<PAGE>
FORTIS HIGH YIELD PORTFOLIO SEMI-ANNUAL REPORT
CONTENTS
LETTER TO SHAREHOLDERS 1
SCHEDULE OF INVESTMENTS 3
STATEMENT OF ASSETS AND LIABILITIES 7
STATEMENT OF OPERATIONS 8
STATEMENTS OF CHANGES IN NET ASSETS 9
NOTES TO FINANCIAL STATEMENTS 10
BOARD OF DIRECTORS AND OFFICERS 12
OTHER PRODUCTS AND SERVICES 13
TOLL-FREE PERSONAL ASSISTANCE
Shareholder Services
(800) 800-2638, Ext. 3012
7:30 a.m. to 5:30 p.m. CST, M-Th
7:30 a.m. to 5:00 p.m. CST, F
TOLL-FREE INFORMATION LINE
For daily account balances,
transaction activity or net asset
value information
(800) 800-2638, Ext. 4344
24 hours a day
HOW TO USE THIS REPORT
For a quick overview of the fund's performance during the past six months, refer
to the Highlights box below. The letter from the portfolio manager and president
provides a more detailed analysis of the fund and financial markets.
The charts alongside the letter are useful because they provide more information
about your investments. The top holdings charts show the types of securities in
which the fund invests, and the pie chart shows a breakdown of the fund's assets
by industry.
The performance chart graphically compares the fund's total return performance
with a selected investment index. Remember, however, that an index may reflect
the performance of securities the fund may not hold. Also, the index does not
deduct sales charges, investment advisory fees and other fund expenses, whereas
your fund does. Individuals cannot buy an unmanaged index fund without incurring
some charges and expenses.
This report is just one of several tools you can use to learn more about your
investment in the Fortis Family of Mutual Funds. Your investment representative,
who understands your personal financial situation, can best explain the features
of your investment and how it's designed to help you meet your financial goals.
HIGHLIGHTS
FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS H
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
HIGH YIELD PORTFOLIO
NET ASSET VALUE PER SHARE:
Beginning of period................... $ 7.61 $ 7.60 $ 7.59 $ 7.60
End of period......................... $ 7.67 $ 7.66 $ 7.65 $ 7.66
TOTAL RETURN* 5.84% 5.52% 5.53% 5.52%
DISTRIBUTIONS PER SHARE................. $0.3779 $0.3539 $0.3539 $0.3539
</TABLE>
* These are the Fund's total returns during the periods, including
reinvestment of all dividend and capital gains distributions without
adjustments for sales charge.
FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2638. TO ORDER
PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800) 800-2638,
EXT. 4579.
<PAGE>
Photo
An Opportunity for the
informed investor.
DEAR SHAREHOLDER,
We are pleased to present the Fortis High Yield Portfolio semi-annual report for
the period ended April 30, 1996.
ECONOMIC REVIEW
During the six-month period ended April 30, 1996, bond markets were whipsawed by
conflicting economic data. The bond market reacted favorably to signs of
weakness in the U.S. economy late in 1995; the price of the benchmark 30-year
U.S. Treasury bond rose and its yield fell below 6 percent for the first time
since the fall of 1993. However, the slow growth, low inflation scenario
anticipated by most bond investors was upset by a series of economic reports,
especially the February employment numbers, which indicated that growth was much
stronger than expected. Also troubling to owners of fixed income securities were
rising commodity prices, especially oil and gas, indicating that inflation may
not be dormant. Finally, bond investors were disappointed by the lack of
progress on a federal budget. As a result, in the first quarter market sentiment
turned bearish; the Federal Reserve was no longer perceived as likely to cut
short-term rates; and the 30-year U.S. Treasury bond finished April with a 6.9
percent yield.
Our fixed income investment strategy going into this reporting period was based
on our outlook for a modestly expanding U.S. economy with meager inflationary
pressure. Accordingly, we had positioned our portfolios to reflect our positive
view on interest rates. Recently, the stronger economic data and resulting
market volatility have led us to take a more defensive position in our
portfolios.
PORTFOLIO REVIEW AND STRATEGY
High Yield bonds generally perform the best, on a relative basis, when the
economy is improving and stocks are moving higher. The prospect of an
acceleration in economic growth that sent Treasury securities prices lower from
mid-February through April had only a subdued effect on high yield bonds. This
relative insensitivity to rising and falling interest rates has historically
served to make high yield bonds good diversifiers for fixed income portfolios.
Looking ahead to the remainder of the calendar year, we believe that low
inflation and a moderately improving U.S. economy will help high yield bonds
outperform other fixed income securities.
Our efforts to improve the overall credit quality and trading liquidity of the
portfolio bore fruit in the six-month period ended April 30, 1996. In addition,
our focus on certain high growth industry sectors, such as telecommunications,
cable television and leisure, generally helped the portfolio's performance.
However, our allocation to the telecommunications sector came under some
pressure at the end of the period due to the prevalence of zero coupon bonds in
this industry group. Zero coupon bonds are typically more sensitive to changes
in interest rates, and in March and April, this type of security was negatively
impacted by the jump in rates. Our strategy for the remainder of the year will
focus on maintaining the portfolio's current credit quality, liquidity and
sector allocations.
IN CLOSING
We appreciate your investment with Fortis and look forward to providing solid
answers you deserve. If you have any questions, please call us or talk with your
investment professional.
Sincerely,
[SIGNATURE] [SIGNATURE]
Dean C. Kopperud Howard G. Hudson
President Vice President
May 16, 1996
1
<PAGE>
CLASS B, C AND H AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Since
1 Year Inception+
- -------------------------------------------------------------
<S> <C> <C>
Class B shares# 6.18% 8.61%
Class B shares## 2.58% 5.01%
Class C shares# 6.05% 8.52%
Class C shares## 5.05% 7.52%
Class H shares# 6.18% 8.61%
Class H shares## 2.58% 5.01%
</TABLE>
Past performance is not indicative of future performance. Total returns include
reinvestment of all dividend and capital gains distributions. The performance of
the separate classes (A, B, C, and H) will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Class A has a maximum sales charge of 4.50%, Class B and H
have a CDSC of 4.00% (with a waiver of 10% of the amount invested) if redeemed
within two years of purchase, and Class C has a CDSC of 1.00% if redeemed within
one year of purchase.
# Without CDSC.
## With CDSC. Assumes redemption on April 30, 1996.
+ Since November 14, 1994 -- Date shares were first offered to the public.
TOP TEN HOLDINGS AS OF 4/30/96
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. United International Holdings, Inc., (14.0%) 1999 2.4%
2. U.S. Treasury Bond, (6.0%) 2026 2.2%
3. Renco Metals, Inc. (12.00%) 2000 2.3%
4. Paging Network, Inc. (10.125%) 2007 1.9%
5. Loehmann's Holdings Co., (13.75%) 1999 1.8%
6. Trump Castle Funding, Inc. (11.75%) 2003 1.8%
7. Kash N Karry Corp., (11.5%) 2003 1.8%
8. Host Marriot Properties Inc., (9.5%) 2005 1.8%
9. Mobilemedia Corp., (9.375%) 2007 1.8%
10. Panamsat L.P., (8.79%) 2003 1.7%
</TABLE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
VALUE OF $10,000 INVESTED JANUARY 4, 1988
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO CLASS A SINCE
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEAR JANUARY 4, 1988@
With Sales Charge* +2.16% +12.23% +8.62%
<S> <C> <C> <C> <C>
Without Sales Charge** +6.97% +13.27% +9.22%
Lehman Brothers High Yield
High Yield Index*** Portfolio Class A
1/4/88 10,000 9,550
4/30/89 11,435 10,553
4/30/90 11,141 9,135
4/30/91 12,891 10,673
4/30/92 16,167 13,673
4/30/93 18,574 15,752
4/30/94 19,799 17,723
4/30/95 21,854 18,602
4/30/96 24,424 19,898
</TABLE>
Past performance is not indicative of future performance. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
* SEC defined total returns, including reinvestment of all dividend and
capital gains distributions and the reduction due to the maximum sales
charge of 4.50%.
** These are the portfolios total returns during the period, including
reinvestment of all dividend and capital gains distributions without
adjustment for sales charge.
*** An unmanaged index of lower quality, high yield corporate debt securities.
@ Date shares were first offered to the public.
PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Telecommunications 20.4%
Cable Television 14.9%
Other 11.1%
Leisure Time-Amusements 10.5%
Retail-Grocery 4.9%
Broadcasting 4.7%
Retail-Miscellaneous 4.7%
Chemicals 4.6%
Banks 4.4%
Metals-Mining and Miscellaneous 4.3%
Containers and Packaging 3.1%
Energy 2.4%
Health Care Services 2.3%
Industrial 2.3%
U.S. Treasury Securities 2.2%
Waste Disposal 2.1%
Cash Equivalents/Receivables 1.1%
</TABLE>
2
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments
April 30, 1996 (Unaudited)
COMMON STOCKS-0.49%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
-------- ----------- -------------
<C> <S> <C> <C>
APPAREL-0.01%
1,250 Hosiery Corp. of America, Class A (a) (f).... $ 21,150 $ 6,250
----------- -------------
BROADCASTING-0.07%
1,000 Commodore Media, Inc. (Warrants) (a) (f)..... 26,500 130,000
----------- -------------
CABLE TELEVISION-0.04%
10,000 American Telecasting, Inc. (Warrants) (a).... 20,000 67,500
----------- -------------
CONSUMER GOODS-0.01%
1,800 Chattem, Inc. (Warrants) (a) (f)............. 18,424 3,150
17,400 Drypers Corp. (Warrants) (a) (f)............. 52,200 174
----------- -------------
70,624 3,324
----------- -------------
CONTAINERS AND PACKAGING-0.01%
2,000 RXI Holdings, Inc. (Warrants) (a) (f)........ 38,954 10,000
----------- -------------
LEISURE TIME-AMUSEMENTS-0.01%
1,000 Boomtown Inc. (Warrants) (a)................. 6,340 200
26,670 Capital Gaming International, Inc. (a)....... 133,350 8,334
22,750 Capital Gaming International, Inc. (Warrants)
(a)........................................ 35,440 683
6,000 Casino Magic Finance Corp. (Warrants) (a).... 9,000 60
6,000 Hemmeter Enterprises, Inc. (Warrants) (a).... 24,000 60
----------- -------------
208,130 9,337
----------- -------------
MACHINERY-0.02%
1,250 MVE, Inc. (Warrants) (a)..................... 8,594 31,250
7,500 Terex Corp. (Rights) (a)..................... 18,750 750
----------- -------------
27,344 32,000
----------- -------------
RETAIL-GROCERY-0.08%
20,697 Grand Union Co. (a).......................... 434,848 129,356
----------- -------------
RETAIL-MISCELLANEOUS-0.10%
1,000 Petro PSC Properties, L.P. (Warrants) (a).... 36,570 33,000
28,500 Thrifty Payless Holdings, Inc. (Warrants)
(a)........................................ 160,500 135,375
----------- -------------
197,070 168,375
----------- -------------
TELECOMMUNICATIONS-0.14%
4,500 American Communications Services, Inc.
(Warrants) (a) (f)......................... 205,650 236,250
----------- -------------
TOTAL COMMON STOCKS.......................... $1,250,270 $ 792,392
----------- -------------
----------- -------------
</TABLE>
CORPORATE BONDS-NON-INVESTMENT GRADE-96.15%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
AEROSPACE AND EQUIPMENT-1.00%
$1,500,000 K & F Industries, Inc., 11.875% Sr Secured
Note 12-1-2003............................. B+ $ 1,455,339 $ 1,620,000
------------- -------------
AIRLINES-1.20%
2,000,000 U.S. Air, Inc., 10.375% Pass Thru Certificate
3-1-2013................................... B+ 1,866,095 1,945,000
------------- -------------
BROADCASTING-4.66%
1,200,000 Allbritton Communications Co., 11.50% Sr Sub
Deb 8-15-2004 (g).......................... B- 1,272,000 1,236,000
500,000 Allbritton Communications Co., 9.75% Sr Sub
Deb 11-30-2007 (f)......................... B- 497,527 468,750
500,000 Argyle Television, Inc., 9.75% Sr Sub Note
11-1-2005.................................. B- 500,000 482,500
1,250,000 Commodore Media, Inc., 13.14% Sr Sub Note
5-1-2003 (e)............................... B3* 1,114,793 1,250,000
2,000,000 EZ Communications, Inc., 9.75% Sr Sub Note
12-1-2005.................................. B- 1,988,536 1,940,000
1,750,000 Spanish Broadcasting Systems, Inc., 11.52% Sr
Note 6-15-2002 (e)......................... B 1,734,810 1,710,625
500,000 Young Broadcasting Corp., 9.00% Sr Sub Note
1-15-2006 (f).............................. B 497,540 460,000
------------- -------------
7,605,206 7,547,875
------------- -------------
CABLE TELEVISION-14.84%
1,500,000 Adelphia Communications Corp., 12.50% Sr Note
5-15-2002.................................. B 1,556,663 1,526,250
2,151,580 American Telecasting, Inc., 14.45% Sr Sub
Disc Note 6-15-2004 (Zero coupon until
6-15-1999) (e)............................. CCC+ 1,371,564 1,581,411
</TABLE>
3
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments
April 30, 1996 (Unaudited)
CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
$2,250,000 Bell Cablemedia plc, 11.875% Sr Disc Note
9-15-2005 (Zero coupon until 9-15-2000) (e)
(g)........................................ BB- $ 1,372,141 $ 1,428,750
1,750,000 Century Communications, Inc., 9.50% Sr Note
3-1-2005................................... BB- 1,823,462 1,736,875
1,500,000 Comcast Corp., 9.125% Sr Sub Note
10-15-2006................................. BB- 1,552,881 1,477,500
1,500,000 Comcast Corp., 9.375% Sr Sub Deb 5-15-2005... BB- 1,530,478 1,498,125
3,000,000 Comcast UK Cable Ltd. 11.20% Sr Disc Deb
11-15-2007 (Zero coupon until 11-15-2000)
(e)........................................ B 1,840,329 1,777,500
2,000,000 Continental Cablevision, Inc., 8.30% Sr Deb
5-15-2006 (f).............................. BB+ 2,000,000 2,030,000
2,003,118 Falcon Holding Group, L.P., 11.00% Sr Sub
Note Ser B 9-15-2003 (Interest is
Payable-in-Kind) (g)....................... NR 1,964,262 1,922,994
500,000 Lenfest Communications, Inc., 8.375% Sr Note
11-1-2005.................................. BB+ 499,691 477,500
2,500,000 Marcus Cable Operating Co., 11.27% Sr Disc
Note 8-1-2004 (Zero coupon until 8-1-1999)
(e)........................................ B 1,818,750 1,809,375
3,000,000 Telewest plc, 11.00% Sr Disc Deb 10-1-2007
(Zero coupon until 10-1-2000) (e).......... BB 1,875,360 1,852,500
6,000,000 United International Holdings, Inc., 14.00%
Sr Sec Disc Note Ser B 11-15-1999 (e)...... B- 3,845,545 3,870,000
1,625,000 Videotron Holdings plc, 11.55% Sr Disc Note
8-15-2005 (Zero coupon until 8-15-2000) (e)
(g)........................................ B+ 982,520 1,072,500
------------- -------------
24,033,646 24,061,280
------------- -------------
CHEMICALS-4.58%
2,500,000 Acetex Corp., 9.75% Sr Secured Note
10-1-2003.................................. BB- 2,551,863 2,500,000
2,000,000 Arcadian Partners L.P., 10.75% Sr Note Ser B
5-1-2005................................... BB- 2,086,801 2,150,000
2,000,000 Indspec Chemical Corp., 11.50% Sr Sub Disc
Note Ser B 12-1-2003 (Zero coupon until
12-1-1998) (e)............................. B- 1,488,154 1,700,000
1,000,000 LaRoche Industries, Inc., 13.00% Sr Sub Note
8-15-2004.................................. B 1,046,250 1,077,500
------------- -------------
7,173,068 7,427,500
------------- -------------
CONSUMER GOODS-0.47%
750,000 Chattem, Inc., 12.75% Sr Sub Note Ser B
6-15-2004.................................. B- 733,874 757,500
------------- -------------
CONTAINERS AND PACKAGING-3.10%
1,000,000 Riverwood International, Inc., 10.25% Sr Note
4-1-2006 (g)............................... B 1,000,000 1,000,000
2,000,000 RXI Holdings, Inc., 14.00% Sr Secured Note
7-15-2002.................................. B- 1,977,914 1,720,000
1,750,000 Silgan Corp., 11.75% Sr Sub Note 6-15-2002... B- 1,846,250 1,820,000
500,000 Silgan Holdings Corp., 13.04% Sr Disc Deb
12-15-2002 (Zero coupon until 6-15-1996)
(e)........................................ B- 496,859 492,500
------------- -------------
5,321,023 5,032,500
------------- -------------
ENERGY-2.39%
750,000 Benton Oil & Gas Co., 11.625% Sr Note
5-1-2003 (f)............................... B 750,000 750,000
3,500,000 Clark R & M Holdings, Inc., 9.97% Sr Note
2-15-2000 (e).............................. B+ 2,431,458 2,380,000
750,000 Falcon Drilling Co., 8.875% Sr Note 3-15-2003
(f)........................................ B+ 750,000 742,500
------------- -------------
3,931,458 3,872,500
------------- -------------
FOOD-GROCERY, MISCELLANEOUS-0.85%
1,500,000 Specialty Foods Corp., 10.25% Sr Note
8-15-2001.................................. B 1,372,923 1,372,500
------------- -------------
FOOD-MISCELLANEOUS-0.79%
1,250,000 Envirodyne Industries, Inc., 12.00% First
Priority Sr Secured Note 6-15-2000......... B+ 1,240,625 1,275,000
------------- -------------
FOREST PRODUCTS-1.23%
750,000 Rainy River Forest Products, Inc., 10.75% Sr
Note 10-15-2001............................ BB+ 829,023 798,750
1,250,000 Repap New Brunswick, Inc., 10.625% Sr Secured
Second Priority Note 4-15-2005............. B+ 1,193,906 1,193,750
------------- -------------
2,022,929 1,992,500
------------- -------------
HEALTH CARE SERVICES-2.27%
2,000,000 Abbey Healthcare Group, Inc., 9.50% Sr Sub
Note 11-1-2002............................. BB+ 2,099,528 2,070,000
1,500,000 Tenet Healthcare Corp., 10.125% Sr Sub Note
3-1-2005................................... B+ 1,668,562 1,605,000
------------- -------------
3,768,090 3,675,000
------------- -------------
HOTEL AND MOTEL-1.80%
3,000,000 Host Marriott Properties, Inc., 9.50% Sr Note
5-15-2005 (g).............................. BB- 2,980,011 2,913,750
------------- -------------
HOUSING-1.83%
1,500,000 MDC Holdings, Inc., 11.125% Note
12-15-2003................................. B 1,415,915 1,455,000
1,500,000 NVR Inc., 11.00% Sr Note 4-15-2003........... B 1,502,694 1,515,000
------------- -------------
2,918,609 2,970,000
------------- -------------
INDUSTRIAL-2.29%
2,000,000 Bar Technologies, Inc., 13.50% Sr Sec Note
4-1-2001(and warrants) (f)................. B- 1,965,272 1,995,000
1,000,000 Chancellor Broadcasting Corp., 9.375% Sr Sub
Note 10-1-2004 (g)......................... B- 960,362 967,500
</TABLE>
4
<PAGE>
CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
$ 750,000 Simmons Co., 10.75% Sr Sub Note 4-15-2006
(f)........................................ B $ 750,000 $ 757,500
------------- -------------
3,675,634 3,720,000
------------- -------------
LEISURE TIME-AMUSEMENTS-10.49%
2,500,000 Bally's Park Place, Inc., 9.25% First Mtg
Bond 3-15-2004............................. BB 2,434,790 2,556,250
850,000 Boomtown, Inc., 11.50% First Mtg Bond
11-1-2003.................................. B 839,465 830,875
1,250,000 Capital Gaming International, Inc., 11.50%
Secured Note 2-1-2001 (a).................. Caa* 868,640 550,000
1,500,000 GNF Corp., 10.625% First Mtg Note 4-1-2003... BB 1,560,000 1,545,000
1,500,000 Grand Casinos, Inc., 10.125% First Mtg Bond
12-1-2003.................................. BB 1,591,463 1,563,750
500,000 Players International, Inc., 10.875% Sr Note
4-15-2005.................................. BB 491,250 508,750
200,000 Showboat Marina Casino & Finance Corp.,
13.50% First Mtg Bond 3-15-2003 (f)........ B 200,000 212,000
1,000,000 Showboat, Inc., 13.00% Sr Sub Note
8-1-2009................................... B 1,082,500 1,140,000
2,500,000 Showboat, Inc., 9.25% First Mtg Bond
5-1-2008................................... BB- 2,562,500 2,562,500
2,500,000 Trump Atlantic City Associates, 11.25% First
Mtg Bond 5-1-2006 (g)...................... BB- 2,500,000 2,559,375
3,000,000 Trump Castle Funding, Inc., 11.75% First Mtg
Bond 11-15-2003............................ Caa* 2,203,124 2,970,000
------------- -------------
16,333,732 16,998,500
------------- -------------
MACHINERY-0.77%
1,250,000 MVE, Inc., 12.50% Sr Secured Note
2-15-2002.................................. B+ 1,242,426 1,256,250
------------- -------------
METALS-MINING AND MISCELLANEOUS-4.31%
1,550,000 Haynes International, Inc., 11.25% Sr Secured
Note Ser A 6-15-1998....................... CCC+ 1,511,250 1,565,500
1,750,000 Haynes International, Inc., 13.50% Sr Sub Deb
8-15-1999.................................. CCC- 1,115,000 1,680,000
3,500,000 Renco Metals, Inc., 12.00% Sr Note
7-15-2000.................................. B+ 3,668,026 3,745,000
------------- -------------
6,294,276 6,990,500
------------- -------------
PUBLISING-1.16%
2,500,000 Marvel (Parent) Holdings, Inc., 12.69% Sr
Secured Note 4-15-1998 (e) (g)............. B- 1,971,638 1,887,500
------------- -------------
RESTAURANTS AND FRANCHISING-0.83%
1,500,000 Flagstar Corp., 10.75% Sr Note 9-15-2001..... B- 1,368,649 1,338,750
------------- -------------
RETAIL-DEPARTMENT STORES-3.15%
3,000,000 Loehmann's Holdings Co., 13.75% Sr Sub Note
2-15-1999.................................. CCC+ 3,003,750 2,992,500
2,175,000 Specialty Retailers, Inc., 10.00% Sr Note
8-15-2000.................................. B+ 2,169,677 2,120,625
------------- -------------
5,173,427 5,113,125
------------- -------------
RETAIL-GROCERY-4.78%
1,250,000 Cumberland Farms, Inc., 10.50% Sr Note
10-1-2003.................................. NR 1,194,044 1,187,500
2,458,682 Farm Fresh Holdings Corp.,14.25% Sr Note
10-1-2002 (Interest is Payable-in-Kind thru
10-1-1997) (f)............................. NR 903,554 811,365
1,500,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000
(g)........................................ B- 1,525,000 1,290,000
1,000,000 Jitney-Jungle Stores, Inc., 12.00% Sr Note
3-1-2006................................... B 1,000,000 1,022,500
2,945,497 Kash N Karry Corp., 11.50% Sr Note
2-1-2003................................... B- 2,799,423 2,945,497
350,000 Pay 'N' Pak Stores, Inc., 13.50% Sr Sub Deb
6-1-1998 (a)............................... NR 350,000 1,750
500,000 Ralph's Grocery Co., 10.45% Sr Note
6-15-2004.................................. B 497,534 490,000
------------- -------------
8,269,555 7,748,612
------------- -------------
RETAIL-MISCELLANEOUS-1.41%
1,000,000 Color Tile, Inc., 10.75% Sr Note 12-15-2001
(a) (g).................................... D 590,000 55,000
2,000,000 Thrifty Payless, Inc., 12.25% Sr Sub Note
4-15-2004.................................. B- 1,847,937 2,230,000
------------- -------------
2,437,937 2,285,000
------------- -------------
STEEL AND IRON-1.35%
2,000,000 AK Steel Corp., 10.75% Sr Note 4-1-2004...... BB 2,176,947 2,185,000
------------- -------------
TECHNOLOGY-1.28%
2,000,000 Computervision Corp., 11.375% Sr Sub Note
8-15-1999.................................. B- 1,724,687 2,080,000
------------- -------------
TELECOMMUNICATIONS-20.23%
2,500,000 A+ Network Inc., 11.875% 11-1-2005........... CCC+ 2,515,742 2,525,000
4,500,000 American Communications Services, Inc.,
13.00% Sr Disc Note 11-1-2005 (Zero coupon
until 11-1-2000) (e)....................... NR 2,358,100 2,452,500
4,620,000 Arch Communications Group, Inc., 10.75% Sr
Disc Note 3-15-2008 (Zero coupon until
3-15-2001) (e) (g) B- 2,783,308 2,581,425
4,000,000 Clearnet Communications, Inc., 14.75% Sr Disc
Note 12-15-2005 (Zero coupon until
12-15-2000) (and warrants) (e)............. B3* 2,075,815 2,480,000
2,500,000 Echostar Communications, Inc., 11.30% Sr Disc
Note 6-1-2004 (Zero coupon until 6-1-1999)
(e) (g).................................... B- 1,857,966 1,850,000
</TABLE>
5
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Schedule of Investments
April 30, 1996 (Unaudited)
CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
Principal & Poor's Market
Amount Rating Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
$2,000,000 Fonorola, Inc., 12.50% Sr Secured Note
8-15-2002.................................. B+ $ 2,057,370 $ 2,150,000
3,960,000 GST Telecommunications, Inc., 13.875% Sr Disc
Note 12-15-2005 (Zero coupon until
12-15-2000) (e) (f)........................ NR 2,146,510 2,419,956
4,000,000 Hyperion Communications, Inc., 13.00% Sr Disc
Note 4-15-2003 (Zero coupon until
4-15-2001) (and warrants) (e) (f).......... NR 2,142,645 2,150,000
3,500,000 MFS Communications, Inc., 8.96% Sr Disc Note
1-15-2006 (Zero coupon until 1-15-2001)
(e)........................................ B 2,304,700 2,156,875
1,000,000 MFS Communications, Inc., 9.59% Sr Disc Note
1-15-2004 (Zero coupon until 1-15-1999)
(e)........................................ B 770,000 770,000
3,000,000 Mobilemedia Corp., 9.375% Sr Sub Note
11-1-2007.................................. B- 3,021,083 2,891,250
2,500,000 NextLink Communications, L.L.C., 12.50% Sr
Note 4-15-2006 (f)......................... NR 2,500,000 2,525,000
3,000,000 Paging Network, Inc., 10.125% Sr Sub Note
8-1-2007................................... B 3,104,453 3,086,250
3,250,000 Panamsat L.P., 8.79% Sr Sub Disc Note
8-1-2003 (Zero coupon until 8-1-1998)
(e)........................................ B 2,821,042 2,762,500
------------- -------------
32,458,734 32,800,756
------------- -------------
TOBACCO-1.04%
2,000,000 Liggett Group, Inc., 11.50% Secured Note Ser
B 2-1-1999 (g)............................. NR 1,492,110 1,685,000
------------- -------------
WASTE DISPOSAL-2.05%
1,015,000 Allied Waste Industries, Inc., 12.00% Sr Sub
Note 2-1-2004.............................. B 987,450 1,101,275
2,125,000 Norcal Waste Systems, Inc., 13.00% Increasing
Rate Sr Note 11-15-2005 (e) (f)............ BB- 2,077,107 2,223,281
------------- -------------
3,064,557 3,324,556
------------- -------------
TOTAL CORPORATE BONDS - NON-INVESTMENT
GRADE...................................... $ 154,107,205 $ 155,876,454
------------- -------------
------------- -------------
</TABLE>
U.S. GOVERNMENT SECURITIES-2.19%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (b) Value (c)
----------- ------------- -------------
<C> <S> <C> <C>
U.S. TREASURY SECURITIES-2.19%
BONDS:
$4,000,000 6.00% 2026................................... $ 3,551,250 $ 3,543,750
------------- -------------
TOTAL LONG-TERM INVESTMENTS.................. $ 158,908,725 $ 160,212,596
------------- -------------
</TABLE>
SHORT-TERM INVESTMENTS-5.04%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
----------- -------------
<C> <S> <C>
BANKS-4.44%
$7,195,000 First Trust Money Market Variable Rate Time
Deposit, Current rate -- 5.14%............. $ 7,195,000
-------------
DIVERSIFIED FINANCE-0.60%
976,000 Associates Corp. Master Variable Rate Note,
Current rate -- 5.29%...................... 976,000
-------------
TOTAL SHORT-TERM INVESTMENTS................. 8,171,000
-------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$167,079,725) (B).......................... $ 168,383,596
-------------
-------------
</TABLE>
(a) Presently non-income producing. For corporate debt securities, items
identified are in default as to payment of interest and/or principal.
(b) At April 30, 1996, the cost of securities for federal income tax
purposes was $167,121,379 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 5,636,787
Unrealized depreciation........................... (4,374,570)
---------------------------------------------------------------
Net unrealized appreciation....................... $ 1,262,217
---------------------------------------------------------------
</TABLE>
(c) See Note 1 of accompanying Notes to Financial Statements regarding
valuation of securities.
(d) Note: Percentage of investments as shown is the ratio of the total
market value to total net assets. Market value of investments in
foreign securities represents 9.41% of net assets as of April 30, 1996
(e) The interest rate disclosed for these securities represents the
original issue discount yields on the date of acquisition.
(f) Securities sold within terms of a private placement memorandum, exempt
from registration under Section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or to other
"accredited investors". These investments have been identified by
portfolio management as illiquid securities. The value of these
securities at April 30, 1996 is $17,931,176 which represents 11.06% of
net assets.
(g) Security is fully or partially on loan at April 30, 1996. See Note A of
accompanying Notes to Financial Statements.
* Moody's Rating.
6
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
April 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, as
detailed in the accompanying
schedules, at market (cost
$167,079,725) (Note 1)......... $168,383,596
Cash on deposit with custodian... 689
Collateral for securities lending
transactions (Note 1).......... 18,765,100
Receivables:
Investment securities sold..... 4,267,500
Interest and dividends......... 3,385,011
Subscriptions of capital
stock......................... 367,080
Deferred registration costs (Note
1)............................. 30,408
Prepaid expenses................. 17,002
------------
TOTAL ASSETS....................... 195,216,386
------------
LIABILITIES
Cash portion of dividends
payable........................ 520,711
Payable upon return of securities
loaned (Note 1)................ 18,765,100
Payable for investment securities
purchased...................... 13,697,031
Redemptions of capital stock..... 910
Payable for investment advisory
and management fees (Note 2)... 95,886
Payable for distribution fees
(Note 2)....................... 9,713
Accounts payable and accrued
expenses....................... 14,852
------------
TOTAL LIABILITIES.................. 33,104,203
------------
NET ASSETS
Net proceeds of capital stock,
par value $.01 per share-
authorized 10,000,000,000
shares......................... 175,354,954
Unrealized appreciation of
investments.................... 1,303,871
Undistributed net investment
income......................... 153,985
Accumulated net realized loss
from sale of investments....... (14,700,627)
------------
TOTAL NET ASSETS................... $162,112,183
------------
SHARES OUTSTANDING AND NET ASSET
VALUE PER SHARE:
Class A shares (based on net assets
of $111,472,841 and 14,539,411
shares outstanding).............. $7.67
------------
Class B shares (based on net assets
of $11,613,508 and 1,515,380
shares outstanding).............. $7.66
------------
Class C shares (based on net assets
of $3,143,230 and 410,718 shares
outstanding)..................... $7.65
------------
Class H shares (based on net assets
of $35,882,604 and 4,683,966
shares outstanding).............. $7.66
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Statement of Operations
(Unaudited)
For the Six-Month Period Ended April 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Income
Interest income................ $8,610,354
Fee income (Note 1)............ 16,952
----------
Total Income..................... 8,627,306
----------
Expenses:
Investment advisory and
management fees (Note 2)...... 566,897
Distribution fees (Class A)
(Note 2)...................... 196,524
Distribution fees (Class B)
(Note 2)...................... 49,661
Distribution fees (Class C)
(Note 2)...................... 13,663
Distribution fees (Class H)
(Note 2)...................... 149,477
Legal and auditing fees (Note
2)............................ 13,103
Custodian fees................. 15,415
Shareholders' notices and
reports....................... 17,109
Registration fees.............. 37,046
Directors' fees and expenses... 5,221
Other.......................... 5,376
----------
Total expenses................... 1,069,492
----------
NET INVESTMENT INCOME.............. 7,557,814
----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 1):
Net realized gain from security
transactions................... 172,064
Net change in unrealized
appreciation of investments in
securities..................... 876,462
----------
NET GAIN ON INVESTMENTS............ 1,048,526
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $8,606,340
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED
APRIL 30,
1996
(UNAUDITED)
------------
<S> <C>
OPERATIONS
Net investment income..................................................................................... $ 7,557,814
Net realized gain (loss) from security transactions....................................................... 172,064
Net change in unrealized appreciation of investments...................................................... 876,462
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................................ 8,606,340
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A................................................................................................. (5,541,663)
Class B................................................................................................. (457,707)
Class C................................................................................................. (125,528)
Class H................................................................................................. (1,377,519)
Excess distributions of net realized gains
Class A................................................................................................. --
Class B................................................................................................. --
Class C................................................................................................. --
Class H................................................................................................. --
------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS......................................................................... (7,502,417)
------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A(1,695,024 and 4,938,047 shares)................................................................. 13,044,531
Class B (567,824 and 1,018,845 shares).................................................................. 4,367,867
Class C (169,669 and 289,026 shares).................................................................... 1,302,360
Class H (1,838,438 and 3,315,347 shares)................................................................ 14,143,222
Proceeds from shares issued as a result of reinvested dividends
Class A (452,587 and 991,834 shares).................................................................... 3,482,143
Class B (28,023 and 15,217 shares)...................................................................... 215,673
Class C (9,393 and 8,061 shares)........................................................................ 72,137
Class H (86,831 and 64,902 shares)...................................................................... 667,983
Less cost of repurchase of shares
Class A (2,497,605 and 3,522,187 shares)................................................................ (19,223,479)
Class B (70,761 and 43,768 shares)...................................................................... (546,420)
Class C (55,492 and 9,939 shares)....................................................................... (424,498)
Class H (380,723 and 240,829 shares).................................................................... (2,932,204)
------------
NET INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS.......................................................... 14,169,315
------------
TOTAL INCREASE IN NET ASSETS................................................................................ 15,273,238
NET ASSETS:
Beginning of period....................................................................................... 146,838,945
------------
End of period (includes undistributed net investment income of $153,985 and $98,588 , respectively)....... $162,112,183
------------
<CAPTION>
FOR THE
YEAR ENDED
OCTOBER 31,
1995
------------
<S> <C>
OPERATIONS
Net investment income..................................................................................... $ 12,733,808
Net realized gain (loss) from security transactions....................................................... (13,580,003)
Net change in unrealized appreciation of investments...................................................... 9,314,020
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................................ 8,467,825
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A................................................................................................. (11,554,220)
Class B................................................................................................. (234,800)
Class C................................................................................................. (90,925)
Class H................................................................................................. (955,294)
Excess distributions of net realized gains
Class A................................................................................................. (528,575)
Class B................................................................................................. (10,742)
Class C................................................................................................. (4,160)
Class H................................................................................................. (43,702)
------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS......................................................................... (13,422,418)
------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
Class A(1,695,024 and 4,938,047 shares)................................................................. 38,455,673
Class B (567,824 and 1,018,845 shares).................................................................. 7,922,888
Class C (169,669 and 289,026 shares).................................................................... 2,255,501
Class H (1,838,438 and 3,315,347 shares)................................................................ 25,836,255
Proceeds from shares issued as a result of reinvested dividends
Class A (452,587 and 991,834 shares).................................................................... 7,704,696
Class B (28,023 and 15,217 shares)...................................................................... 117,480
Class C (9,393 and 8,061 shares)........................................................................ 62,290
Class H (86,831 and 64,902 shares)...................................................................... 502,965
Less cost of repurchase of shares
Class A (2,497,605 and 3,522,187 shares)................................................................ (27,386,262)
Class B (70,761 and 43,768 shares)...................................................................... (337,347)
Class C (55,492 and 9,939 shares)....................................................................... (77,278)
Class H (380,723 and 240,829 shares).................................................................... (1,874,246)
------------
NET INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS.......................................................... 53,182,615
------------
TOTAL INCREASE IN NET ASSETS................................................................................ 48,228,022
NET ASSETS:
Beginning of period....................................................................................... 98,610,923
------------
End of period (includes undistributed net investment income of $153,985 and $98,588 , respectively)....... $146,838,945
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FORTIS ADVANTAGE HIGH YIELD PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Portfolio is a diversified
series of Fortis Advantage Portfolios, Inc. ("Fortis Advantage"), an open-end
management investment company. Fortis Advantage currently is comprised of
three separate investment portfolios and series of capital stock: Asset
Allocation Portfolio, Capital Appreciation Portfolio and High Yield
Portfolio, each of which has different investment objectives and its own
investment portfolio and net asset value. High Yield Portfolio is included in
this report. The other two have a fiscal year-end of August 31 and were
included in a semi-annual report for all Fortis Stock Funds dated February
29, 1996. The Articles of Incorporation of Fortis Advantage permits the Board
of Directors to create additional portfolios in the future. The High Yield
Portfolio's investment objective is maximum current income by investing
primarily in high yielding, fixed-income securities which, in the opinion of
the Portfolio's investment advisor, do not subject the Portfolio to
unreasonable investment risk. The fund offers Class A, Class B, Class C and
Class H shares. The fund began to issue multiple class shares effective
November 14, 1994. Class A shares are sold with a front-end sales charge.
Class B and H shares are sold without a front-end sales charge and may be
subject to a contingent deferred sales charge, and such shares automatically
convert to Class A after eight years. Class C shares are sold without a
front-end sales charge and may be subject to contingent deferred sales
charge. All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that the level of
distribution fees charged differs between classes. Income, expenses (other
than expenses incurred under each class's distribution agreement) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based on its relative net assets.
The significant accounting policies followed by the Fund are summarized as
follows:
SECURITY VALUATION: Investments in securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sales price; listed securities and over-the-counter securities for
which no sale was reported are valued at the last reported bid price.
Long-term debt securities are valued at current market prices on the basis of
valuations furnished by an independent pricing service. Short-term
investments, with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued at amortized cost.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Realized
security gains and losses are determined using the identified cost method.
For financial reporting purposes, the Fund amortizes original issue discount.
For bonds held in the fund prior to October 31, 1995, the fund does not
amortize long-term bond premium or discount. For purchases on or after
November 1, 1995, the fund does amortize long-term bond premium and discount.
For the six-month period ended April 30, 1996, the cost of purchases and
proceeds from sales of securities (other than short-term securities) were
$165,158,845 and $141,316,658, respectively.
LENDING OF PORTFOLIO SECURITIES: At April 30, 1996, securities valued at
$18,014,113 were on loan to brokers from the Portfolio. For collateral, the
Portfolio's custodian received $18,765,100 in cash which is maintained in a
separate account and invested by the custodian in short term investment
vehicles. The risks to the Portfolio in security lending transactions are
that the borrower may not provide additional collateral when required or
return the securities when due and that the proceeds from the sale of
investments made with cash collateral received will be less than amounts
required to be returned to the borrowers. Fee income from securities lending
amounted to $16,952 for the six-month period ended April 30, 1996.
INCOME TAXES: The Portfolio intends to qualify, under the Internal Revenue
Code, as a regulated investment company and if so qualified, will not have to
pay federal income taxes to the extent its taxable net income is distributed.
On a calendar year basis, the portfolio intends to distribute substantially
all of its net investment income and realized gains, if any, to avoid payment
of federal excise taxes.
Net investment income and net realized gains differ for financial statement
and tax purposes primarily because of the recognition of market discount as
ordinary income for tax purposes. The character of distributions made during
the year from net investment income or net realized gains may, therefore,
differ from their ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed differ from the year that the income or realized
gains (losses) were recorded by the portfolio. The effect on dividend
distributions of certain current year permanent book-to-tax differences is
reflected as excess distributions of net realized gains in the statements of
changes in net assets and the financial highlights.
For federal income tax purposes the portfolio had $14,865,044 of capital loss
carryover at October 31, 1995, which, if not offset by subsequent capital
gains, will expire in 1996 through 2003. It is unlikely the Board of
Directors will authorize a distribution of any net realized gains until the
available capital loss carryovers have been offset or expired.
DEFERRED COSTS: Registration costs are deferred and charged to income over
the registration period.
INCOME AND CAPITAL GAINS DISTRIBUTIONS: It is the policy of High Yield
Portfolio to declare daily and pay monthly distributions from net investment
income. Distributions of net realized capital gains, if any, are made
annually by each portfolio. The distributions are recorded on the record date
and are payable in cash or reinvested in additional shares of the portfolio
at net asset value without any charge to the shareholder.
ILLIQUID SECURITIES: At April 30, 1996, investments in securities for the
High Yield Portfolio included issues that are illiquid. The fund currently
limits investments in illiquid securities to 15% of net assets, at market
value, at the date of purchase. The aggregate value of such securities at
April 30, 1996, was $17,931,176 which represents 11.06% of net assets.
Pursuant to guidelines adopted by the Board of Directors, certain
unregistered securities are determined to be liquid and are not included
within the 15% limitation specified above.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets
10
<PAGE>
- --------------------------------------------------------------------------------
and liabilities at the date of the financial statements and the reported
amounts of increase and decrease in net assets from operations during the
reporting period. Actual results could differ from those estimates.
2. PAYMENTS TO RELATED PARTIES: Fortis Advisers, Inc., is the investment adviser
for the High Yield Portfolio. Investment advisory and management fees are
computed at an annual rate of .80% for the first $50 million of average net
assets, .70% for assets over $50 million.
In addition to the investment advisory and management fee, Classes A, B, C
and H pay Fortis Investors, Inc. (the fund's principal underwriter)
distribution fees equal to .35% of average daily net assets for Class A and
1.00% (Class B, C and H) of average daily net assets on an annual basis, to
be used to compensate those who sell shares of the fund and to pay certain
other expenses of selling fund shares. Fortis Investors, Inc. also received
sales charges (paid by purchasers or redeemers of the fund's shares)
aggregating $265,456 for Class A, $5,169 for Class B, $1,711 for Class C and
$58,623 for Class H, for the six-month period ended April 30, 1996.
Legal fees and expenses aggregating $3,947, for the six-month period ended
April 30, 1996, were paid to a law firm of which the secretary of Fortis
Advantage is a partner.
3. FINANCIAL HIGHLIGHTS: Selected per share historical data for each of the
Portfolios was as follows:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
<CAPTION>
HIGH YIELD PORTFOLIO 1996** 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 7.61 $ 7.90 $ 8.65 $ 8.00 $ 7.82 $ 5.72
- -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income-net........................... .37 .86 .86 .87 .85 .95
Net realized and unrealized gain (loss) on
investments................................... .07 (.25) (.72) .68 .22 2.03
- -------------------------------------------------------------------------------------------------------------------
Total from operations............................. .44 .61 .14 1.55 1.07 2.98
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From investment income-net...................... (.38) (.87) (.89) (.89) (.85) (.88)
Excess distributions of net realized gains...... -- (.03) -- (.01) (.04) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............... (.38) (.90) (.89) (.90) (.89) (.88)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 7.67 $ 7.61 $ 7.90 $ 8.65 $ 8.00 $ 7.82
- -------------------------------------------------------------------------------------------------------------------
Total return@..................................... 5.84% 8.07% 1.48% 20.33% 14.20% 55.78%
Net assets at end of period (000's omitted)....... $ 111,473 $ 113,268 $ 98,611 $ 73,395 $ 45,628 $ 31,250
Ratio of expenses to average daily net assets..... 1.20%* 1.25% 1.23% 1.29% 1.33% 1.51%
Ratio of net investment income to average daily
net assets........................................ 9.95%* 10.61% 10.18% 10.43% 10.34% 13.80%
Portfolio turnover rate........................... 94% 101% 63% 95% 80% 61%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS H
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
HIGH YIELD PORTFOLIO 1996** 1995+ 1996** 1995+ 1996** 1995+
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.............. $ 7.60 $ 7.87 $ 7.59 $ 7.87 $ 7.60 $ 7.87
- -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income-net........................... .35 .80 .35 .79 .35 .80
Net realized and unrealized gains (losses) on
investments................................... .06 (.25) .06 (.25) .06 (.25)
- -------------------------------------------------------------------------------------------------------------------
Total from operations............................. .41 .55 .41 .54 .41 .55
- -------------------------------------------------------------------------------------------------------------------
Distribution to shareholders:
From investment income-net...................... (.35) (.78) (.35) (.77) (.35) (.77)
Excess distributions of net realized gains...... -- (.04) -- (.05) -- (.05)
- -------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders............... (.35) (.82) (.35) (.82) (.35) (.82)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 7.66 $ 7.60 $ 7.65 $ 7.59 $ 7.66 $ 7.60
- -------------------------------------------------------------------------------------------------------------------
Total Return@..................................... 5.52% 7.25% 5.53% 7.12% 5.52% 7.26%
Net assets end of period (000s omitted)........... $ 11,614 $ 7,530 $ 3,143 $ 2,180 $ 35,883 $ 23,862
Ratio of expenses to average daily net assets..... 1.85%* 1.90%* 1.85%* 1.90%* 1.85%* 1.90%*
Ratio of net investment income to average daily
net assets........................................ 9.29%* 9.66%* 9.30%* 9.83%* 9.30%* 9.81%*
Portfolio turnover rate........................... 94% 101% 94% 101% 94% 101%
* Annualized.
@ These are the Fund's total returns during the periods, including reinvestment of all dividend and capital gains
distributions without adjustments for sales charge.
+ For the period from November 14, 1994 (commencement of operations) to October 31, 1995.
** For the six-month period ended April 30, 1996.
</TABLE>
11
<PAGE>
DIRECTORS AND OFFICERS
DIRECTORS Richard W. Cutting CPA AND FINANCIAL CONSULTANT
Allen R. Freedman CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
FORTIS, INC. MANAGING DIRECTOR OF
FORTIS INTERNATIONAL, N.V.
Dr. Robert M. Gavin PRESIDENT, MACALESTER COLLEGE
Benjamin S. Jaffray CHAIRMAN, SHEFFIELD GROUP, LTD.
Jean L. King PRESIDENT, COMMUNI-KING
Dean C. Kopperud CHIEF EXECUTIVE OFFICER AND DIRECTOR,
FORTIS ADVISERS, INC. PRESIDENT AND
DIRECTOR, FORTIS INVESTORS, INC.
SENIOR VICE PRESIDENT AND DIRECTOR,
FORTIS BENEFITS INSURANCE COMPANY,
TIME INSURANCE COMPANY
Edward M. Mahoney PRIOR TO JANUARY, 1995, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER, FORTIS
ADVISERS, INC., FORTIS INVESTORS,
INC.
Robb L. Prince FINANCIAL AND EMPLOYEE BENEFIT
CONSULTANT PRIOR TO JULY, 1995, VICE
PRESIDENT AND TREASURER, JOSTENS,
INC.
Leonard J. Santow PRINCIPAL, GRIGGS & SANTOW, INC.
Joseph M. Wikler INVESTMENT CONSULTANT AND PRIVATE
INVESTOR PRIOR TO JANUARY, 1994,
DIRECTOR OF RESEARCH, CHIEF
INVESTMENT OFFICER, PRINCIPAL, AND
DIRECTOR, THE ROTHSCHILD CO.
OFFICERS
Dean C. Kopperud
PRESIDENT AND DIRECTOR
Robert W. Beltz, Jr.
VICE PRESIDENT
James S. Byrd
VICE PRESIDENT
Charles J. Dudley
VICE PRESIDENT
Thomas D. Gualdoni
VICE PRESIDENT
Maroun M. Hayek
VICE PRESIDENT
Howard G. Hudson
VICE PRESIDENT
Robert C. Lindberg
VICE PRESIDENT
Larry A. Medin
VICE PRESIDENT
Kevin J. Michels
VICE PRESIDENT
Jon H. Nicholson
VICE PRESIDENT
Fred Obser
VICE PRESIDENT
Dennis M. Ott
VICE PRESIDENT
David A. Peterson
VICE PRESIDENT
Nicholas L. M. de Peyster
VICE PRESIDENT
Stephen M. Poling
VICE PRESIDENT
Stephen M. Rickert
VICE PRESIDENT
Richard P. Roche
VICE PRESIDENT
Anthony J. Rotondi
VICE PRESIDENT
Rhonda J. Schwartz
VICE PRESIDENT
Keith R. Thomson
VICE PRESIDENT
Christopher J. Woods
VICE PRESIDENT
Gary N. Yalen
VICE PRESIDENT
Michael J. Radmer
SECRETARY
Tamara L. Fagely
TREASURER
INVESTMENT MANAGER, REGISTRAR Fortis Advisers, Inc.
AND TRANSFER AGENT BOX 64284, ST. PAUL, MINNESOTA 55164
PRINCIPAL UNDERWRITER Fortis Investors, Inc.
BOX 64284, ST. PAUL, MINNESOTA 55164
CUSTODIAN Norwest Bank Minnesota, N.A.
MINNEAPOLIS, MINNESOTA
GENERAL COUNSEL Dorsey & Whitney LLP
MINNEAPOLIS, MINNESOTA
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
MINNEAPOLIS, MINNESOTA
The use of this material is authorized only when preceded or accompanied by a
prospectus.
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<PAGE>
FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES
MUTUAL Fortis Bond Funds MONEY FUND
FUNDS/PORTFOLIOS U.S. GOVERNMENT
CONVENIENT ACCESS TO SECURITIES FUND
A BROAD RANGE OF TAX-FREE MINNESOTA
SECURITIES PORTFOLIO
TAX-FREE NATIONAL
PORTFOLIO
TAX-FREE NEW YORK
PORTFOLIO
HIGH YIELD PORTFOLIO
Fortis Stock Funds ASSET ALLOCATION
PORTFOLIO
VALUE FUND
GROWTH & INCOME FUND
CAPITAL FUND
FIDUCIARY FUND
GLOBAL GROWTH PORTFOLIO
GROWTH FUND
CAPITAL APPRECIATION
PORTFOLIO
FIXED AND VARIABLE Fortis Opportunity Fixed FIXED ACCOUNT
ANNUITIES & Variable Annuity MONEY MARKET SUBACCOUNT
TAX-DEFERRED Masters Variable Annuity U.S. GOVERNMENT
INVESTING SECURITIES SUBACCOUNT
DIVERSIFIED INCOME
SUBACCOUNT
GLOBAL BOND SUBACCOUNT
HIGH YIELD SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GROWTH STOCK SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
AGGRESSIVE GROWTH
SUBACCOUNT
Fortune Fixed Annuities SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY
Income Annuities GUARANTEED FOR LIFE
GUARANTEED FOR A
SPECIFIED PERIOD
LIFE AND DISABILITY Wall Street Series FIXED ACCOUNT
INSURANCE PROTECTION Variable Universal Life MONEY MARKET SUBACCOUNT
AND TAX-DEFERRED Insurance U.S. GOVERNMENT
INVESTMENT SECURITIES SUBACCOUNT
OPPORTUNITY DIVERSIFIED INCOME
SUBACCOUNT
GLOBAL BOND SUBACCOUNT
HIGH YIELD SUBACCOUNT
ASSET ALLOCATION
SUBACCOUNT
GLOBAL ASSET ALLOCATION
SUBACCOUNT
VALUE SUBACCOUNT
GROWTH & INCOME
SUBACCOUNT
S&P 500 INDEX SUBACCOUNT
BLUE CHIP STOCK
SUBACCOUNT
GLOBAL GROWTH SUBACCOUNT
GROWTH STOCK SUBACCOUNT
INTERNATIONAL STOCK
SUBACCOUNT
AGGRESSIVE GROWTH
SUBACCOUNT
Adaptable Life
Universal Life
Disability
THE FORTIS FINANCIAL GROUP manages and distributes mutual funds, annuities and
life insurance products. The mutual funds, variable life and variable annuity
products are distributed through FORTIS INVESTORS, INC. and managed by FORTIS
ADVISERS, INC. The insurance products are issued by FORTIS BENEFITS INSURANCE
COMPANY and TIME INSURANCE COMPANY.
FOR MORE COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES, SEND FOR A
PROSPECTUS. WRITE TO: FORTIS INVESTORS, INC., P.O. BOX 64284, ST. PAUL, MN
55164. READ IT CAREFULLY BEFORE INVESTING OR SENDING MONEY.
13
