FORTIS SERIES FUND INC, 485BPOS, 1999-04-30

FORTIS SERIES FUND INC
485BPOS, 1999-04-30

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<PAGE>

1933 Act Registration No. 33-3920
1940 Act Registration No. 811-4615

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 25
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AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
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(Check appropriate box or boxes)

FORTIS SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)

500 Bielenberg Drive
Woodbury, Minnesota 55125
(Address of Principal Executive Offices, Zip Code)

(651) 738-4000
(Registrant's Telephone Number, including Area Code)

Scott R. Plummer, Esq.
500 Bielenberg Drive
Woodbury, Minnesota 55125
(Name and Address of Agent for Service)

COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
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X on May 1, 1999 pursuant to paragraph (b) of Rule 485
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75 days after filing pursuant to paragraph (a) of Rule 485
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on (specify date) pursuant to paragraph (a) of Rule 485
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60 days after filing pursuant to paragraph (a) of Rule 485
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
The Series
Money Market Series.................................................................................... 1
U.S. Government Securities Series...................................................................... 2
Diversified Income Series.............................................................................. 3
Global Bond Series..................................................................................... 4
High Yield Series...................................................................................... 6
Global Asset Allocation Series......................................................................... 7
Asset Allocation Series................................................................................ 9
Value Series........................................................................................... 12
Growth & Income Series................................................................................. 13
S&P 500 Index Series................................................................................... 14
Blue Chip Stock Series................................................................................. 15
International Stock Series............................................................................. 16
Mid Cap Stock Series................................................................................... 17
Small Cap Value Series................................................................................. 18
Global Growth Series................................................................................... 19
Large Cap Growth Series................................................................................ 20
Growth Stock Series.................................................................................... 21
Aggressive Growth Series............................................................................... 22

Shareholder Information
Separate accounts and the contracts.................................................................... 23
Pricing of Series shares............................................................................... 23
Purchase and redemption of Series shares............................................................... 23
Transfers among subaccounts............................................................................ 23
Taxation............................................................................................... 23
Contract owner inquiries............................................................................... 23

Series Management
Investment adviser..................................................................................... 24
Sub-advisers........................................................................................... 25

More Information on Series Objectives, Investment Strategies and Risks
Objectives............................................................................................. 27
Investment strategies.................................................................................. 27
Principal risks........................................................................................ 27

Financial Highlights..................................................................................... 32
</TABLE>
<PAGE>
THE SERIES
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This section briefly describes the objectives, principal investment strategies
and principal risks of Money Market Series, U.S. Government Securities Series,
Diversified Income Series, Global Bond Series, High Yield Series, Global Asset
Allocation Series, Asset Allocation Series, Value Series, Growth & Income
Series, S&P 500 Index Series, Blue Chip Stock Series, International Stock
Series, Mid Cap Stock Series, Small Cap Value Series, Global Growth Series,
Large Cap Growth Series, Growth Stock Series and Aggressive Growth Series (the
"Series"). It also provides you with information on how the Series have
performed. Because of their limited history of operations, performance
information is not provided for Mid Cap Stock Series, Small Cap Value Series and
Large Cap Growth Series. For further information on a Series, please read the
section entitled "More Information on Series Objectives, Investment Strategies
and Risks."

Shares of the Series may be purchased only by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts or variable life
insurance policies. The Series' investment adviser also acts as the investment
adviser to a number of retail mutual funds which have names and investment
objectives and strategies similar to those of certain Series. The Series are not
duplicates of these retail mutual funds and their performance will differ.

AN INVESTMENT IN A SERIES IS NOT A DEPOSIT OF ANY BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

MONEY MARKET SERIES

OBJECTIVE

Money Market Series' objectives are high levels of capital stability and
liquidity and, to the extent consistent with these objectives, a high level of
current income.

PRINCIPAL INVESTMENT STRATEGIES

Money Market Series pursues its objective by investing in high quality,
short-term debt obligations, including:

- commercial paper;

- obligations of United States, Canadian-chartered and foreign banks having
total assets in excess of one billion dollars, including certificates of
deposits, letters of credit and bankers' acceptances;

- obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities;

- other corporate debt obligations; and

- repurchase agreements in connection with the above obligations.

The Series' adviser selects securities based on yield relationships among the
various types and maturities of money market securities and the adviser's
interest rate outlook. For example, the adviser may focus on commercial paper if
it offers a yield advantage over other money market instruments. In selecting
commercial paper investments, the adviser may purchase longer-maturity
securities if interest rates are expected to fall. These purchases would be made
to try to preserve the Series' income level, since longer maturity investments
typically have higher yields than those with shorter maturities. Conversely,
shorter maturities may be favored if interest rates are expected to rise.

Unlike a traditional money market mutual fund, the Series does not attempt to
maintain its net asset value at any set price. The Series does, however, attempt
to maintain a high level of capital stability by investing only in U.S.
dollar-denominated securities that mature in 397 days or less, except that
obligations issued by the United States Government, its agencies or
instrumentalities may have maturities of up to 762 days. The Series may invest
in securities with variable or floating interest rates and securities with
demand features. The maturities of these securities are determined according to
regulations which allow the Series to consider some of the securities to have
maturities shorter than their stated maturity dates. Money Market Series will
maintain a dollar-weighted average portfolio maturity of 90 days or less. All of
the Series' investments must be in high quality securities which have been
determined by the Series' adviser to present minimal credit risk.

PRINCIPAL RISKS

Money Market Series' share price and yield will change daily because of changes
in interest rates and other factors. The principal risks of investing in Money
Market Series include:

- INTEREST RATE RISK. Debt obligations in the Series will fluctuate in
value with changes in interest rates. In general, debt securities will
increase in value when interest rates fall and decrease in value when
interest rates rise. Securities with longer maturities generally have more
volatile prices than securities of comparable quality with shorter
maturities.

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- CREDIT OR DEFAULT RISK. If a bond issuer's credit quality declines or its
credit agency ratings are downgraded, there may be a resulting decline in
the bond's price. If credit quality deteriorates to the point of possible or
actual default (inability to pay interest or repay principal on a timely
basis), the bond's market value could decline precipitously.

- FOREIGN INVESTMENT RISKS. The Series' investment in foreign securities
involves risks not typically associated with U.S. investing. Risks of
foreign investing include limited liquidity and volatile prices of non-U.S.
securities, limited availability of information regarding non-U.S.
companies, investment and repatriation restrictions, and foreign taxation.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Money Market
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table illustrates the Series'
performance over different time periods. Both the chart and the table assume
that all dividends and distributions have been reinvested. Fees and charges
attributable to variable annuity contracts and variable life insurance policies
are not taken into account in calculating the Series' returns. If they had been,
returns would be lower. Remember, how the Series has performed in the past is
not necessarily an indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 1.15%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 3.86% quarter ended June 30, 1989
WORST QUARTER: 0.66% quarter ended June 30, 1993
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
----------- ----------- -----------
<S> <C> <C> <C>
Money Market Series.............. 5.32% 5.09% 5.46%
</TABLE>

1
<PAGE>
U.S. GOVERNMENT SECURITIES SERIES

OBJECTIVE

The objective of the U.S. Government Securities Series is to maximize total
return (from income and market value change), while providing you with a high
level of current income consistent with prudent investment risk.

PRINCIPAL INVESTMENT STRATEGIES

U.S. Government Securities Series pursues its objective by investing primarily
in securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. These securities include both U.S. Treasury obligations and
obligations of U.S. Government agencies and instrumentalities. The Series may
invest a significant portion of its assets in mortgage-backed securities. It is
anticipated that the average effective duration of the Series will be between
three and seven years.

The Series' investments in mortgage-backed securities may include collateralized
mortgage obligations ("CMOs") issued by government agencies or by private
entities. Some types of CMOs, such as interest-only classes ("IOs"),
principal-only classes ("POs"), inverse floaters and accrual bonds, can be
highly volatile in response to changing interest rates. The Series will not
invest more than 5% of its net assets in any one of these types of securities or
more than 10% of its net assets collectively in IOs, POs, inverse floaters and
accrual bonds. In addition, any CMOs issued by private entities must be rated
within the three highest grades assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Rating Services ("S&P"), comparably rated by
another nationally recognized rating organization, or unrated and determined to
be of comparable quality by the Series' adviser.

The Series also may invest in zero coupon obligations of the U.S. Government and
its agencies. Because these obligations do not pay interest currently, their
prices can be highly volatile as interest rates rise and fall.

The Series' portfolio may change based upon factors such as the anticipated
timing and magnitude of changes in interest rates and expectations concerning
the future performance of different asset categories. The decision to purchase a
particular security is based upon a number of factors, the most important of
which are the characteristics of the security (interest rate, term, call
provisions, etc.) and diversification in the Series.

PRINCIPAL RISKS

U.S. Government Securities Series' share price and yield will change daily
because of changes in interest rates and other factors. You may lose money if
you invest in the Series. The principal risks of investing in U.S. Government
Securities Series include:

- INTEREST RATE RISK. Debt securities in the Series will fluctuate in value
with changes in interest rates. In general, debt securities will increase in
value when interest rates fall and decrease in value when interest rates
rise. One measure of interest rate risk is duration. Securities with longer
durations generally have more volatile prices than securities of comparable
quality with shorter durations.

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- CALL RISK. The Series is subject to the possibility that, under certain
conditions, especially during periods of falling interest rates, a bond
issuer will "call"--or repay--its bonds before their maturity date. The
Series may then be forced to invest the unanticipated proceeds at lower
interest rates, resulting in a decline in the Series' income.

- RISKS OF MORTGAGE-BACKED SECURITIES. Because the Series may invest
significantly in mortgage-backed securities, it is subject to prepayment
risk and extension risk. Similar to call risk, prepayment risk is the risk
that falling interest rates could cause faster than expected prepayments of
the mortgages underlying the Series' mortgage-backed securities. These
prepayments pass through to the Series, which must reinvest them at a time
when interest rates on new mortgage investments are falling, reducing the
Series' income. Extension risk is the risk that rising interest rates could
cause mortgage prepayments to slow, which would lengthen the duration of the
Series' mortgage-backed securities and cause their prices to decline.

SERIES PERFORMANCE

The bar chart and table below provide you with information on U.S. Government
Securities Series' volatility and performance. The bar chart shows you how
performance of the Series has varied from year to year. The table compares the
Series' performance over different time periods to that of a broad measure of
market performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was -1.06%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 7.18% quarter ended June 30, 1989
WORST QUARTER: -4.55% quarter ended March 31, 1994
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
----------- ----------- -----------
<S> <C> <C> <C>
U.S. Government Series........... 8.87% 6.17% 8.15%
Lehman Brothers Intermediate
Government Bond Index*......... 8.47% 6.33% 8.28%
</TABLE>

- ------------------------

* An unmanaged index of government bonds with an average maturity of three to
four years.

2
<PAGE>
DIVERSIFIED INCOME SERIES

OBJECTIVE

The objective of Diversified Income Series is to maximize total return from
income and market value change.

PRINCIPAL INVESTMENT STRATEGIES

Diversified Income Series pursues its objective by investing primarily in a
diversified portfolio of government securities and investment grade corporate
bonds, including:

- corporate fixed income securities;

- securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities;

- mortgage-backed securities; and

- asset-backed securities.

The Series may invest up to 30% of its total assets in non-investment grade
corporate bonds (sometimes referred to as "junk bonds" or "high yield"
securities) and unrated corporate bonds. Up to 10% of the Series' assets may be
invested in "non-performing" securities. These are securities rated lower than
Caa by Moody's Investors Service ("Moody's") or CCC by Standard & Poor's Ratings
Service ("S&P"), that are comparably rated by another nationally recognized
rating organization, or that are unrated and determined by the Series' adviser
to be of comparable quality . Non-performing securities are highly speculative
and may be in default or there may be elements of danger with respect to the
payment of principal or interest.

The Series may invest up to 10% of its total assets in securities of foreign
governments and companies.

The Series' portfolio may change based upon factors such as the anticipated
timing and magnitude of changes in interest rates and expectations concerning
the future performance of different asset categories. The decision to purchase a
particular security is based upon many factors, the most important of which are
the characteristics of the security (interest rate, term, call provisions,
etc.), the financial stability and managerial strength of the issuer, and
diversification in the Series. It is anticipated that the average effective
duration of the Series will be between three and seven years.

PRINCIPAL RISKS

Diversified Income Series' share price and yield will change daily because of
changes in interest rates and other factors. You may lose money if you invest in
the Series. The principal risks of investing in Diversified Income Series
include:

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES. Because the Series may
invest significantly in mortgage- and asset-backed securities, it is subject
to prepayment risk and extension risk. Similar to call risk, prepayment risk
is the risk that falling interest rates could cause faster than expected
prepayments of the obligations underlying the Series' mortgage- and
asset-backed securities. These prepayments pass through to the Series, which
must reinvest them at a time when interest rates on new investments are
falling, reducing the Series' income. Extension risk is the risk that rising
interest rates could cause prepayments on the obligations to slow, which
would lengthen the duration of the Series' mortgage- and asset-backed
securities and cause their prices to decline.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. A significant portion of the
Series' portfolio may consist of non-investment grade fixed income
securities, commonly referred to as "high yield" securities or "junk bonds."
These securities generally have more volatile prices and carry more risk to
principal than investment grade securities.

- RISKS OF FOREIGN INVESTMENT. Investing in foreign securities involves
risks not typically associated with U.S. investing. These investments may
involve increased political and economic risk. In addition, the Series may
experience a decline in net asset value resulting from changes in exchange
rates between the United States dollar and foreign currencies.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Diversified Income
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was -0.43%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 6.55% quarter ended June 30, 1989
WORST QUARTER: -3.79% quarter ended March 31, 1994
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
----------- ----------- -----------
<S> <C> <C> <C>
Diversified Income Series........ 6.31% 6.33% 8.69%
Lehman Brothers Aggregate Bond
Index*......................... 8.67% 7.17% 9.20%
</TABLE>

- ------------------------
* An unmanaged index of government, corporate and mortgage-backed securities
with an average maturity of approximately nine years.

3
<PAGE>
GLOBAL BOND SERIES

OBJECTIVE

The objective of Global Bond Series is total return from current income and
capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Global Bond Series pursues its objective by investing in a portfolio of fixed
income securities from issuers located throughout the world, including the
United States. The Series portfolio consists principally of high quality fixed
income securities issued or guaranteed by:

- U.S. and foreign governments and their agencies and instrumentalities;

- government-related issuers, and

- supranational organizations, such as the World Bank and the European
Economic Community.

The Series also invests in corporate fixed-income securities issued by foreign
or U.S. companies.

At least 90% of the Series' assets will be in high quality securities. These
securities will be rated in the two highest rating categories by Moody's, S&P or
another nationally recognized rating organization or, if unrated, determined to
be of comparable quality by the Series' sub-adviser. Although the Series
emphasizes investments in developed countries, up to 10% of its assets may be
invested in emerging markets.

In selecting securities for the Series, the Series sub-adviser, Mercury Asset
Management International Ltd. ("Mercury International") assesses real interest
rates, inflationary trends and yield curves in the global fixed income markets
and combines this with a separate currency analysis that focuses on relative
interest rate differentials and economic competitiveness. Mercury International
then seeks to establish overweight positions in markets that appear to offer the
most attractive yield curves and the highest yields over and above future
inflation. It is anticipated that the average effective duration of the Series
will range from two to eight years.

The Series may enter into interest rate futures contracts and options thereon
for hedging purposes and for efficient portfolio management. The Series also may
engage in forward currency exchange contracts and currency financial futures and
options, both to hedge its portfolio and to enhance returns.

PRINCIPAL RISKS

Global Bond Series' share price and yield will change daily because of changes
in interest rates and other factors. You may lose money if you invest in the
Series. The principal risks of investing in the Series include:

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- RISKS OF FOREIGN INVESTING. The Series' investments in foreign securities
subject it to risks not typically associated with U.S. investing. Because of
these risks, the Series may be subject to greater volatility than most
mutual funds which invest principally in domestic securities. The Series may
experience a decline in net asset value resulting from changes in exchange
rates between the United States dollar and foreign currencies. Other risks
of foreign investing include limited liquidity and volatile prices of
non-U.S. securities, limited availability of information regarding non-U.S.
companies, investment and repatriation restrictions, and foreign taxation.

- RISKS OF EMERGING MARKETS. The risks of foreign investing are
particularly significant in emerging markets. Securities issued by companies
located in emerging markets may exhibit greater price volatility and have
less liquidity than securities issued by companies located in developed
foreign markets.

- RISKS OF INTEREST RATE FUTURES CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS. If the Series uses interest rate futures contracts and
foreign currency transactions it will be exposed to additional risks and
transactions costs. Successful use of these derivative instruments depends
on the sub-adviser's ability to forecast correctly the direction of market
movements. The Series' performance could be worse than if the Series had not
used these instruments if the sub-adviser's judgment proves incorrect. In
addition, even if the sub-adviser's forecast is correct, there may be an
imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies
being hedged.

- RISKS OF NON-DIVERSIFICATION. Global Bond Series is non-diversified,
which means that it may invest in securities of a limited number of issuers.
As a result, the performance of a particular investment or a small group of
investments may affect the Series' performance more than if the Series were
diversified.

4
<PAGE>
SERIES PERFORMANCE

The bar chart and table below provide you with information on Global Bond
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was -4.87%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 10.35% quarter ended March 31, 1995
WORST QUARTER: -4.18% quarter ended March 31, 1997
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- ---------------
<S> <C> <C>
Global Bond Series..................... 13.49% 8.77%
Salomon Brothers World Government Bond
Index**.............................. 15.30% 9.28%
</TABLE>

- ------------------------

* Inception date was January 3, 1995.

** An unmanaged index of world government bonds with maturities of at least one
year.

5
<PAGE>
HIGH YIELD SERIES

OBJECTIVE

The objective of High Yield Series is to maximize return from income and market
value change.

PRINCIPAL INVESTMENT STRATEGIES

High Yield Series pursues its objective by investing primarily in a portfolio of
non-investment grade fixed income securities, also referred to as "high yield"
securities or "junk bonds." It is anticipated that the average effective
duration of the Series will be between three and seven years.

The Series may invest without limitation in securities rated as low as Caa by
Moody's or CCC by S&P, or comparably rated by another nationally recognized
rating organization. In addition, up to 10% of the Series' assets may be
invested in "non-performing" securities rated lower than Caa or CCC.
Non-performing securities are highly speculative and may be in default or there
may be elements of danger with respect to the payment of principal or interest.
The Series may also invest in unrated securities which the Series' adviser
believes are of comparable quality to those rated within the foregoing
categories.

The Series' investments may include payment-in-kind bonds and zero coupon bonds.
The market prices for these securities are affected to a greater extent by
interest rate changes and are more volatile than the market prices of securities
that pay interest periodically and in cash.

The Series also may invest in collateralized mortgage obligations ("CMOs")
issued by government agencies or by private entities. Some types of CMOs, such
as interest-only classes ("IOs"), principal-only classes ("POs"), inverse
floaters and accrual bonds, can be highly volatile in response to changing
interest rates. The Series will not invest more than 7.5% of its net assets in
any one of these types of securities or more than 15% of its net assets
collectively in IOs, POs, inverse floaters and accrual bonds.

In considering investments for the Series, the adviser will attempt to identify
high-yielding securities of issuer companies whose financial condition has
improved or is expected to improve in the future. The adviser's analysis focuses
on relative values, based on such factors as interest or dividend coverage,
asset coverage, earnings prospects, and the experience and managerial strength
of issuer companies.

PRINCIPAL RISKS

High Yield Series' share price and yield will change daily because of changes in
interest rates and other factors. You may lose money if you invest in the
Series. The principal risks of investing in High Yield Series include:
- INTEREST RATE RISK. Debt securities in the Series will fluctuate in value
with changes in interest rates. In general, debt securities will increase in
value when interest rates fall and decrease in value when interest rates
rise.

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. The Series invests primarily in
non-investment grade fixed income securities, commonly referred to as "high
yield" securities or "junk bonds." These securities generally have more
volatile prices and carry more risk to principal than investment grade
securities.

SERIES PERFORMANCE

The bar chart and table below provide you with information on High Yield Series'
volatility and performance. The bar chart shows you how performance of the
Series has varied from year to year. The table compares the Series' performance
over different time periods to that of a broad measure of market performance.
Both the chart and the table assume that all dividends and distributions have
been reinvested. Fees and charges attributable to variable annuity contracts and
variable life insurance policies are not taken into account in calculating the
Series' returns. If they had been, returns would be lower. Remember, how the
Series has performed in the past is not necessarily an indication of how it will
perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 1.57%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 5.64% quarter ended June 30, 1997
quarter ended September 30,
WORST QUARTER: -4.50% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION*
----------- -----------------
<S> <C> <C>
High Yield Series...................... 0.62% 6.90%
Lehman Brothers High Yield Index**..... 1.87% 9.56%
</TABLE>

- ------------------------

* Inception date was May 2, 1994.

** An unmanaged index of lower quality, high yield corporate debt securities.

6
<PAGE>
GLOBAL ASSET ALLOCATION SERIES

OBJECTIVE

The objective of Global Asset Allocation Series is maximum total return to be
derived primarily from capital appreciation, dividends and interest.

PRINCIPAL INVESTMENT STRATEGIES

Global Asset Allocation Series invests in equity and fixed-income securities of
issuers located throughout the world, including the United States. The Series
pursues its objective by following a flexible asset allocation strategy. This
strategy contemplates increased ownership of global equity securities during
periods when stock market conditions appear favorable and increased ownership of
global fixed-income securities during periods when stock market conditions are
less favorable.

- EQUITY INVESTMENTS. The Series' equity investments may include common
stocks, securities convertible into common stocks and securities having
common stock characteristics, such as rights and warrants to purchase common
stocks. The Series may also invest in American Depositary Receipts, European
Depositary Receipts and other depositary receipts.

- FIXED-INCOME INVESTMENTS. Fixed-income investments in which the Series
invests include securities issued or guaranteed by U.S. and foreign
governments and their agencies and instrumentalities, securities of
supranational entities, Eurobonds and corporate bonds with varying
maturities denominated in various currencies and money market instruments.

In selecting equity securities for the Series, the Series' sub-adviser, Morgan
Stanley Dean Witter Investment Management Limited ("Morgan Stanley"), initially
identifies those securities that it believes to be undervalued in relation to
the issuer's assets, cash flow, earnings and, where appropriate, revenues.
Morgan Stanley then evaluates the future value of these securities by applying a
dividend discount model to the information obtained. Holdings are regularly
reviewed and subjected to fundamental analysis to determine whether they
continue to meet Morgan Stanley's value criteria. Securities that no longer
conform to those criteria are sold. The median market capitalization of the
equity portion of the Series' portfolio was $8.7 billion as of March 31, 1999.

In selecting fixed-income securities, Morgan Stanley evaluates the currency,
market and individual features of the securities being considered for
investment. The Series seeks to minimize investment risk by investing in
fixed-income securities rated A or better by S&P or Moody's, comparably rated by
another nationally recognized rating agency or, if unrated, determined to be of
comparable quality by Morgan Stanley. Morgan Stanley will attempt to maintain an
average effective duration of two to eight years for the fixed-income securities
portion of the Series' portfolio.

The Series may engage in forward currency exchange contracts and currency
financial futures and options, both to hedge its portfolio against unfavorable
currency movements and to enhance returns.

PRINCIPAL RISKS

Global Asset Allocation Series' share price and yield will change daily because
of changes in stock prices, interest rates and other factors. You may lose money
if you invest in the Series. The principal risks of investing in the Series
include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. As you consider an investment in the
Series, you should take into account your personal tolerance for daily
fluctuations of the stock market.

- RISKS OF VALUE STOCKS. The Series looks for stocks which appear to be
undervalued in relation to the issuer's assets, cash flow, earnings and,
where appropriate, revenues. These stocks can remain undervalued for years.
There is a risk that a stock's price will never reach what the Series'
sub-adviser believes is its true value, or that the stock's price will go
down.

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

7
<PAGE>
changes in exchange rates between the United States dollar and foreign
currencies. Other risks of foreign investing include limited liquidity and
volatile prices of non-U.S. securities, limited availability of information
regarding non-U.S. companies, investment and repatriation restrictions, and
foreign taxation.

- RISKS OF FOREIGN CURRENCY TRANSACTIONS. If the Series uses foreign
currency transactions it will be exposed to additional risks and
transactions costs. Successful use of these derivative instruments depends
on the sub-adviser's ability to forecast correctly the direction of market
movements. The Series' performance could be worse than if the Series had not
used these instruments if the sub-adviser's judgment proves incorrect. In
addition, even if the sub-adviser's forecast is correct, there may be an
imperfect correlation between the price of derivative instruments and
movements in the prices of the currencies being hedged.

- RISKS OF ACTIVE MANAGEMENT. Because the Series may invest in a wide range
of investments and markets, the Series' sub-adviser has substantially more
investment discretion than the advisers of most mutual funds. The
performance of the Series will reflect in part the sub-adviser's ability to
effectively allocate the Series' assets among these investments and markets.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Global Asset
Allocation Series' volatility and performance. The bar chart shows you how
performance of the Series has varied from year to year. The table compares the
Series' performance over different time periods to that of a broad measure of
market performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was -5.16%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 12.15% 1998
quarter ended September 30,
WORST QUARTER: -3.78% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- ---------------
<S> <C> <C>
Global Asset Allocation Series......... 17.27% 15.25%
Salomon Brothers World Government Bond
Index**.............................. 15.30% 9.28%
MSCI World Index***.................... 24.80% 19.00%
</TABLE>

- ------------------------

* Inception date was January 3, 1995

** An unmanaged index of world government bonds with maturities of at least one
year.

*** An unmanaged index of the world's major equity markets in U.S. dollars,
weighted by stock market value.

8
<PAGE>
ASSET ALLOCATION SERIES

OBJECTIVE

The objective of Asset Allocation Series is maximum total return to be derived
primarily from capital appreciation, dividends and interest.

PRINCIPAL INVESTMENT STRATEGIES

Asset Allocation Series invests primarily in common stocks and fixed-income
securities. The Series pursues its objective by following a flexible asset
allocation strategy. This strategy contemplates increased ownership of common
stocks during periods when stock market conditions appear favorable and
increased ownership of fixed-income securities during periods when stock market
conditions are less favorable. Depending on prevailing economic and market
conditions, the Series may at any given time be primarily comprised of common
stocks, fixed-income securities, short-term money market securities or any
combination of these securities. The Series' investments may include the
following:

- COMMON STOCKS. The Series will generally invest in common stocks which
the Series' adviser believes have superior earnings growth potential.

- U.S. GOVERNMENT SECURITIES. The Series may invest in securities issued or
guaranteed by the United States Government, it agencies or
instrumentalities.

- MORTGAGE-BACKED SECURITIES. The Series may invest in mortgage-backed
securities, including pass-through certificates issued by the Government
National Mortgage Association ("GNMA") and the Federal National Mortgage
Association ("FNMA") and collateralized mortgage obligations ("CMOs"). CMOs
are debt instruments issued by special purpose entities which are secured by
pools of mortgage loans or other mortgage-backed securities.

- ASSET-BACKED SECURITIES. The Series may invest in asset-backed
securities, which are similar to CMOs, but backed by other types of
obligations, such as automobile loans, home equity loans or credit card
receivables.

- ZERO COUPON OBLIGATIONS. The Series may invest in zero coupon obligations
issued by the U.S. Government and its agencies and by corporate issuers.
Because these obligations do not pay interest currently, their prices can be
highly volatile as interest rates rise and fall.

- MUNICIPAL OBLIGATIONS. The Series may invest up to 20% of its total
assets in municipal securities during periods when these securities appear
to offer more attractive returns than taxable securities.

- CORPORATE OBLIGATIONS. The Series may invest in debt secuities such as
bonds, debentures and notes issued by corporations.

- BANK OBLIGATIONS. The Series may invest in obligations of United States
banks, and in U.S. dollar denominated obligations of Canadian chartered
banks and United States branches or agencies of foreign banks.

- COMMERCIAL PAPER. The Series may invest in commercial paper rated at the
time of purchase Prime-2 or higher by Moody's, A-2 or higher by Standard &
Poor's, or comparably rated by another nationally recognized rating
organization, or unrated and issued by a corporation with an outstanding
debt issue rated A or better by Moody's or Standard & Poor's or comparably
rated by another nationally recognized rating organization.

The Series may invest without limitation in fixed income securities rated within
the four highest grades at the time of purchase by Moody's or S&P, comparably
rated by another nationally recognized rating organization, or unrated and
determined to be of comparable quality by the Series' adviser. These are
commonly referred to as "investment grade" securities. In addition, the Series
may invest up to 30% of its total assets in fixed income securities rated lower
than investment grade (or unrated and of comparable quality), commonly known as
"junk bonds." The Series will not invest in bonds rated below Caa by Moody's or
CCC by S&P, comparably rated by another nationally recognized rating
organization, or unrated and determined to be of comparable quality by the
Series' adviser.

The Series may invest up to 20% of its total assets in securities of foreign
governments and companies.

In managing the common stock portion of the Series' portfolio, the Series'
adviser generally invests in stocks of companies whose earnings and growth
potential, in its judgment, exceed industry averages. In addition to superior
earnings growth potential, the adviser seeks companies which it believes to be
well managed with above average returns on equity and invested capital, healthy
balance sheets and the potential to gain market shares. Companies of this nature
typically have above average growth potential and a correspondingly higher than
average valuation level as measured by price to earnings, price to cash flow and
price to book value ratios. The adviser uses a "bottom up" investment style in
which stock selection is driven primarily by the merits of the company itself.
The median market capitalization of the common stock portion of the Series'
portfolio was $31.8 billion as of March 31, 1999.

The adviser bases its decision to purchase a particular fixed-income security
upon many factors, the most important of which are the characteristics of the
security (interest rate, term, call provisions, etc.), the financial stability
and managerial strength of the issuer of the security and diversification in the
Series. The Series will attempt to maintain an average effective duration of
three to seven years for the debt securities portion of its portfolio.

9
<PAGE>
PRINCIPAL RISKS

Asset Allocation Series' share price and yield will change daily because of
changes in stock prices, interest rates and other factors. You may lose money if
you invest in the Series. The principal risks of investing in Asset Allocation
Series include:

- RISKS OF GROWTH STOCKS. In investing in common stocks, the Series'
adviser generally invests in companies that it believes have superior
earnings growth potential. If the adviser incorrectly assesses a company's
prospects for earnings growth, or if its judgment about how other investors
will value the company's earnings growth is wrong, then the price of the
company's stock may decrease, or it may not increase to the level that the
Series' adviser had anticipated.

- INCOME RISK. Income risk is the potential for a decline in the Series'
income due to falling interest rates.

- CREDIT OR DEFAULT RISK. If a bond issuer's credit quality declines or its
agency ratings are downgraded, there may be a resulting decline in the
bond's price. If credit quality deteriorates to the point of possible or
actual default (inability to pay interest or repay principal on a timely
basis), the bond's market value could decline precipitously.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. A significant portion of the
Series' portfolio may consist of non-investment grade debt securities,
commonly referred to as "high yield" securities or "junk bonds." These
securities generally have more volatile prices and carry more risk to
principal than investment grade securities.

- RISKS OF ACTIVE MANAGEMENT. Because the Series may invest in a wide range
of investments, the Series' investment adviser has substantially more
investment discretion than the advisers of most mutual funds. The
performance of the Series will reflect in part the adviser's ability to
effectively allocate the Series' assets among these investments.

10
<PAGE>
SERIES PERFORMANCE

The bar chart and table below provide you with information on Asset Allocation
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 3.38%.

<TABLE>
<S> <C> <C>
BEST QUARTER: 15.22% quarter ended December 31,
1998
WORST QUARTER: -7.49% quarter ended September 30,
1990
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
----------- ----------- -----------
<S> <C> <C> <C>
Asset Allocation Series.......... 19.97% 14.56% 14.08%
Lehman Brothers Aggregate Bond
Index*......................... 8.67% 7.17% 9.20%
S&P 500 Index**.................. 28.58% 24.06% 19.19%
</TABLE>

- ------------------------

* An unmanaged index of government, corporate, and mortgage-backed securities
with an average maturity of approximately nine years.

** An unmanaged index of 500 common stocks.

11
<PAGE>
VALUE SERIES

OBJECTIVE

The objective of Value Series is short and long term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Value Series invests primarily in common stocks. The Series' adviser uses a
"bottom up" investment style in which stock selection is driven primarily by the
merits of the company itself. The adviser selects stocks based on a concept of
fundamental value, seeking to identify companies whose shares appear inexpensive
relative to anticipated profit and dividend growth. The primary emphasis is
placed on companies expected to experience a significant acceleration in
earnings over the next three to five years. The prices of these stocks typically
do not fully reflect this anticipated improvement. Often such a stock is "out of
favor" and priced low relative to the company's earnings, cash flow and book
value. A second source of "value" stocks is provided by companies expected to
sustain their historic rate of growth but which are selling at a low price to
earnings ratio in relation to this anticipated growth.

Under normal market conditions, it is the Series' intention to maintain a median
market capitalization for its portfolio of over $1 billion--making the Series a
"mid to large cap value fund." The Series' median market capitalization was
$32.9 billion as of March 31, 1999.

PRINCIPAL RISKS

Value Series' share price will change daily because of changes in stock prices
and other factors. You may lose money if you invest in the Series. The principal
risks of investing in Value Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, value stocks and/or stocks of
mid and large capitalization companies may underperform the market as a
whole. As you consider an investment in the Series, you should take into
account your personal tolerance for daily fluctuations of the stock market.

- RISKS OF VALUE STOCKS. The Series looks for companies whose stocks appear
inexpensive relative to anticipated profit and dividend growth. These stocks
can remain undervalued for years. There is a risk that a stock's price will
never reach what the Series' adviser believes is its true value, or that the
stock's price will go down.

- RISKS OF LARGE CAP COMPANIES. In the long run, large company stocks may
produce more modest gains than stocks of smaller companies.

- RISKS OF MID CAP COMPANIES. Mid-sized companies may have somewhat limited
product lines, markets and financial resources and may depend upon a
relatively small management group. Stocks of these companies may therefore
be more vulnerable to adverse developments than those of large companies.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Value Series'
volatility and performance. The bar chart shows you how performance of the
Series has varied from year to year. The table compares the Series' performance
over different time periods to that of a broad measure of market performance.
Both the chart and the table assume that all dividends and distributions have
been reinvested. Fees and charges attributable to variable annuity contracts and
variable life insurance policies are not taken into account in calculating the
Series' returns. If they had been, returns would be lower. Remember, how the
Series has performed in the past is not necessarily an indication of how it will
perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 1.59%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 16.01% 1998
quarter ended September 30,
WORST QUARTER: -14.35% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
--------- -----------
<S> <C> <C>
Value Series................................ 9.64% 17.30%
S&P 500 Index**............................. 28.58% 28.99%
</TABLE>

- ------------------------

* Inception date was May 1, 1996.

** An unmanaged index of 500 common stocks.

12
<PAGE>
GROWTH & INCOME SERIES

OBJECTIVE

The objectives of Growth & Income Series are capital appreciation and current
income.

PRINCIPAL INVESTMENT STRATEGIES

Growth & Income Series invests primarily in common stocks, with an emphasis on
stocks of companies that have a history of dividend payments. The Series'
adviser uses a "bottom up" investment style in which stock selection is driven
primarily by the merits of the company itself. The adviser may select stocks
using either a "value" or a "growth" philosophy. In looking for growth stocks,
the adviser seeks to identify companies whose earnings and revenue growth
potential exceed industry averages. Value stocks are those which the adviser
believes are inexpensive relative to anticipated profit and dividend growth.

Under normal market conditions, the Series intends to maintain a median market
capitalization for its portfolio of greater than $5 billion making it a "large
cap fund." The Series' median market capitalization was $21.4 billion as of
March 31, 1999.

PRINCIPAL RISKS

Growth & Income Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risk of investing in Growth & Income Series is the risk that
prices of stocks in the Series' portfolio will decline over short or extended
periods of time. Price changes may occur in the market as a whole, or they may
occur in only a particular company, industry or sector of the market. In
addition, stocks of large capitalization companies may underperform the market
as a whole from time to time and, in the long run, may produce more modest gains
than stocks of smaller companies. As you consider an investment in the Series,
you should take into account your personal tolerance for daily fluctuations of
the stock market.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Growth & Income
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 2.13%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 12.47%% 1998
quarter ended September 30,
WORST QUARTER: -8.75% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- -----------
<S> <C> <C>
Growth & Income Series...................... 13.21% 19.73%
S&P 500 Index**............................. 28.58% 26.69%
</TABLE>

- ------------------------

* Inception date was May 2, 1994.

** An unmanaged index of 500 common stocks.

13
<PAGE>
S&P 500 INDEX SERIES

OBJECTIVE

The objective of S&P 500 Index Series is to replicate the total return of the
Standard & Poor's 500 Composite Stock Price Index (the "Index").

PRINCIPAL INVESTMENT STRATEGIES

S&P 500 Index Series generally invests at least 95% of its total assets in the
common stocks included in the Index. The Series may also use stock index futures
contracts, options on such contracts and options on stock indices as a
substitute for the sale or purchase of securities.

The Index is an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy and is often considered a proxy for the stock
market in general. Each stock is weighted by its market capitalization, which
means larger companies have greater representation in the index than smaller
ones.

The Series' sub-adviser, The Dreyfus Corporation, utilizes a passive investment
approach, attempting to duplicate the investment performance of the Index
through statistical procedures. The Series expects to invest in all 500 stocks
in the Index in proportion to their weighting in the Index. To the extent that
the size of the Series does not permit it to invest in all 500 stocks in the
Index, the Series will purchase a representative sample of stocks from each
industry sector included in the Index in proportion to that industry's weighting
in the Index.

Because the Series may not always hold all of the stocks included in the Index,
and because the Series has expenses and the Index does not, the Series will not
duplicate the Index's performance precisely. However, the Series' adviser and
sub-adviser believe there should be a close correlation between the Series
performance and that of the Index in both rising and falling markets. The Series
attempts to achieve a correlation between the performance of its investments and
that of the Index of at least 0.95, before deduction of expenses. A correlation
of 1.00 would represent perfect correlation between Series and Index
performance. If the Series fails to achieve an appropriate level of correlation
over time, the Series' Board of Directors will consider alternative strategies
for the Series.

The Series' median market capitalization was $64.5 billion as of March 31, 1999.

"STANDARD & POOR'S-REGISTERED TRADEMARK-," "S&P-REGISTERED TRADEMARK-,"
"STANDARD & POOR'S 500" AND "S&P 500-REGISTERED TRADEMARK-" ARE TRADEMARKS OF
THE MCGRAW-HILL COMPANIES, INC., AND HAVE BEEN LICENSED FOR USE BY THE SERIES.
THE SERIES IS NOT SPONSORED, ENDORSED OR SOLD BY STANDARD & POOR'S. STANDARD &
POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
SERIES.

PRINCIPAL RISKS

S&P 500 Index Series' share price will change daily because of changes in stock
prices and other factors. You may lose money if you invest in the Series. The
principal risks of investing in the Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, stocks of the companies in
the Index may underperform the market as a whole. As you consider an
investment in the Series, you should take into account your personal
tolerance for daily fluctuations of the stock market.

- RISKS OF LARGE CAP COMPANIES. The Index is made up of large company
stocks. In the long run, stocks of these companies may produce more modest
gains than stocks of smaller companies.

- FAILURE TO MATCH PERFORMANCE OF THE INDEX. The Series' ability to
replicate the performance of the Index may be affected by, among other
things, changes in securities markets, changes in the composition of the
Index, and the timing of purchases and redemptions of Series shares.

- RISKS OF AN INDEXING STRATEGY. The Series uses an indexing strategy. It
does not attempt to manage market volatility, use defensive strategies or
reduce the effects of any long-term periods of poor stock market
performance.

- RISKS OF FUTURES AND OPTIONS. If the Series uses options and futures
contracts it will be exposed to additional risks such as losses due to
unanticipated market price movements and reduced opportunities for gain.

SERIES PERFORMANCE

The bar chart and table below provide you with information on S&P 500 Index
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 4.78%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 21.19% 1998
quarter ended September 30,
WORST QUARTER: -9.99% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
----------- ---------------
<S> <C> <C>
S&P 500 Index Series.................... 28.11% 28.12%
S&P 500 Index**......................... 28.58% 28.99%
</TABLE>

- ------------------------
* Inception date was May 1, 1996.

** An unmanaged index of 500 common stocks.

14
<PAGE>
BLUE CHIP STOCK SERIES

OBJECTIVE

The primary objective of Blue Chip Stock Series is long-term growth of capital.
Current income is a secondary objective.

PRINCIPAL INVESTMENT STRATEGIES

Blue Chip Stock Series pursues its objectives by primarily investing in common
stocks of large blue chip companies, as defined by T. Rowe Price Associates,
Inc. ("T. Rowe Price"), the sub-adviser to the Series. These are companies that,
in T. Rowe Price's view, are well established in their industries and have the
potential for above-average earnings growth. The approach of T. Rowe Price
reflects its belief that good company fundamentals combined with a positive
industry outlook will ultimately reward investors with a higher stock price. T.
Rowe Price looks for companies that offer leading market positions, seasoned
management teams, and strong financial fundamentals. Where possible, it seeks
stocks attractively priced relative to their long-term value. The Series' median
market capitalization was $48.2 billion as of March 31, 1999.

While most of the Series' assets will be invested in U.S. common stocks, the
Series may also purchase other types of securities, including foreign
securities, preferred stocks and convertible securities, when they are
considered consistent with the Series' investment objectives. The Series may
also buy and sell futures contracts and options on futures contracts. This may
be done to hedge the value of the Series' portfolio against potential adverse
movements in securities prices, to enhance returns, or to maintain market
exposure.

PRINCIPAL RISKS

Blue Chip Stock Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risks of investing in the Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks or blue chip
stocks may underperform the market as a whole. As you consider an investment
in the Series, you should take into account your personal tolerance for
daily fluctuations of the stock market.

- RISKS OF GROWTH STOCKS. The Series invests primarily in stocks of
companies that the sub-adviser believes have the potential for above-average
earnings growth. If the sub-adviser incorrectly assesses a company's
prospects for earnings growth, or if its judgment about how other investors
will value the company's earnings growth is wrong, then the price of the
company's stock may decrease, or it may not increase to the level that the
sub-adviser had anticipated.

- RISKS OF LARGE CAP COMPANIES. In the long run, large company stocks may
produce more modest gains than stocks of smaller companies.

- RISKS OF FUTURES. If the Series uses futures contracts or options on
futures contracts it will be exposed to additional risks and transactions
costs. Successful use of these derivative instruments depends on the
sub-adviser's ability to forecast correctly the direction of market
movements. The Series' performance could be worse than if the Series had not
used these instruments if the sub-adviser's judgment proves incorrect. In
addition, even if the sub-adviser's forecast is correct, there may be an
imperfect correlation between the price of derivative instruments and
movements in the prices of the securities being hedged.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Blue Chip Stock
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 3.82%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 24.38% 1998
quarter ended September 30,
WORST QUARTER: -11.94% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- ---------------
<S> <C> <C>
Blue Chip Stock Series................. 28.07% 26.96%
S&P 500 Index**........................ 28.58% 28.99%
</TABLE>

- ------------------------

* Inception date was May 1, 1996.

** An unmanaged index of 500 common stocks.

15
<PAGE>
INTERNATIONAL STOCK SERIES

OBJECTIVE

The objective of International Stock Series is long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

International Stock Series invests primarily in equity securities, principally
common stocks, of relatively large non-United States companies that the Series'
sub-adviser, Lazard Asset Management ("Lazard"), believes are undervalued based
on their earnings, cash flow or asset value. The allocation of the Series'
assets among geographic sectors may shift from time to time based on Lazard's
judgment. However, Lazard currently intends to invest the Series' assets
primarily in companies based in developed markets.

In selecting investments for the Series, Lazard attempts to identify undervalued
securities through traditional measures of value, including low price to
earnings ratios, high yield, unrecognized assets, potential for management
change and the potential to improve profitability. Lazard's global investment
specialists apply both quantitative and qualitative analysis to securities
selection, and focus on individual stock selection rather than on general stock
market trends.

The Series may engage in forward currency exchange contracts to hedge its
portfolio against unfavorable currency movements and to enhance returns.

The Series' median market capitalization was $19.3 billion as of March 31, 1999.

PRINCIPAL RISKS

International Stock Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risks of investing in International Stock Series include:

- RISKS OF EQUITY SECURITIES. Prices of equity securities in the Series'
portfolio may decline over short or extended periods of time. Price changes
may occur in the market as a whole, or they may occur in only a particular
company, industry or sector of the market. As you consider an investment in
the Series, you should take into account your personal tolerance for daily
fluctuations of the stock market.

- RISKS OF VALUE STOCKS. The Series' sub-adviser looks for companies
worldwide that it believes are undervalued based on their earnings, cash
flow or asset value. These stocks can remain undervalued for years. There is
a risk that a stock's price will never reach what the sub-adviser believes
is its true value, or that the stock's price will go down.

- RISKS OF FOREIGN CURRENCY TRANSACTIONS. If the Series uses foreign
currency hedging transactions it will be exposed to additional risks and
transactions costs. Successful use of these derivative instruments depends
on the sub-adviser's ability to forecast correctly the direction of market
movements. The Series' performance could be worse than if the Series had not
used these instruments if the sub-adviser's judgment proves incorrect. In
addition, even if the sub-adviser's forecast is correct, there may be an
imperfect correlation between the price of derivative instruments and
movements in the prices of the currencies being hedged.

SERIES PERFORMANCE

The bar chart and table below provide you with information on International
Stock Series' volatility and performance. The bar chart shows you how
performance of the Series has varied from year to year. The table compares the
Series' performance over different time periods to that of a broad measure of
market performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 0.33%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 18.26% 1998
quarter ended September 30,
WORST QUARTER: -16.92% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- ---------------
<S> <C> <C>
International Stock Series............. 16.47% 14.22%
MSCI EAFE Index**...................... 20.33% 8.42%
</TABLE>

- ------------------------

* Inception date was January 3, 1995.

** An unmanaged index of stocks of Europe, Australia and the Far East.

16
<PAGE>
MID CAP STOCK SERIES

OBJECTIVE

The objective of Mid Cap Stock Series is total investment returns, including
capital appreciation and income, that consistently outperform the Standard &
Poor's 400 MidCap Index ("S&P MidCap").

PRINCIPAL INVESTMENT STRATEGIES

The Mid Cap Stock Series invests primarily in common stocks of medium
capitalization companies that have a market values between $200 million and $5
billion. The Series' median market capitalization was $3.2 billion as of March
31, 1999.

The Series sub-adviser, The Dreyfus Corporation ("Dreyfus"), selects common
stocks so that, in the aggregate, the investment characteristics and risk
profile of the Series are similar to those of the S&P MidCap. However, the
Series seeks to invest in stocks that, in the aggregate, will provide a higher
return than the S&P MidCap. The Series is not an index series and its
investments are not limited to securities of issuers included in the S&P MidCap.

Dreyfus utilizes computer techniques to track and, if possible, outperform the
S&P MidCap. Dreyfus employs valuation models designed to identify common stocks
of companies that are believed to have superior return potential in order to
construct a portfolio that resembles the S&P MidCap but is weighted toward the
stocks that Dreyfus believes are most attractive.

The Series may buy and sell futures and options contracts. This will be done
primarily to hedge the value of the Series' portfolio against potential adverse
movements in securities prices, but may also be done to enhance returns.

PRINCIPAL RISKS

Mid Cap Stock Series' share price will change daily because of changes in stock
prices and other factors. You may lose money if you invest in the Series. The
principal risks of investing in Mid Cap Stock Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, stocks of mid capitalization
companies may underperform the market as a whole. As you consider an
investment in the Series, you should take into account your personal
tolerance for daily fluctuations of the stock market.

- RISKS OF FUTURES AND OPTIONS. If the Series uses options and futures
contracts it will be exposed to additional risks and transactions costs.
Successful use of these derivative instruments depends on the sub-adviser's
ability to forecast correctly the direction of market movements. The Series'
performance could be worse than if the Series had not used these instruments
if the sub-adviser's judgment proves incorrect. In addition, even if the
sub-adviser's forecast is correct, there may be an imperfect correlation
between the price of derivative instruments and movements in the prices of
the securities being hedged.

SERIES PERFORMANCE

A bar chart and performance table are not provided for the Series because it has
not been in operation for a full calendar year.

17
<PAGE>
SMALL CAP VALUE SERIES

OBJECTIVE

The objective of Small Cap Value Series is capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Small Cap Value Series primarily invests in the common stocks of small companies
whose stock prices are believed to be undervalued. The Series' securities
selection focuses on companies that are out of favor with markets or have not
yet been discovered by the broader investment community.

The Series is sub-advised by Berger Associates, Inc., which has contracted with
Perkins, Wolf, McDonnell & Company (the "Manager") to provide day-to-day
investment management for the Series. In selecting securities for the Series,
the Manager generally looks for companies with:

- a low price relative to their assets, earnings, cash flow or business
franchise;

- products and services that give them a competitive advantage; and

- quality balance sheets and strong management.

The Manager's philosophy is to weigh a security's downside risk before
considering its upside potential, which may help provide an element of capital
preservation.

Under normal circumstances, the Series invests at least 65% of its assets in
common stocks of small companies whose market capitalization, at the time of
initial purchase, is less than the 12-month average of the maximum market
capitalization for companies included in the Russell 2000 Index ($3.33 billion
as of February 28, 1999). This average is updated monthly. The Series' median
market capitalization was $420 million as of March 31, 1999.

PRINCIPAL RISKS

Small Cap Value Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risks of investing in Small Cap Value Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, value stocks and/or stocks of
small capitalization companies may underperform the market as a whole. As
you consider an investment in the Series, you should take into account your
personal tolerance for daily fluctuations of the stock market.

- RISKS OF VALUE STOCKS. The Series' sub-adviser looks for companies whose
stock prices are believed to be undervalued. These stocks can remain
undervalued for years. There is a risk that a stock's price will never reach
what the sub-adviser believes is its true value, or that the stock's price
will go down.

- RISKS OF SMALL CAP COMPANIES. The securities of small capitalization
companies involve greater risk than is customarily associated with
investments in larger companies. Small capitalization companies often have
limited product lines, markets or financial resources and may be dependent
on a small, inexperienced management group. The securities of small
capitalization companies may have limited market stability and may be
subject to more abrupt or erratic market movements than securities of
larger, more established companies or the market averages in general. The
Series' investments are often focused in a small number of business sectors,
which increases the risk should adverse economic developments occur in one
of those sectors. In addition, the Series may invest in certain securities
with unique risks, such as special situations. Special situations are
companies about to undergo a structural, financial or management change
which may significantly affect the value of their securities.

SERIES PERFORMANCE

A bar chart and performance table are not provided for the Series because it has
not been in operation for a full calendar year.

18
<PAGE>
GLOBAL GROWTH SERIES

OBJECTIVE

The objective of Global Growth Series is long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Global Growth Series pursues its objective by investing primarily in common
stocks of issuers located in various developed countries and regions of the
world, including the United States, Canada, the United Kingdom, other Western
European nations, Japan and Australia. The Series focuses primarily on medium-
sized, established growth companies with one of more of the following
characteristics:

- a dominant market position,

- superior growth prospects,

- strong management with a focused growth strategy, and

- the ability to finance future growth.

The Series also may invest in common stocks of U.S. and non-U.S. emerging growth
companies. These companies generally have smaller capitalizations than
established growth companies. In selecting emerging growth companies, the
Series' investment adviser looks for companies that it believes:

- have the potential for earnings growth over time that is above the growth
rate of more established companies, or

- are early in their life cycles and have the potential to become major
enterprises.

Although the Series invests primarily in common stocks of issuers located in
developed countries, the series also may invest in less developed markets of the
world. In selecting emerging market securities, the Series' investment adviser
looks for companies with characteristics similar to those which it looks for in
companies located in developed countries. Emerging market companies, however,
have the potential to benefit from the economic growth of the developing region.

The Series' median market capitalization was $9.0 billion as of March 31, 1999.

PRINCIPAL RISKS

Global Growth Series' share price will change daily because of changes in the
values of the securities held by the Series. You may lose money if you invest in
the Series. The principal risks of investing the Global Growth Series include:

- RISKS OF COMMON STOCKS. Prices of common stocks in the Series' portfolio
may decline over short or extended periods of time. Price changes may occur
in the market as a whole, or they may occur in only a particular company,
industry or sector of the market. As you consider an investment in the
Series, you should take into account your personal tolerance for daily
fluctuations of the stock market.

- RISKS OF GROWTH STOCKS. The Series invests in stocks of both established
and emerging growth companies. If the Series' adviser incorrectly assesses a
company's prospects for earnings growth, or if its judgment about how other
investors will value the company's earnings growth is wrong, then the price
of the company's stock may decrease, or it may not increase to the level
that the Series' adviser anticipated.

- RISKS OF MID AND SMALL CAP COMPANIES. The securities of both U.S. and
non-U.S. medium- and smaller-capitalization companies involve greater risk
than is customarily associated with investments in larger companies. These
companies often have limited product lines, markets or financial resources
and they may be dependent on a small, inexperienced management group. The
securities of medium-and smaller-capitalization companies may have limited
market stability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the
market averages in general.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Global Growth
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was -1.67%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 21.52% 1998
quarter ended September 30,
WORST QUARTER: -20.55% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS INCEPTION*
----------- ----------- ---------------
<S> <C> <C> <C>
Global Growth Series....... 11.36% 12.39% 13.63%
MSCI World Index**......... 24.80% 16.16% 15.85%
</TABLE>

- ------------------------
* Inception date was May 1, 1992.

** An unmanaged index of the world's major equity markets in U.S. dollars,
weighted by stock market value.

19
<PAGE>
LARGE CAP GROWTH SERIES

OBJECTIVE

The objective of Large Cap Growth Series is long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Large Cap Growth Series pursues its objective by investing primarily in the
common stocks of a limited number of large, carefully selected, high quality
United States companies whose securities are believed likely to achieve superior
earnings growth. Normally, about 40 to 50 companies will be represented in the
Series' portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Series' assets. The Series' focus on a
relatively small number of intensively researched companies is not typical of
most equity mutual funds. The Series is designed for those seeking to accumulate
capital over time with less volatility than that typically associated with
investments in smaller companies.

The sub-adviser of Large Cap Growth Series, Alliance Capital Management L.P.
("Alliance"), relies heavily upon the fundamental analysis and research of its
large internal staff. The Alliance staff generally follows a primary research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying companies with substantially
above average prospective earnings growth that is not fully reflected in current
market valuations.

Alliance expects the average market capitalization of companies represented in
the Series' portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the S&P 500. As of March 31, 1999,
the average market capitalization of companies comprising the S&P 500 was $64.5
billion. The Series' average market capitalization as of such date was $58.0
billion.

Although the Series invests primarily in stocks of United States companies, it
may invest up to 15% of its total assets in securities of foreign companies.

PRINCIPAL RISKS

Large Cap Growth Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risks of investing in Large Cap Growth Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, stocks of large
capitalization companies may underperform the market as a whole. As you
consider an investment in the Series, you should take into account your
personal tolerance for daily fluctuations of the stock market.

- RISKS OF LARGE CAP COMPANIES. In the long run, large company stocks may
produce more modest gains than stocks of smaller companies.

- RISKS OF FOCUSING ON A SMALL NUMBER OF COMPANIES. Because the Series
focuses on a limited number of companies, it may be more significantly
affected by adverse developments in one of those companies than if it had
held a more diverse portfolio of securities.

- RISKS OF GROWTH STOCKS. The Series invests primarily in stocks of
companies that the sub-adviser believes are likely to achieve superior
earnings growth. If the sub-adviser incorrectly assesses a company's
prospects for earnings growth, or if its judgment about how other investors
will value the company's earnings growth is wrong, then the price of the
company's stock may decrease, or it may not increase to the level that the
sub-adviser had anticipated.

SERIES PERFORMANCE

A bar chart and performance table are not provided for the Series because it has
not been in operation for a full calendar year.

20
<PAGE>
GROWTH STOCK SERIES

OBJECTIVE

The objective of Growth Stock Series is long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Growth Stock Series invests primarily in common stocks. The Series' adviser uses
a "bottom up" investment style in which stock selection is driven primarily by
the merits of the company itself. The adviser generally invests in stocks of
companies whose earnings and growth potential, in its judgment, exceed industry
averages. In addition to superior earnings growth potential, the adviser seeks
companies which it believes to be well managed with above average returns on
equity and invested capital, healthy balance sheets and the potential to gain
market share. Companies of this nature typically have above average growth
potential and a correspondingly higher than average valuation level as measured
by price to earnings, price to cash flow and price to book value ratios.

Under normal market conditions, the Series intends to maintain a median market
capitalization for its portfolio of $1 billion to $5 billion--making it a "mid
cap growth fund." The Series' median market capitalization was $3.8 billion as
of March 31, 1999.

PRINCIPAL RISKS

Growth Stock Series' share price will change daily because of changes in stock
prices and other factors. You may lose money if you invest in the Series. The
principal risks of investing in Growth Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks and/or stocks
of mid capitalization companies may underperform the market as a whole. As
you consider an investment in the Series, you should take into account your
personal tolerance for daily fluctuations of the stock market.

- RISKS OF GROWTH STOCKS. The Series invests primarily in stocks of
companies that the adviser believes have superior earnings growth potential.
If the adviser incorrectly assesses a company's prospects for earnings
growth, or if its judgment about how other investors will value the
company's earnings growth is wrong, then the price of the company's stock
may decrease, or it may not increase to the level that the adviser had
anticipated.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Growth Stock
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 0.39%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 22.38% 1998
quarter ended September 30,
WORST QUARTER: -16.04% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS
----------- ----------- -----------
<S> <C> <C> <C>
Growth Stock Series.............. 19.01% 14.09% 15.95%
S&P 500 Index*................... 28.58% 24.06% 19.19%
</TABLE>

- ------------------------

* An unmanaged index of 500 common stocks.

21
<PAGE>
AGGRESSIVE GROWTH SERIES

OBJECTIVE

The objective of Aggressive Growth Series is maximum long-term capital
appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Aggressive Growth Series invests primarily in common stocks. The Series focuses
on:

- common stocks of small and medium sized companies that are early in their
life cycles, but which the Series' adviser believes have the potential to
become major enterprises (emerging growth companies); and

- common stocks of more established companies whose rates of earnings growth
are expected to accelerate because of special factors such as new products
or services, changes in demand factors, basic changes in the economic
environment or rejuvenated management.

The Series' adviser uses a "bottom up" investment style in which stock selection
is driven primarily by the merits of the company itself. The adviser generally
invests in stocks of companies whose earnings and growth potential, in its
judgment, exceed industry averages. In addition to superior earnings growth
potential, the adviser seeks companies which it believes to be well managed with
above average returns on equity and invested capital, healthy balance sheets and
the potential to gain market share. Companies of this nature typically have
above average growth potential and a correspondingly higher than average
valuation level as measured by price to earnings, price to cash flow and price
to book value ratios.

Under normal market conditions, the Series intends to maintain a median market
capitalization for its portfolio of less than $1 billion -- making it a "small
cap growth fund." The Series median market capitalization was $660 million as of
March 31, 1999.

PRINCIPAL RISKS

Aggressive Growth Series' share price will change daily because of changes in
stock prices and other factors. You may lose money if you invest in the Series.
The principal risks of investing in Aggressive Growth Series include:

- RISKS OF COMMON STOCKS. Prices of stocks in the Series' portfolio may
decline over short or extended periods of time. Price changes may occur in
the market as a whole, or they may occur in only a particular company,
industry or sector of the market. In addition, growth stocks and/or stocks
of small capitalization companies may underperform the market as a whole. As
you consider an investment in the Series, you should take into account your
personal tolerance for daily fluctuations of the stock market.

SERIES PERFORMANCE

The bar chart and table below provide you with information on Aggressive Growth
Series' volatility and performance. The bar chart shows you how performance of
the Series has varied from year to year. The table compares the Series'
performance over different time periods to that of a broad measure of market
performance. Both the chart and the table assume that all dividends and
distributions have been reinvested. Fees and charges attributable to variable
annuity contracts and variable life insurance policies are not taken into
account in calculating the Series' returns. If they had been, returns would be
lower. Remember, how the Series has performed in the past is not necessarily an
indication of how it will perform in the future.

ANNUAL TOTAL RETURN AS OF DECEMBER 31 EACH YEAR (%)*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

* The Series' total return for the period from January 1, 1999 through March 31,
1999 was 1.03%.

<TABLE>
<S> <C> <C>
quarter ended December 31,
BEST QUARTER: 36.40% 1998
quarter ended September 30,
WORST QUARTER: -21.85% 1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
----------- ---------------
<S> <C> <C>
Aggressive Growth Series............... 21.17% 11.84%
S&P 500 Index**........................ 28.58% 26.69%
</TABLE>

- ------------------------

* Inception date was May 2, 1994.

** An unmanaged index of 500 common stocks.

22
<PAGE>
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------

SEPARATE ACCOUNTS AND THE CONTRACTS

Shares in the Series are currently sold to separate accounts of Fortis Benefits
Insurance Company ("Fortis Benefits") and First Fortis Life Insurance Company
("First Fortis") which fund benefits under variable life insurance policies and
variable annuity contracts issued by those companies. These variable life
insurance policies and variable annuity contracts are sometimes referred to as
"Contracts." As a Contract owner, you allocate the value of your Contract among
subaccounts of the separate accounts. Each subaccount invests in a different
Series. The rights of the separate accounts as shareholders should be
distinguished from your rights as a Contract owner, which are described in your
variable life insurance policy or variable annuity contract.

PRICING OF SERIES SHARES

The net asset values of the Series' shares are determined as of the primary
closing time of business on the New York Stock Exchange (usually 3 p.m. Central
time) on each day the exchange is open.

Each Series' net asset value per share is determined by dividing the value of
the securities and other assets owned by the Series, less all liabilities, by
the number of the Series' shares outstanding. The securities owned by the Series
are generally valued at market value. However, there are times when market
values are not readily available. In these cases, securities are valued at fair
value as determined in good faith by the Series' adviser under supervision of
the Board of Directors.

A significant portion of certain Series' assets may consist of securities of
foreign issuers that trade on weekends or other days when the Series do not
price their shares. As a result, the net asset value of each such Series' shares
may change on days when the Series is not open for shareholder purchases or
redemptions.

PURCHASE AND REDEMPTION OF SERIES SHARES

Series shares are offered only to the separate accounts. On each day when the
Series value their assets, shares of the Series may be purchased or redeemed by
the separate accounts based upon, among other things, the amounts of net
premiums allocated to the separate accounts, dividends and distributions
reinvested, transfers to and among subaccounts of the separate accounts, policy
loans, loan repayments and benefit payments to be processed on that date. These
purchases and redemptions for the separate accounts are effected at the net
asset value per share for each Series determined as of that same date.

TRANSFERS AMONG SUBACCOUNTS

You may transfer amounts among the subaccounts available, and may change
allocations of premiums as explained in the accompanying prospectus for the
Contracts. These transfers have the effect of changing your participation in the
various Series. Transfers between subaccounts are not taxable to you under
current Federal income tax law.

TAXATION

So long as each Series qualifies as a regulated investment company and meets
certain diversification tests applicable to the segregated asset accounts
underlying variable annuity contracts and variable life insurance policies, you
will not be considered to be an owner of shares of the Series, and income earned
with respect to the Contracts will not be taxed to you.

For the tax consequences of owning a Contract, see the accompanying prospectus
for the Contracts. For more information concerning the taxation of the Series,
see "Taxation" in the Statement of Additional Information.

CONTRACT OWNER INQUIRIES

For further information, please contact Fortis Benefits' office, the address of
which is the same as that of Fortis Series, as set forth on the cover of this
Prospectus. If you are a New York Contract owner, please contact First Fortis'
office: P.O. Box 3209, Syracuse, New York 13220.

23
<PAGE>
SERIES MANAGEMENT
- -------------------------------------------------------------------

INVESTMENT ADVISER

Fortis Advisers, Inc. ("Advisers") is the investment adviser for the Series, and
also serves as the Series' transfer agent and dividend agent. Advisers has been
managing investment company portfolios since 1949. In addition to providing
investment advice, Advisers is responsible for the management of the Series'
business affairs, subject to the overall authority of the Board of Directors.
Advisers' address is 500 Bielenberg Drive, Woodbury, Minnesota 55125-1400.

Each Series pays Advisers a monthly fee for providing investment advisory
services. Advisers has entered into investment sub-advisory agreements on behalf
of Global Bond Series, Global Asset Allocation Series, International Stock
Series, S&P 500 Index Series, Mid Cap Stock Series, Blue Chip Stock Series,
Small Cap Value Series and Large Cap Growth Series. For their services, the
sub-advisers are paid a fee by Advisers. During their most recent fiscal year,
the Series paid the following investment advisory fees to Advisers:

<TABLE>
<CAPTION>
ADVISORY FEE
AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
-------------------------
<S> <C>
Money Market Series....................... .30%
U.S. Government Securities Series......... .47%
Diversified Income Series................. .47%
Global Bond Series........................ .75%
High Yield Series......................... .50%
Global Asset Allocation Series............ .90%
Asset Allocation Series................... .47%
Value Series.............................. .70%
Growth & Income Series.................... .63%
S&P 500 Index Series...................... .40%
Blue Chip Stock Series.................... .89%
International Stock Series................ .85%
Mid Cap Stock Series...................... .90%
Small Cap Value Series.................... .90%
Global Growth Series...................... .70%
Large Cap Growth Series................... .90%
Growth Stock Series....................... .61%
Aggressive Growth Series.................. .68%
</TABLE>

Individuals affiliated with Advisers are responsible for the day-to-day
management of Money Market Series, U.S. Government Securities Series,
Diversified Income Series, High Yield Series, Asset Allocation Series, Value
Series, Growth & Income Series, Global Growth Series, Growth Stock Series and
Aggressive Growth Series. Howard G. Hudson supervises the portfolio management
of the fixed income Series, including the fixed income portion of the Asset
Allocation Series. Lucinda S. Mezey supervises the portfolio management of the
equity Series and the equity portion of the Asset Allocation Series. The
individuals responsible for the day-to-day management of the Series are listed
below.

MONEY MARKET SERIES. David C. Greenzang, Maroun M. Hayek and Robert C. Lindberg
have been primarily responsible for the day-to-day management of the Series
since 1995.

U.S. GOVERNMENT SECURITIES SERIES. Mr. Hayek, Christopher J. Pagano and
Christopher J. Woods are primarily responsible for the day-to-day management of
the Series. Messrs. Hayek and Woods have managed the Series since 1995 and Mr.
Pagano since 1996.

DIVERSIFIED INCOME SERIES. Mr. Hayek, Mr. Pagano, Ho Wang and Mr. Woods are
primarily responsible for the day-to-day management of the Series. Messrs. Hayek
and Woods have managed the Series since 1995, Mr. Pagano since 1996 and Mr. Wang
since 1998.

HIGH YIELD SERIES. Mr. Hayek, Mr. Lindberg and Mr. Wang are primarily
responsible for the day-to-day management of the Series. Messrs. Hayek and
Lindberg have managed the Series since 1995 and Mr. Wang since 1998.

ASSET ALLOCATION SERIES. Charles L. Mehlhouse has been primarily responsible
for the day-to-day management of the equity portion of the Series since 1996.
Messrs. Hayek, Pagano, Wang and Woods are primarily responsible for the
day-to-day management of the fixed-income portion of the Series. Messrs. Hayek
and Woods have managed the Series since 1995, Mr. Pagano since 1996 and Mr. Wang
since 1998.

VALUE SERIES. Nicholas M. De Peyster has been primarily responsible for the
day-to-day management of the Series since its inception.

GROWTH & INCOME SERIES. Mr. Mehlhouse has been primarily responsible for the
day-to-day management of the Series since 1996.

GLOBAL GROWTH SERIES. James S. Byrd and Diane M. Gotham are primarily
responsible for the day-to-day management of the Series. Mr. Byrd has managed
the Series since its inception, Ms. Gotham since 1998.

GROWTH STOCK SERIES. Michael J. Romanowski has been primarily responsible for
the day-to-day management of the Series since 1998.

AGGRESSIVE GROWTH SERIES. Laura E. Granger has been primarily responsible for
the day-to-day management of the Series since 1998.

Additional information about these investment supervisors and portfolio managers
is set forth below.

- Mr. Hudson, an Executive Vice President of Advisers and Head of Fixed
Income Investments of Advisers since 1991, has been managing fixed income
securities for Fortis, Inc. since 1991.

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<PAGE>
- Mr. Greenzang, a Money Market Portfolio Officer, has been involved in
management of debt securities for Fortis, Inc. since 1992.

- Mr. Hayek, a Vice President of Advisers since 1995, has been managing debt
securities for Fortis, Inc. since 1987.

- Mr. Lindberg, a Vice President of Advisers since 1993, has been managing
debt securities for Advisers since that time.

- Mr. Pagano, a Vice President of Advisers since 1996, has been managing
debt securities for Advisers since that time. Prior to joining Advisers,
Mr. Pagano was a Government Strategist for Merrill Lynch, New York, New
York.

- Mr. Wang, a Vice President of Advisers since 1998, has been managing
non-investment grade fixed income securities since July 1998. From October
1995 to June 1998, Mr. Wang was a Senior Securities Analyst for Lord,
Abbett & Co. in New York, New York. From 1992 to October 1995, he was a
portfolio manager for New York Life in New York, New York.

- Mr. Woods, a Vice President of Advisers since 1995, has been managing debt
securities for Fortis, Inc. since 1993.

- Ms. Mezey, an Executive Vice President of Advisers and Head of Equity
Investments of Advisers since October 1997, manages equity securities for
Advisers. From 1995 to October 1997, she was Chief Investment Officer,
Alex Brown Capital Advisory and Trust Co., Baltimore, MD. From 1970 to
1995 she was employed by PNC Bank, Philadelphia, Pennsylvania with her
last position being Senior Vice President and Head of Equity Investments.

- Mr. Byrd has been an Executive Vice President of Advisers since 1995,
prior to which he was a Vice President of Advisers.

- Mr. De Peyster, a Vice President of Advisers since 1995, has managed
equity securities for Advisers since 1991.

- Ms. Granger, a Vice President of Advisers since 1998, manages equity
securities for Advisers. From July 1993 to July 1998, she was portfolio
manager for General Motors Investment Management in New York, New York.

- Ms. Gotham has been a Vice President of Advisers since 1998. From 1994 to
1998 she was a securities analyst for Advisers.

- Mr. Mehlhouse, a Vice President of Advisers, has managed equity securities
for Advisers since 1996. From 1993 to 1996, he was a portfolio manager for
Marshall & IIsley Bank Corp., Milwaukee, Wisconsin.

- Mr. Romanowski, a Vice President of Advisers since 1998, was a portfolio
manager for Value Line, New York, NY from October 1995 to March 1998,
prior to which he was a securities analyst for Conning & Co. in Hartford,
CT from 1992 to 1995.

SUB-ADVISERS

Global Bond Series, Global Asset Allocation Series, S&P 500 Index Series, Blue
Chip Stock Series, International Stock Series, Mid Cap Stock Series, Small Cap
Value Series and Large Cap Growth Series each has a sub-adviser. The
sub-advisers provide investment research, advice and supervision and furnish and
conduct the management investment programs for the Series, subject to the
general control of Advisers and the Series' Board of Directors. The sub-adviser
of each Series is also responsible for the selection of brokers and dealers to
effect securities transactions and the negotiation of brokerage commissions, if
any.

GLOBAL BOND SERIES. Mercury Asset Management International Ltd. ("Mercury
International"), 33 King William Street, London, EC4R 9AS, England, is the
sub-adviser of the Global Bond Series. Mercury International is a wholly owned
subsidiary of Mercury Asset Management Group Ltd. ("Mercury"), whose ultimate
parent is Merrill Lynch & Co., Inc. As of December 31, 1998, Merrill Lynch
managed in excess of $500 billion of investments on behalf of clients and
Mercury International managed in excess of $6 billion of investments.

The Global Product Strategy Committee of the Fixed Interest Division of Mercury
International has primary portfolio management responsibility for the Global
Bond Series. Each of the four members of the Strategy Committee is an officer or
director of Mercury International.

GLOBAL ASSET ALLOCATION SERIES. Morgan Stanley Dean Witter Investment
Management Limited ("Morgan Stanley"), 25 Cabot Square, Canary Wharf, London,
E14 4QA, England, is the sub-adviser of the Global Asset Allocation Series.
Morgan Stanley is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.,
a global financial services firm that maintains major market positions in each
of its three primary businesses--securities, asset management and credit
services. Morgan Stanley provides a broad range of portfolio management services
to customers in the United States and abroad and as of December 31, 1998,
together with its affiliated institutional investment managers, managed
investments totaling approximately $163.4 billion.

Portfolio responsibility for the Global Asset Allocation Series is split between
Morgan Stanley's equity team led by Frances Campion and a team of fixed income
portfolio managers with respect to fixed income securities. Frances Campion, a
Managing Director of Morgan Stanley, joined Morgan Stanley in 1990 and her
responsibilities have included the day-to-day management of the global equity
portion of the Series since the Series' inception. The investment strategy and
allocation of the fixed income portion is set by a team of portfolio managers,
the primary members of which are David Germany, Michael Kushma and David
Stanley. These individuals have been managing the Series since 1997, 1995 and
1995, respectively. David Germany joined Morgan Stanley in 1997 and is a
Managing Director. He was previously a partner and portfolio manager at Miller
Anderson & Sherrerd, LLP. Michael Kushma joined Morgan Stanley & Co.
Incorporated in 1987,

25
<PAGE>
became a Principal in 1996, and moved to Morgan Stanley in 1998. David Stanley
joined Morgan Stanley in 1994 and became a Vice President in 1997.

INTERNATIONAL STOCK SERIES. Lazard Asset Management ("Lazard"), 30 Rockefeller
Plaza, New York, New York 10112, is the sub-adviser of the International Stock
Series. Lazard is a division of Lazard Freres & Co. LLC ("Lazard Freres"), a New
York limited liability company. Lazard Freres provides its clients with a wide
variety of investment banking, brokerage and related services. Lazard provides
investment management services to client discretionary accounts with assets as
of March 31, 1999 totaling approximately $64 billion. Its clients are both
individuals and institutions, some of whose accounts have investment policies
similar to those of the Series.

Herbert W. Gullquist is Chief Investment Officer of Lazard and a Vice Chairman
and Managing Director of Lazard Freres. Mr. Gullquist is responsible for
monitoring all investment activity to ensure adherence to Lazard's investment
philosophy and guidelines. John R. Reinsberg is a Managing Director of Lazard
Freres responsible for international/global equity management and overseeing the
day-to-day operations of Lazard's international equity investment team. Mr.
Gullquist and Mr. Reinsberg have been primarily responsible for the day-to-day
management of International Stock Series since its inception.

S&P 500 INDEX SERIES AND MID CAP STOCK SERIES. The Dreyfus Corporation
("Dreyfus"), 200 Park Avenue, New York, New York 10166, is the sub-adviser to
the S&P 500 Index Series and the Mid Cap Stock Series. Dreyfus was formed in
1947. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of December
31, 1998, Dreyfus managed or administered approximately $117 billion in assets
for approximately 1.7 million investor accounts nationwide. Through its
subsidiaries, including Dreyfus, Mellon managed more than $389 billion in assets
as of December 31, 1998, including approximately $141 billion in proprietary
mutual fund assets. As of December 31, 1998, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.9 trillion in assets, including
approximately $62 billion in mutual fund assets.

Steven A. Falci has been primarily responsible for the day-to-day management of
Mid Cap Stock Series since its inception. He has been employed by the Mellon
organization since 1994.

BLUE CHIP STOCK SERIES. T. Rowe Price Associates, Inc. ("T. Rowe Price"), 100
East Pratt Street, Baltimore, MD 21202, is the sub-adviser of the Blue Chip
Stock Series. T. Rowe Price was founded in 1937 and, together with its
affiliates, managed over $149 billion for over seven million individual and
institutional investor accounts as of March 31, 1999. Some of T. Rowe Price's
accounts have investment policies similar to those of the Series.

The Series has an investment advisory committee composed of the following
members: Larry J. Puglia, chairman, Brian W. H. Berghuis, Seema R. Hingorani,
Thomas J. Huber, Robert W. Sharps, Robert W. Smith and William J. Stromberg. Mr.
Puglia has had the day-to-day responsibilities of managing the Series since 1996
and has been managing investments since joining T. Rowe Price in 1990.

SMALL CAP VALUE SERIES. Berger Associates, Inc. ("Berger Associates"), 210
University Boulevard, Denver, Colorado 80206, the sub-adviser of the Small Cap
Value Series, has entered into an agreement with Perkins, Wolf, McDonnell &
Company (the "Manager") under which Berger Associates will pay the Manager a fee
to provide the day-to-day investment management for the Series.

Robert H. Perkins has been primarily responsible for the day-to-day management
of Small Cap Value Series since its inception. Mr. Perkins is President and a
Director of the Manager and has been an investment manager since 1970.

LARGE CAP GROWTH SERIES. Alliance Capital Management L.P. ("Alliance"), a
Delaware limited partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, is the sub-adviser of the Large Cap Growth
Series. Alliance is an international investment manager supervising client
accounts with assets as of December 31, 1998 totaling more than $286 billion (of
which approximately $118 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 54 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over 3.5 million
shareholders.

Alliance Capital Management Corporation ("ACMC"), the sole general partner of,
and owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), which is a wholly-owned subsidiary of The Equitable
Companies Incorporated, a holding company controlled by AXA, a French insurance
holding company.

James G. Reilly, an Executive Vice President of Alliance, has been primarily
responsible for the day-to-day management of Large Cap Growth Series since its
inception. Mr. Reilly joined Alliance in 1984 and has been a portfolio manager
on the U.S. Large Cap team since 1988. Mr. Reilly has 15 years investment
experience.

26
<PAGE>
MORE INFORMATION ON SERIES OBJECTIVES, INVESTMENT STRATEGIES AND RISKS
- -------------------------------------------------------------------

OBJECTIVES

The Series' objectives, which are described above under "The Series," may be
changed without shareholder approval.

INVESTMENT STRATEGIES

The principal investment strategies of each Series are described above under
"The Series." These are the strategies that Advisers and the respective
sub-advisers believe are most likely to be important in trying to achieve each
Series' objective. Of course, there is no guarantee that any Series will achieve
its objectives. You should be aware that a Series may also use strategies and
invest in securities that are not described below, but are described in the
Statement of Additional Information.

SECURITIES LENDING

To generate additional income, High Yield Series, Value Series, Growth & Income
Series, S&P 500 Index Series, Global Growth Series and Aggressive Growth Series
currently lend their portfolio securities.

TEMPORARY DEFENSIVE MEASURES

In an attempt to respond to adverse market, economic, political or other
conditions, a Series may invest its assets for temporary defensive purposes,
without limit, in the following manner:

- Global Bond Series, High Yield Series, Asset Allocation Series, Value
Series, Growth & Income Series, Small Cap Value Series, Large Cap Growth
Series, Growth Stock Series, Aggressive Growth Series and Global Asset
Allocation Series may invest in high grade preferred stocks, bonds, other
fixed income securities, short-term money market instruments, commercial
paper, obligations of banks or the U.S. Government, other high quality
short-term debt instruments, or cash.

- Blue Chip Stock Series may invest in U.S. and foreign dollar-denominated
money market securities, including repurchase agreements, which are in the
two highest rating categories and mature in one year or less. In addition,
the Series may invest in shares of the Reserve Investment Fund, a money
market fund managed by T. Rowe Price, the Series' sub-adviser.

- International Stock Series may invest in the equity securities of U.S.
companies or short-term money market instruments or hold its assets in
cash.

- Global Growth Series may invest in high-quality debt securities of U.S.
and non-U.S. issuers, may hold cash (U.S. dollars, foreign currencies, or
multinational currency units) and/or high-quality money market
instruments.

During periods when a Series assumes a temporary defensive position, the Series
will not be pursuing its investment objective. S&P 500 Index Series and Mid Cap
Stock Series do not intend to take temporary defensive positions that are
inconsistent with their principal investment strategies.

PORTFOLIO TURNOVER

Before investing in a Series you should review its portfolio turnover rate for
an indication of the potential effect of transaction costs on the Series' future
returns. In general, the greater the volume of buying and selling by the Series,
the greater the impact that brokerage commissions and other transaction costs
will have on its return. The Series, while they generally do not invest or trade
for short-term profits, are actively managed and the portfolio managers may
trade securities frequently. As a result, each Series may, from time to time,
have an annual portfolio turnover rate of over 100%. The "Financial Highlights"
section of this Prospectus shows each Series' historical portfolio turnover
rate.

DURATION

As discussed above under "The Series," certain Series attempt to maintain the
average effective durations of their portfolios within specified ranges.
Effective duration, one measure of interest rate risk, measures how much the
value of a security is expected to change with a given change in interest rates.
The longer a security's effective duration, the more sensitive its price to
changes in interest rates. For example, if interest rates were to increase by
one percentage point, the market value of a bond with an effective duration of
five years would decrease by 5%, with all other factors being constant.
Effective duration is based on assumptions and subject to a number of
limitations. It is most useful when interest rate changes are small, rapid and
occur equally in short-term and long-term securities. In addition, it is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage-backed securities, because the calculation requires assumptions about
prepayment rates.

PRINCIPAL RISKS

The principal risks of investing in the Series are summarized above under "The
Series." More information about Series risks is presented below. Please
remember, you may lose money if you invest in a Series.

27
<PAGE>
Money Market Series, U.S. Government Securities Series, Diversified Income
Series, Global Bond Series and High Yield Series are sometimes referred to in
this section as the "Fixed Income Series" and Value Series, Growth & Income
Series, S&P 500 Index Series, Blue Chip Stock Series, International Stock
Series, Mid Cap Stock Series, Small Cap Value Series, Global Growth Series,
Large Cap Growth Series, Growth Stock Series and Aggressive Growth Series are
sometimes referred to as the "Equity Series."

- INTEREST RATE RISK. The Fixed Income Series, Global Asset Allocation
Series and Asset Allocation Series are subject to interest rate risk. Debt
securities in the Series will fluctuate in value with changes in interest
rates. In general, debt securities will increase in value when interest
rates fall and decrease in value when interest rates rise. Longer term debt
securities are generally more sensitive to interest rate changes. In
addition, investments made by certain Series may be highly volatile in
response to changing interest rates. These investments include IOs, POs,
inverse floaters, accrual bonds, payment-in-kind bonds and zero-coupon
obligations.

- CREDIT OR DEFAULT RISK. The Fixed Income Series, Global Asset Allocation
Series and Asset Allocation Series are subject to credit or default risk.
This is the risk that the issuers of debt securities held by the Series will
not make payments on the securities, or that the other party to a contract
(such as a securities lending agreement or repurchase agreement) will
default on its obligations. There is also the risk that an issuer could
suffer adverse changes in financial condition that could lower the credit
quality of a security. This could lead to greater volatility in the price of
the security and in shares of the Series. Also, a change in the credit
quality rating of a bond can affect the bond's liquidity and make it more
difficult for the Series to sell. When a Series purchases unrated
securities, it will depend on the adviser's or sub-adviser's analysis of
credit risk more heavily than usual.

- RISKS OF HIGH YIELD/HIGH RISK SECURITIES. High Yield Series invests
primarily in non-investment grade fixed income obligations, and a
significant portion of the portfolios of Diversified Income Series and Asset
Allocation Series may consist of such obligations. Non-investment grade
obligations are commonly referred to as "high yield" securities or "junk
bonds." Although these securities usually offer higher yields than
investment grade securities, they also involve more risk. High yield bonds
may be more susceptible to real or perceived adverse economic conditions
than investment grade bonds. In addition, the secondary trading market may
be less liquid. High yield securities generally have more volatile prices
and carry more risk to principal than investment grade securities.
Diversified Income Series and Asset Allocation Series may invest up to 30%
of their total assets in securities rated as low as Caa by Moody's, CCC by
Standard & Poor's or comparably rated by another rating agency. High Yield
Portfolio may invest without limitation in these securities, and may invest
up to 10% of its total assets in "non-performing" securities rated lower
than Caa or CCC. Securities in the Caa/CCC rating category are considered to
be of poor standing and are predominantly speculative. "Non-performing"
securities may be in default, or there may be present elements of danger
with respect to the payment of principal or interest. These securities are
highly speculative.

- CALL RISK. U.S. Government Securities Series, Diversified Income Series,
Global Bond Series, High Yield Series, Global Asset Allocation Series and
Asset Allocation Series are subject to call risk. Many corporate bonds may
be redeemed ("called") at the option of the issuer before their stated
maturity date. In general, an issuer will call its bonds if they can be
refinanced by issuing new bonds which bear a lower interest rate. The Series
are subject to the possibility that during periods of falling interest
rates, a bond issuer will call its high-yielding bonds. A Series would then
be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the Series's income.

- RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES. U.S. Government
Securities Series, Diversified Income Series and Asset Allocation Series are
subject to both prepayment and extension risk in connection with their
investments in mortgage-backed and/or asset-backed securities.

PREPAYMENT RISK. Mortgage-backed securities are secured by and payable
from pools of mortgage loans. Similarly, asset-backed securities are
supported by obligations such as automobile loans or home equity loans.
These mortgages and other obligations generally can be prepaid at any
time. As a result, mortgage- and asset-backed securities are subject to
prepayment risk, which is the risk that falling interest rates could
cause prepayments of the securities to occur more quickly than expected.
This occurs because, as interest rates fall, more homeowners refinance
the mortgages underlying mortgage-backed securities or prepay the debt
obligations underlying asset-backed securities. A Series holding these
securities must reinvest the prepayments at a time when interest rates
on new investments are falling, reducing the income of the Series. In
addition, when interest rates fall, prices on mortgage- and asset-backed
securities may not rise as much as for other types of comparable debt
securities because investors may anticipate an increase in prepayments.

EXTENSION RISK. Mortgage- and asset-backed securities are also subject
to extension risk, which is the risk that rising interest rates could
cause mortgages or other obligations underlying the securities to be
prepaid more slowly than expected, resulting in slower prepayments of
securities. This would, in effect, convert a short- or medium-duration
mortgage- or asset-backed security into a longer-duration security,
increasing its sensitivity to interest rate changes and causing its
price to decline.

- INCOME RISK. The Fixed Income Series, Global Asset Allocation Series and
Asset Allocation Series are subject to income risk, which is the potential
for a decline in the Series' income due to falling interest rates.

28
<PAGE>
- RISKS OF COMMON STOCKS. Because of their investments in common stocks,
the Equity Series, Global Asset Allocation Series and Asset Allocation
Series are subject to the following risks:

MARKET RISK. All stocks are subject to price movements due to changes in
general economic conditions, changes in the level of prevailing interest
rates, changes in investor perceptions of the market, or the outlook for
overall corporate profitability.

COMPANY RISK. Individual stocks can perform differently than the overall
market. This may be a result of specific factors such as changes in
corporate profitability due to the success or failure of specific
products or management strategies, or it may be due to changes in
investor perceptions regarding a company.

SECTOR RISK. The stocks of companies within specific industries or
sectors of the economy can periodically perform differently than the
overall market. This can be due to changes in such things as the
regulatory or competitive environment or to changes in investor
perceptions of a particular industry or sector.

- RISKS OF GROWTH STOCKS. Asset Allocation Series, Blue Chip Stock Series,
Global Growth Series, Large Cap Growth Series, Growth Series and Aggressive
Growth Series focus on stocks which Advisers, or a Series' sub-adviser,
believes have the potential for superior earnings growth. Growth & Income
Series may also use this approach. If Advisers or a Series' sub-adviser
incorrectly assesses a company's prospects for earnings growth, or if
Advisers' or the sub-adviser's judgment about how other investors will value
the company's earnings growth is wrong, then the price of the company's
stock may decrease, or it may not increase to the level that Advisers or the
sub-adviser had anticipated.

- RISKS OF VALUE STOCKS. Value Series, Small Cap Value Series, Global Asset
Allocation Series and International Stock Series focus on stocks of
companies whose shares appear to be undervalued. Growth & Income Series may
also use this approach. These "value stocks" can remain undervalued for
years. There is the risk that a value stock may never reach what Advisers,
or a Series' sub-adviser, believes is its full value, or that the stock's
price will go down.

- RISKS OF SMALL CAP COMPANIES. Small Cap Value Series, Global Growth
Series and Aggressive Growth Series are subject to the risks of investing in
smaller-capitalization companies. Smaller-capitalization companies often
have limited product lines, markets or financial resources, and they may be
dependent on a small, inexperienced management group. The securities of
smaller-capitalization companies may have limited market stability and may
be subject to more abrupt or erratic market movements than securities of
larger, more established companies or the market averages in general. The
equity securities of smaller-capitalization companies frequently have
experienced greater price volatility in the past than those of
larger-capitalization companies, and they may be expected to do so in the
future.

- RISKS OF MID CAP COMPANIES. Mid Cap Stock Series, Global Growth Series
and Growth Stock Series are subject to the risks of investing in mid-sized
companies. Mid-sized companies may have somewhat limited product lines,
markets and financial resources and may depend upon a relatively small
management group. Stocks of these companies may therefore be more vulnerable
to adverse developments than those of larger companies.

- RISKS OF LARGE CAP COMPANIES. Each Equity Series, Asset Allocation Series
and Global Asset Allocation Series may invest in stocks of
large-capitalization companies, and Value Series, Growth & Income Series,
S&P 500 Index Series, Blue Chip Stock Series and Large Cap Growth Series
focus on such stocks. Large company stocks historically have tended to be
less volatile than stocks of smaller companies. In the long run, however,
large company stocks may produce more modest gains than stocks of smaller
companies as a trade-off for this potentially lower risk.

- RISKS OF FOREIGN INVESTING. Money Market Series, Diversified Income
Series, Global Bond Series, Global Asset Allocation Series, Asset Allocation
Series, Blue Chip Stock Series, International Stock Series, Global Growth
Series and Large Cap Growth Series may invest in foreign securities as a
principal investment strategy. A Series' investment in foreign securities
subjects it to risks not typically associated with U.S. investing. Because
of these risks, the Series may be subject to greater volatility than most
mutual funds which invest principally in domestic securities. These risks
include:

CURRENCY RISK. Because the Series invest in securities denominated in
currencies other than the U.S. dollar, and because the Series may hold
foreign currencies, the Series may be affected favorably or unfavorably
by changes in currency exchange rates. Changes in exchange rates will
affect a Series' net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities. This
risk factor does not apply to Money Market Series, which invests only in
U.S. dollar denominated obligations.

INFORMATION RISK. There may be less publicly available information about
foreign securities and issuers than is available about domestic
securities and issuers. In addition, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those which apply to domestic
companies.

FOREIGN SECURITIES MARKET RISK. Securities of some foreign companies are
less liquid than securities of comparable domestic companies, and their
prices may be more volatile. In addition, there may be delays in the
settlement of foreign securities transactions. Trading volume on foreign
stock exchanges is substantially less

29
<PAGE>
than that on the New York Stock Exchange. Securities traded on foreign
exchanges may be subject to further risks due to the possibility of
permanent or temporary termination of trading, and greater spreads
between bid and asked prices for securities. In addition, there is
generally less governmental supervision and regulation of foreign stock
exchanges. Stock markets in emerging markets can be more volatile during
periods of investment uncertainty than established major exchanges.

POLITICAL AND ECONOMIC RISK. International investing is subject to the
risk of political, social or economic instability in the country of the
issuer of a security, the difficulty of predicting international trade
patterns, the possibility of the imposition of exchange controls,
expropriation, limits on removal of currency or other assets and
nationalization of assets.

- RISKS OF EMERGING MARKETS. Global Bond Series and Global Growth Series
may invest in emerging markets as a principal investment strategy. The other
Series that invest in foreign securities may invest in emerging markets to a
more limited extent. Emerging markets tend to be in the less economically
developed regions of the world. The risks of foreign investing are of
greater concern in the case of investments in emerging markets, which may
exhibit greater price volatility and have less liquidity. Risks of investing
in securities issued by companies in emerging market countries include,
among other things, greater social, political and economic instability, lack
of liquidity and greater price volatility due to small market size and low
trading volume, certain national policies that restrict investment
opportunities and the lack of a developed judicial system.

- RISKS OF FORWARD CURRENCY EXCHANGE CONTRACTS, FUTURES AND OPTIONS
TRANSACTIONS. Global Bond Series, Global Asset Allocation Series, S&P 500
Index Series, Blue Chip Stock Series, International Stock Series, Mid Cap
Stock Series and Large Cap Growth Series may engage in forward currency
exchange contracts and/or futures and options transactions as a principal
investment strategy. The use of these derivative instruments exposes the
Series to additional investment risks and transaction costs. Risks inherent
in the use of derivative instruments include:

the risk that interest rates, securities prices or currency markets will
not move in the direction that Advisers or a Series' sub-adviser
anticipates;

an imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies
being hedged;

the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits,
either of which may make it difficult or impossible to close out a
position when desired;

leverage risk, which is the risk that adverse price movements in an
instrument can result in a loss substantially greater than the Series'
initial investment in that instrument; and

particularly in the case of privately negotiated instruments, the risk
that the counterparty will fail to perform its obligations, which could
leave the Series worse off than if it had not entered into the position.

If a Series uses derivative instruments and if Advisers' or the Series'
sub-adviser's judgment proves incorrect, the Series' performance could be
worse than if it had not used these instruments.

- RISKS OF SECURITIES LENDING. High Yield Series, Value Series, Growth &
Income Series, S&P 500 Index Series, Global Growth Series and Aggressive
Growth Series currently lend their portfolio securities. Each of these
Series may lend up to 33 1/3% of the value of its total assets (30% in the
case of Global Growth Series). When a Series loans its portfolio securities,
it will receive cash collateral equal to at least 100% of the value of the
loaned securities. Nevertheless, the Series risks a delay in the recovery of
the loaned securities, or even the loss of rights in the collateral
deposited by the borrower if the borrower should fail financially. In
addition, each Series invests the cash collateral in high grade money market
securities, which are subject to credit or default risk.

- MANAGEMENT RISK. All Series, with the exception of S&P 500 Index Series,
are actively managed by professionals with extensive money management
experience and expertise. The performance of a Series will reflect in part
the ability of Advisers or the Series' sub-adviser to select securities
which are suited to achieving the Series' investment objectives. Due to
their active management, the Series could underperform other mutual funds
with similar investment objectives or the market generally.

- INFLATION RISK. Even if the principal value of your investment in a
Series, or your income from that investment, remains constant or increases,
their real value may be less in the future because of inflation. Thus, as
inflation occurs, the purchasing power of your Series shares and
distributions may decline, even if their value in dollars increases.

- EURO CONVERSION. On January 1, 1999, the European Monetary Union ("EMU")
introduced a single currency, the Euro, which was adopted as the common
legal currency for participating member countries. Existing sovereign
currencies of the participating countries will remain legal tender in those
countries, as denominations of the Euro, until January 1, 2002. Countries
participating in the EMU are Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

Whether the Euro conversion will materially affect the performance of Series
investing in foreign securities is uncertain. A Series may be affected by
the Euro's impact on the business or financial condition of European issuers
held

30
<PAGE>
by that Series. The ongoing process of establishing the Euro may result in
market volatility. In addition, the transition to the Euro and the
elimination of currency risk among EMU countries may change the economic
environment and behavior of investors, particularly in European markets. To
the extent the Series hold non-U.S. dollar (Euro or other) denominated
securities, they will still be exposed to currency risk due to fluctuations
in those currencies versus the U.S. dollar.

- YEAR 2000 ISSUES. Like other mutual funds and financial and business
organizations around the world, the Series could be adversely affected if
the computer systems used by the Series, Advisers, the Series' sub-advisers
and other service providers and entities with computer systems that are
linked to the Series' records do not properly process and calculate
date-related information and data from and after January 1, 2000. The
Series, Advisers and its affiliates are taking steps that they believe are
reasonably designed to address year 2000 issues with respect to the computer
systems they use and to obtain satisfactory assurances that comparable steps
are being taken by each of the Series' sub-advisers and other major service
providers. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Series. In addition, the
prices of securities in which the Series invest could be adversely affected
by year 2000 problems experienced by the issuers of those securities. Year
2000 difficulties may be more pronounced in foreign markets, and
particularly in emerging markets.

31
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------

The tables that follow present performance information about the shares of each
Series. This information is intended to help you understand each Series'
financial performance for the past five years or, if shorter, the period of the
Series' operations. Some of this information reflects financial results for a
single Series share. The total returns in the tables represent the rate that you
would have earned or lost on an investment in a Series, assuming you reinvested
all of your dividends and distributions.

This information has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report, along with the Series' financial statements, is included
in the Series' annual report, which is available upon request.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
MONEY MARKET SERIES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $11.03 $10.94 $10.83 $10.63 $10.23
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .57 .58 .57 .60 .41
Net realized and
unrealized gain
(loss) on
investments...... -- -- -- -- (.01)
- ---------------------------------------------------------------------------
Total from
operations......... .57 .58 .57 .60 .40
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.54) (.49) (.46) (.40) --
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $11.06 $11.03 $10.94 $10.83 $10.63
- ---------------------------------------------------------------------------
Total return@....... 5.32% 5.34% 5.17% 5.71% 3.92%
Net assets end of
year (000s
omitted)........... $ 77,097 $ 57,009 $ 61,906 $ 41,807 $ 44,833
Ratio of expenses to
average daily net
assets............. .35% .38% .38% .40% .40%
Ratio of net
investment income
to average daily
net assets......... 5.18% 5.19% 5.14% 5.44% 3.96%
- ---------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
U.S. GOVERNMENT -----------------------------------------------------
SECURITIES SERIES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $10.68 $10.57 $11.16 $9.40 $10.94
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .60 .80 .67 .70 .71
Net realized and
unrealized gain
(loss) on
investments...... .34 .12 (.51) 1.06 (1.54)
- ---------------------------------------------------------------------------
Total from
operations......... .94 .92 .16 1.76 (.83)
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.69) (.81) (.75) -- (.71)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $10.93 $10.68 $10.57 $11.16 $9.40
- ---------------------------------------------------------------------------
Total return@....... 8.87% 9.08% 2.21% 18.78% (6.44%)
Net assets end of
year (000s
omitted)........... $ 152,672 $ 142,070 $ 161,678 $ 182,687 $ 172,656
Ratio of expenses to
average daily net
assets............. .51% .54% .53% .53% .53%
Ratio of net
investment income
to average daily
net assets......... 5.53% 6.03% 6.17% 6.78% 6.87%
Portfolio turnover
rate............... 114% 148% 176% 115% 187%
- ---------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

32
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
DIVERSIFIED INCOME -----------------------------------------------------
SERIES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $11.98 $11.70 $12.20 $10.40 $11.93
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .73 .91 .82 .88 .87
Net realized and
unrealized gain
(loss) on
investments...... .01 .26 (.40) .92 (1.53)
- ---------------------------------------------------------------------------
Total from
operations......... .74 1.17 .42 1.80 (.66)
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.81) (.89) (.91) -- (.87)
Excess
distributions of
net realized
gains............ -- -- (.01) -- --
- ---------------------------------------------------------------------------
Total distributions
to shareholders.... (.81) (.89) (.92) -- (.87)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $11.91 $11.98 $11.70 $12.20 $10.40
- ---------------------------------------------------------------------------
Total return@....... 6.31% 10.44% 4.15% 17.26% (5.22%)
Net assets end of
year (000s
omitted)........... $ 115,182 $ 105,200 $ 105,831 $ 109,120 $ 98,314
Ratio of expenses to
average daily net
assets............. .52% .55% .55% .55% .55%
Ratio of net
investment income
to average daily
net assets......... 6.56% 7.11% 6.86% 7.78% 7.59%
Portfolio turnover
rate............... 96% 166% 171% 139% 142%
- ---------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
GLOBAL BOND SERIES 1998 1997 1996 1995+
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $10.65 $11.11 $11.30 $10.00
- ----------------------------------------------------------------
Operations:
Investment income
- net............ .30 .46 .57 .54
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions..... 1.13 (.45) (.13) 1.52
- ----------------------------------------------------------------
Total from
operations......... 1.43 .01 .44 2.06
- ----------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.19) (.37) (.43) (.54)
From net realized
gains............ (.33) (.10) (.20) (.22)
- ----------------------------------------------------------------
Total distributions
to shareholders.... (.52) (.47) (.63) (.76)
- ----------------------------------------------------------------
Net asset value, end
of year............ $11.56 $10.65 $11.11 $11.30
- ----------------------------------------------------------------
Total return@....... 13.49% 0.14% 3.32% 19.14%
Net assets end of
year (000s
omitted)........... $ 24,659 $ 20,692 $ 20,228 $ 13,187
Ratio of expenses to
average daily net
assets............. .88% 1.10% 1.02% 1.28%*
Ratio of net
investment income
to average daily
net assets......... 4.19% 4.41% 5.07% 5.01%*
Portfolio turnover
rate............... 190% 168% 129% 184%
- ----------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period January 3, 1995 (commencement of operations) to December 31,
1995. The Series' inception was December 14, 1994, when it was initially
capitalized. However, the Series' shares did not become effectively
registered under the Securities Act of 1933 until January 3, 1995.
Information is not presented for the period from December 14, 1994, through
January 3, 1995, as the Series' shares were not registered during that
period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

33
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
HIGH YIELD SERIES 1998 1997 1996 1995 1994+
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $10.77 $9.83 $9.74 $9.47 $10.00
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .75 .96 1.04 1.15 .71
Net realized and
unrealized gain
(loss) on
investments...... (.71) -- .13 .30 (.53)
- ---------------------------------------------------------------------------
Total from
operations......... .04 .96 1.17 1.45 .18
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.83) (.02) (1.03) (1.14) (.71)
From net realized
gains............ (.07) -- -- -- --
Excess
distributions of
net realized
gains............ -- -- (.05) (.04) --
- ---------------------------------------------------------------------------
Total distributions
to shareholders.... (.90) (.02) (1.08) (1.18) (.71)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $9.91 $10.77 $9.83 $9.74 $9.47
- ---------------------------------------------------------------------------
Total return@....... .62% 9.76% 10.52% 12.73% (.75%)
Net assets end of
year (000s
omitted)........... $ 70,983 $ 59,228 $ 42,578 $ 28,129 $ 13,706
Ratio of expenses to
average daily net
assets............. .56% .62% .63% .63% .75%*
Ratio of net
investment income
to average daily
net assets......... 9.39% 10.31% 10.22% 11.30% 10.44%*
Portfolio turnover
rate............... 120% 353% 235% 130% 20%
- ---------------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period May 2, 1994 (commencement of operations) to December 31, 1994.
The Series' inception was April 26, 1994, when it was initially capitalized.
However, the Series' shares did not become effectively registered under the
Securities Act of 1933 until May 2, 1994. Information is not presented for
the period from April 26, 1994, through May 2, 1994, as the Series' shares
were not registered during that period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
GLOBAL ASSET ------------------------------------------
ALLOCATION SERIES 1998 1997 1996 1995+
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $13.29 $12.34 $11.42 $10.00
- ----------------------------------------------------------------
Operations:
Investment income
- net............ .28 .28 .36 .35
Net realized and
unrealized gain
on investments
and foreign
currency
transactions..... 1.81 1.39 1.19 1.55
- ----------------------------------------------------------------
Total from
operations......... 2.09 1.67 1.55 1.90
- ----------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.31) (.26) (.38) (.34)
From net realized
gains............ (.75) (.46) (.25) (.14)
- ----------------------------------------------------------------
Total distributions
to shareholders.... (1.06) (.72) (.63) (.48)
- ----------------------------------------------------------------
Net asset value, end
of year............ $14.32 $13.29 $12.34 $11.42
- ----------------------------------------------------------------
Total return@....... 17.27% 13.51% 12.72% 17.47%
Net assets end of
year (000s
omitted)........... $ 69,086 $ 52,482 $ 37,307 $ 20,080
Ratio of expenses to
average daily net
assets............. 1.01% 1.16% 1.20% 1.28%*
Ratio of net
investment income
to average daily
net assets......... 2.13% 2.42% 3.01% 3.26%*
Portfolio turnover
rate............... 69% 51% 46% 44%
- ----------------------------------------------------------------
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
ASSET ALLOCATION SERIES 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of year...... $17.62 $16.99 $15.90 $13.56 $14.14
- -----------------------------------------------------------------------------------------------
Operations:
Investment income - net............... .49 .59 .61 .65 .56
Net realized and unrealized gain
(loss) on investments................ 3.02 2.82 1.38 2.35 (.58)
- -----------------------------------------------------------------------------------------------
Total from operations................... 3.51 3.41 1.99 3.00 (.02)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.......... (.01) (.59) (.61) (.64) (.56)
From net realized gains............... (.03) (2.19) (.28) (.02) --
Excess distributions of net realized
gains................................ -- -- (.01) -- --
- -----------------------------------------------------------------------------------------------
Total distributions to shareholders..... (.04) (2.78) (.90) (.66) (.56)
- -----------------------------------------------------------------------------------------------
Net asset value, end of year............ $21.09 $17.62 $16.99 $15.90 $13.56
- -----------------------------------------------------------------------------------------------
Total return@........................... 19.97% 20.24% 12.50% 21.97% (.31%)
Net assets end of year (000s omitted)... $ 593,878 $ 482,280 $ 397,712 $ 341,511 $ 260,593
Ratio of expenses to average daily net
assets................................. .51% .53% .54% .55% .56%
Ratio of net investment income to
average daily net assets............... 2.64% 3.16% 3.66% 4.25% 4.05%
Portfolio turnover rate................. 114% 113% 115% 98% 73%
- -----------------------------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns durning the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
--------------------------------
VALUE SERIES 1998 1997 1996+
- ---------------------------------------------------------------------------
Net asset value, beginning of year...... $13.42 $11.38 $10.27
- ---------------------------------------------------------------------------
Operations:
Investment income - net............... .16 .12 .14
Net realized and unrealized gain on
investments.......................... 1.13 2.75 1.10
- ---------------------------------------------------------------------------
Total from operations................... 1.29 2.87 1.24
- ---------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.......... (.16) (.13) (.13)
From net realized gains............... (.17) (.70) --
- ---------------------------------------------------------------------------
Total distributions to shareholders..... (.33) (.83) (.13)
- ---------------------------------------------------------------------------
Net asset value, end of year............ $14.38 $13.42 $11.38
- ---------------------------------------------------------------------------
Total return@........................... 9.64% 25.24% 11.49%
Net assets end of year (000s omitted)... $ 87,604 $ 55,058 $ 13,951
Ratio of expenses to average daily net
assets................................. .76% .83% .87%*
Ratio of net investment income to
average daily net assets............... 1.26% 1.41% 1.72%*
Portfolio turnover rate................. 332% 121% 36%
- ---------------------------------------------------------------------------
</TABLE>

* Annualized
+ For the period May 1, 1996 (commencement of operations) to December 31, 1996.
The Series' inception was March 28, 1996, when it was initially capitalized.
However, the Series' shares did not become effectively registered under the
Securities Act of 1933 until May 1, 1996. Information is not presented for
the period from March 28, 1996, through May 1, 1996, as the Series' shares
were not registered during that period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

35
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
GROWTH & INCOME SERIES 1998 1997 1996 1995 1994+
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of year...... $18.76 $15.16 $12.83 $10.07 $10.00
- ------------------------------------------------------------------------------------------------------
Operations:
Investment income - net............... .48 .40 .34 .33 .21
Net realized and unrealized gain on
investments.......................... 2.00 3.80 2.54 2.76 .07
- ------------------------------------------------------------------------------------------------------
Total from operations................... 2.48 4.20 2.88 3.09 .28
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.......... -- (.39) (.34) (.33) (.21)
From net realized gains............... (.01) (.21) (.21) -- --
- ------------------------------------------------------------------------------------------------------
Total distributions to shareholders..... (.01) (.60) (.55) (.33) (.21)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of year............ $21.23 $18.76 $15.16 $12.83 $10.07
- ------------------------------------------------------------------------------------------------------
Total return@........................... 13.21% 27.69% 21.51% 29.70% 1.74%
Net assets end of year (000s omitted)... $ 312,939 $ 244,970 $ 134,932 $ 59,533 $ 16,276
Ratio of expenses to average daily net
assets................................. .67% .70% .76% .80% .86%*
Ratio of net investment income to
average daily net assets............... 2.45% 2.63% 2.38% 2.86% 3.12%*
Portfolio turnover rate................. 30% 11% 20% 17% 2%
- ------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
----------------------------------
S&P 500 INDEX SERIES 1998 1997 1996+
- -----------------------------------------------------------------------------
Net asset value, beginning of year...... $14.93 $11.47 $10.09
- -----------------------------------------------------------------------------
Operations:
Investment income - net............... .16 .12 .10
Net realized and unrealized gain on
investments.......................... 4.03 3.58 1.37
- -----------------------------------------------------------------------------
Total from operations................... 4.19 3.70 1.47
- -----------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.......... (.16) (.12) (.09)
From net realized gains............... (.13) (.12) --
- -----------------------------------------------------------------------------
Total distributions to shareholders..... (.29) (.24) (.09)
- -----------------------------------------------------------------------------
Net asset value, end of year............ $18.83 $14.93 $11.47
- -----------------------------------------------------------------------------
Total return@........................... 28.11% 32.32% 14.29%
Net assets end of year (000s omitted)... $ 252,832 $ 109,572 $ 21,979
Ratio of expenses to average daily net
assets................................. .46% .51% .79%*
Ratio of net investment income to
average daily net assets............... 1.17% 1.41% 1.47%*
Portfolio turnover rate................. 3% 5% 6%
- -----------------------------------------------------------------------------
</TABLE>

* Annualized.
+ For the period May 1, 1996 (commencement of operations) to December 31, 1996.
The Series' inception was March 28, 1996, when it was initially capitalized.
However, the Series' shares did not become effectively registered under the
Securities Act of 1933 until May 1, 1996. Supplementary information is not
presented for the period from March 28, 1996, through May 1, 1996, as the
Series' shares were not registered during that period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

36
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------
YEAR ENDED DECEMBER 31,
BLUE CHIP STOCK -------------------------------
SERIES 1998 1997 1996+
- -----------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of
year............... $14.76 $11.67 $10.07
- -----------------------------------------------------
Operations:
Investment income
- net............ .05 .07 .07
Net realized and
unrealized gain
on investments
and foreign
currency
transactions..... 4.09 3.08 1.60
- -----------------------------------------------------
Total from
operations......... 4.14 3.15 1.67
- -----------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.06) (.06) (.07)
From net realized
gains............ (.26) -- --
- -----------------------------------------------------
Total distributions
to shareholders.... (.32) (.06) (.07)
- -----------------------------------------------------
Net asset value, end
of year............ $18.58 $14.76 $11.67
- -----------------------------------------------------
Total return@....... 28.07% 27.00% 16.24%
Net assets end of
year (000s
omitted)........... $ 182,921 $ 78,729 $ 17,606
Ratio of expenses to
average daily net
assets............. .94% 1.02% 1.13%*
Ratio of net
investment income
to average daily
net assets......... .41% .75% .82%*
Portfolio turnover
rate............... 34% 24% 17%
- -----------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
INTERNATIONAL STOCK ------------------------------------------
SERIES 1998 1997 1996 1995+
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $13.36 $12.44 $11.27 $10.00
- ----------------------------------------------------------------
Operations:
Investment income
- net............ .15 .13 .20 .14
Net realized and
unrealized gain
on investments
and foreign
currency
transactions..... 2.03 1.35 1.48 1.38
- ----------------------------------------------------------------
Total from
operations......... 2.18 1.48 1.68 1.52
- ----------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.26) (.15) (.21) (.09)
From net realized
gains............ (.80) (.41) (.30) (.16)
- ----------------------------------------------------------------
Total distributions
to shareholders.... (1.06) (.56) (.51) (.25)
- ----------------------------------------------------------------
Net asset value, end
of year............ $14.48 $13.36 $12.44 $11.27
- ----------------------------------------------------------------
Total return@....... 16.47% 11.99% 14.02% 14.35%
Net assets end of
year (000s
omitted)........... $ 103,056 $ 79,142 $ 52,331 $ 21,327
Ratio of expenses to
average daily net
assets............. .94% 1.08% 1.15% 1.14%*
Ratio of net
investment income
to average daily
net assets......... 1.20% 1.10% 1.71% 1.41%*
Portfolio turnover
rate............... 44% 30% 27% 39%
- ----------------------------------------------------------------
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------
MID CAP STOCK SERIES 1998+
- -------------------------------
<S> <C>
Net asset value,
beginning of
period............. $9.94
- -------------------------------
Operations:
Investment income
- net............ .02
Net realized and
unrealized gain
(loss) on
investments...... (.30)
- -------------------------------
Total from
operations......... (.28)
- -------------------------------
Distributions to
shareholders:
From investment
income - net..... (.02)
- -------------------------------
Net asset value, end
of period.......... $9.64
- -------------------------------
Total return@....... (2.89%)
Net assets end of
period (000s
omitted)........... $ 12,995
Ratio of expenses to
average daily net
assets (a)......... 1.25%*
Ratio of net
investment income
to average daily
net assets (a)..... .19%*
Portfolio turnover
rate............... 66%
- -------------------------------
</TABLE>

* Annualized.
+ For the period May 1, 1998 (commencement of operations) to December 31, 1998.
The Series' inception was March 25, 1998, when it was initially capitalized.
However, the Series' shares did not become effectively registered under the
Securities Act of 1933 until May 1, 1998. Information is not presented for
the period from from March 25, 1998, through May 1, 1998, as the Series'
shares were not registered during that period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.
(a) For the period presented, Advisers voluntarily limited annual expenses for
Mid Cap Stock Series (exclusive of interest, taxes, brokerage commissions
and non-recurring extraordinary charges and expenses) to 1.25% of the
average net assets. Had this waiver and reimbursement of expenses not been
in effect, the ratios of expenses and net investment income to average daily
net assets would have been 1.40% and .04%, respectively.

<TABLE>
<CAPTION>
- -------------------------------
SMALL CAP VALUE
SERIES 1998+
- -------------------------------
<S> <C>
Net asset value,
beginning of
period............. $9.96
- -------------------------------
Operations:
Investment income
- net............ .07
Net realized and
unrealized gain
(loss) on
investments...... (.62)
- -------------------------------
Total from
operations......... (.55)
- -------------------------------
Distributions to
shareholders:
From investment
income - net..... (.07)
From net realized
gains............ (.06)
- -------------------------------
Total distributions
to shareholders.... (.13)
- -------------------------------
Net asset value, end
of period.......... $9.28
- -------------------------------
Total return@....... (5.48%)
Net assets end of
period (000s
omitted)........... $ 16,503
Ratio of expenses to
average daily net
assets............. 1.24%*
Ratio of net
investment income
to average daily
net assets......... 1.56%*
Portfolio turnover
rate............... 57%
- -------------------------------
</TABLE>

38
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
GLOBAL GROWTH SERIES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $20.29 $19.00 $15.97 $12.31 $12.77
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .03 .02 .03 .09 .10
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions..... 2.27 1.27 3.03 3.66 (.46)
- ---------------------------------------------------------------------------
Total from
operations......... 2.30 1.29 3.06 3.75 (.36)
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.02) -- (.03) (.09) (.10)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $22.57 $20.29 $19.00 $15.97 $12.31
- ---------------------------------------------------------------------------
Total return@....... 11.36% 6.82% 19.10% 30.49% (2.98%)
Net assets end of
year (000s
omitted)........... $ 351,476 $ 353,255 $ 319,831 $ 207,913 $ 144,647
Ratio of expenses to
average daily net
assets............. .75% .79% .79% .80% .81%
Ratio of net
investment income
to average daily
net assets......... .12% .12% .15% .64% .82%
Portfolio turnover
rate............... 32% 35% 14% 29% 20%
- ---------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- -------------------------------
LARGE CAP GROWTH
SERIES 1998+
- -------------------------------
<S> <C>
Net asset value,
beginning of
period............. $10.16
- -------------------------------
Operations:
Investment income
- net............ --
Net realized and
unrealized gain
(loss) on
investments...... 1.88
- -------------------------------
Total from
operations......... 1.88
- -------------------------------
Net asset value, end
of period.......... $12.04
- -------------------------------
Total return@....... 18.61%
Net assets end of
period (000s
omitted)........... $ 19,121
Ratio of expenses to
average daily net
assets(a).......... 1.25%*
Ratio of net
investment income
to average daily
net assets(a)...... .03%*
Portfolio turnover
rate............... 36%
- -------------------------------
</TABLE>

* Annualized.
+ For the period May 1, 1998 (commencement of operations) to December 31, 1998.
The Series' inception was March 25, 1998, when it was initially capitalized.
However, the Series' shares did not become effectively registered under the
Securities Act of 1933 until May 1, 1998. Information is not presented for
the period from March 25, 1998, through May 1, 1998, as the Series' shares
were not registered during that period.
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.
(a) For the period presented, Advisers voluntarily limited annual expenses for
Large Cap Growth Series (exclusive of interest, taxes, brokerage commissions
and non-recurring extraordinary charges and expenses) to to 1.25% of the
average net assets. Had this waiver and reimbursement of expenses not been
in effect, the ratios of expenses and net investment income to average daily
net assets would have been 1.27% and .01%, respectively.

39
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
GROWTH STOCK SERIES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $36.64 $32.59 $28.09 $22.11 $22.92
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .09 .12 .12 .13 .18
Net realized and
unrealized gain
(loss) on
investments...... 6.40 3.93 4.50 5.98 (.81)
- ---------------------------------------------------------------------------
Total from
operations......... 6.49 4.05 4.62 6.11 (.63)
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.13) -- (.12) (.13) (.18)
From net realized
gains on
investments...... (1.91) -- -- -- --
- ---------------------------------------------------------------------------
Total distributions
to shareholders.... (2.04) -- (.12) (.13) (.18)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $41.09 $36.64 $32.59 $28.09 $22.11
- ---------------------------------------------------------------------------
Total return@....... 19.01% 12.42% 16.41% 27.66% (2.82%)
Net assets end of
year (000s
omitted)........... $ 762,354 $ 707,155 $ 661,217 $ 530,945 $ 377,483
Ratio of expenses to
average daily net
assets............. .65% .66% .67% .67% .68%
Ratio of net
investment income
to average daily
net assets......... .21% .33% .39% .51% .81%
Portfolio turnover
rate............... 106% 19% 30% 20% 19%
- ---------------------------------------------------------------------------
</TABLE>

@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
AGGRESSIVE GROWTH -----------------------------------------------------
SERIES 1998 1997 1996 1995 1994+
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $13.81 $13.62 $12.68 $9.80 $10.03
- ---------------------------------------------------------------------------
Operations:
Investment income
- net............ .01 .03 .03 .07 .08
Net realized and
unrealized gain
(loss) on
investments...... 2.91 .16 .94 2.88 (.23)
- ---------------------------------------------------------------------------
Total from
operations......... 2.92 .19 .97 2.95 (.15)
- ---------------------------------------------------------------------------
Distributions to
shareholders:
From investment
income - net..... (.03) -- (.03) (.07) (.08)
- ---------------------------------------------------------------------------
Net asset value, end
of year............ $16.70 $13.81 $13.62 $12.68 $9.80
- ---------------------------------------------------------------------------
Total return@....... 21.17% 1.43% 7.64% 29.89% (1.89%)
Net assets end of
year (000s
omitted)........... $ 149,860 $ 122,455 $ 96,931 $ 46,943 $ 13,526
Ratio of expenses to
average daily net
assets............. .72% .76% .78% .81% .88%*
Ratio of net
investment income
to average daily
net assets......... .06% .24% .22% .58% 1.24%*
Portfolio turnover
rate............... 135% 25% 22% 21% 5%
- ---------------------------------------------------------------------------
</TABLE>

40
<PAGE>
(This page has been left blank intentionally.)
<PAGE>

MONEY MARKET SERIES
U.S. GOVERNMENT SECURITIES SERIES
DIVERSIFIED INCOME SERIES
GLOBAL BOND SERIES
HIGH YIELD SERIES
GLOBAL ASSET ALLOCATION SERIES
ASSET ALLOCATION SERIES
VALUE SERIES
GROWTH & INCOME SERIES
S&P 500 INDEX SERIES
BLUE CHIP STOCK SERIES
INTERNATIONAL STOCK SERIES
MID CAP STOCK SERIES
SMALL CAP VALUE SERIES
GLOBAL GROWTH SERIES
LARGE CAP GROWTH SERIES
GROWTH STOCK SERIES
AGGRESSIVE GROWTH SERIES
EACH A SERIES OF FORTIS SERIES FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

DATED MAY 1, 1999

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to a Prospectus for the Series
listed above (individually, a "Fund" and collectively, the "Funds") dated
May 1, 1999, and should be read in conjunction therewith. The financial
statements included as a part of the Funds' Annual Report to Shareholders for
the fiscal year ended December 31, 1998 are incorporated by reference into this
Statement of Additional Information. Copies of the Funds' Prospectus and/or
Annual Report are available, without charge, by writing or calling the Funds,
P.O. Box 64284, St. Paul, Minnesota 55164 (telephone: (651) 738-4000 or
(800) 800-2000).

<PAGE>

TABLE OF CONTENTS

PAGE

Fund Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Strategies . . . . . . . . . . . . . . . . . . . . . 3
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Management of the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Principal Holders of Securities. . . . . . . . . . . . . . . . . . . . . . . .55
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . .56
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . .60
Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Pricing of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Underwriter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Other Service Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Limitation of Director Liability . . . . . . . . . . . . . . . . . . . . . . .75
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
Appendix A -- Description of Futures, Options and Forward Contracts. . . . . A-1
Appendix B -- Commercial Paper, Corporate Bond and Preferred Stock Ratings . B-1

<PAGE>

FUND BACKGROUND

Each Fund is a series of Fortis Series Fund, Inc. ("Fortis Series"), which
was incorporated in Minnesota in 1986. Fortis Series is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end management investment company. The
Funds are advised by Fortis Advisers, Inc. ("Advisers"). For certain Funds,
Advisers has retained the services of a sub-adviser. See "Investment Advisory
and Other Services -- Sub-Advisory Agreements."

Shares of the Funds are currently sold to separate accounts (the "Separate
Accounts") of Fortis Benefits Insurance Company ("Fortis Benefits") and First
Fortis Life Insurance Company ("First Fortis"), which are the funding vehicles
for benefits under variable life insurance policies and variable annuity
contracts issued by Fortis Benefits and First Fortis. The Separate Accounts
invest in shares of the Funds through subaccounts that correspond to the
different Funds.

INVESTMENT OBJECTIVES AND STRATEGIES

The investment objectives and principal investment strategies of the Funds
are discussed in the Prospectus. The Funds may also use strategies and invest
in securities that are not principal investment strategies and are not described
in the Prospectus. These are discussed in the sections below relating to each
Fund. The section entitled "More Information on Certain Investments and
Investment Strategies" contains additional information on certain types of
securities in which the Funds may invest and certain investment strategies which
the Funds may use.

Each Fund's investment objectives and, except as otherwise noted, the
strategies by which each Fund seeks to achieve its objectives, may be changed
without the approval of shareholders. No changes are contemplated at this time,
but a change in investment objectives or strategies could result in a Fund no
longer being appropriate for an investor.

Certain Funds are required to have a specified percentage of their assets
invested in a described fashion (e.g., 65% of total assets invested in common
stocks). These percentage calculations will exclude collateral received by a
Fund in connection with securities lending. See "More Information on Certain
Investments and Investment Strategies -- Lending of Portfolio Securities"

MONEY MARKET SERIES

Although Money Market Series does not attempt to maintain its net asset
value at any set price, it is nevertheless subject to certain investment
restrictions of Rule 2a-7 under the 1940 Act, in addition to the other policies
and restrictions discussed herein and in the Prospectus. Rule 2a-7 requires
that the Fund invest exclusively in securities that mature within 397 days from
the date of purchase and that it maintain an average dollar weighted maturity of
not more than 90 days. Under Rule 2a-7, securities which are subject to
specified types of demand or put features may be deemed to mature at the next
demand or put date although they have a longer stated maturity. Rule 2a-7 also
requires that all investments by the Fund be limited to United States dollar-

3
<PAGE>

denominated investments that (a) present "minimal credit risk" and (b) are at
the time of acquisition "Eligible Securities." Eligible Securities include,
among others, securities that are rated by two Nationally Recognized Statistical
Rating Organizations ("NRSROs") in one of the two highest categories for
short-term debt obligations, such as A-1 or A-2 by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Prime-1 or
Prime-2 by Moody's Investors Service, Inc. ("Moody's"). It is the
responsibility of Advisers to determine that the Fund's investments present only
"minimal credit risks" and are Eligible Securities, pursuant to the oversight
of, and written guidelines and procedures established by, the Fund's Board of
Directors.

Rule 2a-7 requires that the Fund may not invest more than 5% of its total
assets in the securities of a single issuer, other than United States
"Government Securities" (as defined in the 1940 Act), provided that the Fund may
invest in First Tier Securities (as defined in Rule 2a-7) in excess of that
limitation for a period of up to three business days after the purchase thereof,
but the Fund may not make more than one such investment at any time. Rule 2a-7
also requires that (1) 95% of the assets of the Fund be invested in Eligible
Securities that are deemed First Tier Securities, which include, among others,
securities rated by two NRSROs in the highest category (such as A-1 and P-1),
(2) the Fund may not invest more than 5% of its total assets in Second Tier
Securities (i.e., Eligible Securities that are not First Tier Securities) and
(3) the Fund's investment in Second Tier Securities of a single issuer may not
exceed the greater of 1% of the Fund's total assets or $1,000,000.

As noted in the Prospectus, Money Market Series' investments in U.S.
dollar-denominated foreign securities may include obligations of foreign banks
having total assets in excess of one billion dollars, and obligations of foreign
branches of domestic banks which have total assets in excess of one billion
dollars. In addition, Money Market Series may invest in U.S. dollar-denominated
securities of, or guaranteed by, the government of Canada or a province of
Canada or any instrumentality or political subdivision thereof, such securities
not to exceed 25% of Money Market Series' total assets, and U.S.
dollar-denominated securities of foreign companies (which do not include
domestic branches of foreign banks and foreign branches of domestic banks), such
securities not to exceed 15% of Money Market Series' total assets. No more than
49% of Money Market Series' total assets may be invested collectively in foreign
securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

Money Market Series may invest in obligations other than those listed in
this Statement of Additional Information or in the Prospectus if the obligation
is accompanied by a guarantee of principal and interest, provided that the
guarantee is that of a bank or corporation whose certificates of deposit or
commercial paper may otherwise be purchased by Money Market Fund.

Money Market Series may (i) enter into repurchase agreements and (ii) sell
securities short against the box. For information about these investment
strategies, restrictions on their use and certain associated risks, see the
related headings under "More Information on Certain Investments and Investment
Strategies."

4
<PAGE>

U.S. GOVERNMENT SECURITIES SERIES

At least 65% of U.S. Government Securities Series' total assets will be
invested in securities issued or guaranteed by the United States government or
its agencies or instrumentalities, and in repurchase agreements pertaining to
such securities.

Up to 35% of U.S. Government Securities Series' total assets may consist
of:

(1) Marketable non-convertible debt securities which are rated at the time
of purchase within the three highest grades assigned by Moody's (Aaa, Aa or A)
or S&P (AAA, AA or A), or comparably rated by another nationally recognized
rating agency. See Appendix B for a discussion of S&P and Moody's ratings;

(2) Marketable securities (payable in U.S. dollars) of, or guaranteed by,
the government of Canada or a province of Canada or any instrumentality or
political subdivision thereof (such securities not to exceed 25% of the Fund's
total assets);

(3) Obligations of, or guaranteed by, U.S. banks, which obligations,
although not rated as a matter of policy by either Moody's or S&P, are
considered by Advisers to have investment quality comparable to securities which
may be purchased under item (1) above (such securities not to exceed 25% of the
Fund's total assets);

(4) Commercial paper obligations rated Prime-1 by Moody's or A-1 by S&P,
or comparably rated by another nationally recognized rating agency; and

(5) Cash, other non-securities assets such as accrued interest,
receivables from investment securities sold, prepaid expenses, as well as other
high-quality short- term interest bearing debt securities not discussed above.

The Fund's investments may include mortgage-backed securities. There is no
percentage limitation on the Fund's purchase of mortgage-backed securities
issued or guaranteed by the United States government or its agencies or
instrumentalities. The Fund may also invest in mortgage-backed securities
issued and insured by private organizations if such securities fall within the
investment restrictions for marketable non-convertible debt securities set forth
above.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; and (iv) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

5
<PAGE>

DIVERSIFIED INCOME SERIES

Under normal circumstances, Diversified Income Series invests at least 70%
of its total assets in (a) corporate fixed income securities rated within one of
the four highest grades assigned by Moody's (Aaa, Aa, A and Baa) or S&P (AAA,
AA, A and BBB), or comparably rated by another nationally recognized rating
agency; (b) securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; (c) mortgage-backed securities in which U.S.
Government Securities Series may invest; (d) repurchase agreements pertaining to
such securities; (e) commercial paper of companies having, at the time of
purchase, an issue of outstanding debt securities rated Baa or above by Moody's
or BBB or above by S&P, or comparably rate by another nationally recognized
rating agency, or commercial paper rated P-1 or P-2 by Moody's or A-1 or A-2 by
S&P, or comparably rated by another nationally recognized rating agency; and (f)
cash and income producing cash equivalents.

The Fund may also invest in common and preferred stocks, convertible
securities and dollar denominated foreign securities. Under normal
circumstances, up to 30% of Diversified Income Series' total assets may be
invested in any combination of (a) common and preferred stocks and convertible
securities; (b) dollar denominated foreign securities (provided that such
investments in foreign securities will be limited to 10% of the Fund's total
assets); and (c) non-investment grade bonds (sometimes referred to as "junk
bonds") and non-rated corporate bonds.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions, and (iv) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

GLOBAL BOND SERIES

As discussed in the Prospectus, Global Bond Series invests primarily in a
portfolio of fixed income securities from issuers located throughout the world.
At all times at least 80% of the Fund's assets will be invested in developed
countries, which include Canada, the United Kingdom, France, Germany, Australia,
New Zealand, Austria, Belgium, Denmark, Finland, Ireland, Italy, Japan,
Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland and the United
States.

Under normal conditions, at least 90% of Global Bond Series' assets will be
invested in high quality securities, I.E., securities that are rated AA or
better by S&P, Aa or better by Moody's, comparably rated by another nationally
recognized rating agency, or unrated and determined to be of comparable quality
by the Fund's sub-adviser . At no time will the Fund invest in securities that
are rated below "A" or, if unrated, determined by the Fund's sub-adviser to be
of comparable quality. See Appendix B for a description of the ratings of fixed
income securities and commercial paper.

6
<PAGE>

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) purchase, write or sell options on
securities or financial indices; (vii) purchase or sell foreign currency forward
exchange contracts; (viii) purchase and write put and call options on foreign
currencies; and (ix) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

HIGH YIELD SERIES

High Yield Series invests at least 65% of its total assets in a diversified
portfolio of high-yield, high-risk, fixed income securities (sometimes referred
to as "junk bonds"). The Fund may also invest in investment grade fixed income
instruments, convertible securities, common and preferred stocks, other equity
securities and cash or cash equivalents.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options and purchase put
and call options on securities; (vii) purchase or sell foreign currency forward
exchange contracts; (viii) purchase and write put and call options on foreign
currencies; and (ix) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

GLOBAL ASSET ALLOCATION SERIES

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."
In addition, the Fund may (i) enter into repurchase agreements; (ii) purchase
securities on a "when-issued" or delayed delivery basis; (iii) enter into dollar
roll transactions; (iv) engage in the lending of portfolio securities; (v) enter
into futures contracts and options thereon; (vi) purchase, write or sell options
on securities or financial indices; (vii) purchase or sell foreign currency
forward exchange contracts; (viii) purchase and write put and call options on
foreign currencies; and (ix) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

7
<PAGE>

ASSET ALLOCATION SERIES

As noted in the Prospectus, Asset Allocation Series may invest up to 20% of
its total assets in foreign securities. However, no more than 15% of the Fund's
total assets may be invested in foreign securities that are not traded on
national foreign securities exchanges or traded in the United States.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

VALUE SERIES

Value Series invests primarily in common stocks. The Fund may also invest
in securities convertible into common stocks, and may occasionally invest
limited amounts in other types of securities (such as nonconvertible preferred
stock and debt securities). Value Series may invest in both listed and unlisted
securities. The Fund may invest up to 10% of its total assets in foreign
securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options and purchase put
and call options on securities; (vii) purchase or sell foreign currency forward
exchange contracts; and (viii) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

GROWTH & INCOME SERIES

Growth & Income Series invests primarily in common stocks. The Fund may
also invest in securities convertible into common stocks, and may occasionally
invest limited amounts in other types of securities (such as nonconvertible
preferred stock and debt securities). Growth & Income Series may invest in both
listed and unlisted securities. The Fund may invest up to 10% of its total
assets in foreign securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

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<PAGE>

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options and purchase put
and call options on securities; (vii) purchase or sell foreign currency forward
exchange contracts; and (viii) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

S & P 500 INDEX SERIES

Under normal circumstances, S&P 500 Index Series invests at least 95% of
its total assets in the common stocks included in the S&P 500 Index. To
maintain liquidity, the Fund also may invest in U.S. Government securities,
commercial paper, bank certificates of deposit and bank demand and time
deposits.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) enter into reverse
repurchase agreements; (iii) purchase securities on a "when-issued" or delayed
delivery basis; (iv) enter into dollar roll transactions; (iv) engage in the
lending of portfolio securities; (v) enter into stock index futures contracts
and options thereon; (vi) purchase and sell options on stock indexes; and (vii)
sell securities short against the box. For more information about these
investment strategies, restrictions on their use and certain associated risks,
see the related headings under "More Information on Certain Investments and
Investment Strategies."

Standard & Poor's -Registered Trademark-, "S&P -Registered Trademark-,"
"S&P 500 -Registered Trademark-," "Standard & Poor's 500," and "500" are
trademarks of McGraw-Hill, Inc. and have been licensed for use by Fortis Series.
The Fund is not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the Fund. S&P makes
no representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of investing in securities
generally or in the Fund particularly or the ability of the S&P 500 Index to
track general stock market performance. S&P's only relationship to Fortis
Series is the licensing of certain trademarks and trade names of S&P and of the
S&P 500 Index which is determined, composed and calculated by S&P without regard
to Fortis Series or the Fund. S&P has no obligation to take the needs of Fortis
Series or the owners of the Fund into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Fund or the
timing of the issuance or sale of the Fund or in the determination or
calculation of the equation by which the Fund is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the Fund.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED

9
<PAGE>

BY THE FUND, OWNERS OF THE FUND OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

BLUE CHIP STOCK SERIES

Blue Chip Stock Series will invest at least 65% of its total assets in the
common stocks of large and medium-sized blue chip companies, as defined by the
Fund's sub-adviser. The Fund may also purchase other types of securities, such
as preferred stocks, convertible stocks and bonds, and warrants, when considered
consistent with the Fund's investment objectives. The Fund may invest in fixed
income securities of any type without regard to quality or rating. Such
securities would be purchased in companies which meet the investment criteria
for the Fund. However, the Fund will not purchase a non-investment grade fixed
income security if, immediately after such purchase, the Fund would have more
than 5% of its total assets invested in such securities. Investments in
convertible securities, preferred stocks and fixed income securities are limited
to 25% of total assets.

The Fund may also invest in hybrid instruments (a type of potentially
high-risk derivative) that can combine the characteristics of securities,
futures and options. For example, the principal amount, redemption or
conversion terms of a security could be related to the market price of some
commodity, currency or securities index. Such securities may bear interest or
pay dividends at below market (or even relatively nominal) rates. Under certain
conditions, the redemption value of such an investment could be zero. The Fund
may invest up to 10% of its total assets in hybrid instruments.

The Fund will hold a certain portion of its assets in U.S. and foreign
dollar-denominated money market securities, including repurchase agreements, in
the two highest rating categories, maturing in one year or less. This reserve
position provides flexibility in meeting redemptions, expenses, and the timing
of new investments, and serves as a short-term defense during periods of unusual
market volatility. During periods when the Fund assumes a temporary defensive
position, it will not be pursuing its investment objective.

The Fund may invest up to 20% of its total assets (excluding reserves) in
foreign securities, including securities from emerging markets. These include
non-dollar-denominated securities traded outside of the U.S. and
dollar-denominated securities traded in the U.S. (such as ADRs).

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

10
<PAGE>

The Fund may (i) enter into repurchase agreements; (ii) enter into reverse
repurchase agreements; (iii) purchase securities on a "when-issued" or delayed
delivery basis; (iv) enter into dollar roll transactions; (v) engage in the
lending of portfolio securities; (vi) enter into futures contracts and options
thereon; (vii) purchase, write or sell options on securities or financial
indices; (viii) purchase or sell foreign currency forward exchange contracts;
and (ix) purchase and write put and call options on foreign currencies. For
more information about these investment strategies, restrictions on their use
and certain associated risks, see the related headings under "More Information
on Certain Investments and Investment Strategies."

INTERNATIONAL STOCK SERIES

International Stock Series invests primarily in the equity securities of
non-U.S. companies (i.e., incorporated or organized outside the United States).
However, the Fund may have substantial investments in American Depositary
Receipts and in convertible bonds and other convertible securities. The Fund
may invest up to 20% of the value of its total assets in fixed income securities
and short-term money market instruments. International Stock Series' fixed
income investments will be limited to those rated A or better by S&P or Moody's
or comparably rated by another nationally recognized rating agency, or, if
unrated, determined by the Fund's sub-adviser to be of comparable quality. See
Appendix B for a description of the ratings of fixed income securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

MID CAP STOCK SERIES

Under normal circumstances, at least 65% of Mid Cap Stock Series' total
assets will be invested in common stocks. The Fund may also invest in: (1)
obligations issued or guaranteed as to interest and principal by the U.S.
government or its agencies or instrumentalities; (2) instruments of U.S. and
foreign banks, including certificates of deposit (including Eurodollar and
Yankee certificates of deposit), banker's acceptances and time deposits
(including Eurodollar time deposits); (3) corporate obligations rated at least
Baa by Moody's or BBB by S&P or, if unrated, of comparable quality as determined
by Fund's sub-adviser; (4) Eurodollar bonds and notes; (5) securities of foreign
companies evidenced by American Depository Receipts; and (6) commercial paper.

11
<PAGE>

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) enter into reverse
repurchase agreements; (iii) purchase securities on a "when-issued" or delayed
delivery basis; (iv) enter into dollar roll transactions; (v) engage in the
lending of portfolio securities; (vi) enter into futures contracts and options
thereon; (vii) purchase, write or sell options on securities or financial
indices; (viii) purchase or sell foreign currency forward exchange contracts;
(ix) purchase and write put and call options on foreign currencies; and (x) sell
securities short against the box. For more information about these investment
strategies, restrictions on their use and certain associated risks, see the
related headings under "More Information on Certain Investments and Investment
Strategies."

SMALL CAP VALUE SERIES

Small Cap Value Series invests at least 65% of its total assets in common
stocks of companies whose market capitalization, at the time of initial
purchase, is less than the 12-month average of the maximum market capitalization
for companies included in the Russell 2000 Index. Market capitalization is
defined as total current market value of a company's outstanding common stock.
The Fund may also invest in common stocks of companies with market
capitalizations in excess of such 12-month average; equity securities other than
common stocks, such as convertible securities, preferred stocks, warrants and
rights; government securities; short-term investments; or other securities. In
addition, Small Cap Value Series may invest in certain securities with unique
risks, such as special situations and securities of unseasoned issuers. The
Fund may also invest in foreign securities.

SPECIAL SITUATIONS. The Fund may invest in special situations, that is, in
common stocks of companies that have recently experienced or are anticipated to
experience a significant change in structure, management, products or services.
Examples of special situations are companies being reorganized or merged,
companies having unusual new products, or which enjoy particular tax advantages,
or companies that are run by new management or may be probable takeover
candidates. The opportunity to invest in special situations, however, is
limited and depends in part on the market's assessment of these issuers and
their circumstances. In addition, stocks of companies in special situations may
be more volatile, since the market value of these stocks may decline if an
anticipated event or benefit does not materialize.

UNSEASONED ISSUERS. The Fund may invest in securities of unseasoned
issuers. Unseasoned issuers are companies with a record of less than three
years' continuous operation, including the operations of any predecessors and
parents. Investment decisions for these securities may place a greater emphasis
on current or planned product lines and the reputation and experience of the
company's management and less emphasis on fundamental valuation factors than
would be the case for more mature growth companies. In addition, many
unseasoned issuers may be small companies and involve the risks and price
volatility associated with smaller companies.

12
<PAGE>

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options and purchase put
and call options on securities; and (vii) purchase or sell foreign currency
forward exchange contracts. For more information about these investment
strategies, restrictions on their use and certain associated risks, see the
related headings under "More Information on Certain Investments and Investment
Strategies."

GLOBAL GROWTH SERIES

Global Growth Series invests primarily in common stocks. The Fund may also
invest in other types of equity securities, such as preferred stocks and
warrants, and in debt obligations. The debt obligations in which the Fund may
invest include a variety of government bonds and corporate debt obligations.
Global Growth Series expects that a large portion of its debt investments will
be high quality government or corporate bonds. High quality debt securities are
securities rated within one of the two highest categories of Moody's (Aaa and
Aa) or of S&P (AAA and AA), or comparably rated by another nationally recognized
rating agency, or, if unrated, determined to be of comparable quality by the
Advisers. Government bonds which the Fund may purchase include debt obligations
issued or guaranteed by the U.S. government or foreign governments (including
foreign states, provinces, or municipalities) or their agencies, authorities or
instrumentalities and also include debt obligations issued by supranational
entities, which entities are organized or supported by several national
governments, such as the World Bank and the Asian Development Bank. Other debt
obligations which the Fund may purchase include corporate bonds and debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities. The Fund may also purchase securities
that are issued by the government or a corporation or financial institution of
one nation but denominated in the currency of another nation (or a multinational
currency unit). No more than 5% of the Fund's net assets may be invested in
debt securities rated lower than Baa or BBB. A description of the Moody's and
S&P ratings is included in Appendix B.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options and purchase put
and call options on securities; (vii) purchase or sell foreign currency forward
exchange contracts; (viii) purchase and write put and call options on foreign
currencies; and (ix) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

13
<PAGE>

LARGE CAP GROWTH SERIES

Large Cap Growth Series invests primarily in the common stocks of a limited
number of large U.S. companies. The Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies
(i) organized under United States law that have their principal office in the
United States, and (ii) the equity securities of which are traded principally in
the United States.

Large Cap Growth Series may also: (1) invest up to 20% of its net assets in
convertible securities of companies whose common stocks are eligible for
purchase; (2) invest up to 5% of its net assets in rights or warrants; (3)
invest up to 15% of its total assets in securities of foreign issuers whose
common stocks are eligible for purchase.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) write call options on securities and
purchase and sell put and call options on securities and financial indices; and
(vii) purchase or sell foreign currency forward exchange contracts. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

GROWTH STOCK SERIES

Growth Stock Series invests primarily in common stocks. The Fund may also
invest in securities convertible into common stocks, and may occasionally invest
limited amounts in other types of securities (such as nonconvertible preferred
and debt securities). Growth Stock Series may invest in both listed and
unlisted securities. The Fund may also invest up to 10% of its total assets in
foreign securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements and (ii) sell securities
short against the box. For information about these investment strategies,
restrictions on their use and certain associated risks, see the related headings
under "More Information on Certain Investments and Investment Strategies."

AGGRESSIVE GROWTH SERIES

Aggressive Growth Series invests at least 65% of its total assets in common
stocks of emerging growth companies and more established companies whose rates
of earnings growth are expected to accelerate because of special factors. The
Fund may, to a limited extent, seek

14
<PAGE>

appreciation in other types of securities such as convertible securities and
warrants when relative values make such purchases appear attractive. Aggressive
Growth Series may invest up to 10% of its total assets in foreign securities.

For more information on the types of securities in which the Fund may
invest, see "More Information on Certain Investments and Investment Strategies."

The Fund may (i) enter into repurchase agreements; (ii) purchase securities
on a "when-issued" or delayed delivery basis; (iii) enter into dollar roll
transactions; (iv) engage in the lending of portfolio securities; (v) enter into
futures contracts and options thereon; (vi) purchase, write or sell options on
securities or financial indices; and (vii) purchase or sell foreign currency
forward exchange contracts; (viii) purchase and write put and call options on
foreign currencies; and (ix) sell securities short against the box. For more
information about these investment strategies, restrictions on their use and
certain associated risks, see the related headings under "More Information on
Certain Investments and Investment Strategies."

MORE INFORMATION ON CERTAIN INVESTMENTS AND INVESTMENT STRATEGIES

COMMON AND PREFERRED STOCKS. Each Fund other than Money Market Series,
U.S. Government Securities Series and Global Bond Series may invest in common
and preferred stocks (except that S&P 500 Index Series does not invest in
preferred stocks). Stocks represent shares of ownership in a company.
Generally, preferred stock has a specified dividend and ranks after bonds and
before common stocks in its claim on income for dividend payments and on assets
should the company be liquidated. After other claims are satisfied, common
stockholders participate in company profits on a pro rata basis; profits may be
paid out in dividends or reinvested in the company to help it grow. Increases
and decreases in earnings are usually reflected in a company's stock price, so
common stocks generally have the greatest appreciation and depreciation
potential of all corporate securities.

CONVERTIBLE SECURITIES. Each Fund other than Money Market Series, U.S.
Government Securities Series, Global Bond Series and S&P 500 Index Series may
invest in debt or preferred stock convertible into or exchangeable for common
stock. Traditionally, convertible securities have paid dividends or interest at
rates higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. In recent years,
convertibles have been developed which combine higher or lower current income
with options and other features.

WARRANTS OR RIGHTS. Warrants or rights may be acquired (no more than 5% of
net assets, valued at the lower of cost or market) by Global Asset Allocation
Series, S&P 500 Index Series, Blue Chip Stock Series, International Stock
Series, Mid Cap Stock Series, Small Cap Value Series, Global Growth Series and
Large Cap Growth Series in connection with other securities or separately.
Warrants are options to buy a stated number of shares of common stock at a
specified price any time during the life of the warrants (generally two or more
years). Warrants or rights acquired by such Funds in units or attached to
securities will be deemed to be without value for purposes of the 5%
restriction.

15
<PAGE>

SECURITIES OF OTHER INVESTMENT COMPANIES. The Funds may purchase the
securities of open-end or closed-end investment companies if such purchases are
in compliance with the 1940 Act. If a Fund invests in securities of other
investment companies, the return on any such investments will be reduced by the
operating expenses, including investment advisory and administrative fees, of
such investment companies. (Such Fund indirectly absorbs its pro rata share of
the other investment companies' expenses.) However, Advisers and the
sub-advisers believe that at times the return and liquidity features of these
securities will be more beneficial than other types of securities.

SHORT-TERM MONEY MARKET INSTRUMENTS. Each Fund may at any time invest
funds awaiting investment or held as reserves for the purposes of satisfying
redemption requests, payment of dividends or making other distributions to
shareholders, in cash and short-term money market instruments. Short-term money
market instruments in which each Fund may invest include (i) short-term U.S.
government securities and short-term obligations of foreign sovereign
governments and their agencies and instrumentalities, (ii) interest bearing
savings deposits on, and certificates of deposit and bankers' acceptances of,
United States and foreign banks, (iii) commercial paper of U.S. or foreign
issuers rated A-1 or higher by S&P or Prime-1 by Moody's or comparably rated by
another nationally recognized rating agency, or, if not rated, determined by
Advisers (or a Fund's sub-adviser, if applicable) to be of comparable quality
and (iv) repurchase agreements relating to the foregoing.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Each Fund may invest in
certificates of deposits. Certificates of deposit are receipts issued by a bank
in exchange for the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date specified on
the certificate. The certificate usually can be traded in the secondary market
prior to maturity. Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

LETTERS OF CREDIT. Commercial paper and other short-term obligations may
be backed by irrevocable letters of credit issued by banks that assume the
obligation for payment of principal and interest in the event of default by an
issuer. Only banks, the securities of which, in the opinion of Advisers (or a
Fund's sub-adviser, if applicable), are of investment quality comparable to
other permitted investments of such Fund, may be used for letter of
credit-backed investments.

EXTENDIBLE NOTES. Money Market Series, Global Bond Series, Global Asset
Allocation Series and Asset Allocation Series each are permitted to invest up to
25% of the value of their total assets in extendible notes. An extendible note
is a debt arrangement under which the holder, at its option, may require the
issuer, typically a financial or an industrial concern, to

16
<PAGE>

repurchase the note for a predetermined fixed price at one or more times prior
to the ultimate maturity date of the note. Typically, an extendible note is
issued at an interest rate that can be adjusted at fixed times throughout its
term. At the same times as the interest rate is adjusted by the issuer, the
holder of the note is typically given the option to "put" the note back to the
issuer at a predetermined price, e.g., at 100% of the outstanding principal
amount plus unpaid accrued interest, if the extended interest rate is
undesirable to the holder. This option to put the note back to the issuer,
i.e., to require the issuer to repurchase the note, provides the holder with an
optional maturity date that is shorter than the actual maturity date of the
note.

Extendible notes are typically issued with maturity dates in excess of 397
days from the date of issuance. If such extendible notes provide for an
optional maturity date of 397 days or less, however, then such notes are deemed
by the Funds to have been issued for the shorter optional maturity date.
Accordingly, investment in such extendible notes would not be in contravention
of the investment policy of Money Market Series not to invest in securities
having a maturity date in excess of 397 days from the date of acquisition.
Investment in extendible notes is not expected to have a material impact on the
effective portfolio maturities of the Funds.

An investment in an extendible note is liquid, and the note may be resold
to another investor prior to its optional maturity date at its market value.
The market value of an extendible note with a given optional maturity date is
determined and fluctuates in a similar manner to the market value of a fixed
maturity note with a maturity equivalent to the optional maturity of the
extendible note. Compared to fixed-term notes of the same issuer, however,
extendible notes with equivalent optional maturities generally yield higher
returns without a material increase in risk to the Fund buying them.

The creditworthiness of the issuers of the extendible notes is monitored
and rated by Moody's and by S&P, and investments by the Funds in such extendible
notes are restricted to notes with the same investment ratings as are acceptable
to the Funds with respect to other forms of investment. The creditworthiness of
such issuers is also monitored by Advisers (or the sub-adviser for Global Bond
Series and Global Asset Allocation Series).

FLOATING AND VARIABLE RATE INSTRUMENTS. Certain of the debt obligations
that the Funds may purchase have floating or variable rates of interest. Such
obligations bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the prime rate, and at specified
intervals. Certain of these obligations may carry a demand feature that would
permit the holder to tender them back to the issuer at par value prior to
maturity. Each Fund limits its purchases of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
Advisers (or a Fund's sub-adviser, if applicable) monitors on an ongoing basis
the ability of an issuer of a demand instrument to pay principal and interest on
demand. A Fund's right to obtain payment at par on a demand instrument can be
affected by events occurring between the date such Fund elects to demand payment
and the date payment is due that may affect the ability of the issuer of the
instrument to make payment when due, except when such demand instruments permit
same-day settlement. To facilitate settlement, these same-day demand
instruments may be held in book entry form at a bank other than the Fund's
custodian, subject to a subcustodian agreement approved by the Fund between the
bank and the Fund's custodian.

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<PAGE>

The floating and variable rate obligations that the Funds may purchase
include certificates of participation in obligations purchased from banks. A
certificate of participation gives the Fund an undivided interest in the
underlying obligations in the proportion that such Fund's interest bears to the
total principal amount of such obligations. Certain of such certificates of
participation may carry a demand feature that would permit the holder to tender
them back to the issuer prior to maturity. To the extent that floating and
variable rate instruments without demand features are not readily marketable,
they will be subject to the investment restrictions pertaining to investments in
illiquid securities.

VARIABLE AMOUNT MASTER DEMAND NOTES. Each Fund may invest in variable
amount master demand notes. These instruments are short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
They allow the investment of fluctuating amounts by a Fund at varying market
rates of interest pursuant to arrangements between the Fund, as lender, and the
borrower. Variable amount master demand notes permit a series of short-term
borrowings under a single note. Both the lender and the borrower have the right
to reduce the amount of outstanding indebtedness at any time. Such notes
provide that the interest rate on the amount outstanding varies on a daily basis
depending upon a stated short-term interest rate barometer. Advisers (or a
Fund's sub-adviser, if applicable) will monitor the creditworthiness of the
borrower throughout the term of the variable master demand note. It is not
generally contemplated that such instruments will be traded and there is no
secondary market for the notes. Typically, agreements relating to such notes
provide that the lender shall not sell or otherwise transfer the note without
the borrower's consent. Thus, variable amount master demand notes may under
certain circumstances be deemed illiquid assets. However, such notes will not
be considered illiquid where the Fund has a "same day withdrawal option," i.e.,
where it has the unconditional right to demand and receive payment in full of
the principal amount then outstanding together with interest to the date of
payment.

U.S. GOVERNMENT SECURITIES. Each Fund may invest in U.S. government
securities, which include: (i) the following U.S. Treasury obligations: U.S.
Treasury bills (initial maturities of one year or less), U.S. Treasury notes
(initial maturities of one to 10 years), and U.S. Treasury bonds (generally
initial maturities of greater than 10 years), all of which are backed by the
full faith and credit of the United States; and (ii) obligations issued or
guaranteed by U.S. government agencies or instrumentalities, including
government guaranteed mortgage-backed securities, some of which are backed by
the full faith and credit of the U.S. Treasury, e.g., direct pass-through
certificates of the Government National Mortgage Association; some of which are
supported by the right of the issuer to borrow from the U.S. government, e.g.,
obligations of Federal Home Loan Banks; and some of which are backed only by the
credit of the issuer itself, e.g., obligations of the Student Loan Marketing
Association. U.S. government securities are backed by the full faith and credit
of the U.S. government or guaranteed by the issuing agency or instrumentality
and, therefore, there is generally considered to be little or no risk as to the
issuer's capacity to pay interest and repay principal. Nevertheless, due to
fluctuations in interest rates, there is no guarantee as to the market value of
U.S. government securities.

U.S. government securities in which the Funds may invest include U.S.
Treasury inflation-protection securities. Inflation-protection securities are
new types of marketable book-entry securities issued by the United States
Department of Treasury ("Treasury") with a nominal

18
<PAGE>

return linked to the inflation rate in prices. Inflation-protection securities
are auctioned and issued on a quarterly basis on the 15th of January, April,
July, and October. Initially, they will be issued as 10-year notes, with other
maturities added thereafter. The index used to measure inflation will be the
non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All
Urban Consumers ("CPI-U").

The value of the principal will be adjusted for inflation, and every six
months the security will pay interest, which will be an amount equal to a fixed
percentage of the inflation-adjusted value of the principal. The final payment
of principal of the security will not be less than the original par amount of
the security at issuance.

The principal of the inflation-protection security will be indexed to the
non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index
ratio for any date is the ratio of the reference CPI applicable to such date to
the reference CPI applicable to the original issue date. Semiannual coupon
interest is determined by multiplying the inflation-adjusted principal amount by
one-half of the stated rate of interest on each interest payment date.

Inflation-adjusted principal or the original par amount, whichever is
larger, will be paid on the maturity date as specified in the applicable
offering announcement. If at maturity the inflation-adjusted principal is less
than the original principal value of the security, an additional amount will be
paid at maturity so that the additional amount plus the inflation-adjusted
principal equals the original principal amount. Some inflation-protection
securities may be stripped into principal and interest components. In the case
of a stripped security, the holder of the stripped principal would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.

The reference CPI for the first day of any calendar month is the CPI-U for
the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October.) The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to the
first day of the month and the reference CPI applicable to the first day of the
following month.

Any revisions the Bureau of Labor Statistics (or successor agency) makes to
any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In
the case that the CPI-U for a particular month is not reported by the last day
of the following month, the Treasury will announce an index number based on the
last year-over-year CPI-U inflation rate available. Any calculations of the
Treasury's payment obligations on the inflation-protection security that need
that month's CPI-U number will be based on the index number that the Treasury
has announced. If the CPI-U is rebased to a different year, the Treasury will
continue to use the CPI-U series based on the base reference period in effect
when the security was first issued as long as that series continues to be
published. If the CPI-U is discontinued during the period the
inflation-protection security is outstanding, the Treasury will, in consultation
with the Bureau of Labor Statistics (or successor

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agency), determine an appropriate substitute index and methodology for linking
the discontinued series with the new price index series. Determinations of the
Secretary of the Treasury in this regard are final.

Inflation-protection securities will be held and transferred in either of
two book-entry systems: the commercial book-entry system (TRADES) and TREASURY
DIRECT. The securities will be maintained and transferred at their original par
amount, i.e., not at their inflation-adjusted value. STRIPS components will be
maintained and transferred in TRADES at their value based on the original par
amount of the fully constituted security.

ZERO COUPON OBLIGATIONS. U.S. Government Securities Series, Diversified
Income Series, Global Bond Series, High Yield Series, Global Asset Allocation
Series, Asset Allocation Series, International Stock Series and Global Growth
Series may invest in zero coupon obligations of government and corporate
issuers, including rights to "stripped" coupon and principal payments. Certain
obligations are "stripped" of their coupons, and the rights to receive each
coupon payment and the principal payment are sold as separate securities. Once
separated, each coupon as well as the principal amount represents a different
single-payment claim due from the issuer of the security. Each single-payment
claim (coupon or principal) is equivalent to a zero coupon bond. A zero coupon
security pays no interest to its holder during its life, and its value consists
of the difference between its face value at maturity (the coupon or principal
amount), if held to maturity, or its market price on the date of sale, if sold
prior to maturity, and its acquisition price (the discounted "present value" of
the payment to be received).

Certain zero coupon obligations represent direct obligations of the issuer
of the "stripped" coupon and principal payments. Other zero coupon obligations
are securities issued by financial institutions which constitute a proportionate
ownership of an underlying pool of stripped coupon or principal payments. The
Funds may invest in either type of zero coupon obligation. A Fund's investment
policies and restrictions applicable to corporate and government securities
shall apply equally to such Fund's investments in zero coupon securities
(including, for example, minimum corporate bond ratings).

PAYMENT-IN-KIND DEBENTURES. U.S. Government Securities Series, Diversified
Income Series, Global Bond Series, High Yield Series, Asset Allocation Series,
Global Asset Allocation Series and International Stock Series may invest in
debentures the interest on which may be paid in other securities rather than
cash ("PIKs"). Typically, during a specified term prior to the debenture's
maturity, the issuer of a PIK may provide for the option or the obligation to
make interest payments in debentures, common stock or other instruments (i.e.,
"in kind" rather than in cash). The type of instrument in which interest may or
will be paid would be known by the Fund at the time of the investment. A Fund's
investment restrictions regarding corporate bond quality are applicable to
investments in PIKs by such Fund as well as to the securities which may
constitute interest payments on PIKs. While PIKs generate income for generally
accepted accounting standards purposes, they do not generate cash flow and thus
could cause a Fund to be forced to liquidate securities at an inopportune time
in order to distribute cash, as required by the Internal Revenue Code.

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<PAGE>

MORTGAGE-BACKED SECURITIES. Each Fund other than Aggressive Growth Series
may invest in certain types of mortgage-backed securities. One type of
mortgage-backed security includes certificates which represent pools of mortgage
loans assembled for sale to investors by various governmental and private
organizations. These securities provide a monthly payment, which consists of
both an interest and a principal payment, which is in effect a "pass-through" of
the monthly payment made by each individual borrower on his or her residential
mortgage loan, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying residential property, refinancing or
foreclosure, net of fees or costs which may be incurred. Some certificates
(such as those issued by the Government National Mortgage Association) are
described as "modified pass-through." These securities entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
certain fees, regardless of whether the mortgagor actually makes the payment.

U.S. GOVERNMENT PASS-THROUGH SECURITIES. A major governmental guarantor of
pass-through certificates is the Government National Mortgage Association
("GNMA"). GNMA guarantees, with the full faith and credit of the United States
government, the timely payments of principal and interest on securities issued
by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. Other governmental guarantors (but not backed by the
full faith and credit of the United States Government) include the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA purchases residential mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Information on the mortgage-backed securities issued by
these entities is set forth below.

(i) GNMA CERTIFICATES. Certificates of the GNMA ("GNMA Certificates")
evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly as
payments of principal, including prepayments, on the mortgages in the
underlying pool are passed through to holders of the GNMA Certificates
representing interests in the pool, rather than returned in a lump sum at
maturity. "Modified pass-through" GNMA Certificates entitle the holder to
receive a share of all interest and principal payments paid or owed to the
mortgage pool, net of fees paid or due to the "issuer" and GNMA, regardless
of whether or not the mortgagor actually makes the payment.

(ii) GNMA GUARANTEE. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal and interest on securities backed
by a pool of mortgages insured by the Federal Housing Administration
("FHA") or the Farmers' Home Administration ("FmHA"), or guaranteed by the
Veterans Administration ("VA"). GNMA is also empowered to borrow without
limitation from the U.S. Treasury, if necessary, to make any payments
required under its guarantee.

(iii) LIFE OF GNMA CERTIFICATES. The average life of a GNMA
Certificate is likely to be substantially less than the stated maturity of
the mortgages underlying the

<PAGE>

securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the pool.
Foreclosures impose no risk of loss of the principal balance of a
Certificate, because of the GNMA guarantee, but foreclosure may impact the
yield to shareholders because of the need to reinvest proceeds of
foreclosure.

As prepayment rates of individual mortgage pools vary widely, it is
not possible to predict accurately the average life of a particular issue
of GNMA Certificates. However, statistics published by the FHA indicate
that the average life of single family dwelling mortgages with 25- to
30-year maturities, the type of mortgages backing the vast majority of GNMA
Certificates, is approximately 12 years. Prepayments are likely to
increase in periods of falling interest rates. It is customary to treat
GNMA Certificates as 30-year mortgage-backed securities which prepay fully
in the twelfth year.

(iv) YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of
interest of GNMA Certificates is lower than the interest rate paid on the
VA-guaranteed or FHA-insured mortgages underlying the certificates, by the
amount of the fees paid to GNMA and the issuer.

The coupon rate by itself, however, does not indicate the yield which
will be earned on GNMA Certificates. First, GNMA Certificates may be
issued at a premium or discount, rather than at par, and, after issuance,
GNMA Certificates may trade in the secondary market at a premium or
discount. Second, interest is earned monthly, rather than semi-annually as
with traditional bonds; monthly compounding raises the effective yield
earned. Finally, the actual yield of a GNMA Certificate is influenced by
the prepayment experience of the mortgage pool underlying it. For example,
if interest rates decline, prepayments may occur faster than had been
originally projected and the yield to maturity and investment income would
be reduced.

(v) FHLMC SECURITIES. "FHLMC" is a federally chartered corporation
created in 1970 through enactment of Title III of the Emergency Home
Finance Act of 1970. Its purpose is to promote development of a nationwide
secondary market in conventional residential mortgages.

The FHLMC issues two types of mortgage pass-through securities,
mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made or
owed on the underlying pool. The FHLMC guarantees timely payment of
interest on PCs and the ultimate payment of principal. Like GNMA
Certificates, PCs are assumed to be prepaid fully in their twelfth year.

GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years.

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<PAGE>

(vi) FNMA SECURITIES. "FNMA" is a federally chartered and privately
owned corporation which was established in 1938 to create a secondary
market in mortgages insured by the FHA. It was originally established as a
government agency and was transformed into a private corporation in 1968.

FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each
FNMA Certificate represents a pro rata share of all interest and principal
payments made or owed on the underlying pool. FNMA guarantees timely
payment of interest on FNMA certificates and the full return of principal.
Like GNMA Certificates, FNMA Certificates are assumed to be prepaid fully
in their twelfth year.

PRIVATE PASS-THROUGH SECURITIES. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and other
secondary market issuers also create pass-through pools of conventional
residential mortgage loans. Such issuers may in addition be the originators of
the underlying mortgage loans as well as the guarantors of the pass-through
certificates. Pools created by such non-governmental issuers generally offer
a higher rate of interest than governmental pools because there are no direct or
indirect governmental guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools may be supported by
various forms of insurance or guarantees, including individual loan, title,
pool, and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers, and the mortgage poolers.

Fortis Series expects that governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. As new types of pass-through securities are developed and
offered to investors, the Funds may, consistent with their investment
objectives, policies and restrictions, consider making investments in such new
types of securities.

CMOS, MULTI-CLASS PASS-THROUGH SECURITIES AND OTHER TYPES OF
MORTGAGE-BACKED SECURITIES. Other types of mortgage-backed securities include
debt securities which are secured, directly or indirectly, by mortgages on
commercial real estate or residential rental properties, or by first liens on
residential manufactured homes (as defined in section 603(6) of the National
Manufactured Housing Construction and Safety Standards Act of 1974), whether
such manufactured homes are considered real or personal property under the laws
of the states in which they are located.

Securities in this investment category include, among others, standard
mortgage-related bonds, collateralized mortgage obligations (CMOs) and
multi-class pass-through securities. Mortgage-related bonds are secured by
pools of mortgages, but, unlike pass-through securities, payments to bondholders
are not determined by payments on the mortgages. The bonds consist of a single
class, with interest payable monthly and principal payable on the stated date of
maturity.

U.S. Government Securities Series, Diversified Income Series, Global Bond
Series, High Yield Series, Global Asset Allocation Series, Asset Allocation
Series and International Stock

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<PAGE>

Series may invest in CMOs and multi-class pass-through securities. CMOs are
debt instruments issued by special purpose entities which are secured by pools
of mortgage loans or other mortgage-backed securities. Multi-class
pass-through securities are interests in a trust composed of mortgage loans or
other mortgage-backed securities. Payments of principal and interest on
underlying collateral provide the funds to pay debt service on the CMO or make
scheduled distributions on the multi-class pass-through security. Multi-class
pass-through securities, CMOs, and classes thereof (including those discussed
below) are examples of the types of financial instruments commonly referred to
as derivatives.

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specified
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO on a monthly, quarterly or
semiannual basis. The principal and interest on the underlying mortgages may be
allocated among the several classes of a series of a CMO in many ways. In a
common structure, payments of principal, including any principal prepayments, on
the underlying mortgages are applied according to scheduled cash flow priorities
to classes of the series of a CMO. CMOs are secured by pools of mortgages,
typically in the form of "guaranteed" pass-through certificates such as GNMA,
FNMA, or FHLMC securities. The payments on the collateral securities determine
the payments to the bondholders, but there is not a direct "pass-through" of
payments. CMO's are structured into multiple classes, each bearing a different
date of maturity. Monthly payments of principal received from the pool of
underlying mortgages, including prepayments, is first returned to investors
holding the shortest maturity class. Investors holding the longest maturity
classes receive principal only after the shorter maturity classes have been
retired.

There are many classes of CMOs. There are "IOs," which entitle the holder
to receive distributions consisting solely or primarily of all or a portion of
the interest in an underlying pool of mortgage loans or mortgage-backed
securities ("Mortgage Assets"). There are also "POs," which entitle the holder
to receive distributions consisting solely or primarily of all or a portion of
the principal of the underlying pool of Mortgage Assets. In addition, there are
"inverse floaters," which have a coupon rate that moves in the reverse direction
to an applicable index, and accrual (or "Z") bonds, which are described below.

As to IOs, POs, inverse floaters, and accrual bonds, not more than 5% of
the net assets of each of U.S. Government Securities Series, Diversified Income
Series, Global Bond Series, High Yield Series, Global Asset Allocation Series,
Asset Allocation Series and International Stock Series will be invested in any
one of these items at any one time, and no more than 10% of the net assets of
each of such Fund will be invested in all such obligations at any one time. Not
more than 5% of the Global Growth Series' net assets collectively will be
invested in such obligations at any time.

Inverse floating CMOs are typically more volatile than fixed or adjustable
rate tranches of CMOs. Investments in inverse floating CMOs would be purchased
by a Fund to attempt to protect against a reduction in the income earned on such
Fund's investments due to a decline in interest rates. The Fund would be
adversely affected by the purchase of such CMOs in the event

24
<PAGE>

of an increase in interest rates since the coupon rate thereon will decrease as
interest rates increase, and, like other mortgage-backed securities, the value
will decrease as interest rates increase.

The cash flows and yields on IO and PO classes are extremely sensitive to
the rate of principal payments (including prepayments) on the related Mortgage
Assets. For example, a rapid or slow rate of principal payments may have a
material adverse effect on the yield to maturity of IOs or POs, respectively.
If the underlying Mortgage Assets experience greater than anticipated
prepayments of principal, the holder of an IO may incur substantial losses, even
if the IO class is rated AAA. Conversely, if the underlying Mortgage Assets
experience slower than anticipated prepayments of principal, the yield and
market value for the holder of a PO will be affected more severely than would be
the case with a traditional mortgage-backed security.

However, if interest rates were expected to rise, the value of an IO might
increase and may partially offset other bond value declines, and if rates were
expected to fall, the inclusion of POs could balance lower reinvestment rates.

An accrual or "Z" bond holder is not entitled to receive cash payments
until one or more other classes of the CMO have been paid in full from payments
on the mortgage loans underlying the CMO. During the period in which cash
payments are not being made on the Z tranche, interest accrues on the Z tranche
at a stated rate, and this accrued interest is added to the amount of principal
which is due to the holder of the Z tranche. After the other classes have been
paid in full, cash payments are made on the Z tranche until its principal
(including previously accrued interest which was added to principal, as
described above) and accrued interest at the stated rate have been paid in full.
Generally, the date upon which cash payments begin to be made on a Z tranche
depends on the rate at which the mortgage loans underlying the CMO are prepaid,
with a faster prepayment rate resulting in an earlier commencement of cash
payments on the Z tranche. Like a zero coupon bond, during its accrual period
the Z tranche of a CMO has the advantage of eliminating the risk of reinvesting
interest payments at lower rates during a period of declining market interest
rates. At the same time, however, and also like a zero coupon bond, the market
value of a Z tranche can be expected to fluctuate more widely with changes in
market interest rates than would the market value of a tranche which pays
interest currently. Changes in market interest rates also can be expected to
influence prepayment rates on the mortgage loans underlying the CMO of which a Z
tranche is a part. As noted above, such changes in prepayment rates will affect
the date at which cash payments begin to be made on a Z tranche, and therefore
also will influence its market value.

Investments in mortgage-backed securities involve certain risks. In
periods of declining interest rates, prices of fixed income securities tend to
rise. However, during such periods, the rate of prepayment of mortgages
underlying mortgage-backed securities tends to increase, with the result that
such prepayments must be reinvested by the issuer at lower rates. In addition,
the value of such securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers of mortgage-backed securities
owned by a Fund. Because investments in mortgage-backed securities are interest
sensitive, the ability of the issuer to reinvest or to reinvest favorably in
underlying mortgages may be limited by government regulation or tax policy. For
example, action by the Board of Governors of the Federal Reserve

25
<PAGE>

System to limit the growth of the nation's money supply may cause interest rates
to rise and thereby reduce the volume of new residential mortgages.
Additionally, although mortgages and mortgage-backed securities are generally
supported by some form of government or private guarantees and/or insurance,
there is no assurance that private guarantors or insurers will be able to meet
their obligations.

REAL ESTATE OR REAL ESTATE INVESTMENT TRUSTS. Diversified Income Series,
Asset Allocation Series, Value Series, Growth & Income Series and Small Cap
Value Series may invest in real estate investment trusts ("REITs"), real estate
development and real estate operating companies and other real estate related
businesses. A REIT may focus on particular projects, such as apartment
complexes or shopping centers, or geographic regions, such as the Southeastern
United States, or both. In addition, Value Series may invest up to 10% of its
total assets in REITs, but will invest only in REITs that are publicly
distributed. Growth & Income Series and Value Series currently intend to make
any REIT investments primarily in equity REITs, which are trusts that sell
shares to investors and use the proceeds to invest in real estate or interests
in real estate. Debt REITs invest in obligations secured by mortgages on real
property or interests in real property.

The Funds' investments in real estate securities may be subject to certain
of the same risks associated with the direct ownership of real estate. These
risks include: declines in the value of real estate; risks related to general
and local economic conditions; overbuilding and competition; increases in
property taxes and operating expenses; and variations in rental income. In
addition, REITs may not be diversified. REITs are subject to the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code and failing to maintain exemption from the 1940 Act. Also, REITs
may be dependent upon management skill and may be subject to the risks of
obtaining adequate financing for projects on favorable terms.

MUNICIPAL SECURITIES. U.S. Government Securities Series, Diversified
Income Series and Asset Allocation Series each may invest not more than 20% of
their total assets in municipal securities during periods when such securities
appear to offer more attractive returns than taxable securities.

HIGH-YIELD/ HIGH-RISK SECURITIES. Diversified Income Series, High Yield
Series and Asset Allocation Series may invest in securities rated lower than
investment grade (commonly known as "high yield" or "junk" bonds).
Participation in lower-rated securities transactions generally involves greater
returns in the form of higher average yields. However, participation in such
transactions involves greater risks, often related to sensitivity to interest
rates, economic changes, solvency, and relative liquidity in the secondary
trading market. Yields on high yield securities will fluctuate over time. The
prices of high-yielding securities have been found to be less sensitive to
interest rate changes than higher-rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or substantial period of rising interest rates highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service their principal and interest payment obligations, to
meet projected business goals, and to obtain additional financing. If the
issuer of a security held by a Fund defaulted, such Fund might incur additional
expenses to seek recovery. In addition, periods of economic uncertainty and
changes can be expected to result in increased

26
<PAGE>

volatility of market prices of high-yielding securities and in the net asset
values of Funds investing in such securities. Furthermore, in the case of
high-yielding securities structured as zero coupon or payment in kind securities
("PIKs"), their market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than securities which pay interest
periodically and in cash.

High-yielding securities present risks based on payment expectations. For
example, high-yielding securities may contain redemption or call provisions. If
an issuer exercises these provisions in a declining interest rate market, a Fund
holding the security likely would have to replace it with a lower-yielding
security, resulting in a decreased return for investors. Conversely, a
high-yielding security's value will decrease in a rising interest rate market,
as will the net asset value of a Fund holding such security. If the Funds
experience unexpected net redemptions, this may force them to sell their
high-yielding securities, without regard to their investment merits, thereby
decreasing the asset base upon which the Funds' expenses can be spread and
possibly reducing the rate of return.

To the extent that there is no established secondary market, there may be
thin trading of high-yielding securities. This may adversely affect the ability
of the Board of Directors to accurately value high-yielding securities and a
Fund's ability to dispose of such securities. Securities valuation becomes more
difficult and judgment plays a greater role in valuation because there is less
reliable, objective data available. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of high-yielding securities, especially in a thinly traded market.
Illiquid or restricted high-yielding securities purchased by the Funds may
involve special registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties.

New laws and proposed new laws could have an adverse impact on the market
for such securities. As examples, recent legislation requires federally-insured
savings and loan associations to divest their investments in high-yielding
securities and pending proposals are designed to limit the use, or tax and other
advantages of high-yielding securities. The new legislation and the proposals,
if enacted, could have an adverse effect on the Funds' net asset values and
investment practices, with the extent of the impact depending upon the
composition of such Funds at that time.

Certain risks are associated with applying credit ratings as a method for
evaluating high-yielding securities. For example, credit ratings evaluate the
safety of principal and interest payments, not market value risk of
high-yielding securities. Since credit rating agencies may fail to timely
change the credit ratings to reflect subsequent events, Advisers (or a Fund's
sub-adviser, if applicable) continuously monitors the issuers of high-yielding
securities held by these Funds to determine if the issuers will have sufficient
cash flow and profits to meet required principal and interest payments, and to
assure the securities' liquidity so such Funds can meet redemption requests.
The achievement of the investment objectives of such Funds may be more dependent
upon the Advisers' or a sub-adviser's own credit analysis than is the case for
higher quality bonds.

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SECURITIES OF FOREIGN ISSUERS. Global Bond Series, Global Asset
Allocation Series, International Stock Series and Global Growth Series invest
significantly in securities of foreign issuers. Money Market Series and U.S.
Government Securities Series each may invest in securities of, or guaranteed by,
the Government of Canada, a Province of Canada, or any instrumentality or
political subdivision thereof in an amount not exceeding 25% of the value of its
total assets. Money Market Series also may invest in obligations of foreign
banks and foreign branches of domestic and foreign banks, provided such banks
have total assets in excess of $1 billion, and it may invest up to 15% of its
total assets in securities of foreign companies. However, Money Market Series
may not invest more than 49% of the value of its total assets collectively in:
(i) securities of, or guaranteed by, the Government of Canada, a Province of
Canada, or any instrumentality or political subdivision thereof; (ii) securities
of foreign companies; and (iii) securities of foreign banks and their branches
and securities of foreign branches of domestic banks. Asset Allocation Series
may invest up to 20% of its total asset in foreign securities, provided that no
more than 15% of its total assets may be invested in foreign securities that are
not traded on national foreign securities exchanges or traded in the United
States. Blue Chip Stock Series may invest up to 20% of its total assets
(excluding reserves) in foreign securities. Large Cap Growth Series may invest
up to 15% of its total assets in foreign securities. High Yield Series, Value
Series, Growth & Income Series, Growth Stock Series, and Aggressive Growth
Series each may invest up to 10% of total assets in securities of foreign
governments and companies. Small Cap Value Series may invest in foreign
securities without limitation.

Investing in foreign securities may result in greater risk than that
incurred by investing in domestic securities due to the potential political and
economic instability of certain countries and risks of expropriation,
nationalization, confiscation, or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization, or other confiscation, by any country, a Fund
could lose its entire investment in any such country. Certain countries
prohibit or impose substantial restrictions on investments in their capital
markets, particularly their equity markets, by foreign entities such as the
Funds. As illustrations, certain countries require governmental approval prior
to investments by foreign persons, or limit the amount of investment by foreign
persons in a particular company, or limit the investment by foreign persons to
only a specific class of securities of a company that may have less advantageous
terms than securities of the company available for purchase by nationals.
Moreover, the national policies of certain countries may restrict investment
opportunities in issuers or industries deemed sensitive to national interests.
In addition, some countries require governmental approval for the repatriation
of investment income, capital, or the proceeds of securities sales by foreign
investors. A Fund, particularly Global Bond Series, Global Asset Allocation
Series, International Stock Series and Global Growth Series, could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation, as well as by the application to it of other restrictions on
investments.

Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards or to other regulatory requirements
comparable to those applicable to U.S. companies. A significant portion of the
securities held by the Global Bond Series, Global Asset Allocation Series,
Global Growth Series and International Stock Series will not be registered with
the SEC or regulators of any foreign country, nor will the issuers thereof be

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<PAGE>

subject to the SEC's reporting requirements. Thus, there will be less available
information concerning foreign issuers of securities held by these Funds than is
available concerning U.S. issuers. In instances where the financial statements
of an issuer are not deemed to reflect accurately the financial situation of the
issuer, the Funds will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists.

Because Global Bond Series, Global Asset Allocation Series, International
Stock Series and Global Growth Series will each invest significantly in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies may
account for part of each such Fund's investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline
in the U.S. dollar value of a Fund's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in that Fund's net asset
value and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders of that Fund.

The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries, and
the U.S., and other economic and financial conditions affecting the world
economy.

Although Global Bond Series, Global Asset Allocation Series, International
Stock Series and Global Growth Series each values its assets daily in terms of
U.S. dollars, each such Fund does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. These Funds will do so from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to sell that currency to the dealer.

Securities of many foreign issuers may be less liquid and their prices more
volatile than securities of comparable U.S. issuers. In addition, foreign
securities exchanges and brokers are generally subject to less governmental
supervision and regulation than in the U.S., and foreign securities exchange
transactions are usually subject to fixed commissions, which are generally
higher than negotiated commissions on U.S. transactions. In addition, foreign
securities exchange transactions may be subject to difficulties associated with
the settlement of such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive opportunities.
Inability to dispose of a portfolio security due to settlement problems either
could result in losses to a Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Each Fund will
consider such difficulties when determining the allocation of its assets,
although the Funds

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do not believe that such difficulties will have a material adverse effect on
their portfolio trading activities.

A Fund's net investment income from foreign issuers may be subject to
non-U.S. withholding taxes, thereby reducing the Fund's net investment income.

There are risks associated with investments in obligations of foreign
branches of domestic banks and domestic branches of foreign banks that do not
accompany investments in obligations of domestic banks generally. Domestic
banks are required to maintain specified levels of reserves, are limited in the
amounts they can loan to a single borrower, and are subject to other regulations
designed to promote financial soundness. Not all of such laws and regulations
apply to foreign branches of domestic banks. In addition, obligations of
foreign branches of domestic banks and domestic branches of foreign banks are
not insured by the Federal Deposit Insurance Corporation. Such investments are
also subject to the risk of investing in foreign securities generally, as
discussed above.

EMERGING MARKETS. Each Fund that may invest in foreign securities may
invest in emerging market countries, with the exception of U.S. Government
Securities Series. Global Growth Series is limited to investing up to 45% of
its equity securities in emerging market countries and Global Bond Series is
limited to investing up to 10% of its total assets in emerging market countries.
Many emerging market countries have experienced substantial or, in some periods,
extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
In an attempt to control inflation, wage and price controls have been imposed in
certain countries. In many cases, emerging market countries are among the
world's largest debtors to commercial banks, foreign governments,
international financial organizations and other financial institutions. In
recent years, the governments of some of these countries have encountered
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.

Emerging markets are countries categorized as emerging markets by the
International Financial Corporation, the World Bank's private sector division.
Such countries may include but are not limited to Singapore, Indonesia, China,
India and certain Latin American countries such as Mexico, Argentina, Chile and
Brazil. Such markets tend to be in the less economically developed regions of
the world. General characteristics of emerging market countries also include
lower degrees of political stability, a high demand for capital investment, a
high dependence on export markets for their major industries, a need to develop
basic economic infrastructures, and rapid economic growth.

DEPOSITARY RECEIPTS. The Funds which may invest in foreign securities may
hold equity securities of foreign issuers in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other securities
convertible into securities of eligible European or Far Eastern Issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs are receipts typically issued
by an American bank or trust company that evidence ownership of underlying
securities issued by a foreign corporation. Generally, ADRs in registered form
are designed for use in the United

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States securities markets. For purposes of the Funds' investment policies, the
Funds' investments in ADRs and EDRs will be deemed to be investments in the
equity securities representing securities of foreign issuers into which they may
be converted.

OPTIONS. Global Bond Series, High Yield Series, Global Asset Allocation
Series, Value Series, Growth & Income Series, Blue Chip Stock Series,
International Stock Series, Mid Cap Stock Series, Small Cap Value Series, Global
Growth Series, Large Cap Growth Series and Aggressive Growth Series may write
(I.E., sell) covered call and secured put options (except that Large Cap Growth
Series may not write put options), and purchase and sell put and call options on
securities written by others. Global Bond Series, Global Asset Allocation
Series, Blue Chip Stock Series, Mid Cap Stock Series, Large Cap Growth Series,
Aggressive Growth Series and S&P 500 Index Series may also purchase and write
put and call options on financial indices. A Fund generally enters into an
option transaction to hedge against the risk of fluctuations in the prices of
(a) securities held by such Fund or (b) securities which Advisers or a Fund's
sub-adviser intends to include in such Fund. However, Global Bond Series,
Global Asset Allocation Series, Blue Chip Stock Series, Mid Cap Stock Series,
International Stock Series and Aggressive Growth Series may enter into such
transactions for other than hedging purposes, which involves greater risk. For
Blue Chip Stock Series, in connection with options on securities, the total
market value of securities against which the Fund has written call or put
options may not exceed 25% of its total assets. In addition, Blue Chip Stock
Series will not commit more than 5% of its total assets to premiums when
purchasing call or put options. Large Cap Growth Series may write covered call
option on its securities of up to 15% of its total assets, and may purchase and
sell call and put options on common stocks written by others of up to, for all
options, 10% of its total assets.

All options purchased or written by S&P 500 Index Series and Mid Cap Stock
Series must be listed on a national securities or futures exchange or traded in
the over-the-counter ("OTC") market. These Funds will not purchase or write an
OTC option if, as a result of such transaction, the sum of (i) the market value
of outstanding OTC options purchased by the Fund, (ii) the market value of the
underlying securities covered by outstanding OTC call options written by the
Fund, and (iii) the market value of all other assets of the Fund that are
illiquid or are not otherwise readily marketable, would exceed 15% of the net
assets of the Fund, taken at market value. However, if an OTC option is sold by
the Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined price,
then the Fund will treat as illiquid such amount of the underlying securities as
is equal to the repurchase price less the amount by which the option is
"in-the-money" (the difference between current market value of the underlying
security and the option's strike price). The repurchase price with primary
dealers is typically a formula price which is generally based on a multiple of
the premium received for the option plus the amount by which the option is
"in-the-money." S&P 500 Index Series and Mid Cap Stock Series will not purchase
puts, calls, straddles, spreads or any combination thereof, if as a result of
such purchase the value of a Fund's aggregate investment in such securities
would exceed 5% of the Fund's total assets.

Options give the investor the right, but not the obligation, to buy or sell
an asset at a predetermined price in the future. Where a Fund writes an option
which expires unexercised or is

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closed out by the Fund at a profit, it will retain all or a portion of the
premium received for the option, which will increase its gross income and will
offset in part the reduced value of any securities held by the Fund underlying
the option, or the increased cost of securities to be acquired by the Fund. In
contrast, however, if the price of the underlying security moves adversely to
the Fund's position, the option may be exercised and the Fund will be required
to purchase or sell the underlying security at a disadvantageous price, which
may only be partially offset by the amount of the premium received by the Fund,
if at all. Each Fund may also write combinations of put and call options on the
same security, known as "straddles." Such transactions can generate additional
premium income but also present increased risk.

The Funds may write only covered options. A call option is covered if the
Fund owns the underlying security or a call option on the same security with a
lower strike price. A put option is covered if the Fund segregates cash and/or
short-term debt securities in an amount necessary to pay the strike price of the
option or purchases a put option on the same underlying security with a higher
strike price.

Each of the above Funds may also purchase and sell put or call options
written by others in anticipation of market fluctuations which may adversely
affect the value of its portfolio or the prices of securities that the Fund
wants to purchase at a later date. In the event that the expected market
fluctuations occur, a Fund may be able to offset the resulting adverse effect on
its portfolio, in whole or in part, through the options purchased. The premium
paid for a put or call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise or liquidation of the
option, and, unless the price of the underlying security changes sufficiently,
the option may expire without value to the Fund.

Additional information regarding options transactions appears in Appendix A
to this Statement of Additional Information.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.

FUTURES CONTRACTS. Global Bond Series, High Yield Series and Global Asset
Allocation Series may enter into interest rate futures contracts. Global Asset
Allocation Series, Value Series, Growth & Income Series, S&P 500 Index Series,
Blue Chip Stock Series, International Stock Series, Mid Cap Stock Series, Small
Cap Value Series, Global Growth Series, Large Cap Growth Series and Aggressive
Growth Series may enter into stock index futures contracts. Global Bond Series,
High Yield Series, Global Asset Allocation Series, Blue Chip Stock Series,
International Stock Series, Mid Cap Stock Series, Small Cap Value Series, Global
Growth Series, Large Cap Growth Series and Aggressive Growth Series may also
enter into foreign currency futures contracts.

A "purchase" of a futures contract means the undertaking of a contractual
obligation to acquire the securities called for by the contract at a specified
price on a specified date. The purchaser of a futures contract on an index
agrees to take or make delivery of an amount of cash equal to the difference
between a specified dollar multiple of the value of the index on the expiration
date of the contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the securities
underlying the index is made.

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Purchases or sales of stock index futures contracts are used to attempt to
protect a Fund's current or intended stock investments from broad fluctuations
in stock prices. Interest rate and foreign currency futures contracts are
purchased or sold to attempt to hedge against the effects of interest or
exchange rate changes on a Fund's current or intended investments in fixed
income or foreign securities. In the event that an anticipated decrease in the
value of a Fund's securities occurs as a result of a general stock market
decline, a general increase in interest rates, or a decline in the dollar value
of foreign currencies in which portfolio securities are denominated, the adverse
effects of such changes may be offset, in whole or in part, by gains on the sale
of futures contracts. Conversely, the increased cost of a Fund's securities to
be acquired, caused by a general rise in the stock market, a general decline in
interest rates, or a rise in the dollar value of foreign currencies, may be
offset, in whole or in part, by gains on futures contracts purchased by such
Fund. A Fund will incur brokerage fees when it purchases and sells futures
contracts, and it will be required to make and maintain margin deposits.

OPTIONS ON FUTURES CONTRACTS. Each Fund that may enter into futures
contracts may also purchase and write put and call options on such contracts.
The Funds may use such options on futures contracts in connection with their
hedging strategies in lieu of purchasing and writing options directly on the
underlying securities or purchasing and selling the underlying futures
contracts.

Purchases of options on futures contracts may present less risk in hedging
than the purchase or sale of the underlying futures contracts since the
potential loss is limited to the amount of the premium plus related transaction
costs. The writing of such options, however, does not present less risk than
the trading of futures contracts. The writing of a call option on a futures
contract generates a premium which may partially offset a decline in the value
of the Fund's portfolio assets. By writing a call option, a Fund becomes
obligated to sell a futures contract, which may have a value higher than the
exercise price. Conversely, the writing of a put option on a futures contract
generates a premium, but the Fund becomes obligated to purchase a futures
contract, which may have a lower value than the exercise price. Thus, the loss
incurred by a Fund in writing options on futures contracts may exceed the amount
of the premium received.

For more information of futures contracts and options thereon, see Appendix
A to this Statement of Additional Information.

FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS. Global Bond Series, High
Yield Series, Global Asset Allocation Series, Value Series, Growth & Income
Series, Blue Chip Stock Series, International Stock Series, Mid Cap Stock
Series, Small Cap Value Series, Global Growth Series, Large Cap Growth Series
and Aggressive Growth Series may purchase or sell foreign currency forward
exchange contracts ("forward contracts") to attempt to minimize the risk from
adverse changes in the relationship between the various currencies in which each
Fund invests. A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date. The contract is
individually negotiated and privately traded by currency traders and their
customers. Each Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the price of the security ("transaction
hedge") in a particular currency.

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<PAGE>

Additionally, when a Fund believes that a foreign currency (for example, the
British pound) may suffer a decline against any other currency or currencies in
the Fund (for example, the U.S. dollar), it may enter into a forward sale
contract to sell an amount of the foreign currency expected to decline (the
British pound) that approximates the value of some or all of the Fund's
investment securities denominated in such foreign currency (the British pound)
(a "position hedge"). In such cases, a Fund also may enter into a forward sale
contract to sell a foreign currency for a fixed amount in another currency
(other than the U.S. dollar) where the Fund believes that the value of the
currency to be sold pursuant to the forward sale contract will fall whenever
there is a decline in the value of the currency (other than the U.S. dollar) in
which certain portfolio securities of the Fund are denominated (a
"cross-hedge").

Under certain conditions, Securities and Exchange Commission (the
"Commission") guidelines require investment companies to set aside cash or any
security that is not considered restricted or illiquid in a segregated account
to cover forward contracts. As required by Commission guidelines, any Fund that
has the ability to enter into a forward contract for an essentially speculative
purpose will, upon entering into such a transaction, segregate assets to cover
such forward contracts. At the present time, only the Global Bond, Global Asset
Allocation and International Stock Series may enter into speculative forward
contracts. A speculative forward contract is one which, unlike the hedging
situations defined above, does not have an underlying position in a security or
securities. The Funds will not segregate assets to cover forward contracts
entered into for hedging purposes.

Although forward contracts will be used primarily to protect the Funds from
adverse currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted.

OPTIONS ON FOREIGN CURRENCIES. Global Bond Series, High Yield Series,
Global Asset Allocation Series, Blue Chip Stock Series, International Stock
Series, Mid Cap Stock Series, Global Growth Series and Aggressive Growth Series
may purchase and write put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. As in the case of other types of options, however, the writing of an
option on foreign currency will constitute only a partial hedge, up to the
amount of the premium received, and these Funds could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on foreign currency may constitute an
effective hedge against fluctuations in exchange rates, although, in the event
of rate movements adverse to such a Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by a Fund are traded on U.S. and foreign
exchanges or over-the-counter.

LIMITATIONS ON INVESTMENTS IN OPTIONS, FUTURES CONTRACTS AND FORWARD
CONTRACTS. Global Bond Series, Global Asset Allocation Series, International
Stock Series, High Yield Series, Value Series, Growth & Income Series, Global
Growth Series and Aggressive Growth Series will not enter into any options,
futures or forward contract transactions if immediately thereafter the amount of
premiums paid for all options, initial margin deposits on all futures contracts
and/or options on futures contracts, and collateral deposited with respect to
forward

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<PAGE>

contracts held by or entered into by a Fund would exceed 5% of the value of such
Fund's total assets. In addition, for High Yield Series, Value Series, Growth &
Income Series, Global Growth Series and Aggressive Growth Series, the aggregate
value of a Fund's assets covering, subject to, or committed to all options,
futures, and forward contracts will not exceed 20% of the value of the total
assets of the Fund. These two restrictions do not apply to securities purchased
on a when-issued, delayed delivery, or forward commitment basis as described
under "Delayed Delivery Transactions." However, each such Fund intends to limit
its investment in futures during the coming year so that the aggregate value of
the Fund's assets subject to futures contracts will not exceed 5% of the value
of its net assets.

S&P 500 Index Series will not enter into futures contracts to the extent
that its outstanding obligations under these contracts would exceed 10% of the
Fund's total assets.

To the extent that any Fund enters into futures contracts and options on
futures contracts that are not for bona fide hedging purposes (as defined by the
Commodity Futures Trading Commission), the aggregate initial margin and premiums
on these positions (excluding the amount by which options are "in-the-money")
may not exceed 5% of the Fund's net assets.

RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS.
The use of options, futures contracts and forward contracts involves certain
risks. For example, a lack of correlation between the index or instrument
underlying an option or futures contract and the assets being hedged or
unexpected adverse price movements, could render a Fund's hedging strategy
unsuccessful and could result in losses. The use of these transactions for
other than hedging purposes involves greater risk. In addition, there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, and a Fund may be required to maintain a position until exercise or
expiration, which could result in losses.

Transactions in options, futures contracts, options on futures contracts,
and currency contracts may be entered into on United States exchanges regulated
by the SEC or the Commodity Futures Trading Commission, as well as in the
over-the-counter market and on foreign exchanges. In addition, the securities
underlying options and futures contracts may include domestic as well as foreign
securities. Investors should recognize that transactions involving foreign
securities or foreign currencies, and transactions entered into in foreign
countries, may involve considerations and risks not typically associated with
investing in U.S. markets.

REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements. A
repurchase agreement is an instrument under which securities are purchased from
a bank or securities dealer with an agreement by the seller to repurchase the
securities at a mutually agreed upon date, interest rate, and price. Generally,
repurchase agreements are of short duration, usually less than a week, but on
occasion for longer periods. Fund investments in repurchase agreements with a
maturity of more than seven days are subject to the Funds' limitations regarding
restricted and illiquid securities. In investing in repurchase agreements, a
Fund's risk is limited to the ability of such bank or securities dealer to pay
the agreed upon amount at the maturity of the repurchase agreement. In the
opinion of management, such risk is not material; if the other party defaults,
the underlying security constitutes collateral for the obligation to pay --

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<PAGE>

although the Fund may incur certain delays in obtaining direct ownership of the
collateral, plus costs in liquidating the collateral. In the event a bank or
securities dealer defaults on the repurchase agreement, management believes
that, barring extraordinary circumstances, the Fund will be entitled to sell the
underlying securities or otherwise receive adequate protection (as defined in
the federal Bankruptcy Code) for its interest in such securities. To the extent
that proceeds from any sale upon a default were less than the repurchase price,
the Fund could suffer a loss. If the Fund owns underlying securities following
a default on the repurchase agreement, the Fund will be subject to risk
associated with changes in the market value of such securities. The Funds'
custodian will hold the securities underlying any repurchase agreement or such
securities may be part of the Federal Reserve Book Entry System. The market
value of the collateral underlying the repurchase agreement will be determined
on each business day. If at any time the market value of the collateral falls
below the repurchase price of a repurchase agreement (including any accrued
interest), the respective Fund will promptly receive additional collateral (so
the total collateral is in an amount at least equal to the repurchase price plus
accrued interest). The Board of Directors evaluates the creditworthiness of
issuers which are securities dealers. U.S. Government Securities Series will
only execute repurchase agreements in which the underlying security meets the
criteria of such Fund's investment policies. U.S. Government Securities Series
will limit transactions involving repurchase agreements to domestic commercial
banks and/or recognized dealers in United States government securities believed
by Advisers to present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. S&P 500 Index Series, Blue Chip Stock
Series and Mid Cap Stock Series each may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous, although Blue Chip
Stock Series does not currently intend to make such investments. Reverse
repurchase agreements are ordinary repurchase agreements in which a Fund is the
seller of, rather than the investor in, securities, and agrees to repurchase
them at an agreed upon time and price. Use of a reverse repurchase agreement
may be preferable to a regular sale and later repurchase of the securities
because it avoids certain market risks and transaction costs. A reverse
repurchase agreement may be viewed as a type of borrowing by a Fund.

DELAYED DELIVERY TRANSACTIONS. All Funds except Money Market Series and
Growth Stock Series may purchase securities on a "when-issued" or delayed
delivery basis and purchase or sell securities on a "forward commitment" basis.
When such transactions are negotiated, the price is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. Normally, the settlement date occurs within two months after the
transaction, but delayed settlements beyond two months may be negotiated. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, a segregated account consisting of cash or any security that is not
considered restricted or illiquid, equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. During the period between a
commitment and settlement, no payment is made for the securities and, thus, no
interest accrues to the purchaser from the transaction. If a Fund disposes of
the right to acquire a when-issued security prior to its acquisition or disposes
of its right to deliver or receive against a forward commitment, it can

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<PAGE>

incur a gain or loss due to market fluctuation. The use of when-issued
transactions and forward commitments enables the Funds to hedge against
anticipated changes in interest rates and prices.

The purchase of securities on a when-issued, delayed delivery, or forward
commitment basis exposes the Funds to risk because the securities may decrease
in value prior to their delivery. Purchasing securities on a when-issued,
delayed delivery, or forward commitment basis involves the additional risk that
the return available in the market when the delivery takes place will be higher
than that obtained in the transaction itself. These risks could result in
increased volatility of a Fund's net asset value to the extent that the Fund
purchases securities on a when-issued, delayed delivery, or forward commitment
basis while remaining substantially fully invested. There is also a risk that
the securities may not be delivered or that a Fund may incur a loss or will have
lost the opportunity to invest the amount set aside for such transaction in the
segregated asset account. As to each Fund, no more than 20% of its net assets
may be invested in when-issued, delayed delivery, or forward commitment
transactions, and of such 20%, no more than one-half (i.e., 10% of its net
assets) may be invested in when-issued, delayed delivery, or forward commitment
transactions without the intention of actually acquiring securities (i.e.,
dollar rolls).

DOLLAR ROLLS. In connection with their ability to purchase securities on a
when-issued or forward commitment basis, each Fund other than Money Market
Series and Growth Stock Series may enter into "dollar rolls" in which a Fund
sells securities for delivery in the current month and simultaneously contracts
with the same counterparty to repurchase similar (same type, coupon and
maturity) but not identical securities on a specified future date. Each Fund
gives up the right to receive principal and interest paid on the securities
sold. However, each Fund would benefit to the extent of any difference between
the price received for the securities sold and the lower forward price for the
future purchase plus any fee income received. Unless such benefits exceed the
income and capital appreciation that would have been realized on the securities
sold as part of the dollar roll, the use of this technique will diminish the
investment performance of each Fund compared with what such performance would
have been without the use of dollar rolls. Each Fund will hold and maintain in
a segregated account until the settlement date cash or any security that is not
considered restricted or illiquid in an amount equal to the value of the
when-issued or forward commitment securities. The benefits derived from the use
of dollar rolls may depend, among other things, upon Adviser's (or the
sub-adviser's) ability to predict interest rates correctly. There is no
assurance that dollar rolls can be successfully employed. In addition, the use
of dollar rolls by a Fund while remaining substantially fully invested increases
the amount of the Fund's assets that are subject to market risk to an amount
that is greater than the Fund's net asset value, which could result in increased
volatility of the price of the Fund's shares.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, Global Bond Series, High Yield Series, Global Asset Allocation
Series, Value Series, Growth & Income Series, S&P 500 Index Series, Blue Chip
Stock Series, International Stock Series, Mid Cap Stock Series, Small Cap Value
Series, Global Growth Series, Large Cap Growth Series and Aggressive Growth
Series, may lend their portfolio securities. However, only High Yield Series,
Value Series, Growth & Income Series, S&P 500 Index Series, Blue Chip Stock
Series, Global Growth Series and Aggressive Growth Series are currently doing
so. Such loans, which will be made principally to broker-dealers, are callable
at any time and are continuously secured by

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<PAGE>

collateral (cash, U.S. government securities, certificates of deposit, or other
high-grade, short-term obligations or interest-bearing cash equivalents) equal
to no less than the market value, determined daily, of the securities loaned.
Such Funds will receive amounts equal to dividends or interest on the securities
loaned. These Funds will also earn income for having made the loan. Such Funds
will limit such lending to not more than 33 1/3% of the value of each such
Fund's total assets and Global Growth Series will limit such lending to not more
than 30% of the value of its total assets (for each such Fund, including the
amount lent as well as the collateral securing such loans). Where voting or
consent rights with respect to loaned securities pass to the borrower,
management will follow the policy of calling the loan, in whole or in part as
may be appropriate, to permit the exercise of such voting or consent rights if
the issues involved have a material effect on such Fund's investment in the
securities loaned.

The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will only be made to firms deemed
by Advisers (or the sub-adviser, if there is one for the Fund) to be of good
standing and will not be made unless, in the judgment of Advisers (or the
sub-adviser), the consideration to be earned from such loans would justify the
risk.

RESTRICTED AND ILLIQUID SECURITIES. Each Fund is subject to certain
restrictions on its investments in illiquid securities. See "Investment
Restrictions." A security is considered illiquid if it cannot be sold in the
ordinary course of business within seven days at approximately the price at
which it is valued. Illiquid securities may offer a higher yield than
securities which are more readily marketable, but they may not always be
marketable on advantageous terms.

The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. A Fund may be restricted in its
ability to sell such securities at a time when Advisers or a sub-adviser deems
it advisable to do so. In addition, in order to meet redemption requests, a
Fund may have to sell other assets, rather than such illiquid securities, at a
time which is not advantageous.

Restricted securities are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid,
since they may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. In 1990, however, the SEC adopted Rule 144A
under the 1933 Act, which provides a safe harbor exemption from the registration
requirements of the 1933 Act for resales of restricted securities to "qualified
institutional buyers," as defined in the rule. The result of this rule has been
the development of a more liquid and efficient institutional resale market for
restricted securities. Thus, restricted securities are no longer necessarily
illiquid. Some Funds may therefore invest in Rule 144A securities and treat
them as liquid when they have been determined to be liquid by the Board of
Directors or its delegate subject to the oversight of and pursuant to procedures
adopted by the Board of Directors. Under these procedures, factors taken into
account in determining the liquidity of a security include (a) the frequency of
trades and quotes for the security; (b) the

38
<PAGE>

number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (c) dealer undertakings to make a market in the
security; and (d) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). Similar determinations may be
made with respect to commercial paper issued in reliance on the so-called
"private placement" exemption from registration under Section 4(2) of the 1933
Act and interest-only and principal-only classes of mortgage-related securities
issued by the U.S. government or its agencies or instrumentalities.

BORROWINGS. Each Fund may borrow money from banks as a temporary measure
to facilitate redemptions, to the extent set forth below under "Investment
Restrictions." Interest paid on borrowings will decrease the net earnings of a
Fund and will not be available for investment.

SEGREGATED ACCOUNTS. To comply with the 1940 Act, a Fund engaging in
certain transactions involving options, futures, reverse repurchase agreements,
delayed delivery and forward contracts on foreign currencies will "cover" its
positions by establishing a segregated account. These segregated accounts will
be established and maintained with the Fortis Series' custodian and will contain
only liquid assets such as cash, or any security that is not considered
restricted or illiquid.

SHORT SALES AGAINST THE BOX. Each of Money Market Series, U.S. Government
Securities Series, Diversified Income Series, Asset Allocation Series, Growth
Stock Series, Global Bond Series, High Yield Series, Global Asset Allocation
Series, Value Series, Growth & Income Series, S&P 500 Index Series,
International Stock Series, Mid Cap Stock Series, Global Growth Series and
Aggressive Growth Series may sell a security short to the extent such Fund
contemporaneously owns or has the right to obtain securities identical to those
sold short without payment of any additional consideration. Such a short sale
is referred to as a short sale "against the box." The aggregate market value of
the underlying securities subject to all outstanding short sales may not exceed
5% of the net assets of the Fund.

RATINGS. After purchase by any Fund, a security may cease to be rated or
its rating may be reduced below the minimum required for purchase by such Fund.
Neither event will require a sale of such security by a Fund. To the extent the
ratings may change as a result of changes in the rating organizations or the
rating systems, each Fund will attempt to use comparable ratings as standards
for investments in accordance with the investment policies contained in the
Prospectus and the Statement of Additional Information. The ratings of Standard
& Poor's Ratings Services and Moody's Investors Service, Inc. are described in
Appendix B attached hereto.

PORTFOLIO TURNOVER

A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the particular fiscal year by the
monthly average of the value of portfolio securities owned by the Fund during
the same fiscal year. "Portfolio securities" for purposes of this calculation
do not include securities with a maturity date of less than twelve

39
<PAGE>

months from the date of investment. A 100% portfolio turnover rate would occur,
for example, if the lesser of the value of purchases or sales of portfolio
securities for a particular year were equal to the average monthly value of the
portfolio securities owned during such year.

The following Funds had portfolio turnover rates during the fiscal year
ended December 31, 1998 which were significantly different from their portfolio
turnover rates during the fiscal year ended December 31, 1997.

<TABLE>
<CAPTION>
1997 Portfolio 1998 Portfolio
Fund Turnover Rate Turnover Rate
- ---- ------------- -------------
<S> <C> <C>
Diversified Income Series 166% 96%
High Yield Series 353% 120%
Value Series 121% 332%
Growth Stock Series 19% 106%
Aggressive Growth Series 25% 135%
</TABLE>

The differences in portfolio turnover rates for Diversified Income Series
and High Yield Series were primarily a result of market conditions. For Value
Series, the difference was due to a change in management style by the Fund's
portfolio manager, with a corresponding repositioning of the Fund's portfolio.
Growth Stock Series and Aggressive Growth Series both had portfolio manager
changes in 1998, which resulted in Portfolio repositioning.

INVESTMENT RESTRICTIONS

Each Fund is subject to certain investment restrictions, which are set
forth below. Any investment restriction which is denoted as "fundamental" may
be changed only by the approval of a majority of a Fund's shareholders. In this
situation, majority means the lesser of (i) 67% of the Fund's outstanding shares
present at a meeting of the holders if more than 50% of the outstanding shares
are present in person or by proxy or (ii) more than 50% of the Fund's
outstanding shares. The insurance laws and regulations of various states as
well as the Internal Revenue Code of 1986 and the regulations thereunder may
from time to time impose additional restrictions on the Funds' investments.

Any investment policy or restriction in the Prospectus or this Statement of
Additional Information which involves a maximum percentage of securities or
assets, except those dealing with borrowing, shall not be considered to be
violated unless an excess over the percentage occurs immediately after an
acquisition of securities or utilization of assets and results therefrom.

DIVERSIFICATION

As a fundamental policy, each Fund (except Global Bond Series) operates as
a "diversified" investment company as defined under the 1940 Act, which means
that it must meet the following requirements:

At least 75% of the value of the Fund's total assets will be
represented by cash and cash items (including receivables), Government
securities, securities of other

40
<PAGE>

investment companies, and other securities for the purposes of this
calculation limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the total assets of the Fund and to not
more than 10% of the outstanding voting securities of such issuer.

Although Global Bond Series is classified as a nondiversified investment
under the Investment Company Act of 1940 (the "1940 Act"), the Fund is still
required to meet certain diversification requirements in order to qualify as a
"regulated investment company" for Federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"). To so qualify, the Fund
must diversify its holdings so that, at the close of each quarter of its taxable
year, (a) at least 50% of the value of its total assets is represented by cash,
cash items, securities issued by the U.S. Government, its agencies and
instrumentalities, the securities of other regulated investment companies, and
other securities limited generally with respect to any one issuer to an amount
not more than 5% of the total assets of the Fund and not more than 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets is invested in the securities of any issuer (other
than securities issued by the U.S. Government, its agencies or
instrumentalities, or the securities of other regulated investment companies),
or in two or more issuers that the Fund controls and that are engaged in the
same or similar trades or businesses.

The insurance laws and regulations of various states impose additional
diversification requirements on the Funds. One such restriction currently
prohibits the Separate Accounts from acquiring the voting securities of any
issuer if, as a result of the acquisition, the Separate Accounts and Fortis
Benefits, in the aggregate, will own more than 10% of the total issued and
outstanding voting securities of the issuer. Another restriction currently
prohibits each Fund from acquiring the securities of any issuer, other than
securities issued or guaranteed as to principal and interest by the United
States Government, if immediately after such acquisition, the value of the
investment together with prior investments in the security would exceed 10% of
the value of the Fund's total assets.

INVESTMENT RESTRICTIONS -- MONEY MARKET SERIES, U.S. GOVERNMENT SECURITIES
SERIES, DIVERSIFIED INCOME SERIES, ASSET ALLOCATION SERIES AND GROWTH STOCK
SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. No Fund will:

(1) Purchase securities on margin or otherwise borrow money or issue
senior securities, except that U.S. Government Securities Series, Diversified
Income Series and Asset Allocation Series, in accordance with their investment
objectives and policies, may purchase securities on a when-issued and delayed
delivery basis, within the limitations set forth in the Prospectus and Statement
of Additional Information. Fortis Series may also obtain such short-term credit
as it needs for the clearance of securities transactions, and may borrow from a
bank, for the account of Money Market Series, U.S. Government Securities Series,
Diversified Income Series, Asset Allocation Series and Growth Stock Series, as a
temporary measure to facilitate redemptions (but not for leveraging or
investment) in an amount that does not exceed

<PAGE>

10% of the value of such Fund's total assets. Investment securities will not be
purchased for a Fund while outstanding bank borrowings exceed 5% of the value of
such Fund's total assets.

(2) Write, purchase or sell puts, calls or combinations thereof.

(3) Mortgage, pledge or hypothecate its assets, except in an amount not
exceeding 10% of the value of its total assets to secure temporary or emergency
borrowing.

(4) Invest in commodities or commodity contracts.

(5) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities, Fortis
Series may be deemed an underwriter under applicable laws.

(6) Participate on a joint, or a joint and several, basis in any
securities trading account.

(7) Invest in real estate, except a Fund may invest in securities issued
by companies owning real estate or interests therein.

(8) Makes loans to other persons. Repurchase agreements and the purchase
of publicly traded debt obligations are not considered to be "loans" for this
purpose and may be entered into or purchased by a Fund in accordance with its
investment objectives and policies.

(9) Concentrate its investments in any particular industry, except that
(i) it may invest up to 25% of the value of its total assets in any particular
industry, and (ii) there is no limitation with respect to investments in
obligations issued or guaranteed by the United States Government or its agencies
and instrumentalities, or obligations of domestic commercial banks. As to
utility companies, gas, electric, water and telephone companies will be
considered as separate industries. As to finance companies, the following
categories will be considered as separate industries: (a) captive automobile
finance, such as General Motors Acceptance Corp. and Ford Motor Credit Corp.;
(b) captive equipment finance companies, such as Honeywell Finance Corporation
and General Electric Credit Corp.; (c) captive retail finance companies, such as
Macy Credit Corp. and Sears Roebuck Acceptance Corp.; (d) consumer loan
companies, such as Beneficial Finance Corporation and Household Finance
Corporation; (e) diversified finance companies such as CIT Financial Corp.,
Commercial Credit Corporation and Borg Warner Acceptance Corp.; and (f) captive
oil finance companies, such as Shell Credit, Inc., Mobil Oil Credit Corp. and
Texaco Financial Services, Inc. [For purposes of this restriction, securities
of each foreign government will be considered a separate "industry".]

(10) Purchase from or sell to any officer, director, or employee of Fortis
Series, or its adviser or underwriter, or any of their officers or directors,
any securities other than shares of Fortis Series' common stock.

(11) Make short sales, except for sales "against the box." While a short
sale is made by selling a security the Fund does not own, a short sale is
"against the box" to the extent that the

42
<PAGE>

Fund contemporaneously owns or has the right to obtain securities identical to
those sold short at no added cost.

(12) Invest more than 5% of the value of its assets in restricted
securities.

The following investment restriction may be changed without shareholder
approval. Money Market Series, U.S. Government Securities Series, Diversified
Income Series, Asset Allocation Series and Growth Stock Series will not:

(1) Invest more than 15% of their net assets (10% for Money Market Series)
in illiquid securities.

INVESTMENT RESTRICTIONS -- HIGH YIELD SERIES, VALUE SERIES, GROWTH & INCOME
SERIES AND AGGRESSIVE GROWTH SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. No Fund will:

(1) Concentrate its investments in any particular industry, except that
(i) it may invest up to 25% of the value of its total assets in any particular
industry, and (ii) there is no limitation with respect to investments in
obligations issued or guaranteed by the United States Government or its agencies
and instrumentalities, or obligations of domestic commercial banks. As to
utility companies, gas, electric, water and telephone companies will be
considered as separate industries. As to finance companies, the following
categories will be considered as separate industries: (a) captive automobile
finance, such as General Motors Acceptance Corp. and Ford Motor Credit Corp.;
(b) captive equipment finance companies, such as Honeywell Finance Corporation
and General Electric Credit Corp.; (c) captive retail finance companies, such as
Macy Credit Corp. and Sears Roebuck Acceptance Corp.; (d) consumer loan
companies, such as Beneficial Finance Corporation and Household Finance
Corporation; (e) diversified finance companies such as CIT Financial Corp.,
Commercial Credit Corporation and Borg Warner Acceptance Corp.; and (f) captive
oil finance companies, such as Shell Credit, Inc., Mobil Oil Credit Corp. and
Texaco Financial Services, Inc.

(2) Purchase or sell physical commodities (such as grains, livestock,
etc.) or futures or options contracts thereon. However, it may purchase or sell
any forms of financial instruments or contracts that might be deemed
commodities.

(3) Invest directly in real estate or interests in real estate; however,
the Fund may invest in interests in real estate investment trusts, debt
securities secured by real estate or interests therein, or debt or equity
securities issued by companies which invest in real estate or interests therein.

(4) Mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any securities owned or held by the Fund, provided that this
restriction shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

<PAGE>

(5) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities, the
Fund may be deemed an underwriter under applicable laws.

(6) Purchase securities on margin, except that the Fund, in accordance
with its investment objectives and policies, may purchase securities on a
when-issued, delayed delivery or forward commitment basis. The Fund may also
obtain such short-term credit as it needs for the clearance of securities
transactions and may make margin deposits in connection with futures contracts.

(7) Make short sales, except for sales "against the box."

(8) Make loans to other persons, except: (i) each Fund may lend its
portfolio securities in an amount not to exceed 33 1/3% of the value of its
total assets if such loans are secured by collateral equal to at least the
market value of the securities lent, provided that such collateral shall be
limited to cash, securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, certificates of deposit or other high-grade,
short-term obligations or interest-bearing cash equivalents; and (ii) it may
purchase debt securities through private placements (restricted securities) in
accordance with the Fund's investment objectives and policies.

(9) Issue senior securities (as defined in the 1940 Act) other than as set
forth in restriction #10 below and except to the extent that using options and
futures contracts or purchasing or selling securities on a when issued, delayed
delivery or forward commitment basis (including the entering into of roll
transactions) may be deemed to constitute issuing a senior security.

(10) Borrow money except from banks for temporary or emergency purposes not
in excess of 33 1/3% of the value of the Fund's total assets. The Fund will not
purchase securities while borrowings (including roll transactions) in excess of
5% of total assets are outstanding. In the event that the asset coverage for
the Fund's borrowings falls below 300%, the Fund will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for 300% asset coverage.

The following investment restrictions may be changed without shareholder
approval. High Yield Series, Value Series, Growth & Income Series and
Aggressive Growth Series will not:

(1) Invest more than 15% of their net assets in illiquid securities.

(2) Enter into any options, futures, or forward contract transactions if
immediately thereafter (a) the amount of premiums paid for all options, initial
margin deposits on all futures contracts and/or options on futures contracts,
and collateral deposited with respect to forward contracts held by or entered
into by the Fund would exceed 5% of the value of the total assets of the Fund or
(b) the Fund's assets covering, subject to, or committed to all options,
futures, and forward contracts would exceed 20% of the value of the total assets
of the Fund. (This restriction

44
<PAGE>

does not apply to securities purchased on a when-issued, delayed delivery, or
forward commitment basis.)

(3) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any issuer to be
held by the Fund.

INVESTMENT RESTRICTIONS --GLOBAL GROWTH SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. Global Growth Series will not:

(1) Concentrate its investments, that is, invest 25% or more of its total
assets in any particular industry.

(2) Buy or sell commodities or commodity contracts, including futures
contracts, other than within the limitations set forth in the Prospectus and
Statement of Additional Information.

(3) Purchase or sell real estate or other interests in real estate, or
interests in real estate investment trusts; however, Global Growth Series may
invest in debt securities secured by real estate or interests therein or issued
by corporations which invest in real estate or interests therein.

(4) Mortgage, pledge, hypothecate, or in any manner transfer, as security
for indebtedness, any securities owned or held by Global Growth Series, provided
that this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities.

(5) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities, Global
Growth Series may be deemed an underwriter under applicable laws and except that
Global Growth Series may invest up to 10% of the value of its assets in
portfolio securities which are not registered under the applicable securities
laws of the country in which such securities are traded and for which no
alternative market is readily available (such securities are referred to herein
as "restricted securities").

(6) Purchase securities on margin, except that Global Growth Series, in
accordance with its investment objectives and policies, may purchase securities
on a when-issued, delayed delivery or forward commitment basis, within the
limitations set forth in the Prospectus and Statement of Additional Information.
Global Growth Series may also obtain such short-term credit as it needs for the
clearance of securities transactions and may make margin deposits in connection
with futures contracts.

(7) Make short sales, except for sales "against the box."

(8) Make loans to other persons, except that it may purchase readily
marketable bonds, debentures, or other debt securities, whether or not publicly
distributed, enter into

45
<PAGE>

repurchase agreements, and make loans of portfolio securities to an aggregate
of 30% of the value of its total assets, measured at the time any such loan is
made.

(9) Issue senior securities, except that Global Growth Series may purchase
securities on a when-issued, delayed delivery or forward commitment basis and
enter into roll transactions and other transactions within the limitations set
forth in the Prospectus and Statement of Additional Information which may be
deemed to constitute borrowing.

(10) Borrow money except from banks for temporary or emergency purposes not
in excess of 33 1/3% of the value of the Fund's total assets. Global Growth
Series will not purchase securities while borrowings (including roll
transactions) in excess of 5% of total assets are outstanding. In the event
that the asset coverage for the Fund's borrowings falls below 300%, Global
Growth Series will reduce, within three days (excluding Sundays and holidays),
the amount of its borrowings in order to provide for 300% asset coverage.

The following investment restrictions may be changed without shareholder
approval. Global Growth Series will not:

(1) Invest more than 15% of its net assets in illiquid securities.

(3) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any issuer to be
held by the Fund.

INVESTMENT RESTRICTIONS --GLOBAL BOND SERIES, GLOBAL ASSET ALLOCATION SERIES AND
INTERNATIONAL STOCK SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. No Fund will:

(1) Concentrate its investments in any particular industry, except that
(i) a Fund may invest up to 25% of the value of its total assets in any
particular industry, and (ii) there is no limitation with respect to investments
in obligations issued or guaranteed by the United States government or its
agencies and instrumentalities, or obligations of domestic commercial banks. As
to utility companies, gas, electric, water and telephone companies will be
considered as separate industries. As to finance companies, the following
categories will be considered as separate industries: (a) captive automobile
finance, such as General Motors Acceptance Corp. and Ford Motor Credit Corp.;
(b) captive equipment finance companies, such as Honeywell

46
<PAGE>

Finance Corporation and General Electric Credit Corp.; (c) captive retail
finance companies, such as Macy Credit Corp. and Sears Roebuck Acceptance Corp.;
(d) consumer loan companies, such as Beneficial Finance Corporation and
Household Finance Corporation; (e) diversified finance companies, such as CIT
Financial Corp., Commercial Credit Corporation and Borg Warner Acceptance Corp.;
and (f) captive oil finance companies, such as Shell Credit, Inc., Mobil Oil
Credit Corp. and Texaco Financial Services, Inc. [For purposes of this
restriction, securities of each foreign government or agency thereof will be
considered separate "industries".]

(2) Purchase or sell physical commodities (such as grains, livestock,
etc.) or futures or options contracts thereon; however, a Fund may purchase or
sell any forms of financial instruments or contracts that might be deemed
commodities.

(3) Invest directly in real estate or interests in real estate; however, a
Fund may invest in interests in real estate investment trusts, debt securities
secured by real estate or interests therein, or debt or equity securities issued
by companies that invest in real estate or interests therein.

(4) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities, a Fund
may be deemed an underwriter under applicable laws.

(5) Purchase securities on margin or otherwise borrow money, except that a
Fund, in accordance with its investment objectives and policies, may purchase
securities on a when-issued, delayed delivery or forward commitment basis, and
may make margin deposits in connection with dealing in commodities or options
thereon. A Fund also may obtain such short-term credit as it needs for the
clearance of securities transactions, and may borrow from a bank an amount that
does not exceed 33 1/3% of the value of a Fund's total assets. A Fund will
not purchase investment securities while outstanding bank borrowings (including
"roll" transactions) in excess of 5% of its total assets are outstanding. In
the event that the asset coverage for a Fund's borrowings falls below 300%, such
Fund will reduce, within three days (excluding Sundays and holidays), the amount
of its borrowings in order to provide for 300% asset coverage.

(6) Make loans to other persons, except that a Fund may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of its total assets
(including the amount lent as well as the collateral securing such loans), if
such loans are secured by collateral at least equal to the market value of the
securities lent, provided that such collateral shall be limited to cash,
government securities, certificates of deposit or other high-grade, short-term
obligations or interest-bearing cash equivalents (including repurchase
agreements pertaining to such securities or obligations). Loans shall not be
deemed to include repurchase agreements or the purchase or acquisition of a
portion of an issue of notes, bonds, debentures or other debt securities,
whether or not such purchase or acquisition is made upon the original issuance
of the securities.

(7) Issue senior securities (as defined in the 1940 Act) other than as set
forth in restriction 5 concerning borrowing and except to the extent that using
options and futures

47
<PAGE>

contracts or purchasing or selling securities on a when-issued, delayed delivery
or forward commitment basis (including the entering into of roll transactions)
may be deemed to constitute issuing a senior security.

The following investment restrictions may be changed without shareholder
approval. Global Bond Series, Global Asset Allocation Series and International
Stock Series will not:

(1) Invest more than 15% of their net assets in illiquid securities.

(2) Enter into any options, futures or forward contract transactions if
immediately thereafter the amount of premiums paid for all options, initial
margin deposits on all futures contracts and/or options on futures contracts,
and collateral deposited with respect to forward contracts held by or entered
into by such Fund would exceed 5% of the value of the total assets of such Fund.
(This restriction does not apply to securities purchased on a when-issued,
delayed delivery or forward commitment basis.)

(3) Purchase the securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any issuer to be
held by the Fund.

INVESTMENT RESTRICTIONS -- S&P 500 INDEX SERIES AND MID CAP STOCK SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. Neither Fund will:

(1) Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities,
and state or municipal governments and their political subdivisions, are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).

(2) Borrow money or issue senior securities as defined in the 1940 Act
except that a Fund may borrow money in an amount not exceeding one-third of the
Fund's total assets at the time of such borrowings. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.

(3) Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall not
be treated as loans.

(4) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in real estate business
or invest or deal in real estate or interests therein).

48
<PAGE>

(5) Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.

(6) Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

The following investment restrictions may be changed without shareholder
approval. S&P 500 Index Series and Mid Cap Stock Series will not:

(1) Invest more than 15% of their net assets in illiquid securities.

(2) Purchase puts, calls, straddles, spreads and any combination thereof
if by reason thereof the value of its aggregate investment in such classes of
securities would exceed 5% of its total assets except that: (a) this limitation
shall not apply to standby commitments, and (b) this limitation shall not apply
to the Fund's transactions in futures contracts and related options.

INVESTMENT RESTRICTIONS -- BLUE CHIP STOCK SERIES AND SMALL CAP VALUE SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. Neither Fund will:

(1) Borrow money except that the Fund may (i) borrow for non-leveraging,
temporary or emergency purposes and (ii) engage in reverse repurchase agreements
and make other investments or engage in other transactions, which may involve a
borrowing, in a manner consistent with the Fund's investment objective and
program, provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage permitted by law.
Any borrowings which come to exceed this amount will be reduced in accordance
with applicable laws. The Fund may borrow from banks or other persons to the
extent permitted by applicable law.

(2) Purchase or sell physical commodities; except that it may enter into
futures contracts and options thereon.

(3) Purchase the securities of any issuer if, as a result, more than 25%
of the value of the Fund's total assets would be invested in the securities of
issuers having their principal business activities in the same industry.

(4) Make loans, although the Fund may (i) lend portfolio securities
provided that no such loan may be made if, as a result, the aggregate of such
loans would exceed 33 1/3% of the value of the Fund's total assets; (ii)
purchase money market securities and enter into repurchase agreements; and (iii)
acquire publicly-distributed or privately-placed debt securities and purchase
debt.

49
<PAGE>

(5) Purchase a security if, as a result, with respect to 75% of the value
of its total assets, more than 5% of the value of the Fund's total assets would
be invested in the securities of a single issuer, except securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.

(6) Purchase a security if, as a result, with respect to 75% of the value
of the Fund's total assets, more than 10% of the outstanding voting securities
of any issuer would be held by the Fund (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities).

(7) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or in
securities of companies engaged in the real estate business).

(8) Issue senior securities except in compliance with the 1940 Act.

(9) Underwrite securities issued by other persons, except to the extent
that the Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of its portfolio
securities in the ordinary course of pursuing its investment program.

The following notes should be read in connection with the above-described
fundamental policies. The notes are not fundamental policies.

With respect to investment restriction (2), the Funds do not consider
currency contracts or hybrid investments to be commodities. For purposes of
investment restriction (3), U.S., state or local governments, or related
agencies or instrumentalities, are not considered an industry. Industries are
determined by reference to the classifications of industries set forth in the
Funds' semi-annual and annual reports. For purposes of investment restriction
(4), the Funds will consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit with a term of
more than nine months.

The following investment restrictions may be changed without shareholder
approval. Blue Chip Stock Series and Small Cap Value Series will not:

(1) Purchase a futures contract or an option thereon if, with respect to
positions in futures or options on futures which do not represent bona fide
hedging, the aggregate initial margin and premiums on such options would exceed
5% of the Fund's net asset value.

(2) Invest more than 15% of their net assets in illiquid securities.

INVESTMENT RESTRICTIONS -- LARGE CAP GROWTH SERIES

The following investment restrictions are fundamental and may be changed
only by the approval of shareholders. The Fund will not:

50
<PAGE>

(1) Purchase more than 10% of the outstanding voting securities of any one
issuer.

(2) Invest 25% or more of the value of its total assets in the same
industry except that this restriction does not apply to securities issued or
guaranteed by the United States Government, its agencies and instrumentalities.

(3) Borrow money or issue senior securities except for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total
assets at the time the borrowing is made.

(4) Pledge, mortgage, hypothecate or otherwise encumber any of its assets
except in connection with the writing of call options and except to secure
permitted borrowings.

(5) Make loans except through the purchase of debt obligations, lending
portfolio securities and entering into repurchase agreements.

(6) Write put options.

(7) (a) Purchase or sell real estate except that it may purchase and sell
securities of companies that deal in real estate or interests therein; (b)
purchase or sell commodities or commodity contracts (other than stock index
futures contracts), (c) make short sales of securities or purchase securities on
margin except for such short-term credits as may be necessary for the clearance
of transactions, or (d) act as an underwriter of securities, except that the
Large Cap Growth Series may acquire restricted securities or securities in
private placements under circumstances in which, if such securities were sold,
the Large Cap Growth Series might be deemed to be an underwriter within the
meaning of the Securities Act of 1933.

The following investment restrictions may be changed without shareholder
approval. Large Cap Growth Series will not:

(1) Invest more than 20% of the value of its total assets in convertible
securities.

(2) Invest more than 5% of the value of its total assets in rights or
warrants that entitle the holder to buy equity securities.

(3) Invest more than 15% of the value of its total assets in securities of
foreign issuers.

(4) Invest more than 15% of its net assets in illiquid securities.

(5) Sell a call option written by it if, as a result of the sale, the
aggregate of the Fund's portfolio securities subject to outstanding call options
(valued at the lower of the option price or market value of such securities)
would exceed 15% of the value of the Fund's total assets.

(6) Invest more than 10% of its total assets in put and call options
(including options on market indices).

51
<PAGE>

(7) Purchase or sell options on stock index futures contracts.

(8) Purchase or sell a stock index future if, immediately thereafter, more
than 30% of its total assets would be hedged by stock index futures.

MANAGEMENT OF THE FUNDS

Under Minnesota law, the Board of Directors of Fortis Series has overall
responsibility for managing Fortis Series in good faith, in a manner reasonably
believed to be in the best interests of the company and with the care an
ordinarily prudent person would exercise in similar circumstances. This
management may not be delegated. The Articles of Incorporation limit the
liability of directors to the fullest extent permitted by law.

The names, addresses, principal occupations and other affiliations of
directors and executive officers of Fortis Series are listed below. Unless
stated otherwise, all positions have been held at least five years. Each
director and officer also serves as a director or officer of all investment
companies managed by Advisers (the "Fund Complex"). The Fund Complex currently
consists of one closed-end and eight open-end investment companies.

<TABLE>
<CAPTION>
POSITION
WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS AGE THE FUNDS PAST 5 YEARS
- ---------------- --- --------- ------------
<S> <C> <C> <C>
Richard W. Cutting 67 Director Certified public accountant and
137 Chapin Parkway financial consultant.
Buffalo, New York

Allen R. Freedman* 58 Director Chairman, Chief Executive Officer
One Chase Manhattan Plaza and President of Fortis, Inc.; a
New York, New York Managing Director of Fortis
International, N. V.

Dr. Robert M. Gavin 58 Director President, Cranbrook Education
380 Lone Pine Road Community; prior to July 1996,
Bloomfield Hills, Michigan President, Macalester College,
St. Paul, MN.

Jean L. King 54 Director President, Communi-King, a
12 Evergreen Lane communications consulting firm,
St. Paul, Minnesota St. Paul, MN.

Dean C. Kopperud * 46 President Chief Executive Officer and a
500 Bielenberg Drive and Director of Advisors, President
Woodbury, Minnesota Director and a Director of Investors,
President of Fortis Financial
Group, a Director of Fortis
Benefits Insurance Company and a
Senior Vice President of Time
Insurance Company.

Edward M. Mahoney 68 Director Retired; prior to December, 1994,
2760 Pheasant Road Chairman and Chief Executive
Excelsior, Minnesota Officer and a Director of Advisers
and Investors, Senior Vice
President and a Director of Fortis
Benefits Insurance Company, and
Senior Vice President of Time
Insurance Company.

Robb L. Prince 57 Director Financial and Employee Benefit
5108 Duggan Plaza Consultant; prior to July, 1995,
Edina, Minnesota Vice President and Treasurer,
Jostens, Inc., a producer of
products and services for the
youth, education, sports award,
and recognition markets,
Minneapolis, MN.

52
<PAGE>

<CAPTION>
POSITION
WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS AGE THE FUNDS PAST 5 YEARS
- ---------------- --- --------- ------------
<S> <C> <C> <C>
Leonard J. Santow 62 Director Principal, Griggs & Santow,
75 Wall Street Incorporated, economic and
21st Floor financial consultants, New York,
New York, New York NY.

Joseph M. Wikler 57 Director Investment consultant and private
12520 Davan Drive investor.
Silver Spring, Maryland

Gary N. Yalen 56 Vice President and Chief Investment
One Chase Manhattan Plaza President Officer of Advisers (since 1995)
New York, New York New York, NY, and Senior Vice
President, Investments, Fortis,
Inc.; prior to 1996, President and
Chief Investment Officer, Fortis
Asset Management, a former
division of Fortis, Inc.

Howard G. Hudson 61 Vice Executive Vice President and Head
One Chase Manhattan Plaza President of Fixed Income Investments of
New York, New York Advisers since 1995; prior to
1996, Senior Vice President, Fixed
Income, Fortis Asset Management.

Lucinda S. Mezey 51 Vice Executive Vice President and Head
One Chase Manhattan Plaza President of Equity Investments of Advisers
New York, New York since October 1997; from 1995 to
October 1997, Chief Investment
Officer, Alex Brown Capital
Advisory and Trust Co., Baltimore,
MD; and prior to 1995, Senior Vice
President and Head of Equity
Investments, PNC Bank,
Philadelphia, PA.

James S. Byrd 47 Vice Executive Vice President of
90 South 7th Street, #5030 President Advisers since 1995; prior to
Minneapolis, Minnesota 1995, Vice President of Advisers
and Investors.

Nicholas L. M. de Peyster 32 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1995; prior to 1996, Vice
New York, New York President, Equities, Fortis Asset
Management.

Diane M. Gotham 40 Vice Vice President of Advisers since
90 South 7th Street, #5030 President 1998; from 1994 to 1998,
Minneapolis, Minnesota securities analyst for Advisers.

Laura E. Granger 37 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1998; from 1993 to 1998, portfolio
New York, New York manager, General Motors Investment
Management, New York, NY.

Maroun M. Hayek 50 Vice Vice President of Advisers; prior
One Chase Manhattan Plaza President to August 1996, Vice President,
New York, New York Fixed Income, Fortis Asset
Management.

Robert C. Lindberg 46 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1993.
New York, New York

Charles L. Mehlhouse 56 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1996; prior to March 1996,
New York, New York Portfolio Manager to Marshall &
Ilsley Bank Corporation,
Milwaukee, WI.

Kevin J. Michels 47 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1995. Prior to 1996, Vice
New York, New York President, Administration, Fortis
Asset Management.

Christopher J. Pagano 35 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1996; prior to March 1996,
New York, New York Government Strategist for Merrill
Lynch, New York, N.Y.

Stephen M. Rickert 55 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1995; from 1994 to 1996, Corporate
New York, New York Bond Analyst, Fortis Asset
Management.

53
<PAGE>

<CAPTION>
POSITION
WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS AGE THE FUNDS PAST 5 YEARS
- ---------------- --- --------- ------------
<S> <C> <C> <C>
Michael J. Romanowski 47 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1998; from October 1995 to March
New York, New York 1998, Portfolio Manager, Value
Line, New York, NY; prior to
October 1995, securities analyst,
Conning & Co., Hartford, CT.

Ho Wang 51 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1998; from 1995 to 1998, senior
New York, New York securities analyst, Lord, Abbett &
Co., New York, NY; prior to 1995,
portfolio manager, New York Life,
New York, NY.

Christopher J. Woods 38 Vice Vice President of Advisers since
One Chase Manhattan Plaza President 1995; prior to 1996, Vice
New York, New York President, Fixed Income, Fortis
Asset Management.

Robert W. Beltz, Jr. 49 Vice Vice President - Securities
500 Bielenberg Drive President Operations of Advisers and
Woodbury, Minnesota Investors.

Peggy E. Ettestad 41 Vice Senior Vice President, Operations
500 Bielenberg Drive President of Advisers; prior to March 1997,
Woodbury, Minnesota Vice President G.E. Capital Fleet
Services, Minneapolis, MN.

Tamara L. Fagely 40 Vice Vice President of Advisers and
500 Bielenberg Drive President Investors since 1998; prior
Woodbury, Minnesota and thereto, Second Vice President of
Treasurer Advisers and Investors.

Dickson Lewis 49 Vice Senior Vice President, Marketing
500 Bielenberg Drive President and Sales of Advisers; from 1993
Woodbury, Minnesota to July 1997, President and Chief
Executive Officer
Hedstrom/Blessing, Inc., a
marketing communications company,
Minneapolis, MN.

David A. Peterson 56 Vice Vice President and Assistant
500 Bielenberg Drive President General Counsel, Fortis Benefits
Woodbury, Minnesota Insurance Company.

Scott R. Plummer 39 Vice Vice President since 1998,
500 Bielenberg Drive President Associate General Counsel since
Woodbury, Minnesota 1998 and Assistant Secretary of
Advisers; prior thereto, Second
Vice President and Corporate
Counsel of Advisers.

Rhonda J. Schwartz 40 Vice Senior Vice President and General
500 Bielenberg Drive President Counsel of Advisers; Senior Vice
Woodbury, Minnesota President and General Counsel,
Life and Investment Products,
Fortis Benefits Insurance Company
and Vice President and General
Counsel, Life and Investment
Products, Time Insurance Company;
from 1993 to January 1996, Vice
President, General Counsel,
Fortis, Inc.

Melinda S. Urion 45 Vice Since December 1997, Senior Vice
500 Bielenberg Drive President President and Chief Financial
Woodbury, Minnesota Officer of Advisers. Prior to
December 1997, Senior Vice
President of Finance and Chief
Financial Officer, American
Express Financial Corporation;
prior to 1995, Corporate
Controller, American Express
Financial Corporation.

Michael J. Radmer 54 Secretary Partner, Dorsey & Whitney LLP, the
220 South Sixth Street Fund's General Counsel.
Minneapolis, Minnesota

- -------------------------
* Mr. Kopperud is an "interested person" (as defined under the 1940 Act) of
Advisers and Fortis Series because he holds certain positions including
serving as Chief Executive Officer and a director of Advisers. Mr.
Freedman is an "interested person" of Advisers and Fortis Series because he
holds certain positions including serving as Chairman and Chief Executive
Officer of Fortis, Inc., the parent company of Advisers.

Each director who is not affiliated with Advisers or Investors receives a
monthly fee of
</TABLE>

54
<PAGE>

$700 from Fortis Series, $100 per meeting attended from Fortis Series, and $100
per committee meeting attended from Fortis Series (and reimbursement of travel
expenses to attend meetings). Each such director also receives a monthly fee, a
meeting fee and a committee meeting fee from each fund in the Fund Complex for
which they are a director. The following table sets forth the aggregate
compensation received by each director from Fortis Series during the fiscal year
ended December 31, 1998, as well as the total compensation received by each
director from the Fund Complex during the calendar year ended December 31, 1998.
Mr. Freedman and Mr. Kopperud, who are affiliated with Advisers and Investors,
did not receive any compensation. No executive officer receives any
compensation from the Funds.

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from from
Director Fortis Series Fund Complex*
------------------- ----------------- ------------------
<S> <C> <C>
Richard W. Cutting $9,000 $31,200
Dr. Robert M. Gavin $9,000 $31,200
Jean L. King $9,000 $31,200
Edward M. Mahoney $9,000 $31,200
Robb L. Prince $9,000 $31,200
Leonard J. Santow $9,000 $30,300
Joseph M. Wikler $9,000 $31,300
</TABLE>

- ---------------
* The Fund Complex consists of one closed-end and eight open-end investment
companies managed by Advisers.

During the fiscal year ended December 31, 1998, Fortis Series paid $113,185
in legal fees and expenses to a law firm of which the Funds' Secretary is a
partner.

Directors Gavin, Kopperud, Mahoney and Prince are members of the Executive
Committee of the Board of Directors. While the Executive Committee is
authorized to act in the intervals between regular board meetings with full
capacity and authority of the full Board of Directors, except as limited by law,
it is expected that the Committee will meet at least twice a year.

PRINCIPAL HOLDERS OF SECURITIES

As of March 31, 1999, less than 1% of the outstanding shares of Fortis
Series were attributable to contracts owned of record or beneficially by the
directors and executive officers as a group. The directors and executive
officers otherwise do not own any of the outstanding shares of Fortis Series.

As of March 31, 1999, no person was a record holder or, to the knowledge of
Fortis Series, a beneficial owner of more than 5% of the outstanding shares of
any Fund, except as set forth below:

<PAGE>

Number Percent of
of Outstanding
Fund Name and Address of Shareholder Shares Shares
- ---- ------------------------------- ------ ------
<S> <C> <C> <C>
Diversified Fortis Benefit Life Insurance 112,715,571 98.7
Income Series Co. ("FBIC")
500 Bielenberg Drive
Woodbury, MN 55125
Growth Stock Series FBIC 720,139,517 99.7
Asset Allocation Series FBIC 607,894,978 99.5
Money Market Series FBIC 79,620,430 99.2
U.S. Gov. Securities Series FBIC 150,755,392 99.1
Global Growth Series FBIC 315,699,851 99.5
Aggressive Growth Series FBIC 146,718,853 98.9
Growth & Income Series FBIC 304,647,848 97.5
High Yield Series FBIC 72,371,254 97.5
Global Asset Allocation Series FBIC 66,357,148 97.7
International Stock Series FBIC 102,613,642 97.9
Global Bond Series FBIC 25,199,125 99.1
Value Series FBIC 85,091,260 97.1
S&P 500 Index Series FBIC 287,120,370 97.1
Blue Chip Series FBIC 207,264,219 97.3
Mid Cap Stock Series FBIC 14,466,964 98.8
Large Cap Growth Series FBIC 31,437,999 94.6
Large Cap Growth Series First Fortis Life Ins. Co. 1,808,877 5.4
220 Salina Meadows Pkwy
Syracuse, NY 13220
Small Cap Value Series FBIC 19,405,026 98.6
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL

Fortis Advisers, Inc. ("Advisers") has been the investment adviser and
manager of Fortis Series since its inception. Fortis Investors, Inc.
("Investors") acts as the Funds' underwriter. Each acts pursuant to written
agreements periodically approved by the directors or shareholders. The address
of each is that of the Funds. As of December 31, 1998, Advisers managed
thirty-three investment company portfolios with combined net assets of
approximately $6.4 billion.

CONTROL AND MANAGEMENT OF ADVISERS AND INVESTORS

Fortis, Inc. ("Fortis") owns 100% of the outstanding voting securities of
Advisers, and Advisers owns all of the outstanding voting securities of
Investors.

Fortis, located in New York, New York, is a financial services company that
provides specialty insurance and investment products to individuals, businesses,
associations and other financial services organizations in the United States.
Fortis is a part of a worldwide group of companies active in the fields of
insurance, banking and investments. Fortis is jointly owned by Fortis (NL) N.V.
of The Netherlands and Fortis (B) of Belgium.

Fortis (NL) N.V. is a diversified financial services company headquartered
in Utrecht, The Netherlands, where its insurance operations began in 1847.
Fortis (B) is a diversified financial services company headquartered in
Brussels, Belgium, where its insurance operations began in 1824. Fortis (NL)
N.V. and Fortis (B) own a group of companies active in insurance, banking and
financial services, and real estate development in The Netherlands, Belgium, the
United States, Western Europe, and the Pacific Rim.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

Advisers acts as investment adviser and manager of each Fund under separate
Investment Advisory and Management Agreements. These agreements are
individually referred to as an "Agreement" and collectively referred to as
"Agreements." The Agreements will terminate automatically in the event of their
assignment. In addition, the Agreements are terminable at any time, without
penalty, by the Board of Directors or, with respect to any particular Fund, by
vote of a majority of the outstanding voting securities of such Fund, on not
more than 60 days' written notice to Advisers, and by Advisers on 60 days'
notice to Fortis Series. Unless sooner terminated, each Agreement shall
continue in effect for more than two years after its execution

56
<PAGE>

only so long as such continuance is specifically approved at least annually by
either the Board of Directors or, with respect to any particular Fund, by vote
of a majority of the outstanding voting securities of such Fund, provided that
in either event such continuance is also approved by the vote of a majority of
the directors who are not parties to such Agreement, or interested persons of
such parties, cast in person at a meeting called for the purpose of voting on
such approval.

The Agreements provide for the payment of investment advisory and
management fees by the Funds calculated as described in the following table.

<TABLE>
<CAPTION>
Annual
Investment
Advisory and
Fund Average Net Assets Management Fee
- ---- ------------------ --------------
<S> <C> <C>
Money Market Series For the first $500 million .30%
For assets over $500 million .25%
U.S. Government Securities Series For the first $50 million .50%
For assets over $50 million .45%
Diversified Income Series For the first $50 million .50%
For assets over $50 million .45%
Global Bond Series For the first $100 million .75%
For assets over $100 million .65%
High Yield Series For the first $250 million .50%
For assets over $250 million .45%
Global Asset Allocation Series For the first $100 million .90%
For assets over $100 million .85%
Asset Allocation Series For the first $250 million .50%
For assets over $250 million .45%
Value Series For the first $100 million .70%
For assets over $100 million .60%
Growth & Income Series For the first $100 million .70%
For assets over $100 million .60%
S&P 500 Index Series All levels of assets .40%
Blue Chip Stock Series For the first $100 million .90%
For assets over $100 million .85%
International Stock Series For the first $100 million .85%
For assets over $100 million .80%
Mid Cap Stock Series For the first $100 million .90%
For the next $150 million .85%
For assets over $250 million .80%
Small Cap Value Series For the first $50 million .90%
For assets over $50 million .85%
Global Growth Series For the first $500 million .70%
For assets over $500 million .60%
Large Cap Growth Series For the first $100 million .90%
For the next $100 million .85%
For assets over $200 million .80%
Growth Stock Series For the first $100 million .70%
For assets over $100 million .60%
Aggressive Growth Series For the first $100 million .70%
For assets over $100 million .60%

</TABLE>

57
<PAGE>

During the fiscal years ended December 31, 1996, 1997 and 1998, the Funds
paid the following investment advisory and management fees to Advisers.

<TABLE>
<CAPTION>
Fund 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C>
Money Market $ 57,756 $ 191,433 $ 194,182
U.S. Government Securities 786,612 687,529 673,637
Diversified Income 503,938 488,855 521,184
Global Bond 131,386 149,694 163,906
High Yield 171,148 258,195 338,252
Global Asset Allocation 258,678 406,583 546,257
Asset Allocation 1,794,647 2,102,625 2,471,163
Value(1) 32,997 230,143 531,886
Growth & Income 660,575 1,250,461 1,816,200
S&P 500 Index(1) 34,900 251,081 707,922
Blue Chip Stock(1) 66,780 407,113 1,131,224
International Stock 317,951 571,117 782,792
Mid Cap Stock(2) * * 49,482
Small Cap Value(2) * * 61,548
Global Growth 1,888,142 ,416,410 2,487,275
Large Cap Growth(2) * * 63,457
Growth Stock 3,734,829 4,268,503 4,378,864
Aggressive Growth 535,835 735,430 871,318
</TABLE>

* Not in existence during this period.
(1) Inception date: May 1, 1996.
(2) Inception date: May 1, 1998.

Advisers, at its own expense, furnishes suitable office space, facilities,
equipment, administrative services, and clerical and other personnel as may be
required for the management of the affairs and business of Fortis Series, and
acts as Fortis Series' registrar, transfer agent, and dividend disbursing agent.
Fortis Series pays all its expenses which are not expressly assumed by Advisers
or Investors. These expenses include, among others, the investment advisory and
management fee, the fees and expenses of directors and officers of Fortis Series
who are not "affiliated persons" of Advisers, interest expenses, taxes,
brokerage fees and commissions, fees and expenses of registering and qualifying
Fortis Series and its shares for distribution under Federal securities laws,
expenses of preparing prospectuses and of printing and distributing prospectuses
annually to existing contract owners, custodian charges, auditing and legal
expenses, insurance expenses, association membership dues, and the expense of
reports to shareholders and contract owners, shareholders' meetings, and proxy
solicitations. Fortis Series is also liable for such nonrecurring expenses as
may arise, including litigation to which it may be a party. Fortis Series may
have an obligation to indemnify its directors and officers with respect to such
litigation.

SUB-ADVISORY AGREEMENTS

Global Bond Series, Global Asset Allocation Series, S&P 500 Index Series,
Blue Chip Stock Series, International Stock Series, Mid Cap Stock Series, Small
Cap Value Series and Large Cap Growth Series have retained sub-advisers under
investment sub-advisory agreements and for Small Cap Value Series the
sub-adviser has entered into a sub-management agreement

58
<PAGE>

with a manager (such agreements are collectively referred to as the
"Sub-Advisory Agreements"). Each Sub-Advisory Agreement will terminate
automatically upon the termination of the Investment Advisory and Management
Agreement between Fortis Series and Advisers, and in the event of its
assignment. In addition, the Sub-Advisory Agreements are terminable at any
time, without penalty, by the Board of Directors, by Advisers or by a vote of
the majority of the applicable Fund's outstanding voting securities on 60 days'
written notice to such Fund's sub-adviser and by a sub-adviser on 60 days'
written notice to Advisers. Unless sooner terminated, the Sub-Advisory
Agreements shall continue in effect from year to year if approved at least
annually by the Board of Directors of Fortis Series or by a vote of a majority
of the outstanding voting securities of the applicable Fund, provided that in
either event such continuance is also approved by the vote of a majority of the
directors who are not interested persons of any party to the Sub-Advisory
Agreements, cast in person at a meeting called for the purpose of voting on such
approval.

For their services, the sub-advisers receive a fee from Advisers (such
amounts are payable out of the advisory fees received by Advisers for the same
period and are not in addition to such amounts). From its advisory fee,
Advisers pays fees to each of the sub-advisers calculated as described below:

<TABLE>
<CAPTION>
Fund Sub-adviser Annual Average Net Assets Sub-Advisory Fee
- ---- ----------- ------------------------- ----------------
<S> <C> <C> <C>
Global Bond Series Mercury For the first $100 million .350%
For assets over $100 million .225%
Global Asset Allocation Morgan Stanley For the first $100 million .500%
Series For assets over $100 million .400%
S&P 500 Index Series Dreyfus All levels of assets .170%
Blue Chip Stock Series T. Rowe Price For the first $100,000,000 .500%
For assets over $100,000,000 .450%
International Stock Series Lazard For the first $100 million .450%
For assets over $100 million .375%
Mid Cap Stock Series Dreyfus For the first $100 million .500%
For the next $150 million .450%
For assets over $250 million .400%
Small Cap Value Series Berger Associates For the first $50 million .500%
For assets over $50 million .450%
Large Cap Growth Series Alliance For the first $100 million .500%
For the next $100 million .450%
For assets over $200 million .400%
</TABLE>

For the Small Cap Value Series, Berger Associates pays Perkins, Wolf,
McDonnell & Company (the "Manager") an amount equal to .25 of 1% of the Fund's
first $50 million of average daily net assets and .225 of 1% of the Fund's net
assets in excess of $50 million.

59
<PAGE>

During the fiscal years ended December 31, 1996, 1997 and 1998, Advisers
paid advisory fees to the sub-advisers of the following Funds in the amounts set
forth below:

<TABLE>
<CAPTION>
Fund 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
Global Bond $ 61,272 $ 69,898 $ 76,489
Global Asset Allocation 144,079 225,590 303,415
S&P 500 Index(1) 14,834 105,647 300,867
Blue Chip Stock(1) 37,202 209,455 551,946
International Stock 168,327 302,356 414,873
Mid Cap Stock(2) * * 26,668
Small Cap Value(2) * * 34,193
Large Cap Growth(2) * * 35,254
</TABLE>
- ---------------
* Not in existence during this period.
(1) Inception date: May 1, 1996.
(2) Inception date: May 1, 1998.

EXPENSES

Expenses that relate exclusively to a particular Fund, such as custodian
charges and registration fees for shares, are charged to that Fund. Other
expenses of Fortis Series are allocated between the Funds in an equitable manner
as determined by officers of Fortis Series under the supervision of the Board of
Directors, usually on the basis of net assets or number of contract holders.

Advisers bears the costs of acting as Fortis Series' transfer agent,
registrar, and dividend agent. Investors has agreed to pay all expenses of
distributing Fortis Series' shares, including, but not limited to, costs of
printing and distributing prospectuses to new contract owners. Pursuant to a
separate Distribution Agreement between Fortis Benefits and Investors, Fortis
Benefits reimburses Investors for these costs and expenses with respect to
variable life insurance policies issued by Fortis Benefits or pays them on
Investors' behalf.

Advisers reserves the right, but shall not be obligated, to institute
voluntary expense reimbursement programs which, if instituted, shall be in such
amounts and based on such terms and conditions as Advisers, in its sole and
absolute discretion, determines. Furthermore, Advisers reserves the absolute
right to discontinue any of such reimbursement programs at any time without
notice to Fortis Series.

BROKERAGE ALLOCATION AND OTHER PRACTICES

Advisers or, where applicable, a Fund's sub-adviser, selects and (where
applicable) negotiates commissions with broker-dealers who execute trades for
the Funds. In selecting a broker-dealer to execute an equity trade, Advisers or
the sub-adviser primarily considers whether the broker-dealer can provide best
execution on the trade including best price for a security. Other factors that
Advisers or the sub-adviser considers when selecting a broker-dealer for an
equity trade include:

60
<PAGE>

- - competitive commissions commensurate with the value of research products
and services provided to Advisers or the sub-adviser;
- - consistently good service quality;
- - adequate capital position;
- - broad market coverage;
- - continuous flow of information concerning bids and offers;
- - the ability to complete, clear and settle trades in a timely and efficient
manner;
- - capital usage;
- - specialized expertise;
- - access to new issues; and
- - the ability to handle large blocks of stock discreetly.

For a Fund exclusively composed of debt, rather than equity securities,
portfolio transactions are effected with dealers without the payment of
brokerage commissions, but at net prices which usually include a spread or
markup. The volume of business done with a broker-dealer for fixed income
trades is based to a large extent on the availability and competitive price of
the fixed income securities that fit the strategy of the fixed income portfolio.
Best execution, the quality of research, making of secondary markets and other
services are also determining factors for the allocation of business when buying
and selling fixed income securities. If a broker-dealer charging a higher
commission or offering a larger spread is more reliable or provides better
execution than a broker-dealer charging a lower commission or offering a smaller
spread, then Advisers or the sub-adviser may select the broker-dealer charging a
higher commission or offering a larger spread for a particular equity or fixed
income trade.

Advisers or the sub-adviser may direct orders to broker-dealers who furnish
research products and services to Advisers or the sub-adviser as long as the
broker-dealers meet the selection criteria outlined above. The research
products and services supplement Advisers' or the sub-adviser's own research and
enable Advisers or the sub-adviser to obtain the views and information of others
prior to making investment decisions for the Funds. The following table sets
forth the amount of commissions paid by certain Funds during the fiscal year
ended December 31, 1998 to broker-dealers who provided research products and
services to Advisers or the Fund's sub-adviser. Funds not listed did not pay
any such commissions.
<TABLE>
<CAPTION>
Amount of Commissions
Paid to Broker-Dealers
Fund Providing Research
------------------------- ----------------------
<S> <C>
Asset Allocation Series $ 94,337
Value Series 112,890

Growth & Income Series 40,228
Global Growth Series 17,601
Growth Stock Series 227,597
Aggressive Growth Series 8,347
</TABLE>

Advisers and the sub-advisers believe that most research services obtained
by them generally benefit several or all of the investment companies, insurance
company accounts and

61
<PAGE>

private accounts which they manage, as opposed to solely benefitting one
specific managed fund or account. Such research services include advice, both
directly and in writing, as to the value of the securities; the advisability of
investing in, purchasing, or selling securities; the availability of securities,
or purchasers or sellers of securities; and analysis and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. Examples of some of the research products and
services that were furnished to Advisers in 1998 include:

- - hard copy securities research services;
- - securities research software database services;
- - electronic securities trading networks; and
- - statistical services useful to mutual fund directors and account
representatives in evaluating the relative performance of mutual fund
portfolios.

If a broker-dealer furnishes Advisers or a sub-adviser with non-research
products and services, Advisers or the sub-adviser will pay the broker-dealer
for such products and services. No client brokerage will be used to pay for
non-research products and services.

Advisers or the respective sub-adviser will authorize a Fund to pay an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker-dealer would have charged only if Advisers
or such sub-adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or Adviser's or the sub-adviser's overall responsibilities with
respect to the accounts to which Advisers or the sub-adviser exercises
investment discretion. In 1998, the Funds generally paid higher commissions
than those obtainable from other broker-dealers in return for research products
and services. Morgan Stanley has agreements in place with several
broker-dealers that relate to equity trades directed by Morgan Stanley. Berger
Associates has informal agreements in place with several broker-dealers that
relate to equity trades directed by Berger Associates. Under these agreements,
the brokers pay for services which assist the investment manager (Morgan Stanley
and Berger Associates) in making investment decisions. The brokers are
obligated to achieve best execution and the commission rates charged by the
brokers are comparable to those charged by brokers with which there is no such
agreement. Advisers and the sub-advisers have not entered and will not enter
into any agreement with a broker-dealer that would prevent Advisers or the
sub-advisers from obtaining best execution on a trade.

62
<PAGE>

The Funds paid brokerage commissions during the periods and in the amounts
listed below:

<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year
Fund ended 12/31/96 ended 12/31/97 ended 12/31/98
- ---- -------------- -------------- --------------
<S> <C> <C> <C>
Global Asset Allocation $ 29,730 $ 47,973 $ 79,680
Asset Allocation 216,651 311,739 688,253
Value 20,397 (1) 119,158 490,162
Growth & Income 112,773 114,941 222,420
S&P 500 Index 19,233 (1) 60,463 61,675
Blue Chip Stock 12,981 (1) 46,609 99,364
International Stock 126,800 145,900 192,277
Mid Cap Stock * * 17,763 (2)
Small Cap Value * * 47,894 (2)
Global Growth 272,063 485,715 475,037
Large Cap Growth Stock * * 16,464 (2)
Growth Stock 323,731 311,310 1,178,542
Aggressive Growth 50,376 47,456 130,650
</TABLE>

- --------------------------------------
* Not in existence during this period.
(1) Inception date: May 1, 1996.
(2) Inception date: May 1, 1998.

Money Market Series, U.S. Government Securities Series, Diversified Income
Series, Global Bond Series and High Yield Series did not pay any brokerage
commissions for the fiscal years ended December 31, 1996, 1997 or 1998.

The Funds will not effect any brokerage transactions in their portfolio
securities with any broker-dealer affiliated directly or indirectly with
Advisers or any sub-adviser, unless such transactions, including the frequency
thereof, the receipt of commissions payable in connection therewith, and the
selection of the affiliated broker-dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Funds. No commissions were
paid by any Fund to any affiliate of Advisers or a sub-adviser during the fiscal
years ended December 31, 1996, 1997 and 1998.

From time to time, the Funds may acquire the securities of their regular
brokers or dealers or parent companies of such brokers or dealers. The Funds
acquired the following securities of their regular brokers or dealers or parent
companies of such brokers or dealers during the fiscal year ended
December 31, 1998:

63
<PAGE>

<TABLE>
<CAPTION>
Value of Value of
Securities Securities
Owned at Year Owned at Year
Name of Issuer End Name of Issuer End
- -------------------------------------- -------------- ------------------------------------- -------------
<S> <C> <C> <C>
MONEY MARKET SERIES GROWTH & INCOME SERIES
American Express Credit Corp. $ 3,497,997 U.S. Bank (N.A.) $ 7,644,705
Chevron Oil USA, Inc. 1,992,778
CIT Group Holdings, Inc. 3,187,616 S&P 500 INDEX SERIES
Commercial Credit Corp. 3,094,647 Bear Stearns & Co. 104,650
John Deere Capital Corp. 3,270,197 J.P. Morgan & Co. 451,769
Merrill Lynch & Co., Inc. 3,467,292 Lehman Brothers, Inc. 127,781
Morgan Stanley Dean Witter Corp. 2,791,476 Merrill Lynch & Co., Inc. 587,400
Texaco, Inc. 3,374,398 Morgan Stanley Dean Witter Corp. 1,023,465
U.S. Bank (N.A.) 1,083,000 U.S. Bank (N.A.) 6,146,947

U.S. GOVERNMENT SECURITIES SERIES BLUE CHIP STOCK SERIES
U.S. Bank (N.A.) 1,812,000 Chase Manhattan Corp. 1,218,319

Morgan Stanley Dean Witter Corp. 695,800
DIVERSIFIED INCOME SERIES U.S. Bank (N.A.) 255,600
Bear Stearns & Co. 1,504,798
Donaldson, Lufkin & Jenrette Securities 4,658,895 INTERNATIONAL STOCK SERIES
J.P. Morgan & Co. 703,600 U.S. Bank (N.A.) 2,931,176
Lehman Brothers, Inc. 2,904,855
Merrill Lynch & Co., Inc. 2,271,700 MID CAP STOCK SERIES
Salomon Smith Barney 1,039,885 U.S. Bank (N.A.) 320,566
U.S. Bank (N.A.) 1,180,144
SMALL CAP VALUE SERIES
GLOBAL BOND SERIES Morgan Stanley Dean Witter Corp. 315,000
U.S. Bank (N.A.) 592,546 U.S. Bank (N.A.) 934,302

HIGH YIELD SERIES GLOBAL GROWTH SERIES
U.S. Bank (N.A.) 2,247,000 U.S. Bank (N.A.) 267,000

GLOBAL ASSET ALLOCATION SERIES LARGE CAP GROWTH SERIES
ABN Bank 393,000 Morgan Stanley Dean Witter Corp. 234,300
Merrill Lynch & Co., Inc. 124,905 U.S. Bank (N.A.) 493,301
U.S. Bank (N.A.) 3,672,934
GROWTH STOCK SERIES
ASSET ALLOCATION SERIES U.S. Bank (N.A.) 3,611,595
Bear Stearns & Co. 1,504,798
Donaldson, Lufkin & Jenrette Securities 9,694,574 AGGRESSIVE GROWTH SERIES
J.P. Morgan & Co. 1,979,504 U.S. Bank (N.A.) 5,061,000

Lehman Brothers, Inc. 5,030,782
Merrill Lynch & Co., Inc. 3,344,822
Salomon Smith Barney 1,299,856
U.S. Bank (N.A.) 15,498,000

VALUE SERIES
J.P. Morgan & Co. 420,250
Merrill Lynch & Co., Inc. 433,875

Morgan Stanley Dean Witter Corp. 1,136,000
U.S. Bank (N.A.) 1,720,250
</TABLE>

64
<PAGE>

Although investment decisions for each Fund are made independently from
those of the other Funds or those of other funds or private accounts managed by
Advisers, sometimes the same security is suitable for more than one fund or
private account. If and when two or more funds or private accounts
simultaneously purchase or sell the same security, the transactions will be
allocated as to price and amount in accordance with arrangements equitable to
each fund or private account. The simultaneous purchase or sale of the same
securities by a Fund and another fund or account may have a detrimental effect
on the Fund, as this may affect the price paid or received by the Fund or the
size of the position obtainable by the Fund.

Advisers has developed written trade allocation procedures for its
management of the securities trading activities of its clients. Advisers
manages multiple portfolios, both public (mutual funds) and private. The
purpose of the trade allocation procedures is to treat the portfolios fairly and
reasonably in situations where the amount of a security that is available is
insufficient to satisfy the volume or price requirements of each portfolio that
is interested in purchasing that security. Generally, when the amount of
securities available in a public offering or the secondary market is
insufficient to satisfy the requirements for the interested portfolios, the
procedures require a pro rata allocation based upon the amounts initially
requested by each portfolio manager. In allocating trades made on combined
basis, each participating portfolio will receive the same average price for the
securities purchased or sold.

Because a pro rata allocation may not always adequately accommodate all
facts and circumstances, the procedures provide for exceptions to allocate
trades on a basis other than pro rata. Adjustments may be made, for example, as
a result of: (i) the cash position of the portfolios involved in the
transaction; or (ii) the relative importance of the security to a portfolio in
seeking to achieve its investment objective.

CAPITAL STOCK

Fortis Series' shares have a par value of $.01 per share and equal rights
to share in dividends and assets. The shares possess no preemptive or
conversion rights.

Fortis Series currently has eighteen Funds, each constituting a separate
series of shares. Under Fortis Series' Articles of Incorporation, the Board of
Directors is authorized to create new series in addition to those already
existing without the approval of the shareholders of Fortis Series. Each share
of stock will have a pro-rata interest in the assets of the Fund to which the
stock of that series relates and will have no interest in the assets of any
other Fund. In the event of liquidation, each share of a Fund would have the
same rights to dividends and assets as every other share of that Fund.

Each share of a Fund has one vote (with proportionate voting for fractional
shares) irrespective of the relative net asset value of the Funds' shares. On
some issues, such as the election of directors, all shares of Fortis Series vote
together as one series. Cumulative voting is not authorized. This means that
the holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they choose to do so, and, in such event, the
holders of the remaining shares will be unable to elect any directors.

<PAGE>

On an issue affecting only a particular Fund, the shares of the affected
Fund vote as a separate series. An example of such an issue would be a
fundamental investment restriction pertaining to only one Fund.

Fortis Series is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders. Minnesota corporation
law provides for the Board of Directors to convene shareholder meetings when it
deems appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding three percent or more of the voting shares of Fortis Series
may demand a regular meeting of shareholders by written notice of demand given
to the chief executive officer or the chief financial officer of Fortis Series.
Within ninety days after receipt of the demand, a regular meeting of
shareholders must be held at Fortis Series' expense. Additionally, the 1940 Act
requires shareholder votes for all amendments to fundamental investment policies
and restrictions and for all investment advisory contracts and amendments
thereto.

PRICING OF SHARES

On December 31, 1998, each Fund's net asset value per share was calculated
as shown below.

MONEY MARKET SERIES
Net Assets ($77,097,135) = Net Asset Value per Share ($11.06)
-------------------------
Shares Outstanding (6,968,506)

U. S. GOVERNMENT SECURITIES SERIES
Net Assets ($152,672,303) = Net Asset Value per Share ($10.93)
-------------------------
Shares Outstanding (13,970,615)

DIVERSIFIED INCOME SERIES
Net Assets ($115,182,377) = Net Asset Value per Share ($11.91)
-------------------------
Shares Outstanding (9,667,496)

GLOBAL BOND SERIES
Net Assets ($24,659,197) = Net Asset Value per Share ($11.56)
-------------------------
Shares Outstanding (2,133,030)

HIGH YIELD SERIES
Net Assets ($70,982,698) = Net Asset Value per Share ($9.91)
-------------------------
Shares Outstanding (7,165,758)

GLOBAL ASSET ALLOCATION SERIES
Net Assets ($69,086,255) = Net Asset Value per Share ($14.32)
-------------------------
Shares Outstanding (4,824,005)

ASSET ALLOCATION SERIES
Net Assets ($593,877,870) = Net Asset Value per Share ($21.09)
-------------------------
Shares Outstanding (28,154,879)

VALUE SERIES
Net Assets ($87,604,393) = Net Asset Value per Share ($14.38)
-------------------------
Shares Outstanding (6,094,107)

66
<PAGE>

GROWTH & INCOME SERIES
Net Assets ($312,939,490) = Net Asset Value per Share ($21.23)
-------------------------
Shares Outstanding (14,742,412)

S&P 500 INDEX SERIES
Net Assets ($252,831,976) = Net Asset Value per Share ($18.83)
-------------------------
Shares Outstanding (13,423,931)

BLUE CHIP STOCK SERIES
Net Assets ($182,921,391) = Net Asset Value per Share ($18.58)
-------------------------
Shares Outstanding (9,846,939)

INTERNATIONAL STOCK SERIES
Net Assets ($103,055,531) = Net Asset Value per Share ($14.48)
-------------------------
Shares Outstanding (7,115,716)

MID CAP STOCK SERIES
Net Assets ($12,995,187) = Net Asset Value per Share ($9.64)
-------------------------
Shares Outstanding (1,348,541)

SMALL CAP VALUE SERIES
Net Assets ($16,503,463) = Net Asset Value per Share ($9.28)
-------------------------
Shares Outstanding (1,778,432)

GLOBAL GROWTH SERIES
Net Assets ($351,476,154) = Net Asset Value per Share ($22.57)
-------------------------
Shares Outstanding (15,574,153)

LARGE CAP GROWTH
Net Assets ($19,120,730) = Net Asset Value per Share ($12.04)
-------------------------
Shares Outstanding (1,587,509)

GROWTH STOCK SERIES
Net Assets ($762,353,767) = Net Asset Value per Share ($41.09)
-------------------------
Shares Outstanding (18,554,191)

AGGRESSIVE GROWTH SERIES
Net Assets ($149,859,678) = Net Asset Value per Share ($16.70)
-------------------------
Shares Outstanding (8,973,277)

The offering price for purchase orders received in the office of Fortis
Series after the beginning of each day the New York Stock Exchange (the
"Exchange") is open for trading is based on net asset value determined as of the
close of regular trading (currently 3:00 P.M. Central Time) on the Exchange that
day; the price in effect for orders received after such close is based on the
net asset value as of such close of the Exchange on the next day the Exchange is
open for trading. Generally, the net asset value of each Fund's shares is
determined on each day on which the Exchange is open for business. The Exchange
is not open for business on the following holidays (nor on the nearest Monday or
Friday if the holiday falls on a weekend): New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Additionally, net asset value need
not be determined for a Fund (i) on days on which changes in the value of the
Fund's

67
<PAGE>

portfolio securities will not materially affect the current net asset value of
the Fund's shares; or (ii) on days during which no shares of the Fund are
tendered for redemption and no orders to purchase or sell shares of the Fund are
received by Fortis Series.

REDEMPTION OF SHARES
Redemption of shares, or payment, may be suspended at times (a) when the
Exchange is closed for other than customary weekend or holiday closings, (b)
when trading on the Exchange is restricted, (c) when an emergency exists, as a
result of which disposal by Fortis Series of securities owned by it is not
reasonably practicable, or it is not reasonably practicable for Fortis Series
fairly to determine the value of its net assets, or during any other period when
the Securities and Exchange Commission, by order, so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.

TAXATION

The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). As long as each Fund so qualifies, it is not taxed on the income it
distributes to shareholders. Generally, in order to qualify as a regulated
investment company, a Fund must derive at least 90% of its gross income from
dividends, interest, and gains from the sale or other disposition of stock or
securities or other income derived with respect to its investing in such stock
or securities. Being qualified as a regulated investment company does not mean
that the Internal Revenue Service supervises Fortis Series or approves its
policies.

Under the Code, each Fund will generally be treated as a separate entity
for federal tax purposes. Therefore, each Fund will be treated separately in
determining whether it qualifies as a regulated investment company and in
determining the net ordinary income (or loss), net realized capital gains (or
losses) and distributions necessary to relieve the Fund of any federal income
tax liability.

Pursuant to the Code, each Fund will be subject to a nondeductible excise
tax for each calendar year equal to 4% of the excess, if any, of the amount
required to be distributed over the amount distributed. However, the excise tax
does not apply to any income on which a Fund pays income tax. In order to avoid
the imposition of this excise tax, each Fund generally must declare dividends by
the end of a calendar year representing 98% of the Fund's ordinary income for
the calendar year and 98% of its capital gain net income (both long-term and
short-term capital gains) for the twelve-month period ending October 31 of the
calendar year.

The Code imposes certain diversification requirements on the investments of
segregated asset accounts underlying variable annuity and life insurance
contracts. Treasury Regulations interpret those requirements. Under the Code
and the Regulations, if a variable contract is based in part or in whole on a
segregated asset account that fails to meet the diversification standards, the
variable contract will not be treated as an annuity or life insurance contract
for federal income

68
<PAGE>

tax purposes. As a consequence, the income on the contract for any taxable
year, whether or not distributed, will be treated as ordinary income received by
the contract owner during such year.

As a general rule, each Fund may invest not more than 55% of the value of
its total assets in the securities of a single issuer, not more than 70% of the
value of its total assets in the securities of any two issuers, not more than
80% of the value of its total assets in the securities of any three issuers, and
not more than 90% of the value of its total assets in the securities of any four
issuers. Under the Code and the Regulations, for purposes of the
diversification tests, the securities of each agency or instrumentality of the
U.S. government are considered the securities of a separate issuer. Each Fund
intends to satisfy either the diversification test described above or an
alternative diversification test provided by the Code, so that the variable
contracts invested in each Fund will be treated as variable contracts under the
Code and the income earned with respect to the contracts will not be currently
taxable to the contract owners.

If a Fund invests in zero coupon obligations upon their issuance, such
obligations will have original issue discount in the hands of such Fund.
Generally, original issue discount equals the difference between the "stated
redemption price at maturity" of the obligation and its "issue price" as those
terms are defined in the Code. If a Fund acquires an already issued zero coupon
bond from another holder, the bond will have original issue discount in the
Fund's hands, equal to the difference between the "adjusted issue price" of the
bond at the time the Fund acquires it (that is, the original issue price of the
bond plus the amount of original issue discount accrued to date) and its stated
redemption price at maturity. In each case, a Fund is required to accrue as
ordinary interest income a portion of such original issue discount even though
such Fund receives no cash currently as interest payments on the obligation.
Similarly, in the case of PIKs, the Funds are required to recognize interest
income in the amount of the fair market value of the securities received as
interest payments on the PIKs, even though they receive no cash.

Because each Fund is required to distribute substantially all of its net
investment income (including accrued original issue discount and interest income
attributable to PIKs) in order to be taxed as a regulated investment company, a
Fund having such income may be required to distribute an amount greater than the
total cash income the Fund actually receives. Accordingly, in order to make the
required distribution, the Fund may be required to borrow or liquidate
securities.

For Federal income tax purposes the Funds had the following capital loss
carryovers at December 31, 1998, which, if not offset by subsequent capital
gains, will expire in 1999 through 2006 . 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.

<TABLE>
<CAPTION>
<S> <C>
Money Market Series $ 65,473
U.S. Government Securities Series 17,090,438
Diversified Income Series 8,540,124
High Yield Series 1,580,586
International Stock Series 769,390
Mid Cap Stock Series 340,752
Large Cap Growth Series 327,690
</TABLE>

69
<PAGE>

UNDERWRITER

Investors has entered into an Underwriting Agreement for the sale and
distribution of the Funds' shares. This Underwriting Agreement may be
terminated by Fortis Series or Investors at any time by the giving of 60 days'
written notice, and terminates automatically in the event of its assignment.
Unless sooner terminated, the Underwriting Agreement shall continue in effect
for more than two years after its execution only so long as such continuance is
also approved by the vote of a majority of the directors who are not parties to
such Underwriting Agreement, or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval.

The Underwriting Agreement requires Investors to pay all promotional
expenses in connection with the distribution of the Fortis Series' shares,
including printing and distributing prospectuses and shareholder reports to new
policy owners and the costs of sales literature. Pursuant to a separate
distribution agreement between Fortis Benefits and Investors, Fortis Benefits
reimburses Investors for these expenses or pays them on Investors' behalf, to
the extent they involve shares issued to fund variable life insurance policies
issued by Fortis Benefits.

In the Underwriting Agreement, Investors undertakes to indemnify Fortis
Series against all costs of litigation and other legal proceedings, and against
any liability incurred by or imposed upon Fortis Series in any way arising out
of or in connection with the sale or distribution of the Fortis Series' shares,
except to the extent that such liability is the result of information which was
obtainable by Investors only from persons affiliated with Fortis Series but not
with Investors.

PERFORMANCE INFORMATION

The Funds may refer to or advertise average annual total returns and
cumulative returns, and may compare such figures to recognized indices. Certain
Funds may provide yield calculations. Any advertisement of a Fund's performance
will be accompanied by performance of the Separate Account being advertised.
All such yield and total return quotations are based on historical earnings and
are not intended to indicate future performance. The return on and principal
value of an investment in any Fund will fluctuate, so that shares when redeemed
may be worth more or less than their original cost.

Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:

CTR = ( ERV - P ) 100
-------
p

70
<PAGE>

Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made at
the beginning of such period; and
P = initial payment of $1,000

This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The following table sets forth the cumulative total return of each Fund for
the period from inception through December 31, 1998:

<TABLE>
<CAPTION>
Cumulative Total
Fund Return
------------------------------------------ ----------------
<S> <S>
Money Market Series (1) 89.83%
U. S. Government Securities Series (1) 132.64%
Diversified Income Series (3) 139.03%
Global Bond Series (6) 39.90%
High Yield Series(5) 36.57%
Global Asset Allocation Series(6) 76.26%
Asset Allocation Series(2) 264.98%
Value Series (7) 53.09%
Growth & Income Series (5) 131.81%
S&P 500 Index Series (7) 93.74%
Blue Chip Stock Series (7) 89.06%
International Stock Series (6) 70.06%
Mid Cap Stock Series (8) -2.89%
Small Cap Value Series (8) -5.48%
Global Growth Series (4) 134.51%
Large Cap Growth Series (8) 18.61%
Growth Stock Series(1) 296.52%
Aggressive Growth Series (5) 68.58%
______________________
(1) Inception date: March 24, 1987.
(2) Inception date: May 1, 1987.
(3) Inception date: May 2, 1988.
(4) Inception date: May 1, 1992.
(5) Inception date: May 2, 1994.
(6) Inception date: January 3, 1995.
(7) Inception date: May 1, 1996.
(8) Inception date: May 1, 1998.
</TABLE>

71
<PAGE>

Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Average annual total return figures are computed according to the
following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made at
the beginning of such period.

This calculation assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates, and
includes all recurring fees, such as investment advisory and management fees,
charged to all shareholder accounts.

72
<PAGE>

The following tables set forth the average annual total returns for each
Fund for one year, five years and since inception (10 years with respect to
Money Market Series, U.S. Government Securities Series, Asset Allocation Series
and Growth Stock Series) for the period ending December 31, 1998.

<TABLE>
<CAPTION>
Average Annual Total Returns
-------------------------------------
10 Years/Since
Fund 1 Year 5 Years Inception
- -------------------------------------- -------- -------- ----------------
<S> <C> <C> <C>
Money Market Series 5.32% 5.09% 5.46%
U. S. Government Securities Series 8.87% 6.17% 8.15%
Diversified Income Series 6.31% 6.33% 8.69%
Global Bond Series (3) 13.49% * 8.77%
High Yield Series (2) 0.62% * 6.90%
Global Asset Allocation Series (3) 17.27% * 15.25%
Asset Allocation Series 19.97% 14.56% 14.08%
Value Series (4) 9.64% * 17.30%
Growth & Income Series (2) 13.21% * 19.73%
S&P 500 Index Series (4) 28.11% * 28.12%
Blue Chip Stock Series (4) 28.07% * 26.96%
International Stock Series (3) 16.47% * 14.22%
Mid Cap Stock Series (5) * * -2.89%
Small Cap Value Series (5) * * -5.48%
Global Growth Series (1) 11.36% 12.39% 13.63%
Large Cap Growth Series (5) * * 18.61%
Growth Stock Series 19.01% 14.09% 15.95%
Aggressive Growth Series (2) 21.17% * 11.84%
___________________________
* Not applicable.
(1) Inception date: May 1, 1992.
(2) Inception date: May 2, 1994.
(3) Inception date: January 3, 1995.
(4) Inception date: May 1, 1996.
(5) Inception date: May 1, 1998.
</TABLE>

U.S. Government Securities Series, Diversified Income Series, Global Bond
Series and High Yield Series, Global Asset Allocation Series and Asset
Allocation Series may quote 30-day yield figures. A Fund's 30-day yield refers
to the income generated by an investment over a 30-day (or one month) period.
It is calculated by dividing the net investment income per share (as defined
under Securities and Exchange Commission rules) earned during the computation
period by the maximum offering price per share on the last day of the period,
according to the following formula. The result is then annualized using a
formula that provides for semiannual compounding of income.

73
<PAGE>

6
Yield = 2 [(a-b + 1) - 1]
----
cd

Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last
day of the period.

The Funds' yields for the 30-day period ended December 31, 1998, were:

<TABLE>
<CAPTION>
Fund Yield
--------------------------------------- ---------
<S> <C>
U.S. Government Securities Series 5.08%
Diversified Income Series 6.34%
Global Bond Series 3.53%
High Yield Series 10.17%
</TABLE>

Money Market Series may quote its current and effective yields for a
seven-day period. Current yield (calculated over a seven-day period) is a
percentage computed by determining the net change, exclusive of capital changes,
in the value of a hypothetical preexisting account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting figure carried to at least the nearest hundredth of one percent.

Effective yield (calculated over a seven-day period) is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical preexisting account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:

Effective Yield = [ (Base Period Return +1) 365/7 ] -1

Money Market Series' yield and effective yield for the seven days ended
December 31, 1998, were 4.73% and 4.65%, respectively.

The Funds also may quote annual yield figures, calculated similarly to the
above methods.

Current yield information is useful in reviewing performance, but because
current yield will fluctuate, such information may not provide a basis for
comparison with bank deposits or other investments which pay a fixed yield for a
stated period of time and may be insured and the current yield is not
necessarily representative of future results.

74
<PAGE>

Comparative performance information also may be used from time to time in
advertising. Advertisements may compare the Funds' performance to that of
various unmanaged market indices, or may include performance data compiled by
outside organizations such as Lipper Analytical Services, Inc.,
CDA/Wiesenberger, other entities or organizations or publications which track
the performance of investment companies.

OTHER SERVICE PROVIDERS

U.S. Bank National Association, 601 Second Avenue South, Minneapolis, MN
55480 acts as custodian of each Fund's assets and portfolio securities. Dorsey
& Whitney LLP, 220 South Sixth Street, Minneapolis, MN 55402, is the independent
General Counsel for the Funds.

LIMITATION OF DIRECTOR LIABILITY

Under Minnesota law, each director of Fortis Series owes certain fiduciary
duties to Fortis Series and to its shareholders. Minnesota law provides that a
director "shall discharge the duties of the position of director in good faith,
in a manner the director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Fiduciary duties of a director of a
Minnesota corporation include, therefore, both a duty of "loyalty" (to act in
good faith and act in a manner reasonably believed to be in the best interests
of the corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar circumstances).
Minnesota law authorizes corporations to eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the fiduciary duty of "care." Minnesota law does not,
however, permit a corporation to eliminate or limit the liability of a director
(i) for any breach of the director's duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
laws, or (iv) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of Fortis Series limit the
liability of directors to the fullest extent permitted by Minnesota statutes,
except to the extent that such a liability cannot be limited as provided in the
1940 Act (which act prohibits any provisions which purport to limit the
liability of directors arising from such directors' willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their role as directors).

Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers (including the liability of directors who serve as officers
for breach of their duties as officers). Minnesota law does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or recessionary relief. Further, Minnesota law does not permit
elimination or limitation of a director's liability under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is uncertain whether and to
what extent the

75
<PAGE>

elimination of monetary liability would extend to violations of duties imposed
on directors by the 1940 Act and the rules and regulations adopted under such
act.

ADDITIONAL INFORMATION

The Funds have filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the common stock offered hereby. The
Prospectus and this Statement of Additional Information do not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with Rules and Regulations of the Commission. The
Registration Statement may be inspected at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C., and copies thereof may
be obtained from the Commission at prescribed rates.

FINANCIAL STATEMENTS

The audited financial statements as of December 31, 1998, as set forth in
Fortis Series' 1998 Annual Report to Shareholders, are incorporated herein by
reference. The audited financial statements are provided in reliance on the
report of KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota
55402, independent auditors of Fortis Series, and given on the authority of such
firm as experts in accounting and auditing.

76
<PAGE>

APPENDIX A

DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS

OPTIONS ON SECURITIES

An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date or, in the
case of certain options, on such date. The holder pays a nonrefundable purchase
price for the option, known as the "premium." The maximum amount of risk the
purchaser of the option assumes is equal to the premium plus related transaction
costs, although this entire amount may be lost. The risk of the seller, or
"writer," however, is potentially unlimited, unless the option is "covered." A
call option written by a Fund is "covered" if the Fund owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written o r) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash and high grade government securities in a segregated account
with its custodian. A put option written by a Fund is "covered" if the Fund
maintains cash and high grade government securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security and in the same principal amount as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written. If the writer's obligation is not so covered, it is
subject to the risk of the full change in value of the underlying security from
the time the option is written until exercise.

Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.

Options on securities and options on indexes of securities, discussed
below, are traded on national securities exchanges, such as the Chicago Board
Options Exchange and the New York Stock Exchange, which are regulated by the
SEC. The Options Clearing Corporation guarantees the performance of each party
to an exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded
options on securities and options on indexes of securities only through a
registered broker-dealer which is a member of the exchange on which the option
is traded.

A-1
<PAGE>

In addition, options on securities and options on indexes of securities may
be traded on exchanges located outside the United States and over-the-counter
through financial institutions dealing in such options as well as the underlying
instruments. The particular risks of transactions on foreign exchanges and
over-the-counter transactions are set forth more fully in the Statement of
Additional Information.

OPTIONS ON STOCK INDEXES

In contrast to an option on a security, an option on a stock index provides
the holder with the right to make or receive a cash settlement upon exercise of
the option, rather than the right to purchase or sell a security. The amount of
this settlement is equal to (a) the amount, if any, by which the fixed exercise
price of the option exceeds (in the case of a call) or is below (in the case of
a put) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." The purchaser of the option
receives this cash settlement amount if the closing level of the stock index on
the day of exercise is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount
if the option is exercised. As in the case of options on securities, the writer
or holder may liquidate positions in stock index options prior to exercise or
expiration by entering into closing transactions on the exchange on which such
positions were established, subject to the availability of a liquid secondary
market.

The Funds will cover all options on stock indexes by owning securities
whose price changes, in the opinion of Advisers (or a sub-adviser, if
applicable), are expected to be similar to those of the index, or in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where a
Fund covers a call option on a stock index through ownership of securities, such
securities may not match the composition of the index. In that event, the Fund
will not be fully covered and could be subject to risk of loss in the event of
adverse changes in the value of the index. The Funds will secure put options on
stock indexes by segregating assets equal to the option's exercise price, or in
such other manner as may be in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations.

The index underlying a stock option index may be a "broad-based" index,
such as the Standard & Poor's 500 Index or the New York Stock Exchange Composite
Index, the changes in value of which ordinarily will reflect movements in the
stock market in general. In contrast, certain options may be based upon
narrower market indexes, such as the Standard & Poor's 100 Index, or on indexes
of securities of particular industry groups, such as those of oil and gas or
technology companies. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market values
of the stocks so included.

FUTURES CONTRACTS ON FIXED INCOME SECURITIES, STOCK INDEXES AND FOREIGN
CURRENCIES

A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which, in the case of the majority of

A-2
<PAGE>

interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and the seller in
cash. Futures contracts differ from options in that they are bilateral
agreements, with both the purchaser and the seller equally obligated to complete
the transaction. Futures contracts call for settlement only on the expiration
date, and cannot be "exercised" at any other time during their term.

The purchase or sale of a futures contract differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but maybe as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the Futures contract fluctuates, making positions
in the futures contracts more or less valuable, a process known as "marking to
the market."

U.S. futures contracts may be purchased or sold only on an exchange, known
as a "contract market," designated by the CFTC for the trading of such contract,
and only through a registered futures commission merchant which is a member of
such contract market. A commission must be paid on each completed purchase and
sale transaction. The contract market clearing house guarantees the performance
of each party to a futures contract by in effect taking the opposite side of
such contract. At any time prior to the expiration of a futures contract, a
trader may elect to close out its position by taking an opposite position on the
contract market on which the position was entered into, subject to the
availability of a secondary market, which will operate to terminate the initial
position. At that time, a final determination of variation margin is made and
any loss experienced by the trader is required to be paid to the contract market
clearing house while any profit due to the trader must be delivered to it.
Futures contracts may also be traded on foreign exchanges.

Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, and U.S. Treasury Bills. In addition, interest rate futures
contracts include contracts on indexes of municipal securities. Foreign currency
futures contracts currently are traded on the British pound, Canadian dollar,
Japanese yen, Swiss franc, West German mark, and on Eurodollar deposits.

A stock index or Eurodollar futures contract provides for the making and
acceptance of a cash settlement in much the same manner as the settlement of an
option on a stock index. The types of indexes underlying stock index futures
contracts are essentially the same as those underlying stock index options, as
described above. The index underlying a municipal bond index futures contract
is a broad-based index of municipal securities designed to reflect movements in
the municipal securities market as a whole. The index assigns weighted values
to the securities included in the index and its composition is changed
periodically.

A-3
<PAGE>

OPTIONS ON FUTURES CONTRACTS

An option on a futures contract provides the holder with the right to enter
into a "long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearing house establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position, in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of variation margin
deposits. In addition, the writer of an option on a futures contract, unlike
the holder, is subject to initial and variation margin requirements on the
option position. A position in an option on a futures contract may be
terminated by the purchaser or the seller prior to expiration by effecting a
closing purchase or sale transaction, subject to the availability of a liquid
secondary market, which is the purchase or sale of an option of the same series
(i.e., the same exercise price and expiration date) as the option previously
purchased or sold. The difference between the premiums paid and received
represents the trader's profit or loss on the transaction.

Options on futures contracts that are written or purchased by the Funds on
United States exchanges are traded on the same contract market as the underlying
futures contract and, like futures contracts, are subject to regulation by the
CFTC and the performance guarantee of the exchange clearing house. In addition,
options on futures contracts may be traded on foreign exchanges.

An option, whether based on a futures contract, a stock index, or security,
becomes worthless to the holder when it expires. Upon exercise of an option,
the exchange or contract market clearing house assigns exercise notices on a
random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
timing of such exercise.

FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS

A foreign currency forward exchange contract (a "forward contract") is a
contractual obligation to purchase or sell a specific quantity of a given
foreign currency for a fixed exchange rate at a future date. Forward contracts
are individually negotiated and are traded through the "interbank currency
market," an informal network of banks and brokerage firms which operates around
the clock and throughout the world. Transactions in the interbank market may be
executed only through financial institutions acting as market-makers in the
interbank market, or through brokers exercising purchases and sales through such
institutions. Market-makers in the interbank market generally act as principals
in taking the opposite side of their customers' positions in forward contracts,
and ordinarily charge a mark-up commission which may be included in the cost of
the forward contract. In addition, market-makers may require their customers to
deposit collateral upon entering into a forward contract, as security for the
customer's obligation to make or receive delivery of currency, and to deposit
additional collateral

A-4
<PAGE>

if exchange rates move adversely to the customer's position. Such deposits may
function in a manner similar to the margining of futures contracts, described
above.

Prior to the stated maturity date of a forward contract, it may be possible
to liquidate the transaction by entering into an offsetting contract. In order
to do so, however, a customer may be required to maintain both contracts as open
positions until maturity and to make or receive a settlement of the difference
owed to or from the market-maker or broker at that time.

OPTIONS ON FOREIGN CURRENCIES

Options on foreign currencies are traded in a manner substantially similar
to options on securities. In particular, an option on foreign currency provides
the holder with the right to purchase, in the case of a call option, or to sell,
in the case of a put option, a stated quantity of a particular currency for a
fixed price up to a stated expiration date or, in the case of certain options,
on such date. The writer of the option undertakes the obligation to deliver, in
the case of a call option, or to purchase, in the case of a put option, the
quantity of the currency called for in the option, upon exercise of the option
by the holder.

As in the case of other types of options, the holder of an option on
foreign currency is required to pay a one-time, nonrefundable premium, which
represents the cost of purchasing the option. The holder can lose the entire
amount of this premium, as well as related transaction costs, but not more than
this amount. The writer of the option, in contract, generally is required to
make initial and variation margin payments, similar to margin deposits required
in the trading of futures contracts and the writing of other types of options.
The writer is therefore subject to risk of loss beyond the amount originally
invested and above the value of the option at the time it is entered into.

Certain options on foreign currencies, like currency contracts, are traded
over-the-counter through financial institutions acting as market-makers in such
options and the underlying currencies. Such transactions therefore involve
risks not generally associated with exchange-traded instruments, which are
discussed below. Options on foreign currencies may also be traded on national
securities exchanges regulated by the SEC and on exchanges located in foreign
countries.

Over-the-counter transactions can only be entered into with a financial
institution willing to take the opposite side, as principal, of a Fund's
position, unless the institution acts as broker and is able to find another
counter party willing to enter into the transaction with the Fund. Where no
such counter party is available, it will not be possible to enter into a desired
transaction. There also may be no liquid secondary market in the trading of
over-the-counter contracts, and a Fund could be required to retain options
purchased or written until exercise, expiration or maturity. This in turn could
limit the Fund's ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.

Further, over-the-counter transactions are not subject to the guarantee of
an exchange clearing house, and the Funds will therefore be subject to the risk
of default by, or the bankruptcy of, the financial institution serving as its
counterparty. One or more of such institutions also may

A-5
<PAGE>

decide to discontinue their role as market-makers in a particular currency or
security, thereby restricting the Funds' ability to enter into desired hedging
transactions. The Funds will enter into an over-the-counter transaction only
with parties whose creditworthiness has been reviewed and found satisfactory by
Advisers or, if applicable, the Fund's sub-adviser.

A-6
<PAGE>

APPENDIX B

COMMERCIAL PAPER, CORPORATE BOND
AND PREFERRED STOCK RATINGS

COMMERCIAL PAPER RATINGS

STANDARD & POOR'S RATING SERVICES. A Standard & Poor's commercial paper
rating is a current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. Ratings are graded into
categories ranging from "A" for the highest quality obligations to "D" for the
lowest.

"A" Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.

"A-1" This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a (+) sign
designation.

"A-2" Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated "A-1."

"A-3" Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.

The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard
&Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.

MOODY'S INVESTORS SERVICE, INC. Moody's short-term debt ratings are
opinions of the ability of the issuers to repay punctually senior debt
obligations which have an original maturity not exceeding one year. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

"Prime-1" Superior ability for repayment of senior short-term debt
obligations.

"Prime-2" Strong ability for repayment of senior short-term debt
obligations.

"Prime-3" Acceptable ability for repayment of senior short-term debt
obligations.

B-1
<PAGE>

CORPORATE BOND RATINGS

Note: Standard & Poor's Ratings Services ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories. Moody's Investors Service, Inc. applies
numerical modifiers 1, 2 and 3 in each generic rating classification from "Aa"
to "B." The modifier "1" indicates that the applicable company ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the applicable company
ranks in the lower end of its generic rating category.

STANDARD & POOR'S RATINGS SERVICES. Its ratings for corporate bonds have
the following definitions:

Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.

Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The
"BB"rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or
"BB-"rating.

B-2
<PAGE>

Debt rated "CCC" has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.

The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

The rating "CI" is reserved for income bonds on which no interest is being
paid.

Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

"NO" indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.

MOODY'S INVESTORS SERVICE, INC. Its ratings for corporate bonds include
the following:

Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.

Bonds which are rated "A" possess many favorable attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

B-3
<PAGE>

Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Bonds which are rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

Bond which rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (Moody's ratings Aaa, Aa, A and Baa, and Standard & Poor's
ratings AAA, AA, A and BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies and fiduciaries generally.

PREFERRED STOCK RATINGS

Note: Standard & Poor's Corporation ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories. Moody's Investors Service, Inc. applies
numerical modifiers 1, 2 and 3 in each generic rating classification from "Aa"
to "B." The modifier "1" indicates that the applicable company ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the applicable company
ranks in the lower end of its generic rating category.

STANDARD & POOR'S RATINGS SERVICES. Its ratings for preferred stock have
the following definitions:

B-4
<PAGE>

An issue rated "AAA" has the highest rating that may be assigned by
Standard & Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.

A preferred stock issue rated "AA" also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."

An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions, or changing circumstances
are more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.

MOODY'S INVESTORS SERVICE, INC. Its ratings for preferred stock include
the following:

An issue which is rated "Aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.

An issue which is rated "Aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

An issue which is rated "A" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "AAA"
and "AA"classifications, earnings and asset protection are nevertheless expected
to be maintained at adequate levels.

An issue which is rated "Baa" is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.

B-5

<PAGE>

PART C

Fortis Series Fund, Inc.

OTHER INFORMATION

ITEM 23. EXHIBITS
THE FUND IS FILING OR INCORPORATING BY REFERENCE THE FOLLOWING EXHIBITS:

(a).1 Amended and Restated Articles of Incorporation (1)
(a).2 Certification of Designation of Series G Common Shares, Series H
Common Shares and Series I Common Shares dated 4/20/94 (1)
(a).3 Certification of Designation of Series J Common Shares, Series K
Common Shares and Series L Common Shares dated 10/3/94 (1)
(a).4 Certification of Designation of Series M Common Shares, Series N
Common Shares and Series O Common Shares dated 4/11/96 (2)
(a).5 Certification of Designation of Series P Common Shares, Series Q
Common Shares and Series R Common Shares dated 4/13/98 (3)
(b) Amended and Restated Bylaws (amended 3/19/98) (3)
(c) Instruments Defining Rights of Security Holders - not applicable
(d).1 Investment Advisory and Management Agreement between the
Registrant and Fortis Advisers, Inc. (on behalf of Growth Stock
Series, U.S. Government Securities Series, Diversified Income
Series, Money Market Series, Asset Allocation Series and Global
Growth Series) dated 5/1/92 *
(d).2 Investment Advisory and Management Agreement between the
Registrant and Fortis Advisers, Inc. (on behalf of High Yield
Series, Growth & Income Series and Aggressive Growth Series)
dated 5/1/94 *
(d).3 Investment Advisory and Management Agreement between the
Registrant and Fortis Advisers, Inc. (on behalf of International
Stock Series, Global Bond Series and Global Asset Allocation
Series) dated 12/8/94 *
(d).4 Investment Advisory and Management Agreement between the
Registrant and Fortis Advisers, Inc. (on behalf of Small Cap
Value Series, Mid Cap Stock Series and Large Cap Growth Series)
dated 4/2/98 (3)
(d).5 Investment Advisory and Management Agreement between the
Registrant and Fortis Advisers, Inc. (on behalf of Value Series,
S&P 500 Index Series and Blue Chip Stock Series) dated 3/22/96 *
(d).6 Investment Sub-Advisory and Management Agreement between
Fortis Advisers, Inc. and Lazard Freres Asset Management (on
behalf of International Stock Series) dated 12/27/94 *
(d).7 Form of Investment Sub-Advisory and Management Agreement between
Fortis Advisers, Inc. and Mercury Asset Management International
Ltd. (on behalf of Global Bond Series) dated 1/12/98 *
(d).8 Investment Sub-Advisory and Management Agreement between
Fortis Advisers, Inc. and Morgan Stanley Asset Management Limited
(on behalf of Global Asset Allocation Series) dated 12/29/94*

<PAGE>

(d).9 Investment Sub-Advisory and Management Agreement between Fortis
Advisers, Inc. and The Dreyfus Corporation (on behalf of S&P 500
Index Series) dated 3/22/96 (2)
(d).10 Investment Sub-Advisory and Management Agreement between Fortis
Advisers, Inc. and T. Rowe Price Associates, Inc. (on behalf of
Blue Chip Stock Series) dated 3/22/96 (2)
(d).11 Investment Sub-Advisory and Management Agreement between Fortis
Advisers, Inc. and The Dreyfus Corporation (on behalf of Mid Cap
Stock Series) dated 4/3/98 (3)
(d).12 Investment Sub-Advisory and Management Agreement between Fortis
Advisers, Inc. and Berger Associates, Inc. (on behalf of Small
Cap Value Series) dated 4/2/98 (3)
(d).13 Investment Sub-Advisory and Management Agreement between Fortis
Advisers, Inc. and Alliance Capital Management L.P. (on behalf of
Large Cap Growth Series) dated 4/2/98 (3)
(d).14 Sub-Management Agreement between Berger Associates, Inc. and
Perkins, Wolf, McDonnell & Company (on behalf of Small Cap Value
Series) dated 4/2/98 (3)
(e).1 Form of Underwriting and Distribution Agreement (1)
(e).2 Dealer Sales Agreement (4)
(f) Bonus or Profit Sharing Contracts - not applicable
(g).1 Custody Agreement dated 3/21/92 (2)
(g).2 Exhibit A amended 4/2/98 to Custody Agreement (3)
(g).3 Custody Agreement for Global Growth Series, International Stock
Series, Global Bond Series, Global Asset Allocation Series and
Blue Chip Stock Series dated 3/27/96 (2)
(h) Other Material Contracts - not applicable
(i).1 Opinion and Consent of Dorsey & Whitney LLP for Series J,
Series K and Series L Common Shares (5)
(i).2 Opinion and Consent of Dorsey & Whitney LLP for Series M,
Series N and Series O Common Shares (2)
(i).3 Opinion and Consent of Dorsey & Whitney LLP for Series P,
Series Q and Series R Common Shares (3)
(j) Consent of KPMG Peat Marwick LLP *
(k) Omitted Financial Statements - not applicable
(l) Initial Capital Agreements - not applicable
(m) Rule 12b-1 Plan - not applicable
(n) Financial Data Schedule - not applicable
(o) Rule 18f-3 Plan - not applicable

- -------------------------
(1) Incorporated by reference to Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form N-1A filed with the Commission
on February 16, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A filed with the Commission
on April 30, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 23 to the
Registrant's

<PAGE>

Registration Statement on Form N-1A filed with the Commission on
May 1, 1998.
(4) Incorporated by reference to Post-Effective Amendment No. 45 to the
Registration Statement of Fortis Income Portfolios, Inc. on Form N-1A filed
with the Commission on December 1, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission in October 1994.
* Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
THE FOLLOWING IS A LIST OF ALL PERSONS DIRECTLY OR INDIRECTLY CONTROLLED BY
OR UNDER COMMON CONTROL WITH THE FUND:

No person is directly or indirectly controlled by or under common control
with the Registrant.

ITEM 25. INDEMNIFICATION
STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS OR STATUTE UNDER
WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON OF THE FUND IS
INSURED OR INDEMNIFIED AGAINST ANY LIABILITY INCURRED IN THEIR OFFICIAL
CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR, OFFICER, AFFILIATED
PERSON, OR UNDERWRITER FOR THEIR OWN PROTECTION.

Paragraph 8(d) of the Registrant's Articles of Incorporation provides that
the Registrant shall indemnify such person for such expenses and liabilities, in
such manner, under such circumstances, and to the full extent permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereinafter amended, and any rules, regulations, or releases promulgated
thereunder.

The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section 302A.521)
pursuant to a determination by the board of directors or shareholders of the
Registrant as set forth in Section 302A.521, by special legal counsel selected
by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purposes of determining either the presence of a
quorum or such director's eligibility to be indemnified.

In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification:

(a) has not received indemnification for the same conduct from any
other party or organization;
(b) acted in good faith;

<PAGE>

(c) received no improper personal benefit;
(d) in the case of criminal proceedings, has no reasonable cause to
believe the conduct was unlawful;
(e) reasonably believed that the conduct was in the best interest of
the Registrant, or in certain contexts, was not opposed to the
best interest of the Registrant; and
(f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or Federal law (including,
without limitation, conduct constituting willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as set
forth in Section 17(h) and (i) of the Investment Company Act of
1940).

ADVANCES. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the Registrant of reasonable expenses, including
attorneys fees and disbursements, incurred by the person in advance of the final
disposition of the proceeding, (a) upon receipt by the Registrant of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have been satisfied, and (b) after a determination that the facts then known to
those making the determination would not preclude indemnification under
302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.

UNDERTAKING. The Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provision, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless, in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
DESCRIBE ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT OF A
SUBSTANTIAL NATURE THAT EACH INVESTMENT ADVISER, AND EACH DIRECTOR, OFFICER OR
PARTNER OF THE ADVISER, IS OR HAS BEEN ENGAGED WITHIN THE LAST TWO FISCAL YEARS
FOR HIS OR HER OWN ACCOUNT OR IN THE CAPACITY OF DIRECTOR, OFFICER, EMPLOYEE,
PARTNER OR TRUSTEE.

Information on the business of the Adviser, its directors and officers is
described in the Statement of Additional Information. The following officers
are not listed in the Statement of

<PAGE>

Additional Information:

Other Business/Employment
Name Position with Adviser During Past Two Years
- ---- --------------------- ---------------------
Michael D. O'Connor Qualified Plan Officer Qualified Plan Officer of Fortis
Benefits Insurance Company
David C. Greenzang Money Market Portfolio Debt securities manager with
Officer Fortis, Inc.

ITEM 27. PRINCIPAL UNDERWRITERS
(a) STATE THE NAME OF EACH INVESTMENT COMPANY (OTHER THAN THE FUND) FOR WHICH
EACH PRINCIPAL UNDERWRITER CURRENTLY DISTRIBUTING THE FUND'S SECURITIES ALSO
ACTS AS A PRINCIPAL UNDERWRITER, DEPOSITOR, OR INVESTMENT ADVISER.

Investors also acts as the principal underwriter for: Fortis Advantage
Portfolios, Inc., Fortis Equity Portfolios, Inc., Fortis Money Portfolios, Inc.,
Fortis Income Portfolios, Inc., Fortis Securities, Inc., Fortis Tax-Free
Portfolios, Inc., Fortis Worldwide Portfolios, Inc., Fortis Growth Fund, Inc.,
Variable Account C of Fortis Benefits Insurance Company and Variable Account D
of Fortis Benefits Insurance Company.

(b) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR EACH DIRECTOR,
OFFICER, OR PARTNER OF EACH PRINCIPAL UNDERWRITER NAMED IN RESPONSE TO ITEM 20.

In addition to those listed in the Statement of Additional Information with
respect to Investors, the following are also officers of Investors. The
principal business address of each individual is 500 Bielenberg Drive, Woodbury,
Minnesota 55125.

Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Fund
- ------------------------ ------------------------ ------------------------
Carol M. Houghtby Director, Vice President & None
Treasurer
Roger W. Arnold Senior Vice President None
Peter M. Delehanty Senior Vice President None
John E. Hite Vice President & Secretary None

(c) PROVIDE THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR ALL COMMISSIONS
AND OTHER COMPENSATION RECEIVED, DIRECTLY OR INDIRECTLY, FROM THE FUND DURING
THE LAST FISCAL YEAR BY EACH PRINCIPAL UNDERWRITER WHO IS NOT AN AFFILIATED
PERSON OF THE FUND OR ANY AFFILIATED PERSON OF AN AFFILIATED PERSON.

Not applicable.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
STATE THE NAME AND ADDRESS OF EACH PERSON MAINTAINING PHYSICAL POSSESSION
OF EACH ACCOUNT, BOOK, OR OTHER DOCUMENT REQUIRED TO BE MAINTAINED BY SECTION
31(a) AND THE RULES UNDER THAT SECTION.

<PAGE>

The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Fortis Advisers, Inc., 500 Bielenberg Drive, Woodbury, MN 55125.

ITEM 29. MANAGEMENT SERVICES
PROVIDE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF ANY MANAGEMENT-RELATED
SERVICE CONTRACT NOT DISCUSSED IN PART A OR B, DISCLOSING THE PARTIES TO THE
CONTRACT AND THE TOTAL AMOUNT PAID AND BY WHOM FOR THE FUND FOR THE LAST THREE
FISCAL YEARS.

All contracts were discussed in Part A or B.

ITEM 30. UNDERTAKINGS

(a) IN INITIAL REGISTRATION STATEMENTS FILED UNDER THE SECURITIES ACT, PROVIDE
AN UNDERTAKING TO FILE AN AMENDMENT TO THE REGISTRATION STATEMENT WITH
CERTIFIED FINANCIAL STATEMENTS SHOWING THE INITIAL CAPITAL RECEIVED BEFORE
ACCEPTING SUBSCRIPTIONS FROM MORE THAN 25 PERSONS IF THE FUND INTENDS TO
RAISE ITS INITIAL CAPITAL UNDER SECTION 14(a)(3).

Not applicable.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement on Form N-1A
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Woodbury and State of Minnesota on
April 30, 1999.

FORTIS SERIES FUND, INC.
(Registrant)

By /s/ Dean C. Kopperud
-----------------------------
Dean C. Kopperud, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

/s/ Dean C. Kopperud President (principal April 30, 1999
- -------------------------- executive officer)
Dean C. Kopperud

/s/ Tamara L. Fagely Treasurer (principal April 30, 1999
- -------------------------- financial and
Tamara L. Fagely accounting officer)

Richard W. Cutting* Director

Allen R. Freedman* Director

Robert M. Gavin* Director

Jean L. King* Director

Edward M. Mahoney* Director

Robb L. Prince* Director

Leonard J. Santow* Director

Joseph M. Wikler* Director

*By /s/ Dean C. Kopperud April 30, 1999
- --------------------------
Dean C. Kopperud, Attorney-in-Fact
(Pursuant to a Power of Attorney dated March 21, 1996)

<PAGE>

EXHIBIT (d).1

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

THIS AGREEMENT, made this 1st day of May 1992, by and between Fortis
Series Fund, Inc. (formerly AMEV Series Funds, Inc.), a Minnesota corporation
(the "Fund") and Fortis Advisers, Inc. (formerly AMEV Advisers, Inc.), a
Minnesota corporation ("Advisers").

1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.

The Fund hereby engages Advisers, and Advisers hereby agrees to act,
as investment adviser for, and to manage the affairs, business and the
investment of the assets of the Fund's Series referred to herein, and any
further Series from time to time created by the Board of Directors.

The investment of the assets of the Series shall at all times be
subject to the applicable provisions of the Articles of Incorporation, Bylaws,
Registration Statement and current Prospectus of the Fund and shall conform to
the policies and purposes of the Fund and the Series as set forth in the
Registration Statement and Prospectus and as interpreted from time to time by
the Board of Directors of the Fund. Within the framework of the investment
policies of the Series, Advisers shall have the sole and exclusive
responsibility for the management of the Series and the making and execution of
all investment decisions for the Series. Advisers shall report to the Board of
Directors regularly at such times and in such detail as the Board may from time
to time determine to be appropriate, in order to permit the Board to determine
the adherence of Advisers to the investment policies of the Series.

Advisers shall, at its own expense, furnish the Fund suitable office
space, and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund. Advisers shall arrange, if required by
the Fund, for officers, employees or other affiliates of Advisers to serve
without compensation from the Fund as directors, officers, or employees of the
Fund if duly elected to such positions by the shareholders or directors of the
Fund.

Advisers shall create and maintain all reports, books and records
relating to its

<PAGE>

activities and obligations under this Agreement in such a manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, applicable
federal and state tax and insurance laws and regulations and any other law or
regulation which may be or become applicable to the Fund. All such reports,
books and records shall be the property of the Fund. Furthermore, such reports,
books and records shall at all reasonable times be available for copying and
otherwise open to inspection and audit by the Securities and Exchange
Commission, banking and insurance regulators and other authorities and
regulators having authority over the Fund, and by officers and employees of, and
auditors employed by, the Fund. Advisers hereby further agrees that, upon the
termination of this Agreement, all reports, books and records pertaining to
Adviser's activities under this Agreement shall be promptly segregated and
returned to the Fund free from any claim or retention of rights by Advisers.

2. COMPENSATION FOR SERVICES.

In payment for all services, facilities, equipment and personnel, and
for other costs of Advisers hereunder, the Fund shall pay to advisers a monthly
fee for each Series, which fee shall be paid to Advisers not later than the
fifth business day of the month following the month in which such services are
rendered. Each such monthly fee shall be at the rate or rates set forth below
and shall be based on the average of the net asset values of all of the issued
and outstanding shares of the respective Series as determined as of the close of
each business day of the month pursuant to the Article of Incorporation, Bylaws
and currently effective Prospectus and Statement of Additional Information of
the Fund. The following table sets forth the fees on a monthly and annual
basis:

<TABLE>
<CAPTION>
Equivalent
Monthly Annual Average Asset
Rate Rate Values of the Series
---- ---- --------------------
<S> <C> <C> <C>
Growth Stock Series 1/12 of .7% .7% On the first $100,000,000
1/12 of .6% .6% On average assets over $100,000,000

U.S. Government 1/12 of .5% .5% On the first $50,000,000
Securities Series 1/12 of .45% .45% On average assets over $50,000,000

Diversified Income Series 1/12 of .5% .5% On the first $50,000,000
1/12 of .45% .45% On average assets over $50,000,000
</TABLE>

-2-

<PAGE>

<TABLE>
<S> <C> <C> <C>
Money Market Series 1/12 of .3% .3% On the first $500,000,000
On average assets over $500,000,000

Asset Allocation Series 1/12 of .5% .5% On the first $250,000,000
1/12 of .45% .45% On average assets over $250,000,000

Global Growth Series 1/12 of .7% .7% On the first $500,000,000
1/12 of .6% .6% On average assets over $500,000,000
</TABLE>

The fees shall be prorated for any fraction of a month at the
commencement or termination of this Agreement.

The investment advisory fee for any future Series shall be as
determined by the Board of Directors of the Fund upon creation of such Series.

3. ALLOCATION OF EXPENSES.

(a) In addition to the fees described in Section 2 hereof, the Fund
shall pay all its expenses which are not assumed by Advisers, Fortis Investors,
Inc. ("Investors") or any other person. These Fund expenses include, by way of
example, but not by way of limitation, the fees and expenses of directors and
officers of the Fund who are not "affiliated persons" of Advisers, interest
expenses, taxes, brokerage fees and commissions, fees and expenses of
registering and qualifying the Fund and its shares for distribution under
federal and state securities laws, expenses of preparing prospectuses and of
printing and distributing prospectuses and Statements of Additional Information
annually to existing shareholders and existing insurance contract owners,
custodian charges, auditing and legal expenses, insurance expenses, association
membership dues, and the expense of reports to shareholders, shareholders'
meetings, and proxy solicitations. Advisers shall bear the costs of acting as
the Fund's transfer agent, registrar, and dividend disbursing agent.

(b) Advisers (or Investors or Fortis Benefits Insurance Company)
shall bear all promotional expenses in connection with the distribution of the
Fund's shares, including paying for prospectuses and shareholder reports for new
shareholders and new insurance contract owners, and the costs of sales
literature.

4. LIMIT ON EXPENSES.

-3-

<PAGE>

Out of its advisory fee, but not in excess thereof, Advisers shall
reimburse the Fund for each Series' expenses from the date of the initial public
offering until the date a Series' aggregate net assets first reach $10,000,000,
to the extent that the aggregate expenses of the Series (including the
investment advisory and management fees for such Series under paragraph 2 of
this Agreement, but excluding interest, taxes, brokerage fees and commissions)
exceed an amount equal, on an annual basis, to the following percentage of the
average daily net assets of the Series:

<TABLE>
<S> <C>
Growth Stock Series 1.00%
U.S. Government Securities Series .75%
Income Series .75%
Money Market Series .60%
Managed Series .75%
Global Growth Series 1.70%
</TABLE>

5. FREEDOM TO DEAL WITH THIRD PARTIES.

Advisers shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.

6. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.

This Agreement shall be effective as to each Series on May 1, 1992.
Wherever referred to in this Agreement, the vote or approval of the holders of a
majority of the outstanding voting securities of a Series or of the Fund shall
mean the vote of 67% or more of such securities if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of such securities, whichever is less.

-4-

<PAGE>

of a majority of the outstanding voting securities of such Series, and (b) by a
majority of the directors who are not interested persons of Advisers or of the
Fund cast in person at a meeting called for the purpose of voting on such
approval; provided that, if a majority of the outstanding voting securities of
any of the Series approves this Agreement, this Agreement shall continue in
effect with respect to such approving Series whether or not the shareholders of
any other Series of the Fund approve this Agreement.

This Agreement may be terminated at any time without the payment of
any penalty by the vote of the Board of Directors of the Fund, or by Advisers,
upon sixty (60) days' written notice to the other party. This Agreement may be
terminated with respect to a particular Series at any time without the payment
of any penalty by the vote of the holders of a majority of the outstanding
voting securities of such Series, upon sixty (60) days' written notice to
Advisers. Any termination may be made effective with respect to both the
investment advisory and management services provided for in this Agreement or
with respect to either of such kinds of services. This Agreement shall
automatically terminate in the event of its assignment.

7. AMENDMENTS TO AGREEMENT.

No material amendment to this Agreement shall be effective until
approved by vote of the holders of majority of the outstanding voting securities
of the Series which have approved and are subject to this Agreement. In
addition, if a majority of the outstanding voting securities of any Series of
the Fund votes to amend this Agreement, such amendment shall be effective with
respect to such Series whether or not the shareholders of any other Series vote
to adopt such amendment.

8. NOTICES. Any notice under this Agreement shall be in writing,
addressed, delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such notice.

IN WITNESS WHEREOF, the Fund and Advisers have caused this Agreement
to

-5-

<PAGE>

be executed by their duly authorized officers as of the day and year first above
written.

FORTIS SERIES FUND, INC.

By: /s/ Edward M. Mahoney
---------------------------
Edward M. Mahoney
Its President

FORTIS ADVISERS, INC.

By: /s/ Edward M. Mahoney
---------------------------
Edward M. Mahoney
Its President

<PAGE>

EXHIBIT (d).2

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

THIS AGREEMENT, made this 1st day of May 1994, by and between Fortis
Series Fund, Inc., a Minnesota corporation (the "Fund") and Fortis Advisers,
Inc., a Minnesota corporation ("Advisers").

1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.

The Fund hereby engages Advisers, and Advisers hereby agrees to act,
as investment adviser for, and to manage the affairs, business and the
investment of the assets of the High Yield Series, the Growth & Income Series,
and the Aggressive Growth Series of the Fund. Each such Series is herein
individually referred to as a "Series," and the Series are herein collectively
referred to as the "Series."

Advisers shall create and maintain all reports, books and records
relating to its

<PAGE>

2. COMPENSATION FOR SERVICES.

<TABLE>
<CAPTION>
Equivalent
Monthly Annual Average Asset
Rate Rate Values of the Series
---- ---- --------------------
<S> <C> <C> <C>
High Yield Series 1/12 of .5% .5% On the first $250,000,000
1/12 of .45% .45% On average assets over $250,000,000

Growth & Income Series 1/12 of .7% .7% On the first $100,000,000
1/12 of .6% .6% On average assets over $100,000,000

Aggressive Growth Series 1/12 of .7% .7% On the first $100,000,000
</TABLE>

-2-

<PAGE>

<TABLE>
<S> <C> <C>
1/12 of .6% .6% On average assets over $100,000,000
</TABLE>

The fees shall be prorated for any fraction of a month at the
commencement or termination of this Agreement.

3. ALLOCATION OF EXPENSES.

(b) Advisers (or Investors or Fortis Benefits Insurance Company or
First Fortis Life Insurance Company) shall bear all promotional expenses in
connection with the distribution of the Fund's shares, including paying for
prospectuses and shareholder reports for new shareholders and new insurance
contract owners, and the costs of sales literature.

4. LIMIT ON EXPENSES.

-3-

<PAGE>

the Series:

<TABLE>
<S> <C>
High Yield Series .80%
Growth & Income Series 1.00%
Aggressive Growth Series 1.00%
</TABLE>

5. FREEDOM TO DEAL WITH THIRD PARTIES.

6. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.

This Agreement shall be effective as to each Series on May 1, 1994.
Wherever referred to in this Agreement, the vote or approval of the holders of a
majority of the outstanding voting securities of a Series or of the Fund shall
mean the vote of 67% or more of such securities if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of such securities, whichever is less.

Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect only so long as such continuance is specifically approved at
least annually (a) by the Board of Directors of the Fund, or, with respect to a
particular Series, by the vote of the holders of a majority of the outstanding
voting securities of such Series, and (b) by a majority of the directors who are
not interested persons of Advisers or of the Fund cast in person at a meeting
called for the purpose of voting on such approval; provided that, if a majority
of the outstanding voting securities of any of the Series approves this
Agreement, this Agreement shall continue in effect with respect to such
approving Series whether or not the shareholders of any other Series of the Fund
approve this Agreement.

This Agreement may be terminated at any time without the payment of
any penalty by the vote of the Board of Directors of the Fund, or by Advisers,
upon sixty (60) days'

-4-

<PAGE>

written notice to the other party. This Agreement may be terminated with
respect to a particular Series at any time without the payment of any penalty by
the vote of the holders of a majority of the outstanding voting securities of
such Series, upon sixty (60) days' written notice to Advisers. Any termination
may be made effective with respect to both the investment advisory and
management services provided for in this Agreement or with respect to either of
such kinds of services. This Agreement shall automatically terminate in the
event of its assignment.

7. AMENDMENTS TO AGREEMENT.

IN WITNESS WHEREOF, the Fund and Advisers have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.

FORTIS SERIES FUND, INC.

By: /s/ Edward M. Mahoney
---------------------------
Edward M. Mahoney
Its President

FORTIS ADVISERS, INC.

By: /s/ Dean C. Kopperud
---------------------------
Dean C. Kopperud
Its President

-5-

<PAGE>

EXHIBIT (d).3

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

THIS AGREEMENT, made this 8th day of December 1994, by and between
Fortis Series Fund, Inc., a Minnesota corporation (the "Fund") and Fortis
Advisers, Inc., a Minnesota corporation ("Advisers").

1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.

The Fund hereby engages Advisers, and Advisers hereby agrees to act,
as investment adviser for, and to manage the affairs, business and the
investment of the assets of the International Stock Series, the Global Bond
Series, and the Global Asset Allocation Series of the Fund. Each such Series is
herein individually referred to as a "Series," and the Series are herein
collectively referred to as the "Series."

The investment of the assets of the Series shall at all times be
subject to the applicable provisions of the Articles of Incorporation and Bylaws
of the Fund and the current Registration Statement (including the Prospectus and
Statement of Additional Information) of the Series and shall conform to the
policies and restrictions of the Series as set forth in the Registration
Statement and any additional limitations as may be adopted from time to time by
the Board of Directors of the Fund and communicated to Advisers. Within the
framework of the investment policies, restrictions, and limitations of the
Series, Advisers shall have the sole and exclusive responsibility for the
management of the Series and the making and execution of all investment
decisions for the Series, provided:

Advisers may, at is option and expense, with respect to each of the Series,
appoint a sub-adviser, which shall assume such responsibilities and
obligations of Advisers pursuant to this Investment Advisory and Management
Agreement as shall be delegated to the sub-adviser; provided, however, that
any discretionary investment decisions made by a sub-adviser on behalf of
any of the Series shall be subject to approval or ratification by Advisers,
and, not withstanding any delegation of responsibilities and obligations to
the sub-adviser, Advisers shall retain the right, in its discretion, to
make investment decisions for the Series. Any appointment of a sub-adviser
and assumption of responsibilities and obligations of Advisers by such
sub-adviser shall be subject to approval by the Board of Directors of the
Fund and, to the extent (if any) required by law, by the shareholders of
the Series. Any appointment of a sub-adviser for the Series pursuant
hereto shall in no way limit or diminish Advisers' obligations and

<PAGE>

responsibilities under this Investment Advisory and Management Agreement,
and Advisers shall be responsible for monitoring compliance by the
sub-adviser(s) with the investment policies, restrictions, and limitations
of the Series, and will also be responsible for ensuring that the Series
are managed in a way so that: (1) they meet the requirements of Subchapter
M of the Internal Revenue Code to be taxed as a regulated investment
company; and (2) they comply with the provisions of Section 817(h) of the
Internal Revenue Code, and the regulations promulgated thereunder.

Advisers shall report to the Board of Directors regularly at such times and in
such detail as the Board may from time to time determine to be appropriate, in
order to permit the Board to determine the adherence of Advisers to the
investment policies of the Series.

Advisers shall create and maintain all reports, books and records
relating to its activities and obligations under this Agreement in such a manner
as will meet the obligations of the Fund under the Investment Company Act of
1940, applicable federal and state tax and insurance laws and regulations and
any other law or regulation which may be or become applicable to the Fund. All
such reports, books and records shall be the property of the Fund. Furthermore,
such reports, books and records shall at all reasonable times be available for
copying and otherwise open to inspection and audit by the Securities and
Exchange Commission, banking and insurance regulators and other authorities and
regulators having authority over the Fund, and by officers and employees of, and
auditors employed by, the Fund. Advisers hereby further agrees that, upon the
termination of this Agreement, all reports, books and records pertaining to
Adviser's activities under this Agreement shall be promptly segregated and
returned to the Fund free from any claim or retention of rights by Advisers.

2. COMPENSATION FOR SERVICES.

In payment for all services, facilities, equipment and personnel, and
for other costs of Advisers hereunder, the Fund shall pay to advisers a monthly
fee for each Series, which

<PAGE>

fee shall be paid to Advisers not later than the fifth business day of the month
following the month in which such services are rendered. Each such monthly fee
shall be at the rate or rates set forth below and shall be based on the average
of the net asset values of all of the issued and outstanding shares of the
respective Series as determined as of the close of each business day of the
month pursuant to the Article of Incorporation, Bylaws and currently effective
Prospectus and Statement of Additional Information of the Fund. The following
table sets forth the fees on a monthly and annual basis:

<TABLE>
<CAPTION>
Equivalent
Monthly Annual Average Asset
Rate Rate Values of the Series
---- ---- --------------------
<S> <C> <C> <C>
International Stock Series 1/12 of .85% .85% On the first $100,000,000
1/12 of .80% .80% On average assets over $100,000,000

Global Bond Series 1/12 of .75% .75% On the first $100,000,000
1/12 of .65% .65% On average assets over $100,000,000

Asset Allocation Series 1/12 of .90% .90% On the first $100,000,000
1/12 of .85% .85% On average assets over $100,000,000
</TABLE>

The fees shall be prorated for any fraction of a month at the
commencement or termination of this Agreement.

3. ALLOCATION OF EXPENSES.

(a) In addition to the fees described in Section 2 hereof, the Fund
shall pay all its expenses which are not assumed by Advisers, Fortis Investors,
Inc. ("Investors") or any other person. These Fund expenses include, by way of
example, but not by way of limitation, the fees and expenses of directors and
officers of the Fund who are not "affiliated persons" of Advisers, interest
expenses, taxes, brokerage fees and commissions, fees and expenses of
registering and qualifying the Fund and its shares for distribution under
federal and state securities laws, expenses of preparing Prospectuses and of
printing and distributing Prospectuses and Statements of Additional Information
annually to existing shareholders and existing insurance contract owners,
custodian charges, auditing and legal expenses, insurance expenses, association
membership dues, and the expense of reports to shareholders, shareholders'
meetings, and proxy solicitations. Advisers shall bear the costs of acting as
the Fund's transfer agent, registrar, and

<PAGE>

dividend disbursing agent.

4. LIMIT ON EXPENSES.

<TABLE>
<S> <C>
International Stock Series 2.00%
Global Bond Series 2.00%
Global Asset Allocation Series 2.00%
</TABLE>

5. FREEDOM TO DEAL WITH THIRD PARTIES.

6. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.

This Agreement shall be effective as to each Series on January 3,
1995. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of a Series or of the
Fund shall mean the vote of 67% or more of such securities if the holders of
more than 50% of such securities are present in person or by proxy or the vote
of more than 50% of such securities, whichever is less.

Unless sooner terminated as hereinafter provided, this Agreement shall
continue

<PAGE>

in effect only so long as such continuance is specifically approved at least
annually (a) by the Board of Directors of the Fund, or, with respect to a
particular Series, by the vote of the holders of a majority of the outstanding
voting securities of such Series, and (b) by a majority of the directors who are
not interested persons of Advisers or of the Fund cast in person at a meeting
called for the purpose of voting on such approval; provided that, if a majority
of the outstanding voting securities of any of the Series approves this
Agreement, this Agreement shall continue in effect with respect to such
approving Series whether or not the shareholders of any other Series of the Fund
approve this Agreement.

7. AMENDMENTS TO AGREEMENT.

IN WITNESS WHEREOF, the Fund and Advisers have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.

FORTIS SERIES FUND, INC.

By: /s/ Dean C. Kopperud
----------------------------
Dean C. Kopperud
Its President

FORTIS ADVISERS, INC.

By: /s/ Dean C. Kopperud
----------------------------
Dean C. Kopperud
Its President

<PAGE>
EXHIBIT (d).5

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

THIS AGREEMENT, made this 22nd day of March 1996, by and between
Fortis Series Fund, Inc., a Minnesota corporation (the "Fund") and Fortis
Advisers, Inc., a Minnesota corporation ("Advisers").

1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES.

The Fund hereby engages Advisers, and Advisers hereby agrees to act,
as investment adviser for, and to manage the affairs, business and the
investment of the assets of the Value Series, the S&P 500 Index Series, and the
Blue Chip Stock Series of the Fund. Each such Series is herein individually
referred to as a "Series," and the Series are herein collectively referred to as
the "Series."

<PAGE>

2. COMPENSATION FOR SERVICES.

<PAGE>

rates set forth below and shall be based on the average of the net asset values
of all of the issued and outstanding shares of the respective Series as
determined as of the close of each business day of the month pursuant to the
Article of Incorporation, Bylaws and currently effective Prospectus and
Statement of Additional Information of the Fund. The following table sets forth
the fees on a monthly and annual basis:

<TABLE>
<CAPTION>
Equivalent
Monthly Annual Average Asset
Rate Rate Values of the Series
---- ---- --------------------
<S> <C> <C> <C>
Value Series 1/12 of .70% .70% On the first $100,000,000
1/12 of .60% .60% On average assets over $100,000,000

S&P 500 Index Series 1/12 of .40% .40% All level of assets

Blue Chip Series 1/12 of .90% .90% On the first $100,000,000
1/12 of .85% .85% On average assets over $100,000,000
</TABLE>

The fees shall be prorated for any fraction of a month at the
commencement or termination of this Agreement.

3. ALLOCATION OF EXPENSES.

(a) In addition to the fees described in Section 2 hereof, the Fund
shall pay all its expenses which are not assumed by Advisers, Fortis Investors,
Inc. ("Investors") or any other person. These Fund expenses include, by way of
example, but not by way of limitation, the fees and expenses of directors and
officers of the Fund who are not "affiliated persons" of Advisers, interest
expenses, taxes, brokerage fees and commissions, fees and expenses of
registering and qualifying the Fund and its shares for distribution under
federal and state securities laws, expenses of preparing Prospectuses and of
printing and distributing Prospectuses and Statements of Additional Information
annually to existing shareholders and existing insurance contract owners,
custodian charges, auditing and legal expenses, insurance expenses, association
membership dues, and the expense of reports to shareholders, shareholders'
meetings, and proxy solicitations. Advisers shall bear the costs of acting as
the Fund's transfer agent, registrar, and dividend disbursing agent.

<PAGE>

new shareholders and new insurance contract owners, and the costs of sales
literature.

4. LIMIT ON EXPENSES.

<TABLE>
<S> <C>
Value Series 1.25%
S&P 500 Index Series 1.25%
Blue Chip Stock Series 1.25%
</TABLE>

5. FREEDOM TO DEAL WITH THIRD PARTIES.

6. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.

This Agreement shall be effective as to each Series on May 1, 1996.
Wherever referred to in this Agreement, the vote or approval of the holders of a
majority of the outstanding voting securities of a Series or of the Fund shall
mean the vote of 67% or more of such securities if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of such securities, whichever is less.

<PAGE>

voting securities of any of the Series approves this Agreement, this Agreement
shall continue in effect with respect to such approving Series whether or not
the shareholders of any other Series of the Fund approve this Agreement.

7. AMENDMENTS TO AGREEMENT.

IN WITNESS WHEREOF, the Fund and Advisers have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.

FORTIS SERIES FUND, INC.

By: /s/ Dean C. Kopperud
-----------------------------
Dean C. Kopperud
Its President

FORTIS ADVISERS, INC.

By: /s/ Dean C. Kopperud
-----------------------------
Dean C. Kopperud
Its President

<PAGE>

EXHIBIT (d).6

INVESTMENT SUB-ADVISORY AGREEMENT

Agreement dated 27th of December 1994 by and between Fortis Advisers, Inc.,
a Minnesota Corporation (the "Manager") and Lazard Freres Asset Management, a
division of Lazard Freres & Co., a limited partnership organized under the laws
of New York (the "Sub-Adviser").

WHEREAS, the Manager serves as the investment adviser, manager, registrar,
transfer agent and dividend disbursing agent for Fortis Series Fund, Inc. (the
"Company"), an open-end, management investment company registered with the
Securities and Exchange Commission ("SEC") pursuant to the Investment Company
Act of 1940, as amended ("1940 Act"), that is comprised of a number of separate
series of investments that act as funding vehicles for various variable annuity
contracts and variable universal life insurance policies issued by Fortis
Benefits Insurance Company ("FBIC");

WHEREAS, the Manager desires to retain the Sub-Adviser to assist the
Manager in furnishing an investment program to one series of the Company, the
International Stock Series (the "Portfolio");

NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Manager and the Sub-Adviser agree as follows:

1. APPOINTMENT AND EXPENSES OF THE SUB-ADVISER. The Manager hereby
appoints the Sub-Adviser to serve as sub-adviser with respect to the assets of
the Portfolio and to perform the services hereinafter set forth and the
Sub-Adviser hereby accepts such appointment. The Sub-Adviser agrees, for the
compensation herein provided, to assume all obligations herein provided and bear
all its personnel and other expenses associated with the performance of its
services hereunder. The Company shall be responsible for the Portfolio's
administrative and other direct expenses, including, but not limited to:
(a) fees pursuant to any plan of distribution that the Portfolio may adopt;
(b) the Portfolio's brokerage and commission expenses, including all ordinary
and reasonable transaction costs; (c) fees and expenses of pricing services used
by the Company to determine the value of the Portfolio's holdings; (d) Federal,
state, local and foreign taxes, including issue and transfer taxes incurred by
or levied on the Portfolio; (e) interest charges on any Portfolio borrowings;
(f) the Company's organizational and offering expenses; (g) the cost of the
Company's personnel providing services to the Company; (h) fees and expenses of
registering the Company's shares under the appropriate Federal securities laws
and of qualifying the Company's shares under applicable state securities laws
and pursuant to any foreign laws; (i) expenses of printing and distributing
reports to the Company's shareholders, proxy materials, prospectuses and
distribution of dividends; (j) costs of the Company's shareholders' meetings and
proxy solicitation; (k) charges and expenses of the Company's custodian and
registrar, transfer agent and dividend disbursing agent; (l) compensation of the
Company's officers, directors and employees that are not "affiliated persons" or
"interested persons" [as defined in Section 2(a) of the 1940 Act and the rules,
regulations and releases relating thereto] of the Sub-Adviser; (m) the Company's
legal and auditing expenses; (n) cost of certificates representing shares of the
Portfolio; (o) the Company's costs of stationery and

<PAGE>

supplies; (p) the Company's insurance expenses; (q) the Company's association
membership dues; (r) travel expenses of officers and employees of the
Sub-Adviser to the extent such expenses relate to the attendance of such persons
at meetings at the request of the Board of Directors of the Company (EXCEPT that
a representative of the Sub-Adviser will attend one Board meeting per year, at
the Sub-Adviser's own expense); and (s) travel expenses for attendance at Board
of Directors meetings by members of the Board of Directors of the Company who
are not "interested persons" or "affiliated persons" of the Sub-Adviser. The
Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or on behalf of the Company in any
way or otherwise be deemed an agent of the Company.

2. DUTIES OF THE SUB-ADVISER. The Sub-Adviser will deal in good faith
and with due diligence and will use professional skill, care and judgment in the
performance of its duties under this Agreement. In so doing, the Sub-Adviser
shall formulate and implement a continuing program for the management of the
assets of the Portfolio. The Sub-Adviser shall amend and update such program
from time to time as financial and other economic conditions warrant. The
Sub-Adviser shall make all determinations with respect to the investment of the
assets of the Portfolio and shall take such steps as may be necessary to
implement the same, including the placement of purchase and sale orders on
behalf of the Portfolio. The Manager shall be responsible for the
administration of the investment activities of the Company and the Portfolio,
including compliance with the requirements of the 1940 Act, except for the
investment management activities specifically delegated to the Sub-Adviser
pursuant to this Agreement.

3. POWERS OF THE SUB-ADVISER.

3.1 The Sub-Adviser's power to direct the investment and reinvestment
of the assets of the Portfolio shall be exercised in accordance with applicable
law, the Company's Articles of Incorporation and the investment objectives,
policies and restrictions set forth in the then-current Prospectus and Statement
of Additional Information (collectively the "Prospectus") relating to the
Portfolio contained in the Company's Registration Statement under the 1940 Act
and the Securities Act of 1933, as amended. The Company and/or the Manager may
also place additional limitations on the Sub-Adviser's investment decisions by
written notice to the Sub-Adviser. The Company agrees to provide promptly to
the Sub-Adviser a copy of the documents mentioned above and all changes made to
such documents.

3.2 While the Sub-Adviser will have day-to-day responsibility for the
discretionary investment decisions to be made on behalf of the Portfolio, the
Sub-Adviser will be subject to oversight by the Manager. Such oversight,
however, shall not require prior approval of discretionary investment decisions
made by the Sub-Adviser except as may be required by applicable law, the
Portfolio's investment policies and restrictions and/or any limitations imposed
on the Sub-Adviser by the Company and/or the Manager pursuant to the preceding
paragraph. The Manager shall retain the right to instruct the Sub-Adviser to
effect any transactions necessary to ensure compliance with the Portfolio's
investment policies and restrictions as well as the requirements of Subchapter M
of the Internal Revenue Code and the provisions of Section 817(h) of the
Internal Revenue Code and the regulations promulgated

-2-

<PAGE>

thereunder.

3.3 In the event the Sub-Adviser's compliance with any amendment of
the Portfolio's investment objectives, policies and restrictions or other
limitations placed on the Sub-Adviser's investment decisions with respect to the
Portfolio would interfere with the completion of any transaction commenced on
behalf of the Portfolio prior to the Sub-Adviser's knowledge of such amendment,
the Sub-Adviser may complete such transaction unless doing so would violate any
applicable law, rule or regulation. In such an event, the Sub-Adviser will not
be responsible for any loss that may result from the completion of the
transaction.

3.4 Further, and except as may be qualified elsewhere in this
Agreement, the Sub-Adviser is hereby authorized, for and on behalf of the
Company, with respect to the Portfolio, in its discretion to:

(a) exercise any conversion and/or subscription rights available
in connection with any securities or other investments held in the
Portfolio;

(b) maintain all or part of the Portfolio's assets uninvested in
short-term income-producing instruments for such periods of time as shall
be deemed reasonable and prudent by the Sub-Adviser;

(c) instruct the Custodian, in accordance with the Custodian
Agreement, to deliver for cash received, securities or other cash and/or
securities instruments sold, exchanged, redeemed or otherwise disposed of
from the Portfolio, and to pay cash for securities or other cash and/or
securities instruments delivered to the Custodian and/or credited to the
Portfolio upon acquisition of the same for the Portfolio;

(d) determine how to vote all proxies received with respect to
securities held in the Portfolio and direct the Custodian as to the voting
of such proxies; and

(e) generally, perform any other act necessary to enable the
Sub-Adviser to carry out its obligations under this Agreement.

4. SELECTION OF BROKER-DEALERS. The Sub-Adviser shall select the brokers
and dealers through whom transactions on behalf of the Portfolio will be
executed and the markets on or in which such transactions will be executed and
shall place, in the name of the Portfolio or its nominee (or appropriate foreign
equivalent), all such orders. In selecting brokers and dealers to execute such
transactions, and in negotiating brokerage commissions, and in obtaining
research, statistical and other information from brokers and dealers in
connection with Portfolio transactions, the Sub-Adviser shall comply with the
description of the process contained in the Prospectus.

4.1 It is understood that certain other clients (including other
funds, portfolios and accounts) of the Sub-Adviser may have investment
objectives and policies similar to those of

-3-

<PAGE>

the Portfolio and that the Sub-Adviser may, from time to time, make
recommendations that result in the purchase (or sale) of a particular security
by its other clients and the Portfolio during the same period of time. If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. In such event, the
Sub-Adviser shall allocate the securities or investments to be purchased or
sold, as well as the expenses incurred in the transactions (including price) in
a manner the Sub-Adviser considers equitable and consistent with its obligations
to the Portfolio and the Sub-Adviser's other clients.

4.2 The Sub-Adviser agrees that it will only enter into transactions
that are covered by Section 10(f) or Section 17(e) of the 1940 Act if it has
(i) complied with Rule 10f-3 or Rule 17e-1 thereunder, respectively, or the
terms of an appropriate exemptive order issued to the Company by the SEC, and
(ii) has complied with the procedures adopted thereunder by the Board of
Directors of the Company which may, pursuant to authority granted by the
Company, be supplemented by interpretive guidelines of the Manager. Aside from
parties that are known or should be known by the Sub-Adviser, the Manager shall
promptly notify the Sub-Adviser of any additional parties with whom engaging in
a transaction for the Portfolio would result in a violation of the 1940 Act.

5. REPORTS AND INFORMATION TO BE PROVIDED BY THE SUB-ADVISER. The
Sub-Adviser shall furnish such information and reports relating to the
Portfolio, its holdings and transactions involving Portfolio securities as the
Manager and/or the Company may reasonably require to fulfill its or their legal
responsibilities or to meet regulatory requirements or discharge other duties
they may have. Among the subjects of the reports and information to be provided
by the Sub-Adviser are the following:

(a) Information reasonably required by the Manager to determine the
Company's and Portfolio's compliance with the 1940 Act, the Advisers Act,
the Internal Revenue Code, applicable federal and state securities and
insurance laws and other applicable laws and regulations or regulatory and
taxing authorities in the United States and other relevant countries;

(b) Information reasonably required by the Manager to meet the
accounting and operational requirements of the Portfolio. Specific
examples of the types of reports and information that will be needed by the
Manager and the Company are set forth in Exhibit A, attached hereto;

(c) Information reasonably required by the Manager to satisfy its
reporting obligations to the Company arising from the Investment Advisory
and Management Agreement between the Manager and the Company;

(d) Information reasonably requested by the Manager to determine the
Portfolio's compliance with Rule 17f-5 under the 1940 Act, relating to
foreign custodians and sub-custodians;

-4-

<PAGE>

(e) Information reasonably required by the Manager to determine the
Sub-Adviser's compliance with Rule 17j-1 under the 1940 Act with respect to
the Sub-Adviser's activities on behalf of the Portfolio;

(f) Information reasonably required by the Manager to determine
compliance with Rule 10f-3 and Rule 17e-1 under the 1940 Act with respect
to the Sub-Adviser's (or its affiliates') activities on behalf of the
Portfolio; and

(g) Information reasonably necessary to respond to specific inquiries
from the Company's management and/or Board of Directors.

6. NON-EXCLUSIVE SERVICES, CONFLICTS OF INTEREST AND MATERIAL NONPUBLIC
INFORMATION. The Manager understands that the Sub-Adviser and its affiliates
may furnish investment management and advisory services to others, and that the
Sub-Adviser and its affiliates shall be at all times free, in their discretion,
to make recommendations to, and investments for, others which may or may not
correspond to investments made for the Portfolio. The Manager further
understands that the Sub-Adviser, its affiliates, and any officer, director,
stockholder, employee or any member of their families may or may not have an
interest in the securities whose purchase and sale the Sub-Adviser effects for
the Portfolio. Actions taken by the Sub-Adviser on behalf of the Portfolio may
be the same as, or different from, actions taken by the Sub-Adviser on its own
behalf or for others or from actions taken by the Sub-Adviser's affiliates,
officers, directors, partners, employees of the Sub-Adviser or its affiliates,
or the family members of such persons or other investors. The Sub-Adviser
represents that it has in effect a code of ethics that complies with Rule 17j-1
under the 1940 Act and has procedures in place that, taken together, provide
reasonable enforcement of the code's provisions. Similarly, the Sub-Adviser
represents that, with respect to the use of nonmaterial nonpublic information,
it has complied, and will continue to comply, with Section 204A of the
Investment Advisers Act of 1940, as amended ("Advisers Act") and any rules
thereunder.

7. DISCLOSURE OF INFORMATION AND CONFIDENTIALITY.

7.1 The Sub-Adviser, the Company and the Manager, either during or
after the termination of this Agreement, are authorized with respect to matters
arising out of this Agreement to make any disclosures and/or participate in any
conduct required by any applicable law, rule, regulation, self-regulating
organization, investment exchange or any other body having regulatory or
enforcement responsibility with respect to any investment business conducted by
the Sub-Adviser on behalf of the Portfolio.

7.2 Subject to the preceding paragraph, the Sub-Adviser agrees that
all information which has or will come into its possession or knowledge
concerning the Portfolio or its investments in connection with this Agreement
shall be held by the Sub-Adviser in confidence. The Sub-Adviser shall make no
use of such information other than for the performance of this Agreement, shall
disclose such information only to the directors, officers or employees of the
Sub-Adviser or its affiliated firms or of any third party appointed pursuant to
this Agreement requiring such information and shall not disclose such
information to any other

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<PAGE>

person without the written consent of the Company; provided, however, that to
the extent the investments for the Portfolio are similar to investments for
other clients of the Sub-Adviser, the Sub-Adviser may disclose such investments
without direct reference to the Portfolio. The Sub-Adviser may also include the
name of the Portfolio in a representative client list.

7.3 Subject to the preceding paragraph, the Company and the Manager
agree that all information which has or will come into their possession or
knowledge concerning the operations and procedures of the Sub-Adviser shall be
held by the Company and the Manager in confidence. The Company and the Manager
shall make no use of such information other than for the performance of this
Agreement, shall disclose such information only to their directors, officers or
employees or those of its affiliated firms and shall not disclose such
information to any other person without the written consent of the Sub-Adviser.

7.4 The Manager and the Company agree not to refer to Lazard Freres
Asset Management, Lazard Freres & Co. or their affiliates in any advertisement
or other document without prior consent of the Sub-Adviser. Similarly, Lazard
Freres Asset Management, Lazard Freres & Co. and their affiliates shall not
refer to the Manager, the Company, the Portfolio, or other Fortis affiliates in
any advertisement or other document without the Manager's prior consent.
However, the Parties to this Agreement agree that they may reference one another
as necessary in regulatory and other legal filings. Further, the parties agree
that they will not unreasonably withhold permission to use their names or
otherwise reference them in materials used to describe the Portfolio and/or the
Company.

8. DEALINGS WITH THE CUSTODIAN. The Manager shall notify the Sub-Adviser
of the appointment of the custodian(s) ("Custodian") for all or any portion of
the Portfolio's assets, shall provide the Sub-Adviser with a true and complete
copy of each agreement with the Custodian that deals with the Portfolio's assets
("Custodian Agreements"), and shall provide the Sub-Adviser with the names of
persons authorized to act on behalf of the Custodian and such other information
as the Sub-Adviser shall reasonably require. The Sub-Adviser agrees to give
instructions in accordance with the terms of the applicable Custodian
Agreements. The Company agrees to provide promptly to the Sub-Adviser a copy of
all relevant Custodian Agreements, and all changes made to such documents.

9. DELEGATION OF THE SUB-ADVISER'S RESPONSIBILITIES. The Sub-Adviser may
not delegate its investment advisory responsibilities as Sub-Adviser to the
Portfolio. However, the Sub-Adviser may employ, retain or otherwise avail
itself of the services and facilities of persons and entities within its own
organization or any other organization for the purpose of providing the
Sub-Adviser, the Manager or the Portfolio with such information, advice or
assistance, including but not limited to advice regarding economic factors and
trends and advice as to transactions in specific securities, as the Sub-Adviser
may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or as may otherwise be helpful to the Manager or the
Portfolio, or in the discharge of the Sub-Adviser's overall responsibilities
with respect to the other accounts for which it serves as investment manager or
investment adviser.

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<PAGE>

The Sub-Adviser's acquisition of information, advice or assistance pursuant to
this paragraph shall be at the Sub-Adviser's own expense and shall not relieve
the Sub-Adviser of any of its obligations under this Agreement.

10. COMPENSATION. For the services to be rendered under this Agreement
and the facilities to be furnished, the Manager shall pay to the Sub-Adviser for
each fiscal year of the Company, a monthly management fee at the annual rate of
.45 of 1% of the Portfolio's first $100 million of average daily net assets and
.375 of 1% of the Portfolio's average daily net assets in excess of $100
million. The monthly management fee shall be paid to the Sub-Adviser not later
than the tenth business day of the month following the month in which such
services were rendered and shall be based upon the average net asset values of
all the issued and outstanding shares of the Portfolio as determined as of the
close of each business day of the month pursuant to the Articles of
Incorporation, Bylaws and currently effective Prospectus of the Portfolio.
Payments of the monthly management fee will be accompanied by documentation that
verifies the calculation of such fee. If the management of the Portfolio by the
Sub-Adviser commences or terminates at any time other than the beginning or end
of a month, the management fee shall be prorated for that portion of such month
during which this Agreement was in force.

11. REPRESENTATIONS OF THE SUB-ADVISER. The Sub-Adviser represents and
agrees that:

(a) The Sub-Adviser is registered as an "investment adviser" under
the Advisers Act and is currently in compliance in all material respects
and shall at all times continue to comply in all material respects with the
requirements imposed upon it by the Advisers Act, the 1940 Act, the
Internal Revenue Code, state securities laws and all applicable rules and
regulations thereunder as they relate to the services provided under this
Agreement. The Sub-Adviser will immediately notify the Manager if it
becomes aware of the occurrence of any event that would disqualify the
Sub-Adviser from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or any other applicable law or
regulation.

(b) The Sub-Adviser will maintain, keep current and accurate, and
preserve all records with respect to the Portfolio as are required of it
under the Advisers Act and the 1940 Act, in the manner provided by such
Acts and the rules thereunder. The Sub-Adviser agrees that such records
are the property of the Company, and following termination of this
Agreement will be surrendered to the Company promptly upon request except
to the extent that they are required to be retained by the Sub-Adviser
under applicable law. Further, such records shall be open to inspection by
the Company. The Sub-Adviser will also assure that the Company will have
the same access as the Sub-Adviser has to records relating to the Portfolio
that are held by relevant third parties. Such inspections will be at
reasonable times during business hours and only upon reasonable notice of
the Company's desire to make an inspection.

(c) The Sub-Adviser agrees to advise the Manager of any developments,
such as the reassignment of a portfolio manager, that would require
Prospectus disclosure and

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<PAGE>

to provide any necessary information related to such developments.

(d) The Sub-Adviser has provided the Manager and the Company with a
copy of its most recent and complete Form ADV and will promptly furnish
them with copies of any material amendments to the Form.

(e) If the Sub-Adviser's performance of its obligations under this
Agreement takes place in the United Kingdom, the Sub-Adviser shall be and
shall remain during the effectiveness of this Agreement, a member of the
Investment Management Regulatory Organization, Ltd. ("IMRO") and thereby
regulated in the conduct of Investment Business (as defined in IMRO's
rules) by the IMRO. The Company and the Manager will be treated as a
Non-Private Customer (as defined in IMRO's rules) of the Sub-Adviser.

(f) The Sub-Adviser shall furnish the Manager with a certificate,
signed by a duly authorized officer of the Sub-Adviser that designates the
officers or employees of the Sub-Adviser having authority to act for and on
behalf of the Sub-Adviser in connection with this Agreement. The
Sub-Adviser agrees that, until such time as the Manager is otherwise
informed in writing by a duly authorized officer of the Sub-Adviser, the
Manager shall be authorized and entitled to rely on any notice,
instruction, request, order or other communication, given either in writing
or orally, and reasonably believed by the Manager in good faith to be given
by an authorized representative of the Sub-Adviser.

12. REPRESENTATIONS OF THE MANAGER. The Manager represents and agrees
that:

(a) The Manager is registered as an "investment adviser" under the
Advisers Act and has provided to the Sub-Adviser a copy of its most recent
and complete Form ADV, along with a copy of the Investment Advisory and
Management Agreement between the Manager and the Company and the current
Company Prospectus regarding the Portfolio. After any amendment to the
documents referenced in this paragraph, the Manager will promptly furnish a
copy of such amended document to the Sub-Adviser. In addition, the Manager
will provide the Sub-Adviser with notice of proposed changes in the
Prospectus and the opportunity to review and comment upon such changes
before they are finalized, wherever possible.

(b) The Manager and the Company are currently in material compliance
and shall at all times continue to be in material compliance with the
relevant requirements of the Advisers Act, the 1940 Act, all applicable
state securities and insurance laws, and the rules thereunder, as they
pertain to the Portfolio.

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<PAGE>

informed in writing by a duly authorized officer of the Manager, the
Sub-Adviser shall be authorized and entitled to rely on any notice,
instruction, request, order or other communication, given either in writing
or orally, and reasonably believed by the Sub-Adviser in good faith to be
given by an authorized representative of the Manager.

13. LIABILITY, INDEMNIFICATION AND FORCE MAJEURE.

13.1 The Sub-Adviser, its affiliated firms or its or their employees,
officers, or directors will not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio, its shareholders, FBIC
contract owners in connection with the performance of their duties under this
Agreement, except for loss resulting from willful misfeasance, bad faith or
negligence on their part in the performance of their duties or from reckless
disregard by them of their duties under this Agreement.

13.2 The Manager shall indemnify the Sub-Adviser against all claims
which may be made against the Sub-Adviser in connection with the exercise of the
powers and discretion conferred upon it pursuant to this Agreement, including
reasonable attorneys' fees incurred in connection with any such claim, EXCEPT
insofar as such claims allege or are the result of the willful misfeasance, bad
faith or negligence of the Sub-Adviser or any of its affiliated firms or its or
their employees, officers or directors or its or their breach of this Agreement
or violation of applicable law. Conversely, the Sub-Adviser shall indemnify the
Manager and the Company against all claims alleging or resulting from the
willful misfeasance, bad faith or negligence of the Sub-Adviser or any of its
affiliated firms or its or their employees, officers or directors or its or
their breach of this Agreement or violation of applicable law, including
reasonable attorneys' fees incurred in connection with any such claim.

13.3 Neither party shall be held responsible for their nonperformance
of any of their obligations under this Agreement by reason of any cause beyond
their control, including any breakdown or failure of transmission, communication
or computer facilities, postal or other strikes or similar industrial action and
the failure of any relevant exchange, clearing house and/or broker for any
reason to perform its obligations.

14. TERM, RENEWAL AND TERMINATION.

14.1 This Agreement shall, with respect to the Portfolio, become
effective as of the date first above written and shall remain in force for two
years thereafter, and for successive annual periods thereafter but only so long
as each such continuance is specifically approved at least annually by (1) a
majority of the Directors of the Company who are not parties to this Agreement
or interested persons of any such parties (other than as Directors of the
Company), by vote cast in person at a meeting called for the purpose of voting
on such approval; or (2) a vote of the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of such Portfolio. It shall be
the duty of the Directors of the Company to request and evaluate, and the duty
of the Manager and Sub-Adviser to furnish, such information as may be reasonably

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<PAGE>

necessary to evaluate the terms of this Agreement and any renewal hereof.

14.2 This Agreement may be terminated with respect to the Portfolio at
any time without the payment of any penalty by the Portfolio (1) by a vote of a
majority of the entire Board of Directors of the Company on sixty (60) days'
written notice to the Manager and the Sub-Adviser; (2) by vote of the holders of
a majority of the outstanding voting securities of such Portfolio (as defined in
the 1940 Act); or (3) by the Sub-Adviser on 60 days' written notice to the
Manager and the Company.

14.3 This Agreement shall automatically terminate in the event of its
assignment, as that term is defined in Section 2(a)(4) of the 1940 Act and the
rules thereunder.

14.4 On the effective date of any termination of this Agreement or as
close to such date as is reasonably possible, the Sub-Adviser shall provide the
Manager with a final report for the Portfolio which will include the fair market
value for each of the Portfolio's investments.

14.5 Upon the Manager's receipt or service of any notice given by or
to the Company concerning the termination of the Manager's appointment as the
investment adviser to the Company, the Manager shall immediately forward a copy
of such notice to the Sub-Adviser and the Sub-Adviser's appointment under this
Agreement shall terminate on the same date as the termination of the Manager's
appointment.

15. AMENDMENT. No material amendment to or modification of this Agreement
shall be effective unless and until it is set forth in a written amendment
signed by the Manager and the Sub-Adviser and approved by the vote of a majority
of the outstanding shares of the Portfolio, as defined in the 1940 Act.

16. AUTHORITY AND ENFORCEABILITY.

16.1 Each of the parties to this Agreement hereby represents that it
is duly authorized and empowered to execute, deliver, and perform this Agreement
and that such actions do not conflict with or violate any provision of law,
rule, regulation, other legal requirement, contract or other instrument to which
it is a party or to which it is subject and that this Agreement constitutes a
valid and binding obligation, inuring to the benefit of the Manager and the
Sub-Adviser and their respective successors, enforceable in accordance with its
terms.

16.2 If any provision of this Agreement shall be held or made invalid
or unenforceable by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby and any such invalid or
unenforceable provision shall be deemed to be replaced with a valid and
enforceable provision that most closely reflects the intention of the parties.

17. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the

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<PAGE>

laws of the State of Minnesota.

18. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or by facsimile (followed by delivery in person) to the
parties at the addresses set forth below:

If to the Manager: Fortis Advisers, Inc.
500 Bielenberg Drive
St. Paul, MN 55125
Fax #: (612) 738-5262
Attn: Legal Department

If to the Sub-Adviser: Lazard Freres Asset Management
One Rockefeller Plaza
New York, NY 10020
Fax #: (212) 698-1138
Attn: Gus Coutsouros

or such other name or address as may be given in writing to the other party.

Unless specifically provided elsewhere, notice given as provided above
shall be deemed to have been given, if by personal delivery, on the day of such
delivery, and if by facsimile and mail, on the date on which such facsimile is
sent.

19. CHANGE IN MEMBERSHIP. The Sub-Adviser shall notify the Manager of any
change in the membership of the Sub-Adviser within a reasonalbe period of time
following such a change.

20. EXECUTION. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers.

Attest: FORTIS ADVISERS, INC.

/s/ By: /s/ Dean C. Kopperud
- ------------------------------ -------------------------
Secretary Dean C. Kopperud

Attest: LAZARD FRERES ASSET MANAGEMENT
a division of Lazard Freres & Co.

/s/ By: /s/ Hubert W. Wullquast
- ------------------------------ -------------------------
General Partner

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<PAGE>

EXHIBIT A

EXAMPLES OF THE ROUTINE ACCOUNTING AND OPERATIONAL
INFORMATION AND DOCUMENTATION REQUIREMENTS OF THE
PORTFOLIO TO BE SATISFIED BY THE SUB-ADVISER

The following information is to be provided to:

Fortis Series Fund, Inc.
ATTN: Fund Accounting
P.O. Box 64284
St. Paul, MN 55164
FAX: (612) 738-0996
PHONE: (612) 738-4510, 5517 or 5369

1. DOCUMENTATION OF TRADES. On a daily basis, via facsimile, a listing
of that day's executed trades and copies of the trade tickets for that day's
trades. At the end of each week, by mail, hard copies of documentation for that
week's executed trades. The signature or initials of the portfolio manager or
duly authorized officer or employee of the Sub-Adviser should be placed on the
trade tickets to validate the authenticity of the trading information.

2. PORTFOLIO HOLDINGS. On a weekly basis, via facsimile and mail, a list
of the Portfolio's holdings. The list should include the following information,
for each of the Portfolio's holdings, where applicable: long description,
cusip/sedol number, maturity date, par/principal amounts, market value, market
price, coupon rate and bond rating.

3. SECURITY PRICING. On a daily basis, by telephone or facsimile:
(i) review with the Company's Fund Accounting Department (the "Department") the
prices of the Portfolio's securities, which shall be provided by the Department;
(ii) inform the Department of its agreement or disagreement with such prices;
(iii) provide the Department with the basis for any disagreement it may have
with respect to a particular security's price and its opinion (along with
outside broker quotes) as to what that security's price should be; and (iv) in
any instance where the pricing services utilized by the Department do not
provide a price for a security held by the Portfolio, provide the Department
with reasonable assistance in determining a price for such security.

A-12

<PAGE>
EXHIBIT (d).7

INVESTMENT SUB-ADVISORY AGREEMENT

Agreement dated January 12, 1998 by and between Fortis Advisers, Inc., a
Minnesota Corporation (the "Manager") and Mercury Asset Management International
Ltd., a corporation organized under the Companies Act of England and Wales (the
"Sub-Adviser") the principal office of which is located at 33 King William
Street, London EC4R 9AS, England.

WHEREAS, the Manager desires to retain the Sub-Adviser to assist the
Manager in furnishing an investment program to one series of the Company, the
Global Bond Series (the "Portfolio");

NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Manager and the Sub-Adviser agree as follows:

<PAGE>

certificates representing shares of the Portfolio; (o) the Company's costs of
stationery and supplies; (p) the Company's insurance expenses; (q) the Company's
association membership dues; (r) travel expenses of officers and employees of
the Sub-Adviser to the extent such expenses relate to the attendance of such
persons at meetings at the request of the Board of Directors of the Company
(EXCEPT that a representative of the Sub-Adviser will attend one Board meeting
per year, at the Sub-Adviser's own expense); and (s) travel expenses for
attendance at Board of Directors meetings by members of the Board of Directors
of the Company who are not "interested persons" or "affiliated persons" of the
Sub-Adviser. The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or on behalf of the
Company in any way or otherwise be deemed an agent of the Company.

3. POWERS OF THE SUB-ADVISER.

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<PAGE>

provisions of Section 817(h) of the Internal Revenue Code and the regulations
promulgated thereunder.

3.4 Further, and except as may be qualified elsewhere in this
Agreement, the Sub-Adviser is hereby authorized, for and on behalf of the
Company, with respect to the Portfolio, in its discretion to:

(a) exercise any conversion and/or subscription rights available
in connection with any securities or other investments held in the
Portfolio;

(b) maintain all or part of the Portfolio's assets uninvested in
short-term income-producing instruments for such periods of time as shall
be deemed reasonable and prudent by the Sub-Adviser;

(d) determine how to vote all proxies received with respect to
securities held in the Portfolio and direct the Custodian as to the voting
of such proxies; and

(e) generally, perform any other act necessary to enable the
Sub-Adviser to carry out its obligations under this Agreement.

(a) It is understood that certain other clients (including other
funds, portfolios and accounts) of the Sub-Adviser may have investment
objectives and policies similar to those of

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<PAGE>

(b) The Sub-Adviser agrees that it will only enter into transactions
that are covered by Section 10(f) or Section 17(e) of the 1940 Act if it has
(i) complied with Rule 10f-3 or Rule 17e-1 thereunder, respectively, or the
terms of an appropriate exemptive order issued to the Company by the SEC, and
(ii) has complied with the procedures adopted thereunder by the Board of
Directors of the Company which may, pursuant to authority granted by the
Company, be supplemented by interpretive guidelines of the Manager. Aside from
parties that are known or should be known by the Sub-Adviser, the Manager shall
promptly notify the Sub-Adviser of any additional parties with whom engaging in
a transaction for the Portfolio would result in a violation of the 1940 Act.

(d) Information reasonably requested by the Manager to determine the
Portfolio's compliance with Rule 17f-5 under the 1940 Act, relating to
foreign custodians and sub-custodians;

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<PAGE>

(g) Information reasonably necessary to respond to specific inquiries
from the Company's management and/or Board of Directors.

7. DISCLOSURE OF INFORMATION AND CONFIDENTIALITY.

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<PAGE>

7.4 The Manager and the Company agree not to refer to Mercury Asset
Management International Ltd. or its affiliates in any advertisement or other
document without prior consent of the Sub-Adviser. Similarly, Mercury Asset
Management International Ltd. and its affiliates shall not refer to the Manager,
the Company, the Portfolio, or other Fortis affiliates in any advertisement or
other document without the Manager's prior consent. However, the Parties to
this Agreement agree that they may reference one another as necessary in
regulatory and other legal filings. Further, the parties agree that they will
not unreasonably withhold permission to use their names or otherwise reference
them in materials used to describe the Portfolio and/or the Company.

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<PAGE>

10. COMPENSATION.

10.1 For the services to be rendered under this Agreement and the
facilities to be furnished, the Manager shall pay to the Sub-Adviser for
each fiscal year of the Company, a monthly management fee at the annual
rate of .35 of 1% of the Portfolio's first $100 million of average daily
net assets and .225 of 1% of the Portfolio's average daily net assets in
excess of $100 million. The monthly management fee shall be paid to the
Sub-Adviser not later than the tenth business day of the month following
the month in which such services were rendered and shall be based upon the
average net asset values of all the issued and outstanding shares of the
Portfolio as determined as of the close of each business day of the month
pursuant to the Articles of Incorporation, Bylaws and currently effective
Prospectus of the Portfolio. Payments of the monthly management fee will
be accompanied by documentation that verifies the calculation of such fee.
If the management of the Portfolio by the Sub-Adviser commences or
terminates at any time other than the beginning or end of a month, the
management fee shall be prorated for that portion of such month during
which this Agreement was in force.

10.2 Any fees payable by the Manager pursuant to Clause 10.1 during
the period commencing on the later of (a) the first date that Merrill Lynch
& Co., Inc. ("Merrill Lynch") controls Mercury Asset Management Group plc
("MAM") (the "Assignment Date") and (b) the date on which the SEC grants
the exemptive order application of Merrill Lynch, MAM, Mercury Asset
Management International Chanel Islands Ltd. and the Sub-Adviser filed with
the SEC on December 10, 1997 seeking an exemption from compliance with
certain provisions of Section 15(a) of the 1940 Act (the "Issuance Date")
and ending on the date of the initial approval of this Agreement by a
majority of the outstanding voting securities of the Portfolio shall be
paid into an interest-bearing account with an unaffiliated financial
institution, as the Sub-Adviser and the manager may establish, to be
released to the Sub-Adviser only upon such initial approval of this
Agreement, or, if such approval shall not occur prior to the earlier of (i)
the 150th day following the Assignment Date and (ii) July 15, 1998, to the
Portfolio.

11. REPRESENTATIONS OF THE SUB-ADVISER. The Sub-Adviser represents and agrees
that:

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<PAGE>

or any other applicable law or regulation.

(c) The Sub-Adviser agrees to advise the Manager of any developments,
such as the reassignment of a portfolio manager, that would require
Prospectus disclosure and to provide any necessary information related to
such developments.

(d) The Sub-Adviser has provided the Manager and the Company with a
copy of its most recent and complete Form ADV and will promptly furnish
them with copies of any material amendments to the Form.

12. REPRESENTATIONS OF THE MANAGER. The Manager represents and agrees
that:

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<PAGE>

between the Manager and the Company and the current Company Prospectus
regarding the Portfolio. After any amendment to the documents referenced
in this paragraph, the Manager will promptly furnish a copy of such amended
document to the Sub-Adviser. In addition, the Manager will provide the
Sub-Adviser with notice of proposed changes in the Prospectus and the
opportunity to review and comment upon such changes before they are
finalized, wherever possible.

(c) The Manager shall furnish the Sub-Adviser with a certificate,
signed by a duly authorized officer of the Manager that designates the
officers or employees of the Manager having authority to act for and on
behalf of the Manager in connection with this Agreement. The Manager
agrees that, until such time as the Sub-Adviser is otherwise informed in
writing by a duly authorized officer of the Manager, the Sub-Adviser shall
be authorized and entitled to rely on any notice, instruction, request,
order or other communication, given either in writing or orally, and
reasonably believed by the Sub-Adviser in good faith to be given by an
authorized representative of the Manager.

13. LIABILITY, INDEMNIFICATION AND FORCE MAJEURE.

13.1 The Sub-Adviser, its affiliated firms or its or their employees,
officers, or directors will not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio, its shareholders, FBIC
contract owners or First Fortis contract owners in connection with the
performance of their duties under this Agreement, except for loss resulting from
willful misfeasance, bad faith or negligence on their part in the performance of
their duties or from reckless disregard by them of their duties under this
Agreement.

13.3 Neither party shall be held responsible for their nonperformance
of any of their obligations under this Agreement by reason of any cause beyond
their control, including

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<PAGE>

any breakdown or failure of transmission, communication or computer facilities,
postal or other strikes or similar industrial action and the failure of any
relevant exchange, clearing house and/or broker for any reason to perform its
obligations.

14. TERM, RENEWAL AND TERMINATION.

14.1 This Agreement shall, with respect to the Portfolio, become
effective on the later of the Assignment Date and the Issuance Date and shall
remain in force for two years thereafter, and for successive annual periods
thereafter but only so long as each such continuance is specifically approved at
least annually by (1) a majority of the Directors of the Company who are not
parties to this Agreement or interested persons of any such parties (other than
as Directors of the Company), by vote cast in person at a meeting called for the
purpose of voting on such approval; or (2) a vote of the holders of a majority
of the outstanding voting securities (as defined in the 1940 Act) of such
Portfolio. It shall be the duty of the Directors of the Company to request and
evaluate, and the duty of the Manager and Sub-Adviser to furnish, such
information as may be reasonably necessary to evaluate the terms of this
Agreement and any renewal hereof.

14.3 This Agreement shall automatically terminate in the event of its
assignment, as that term is defined in Section 2(a)(4) of the 1940 Act and the
rules thereunder.

16. AUTHORITY AND ENFORCEABILITY.

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<PAGE>

18. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or by facsimile (followed by delivery in person) to the
parties at the addresses set forth below:

If to the Manager: Fortis Advisers, Inc.
500 Bielenberg Drive
St. Paul, MN 55125
Fax #: (612) 738-5262
Attn: Legal Department

If to the Sub-Adviser: Mercury Asset Management International, Ltd.
33 King William Street
London EC4R 9AS, England
Fax #: 011-44-71-280-2820

or such other name or address as may be given in writing to the other party.

Unless specifically provided elsewhere, notice given as provided above
shall be deemed to have been given, if by personal delivery, on the day of
such delivery, and if by facsimile and mail, on the date on which such
facsimile is sent.

19. EXECUTION. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers.

Attest: FORTIS ADVISERS, INC.

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<PAGE>

_____________________________ By: _____________________________

Attest: MERCURY ASSET MANAGMENT
INTERNATIONAL, LTD.

_____________________________ By: _____________________________

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<PAGE>

EXHIBIT A

EXAMPLES OF THE ROUTINE ACCOUNTING AND OPERATIONAL
INFORMATION AND DOCUMENTATION REQUIREMENTS OF THE
PORTFOLIO TO BE SATISFIED BY THE SUB-ADVISER

The following information is to be provided to:

Fortis Series Fund, Inc.
ATTN: Fund Accounting
P.O. Box 64284
St. Paul, MN 55164
FAX: (612) 738-0996
PHONE: (612) 738-4510, 5517 or 5369

1. DOCUMENTATION OF TRADES. On a daily basis, via facsimile, a listing
of that day's executed trades. At the end of each week, by mail, hard copies of
documentation for that week's executed trades. The signature or initials of the
portfolio manager or duly authorized officer or employee of the Sub-Adviser
should be placed on the trade tickets to validate the authenticity of the
trading information.

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<PAGE>

EXHIBIT (d).8

INVESTMENT SUB-ADVISORY AGREEMENT

Agreement dated December 29, 1994 by and between Fortis Advisers, Inc., a
Minnesota Corporation (the "Manager") and Morgan Stanley Asset Management
Limited, an English corporation (the "Sub-Adviser") whose principal office is
located at 25 Cabot Square, Canary Wharf, London E14 4QA, England.

WHEREAS, the Manager desires to retain the Sub-Adviser to assist the
Manager in furnishing an investment program to one series of the Company, the
Global Asset Allocation Series (the "Portfolio");

NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Manager and the Sub-Adviser agree as follows:

<PAGE>

3. POWERS OF THE SUB-ADVISER.

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<PAGE>

thereunder.

3.4 Further, and except as may be qualified elsewhere in this
Agreement, the Sub-Adviser is hereby authorized, for and on behalf of the
Company, with respect to the Portfolio, in its discretion to:

(a) exercise any conversion and/or subscription rights available
in connection with any securities or other investments held in the
Portfolio;

(b) maintain all or part of the Portfolio's assets uninvested in
short-term income-producing instruments for such periods of time as shall
be deemed reasonable and prudent by the Sub-Adviser;

(d) determine how to vote all proxies received with respect to
securities held in the Portfolio and direct the Custodian as to the voting
of such proxies; and

(e) generally, perform any other act necessary to enable the
Sub-Adviser to carry out its obligations under this Agreement.

(a) It is understood that certain other clients (including other
funds, portfolios and accounts) of the Sub-Adviser may have investment
objectives and policies similar to those of

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<PAGE>

(d) Information reasonably requested by the Manager to determine the
Portfolio's compliance with Rule 17f-5 under the 1940 Act, relating to
foreign custodians and sub-custodians;

-4-

<PAGE>

(g) Information reasonably necessary to respond to specific inquiries
from the Company's management and/or Board of Directors.

7. DISCLOSURE OF INFORMATION AND CONFIDENTIALITY.

-5-

<PAGE>

7.4 The Manager and the Company agree not to refer to Morgan Stanley
Asset Management Limited or its affiliates in any advertisement or other
document without prior consent of the Sub-Adviser. Similarly, Morgan Stanley
Asset Management Limited and its affiliates shall not refer to the Manager, the
Company, the Portfolio, or other Fortis affiliates in any advertisement or other
document without the Manager's prior consent. However, the Parties to this
Agreement agree that they may reference one another as necessary in regulatory
and other legal filings. Further, the parties agree that they will not
unreasonably withhold permission to use their names or otherwise reference them
in materials used to describe the Portfolio and/or the Company.

-6-

<PAGE>

10. COMPENSATION. For the services to be rendered under this Agreement
and the facilities to be furnished, the Manager shall pay to the Sub-Adviser for
each fiscal year of the Company, a monthly management fee at the annual rate of
.50 of 1% of the Portfolio's first $100 million of average daily net assets and
.40 of 1% of the Portfolio's average daily net assets in excess of $100 million.
The monthly management fee shall be paid to the Sub-Adviser not later than the
tenth business day of the month following the month in which such services were
rendered and shall be based upon the average net asset values of all the issued
and outstanding shares of the Portfolio as determined as of the close of each
business day of the month pursuant to the Articles of Incorporation, Bylaws and
currently effective Prospectus of the Portfolio. Payments of the monthly
management fee will be accompanied by documentation that verifies the
calculation of such fee. If the management of the Portfolio by the Sub-Adviser
commences or terminates at any time other than the beginning or end of a month,
the management fee shall be prorated for that portion of such month during which
this Agreement was in force.

11. REPRESENTATIONS OF THE SUB-ADVISER. The Sub-Adviser represents and
agrees that:

(c) The Sub-Adviser agrees to advise the Manager of any developments,
such as the reassignment of a portfolio manager, that would require
Prospectus disclosure and

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<PAGE>

to provide any necessary information related to such developments.

(d) The Sub-Adviser has provided the Manager and the Company with a
copy of its most recent and complete Form ADV and will promptly furnish
them with copies of any material amendments to the Form.

(e) The Manager and the Company acknowledge that the Sub-Adviser
shall be and shall remain during the effectiveness of this Agreement, a
member of the Investment Management Regulatory Organization, Ltd. ("IMRO")
and that they have received a letter from the Sub-Adviser setting forth its
Terms of Business.

12. REPRESENTATIONS OF THE MANAGER. The Manager represents and agrees
that:

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<PAGE>

Sub-Adviser in good faith to be given by an authorized representative of
the Manager.

13. LIABILITY, INDEMNIFICATION AND FORCE MAJEURE.

13.1 The Sub-Adviser, its affiliated firms or its or their employees,
officers, or directors will not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio, its shareholders, FBIC
contract owners or First Fortis contract owners in connection with the
performance of their duties under this Agreement, except for loss resulting from
willful misfeasance, bad faith or negligence on their part in the performance of
their duties or from reckless disregard by them of their duties under this
Agreement.

14. TERM, RENEWAL AND TERMINATION.

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<PAGE>

Sub-Adviser; (2) by vote of the holders of a majority of the outstanding voting
securities of such Portfolio (as defined in the 1940 Act); or (3) by the
Sub-Adviser on 60 days' written notice to the Manager and the Company.

14.3 This Agreement shall automatically terminate in the event of its
assignment, as that term is defined in Section 2(a)(4) of the 1940 Act and the
rules thereunder.

16. AUTHORITY AND ENFORCEABILITY.

18. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or by facsimile (followed by delivery in person) to the
parties at the addresses set forth below:

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<PAGE>

If to the Manager: Fortis Advisers, Inc.
500 Bielenberg Drive
St. Paul, MN 55125
Fax #: (612) 738-5262
Attn: Legal Department

If to the Sub-Adviser: Morgan Stanley Asset Management Limited
25 Cabot Square
Canary Wharf
London E14 4QA, England
Fax #: 011-44-71-425-4848
Attn: Julie Tompson

or such other name or address as may be given in writing to the other party.

Unless specifically provided elsewhere, notice given as provided above
shall be deemed to have been given, if by personal delivery, on the day of
such delivery, and if by facsimile and mail, on the date on which such
facsimile is sent.

19. EXECUTION. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers.

Attest: FORTIS ADVISERS, INC.

/s/ By: /s/ Dean C. Kopperud
- --------------------------- ---------------------------
Dean C. Kopperud

Attest: MORGAN STANLEY ASSET
MANAGEMENT LIMITED

/s/ T. Day By: /s/
- --------------------------- ---------------------------
Director

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<PAGE>

EXHIBIT A

EXAMPLES OF THE ROUTINE ACCOUNTING AND OPERATIONAL
INFORMATION AND DOCUMENTATION REQUIREMENTS OF THE
PORTFOLIO TO BE SATISFIED BY THE SUB-ADVISER

The following information is to be provided to:

Fortis Series Fund, Inc.
ATTN: Fund Accounting
P.O. Box 64284
St. Paul, MN 55164
FAX: (612) 738-0996
PHONE: (612) 738-4510, 5517 or 5369

A-12

<PAGE>

EXHIBIT(j)

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Fortis Series Fund, Inc.:

We consent to the use of our report incorporated herein by reference and the
references to our Firm under the headings "Financial Highlights" in Part A
and "Financial Statements" in Part B of the Registration Statement.

/s/ KPMG Peat Marwick LLP

Minneapolis, Minnesota
April 30, 1999