<PAGE>
FORTIS SECURITIES, INC. SEMI-ANNUAL REPORT
Contents
Letter to Shareholders 2
Schedule of Investments 3
Statement of Assets and Liabilities 8
Statement of Operations 9
Statements of Changes in Net Assets 10
Notes to Financial Statements 11
Board of Directors and Officers 13
HIGHLIGHTS
<TABLE>
<CAPTION>
Fortis
Securities,
Inc.
January 31, 1995:
<S> <C>
Total net assets $110,868,244
Market price per share $9.125
Shares outstanding 12,507,615
For the six-month period ended January 31, 1995:
Net asset value per share:
Beginning of period $9.33
End of period $8.86
Distributions from net investment income:
Total dividends paid $5,606,682
Dividends per share $ .45
</TABLE>
FORTIS FINANCIAL GROUP'S OTHER PRODUCTS AND SERVICES
Mutual Funds/Portfolios
Fortis Advantage Portfolios, Inc.
ASSET ALLOCATION PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
GOVERNMENT TOTAL RETURN PORTFOLIO
HIGH YIELD PORTFOLIO
Fortis Capital Fund
Fortis Fiduciary Fund, Inc.
Fortis Global Growth Portfolio
Fortis Growth Fund, Inc.
Fortis Money Fund
Fortis Tax-Free Portfolios, Inc.
MINNESOTA PORTFOLIO
NATIONAL PORTFOLIO
NEW YORK PORTFOLIO
Fortis U.S. Government
Securities Fund
Fixed and Variable Annuities
Fortis Opportunity Fixed
& Variable Annuity
Masters Variable Annuity
FIXED ACCOUNT
<PAGE>
MONEY MARKET
U.S. GOVERNMENT SECURITIES
DIVERSIFIED INCOME
GLOBAL BOND
HIGH YIELD
ASSET ALLOCATION
GLOBAL ASSET ALLOCATION
GROWTH &INCOME
GLOBAL GROWTH
GROWTH STOCK
INTERNATIONAL STOCK
AGGRESSIVE GROWTH
Fortune Fixed Annuities
SINGLE PREMIUM ANNUITY
FLEXIBLE PREMIUM ANNUITY
Income Annuities
GUARANTEED FOR LIFE
GUARANTEED FOR A SPECIFIC PERIOD
Life and Disability
Wall Street Series VUL 220 & VUL500
FIXED ACCOUNT
MONEY MARKET
U.S. GOVERNMENT SECURITIES
DIVERSIFIED INCOME
GLOBAL BOND
HIGH YIELD
ASSET ALLOCATION
GLOBAL ASSET ALLOCATION
GROWTH &INCOME
GLOBAL GROWTH
GROWTH STOCK
INTERNATIONAL STOCK
AGGRESSIVE GROWTH
Adaptable Life
Universal Life
Disability
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.
Dear Shareholder,
We're pleased to present the Fortis Securities semi-annual report for the period
ended January 31, 1995.
ECONOMIC REVIEW AND INVESTMENT STRATEGIES
As we reflect upon the recent investment period, we can safely say that it was a
most difficult time for investors. In general, the bond market suffered its
largest 12-month losses since systematic records began about 50 years ago. For
example, the total return of a 30-year treasury bond from January 1, 1994
through December 31, 1994, was -11.9 percent. The market's troubles started in
February 1994 when the Federal Reserve began a restrictive interest rate policy
that led to six interest rate hikes during the year. This rate environment
contributed to investor unease. Investors tried to accurately size up the course
of the Fed's monetary policy, only to repeatedly underestimate how committed it
was to containing inflation. We believe the monetary tightening will have a
positive long-term effect on stocks and bonds, as it demonstrates the Federal
Reserve's resolve to keep inflation in check. However, this long-term effect
does not preclude temporary sell-offs based on concerns that rate hikes are
either excessive or insufficient.
PORTFOLIO REVIEW
Over the last six months, interest rates increased nearly one-half of one
percent on most
<PAGE>
investment grade securities. This movement resulted in a small, unrealized net
asset value loss. However, the high yield portion of the portfolio had more
significant market losses. Our poorest performing high yield holding was Grand
Union, a large grocery chain in the northeast part of the country. While the
company is in bankruptcy, we believe the bonds at the currently depressed levels
represent excellent long-term value. We also expect the company to resolve its
financial problems before the end of the year.
Recently, the fund's board of directors slightly reduced the monthly dividend,
from .075 per month to .073 per month. For some time, we have paid a little more
than the fund has generated due to an earnings build-up during 1994. This
surplus has been exhausted, requiring the slight dividend reduction.
IN CLOSING
We appreciate your investment in Fortis Securities. If you have any questions,
please call us.
Sincerely,
Dean C. Kopperud
President
Dennis M. Ott
Vice President
February 23, 1995
Top Ten Holdings as of 1/31/95
<TABLE>
<CAPTION>
Percent of
Bonds net assets
<S> <C> <C>
1. U.S. Treasury Bond (8.125%) 2021 4.1%
2. FNMA (11.70%) 1995 3.6%
3. REFCORP (7.355%) 2014 3.1%
4. DLJMortgage Acceptance Corp. (8.50%) 2001 2.7%
5. Green Tree Financial Corp.(7.65%) 2019 2.5%
6. FHLMCREMIC(7.50%) 2021 2.5%
7. GNMA (7.50%) 2023 2.3%
8. FNMAREMICInverse Floater (9.60%) 2008 2.2%
9. GNMA (7.50%) 2024 2.1%
10. FNMA REMIC (7.50%) 2021 2.1%
</TABLE>
<PAGE>
Fortis Securities, Inc.
Schedule of Investments
(Unaudited)
January 31, 1995
Common Stocks - 0.05%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Market
Shares Cost (a) Value (b)
3,000 Casino Magic Finance Corp. (Warrants) (c) $ 4,500 $ 750
5,800 Drypers Corp. (Warrants) (c) 17,400 14,500
500 Petro PSC Properties, L.P. (Warrants) (c) 18,285 17,500
8,995 Southland Corp. (Warrants) (c) 2,922 17,287
Total Common Stocks $ 43,107 $ 50,037
Long-Term Debt Securities - 97.31%
Standard
Principal &Poor's Market
Amount Rating Cost (a) Value (b)
Asset Backed, Corporate, Municipal and Foreign Debt Securities - 53.39%
Investment Grade Asset Backed, Corporate, Municipal and Foreign Debt Securities - 28.80%
Asset Backed - Manufactured Homes - 2.27%
$ 1,000,000 Green Tree Financial Corp., 8.35% Ser 1994-7 Cl A4 3-15-2020 Aaa* $ 998,750 $ 998,750
1,500,000 Oakwood Mtg Investors, Inc., 8.40% Ser 1994-A Cl A2 Sr Sub Pass Thru Certificate 2-15-2015 AAA
1,497,891 1,515,914
2,496,641 2,514,664
Asset Backed - Miscellaneous - 2.50%
3,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1 Cl A5 Sr Sub Pass Thru Certificate 4-15-2019 Aa2*
2,988,281 2,776,395
Asset Backed - Multifamily Loans - 3.51%
1,000,000 DLJ Mtg Acceptance Corp., 8.80% Ser 1993-12 Cl B1 Multifamily Mtg Pass
Thru Certificate 9-8-2003 BBB** 982,500 952,944
3,000,000 DLJ Mtg Acceptance Corp., 8.50% Ser 1994-4 Cl A2 Multifamily Mtg Pass
Thru Certificate 4-18-2001 A 3,023,906 2,940,552
4,006,406 3,893,496
Asset Backed - Whole Loan Residential - 3.17%
1,668,625 Prudential Home Mtg Securities Corp., 10.00% Ser 1989-7 Cl A1 11-25-2019 AA 1,692,612
1,723,368
1,755,456 Residential Resouces, Inc., 9.50% Ser 14 Cl A 12-1-2018 AAA 1,799,891 1,793,828
3,492,503 3,517,196
Captive Auto Finance - 1.16%
1,300,000 General Motors Acceptance Corp., 7.75% Note 4-15-1997 BBB+ 1,381,692 1,284,949
Finance Companies - 1.43%
1,500,000 Tenneco Credit Corp., 9.625% Note 8-15-2001 BBB 1,585,320 1,589,055
Foreign - Government - 3.04%
2,000,000 Hydro-Quebec, 8.00% Deb 2-1-2013 A+ 2,182,120 1,849,538
1,500,000 Quebec (Province of), 8.80% Bond 4-15-2003 A+ 1,637,670 1,521,964
3,819,790 3,371,502
Forest Products - 3.37%
2,150,000 Georgia-Pacific Corp., 9.625% Deb 3-15-2022 BBB- 2,169,818 2,214,081
1,500,000 Noranda, Inc., 8.625% Deb 7-15-2002 BBB 1,494,960 1,524,981
3,664,778 3,739,062
Media - 1.28%
1,500,000 News America Holdings, Inc., 8.875% Sr Note 4-26-2023 BBB- 1,487,133 1,412,566
Miscellaneous - 6.09%
1,380,000 Minneapolis MN Community Development Agency, 11.25% Ltd Tax Dev Rev Bond
Ser 1990-6B 6-1-2007 BBB+ 1,406,875 1,534,826
1,000,000 New York (City of), 9.75% General Obligation Taxable Bond Fiscal 1991 Ser D 8-1-1996 A-
980,180 1,032,936
1,000,000 New York (City of), 10.00% General Obligation Taxable Bond Fiscal 1991 Ser D 8-1-2005 A-
<PAGE>
<CAPTION>
941,565 1,077,809
1,500,000 Penn Central Corp., 10.875% Sub Note 5-1-2011 BBB- 1,555,080 1,604,531
1,500,000 Telecommunications, Inc., 9.80% Sr Note 2-1-2012 BBB- 1,658,835 1,495,714
6,542,535 6,745,816
Oil - Crude Petroleum & Gas - 0.98%
1,000,000 Occidental Petroleum Corp., 11.75% Sr Sub Deb 3-15-2011 BBB 1,013,662 1,081,832
Total Investment Grade Asset Backed, Corporate, Municipal and Foreign Debt Securities
32,478,741 31,926,533
Non-Investment Grade Corporate and Foreign Debt Securities - 24.59%
Automobile & Motor Vehicle Parts - 0.46%
500,000 Doehler Jarvis, Inc., 11.875% Sr Note 6-1-2002 B 498,125 510,025
Beverage - 0.38%
600,000 Heileman Acquisition Co., 9.625% Sr Sub Note 1-31-2004 B- 519,000 426,000
Building Materials - 0.83%
500,000 Associated Materials, Inc., 11.50% Sr Sub Note 8-15-2003 B- 500,000 455,000
500,000 Wickes Lumber Co., 11.625% Sr Sub Note 12-15-2003 B- 502,500 470,000
1,002,500 925,000
Chemicals - 0.37%
750,000 Indspec Chemical Corp., 11.50% Sr Sub Disc Note Ser B 12-1-2003 (Zero coupon
until 12-1-1998) (d) B- 490,206 412,500
Consumer Goods - 2.21%
300,000 Drypers Corp., 12.50% Sr Note Ser B 11-1-2002 B+ 291,810 301,500
500,000 Florsheim Shoe Co., 12.75% Sr Note 9-1-2002 B+ 500,000 432,500
500,000 Hosiery Corp. of America, Inc., 13.75% Sr Sub Note 8-1-2002 (and common stock) (f) B-
494,305 467,500
750,000 Plastic Specialty & Technologies, Inc., 11.25% Sr Secured Note 12-1-2003 B- 718,000
667,500
600,000 Solon Automated Services, Inc., 12.75% Sr Note 7-15-2001 B+ 602,125 576,000
2,606,240 2,445,000
Containers & Packaging - 2.24%
500,000 IVEX Packaging Corp., 12.50% Sr Sub Note 12-15-2002 B- 497,244 495,000
500,000 Mail-Well Corp., 10.50% Sr Sub Note 2-15-2004 (g) B- 490,625 440,000
500,000 Malette, Inc., 12.25% Sr Secured Note 7-15-2004 BB- 500,000 500,000
564,000 Seminole Kraft Corp., 13.50% Sub Deb 10-15-1996 N/R 556,625 562,590
500,000 Williamhouse-Regency of Delaware, Inc., 11.50% Sr Sub Deb 6-15-2005 B- 505,000
485,000
2,549,494 2,482,590
Food - Grocery, Miscellaneous - 2.17%
750,000 Di Giorgio Corp., 12.00% Sr Note 2-15-2003 B 730,000 686,250
500,000 Envirodyne Industries, Inc., 10.25% Sr Note 12-1-2001 B- 437,500 375,000
500,000 Fresh Del Monte Produce N.V., 10.00% Sr Note Ser B 5-1-2003 B 469,375 315,000
500,000 Pilgrims Pride Corp., 10.875% Sr Sub Deb 8-1-2003 B- 493,605 450,000
650,000 Specialty Foods Corp., 11.25% Sr Sub Note 8-15-2003 B- 617,375 578,500
2,747,855 2,404,750
Leisure Time - Amusements - 2.84%
500,000 Capital Gaming International, Inc.,11.50% Sr Secured Note 2-1-2001 Caa* 261,250 300,000
500,000 Casino Magic Finance Corp., 11.50% First Mtg Note Cl B 10-15-2001 B+ 494,250 346,250
530,000 Hemmeter Enterprises, Inc., 12.00% Sr Secured Note 12-15-2000 (and warrants)
(Interest is Payable-in-Kind) (g) N/R 405,006 300,395
600,000 PRT Funding Corp., 11.625% Sr Note 4-15-2004 B- 572,500 468,000
750,000 Roadmaster Industries, Inc., 11.75% Sr Sub Note 7-15-2002 B- 750,000 716,250
500,000 Trump Plaza Funding, Inc., 10.875% First Mtg Note 6-15-2001 B 424,113 401,250
500,000 Trump Taj Mahal Funding, Inc., 11.35% First Mtg Note 11-15-1999 (Interest is 9.375% cash
and 1.975% Payable-in-Kind) Caa* 380,362 327,414
500,000 Trump Castle Funding, Inc., 11.75% First Mtg Bond 11-15-2003 Caa* 295,000 285,000
<PAGE>
<CAPTION>
3,582,481 3,144,559
Machinery - 2.29%
500,000 Specialty Equipment Companies, Inc., 11.375% Sr Sub Note 12-1-2003 B- 500,000 485,000
1,000,000 Spreckels Industries, Inc., 11.50% Sr Secured Note 9-1-2000 B 1,015,000 960,000
655,667 Terex Corp., 13.00% Sr Secured Note 8-1-1996 (and rights) (g) N/R 615,540 631,080
500,000 Thermadyne Industries, Inc., 10.75% Sr Sub Note 11-1-2003 CCC 463,803 467,500
2,594,343 2,543,580
Media - 1.00%
500,000 American Telecasting, Inc., 14.23% Sr Sub Disc Note 6-15-2004 (and warrants) (d) CCC+
257,377 218,750
1,112,239 Falcon Holding Group, L.P., 11.00% Sr Sub Note Ser B 9-15-2003 (Interest is Payable-in-Kind) N/R
1,095,527 888,205
1,352,904 1,106,955
Metals - Mining & Miscellaneous - 0.85%
500,000 Renco Metals, Inc., 12.00% Sr Note 7-15-2000 B+ 500,000 465,000
500,000 Sheffield Steel Corp., 12.00% First Mtg Note 11-1-2001 (and warrants) B- 497,500 482,500
997,500 947,500
Mortgage Backed Securities - 0.64%
948,327 Sandia Mortgage Corp., 8.95% 1991-A Variable Rate Pass Thru Certificate Cl B 8-1-2018 (e) N/R
713,330 711,245
Restaurants & Franchising - 0.96%
500,000 Carrols Corp., 11.50% Sr Note 8-15-2003 B+ 501,875 460,000
752,000 Flagstar Corp., 11.25% Sr Sub Deb 11-1-2004 CCC+ 763,485 603,480
1,265,360 1,063,480
Retail - 3.78%
1,000,000 Cumberland Farms, Inc., 10.50% Sr Secured Note 10-1-2003 (e) N/R 927,500 800,000
500,000 Farm Fresh, Inc., 12.25% Sr Note 10-1-2000 B- 500,000 450,000
1,000,000 Grand Union Co., 12.25% Sr Sub Note 7-15-2002 (c) D 977,500 332,500
500,000 Mayfair Supermarkets, Inc., 11.75% Sr Sub Note 3-30-2003 B- 525,000 420,000
1,000,000 Pantry (The), Inc., 12.00% Sr Note Ser B 11-15-2000 B 1,000,000 960,000
500,000 Pay 'N' Pak Stores, Inc., 13.50% Sr Sub Deb 6-1-1998 (c) D 498,688 2,500
500,000 Purity Supreme, Inc., 11.75% Sr Secured Note 8-1-1999 (and warrants) CCC+ 443,767
411,250
500,000 Thrifty Payless, Inc., 12.25% Sr Sub Note 4-15-2004 B- 465,000 475,000
500,000 Victory Markets, Inc., 12.50% Sub Exchange Note 3-15-2000 N/R 425,000 340,000
5,762,455 4,191,250
Technology - 0.81%
500,000 Computervision Corp., 11.375% Sr Sub Note 8-15-1999 CCC+ 450,000 440,000
500,000 Genicom Corp., 12.50% Sr Sub Note 2-15-1997 N/R 445,000 457,500
895,000 897,500
Textile Manufacturing - 1.01%
750,000 Synthetic Industries, Inc., 12.75% Sr Sub Deb 12-1-2002 B- 755,000 697,500
500,000 U.S. Leather, Inc., 10.25% Sr Note 7-31-2003 B+ 488,051 417,500
1,243,051 1,115,000
Tobacco - 0.34%
500,000 Liggett Group, Inc., 11.50% Ser B Secured Note 2-1-1999 N/R $ 375,000 $ 373,750
Transportation - 1.41%
650,000 Continental Airlines, Inc., 12.125% Secured Equipment Trust Certificate 4-15-1996 (c) N/R
235,210 97,500
500,000 K & F Industries, Inc., 11.875% Sr Secured Note 12-1-2003 B+ 471,250 485,000
500,000 Northwest Airlines Trust No. 2, 13.875% Series D Sub Aircraft Note 6-21-2008 (f) BB+
500,000 505,000
500,000 Petro PSC Properties, L.P., 12.50% Sr Note 6-1-2002 B 481,715 477,500
1,688,175 1,565,000
<PAGE>
<CAPTION>
Total Non-Investment Grade Corporate and Foreign Debt Securities 30,883,019 27,265,684
Total Asset Backed, Corporate, Municipal and Foreign Debt Securities $ 63,361,760 $ 59,192,217
U.S. Government and Agencies - 43.92%
Federal Home Loan Mortgage Corporation - 11.17%
MORTGAGE BACKED SECURITIES:
687,628 9.00% 2022 731,249 699,016
1,293,185 9.50% 2016 1,391,589 1,340,063
1,110,970 10.50% 2017 1,180,854 1,182,835
595,069 11.25% 2010 643,604 642,860
468,640 11.50% 2014-2015 515,660 508,181
556,019 11.75% 2010 589,380 605,366
5,052,336 4,978,321
REMICS:
3,187,644 7.50% Trust #1157-L Z-TRANCHE 2021 (h) 3,134,710 2,766,330
1,100,000 9.00% Trust #136-D 2020 1,105,500 1,123,583
1,500,000 9.50% Trust #1001-F 2003 1,529,063 1,539,853
49,001 12.87% Trust #1364-L Interest Only Strip I/O-ette 2005 (i) 400,360 921,217
55,485 17.08% Trust #1404-E Interest Only Strip I/O-ette 2006 (i) 561,240 1,054,220
6,730,873 7,405,203
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION SECURITIES 11,783,209 12,383,524
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.90%
MORTGAGE BACKED SECURITIES:
2,645,509 10.50% 2014-2020 2,763,324 2,839,787
1,444,635 11.00% 2011-2018 1,488,885 1,567,429
53,993 11.25% 2011 56,051 58,802
160,357 12.00% 2014 170,730 176,693
338,449 12.50% 2015 382,236 375,256
4,861,226 5,017,967
NOTE:
3,950,000 11.70% 5-10-1995 4,441,899 4,003,771
REMICS:
2,000,000 7.50% Trust #1992-43E 2022 2,099,374 1,856,558
2,500,000 7.50% Trust #1992-41K 2021 2,623,438 2,315,898
1,441,709 9.06% Inverse COFI Floating Rate 2008 (j) 897,464 898,815
3,132,212 9.60% Inverse COFI Floating Rate 2008 (j) 3,251,387 2,396,142
1,086,224 13.50% Trust #1989-98G 2017 1,178,341 1,143,923
10,050,004 8,611,336
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION SECURITIES 19,353,129 17,633,074
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 9.68%
5,197,677 7.50% 2023-2024 $ 5,038,993 $ 4,906,937
2,204,101 9.00% 2021 2,277,758 2,246,805
2,206,566 Fleet Mtg Securities Cl D, 9.125% 2018 (GNMA Backed) 2,258,972 2,251,401
1,272,438 9.50% 2020 1,363,140 1,326,119
10,938,863 10,731,255
Resolution Funding Corporation - 3.08%
15,500,000 7.355% Zero Coupon Strip 2014 (d) 3,835,792 3,412,154
U. S. Treasury Bond - 4.09%
4,375,000 8.125% 2021 4,409,805 4,533,594
TOTAL U.S. GOVERNMENT & AGENCIES 50,320,798 48,693,601
TOTAL LONG-TERM DEBT SECURITIES 113,682,558 107,885,818
TOTAL LONG-TERM INVESTMENTS $113,725,665 $107,935,855
</TABLE>
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<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS - 1.51%
Principal Market
Amount Value (b)
<S> <C> <C> <C>
$1,678,000 First Trust Money Market Variable Rate Time Deposit Account, Current Rate - 5.78% $ 1,678,000
TOTAL INVESTMENTS IN SECURITIES (COST: $115,403,665) (A) $109,613,855
(a) At January 31, 1995, the cost of securities for federal income tax purposes was $115,490,879, and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 2,052,065
Unrealized depreciation (7,929,089)
Net unrealized depreciation ($ 5,877,024)
(b) See Note A of accompanying Notes to Financial Statements regarding valuation of securities.
(c) Presently non-income producing. For long-term debt securities, items identified are in default as to payment of interest
and/or principal.
(d) The interest rates disclosed for these securities represent the effective yields on the date of acquisition.
(e) The fund entered into the following restricted security transactions: On March 8 and October 27, 1993, the fund acquired
844,113 and 104,214 par of Sandia Mortgage 1991-A Variable Pass Thru Certificates due 2018 with a cost basis of $633,085
and $80,245, respectively. On February 2, 1994 the fund purchased 1,000,000 par of Cumberland Farms with a cost basis of
$927,500. These private placements represent all of the restricted illiquid securities owned by the fund and is equal to
1.36% of net assets. See Note A of accompanying Notes to Financial Statements.
(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 other "accredited investors".
These investments have been identified by portfolio management as illiquid securities. The value of these securities at
January 31, 1995 is $972,500 which represent .88% of net assets.
(g) Securities sold within terms of a private placement 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 other "accredited investors". Pursuant to
guidelines adopted by the Board of Directors, these issues are determined to be liquid.
(h) Z-Tranche securities pay no principal or interest during their initial accrual period, but accrue additional principal
at a specified coupon rate. The interest rate disclosed represents the coupon rate at which the additional principal is
being accrued.
(i) The interest rates disclosed for interest only strips represent effective yields at January 31, 1995 based upon the
current cost basis, estimated timing and amount of future cash flows. These investments have been identified by
portfolio management as illiquid securities. The aggregate of these securities at January 31, 1995, is $1,975,437 which
represents 1.78% of net assets.
(j) Inverse floaters represent securities that pay interest at a rate that increases (decreases) with a decline (increase)
in a specified index. Interest rates disclosed are the rates in effect on January 31, 1995.
(k) Note: Percentage of investments as shown is the ratio of the total market value to total net assets.
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(Unaudited)
January 31, 1995
<S> <C>
Assets:
Investments in securities, as detailed in the accompanying schedules,
at market (cost $115,403,665) (Note A) $109,613,855
Cash on deposit with custodian 39,880
Receivables:
Interest 2,200,611
Investment securities sold 59,687
Prepaid expenses 25,723
TOTAL ASSETS 111,939,756
LIABILITIES:
Dividends payable ($.075 per share) 938,070
Payable for investment advisory and management fees 64,009
Accounts payable and accrued expenses 69,433
TOTAL LIABILITIES 1,071,512
NET ASSETS:
Net proceeds of capital stock, par value $.01 per share --
authorized 15,000,000 shares; outstanding 12,507,615 shares 134,991,872
Unrealized depreciation of investments (5,789,810)
Excess of distributions over net investment income (49,723)
Accumulated net realized loss from sale of investments (18,284,095)
TOTAL NET ASSETS $110,868,244
Net Asset Value Per Share $ 8.86
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(Unaudited)
For the Six-Month Period Ended January 31, 1995
<S> <C>
Net Investment Income:
Income:
Interest income $ 5,708,936
Fee income (Note A) 5,371
Total income 5,714,307
Expenses:
Investment advisory and management fees (Note B) 366,725
Shareholders' notices and reports 18,652
Legal and auditing fees (Note B) 15,375
Exchange listing fees 12,351
Custodian fees 10,838
Directors' fees and expenses 7,411
Other 9,265
Total expenses 440,617
Net Investment Income 5,273,690
Realized and Unrealized Gain (Loss) on Investments (Note A):
Net realized loss from securities transactions (4,121,377)
Net change in unrealized appreciation (depreciation) of investments (1,307,250)
Net Loss on Investments (5,428,627)
Net Decrease in Net Assets Resulting from Operations $ (154,937)
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX-MONTH
PERIOD ENDED FOR THE
JANUARY 31, 1995 YEAR ENDED
(UNAUDITED) JULY 31, 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,273,690 $ 11,263,729
Net realized loss from security transactions (4,121,377) (3,427,672)
Net change in unrealized appreciation (depreciation) of investments (1,307,250) (7,548,805)
Net Increase (Decrease) in Net Assets Resulting from Operations (154,937) 287,252
Distributions to Shareholders:
From net investment income (5,606,682) (11,514,885)
Excess distributions of net realized gains (Note A) -- (37,369)
Total Distributions to Shareholders (5,606,682) (11,552,254)
Capital Stock Transactions:
Issuance of 141,616 and 299,808 shares, respectively, to shareholders
participating in the dividend reinvestment plan 1,279,821 3,073,781
Total Decrease in Net Assets (4,481,798) (8,191,221)
Net Assets:
Beginning of period 115,350,042 123,541,263
End of period [includes undistributed net investment income
(excess of distributions over net investment income)
of ($49,723) and $283,269, respectively] $110,868,244 $115,350,042
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
A. Summary of Significant Accounting Policies: Fortis Securities, Inc., ("the
fund") is a closed-end diversified management investment company. The primary
investment objective of the fund is to seek a high level of current income
through investment in a diversified portfolio of debt securities, some of which
may be privately placed and some of which may have equity features. Capital
appreciation is a secondary objective.
Security Valuation: Long-term debt securities are valued at current market
prices on the basis of valuations furnished by independent pricing services;
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.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: Delivery and payment for securities
that have been purchased by the Fortis Securities Fund on a forward commitment
or when-issued basis can take place a month or more after the transaction date.
During this period, such securities are subject to market fluctuations and the
fund maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. As of January 31, 1995,
there were no outstanding purchases on when-issued basis.
The Fund may enter into transactions to sell its purchase commitments to third
parties at the current market values and concurrently acquire other purchase
commitments for similar securities at later dates. As an inducement for the fund
to "rollover" its purchase commitments, the fund receives negotiated fees. For
the six-month period ended January 31, 1995, such fees earned by the fund
amounted to $5,371.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized security gains and losses are determined using the identified
cost method. For financial reporting purposes, except for original issue
discount, the fund does not amortize long-term bond premiums and discounts. For
the six-month period ended January 31, 1995, the cost of purchases and proceeds
from sales of securities (other than short-term securities) aggregated
$28,039,962 and $29,181,612, respectively.
Income Taxes: The fund 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 income is distributed. On a calendar year
basis, the fund is subject to a 4% federal excise tax to the extent it does not
distribute substantially all of its net investment income and realized gains, if
any.
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 and wash sale transactions. 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. The effect on dividend distributions of the book-to-tax
difference is presented as "excess distributions of net realized gains" in the
statement of changes in net assets and the financial highlights.
<PAGE>
For federal income tax purposes, the fund had a capital loss carryover of
$14,075,504 at July 31, 1994, which, if not offset by subsequent capital gains
will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $1,078,684
1997 2,087,647
1998 1,344,644
1999 5,325,293
2001 315,226
2002 258,409
2003 3,665,601
</TABLE>
It is unlikely the Board of Directors will authorize a distribution of any net
realized gains until the available capital loss carryover has been offset or
expired.
RESTRICTED SECURITIES: At January 31, 1995, investments in securities for the
fund 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 January 31, 1995 was
$4,459,182 which represents 4.02% 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.
DIVIDEND REINVESTMENT PLAN: A shareholder may choose to have their dividends and
capital gains distributions reinvested in additional whole and fractional
shares. Although reinvested, this distribution will still be taxable. Under this
plan, when the market price is greater than the net asset value, the
reinvestment price will be the greater of 95 percent of the month-end market
price (plus brokerage commissions) or the month-end net asset value. When the
market price is less than the net asset value, the reinvestment price will be
the market price (plus brokerage commissions) to the extent that shares can be
purchased in the open market.
A shareholder will receive their dividends and capital gains distributions in
cash automatically, unless they inform the fund in writing that they desire to
have their distributions reinvested in additional shares. This may be done by
contacting Fortis Advisers, Inc. (see page 13). Notice to initiate or to
terminate this Plan must be received by Advisers 15 days prior to the dividend
date for which it is to become effective.
B. Payments to Related Parties: Fortis Advisers, Inc., is the investment adviser
for the fund. Investment advisory and management fees are computed at the annual
rate of .45% for the first $100 million of average monthly net assets and at the
annual rate of .40% of average monthly net assets over $100 million, plus 2% of
dividend and interest income.
Legal fees and expenses aggregating $7,058 for the six-month period ended
January 31, 1995, were paid to a law firm of which the secretary of the fund is
a partner.
<TABLE>
<CAPTION>
C. FINANCIAL HIGHLIGHTS: Selected per share historical data was as follows:
Year Ended July 31,
1995+ 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.33 $ 10.24 $ 10.13 $ 9.91 $ 9.62 $ 10.42
Operations:
Net investment income .42 .93 1.02 1.02 1.06 1.07
Net realized and unrealized gain (loss) on investments (.44) (.89) 0.12 0.25 0.30 (0.77)
Total from operations (.02) .04 1.14 1.27 1.36 0.30
Distributions to shareholders:
From net investment income (.45) (.95) (1.03) (1.03) (1.07) (1.10)
Excess distributions of net realized gains -- -- -- (0.02) -- --
Total distributions to shareholders (.45) (.95) (1.03) (1.05) (1.07) (1.10)
Net asset value, end of period $ 8.86 $ 9.33 $ 10.24 $ 10.13 $ 9.91 $ 9.62
Per-share market value, end of period $ 9.125 $ 9.625 $ 11.50 $ 11.50 $ 10.88 $ 9.00
Total investment return, market value* .48% (8.16%) 9.91% 16.51% 35.11% (1.78%)
Total investment return, net asset value** .67% .01% 11.06% 12.61% 15.18% 3.26%
Net assets at end of period (000' s omitted) $ 110,868 $ 115,350 $ 123,541 $ 119,080 $ 113,364 $ 107,181
Ratio of expenses to average monthly net assets 0.79%*** 0.76% 0.80% 0.82% 0.88% 0.86%
Ratio of net investment income to average monthly net assets 9.45%*** 9.30% 10.12% 10.10% 11.12% 10.95%
Portfolio turnover rate (excluding short-term securities) 26% 125% 86% 49% 67% 117%
<FN>
+ For the six-month period ended January 31, 1995.
* Total investment return, market value, is based on the change in market
price of a share during the period and assumes reinvestment of
distributions at actual prices pursuant to the fund's dividend reinvestment
plan.
<PAGE>
** Total investment return, net asset value, is based on the change in
net asset value of a share during the period and assumes reinvestment of
distributions at actual prices pursuant
to the fund's dividend reinvestment plan.
*** Annualized.
</TABLE>
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
President and Director
Fortis Advisers, Inc.
Fortis Investors, Inc.
Senior Vice President
and Director of Fortis
Benefits Insurance
Company
Senior Vice President of
Time Insurance
Company
EDWARD M. MAHONEY
Prior to January 1995,
Chairman and Chief
Executive Officer
Fortis Advisers, Inc.
Fortis Investors, Inc.
ROBB L. PRINCE
Vice President and
Treasurer
Jostens, Inc.
LEONARD J. SANTOW
Principal
<PAGE>
Griggs &Santow, Inc.
JOSEPH M. WIKLER
Prior to January, 1994,
Director of Research,
Chief Investment
Officer, Principal,
and Director
The Rothschild Co.
OFFICERS
DEAN C. KOPPERUD
President and Director
STEPHEN M. POLING
Vice President
DENNIS M. OTT
Vice President
JAMES S. BYRD
Vice President
ROBERT C. LINDBERG
Vice President
KEITH R. THOMSON
Vice President
ROBERT W. BELTZ, JR.
Vice President
ROBERT J. CLANCY
Vice President
THOMAS D. GUALDONI
Vice President
LARRY A. MEDIN
Vice President
JON H. NICHOLSON
Vice President
JOHN W. NORTON
Vice President
DAVID A. PETERSON
Vice President
MICHAEL J. RADMER
Secretary
TAMARA L. FAGELY
Treasurer
DAVID G. CARROLL
2nd Vice President
CHRIS J. NEUHARTH
2nd Vice President
INVESTMENT ADVISOR AND
DIVIDEND DISBURSING
AGENT
Fortis Advisers, Inc.
Box 64284
<PAGE>
St. Paul,
Minnesota 55164
PRINCIPAL UNDERWRITER
Fortis Investors, Inc.
Box 64284
St. Paul,
Minnesota 55164
REGISTRAR
Norwest Bank
Minnesota, N.A.
Minneapolis, Minnesota
CUSTODIAN
First Bank
National Association
Minneapolis, Minnesota
GENERAL COUNSEL
Dorsey &Whitney
Minneapolis, Minnesota
INDEPENDENT AUDITORS
KPMGPeat Marwick LLP
Minneapolis, Minnesota
MARKET PRICE
Fortis Securities, Inc. is listed on the New York Stock Exchange with the Ticker
symbol "FOR." The market price is carried daily in the financial pages of most
newspapers in the New York Stock Exchange Composite Transactions listings under
the abbreviation FortisSec.
In addition, each Monday THE WALL STREET JOURNAL and other financial
publications include a "Closed-End Funds" table which sets forth on a per share
basis the previous week's net asset value, market price and the percentage
differnce between net asset value and market price for the fund uinder the name
Fortis Securities.
