<PAGE>
FORTIS U.S. GOVERNMENT SECURITIES SEMI-ANNUAL REPORT
CONTENTS
Letter to Shareholders 1
Schedule of Investments 3
Statement of Assets and Liabilities 4
Statement of Operations 5
Statements of Changes in Net Assets 6
Notes to Financial Statements 7
Board of Directors and Officers 9
HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the six-month period ended January 31, 1995:
Class A* Class B* Class C* Class E Class H*
Net Asset Value per share:
Beginning of period $8.63 $8.63 $8.63 $9.03 $8.63
End of period $8.72 $8.72 $8.72 $8.72 $8.72
Distributions per share:
From net investment income $0.142 $0.126 $0.126 $0.339 $0.126
<FN>
*Period from November 14, 1994 (commencement of operations) to January 31, 1995.
</TABLE>
HOW TO USE THIS REPORT
For a quick overview of the fund's performance during the past six months,
refer to the Highlights box below. The letter from the portfolio manager and
president provides a more detailed analysis of the fund and financial markets.
The charts alongside the letter are useful because they provide more information
about your investments. The top holdings chart shows the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by sector.
The performance chart graphically compares the fund's total return performance
with a selected investment index. Remember, however, that an index may reflect
the performance of securities the fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your fund does. Individuals cannot buy an unmanaged index fund without incurring
some charges and expenses. Sales charges pay for your investment
representative's advice.
This report is just one of several tools you can use to learn more about your
investment in the Fortis Family of Mutual Funds. Your investment representative,
who understands your personal financial situation, can best explain the features
of your investment and how it's designed to help you meet your financial goals.
TOLL-FREE PERSONAL ASSISTANCE
Shareholder Services
(800) 800-2638, Ext. 3012 or 3014
7:30 a.m. to 5:30 p.m. CST, M-Th
7:30 a.m. to 5:00 p.m. CST, F
TOLL-FREE INFORMATION LINE
For daily account balances, transaction activity or net asset value information
(800) 800-2638, Ext. 4344 24 hours a day
FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2638. TO ORDER
PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800) 800-2638
EXT. 4579.
<PAGE>
DEAR SHAREHOLDER,
We're pleased to present the Fortis U.S. Government Securities Fund semi-annual
report for the period ended January 31, 1995.
ECONOMIC REVIEW AND INVESTMENT STRATEGIES
As we reflect upon the recent investment period, we can safely say that it was a
most difficult time for investors. In general, the bond market suffered its
largest 12-month losses since systematic records began about 50 years ago. For
example, the total return of a 30-year treasury bond from January 1, 1994,
through December 31, 1994, was -11.9 percent.
The market's troubles started in February 1994 when the Federal Reserve began a
restrictive interest rate policy that led to six interest rate hikes during the
year. This rate environment contributed to investor unease. Investors tried to
accurately size up the course of the Fed's monetary policy, only to repeatedly
underestimate how committed it was to containing inflation. We believe the
monetary tightening will have a positive long-term effect on stocks and bonds,
as it demonstrates the Federal Reserve's resolve to keep inflation in check.
However, this long-term effect does not preclude temporary sell-offs based on
concerns that rate hikes are either excessive or insufficient.
PORTFOLIO REVIEW
Portfolio shifts were very modest during this six-month period. Last summer, the
portfolio's duration was slightly more than five years. Now it stands at
approximately 4.5 years.
At the beginning of the investment period, the asset split was 50 percent
mortgage-backed securities and 50 percent treasuries. By January 31, 1995,
mortgages were reduced to 46 percent and other government securities were
increased to 54 percent. In addition, our mortgage-backed derivative position
has declined to less than 2 percent of net assets.
While the Fed could tighten interest rates further during 1995, we believe we
are near the point where increased interest rates will cause growth to slow.
When that happens, and assuming inflation remains under control, interest rates
could stabilize -- and even recede somewhat.
IN CLOSING
Finally we're pleased to announce the addition of class share pricing, which
offers investors a choice of purchasing plans. Each class of shares represents
the same investment portfolio, the same fund philosophy and the same
professional money management you've come to associate with Fortis Financial
Group. As you invest, consider the amount of your investment, the length of time
you plan to hold it, your current financial needs and the expenses of each class
of shares. Then, talk with your financial advisor to determine the class of
shares that best meets your financial needs and goals.
We appreciate your investment in the Fortis U.S. Government Securities Fund. If
you have any questions, please call us or talk with your investment
professional.
Sincerely,
Dean C. Kopperud
President
Dennis M. Ott
Vice President
February 23, 1995
TOP TEN HOLDINGS AS OF 1/31/95
PERCENT OF
BONDS NET ASSETS
1. U.S. Treasury Note (9.375%) 1996 7.7%
2. U.S. Treasury Note (9.00%) 1998 7.0%
3. U.S. Treasury Bond (8.125%) 2021 5.5%
4. U.S. Treasury Note (8.75%) 1997 5.2%
5. FHLB Note (7.31%) 2004 4.9%
6. U.S. Treasury Note (8.875%) 1998 4.2%
7. U.S. Treasury Note (8.25%) 1998 4.2%
8. U.S. Treasury Note (7.875%) 2001 4.1%
9. U.S. Treasury Note (7.875%) 1998 4.1%
10. U.S. Treasury Note (11.50%) 1995 4.0%
<PAGE>
U.S. GOVERNMENT SECURITIES FUND CLASS A, B, C AND H TOTAL RETURNS
WITHOUT WITH
SALES CHARGE SALES CHARGE
Class A shares+ +2.71% -1.91%
WITHOUT WITH
CDSC CDSC++
Class B shares+ +2.53% -1.07%
Class C shares+ +2.53% -1.07%
Class H shares+ +2.53% -1.07%
The performance of the separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Past performance is not indicative of future performance.
Total returns include reinvestment of all dividend and capital gains
distributions. Class A has a maximum sales charge of 4.5%.
+Since November 14, 1994 (commencement of operations) -- Date shares were
first offered to the public.
++Assumes redemption on January 31, 1995.
SCHEDULE OF INVESTMENTS
(Unaudited)
January 31, 1995
U. S. Government and Agencies - 98.17%
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT COST (A) VALUE (B)
FEDERAL HOME LOAN BANK - 4.87%
NOTE:
<S> <C> <C> <C>
$25,000,000 7.31% 2004 $ 24,907,575 $ 24,080,475
FEDERAL HOME LOAN MORTGAGE CORP. - 5.58%
MORTGAGE BACKED SECURITIES:
6,188,650 9.00% 2022 6,581,243 6,291,147
11,852,950 9.50% 2016 12,754,885 12,282,619
496,875 10.50% 2015 534,296 529,016
338,405 11.25% 2013 367,170 365,583
1,352,278 11.50% 2015-2019 1,475,101 1,466,376
1,525,303 11.75% 2010-2015 1,669,911 1,660,674
23,382,606 22,595,415
REMICS:
2,600,000 9.00% Trust #136-D PAC 2020 2,613,000 2,655,741
122,502 12.87% Trust #1364-L Interest
Only Strip I/O-ette 2005 (e) 1,000,892 2,303,042
3,613,892 4,958,783
TOTAL FEDERAL HOME LOAN
MORTGAGE CORP. SECURITIES 26,996,498 27,554,198
<CAPTION>
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 26.35%
MORTGAGE BACKED SECURITIES:
24,722,673 7.50% 2022-2024 24,529,775 23,471,087
35,844,756 8.00% 2024-2025 34,793,144 34,892,613
227,405 9.00% 2020 225,202 231,029
2,532,448 9.75% 2020 2,731,878 2,652,342
1,983,372 10.00% 2020 2,163,735 2,097,416
1,685,915 10.50% 2012-2018 1,792,843 1,809,723
412,992 10.75% 2013 425,382 445,708
5,032,590 11.00% 2015-2020 5,406,122 5,460,360
706,992 11.25% 2013 742,342 769,959
465,327 12.00% 2014-2016 495,436 512,733
1,005,637 12.50% 2015 1,135,741 1,115,000
74,441,600 73,457,970
NOTE:
13,800,000 8.90% 2000 14,897,376 14,446,668
REMICS:
6,307,416 6.50% Trust #1991-59X
Z-Tranche 2019 (f) 6,315,303 5,483,535
3,622,958 7.50% Trust #1991-136G 2019 3,757,121 3,599,224
15,000,000 7.50% Trust #1992-43E 2022 15,745,313 13,924,185
10,000,000 8.00% Trust #1992-34G 2022 10,568,750 9,594,090
6,500,000 9.00% Trust #1991-39J 2021 6,638,125 6,782,678
2,662,574 9.00% Trust #1990-27C 2014 2,825,657 2,686,295
213,986 13.00% Trust #1989-98G 2017 248,491 ,225,353
46,098,760 42,295,360
<PAGE>
<CAPTION>
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION SECURITIES 135,437,736 130,199,998
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 12.04%
MORTGAGE BACKED SECURITIES:
26,921,393 7.50% 2022-2023 28,052,215 25,415,465
14,184,957 8.50% 2016-2020 14,402,164 14,149,494
9,843,477 9.00% 2016-2020 10,514,675 9,994,401
8,256,549 9.50% 2017-2019 8,701,083 8,604,867
1,179,987 11.00% 2015-2018 1,271,109 1,266,641
66,818 11.25% 2015 70,955 71,704
63,012,201 59,502,572
Resolution Funding Corp. - 0.66%
15,000,000 7.42% Zero Coupon Strip 2014 (c) $ 3,637,364 $ 3,236,985
U. S. Treasury Securities - 48.67%
3,750,000 7.50% 2001 (g) 3,851,953 3,733,594
50,000,000 7.875% 1998-2004 (g) 51,395,313 50,703,060
26,000,000 8.125% 2021 (g) 28,415,937 26,942,500
20,000,000 8.25% 1998 (g) 22,813,281 20,468,720
25,000,000 8.75% 1997 (g) 27,978,516 25,804,650
20,000,000 8.875% 1998 (g) 21,665,625 20,875,000
33,000,000 9.00% 1998 (g) 35,873,437 34,443,750
36,850,000 9.375% 1996 (g) 39,580,438 37,828,773
19,000,000 11.50% 1995 (g) $ 21,563,125 $ 19,682,784
$253,137,625 $240,482,831
TOTAL U.S. GOVERNMENT
& AGENCIES $507,128,999 $485,057,059
<CAPTION>
SHORT-TERM INVESTMENT - 0.81%
Principal Market
Amount Value (b)
MASTER NOTE:
$4,009,741 Federated Treasury Obligation Fund,
Current Rate - 5.69% $ 4,009,741
Total Investments in Securities
(Cost: $511,138,740) (a) $489,066,800
<FN>
(a) At January 31, 1995, the cost of securities for federal income tax
purposes was $512,948,377 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $ 1,731,847
Unrealized depreciation (25,613,424)
Net unrealized depreciation ($23,881,577)
(b) See Note A of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) The interest rate disclosed for zero coupon issues represents the
effective yield on the date of acquisition.
(d) Note: Percentage of investments as shown is the ratio of the total
market value to total net assets.
(e) The interest rate disclosed for the interest only strip represents the
effective yield at January 31, 1995 based upon the estimated timing
and, in the case of interest only strips, amount of future cash flows.
This investment has been identified by portfolio management as an
illiquid security. The aggregate value of this security at January 31,
1995 is $2,303,042 which represents .47% of total net assets.
(f) Z-Tranche securities pay no principal or interest during their initial
accrual period, but accrue additional principal at a specified coupon
rate. The interest rate disclosed represents the coupon rate at which
the additional principal is being accrued.
(g) Security is fully or partially on loan at January 31, 1995. See Note A
of accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1995
(Unaudited)
<S> <C>
Assets:
Investments in securities, as detailed in the accompanying schedule, at market
(cost: $511,138,740) (Note A) $489,066,800
Collateral for securities lending transactions (Note A) 238,119,218
Receivables:
Investment securities sold 61,237
Subscriptions of capital stock 223,883
Interest 7,022,575
Deferred registration costs (Note A) 29,852
Prepaid expenses 85,725
Total Assets 734,609,290
Liabilities:
Payable upon return of securities loaned (Note A) 238,119,218
Cash portion of dividends payable 1,056,076
Redemptions of capital stock 952,589
Payable for investment advisory and management fees 296,538
Distribution fees payable 220
Accounts payable and accrued expenses 65,795
Total Liabilities 240,490,436
Net Assets:
Net proceeds of capital stock, par value $.01 per share - authorized 100,000,000,000 shares 566,695,887
Unrealized depreciation of investments (22,071,940)
Undistributed net investment income 68,602
Accumulated net realized loss from sale of investments (50,573,695)
Total Net Assets $494,118,854
Shares outstanding and net asset value per share:
Class A shares (based on net assets of $1,579,824 and 181,148 shares outstanding) $8.72
Class B shares (based on net assets of $138,987 and 15,933 shares outstanding) $8.72
Class C shares (based on net assets of $101,844 and 11,684 shares outstanding) $8.72
Class E shares (based on net assets of $490,815,635 and 56,255,073 shares outstanding) $8.72
Class H shares (based on net assets of $1,482,564 and 69,941 shares outstanding) $8.72
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six-Month Period Ended January 31, 1995
(Unaudited)
<S> <C>
Net Investment Income:
Income:
Interest Income $21,673,675
Fee Income (Note A) 173,333
Total Income 21,847,008
Expenses:
Investment advisory and management fees (Note B) 1,844,960
Distribution fees (Class A) (Note B) 361
Distribution fees (Class B) (Note B) 184
Distribution fees (Class C) (Note B) 82
Distribution fees (Class H) (Note B) 1,577
Registration fees 57,161
Custodian fees 39,482
Shareholders' notices and reports 26,784
Directors' fees and expenses 20,416
Legal and auditing fees (Note B) 26,819
Other 23,880
Total Expenses 2,041,706
Less reimbursable expenses (Note B) (20,664)
Net Expenses 2,021,042
Net Investment Income 19,825,966
Realized and Unrealized Gain (Loss) on Investments (Note A):
Net realized loss from security transactions (24,554,013)
Net change in unrealized appreciation (depreciation) of investments 5,916,257
Net Loss on Investments (18,637,756)
Net Increase (Decrease) in Net Assets Resulting from Operations $ 1,188,210
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six-Month
Period Ended For the Seven-Month
January 31, 1995 Period Ended
(Unaudited) July 31, 1994 (Note C)
<S> <C> <C>
Operations:
Net investment income $ 19,825,966 $ 26,704,011
Net realized loss from security transactions (24,554,013) (25,969,017)
Net change in unrealized appreciation
(depreciation) of investments 5,916,257 (28,114,831)
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,188,210 (27,379,837)
Distributions to Shareholders:
From net investment income
Class A (10,777) --
Class B (1,128) --
Class C (484) --
Class E (19,937,797) (26,606,994)
Class H (9,899) --
Total Distributions to Shareholders (19,960,085) (26,606,994)
Capital Stock Sold and Repurchased:
Proceeds from sale of shares (Note B)
Class A (188,723 shares) 1,632,099 --
Class B (16,054 shares) 138,618 --
Class C (11,656 shares) 100,506 --
Class E (2,046,093 and 5,018,611 shares) 17,959,543 47,438,736
Class H (168,922 shares) 1,457,611 --
Proceeds of shares issued as a result of reinvested dividends
Class A (857 shares) 7,440 --
Class B (53 shares) 465 --
Class C (29 shares) 248 --
Class E (1,510,313 and 1,871,208 shares) 13,202,091 17,392,603
Class H (1,029 shares) 8,938 --
Less cost of repurchase of shares
Class A (8,432 shares) (73,599) --
Class B (174 shares) (1,680) --
Class C (1 share) (7) --
Class E (8,783,500 and 10,418,385 shares) (76,816,129) (97,546,638)
Class H (10 shares) (87) --
Net Decrease in Net Assets from Share Transactions (42,383,943) (32,715,299)
Total Decrease in Net Assets (61,155,818) (86,702,130)
Net Assets:
Beginning of period 555,274,672 641,976,802
End of period (includes undistributed net investment income
of $68,602 and $202,721, respectively) $ 494,118,854 $555,274,672
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The fund is a diversified
series of Fortis Income Portfolios, Inc., an open-end management investment
company. The primary investment objective of the fund is a high level of
current income consistent with prudent investment risk. This objective is
sought principally by investment in debt securities issued, guaranteed,
insured or collateralized by the U.S. Government, its agencies, or its
instrumentalities. The Articles of Incorporation of Fortis Income
Portfolios permit the Board of Directors to create additional portfolios in
the future.
SECURITY VALUATION: Long-term debt securities are valued at current market
prices on the basis of valuations furnished by an independent pricing
service. Short-term investments with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued
at amortized cost.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for
securities that have been purchased by the fund on a forward commitment or
when-issued basis can take place a month or more after the transaction
date. During this period, such securities are subject to market
fluctuations and the portfolio maintains, in a segregated account with its
custodian, assets with a market value equal to the amount of its purchase
commitments.
The fund may enter into transactions to sell its purchase commitments to
third parties at the current market values and concurrently acquire other
purchase commitments for similar securities at later dates. As an
inducement for the portfolio to "rollover" its purchase commitments, the
fund receives negotiated fees.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date. Interest income is recorded on the
accrual basis. Realized security gains and losses are determined using the
identified cost method. For financial reporting
<PAGE>
purposes, except for original issue discount, the fund does not amortize
long-term bond premium and discount.
For the six-month period ended January 31, 1995, the cost of purchases and
proceeds from sales of securities (other than short-term securities)
aggregated $132,858,871 and $158,030,340, respectively.
LENDING OF PORTFOLIO SECURITIES: At January 31, 1995, securities valued at
$234,269,501 were on loan to brokers from the Fund. For collateral, the
Fund's custodian received $238,119,218 in cash which is maintained in a
separate account and invested by the custodian in short term investment
vehicles. Fee income from securities lending amounted to $173,333 for the
six-month period ended January 31, 1995. The risks to the Fund in security
lending transactions are that the borrower may not provide additional
collateral when required or return the securities when due and that the
proceeds from the sale of investments made with cash collateral received
will be less than amounts required to be returned to the borrowers.
DEFERRED COSTS: Registration costs are deferred and charged to income over
the registration period.
FEDERAL TAXES: The fund intends to qualify, under the Internal Revenue
Code, as a regulated investment company and if so qualified, will not have
to pay federal income taxes to the extent its taxable net income is
distributed. On a calendar year basis, the fund intends to distribute
substantially all of its net investment income and realized gains, if any,
to avoid the payment of federal excise taxes.
Net investment income and net realized gains differ for financial statement
and tax purposes primarily because of the recognition of market discount as
ordinary income and the deferral of "wash sale" losses for tax purposes.
The character of distributions made during the year from net investment
income or net realized gains may, therefore, differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing
of dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains (losses) were
recorded by the fund. The effect on dividend distributions of certain
current year permanent book-to-tax differences is reflected as excess
distributions of net realized gains in the statements of changes in net
assets.
For federal income tax purposes the fund had a capital loss carryover of
$24,462,623 at July 31, 1994, which, if not offset by subsequent capital
gains, will expire in 2002. It is unlikely the Board of Directors will
authorize a distribution of any net realized gains until the available
capital loss carryover has been offset or expired.
INCOME AND CAPITAL GAINS DISTRIBUTIONS: Distributions from net investment
income are declared daily and paid monthly. The fund will generally make
annual distributions of any realized capital gains as required by law.
These income and capital gains distributions may be reinvested in
additional shares of the fund at net asset value without any charge to the
shareholder or payable in cash.
B. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment
adviser for the fund. Effective April 2, 1993, investment advisory and
management fees are computed at an annual rate of .8% of the first $50
million of average daily net assets and .7% of net assets in excess of $50
million. Prior to April 2, 1993, investment advisory and management fees
were computed at an annual rate of .8% of the first $50 million of average
daily net assets, .7% for the next $50 million, and .625% of net assets in
excess of $100 million. In addition, effective June 1, 1993, if fees and
other operating expenses (excluding interest expense, taxes, brokerage fees
and commmissions) exceed .77% of the average daily net assets, for the two-
year period commencing June 1, 1993, such excess will be reimbursed by
Fortis Advisers, Inc. During the six-month period ended January 31, 1995,
Advisers waived $20,664 of its advisory fee in accordance with these
limits.
In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the fund's principal underwriter)
distribution fees equal to .25% (Class A) and 1.00% (Class B, C, and H) of
average daily net assets (of the respective classes) on an annual basis, to
be used to compensate those who sell shares of the fund and to pay certain
other expenses of selling fund shares. Fortis Investors, Inc., also
received sales charges (paid by purchasers of the fund's shares)
aggregating $41,367 for Class A and $455,204 for Class E for the six-month
period ended January 31, 1995.
Legal fees and expenses aggregating $11,696 for the six-month period ended
January 31, 1995, were paid to a law firm of which the secretary of the
fund is a partner.
C. CHANGE IN ACCOUNTING PERIOD: Effective July 31, 1994, Fortis U.S.
Government Securities Fund changed its Fiscal accounting and tax year-end
to July 31 (previously December 31).
D. At the special shareholder's meeting of August 23, 1994, the Amended and
Restated Articles of Incorporation were approved which allows the Fund to
issue multiple class shares effective November 14, 1994.
E. FINANCIAL HIGHLIGHTS: Selected per share historical data was as follows:
<TABLE>
<CAPTION>
Class E
Year Ended December 31,
1995* 1994*** 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.03 $ 9.87 $ 9.86 $ 10.16 $ 9.76 $ 9.72
Operations:
Investment income - net .34 .42 .75 .84 .88 .89
Net realized and unrealized gains
(losses) on investments (.31) (.84) .05 (.30) .41 .06
Total from operations .03 (.42) .80 .54 1.29 .95
Distribution to shareholders:
From investment income - net (.34) (.42) (.75) (.84) (.89) (.91)
From realized gains -- -- (.04) -- -- --
Total distributions to shareholders (.34) (.42) (.79) (.84) (.89) (.91)
Net asset value, end of period $ 8.72 $ 9.03 $ 9.87 $ 9.86 $ 10.16 $ 9.76
Total Return@ (.27%) (4.29%) 8.31% 5.60% 13.90% 10.43%
Net assets end of period (000s omitted) $490,816 $555,275 $641,977 $587,996 $452,222 $208,054
Ratio of expenses to average daily net
assets .77%** .77%** .76% .72% .72% .81%
Ratio of net investment income to
average daily net assets 7.69%** 7.72%** 7.43% 8.48% 8.88% 9.37%
Portfolio turnover rate 27% 85% 157% 128% 95% 118%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C Class H
1995+ 1995+ 1995+ 1995+
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.63 $ 8.63 $ 8.63 $ 8.63
Operations:
Investment income - net .14 .13 .13 .13
Net realized and unrealized gains (losses) on investments .09 .09 .09 .09
Total from operations .23 .22 .22 .22
Distribution to shareholders:
From investment income - net (.14) (.13) (.13) (.13)
From realized gains -- -- -- --
Total distributions to shareholders (.14) (.13) (.13) (.13)
Net asset value, end of period $ 8.72 $ 8.72 $ 8.72 $ 8.72
Total Return@ 2.71% 2.53% 2.53% 2.53%
Net assets end of period (000s omitted) $ 1,580 $ 139 $ 102 $ 1,482
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 7.20%** 6.38%** 6.38%** 6.38%**
Portfolio turnover rate 27% 27% 27% 27%
<FN>
@ These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
* For the six-month period ended January 31, 1995.
** Annualized.
*** For the seven-month period ended July 31, 1994.
+ For the period from November 14, 1994 (commencement of operations) to
January 31, 1995.
</TABLE>
DIRECTORS
RICHARD W. CUTTING
CPA and Financial
Consultant
ALLEN R. FREEDMAN
Chairman and Chief
Executive Officer
Fortis, Inc.;
Managing Director of
Fortis International, N.V.
DR. ROBERT M. GAVIN
President
Macalester College
BENJAMIN S. JAFFRAY
Chairman
Sheffield Group, Ltd.
JEAN L. KING
President
Communi-King
DEAN C. KOPPERUD
President and Director
Fortis Advisers, Inc.
Fortis Investors, Inc.
Senior Vice President
and Director of Fortis
Benefits Insurance
Company
Senior Vice President of
Time Insurance
Company
EDWARD M. MAHONEY
Prior to January 1995,
Chairman and Chief
Executive Officer
Fortis Advisers, Inc.
<PAGE>
Fortis Investors, Inc.
THOMAS R. PELLETT
Prior to January, 1991,
Senior Vice President-
Administration and
Corporate Affairs and
Director
Pet, Inc.
ROBB L. PRINCE
Vice President and
Treasurer
Jostens, Inc.
LEONARD J. SANTOW
Principal
Griggs &Santow, Inc.
JOSEPH M. WIKLER
Prior to January, 1994,
Director of Research,
Chief Investment
Officer, Principal,
and Director
The Rothschild Co.
OFFICERS
DEAN C. KOPPERUD
President and Director
STEPHEN M. POLING
Vice President
DENNIS M. OTT
Vice President
JAMES S. BYRD
Vice President
ROBERT C. LINDBERG
Vice President
KEITH R. THOMSON
Vice President
ROBERT W. BELTZ, JR.
Vice President
ROBERT J. CLANCY
Vice President
THOMAS D. GUALDONI
Vice President
LARRY A. MEDIN
Vice President
JON H. NICHOLSON
Vice President
JOHN W. NORTON
Vice President
DAVID A. PETERSON
Vice President
<PAGE>
MICHAEL J. RADMER
Secretary
TAMARA L. FAGELY
Treasurer
DAVID G. CARROLL
2nd Vice President
CHRIS J. NEUHARTH
2nd Vice President
INVESTMENT MANAGER,
REGISTRAR AND TRANSFER
AGENT
Fortis Advisers, Inc.
Box 64284
St. Paul,
Minnesota 55164
PRINCIPAL UNDERWRITER
Fortis Investors, Inc.
Box 64284
St. Paul,
Minnesota 55164
CUSTODIAN
First Bank
National Association
Minneapolis, Minnesota
GENERAL COUNSEL
Dorsey &Whitney
Minneapolis, Minnesota
INDEPENDENT AUDITORS
KPMGPeat Marwick LLP
Minneapolis, Minnesota
THE USE OF THIS MATERIAL IS AUTHORIZED ONLY WHEN PRECEDED OR ACCOMPANIED BY A
PROSPECTUS.
