<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
Enjoy the benefits of TAX-SMART INVESTING
Fortis Tax-Free
Portfolios, Inc.
semiannual report
March 31, 2000
FORTIS FINANCIAL GROUP
[GRAPHIC]
Fortis Tax-Free National Fund
Fortis Tax-Free Minnesota Fund
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
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 20
OTHER PRODUCTS AND SERVICES 21
- - TOLL-FREE PERSONAL ASSISTANCE
- Shareholder Services
- (800) 800-2000, Ext. 3012
- 7:30 a.m. to 7:00 p.m. CST, M-Th
- 7:30 a.m. to 7:00 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 charts show the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by industry.
The performance chart graphically compares the Fund's total return performance
with a selected investment index. Remember, however, that an index may reflect
the performance of securities the fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your fund does. Individuals cannot buy an unmanaged index fund without incurring
some charges and expenses.
This report is just one of several tools you can use to learn more about your
investment in the Fortis Family of Mutual Funds. Your investment representative,
who understands your personal financial situation, can best explain the features
of your investment and how it's designed to help you meet your financial goals.
HIGHLIGHTS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS E CLASS H
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
TAX-FREE NATIONAL
NET ASSET VALUE PER SHARE:
Beginning of period........................ $10.47 $10.46 $10.45 $10.49 $10.46
End of period.............................. $10.41 $10.40 $10.39 $10.43 $10.40
DISTRIBUTIONS PER SHARE
From net investment income................. $ .236 $ .195 $ .195 $ .248 $ .195
TAX-FREE MINNESOTA
NET ASSET VALUE PER SHARE:
Beginning of period........................ $ 9.91 $ 9.90 $ 9.93 $ 9.94 $ 9.93
End of period.............................. $ 9.83 $ 9.83 $ 9.85 $ 9.86 $ 9.86
DISTRIBUTIONS PER SHARE
From net investment income................. $ .229 $ .192 $ .192 $ .241 $ .192
</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, 2000. The economy continued to show strong growth, as
Real Gross Domestic Product (GDP) grew at a 7.3% rate during the fourth quarter
of 1999 and growth during the first quarter of 2000 is expected to be near 5%.
Economic growth was supported by strong non-farm payroll growth, as the
unemployment rate during late 1999 and early 2000 remained in a range between
4.0% and 4.2%. Although headline inflation measures were sharply higher because
of rising oil prices, the year-over-year core Consumer Price Index (the core CPI
excludes food and energy) rose a modest 2.1%, and the year-over-year core
Producer Price Index up 1.0% through February. The Federal Reserve raised the
Federal Funds rate three times, totaling 75 basis points, and the Discount Rate
by 75 basis points during the six months ended March 31, 2000. The Fed continues
to be concerned about the potential for increased inflationary pressures in the
U.S. economy, and we believe that further Fed rate increases are possible.
Municipal bond yields, as reflected by the Bond Buyer Revenue Bond Index, rose
steadily early in the six-month period, reflecting rate increases by the Federal
Reserve and concerns about the possibility of increased inflationary pressure
caused by strong growth and tight labor markets. The Index rose from a yield of
5.96% on September 30, 1999 to 6.35% on January 20, 2000. As 2000 unfolded, a
35% decrease in new issue municipal supply combined with a Treasury market
helped by expected reductions in long bond supply to produce a market rally. The
Revenue Bond Index closed March 2000, at 6.03%.
During the fourth quarter of 1999, the durations of the funds were held
relatively constant, shorter than their respective benchmarks. This shorter
duration helped performance as rates rose during the quarter. The duration of
the funds was lengthened modestly during the first quarter of 2000, as the
announcement of Treasury buybacks improved the tone of the market, and we
believed that the market was beginning to anticipate an end to Fed tightening.
Total returns for the six months ended March 31, 2000, were 1.84% for the
National Portfolio Class E before sales charge, and 1.67% for the Minnesota
Portfolio Class E shares before sales charge. These levels compare with the
2.12% total return of the Lehman Municipal Index during the same period. The
durations of the funds at the end of the reporting period were 6.6 years for the
Minnesota portfolio, and 7.9 years for the National Portfolio. This compares to
a duration of 7.2 years for the Lehman Municipal Index.
As the year 2000 moves forward, we expect economic growth to continue to be
strong during the first half of the year. Continuing tightness in the labor
markets could exert modest upward inflationary pressure. Since the response to
Fed action in the economy occurs with a 12-18 month lag, we expect growth to
moderate later this year in response to the rate increases that began in 1999.
For purposes of liquidity, we believe that it will be important to maintain
strong credit quality in both portfolios. 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 03/31/2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligations 21.4%
Transportation 20.6%
Utilities - Water and Sewer 14.7%
Health Care Services 12.1%
Utilities - Electric 7.1%
Housing 6.2%
Pollution Control 5.1%
Cash Equivalents/Receivables 3.1%
Public Facilities 3.0%
Miscellaneous 2.7%
Prerefunded with U.S. Gov't
Securities 2.7%
Other 1.3%
</TABLE>
NATIONAL PORTFOLIO
VALUE OF $10,000 INVESTED APRIL 1, 1990
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROS. NATIONAL PORTFOLIO
MUNICIPAL BOND INDEX*** CLASS E
04/01/90 10,000 9,550
<S> <C> <C>
91 10,923 10,309
92 12,013 11,381
93 13,518 12,826
94 13,832 13,158
95 14,859 13,999
96 16,105 14,963
97 16,982 15,646
98 18,802 17,237
99 19,968 18,059
00 19,952 17,848
</TABLE>
<TABLE>
<CAPTION>
NATIONAL PORTFOLIO CLASS E
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C>
Class E* -5.62% +4.01% +5.96%
Class E** -1.17% +4.98% +6.45%
</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 3/31/2000
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. New York Triborough Bridge & Tunnel Authority
(5.50%) 2017 4.5%
2. Metropolitan Transportation Authority NY (5.75%)
2013 4.4%
3. Ohio State Turnpike Commission (5.50%) 2017 4.4%
4. Southern California Public Power (6.36%) 2013 3.4%
5. Detroit, MI Water System (6.50%) 2015 3.4%
6. Fulton County, GA Water & Sewer (6.375%) 2014 3.4%
7. La Canada, CA School District (5.75%) 2025 3.2%
8. Connecticut State, Special Tax Obligation (6.125%)
2012 2.8%
9. Sulphur Springs (City of), CA, (7.00%) 2012 2.5%
10. Hamilton City School District, OH, (6.15%) 2016 2.4%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception+
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A shares# -1.40% +4.71% +6.34%
Class A shares## -5.83% +3.75% +5.43%
Class B shares# -2.17% +3.92% +5.51%
Class B shares## -5.54% +3.61% +5.38%
Class C shares# -2.17% +3.90% +5.50%
Class C shares## -3.12% +3.90% +5.50%
Class H shares# -2.17% +3.91% +5.51%
Class H shares## -5.54% +3.61% +5.38%
</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, 2000.
+ Since November 14, 1994 - Date shares were first offered to the public.
2
<PAGE>
COMPOSITION BY INDUSTRY
AS OF 03/31/2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
General Obligations 27.5%
Housing 17.9%
Higher Education 15.8%
Miscellaneous 7.2%
Health Care Services 7.1%
Utilities - Electric 6.3%
Prerefunded with U.S. Gov't
Securities 5.2%
Cash Equivalents/Receivables 4.0%
Pollution Control 3.3%
Public Facilities 3.1%
Transportation 2.6%
</TABLE>
MINNESOTA PORTFOLIO
VALUE OF $10,000 INVESTED APRIL 1, 1990
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROS. MINNESOTA PORTFOLIO
MUNICIPAL BOND INDEX*** CLASS E
4/1/90 10,000 9,550
<S> <C> <C>
91 10,923 10,330
92 12,013 11,273
93 13,518 12,557
94 13,832 12,900
95 14,859 13,739
96 16,105 14,602
97 16,982 15,204
98 18,802 16,585
99 19,968 17,481
00 19,952 17,369
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA PORTFOLIO CLASS E
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C>
Class E* -5.11% +3.84% +5.68%
Class E** -0.64% +4.80% +6.16%
</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 3/31/2000
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. University of MN (Regents of) (5.50%) 2021
4.9%
2. Brainerd (City of), MN (6.65%) 2017 3.8%
3. Minneapolis (City of), MN (4.09%) Zero Coupon
General Obligation 2005 3.5%
4. Becker (City of), MN, Independent School District
(6.00%) 2017 3.3%
5. St. Louis Park (City of), MN Hospital Facility
(7.25%) 2015 3.2%
6. Rochester (City of), MN Health Care Facility
(5.90%) 2010 2.6%
7. Minneapolis (City of), MN, CDA Limited Tax
(7.375%) 2012 2.6%
8. University of MN (Regents of) (5.75%) 2013 2.6%
9. Puerto Rico, Commonwealth Highway & Transportation
(5.50%) 2013 2.5%
10. University of MN (Regents of) (5.75%) 2018 2.5%
</TABLE>
CLASS A, B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception+
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A shares# -0.88% +4.55% +5.91%
Class A shares## -5.35% +3.59% +5.00%
Class B shares# -1.57% +3.79% +5.08%
Class B shares## -4.96% +3.49% +4.94%
Class C shares# -1.66% +3.75% +5.10%
Class C shares## -2.61% +3.75% +5.10%
Class H shares# -1.56% +3.78% +5.13%
Class H shares## -4.96% +3.48% +4.99%
</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, 2000.
+ Since November 14, 1994 -- Date shares were first offered to the public.
3
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
NATIONAL PORTFOLIO
Schedule of Investments
March 31, 2000 (Unaudited)
MUNICIPAL BONDS-96.86%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
ARIZONA-2.14%
$1,225,000 Tucson, AZ, 5.50% Water Rev Refunding Bond
7-1-2014................................... A+ $1,205,902 $ 1,239,369
----------- -----------
CALIFORNIA-12.14%
1,830,000 La Canada School Dist, CA, 5.75% General
Obligation Bond Ser A 8-1-2025............. AAA 1,859,243 1,863,507
2,385,000 Redwood City California Elem School Dist,
5.50% Zero Coupon General Obligation FGIC
Insured 8-1-2018 (d)....................... AAA 881,928 837,588
2,750,000 Sulphur Springs (City of), CA, 7.00% Zero
Coupon General Obligation Ser A MBIA
Insured 9-1-2012 (d)....................... AAA 1,170,253 1,434,593
1,000,000 Los Angeles County, CA, Public Works Finance
Authority, 5.00% Regional Park and Open
Space District A 10-1-2019................. AA 919,867 921,550
4,000,000 Southern California Public Power, 6.36% Zero
Coupon Bond 7-1-2013 (d)................... A 1,745,315 1,969,360
----------- -----------
6,576,606 7,026,598
----------- -----------
CONNECTICUT-2.81%
1,500,000 Connecticut State, 6.125% Special Tax
Obligation Rev Transportation
Infrastructure Ser B 9-1-2012.............. AA- 1,568,336 1,624,965
----------- -----------
DISTRICT OF COLUMBIA-2.22%
1,250,000 District of Columbia, 7.50% General
Obligation Ser 1990B FSA Insured
6-1-2010 (Prerefunded 6-1-2000 @ 102)...... AAA 1,240,293 1,281,650
----------- -----------
FLORIDA-0.91%
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 472,153 529,110
----------- -----------
GEORGIA-7.25%
1,000,000 Georgia Municipal Electric, 6.50% Auth Power
Rev Ser Y 1-1-2017......................... A 991,250 1,088,880
1,765,000 Fulton County, GA, Water & Sewer, 6.375% Ref
Bond FGIC Insured 1-1-2014 (Escrowed to
Maturity).................................. AAA 1,753,678 1,944,783
35,000 Fulton County, GA, Water & Sewer, 6.375% Ref
Bond FGIC Insured 1-1-2014 (Unrefunded).... AAA 34,751 38,249
1,165,000 Rockdale County, GA, 5.50% Water & Sewer Rev
Bond Ser A MBIA Insured 7-1-2025........... AAA 1,115,130 1,124,831
----------- -----------
3,894,809 4,196,743
----------- -----------
ILLINOIS-5.82%
500,000 Channahon Park, IL District, 7.50% General
Obligation 1-1-2011 (Prerefunded 7-1-2001
@ 100)..................................... NR 499,375 518,415
1,000,000 Illinois Housing Dev Auth, 7.55% Multi-family
Housing Ser 1990A 7-1-2014................. A+ 987,575 1,024,530
1,000,000 Illinois Dev Fin Auth, 7.375% Power Co Proj
Ser 1991A 7-1-2021......................... BBB 992,027 1,061,330
750,000 Chicago Gas Supply, 7.50% Rev for Peoples Gas
Ser B 3-1-2015............................. AA- 754,979 765,000
----------- -----------
3,233,956 3,369,275
----------- -----------
INDIANA-1.78%
1,000,000 Indianapolis (City of), IN, Local Public
Improvement Bond Bank, 7.40% Ser 1990A
1-1-2020 (Prerefunded 7-1-2000 @102)....... Aaa* 997,838 1,027,840
----------- -----------
KENTUCKY-5.42%
1,000,000 Christian County, KY, 6.00% Hospital Rev Ref
Bond Jennie Stuart Medical Center
7-1-2013................................... A- 995,481 976,700
1,000,000 Carroll County, KY, 7.45% Collateralized
Pollution Control Rev Bond Utilities
Project Ser A 9-15-2016.................... A 1,065,242 1,064,780
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 996,633 1,094,220
----------- -----------
3,057,356 3,135,700
----------- -----------
LOUISIANA-1.57%
1,000,000 St. John Baptist Parish, LA, 5.35%
Environmental Improvement Rev Bond-USX
Corp. Project 12-1-2013.................... BBB- 975,410 905,200
----------- -----------
MASSACHUSETTS-2.79%
500,000 Boston, MA, 7.625% City Hospital Rev Bond Ser
A 2 -15-2021 (Prerefunded 8-15-2000
@102)...................................... Aaa* 496,068 514,655
1,140,000 Massachusetts Bay Transit Authority, 5.25%
General Transit System Bond Ser A FGIC
Insured 3-1-2017........................... AAA 1,072,950 1,099,097
----------- -----------
1,569,018 1,613,752
----------- -----------
MICHIGAN-5.09%
1,000,000 Michigan Municipal Bond Authority, 5.50%
Drinking Water Revolving Fund Rev Bond
10-1-2018.................................. AA+ 966,006 984,050
1,750,000 Detroit, MI, Water System, 6.50% Rev Bond
FGIC Insured 7-1-2015...................... AAA 1,859,789 1,957,830
----------- -----------
2,825,795 2,941,880
----------- -----------
</TABLE>
4
<PAGE>
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
----------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
MINNESOTA-7.46%
$1,140,000 Fergus Falls (City of), MN, 6.50% Health Care
Fac Rev (Lake Regional Hospital) Ser A
9-1-2018................................... BBB+ $1,132,392 $ 1,094,491
670,000 Minneapolis (City of), MN, 7.00% Health Care
Fac Rev (St. Olaf Residence) Ser 1993
10-1-2012.................................. NR 670,000 674,844
1,000,000 Minnesota Agriculture and Economic
Development, 5.50% Healthcare System Rev
Fairview Hospital and Healthcare Services
Ser 1997A MBIA Insured 11-15-201........... AAA 1,004,369 994,350
500,000 Duluth (City of), MN, 5.875% Economic Dev
Auth Health Care Fac Rev Bond Ser A
12-1-2028.................................. NR 500,000 407,470
500,000 Minneapolis (City of), MN, 5.875% Walker
Methodist Services Rev Bond Ser C
11-15-2018................................. NR 492,764 421,540
690,000 St. Anthony (City of), MN, 6.75% Housing Dev
Rev Ref Bond 7-1-2007...................... AA 690,000 721,057
----------- -----------
4,489,525 4,313,752
----------- -----------
MISSOURI-2.26%
1,235,000 Missouri State Health & Educ, 7.70% Still
Regional Med Ctr 2-1-2013.................. BBB 1,271,292 1,308,161
----------- -----------
NEW YORK-12.62%
1,000,000 New York City, NY, 8.25% General Obligation
Ser B 6-1-2005............................. A- 991,304 1,138,230
1,000,000 New York State Dorm Auth, 6.00% Rev Cons City
Univ System 2nd Gen 7-1-2020............... A- 1,017,596 1,018,750
2,465,000 Metropolitan Transportation Authority, NY,
Commuter Facilities, 5.75% Ser O
7-1-2013................................... A- 2,398,031 2,539,788
2,600,000 New York Triborough Bridge and Tunnel Auth,
5.50% General Purpose Ser Y 1-1-2017....... A+ 2,503,974 2,607,592
----------- -----------
6,910,905 7,304,360
----------- -----------
NORTH DAKOTA-1.96%
1,100,000 Ward County, ND, 7.50% Health Care Fac Ser
1991B 7-1-2011............................. BBB+ 1,112,673 1,136,300
----------- -----------
OHIO-12.22%
1,270,000 Hamilton City School Dist, OH, 6.15% School
Improvement Ser A 12-1-2016................ AA- 1,322,266 1,373,696
1,250,000 Strongsville City School Dist, OH, 5.375%
General Obligation Bond MBIA Insured
12-1-2012.................................. AAA 1,237,908 1,273,500
750,000 Cleveland (City of), OH, Parking Fac, 8.10%
Improvement Proj Rev Bond
9-15-2022 (Prerefunded 9-15-2002
@ 102)..................................... NR 765,000 819,540
2,500,000 Ohio State Turnpike Commission, 5.50% Rev
Bond Ser A FGIC Insured 2-15-2017.......... AAA 2,437,200 2,519,000
1,100,000 Cleveland, OH, 5.50% Water Works Rev Ref Bond
Ser G First Mortgage MBIA Insured
1-1-2021................................... AAA 1,091,838 1,083,841
----------- -----------
6,854,212 7,069,577
----------- -----------
OREGON-1.86%
1,100,000 Oregon State Dept. of Administrative
Services, 5.25% Rev Bond Ser B FSA Insured
4-1-2015................................... AAA 1,061,237 1,077,648
----------- -----------
PENNSYLVANIA-2.18%
750,000 Clarion County, PA, 8.50% Clarion Hospital
Proj Rev Bond 7-1-2021 (Prerefunded
7-1-2001 @102)............................. NR 731,886 798,270
500,000 LeHigh County, PA, 5.70% General Purpose Auth
Rev Bond, Kidspeace Obligation Group
11-1-2009.................................. NR 500,000 461,895
----------- -----------
1,231,886 1,260,165
----------- -----------
PUERTO RICO-2.35%
1,250,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 1,330,013 1,360,650
----------- -----------
VIRGINIA-1.71%
1,000,000 Peninsula Ports Authority of VA, 6.0% Port
Facility CSX Transit Project Rev Bond
12-15-2012................................. Baa2* 1,000,000 987,230
----------- -----------
WISCONSIN-2.30%
1,305,000 Sparta School Dist, WI, 5.90% General
Obligation Bond FGIC Insured 3-1-2016...... Aaa* 1,303,374 1,332,418
----------- -----------
TOTAL MUNICIPAL BONDS........................ $54,182,589 $56,042,343
=========== ===========
</TABLE>
5
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
NATIONAL PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 2000 (Unaudited)
SHORT-TERM INVESTMENTS-0.70%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value (b)
---------- -----------
<C> <S> <C>
INVESTMENT COMPANY-0.70%
$ 402,328 First American Tax-Free Obligations Fund,
Current rate -- 3.43%...................... $ 402,328
-----------
TOTAL INVESTMENTS IN SECURITIES (COST:
$54,584,917) (a)........................... $56,444,671
===========
</TABLE>
(a) At March 31, 2000, the cost of securities for federal income tax purposes
was $54,584,917 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $2,265,839
Unrealized depreciation..................................... (406,085)
- ------------------------------------------------------------------------
Net unrealized appreciation................................. $1,859,754
- ------------------------------------------------------------------------
</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
6
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
MINNESOTA PORTFOLIO
Schedule of Investments
March 31, 2000 (Unaudited)
MUNICIPAL BONDS-95.97%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
---------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
GENERAL OBLIGATIONS-27.49%
$1,300,000 Becker (City of), MN, Independent School
District #726, 6.00% Ser A FSA Insured
2-1-2017................................... Aaa* $1,308,599 $ 1,356,771
1,000,000 Bloomington (City of), MN, Independent School
District #271, 5.45% General Obligation
2-1-2012................................... Aa1* 995,707 1,018,160
1,000,000 Delano (City of), MN, Independent School
District #879, 5.65% General Obligation Ser
A 2-1-2016................................. Aa1* 995,342 1,018,250
1,000,000 Delano (City of), MN, Independent School
District #879, 5.70% General Obligation Ser
A 2-1-2017................................. Aa1* 994,203 1,018,690
1,240,000 Farmington (City of), MN, Independent School
District #192, 5.04% Zero Coupon General
Obligation Ser B FSA Insured 2-1-2012
(d)........................................ Aaa* 687,853 655,526
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* 1,026,917 1,002,592
1,915,000 Minneapolis (City of), MN, 4.09% Zero Coupon
General Obligation Cap Apprec Ser B
12-1-2005 (d).............................. AAA 1,522,736 1,441,152
1,000,000 Minnesota State, 5.25% General Obligation
8-1-2016................................... AAA 964,817 979,530
750,000 Puerto Rico, 6.25% Commonwealth Aqueduct &
Sewer Auth Rev Ref Bond PR-GTD 7-1-2013.... A 798,008 816,390
1,000,000 Robbinsdale (City of), MN, Independent School
District #201, 5.50% General Obligation
2-1-2015................................... NR 1,003,380 1,006,170
1,950,000 Rosemount (City of), MN, Independent School
District #196, 5.70% Zero Coupon General
Obligation MBIA Insured 4-1-2015 (d)....... AA+ 839,243 850,375
----------- -----------
11,136,805 11,163,606
----------- -----------
HEALTH CARE SERVICES-7.09%
1,000,000 Rochester (City of), MN, 5.90% Health Care
Fac Rev Mayo Med Ctr Ser I 11-15-2010...... AA+ 1,044,096 1,064,410
1,000,000 St Paul (City of), MN, 5.25% Health Care Fac
Rev Regions Hospital 5-15-2018............. BBB+ 977,143 809,010
1,000,000 Waconia (City of), MN, 6.10% Health Care Fac
Rev Ridgeview Med Ctr Ser A Asset Guaranty
Insured 1-1-2019........................... AA 994,437 1,007,920
----------- -----------
3,015,676 2,881,340
----------- -----------
HIGHER EDUCATION (UNIV, DORMS, ETC.)-15.83%
1,000,000 Minnesota Higher Education, 5.375% Fac Auth
Rev for University of St. Thomas Ser 4-P
4-1-2018................................... A2* 995,922 958,290
1,000,000 Minnesota Higher Education, 5.40% Fac Auth
Rev for University of St. Thomas Ser 4-P
4-1-2023................................... A2* 942,983 937,980
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- 457,700 479,913
2,000,000 University of MN (Regents of), 5.50% General
Obligation Ser A 7-1-2021.................. AA 2,021,199 1,970,260
1,000,000 University of MN (Regents of), 5.75% General
Obligation Ser 1996A 7-1-2013.............. AA 1,048,170 1,048,190
1,000,000 University of MN (Regents of), 5.75% General
Obligation Ser A 7-1-2018.................. AA 1,011,253 1,033,140
----------- -----------
6,477,227 6,427,773
----------- -----------
HOUSING-17.93%
1,500,000 Brainerd (City of), MN, 6.65% Rev Ref Bond
Evangelical Lutheran-Good Samaritan Proj
Ser B FSA Insured 3-1-2017................. AAA 1,513,240 1,553,445
45,000 Dakota County, MN, 8.10% HRA Single Family
Rev GNMA Backed 3-1-2016................... AA 45,176 45,248
500,000 Duluth (City of), MN, 5.625% EDA Health Care
Fac Rev Board of Social Ministries
Properties Proj Ser A 12-1-2018............ NR 500,000 408,510
300,000 Eden Prairie (City of), MN, 7.40% Multifamily
Housing FHA Insured 8-1-2025............... AAA 299,956 307,092
835,000 Eden Prairie (City of), MN, 8.00% Multifamily
Housing Ser A FHA Insured 7-1-2026......... AAA 835,000 862,363
525,000 Mankato (City of), MN, 8.25% Nursing Home Rev
Board of Social Ministry Mankato Lutheran
Ser A 10-1-2021 (Prerefunded 10-1-2001
@ 102)..................................... NR 520,000 561,130
500,000 Minneapolis (City of), MN, 5.875% Walker
Methodist Services Rev Bond Ser C
11-15-2018................................. NR 492,764 421,540
485,000 Minneapolis (City of), MN, 6.00% Health Care
Fac Rev Bond Shelter Care Foundation Ser A
4-1-2010................................... NR 485,000 447,257
840,000 Minneapolis (City of), MN, 7.10% HRA Mortgage
Rev Bond Riverplace Proj Ser A LOC Bank of
Tokyo 1-1-2020............................. A2* 851,756 841,126
350,000 Minneapolis (City of), MN, 8.25% Rev Bond
Trinity Housing Proj 2-1-2018 (Prerefunded
2-1-2001 @ 102)............................ NR 350,000 367,525
440,000 Northfield (City of), MN, 7.00% Health Care
Fac Northfield Parkview Proj Ser B
5-1-2015 (Prerefunded 5-1-2001 @ 102)...... NR 436,301 459,804
500,000 Red Wing (City of), MN, 6.50% Elderly Housing
Fac Rev River Region Obligated Group Ser C
9-1-2022................................... BBB+ 497,080 472,695
500,000 Spring Park (City of), MN, 8.25% Health Care
Fac Rev Bond Twin Birch Health Care Ctr
8-1-2011 (Prerefunded 8-1-2001 @ 102)...... NR 500,000 531,995
----------- -----------
7,326,273 7,279,730
----------- -----------
MISCELLANEOUS-7.21%
450,000 Dakota County, MN, 7.50% HRA Limited Annual
Appropriation Tax & Rev Supported Bond
1-1-2006................................... BBB+ 450,000 460,193
400,000 Dawson (City of), MN, 7.30% IDR Ref Bond
Associated Milk Producers 9-1-2000......... NR 396,426 401,660
1,000,000 Golden Valley (City of), MN, 5.875% Rev Bond
Breck School Proj 10-1-2019................ A2* 985,677 1,007,600
</TABLE>
7
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
MINNESOTA PORTFOLIO (CONTINUED)
Schedule of Investments
March 31, 2000 (Unaudited)
MUNICIPAL BONDS-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (a) Value (b)
---------- ----------- ----------- -----------
<C> <S> <C> <C> <C>
$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 $ 1,056,880
----------- -----------
2,832,103 2,926,333
----------- -----------
POLLUTION CONTROL-3.31%
650,000 East Grand Forks (City of), MN, 7.75%
Pollution Control Rev (American Crystal
Sugar) Ser 1991A 4-1-2018.................. BBB+ 650,212 676,007
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 636,107 670,150
----------- -----------
1,286,319 1,346,157
----------- -----------
PREREFUNDED WITH U.S. GOVERNMENT
SECURITIES-5.17%
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 1,259,655 1,310,050
765,000 St. Louis Park (City of), MN, 8.50% Health
Care Fac Rev Park Nicollet Med Ctr Ser A
1-1-2011 (Prerefunded 1-1-2001 @ 100)...... Aaa* 766,236 788,814
----------- -----------
2,025,891 2,098,864
----------- -----------
PUBLIC FACILITIES-3.10%
400,000 Duluth (City of), MN, 6.75% Gross Rev
Recreation Fac Bond Spirit Mountain Ser
1992 2-1-2007.............................. NR 400,000 404,240
325,000 Moorhead (City of), MN, 7.75% Golf Course Rev
Bond Ser 1992A 12-1-2015 (Prerefunded
12-1-2001 @ 100)........................... NR 325,000 340,766
500,000 St. Paul (City of), MN, 6.45% HRA Parking Rev
Bond Ser 1992A 8-1-2007 (Prerefunded
8-1-2000 @ 102)............................ A- 500,000 513,615
----------- -----------
1,225,000 1,258,621
----------- -----------
TRANSPORTATION-2.55%
1,000,000 Puerto Rico, 5.50% Commonwealth Highway &
Transportation Auth Rev Ser W FSA-CR
7-1-2013................................... AAA 1,022,602 1,035,170
----------- -----------
UTILITIES-ELECTRIC-6.29%
1,295,000 Northern MN Municipal Power Agency, 6.60%
Zero Coupon Elec Sys Rev Ref Ser A AMBAC
Primary Insured 1-1-2011 (d)............... AAA 621,875 724,216
1,000,000 Southern MN Municipal Power Agency, 5.27%
Zero Coupon Power Supply Systems Rev Bonds
MBIA Insured 1-1-2019 (d).................. AAA 377,100 338,590
1,600,000 Southern MN Municipal Power Agency, 6.25%
Zero Coupon Power Supply Systems Rev Bonds
MBIA Insured 1-1-2021 (d).................. AAA 446,186 476,848
1,000,000 Western MN Municipal Power Agency, 5.50% Ser
A AMBAC Insured 1-1-2013................... AAA 992,682 1,013,120
----------- -----------
2,437,843 2,552,774
----------- -----------
TOTAL MUNICIPAL BONDS........................ $38,785,739 $38,970,368
=========== ===========
</TABLE>
SHORT-TERM INVESTMENTS-2.99%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value (b)
---------- -----------
<C> <S> <C>
INVESTMENT COMPANY-2.99%
$1,216,925 Federated Minnesota Municipal Cash Trust,
Current rate -- 3.65%...................... $ 1,216,925
-----------
TOTAL INVESTMENTS IN SECURITIES (COST:
$40,002,664) (A)........................... $40,187,293
===========
</TABLE>
(a) At March 31, 2000, the cost of securities for federal income tax purposes
was $40,002,664 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 858,684
Unrealized depreciation........................... (674,055)
--------------------------------------------------------------
Net unrealized appreciation....................... $ 184,629
--------------------------------------------------------------
</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, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL MINNESOTA
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
ASSETS:
Investments in securities, as detailed in the accompanying schedules, at
market (cost $54,584,917; $40,002,664; respectively) (Note 1)............... $56,444,671 $40,187,293
Receivables:
Investment securities sold.................................................. 2,534,715 2,032,040
Interest and dividends...................................................... 864,279 541,140
Deferred registration costs(Note 1)........................................... 22,504 1,181
Prepaid expenses.............................................................. 524 722
----------- -----------
TOTAL ASSETS.................................................................... 59,866,693 42,762,376
----------- -----------
LIABILITIES:
Cash portion of dividends payable............................................. 72,258 49,608
Payable for investment securities purchased................................... 1,859,243 2,051,550
Redemptions of capital stock.................................................. 4,770 5,956
Payable for investment advisory and management fees (Note 2).................. 38,435 24,410
Payable for distribution fees (Note 2)........................................ 244 83
Accounts payable and accrued expenses......................................... 32,863 22,700
----------- -----------
TOTAL LIABILITIES............................................................... 2,007,813 2,154,307
----------- -----------
NET ASSETS:
Net proceeds of capital stock, par value $.01 per share-authorized
100,000,000,000; 100,000,000,000 shares; respectively....................... 56,515,532 40,775,243
Unrealized appreciation of investments........................................ 1,859,754 184,629
Undistributed net investment income........................................... 99,856 63,775
Accumulated net realized gain (loss) from sale of investments................. (616,262) (415,578)
----------- -----------
TOTAL NET ASSETS................................................................ $57,858,880 $40,608,069
=========== ===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A shares (based on net assets of $6,395,641; and $3,550,257; respectively
and 614,409; and 361,182 shares outstanding; respectively).................... $10.41 $9.83
----------- -----------
Class B shares (based on net assets of $1,642,909; and $777,300; respectively
and 157,925; and 79,079 shares outstanding; respectively)..................... $10.40 $9.83
----------- -----------
Class C shares (based on net assets of $318,185; and $223,827; respectively and
30,628; and 22,719 shares outstanding; respectively).......................... $10.39 $9.85
----------- -----------
Class E shares (based on net assets of $44,096,597; and $34,838,994;
respectively and 4,228,290; and 3,533,103 shares outstanding; respectively)... $10.43 $9.86
----------- -----------
Class H shares (based on net assets of $5,405,548; and $1,217,691; respectively
and 519,781; and 123,542 shares outstanding; respectively).................... $10.40 $9.86
----------- -----------
</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, 2000
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL MINNESOTA
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest income........................................................... $1,780,125 $1,237,110
---------- ----------
Expenses:
Investment advisory and management fees (Note 2).......................... 233,553 148,916
Distribution fees (Class A) (Note 2)...................................... 8,835 4,068
Distribution fees (Class B) (Note 2)...................................... 8,398 3,760
Distribution fees (Class C) (Note 2)...................................... 2,096 1,141
Distribution fees (Class H) (Note 2)...................................... 28,160 6,467
Registration fees (Note 1)................................................ 22,750 3,000
Legal and auditing fees................................................... 9,187 9,550
Shareholders' notices and reports......................................... 14,500 9,750
Custodian fees............................................................ 1,500 1,850
Directors' fees and expenses.............................................. 5,300 3,325
Other..................................................................... 8,420 3,900
---------- ----------
Total expenses.............................................................. 342,699 195,727
---------- ----------
NET INVESTMENT INCOME......................................................... 1,437,426 1,041,383
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (NOTE 1)
Net realized gain (loss) from security transactions......................... (167,377) (280,307)
Net realized gain (loss)from interest rate futures.......................... 1,594 --
---------- ----------
NET REALIZED LOSS ON INVESTMENTS.............................................. (165,783) (280,307)
---------- ----------
Net change in unrealized depreciation of investments........................ (299,347) (124,084)
---------- ----------
NET GAIN (LOSS) ON INVESTMENTS................................................ (465,130) (404,391)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $ 972,296 $ 636,992
========== ==========
</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
SIX-MONTH
PERIOD ENDED FOR THE
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 1,437,426 $ 3,106,189
Net realized loss from security transactions.................................. (165,783) (447,559)
Net change in unrealized depreciation on investments in securities............ (299,347) (4,554,712)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................. 972,296 (1,896,082)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A..................................................................... (161,401) (358,626)
Class B..................................................................... (31,807) (65,694)
Class C..................................................................... (7,888) (17,374)
Class E..................................................................... (1,074,011) (2,370,705)
Class H..................................................................... (106,599) (231,888)
From net realized gains on investments
Class A..................................................................... -- (90,276)
Class B..................................................................... -- (16,339)
Class C..................................................................... -- (4,978)
Class E..................................................................... -- (589,072)
Class H..................................................................... -- (71,581)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................................. (1,381,706) (3,816,533)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (29,576 and 159,281 shares)......................................... 305,242 1,748,357
Class B (4,459 and 102,711 shares).......................................... 45,611 1,139,703
Class C (3,135 and 19,583 shares)........................................... 32,300 211,700
Class E (41,225 and 109,227 shares)......................................... 425,752 1,197,525
Class H (10,318 and 151,781 shares)......................................... 107,183 1,688,819
Proceeds from shares issued as a result of reinvested dividends
Class A (11,049 and 25,779 shares).......................................... 113,666 282,949
Class B (2,710 and 6,255 shares)............................................ 27,853 68,470
Class C (693 and 1,782 shares).............................................. 7,111 19,489
Class E (69,982 and 177,747 shares)......................................... 721,011 1,955,188
Class H (5,688 and 16,763 shares)........................................... 58,443 184,180
Less cost of repurchase of shares
Class A (213,918 and 128,393 shares)........................................ (2,209,106) (1,402,494)
Class B (16,722 and 72,984 shares).......................................... (171,529) (792,178)
Class C (25,673 and 12,353 shares).......................................... (262,923) (135,294)
Class E (377,350 and 797,205 shares)........................................ (3,900,627) (8,692,661)
Class H (71,732 and 130,296 shares)......................................... (737,871) (1,406,941)
------------ ------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS.............................. (5,437,884) (3,933,188)
------------ ------------
TOTAL DECREASE IN NET ASSETS.................................................... (5,847,294) (9,645,803)
NET ASSETS:
Beginning of period........................................................... 63,706,174 73,351,977
------------ ------------
End of period (includes undistributed net investment income of $99,856 and
$44,136 , respectively)..................................................... $ 57,858,880 $ 63,706,174
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Statements of Changes in Net Assets
MINNESOTA PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 1,041,383 $ 2,160,827
Net realized loss from security transactions.................................. (280,307) (118,813)
Net change in unrealized depreciation of investments in securities............ (124,084) (2,876,460)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................. 636,992 (834,446)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A..................................................................... (76,794) (149,384)
Class B..................................................................... (14,676) (40,527)
Class C..................................................................... (4,465) (8,069)
Class E..................................................................... (880,559) (1,884,736)
Class H..................................................................... (25,072) (56,779)
From realized gains on investments
Class A..................................................................... -- (52,042)
Class B..................................................................... -- (20,754)
Class C..................................................................... -- (3,754)
Class E..................................................................... -- (660,723)
Class H..................................................................... -- (26,232)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................................. (1,001,566) (2,903,000)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A (57,729 and 92,718 shares).......................................... 566,074 970,636
Class B (11,921 and 19,520 shares).......................................... 115,602 199,062
Class C (1,006 and 12,467 shares)........................................... 9,796 129,572
Class E (42,325 and 118,222 shares)......................................... 414,852 1,219,784
Class H (32,911 and 26,466 shares).......................................... 319,281 278,026
Proceeds from shares issued as a result of reinvested dividends
Class A (5,865 and 14,757 shares)........................................... 57,139 152,679
Class B (1,499 and 4,423 shares)............................................ 14,602 45,770
Class C (246 and 824 shares)................................................ 2,400 8,553
Class E (61,976 and 171,562 shares)......................................... 605,677 1,781,326
Class H (1,387 and 5,383 shares)............................................ 13,558 55,968
Less cost of repurchase of shares
Class A (29,391 and 75,526 shares).......................................... (286,502) (780,540)
Class B (21,143 and 55,585 shares).......................................... (207,014) (569,738)
Class C (3,437 and 6,459 shares)............................................ (33,604) (65,701)
Class E (334,399 and 440,999 shares)........................................ (3,261,102) (4,539,493)
Class H (51,881 and 26,178 shares).......................................... (502,449) (266,818)
------------ ------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS.............................. (2,171,690) (1,380,914)
------------ ------------
TOTAL DECREASE IN NET ASSETS.................................................... (2,536,264) (5,118,360)
NET ASSETS:
Beginning of period........................................................... 43,144,333 48,262,693
------------ ------------
End of period (includes undistributed of $63,775 and $23,958, respectively)... $ 40,608,069 $ 43,144,333
------------ ------------
</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. 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: Municipal securities for which the over-the-counter
market quotations are readily available are valued on the basis of the last
current bid price. An outside pricing service may be utilized to provide such
valuations. The pricing service may employ electronic data processing
techniques and/or a matrix system to determine valuations using methods which
include consideration of yields or prices of 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. The portfolios amortize long-term bond premium and
original issue discount.
For the six-month period ended March 31, 2000, the cost of purchases and
proceeds from sales of securities (other than short-term securities)
aggregated $17,765,408 and $22,460,955 for National Portfolio; and
$12,929,049 and $15,004,857 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. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded
by the fund.
For federal income tax purposes the National Portfolio and Minnesota
Portfolio had capital loss carryovers of $450,479 and $135,790, respectively,
at September 30, 1999, which, if not offset by subsequent capital gains, will
expire in 2008. It is unlikely the Board of Directors will authorize a
distribution of any net realized gains until the available capital loss
carryovers have been offset or expired.
DEFERRED COSTS: Registration costs are deferred and charged to income over
the registration period.
INCOME AND CAPITAL GAINS DISTRIBUTION: The portfolios declare income
distributions daily to be paid on the last business day of each month. The
portfolios will make annual distributions of any realized capital gains as
required by law. These income and capital gains distributions may be
reinvested in additional shares of the portfolio at net asset value on the
payable date or paid in cash five business days after month end without any
charge to the shareholder.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities 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 TRANSACTIONS: The portfolios may invest in financial futures
contracts in order to gain exposure to or protect against changes in the
market. The portfolios would be exposed to market risk as a result of changes
in the value of the underlying financial instruments. Investment in financial
futures requires 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.
13
<PAGE>
FORTIS TAX-FREE PORTFOLIOS, INC.
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
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. There were no open
contracts as of March 31, 2000.
2. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc. (Advisers), is the
investment adviser for the funds. Under the investment advisory and
management 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. 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 National Portfolio.
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............ $3,665 $3,444 $1,200 $9,669 $14,721
Minnesota Portfolio........... $1,645 $4,727 $ 136 $9,973 $ 8,685
</TABLE>
Legal fees and expenses aggregating $1,300 and $1,050 for the National and
Minnesota Portfolios, respectively, were paid to a law firm of which the
secretary of the fund is a partner.
14
<PAGE>
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS: Selected per share historical data for each of the
portfolios was as follows:
<TABLE>
<CAPTION>
Class E
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
NATIONAL PORTFOLIO 2000** 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.49 $ 11.38 $ 11.07 $ 10.76 $ 10.72 $ 10.38
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .26 .50 .52 .55 .56 .58
Net realized and unrealized
gains (losses) on
investments............... (.07) (.78) .34 .31 .04 .36
------- ------- ------- ------- ------- -------
Total from operations......... .19 (.28) .86 .86 .60 .94
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.25) (.49) (.51) (.55) (.56) (.59)
From net realized gains..... -- (.12) (.04) -- -- (.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.25) (.61) (.55) (.55) (.56) (.60)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.43 $ 10.49 $ 11.38 $ 11.07 $ 10.76 $ 10.72
------- ------- ------- ------- ------- -------
Total Return @................ 1.84% (2.56%) 7.97% 8.19% 5.69% 9.30%
Net assets end of period (000s
omitted).................... $44,097 $47,140 $56,959 $59,727 $65,237 $70,531
Ratio of expenses to average
daily net assets............ .97%* .94% .98% .95% .93% 1.03%
Ratio of net investment income
to average daily net
assets...................... 4.99%* 4.56% 4.65% 5.03% 5.19% 5.54%
Portfolio turnover rate....... 31% 89% 74% 71% 52% 35%
</TABLE>
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
NATIONAL PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.47 $ 11.37 $ 11.06 $ 10.75 $ 10.71 $ 9.79
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .25 .47 .50 .53 .53 .49
Net realized and unrealized
gains (losses) on
investments............... (.07) (.78) .34 .31 .04 .94
------- ------- ------- ------- ------- -------
Total from operations......... .18 (.31) .84 .84 .57 1.43
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.24) (.47) (.49) (.53) (.53) (.50)
From net realized gains..... -- (.12) (.04) -- -- (.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.24) (.59) (.53) (.53) (.53) (.51)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.41 $ 10.47 $ 11.37 $ 11.06 $ 10.75 $ 10.71
------- ------- ------- ------- ------- -------
Total Return @................ 1.73% (2.87%) 7.75% 7.96% 5.46% 14.80%
Net assets end of period (000s
omitted).................... $ 6,396 $ 8,247 $ 8,308 $ 7,263 $ 6,239 $ 1,807
Ratio of expenses to average
daily net assets............ 1.22% 1.19% 1.23% 1.20% 1.18% 1.28%*
Ratio of net investment income
to average daily net
assets...................... 4.73%* 4.31% 4.40% 4.78% 4.97% 5.03%*
Portfolio turnover rate....... 31% 89% 74% 71% 52% 35%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 2000.
+ 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)
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS (continued):
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------
NATIONAL PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.46 $ 11.36 $ 11.05 $ 10.74 $ 10.70 $ 9.79
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .38 .42 .44 .45 .42
Net realized and unrealized
gains (losses) on
investments............... (.07) (.78) .34 .31 .04 .93
------- ------- ------- ------- ------- -------
Total from operations......... .14 (.40) .76 .75 .49 1.35
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.20) (.38) (.41) (.44) (.45) (.43)
From net realized gains..... -- (.12) (.04) -- -- (.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.20) (.50) (.45) (.44) (.45) (.44)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.40 $ 10.46 $ 11.36 $ 11.05 $ 10.74 $ 10.70
------- ------- ------- ------- ------- -------
Total Return @................ 1.33% (3.61%) 6.95% 7.14% 4.65% 13.96%
Net assets end of period (000s
omitted).................... $ 1,643 $ 1,752 $ 1,493 $ 1,287 $ 997 $ 668
Ratio of expenses to average
daily net assets............ 1.97%* 1.94% 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 3.99%* 3.56% 3.65% 4.02% 4.20% 4.04%*
Portfolio turnover rate....... 31% 89% 74% 71% 52% 35%
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------
NATIONAL PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.45 $ 11.34 $ 11.04 $ 10.74 $ 10.70 $ 9.79
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .39 .41 .43 .45 .43
Net realized and unrealized
gains (losses) on
investments............... (.07) (.78) .34 .31 .04 .92
------- ------- ------- ------- ------- -------
Total from operations......... .14 (.39) .75 .74 .49 1.35
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.20) (.38) (.41) (.44) (.45) (.43)
From net realized gains..... -- (.12) (.04) -- -- (.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.20) (.50) (.45) (.44) (.45) (.44)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.39 $ 10.45 $ 11.34 $ 11.04 $ 10.74 $ 10.70
------- ------- ------- ------- ------- -------
Total Return @................ 1.33% (3.53%) 6.86% 7.04% 4.65% 13.95%
Net assets end of period (000s
omitted).................... $ 318 $ 548 $ 493 $ 584 $ 223 $ 106
Ratio of expenses to average
daily net assets............ 1.97%* 1.94% 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 3.97%* 3.56% 3.65% 4.05% 4.20% 4.14%*
Portfolio turnover rate....... 31% 89% 74% 71% 52% 35%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 2000.
+ 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>
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS (continued):
<TABLE>
<CAPTION>
Class H
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
NATIONAL PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 10.46 $ 11.35 $ 11.06 $ 10.75 $ 10.71 $ 9.79
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .39 .40 .44 .45 .43
Net realized and unrealized
gains (losses) on
investments............... (.07) (.78) .34 .31 .04 .93
------- ------- ------- ------- ------- -------
Total from operations......... .14 (.39) .74 .75 .49 1.36
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.20) (.38) (.41) (.44) (.45) (.43)
From net realized gains..... -- (.12) (.04) -- -- (.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.20) (.50) (.45) (.44) (.45) (.44)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 10.40 $ 10.46 $ 11.35 $ 11.06 $ 10.75 $ 10.71
------- ------- ------- ------- ------- -------
Total Return @................ 1.33% (3.52%) 6.76% 7.13% 4.64% 14.06%
Net assets end of period (000s
omitted).................... $ 5,406 $ 6,019 $ 6,099 $ 5,111 $ 4,015 $ 1,757
Ratio of expenses to average
daily net assets............ 1.97%* 1.94% 1.98% 1.95% 1.93% 2.03%*
Ratio of net investment income
to average daily net
assets...................... 3.99%* 3.56% 3.65% 4.03% 4.20% 4.24%*
Portfolio turnover rate....... 31% 89% 74% 71% 52% 35%
</TABLE>
<TABLE>
<CAPTION>
Class E
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
MINNESOTA PORTFOLIO 2000** 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 9.94 $ 10.77 $ 10.46 $ 10.28 $ 10.32 $ 10.08
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .25 .50 .52 .53 .55 .57
Net realized and unrealized
gains (losses) on
investments............... (.09) (.67) .32 .18 (.04) .24
------- ------- ------- ------- ------- -------
Total from operations......... .16 (.17) .84 .71 .51 .81
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.24) (.49) (.52) (.53) (.55) (.57)
From net realized gains..... -- (.17) (.01) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.24) (.66) (.53) (.53) (.55) (.57)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 9.86 $ 9.94 $ 10.77 $ 10.46 $ 10.28 $ 10.32
------- ------- ------- ------- ------- -------
Total Return @................ 1.67% (1.71%) 8.25% 7.10% 5.01% 8.35%
Net assets end of period (000s
omitted).................... $34,839 $37,396 $42,170 $43,584 $49,262 $52,603
Ratio of expenses to average
daily net assets............ .87%* .86% .91% .96% .93% .98%
Ratio of net investment income
to average daily net
assets...................... 5.12%* 4.73% 4.94% 5.14% 5.34% 5.60%
Portfolio turnover rate....... 36% 55% 55% 61% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 2000.
+ 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)
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS (continued):
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
MINNESOTA PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 9.91 $ 10.74 $ 10.43 $ 10.26 $ 10.30 $ 9.55
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .24 .47 .49 .50 .52 .48
Net realized and unrealized
gains (losses) on
investments............... (.09) (.67) .32 .18 (.04) .76
------- ------- ------- ------- ------- -------
Total from operations......... .15 (.20) .81 .68 .48 1.24
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.23) (.46) (.49) (.51) (.52) (.49)
From net realized gains..... -- (.17) (.01) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.23) (.63) (.50) (.51) (.52) (.49)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 9.83 $ 9.91 $ 10.74 $ 10.43 $ 10.26 $ 10.30
------- ------- ------- ------- ------- -------
Total Return @................ 1.55% (1.94%) 8.13% 6.66% 4.78% 13.15%
Net assets end of period (000s
omitted).................... $ 3,550 $ 3,240 $ 3,170 $ 3,689 $ 1,822 $ 884
Ratio of expenses to average
daily net assets............ 1.12%* 1.11% 1.16% 1.21% 1.18% 1.23%*
Ratio of net investment income
to average daily net
assets...................... 4.87%* 4.48% 4.69% 4.89% 5.07% 5.10%*
Portfolio turnover rate....... 36% 55% 55% 61% 41% 27%
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------
MINNESOTA PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 9.90 $ 10.73 $ 10.42 $ 10.24 $ 10.27 $ 9.55
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .39 .41 .42 .45 .41
Net realized and unrealized
gains (losses) on
investments............... (.09) (.67) .32 .18 (.04) .73
------- ------- ------- ------- ------- -------
Total from operations......... .12 (.28) .73 .60 .41 1.14
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.19) (.38) (.41) (.42) (.44) (.42)
From net realized gains..... -- (.17) (.01) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.19) (.55) (.42) (.42) (.44) (.42)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 9.83 $ 9.90 $ 10.73 $ 10.42 $ 10.24 $ 10.27
------- ------- ------- ------- ------- -------
Total Return @................ 1.27% (2.73%) 7.18% 6.01% 4.04% 12.10%
Net assets end of period (000s
omitted).................... $ 777 $ 860 $ 1,271 $ 1,301 $ 1,109 $ 180
Ratio of expenses to average
daily net assets............ 1.87%* 1.86% 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 4.12%* 3.73% 3.94% 4.14% 4.34% 4.37%*
Portfolio turnover rate....... 36% 55% 55% 61% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 2000.
+ 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>
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS (continued):
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------
MINNESOTA PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 9.93 $ 10.73 $ 10.44 $ 10.26 $ 10.30 $ 9.55
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .20 .42 .39 .42 .44 .42
Net realized and unrealized
gains (losses) on
investments............... (.09) (.67) .32 .18 (.04) .75
------- ------- ------- ------- ------- -------
Total from operations......... .11 (.25) .71 .60 .40 1.17
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.19) (.38) (.41) (.42) (.44) (.42)
From net realized gains..... -- (.17) (.01) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.19) (.55) (.42) (.42) (.44) (.42)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 9.85 $ 9.93 $ 10.73 $ 10.44 $ 10.26 $ 10.30
------- ------- ------- ------- ------- -------
Total Return @................ 1.16% (2.45%) 6.97% 6.00% 4.00% 12.31%
Net assets end of period (000s
omitted).................... $ 224 $ 247 $ 194 $ 232 $ 210 $ 143
Ratio of expenses to average
daily net assets............ 1.87%* 1.86% 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 4.12%* 3.73% 3.94% 4.14% 4.31% 4.28%*
Portfolio turnover rate....... 36% 55% 55% 61% 41% 27%
</TABLE>
<TABLE>
<CAPTION>
Class H
------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------------
MINNESOTA PORTFOLIO 2000** 1999 1998 1997 1996 1995+
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period...................... $ 9.93 $ 10.76 $ 10.44 $ 10.26 $ 10.30 $ 9.55
------- ------- ------- ------- ------- -------
Operations:
Investment income - net..... .21 .39 .42 .42 .44 .41
Net realized and unrealized
gains (losses) on
investments............... (.09) (.67) .32 .18 (.04) .76
------- ------- ------- ------- ------- -------
Total from operations......... .12 (.28) .74 .60 .40 1.17
------- ------- ------- ------- ------- -------
Distributions to shareholders:
From investment income -
net....................... (.19) (.38) (.41) (.42) (.44) (.42)
From net realized gains..... -- (.17) (.01) -- -- --
------- ------- ------- ------- ------- -------
Total distributions to
shareholders................. (.19) (.55) (.42) (.42) (.44) (.42)
------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $ 9.86 $ 9.93 $ 10.76 $ 10.44 $ 10.26 $ 10.30
------- ------- ------- ------- ------- -------
Total Return @................ 1.26% (2.73%) 7.26% 6.00% 3.93% 12.42%
Net assets end of period (000s
omitted).................... $ 1,218 $ 1,401 $ 1,458 $ 1,227 $ 1,061 $ 638
Ratio of expenses to average
daily net assets............ 1.87%* 1.86% 1.91% 1.96% 1.93% 1.98%*
Ratio of net investment income
to average daily net
assets...................... 4.12%* 3.73% 3.94% 4.14% 4.33% 4.29%*
Portfolio turnover rate....... 36% 55% 55% 61% 41% 27%
</TABLE>
* Annualized.
** For the six-month period ended March 31, 2000.
+ 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.
19
<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
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
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 Schenker 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 LLP
MINNEAPOLIS, MINNESOTA
The use of this material is authorized only when preceded or accompanied by a
prospectus.
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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
MULTISECTOR BOND
SUBACCOUNT
HIGH YIELD SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
AMERICAN LEADERS
SUBACCOUNT
VALUE SUBACCOUNT
CAPITAL OPPORTUNITIES
SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK II
SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
MID CAP STOCK SUBACCOUNT
SMALL CAP VALUE
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GLOBAL EQUITY SUBACCOUNT
LARGE CAP GROWTH
SUBACCOUNT
INVESTORS 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
MULTISECTOR BOND
SUBACCOUNT
HIGH YIELD SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
AMERICAN LEADERS
SUBACCOUNT
VALUE SUBACCOUNT
CAPITAL OPPORTUNITIES
SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK II
SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
MID CAP STOCK SUBACCOUNT
SMALL CAP VALUE
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GLOBAL EQUITY SUBACCOUNT
LARGE CAP GROWTH
SUBACCOUNT
INVESTORS 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.
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<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
Invest from a position of DISCIPLINED GROWTH
When you're looking for a disciplined growth approach to mutual fund
investing, with a strict adherence to investment style, turn to Fortis. Our
expert fund managers carefully and cautiously follow stringent buy and sell
disciplines.
This disciplined approach to managing your money starts with rigorous,
company-by-company research. It's the platform upon which we carefully craft
each fund portfolio, spread risk through diversification and seek rewards
through long-term performance.
FORTIS AND DISCIPLINE, IT'S A POWERFUL COMBINATION.
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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 provides a wide selection of investment products
including annuities, life insurance and mutual funds. 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 the international Fortis group, which operates in the
fields of insurance, banking and investments. Fortis' listed companies are
Fortis (B) of Belgium and Fortis (NL) of the Netherlands.
Fortis: steadfast for YOU!
FORTIS FINANCIAL GROUP
Fund management offered through
Fortis Advisers, Inc. since 1949
Securities offered through
Fortis Investors, Inc.,
member NASD, SIPC
Insurance products issued by
Fortis Benefits Insurance Company
& Fortis Insurance Company
P.O. Box 64284, St. Paul, MN 55164-0284
Telephone (800) 800-2000
http://www.ffg.us.fortis.com
- --------------------------------------------------------------------------------
FORTIS FINANCIAL GROUP ---------------
P.O. Box 64284 PRSRTSTD
St. Paul, MN 55164-0284 U.S. Postage
PAID
Fortis Tax-Free Portfolios, Inc. Permit No. 3794
Minneapolis, MN
---------------
[LOGO] Printed on recycled paper with 40% preconsumer
waste and 10% post consumer waste. Please recycle.
The Fortis brandmark and Fortis-SM- are servicemarks
of Fortis (B) and Fortis (NL).
95380-C- Fortis, Inc. 5/00
