<PAGE>
FORTIS
[PHOTOGRAPH]
ENJOY THE LIBERTY
OF TAX-FREE INVESTING.......
FORTIS
TAX-FREE PORTFOLIOS
SEMI-ANNUAL REPORT
March 31, 1997
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC. SEMI-ANNUAL REPORT
CONTENTS
LETTER TO SHAREHOLDERS 2
SCHEDULE OF INVESTMENTS
NATIONAL PORTFOLIO 5
MINNESOTA PORTFOLIO 8
STATEMENTS OF ASSETS AND LIABILITIES 11
STATEMENTS OF OPERATIONS 12
STATEMENTS OF CHANGES IN NET ASSETS 13
NOTES TO FINANCIAL STATEMENTS 15
BOARD OF DIRECTORS AND OFFICERS 19
OTHER PRODUCTS AND SERVICES 20
- - 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 six months, refer
to the Highlights box below. The letter from the portfolio manager and president
provides a more detailed analysis of the fund and financial markets.
The charts alongside the letter are useful because they provide more information
about your investments. The top holdings 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
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1997
<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 period........................ $10.75 $10.74 $10.74 $10.76 $10.75
End of period.............................. $10.65 $10.64 $10.64 $10.66 $10.65
DISTRIBUTIONS PER SHARE
From net investment income................. $ 0.26 $ 0.22 $ 0.22 $ 0.28 $ 0.22
FORTIS TAX-FREE MINNESOTA
NET ASSET VALUE PER SHARE:
Beginning of period...................... $10.26 $10.24 $10.26 $10.28 $10.26
End of period............................ $10.14 $10.12 $10.14 $10.16 $10.15
DISTRIBUTIONS PER SHARE
From net investment income............... $ 0.25 $ 0.21 $ 0.21 $ 0.27 $ 0.21
</TABLE>
1
<PAGE>
Photo
DEAR SHAREHOLDER,
We are pleased to present the Fortis Tax-Free Portfolios, Inc., semi-annual
report for the period ending March 31, 1997.
ECONOMIC REVIEW AND INVESTMENT STRATEGIES
During the past six months, the bond market has digested a wide variety of
economic information. Economic growth was strong during the fourth quarter of
1996. Real Gross Domestic Product (GDP) rose at a 3.8% annual rate and municipal
yields stayed within a narrow trading range. Yields, as represented by indices
published by The Bond Buyer, declined as inflation continued to behave well. The
Bond Buyer Revenue Bond Index (an index comprised of long maturity, good quality
municipal revenue bonds) reached a low yield of 5.80% in late November.
A backup in rates, caused by year-end technical factors and limited market
activity, was reflected in a rise in the Revenue Index to 6.02% on January 30,
1997. After retracing most of that backup in yields in February, comments by
Federal Reserve Chairman Alan Greenspan led the market to expect an increase in
short-term interest rates. On March 25, 1997, the Federal Reserve raised its Fed
Funds target .25% to 5.50%. As a result, municipal yields broke out of their
trading range, and the Revenue Bond Index rose to 6.09% at the end of March.
During the rest of 1997, we expect real Gross Domestic Product growth of roughly
3% with inflation continuing to stay at about 3%. The Federal Reserve, having
raised short rates in late March, could raise rates once or twice before the end
of the year. While this action would likely drive short-term rates higher, in
the longer term, the effects ought to be beneficial for bonds.
During the fourth quarter of 1996, in order to benefit from expected price
appreciation, the National and Minnesota Portfolio durations* were lengthened to
levels slightly longer than their benchmarks (internally created index of
competitive portfolios). The National Fund, in particular, accomplished this by
acquiring noncallable bonds with coupons higher than current market levels.
While these securities enjoyed good performance during the quarter, they were
slightly outperformed by callable securities with coupons which were 50 basis
points lower than market levels.
As rates rose late in the first quarter, the funds have moved into bond
structures which should help their total return performance (bonds with good
call and Original Issue Discount [OID] characteristics) and modestly increase
yields. At the end of the reporting period, the duration of the funds was 8.56
years for Tax-Free National and 7.44 years for Tax-Free Minnesota, each
representing about 102% of their benchmarks. The six-month total return for the
Tax-Free National Fund was 1.62% (Class E), while the six-month total return for
the Tax-Free Minnesota Fund was 1.42% (Class E).
Our strategy is to keep the duration of the portfolios at levels slightly above
their benchmarks, with the intention of lengthening their durations further if
rates rise. With quality spreads at historically narrow levels, there is little
incentive to reduce the funds' current AA average quality. We will continue to
emphasize call protection and OID as we seek to enhance portfolio performance.
IN CLOSING
We remain committed to our disciplined investment strategy, and we consider it a
privilege to help you invest for your future. Please call us or talk with your
investment professional if you have any questions or comments.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Dean C. Kopperud Howard G. Hudson
President Vice President
</TABLE>
* 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.
2
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 3/31/97
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligation 22.1%
Utilities - Water and Sewer 17.6%
Health Care/Services 14.0%
Transportation 12.5%
Utilities-Electric 8.1%
Refunded with U.S. Gov't 7.9%
Higher Education 4.4%
Housing 3.8%
Cash Equivalents/Receivables 2.6%
Public Facilities 2.1%
Miscellaneous 1.7%
Pollution Control 1.2%
Utilities-Gas 1.1%
Industrial 0.9%
</TABLE>
NATIONAL PORTFOLIO
VALUE OF $10,000 INVESTED JUNE 2, 1986
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MUNI BOND INDEX TAX-FREE NATIONAL
<S> <C> <C> <C> <C>
6/2/86 10,000 9,685
87 11,272 10,403
88 11,556 10,434
89 12,388 11,118
90 13,695 11,988
91 14,959 12,967
92 16,453 14,151
93 18,513 15,763
94 18,943 16,193
95 20,357 17,246
96 22,063 18,329
97 23,704 20,181
National Portfolio Class E
Average Annual Total Return
Since
1 Year 5 Year 10 Year June 2, 1986@
Class E* -0.14% +5.60% +6.31% +6.70%
Class E** +4.56% +6.57% +6.80% +7.15%
</TABLE>
Annual Period ended March 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
@ 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 10 HOLDINGS AS OF 03/31/97
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. Massachusetts State Water Resources Auth (5.25%)
2015 3.9%
2. New York Triborough Bridge & Tunnel Auth (5.50%)
2017 3.4%
3. Metropolitan Transportation Auth, NY (5.75%) 2013 3.3%
4. Grapevine-Colleyville, TX Independent School
District (5.75%) 2012 3.2%
5. Fulton County Georgia Water & Sewer (6.375%) 2014 2.7%
6. Detroit, MI Water System (6.50%) 2015 2.6%
7. Southern California Public Power (6.36%) 2013 2.2%
8. Connecticut State (6.125%) 2012 2.2%
9. Madison, TN Suburban Utility District (5.00%) 2019 2.1%
10. Texas Public Finance Auth (5.00%) 2014 2.1%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ------------------------------------------------------------------
<S> <C> <C>
Class A shares# +4.34% +9.06%
Class A shares## -.35% +6.97%
Class B shares# +3.53% +8.19%
Class B shares## -.07% +5.49%
Class C shares# +3.44% +8.19%
Class C shares## +2.44% +8.19%
Class H shares# +3.53% +8.23%
Class H shares## -.07% +5.53%
</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 (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 A has a maximum sales charge of 4.50%, Class B and H
have a CDSC of 4.00% if redeemed within two years of purchase, or 3.00% if
redeemed in year three or four (with a waiver of 10% of the amount purchased)
and Class C has a CDSC of 1.00% if redeemed within one year of purchase.
# Without Sales Charge.
## With Sales Charge. Assumes redemption on March 31, 1997.
+ Since November 14, 1994 -- Date shares were first offered to the public
3
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 3/31/97
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligation 28.9%
Housing 18.1%
Utilities-Electric 12.5%
Health Care / Services 11.1%
Refunded with U.S. Gov't 7.8%
Pollution Control 7.1%
Miscellaneous 5.0%
Higher Education 4.1%
Public Facilities 2.6%
Cash Equivalents/Receivables 1.7%
Utility-Water & Sewer 1.1%
</TABLE>
MINNESOTA PORTFOLIO
VALUE OF $10,000 INVESTED JUNE 2, 1986
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROTHERS TAX-FREE
MUNI BOND INDEX MINNESOTA CLASS E
<S> <C> <C> <C> <C>
6/2/86 10,000 9,627
87 11,272 10,457
88 11,556 10,569
89 12,388 11,411
90 13,695 12,318
91 14,959 13,298
92 16,453 14,680
93 18,513 16,544
94 18,943 16,972
95 20,357 18,057
96 22,063 19,300
97 23,704 19,086
Minnesota Portfolio Class E
Average Annual Total Return
Since
1 Year 5 Year 10 Year June 2, 1986@
Class E* -0.56% +5.19% +5.77% +6.15%
Class E** +4.12% +6.17% +6.26% +6.61%
</TABLE>
Annual Period ended March 31
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
@ 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 10 HOLDINGS AS OF 3/31/97
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. St. Cloud , MN (5.25%) 2018 4.5%
2. Minnesota General Obligation (5.25%) 2015 4.2%
3. Minneapolis & St. Paul, MN (5.70%) 2016 4.0%
4. Cambridge, MN Independent School District (5.70%)
2016 3.6%
5. Brainerd, MN (6.65%) 2017 3.2%
6. Rochester, MN Health Care Facility (5.90%) 2010 3.2%
7. Southern MN Municipal Power Agency (5.75%) 2018 2.9%
8. St. Louis Park, MN Hospital Facility (7.25%) 2015 2.8%
9. Rochester, MN Independent School District (5.25%)
2014 2.5%
10. Minnetonka, MN Independent School District (5.70%)
2013 2.5%
</TABLE>
CLASS A, B, C AND H TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ------------------------------------------------------------------
<S> <C> <C>
Class A shares# +3.99% +8.05%
Class A shares## -.69% +5.98%
Class B shares# +3.15% +7.17%
Class B shares## -.45% +4.47%
Class C shares# +3.15% +7.24%
Class C shares## +2.15% +7.24%
Class H shares# +3.15% +7.25%
Class H shares## -.45% +4.55%
</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 (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 A has a maximum sales charge of 4.50%, Class B and H
have a CDSC of 4.00% if redeemed within two years of purchase or 3.00% if
redeemed in year three or four (with a waiver of 10% of the amount purchased)
and Class C has a CDSC of 1.00% if redeemed within one year of purchase.
# Without Sales Charge.
## With Sales Charge. Assumes redemption on March 31, 1997
+ Since November 14, 1994 -- Date shares were first offered to the public
4
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
NATIONAL PORTFOLIO
Schedule of Investments
March 31, 1997 (Unaudited)
MUNICIPAL BONDS-97.36%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
CALIFORNIA-3.72%
$4,000,000 Southern California Public Power, 6.36% Zero
Coupon Bond 7-1-2013 (d)................... A+ $ 1,446,111 $ 1,607,320
2,750,000 Sulphur Springs (City of), CA, 7.00% Zero
Coupon General Obligation Ser A MBIA
Insured 9-1-2012 (d)....................... AAA 952,058 1,151,012
------------ ------------
2,398,169 2,758,332
------------ ------------
CONNECTICUT-2.15%
1,500,000 Connecticut State, 6.125% Special Tax
Obligation Rev Transportation
Infrastructure Ser B 9-1-2012.............. AA- 1,578,930 1,596,525
------------ ------------
DISTRICT OF COLUMBIA-3.28%
1,250,000 District of Columbia, 7.50% General
Obligation Ser 1990B FSA Insured 6-1-2010
(Refunded 6-1-2000 @ 102).................. AAA 1,235,937 1,373,725
1,000,000 Georgetown University, 8.25% District of
Columbia Bond 4-1-2018 (Crossover Refunded
10-1-2001 @ 103)........................... A+ 1,033,726 1,055,810
------------ ------------
2,269,663 2,429,535
------------ ------------
FLORIDA-1.57%
500,000 Florida (State of), 7.50% Mid-Bay Bridge Auth
Ser 1991A 10-1-2017 (Crossover Refunded
10-1-2001 @ 103)........................... NR 474,800 534,360
600,000 Tampa (City of), FL, 8.25% Cap Improvement
Program Rev Bond Ser A 10-1-2018........... AA 598,933 631,218
------------ ------------
1,073,733 1,165,578
------------ ------------
GEORGIA-6.05%
1,375,000 Brunswick, GA, Water & Sewer, 6.10% Rev Ref &
Improvement Bond MBIA Insured 10-1-2019.... AAA 1,467,934 1,444,245
1,800,000 Fulton County, GA, Water & Sewer, 6.375% Ref
Bond FGIC Insured 1-1-2014................. AAA 1,785,483 1,966,608
1,000,000 Municipal Electric Auth of Georgia, 6.50% 5th
Crossover Ser Proj 1 1-1-2017.............. A 992,962 1,072,970
------------ ------------
4,246,379 4,483,823
------------ ------------
ILLINOIS-4.75%
500,000 Channahon Park, IL District, 7.50% General
Obligation 1-1-2011........................ NR 499,375 552,305
750,000 Chicago Gas Supply, 7.50% Rev for Peoples Gas
Ser B 3-1-2015............................. AA- 759,205 808,252
1,000,000 Illinois Dev Fin Auth, 7.375% Power Co Proj
Ser 1991A 7-1-2021......................... BBB 992,740 1,104,210
1,000,000 Illinois Housing Dev Auth, 7.55% Multi-family
Housing Ser 1990A 7-1-2014................. A+ 987,575 1,054,240
------------ ------------
3,238,895 3,519,007
------------ ------------
INDIANA-3.56%
1,200,000 Indiana Bond Bank, 8.50% Special Loan Program
Ser B 2-1-2018............................. A 1,212,361 1,263,468
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* 1,247,337 1,375,175
------------ ------------
2,459,698 2,638,643
------------ ------------
KANSAS-1.33%
1,000,000 Kansas Development Finance Auth, 5.375%
Health Fac Rev Bond - Hays Med Ctr, Inc.
Ser B MBIA Insured 11-15-2011.............. Aaa* 985,114 984,530
------------ ------------
KENTUCKY-2.83%
1,000,000 Christian City, KY, Hospital, 6.00% Rev Ref
Bond Jennie Stuart Medical Center
7-1-2013................................... A- 994,865 999,890
1,000,000 Louisville & Jefferson County, KY, 6.75%
Metro Sewer Dist Rev Bond Ser A AMBAC
Insured 5-15-2019.......................... AAA 996,345 1,096,690
------------ ------------
1,991,210 2,096,580
------------ ------------
MASSACHUSETTS-6.22%
500,000 Boston, MA, City Hospital, 7.625% Rev Bond
Ser A 2-1-2021 (Refunded 8-15-2000 @
102)....................................... Aaa* 496,483 554,625
1,100,000 Massachusetts Health & Educ Fac Auth, 6.25%
Harvard University Ser N 4-1-2020.......... AAA 1,219,190 1,188,847
3,000,000 Massachusetts State Water Resources Auth,
5.25% Ser C Rev Bond AMBAC-TCRS
12-1-2015.................................. AAA 2,982,086 2,862,420
------------ ------------
4,697,759 4,605,892
------------ ------------
MICHIGAN-4.42%
1,750,000 Detroit, MI, Water System, 6.50% Rev Bond
7-1-2015................................... AAA 1,872,142 1,915,742
1,350,000 Lincoln Park, MI, 5.85% School District Ref
Bond FGIC Q-SBLF 5-1-2015.................. AAA 1,346,894 1,360,881
------------ ------------
3,219,036 3,276,623
------------ ------------
</TABLE>
5
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
NATIONAL PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 1997 (Unaudited)
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
MINNESOTA-7.42%
$1,140,000 Fergus Falls (City of), MN, 6.50% Health Care
Facility (Lake Regional Hospital) Ser A
9-1-2018................................... BBB+ $ 1,133,592 $ 1,152,415
2,000,000 Minneapolis (City of), MN, 5.75% General
Obligation Zero Coupon Bond Ser 1993A
12-1-2013 (d).............................. AAA 792,272 782,560
670,000 Minneapolis (City of), MN, 7.00% Health Care
Fac Rev (St. Olaf Residence) Ser 1993
10-1-2012.................................. NR 670,000 697,959
1,100,000 Minnetonka, MN, Independent School District
#276, 5.70% General Obligation 2-1-2011.... Aa1* 1,100,000 1,115,169
690,000 St. Anthony (City of), MN, 6.75% Housing Dev
Rev Ref Bond 7-1-2007...................... AA 690,000 749,057
1,000,000 University of MN (Regents of), 5.75% General
Obligation Ser 1996A 7-1-2018.............. AA 1,012,235 997,470
------------ ------------
5,398,099 5,494,630
------------ ------------
MISSOURI-1.81%
1,250,000 Missouri State Health & Educ, 7.70% Still
Regional Med Ctr 2-1-2013.................. BBB 1,293,348 1,341,662
------------ ------------
NEVADA-1.46%
1,000,000 Washoe County, NV, Hosp, 7.60% (Washoe Med
Ctr) Rev Bond Ser 1989A 6-1-2019........... A 971,310 1,080,740
------------ ------------
NEW JERSEY-2.93%
1,000,000 New Jersey State Highway Auth, 6.20% Garden
State Pkwy Gen Rev Bond Sr Parking Bond
1-1-2010................................... AA- 1,077,751 1,072,940
1,000,000 New Jersey Turnpike Rev Bond, 6.50% Ser C
MBIA-IBC Insured 1-1-2016.................. AAA 1,112,287 1,094,960
------------ ------------
2,190,038 2,167,900
------------ ------------
NEW YORK-13.71%
2,465,000 Metropolitan Transportation Authority, NY,
Commuter Facilities, 5.75% Ser O
7-1-2013................................... BBB 2,390,819 2,413,827
1,100,000 New York City, NY, 5.875% General Obligation
Ser A 8-1-2003............................. BBB+ 1,095,648 1,124,662
1,000,000 New York City, NY, 8.25% General Obligation
Ser B 6-1-2005............................. BBB+ 990,286 1,164,890
1,000,000 New York State Dorm Auth, 6.00% Rev Cons City
Univ System 2nd Gen 7-1-2020............... BBB 1,018,859 997,400
730,000 New York State Med Care, 7.50% Mental Health
Ser A 2-15-2021 (Refunded 2-15-2001 @
102)....................................... AAA 703,240 814,286
1,000,000 New York State, 7.75% UDC Correctional Fac
Ser 1 1-1-2014 (Refunded 1-1-2000 @ 102)... Aaa* 961,765 1,100,500
2,600,000 New York Triborough Bridge and Tunnel Auth,
5.50% General Purpose Ser Y 1-1-2017....... A+ 2,494,549 2,538,588
------------ ------------
9,655,166 10,154,153
------------ ------------
NORTH CAROLINA-1.59%
1,255,000 North Carolina Municipal Power Agency No. 1,
5.00% Catawba Elec Rev Bond 1-1-2020....... A- 1,174,027 1,178,181
------------ ------------
NORTH DAKOTA-1.59%
1,100,000 Ward County, ND, 7.50% Health Care Fac Ser
1991B 7-1-2011............................. A- 1,126,530 1,174,635
------------ ------------
OHIO-2.63%
750,000 Cleveland (City of), OH, Parking Facility,
8.10% Improvement Proj Rev Bond
9-15-2022.................................. NR 759,430 873,127
1,100,000 Cleveland, OH, 5.50% Water Works Rev Ref Bond
Ser G First Mtg MBIA Insured 1-1-2021...... AAA 1,091,253 1,072,852
------------ ------------
1,850,683 1,945,979
------------ ------------
PENNSYLVANIA-2.36%
750,000 Clarion County, PA, Hospital Auth, 8.50%
Clarion Hospital Proj Rev Bond 7-1-2021.... BBB- 733,998 821,948
890,000 Delaware County, PA, 8.10% IDA Rev Res Recov
Ser A LOC Security Pacific: Proj Guar By
Westinghouse 12-1-2013..................... AA- 930,293 925,271
------------ ------------
1,664,291 1,747,219
------------ ------------
PUERTO RICO-1.79%
1,250,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 1,341,380 1,327,550
------------ ------------
SOUTH CAROLINA-2.90%
1,100,000 Greenville, SC, 5.25% Hospital Fac Rev Ser B
5-1-2023................................... AA- 1,043,094 994,532
1,175,000 Greenville, SC, 5.75% Hospital Fac Rev Ser A
5-1-2014................................... AA- 1,164,922 1,151,171
------------ ------------
2,208,016 2,145,703
------------ ------------
TENNESSEE-3.61%
1,750,000 Madison, TN, Suburban Util Dist, 5.00% MBIA
Insured 2-1-2019........................... AAA 1,626,928 1,571,763
1,000,000 Metro Gov't of Nashville & Davidson County,
TN, 6.50% Water & Sewer Ref Bond
1-1-2010................................... AAA 1,090,745 1,104,220
------------ ------------
2,717,673 2,675,983
------------ ------------
TEXAS-7.26%
2,250,000 Grapevine-Colleyville, TX, 5.75% Independent
School District PSF Rev Ref Bond
8-15-2012.................................. AAA 2,284,353 2,307,690
2,500,000 Keller, TX, 5.85% Independent School District
PSF Rev Ref Zero Coupon Bond Ser A
8-15-2021 (d).............................. AAA 613,295 583,200
</TABLE>
6
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
$1,700,000 Texas (State of), 5.00% Pub Fin Auth Ser A
General Obilgation 10-1-2014............... AA $ 1,623,513 $ 1,564,000
1,000,000 Waller, TX, 5.25% Cons Independent School
District 2-15-2021......................... Aaa* 940,407 926,890
------------ ------------
5,461,568 5,381,780
------------ ------------
WASHINGTON-4.33%
1,000,000 Washington Public Power Supply Sys, 7.00%
Nuclear Proj 2 Ref Rev Bond Ser 1990B
7-1-2012................................... AA 958,365 1,088,520
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 1,106,860
1,000,000 Washington Suburban Sanitary Dist Md., 5.75%
Rev Ref Bond Gen Const 6-1-2017............ AA 1,036,351 1,015,480
------------ ------------
2,981,591 3,210,860
------------ ------------
WISCONSIN-2.09%
3,000,000 Wisconsin Center District, 5.88% Convention
Ctr Sr Lien Ser A Dedicated Tax Rev MBIA
Insured Double Exempt Zero Coupon Bond
12-15-2021 (d)............................. AAA 716,905 710,850
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* 750,000 840,983
------------ ------------
1,466,905 1,551,833
------------ ------------
TOTAL MUNICIPAL BONDS........................ $69,659,211 $72,133,876
------------ ------------
------------ ------------
</TABLE>
SHORT-TERM INVESTMENTS-1.28%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
--------- ------------
<C> <S> <C>
INVESTMENT COMPANY-1.28%
$944,726 Federated Tax-Free Obligation Fund, Current
Rate - 3.27%............................... $ 944,726
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$70,603,937) (A)........................... $73,078,602
------------
------------
</TABLE>
(a) At March 31, 1997 the cost of securities for federal income tax
purposes was $70,603,937 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 3,004,326
Unrealized depreciation..................................... (529,661)
- -------------------------------------------------------------------------
Net unrealized appreciation................................. $ 2,474,665
- -------------------------------------------------------------------------
</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
March 31, 1997 (Unaudited)
MUNICIPAL BONDS-98.28%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
GENERAL OBLIGATIONS-28.94%
$1,900,000 Cambridge (City of), MN, 5.25% Independent
School District #911 General Obligation Ser
A MBIA Insured 4-1-2018.................... AAA $ 1,864,413 $ 1,778,438
1,200,000 Centennial Independent School District #12,
5.625% Ser A 2-1-2016...................... Aa1* 1,186,852 1,184,136
1,265,000 Columbia Heights (City of), MN, 5.20%
Independent School District #13 General
Obligation State Enhancement Program
2-1-2012................................... Aa1* 1,258,440 1,221,155
1,000,000 Eden Prairie (City of), MN, Independent
School District #272, 5.125% General
Obligation State Enhancement Program
2-1-2013................................... Aa1* 988,369 946,660
1,215,000 Maple Grove (City of), MN, 5.20% General
Olbigation Improvement Ser A 2-1-2013...... NR 1,182,936 1,164,930
1,180,000 McIntosh (City of), MN, Independent School
District #2609, 5.25% General Obligation
FSA Insured State Enhancement Program Bank
Qualified 2-1-2017......................... AAA 1,155,584 1,113,295
2,200,000 Minnesota (State of), 5.25% General
Obligation State Enhancement Program
8-1-2015................................... AA+ 2,160,462 2,100,142
1,225,000 Minnetonka (City of), MN, Independent School
District #276, 5.70% General Obligation Ser
B 2-1-2013................................. Aa1* 1,212,380 1,231,970
750,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 804,828 796,530
800,000 Puerto Rico, 6.25% Public Building Auth Rev
GTD Gov't Facilities Ser A AMBAC Insured
7-1-2009................................... AAA 893,087 872,288
1,310,000 Rochester (City of), MN, Independent School
District #535, 5.25% General Obligation Ser
A 2-1-2014................................. AA 1,288,405 1,264,477
1,950,000 Rosemount (City of), MN, Independent School
District #196, 5.70% Zero Coupon General
Obligation Cap Apprec Ser A MBIA Insured
State Enhancement Program 4-1-2015 (d)..... AAA 709,020 689,481
------------ ------------
14,704,776 14,363,502
------------ ------------
HEALTH CARE/SERVICES-11.10%
785,000 Duluth (City of), MN, 9.00% Hosp Fac Rev Bond
(St. Luke's Hospital) Ser 1988 5-1-2018
(Refunded 5-1-1998 @ 102).................. AAA 799,205 841,528
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 1,019,382 1,117,440
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 1,976,636 1,979,040
1,500,000 Rochester (City of), MN, 5.90% Health Care
Fac Rev Bond Mayo Med Ctr Ser I
11-15-2010................................. AA+ 1,579,031 1,570,395
------------ ------------
5,374,254 5,508,403
------------ ------------
HIGHER EDUCATION-4.10%
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- 457,700 511,249
500,000 Northfield (City of), MN, 8.00% College
Facility Rev Bond for St. Olaf College
10-1-2018 (Refunded 10-1-1998 @ 100)....... NR 500,443 527,940
1,000,000 University of MN (Regents of), 5.75% General
Obligation Ser 1996A 7-1-2018.............. AA 1,012,235 997,470
------------ ------------
1,970,378 2,036,659
------------ ------------
HOUSING-18.10%
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 1,513,640 1,596,990
250,000 Dakota County, MN, 8.10% HRA Single Family
Rev GNMA Backed 3-1-2016................... AAA 256,138 256,852
300,000 Eden Prairie (City of), MN, 7.40% Multifamily
Housing Ser 1990 FHA Insured 8-1-2025...... AAA 299,956 313,338
860,000 Eden Prairie (City of), MN, 8.00% Multifamily
Housing Ser A FHA Insured 7-1-2026......... AAA 860,000 917,199
555,000 Edina (City of), MN, 7.50% Housing Dev Ref
Rev Edina Park Plaza Ser 1989A 12-1-2009... Aa* 554,625 583,105
500,000 Edina (City of), MN, 7.70% Housing Dev Ref
Rev Edina Park Plaza Ser A FHA Insured
12-1-2028.................................. Aa* 500,000 523,215
525,000 Mankato (City of), MN, 8.25% Nursing Home Rev
Bond Board of Soc Ministry Mankato Lutheran
Ser 1991A 10-1-2021........................ NR 520,000 603,587
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* 1,082,074 1,095,755
485,000 Minneapolis (City of), MN, 8.25% Health Care
Fac Rev Bond Jones-Harrison Residence Ser
1991 9-1-2011.............................. NR 479,122 512,897
350,000 Minneapolis (City of), MN, 8.25% Rev Bond
Trinity Housing Proj Ser 1991 2-1-2018..... NR 350,000 359,510
500,000 Minnesota Housing Finance Agency, 6.95%
Housing Dev Bond Ser 1992A 8-1-2017........ AA 500,000 523,690
200,000 Minnesota Housing Finance Agency, 7.70%
Single Family Mortgage Bond Ser C
7-1-2014................................... AA+ 201,076 210,570
440,000 Northfield (City of), MN, 7.00% Health Care
Facility Northfield Retirement Ctr
5-1-2015................................... NR 436,340 448,844
500,000 Red Wing (City of), MN, 6.50% Elderly Housing
Fac Ref Rev River Region Obligated Group
Ser 1993C 9-1-2022......................... BBB+ 497,205 507,070
</TABLE>
8
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
$ 500,000 Spring Park (City of), MN, 8.25% Health Care
Fac Rev Bond Twin Birch Health Care Ctr
8-1-2011................................... NR $ 500,000 $ 531,810
------------ ------------
8,550,176 8,984,432
------------ ------------
MISCELLANEOUS-5.03%
450,000 Dakota County, MN, 7.50% HRA Limited Annual
Appropriation Tax & Rev Supported Bond Ser
1991 1-1-2006.............................. BBB+ 450,000 470,142
400,000 Dawson (City of), MN, 7.30% IDR Ref Bond
Associated Milk Producers 9-1-2000......... NR 396,426 415,248
1,000,000 Minneapolis (City of), MN, 7.375% CDA Limited
Tax Supported Dev Rev Common Bond Fund Ser
1995-G3 12-1-2012.......................... A- 1,000,000 1,084,450
500,000 Minneapolis (City of), MN, 8.375% CDA Limited
Tax Supported Dev Rev Common Bond Fund Ser
1990-6A 6-1-2007........................... A- 497,500 528,280
------------ ------------
2,343,926 2,498,120
------------ ------------
POLLUTION CONTROL-7.07%
650,000 East Grand Forks (City of), MN, 7.75%
Pollution Control Rev (American Crystal
Sugar) Ser 1991A 4-1-2018.................. BBB+ 650,486 692,302
1,200,000 Minnesota Public Fac Auth, 5.40% Water
Pollution Control Bond Ser B 3-1-2015...... AAA 1,179,675 1,163,520
1,000,000 Minnesota Public Fac Auth, 6.65% Zero Coupon
Water Pollution Rev Bond Ser 1992A 3-1-2007
(d)........................................ AAA 522,797 569,190
1,000,000 Minnesota Public Fac Auth, 7.10% Water
Pollution Rev Bond Ser 1990A 3-1-2012...... AAA 978,768 1,086,860
------------ ------------
3,331,726 3,511,872
------------ ------------
PUBLIC FACILITIES-2.59%
400,000 Duluth (City of), MN, 6.75% Gross Rev
Recreation Fac Bond Spirit Mountain Ser
1992 2-1-2007.............................. NR 400,000 407,632
325,000 Moorhead (City of), MN, 7.75% Golf Course Rev
Bond Ser 1992A 12-1-2015................... NR 325,000 341,276
500,000 St. Paul (City of), MN, 6.45% HRA Parking Rev
Bond Ser 1992A 8-1-2007 (Refunded 8-1-2000
@ 102)..................................... A- 500,000 535,875
------------ ------------
1,225,000 1,284,783
------------ ------------
REFUNDED WITH U.S. GOVERNMENT SECURITIES-7.79%
400,000 Minneapolis (City of), MN, 8.00% HRA St. Paul
HealthOne Ser 1990B 8-15-2014 (Refunded
8-15-2000 @ 102)........................... AAA 411,621 448,065
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 1,180,318 1,159,389
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 1,262,084 1,396,571
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* 769,584 862,392
------------ ------------
3,623,607 3,866,417
------------ ------------
UTILITIES-ELECTRIC-12.49%
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 506,907 601,139
1,000,000 Southern MN Municipal Power Agency, 5.00%
Power Supply Sys Rev Bond Ser 1993A
1-1-2012................................... A+ 952,073 912,070
1,500,000 Southern MN Municipal Power Agency, 5.75%
Power Supply Sys Rev 1-1-2018.............. A+ 1,454,742 1,447,050
2,400,000 St. Cloud (City of), MN, 5.25% General
Obligation Hydroelectric Rev Ref MBIA
Insured 12-1-2018.......................... AAA 2,325,453 2,252,208
1,000,000 Western MN Municipal Power Agency, 5.50% Ref
Ser A AMBAC Insured 1-1-2013............... AAA 991,587 986,440
------------ ------------
6,230,762 6,198,907
------------ ------------
UTILITIES-WATER AND SEWER-1.07%
500,000 St. Paul (City of), MN, 8.00% Sewer Rev Bond
Ser 1988A 12-1-2008 (Crossover Refunded
12-1-1998 @ 101)........................... BBB 500,000 532,725
------------ ------------
TOTAL MUNICIPAL BONDS........................ $47,854,605 $48,785,820
------------ ------------
------------ ------------
</TABLE>
9
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
MINNESOTA PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 1997 (Unaudited)
SHORT-TERM INVESTMENTS-0.42%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
--------- ------------
<C> <S> <C>
INVESTMENT COMPANY-0.42%
$210,712 Federated Minnesota Municipal Cash Trust,
Current rate -- 3.31%...................... $ 210,712
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$48,065,317) (A)........................... $48,996,532
------------
------------
</TABLE>
(a) At March 31, 1997, the cost of securities for federal income tax
purposes was $48,065,836, and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 1,478,650
Unrealized depreciation..................................... (547,954)
- -------------------------------------------------------------------------
Net Unrealized depreciation................................. $ 930,696
- -------------------------------------------------------------------------
</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 rates disclosed for these securities represent the
original issue discount yields on the date of acquisition.
* Moody's Rating
10
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Assets and Liabilities
(Unaudited)
For the Six-Month Period Ended March 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NATIONAL MINNESOTA
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities, as detailed
in the accompanying schedules, at
market (cost $70,603,937;
$48,065,317; respectively) (Note
1).................................. $ 73,078,602 $ 48,996,532
Receivables:
Interest and dividends.............. 1,129,865 689,401
Subscriptions of capital stock...... -- 13,572
Deferred registration costs (Note
1).................................. 36,471 31,428
Prepaid expenses...................... 13,783 9,827
------------- -------------
TOTAL ASSETS............................ 74,258,721 49,740,760
------------- -------------
LIABILITIES:
Cash portion of dividends payable..... 109,856 55,808
Redemptions of capital stock.......... 880 --
Payable for investment advisory and
management fees (Note 2)............ 48,978 32,228
Payable for distribution fees (Note
2).................................. 933 372
Accounts payable and accrued
expenses............................ 11,630 12,369
------------- -------------
TOTAL LIABILITIES....................... 172,277 100,777
------------- -------------
NET ASSETS:
Net proceeds of capital stock, par
value $.01 per share-authorized
100,000,000,000; 100,000,000,000
shares; respectively................ 71,403,584 48,583,169
Unrealized appreciation of
investments......................... 2,474,665 931,215
Undistributed (distributions in excess
of) net investment income........... (33,333) (7,474)
Accumulated net realized gain from
sale of investments................. 241,528 133,073
------------- -------------
TOTAL NET ASSETS........................ $ 74,086,444 $ 49,639,983
------------- -------------
SHARES OUTSTANDING AND NET ASSET VALUE
PER SHARE:
Class A shares (based on net assets of
$6,748,279; and $3,346,606;
respectively and 633,748; and 330,090
shares outstanding; respectively)..... $10.65 $10.14
------------- -------------
Class B shares (based on net assets of
$1,067,727; and $1,235,955;
respectively and 100,351; and 122,085
shares outstanding; respectively)..... $10.64 $10.12
------------- -------------
Class C shares (based on net assets of
$1,084,791; and $213,214; respectively
and 101,967; and 21,018 shares
outstanding; respectively)............ $10.64 $10.14
------------- -------------
Class E shares (based on net assets of
$60,483,972; and $43,722,391;
respectively and 5,674,862; and
4,302,918 shares outstanding;
respectively)......................... $10.66 $10.16
------------- -------------
Class H shares (based on net assets of
$4,701,675; and $1,121,817;
respectively and 441,311; and 110,575
shares outstanding; respectively)..... $10.65 $10.15
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Operations
(Unaudited)
For the Six-Month Period Ended March 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MINNESOTA
NATIONAL PORTFOLIO
PORTFOLIO -
-------------
<S> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income..................... $ 2,308,525 $ 1,590,601
------------- -------------
Expenses:
Investment advisory and management
fees (Note 2)...................... 293,211 190,899
Distribution fees (Class A) (Note
2)................................. 8,260 3,158
Distribution fees (Class B) (Note
2)................................. 4,788 5,955
Distribution fees (Class C) (Note
2)................................. 4,833 1,075
Distribution fees (Class H) (Note
2)................................. 22,137 5,463
Registration fees (Note 1).......... 20,159 19,342
Legal and auditing fees............. 14,460 12,886
Shareholders' notices and reports... 7,945 7,925
Custodian fees...................... 5,984 5,501
Directors' fees and expenses........ 4,487 5,545
Other............................... 8,314 5,976
------------- -------------
Total expenses........................ 394,578 263,725
------------- -------------
NET INVESTMENT INCOME................... 1,913,947 1,326,876
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS: (NOTE 1)
Net realized gain from security
transactions........................ 686,864 569,086
Net change in unrealized depreciation
of investments...................... (1,335,851) (1,150,062)
------------- -------------
NET LOSS ON INVESTMENTS................. (648,987) (580,976)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... $ 1,264,960 $ 745,900
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
MARCH 31, YEAR ENDED
1997 SEPTEMBER 30,
(UNAUDITED) 1996
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 1,913,947 $ 3,891,276
Net realized gain from security
transacations....................... 686,864 685,982
Net change in unrealized depreciation
of investments in securities........ (1,335,851) (471,072)
------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... 1,264,960 4,106,186
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A............................. (162,026) (182,138)
Class B............................. (19,661) (32,480)
Class C............................. (20,091) (8,022)
Class E............................. (1,627,654) (3,534,046)
Class H............................. (91,098) (122,710)
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS..... (1,920,530) (3,879,396)
------------- --------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (84,494 and 449,965
shares)............................ 914,328 4,861,712
Class B (18,321 and 45,495
shares)............................ 198,346 489,032
Class C (83,590 and 14,245
shares)............................ 900,220 153,026
Class E (97,041 and 269,334
shares)............................ 1,049,960 2,914,650
Class H (81,119 and 260,768
shares)............................ 878,361 2,813,222
Proceeds from shares issued as a
result of reinvested dividends
Class A (8,710 and 11,432 shares)... 94,269 122,884
Class B (1,303 and 2,485 shares).... 14,088 26,794
Class C (1,675 and 684 shares)...... 18,110 7,375
Class E (97,469 and 214,235
shares)............................ 1,056,296 2,315,910
Class H (5,407 and 7,642 shares).... 58,536 82,355
Less cost of repurchase of shares
Class A (39,940 and 49,683
shares)............................ (432,109) (529,388)
Class B (12,113 and 17,603
shares)............................ (130,829) (190,790)
Class C (4,035 and 4,088 shares).... (43,592) (44,079)
Class E (585,273 and 999,377
shares)............................ (6,342,043) (10,775,813)
Class H (18,681 and 58,950
shares)............................ (201,715) (632,516)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS................. (1,967,774) 1,614,374
------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.................................. (2,623,344) 1,841,164
NET ASSETS:
Beginning of period................... 76,709,788 74,868,624
------------- --------------
End of period (includes excess of
distributions over net investment
income of $33,333 and $26,750,
respectively)....................... $ 74,086,444 $ 76,709,788
------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statement of Changes in Net Assets
MINNESOTA PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
MARCH 31, YEAR ENDED
1997 SEPTEMBER 30,
(UNAUDITED) 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................. $ 1,326,876 $ 2,891,691
Net realized gain (loss) from security
transacations....................... 569,086 (66,018)
Net change in unrealized depreciation
of investments in securities........ (1,150,062) (181,219)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS......................... 745,900 2,644,454
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A............................. (62,627) (82,763)
Class B............................. (24,839) (27,649)
Class C............................. (4,473) (9,242)
Class E............................. (1,210,905) (2,719,829)
Class H............................. (22,676) (39,824)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS..... (1,325,520) (2,879,307)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (183,120 and 141,525
shares)............................ 1,888,992 1,468,872
Class B (13,449 and 91,006
shares)............................ 138,231 930,206
Class C (1,555 and 12,417 shares)... 16,000 129,148
Class E (56,923 and 183,971
shares)............................ 586,945 1,903,947
Class H (18,070 and 124,931
shares)............................ 186,553 1,278,687
Proceeds from shares issued as a
result of reinvested dividends
Class A (4,285 and 5,575 shares).... 44,058 57,472
Class B (1,406 and 1,733 shares).... 14,449 17,780
Class C (343 and 769 shares)........ 3,534 7,919
Class E (87,123 and 202,818
shares)............................ 898,811 2,099,431
Class H (1,190 and 2,618 shares).... 12,256 26,982
Less cost of repurchase of shares
Class A (34,990 and 55,198
shares)............................ (360,431) (568,492)
Class B (1,005 and 2,025 shares).... (10,340) (20,727)
Class C (1,384 and 6,577 shares).... (14,267) (67,864)
Class E (632,518 and 692,789
shares)............................ (6,525,655) (7,141,366)
Class H (12,116 and 86,089
shares)............................ (124,849) (869,654)
------------- -------------
NET DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS............................ (3,245,713) (747,659)
------------- -------------
TOTAL DECREASE IN NET ASSETS............ (3,825,333) (982,512)
NET ASSETS:
Beginning of period................... 53,465,316 54,447,828
------------- -------------
End of period (includes excess of
distributions over net investment
income of $7,474 and $8,830,
respectively)....................... $ 49,639,983 $ 53,465,316
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
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 two separate investment portfolios and series of capital stock:
the National and Minnesota Portfolios, are diversified portfolios each of
which has different investment objectives and its own investment portfolio
and net asset values. The investment objective of the National Portfolio is
to maximize total return, to be derived primarily from current income exempt
from federal income tax (at a level consistent with prudent investment risk)
and from change in the market value of the securities held by the portfolio.
The investment objective of Minnesota Portfolio is to maximize total return,
to be derived primarily from current income exempt from federal and Minnesota
income tax (at a level consistent with prudent investment risk) and from
change in the market value of the securities held by the portfolio.
The Minnesota Portfolio concentrates it's 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 six-month period ended March 31, 1997, the cost of purchases and
proceeds from sales of securities (other than short-term securities)
aggregated $34,650,188 and $37,403,873 for National Portfolio; and
$15,300,704 and $17,901,642 for Minnesota 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.
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 Portfolio 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 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 Portfolio is based upon the average net assets of the
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
15
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
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
Class A Class B C Class E Class H
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
National Portfolio........................... $ 17,114 $3,414 $145 $ 22,119 $2,540
Minnesota Portfolio.......................... $ 10,016 $ 0 $ 63 $ 15,541 $3,492
</TABLE>
Legal fees and expenses aggregating $4,986 and $5,130 for the National and
Minnesota Portfolios, respectively, were paid to a law firm of which the
secretary of the fund is a partner.
16
<PAGE>
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS Selected per share historical data for each of the
Portfolios was as follows:
<TABLE>
<CAPTION>
Class E
--------------------------------------------------------------------------------
Three-Month
Period
Year Ended September 30, Ended Year Ended June 30,
-------------------------------- September --------------------------------
30,
NATIONAL PORTFOLIO 1997 1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.76 $ 10.72 $ 10.38 $ 10.46 $ 11.13 $ 10.54 $ 9.99
-------- -------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .27 .56 .58 .15 .60 .63 .66
Net realized and unrealized gain
(loss) on investments............... (.09) .04 .36 (.09) (.64) .59 .55
-------- -------- -------- -------- -------- -------- --------
Total from operations................... .18 .60 .94 .06 (.04) 1.22 1.21
-------- -------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.28) (.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..... (.28) (.56) (.60) (.14) (.63) (.63) (.66)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.66 $ 10.76 $ 10.72 $ 10.38 $ 10.46 $ 11.13 $ 10.54
-------- -------- -------- -------- -------- -------- --------
Total return @.......................... 1.62% 5.69% 9.30% .59% .49% 11.99% 12.46%
Net assets end of period (000s
omitted).............................. $ 60,484 $ 65,237 $ 70,531 $74,877 $ 76,746 $ 70,754 $ 54,189
Ratio of expenses to average daily net
assets................................ .92% .93% 1.03% .87% .87% .94% .92%
Ratio of net investment income to
average daily net assets.............. 5.09% 5.19% 5.54% 5.74% 5.38% 5.80% 6.40%
Portfolio turnover rate................. 46% 52% 35% 17% 25% 29% 38%
<CAPTION>
Class A
Year Ended September 30,
--------------------------------
NATIONAL PORTFOLIO 1997 1996 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.75 $ 10.71 $ 9.79
-------- -------- --------
Operations:
Investment income - net............... .25 .53 .49
Net realized and unrealized gain
(loss) on investments............... (.09) .04 .94
-------- -------- --------
Total from operations................... .16 .57 1.43
-------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.26) (.53) (.50)
Excess distributions of net investment
income.............................. -- -- --
From net realized gains on
investments......................... -- -- (.01)
-------- -------- --------
Total distributions to shareholders..... (.26) (.53) (.51)
-------- -------- --------
Net asset value, end of period.......... $ 10.65 $ 10.75 $ 10.71
-------- -------- --------
Total return @.......................... 1.51% 5.46% 14.80%
Net assets end of period (000s
omitted).............................. $ 6,748 $ 6,239 $ 1,807
Ratio of expenses to average daily net
assets................................ 1.17% 1.18% 1.28%
Ratio of net investment income to
average daily net assets.............. 4.84% 4.97% 5.03%
Portfolio turnover rate................. 46% 52% 35%
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
-------------------------------- --------------------------------
Year Ended September 30,
--------------------------------------------------------------------
NATIONAL PORTFOLIO 1997** 1996 1995+ 1997** 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.74 $ 10.70 $ 9.79 $ 10.74 $ 10.70 $ 9.79
-------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .21 .45 .42 .21 .45 .43
Net realized and unrealized gain
(loss) on investments............... (.09) .04 .93 (.09) .04 .92
-------- -------- -------- -------- -------- --------
Total from operations................... .12 .49 1.35 .12 .49 1.35
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.22) (.45) (.43) (.22) (.45) (.43)
From net realized gains on
investments......................... -- -- (.01) -- -- (.01)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders..... (.22) (.45) (.44) (.22) (.45) (.44)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.64 $ 10.74 $ 10.70 $ 10.64 $ 10.74 $ 10.70
-------- -------- -------- -------- -------- --------
Total return @.......................... 1.12% 4.65% 13.96% 1.12% 4.65% 13.95%
Net assets end of period (000s
omitted).............................. $ 1,068 $ 997 $ 668 $ 1,085 $ 223 $ 106
Ratio of expenses to average daily net
assets................................ 1.92%* 1.93% 2.03%* 1.92%* 1.93% 2.03%*
Ratio of net investment income to
average daily net assets.............. 4.10%* 4.20% 4.04%* 4.10%* 4.20% 4.14%*
Portfolio turnover rate................. 46% 52% 35% 46% 52% 35%
<CAPTION>
Class H
--------------------------------
NATIONAL PORTFOLIO 1997** 1996 1995+
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.75 $ 10.71 $ 9.79
-------- -------- --------
Operations:
Investment income - net............... .21 .45 .43
Net realized and unrealized gain
(loss) on investments............... (.09) .04 .93
-------- -------- --------
Total from operations................... .12 .49 1.36
-------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.22) (.45) (.43)
From net realized gains on
investments......................... -- -- (.01)
-------- -------- --------
Total distributions to shareholders..... (.22) (.45) (.44)
-------- -------- --------
Net asset value, end of period.......... $ 10.65 $ 10.75 $ 10.71
-------- -------- --------
Total return @.......................... 1.12% 4.64% 14.06%
Net assets end of period (000s
omitted).............................. $ 4,702 $ 4,015 $ 1,757
Ratio of expenses to average daily net
assets................................ 1.92%* 1.93% 2.03%*
Ratio of net investment income to
average daily net assets.............. 4.10%* 4.20% 4.24%*
Portfolio turnover rate................. 46% 52% 35%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 1997.
+ 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.
17
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
3. FINANCIAL HIGHLIGHTS (continued):
Class E
--------------------------------------------------------------------
Three-Month
Period
Year Ended September 30, Ended Year Ended June 30,
-------------------------------- September --------------------------------
30,
MINNESOTA PORTFOLIO 1997 1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.28 $ 10.32 $ 10.08 $ 10.15 $ 10.65 $ 10.16 $ 9.78
-------- -------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .27 .55 .57 .15 .59 .61 .64
Net realized and unrealized gain
(loss) on investments............... (.12) (.04) .24 (.08) (.51) .49 .38
-------- -------- -------- -------- -------- -------- --------
Total from operations................... .15 .51 .81 .07 .08 1.10 1.02
-------- -------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.27) (.55) (.57) (.14) (.58) (.61) (.64)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.16 $ 10.28 $ 10.32 $ 10.08 $ 10.15 $ 10.65 $ 10.16
-------- -------- -------- -------- -------- -------- --------
Total return @.......................... 1.42% 5.01% 8.35% .72% .64% 11.17% 10.71%
Net assets end of period (000s
omitted).............................. $ 43,722 $ 49,262 $ 52,603 $54,560 $ 54,854 $ 52,271 $ 38,586
Ratio of expenses to average daily net
assets................................ .96% .93% .98% .85% .85% .89% .90%
Ratio of net investment income to
average daily net assets.............. 5.19% 5.34% 5.60% 5.69% 5.51% 5.82% 6.37%
Portfolio turnover rate................. 30% 41% 27% 8% 11% 17% 10%
<CAPTION>
Class A
Year Ended September 30,
--------------------------------
MINNESOTA PORTFOLIO 1997 1996 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.26 $ 10.30 $ 9.55
-------- -------- --------
Operations:
Investment income - net............... .25 .52 .48
Net realized and unrealized gain
(loss) on investments............... (.12) (.04) .76
-------- -------- --------
Total from operations................... .13 .48 1.24
-------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.25) (.52) (.49)
-------- -------- --------
Net asset value, end of period.......... $ 10.14 $ 10.26 $ 10.30
-------- -------- --------
Total return @.......................... 1.30% 4.78% 13.15%
Net assets end of period (000s
omitted).............................. $ 3,347 $ 1,822 $ 884
Ratio of expenses to average daily net
assets................................ 1.21% 1.18% 1.23%
Ratio of net investment income to
average daily net assets.............. 4.98% 5.07% 5.10%
Portfolio turnover rate................. 30% 41% 27%
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
-------------------------------- --------------------------------
Year Ended September 30,
--------------------------------------------------------------------
MINNESOTA PORTFOLIO 1997** 1996 1995+ 1997** 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.24 $ 10.27 $ 9.55 $ 10.26 $ 10.30 $ 9.55
-------- -------- -------- -------- -------- --------
Operations:
Investment income - net............... .21 .45 .41 .21 .44 .42
Net realized and unrealized gain
(loss) on investments............... (.12) (.04) .73 (.12) (.04) .75
-------- -------- -------- -------- -------- --------
Total from operations................... .09 .41 1.14 .09 .40 1.17
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.21) (.44) (.42) (.21) (.44) (.42)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.12 $ 10.24 $ 10.27 $ 10.14 $ 10.26 $ 10.30
-------- -------- -------- -------- -------- --------
Total return @.......................... .89% 4.04% 12.10% .89% 4.00% 12.31%
Net assets end of period (000s
omitted).............................. $ 1,236 $ 1,109 $ 180 $ 213 $ 210 $ 143
Ratio of expenses to average daily net
assets................................ 1.96%* 1.93% 1.98%* 1.96%* 1.93% 1.98%*
Ratio of net investment income to
average daily net assets.............. 4.20%* 4.34% 4.37%* 4.20%* 4.31% 4.28%*
Portfolio turnover rate................. 30% 41% 27% 30% 41% 27%
<CAPTION>
Class H
--------------------------------
MINNESOTA PORTFOLIO 1997** 1996 1995+
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.... $ 10.26 $ 10.30 $ 9.55
-------- -------- --------
Operations:
Investment income - net............... .22 .44 .41
Net realized and unrealized gain
(loss) on investments............... (.12) (.04) .76
-------- -------- --------
Total from operations................... .10 .40 1.17
-------- -------- --------
Distributions to shareholders:
From investment income - net.......... (.21) (.44) (.42)
-------- -------- --------
Net asset value, end of period.......... $ 10.15 $ 10.26 $ 10.30
-------- -------- --------
Total return @.......................... .99% 3.93% 12.42%
Net assets end of period (000s
omitted).............................. $ 1,122 $ 1,061 $ 638
Ratio of expenses to average daily net
assets................................ 1.96%* 1.93% 1.98%*
Ratio of net investment income to
average daily net assets.............. 4.20%* 4.33% 4.29%*
Portfolio turnover rate................. 30% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 1997.
+ 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.
18
<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, HAVERFORD COLLEGE.
PRIOR TO JULY 1996, 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 AND DIRECTOR,
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
Tamara L. Fagely
VICE PRESIDENT AND TREASURER
Howard G. Hudson
VICE PRESIDENT
David A. Peterson
VICE PRESIDENT
Scott R. Plummer
VICE PRESIDENT
Rhonda J. Schwartz
VICE PRESIDENT
Gary N. Yalen
VICE PRESIDENT
Michael J. Radmer
SECRETARY
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.
19
<PAGE>
FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES
MUTUAL Fortis Bond Funds MONEY FUND
FUNDS/PORTFOLIOS U.S. GOVERNMENT
CONVENIENT ACCESS TO SECURITIES FUND
A BROAD RANGE OF TAX-FREE MINNESOTA
SECURITIES PORTFOLIO
TAX-FREE NATIONAL
PORTFOLIO
HIGH YIELD PORTFOLIO
Fortis Stock Funds ASSET ALLOCATION
PORTFOLIO
VALUE FUND
GROWTH & INCOME FUND
CAPITAL FUND
FIDUCIARY FUND
GLOBAL GROWTH PORTFOLIO
GROWTH FUND
CAPITAL APPRECIATION
PORTFOLIO
FIXED AND VARIABLE Fortis Opportunity Fixed FIXED ACCOUNT
ANNUITIES & Variable Annuity MONEY MARKET SUBACCOUNT
TAX-DEFERRED Masters Variable Annuity U.S. GOVERNMENT
INVESTING SECURITIES SUBACCOUNT
DIVERSIFIED INCOME
SUBACCOUNT
GLOBAL BOND SUBACCOUNT
HIGH YIELD SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GROWTH STOCK SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
AGGRESSIVE GROWTH
SUBACCOUNT
Fortune Fixed Annuities SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY
Income Annuities GUARANTEED FOR LIFE
GUARANTEED FOR A
SPECIFIED PERIOD
LIFE Wall Street Series FIXED ACCOUNT
INSURANCE PROTECTION Variable Universal Life MONEY MARKET SUBACCOUNT
AND TAX-DEFERRED Insurance U.S. GOVERNMENT
INVESTMENT SECURITIES SUBACCOUNT
OPPORTUNITY DIVERSIFIED INCOME
SUBACCOUNT
GLOBAL BOND SUBACCOUNT
HIGH YIELD SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GROWTH STOCK SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
AGGRESSIVE GROWTH
SUBACCOUNT
Adaptable Life
Universal Life
FORTIS FINANCIAL GROUP manages and distributes mutual funds, annuities and life
insurance products. The mutual funds, variable life and variable annuity
products are distributed through FORTIS INVESTORS, INC. and managed by FORTIS
ADVISERS, INC. The insurance products are issued by FORTIS BENEFITS INSURANCE
COMPANY, FIRST FORTIS LIFE INSURANCE COMPANY and TIME INSURANCE COMPANY.
FOR MORE COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES, SEND FOR A
PROSPECTUS. WRITE TO: FORTIS INVESTORS, INC., P.O. BOX 64284, ST. PAUL, MN
55164. READ IT CAREFULLY BEFORE INVESTING OR SENDING MONEY.
20
<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.
[PICTURE]
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 investments. Fortis is jointly
owned by Fortis AMEV of The Netherlands and Fortis AG of Belgium.
[GRAPHIC] FOR MORE INFORMATION, CALL YOUR INVESTMENT REPRESENTATIVE OR FORTIS
AT (800) 800-2638.
----------------
Bulk Rate
FORTIS -REGISTERED TRADE MARK- U.S. Postage
PAID
FORTIS FINANCIAL GROUP Permit No. 3794
P.O. BOX 64284 Minneapolis, MN
ST. PAUL, MN 55164 -----------------
FORTIS TAX-FREE PORTFOLIOS
[GRAPHIC] Printed on recycled paper with
40% preconsumer waste and 10%
post consumer waste. Please recycle.
FORTIS-REGISTERED TRADEMARK- and Fortis -REGISTERED TRADEMARK- are registered
servicemarks of Fortis AMEV and Fortis AG.
95380 (5/97)
