<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S)
240.14a-12
Fortis Tax-Free Portfolios, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[FORTIS LOGO]
FORTIS TAX-FREE PORTFOLIOS, INC.
500 Bielenberg Drive, Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64284, St. Paul, Minnesota 55164
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JANUARY 29, 1998
TO THE SHAREHOLDERS OF FORTIS TAX-FREE PORTFOLIOS, INC.
A special meeting of the shareholders of National Portfolio and Minnesota
Portfolio (each a "Portfolio" and together the "Portfolios"), each a series of
Fortis Tax-Free Portfolios, Inc. (the "Fund") will be held at the offices of the
Fund, 500 Bielenberg Drive, Woodbury, Minnesota, on Thursday, January 29, 1998
at 10:00 a.m. for the following purposes:
1. To elect a Board of Directors.
2. To approve or disapprove an amendment to the respective Portfolios'
fundamental investment restriction concerning investing in commodities
to make it clear that the Portfolios may not purchase or sell physical
commodities (such as agricultural products), but the Portfolios may
invest in forms of financial contracts and instruments, such as
futures contracts, which may be deemed, for regulatory purposes, to be
"commodities."
3. To approve or disapprove an amended Investment Advisory and Management
Agreement between the Fund and Fortis Advisers, Inc. for the Minnesota
Portfolio. Under the proposed amended Agreement, the investment
advisory fee (as a percentage of average net assets) payable by the
Minnesota Portfolio will decrease if average net assets are
$100,000,000 or less; however, the investment advisory fee (as a
percentage of average net assets) payable by the Minnesota Portfolio
will no longer be based on the combined average net assets of the
National Portfolio and the Minnesota Portfolio but will be based on
the average net assets of the Minnesota Portfolio and the size of the
fee (as a percentage of average net assets) paid by the Minnesota
Portfolio will no longer be reduced on average net assets over
$100,000,000. At the Minnesota Portfolio's level of average net
assets of $50,032,792 as of September 30, 1997, the amount of the
investment advisory and management fee payable by the Minnesota
Portfolio would be approximately the same under either the proposed
amended Agreement or the current Agreement.
<PAGE>
4. To transact such other business as may properly come before the
meeting.
Shareholders of record on December 19, 1997, are the only persons entitled
to notice of and to vote at the meeting.
The costs of solicitation, including the costs of preparing and mailing
this Notice of Special Shareholders' Meeting and Proxy Statement, will be paid
by the Fund.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN, DATE, AND MAIL
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE ANY FURTHER
SOLICITATION EXPENSE. A return envelope is enclosed for your convenience.
SHAREHOLDERS WHO OWN SHARES IN MORE THAN ONE PORTFOLIO WILL RECEIVE A
SEPARATE PROXY CARD FOR EACH PORTFOLIO. THESE ARE NOT DUPLICATES; YOU SHOULD
SIGN AND RETURN EACH PROXY CARD IN ORDER FOR YOUR VOTES TO BE COUNTED.
Michael J. Radmer
Secretary
Dated: December 29, 1997
<PAGE>
PROXY STATEMENT
FORTIS TAX-FREE PORTFOLIOS, INC.
500 Bielenberg Drive, Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64284, St. Paul, Minnesota 55164
SPECIAL MEETING OF SHAREHOLDERS--JANUARY 29, 1998
The enclosed proxy is solicited by the Board of Directors of Fortis Tax-
Free Portfolios, Inc. (the "Fund") in connection with a special meeting of
shareholders of National Portfolio and Minnesota Portfolio (each a "Portfolio"
and together the "Portfolios"), each a series of the Fund, to be held
January 29, 1998, and at any adjournment thereof. The cost of solicitation,
including the cost of preparing and mailing the Notice of Special Shareholders'
Meeting and this Proxy Statement, will be paid by the Fund, and such mailing
will take place on approximately December 29, 1997. Representatives of Fortis
Advisers, Inc. ("Advisers"), the investment adviser and manager of the
Portfolios, or its affiliates, may, without cost to the Fund, solicit proxies
for the management of the Fund by means of mail, telephone, or personal calls.
The address of Advisers is that of the Fund as provided above. Also, Advisers
has retained Shareholder Communications Corporation, a proxy solicitation firm,
to solicit proxies from shareholders personally or by telephone, letter,
telegram, or other means. The anticipated costs of the services of Shareholder
Communications Corporation on behalf of the Fund are approximately $7,500, which
costs will be borne by the Fund.
A proxy may be revoked before the meeting by giving written notice, in
person or by mail, of revocation to the Secretary of the Fund or at the meeting
prior to voting in person. Unless revoked, properly executed proxies in which
choices are not specified by the shareholders will be voted "for" each item for
which no choice is specified, in accordance with the recommendation of the Board
of Directors. In instances where choices are specified by the shareholders in
the proxy, those proxies will be voted as the shareholder has instructed.
An "abstention" on any proposal will be counted as present for purposes of
determining whether a quorum of shares is present at the meeting with respect to
the proposal on which the abstention is noted, but will be counted as a vote
"against" such proposal. Under the rules of the New York Stock Exchange,
Proposal 1 is considered a "discretionary" proposal, which means that brokers
who hold shares of a Portfolio in street name for customers are authorized to
vote on such proposal on behalf of their customers with or without specific
voting instructions from such customers. However, Proposals 2 and 3 are
considered "nondiscretionary" proposals, which means that such brokers are NOT
authorized to vote on such proposal without specific voting instructions as to
such proposal. Therefore, "broker nonvotes" on Proposal 2 and 3 will not be
counted as present for purposes of determining whether a quorum of shares is
present at the meeting with respect to such proposals.
Only shareholders of record on December 19, 1997, may vote at the meeting
or any adjournment thereof. As of that date there were issued and outstanding
6,522,501 common shares, $.01 par value, in National Portfolio and 4,735,475
common shares, $.01 par value, in Minnesota Portfolio. Each shareholder is
entitled to one vote for each share held. None of the matters to be presented
at the meeting will entitle any shareholder of the Fund to appraisal rights.
<PAGE>
With respect to the election of directors (Proposal 1), all shares of the
Fund vote together as one series and one class. With respect to voting on the
proposal to approve or disapprove the amendment to the Portfolios' fundamental
investment restriction concerning investment in commodities (Proposal 2), each
Portfolio votes as a separate series. With respect to voting on the proposal to
approve or disapprove the amended Investment Advisory and Management Agreement
between the Fund and Fortis Advisers, Inc. with respect to the Minnesota
Portfolio (Proposal 3), only the Minnesota Portfolio votes and all shares of the
Portfolio vote together as one class. SHAREHOLDERS WHO OWN SHARES IN MORE THAN
ONE PORTFOLIO WILL RECEIVE A SEPARATE PROXY CARD FOR EACH PORTFOLIO. THESE ARE
NOT DUPLICATES; YOU SHOULD SIGN AND RETURN EACH PROXY CARD IN ORDER FOR YOUR
VOTES TO BE COUNTED.
If a quorum is not present at a meeting, or if a quorum is present but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the meeting of the
shareholders of National Portfolio or Minnesota Portfolio or both of the
Portfolios, to permit further solicitation of proxies. In determining whether
to adjourn the meeting, the following factors may be considered: the nature of
the proposals that are the subject of the meeting, the percentage of votes
actually cast, the percentage of negative votes actually cast, the nature of any
further solicitation, and the information to be provided to shareholders with
respect to the reasons for the solicitation. Any adjournment will require the
affirmative vote of a majority of those shares represented at the meeting in
person or by proxy.
The following table illustrates which Proposals are to be voted upon by
shareholders of the Fund:
PROPOSAL NUMBER
--------------------------------------------------------------
1 2 3
APPROVE AMENDMENT APPROVE AMENDMENT
ELECT BOARD TO RESTRICTION ON OF INVESTMENT
PORTFOLIO OF DIRECTORS INVESTING IN COMMODITIES ADVISORY AGREEMENT
- -------------------------------------------------------------------------------
National X X
Portfolio
Minnesota X X X
Portfolio
ANNUAL REPORT OF THE FUND
The Annual Report for the fiscal year ended September 30, 1997, of the Fund
containing financial statements of both of the Portfolios was mailed to Fund
shareholders on approximately November 24, 1997. If you did not receive a copy
of the Annual Report or would like to receive an additional copy of the Annual
Report, please call the Fund at 1-800-800-2638, extension 4579, and a copy will
be sent to you by first class mail within 48 hours.
2
<PAGE>
SHARE OWNERSHIP
The following table sets forth, as of November 30, 1997, shares of each
Portfolio of the Fund owned beneficially by, and certain other share ownership
information with respect to, directors of the Fund and all officers and
directors as a group. As of November 30, 1997, each director who beneficially
owned shares of the Fund or Other Fortis Funds (as defined below) and all
directors and officers as a group owned less than 1% of the outstanding shares
of the Fund or such Other Fortis Funds.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NATIONAL MINNESOTA NUMBER OF
PORTFOLIO SHARES PORTFOLIO SHARES OTHER FORTIS FUND
BENEFICIAL OWNER OWNED OWNED SHARES OWNED (1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard W. Cutting -0- -0- 7,341
Allen R. Freedman -0- -0- 36,137
Dr. Robert M. Gavin 2,466 -0- 23,411
Benjamin S. Jaffray -0- -0- 1,633
Jean L. King -0- -0- 11,138
Dean C. Kopperud -0- -0- 3,681
Edward M. Mahoney 1,239 1,800 187,857
Robb L. Prince -0- -0- 132,660
Leonard J. Santow -0- -0- 231,808
Noel S. Shadko -0- -0- 328
Joseph M. Wikler -0- -0- 117,272
All officers and 3,705 3,395 1,079,636
directors as a
group
</TABLE>
- -----------------------
(1) "Other Fortis Funds" currently consists of eight other open-end investment
companies and one closed-end investment company managed by Advisers. The
Other Fortis Funds are Fortis Advantage Portfolios, Inc.; Fortis Equity
Portfolios, Inc.; Fortis Fiduciary Fund, Inc.; Fortis Growth Fund, Inc.;
Fortis Income Portfolios, Inc.; Fortis Money Portfolios, Inc.; Fortis
Securities, Inc.; Fortis Series Fund, Inc.; and Fortis Worldwide
Portfolios, Inc.
3
<PAGE>
No person as of November 30, 1997, to the knowledge of management, owned
beneficially more than 5% of the outstanding shares of either Portfolio, except
as follows.
National Portfolio: Class A--5% Gene W. Paulsen, P.O. Box 164, Gothenburg,
NE 69138-0164; 17% Brian L. Johnson, Joan M. Johnson Jt WROS, P.O. Box 400,
Spooner, WI 54801-0400; Class B--5% Julie M. March Trust Dated 4/3/96, Julie M.
March TTEE, 1031 S. Fremont Ave., Springfield, MO 65804-0145; 15% NFSC FEBO,
Barbara A. Creel TTEE, Creel Family Trust - A, U/A 11/8/85, 11232 W. Cooper Dr.,
Littleton, CO 80127-5845; 5% Curtis A. March Trust Dated 4/3/96, Curtis A. March
TTEE, 1031 S. Fremont Ave., Springfield, MO 65804-0145; 13% NFSC FEBO, First
Bank NA, Attn: Melissa Peden, 918 17th St., Denver, CO 80202-2827; Class C--9%
Jerry J. Cummins, Susan L. Cummins JtWROS, 5340 Wolf Road, Western Springs, IL
60558-1858; 21% Robert L. Wafer, TOD, 16020 Lima Road, Apt. 10, Huntertown, IN
46748-9348; 5% Eugene E. Shepard TTEE, FBO Eugene E. Shepard Rev, Inter Vivos
Trust U/A 5/2/97, 12690 Grandin Lane, Bridgeton, MO 63044-1553; 7% Glenn H.
Mannes, Bernita K. Mannes JtWROS, RR1, Box 105-A60, Yankton, SD 57078-9801; 7%
Sheldon Schram TOD, 61 Ridgeview Drive, West Paterson, NJ 07424-2719; Class H--
6% Maurice T. Moler, Prairie View Center of Charleston, East Wing - Room 3, 716
18th St., Charleston, IL 61920-2382; 5% Sylvia W. Jacobs, TOD, 73 High St.,
Montclair, NJ 07042-2478; 5% Ashton Burt Cobourn, Patricia Ann Cobourn JtWROS,
9607 Bristol Ave., Silver Springs, MD 20901-3206; 5% David L. Ashworth, TOD, 130
Elizabeths Quay, Grafton, VA 23692-3639.
Minnesota Portfolio: Class A--12% Julie A. Robeck TTEE, FBO David & Carol
Cook Irrev. Trust, 321 S. Jefferson St., New Ulm, MN 56073-3239; 23% NFSC FEBO,
Michael Labalo, 2985 Norway Pine Road W., Brainerd, MN 56401-7519; 5% Edward D.
Jones & Co. F/A/O, W.E. Mudge, P.O. Box 2500, Maryland Heights, MO 63043-8500;
Class B--7% Elsie M. Krostue, TOD, 100 Roosevelt St. SE, #6, Bemidji, MN 56601-
3487; 46% NFSC FEBO, Minerva Mikkila Charitable Remainder Trust, Minerva Mikkila
TTEE, 70 E. St. Marie St., Apt. #129, Duluth, MN 55803-2639; Class C--5% Henry
A. Prchal & Patricia E. Prchal Jtten, 214 SW 2nd St., P.O. Box 51, Young
America, MN 55397-0051; 15% Theodore Pulasky C/F, Brandie L. Pearson UTMA, RR 1,
Box 87, Donnelly, MN 56235-9742; 5% Joann Sathoff, TOD, RR1, Box 46, Dunnell,
MN 56127-9612; 5% Harvey Hagedorn TOD, 35624 140th Street, Winnebago, MN 56098-
4925; 10% Lyle W. Jahnke TOD, 1305 W. Birch Ave., Olivia, MN 56277-1613; 11%
Catherine A. Estrem, TOD, 1594 Lakewood Dr., Maplewood, MN 55119-7167; 10% Greg
L. Krause, Debra Krause JtWROS, 19050 101st Ave. N., Maple Grove, MN 55311-1017;
11% Dennis E. Jones, Pamela M. Jones JtWROS, P.O. Box 186, Lowry, MN 56349-0186;
15% Ardis E. Ninke TOD, 8006 Hayes Street NE, Spring Lake Park, MN 55432-2161;
Class H--12% Mary C. Jackson, 4300 W. River Parkway, Apt. 215, Minneapolis, MN
55406-3677; 16% Norwest Investment Services, Inc., FBO, Northstar Building East
- - 8th Floor, 608 Second Avenue S., Minneapolis, MN 55479-8004; 22% NFSC FEBO,
Keith B. Magnuson, 737 Memorial Drive, Crookston, MN 56716-1131; 6% Norwest
Investment Services, Inc., FBO, Northstar Building East - 8th Floor, 608 Second
Ave. S., Minneapolis, MN 55479-8004.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Fund's management recommends that the eleven persons named below be
elected as directors at the meeting. It is intended that the enclosed proxy
will be voted for the election of the eleven persons named below as
4
<PAGE>
directors unless such authority has been withheld in the proxy. The term of
office of persons elected will be until the next regular meeting of the
shareholders or until their successors are elected and shall qualify. Pertinent
information regarding the nominees is set forth below.
<TABLE>
<CAPTION>
NAME, AGE, AND DIRECTORSHIP OF
PERIOD SERVED AS PRINCIPAL OCCUPATION AND OTHER REPORTING
DIRECTOR OF THE FUND FIRM AT WHICH CARRIED ON COMPANIES(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Richard W. Cutting Certified public accountant Other Fortis Funds
Age 66, Director since and financial consultant.
1991(2)
Allen R. Freedman Chairman, Chief Executive Other Fortis Funds;
Age 57, Director since Officer, and President of Systems and Computer
1988* Fortis, Inc.; a Managing Technology
Director of Fortis Corporation; Genesis
International, N.V. Health Ventures, Inc.
Dr. Robert M. Gavin President, Cranbrook Other Fortis Funds
Age 57, Director since Educational Community; prior
1986(3) to July 1996, President,
Macalester College.
Benjamin S. Jaffray Chairman of The Sheffield Other Fortis Funds
Age 67, Director since Group, Ltd., a financial
1984(3) consulting group.
Jean L. King President, Communi-King, a Other Fortis Funds
Age 53, Director since communications consulting firm.
1984(2)
Dean C. Kopperud* Chief Executive Officer and Other Fortis Funds
Age 45, Director since a Director of Advisers;
1995(3) President and a Director of
Fortis Investors, Inc.
("Investors"), the underwriter
of shares of investment
companies affiliated with the
Fund; President of Fortis
Financial Group and a Director
of Fortis Benefits Insurance
Company; and Senior Vice
President of Time Insurance
Company.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, AND DIRECTORSHIP OF
PERIOD SERVED AS PRINCIPAL OCCUPATION AND OTHER REPORTING
DIRECTOR OF THE FUND FIRM AT WHICH CARRIED ON COMPANIES(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Edward M. Mahoney Retired; prior to December Other Fortis Funds;
Age 67, Director since 1994, Chairman, Chief Analysts
1982(3) Executive Officer, and a International
Director of Advisers and Corporation
Investors; Senior Vice
President and a Director of
Fortis Benefits Life Insurance
Company and Senior Vice
President of Time Insurance
Company.
Robb L. Prince Financial and employee benefit Other Fortis Funds;
Age 56, Director since consultant; prior to July Analysts
1982(3) 1995, Vice President and International
Treasurer, Jostens, Inc., a Corporation
producer of products and
services for youth, education,
sports award, and recognition
markets.
Leonard J. Santow Principal, Griggs & Santow Other Fortis Funds
Age 61, Director since Incorporated, economic and
1982(4) financial consultants.
Noel S. Shadko Marketing consultant; prior to Other Fortis Funds
Age 43, Director since 1996, Senior Vice President,
1996(3) Marketing and Strategic
Planning, Rollerblade, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, AND DIRECTORSHIP OF
PERIOD SERVED AS PRINCIPAL OCCUPATION AND OTHER REPORTING
DIRECTOR OF THE FUND FIRM AT WHICH CARRIED ON COMPANIES(1)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Joseph M. Wikler Investment consultant and Other Fortis Funds
Age 56, Director since private investor; prior
1994(2) to 1994, Director of Research,
Chief Investment Officer,
principal, and a Director of
The Rothschild Co., an
investment adviser, Baltimore,
Maryland.
</TABLE>
________________________
* Denotes directors who are interested persons (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Fund and Advisers.
Mr. Kopperud is an "interested person" of Advisers and the Fund primarily
because he holds certain positions, including serving as Chief Executive
Officer and a director of Advisers. Mr. Freedman is an "interested person" of
Advisers and the Fund primarily because he holds certain positions, including
serving as Chairman and Chief Executive Officer of Fortis, Inc., the parent
company of Advisers, and as a Managing Director of Fortis International, N.V.,
the parent company of Fortis, Inc.
(1) "Reporting Companies" means companies with a class of securities registered
pursuant to Section 12 of the federal Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such act and any company
registered as an investment company under the 1940 Act.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Executive Committee of the Board of Directors.
(4) Member of the Investment Consulting Committee of the Board of Directors.
All of the above nominees are currently serving as directors of the Fund.
All of the nominees were elected directors by the shareholders at their last
regular meeting, except for Mr. Kopperud and Ms. Shadko, who were elected by the
Board of Directors in January 1995 and September 1996, respectively, to fill
newly created vacancies on the Board of Directors.
The Board of Directors has an Audit Committee whose members are selected
annually by the full Board of Directors. None of the members of the Audit
Committee are "interested persons" as defined by the 1940 Act. The Audit
Committee met two times during the fiscal year ended September 30, 1997. The
Fund does not have a standing compensation committee or nominating committee of
the Board of Directors.
The functions performed by the Audit Committee are to recommend annually to
the Board a firm of independent certified public accountants to audit the books
and records of the Fund for the ensuing year; to monitor that firm's
performance; to review with the firm the scope and results of each audit and
determine the need, if any, to extend audit procedures; to confer with the firm
and representatives of the Fund on matters concerning the Fund's
7
<PAGE>
financial statements and procedures; to evaluate the independence of the firm;
to review procedures to safeguard portfolio securities; to review the purchase
by the Fund from the firm of nonaudit services; to review all fees paid to the
firm; and to facilitate communications between the firm and the Fund's officers
and directors.
During the fiscal year ended September 30, 1997, there were four meetings
of the full Board of Directors. No director attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors (held during
the period during which he or she has been a director) and the total number of
meetings held by all committees of the Board on which such director served
(during the periods that such director served).
The following table sets forth the aggregate compensation received by each
director from the Fund during the fiscal year ended September 30, 1997, as well
as the total compensation received by each director from the Fund and all Other
Fortis Funds during the fiscal year ended September 30, 1997. Neither
Mr. Freedman, who is an officer of the parent company of Advisers, nor
Mr. Kopperud, who is an officer of Advisers and Investors, received any such
compensation and they are not included in the table. No executive officer of
the Fund received compensation from the Fund during the fiscal year ended
September 30, 1997.
TOTAL
AGGREGATE COMPENSATION FROM
COMPENSATION FUND COMPLEX
DIRECTOR FROM THE FUND PAID TO DIRECTOR (1)
- --------------------- ------------- --------------------
Richard W. Cutting... $1,800 $31,200
Dr. Robert M. Gavin.. 1,800 31,200
Benjamin S. Jaffray.. 1,790 24,300
Jean L. King......... 1,760 32,200
Edward M. Mahoney.... 1,800 31,200
Robb L. Prince....... 1,860 33,200
Leonard J. Santow.... 1,700 30,200
Noel S. Shadko....... 1,800 22,200
Joseph M. Wikler..... 1,800 31,200
____________________
(1) Includes aggregate compensation paid by the Fund and all nine Other Fortis
Funds to the director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS SET THE NUMBER OF
DIRECTORS AT ELEVEN AND VOTE IN FAVOR OF THE FOREGOING NOMINEES TO SERVES AS
DIRECTORS OF THE COMPANY. The vote of a majority of the shares of both
Portfolios represented at the meeting, voting together as a single class,
provided at least a quorum (more than 10% of the outstanding shares) is
represented in person or by proxy, is sufficient for the election of the above
nominees to the Board of Directors. Unless otherwise instructed, the proxies
will vote for the above eleven nominees.
8
<PAGE>
All of the nominees listed above have consented to serve as directors if
elected. In the event any of the above nominees are not candidates for election
at the meeting, the proxies may vote for such other persons as management may
designate. Nothing currently indicates that such a situation will arise.
PROPOSAL TWO
PROPOSED AMENDMENT TO THE PORTFOLIOS' FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING INVESTING IN COMMODITIES
SUMMARY
The proposal makes certain changes to a restriction prohibiting investing
in commodities to make it clear that the Portfolios may not purchase or sell
physical commodities (such as agricultural products), but the Portfolios may
invest in forms of financial contracts and instruments which may be deemed, for
regulatory purposes, to be "commodities." If the proposal to amend the
fundamental investment restriction is approved, new nonfundamental policies also
will limit investing in commodities as described below.
CURRENT RESTRICTION AND PROPOSED AMENDED RESTRICTION
As a fundamental policy, the Portfolios currently may not
Buy or hold any commodity or commodity future contracts, or any oil,
gas, or mineral exploration or development programs.
Subject to shareholder approval, this limitation will be replaced with a
fundamental investment restriction that provides that the Portfolios may not:
Purchase or sell physical commodities (such as grains, livestock, etc.)
or futures or options contracts thereon; however, it may purchase or
sell any forms of financial instruments or contracts that might be
deemed commodities.
The 1940 Act requires a mutual fund to state as a fundamental investment
policy the extent to which it may engage in the purchase and sale of
"commodities." At the time the 1940 Act was enacted, the term "commodities" was
understood to refer principally to physical commodities such as agricultural
products, precious and base metals, oil and gas, and the like. In recent years,
however, a variety of new financial contracts and instruments, such as certain
interest rate futures, have been created which may be deemed, for regulatory
purposes, to be "commodities," and the Board of Directors of the Fund
anticipates that more such contracts and instruments will be created in the
future.
The purpose of the proposed change in this fundamental investment policy is
to provide the Board of Directors with the flexibility, without further
shareholder vote, to determine what categories of financial contracts and
instruments which may be deemed "commodities" are permissible investments for
the Portfolios, while continuing to make it clear that the Portfolios are not
permitted to invest in physical commodities. The Board
9
<PAGE>
believes that either changing conditions or the creation of new financial
contracts and instruments could render it advisable in the future for the Board
to expand or contract the categories of such investments from which the
Portfolios' investment adviser may choose. Furthermore, since the development
and potential uses of such contracts and instruments continue to evolve and
change, the Board believes that it is unnecessarily time-consuming and
burdensome to seek shareholder approval for each change in the permitted use of
these contracts and instruments.
The proposed change would permit each Portfolio to a limited extent enter
into options, futures, and forward contracts on a variety of investments and
indexes, in order to protect against declines in the value of Portfolio
securities or increases in the cost of securities to be acquired and, in the
case of options on indexes of securities, to increase a Portfolio's gross
income. In addition, the proposed change would permit the Portfolios to enter
into options, futures and forward contracts to manage the duration of the
Portfolios' investments. Duration is a measure which reflects estimated price
sensitivity to a given change in interest rates. For example, for an interest
rate change of 1%, a portfolio with a duration of 5 years would be expected to
experience a price change of 5%.
The Portfolios would attempt to reduce the risk associated with the use of
options and futures strategies through the adoption, subject to shareholder
approval of the proposed change to the fundamental investment restriction, of a
nonfundamental investment restriction, which may be changed by the Board of
Directors without shareholder approval, on the use of options, futures, and
forward contracts. This nonfundamental investment restriction provides that
neither of the Portfolios will enter into any options, futures, or forward
contract transactions if immediately thereafter (a) the amount of premiums paid
for all options, initial margin deposits on all futures contracts and/or options
on futures contracts, and collateral deposited with respect to forward contracts
held by or entered into by the Portfolio would exceed 5% of the value of the
total assets of the Portfolio or (b) the Portfolio's assets covering, subject
to, or committed to all options, futures, and forward contracts would exceed 20%
of the value of the total assets of the Portfolio.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The proposed change would permit each Portfolio to invest in futures
contracts and options on futures contracts.
Futures Contracts. A Futures Contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a financial
instrument, or for the making and acceptance of a cash settlement, at a stated
time in the future for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate futures contracts, the fixed income securities underlying the
contract are delivered by the seller and paid for by the purchaser, or on which,
in the case of certain interest rate futures contracts, the difference between
the price at which the contract was entered into and the contract's closing
value is settled between the purchaser and the seller in cash. Interest rate
Futures Contracts currently are traded on a variety of fixed income securities
and include contracts on indexes of municipal securities.
Interest rate Futures Contracts may be purchased or sold to attempt to
hedge against the effects of changes in interest rates on a Portfolio's current
or intended investments in fixed income securities. In the event that an
anticipated decrease in the value of a Portfolio's securities occurs as a result
of a general increase in interest rates, the adverse effects of such changes may
be offset, in whole or in part, by gains on the sale of Futures Contracts.
10
<PAGE>
Conversely, the increased cost of a Portfolio's securities to be acquired caused
by a general decline in interest rates may be offset, in whole or in part, by
gains on Futures Contracts purchased by such Portfolio. A major advantage of
futures contracts is that they provide a low-cost tool for quick action by the
portfolio managers to adjust the duration of the portfolio. For example, if the
manager wishes to lengthen a Portfolio's maturity, securities can be sold and
others purchased to move the Portfolio to its new targeted duration.
Unfortunately, the desired combination of credit quality, call features,
original issue discount, coupon, and maturity are frequently not available in
sufficient quantity to allow for quick shifts in duration, particularly in
municipal securities. There is also an opportunity cost to the Portfolio during
the period when duration is being changed. These delays in adjusting duration
can be avoided by the use of Futures Contracts. A Portfolio will incur brokerage
fees when it purchases and sells Futures Contracts, and it will be required to
make and maintain margin deposits.
Options on Futures Contracts. If the proposed change is approved, the
Portfolios may purchase and write options to buy or sell interest rate futures
contracts. Advisers expects to use such investment strategies as a hedge and
not for speculation. An Option on a Futures Contract provides the holder with
the right to enter into a "long" position in the underlying Futures Contract, in
the case of a call option, or a "short" position in the underlying Futures
Contract, in the case of a put option, at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date.
Put and call Options on Futures Contracts may be traded by the Portfolios
in order to protect against declines in the values of Portfolio securities or
against increases in the cost of securities to be acquired. Purchases of
Options on Futures Contracts may present less risk in hedging than the purchase
or sale of the underlying Futures Contracts since the potential loss is limited
to the amount of the premium plus related transaction costs. The writing of
such options, however, does not present less risk than the trading of Futures
Contracts and will constitute only a partial hedge, up to the amount of the
premium received, and, if an option is exercised, a Portfolio may suffer a loss
on the transaction.
RISKS OF OPTIONS AND FUTURES STRATEGY TRANSACTIONS
The Portfolios' use of forward contracts and options and futures strategies
would involve certain investment risks and transaction costs. These risks
include: dependence on Advisers' ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets, and
movements in interest rates; imperfect correlation between movements in the
price of futures contracts or options thereon and movements in the price of the
security hedged or used for cover; unexpected adverse price movements which
could render a Portfolio's hedging strategy unsuccessful and could result in
losses; the fact that skills and techniques needed to trade futures contracts
and options thereon or to use forward contracts are different from those needed
to select the securities in which the Portfolios invest; the lack of assurance
that a liquid secondary market will exist for any particular futures contract or
option thereon at any particular time requiring a Portfolio to maintain a
position until exercise or expiration, which could result in losses; and the
possible need to defer closing out certain futures contacts and options thereon
in order to continue to qualify for the beneficial tax treatment afforded
"regulated investment companies" under the Internal Revenue Code.
11
<PAGE>
SHAREHOLDER APPROVAL
EACH PORTFOLIO VOTES AS A SEPARATE SERIES WITH RESPECT TO THE INVESTMENT
RESTRICTION APPLICABLE TO SUCH PORTFOLIO. If approved, the change to the
fundamental investment restriction set forth above is expected to become
effective on or about February 1, 1998. The adoption of the proposal with
respect to a Portfolio requires the affirmative vote of the holders of a
majority of that Portfolio's outstanding shares. In this context, "majority" of
the outstanding voting securities of a Portfolio means the lesser of: (a) 67% of
the Portfolio's outstanding shares present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy or (b) more
than 50% of the Portfolio's outstanding shares. Unless otherwise instructed,
the persons named as proxies will vote for approval of the proposed amended
investment restriction.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS APPROVE THE
PROPOSED AMENDMENT TO THE FUNDAMENTAL INVESTMENT RESTRICTION.
PROPOSAL THREE
APPROVAL OR DISAPPROVAL OF AN AMENDED
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
WITH FORTIS ADVISERS, INC. FOR THE MINNESOTA PORTFOLIO
SUMMARY
Advisers is currently acting as investment adviser to the Minnesota
Portfolio pursuant to an Investment Advisory and Management Agreement (the
"Current Agreement") dated December 12, 1990, between Advisers and the Fund.
Advisers has proposed, and the Board of Directors has approved resolutions
recommending the adoption by shareholders of the Minnesota Portfolio of an
amended investment advisory and management agreement (the "Proposed Agreement").
Under the Proposed Agreement, the size of the investment advisory fee (as a
percentage of average net assets) payable by the Minnesota Portfolio will
decrease if average net assets are $100,000,000 or less; however, the investment
advisory fee (as a percentage of average net assets) payable by the Minnesota
Portfolio will no longer be based on the combined average net assets of the
National Portfolio and the Minnesota Portfolio but will be based on the average
net assets of the Minnesota Portfolio and the size of the fee (as a percentage
of average net assets) paid by the Minnesota Portfolio will no longer be reduced
if the Minnesota Portfolio has average net assets over $100,000,000. As of
September 30, 1997, the Minnesota Portfolio had net assets of $50,032,792. The
proposed fee structure reduces expenses by approximately 9c for every $1,000
invested in the Minnesota Portfolio at its current size.
12
<PAGE>
Set forth below is a table illustrating the historical fees paid to
Advisers for investment advisory and management services provided for the
Minnesota Portfolio for its last fiscal year ended September 30, 1997; how such
actual fees compare to fees which would have been payable by the Minnesota
Portfolio had the Proposed Agreement been in effect; and the percentage
decrease:
ADVISORY FEES
ADVISORY FEES PAID PAYABLE BY
BY MINNESOTA PORTFOLIO MINNESOTA PORTFOLIO IF
DURING FISCAL YEAR ENDED AMENDED AGREEMENT HAD
SEPTEMBER 30, 1997 HAD BEEN IN EFFECT DIFFERENCE
------------------------ ---------------------- ----------
$371,144 $366,563 (1.2%)
BASES FOR RECOMMENDATION OF THE PROPOSED AGREEMENT
Currently, the assets of the Minnesota Portfolio are combined with those of
the National Portfolio to determine the Minnesota Portfolio's management fee.
Prior to 1992, the National Portfolio's fee had been calculated in the same
manner. However, in 1992, the National Portfolio shareholders approved a new
advisory agreement with a different fee structure under which its investment
advisory fee is based solely on its assets. The shareholders of the Minnesota
Portfolio were presented with, but did not approve, a similar change at that
time. Accordingly, shareholders of the Minnesota Portfolio are being asked to
approve a proposal to modify the fee structure for the Minnesota Portfolio under
which its investment advisory fee will be based solely on the assets of the
Minnesota Portfolio.
In addition, despite inflationary factors and increasing costs to Advisers
of rendering investment advisory and other shareholder services to the Minnesota
Portfolio, no increases in the fee structure under which Advisers manages the
Minnesota Portfolio have occurred since the existing advisory fee schedule went
into effect over 11 years ago.
In the years since the existing advisory fee schedule went into effect,
many events have occurred and are continuing that are dramatically changing the
mutual fund industry. Significant increases in the cost of managing mutual
funds and providing shareholder services are two of the more significant of
these events. Consequently, the costs of managing mutual fund assets have
increased and are likely to continue to increase because of continually rising
costs, expenses of personnel, and expansion of services. Unlike most other
mutual funds, the costs to Advisers of acting as the Fund's registrar, transfer
agent, and dividend disbursing agent are included in the investment advisory and
management fee. Therefore, such shareholder servicing cost increases also have
been absorbed by Advisers over the years. An example of an increase in costs is
the increase in first-class postage since 1986. This increase has been even
more significant to Advisers because it has been applied to a much larger
shareholder base. (The number of shareholders has increased 408% from 247 at
December 31, 1986, to 1,255 at September 30, 1997.)
The quality and quantity of services provided to the Fund have continuously
been maintained and improved. For example, Advisers continues to upgrade
telephone systems and computer systems (as to portfolio management, shareholder
servicing, and portfolio accounting) that have enabled it to offer a high
quality of service. Since 1986 Advisers has added new methods, such as the use
of micro-computers and the development of on-line research
13
<PAGE>
databases, to aid its research efforts. The following is a summary of some of
the other additional services provided by Advisers to the Fund and its
shareholders since 1986:
- daily dividends since 1990;
- telephone redemptions since 1992;
- quarterly consolidated statements of shareholder accounts since 1993;
- Fortis Information Line since 1994, which allows the Fund's investors to
receive information regarding prices of the Fund's shares and account
information 24 hours a day, seven days a week;
- electronic funds transfer for purchases and redemptions since 1994;
- average cost statements since 1994; and
- consolidated 1099 tax statements since 1995
The tables below shows the effect of the Proposed Agreement on the average
annual total return of Minnesota Portfolio Class A, B, C, and H shares for the
past one year and since inception of such classes and the average annual total
return of Minnesota Portfolio Class E shares for the past one, five, and ten
years, and since inception.
14
<PAGE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
IF PROPOSED AGREEMENT
HISTORICAL HAD BEEN IN EFFECT
------------------------ --------------------
SINCE SINCE
1 YEAR INCEPTION* 1 YEAR INCEPTION*
----------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Class A shares/1/ 6.66% 8.49% 6.66% 8.49%
Class A shares/2/ 1.86% 6.77% 1.86% 6.77%
Class B shares/1/ 6.01% 7.65% 6.01% 7.65%
Class B shares/2/ 2.41% 6.83% 2.41% 6.83%
Class C shares/1/ 6.00% 7.70% 6.00% 7.70%
Class C shares/2/ 5.00% 7.70% 5.00% 7.70%
Class H shares/1/ 6.00% 7.71% 6.00% 7.71%
Class H shares/2/ 2.40% 6.89% 2.40% 6.89%
</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.
/1/ Without Sales Charge.
/2/ With Sales Charge. Classes B, C and H assume full redemption on
September 30, 1997.
* Since November 14, 1994--Date shares were first offered to the public.
15
<PAGE>
CLASS E AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
IF PROPOSED AGREEMENT
HISTORICAL HAD BEEN IN EFFECT
--------------------------------------------------------------------------------------
SINCE SINCE
1 YEAR 5 YEAR 10 YEAR 10/2/86* 1 YEAR 5 YEAR 10 YEAR 10/2/86*
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class E 2.28% 5.18% 7.10% 6.38% 2.28% 5.18% 7.10% 6.38%
Shares/1/
Class E 7.10% 6.15% 7.60% 6.81% 7.10% 6.15% 7.60% 6.81%
Shares/2/
</TABLE>
_______________
Past performance is not indicative of future performance. Investment return and
principal value fluctuate so that shares, when redeemed, may be worth more or
less than their original cost.
* Date shares were first offered to the public.
/1/ 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%.
/2/ These are the total returns of the class during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
CURRENT AGREEMENT
Since its inception, the Fund has been managed by Advisers or its
former wholly owned subsidiary, AMEV Money Managers, Inc., subject to the
supervision of the Fund's Board of Directors, pursuant to a written advisory
agreement periodically approved by the Fund's directors and the Portfolios'
shareholders. The Current Agreement was last approved by the shareholders of
the Minnesota Portfolio at a special shareholders' meeting held on November 8,
1990. Although the Current Advisory Agreement contains the same material terms
and conditions, including the fee paid by the Minnesota Portfolio, as the Fund's
former investment advisory and services agreement with Advisers pertaining to
the Minnesota Portfolio, approval of the Current Advisory Agreement was
necessitated by reason of the combination of Fortis AMEV (formerly N.V. AMEV)
and Fortis AG (formerly Compagnie Financiere et de Reassurance du Groupe AG).
As a result of the combination, each of Fortis AMEV and Fortis AG own and
control indirectly 50% of all of its respective subsidiaries and the
subsidiaries of the other party. Immediately prior to the combination, Advisers
was an indirect wholly owned subsidiary of Fortis AMEV. Under the terms of the
former agreement, and as required by the Investment Company Act of 1940 (the
"1940 Act"), such agreement automatically terminated upon its assignment. The
combination of Fortis AMEV and Fortis AG was considered to be an assignment of
such agreement, thereby terminating the agreement upon consummation of the
combination on December 12, 1990.
The Current Agreement gives Advisers the authority and responsibility
to make and execute investment decisions for the Minnesota Portfolio within the
framework of the Portfolio's investment policies. Under the Current Agreement,
Advisers is required to furnish the Fund with all necessary management services,
facilities, equipment, and personnel. Advisers will arrange, if requested by
the Fund, for officers, employees, or other affiliates
16
<PAGE>
of Advisers to serve without compensation to the Fund as directors, officers, or
employees of the Fund if duly elected to such positions by the shareholders or
directors of the Fund. In addition, Advisers will bear the costs of acting as
the Fund's transfer agent, registrar, and dividend disbursing agent. The Current
Agreement provides that Advisers or Investors will also bear all promotional
expenses in connection with the distribution of the Fund's shares, including
paying for prospectuses and shareholder reports for new shareholders and the
costs of sales literature.
The Current Agreement provides that Advisers shall receive an
investment advisory and management fee (as a percentage of average net assets)
for the Minnesota Portfolio as its compensation for acting as investment adviser
and manager of the Minnesota Portfolio.
The size of the fee paid by the Minnesota Portfolio (as a percentage
of average net assets) is based upon the combined net assets of the National
Portfolio and the Minnesota Portfolio as shown in the table below.
Average of Combined Annual Investment Advisory
Portfolio Net Assets and Management Fee
-------------------- --------------------------
On the first $50 million .8 of 1%
On the next $50 million .7 of 1%
On assets over $100 million .625 of 1%
Advisers also receives compensation from the National Portfolio of the Fund
for acting as investment adviser and manager of the National Portfolio pursuant
to an Investment Advisory and Management Agreement dated January 31, 1992 (the
"National Portfolio Agreement"). Under the National Portfolio Agreement,
Advisers receives an investment advisory and management fee based upon the net
assets of the National Portfolio as shown in the table below.
Average of Portfolio Annual Investment Advisory
Net Assets and Management Fee
-------------------- --------------------------
On the first $50 million .8 of 1%
On assets over $50 million .7 of 1%
Advisers has not waived, reduced, or otherwise agreed to reduce its
compensation under the National Portfolio Agreement.
During the fiscal year ended September 30, 1997, the Fund paid investment
advisory and management fees to Advisers aggregating $576,384 and $371,144 for
the National Portfolio and the Minnesota Portfolio, respectively. As of
September 30, 1997, the National Portfolio and the Minnesota Portfolio had net
assets of $73,971,150 and $50,032,792, respectively.
The Current Agreement provides that in addition to the investment advisory
and management fee described above, the Fund shall also pay all its expenses
which are not assumed by Advisers or Investors. These Fund expenses include,
for example, the fees and expenses of directors and officers of the Fund who are
not "affiliated
17
<PAGE>
persons" of Advisers, interest expenses, taxes, brokerage fees and commissions,
fees and expenses of registering and qualifying the Fund and its shares for
distribution under federal and state securities laws, expenses of preparing
prospectuses and of printing and distributing prospectuses annually to existing
shareholders, custodian charges, auditing and legal expenses, insurance
expenses, association membership dues, and the expense of reports to
shareholders, shareholders' meetings, and proxy solicitations. The Fund is also
liable for such nonrecurring expenses as may arise, including litigation to
which it may be a party. The Fund may have an obligation to indemnify its
directors and officers with respect to any litigation.
Expenses that relate exclusively to a particular Portfolio, such as
custodian charges and registration fees for shares, are charged to that
Portfolio. Other expenses of the Fund are allocated among the Portfolios in an
equitable manner as determined by officers of the Fund under the supervision of
the Board of Directors, usually on the basis of net assets or numbers of
accounts.
The Current Agreement provides that it will continue in effect from year to
year only so long as such continuation is specifically approved at least
annually by the Board of Directors of the Fund or, with respect to the Minnesota
Portfolio, by a vote of a majority of the outstanding voting securities of the
Portfolio, provided that in either event such continuation is also approved by
the vote of the majority of the directors who are not parties to such agreement
or interested persons of such parties, cast in person at a meeting called for
the purpose of voting on such approval. The Current Agreement automatically
terminates upon its assignment and is terminable at any time without penalty by
the Board of Directors of the Fund or, with respect to the Minnesota Portfolio,
by the vote of the holders of a majority of the outstanding voting securities of
the Minnesota Portfolio on 60 days' notice to Advisers and by Advisers on 60
days' notice to the Fund. For purposes of these provisions, a majority of the
outstanding voting securities of a Portfolio means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares.
PROPOSED AGREEMENT
At the Board of Directors meeting held June 24, 1997, in response to a
proposal by Advisers, the Board of Directors approved resolutions recommending
the adoption by shareholders of the Minnesota Portfolio of an amended Investment
Advisory and Management Agreement (the "Proposed Agreement"), which includes a
change in the fee structure and a decrease in the investment advisory and
management fee (as a percentage of average net assets) payable by the Minnesota
Portfolio if average net assets are $100,000,000 or less as described above
under "Summary." In 1992, the Fund's Board of Directors approved an amended
Investment Advisory and Management Agreement for the Minnesota Portfolio and the
National Portfolio; however, although the proposed amended agreement was
approved by shareholders of the National Portfolio it did not receive the
sufficient votes required for approval by the Minnesota Portfolio at the
shareholders' meeting held January 28, 1992. On June 24, 1997, the Fund's Board
of Directors therefore approved the Proposed Agreement.
The Proposed Agreement differs from the Current Agreement in only the
following material respects:
(a) The investment advisory fee (as a percentage of average net assets)
payable by the Minnesota Portfolio will no longer be based on the combined
average net assets of the National Portfolio and the Minnesota Portfolio
but will be based on the average net assets of the Minnesota Portfolio, (b)
18
<PAGE>
the size of the fee (as a percentage of average net assets) on the first
$50 million in average net assets will change to .72%, and (c) the size of
the fee (as a percentage of average net assets) paid by the Minnesota
Portfolio will no longer be reduced if the Minnesota Portfolio has average
net assets over $100 million. The new fee schedule is set forth below:
Average of Portfolio Annual Investment Advisory
Net Assets and Management Fee
-------------------- ------------------------------
On the first $50 million .72 of 1%
On assets over $50 million .7 of 1%
As indicated above, the annual fee for the Minnesota Portfolio as a
percentage of average net assets would change to .72 of 1% for the first $50
million in average net assets and .7 of 1% on average net assets over $50
million. The annual fee as a percentage of average net assets for the Minnesota
Portfolio would no longer decrease to .625 of 1% on average net assets over $100
million but would remain at .7 of 1% on average net assets over $100 million.
In approving the Proposed Agreement and recommending its approval by
shareholders, the directors who are not "interested persons" of the Fund, in
weighing what was in the best interests of the shareholders of the Fund,
evaluated all factors deemed relevant. The factors considered, which were
augmented by the documentation received from Advisers and evaluated, were the
nature, quality, and extent of the services furnished by Advisers to the
Minnesota Portfolio; the unique manner in which the investment advisory fee is
calculated on the Minnesota Portfolio; the accounting difficulties that at times
have been created by the current method of calculating the investment advisory
fee and the benefits of changing the method of calculating the fee; the fact
that the investment and management fee also covers the added costs to Advisers
of acting as the Fund's registrar, transfer agent, and dividend disbursing
agent, which Advisers pays, which costs are paid directly by most other
investment companies; the necessity of Advisers being able to maintain its
ability to retain and attract capable personnel to serve the Fund; the
advantages and possible disadvantages to the Minnesota Portfolio of having an
adviser which serves other funds; the investment record of Advisers; Advisers'
before-tax profitability for the year ended December 31, 1996, and the nine-
month period ended September 30, 1997, from serving the Minnesota Portfolio,
which Advisers reported as $98,018 and $1,178, respectively; comparative data as
to investment performance, advisory fees and expense ratios of other mutual
funds; possible benefits to Advisers from serving as adviser; the economic
benefits to Advisers from higher advisory fees; current and developing
conditions in the financial services industry, including the presence in the
industry of large and highly capitalized companies which are spending and appear
to be prepared to continue to spend substantial sums to engage personnel and to
provide services to competing investment companies; the financial resources of
Advisers; and the need for appropriate incentives to assure that Advisers will
continue to furnish high quality services to the Minnesota Portfolio. The Board
did not assign relative weights to such factors.
The directors also considered the following:
- - The Minnesota Portfolio's average management fees for the fiscal year ended
September 30, 1997, were a low .73 of 1% of the Minnesota Portfolio's
average net assets and the total expense ratios of the Portfolio's
19
<PAGE>
Class A, B, C, E, and H shares were 1.21%, 1.96%, 1.96%, 0.96%, and 1.96%,
respectively, of the Portfolio's average net assets.
- - If the Current Agreement were to remain in effect, the Minnesota
Portfolio's average management fees for each Class for the fiscal year
ending September 30, 1998, were estimated to equal .73 of 1% of the
Portfolio's average net assets and the total expense ratios of the
Portfolio's Class A, B, C, E, and H shares were estimated to equal 1.21%,
1.96%, 1.96%, 0.96%, and 1.96%, respectively, of the Portfolio's average
net assets.
- - If the Proposed Agreement is approved, the Minnesota Portfolio's average
management fees for each Class for the fiscal year ending September 30,
1998, were estimated to equal .72 of 1% of the Portfolio's average net
assets and the total expense ratios of the Portfolio's Class A, B, C, E,
and H shares were estimated to equal 1.20%, 1.95%, 1.95%, 0.95%, and 1.95%,
respectively, of the Portfolio's average net assets.
ONLY HOLDERS OF THE MINNESOTA PORTFOLIO'S SHARES VOTE ON THIS PROPOSAL.
The adoption of the proposal requires the affirmative vote of the holders of a
majority of the Minnesota Portfolio's outstanding shares as defined above.
Unless otherwise instructed, the proxies will vote in favor of the adoption of
the Proposed Agreement.
The Proposed Agreement will become effective February 1, 1998, if approved
by shareholders. The Proposed Agreement will continue in effect from year to
year thereafter only so long as such continuance is specifically approved at
least annually by the Board of Directors of the Fund or, with respect to the
Minnesota Portfolio, by a vote of the holders of a majority of the outstanding
voting securities of the Minnesota Portfolio, provided that in either event such
continuance is also approved by a vote of a majority of the directors who are
not parties to such Proposed Agreement or interested persons of such parties
cast in person at a meeting called for the purpose of voting on such approval.
If the shareholders do not approve the Proposed Agreement, the Current Agreement
may continue in effect, or Advisers may propose alternative amendments at a
subsequent shareholders' meeting.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE MINNESOTA
PORTFOLIO APPROVE THE PROPOSED AGREEMENT WITH ADVISERS.
PORTFOLIO TRANSACTIONS
As the Fund's Portfolios are exclusively composed of debt, rather than
equity securities, most of the Fund's portfolio transactions are effected with
dealers without the payment of brokerage commissions, but at net prices which
usually include a spread or markup. In effecting such portfolio transactions on
behalf of the Fund, Advisers seeks the most favorable net price consistent with
the best execution. However, frequently Advisers selects a dealer to effect a
particular transaction without contacting all dealers who might be able to
effect such transaction, because of the volatility of the bond market and the
desire of Advisers to accept a particular price for a security because the price
offered by the dealer meets its guidelines for profit, yield, or both.
20
<PAGE>
Decisions with respect to placement of the Fund's portfolio transactions
are made by its investment adviser. The primary consideration in making these
decisions is efficiency in the execution of orders and obtaining the most
favorable net prices for the Fund. When consistent with these objectives,
business may be placed with broker-dealers who furnish investment research
services to Advisers. Such research services include advice, both directly and
in writing, as to the value of securities; the advisability of investing in,
purchasing, or selling securities; and the availability of securities, or
purchasers or sellers of securities; as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. This allows Advisers to supplement its own
investment research activities and enables Advisers to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Fund. To the extent such
commissions are directed to these other broker-dealers who furnish research
services to Advisers, Advisers receives a benefit, not capable of valuation in
dollar amounts, without providing any direct monetary benefit to the Fund from
these transactions.
Advisers has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of Fund portfolio transactions in exchange for
research services provided Advisers, except as noted below. However, Advisers
does maintain an informal list of broker-dealers which is used from time to time
as a general guide in the placement of Fund business, in order to encourage
certain broker-dealers to provide Advisers with research services which Advisers
anticipates will be useful to it. Because the list is merely a general guide
which is to be used only after the primary criteria for the selection of broker-
dealers (discussed above) have been met, substantial deviations from the list
are permissible and may be expected to occur. Advisers will authorize the Fund
to pay an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker-dealer would have charged only if
Advisers determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of either that particular transaction or Advisers'
overall responsibilities with respect to the accounts as to which Advisers
exercises investment discretion. Generally the Fund pays higher than the lowest
rates available.
During the fiscal year ended September 30, 1997, fixed income securities
transactions having an aggregate dollar value of approximately $110,655,057 and
$64,441,383 for National Portfolio and Minnesota Portfolio, respectively
(excluding short-term securities), were traded at net prices including a spread
or markup; during the same period, the Portfolios paid no brokerage commissions
to brokers involved in the purchase and sale of securities for the Portfolios.
The Portfolios will not effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with
Advisers, unless such transactions, including the frequency thereof, the receipt
of commission payable in connection therewith, and the selection of the
affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the Portfolio. No commission were paid to
any affiliate of Advisers during the fiscal year ended September 30, 1997.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to the policies as set forth in the
preceding paragraphs and such other policies as the Fund's directors may
determine, Advisers considers sales of shares of the Portfolios and of other
funds advised by Advisers as a factor in the selection of broker-dealers to
execute Portfolio securities transactions.
21
<PAGE>
EXECUTIVE OFFICERS OF THE FUND
Certain information about the executive officers of the Fund is set forth
below. Unless otherwise indicated, all positions have been held more than five
years.
<TABLE>
<CAPTION>
CURRENT POSITION WITH ADVISERS
NAME, (AGE), POSITION AND TERM OF AND BUSINESS EXPERIENCE
AND ADDRESS OFFICE WITH THE FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Dean C. Kopperud (45) President since 1995 See biographical information in
500 Bielenberg Drive Proposal One.
Woodbury, Minnesota
Gary N. Yalen (55) Vice President since President and Chief Investment
One Chase Manhattan 1995 Officer of Advisers (since 1995)
Plaza and Senior Vice President,
New York, New York Investments, of Fortis, Inc; prior
to 1996, President and Chief
Investment Officer, Fortis Asset
Management, a former division of
Fortis, Inc.
Howard G. Hudson (60) Vice President since Executive Vice President and Head
One Chase Manhattan 1995 of Fixed Income Investments of
Plaza Advisers since 1995; prior to
New York, New York 1996, Senior Vice President, Fixed
Income, Fortis Asset Management.
Lucinda S. Mezey (50) Vice President since Executive Vice President and Head
One Chase Manhattan 1997 of Equity Investments of Advisers
Plaza since October 1997; from 1995 to
New York, New York October 1997, Chief Investment
Officer, Alex Brown Capital
Advisory and Trust Co., Baltimore,
MD; prior to 1995, Senior Vice
President and Head of Equity
Investments, PNC Bank,
Philadelphia, Pennsylvania.
James S. Byrd (46) Vice President since Executive Vice President of
5500 Wayzata 1991 Advisers since 1995; prior to
Boulevard 1995, Vice President of Advisers
Golden Valley, and of Investors.
Minnesota
Nicholas L. M. de Vice President since Vice President of Advisers since
Peyster (31) 1995 1995; prior to 1996, Vice
One Chase Manhattan President, Equities, Fortis Asset
Plaza Management.
New York, New York
Charles J. Dudley (33) Vice President since Vice President of Advisers since
One Chase Manhattan 1995 1995; prior to 1995, Senior Vice
Plaza President, Sun America Asset
New York, New York Management, Los Angeles,
California.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
CURRENT POSITION WITH ADVISERS
NAME, (AGE), POSITION AND TERM OF AND BUSINESS EXPERIENCE
AND ADDRESS OFFICE WITH THE FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Maroun M. Hayek (49) Vice President since Vice President of Advisers since
One Chase Manhattan 1995 1995; prior to 1996, Vice
Plaza President, Fixed Income, Fortis
New York, New York Asset Management.
Robert C. Vice President since Vice President of Advisers since
Lindberg (44) 1993 1993; prior to 1993, Vice
One Chase Manhattan President, Portfolio Manager and
Plaza Chief Securities Trader, COMERICA,
New York, New York Inc., Detroit, Michigan.
Charles L. Vice President since Vice President of Advisers; prior
Mehlhouse (55) 1996 to March 1996, Portfolio Manager,
One Chase Manhattan Marshall & Ilsley Bank
Plaza Corporation, Milwaukee, Wisconsin.
New York, New York
Kevin J. Michels (46) Vice President since Vice President of Advisers since
One Chase Manhattan 1995 1995; prior to 1996, Vice
Plaza President, Administration, Fortis
New York, New York Asset Management.
Christopher J. Vice President since Vice President of Advisers since
Pagano (34) 1996 1996; prior to March 1996,
One Chase Manhattan government strategist, Merrill
Plaza Lynch, New York, New York.
New York, New York
Stephen M. Vice President since Vice President of Advisers since
Rickert (54) 1995 1995; from 1994 to 1996, Corporate
One Chase Manhattan Bond Analyst, Fortis Asset
Plaza Management; from 1993 to 1994,
New York, New York Corporate Bond Analyst, Dillon,
Reed & Co., Inc., New York, New
York.
Keith R. Thomson (60) Vice President since Vice President of Advisers.
5500 Wayzata 1993
Boulevard
Golden Valley,
Minnesota
Christopher J. Vice President since Vice President of Advisers since
Woods (37) 1995 1995; prior to 1996, Vice
One Chase Manhattan President, Fixed Income, Fortis
Plaza Asset Management.
New York, New York
Robert W. Beltz, Vice President since Vice President--Securities
Jr. (48) 1993 Operations of Advisers and of
500 Bielenberg Drive Investors.
Woodbury, Minnesota
Peggy E. Ettestad Vice President since Senior Vice President, Operations
(40) 1997 of Advisers since March 1997;
500 Bielenberg Drive prior to March 1997, Vice
Woodbury, Minnesota President, G.E. Capital Fleet
Services, Minneapolis, Minnesota.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
CURRENT POSITION WITH ADVISERS
NAME, (AGE), POSITION AND TERM OF AND BUSINESS EXPERIENCE
AND ADDRESS OFFICE WITH THE FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Tamara L. Fagely (39) Treasurer since 1993 Second Vice President of Advisers
500 Bielenberg Drive and Vice President and of Investors.
Woodbury, Minnesota since 1996
Dickson W. Lewis (48) Vice President since Senior Vice President, Marketing
500 Bielenberg Drive 1997 and Sales of Advisors and of
Woodbury, Minnesota Investors since July 1997; from
1993 to July 1997, President and
Chief Executive Office,
Hedstrom/Blessing, Inc.,
Minneapolis, Minnesota; from 1992
to 1993, an independent marketing
consultant.
David A. Peterson (55) Vice President since Vice President and Assistant
500 Bielenberg Drive 1991. General Counsel of Fortis
Woodbury, Minnesota Benefits Insurance Company.
Scott R. Plummer (38) Vice President since Second Vice President, Corporate
500 Bielenberg Drive 1996. Counsel and Assistant Secretary of
Woodbury, Minnesota Advisers since 1994; prior to
1994, Attorney, Zelle & Larson,
Minneapolis, Minnesota.
Michael J. Radmer (52) Secretary since 1982. Partner, Dorsey & Whitney LLP, the
220 South Sixth Street Fund's General Counsel.
Minneapolis,
Minnesota
Rhonda J. Schwartz Vice President since Since January 1996, Senior Vice
(39) 1996. President and General Counsel of
500 Bielenberg Drive Advisers, Senior Vice President
Woodbury, Minnesota and General Counsel, Life and
Investment Products, of Fortis
Benefits Insurance Company and
Vice President and General
Counsel, Life and Investment
Products, of Time Insurance
Company; from 1993 to January
1996, Vice President and General
Counsel of Fortis, Inc.; prior to
1993, Attorney, Norris, McLaughlin
& Marcus, Washington, D.C.
</TABLE>
UNDERWRITING AND DISTRIBUTION
On December 11, 1997, the Board of Directors (including a majority of the
directors who were not parties to the contract or interested persons of any such
party) reapproved the existing Underwriting Agreement with Investors dated
November 14, 1994 (the "Underwriting Agreement") The Underwriting Agreement may
be terminated by the
24
<PAGE>
Fund or Investors at any time by the giving of 60 days' written notice, and it
terminates automatically in the event of an assignment. The Underwriting
Agreement may be terminated with respect to a Portfolio by the vote of the
holders of a majority of the outstanding voting securities of that Portfolio
upon 60 days' written notice to Investors. Unless sooner terminated, the
Underwriting Agreement shall continue in effect for more than two years after
its execution only so long as such continuance is specifically approved at least
annually by a majority of the directors who are not parties to such Underwriting
Agreement, or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval.
During the fiscal year ended September 30, 1997, Investors received $99,076
and $58,107, respectively, for underwriting the National Portfolio's shares and
the Minnesota Portfolio's shares. Of such amount received, Investors paid to
broker-dealers and registered representatives $66,974 and $49,659, respectively,
for selling shares of the National Portfolio and the Minnesota Portfolio.
Pursuant to a Plan of Distribution adopted by the Fund under Rule 12b-1
under the 1940 Act, the Fund is obligated to pay Investors an annual fee of .25%
of average net assets attributable to the Funds' Class A shares and 1.00% of
average net assets attributable to Class B, H, and C shares. While all of Class
A's Rule 12b-1 fee constitutes a "distribution fee," only 75% of Class B, H, and
C's fees constitute distribution fees. A portion of the Rule 12b-1 fee equal to
.25% of the average net assets of the Fund attributable to the Class B, H. and C
shares, constitutes a shareholder servicing fee designed to compensate Investors
for the provision of certain services to shareholders. During the fiscal period
ended September 30, 1997, Investors received $33,596 from the Minnesota
Portfolio pursuant to the Plan of Distribution, paid $22,370 to broker-dealers
and registered representatives, and in addition to such amount (along with
Advisers) spent $38,470 on activities related to the distribution of the
Minnesota Portfolio's share.
CONTROL AND MANAGEMENT OF ADVISERS
Dean C. Kopperud is the Chief Executive Officer of Advisers. Messrs.
Kopperud, Gary N. Yalen, and James S. Byrd are the Directors of Advisers.
Fortis, Inc. owns 100% of the outstanding voting securities of Advisers.
Fortis, Inc. located in New York, New York, is a wholly owned subsidiary of
Fortis International, N.V., which has approximately $100 billion in assets
worldwide and is in turn a wholly owned subsidiary of AMEV/VSB 1990 N.V.
("AMEV/VSB 1990").
AMEV/VSB 1990 is a corporation organized under the laws of The Netherlands
to serve as the holding company for all U.S. operations and is owned 50% by
Fortis AMEV and 50% by Fortis AG. AMEV/VSB 1990 owns a group of companies
active in insurance, banking and financial services, and real estate development
in The Netherlands, the United States, Western Europe, Australia, and New
Zealand.
Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1947. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis
AG own a group of
25
<PAGE>
companies (of which AMEV/VSB 1990 is one) active in insurance, banking and
financial services and real estate development in The Netherlands, Belgium, the
United States, Western Europe, and the Pacific Rim.
No officer or director of the Fund owns any securities of Advisers. No
officer or director of the Fund or of Advisers owns more than 1% of the
outstanding common stock of Fortis, Inc. or N.V. AMEV.
The address of Fortis, Inc. is One Chase Manhattan Plaza, New York, New
York. The address of Fortis International, AMEV/VSB 1990, and Fortis AMEV is
Archimedeslaan 10, 3584 BA Utrecht, The Netherlands. The address of Fortis AG
is Boulevard Emile Jacqanin 53, 1000 Brussels, Belgium.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP serves the Fund's independent public accountants for
the fiscal year ending September 30, 1998. KPMG Peat Marwick LLP has served as
the independent public accountants of the Fund since the then fiscal year ended
December 31, 1988. KPMG Peat Marwick LLP also serves as independent public
accountants for the Other Fortis Funds.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting. Such representatives will be given the opportunity to make a statement
to the shareholders if they desire to do so and are expected to be available to
respond to any questions which may be raised at the meeting.
OTHER MATTERS
Management does not intend to present any business to the meeting not
mentioned in this Proxy Statement and currently knows of no other business to be
presented. If any other matters are brought before the meeting, the persons
named as proxies will vote on such matters in accordance with their judgment of
the best interests of the Fund.
PROPOSALS OF FUND SHAREHOLDERS
The Fund is not required to hold annual meetings of shareholders.
Therefore, an anticipated date of the next regular meeting cannot be provided.
If a shareholder has a proposal which such shareholder feels should be presented
to all shareholders, the shareholder should send the proposal to the Fund. The
proposal will be considered as appropriate at a meeting of the Board of
Directors as soon as practicable. Should it be a matter which would have to be
submitted to shareholders at a regular meeting, it will be presented at the next
special or regular meeting of shareholders. In addition, should it be a matter
which the Board of Directors deems of such significance as to require a special
meeting, such a meeting will be called.
Dated: December 29, 1997 Michael J. Radmer, Secretary
26
<PAGE>
[LOGO]
FORTIS TAX-FREE PORTFOLIOS, INC.
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
To Be Held January 29, 1998
AND PROXY STATEMENT
FORTIS-REG- and Fortis-REG- are registered servicemarks
of Fortis AMEV and Fortis AG.
[LOGO]
FORTIS TAX-FREE
PORTFOLIOS, INC.
<PAGE>
[FORTIS LOGO]
FORTIS TAX-FREE PORTFOLIOS, INC.
P.O. BOX 64284
ST. PAUL, MN 55164
FORTIS TAX-FREE PORTFOLIOS, INC.
500 Bielenberg Drive
Woodbury, Minnesota 55125
PROXY FOR SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JANUARY 29, 1998
THIS PROXY IS SOLICICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned appoints Robert W. Beltz, Jr., Tamara L. Fagely,
Scott R. Plummer, and Michael J. Radmer, and each of them with power
to act without the other and with all the rights of substitution in
each, the proxies of the undersigned to vote all shares of Fortis Tax-
Free Portfolios, Inc, (the "Fund") held by the undersigned on
December 19, 1997, at the Special Shareholders' Meeting of the Fund,
to be held at the offices of the Fund, 500 Bielenberg Drive,
Woodbury, Minnesota, on Thursday, January 29, 1998 at 10:00 a.m. and
any adjournment thereof, with all powers the undersigned would
possess if present in person. All previous proxies given with respect
to the meeting are revoked.
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE MATTERS BELOW. IT
IS UNDERSTOOD THAT IF NO CHOICE IS SPECIFIED BELOW, THIS PROXY WILL
BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL
VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE FUND.
Receipt of Notice of Special Shareholders' Meeting and Proxy
Statement is acknowledged by your execution of this proxy. Mark, sign,
date, and return this proxy in the addressed envelope--no postage
required. Please mail promptly to save further solicitation expenses.
<TABLE>
<CAPTION>
<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X FORTFN KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
- ------------------------------------------------------------------------------------------------------------------------------------
FORTIS TAX-FREE PORTFOLIOS, INC.-NATIONAL PORTFOLIO
THE PROXIES ARE INSTRUCTED TO VOTE MY SHARES AS FOLLOWS
1. Election of directors: For Withhold For All To withhold authority to vote mark "For All
Nominees: 01) Richard W. Cutting, 02) Allen R. Freedman, All All Except: Except" and write the nominees number on
03) Dr. Robert M. Gavin, 04) Benjamin S. Jaffray, 05) the line below.
Jean L. King, 06) Dean C. Kopperud, 07) Edward M. [_] [_] [_]
Mahoney, 08) Robb L. Prince, 09) Noel S. Shadko, 10) ___________________________________________
Leonard J. Santow, and 11) Joseph M. Wikler.
VOTE ON PROPOSALS For Against Abstain
2. Proposal to amend the Portfolio's fundamental investment restriction on investing in commodities: [_] [_] [_]
3. To vote with discretionary authority upon other matters as may come before the meeting.
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
__________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
[FORTIS LOGO]
FORTIS TAX-FREE PORTFOLIOS, INC.
P.O. BOX 64284
ST. PAUL, MN 55164
FORTIS TAX-FREE PORTFOLIOS, INC
500 Bielenberg Drive
Woodbury, Minnesota 55125
PROXY FOR SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JANUARY 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned appoints Robert W. Beltz Jr., Tamara L.
Fagely, Scott R. Plummer, and Michael J. Radmer, and each of
them with power to act without the other and with all the
rights of substitution in each, the proxies of the undersigned
to vote all shares of Fortis Tax-Free Portfolios, Inc. (the
"Fund") held by the undersigned on December 19, 1997, at the
special Shareholders' Meeting of the Fund, to be held at the
offices of the Fund, 500 Bielenberg Drive, Woodbury, Minnesota,
on Thursday, January 29, 1998 at 10:00 a.m. and any adjournment
thereof, with all powers the undersigned would possess if present
in person. All previous proxies given with respect to the meeting
are revoked.
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE MATTERS BELOW.
IT IS UNDERSTOOD THAT IF NO CHOICE IS SPECIFIED BELOW, THIS
PROXY WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE
PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE
FUND.
Receipt of Notice of Special Shareholders' Meeting and Proxy
Statement is acknowledged by your execution of this proxy. Mark, sign,
date, and return this proxy in the addressed envelope--no postage
required. Please mail promptly to save further solicitation expenses.
<TABLE>
<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X FORTFM KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
====================================================================================================================================
FORTIS TAX-FREE PORTFOLIOS, INC.-MINNESOTA PORTFOLIO
THIS PROXIES ARE INSTRUCTED TO VOTE MY SHARES AS FOLLOWS:
1. Election of directors: For Withhold For All To withhold authority to vote mark "For
Nominees: 01) Richard W. Cutting, 02) Allen R. Freedman, All All Except: All Except" and write the nominee's
03) Dr. Robert M. Gavin, 04) Benjamin S. Jaffray, 05) Jean number on the line below.
L. King, 06) Dean C. Kopperud, 07) Edward M. Mahoney,
08) Robb L. Prince, 09) Noel S. Shadko, 10) Leonard J. [_] [_] [_] ________________________________________
Santow, and 11) Joseph M. Wikler.
VOTE ON PROPOSALS For Against Abstain
2. Proposal to amend the Portfolio's fundamental investment restriction on investing in commodities: [_] [_] [_]
3. Proposal to approve an amended Investment Advisory and Management Agreement with Fortis Advisers,
Inc., which includes a change in the fee structure and a decrease in the investment advisory and
management fee (as a percentage of average net assets) if average net assets are $100,000,000 or
less and an increase in the fee on average net assets over $100,000,000: [_] [_] [_]
4. To vote with discretionary authority upon such other matters as may come before the meeting.
_____________________________________________ _____________________________________________
_____________________________________________ _____________________________________________
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
====================================================================================================================================
</TABLE>
<PAGE>
[FORTIS LOGO]
December 29, 1997 [LETTERHEAD OF FORTIS FINANCIAL GROUP]
Dear Fortis Tax-Free Portfolio Shareholder:
We are requesting your participation in a special meeting of shareholders that
will be held on Thursday, January 29, 1998 at 10:00 a.m. The meeting will be
held at the offices of Fortis Tax-Free Portfolios (the "Fund"), 500 Bielenberg
Drive in Woodbury, Minnesota. PLEASE CAREFULLY REVIEW THE ENCLOSED MATERIALS,
COMPLETE THE PROXY FORM AND RETURN IT IN THE ENCLOSED ENVELOPE PROMPTLY AS
POSSIBLE. You may also receive a telephone call from Shareholder Communications
Corporation, a proxy solicitation firm, asking for your support on the voting
items. Please remember that the costs of this solicitation are being paid by the
Fund. Therefore, your prompt action will reduce the time and expense of further
solicitation.
Besides electing the Fund's directors, there are two other important issues we
would like you to consider and approve.
First, we are asking you to approve a modification of the Minnesota and National
Portfolios' investment restrictions to allow the Portfolios to utilize options
and futures contracts. Since the Fund began in 1982, there have been substantial
changes in the securities markets and in the securities laws applicable to
mutual funds. The Portfolios' currently have certain investment limitations
which prevent them from taking advantage of these investment tools and
opportunities. Beginning on page 9 of the Proxy Statement, the proposed changes
are explained in great detail. We apologize for the length of the descriptions
and the technical language involved. However, we have attempted to summarize the
history behind, and reasons for, these changes as well as their potential risks.
Although there is some risk in all forms of investments, we believe that these
risks are reasonable in light of the overall benefits to be derived, including
the opportunity to more effectively manage the impact to the Portfolios of
changes in interest rates. You should also note that many other Fund groups have
made similar changes to their investment policies and restrictions. In order to
remain competitive in the marketplace we believe that the Portfolios must also
make these changes.
The Second item only pertains to shareholders of the MINNESOTA PORTFOLIO.
Currently, the assets of the Minnesota Portfolio are combined with the assets of
the National Portfolio to determine the management fees of the Minnesota
Portfolio. Under the proposed agreement, the fees of the Minnesota Portfolio
would be based solely on the assets of that Portfolio. As more fully explained
in the Proxy Statement beginning on page 12, under the proposal there would be a
slight decrease in the Portfolio's management fee schedule at its current asset
level. Specifically, the fee on the first $50 million dollars in assets will be
.72% as opposed to .8% under the current agreement. The fee on the next $50
million will remain at .7%. Under the new agreement, the fee on assets over $100
million will remain at .7% as opposed to .625% under the current agreement. As
of the end of November the assets of the Minnesota Portfolio stood at S49,
690,143 and it is not expected that the assets of this Portfolio will exceed
$100 million in the near furture.
<PAGE>
Your Board of Directors urges you to vote FOR these proposals. Because these
items require the approval of a majority of the Fund's shareholders, it is
important that you sign, date and return the enclosed proxy form in the envelope
provided.
If you have any questions, please call your investment representative or call us
at 1-800-800-2638, extension 3012.
Sincerely
/s/ Dean C. Kopperud
Dean C. Kopperud
President
Fortis Tax-Free Portfolios, Inc.
