U.S. Government Securities Fund [Fortis
Logo]
A portfolio of Fortis Income Portfolios, Inc.
July 1, 2000
Supplement to Fortis Bond Funds Prospectus Dated
December 1, 1999
- The following replaces the information provided
under the heading "Principal investment
strategies" on page 1.
U.S. Government Securities Fund pursues its objective
by investing primarily in securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities. The Fund invests both in U.S.
Treasury obligations and in obligations of U.S.
Government agencies and instrumentalities. The Fund may
invest a significant portion of its assets in mortgage-
backed securities issued by U.S. Government agencies.
The Fund also may invest in asset-backed and commercial
mortgage-backed securities issued by private entities.
Asset-backed securities are backed by a pool of assets
derived from payments made on credit card, automobile
and home equity loans, while commercial mortgage-backed
securities are backed by a pool of mortgage payments
made on commercial property.
It is anticipated that the duration of the Fund will be
between three and seven years.
The decision to purchase a particular security is based
upon many factors, the most important of which are the
characteristics of the security (interest rate, term,
call provisions, etc.), the financial stability and
managerial strength of the issuer of the security and
diversification in the Fund.
- The following replaces "Risks of mortgage-related
securities" under the heading "Principal risks" on
page 1.
- Risks of mortgage-backed and asset-backed
securities. Because the Fund may invest
significantly in mortgage- and asset-backed
securities, it is subject to prepayment risk and
extension risk. Similar to call risk, prepayment
risk is the risk that falling interest rates could
cause faster than expected prepayments of the
mortgages and loans underlying the Fund's mortgage-
and asset-backed securities. These prepayments pass
through to the Fund, which must reinvest them at a
time when interest rates on new mortgage and asset-
backed investments are falling, reducing the Fund's
income. Extension risk is the risk that rising
interest rates could cause mortgage and loan
prepayments to slow, which could lengthen the
duration of the Fund's mortgage- and asset-backed
securities thereby increasing their interest rate
sensitivity.
- The following replaces the information provided
under the heading "U.S. Government Securities Fund"
on page 20.
U.S. Government Securities Fund invests primarily in
securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. The Fund invests
in U.S. Treasury obligations and in obligations of U.S.
Government agencies and instrumentalities. The Fund may
invest a significant portion of its assets in mortgage-
backed securities issued by U.S. Government agencies.
The Fund's investments in U.S. Treasury obligations may
include U.S. Treasury inflation-protection securities.
The principal amount of inflation-protection securities
is adjusted for inflation, and interest payments are
equal to a fixed percentage of this adjusted principal
amount.
The Fund's investments in mortgage-backed securities
include U.S. Government agency-backed collateralized
mortgage obligations ("CMOs"). The Fund also may invest
in high-grade CMOs issued by private-entities (e.g.,
rated A or above by either Moody's or S&P). Some types
of CMOs, such as interest-only classes ("IOs"),
principal-only classes ("POs"), inverse floaters and
accrual bonds, can be highly volatile in response to
changing interest rates. The Fund will not invest more
than 5% of its net assets in any one of these types of
securities or more than 10% of its net assets
collectively in IOs, POs, inverse floaters and accrual
bonds.
The Fund also may invest in zero coupon obligations
issued by either the U.S. Government and its agencies,
or by private entities. Because these obligations do
not pay interest currently, their prices can be highly
volatile as interest rates rise and fall.
The Fund also may invest in high-grade asset-backed and
commercial mortgage-backed securities issued by private
entities (e.g., rated A or above by either Moody's or
S&P). In addition, the Fund may invest a portion of
its assets in a combination of other high-grade non-
convertible debt securities and U.S. bank obligations,
bonds issued or guaranteed by the Canadian government
or its agencies, high-grade commercial paper (e.g.,
rated Prime-1 by Moody's or A-1 by S&P), and in cash or
other high-quality, short-term debt securities.
To generate additional income, the Fund may lend
securities representing up to one-third of the value of
its total assets to broker-dealers and other
institutions.
U.S. Government Securities Fund [Fortis
Logo]
A portfolio of Fortis Income Portfolios, Inc.
July 1, 2000
Supplement to Fortis Bond Funds Statement of Additional
Information dated December 1, 1999
- The following replaces the information provided
under the heading "Investment Policies-U.S.
Government Securities Fund" on page 1.
The Fund will invest at least 65% of its total
assets in securities issued, guaranteed, insured or
collateralized by the U.S. Government, its agencies or
instrumentalities (whether or not backed by the full
faith and credit of the U.S. Government). Securities
issued or guaranteed as to principal and interest by
the U.S. Government include a variety of securities,
which differ in their interest rates, maturities, and
dates of issuance and include U.S. Treasury inflation-
protection securities. In addition to Treasury
obligations, the Fund may invest in the following such
securities: (1) obligations of U.S. government agencies
and instrumentalities which are secured by the full
faith and credit of the U.S. 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 these types of
securities which are not backed by the full faith and
credit of the U.S. Treasury when, in the opinion of
Advisers, the credit risk with respect to the
instrumentality or agency issuing such securities does
not make the securities unsuitable investments for the
Fund.
Up to 35% of the Fund's total assets may consist
of:
1. Marketable non-convertible debt securities which
are rated at the time of purchase within the three
highest grades assigned by Moody's (Aaa, Aa, or A) or
S&P (AAA, AA or A), or comparably rated by another
nationally recognized rating agency. See Appendix B
for a discussion of S&P and Moody's ratings;
2. Marketable securities (payable in U.S. dollars)
of, or guaranteed by, the government of Canada or a
province of Canada or any instrumentality or political
subdivision thereof (such securities not to exceed 25%
of the Fund's total assets);
3. Obligations of, or guaranteed by, U.S. banks,
which obligations, although not rated as a matter of
policy by either Moody's or S&P, are considered by
Advisers to have investment quality comparable to
securities which may be purchased under item (1) above
(such securities not to exceed 25% of the Fund's total
assets);
4. Commercial paper obligations rated Prime-1 by
Moody's or A-1 by S&P, or comparably rated by another
nationally recognized rating agency; and
5. Cash, other non-securities assets such as accrued
interest, receivables from securities sold, prepaid
expenses, as well as other high-quality short-term
interest bearing debt securities not discussed above.
