<PAGE>
[Logo]
FORTIS
TAX-FREE
PORTFOLIOS, INC.
Annual Report
September 30, 1996
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC. ANNUAL REPORT
CONTENTS
LETTER TO SHAREHOLDERS 1
SCHEDULES OF INVESTMENTS
NATIONAL PORTFOLIO 5
MINNESOTA PORTFOLIO 8
NEW YORK PORTFOLIO 11
STATEMENTS OF ASSETS AND LIABILITIES 13
STATEMENTS OF OPERATIONS 14
STATEMENTS OF CHANGES IN NET ASSETS
NATIONAL PORTFOLIO 15
MINNESOTA PORTFOLIO 16
NEW YORK PORTFOLIO 17
NOTES TO FINANCIAL STATEMENTS 18
INDEPENDENT AUDITORS' REPORT 23
FEDERAL INCOME TAX INFORMATION 24
BOARD OF DIRECTORS AND OFFICERS 25
- - TOLL-FREE PERSONAL ASSISTANCE
- Shareholder Services
- (800) 800-2638, Ext. 3012
- 7:30 a.m. to 5:30 p.m. CST, M-Th
- 7:30 a.m. to 5:00 p.m. CST, F
- - TOLL-FREE INFORMATION LINE
- For daily account balances,
transaction activity or net asset
value information
- (800) 800-2638, Ext. 4344
- 24 hours a day
FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2638.
TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800)
800-2638, EXT. 4579.
HOW TO USE THIS REPORT
For a quick overview of the fund's performance during the past twelve months,
refer to the Highlights box below. The letter from the portfolio manager and
president provides a more detailed analysis of the fund and financial markets.
The charts alongside the letter are useful because they provide more information
about your investments. The top holdings charts show the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by industry.
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.
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.
HIGHLIGHTS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS E CLASS H
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FORTIS TAX-FREE NATIONAL
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 10.71 $ 10.70 $ 10.70 $ 10.72 $ 10.71
End of year................................ $ 10.75 $ 10.74 $ 10.74 $ 10.76 $ 10.75
DISTRIBUTIONS PER SHARE
From net investment income................. $ 0.53 $ 0.45 $ 0.45 $ 0.56 $ 0.45
FORTIS TAX-FREE MINNESOTA
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 10.30 $ 10.27 $ 10.30 $ 10.32 $ 10.30
End of year................................ $ 10.26 $ 10.24 $ 10.26 $ 10.28 $ 10.26
DISTRIBUTIONS PER SHARE
From net investment income................. $ 0.52 $ 0.44 $ 0.44 $ 0.55 $ 0.44
FORTIS TAX-FREE NEW YORK
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 10.87 $ 10.84 $ 10.85 $ 10.87 $ 10.83
End of year................................ $ 10.72 $ 10.69 $ 10.70 $ 10.72 $ 10.69
DISTRIBUTIONS PER SHARE
From net investment income................. $ 0.55 $ 0.47 $ 0.47 $ 0.58 $ 0.47
From net realized gains on investments..... $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02
</TABLE>
<PAGE>
Photo
DEAR SHAREHOLDER,
Offering tax-free income, the Fortis Tax-Free Portfolios invest in high quality
municipal bonds. These portfolios are designed to help you reduce your tax
burden as they help to revitalize the country by investing in America.
This past year, due to specific actions detailed below, we helped the National
Portfolio outperform the majority of national municipal bond funds. Similar
activities in the Minnesota Portfolio enhanced its performance to place it
within the upper two-thirds of similar funds. However, because of efforts to
limit taxable gains, the New York Portfolio underperformed its peer group.
DIVERSE ECONOMIC CONDITIONS
The bond market has digested a wide variety of economic information during the
past 12 months. Late in 1995, the bond market responded favorably to an economic
environment that indicated modest economic growth and little inflation. But this
scenario changed abruptly in the first and second quarters when monthly
employment statistics indicated stronger economic growth. Concern that this
growth could increase inflation and cause the Federal Reserve to raise interest
rates led the U.S. Treasury long bond rate to move from 6 percent in late
January to slightly over 7 percent in mid-July.
More recently, the subdued September employment statistics and other recent
economic indicators lead us to believe that real growth continues at a more
modest and sustainable pace of about 2 percent. In this environment, there is
less concern that the Federal Reserve will raise interest rates.
PORTFOLIOS REPOSITIONED AS INTEREST RATES ROSE
Late last year, in order to benefit from expected price appreciation, we
positioned the portfolios with durations* or effective maturities longer than
their respective benchmarks (a measure of reference against which the fund is
compared and evaluated). As the likelihood of accelerated growth and rising
rates increased during the first quarter of 1996, we shifted to a more defensive
posture, with durations closer to their respective benchmarks. Since March, we
have maintained a basically neutral duration position, which we expect to
maintain until economic signals are more clear.
At the end of 1995 and in early 1996, the addition of call protection (the
amount of time during which a security cannot be redeemed by the issuer)
lengthened the effective maturities of the National and Minnesota Portfolios.
Specifically, call protection increased by more than two years in the National
Portfolio and by one year in the Minnesota Portfolio. In so doing, performance
in these two portfolios was enhanced, while interest rates declined. To limit
taxable gains, transactions in the New York Portfolio were few.
RISK/RETURN PROFILES CONTINUE TO IMPROVE
Durations of the National and Minnesota Portfolios were reduced when market
sentiment shifted in the first and second quarters, though not quickly enough to
prevent modest underperformance in comparison to their respective peer groups.
Since March 1996, municipal yields have fluctuated within a 35 basis point
range. (One basis point represents 0.01 percent of yield, the smallest measure
used to quote bond performance.) During August and September, some of the bonds
purchased in late 1995 and early 1996 were sold and replaced with bonds having
comparable performance characteristics and higher yields.
Looking forward, we will continue to improve the risk and return profiles of the
portfolios. Special attention will be given to credit quality, call protection
and other aspects of bond structure, as we seek to enhance portfolio
performance.
WE APPRECIATE YOUR INVESTMENT
Today's economic and investment climates remain ever-changing, and we appreciate
your trust in us as we manage these portfolios for you. If you have any
questions, please call us or your investment professional.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Dean C. Kopperud Howard G. Hudson
President Vice President
</TABLE>
October 17, 1996
*An important concept in managing fixed income securities, duration is the
measure of a bond fund's sensitivity to interest rate changes. Traditionally
measured in years, higher durations mean potentially greater fluctuations in
bond values, just as lower durations typically mean less volatility.
1
<PAGE>
COMPOSITION BY INDUSTRY AS OF 9/30/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligation 36.1%
Health Care/Services 10.5%
Utilities - Electric 7.7%
Utilities - Water and Sewer 10.7%
Utilities - Gas 1.1%
Refunded with U.S. Gov't 11.0%
Transportation 10.7%
Cash Equivalents/Receivables 3.2%
Housing 3.7%
Pollution control 1.2%
Higher Education 2.1%
Industrial 0.8%
Miscellaneous 1.2%
</TABLE>
NATIONAL PORTFOLIO
VALUE OF $10,000 INVESTED JUNE 2, 1986
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NATIONAL PORTFOLIO CLASS E
AVERAGE ANNUAL TOTAL RETURN
SINCE
<S> <C> <C> <C> <C>
1 Year 5 Year 10 Year June 2, 1986@
Class E* +0.93% +5.95% +6.75% +6.86%
Class E** +5.69% +6.93% +7.24% +7.34%
Lehman Brothers Tax-Free --
Muni Bond Index*** National
06/02/86 10,000 9,525
87 10,638 9,810
88 10,694 11,025
89 12,082 11,941
90 13,131 12,460
91 14,023 14,205
92 15,872 15,619
93 17,531 17,749
94 19,765 17,193
95 19,290 18,737
96 22,771 19,765
</TABLE>
Annual period ended September 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of municipal bonds with maturities greater than two
years.
@ Date shares were first offered to the public.
TOP TEN HOLDINGS AS OF 9/30/96
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. Massachusetts (5.875%) 2010 3.8%
2. New York Triborough Bridge & Tunnel Auth (5.50%)
2017 3.4%
3. Boston, MA (6.00%) 2014 3.4%
4. North Carolina Eastern Municipal Power (6.50%)
2018 3.3%
5. Metropolitan Transportation Auth, NY (5.75%) 2013 3.2%
6. Grapevine-Colleyville TX (5.75%) 2012 3.0%
6. Massachusetts Water Resources (6.25%) 2010 2.7%
8. Fulton County Georgia Water & Sewer (6.375%) 2014 2.6%
9. Detroit MI Water System (6.50%) 2015 2.5%
10. Maricopa County AZ (6.00%) 2008 2.4%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ----------------------------------------------------------------
<S> <C> <C>
Class A sharesDiamond +5.46% +10.71%
Class A sharesDiamond Diamond +.71% +8.03%
Class B sharesDiamond +4.65% +9.82%
Class B sharesDiamond Diamond +1.05% +8.05%
Class C sharesDiamond +4.65% +9.82%
Class C sharesDiamond Diamond +3.65% +9.82%
Class H sharesDiamond +4.64% +9.87%
Class H sharesDiamond Diamond +1.04% +8.09%
</TABLE>
Past performance is not indicative of future performance. Total returns include
reinvestment of all dividend and capital gains distributions. The performance of
the separate classes (E, A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class E and A have a maximum sales charge of 4.50%, Class B
and H have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if
redeemed within two years of purchase, and Class C has a CDSC of 1.00% if
redeemed within one year of purchase.
Diamond Without Sales Charge.
Diamond With Sales Charge. Assumes redemption on September 30, 1996.
Diamond
+ Since November 14, 1994 -- Date shares were first offered to the public.
2
<PAGE>
COMPOSITION BY INDUSTRY AS OF 9/30/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Health Care/Services 13.2%
Housing 18.6%
General Obligation 29.4%
Utilities - Electric 11.8%
Higher Education 2.0%
Public Facilities 2.5%
Refunded with U.S. Gov't 7.3%
Miscellaneous 4.8%
Pollution Control 6.6%
Cash Equivalents/Receivables 2.8%
Utility - Water & Sewer 1.0%
</TABLE>
MINNESOTA PORTFOLIO
VALUE OF $10,000 INVESTED JUNE 2, 1986
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MINNESOTA PORTFOLIO CLASS E
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C> <C> <C>
Since
1 Year 5 Year 10 Year June 2, 1986@
Class E* +.28% +5.61% +6.18% +6.31%
Class E** +5.01% +6.58% +6.67% +6.78%
Lehman Brothers Tax-Free --
Muni Bond Index*** Minnesota
06/02/86 10,000 9,865
87 10,638 9,692
88 12,082 10,817
89 13,131 11,603
90 14,023 12,214
91 15,872 13,681
92 17,531 14,952
93 19,765 16,787
94 19,290 16,541
95 21,448 17,851
96 22,771 18,710
</TABLE>
Annual period ended September 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of municipal bonds with maturities greater than two
years.
@ Date shares were first offered to the public.
TOP TEN HOLDINGS AS OF 9/30/96
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. Kenyon-Wanamingo (City of), MN Independent School
District #2172 (5.90%) 2015 3.8%
2. Minneapolis & St. Paul, MN (5.70%) 2016 3.7%
3. Northern MN Municipal Power Agency (5.50%) 2018 3.7%
4. Southern MN Municipal Power Agency (5.75%) 2018 3.5%
5. Stillwater Independent School District #834, MN
(5.75%) 2015 3.0%
6. Brainerd, MN (6.65%) 2017 3.0%
7. St. Louis Park (City of), MN, (7.25%) 2015 2.6%
8. Rochester (City of), MN, (6.25%) 2014 2.5%
9. Hutchinson (City of), MN, Independent School
District #423 (5.75%) 2013 2.4%
10. Rochester (City of), MN, Independent School
District #525 (5.25%) 2014 2.4%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ----------------------------------------------------------------
<S> <C> <C>
Class A sharesDiamond +4.78% +9.48%
Class A sharesDiamond Diamond +.06% +6.83%
Class B sharesDiamond +4.04% +8.53%
Class B sharesDiamond Diamond +.44% +6.73%
Class C sharesDiamond +4.00% +8.61%
Class C sharesDiamond Diamond +3.00% +8.61%
Class H sharesDiamond +3.93% +8.63%
Class H sharesDiamond Diamond +.33% +6.84%
</TABLE>
Past performance is not indicative of future performance. Total returns include
reinvestment of all dividend and capital gains distributions. The performance of
the separate classes (E, A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class E and A have a maximum sales charge of 4.50%, Class B
and H have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if
redeemed within two years of purchase, and Class C has a CDSC of 1.00% if
redeemed within one year of purchase.
Diamond Without Sales Charge.
Diamond With Sales Charge. Assumes redemption on September 30, 1996.
Diamond
+ Since November 14, 1994 -- Date shares were first offered to the public.
3
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 9/30/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Refunded with U.S. Gov't 32.6%
Housing 22.9%
Transportation 13.9%
Health Care/Services 7.6%
Miscellaneous 7.0%
General Obligations 12.2%
Cash Equivalents/Receivables 3.8%
</TABLE>
NEW YORK PORTFOLIO
VALUE OF $10,000 INVESTED NOVEMBER 6, 1987
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO CLASS E
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C> <C>
Since
1 Year 5 Year November 6, 1987@
Class E* -.52% +5.59% +6.89%
Class E** +4.16% +6.57% +7.45%
Lehman Brothers Tax-Free --
Muni Bond Index*** New York
11/06/87 10,000 9,550
88 11,258 10,413
89 12,235 11,371
90 13,067 11,887
91 14,790 13,385
92 16,336 14,893
93 18,418 16,662
94 17,974 16,458
95 19,986 17,627
96 21,219 18,221
</TABLE>
Annual Period ended September 30
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
@ Date shares were first offered to the public
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of municipal bonds with maturities greater than two
years.
TOP TEN HOLDINGS AS OF 9/30/96
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. New York State Dorm Auth (7.50%) 2011 8.1%
2. New York City, NY (8.25%) 2017 7.3%
3. New York State Dorm Auth (7.80%) 2005 7.0%
4. New York State Urban Development Corp (7.375%)
2018 6.2%
5. New York Local Government Assistance Corp (7.50%)
2020 6.2%
6. New York State Med Care (7.45%) 2029 6.0%
7. Albany County New York, (5.60%) 2016 5.0%
8. New York Triborough Bridge & Tunnel Auth (8.125%)
2012 4.8%
9. New York State Med Care (6.375%) 2029 4.7%
10. New York State Thruway Auth (6.25%) 2014 4.6%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- -----------------------------------------------------------------
<S> <C> <C>
Class A sharesDiamond +3.94% +7.65%
Class A sharesDiamond Diamond -.74% +5.05%
Class B sharesDiamond +3.14% +6.67%
Class B sharesDiamond Diamond -.46% +4.84%
Class C sharesDiamond +3.14% +3.99%++
Class C sharesDiamond Diamond +2.14% +3.99%++
Class H sharesDiamond +3.24% +3.18%+++
Class H sharesDiamond Diamond -.36% +.50%+++
</TABLE>
Past performance is not indicative of future performance. Total returns include
reinvestment of all dividend and capital gains distributions. The performance of
the separate classes (E, A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class E and A have a maximum sales charge of 4.50%, Class B
and H have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if
redeemed within two years of purchase, and Class C has a CDSC of 1.00% if
redeemed within one year of purchase.
Diamond Without Sales Charge.
Diamond With Sales Charge. Assumes redemption on September 30, 1996.
Diamond
+ Since November 14, 1994 - Date shares were first offered to the public.
++ Since April 26, 1995 - Date of first investment.
+++ Since May 31, 1995 - Date of first investment.
4
<PAGE>
FORTIS TAX-FREE PORTFOLIOS
NATIONAL PORTFOLIO
Schedule of Investments
September 30, 1996
MUNICIPAL BONDS-98.47%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
ARIZONA-2.36%
$1,700,000 Maricopa County AZ, 6.00% School Dist #001
Phoenix MBIA Insured 7-1-2008.............. AAA $ 1,780,288 $ 1,810,619
------------ ------------
CALIFORNIA-4.76%
1,000,000 California State, 5.75% General Obligation
11-1-2012.................................. A+ 1,048,217 1,026,410
4,000,000 Southern California Public Power, 6.36% Zero
Coupon Bond 7-1-2013 (d)................... A+ 1,401,542 1,512,560
2,750,000 Sulphur Springs (City of) CA, 7.00% Zero
Coupon General Obligation Ser A MBIA
Insured 9-1-2012 (d)....................... AAA 919,862 1,108,442
------------ ------------
3,369,621 3,647,412
------------ ------------
CONNECTICUT-4.16%
1,500,000 Connecticut State, 6.00% General Obligation
Ser E 3-15-2012............................ AA- 1,617,997 1,583,790
1,500,000 Connecticut State, 6.125% Special Tax
Obligation Rev Transportation
Infrastructure Ser B Noncall Sinking Fund
9-1-2012................................... AA- 1,580,531 1,608,420
------------ ------------
3,198,528 3,192,210
------------ ------------
DISTRICT OF COLUMBIA-3.92%
1,250,000 District of Columbia, 7.50% General
Obligation Ser1990B FSA Insured 6-1-2010
(Refunded 6-1-2000 @ 102).................. AAA 1,235,938 1,394,862
1,500,000 Georgetown University, 8.25% District of
Columbia Bond 4-1-2018 (Crossover Refunded
10-1-2001 @ 103)........................... A+ 1,550,161 1,610,970
------------ ------------
2,786,099 3,005,832
------------ ------------
FLORIDA-2.29%
500,000 Florida (State of), 7.50% Mid-Bay Bridge Auth
Ser 1991A 10-1-2017 (Crossover Refunded
10-1-2001 @ 103)........................... N/R 474,187 541,145
500,000 Leesburg (City of) FL, 7.50% Capital
Improvement Hosp Rev Bond (Leesburg
Regional Med Ctr) Ser 1991A 7-1-2021
(Refunded 7-1-2002 @ 102).................. A- 488,538 576,910
600,000 Tampa (City of) FL, 8.25% Cap Improvement
Program Rev Bond Ser A 10-1-2018........... AA 598,908 639,672
------------ ------------
1,561,633 1,757,727
------------ ------------
GEORGIA-4.00%
1,800,000 Fulton County Georgia Water & Sewer, 6.375%
Ref Bond FGIC Insured 1-1-2014............. AAA 1,785,248 1,984,500
1,000,000 Municipal Electric Auth of Georgia, 6.50% 5th
Crossover Ser Proj 1 1-1-2017.............. A 992,784 1,082,660
------------ ------------
2,778,032 3,067,160
------------ ------------
ILLINOIS-4.62%
500,000 Channahon Park IL District, 7.50% General
Obligation 1-1-2011........................ N/R 499,375 561,220
750,000 Chicago Gas Supply, 7.50% Rev for Peoples Gas
Ser B 3-1-2015............................. AA- 759,461 816,735
1,000,000 Illinois Dev Fin Auth, 7.375% Power Co Proj
Ser 1991-A 7-1-2021........................ BBB 992,591 1,106,420
1,000,000 Illinois Housing Dev Auth, 7.55% Multi-family
Housing Ser 1990A 7-1-2014................. A+ 987,575 1,060,350
------------ ------------
3,239,002 3,544,725
------------ ------------
INDIANA-3.49%
1,200,000 Indiana Bond Bank, 8.50% Special Loan Program
Ser B 2-1-2018............................. A 1,212,656 1,286,664
1,250,000 Indianapolis (City of) IN Local Public
Improvement Bond Bank, 7.40% Ser 1990A
1-1-2020 (Refunded 7-1-2000 @ 102)......... Aaa* 1,247,290 1,393,087
------------ ------------
2,459,946 2,679,751
------------ ------------
KENTUCKY-1.44%
1,000,000 Louisville & Jefferson County KY, 6.75% Metro
Sewer Dist Rev Bond Ser A AMBAC Insured
5-15-2019.................................. AAA 996,310 1,107,020
------------ ------------
MAINE-2.13%
1,500,000 Regional Waste Sys, Inc. of ME, 7.95% Ser A-C
7-1-2010................................... AA 1,510,109 1,637,655
------------ ------------
MASSACHUSETTS-10.64%
2,500,000 Boston (City of) MA, 6.00% General Obligation
AMBAC Insured 8-1-2014..................... AAA 2,493,960 2,574,625
500,000 Boston City Hospital MA, 7.625% Rev Bond Ser
A 2-15-2021 (Refunded 8-15-2000 @102)...... Aaa* 496,410 562,040
2,000,000 Massachusetts Water Resources, 6.25% Gen Rev
Ref Bond Ser 1992B 11-1-2010............... A 1,979,518 2,092,760
2,850,000 Massachusetts, 5.875% General Obligation Ser
B FGIC Insured 8-1-2010.................... AAA 2,825,835 2,934,474
------------ ------------
7,795,723 8,163,899
------------ ------------
</TABLE>
5
<PAGE>
FORTIS TAX-FREE PORTFOLIOS
NATIONAL PORTFOLIO (CONTINUED)
Schedule of Investments
September 30, 1996
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
MICHIGAN-5.58%
$1,750,000 Detroit MI Water System, 6.50% Rev Bond
7-1-2015................................... AAA $ 1,873,995 $ 1,933,382
1,000,000 Lake Orion MI, 5.50% School District Ref
Bonds UT100 AMBAC Insured Q-SBLF
5-1-2020................................... AAA 944,469 971,650
1,350,000 Lincoln Park MI, 5.85% School District Ref
Bond FGIC Q-SBLF 5-1-2015.................. AAA 1,346,846 1,371,506
------------ ------------
4,165,310 4,276,538
------------ ------------
MINNESOTA-6.34%
1,140,000 Fergus Falls (City of) MN, 6.50% Health Care
Facility (Lake Regional Hospital) Ser A
9-1-2018................................... BBB+ 1,133,588 1,151,662
2,000,000 Minneapolis (City of) MN, 5.75% General
Obligation Zero Coupon Bond Ser 1993A
12-1-2013 (d).............................. AAA 770,566 760,720
670,000 Minneapolis (City of) MN, 7.00% Health Care
Fac Rev (St Olaf Residence) Ser 1993
10-1-2012.................................. N/R 670,000 696,398
1,475,000 Minnetonka MN, 5.70% Indpt School Dist No 276
General Obligation 2-1-2011................ Aa1* 1,475,000 1,498,276
690,000 St. Anthony (City of) MN, 6.75% Housing Dev
Rev Ref Bond 7-1-2007...................... AA 690,000 758,945
------------ ------------
4,739,154 4,866,001
------------ ------------
MISSOURI-1.73%
1,250,000 Missouri State Health & Educ, 7.70% Still
Regional Med Ctr 2-1-2013.................. BBB 1,296,507 1,328,688
------------ ------------
NEVADA-1.42%
1,000,000 Washoe County Nevada Hosp, 7.60% (Washoe Med
Ctr) Rev Bond Ser 1989A 6-1-2019........... A 971,310 1,090,060
------------ ------------
NEW JERSEY-1.40%
1,000,000 New Jersey State Highway Auth, 6.20% Garden
State Pkwy Gen Rev Bond Sr Parking Bonds
1-1-2010................................... AA- 1,079,854 1,071,990
------------ ------------
NEW YORK-13.33%
2,465,000 Metropolitan Transportation Authority NY
Commuter Facilities, 5.75% Ser O
7-1-2013................................... BBB 2,389,546 2,430,884
1,100,000 New York City, 5.875% General Obligation Ser
A 8-1-2003................................. BBB+ 1,095,370 1,116,269
1,000,000 New York City, 8.25% General Obligation Ser B
6-1-2005................................... BBB+ 989,855 1,157,430
730,000 New York State Med Care, 7.50% Mental Health
Ser A 2-15-2021 (Refunded 2-15-2001 @
102)....................................... AAA 702,681 824,009
1,000,000 New York State, 6.00% Dorm Auth Revs Cons
City Univ System 2nd Gen A 7-1-2020........ BBB 1,019,048 1,004,940
1,000,000 New York State, 7.75% UDC Correctional Fac
Ser 1 1-1-2014 (Refunded 1-1-2000 @ 102)... Aaa* 960,628 1,116,140
2,600,000 New York Triborough Bridge and Tunnel Auth,
5.50% General Purpose Ser Y 1-1-2017....... A+ 2,493,141 2,577,822
------------ ------------
9,650,269 10,227,494
------------ ------------
NORTH CAROLINA-4.82%
2,300,000 North Carolina Eastern Municipal Power Sys
Rev, 6.50% Ser A 1-1-2018 (Escrowed to
Maturity).................................. AAA 2,540,678 2,544,720
1,255,000 North Carolina Municipal Power Agency No 1,
5.00% Catawba Elec Rev Bond 1-1-2020....... A- 1,173,140 1,150,484
------------ ------------
3,713,818 3,695,204
------------ ------------
NORTH DAKOTA-1.57%
1,100,000 Ward County ND, 7.50% Health Care Fac Ser
1991B 7-1-2011............................. BBB+ 1,129,102 1,202,938
------------ ------------
OHIO-1.16%
750,000 Cleveland (City of) OH Parking Fac, 8.10%
Improvement Rev Bond 9-15-2022............. N/R 760,060 886,935
------------ ------------
PENNSYLVANIA-2.26%
750,000 Clarion County PA Hosp Auth, 8.50% Clarion
Hosp Proj Rev Bond 7-1-2021................ BBB- 733,670 808,125
890,000 Delaware County PA, 8.10% IDA Rev Res Recov
Ser A LOC Security Pacific: Proj Guar by
Westinghouse 12-1-2013..................... AA- 931,497 925,235
------------ ------------
1,665,167 1,733,360
------------ ------------
PUERTO RICO-3.02%
1,250,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 1,343,094 1,340,263
900,000 Puerto Rico, 6.25% Public Building Auth Rev
GTD Gov't Facilities Ser A AMBAC Insured
7-1-2009................................... AAA 1,007,793 978,444
------------ ------------
2,350,887 2,318,707
------------ ------------
</TABLE>
6
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
SOUTH CAROLINA-1.52%
$1,175,000 Greenville S.C. Hosp, 5.75% Fac Rev Ser A
5-1-2014................................... AA- $ 1,164,751 $ 1,168,502
------------ ------------
TENNESSEE-1.44%
1,000,000 Metro Govt of Nashville & Davidson County
Tenn, 6.50% Water & Sewer Ref Bond
1-1-2010................................... AAA 1,093,173 1,105,060
------------ ------------
TEXAS-3.01%
2,250,000 Grapevine-Colleyville TX, 5.75% Independent
School District PSF Rev Ref Bond
8-15-2012.................................. AAA 2,285,048 2,306,498
------------ ------------
VIRGINIA-2.05%
1,500,000 Virginia State Public School Auth, 6.20% Ser
A 8-1-2014................................. AA 1,491,812 1,569,525
------------ ------------
WASHINGTON-2.89%
1,000,000 Washington Public Power Supply Sys, 7.00%
Nuclear Proj 2 Ref Rev Bond Ser 1990B
7-1-2012................................... AA- 957,644 1,100,810
1,000,000 Washington Public Power Supply Sys, 7.625%
Proj 2 Rec Bond Ser 1990A 7-1-2008
(Refunded 7-1-2000 @ 102).................. AAA 986,875 1,118,830
------------ ------------
1,944,519 2,219,640
------------ ------------
WISCONSIN-1.12%
750,000 Wisconsin Health & Educ Fac Auth, 8.50% Rev
Bond Ser 1990 (Franciscan Health Sys)
3-1-2020 (Refunded 3-1-2000 @ 102)......... Aaa* 750,000 855,398
------------ ------------
TOTAL MUNICIPAL BONDS........................ $71,726,032 $75,536,548
------------ ------------
------------ ------------
</TABLE>
SHORT-TERM INVESTMENTS-0.22%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
--------- ------------
<C> <S> <C>
INVESTMENT COMPANY-0.22%
$171,198 Federated Tax-Free Obligation Fund, Current
Rate -- 3.62%.............................. $ 171,198
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$71,897,230) (a)........................... $75,707,746
------------
------------
</TABLE>
(a) At September 30, 1996, the cost of securities for federal income tax
purposes was $71,897,230 and the aggregate gross unrealized appreciation
and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 3,962,292
Unrealized depreciation........................... (151,776)
---------------------------------------------------------------
Net unrealized appreciation....................... $ 3,810,516
---------------------------------------------------------------
</TABLE>
(b) See Note 1 of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets.
(d) The interest rate disclosed for these securities represents the original
issue discount yields on the date of acquisition.
* Moody's Rating.
7
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
MINNESOTA PORTFOLIO
Schedule of Investments
September 30, 1996
MUNICIPAL BONDS-97.20%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
GENERAL OBLIGATIONS-29.45%
$1,200,000 Centennial Independent School District #012,
5.625% Ser A 2-1-2016...................... Aa1* $ 1,186,660 $ 1,201,896
450,000 Eagan (City of), MN, 7.25% General Obligation
Water Rev Sys Bond Ser 1990A 12-1-2008
(Crossover Refunded 12-1-1999 @ 100)....... AA- 445,500 486,410
1,000,000 Eden Prairie (City of), MN Independent School
District #272, 5.125% General Obligation
State Enhancement Program 2-1-2013......... Aa1* 988,136 950,640
500,000 Edina (City of) MN, 7.30% General Obligation
2-1-2008 (Crossover Refunded 2-1-1998 @
100)....................................... A1* 501,975 520,160
1,275,000 Hutchinson (City of), MN Independent School
District #423, 5.75% MN School District
Credit Enhancement Program 2-1-2013........ Aa1* 1,265,002 1,285,455
1,100,000 Hutchinson (City of), MN, Independent School
District #423, 5.75% General Obligation
State Enhancement Program 2-1-2016......... Aa1* 1,093,574 1,106,270
2,020,000 Kenyon-Wanamingo (City of), MN Independent
School District #2172, 5.90% General
Obligation MBIA Insured 2-1-2015........... AAA 2,008,691 2,044,987
1,225,000 Minnetonka (City of), MN Independent School
District #276, 5.70% General Obligation Ser
B 2-1-2013................................. Aa1* 1,212,140 1,238,144
750,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 805,857 804,158
900,000 Puerto Rico, 6.25% Public Building Auth Rev
GTD Gov't Facilities Ser A AMBAC Insured
7-1-2009................................... AAA 1,007,793 978,444
1,310,000 Rochester (City of), MN Independent School
District #535, 5.25% General Obligation Ser
A 2-1-2014................................. AA 1,288,016 1,273,595
1,200,000 St. Paul (City of), MN, 5.80% Independent
School District #625 Ser B 2-1-2012........ AA 1,191,682 1,219,704
1,600,000 Stillwater (City of), MN, 5.75% Independent
School District #834 MBIA Ins. Sch Dist
Enhancement Program 2-1-2015............... AAA 1,582,056 1,611,440
1,000,000 Wayzata (City of), MN, 5.95% Independent
School District #284-General Obligation
Ser 1995B 2-1-2013......................... AAA 1,000,000 1,022,700
------------ ------------
15,577,082 15,744,003
------------ ------------
HEALTH CARE/SERVICES-13.20%
1,000,000 Duluth (City of), MN, 8.375% EDA Health Care
Fac Rev (St. Mary's Med Ctr) Ser 1990
2-15-2020 (Refunded 2-15-2000 @ 102)....... AAA 1,020,577 1,135,190
785,000 Duluth (City of), MN, 9.00% Hospital Fac Rev
Bond for St. Luke's Ser 1988 5-1-2018...... AAA 800,191 857,511
500,000 Minneapolis & St Paul (Cities of), MN, 6.75%
HRA Health Care Fac Rev Bond Group Health,
Inc. Ser 1992-1 2-1-2013................... A- 486,654 539,975
2,000,000 Minneapolis & St. Paul (Cities of), MN, 5.70%
HSG & Redev Auth Health Care System
Childrens Health Care Ser A FSA Insured
8-15-2016.................................. AAA 1,976,313 1,995,140
1,100,000 Minneapolis & St. Paul (Cities of), MN, 6.75%
HRA Health Care System HealthOne Obligated
Group MBIA Insured 8-15-2014............... AAA 1,098,814 1,194,479
1,275,000 Rochester (City of), MN, 6.25% Health Care
Fac Rev Bond Mayo Foundation/Mayo Med Ctr
Ser 1992D 11-15-2014....................... AA+ 1,274,860 1,336,034
------------ ------------
6,657,409 7,058,329
------------ ------------
HIGHER EDUCATION-1.97%
460,000 Minnesota Higher Education, 7.625% Mortgage
Rev Ser 3F for St. Mary's College 10-1-2016
(Refunded 10-1-2001 @ 100)................. BBB- 457,700 518,278
500,000 Northfield (City of), MN, 8.00% College
Facility Rev Bond for St. Olaf College
10-1-2018 (Refunded 10-1-1998 @ 100)....... N/R 500,590 534,930
------------ ------------
958,290 1,053,208
------------ ------------
HOUSING-18.61%
1,500,000 Brainerd (City of), MN, 6.65% Rev Ref Bond
Ser 1992B, Evangelical Lutheran-Good
Samaritan Project FSA Insured 3-1-2017..... AAA 1,513,982 1,608,015
290,000 Dakota County, MN, 8.10% HRA Single Family
Rev GNMA Backed 3-1-2016................... AAA 296,930 300,147
300,000 Eden Prairie (City of), MN, 7.40% Multifamily
Housing Ser 1990 FHA Insured 8-1-2025...... AAA 299,957 314,976
865,000 Eden Prairie (City of), MN, 8.00% Multifamily
Housing Ser A FHA Insured 7-1-2026......... AAA 865,000 932,608
570,000 Edina (City of), MN, 7.50% Housing Dev Ref
Rev Edina Park Plaza Ser 1989A 12-1-2009... Aa* 569,625 602,541
500,000 Edina (City of), MN, 7.70% Housing Dev Ref
Rev Edina Park Plaza Ser A FHA Insured
12-1-2028.................................. Aa* 500,000 526,065
525,000 Mankato (City of), MN, 8.25% Nursing Home Rev
Bond Board of Soc Ministry Mankato Lutheran
Ser 1991A 10-1-2021........................ N/R 520,000 561,876
1,070,000 Minneapolis (City of), MN, 7.10% HRA Mortgage
Rev Bond Riverplace Proj Ser A LOC Bank of
Tokyo 1-1-2020............................. Aa2* 1,082,339 1,100,998
485,000 Minneapolis (City of), MN, 8.25% Health Care
Fac Rev Bond Jones-Harrison Residence Ser
1991 9-1-2011.............................. N/R 479,122 515,555
350,000 Minneapolis (City of), MN, 8.25% Rev Bond
Trinity Housing Proj Ser 1991 2-1-2018..... N/R 350,000 358,747
</TABLE>
8
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
$ 500,000 Minnesota Housing Finance Agency, 6.95%
Housing Dev Bond Ser 1992A 8-1-2017........ AA $ 500,000 $ 527,195
200,000 Minnesota Housing Finance Agency, 7.70%
Single Family Mortgage Bond Ser C
7-1-2014................................... AA+ 201,107 211,270
440,000 Northfield (City of), MN, 7.00% Health Care
Facility Northfield Retirement Center
5-1-2015................................... N/R 436,239 448,026
735,000 Red Wing (City of), MN, 6.50% Elderly Housing
Fac Ref Rev River Region Obligated Group
Ser 1993C 9-1-2022......................... BBB+ 730,810 743,070
500,000 Spring Park (City of), MN, 8.25% Health Care
Fac Rev Bond Twin Birch Health Care Ctr
8-1-2011................................... N/R 500,000 539,670
660,000 Waconia (City of), MN HRA, 6.00% Ref Rev Bond
Evangelical Lutheran Good Samaritan Society
Ser 1993A 6-1-2014......................... A- 660,000 658,508
------------ ------------
9,505,111 9,949,267
------------ ------------
MISCELLANEOUS-4.76%
450,000 Dakota County, MN, 7.50% HRA Limited Annual
Appropriation Tax & Rev Supported Bond Ser
1991 1-1-2006.............................. BBB+ 450,000 472,284
400,000 Dawson (City of), MN, 7.30% IDR Ref Bond
Associated Milk Producers 9-1-2000......... N/R 396,426 416,792
1,000,000 Minneapolis (City of), MN, 7.375% CDA Limited
Tax Supported Dev Rev Common Bond Fund Ser
1995-G3 12-1-2012.......................... BBB+ 1,000,000 1,118,990
500,000 Minneapolis (City of), MN, 8.375% CDA Limited
Tax Supported Dev Rev Common Bond Fund Ser
1990-6A 6-1-2007........................... BBB+ 497,500 537,365
------------ ------------
2,343,926 2,545,431
------------ ------------
POLLUTION CONTROL-6.60%
650,000 East Grand Forks (City of), MN, 7.75%
Pollution Control Rev (American Crystal
Sugar) Ser 1991A 4-1-2018.................. BBB+ 650,498 695,097
1,200,000 Minnesota Public Fac Auth, 5.40% Water
Pollution Control Bond Ser B 3-1-2015...... AAA 1,179,345 1,182,060
1,000,000 Minnesota Public Fac Auth, 6.65% Zero Coupon
WaterPollution Rev Bond Ser 1992A 3-1-2007
(d)........................................ AAA 505,973 551,260
1,000,000 Minnesota Public Fac Auth, 7.10% Water
Pollution Rev Bond Ser 1990A 3-1-2012...... AAA 978,768 1,098,680
------------ ------------
3,314,584 3,527,097
------------ ------------
PUBLIC FACILITES-2.46%
400,000 Duluth (City of), MN, 6.75% Gross Rev
Recreation Fac Bond Spirit Mountain Ser
1992 2-1-2007.............................. N/R 400,000 410,496
325,000 Moorhead (City of), MN, 7.75% Golf Course Rev
Bond Ser 1992A 12-1-2015................... N/R 325,000 363,204
500,000 St. Paul (City of), MN, 6.45% HRA Parking Rev
Bond Ser 1992A 8-1-2007 (Refunded 8-1-2000
@ 102)..................................... A- 500,000 540,185
------------ ------------
1,225,000 1,313,885
------------ ------------
REFUNDED WITH U.S. GOVERNMENT SECURITIES-7.34%
400,000 Minneapolis (City of), MN, 8.00% HRA St. Paul
HealthOne Ser 1990B 8-15-2014 (Prefunded
8-15-2000 @ 102)........................... AAA 411,954 454,444
1,100,000 Minneapolis (City of), MN, 9.125% Hospital
Fac Ref Rev Bond Ser B 12-1-2014 (Refunded
12-1-1997 @ 102)........................... AAA 1,182,583 1,185,569
1,275,000 St. Louis Park (City of), MN, 7.25% Hospital
Fac Rev Methodist Ser 1990C AMBAC Insured
7-1-2015 (Refunded 7-1-2000 @ 102)......... AAA 1,261,899 1,412,547
765,000 St. Louis Park (City of), MN, 8.50% Health
Care Fac (Park Nicollet Med Ctr) Ser A
1-1-2011 (Refunded 1-1-2001 @ 100)......... Aaa* 770,192 875,787
------------ ------------
3,626,628 3,928,347
------------ ------------
UTILITIES-ELECTRIC-11.80%
2,000,000 Northern MN Municipal Power Agency, 5.50%
ElectricSys Rev Bond Ser B AMBAC Insured
1-1-2018................................... AAA 1,933,104 1,960,540
1,295,000 Northern MN Municipal Power Agency, 7.102%
Zero Coupon Elec Sys Rev Ref Ser A AMBAC
Primary Insured 1-1-2011 (d)............... AAA 489,909 587,749
1,000,000 Southern MN Municipal Power Agency, 5.00%
Power Supply Sys Rev Bond Ser 1993A
1-1-2012................................... A+ 950,857 926,330
1,870,000 Southern MN Municipal Power Agency, 5.75%
Power Supply Sys Rev 1-1-2018.............. A+ 1,813,127 1,847,223
1,000,000 Western MN Municipal Power Agency, 5.50% Ref.
Ser A AMBAC Insured 1-1-2013............... AAA 991,430 987,230
------------ ------------
6,178,427 6,309,072
------------ ------------
UTILITIES-WATER AND SEWER-1.01%
500,000 St. Paul (City of), MN, 8.00% Sewer Rev Bond
Ser 1988A 12-1-2008 (Crossover Refunded
12-1-1998 @ 101)........................... BBB 500,000 539,095
------------ ------------
TOTAL MUNICIPAL BONDS........................ $49,886,457 $51,967,734
------------ ------------
------------ ------------
</TABLE>
9
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
MINNESOTA PORTFOLIO (CONTINUED)
Schedule of Investments
September 30, 1996
SHORT-TERM INVESTMENTS-1.48%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
--------- ------------
<C> <S> <C>
INVESTMENT COMPANY-1.48%
$792,919 Federated Minnesota Municipal Cash Trust,
Current rate -- 3.79%...................... $ 792,919
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$50,679,376) (a)........................... $52,760,653
------------
------------
</TABLE>
(a) At September 30, 1996, the cost of securities for federal income tax
purposes was $50,680,049 and the aggregate gross unrealized appreciation
and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 2,209,529
Unrealized depreciation........................... (128,925)
---------------------------------------------------------------
Net unrealized appreciation....................... $ 2,080,604
---------------------------------------------------------------
</TABLE>
(b) See Note 1 of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets.
(d) The interest rate disclosed for these securities represents the original
issue discount yields on the date of acquisition.
* Moody's Rating
10
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
NEW YORK PORTFOLIO
Schedule of Investments
September 30, 1996
MUNICIPAL BONDS-96.17%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (a) Value (b)
--------- ------------- ----------- ------------
<C> <S> <C> <C> <C>
GENERAL OBLIGATIONS-12.17%
$550,000 Albany County New York, 5.60% Public Impt
General Obligation Ser B 3-15-2016......... AAA $ 540,407 $ 550,429
300,000 New York City, 5.875% General Obligation Ser
A 8-1-2003................................. BBB+ 298,737 304,437
250,000 North Hempstead (Town of) NY, 7.25% Public
Improvement Bond FGIC Insured Ser A
Unlimited Tax 4-1-2012 (Refunded 4-1-1999 @
102)....................................... AAA 249,375 271,942
200,000 Puerto Rico, 6.25% Public Building Auth Rev
GTD Gov't Facilities Ser A AMBAC Insured
7-1-2009................................... AAA 223,954 217,432
----------- ------------
1,312,473 1,344,240
----------- ------------
HEALTH CARE/SERVICES-7.59%
305,000 New York State Med Care Fac Fin
Agency -- Mental Health, 7.70% Rev Bond
2-15-2018.................................. BBB+ 315,054 323,291
500,000 New York State Med Care Fac Fin Agency,
6.375% Mt.Sinai Hospital & Nursing Home Rev
Ref Mtg C FHA Insured 8-15-2029............ AAA 497,192 515,380
----------- ------------
812,246 838,671
----------- ------------
HOUSING-22.94%
410,000 New York State Mtg Agency, 7.85% Rev
Homeowner Mtg Ser BB-2 10-1-2008........... Aa* 409,133 428,643
770,000 New York State, 7.50% Dorm Auth Rev Ref State
Univ Educ Fac Ser B 5-15-2011.............. BBB+ 784,111 900,315
716,000 New York State, 7.80% Dorm Auth Rev Bond
Insd-Pooled Cap Prog, FGIC Insured
12-1-2005 (Partially Refunded 12-1-1998
@102)...................................... AAA 725,228 775,500
400,000 New York State, 8.125% Dorm Auth City Univ
Ref Bond Ser A 7-1-2007.................... BBB 401,556 430,828
----------- ------------
2,320,028 2,535,286
----------- ------------
MISCELLANEOUS-6.99%
250,000 New York (City of) Municipal Assistance
Corp., 7.625% Ser 67 Bond (Pub Benefit
Corp., of the State of NY) 7-1-2008........ AA- 252,471 273,663
500,000 United Nations Development Corp., of NY,
6.00% Rev Ref Sr Lien Ser 1992A 7-1-2012... A 484,445 498,435
----------- ------------
736,916 772,098
----------- ------------
REFUNDED WITH U.S. GOVERNMENT SECURITIES-32.62%
290,000 Babylon (Town of) NY, 8.10% Industrial Dev
Agency Res Recov Rev Bond Ser 1985C (Ogden
Martin Systems, Inc.) 1-1-2000 (Refunded
7-1-1998 @ 103)............................ Aaa* 289,825 317,599
405,000 Babylon (Town of) NY, 8.50% Industrial Dev
Agency Res Recov Rev Bond Ser 1985C (Ogden
Martin Systems, Inc.) 1-1-2019 (Refunded
7-1-1998 @ 103)............................ Aaa* 420,225 446,257
690,000 New York City, 8.25% General Obligation Ser
1991F 11-15-2017 (Refunded 11-15-2001 @
101.5)..................................... BBB+ 673,416 810,929
600,000 New York Local Goverment Assistance Corp.,
7.50% Ser 1991B Bond 4-1-2020 (Refunded
4-1-2001 @ 102)............................ AAA 599,375 680,082
600,000 New York State Med Care, 7.45% (St. Luke's
Hosp) FHA and Secondary MBIA Insured Ser B
2-15-2029 (Refunded 2-15-2000 @ 102)....... AAA 598,500 665,334
600,000 New York State Urban Development Corp.,
7.375% Rev Correctional Cap Fac FSA Insured
Ser 3 1-1-2018 (Refunded 1-1-2002 @102).... Aaa 595,918 684,186
----------- ------------
3,177,259 3,604,387
----------- ------------
TRANSPORTATION-13.86%
500,000 Metropolitan Transportation Authority NY
Commuter Facilities, 5.75% Ser O
7-1-2013................................... BBB 484,179 493,080
500,000 New York State Thruway Auth, 6.25% Loc Hwy &
Bridge Svc Contract Ser 1995 4-1-2014...... BBB 490,000 504,595
500,000 New York Triborough Bridge and Tunnel Auth,
8.125% General Purpose Rev Ref Bond Ser L
1-1-2012................................... A+ 501,780 533,405
----------- ------------
1,475,959 1,531,080
----------- ------------
TOTAL MUNICIPAL BONDS........................ $9,834,881 $10,625,762
----------- ------------
----------- ------------
</TABLE>
11
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
NEW YORK PORTFOLIO (CONTINUED)
Schedule of Investments
September 30, 1996
SHORT-TERM INVESTMENTS-1.98%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
--------- ------------
<C> <S> <C>
INVESTMENT COMPANY-1.98%
$219,303 Federated Tax-Free Obligation Fund, Current
Rate -- 3.61%.............................. $ 219,303
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$10,054,184) (a)........................... $10,845,065
------------
------------
</TABLE>
(a) At September 30, 1996, the cost of securities for federal income tax
purposes was $10,054,184 and the aggregate gross unrealized appreciation
and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 797,403
Unrealized depreciation........................... (6,522)
-------------------------------------------------------------
Net unrealized appreciation....................... $ 790,881
-------------------------------------------------------------
</TABLE>
(b) See Note 1 of accompanying Notes to Financial Statements regarding
valuation of securities.
(c) Note: Percentage of investments as shown is the ratio of the total market
value to total net assets.
* Moody's Rating
12
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NATIONAL MINNESOTA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, as detailed
in the accompanying schedules, at
market (cost $71,897,230;
$50,679,376; and $10,054,184;
respectively) (Note 1).............. $ 75,707,746 $ 52,760,653 $ 10,845,065
Receivables:
Investment securities sold.......... -- 986,770 --
Interest and dividends.............. 1,120,947 793,065 208,686
Subscriptions of capital stock...... 40,923 -- --
Deferred registration costs (Note
1).................................. 19,743 18,366 13,548
Prepaid expenses...................... -- -- 4,040
------------- ------------- -------------
TOTAL ASSETS............................ 76,889,359 54,558,854 11,071,339
------------- ------------- -------------
LIABILITIES:
Cash portion of dividends payable..... 108,429 55,929 10,091
Payable for investment securities
purchased........................... -- 991,430 --
Redemptions of capital stock.......... 9,318 5,566 1,059
Payable for investment advisory and
management fees (Note 2)............ 47,743 32,163 7,270
Payable for distribution fees (Note
2).................................. 739 310 57
Accounts payable and accrued
expenses............................ 13,342 8,140 4,029
------------- ------------- -------------
TOTAL LIABILITIES....................... 179,571 1,093,538 22,506
------------- ------------- -------------
NET ASSETS:
Net proceeds of capital stock, par
value $.01 per share-authorized
100,000,000,000; 100,000,000,000;
100,000,000,000 shares;
respectively........................ 73,371,358 51,828,882 10,248,390
Unrealized appreciation of
investments......................... 3,810,516 2,081,277 790,881
Undistributed (excess of distributions
over) net investment income......... (26,750) (8,830) 4,606
Accumulated net realized gain (loss)
from sale of investments............ (445,336) (436,013) 4,956
------------- ------------- -------------
TOTAL NET ASSETS........................ $ 76,709,788 $ 53,465,316 $ 11,048,833
------------- ------------- -------------
------------- ------------- -------------
SHARES OUTSTANDING AND NET ASSET VALUE
PER SHARE:
Class A shares (based on net assets of
$6,238,551; $1,822,433; and $104,213;
respectively and 580,484; 177,675; and
9,722 shares outstanding;
respectively)......................... $10.75 $10.26 $10.72
------------- ------------- -------------
Class B shares (based on net assets of
$996,745; $1,108,540; and $230,591;
respectively and 92,840; 108,235; and
21,570 shares outstanding;
respectively)......................... $10.74 $10.24 $10.69
------------- ------------- -------------
Class C shares (based on net assets of
$222,651; $210,418; and $52,495;
respectively and 20,737; 20,504; and
4,907 shares outstanding;
respectively)......................... $10.74 $10.26 $10.70
------------- ------------- -------------
Class E shares (based on net assets of
$65,236,879; $49,262,468; and
$10,444,360; respectively and
6,065,625; 4,791,390; and 974,172
shares outstanding; respectively)..... $10.76 $10.28 $10.72
------------- ------------- -------------
Class H shares (based on net assets of
$4,014,962; $1,061,457; and $217,174;
respectively and 373,466; 103,431; and
20,307 shares outstanding;
respectively)......................... $10.75 $10.26 $10.69
------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Operations
For the Year Ended September 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NATIONAL MINNESOTA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -----------
<S> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income..................... $ 4,647,598 $ 3,420,118 $ 755,482
------------ ------------ -----------
Expenses:
Investment advisory and management
fees (Note 2)...................... 581,556 395,618 93,048
Distribution fees (Class A) (Note
2)................................. 9,570 4,068 176
Distribution fees (Class B) (Note
2)................................. 7,782 6,588 2,049
Distribution fees (Class C) (Note
2)................................. 1,905 2,194 518
Distribution fees (Class H) (Note
2)................................. 29,505 9,495 1,008
Registration fees (Note 1).......... 46,453 49,101 35,055
Legal and auditing fees............. 27,206 21,853 12,887
Shareholders' notices and reports... 17,083 9,522 2,739
Custodian fees...................... 9,997 11,131 3,915
Directors' fees and expenses........ 9,000 6,548 1,911
Other............................... 16,265 12,309 3,603
------------ ------------ -----------
Total expenses........................ 756,322 528,427 156,909
Less reimbursable expenses.......... -- -- (24,580)
------------ ------------ -----------
Net Expenses.......................... 756,322 528,427 132,329
------------ ------------ -----------
NET INVESTMENT INCOME................... 3,891,276 2,891,691 623,153
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 1):
Net realized gain (loss) from security
transactions........................ 685,982 (66,018) 13,314
Net change in unrealized depreciation
of investments...................... (471,072) (181,219) (164,569)
------------ ------------ -----------
NET GAIN (LOSS) ON INVESTMENTS.......... 214,910 (247,237) (151,255)
------------ ------------ -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... $ 4,106,186 $ 2,644,454 $ 471,898
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
14
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 3,891,276 $ 4,004,364
Net realized gain (loss) from security
transacations....................... 685,982 (592,450)
Net change in unrealized appreciation
(depreciation) of investments in
securities.......................... (471,072) 2,893,045
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... 4,106,186 6,304,959
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A............................. (182,138) (40,810)
Class B............................. (32,480) (8,802)
Class C............................. (8,022) (1,397)
Class E............................. (3,534,046) (4,004,117)
Class H............................. (122,710) (23,755)
From net realized gains on investments
Class A............................. -- (158)
Class B............................. -- (39)
Class C............................. -- --
Class E............................. -- (35,901)
Class H............................. -- (111)
-------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS..... (3,879,396) (4,115,090)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (449,965 and 174,678
shares)............................ 4,861,712 1,836,979
Class B (45,495 and 61,707
shares)............................ 489,032 652,193
Class C (14,245 and 10,282
shares)............................ 153,026 108,826
Class E (269,334 and 554,163
shares)............................ 2,914,650 5,801,785
Class H (260,768 and 162,867
shares)............................ 2,813,222 1,720,757
Proceeds from shares issued as a
result of reinvested dividends
Class A (11,432 and 2,193 shares)... 122,884 23,365
Class B (2,485 and 756 shares)...... 26,794 8,023
Class C (684 and 104 shares)........ 7,375 1,105
Class E (214,235 and 255,916
shares)............................ 2,315,910 2,677,589
Class H (7,642 and 1,187 shares).... 82,355 12,614
Less cost of repurchase of shares
Class A (49,683 and 8,101 shares)... (529,388) (86,435)
Class B (17,603 and 0 shares)....... (190,790) --
Class C (4,088 and 490 shares)...... (44,079) (5,246)
Class E (999,377 and 1,440,336
shares)............................ (10,775,813) (14,948,936)
Class H (58,950 and 48 shares)...... (632,516) (514)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS................. 1,614,374 (2,197,895)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.................................. 1,841,164 (8,026)
NET ASSETS:
Beginning of year..................... 74,868,624 74,876,650
-------------- --------------
End of year (includes excess of
distributions over net investment
income of $26,750 and $38,630,
respectively)....................... $ 76,709,788 $ 74,868,624
-------------- --------------
-------------- --------------
</TABLE>
15
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
MINNESOTA PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 2,891,691 $ 3,007,735
Net realized loss from security
transacations....................... (66,018) (208,947)
Net change in unrealized appreciation
(depreciation) of investments in
securities.......................... (181,219) 1,525,922
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... 2,644,454 4,324,710
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A............................. (82,763) (17,812)
Class B............................. (27,649) (3,618)
Class C............................. (9,242) (1,393)
Class E............................. (2,719,829) (3,012,388)
Class H............................. (39,824) (15,259)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS..... (2,879,307) (3,050,470)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (141,525 and 87,978
shares)............................ 1,468,872 892,384
Class B (91,006 and 17,169
shares)............................ 930,206 173,312
Class C (12,417 and 13,795
shares)............................ 129,148 140,806
Class E (183,971 and 236,250
shares)............................ 1,903,947 2,367,394
Class H (124,931 and 60,955
shares)............................ 1,278,687 614,862
Proceeds from shares issued as a
result of reinvested dividends
Class A (5,575 and 665 shares)...... 57,472 6,825
Class B (1,733 and 355 shares)...... 17,780 3,618
Class C (769 and 103 shares)........ 7,919 1,058
Class E (202,818 and 228,148
shares)............................ 2,099,431 2,306,428
Class H (2,618 and 1,016 shares).... 26,982 10,395
Less cost of repurchase of shares
Class A (55,198 and 2,870 shares)... (568,492) (28,715)
Class B (2,025 and 3 shares)........ (20,727) (25)
Class C (6,577 and 3 shares)........ (67,864) (25)
Class E (692,789 and 781,394
shares)............................ (7,141,366) (7,875,096)
Class H (86,089 and 0 shares)....... (869,654) --
------------- -------------
NET DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS............................ (747,659) (1,386,779)
------------- -------------
TOTAL DECREASE IN NET ASSETS............ (982,512) (112,539)
NET ASSETS:
Beginning of year..................... 54,447,828 54,560,367
------------- -------------
End of year (includes excess of
distributions over net investment
income of $8,830 and $21,214,
respectively)....................... $ 53,465,316 $ 54,447,828
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 623,153 $ 704,534
Net realized gain from security
transacations....................... 13,314 18,022
Net change in unrealized appreciation
(depreciation) of investments in
securities.......................... (164,569) 158,431
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... 471,898 880,987
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A............................. (3,575) (941)
Class B............................. (8,941) (7,056)
Class C............................. (2,249) (568)
Class E............................. (597,909) (694,432)
Class H............................. (4,254) (1,034)
From realized gains on investments
Class A............................. (70) (34)
Class B............................. (283) (287)
Class C............................. (73) --
Class E............................. (16,521) (21,816)
Class H............................. (113) --
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS..... (633,988) (726,168)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (4,915 and 4,869 shares).... 52,603 51,726
Class B (2,855 and 17,184 shares)... 30,780 178,351
Class C (0 and 4,640 shares)........ -- 50,125
Class E (18,463 and 26,693
shares)............................ 200,027 287,441
Class H (13,492 and 6,604 shares)... 144,851 72,245
Proceeds from shares issued as a
result of reinvested dividends
Class A (317 and 86 shares)......... 3,419 929
Class B (852 and 679 shares)........ 9,191 7,285
Class C (216 and 53 shares)......... 2,322 571
Class E (44,282 and 52,417
shares)............................ 479,372 561,495
Class H (131 and 82 shares)......... 1,406 881
Less cost of repurchase of shares
Class A (0 and 465 shares).......... -- (5,003)
Class B (0 and 0 shares)............ -- --
Class C (0 and 2 shares)............ -- (25)
Class E (181,528 and 178,182
shares)............................ (1,960,805) (1,909,876)
Class H (0 and 2 shares)............ -- (25)
------------- -------------
NET DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS............................ (1,036,834) (703,880)
------------- -------------
TOTAL DECREASE IN NET ASSETS............ (1,198,924) (549,061)
NET ASSETS:
Beginning of year..................... 12,247,757 12,796,818
------------- -------------
End of year (includes undistributed
(excess of distributions over) net
investment income of $4,606 and
($1,619), respectively)............. $ 11,048,833 $ 12,247,757
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Fortis Tax-Free Portfolios, Inc.
(the fund) is an open-end management investment company which currently is
comprised of three separate investment portfolios and series of capital
stock: the National and Minnesota Portfolios, both of which are diversified
portfolios, and the New York Portfolio, which is a non-diversified portfolio,
each of which has different investment objectives and its own investment
portfolio and net asset values. The investment objective of National
Portfolio is to seek as high a level of current income exempt from federal
income tax as is believed to be consistent with preservation of capital. The
investment objective of Minnesota Portfolio is to seek as high a level of
current income exempt from federal and Minnesota income tax as is believed to
be consistent with preservation of capital. The investment objective of New
York Portfolio is to seek as high a level of current income exempt from
federal, New York State, and New York City income tax as is believed to be
consistent with the preservation of capital.
The Minnesota and New York Portfolios concentrate their investments in a
single state and, therefore, may have more credit risk related to the
economic conditions of the respective state than a portfolio with broader
geographical diversification.
The fund offers Class A, Class B, Class C, Class E and Class H shares. The
fund began to issue class shares effective November 14, 1994. Class E shares
are only available to existing shareholders on November 14, 1994. Class A and
E shares are sold with a front-end sales charge. Class B and H shares are
sold without a front-end sales charge and may be subject to a contingent
deferred sales charge for six years, and such shares automatically convert to
Class A after eight years. Class C shares are sold without a front-end sales
charge and may be subject to a contingent deferred sales charge for one year.
All classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that the level of
distribution fees charged differs between classes. Income, expenses (other
than expenses incurred under each class's distribution agreement) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based on its relative net assets.
The significant accounting policies followed by the fund are summarized as
follows:
SECURITY VALUATION: Securities for which over-the-counter market quotations
are readily available are valued on the basis of the last current bid price.
An outside pricing service may be utilized to provide such valuations. The
pricing service may employ electronic data processing techniques and/or a
matrix system to determine valuations using methods which include
consideration of yields or prices of municipal bonds of comparable quality,
type of issue, coupon, maturity and rating; indications as to value from
dealers; and general market conditions. Securities for which quotations are
not readily available are valued at fair value as determined in good faith by
management under supervision of the Board of Directors. 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.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date. Interest income is recorded on the
accrual basis. Realized security gains and losses are determined using the
identified cost method. For financial reporting purposes, the portfolios
amortize long-term bond premium and original issue discount.
For the year ended September 30, 1996, the cost of purchases and proceeds
from sales of securities (other than short-term securities) aggregated
$41,454,824 and $38,809,617 for National Portfolio; $21,926,224 and
$22,891,399 for Minnesota Portfolio; and $1,305,200 and $2,384,140 for New
York Portfolio; respectively.
INCOME TAXES: The portfolios intend to qualify, under the Internal Revenue
Code, as regulated investment companies and if so qualified, will not have to
pay federal income taxes to the extent their taxable net income is
distributed. On a calendar year basis, the fund intends to distribute
substantially all of its taxable net investment income and realized gains, if
any, to avoid the payment of federal excise taxes.
Net realized gains may differ for financial statement and tax purposes
primarily because of wash sale transactions. The character of distributions
made during the year from net investment income or net realized gains may
also 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.
For federal income tax purposes the National and Minnesota Portfolios had the
following capital loss carryovers at September 30, 1996, which, if not offset
by subsequent capital gains, will expire in 2002 and 2003 for the National
Portfolio, and in 1997, 2002 through 2004 for the Minnesota Portfolio:
National Portfolio $445,336; Minnesota Portfolio $435,340. It is unlikely the
Board of Directors will authorize a distribution of any net realized gains
until the available capital loss carryovers have been offset or expired.
DEFERRED COSTS: Registration costs are deferred and charged to income over
the registration period.
INCOME AND CAPITAL GAINS DISTRIBUTION: The portfolios declare income
distributions daily to be paid on the last business day of each month. The
portfolios will 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 portfolio at net asset value on the
payable date or paid in cash five business days after month end without any
charge to the shareholder.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of increase and decrease in net assets from operations during the reporting
period. Actual results could differ from those estimates.
2. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc. (Advisers), is the
investment adviser for the fund. Investment advisory fees paid by the
Minnesota and New York Portfolios are computed at an annual rate of .8% of
the first $50 million in average daily net assets, .7% of the next $50
million in average daily net assets and .625% of average daily net assets in
excess of $100 million. The National Portfolio's investment advisory fees are
computed at an annual rate of .8% of the first $50 million in average daily
net assets, and .7% of average daily net assets in excess of $50 million. The
fee percentage for the Minnesota Portfolio is based upon the
18
<PAGE>
- --------------------------------------------------------------------------------
aggregate average net assets of the National and Minnesota Portfolios
combined. The fee is then allocated to the Minnesota Portfolio based upon
proportionate net assets. The fee percentage for National and New York
Portfolio is based upon the average net assets of each portfolio alone.
In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the fund's principal underwriter)
distribution fees equal to .25% (Class A) and 1.00% (Class B, C, and H) of
average daily net assets (of the respective classes) on an annual basis, to
be used to compensate those who sell shares of the fund and to pay certain
other expenses of selling fund shares. Fortis Investors, Inc., also received
sales charges (paid by purchasers or redeemers of the fund's shares)
aggregating:
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class H
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
National Portfolio...................... $112,140 $5,760 $ 296 $67,263 $7,725
Minnesota Portfolio..................... $ 35,543 $ 709 $ 1 $51,994 $4,151
New York Portfolio...................... $ 16 $ 0 $ 0 $ 6,091 $ 0
</TABLE>
Advisers has voluntarily undertaken to limit annual expenses for New York
Portfolio (exclusive of interest, taxes, brokerage commissions, 12b-1 fees
and non-recurring extraordinary charges and expenses) commencing November 1,
1994 to 1.09% of average daily net assets. During the year ended September
30, 1996, Advisers waived $24,580 of its advisory fee.
Legal fees and expenses aggregating $8,474, $6,346 and $2,274 for the
National, Minnesota, and New York Portfolios, respectively, were paid to a
law firm of which the secretary of the fund is a partner.
3. PROPOSED FUND REORGANIZATION: On March 21, 1996, the fund's Board of
Directors approved a proposed reorganization by which the New York Portfolio
will be combined into the Voyageur New York Tax Free Fund, which is managed
by Voyageur Fund Managers, Inc. This reorganization is subject to approval by
New York Portfolio shareholders at a special shareholder meeting to be held
November 12, 1996.
19
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. FINANCIAL HIGHLIGHTS Selected per share historical data for each of the
Portfolios were as follows:
<TABLE>
<CAPTION>
Class E
------------------------------------------------------------------------
Three-Month
Year Ended Period Ended
September 30, September 30, Year Ended June 30,
-------------------- ------------- --------------------------------
NATIONAL PORTFOLIO 1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.72 $ 10.38 $ 10.46 $ 11.13 $ 10.54 $ 9.99
-------- -------- ------------- -------- -------- --------
Operations:
Investment income - net............... .56 .58 .15 .60 .63 .66
Net realized and unrealized gain
(loss) on investments............... .04 .36 (.09) (.64) .59 .55
-------- -------- ------------- -------- -------- --------
Total from operations................... .60 .94 .06 (.04) 1.22 1.21
-------- -------- ------------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.56) (.59) (.14) (.59) (.62) (.66)
Excess distributions of net investment
income.............................. -- -- -- -- (.01) --
From net realized gains on
investments......................... -- (.01) -- (.04) -- --
-------- -------- ------------- -------- -------- --------
Total distributions to shareholders..... (.56) (.60) (.14) (.63) (.63) (.66)
-------- -------- ------------- -------- -------- --------
Net asset value, end of period.......... $ 10.76 $ 10.72 $ 10.38 $ 10.46 $ 11.13 $ 10.54
-------- -------- ------------- -------- -------- --------
Total return @.......................... 5.69% 9.30% .59% (.49%) 11.99% 12.46%
Net assets end of period (000s
omitted).............................. $ 65,237 $ 70,531 $ 74,877 $ 76,746 $ 70,754 $ 54,189
Ratio of expenses to average daily net
assets................................ .93% 1.03% .87%* .87% .94% .92%
Ratio of net investment income to
average daily net assets.............. 5.19% 5.54% 5.74%* 5.38% 5.80% 6.40%
Portfolio turnover rate................. 52% 35% 17% 25% 29% 38%
</TABLE>
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
<TABLE>
<CAPTION>
Class A Class B Class C Class H
------------------- ------------------- ------------------- -------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
NATIONAL PORTFOLIO 1996 1995+ 1996 1995+ 1996 1995+ 1996 1995+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.71 $ 9.79 $ 10.70 $ 9.79 $ 10.70 $ 9.79 $ 10.71 $ 9.79
-------- -------- -------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .53 .49 .45 .42 .45 .43 .45 .43
Net realized and unrealized gain
(loss) on investments............... .04 .94 .04 .93 .04 .92 .04 .93
-------- -------- -------- -------- -------- -------- -------- --------
Total from operations................... .57 1.43 .49 1.35 .49 1.35 .49 1.36
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.53) (.50) (.45) (.43) (.45) (.43) (.45) (.43)
From net realized gains on
investments......................... -- (.01) -- (.01) -- (.01) -- (.01)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions to shareholders..... (.53) (.51) (.45) (.44) (.45) (.44) (.45) (.44)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.75 $ 10.71 $ 10.74 $ 10.70 $ 10.74 $ 10.70 $ 10.75 $ 10.71
-------- -------- -------- -------- -------- -------- -------- --------
Total return @.......................... 5.46% 14.80% 4.65% 13.96% 4.65% 13.95% 4.64% 14.06%
Net assets end of period (000s
omitted).............................. $ 6,239 $ 1,807 $ 997 $ 668 $ 223 $ 106 $ 4,015 $ 1,757
Ratio of expenses to average daily net
assets................................ 1.18% 1.28%* 1.93% 2.03%* 1.93% 2.03%* 1.93% 2.03%*
Ratio of net investment income to
average daily net assets.............. 4.97% 5.03%* 4.20% 4.04%* 4.20% 4.14%* 4.20% 4.24%*
Portfolio turnover rate................. 52% 35% 52% 35% 52% 35% 52% 35%
</TABLE>
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS (continued):
Class E
------------------------------------------------------------------------
Three-Month
Year Ended Period Ended
September 30, September 30, Year Ended June 30,
-------------------- ------------- --------------------------------
MINNESOTA PORTFOLIO 1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.32 $ 10.08 $ 10.15 $ 10.65 $ 10.16 $ 9.78
-------- -------- ------------- -------- -------- --------
Operations:
Investment income - net............... .55 .57 .15 .59 .61 .64
Net realized and unrealized gain
(loss) on investments............... (.04) .24 (.08) (.51) .49 .38
-------- -------- ------------- -------- -------- --------
Total from operations................... .51 .81 .07 .08 1.10 1.02
-------- -------- ------------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.55) (.57) (.14) (.58) (.61) (.64)
-------- -------- ------------- -------- -------- --------
Net asset value, end of period.......... $ 10.28 $ 10.32 $ 10.08 $ 10.15 $ 10.65 $ 10.16
-------- -------- ------------- -------- -------- --------
Total return @.......................... 5.01% 8.35% .72% .64% 11.17% 10.71%
Net assets end of period (000s
omitted).............................. $ 49,262 $ 52,603 $ 54,560 $ 54,854 $ 52,271 $ 38,586
Ratio of expenses to average daily net
assets................................ .93% .98% .85%* .85% .89% .90%
Ratio of net investment income to
average daily net assets.............. 5.34% 5.60% 5.69%* 5.51% 5.82% 6.37%
Portfolio turnover rate................. 41% 27% 8% 11% 17% 10%
</TABLE>
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
<TABLE>
<CAPTION>
Class A Class B Class C Class H
------------------- ------------------- ------------------- -------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
MINNESOTA PORTFOLIO 1996 1995+ 1996 1995+ 1996 1995+ 1996 1995+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.30 $ 9.55 $ 10.27 $ 9.55 $ 10.30 $ 9.55 $ 10.30 $ 9.55
-------- -------- -------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .52 .48 .45 .41 .44 .42 .44 .41
Net realized and unrealized gain
(loss) on investments............... (.04) .76 (.04) .73 (.04) .75 (.04) .76
-------- -------- -------- -------- -------- -------- -------- --------
Total from operations................... .48 1.24 .41 1.14 .40 1.17 .40 1.17
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.52) (.49) (.44) (.42) (.44) (.42) (.44) (.42)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.26 $ 10.30 $ 10.24 $ 10.27 $ 10.26 $ 10.30 $ 10.26 $ 10.30
-------- -------- -------- -------- -------- -------- -------- --------
Total return @.......................... 4.78% 13.15% 4.04% 12.10% 4.00% 12.31% 3.93% 12.42%
Net assets end of period (000s
omitted).............................. $ 1,822 $ 884 $ 1,109 $ 180 $ 210 $ 143 $ 1,061 $ 638
Ratio of expenses to average daily net
assets................................ 1.18% 1.23%* 1.93% 1.98%* 1.93% 1.98%* 1.93% 1.98%*
Ratio of net investment income to
average daily net assets.............. 5.07% 5.10%* 4.34% 4.37%* 4.31% 4.28%* 4.33% 4.29%*
Portfolio turnover rate................. 41% 27% 41% 27% 41% 27% 41% 27%
</TABLE>
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
21
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS (continued):
Class E
------------------------------------------------------------------------
Three-Month
Year Ended Period Ended
September 30, September 30, Year Ended June 30,
-------------------- ------------- --------------------------------
NEW YORK PORTFOLIO 1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.87 $ 10.74 $ 10.81 $ 11.51 $ 11.03 $ 10.57
-------- -------- ------------- -------- -------- --------
Operations:
Investment income - net............... .58 .61 .15 .62 .65 .66
Net realized and unrealized gain
(loss) on investments............... (.13) .15 (.06) (.54) .65 .62
-------- -------- ------------- -------- -------- --------
Total from operations................... .45 .76 .09 .08 1.30 1.28
-------- -------- ------------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.58) (.61) (.16) (.62) (.65) (.66)
Excess distributions of net investment
income.............................. -- -- -- -- (.01) --
From net realized gains on
investments......................... (.02) (.02) -- (.16) (.16) (.16)
-------- -------- ------------- -------- -------- --------
Total distributions to shareholders..... (.60) (.63) (.16) (.78) (.82) (.82)
-------- -------- ------------- -------- -------- --------
Net asset value, end of period.......... $ 10.72 $ 10.87 $ 10.74 $ 10.81 $ 11.51 $ 11.03
-------- -------- ------------- -------- -------- --------
Total return @.......................... 4.16% 7.31% .79% .63% 12.19% 12.53%
Net assets end of period (000s
omitted).............................. $ 10,444 $ 11,882 $ 12,797 $ 12,851 $ 13,915 $ 14,943
Ratio of expenses to average daily net
assets(a)............................. 1.09% 1.09% 1.09%* .99% .99% 1.00%
Ratio of net investment income to
average daily net assets(a)........... 5.39% 5.69% 5.74%* 5.55% 5.74% 6.15%
Portfolio turnover rate................. 12% 10% 0% 4% 17% 19%
</TABLE>
(a) Advisers has voluntarily undertaken to limit annual expenses for New
York Portfolio (exclusive of interest, taxes, brokerage commission,
12b-1 fees and non-recurring extraordinary charges and expenses) to
1.09% of average net assets. From June 1, 1993 to June 30, 1994,
Advisers agreed to limit expenses to .99% of average net assets. Prior
to June 1, 1993, Advisers agreed to limit expenses to 1.00% of average
net assets. For each of the periods presented, had the waivers and
reimbursement of expenses not been in effect, the ratios of expenses
and net investment income to average daily net assets would have been
1.30% and 5.18% for class E, 1.55% and 4.93% for class A, 2.30% and
4.18% for class B, 2.30% and 4.18% for class C, and 2.30% and 4.18%
for class H, for the year ending September 30, 1996; 1.60% and 5.18%
for class E, 1.85% and 4.90% for class A, 2.60% and 4.17% for class B,
2.60% and 3.93% for class C, and 2.60% and 3.85% for class H. for the
year ending September 30, 1995; 1.09% and 5.45% for the year ended
June 30, 1994; 1.05% and 5.68% for the year ended June 30, 1993; and
1.26% and 5.89% for the year ended June 30, 1992.
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
++ For the period from April 26, 1995 (date of first investment) to
September 30, 1995.
+++ for the period from May 31, 1995 (date of first investment) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
<TABLE>
<CAPTION>
Class A Class B Class C Class H
------------------- ------------------- ------------------- -------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
NEW YORK PORTFOLIO 1996 1995+ 1996 1995+ 1996 1995++ 1996 1995+++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.87 $ 10.34 $ 10.84 $ 10.34 $ 10.85 $ 10.79 $ 10.83 $ 10.89
-------- -------- -------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .55 .50 .47 .43 .47 .21 .48 .16
Net realized and unrealized gain
(loss) on investments............... (.13) .57 (.13) .54 (.13) .06 (.13) (.05)
-------- -------- -------- -------- -------- -------- -------- --------
Total from operations................... .42 1.07 .34 .97 .34 .27 .35 .11
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.55) (.52) (.47) (.45) (.47) (.21) (.47) (.17)
From net realized gains on
investments......................... (.02) (.02) (.02) (.02) (.02) -- (.02) --
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions to shareholders..... (.57) (.54) (.49) (.47) (.49) (.21) (.49) (.17)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.72 $ 10.87 $ 10.69 $ 10.84 $ 10.70 $ 10.85 $ 10.69 $ 10.83
-------- -------- -------- -------- -------- -------- -------- --------
Total return @.......................... 3.94% 10.51% 3.14% 9.46% 3.14% 2.54% 3.24% 1.00%
Net assets end of period (000s
omitted).............................. $ 104 $ 49 $ 231 $ 194 $ 52 $ 51 $ 217 $ 72
Ratio of expenses to average daily net
assets(a)............................. 1.34% 1.34%* 2.09% 2.09%* 2.09% 2.09%* 2.09% 2.09%*
Ratio of net investment income to
average daily net assets(a)........... 5.14% 5.41%* 4.39% 4.68%* 4.39% 4.44%* 4.39% 4.36%*
Portfolio turnover rate................. 12% 10% 12% 10% 12% 10% 12% 10%
</TABLE>
(a) Advisers has voluntarily undertaken to limit annual expenses for New
York Portfolio (exclusive of interest, taxes, brokerage commission,
12b-1 fees and non-recurring extraordinary charges and expenses) to
1.09% of average net assets. From June 1, 1993 to June 30, 1994,
Advisers agreed to limit expenses to .99% of average net assets. Prior
to June 1, 1993, Advisers agreed to limit expenses to 1.00% of average
net assets. For each of the periods presented, had the waivers and
reimbursement of expenses not been in effect, the ratios of expenses
and net investment income to average daily net assets would have been
1.30% and 5.18% for class E, 1.55% and 4.93% for class A, 2.30% and
4.18% for class B, 2.30% and 4.18% for class C, and 2.30% and 4.18%
for class H, for the year ending September 30, 1996; 1.60% and 5.18%
for class E, 1.85% and 4.90% for class A, 2.60% and 4.17% for class B,
2.60% and 3.93% for class C, and 2.60% and 3.85% for class H. for the
year ending September 30, 1995; 1.09% and 5.45% for the year ended
June 30, 1994; 1.05% and 5.68% for the year ended June 30, 1993; and
1.26% and 5.89% for the year ended June 30, 1992.
* Annualized.
+ For the period from November 14, 1994 (commencement of operations) to
September 30, 1995.
++ For the period from April 26, 1995 (date of first investment) to
September 30, 1995.
+++ for the period from May 31, 1995 (date of first investment) to
September 30, 1995.
@ These are the portfolio's total returns during the period, including
reinvestment of all dividend and capital gains distributions, without
adjustment for sales charge.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Fortis Tax-Free Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of National Portfolio, Minnesota
Portfolio and New York Portfolio (portfolios within Fortis Tax-Free Portfolios,
Inc.) as of September 30, 1996, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the years
in the two-year period ended September 30, 1996, and the financial highlights
presented in footnote 4 to the financial statements. These financial statements
and the financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
National Portfolio, Minnesota Portfolio and New York Portfolio at September 30,
1996 and the results of their operations for the year then ended, the changes in
their net assets for each of the years in the two-year period ended September
30, 1996, and the financial highlights presented in footnote 4 to the financial
statements, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 8, 1996
23
<PAGE>
FEDERAL INCOME TAX INFORMATION
Exempt interest dividends are exempt from federal income taxes and should not be
included in shareholder's gross income, but need to be reported on the income
tax return for informational purposes. Each shareholder should consult a tax
adviser about reporting this income for state and local tax purposes. In
January, 1997, the fund will provide the shareholder with information regarding
the percentage of distributions exempt from federal income taxes and a breakdown
setting forth states from which income was earned.
During the year ended September 30, 1996, 100% of the National, Minnesota and
New York Portfolios' distributions were derived from interest on municipal
securities and qualify as exempt interest dividends for federal tax purposes.
Detailed below are the per share distributions made for the year ended September
30, 1996.
NATIONAL PORTFOLIO
Record Date
<TABLE>
<CAPTION>
INCOME DISTRIBUTIONS PER SHARE Class A Class B Class C Class E Class H
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------
October 31, 1995............................. $0.046 $0.039 $0.039 $0.048 $0.039
November 30, 1995............................ 0.046 0.039 0.039 0.048 0.039
December 29, 1995............................ 0.045 0.038 0.038 0.047 0.038
January 31, 1996............................. 0.045 0.038 0.038 0.047 0.038
February 29, 1996............................ 0.045 0.038 0.038 0.047 0.038
March 29, 1996............................... 0.044 0.037 0.037 0.046 0.037
April 30, 1996............................... 0.044 0.037 0.037 0.046 0.037
May 31, 1996................................. 0.044 0.037 0.037 0.046 0.037
June 28, 1996................................ 0.044 0.037 0.037 0.046 0.037
July 31, 1996................................ 0.044 0.037 0.037 0.046 0.037
August 30, 1996.............................. 0.044 0.037 0.037 0.046 0.037
September 30, 1996........................... 0.044 0.037 0.037 0.046 0.037
------- ------- ------- ------- -------
Total Income Distributions................... $0.535 $0.451 $0.451 $0.559 $0.451
------- ------- ------- ------- -------
</TABLE>
MINNESOTA PORTFOLIO
Record Date
<TABLE>
<CAPTION>
INCOME DISTRIBUTIONS PER SHARE Class A Class B Class C Class E Class H
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------
October 31,1995.............................. $0.045 $0.038 $0.038 $0.047 $0.038
November 30, 1995............................ 0.045 0.038 0.038 0.047 0.038
December 29, 1995............................ 0.044 0.037 0.037 0.046 0.037
January 31, 1996............................. 0.044 0.037 0.037 0.046 0.037
February 29, 1996............................ 0.044 0.037 0.037 0.046 0.037
March 29, 1996............................... 0.043 0.036 0.036 0.045 0.036
April 30, 1996............................... 0.043 0.036 0.036 0.045 0.036
May 31, 1996................................. 0.043 0.036 0.036 0.045 0.036
June 28, 1996................................ 0.043 0.036 0.036 0.045 0.036
July 31, 1996................................ 0.043 0.036 0.036 0.045 0.036
August 30, 1996.............................. 0.043 0.036 0.036 0.045 0.036
September 30, 1996........................... 0.043 0.036 0.036 0.045 0.036
------- ------- ------- ------- -------
Total Income Distributions................... $0.523 $0.439 $0.439 $0.547 $0.439
------- ------- ------- ------- -------
</TABLE>
NEW YORK PORTFOLIO
Record Date
<TABLE>
<CAPTION>
INCOME DISTRIBUTIONS PER SHARE Class A Class B Class C Class E Class H
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------
October 31, 1995............................. $0.048 $0.041 $0.041 $0.050 $0.041
November 30, 1995............................ 0.048 0.041 0.041 0.050 0.041
December 29, 1995............................ 0.047 0.040 0.040 0.049 0.040
January 31, 1996............................. 0.047 0.040 0.040 0.049 0.040
February 29, 1996............................ 0.047 0.040 0.040 0.049 0.040
March 29, 1996............................... 0.047 0.040 0.040 0.049 0.040
April 30, 1996............................... 0.045 0.038 0.038 0.047 0.038
May 31, 1996................................. 0.045 0.038 0.038 0.047 0.038
June 28, 1996................................ 0.045 0.038 0.038 0.047 0.038
July 31, 1996................................ 0.045 0.038 0.038 0.047 0.038
August 30, 1996.............................. 0.045 0.038 0.038 0.047 0.038
September 30, 1996........................... 0.045 0.038 0.038 0.047 0.038
------- ------- ------- ------- -------
Total Income Distributions................... $0.554 $0.470 $0.470 $0.578 $0.470
------- ------- ------- ------- -------
LONG-TERM CAPITAL GAIN PER SHARE
December 29, 1995............................ $0.0155 $0.0155 $0.0155 $0.0155 $0.0155
------- ------- ------- ------- -------
</TABLE>
24
<PAGE>
DIRECTORS AND OFFICERS
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 INTERIM PRESIDENT, MACALESTER COLLEGE
Benjamin S. Jaffray CHAIRMAN, SHEFFIELD GROUP, LTD.
Jean L. King PRESIDENT, COMMUNI-KING
Dean C. Kopperud CHIEF EXECUTIVE OFFICER AND DIRECTOR,
FORTIS ADVISERS, INC. PRESIDENT AND
DIRECTOR, FORTIS INVESTORS, INC.
SENIOR VICE PRESIDENT OF FORTIS
BENEFITS INSURANCE COMPANY AND TIME
INSURANCE COMPANY
Edward M. Mahoney PRIOR TO JANUARY, 1995, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER, FORTIS
ADVISERS, INC., FORTIS INVESTORS,
INC.
Robb L. Prince FINANCIAL AND EMPLOYEE BENEFIT
CONSULTANT PRIOR TO JULY, 1995, VICE
PRESIDENT AND TREASURER,
JOSTENS, INC.
Leonard J. Santow PRINCIPAL, GRIGGS & SANTOW, INC.
Noel Shadko MARKETING CONSULTANT PRIOR TO MAY,
1996, SENIOR VICE PRESIDENT OF
MARKETING & STRATEGIC PLANNING,
ROLLERBLADE, INC.
Joseph M. Wikler INVESTMENT CONSULTANT AND PRIVATE
INVESTOR PRIOR TO JANUARY, 1994,
DIRECTOR OF RESEARCH, CHIEF
INVESTMENT OFFICER, PRINCIPAL, AND
DIRECTOR, THE ROTHSCHILD CO.
OFFICERS
Dean C. Kopperud
PRESIDENT AND DIRECTOR
Robert W. Beltz, Jr.
VICE PRESIDENT
James S. Byrd
VICE PRESIDENT
Charles J. Dudley
VICE PRESIDENT
Thomas D. Gualdoni
VICE PRESIDENT
Maroun M. Hayek
VICE PRESIDENT
Howard G. Hudson
VICE PRESIDENT
Robert C. Lindberg
VICE PRESIDENT
Charles L. Mehlhouse
VICE PRESIDENT
Kevin J. Michels
VICE PRESIDENT
Jon H. Nicholson
VICE PRESIDENT
Fred Obser
VICE PRESIDENT
Dennis M. Ott
VICE PRESIDENT
Christopher J. Pagano
VICE PRESIDENT
David A. Peterson
VICE PRESIDENT
Nicholas L. M. de Peyster
VICE PRESIDENT
Stephen M. Poling
VICE PRESIDENT
Stephen M. Rickert
VICE PRESIDENT
Richard P. Roche
VICE PRESIDENT
Rhonda J. Schwartz
VICE PRESIDENT
Keith R. Thomson
VICE PRESIDENT
Christopher J. Woods
VICE PRESIDENT
Gary N. Yalen
VICE PRESIDENT
Michael J. Radmer
SECRETARY
Tamara L. Fagely
TREASURER
INVESTMENT MANAGER, REGISTRAR Fortis Advisers, Inc.
AND TRANSFER AGENT 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 LLP
MINNEAPOLIS, MINNESOTA
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
MINNEAPOLIS, MINNESOTA
The use of this material is authorized only when preceded or accompanied by a
prospectus.
25
<PAGE>
Fortis Financial Group
Fortis Financial Group (FFG) provides solutions for customers'
financial needs using mutual funds, annuities and life insurance.
Besides our own array of quality products, we create and deliver
customized products for other financial service providers. Like the
Fortis name, which comes from the Latin for strong and steadfast, we
concentrate on the customer relationships we build, the services we
provide, the solutions we offer and the performance we seek.
FFG includes Fortis Advisers, Inc., an established money manager,
as well as Fortis Investors, Inc., a broker dealer with nationwide
sales and marketing influence. The guarantees in our insurance
products are underwritten by Fortis Benefits Insurance Company and
Time Insurance Company.
Fortis Financial Group is part of Fortis, Inc., a financial
services company that provides specialty insurance and investment
products to individuals, businesses, associations and other financial
services organizations in the United States. Fortis, Inc., is part of
Fortis, a worldwide group of companies active in the fields of
insurance, banking and investment. Fortis is jointly owned by Fortis
AMEV of The Netherlands and Fortis AG of Belgium.
[Logo] Bulk Rate
Fortis Financial Group US Postage
P.O. Box 64284 PAID
St. Paul, MN 55164 Permit No. 3794
Minneapolis, MN
FORTIS TAX-FREE PORTFOLIOS, INC.
PRINTED ON RECYCLED PAPER WITH
-Recycled 40% PRECONSUMER WASTE AND
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95380 (Ed. 11/96)
