12
<PAGE>

<TABLE>
<CAPTION>
DIRECTORS OFFICERS

RICHARD W. CUTTING DEAN C. KOPPERUD THOMAS R. PELLETT DEAN C. KOPPERUD
CPA and Financial President and Director Prior to January, 1991, President and Director
Consultant Fortis Advisers, Inc. Senior Vice STEPHEN M. POLING
ALLEN R. FREEDMAN Fortis Investors, Inc. President-Administration Vice President
Chairman and Chief Senior Vice President and and Corporate Affairs DENNIS M. OTT
Executive Officer Director of Fortis Benefits and Director Vice President
Fortis, Inc.; Insurance Company Pet, Inc. JAMES S. BYRD
Managing Director of Senior Vice President of ROBB L. PRINCE Vice President
Fortis International, N.V. Time Insurance Prior to July, 1995 ROBERT C. LINDBERG
DR. ROBERT M. GAVIN Company Vice President and Vice President
President EDWARD M. MAHONEY Treasurer KEITH R. THOMSON
Macalester College Prior to January, 1995, Jostens, Inc. Vice President
BENJAMIN S. JAFFRAY Chairman and Chief LEONARD J. SANTOW ROBERT W. BELTZ, JR.
Chairman Executive Officer Principal Vice President
Sheffield Group, Ltd. Fortis Advisers, Inc. Griggs & Santow, Inc. THOMAS D. GUALDONI
JEAN L. KING Fortis Investors, Inc. JOSEPH M. WIKLER Vice President
President Investment Consultant and LARRY A. MEDIN
Communi-King Private Investor Vice President
Prior to January, 1994, JON H. NICHOLSON
Director of Research, Vice President
Chief Investment Officer, JOHN W. NORTON
Principal, and Director Vice President
The Rothschild Co. DAVID A. PETERSON
Vice President
MICHAEL J. RADMER
Secretary
TAMARA L. FAGELY
Treasurer
DAVID G. CARROLL
2nd Vice President
CHRIS J. NEUHARTH
2nd Vice President
INVESTMENT MANAGER, CUSTODIAN
REGISTRAR AND First Bank
TRANSFER AGENT National Association
Fortis Advisers, Inc. Minneapolis, Minnesota
Box 64284 GENERAL COUNSEL
St. Paul, Minnesota 55164 Dorsey & Whitney P.L.L.P.
PRINCIPAL UNDERWRITER Minneapolis, Minnesota
Fortis Investors, Inc. INDEPENDENT AUDITORS
Box 64284 KPMG Peat Marwick LLP
St. Paul, Minnesota 55164 Minneapolis, Minnesota
</TABLE>

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

13
<PAGE>

<TABLE>
<S> <C> <C>
FORTIS FINANCIAL GROUP Fortis Financial Group (FFG) is a premier With more than $5 billion in assets under
provider of insurance and investment portfolios management, FFG is part of Fortis, a $100 billion
whose fund manager, Fortis Advisers, Inc. has worldwide financial services and insurance
established a nationwide reputation for money organization represented in 11 countries.
management. Through Fortis Investors, Inc., FFG Like the Fortis name, which comes
offers mutual funds, annuities and variable from the Latin for steadfast, our focus is on the
universal life insurance. Life and disability long-term in all we do: the relationships we
products are issued and underwritten by Time build, the performance we seek, the service we
Insurance Company and Fortis Benefits Insurance provide and the products we offer.
Company.
</TABLE>

[LOGO]
----------------
Bulk Rate
FORTIS FINANCIAL GROUP
US Postage
P.O. Box 64284
PAID
St. Paul, MN 55164
Permit No. 3794
Minneapolis, MN
------------------

FORTIS U.S. GOVERNMENT
SECURITIES FUND
[LOGO]
PRINTED ON RECYCLED PAPER WITH
40% PRECONSUMER WASTE AND
10% POST CONSUMER WASTE.
PLEASE RECYCLE.

95167 (Ed. 9/95)
<PAGE>

FORTIS
ADVANTAGE
PORTFOLIOS,
INC.

(A series fund with four separate
portfolios, each with different
goals and investment policies:
Capital Appreciation Portfolio,
High Yield Portfolio, Asset
Allocation Portfolio, and
Government Total Return Portfolio)

PROSPECTUS DATED
March 1, 1995

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

Fortis Advantage Portfolios, Inc. ("Fortis Advantage") is a diversified,
open-end management investment company that is intended to provide a range of
investment alternatives through its four separate investment portfolios (the
"Portfolios"), each of which is, for investment purposes, in effect a
separate fund with its own separate goals and investment policies. A separate
series of capital shares is issued for each Portfolio. Each Portfolio's
shares are of four classes (A, B, H, and C), each with different sales
arrangements and expenses.

- - The investment objective of "Capital Appreciation Portfolio" is maximum
long-term capital appreciation by investing primarily in equity securities of
small and medium sized companies that are early in their life cycles but
which have the potential to become major enterprises ("emerging growth
companies"), and of more established companies that have the potential for
above-average capital growth.

- - The investment objective of "High Yield Portfolio" is maximum current
income by investing primarily in high-yielding, fixed-income securities
which, in the opinion of the Portfolio's investment adviser, do not subject
High Yield Portfolio to unreasonable investment risk. The Portfolio
invests primarily in high-yield, high-risk securities and therefore may not
be suitable for all investors. (See "Investment Objectives and Policies of
the Portfolios--High Yield Portfolio--Risks of Transactions in High-Yielding
Securities.")

- - The investment objective of "Asset Allocation Portfolio" is maximum total
return on invested capital, to be derived primarily from capital
appreciation, dividends, and interest, by following a flexible asset
allocation strategy that contemplates shifts among a wide range of
investments and markets. The Portfolio may invest up to 30% of its assets in
the types of high yield securities in which the High Yield Portfolio may
invest.

- - The investment objective of "Government Total Return Portfolio" is a high
level of current income consistent with liquidity and preservation of
principal by investing primarily in a broad range of obligations issued or
guaranteed by the United States Government or its agencies and
instrumentalities. Capital appreciation is a secondary objective.

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

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

[LOGO]

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Class Shares.......................................................... 2
Summary of Portfolio Expenses......................................... 3
Financial Highlights.................................................. 4
Organization and Classification....................................... 6
Investment Objectives and Policies.................................... 7
- Capital Appreciation Portfolio.................................. 7
- High Yield Portfolio............................................ 8
- Asset Allocation Portfolio...................................... 10
- Government Total Return Portfolio............................... 11
- Other Investment Practices of the Portfolios.................... 14
Management............................................................ 17
- Board of Directors.............................................. 17
- The Investment Adviser/Transfer Agent/Dividend Agent............ 17
- The Underwriter and Distribution Expenses....................... 17
- Expenses and Allocations Among Portfolios....................... 19
- Brokerage Allocation............................................ 19
Capital Stock......................................................... 19
Shareholder Inquiries................................................. 19
Dividends and Capital Gains Distributions............................. 19
Taxation.............................................................. 20
How to Buy Portfolio Shares........................................... 20
- General Purchase Information.................................... 20
- Alternative Purchase Arrangements............................... 21
- Class A Shares--Initial Sales Charge Alternative................ 21
- Class B and H Shares--Contingent Deferred Sales
Charge Alternatives............................................ 23
- Class C Shares--Level Sales Charge Alternative.................. 23
Valuation of Securities............................................... 24
Redemption............................................................ 25
- Contingent Deferred Sales Charge................................ 26
Corporate Bond, Preferred Stock, and Commercial Paper Ratings......... Appendix
Systematic Investment Plan Authorization Agreement.................... 31
</TABLE>

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

CLASS SHARES

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

CLASS A SHARES. Generally, an investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed (except for sales at net asset value in
excess of $1 million which may be subject to a contingent deferred sales
charge). The initial sales charge may be reduced or waived for certain
purchases. Class A shares are subject to an annual Rule 12b-1 fee as a
percentage of average daily net assets attributable to Class A shares as
follows:

Asset Allocation Portfolio ............................................... .45%
Capital Appreciation Portfolio ........................................... .45%
High Yield Portfolio ..................................................... .35%
Government Total Return Portfolio ........................................ .35%

This fee is lower than the other classes and therefore Class A shares have lower
expenses and pay higher dividends. See "How to Buy Portfolio Shares--Class A
Shares."

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

<PAGE>

shares due to the higher Rule 12b-1 fee and any other class specific expenses.
While Class C shares, unlike Classes B and H, do not convert to Class A shares,
they are subject to a lower contingent deferred sales charge (1%) than Class B
or H shares and do not have to be held for as long a time (one year) to avoid
paying the contingent deferred sales charge. See "How to Buy Portfolio
Shares--Class C Shares."

SUMMARY OF PORTFOLIO
EXPENSES

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

SHAREHOLDER TRANSACTION EXPENSES

MAXIMUM SALES
CHARGE IMPOSED CAPITAL HIGH ASSET GOVERNMENT
ON PURCHASES APPRECIATION YIELD ALLOCATION TOTAL RETURN
(AS A PERCENTAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
OF OFFERING PRICE) --------------------------------------------------------

<S> <C> <C> <C> <C>
Class A Shares.............. 4.5%* 4.5%* 4.5%* 4.5%*
Class B and H Shares........ 0.00%** 0.00%** 0.00%** 0.00%**
Class C Shares.............. 0.00%** 0.00%** 0.00%** 0.00%**
</TABLE>

MAXIMUM DEFERRED
SALES CHARGE (AS
A PERCENTAGE OF
ORIGINAL PURCHASE CAPITAL HIGH ASSET GOVERNMENT
PRICE OR REDEMPTION APPRECIATION YIELD ALLOCATION TOTAL RETURN
PROCEEDS, AS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
APPLICABLE) --------------------------------------------------------

<S> <C> <C> <C> <C>
Class A Shares.............. *** *** *** ***
Class B and H Shares........ 4.0% 4.0% 4.0% 4.0%
Class C Shares.............. 1.0% 1.0% 1.0% 1.0%
</TABLE>

*Since the Portfolios also pay an asset based sales charge, long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by NASD rules.

**Class B, H and C shares are sold without a front end sales charge, but their
contingent deferred sales charge and Rule 12b-1 fees may cause long-term
shareholders to pay more than the economic equivalent of the maximum
permitted front end sales charges.

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

ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION
PORTFOLIO
-------------------------------------------
CLASS A CLASS B AND CLASS C
SHARES H SHARES SHARES
-------------------------------------------
<S> <C> <C> <C>
Management Fees.............. 1.00% 1.00% 1.00%
12b-1 fees................... .45% 1.00% 1.00%
Other Expenses............... .17% .17% .17%
Total Portfolio Operating
Expenses................ 1.62% 2.17% 2.17%

HIGH YIELD
PORTFOLIO
-------------------------------------------
CLASS A CLASS B AND CLASS C
SHARES H SHARES SHARES
-------------------------------------------
<S> <C> <C> <C>
Management Fees.............. .75% .75% .75%
12b-1 fees................... .35% 1.00% 1.00%
Other Expenses............... .13% .13% .13%
Total Portfolio Operating
Expenses................ 1.23% 1.88% 1.88%

ASSET ALLOCATION
PORTFOLIO
-------------------------------------------
CLASS A CLASS B AND CLASS C
SHARES H SHARES SHARES
-------------------------------------------
<S> <C> <C> <C>
Management Fees.............. .98% .98% .98%
12b-1 fees................... .45% 1.00% 1.00%
Other Expenses............... .12% .12% .12%
Total Portfolio Operating
Expenses................ 1.55% 2.10% 2.10%

GOVERNMENT TOTAL
RETURN PORTFOLIO
-------------------------------------------
CLASS A CLASS B AND CLASS C
SHARES H SHARES SHARES
-------------------------------------------
<S> <C> <C> <C>
Management Fees.............. .78% .78% .78%
12b-1 fees................... .35% 1.00% 1.00%
Other Expenses............... .15% .15% .15%
Total Portfolio Operating
Expenses................ 1.28% 1.93% 1.93%
</TABLE>

The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in Fortis Advantage will bear,
whether directly or indirectly. For a more complete description of the various
costs and expenses, see "Management" and "How to Buy Portfolio Shares." The
information set forth in the table reflects actual expenses incurred during
fiscal 1994 for Class A shares only since they were the only shares outstanding
during such year.

EXAMPLE

<PAGE>

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares................. $61 $94 $129 $229
Class B and H Shares........... $58 $95 $134 $236
Class C Shares................. $32 $68 $116 $250

<CAPTION>
HIGH YIELD PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares................. $57 $82 $110 $187
Class B and H Shares........... $55 $86 $120 $203
Class C Shares................. $29 $51 $102 $220

ASSET ALLOCATION PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares................. $60 $92 $126 $221
Class B and H Shares........... $57 $93 $131 $229
Class C Shares................. $31 $66 $113 $243

GOVERNMENT TOTAL RETURN PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares................. $57 $84 $112 $193
Class B and H Shares........... $56 $88 $122 $209
Class C Shares................. $30 $61 $104 $225
</TABLE>

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

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class B and H Shares........... $22 $68 $116 $236
Class C Shares................. $22 $68 $116 $250

HIGH YIELD PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class B and H Shares........... $19 $59 $102 $203
Class C Shares................. $19 $59 $102 $220

<CAPTION>
ASSET ALLOCATION PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class B and H Shares........... $21 $66 $113 $229
Class C Shares................. $21 $66 $113 $243

GOVERNMENT TOTAL RETURN PORTFOLIO
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------
<S> <C> <C> <C> <C>
Class B and H Shares........... $20 $61 $104 $209
Class C Shares................. $20 $61 $104 $225
</TABLE>

The above example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

The information below has been derived from audited financial statements and
should be read in conjunction with the financial statements of Fortis Advantage
found in its 1994 Annual Report to Shareholders. Data is only presented for
Class A shares because no other classes shares were outstanding during the
periods presented.

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

- ------------------------------
*January 4, 1988 to October 31, 1988.
**Per share amounts compiled based upon average shares outstanding during the
period.
***These are the Portfolio's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
****Annualized.

<PAGE>

FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
HIGH YIELD PORTFOLIO 1994 1993 1992 1991 1990 1989 1988*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 8.65 $ 8.00 $ 7.82 $ 5.72 $ 8.59 $ 9.92 $ 10.00
--------- --------- --------- --------- --------- --------- ---------
Operations:
Investment income-net........... .86 .87 .85 .95 1.04 1.22 .92
Net realized and unrealized gain
(loss) on investments.......... (.72) .68 .22 2.03 (2.73) (1.35) (.07)
--------- --------- --------- --------- --------- --------- ---------
Total from operations............. .14 1.55 1.07 2.98 (1.69) (.13) .85
--------- --------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...... (.89) (.89) (.85) (.88) (1.12) (1.20) (.93)
Excess distributions of net
realized gains................. -- (.01) (.04) -- -- -- --
From net realized gains......... -- -- -- -- (.06) -- --
--------- --------- --------- --------- --------- --------- ---------
Total distributions to
shareholders..................... (.89) (.90) (.89) (.88) (1.18) (1.20) (.93)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period.... $ 7.90 $ 8.65 $ 8.00 $ 7.82 $ 5.72 $ 8.59 $ 9.92
--------- --------- --------- --------- --------- --------- ---------
Total return**.................... 1.48% 20.33% 14.20% 55.78% (21.56%) (1.79%) 8.85%
Net assets at end of period (000's
omitted)......................... $ 98,611 $ 73,395 $ 45,628 $ 31,250 $ 17,484 $ 21,814 $ 14,709
Ratio of expenses to average daily
net assets....................... 1.23% 1.29% 1.33% 1.51% 1.53% 1.52% 1.35%***
Ratio of net investment income to
average daily net assets......... 10.18% 10.43% 10.34% 13.80% 14.16% 12.77% 11.55%***
Portfolio turnover rate........... 63% 95% 80% 61% 65% 52% 63%
</TABLE>

- ------------------------------
*January 4, 1988 to October 31, 1988.
**These are the Portfolios' total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
***Annualized.

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

- ------------------------------
*January 4, 1988 to October 31, 1988.
**Annualized.
***These are the Portfolio's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED APRIL 27, 1991 FOR THE PERIOD
GOVERNMENT OCTOBER 31, TO MAY 1, 1990 TO YEAR ENDED APRIL 30, MAY 28, 1986
TOTAL RETURN ---------------------------- OCTOBER 31, APRIL 26, --------------------------- TO APRIL 30,
PORTFOLIO 1994 1993 1992 1991* 1991(A)(C) 1990(A) 1989(A)(B) 1988(A) 1987(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period........ $ 9.01 $ 8.88 $ 9.11 $ 9.06 $ 8.91 $ 8.85 $ 9.15 $ 9.48 $ 9.75
------- ------- ------- ------- ------- ------- ------- ------- -------
Operations:
Investment income-net..... .52 .52 .63 .31 .85 .78 .65 .60 .45
Net realized and
unrealized gain (loss)
on investments.......... (1.16) .33 (.13) .13 .12 .06 (.15) (.08) (.23)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from operations....... (.64) .85 .50 .44 .97 .84 .50 .52 .22
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income-
net...................... (.52) (.53) (.59) (.37) (.82) (.78) (.65) (.60) (.45)
Excess distributions of
net realized gains....... (.12) (.19) (.14) (.02) -- -- -- -- --
From net realized gains.... -- -- -- -- -- -- (.15) (.25) (.04)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions to
shareholders............... (.64) (.72) (.73) (.39) (.82) (.78) (.80) (.85) (.49)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset
value, end of
period..................... $ 7.73 $ 9.01 $ 8.88 $ 9.11 $ 9.06 $ 8.91 $ 8.85 $ 9.15 $ 9.48
------- ------- ------- ------- ------- ------- ------- ------- -------
Total return@............... (7.38%) 9.87% 5.73% 4.98% 11.27% 9.73% 5.64% 5.65% 4.92%
Net assets at end of period
(000's omitted)............ $70,041 $90,138 $94,336 $70,912 $75,605 $89,998 $82,503 $74,101 $16,865
Ratio of expenses to average
daily net assets........... 1.28% 1.25% 1.25% 1.25%+ 1.25%+ 1.57% 1.93% 2.10% 2.27%(d)+
Ratio of net investment
income to average daily
net assets................. 6.20% 5.81% 6.64% 6.74%+ 9.37%+ 8.56% 7.29% 6.40% 4.74%+
Portfolio turnover rate..... 135% 113% 122% 118% 101% 111% 145% 241% 276%
</TABLE>

* Fortis Advisers, Inc. assumed management of the fund on April 27, 1991
(formerly Olympus U.S. Government Plus Fund).
+ Annualized.
@ These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
(a) Based upon the weighted average number of shares outstanding during the
period.
(b) Prior to January 9, 1989, the Olympus U.S. Government Plus Fund (the
"Olympus Fund"), a predecessor of the Government Total Return Portfolio, was
managed by Continental Equities Corporation of America (see "Organization
and Classification of Fortis Advantage").
(c) The Olympus Fund was managed by Furman Selz Capital Management from January
9, 1989 to April 26, 1991 (see "Organization and Classification of Fortis
Advantage").
(d) The expenses ratio was 3.60% prior to reimbursement during this period.
- ------------------------------

Each Portfolio may advertise its "cumulative total return," "average
annual total return," "systematic investment plan cumulative total
return," and "systematic investment plan average annual total return," and
may compare such figures to recognized indices. High Yield Portfolio and
Government Total Return Portfolio may advertise their "yield." When they
advertise yield, they will also advertise "average annual total return" for
the most recent one, five, and ten year periods, along with other
performance data. Performance figures are calculated separately for each
class of shares, and figures for each class will be presented. Each
Portfolio may advertise its relative performance as compiled by outside
organizations such as Lipper Analytical or Wiesenberger, or refer to
publications which have mentioned Fortis Advantage, Fortis Advisers, or
their personnel, and also may advertise other performance items as set
forth in the Statement of Additional Information. The performance
discussion required by the Securities and Exchange Commission is found in
Fortis Advantage's Annual Report to Shareholders and will be made available
without charge upon request.

ORGANIZATION AND CLASSIFICATION

Fortis Advantage was incorporated under Minnesota law in 1987 and is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 (the "1940 Act") as an "open-end diversified management investment
company".

<PAGE>

Fortis Advantage is currently comprised of four separate Portfolios--the Capital
Appreciation Portfolio, the High Yield Portfolio, the Asset Allocation
Portfolio, and the Government Total Return Portfolio. Each Portfolio is, for
investment purposes, in effect a separate investment fund. A separate series of
capital shares is issued for each Portfolio. Each share issued with respect to a
Portfolio has a pro-rata interest in the assets of that Portfolio and has no
interest in the assets of any other Portfolio. Each Portfolio bears its own
liabilities and also its proportionate share of the general liabilities of
Fortis Advantage. In other respects, Fortis Advantage is treated as one entity.

Government Total Return Portfolio commenced operations on April 29, 1991 as a
result of the transfer of substantially all of the assets of the Olympus U.S.
Government Plus Fund (the "Olympus Fund"), a series of the Olympus Funds Trust,
to Government Total Return Portfolio. The Olympus Fund was managed by Furman
Selz Capital Management prior to that date.

INVESTMENT OBJECTIVES AND POLICIES

Since each Portfolio has different investment objectives, each can be expected
to have different investment results and incur different market and financial
risks. There can be no assurance that any of these objectives will be met.
Fortis Advantage may in the future establish other Portfolios with different
investment objectives without the approval of the shareholders of the existing
Portfolios. The investment objectives of the Portfolios and, except as otherwise
noted, their investment policies, could be changed without shareholder approval.
Any change in a Portfolio investment objective may result in the Portfolio
having an investment objective which is different from that which an investor
deemed appropriate to his or her objectives at the time of investment.

CAPITAL APPRECIATION PORTFOLIO

The investment objective of Capital Appreciation Portfolio is maximum long-term
capital appreciation by investing primarily in equity securities of small and
medium sized companies that are early in their life cycles, but which have the
potential to become major enterprises, and of more established companies that
have the potential for above-average capital growth. Dividend and interest
income from securities, if any, is incidental to the Portfolio's investment
objective of long-term growth of capital.

Capital Appreciation Portfolio's policy is to invest, under normal
circumstances, at least 65% of its assets (exclusive of collateral in connection
with securities lending) in: (a) common stocks of small and medium-sized
companies that are early in their life cycles, but which have the potential to
become major enterprises ("emerging growth companies"); and (b) equity
securities of some more established companies whose rates of earnings growth are
expected to accelerate because of special factors such as new products, changes
in consumer demand, basic changes in the economic environment, or rejuvenated
management. Emerging growth companies generally have annual gross revenues
ranging from $10 million to $1 billion, would be expected to show earnings
growth over time that is well above the growth rate of the overall economy and
the rate of inflation, and would have products, management, and market
opportunities which are usually necessary to become more widely recognized as
growth companies.

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

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

As set forth above, Capital Appreciation Portfolio, under normal economic
conditions, will be principally invested in equity securities. However, when
Fortis Advisers, Inc. ("Advisers"), the investment adviser of Fortis Advantage,
considers a more defensive posture appropriate, the Portfolio temporarily can be
100% invested in commercial paper, obligations of banks or the United States
Government, and other high quality, short-term debt instruments.

<PAGE>

HIGH YIELD PORTFOLIO

The investment objective of High Yield Portfolio is maximum current income by
investing primarily in a diversified portfolio of high-yielding, fixed-income
securities (sometimes referred to as "junk bonds") which, in the opinion of
Advisers, do not subject High Yield Portfolio to unreasonable investment risk.
In choosing investment securities for High Yield Portfolio, Advisers may also
consider capital appreciation potential, but only when consistent with the
primary objective of current income. Under normal economic circumstances, High
Yield Portfolio will be at least 65% (exclusive of collateral in connection with
securities lending) invested in lower grade (as explained below) debt
securities, convertible securities, options on debt securities, interest rate
futures contracts and options thereon, common and preferred stocks, and other
equity securities when these types of investments are consistent with the
Portfolio's investment objective of high current income. The Portfolio's
remaining assets may be held in cash or cash equivalents or invested in
investment grade debt instruments.

The higher yields that High Yield Portfolio seeks are usually available from
lower-rated securities--those rated Baa or lower by Moody's Investors Service,
Inc. ("Moody's") or BBB or lower by Standard & Poor's Corporation ("S&P"), or
comparably rated by another nationally recognized rating agency, and unrated
securities of similar quality. This is an aggressive approach to income
investing and is subject to greater risk than investing in higher quality
securities. The Portfolio may invest without limitation in any "eligible" rating
category. The lowest eligible rating categories in which the Portfolio will
invest are Caa as determined by Moody's and CCC as determined by S&P, or
comparably rated by another nationally recognized rating agency, except that up
to 10% of the Portfolio's assets (at the time of investment) may be invested in
"non-performing" securities rated lower than these categories. Securities in the
Caa/CCC rating categories are considered to be of poor standing and are
predominantly speculative. Lower ratings may reflect a greater possibility that
the financial condition of the issuer, or adverse changes in general economic
conditions, or both, may impair the ability of the issuer to make payments of
interest and principal. Additionally, investments in securities rated Caa or CCC
involve significant risk exposure to adverse conditions. Such securities may be
in default, or there may be present elements of danger with respect to the
payment of principal or interest. "Non-performing" securities are highly
speculative. For a description of ratings assigned by both Moody's and S&P, see
Appendix.

The prices and yields of lower rated securities generally fluctuate more than
higher quality securities, and such prices may decline significantly in periods
of general economic difficulty or rising interest rates. Advisers reserves the
right to adopt a defensive approach by temporarily investing up to 100% of High
Yield Portfolio's assets in investment grade debt securities and commercial
paper, and/or in obligations of banks or the United States Government.

In considering investments for High Yield Portfolio, Advisers will attempt to
identify high-yielding securities of issuer companies whose financial condition
has improved or is expected to improve in the future. Advisers will not rely
exclusively on ratings assigned by Moody's and S&P in this process, but, in
appropriate circumstances, may perform its own credit analysis as well.
Adviser's analysis focuses on relative values, based on such factors as interest
or dividend coverage, asset coverage, earnings prospects, and the experience and
managerial strength of the issuer companies.

Because High Yield Portfolio invests primarily in securities in the lower rating
categories, investors should carefully consider their ability to assume the
risks involved before making an investment in the High Yield Portfolio.

High Yield Portfolio may invest in CMOs and multi-class pass-through securities
to the same extent as Government Total Return Portfolio. (See "Government Total
Return Portfolio".)

PAYMENT-IN-KIND DEBENTURES. High Yield Portfolio may invest in debentures the
interest on which may be paid in other securities rather than cash ("PIKs").
Typically, during a specified term prior to the debenture's maturity, the issuer
of a PlK may provide for the option or the obligation to make interest payments
in debentures, common stock, or other instruments (i.e., "in kind" rather than
in cash). The type of instrument in which interest may or will be paid would be
known by Fortis Advantage at the time of the investment. The investment
restrictions regarding corporate bond quality are applicable to High Yield
Portfolio's investments in PIKs as well as to the securities which may
constitute interest payments on PIKs. While PIKs generate income for generally
accepted accounting standards purposes, they do not generate cash flow and thus
could cause High Yield Portfolio to be forced to liquidate securities at an
inopportune time in order to distribute cash, as required by the Internal
Revenue Code.

<PAGE>

RISKS OF TRANSACTIONS IN HIGH-YIELDING SECURITIES. Participation in
high-yielding securities transactions generally involves greater returns in the
form of higher average yields. However, participation in such transactions
involves greater risks, often related to sensitivity to interest rates, economic
changes, solvency, and relative liquidity in the secondary trading market.

The high yielding securities market is still relatively new and its recent
growth paralleled a long period of economic expansion and an increase in merger,
acquisition, and leveraged buyout activity. High yielding securities are
especially subject to adverse changes in general economic conditions, to changes
in the financial condition of their issuers, and to price fluctuation in
response to changes in interest rates. During periods of economic downturn or
rising interest rates, issuers of high yielding securities may experience
financial stress that could adversely their ability to make payments of
principal and interest and increase the possibility of default.

Yields on high yield securities will fluctuate over time. The prices of
high-yielding securities have been found to be less sensitive to interest rate
changes than higher-rated investments, but more sensitive to adverse economic
changes or individual corporate developments. Also, during an economic downturn
or substantial period of rising interest rates highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the issuer of a security
held by High Yield Portfolio defaulted, High Yield Portfolio may incur
additional expenses to seek recovery. In addition, periods of economic
uncertainty and changes can be expected to result in increased volatility of
market prices of high-yielding securities and the Portfolio's asset value.
Furthermore, in the case of high-yielding securities structured as zero coupon
or PIKs, their market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than securities which pay interest
periodically and in cash.

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

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

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

The table below shows the weighted average percentages of High Yield Portfolio's
long-term bond investments during the fiscal year ended October 31, 1994,
represented by

<PAGE>

(1) bonds rated by a nationally recognized statistical rating organization,
separated into each rating category, and (2) all unrated bonds as a group.

STANDARD & POOR'S RATING PERCENT OF TOTAL
(OR EQUIVALENT) INVESTMENTS
- ----------------------------------- ------------------
<S> <C>
AAA................................ .2%
AA................................. 0%
A.................................. 0%
BBB................................ 0%
BB................................. 3.0%
B.................................. 65.8%
CCC................................ 13.9%
Below CCC.......................... 2.4%
All unrated bonds
as a group........................ 14.7%
-----
100.0%
</TABLE>

ASSET ALLOCATION PORTFOLIO

The investment objective of Asset Allocation Portfolio is maximum total return
on invested capital, to be derived primarily from capital appreciation,
dividends, and interest. Asset Allocation Portfolio will endeavor to achieve its
investment objective by following a flexible asset allocation strategy that
contemplates shifts, which may be frequent, among a wide range of investments
and markets. Asset Allocation Portfolio will invest in equity securities of
domestic and foreign issuers, including common stocks, preferred stocks,
convertible securities, and warrants; debt securities of domestic and foreign
issuers, including bonds, debentures, and notes; and money market instruments.
The Portfolio may also write covered call and secured put options and purchase
call and put options on securities and securities indexes in an effort to
increase current income and for hedging purposes, and may purchase and sell
stock index and interest rate futures contracts and options thereon for hedging
purposes. (See "Other Investment Practices of the Portfolios," below.)

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

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

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

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

U.S. GOVERNMENT SECURITIES. Asset Allocation Portfolio may invest, without
limitation, in s issued or guaranteed by the United States Government, its
agencies, or instrumentalities. Such securities include a variety of Treasury
securities, which differ in their interest rates, maturities, and times of
issuance. Treasury Bills have maturities of one year or less; Treasury Notes
have maturities of one to ten years; and Treasury Bonds have maturities of
greater than ten years. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, such as Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those issued by the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as those issued by the Student Loan Marketing Association, are supported only by
the credit of the agency or instrumentality. While the U.S. Government provides
financial support to such U.S. Government-sponsored agencies and
instrumentalities, no assurance can be given that it will always do so since it
is not so obligated by law. Asset Allocation Portfolio will invest in such
securities only when it is satisfied that the credit risk with respect to the
issuer is acceptable.

<PAGE>

Asset Allocation Portfolio may invest in CMOs and multi-class pass-through
securities to the same extent as Government Total Return Portfolio. (See
"Government Total Return Portfolio".)

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

(a) CORPORATE BONDS. Asset Allocation Portfolio may invest, without
limitation, in corporate bonds rated within the four highest rating grades
assigned by Moody's or S&P, or comparably rated by another nationally
recognized rating agency, and may invest up to 30% of its assets in lower
rated bonds; however, the Portfolio will not invest in bonds rated below Caa
by Moody's or CCC by S&P, or comparably rated by another nationally
recognized rating agency;

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

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

As noted above, the Asset Allocation Portfolio may invest up to 30% of its
assets in lower rated bonds. The Asset Allocation Portfolio may retain a
portfolio security whose rating has been changed if the security otherwise meets
the Portfolio's investment objective and investment criteria. Lower rated bonds
in which the Asset Allocation Portfolio may invest include the high yield
securities in which the High Yield Portfolio may invest. For risks connected
with such investments, see "High Yield Portfolio-- Risks of Transactions in
High-Yielding Securities," above. For the fiscal year ended October 31, 1994,
the weighted average percentage of Asset Allocation Portfolio's long-term bond
investments represented by certain securities is set forth in the following
table:

STANDARD & POOR'S RATING PERCENT OF TOTAL
(OR EQUIVALENT) INVESTMENTS
- ----------------------------------- ------------------
<S> <C>
AAA................................ 61.5%
AA................................. 5.8%
A.................................. 3.7%
BBB................................ 7.1%
BB................................. 4.6%
B.................................. 15.4%
CCC................................ 1.9%
Below CCC.......................... 0%
All unrated bonds as a group....... 0%
-----
100.0%
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO

The investment objective of Government Total Return Portfolio is to provide
investors with a high level of current income consistent with liquidity and the
preservation of principal. It does so by investing primarily in a broad range of
obligations issued or guaranteed by the United States Government or its agencies
and instrumentalities ("U.S. Government Obligations"), including obligations
issued by the Government National Mortgage Association. Under normal market
conditions Government Total Return Portfolio will invest at least 80% of its net
assets in U.S. Government Obligations, cash, and receivables.

The securities in Government Total Return Portfolio may have stated maturities
of up to thirty or more years. The maturities of the portfolio securities held
by Government Total Return Portfolio will vary depending on the Adviser's view
of market conditions, but will generally not exceed 12 years as a result of
prepayments. The obligations in which Government Total Return Portfolio invests
may not yield as high a level of current income as longer-term or lower quality
obligations. However, the maturities

<PAGE>

and high quality of the purchased securities are expected to result in higher
liquidity and more stable yields during periods of changing interest rates.

Although Government Total Return Portfolio's primary investment objective is to
seek a high level of current income, it will, when market conditions permit and
consistent with the overall goal of preserving capital, seek capital
appreciation. For example, since declines in general levels of interest rates
will produce increases in the price of longer-term fixed income securities,
Advisers, if it believes that prevailing levels of interest rates will fall, may
lengthen the average maturity of the portfolio to take advantage of the effect
of falling interest rates.

U.S. Government Obligations are debt securities either issued directly by the
United States Government, such as Treasury bills, notes or bonds, or by United
States Government-sponsored enterprises and federal agencies. Some obligations
of agencies and instrumentalities of the United States Government are supported
by the full faith and credit of the United States or by United States Treasury
guarantees (such as "Ginnie Maes" or securities issued by the Export-Import
Bank); others, by the right of the issuer to borrow from the United States
Treasury (such as obligations of the Federal Home Loan Mortgage Corporation or
the Federal National Mortgage Association); and others, only by the credit of
the agency or instrumentality issuing the obligation (such as obligations of the
Federal Home Loan Banks). In the case of obligations not backed by the full
faith and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.

Although the payment of interest and principal on a portfolio security may be
guaranteed by the United States Government or one of its agencies or
instrumentalities, the net asset value of shares of Government Total Return
Portfolio will fluctuate in response to changes in interest rates. In general,
when interests rates rise, prices of fixed income securities held by Government
Total Return Portfolio will decline. When interest rates decline, prices of
fixed income securities held by Government Total Return Portfolio will rise.
Interest rate fluctuation can be expected to affect the net asset value of
Government Total Return Portfolio's shares.

MORTGAGE-BACKED SECURITIES. Government Total Return Portfolio may invest in
mortgage-backed securities issued or guaranteed by United States Government
agencies, such as the Government National Mortgage Association ("GNMA" or
"Ginnie Maes"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities are
securities that, directly or indirectly, represent a participation in (or are
secured by and payable from) mortgage loans on real property. Mortgage-backed
securities may represent the right to receive both principal and interest
payments on underlying mortgages or may represent the right to receive varying
proportions of such payments. See "Other Investment Practices of the
Portfolios-Mortgage Related Securities", below, for more discussion of
mortgage-backed securities.

FNMA is a federally chartered private corporation and FHLMC is a federally
chartered corporation owned by the Federal Home Loan Banks. In contrast to
Ginnie Maes, the full faith and credit of the United States Government does not
support the obligations of either FNMA or FHLMC. Further, although FNMA or FHLMC
may, under certain conditions, borrow from the United States Treasury, neither
the United States Government nor any of its agencies are generally obligated to
finance or assist FNMA or FHLMC.

CMOS AND MULTI-CLASS PASS-THROUGH SECURITIES. CMOs are debt instruments issued
by special purpose entities which are secured by pools of mortgage loans or
other mortgage-backed Securities. Multi-class pass-through securities are
interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the CMO or make scheduled distributions on the
multi-class pass-through security. Multi-class pass-through securities, CMOs,
and classes thereof (including those discussed below) are examples of the types
of financial instruments commonly referred to as "derivatives".

There are many classes of CMOs. There are IOs, which entitle the holder to
receive distributions consisting solely

<PAGE>

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

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

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

OTHER INVESTMENTS. Government Total Return Portfolio may invest up to 20% of its
net assets in debt securities which are not U.S. Government obligations,
including (a) in corporate and bank money market instruments as described below,
and (b) in corporate debt securities or debt securities of foreign government
issuers denominated and payable in United States dollars and rated "Aaa" or "Aa"
by Moody's Investors Service, Inc. ("Moody's") or "AAA" or "AA" by S&P, or
comparably rated by another nationally recognized rating agency.

(a) BANK OBLIGATIONS. These obligations include negotiable certificates of
deposit, bankers acceptances and fixed time deposits. Fixed time deposits
may be withdrawn on demand by Government Total Return Portfolio, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. Government Total
Return Portfolio may not invest in fixed time deposits maturing in more than
seven calendar days which are subject to withdrawal penalties.

Government Total Return Portfolio will limit its investments in United
States bank obligations to obligations of United States banks (including
foreign branches) which have more than $1 billion in total

<PAGE>

assets at the time of investment and are members of the Federal Reserve
System, are examined by the Comptroller of the Currency, or whose deposits
are insured by the Federal Deposit Insurance Corporation. The Government
Portfolio limits its investments in foreign bank obligations to United
States dollar denominated obligations of foreign banks (including United
States branches) which at the time of investment: (i) have more than $5
billion, or the equivalent in other currencies, in total assets; (ii) are
among the 75 largest foreign banks in the world in terms of assets; (iii)
have branches or agencies in the United States; and (iv) in the opinion of
Advisers, are of an investment quality comparable to obligations of United
States banks which may be purchased by the Portfolio.

Obligations of foreign banks, as well as all foreign investments, involve
somewhat different investment risks than those affecting obligations of
United States banks, including the possibility that their liquidity could be
impaired because of future political and economic developments, that the
obligations may be less marketable than comparable obligations of United
States banks, that a foreign jurisdiction might impose more taxes with
respect to the obligations including withholding taxes on interest income
payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange
controls may be adopted which might adversely affect the payment of
principal and interest on those obligations and that the selection of those
obligations may be more difficult because there may be less publicly
available information concerning foreign banks or because the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United
States banks. Foreign banks may not be subject to examination by any United
States Government agency or instrumentality.

(b) COMMERCIAL PAPER. The commercial paper purchased by Government Total
Return Portfolio consists of direct obligations of domestic and foreign
issuers.

(c) RATINGS. The United States bank obligations and commercial paper in
which the Government Total Return Portfolio will invest will be obligations
which at the time of investment are (i) rated "P1" or "P2" by Moody's or
"A1" or "A2" or better by S&P, or comparably rated by another nationally
recognized rating agency, (ii) issued or guaranteed as to principal and
interest by issuers having an existing debt security rating of "Aa" or
better by Moody's or "AA" or better by S&P, or comparably rated by another
nationally recognized rating agency, or (iii) securities which, if not rated
are, in the opinion of Advisers, of an investment quality comparable to
rated commercial paper in which the Government Portfolio may invest.

OTHER INVESTMENT PRACTICES OF THE PORTFOLIOS

ILLIQUID SECURITIES. Policies which could be changed without shareholder
approval prohibit: 1) more than 5% of the Portfolio's assets from being invested
in securities of unseasoned issuers, including their predecessors, which have
been in operation for less than three years; and 2) more than 15% of its net
assets from being invested in all forms of illiquid investments, as determined
pursuant to applicable Securities and Exchange Commission rules and
interpretations. For this purpose illiquid securities include, among others, (i)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (ii) options purchased
over-the-counter and the cover for options written over-the-counter, and (iii)
repurchase agreements not terminable within seven days. Securities that have
been determined to be liquid by the Board of Directors of Fortis Advantage, or
by Advisers subject to the oversight of such Board of Directors, will not be
subject to this limitation. Commercial paper issued pursuant to the private
placement exemption of Section 4(2) of the 1933 Act and securities that are
eligible for resale under Rule 144A under the 1933 Act that have legal or
contractual restrictions on resale but have a readily available market are not
deemed illiquid securities for this purpose.

MORTGAGE-RELATED SECURITIES. High Yield Portfolio, Asset Allocation Portfolio,
and Government Total Return Portfolio may invest in certain types of
mortgage-related securities. One type of mortgage-related security includes
certificates which represent pools of mortgage loans assembled for sale to
investors by various governmental and private organizations. Another type of
mortgage-related security includes debt securities which are secured, directly
or indirectly, by mortgages on commercial or residential real estate. Such
Portfolios may invest to a limited extent in collateralized mortgage
obligations, as set forth in the Statement of Additional Information.

<PAGE>

rates. In addition, the value of such securities may fluctuate in response to
the market's perception of the creditworthiness of the issuers of
mortgage-related securities owned by the Portfolios. The ability of the issuer
of mortgage-related securities to reinvest favorably in underlying mortgages may
be limited by prevailing economic conditions or by government regulation.
Additionally, although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantee and/or insurance,
there is no assurance that private guarantors or insurers will be able to meet
their obligations.

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

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

TRANSACTIONS IN OPTIONS, FUTURES, AND FORWARD CONTRACTS. Each of the Portfolios
may, to a limited extent, enter into options, futures, and forward contracts on
a variety of investments and indexes, in order to protect against declines in
the value of Portfolio securities or increases in the cost of securities to be
acquired and, in the case of options on securities or indexes of securities, to
increase a Portfolio's gross income. It is currently the intention of Fortis
Advantage Portfolios to limit the investment in options by each Portfolio so
that such investments do not expose more than 5% of such Portfolio's assets to
risk of loss. Government Total Return Portfolio may write covered call options
on up to one-third of net assets and may not invest more than 2% of its net
assets in premiums on put options. With respect to Government Total Return
Portfolio, that Portfolio will not purchase or sell futures or related options
if, immediately thereafter, together with its writing of covered call options,
more than one-third of its net assets would be hedged. Additionally, that
Portfolio will not purchase or sell futures, or purchase options on futures if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for such options would exceed 5% of
the market value of the Portfolio's total assets.

REPURCHASE AGREEMENTS. Each of the Portfolios may invest in repurchase
agreements.

FOREIGN SECURITIES. Capital Appreciation Portfolio and High Yield Portfolio may
each invest up to 10%, and Asset Allocation Portfolio may invest up to 20%, of
its

Investors should recognize that investing in foreign companies involves certain
considerations, including those discussed below, which are not typically
associated with investing in United States issuers. Since the indicated
Portfolios may invest in securities denominated in currencies other than U.S.
dollars, and since the indicated Portfolios may temporarily hold funds in bank
total assets (at the time of investment) in foreign securities. Additionally,
Government Total Return Portfolio may invest up to 20% of its total assets in
dollar denominated foreign securities. eposits or other money market investments
denominated in foreign currencies, the indicated Portfolios may be affected
favorably or unfavorably by exchange control regulations or changes in the
exchange rate between such currencies and the dollar. A change in the value of a
foreign currency relative to the U.S. dollar will result in a corresponding
change in the dollar value of the indicated Portfolios' assets denominated in
that foreign currency. Changes in foreign currency exchange rates may also
affect the value of dividends and interest earned, gains and losses realized in
the sale of securities, and net investment income and gains, if any, to be
distributed to shareholders by the indicated Portfolios. The rate of

<PAGE>

exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balances of payments and other economic and
financial conditions, government intervention, speculation, and other factors.

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

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

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

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

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

DELAYED DELIVERY TRANSACTIONS. The Portfolios (primarily High Yield Portfolio,
Asset Allocation Portfolio, and Government Total Return Portfolio) may purchase
securities on a "when issued" or delayed delivery basis and purchase or sell
securities on a "forward commitment" basis. When such transactions are
negotiated, the price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date. Normally, the
settlement date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. At the time the Portfolio
enters into a transaction on a when-issued or forward commitment basis, a
segregated account consisting of cash, U.S. Government securities or liquid
high-grade debt securities equal to the value of the when-issued or forward
commitment securities will be established and maintained with the custodian and
will be marked to the market daily. During the period between a commitment and
settlement, no payment is made for the securities purchased by the purchaser
and, thus, no interest accrues to the purchaser from the transaction. If the
Portfolio disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss due to market fluctuation. The use of
when-issued transactions and forward commitments enables the Portfolio to hedge
against anticipated changes in interest rates and prices. The Portfolio may also
enter into such transactions to generate incremental income. In some instances,
the third-party seller of when-issued or forward commitment securities may
determine prior to the settlement date that it will be unable or unwilling to
meet its existing transaction commitments without borrowing securities. If
advantageous from a yield perspective, the Portfolios (primarily High Yield
Portfolio, Asset Allocation Portfolio, and Government Total Return Portfolio)
may, in that event, agree to resell its purchase commitment to the third-party
seller at the current market price on the date of sale and concurrently enter
into another purchase commitment for such securities at a later date. As an
inducement for the Portfolio to "roll over" its purchase commitment, the
Portfolio may receive a negotiated fee. The purchase of securities on a
when-issued, delayed delivery, or forward commitment basis exposes the Portfolio
to risk because the securities may decrease in value prior to their delivery.
Purchasing securities on a when-issued, delayed delivery, or forward commitment
basis involves the additional risk that the

<PAGE>

return available in the market when the delivery takes place will be higher than
that obtained in the transaction itself. These risks could result in increased
volatility of the Portfolio's net asset value to the extent that the Portfolio
purchases securities on a when-issued, delayed delivery, or forward commitment
basis while remaining substantially fully invested. There is also a risk that
the securities may not be delivered or that a Portfolio may incur a loss or will
have lost the opportunity to invest the amount set aside for such transaction in
the segregated asset account. As to each Portfolio, no more than 20% of its net
assets may be invested in when-issued, delayed delivery or forward commitment
transactions, and of such 20%, no more than one-half (i.e., 10% of its net
assets) may be invested in when-issued, delayed delivery or forward commitment
transactions without the intention of actually acquiring securities (i.e.,
dollar rolls).

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolios may lend their portfolio securities (principally to
broker-dealers) where such loans are callable at any time and are continuously
secured by collateral equal to no less than the market value, determined daily,
of the securities loaned. The Portfolios will receive amounts equal to dividends
or interest on the securities loaned. The Portfolios will also earn income for
having made the loan. Any cash collateral pursuant to these loans will be
invested in short-term money market instruments. Management will limit such
lending to not more than 33 1/3% percent of the value of each Portfolio's total
assets. ("Total assets" of a Portfolio includes the amount lent as well as the
collateral securing such loans.) Where voting or consent rights with respect to
loaned securities pass to the borrower, management will follow the policy of
calling the loan, in whole or in part as may be appropriate, to permit the
exercise of such voting or consent rights if the issues involved have a material
effect on the Portfolio's investment in the securities loaned. Apart from
lending its securities, investing in repurchase agreements, and acquiring debt
securities, as described in the Prospectus and Statement of Additional
Information, the Portfolios will not make loans to other persons.

PORTFOLIO TURNOVER. While it is not generally the policy of any Portfolio to
invest or trade for short-term profits, each Portfolio may dispose of a security
without regard to the time such security has been held when such action appears
advisable to Advisers.

MANAGEMENT

BOARD OF DIRECTORS

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

The Articles of Incorporation of Fortis Advantage limit the liability of
directors to the fullest extent permitted by law.

THE INVESTMENT ADVISER/TRANSFER AGENT/DIVIDEND AGENT

Fortis Advisers, Inc. ("Advisers") is the investment adviser, transfer agent,
and dividend agent for each Portfolio. Advisers has been managing investment
company portfolios since 1949, and is indirectly owned 50% by Fortis AMEV and
50% by Fortis AG, diversified financial services companies. In addition to
providing investment advice, Advisers is responsible for management of Fortis
Advantage's business affairs, subject to the overall authority of the Board of
Directors. Advisers' address is that of the Fund.

Capital Appreciation Portfolio has been managed by Stephen M. Poling, James S.
Byrd, and Keith R. Thomson since 1988, 1991, and 1988, respectively; High Yield
Portfolio has been managed by Dennis M. Ott and David G. Carroll since 1988;
Asset Allocation Portfolio has been managed by Stephen M. Poling, Dennis M. Ott,
James S. Byrd, Keith R. Thomson, David G. Carroll, and Chris J. Neuharth since
1988, 1988, 1991, 1988, 1988, and 1989, respectively; and Government Total
Return Portfolio has been managed by Dennis M. Ott and Chris J. Neuharth since
1991 -- prior thereto it was managed by Furman Selz Capital Management since
1989.

All of the above managers except James S. Byrd have managed portfolios for
Advisers for at least the past five years. Prior to 1991, Mr. Byrd was Senior
Vice President of Templeton Investment Counsel, Inc., Ft. Lauderdale, Florida
for at least the remainder of the five years prior to the date of this
Prospectus. All of the above managers are Vice Presidents of Advisers except
Mssrs. Poling (Executive Vice President and a director), Ott (Senior Vice
President), Carroll (2nd Vice President), and Neuharth (2nd Vice President).

THE UNDERWRITER AND DISTRIBUTION EXPENSES

Fortis Investors, Inc. ("Investors"), a subsidiary of Advisers, is Fortis
Advantage's underwriter. Investors' address

<PAGE>

is that of Fortis Advantage. Investors reserves the right to reject any purchase
order. The following persons are affiliated with both Investors and Fortis
Advantage: Dean C. Kopperud is a director and officer of both; Stephen M. Poling
and Robert J. Clancy are directors of Investors and officers of both; and Dennis
M. Ott, James S. Byrd, Robert C. Lindberg, Keith R. Thomson, Robert W. Beltz,
Jr., Thomas D. Gualdoni, Larry A. Medin, John W. Norton, David G. Carroll, Chris
J. Neuharth, Carol M. Houghtby, Tamara L. Fagely, John E. Hite, Thomas E.
Erickson, and Gregory S. Swenson are officers of both.

Pursuant to a Plan of Distribution adopted by Fortis Advantage under Rule 12b-1
under the 1940 Act, each Portfolio is obligated to pay Investors a distribution
fee to be used to compensate those who sell Portfolio shares and to pay certain
other expenses of selling and servicing Portfolio shares. High Yield Portfolio
and Government Total Return Portfolio are each obligated to pay Investors an
annual distribution fee of .35 of 1% of the Portfolio's respective average net
assets attributable to its Class A shares and 1.00% of average net assets
attributable to Class B, H, and C shares. Capital Appreciation Portfolio and
Asset Allocation Portfolio are each obligated to pay Investors an annual fee of
.45 of 1% of the Portfolio's respective average net assets attributable to its
Class A shares and 1.00% of average net assets attributable to Class B, H, and C
shares.

The standard payout to broker-dealers not affiliated with Investors for selling
each Portfolio's shares is equal to an annual rate of .25 of 1% of the net asset
value of the shares sold (the "Base Fee"). However, should any of such
broker-dealers have sold currently outstanding shares of a Portfolio that,
coupled with the shares of the same Portfolio currently being sold and computed
at the time of each individual sale, have an aggregate net asset value of
greater than $1,000,000 (this $1,000,000 to be calculated separately for each
Portfolio), then with respect to such Portfolio, the broker-dealer would be
entitled to an additional fee of .10 of 1% of the net asset value of High Yield
Portfolio and Government Total Return Portfolio shares sold or .20 of 1% of the
net asset value of Capital Appreciation Portfolio or Asset Allocation Portfolio
shares sold (the "Service Fee").

While all of Class A's Rule 12b-1 fee constitutes a "distribution fee", only 75%
of Class B, H, and C's fees constitute distribution fees.

The higher distribution fee attributable to Class B, H, and C shares is designed
to permit an investor to purchase such shares through registered representatives
of Investors and other broker-dealers without the assessment of an initial sales
charge and at the same time to permit Investors to compensate its registered
representatives and other broker-dealers in connection with the sale of such
shares. The Base Fee and Service Fee set forth above for all classes may be used
for such distribution expenses as the broker-dealer not affiliated with
Investors in its sole discretion determines, including compensation to its
registered representatives, expenses of servicing existing shareholders, or
distribution expenses as set forth below. Registered representatives of
broker-dealers not affiliated with Investors will be entitled only to such
compensation as set forth in agreements between such registered representatives
and broker-dealers. Registered representatives of Investors as well as their
field supervisors will be entitled to a portion of the distribution fee set
forth above based on the net asset value of Portfolio shares sold as set forth
in written agreements between Investors and its registered representatives and
field supervisors. Salaried licensed employees of Investors who are not entitled
to receive compensation for sales of Portfolio shares will not receive any of
the distribution fee. To the extent that the entire distribution fee is not paid
to registered representatives of Investors or other broker-dealers, such balance
of the distribution fee will be used to cover other expenses of
distribution--such as the cost of prospectuses for other than current
shareholders; preparation and distribution of sales literature; advertising of
any type; expense of branch offices provided jointly by Investors and affiliated
insurance companies; and compensation paid to, and expenses incurred by
officers, employees, or representatives of Investors or of other broker-dealers,
including travel, entertainment, and telephone expenses.

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

Investors may also enter into Sales or Servicing Agreements with certain
institutions such as banks ("Service Organizations") which have purchased shares
of a Portfolio for the accounts of their clients, or which have Fortis Advantage
shares available for purchase by their clients, and/or which provide continuing
service to such clients. The Glass-Steagall Act and other applicable laws
prohibit

<PAGE>

certain banks from engaging in the business of underwriting securities. In such
circumstances, Investors, if so requested, will engage such banks as Service
Organizations only to perform administrative and shareholder servicing
functions, but at the same fees and other terms applicable to dealers. (If a
bank were later prohibited from acting as a Service Organization, its
shareholder clients would be permitted to remain Portfolio shareholders and
alternative means for continuing servicing of such shareholders would be
sought.) In such event changes in the operation of a Portfolio might occur and a
shareholder serviced by such bank might no longer be able to avail itself of any
automatic investment or other services then being provided by the Bank. (State
securities laws on this issue may differ from the interpretations of Federal law
expressed above and banks and other financial institutions may be required to
register as dealers pursuant to state law.)

EXPENSES AND ALLOCATIONS AMONG PORTFOLIOS

For the most recent fiscal year, the ratio of Capital Appreciation, High Yield,
Asset Allocation, and Government Total Return Portfolios' total operating
expenses for Class A shares (including the distribution fees referred to under
"Distribution Expenses") as a percentage of average daily net assets were 1.62%,
1.23%, 1.55%, and 1.28%, respectively. Included in these totals were the
advisory fees paid to Advisers, which equaled 1.00%, .75%, .98%, and .78%,
respectively, of average daily net assets. While these fees paid to Advisers are
higher than those paid by many other investment companies, they are partially
offset by the added costs which Advisers pays (which other investment companies
pay), such as acting as the Portfolios' registrar, transfer agent, and dividend
agent.

BROKERAGE ALLOCATION

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

CAPITAL STOCK

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

SHAREHOLDER INQUIRIES

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

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

High Yield Portfolio and Government Total Return Portfolio declare dividends
from net investment income on each day the New York Stock Exchange (the
"Exchange") is open (to shareholders of record as of 3:00 p.m., Central Time,
the preceding business day) and pay dividends monthly. A shareholder will not be
credited with a dividend until payment is received for the shares. Shareholders
will receive confirmations after each dividend, or quarterly, at Advisers'
option.

Capital Appreciation Portfolio pays dividends annually, while Asset Allocation
Portfolio pays quarterly dividends.

Distributions of net realized capital gains are made by each Portfolio annually.

Distributions paid by each Portfolio with respect to all classes of shares will
be calculated in the same manner, at the same time, on the same day, and will be
in the same amount, except that the higher Rule 12b-1 fees applicable to Class
B, H, and C shares will be borne exclusively by such shares. The per share
dividends on Class B, H, and C shares will be lower than those on Class A shares
as a result of the higher Rule 12b-1 fees applicable to Class B, H, and C
shares.

Such dividends and capital gains distributions will be made in the form of
additional shares of the same class and Portfolio (at net asset value) unless
the shareholder sends Fortis Advantage a written request that either or both be
sent to the shareholder or reinvested (at net asset value) in shares of the same
class of another Fortis Portfolio or fund. If they are to be reinvested in the
other Portfolios or funds, processing normally takes up to three business days.

High Yield Portfolio and Government Total Return Portfolio dividends will be
reinvested monthly, on the last business day of each month, at the net asset
value on that

<PAGE>

date. If cash payment is requested, checks will be mailed within five business
days after the end of the month. If shareholders withdraw their entire account,
all dividends accrued from the last payment date to the time of withdrawal will
be paid at that time.

TAXATION

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

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

Prior to purchasing shares of a Portfolio, prospective shareholders (except for
tax qualified retirement plans) should consider the impact of dividends or
capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or capital gains distributions paid
shortly after a purchase of shares by an investor prior to the record date will
have the effect of reducing the per share net asset value by the amount of the
dividends or distributions. All or a portion of such dividends or distributions,
although in effect a return of capital, is subject to taxation. As of October
31, 1994, approximately 27% and 13% of Capital Appreciation Portfolio's and
Asset Allocation Portfolio's net assets, respectively, represented unrealized
appreciation, undistributed net investment income, and accumulated net realized
gains or losses.

HOW TO BUY PORTFOLIO SHARES

GENERAL PURCHASE INFORMATION
MINIMUM AND MAXIMUM INVESTMENTS

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

INVESTING BY TELEPHONE

Your registered representative may make your purchase ($500 minimum) by
telephoning the number on the cover page of this Prospectus. In addition, the
Account Application which accompanies this Prospectus must be promptly
forwarded. If you have a Fortis registered representative, please make your
check payable to Fortis Investors, Inc. and mail it with your Application to
"CM-9651, St. Paul, MN 55170-9651". If you have another broker-dealer, please
make your check payable to Fortis Funds and mail it with your Application to
"CM-9614, St. Paul, MN 55170-9614." Shareholders may not place telephone orders
themselves.

INVESTING BY WIRE

First Bank National Association
ABA #091000022, credit account no: 1-702-2514-1341
Fortis Funds Purchase Account

For further credit to
----------------------------------------------------------
(name of client)

Fortis Account NBR
-------------------------------------------------------------

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

<PAGE>

ALTERNATIVE PURCHASE ARRANGEMENTS

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

CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE

The public offering price of Class A Portfolio shares is determined once daily,
by adding a sales charge to the net asset value per share of the shares next
calculated after receipt of the purchase order. The sales charges and
broker-dealer concessions, which vary with the size of the purchase, are shown
in the following table. Additional compensation (as a percentage of sales
charge) will be paid to a broker-dealer when its annual sales of Fortis funds
having a sales charge exceed $10,000,000 (2%), $25,000,000 (4%), and $50,000,000
(5%).

<TABLE>
<CAPTION>
SALES SALES
CHARGE AS CHARGE AS
PERCENTAGE OF PERCENTAGE
OF THE OF THE BROKER-
OFFERING NET AMOUNT DEALER
AMOUNT OF SALE PRICE INVESTED CONCESSION
<S> <C> <C> <C>
Less than $100,000 4.500% 4.712% 4.00%
$100,000 but less than
$250,000 3.500% 3.627% 3.00%
$250,000 but less than
$500,000 2.500% 2.564% 2.25%
$500,000 but less than
$1,000,000 2.000% 2.041% 1.75%
$1,000,000 or more* -0- -0- 1.00%
</TABLE>

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

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

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

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

SPECIAL PURCHASE PLANS FOR CLASS A SHARES

For information on any of the following special purchase or exchange plans
applicable to Class A shares, see the Statement of Additional Information or
contact your broker-dealer or sales representative. It is the purchaser's
obligation to notify his or her broker-dealer or sales representative about the
purchaser's eligibility for any of the following special purchase or exchange
plans. Any plan involving systematic purchases may, at Advisers' option, result
in transactions under such plan being confirmed to the investor quarterly,
rather than as a separate notice following the transaction.

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

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

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

<PAGE>

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

EXEMPTIONS FROM SALES CHARGE:

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

- Fortis Advantage directors, officers, or their spouses (or such persons'
children, grandchildren, parents, or grandparents--or spouses of any such
persons), if all account owners fit this description;

- Representatives or employees (or their spouses) of Investors (including
agencies) or of other broker-dealers having a sales agreement with
Investors (or such persons' children, grandchildren, parents, or
grandparents--or spouses of any such persons), if all account owners fit
this description;

- Pension, profit-sharing, and other retirement plans of directors,
officers, employees, representatives, and other relatives and affiliates
(as set forth in the preceding three paragraphs) of Fortis Advantage,
Fortis, Inc., and broker-dealers (and certain affiliated companies) having
a sales agreement with Investors and purchases with the proceeds from such
plans upon the retirement or employment termination of such persons;

- Registered investment companies;

- Shareholders of unrelated mutual funds with front-end and/or deferred
sales loads, to the extent that the purchase price of such Portfolio
shares is funded by the proceeds from the redemption of shares of any
such unrelated mutual fund (within 60 days of the purchase of Portfolio
shares), provided that the shareholder's application so specifies and is
accompanied either by the redemption check of such unrelated mutual fund
(or a copy of the check) or a copy of the confirmation statement showing
the redemption. Similarly, anyone who is or has been the owner of a fixed
annuity contract not deemed a security under the securities laws who
wishes to surrender such contract and invest the proceeds in a Portfolio,
to the extent that the purchase price of such Portfolio shares is funded
by the proceeds from the surrender of the contract (within 60 days of the
purchase of Portfolio shares), provided that such owner's application so
specifies and is accompanied either by the insurance company's check (or
a copy of the check) or a copy of the insurance company surrender form.
From time to time, Investors may pay commissions to broker-dealers and
registered representatives on transfers from mutual funds or annuities as
described above;

- Purchases by employees (including their spouses and dependent children)
of banks and other financial institutions that provide referral and
administrative services related to order placement and payment to
facilitate transactions in shares of Fortis Advantage for their clients
pursuant to a sales or servicing agreement with Investors; provided,
however, that only those employees of such banks and other firms who as
a part of their usual duties provide such services related to such
transactions in Fortis Advantage shares shall qualify.

- Commercial banks offering self directed 401(k) programs containing both
pooled and individual investment options may purchase Portfolio shares
for such programs at a reduced sales charge of 2.5% on sales of less than
$500,000. For sales of $500,000 or more, normal sales charges apply.

- Registered investment advisers, trust companies, and bank trust
departments exercising discretionary investment authority or using a
money management/mutual fund "wrap" program with respect to the money to
be invested in a Portfolio, provided that the investment adviser, trust
company or trust department provides Advisers with evidence of such
authority or the existence of such a wrap program with respect to the
money invested.

- Purchases of Asset Allocation Portfolio shares by former officers and
directors of Morison Asset Allocation Fund or by officers, directors,
and employees of Morison Asset Management, Inc. and its affiliates.

- Purchases of Government Total Return Portfolio shares by: (1) officers
and directors of the Olympus U.S. Government Plus Fund or any officers,

<PAGE>

directors and employees of Furman Selz Capital Management, Inc. and Furman
Selz Mager Dietz and Birney, Incorporated; (2) members of the Xerox
Employee's Credit Union and members of their immediate family; (3)
accounts which were in existence and entitled to purchase shares of the
Olympus Fund without a sales charge at the time of the effectiveness of
the acquisition of its assets by Government Total Return Portfolio.

- Purchases of a Portfolio's shares by accounts which were in existence and
entitled to purchase shares of the applicable Carnegie Series without a
sales charge at the time of the effectiveness of the acquisition of
their assets by the applicable Portfolio.

RULE 12B-1 FEES

Class A shares are subject to a Rule 12b-1 fee payable at an annual rate of .35%
to .45% of the average daily net assets of the Portfolio attributable to such
shares. For additional information, see "Management--The Underwriter and
Distribution Expenses."

DEFERRED SALES CHARGES

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

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

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

3 years -- 3%
4 years -- 3%
5 years -- 2%
6 years -- 1%

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

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

RULE 12B-1 FEES

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

CONVERSION TO CLASS A SHARES

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

CLASS C SHARES--LEVEL SALES CHARGE ALTERNATIVE

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

<PAGE>

Proceeds from the CDSC are paid to Investors and are used to defray its expenses
related to providing distribution-related services to the Portfolios in
connection with the sale of Class C shares, such as the payment of compensation
to selected broker-dealers, and for selling Class C shares. The combination of
the CDSC and the Rule 12b-1 fee enables the Portfolio to sell the Class C shares
without deduction of a sales charge at the time of purchase. Although Class C
shares are sold without an initial sales charge, Investors pays a dealer
concession equal to 1.00% of the amount invested to broker-dealers who sell
Class C shares at the time the shares are sold and an annual fee of 1.00% of the
amount invested that begins to accrue one year after the shares are sold.

RULE 12B-1 FEES

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

SPECIAL PURCHASE PLANS FOR ALL CLASSES

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

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

- SYSTEMATIC INVESTMENT PLAN Voluntary $25 or more per month purchases by
automatic financial institution transfers (see Systematic Investment
Plan Authorization Agreement in this Prospectus) or $50 or more per
month by any other means enable an investor to lower his or her average
cost per share through the principle of "dollar cost averaging."

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

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

VALUATION OF SECURITIES

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

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

<PAGE>

that day, and lacking any sales that day on the Nasdaq National Market, the
security generally is valued at the last bid price.

When market quotations are not readily available, or when illiquid securities or
other assets are being valued, such securities or other assets are valued at
fair value as determined in good faith by management under supervision of the
Board of Directors. However, debt securities may be valued on the basis of
valuations furnished by a pricing service which utilizes electronic data
processing techniques to determine valuations for normal institutional-size
trading units of debt securities when such valuations are believed to more
accurately reflect the fair market value of such securities. Short-term
investments in debt securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued at
amortized cost. Purchases and sales by the Portfolios after 2:00 P.M. Central
Time normally are not recorded until the following day.

REDEMPTION

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

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

Class A shares may be registered in broker-dealer "street name accounts" only if
the broker-dealer has a selling agreement with Investors. In such cases,
instructions from the broker-dealer are required to redeem shares or transfer
ownership and transfer to another broker-dealer requires the new broker-dealer
to also have a selling agreement with Investors. If the proposed new broker-
dealer does not have a selling agreement with Investors, the shareholder can, of
course, leave the shares under the original street name account or have the
broker-dealer transfer ownership to the shareholder's name.

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

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

Payment will be made as soon as possible, but not later than seven days after
receipt of a proper redemption request. However, if shares subject to the
redemption request were recently purchased with non-guaranteed funds (e.g.,
personal check), the mailing of your redemption check may be delayed by fifteen
days. A shareholder

<PAGE>

wishing to avoid these delays should consider the wire purchase method described
under "How to Buy Portfolio Shares."

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

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

Each Portfolio has a "Systematic Withdrawal Plan," which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semiannually, or
annually. Deferred sales charges may apply to monthly redemptions.

CONTINGENT DEFERRED SALES CHARGE

CLASS A SHARES

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

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

The Portfolios will waive the CDSC in the event of the shareholder's death or
disability, as defined in Section 72(m)(7) of the Code (if satisfactory evidence
is provided to the Fund), and for tax-qualified retirement plans (excluding
IRAs, SEPS, 403(b) plans, and 457 plans) and each class of purchaser and each
class of transaction that qualifies for exemption from the Portfolio's FESC (see
"How to Buy Portfolio Shares--Special Purchase Plans"). Shares of a Portfolio
that are acquired in exchange for shares of another Fortis fund that were
subject to a CDSC will remain subject to the CDSC that applied to the shares of
the other Fortis fund. Additionally, the CDSC will not be imposed at the time
that the Portfolio shares subject to the CDSC are exchanged for shares of Fortis
Money Fund or at the time such Fortis Money Fund shares are exchanged for shares
of any Fortis fund subject to a CDSC; provided, however, that, in each such
case, the shares acquired will remain subject to the CDSC if redeemed within the
CDSC Period.

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

<PAGE>

CLASS B, H, AND C SHARES

The CDSC does not apply to: (1) redemption of shares when a Portfolio exercises
its right to liquidate accounts which are less than the minimum account size;
(2) death or disability, as defined in Section 72(m)(7) of the Code (if
satisfactory evidence is provided to a Portfolio); (3) with respect to Class B
and H shares only, an amount that represents, on an annual (non-cumulative)
basis, up to 10% of the amount (at the time of the investment) of the
shareholder's purchases; and (4) with respect to Class B, H, and C shares,
qualified plan benefit distributions due to participant's separation from
service, loans or financial hardship (excluding IRAs, SEPs, and 403(b), 457, and
Fortis KEY plans) upon the Portfolio's receipt from the plan's administrator or
trustee of a signature guarantee and written instructions detailing the reason
for the distribution.

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

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

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

APPENDIX
CORPORATE BOND, PREFERRED STOCK AND COMMERCIAL PAPER RATINGS

COMMERCIAL PAPER RATINGS

STANDARD & POOR'S CORPORATION. Commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
designation 1, 2, and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong.

MOODY'S INVESTORS SERVICE INC. Moody's commercial paper ratings are opinions of
the ability of the issuers to repay punctually promissory obligations not having
an original maturity in excess of nine months. Moody's makes no representation
that such obligations are exempt from registration under the Securities Act of
1933, nor does it represent that any specific note is a valid obligation of a
rated issuer or issued in conformity with any

<PAGE>

applicable law. Moody's employs the following three designations, all judged to
be investment grade, to indicate the relative repayment capacity of rated
issuers:

Prime-1 Superior capacity for repayment of short-term promissory
obligations.

Prime-2 Strong capacity for repayment of short-term promissory obligations.

Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.

CORPORATE BOND RATINGS

STANDARD & POOR'S CORPORATION. Its ratings for corporate bonds have the
following definitions:

Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity
to pay interest and repay principal is extremely strong.

Debt rated "AA" has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in a small degree.

Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in high rated categories.

Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

Debt rated "CCC" has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC"' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

The rating "CC" is typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.

The rating "C" is typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The rating "C1" is reserved for income bonds on which no interest is being paid.

"NR" indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.

BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA,

<PAGE>

AA, A, BBB, commonly known as "Investment Grade" ratings) are generally regarded
as eligible for bank investment. In addition, the Legal Investment Laws of
various states impose certain rating or other standards for obligations eligible
for investment by savings banks, trust companies, insurance companies and
fiduciaries generally.

MOODY'S INVESTORS SERVICE, INC. Its ratings for corporate bonds include the
following:

Bonds which are rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.

Bonds which are rated "A" possess many favorable attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest arc considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Bonds which are rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Bonds which are rated "Ba" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Bonds which are rated "Caa" are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Bonds which are rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

PREFERRED STOCK RATING

STANDARD & POOR'S CORPORATION. Its ratings for preferred stock have the
following definitions:

An issue rated "AAA" has the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.

A preferred stock issue rated "AA" also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA."

An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

An issue rated "BBB" is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.

Preferred stock rated "BB", "B", and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While

<PAGE>

such issues will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

The rating "CC" is reserved for a preferred stock issue in arrears on dividends
or sinking fund payments but that is currently paying.

A preferred stock rated "C" is a non-paying issue.

A preferred stock rated "D" is a non-paying issue with the issuer in default on
debt instruments.

"NR" indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.

MOODY'S INVESTORS SERVICE, INC. Its ratings for preferred stock include the
following:

An issue which is rated "Aaa" is considered to be a top-quality preferred stock.
This rating indicates good asset protection and the least risk of dividend
impairment within the universe of preferred stocks.

An issue which is rated "Aa" is considered a high-grade preferred stock. This
rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

An issue which is rated "A" is considered to be an upper-medium grade preferred
stock. While risks are judged to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

An issue which is rated "Baa" is considered to be medium-grade, neither highly
protected nor poorly secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of time.

An issue which is rated "Ba" is considered to have speculative elements and its
future cannot be considered well assured. Earnings and asset protection may be
very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.

An issue which is rated "B" generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.

An issue which is rated "Caa" is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments. An issue which is rated "Ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
An issue rated "C" is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

<PAGE>

SYSTEMATIC INVESTMENT PLAN
AUTHORIZATION AGREEMENT

I request Fortis Financial Group ("FFG") to obtain payment of sums becoming due
FFG by charging my account in the form of checks, drafts, or electronic debit
entries. I request and authorize the financial institution named to accept,
honor, and charge those entries to my account. This Authorization will remain in
effect until I notify FFG. I understand that any returned item or redemption of
the entire account may result in termination of my Systematic Investment Plan.
This Authorization will become effective only upon acceptance by FFG at its home
office.

BANK/FINANCIAL INSTITUTION INFORMATION
(please print clearly)
Please check one:
/ / CHECKING
/ / SAVINGS

- ------------------------- ---------------------------------------
TRANSIT NUMBER BANK ACCOUNT NUMBER

- ------------------------- ---------------------------------------
ACCOUNT NAME DATE
if other than name of Depositor

( )
- --------------------------------------------------------------------------------
DEPOSITOR'S DAYTIME TELEPHONE
CLEARLY PRINT THE BANK/FINANCIAL INSTITUTION NAME AND ADDRESS ON THE LINES
BELOW.

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

- --------------------------------------------------------------------------------
SIGNATURE OF JOINT DEPOSITOR
/ / START A NEW SYSTEMATIC INVESTMENT PLAN

/ / CHANGE AMOUNT OF EXISTING PLAN

/ / ADD NEW PRODUCT TO EXISTING PLAN

/ / CHANGE OF BANK ACCOUNT

/ / CHANGE OF FUND FROM TO .
-------------------------- -------------------------
/ / CHANGE DATE

PLEASE COMPLETE 1 THROUGH 6 BELOW

1. Requested Date
-------------------------------------------------------------
2. Beginning Payment Month
----------------------------------------------------

A/ / B/ / C/ / H/ /
- ------------------ ------------------
Fund Name $ Amount Class
A/ / B/ / C/ / H/ /
- ------------------ ------------------
Fund Name $ Amount Class
A/ / B/ / C/ / H/ /
- ------------------ ------------------
Fund Name $ Amount Class
3. Account/Contract Numbers
---------------------------------------------------
4. Name of Account/Contract Owner
----------------------------------------------
5. Address
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. Social Security #
-----------------------------------------------------------
ATTACH ADDITIONAL INFORMATION IF MORE SPACE IS NEEDED.
ALWAYS ATTACH A VOIDED CHECK (NOT A DEPOSIT SLIP)

<PAGE>

This page left blank intentionally.

<PAGE>

PROSPECTUS
MARCH 1, 1995

FORTIS
ADVANTAGE PORTFOLIOS, INC.
(A SERIES FUND WITH FOUR SEPARATE PORTFOLIOS, EACH WITH DIFFERENT GOALS AND
INVESTMENT POLICIES: CAPITAL APPRECIATION PORTFOLIO, HIGH YIELD PORTFOLIO,
ASSET ALLOCATION PORTFOLIO, AND GOVERNMENT TOTAL RETURN PORTFOLIO)

95499 (REV. 3/95)

[LOGO] BULK RATE
FORTIS FINANCIAL GROUP U.S. POSTAGE
P.O. BOX 64284 PAID
ST. PAUL, MN 55164 PERMIT NO. 3794
MINNEAPOLIS, MN
<PAGE>

PART B

STATEMENT OF ADDITIONAL INFORMATION
dated December 27, 1995

Acquisition of the Assets of

GOVERNMENT TOTAL RETURN PORTFOLIO
A Separately Managed Series of
FORTIS ADVANTAGE 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 U.S. GOVERNMENT SECURITIES FUND
A Separately Managed Series of
FORTIS INCOME PORTFOLIOS, 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
Government Total Return Portfolio (the "Acquired Fund"), a separately managed
series of Fortis Advantage Portfolios, Inc. ("Fortis Advantage") by Fortis
U.S. Government Securities Fund (the "Acquiring Fund"), a separately managed
series of Fortis Income Portfolios, Inc., 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 5 are incorporated by
reference herein:

1. The Statement of Additional Information dated December 1, 1995 of the
Acquiring Fund.

2. The Annual Report of the Acquiring Fund for the fiscal year ended
July 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, 1994.

5. The Semi-Annual Report of the Acquired Fund for the six months ended
April 30, 1995.

6. Financial Statements required by Form N-14, Item 14 (to the extent
not included in items 2, 4 and 5 above).

This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated December 27, 1995 relating to the
above-referenced transaction may be obtained without charge by writing or
calling the Acquired Fund or the Acquiring Fund at the addresses or telephone
numbers noted above. This Statement of Additional Information relates to,
and should be read in conjunction with, such Prospectus/Proxy Statement.

[Note: In the SEC filing package, Item No. 2 referred to above is
included in Part A as materials to be delivered with the Prospectus/Proxy
Statement. A copy of Item No. 2 also will be delivered to any person
requesting the Statement of Additional Information.]

<PAGE>

FORTIS U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 1, 1995

Fortis U.S. Government Securities Fund (the "Fund") is a portfolio of Fortis
Income Portfolios, Inc. ("Fortis Income"). This Statement of Additional
Information is NOT a prospectus, but should be read in conjunction with the Fund
Prospectus dated December 1, 1995. A copy of that prospectus may be obtained
from your broker-dealer or sales representative. The address of Fortis
Investors, Inc. ("Investors") is P.O. Box 64284, St. Paul, Minnesota 55164.
Telephone: (612) 738-4000. Toll Free 1-(800) 800-2638.

22
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
ORGANIZATION AND CLASSIFICATION............................. 24
INVESTMENT OBJECTIVES AND POLICIES.......................... 24
- Mortgage-backed Securities............................ 24
- Investment Restrictions............................... 25
DIRECTORS AND EXECUTIVE OFFICERS............................ 26
INVESTMENT ADVISORY AND OTHER SERVICES...................... 29
- General............................................... 29
- Control and Management of Advisers and Investors...... 30
- Investment Advisory and Management Agreement.......... 30
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE.......... 31
CAPITAL STOCK............................................... 32
COMPUTATION OF NET ASSET VALUE AND PRICING.................. 33
SPECIAL PURCHASE PLANS...................................... 34
- Statement of Intention................................ 34
- Tax Sheltered Retirement Plans........................ 34
- Gifts or Transfers to Minor Children.................. 36
- Systematic Investment Plan............................ 36
- Exchange Privilege.................................... 37
- Reinvested Dividend/Capital Gains Distributions
between Fortis Funds.................................. 37
- Purchases by Fortis Income Directors or Officers...... 37
- Purchases by Fortis, Inc. (or its Subsidiaries) or
Associated Persons.................................... 37
- Purchases by Representatives or Employees of
Broker-Dealers........................................ 37
- Purchases by Certain Retirement Plans................. 37
- Purchases by Registered Investment Companies.......... 37

<CAPTION>
PAGE
<S> <C>
- Purchases with Proceeds from Redemption of Unrelated
Mutual Fund Shares or Surrender of Certain Fixed
Annuity Contracts..................................... 37
- Purchases by Employees of Certain Banks and Other
Financial Services Firms.............................. 37
- Purchases by Commercial Banks Offering Self-Directed
401(k) Programs Containing both Pooled and Individual
Investment Options.................................... 37
- Purchases by Investment Advisers, Trust Companies, and
Bank Trust Departments Exercising Discretionary
Investment Authority or Using a Money
Management/Mutual Fund "Wrap" Program................. 38
- Purchases by Certain Persons Associated with the
Pathfinder Fund....................................... 38
- Purchases by Certain Carnegie Intermediate Government
Series (of Carnegie Government Securities Trust)
Accounts.............................................. 38
REDEMPTION.................................................. 38
- Systematic Withdrawal Plan............................ 38
- Reinvestment Privilege................................ 39
TAXATION.................................................... 39
UNDERWRITER................................................. 40
PLAN OF DISTRIBUTION........................................ 40
PERFORMANCE................................................. 41
FINANCIAL STATEMENTS........................................ 48
CUSTODIAN; COUNSEL; ACCOUNTANTS............................. 48
LIMITATION OF DIRECTOR LIABILITY............................ 48
ADDITIONAL INFORMATION...................................... 48
</TABLE>

23
<PAGE>
ORGANIZATION AND CLASSIFICATION

Fortis Income was originally organized as a "non-series" investment company. On
January 31, 1992, the Fund was reorganized as a "series" fund and its name was
changed from AMEV U.S. Government Securities Fund, Inc. to Fortis Income
Portfolios, Inc. ("Fortis Income"). The Fund became a portfolio of Fortis
Income. Fortis Income may establish other portfolios, each corresponding to a
distinct investment portfolio and a distinct series of Fortis Income's common
stock.

An investment company is an arrangement by which a number of persons invest in a
company that in turn invests in securities of other companies. The Fund operates
as an "open-end" investment company because it generally must redeem an
investor's shares upon request. The Fund operates as a "diversified" investment
company because it offers investors an opportunity to minimize the risk inherent
in all investments in securities by spreading their investment over a number of
companies in various industries. However, diversification cannot eliminate such
risks.

INVESTMENT OBJECTIVES AND POLICIES

The Fund will operate as a "diversified" investment company as defined under the
Investment Company Act of 1940 (the "1940 Act"), which means that it must meet
the following requirements:

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

Portfolio turnover, as described in the Prospectus, is the ratio of the lesser
of annual purchases or sales of portfolio securities to average monthly
portfolio value, not including short-term securities. A 100% portfolio turnover
rate would occur, for example, if all of the Fund's portfolio securities were
replaced within one year. The Fund's portfolio turnover rates for the fiscal
year ended July 31, 1995 and the seven-month fiscal period ended July 31, 1994,
were 76% and 85%, respectively.

As noted in the Prospectus, the Fund may invest in repurchase agreements
("repos"). Repos are short-term instruments under which securities are purchased
from a bank or a securities dealer with an agreement by the seller to repurchase
the securities at a mutually agreeable date, interest rate, and price. In
investing in repos, the Fund's risk is limited to the ability of such seller to
pay the agreed upon amount at the maturity of the repo. In the opinion of
Advisers, such risk is not material, since in the event of default, barring
extraordinary circumstances, the 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.

MORTGAGE-BACKED SECURITIES

Consistent with the Fund's investment objective and policies set forth in the
Prospectus, and the investment restrictions set forth below, the Fund may invest
in certain types of mortgage-backed securities. One type of mortgage-backed
security includes certificates which represent pools of mortgage loans assembled
for sale to investors by various governmental organizations. These securities
provide a monthly payment which consists of both interest and principal payment,
which are in effect a "pass-through" of the monthly payments made by individual
borrowers on their residential mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying residential
property, refinancing or foreclosure, net of fees or costs which may be
incurred. Some certificates (such as those issued by the Government National
Mortgage Association) are described as "modified pass-through." These securities
entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, regardless of whether the mortgagor actually
makes the payment.

A major governmental guarantor of pass-through certificates is the Government
National Mortgage Association ("GNMA"). GNMA is authorized to guarantee, with
the full faith and credit of the United States Government, the timely payments
of principal and interest on securities

24
<PAGE>
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-
guaranteed mortgages.

Other governmental (but not backed by the full faith and credit of the United
States Government) guarantors include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA
purchases residential mortgages from a list of approved seller/servicers which
include state and Federally-chartered savings and loan associations, mutual
savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States Government. FHLMC issues Participation Certificates ("PCs")
which represent interests in mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal
but PCs are not backed by the full faith and credit of the United States
Government.

If mortgage interest rates decrease, the value of the Fund's securities
generally will increase, however it is anticipated that the average life of the
mortgages in the pool will decrease--as borrowers refinance and prepay mortgages
in order to take advantage of lower rates. The proceeds to the Fund from such
prepayments will have to be invested at the then prevailing lower interest
rates. On the other hand, if interest rates increase, the value of the Fund's
securities generally will decrease, while it is anticipated that borrowers will
not refinance and therefore the average life of the mortgages in the pool will
be longer.

INVESTMENT RESTRICTIONS

The following investment restrictions are deemed fundamental policies. They may
be changed only by the vote of a "majority" of the Fund's outstanding shares,
which as used in this Statement of Additional Information, means the lesser of
(i) 67% of the Fund's outstanding shares present at a meeting of the holders if
more than 50% of the outstanding shares are present in person or by proxy or
(ii) more than 50% of the Fund's outstanding shares.

The Fund will not:

(1) Issue any senior securities (as defined in the Investment Company
Act of 1940, as amended).

(2) Borrow money, except from banks for temporary or emergency purposes
in an amount not exceeding 5% of the value of its total assets.

(3) Mortgage, pledge, or hypothecate its assets, except in an amount not
exceeding 10% of the value of its total assets to secure temporary or
emergency borrowing. In order to comply with certain state statutes or
investment restrictions, the Fund will not, as a matter of operating policy,
pledge, mortgage, or hypothecate its portfolio securities to the extent that
at any time the percentage of pledged securities plus the sales load will
exceed 10% of the offering price of the Fund's shares.

(4) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, the Fund may be deemed to be an
underwriter under applicable laws.

(5) Purchase or sell real estate.

(6) Purchase or sell commodities or commodity contracts.

(7) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, provided that this limitation does not apply to securities
issued, guaranteed, insured, or collateralized by the United States
Government or its agencies or instrumentalities.

(8) Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers or directors of the Fund or of its investment
adviser who individually own beneficially more than 5% of the outstanding
securities of such issuer, together owned beneficially more than 5% of such
outstanding securities.

(9) Make loans to other persons except for the entering into of
repurchase agreements and except that the Fund may lend its portfolio
securities if such loans are secured by collateral equal to at least the
market value of the securities lent, provided that such collateral shall be
limited to cash, securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, certificates of deposit or other
high-grade, short-term obligations or interest-bearing cash equivalents, and
provided further that such loans may not be made if as a result the
aggregate of such loans would exceed fifty percent of the value of the
Fund's total assets [excluding collateral securing such loans] taken at
current value. The purchase of a portion of an issue of publicly distributed
bonds, debentures, or other debt securities will not be considered the
making of a loan. Fund assets may be invested in repurchase agreements in
connection with interest bearing debt

25
<PAGE>
securities which may otherwise be purchased by the Fund, provided that the
Fund will not enter into repurchase agreements if, as a result thereof, more
than 10% of the Fund's total assets valued at the time of the transaction
would be subject to repurchase agreements maturing in more than seven days.

(10) Purchase securities on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases or
sales of securities.

(11) Participate on a joint or a joint and several basis in any
securities trading account.

(12) Invest in puts, calls, or combinations thereof.

(13) Make short sales, except for sales "against the box." While a short
sale is made by selling a security the Fund does not own, a short sale is
"against the box" to the extent that the Fund contemporaneously owns or has
the right to obtain securities identical to those sold short at no added
cost.

(14) Purchase from or sell to any officer, director, or employee of the
Fund, or its adviser or underwriter, or any of their officers or directors,
any securities other than shares of the Fund's common stock.

The following investment restrictions may be changed without shareholder
approval.

The Fund will not:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization. (Although the Fund indirectly
absorbs its prorata share of the other investment companies' expenses
through the yield received on these securities, management believes the
yield and liquidity features of these securities to, at times, be more
beneficial to the Fund than other types of short-term securities and that
the indirect absorption of these expenses has a de minimis effect on the
Fund's return.)

(2) Invest more than 15% of its net assets in illiquid securities.

(3) Invest, with respect to collateral obtained in lending portfolio
securities, more than 35% of its total assets in short-term (one year or
less) high-grade securities.

(4) Invest more than 5% of the Fund's net assets in IOs, POs, inverse
floaters, and accrual bonds at any one time, and no more than 10% of the net
assets of the Fund will be invested in all such obligations at any one time.

(5) Invest more than 20% of the Fund's net assets may be invested in
when-issued, delayed delivery or forward commitment transactions without the
intention of actually acquiring securities (i.e., dollar rolls).

Pursuant to requirements of the Texas Securities Board, the Fund will not invest
in oil, gas, and other mineral leases, nor more than 5% of its net assets,
valued at the lower of cost or market, in warrants; nor, within such amount,
invest more than 2% of such net assets in warrants not listed on the New York
Stock Exchange or American Stock Exchange. Warrants attached to securities or
acquired in units are excepted from the above limitations.

Any investment policy or restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities or
utilization of assets and results therefrom.

DIRECTORS AND EXECUTIVE OFFICERS

The names, addresses, principal occupations, and other affiliations of directors
and executive officers of Fortis Income are given below:

26
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Dr. Robert M. Gavin Director President, Macalester College.
1600 Grand Avenue
St. Paul, Minnesota
Benjamin S. Jaffray Director Chairman of the Sheffield Group, Ltd., a financial consulting
4040 IDS Center group.
Minneapolis, Minnesota
Jean L. King Director President, Communi-King, a communications consulting firm.
12 Evergreen Lane
St. Paul, Minnesota
Dean C. Kopperud* President and Chief Executive Officer and a Director of Advisers, President and
500 Bielenberg Drive Director a Director of Investors, and Senior Vice President and a Director
Woodbury, Minnesota of Fortis Benefits Insurance Company and Time Insurance Company.
Edward M. Mahoney Director Retired; prior to December, 1994, Chairman and Chief Executive
2760 Pheasant Road Officer and a Director of Advisers and Investors, Senior Vice
Excelsior, Minnesota President and a Director of Fortis Benefits Insurance Company, and
Senior Vice President of Time Insurance Company.
Robb L. Prince Director Retired; prior to July, 1995, Vice President and Treasurer,
5108 Duggan Plaza Jostens, Inc., a producer of products and services for the youth,
Edina, Minnesota education, sports award, and recognition markets.
Leonard J. Santow Director Principal, Griggs & Santow, Incorporated, economic and financial
75 Wall Street consultants.
21st Floor
New York, New York
Joseph M. Wikler Director Investment consultant and private investor; prior to January,
12520 Davan Drive 1994, Director of Research, Chief Investment Officer, Principal,
Silver Spring, Maryland and a Director, The Rothschild Co., Baltimore, Maryland. The
Rothschild Co. is an investment advisory firm.
Gary N. Yalen Vice President President and Chief Investment Officer of Advisers (since August,
One Chase Manhattan Plaza 1995) and Fortis Asset Management, a division of Fortis, Inc., New
New York, New York York, NY, and Senior Vice President, Investments, Fortis, Inc.
Howard G. Hudson Vice President Executive Vice President of Advisers (since August, 1995) and
One Chase Manhattan Plaza Senior Vice President, Fixed Income, Fortis Asset Management;
New York, New York prior to February, 1991, Senior Vice President, Fairfield
Research, New Canaan, CT.
Stephen M. Poling Vice President Executive Vice President and Director of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota
Fred Obser Vice President Senior Vice President of Advisers (since August, 1995) and Senior
One Chase Manhattan Plaza Vice President, Equities, Fortis Asset Management.
New York, New York
Dennis M. Ott Vice President Senior Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota
James S. Byrd Vice President Vice President of Advisers and Investors; prior to March, 1991,
5500 Wayzata Boulevard Senior Vice President, Templeton Investment Counsel, Inc., Fort
Golden Valley, Minnesota Lauderdale, Florida.
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Nicholas L. M. dePeyster Vice President Vice President of Advisers (since August, 1995) and Vice
One Chase Manhattan Plaza President, Equities, Fortis Asset Management; prior to July, 1991,
New York, New York Research Associate, Smith Barney, Inc., New York, NY.
Charles J. Dudley Vice President Vice President of Advisers and Fortis Asset Management; prior to
One Chase Manhattan Plaza August, 1995, Senior Vice President, Sun America Asset Management,
New York, New York Los Angeles, CA.
Maroun M. Hayek Vice President Vice President of Advisers (since August, 1995) and Vice
One Chase Manhattan Plaza President, Fixed Income, Fortis Asset Management.
New York, New York
Robert C. Lindberg Vice President Vice President of Advisers and Investors; prior to July, 1993,
One Chase Manhattan Plaza Vice President, Portfolio Manager, and Chief Securities Trader,
New York, New York COMERICA, Inc., Detroit, Michigan. COMERCA, Inc. is a bank.
Kevin J. Michels Vice President Vice President of Advisers (since August, 1995) and Vice
One Chase Manhattan Plaza President, Administration, Fortis Asset Management.
New York, New York
Stephen M. Rickert Vice President Vice President of Advisers (since August, 1995) and Corporate Bond
One Chase Manhattan Plaza Analyst, Fortis Asset Management; from August, 1993 to April,
New York, New York 1994, Corporate Bond Analyst, Dillon, Read & Co., Inc., New York,
NY; prior to June, 1992, Corporate Bond Analyst, Western Asset
Management, Los Angeles, CA.
Keith R. Thomson Vice President Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota
Christopher J. Woods Vice President Vice President of Advisers (since August, 1995) and Vice
One Chase Manhattan Plaza President, Fixed Income, Fortis Asset Management; prior to
New York, New York November, 1992, Head of Fixed Income, The Police and Firemen's
Disability and Pension Fund of Ohio, Columbus, OH.
Robert W. Beltz, Jr. Vice President Vice President--Mutual Fund Operations of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
Thomas D. Gualdoni Vice President Vice President of Advisers, Investors, and Fortis Benefits
500 Bielenberg Drive Insurance Company.
Woodbury, Minnesota
Larry A. Medin Vice President Senior Vice President--Sales of Advisers and Investors; from
500 Bielenberg Drive August 1992 to November 1994, Senior Vice President, Western
Woodbury, Minnesota Divisional Officer of Colonial Investment Services, Inc., Boston,
Massachusetts; from June 1991 to August 1992, Regional Vice
President, Western Divisional Officer of Alliance Capital
Management, New York, New York; prior to June 1991, Senior Vice
President, National Sales Director, Met Life State Street
Investment Services, Inc.
Jon H. Nicholson Vice President Vice President--Marketing and Product Development of Fortis
500 Bielenberg Drive Benefits Insurance Company.
Woodbury, Minnesota
</TABLE>

28
<PAGE>

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

* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
Fortis Income, Advisers, and Investors primarily because he is an officer
and director of each. Mr. Freedman is an "interested person" of Fortis
Income, Advisers, and Investors because he is Chairman and Chief Executive
Officer of Fortis, Inc. ("Fortis"), the parent company of Advisers and
indirect parent company of Investors, and a Managing Director of Fortis
International, N. V., the parent company of Fortis.

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

All of the above officers and directors also are officers and/or directors of
other investment companies of which Advisers is the investment adviser. No
compensation is paid by Fortis Income to any of its officers or directors except
for a fee of $350 per month, $100 per meeting attended, and $100 per applicable
committee meeting attended (and reimbursement of travel expenses to attend
meetings) to each director not affiliated with Advisers. During the fiscal year
ended July 31, 1995, Fortis Income paid $43,143 in directors' fees to directors
who were not affiliated with Advisers or Investors and reimbursed three such
directors a total of $3,383 for travel expenses incurred in attending directors'
meetings. Legal fees and expenses of $47,156 also were paid to a law firm of
which Fortis Income's Secretary is a partner. As of October 31, 1995, the
directors and executive officers beneficially owned less than 1% of the
outstanding shares of Fortis Income. Directors Kopperud, Mahoney, Prince, King,
and Jaffray are members of the Executive Committee of the Board of Directors.
While the Executive Committee is authorized to act in the intervals between
regular board meetings with full capacity and authority of the full Board of
Directors, except as limited by law, it is expected that the Committee will act
only infrequently.

INVESTMENT ADVISORY AND OTHER
SERVICES

GENERAL

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and manager
of the Fund since the Fund began business in 1972. Investors acts as the Fund's
underwriter. Both act as such pursuant to written agreements periodically
approved by the directors or shareholders of the Fund. The address of both is
that of the Fund.

As of August 31, 1995, Advisers managed twenty-eight investment company
portfolios with combined net assets of approximately $3,979,921,000, and one
private account with net assets of approximately $17,644,000. Fortis Financial
Group also has approximately $1.9 billion in

29
<PAGE>

insurance reserves. As of the same date, the investment company portfolios had
an aggregate of 219,680 shareholders, including 30,354 shareholders of the Fund.

During the fiscal year ended July 31, 1995, the seven-month fiscal period ended
July 31, 1994, and the fiscal year ended December 31, 1993, Advisers received
$3,576,719, $2,444,873, and $4,405,583, respectively, as its compensation for
acting as the investment adviser and manager of the Fund. However, for such
periods, Advisers reimbursed the Fund $84,896, $58,157, and $71,866 pursuant to
the expense reimbursement agreement then in effect, resulting in a net fee of
$3,491,823, $2,386,716, and $4,333,717, respectively. Investors received
$802,986, $1,465,992, and $5,071,141 during these same periods for underwriting
the Fund's shares, out of which commissions of sales representatives and
allowances to dealers approximating $665,203, $1,221,615, and $4,290,352, were
paid by Investors.

During the fiscal year ended July 31, 1995, Investors received $23,151 pursuant
to the Plan of Distribution (see "Plan of Distribution"). Investors paid
$278,793 to broker-dealers and registered representatives. In addition to such
amount paid, Advisers and Investors together spent $140,061 on activities
related to the distribution of the Fund's shares.

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

Fortis owns 100% of the outstanding voting securities of Advisers, and Advisers
owns all of the outstanding voting securities of Investors.

Fortis, located in New York, New York, is a wholly owned subsidiary of Fortis
International, N.V., which has approximately $100 billion in assets worldwide
and is in turn an indirect wholly owned subsidiary of AMEV/VSB 1990 N.V.
("AMEV/VSB 1990").

AMEV/VSB 1990 is a corporation organized under the laws of The Netherlands to
serve as the holding company for all U.S. operations and is owned 50% by Fortis
AMEV and 50% by Fortis AG. AMEV/VSB 1990 owns a group of companies active in
insurance, banking and financial services, and real estate development in The
Netherlands, the United States, Western Europe, Australia, and New Zealand.

Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis AG
own a group of companies (of which AMEV/VSB 1990 is one) active in insurance,
banking and financial services, and real estate development in The Netherlands,
Belgium, the United States, Western Europe, and the Pacific Rim.

Dean C. Kopperud is Chief Executive Officer of Advisers and President of
Investors; Gary N. Yalen is President and Chief Investment Officer of Advisers;
Stephen M. Poling is Executive Vice President of Advisers and Investors; Howard
G. Hudson is Executive Vice President of Advisers; Dennis M. Ott, Larry A.
Medin, and Anthony J. Rotondi are Senior Vice Presidents of Advisers and
Investors; John W. Norton is Senior Vice President and Deputy General Counsel
for Securities of Advisers and Investors; Fred Obser is Senior Vice President of
Advisers; Robert W. Beltz, Jr., James S. Byrd, Thomas D. Gualdoni, Robert C.
Lindberg, Jon H. Nicholson, Richard P. Roche, and Keith R. Thomson are Vice
Presidents of Advisers and Investors; Nicholas L. M. De Peyster, Charles J.
Dudley, Maroun M. Hayek, Kevin J. Michels, Stephen M. Rickert, and Christopher
J. Woods are Vice Presidents of Advisers; John E. Hite is 2nd Vice President and
Assistant Secretary of Advisers and Investors; Carol M. Houghtby is 2nd Vice
President and Treasurer of Advisers and Investors; Barbara W. Kirby is 2nd Vice
President of Advisers and Investors; Tamara L. Fagely is Fund Accounting Officer
of Advisers and Investors; David C. Greenzang is Money Market Portfolio Officer
of Advisers; Michael D. O'Connor is Qualified Plan Officer of Advisers and
Investors; Barbara J. Wolf is Trading Officer of Advisers; Joanne M. Herron is
Assistant Treasurer of Advisers and Investors and Sharon R. Jibben is Assistant
Secretary of Advisers.

Messrs. Kopperud, Yalen, and Poling are the Directors of Advisers.

All of the above persons reside or have offices in the Minneapolis/St. Paul
area, except Messrs. Yalen, Hudson, De Peyster, Dudley, Hayek, Lindberg,
Michels, Obser, and Woods, who all are located in New York City.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

Advisers acts as investment adviser and manager of the Fund under an Investment
Advisory and Management Agreement (the "Agreement") dated April 2, 1993, which
became effective the same date following shareholder approval on April 1, 1993.
This Agreement was last approved by the Board of Directors (including a majority
of the directors who are not parties to the contract, or interested persons of
any such party) on December 7, 1994. The Agreement will terminate automatically
in the event of its assignment. In addition, the Agreement is

30
<PAGE>
terminable at any time, without penalty, by the Board of Directors or, with
respect to any particular portfolio, by vote of a majority of the outstanding
voting securities of the applicable portfolio, on not more than 60 days' written
notice to Advisers, and by Advisers on 60 days' notice to Fortis Income. Unless
sooner terminated, the Agreement shall continue in effect for more than two
years after its execution only so long as such continuance is specifically
approved at least annually by either the Board of Directors or, with respect to
any particular portfolio, by vote of a majority of the outstanding voting
securities of the applicable portfolio, provided that in either event such
continuance is also approved by the vote of a majority of the directors who are
not parties to such Agreement, or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval.

The Agreement provides for an investment advisory and management fee calculated
as described in the following table. As you can see from the table, this fee
decreases (as a percentage of Fund net assets) as the Fund grows. As of August
31, 1995, the Fund had net assets of approximately $482,040,000.

<TABLE>
<CAPTION>
ANNUAL
INVESTMENT ADVISORY
AVERAGE NET ASSETS AND MANAGEMENT FEE
- --------------------------- ------------------------
<S> <C>
For the first $50,000,000 .8%
For assets over $50,000,000 .7%
</TABLE>

The Agreement requires the Fund to pay all its expenses which are not assumed by
Advisers and/or Investors. These Fund expenses include, by way of example, but
not by way of limitation, the fees and expenses of directors and officers of
Fortis Income who are not "affiliated persons" of Advisers, interest expenses,
taxes, brokerage fees and commissions, fees and expenses of registering and
qualifying Fortis Income and its shares for distribution under Federal and state
securities laws, expenses of preparing prospectuses and of printing and
distributing prospectuses annually to existing shareholders, custodian charges,
auditing and legal expenses, insurance expenses, association membership dues,
and the expense of reports to shareholders, shareholders' meetings, and proxy
solicitations.

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

Pursuant to an undertaking given to the State of California, Advisers has agreed
to reimburse the Fund monthly for any amount by which the Fund's aggregate
annual expenses, exclusive of taxes, brokerage commissions, and interest on
borrowing exceeds 2 1/2% on the first $30,000,000 of average net assets, 2% on
the next $70,000,000, and 1 1/2% on the balance. Pursuant to an additional
undertaking given to the State of California, Advisers has agreed to limit
aggregate annual expenses charged to the Fund to 1.5% of the first $30,000,000
of its average net assets and 1% of its remaining average net assets with
respect to any period that the Fund invests in other open-end investment
companies. Advisers reserves the right to agree to lesser expense limitations
from time to time. In the fiscal year ended July 31, 1995, Advisers was not
required to make any reimbursement to the Fund pursuant to these limitations.

From June 1, 1993 until June 1, 1995, Advisers limited expenses (exclusive of
12b-1 fees, interest, taxes, brokerage commissions, and non-recurring or
extraordinary charges and expenses) to .77% of the Fund's average net assets.

Under the Agreement, Advisers, as investment adviser to the Fund, has the sole
authority and responsibility to make and execute investment decisions for the
Fund within the framework of the Fund's investment policies, subject to review
by the Board of Directors. Advisers also furnishes the Fund with all required
management services, facilities, equipment, and personnel.

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

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

As the Fund's portfolio is exclusively composed of debt, rather than equity
securities, most of the Fund's portfolio transactions are effected with dealers
without the payment of brokerage commissions, but at net prices which

31
<PAGE>
usually include a spread or markup. In effecting such portfolio transactions on
behalf of the Fund, Advisers seeks the most favorable net price consistent with
the best execution. However, frequently Advisers selects a dealer to effect a
particular transaction without contacting all dealers who might be able to
effect such transaction, because of the volatility of the bond market and the
desire of Advisers to accept a particular price for a security because the price
offered by the dealer meets its guidelines for profit, yield, or both.

Decisions with respect to placement of the Fund's portfolio transactions are
made by its investment adviser. The primary consideration in making these
decisions is efficiency in the execution of orders and obtaining the most
favorable net prices for the Fund. When consistent with these objectives,
business may be placed with broker-dealers who furnish investment research
services to Advisers. Such research services include advice, both directly and
in writing, as to the value of securities; the advisability of investing in,
purchasing, or selling securities; and the availability of securities, or
purchasers or sellers of securities; as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. This allows Advisers to supplement its own
investment research activities and enables Advisers to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Fund. To the extent portfolio
transactions are effected with broker-dealers who furnish research services to
Advisers, Advisers receives a benefit, not capable of evaluation in dollar
amounts, without providing any direct monetary benefit to the Fund from these
transactions. Advisers believes that most research services obtained by it
generally benefits several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account. Normally, research services obtained through managed funds or
accounts investing in common stocks would primarily benefit those funds or
accounts managed by Advisers which invest in common stock; similarly, services
obtained from transactions in fixed income securities would normally be of
greater benefit to the managed funds or accounts which invest in debt
securities.

Advisers has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of Fund portfolio transactions in exchange for
research services provided Advisers, except as noted below. However, Advisers
does maintain an informal list of broker-dealers, which is used from time to
time as a general guide in the placement of Fund business, in order to encourage
certain broker-dealers to provide Advisers with research services which Advisers
anticipates will be useful to it. Because the list is merely a general guide,
which is to be used only after the primary criterion for the selection of
broker-dealers (discussed above) has been met, substantial deviations from the
list are permissible and may be expected to occur. Advisers will authorize the
Fund to pay an amount of commission for effecting a securities transaction in
excess of the amount of commission another broker-dealer would have charged only
if Advisers determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-
dealer, viewed in terms of either that particular transaction or Advisers'
overall responsibilities with respect to the accounts as to which Advisers
exercises investment discretion. Generally, the Fund pays higher commissions
than the lowest rates available.

During the fiscal year ended July 31, 1995, fixed income securities transactions
having an aggregate dollar value of approximately $798,222,000 (excluding
short-term securities) were traded at net prices including a spread or markup;
during the same period, the Fund paid no brokerage commissions to brokers
involved in the purchase and sale of securities for the Fund's portfolio.

The Fund will not effect any brokerage transactions in its portfolio securities
with any broker-dealer affiliated directly or indirectly with Advisers, unless
such transactions, including the frequency thereof, the receipt of commissions
payable in connection therewith, and the selection of the affiliated
broker-dealer effecting such transactions are not unfair or unreasonable to the
shareholders of the Fund. No commissions were paid to any affiliate of Advisers
during the fiscal year ended July 31, 1995, the seven-month fiscal period ended
July 31, 1994, or the fiscal year ended December 31, 1993.

During the fiscal year ended July 31, 1995, the Fund did not acquire the
securities of any of its regular brokers or dealers or the parent of those
brokers or dealers that derive more than fifteen percent of their gross revenue
from securities-related activities.

CAPITAL STOCK

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

32
<PAGE>

On August 31, 1995, the Fund had 53,119,105 shares outstanding. On that date, no
person owned of record or, to the Fund's knowledge, beneficially as much as 5%
of the outstanding shares of the Fund, except as follows: Class B--8.8% Esther
Sachs, P.O. Box 1489, Aspen, CO 81612-1489; Class C--10.2% American Chemical
Systems, Inc., 320 Burning Oaks Drive, Irwin, PA 15642-5906; 7.3% Alvina Den
Ouden, 1501 Leisure World, Mesa, AZ 85206-2308; 7.1% Vivian C. Gilbertson, 1717
S. Main St., Burlington, IA 52601-6126; and 5.6% Myrtle E. Felty, RR2, Box 180,
Palisade, MN 56469-9705.

The Fund currently offers its shares in five classes, each with different sales
arrangements and bearing different expenses. Under Fortis Income's Articles of
Incorporation, the Board of Directors is authorized to create new portfolios or
classes without the approval of the shareholders of the Fund. Each share will
have a pro rata interest in the assets of the Fortis Income portfolios to which
the shares of that series relates, and will have no interest in the assets of
any other Fortis Income portfolio. In the event of liquidation, each share of a
Fortis Income portfolio would have the same rights to dividends and assets as
every other share of that Fortis Income portfolio, except that, in the case of a
series with more than one class of shares, such distributions will be adjusted
to appropriately reflect any charges and expenses borne by each individual
class.

Fortis Income is not required under Minnesota law to hold annual or periodically
scheduled regular meetings of shareholders. Minnesota corporation law provides
for the Board of Directors to convene shareholder meetings when it deems
appropriate. In addition, if a regular meeting of shareholders has not been held
during the immediately preceding fifteen months, a shareholder or shareholders
holding three percent or more of the voting shares of Fortis Income may demand a
regular meeting of shareholders by written notice of demand given to the chief
executive officer or the chief financial officer of Fortis Income. Within ninety
days after receipt of the demand, a regular meeting of shareholders must be held
at Fortis Income's expense. Additionally, the 1940 Act requires shareholder
votes for all amendments to fundamental investment policies and restrictions and
for all investment advisory contracts and amendments thereto.

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

COMPUTATION OF NET ASSET VALUE AND PRICING

On July 31, 1995, the Fund's net asset values per share were calculated as
follows:

CLASS E
Net Assets ($470,596,689)
- --------------------------- = Net Asset Value Per Share
Shares Outstanding (52,149,917) ($9.02)

To obtain the public offering price per share, the 4.5% sales charge had to be
added to the net asset value obtained above:

$9.02
---- = Public Offering Price Per Share ($9.45)
.955

CLASS A
Net Assets ($4,908,726)
- -------------------------- = Net Asset Value Per Share
Shares Outstanding (544,097) ($9.02)

To obtain the public offering price per share, the 4.5% sales charge had to be
added to the net asset value obtained above:

$9.02
---- = Public Offering Price Per Share ($9.45)
.955

CLASS B
Net Assets ($482,701)
- -------------------------- = Net Asset Value Per Share
Shares Outstanding (53,530) ($9.02)

CLASS H
Net Assets ($4,822,508)
- -------------------------- = Net Asset Value Per Share
Shares Outstanding (534,676) ($9.02)

CLASS C
Net Assets ($326,166)
- -------------------------- = Net Asset Value Per Share
Shares Outstanding (36,194) ($9.01)

The primary close of trading of the New York Stock Exchange (the "Exchange")
currently is 3:00 P.M. (Central Time), but this time may be changed. The
offering price for purchase orders received in the office of the Fund after the
beginning of each day the Exchange is open for trading is based on net asset
value determined as of the primary closing time for business on the Exchange
that day; the price in effect for orders received after such close is based on
the net asset value as of such close of the Exchange on the next day the
Exchange is open for trading.

Generally, the net asset value of the Fund's shares is determined on each day on
which the Exchange is open for business. The Exchange is not open for business
on the following holidays (nor on the nearest Monday or Friday if the holiday
falls on a weekend): New Year's Day,

33
<PAGE>
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Additionally, net asset value need not be
determined (i) on days on which changes in the value of the Fund's portfolio
securities will not materially affect the current net asset value of the Fund's
shares; or (ii) on days during which no Fund shares are tendered for redemption
and no orders to purchase or sell Fund shares are received by the Fund.

SPECIAL PURCHASE PLANS

The Fund offers several special purchase plans, described in the Prospectus,
which allow reduction or elimination of the sales charge for Class A and E
shares under certain circumstances. Additional information regarding some of the
plans is as follows:

STATEMENT OF INTENTION

The 13-month period is measured from the date the letter of intent is approved
by Investors, or at the purchaser's option it may be made retroactive 90 days,
in which case Investors will make appropriate adjustments on purchases during
the 90-day period.

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

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

TAX SHELTERED RETIREMENT PLANS

IRAS AND KEOGH PLANS. Individual taxpayers can defer taxes on current income by
investing in Keogh Plans or Individual Retirement Accounts (IRAs) for
retirement. You can qualify for a Keogh Plan if you are self-employed. lRAs may
be opened by anyone who has earned compensation for services rendered. Certain
reductions in sales charges set forth under "How to Buy Fund Shares" in the
Fund's Prospectus are available to any organized group of individuals desiring
to establish IRAs for the benefit of its members. If you are interested in one
of these accounts, contact Investors for copies of our plans. You should check
with your tax adviser before investing.

Under current Federal tax law, IRA depositors generally may contribute 100% of
their earned income up to a maximum of $2,000 (including sales charge).
Contributions up to $2,250 (including sales charge) can be made to IRA accounts
for an individual and a nonemployed spouse. All shareholders who, along with
their spouse, are not active participants in an employer sponsored retirement
plan or who have adjusted gross income below a specified level can deduct such
contributions (there is a partial deduction for higher income levels up to a
specified amount) from taxable income so that taxes are put off until
retirement, when reduced overall income and added deductions may result in a
lower tax rate. There are penalty taxes for withdrawing this retirement money
before reaching age 59 1/2 (unless the investor dies, is disabled, or withdraws
equal installments over a lifetime). In addition, there are penalties on
insufficient payouts after age 70 1/2, excess contributions, and excess
distributions.

The Fund may advertise the number or percentage of its shareholders, or the
amount or percentage of its assets, which are invested in retirement accounts or
in any particular type of retirement account. Such figures also may be given on
an aggregate basis for all of the funds managed by Advisers. Any retirement plan
numbers may be compared to appropriate industry averages.

34
<PAGE>
TAX SAVINGS AND YOUR IRA--A FULLY TAXABLE INVESTMENT COMPARED TO AN INVESTMENT
THROUGH AN IRA

The following table shows the yield on an investment of $2,000 made at the
beginning of each year for a period of 10 years and a period of 20 years. For
illustrative purposes only, the table assumes an annual rate of return of 8%.

<TABLE>
<CAPTION>
FULLY FULLY PARTIALLY
TAXABLE DEDUCTIBLE DEDUCTIBLE NON-DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
10 years - 15% Federal tax bracket $24,799 $31,291 $28,944 $26,597
10 years - 28% Federal tax bracket $19,785 $31,291 $26,910 $32,530
10 years - 31% Federal tax bracket $18,702 $31,291 $26,441 $21,591
10 years - 36% Federal tax bracket $16,597 $31,291 $25,659 $20,026
10 years - 39.6% Federal tax bracket $15,744 $31,291 $25,095 $18,900
20 years - 15% Federal tax bracket $72,515 $98,846 $91,432 $84,019
20 years - 28% Federal tax bracket $54,236 $98,846 $85,007 $71,169
20 years - 31% Federal tax bracket $50,526 $98,846 $83,525 $68,204
20 years - 36% Federal tax bracket $44,722 $98,846 $81,054 $63,261
20 years - 39.6% Federal tax bracket $40,820 $98,846 $79,274 $59,703
<FN>
- ------------------------
* This column assumes that the entire $2,000 contribution each year is tax
deductible. Tax on income earned on the IRA is deferred.
** This column assumes that only $1,000 of the $2,000 contribution each year is
tax deductible. Tax on income earned in the IRA is deferred.
*** This column assumes that none of the $2,000 contribution each year is tax
deductible. Tax on income earned in the IRA is deferred.
</TABLE>

The 15% Federal income tax bracket applies to taxable income up to and including
$38,000 for married couples filing jointly and $22,750 for unmarried
individuals. The 28% Federal income tax rate applies to taxable income from
$38,000 to $91,850 for married couples filing jointly and to taxable income from
$22,750 to $55,100 for unmarried individuals. The 31% Federal income tax applies
to taxable income from $91,850 to $140,000 for married couples filing jointly
and to taxable income from $55,100 to $115,000 for unmarried individuals. The
36% Federal income tax rate applies to taxable income from $140,000 to $250,000
for married couples filing jointly and to taxable income from $115,000 to
$250,000 for unmarried individuals. The 39.6% Federal income tax rate applies to
taxable income above $250,000 for married couples filing jointly and to taxable
income above $250,000 for unmarried individuals. (Although the above table
reflects the nominal Federal tax rates, the effective Federal tax rates exceed
those rates for certain taxpayers because of the phase-out of personal
exemptions and the partial disallowance of itemized deductions for taxpayers
above certain income levels).

The table reflects only Federal income tax rates, and not any state or local
income taxes.
- -------------------------------------------

If you change your mind about opening your IRA, you generally have seven days
after receipt of notification within which to cancel your account. To do this,
you must send a written cancellation to Investors (at its mailing address listed
on the cover page) within that seven day period. If you cancel within seven
days, any amounts invested in the Fund will be returned to you, together with
any sales charge. If your investment has declined, Investors will make up the
difference so that you receive the full amount invested.

PENSION; PROFIT-SHARING; IRA; 403(B). Tax qualified retirement plans also are
available, including pension and profit-sharing plans, IRA's, and Section 403(b)
salary reduction arrangements. The Section 403(b) salary reduction arrangement
is principally for employees of state and municipal school systems and employees
of many types of tax-exempt or nonprofit organizations. Persons desiring
information about such Plans, including their availability, should contact
Investors. All the Retirement Plans summarized above involve a long-term
commitment of assets and are subject to various legal requirements and
restrictions. The legal and tax implications may vary according to the
circumstances of the individual investor. Therefore, the investor is urged to
consult with an attorney or tax adviser prior to establishing such a plan.

35
<PAGE>
participant account termination fee of $25). First Trust National Association is
the Custodian under the IRA and 403(b) plans. If a shareholder pays custodial
fees by separate check, they will not be deducted from his or her account and
will not constitute excess contributions. First Trust National Association also
acts as Trustee under the Keogh and small group corporate plans. The bank
reserves the right to change its fees on 30 days' prior written notice.

WITHHOLDING. Distributions from accounts for tax qualified plans are subject to
tax withholding unless: (a) the payee elects to have no withholding and is
permitted to do so under Federal law; or (b) payment is made to an exempt person
(normally the plan trustee in his or her capacity as plan trustee). Any payee
electing to have no withholding must do so in writing, and must do so at or
before the time that payment is made. A payee is not permitted to elect no
withholding if he or she is subject to mandatory backup withholding under
Federal law for failure to provide his or her tax identification number or for
failure to report all dividend or interest payments. Payees from 403(b) and
corporate or Keogh accounts also are not permitted to elect out of withholding
except as regards systematic partial withdrawals extending over 10 or more
years.

For IRAs, the withholding amount is 10% of the amount withdrawn. For corporate,
Keogh, and 403(b) plans, the withholding amount is as follows:

Total withdrawals or unscheduled partial 20% of the amount withdrawn;
withdrawals or systematic partial with-
drawals for less than a 10 year period--

Other systematic partial withdrawals-- amount determined by wage withholding
tables and your completed withholding
allowance election (or if none, is
submitted based on the presumption
that you are a married individual
claiming three withholding allowances
(no withholding if withdrawals do not
exceed $10,600 per year);

Withholding for non-resident aliens is subject to special rules. When payment is
made to a plan trustee, Advisers assumes no responsibility for withholding.
Subsequent payment by the trustee to other payees may require withholding. Such
withholding is the responsibility of the plan trustee or of the plan
administrator.

Any amounts withheld may be applied as a credit against Federal tax subsequently
due.

GIFTS OR TRANSFERS TO MINOR CHILDREN

This gift or transfer is registered in the name of the custodian for a minor
under the Uniform Transfers to Minors Act (in some states the Uniform Gifts to
Minors Act). Dividends or capital gains distributions are taxed to the child,
whose tax bracket is usually lower than the adult's. However, if the child is
under 14 years old and his or her unearned income is more than $1,200 per year,
then that portion of the child's income which exceeds $1,200 per year will be
taxed to the child at the parents' top rate. Control of the Fund shares passes
to the child upon reaching a specified adult age (either 18 or 21 years in most
states).

SYSTEMATIC INVESTMENT PLAN

The Fund provides a convenient, voluntary method of purchasing shares in the
Fund through its "Systematic Investment Plan."

The principal purposes of the Plan are to encourage thrift by enabling you to
make regular purchases in amounts less than normally required, and to employ the
principle of dollar cost averaging, described below.

By acquiring Fund shares on a regular basis pursuant to a Systematic Investment
Plan, or investing regularly on any other systematic plan, the investor takes
advantage of the principle of dollar cost averaging. Under dollar cost
averaging, if a constant amount is invested at regular intervals at varying
price levels, the average cost of all the shares will be lower than the average
of the price levels. This is because the same fixed number of dollars buys more
shares when price levels are low and fewer shares when price levels are high. It
is essential that the investor consider his or her financial ability to continue
this investment program during times of market decline as well as market rise.
The principle of dollar cost averaging will not protect against loss in a
declining market, as a loss will result if the plan is discontinued when the
market value is less than cost.

36
<PAGE>
reinvested in additional shares at net asset value unless a shareholder
instructs Investors in writing to pay them in cash. Investors reserves the right
to increase or decrease the amount required to open and continue a Plan, and to
terminate any Plan after one year if the value of the amount invested is less
than the amount indicated.

EXCHANGE PRIVILEGE

The amount to be exchanged must meet the minimum purchase amount of the fund
being purchased.

Shareholders should consider the differing investment objectives and policies of
these other funds prior to making such exchange.

For Federal tax purposes, except where the transferring shareholder is a tax
qualified plan, a transfer between funds is a taxable event that probably will
give rise to a capital gain or loss. Furthermore, if a shareholder carries out
the exchange within 90 days of purchasing the shares in the Fund, the sales
charge incurred on that purchase cannot be taken into account for determining
the shareholder's gain or loss on the sale of those shares to the extent that
the sales charge that would have been applicable to the purchase of the
later-acquired shares in the other fund is reduced because of the exchange
privilege. However, the amount of the sales charge that may not be taken into
account in determining the shareholder's gain or loss on the sale of the
first-acquired shares may be taken into account in determining gain or loss on
the eventual sale or exchange of the later-acquired shares.

REINVESTED DIVIDEND/CAPITAL GAINS DISTRIBUTIONS BETWEEN FORTIS FUNDS

This privilege is based upon the fact that such orders are generally unsolicited
and the resulting lack of sales effort and expense.

PURCHASES BY FORTIS INCOME DIRECTORS OR OFFICERS

This privilege is based upon their familiarity with the Fund and the resulting
lack of sales effort and expense.

PURCHASES BY FORTIS, INC. (OR ITS SUBSIDIARIES) OR ASSOCIATED PERSONS

This privilege is based upon the relationship of such persons to the Fund and
the resulting economies of sales effort and expense.

PURCHASES BY REPRESENTATIVES OR EMPLOYEES OF
BROKER-DEALERS

This privilege is based upon the presumed knowledge such persons have about the
Fund as a result of their working for a company selling the Fund's shares and
resulting economies of sales effort and expense.

PURCHASES BY CERTAIN RETIREMENT PLANS

This privilege is based upon the familiarity of such investors with the Fund and
the resulting lack of sales effort and expense.

PURCHASES BY REGISTERED INVESTMENT COMPANIES

This privilege is based upon the generally unsolicited nature of such purchases
and the resulting lack of sales effort and expense.

PURCHASES WITH PROCEEDS FROM REDEMPTION OF UNRELATED MUTUAL FUND SHARES OR
SURRENDER OF CERTAIN FIXED ANNUITY CONTRACTS

SHAREHOLDERS OF UNRELATED MUTUAL FUNDS WITH SALES LOADS--This privilege is based
upon the existing relationship of such persons with their broker-dealer or
registered representative and/or the familiarity of such shareholders with
mutual funds as an investment concept, with resulting economies of sales effort
and expense.

OWNERS OF A FIXED ANNUITY CONTRACT NOT DEEMED A SECURITY UNDER THE SECURITIES
LAWS--This privilege is based upon the existing relationship of such persons
with their broker-dealer or registered representative and/or the lower
acquisition costs associated with such sale, with resulting economies of sales
effort and expense.

PURCHASES BY EMPLOYEES OF CERTAIN BANKS AND OTHER FINANCIAL SERVICES FIRMS

This privilege is based upon the familiarity of such investors with the Fund and
the resulting lack of sales effort and expense.

PURCHASES BY COMMERCIAL BANKS OFFERING SELF DIRECTED 401(K) PROGRAMS CONTAINING
BOTH POOLED AND INDIVIDUAL INVESTMENT OPTIONS

This privilege is based upon the existing relationship of such persons with
their broker-dealer or registered representative and/or the lower acquisition
costs associated with such sale, with resulting economies of sales effort and
expense.

37
<PAGE>
PURCHASES BY INVESTMENT ADVISERS, TRUST COMPANIES, AND BANK TRUST DEPARTMENTS
EXERCISING DISCRETIONARY INVESTMENT AUTHORITY OR USING A MONEY MANAGEMENT/MUTUAL
FUND "WRAP" PROGRAM

This privilege is based upon the familiarity of such investors with the Fund and
the resulting lack of sales effort and expense.

PURCHASES BY CERTAIN PERSONS ASSOCIATED WITH THE PATHFINDER FUND

This privilege is based upon their familiarity with the Fund stemming from the
Fund's acquisition of Pathfinder Fund and resulting economies of sales effort
and expense.

PURCHASES BY CERTAIN CARNEGIE INTERMEDIATE GOVERNMENT SERIES (OF CARNEGIE
GOVERNMENT SECURITIES TRUST) ACCOUNTS

This privilege is based upon their familiarity with the Fund stemming from its
acquisition of Carnegie Intermediate Government Series and resulting economies
of sales effort and expense.

REDEMPTION

The obligation of the Fund to redeem its shares when called upon to do so by the
shareholder is mandatory with certain exceptions. The Fund will pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund
at the beginning of such period. When redemption requests exceed such amount,
however, the Fund reserves the right to make part or all of the payment in the
form of readily marketable securities or other assets of the Fund. An example of
when this might be done is in case of emergency, such as in those situations
enumerated in the following paragraph, or at any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing shareholders.
Any securities being so distributed would be valued in the same manner as the
portfolio of the Fund is valued. If the recipient sold such securities, he or
she probably would incur brokerage charges.

Redemption of shares, or payment, may be suspended at times (a) when the
Exchange is closed for other than customary weekend or holiday closings, (b)
when trading on said Exchange is restricted, (c) when an emergency exists, as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable, or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. The Exchange
is not open for business on the following holidays (nor on the nearest Monday or
Friday if the holiday falls on a weekend), on which the Fund will not redeem
shares: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.

There is no charge for redemption, nor does the Fund contemplate establishing a
charge, although it has the right to do so. In the event a charge were
established, it would apply only to persons who became shareholders after such
charge was implemented, and it would not, in any event, exceed 1% of the net
asset value of the shares redeemed. Should further public sales ever be
discontinued, the Fund may deduct a proportionate share of the cost of
liquidating assets from the asset value of the shares being redeemed, in order
to protect the equity of the other shareholders.

SYSTEMATIC WITHDRAWAL PLAN

An investor may open a "Systematic Withdrawal Plan" providing for withdrawals of
$50 or more per quarter, semiannually, or annually. The minimum amount which may
be withdrawn of $50 per month is a minimum only, and should not be considered a
recommendation.

These payments may constitute return of capital, and it should be understood
that they do not represent a yield or return on investment and that they may
deplete or eliminate the investment. The shareholder cannot be assured of
receiving payment for any specific period because payments will terminate when
all shares have been redeemed. The number of such payments will depend on the
amount of each payment, the frequency of each payment, and the increase (or
decrease) in value of the remaining shares.

Under this Plan, any distributions of income and realized capital gains are
reinvested at net asset value. If a shareholder wishes to purchase additional
shares of the Fund under this Plan, other than by reinvestment of distributions,
it should be understood that he or she would be paying a sales commission on
such purchases, while liquidations effected under the Plan would be at net asset
value. Purchases of additional shares concurrent with withdrawals are ordinarily
disadvantageous to the shareholder because of sales charges and tax liabilities.
Additions to a shareholder account in which an election has been made to receive
systematic withdrawals will be accepted only if each such addition is equal to
at least

38
<PAGE>
one year's scheduled withdrawals or $1,200, whichever is greater. A shareholder
may not have a "Systematic Withdrawal Plan" and a "Systematic Investment Plan"
in effect simultaneously, as it is not, as explained above, advantageous to do
so.

The Plan is voluntary, flexible, and under the shareholder's control and
direction at all times, and does not limit or alter his or her right to redeem
shares. The Plan may be terminated in writing at any time by either the
shareholder or the Fund. The cost of operating the Plan is borne by Advisers.
The redemption of Fund shares pursuant to the Plan is a taxable event to the
shareholder.

REINVESTMENT PRIVILEGE

In order to allow investors who have redeemed Fund shares an opportunity to
reinvest, without additional cost, a one-time privilege is offered whereby an
investor may reinvest in the Fund, or in any other fund underwritten by
Investors and available to the public, without a sales charge. The reinvestment
privilege must be exercised in an amount not exceeding the proceeds of
redemption; must be exercised within 60 days of redemption; and only may be
exercised once with respect to the Fund.

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

TAXATION

The Fund qualified in the tax year ended July 31, 1995, and intends to continue
to qualify, as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"). As long as the Fund so qualifies, the Fund is not
taxed on the income it distributes to its shareholders.

For individuals in taxable year 1995, long-term capital gains are subject to a
maximum Federal income tax rate of 28% while ordinary income is subject to a
maximum rate of 39.6% (for taxable income in excess of $256,500). (The maximum
effective tax rate may be in excess of 39.6%, resulting from a combination of
the nominal tax rate and a phase-out of personal exemptions and a partial
disallowance of itemized deductions for individuals with taxable incomes above
certain levels.)

Gain or loss realized upon the sale of shares in the Fund will be treated as
capital gain or loss, provided that the shares represented a capital asset in
the hands of the shareholder. Such gain or loss will be long-term capital gain
or loss if the shares were held for more than one year.

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

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

Under the Code, the Fund is required to withhold and remit to the U.S. Treasury
31% of dividend and capital gain income on the accounts of certain shareholders
who fail to provide a correct tax identification number, fail to certify that
they are not subject to backup withholding, or are subject to backup withholding
for some other reason.

The foregoing is a general discussion of the Federal income tax consequences of
an investment in the Fund as of the date of this Statement of Additional
Information. Distributions from net investment income and from net realized
capital gains may also be subject to state and local taxes. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state, or local taxes.

39
<PAGE>
UNDERWRITER

On December 8, 1994, the Board of Directors (including a majority of the
directors who are not parties to the contract, or interested persons of any such
party) last approved the Underwriting Agreement with Investors dated November
14, 1994, which became effective November 14, 1994. This Underwriting Agreement
may be terminated by Fortis Income or Investors at any time by the giving of 60
days' written notice, and terminates automatically in the event of its
assignment. Unless sooner terminated, the Underwriting Agreement shall continue
in effect for more than two years after its execution only so long as such
continuance is also approved by the vote of a majority of the directors who are
not parties to such Underwriting Agreement, or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval.

In the Underwriting Agreement, Investors undertakes to indemnify Fortis Income
against all costs of litigation and other legal proceedings, and against any
liability incurred by or imposed upon Fortis Income in any way arising out of or
in connection with the sale or distribution of the Fund's shares, except to the
extent that such liability is the result of information which was obtainable by
Investors only from persons affiliated with Fortis Income but not with
Investors.

PLAN OF DISTRIBUTION

The policy of having the fund compensate those who sell Fund shares has been
adopted pursuant to Rule 12b-1 under the 1940 Act. Rule 12b-1(b) provides that
any payments made by the Fund in connection with financing the distribution of
its shares may only be made pursuant to a written plan describing all aspects of
the proposed financing of distribution, and also requires that all agreements
with any person relating to the implementation of the plan must be in writing.
In addition, Rule 12b-1(b)(1) requires that such plan be approved by a majority
of the Fund's outstanding shares, and Rule 12b-1(b)(1) requires that such plan,
together with any related agreements, be approved by a vote of the Board of
Directors who are not interested persons of the Fund and have no direct or
indirect interest in the operation of the plan or in the agreements related to
the plan, cast in person at a meeting called for the purpose of voting on such
plan or agreement. Rule 12b-1(b)(3) requires that the plan or agreement provide
in substance:

(i) That it shall continue in effect for a period of more than one year
from the date of its execution or adoption only so long as such continuance
is specifically approved at least annually in the manner described in
paragraph (b)(2) of Rule 12b-1;

(ii) That any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to the plan or any related agreement shall
provide to the Board of Directors, and the directors shall review, at least
quarterly, a written report of the amounts so expended and the purpose for
which such expenditures were made; and

(iii) In the case of a plan, that it may be terminated at any time by
vote of a majority of the members of the Board of Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the plan, or in any agreements related to the
plan or by vote of a majority of the outstanding voting securities of the
Fund.

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

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

The Board of Directors last approved the plan on December 8, 1994.

40
<PAGE>
PERFORMANCE

The "yield" of the Fund refers to the income generated by an investment in the
Fund over a 30-day (or one month) period (which period will be stated in the
advertisement). It is calculated by dividing the net investment income per share
(as defined under Securities and Exchange Commission Rules) earned during the
period by the maximum offering price per share on the last day of the period.
The result is then "annualized" using a formula that provides for semiannual
compounding of income. The Fund's yields for the 30-day period ended October 31,
1995, were as follows:

Class A -- 5.31%
Class B -- 4.81%
Class H -- 4.81%
Class C -- 4.81%
Class E -- 5.55%

While the Fund's yield may be compared to that of "CDs" (insured, fixed rate
certificates of deposit issued by financial institutions), the Fund's yield is
not fixed and an investment in the Fund is not insured.

$1,000 SINGLE INVESTMENT

CLASS E

<TABLE>
<CAPTION>
VALUE OF REINVESTED TOTAL
YEAR ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
86 1,025 0 109 1,134 13.4%
87 934 8 200 1,142 0.7%
88 960 8 319 1,287 12.7%
89 954 8 445 1,407 9.3%
90 942 8 579 1,529 8.7%
91 985 8 760 1,753 14.7%
92 997 8 926 1,931 10.2%
93 998 8 1,084 2,090 8.2%
94 871 13 1,091 1,975 (5.5)%
95 902 14 1,286 2,202 11.5%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 37.5%
Last 10 Yrs. 120.2%
</TABLE>

CLASS A

<TABLE>
<CAPTION>
VALUE OF REINVESTED TOTAL
PERIOD ENDED INITIAL $1,000 CAPITAL GAINS REINVESTED CUMULATIVE % YEARLY
SEPTEMBER 30, INVESTMENT($) + DISTRIBUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95 1,007 0 65 1,072 7.2%
</TABLE>

CLASS B

CLASS H

CLASS C

41
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST
RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class E 6.47 % 0.31 % 2.89 % 4.66 % 6.58 % 6.93 % 7.26 % 7.93 % 7.10 % 8.21 %
Class
A * 8.25% -- -- -- -- -- -- -- -- -- --
Class
B * 13.10% -- -- -- -- -- -- -- -- -- --
Class
H * 13.33% -- -- -- -- -- -- -- -- -- --
Class
C * 13.10% -- -- -- -- -- -- -- -- -- --
</TABLE>

* Since November 14, 1994 inception.

$2,000 ANNUAL INVESTMENTS

CLASS E

<TABLE>
<CAPTION>
REINVESTED
VALUE OF CAPITAL
ANNUAL $2,000 GAINS TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
86 2,000 2,051 0 219 2,270
87 4,000 3,609 28 569 4,206
88 6,000 5,671 29 1,195 6,895
89 8,000 7,534 29 2,059 9,622
90 10,000 9,326 28 3,181 12,535
91 12,000 11,744 30 4,780 16,554
92 14,000 13,819 30 6,495 20,344
93 16,000 15,745 30 8,312 24,087
94 18,000 15,411 104 9,051 24,566
95 20,000 17,931 108 11,479 29,518
</TABLE>

CLASS A

<TABLE>
<CAPTION>
REINVESTED
VALUE OF CAPITAL
ANNUAL $2,000 GAINS TOTAL
PERIOD ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE
SEPTEMBER 30, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
95 2,000 2,014 0 130 2,144
</TABLE>

CLASS B

CLASS H

CLASS C

42
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
MOST
RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class E 6.47 % 2.35 % 2.62 % 3.48 % 4.60 % 5.35 % 5.90 % 6.44 % 6.60 % 6.97 %
Class
A * 8.25% -- -- -- -- -- -- -- -- -- --
Class
B * 13.10% -- -- -- -- -- -- -- -- -- --
Class
H * 13.33% -- -- -- -- -- -- -- -- -- --
Class
C * 13.10% -- -- -- -- -- -- -- -- -- --
</TABLE>

* Since November 14, 1994 inception date.

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The above tables each
include reduction due to the maximum 4.5% sales charge and assume quarterly
reinvestment of all dividend and capital gains distributions. In the first two
tables, had dividends and capital gains distributions been taken in cash, with
no shares being acquired through reinvestment, the cash payments for Classes E,
A, B, C, and H for the period would have been $11, $0, $0, $0, and $0 ,
respectively, for capital gains distributions and $852, $62, $58, $58, and $58,
respectively, for income dividends, and the value of the shares as of September
30, 1995, would have been $902, $1,007, $1,053, $1,053, and $1,054,
respectively. All figures are based upon historical earnings and are not
intended to indicate future performance. Investment return and share value
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. No adjustment has been made for a shareholder's income
tax liability on dividends or capital gains.

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

Cumulative total return is computed by finding the cumulative compounded rate of
return over the period indicated in the advertisement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:

ERV+P
CTR = ( ----- ) 100
P

Where: CTR = Cumulative total return
ERV = ending redeemable value
at the end of the period
of a hypothetical $1,000
payment made at the
beginning of such period;
and
P = initial payment of $1,000

This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

Average annual total return figures are computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:

P(1+T)n = ERV

Where: P = a hypothetical initial
payment of $1,000
T = average annual total
return;
n = number of years; and
ERV = ending redeemable value
at the end of the period
of a hypothetical $1,000
payment made at the
beginning of such period.

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

43
<PAGE>
indicated in the advertisement that would equate the periodic payment amount
invested to the ending redeemable value according to the following formula:

( (1+T)n + 1 )
ERV = PMT (1+T) ( --------- )
( T )

Where: ERV = ending redeemable value
at the end of the period
of hypothetical
investments of $2,000
made at the beginning of
each year;
PMT = Periodic payment
($2,000);
T = Average annual total
return; and
n = number of years.

This calculation deducts the applicable sales charge from each hypothetical
$2,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

Yield is computed by dividing the net investment income per share (as defined
under Securities and Exchange Commission rules and regulations) earned during
the computation period by the maximum offering price per share on the last day
of the period, according to the following formula:

( ( (a-b) ) 6 )
YIELD = 2 ( ( ----- + 1 ) - 1 )
( ( cd ) )

Where: a = dividends and
interest earned
during the period;
b = expenses accrued for
the period (net of
reimbursements);
c = the average daily
number of shares
outstanding during
the period that were
entitled to receive
dividends; and
d = the maximum offering
price per share on
the last day of the
period.

As noted in the Prospectus, the Fund may advertise its relative performance as
compiled by outside organizations or refer to publications which have mentioned
its performance.

Following is a list of ratings services which may be referred to, along with the
category in which the Fund is included. Because some of these services do not
take into account sales charges, their ratings may sometimes be different than
had they done so:

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- ---------------------------------------- --------------------------------------
<S> <C>
Lipper Analytical Services, Inc. fixed income
Wiesenberger Investment Companies
Services U.S. Government Securities
Morningstar Publications, Inc. general government
Johnson's Charts government securities
CDA Technologies, Inc. bond and preferred
</TABLE>

44
<PAGE>
Following is a list of the publications whose articles may be referred to:

AMERICAN BANKER (The)
AP-DOW Jones News Service
ASSOCIATED PRESS (The)
BARRON'S
BETTER INVESTING
BOARDROOM REPORTS
BOND BUYER & CREDIT MARKETS (The)
BOND BUYER (The)
BONDWEEK
BUSINESS MONTH
BUSINESS WEEK
CABLE NEWS NETWORK
CASHFLOW MAGAZINE
CFO
CHICAGO TRIBUNE (The)
CHRISTIAN SCIENCE MONITOR
CITY BUSINESS/CORPORATE REPORT
CITYBUSINESS PUBLICATIONS
COMMERCIAL & FINANCIAL CHRONICLE
CONSUMER GUIDE
CORPORATE FINANCE
DALLAS MORNING NEWS
DOLLARS & SENSE
DOW-JONES NEWS SERVICE
ECONOMIST (The)
EQUITY INTERNATIONAL
EUROMONEY
FINANCIAL EXECUTIVE
FINANCIAL PLANNING
FINANCIAL SERVICES WEEK
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
FUTURES
GLOBAL FINANCE
GLOBAL INVESTOR
INDUSTRY WEEK
INSTITUTIONAL INVESTOR
INTERNATIONAL HERALD TRIBUNE
INVESTMENT DEALER'S DIGEST
INVESTOR'S BUSINESS DAILY
KIPLINGER PERSONAL FINANCE
KIPLINGER CALIF. LETTER (The)
KIPLINGER FLORIDA LETTER
KIPLINGER TEXAS LETTER
KIPLINGER WASHINGTON LETTER (The)
KNIGHT/RIDDER FINANCIAL
LA TIMES
LIPPER ANALYTICAL SERVICES
MARKET CHRONICLE
MINNEAPOLIS STAR TRIBUNE
MONEY
MONEY MANAGEMENT LETTER
MOODY'S INVESTORS SERVICE, INC.
NATIONAL THRIFT NEWS
NATIONAL UNDERWRITER
NELSON'S RESEARCH MONTHLY
NEW YORK DAILY NEWS
NEW YORK NEWSDAY
NEW YORK TIMES (The)
NEWSWEEK
NIGHTLY BUSINESS REPORT (The)
PENSION WORLD
PENSIONS & INVESTMENT AGE
PERSONAL INVESTOR
PORTFOLIO LETTER
REGISTERED REPRESENTATIVE
RUETERS
SECURITIES PRODUCT NEWS
SECURITIES WEEK
SECURITY TRADERS HANDBOOK
SAINT PAUL PIONEER PRESS
STANDARD & POOR'S CORPORATION
STANGER'S INVESTMENT ADVISOR
STANGER'S SELLING MUTUAL FUNDS
STOCK MARKET MAGAZINE (The)
TIME
TRUSTS & ESTATES
U.S. NEWS & WORLD REPORT
UNITED PRESS INTERNATIONAL
USA TODAY
WALL STREET JOURNAL (The)
WASHINGTON POST (The)
FORTIS BENEFITS INSURANCE COMPANY
WOODBURY BULLETIN
WIESENBERGER INVESTMENT COMPANIES
SERVICES

45
<PAGE>
TWO GENERATIONS:
INVESTING IN AMERICA WITH
THE FORTIS U.S. GOVERNMENT
SECURITIES FUND

SUSAN AND BILL: CONSERVATIVE
INVESTING FOR GROWTH
When Susan and Bill were in their mid-'20s, they knew it was time to start
saving for their children's college expenses. While they liked the safety of
Certificates of Deposit, they hoped to find a conservative investment that had
the potential for better return.
"We knew about mutual funds, but we didn't want the added risk of investing
in stocks," Bill adds.
That's when their registered representative introduced them to the Fortis
U.S. Government Securities Fund. He explained that while the fund itself is not
guaranteed, it invests in securities that are backed by the U.S. Government.

Bill and Susan liked the history of stability behind the Fortis U.S.
Government Securities Fund, as well as the fact that they could access their
money. So on October 1, 1985, they invested $10,000 in Class E shares.

By September 30, 1995, they had a good start on their children's college
fund. Their account value had grown to $ -- with AN AVERAGE ANNUAL RETURN OF
% -- SIGNIFICANTLY BETTER THAN WHAT THEY WOULD HAVE AVERAGED WITH CDS.*

Because Susan and Bill felt so positive about their decision to invest in
the Fortis U.S. Government Fund, they recommended it to Susan's mother, Marie.
MARIE: CONSERVATIVE
INVESTING FOR
ADDITIONAL INCOME
An active widow in her early '60s, Marie was seeking current income to
supplement her pension and Social Security. She was getting by, but most of the
income from her CD was absorbed by the cost of food, housing and other basics.

In October, 1985, Marie put $100,000 in the Fortis U.S. Government
Securities Fund. Since then, she has withdrawn $ in dividends (an average
annual dividend of $ ).

While CD rates were high in the early '80s, they've since fallen. OVER THE
LAST TEN YEARS, THE FORTIS U.S. GOVERNMENT SECURITIES FUND HAS PROVIDED INCOME
% HIGHER THAN THAT OFFERED BY 1-YEAR CDS.**

"With the Fortis U.S. Government Fund, the principal is relatively stable
and any dividends give me the income I need for my living expenses," Marie adds.
Though they had different goals, Susan, Bill, and Marie, found that the
Fortis U.S. Government Securities Fund helped them find the security and
performance they wanted.

TWO GENERATIONS...TWO GOALS...ONE SOLUTION --
THE FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS E)
SUSAN AND BILL: $10,000 invested on October 1, 1985
OBJECTIVE: Conservative total return
RESULT:Over 10 years, Susan and Bill's $10,000 grew to $
MARIE: $100,000 invested on October 1, 1985
OBJECTIVE: Current income plus principal protection
RESULT:Over 10 years, Marie's account generated $ in income, which was
in addition to her ending account value of $

SUSAN, BILL AND MARIE ARE FICTIONAL CHARACTERS, BUT THE FIGURES DEPICTED IN
THEIR STORY ARE REAL. HYPOTHETICAL INVESTMENT/REDEMPTION DATES AND AMOUNTS UPON
WHICH THIS FICTIONAL ACCOUNT IS BASED ARE AVAILABLE UPON REQUEST.

Investment results are based upon historical earnings, are not intended to
indicate future performance, and may not be representative of the experiences of
other investors. Because investment return and principal value fluctuate, an
investor's shares, when redeemed, may be worth more or less than their original
cost. Returns cited in this brochure reflect deduction of maximum sales charge
of 4.50%, and assume reinvestment of dividends and capital gains. Investments of
$100,000 or more qualify for a sales charge reduction not illustrated by this
example.
The fund is not FDIC insured, is not an obligation of nor guaranteed by any bank
or financial institution, and involves investment risks, including possible loss
of principal.

*If Bill and Susan had invested their $10,000 in one-year CDs over the same time
period, they would have earned an average rate of return of %. (Source: Wall
Street Journal). CD principal and interest rate are guaranteed by the FDIC;
unlike mutual funds where principal and share value fluctuate. Debt securities
may be sensitive to interest changes.

**One-year CD rates have averaged % over the past ten years (Source: Wall
Street Journal), while the Fortis U.S. Government Securities Fund had an average
annual rate of %.

While the Fortis U.S. Government Securities Fund invests in securities that are
backed by the U.S. Government and its agencies (based on timely payment of
principal and interest only and not to the shares of the fund), it is not
guaranteed. The fund seeks stability of principal, but there is no assurance
this will be achieved.

46
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
VALUE OF ORIGINAL
SHARES VALUE OF REINVESTED
<S> <C> <C>
income
(including cap gains) distributions
1973 $9,041 396
1974 8,189 1,056
1975 8,465 1,907
1976 9,266 2,990
1977 8,949 3,825
1978 8,448 4,609
1979 7,672 5,235
1980 7,329 6,323
1981 7,304 8,055
1982 8,540 11,614
1983 8,047 13,087
1984 7,855 15,378
1985 8,481 19,641
1986 8,648 22,951
1987 8,329 24,436
1988 8,149 27,017
1989 8,329 31,225
1990 8,363 35,316
1991 8,706 41,042
1992 8,449 44,083
1993 8,649 59,719
09/30/95 7,703
Value of original
shares
(including cap gains) $51,741
Value of reinvested
income distributions $7,974
Total value of
investment $59,716
Average annual rates of
return
1 Year 6.48%
5 Year 6.53%
10 Year 8.19%
Since Incept 8.23%
</TABLE>

47
<PAGE>
FINANCIAL STATEMENTS

The financial statements included as part of the Fund's 1995 Annual Report to
Shareholders, filed with the Securities and Exchange Commission in September,
1995, are incorporated herein by reference. The Annual Report accompanies this
Statement of Additional Information.

CUSTODIAN; COUNSEL; ACCOUNTANTS

First Bank National Association, First Bank Place, Minneapolis, MN 55480 acts as
custodian of the Fund's assets and portfolio securities; Dorsey & Whitney
P.L.L.P., 220 South Sixth Street, Minneapolis, MN 55402, is the independent
General Counsel for the Fund; and KPMG Peat Marwick LLP, 4200 Norwest Center,
Minneapolis, MN 55402, acts as the Fund's independent auditors.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of Fortis Income owes certain fiduciary
duties to it and to its shareholders. Minnesota law provides that a director
"shall discharge the duties of the position of director in good faith, in a
manner the director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Fiduciary duties of a director of a
Minnesota corporation include, therefore, both a duty of "loyalty" (to act in
good faith and act in a manner reasonably believed to be in the best interests
of the corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar circumstances).
Minnesota law authorizes corporations to eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the fiduciary duty of "care." Minnesota law does not,
however, permit a corporation to eliminate or limit the liability of a director
(i) for any breach of the director's duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
laws, or (iv) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of Fortis Income limit the
liability of directors to the fullest extent permitted by Minnesota statutes,
except to the extent that such a liability cannot be limited as provided in the
1940 Act (which act prohibits any provisions which purport to limit the
liability of directors arising from such directors' willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their role as directors).

Minnesota law does not eliminate the duty of "care" imposed upon a director. It
only authorizes a corporation to eliminate monetary liability for violations of
that duty. Minnesota law, further, does not permit elimination or limitation of
liability of "officers" to the corporation for breach of their duties as
officers (including the liability of directors who serve as officers for breach
of their duties as officers). Minnesota law does not permit elimination or
limitation of the availability of equitable relief, such as injunctive or
rescissionary relief. Further, Minnesota law does not permit elimination or
limitation of a director's liability under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and it is uncertain whether and to what extent
the elimination of monetary liability would extend to violations of duties
imposed on directors by the 1940 Act and the rules and regulations adopted under
such act.

ADDITIONAL INFORMATION

The Fund has filed with the Securities and Exchange Commission, Washington, D.C.
20549, a Registration Statement under the Securities Act of 1933, as amended,
with respect to the common shares offered hereby. The Prospectus and this
Statement of Additional Information do not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with Rules and Regulations of the Commission. The Registration
Statement may be inspected at the principal office of the Commission at 450
Fifth Street, N.W., Washington, D.C., and copies thereof may be obtained from
the Commission at prescribed rates.

95331N (Rev. 12/95)

48
<PAGE>

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Fortis Income Portfolios, Inc:

We consent to the use of our report included herein and the references to our
Firm under the headings "Financial Highlights" in Part A and "Custodian;
Counsel; Accountants" in Part B of the Registration Statement.

/s/ KPMG Peat Marwick LLP

Minneapolis, Minnesota
September 27, 1995

<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 1, 1995

This Statement of Additional Information is NOT a prospectus, but should be
read in conjunction with the Fortis Advantage Portfolios, Inc. ("Fortis
Advantage") (prior to January 31, 1992, known as AMEV Advantage Portfolios,
Inc.) Prospectus dated March 1, 1995. A copy of that prospectus may be
obtained from your broker-dealer or sales representative. The address of
Fortis Investors, Inc. ("Investors") is P.O. Box 64284, St. Paul, Minnesota
55164. Telephone: (612) 738-4000. Toll Free 1-(800) 800-2638.

No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Statement of Additional Information, and if given or made, such
information or representations must not be relied upon as having been authorized
by Fortis Advantage or Investors. This Statement of Additional Information does
not constitute an offer or solicitation by anyone in any state in which such
offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ORGANIZATION AND CLASSIFICATION... 33
INVESTMENT OBJECTIVES AND
POLICIES......................... 33
- Mortgage-Related
Securities.................. 33
- Foreign Securities.......... 35
- Options..................... 36
- Futures Contracts and
Options on Futures
Contracts................... 36
- Forward Foreign Currency
Exchange Contracts.......... 37
- Risks of Transactions in
Options, Futures Contracts,
and Forward Contracts....... 37
- Regulatory Restrictions..... 38
- Borrowing Money............. 38
- Repurchase Agreements....... 38
- Variable Amount Master
Demand Notes................ 39
- Illiquid Securities......... 39
- Portfolio Turnover.......... 39
- Investment Restrictions for
Government Total Return
Portfolio................... 40
- Investment Restrictions for
All Portfolios Other Than
Government Total Return
Portfolio................... 41
DIRECTORS AND EXECUTIVE
OFFICERS......................... 43
INVESTMENT ADVISORY AND OTHER
SERVICES......................... 46
- General..................... 46
- Control and Management of
Advisers and Investors...... 46
- Investment Advisory and
Management Agreements....... 47
PORTFOLIO TRANSACTIONS AND
ALLOCATION OF BROKERAGE.......... 48
CAPITAL STOCK..................... 50
COMPUTATION OF NET ASSET VALUE AND
PRICING.......................... 52
SPECIAL PURCHASE PLANS............ 52
- Statement of Intention...... 52
- Tax Sheltered Retirement
Plans....................... 53
- Gifts or Transfers to Minor
Children.................... 55
- Systematic Investment
Plan........................ 55
- Exchange Privilege.......... 55
- Reinvested Dividend/Capital
Gains Distributions between
Fortis Funds................ 56
- Purchases by Fortis, Inc.
(or its Subsidiaries) or
Associated Persons.......... 56
- Purchases by Fortis
Advantage Directors or
Officers.................... 56

<CAPTION>
PAGE
<S> <C>
- Purchases by Representatives
or Employees of
Broker-Dealers.............. 56
- Purchases by Certain
Retirement Plans............ 56
- Purchases by Registered
Investment Companies........ 56
- Purchases with Proceeds from
Redemption of Unrelated
Mutual Fund Shares or
Surrender of Certain Fixed
Annuity Contracts........... 56
- Purchases by Employees of
Certain Banks and Other
Financial Services Firms.... 56
- Purchases by Commercial
Banks Offering Self-Directed
401(k) Programs Containing
both Pooled and Individual
Investment Options.......... 56
- Purchases by Investment
Advisers, Trust Companies,
and Bank Trust Departments
Exercising Discretionary
Investment Authority or
Using a Money Management
Mutual Fund "Wrap"
Program..................... 56
- Purchases of Asset
Allocation Portfolio by
Morison Directors, Officers,
and Employees............... 56
- Purchases by Certain Groups
or Entities of Government
Total Return Portfolio...... 56
- Purchases by Certain Total
Return Series, Emerging
Growth Series, or
Diversified Income Series
(of Carnegie-Cappiello
Trust) or Government Series
(of Carnegie Government
Securities Trust) Accounts.. 56
REDEMPTION........................ 57
- Systematic Withdrawal
Plan........................ 57
- Reinvestment Privilege...... 58
TAXATION.......................... 58
UNDERWRITER....................... 59
PLAN OF DISTRIBUTION.............. 59
PERFORMANCE....................... 61
FINANCIAL STATEMENTS.............. 82
CUSTODIAN; COUNSEL; ACCOUNTANTS... 82
LIMITATION OF DIRECTOR
LIABILITY........................ 82
ADDITIONAL INFORMATION............ 82
DESCRIPTION OF FUTURES, OPTIONS,
AND FORWARD CONTRACTS............ Appendix
</TABLE>

32
<PAGE>

ORGANIZATION AND CLASSIFICATION

Fortis Advantage is made up of four separate portfolios (the "Portfolios"):
Capital Appreciation Portfolio, High Yield Portfolio, Asset Allocation
Portfolio, and Government Total Return Portfolio.

An investment company is an arrangement by which a number of persons invest in a
company that in turn invests in securities of other companies. Fortis Advantage
is an "open-end" investment company because it generally must redeem an
investor's shares upon request. Fortis Advantage is a "diversified" investment
company because it offers investors an opportunity to minimize the risk inherent
in all investments in securities by spreading their investment over a number of
companies in various industries. However, diversification cannot eliminate such
risks.

INVESTMENT OBJECTIVES AND POLICIES

Fortis Advantage is a "diversified" investment company as defined under the
Investment Company Act of 1940 (the "1940 Act"), which means that each Portfolio
must meet the following requirements:

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

MORTGAGE-RELATED SECURITIES

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

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

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

(ii) GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee
the timely payment of principal and interest on securities backed by a pool
of mortgages insured by the Federal Housing Administration ("FHA") or the
Farmers' Home

33
<PAGE>

Administration ("FmHA"), or guaranteed by the Veterans Administration
("VA"). GNMA is also empowered to borrow without limitation from the U.S.
Treasury, if necessary, to make any payments required under its guarantee.

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

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

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

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

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

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

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

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

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

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers, and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
in addition be the originators of the underlying mortgage loans as well as the
guarantors of the pass-through certificates. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
governmental pools because there are no direct or

34
<PAGE>

indirect governmental guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools may be supported by
various forms of insurance or guarantees, including individual loan, title,
pool, and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers, and the mortgage poolers.

Fortis Advantage expects that governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. As new types of pass-through securities are developed and
offered to investors, Advisers may, consistent with High Yield Portfolio's,
Asset Allocation Portfolio, and Government Total Return Portfolio's investment
objectives, policies, and restrictions, consider making investments in such new
types of securities.

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

Securities in this investment category include, among others, standard
mortgage-backed bonds and newer collateralized mortgage obligations (CMO's).
Mortgage-backed bonds are secured by pools of mortgages, but, unlike
pass-through securities, payments to bondholders are not determined by payments
on the mortgages. The bonds consist of a single class, with interest payable
periodically and principal payable on the stated date of maturity. CMO's have
characteristics of both pass-through securities and mortgage-backed bonds. CMO's
are secured by pools of mortgages, typically in the form of "guaranteed"
pass-through certificates such as GNMA, FNMA, or FHLMC securities. The payments
on the collateral securities determine the payments to the bondholders, but
there is not a direct "pass-through" of payments. CMO's are structured into
multiple classes, each bearing a different date of maturity. Monthly payments of
principal received from the pool of underlying mortgages, including prepayments,
is first returned to investors holding the shortest maturity class. Investors
holding the longest maturity classes receive principal only after the shorter
maturity classes have been retired.

CMO's are issued by entities that operate under orders from the Securities and
Exchange Commission (the SEC) exempting such issuers from the provisions of the
Investment Company Act of 1940 (the 1940 Act). Until recently, the staff of the
SEC had taken the position that such issuers were investment companies and that,
accordingly, an investment by an investment company (such as the Portfolios) in
the securities of such issuers was subject to limitations imposed by Section 12
of the 1940 Act. However, in reliance on a recent SEC staff interpretation, the
Portfolios may invest in securities issued by certain "exempted issuers" without
regard to the limitations of Section 12 of the 1940 Act. In its interpretation,
the SEC staff defined "exempted issuers" as unmanaged, fixed asset issuers that
(a) invest primarily in mortgage-backed securities, (b) do not issue redeemable
securities as defined in Section 2(a)(32) of the 1940 Act, (c) operate under
general exemptive orders exempting them from "all provisions of the [1940] Act"
and (d) are not registered or regulated under the 1940 Act as investment
companies.

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

FOREIGN SECURITIES

Capital Appreciation Portfolio and High Yield Portfolio may each invest up to
10%, and Asset Allocation Portfolio may invest up to 20%, of its total assets in
securities of foreign governments and companies (provided that no more than 15%
of Asset Allocation Portfolio's total assets may be invested in foreign
securities that are not traded on national foreign securities exchanges or
traded in the United States). Government Total Return Portfolio may invest up to
20% of its total assets in dollar denominated

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foreign securities. Domestic branches of foreign banks and foreign branches
of domestic banks are deemed by Fortis Advantage to be domestic, not foreign,
companies. Investing in foreign securities may result in greater risk than
that incurred by investing in domestic securities. The obligations of foreign
issuers may be affected by political or economic instabilities. Financial
information published by foreign companies may be less reliable or complete
than information disclosed by domestic companies pursuant to United States
Government securities laws, and may not have been prepared in accordance with
generally accepted accounting principles. Fluctuations in exchange rates may
affect the value of foreign securities not denominated in United States
currency.

OPTIONS

As provided below, the Portfolios may enter into transactions in options on a
variety of instruments and indexes, in order to protect against declines in the
value of portfolio securities or increases in the costs of securities to be
acquired and in order to increase the gross income of the Portfolios. The types
of instruments to be purchased and sold are further described in the Appendix of
this Statement of Additional Information, which should be read in conjunction
with the following sections.

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

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

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

A Portfolio may also purchase put or call options on stock indexes in order
either to hedge its investments against a decline in value or to attempt to
reduce the risk of missing a market or industry segment advance. The Portfolio's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

FUTURES CONTRACTS. High Yield Portfolio, Asset Allocation Portfolio, and
Government Total Return Portfolio may enter into interest rate futures contracts
for hedging purposes. With respect to the Government Total Return Portfolio,
such contracts will relate only to U.S. Government Obligations. In addition,
Capital Appreciation Portfolio and Asset Allocation Portfolio may enter into
stock index futures contracts for hedging purposes. Each Portfolio, other than
Government Total Return Portfolio, may also enter into foreign currency futures
contracts.

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(Unless otherwise specified, interest rate futures contracts, stock index
futures contracts and foreign currency futures contracts are collectively
referred to as "Futures Contracts.")

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

OPTIONS ON FUTURES CONTRACTS. High Yield Portfolio and Asset Allocation
Portfolio may purchase and write options to buy or sell interest rate futures
contracts. In addition, Capital Appreciation Portfolio and Asset Allocation
Portfolio may purchase and write options on stock index futures contracts, and
each Portfolio may purchase and write options on foreign currency futures
contracts. (Unless otherwise specified, options on interest rate futures
contracts, options on stock index futures contracts, and options on foreign
currency futures contracts are collectively referred to as "Options on Futures
Contracts.") Such investment strategies will be used as a hedge and not for
speculation.

Put and call options on Futures Contracts may be traded by the Portfolios in
order to protect against declines in the values of portfolio securities or
against increases in the cost of securities to be acquired. Purchases of options
on Futures Contracts may present less risk in hedging the portfolios of the
Portfolios than the purchase or sale of the underlying Futures Contracts since
the potential loss is limited to the amount of the premium plus related
transaction costs. The writing of such options, however, does not present less
risk than the trading of futures contracts and will constitute only a partial
hedge, up to the amount of the premium received, and, if an option is exercised,
a Portfolio may suffer a loss on the transaction.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

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

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

RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS, AND FORWARD CONTRACTS

Although the indicated Portfolios will enter into transaction in Futures
Contracts, Options on Futures Contracts,

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Currency Contracts, and certain options solely for hedging purposes, their
use does involve certain risks. For example, a lack of correlation between
the index or instrument underlying an option or Futures Contract and the
assets being hedged, or unexpected adverse price movements, could render a
Portfolio's hedging strategy unsuccessful and could result in losses. The
indicated Portfolios also may enter into transactions in options on
securities and indexes of securities for other than hedging purposes, which
involves greater risk. In addition, there can be no assurance that a liquid
secondary market will exist for any contract purchased or sold, and a
Portfolio may be required to maintain a position until exercise or
expiration, which could result in losses.

Transactions in options, Futures Contracts, Options on Futures Contracts, and
Currency Contracts may be entered into on United States exchanges regulated by
the SEC or the Commodity Futures Trading Commission (the "CFTC"), as well as in
the over-the-counter market and on foreign exchanges. In addition, the
securities underlying options and Futures Contracts traded by the Portfolios may
include domestic as well as foreign securities. Investors should recognize that
transactions involving foreign securities or foreign currencies, and
transactions entered into in foreign countries, may involve considerations and
risks not typically associated with investing in U.S. markets. See "Other
Investment Practices of the Portfolios--Foreign Securities" in the Prospectus.

REGULATORY RESTRICTIONS

To the extent required to comply with Securities and Exchange Commission Release
No. 10666, when purchasing a futures contract, writing a put option, or entering
into a delayed delivery purchase, the Portfolios will each maintain in a
segregated account cash or liquid high-grade securities equal to the value of
such contracts.

To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, none of the
Portfolios will enter into a futures contract or purchase an option thereon if
immediately thereafter the initial margin deposits for futures contracts held by
the Portfolio, plus premiums paid by it for open options on futures (less the
amount by which the value of the underlying futures contract exceeds the
exercise price at the time of purchase), would exceed 5% of the Portfolio's
total assets. The Portfolios will not engage in transactions in financial
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the values of securities
which the Portfolios hold or intend to purchase. When futures contracts or
options thereon are purchased to protect against a price increase on securities
intended to be purchased later, it is anticipated that at least 75% of such
intended purchases will be completed. When other futures contracts or options
thereon are purchased, the underlying value of such contracts will at all times
not exceed the sum of: (1) accrued profit on such contracts held by the broker;
(2) cash or high quality money market instruments set aside in an identifiable
manner; and (3) cash proceeds from investments due in 30 days.

BORROWING MONEY

Each Portfolio may borrow money from banks as a temporary measure to facilitate
redemptions. As a fundamental policy, however, borrowings may not exceed 10% of
the value of such Portfolio's total assets and no additional investment
securities may be purchased by a Portfolio while outstanding bank borrowings
(including "roll" transactions for Government Total Return Portfolio) exceed 5%
of the value of such Portfolio's total assets. Interest paid on borrowings will
not be available for investment.

REPURCHASE AGREEMENTS

A repurchase agreement is an instrument under which securities are purchased
from a bank or securities dealer with an agreement by the seller to repurchase
the securities at a mutually agreed upon date, interest rate, and price.
Generally, repurchase agreements are of short duration--usually less than a
week, but on occasion for longer periods. Each Portfolio will limit its
investment in repurchase agreements with a maturity of more than seven days to
15% of its net assets.

In investing in repurchase agreements, a Portfolio's risk is limited to the
ability of such bank or securities dealer to pay the agreed upon amount at the
maturity of the repurchase agreement. In the opinion of management, such risk is
not material; if the other party defaults, the underlying security constitutes
collateral for the obligation to pay--although the Portfolio may incur certain
delays in obtaining direct ownership of the collateral, plus costs in
liquidating the collateral. In the event a bank or securities dealer defaults on
the repurchase agreement, management believes that, barring extraordinary
circumstances, the Portfolio will be entitled to sell the underlying securities
or otherwise receive adequate protection (as defined in the federal Bankruptcy
Code) for its interest in such securities. To the extent that proceeds from any
sale upon a default were less than the repurchase price, however, the Portfolio
could suffer a loss. If the Portfolio owns

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underlying securities following a default on the repurchase agreement, the
Portfolio will be subject to risk associated with changes in the market value
of such securities. The Portfolios' custodian will hold the securities
underlying any repurchase agreement or such securities may be part of the
Federal Reserve Book Entry System. The market value of the collateral
underlying the repurchase agreement will be determined on each business day.
If at any time the market value of the collateral falls below the repurchase
price of the repurchase agreement (including any accrued interest), the
Portfolio will promptly receive additional collateral (so the total
collateral is in an amount at least equal to the repurchase price plus
accrued interest).

VARIABLE AMOUNT MASTER DEMAND NOTES

Variable amount master demand notes are short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. They allow the
investment of fluctuating amounts by the Portfolio at varying market rates of
interest pursuant to arrangements between the Portfolio and a financial
institution which has lent money to a borrower. Variable amount master demand
notes permit a series of short-term borrowings under a single note. Both the
lender and the borrower have the right to reduce the amount of outstanding
indebtedness at any time. Such notes provide that the interest rate on the
amount outstanding varies on a daily basis depending upon a stated short-term
interest rate barometer. Advisers will monitor the creditworthiness of the
borrower throughout the term of the variable master demand note. It is not
generally contemplated that such instruments will be traded and there is no
secondary market for the notes. Typically, agreements relating to such notes
provide that the lender shall not sell or otherwise transfer the note without
the borrower's consent. Thus, variable amount master demand notes may under
certain circumstances be deemed illiquid assets. However, such notes will not be
considered illiquid where the Portfolio has a "same day withdrawal option,"
I.E., where it has the unconditional right to demand and receive payment in full
of the principal amount then outstanding together with interest to the date of
payment.

ILLIQUID SECURITIES

Each Portfolio may invest in illiquid securities, including "restricted"
securities. (A restricted security is one which was originally sold in a private
placement and was not registered with the Commission under the Securities Act of
1933 (the "1933 Act") and which is not free to be resold unless it is registered
with the Commission or its sale is exempt from registration.) However, the
Portfolio will not invest more than 15% of the value of its net assets in
illiquid securities, as determined pursuant to applicable Commission rules and
interpretations.

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

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

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

PORTFOLIO TURNOVER

The portfolio turnover rate for a Portfolio is calculated by dividing the lesser
of purchases or sales by such Portfolio of investment securities for the
particular fiscal year by the monthly average value of investment securities
owned by the Portfolio during the same fiscal year. "Investment

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securities," for purposes of this calculation, only include securities with a
maturity date more than twelve months from the date of investment. A 100%
portfolio turnover rate would occur, for example, if the lesser of the value
of purchases or sales of investment securities for a particular year were
equal to the average monthly value of the investment securities owned during
such year. Portfolio turnover rates for the fiscal years ended October 31,
1994 and 1993 were: 36% and 60% respectively, for Capital Appreciation
Portfolio; 63% and 95% for High Yield Portfolio; 94% and 103% for Asset
Allocation Portfolio; and 135% and 113% for Government Total Return Portfolio.

INVESTMENT RESTRICTIONS FOR GOVERNMENT TOTAL RETURN PORTFOLIO

Certain investment restrictions are fundamental to the operation of the
Portfolios and may not be changed except with the approval of the holders of a
majority of the outstanding shares of the Portfolio(s) affected. For this
purpose, "majority of the outstanding voting securities" means the lesser of (i)
67% of the outstanding shares of the affected Portfolio(s) present at the
meeting of shareholders if more than 50% of the outstanding shares of the
affected Portfolio(s) are present in person or by proxy, or (ii) more than 50%
of the outstanding shares of the affected Portfolio(s).

As a result of these fundamental investment restrictions, except as set forth
below, the Government Total Return Portfolio will not:

(1) Concentrate its investments in any particular industry, except that
(i) it may invest up to 25% of the value of its total assets in any
particular industry, and (ii) there is no limitation with respect to
investments in obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, or obligations of domestic
commercial banks. As to utility companies, gas, electric, water and
telephone companies will be considered as separate industries. As to finance
companies, the following categories will be considered as separate
industries: (a) captive automobile finance, such as General Motors
Acceptance Corp. and Ford Motor Credit Corp.; (b) captive equipment finance
companies, such as Honeywell Finance Corporation and General Electric Credit
Corp.; (c) captive retail finance companies, such as Macy Credit Corp. and
Sears Roebuck Acceptance Corp.; (d) consumer loan companies, such as
Beneficial Finance Corporation and Household Finance Corporation; (e)
diversified finance companies such as CIT Financial Corp., Commercial
Credit Corporation and Borg Warner Acceptance Corp.; and (f) captive oil
finance companies, such as Shell Credit, Inc., Mobil Oil Credit Corp.
and Texaco Financial Services, Inc.

(2) Purchase or sell physical commodities (such as grains, livestock,
etc.) or futures or options contracts thereon; however, it may purchase or
sell any forms of financial instruments or contracts that might be deemed
commodities.

(3) Invest directly in real estate or interests in real estate; however,
the Portfolio may invest in interests in real estate investment trusts, debt
securities secured by real estate or interests therein, or debt or equity
securities issued by companies which invest in real estate or interests
therein.

(4) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
Fortis Advantage may be deemed an underwriter under applicable laws.

(5) Purchase securities on margin or otherwise borrow money, except that
the Portfolio, in accordance with its investment objectives and policies,
may purchase securities on a when-issued, delayed delivery, or forward
commitment basis, and may make margin deposits in connection with dealing in
commodities or options thereon. The Portfolio may also obtain such
short-term credit as it needs for the clearance of securities transactions,
and may borrow from a bank as a temporary measure to facilitate redemptions
(but not for leveraging or investment) an amount that does not exceed 10% of
the value of the Portfolio's total assets. Investment securities will not be
purchased while outstanding bank borrowings (including "roll" transactions)
exceed 5% of the value of the Portfolio's total assets.

(6) Make loans to other persons, except that it may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of the
Portfolio's total assets (including the amount lent) if such loans are
secured by collateral at least equal to the market value of the securities
lent, provided that such collateral shall be limited to cash, securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit or other high-grade, short-term
obligations or interest-bearing cash equivalents. Loans shall not be deemed
to include repurchase agreements or the purchase or acquisition of a portion
of an issue of notes, bonds, debentures, or other debt securities, whether
or not such purchase or acquisition is made upon the original issuance of
the securities.

(7) Issue senior securities (as defined in the 1940 Act) other than as
set forth in restriction #5 concerning

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<PAGE>

borrowing and except to the extent that using options and futures contracts
or purchasing or selling securities on a when issued, delayed delivery, or
forward commitment basis (including the entering into of roll transactions)
may be deemed to constitute issuing a senior security.

The following investment restrictions may be changed by the Board of
Directors of Fortis Advantage (the "Board of Directors") without shareholder
approval. The Government Total Return Portfolio, unless otherwise noted,
will not:

(1) Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization; provided that the Fund shall
not purchase or otherwise acquire more than 3% of the total outstanding
voting stock of any other investment company. (Due to restrictions imposed
by the California Department of Corporations, the Portfolios do not
currently invest in other investment companies.)

(2) Invest in a company for the purposes of exercising control or
management.

(3) Buy or sell foreign exchange, except as incidental to the purchase
or sale of permissible foreign investments.

(4) Invest in interests (including partnership interests or leases) in
oil, gas, or other mineral exploration or development programs, except it
may purchase or sell securities issued by corporations engaging in oil, gas,
or other mineral exploration or development business.

(5) Purchase or retain the securities of any issuer if those officers
and directors of Fortis Advantage or its investment adviser owning
(including beneficial ownership) individually more than 1/2 of 1% of the
securities of such issuer together own (including beneficial ownership)
more than 5% of the securities of such issuer.

(6) Invest more than 5% of its total assets in securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years (except that a company will be deemed to have been in
business for more than three years if such company is the subsidiary of
another company which has been in business for more than three years).

(7) Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations. (Securities that have been determined
to be liquid by the Board of Directors of Fortis Advantage or Advisers
subject to the oversight of such Board of Directors will not be subject to
this limitation.)

(8) Make short sales, except for sales "against the box."

(9) Mortgage, pledge, or hypothecate its assets except to the extent
necessary to secure permitted borrowings.

(10) Invest in real estate limited partnership interests.

(11) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any issuer to
be held by the Fund.

(12) Invest more than 5% of its net assets, valued at the lower of cost
or market, in warrants; nor, within such amount, invest more than 2% of such
net assets in warrants not listed on the New York Stock Exchange or American
Stock Exchange. Warrants attached to securities or acquired in units are
excepted from the above limitations.

(13) Invest more than 10% of its total assets in real estate investment
trusts or invest in real estate investment trusts that are not publicly
distributed.

(14) Invest more than 20% of its net assets in when-issued, delayed
delivery or forward commitment transactions, and of such 20%, no more than
one-half (i.e., 10% of its net assets) may be invested in when-issued,
delayed delivery or forward commitment transactions without the intention of
actually acquiring securities (i.e., dollar rolls).

(15) Purchase from or sell to any officer, director, or employee of
Fortis Advantage, or its adviser or underwriter, or any of their officers or
directors, any securities other than shares of Fortis Advantage common
stock.

Any investment restriction or limitation, fundamental or otherwise, which
involves a maximum percentage of securities or assets shall not be considered to
be violated unless an excess over the percentage occurs immediately after an
acquisition of securities or utilization of assets, and such excess results
therefrom.

INVESTMENT RESTRICTIONS FOR ALL PORTFOLIOS OTHER THAN
GOVERNMENT TOTAL RETURN PORTFOLIO

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affected Portfolios(s) are present in person or by proxy, or (ii) more than 50%
of the outstanding shares of the affected Portfolio(s).

As a result of these fundamental investment restrictions, except as set forth
below, the Portfolios will not:

1. Purchase securities on margin or otherwise borrow money or issue
senior securities, except that the Portfolios, in accordance with their
investment objectives and policies, may purchase securities on a when-issued
and delayed delivery basis, within the limitations set forth in the
Prospectus and Statement of Additional Information. Fortis Advantage may
also obtain such short-term credit as it needs for the clearance of
securities transactions, and may borrow from a bank, for the account of any
Portfolio, as a temporary measure to facilitate redemptions (but not for
leveraging or investment) an amount that does not exceed 10% of the value of
the Portfolio's total assets. Investment securities will not be purchased
for a Portfolio while outstanding bank borrowings exceed 5% of the value of
such Portfolio's total assets.

2. Mortgage, pledge or hypothecate its assets, except in an amount not
exceeding 10% of the value of its total assets to secure temporary or
emergency borrowing.

3. Invest in commodities or commodity contracts, other than for hedging
purposes only.

4. Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
Fortis Advantage may be deemed an underwriter under applicable laws.

5. Participate on a joint or a joint and several basis in any
securities trading account.

6. Invest in real estate, except a Portfolio may invest in securities
issued by companies owning real estate or interests therein.

7. Make loans to other persons. Repurchase agreements, the lending of
securities and the acquiring of debt securities in accordance with the
Prospectus and Statement of Additional Information are not considered to be
"loans" for this purpose.

8. Concentrate its investments in any particular industry, except that
(i) it may invest up to 25% of the value of its total assets in any
particular industry, and (ii) there is no limitation with respect to
investments in obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, or obligations of domestic
commercial banks. As to utility companies, gas, electric, water and
telephone companies will be considered as separate industries. As to finance
companies, the following categories will be considered as separate
industries: (a) captive automobile finance, such as General Motors
Acceptance Corp. and Ford Motor Credit Corp.; (b) captive equipment finance
companies, such as Honeywell Finance Corporation and General Electric Credit
Corp.; (c) captive retail finance companies, such as Macy Credit Corp. and
Sears Roebuck Acceptance Corp.; (d) consumer loan companies, such as
Beneficial Finance Corporation and Household Finance Corporation; (e)
diversified finance companies such as CIT Financial Corp., Commercial Credit
Corporation and Borg Warner Acceptance Corp.; and (f) captive oil finance
companies, such as Shell Credit, Inc., Mobil Oil Credit Corp. and Texaco
Financial Services, Inc.

9. Purchase from or sell to any officer, director, or employee of
Fortis Advantage, or its adviser or underwriter, or any of their officers or
directors, any securities other than shares of Fortis Advantage's common
stock.

10. Make short sales, except for sales "against the box." While a short
sale is made by selling a security the Portfolio does not own, a short sale
is "against the box" to the extent that the Portfolio contemporaneously owns
or has the right to obtain securities identical to those sold short at no
added cost.

The following investment restrictions may be changed by the Board of Directors
of Fortis Advantage (the "Board of Directors") without shareholder approval. The
Portfolios, unless otherwise noted, will not:

1. Invest more than 5% of the value of its total assets in securities
of other investment companies, except in connection with a merger,
consolidation, acquisition or reorganization. (Due to restrictions imposed
by the California Department of Corporations, the Portfolios do not
currently invest in other investment companies.)

2. Invest in a company for the purposes of exercising control or
management.

3. Buy or sell foreign exchange, except as incidental to the purchase
or sale of permissible foreign investments.

4. Invest in interests (including partnership interests or leases) in
oil, gas, or other mineral exploration or development programs, except it
may purchase or sell securities issued by corporations engaging in oil, gas,
or other mineral exploration or development business.

5. Purchase or retain the securities of any issuer if those officers
and directors of Fortis Advantage or its

42
<PAGE>

investment adviser owning (including beneficial ownership) individually more
than 1/2 of 1% of the securities of such issuer together own (including
beneficial ownership) more than 5% of the securities of such issuer.

6. Invest more than 5% of its total assets in companies which have been
in business for less than three years (except that a company will be deemed
to have been in business for more than three years if such company is the
subsidiary of another company which has been in business for more than three
years).

7. Invest more than 15% of its net assets in all forms of illiquid
investments, as determined pursuant to applicable Securities and Exchange
Commission rules and interpretations. (Securities that have been determined
to be liquid by the Board of Directors of Fortis Advantage or Advisers
subject to the oversight of such Board of Directors will not be subject to
this limitation.)

8. Invest more than 5% of its total assets in warrants, nor invest more
than 2% of its total assets in warrants not traded on the New York Stock
Exchange or the American Stock Exchange.

9. Invest in real estate limited partnership interests.

10. Invest more than 20% of its net assets in when-issued, delayed
delivery or forward commitment transactions, and of such 20%, no more than
one-half (I.E., 10% of its net assets) may be invested in when-issued,
delayed delivery or forward commitment transactions without the intention of
actually acquiring securities (I.E., dollar rolls).

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

DIRECTORS AND EXECUTIVE OFFICERS

The names, addresses, principal occupations, and other affiliations of directors
and executive officers of Fortis Advantage are given below:

<TABLE>
<CAPTION>
POSITION WITH
FORTIS PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS ADVANTAGE "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Richard W. Cutting Director Certified public accountant and financial consultant.
137 Chapin Parkway
Buffalo, New York

Allen R. Freedman* Director Chairman and Chief Executive Officer of Fortis, Inc.; a Managing
Suite 5001 Director of Fortis International, N. V.
One World Trade Center
New York, New York

Dr. Robert M. Gavin Director President, Macalester College.
1600 Grand Avenue
St. Paul, Minnesota

Benjamin S. Jaffray Director Chairman of the Sheffield Group, Ltd., a financial consulting
4040 IDS Center group.
Minneapolis, Minnesota

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

Dean C. Kopperud* President and President and a Director of Advisers and Investors and Senior Vice
500 Bielenberg Drive Director President of Fortis Benefits Insurance Company and Time Insurance
Woodbury, Minnesota Company.

</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
FORTIS PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS ADVANTAGE "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Edward M. Mahoney Director Retired; prior to December, 1994, Chairman and Chief Executive
2760 Pheasant Drive Officer and a Director of Advisers and Investors, Senior Vice
Excelsior, Minnesota President and a Director of Fortis Benefits Insurance Company, and
Senior Vice President of Time Insurance Company.

Thomas R. Pellett Director Retired; prior to January, 1991, Senior Vice President--
731 Havenwood Circle Drive Administration and Corporate Affairs, Pet Incorporated, which is
Warson Woods, Missouri in the food products business.

Robb L. Prince Director Vice President and Treasurer, Jostens, Inc., a producer of
5501 Norman Center Dr. products and services for the youth, education, sports award, and
Minneapolis, Minnesota recognition markets.

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

Joseph M. Wikler Director Investment consultant and private investor; prior to January,
12520 Davan Drive 1994, Director of Research, Chief Investment Officer, Principal,
Silver Spring, Maryland and a Director, the Rothschild Co., Baltimore, Maryland. The
Rothschild Co. is an investment advisory firm.

Stephen M. Poling Vice President Executive Vice President and Director of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

Dennis M. Ott Vice President Senior Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

James S. Byrd Vice President Vice President of Advisers and Investors; prior to March, 1991,
5500 Wayzata Boulevard Senior Vice President, Templeton Investment Counsel, Inc., Fort
Golden Valley, Minnesota Lauderdale, Florida.

Robert C. Lindberg Vice President Vice President of Advisers and Investors; prior to July, 1993,
5500 Wayzata Boulevard Vice President, Portfolio Manager, and Chief Securities Trader,
Golden Valley, Minnesota COMERICA, Inc., Detroit, Michigan. COMERCA, Inc. is a bank.

Keith R. Thomson Vice President Vice President of Advisers and Investors.
5500 Wayzata Boulevard
Golden Valley, Minnesota

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

Robert J. Clancy Vice President Senior Vice President and Director of Advisers and Investors and
500 Bielenberg Drive Senior Vice President, Investment Products of Fortis Benefits
Woodbury, Minnesota Insurance Company.

Thomas D. Gualdoni Vice President Vice President of Advisers, Investors, and Fortis Benefits
500 Bielenberg Drive Insurance Company.
Woodbury, Minnesota
</TABLE>

44
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
FORTIS PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS ADVANTAGE "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ---------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
Larry A. Medin Vice President Senior Vice President--Sales of Advisers and Investors; from
500 Bielenberg Drive August 1992 to November 1994, Senior Vice President, Western
Woodbury, Minnesota Divisional Officer of Colonial Investment Services, Inc., Boston,
Massachusetts; from June 1991 to August 1992, Regional Vice
President, Western Divisional Officer of Alliance Capital
Management, New York, New York; prior to June 1991, Senior Vice
President, National Sales Director, Met Life State Street
Investment Services, Inc.

Jon H. Nicholson Vice President Vice President--Marketing and Product Development of Fortis
500 Bielenberg Drive Benefits Insurance Company.
Woodbury, Minnesota

John W. Norton Vice President Senior Vice President, General Counsel, and Secretary of Advisers
500 Bielenberg Drive and Investors; since January, 1993, Senior Vice President and
Woodbury, Minnesota General Counsel, Life and Investment Products, Fortis Benefits
Insurance Company and Vice President and General Counsel, Life and
Investment Products, Time Insurance Company.

David A. Peterson Vice President Vice President and Assistant General Counsel, Fortis Benefits
500 Bielenberg Drive Insurance Company; prior to January, 1991, Senior Vice
Woodbury, Minnesota President--Law, State Bond and Mortgage Company, Minneapolis,
Minnesota.

Michael J. Radmer Secretary Partner, Dorsey & Whitney P.L.L.P., the Fund's General Counsel.
220 South Sixth Street
Minneapolis, Minnesota

Tamara L. Fagely Treasurer Fund Accounting Officer of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
</TABLE>

- -------------------------------------------
* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
each Fortis Fund, Advisers, and Investors primarily because he is an officer
of each. Mr. Freedman is an "interested person" of each Fortis Fund,
Advisers, and Investors because he is Chairman and Chief Executive Officer
of Fortis, Inc. ("Fortis"), the parent company of Advisers and indirect
parent company of Investors, and a Managing Director of Fortis
International, N. V., the parent company of Fortis.
- -------------------------------------------

All of the above officers and directors also are officers and/or directors of
other investment companies of which Advisers is the investment adviser. No
compensation is paid by Fortis Advantage to any of its officers or directors
except for a fee of $200 per month, $100 per meeting attended, and $100 per
applicable committee meeting attended (and reimbursement of travel expenses to
attend meetings) to each director not affiliated with Advisers. During the
fiscal year ended October 31, 1994, Capital Appreciation Portfolio, High Yield
Portfolio, Asset Allocation Portfolio, and Government Total Return Portfolio
paid $5,050, $5,900, $7,440, and $6,000, respectively, in directors' fees to
directors who were not affiliated with Advisers or Investors and reimbursed two
such directors a total of $175, $320, $400, and $330, respectively, for travel
expenses incurred in attending directors' meetings. Legal fees and expenses of
$4,600, $7,200, $8,579, and $6,000, respectively, also were paid to a law firm
of which Fortis Advantage's Secretary is a partner. As of January 31, 1995, the
directors and executive officers beneficially owned less than 1% of the
outstanding shares of Capital Appreciation Portfolio, High Yield Portfolio,
Asset Allocation Portfolio, and Government Total Return Portfolio. Directors
Kopperud, Mahoney, Prince, King, and Jaffray are members of the Executive
Committee of the Board of Directors. While the Executive Committee is authorized
to act in the intervals between regular board meetings with full capacity and
authority of the full Board of Directors, except as limited by law, it is
expected that the Committee will act only infrequently.

45
<PAGE>

INVESTMENT ADVISORY AND OTHER
SERVICES

GENERAL

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and manager
of each Portfolio of Fortis Advantage since each Portfolio's inception.
Investors acts as Fortis Advantage's underwriter. Both act as such pursuant to
written agreements periodically approved by the directors or shareholders of
Fortis Advantage. The address of both is that of Fortis Advantage.

As of January 31, 1995, Advisers managed twenty-eight investment company
portfolios with combined net assets of approximately $3,349,326,000, and one
private account with net assets of approximately $15,389,000. Fortis Financial
Group also has approximately $1.7 billion in insurance reserves. As of the same
date, the investment company portfolios had an aggregate of 210,844
shareholders, including 40,119 shareholders of Fortis Advantage.

During the past three fiscal years ended October 31, 1994, 1993, and 1992, the
Portfolios paid to Advisers advisory and management fees as follows: $607,491,
$497,620, and $349,733 for the Capital Appreciation Portfolio; $685,802,
$450,524, and $319,988 for the High Yield Portfolio; $1,103,566, $980,482, and
$534,751, for the Asset Allocation Portfolio; and $633,248, $712,517, and
$623,293 for the Government Total Return Portfolio, respectively. However, for
the fiscal years ended October 31, 1993 and 1992, respectively, Advisers
reimbursed the Government Total Return Portfolio $7,223 and $32,538 pursuant to
the expense reimbursement agreement, resulting in net fees of $705,294 and
$590,755.

Investors received $533,938, $337,851, and $249,090, for the Capital
Appreciation Portfolio, $1,332,078, $827,899, and $595,599, for the High Yield
Portfolio, $682,089, $712,769, and $408,514, for the Asset Allocation Portfolio,
and $182,623, $258,606, and $76,006, for the Government Total Return Portfolio
during the fiscal years ended October 31, 1994, 1993, and 1992, respectively,
for underwriting the Portfolios' shares, out of which allowances to dealers and
representatives totaling approximately $435,291, $285,774, and $208,844 for the
Capital Appreciation Portfolio, $1,120,285, $696,024, and $494,127 for the High
Yield Portfolio, $571,020, $608,236, and $335,555 for the Asset Allocation
Portfolio, and $147,365, $214,034, and $62,472, for the Government Total Return
Portfolio, respectively, were paid.

During the fiscal year ended October 31, 1994, Investors received $273,371 from
the Capital Appreciation Portfolio, $317,900 from the High Yield Portfolio,
$508,256 from the Asset Allocation Portfolio, and $283,848 from the Government
Total Return Portfolio, respectively, pursuant to the Plan of Distribution (see
"Plan of Distribution"). Of these amounts, Investors paid $173,573 for the
Capital Appreciation Portfolio, $242,020 for the High Yield Portfolio, $369,544
for the Asset Allocation Portfolio, and $220,870 for the Government Total Return
Portfolio, respectively, to broker-dealers and registered representatives. In
addition to such amounts paid, Advisers and Investors together spent $166,376
for the Capital Appreciation Portfolio, $361,458 for the High Yield Portfolio,
$203,048 for the Asset Allocation Portfolio, and $49,492 for the Government
Total Return Portfolio, respectively, on activities related to the distribution
of the Portfolios' shares.

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

Fortis owns 100% of the outstanding voting securities of Advisers, and Advisers
owns all of the outstanding voting securities of Investors.

Fortis, located in New York, New York, is a wholly owned subsidiary of Fortis
International, N.V., which has approximately $100 billion in assets worldwide
and is in turn a wholly owned subsidiary of AMEV/VSB 1990 N.V. ("AMEV/VSB
1990").

Dean C. Kopperud is President of Advisers and Investors; Stephen M. Poling is
Executive Vice President of Advisers and Investors; Robert C. Clancy, Larry A.
Medin, and Dennis M. Ott are Senior Vice Presidents of Advisers and

46
<PAGE>

Investors; John W. Norton is Senior Vice President, General Counsel, and
Secretary of Advisers and Investors; Robert W. Beltz, Jr., James S. Byrd,
Thomas D. Gualdoni, Robert C. Lindberg, Lee V. Rosenblum, Kyle R. Selberg,
Keith R. Thomson, and Sylvia R. Wagner are Vice Presidents of Advisers and
Investors; Barbara W. Kirby, David G. Carroll, Carol M. Houghtby, and Chris
J. Neuharth are 2nd Vice Presidents of Advisers and Investors; Michael D.
O'Connor is Qualified Plan Officer of Advisers and Investors; Tamara L.
Fagely is Fund Accounting Officer of Advisers and Investors; John E. Hite is
Corporate Counsel and Assistant Secretary of Advisers and Investors; Gregory
S. Swenson and Thomas E. Erickson are Assistant Secretaries of Advisers and
Investors; Sharon R. Jibben is Assistant Secretary of Advisers; and Barbara
J. Wolf is Trading Officer of Advisers.

Messrs. Kopperud, Clancy, and Poling are the Directors of Advisers.

All of the above persons reside or have offices in the Minneapolis/St. Paul
area.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENTS

Advisers acts as investment adviser and manager of Government Total Return
Portfolio under an Investment Advisory and Management Agreement dated April 24,
1991, which became effective the same date upon shareholder approval, and acts
as investment adviser and manager of Capital Appreciation, High Yield, and Asset
Allocation Portfolios under an Investment Advisory and Management Agreement
dated January 31, 1992, which became effective January 31, 1992, following
shareholder approval on January 28, 1992 (hereafter collectively "the
Agreements"). These Agreements were last approved by the Board of Directors
(including a majority of the directors who are not parties to the contracts, or
interested persons of any such party) on December 8, 1994. The Agreements will
terminate automatically in the event of their assignment. In addition, the
Agreements are terminable at any time, without penalty, by the Board of
Directors or, with respect to any particular portfolio, by vote of a majority of
the outstanding voting securities of the applicable portfolio, on not more than
60 days' written notice to Advisers, and by Advisers on 60 days' notice to
Fortis Advantage. Unless sooner terminated, the Agreements shall continue in
effect for more than two years after their execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors or, with respect to any particular portfolio, by vote of a majority of
the outstanding voting securities of the applicable portfolio, provided that in
either event such continuance is also approved by the vote of a majority of the
directors who are not parties to such Agreements, or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval.

The Agreements collectively provide for investment advisory and management fees
calculated as described in the following table. As you can see from the table,
this fee decreases (as a percentage of Portfolio net assets) as the Portfolio
grows. As of January 31, 1995, Capital Appreciation Portfolio, High Yield
Portfolio, Asset Allocation Portfolio, and Government Total Return Portfolio had
net assets of approximately $67,850,000, $101,262,000, $117,916,000, and
$66,599,000, respectively.

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

High Yield For the first $50 million .8 %
Portfolio For assets over $50 million .7 %

Asset For the first $100 million 1.0 %
Allocation For the next $150 million .8 %
Portfolio For assets over $250 million .7 %

Government For the first $50 million .80%
Total Return For the next $450 million .75%
Portfolio For assets over $500 million .70%
</TABLE>

The Agreements require each Portfolio of Fortis Advantage to pay all its
expenses which are not assumed by Advisers and/or Investors. These expenses
include, by way of example, but not by way of limitation, the fees and expenses
of directors and officers of Fortis Advantage who are not "affiliated persons"
of Advisers, interest expenses, taxes, brokerage fees and commissions, fees and
expenses of registering and qualifying Fortis Advantage and its shares for
distribution under Federal and state securities laws, expenses of preparing
prospectuses and of printing and distributing prospectuses annually to existing
shareholders, custodian charges, auditing and legal expenses, insurance
expenses, association membership dues, and the expense of reports to
shareholders, shareholders' meetings, and proxy solicitations.

Advisers bears the costs of acting as Fortis Advantage's transfer agent,
registrar, and dividend agent.

Pursuant to an undertaking given to the State of California, Advisers has agreed
to reimburse Fortis Advantage monthly for any amount by which aggregate annual
expenses, exclusive of taxes, brokerage commissions, and interest on borrowing
exceeds 2 1/2% on the first $30,000,000 of average net assets, 2% on the next

47
<PAGE>

$70,000,000, and 1 1/2% on the balance. The distribution fee is excluded from
these limits. Advisers reserves the right to agree to lesser expense limitations
from time to time. In the fiscal year ended October 31, 1994, Advisers was not
required to make any reimbursement to Fortis Advantage pursuant to this
limitation.

Advisers reserves the right, but shall not be obligated, to institute voluntary
expense reimbursement programs which, if instituted, shall be in such amounts
and based on such terms and conditions as Advisers, in its sole and absolute
discretion, determines. Furthermore, Advisers reserves the absolute right to
discontinue any of such reimbursement programs at any time without notice to
Fortis Advantage.

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

Under the Agreements, Advisers, as investment adviser to each Portfolio of
Fortis Advantage, has the sole authority and responsibility to make and execute
investment decisions for each Portfolio within the framework of Fortis
Advantage's investment policies, subject to review by the Board of Directors of
Fortis Advantage. Advisers also furnishes Fortis Advantage with all required
management services, facilities, equipment, and personnel.

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

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

In the case of Capital Appreciation and Asset Allocation Portfolios,
transactions on a stock exchange in equity securities will be executed primarily
through brokers that will receive a commission paid by those Portfolios. The
High Yield Portfolio and the Government Total Return Portfolio, on the other
hand, will not normally incur any brokerage commissions. Fixed income
securities, as well as equity securities traded in the over-the-counter market,
are generally traded on a "net" basis with dealers acting as principals for
their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. In underwritten offerings,
securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. Certain of these securities may also be purchased
directly from an issuer, in which case neither commissions nor discounts are
paid. For Government Total Return Portfolio, Asset Allocation Portfolio, High
Yield Portfolio, and Capital Appreciation Portfolio, transactions having an
aggregate dollar value of approximately $247,324,000, $208,644,000,
$142,189,000, and $32,348,000, respectively (excluding short-term securities),
were traded at net prices including a spread or markup during the fiscal year
ended October 31, 1994. During the fiscal years ended October 31, 1994, 1993,
and 1992, transactions in equity securities having an aggregate dollar value of
approximately $14,833,000, $47,538,000, and $22,541,000, respectively (excluding
short-term securities), were traded with respect to the Asset Allocation
Portfolio; $8,086,000, $6,654,000, and $7,265,000, respectively, for Capital
Appreciation Portfolio; and $80,000, $136,000, and $677,000, respectively for
High Yield Portfolio. For such periods, Asset Allocation Portfolio's brokerage
commissions totaled $33,000, $104,452, and $49,981, respectively, amounting to
.03%, .11%, and .09%, respectively, of average net assets and resulting in an
average commission rate for the fiscal year ended October 31, 1994 of .22%,
(calculated by dividing the dollar amount of transactions into the total dollar
amount of commissions paid). For such periods, Capital Appreciation Portfolio's
brokerage commissions totaled $30,112, $22,936, and $33,386, respectively,
amounting to .05%, .05%, and .10%, respectively, of average net assets and
resulting in an average commission rate of .37% for the fiscal year ended
October 31, 1994. For the fiscal year ended October 31, 1994, High Yield
Portfolio's commissions totaled $1,460, amounting to 0% of average net assets
and resulting in an average commission rate of 1.8%.

48
<PAGE>

Advisers selects and (where applicable) negotiates commissions with the
broker-dealers who execute the transactions for the Portfolios. The primary
criterion for the selection of a broker-dealer is the ability of the
broker-dealer, in the opinion of Advisers, to secure prompt execution of the
transactions on favorable terms, including the reasonableness of the
commission and considering the state of the market at the time. When
consistent with these objectives, business may be placed with broker-dealers
who furnish investment research or services to Advisers. Such research or
services include advice, both directly and in writing, as to the value of
securities; the advisability of investing in, purchasing or selling
securities; and the availability of securities, or purchasers or sellers of
securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy, and the
performance of accounts. This allows Advisers to supplement its own
investment research activities and enables Advisers to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Portfolios. To the extent
portfolio transactions are effected with broker-dealers who furnish research
services to Advisers, Advisers receives a benefit, not capable of evaluation
in dollar amounts, without providing any direct monetary benefit to the
Portfolios from these transactions. Advisers believes that most research
services obtained by it generally benefit several or all of the investment
companies and private accounts which it manages, as opposed to solely
benefiting one specific managed fund or account. Normally, research services
obtained through managed funds or accounts investing in common stocks would
primarily benefit the managed funds or accounts which invest in common stock;
similarly, services obtained from transactions in fixed income securities
would normally be of greater benefit to the managed funds or accounts which
invest in debt securities.

Advisers has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of Fortis Advantage portfolio transactions in
exchange for research services provided Advisers, except as noted below.
However, Advisers does maintain an informal list of broker-dealers, which is
used from time to time as a general guide in the placement of Fortis Advantage
business, in order to encourage certain broker-dealers to provide Advisers with
research services which Advisers anticipates will be useful to it. Because the
list is merely a general guide, which is to be used only after the primary
criterion for the selection of broker-dealers (discussed above) has been met,
substantial deviations from the list are permissible and may be expected to
occur. Advisers will authorize Fortis Advantage to pay an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker-dealer would have charged only if Advisers determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker-dealer, viewed in
terms of either that particular transaction or Advisers' overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Generally, Fortis Advantage pays higher commissions than
the lowest rates available.

Asset Allocation Portfolio, Capital Appreciation Portfolio, and High Yield
Portfolio paid $33,274, $30,112, and $1,460, respectively, in commissions (in
connection with transactions having an aggregate value of approximately
$14,833,277, $8,086,061, and $80,290, respectively) during the fiscal year ended
October 31, 1994. Of this amount, virtually all was paid to broker-dealers who
furnished investment research to Advisers, as outlined above.

Fortis Advantage will not effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with
Advisers, unless such transactions, including the frequency thereof, the receipt
of commissions payable in connection therewith, and the selection of the
affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the Portfolios. No commissions were paid to
any affiliate of Advisers during the fiscal years ended October 31, 1994, 1993,
and 1992.

Fortis Advantage's acquisitions during the fiscal year ended October 31, 1994,
of securities of its regular brokers or dealers or of the parent of those
brokers or dealers that derive more than fifteen percent of their gross revenue
from securities-related activities is presented below:

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
VALUE OF SECURITIES
OWNED AT END OF
NAME OF ISSUER FISCAL YEAR
- ------------------------------ -------------------
<S> <C>
First Bank (N.A.) $2,972,064
Goldman, Sachs & Co. 882,000

HIGH YIELD PORTFOLIO
VALUE OF SECURITIES
OWNED AT END OF
NAME OF ISSUER FISCAL YEAR
- ------------------------------ -------------------
<S> <C>
Goldman, Sachs & Co. $699,000
</TABLE>

49
<PAGE>
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
VALUE OF SECURITIES
OWNED AT END OF
NAME OF ISSUER FISCAL YEAR
- ------------------------------ -------------------
<S> <C>
Donaldson, Lufkin & Jenrette Sec. $950,482
First Bank (N.A.) 689,000

<CAPTION>
GOVERNMENT TOTAL RETURN PORTFOLIO
VALUE OF SECURITIES
OWNED AT END OF
NAME OF ISSUER FISCAL YEAR
- ------------------------------ -------------------
<S> <C>
Prudential-Bache Securities,
Inc. $1,931,015
Nomura Securities
International, Inc. 1,481,692
Kidder Peabody & Co., Inc. 1,481,370
</TABLE>

CAPITAL STOCK

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

On January 31, 1995, Fortis Advantage had outstanding 2,974,417 Class A shares,
5,113, Class B shares, 952 Class C shares, and 9,398 Class H shares of Capital
Appreciation Portfolio; 12,785,636 Class A shares, 50,317 Class B shares, 41,978
Class C shares, and 377,671 Class H shares of High Yield Portfolio; 8,243,149
Class A shares, 4,903 Class B shares, 3,084 Class C shares, and 53,422 Class H
shares of Asset Allocation Portfolio; and 8,589,021 Class A shares, 18 Class B
shares, 1,756 Class C shares, and 5,992 Class H shares of Government Total
Return Portfolio. On that date, no person owned of record or, to Fortis
Advantage's knowledge, beneficially as much as 5% of the outstanding shares of
any Class of any Portfolio, except as follows:

CAPITAL APPRECIATION PORTFOLIO--

<TABLE>
<S> <C>
Class B: J.D. Adams Culvert Co.
401(k) Profit Sharing Plan, P.O.
Box 5218,
Colorado Springs, CO 80931--31.6%;
Peter J. Draxler, 2417 Heights
Drive, Ferndale, WA 98248--12.8%;
Brett T. Walker, 110 Starbird Road
#5, Jericho, VT 05465--7.2%; and
Robert T. Mcaleer, 1013 Avenue East,
Fort Madison, IA 52627--5.2%;

Class H: David C. Sanders, W8485 Old Carney
Lake Road, Iron Mountain, MI
49801--14.8%;
David J. Bohn, 2590 Cleveland Ave
N., Roseville, MN 55113--10.6%;
Earl J. Wing, 2590 Cleveland Ave.
N., Roseville, MN 55113--6.9%; and
The John Companies, 5593 Highland
Courts Drive, Bloomington, MN
55437--5.3%;

Class C: J.A. Hall, Rural Route 5, Box 808,
Duncan OK 73533--37.6%;
Kevin L. Pyle, 1013 Hemlock Street,
Celina, OH 45822--11.0%;
Kim A. Luttenegger, 11656 Highway
99, Burlington, IA 52601--10.8%;
Darlene G. Cullen, 3209 139th Lane
NW, Andover, MN 55304--8.3% and
Dean J. Ertmer & Kimberly K. Ertmer,
308 S. Center Street, Lena, IL
61048--7.9%;
</TABLE>

HIGH YIELD PORTFOLIO--

<TABLE>
<S> <C>
Class B: David L. Alread & Stacy T. Alread,
175 Highview Terrace,
Fayetteville, GA 30214--10.1%;
Roger B. Geoffroy & Diane B.
Geoffroy,
Route 5, Box 74-A,
Irasburg, VT 05845--9.9%;
Joanie R. Austin & Lawrence D.
Austin,
21 High Street, Orleans, VT
05860--7.8%;
Richard J. Boyd, 2430 Dunn Valley
Road, Waterford, PA 16441--6.8%;
and
Mario J. Palmer & Irene M. Palmer,
10601 Wild Flower Place,
Fort Wayne, IN 46845--6.6%;

Class H: Florence A. Dahrouge, 4100 Cathedral
Avenue NW, Washington, DC
20016--12.3%;
William English, 26 Fair Oaks Drive,
Pasadena, CA 91103--8.1%; and
Joseph H. Jungbluth & Rita C.
Jungbluth, W 292 N 5649 Dorn Road,
Hartland, WI 53029--7.7%;

Class C: Stella Broering, 229 South Garfield
Street, Minster, OH 45865--36.1%;
Harold E. Hills, 0-11590 8th Avenue
NW, Grand Rapids, MI 49504--15.3%;
A. Scott Hughes & Anne H. Bishop,
107 Bennington Drive,
Lynchburg, VA 24503--12.0%;
Bertha Ballinger, 212 Stillwater
Street,
West Milton, OH 45383--11.3%; and
Mark Tessier & Dorita Tessier,
4085 E. 133rd Circle,
Thornton, CO 80241--6.7%;
</TABLE>

50
<PAGE>

ASSET ALLOCATION PORTFOLIO--

<TABLE>
<S> <C>
Class B: H. Edwin Castor, 291 Creek Road,
Doylestown, PA 18901--22.2%;
Guy A. Hargrove, 115 Grand Ridge
Road, Starkville, MS 39759--18.2%;
Shirley J. Marshall, 1180 Balsam
Avenue, Nora Springs, IA
50458--12.2%;
Linda M. Erickson, P.O. Box 1048,
Fargo, ND 58107--11.4%;
Robert T. Mcaleer, 1013 Avenue East,
Fort Madison, IA 52627--6.4%; and
Alex Brown & Sons, Inc., P.O. Box
1346, Baltimore, MD 21203--6.2%;

Class H: James A. Cottone, 34 Donore Square,
San Antonio, TX 78229--11.5%;
Helen K. Carmack, 1469 Dermott
Avenue, Virginia Beach, VA
23455--8.7%;
Everett E. Eabanks, 7606 East 48th
Street, Indianapolis, IN
46226--7.1%;
Dr. Yoon K. Kim, PSC, 1848 North
Island Drive, Fullerton, CA
92633--6.8%; and
Robert H. Jarvis, P.O. Box 3017,
Winter Park, FL 32790--5.2%;

Class C: Richard K. Taylor & Shirley A.
Taylor,
117 Crestview Drive,
Burlington, IA 52601--11.4%;
J.A. Hall, RR 5, Box 808,
Duncan, OK 73533-9351--14.5%;
N.R. Broussard, Jr., 1905 Jacqulyn,
Abbeville, LA 70510--10.9%;
The Kimm Co. 401(k) Plan,
428 Washington Avenue North,
Minneapolis, MN 55401--10.5%;
David C. Quandt, 640 Alta Vista
Drive, Carroll, IA 51401--9.4%;
Kim A. Luttenegger, 11656 Highway
99, Burlington, IA 52601--8.0%; and
Glen E. Bennett & Dorothy C.
Bennett, 608 West Main Street,
Aledo, IL 61231--5.3%;
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO--

<TABLE>
<S> <C>
Class C: Kim A. Luttenegger, 11656 Highway
99, Burlington, IA 52601--78.0%;
Bruce N. Gorrell & Sherri L.
Gorrell,
11512 Woody Lane,
W. Burlington, IA 52655--12.5%; and
Larry D. Aden, 2331 Mason Road,
Burlington, IA 52601--7.5%.
</TABLE>

Fortis Advantage currently has four Portfolios, each issuing its own series of
shares. Each Portfolio currently offers its shares in four classes, each with
different sales arrangements and bearing different expenses. Under Fortis
Advantage's Articles of Incorporation, the Board of Directors is authorized to
create new portfolios or classes without the approval of the shareholders of
Fortis Advantage. Each share of stock will have a pro rata interest in the
assets of the Portfolio to which the stock of that series relates and will have
no interest in the assets of any other Portfolio. In the event of liquidation,
each share of a Portfolio would have the same rights to dividends and assets as
every other share of that Portfolio, except that, in the case of a series with
more than one class of shares, such distributions will be adjusted to
appropriately reflect any charges and expenses borne by each individual class.

Each share of a Portfolio has one vote (with proportionate voting for fractional
shares) irrespective of the relative net asset value of the Portfolios' shares.
On some issues, such as the election of directors, all shares of Fortis
Advantage vote together as one series. Cumulative voting is not authorized. This
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining shares will be unable to elect any
directors.

On an issue affecting only a particular Portfolio, the shares of the affected
Portfolio vote as a separate series. An example of such an issue would be a
fundamental investment restriction pertaining to only one Portfolio. In voting
on an investment advisory agreement, approval of the agreement by the
shareholders of a particular Portfolio would make the agreement effective as to
that Portfolio whether or not it had been approved by the shareholders of the
other Portfolios.

Fortis Advantage is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders. Minnesota corporation
law provides for the Board of Directors to convene shareholder meetings when it
deems appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding three percent or more of the voting shares of Fortis
Advantage may demand a regular meeting of shareholders by written notice of
demand given to the chief executive officer or the chief financial officer of
Fortis Advantage. Within ninety days after receipt of the demand, a regular
meeting of shareholders must be held at Fortis Advantage's expense.
Additionally, the 1940 Act requires shareholder votes for all amendments to
fundamental investment policies and restrictions and for all investment
advisory contracts and amendments thereto.

51
<PAGE>

COMPUTATION OF NET ASSET VALUE AND PRICING

On October 31, 1994, the Portfolio's net asset values per share for Class A
shares were calculated as follows:

CAPITAL APPRECIATION PORTFOLIO

<TABLE>
<S> <C>
Net Assets ($68,351,704)
- ----------------------------------- = Net Asset Value Per Share
Shares Outstanding (2,965,225) ($23.05)
</TABLE>

To obtain the public offering price per share for Class A shares, the 4.5% sales
charge must be added to the net asset value obtained above:

<TABLE>
<S> <C>
$23.05
- -------- = Public Offering Price Per Share ($24.14)
.955
</TABLE>

HIGH YIELD PORTFOLIO

<TABLE>
<S> <C>
Net Assets ($98,610,923)
- -------------------------------- = Net Asset Value Per Share
Shares Outstanding (12,481,711) ($7.90)
</TABLE>

To obtain the public offering price per share for Class A shares, the 4.5% sales
charge must be added to the net asset value obtained above:

<TABLE>
<S> <C>
$7.90
- ------- = Public Offering Price Per Share ($8.27)
.955
</TABLE>

ASSET ALLOCATION PORTFOLIO

<TABLE>
<S> <C>
Net Assets ($119,394,872)
- ------------------------------ = Net Asset Value Per Share
Shares Outstanding (8,265,974) ($14.44)
</TABLE>

To obtain the public offering price per share for Class A shares, the 4.5% sales
charge must be added to the net asset value obtained above:

<TABLE>
<S> <C>
$14.44
- ------- = Public Offering Price Per Share ($15.12)
.955
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO

<TABLE>
<S> <C>
Net Assets ($70,041,280)
- ------------------------------- = Net Asset Value Per Share
Shares Outstanding (9,058,615) ($7.73)
</TABLE>

To obtain the public offering price per share for Class A shares, the 4.5% sales
charge must be added to the net asset obtained above:

<TABLE>
<S> <C>
$7.73
- -------- = Public Offering Price Per Share ($8.09)
.955
</TABLE>

The primary close of trading of the New York Stock Exchange (the "Exchange")
currently is 3:00 P.M. (Central Time), but this time may be changed. The
offering price for purchase orders received in the office of Fortis Advantage
after the beginning of each day the Exchange is open for trading is based on net
asset value determined as of the primary closing time for business on the
Exchange that day; the price in effect for orders received after such close is
based on the net asset value as of such close of the Exchange on the next day
the Exchange is open for trading.

Generally, the net asset value of each Portfolio's shares is determined on each
day on which the Exchange is open for business. The Exchange is not open for
business on the following holidays (nor on the nearest Monday or Friday if the
holiday falls on a weekend): New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, net asset value of a Portfolio need not be determined (i) on days
on which changes in the value of the Portfolio's portfolio securities will not
materially affect the current net asset value of the Portfolio's shares; or (ii)
on days during which no Portfolio shares are tendered for redemption and no
orders to purchase or sell Portfolio shares are received by Fortis Advantage.

SPECIAL PURCHASE PLANS

Fortis Advantage offers several special purchase plans, described in the
Prospectus, which allow reduction or elimination of the sales charge for Class A
shares under certain circumstances. Additional information regarding some of the
plans is as follows:

STATEMENT OF INTENTION

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

52
<PAGE>

TAX SHELTERED RETIREMENT PLANS

IRAS AND KEOGH PLANS. Individual taxpayers can defer taxes on current income by
investing in Keogh Plans or Individual Retirement Accounts (IRAs) for
retirement. You can qualify for a Keogh Plan if you are self-employed. lRAs may
be opened by anyone who has earned compensation for services rendered. Certain
reductions in sales charges set forth under "How to Buy Portfolio Shares" in the
Prospectus are available to any organized group of individuals desiring to
establish IRAs for the benefit of its members. If you are interested in one of
these accounts, contact Investors for copies of our plans. You should check with
your tax adviser before investing.

Fortis Advantage may advertise the number or percentage of its shareholders, or
the amount or percentage of its assets, which are invested in retirement
accounts or in any particular type of retirement account. Such figures also may
be given on an aggregate basis for all of the funds managed by Advisers. Any
retirement plan numbers may be compared to appropriate industry averages.

TAX SAVINGS AND YOUR IRA--A FULLY TAXABLE INVESTMENT COMPARED TO AN INVESTMENT
THROUGH AN IRA

<TABLE>
<CAPTION>
FULLY FULLY PARTIALLY
TAXABLE DEDUCTIBLE DEDUCTIBLE NON-DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
10 years - $ 24,799 $ 31,291 $ 28,944 $ 26,597
15%
Federal
tax
bracket

10 years - $ 19,785 $ 31,291 $ 26,910 $ 32,530
28%
Federal
tax
bracket

10 years - $ 18,702 $ 31,291 $ 26,441 $ 21,591
31%
Federal
tax
bracket

10 years - $ 16,597 $ 31,291 $ 25,659 $ 20,026
36%
Federal
tax
bracket

10 years - $ 15,744 $ 31,291 $ 25,095 $ 18,900
39.6%
Federal
tax
bracket

20 years - $ 72,515 $ 98,846 $ 91,432 $ 84,019
15%
Federal
tax
bracket

20 years - $ 54,236 $ 98,846 $ 85,007 $ 71,169
28%
Federal
tax
bracket

20 years - $ 50,526 $ 98,846 $ 83,525 $ 68,204
31%
Federal
tax
bracket

20 years - $ 44,722 $ 98,846 $ 81,054 $ 63,261
36%
Federal
tax
bracket
</TABLE>
53
<PAGE>

<TABLE>
<CAPTION>
FULLY FULLY PARTIALLY
TAXABLE DEDUCTIBLE DEDUCTIBLE NON-DEDUCTIBLE
INVESTMENT IRA* IRA** IRA***
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
20 years - $ 40,820 $ 98,846 $ 79,274 $ 59,703
39.6%
Federal
tax
bracket
</TABLE>

- ------------------------
* This column assumes that the entire $2,000 contribution each year is tax
deductible. Tax on income earned on the IRA is deferred.
** This column assumes that only $1,000 of the $2,000 contribution each year is
tax deductible. Tax on income earned in the IRA is deferred.
*** This column assumes that none of the $2,000 contribution each year is tax
deductible. Tax on income earned in the IRA is deferred.

The 15% Federal income tax rate applies to taxable income up to and including
$39,000 for married couples filing jointly and $23,350 for unmarried
individuals. The 28% Federal income tax rate applies to taxable income from
$39,000 to $94,250 for married couples filing jointly and to taxable income from
$23,350 to $56,550 for unmarried individuals. The 31% Federal income tax applies
to taxable income from $94,250 to $143,600 for married couples filing jointly
and to taxable income from $56,550 to $117,950 for unmarried individuals. The
36% Federal income tax rate applies to taxable income from $143,600 to $256,500
for married couples filing jointly and to taxable income from $117,950 to
$256,500 for unmarried individuals. The 39.6% Federal income tax rate applies to
taxable income above $256,500 for married couples filing jointly and to taxable
income above $256,500 for unmarried individuals. (Although the above table
reflects the nominal Federal tax rates, the effective Federal tax rates exceed
those rates for certain taxpayers because of the phase-out of personal
exemptions and the partial disallowance of itemized deductions for taxpayers
above certain income levels.)

The table reflects only Federal income tax rates, and not any state or local
income taxes.

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

If you change your mind about opening your IRA, you generally have seven days
after receipt of notification within which to cancel your account. To do this,
you must send a written cancellation to Investors (at its mailing address listed
on the cover page) within that seven day period. If you cancel within seven
days, any amounts invested in a Portfolio will be returned to you, together with
any sales charge. If your investment has declined, Investors will make up the
difference so that you receive the full amount invested.

TAX-QUALIFIED PLAN CUSTODIANS AND TRUSTEES. Current fees: IRA and 403(b)--$10
annually; Keogh or small group corporate plan--$15 initial fee plus $30 annually
(plus $5 annually per participant account and a per participant account
termination fee of $25). First Trust National Association is the Custodian under
the IRA and 403(b) plans. If a shareholder pays custodial fees by separate
check, they will not be deducted from his or her account and will not constitute
excess contributions. First Trust National Association also acts as Trustee
under the Keogh and small group corporate plans. The bank reserves the right to
change its fees on 30 days' prior written notice.

WITHHOLDING. Distributions from accounts for tax qualified plans are subject to
tax withholding unless: (a) the payee elects to have no withholding and is
permitted to do so under Federal law; or (b) payment is made to an exempt person
(normally the plan trustee in his or her capacity as plan trustee). Any payee
electing to have no withholding must do so in writing, and must do so at or
before the time that payment is made. A payee is not permitted to elect no
withholding if he or she is subject to mandatory backup withholding under
Federal law for failure to provide his or her tax identification number or for
failure to report all dividend or interest payments. Payees from 403(b) and
corporate or Keogh accounts also are not permitted to elect out of
withholding except as regards systematic partial withdrawals extending over
10 or more years.

54
<PAGE>

For IRAs, the withholding amount is 10% of the amount withdrawn. For corporate,
Keogh, and 403(b) plans, the withholding amount is as follows:

<TABLE>
<S> <C>
Total withdrawals 20% of the amount
or unscheduled withdrawn;
partial
withdrawals or
systematic
partial with-
drawals for less
than a 10 year
period--

Other systematic amount determined by
partial wage withholding tables
withdrawals-- and your completed
withholding allowance
election (or if none, is
submitted based on the
presumption that you are
a married individual
claiming three withhold-
ing allowances (no
withholding if
withdrawals do not
exceed $10,600 per
year);
</TABLE>

Any amounts withheld may be applied as a credit against Federal tax subsequently
due.

GIFTS OR TRANSFERS TO MINOR CHILDREN

This gift or transfer is registered in the name of the custodian for a minor
under the Uniform Gifts to Minors Act (in some states the Uniform Transfers to
Minors Act). Dividends or capital gains distributions are taxed to the child,
whose tax bracket is usually lower than the adult's. However, if the child is
under 14 years old and his or her unearned income is more than $1,200 per year,
then that portion of the child's income which exceeds $1,200 per year will be
taxed to the child at the parents' top rate. Control of the shares passes to the
child upon reaching a specified adult age (either 18 or 21 years in most
states).

SYSTEMATIC INVESTMENT PLAN

The Fund provides a convenient, voluntary method of purchasing shares in a
Portfolio through its "Systematic Investment Plan."

By acquiring Portfolio shares on a regular basis pursuant to a Systematic
Investment Plan, or investing regularly on any other systematic plan, the
investor takes advantage of the principle of dollar cost averaging. Under dollar
cost averaging, if a constant amount is invested at regular intervals at varying
price levels, the average cost of all the shares will be lower than the average
of the price levels. This is because the same fixed number of dollars buys more
shares when price levels are low and fewer shares when price levels are high. It
is essential that the investor consider his or her financial ability to continue
this investment program during times of market decline as well as market rise.
The principle of dollar cost averaging will not protect against loss in a
declining market, as a loss will result if the plan is discontinued when the
market value is less than cost.

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

EXCHANGE PRIVILEGE

The amount to be exchanged must meet the minimum purchase amount of the fund
being purchased.

Shareholders should consider the differing investment objectives and policies of
these other Portfolios and funds prior to making such exchange.

For Federal tax purposes, except where the transferring shareholder is a tax
qualified plan, a transfer between Portfolios or funds is a taxable event that
probably will give rise to a capital gain or loss. Furthermore, if a shareholder
carries out the exchange within 90 days of purchasing the shares in a Portfolio,
the sales charge incurred on that purchase cannot be taken into account for
determining the shareholder's gain or loss on the sale of those shares to the
extent that the sales charge that would have been applicable to the purchase
of the later-acquired shares in the other Portfolio or fund is reduced
because of the exchange privilege. However, the amount of the sales charge
that may not be taken into account in determining the shareholder's gain or
loss on the sale of the first-acquired shares may be taken into account in
determining gain or loss on the eventual sale or exchange of the
later-acquired shares.

55
<PAGE>

REINVESTED DIVIDEND/CAPITAL GAINS DISTRIBUTIONS BETWEEN FORTIS FUNDS

This privilege is based upon the fact that such orders are generally unsolicited
and the resulting lack of sales effort and expense.

PURCHASES BY FORTIS, INC. (OR ITS SUBSIDIARIES) OR ASSOCIATED PERSONS

This privilege is based upon the relationship of such persons to Fortis
Advantage and the resulting economies of sales effort and expense.

PURCHASES BY FORTIS ADVANTAGE DIRECTORS OR OFFICERS

This privilege is based upon their familiarity with Fortis Advantage and the
resulting lack of sales effort and expense.

PURCHASES BY REPRESENTATIVES OR EMPLOYEES OF
BROKER-DEALERS

This privilege is based upon the presumed knowledge such persons have about
Fortis Advantage as a result of their working for a company selling Fortis
Advantage's shares and resulting economies of sales effort and expense.

PURCHASES BY CERTAIN RETIREMENT PLANS

This privilege is based upon the familiarity of such investors with Fortis
Advantage and the resulting lack of sales effort and expense.

PURCHASES BY REGISTERED INVESTMENT COMPANIES

This privilege is based upon the generally unsolicited nature of such purchases
and the resulting lack of sales effort and expense.

PURCHASES WITH PROCEEDS FROM REDEMPTION OF UNRELATED MUTUAL FUND SHARES OR
SURRENDER OF CERTAIN FIXED ANNUITY CONTRACTS

PURCHASES BY EMPLOYEES OF CERTAIN BANKS AND OTHER FINANCIAL SERVICES FIRMS

This privilege is based upon the familiarity of such investors with the Fund and
the resulting lack of sales effort and expense.

PURCHASES BY COMMERCIAL BANKS OFFERING SELF DIRECTED 401(K) PROGRAMS CONTAINING
BOTH POOLED AND INDIVIDUAL INVESTMENT OPTIONS

PURCHASES BY INVESTMENT ADVISERS, TRUST COMPANIES, AND BANK TRUST DEPARTMENTS
EXERCISING DISCRETIONARY INVESTMENT AUTHORITY OR USING A MONEY MANAGEMENT MUTUAL
FUND "WRAP" PROGRAM

This privilege is based upon the familiarity of such investors with Fortis
Advantage and the resulting lack of sales effort and expense.

PURCHASES OF ASSET ALLOCATION PORTFOLIO BY MORISON DIRECTORS, OFFICERS AND
EMPLOYEES

This privilege is based upon their familiarity with Fortis Advantage stemming
from Fortis Advantage's acquisition of Morrison Asset Allocation Fund and
resulting economies of sales effort and expense.

PURCHASES BY CERTAIN GROUPS OR ENTITIES OF GOVERNMENT TOTAL RETURN PORTFOLIO

This privilege is based upon their familiarity with Fortis Advantage stemming
from Fortis Advantage's acquisition of Olympus U.S. Government Plus Fund and
resulting economies of sales effort and expense.

PURCHASES BY CERTAIN TOTAL RETURN SERIES, EMERGING GROWTH SERIES, OR DIVERSIFIED
INCOME SERIES (OF CARNEGIE-CAPPIELLO TRUST) OR GOVERNMENT SERIES (OF CARNEGIE
GOVERNMENT SECURITIES TRUST) ACCOUNTS

This privilege is based upon their familiarity with the applicable Portfolio
stemming from its acquisition of the applicable Series and resulting economies
of sales effort and expense.

56
<PAGE>

REDEMPTION

The obligation of Fortis Advantage to redeem its shares when called upon to do
so by the shareholder is mandatory with certain exceptions. Fortis Advantage
will pay in cash all redemption requests by a shareholder of record, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the net asset
value of Fortis Advantage at the beginning of such period. When redemption
requests exceed such amount, however, Fortis Advantage reserves the right to
make part or all of the payment in the form of readily marketable securities or
other assets of Fortis Advantage. An example of when this might be done is in
case of emergency, such as in those situations enumerated in the following
paragraph, or at any time a cash distribution would impair the liquidity of
Fortis Advantage to the detriment of the existing shareholders. Any securities
being so distributed would be valued in the same manner as the Portfolios of
Fortis Advantage are valued. If the recipient sold such securities, he or she
probably would incur brokerage charges.

Redemption of shares, or payment, may be suspended at times (a) when the
Exchange is closed for other than customary weekend or holiday closings, (b)
when trading on said Exchange is restricted, (c) when an emergency exists, as a
result of which disposal by Fortis Advantage of securities owned by it is not
reasonably practicable, or it is not reasonably practicable for Fortis Advantage
fairly to determine the value of its net assets, or during any other period when
the Securities and Exchange Commission, by order, so permits provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. The Exchange
is not open for business on the following holidays (nor on the nearest Monday or
Friday if the holiday falls on a weekend), on which Fortis Advantage will not
redeem shares: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

There is no charge for redemption, nor does Fortis Advantage contemplate
establishing a charge, although it has the right to do so. In the event a charge
were established, it would apply only to persons who became shareholders after
such charge was implemented and it would not, in any event, exceed 1% of the net
asset value of the shares redeemed. Should further public sales ever be
discontinued, Fortis Advantage may deduct a proportionate share of the cost of
liquidating assets from the asset value of the shares being redeemed, in order
to protect the equity of the other shareholders.

SYSTEMATIC WITHDRAWAL PLAN

An investor may open a "Systematic Withdrawal Plan" providing for withdrawals of
$50 or more per quarter, semiannually, or annually if he or she has made a
minimum investment in Fortis Advantage shares of $4,000 ($50 or more per month
if at least $10,000 has been invested), or he or she acquired and deposited
shares having either an original cost, or current value computed on the basis of
the offering price, equal to the appropriate amount. The minimum amount which
may be withdrawn of $50 per month is a minimum only, and should not be
considered a recommendation.

Under this Plan, any distributions of income and realized capital gains are
reinvested at net asset value. If a shareholder wishes to purchase additional
shares of a Portfolio under this Plan, other than by reinvestment of
distributions, it should be understood that he or she would be paying a sales
commission on such purchases, while liquidations effected under the Plan would
be at net asset value. Purchases of additional shares concurrent with
withdrawals are ordinarily disadvantageous to the shareholder because of sales
charges and tax liabilities. Additions to a shareholder account in which an
election has been made to receive systematic withdrawals will be accepted only
if each such addition is equal to at least one year's scheduled withdrawals or
$1,200, whichever is greater. A shareholder may not have a "Systematic
Withdrawal Plan" and a "Systematic Investment Plan" in effect simultaneously,
as it is not, as explained above, advantageous to do so.

The Plan is voluntary, flexible, and under the shareholder's control and
direction at all times, and does not limit or alter his or her right to redeem
shares. The Plan may be terminated in writing at any time by either the
shareholder or Fortis Advantage. The cost of operating the Plan is borne by
Advisers. The redemption of Portfolio shares pursuant to the Plan is a taxable
event to the shareholder.

57
<PAGE>

REINVESTMENT PRIVILEGE

In order to allow investors who have redeemed Portfolio shares an opportunity to
reinvest, without additional cost, a one time privilege is offered whereby an
investor may reinvest in a Portfolio, or in any other fund underwritten by
Investors and available to the public, without a sales charge. The reinvestment
privilege must be exercised in an amount not exceeding the proceeds of
redemption; must be exercised within 60 days of redemption; and only may be
exercised once with respect to each Portfolio.

The purchase price for Portfolio shares will be based upon net asset value at
the time of reinvestment, and may be more or less than the redemption value.
Should an investor utilize the reinvestment privilege within 30 days following a
redemption which resulted in a loss, all or a portion of that loss may not be
currently deductible for federal income tax purposes. Exercising the
reinvestment privilege would not alter any capital gains taxes payable on a
realized gain. The sale charge incurred on a purchase after October 2, 1989
cannot be taken into account in determining a shareholder's gain or loss on the
sale of the shares if the shareholder redeems the shares within 90 days of their
purchase and subsequently utilizes the reinvestment privilege. However, the
sales charge may be taken into account in determining gain or loss on the
eventual sale or exchange of the later acquired shares.

TAXATION

Under the Internal Revenue Code of 1986, as amended (the "Code"), each Portfolio
offered through Fortis Advantage is treated as a separate entity for Federal tax
purposes. Therefore, each Portfolio is treated separately in determining whether
it qualifies as a regulated investment company and for purposes of determining
the net ordinary income (or loss), net realized capital gains (or losses), and
distributions necessary to relieve each Portfolio of any Federal income tax
liability.

Each Portfolio qualified in the fiscal year ended October 31, 1994, and intends
to continue to qualify, as a regulated investment company under the Code. As
long as each Portfolio so qualifies, it is not taxed on the income it
distributes to its shareholders.

For individuals in taxable year 1995, long-term capital gains are subject to a
maximum tax rate of 28% while ordinary income is subject to a maximum rate of
39.6% (for taxable income in excess of $256,500). (The maximum effective tax
rate may be in excess of 39.6%, resulting from a combination of the nominal tax
rate and a phase-out of personal exemptions and a partial disallowance of
itemized deductions for individuals with taxable incomes above certain levels.)

Gain or loss realized upon the sale of shares in Fortis Advantage will be
treated as capital gain or loss, provided that the shares represented a capital
asset in the hands of the shareholder. Such gain or loss will be long-term
capital gain or loss if the shares were held for more than one year.

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

The marked-to-market rules of the Code may require the Portfolios that invest in
options and futures to recognize gains and losses on certain options and futures
held by the Portfolios at the end of the fiscal year. Under the marked-to-market
rules, 60% of any net capital gain or loss recognized is treated as long-term
and 40% as short-term. In addition, the straddle rules of the Code would require
deferral of certain losses realized on positions of a straddle to the extent
that the Portfolio had unrealized gains in offsetting positions at year end.

If High Yield Portfolio, Asset Allocation Portfolio, or Government Total Return
Portfolio invest in zero coupon obligations upon their issuance, such
obligations will have original issue discount in the hands of the Portfolio.
Generally, the original issue discount equals the difference between the "stated
redemption price at maturity" of the obligation and its "issue price" as those
terms are defined in the Code. The Portfolios are required to accrue as ordinary
interest income a portion of such original issue discount even though they
receive no cash currently as interest payment on the obligation. Similarly, in
the case of PIK's, High Yield Portfolio is required to recognize interest income
in the amount of the fair market value of the securities received as interest
payments on the PIK's, even though it receives no cash.

Because High Yield Portfolio, Asset Allocation Portfolio, and Government Total
Return Portfolio are each required

<PAGE>

to distribute substantially all of their net investment income (including
accrued original issue discount and interest income attributable to PIK's) in
order to be taxed as regulated investment companies, such Portfolios may be
required to distribute an amount greater than the total cash income the
Portfolio actually receives. Accordingly, in order to make the required
distribution, such Portfolios may be required to borrow or to liquidate
securities. The extent to which such Portfolios may liquidate securities at a
gain may be limited by the requirement that generally less than 30% of such
Portfolio's gross income (on an annual basis) consists of gains from the sale
of securities held for less than three months.

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

To the extent paid from "qualifying dividends" paid by a domestic corporation,
distributions to corporate shareholders will qualify for the 70% dividends
received deduction.

Under the Code, Fortis Advantage is required to withhold and remit to the U.S.
Treasury 31% of dividend and capital gain income on the accounts of certain
shareholders who fail to provide a correct tax identification number, fail to
certify that they are not subject to backup withholding, or are subject to
backup withholding for some other reason.

At October 31, 1994, Capital Appreciation Portfolio, High Yield Portfolio, and
Government Total Return Portfolio had capital loss carryforwards of $426,791,
$705,509, and $10,327,608, respectively, which, if not offset by subsequent
capital gains, will expire in 1995 through 2002. It is unlikely the Board of
Directors will authorize a distribution of any net realized gains until the
available capital loss carryovers have been offset or expired.

The foregoing is a general discussion of the Federal income tax consequences of
an investment in Fortis Advantage as of the date of this Statement of Additional
Information. Distributions from net investment income and from net realized
capital gains may also be subject to state and local taxes. Shareholders are
urged to consult their own tax advisers regarding specific questions as to
Federal, state, or local taxes.

UNDERWRITER

On December 8, 1994, the Board of Directors (including a majority of the
directors who are not parties to the contract, or interested persons of any such
party) last approved a new Underwriting Agreement with Investors dated November
14, 1994, which became effective November 14, 1994. This Underwriting Agreement
may be terminated by Fortis Advantage or Investors at any time by the giving of
60 days' written notice, and terminates automatically in the event of its
assignment. Unless sooner terminated, the Underwriting Agreement shall continue
in effect for more than two years after its execution only so long as such
continuance is also approved by the vote of a majority of the directors who are
not parties to such Underwriting Agreement, or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval.

The Underwriting Agreement requires Investors or Advisers to pay all promotional
expenses in connection with the distribution of Fortis Advantage's shares,
including paying for printing and distributing prospectuses and shareholder
reports to new shareholders, and the costs of sales literature. See "Plan of
Distribution," below, regarding fees paid to Investors to be used to compensate
those who sell Fortis Advantage shares and to pay certain other expenses of
selling Fortis Advantage shares.

In the Underwriting Agreement, Investors undertakes to indemnify Fortis
Advantage against all costs of litigation and other legal proceedings, and
against any liability incurred by or imposed upon Fortis Advantage in any way
arising out of or in connection with the sale or distribution of Fortis
Advantage's shares, except to the extent that such liability is the result of
information which was obtainable by Investors only from persons affiliated with
Fortis Advantage but not with Investors.

PLAN OF DISTRIBUTION

The policy of having each Portfolio compensate those who sell Portfolio shares
has been adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940. Rule 12b-1(b) provides that any payments made by a Portfolio in connection
with financing the distribution of its shares may only be made pursuant to a
written plan describing all aspects of the proposed financing of distribution,
and also requires that all agreements with any person relating to the
implementation of the plan must be in writing. In addition, Rule 12b-1(b)(1)
requires that such plan be approved by a majority of the Portfolio's outstanding
shares, and Rule 12b-1(b)(2) requires that

59
<PAGE>

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

(ii) That any person authorized to direct the disposition of monies paid
or payable by the Portfolio pursuant to the plan or any related agreement
shall provide to the Board of Directors, and the directors shall review, at
least quarterly, a written report of the amounts so expended and the purpose
for which such expenditures were made; and

(iii) In the case of a plan, that it may be terminated at any time by
vote of a majority of the members of the Board of Directors who are not
interested persons of the Portfolio and have no direct or indirect financial
interest in the operation of the plan, or in any agreements related to the
plan or by vote of a majority of the outstanding voting securities of the
Portfolio.

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

The Board of Directors last approved the plan on December 8, 1994.

60
<PAGE>

PERFORMANCE

Performance data is only provided for Class A shares because no Class B, H, or C
shares were outstanding during the periods indicated.

The "yield" refers to the income generated by an investment over a 30-day (or
one month) period (which period will be stated in the advertisement). It is
calculated by dividing the net investment income per share (as defined under
Securities and Exchange Commission Rules) earned during the period by the
maximum offering price per share on the last day of the period. The result is
than "annualized" using a formula that provides for semiannual compounding of
income. The High Yield Portfolio's and Government Total Return Portfolio's
yields for the 30-day period ended October 31, 1994, were 13.26% and 6.78%,
respectively.

While yield may be compared to that of "CDs" (insured, fixed rate certificates
of deposit issued by financial institutions), the Portfolios' yield is not fixed
and an investment in the Portfolios is not insured.

CAPITAL APPRECIATION PORTFOLIO

$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
REINVESTED
VALUE OF CAPITAL S&P 500
INITIAL $1,000 GAINS TOTAL TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C>
88* 1,050 0 9 1,059 5.9% 1,168 16.8%
89 1,448 72 16 1,536 45.0% 1,536 31.5%
90 1,240 62 14 1,316 (14.3)% 1,487 (3.2)%
91 2,063 103 23 2,189 66.3% 1,942 30.6%
92 2,184 109 24 2,317 5.8% 2,090 7.6%
93 2,355 303 26 2,684 15.8% 2,299 10.0%
94 2,186 281 24 2,491 (7.2)% 2,328 1.3%
Last 5
CUMULATIVE TOTAL RETURN years 54.9% -- -- -- 51.6%
Life of
Portfolio 149.1% -- -- -- 132.8%

<CAPTION>
DJIA
TOTAL
YEAR ENDED CUMULATIVE % YEARLY
DECEMBER 31, VALUE($) CHANGE
<S> <C> <C>
88* 1,162 16.2%
89 1,537 32.3%
90 1,528 (0.6)%
91 1,900 24.3%
92 2,040 7.4%
93 2,386 17.0%
94 2,509 5.2%
-- -- -- 63.3%
-- -- -- 150.9%
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Portfolio (11.35)% 1.33% 2.83% 15.98% 9.15% 14.44% 13.95%
S&P 500 1.25% 5.53% 6.24% 11.85% 8.67% 12.18% 12.85%
DJIA 5.12% 10.90% 9.70% 13.19% 10.30% 13.68% 14.06%
</TABLE>

$2,000 ANNUAL INVESTMENTS

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
VALUE OF REINVESTED
ANNUAL CAPITAL S&P 500
$2,000 GAINS TOTAL TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED CUMULATIVE CUMULATIVE CUMULATIVE
DECEMBER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) = VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
88* 2,000 2,101 0 17 2,118 2,336 2,324
89 4,000 5,528 274 40 5,842 5,702 5,718
90 6,000 6,368 235 34 6,637 7,457 7,676
91 8,000 13,776 391 57 14,224 12,346 12,030
92 10,000 16,608 414 60 17,082 15,446 15,062
93 12,000 19,968 1,966 65 21,999 19,190 19,961
94 14,000 20,307 1,825 60 22,192 21,454 23,086
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Portfolio (11.35)% (2.93)% 0.01% 7.51% 8.12% 10.40% 11.55%
S&P 500 1.25% 4.14% 5.23% 8.20% 8.38% 9.70% 10.70%
DJIA 5.12% 9.09% 9.42% 11.12% 10.81% 11.82% 12.54%
</TABLE>

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The above tables each
include reduction due to the maximum 4.5% sales charge and assume quarterly
reinvestment of all dividend and capital gains distributions (for the Standard &
Poor's 500 Stock Index ("S&P 500") and Dow Jones Industrial Average ("DJIA") as
well as the Portfolio). Both indices consist of unmanaged groups of common
stocks. In the first two tables, had dividends and capital gains distributions
been taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $236 for capital gains distributions and
$12 for income dividends, and the value of the shares as of December 31, 1994,
would have been $2,186. All figures are based upon historical earnings and are
not intended to indicate future performance. Investment return and share value
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. No adjustment has been made for a shareholder's income
tax liability on dividends or capital gains.

* January 4, 1988 through December 31, 1988

61
<PAGE>

HIGH YIELD PORTFOLIO

$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
VALUE OF REINVESTED HIGH YIELD PORTFOLIO
INITIAL CAPITAL
$1,000 GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
88* 934 0 112 1,046 4.6%
89 770 8 213 991 (5.3)%
90 535 5 265 805 (18.8)%
91 738 7 514 1,259 56.4%
92 765 8 683 1,456 15.6%
93 838 8 926 1,772 21.7%
94 728 7 976 1,711 (3.4)%
Last five
CUMULATIVE TOTAL RETURN years 65.0%
Life of
Portfolio 71.1%
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Portfolio (7.83)% 5.96% 9.06% 19.35% 10.54% 7.72% 7.99%
</TABLE>

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
VALUE OF HIGH YIELD PORTFOLIO
ANNUAL REINVESTED
$2,000 CAPITAL GAINS
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED
DECEMBER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) =
<S> <C> <C> <C> <C> <C> <C> <C>
88* 2,000 1,868 0 224
89 4,000 3,114 29 646
90 6,000 3,490 20 1,123
91 8,000 7,454 28 2,756
92 10,000 9,704 29 4,301
93 12,000 12,730 32 6,660
94 14,000 12,706 28 7,854

<CAPTION>
TOTAL
YEAR ENDED CUMULATIVE
DECEMBER 31, VALUE($)
<S> <C>
88* 2,092
89 3,789
90 4,633
91 10,238
92 14,034
93 19,422
94 20,588
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Portfolio (7.83)% 1.48% 5.49% 12.14% 11.54% 10.33% 9.66%
</TABLE>

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The above tables each
include reduction due to the maximum 4.5% sales charge and assume quarterly
reinvestment of all dividend and capital gains distributions. In the first two
tables, had dividends and capital gains distributions been taken in cash, with
no shares being acquired through reinvestment, the cash payments for the period
would have been $6 for capital gains distributions and $666 for income
dividends, and the value of the shares as of December 31, 1994, would have been
$728. All figures are based upon historical earnings and are not intended to
indicate future performance. Investment return and share value fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. No adjustment has been made for a shareholder's income tax
liability on dividends or capital gains.

* January 4, 1988 through December 31, 1988.

62
<PAGE>

ASSET ALLOCATION PORTFOLIO

$1,000 SINGLE INVESTMENT
<TABLE>
<CAPTION>
VALUE OF ASSET ALLOCATION PORTFOLIO
INITIAL REINVESTED
$1,000 CAPITAL GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
88* 943 0 43 986 (1.4)%
89 1,117 0 93 1,210 22.7%
90 1,063 0 133 1,196 (1.2)%
91 1,326 0 221 1,547 29.3%
92 1,355 0 290 1,645 6.3%
93 1,400 87 344 1,831 11.3%
94 1,341 94 379 1,814 (0.9)%
CUMULATIVE TOTAL RETURN Last 5 Years 43.4 %
Life of
Portfolio 81.5 %

<CAPTION>
S&P 500 DJIA
TOTAL TOTAL
YEAR ENDED CUMULATIVE % YEARLY CUMULATIVE % YEARLY
DECEMBER 31, VALUE($) CHANGE VALUE($) CHANGE
<S> <C> <C> <C> <C>
88* 1,168 16.8% 1,162 16.2%
89 1,536 31.5% 1,537 32.3%
90 1,487 (3.2)% 1,528 (0.6)%
91 1,942 30.6% 1,900 24.3%
92 2,090 7.6% 2,040 7.4%
93 2,299 10.0% 2,386 17.0%
94 2,328 1.3% 2,509 5.2%
-- -- -- 51.6 % -- -- -- 63.3 %
-- -- -- 132.8 % -- -- -- 150.9 %
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio (5.29)% 2.66% 3.86% 9.71% 7.47% 9.87% 8.90%
S&P 500 1.25% 5.53% 6.24% 11.85% 8.67% 12.18% 12.85%
DJIA 5.12% 10.90% 9.70% 13.19% 10.30% 13.68% 14.06%
</TABLE>

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
VALUE OF ASSET ALLOCATION PORTFOLIO
ANNUAL REINVESTED
$2,000 CAPITAL GAINS
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED
DECEMBER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) =
<S> <C> <C> <C> <C> <C> <C> <C>
88* 2,000 1,885 0 86
89 4,000 4,496 0 265
90 6,000 6,099 0 502
91 8,000 9,989 0 1,019
92 10,000 12,156 0 1,575
93 12,000 14,533 823 2,048
94 14,000 15,758 911 2,486

<CAPTION>
TOTAL S&P 500 TOTAL DJIA TOTAL
YEAR ENDED CUMULATIVE CUMULATIVE CUMULATIVE
DECEMBER 31, VALUE($) VALUE($) VALUE($)
<S> <C> <C> <C>
88* 1,971 2,336 2,324
89 4,761 5,702 5,718
90 6,601 7,457 7,676
91 11,008 12,346 12,030
92 13,731 15,446 15,062
93 17,404 19,190 19,961
94 19,155 21,454 23,086
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)

<TABLE>
<CAPTION>
LIFE OF
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio (5.29)% 0.03% 1.99% 5.40% 6.16% 7.41% 7.85%
S&P 500 1.25% 4.14% 5.23% 8.20% 8.38% 9.70% 10.70%
DJIA 5.12% 9.09% 9.42% 11.12% 10.81% 11.82% 12.54%
</TABLE>

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The above tables each
include reduction due to the maximum 4.5% sales charge and assume quarterly
reinvestment of all dividend and capital gains distributions (for the Standard &
Poor's 500 Stock Index ("S&P 500") and Dow Jones Industrial Average ("DJIA") as
well as the Portfolio). Both indices consist of unmanaged groups of common
stocks. In the first two tables, had dividends and capital gains distributions
been taken in cash, with no shares being acquired through reinvestment, the cash
payments for the period would have been $77 for capital gains distributions and
$298 for income dividends, and the value of the shares as of December 31, 1994,
would have been $1,341. All figures are based upon historical earnings and are
not intended to indicate future performance. Investment return and share value
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. No adjustment has been made for a shareholder's income
tax liability on dividends or capital gains.

* January 4, 1988 through December 31, 1988.

63
<PAGE>

GOVERNMENT TOTAL RETURN PORTFOLIO

$1,000 SINGLE INVESTMENT

<TABLE>
<CAPTION>
VALUE OF GOVERNMENT TOTAL RETURN PORTFOLIO
INITIAL REINVESTED
$1,000 CAPITAL GAINS TOTAL
YEAR ENDED INVEST- DISTRI- REINVESTED CUMULATIVE % YEARLY
DECEMBER 31, MENT($) + BUTIONS($) + DIVIDENDS($) = VALUE($) CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
86* 974 0 46 1,020 2.0%
87 905 0 132 1,037 1.7%
88 873 0 221 1,094 5.5%
89 891 0 326 1,217 11.2%
90 907 0 450 1,357 11.5%
91 901 0 565 1,466 8.0%
92 870 0 667 1,537 4.8%
93 875 0 796 1,671 8.7%
94 747 0 795 1,542 (7.7)%
CUMULATIVE TOTAL RETURN Last 5 Yrs. 21.0 %
Life of
Portfolio 54.2 %
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(Percentages based upon the above hypothetical investment)
<TABLE>
<CAPTION>
MOST RECENT: 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS 7 YEARS
<S> <C> <C> <C> <C> <C> <C> <C>
Government Total Return Portfolio (11.87)% (2.11)% 0.14% 2.07% 3.88% 5.09% 5.13%

<CAPTION>
LIFE OF
MOST RECENT: 8 YEARS PORTFOLIO
<S> <C> <C>
Government Total Return Portfolio 4.70% 5.17%
</TABLE>

$2,000 ANNUAL INVESTMENTS
<TABLE>
<CAPTION>
VALUE OF GOVERNMENT TOTAL RETURN PORTFOLIO
ANNUAL REINVESTED
$2,000 CAPITAL GAINS
YEAR ENDED CUMULATIVE INVEST- DISTRI- REINVESTED
DECEMBER 31, INVESTMENT($) MENTS($) + BUTIONS($) + DIVIDENDS($) =
<S> <C> <C> <C> <C> <C> <C> <C>
86* 2,000 1,947 0 92
87 4,000 3,586 0 433
88 6,000 5,299 0 949
89 8,000 7,363 0 1,723
90 10,000 9,436 0 2,817
91 12,000 11,273 0 4,035
92 14,000 12,724 0 5,321
93 16,000 14,716 0 6,981
94 18,000 14,206 0 7,579

<CAPTION>
TOTAL
YEAR ENDED CUMULATIVE
DECEMBER 31, VALUE($)
<S> <C>
86* 2,039
87 4,019
88 6,248
89 9,086
90 12,253
91 15,308
92 18,045
93 21,697
94 21,785
</TABLE>

<CAPTION>
LIFE OF
MOST RECENT: 8 YEARS PORTFOLIO
<S> <C> <C>
Government Total Return Portfolio 3.46% 3.83%
</TABLE>

Cumulative total return is the increase in value of a hypothetical $1,000
investment made at the beginning of the advertised period. It may be expressed
in terms of dollars or percentage. Average annual total return is the annual
compounded rate of return based upon the same hypothetical investment.
Systematic investment plan cumulative total return and systematic investment
plan average annual total return are similar except that $2,000 annual
investments are assumed (at the beginning of each year). The above tables each
include reduction due to the maximum 4.5% sales charge and assume quarterly
reinvestment of all dividend and capital gains distributions. In the first two
tables, had dividends and capital gains distributions been taken in cash, with
no shares being acquired through reinvestment, the cash payments for the period
would have been $0 for capital gains distributions and $644 for income
dividends, and the value of the shares as of December 31, 1994, would have been
$747. All figures are based upon historical earnings and are not intended to
indicate future performance. Investment return and share value fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. No adjustment has been made for a shareholder's income tax
liability on dividends or capital gains.

* May 28, 1986 through December 31, 1986.

<TABLE>
<S> <C> <C> <C>
Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period; and
P = initial payment of $1,000
</TABLE>

64
<PAGE>

P(1+T)n = ERV

<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
</TABLE>

The systematic investment plan average annual total return (for hypothetical
investments of $2,000 at the beginning of each year) is computed by finding the
average annual compounded rate of return over the periods indicated in the
advertisement that would equate the periodic payment amount invested to the
ending redeemable value according to the following formula:

<TABLE>
<S> <C> <C> <C>
Where: ERV = ending redeemable value at the end of the period of
hypothetical investments of $2,000 made at the beginning of
each year;
PMT = Periodic payment ($2,000);
T = Average annual total return; and
n = number of years.
</TABLE>

<TABLE>
<S> <C> <C> <C>
YIELD = 2 (a-b) 6
----- + 1 - 1
cd
</TABLE>

<TABLE>
<S> <C> <C> <C>
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
</TABLE>

As noted in the Prospectus, Fortis Advantage may advertise its relative
performance as compiled by outside organizations or refer to publications which
have mentioned its performance.

65
<PAGE>
Following is a list of ratings services which may be referred to, along with the
category in which the applicable portfolio is included. Because some of these
services do not take into account sales charges, their ratings may sometimes be
different than had they done so:

CAPITAL APPRECIATION PORTFOLIO

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- --------------------------------------------- -----------------------------------
<S> <C>
Lipper Analytical Services, Inc. small company growth
Wiesenberger Investment Companies Services small company growth
Morningstar Publications, Inc. small company growth
Johnson's Charts long term growth
CDA Technologies, Inc. growth
</TABLE>

HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- --------------------------------------------- -----------------------------------
<S> <C>
Lipper Analytical Services, Inc. fixed income
Wiesenberger Investment Companies Services high yield bond
Morningstar Publications, Inc. corporate bond-high quality
Johnson's Charts high yield corporate bond
CDA Technologies, Inc. fixed income-primarily high yield
</TABLE>

ASSET ALLOCATION PORTFOLIO

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- --------------------------------------------- -----------------------------------
<S> <C>
Lipper Analytical Services, Inc. flexible portfolio
Wiesenberger Investment Companies Services flexible portfolio
Morningstar Publications, Inc. asset allocation
Johnson's Charts total return
CDA Technologies, Inc. balanced
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO

<TABLE>
<CAPTION>
RATINGS SERVICE CATEGORY
- --------------------------------------------- -----------------------------------
<S> <C>
Lipper Analytical Services, Inc. fixed income
Wiesenberger Investment Companies Services U.S. Government Securities
Morningstar Publications, Inc. general government
Johnson's Charts government securities
CDA Technologies, Inc. bond and preferred
</TABLE>

Following is a list of the publications whose articles may be referred to:

66
<PAGE>

FORBES
FORTUNE
FUTURES
GLOBAL FINANCE
GLOBAL INVESTOR
INDUSTRY WEEK
INSTITUTIONAL INVESTOR
INTERNATIONAL HERALD TRIBUNE
INVESTMENT DEALER'S DIGEST
INVESTOR'S BUSINESS DAILY
KIPLINGER PERSONAL FINANCE
KIPLINGER CALIF. LETTER (The)
KIPLINGER FLORIDA LETTER
KIPLINGER TEXAS LETTER
KIPLINGER WASHINGTON LETTER (The)
KNIGHT/RIDDER FINANCIAL
LA TIMES
LIPPER ANALYTICAL SERVICES
MARKET CHRONICLE
MINNEAPOLIS STAR TRIBUNE
MONEY
MONEY MANAGEMENT LETTER
MOODY'S INVESTORS SERVICE, INC.
NATIONAL THRIFT NEWS
NATIONAL UNDERWRITER
NELSON'S RESEARCH MONTHLY
NEW YORK DAILY NEWS
NEW YORK NEWSDAY
NEW YORK TIMES (The)
NEWSWEEK
NIGHTLY BUSINESS REPORT (The)
PENSION WORLD
PENSIONS & INVESTMENT AGE
PERSONAL INVESTOR
PORTFOLIO LETTER
REGISTERED REPRESENTATIVE
RUETERS
SECURITIES PRODUCT NEWS
SECURITIES WEEK
SECURITY TRADERS HANDBOOK
SAINT PAUL PIONEER PRESS
STANDARD & POOR'S CORPORATION
STANGER'S INVESTMENT ADVISOR
STANGER'S SELLING MUTUAL FUNDS
STOCK MARKET MAGAZINE (The)
TIME
TRUSTS & ESTATES
U.S. NEWS & WORLD REPORT
UNITED PRESS INTERNATIONAL
USA TODAY
WALL STREET JOURNAL (The)
WASHINGTON POST (The)
FORTIS BENEFITS INSURANCE COMPANY
WOODBURY BULLETIN
WIESENBERGER INVESTMENT COMPANIES
SERVICES

<PAGE>

FORTIS CLASS SHARES

A SELECT MUTUAL FUND PRICING PROGRAM

A TOUCH OF CLASS

FORTIS LOGO

With Fortis funds, you have the flexibility to choose not only the most
appropriate investment, but the purchasing plan that is best for you.

Each class of shares represent an interest in the same investment portfolio,
the same fund philosophy and the same professional management.

There are several things to consider as you make your investment decision:

- The amount of your investment

- The length of time you intend to hold your investment

- Your current financial needs

- The expenses of each class of shares

We recommend that you consult with your financial advisor to help you
determine the class of shares that will best meet your financial needs and
goals.

For more complete information, including charges and expenses, obtain a
current fund prospectus. Read it carefully before you invest.

FORTIS... A WORLD CLASS ACT

A classic investment company, Fortis Financial Group (FFG) has established a
nationwide reputation for money management through its fund manager, Fortis
Advisers, Inc. FFG's principal underwriter, Fortis Investors, Inc., offers
mutual funds, annuities and variable universal life insurance. Individual
life and disability insurance products are issued by Time Insurance Company
and Fortis Benefits Insurance Company.

With more than $3 billion in assets under management, FFG is part of a $100
billion worldwide financial services and insurance organization represented
in 14 countries.

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

Fund shares are not insured by the FDIC, Federal Reserve Board, or any other
agency. The Funds are not an obligation of, nor guaranteed by any bank or
financial institution, and involve investment risks, including possible loss
of principal.

FORTIS-Registered Trademark-

FORTIS FINANCIAL GROUP

FORTIS ADVISERS, INC. (FUND MANAGEMENT SINCE 1949)

FORTIS INVESTORS, INC. (PRINCIPAL UNDERWRITER; MEMBER SIPC)

FORTIS BENEFITS INSURANCE COMPANY & TIME INSURANCE COMPANY
(ISSUERS OF FFG'S INSURANCE PRODUCTS)

P.O. BOX 64284 - ST. PAUL, MN 55164 - (800)-800-2638

97763 (10/94)

<PAGE>

CLASS A SHARES

UPFRONT SALES CHARGE

Class A Shares: traditional mutual fund pricing. You pay a one-time, initial
sales charge.

INITIAL SALES CHARGE UP TO 4.75%

CONTINGENT DEFERRED SALES CHARGE (CDSC) NONE*

MAXIMUM INVESTMENT NO LIMIT

CLASS B AND H SHARES

BACK-END SALES CHARGE

Class B and H Shares: put all of your investment to work right away. There is
no initial sales charge.

FFG's Class B and H Shares assess a declining, contingent deferred sales
charge (CDSC) if you redeem your shares in the first six years. However,
with Fortis' liberal liquidity feature, up to 10 percent of your purchase
amount annually, PLUS all appreciation AND distributions of dividends and
capital gains, may be withdrawn at no cost.

INITIAL SALES CHARGE NONE

CONTINGENT DEFERRED SALES CHARGE (CDSC) 4-4-3-3-2-1%

AUTOMATIC CONVERSION TO CLASS A SHARES End of year 8

MAXIMUM INVESTMENT $500,000

CLASS C SHARES

LEVEL SALES CHARGE

Class C Shares: a level-load or pay-as-you-go plan. There is no initial sales
charge. You pay a contingent deferred sales charge of 1 percent only if you
redeem shares within one year.

INITIAL SALES CHARGE NONE

CONTINGENT DEFERRED SALES CHARGE (CDSC) 1% in first year

MAXIMUM INVESTMENT $1,000,000

*Purchases over $1 million have no sales charge, but are subject to a 1% CDSC
for two years.

12b-1 fees: Class A-.20 to .45%, Class B, H, C-1.00%, Class E (closed to new
investors)-0%.

<PAGE>

FORTIS FAMILY OF MUTUAL FUNDS

Solid answers for a changing world

[PHOTOS]

FORTIS LOGOS

<PAGE>

FORTIS FINANCIAL GROUP

[PHOTO] FIXED INCOME FUNDS

[PHOTO] FORTIS MONEY FUND Page 1

[PHOTO] FORTIS U.S. GOVERNMENT SECURITIES FUND Page 2

[PHOTO] FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO Page 2

[PHOTO] FORTIS TAX-FREE PORTFOLIOS
(National, Minnesota, New York) Page 3

[PHOTO] FORTIS ADVANTAGE HIGH YIELD PORTFOLIO Page 3

[PHOTO] GROWTH FUNDS

[PHOTO] FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO Page 6

[PHOTO] FORTIS CAPITAL FUND Page 6

[PHOTO] FORTIS FIDUCIARY FUND Page 6

[PHOTO] FORTIS GROWTH FUND Page 7

[PHOTO] FORTIS GLOBAL GROWTH FUND Page 7

[PHOTO] FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO Page 7

Shares in these funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank; are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency; and
involve investment risks, including the possible loss of principal.

<PAGE>

MUTUAL FUNDS

WELCOME TO MUTUAL FUND INVESTING

Investing wisely can help you get where you want to go financially. But
in today's complex world, making the right investment decision is a
challenging task. After considering the alternatives, people often choose
mutual funds because of the many features and benefits. In fact, one out of
every four American households uses mutual funds as the foundation of their
investment program.

A mutual fund is an investment company that pools the money of many
investors who share common financial goals. Rather than trade stocks and
bonds individually, mutual funds offer a simpler, more convenient, less
expensive and less time-consuming method of investing in a broader range of
securities. Eight key features typically describe mutual funds: liquidity,
diversification, choice, professional management, flexibility, regulation,
accessibility and growth potential.*

When considering mutual funds, investors should select funds that have
investment objectives that closely mirror their own. Then, as personal
circumstances change over the years, shareholders should tailor their
portfolios to match their evolving financial needs and goals.

For more than four decades, Fortis Financial Group has dedicated itself
to providing high quality mutual funds, investment products and services.
We're proud of our established reputation for money management and our
innovative solutions that help people meet their financial challenges.

The Fortis mutual funds introduced in this brochure encompass a range of
investment goals and objectives. We also detail our investment philosophy and
the wide array of supporting services and strategies we offer. At Fortis, it
is our goal to provide shareholders with the solid answers they deserve in a
changing world.

* As condensed from "What Is A Mutual Fund," Investment Company Institute.

FORTIS MONEY FUND

Seeks current income to maintain a stable net asset value of $1.00 per
share. Invests in high quality, short-term money market securities (less than
120 days). This feature helps make money funds one of the safest investments
available.

- Instant liquidity through check-writing privileges.

- Low $100 check minimum.

- Free checks.

<TABLE>
<CAPTION>
MONEY FUND TOP 5 SHORT-TERM NOTES AS OF 12/93
- ----------------------------------------------------------------------
<S> <C> <C>
K-Mart 4.91% A1
American Express 4.91% A1
Prudential 4.76% A1+
Ford Motor Co. 4.65% A1
Comm. Credit 4.65% A1
- ----------------------------------------------------------------------
</TABLE>

An investment in a money market fund is neither insured nor guaranteed by the
U.S. Government. While a stable net asset value is a goal of the fund, it is
not a guarantee.

[PHOTO]
72

<PAGE>

FORTIS FINANCIAL GROUP

FORTIS U.S. GOVERNMENT SECURITIES FUND

Seeks to provide a high level of current income and to minimize price
fluctuations. Invests in debt securities backed by the full faith and credit
of the United States Government and/or its agencies. Because of its
conservative duration (3 to 5 years), it offers the opportunity to perform
competitively in a variety of interest rate environments.

- Offers relative price stability with 14 consecutive years of positive
annual returns.

- "Plain vanilla" -- no options or exotic hedging strategies.

<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND TOP CATEGORIES AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
U.S. Treasuries 40.51%
FNMA 37.74%
GNMA 19.79%
- ----------------------------------------------------------------------
</TABLE>

Fund shares are not guaranteed by the U.S. Government, or any of its
agencies, and past performance is not a guarantee of future results.

[PHOTO]

FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO

Seeks to provide a high level of current income and to minimize price
fluctuations. Invests at least 80% of the portfolio in debt securities backed
by the full faith and credit of the United States Government and/or its
agencies and up to 20% in other securities, such as high quality corporate
bonds. This fund offers the opportunity to perform competitively in a variety
of interest rate environments because of its conservative duration (4 to 6
years).

- Offers relative price stability with positive returns every year since
its 1986 inception.

- Flexibility to invest up to 20% in high quality corporate bonds.

<TABLE>
<CAPTION>
GOVERNMENT TOTAL RETURN PORTFOLIO CATEGORIES AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
U.S. Treasuries 34.83%
FNMA 30.35%
FHLMC 19.07%
Corp. Bonds 5.52%
- ----------------------------------------------------------------------
</TABLE>

Fund shares are not guaranteed by the U.S. Government, or any of its
agencies, and past performance is not a guarantee of future results.

<PAGE>

MUTUAL FUNDS

FORTIS TAX-FREE PORTFOLIOS

Seek a high level of current income free from federal tax while
preserving principal. Income earned from bonds held in the Minnesota or New
York Portfolios are double tax exempt for residents of those states. New York
City residents realize triple tax-free income.

- Seek high yield -- no options or futures.

- Emphasize relative safety through high quality bonds:

- National A+

- Minnesota A+

- New York AA-

<TABLE>
<CAPTION>
TAX-FREE PORTFOLIOS TOP 5 INDUSTRIES AS OF 12/93

NATIONAL
- ----------------------------------------
<S> <C>
Utilities: electric 24.29%
General obligations 23.95%
Healthcare 21.41%
Transportation 9.30%
Utilities: water/sewer 6.48%

<CAPTION>
MINNESOTA
- ----------------------------------------
<S> <C>
Healthcare 24.50%
Utilities: electric 20.31%
Housing 18.16%
General obligations 13.52%
Education 7.76%

<CAPTION>
NEW YORK
- ----------------------------------------
<S> <C>
Housing 20.83%
Education 17.56%
Transportation 16.43%
Healthcare 14.00%
General obligations 10.75%
- ----------------------------------------
</TABLE>

A portion of the income may be subject to federal and state income taxes,
and, if applicable, to the Alternative Minimum Tax.

[PHOTO]

FORTIS ADVANTAGE HIGH YIELD PORTFOLIO

Seeks maximum current income. Invests at least 80% of its portfolio in
high yield corporate bonds. High yield securities, such as medium, lower or
non-rated corporate bonds, are issued by a variety of American companies to
fund corporate expansion and modernization.

- Hallmark of the portfolio is its high degree of diversification.

<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO TOP 5 BOND HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
Synthetic Industry 2.01%
GU Company 1.92%
Drypers Corp. 1.91%
Flagstar 1.75%
Computervision Corp. 1.68%
- ----------------------------------------------------------------------
</TABLE>

[PHOTO]

74
<PAGE>

FORTIS FINANCIAL GROUP

THE FORTIS FAMILY OF FUNDS AT A GLANCE
Total return performance based on maximum sales charge and
reinvestment of dividends and capital: December 31, 1993

<TABLE>
<CAPTION>
FIXED INCOME FUNDS
U.S. GOVERNMENT GOVERNMENT TAX-FREE TAX-FREE TAX-FREE
MONEY(1) SECURITIES(2) TOTAL RETURN(3) NATIONAL(4)(5) MINNESOTA(4) NEW YORK(4)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-yr avg annual rate of return 2.29% 3.43% 3.84% 7.25% 6.51% 5.82%
- -----------------------------------------------------------------------------------------------------------------------------
5-yr avg annual rate of return 5.42% 9.09% 7.86% 8.65% 8.04% 8.46%
- -----------------------------------------------------------------------------------------------------------------------------
10-yr avg annual rate of return 6.39% 9.90% N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Incep avg ann'l rate of return 8.21% 8.70% 7.01% 8.00% 7.28% 8.83%
- -----------------------------------------------------------------------------------------------------------------------------
Fund inception date 11/79 3/73 5/86 6/86 6/86 11/87
- -----------------------------------------------------------------------------------------------------------------------------
Min initial investment $500 $500 $500 $500 $500 $500
- -----------------------------------------------------------------------------------------------------------------------------
Min additional investment $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
- -----------------------------------------------------------------------------------------------------------------------------
Div/Cap gains declared Daily Daily Daily Daily Daily Daily
- -----------------------------------------------------------------------------------------------------------------------------
Div/Cap gains distributed Month-end Month-end Month-end Month-end Month-end Month-end
- -----------------------------------------------------------------------------------------------------------------------------
1993 dividends paid $.02 $.76 $.71 $.61 $.59 $.63
- -----------------------------------------------------------------------------------------------------------------------------
1993 capital gains paid -- $.03 -- $.04 -- $.16
- -----------------------------------------------------------------------------------------------------------------------------
NASDAQ symbol FORXX FIUGX FAGTX FTNLX FTMNX FTNYX
- -----------------------------------------------------------------------------------------------------------------------------
Fund abbreviation MON USG ATR TNA TMN TNY
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

FORTIS FIXED INCOME INVESTMENT PHILOSOPHY

The Fortis fixed income money management team strives to consistently
provide investors with principal stability and attractive total return. By
applying a "top-down" investment philosophy, they look first at worldwide
conditions, then at the U.S. economy and inflation rates before they
ultimately formulate an outlook for interest rates.

The management team also assesses the relative value of securities
(i.e., government-backed bonds and Treasury bonds), liquidity and duration.
When interest rates are expected to rise, duration is shortened; and when
rates are expected to decrease, duration is lengthened.

When managing the High Yield Portfolio, the investment philosophy varies
slightly. While the fund's performance is tied to economic conditions and
interest rates moves, another critical factor that must be considered is the
credit quality of the securities.

FORTIS GROWTH INVESTMENT PHILOSOPHY

The Fortis equity management team uses a "bottom-up" investment style.
In using this approach, a stock selection is driven primarily by the merits
of the company itself; other considerations may include general economic and
market trends.

The portfolio managers evaluate companies within viable business sectors
that produce cost-efficient goods and services. Targeted companies also
foster an entrepreneurial management with high levels of inside ownership.
These

<PAGE>

MUTUAL FUNDS

<TABLE>
<CAPTION>
GROWTH FUNDS
CAPITAL
HIGH YIELD ASSET ALLOCATION CAPITAL FIDUCIARY GROWTH GLOBAL GROWTH APPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
16.33% 6.27% -2.09% -2.07% 5.13% 13.84% 10.62%
- ---------------------------------------------------------------------------------------------------------
10.11% 12.14% 14.31% 14.80% 18.92% N/A 19.33%
- ---------------------------------------------------------------------------------------------------------
N/A N/A 12.59% 13.41% 14.35% N/A N/A
- ---------------------------------------------------------------------------------------------------------
10.01% 10.60% 11.44% 16.11% 14.18% 14.41% 17.89%
- ---------------------------------------------------------------------------------------------------------
1/88 1/88 6/49 1/82 4/63 7/91 1/88
- ---------------------------------------------------------------------------------------------------------
$500 $500 $500 $500 $500 $500 $500
- ---------------------------------------------------------------------------------------------------------
$ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
- ---------------------------------------------------------------------------------------------------------
Daily Quarterly Quarterly Annually Annually Annually Annually
- ---------------------------------------------------------------------------------------------------------
Month-end Mid-month Mid-month Year-end Year-end Year-end Year-end
- ---------------------------------------------------------------------------------------------------------
$.90 $.38 $.15 -- -- -- --
- ---------------------------------------------------------------------------------------------------------
-- $.72 $1.44 $2.69 $1.86 -- $1.76
- ---------------------------------------------------------------------------------------------------------
FOHYX FAAAX FECLX FFDFX FGRWX FWGGX FACAX
- ---------------------------------------------------------------------------------------------------------
AHY AAA CAP FID GRO GLO ACA
- ---------------------------------------------------------------------------------------------------------
</TABLE>

companies are striving to become market leaders.

Fortis differentiates itself from other growth managers by requiring
high rates of growth in revenues, as well as earnings. When analyzing
companies, the management team looks first at revenue growth, typically
seeking companies with five-year growth rates in the 15% to 25% range. This
approach is based on the belief that sustained growth can only come from an
ability to increase revenues during all kinds of economic conditions. In
addition, the portfolio managers seek companies with above-average returns on
equity and invested capital, healthy balance sheets and the potential for
strong market share. Finally, the Fortis managers invest for the long-term,
as witnessed by the relatively low turnover rates experienced in the
portfolios during the last several years.

Returns shown above represent past performance, are not an indication of
future results and reflect the maximum sales charge, where applicable.
Capital gain distributions and income dividends are reinvested. Naturally,
investment return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost.

(1) An investment in a money market fund is neither insured nor guaranteed by
the U.S. Government. There is no assurance the fund will maintain a stable
per share net asset value.

(2) Until May 1, 1985, the fund's investment objectives included capital
appreciation through investing in equity securities as a secondary objective.
While the portfolio itself is not guaranteed, it invests in securities that
are guaranteed by the U.S. Government, based on the timely payment of
principal and interest of those securities.

(3) Prior to April 29, 1991, this portfolio was the Olympus Government Plus
Fund managed by a different investment advisor and subject to different fees
and expenses.

(4) Tax-Free Portfolios: a portion of income may be subject to federal and
state income taxes, and, if applicable, to the Alternative Minimum Tax.

(5) Prior to June 3, 1991, this portfolio was the Pathfinder Heritage
Tax-Free Income Fund managed by a different investment advisor and subject to
different fees and expenses.

For more complete information, including charges and expenses, obtain a
prospectus from Fortis Investors, Inc., P.O. Box 64284, St. Paul, MN 55164.
Read it carefully before you invest.

<PAGE>

FORTIS FINANCIAL GROUP

FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO

Seeks maximum total return. Considers current market and economic
conditions and may diversify across three distinct categories: stocks, bonds
and money markets.

- Managers allocate assets according to current market conditions.

- 10.60% average annual rate of return* since inception (1/88).

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO TOP HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
STOCKS: 56%
<S> <C>
Franklin Resources Inc. 3.48%
Oracle Systems Corp. 2.34%
Microsoft Corp. 2.29%
General Instrument Corp. 1.71%
Silicon Graphics Inc. 1.61%

<CAPTION>
BONDS: 42%
U.S. Treasury 2000 4.22%
U.S. Treasury 2001 3.53%
GNMA 2.76%
Kidder Peabody Corp. 2.24%
U.S. Treasury 2021 2.16%

<CAPTION>
SHORT-TERM/CASH: 2%
First Bank TDOA 1%
Cash 1%
- ----------------------------------------------------------------------
</TABLE>

[PHOTO]

FORTIS CAPITAL FUND

Seeks long-term growth and income. Invests in the stocks of larger
companies with established track records. Focuses primarily on blue chip
companies valued in the $1 billion or greater range.

- Paid consecutive quarterly dividends since its inception in 1949.

- 11.44% average annual rate of return* since inception (6/49).

<TABLE>
<CAPTION>
CAPITAL FUND TOP 5 HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
Oracle Systems Corp. 5.12%
Motorola Inc. 3.75%
Silicon Graphics Inc. 3.57%
LDDS Communications 3.24%
Mattel, Inc. 3.18%
- ----------------------------------------------------------------------
</TABLE>

[PHOTO]

FORTIS FIDUCIARY FUND

Seeks long-term capital appreciation. Invests the greater portion of its
portfolio in the stocks of medium to larger growth companies, generally
considered to be industry leaders. The remaining portion invests in mid-size
companies with the potential to become tomorrow's blue chip companies.

- Diversification through a mix of medium to large growth companies.

- 16.11% average annual rate of return* since inception (1/82).

<TABLE>
<CAPTION>
FIDUCIARY FUND TOP 5 HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
Oracle Systems Corp. 4.36%
Motorola Inc. 3.13%
Fed Nat'l Mtg. Assoc. 3.05%
Silicon Graphics Inc. 3.00%
Mattel Inc. 2.88%
- ----------------------------------------------------------------------
</TABLE>

[PHOTO]

* Average annual rates of return as of 12/31/93 compounded annually since
fund inception at maximum sales charge. See page 5 for full details on fund
performance.

<PAGE>

MUTUAL FUNDS

FORTIS GROWTH FUND

Seeks capital appreciation and focuses on the stocks of dynamic American
companies with solid earnings records. Tends to invest in growth companies
valued in the $300 to $750 million range.

- 67 stocks in 17 industries represented in portfolio as of 12/31/93.

- 14.18% average annual rate of return* since inception (4/63).

<TABLE>
<CAPTION>
GROWTH FUND TOP 5 HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
Oracle Systems Corp. 4.30%
International Game Tech. 3.08%
Newbridge Networks Corp. 3.05%
CISCO Systems Inc. 2.95%
3Com Corp. 2.72%
- ----------------------------------------------------------------------
</TABLE>

[PHOTO]

FORTIS GLOBAL GROWTH FUND

Seeks capital appreciation worldwide without geographic requirements.
Invests in the growth stocks of niche companies with healthy balance sheets
and a strong market franchise. This "growth" approach to global investing
differentiates the fund from other global funds, which generally are managed
with a "value" philosophy.

- At least 65% invested in high quality common stocks worldwide.

- 14.41% average annual rate of return* since inception (7/91).

<TABLE>
<CAPTION>
GLOBAL GROWTH FUND TOP 5 COUNTRIES AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
United States 42.82%
Mexico 6.49%
United Kingdom 4.37%
France 4.19%
Canada 4.12%
- ----------------------------------------------------------------------
</TABLE>

Currency fluctuations caused by political and economic factors mean that
international investing poses greater risk, as well as potential rewards,
when compared to similar U.S. investments.

[PHOTO]

FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO

Seeks maximum capital appreciation. Invests in the stocks of small,
promising growth companies, also known as "small cap stocks." The nature of
these young companies allows faster growth than their larger, more
established counterparts.

- Growth opportunity through America's entrepreneurs.

- 17.89% average annual rate of return* since inception (1/88).

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO TOP 5 HOLDINGS AS OF 12/93
- ----------------------------------------------------------------------
<S> <C>
Newbridge Networks Corp. 4.28%
Lonestar Steakhouse 3.80%
Nature's Bounty Inc. 3.18%
Sybase Inc. 3.04%
Wellfleet Communication 2.52%
- ----------------------------------------------------------------------
</TABLE>

*Average annual rates of return as of 12/31/93 compounded annually since
fund inception at maximum sales charge. See page 5 for full details on fund
performance.

[PHOTO]

<PAGE>

FORTIS FINANCIAL GROUP

WE'RE DEDICATED TO SERVICE

At Fortis, our dedication to service is supported by the fact that
for the third year in a row, we've received the #1 service award from
Dalbar Publications, an independent
research firm. We're proud that all [GRAPHIC]
of our shareholder services and sales
support employees (as well as many others!) are registered with the National
Association of Securities Dealers so that we may answer your questions
quickly and correctly. To further illustrate our commitment to service, we
tie our employees' annual reviews, salary increases and any bonuses to the
level of service each employee provides.

It is our corporate goal to help shareholders and their investment
representatives succeed by providing professional money management,
innovative financial products and the investment services to support those
products.

Classic investment strategies

PRIVILEGED ACCOUNT SERVICE

Fortis offers you the opportunity to buy low and sell high and limit
market exposure with its Privileged Account Service (PAS). With PAS, Fortis
automatically rebalances your investment -- at no cost -- in up to five
Fortis portfolios on a quarterly, semi-annual or annual basis. (Available on
accounts of $10,000 and above.) This strategy is particularly suited for
tax-deferred accounts.

MAXIMIZE DIVIDENDS

A convenient way to balance risk and reward and try to outpace inflation
is to dollar cost average into the equity market. Simply reinvest dividends
or earnings automatically from a Fortis fixed income portfolio into a Fortis
equity portfolio. This strategy offers less volatility than investing in
equities alone, yet provides greater opportunity for higher returns than by
investing only in fixed income securities.

MUTUAL FUND BENEFICIARIES

Fortis makes it easy for you to pass mutual fund assets to loved ones
through its transfer on death designation. This service provides cost
savings, immediate transfers, privacy and control.

ASSET ALLOCATION

Harry Markowitz, Merton Miller and William Sharpe won the 1990 Nobel
Peace Prize in the Economic Sciences for their research of modern portfolio
theory. They learned that asset allocation is the SINGLE MOST IMPORTANT
FACTOR in determining long-term performance; and that asset allocation is
MORE IMPORTANT THAN TIMING AND INDIVIDUAL SECURITY SELECTION.

By allocating varying portions of your assets into different kinds of
investments, you create a portfolio designed for your age, risk tolerance and
income level. As your lifestyle changes, Fortis offers you the flexibility to
reallocate your investments.

ASSET ALLOCATION MODELS

The charts illustrate investment models to consider: conservative
investor, moderate investor, or wealth builder. Your investment professional
can help you clarify your financial goals and risk tolerance, and work with
you to determine the investment strategy and Fortis fund(s) appropriate for
your situation. These charts are simply suggestions to help you get started.

*Note: if in high tax bracket, substitute one or more of funds illustrated
with one of the Fortis Tax-Free Portfolios.

<PAGE>
MUTUAL FUNDS

Shareholder services

- - LOW INITIAL INVESTMENTS.

- Start your investment for as little as $500, with subsequent
investments of $50 or more.

- Preauthorized check plan for as little as $25 a month drafted from
your personal checking account.

- - LOW SALES CHARGES.

- Maximum of 4.50% or 4.75%.

- Reduced sales charge for investments of $100,000 or more.

- No front-end sales charge for investments of $1 million or more.

- No sales charge on Fortis Money Fund.

- - SPECIAL PURCHASE PLANS.

- Letter of intent.

- Rights of accumulation.

- - SHAREHOLDER COMMUNICATIONS.

- Consolidated, easy-to-read confirmations and quarterly statements.

- Quarterly shareholder newsletter.

- Shareholder reports.

- Year-end tax information.

- - FREE DISTRIBUTION PRIVILEGES.

- Reinvest dividends and/or capital gains into the same fund or any
other Fortis fund.

- Available in cash and sent to you, your bank or anyone you designate.

- - FREE EXCHANGE PRIVILEGES.

- Make exchanges within Fortis family of funds in writing or by
telephone. (Restrictions may apply.)

- - FREE MONEY FUND CHECK WRITING PRIVILEGES.

- Low $100 check minimum.

- No transaction fee. (Restrictions may apply.)

- Free checks.

- - QUALIFIED PLANS.

- Individual Retirement Account (IRA).

- Simplified Employee Pension (SEP).

- Salary Reduction SEP (SARSEP).

- 403(b) plan.

- KEY plan (profit sharing and/or money purchase plan).

- CHOICE 401(k) plan.

- - SYSTEMATIC WITHDRAWAL PLANS.

- Choice of monthly, quarterly, semi-annually, annually.

- Redemptions sent directly to you, your bank or anyone you designate.

- - TOLL-FREE INFORMATION LINE.

- Call 1-800-800-2638, x4344.

- Daily account balances.

- Transaction activity.

- Fund net asset values.

- - TOLL-FREE, PERSONAL ASSISTANCE

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

- Call 1-800-800-2638.

- Fund Services: x3012 or 3014.

- Mktg/Sales: x3016 or 3019.

SEEKING INCOME* SEEKING GROWTH

CONSERVATIVE INVESTOR
[GRAPHIC] [GRAPHIC]

MODERATE INVESTOR
[GRAPHIC] [GRAPHIC]

WEALTH SEEKER
[GRAPHIC] [GRAPHIC]

80
<PAGE>

FORTIS FINANCIAL GROUP

Fortis Financial Group is a premier manufacturer of investment products
whose principal underwriter, Fortis Investors, Inc., offers mutual funds,
annuities and variable universal life insurance. A classic investment
company, Fortis has built a reputation for superior money management and
unequaled service to shareholders and their investment professionals.

With more than $3 billion in mutual fund assets under management, FFG is
part of a worldwide financial services and insurance concern that has
components in 14 countries around the globe and a total of $100 billion in
assets.

Fortis Financial Group is comprised of member companies Fortis
Advisers, Inc., Fortis Investors, Inc., and Fortis Benefits Insurance Co.
Like the Fortis name, which comes from the Latin for steadfast, our focus is on
the long-term in all we do: in the relationships we build, the performance we
seek, the service we provide, the products we offer.

The symbols below illustrate the security, performance, growth, balance
and service that Fortis Financial Group seeks to offer our shareholders
through our family of financial products.

For more complete information, call or write for current prospectuses. Read
them carefully before you invest.

This material must be preceded or accompanied by a Fortis Mutual Fund
Quarterly Performance Update, which includes rates of return for the most
recent calendar quarter.

[GRAPHICS]

FORTIS LOGO

FORTIS FINANCIAL GROUP
Fortis Advisers, Inc. (fund management since 1949)
Fortis Investors, Inc. (member NASD; SIPC)
Fortis Benefits Insurance Co. (issuer of FFG's variable insurance products)
P.O. Box 64284 - St. Paul, MN 55164 - 1-800-800-2638

97150 (1/94)
81

<PAGE>

FINANCIAL STATEMENTS

The financial statements included as part of Fortis Advantage's 1994 Annual
Report to Shareholders, filed with the Securities and Exchange Commission in
December, 1994, are incorporated herein by reference. The Annual Report
accompanies this Statement of Additional Information.

CUSTODIAN; COUNSEL; ACCOUNTANTS

Norwest Bank Minnesota, N.A., 8th and Marquette, Minneapolis, Minnesota 55479
acts as custodian of Fortis Advantage's assets and portfolio securities; Dorsey
& Whitney P.L.L.P., 220 South Sixth Street, Minneapolis, Minnesota 55402, is the
independent General Counsel for Fortis Advantage; and KPMG Peat Marwick LLP,
4200 Norwest Center, Minneapolis, Minnesota 55402, acts as Fortis Advantage's
independent auditors.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of Fortis Advantage owes certain fiduciary
duties to Fortis Advantage and to its shareholders. Minnesota law provides that
a director "shall discharge the duties of the position of director in good
faith, in a manner the director reasonably believes to be in the best interest
of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances." Fiduciary duties of a
director of a Minnesota corporation include, therefore, both a duty of "loyalty"
(to act in good faith and act in a manner reasonably believed to be in the best
interests of the corporation) and a duty of "care" (to act with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances). In February 1987, Minnesota enacted legislation which authorizes
corporations to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of the fiduciary
duty of "care." Minnesota law does not, however, permit a corporation to
eliminate or limit the liability of a director (i) for any breach of the
directors' duty of "loyalty" to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for authorizing a dividend, stock repurchase or
redemption or other distribution in violation of Minnesota law or for violation
of certain provisions of Minnesota securities laws, or (iv) for any transaction
from which the director derived an improper personal benefit. The Articles of
Incorporation of Fortis Advantage limit the liability of directors to the
fullest extent permitted by Minnesota statutes, except to the extent that such
liability cannot be limited as provided in the 1940 Act (which Act prohibits any
provisions which purport to limit the liability of directors arising from such
directors' willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their role as directors).

ADDITIONAL INFORMATION

Fortis Advantage has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the common shares offered hereby. The
Prospectus and this Statement of Additional Information do not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with Rules and Regulations of the Commission. The
Registration Statement may be inspected at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C., and copies thereof may
be obtained from the Commission at prescribed rates.

APPENDIX
DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS

OPTIONS ON SECURITIES

An option on a security provides the purchaser, or "holder," with the right, but
not the obligation, to purchase, in the case of a "call" option, or sell, in the
case of a "put" option, the security or securities underlying the option, for a
fixed exercise price up to a stated expiration date or, in the case of certain
options, on such date. The holder pays a non-refundable purchase price for the

82
<PAGE>

option, known as the "premium." The maximum amount of risk the purchaser of the
option assumes is equal to the premium plus related transaction costs, although
this entire amount may be lost. The risk of the seller, or "writer," however, is
potentially unlimited, unless the option is "covered." A call option written by
a Portfolio is "covered" if the Portfolio owns the underlying security covered
by the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if a Portfolio
holds a call on the same security and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in cash and
high grade government securities in a segregated account with its custodian. A
put option written by a Portfolio is "covered" if the Portfolio maintains cash
and high grade government securities with a value equal to the exercise price in
a segregated account with its custodian, or else holds a put on the same
security and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written. If the writer's obligation is not so covered, it is subject to the risk
of the full change in value of the underlying security from the time the option
is written until exercise.

Upon exercise of the option, the holder is required to pay the purchase price of
the underlying security, in the case of a call option, or to deliver the
security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.

Options on securities and options on indexes of securities, discussed below, are
traded on national securities exchanges, such as the Chicago Board Options
Exchange and the New York Stock Exchange, which are regulated by the SEC. The
Options Clearing Corporation guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indexes of securities only through a registered
broker-dealer which is a member of the exchange on which the option is traded.

In addition, options on securities and options on indexes of securities may be
traded on exchanges located outside the United States and over-the-counter
through financial institutions dealing in such options as well as the underlying
instruments. The particular risks of transactions on foreign exchanges and over-
the-counter transactions are set forth more fully in the Statement of Additional
Information.

OPTIONS ON STOCK INDEXES

In contrast to an option on a security, an option on a stock index provides the
holder with the right to make or receive a cash settlement upon exercise of the
option, rather than the right to purchase or sell a security. The amount of this
settlement is equal to (i) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a call) or is below (in the case of a put)
the closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." The purchaser of the option receives this cash
settlement amount if the closing level of the stock index on the day of exercise
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount if the option is
exercised. As in the case of options on securities, the writer or holder may
liquidate positions in stock index options prior to exercise or expiration by
entering into closing transactions on the exchange on which such positions were
established, subject to the availability of a liquid secondary market.

A Portfolio will cover all options on stock indexes by owning securities whose
price changes, in the opinion of Advisers, are expected to be similar to those
of the index, or in such other manner as may be in accordance with the rules of
the exchange on which the option is traded and applicable laws and regulations.
Nevertheless, where a Portfolio covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index. In that event, the Portfolio will not be fully covered and could be
subject to risk of loss in the event of adverse changes in the value of the
index. A Portfolio will secure put options on stock indexes by segregating
assets equal to the option's exercise price, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations.

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<PAGE>

The index underlying a stock index option may be a "broad-based" index, such as
the Standard & Poor's 500 Index or the New York Stock Exchange Composite index,
the changes in value of which ordinarily will reflect movements in the stock
market in general. In contrast, certain options may be based on narrower market
indexes, such as the Standard & Poor's 100 Index, or on indexes of securities of
particular industry groups, such as those of oil and gas or technology
companies. A stock index assigns relative values to the stocks included in the
index and the index fluctuates with changes in the market values of the stocks
so included.

FUTURES CONTRACTS ON FIXED INCOME SECURITIES, STOCK INDEXES AND FOREIGN
CURRENCIES

A Futures Contract is a bilateral agreement providing for the purchase and sale
of a specified type and amount of a financial instrument or foreign currency, or
for the making and acceptance of a cash settlement, at a stated time in the
future for a fixed price. By its terms, a Futures Contract provides for a
specified settlement date on which, in the case of the majority of interest rate
and foreign currency futures contracts, the fixed income securities or currency
underlying the contract are delivered by the seller and paid for by the
purchaser, or on which, in the case of stock index futures contracts and certain
interest rate and foreign currency futures contracts, the difference between the
price at which the contract was entered into and the contract's closing value is
settled between the purchaser and seller in cash. Futures Contracts differ from
options in that they are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. Futures Contracts call for
settlement only on the expiration date, and cannot be "exercised" at any other
time during their term.

The purchase or sale of a Futures Contract differs from the purchase or sale of
a security or the purchase of an option in that no purchase price is paid or
received. Instead, an amount of cash or cash equivalents, which varies but may
be as low as 5% or less of the value of the contract, must be deposited with the
broker as "initial margin." Subsequent payments to and from the broker, referred
to as "variation margin," are made on a daily basis as the value of the index or
instrument underlying the Futures Contract fluctuates, making positions in the
Futures Contracts more or less valuable, a process known as "marking to the
market."

U.S. Futures Contracts may be purchased or sold only on an exchange, known as a
"contract market," designated by the CFTC for the trading of such contract, and
only through a registered futures commission merchant which is a member of such
contract market. A commission must be paid on each completed purchase and sale
transaction. The contract market clearing house guarantees the performance of
each party to a Futures Contract, by in effect taking the opposite side of such
contract. At any time prior to the expiration of a Futures Contract, a trader
may elect to close out its position by taking an opposite position on the
contract market on which the position was entered into, subject to the
availability of a secondary market, which will operate to terminate the initial
position. At that time, a final determination of variation margin is made and
any loss experienced by the trader is required to be paid to the contract market
clearing house while any profit due to the trader must be delivered to it.
Futures Contracts may also be traded on foreign exchanges.

Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities and U.S. Treasury Bills. In addition, interest rate futures contracts
include contracts on indexes of municipal securities. Foreign currency futures
contracts currently are traded on the British pound, Canadian dollar, Japanese
yen, Swiss franc, West German mark and on Eurodollar deposits.

A stock index or Eurodollar futures contract provides for the making and
acceptance of a cash settlement in much the same manner as the settlement of an
option on a stock index. The types of indexes underlying stock index futures
contracts are essentially the same as those underlying stock index options, as
described above. The index underlying a municipal bond index futures contract is
a broad based index of municipal securities designed to reflect movements in the
municipal securities market as a whole. The index assigns weighted values to the
securities included in the index and its composition is changed periodically.

OPTIONS ON FUTURES CONTRACTS

An Option on a Futures Contract provides the holder with the right to enter into
a "long" position in the underlying Futures Contract, in the case of a call
option, or a "short" position in the underlying Futures Contract, in the case of
a put option, at a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearing house establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of

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<PAGE>

a put option. In the event that an option is exercised, the parties will be
subject to all the risks associated with the trading of Futures Contracts,
such as payment of variation margin deposits. In addition, the writer of an
Option on a Futures Contract, unlike the holder, is subject to initial and
variation margin requirements on the option position.

A position in an Option on a Futures Contract may be terminated by the purchaser
or seller prior to expiration by affecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.

Options on Futures Contracts that are written or purchased by a Portfolio on
United States exchanges are traded on the same contract market as the underlying
Futures Contract, and, like Futures Contracts, are subject to regulation by the
CFTC and the performance guarantee of the exchange clearing house. In addition,
Options on Futures Contracts may be traded on foreign exchanges.

An option, whether based on a Futures Contract, a stock index or security,
becomes worthless to the holder when it expires. Upon exercise of an opinion,
the exchange or contract market clearing house assigns exercise notices on a
random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
timing of such exercise.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A Currency Contract is a contractual obligation to purchase or sell a specific
quantity of a given foreign currency for a fixed exchange rate at a future date.
Currency Contracts are individually negotiated and are traded through the
"interbank currency market," an informal network of banks and brokerage firms
which operates around the clock and throughout the world. Transactions in the
interbank market may be executed only through financial institutions acting as
market-makers in the interbank market, or through brokers executing purchases
and sales through such institutions. Market-makers in the interbank market
generally act as principals in taking the opposite side of their customers'
positions in Currency Contracts, and ordinarily charge a mark-up commission
which may be included in the cost of the Contract. In addition, market-makers
may require their customers to deposit collateral upon entering into a Currency
Contract, as security for the customer's obligation to make or receive delivery
of currency, and to deposit additional collateral if exchange rates move
adversely to the customer's position. Such deposits may function in a manner
similar to the margining of Futures Contracts, described above.

Prior to the stated maturity date of a Currency Contract, it may be possible to
liquidate the transaction by entering into an offsetting contract. In order to
do so, however, a customer may be required to maintain both contracts as open
positions until maturity and to make or receive a settlement of the difference
owed to or from the market-maker or broker at that time.

OPTIONS ON FOREIGN CURRENCIES

Options on foreign currencies are traded in a manner substantially similar to
options on securities. In particular, an option on foreign currency provides
the holder with the right to purchase, in the case of a call option, or to
sell, in the case of a put option, a stated quantity of a particular currency
for a fixed price up to a stated expiration date or, in the case of certain
options, on such date. The writer of the option undertakes the obligation to
deliver, in the case of a call option, or to purchase in the case of a put
option, the quantity of the currency called for in the option, upon exercise
of the option by the holder.

As in the case of other types of options, the holder of an option on foreign
currency is required to pay a one-time, non-refundable premium, which represents
the cost of purchasing the option. The holder can lose the entire amount of this
premium, as well as related transaction costs, but not more than this amount.
The writer of the option, in contrast, generally is required to make initial and
variation margin payments, similar to margin deposits required in the trading of
Futures Contracts and the writing of other types of options. The writer is
therefore subject to risk of loss beyond the amount originally invested and
above the value of the option at the time it is entered into.

Certain options on foreign currencies, like Currency Contracts, are traded
over-the-counter through financial institutions acting as market-makers in such
options and the underlying currencies. Such transactions therefore

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<PAGE>

involve risks not generally associated with exchange-traded instruments,
which are discussed below. Options on foreign currencies may also be traded
on national securities exchanges regulated by the SEC and on exchanges
located in foreign countries.

Over-the-counter transactions can only be entered into with a financial
institution willing to take the opposite side, as principal, of a Portfolio's
position unless the institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Portfolio. Where no
such counterparty is available, it will not be possible to enter into a desired
transaction. There also may be no liquid secondary market in the trading of
over-the-counter contracts, and a Portfolio could be required to retain options
purchased or written until exercise, expiration or maturity. This in turn could
limit the Portfolio's ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.

Further, over-the-counter transactions are not subject to the guarantee of an
exchange clearing house, and a Portfolio will therefore be subject to the risk
of default by, or the bankruptcy of, the financial institution serving as its
counterparty. One or more of such institutions also may decide to discontinue
their role as market-makers in a particular currency or security, thereby
restricting the Portfolio's ability to enter into desired hedging transactions.
A Portfolio will enter into an over-the-counter transaction only with parties
whose creditworthiness has been reviewed and found satisfactory by Advisers.

95500 (Rev. 3/95)

86
<PAGE>

FORTIS-REGISTERED TRADEMARK-

[LOGOS]

FORTIS
ADVANTAGE
PORTFOLIOS, INC.

Annual Report

October 31, 1994

[LOGOS]

<PAGE>

FORTIS ADVANTAGE PORTFOLIO ANNUAL REPORT
<TABLE>
<CAPTION>

- ------------------------------------------
Contents
<S> <C>
Letter to Shareholders 1

Schedules of Investments
Asset Allocation Portfolio 7
Capital Appreciation Portfolio 11
High Yield Portfolio 13
Government Total Return
Portfolio 17

Statements of Assets and
Liabilities 19

Statements of Operations 20

Statements of Changes in Net Assets
Asset Allocation Portfolio 21
Capital Appreciation Portfolio 21
High Yield Portfolio 22
Government Total Return
Portfolio 22

Notes to Financial Statements 23

Independent Auditors' Report 27

Board of Directors and Officers 28
- ------------------------------------------
</TABLE>

SHAREHOLDER SERVICES FOR ALL FORTIS MUTUAL FUNDS

- -LOW INITIAL INVESTMENTS
-Start your investment for as little as $500, with subsequent investments
$50 or more
-Preauthorized check plan for as little as $25 a month drafted from your
personal checking or savings account

- -SPECIAL PURCHASE PLANS
-Letter of intent
-Rights of accumulation

- -SHAREHOLDER COMMUNICATIONS
-Consolidated, easy-to-read quarterly statements
-Quarterly shareholder newsletter
-Shareholder reports
-Year-end tax information

- -FREE DISTRIBUTION PRIVILEGES
-Reinvest dividends and/or capital gains into the same fund or any other Fortis
fund
-Available in cash and sent to you, your bank or anyone you designate

- -FREE EXCHANGE PRIVILEGES
-Make exchanges within Fortis family of funds by writing or by telephone.
There is no exchange fee, and this privilege may be terminated or modified.

- -FREE MONEY FUND CHECK WRITING PRIVILEGES
-Low $100 check minimum
-No transaction fee. (Restrictions may apply)

- -QUALIFIED PLANS
-Individual Retirement Account (IRA)
-Simplified Employee Pension (SEP)
-Salary Reduction SEP (SARSEP)
-403(b) plan
-KEY plan (profit sharing and/or money purchase plan)
-CHOICE 401(k) plan

- -SYSTEMATIC WITHDRAWAL PLANS
-Choice of monthly, quarterly, semi-annually, annually
-Redemptions sent directly to you, your bank or anyone you designate

- -TOLL-FREE INFORMATION LINE
-Call 1-800-800-2638, x4344
-Daily account balances
-Transaction activity
-Fund net asset values

- -TOLL-FREE, PERSONAL ASSISTANCE
-7:30 a.m. to 5:30 p.m. CST, M-Th
-7:30 a.m. to 5:00 p.m. CST, F
-Call 1-800-800-2638
-Shareholder Services: ext. 3012 or 3014

FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT 1-800-800-2638.

TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL
1-800-800-2638, EXT. 4579.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
HIGHLIGHTS
ASSET CAPITAL HIGH GOVT. TOTAL
ALLOCATION APPRECIATION YIELD RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------ --------- -----------

FOR THE YEAR ENDED OCTOBER 31, 1994:
<S> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . $15.43 $27.38 $8.65 $9.01
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.44 $23.05 $7.90 $7.73

DISTRIBUTIONS PER SHARE:
From net investment income. . . . . . . . . . . . . . . . . . . . . $ 0.3250 -- $0.8940 $0.5196
From net realized gains . . . . . . . . . . . . . . . . . . . . . . $ 0.7200 $ 1.7610 -- $0.1192*

Fortis Advantage Portfolios paid distributions, taxable as dividend
income, of which 8% and 0% for the Asset Allocation Portfolio and High
Yield Portfolio, respectively, qualified for dividends received
deductions by corporations.

*Characterized as ordinary income for federal tax purposes.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

[PHOTO]

"I want to spend time enjoying my family and building my career-not managing my
investments. With the Asset Allocation Portfolio, I can do the things that are
important today knowing that my money is hard at work for tomorrow."

ASSET ALLOCATION
TOP HOLDINGS AS OF 10/31/94
Percent of
Stocks net assets
- --------------------------------------------
<S> <C>
1 3Com Corp. 2.0%
2 Franklin Resources, Inc. 1.9%
3 Oracle Systems Corp. 1.8%
4 Silicon Graphics, Inc. 1.7%
5 Ericsson (L.M.) Telephone Co.
Class B ADR 1.4%

Bonds
- --------------------------------------------
1 FHLB Global Note (6.125%) 1996 5.8%
2 FNMA Global Note (7.40%) 2004 4.0%
3 FNMA (6.50%) 2024 3.7%
4 Mortgage Obligation
Structured Trust (6.85%) 2018 3.2%
5 U.S. Treasury (7.50%) 2001 2.9%
</TABLE>

PORTFOLIO CHANGES FOR THE
YEAR ENDED 10/31/94.

STOCK ADDITIONS:
Air Touch Communications, Inc.
Applied Materials, Inc.
Cisco Systems, Inc.
Columbia/HCA Healthcare Corp.
Grupo Televisa, S.A. de C.V. ADR
Lotus Development Corp.
Nokia ADS
Talbots (The), Inc.
Tandy Corp.
Viacom, Inc. Non-Voting

STOCK ELIMINATIONS:
Caesars World, Inc.
Chrysler Corp.
Circuit City Stores, Inc.
Circus Circus Enterprises, Inc.
MCI Communications Corp.
Primerica Corp.
Progressive Corp. (The)
Schlumberger Ltd.
Shaw Industries, Inc.
SynOptics Communications, Inc.
Tele-Communications, Inc. Class A

DEAR SHAREHOLDER,

We are pleased to present the annual report to the shareholders of Fortis
Advantage Portfolios, Inc. for the fiscal year ended October 31, 1994. Fortis
Advantage Portfolios, Inc. consists of the Asset Allocation, Capital
Appreciation, High Yield and Government Total Return Portfolios.

ECONOMIC OUTLOOK

In the fourth quarter of 1993, the Gross Domestic Product grew at a surprisingly
strong annual rate of 7%. In response to this surging economic growth, the
Federal Reserve Board reacted by raising the federal funds rate (the interest
rate banks charge one another for overnight loans). On six separate occasions to
date in 1994, the rate has been raised from 3.00 percent to the current level of
5.50 percent.

These interest rate moves were presented as a series of preemptive strikes
against growing inflationary fears. Based on this evidence, it seems the Federal
Reserve Board acted proactively, attempting to stem inflation considerably
sooner than it has in the past.

The focus on inflation is important to investors because inflationary trends
determine which assets will outperform others. When inflation is low, financial
assets typically have been the leading investments. However, when inflation
exceeds 4%, "hard" assets such as gold, real estate or natural resources have
been the strong performers. For financial assets,

ASSET ALLOCATION
PORTFOLIO ALLOCATIONS AS
OF 10/31/94

[PIE GRAPH]

ASSET ALLOCATION PORTFOLIO
Value of $10,000 invested January 4, 1988

[GRAPH]

Annual period ended October 31

Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
*SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%
**Date shares were first offered to the public
+An unmanaged index of government, corporate, and mortgage-backed securities
with an average maturity of approximately nine years
++This is an unmanaged index of 500 common stocks

<PAGE>

[PHOTO]

"The entrepreneurial spirit still thrives in America. For people willing to work
hard and take some risks, opportunities are unlimited. Young, growing companies
are bringing new products and new ideas to the marketplace every day. The
Capital Appreciation Portfolio lets us invest in these companies."

CAPITAL APPRECIATION
CHANGES FOR THE
YEAR ENDED 10/31/94.

ADDITIONS:
Applebees International, Inc.
Benchmark Electronics, Inc.
Books-A-Million, Inc.
Centocor, Inc.
Corporate Express, Inc.
Cygne Designs, Inc.
Dovatron International, Inc.
Franklin Quest Co.
Healthsource, Inc.
Intelcom Group, Inc.
LCI International, Inc.
Landmark Graphics Corp.
Mid Atlantic Medical Services, Inc.
Petroleum Geo Services
Resound Corp.
Stratacom, Inc.
Ultratech Stepper, Inc.
United Waste System, Inc.
Unitrode Corp.
West Marine, Inc.

ELIMINATIONS:
Bertucci's, Inc.
BroadBand Technologies, Inc.
Brock Control Systems, Inc.
Century Communications Corp. Class A
Cott Corp.
Cracker Barrel Old Country Store, Inc.
Creative Technology Ltd.
CrossComm Corp.
Education Alternatives, Inc.
Electronic Arts
GMIS, Inc.
Haemonetics Corp.
Media Vision Technology, Inc.
Nature's Bounty, Inc.
North American Mortgage Co.
PerSeptive Biosystems, Inc.
Platinum Software Corp.
President Riverboat Casinos, Inc.
QUALCOMM, Inc.
QuickResponse Services, Inc.
Softimage, Inc.
Sofamor/Danek Group, Inc.
Summa Four, Inc.
SuperMac Technology, Inc.
Valuevision International, Inc. Class A
Ventritex, Inc.
Wellfleet Communications, Inc.
Wind River Systems

therefore, it is critical that the Federal Reserve Board act effectively to keep
economic growth in the two to three percent range.

After a strong market in the months of December 1993 and January 1994, the Dow
Jones Industrial Average peaked January 31, 1994. However, the stock market
began to slide after the Federal Reserve Board first raised short-term interest
rates February 4, 1994, and then began to fall more sharply after the second
rate hike March 22nd. During this time, the bond markets fell even more sharply,
as bond investors became unsettled by the threat of higher inflation in a strong
economy.

Indeed, between October 15, 1993 and October 15, 1994, the treasury market
suffered the worst twelve month decline in its history.

ASSET ALLOCATION PORTFOLIO

During the past 12 months, we have been reducing our position in stock holdings
from 52% of assets to about 40% of assets. As interest rates have risen, we have
found the relative

CAPITAL APPRECIATION
PORTFOLIO CMPOSITION BY
INDUSTRY AS OF 10/31/94

[PIE GRAPH]

TOP TEN HOLDINGS AS OF 10/31/94
Percent of
Stocks net assets
- ---------------------------------------
<S> <C>
1 Input/Output, Inc. 3.1%
2 Lone Star Steakhouse
and Saloon, Inc. 3.0%
3 Xilinx, Inc. 2.8%
4 Micro Warehouse, Inc. 2.6%
5 Acxiom Corp. 2.6%
6 Sybase, Inc. 2.4%
7 Callaway Golf Co. 2.2%
8 Petroleum Geo Services 2.2%
9 Informix Corp. 2.1%
10 Gymboree Corp. 2.0%
</TABLE>

CAPITAL APPRECIATION PORTFOLIO
Value of $10,000 invested January 4, 1988

[GRAPH]

Annual period ended October 31

Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
*SEC defined total returns, including reinvestment of all dividend and capital
gains distributions and the reduction due to the maximum sales charge of
4.50%
**Date shares first offered to the public
+An unmanaged index of 500 common stocks

<PAGE>

[PHOTO]

"It makes sense to put part of my money into the High Yield Portfolio. I want
the opportunity to earn the kind of returns that high yield bonds can offer."

HIGH YIELD PORTFOLIO
TOP TEN HOLDINGS AS OF 10/31/94
Percent of
net assets
- -------------------------------------------------
<S> <C>
1 Falcon Holding Group
(11.00%) 2003 2.2%
2 Terex Corp. (13.00%) 1996 2.1%
3 Computervision Corp.
(11.375%) 1999 1.9%
4 Farm Fresh, Inc. (12.25%) 2000 1.9%
5 Specialty Foods Corp.
(11.25%) 2003 1.8%
6 Grand Union Co. (12.25%) 2002 1.8%
7 Thrifty Payless, Inc. (12.25%) 2004 1.8%
8 Flagstar Corp. (11.25%) 2004 1.7%
9 Liggett Group (11.50%) 1999 1.6%
10 Heileman Acquisition Co.
(9.625%) 2004 1.5%
</TABLE>

PORTFOLIO COMPOSITION BY
INDUSTRY AS OF 10/31/94

[PIE GRAPH]

value of bonds to be greater than that of stocks. As of the end of the period,
our allocation decision was to take bonds to a 60% weighting. During this
period, we have maintained an average duration of between 4.5 and 5.5 years.
Also, we have reduced our exposure to high yield from 25% of the fixed income
portion to 22% of the fixed income portion of the portfolio.

CAPITAL APPRECIATION PORTFOLIO

Growth stock portfolios are especially sensitive to increasing interest rates.
This is due to the fact that the typical growth stock portfolio has many
individual holdings with high price/earnings (P/E) ratios. When markets correct,
it is generally the high P/E stocks that correct most sharply. The past twelve
months have been no exception, as is evidenced by the performance of the Capital
Appreciation portfolio versus the S&P 500 Stock Index. Indeed, during the months
of February through July, the Fund had negative returns for each of these
monthly periods.

In order to limit the Fund's downside exposure in the uncertain market
atmosphere, we reduced the size of our larger holdings, as well as in those
stocks that were trading at especially high P/E's. We also eliminated the Fund's
weakest holdings. Since mid-year, we have become more optimistic about prospects
for smaller growth companies, and have added some new companies to the portfolio
and reduced our cash position overall to 20%. We foresee a shift of investor
interest toward growth stocks as economic activity moderates under the pressure
of higher interest rates. Consumer confidence in the economy could weaken, and
cyclical companies may find it increasingly difficult to deliver good quarterly
earnings comparisons.

HIGH YIELD PORTFOLIO

In general, high yield portfolios have had somewhat better total perform-
ance than many other sectors of the fixed income markets. This might be
explained by the higher coupons which cushion price declines in
higher interest rate environments.

HIGH YIELD PORTFOLIO
Value of $10,000 invested January 4, 1988

[GRAPH]

Annual period ended October 31

Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
*SEC defined total returns, including reinvestment of all dividend and capital
gains distributions and the reduction due to the maximum sales charge of
4.50%
**Date shares first offered to the public
+An unmanaged index of lower quality, high yield corporate debt securities

<PAGE>

[PHOTO]

"The Government Total Return Portfolio offers an alternative to today's low-
yielding CDs. It seemed to be the right choice for us."

GOVERNMENT TOTAL RETURN PORTFOLIO
TOP TEN HOLDINGS AS OF 10/31/94
Percent of
net assets
- --------------------------------------------

<S> <C>
1 U.S. Treasury (8.75%) 1997 7.4%
2 U.S. Treasury (7.50%) 2001 7.1%
3 U.S. Treasury (9.00%) 1998 6.8%
4 U.S. Treasury (9.375%) 1996 5.4%
5 GNMA (8.00%) 2022 5.2%
6 FHLB (7.31%) 2004 4.8%
7 FNMA REMIC (7.50%) 2022 3.9%
8 FNMA REMIC Inverse Floater
(10.52%) 2008 3.5%
9 FNMA (8.50%) 2022 3.3%
10 FNMA REMIC (7.50%) 2021 3.2%
</TABLE>

Also, the expanding economy creates growing cash flow and, in some cases,
perceived improvements in credit quality.

Over the last 12 months, our total performance was enhanced by our cyclical
holdings (Terex, Horsehead Industries), auto related (Harvard Industries,
Aftermarket Technologies), and building materials holdings. The largest
detractor to performance was our exposure to gaming securities. Particularly
during the second half of the year, gaming securities came under pressure due to
fear of increased competition in the marketplace. We began the fiscal year with
5.5% in gaming securities and ended with 11.3% of assets in gaming bonds as we
become more attracted to their relative value. During the period we reduced our
media securities from 14% to 4.4% and added to the food, beverage and tobacco
sector, bringing it from 12.2% to 14.4%.

As long as the economy continues to expand, the outlook remains positive for
high yield securities. Improving the economic environments allow well-managed
companies to increase cash-flow and improve balance sheets. As always, our
guiding principal in managing our portfolio is diversification. Throughout the
period, we have maintained a portfolio of between 80 and 90 holdings of debt
securities.

GOVERNMENT TOTAL RETURN PORTFOLIO

For the 12 month period ending 10/31/94, interest rates rose an unprecedented
amount. For example, had an investor purchased a 5-year treasury note in
November of 1993, the total return by 10/31/94 would have been -4.4% and for a
10-year note, -10.3%.

Our recent performance, compared to the Lehman Intermediate Index, reflects
longer durations than we had expected. Our mortgage portfolio average duration
extended as prepayments slowed. When our fiscal year began, nearly 65% of the
portfolio was invested in mortgage backed bonds. Because of slower prepayments,
our duration extended beyond 6 years (versus our estimate of about 5 years).

PORTFOLIO COMPOSITION BY
INDUSTRY AS OF 10/31/94

[PIE GRAPH]

Value of $10,000 invested May 28, 1986

[GRAPH]

Annual period ended October 31

Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
*SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%
**Date shares first offered to the public
+An unmanaged index of government bonds with an average maturity of three to
four years

<PAGE>

When interest rates increase, longer duration securities decline more in price
than shorter duration securities. As a result we reduced the portfolio weighting
in mortgage-backed securities through the period to the current level of about
50% of assets. We maintained our exposure to treasury securities at between 30%
and 40%. A small portion of the portfolio was invested in high quality asset-
backed securities, which, on balance, aided performance. During the period, our
holdings in mortgage-backed derivative securities averaged about 15% of assets.
While some of these securities performed poorly, others had outstanding
performance.

We believe the largest part of the up-ward movement in rates is behind us.

While rates may rise further, the increase should be minor compared to the
recent experience. Our current duration is 5.1 years. The duration may be
extended if we feel that the Fed's recent tightening has caused the economy to
slow enough to cause interest rates to decline.

SUMMARY

It is difficult to forecast when the Federal Reserve Board will reach its stated
goal of two to three percent economic growth. Given the prevailing economic
forces, it seems likely that this level will be reached by mid-1995. However, we
expect that once this goal is reached, the environment for stocks and bonds will
again be favorable, and the U.S. capital markets will return to better days.

IN CLOSING

We appreciate your investment in the Advantage Portfolios. If you have any
questions, please call us at Fortis.

Sincerely,

/s/ Edward M. Mahoney
Edward M. Mahoney
President

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

/s/ Dennis M. Ott
Dennis M. Ott
Vice President

November 17, 1994

<PAGE>

FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES

LIFE AND DISABILITY

Wall Street Series VUL 220 & VUL 500

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

Adaptable Life
Universal Life
Disability

MUTUAL FUNDS/PORTFOLIOS

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

Fortis Capital Fund

Fortis Fiduciary Fund, Inc.

Fortis Global Growth Portfolio

Fortis Growth Fund, Inc.

Fortis Money Fund

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

Fortis U.S. Government
Securities Fund

FIXED AND VARIABLE ANNUITIES

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

Fortune Fixed Annuities
SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY
DA (DEPOSIT ADMINISTRATION FOR GROUPS)

Income Annuities
GUARANTEED FOR LIFE
GUARANTEED FOR A SPECIFIC PERIOD

FORTIS -REGISTERED TRADEMARK-

THE FORTIS FINANCIAL GROUP manages and distributes mutual funds, annuities and
life insurance products. The mutual funds, variable life and variable annuity
products are distributed through FORTIS INVESTORS, INC. and managed by FORTIS
ADVISERS, INC. The insurance products are issued by FORTIS BENEFITS INSURANCE
COMPANY and TIME INSURANCE COMPANY.

6
<PAGE>

FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments
October 31, 1994

<TABLE>
<CAPTION>
COMMOM STOCKS - 45.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ---------- ----------- ----------
<C> <S> <C> <C>
BROADCASTING - 2.12%
6,000 Grupo Televisa, S.A. de C.V. ADR. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 384,000 $ 266,250
17,000 The News Corp., Ltd. ADS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836,706 830,875
36,369 Viacom, Inc. Non-Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403,898 1,427,483
----------- -----------
2,624,604 2,524,608
----------- -----------

BUSINESS SERVICES AND SUPPLIES - 3.59%
30,400 First Data Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988,244 1,523,800
2,809 First Financial Management Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . 142,788 157,304
48,000 MBNA Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,033,494 1,284,000
34,950 Sensormatic Electronics Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,009,975 1,314,994
----------- -----------
3,174,501 4,280,098
----------- -----------

COMPUTERS - SOFTWARE - 3.95%
23,000 Lotus Development Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,079,866 879,750
25,900 Microsoft Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,102,815 1,631,700
48,000 Oracle Systems Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526,826 2,208,000
----------- -----------
2,709,507 4,719,450
----------- -----------
ELECTRONICS - CONTROLS AND EQUIPMENT - 1.02%
23,500 Applied Materials, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918,164 1,222,000
----------- -----------

ELECTRONIC - SEMICONDUCTOR AND CAPACITOR - 1.71%
10,100 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384,951 627,463
24,000 Motorola, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578,050 1,413,000
----------- -----------
963,001 2,040,463
----------- -----------
FINANCE COMPANIES - 3.53%
10,500 Federal National Mortgage Association . . . . . . . . . . . . . . . . . . . . . . . . 860,213 798,000
56,100 Franklin Resources, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660,577 2,293,088
41,192 Green Tree Financial Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,036,226 1,127,631
----------- -----------
2,557,016 4,218,719
----------- -----------
HEALTH CARE SERVICES - 3.51%
25,000 Columbia/HCA Healthcare Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929,928 1,040,625
14,500 PacifiCare Health Systems, Inc., Class B (a). . . . . . . . . . . . . . . . . . . . . 678,133 1,058,500
19,100 United Healthcare Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,486 1,007,525
23,000 U.S. HealthCare, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551,272 1,086,750
----------- -----------
2,733,819 4,193,400
----------- -----------

HOTEL & MOTEL - 0.86%
49,500 Mirage Resorts, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,820 1,027,125
----------- -----------

MEDICAL SUPPLIES - 0.52%
12,000 Medtronic, Inc. (and rights). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,844 625,500
----------- -----------

MISCELLANEOUS - 1.12%
41,500 CUC International, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019,365 1,333,187
----------- -----------

OFFICE EQUIPMENT AND SUPPLIES - 3.69%
66,000 Silicon Graphics, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843,393 2,004,750
40,000 Sterling Software, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772,400 1,250,000
26,100 Tandy Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,182,405 1,154,925
----------- -----------
2,798,198 4,409,675
----------- -----------

PUBLISHING - 0.80%
21,000 Scholastic Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,712 958,125
----------- -----------

RESTAURANTS AND FRANCHISING - 0.58%
29,700 Brinker International, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 533,657 686,812
----------- -----------

RETAIL - DEPARTMENT STORES - 1.10%
24,500 Kohl's Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957,074 1,035,125
12,000 Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,670 282,000
----------- -----------
1,094,744 1,317,125
----------- -----------
</TABLE>

7
<PAGE>

FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments (continued)
October 31, 1994

<TABLE>
<CAPTION>
COMMON STOCK - CONTINUED
- ----------------------------------------------------------------------------------------------------------------------------------

Shares Cost (b) Value (c)
- ---------- ----------- ----------
<C> <S> <C> <C>
RETAIL - MISCELLANEOUS - 5.16%
40,800 AutoZone, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 783,087 $ 979,200
19,200 Home Depot, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,400 873,600
39,000 Lowe's Companies, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791,742 1,550,250
50,700 Office Depot, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,429 1,254,825
27,400 Pep Boys Manny Moe & Jack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608,270 979,550
5,300 Talbots (The), Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,104 184,175
8,787 Toys `R' Us, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,897 338,300
----------- -----------
3,177,929 6,159,900
----------- -----------

TELECOMMUNICATIONS - 6.30%
27,900 Cisco Systems, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698,222 840,488
26,800 Ericsson (L.M.) Telephone Co. Class B ADR . . . . . . . . . . . . . . . . . . . . . . 1,309,393 1,633,125
46,400 General Instrument Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,278,464 1,554,400
14,300 Nokia ADS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,679 1,074,287
60,000 3Com Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945,864 2,415,000
----------- -----------
4,816,622 7,517,300
----------- -----------

TELEPHONE SERVICES - 1.35%
68,508 LDDS Communications, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736,620 1,609,938
----------- -----------

TOYS - 1.23%
50,233 Mattel, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694,623 1,469,315
----------- -----------
UTILITIES - TELEPHONE - 3.75%
36,230 ALC Communications Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 926,318 1,372,211
47,000 Air Touch Communications, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . 1,186,660 1,404,125
12,800 Telefonos De Mexico, S.A. de C.V. ADR . . . . . . . . . . . . . . . . . . . . . . . . 538,307 705,600
20,000 Telephone & Data Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,062,000 990,000
----------- -----------
3,713,285 4,471,936
----------- -----------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,746,031 $54,784,676
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM DEBT SECURITIES - 51.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
- ----------- ---------- ---------- ----------
<C> <S> <C> <C> <C>
ASSET BACKED, CORPORATE, FOREIGN & MUNICIPAL DEBT SECURITIES - 24.71%

INVESTMENT GRADE ASSET BACKED, CORPORATE, FOREIGN, & MUNICIPAL DEBT SECURITIES - 13.46%
MANUFACTURED HOMES - 0.84%
$1,000,000 Green Tree Mfg Housing Corp., 8.35% Ser 1994-7 Class A4 3-15-2020 . . . . . . . AAA $ 998,750 $ 998,750
----------- -----------

MISCELLANEOUS ASSET BACKED - 7.04%
3,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1 Sr Sub Pass Thru Certificates
Class A-5 4-15-2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aa2* 2,988,281 2,720,304
4,000,000 Mortgage Obligation Structured Trust, 6.85% 10-25-2018. . . . . . . . . . . . . AAA 3,908,750 3,795,092
1,919,844 Vanderbilt Mtg & Finance, Inc., 7.0% Ser 1994A, 7-10-2019 . . . . . . . . . . . AA 1,918,644 1,901,373
----------- -----------
8,815,675 8,416,769
----------- -----------

MULTI-FAMILY LOANS - 0.80%
1,000,000 DLJ Mortgage Acceptance, 8.80% Ser 1993 Multi-Family 9-18-2003. . . . . . . . . N/R 982,500 950,482
----------- -----------

CAPTIVE AUTO FINANCE - 0.63%
750,000 General Motors Acceptance Corp., 7.75% Note 4-15-1997 . . . . . . . . . . . . . BBB+ 783,818 747,324
----------- -----------

FOREIGN - GOVERNMENT - 1.52%
2,000,000 Hydro-Quebec, 8.00% Deb 2-1-2013. . . . . . . . . . . . . . . . . . . . . . . . A+ 1,953,780 1,812,072
----------- -----------

FOREST PRODUCTS - 0.50%
600,000 Georgia-Pacific Corp., 9.625% Deb 3-15-2022 . . . . . . . . . . . . . . . . . . BBB- 616,932 602,073
----------- -----------

MEDIA - 0.91%
600,000 News America Holdings, Inc., 10.125% Sr Note 10-15-2012 . . . . . . . . . . . . BBB- 600,000 622,892
500,000 News America Holdings, Inc., 8.875% Sr Note 4-26-2023 . . . . . . . . . . . . . BBB- 495,673 457,994
----------- -----------
1,095,673 1,080,886
----------- -----------
</TABLE>
*Moody's Rating

8
<PAGE>

<TABLE>
<CAPTION>
LONG-TERM DEBT SECURITIES - CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------------
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ---------- ---------- ----------
<C> <S> <C> <C> <C>
MUNICIPAL - 0.45%
$ 500,000 New York (City of), 10.00% General Obligation Taxable Bond Fiscal
1991-Ser D 8-1-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A- $ 470,243 $ 539,405
----------- -----------
MISCELLANEOUS CORPORATE - 0.77%
1,000,000 RJR Nabisco, Inc., 8.625% Sr Note 12-1-2002 . . . . . . . . . . . . . . . . . . BBB- 997,895 922,500
----------- -----------
TOTAL INVESTMENT GRADE ASSET BACKED, CORPORATE, FOREIGN & MUNICIPAL
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,715,266 16,070,261
----------- -----------

NON-INVESTMENT GRADE CORPORATE & FOREIGN DEBT SECURITIES - 11.25%
BEVERAGE - 0.38%
500,000 Royal Crown Corp., 9.75% Sr Secured Note 8-1-2000 . . . . . . . . . . . . . . . B+ 511,250 457,500
----------- -----------

BUILDING MATERIAL - 1.59%
500,000 American Standard, Inc., 9.25% Sinking Fund Deb 12-1-2016 . . . . . . . . . . . B+ 450,000 462,500
500,000 Essex Group, 10.00% Sr Note 5-1-2003. . . . . . . . . . . . . . . . . . . . . . B+ 503,125 474,375
500,000 Inter-City Products Corp., 9.75% Sr Secured Note 3-1-2000 . . . . . . . . . . . B 447,500 455,000
500,000 Wickes Lumber Co., 11.625% Sr Sub Note 12-15-2003 . . . . . . . . . . . . . . . B- 502,500 497,500
----------- -----------
1,903,125 1,889,375
----------- -----------

CHEMICALS - 0.84%
500,000 Arcadian Partners L.P., 10.75% Sr Note Ser B 5-1-2005 . . . . . . . . . . . . . B+ 492,727 486,875
500,000 Huntsman Corp., 11.00% First Mortgage Note 4-15-2004. . . . . . . . . . . . . . BB- 500,000 513,750
----------- -----------
992,727 1,000,625
----------- -----------

CONTAINERS AND PACKAGING - 0.86%
500,000 Domtar, Inc., 11.25% Sinking Fund Deb 9-15-2017 . . . . . . . . . . . . . . . . BB- 485,000 508,750
500,000 Gaylord Container Corp., 11.50% Sr Note 5-15-2001 . . . . . . . . . . . . . . . B 492,500 518,750
----------- -----------
977,500 1,027,500
----------- -----------

ENERGY - 0.38%
473,339 Midland Cogeneration Venture, L.P., 10.33% 7-23-2002. . . . . . . . . . . . . . BB- 469,789 449,672
----------- -----------
FOOD - GROCERY, MISCELLANEOUS - 0.74%
500,000 Fresh Del Monte Produce N.V.,10.00% Note Ser B 5-1-2003 . . . . . . . . . . . . BB- 511,250 421,250
500,000 Specialty Foods Corp., 10.25% Sr Note Ser B 8-15-2001 . . . . . . . . . . . . . B 482,500 465,000
----------- -----------
993,750 886,250
----------- -----------

LEISURE TIME - AMUSEMENTS - 0.30%
500,000 Trump Plaza Funding, 10.875% First Mortgage Note 6-15-2001. . . . . . . . . . . B 395,096 362,500
----------- -----------
MEDIA - 0.74%
500,000 Cablevision Industries, Inc., 9.25% Sr Note 4-1-2008. . . . . . . . . . . . . . BB- 475,000 441,250
500,000 Marvel III Holdings, Inc. 9.125% Sr Secured Note 2-15-1998. . . . . . . . . . . B 438,750 437,500
----------- -----------
913,750 878,750
----------- -----------

RESTAURANTS AND FRANCHISING - 1.10%
500,000 Carrols Corp., 11.50% Sr Note 8-15-2003 . . . . . . . . . . . . . . . . . . . . B+ 478,750 467,500
500,000 Family Restaurants, Inc., 9.75% Sr Note 2-1-2002. . . . . . . . . . . . . . . . B 431,875 425,000
500,000 Flagstar Corp., 11.25% Sr Sub Deb 11-1-2004 . . . . . . . . . . . . . . . . . . CCC+ 521,250 425,000
----------- -----------
1,431,875 1,317,500
----------- -----------

RETAIL - 2.08%
600,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000. . . . . . . . . . . . . . . . . . . B- 600,000 519,000
600,000 Grand Union Co., 11.25% Sr Note 7-15-2000 . . . . . . . . . . . . . . . . . . . B 600,000 537,000
500,000 Pantry (The), Inc., 12.00% Sr Note Ser B 11-15-2000 . . . . . . . . . . . . . . B 490,000 480,000
500,000 Pathmark Stores, Inc., 9.625%, Sr. Sub Note 5-1-2003. . . . . . . . . . . . . . B 496,581 443,750
750,000 Southland Corp., 5.00% Sr Sub Deb 12-15-2003. . . . . . . . . . . . . . . . . . BB+ 555,000 498,750
----------- -----------
2,741,581 2,478,500
----------- -----------

Technology - 0.75%
500,000 Computervision Corp., 10.875% Sr Note 8-15-1997 . . . . . . . . . . . . . . . . B 466,875 470,000
500,000 U.S. Banknote Corp., 10.375% Sr Note 6-1-2002 . . . . . . . . . . . . . . . . . BB- 452,500 430,000
----------- -----------
919,375 900,000
----------- -----------
</TABLE>

<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORFFOLIO
Schedule of Investments (continued)
October 31, 1994
<TABLE>
<CAPTION>
LONG-TERM DEBT SECURITIES - CONTINUED
- -----------------------------------------------------------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
- ------------ ----------- ----------- -----------
<C> <S> <C> <C> <C>
TEXTILE MANUFACTURING - 1.08%
$ 500,000 CMI Industries, Inc., 9.50% Sr Sub Note 10-1-2003 . . . . . . . . . . . . . . . B+ $ 496,247 $ 415,000
500,000 U.S. Leather, Inc., 10.25% Sr Note 7-31-2003. . . . . . . . . . . . . . . . . . B+ 491,709 430,000
500,000 Westpoint Stevens, Inc., 9.375% Sr Sub Deb 12-15-2005 . . . . . . . . . . . . . B+ 460,000 446,250
----------- -----------
1,447,956 1,291,250
----------- -----------

TRANSPORTATION - 0.41%
500,000 Petro PSC Properties L.P., 12.50% Sr Note 6-1-2002. . . . . . . . . . . . . . . B 497,500 491,250
----------- -----------
TOTAL NON-INVESTMENT GRADE CORPORATE & FOREIGN DEBT SECURITIES. . . . . . . . . 14,195,274 13,430,672
----------- -----------
TOTAL ASSET BACKED, CORPORATE, FOREIGN, & MUNICIPAL DEBT SECURITIES . . . . . . 30,910,540 29,500,933
----------- -----------

U.S. GOVERNMENT & AGENCIES - 26.86%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.27%
MORTGAGE BACKED SECURITIES - 6.27%
$4,982,505 6.50% 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,728,709 4,392,387
3,038,014 7.00% 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,938,877 2,764,593
315,964 9.00% 2016-2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312,309 322,382
----------- -----------
7,979,895 7,479,362
----------- -----------

NOTE - 4.00%
5,000,000 7.40% Global Registered Note 2004 . . . . . . . . . . . . . . . . . . . . . . . 5,009,375 4,780,490
----------- -----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION . . . . . . . . . . . . . . . . . . 12,989,270 12,259,852
----------- -----------

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.45%
MORTGAGE BACKED SECURITIES
3,052,070 7.50% 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,979,584 2,831,747
84,952 9.50% 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,262 88,749
----------- -----------
3,063,846 2,920,496
----------- -----------

FEDERAL HOME LOAN BANK - 7.79%
7,000,000 6.125% Global Registered Note 1996. . . . . . . . . . . . . . . . . . . . . . . 6,988,580 6,920,767
2,500,000 7.31% Note 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,5O8,984 2,378,960
----------- -----------
9,497,564 9,299,727
----------- -----------

U.S. TREASURY NOTES AND BONDS - 6.35%
3,500,000 7.50% Note 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,877,421 3,473,750
2,000,000 8.125% Bond 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,426,875 2,005,000
2,000,000 9.00% Note 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,178,125 2,107,500
----------- -----------
8,482,421 7,586,250
----------- -----------
TOTAL U.S. GOVERNMENT & AGENCIES. . . . . . . . . . . . . . . . . . . . . . . . 34,033,101 32,066,325
----------- -----------
TOTAL LONG-TERM DEBT SECURITIES.................. . . . . . . . . . . . . . . . 64,943,641 61,567,258
----------- -----------
TOTAL LONG-TERM INVESTMENTS...................... . . . . . . . . . . . . . . . $101,689,671 $116,351,934
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS - 0.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- --------- ---------
<C> <S> <C>
MASTER NOTES:
$ 108,000 Associates Corp. Master Variable Rate Note,
Current Rate - 4.88% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $108,000

TIME DEPOSIT:
689,000 First Bank (N.A.) Variable Rate Time Deposit
Open Account, Current Rate - 4.81% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689,000
------------
TOTAL SHORT-TERM INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797,000
------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $102,486,672) (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $117,148,934
------------
------------
(a) Presently not paying dividend income.
(b) At October 31, 1994, the cost of securities for federal income tax purposes was $102,488,672,and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,918,806
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,256,544)
-------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,662,262
-------------------------------------------------------------------------------------------------------------------
(c) See Note A of accompanying Notes to Financial Statements regarding valuation of securities.
(d) Note: Percentage of investments as shown is the ratio of the total market value to total net assets. Market value of
investments in foreign securities represents 5.72% of net assets as of October 31, 1994.
</TABLE>

10
<PAGE>

FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO
Schedule of Investments
October 31, 1994

<TABLE>
<CAPTION>
COMMON STOCKS - 80.23%
- -----------------------------------------------------------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------------- ----------- -----------
<C> <S> <C> <C>
APPAREL - 0.76%
40,300 Cygne Designs, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 753,700 $ 518,863

----------- -----------
Biomedics, Genetics Research - 1.42%
55,000 Centocor, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985,784 972,813
----------- -----------

BROADCASTING - 1.86%
15,000 America Online, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513,750 1,061,250
20,000 Silver King Communications, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . 327,500 210,000
----------- -----------
841,250 1,271,250
----------- -----------

BUSINESS SERVICES AND SUPPLIES - 3.93%
60,000 Acxiom Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738,750 1,755,000
45,500 Landmark Graphics Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282,606 932,750
----------- -----------
2,021,356 2,687,750
----------- -----------

COMPUTER - SOFTWARE - 13.72%
52,000 Informix Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,875 1,430,000
100,000 Input/Output, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556,250 2,150,000
31,000 Parametric Technology Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,238 1,116,000
15,000 Powersoft Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559,000 948,750
31,600 Sybase, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494,422 1,655,050
21,500 Synopsys, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,750 991,687
30,000 Wall Data (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736,248 1,087,500
----------- -----------
3,941,783 9,378,987
----------- -----------

CONSTRUCTION - 1.97%
30,000 Fastenal Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,876 1,348,125
----------- -----------

ELECTRONICS - CONTROLS AND EQUIPMENT - 5.90%
41,700 Benchmark Electronics, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,009,517 1,063,350
26,000 DOVatron International, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 650,000 702,000
16,500 StrataCom, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,875 934,312
34,000 Ultratech Stepper, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901,875 1,334,500
----------- -----------
3,382,267 4,034,162
----------- -----------

ELECTRONIC - SEMICONDUCTOR AND CAPACITOR - 3.79%
35,000 Unitrode Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683,816 673,750
33,000 Xilinx, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,285,926 1,918,125
----------- -----------
1,969,742 2,591,875
----------- -----------

HEALTH CARE SERVICES - 4.42%
43,000 Genesis Health Ventures, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 773,603 1,268,500
40,000 Health Care & Retirement Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . 340,000 1,075,000
17,400 Healthsource, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698,436 674,250
----------- -----------
1,812,039 3,017,750
----------- -----------

HOTEL AND MOTEL - 1.13%
60,000 Rio Hotel & Casino, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510,000 772,500
----------- -----------

INSURANCE - 0.75%
22,000 Mid Atlantic Medical Services, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . 656,260 508,750
----------- -----------

MACHINERY-OIL AND WELL - 2.22%
60,000 Petroleum Geo Services A/S ADS (a). . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,250 1,518,750
----------- -----------

MEDICAL SUPPLIES - 0.86%
58,500 Resound Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982,002 585,000
----------- -----------

OFFICE EQUIPMENT AND SUPPLIES - 3.07%
29,000 Avid Technology, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,825 1,091,125
32,200 Sterling Software, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,985 1,006,250
----------- -----------
1,239,810 2,097,375
----------- -----------

RECREATION EQUIPMENT - 2.24%
40,000 Callaway Golf Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661,376 1,530,000
----------- -----------

RESTAURANTS AND FRANCHISING - 4.85%
67,300 Applebees International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,201,960 1,236,638
81,200 Lone Star Steakhouse & Saloon, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . 356,925 2,080,750
----------- -----------
1,558,885 3,317,388
----------- -----------
</TABLE>

11
<PAGE>

FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO
Schedule of Investments (continued)
October 31, 1994

<TABLE>
<CAPTION>
COMMON STOCKS - CONTINUED
- -----------------------------------------------------------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------------- ----------- -----------
<C> <S> <C> <C>
RETAIL - MISCELLANEOUS - 15.37%
73,000 Authentic Fitness Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,723 $ 1,104,125
40,000 Bed, Bath & Beyond, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,000 1,180,000
50,000 Books-A-Million, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679,370 712,500
48,600 Corporate Express, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777,600 1,093,500
27,000 Franklin Quest Co. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966,660 955,125
42,000 Gymboree Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993,000 1,365,000
50,000 Micro Warehouse, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512,500 1,762,500
32,000 Starbucks Corp. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628,496 868,000
51,000 Stein Mart, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952,000 905,250
25,500 West Marine, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,875 561,000
----------- -----------
7,249,224 10,507,000
----------- -----------

TELECOMMUNICATIONS - 5.65%
38,800 Cisco Systems, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,552 1,168,850
57,000 ECI Telecom Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930,833 1,104,375
19,000 MFS Communications Co. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781,228 703,000
32,000 Newbridge Networks Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,437 884,000
----------- -----------
2,347,050 3,860,225
----------- -----------

TRANSPORTATION - 1.55%
50,000 American Freightways Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 771,875 1,062,500
----------- -----------

UTILITIES - TELEPHONE - 2.94%
45,000 IntelCom Group, Inc. (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644,000 686,250
55,000 LCI International, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 894,300 1,320,000
----------- -----------
1,538,300 2,006,250
----------- -----------

WASTE DISPOSAL - 1.83%
51,700 United Waste System, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158,950 1,253,725
----------- -----------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,741,779 $54,841,038
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS - 19.91%
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ------------ -----------
<C> <S> <C>
DISCOUNT NOTES:
$6,700,000 Federal Farm Credit Bank, 4.85% 11-28-1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,675,195
2,500,000 Federal Home Loan Mortgage Corp., 4.94% 11-28-1994. . . . . . . . . . . . . . . . . . . . . . . . . 2,490,589
-----------
9,165,784
-----------

MASTER NOTES:
882,000 Goldman Sachs Master Variable Rate Note, Current Rate - 5.05% . . . . . . . . . . . . . . . . . . . 882,000
592,000 Associates Corp. Master Variable Rate Note, Current Rate - 4.88%. . . . . . . . . . . . . . . . . . 592,000
-----------
1,474,000
-----------

TIME DEPOSITS:
2,972,064 First Bank (N.A.) Variable Rate Time Deposit, Current Rate - 4.81%. . . . . . . . . . . . . . . . . 2,972,064
-----------
TOTAL SHORT-TERM INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,611,848
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $49,353,627) (b) . . . . . . . . . . . . . . . . . . . . . . $68,452,886
-----------
-----------

(a) Presently not paying dividend income.
(b) At October 31, 1994, the cost of securities for federal income tax purposes was $49,353,627 and the
aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,529,701
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,430,442)
-------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,099,259
-------------------------------------------------------------------------------------------------------------------
(c) See Note A of accompanying Notes to Financial Statements regarding valuation of securities.
(d) Note: Percentage of investments as shown is the ratio of the total market value to total net assets.
Market value of investments in foreign securities represents 5.13% of net assets as of October 31, 1994.
</TABLE>

12
<PAGE>

FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments
October 31, 1994

<TABLE>
<CAPTION>
EQUITY INVESTMENTS - 1.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Market
Shares Cost (a) Value (b)
- ------------- ---------- ----------
<C> <S> <C> <C>
COMMON STOCKS - .62%
4,565 Boomtown, Inc (Warrants) (d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,942 $ 9,130
6,000 Casino Magic Finance Corp (Warrants) (d). . . . . . . . . . . . . . . . . . . . . . . 9,000 1,500
26,670 Capital Gaming International (d). . . . . . . . . . . . . . . . . . . . . . . . . . . 133,350 190,024
22,750 Capital Gaming International (Warrants) (d) . . . . . . . . . . . . . . . . . . . . . 35,440 68,250
17,400 Drypers Corp (Warrants) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,200 43,500
5,397 Southland Corp (Warrants) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,991 13,830
20,000 Speciality Equipment Companies, Inc(d). . . . . . . . . . . . . . . . . . . . . . . . 228,250 212,500
28,500 Thrifty Payless Holdings, Inc (Warrants) (d). . . . . . . . . . . . . . . . . . . . . 160,500 71,250
---------- ----------
TOTAL COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649,673 609,984
---------- ----------

PREFERRED STOCKS - .71%
25,000 Terex Corp., (Warrants) (d) (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 300,000
25,000 Terex Corp., Mandatory Redemption Stock (d) (g) . . . . . . . . . . . . . . . . . . . 575,000 400,000
---------- ----------
TOTAL PREFERRED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,000 700,000
---------- ----------
TOTAL EQUITY INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,274,673 $1,309,984
---------- ----------
</TABLE>

<TABLE>
<CAPTION>
CORPORATE DEBT SECURITIES - 95.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
- ------------- ------------ ------------ ------------
<C> <S> <C> <C> <C>
AUTOMOBILE AND MOTOR VEHICLE - 4.65%
$1,000,000 Aftermarket Technology Corp., 12.00% Sr Sub Note 8-1-2004 (f) . . . . . . . B- $ 1,000,000 $ 1,010,000
1,000,000 Doehler Jarvis, Inc., 11.875% Sr Note 6-1-2002. . . . . . . . . . . . . . . B 1,005,000 1,000,000
1,200,000 Harvard Industries, Inc., 12.00% Sr Note 7-15-2004. . . . . . . . . . . . . B 1,200,000 1,215,000
1,500,000 Penda Corp., 10.75% Sr Note Ser B 3-1-2004. . . . . . . . . . . . . . . . . B- 1,462,500 1,365,000
----------- -----------
4,667,500 4,590,000
----------- -----------

BEVERAGE - 5.53%
1,500,000 All-American Bottling Corp., 13.00% Sr Secured Note 8-15-2001 . . . . . . . B- 1,505,000 1,500,000
1,800,000 Heileman Acquisition Co., 9.625% Sr Sub Note 1-31-2004. . . . . . . . . . . B- 1,759,500 1,507,500
1,000,000 PF Acquisition Corp. (Curtice-Burns Foods, Inc.), 12.25% Sr Sub
Note 2-1-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 1,000,000 1,010,000
1,500,000 Seven-Up/RC Bottling Co. of Southern CA, 11.50% Sr Secured Note 8-1-1999. . B- 1,526,875 1,440,000
----------- -----------
5,791,375 5,457,500
----------- -----------

BUILDING MATERIALS - 5.01%
1,000,000 Associated Materials, Inc., 11.50% Sr Sub Note 8-15-2003. . . . . . . . . . B- 1,000,000 970,000
1,000,000 Essex Group, Inc.,10.00% Sr Note 5-1-2003 . . . . . . . . . . . . . . . . . B+ 1,015,000 948,750
750,000 Inter-City Products Corp., 9.75% Sr Secured Note 3-1-2000 . . . . . . . . . B 645,000 682,500
1,500,000 Nortek, Inc., 9.875% Sr Sub Note 3-1-2004 . . . . . . . . . . . . . . . . . CCC 1,488,393 1,350,000
1,000,000 Wickes Lumber Co., 11.625% Sr Sub Note 12-15-2003 . . . . . . . . . . . . . B- 998,750 995,000
----------- -----------
5,147,143 4,946,250
----------- -----------

CHEMICALS - 1.17%
2,000,000 Indspec Chemical Corp., 11.50% Sr Sub Disc Note Ser B 12-1-2003 (c) . . . . B- 1,253,354 1,155,000
----------- -----------

CONSUMER GOODS - 8.50%
1,290,000 Allied Waste Industries, Inc., 10.75% Sr Sub Note 2-1-2004. . . . . . . . . B 1,262,450 1,167,450
1,300,000 Chattem, Inc., 12.75% Sr Sub Note Ser B 6-15-2004 . . . . . . . . . . . . . B- 1,282,798 1,238,250
1,200,000 Drypers Corp., 12.50% Sr Note Ser B 11-1-2002 . . . . . . . . . . . . . . . B+ 1,204,390 1,266,000
1,250,000 Hosiery Corp. of America, Inc., 13.75% Sr Sub Note 8-1-2002 (f) . . . . . . B- 1,235,973 1,234,750
900,000 Mid-American Waste Systems, Inc., 12.25% Sr Sub Note 2-15-2003. . . . . . . B 900,000 877,500
1,550,000 Plastic Specialties & Technologies, Inc., 11.25% Sr Secured Note 12-1-2003. B- 1,558,375 1,410,500
1,200,000 Solon Automated Services, Inc., 12.75% Sr Note 7-15-2001. . . . . . . . . . B+ 1,211,750 1,188,000
----------- -----------
8,655,736 8,382,450
----------- -----------
</TABLE>
13

<PAGE>

FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments (continued)
October 31, 1994

<TABLE>
<CAPTION>
CORPORATE DEBT SECURITIES -- CONTINUED
- -------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
- --------- ----------- -------- ---------
<C> <S> <C> <C> <C>
CONTAINERS AND PACKAGING - 7.93%
$1,350,000 Crown Packaging Ltd., 10.75% Sr Secured Note Ser B11-1-2000 . . . . . B $ 1,349,250 $ 1,353,375
1,000,000 Domtar, Inc., 11.25% Sinking Fund Deb 9-15-2017 . . . . . . . . . . . BB- 983,750 1,017,500
1,250,000 IVEX Packaging Corp., 12.50% Sr Sub Note 12-15-2002 . . . . . . . . . B- 1,296,530 1,268,750
1,300,000 Mail-Well Corp., 10.50% Sr Sub Note 2-15-2004 (g) . . . . . . . . . . B- 1,271,000 1,144,000
1,250,000 Malette, Inc., 12.25% Sr Secured Note 7-15-2004 . . . . . . . . . . . BB- 1,250,000 1,281,250
952,000 Seminole Kraft Corp., 13.50% Sub Deb 10-15-1996 . . . . . . . . . . . N/R 931,125 950,810
800,000 Williamhouse-Regency of Delaware, Inc., 11.50% Sr Sub Deb 6-15-2005 . B- 789,500 808,000
------------ -----------
7,871,155 7,823,685
------------ -----------
ENERGY - .96%
1,000,400 Presidio Oil Co., 11.50% Sr Secured Note 9-15-2000. . . . . . . . . . CCC+ 1,018,910 945,378
------------ -----------
FOOD - GROCERY, MISCELLANEOUS - 7.28%
900,000 Di Giorgio Corp., 12.00% Sr Note 2-15-2003. . . . . . . . . . . . . . B 927,500 900,000
1,500,000 Envirodyne Industries, Inc., 10.25% Sr Note 12-1-2001 . . . . . . . . B- 1,253,250 1,200,000
1,000,000 Fresh Del Monte Produce N.V., 10.00% Note Ser A 5-1-2003. . . . . . . B 981,250 842,500
1,400,000 Pilgrims Pride Corp., 10.875% Sr Sub Deb 8-1-2003 . . . . . . . . . . B- 1,400,023 1,361,500
2,000,000 Specialty Foods Corp., 11.25% Sr Sub Note 8-15-2003 . . . . . . . . . B- 1,828,750 1,800,000
2,000,000 White Rose Foods, Inc., 12.44% Sr Note 11-1-1998 (c). . . . . . . . . B- 1,238,445 1,080,000
------------ -----------
7,629,218 7,184,000
------------ -----------
LEISURE TIME - AMUSEMENTS - 11.07%
1,350,000 Boomtown, Inc., 11.50% First Mtg Note 11-1-2003 . . . . . . . . . . . B+ 1,284,308 1,171,125
1,000,000 Capital Gaming International, 11.50% Secured Note 2-1-2001. . . . . . NR 964,560 690,000
1,100,000 Casino Magic Finance Corp., 11.50% First Mtg Note Ser B 10-15-2001. . B+ 1,075,500 750,750
1,000,000 GNF Corp., 10.625% 1st Mtg Note 4-1-2003. . . . . . . . . . . . . . . BB 530,000 570,000
1,000,000 HWCC-Tunica, Inc., 13.50% First Mtg Note 9-30-1998 (f). . . . . . . . NR 1,000,000 800,000
1,558,000 Hemmeter Enterprises, Inc., 12.00% Sr Secured Note 12-15-2000
(Interest is Payable in Kind) (g) . . . . . . . . . . . . . . . . NR 1,386,297 952,571
2,000,000 Lady Luck Gaming Finance Corp.,10.50% First Mtg Note 3-1-2001 . . . . B+ 1,330,000 720,000
600 Live Entertainment, Inc., 10.00% Sr Secured Increasing Rate
Note 3-23-1999. . . . . . . . . . . . . . . . . . . . . . . . . . NR 818 300
1,500,000 PRT Funding Corp., 11.625% Sr Note 4-15-2004. . . . . . . . . . . . . B- 1,384,500 960,000
1,250,000 Roadmaster Industries, Inc., 11.75% Sr Sub Note 7-15-2002 . . . . . . B- 1,250,000 1,218,750
1,500,000 Trump Plaza Funding, Inc., 10.875% First Mtg Note 6-15-2001 . . . . . B 1,233,695 1,087,500
1,816,268 Trump Taj Mahal Funding, Inc., 11.35% First Mtg Note 11-15-1999
(Interest is 9.375% cash and 1.975% Payable in Kind). . . . . . . N/R 1,651,454 1,159,586
1,544,000 Trump's Castle Funding, Inc., 11.75% First Mtg Bond 11-15-2003. . . . N/R 1,307,998 833,760
------------ -----------
14,399,130 10,914,342
------------ -----------
MACHINERY - 5.34%
1,000,000 Specialty Equipment Companies, Inc., 11.375% Sr Sub Note 12-1-2003. . B- 1,000,000 995,000
1,300,000 Spreckels Industries, Inc., 11.50% Sr Secured Note 9-1-2000 . . . . . B 1,310,875 1,235,000
2,155,000 Terex Corp., 13.00% Sr Secured Note 8-1-1996 (g). . . . . . . . . . . N/R 1,822,050 2,090,350
1,000,652 Thermadyne Industries, Inc., 10.75% Sr Sub Note 11-1-2003 . . . . . . CCC 962,827 940,613
------------ -----------
5,095,752 5,260,963
------------ -----------
MEDIA - 4.43%
2,000,000 American Telecasting, Inc., 12.75% Sr Sub Disc Note 6-15-2004 (c) . . CCC+ 1,121,249 945,000
2,387,178 Falcon Holding Group, Inc., L.P., 11.00% Sr Sub Note
Ser B 9-15-2003 (Interest is Payable in Kind) . . . . . . . . . . N/R 2,385,458 2,184,002
2,000,000 Marvel (Parent) Holdings, Inc., 12.25% Sr Secured Disc
Note 4-15-1998 (c). . . . . . . . . . . . . . . . . . . . . . . . B 1,331,197 1,240,000
------------ -----------
4,837,904 4,369,002
------------ -----------
METALS - MINING AND MISCELLANEOUS - 5.27%
1,000,000 Bayou Steel Corp., 10.25% First Mtg Note 3-1-2001 . . . . . . . . . . B 1,000,000 937,500
1,250,000 Haynes International, Inc., 11.25% Sr Secured Ser A Note 6-15-1998. . CCC+ 1,226,250 1,062,500
1,000,000 Horsehead Industries, Inc., 15.75% Sr Sub Ext Reset Note 6-1-1997 . . CCC- 991,250 1,030,000
1,250,000 Renco Metals, Inc., 12.00% Sr Note 7-15-2000. . . . . . . . . . . . . B+ 1,235,000 1,171,875
1,000,000 Sheffield Steel Corp., 12.00% First Mtg Note 11-1-2001
(and warrants). . . . . . . . . . . . . . . . . . . . . . . . . . B- 1,000,000 990,000
------------ -----------
5,452,500 5,191,875
------------ -----------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CORPORATE DEBT SECURITIES -- CONTINUED
- -------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
- --------- ----------- -------- ---------
<C> <S> <C> <C> <C>
RESTAURANTS AND FRANCHISING - 3.54%
$1,000,000 Carrols Corp., 11.50% Sr Note 8-15-2003 . . . . . . . . . . . . . . . B+ $ 1,000,000 $ 935,000
1,000,000 Family Restaurants, Inc., 9.75% Sr Note 2-1-2002. . . . . . . . . . . B 986,375 850,000
2,002,000 Flagstar Corp., 11.25% Sr Sub Deb 11-1-2004 . . . . . . . . . . . . . CCC+ 1,977,780 1,701,700
------------ -----------
3,964,155 3,486,700
------------ -----------
RETAIL - 12.49%
2,000,000 Almacs, Inc., 13.00% Sr Sec Note 8-1-2000 (d) . . . . . . . . . . . . D 450,000 100,000
1,000,000 Cumberland Farms, 10.50% Secured Note 10-1-2003 (e) . . . . . . . . . N/R 927,500 840,000
2,150,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000. . . . . . . . . . . . . . B- 2,215,000 1,859,750
2,500,000 Grand Union Co., 12.25% Sr Sub Note 7-15-2002 . . . . . . . . . . . . CCC+ 2,392,562 1,750,000
1,000,000 Kash N' Karry, Inc., 12.375% Sr Note 2-1-1999 (d) . . . . . . . . . . D 890,000 815,000
1,300,000 Mayfair Supermarkets, Inc., 11.75% Sr Sub Note 3-20-2003. . . . . . . B- 1,332,500 1,131,000
1,250,000 Pantry (The), Inc., 12.00% Sr Note Ser B 11-15-2000 . . . . . . . . . B 1,243,750 1,200,000
350,000 Pay 'N' Pak Stores, Inc., 13.50% Sr Sub Deb 6-1-1998 (d). . . . . . . D 350,000 1,750
1,500,000 Purity Supreme, Inc., 11.75% Sr Secured Note 8-1-1999 (and warrants). CCC+ 1,469,384 1,267,500
1,000,000 Stater Brother, Inc.,11.00% Sr Note 3-1-2001. . . . . . . . . . . . . B+ 1,000,000 935,000
1,750,000 Thrifty Payless, Inc., 12.25% Sr Sub Note 4-15-2004 . . . . . . . . . B- 1,587,938 1,662,500
1,000,000 Victory Markets, Inc., 12.50% Sub Exchange Note 3-15-2000 . . . . . . N/R 870,000 750,000
------------ -----------
14,728,634 12,312,500
------------ -----------
TECHNOLOGY - 4.73%
2,250,000 Computervision Corp., 11.375% Sr Sub Note 8-15-1999 . . . . . . . . . CCC+ 1,942,188 1,890,000
1,600,000 Genicom Corp., 12.50% Sr Sub Note 2-15-1997 . . . . . . . . . . . . . N/R 1,419,000 1,472,000
1,450,000 U.S. Banknote Corp., 11.625% Sr Note Ser B 8-1-2002 . . . . . . . . . B+ 1,375,978 1,297,750
------------ -----------
4,737,166 4,659,750
------------ -----------
TEXTILE MANUFACTURING - 1.86%
1,000,000 Synthetic Industries, Inc., 12.75% Sr Sub 12-1-2002 . . . . . . . . . B- 1,005,555 975,000
1,000,000 U.S. Leather, Inc., 10.25% Sr Note 7-31-2003. . . . . . . . . . . . . B+ 991,192 860,000
------------ -----------
1,996,747 1,835,000
------------ -----------
TOBACCO - 1.58%
2,250,000 Liggett Group, Inc., 11.50% Ser B Secured Note 2-1-1999 . . . . . . . N/R 1,664,750 1,530,000
29,000 Liggett Group, Inc., 16.50% Sr Sec Resettable Note Ser C 2-1-1999 . . N/R 29,000 24,650
------------ -----------
1,693,750 1,554,650
------------ -----------
TRANSPORTATION - 3.77%
350,000 Continental Airlines, Inc., 12.125% Secured Equip. Trust Certificate
4-15-1996 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . N/R 141,213 80,500
1,750,000 GPA Delaware, Inc., 8.75% Deb 12-15-1998. . . . . . . . . . . . . . . CCC+ 1,445,000 1,435,000
1,250,000 K & F Industries, Inc., 11.875% Sr Secured Note 12-1-2003 . . . . . . B+ 1,185,000 1,221,875
1,000,000 Petro PSC Properties L.P., 12.50% Sr Note 6-1-2002 (and warrants) . . B 999,500 982,500
------------ -----------
3,770,713 3,719,875
------------ -----------
TOTAL CORPORATE DEBT SECURITIES . . . . . . . . . . . . . . . . . . . 102,710,842 93,788,920
------------ -----------
TOTAL LONG-TERM INVESTMENTS . . . . . . . . . . . . . . . . . . . . . $103,985,515 $95,098,904
------------ -----------
</TABLE>

<PAGE>

FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments (continued)
October 31, 1994

<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS - 0.90%
- -------------------------------------------------------------------------------
Principal Market
Amount Value (b)
- --------- ---------
<C> <S> <C>
MASTER NOTES:
$ 699,000 Goldman Sachs Master Variable Rate Note, Current Rate - 5.05% . . . . . . . . . . . . . . . . . . $ 699,000
189,000 Associates Corp. Master Variable Rate Note - 4.88%. . . . . . . . . . . . . . . . . . . . . . . . 189,000
-----------
TOTAL SHORT-TERM INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888,000
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $104,873,515). . . . . . . . . . . . . . . . . . . . . . . $95,986,904
-----------
-----------

</TABLE>

(a) At October 31, 1994, the cost of securities for federal income tax purposes
was $104,873,515 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . $ 1,104,230
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . (9,990,841)
- -----------------------------------------------------------------------------
Net unrealized depreciation . . . . . . . . . . . . . . . . . . $(8,886,611)
- -----------------------------------------------------------------------------
</TABLE>

(b) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) The interest rates disclosed for zero coupon issues represent effective
yields on the date of acquisition.
(d) Presently non-income producing. For corporate debt securities, items
identified are in default as to payment of interest and/or principal.
(e) The fund entered into the following restricted security transactions: On
February 2,1994, the fund purchased $1,000,000 par of Cumberland Farms
with a cost basis of $927,500. This private placement represents all of
the restricted illiquid securities owned by the fund and is equal to .85%
of net assets. See Note A of accompanying Notes to Financial Statements.
(f) Securities sold within terms of a private placement memorandum, exempt
from registration under Section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." These investments have been identified by
portfolio management as illiquid securities. The value of these
securities at October 31,1994 is $4,054,750 which represents 4.11% of
net assets.
(g) Securities sold within terms of a private placement memorandum, exempt
from registration under Section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." Pursuant to guidelines adopted by the Board of
Directors, these issues are determined to be liquid.
(h) Note: Percentage of investments as shown is the ratio of the total
market value to total net assets.

<PAGE>

FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO
Schedule of Investments
October 31, 1994

<TABLE>
<CAPTION>
LONG-TERM DEBT SECURITIES -- 95.57%
- -------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
- --------- ----------- -------- ---------
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES - 12.31%
$ 2,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1 Sr Sub
Pass Thru Certificates Class A-5, 4-15-2019 . . . . . . . . . Aa2* $ 1,992,378 $ 1,813,536
30,000,000 Kidder Peabody Acceptance Corp., 1994-C1 Class AX-P,
7.76% Net Interest Margin Commercial Mtg PassThru
Certificates 2-1-2006 (h) . . . . . . . . . . . . . . . . . . AAA 1,470,712 1,481,370
38,996,000 Nomura Asset Securities Corp., 1994-MD1 Class AX-2,
8.20% Net Interest Margin Commercial Mtg Pass Thru
Certificates 3-15-2015 (h). . . . . . . . . . . . . . . . . . AA 1,532,155 1,481,692
1,865,889 Prudential Home Mortgage Corp., 1989-7 A1 10.00% 10-25-2019 . . . AA 1,892,266 1,931,015
1,857,649 Residential Resources Inc., Ser 14 Class A, 9.50% 12-1-2018 . . . AAA 1,903,831 1,913,971
------------ -----------
8,791,342 8,621,584
------------ -----------
U.S. GOVERNMENT AND AGENCIES - 83.26%
FEDERAL HOME LOAN BANK - 4.76%
3,500,000 7.31% Bond 6-16-2004. . . . . . . . . . . . . . . . . . . . . . . 3,512,096 3,330,544
------------ -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.30%
MORTGAGE BACKED SECURITIES:
498,328 9.00% 2001-2018 . . . . . . . . . . . . . . . . . . . . . . . . . 479,952 508,137
2,036,990 9.50% 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,187,259 2,120,378
266,532 11.25% 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,972 288,437
546,052 11.50% 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,091 595,025
383,946 12.50% 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,181 426,540
------------ -----------
3,958,455 3,938,517
------------ -----------
REMICS:
1,208,608 1.29% #1711-K Principal Only Strip 2024 (f) . . . . . . . . . . . 905,110 229,636
2,081,414 6.66% #1685-Z 2023 (e). . . . . . . . . . . . . . . . . . . . . . 1,911,138 1,292,568
53,002 12.87% #1364-l Interest Only Strip I/O-ette 2005 (f). . . . . . . 546,244 1,055,273
------------ -----------
3,362,492 2,577,477
------------ -----------
7,320,947 6,515,994
------------ -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.38%
MORTGAGE BACKED SECURITIES:
2,307,960 8.50% 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,441,012 2,287,043
528,366 10.50% 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,556 569,479
456,277 11.50% 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 499,810 502,047
346,561 12.00% 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,177 383,925
373,673 12.50% 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,562 416,762
------------ -----------
4,307,117 4,159,256
------------ -----------
REMICS:
2,730,276 4.15% Inverse COFI Floating Rate 2022 (g) . . . . . . . . . . . . 1,580,398 773,009
2,460,000 7.50% Trust #1992-41K 2021. . . . . . . . . . . . . . . . . . . . 2,576,618 2,241,254
3,000,000 7.50% Trust #1992-43E 2022. . . . . . . . . . . . . . . . . . . . 3,143,501 2,736,447
2,833,703 9.98% Inverse COFI Floating Rate 2008 (g) . . . . . . . . . . . . 1,765,033 1,775,935
3,177,226 10.52% Inverse COFI Floating Rate 2008 (g). . . . . . . . . . . . 3,290,165 2,430,578
150,127 13.50% Trust #1989-98G 2017 . . . . . . . . . . . . . . . . . . . 172,751 159,452
------------ -----------
12,528,466 10,116,675
------------ -----------
16,835,583 14,275,931
------------ -----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 17.13%
1,845,409 7.50% 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,933,942 1,712,192
2,145,332 7.50% 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,236,889 1,990,465
564,747 8.00% 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,231 541,099
3,779,990 8.00% 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,895,592 3,621,703
615,038 9.00% 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,350 620,611
1,722,043 Fleet Mtg Securities Class D, 9.125% 2018 (GNMA Backed) . . . . . 1,762,741 1,768,846
1,665,611 9.50% 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,764,999 1,740,043
------------ -----------
12,812,744 11,994,959
------------ -----------
</TABLE>

*Moody's Rating

<PAGE>

FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO
Schedule of Investments (continued)
October 31, 1994

<TABLE>
<CAPTION>
LONG-TERM DEBT SECURITIES -- CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Cost (a) Value (b)
- --------- -------- ---------
<S> <C> <C> <C>
RESOLUTION FUNDING CORPORATION - 1.99%
$7,000,000 7.355% Zero Coupon Strip 2014 (c) $ 1,690,755 $ 1,396,563
------------ -----------
U.S. TREASURY NOTES - 29.70%
5,000,000 7.50% 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,214,659 4,962,500
2,000,000 8.50% 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,298,152 2,090,622
5,000,000 8.75% 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,325,017 5,214,055
4,500,000 9.00% 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,891,568 4,741,875
3,650,000 9.375% 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,825,045 3,792,573
------------ -----------
21,554,441 20,801,625
------------ -----------
TOTAL U.S. GOVERNMENT AND AGENCIES . . . . . . . . . . . . . . . . . . . . . . . 63,726,566 58,315,616
------------ -----------
TOTAL LONG-TERM DEBT SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . $72,517,908 $66,937,200
------------ -----------
</TABLE>

<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS - 2.51%
- -------------------------------------------------------------------------------
Principal Market
Amount Value (b)
- --------- ---------
<S> <C> <C>
MASTER NOTE:
$1,760,000 Associates Corp. Master Variable Rate Note, Current Rate - 4.88% . . . . . . . . . . . . . . . . . $ 1,760,000
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $74,277,908) (A). . . . . . . . . . . . . . . . . . . . . . $68,697,200
-----------
-----------

</TABLE>

(a) At October 31, 1994, the cost of securities for federal income tax
purposes was $74,955,627 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:

<TABLE>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . . $ 626,570
Unrealized depreciation . . . . . . . . . . . . . . . . . . (6,884,997)
- ----------------------------------------------------------------------------
Net unrealized depreciation . . . . . . . . . . . . . . . . $(6,258,427)
- ----------------------------------------------------------------------------
</TABLE>

(b) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) The interest rate disclosed for zero coupon securities represent the
original issue discount yields on the date of acquisition.
(d) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets.
(e) Z-Tranche securities pay no principal or interest during their initial
accrual period, but accrue additional principal at a specified coupon
rate. The interest rate disclosed represents the coupon rate at which
the additional principal is being accrued.
(f) The interest rates disclosed for interest only and principal only
strips represent effective yields at October 31, 1994 based upon the
current cost basis, estimated timing and, in the case of interest only
strips, amount of future cash flows. These investments have been
identified by portfolio management as illiquid securities. The
aggregate value of these securities at October 31, 1994 is $1,284,909
which represents 1.83% of total net assets.
(g) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest rates disclosed are the rates in effect on October 31, 1994.
(h) Net interest margin securities entitle the holder to cash flows on the
interest spread on a securitized pool of loans. The interest rates
disclosed for these securities represent effective yields at October 31,
1994, based upon the current cost basis, estimated timing and amount
of future cash flows. These investments have been identified by portfolio
management as illiquid securities. The aggregate value of these
securities at October 31, 1994 is $2,963,062 which represents 4.23% of
net assets.

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Assets and Liabilities
October 31, 1994

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT
ASSET CAPITAL HIGH TOTAL
ALLOCATION APPRECIATION YIELD RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, as detailed in the accompanying schedule,
at market (cost $102,486,672; $49,353,627; $104,873,515; and
$74,277,908, respectively) (Note A) . . . . . . . . . . . . . . . . $117,148,934 $ 68,452,886 $ 95,986,904 $ 68,697,200
Cash on deposit with custodian. . . . . . . . . . . . . . . . . . . . 124,128 892 149,311 336
Receivables:
Investment securities sold. . . . . . . . . . . . . . . . . . . . . 2,052,646 96,250 719,742 3,158,660
Interest and dividends. . . . . . . . . . . . . . . . . . . . . . . 1,268,897 21,437 3,277,911 962,576
Subscriptions of capital stock. . . . . . . . . . . . . . . . . . . 203,607 100,358 226,721 7,143
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 55,284 51,597 56,025 42,944
------------ ------------ ------------ ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,853,496 68,723,420 100,416,614 72,868,859
------------ ------------ ------------ ------------
LIABILITIES:
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 327,754 186,275
Payable for investment advisory and management fees . . . . . . . . . 96,628 56,279 62,279 47,333
Payable for investment securities purchased . . . . . . . . . . . . . 998,750 82,500 1,235,000 1,763,980
Distribution fees payable . . . . . . . . . . . . . . . . . . . . . . 44,799 25,326 29,016 21,098
Redemptions of capital stock. . . . . . . . . . . . . . . . . . . . . 304,801 200,231 140,904 794,582
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . 13,646 7,380 10,738 14,311
------------ ------------ ------------ ------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,458,624 371,716 1,805,691 2,827,579
------------ ------------ ------------ ------------
NET ASSETS:
Net proceeds of capital stock, par value $.01 per share - authorized
20,000,000,000 shares; outstanding 8,265,974; 2,965,225;
12,481,711; and 9,058,615 shares, respectively. . . . . . . . . . . 103,502,159 49,679,236 108,003,632 86,813,590
Unrealized appreciation (depreciation) of investments . . . . . . . . 14,662,262 19,099,259 (8,886,611) (5,580,708)
Undistributed (excess distribution of) net investment income. . . . . 492,397 -- 199,411 (186,275)
Accumulated net realized gain (loss) on investments . . . . . . . . . 738,054 (426,791) (705,509) (11,005,327)
------------ ------------ ------------ ------------
Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $119,394,872 $ 68,351,704 $ 98,610,923 $ 70,041,280
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net Asset Value Per Share. . . . . . . . . . . . . . . . . . . . . . . $14.44 $23.05 $ 7.90 $7.73
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

19
</TABLE>

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Operations
For the Year Ended October 31, 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT
ASSET CAPITAL HIGH TOTAL
ALLOCATION APPRECIATION YIELD RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,436,503 $ 574,312 $10,368,664 $ 5,813,251
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . 242,847 41,760 -- --
Fee income (Note A) . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 248,135
----------- ----------- ----------- ------------
Total Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,679,350 616,072 10,368,664 6,061,386
----------- ----------- ----------- ------------
Expenses:
Investment advisory and management fees (Note B). . . . . . . . . . 1,103,566 607,491 685,802 633,248
Distribution fees (Note B). . . . . . . . . . . . . . . . . . . . . 508,256 273,371 317,900 283,848
Legal and auditing fees (Note B). . . . . . . . . . . . . . . . . . 26,691 19,800 30,200 30,000
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 31,852 19,100 24,000 29,700
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . 31,931 32,075 20,939 24,900
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 31,516 22,675 29,830 22,414
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . . 7,840 5,225 6,220 6,330
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,827 4,316 5,001 6,718
----------- ----------- ----------- ------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748,479 984,053 1,119,892 1,037,158
----------- ----------- ----------- ------------
NET INVESTMENT INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . 2,930,871 (367,981) 9,248,772 5,024,228
----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A):
Net realized gain (loss) from security transactions . . . . . . . . . 788,635 (426,791) 806,811 (4,120,660)
Net change in unrealized appreciation (depreciation) of investments . (2,994,032) (4,853,816) (9,512,273) (7,013,797)
----------- ----------- ----------- ------------
NET LOSS ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . (2,205,397) (5,280,607) (8,705,462) (11,134,457)
----------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. . . . $ 725,474 $(5,648,588) $ 543,310 $ (6,110,229)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC.
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,930,871 $ 2,852,764
Net realized gain from security transactions. . . . . . . . . . . . . . . 788,635 5,221,585
Net change in unrealized appreciation (depreciation) of investments . . . (2,994,032) 5,176,809
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . 725,474 13,251,158
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income. . . . . . . . . . . . . . . . . . . . . . . . (2,556,356) (3,427,300)
From realized gains on investments. . . . . . . . . . . . . . . . . . . . (5,171,318) --
------------ ------------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,727,674) (3,427,300)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of 2,102,540 and 1,764,331 shares, respectively
(Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,350,907 25,531,620
Proceeds from 485,931 and 211,040 shares, respectively, issued as a
result of reinvested dividends . . . . . . . . . . . . . . . . . . . . . 6,992,258 3,021,821
Less cost of repurchase of 1,354,658 and 1,348,119 shares, respectively . (19,434,221) (19,562,929)
------------ ------------
NET INCREASE OF 1,233,813 AND 627,252 SHARES, RESPECTIVELY . . . . . . . . 17,908,944 8,990,512
------------ ------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . 10,906,744 18,814,370
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,488,128 89,673,758
------------ ------------
End of year (including undistributed net investment income of $492,397
and $76,194, respectively) . . . . . . . . . . . . . . . . . . . . . . . $119,394,872 $108,488,128
------------ ------------
------------ ------------

</TABLE>

<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (367,981) $ (612,845)
Net realized gain (loss) from security transactions . . . . . . . . . . . (426,791) 4,202,215
Net change in unrealized appreciation (depreciation) of investments . . . (4,853,816) 11,960,937
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. . . . . . (5,648,588) 15,550,307
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments. . . . . . . . . . . . . . . . . . . . (3,890,570) --
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of 1,429,148 and 1,325,002 shares, respectively
(Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,401,050 30,657,726
Proceeds from 160,390 and 0 shares, respectively, issued as a result of
reinvested dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 3,804,448 --
Less cost of repurchase of 758,288 and 1,367,450 shares, respectively . . (17,748,768) (30,980,896)
------------- ------------
NET INCREASE (DECREASE) OF 831,250 AND (42,448) SHARES, RESPECTIVELY . . . 19,456,730 (323,170)
------------- ------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . 9,917,572 15,227,137
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,434,132 43,206,995
------------- ------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,351,704 $ 58,434,132
------------- ------------
------------- ------------

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

21
</TABLE>

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC.
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,248,772 $ 5,984,100
Net realized gain from security transactions. . . . . . . . . . . . . . . 806,811 2,740,132
Net change in unrealized appreciation (depreciation) of investments . . . (9,512,273) 1,743,520
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . 543,310 10,467,752
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . . . . . . . . . . . (9,506,269) (6,081,382)
Excess distributions of net realized gains (Note A) . . . . . . . . . . . (45,321) (75,346)
------------ ------------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,551,590) (6,156,728)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of 6,891,317 and 4,573,833 shares, respectively
(Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,803,866 38,442,664
Proceeds from 719,057 and 453,562 shares, respectively, issued as a
result of reinvested dividends . . . . . . . . . . . . . . . . . . . . . 6,047,165 3,810,290
Less cost of repurchase of 3,616,490 and 2,245,379 shares, respectively . (30,627,114) (18,796,643)
------------ ------------
NET INCREASE OF 3,993,884 AND 2,782,016 SHARES, RESPECTIVELY . . . . . . . 34,223,919 23,456,311
------------ ------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . 25,215,639 27,767,335
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,395,284 45,627,949
------------ ------------
End of year (including undistributed net investment income of $199,411
and $257,497, respectively). . . . . . . . . . . . . . . . . . . . . . . $ 98,610,923 $ 73,395,284
------------ ------------
------------ ------------

</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,024,228 $ 5,325,692
Net realized gain (loss) from security transactions . . . . . . . . . . . (4,120,660) 3,170,933
Net change in unrealized appreciation (depreciation) of investments . . . (7,013,797) 184,179
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. . . . . . (6,110,229) 8,680,804
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income. . . . . . . . . . . . . . . . . . . . . . . . (5,025,096) (5,420,854)
Excess distributions of net realized gains (Note A) . . . . . . . . . . . (1,152,236) (1,897,036)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . (6,177,332) (7,317,890)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of 690,778 and 1,042,217 shares, respectively
(Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,875,894 9,451,398
Proceeds from 433,482 and 503,314 shares, respectively, issued as a
result of reinvested dividends . . . . . . . . . . . . . . . . . . . . . 3,609,513 4,537,547
Less cost of repurchase of 2,074,479 and 2,158,038 shares, respectively . (17,294,834) (19,549,212)
------------ ------------
NET DECREASE OF 950,219 AND 612,507 SHARES, RESPECTIVELY . . . . . . . . . (7,809,427) (5,560,267)
------------ ------------
TOTAL DECREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . (20,096,988) (4,197,353)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,138,268 94,335,621
------------ ------------
End of year (including distributions in excess of net investment income
of $186,275 and $2,648, respectively). . . . . . . . . . . . . . . . . . $ 70,041,280 $ 90,138,268
------------ ------------
------------ ------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

</TABLE>

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC
Notes to Financial Statements

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

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

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for
securities that have been purchased by the Government Total Return
Portfolio on a forward commitment or when-issued basis can take place a
month or more after the transaction date. During this period, such
securities are subject to market fluctuation and the portfolio
maintains, in a segregated account with its custodian, assets with a
market value equal to the amount of its purchase commitments. As of
October 31, 1994, the portfolio had entered into outstanding when-issued
or forward commitments of $0.

The Government Total Return Portfolio may enter into transactions to
sell its purchase commitments to third parties at the current market
values and concurrently acquire other purchase commitments for similar
securities at later dates. As an inducement for the portfolio to
"rollover" its purchase commitments, the portfolio receives negotiated
fees. For the year ended October 31, 1994, such fees earned by the
portfolio amounted to $248,135.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security
transactions are accounted for on the trade date and dividend income is
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized security gains and losses are determined using
the identified cost method. For financial reporting purposes, except for
original issue discount, the Asset Allocation and High Yield portfolios
do not amortize bond premium and discount. For Government Total Return
Portfolio, interest income includes amortization of bond premium and
discount.

For the year ended October 31, 1994, the cost of purchases and proceeds
from sales of securities (other than short-term securities) were as
follows:

<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
- -------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Portfolio............ $121,432,744 $102,044,633
Capital Appreciation Portfolio........ 23,172,281 17,262,029
High Yield Portfolio.................. 87,121,014 55,148,539
Government Total Return Portfolio..... 114,103,721 133,220,155

</TABLE>

INCOME TAXES: The portfolios intend to qualify, under the Internal
Revenue Code, as regulated investment companies and if so qualified,
will not have to pay federal income taxes to the extent their taxable
net income is distributed. For tax purposes, each portfolio is a single
taxable entity.

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

Net investment income and net realized gains differ for financial
statement and tax purposes primarily because of the recognition of
market discount as ordinary income for tax purposes for Asset Allocation
and High Yield Portfolios, the non-recognition of premium amortization
as a reduction of ordinary income for tax purposes for Government Total
Return Portfolio, and wash sale transactions. The character of
distributions made during the year from net investment income or net
realized gains may, therefore, differ from their ultimate
characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the fund. The effect on dividend distributions
of certain current year permanent book-to-tax differences is reflected
as excess distributions of net realized gains in the statements of
changes in net assets and the financial highlights.

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

<TABLE>
<CAPTION>
Asset Capital Government
Allocation Appreciation High Yield Total Return
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Net
Realized Gain (Loss)... $(41,688) $ 12,191 $(199,411) $11,610,489
Undistributed Net
Investment Income...... 41,688 367,981 199,411 (182,759)
--------- -------- ---------- ------------
Paid-in-Capital......... $ 0 $380,172 $ 0 $11,427,730
--------- -------- ---------- ------------

</TABLE>

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC
Notes to Financial Statements (continued)

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

For federal income tax purposes the portfolios had the following capital
loss carryovers at October 31, 1994, which, if not offset by subsequent
capital gains, will expire in 1995 through 2002.

<TABLE>
<CAPTION>
<S> <C>
Capital Appreciation Portfolio............................ $ 426,791
High Yield Portfolio...................................... 705,509
Government Total Return Portfolio......................... 10,327,608

</TABLE>

It is unlikely the Board of Directors will authorize a distribution of
any net realized gains until the available capital loss carryovers have
been offset or expired.

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

ILLIQUID SECURITIES: At October 31, 1994, investments in securities for
the High Yield and Government Total Return Portfolios included issues
that are illiquid. The fund currently limits investments in illiquid
securities to 10% of net assets, at market value, at the date of
purchase. The aggregate value of such securities at October 31, 1994,
was $4,894,750 for the High Yield Portfolio which represents 4.96% of
net assets and $4,247,971 for the Government Total Return Portfolio
which represents 6.06% of net assets. Pursuant to guidelines adopted by
the Board of Directors, certain unregistered securities are determined
to be liquid and are not included within the 10% limitation specified
above.

B. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the
investment adviser for each portfolio. Investment advisory and
management fees are computed for Asset Allocation and Capital
Appreciation Portfolios at an annual rate of 1% of the first $100
million of average daily net assets, .80% for the next $150 million, and
.70% for net assets in excess of $250 million of each portfolio. For
High Yield Portfolio, investment advisory and management fees are
computed at an annual rate of .80% for the first $50 million of average
daily net assets, .70% for net assets in excess of $50 million. The fee
for Government Total Return Portfolio is computed at an annual rate of
.80% of the first $50 million of average daily net assets, .75% of the
next $450 million, and .70% of net assets in excess of $500 million.

In addition to the investment advisory and management fees, a
distribution fee of .45% of average daily net assets for each of Asset
Allocation and Capital Appreciation Portfolios and .35% of average daily
net assets for each of High Yield and Government Total Return Portfolios
is to be used to compensate those who sell shares of the portfolios and
to pay certain other expenses of selling portfolio shares.

Fortis Investors, Inc., the principal underwriter for each portfolio,
received sales charges (paid by purchasers of the portfolios' shares)
aggregating $682,089 for Asset Allocation Portfolio; $533,938 for
Capital Appreciation Portfolio; $1,332,078 for High Yield Portfolio; and
$182,623 for Government Total Return Portfolio for the year ended
October 31, 1994.

Legal fees and expenses aggregating $8,579; $4,600; $7,200 and $6,000
for Asset Allocation Portfolio, Capital Appreciation Portfolio, High
Yield Portfolio, and Government Total Return Portfolio, respectively,
for the year ended October 31, 1994, were paid to a law firm of which
the secretary of Fortis Advantage is a partner.

C. At the special shareholder's meeting of August 23, 1994, the Amended
and Restated Articles of Incorporation were approved, which allows the
fund to issue multiple class shares effective November 14, 1994.

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC
Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS: Selected per share historical data for each of
the Portfolios was as follows:

<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
ASSET ALLOCATION PORTFOLIO 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year. . . . $ 15.43 $ 14.00 $ 13.34 $ 10.72 $ 11.91
-------- -------- ------- ------- -------
Operations:
Investment income -- net. . . . . . . . .37 .42 .53 .50 .42
Net realized and unrealized gain
(loss) on investments. . . . . . . . . (.31) 1.52 .96 2.37 (1.00)
-------- -------- ------- ------- -------
Total from operations . . . . . . . . . . .06 1.94 1.49 2.87 (.58)
-------- -------- ------- ------- -------
Distributions to shareholders:
From investment income -- net . . . . . (.33) (.51) (.82) (.25) (.61)
From net realized gains . . . . . . . . (.72) -- -- -- --
Excess distributions of net realized
gains. . . . . . . . . . . . . . . . . -- -- (.01) -- --
-------- -------- ------- ------- -------
Total distributions to shareholders . . . (1.05) (.51) (.83) (.25) (.61)
-------- -------- ------- ------- -------
Net asset value, end of year. . . . . . . $ 14.44 $ 15.43 $ 14.00 $ 13.34 $ 10.72
-------- -------- ------- ------- -------
Total return* . . . . . . . . . . . . . . 0.48% 14.20% 11.55% 27.25% (5.27%)
Net assets at end of year
(000's omitted). . . . . . . . . . . . . $119,395 $108,488 $89,674 $27,270 $21,691
Ratio of expenses to average daily
net assets . . . . . . . . . . . . . . . 1.55% 1.58% 1.58% 1.83% 1.98%
Ratio of net investment income to
average daily net assets . . . . . . . . 2.60% 2.90% 4.05% 4.11% 3.89%
Portfolio turnover rate . . . . . . . . . 94% 103% 45% 64% 112%

</TABLE>

<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year. . . . $ 27.38 $ 19.85 $ 19.80 $ 11.58 $ 15.44
-------- -------- ------- ------- -------
Operations:
Investment income (loss) -- net** . . . (.12) (.30) (.17) (.14) (.07)
Net realized and unrealized gain
(loss) on investments. . . . . . . . . (2.45) 7.83 .22 8.36 (3.06)
-------- -------- ------- ------- -------
Total from operations . . . . . . . . . . (2.57) 7.53 .05 8.22 (3.13)
-------- -------- ------- ------- -------
Distributions to shareholders:
From investment income -- net . . . . . -- -- -- -- (.02)
From net realized gains . . . . . . . . (1.76) -- -- -- (.71)
-------- -------- ------- ------- -------
Total distributions to shareholders . . . (1.76) -- -- -- (.73)
-------- -------- ------- ------- -------
Net asset value, end of year. . . . . . . $ 23.05 $ 27.38 $ 19.85 $ 19.80 $ 11.58
-------- -------- ------- ------- -------
Total return* . . . . . . . . . . . . . . (9.56%) 37.93% .25% 70.98% (21.21%)
Net assets at end of year
(000's omitted). . . . . . . . . . . . . $ 68,352 $ 58,434 $43,207 $29,992 $15,194
Ratio of expenses to average daily
net assets . . . . . . . . . . . . . . . 1.62% 1.62% 1.68% 1.82% 1.88%
Ratio of net investment income
(loss) to average daily net assets . . . (.61%) (1.23%) (.88%) (.97%) (.56%)
Portfolio turnover rate . . . . . . . . . 36% 60% 43% 93% 62%

</TABLE>

* These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
** Per share amounts compiled based upon average shares outstanding for the
period.

<PAGE>

FORTIS ADVANTAGE PORTFOLIOS, INC
Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS (CONTINUED):

<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
HIGH YIELD PORTFOLIO 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year . . . $ 8.65 $ 8.00 $ 7.82 $ 5.72 $ 8.59
------- ------- ------- ------- -------
Operations:
Investment income -- net . . . . . . . .86 .87 .85 .95 1.04
Net realized and unrealized gain
(loss) on investments. . . . . . . . . (.72) .68 .22 2.03 (2.73)
------- ------- ------- ------- -------
Total from operations. . . . . . . . . . .14 1.55 1.07 2.98 (1.69)
------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -- net. . . . . (.89) (.89) (.85) (.88) (1.12)
Excess distributions of net
investment income . . . . . . . . . . -- (.01) (.04) -- --
From net realized gains. . . . . . . . -- -- -- -- (.06)
------- ------- ------- ------- -------
Total distributions to shareholders. . . (.89) (.90) (.89) (.88) (1.18)
------- ------- ------- ------- -------
Net asset value, end of year . . . . . . $ 7.90 $ 8.65 $ 8.00 $ 7.82 $ 5.72
------- ------- ------- ------- -------
Total return*. . . . . . . . . . . . . . 1.48% 20.33% 14.20% 55.78% (21.56%)
Net assets at end of year
(000's omitted) . . . . . . . . . . . . $98,611 $73,395 $45,628 $31,250 $17,484
Ratio of expenses to average daily
net assets. . . . . . . . . . . . . . . 1.23% 1.29% 1.33% 1.51% 1.53%
Ratio of net investment income to
average daily net assets. . . . . . . . 10.18% 10.43% 10.34% 13.80% 14.16%
Portfolio turnover rate. . . . . . . . . 63% 95% 80% 61% 65%

</TABLE>

<TABLE>
<CAPTION>
For the Year
Ended October 31, For the Period For the Period
------------------------------ April 27, 1991 to May 1, 1990
GOVERNMENT TOTAL RETURN PORTFOLIO 1994 1993 1992 October 31, 1991@ to April 26, 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . $ 9.01 $ 8.88 $ 9.11 $ 9.06 $ 8.91
------- ------- ------- ------- -------
Operations:
Investment income -- net . . . . . . . .52 .52 .63 .31 .85
Net realized and unrealized gain
(loss) on investments . . . . . . . . (1.16) .33 (.13) .13 .12
------- ------- ------- ------- -------
Total from operations. . . . . . . . . . (.64) .85 .50 .44 .97
------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -- net. . . . . (.52) (.53) (.59) (.37) (.82)
Excess distributions of net
realized gains. . . . . . . . . . . . (.12) (.19) (.14) (.02) --
------- ------- ------- ------- -------
Total distributions to shareholders. . . (.64) (.72) (.73) (.39) (.82)
------- ------- ------- ------- -------
Net asset value, end of period . . . . . $ 7.73 $ 9.01 $ 8.88 $ 9.11 $ 9.06
------- ------- ------- ------- -------
Total return*. . . . . . . . . . . . . . (7.38%) 9.87% 5.73% 4.98% 11.27%
Net assets at end of period
(000's omitted) . . . . . . . . . . . . $70,041 $90,138 $94,336 $70,912 $75,605
Ratio of expenses to average daily
net assets. . . . . . . . . . . . . . . 1.28% 1.25% 1.25% 1.25%+ 1.25%+
Ratio of net investment income to
average daily net assets. . . . . . . . 6.20% 5.81% 6.64% 6.74%+ 9.37%+
Portfolio turnover rate. . . . . . . . . 135% 113% 122% 118% 101%

</TABLE>

* These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
+ Annualized.
@ Fortis Advisers, Inc. assumed management of the fund on April 27, 1991
(formerly Olympus U.S. Government Plus Fund).

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Fortis Advantage Portfolios, Inc.:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of Asset Allocation
Portfolio, Capital Appreciation Portfolio, High Yield Portfolio and
Government Total Return Portfolio (portfolios within Fortis Advantage
Portfolios, Inc.) as of October 31, 1994 and the related statements of
operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period ended October 31, 1994, and the
financial highlights for each of the years in the five-year period ended
October 31, 1994 (for each of the years in the three-year period ended
October 31, 1994 and the period from April 27, 1991 to October 31, 1991 for
Government Total Return Portfolio). These financial statements and the
financial highlights are the responsibility of the Fortis Advantage
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits. For Government
Total Return Portfolio, the financial highlights for the period from May 1,
1990 to April 26, 1991 were audited by other auditors whose report dated
June 17, 1991 expressed an unqualified opinion on this information.

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

In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of Asset Allocation Portfolio, Capital Appreciation Portfolio, High
Yield Portfolio and Government Total Return Portfolio at October 31, 1994 and
the results of their operations for the year then ended, the changes in their
net assets for each of the years in the two-year period ended October 31,
1994, and the financial highlights for the periods specified in the first
paragraph above, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
December 9, 1994

27
<PAGE>

DIRECTORS OFFICERS

RICHARD W. CUTTING THOMAS R. PELLETT EDWARD M. MAHONEY
CPA and Financial Prior to January, 1991, President and Director
Consultant Senior Vice President--
Administration and DEAN C. KOPPERUD
ALLEN R. FREEDMAN Corporate Affairs and Vice President
Chairman and Chief Director
Executive Officer Pet Incorporated STEPHEN M. POLING
Fortis, Inc.; Vice President
Managing Director of ROBB L. PRINCE
Fortis International, N.V Vice President and DENNIS M. OTT
Treasurer Vice President
DR. ROBERT M. GAVIN Jostens, Inc.
President JAMES S. BYRD
Macalester College LEONARD J. SANTOW Vice President
Principal
BENJAMIN S. JAFFRAY Griggs &Santow, Inc. ROBERT C. LINDBERG
Chairman Vice President
Sheffield Group, Ltd. JOSEPH M. WIKLER
Prior to January, 1994, KEITH R. THOMSON
JEAN L. KING Director of Vice President
President Research, Chief
Communi-King Investment Officer, ROBERT W. BELTZ, JR.
Principal, and Director Vice President
EDWARD M. MAHONEY The Rothschild Co.
Chairman and Chief ROBERT J. CLANCY
Executive Officer Vice President
Fortis Advisers, Inc.
Fortis Investors, Inc. THOMAS D. GUALDONI
Senior Vice President Vice President
and Director of Fortis
Benefits Insurance JOHN W. NORTON
Company Vice President
Senior Vice President of
Time Insurance MICHAEL J. RADMER
Company Secretary

TAMARA L. FAGELY
Treasurer

DAVID G. CARROLL
2nd Vice President

CHRIS J. NEUHARTH
2nd Vice President

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

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

<PAGE>

FORTIS FINANCIAL GROUP

Fortis Financial Group (FFG) is a premier manufacturer of investment products
whose principal underwriter, Fortis Investors, Inc., offers mutual funds,
annuities and variable universal life insurance. A classic investment company,
Fortis has built a reputation for superior money management and unequaled
service to shareholders and their investment professionals.

With more than $3 billion in assets under management, FFG is part of a
worldwide financial services and insurance concern which has components in 14
countries around the globe and a total of $100 billion in assets.

Fortis Financial Group is comprised of member companies Fortis Advisers,
Inc., Fortis Investors, Inc., Time Insurance Company, and Fortis Benefits
Insurance Co. Like the Fortis name, which comes from the Latin for STEADFAST,
our focus is on the long-term in all we do: in the relationships we build, the
performance we seek, the service we provide, the products we offer.

FORTIS -REGISTERED TRADEMARK-

FORTIS FINANCIAL GROUP
P.O. Box 64284
St. Paul, MN 55164
---------------
Bulk Rate
US Postage
PAID
Permit No. 3794
Minneapolis, MN
---------------
FORTIS ADVANTAGE
PORTFOLIOS, INC.

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<PAGE>
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FORTIS
ADVANTAGE
PORTFOLIOS, INC.

Semi-Annual Report
April 30, 1995
[LOGO]
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC. SEMI-ANNUAL REPORT

CONTENTS

LETTER TO SHAREHOLDERS 1
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION PORTFOLIO 5
CAPITAL APPRECIATION PORTFOLIO 9
HIGH YIELD PORTFOLIO 11
GOVERNMENT TOTAL RETURN PORTFOLIO 15
STATEMENTS OF ASSETS AND LIABILITIES 17
STATEMENTS OF OPERATIONS 18
STATEMENTS OF CHANGES IN NET ASSETS
ASSET ALLOCATION PORTFOLIO 19
CAPITAL APPRECIATION PORTFOLIO 20
HIGH YIELD PORTFOLIO 21
GOVERNMENT TOTAL RETURN PORTFOLIO 22
NOTES TO FINANCIAL STATEMENTS 23
BOARD OF DIRECTORS AND OFFICERS 29

- - TOLL-FREE PERSONAL ASSISTANCE

- Shareholder Services

- (800) 800-2638, Ext. 3012 or 3014

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

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

- - TOLL-FREE INFORMATION LINE

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

- (800) 800-2638, Ext. 4344

- 24 hours a day

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

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

HOW TO USE THIS REPORT

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

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

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

HIGHLIGHTS

<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1995
CLASS A CLASS B* CLASS C* CLASS H*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSET ALLOCATION PORTFOLIO
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 14.44 $ 14.27 $ 14.27 $ 14.27
End of period................................... $ 14.95 $ 14.91 $ 14.87 $ 14.89
TOTAL RETURN** 6.14% 7.01% 6.73% 6.87%
DISTRIBUTIONS PER SHARE:
From net investment income...................... $ 0.2650 $ 0.2500 $ 0.2500 $ 0.2500
From net realized gains on investments.......... $ 0.0896 $ 0.0896 $ 0.0896 $ 0.0896
CAPITAL APPRECIATION PORTFOLIO
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 23.05 $ 22.45 $ 22.45 $ 22.45
End of period................................... $ 24.60 $ 24.55 $ 24.56 $ 24.56
TOTAL RETURN** 6.72% 9.35% 9.40% 9.40%
DISTRIBUTIONS PER SHARE:
From net investment income...................... -- -- -- --
From net realized gains on investments.......... -- -- -- --
HIGH YIELD PORTFOLIO
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 7.90 $ 7.87 $ 7.87 $ 7.87
End of period................................... $ 7.97 $ 7.96 $ 7.96 $ 7.96
TOTAL RETURN** 6.93% 6.59% 6.59% 6.59%
DISTRIBUTIONS PER SHARE:
From net investment income...................... $ 0.453943 $ 0.398606 $ 0.398606 $ 0.398606
From net realized gains on investments.......... -- -- -- --
GOVERNMENT TOTAL RETURN PORTFOLIO
NET ASSET VALUE PER SHARE:
Beginning of period............................. $ 7.73 $ 7.64 $ 7.64 $ 7.64
End of period................................... $ 7.88 $ 7.86 $ 7.87 $ 7.86
TOTAL RETURN** 5.86% 6.21% 6.34% 6.21%
DISTRIBUTIONS PER SHARE:
From net investment income...................... $ 0.293904 $ 0.247462 $ 0.247462 $ 0.247462
From net realized gains on investments.......... -- -- -- --
<FN>
* Period from November 14, 1994 (commencement of operations) to April 30,
1995.
** These are the fund's total returns during the period, including reinvestment
of all dividend and capital gains distributions without adjustments for
sales charge.
</TABLE>
<PAGE>
DEAR SHAREHOLDER:

[PHOTO]

"I want to spend time enjoying my family and building my career--not
managing my investments. With the Asset Allocation Portfolio, I can do
the things that are important today knowing that my money is hard at
work for tomorrow."

We're pleased to present the Fortis Advantage Portfolios, Inc. semi-annual
report for the period ended April 30, 1995.

ECONOMIC REVIEW AND INVESTMENT STRATEGIES

The rise of the U.S. equity markets year-to-date has been surprising for its
strength, yet not entirely unexpected. The reasons for continued vigor in the
equity markets are quiet inflation, a more relaxed posture by the Federal
Reserve, and declining interest rates. The economic slowdown in the United
States is well under way, and is likely to last a few more quarters. This is in
contrast to the economy's strength in 1994, which was due to two unsustainable
forces: excessive consumer credit growth and business inventory buildup. Neither
of these factors is likely to resume soon. In fact, slower final demand is
beginning to feed back into the system, con-

ASSET ALLOCATION PORTFOLIO ALLOCATION AS OF 4/30/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Long-Term Debt Securities 46.6%
Equity Investments 41.3%
Cash Equivalents/Receivables 12.1%
100.0%
</TABLE>

tributing to a weaker employment picture and falling commodity prices.

Currently, the greatest risk to the U.S. equity markets is if the Fed overstays
its welcome and maintains a tight credit policy for too long. This situation
would hurt corporate profits in general, and provoke a narrowing list of
companies to sustain earnings growth during late 1995 and early 1996.

ASSET ALLOCATION PORTFOLIO
TOP HOLDINGS AS OF 4/30/95
<TABLE>
<CAPTION>
Percent of
Stocks Net Assets
- -----------------------------------------------------------------------------
<C> <S> <C>
1. Microsoft Corp. 1.6%
2. 3Com Corp. 1.4%
3. Silicon Graphics, Inc. 1.4%
4. First Data Corp. 1.4%
5. CUC International, Inc. 1.4%

<CAPTION>
Bonds
- -----------------------------------------------------------------------------
<C> <S> <C>
1. U.S. Treasury Bond (8.125%) 2021 5.2%
2. FNMA Note (7.84%) 1998 3.3%
3. U.S. Treasury Note (7.25%) 1996 3.1%
4. FHLB Global Note (6.125%) 1996 3.0%
5. FNMA (8.50%) 2025 2.5%
</TABLE>

PORTFOLIO CHANGES FOR THE SIX-MONTH PERIOD ENDED 4/30/95

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

STOCK ELIMINATIONS:
ALC Communications Corp.
Brinker International, Inc.
Grupo Televisa, S.A. de C.V. ADR
Telefonos de Mexico, S.A. de C.V. ADR
Toys 'R' Us, Inc.

ASSET ALLOCATION PORTFOLIO
CLASS B, C AND H TOTAL RETURNS
Since Inception 11/14/94+

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares +7.01 % +3.41 %
Class C shares +6.73 % +5.73 %
Class H shares +6.87 % +3.27 %
<FN>
The performance of the separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Past performance is not indicative of future performance.
Total returns include reinvestment of all dividend and capital gains
distributions.
+ Date shares were first offered to the public.
++ Assumes redemption on April 30, 1995.
</TABLE>

ASSET ALLOCATION PORTFOLIO CLASS A

Value of $10,000 invested January 4, 1988

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
LEHMAN BROTHERS AGGREGATE ASSET ALLOCATION
BOND INDEX# S&P 500## PORTFOLIO CLASS A
<S> <C> <C> <C>
01/04/88 10,000 10,000 9,550
04/30/88 10,320 10,702 9,560
04/30/89 11,140 13,147 10,617
04/30/90 12,146 14,527 11,542
04/30/91 13,991 17,085 13,212
04/30/92 15,529 19,470 15,095
04/30/93 17,589 21,266 16,645
04/30/94 17,737 22,403 17,610
04/30/95 19,053 26,336 19,499
Asset Allocation Portfolio Class A
Average Annual Total Return
1 Year 5 Year Since January 4, 1988@
With Sales Charge* +5.74% +10.04% +9.55%
Without Sales Charge** +10.72% +11.06% +10.24%
<FN>
Annual period ended April 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
# An unmanaged index of government, corporate, and mortgage-backed securities
with an average maturity of approximately nine years.
## This is an unmanaged index of 500 common stocks.
@ Date shares were first offered to the public.
</TABLE>

1
<PAGE>
[PHOTO]

"The entrepreneurial spirit still thrives in America. For people willing
to work hard and take some risks, opportunities are unlimited. Young,
growing companies are bringing new products and new ideas to the
marketplace every day. The Capital Appreciation Portfolio lets us invest
in these companies."

However, we do not expect this scenario to unfold. The U.S. bond market has
already taken charge by leading rates downward. Today's lower interest rates may
stimulate growth later.

PORTFOLIO REVIEW
ASSET ALLOCATION PORTFOLIO

There were some small changes in the fixed income portion of the Asset
Allocation over the past six months. When the period began, we changed our
recommended balance from 40 percent equity, 55 percent bonds, 5 percent cash to
40 percent equities and 60 percent bonds. The additional fixed income allocation
was used to purchase a 5 percent position in high grade municipal bonds, as they
seemed to present an unusual value. This small position was completely
eliminated in January 1995 as the municipal market exhibited very strong
performance. Throughout this period, our commitment to high yield has remained
unchanged at about 20 percent of fixed income assets.

CAPITAL APPRECIATION PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Other 21.3%
Computer-Software 18.3%
Retail: Miscellaneous 13.0%
Cash Equivalents/Receivables 8.4%
Electronic-Semiconductor and Ca-
pacitor 7.0%
Health Care Services 6.8%
Restaurants and Franchising 6.5%
Electronics-Controls and Equip-
ment 5.4%
Office Equipment and Supplies 4.8%
Business Services and Supplies 4.3%
Telecommunications 4.2%
</TABLE>

CAPITAL APPRECIATION PORTFOLIO
CLASS B, C AND H TOTAL RETURNS
Since Inception 11/14/94+

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares +9.35 % +5.80 %
Class C shares +9.40 % +8.40 %
Class H shares +9.40 % +5.80 %
<FN>
The performance of the separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Past performance is not indicative of future performance.
Total returns include reinvestment of all dividend and capital gains
distributions.
+ Date shares were first offered to the public.
++ Assumes redemption on April 30, 1995.
</TABLE>

CAPITAL APPRECIATION PORTFOLIO
TOP TEN HOLDINGS AS OF 4/30/95

<TABLE>
<CAPTION>
Percent
of
Net
Stocks Assets
- ------------------------------------------------------------------------------
<C> <S> <C>
1. Input/Output, Inc. 4.6%
2. America Online, Inc. 3.8%
3. Xilinx, Inc. 3.4%
4. Lone Star Steakhouse and Saloon, Inc. 3.4%
5. Acxiom Corp. 2.8%
6. Informix Corp. 2.8%
7. Ultratech Stepper, Inc. 2.6%
8. Micro Warehouse, Inc. 2.4%
9. Petroleum Geo Services A/S ADS 2.2%
10. Fastenal Co. 2.1%
</TABLE>

PORTFOLIO CHANGES FOR THE SIX-MONTH
PERIOD ENDED 4/30/95

ADDITIONS:
ADC Telecommunications, Inc.
Alliance Semiconductor Corp.
Cerner Corp.
FTP Software, Inc.
Fastenal Co.
Franklin Electric Publishers, Inc.
Hollywood Entertainment Corp.
Indigo NV
Integrated Device Technology, Inc.
Integrated Silicon Solutions, Inc.
Medaphis Corp.
Medic Computer Systems, Inc.
Medpartners, Inc.
Network General Corp.
Omnicare, Inc.
Papa John's International, Inc.
Rotech Medical Corp.
Steris Corp.
Sunglass Hut International, Inc.
System Software Associates, Inc.

ELIMINATIONS:
Cygne Designs, Inc.
DOVatron International, Inc.
ECI Telecom Ltd.
Fastenal Co.
Mid Atlantic Medical Services, Inc.
Powersoft Corp.
Resound Corp.
Rio Hotel & Casino, Inc.
Starbucks Corp.
Stein Mart, Inc.

CAPITAL APPRECIATION PORTFOLIO CLASS A

Value of $10,000 invested January 4, 1988

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CAPITAL APPRECIATION
S&P 500*** PORTFOLIO CLASS A
<S> <C> <C> <C>
01/04/88 10,000 9,550
04/30/88 10,702 10,390
04/30/89 13,147 12,808
04/30/90 14,527 15,400
04/30/91 17,085 16,251
04/30/92 19,470 19,017
04/30/93 21,266 21,358
04/30/94 22,403 24,903
04/30/95 26,336 26,775
Capital Appreciation Portfolio
Class A
Average Annual Total Return
1 Year 5 Year Since January 4, 1988@
With Sales Charge* +2.68% +10.67% +14.40%
Without Sales Charge** +7.52% +11.70% +15.12%
<FN>
Annual period ended April 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of 500 common stocks.
@ Date shares were first offered to the public.
</TABLE>

2
<PAGE>
[PHOTO]

"It makes sense to put part of my money into the High Yield Portfolio. I
want the opportunity to earn the kind of returns that high yield bonds
can offer."

In early April we again changed our allocation to a 50/50 (equities/bonds). In
addition, we shortened our average duration over this period from about five
years at the beginning to the current 4.75 years.

CAPITAL APPRECIATION PORTFOLIO

While the stocks of smaller, emerging growth companies, such as those
represented in the Capital Appreciation Fund, lagged those of large
multinational companies in the early stages of the market advance, they have
gained ground recently as growth stocks have moved back into favor with
investors. Earnings of growth companies should continue to increase strongly as
cyclical earnings begin to weaken under pressure of a slowing economy.

HIGH YIELD PORTFOLIO

Returns for the High Yield Portfolio continued to be excellent. Higher market
prices for gaming credits, machinery, and metal industry securities have aided
recent performance. However, several food distributor holdings have slightly
hurt overall results.

Our strategy continues to emphasize gaming, retail and consumer credits. And we
have -- and may continue to -- sell machinery, metal and container-related
bonds.

The "soft landing" promoted by the Federal Reserve should pose little threat to
most high yield issues. However, should the economy roll into a recession, the
outlook for high yield securities could be more negative. As stated previously,
we do not believe we're on the brink of recession, rather we feel we are in a
temporary pause.

HIGH YIELD PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Other 14.1%
Retail 12.7%
Leisure Time-Amusements 11.0%
Consumer Goods 9.0%
Machinery 8.0%
Metals-Mining and Miscellaneous 7.4%
Food-Grocery, Miscellaneous 7.9%
Containers and Packaging 5.8%
Media 5.2%
Cash Equivalents/Receivables 5.3%
Technology 4.7%
Beverage 4.7%
Transportation 4.2%
</TABLE>

HIGH YIELD PORTFOLIO
TOP TEN HOLDINGS AS OF 4/30/95

<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------------------------------------
<C> <S> <C>
1. Computervision Corp. (11.375%) 1999 2.4%
2. Terex Corp. (13.00%) 1996 1.9%
3. Falcon Holding Group (11.00%) 2003 1.9%
4. Liggett Group (11.50%) 1999 1.8%
5. Specialty Foods Corp. (11.25%) 2003 1.7%
6. Envirodyne Industries, Inc. (10.25%) 2001 1.6%
7. Flagstar Corp. (11.25%) 2004 1.6%
8. Plastic Specialty & Technologies, Inc. (11.25%) 2003 1.5%
9. Thrifty Payless, Inc. (12.25%) 2004 1.5%
10. All-American Bottling Corp. (13.00%) 2001 1.5%
</TABLE>

HIGH YIELD PORTFOLIO
CLASS B, C AND H TOTAL RETURNS
Since Inception 11/14/94+

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
<S> <C> <C>
- ------------------------------------------------------------
Class B shares +6.58 % +2.98 %
Class C shares +6.59 % +5.59 %
Class H shares +6.59 % +2.99 %
<FN>
The performance of the separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Past performance is not indicative of future performance.
Total returns include reinvestment of all dividend and capital gains
distributions.
+ Date shares were first offered to the public.
++ Assumes redemption on April 30, 1995.
</TABLE>

HIGH YIELD PORTFOLIO CLASS A

Value of $10,000 invested January 4, 1988

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
LEHMAN BROTHERS HIGH HIGH YIELD PORTFOLIO
YIELD INDEX*** CLASS A
<S> <C> <C> <C>
01/04/88 10,000 9,550
04/30/88 10,639 9,895
04/30/89 11,435 10,553
04/30/90 11,141 9,135
04/30/91 12,891 10,673
04/30/92 16,167 13,673
04/30/93 18,574 15,752
04/30/94 19,799 17,723
04/30/95 21,854 18,602
High Yield Portfolio Class A
Average Annual Total Return
1 Year 5 Year Since January 4, 1988@
With Sales Charge* +0.24% +14.23% +8.85%
Without Sales Charge** +4.96% +15.29% +9.54%
<FN>
Annual period ended April 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of lower quality, high yield corporate debt securities.
@ Date shares were first offered to the public.
</TABLE>

3
<PAGE>
[PHOTO]

"The Government Total Return Portfolio offers an alternative to today's
low-yielding CDs. It seemed to be the right choice for us."

GOVERNMENT TOTAL RETURN PORTFOLIO

Since the last shareholder letter, some modest changes were made in the
portfolio. Last October, 50 percent of assets were mortgage-backed securities
and approximately 37 percent in treasury/agency bonds. Because mortgage-backed
securities seemed to provide less attractive yields over comparable treasuries,
we have lessened our mortgage exposure to about 35 percent and increased the
treasury/agency holdings to 50 percent.

Last year the portfolio had an overall duration of about 5.1 years, which was
maintained until recently when it was lowered to 4.75 years.

IN CLOSING

We appreciate your investment in the Fortis Advantage Portfolios. If

you have any questions, please call us or talk with your investment
professional.

Sincerely,

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

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

/s/ DENNIS M. OTT
- ----------------
Dennis M. Ott
Vice President

May 24, 1995

GOVERNMENT TOTAL RETURN PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/95

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
U.S. Treasury Securities 38.6%
GNMA's 15.3%
FNMA's 12.2%
FHLMC's 11.2%
Whole Loan Residential 6.2%
Receivables/Cash Equivalents 5.7%
Other Direct Federal Obligations 5.4%
Miscellaneous 2.9%
Other Government Agencies 2.5%
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO
TOP TEN HOLDINGS AS OF 4/30/95

<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------------------------------
<C> <S> <C>
1. U.S. Treasury Note (8.75%) 1997 8.1%
2. U.S. Treasury Note (9.375%) 1996 7.4%
3. U.S. Treasury Note (9.00%) 1998 7.4%
4. U.S. Treasury Bond (8.125%) 2021 7.4%
5. GNMA (8.00%) 2022 5.5%
6. FHLB (7.31%) 2004 5.4%
7. U.S. Treasury Note (7.25%) 1996 5.2%
8. FNMA (8.50%) 2022 3.4%
9. U.S. Treasury Note (7.875%) 2004 3.3%
10. GNMA II (9.50%) 2019 3.2%
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO
CLASS B, C AND H TOTAL RETURNS
Since Inception 11/14/94+

<TABLE>
<CAPTION>
Without With
CDSC CDSC++
- ------------------------------------------------------------
<S> <C> <C>
Class B shares +6.20 % +2.60 %
Class C shares +6.34 % +5.34 %
Class H shares +6.21 % +2.61 %
<FN>
The performance of the separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Past performance is not indicative of future performance.
Total returns include reinvestment of all dividend and capital gains
distributions.
+ Date shares were first offered to the public.
++ Assumes redemption on April 30, 1995.
</TABLE>

GOVERNMENT TOTAL RETURN PORTFOLIO CLASS A

Value of $10,000 invested May 28, 1986

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
LEHMAN BROTHERS
INTERMEDIATE GOV'T GOVERNMENT TOTAL RETURN
INDEX*** PORTFOLIO CLASS A
<S> <C> <C> <C>
05/28/86 10,000 9,550
04/30/87 10,692 10,020
04/30/88 11,475 10,586
04/30/89 12,223 11,182
04/30/90 13,300 12,270
04/30/91 15,117 13,623
04/30/92 16,678 14,411
04/30/93 18,676 16,136
04/30/94 18,841 15,694
04/30/95 20,027 16,325
Government Total Return Portfolio
Class A
Average Annual Total Return
1 Year 5 Year Since May 28, 1986@
With Sales Charge* -0.66% +4.91% +5.64%
Without Sales Charge** +4.03% +5.88% +6.19%
<FN>
Annual period ended April 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of government bonds with an average maturity of three to
four years.
@ Date shares were first offered to the public.
</TABLE>

4
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments
(Unaudited)
April 30, 1995

COMMON STOCKS-41.05%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- --------- ----------- -----------
<C> <S> <C> <C>
BROADCASTING - 1.47%
500 Petro PSC Properties, L.P.
(Warrants).......................... $ 18,285 $ 16,500
34,000 The News Corp., Ltd. ADR (e).......... 584,292 663,000
24,669 Viacom, Inc., Non-Voting Class B
(a)................................. 948,787 1,131,690
----------- -----------
1,551,364 1,811,190
----------- -----------
BUSINESS SERVICES AND SUPPLIES - 3.57%
30,400 First Data Corp....................... 988,244 1,710,000
2,809 First Financial Management Corp....... 142,788 205,408
48,000 MBNA Corp............................. 1,033,494 1,452,000
34,950 Sensormatic Electronics Corp.......... 1,009,975 1,039,763
----------- -----------
3,174,501 4,407,171
----------- -----------
COMPUTER-SOFTWARE - 4.61%
15,000 Computer Associates International,
Inc................................. 777,928 965,625
23,000 Lotus Development Corp. (a)........... 1,079,866 724,500
23,600 Microsoft Corp. (a)................... 1,005,434 1,929,300
30,000 Novell, Inc. (a)...................... 653,310 652,500
46,500 Oracle Systems Corp. (a).............. 344,821 1,418,250
----------- -----------
3,861,359 5,690,175
----------- -----------
ELECTRONIC-CONTROLS AND EQUIPMENT -
1.17%
23,500 Applied Materials, Inc. (a)........... 918,164 1,448,187
----------- -----------
ELECTRONIC-SEMICONDUCTOR AND CAPACITOR
- 1.94%
10,100 Intel Corp............................ 384,951 1,033,987
24,000 Motorola, Inc......................... 578,050 1,365,000
----------- -----------
963,001 2,398,987
----------- -----------
FINANCE COMPANIES - 2.90%
10,500 Federal National Mortgage
Association......................... 860,212 926,625
24,100 Franklin Resources, Inc............... 283,777 970,025
41,192 Green Tree Financial Corp............. 1,036,227 1,683,723
----------- -----------
2,180,216 3,580,373
----------- -----------
HEALTH CARE SERVICES - 2.35%
25,000 Columbia/HCA Healthcare Corp.......... 929,928 1,050,000
12,500 PacifiCare Health Systems, Inc., Class
B (a)............................... 594,808 775,000
17,500 U.S. HealthCare, Inc.................. 478,244 468,125
16,600 United Healthcare Corp................ 504,429 601,750
----------- -----------
2,507,409 2,894,875
----------- -----------
HOTEL AND MOTEL - 1.20%
49,500 Mirage Resorts, Inc. (a).............. 1,115,820 1,485,000
----------- -----------
LEISURE TIME-AMUSEMENTS - 0.74%
16,500 Disney (Walt) Co...................... 910,134 913,687
----------- -----------

<CAPTION>
Market
Shares Cost (b) Value (c)
- --------- ----------- -----------
<C> <S> <C> <C>
MEDICAL SUPPLIES - 0.72%
12,000 Medtronic, Inc. (and rights).......... $ 293,844 $ 892,500
----------- -----------
MISCELLANEOUS - 1.37%
41,500 CUC International, Inc. (a)........... 1,019,365 1,691,125
----------- -----------
OFFICE EQUIPMENT AND SUPPLIES - 3.54%
46,000 Silicon Graphics, Inc. (a)............ 591,093 1,725,000
40,000 Sterling Software, Inc. (a)........... 772,400 1,360,000
26,100 Tandy Corp............................ 1,182,405 1,291,950
----------- -----------
2,545,898 4,376,950
----------- -----------
PUBLISHING - 0.71%
15,700 Scholastic Corp. (a).................. 810,604 879,200
----------- -----------
RETAIL - DEPARTMENT STORES - 1.12%
24,500 Kohl's Corp. (a)...................... 957,074 1,096,375
12,000 Wal-Mart Stores, Inc.................. 137,670 285,000
----------- -----------
1,094,744 1,381,375
----------- -----------
RETAIL - MISCELLANEOUS - 3.96%
40,800 AutoZone, Inc. (a).................... 783,086 943,500
19,200 Home Depot, Inc....................... 222,400 801,600
39,000 Lowe's Companies, Inc. (e)............ 791,743 1,126,125
50,700 Office Depot, Inc. (a)................ 477,429 1,153,425
27,400 Pep Boys Manny Moe & Jack............. 608,270 705,550
5,300 Talbots (The), Inc.................... 106,104 160,987
----------- -----------
2,989,032 4,891,187
----------- -----------
TELECOMMUNICATIONS - 5.82%
31,000 3Com Corp. (a)........................ 488,696 1,736,000
27,900 Cisco Systems, Inc. (a)............... 698,222 1,112,512
23,600 Ericsson (L.M.) Telephone Co., Class B
ADR (e)............................. 1,146,993 1,582,675
46,400 General Instrument Corp. (a) (e)...... 1,278,464 1,583,400
28,600 Nokia ADS............................. 584,679 1,172,600
----------- -----------
4,197,054 7,187,187
----------- -----------
TELEPHONE SERVICES - 1.18%
60,508 LDDS Communications, Inc. (a)......... 657,407 1,452,192
----------- -----------
TOYS - 1.21%
62,791 Mattel, Inc........................... 694,623 1,491,292
----------- -----------
UTILITIES - TELEPHONE - 1.47%
47,000 Air Touch Communications, Inc. (a).... 1,186,660 1,263,125
14,800 Telephone & Data Systems, Inc......... 785,880 551,300
----------- -----------
1,972,540 1,814,425
----------- -----------
TOTAL COMMON STOCKS................... $33,457,079 $50,687,078
----------- -----------
</TABLE>

PREFERRED STOCKS-0.25%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Value
Shares Cost (b) (c)
- ------ -------- --------
<C> <S> <C> <C>
BROADCASTING - 0.25%
17,000 The News Corp., Preferred ADR (e).......................................... $252,414 $306,000
-------- --------
TOTAL PREFERRED STOCK...................................................... $252,414 $306,000
-------- --------
</TABLE>

5
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

ASSET BACKED SECURITIES-5.58%

CORPORATE BONDS-INVESTMENT GRADE-3.49%
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOREIGN - GOVERNMENT - 1.58%
<C> <S> <C> <C> <C>
2,000,000 Hydro-Quebec, 8.00% Deb 2-1-2013................................. A+ 1,953,780 1,952,998
------------ ------------
FOREST PRODUCTS - 0.53%
600,000 Georgia-Pacific Corp., 9.625% Deb 3-15-2022...................... BBB- 616,932 652,918
------------ ------------
MEDIA - 0.94%
600,000 News America Holdings, Inc., 10.125% Sr Note 10-15-2012.......... BBB- 600,000 654,334
500,000 News America Holdings, Inc., 8.875% Sr Note 4-26-2023............ BBB- 495,749 501,112
------------ ------------
1,095,749 1,155,446
------------ ------------
MISCELLANEOUS - 0.44%
500,000 New York (City of), 10.00% General Obligation Taxable Bond Fiscal
1991 Ser D 8-1-2005............................................ A- 471,093 545,485
------------ ------------
TOTAL CORPORATE BONDS - INVESTMENT GRADE......................... 4,137,554 4,306,847
------------ ------------
TOTAL ASSET BACKED & INVESTMENT GRADE CORPORATE DEBT
SECURITIES..................................................... $11,058,613 $11,195,983
------------ ------------
</TABLE>

CORPORATE BONDS-NON-INVESTMENT GRADE-10.59%
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BUILDING MATERIALS - 1.51%
<C> <S> <C> <C> <C>
500,000 Associated Materials, Inc., 11.50% Sr Sub Note 8-15-2003......... B- 462,500 458,750
500,000 Essex Group, 10.00% Sr Note 5-1-2003............................. B+ 503,125 481,875
500,000 Inter-City Products Corp., 9.75% Sr Secured Note 3-1-2000........ B 447,500 447,500
500,000 Wickes Lumber Co., 11.625% Sr Sub Note 12-15-2003................ B- 502,500 475,000
------------ ------------
1,915,625 1,863,125
------------ ------------
CHEMICALS - 1.29%
500,000 Arcadian Partners L.P., 10.75% Sr Note Ser B 5-1-2005............ B+ 493,070 512,500
900,000 Indspec Chemical Corp., 11.50% Sr Sub Disc Note Ser B 12-1-2003
(Zero coupon until 12-1-1998).................................. B- 541,220 549,000
500,000 NL Industries, Inc., 11.75% Sr Secured Note 10-15-2003........... B 475,000 530,000
------------ ------------
1,509,290 1,591,500
------------ ------------
CONSUMER GOODS - 0.36%
500,000 Plastic Specialty & Technologies, Inc., 11.25% Sr Secured Note
12-1-2003...................................................... B- 443,125 441,250
------------ ------------
CONTAINERS AND PACKAGING - 0.43%
500,000 Domtar, Inc., 11.25% Sinking Fund Deb 9-15-2017.................. BB- 485,000 531,250
------------ ------------
ENERGY - 0.37%
458,109 Midland Cogeneration Venture, L.P., 10.33% Midland Funding Sr
Secured Lease Obligation Bond Ser C 7-23-2002.................. BB 454,674 461,187
------------ ------------
FOOD - GROCERY, MISCELLANEOUS - 0.39%
500,000 Specialty Foods Corp., 10.25% Sr Note Ser B 8-15-2001............ B 482,500 487,500
------------ ------------
</TABLE>

*Moody's Rating

6
<PAGE>
CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED

7
<PAGE>
FORTIS ADVANTAGE ASSET ALLOCATION PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

U.S. GOVERNMENT SECURITIES-26.96%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (b) Value (c)
- ----------- ------------- --------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.28%
MORTGAGE BACKED SECURITIES:
$ 3,000,000 6.615% 2004...................................................... $ 2,802,187 $ 2,817,375
------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.60%
MORTGAGE BACKED SECURITIES:
3,000,000 8.500% 2025...................................................... 3,050,626 3,043,125
1,300,709 9.000% 2016-2025................................................. 1,329,301 1,340,543
------------- --------------
4,379,927 4,383,668
------------- --------------
NOTES:
4,000,000 7.840% 1998...................................................... 4,026,840 4,043,752
------------- --------------
REMIC-PAC'S:
1,000,000 7.000% 2020...................................................... 954,375 953,229
------------- --------------
9,361,142 9,380,649
------------- --------------

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.43%
MORTGAGE BACKED SECURITIES:
2,807,317 9.000% 2023...................................................... 2,898,555 2,908,204
83,418 9.500% 2019...................................................... 82,740 87,667
------------- --------------
2,981,295 2,995,871
------------- --------------

<CAPTION>
Principal Market
Amount Cost (b) Value (c)
- ----------- ------------- --------------
<C> <S> <C> <C>

OTHER DIRECT FEDERAL OBLIGATIONS - 5.05%
FEDERAL HOME LOAN BANK:
$ 3,750,000 6.125% 1996...................................................... $ 3,745,313 $ 3,730,538
2,500,000 7.310% 2004...................................................... 2,508,984 2,500,000
------------- --------------
6,254,297 6,230,538
------------- --------------
U.S. TREASURY SECURITIES - 8.37%
BONDS:
6,000,000 8.125% 2021...................................................... 6,618,125 6,448,116
------------- --------------
NOTES:
3,850,000 7.250% 1996...................................................... 3,871,055 3,887,291
------------- --------------
10,489,180 10,335,407
------------- --------------

STUDENT LOAN MARKETING ASSOCIATION - 1.23%
NOTES:
1,500,000 7.500% 2000...................................................... 1,525,312 1,522,841
------------- --------------
TOTAL U.S. GOVERNMENT SECURITIES................................. 33,413,413 33,282,681
------------- --------------
TOTAL LONG TERM DEBT SECURITIES.................................. 57,732,870 57,555,482
------------- --------------
TOTAL LONG TERM INVESTMENTS...................................... $ 91,442,363 $ 108,548,560
------------- --------------
</TABLE>

SHORT-TERM INVESTMENTS-14.04%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------- --------------
<C> <S> <C>
BANKS - 4.83%
$ 5,969,000 First Trust Money Market Variable Rate Time Deposit Account,
Current rate - 5.95%........................................... $ 5,969,000
--------------
DIVERSIFIED FINANCE - 1.93%
2,378,000 Associates Corp. Master Variable Rate Note, Current rate -
6.00%.......................................................... 2,378,000
--------------
U.S. GOVERNMENT AGENCY - 1.13%
1,400,000 Federal Home Loan Mortgage Corp., 5.86% 5-3-1995................. 1,399,317
--------------

<CAPTION>
Principal Market
Amount Value
- ----------- --------------
<C> <S> <C>
U.S. OTHER DIRECT FEDERAL OBLIGATIONS - 6.15%
7,600,000 Federal Home Loan Bank 5.84% 5-3-1995............................ 7,596,301
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 17,342,618
--------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $108,784,981) (B)....................................... $ 125,891,178
--------------
<FN>
(a) Presently not paying dividend income.
(b) At April 30, 1995, the cost of securities for federal income
tax purposes was $108,784,981 and the aggregate gross
unrealized appreciation and depreciation based on that cost
was:
Unrealized appreciation........................... $ 18,750,324
Unrealized depreciation........................... (1,644,127)
- ----------------------------------------------------------------
Net unrealized appreciation....................... $ 17,106,197
- ----------------------------------------------------------------
(c) See Note A of accompanying Notes to Financial Statements
regarding valuation of securities.
(d) Note: Percentage of investments as shown is the ratio of the
total market value to total net assets. Market value of
investments in foreign securities represents 5.03% of net
assets as of April 30, 1995.
(e) Security is fully or partially on loan at April 30, 1995.
See Note A of accompanying Notes to Financial Statements.
</TABLE>

8
<PAGE>
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO
Schedule of Investments
(Unaudited)
April 30, 1995

COMMON STOCKS-91.62%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- --------- ----------- -----------
<C> <S> <C> <C>
BIOMEDICS, GENETICS RESEARCH AND
DEVELOPMENT-1.05%
55,000 Centocor, Inc. (a).................. $ 985,784 $ 776,875
----------- -----------
BROADCASTING-3.75%
60,000 America Online, Inc. (a) (e)........ 513,750 2,782,500
----------- -----------
BUSINESS SERVICES AND SUPPLIES -
4.33%
120,000 Acxiom Corp. (a).................... 738,750 2,085,000
45,500 Landmark Graphics Corp. (a)......... 1,282,606 1,126,125
----------- -----------
2,021,356 3,211,125
----------- -----------
COMPUTER-SOFTWARE-18.31%
8,000 Cerner Corp. (a).................... 378,000 425,000
23,000 FTP Software, Inc. (a).............. 720,843 603,750
52,000 Informix Corp. (a).................. 604,875 2,047,500
100,000 Input/Output, Inc. (a).............. 556,250 3,387,500
12,000 Medaphis Corp. (a).................. 663,609 684,000
15,000 Medic Computer Systems, Inc. (a).... 721,680 660,000
25,000 Network General Corp. (a)........... 730,268 653,125
31,000 Parametric Technology Corp. (a)..... 304,238 1,472,500
28,500 Sybase, Inc. (a).................... 650,688 691,125
24,900 Synopsys, Inc. (a).................. 857,600 1,350,825
41,000 System Software Associates, Inc..... 807,700 1,030,125
30,000 Wall Data (a) (e)................... 736,248 577,500
----------- -----------
7,731,999 13,582,950
----------- -----------
CONSTRUCTION-2.14%
60,000 Fastenal Co. (e).................... 356,876 1,590,000
----------- -----------
ELECTRONIC-COMMUNICATION SECURITY -
1.00%
22,500 ADC Telecommunications, Inc. (a).... 729,612 742,500
----------- -----------
ELECTRONIC-CONTROLS AND EQUIPMENT -
5.35%
41,700 Benchmark Electronics, Inc. (a)..... 1,009,517 854,850
33,000 StrataCom, Inc. (a)................. 820,875 1,212,750
34,000 Ultratech Stepper, Inc. (a)......... 901,875 1,904,000
----------- -----------
2,732,267 3,971,600
----------- -----------
ELECTRONIC-SEMICONDUCTOR AND
CAPACITOR-6.95%
10,000 Alliance Semiconductor Corp. (a).... 498,965 407,500
13,500 Integrated Device Technology, Inc.
(a)............................... 533,250 514,688
12,500 Integrated Silicon Solutions, Inc.
(a)............................... 524,413 481,250
59,000 Unitrode Corp. (a).................. 1,129,256 1,224,250
33,000 Xilinx, Inc. (a).................... 1,285,926 2,532,750
----------- -----------
3,971,810 5,160,438
----------- -----------
HEALTH CARE SERVICES-6.83%
43,000 Genesis Health Ventures, Inc. (a)
(e)............................... 773,603 1,171,750
40,000 Health Care & Retirement Corp.
(a)............................... 340,000 1,130,000
17,400 Healthsource, Inc. (a).............. 698,436 624,225
33,500 Medpartners, Inc. (a) (e)........... 603,875 791,438
15,000 Omnicare, Inc. (e).................. 592,500 729,375
19,000 Rotech Medical Corp. (a)............ 555,750 617,500
----------- -----------
3,564,164 5,064,288
----------- -----------

<CAPTION>
Market
Shares Cost (b) Value (c)
- --------- ----------- -----------
<C> <S> <C> <C>
LEISURE TIME-AMUSEMENTS-1.09%
22,500 Hollywood Entertainment Corp. (a)
(e)............................... $ 763,275 $ 810,000
----------- -----------
MACHINERY-OIL AND WELL-2.21%
60,000 Petroleum Geo Services A/S ADS (a)
(e) 1,003,250 1,638,750
----------- -----------
MEDICAL SUPPLIES-1.60%
30,000 Steris Corp. (a) (e)................ 1,067,130 1,185,000
----------- -----------
OFFICE EQUIPMENT AND SUPPLIES -
4.83%
31,000 Avid Technology, Inc. (a) (e)....... 692,825 1,249,687
40,000 Franklin Electric Publishers, Inc.
(a)............................... 977,760 1,240,000
32,200 Sterling Software, Inc. (a)......... 604,985 1,094,800
----------- -----------
2,275,570 3,584,487
----------- -----------
PRINTING-0.92%
14,000 Indigo NV (a)....................... 540,946 679,000
----------- -----------
RECREATION EQUIPMENT-1.46%
87,800 Callaway Golf Co. (e)............... 793,888 1,086,525
----------- -----------
RESTAURANTS AND FRANCHISING-6.51%
67,300 Applebees International, Inc........ 1,201,960 1,480,600
81,200 Lone Star Steakhouse & Saloon, Inc.
(a) (e)........................... 356,925 2,486,750
25,000 Papa John's International, Inc. (a)
(e)............................... 720,625 865,625
----------- -----------
2,279,510 4,832,975
----------- -----------
RETAIL-MISCELLANEOUS-12.97%
73,000 Authentic Fitness Corp. (a)......... 862,723 1,204,500
40,000 Bed, Bath & Beyond, Inc. (a)........ 455,000 835,000
72,000 Books-A-Million, Inc. (a)........... 991,813 999,000
48,600 Corporate Express, Inc. (a) (e)..... 777,600 1,372,950
27,000 Franklin Quest Co. (a) (e).......... 966,660 897,750
42,000 Gymboree Corp. (a) (e).............. 993,000 987,000
50,000 Micro Warehouse, Inc. (a) (e)....... 512,500 1,750,000
33,000 Sunglass Hut International, Inc. (a)
(e)............................... 941,203 946,687
25,500 West Marine, Inc. (a)............... 421,875 631,125
----------- -----------
6,922,374 9,624,012
----------- -----------
TELECOMMUNICATIONS-4.24%
38,800 Cisco Systems, Inc. (a)............. 327,552 1,547,150
26,500 MFS Communications Co. (a).......... 1,039,978 947,375
21,000 Newbridge Networks Corp. (a) (e).... 216,974 651,000
----------- -----------
1,584,504 3,145,525
----------- -----------
TRANSPORTATION-1.58%
50,000 American Freightways Corp. (a)...... 771,875 1,168,750
----------- -----------
UTILITIES-TELEPHONE-2.53%
45,000 IntelCom Group, Inc. (a)............ 644,000 489,375
55,000 LCI International, Inc. (a) (e)..... 894,300 1,388,750
----------- -----------
1,538,300 1,878,125
----------- -----------
WASTE DISPOSAL-1.97%
51,700 United Waste System, Inc. (a)....... 1,158,950 1,460,525
----------- -----------
TOTAL COMMON STOCKS................. $43,307,190 $67,975,950
----------- -----------
</TABLE>

9
<PAGE>
FORTIS ADVANTAGE CAPITAL APPRECIATION PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

SHORT-TERM INVESTMENTS-8.31%

10
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments
(Unaudited)
April 30, 1995

COMMON STOCKS-0.31%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------- --------- ----------
<C> <S> <C> <C>
BROADCASTING-0.02%
1,000 Petro PSC Properties, L.P. (Warrants) (a)........................ $ 36,570 $ 33,000
--------- ----------
CONSUMER GOODS-0.03%
1,800 Chattem, Inc. (Warrants) (a) (f)................................. 18,424 7,200
17,400 Drypers Corp. (Warrants) (a)..................................... 52,200 34,800
--------- ----------
70,624 42,000
--------- ----------
LEISURE TIME-AMUSEMENTS-0.14%
4,565 Boomtown, Inc. (warrants) (a).................................... 28,942 2,283
26,670 Capital Gaming International (a)................................. 133,350 113,348
22,750 Capital Gaming International (warrants) (a)...................... 35,440 34,836
6,000 Casino Magic Finance Corp. (Warrants) (a)........................ 9,000 1,500
6,000 Hemmeter Enterprises, Inc. (Warrants) (a)........................ 24,000 12,000
--------- ----------
230,732 163,967
--------- ----------
MACHINERY-0.01%
7,500 Terex Corp. (Rights) (a)......................................... 18,750 6,000
--------- ----------
RETAIL-MISCELLANEOUS-0.11%
5,397 Southland Corp. (Warrants) (a)................................... 1,991 11,131
28,500 Thrifty Payless Holdings, Inc. (Warrants) (a).................... 160,500 114,000
--------- ----------
162,491 125,131
--------- ----------
TOTAL COMMON STOCKS.............................................. $519,167 $ 370,098
--------- ----------
</TABLE>

PREFERRED STOCKS-0.58%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
- ------- --------- ----------
<C> <S> <C> <C>
MACHINERY-0.58%
25,000 Terex Corp. (Warrants) (a) (i)................................... $ 50,000 $ 300,000
25,000 Terex Corp., Mandatory Redemption Pfd Stock (a) (i).............. 575,000 387,500
--------- ----------
TOTAL PREFERRED STOCKS........................................... $625,000 $ 687,500
--------- ----------
</TABLE>

CORPORATE BONDS-NON-INVESTMENT GRADE-93.82%

11
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
- ----------- ----------- ------------- -------------
<C> <S> <C> <C> <C>
CHEMICALS-1.68%
$2,000,000 Indspec Chemical Corp., 11.50% Sr Sub Disc Note
Ser B 12-1-2003 (Zero coupon until 12-1-1998)
(e)............................................. B- $ 1,327,173 $ 1,220,000
750,000 Pioneer Americas Acquisition Corp., 13.375% First
Mtg Note 4-15-2005.............................. B2* 750,000 750,000
------------- -------------
2,077,173 1,970,000
------------- -------------
CONSUMER GOODS-9.00%
1,290,000 Allied Waste Industries, Inc., 10.75% Sr Sub Note
2-1-2004........................................ B 1,262,450 1,315,800
1,300,000 Chattem, Inc., 12.75% Sr Sub Note Ser B
6-15-2004....................................... B- 1,268,601 1,189,500
1,200,000 Drypers Corp., 12.50% Sr Note Ser B 11-1-2002..... B+ 1,204,390 1,212,000
1,250,000 Florsheim Shoe Co., 12.75% Sr Note 9-1-2002 (h)... B+ 1,250,000 1,190,625
1,250,000 Hosiery Corp. of America, Inc., 13.75% Sr Sub Note
8-1-2002 (f).................................... B- 1,235,314 1,237,500
2,030,000 Plastic Specialty & Technologies, Inc., 11.25% Sr
Secured Note 12-1-2003.......................... B- 1,978,375 1,791,475
1,500,000 Roadmaster Industries, Inc., 11.75% Sr Sub Note
7-15-2002....................................... B- 1,491,563 1,451,250
1,200,000 Solon Automated Services, Inc., 12.75% Sr Note
7-15-2001....................................... B+ 1,211,750 1,188,000
------------- -------------
10,902,443 10,576,150
------------- -------------
CONTAINERS AND PACKAGING-5.77%
1,350,000 Crown Packaging Ltd., 10.75% Sr Secured Note Ser B
11-1-2000....................................... B3* 1,349,250 1,353,375
1,300,000 Mail-Well Corp., 10.50% Sr Sub Note 2-15-2004
(i)............................................. B- 1,271,000 1,144,000
1,250,000 Malette, Inc., 12.25% Sr Secured Note 7-15-2004... BB- 1,250,000 1,300,000
1,250,000 RXI Holdings, Inc., 14.00% Sr Secured Note
7-15-2002 (f)................................... B- 1,250,000 1,250,000
952,000 Seminole Kraft Corp., 13.50% Sub Deb 10-15-1996... NR 931,125 953,190
800,000 Williamhouse-Regency of Delaware, Inc., 11.50% Sr
Sub Deb 6-15-2005............................... B- 789,500 780,000
------------- -------------
6,840,875 6,780,565
------------- -------------
ENERGY-1.07%
1,250,000 WRT Energy Corp., 13.875% Sr Note 3-1-2002........ B- 1,250,000 1,259,375
------------- -------------
FOOD-GROCERY, MISCELLANEOUS-7.88%
1,000,000 Curtice-Burns Foods Inc., 12.25% Sr Sub Note
2-1-2005........................................ B 1,000,000 1,060,000
1,617,000 Di Giorgio Corp., 12.00% Sr Note 2-15-2003........ B 1,576,930 1,390,620
2,350,000 Envirodyne Industries, Inc., 10.25% Sr Note
12-1-2001 (h)................................... B- 1,901,375 1,915,250
1,000,000 Fresh Del Monte Produce N.V., 10.00% Note Ser A
5-1-2003........................................ B 981,250 840,000
1,400,000 Pilgrims Pride Corp., 10.875% Sr Sub Deb
8-1-2003........................................ B- 1,400,694 1,316,000
2,000,000 Specialty Foods Corp., 11.25% Sr Sub Note
8-15-2003....................................... B- 1,828,750 1,940,000
2,000,000 White Rose Foods, Inc., 12.44% Sr Note
11-1-1998....................................... B- 1,316,169 800,000
------------- -------------
10,005,168 9,261,870
------------- -------------
LEISURE TIME-AMUSEMENTS-10.81%
1,250,000 Boomtown, Inc., 11.50% First Mtg Note 11-1-2003... B+ 1,201,995 1,143,750
2,000,000 Capital Gaming International, Inc., 11.50% Secured
Note 2-1-2001................................... Caa* 1,592,060 1,580,000
1,000,000 GB Property Funding, 10.875% First Mtg Bond
1-15-2004....................................... B+ 820,000 855,000
1,901,480 Hemmeter Enterprises, Inc., 12.00% Sr Secured Note
12-15-2000 (Interest is Payable-in-Kind) (i).... NR 1,606,592 1,443,171
1,000,000 Lady Luck Gaming Finance Corp., 10.50% First Mtg
Note 3-1-2001................................... CCC+ 1,000,000 585,000
1,750,000 Pioneer Finance Corp., 13.50% First Mtg Bond
12-1-1998....................................... B- 1,371,875 1,391,250
1,500,000 PRT Funding Corp., 11.625% Sr Note 4-15-2004(h)... B- 1,384,500 1,233,750
2,750,000 Trump Castle Funding, Inc., 11.75% First Mtg Bond
11-15-2003...................................... Caa* 1,969,087 1,711,875
1,750,000 Trump Plaza Funding, Inc., 10.875% First Mtg Note
6-15-2001....................................... B 1,435,913 1,452,500
1,852,139 Trump Taj Mahal Funding, Inc., 11.35% First Mtg
Note 11-15-1999 (Interest is 9.375% cash and
1.975% Payable-in-Kind)......................... Caa* 1,687,325 1,312,147
------------- -------------
14,069,347 12,708,443
------------- -------------
MACHINERY-7.44%
1,250,000 MVE, Inc., 12.50% Sr Secured Note 2-15-2002....... B+ 1,250,000 1,306,250
1,250,000 Primeco, Inc., 12.75% Sr Sub Note 3-1-2005........ B 1,250,000 1,293,750
1,000,000 Specialty Equipment Companies, Inc., 11.375% Sr
Sub Note 12-1-2003.............................. B- 1,000,000 997,500
1,300,000 Spreckels Industries, Inc., 11.50% Sr Secured Note
9-1-2000 (h).................................... B 1,310,875 1,300,000
622,000 Terex Corp., 13.00% Sr Secured Note 8-1-1996
(i)............................................. NR 600,840 634,440
2,250,000 Terex Corp., 13.75% Sr Secured Note 5-15-2002
(f)............................................. Caa* 2,250,000 2,250,000
</TABLE>

*Moody's Rating

12
<PAGE>

CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
- ----------- ----------- ------------- -------------
<C> <S> <C> <C> <C>
$1,000,652 Thermadyne Industries, Inc., 10.75% Sr Sub Note
11-1-2003....................................... CCC $ 962,827 $ 960,626
------------- -------------
8,624,542 8,742,566
------------- -------------
MEDIA-5.21%
2,000,000 American Telecasting, Inc., 12.75% Sr Sub Disc
Note 6-15-2004 (Zero coupon until 6-15-1999)
(and warrants) (e).............................. CCC+ 1,192,346 1,090,000
1,000,000 Commodore Media, 13.25% 5-1-2003 (e) (f).......... NR 860,350 860,350
2,518,472 Falcon Holding Group, L.P., 11.00% Sr Sub Note Ser
B 9-15-2003 (Interest is Payable-in-Kind)....... NR 2,498,844 2,175,343
1,000,000 In-Flight Phone Corp., 14.00% Sr Sub Disc Note Ser
A 5-15-2002 (Zero coupon until 5-15-1998) (e)
(f)............................................. B- 664,840 664,840
2,000,000 Marvel (Parent) Holdings, Inc., 12.25% Sr Secured
Disc Note 4-15-1998 (e)......................... B 1,411,960 1,335,000
------------- -------------
6,628,340 6,125,533
------------- -------------
METALS-MINING AND MISCELLANEOUS-7.43%
1,250,000 Bayou Steel Corp., 10.25% First Mtg Note
3-1-2001........................................ B 1,223,750 1,156,250
1,250,000 Gulf States Steel, 13.50% First Mtg Note 4-15-2003
(and warrants) (f).............................. B1* 1,250,000 1,250,000
1,550,000 Haynes International, Inc., 11.25% Sr Secured Note
Ser A 6-15-1998................................. CCC+ 1,511,250 1,480,250
1,750,000 Haynes International, Inc., 13.50% Sr Sub Deb
8-15-1999....................................... CCC- 1,115,000 1,155,000
1,000,000 Horsehead Industries, Inc., 15.75% Sr Sub Ext
Reset Note 6-1-1999 (h)......................... CCC- 991,250 1,025,000
1,250,000 Renco Metals, Inc., 12.00% Sr Note 7-15-2000...... B+ 1,235,000 1,262,500
1,400,000 Sheffield Steel Corp., 12.00% First Mtg Note
11-1-2001 (and warrants)........................ B- 1,399,000 1,400,000
------------- -------------
8,725,250 8,729,000
------------- -------------
RESTAURANTS AND FRANCHISING-3.22%
1,000,000 Carrols Corp., 11.50% Sr Note 8-15-2003........... B+ 1,000,000 930,000
1,500,000 Family Restaurants, Inc., 9.75% Sr Note
2-1-2002........................................ B 1,375,125 1,025,625
2,252,000 Flagstar Corp., 11.25% Sr Sub Deb 11-1-2004....... CCC+ 2,186,530 1,829,750
------------- -------------
4,561,655 3,785,375
------------- -------------
RETAIL-MISCELLANEOUS-12.59%
511,500 Almacs, Inc., 11.50% Note 11-19-2004 (a).......... D 575,875 178,920
2,000,000 Color Tile, Inc., 10.75% Sr Note 12-15-2001....... B- 1,515,625 1,380,000
1,000,000 Cumberland Farms, Inc., 10.50% Sr Secured Note
10-1-2003 (g)................................... NR 927,500 820,000
2,142,500 Farm Fresh Holdings Corp., 14.25% Sr Note
10-1-2002 (Interest is Payable-in-kind thru
10-1-1997)...................................... CCC+ 781,872 1,056,704
1,400,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000........ B- 1,427,500 1,335,250
4,000,000 Grand Union Co., 12.25% Sr Sub Note 7-15-2002 (a)
(h)............................................. D 2,956,937 1,330,000
1,345,563 Kash N Karry Corp., 11.50% Sr Note 2-1-2003
(Interest is Payable in Kind until 2-1-1996).... B- 1,200,706 1,286,244
1,300,000 Mayfair Supermarkets, Inc., 11.75% Sr Sub Note
3-30-2003....................................... B- 1,332,500 1,196,000
1,250,000 Pantry (The), Inc., 12.00% Sr Note Ser B
11-15-2000...................................... B 1,243,750 1,256,250
350,000 Pay 'N' Pak Stores, Inc., 13.50% Sr Sub Deb
6-1-1998 (a).................................... Ca* 350,000 1,750
1,500,000 Purity Supreme, Inc., 11.75% Sr Secured Note
8-1-1999 (and warrants)......................... CCC+ 1,428,733 1,605,000
1,250,000 Stater Brothers, Inc., 11.00% Sr Note 3-1-2001.... B+ 1,236,250 1,221,875
1,750,000 Thrifty Payless, Inc., 12.25% Sr Sub Note
4-15-2004....................................... B- 1,587,937 1,785,000
1,000,000 Victory Markets, Inc., 12.50% Sub Exchange Note
3-15-2000....................................... NR 870,000 350,000
------------- -------------
17,435,185 14,802,993
------------- -------------
TECHNOLOGY-4.74%
3,000,000 Computervision Corp., 11.375% Sr Sub Note
8-15-1999....................................... CCC+ 2,590,000 2,865,000
1,650,000 Genicom Corp., 12.50% Sr Sub Note 2-15-1997....... NR 1,465,500 1,617,000
1,450,000 U.S. Banknote Corp., 11.625% Sr Note Ser B
8-1-2002........................................ B+ 1,377,700 1,087,500
------------- -------------
5,433,200 5,569,500
------------- -------------
TEXTILE MANUFACTURING-2.13%
1,500,000 Synthetic Industries, Inc., 12.75% Sr Sub Deb
12-1-2002....................................... B- 1,454,305 1,470,000
1,250,000 U.S. Leather, Inc., 10.25% Sr Note 7-31-2003...... B+ 1,197,126 1,037,500
------------- -------------
2,651,431 2,507,500
------------- -------------
TOBACCO-1.84%
3,000,000 Liggett Group, Inc., 11.50% Ser B Secured Note
2-1-1999........................................ NR 2,196,625 2,160,000
------------- -------------
</TABLE>

*Moody's Rating

13
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED

SHORT-TERM INVESTMENTS-2.89%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
- ----------- -------------
<C> <S> <C>
BANKS-2.89%
$3,395,000 First Trust Money Market Variable Rate Time Deposit Account,
Current rate -- 5.95%.......................................... $ 3,395,000
-------------
TOTAL INVESTMENTS IN SECURITIES (COST: $122,326,374) (B)......... $ 114,730,991
-------------
-------------
<FN>
(a) Presently non-income producing. For corporate debt securities, items identified are
in default as to payment of interest and/or principal.
(b) At April 30, 1995, the cost of securities for federal income tax purposes was
$122,326,374 and the aggregate gross unrealized appreciation and depreciation based
on that cost was:
Unrealized appreciation................................................ $ 3,004,736
Unrealized depreciation................................................ (10,600,119)
-------------------------------------------------------------------------------------
Net unrealized depreciation............................................ $ (7,595,383)
-------------------------------------------------------------------------------------
(c) See Note A of accompanying Notes to Financial Statements regarding valuation of
Securities.
(d) Note:Percentage of investments as shown is the ratio of the total market value to
total net assets.
(e) The interest rate disclosed for these securities represent the original issue
discount yields on the date of acquisition.
(f) Securities sold within terms of a private placement memorandum, exempt from
registration under Section 144A of the Securities Act of 1933, as amended, and may be
sold only to dealers in that program or to other "accredited investors". These
investments have been identified by portfolio management as illiquid securities, the
value of these securities at April 30, 1995 is $8,570,663 which represents 7.29% of
net assets.
(g) The fund entered into the following restricted security transaction. On February 2,
1994, the fund purchased $1,000,000 of Cumberland Farms with a cost basis of
$927,500. This private placement represents allof the restricted illiquid securities
owned by the fund and is equal to .70% of net assets. See Note A of accompanying
Notes to Financial Statements.
(h) Security is fully or partially on loan at April 30, 1995. See Note A of accompanying
Notes to Financial Statements.
(i) Securities sold within terms of a private placement memorandum, exempt from
registration under Section 144A of the Securities Act of 1933, as amended, and may be
sold only to dealers in that program or other "accreditied investors". Pursuant to
guidelines adopted by The Board of Directors, these issues are deemed to be liquid.
</TABLE>

14
<PAGE>
FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO
Schedule of Investments
(Unaudited)
April 30, 1995

ASSET BACKED SECURITIES-9.17%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------ ----------- -----------
<C> <S> <C> <C> <C>
MISCELLANEOUS-2.94%
$2,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1 Class A5 Sr Sub Pass
Thru Certificate 4-15-2019..................................... AA2* $1,992,533 $1,908,958
----------- -----------
WHOLE LOAN RESIDENTIAL-6.23%
1,000,000 General Electric Capital Mtg Services, Inc., 8.50% 1995-2 Class M
5-25-2025...................................................... AA 993,141 993,125
1,686,443 Residential Resources, Inc., 9.50% Series 14 Class A Busted PAC
12-1-2018...................................................... AAA 1,727,506 1,726,191
1,486,682 Securitized Asset Sales, Inc., 7.00% Ser 1994-5 Class AM
7-25-2024...................................................... AAA 1,328,849 1,328,258
----------- -----------
4,049,496 4,047,574
----------- -----------
TOTAL ASSET BACKED SECURITIES.................................... $6,042,029 $5,956,532
----------- -----------
</TABLE>

U.S. GOVERNMENT SECURITIES-85.13%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (a) Value (b)
- ---------- ----------- -----------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 11.18%
MORTGAGE BACKED SECURITIES:
$ 436,347 9.00% 2001-2018.................... $ 421,422 $ 448,481
1,859,865 9.50% 2016......................... 1,992,576 1,941,815
263,216 11.25% 2014........................ 283,855 287,316
468,326 11.50% 2019........................ 501,123 512,817
337,683 12.50% 2019........................ 367,188 374,828
----------- -----------
3,566,164 3,565,257
----------- -----------
REMIC-IO & IO-ETTE:
47,088 38.00% #1364-1 Interest Only Strip
I/O-ette 2005 (d)................ 278,879 832,046
----------- -----------
REMIC-PACS:
1,278,792 9.00% #136-D 2020.................. 1,285,109 1,314,341
1,500,000 9.50% #1001-F 2003................. 1,527,828 1,548,584
----------- -----------
2,812,937 2,862,925
----------- -----------
6,657,980 7,260,228
----------- -----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 12.16%
MORTGAGE BACKED SECURITIES:
2,178,124 8.50% 2022......................... 2,301,401 2,209,435
455,359 10.50% 2014........................ 486,589 492,641
402,938 11.50% 2015........................ 440,460 444,742
307,677 12.00% 2011........................ 338,375 342,099
309,241 12.50% 2015........................ 345,509 345,963
----------- -----------
3,912,334 3,834,880
----------- -----------
NOTE:
2,000,000 8.50% 2005......................... 2,080,377 2,067,768
----------- -----------
REMIC-INVERSE FLOATER:
2,833,703 7.85% Inverse COFI Floating Rate
2008 (e)......................... 1,803,131 1,884,413
----------- -----------
REMIC-PACS:
108,702 13.50% Trust #1989-98G 2017........ 124,730 113,072
----------- -----------
7,920,572 7,900,133
----------- -----------

<CAPTION>
Principal Market
Amount Cost (a) Value (b)
- ---------- ----------- -----------
<C> <S> <C> <C>

GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 15.31%
MORTGAGE BACKED SECURITIES:
$1,441,231 Fleet Mtg Securities Class D,
9.125% 2018 (GNMA Backed)........ $ 1,474,568 $ 1,477,736
4,130,438 8.00% 2017......................... 4,238,200 4,122,693
584,582 9.00% 2016......................... 620,172 600,840
3,584,109 9.50% 2016......................... 3,754,966 3,744,172
----------- -----------
10,087,906 9,945,441
----------- -----------

OTHER DIRECT FEDERAL OBLIGATIONS -
5.39%
FEDERAL HOME LOAN BANK:
3,500,000 7.31% 2004......................... 3,511,474 3,500,000
----------- -----------

OTHER GOVERNMENT AGENCIES - 2.52%
RESOLUTION FUNDING CORPORATION:
7,000,000 8.395% Zero Coupon Strip 2014
(f).............................. 1,753,629 1,638,203
----------- -----------

U.S. TREASURY SECURITIES - 38.57%
BONDS:
4,430,000 8.125% 2021........................ 4,657,931 4,760,858
----------- -----------
NOTES:
3,360,000 7.25% 1996......................... 3,378,375 3,392,544
2,000,000 7.875% 2004........................ 2,077,988 2,110,000
5,000,000 8.75% 1997......................... 5,270,496 5,229,680
4,500,000 9.00% 1998......................... 4,836,670 4,774,211
4,650,000 9.375% 1996........................ 4,787,933 4,780,781
----------- -----------
20,351,462 20,287,221
----------- -----------
25,009,393 25,048,074
----------- -----------
TOTAL U.S. GOVERNMENT AND
AGENCIES......................... 54,940,954 55,292,079
----------- -----------
TOTAL LONG-TERM DEBT SECURITIES.... $60,982,983 $61,248,611
----------- -----------
</TABLE>

*Moody's Rating

15
<PAGE>
FORTIS ADVANTAGE GOVERNMENT TOTAL RETURN PORTFOLIO
Schedule of Investments (continued)
(Unaudited)
April 30, 1995

SHORT-TERM INVESTMENTS-1.38%

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
- --------- ------------
<C> <S> <C>
DIVERSIFIED FINANCE-0.09%
$ 55,000 Associates Corp. Master Variable Rate Note, Current
rate -- 6.00%.................................................. $ 55,000
------------
U.S. GOVERNMENT AGENCY-1.29%
840,000 Federal National Mortgage Association, 5.85% 5-3-1995............ 839,591
------------
TOTAL SHORT-TERM INVESTMENTS..................................... 894,591
------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $61,877,574) (B)........................................ $ 62,143,202
------------
------------
<FN>
(a) At April 30, 1995, the cost of securities for federal income tax
purposes was $62,600,792 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation................................. $ 876,773
Unrealized depreciation................................. (1,334,363)
---------------------------------------------------------------------
Net unrealized depreciation............................. $ (457,590)
---------------------------------------------------------------------
(b) See Note A of accompanying Notes to Financial Statements regarding
valuation of Securities.
(c) Note: Percentage of investments as shown is the ratio of the total
market value to total net assets.
(d) The interest rates disclosed for interest only and principal only
strips represent effective yields at April 30, 1995, based upon the
estimated timing and, in the case of interest only strips, amount
of future cash flows. These investments have been identified by
portfolio management as illiquid securities. The aggregate value of
these securities at April 30, 1995 is $832,046 which represents
1.28% of total net assets.
(e) Inverse floaters represent securities that pay interest at a rate
that increases (decreases) with a decrease (increase) in a
specified index. Interest rates disclosed are the rates in effect
on April 30, 1995.
(f) The interest rate disclosed for these securities represent the
original issue discount yields on the date of acquisition.
</TABLE>

16
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Assets and Liabilities

(Unaudited)

April 30, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GOVERNMENT
ASSET CAPITAL HIGH TOTAL
ALLOCATION APPRECIATION YIELD RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, as detailed in the accompanying
schedules, at market (cost $108,784,981; $49,471,254;
$122,326,374; and $61,877,574; respectively) (Note A)... $ 125,891,178 $74,140,014 $ 114,730,991 $ 62,143,202
Cash on deposit with custodian............................ 5,113 854 26,310 25,952
Collateral for securities lending transactions............ 5,035,140 22,412,800 4,780,740 --
Receivables:
Investment securities sold.............................. 4,190,060 -- 3,708,592 2,136,381
Interest and dividends.................................. 1,073,158 16,810 3,690,332 911,213
Subscriptions of capital stock.......................... 14,312 39,900 891,060 7,323
Deferred registration costs (Note A)...................... 39,255 49,530 61,992 30,668
Prepaid expenses.......................................... 30,334 22,663 27,387 16,886
------------- ------------ ------------- -------------
TOTAL ASSETS................................................ 136,278,550 96,682,571 127,917,404 65,271,625
------------- ------------ ------------- -------------
LIABILITIES:
Cash portion of dividends payable......................... -- -- 386,662 150,960
Payable upon return of securities loaned.................. 5,035,140 22,412,800 4,780,740 --
Payable for investment securities purchased............... 7,592,685 -- 5,113,215 --
Redemptions of capital stock.............................. 60,365 884 9,912 119,474
Payable for investment advisory and management fees (Note
B)...................................................... 97,049 59,764 68,887 42,458
Payable for distribution fees............................. 6,217 3,737 5,200 2,494
Accounts payable and accrued expenses..................... 16,549 11,444 11,357 7,755
------------- ------------ ------------- -------------
TOTAL LIABILITIES........................................... 12,808,005 22,488,629 10,375,973 323,141
------------- ------------ ------------- -------------
NET ASSETS:
Net proceeds of capital stock, par value $.01 per share -
authorized 20,000,000,000 shares........................ 103,349,747 50,828,402 125,622,752 80,481,982
Unrealized appreciation (depreciation) of investments..... 17,106,197 24,668,760 (7,595,383) 265,628
Undistributed net investment income (loss)................ 403,104 (185,632) 867 (188,464)
Accumulated net realized gain (loss) from sale of
investments............................................. 2,611,497 (1,117,588) (486,805) (15,610,662)
------------- ------------ ------------- -------------
TOTAL NET ASSETS............................................ $ 123,470,545 $74,193,942 $ 117,541,431 $ 64,948,484
------------- ------------ ------------- -------------
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A shares (based on net assets of $121,171,781;
$72,831,715; $107,024,136; and $64,857,047; respectively
and 8,104,042; 2,960,528; 13,429,902; and 8,229,616
shares outstanding; respectively)....................... $14.95 $24.60 $7.97 $7.88
------------- ------------ ------------- -------------
Class B shares (based on net assets of $259,670; $300,178;
$1,598,093; $9,104; respectively and 17,415; 12,228;
200,662; and 1,159 shares outstanding; respectively).... $14.91 $24.55 $7.96 $7.86
------------- ------------ ------------- -------------
Class C shares (based on net assets of $325,145; $84,500;
$667,820; $15,103; respectively and 21,864; 3,441;
83,903; and 1,920 shares outstanding; respectively)..... $14.87 $24.56 $7.96 $7.87
------------- ------------ ------------- -------------
Class H shares (based on net assets of $1,713,949;
$977,549; $8,251,382; $67,230; respectively and 115,084;
39,799; 1,036,069; and 8,554 shares outstanding;
respectively)........................................... $14.89 $24.56 $7.96 $7.86
------------- ------------ ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

17
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Operations

(Unaudited)

April 30, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GOVERNMENT
ASSET CAPITAL HIGH TOTAL
ALLOCATION APPRECIATION YIELD RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income................................................... $2,883,188 $ 316,436 $6,426,794 $ 2,655,503
Dividend income................................................... 118,597 13,513 -- --
Fee income (Note A)............................................... 9,185 52,064 6,265 1,691
----------- ----------- ----------- ------------
Total income........................................................ 3,010,970 382,013 6,433,059 2,657,194
----------- ----------- ----------- ------------
Expenses:
Investment advisory and management fees (Note B).................. 572,238 346,336 382,349 260,612
Distribution fees (Class A) (Note B).............................. 264,076 154,761 172,472 115,756
Distribution fees (Class B) (Note B).............................. 460 616 2,277 12
Distribution fees (Class C) (Note B).............................. 503 165 1,481 44
Distribution fees (Class H) (Note B).............................. 3,529 1,694 14,254 166
Registration fees................................................. 23,769 19,393 15,649 22,597
Shareholders' notices and reports................................. 21,065 17,031 12,153 11,960
Custodian fees.................................................... 15,373 10,411 12,149 14,381
Legal and auditing fees (Note B).................................. 12,695 11,258 13,034 12,827
Directors' fees and expenses...................................... 3,843 2,579 3,169 2,579
Other............................................................. 4,530 3,401 3,343 3,759
----------- ----------- ----------- ------------
Total Expenses...................................................... 922,081 567,645 632,330 444,693
----------- ----------- ----------- ------------
NET INVESTMENT INCOME (LOSS).......................................... 2,088,889 (185,632) 5,800,729 2,212,501
----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A):
Net realized gain (loss) from security transactions................. 2,611,611 (690,797) 218,704 (4,285,955)
Net change in unrealized appreciation (depreciation) of
investments....................................................... 2,443,935 5,569,501 1,291,228 5,846,336
----------- ----------- ----------- ------------
NET GAIN ON INVESTMENTS............................................... 5,055,546 4,878,704 1,509,932 1,560,381
----------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $7,144,435 $4,693,072 $7,310,661 $ 3,772,882
----------- ----------- ----------- ------------
</TABLE>

18
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Changes in Net Assets

ASSET ALLOCATION PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
APRIL 30, YEAR ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 2,088,889 $ 2,930,871
Net realized gain from security transacations....................... 2,611,611 788,635
Net change in unrealized appreciation (depreciation) of investments
in securities..................................................... 2,443,935 (2,994,032)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 7,144,435 725,474
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A........................................................... (2,163,854) (2,556,356)
Class B........................................................... (1,643) --
Class C........................................................... (1,846) --
Class H........................................................... (10,839) --
From realized gains on investments
Class A........................................................... (736,415) (5,171,318)
Class B........................................................... (258) --
Class C........................................................... (158) --
Class H........................................................... (1,337) --
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................................... (2,916,350) (7,727,674)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (535,916 and 2,102,540 shares)............................ 7,733,824 30,350,907
Class B (17,849 shares)........................................... 259,678 --
Class C (22,228 shares)........................................... 322,894 --
Class H (117,369 shares).......................................... 1,686,957 --
Proceeds from shares issued as a result of reinvested dividends
Class A (185,880 and 485,931 shares).............................. 2,626,601 6,992,258
Class B (130 shares).............................................. 1,878 --
Class C (139 shares).............................................. 2,000 --
Class H (749 shares).............................................. 10,789 --
Less cost of repurchase of shares
Class A (883,728 and 1,354,658 shares)............................ (12,738,248) (19,434,221)
Class B (564 shares).............................................. (8,214) --
Class C (503 shares).............................................. (7,187) --
Class H (3,034 shares)............................................ (43,384) --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS......... (152,412) 17,908,944
------------ ------------
TOTAL INCREASE IN NET ASSETS.......................................... 4,075,673 10,906,744
NET ASSETS:
Beginning of period................................................. 119,394,872 108,488,128
------------ ------------
End of period (includes undistributed net investment income of
$403,104 and $492,397 , respectively)............................. $123,470,545 $119,394,872
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

19
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Changes in Net Assets

CAPITAL APPRECIATION PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
APRIL 30, YEAR ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss................................................. $ (185,632) $ (367,981)
Net realized loss from security transacations....................... (690,797) (426,791)
Net change in unrealized appreciation (depreciation) of investments
in securities..................................................... 5,569,501 (4,853,816)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 4,693,072 (5,648,588)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains on investments
Class A............................................................. -- (3,890,570)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (484,817 and 1,429,148 shares).............................. 11,269,627 33,401,050
Class B (12,281 shares)............................................. 284,955 --
Class C (3,441 shares).............................................. 80,695 --
Class H (40,264 shares)............................................. 946,184 --
Proceeds from shares issued as a result of reinvested dividends
Class A (0 and 160,390 shares)...................................... -- 3,804,448
Less cost of repurchase of shares
Class A (489,514 and 758,288 shares)................................ (11,423,409) (17,748,768)
Class B (53 shares)................................................. (1,112) --
Class H (465 shares)................................................ (7,774) --
------------- -------------
NET INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS.................... 1,149,166 19,456,730
------------- -------------
TOTAL INCREASE IN NET ASSETS.......................................... 5,842,238 9,917,572
NET ASSETS:
Beginning of period.................................................. 68,351,704 58,434,132
------------- -------------
End of period (includes undistributed net investment loss of $185,632
and $0 , respectively).............................................. $ 74,193,942 $ 68,351,704
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

20
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Changes in Net Assets

HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
APRILL 30, YEAR ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 5,800,729 $ 9,248,772
Net realized gain from security transacations....................... 218,704 806,811
Net change in unrealized appreciation (depreciation) of investments
in securities..................................................... 1,291,228 (9,512,273)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 7,310,661 543,310
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A........................................................... (5,810,282) (9,506,269)
Class B........................................................... (23,017) --
Class C........................................................... (15,962) --
Class H........................................................... (150,012) --
Excess distributions of net realized gains
Class A........................................................... -- (45,321)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................................... (5,999,273) (9,551,590)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (2,209,588 and 6,891,317 shares).......................... 17,111,433 58,803,866
Class B (200,579 shares).......................................... 1,562,549 --
Class C (84,389 shares)........................................... 653,764 --
Class H (1,045,618 shares)........................................ 8,118,138 --
Proceeds from shares issued as a result of reinvested dividends
Class A (475,826 and 719,057 shares).............................. 3,695,445 6,047,165
Class B (1,793 shares)............................................ 14,435 --
Class C (1,228 shares)............................................ 9,777 --
Class H (9,919 shares)............................................ 77,814 --
Less cost of repurchase of shares
Class A (1,737,223 and 3,616,490 shares).......................... (13,449,281) (30,627,112)
Class B (1,710 shares)............................................ (13,266) --
Class C (1,714 shares)............................................ (13,400) --
Class H (19,468 shares)........................................... (148,288) --
------------- -------------
NET INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS.................... 17,619,120 34,223,919
------------- -------------
TOTAL INCREASE IN NET ASSETS.......................................... 18,930,508 25,215,639
NET ASSETS:
Beginning of period................................................. 98,610,923 73,395,284
------------- -------------
End of period (includes undistributed net investment income of $867
and $199,411 , respectively)...................................... $ 117,541,431 $ 98,610,923
------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

21
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Statements of Changes in Net Assets

GOVERNMENT TOTAL RETURN PORTFOLIO

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH FOR THE
PERIOD ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 2,212,501 $ 5,024,228
Net realized loss from security transacations....................... (4,285,955) (4,120,660)
Net change in unrealized appreciation (depreciation) of investments
in securities..................................................... 5,846,336 (7,013,797)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 3,772,882 (6,110,229)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A........................................................... (2,213,335) (5,025,096)
Class B........................................................... (66) --
Class C........................................................... (252) --
Class H........................................................... (1,037) --
Excess distributions of net realized gains
Class A........................................................... (319,185) (1,152,236)
Class B........................................................... (10) --
Class C........................................................... (36) --
Class H........................................................... (149) --
-------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................................... (2,534,070) (6,177,332)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (72,385 and 690,778 shares)............................... 546,761 5,875,894
Class B (1,154 shares)............................................ 8,985 --
Class C (1,909 shares)............................................ 14,640 --
Class H (8,393 shares)............................................ 64,627 --
Proceeds from shares issued as a result of reinvested dividends
Class A (196,094 and 433,482 shares).............................. 1,524,324 3,609,513
Class B (10 shares)............................................... 76 --
Class C (11 shares)............................................... 86 --
Class H (161 shares).............................................. 1,255 --
Less cost of repurchase of shares
Class A (1,097,476 and 2,074,479 shares).......................... (8,492,327) (17,294,834)
Class B (5 shares)................................................ (35) --
Class C (0 shares)................................................ -- --
Class H (0 shares)................................................ -- --
-------------- --------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS.................... (6,331,608) (7,809,427)
-------------- --------------
TOTAL DECREASE IN NET ASSETS.......................................... (5,092,796) (20,096,988)
NET ASSETS:
Beginning of period................................................. 70,041,280 90,138,268
-------------- --------------
End of period (including distributions in excess of net investment
income of $188,464 and $186,275 , respectively)................... $ 64,948,484 $ 70,041,280
-------------- --------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

22
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements

(Unaudited)

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

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Fortis Advantage Portfolios, Inc.
("Fortis Advantage") is a diversified, open-end management investment company
which currently is comprised of four separate investment portfolios and
series of capital stock: Asset Allocation Portfolio, Capital Appreciation
Portfolio, High Yield Portfolio, and Government Total Return Portfolio, each
of which has different investment objectives and its own investment portfolio
and net asset value. The Articles of Incorporation of Fortis Advantage
permits the Board of Directors to create additional portfolios in the future.
The fund offers Class A, Class B, Class C and Class H shares. Class A shares
are sold with a front-end sales charge. Class B and H shares are sold without
a front-end sales charge and may be subject to a contingent deferred sales
charge, and such shares automatically convert to Class A after eight years.
Class C shares are sold without a front-end sales charge and may be subject
to contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that the level of distribution fees charged differs
between classes. Income, expenses (other than expenses incurred under each
class's distribution agreement) and realized and unrealized gains or losses
on investments are allocated to each class of shares based on its relative
net assets.

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

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for
securities that have been purchased by the Government Total Return Portfolio
on a forward commitment or when-issued basis can take place a month or more
after the transaction date. During this period, such securities are subject to
market fluctuation and the portfolio maintains, in a segregated account with
its custodian, assets with a market value equal to the amount of its purchase
commitments. As of April 30, 1995, the portfolio had entered into outstanding
when-issued or forward commitments of $0.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Realized
security gains and losses are determined using the identified cost method. For
financial reporting purposes, except for original issue discount, the Asset
Allocation and High Yield portfolios do not amortize bond premium and
discount. For Government Total Return Portfolio, interest income includes
amortization of bond premium and discount.

For the six-month period ended April 30, 1995, the cost of purchases and
proceeds from sales of securities (other than short-term securities) were as
follows:

<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Asset Allocation Portfolio.............. $61,440,970 $74,299,890
Capital Appreciation Portfolio.......... 14,863,399 6,607,191
High Yield Portfolio.................... 35,669,561 20,942,406
Government Total Return Portfolio....... 30,152,999 37,401,969
</TABLE>

LENDING OF PORTFOLIO SECURITIES: At April 30, 1995, securities were on loan to
brokers from the Portfolios. For collateral, the Fund's custodian received
cash which is maintained in a separate account and invested by the custodian
in short term investment vehicles. The risks to the Portfolios in security
lending transactions are that the borrower may not provide additional
collateral when required or return the securities when due and that the
proceeds from the sale of investments made with cash collateral received will
be less than amounts required to be returned to the borrowers. Value of
securities on loan at April 30, 1995 and fee income from securities lending
was as follows for the six-month period ended April 30, 1995:

<TABLE>
<CAPTION>
FEE INCOME
SECURITIES FOR SIX-MONTH
ON LOAN COLLATERAL PERIOD
----------- ----------- -------------
<S> <C> <C> <C>
Asset Allocation Portfolio.............. $ 4,866,375 $ 5,035,140 $ 9,185
Capital Appreciation Portfolio.......... 20,671,081 22,412,800 52,064
High Yield Portfolio.................... 4,547,613 4,780,740 6,265
Government Total Return Portfolio....... -- -- 1,691
</TABLE>

INCOME TAXES: The portfolios intend to qualify, under the Internal Revenue
Code, as regulated investment companies and if so qualified, will not have to
pay federal income taxes to the extent their taxable net income is
distributed. For tax purposes, each portfolio is a single taxable entity.

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

Net investment income and net realized gains differ for financial statement
and tax purposes primarily because of the recognition of market discount as
ordinary income for tax purposes for Asset Allocation and High Yield
Portfolios, the non-recognition of premium amortization as a reduction of
ordinary income for tax purposes for Government Total Return Portfolio, and
wash sale transactions. The character of distributions made during the year
from net investment income or net realized gains may, therefore, differ from
their ultimate characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the fund. The effect on dividend distributions of
certain current year permanent book-to-tax differences is reflected as excess
distributions of net realized gains in the statements of changes in net
assets and the financial highlights.

23
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements (continued)

(Unaudited)

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

For federal income tax purposes the portfolios had the following capital loss
carryovers at October 31, 1994, which, if not offset by subsequent capital
gains, will expire in 1995 through 2002.

<TABLE>
<S> <C>
Capital Appreciation Portfolio.......... $ 426,791
High Yield Portfolio.................... 705,509
Government Total Return Portfolio....... 10,327,608
</TABLE>

It is unlikely the Board of Directors will authorize a distribution of any
net realized gains until the available capital loss carryovers have been
offset or expired.

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

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

ILLIQUID SECURITIES: At April 30, 1995, investments in securities for the High
Yield and Government Total Return Portfolios included issues that are
illiquid. The fund currently limits investments in illiquid securities to 15%
of net assets, at market value, at the date of purchase. The aggregate value
of such securities at April 30, 1995, was $8,339,890 for the High Yield
Portfolio which represents 7.10% of net assets and $832,046 for the Government
Total Return Portfolio which represents 1.28% of net assets. Pursuant to
guidelines adopted by the Board of Directors, certain unregistered securities
are determined to be liquid and are not included within the 15% limitation
specified above.

B. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment adviser
for each portfolio. Investment advisory and management fees are computed for
Asset Allocation and Capital Appreciation Portfolios at an annual rate of 1%
of the first $100 million of average daily net assets, .80% for the next $150
million, and .70% for average assets over $250 million of each portfolio. For
High Yield Portfolio, investment advisory and management fees are computed at
an annual rate of .80% for the first $50 million of average net assets, .70%
for assets over $50 million. The fee for Government Total Return Portfolio is
computed at an annual rate of .80% of the first $50 million of average daily
net assets, .75% of the next $450 million, and .70% of net assets in excess
of $500 million.

In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the fund's principal underwriter)
distribution fees equal to .45% of average daily net assets for Class A for
each of Asset Allocation and Capital Appreciation Portfolios and .35% of
average daily net assets for Class A for each of High Yield and Government
Total Return Portfolios and 1.00% of average daily net assets for classes B,
C and H for each of the portfolios on an annual basis, to be used to
compensate those who sell shares of the fund and to pay certain other
expenses of selling fund shares. Fortis Investors, Inc. also received sales
charges (paid by purchasers of the fund's shares) aggregating $179,500 for
Class A for the Asset Allocation Portfolio; $164,864 for Class A for Capital
Appreciation Portfolio; $344,185 for Class A for High Yield Portfolio; and
$20,679 for Class A for Government Total Return Portfolio, for the six-month
period ended April 30, 1995.

Legal fees and expenses aggregating $3,670; $3,078; $3,186 and $2,727 for
Asset Allocation Portfolio, Capital Appreciation Portfolio, High Yield
Portfolio, and Government Total Return Portfolio, respectively, for the
six-month period ended April 30, 1995, were paid to a law firm of which the
secretary of Fortis Advantage is a partner.

C. At the special shareholder's meeting of August 23, 1994, the Amended and
Restated Articles of Incorporation were approved, which allows the fund to
issue multiple class shares effective November 14, 1994.

24
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS: Selected per share historical data for each of the
Portfolios was as follows:

<TABLE>
<CAPTION>
Class A
For the Year Ended October 31,
------------------------------------------------------
ASSET ALLOCATION PORTFOLIO 1995** 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 14.44 $ 15.43 $ 14.00 $ 13.34 $ 10.72 $ 11.91
--------- --------- --------- -------- -------- --------
Operations:
Investment income-net........................... .31 .37 .42 .53 .50 .42
Net realized and unrealized gain (loss) on
investments................................... .56 (.31) 1.52 .96 2.37 (1.00)
--------- --------- --------- -------- -------- --------
Total from operations............................. .87 .06 1.94 1.49 2.87 (.58)
--------- --------- --------- -------- -------- --------
Distributions to shareholders:
From investment income-net...................... (.27) (.33) (.51) (.82) (.25) (.61)
From net realized gains......................... (.09) (.72) -- -- -- --
Excess distributions of net realized gains...... -- -- -- (.01) -- --
--------- --------- --------- -------- -------- --------
Total Distributions to Shareholders............... (.36) (1.05) (.51) (.83) (.25) (.61)
--------- --------- --------- -------- -------- --------
Net asset value, end of period.................... $ 14.95 $ 14.44 $ 15.43 $ 14.00 $ 13.34 $ 10.72
--------- --------- --------- -------- -------- --------
Total return@..................................... 6.14% (0.48%) 14.20% 11.55% 27.25% (5.27%)
Net assets at end of period (000's omitted)....... $ 121,172 $ 119,395 $ 108,488 $ 89,674 $ 27,270 $ 21,691
Ratio of expenses to average daily net assets..... 1.52%* 1.55% 1.58% 1.58% 1.83% 1.98%
Ratio of net investment income to average daily
net assets....................................... 3.47%* 2.60% 2.90% 4.05% 4.11% 3.89%
Portfolio turnover rate........................... 23% 94% 103% 45% 64% 112%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
ASSET ALLOCATION PORTFOLIO 1995+ 1995+ 1995+
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $ 14.27 $ 14.27 $ 14.27
-------- -------- --------
Operations:
Investment income-net......................................................... .23 .23 .25
Net realized and unrealized gains (losses) on investments..................... .75 .71 .71
-------- -------- --------
Total from operations........................................................... .98 .94 .96
-------- -------- --------
Distribution to shareholders:
From investment income-net.................................................... (.25) (.25) (.25)
From net realized gains....................................................... (.09) (.09) (.09)
Excess distributions of net realized gains.................................... -- -- --
-------- -------- --------
Total distributions to shareholders............................................. (.34) (.34) (.34)
-------- -------- --------
Net asset value, end of period.................................................. $ 14.91 $ 14.87 $ 14.89
-------- -------- --------
Total Return@................................................................... 7.01% 6.73% 6.87%
Net assets end of period (000's omitted)........................................ $ 260 $ 325 $ 1,714
Ratio of expenses to average daily net assets................................... 2.07%* 2.07%* 2.07%*
Ratio of net investment income to average daily net assets...................... 2.91%* 2.91%* 2.91%*
Portfolio turnover rate......................................................... 23% 23% 23%

<FN>

* Annualized.
** Six-month period ended April 30, 1995.
@ These are the Fund's total returns during the periods, including reinvestment
of all dividend and capital gains distributions without adjustments for sales
charge.
+ For the period from November 14, 1994 (commencement of operations) to April
30, 1995.
</TABLE>

25
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS (continued):

<TABLE>
<CAPTION>
For the Year Ended October 31,
---------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO 1995*** 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 23.05 $ 27.38 $ 19.85 $ 19.80 $ 11.58 $ 15.44
--------- --------- --------- --------- --------- ---------
Operations:
Investment income (loss)-net**.................. (.06) (.12) (.30) (.17) (.14) (.07)
Net realized and unrealized gain (loss) on
investments................................... 1.61 (2.45) 7.83 .22 8.36 (3.06)
--------- --------- --------- --------- --------- ---------
Total from operations............................. 1.55 (2.57) 7.53 .05 8.22 (3.13)
--------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...................... -- -- -- -- -- (.02)
From net realized gains......................... -- (1.76) -- -- -- (.71)
--------- --------- --------- --------- --------- ---------
Total distributions to shareholders............... -- (1.76) -- -- -- (.73)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 24.60 $ 23.05 $ 27.38 $ 19.85 $ 19.80 $ 11.58
--------- --------- --------- --------- --------- ---------
Total return@..................................... 6.72% (9.56%) 37.93% .25% 70.98% (21.21%)
Net assets at end of period (000's omitted)....... $ 72,832 $ 68,352 $ 58,434 $ 43,207 $ 29,992 $ 15,194
Ratio of expenses to average daily net assets..... 1.62%* 1.62% 1.62% 1.68% 1.82% 1.88%
Ratio of net investment income (loss) to average
daily net assets................................. (.53%)* (.61%) (1.23%) (.88%) (.97%) (.56%)
Portfolio turnover rate........................... 11% 36% 60% 43% 93% 62%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
CAPITAL APPRECIATION PORTFOLIO 1995+ 1995+ 1995+
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $ 22.45 $ 22.45 $ 22.45
-------- -------- --------
Operations:
Investment income (loss)-net.................................................. (.06) (.06) (.06)
Net realized and unrealized gains (losses) on investments..................... 2.16 2.17 2.17
-------- -------- --------
Total from operations........................................................... 2.10 2.11 2.11
-------- -------- --------
Net asset value, end of period.................................................. $ 24.55 $ 24.56 $ 24.56
-------- -------- --------
Total Return@................................................................... 9.35% 9.40% 9.40%
Net assets end of period (000's omitted)........................................ $ 300 $ 85 $ 978
Ratio of expenses to average daily net assets................................... 2.17%* 2.17%* 2.17%*
Ratio of net investment income (loss) to average daily net assets............... (1.24%)* (1.24%)* (1.24%)*
Portfolio turnover rate......................................................... 11% 11% 11%

<FN>

* Annualized.
** Per share amounts compiled based upon average shares outstanding for the
period.
*** Six-month period ended April 30, 1995.
@ These are the Fund's total returns during the periods, including reinvestment
of all dividend and capital gains distributions without adjustments for sales
charge.
+ For the period from November 14, 1994 (commencement of operations) to April
30, 1995.
</TABLE>

26
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS (continued):

<TABLE>
<CAPTION>
Class A
For the Year Ended October 31,
---------------------------------------------------------
HIGH YIELD PORTFOLIO 1995** 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 7.90 $ 8.65 $ 8.00 $ 7.82 $ 5.72 $ 8.59
--------- --------- --------- --------- --------- ---------
Operations:
Investment income-net........................... .45 .86 .87 .85 .95 1.04
Net realized and unrealized gain (loss) on
investments................................... .07 (.72) .68 .22 2.03 (2.73)
--------- --------- --------- --------- --------- ---------
Total from operations............................. .52 .14 1.55 1.07 2.98 (1.69)
--------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income-net...................... (.45) (.89) (.89) (.85) (.88) (1.12)
Excess distributions of net realized gains...... -- -- (.01) (.04) -- --
From net realized gains......................... -- -- -- -- -- (.06)
--------- --------- --------- --------- --------- ---------
Total distributions to shareholders............... (.45) (.89) (.90) (.89) (.88) (1.18)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.................... $ 7.97 $ 7.90 $ 8.65 $ 8.00 $ 7.82 $ 5.72
--------- --------- --------- --------- --------- ---------
Total return@..................................... 6.93% 1.48% 20.33% 14.20% 55.78% (21.56%)
Net assets at end of period (000's omitted)....... $ 107,024 $ 98,611 $ 73,395 $ 45,628 $ 31,250 $ 17,484
Ratio of expenses to average daily net assets..... 1.24%* 1.23% 1.29% 1.33% 1.51% 1.53%
Ratio of net investment income to average daily
net assets....................................... 11.58%* 10.18% 10.43% 10.34% 13.80% 14.16%
Portfolio turnover rate........................... 21% 63% 95% 80% 61% 65%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
HIGH YIELD PORTFOLIO 1995+ 1995+ 1995+
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $ 7.87 $ 7.87 $ 7.87
-------- -------- --------
Operations:
Investment income-net......................................................... .40 .40 .40
Net realized and unrealized gains (losses) on investments..................... .09 .09 .09
-------- -------- --------
Total from operations........................................................... .49 .49 .49
-------- -------- --------
Distribution to shareholders:
From investment income-net.................................................... (.40) (.40) (.40)
Excess distributions of net realized gains.................................... -- -- --
From net realized gains....................................................... -- -- --
-------- -------- --------
Total distributions to shareholders............................................. (.40) (.40) (.40)
-------- -------- --------
Net asset value, end of period.................................................. $ 7.96 $ 7.96 $ 7.96
-------- -------- --------
Total Return@................................................................... 6.59% 6.59% 6.59%
Net assets end of period (000's omitted)........................................ $ 1,598 $ 668 $ 8,251
Ratio of expenses to average daily net assets................................... 1.89%* 1.89%* 1.89%*
Ratio of net investment income to average daily net assets...................... 10.09%* 10.09%* 10.09%*
Portfolio turnover rate......................................................... 21% 21% 21%

<FN>

27
<PAGE>
FORTIS ADVANTAGE PORTFOLIOS, INC.

Notes to Financial Statements (continued)

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

D. FINANCIAL HIGHLIGHTS: (continued)

<TABLE>
<CAPTION>
Class A
For the Period For the Period
For the Year Ended October 31, April 27, 1991 May 1, 1990
------------------------------------ to October 31, to April 26,
GOVERNMENT TOTAL RETURN PORTFOLIO: 1995*** 1994 1993 1992 1991** 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 7.73 $ 9.01 $ 8.88 $ 9.11 $ 9.06 $ 8.91
--------- ---------- ---------- ---------- -------- --------
Operations:
Investment income-net................. .25 .52 .52 .63 .31 .85
Net realized and unrealized gain
(loss) on investments............... .23 (1.16) .33 (.13) .13 .12
--------- ---------- ---------- ---------- -------- --------
Total from operations................... .48 (.64) .85 .50 .44 .97
--------- ---------- ---------- ---------- -------- --------
Distributions to shareholders:
From investment income-net............ (.29) (.52) (.53) (.59) (.37) (.82)
Excess distributions of net realized
gains............................... (.04) (.12) (.19) (.14) (.02) --
--------- ---------- ---------- ---------- -------- --------
Total distributions to shareholders..... (.33) (.64) (.72) (.73) (.39) (.82)
--------- ---------- ---------- ---------- -------- --------
Net asset value, end of period.......... $ 7.88 $ 7.73 $ 9.01 $ 8.88 $ 9.11 $ 9.06
--------- ---------- ---------- ---------- -------- --------
Total return@........................... 5.86% (7.38%) 9.87% 5.73% 4.98% 11.27%
Net assets at end of period (000's
omitted)............................... $ 64,857 $ 70,041 $ 90,138 $ 94,336 $ 70,912 $ 75,605
Ratio of expenses to average daily net
assets................................. 1.33%* 1.28% 1.25% 1.25% 1.25%* 1.25%*
Ratio of net investment income to
average daily net assets............... 6.63%* 6.20% 5.81% 6.64% 6.74%* 9.37%*
Portfolio turnover rate................. 40% 135% 113% 122% 118% 101%
</TABLE>

<TABLE>
<CAPTION>
Class B Class C Class H
GOVERNMENT TOTAL RETURN PORTFOLIO: 1995+ 1995+ 1995+
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $ 7.64 $ 7.64 $ 7.64
-------- -------- --------
Operations:
Investment income-net......................................................... .24 .21 .21
Net realized and unrealized gains (losses) on investments..................... .24 .29 .28
-------- -------- --------
Total from operations........................................................... .48 .50 .49
-------- -------- --------
Distribution to shareholders:
From investment income - net.................................................. (.25) (.25) (.25)
Excess distributions of net realized gains.................................... (.01) (.02) (.02)
-------- -------- --------
Total distributions to shareholders............................................. (.26) (.27) (.27)
-------- -------- --------
Net asset value, end of period.................................................. $ 7.86 $ 7.87 $ 7.86
-------- -------- --------
Total Return@................................................................... 6.21% 6.34% 6.21%
Net assets end of period (000's omitted)........................................ $ 9 $ 15 $ 67
Ratio of expenses to average daily net assets................................... 1.98%* 1.98%* 1.98%*
Ratio of net investment income to average daily net assets...................... 5.32%* 5.32%* 5.32%*
Portfolio turnover rate......................................................... 40% 40% 40%

<FN>

* Annualized.
** Fortis Advisers, Inc. assumed management of the fund on April 27, 1991
(formerly Olympus U.S. Government Plus Fund).
*** Six-month period ended April 30, 1995.
@ These are the Fund's total returns during the periods, including reinvestment
of all dividend and capital gains distributions without adjustments for sales
charge.
+ For the period from November 14, 1994 (commencement of operations) to April
30, 1995.
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
DIRECTORS OFFICERS

RICHARD W. CUTTING DEAN C. KOPPERUD THOMAS R. PELLETT OFFICERSDEAN C. KOPPERUD
CPA and Financial President and Director Prior to January, 1991, President and Director
Consultant Fortis Advisers, Inc. Senior Vice STEPHEN M. POLING
ALLEN R. FREEDMAN Fortis Investors, Inc. President-Administration Vice President
Chairman and Chief Senior Vice President and and Corporate Affairs DENNIS M. OTT
Executive Officer Director of Fortis Benefits and Director Vice President
Fortis, Inc.; Insurance Company Pet, Inc. JAMES S. BYRD
Managing Director of Senior Vice President of ROBB L. PRINCE Vice President
Fortis International, N.V. Time Insurance Vice President and ROBERT C. LINDBERG
DR. ROBERT M. GAVIN Company Treasurer Vice President
President EDWARD M. MAHONEY Jostens, Inc. KEITH R. THOMSON
Macalester College Prior to January, 1995, LEONARD J. SANTOW Vice President
BENJAMIN S. JAFFRAY Chairman and Chief Principal ROBERT W. BELTZ, JR.
Chairman Executive Officer Griggs & Santow, Inc. Vice President
Sheffield Group, Ltd. Fortis Advisers, Inc. JOSEPH M. WIKLER ROBERT J. CLANCY
JEAN L. KING Fortis Investors, Inc. Investment Consultant and Vice President
President Private Investor THOMAS D. GUALDONI
Communi-King Prior to January, 1994, Vice President
Director of Research, LARRY A. MEDIN
Chief Investment Officer, Vice President
Principal, and Director JON H. NICHOLSON
The Rothschild Co. Vice President
JOHN W. NORTON
Vice President
DAVID A. PETERSON
Vice President
MICHAEL J. RADMER
Secretary
TAMARA L. FAGELY
Treasurer
DAVID G. CARROLL
2nd Vice President
CHRIS J. NEUHARTH
2nd Vice President
INVESTMENT MANAGER, CUSTODIAN
REGISTRAR AND Norwest Bank
TRANSFER AGENT Minnesota, N.A.
Fortis Advisers, Inc. Minneapolis, Minnesota
Box 64284 GENERAL COUNSEL
St. Paul, Minnesota 55164 Dorsey & Whitney P.L.L.P.
PRINCIPAL UNDERWRITER Minneapolis, Minnesota
Fortis Investors, Inc. INDEPENDENT AUDITORS
Box 64284 KPMG Peat Marwick LLP
St. Paul, Minnesota 55164 Minneapolis, Minnesota
</TABLE>

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

29
<PAGE>

[LOGO]
----------------
Bulk Rate
FORTIS FINANCIAL GROUP
US Postage
P.O. Box 64284
PAID
St. Paul, MN 55164
Permit No. 3794
Minneapolis, MN
------------------

FORTIS ADVANTAGE
PORTFOLIOS, INC.
[LOGO]
PRINTED ON RECYCLED PAPER WITH
40% PRECONSUMER WASTE AND
10% POST CONSUMER WASTE.
PLEASE RECYCLE.

95557 (Ed. 6/95)
<PAGE>

COMBINATION OF
GOVERNMENT TOTAL RETURN PORTFOLIO OF FORTIS ADVANTAGE PORTFOLIOS, INC.
WITH AND INTO
FORTIS U.S. GOVERNMENT SECURITIES FUND OF FORTIS INCOME PORTFOLIOS, 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
Government Total Return Portfolio of Fortis Advantage Portfolios, Inc. (the
"Acquired Fund") and the Fortis U.S. Government Securities Fund of Fortis
Income Portfolios, Inc. (the "Acquiring Fund"), reflect the accounts of the
two Funds at and for the 12-month period ended July 31, 1995. These
statements have been derived from the annual report for the Acquiring Fund as
of July 31, 1995, and the underlying accounting records used in calculating
daily net asset values for the 12-month period ended July 31, 1995 for the
Acquired Fund. The pro forma combining statements have been prepared based
upon the various fee structures of the Funds in existence as of July 31, 1995.

<PAGE>

PROFORMA STATEMENT OF ASSETS AND LIABILITIES
At July 31, 1995 (Unaudited)
<TABLE>
<CAPTION>

Acquired Acquiring
Fund Fund
07/31/95 07/31/95 Proforma Proforma
(Historical) (Historical) Adjustments Combined
----------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value $63,234,031 $479,504,553 $542,738,584
Collateral for securities lending transactions 12,501,150 252,179,800 264,680,950
Receivables:
Investment securities sold 544,096 10,866,864 11,410,960
Interest and dividends 896,359 6,767,642 7,664,001
Subscriptions of capital stock 107 105,824 105,931
Deferred registration costs 36,220 43,544 79,764
----------------- ------------------ ---------------- ------------------
TOTAL ASSETS 77,211,963 749,468,227 0 826,680,190
----------------- ------------------ ---------------- ------------------
LIABILITIES
Bank Overdraft 7,004 0 7,004
Cash portion of dividends payable 146,180 924,673 1,070,853
Payable upon return of securities loaned 12,501,150 252,179,800 264,680,950
Payable for investment securities purchased 0 14,771,875 14,771,875
Redemptions of capital stock 12,402 129,849 142,251
Payable for investment advisory and management fees 43,634 293,744 337,378
Payable for distribution fees 2,495 745 3,240
Accounts payable and accrued expenses 14,842 30,751 45,593
----------------- ------------------ ---------------- ------------------
TOTAL LIABILITIES 12,727,707 268,331,437 0 281,059,144
----------------- ------------------ ---------------- ------------------
NET ASSETS $64,484,256 $481,136,790 $ 0 $545,621,046
================= ================== ================ ==================

NET ASSETS
Net proceeds of capital stock, par value $.01 per share $78,063,964 $537,043,809 $615,107,773
Unrealized appreciation of investments 1,087,931 3,867,629 4,955,560
Excess distributions over net investment income (186,491) (17,686) (204,177)
Accumulated net realized loss from sale of investments (14,481,148) (59,756,962) (74,238,110)
----------------- ------------------ ---------------- ------------------
TOTAL NET ASSETS $64,484,256 $481,136,790 $ 0 $545,621,046
================= ================== ================ ==================

OUTSTANDING SHARES
Class A 7,978,790 544,097 (879,761)(a) 7,643,126
Class B 5,826 53,530 (662)(a) 58,694
Class C 2,402 36,194 (266)(a) 38,330
Class H 48,211 534,676 (5,507)(a) 577,380
Class E N/A 52,149,917 52,149,917

NET ASSET VALUE
Class A $8.03 $9.02 $9.02
Class B $8.00 $9.02 $9.02
Class C $8.01 $9.01 $9.01
Class H $7.99 $9.02 $9.02
Class E N/A $9.02 $9.02
</TABLE>

See accompanying notes to proforma financial statements.

(a) Reflects reduction in shares due to differences in the net asset values
of the Funds.
<PAGE>

PROFORMA STATEMENT OF OPERATIONS
For the year ended July 31, 1995 (Unaudited)

ACQUIRED ACQUIRING
FUND FUND
07/31/95 07/31/95 PROFORMA PROFORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
---------------- ------------------ --------------- ----------------
NET INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Income
Interest Income $5,282,170 $41,392,499 $ 702,522 (c) $47,377,191
Fee Income 5,132 321,417 0 326,549
---------------- ------------------ --------------- ----------------
Total Income 5,287,302 41,713,916 702,522 47,703,740
---------------- ------------------ --------------- ----------------
Expenses:
Investment advisory and management fees 535,894 3,576,719 (59,333) (a) 4,053,280
Distribution fees 239,212 23,151 (67,957) (a) 194,406
Shareholders' notices and reports 29,690 112,706 (12,239) (a) 130,157
Legal and auditing fees 24,608 72,056 (24,608) (a) 72,056
Registration fees 46,266 67,862 (46,266) (a) 67,862
Custodian fees 32,692 62,744 (32,060) (a) 63,376
Directors' fees and expenses 5,709 46,526 (5,709) (a) 46,526
Other 8,266 46,734 (8,266) (a) 46,734
---------------- ------------------ --------------- ----------------
Total Expenses 922,337 4,008,498 (256,438) 4,674,397
Less reimbursable expenses 0 (84,896) 84,896 (b) 0
---------------- ------------------ --------------- ----------------
Net Expenses 922,337 3,923,602 (171,542) 4,674,397
---------------- ------------------ --------------- ----------------
NET INVESTMENT INCOME 4,364,965 37,790,314 874,064 43,029,343
---------------- ------------------ --------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions (5,261,210) (33,680,898) 0 (38,942,108)
Net change in unrealized appreciation of investments
in securities 5,179,283 31,855,826 (702,522) (c) 36,332,587
---------------- ------------------ --------------- ----------------
NET LOSS ON INVESTMENTS (81,927) (1,825,072) (702,522) (2,609,521)
---------------- ------------------ --------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,283,038 $35,965,242 $ 171,542 $40,419,822
================ ================== =============== ================
</TABLE>

See accompanying notes to pro forma financial statements.

(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Expense waiver was in effect only through June 1, 1995.
(c) Reflects differences in the amortization policies of the Funds.
<PAGE>

PROFORMA SCHEDULE OF INVESTMENTS
At July 31, 1995 (Unaudited)
<TABLE>
<CAPTION>

FACE AMOUNT (HISTORICAL) SECURITY MARKET AMOUNT (HISTORICAL)
- ------------------------------------------------------------------------------------------------------------------------------------
ACQUIRED ACQUIRING ACQUIRED ACQUIRING
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES
-----------------------
<C> <C> <C> <S> <C> <C> <C>
$ 1,500,000 $0 $1,500,000 Oakwood Mtg. Investors, Inc., 7.1% Ser 1995-A $1,468,687 $0 $1,468,687
9-15-2020
2,000,000 0 2,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1 2,008,396 0 2,008,396
4-15-2019
1,620,942 0 1,620,942 Residential Resources, Inc., 9.50% Series 14 1,651,722 0 1,651,722
12-1-2018
- ------------------------------------------------------------------------------------------------------------------------------------
5,120,942 0 5,120,942 5,128,805 0 5,128,805
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT OBLIGATIONS
------------------------------------------
0 18,656,985 18,656,985 FHLMC Mortgage Backed, 8.00% 2001-2002 0 19,094,248 19,094,248
393,810 5,933,756 6,327,566 FHLMC Mortgage Backed, 9.00% 2001-2022 405,748 6,174,814 6,580,562
1,725,912 10,546,129 12,272,041 FHLMC Mortgage Backed, 9.50% 2016 1,811,129 11,066,844 12,877,973
0 426,504 426,504 FHLMC Mortgage Backed, 10.50% 2015 0 463,690 463,690
261,578 248,872 510,450 FHLMC Mortgage Backed, 11.25% 2013-2014 288,553 274,537 563,090
447,148 1,044,017 1,491,165 FHLMC Mortgage Backed, 11.50% 2015-2019 494,797 1,155,269 1,650,066
0 1,265,083 1,265,083 FHLMC Mortgage Backed, 11.75% 2010-2015 0 1,405,033 1,405,033
313,863 0 313,863 FHLMC Mortgage Backed, 12.50% 2019 352,017 0 352,017
0 2,404,831 2,404,831 FHLMC #136-D PAC, 9.00% 2020 0 2,459,467 2,459,467
44,025 108,257 152,282 FHLMC #1364 Interest Only I/O-ette strip, 100% 2015 660,368 1,623,856 2,284,224
1,202,416 0 1,202,416 FHLMC Remic-Pac's, 9.0% 2020 1,229,733 0 1,229,733
1,500,000 0 1,500,000 FHLMC Remic-Pac's, 9.5% 2003 1,535,444 0 1,535,444
0 15,000,000 15,000,000 FNMA Mortgage Backed, 7.00% 2025 (TBA) 0 14,625,000 14,625,000
0 21,227,505 21,227,505 FNMA Mortgage Backed, 7.50% 2022-2024 0 21,161,169 21,161,169
0 15,080,429 15,080,429 FNMA Mortgage Backed, 8.00% 2024 0 15,311,340 15,311,340
2,095,473 11,963,741 14,059,214 FNMA Mortgage Backed, 8.50% 2022-2025 2,158,991 12,146,930 14,305,921
0 226,337 226,337 FNMA Mortgage Backed, 9.00% 2020 0 235,391 235,391
0 2,315,203 2,315,203 FNMA Mortgage Backed, 9.75% 2020 0 2,471,838 2,471,838
0 1,882,841 1,882,841 FNMA Mortgage Backed, 10.00% 2020 0 2,045,236 2,045,236
410,220 1,517,640 1,927,860 FNMA Mortgage Backed, 10.50% 2012-2018 449,575 1,663,238 2,112,813
0 404,443 404,443 FNMA Mortgage Backed, 10.75% 2013 0 445,772 445,772
0 4,561,957 4,561,957 FNMA Mortgage Backed, 11.00% 2015-2020 0 5,056,641 5,056,641
0 588,197 588,197 FNMA Mortgage Backed, 11.25% 2013 0 654,002 654,002
382,269 0 382,269 FNMA Mortgage Backed, 11.50% 2015 426,349 0 426,349
278,109 417,628 695,737 FNMA Mortgage Backed, 12.00% 2011-2016 312,438 469,179 781,617
265,702 789,482 1,055,184 FNMA Mortgage Backed, 12.50% 2015 300,326 892,361 1,192,687
2,000,000 10,000,000 12,000,000 FNMA Note, 6.85% 2000 2,002,974 10,014,870 12,017,844
1,500,000 9,000,000 10,500,000 FNMA Note, 7.40% 2004 1,567,463 9,404,775 10,972,238
0 16,750,000 16,750,000 FNMA Note, 7.65% 2005 0 17,850,106 17,850,106
2,000,000 13,000,000 15,000,000 FNMA Note, 8.50% 2005 2,140,282 13,911,833 16,052,115
0 3,161,624 3,161,624 FNMA Remic-Pac's, 7.50% 2019 0 3,174,046 3,174,046
0 6,500,000 6,500,000 FNMA Remic-Pac's, 9.00% 2021 0 6,846,899 6,846,899
89,622 158,899 248,521 FNMA Remic-Pac's, 13.50% 2017 91,454 162,149 253,603
1,664,702 8,332,978 9,997,680 GNMA Mortgage Backed, 7.50% 2022 1,662,100 8,319,954 9,982,054
4,048,638 0 4,048,638 GNMA Mortgage Backed, 8.00% 2017-2022 4,129,611 0 4,129,611
567,030 18,622,484 19,189,514 GNMA Mortgage Backed, 9.00% 2016-2022 590,420 19,504,064 20,094,484
1,316,936 0 1,316,936 GNMA Mortgage Backed, 9.125% 2018 1,345,526 0 1,345,526
3,446,582 24,907,854 28,354,436 GNMA Mortgage Backed, 9.50% 2016-2019 3,636,164 26,240,116 29,876,280
0 1,066,600 1,066,600 GNMA Mortgage Backed, 11.00% 2015-2018 0 1,167,927 1,167,927
0 66,368 66,368 GNMA Mortgage Backed, 11.25% 2015 0 73,720 73,720
3,500,000 25,150,000 28,650,000 FHLB Note, 7.31% 2004 3,628,874 26,076,048 29,704,922
7,000,000 15,000,000 22,000,000 Resolution Funding Corp. Zero Coupon Strip, 1,831,963 3,849,135 5,681,098
7.24% 2014
2,930,000 33,500,000 36,430,000 U.S. Treasury Bond, 8.125% 2021 3,340,200 38,190,000 41,530,200
5,000,000 34,500,000 39,500,000 U.S. Treasury Note, 6.75% 2000 5,109,375 35,254,688 40,364,063
1,360,000 4,400,000 5,760,000 U.S. Treasury Note, 7.25% 1996 1,380,400 4,466,000 5,846,400
2,000,000 15,000,000 17,000,000 U.S. Treasury Note, 7.875% 1996-2004 2,191,872 15,173,415 17,365,287
0 20,000,000 20,000,000 U.S. Treasury Note, 8.25% 1998 0 21,181,220 21,181,220
5,000,000 25,000,000 30,000,000 U.S. Treasury Note, 8.75% 1997 5,285,930 26,429,650 31,715,580
0 20,000,000 20,000,000 U.S. Treasury Note, 8.875% 1998 0 21,643,720 21,643,720
4,500,000 33,000,000 37,500,000 U.S. Treasury Note, 9.00% 1998 4,838,900 35,485,263 40,324,163
2,650,000 13,350,000 16,000,000 U.S. Treasury Note, 9.375% 1996 2,716,250 13,683,750 16,400,000
- ------------------------------------------------------------------------------------------------------------------------------------
59,894,035 467,076,644 526,970,679 57,915,226 478,999,203 536,914,429
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
----------------------
190,000 0 190,000 Associates Corp. Master Variable Rate Note, 5.79% 190,000 0 190,000
0 505,350 505,350 Federated Treasury Obligation Fund, 5.70% 0 505,350 505,350
- ------------------------------------------------------------------------------------------------------------------------------------
190,000 505,350 695,350 190,000 505,350 695,350
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
-----------------
$65,204,977 $467,581,994 $532,786,971 $63,234,031 $479,504,553 $542,738,584
- ------------------------------------------------------------------------------------------------------------------------------------
COST
----
$62,146,100 $475,636,924 $537,783,024
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

PRO FORMA FOOTNOTES OF MERGER BETWEEN ACQUIRED FUND AND ACQUIRING FUND
July 31, 1995 (Unaudited)

1. GENERAL

The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Fortis Advantage Government Total Return
Portfolio (Acquired Fund) by Fortis U.S. Government Securities Fund (Acquiring
Fund), as if such acquisition had taken place as of the close of business on
July 31, 1994.

Under the terms of the 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 July 31, 1995.

The accompanying proforma 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 July 31, 1995. The information
included in the proforma 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 semi-annual report dated April 30, 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 July 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) securities transactions are accounted for on the trade date (b)
long-term debt securities are valued at current market prices on the basis of
valuations furnished by an independent pricing service; short-term
investments that have a maturity of 60 days or less are valued at amortized
cost (c) interest income is recorded on the accrual basis (d) gains or losses
on the sale of securities are calculated by using the identified cost method
(e) for financial reporting purposes, except for original issue discount, the
Acquiring Fund does not amortize long-term bond premium and discount (the
Acquired Fund amortizes all premium and discount including original issue
discount for financial reporting purposes, differences in amortization have
been reflected in the proforma financials) (f) the Acquiring Fund lends its
portfolio securities (as does the Acquired Fund) (g) 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 (h)
distributions from net investment income are declared daily and paid
monthly; the Fund

<PAGE>

PRO FORMA FOOTNOTES OF MERGER BETWEEN ACQUIRED FUND AND ACQUIRING FUND
July 31, 1995 (Unaudited) (continued)

will generally make annual distributions of any realized capital gains as
required by law (i) 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 July 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 July 31, 1994.

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 .80%
on the first 50 million of average daily net assets and .70% of net assets in
excess of $50 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% (Class 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.

5. FEDERAL TAXES

At July 31, 1995, the Acquiring Fund had net capital loss carryovers of
$59,084,201 available to offset future capital gains. To the extent that these
carryover losses are used to offset capital gains, it is probable that any gains
so offset will not be distributed.

<PAGE>

PART C

OTHER INFORMATION

ITEM 15. INDEMNIFICATION.

The response to Item 27 of Part C of Post-Effective Amendment No. 28 to
the Registrant's Registration Statement on Form N-1A, File No. 2-46686, filed
in March 1988, is incorporated herein by reference.

ITEM 16. EXHIBITS.

1(a) Amended and Restated Articles of Incorporation. (Incorporated by
referene to Post-Effective Amendment No. 36 to the Registrant's
Registration Statement on Form N-1A, File No. 2-46686, filed in
September 1994.)

1(b) Form of amendment to Amended and Restated Articles of Incorporation
to effect the Reorganization. (Included as Exhibit 1 to the
Agreement and Plan of Reorganization referred to in 4 below.)

2 Bylaws. (Incorporated by reference to Post-Effective Amendment No.
33 to the Registrant's Registration Statement on Form N-1A, File No.
2-44686, filed in February 1992.)

3 Not Applicable.

4 Agreement and Plan of Reorganization is attached as Exhibit A to the
Prospectus/Proxy Statement included in Part A of this Registration
Statement on Form N-14.

5 See 1(a) and 1(b) above.

6 Investment Advisory Agreement. (Incorporated by reference to
Post-Effective Amendment No. 33 to the Registrant's Registration
Statement on Form N-1A, File No. 2-44686, filed in February 1992.)

7(a) Underwriting Agreement. (Incorporated by reference to
Post-Effective Amendment No. 37 to the Registrant's Registration
Statement on Form N-1A, File No. 2-46686, filed in July 1995.)

7(b) Dealer Sales Agreement. (Incorporated by reference to
Post-Effective Amendment No. 36 to the Registrant's Registration
Statement on Form N-1A, File No. 2-46686, filed in September 1994.)

8 Not Applicable.

9 Custodian Agreement. (Incorporated by reference to Post-Effective
Amendment No. 34 to the Registrant's Registration Statement on Form
N-1A, File No. 2-46686, filed in February 1993.)

C-1

<PAGE>

(10)(a) Rule 12b-1 Plan. (Incorporated by reference to Post-Effective
Amendment No. 36 to the Registrant's Registration Statement on
Form N-1A, File No. 2-46686, filed in September 1994.)

(10)(b) Multiple Class Plan Pursuant to Rule 18f-3. (Incorporated by
reference to Post-Effective Amendment No. 37 to the Registrant's
Registration Statement on Form N-1A, File No. 2- 46686, filed in
July 1995.)

* 11 Opinion and Consent of Dorsey & Whitney P.L.L.P. with respect to
the legality of the securities being registered.

* 12 Opinion and Consent of Dorsey & Whitney P.L.L.P. with respect to
tax matters.

13 Not Applicable.

* 14 Consent of KPMG Peat Marwick LLP.

15 Not Applicable.

* 16 Powers of Attorney of Directors signing the Registration Statement.

* 17(a) Rule 24f-2 Election of Registrant.

* 17(b) Form of Proxy Card.

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

* Filed herewith.

ITEM 17. UNDERTAKINGS.

(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part
of this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.

C-2

<PAGE>

SIGNATURES

As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of Woodbury, State
of Minnesota, on the 14th day of November, 1995.

FORTIS INCOME PORTFOLIOS, INC.

By: /s/ Dean C. Kopperud
---------------------------------
Dean C. Kopperud, President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacity and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Tamara L. Fagely Treasurer (Principal **
- --------------------------- Financial and Accounting
Tamara L. Fagely Officer)

* Director **
- ---------------------------
Richard W. Cutting

Director
- ---------------------------
Allen R. Freedman

* Director **
- ---------------------------
Dr. Robert M. Gavin

* Director **
- ---------------------------
Benjamin S. Jaffray

Director
- ---------------------------
Jean L. King

/s/ Dean C. Kopperud Director **
- ---------------------------
Dean C. Kopperud

* Director **
- ---------------------------
Edward M. Mahoney

* Director **
- ---------------------------
Robb L. Prince

* Director **
- ---------------------------
Leonard J. Santow

* Director **
- ---------------------------
Joseph M. Wikler

* By: /s/ Dean C. Kopperud
- ---------------------------
Dean C. Kopperud
Attorney in Fact
** November 14, 1995.

C-3

<PAGE>

Exhibit 11

DORSEY & WHITNEY P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

November 14, 1995

Fortis Income Portfolios, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Re: Fortis Income Portfolios, Inc.
Shares to be Issued Pursuant to Agreement and Plan of Reorganization

Ladies and Gentlemen:

We have acted as counsel to Fortis Income Portfolios, Inc., a
Minnesota corporation ("Fortis Income"), in connection with Fortis Income's
authorization and proposed issuance of its Series A (also known as "Fortis
U.S. Government Securities Fund") common shares, par value $.01 per share
(the "Shares"). The Shares are to be issued pursuant to an Agreement and
Plan of Reorganization (the "Agreement"), by and between Fortis U.S.
Government Securities Fund, a series of Fortis Income (the "Acquiring Fund"),
and Government Total Return Portfolio, a series of Fortis Advantage
Portfolios, Inc., a Minnesota corporation (the "Acquired Fund"), the form of
which Agreement is included as Exhibit 1 to the Prospectus/Proxy Statement
relating to the transactions contemplated by the Agreement included in the
Fortis Income's Registration Statement on Form N-14 filed with the Securities
and Exchange Commission (the "Registration Statement").

In rendering the opinions hereinafter expressed, we have reviewed
the corporate proceedings taken by Fortis Income in connection with the
authorization and issuance of the Shares, and we have reviewed such questions
of law and examined copies of such corporate records of Fortis Income,
certificates of public officials and of responsible officers of Fortis
Income, and other documents as we have deemed necessary as a basis for such
opinions. As to the various matters of fact material to such opinions, we
have, when such facts were not independently established, relied to the
extent we deem proper on certificates of public officials and of responsible
officers of Fortis Income. In connection with such review and examination,
we have assumed that all copies of documents provided to us conform to the
originals; that all signatures are genuine; and that prior to the
consummation of the transactions contemplated thereby, the Agreement will
have

<PAGE>

been duly and validly executed and delivered on behalf of each of the parties
thereto in substantially the form included in the Registration Statement.

Based on the foregoing, it is our opinion that:

1. Fortis Income is validly existing as a corporation in good
standing under the laws of the State of Minnesota.

2. The Shares, when issued and delivered by the Acquiring Fund
pursuant to, and upon satisfaction of the conditions contained in, the
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable.

In rendering the foregoing opinions (a) we express no opinion as to
the laws of any jurisdiction other than the State of Minnesota; and (b) we
have assumed, with your concurrence, that the conditions to closing set forth
in the Agreement will have been satisfied.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in Fortis Income's final Prospectus/Proxy Statement relating
to the Shares included in the Registration Statement.

Very truly yours,

/s/ Dorsey & Whitney P.L.L.P.
JDA

<PAGE>

EXHIBIT 12

DORSEY & WHITNEY P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

November 14, 1995

Fortis Income Portfolios, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Fortis Advantage Portfolios, Inc.
500 Bielenberg Drive
Woodbury, Minnesota 55125

Ladies and Gentlemen:

We have acted as counsel to Fortis Income Portfolios, Inc. ("Fortis
Income") and Fortis Advantage Portfolios, Inc. ("Fortis Advantage") in
connection with the proposed acquisition of all or substantially all of the
assets and all of the liabilities of Government Total Return Portfolio (the
"Acquired Fund"), a series of Fortis Advantage, by Fortis U.S. Government
Securities Fund (the "Acquiring Fund"), a series of Fortis Income, pursuant
to an Agreement and Plan of Reorganization to be executed by and between
Fortis Income on behalf of the Acquiring Fund and Fortis Advantage of behalf
of the Acquired Fund (the "Agreement").

You have asked for our opinion concerning certain federal income
tax consequences of the transfer of substantially all of the assets of the
Acquired Fund to the Acquiring Fund and the assumption by the Acquiring Fund
of all of the liabilities of the Acquired Fund in exchange solely for
Acquiring Fund Shares and the distribution of such shares to the shareholders
of the Acquired Fund upon complete liquidation of Acquired Fund and
cancellation of the Acquired Fund Shares, all pursuant to the Agreement (the
"Reorganization"). In this regard we have examined (1) the form of the
Agreement included in the Registration Statement on Form N-14 to be filed
with the Securities and Exchange Commission on or about November 15, 1995,
(the "Registration Statement"), (2) the Registration Statement (including,
but not limited to, the Prospectus and Proxy Statement included therein) and
such other documents and records as we consider necessary in order to render
this opinion. Unless otherwise provided herein, capitalized terms used in
this opinion shall have the same meaning as set forth in the Prospectus and
Proxy Statement or the Agreement, as the case may be.

<PAGE>

November 14, 1995
Page 2

Pursuant to the Agreement, all or substantially all of the assets
and all of the liabilities of the Acquired Fund immediately prior to the
Effective Time shall be exchanged for that number of Acquiring Fund Shares
having an aggregate value immediately prior to the Effective Time equal to
the net value of assets of the Acquired Fund immediately prior to the
Effective Time. All Acquiring Fund Shares then held by the Acquired Fund,
representing all of the assets of Acquired Fund, will be distributed to
Acquired Fund shareholders pursuant to the Agreement (which includes the
cancellation and retirement of all the shares of the Acquired Fund ).

The Board of Directors of both the Acquired Fund and the Acquiring
Fund, including all of the "non-interested" directors, has determined that
the Reorganization is advantageous to both funds and is in the best interests
of each fund's respective shareholders. In approving the Reorganization, the
Boards considered, among other things, the following factors: (1) the
similarity of the investment objectives, policies and restrictions of the two
funds; (2) the advantages to both funds of a potentially reduced expense
ratio, economies of scale resulting from fund growth, and the facilitation of
portfolio management; (3) the terms and conditions of the Agreement; (4) the
provision in the Agreement that Reorganization expenses will be allocated
between the Acquired Fund and the Acquiring Fund in proportion to their
relative net assets at the Effective Time; (5) the fact that advisory fees,
Rule 12b-1 fees and sales charges would remain constant or, in some
instances, be reduced for the Acquired Fund Shareholders; and (6) the
Acquiring Fund's agreements that (i) the former holders of Acquired Fund
Class B and Class H shares would receive credit for the period during which
they held such Acquired Fund Shares in determining the application of
deferred sales charges on the corresponding classes of Acquiring Fund shares
they receive in the Reorganization and for purposes of determining the date
of conversion of such shares to Acquiring Fund Class A shares, (ii) former
holders of Acquired Fund Class A and Class C shares would receive credit for
the period during which they held such Acquired Fund Shares in determining
the application of the applicable deferred sales charges on the corresponding
classes of Acquiring Fund shares they receive in the Reorganization

Our opinion is based upon existing law and currently applicable
Treasury Regulations, currently published administrative positions of the
Internal Revenue Service contained in Revenue Rulings and Revenue Procedures
and judicial decisions, all of which are subject to change prospectively and
retroactively. It is not a guarantee of the current status of the law and
should not be accepted as a guarantee that a court of law or an
administrative agency will concur in the opinion.

<PAGE>

November 14, 1995
Page 3

Based on the Agreement, the other documents referred to herein, the
facts and assumptions stated above, as well as representations made by Fortis
Income in a Certificate dated November 14, 1995, representations made by
Fortis Advantage in a Certificate dated November 14, 1995, the provisions of
the Code and judicial and administrative interpretations as in existence on
the date hereof, and on the assumption that the Agreement will be executed
and the Reorganization will be carried out pursuant to the Agreement, it is
our opinion that the Reorganization will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of the Code, and that the Acquiring Fund
and the Acquired Fund will each be a party to the reorganization within the
meaning of Section 368(b) of the Code.

On the basis of the foregoing opinion that the Reorganization will
constitute a reorganization within the meaning of Section 368 of the Code, it
is further our opinion that:

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

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

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

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

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

<PAGE>

November 14, 1995
Page 4

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

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

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

We consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this firm
under the caption "Information About the Reorganization -- Federal Income Tax
Consequences" in the Prospectus/Proxy Statement included in Part A of the
Registration Statement.

Very truly yours,

/s/ Dorsey & Whitney P.L.L.P.

<PAGE>

EXHIBIT 14

KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Fortis Income Portfolios, Inc.
Fortis Advantage Portfolios, Inc.:

We consent to the use of our reports and references to our Firm included in
or incorporated by reference in the Prospectuses and Statements of Additional
Information of Fortis Income Portfolios, Inc. and Fortis Advantage
Portfolios, Inc., and the reference to our Firm under the heading "FINANCIAL
STATEMENTS AND EXPERTS" in Part A of this Registration Statement.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Minneapolis, Minnesota
November 13, 1995

<PAGE>
EXHIBIT 16
FORTIS INCOME PORTFOLIOS, INC.

POWER OF ATTORNEY N-14 REGISTRATION STATEMENT

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Dean C. Kopperud, John W.
Norton, and Michael J. Radmer, and each of them, his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on
Form N-14 of Fortis Income Portfolios, Inc., relating to the combination of
the Government Total Return Portfolio of Fortis Advantage Portfolios, Inc.
with and into the Fortis U.S. Government Securities Fund of Fortis Income
Portfolios, Inc., and any and all amendments thereto, including
post-effective amendments, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting
alone, full power and authority to do and perform to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or the substitutes
for such attorneys-in-fact and agents, may lawfully do or cause to be done by
virtue hereof.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Richard W. Cutting
- ---------------------------- Director November 1, 1995
Richard W. Cutting

- ---------------------------- Director
Allen R. Freedman

/s/ Robert M. Gavin
- ---------------------------- Director October 30, 1995
Dr. Robert M. Gavin

/s/ Benjamin S. Jaffray
- ---------------------------- Director November 10, 1995
Benjamin S. Jaffray

- ---------------------------- Director
Jean L. King

/s/ Dean C. Kopperud
- ---------------------------- Director October 29, 1995
Dean C. Kopperud

Page 1 of 2
<PAGE>

/s/ Edward M. Mahoney
- ---------------------------- Director November 1, 1995
Edward M. Mahoney

/s/ Robb L. Prince
- ---------------------------- Director November 7, 1995
Robb L. Prince

/s/ Leonard J. Santow
- ---------------------------- Director October 30, 1995
Leonard J. Santow

/s/ Joseph M. Wikler
- ---------------------------- Director October 30, 1995
Joseph M. Wikler

Page 2 of 2

<PAGE>
EXHIBIT 17(a)

RULE 24f-2 NOTICE

FOR

FORTIS INCOME PORTFOLIOS, INC.

811-2341

FOR FISCAL YEAR ENDED
JULY 31, 1995

Shares registered under the Securities
Act of 1933, other than shares registered
pursuant to this section, which remained
unsold at the beginning of the above
fiscal year. 0
--------------

Number of shares registered during the
above fiscal year other than pursuant
to this rule. 0
--------------

Net shares sold during the above fiscal year. (8,163,753)
--------------

Shares registered under the Securities
Act of 1933, other than shares registered
pursuant to this section, which remained
unsold at the end of the above fiscal year. 0
--------------

Net aggregate amount sold during the above
year in reliance upon registration
pursuant to this rule $(72,036,021)
--------------

Dated: September 24, 1995

/s/ Tamara L. Fagely
- ----------------------------
Tamara L. Fagely
Treasurer

Amount sold Sales Proceeds 65,642,052
Amount redeemed Redeemed Value 137,678,073
New amount sold Redeemed Value Used (72,036,021)
x

Fee - 0 -

<PAGE>
EXHIBIT 17(b)

PROXY

GOVERNMENT TOTAL RETURN PORTFOLIO
(A SERIES OF FORTIS ADVANTAGE PORTFOLIOS, INC.)
500 BIELENBERG DRIVE, WOODBURY, MINNESOTA 55125
MAILING ADDRESS: P.O. BOX 64284, ST. PAUL, MINNESOTA 55164

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FORTIS
ADVANTAGE PORTFOLIOS, INC.

The undersigned hereby appoints Michael J. Radmer and Scott R. Plummer,
and each of them, with power to act without the other and with the right of
substitution in each, as proxies of the undersigned and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
Government Total Return Portfolio (the "Acquired Fund"), a series of Fortis
Advantage Portfolios, Inc. ("Fortis Advantage"), held of record by the
undersigned on December 15, 1995, at the Special Meeting of shareholders of
the Acquired Fund to be held on February 9, 1996, or any adjournments or
postponements thereof, with all powers the undersigned would possess if
present in person. All previous proxies given with respect to the Special
Meeting hereby are revoked.

THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:

1. PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION (the "Plan")
providing for (a) the acquisition of substantially all of the assets and
the assumption of all liabilities of the Acquired Fund by Fortis U.S.
Government Securities Fund (the "Acquiring Fund"), a separately managed
series of Fortis Income Portfolios, Inc., 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
the same class of shares of the Acquiring Fund that they held in the
Acquired 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 Fortis Advantage required to effect
the reorganization contemplated by the Plan.

/ / FOR / / AGAINST / / ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" PROPOSAL 1 ABOVE. RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY.

PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
PARTNER OR OTHER AUTHORIZED PERSON.

DATED: , 199
---------------------- ----

--------------------------------------
Signature
[SHAREHOLDER INFORMATION]

--------------------------------------
Signature if held jointly

TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.