<PAGE>
File No. 2-46686
FISCAL YEAR END - July 31
Registrant proposes that
this amendment will become
effective:
60 days after filing
As of the filing date
As of December 1, 1995 X
Pursuant to Rule 485:
paragraph (a)
paragraph (b) X
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
----------------
Post-Effective Amendment Number 39
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
FORTIS INCOME PORTFOLIOS, INC.
(Exact Name of Registrant as Specified in Charter)
500 Bielenberg Drive, Woodbury, Minnesota 55125
(Address of Principal Executive Offices)
Registrant's Telephone Number: (612) 738-4000
John E. Hite, Esq., Asst. Secretary (Same address as
above) (Name and Address of Agent for Service)
----------------
Copy to:
Michael J. Radmer, Esq.
Dorsey & Whitney
2200 First Bank Place East
Minneapolis, MN 55402
----------------
Pursuant to Section 270.24f-2 of the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933. The Rule 24f-2 Notice for the Registrant's most
recent fiscal period will be filed by September 30, 1995.
==============================================================================
<PAGE>
FORTIS INCOME PORTFOLIOS, INC.
Registration Statement on Form N-1A
-----------------------------------------------------------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) and Instruction F1 of Form N-1A
-----------------------------------------------------------------------------
Form N-1A
Item No.
PART A (PROSPECTUS) PROSPECTUS HEADING
1. Cover Page.....................................COVER PAGE (no caption)
2. Synopsis (optional)............................SUMMARY OF FUND EXPENSES
3. Condensed Financial Information................FINANCIAL HIGHLIGHTS
4. General Description of Registrant..............ORGANIZATION AND
CLASSIFICATION; INVESTMENT
OBJECTIVES AND POLICIES
5. Management of the Fund.........................MANAGEMENT
6. Capital Stock and Other Securities.............CAPITAL STOCK; SHAREHOLDER
INQUIRIES; DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS;
TAXATION
7. Purchase of Securities Being Offered...........HOW TO BUY FUND SHARES;
VALUATION OF SECURITIES
8. Redemption or Repurchase.......................REDEMPTION
9. Pending Legal Proceedings......................None
PART B (STATEMENT OF ADDITIONAL INFORMATION) STATEMENT OF ADDITIONAL INFORMATION
HEADING
10. Cover Page....................................COVER PAGE (no caption)
11. Table of Contents.............................TABLE OF CONTENTS
12. General Information and History...............ORGANIZATION AND
CLASSIFICATION
13. Investment Objectives and Policies............INVESTMENT OBJECTIVES AND
POLICIES
14. Management of the Fund........................DIRECTORS AND EXECUTIVE
OFFICERS
15. Control Persons and Principal
Holders of Securities.........................CAPITAL STOCK
16. Investment Advisory and Other Services........INVESTMENT ADVISORY AND
OTHER SERVICES
17. Brokerage Allocation..........................PORTFOLIO TRANSACTIONS AND
ALLOCATION OF BROKERAGE
18. Capital Stock and Other Securities............CAPITAL STOCK
<PAGE>
19. Purchase, Redemption, and Pricing of
Securities Being Offered......................COMPUTATION OF NET ASSET
VALUE AND PRICING; SPECIAL
PURCHASE PLANS; REDEMPTION
20. Tax Status....................................TAXATION
21. Underwriters..................................UNDERWRITER
22. Calculations of Performance Data..............PERFORMANCE
23. Financial Statements..........................FINANCIAL STATEMENTS
<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
Account Application..................................................... 17
Systematic Investment Plan Authorization Agreement...................... 21
</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 July 31, 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 the Fund's 1995
Annual Report to Shareholders, which may be obtained without charge.
<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.
9
<PAGE>
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>
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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.
13
<PAGE>
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.
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
14
<PAGE>
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>
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16
<PAGE>
LOGO-Registered Trademark- ACCOUNT APPLICATION
Mail to: Complete this application to open a new
FORTIS MUTUAL FUNDS Fortis account or to add services to an
CM-9614 existing Fortis account. For personal
St. Paul, MN 55170-9614 service, please call your investment
professional or Fortis at
1-800-800-2638, ext. 3012 or ext. 3014.
DO NOT USE TO OPEN A FORTIS IRA, SEP,
403(B) OR FORTIS MONEY FUND ACCOUNT.
________________________________________________________________________________
1 ACCOUNT INFORMATION
________________________________________________________________________________
Please provide the information requested below:
<TABLE>
<S> <C>
/ / INDIVIDUAL: Please print your name, Social
Security number, U.S. citizen status.
/ / JOINT TENANT: List all names, one Social Security
number, one U.S. citizen status.
/ / UNIFORM GIFT/TRANSFER TO MINORS: Provide name of
custodian and minor, minor's Social Security
number, minor's U.S. citizen status and date of
birth of minor.
/ / TRUST: List trustee and trust title, including
trust date, trust's Taxpayer I.D. number.
/ / CORPORATION, ASSOCIATION, PARTNERSHIP: Include
full name, Taxpayer I.D. number.
/ / FORTIS KEY PLAN: Include Social Security number.
/ / QUALIFIED PLAN: Include name of Plan and trustee,
Plan's Taxpayer I.D. number.
/ / OTHER:
</TABLE>
________________________________________________________________________________
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.)
Date of Trust (if applicable) __________________________________________________
Are you a U.S. citizen? / / Yes / / No
If no, country of permanent residence __________________________________________
( )
__________________________ __________________________________________________
Date of birth Daytime phone
(Uniform Gift/Transfer to Minors)
________________________________________________________________________________
2 INVESTMENT ACCOUNT
________________________________________________________________________________
A. PHONE ORDERS
Was order previously phoned in? If yes, date ___________________________________
Confirmation # ____________________________ Account# ___________________________
FOR PHONE ORDERS, CHECK MUST BE MADE PAYABLE TO FORTIS INVESTORS
B. MAIL-IN ORDERS
Check enclosed for $____________________________. (MADE PAYABLE TO FORTIS FUNDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1) $ A / / B / / C / / H / /
Fund Name Amount Class
2) $ A / / B / / C / / H / /
Fund Name Amount Class
3) $ A / / B / / C / / H / /
Fund Name Amount Class
4) $ A / / B / / C / / H / /
Fund Name Amount Class
5) $ A / / B / / C / / H / /
Fund Name Amount Class
</TABLE>
CHECK IF APPLICABLE (for net asset value purchases):
/ / I am a member of one of the categories of persons listed under "Exemptions
from Sales Charge" in the prospectus. I qualify for exemption from the
sales charge because _____________________________________________________.
/ / I was (within the past 60 days) the owner of a fixed annuity contract not
deemed a security or a share holder of an unrelated mutual fund with a
front-end and/or deferred sales charge. I have attached the mutual
fund/insurance check (or copy of the redemption confirmation/surrender
form).
________________________________________________________________________________
3 DISTRIBUTION OPTIONS
________________________________________________________________________________
If no option is selected, all distributions will be reinvested in the same
Fortis fund(s) selected above. Please note that distributions can only be
reinvested in the SAME CLASS.
/ / Reinvest dividends and capital gains
/ / Dividends in cash and reinvest capital gains (See Section 8 for payment
options.)
/ / Dividends in capital gains in cash (See Section 8 for payment options.)
/ / Distributions into another Fortis fund (must be SAME CLASS).
_______________________________________ ______________________________________
Fund/Account # (if existing
Fund Name account)
________________________________________________________________________________
4 SYSTEMATIC INVESTMENT PLAN
________________________________________________________________________________
Complete the Systematic Investment Plan Form in the prospectus and attach a
VOIDED check from your bank checking account. These plans may be established for
as little as $25.
97815 (10/94)
17
<PAGE>
________________________________________________________________________________
5 SYSTEMATIC TRANSFER PROGRAM
________________________________________________________________________________
Fortis' Systematic Transfer Program allows you to transfer money from any Fortis
fund, in which you have a current balance of at least $1,000, into any other
Fortis fund (maximum of three), on a monthly basis. The minimum amount for each
transfer is $50. Generally, transfers between funds must be within the SAME
CLASS. See prospectus for details.
- ------------------------------------------------------- ---------------
Fund from which shares will be sold: Effective Date
Fund(s) to receive investment(s):
<TABLE>
<S> <C>
Fund Amount to invest monthly
</TABLE>
________________________________________________________________________________
6 REDUCED FRONT-END SALES CHARGES
________________________________________________________________________________
A. RIGHT OF ACCUMULATION
/ / I own shares of more than one fund in the Fortis Family of Funds, which may
entitle me to a reduced sales charge.
- ------------------------------ ---------------------
Name on account Account number
- ------------------------------ ----------------------------------------
Name on account Account number
- ------------------------------ ----------------------------------------
Name on account Account number
B. STATEMENT OF INTENT
I agree to invest $_____ over a 13-month period beginning ____, 19__ (not more
than 90 days prior to this application). I understand that an additional sales
charge must be paid if I do not complete my purchase.
________________________________________________________________________________
7 PRIVILEGED ACCOUNT SERVICE
________________________________________________________________________________
Fortis' Privileged Account Service systematically rebalances your funds back to
your original specifications ($10,000 minimum per account). All funds must be
within the SAME CLASS.
FREQUENCY: / / quarterly / / semi-annually / / annually
Fund Selected Percentage
(up to 5) (whole %)
1)
----------------------------------- ------------------
2)
----------------------------------- ------------------
3)
----------------------------------- ------------------
4)
----------------------------------- ------------------
5)
----------------------------------- ------------------
________________________________________________________________________________
8 WITHDRAWAL OPTIONS
________________________________________________________________________________
A. CASH DIVIDENDS
PLEASE SEND THE PAYMENT TO:
/ / My bank. (Please complete Bank Information in Section D below.)
/ / My address of record.
B. SYSTEMATIC WITHDRAWAL PLAN
Please consult your financial or tax adviser before electing a Systematic
Withdrawal Plan.
Please redeem shares from my Fortis ______________________________________ Fund,
account number ______________________________ in the amount of $_______________.
Effective Payment Date ____________________________ ____________________________
Month Day
<TABLE>
<S> <C> <C> <C>
FREQUENCY: / / Monthly DATE: / / Semi-Annually
/ / Quarterly / / Annually
</TABLE>
PLEASE SEND THE PAYMENT TO:
/ / My bank. (Please complete Bank Information in Section D below.)
/ / My address of record. (If bank option is not chosen, check will be
processed on the 15th of every month.)
C. TELEPHONE OPTIONS
/ / TELEPHONE EXCHANGE
All exchanges must be into accounts having the identical
registration-ownership. All authorized signatures listed in Section 9 (or
your registered representative with shareholder consent) can make telephone
transfers.
/ / TELEPHONE REDEMPTION ($25,000 LIMIT AND NOT AVAILABLE FOR QUALIFIED PLANS)
If you have not changed your address in the past 30 days, you are eligible
for this service. This option allows all authorized signatures in Section 9
(or your registered representative with shareholder consent) to redeem up
to $25,000 from your Fortis account.
PLEASE SEND THE PAYMENT TO:
/ / My bank. (Please complete Bank Information in Section D below.)
/ / My address of record.
D. BANK INFORMATION
I request Fortis Financial Group (FFG) to pay sums due me by crediting my bank
account in the form of electronic entries. This authorization will remain in
effect until I notify FFG.
TYPE OF ACCOUNT: / / Checking / / Savings
Bank name ______________________________________________________________________
Address ________________________________________________________________________
City, State, Zip _______________________________________________________________
Name of bank account ___________________________________________________________
Bank account number ____________________________________________________________
Bank transit number ____________________________________________________________
Bank phone number ______________________________________________________________
ATTACH A VOIDED CHECK FROM YOUR BANK CHECKING ACCOUNT
18
<PAGE>
________________________________________________________________________________
9 SIGNATURE & CERTIFICATION
________________________________________________________________________________
I HAVE RECEIVED AND READ EACH APPROPRIATE FUND PROSPECTUS AND UNDERSTAND THAT
ITS TERMS ARE INCORPORATED BY REFERENCE INTO THIS APPLICATION. I AM OF LEGAL AGE
AND LEGAL CAPACITY.
I understand that this application is subject to acceptance by Fortis Investors,
Inc.
I certify, under penalties or perjury, that:
(1) The Social Security number or Taxpayer I.D. number provided is correct; and
(cross out the following if not true)
(2) that the IRS has never notified me that I am subject to 31% backup
withholding, or has notified me that I am no longer subject to such backup
withholding.
Each person signing on behalf of any entity represents that his or her actions
are authorized. It is agreed that all Fortis Funds, Fortis Investors, Fortis
Advisers and their officers, directors, agents and employees will not be liable
for any loss, liability, damage or expense for relying upon this application or
any instruction believed genuine.
IF YOU ARE NOT SIGNING AS AN INDIVIDUAL, STATE YOUR TITLE OR CAPACITY (INCLUDE
APPROPRIATE DOCUMENTS VERIFYING YOUR CAPACITY).
AUTHORIZED SIGNATURE(S)
X
- ----------------------------------------------------
Owner, Custodian, Trustee Date
X
- ----------------------------------------------------
Joint Owner, Trustee Date
________________________________________________________________________________
10 DEALER/REPRESENTATIVE INFORMATION
________________________________________________________________________________
- -----------------------------------------------
Representative's name (please print)
- -----------------------------------------------------------------
Name of Broker/Dealer
- -----------------------------------------------------------------
Branch Office address
- -----------------------------------------------------------------
Representative's signature
( )
- ------------------------ ------------------------------
Representative's number Representative's Phone Number
- ----------------------------------------------------
AUTHORIZED SIGNATURE OF BROKER/DEALER
________________________________________________________________________________
11 OTHER SPECIAL INSTRUCTIONS
________________________________________________________________________________
- -----------------------------------------------
- -----------------------------------------------
________________________________________________________________________________
12 TRANSFER ON DEATH
________________________________________________________________________________
Please indicate the Primary Beneficiary with "PB" after the beneficiary(ies)
name(s). Indicate Contingent Beneficiary with "CB." Indicate Lineal Descendant
Per Stirpes with "LDPS" if you want ownership to pass to the legal heirs of the
primary beneficiary in the event a designated beneficiary dies before the
account owner. TOD IS ONLY AVAILABLE FOR INDIVIDUAL AND JOINT TENANTS (JTWROS)
ACCOUNTS.
BENEFICIARY(IES):
Name __________________________________ SS# ___________________________________
Name __________________________________ SS# ___________________________________
Name __________________________________ SS# ___________________________________
________________________________________________________________________________
13 SUITABILITY
________________________________________________________________________________
(NOTE: Must be completed with each fund application unless you provide
suitability information to your broker/dealer on a different form.)
State In Which Application Was Signed __________________________________________
- ----------------------------------------------------
Employer
- -----------------------------------------------------------------
Business Address
- -----------------------------------------------------------------
City, State, ZIP
______________________________________ ______________________________________
Occupation Age (optional)
Is customer associated with or employed by another NASD member?
/ / Yes / / No
<TABLE>
<S> <C> <C>
ESTIMATED ESTIMATED
Please mark one box under ANNUAL NET
ESTIMATED ANNUAL INCOME INCOME WORTH
and one box under (All (Exclusive of
ESTIMATED NET WORTH. Sources) Family Residence)
under $10,000
$10,000 - $25,000
$25,000 - $50,000
$50,000 - $100,000
$100,000 - $500,000
$500,000 - $1,000,000
Over $1,000,000
Declined
</TABLE>
Source of Funds ________________________________________________________________
ESTIMATED TAX BRACKET
/ / 15% / / 28% / / 31% / / 33% / / Declined
INVESTMENT OBJECTIVES
/ / Growth (long-term capital appreciation)
/ / Income (cash generating)
/ / Tax-Free Income
/ / Diversification
/ / Other (please specify)
Did You Use a Fortis Asset Allocation Model? / / Yes / / No
19
<PAGE>
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20
<PAGE>
LOGO-Registered Trademark-
FORTIS MUTUAL FUND Mail to:
AUTOMATED CLEARING HOUSE (ACH) FORTIS MUTUAL FUNDS
AUTHORIZATION AGREEMENT P.O. Box 64284
St. Paul, MN 55164
Please complete each section below to establish ACH capability to your Fortis
Mutual Fund Account. For personal service, please call your investment
professional or Fortis at (800) 800-2638, Ext. 3012.
________________________________________________________________________________
1 FORTIS ACCOUNT INFORMATION
________________________________________________________________________________
Account Registration:
________________________________________________________________________________
Owner (Individual, 1st Joint Tenant, Custodian, Trustee)
________________________________________________________________________________
Owner (2nd Joint Tenant, Minor, Trust Name)
________________________________________________________________________________
Additional Information, if needed
________________________________________________________________________________
Street address
________________________________________________________________________________
City State Zip
________________________________________________________________________________
Social Security number (Taxpayer I.D.)
Account # ______________________________________________________________________
Fund: Class:
1)
Fund Name / / A / / B / / C / / H
2)
Fund Name / / A / / B / / C / / H
3)
Fund Name / / A / / B / / C / / H
4)
Fund Name / / A / / B / / C / / H
5)
Fund Name / / A / / B / / C / / H
________________________________________________________________________________
2 BANK/FINANCIAL INSTITUTION INFORMATION
________________________________________________________________________________
PLAN TYPE: / / New Plan / / Bank Change
ACCOUNT TYPE: / /Checking / /Savings
(must attach a (must attach a
voided check) deposit slip)
________________________________________________________________________________
Transit Number
________________________________________________________________________________
Bank Account Number
________________________________________________________________________________
Account Owner (if other than name of Depositor)
________________________________________________________________________________
Depositor's Daytime Phone Number
CLEARLY PRINT THE BANK/FINANCIAL INSTITUTION'S NAME AND ADDRESS BELOW:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature of Depositor Date
________________________________________________________________________________
Signature of Joint-Depositor Date
21
<PAGE>
________________________________________________________________________________
3 SELECT OPTION
________________________________________________________________________________
I. INVESTMENT OPTION(S)
A. / / Invest via FORTIS INFORMATION LINE by
phone (minimum $25, maximum $10,000)
Please allow up to four business days for deposit
into Fortis Funds. Transactions after 3:00 p.m.
(CST) will be processed the following business
day.
*Not available on tax qualified accounts such as
IRA, SEP, SARSEP and Key plans.
B. / / Systematic Investment Plan
/ / New Plan
/ / Change Plan
I request Fortis Financial Group (FFG) to obtain payment of
sums becoming due the company by charging my account in the
form of electronic debit entries. I request and authorize the
financial institution named to accept, honor and charge those
entries to my account. Please allow 30 days for collected
funds to be available in your Fortis account.
Draft Date (1-26 only):
Amount per Fund (Min. $25):
Beginning Draft Month:
II. WITHDRAWAL OPTION(S)
(Please consult your financial or tax adviser before electing
a systematic withdrawal plan. For tax qualified accounts,
additional forms are required for distribution.)
A. / / Cash Dividends
B. / / Redeem via FORTIS INFORMATION LINE by
phone (minimum $100, maximum $25,000)
Please allow up to four business days for withdrawal to credit
your bank account. Transactions after 3:00 p.m. (CST) will be
processed the following business day.
*Not available on tax qualified accounts such as IRA, SEP,
SARSEP and Key plans.
C. / / Systematic Withdrawal Plan
/ / New Plan
/ / Change Plan
I request Fortis Financial Group (FFG) to pay sums due me by
crediting my bank account in the form of electronic entries.
I request and authorize the financial institution to accept,
honor and credit those entries to my account.
Withdrawal Date (1-26 only):
Amount per Fund (Min. $25):
Beginning Withdrawal Month:
________________________________________________________________________________
4 SIGNATURES
________________________________________________________________________________
Each person signing on behalf of any entity represents that his or her actions
are authorized. It is agreed that all Fortis Funds, Fortis Investors, Fortis
Advisers and their officers, directors, agents and employees will not be liable
for any loss, liability, damage or expense for relying upon this application or
any instruction believed genuine.
This authorization will remain in effect until I notify FFG. I hereby terminate
any prior Authorization of FFG to initiate charges to this account. I understand
that any returned item or redemption of the entire account may result in
termination of my Automated Clearing House agreement. This authorization will
become effective upon acceptance by FFG at its home office.
Authorized Signature(s)
X ______________________________________________________________________________
Owner, Custodian, Trustee Date
X ______________________________________________________________________________
Joint Owner, Trustee Date
LOGO-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)
22
<PAGE>
(This page has been left blank intentionally.)
23
<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)
LOGO-Registered Trademark-
FORTIS FINANCIAL GROUP
P.O. BOX 64284
ST. PAUL, MN 55164
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 3794
MINNEAPOLIS, MN
<PAGE>
FORTIS 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.
No broker-dealer, sales representative, or other person has been authorized to
give any information or to make any representations other than those contained
in this Statement of Additional Information, and if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or Investors. This Statement of Additional Information does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation.
25
<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>
26
<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 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 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
27
<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
28
<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:
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ------------------------- --------------- ----------------------------------------------------------------------
<S> <C> <C>
Richard W. Cutting Director Certified public accountant and financial consultant.
137 Chapin Parkway
Buffalo, New York
Allen R. Freedman* Director Chairman and Chief Executive Officer of Fortis, Inc.; a Managing
One Chase Manhattan Plaza Director of Fortis International, N. V.
New York, New York
</TABLE>
29
<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 group.
4040 IDS Center
Minneapolis, Minnesota
Jean L. King Director President, Communi-King, a communications consulting firm.
12 Evergreen Lane
St. Paul, Minnesota
Dean C. Kopperud* President and Chief Executive Officer and a Director of Advisers, President and a
500 Bielenberg Drive Director Director of Investors, and Senior Vice President and a Director of
Woodbury, Minnesota Fortis Benefits Insurance Company and Time Insurance Company.
Edward M. Mahoney Director Retired; prior to December, 1994, Chairman and Chief Executive Officer
2760 Pheasant Road and a Director of Advisers and Investors, Senior Vice President and a
Excelsior, Minnesota 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, Jostens,
5108 Duggan Plaza Inc., a producer of products and services for the youth, education,
Edina, Minnesota 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, 1994,
12520 Davan Drive Director of Research, Chief Investment Officer, Principal, and a
Silver Spring, Maryland 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 Senior
One Chase Manhattan Plaza Vice President, Fixed Income, Fortis Asset Management; prior to
New York, New York 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 Vice
One Chase Manhattan Plaza 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, Senior
5500 Wayzata Boulevard Vice President, Templeton Investment Counsel, Inc., Fort Lauderdale,
Golden Valley, Minnesota Florida.
</TABLE>
30
<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 President,
One Chase Manhattan Plaza Equities, Fortis Asset Management; prior to July, 1991, Research
New York, New York 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, Los
New York, New York Angeles, CA.
Maroun M. Hayek Vice President Vice President of Advisers (since August, 1995) and Vice President,
One Chase Manhattan Plaza Fixed Income, Fortis Asset Management.
New York, New York
Robert C. Lindberg Vice President Vice President of Advisers and Investors; prior to July, 1993, Vice
One Chase Manhattan Plaza President, Portfolio Manager, and Chief Securities Trader, COMERICA,
New York, New York Inc., Detroit, Michigan. COMERCA, Inc. is a bank.
Kevin J. Michels Vice President Vice President of Advisers (since August, 1995) and Vice President,
One Chase Manhattan Plaza 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, 1994,
New York, New York 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 President,
One Chase Manhattan Plaza Fixed Income, Fortis Asset Management; prior to November, 1992, Head
New York, New York 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 Insurance
500 Bielenberg Drive Company.
Woodbury, Minnesota
Larry A. Medin Vice President Senior Vice President--Sales of Advisers and Investors; from August
500 Bielenberg Drive 1992 to November 1994, Senior Vice President, Western Divisional
Woodbury, Minnesota 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 Benefits
500 Bielenberg Drive Insurance Company.
Woodbury, Minnesota
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION AND AFFILIATIONS WITH
NAME & ADDRESS THE FUND "AFFILIATED PERSONS" OR INVESTORS (PAST 5 YEARS)
- ------------------------- --------------- ----------------------------------------------------------------------
<S> <C> <C>
John W. Norton Vice President Senior Vice President and Deputy General Counsel for Securities of
500 Bielenberg Drive Advisers and Investors; since January, 1993, Senior Vice President,
Woodbury, Minnesota Life and Investment Products, Fortis Benefits Insurance Company and
Vice President, 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.
Woodbury, Minnesota
Richard P. Roche Vice President Vice President of Advisers and Investors; prior to August, 1995,
500 Bielenberg Drive President of Prospecting By Seminars, Inc., Guttenberg, NJ.
Woodbury, Minnesota
Anthony J. Rotondi Vice President Senior Vice President of Advisers; from January, 1993 to August, 1995,
500 Bielenberg Drive Senior Vice President, Operations, Fortis Benefits Insurance Company;
Woodbury, Minnesota prior to January, 1993, Senior Vice President, Information Technology,
Fortis, Inc.
Michael J. Radmer Secretary Partner, Dorsey & Whitney P.L.L.P., the Fund's General Counsel.
220 South Sixth Street
Minneapolis, Minnesota
Tamara L. Fagely Treasurer Fund Accounting Officer of Advisers and Investors.
500 Bielenberg Drive
Woodbury, Minnesota
</TABLE>
- -------------------------------------------
* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
Fortis 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
32
<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
33
<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
34
<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.
35
<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,
36
<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.
37
<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.
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
38
<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.
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
39
<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.
40
<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
41
<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.
42
<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.
43
<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
<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 1,053 0 61 1,114 11.4%
</TABLE>
CLASS H
<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 1,054 0 62 1,116 11.6%
</TABLE>
CLASS C
<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 1,053 0 61 1,114 11.4%
</TABLE>
44
<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 * 7.24% -- -- -- -- -- -- -- -- -- --
Class
B * 11.43% -- -- -- -- -- -- -- -- -- --
Class
H * 11.53% -- -- -- -- -- -- -- -- -- --
Class
C * 11.43% -- -- -- -- -- -- -- -- -- --
</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
<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 2,107 0 121 2,228
</TABLE>
CLASS H
<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 2,109 0 123 2,232
</TABLE>
CLASS C
<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 2,107 0 121 2,228
</TABLE>
45
<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 * 7.24% -- -- -- -- -- -- -- -- -- --
Class
B * 11.43% -- -- -- -- -- -- -- -- -- --
Class
H * 11.53% -- -- -- -- -- -- -- -- -- --
Class
C * 11.43% -- -- -- -- -- -- -- -- -- --
</TABLE>
* Since November 14, 1994 inception.
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.
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
46
<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>
47
<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
48
<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 $22,018 -- with AN AVERAGE ANNUAL RETURN
OF 8.24% -- 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 $86,634 in dividends (an average
annual dividend of $8,663).
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
32% 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 $22,018
MARIE: $100,000 invested on October 1, 1985
OBJECTIVE: Current income plus principal protection
RESULT:Over 10 years, Marie's account generated $86,634 in income, which
was in addition to her ending account value of $92,056
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 6.08%. (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 6.08% over the past ten years (Source: Wall
Street Journal), while the Fortis U.S. Government Securities Fund had an average
annual rate of 8.21%.
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.
49
<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
9/30/95 7,703
Value of reinvested
income distributions $7,974
Value of original
shares
(including cap gains) $51,741
Total value of
investment $59,716
Average annual rates of
return
1 Year 6.48%
5 Year 6.58%
10 Year 8.21%
Since Incept 8.24%
</TABLE>
50
<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)
51
<PAGE>
PART C - OTHER INFORMATION
Item 24.(a) Financial Statements:
The following financial statements are included in the
registration statement:
Financial Statements included in Part A:
Financial Highlights
Financial Statements included in Part B:
All financial statements required by Part B were
incorporated therein by reference to Registrant's 1995
Annual Report to Shareholders.
Item 24.(b) Exhibits:
(1) Copy of the charter as now in effect;
*******
(2) Copies of the existing by-laws or instruments corresponding
thereto;
*
(3) Copies of any voting trust agreement with respect to more
than 5 percent of any class of equity securities of the
Registrant;
Inapplicable
(4) Copies of all instruments defining the rights of holders of
the securities being registered including, where
applicable, a relevant portion of the articles of
incorporation or by-laws of the Registrant;
See Item 24(b)(1)
(5) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
*
(6) Copies of each underwriting or distribution contract
between the Registrant and a principal underwriter, and
specimens or copies of all agreements between principal
underwriters and dealers;
<PAGE>
a) Underwriting agreement - ********
b) Dealer sales agreement - *******
(7) Copies of all bonus, profit sharing, pension or other
similar contracts or arrangements wholly or partly for the
benefit of directors or officers of the Registrant in
their capacity as such; if any such plan is not set
forth in a formal document, furnish a reasonably
detailed description thereof;
Inapplicable
(8) Copies of all custodian agreements, and depository
contracts under Section 17(f) of the 1940 Act, with respect
to securities and similar investments of the Registrant,
including the schedule of remuneration;
*****
(9) Copies of all other material contracts not made in the
ordinary course of business which are to be performed in
whole or in part at or after the date of filing the
Registration Statement;
Inapplicable
(10) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will
when sold be legally issued, fully paid and non-assessable;
Inapplicable
(11) Copies of any other opinions, appraisals or rulings and
consents to the use thereof relied on in the preparation of
this Registration Statement and required by Section 7 of the
1933 Act;
Accountants' Consent - attached
(12) All financial statements omitted from Item 23;
Inapplicable
(13) Copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant, the underwriter, adviser, promoter or
<PAGE>
initial stockholders and written assurances from promoters
or initial stockholders that their purchases were made for
investment purposes without any present intention of
redeeming or reselling;
See Original Registration Statement
(14) Copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant offers
its securities, any instructions thereto and any other
documents making up the model plan. Such form(s) should
disclose the costs and fees charged in connection therewith;
***; ****; and ******
(15) Copies of any plan entered into by Registrant pursuant to
rule 12b-1 of the 1940 Act, which describes all material
aspects of the financing of distribution of Registrant's
shares, and any agreement with any person relating to
implementation of such plan.
*******
(16) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item
21 (which need not be audited).
**
(17) A financial Data Schedule meeting the requirements of rule
483 under the Securities Act of 1933 (U230.483 of this
chapter).
Attached
(18) Copies of any plan entered into by Registrant pursuant to
Rule 18f-3 under the 1940 Act, any agreement with any person
relating to the implementation of a plan, any amendment to a
plan or agreement, and a copy of the portion of the minutes
of a meeting of the Registrant's directors describing any
action taken to revoke a plan.
********
*Incorporated by reference to Part II of Post-Effective Amendment
Number 33 to Registrant's registration statement, filed with the
Securities and Exchange Commission in February, 1992.
**Incorporated by reference to Part C of Post-Effective Amendment
Number 29 to Registrant's registration statement, filed with the
<PAGE>
Securities and Exchange Commission in March, 1989.
***Incorporated by reference to Part C of Post-Effective Amendment
No. 35 to the Registration Statement of Special Portfolios, Inc.
(File No. 2-24652 -- filed December 24, 1990).
****Incorporated by reference to Post-Effective Amendment No. 51 to
the Registration Statement of AMEV Growth Fund, Inc. (File No. 2-14784
- -- filed December, 1991).
*****Incorporated by reference to Post-Effective Amendment No. 34 to
the Registrants's Registration Statement, filed with the Securities
and Exchange Commission in February, 1993.
******Incorporated by reference to Post Effective Amendment No. 72 to
Fortis Equity Portfolios, Inc.'s Registration Statement, filed with
the Securities and Exchange Commission in November, 1993 (SEC File
No. 2-11-387).
*******Incorporated by reference to Post Effective Amendment No. 36 to
the Registrant's Registration Statement, filed with the Securities
and Exchange Commission in September, 1994.
********Incorporated by reference to Post Effective Amendment No. 37
to the Registrant's Registration Statement, filed with the Securities
and Exchange Commission in July, 1995.
Item 25. Persons Controlled by or under Common Control with
Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to
each person indicate (1) if a company, the state or other sovereign
power under the laws of which it is organized, and (2) the percentage
of voting securities owned or other basis of control by the person,
if any, immediately controlling it.
Inapplicable
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record
holders of each class of securities of the Registrant:
Title of Class Number of Record Holders
Common Class A 990
(8/31/95) -------------
Class E 28,601
-------------
Class B 118
-------------
<PAGE>
Class H 559
-------------
Class C 86
-------------
Item 27. Indemnification
State the general effect of any contract, arrangement or statute
under which any director, officer, underwriter or affiliated person
of the Registrant is insured or indemnified in any manner against
any liability which may be incurred in such capacity, other than
insurance provided by any director, officer, affiliated person or
underwriter for their own protection.
Incorporated by reference to Part C of Post-Effective Amendment
Number 28 to Registrant's registration statement, filed with the
Securities and Exchange Commission in March, 1988.
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation, or employment of
a substantial nature in which each investment adviser of the
Registrant, and each director, officer, or partner of any such
investment adviser, is or has been, at any time during the past two
fiscal years, engaged for his own account or in the capacity of
director, officer, employee, partner, or trustee.
In addition to those listed in the Statement of Additional
Information:
Name
Michael D. O'Connor
Current Position
With Advisers
Qualified Plan Officer
Other business,
professions, vocations,
or employments of a
substantial nature
during past two years
Qualified Plan officer of
Fortis Benefits Insurance
Company and Qualified
Plan Officer for
Investors.
David C. Greenzang
Money Market
Portfolio Officer
Debt securities manager
with Fortis, Inc.
<PAGE>
Item 29. Principal Underwriters
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal underwriter, depositor,
or investment adviser.
Fortis Advantage Portfolios, Inc.
Fortis Equity Portfolios, Inc.
Fortis Fiduciary Fund, Inc.
Fortis Growth Fund, Inc.
Fortis Money Portfolios, Inc.
Fortis Securities, Inc.
Fortis Series Fund, Inc.
Fortis Tax-Free Portfolios, Inc.
Fortis Worldwide Portfolios, Inc.
Special Portfolios, Inc.
Variable Account C of Fortis Benefits Insurance Company
Variable Account D of Fortis Benefits Insurance Company
(b) Furnish the information required by the following table with
respect to each director, officer, or partner of each principal underwriter
named in the answer to Item 21:
In addition to those listed in the Statement of Additional Information:
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
Carol M. Houghtby* 2nd Vice President Accounting Officer
John E. Hite* 2nd Vice President Assistant Secretary
and Assistant Secretary
Thomas E. Erickson* Assistant Secretary Assistant Secretary
Gregory S. Swenson* Assistant Secretary Assistant Secretary
* The business address of these persons is 500 Bielenberg Drive,
Woodbury, MN 55125
(c) Furnish the information required by the following table with
<PAGE>
respect to all commissions and other compensation received by each principal
underwriter who is not an affiliated person of the Registrant or an
affiliated person of such an affiliated person, directly or indirectly, from
the Registrant during the Registrant's last fiscal year.
Inapplicable
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270, 31a-1
to 31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
Fortis Advisers, Inc., 500 Bielenberg Drive, Woodbury, Minnesota 55125
Item 31. Management Services
Furnish a summary of the substantive provisions of any management-related
service contract not discussed in Part I of this Form (because the contract
was not believed to be material to a purchaser of securities of the
Registrant) under which services are provided to the Registrant, indicating
the parties to the contract, the total dollars paid and by whom, for the last
three fiscal years.
Inapplicable
Item 32. Undertakings
Furnish the following undertakings in substantially the following form in all
initial Registration Statements filed under the 1933 Act:
(a) an undertaking to file an amendment to the Registration Statement with
certified financial statements showing the initial capital received before
accepting subscriptions from any persons in excess of 25 if Registrant
proposes to raise its initial capital pursuant to Section 14(a)(3) of the
1940 Act;
Inapplicable
(b) an undertaking to file a post-effective amendment, using financial
statements which need not be certified, within four to six months from the
effective date of Registrant's 1933 act Registration Statement;
Inapplicable
<PAGE>
(c) if the information called for by Item 5A is contained in the latest
annual report to shareholders, an undertaking to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
We undertake to furnish each person to whom a prospectus is delivered with a
copy of the Registrant's latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Woodbury, State of Minnesota, on September 28, 1995.
Fortis Income Portfolios, Inc.
By: /s/
Dean C. Kopperud, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registration Statement has been signed below by
the following persons in the capacities and on the dates shown.
Signature and Title
/s/ Dated September 28, 1995
Dean C. Kopperud, President
(principal executive officer)
/s/ Dated September 28, 1995
Tamara L. Fagely, Treasurer
(principal financial and accounting officer)
Richard W. Cutting*
Director
Allan R. Freedman*
Director
Robert M. Gavin*
Director
Benjamin S. Jaffray*
Director
Jean L. King*
Director
Edward M. Mahoney*
Director
Thomas R. Pellett*
Director
<PAGE>
/s/
Robb L. Prince* Dean C. Kopperud, Director
Director Pro Se and Attorney-in-Fact
Leonard J. Santow*
Director Dated: September 28, 1995
Joseph M. Wikler*
Director
*Registrant's directors executing Power of Attorney dated March 30,
1995.
<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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, AND STATEMENT OF
CHANGES IN NET ASSETS FOUND ON PAGES 7 - 11 OF THE ANNUAL SHAREHOLDER REPORT.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS B)
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> NOV-14-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 475,636,924
<INVESTMENTS-AT-VALUE> 479,504,553
<RECEIVABLES> 17,740,330
<ASSETS-OTHER> 252,179,800<F1><F2>
<OTHER-ITEMS-ASSETS> 43,544
<TOTAL-ASSETS> 749,468,227
<PAYABLE-FOR-SECURITIES> 14,771,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 253,559,562<F1><F2>
<TOTAL-LIABILITIES> 268,331,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 537,043,809
<SHARES-COMMON-STOCK> 53,530
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (17,686)
<ACCUMULATED-NET-GAINS> (59,756,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,867,629
<NET-ASSETS> 481,136,790
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,392,499
<OTHER-INCOME> 321,417<F3>
<EXPENSES-NET> (3,923,602)
<NET-INVESTMENT-INCOME> 37,790,314
<REALIZED-GAINS-CURRENT> (33,680,898)
<APPREC-INCREASE-CURRENT> 31,855,826
<NET-CHANGE-FROM-OPS> 35,965,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,070)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,065
<NUMBER-OF-SHARES-REDEEMED> (2,236)
<SHARES-REINVESTED> 701
<NET-CHANGE-IN-ASSETS> (74,137,882)
<ACCUMULATED-NII-PRIOR> 202,721
<ACCUMULATED-GAINS-PRIOR> (26,019,682)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,576,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,008,498
<AVERAGE-NET-ASSETS> 504,413,000
<PER-SHARE-NAV-BEGIN> 8.63
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .39
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.02
<EXPENSE-RATIO> 1.77<F4>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>AT JULY 31, 1995, SECURITIES VALUED AT $242,279,288 WERE ON LOAN TO BROKERS
FROM THE FUND.
<F2>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.
<F3>FEE INCOME FROM SECURITIES LENDING PROGRAM FOR THE FISCAL YEAR ENDED JULY
31, 1995.
<F4>ANNUALIZED
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, AND STATEMENT OF
CHANGES IN NET ASSETS FOUND ON PAGES 7 - 11 OF THE ANNUAL SHAREHOLDER REPORT.
</LEGEND>
<SERIES>
<NUMBER> 015
<NAME> FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS E)
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 475,636,924
<INVESTMENTS-AT-VALUE> 479,504,553
<RECEIVABLES> 17,740,330
<ASSETS-OTHER> 252,179,800<F1><F2>
<OTHER-ITEMS-ASSETS> 43,544
<TOTAL-ASSETS> 749,468,227
<PAYABLE-FOR-SECURITIES> 14,771,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 253,559,562<F1><F2>
<TOTAL-LIABILITIES> 268,331,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 537,043,809
<SHARES-COMMON-STOCK> 52,149,917
<SHARES-COMMON-PRIOR> 61,482,167
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (17,686)
<ACCUMULATED-NET-GAINS> (59,756,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,867,629
<NET-ASSETS> 481,136,790
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,392,499
<OTHER-INCOME> 321,417<F3>
<EXPENSES-NET> (3,923,602)
<NET-INVESTMENT-INCOME> 37,790,314
<REALIZED-GAINS-CURRENT> (33,680,898)
<APPREC-INCREASE-CURRENT> 31,855,826
<NET-CHANGE-FROM-OPS> 35,965,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (37,825,032)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,223,444
<NUMBER-OF-SHARES-REDEEMED> (15,398,667)
<SHARES-REINVESTED> 2,842,973
<NET-CHANGE-IN-ASSETS> (74,137,882)
<ACCUMULATED-NII-PRIOR> 202,721
<ACCUMULATED-GAINS-PRIOR> (26,019,682)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,576,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,008,498
<AVERAGE-NET-ASSETS> 504,413,000
<PER-SHARE-NAV-BEGIN> 9.03
<PER-SHARE-NII> .67
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> (.67)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.02
<EXPENSE-RATIO> .77<F4>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>AT JULY 31, 1995, SECURITIES VALUED AT $242,279,288 WERE ON LOAN TO BROKERS
FROM THE FUND.
<F2>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.
<F3>FEE INCOME FROM SECURITIES LENDING PROGRAM FOR THE FISCAL YEAR ENDED JULY
31, 1995.
<F4>ANNUALIZED
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, AND STATEMENT OF
CHANGES IN NET ASSETS FOUND ON PAGES 7 - 11 OF THE ANNUAL SHAREHOLDER REPORT.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS A)
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> NOV-14-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 475,636,924
<INVESTMENTS-AT-VALUE> 479,504,553
<RECEIVABLES> 17,740,330
<ASSETS-OTHER> 252,179,800<F1><F2>
<OTHER-ITEMS-ASSETS> 43,544
<TOTAL-ASSETS> 749,468,227
<PAYABLE-FOR-SECURITIES> 14,771,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 253,559,562<F1><F2>
<TOTAL-LIABILITIES> 268,331,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 537,043,809
<SHARES-COMMON-STOCK> 544,097
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (17,686)
<ACCUMULATED-NET-GAINS> (59,756,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,867,629
<NET-ASSETS> 481,136,790
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,392,499
<OTHER-INCOME> 321,417<F3>
<EXPENSES-NET> (3,923,602)
<NET-INVESTMENT-INCOME> 37,790,314
<REALIZED-GAINS-CURRENT> (33,680,898)
<APPREC-INCREASE-CURRENT> 31,855,826
<NET-CHANGE-FROM-OPS> 35,965,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (123,171)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 656,757
<NUMBER-OF-SHARES-REDEEMED> (123,015)
<SHARES-REINVESTED> 10,355
<NET-CHANGE-IN-ASSETS> (74,137,882)
<ACCUMULATED-NII-PRIOR> 202,721
<ACCUMULATED-GAINS-PRIOR> (26,019,682)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,576,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,008,498
<AVERAGE-NET-ASSETS> 504,413,000
<PER-SHARE-NAV-BEGIN> 8.63
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> .39
<PER-SHARE-DIVIDEND> (.46)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.02
<EXPENSE-RATIO> 1.02<F4>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>AT JULY 31, 1995, SECURITIES VALUED AT $242,279,288 WERE ON LOAN TO BROKERS
FROM THE FUND.
<F2>FOR COLLATERAL, THE FUND'S CUSTODIAN RECEIVED $252,179,800 IN
CASH WHICH IS MAINTAINED IN A SEPARATE ACCOUNT & INVESTED BY THE CUSTODIAN
IN SHORT-TERM INVESTMENT VEHICLES.
<F3>FEE INCOME FROM SECURITIES LENDING PROGRAM FOR THE FISCAL YEAR ENDED JULY
31, 1995.
<F4>ANNUALIZED
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, AND STATEMENT OF
CHANGES IN NET ASSETS FOUND ON PAGES 7 - 11 OF THE ANNUAL SHAREHOLDER REPORT.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS C)
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> NOV-14-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 475,636,924
<INVESTMENTS-AT-VALUE> 479,504,553
<RECEIVABLES> 17,740,330
<ASSETS-OTHER> 252,179,800<F1><F2>
<OTHER-ITEMS-ASSETS> 43,544
<TOTAL-ASSETS> 749,468,227
<PAYABLE-FOR-SECURITIES> 14,771,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 253,559,562<F1><F2>
<TOTAL-LIABILITIES> 268,331,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 537,043,809
<SHARES-COMMON-STOCK> 36,194
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (17,686)
<ACCUMULATED-NET-GAINS> (59,756,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,867,629
<NET-ASSETS> 481,136,790
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,392,499
<OTHER-INCOME> 321,417<F3>
<EXPENSES-NET> (3,923,602)
<NET-INVESTMENT-INCOME> 37,790,314
<REALIZED-GAINS-CURRENT> (33,680,898)
<APPREC-INCREASE-CURRENT> 31,855,826
<NET-CHANGE-FROM-OPS> 35,965,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,511)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,045
<NUMBER-OF-SHARES-REDEEMED> (358)
<SHARES-REINVESTED> 507
<NET-CHANGE-IN-ASSETS> (74,137,882)
<ACCUMULATED-NII-PRIOR> 202,721
<ACCUMULATED-GAINS-PRIOR> (26,019,682)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,576,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,008,498
<AVERAGE-NET-ASSETS> 504,413,000
<PER-SHARE-NAV-BEGIN> 8.63
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .38
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.01
<EXPENSE-RATIO> 1.77<F4>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>AT JULY 31, 1995, SECURITIES VALUED AT $242,279,288 WERE ON LOAN TO BROKERS
FROM THE FUND.
<F2>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.
<F3>FEE INCOME FROM SECURITIES LENDING PROGRAM FOR THE FISCAL YEAR ENDED JULY
31, 1995.
<F4>ANNUALIZED
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, AND STATEMENT OF
CHANGES IN NET ASSETS FOUND ON PAGES 7 - 11 OF THE ANNUAL SHAREHOLDER REPORT.
</LEGEND>
<SERIES>
<NUMBER> 018
<NAME> FORTIS U.S. GOVERNMENT SECURITIES FUND (CLASS H)
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> NOV-14-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 475,636,924
<INVESTMENTS-AT-VALUE> 479,504,553
<RECEIVABLES> 17,740,330
<ASSETS-OTHER> 252,179,800<F1><F2>
<OTHER-ITEMS-ASSETS> 43,544
<TOTAL-ASSETS> 749,468,227
<PAYABLE-FOR-SECURITIES> 14,771,875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 253,559,562<F1><F2>
<TOTAL-LIABILITIES> 268,331,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 537,043,809
<SHARES-COMMON-STOCK> 534,676
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (17,686)
<ACCUMULATED-NET-GAINS> (59,756,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,867,629
<NET-ASSETS> 481,136,790
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,392,499
<OTHER-INCOME> 321,417<F3>
<EXPENSES-NET> (3,923,602)
<NET-INVESTMENT-INCOME> 37,790,314
<REALIZED-GAINS-CURRENT> (33,680,898)
<APPREC-INCREASE-CURRENT> 31,855,826
<NET-CHANGE-FROM-OPS> 35,965,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (101,319)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 588,648
<NUMBER-OF-SHARES-REDEEMED> (62,931)
<SHARES-REINVESTED> 8,959
<NET-CHANGE-IN-ASSETS> (74,137,882)
<ACCUMULATED-NII-PRIOR> 202,721
<ACCUMULATED-GAINS-PRIOR> (26,019,682)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,576,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,008,498
<AVERAGE-NET-ASSETS> 504,413,000
<PER-SHARE-NAV-BEGIN> 8.63
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .39
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.02
<EXPENSE-RATIO> 1.77<F4>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>AT JULY 31, 1995, SECURITIES VALUED AT $242,279,288 WERE ON LOAN TO BROKERS
FROM THE FUND.
<F2>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.
<F3>FEE INCOME FROM SECURITIES LENDING PROGRAM FOR THE FISCAL YEAR ENDED JULY
31, 1995.
<F4>ANNUALIZED
</FN>
</TABLE>
