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[FORTIS Solid partners, flexible solutions(SM) LOGO]
Fortis Series Fund Prospectus
May 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any statement to the contrary is a criminal offense.
Mailing address:
P.O. Box 64284
St. Paul, Minnesota 55164-0284
Street address:
500 Bielenberg Drive
Woodbury, Minnesota 55125-1400
Telephone: (651) 738-4000
Toll free: (800) 800-2000, extension 3012
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
The Series
Money Market Series....................................... 1
Global Growth Series...................................... 2
Growth Stock Series....................................... 3
Shareholder Information
Separate accounts and the contracts....................... 4
Pricing of Series shares.................................. 4
Purchase and redemption of Series shares.................. 4
Transfers among subaccounts............................... 4
Dividends and distributions............................... 4
Taxation.................................................. 4
Contract owner inquiries.................................. 4
Series Management
Investment adviser........................................ 5
More Information on Series Objectives, Investment Strategies
and Risks Objectives...................................... 6
Objectives................................................ 6
Investment strategies..................................... 6
Principal risks........................................... 6
Financial Highlights........................................ 8
</TABLE>
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THE SERIES
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This section briefly describes the objectives, principal investment strategies
and principal risks of Money Market Series, Global Growth Series and Growth
Stock Series (the "Series"). It also provides you with information on how the
Series have performed. 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:
- 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.
- 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.
- 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*
[FORTIS ANNUAL TOTAL RETURN BAR GRAPH]
* The Series' total return for the period from January 1, 2000 through March 31,
2000 was 1.39%.
<TABLE>
<S> <C> <C>
BEST QUARTER: 2.12% quarter ended December 31, 1990
WORST QUARTER: 0.66% quarter ended June 30, 1993
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1999
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Money Market Series..... 4.96% 5.30% 5.02% 5.63%
</TABLE>
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* Inception date was March 24, 1987.
1
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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-
to large-sized established growth companies with one or 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.
Under normal market conditions, it is the Series' intention to maintain a median
market capitalization for its portfolio of over $5 billion. The Series' median
market capitalization was $22.3 billion as of March 31, 2000.
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. In addition, stocks of established and
emerging growth 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 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 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 LARGE CAP COMPANIES. In the long run, large company stocks may
produce more modest gains than stocks of smaller companies.
- RISKS OF MEDIUM 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.
- OVER-THE-COUNTER RISK. Over-the-counter ("OTC") transactions involve
risks in addition to those associated with transactions in securities traded
on exchanges. OTC listed companies may have limited product lines, markets
or financial resources. Many OTC stocks trade less frequently and in smaller
volume than exchange-listed stocks. The values of these stocks may be more
volatile than exchange-listed stocks, and the Series may experience
difficulty in establishing or closing out positions in these stocks at
prevailing market prices.
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*
* The Series' total return for the period from January 1, 2000 through March 31,
2000 was 8.16%.
<TABLE>
<S> <C> <C>
BEST QUARTER: 39.86% quarter ended December 31, 1999
WORST QUARTER: -20.55% quarter ended September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1999
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS SINCE INCEPTION*
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<S> <C> <C> <C>
Global Growth Series........ 57.68% 23.86% 18.60%
MSCI World Index**.......... 25.34% 20.24% 17.02%
</TABLE>
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* 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.
2
<PAGE> 5
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. The
Series may engage in active and frequent trading to achieve its principal
investment strategies.
The Series' investments may include securities traded in the over-the-counter
markets.
Under normal market conditions, the Series intends to maintain a median market
capitalization for its portfolio of $1 billion to $8 billion -- making it a "mid
cap growth fund." The Series' median market capitalization was $5.9 billion as
of March 31, 2000.
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.
- OVER-THE-COUNTER RISK. Over-the-counter ("OTC") transactions involve
risks in addition to those associated with transactions in securities traded
on exchanges. OTC listed companies may have limited product lines, markets
or financial resources. Many OTC stocks trade less frequently and in smaller
volume than exchange-listed stocks. The values of these stocks may be more
volatile than exchange-listed stocks, and the Series may experience
difficulty in establishing or closing out positions in these stocks at
prevailing market prices.
- 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 larger companies.
- RISKS OF SHORT-TERM TRADING. Due to many factors, the Series may trade
securities frequently and hold securities in its portfolio for one year or
less. Frequent purchases and sales of portfolio securities will increase the
Series' transaction costs. Factors that can lead to short-term trading
include market volatility; a significant positive or negative development
concerning a security; an attempt to maintain the Series' market
capitalization target; and the need to sell a security to meet redemption
activity in the Series.
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*
* The Series' total return for the period from January 1, 2000 through March 31,
2000 was 15.85%.
<TABLE>
<S> <C> <C>
BEST QUARTER: 44.29% quarter ended December 31, 1999
WORST QUARTER: -16.04% quarter ended September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS as of December 31, 1999
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Growth Stock Series..... 55.17% 25.28% 17.45% 15.79%
S&P 500 Index**......... 21.04% 28.51% 18.17% 16.57%
S&P 400 Midcap
Index***.............. 14.70% 23.01% 15.10% 13.41%
</TABLE>
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* Inception date was March 24, 1987.
** An unmanaged index of 500 common stocks.
*** An unmanaged capitalization-weighted index that measures the performance of
the mid-range sector of the U.S. stock market. Going forward, the Series
will use S&P Midcap Index as a measure of comparable total return because it
is better suited for the investment strategy of the Series.
3
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SHAREHOLDER INFORMATION
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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.
4
<PAGE> 7
SERIES MANAGEMENT
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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. The services provided by Advisers include:
- General management of all Series.
- Investment management for those Series that do not have a sub-adviser.
- Ultimate responsibility (subject to oversight by the Fund's Board of
Directors) to oversee any sub-advisers hired to manage all or a portion of
any of the Series and recommend the hiring, termination and replacement of
sub-advisers.
The Fund has received an exemptive order from the Securities and Exchange
Commission under which the Fund uses a "Manager of Managers" structure. This
permits Advisers to appoint new sub-advisers, with approval by the Fund's Board
of Directors and without obtaining approval from those contract holders that
participate in the applicable Series. Within 90 days after hiring any new
sub-adviser, affected contract holders will receive all information about the
new sub-advisory relationship that would have been included if a proxy statement
had been required. Advisers will not enter into a sub-advisory agreement with an
affiliated sub-adviser unless contract holders approve such agreement.
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%
Global Growth Series..................... .70%
Growth Stock Series...................... .61%
</TABLE>
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Individuals affiliated with Advisers are responsible for the day-to-day
management of Money Market Series, Global Growth Series and Growth Stock Series.
Howard G. Hudson supervises the portfolio management of the Money Market Series.
Lucinda S. Mezey supervises the portfolio management of the Global Growth Series
and Growth Stock 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.
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.
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.
- 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.
- 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.
- Ms. Gotham has been a Vice President of Advisers since 1998. From 1994 to
1998 she was a securities analyst for Advisers.
- 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.
5
<PAGE> 8
MORE INFORMATION ON SERIES OBJECTIVES, INVESTMENT STRATEGIES AND RISKS
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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 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, Global Growth Series lends its 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:
- Growth Stock Series, may invest in cash, money market instruments, bonds
or other debt securities.
- 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.
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%. Factors contributing to a Series' higher turnover
rate may include general market volatility, significant positive or negative
developments concerning particular security holdings, an attempt to maintain the
Series' market capitalization target and the need to sell holdings to meet
redemption activity in the Series. For the fiscal year ended December 31, 1999,
Growth Stock Series (175%) had a portfolio turnover rate in excess of 100%.
While higher turnover rates may result in increased transaction costs, the
Series' managers attempt to have the benefits of these transactions outweigh the
costs, although this cannot be assured. The "Financial Highlights" section of
this Prospectus shows each Series' historical portfolio turnover rate.
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.
Global Growth Series and Growth Stock Series are sometimes referred to in this
section as the "Equity Series."
- INTEREST RATE RISK. Money Market Series, is 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.
- CREDIT OR DEFAULT RISK. The Money Market Series is subject to 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.
- INCOME RISK. Money Market Series is subject to income risk, which is the
potential for a decline in the Series' income due to falling interest rates.
- RISKS OF COMMON STOCKS. Because of their investments in common stocks,
the Equity 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. The Equity Series focus on stocks which Advisers
believe have the potential for superior earnings growth. If Advisers
incorrectly assesses a company's prospects for earnings growth, or if
Advisers' 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 had anticipated.
- RISKS OF SMALL CAP COMPANIES. Global Growth Series is 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.
6
<PAGE> 9
- RISKS OF MID CAP COMPANIES. The Equity 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
and therefore may have greater volatility than more established companies.
- OVER-THE-COUNTER RISK. Each Equity Series may invest in companies whose
stocks trade in the over-the-counter market. Over-the-counter ("OTC")
transactions involve risks in addition to those associated with transactions
in securities traded on exchanges. OTC listed companies may have limited
product lines, markets or financial resources. Many OTC stocks trade less
frequently and in smaller volume than exchange-listed stocks. The values of
these stocks may be more volatile than exchange-listed stocks, and the
Series may experience difficulty in establishing or closing out positions in
these stocks at prevailing market prices.
- RISKS OF INITIAL PUBLIC OFFERINGS. Each Equity Series may invest in
initial public offerings ("IPOs"). Companies making initial public offerings
of their stock generally have limited operating histories and prospects for
future profitability may be uncertain. Prices of IPOs may also be unstable
due to the absence of a prior public market and the small number of shares
available for trading.
- RISKS OF FOREIGN INVESTING. Money Market Series and Global Growth Series
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 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 Growth Series may invest in emerging
markets as a principal investment strategy. 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 SECURITIES LENDING. Global Growth Series currently lends its
portfolio securities. The Series may lend up to 30% of the value of its
total assets. When the 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, the
Series invests the cash collateral in high grade money market securities,
which are subject to credit risk.
- RISKS OF SHORT-TERM TRADING. Due to many factors, the Equity Series may
trade securities frequently and hold securities in their portfolios for one
year or less. Frequent purchases and sales of a portfolio securities will
increase a Series' transaction costs. Factors that can lead to short-term
trading include market volatility; a significant positive or negative
development concerning a security; an attempt to maintain the Series' market
capitalization target; and the need to sell a security to meet redemption
activity in the Series.
- MANAGEMENT RISK. All 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 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.
- 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 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.
- 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.
7
<PAGE> 10
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 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... 11.06 $11.03 $10.94 $10.83 $10.63
- ----------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net................................... .54 .57 .58 .57 .60
Net realized and unrealized gain (loss) on investments.... -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total from operations....................................... .54 .57 .58 .57 .60
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. (.40) (.54) (.49) (.46) (.40)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $11.20 $11.06 $11.03 $10.94 $10.83
- ----------------------------------------------------------------------------------------------------------------------------
Total return@............................................... 4.96% 5.32% 5.34% 5.17% 5.71%
Net assets end of year (000s omitted)....................... $124,105 $ 77,097 $ 57,009 $ 61,906 $ 41,807
Ratio of expenses to average daily net assets............... .35% .35% .38% .38% .40%
Ratio of net investment income to average daily net
assets.................................................... 4.88% 5.18% 5.19% 5.14% 5.44%
- ----------------------------------------------------------------------------------------------------------------------------
</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 GROWTH SERIES 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $22.57 $20.29 $19.00 $15.97 $12.31
- ----------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net................................... -- .03 .02 .03 .09
Net realized and unrealized gain (loss) on investments and
foreign currency transactions........................... $12.78 2.27 1.27 3.03 3.66
- ----------------------------------------------------------------------------------------------------------------------------
Total from operations....................................... $12.78 2.30 1.29 3.06 3.75
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.............................. (.03) (.02) -- (.03) (.09)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year................................ $34.72 $22.57 $20.29 $19.00 $15.97
- ----------------------------------------------------------------------------------------------------------------------------
Total return@............................................... 57.68% 11.36% 6.82% 19.10% 30.49%
Net assets end of year (000s omitted)....................... $474,180 $351,476 $353,255 $319,831 $207,913
Ratio of expenses to average daily net assets............... .77% .75% .79% .79% .80%
Ratio of net investment income (loss) to average daily net
assets.................................................... (.01%) .12% .12% .15% .64%
Portfolio turnover rate..................................... 44% 32% 35% 14% 29%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.
8
<PAGE> 11
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------
GROWTH STOCK SERIES 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $41.09 $36.64 $32.59 $28.09 $22.11
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net................ (.05) .09 .12 .12 .13
Net realized and unrealized gain (loss) on
investments................................. 17.42 6.40 3.93 4.50 5.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations........................... 17.37 6.49 4.05 4.62 6.11
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income - net.................. (.09) (.13) -- (.12) (.13)
From net realized gains on investments........ (13.23) (1.91) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............. (13.32) (2.04) -- (.12) (.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year.................... $45.14 $41.09 $36.64 $32.59 $28.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total return@................................... 55.17% 19.01% 12.42% 16.41% 27.66%
Net assets end of year (000s omitted)........... $1,044,728 $762,354 $707,155 $661,217 $530,945
Ratio of expenses to average daily net assets... .66% .65% .66% .67% .67%
Ratio of net investment income (loss) to average
daily net assets.............................. (.18%) .21% .33% .39% .51%
Portfolio turnover rate......................... 175% 106% 19% 30% 20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
@ These are the Series' total returns during the period, including reinvestment
of all dividend and capital gains distributions.
9
<PAGE> 12
[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
10
<PAGE> 13
[FORTIS(SM) LOGO]
FORTIS FINANCIAL GROUP
P.O. Box 64284
St. Paul, Minnesota 55164-0284
Prospectus
May 1, 2000
- - Series Fund
SEC file numbers: 811-04615
[FORTIS(SM) LOGO]
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc. (fund management since 1949)
Fortis Investors, Inc. (principal underwriter; member NASD, SIPC)
Fortis Benefits Insurance Company & Fortis Insurance Company
(issuers of FFG's insurance products)
P.O. Box 64284 - St. Paul, MN 55164-0284 - (800) 800-2000
http://www.ffg.us.fortis.com
This prospectus is intended for use in connection with variable life insurance
policies and variable annuity contracts issued by Fortis Benefits and First
Fortis.
More information about the Fund is available in the Series' Statement of
Additional Information (SAI) and annual and semiannual reports.
- - STATEMENT OF ADDITIONAL INFORMATION. The SAI provides more details about the
Series and their policies. A current SAI is on file with the Securities and
Exchange Commission (SEC) and is incorporated into this Prospectus by
reference, which means that it is legally considered part of this Prospectus.
- - ANNUAL AND SEMIANNUAL REPORTS. Additional information about Series'
investments is available in the Series' annual and semiannual reports to
shareholders. In the Series' annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Series' performance during their last fiscal year.
You can obtain a free copy of the Series' SAI and/or free copies of the Series'
most recent annual or semiannual reports by calling (800) 800-2000, extension
3012. The material you request will be sent by first-class mail, or other means
designed to ensure equally prompt delivery, within three business days of
receipt of request.
You can also obtain copies by visiting the SEC's public reference room in
Washington DC, or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington DC 20549-6009. For more information, call
(800) SEC-0330.
Information about the Series is available on the Internet. Text-only versions of
the Series documents can be viewed online or downloaded from the SEC's Internet
site at http://www.sec.gov.
The Fortis logo and Fortis(SM) are servicemarks of Fortis (NL) N.V. and
Fortis (B).
