<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
A disciplined, consistent
approach to investing
Fortis Securities
Fund, Inc.
Annual Report
JULY 31, 1998
Fortis Financial Group
<PAGE>
FORTIS SECURITIES, INC. ANNUAL REPORT
CONTENTS
LETTER TO SHAREHOLDERS 1
SCHEDULE OF INVESTMENTS 2
STATEMENT OF ASSETS AND LIABILITIES 8
STATEMENT OF OPERATIONS 8
STATEMENTS OF CHANGES IN NET ASSETS 9
NOTES TO FINANCIAL STATEMENTS 10
INDEPENDENT AUDITORS' REPORT 12
BOARD OF DIRECTORS AND OFFICERS 13
- - TOLL-FREE PERSONAL ASSISTANCE
- Shareholder Services
- (800) 800-2000, 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) 800-2000, Ext. 4344
- 24 hours a day
FOR MORE INFORMATION ABOUT FORTIS FINANCIAL GROUP'S FAMILY OF PRODUCTS, CALL
YOUR INVESTMENT REPRESENTATIVE OR THE HOME OFFICE AT (800) 800-2000.
TO ORDER PROSPECTUSES OR SALES LITERATURE FOR ANY FORTIS PRODUCT, CALL (800)
800-2000, EXT. 4579.
HOW TO USE THIS REPORT
For a quick overview of the Fund's performance during the past twelve 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 chart shows the types of securities in
which the Fund invests, and the pie chart shows a breakdown of the fund's assets
by sector.
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
<TABLE>
<CAPTION>
FORTIS
SECURITIES
INC.
--------------
<S> <C>
JULY 31, 1998:
TOTAL NET ASSETS............................. $ 120,720,918
MARKET PRICE PER SHARE....................... $ 9.000
SHARES OUTSTANDING........................... 12,642,180
FOR THE YEAR ENDED JULY 31, 1998:
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 9.45
End of year................................ $ 9.55
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Total dividends paid....................... $ 9,334,311
Dividends per share........................ $ .739
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION BY SECTOR AS OF 07/31/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Corporate Bonds-Investment Grade 46.7%
Corporate Bonds-Non-Investment Grade 24.4%
Asset Backed Securities 12.4%
U.S. Government Agencies 10.1%
U.S. Treasury Securities 4.1%
Cash Equivalents/Receivables 2.2%
Other 0.1%
</TABLE>
TOP 10 HOLDINGS AS OF 07/31/98
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. Green Tree Financial Corp. (7.65%) 2019 ABS 2.6%
2. DLJ Mortgage Acceptance Corp. (8.50%) 2001 ABS 2.6%
3. Nationsbank Corp. (7.25%) 2025 2.2%
4. United Airlines (10.02%) 2014 2.1%
5. Georgia-Pacific Corp. (9.625%) 2022 2.0%
6. FNMA (7.50%) 2027 1.9%
7. Midland Reality Acceptance Corp. (7.635%) 2028 1.8%
8. Time Warner Entertainment (8.375%) 2033 1.8%
9. GTE Corp. (7.90%) 2027 1.7%
10. U.S. Treasury Note (5.875%) 1999 1.7%
</TABLE>
DEAR SHAREHOLDER,
The U.S. economy continued on the path of above average growth and low inflation
throughout the first quarter of 1998. Going into the second quarter, it became
apparent that the crisis in Southeast Asia was more severe than anticipated, and
that no cure was in sight for the shattered economies in that region. The
fallout on the U.S. economy caused growth to moderate while inflation remained
under check. Although the fundamentals in the U.S. remained extraordinarily
strong, second quarter gross domestic product grew by only 1.40 percent. This
environment fueled investors' concerns about corporate profits and caused a
flight to quality followed by a widening of quality spreads. This phenomenon,
where investors require a higher yield than usual to invest in lower quality
bonds, causes U.S. government securities and higher quality bonds to outperform
lower quality securities.
For the twelve months ended July 31, 1998, the Fortis Securities Fund provided a
distribution yield of 8.22 percent, the highest in its competitive universe
(Lipper Closed-End Investment Grade Bond Funds). For the same period, the fund
had a market value total return of 12.29 percent and a net asset value total
return of 9.50 percent, the second highest in its competitive universe. The
fund's outstanding performance was primarily due to our strategies regarding
duration, asset allocation and security selection. Duration is a measure of a
bond portfolio's sensitivity to changes in interest rates; therefore a "long
duration" portfolio assumes interest rates will decline.
The Fortis Securities Fund's primary investment objective is to maximize the
fund's yield with a secondary emphasis on capital appreciation. Given an
investment climate that was little changed over the twelve months ending July
31, 1998, our investment strategies were similar to those we employed the prior
year. Specifically, we have maintained a maximum 25 percent allocation in
lower-rated corporate debt and have kept the fund's duration close to six years
to take advantage of declining interest rates.
Currently, the economic crises in Asia, Russia and Latin America become a major
factor in defining the direction of the U.S. economy and of interest rates. Our
strategy going forward will depend mainly on the developments in the Far East,
Russia and Latin America. Should their troubles prove to be difficult to
contain, they will impede U.S. growth to some extent, but impact inflation
positively. Low inflation and slower growth should keep monetary policy on hold,
with an easing bias perhaps, for the remaining part of the year. Our outlook for
investment grade and lower grade corporate bonds is also tempered by those
troubled economies and leads us to be more cautious in our quest for yield.
Better quality bonds gained more emphasis as we were replacing securities that
were called or problem credits that were sold.
Sincerely,
/s/ Dean C. Kopperud /s/ Howard G. Hudson
Dean C. Kopperud Howard G. Hudson
President Vice President
1
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments
July 31, 1998
ASSET BACKED SECURITIES-12.43%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
COMMERCIAL LOANS-2.75%
$2,000,000 Midland Realty Acceptance Corp., 7.635% Ser
1996-C1 Class A3 8-25-2028................. AAA $ 2,143,438 $ 2,143,400
1,100,000 Midland Realty Acceptance Corp., 7.76% Ser
1996-C1 Class B 7-25-2008.................. AA 1,109,861 1,179,063
------------ -------------
3,253,299 3,322,463
------------ -------------
HOUSING-0.78%
938,982 Green Tree Recreational, Equipment & Consumer
Trust, 6.71% Ser 1998-A Class A1H
5-15-2029.................................. AAA 935,033 938,102
------------ -------------
MANUFACTURED HOMES-3.44%
3,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1
Class A5 4-15-2019......................... Aa2* 2,988,281 3,164,433
1,000,000 Green Tree Financial Corp., 7.76% Ser 1997-1
Class B2 3-15-2028......................... Baa3* 999,846 991,875
------------ -------------
3,988,127 4,156,308
------------ -------------
MULTI-FAMILY LOANS-4.70%
3,000,000 DLJ Mtg Acceptance Corp., 8.50% Multifamily
Mtg Pass Thru Certificate Ser 1994-4 Class
A2 4-18-2001............................... A 3,023,906 3,094,260
1,000,000 DLJ Mtg Acceptance Corp., 8.80% Multifamily
Mtg Pass Thru Certificate Ser 1993-12 Class
B1 9-18-2003............................... NR 982,500 1,036,090
1,500,000 J.P. Morgan Commercial Mtg Finance Corp.,
7.35% Ser 1997-C5 Class D 9-15-2029........ BBB 1,543,553 1,535,625
------------ -------------
5,549,959 5,665,975
------------ -------------
WHOLE LOAN RESIDENTIAL-0.76%
893,448 Mid-State Trust, 7.54% Ser 6 Class A3
7-1-2035................................... AA 892,892 921,475
------------ -------------
TOTAL ASSET BACKED SECURITIES................ $14,619,310 $ 15,004,323
------------ -------------
------------ -------------
</TABLE>
CORPORATE BONDS-INVESTMENT GRADE-46.67%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
AIR FREIGHT-1.81%
$ 984,482 Federal Express, 7.50% Pass Thru Certificate
Ser 1997-A 1-15-2018....................... AAA $ 984,482 $ 1,067,769
1,000,000 Federal Express, 7.84% Pass Thru Certificate
Ser 1996-B2 1-30-2018...................... BBB+ 1,000,000 1,115,760
------------ -------------
1,984,482 2,183,529
------------ -------------
AIRLINES-4.51%
1,000,000 AMR Corp., 10.00% Deb 4-15-2021.............. BBB- 1,164,907 1,350,113
1,200,000 Delta Airlines, 10.50% Pass Thru Certificate
4-30-2016.................................. BBB 1,454,770 1,607,088
2,000,000 United Airlines, 10.02% Deb 3-22-2014........ BBB 2,397,630 2,488,780
------------ -------------
5,017,307 5,445,981
------------ -------------
AUTOMOBILE MANUFACTURERS-0.89%
1,000,000 Chrysler Corp., 7.40% Deb 8-1-2097........... A 999,140 1,076,255
------------ -------------
BANKS-4.43%
1,000,000 Comerica Bank, 7.875% 9-15-2026.............. A- 988,181 1,136,294
1,500,000 Keystone Financial Funding Corp., 7.30%
Medium Term Note 5-15-2004................. BBB+ 1,496,831 1,573,617
2,500,000 Nationsbank Corp., 7.25% Sub Note
10-15-2025................................. A 2,329,636 2,644,000
------------ -------------
4,814,648 5,353,911
------------ -------------
BROKERAGE AND INVESTMENT-1.30%
1,500,000 Lehman Brothers Holdings, Inc., 7.375% Note
5-15-2004.................................. A 1,494,912 1,574,166
------------ -------------
CABLE TELEVISION-4.95%
1,000,000 Comcast Cable Communications, Inc., 8.50%
Note 5-1-2027 (with rights)................ BBB- 998,307 1,196,552
750,000 Cox Communications, Inc., 6.95% 1-15-2028.... A- 747,233 752,659
1,500,000 Telecommunications, Inc., 9.80% Sr Note
2-1-2012................................... BBB- 1,658,835 1,913,821
1,800,000 Time Warner Entertainment, 8.375% Sr Note
7-15-2033.................................. Baa* 1,732,402 2,114,795
------------ -------------
5,136,777 5,977,827
------------ -------------
</TABLE>
2
<PAGE>
CORPORATE BONDS-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
CHEMICALS-2.11%
$ 600,000 Agrium, Inc., 7.70% 2-1-2017................. BBB $ 594,369 $ 659,689
2,000,000 Lyondell Petrochemical, 7.55% Deb
2-15-2026.................................. BBB- 1,871,641 1,887,744
------------ -------------
2,466,010 2,547,433
------------ -------------
ENERGY-1.84%
1,500,000 Apache Corp, 7.70% 3-15-2026................. BBB 1,494,607 1,646,227
500,000 NGC Corp. Capital Trust, 8.32% 6-1-2027...... BBB 500,000 578,897
------------ -------------
1,994,607 2,225,124
------------ -------------
FINANCE COMPANIES-0.40%
406,000 Homeside, Inc., 11.25% Second Priority Sr
Secured Note 5-15-2003..................... A+ 418,452 479,080
------------ -------------
FOOD SERVICE-0.82%
1,000,000 Sysco Corp., 6.50% 8-1-2028.................. AA- 996,851 986,754
------------ -------------
FOREIGN-GOVERNMENT-1.38%
1,500,000 Quebec (Province of), 8.80% Bond 4-15-2003... A+ 1,637,670 1,662,120
------------ -------------
FOREST PRODUCTS-3.37%
2,150,000 Georgia-Pacific Corp., 9.625% Deb
3-15-2022.................................. BBB- 2,169,818 2,448,682
1,500,000 Noranda, Inc., 8.625% Deb 7-15-2002.......... BBB 1,494,960 1,614,099
------------ -------------
3,664,778 4,062,781
------------ -------------
HOUSING-1.32%
1,500,000 Pulte Corp., 7.625% Note 10-15-2017.......... BBB 1,478,628 1,595,625
------------ -------------
MEDIA-2.14%
750,000 Belo (A.H.) Corp., 7.25% Note 9-15-2027...... BBB- 745,612 799,609
1,500,000 News America Holdings, 8.875% Deb
4-26-2023.................................. BBB- 1,488,727 1,789,470
------------ -------------
2,234,339 2,589,079
------------ -------------
MISCELLANEOUS-1.99%
1,150,000 Minneapolis MN Community Development Agency,
11.25% Ltd Tax Dev Rev Bond Ser 1990-6B
6-1-2007................................... A- 1,176,875 1,274,507
210,000 New York (City of), 10.00% General Obligation
Taxable Bond Ser D 8-1-2005................ A- 207,818 234,348
790,000 New York (City of), 10.00% General Obligation
Taxable Bond Ser D 8-1-2005 (Prerefunded
8-1-2001 @103)............................. A- 781,792 898,792
------------ -------------
2,166,485 2,407,647
------------ -------------
NATURAL GAS TRANSMISSIONS-3.13%
1,500,000 Columbia Gas Systems, 7.62% 11-28-2025....... BBB+ 1,421,798 1,607,160
1,500,000 Tennessee Gas Pipeline, 7.625% 4-1-2037...... BBB 1,481,862 1,654,292
500,000 Trans-Canada Pipelines Ltd., 7.06% Note
10-14-2025................................. A- 500,000 517,469
------------ -------------
3,403,660 3,778,921
------------ -------------
OIL-CANADIAN-0.85%
1,000,000 Talisman Energy, Inc., 7.25% 10-15-2027...... BBB+ 993,182 1,030,446
------------ -------------
OIL-OFFSHORE DRILLING-0.79%
1,000,000 Seagull Energy Corp., 7.50% Sr Note
9-15-2027.................................. BBB- 995,476 950,229
------------ -------------
OIL-REFINING-1.27%
1,500,000 Coastal Corp., 7.42% Note 2-15-2037.......... BBB- 1,427,145 1,534,041
------------ -------------
RAILROAD AND RAILROAD EQUIPMENT-0.70%
750,000 CSX Corp., 7.90% Deb 5-1-2017................ BBB 749,577 840,479
------------ -------------
REAL ESTATE-INVESTMENT TRUST-0.86%
1,000,000 Meditrust, 7.82% Note 9-10-2026.............. BBB- 1,000,000 1,036,707
------------ -------------
RETAIL-DEPARTMENT STORES-1.23%
1,400,000 Dayton Hudson Co., 7.875% 6-15-2023.......... BBB+ 1,410,312 1,482,061
------------ -------------
</TABLE>
3
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments (continued)
July 31, 1998
CORPORATE BONDS-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS-0.88%
$1,000,000 360 Communications Co., 7.50% Sr Note
3-1-2006................................... A $ 998,101 $ 1,066,516
------------ -------------
TELEPHONE SERVICES-1.75%
2,000,000 GTE Corp., 7.90% 2-1-2027.................... A 2,000,000 2,110,634
------------ -------------
UTILITIES-ELECTRIC-1.95%
750,000 Puget Sound Energy, Inc., 7.02% Medium Term
Note 12-1-2027............................. A- 750,000 766,971
1,500,000 Texas Utilities Electric Capital V, 8.175%
1-30-2037.................................. BBB 1,500,000 1,581,659
------------ -------------
2,250,000 2,348,630
------------ -------------
TOTAL CORPORATE BONDS - INVESTMENT GRADE..... $51,732,539 $ 56,345,976
------------ -------------
------------ -------------
</TABLE>
CORPORATE BONDS-NON-INVESTMENT GRADE-24.44%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
AIRLINES-0.48%
$ 500,000 Northwest Airlines Trust No. 2, 13.875% Sub
Aircraft Note Ser D 6-21-2008.............. BB+ $ 500,000 $ 580,350
------------ -------------
APPAREL-0.46%
500,000 Hosiery Corp. of America, Inc., 13.75% Sr Sub
Note 8-1-2002.............................. B- 490,296 548,750
------------ -------------
AUTOMOBILE AND MOTOR VEHICLE PARTS-0.67%
500,000 Highwaymaster, Inc., 13.75% Sr Note 9-15-2005
(e)........................................ CCC+ 536,104 300,000
500,000 J.B. Poindexter & Co., 12.50% Sr Note
5-15-2004.................................. B- 482,209 505,000
------------ -------------
1,018,313 805,000
------------ -------------
BUSINESS SERVICES AND SUPPLIES-0.42%
500,000 T/SF Communications Corp., 10.375% Sr Sub
Note 11-1-2007............................. B- 490,440 508,750
------------ -------------
CABLE TELEVISION-1.06%
500,000 Rifkin Acquisition Partners L.P., 11.125% Sr
Sub Note 1-15-2006......................... B- 551,933 553,750
1,000,000 United International Holdings, 10.75% Sr Disc
Note 2-15-2008 (Zero coupon through
2-15-2003, thereafter 10.75%) (f).......... B 622,668 632,500
500,000 Wireless One, Inc., 13.00% Sr Note
10-15-2003................................. CCC+ 493,769 90,000
------------ -------------
1,668,370 1,276,250
------------ -------------
CHEMICALS-1.31%
500,000 NL Industries, Inc., 11.75% Sr Secured Note
10-15-2003................................. B 512,272 550,000
1,000,000 Sterling Chemicals, Inc., 11.75% Sr Sub Note
8-15-2006.................................. B+ 1,037,762 1,025,000
------------ -------------
1,550,034 1,575,000
------------ -------------
CONSUMER GOODS-0.23%
250,000 Chattem, Inc., 12.75% Sr Sub Note Ser B
6-15-2004.................................. B- 231,080 280,625
------------ -------------
FOOD-MISCELLANEOUS-1.27%
500,000 Envirodyne Industries, Inc., 12.00% First
Priority Sr Secured Note 6-15-2000......... B+ 497,546 530,000
500,000 Fresh Foods, Inc., 10.75% Sr Note 6-1-2006
(e)........................................ B 500,778 501,250
500,000 RAB Holdings, Inc., 13.00% Sr Note 5-1-2008
(e)........................................ CCC+ 505,560 502,500
------------ -------------
1,503,884 1,533,750
------------ -------------
FOREIGN-GOVERNMENT-0.40%
500,000 Korea (Republic of), 8.75% Note 4-15-2003.... BB+ 476,880 486,700
------------ -------------
FOREST PRODUCTS-0.46%
500,000 Stone Container Corp., 12.58% Sr Note
8-1-2016................................... B 500,000 556,250
------------ -------------
HEALTH PRODUCTS-0.83%
1,000,000 Global Health Sciences, 11.00% Sr Note
5-1-2008 (e)............................... B+ 977,838 995,000
------------ -------------
</TABLE>
4
<PAGE>
CORPORATE BONDS-NON-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------ -------------
<C> <S> <C> <C> <C>
HOTEL AND MOTEL-1.24%
$1,500,000 HMH Properties, 7.875% Sr Note 8-1-2008...... BB $ 1,490,280 $ 1,492,500
------------ -------------
HOUSING-0.90%
1,000,000 MDC Holding, Inc., 11.125% Note 12-15-2003... BB- 1,009,048 1,085,000
------------ -------------
INDUSTRIAL-0.65%
1,000,000 Intelcom Group (USA), Inc., 10.88% 5-1-2006
(Zero coupon through 5-1-2001, thereafter
12.50%) (f)................................ NR 782,426 785,000
------------ -------------
LEISURE TIME-AMUSEMENTS-0.48%
500,000 Showboat Marina Casino & Finance Corp.,
13.50% First Mtg Bond 3-15-2003............ BB- 500,000 581,875
------------ -------------
MORTGAGE BACKED SECURITIES-0.40%
734,192 Sandia Mtg Corp., 9.14% 1991-A Variable Rate
Pass Thru Certificate Class B 8-1-2018
(a)(e)..................................... NR 552,920 477,225
------------ -------------
PUBLISHING-0.90%
500,000 Affinity Group Holding, 11.00% Sr Note
4-1-2007................................... B 504,027 535,000
500,000 Garden State Newspapers, 12.00% Sr Sub Note
7-1-2004................................... B+ 561,568 556,250
------------ -------------
1,065,595 1,091,250
------------ -------------
RESTAURANTS AND FRANCHISING-0.32%
370,000 Advantica Restaurant Group, Inc., 11.25% Sr
Note 1-15-2008............................. B 399,542 390,812
------------ -------------
RETAIL-GROCERY-0.86%
1,000,000 Big V Supermarkets, Inc., 11.00% Sr Sub Note
2-15-2004.................................. B- 1,016,366 1,040,000
------------ -------------
RETAIL-MISCELLANEOUS-0.43%
1,000,000 Color Tile, Inc., 10.75% Sr Note 12-15-2001
(a)........................................ NR 700,000 10,000
500,000 Duane Reade, Inc., 9.25% Sr Sub Note
2-15-2008.................................. B- 500,000 512,500
------------ -------------
1,200,000 522,500
------------ -------------
STEEL AND IRON-0.44%
500,000 Weirton Steel Corp., 11.375% Sr Note
7-1-2004................................... B 502,121 536,250
------------ -------------
TELECOMMUNICATIONS-8.52%
1,000,000 Dobson Communications Corp., 11.75% Sr Note
4-15-2007.................................. NR 955,748 1,081,250
1,000,000 E Spire Communications, Inc., 13.75%
7-15-2007.................................. NR 1,099,019 1,165,000
500,000 Fonorola, Inc., 12.50% Sr Secured Note
8-15-2002.................................. NR 500,000 562,500
500,000 Globalstar L.P. Capital Corp., 10.75% Sr Note
11-1-2004.................................. B 494,458 455,000
1,000,000 Hyperion Communications, Inc., 10.47% Sr Disc
Note 4-15-2003 (Zero coupon through
4-15-2001, thereafter 13.00%) (f).......... B 787,290 770,000
500,000 Iridium LLC/Capital Corp., 14.00% Sr Note
7-15-2005.................................. B- 478,873 532,500
500,000 Metrocall, Inc., 10.375% Sr Sub Note
10-1-2007.................................. CCC 437,319 525,000
500,000 Microcell Telecommunications, Inc., 12.52% Sr
Disc Note 6-1-2006 (Zero coupon through
12-1-2001, thereafter 14.00%) (f).......... B3* 352,946 387,500
1,000,000 Nextel Communications, Inc., 9.84% Sr Disc
Note 9-15-2007 (Zero coupon through
9-15-2002, thereafter 10.65%) (f).......... CCC+ 691,303 693,750
500,000 Nextlink Communications, L.L.C., 12.50% Sr
Note 4-15-2006............................. B 500,000 567,500
1,000,000 Omnipoint Corp., 11.625% Sr Note Ser A
8-15-2006.................................. CCC+ 973,614 1,066,250
1,000,000 Orbcomm Global LP Capital, 14.00% Sr Note
8-15-2004.................................. B- 1,034,099 1,110,000
1,000,000 Phonetel Technologies, Inc., 12.00% Sr Note
12-15-2006................................. CCC 1,002,315 1,000,000
333,000 RSL Communications Ltd., 12.25% Sr Note
11-15-2006................................. B- 332,702 373,793
------------ -------------
9,639,686 10,290,043
------------ -------------
TEXTILE MANUFACTURING-0.87%
500,000 Anvil Knitwear, Inc., 10.875% Sr Note
3-15-2007.................................. B+ 515,453 505,000
500,000 Pillowtex Corp., 10.00% Sr Sub Note
11-15-2006................................. B+ 523,815 538,750
------------ -------------
1,039,268 1,043,750
------------ -------------
TRANSPORTATION - 0.84%
1,000,000 Stena Line AB, 10.625% Sr Note 6-1-2008...... B+ 1,001,273 1,017,500
------------ -------------
TOTAL CORPORATE BONDS - NON-INVESTMENT
GRADE...................................... $29,605,660 $ 29,500,130
------------ -------------
------------ -------------
</TABLE>
5
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments (continued)
July 31, 1998
U.S. GOVERNMENT SECURITIES-14.15%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Cost (b) Value (c)
----------- ------------ -------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION -
2.07%
MORTGAGE BACKED SECURITIES:
$ 651,024 8.00% 2001................................... $ 667,300 $ 664,248
276,723 9.00% 2022................................... 294,278 292,980
514,207 10.50% 2017.................................. 548,916 561,771
237,638 11.25% 2010.................................. 257,020 264,298
231,575 11.50% 2014-2015............................. 254,529 259,075
186,226 11.75% 2010.................................. 197,400 209,272
------------ -------------
2,219,443 2,251,644
------------ -------------
REMIC-IO-ETTE:
10,237 10.90% Trust #1404-E Interest Only Strip IO
ette 2006 (e)(g)........................... 2,574 106,394
------------ -------------
REMIC-PAC'S:
144,602 9.00% Trust #136D 2020....................... 145,325 145,295
------------ -------------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORPORATION................................ 2,367,342 2,503,333
------------ -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.60%
MORTGAGE BACKED SECURITIES:
2,202,688 7.50% 2027................................... 2,260,329 2,261,197
2,271,137 8.00% 2024-2025.............................. 2,299,883 2,352,757
1,080,673 10.50% 2014-2020............................. 1,133,695 1,181,988
645,701 11.00% 2011-2018............................. 664,829 714,307
28,616 11.25% 2011.................................. 29,707 31,836
69,517 12.00% 2014.................................. 74,014 78,554
118,597 12.50% 2015.................................. 133,940 134,978
------------ -------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION................................ 6,596,397 6,755,617
------------ -------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -
2.38%
MORTGAGE BACKED SECURITIES:
1,010,107 9.00% 2021................................... 1,018,156 1,079,236
1,672,317 9.50% 2019-2020.............................. 1,738,815 1,794,413
------------ -------------
TOTAL GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION................................ 2,756,971 2,873,649
------------ -------------
U.S. TREASURY SECURITIES - 4.10%
BONDS:
270,000 8.125% 2021.................................. 349,423 347,794
------------ -------------
NOTES:
900,000 5.75% 2003................................... 904,940 907,032
2,000,000 5.875% 1999.................................. 2,003,220 2,007,500
1,645,000 6.25% 2002................................... 1,654,566 1,683,555
------------ -------------
4,562,726 4,598,087
------------ -------------
TOTAL U.S. TREASURY SECURITIES............... 4,912,149 4,945,881
------------ -------------
TOTAL U.S. GOVERNMENT SECURITIES............. $16,632,859 $ 17,078,480
------------ -------------
------------ -------------
</TABLE>
COMMON STOCKS AND WARRANTS - 0.09%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market
Shares Cost (b) Value (c)
----------- ------------- -------------
<C> <S> <C> <C>
APPAREL-0.03%
500 Hosiery Corp. of America Class A (a)(e)...... $ 8,460 $ 35,000
------------- -------------
AUTOMOBILE AND MOTOR VEHICLE PARTS-0.00%
1,000 Highwaymaster Communications, Inc. (Warrants)
(a)(e)..................................... 14,093 2,500
------------- -------------
LEISURE TIME-AMUSEMENTS-0.00%
6,000 Hemmeter Enterprises, Inc. (Warrants)
(a)(e)..................................... 24,000 1
------------- -------------
</TABLE>
6
<PAGE>
COMMON STOCKS AND WARRANTS - 0.09%-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Cost (b) Value (c)
----------- ------------- -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS-0.06%
500 RSL (Warrants) (a)(e)........................ $ 500 $ 71,300
------------- -------------
TOTAL COMMON STOCKS AND WARRANTS............. 47,053 108,801
------------- -------------
------------- -------------
TOTAL LONG-TERM INVESTMENTS.................. $ 112,637,421 $ 118,037,710
------------- -------------
------------- -------------
</TABLE>
SHORT-TERM INVESTMENTS-1.70%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Market
Amount Value (c)
----------- -------------
<C> <S> <C>
BANKS-1.67%
$2,019,000 U.S. Bank N.A. Money Market Variable Rate
Time Deposit, Current rate -- 5.43%........ $ 2,019,000
-------------
DIVERSIFIED FINANCE-0.03%
39,000 Associates Corp. Master Variable Rate Note,
Current rate -- 5.54%...................... 39,000
-------------
TOTAL SHORT-TERM INVESTMENTS................. 2,058,000
-------------
-------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$114,695,421) (b).......................... $ 120,095,710
-------------
-------------
</TABLE>
(a) Presently non-income producing. For long-term debt securities, items
identified are in default as to payment of interest and/or principal.
(b) At July 31, 1998, the cost of securities for federal income tax purposes
was $114,695,421 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation......................................................................................... $ 7,042,672
Unrealized depreciation......................................................................................... (1,642,383)
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation..................................................................................... $ 5,400,289
- -----------------------------------------------------------------------------------------------------------------------------
</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 6.10% of total net assets as of July 31, 1998.
(e) Securities issued within the 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
manangement as illiquid securities:
<TABLE>
<CAPTION>
Date Acquired Shares/Par Security Cost Basis
- ------------- ----------- ------------------------------------------------------------------------------------ -----------
<S> <C> <C> <C>
1993 10,237 FHLMC Remic Trust #1404-E IO-ette 2006 $ 2,574
1998 500,000 Fresh Foods, Inc., 10.75% Sr Note 2006 - 144A 500,778
1998 1,000,000 Global Health Sciences, 11.00% Sr Note 2008 - 144A 977,838
1994 6,000 Hemmeter Enterprises, Inc. (Warrants) - 144A 24,000
1998 500,000 Highwaymaster, Inc., 13.75% Sr Note 2005 536,104
1997 500 Highwaymaster Communications, Inc. (Warrants) - 144A 9,093
1998 500 Highwaymaster Communications, Inc. (Warrants) - 144A 5,000
1994 500 Hosiery Corp. of America, Class A - 144A 8,460
1998 500,000 RAB Holdings, Inc., 13.00% Sr Note 2008 - 144A 505,560
1996 500 RSL (Warrants) - 144A 500
1993 734,192 Sandia Mortgage Corp., 2018-restricted 552,920
</TABLE>
The aggregate value of these securities at July 31, 1998, was $2,991,170
which represents 2.48% of total net assets.
(f) The interest rate disclosed for these securities represents the effective
yield on the date of acquisition.
(g) The interest rate disclosed for interest only strips represents the
effective yield at July 31, 1998, based upon the estimated timing and
amount of future cash flows.
* Moody's Rating
7
<PAGE>
FORTIS SECURITIES, INC.
Statement of Assets and Liabilities
July 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, as detailed in the accompanying schedules, at
market (cost $114,695,421) (Note 1)......................................... $ 120,095,710
Cash on deposit with custodian................................................ 160
Receivables:
Investment securities sold.................................................. 583,318
Interest and dividends...................................................... 2,389,625
-------------
TOTAL ASSETS.................................................................... 123,068,813
-------------
LIABILITIES
Cash portion of dividends payable ($.060 per share)........................... 758,531
Payable for investment securities purchased................................... 1,490,280
Payable for investment advisory and management fees (Note 2).................. 67,839
Accounts payable and accrued expenses......................................... 31,245
-------------
TOTAL LIABILITIES............................................................... 2,347,895
-------------
NET ASSETS
Net proceeds of capital stock, par value $.01 per share-authorized 15,000,000
shares; outstanding 12,642,180 shares....................................... 132,748,817
Unrealized appreciation of investments........................................ 5,400,289
Undistributed net investment income........................................... 219,760
Accumulated net realized loss from sale of investments........................ (17,647,948)
-------------
TOTAL NET ASSETS................................................................ $ 120,720,918
-------------
-------------
NET ASSET VALUE PER SHARE....................................................... $9.55
-------------
-------------
Statement of Operations
For the Year Ended July 31, 1998
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Income
Interest income............................................................. $ 10,179,421
-------------
Expenses:
Investment advisory and management fees (Note 2)............................ 756,186
Legal and auditing fees (Note 2)............................................ 31,737
Custodian fees.............................................................. 8,035
Shareholders' notices and reports........................................... 46,705
Directors' fees and expenses................................................ 14,297
Exchange listing fees....................................................... 25,760
Other....................................................................... 34,006
-------------
Total expenses................................................................ 916,726
-------------
NET INVESTMENT INCOME........................................................... 9,262,695
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 1):
Net realized gain from security transactions.................................. 1,120,419
Net change in unrealized appreciation of investments in securities............ 197,289
-------------
NET GAIN ON INVESTMENTS......................................................... 1,317,708
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 10,580,403
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FORTIS SECURITIES, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income......................................................... $ 9,262,695 $ 9,130,198
Net realized gain from security transactions.................................. 1,120,419 188,166
Net change in unrealized appreciation on investments in securities............ 197,289 5,994,806
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ 10,580,403 15,313,170
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................................................... (9,334,311) (8,824,054)
Excess distributions of net realized gains (Note 1)........................... -- (423,050)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................................. (9,334,311) (9,247,104)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from 20,730 and 6,372 shares issued as a result of reinvested
dividends................................................................... 189,866 67,899
------------- -------------
TOTAL INCREASE IN NET ASSETS.................................................... 1,435,958 6,133,965
NET ASSETS:
Beginning of year............................................................. 119,284,960 113,150,995
------------- -------------
End of year (includes undistributed net investment income of $219,760 and
$287,278, respectively)..................................................... $ 120,720,918 $ 119,284,960
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
FORTIS SECURITIES, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. 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: Investments in securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sales price. Securities for which over-the-counter market quotations
are readily available are valued on the basis of the last current bid price.
An outside pricing service may be utilized to provide such valuations. For
fixed income securities, the pricing service may employ electronic data
processing techniques and/or a matrix system to determine valuations using
methods which include consideration of yields or prices of bonds of
comparable quality, type of issue, coupon, maturity and rating indications as
to value from dealers, and general market conditions. Securities for which
quotations are not readily available are valued at fair value as determined
in good faith by management under supervision of the Board of Directors.
Short-term investments, with maturities of less than 60 days when acquired,
or which subsequently are within 60 days of maturity, are valued at amortized
cost.
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 July 31, 1998, there were no outstanding purchases on a
when-issued basis.
Consistent with its ability to purchase securities on a when-issued basis,
Fortis Securities Fund has entered into transactions to defer settlement of
its purchase commitments. As an inducement to defer settlement, the Portfolio
repurchases a similar security for settlement at a later date at a lower
purchase price relative to the current market. This transaction is referred
to as a Dollar Roll. As of July 31, 1998, there were no outstanding Dollar
Rolls.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are accounted for on the trade date. Interest income is recorded on the
accrual basis. Realized security gains and losses are determined using the
identified cost method. For the year ended July 31, 1998, the cost of
purchases and proceeds from sales of securities (other than short-term
securities) aggregated $52,085,553 and $51,167,399, 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. 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 may differ from the year that the income or realized gains
(losses) were recorded by the fund. 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.
On the statement of Assets and Liabilities; due to permanent book-to-tax
differences, accumulated net realized loss has been decreased $289,664,
undistributed net investment income increased by $4,098, resulting in a
reclassification to reduce paid-in-capital by $293,762.
For federal income tax purposes, the fund had a capital loss carryover of
$17,647,948 at July 31, 1998, which if not offset by subsequent capital
gains, will expire in 1999 through 2005. 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.
ILLIQUID SECURITIES: At July 31, 1998, 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 July 31, 1998, was
$2,991,170 which represents 2.48% 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 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.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of increase and decrease
in net assets from operations during the reporting period. Actual results
could differ from those estimates.
2. 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 investment income.
Legal fees and expenses aggregating $3,292 for the year ended July 31, 1998,
were paid to a law firm of which the secretary of the fund is a partner.
10
<PAGE>
- --------------------------------------------------------------------------------
3. FINANCIAL HIGHLIGHTS: Selected per share historical data was as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of year...... $ 9.45 $ 8.97 $ 9.18 $ 9.33 $ 10.24
--------- --------- --------- --------- ---------
Operations:
Investment income - net............... .73 .72 .78 .84 .93
Net realized and unrealized gains
(losses) on investments............. .11 .49 (.20) (.11) (.89)
--------- --------- --------- --------- ---------
Total from operations................... .84 1.21 .58 .73 .04
--------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income - net.......... (.74) (.70) (.78) (.87) (.95)
Excess distributions of net realized
gains............................... -- (.03) (.01) (.01) --
--------- --------- --------- --------- ---------
Total distributions to shareholders..... (.74) (.73) (.79) (.88) (.95)
--------- --------- --------- --------- ---------
Net asset value, end of year............ $ 9.55 $ 9.45 $ 8.97 $ 9.18 $ 9.33
--------- --------- --------- --------- ---------
Per-share market value, end of year..... $ 9.000 $ 8.688 $ 7.875 $ 8.750 $ 9.625
Total investment return, market value
@..................................... 12.29% 20.27% (1.36)% .25% (8.16)%
Total investment return, net asset value
@@.................................... 9.50% 14.83% 6.93% 8.46% .01%
Net assets end of year (000s omitted)... $ 120,721 $ 119,285 $ 113,151 $ 115,642 $ 115,350
Ratio of expenses to average monthly net
assets................................ .76% .76% .80% .78% .76%
Ratio of net investment income to
average monthly net assets............ 7.68% 7.91% 8.47% 9.33% 9.30%
Portfolio turnover rate................. 44% 130% 67% 75% 125%
</TABLE>
@ Total investment return, market value, is based on the change in
market price of a share duirng the year and assumes reinvestment of
distributions at actual prices pursuant to the fund's dividend
reinvestment plan.
@@ Total investment return, net asset value, is based on the change in
net asset value of a share during the year and assumes reinvestment of
distributions at actual prices pursuant to the fund's dividend
reinvestment plan.
11
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Fortis Securities, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Fortis Securities, Inc. as of July
31, 1998 and the related statement of operations for the year ended, the
statements of changes in net assets for each of the years in the five-year
period ended July 31, 1998 and the financial highlights for each of the years in
the five-year period ended July 31, 1998. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Fortis
Securities, Inc. as of July 31, 1998 and the results of its operations, changes
in its net assets and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 4 , 1998
12
<PAGE>
DIRECTORS AND OFFICERS
DIRECTORS Richard W. Cutting CPA AND FINANCIAL CONSULTANT
Allen R. Freedman CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
FORTIS, INC. MANAGING DIRECTOR OF
FORTIS INTERNATIONAL, N.V.
Dr. Robert M. Gavin PRESIDENT, CRANBROOK EDUCATION
COMMUNITY. PRIOR TO JULY 1996,
PRESIDENT MACALESTER COLLEGE
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 AND
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.
Noel Shadko MARKETING CONSULTANT. PRIOR TO MAY
1996, SENIOR VICE PRESIDENT OF
MARKETING & STRATEGIC PLANNING,
ROLLERBLADE, INC.
Joseph M. Wikler INVESTMENT CONSULTANT AND PRIVATE
INVESTOR. PRIOR TO JANUARY 1994,
DIRECTOR OF RESEARCH, CHIEF
INVESTMENT OFFICER, PRINCIPAL, AND
DIRECTOR, THE ROTHSCHILD CO.
OFFICERS
Dean C. Kopperud
PRESIDENT AND DIRECTOR
Robert W. Beltz, Jr.
VICE PRESIDENT
James S. Byrd
VICE PRESIDENT
Peggy L. Ettestad
VICE PRESIDENT
Tamara L. Fagely
VICE PRESIDENT AND TREASURER
Howard G. Hudson
VICE PRESIDENT
Dickson W. Lewis
VICE PRESIDENT
Lucinda S. Mezey
VICE PRESIDENT
David A. Peterson
VICE PRESIDENT
Scott R. Plummer
VICE PRESIDENT
Rhonda J. Schwartz
VICE PRESIDENT
Melinda S. Urion
VICE PRESIDENT
Gary N. Yalen
VICE PRESIDENT
Michael J. Radmer
SECRETARY
INVESTMENT ADVISOR AND Fortis Advisers, Inc.
DIVIDEND DISBURSING AGENT BOX 64284, ST. PAUL, MINNESOTA 55164
REGISTRAR Norwest Bank Minnesota, N.A.
MINNEAPOLIS, MINNESOTA
CUSTODIAN U.S. Bank National Association
MINNEAPOLIS, MINNESOTA
GENERAL COUNSEL Dorsey & Whitney LLP
MINNEAPOLIS, MINNESOTA
INDEPENDENT AUDITORS KPMG Peat 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 difference between net
asset value and market price for the fund under the name Fortis
Securities.
13
<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
FORTIS MEANS STEADFAST
Fortis means "steadfast" in Latin. The worldwide Fortis family of companies
lives up to the name, and has each day since the 1800s, with flexible
solutions tailored to our customers' individual needs. We deliver the
stability you require today ... and tomorrow. You can count on it.
Fortis Financial Group offers mutual funds, annuities and life insurance
through its broker/dealer Fortis Investors, Inc.
We're part of Fortis, Inc., a financial services company that provides
specialty insurance and investment products to individuals, businesses,
associations and other financial services organizations throughout the United
States.
Fortis, Inc. is part of Fortis, a worldwide group of companies active in the
fields of insurance, banking and investments. Fortis is jointly owned by
Fortis AMEV of The Netherlands and Fortis AG of Belgium.
Fortis: steadfast for YOU!
FORTIS FINANCIAL GROUP
Fortis Advisers, Inc.
(fund management since 1949)
Fortis Investors, Inc.
(principal underwriter;
member NASD, SIPC)
Fortis Benefits Insurance Company
& Fortis Insurance Company
(issuers of FFG's insurance products)
P.O. Box 64284, St. Paul, MN 55164
(800) 800-2000
http://www.ffg.us.fortis.com
FORTIS FINANCIAL GROUP ----------------------
P.O. Box 64284 Bulk Rate
St. Paul, MN 55164 U.S. Postage
PAID
Fortis Securities Fund, Inc. Permit No. 3794
Minneapolis, MN
----------------------
[RECYCLE LOGO] Printed on recycled paper with
40% preconsumer waste and 10%
post consumer waste. Please recycle.
The Fortis logo and Fortis-Registered Trademark- are registered
servicemarks of Fortis AMEV and Fortis AG.
95387 -C-Fortis 9/98
