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FORTIS
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ENJOY THE LIBERTY OF TAX-FREE INVESTING
Fortis Tax-Free Portfolios
Semiannual Report
March 31, 1999
FORTIS FINANCIAL GROUP
[GRAPHIC]
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC. SEMIANNUAL REPORT
CONTENTS
LETTER TO SHAREHOLDERS 1
SCHEDULES OF INVESTMENTS
NATIONAL PORTFOLIO 4
MINNESOTA PORTFOLIO 7
STATEMENTS OF ASSETS AND LIABILITIES 9
STATEMENTS OF OPERATIONS 10
STATEMENTS OF CHANGES IN NET ASSETS
NATIONAL PORTFOLIO 11
MINNESOTA PORTFOLIO 12
NOTES TO FINANCIAL STATEMENTS 13
BOARD OF DIRECTORS AND OFFICERS 19
OTHER PRODUCTS AND SERVICES 20
- - TOLL-FREE PERSONAL ASSISTANCE
- Shareholder Services
- (800) 800-2000, 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) 800-2000, 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) 800-2000.
TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800)
800-2000, 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 following the letter are useful because they provide more information
about your investments. The top holdings chart shows the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by 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, 1999
<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........................ $ 11.37 $ 11.36 $ 11.34 $ 11.38 $ 11.35
End of period.............................. $ 11.04 $ 11.03 $ 11.02 $ 11.06 $ 11.03
DISTRIBUTIONS PER SHARE
From net investment income................. $ .234 $ .192 $ .192 $ .246 $ .192
From net realized gains on investments..... $ .120 $ .120 $ .120 $ .120 $ .120
FORTIS TAX-FREE MINNESOTA
NET ASSET VALUE PER SHARE:
Beginning of period........................ $ 10.74 $ 10.73 $ 10.73 $ 10.77 $ 10.76
End of period.............................. $ 10.38 $ 10.37 $ 10.40 $ 10.41 $ 10.40
DISTRIBUTIONS PER SHARE
From net investment income................. $ .238 $ .196 $ .196 $ .250 $ .196
From net realized gains on investments..... $ .171 $ .171 $ .171 $ .171 $ .171
</TABLE>
<PAGE>
[Photo]
Investing in municipal bonds for
tax-free income.
DEAR FORTIS SHAREHOLDER,
The bond market digested a wide variety of economic information during the six
months ended March 31, 1999. The economy showed unexpected strength, combined
with low inflation. Real Gross Domestic Product (GDP) grew at a 6.1% rate during
the fourth quarter of 1998, and economic growth for the three months ended March
31, 1999, is expected to be about 4%. Economic growth was supported by strong
non-farm payroll growth, as the unemployment rate fell to 4.2% in March, 1999,
from 4.6% in September, 1998. Inflation continued to be low, with the
year-over-year core Consumer Price Index (the core CPI excludes food and energy)
up only 2.1% and the year-over-year core Producer Price Index up 1.7% through
February, 1999. In response to continuing concern about Asian economic turmoil
and the uncertain financial markets, the Federal Reserve reduced its Federal
Funds target rate to 5%, from 5.25%, on October 15, and again, to 4.75% on
November 17, 1998.
Municipal bond yields, as reflected by the Bond Buyer Revenue Bond Index, traded
within a 25 basis point range over the six-month period. The yield of the Index
began October, 1998, at 5.09%, which turned out to be the lowest level for the
Index during the entire period through March 31, 1999. Concerns about strong GDP
growth in the U.S. pushed the Index to 5.29% in late October. Interest rates
declined in November as concerns about foreign economies and extreme illiquidity
in some markets caused an increase in demand for the relative security and
liquidity of U.S. Treasuries, and to a much lesser extent, municipal securities.
The Index fell during this period, reaching 5.18% in early December. After the
Federal Reserve reduced interest rates in November, the financial markets
recovered some of their liquidity, and rates moved higher, with the Index
reaching 5.34% on March 4, 1999. The Index closed March, 1999, at 5.29%.
During the fourth quarter of 1998, and during most of the first quarter of 1999,
in order to benefit from expected price appreciation due to declining interest
rates, the duration of the funds was maintained at levels longer than their
respective benchmarks, and for the same reason, there was continuing emphasis on
reducing the call risk of the portfolios. Duration is a measure of a bond
portfolio's sensitivity to changes in interest rates; therefore a "long
duration" portfolio assumes interest rates will decline. This duration
positioning hurt fund performance as rates rose during the first quarter of
1999. During this period, some lower yielding securities in both funds were
sold, and replaced with securities with higher yields. Total returns for the six
months ended March 31, 1999, were .41% for the National Portfolio Class E with
no sales charge and .58% for the Minnesota Portfolio Class E with no sales
charge. These levels compare with the 1.49% total return of the Lehman Municipal
Index during the same period. The durations of the funds at the end of the
reporting period were 6.5 years for the Minnesota portfolio, and 7.5 years for
the National Portfolio.
Our current forecast calls for stable interest rates throughout 1999. We expect
the economy to grow at a modestly slower pace (3%-3.5% real GDP growth) than in
1998, with foreign economic difficulties acting as a restraining influence.
Inflation should continue to be held in check. In our view, narrow quality
spreads do not justify any adjustment in the funds' current AA average quality.
Call protection and coupon will continue to be important elements of bond
structure as we look to enhance future portfolio performance.
Sincerely,
<TABLE>
<S> <C>
/s/ DEAN C. KOPPERUD /s/ HOWARD G. HUDSON
Dean C. Kopperud Howard G. Hudson
President Vice President
</TABLE>
1
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 03/31/99
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligation 24.2%
Health Care / Services 19.6%
Utilities - Water and
Sewer 16.2%
Transportation 12.2%
Housing 9.1%
Utilities - Electric 7.5%
Prerefunded with U.S.
Gov't 5.2%
Higher Education 3.9%
Public Facilities 1.2%
Miscellaneous 0.9%
</TABLE>
NATIONAL PORTFOLIO
VALUE OF $10,000 INVESTED APRIL 1, 1989
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROS.
NATIONAL
MUNICIPAL BOND PORTFOLIO
INDEX*** CLASS E
<S> <C> <C> <C>
89 10,000 9,550
90 11,055 10,309
91 12,075 11,129
92 13,281 12,286
93 14,944 13,846
94 15,291 14,204
95 16,432 15,113
96 17,765 16,153
97 18,714 16,891
98 20,712 18,608
99 21,921 19,495
NATIONAL PORTFOLIO CLASS E AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
CLASS E* +0.06% +5.56% +6.90%
CLASS E** +4.77% +6.54% +7.40%
</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.
* 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 portfolio's 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 3/31/99
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. University of New Mexico (6.00%) 2021 3.9%
2. New York Triborough Bridge & Tunnel Authority
(5.50%) 2017 3.9%
3. Metropolitan Transportation Authority NY (5.75%)
2013 3.7%
4. Grapevine-Colleyville, TX Independent School
District (5.75%) 2012 3.4%
5. Tucson, AZ Water (5.50%) 2014 3.3%
6. New Castle County, DE General Obligation (5.125%)
2013 3.2%
7. Minnesota Agriculture & Economic Development
(5.50%) 2017 2.9%
8. Detroit, MI Water System (6.50%) 2015 2.9%
9. Fulton County, GA Water & Sewer (6.375%) 2014 2.9%
10. Southern California Public Power (6.36%) 2013 2.8%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ------------------------------------------------------------------
<S> <C> <C>
Class A shares# +4.46% +8.19%
Class A shares## (0.24%) +7.06%
Class B shares# +3.68% +7.35%
Class B shares## +0.08% +7.03%
Class C shares # +3.69% +7.33%
Class C shares ## +2.69% +7.33%
Class H shares # +3.68% +7.35%
Class H shares ## +0.08% +7.02%
</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% if redeemed within two years of purchase, 3.00% if
redeemed in year three or four, 2.00% if redeemed in year five and 1.00% if
redeemed in year six (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, 1999.
+ Since November 14, 1994 - Date shares were first offered to the public.
2
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 03/31/99
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligation 23.8%
Housing 18.9%
Health Care / Services 16.9%
Higher Education 7.9%
Miscellaneous 6.7%
Cash Equivalents /
Receivables 5.7%
Utilities - Electric 5.6%
Pollution Control 5.1%
Prerefunded with U.S. Gov't 4.6%
Public Facilities 2.7%
Ariport Revenues 2.1%
</TABLE>
MINNESOTA PORTFOLIO
VALUE OF $10,000 INVESTED APRIL 1, 1989
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROS.
MUNICIPAL BOND MINNESOTA PORTFOLIO
INDEX*** CLASS E
<S> <C> <C> <C>
89 10,000 9,550
90 11,055 10,297
91 12,075 11,138
92 13,281 12,155
93 14,944 13,540
94 15,291 13,909
95 16,432 14,813
96 17,765 15,744
97 18,714 16,394
98 20,712 17,883
99 21,921 18,849
MINNESOTA PORTFOLIO CLASS E AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
CLASS E* +0.66% +5.29% +6.54%
CLASS E** +5.40% +6.27% +7.04%
</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.
* 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 portfolio's 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 3/31/99
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. Minnesota Agriculture & Economic Development
(5.50%) 2017 6.6%
2. University of MN (Regents of) (5.50%) 2018 4.5%
3. Centennial Independent School District #12
(5.625%) 2016 4.5%
4. Minnesota State Various Purpose (4.75%) 2002 4.4%
5. Rochester (City of), MN Health Care Facility
(5.90%) 2010 3.6%
6. Brainerd (City of), MN (6.65%) 2017 3.4%
7. Minneapolis (City of), MN (4.10%) Zero Coupon
General Obligation 2005 3.1%
8. St. Louis Park (City of), MN Hospital Facility
(7.25%) 2015 2.9%
9. Puerto Rico Public Financial Corp. (5.375%) 2019 2.5%
10. Buffalo (City of), MN Independent School District
#877 (4.25%) 2006 2.5%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- ------------------------------------------------------------------
<S> <C> <C>
Class A shares# +5.18% +7.52%
Class A shares## +0.44% +6.40%
Class B shares# +4.35% +6.66%
Class B shares## +0.75% +6.33%
Class C shares # +4.35% +6.71%
Class C shares ## +3.35% +6.71%
Class H shares # +4.34% +6.72%
Class H shares ## +0.74% +6.39%
</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% if redeemed within two years of purchase, 3.00% if
redeemed in year three or four, 2.00% if redeemed in year five and 1.00% if
redeemed in year six (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, 1999
+ Since November 14, 1994 -- Date shares were first offered to the public.
3
<PAGE>
FORTIS TAX-FREE PORTFOLIOS
NATIONAL PORTFOLIO
Schedule of Investments
March 31, 1999 (Unaudited)
MUNICIPAL BONDS-101.10%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
------------ ------------- ------------ ------------
<C> <S> <C> <C> <C>
ARIZONA-4.76%
$ 1,000,000 Phoenix, AZ, 5.00% General Obligation Bond
7-1-2008................................... AA+ $ 1,068,666 $ 1,051,870
2,225,000 Tucson, AZ, 5.50% Water Rev Refunding Bond
7-1-2014................................... A+ 2,188,761 2,379,170
------------ ------------
3,257,427 3,431,040
------------ ------------
CALIFORNIA-6.10%
2,385,000 Redwood City California Elem School Dist,
5.50% Zero Coupon General Obligation FGIC
Insured 8-1-2018 (d)....................... AAA 835,267 900,838
4,000,000 Southern California Public Power, 6.36% Zero
Coupon Bond 7-1-2013 (d)................... A 1,639,020 2,026,280
2,750,000 Sulphur Springs (City of), CA, 7.00% Zero
Coupon General Obligation Ser A MBIA
Insured 9-1-2012 (d)....................... AAA 1,092,511 1,468,692
------------ ------------
3,566,798 4,395,810
------------ ------------
COLORADO-2.22%
1,500,000 Denver, CO, 5.25% City and County General
Obligation Bond 8-1-2006................... AA 1,618,144 1,599,225
------------ ------------
CONNECTICUT-2.38%
1,500,000 Connecticut State, 6.125% Special Tax
Obligation Rev Transportation
Infrastructure Ser B 9-1-2012.............. AA- 1,572,063 1,714,095
------------ ------------
DELAWARE-3.20%
2,220,000 New Castle County, DE, 5.125% General
Obligation Bond 10-1-2013.................. AA 2,313,028 2,305,093
------------ ------------
DISTRICT OF COLUMBIA-1.85%
1,250,000 District of Columbia, 7.50% General
Obligation Ser 1990B FSA Insured 6-1-2010
(Prerefunded 6-1-2000 @ 102)............... AAA 1,235,937 1,333,675
------------ ------------
FLORIDA-0.77%
500,000 Florida (State of), 7.50% Mid-Bay Bridge Auth
Ser 1991A 10-1-2017(Subject to Crossover
Refunding 10-1-2001 @ 103)................. NR 477,257 556,740
------------ ------------
GEORGIA-6.71%
1,375,000 Brunswick, GA, Water & Sewer, 6.10% Rev Ref &
Improvement Bond MBIA Insured 10-1-2019.... AAA 1,463,514 1,577,207
1,765,000 Fulton County, GA, Water & Sewer, 6.375% Ref
Bond FGIC Insured 1-1-2014 (Escrowed to
Maturity).................................. AAA 1,752,866 2,055,431
35,000 Fulton County, GA, Water & Sewer, 6.375% Ref
Bond FGIC Insured 1-1-2014 (Unrefunded).... AAA 34,740 40,538
1,000,000 Georgia Municipal Electric, 6.50% Auth Power
Rev Ser Y 1-1-2017......................... A 993,674 1,162,370
------------ ------------
4,244,794 4,835,546
------------ ------------
ILLINOIS-4.91%
500,000 Channahon Park, IL District, 7.50% General
Obligation 1-1-2011 (Prerefunded 7-1-2001 @
100)....................................... NR 499,375 542,195
750,000 Chicago Gas Supply, 7.50% Rev for Peoples Gas
Ser B 3-1-2015............................. AA- 758,178 788,107
1,000,000 Illinois Dev Fin Auth, 7.375% Power Co Proj
Ser 1991A 7-1-2021......................... BBB 993,339 1,156,490
1,000,000 Illinois Housing Dev Auth, 7.55% Multi-family
Housing Ser 1990A 7-1-2014................. A+ 987,575 1,051,220
------------ ------------
3,238,467 3,538,012
------------ ------------
INDIANA-2.23%
265,000 Indiana Bond Bank, 8.50% Special Loan Program
Ser B 2-1-2018............................. A+ 267,531 271,606
1,250,000 Indianapolis (City of), IN, Local Public
Improvement Bond Bank, 7.40% Ser 1990A
1-1-2020 (Prerefunded 7-1-2000 @102)....... Aaa* 1,247,543 1,335,837
------------ ------------
1,515,074 1,607,443
------------ ------------
KENTUCKY-3.11%
1,000,000 Christian County, KY, 6.00% Hospital Rev Ref
Bond Jennie Stuart Medical Center
7-1-2013................................... A- 995,263 1,079,800
1,000,000 Louisville & Jefferson County, KY, 6.75%
Metro Sewer Dist Rev Bond Ser A AMBAC
Insured 5-15-2019 (Prerefunded 11-15-2004
@102)...................................... AAA 996,495 1,158,130
------------ ------------
1,991,758 2,237,930
------------ ------------
MASSACHUSETTS-0.75%
500,000 Boston, MA, 7.625% City Hospital Rev Bond Ser
A 2 -15-2021 (Prerefunded 8-15-2000
@102)...................................... Aaa* 496,778 537,055
------------ ------------
MICHIGAN-7.37%
1,360,000 Michigan State Hospital, 5.50% Fin Auth Mercy
Health System Ser S 8-15-2020.............. AA- 1,281,687 1,387,921
1,600,000 Royal Oak, MI, Hospital Fin Auth, 6.25%
Hospital Rev Bond 1-1-2012................. AA 1,822,447 1,839,024
</TABLE>
4
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
------------ ------------- ------------ ------------
<C> <S> <C> <C> <C>
$ 1,750,000 Detroit, MI, Water System, 6.50% Rev Bond
FGIC Insured 7-1-2015...................... AAA $ 1,864,151 $ 2,078,492
------------ ------------
4,968,285 5,305,437
------------ ------------
MINNESOTA-9.45%
500,000 Duluth (City of), MN, 5.875% Economic Dev
Auth Health Care Fac Rev Bond Ser A
12-1-2028.................................. NR 500,000 496,480
1,140,000 Fergus Falls (City of), MN, 6.50% Health Care
Fac Rev (Lake Regional Hospital) Ser A
9-1-2018................................... BBB+ 1,133,608 1,210,817
670,000 Minneapolis (City of), MN, 7.00% Health Care
Fac Rev (St. Olaf Residence) Ser 1993
10-1-2012.................................. NR 670,000 717,945
500,000 Minneapolis (City of), MN, 5.875% Walker
Methodist Sr Services Rev Bond Ser C
11-15-2018................................. NR 492,558 500,170
2,000,000 Minnesota Agriculture and Economic
Development, 5.50% Healthcare System Rev
Fairview Hospital and Healthcare Services
Ser 1997A MBIA Insured 11-15-2017.......... AAA 1,957,919 2,094,960
1,000,000 Southern MN Municipal Power Agency, 5.00% Rev
Bond Ser A AMBAC Insured 1-1-2009.......... AAA 1,056,841 1,046,280
690,000 St. Anthony (City of), MN, 6.75% Housing Dev
Rev Ref Bond 7-1-2007...................... AA 690,000 742,240
------------ ------------
6,500,926 6,808,892
------------ ------------
MISSOURI-1.92%
1,250,000 Missouri State Health & Educ, 7.70% Still
Regional Med Ctr 2-1-2013.................. BBB 1,280,675 1,386,338
------------ ------------
NEVADA-1.40%
980,000 Washoe County, NV, 7.60% Washoe Med Ctr Rev
Bond Ser A 6-1-2019 (Prerefunded 6-1-1999
@102)...................................... NR 951,884 1,006,440
------------ ------------
NEW JERSEY-1.46%
1,000,000 New Jersey State Transportation, 5.00%
Transit Rev Bond Ser A 6-15-2007........... AA- 1,051,419 1,052,850
------------ ------------
NEW MEXICO-3.91%
2,500,000 University of New Mexico, 6.00% Rev Ref Ser A
6-1-2021(e)................................ AA 2,574,710 2,813,325
------------ ------------
NEW YORK-12.29%
2,465,000 Metropolitan Transportation Authority, NY,
Commuter Facilities, 5.75% Ser O
7-1-2013................................... BBB+ 2,395,481 2,681,057
1,000,000 New York City, NY, 8.25% General Obligation
Ser B 6-1-2005............................. A- 992,015 1,211,700
1,000,000 New York State Dorm Auth, 6.00% Rev Cons City
Univ System 2nd Gen 7-1-2020............... BBB+ 1,018,042 1,120,040
1,000,000 New York State, 7.75% UDC Correctional Fac
Ser 1 1-1-2014 (Prerefunded 1-1-2000
@102)...................................... Aaa* 966,327 1,053,600
2,600,000 New York Triborough Bridge and Tunnel Auth,
5.50% General Purpose Ser Y 1-1-2017....... A+ 2,500,663 2,783,326
------------ ------------
7,872,528 8,849,723
------------ ------------
NORTH DAKOTA-1.63%
1,100,000 Ward County, ND, 7.50% Health Care Fac Ser
1991B 7-1-2011............................. BBB+ 1,116,262 1,175,207
------------ ------------
OHIO-2.83%
750,000 Cleveland (City of), OH, Parking Fac, 8.10%
Improvement Proj Rev Bond 9-15-2022
(Prerefunded 9-15-2002 @ 102).............. NR 756,903 864,788
1,100,000 Cleveland, OH, 5.50% Water Works Rev Ref Bond
Ser G First Mortgage MBIA Insured
1-1-2021................................... AAA 1,091,632 1,175,361
------------ ------------
1,848,535 2,040,149
------------ ------------
PENNSYLVANIA-8.82%
1,000,000 Allegheny County, PA, 5.25% Hospital Dev Auth
Rev Bond Ser B AMBAC Insured
12-15-2011(f).............................. AAA 1,042,830 1,042,830
1,290,000 Allegheny County, PA, 5.70% Hospital Dev Auth
Rev 10-1-2001.............................. AAA 1,344,790 1,350,604
750,000 Clarion County, PA, 8.50% Clarion Hospital
Proj Rev Bond 7-1-2021 (Prerefunded
7-1-2001 @102)............................. NR 735,317 839,648
500,000 LeHigh County, PA, 5.70% General Purpose Auth
Rev Bond, Kidspeace Obligation Group
11-1-2009.................................. NR 500,464 493,920
1,500,000 Pennsylvania Intergovernmental Coop, 5.25%
Auth Special Tax Rev Philadelphia Funding
Program 6-15-2010(f)....................... AAA 1,580,850 1,581,090
1,000,000 Philadelphia, PA, 5.25% School District
General Obligation Bond Ser A 4-1-2011..... AAA 1,059,800 1,045,920
------------ ------------
6,264,051 6,354,012
------------ ------------
PUERTO RICO-2.00%
1,250,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 1,334,015 1,438,213
------------ ------------
TENNESSEE-3.10%
1,000,000 Metro Gov't of Nashville & Davidson County,
TN, 6.50% Water & Sewer Ref Bond FGIC
Insured 1-1-2010........................... AAA 1,080,317 1,169,830
1,000,000 Tennessee State, 5.50% General Obligation Ser
B 5-1-2003................................. AAA 1,051,696 1,066,820
------------ ------------
2,132,013 2,236,650
------------ ------------
TEXAS-3.36%
2,250,000 Grapevine-Colleyville, TX, 5.75% Independent
School District PSF Rev Ref Bond
8-15-2012.................................. AAA 2,281,354 2,418,368
------------ ------------
</TABLE>
5
<PAGE>
FORTIS TAX-FREE PORTFOLIOS
NATIONAL PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 1999 (Unaudited)
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
------------ ------------- ------------ ------------
<C> <S> <C> <C> <C>
VIRGINIA-1.46%
$ 1,000,000 Norfolk (City of), VA, 5.00% General
Obligation 7-1-2004........................ AAA $ 1,033,538 $ 1,051,710
------------ ------------
WISCONSIN-1.11%
750,000 Wisconsin Health & Educ Fac Auth, 8.50% Rev
Bond Ser 1990 (Franciscan Health Sys)
3-1-2020 (Prerefunded 3-1-2000 @102)....... Aaa* 750,000 800,273
------------ ------------
TOTAL MUNICIPAL BONDS........................ $67,487,720 $72,829,251
------------ ------------
------------ ------------
</TABLE>
SHORT-TERM INVESTMENTS-1.43%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
----------- ------------
<C> <S> <C>
OPEN-ENDED BOND FUNDS-1.43%
$1,025,726 First American Tax-Free Obligations Fund,
Current rate -- 2.64%...................... $ 1,025,726
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$68,513,446) (a)........................... $73,854,977
------------
------------
</TABLE>
(a) At March 31, 1999, the cost of securities for federal income tax purposes
was $68,513,446 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 5,419,687
Unrealized depreciation........................... (78,156)
---------------------------------------------------------------
Net unrealized appreciation....................... $ 5,341,531
---------------------------------------------------------------
</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 effective
yield on the date of acquisition.
(e) Security pledged as initial margin deposit for open financial futures
position detailed below.
<TABLE>
<S> <C> <C> <C> <C>
Unrealized
Market Value Appreciation/
Number of Covered (Depreciation)
Issuer Contract(s) by Contract(s) Expiration at 3/31/99
- ---------------------------------------- ----------- -------------- ---------- --------------
US Treasury Bond Futures 11 $ 1,326,188 June 99 $8,164
</TABLE>
(f) The cost of securities purchased on a when-issued basis at March 31, 1999,
is $2,623,680.
* Moody's Rating
6
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
MINNESOTA PORTFOLIO
Schedule of Investments
March 31, 1999 (Unaudited)
MUNICIPAL BONDS-94.34%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
AIRPORT REVENUES-2.12%
$1,000,000 Minneapolis-St. Paul (City of), MN, 5.00%
Metropolitan Airports Commission Rev Ser
1998A AMBAC Insured 1-1-2019............... AAA $ 980,304 $ 1,000,750
------------ ------------
GENERAL OBLIGATIONS-23.83%
1,150,000 Buffalo (City of), MN, Independent School
District #877, 4.25% General Obligation Ref
Bond 2-1-2006.............................. Aa1* 1,164,223 1,162,190
2,000,000 Centennial Independent School District #12,
5.625% Ser A 2-1-2016...................... Aa1* 1,971,824 2,124,920
1,000,000 Chaska (City of), MN, Independent School
District #112, 5.00% General Obligation Ser
A 2-1-2014................................. Aa1* 1,000,000 1,012,460
1,240,000 Farmington (City of), MN, Independent School
District #192, 5.04% Zero Coupon Ser B FSA
Insured 2-1-2012 (d)....................... Aaa* 654,382 671,237
1,685,000 Lakeville (City of), MN, Independent School
District #194, 5.10% Zero Coupon General
Obligation Cap Apprec Ser B FSA Insured
2-1-2010 (d)............................... Aaa* 976,400 1,024,076
1,915,000 Minneapolis (City of), MN, 4.09% Zero Coupon
General Obligation Ser B 12-1-2005 (d)..... AAA 1,462,318 1,458,177
2,000,000 Minnesota State Various Purpose, 4.75%
General Obligation 6-1-2002................ AAA 2,066,365 2,066,340
750,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 800,409 862,927
1,950,000 Rosemount (City of), MN, Independent School
District #196, 5.70% Zero Coupon General
Obligation MBIA Insured 4-1-2015 (d)....... AA+ 793,374 886,236
------------ ------------
10,889,295 11,268,563
------------ ------------
HEALTH CARE/SERVICES-16.89%
1,000,000 Duluth (City of), MN, 8.375% EDA Health Care
Fac Rev St. Mary's Med Ctr Ser 1990
2-15-2020 (Prerefunded 2-15-2000 @ 102).... AAA 1,014,589 1,063,840
3,000,000 Minnesota Agriculture and Economic
Development, 5.50% Healthcare System Rev
Fairview Hospital and Healthcare Services
Ser 1997A MBIA Insured 11-15-2017.......... AAA 2,951,777 3,142,440
1,000,000 Rochester (City of), MN, 5.90% Health Care
Fac Rev Bond Mayo Med Ctr Ser I
11-15-2009................................. AA+ 1,111,781 1,129,760
1,500,000 Rochester (City of), MN, 5.90% Health Care
Fac Rev Bond Mayo Med Ctr Ser I
11-15-2010................................. AA+ 1,570,671 1,686,915
1,000,000 St Paul (City of), MN, 5.25% Health Care Rev
5-15-2018.................................. BBB+ 976,160 960,300
------------ ------------
7,624,978 7,983,255
------------ ------------
HIGHER EDUCATION (UNIV, DORMS, ETC.)-7.93%
460,000 Minnesota Higher Education, 7.625% Mortgage
Rev for St. Mary's College Ser 3F 10-1-2016
(Prerefunded 10-1-2001 @ 100).............. BBB- 457,700 502,624
2,000,000 University of MN (Regents of), 5.50% General
Obligation Ser A 7-1-2021.................. AA 2,021,722 2,144,380
1,000,000 University of MN (Regents of), 5.75% General
Obligation Ser 1996A 7-1-2018.............. AA 1,011,599 1,103,750
------------ ------------
3,491,021 3,750,754
------------ ------------
HOUSING-18.84%
1,500,000 Brainerd (City of), MN, 6.65% Rev Ref Bond
Evangelical Lutheran-Good Samaritan Proj
Ser 1992B FSA Insured 3-1-2017............. AAA 1,512,271 1,630,725
95,000 Dakota County, MN, 8.10% HRA Single Family
Rev GNMA Backed 3-1-2016................... AA+ 97,086 96,974
500,000 Duluth (City of), MN, 5.625% EDA Health Care
Fac Rev Board of Social Ministries
Properties Proj Ser 1998A 12-1-2018........ NR 500,000 491,205
300,000 Eden Prairie (City of), MN, 7.40% Multifamily
Housing Ser 1990 FHA Insured 8-1-2025...... AAA 299,956 313,098
845,000 Eden Prairie (City of), MN, 8.00% Multifamily
Housing Ser A FHA Insured 7-1-2026......... AAA 845,000 896,215
500,000 Edina (City of), MN, 7.50% Housing Dev Ref
Rev Edina Park Plaza Ser A FHA Insured
12-1-2009.................................. Aa* 499,625 515,620
500,000 Edina (City of), MN, 7.70% Housing Dev Ref
Rev Edina Park Plaza Ser A FHA Insured
12-1-2028.................................. Aa* 500,000 515,855
525,000 Mankato (City of), MN, 8.25% Nursing Home Rev
Bond Board of Social Ministry Mankato
Lutheran Ser 1991A 10-1-2021 (Prerefunded
10-1-2001 @ 102)........................... NR 520,000 590,410
500,000 Minneapolis (City of), MN, 5.875% Walker
Methodist Sr Services Rev Bond Ser C
11-15-2018................................. NR 492,558 500,170
945,000 Minneapolis (City of), MN, 7.10% HRA Mortgage
Rev Bond Riverplace Proj Ser A LOC Bank of
Tokyo 1-1-2020............................. A2* 955,548 954,025
485,000 Minneapolis (City of), MN, 8.25% Health Care
Fac Rev Bond Jones-Harrison Residence Ser
1991 9-1-2011.............................. NR 479,122 499,341
350,000 Minneapolis (City of), MN, 8.25% Rev Bond
Trinity Housing Proj Ser 1991 2-1-2018..... NR 350,000 363,093
440,000 Northfield (City of), MN, 7.00% Health Care
Fac Northfield Retirement Ctr 5-1-2015
(Prerefunded 5-1-2001 @ 102)............... NR 436,745 476,806
500,000 Red Wing (City of), MN, 6.50% Elderly Housing
Fac Ref Rev River Region Obligated Group
Ser 1993C 9-1-2022......................... BBB+ 497,424 532,485
500,000 Spring Park (City of), MN, 8.25% Health Care
Fac Rev Bond Twin Birch Health Care Ctr
8-1-2011................................... NR 500,000 532,015
------------ ------------
8,485,335 8,908,037
------------ ------------
</TABLE>
7
<PAGE>
FORTIS TAX-FREE PORTFOLIOS INC.
MINNESOTA PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 1999 (Unaudited)
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ------------- ------------ ------------
<C> <S> <C> <C> <C>
MISCELLANEOUS-6.67%
$ 450,000 Dakota County, MN, 7.50% HRA Limited Annual
Appropriation Tax & Rev Supported Bond Ser
1991 1-1-2006.............................. BBB+ $ 450,000 $ 470,489
400,000 Dawson (City of), MN, 7.30% IDR Ref Bond
Associated Milk Producers 9-1-2000......... NR 396,426 410,260
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 1,104,490
1,100,000 Puerto Rico, 5.375% Public Financial Corp.
Rev Bond Ser A AMBAC Insured 6-1-2019...... AAA 1,177,383 1,169,300
------------ ------------
3,023,809 3,154,539
------------ ------------
POLLUTION CONTROL-5.06%
650,000 East Grand Forks (City of), MN, 7.75%
Pollution Control Rev (American Crystal
Sugar) Ser 1991A 4-1-2018.................. BBB+ 650,440 698,952
1,000,000 Minnesota Public Fac Auth, 5.00% Water
Pollution Rev Bond Ser B 3-1-2002.......... AAA 1,023,708 1,036,800
1,000,000 Minnesota Public Fac Auth, 6.86% Zero Coupon
Water Pollution Rev Bond Ser 1992A 3-1-2007
(Prerefunded 3-1-2002 @ 73.543) (d)........ AAA 604,248 656,990
------------ ------------
2,278,396 2,392,742
------------ ------------
PREREFUNDED WITH U.S. GOVERNMENT
SECURITIES-4.63%
1,275,000 St. Louis Park (City of), MN, 7.25% Hospital
Fac Rev Methodist Ser 1990C AMBAC Insured
7-1-2015 (Prerefunded 7-1-2000 @ 102)...... AAA 1,262,826 1,360,234
765,000 St. Louis Park (City of), MN, 8.50% Health
Care Fac Park Nicollet Med Ctr Ser A
1-1-2011 (Prerefunded 1-1-2001 @ 100)...... Aaa* 767,143 828,158
------------ ------------
2,029,969 2,188,392
------------ ------------
PUBLIC FACILITIES-2.74%
400,000 Duluth (City of), MN, 6.75% Gross Rev
Recreation Fac Bond Spirit Mountain Ser
1992 2-1-2007.............................. NR 400,000 409,448
325,000 Moorhead (City of), MN, 7.75% Golf Course Rev
Bond Ser 1992A 12-1-2015................... NR 325,000 357,958
500,000 St. Paul (City of), MN, 6.45% HRA Parking Rev
Bond Ser 1992A 8-1-2007 (Prerefunded
8-1-2000 @ 102)............................ A- 500,000 529,565
------------ ------------
1,225,000 1,296,971
------------ ------------
UTILITIES-ELECTRIC-5.63%
1,295,000 Northern MN Municipal Power Agency, 6.94%
Zero Coupon Elec Sys Rev Ref Ser A AMBAC
Primary Insured 1-1-2011 (d)............... AAA 580,896 745,959
2,440,000 Southern MN Municipal Power Agency, 5.15%
Zero Coupon Cap Apprec Ser A MBIA Insured
1-1-2020 (d) AAA 849,716 851,218
1,000,000 Western MN Municipal Power Agency, 5.50% Ref
Ser A AMBAC Insured 1-1-2013............... AAA 992,297 1,062,670
------------ ------------
2,422,909 2,659,847
------------ ------------
TOTAL MUNICIPAL BONDS........................ $42,451,016 $44,603,850
------------ ------------
------------ ------------
</TABLE>
SHORT-TERM INVESTMENTS-4.63%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (b)
----------- ------------
<C> <S> <C>
OPEN-ENDED BOND FUNDS-4.63%
$2,187,843 Federated Minnesota Municipal Cash Trust,
Current rate -- 2.88%...................... $ 2,187,843
------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$44,638,859)(A)............................ $46,791,693
------------
------------
</TABLE>
(a) At March 31, 1999, the cost of securities for federal income tax purposes
was $44,639,378 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 2,198,235
Unrealized depreciation........................... (45,920)
---------------------------------------------------------------
Net unrealized appreciation....................... $ 2,152,315
---------------------------------------------------------------
</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 effective
yield on the date of acquisition.
* Moody's Rating
8
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Assets and Liabilities
(Unaudited)
March 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NATIONAL MINNESOTA
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities, as detailed in the accompanying schedules, at
market (cost $68,513,446; $44,638,859; respectively) (Note 1)............... $ 73,854,977 $ 46,791,693
Receivables:
Interest and dividends...................................................... 948,087 598,502
Subscriptions of capital stock.............................................. 35 --
Deferred registration costs (Note1)........................................... 23,995 1,361
Prepaid expenses.............................................................. 1,069 534
------------- -------------
TOTAL ASSETS.................................................................... 74,828,163 47,392,090
------------- -------------
LIABILITIES:
Cash portion of dividends payable............................................. 90,246 55,506
Payable for investment securities purchased................................... 2,623,680 --
Redemptions of capital stock.................................................. -- 4,788
Payable for investment advisory and management fees (Note 2).................. 47,036 28,902
Payable for distribution fees (Note 2)........................................ 635 218
Accounts payable and accrued expenses......................................... 32,331 24,016
------------- -------------
TOTAL LIABILITIES............................................................... 2,793,928 113,430
------------- -------------
NET ASSETS:
Net proceeds of capital stock, par value $.01 per share-authorized
100,000,000,000; 100,000,000,000 shares; respectively....................... 66,657,641 44,974,591
Unrealized appreciation of investments........................................ 5,349,695 2,152,834
Undistributed (distributions in excess over) net investment income............ 8,909 (16,313)
Accumulated net realized gain from sale of investments........................ 17,990 167,548
------------- -------------
TOTAL NET ASSETS................................................................ $ 72,034,235 $ 47,278,660
------------- -------------
------------- -------------
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A shares (based on net assets of $8,445,920 and $3,474,303; respectively
and 765,000 and 334,691 shares outstanding; respectively)..................... $11.04 $10.38
------------- -------------
Class B shares (based on net assets of $1,969,543 and $1,258,610; respectively
and 178,555 and 121,345 shares outstanding; respectively)..................... $11.03 $10.37
------------- -------------
Class C shares (based on net assets of $493,097 and $222,490; respectively and
44,751 and 21,399 shares outstanding; respectively)........................... $11.02 $10.40
------------- -------------
Class E shares (based on net assets of $54,095,873 and $40,710,403; respectively
and 4,891,898 and 3,910,947 shares outstanding; respectively)................. $11.06 $10.41
------------- -------------
Class H shares (based on net assets of $7,029,802 and $1,612,854; respectively
and 637,489 and 155,107 shares outstanding; respectively)..................... $11.03 $10.40
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Operations
For the Six-Month Period Ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NATIONAL MINNESOTA
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income............................................................. $ 1,959,120 $ 1,310,345
------------- -------------
Expenses:
Investment advisory and management fees (Note 2)............................ 278,215 170,900
Distribution fees (Class A) (Note 2)........................................ 10,526 4,099
Distribution fees (Class B) (Note 2)........................................ 8,318 6,378
Distribution fees (Class C) (Note 2)........................................ 2,333 1,087
Distribution fees (Class H) (Note 2)........................................ 32,939 7,584
Registration fees (Note 1).................................................. 23,261 5,614
Legal and auditing fees..................................................... 9,162 8,464
Shareholders' notices and reports........................................... 14,099 8,629
Custodian fees.............................................................. 95 1,496
Directors' fees and expenses................................................ 5,286 3,490
Other....................................................................... 8,893 5,586
------------- -------------
Total expenses................................................................ 393,127 223,327
------------- -------------
NET INVESTMENT INCOME........................................................... 1,565,993 1,087,018
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (NOTE 1)
Net realized gain from security transactions.................................. 108,712 184,007
Net realized gain from interest rate futures.................................. (87,687) --
------------- -------------
Net realized gain on investments.............................................. 21,025 184,007
------------- -------------
Net change in unrealized depreciation of investments.......................... (1,364,118) (1,032,339)
------------- -------------
NET LOSS ON INVESTMENTS......................................................... (1,343,093) (848,332)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 222,900 $ 238,686
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
PERIOD ENDED FOR THE
MARCH 31, YEAR ENDED
1999 SEPTEMBER 30,
(UNAUDITED) 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 1,565,993 $ 3,297,595
Net realized gain from security transactions.................................. 21,025 841,665
Net change in unrealized appreciation (depreciation) on investments in
securities.................................................................. (1,364,118) 1,361,161
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ 222,900 5,500,421
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A..................................................................... (176,417) (338,406)
Class B..................................................................... (28,725) (51,129)
Class C..................................................................... (8,023) (19,545)
Class E..................................................................... (1,213,063) (2,656,955)
Class H..................................................................... (113,090) (201,242)
From net realized gains on investments
Class A..................................................................... (90,276) (23,860)
Class B..................................................................... (16,339) (4,260)
Class C..................................................................... (4,978) (1,845)
Class E..................................................................... (589,187) (188,744)
Class H..................................................................... (71,581) (15,907)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................................. (2,311,679) (3,501,893)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (66,433 and 168,869 shares)......................................... 744,900 1,884,679
Class B (68,451 and 27,291 shares).......................................... 763,277 303,559
Class C (5,842 and 12,943 shares)........................................... 65,193 144,041
Class E (41,236 and 182,874 shares)......................................... 461,932 2,053,379
Class H (115,469 and 145,610 shares)........................................ 1,294,594 1,619,378
Proceeds from shares issued as a result of reinvested dividends
Class A (15,208 and 19,967 shares).......................................... 169,759 223,080
Class B (3,359 and 3,514 shares)............................................ 37,443 39,225
Class C (1,015 and 1,696 shares)............................................ 11,308 18,910
Class E (106,407 and 163,960 shares)........................................ 1,189,801 1,833,309
Class H (10,620 and 11,998 shares).......................................... 118,364 133,931
Less cost of repurchase of shares
Class A (47,676 and 114,659 shares)......................................... (533,627) (1,277,661)
Class B (24,751 and 15,741 shares).......................................... (276,979) (175,491)
Class C (5,567 and 24,064 shares)........................................... (62,565) (267,354)
Class E (260,409 and 737,765 shares)........................................ (2,923,384) (8,235,319)
Class H (25,859 and 82,292 shares).......................................... (288,979) (915,367)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS................... 771,037 (2,617,701)
------------- -------------
TOTAL DECREASE IN NET ASSETS.................................................... (1,317,742) (619,173)
NET ASSETS:
Beginning of period........................................................... 73,351,977 73,971,150
------------- -------------
End of period ((includes undistributed (excess of distribution over) net
investment income of $8,909 and $(17,766), respectively))................... $ 72,034,235 $ 73,351,977
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statement of Changes in Net Assets
MINNESOTA PORTFOLIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
PERIOD ENDED FOR THE
MARCH 31, YEAR ENDED
1999 SEPTEMBER 30,
(UNAUDITED) 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 1,087,018 $ 2,373,409
Net realized gain from security transactions.................................. 184,007 785,347
Net change in unrealized appreciation (depreciation) of investments in
securities.................................................................. (1,032,339) 701,009
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ 238,686 3,859,765
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A..................................................................... (74,430) (169,880)
Class B..................................................................... (23,766) (46,230)
Class C..................................................................... (3,556) (8,174)
Class E..................................................................... (974,691) (2,084,604)
Class H..................................................................... (29,514) (52,848)
From realized gains on investments
Class A..................................................................... (52,042) (5,160)
Class B..................................................................... (20,754) (1,292)
Class C..................................................................... (3,755) (238)
Class E..................................................................... (660,723) (50,432)
Class H..................................................................... (26,232) (1,461)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................................. (1,869,463) (2,420,319)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (68,313 and 138,615 shares)......................................... 722,465 1,449,793
Class B (7,331 and 16,125 shares)........................................... 77,264 169,764
Class C (5,086 and 967 shares).............................................. 53,947 10,000
Class E (46,890 and 111,624 shares)......................................... 496,242 1,177,034
Class H (18,800 and 20,470 shares).......................................... 200,330 218,276
Proceeds from shares issued as a result of reinvested dividends
Class A (9,112 and 9,988 shares)............................................ 95,566 105,254
Class B (2,850 and 2,500 shares)............................................ 29,845 26,326
Class C (540 and 526 shares)................................................ 5,670 5,539
Class E (109,214 and 141,459 shares)........................................ 1,149,218 1,494,183
Class H (3,753 and 3,448 shares)............................................ 39,428 36,388
Less cost of repurchase of shares
Class A (37,764 and 207,182 shares)......................................... (399,439) (2,183,158)
Class B (7,280 and 25,031 shares)........................................... (75,813) (260,690)
Class C (2,299 and 5,599 shares)............................................ (24,000) (58,479)
Class E (159,573 and 506,507 shares)........................................ (1,693,403) (5,336,737)
Class H (2,900 and 5,981 shares)............................................ (30,576) (63,038)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS................... 646,744 (3,209,545)
------------- -------------
TOTAL DECREASE IN NET ASSETS.................................................... (984,033) (1,770,099)
NET ASSETS:
Beginning of period........................................................... 48,262,693 50,032,792
------------- -------------
End of period ((includes undistributed (excess distribution over) net
investment income of $(16,313) and $2,626, respectively))................... $ 47,278,660 $ 48,262,693
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Fortis Tax Free Portfolios, Inc.
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, (the Funds) are diversified portfolios each of
which has different investment objectives and its own investment portfolio
and net asset value. The investment objective of 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 both 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: Investments in securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sales price. 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. For
fixed income securities, 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 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, 1999, the cost of purchases and
proceeds from sales of securities (other than short-term securities)
aggregated $28,194,778 and $25,058,514 for National Portfolio; and $8,163,900
and $8,996,817 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 and disclosure of contingent 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.
FUTURES TRANSATIONS: The portfolios may invest in financial futures contracts
in order to gain exposure to or protect against changes in the market. The
Tax-Free National Portfolio is exposed to market risk as a result of changes
in the value of the underlying financial instruments (see Notes to the
Schedule of Investments).
13
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
Investment in financial futures require the portfolios to mark to market on a
daily basis, which reflects the change in the market value of the contract at
the close of each days trading. Accordingly, variation margin payments are
received or made to reflect daily unrealized gain or losses. When the
contracts are closed, the portfolios recognize a realized gain or loss. These
investments require initial margin deposits with a custodian, which consist
of cash or cash equivalents. The amount of these deposits is determined by
the exchange or Board of Trade on which the contract is traded and is subject
to change. Contracts open as of March 31, 1999, and their related unrealized
market appreciation are set forth in the Notes to the Schedule of
Investments.
2. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc. (Advisers), is the
investment adviser for the funds. At the special shareholders' meeting of
January 29, 1998, shareholders of the Minnesota Portfolio approved an amended
Investment Advisory and Management Agreement between the Portfolio and Fortis
Advisers, Inc. Under the approved amended agreement, the investment advisory
fee payable by the Minnesota Portfolio is computed at an annual rate of .72%
of the first $50 million in average daily net assets and .70% of average
daily net assets in excess of $50 million and are based on the average net
assets of the Minnesota Portfolio. Prior to January 29, 1998, investment
advisory fees paid by the Minnesota Portfolio were computed at an annual rate
of .80% of the first $50 million in average daily net assets, .70% of the
next $50 million in average daily net assets and .625% of average daily net
assets in excess of $100 million and was based upon the aggregate average net
assets of the National and Minnesota Portfolios combined, then allocated to
the Minnesota Portfolio based upon proportionate net assets. The National
Portfolio's investment advisory fees are computed at an annual rate of .80%
of the first $50 million in average daily net assets, and .70% of average
daily net assets in excess of $50 million, and are 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
average daily net assets (of the respective classes) on an annual basis, to
be used to compensate those who sell shares of the fund and to pay certain
other expenses of selling fund shares. Fortis Investors, Inc., also received
sales charges (paid by purchasers or redeemers of the fund's shares)
aggregating:
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class H
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
National Portfolio............ $17,926 $6,006 $ 69 $10,826 $4,893
Minnesota Portfolio........... $18,804 $ 231 -- $16,355 $ 699
</TABLE>
Legal fees and expenses aggregating $1,296 and $598 for the National and
Minnesota Portfolios, respectively, were paid to a law firm of which the
secretary of the fund is a partner.
3. FUNDAMENTAL CHANGES: At the special shareholder's meeting of January 29,1998,
shareholders of the National and Minnesota Portfolios approved an amendment
to the Fundamental policy of investing in commodities to allow the portfolios
to invest in forms of financial contracts and instruments such as futures
contracts, which may be deemed, for regulatory purposes, to be "commodities",
but the portfolios may not purchase or sell physical commodities (such as
agricultural products).
14
<PAGE>
- --------------------------------------------------------------------------------
4. FINANCIAL HIGHLIGHTS: Selected per share historical data for each of the
Portfolios was as follows:
<TABLE>
<CAPTION>
Class E
--------------------------------------------------------------------------------
Three-Month Year
Period Ended Ended
Year Ended September 30, September 30, June 30,
---------------------------------------------------- -------------- --------
NATIONAL PORTFOLIO 1999** 1998 1997 1996 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 11.38 $ 11.07 $ 10.76 $ 10.72 $ 10.38 $ 10.46 $ 11.13
-------- -------- -------- -------- -------- -------------- --------
Operations:
Investment income - net..... .24 .52 .55 .56 .58 .15 .60
Net realized and unrealized
gains (losses) on
investments............... (.19) .34 .31 .04 .36 (.09) (.64)
-------- -------- -------- -------- -------- -------------- --------
Total from operations......... .05 .86 .86 .60 .94 .06 (.04)
-------- -------- -------- -------- -------- -------------- --------
Distributions to shareholders:
From investment income -
net....................... (.25) (.51) (.55) (.56) (.59) (.14) (.59)
From net realized gains..... (.12) (.04) -- -- (.01) -- (.04)
-------- -------- -------- -------- -------- -------------- --------
Total distributions to
shareholders................. (.37) (.55) (.55) (.56) (.60) (.14) (.63)
-------- -------- -------- -------- -------- -------------- --------
Net asset value, end of
period....................... $ 11.06 $ 11.38 $ 11.07 $ 10.76 $ 10.72 $ 10.38 $ 10.46
-------- -------- -------- -------- -------- -------------- --------
Total return @................ .41% 7.97% 8.19% 5.69% 9.30% .59% (.49%)
Net assets end of period (000s
omitted).................... $ 54,096 $ 56,959 $ 59,727 $ 65,237 $ 70,531 $ 74,877 $76,746
Ratio of expenses to average
daily net assets............ .94%* .98% .95% .93% 1.03% .87%* .87%
Ratio of net investment income
to average daily net
assets...................... 4.48%* 4.65% 5.03% 5.19% 5.54% 5.74%* 5.38%
Portfolio turnover rate....... 35% 74% 71% 52% 35% 17% 25%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------------- --------------------------------------------
Year Ended September 30, Year Ended September 30,
-------------------------------------------- --------------------------------------------
NATIONAL PORTFOLIO 1999** 1998 1997 1996 1995+ 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 11.37 $ 11.06 $ 10.75 $ 10.71 $ 9.79 $ 11.36 $ 11.05 $ 10.74 $ 10.70 $ 9.79
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .50 .53 .53 .49 .17 .42 .44 .45 .42
Net realized and unrealized
gains (losses) on
investments............... (.19) .34 .31 .04 .94 (.19) .34 .31 .04 .93
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Total from operations......... .02 .84 .84 .57 1.43 (.02) .76 .75 .49 1.35
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.23) (.49) (.53) (.53) (.50) (.19) (.41) (.44) (.45) (.43)
From net realized gains..... (.12) (.04) -- -- (.01) (.12) (.04) -- -- (.01)
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Total distributions to
shareholders................. (.35) (.53) (.53) (.53) (.51) (.31) (.45) (.44) (.45) (.44)
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 11.04 $ 11.37 $ 11.06 $ 10.75 $ 10.71 $ 11.03 $ 11.36 $ 11.05 $ 10.74 $ 10.70
-------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Total return @................ .21% 7.75% 7.96% 5.46% 14.80% (.16%) 6.95% 7.14% 4.65% 13.96%
Net assets end of period (000s
omitted).................... $ 8,446 $ 8,308 $ 7,263 $ 6,239 $ 1,807 $ 1,970 $ 1,493 $ 1,287 $ 997 $ 668
Ratio of expenses to average
daily net assets............ 1.19%* 1.23% 1.20% 1.18% 1.28%* 1.94%* 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 4.23%* 4.40% 4.78% 4.97% 5.03%* 3.48%* 3.65% 4.02% 4.20% 4.04%*
Portfolio turnover rate....... 35% 74% 71% 52% 35% 35% 74% 71% 52% 35%
</TABLE>
* Annualized.
** For the six-month period ended March 31,1999.
+ 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 gain distributions, without
adjustment for sales charge.
15
<PAGE>
FORTIS TAX FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS (continued):
Class C
----------------------------------------------------
Year Ended September 30,
----------------------------------------------------
NATIONAL PORTFOLIO 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 11.34 $ 11.04 $ 10.74 $ 10.70 $ 9.79
-------- -------- -------- -------- --------
Operations:
Investment income - net..... .18 .41 .43 .45 .43
Net realized and unrealized
gains (losses) on
investments............... (.19) .34 .31 .04 .92
-------- -------- -------- -------- --------
Total from operations......... (.01) .75 .74 .49 1.35
-------- -------- -------- -------- --------
Distributions to shareholders:
From investment income -
net....................... (.19) (.41) (.44) (.45) (.43)
From net realized gains..... (.12) (.04) -- -- (.01)
-------- -------- -------- -------- --------
Total distributions to
shareholders................. (.31) (.45) (.44) (.45) (.44)
-------- -------- -------- -------- --------
Net asset value, end of
period....................... $ 11.02 $ 11.34 $ 11.04 $ 10.74 $ 10.70
-------- -------- -------- -------- --------
Total return @................ (.08%) 6.86% 7.04% 4.65% 13.95%
Net assets end of period (000s
omitted).................... $ 493 $ 493 $ 584 $ 223 $ 106
Ratio of expenses to average
daily net assets............ 1.94%* 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 3.48%* 3.65% 4.05% 4.20% 4.14%*
Portfolio turnover rate....... 35% 74% 71% 52% 35%
</TABLE>
<TABLE>
<CAPTION>
Class H
----------------------------------------------------
Year Ended September 30,
----------------------------------------------------
NATIONAL PORTFOLIO 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 11.35 $ 11.06 $ 10.75 $ 10.71 $ 9.79
-------- -------- -------- -------- --------
Operations:
Investment income - net..... .18 .40 .44 .45 .43
Net realized and unrealized
gains (losses) on
investments............... (.19) .34 .31 .04 .93
-------- -------- -------- -------- --------
Total from operations......... (.01) .74 .75 .49 1.36
-------- -------- -------- -------- --------
Distributions to shareholders:
From investment income -
net....................... (.19) (.41) (.44) (.45) (.43)
From net realized gains..... (.12) (.04) -- -- (.01)
-------- -------- -------- -------- --------
Total distributions to
shareholders................. (.31) (.45) (.44) (.45) (.44)
-------- -------- -------- -------- --------
Net asset value, end of
period....................... $ 11.03 $ 11.35 $ 11.06 $ 10.75 $ 10.71
-------- -------- -------- -------- --------
Total return @................ (.07%) 6.76% 7.13% 4.64% 14.06%
Net assets end of period (000s
omitted).................... $ 7,030 $ 6,099 $ 5,111 $ 4,015 $ 1,757
Ratio of expenses to average
daily net assets............ 1.94%* 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 3.48%* 3.65% 4.03% 4.20% 4.24%*
Portfolio turnover rate....... 35% 74% 71% 52% 35%
</TABLE>
* Annualized.
** For the six-month period ended March 31,1999.
+ 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 gain distributions, without
adjustment for sales charge.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS (continued):
Class E
--------------------------------------------------------------------------------
Three-Month Year
Period Ended Ended
Year Ended September 30, September 30, June 30,
---------------------------------------------------- -------------- --------
MINNESOTA PORTFOLIO 1999** 1998 1997 1996 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.77 $ 10.46 $ 10.28 $ 10.32 $ 10.08 $ 10.15 $ 10.65
-------- -------- -------- -------- -------- -------------- --------
Operations:
Investment income - net..... .25 .52 .53 .55 .57 .15 .59
Net realized and unrealized
gains (losses) on
investments............... (.19) .32 .18 (.04) .24 (.08) (.51)
-------- -------- -------- -------- -------- -------------- --------
Total from operations......... .06 .84 .71 .51 .81 .07 .08
-------- -------- -------- -------- -------- -------------- --------
Distributions to shareholders:
From investment income -
net....................... (.25) (.52) (.53) (.55) (.57) (.14) (.58)
From net realized gains..... (.17) (.01) -- -- -- -- --
-------- -------- -------- -------- -------- -------------- --------
Total distributions to
shareholders................. (.42) (.53) (.53) (.55) (.57) (.14) (.58)
-------- -------- -------- -------- -------- -------------- --------
Net asset value, end of
period....................... $ 10.41 $ 10.77 $ 10.46 $ 10.28 $ 10.32 $ 10.08 $ 10.15
-------- -------- -------- -------- -------- -------------- --------
Total return @................ .58% 8.25% 7.10% 5.01% 8.35% .72% .64%
Net assets end of period (000s
omitted).................... $ 40,710 $ 42,170 $ 43,584 $ 49,262 $ 52,603 $ 54,560 $54,854
Ratio of expenses to average
daily net assets............ .86%* .91% .96% .93% .98% .85%* .85%
Ratio of net investment income
to average daily net
assets...................... 4.65%* 4.94% 5.14% 5.34% 5.60% 5.69%* 5.51%
Portfolio turnover rate....... 17% 55% 61% 41% 27% 8% 11%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------ --------------------------------------------
Year Ended September 30, Year Ended September 30,
------------------------------------------------ --------------------------------------------
MINNESOTA PORTFOLIO 1999** 1998 1997 1996 1995+ 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.74 $ 10.43 $ 10.26 $ 10.30 $ 9.55 $ 10.73 $ 10.42 $ 10.24 $ 10.27 $ 9.55
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Operations:
Investment income - net..... .24 .49 .50 .52 .48 .20 .41 .42 .45 .41
Net realized and unrealized
gains (losses) on
investments............... (.19) .32 .18 (.04) .76 (.19) .32 .18 (.04) .73
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Total from operations......... .05 .81 .68 .48 1.24 .01 .73 .60 .41 1.14
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.24) (.49) (.51) (.52) (.49) (.20) (.41) (.42) (.44) (.42)
From net realized gains..... (.17) (.01) -- -- -- (.17) (.01) -- -- --
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Total distributions to
shareholders................. (.41) (.50) (.51) (.52) (.49) (.37) (.42) (.42) (.44) (.42)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.38 $ 10.74 $ 10.43 $ 10.26 $ 10.30 $ 10.37 $ 10.73 $ 10.42 $ 10.24 $ 10.27
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Total return @................ .47% 8.13% 6.66% 4.78% 13.15% .07% 7.18% 6.01% 4.04% 12.10%
Net assets end of period (000s
omitted).................... $ 3,474 $ 3,170 $ 3,689 $ 1,822 $ 884 $ 1,259 $ 1,271 $ 1,301 $ 1,109 $ 180
Ratio of expenses to average
daily net assets............ 1.11%* 1.16% 1.21% 1.18% 1.23%* 1.86%* 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 4.40%* 4.69% 4.89% 5.07% 5.10%* 3.65%* 3.94% 4.14% 4.34% 4.37%*
Portfolio turnover rate....... 17% 55% 61% 41% 27% 17% 55% 61% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 1999.
+ 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>
4. FINANCIAL HIGHLIGHTS (continued):
Class C
------------------------------------------------
Year Ended September 30,
------------------------------------------------
MINNESOTA PORTFOLIO 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.73 $ 10.44 $ 10.26 $ 10.30 $ 9.55
-------- ------- ------- ------- -------
Operations:
Investment income - net..... .23 .39 .42 .44 .42
Net realized and unrealized
gains (losses) on
investments............... (.19) .32 .18 (.04) .75
-------- ------- ------- ------- -------
Total from operations......... .04 .71 .60 .40 1.17
-------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.20) (.41) (.42) (.44) (.42)
From net realized gains..... (.17) (.01) -- -- --
-------- ------- ------- ------- -------
Total distributions to
shareholders................. (.37) (.42) (.42) (.44) (.42)
-------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.40 $ 10.73 $ 10.44 $ 10.26 $ 10.30
-------- ------- ------- ------- -------
Total return @................ .35% 6.97% 6.00% 4.00% 12.31%
Net assets end of period (000s
omitted).................... $ 222 $ 194 $ 232 $ 210 $ 143
Ratio of expenses to average
daily net assets............ 1.86%* 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 3.66%* 3.94% 4.14% 4.31% 4.28%*
Portfolio turnover rate....... 17% 55% 61% 41% 27%
</TABLE>
<TABLE>
<CAPTION>
Class H
----------------------------------------------------
Year Ended September 30,
----------------------------------------------------
MINNESOTA PORTFOLIO 1999** 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.76 $ 10.44 $ 10.26 $ 10.30 $ 9.55
-------- -------- -------- -------- --------
Operations:
Investment income - net..... .20 .42 .42 .44 .41
Net realized and unrealized
gains (losses) on
investments............... (.19) .32 .18 (.04) .76
-------- -------- -------- -------- --------
Total from operations......... .01 .74 .60 .40 1.17
-------- -------- -------- -------- --------
Distributions to shareholders:
From investment income -
net....................... (.20) (.41) (.42) (.44) (.42)
From net realized gains..... (.17) (.01) -- -- --
-------- -------- -------- -------- --------
Total distributions to
shareholders................. (.37) (.42) (.42) (.44) (.42)
-------- -------- -------- -------- --------
Net asset value, end of
period....................... $ 10.40 $ 10.76 $ 10.44 $ 10.26 $ 10.30
-------- -------- -------- -------- --------
Total return @................ .07% 7.26% 6.00% 3.93% 12.42%
Net assets end of period (000s
omitted).................... $ 1,613 $ 1,458 $ 1,227 $ 1,061 $ 638
Ratio of expenses to average
daily net assets............ 1.86%* 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 3.65%* 3.94% 4.14% 4.33% 4.29%*
Portfolio turnover rate....... 17% 55% 61% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 1999.
+ 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 PRESIDENT, CRANBROOK EDUCATION
COMMUNITY. 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.
PRESIDENT - FORTIS FINANCIAL GROUP,
FORTIS BENEFITS INSURANCE COMPANY AND
SENIOR VICE PRESIDENT, FORTIS
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
Peggy L. Ettestad
VICE PRESIDENT
Tamara L. Fagely
VICE PRESIDENT AND TREASURER
Howard G. Hudson
VICE PRESIDENT
Dickson W. Lewis
VICE PRESIDENT
Lucinda S. Mezey
VICE PRESIDENT
David A. Peterson
VICE PRESIDENT
Scott R. Plummer
VICE PRESIDENT
Rhonda J. Schwartz
VICE PRESIDENT
Melinda S. Urion
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 U.S. 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.
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<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 NATIONAL
SECURITIES PORTFOLIO
TAX-FREE MINNESOTA
PORTFOLIO
STRATEGIC INCOME FUND
HIGH YIELD PORTFOLIO
Fortis Stock Funds ASSET ALLOCATION
PORTFOLIO
VALUE FUND
GROWTH & INCOME FUND
CAPITAL FUND
GLOBAL GROWTH PORTFOLIO
GROWTH FUND
INTERNATIONAL EQUITY
PORTFOLIO
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
Empower Variable DIVERSIFIED INCOME
Annuity SUBACCOUNT
GLOBAL BOND SUBACCOUNT
HIGH YIELD SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
MID CAP STOCK SUBACCOUNT
SMALL CAP VALUE
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
LARGE CAP GROWTH
SUBACCOUNT
GROWTH 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
GLOBAL ASSET ALLOCATION
SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
MID CAP STOCK SUBACCOUNT
SMALL CAP VALUE
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
LARGE CAP GROWTH
SUBACCOUNT
GROWTH 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 FORTIS 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>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
- --------------------------------------------------------------------------------
FORTIS MEANS STEADFAST
Fortis means "steadfast" in Latin. The worldwide Fortis family of companies
lives up to the name, and has each day since the 1800s, with flexible
solutions tailored to our customers' individual needs. We deliver the
stability you require today ... and tomorrow. You can count on it.
Fortis Financial Group offers mutual funds, annuities and life insurance
through its broker/dealer Fortis Investors, Inc. We're part of Fortis, Inc.,
a financial services company that provides specialty insurance and
investment products to individuals, businesses, associations and other
financial services organizations throughout 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.
Fortis: steadfast for YOU!
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc.
(fund management since 1949)
Fortis Investors, Inc.
(principal underwriter;
member NASD, SIPC)
Fortis Benefits Insurance Company
& Fortis Insurance Company
(issuers of FFG's insurance products)
P.O. Box 64284, St. Paul, MN 55164
Telephone (800) 800-2000
http://www.ffg.us.fortis.com
- --------------------------------------------------------------------------------
FORTIS FINANCIAL GROUP ---------------
P.O. Box 64284 Bulk Rate
St. Paul, MN 55164 U.S. Postage
PAID
Permit No. 3794
FORTIS TAX-FREE PORTFOLIOS Minneapolis, MN
---------------
[LOGO] Printed on recycled paper with
40% preconsumer waste and 10%
post consumer waste. Please recycle.
The Fortis logo and Fortis-SM- are servicemarks
of Fortis AMEV and Fortis AG.
95380-C- Fortis 5/99
