<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
A disciplined, consistent
approach to investing
Fortis Securities
Fund, Inc.
Annual Report
JULY 31, 1999
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 9
STATEMENTS OF CHANGES IN NET ASSETS 10
NOTES TO FINANCIAL STATEMENTS 11
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, 1999:
TOTAL NET ASSETS............................. $ 108,950,792
MARKET PRICE PER SHARE....................... $ 8.500
SHARES OUTSTANDING........................... 12,661,702
FOR THE YEAR ENDED JULY 31, 1999:
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 9.55
End of year................................ $ 8.60
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Total dividends paid....................... $ 9,104,432
Dividends per share........................ $ .720
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION BY SECTOR AS OF 7/31/99
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Corporate Bonds - Investment Grade 53.5%
Corporate Bonds - Non-Investment Grade 24.9%
Asset Backed Securities 12.7%
U.S. Government Agencies 6.7%
Cash Equivalents/Receivables 1.5%
U.S. Treasury Securities 0.7%
</TABLE>
TOP 10 HOLDINGS AS OF 7/31/99
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
- -------------------------------------------------------------------
<C> <S> <C>
1. DLJ Mortgage Acceptance Corp.
(8.50%) 2001 ABS 2.8%
2. Green Tree Financial Corp.
(7.65%) 2019 ABS 2.7%
3. Nationsbank Corp.
(7.25%) 2025 2.2%
4. Georgia-Pacific Corp.
(9.625%) 2022 2.1%
5. United Airlines
(10.02%) 2014 2.1%
6. Midland Realty Acceptance Corp.
(7.635%) 2028 1.8%
7. GTE Corp.
(7.90%) 2027 1.8%
8. Time Warner Entertainment
(8.375%) 2033 1.8%
9. Telecommunications, Inc.
(9.80%) 2012 1.7%
10. News America Holdings
(8.875%) 2023 1.5%
</TABLE>
DEAR SHAREHOLDER:
The outlook for the Global economy improved during the first quarter of 1999 as
Korea's economy recovered and Japan's business confidence began to revive. In
the second quarter, the focus of the fixed income markets shifted from worries
about global recession to concerns that domestic economic growth could fuel
inflation. Subsequently, Treasury yields rose more than 1% in some maturities
reflecting anticipation of a tighter monetary policy. In fact, the Federal Open
Market Committee raised the federal funds rate on June 30 by 0.25% to 5.0%, and
left open the possibility of further tightening in the future.
Improvement in global economies in the beginning of the year also contributed to
the increase in liquidity for spread products (non-Treasury securities),
particularly in the corporate market. Stronger demand for debt obligations that
command a yield premium to U.S. Treasuries caused the yield premium, or spread,
to tighten. However, this trend was reversed in June and July as inflation
became a real concern, and corporations rushed to issue securities ahead of
schedule to avoid potential Y2K liquidity squeeze.
Lower reinvestment yield throughout most of the fiscal year and wider credit
spreads at the end of the period, negatively impacted the yield distribution and
the valuation of the portfolio. For the twelve months ended July 31, 1999, the
Fortis Securities Fund provided a distribution yield of 8.47% and total returns
of 2.34% at market value and -2.43% at net asset value. Nonetheless, the recent
rise in rates, wider spreads and new issue calendar offers an opportunity to
purchase securities at attractive yields.
We anticipate economic growth in the months ahead to be affected by higher
interest rates, slowing to a more sustainable level of 3-3.5% real rate. We also
expect that inflation will remain low, although potentially higher than its
current 2% level. While the situation is volatile, we believe that the market
has substantially discounted a number of negatives and will offer attractive
investment opportunity during the upcoming months.
Sincerely,
<TABLE>
<S> <C>
/s/ Dean C. Kupperud /s/ Howard G. Hudson
Dean C. Kupperud Howard G. Hudson
President Vice President
</TABLE>
1
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments
July 31, 1999
ASSET BACKED SECURITIES-12.71%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
COMMERCIAL LOANS-2.90%
$2,000,000 Midland Realty Acceptance Corp., 7.635% Ser
1996-C1 Class A3 8-25-2028................. AAA $ 2,141,993 $ 2,009,100
1,100,000 Midland Realty Acceptance Corp., 7.74%
Variable Rate Ser 1996-C1 Class B
8-25-2028.................................. AA 1,110,744 1,147,641
------------- -------------
3,252,737 3,156,741
------------- -------------
HOUSING-0.65%
702,776 Green Tree Recreational, Equipment & Consumer
Trust, 6.71% Ser 1998-A Class A1H
5-15-2029.................................. AAA 699,850 707,084
------------- -------------
MANUFACTURED HOMES-3.43%
3,000,000 Green Tree Financial Corp., 7.65% Ser 1994-1
Class A5 4-15-2019......................... Aa2* 2,988,281 2,982,300
1,000,000 Green Tree Financial Corp., 7.76% Ser 1997-1
Class B2 3-15-2028......................... Ba1* 999,847 761,875
------------- -------------
3,988,128 3,744,175
------------- -------------
MULTI-FAMILY LOANS-5.02%
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 3,018,030
1,000,000 DLJ Mtg Acceptance Corp., 8.80% Multifamily
Mtg Pass Thru Certificate Ser 1993-12 Class
B1 9-18-2003............................... BBB* 982,500 998,270
1,500,000 J.P. Morgan Commercial Mtg Finance Corp.,
7.35% Ser 1997-C5 Class D 9-15-2029........ BBB 1,543,158 1,449,390
------------- -------------
5,549,564 5,465,690
------------- -------------
WHOLE LOAN RESIDENTIAL-0.71%
790,561 Mid-State Trust, 7.54% Ser 6 Class A3
7-1-2035................................... AA 790,072 774,805
------------- -------------
TOTAL ASSET BACKED SECURITIES................ $ 14,280,351 $ 13,848,495
------------- -------------
------------- -------------
</TABLE>
CORPORATE BONDS-INVESTMENT GRADE-53.47%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
AIR FREIGHT-1.76%
$ 964,344 Federal Express, 7.50% Pass Thru Certificate
Ser 1997-A 1-15-2018....................... AAA $ 964,344 $ 946,735
1,000,000 Federal Express, 7.84% Pass Thru Certificate
Ser 1996-B2 1-30-2018...................... BBB+ 1,000,000 975,730
------------- -------------
1,964,344 1,922,465
------------- -------------
AIRLINES-4.49%
1,000,000 AMR Corp., 10.00% Deb 4-15-2021.............. BBB- 1,162,313 1,171,180
1,200,000 Delta Air Lines, 10.50% Pass Thru Certificate
4-30-2016.................................. BBB 1,448,034 1,458,540
2,000,000 United Airlines, 10.02% Deb 3-22-2014........ BBB 2,383,938 2,256,300
------------- -------------
4,994,285 4,886,020
------------- -------------
AUTOMOBILE AND MOTOR VEHICLE PARTS-0.89%
1,000,000 TRW, Inc., 7.75% Deb 6-1-2029 (h)............ BBB 990,824 969,403
------------- -------------
AUTOMOBILE MANUFACTURERS-0.87%
1,000,000 Chrysler Corp., 7.40% Deb 8-1-2097........... A+ 999,140 948,127
------------- -------------
BANKS-4.48%
1,000,000 Comerica Bank, 7.875% 9-15-2026.............. A- 988,300 1,028,661
1,500,000 Keystone Financial Funding Corp., 7.30%
Medium Term Note 5-15-2004................. BBB+ 1,497,289 1,496,446
2,500,000 Nationsbank Corp., 7.25% Sub Note
10-15-2025................................. A 2,331,547 2,354,160
------------- -------------
4,817,136 4,879,267
------------- -------------
BROKERAGE AND INVESTMENT-1.37%
1,500,000 Lehman Brothers Holdings, Inc., 7.375% Note
5-15-2004.................................. A 1,495,645 1,493,925
------------- -------------
BUILDING MATERIALS-2.24%
1,000,000 Armstrong World, 7.45% Sr Note 5-15-2029..... A- 998,822 946,615
1,500,000 Masco Corp 7.75% Sr Sub Note 8-1-2029........ A- 1,496,955 1,496,955
------------- -------------
2,495,777 2,443,570
------------- -------------
</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>
CABLE TELEVISION-5.06%
$1,000,000 Comcast Cable Communications, Inc., 8.50%
Note 5-1-2027 (with rights)................ BBB $ 998,322 $ 1,091,167
750,000 Cox Communications, Inc., 6.95% Sr Note
1-15-2028.................................. BBB+ 747,263 674,756
1,500,000 Telecommunications, Inc., 9.80% Sr Note
2-1-2012................................... AA- 1,658,835 1,819,855
1,800,000 Time Warner Entertainment, 8.375% Sr Note
7-15-2033.................................. BBB 1,732,723 1,921,999
------------- -------------
5,137,143 5,507,777
------------- -------------
CHEMICALS-1.91%
600,000 Agrium, Inc., 7.70% Deb 2-1-2017............. BBB 594,513 577,156
1,500,000 Equistar Chemicals, L.P., 8.75% Sr Note
2-15-2009 (h).............................. BBB- 1,573,758 1,501,344
------------- -------------
2,168,271 2,078,500
------------- -------------
CONSUMER GOODS-0.43%
500,000 Pennzoil-Quaker State, 7.375% Deb 4-1-2029... BBB- 497,493 464,051
------------- -------------
DIVERSIFIED FINANCE-1.38%
1,500,000 AT&T Capital Corp., 7.50% Medium Term Note
11-15-2000................................. BBB 1,499,082 1,507,303
------------- -------------
ENERGY-2.67%
1,500,000 Apache Corp, 7.70% Note 3-15-2026............ BBB+ 1,494,667 1,475,778
500,000 NGC Corp. Capital Trust, 8.316% Deb
6-1-2027................................... BBB- 500,000 459,127
1,000,000 NRG Energy, Inc., 7.50% Sr Note 6-1-2009..... BBB- 999,704 973,443
------------- -------------
2,994,371 2,908,348
------------- -------------
FINANCIAL SERVICES-0.42%
406,000 Homeside, Inc., 11.25% Second Priority Sr
Secured Note 5-15-2003..................... A+ 416,326 460,303
------------- -------------
FOREIGN-GOVERNMENT-1.47%
1,500,000 Quebec (Province of), 8.80% Bond 4-15-2003... A+ 1,637,670 1,601,190
------------- -------------
FOREST PRODUCTS-3.53%
2,150,000 Georgia-Pacific Corp., 9.625% Deb
3-15-2022.................................. BBB- 2,169,818 2,307,281
1,500,000 Noranda, Inc., 8.625% Deb 7-15-2002.......... BBB 1,494,960 1,543,541
------------- -------------
3,664,778 3,850,822
------------- -------------
HOUSING-1.20%
1,500,000 Pulte Corp., 7.625% Note 10-15-2017.......... BBB 1,479,138 1,307,531
------------- -------------
INSURANCE-0.82%
1,000,000 American General Corp., 6.625% Note
2-15-2029.................................. AA- 953,314 891,984
------------- -------------
MEDIA-2.83%
750,000 Belo (A.H.) Corp., 7.25% Note 9-15-2027...... BBB- 745,658 675,169
1,500,000 News America Holdings, 8.875% Deb
4-26-2023.................................. BBB- 1,489,182 1,611,731
800,000 Westinghouse Electric Corp., 7.875% Deb
9-1-2023................................... BBB- 883,931 790,918
------------- -------------
3,118,771 3,077,818
------------- -------------
MISCELLANEOUS-2.07%
1,075,000 Minneapolis MN Community Development Agency,
11.25% Ltd Tax Dev Rev Bond Ser 1990-6B
6-1-2007................................... A- 1,101,875 1,152,892
1,000,000 New York (City of), 10.00% General Obligation
Taxable Bond Ser D 8-1-2005................ A- 1,001,625 1,105,501
------------- -------------
2,103,500 2,258,393
------------- -------------
NATURAL GAS TRANSMISSIONS-3.03%
500,000 CMS Panhandle Holding Co., 7.00% Sr Note
7-15-2029 (h).............................. BBB- 495,186 448,482
1,500,000 Columbia Gas Systems, 7.62% Note
11-28-2025................................. BBB+ 1,422,632 1,407,915
1,500,000 Tennessee Gas Pipeline, 7.625% Deb
4-1-2037................................... BBB 1,481,942 1,443,593
------------- -------------
3,399,760 3,299,990
------------- -------------
OIL-CANADIAN-0.83%
1,000,000 Talisman Energy, Inc., 7.25% Deb
10-15-2027................................. BBB+ 993,253 907,661
------------- -------------
OIL-CRUDE PETROLEUM AND GAS-0.87%
1,000,000 Burlington Resources, 7.375% Deb 3-1-2029.... A- 1,020,056 952,304
------------- -------------
</TABLE>
3
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments (continued)
July 31, 1999
CORPORATE BONDS-INVESTMENT GRADE-CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
OIL-REFINING-1.27%
$1,500,000 Coastal Corp., 7.42% Note 2-15-2037.......... BBB $ 1,427,464 $ 1,383,515
------------- -------------
RAILROAD AND RAILROAD EQUIPMENT-0.70%
750,000 CSX Corp., 7.90% Deb 5-1-2017................ BBB 749,587 759,917
------------- -------------
RETAIL-DEPARTMENT STORES-1.27%
1,400,000 Dayton Hudson Co., 7.875% Deb 6-15-2023...... A- 1,410,169 1,386,897
------------- -------------
TELECOMMUNICATIONS-1.79%
1,000,000 360 Communications Alltel Corp., 7.50% Sr
Note 3-1-2006.............................. A 998,294 1,023,887
1,000,000 Sprint Capital Corp., 6.90% 5-1-2019......... BBB+ 997,027 923,659
------------- -------------
1,995,321 1,947,546
------------- -------------
TELEPHONE SERVICES-1.81%
2,000,000 GTE Corp., 7.90% Deb 2-1-2027................ A 2,000,000 1,975,656
------------- -------------
UTILITIES-ELECTRIC-2.01%
750,000 Puget Sound Energy, Inc., 7.02% Medium Term
Note 12-1-2027............................. A- 750,000 699,967
1,500,000 TXU Electric Capital V, 8.175% Deb
1-30-2037.................................. BBB- 1,511,033 1,490,781
------------- -------------
2,261,033 2,190,748
------------- -------------
TOTAL CORPORATE BONDS - INVESTMENT GRADE..... $ 58,683,651 $ 58,261,031
------------- -------------
------------- -------------
</TABLE>
CORPORATE BONDS-NON-INVESTMENT GRADE-24.90%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
AIRLINES-0.50%
$ 500,000 Northwest Airlines Trust No. 2, 13.875% Sub
Aircraft Note Ser D 6-21-2008.............. Ba1* $ 500,000 $ 542,835
------------- -------------
APPAREL-0.48%
500,000 Hosiery Corp. of America, Inc., 13.75% Sr Sub
Note 8-1-2002.............................. B- 492,173 527,500
------------- -------------
BROADCASTING-0.91%
500,000 Chancellor Media Corp., 9.00% Sr Sub
10-1-2008.................................. B 550,703 508,750
500,000 Sinclair Broadcasting Group, Inc., 8.75% Sr
Sub Note 12-15-2007........................ B 508,731 486,250
------------- -------------
1,059,434 995,000
------------- -------------
BUSINESS SERVICES-1.40%
1,000,000 Avis Rent A Car, Inc., 11.00% Sr Sub Note
5-1-2009 (h)............................... BB- 1,000,742 1,025,000
500,000 T/SF Communications Corp., 10.375% Sr Sub
Note 11-1-2007............................. B- 491,087 495,000
------------- -------------
1,491,829 1,520,000
------------- -------------
CABLE TELEVISION-2.15%
2,000,000 Charter Communications Holdings LLC, 9.92% Sr
Disc Note 4-1-2011 (Zero coupon through
4-1-2004, thereafter 9.92%) (f)(h)......... B+ 1,272,953 1,220,000
500,000 Rifkin Acquisition Partners L.P., 11.125% Sr
Sub Note 1-15-2006......................... B- 546,810 542,500
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 691,218 580,000
------------- -------------
2,510,981 2,342,500
------------- -------------
CHEMICALS-1.19%
500,000 NL Industries, Inc., 11.75% Sr Secured Note
10-15-2003................................. B 510,417 520,000
1,000,000 Sterling Chemicals, Inc., 11.75% Sr Sub Note
8-15-2006.................................. B 1,034,633 776,250
------------- -------------
1,545,050 1,296,250
------------- -------------
CONSUMER GOODS-0.25%
250,000 Chattem, Inc., 12.75% Sr Sub Note Ser B
6-15-2004.................................. B- 231,392 271,250
------------- -------------
</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>
FOOD-MISCELLANEOUS-0.91%
$ 500,000 Fresh Foods, Inc., 10.75% Sr Note 6-1-2006... B $ 500,000 $ 497,500
500,000 Luigino's, Inc., 10.00% Sr Sub Note 2-1-2006
(h)........................................ B- 502,533 489,375
------------- -------------
1,002,533 986,875
------------- -------------
FOREIGN-GOVERNMENT-1.02%
300,000 Brazil (Republic of), 11.625% Global Bond
4-15-2004.................................. B+ 297,318 273,000
500,000 Philippines (Republic of), 8.875% Global Bond
4-15-2008.................................. BB+ 487,859 488,125
500,000 United Mexican States, 6.25% Secured Bond Ser
W-B 12-31-2019............................. BB 378,613 353,125
------------- -------------
1,163,790 1,114,250
------------- -------------
FOREST PRODUCTS-0.50%
500,000 Stone Container Corp., 12.58% Sr Note
8-1-2016................................... B 500,000 547,500
------------- -------------
HOTEL AND GAMING-1.25%
1,500,000 HMH Properties, 7.875% Sr Note 8-1-2008...... BB 1,501,818 1,361,250
------------- -------------
INDUSTRIAL-0.75%
1,000,000 Intelcom Group (USA), Inc., 10.88% 5-1-2006
(Zero coupon through 5-1-2001, thereafter
12.50%) (f)................................ B- 855,520 817,500
------------- -------------
LEISURE TIME-AMUSEMENTS-0.47%
500,000 Argosy Gaming, 10.75% Sr Sub Note 6-1-2009
(h)........................................ B- 500,598 510,009
86,615 Capital Gaming International, Inc., 12.00% Sr
Note 5-28-2001 (e)......................... NR -- --
------------- -------------
500,598 510,009
------------- -------------
MORTGAGE BACKED SECURITIES-0.33%
601,872 Sandia Mtg Corp., 9.14% 1991-A Variable Rate
Pass Thru Certificate Class B 8-1-2018
(e)........................................ NR 471,523 361,123
------------- -------------
OIL-CRUDE PETROLEUM AND GAS-0.18%
200,000 Ocean Energy, Inc., 8.875% Sr Sub Note
7-15-2007.................................. BB- 198,045 199,500
------------- -------------
PAPER-0.47%
500,000 Packaging Corp. of America, 9.625% Sr Sub
Note 4-1-2009 (h).......................... B 513,071 507,500
------------- -------------
PRINTING-0.46%
500,000 Cadmus Communication Corp., 9.75% Sr Sub Note
6-1-2009 (h)............................... B 500,627 501,250
------------- -------------
PUBLISHING-0.46%
500,000 Affinity Group Holding, 11.00% Sr Note
4-1-2007................................... B 503,727 502,500
------------- -------------
RESTAURANTS AND FRANCHISING-0.32%
370,000 Advantica Restaurant Group, Inc., 11.25% Sr
Note 1-15-2008............................. B 397,535 347,800
------------- -------------
RETAIL-GROCERY-0.94%
1,000,000 Big V Supermarkets, Inc., 11.00% Sr Sub Note
2-15-2004.................................. B- 1,014,060 1,025,000
------------- -------------
TELECOMMUNICATIONS-8.17%
1,000,000 Dobson Communications Corp., 11.75% Sr Note
4-15-2007.................................. NR 958,779 1,050,000
500,000 e.Spire Communications, Inc., 13.75% Sr Note
7-15-2007.................................. NR 500,000 450,000
500,000 e.Spire Communications, Inc., 13.75% Sr Note
7-15-2007 (e).............................. NR 591,846 450,000
250,000 Emmis Communications Corp., 8.125% Sr Sub
Note 3-15-2009............................. B- 250,765 240,000
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+ 860,069 830,000
750,000 McleodUSA, Inc., 8.125% Sr Note 2-15-2009.... B+ 746,919 678,750
500,000 Microcell Telecommunications, Inc., 12.52% Sr
Disc Note 6-1-2006 (Zero coupon through
12-1-2001, thereafter 14.00%) (f).......... B3* 397,014 407,500
1,250,000 Nextel Communications, Inc., 9.84% Sr Disc
Note 9-15-2007 (Zero coupon through
9-15-2002, thereafter 10.65%) (f).......... B- 945,758 918,750
500,000 Nextlink Communications, L.L.C., 12.50% Sr
Note 4-15-2006............................. B 500,000 535,000
1,050,000 Omnipoint Corp., 11.625% Sr Note Ser A
8-15-2006.................................. CCC+ 818,826 1,081,500
1,000,000 Orbcomm Global LP Capital, 14.00% Sr Note
8-15-2004.................................. B- 1,030,100 945,000
500,000 Psinet, Inc., 11.00% Sr Note 8-1-2009 (with
rights) (h)................................ B- 500,101 496,250
333,000 RSL Communications Ltd., 12.25% Sr Note
11-15-2006................................. B- 332,724 342,990
</TABLE>
5
<PAGE>
FORTIS SECURITIES, INC.
Schedule of Investments (continued)
July 31, 1999
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>
$ 500,000 Splitrock Services, Inc., 11.75% Sr Note
7-15-2008.................................. NR $ 503,680 $ 470,000
------------- -------------
8,936,581 8,895,740
------------- -------------
TEXTILE MANUFACTURING-0.44%
500,000 Pillowtex Corp., 10.00% Sr Sub Note
11-15-2006................................. B+ 521,789 480,000
------------- -------------
TRANSPORTATION-0.69%
1,000,000 Stena Line AB, 10.625% Sr Note 6-1-2008...... B 1,009,842 752,500
------------- -------------
WASTE DISPOSAL-0.66%
750,000 IT Group, Inc., 11.25% Sr Sub Note 4-1-2009
(h)........................................ B+ 735,014 720,000
------------- -------------
TOTAL CORPORATE BONDS - NON-INVESTMENT
GRADE...................................... $ 28,156,932 $ 27,125,632
------------- -------------
------------- -------------
</TABLE>
U.S. GOVERNMENT SECURITIES-7.42%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Cost (b) Value (c)
----------- ------------- -------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP. - 1.29%
MORTGAGE BACKED SECURITIES:
$ 297,762 8.00% 2001................................... $ 305,206 $ 301,668
166,993 9.00% 2022................................... 177,587 176,583
359,379 10.50% 2017.................................. 383,637 390,445
164,313 11.25% 2010.................................. 177,715 180,227
161,748 11.50% 2014-2015............................. 177,404 178,803
134,511 11.75% 2010.................................. 142,582 149,089
------------- -------------
1,364,131 1,376,815
------------- -------------
REMIC-IO & IO-ETTE:
4,162 10.90% Trust # 1404-E Interest only Strip
IO-Ette 2006 (e)(g)........................ 1,046 25,606
------------- -------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORP........ 1,365,177 1,402,421
------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.70%
MORTGAGE BACKED SECURITIES:
1,361,317 7.50% 2027................................... 1,396,553 1,361,674
1,221,808 8.00% 2024-2025.............................. 1,237,152 1,247,684
682,549 10.50% 2014-2020............................. 721,620 739,644
457,540 11.00% 2011-2018............................. 470,660 502,059
20,065 11.25% 2011.................................. 20,830 22,148
42,865 12.00% 2014.................................. 45,637 48,170
94,899 12.50% 2015.................................. 107,176 107,645
------------- -------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION................................ 3,999,628 4,029,024
------------- -------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -
1.72%
MORTGAGE BACKED SECURITIES:
653,315 9.00% 2021................................... 658,521 690,898
1,107,596 9.50% 2019-2020.............................. 1,151,686 1,183,893
------------- -------------
TOTAL GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION................................ 1,810,207 1,874,791
------------- -------------
U.S. TREASURY SECURITIES - 0.71%
BONDS:
270,000 8.125% 2021.................................. 347,676 324,675
------------- -------------
NOTES:
450,000 6.125% 2007.................................. 455,574 450,844
------------- -------------
TOTAL U.S. TREASURY SECURITIES............... 803,250 775,519
------------- -------------
TOTAL U.S. GOVERNMENT SECURITIES............. $ 7,978,262 $ 8,081,755
------------- -------------
------------- -------------
</TABLE>
6
<PAGE>
COMMON STOCKS AND WARRANTS-0.05%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Cost (b) Value (c)
----------- ------------- -------------
<C> <S> <C> <C>
APPAREL-0.02%
500 Hosiery Corp. of America, Inc. Class A (a)
(e)........................................ $ 8,460 $ 20,000
------------- -------------
AUTOMOBILE AND MOTOR VEHICLE PARTS-0.00%
500 Highwaymaster Communications, Inc. (Warrants)
(a) (e).................................... 5,000 125
------------- -------------
LEISURE TIME-AMUSEMENTS-0.00%
6,300 Capital Gaming International, Inc. (a)....... -- 64
6,000 Hemmeter Enterprises, Inc. (Warrants) (a)
(e)........................................ 24,000 --
------------- -------------
24,000 64
------------- -------------
TELECOMMUNICATIONS-0.03%
500 RSL(Warrants)(a) (e)......................... 500 39,500
------------- -------------
TOTAL COMMON STOCKS AND WARRANTS............. 37,960 59,689
------------- -------------
------------- -------------
TOTAL LONG-TERM INVESTMENTS.................. $ 109,137,156 $ 107,376,602
------------- -------------
------------- -------------
</TABLE>
SHORT-TERM INVESTMENTS-1.61%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value (c)
----------- -------------
<C> <S> <C>
BANKS-1.61%
$1,753,285 U.S. Bank N.A. Money Market Variable Rate
Time Deposit, Current rate -- 4.91%........ $ 1,753,285
-------------
TOTAL INVESTMENTS IN SECURITIES (COST:
$110,890,441)(B)........................... $ 109,129,887
-------------
-------------
</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, 1999, the cost of securities for federal income tax purposes
was $110,933,299 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation........................... $ 1,957,897
Unrealized depreciation........................... (3,761,309)
---------------------------------------------------------------
Net unrealized depreciation....................... $(1,803,412)
---------------------------------------------------------------
</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 6.65% of total net assets as of July 31, 1999.
(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
management as illiquid securities:
<TABLE>
<CAPTION>
Year Acquired Shares/Par Security Cost Basis
- ------------- ----------- ------------------------------------------------------------------------------------ -----------
<S> <C> <C> <C>
1999 86,615 Capital Gaming International, Inc., 12.00% 5-15-2001 $ --
1998 500,000 E Spire Communications, Inc., 13.75% 7-15-2007 591,846
1993 4,162 FHLMC Remic Trust #1404-E IO-ette 2006 1,046
1994 6,000 Hemmeter Enterprises, Inc. (Warrants) - 144A 24,000
1998 500 Highwaymaster Communications, Inc. (Warrants) - 144A 5,000
1994 500 Hosiery Corp. of America, Class A - 144A 8,460
1996 500 RSL (Warrants) - 144A 500
1993 601,872 Sandia Mortgage Corp., 2018-restricted 471,523
</TABLE>
The aggregate value of these securities at July 31, 1999, was $896,364
which represents 0.82% 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, 1999, based upon the estimated timing and
amount of future cash flows.
(h) Securities sold 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". Pursuant to guidelines adopted by the Board of
Directors, these issues are deemed to be liquid. The aggregate value of
these securities at July 31, 1999, was $8,388,604, which represents 7.70%
of the total net assets.
* Moody's Rating
7
<PAGE>
FORTIS SECURITIES, INC.
Statement of Assets and Liabilities
July 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, as detailed in the accompanying
schedules, at market (cost $110,890,441)(Note 1).................. $ 109,129,887
Receivables:
Investment securities sold........................................ 13,487
Interest and dividends............................................ 2,154,708
-------------
TOTAL ASSETS.......................................................... 111,298,082
-------------
LIABILITIES
Cash portion of dividends payable ($0.060 per share)................ 759,703
Payable for investment securities purchased......................... 1,496,955
Payable for investment advisory and management fees (Note 2)........ 57,201
Accounts payable and accrued expenses............................... 33,431
-------------
TOTAL LIABILITIES..................................................... 2,347,290
-------------
NET ASSETS
Net proceeds of capital stock, par value $.01 per share-authorized
15,000,000 shares; outstanding 12,661,702 shares.................. 127,598,956
Unrealized depreciation of investments.............................. (1,760,554)
Excess of distributions over net investment income.................. (68,651)
Accumulated net realized loss from sale of investments.............. (16,818,959)
-------------
TOTAL NET ASSETS...................................................... $ 108,950,792
-------------
-------------
NET ASSET VALUE PER SHARE............................................. $8.60
-------------
-------------
</TABLE>
Statement of Operations
For the Year Ended July 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Income
Interest income................................................... $ 9,659,010
-------------
Expenses:
Investment advisory and management fees (Note 2).................. 694,003
Legal and auditing fees (Note 2).................................. 26,000
Custodian fees.................................................... 6,003
Shareholders' notices and reports................................. 54,544
Directors' fees and expenses...................................... 16,844
Exchange listing fees............................................. 26,299
Other............................................................. 22,724
-------------
Total expenses...................................................... 846,417
-------------
NET INVESTMENT INCOME................................................. 8,812,593
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 1):
Net realized loss on securities transactions........................ (4,496,304)
Net change in unrealized depreciation of investments in
securities........................................................ (7,160,843)
-------------
NET LOSS ON INVESTMENTS............................................... (11,657,147)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $ (2,844,554)
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FORTIS SECURITIES, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income................................................. $ 8,812,593 $ 9,262,695
Net realized gain (loss) on investments............................... (4,496,304) 1,120,419
Net change in unrealized appreciation (depreciation) on investments... (7,160,843) 197,289
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... (2,844,554) 10,580,403
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................................ (9,104,432) (9,334,311)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of 19,522 and 20,730 shares issued as a result of
reinvested dividends, respectively.................................. 178,860 189,866
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................... (11,770,126) 1,435,958
NET ASSETS:
Beginning of year..................................................... 120,720,918 119,284,960
------------- -------------
End of year (includes undistributed (excess of distributions over) net
investment income of ($68,651) and $219,760, respectively).......... $ 108,950,792 $ 120,720,918
------------- -------------
------------- -------------
</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, 1999, there were no outstanding purchases on a
when-issued basis.
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, 1999, the cost of
purchases and proceeds from sales of securities (other than short-term
securities) aggregated $38,270,519 and $37,274,480, 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 $5,325,293,
undistributed net investment income increased by $3,428, resulting in a
reclassification to reduce paid-in-capital by $5,328,721.
For federal income tax purposes, the fund had a capital loss carryover of
$16,776,101 at July 31, 1999, which, if not offset by subsequent capital
gains, will expire in 2001 through 2008. 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, 1999, 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, 1999, was
$896,364 which represents .82% 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 his 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 $5,000 for the year ended July 31, 1999,
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,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year................ $ 9.55 $ 9.45 $ 8.97 $ 9.18 $ 9.33
--------- --------- --------- --------- ---------
Operations:
Investment income - net......................... .70 .73 .72 .78 .84
Net realized and unrealized gain (loss) on
investments................................... (.93) .11 .49 (.20) (.11)
--------- --------- --------- --------- ---------
Total from operations......................... (.23) .84 1.21 .58 .73
--------- --------- --------- --------- ---------
Distributions to shareholders:
From investment income - net.................... (.72) (.74) (.70) (.78) (.87)
Excess distributions of net realized gains...... -- -- (.03) (.01) (.01)
--------- --------- --------- --------- ---------
Total distributions to shareholders............... (.72) (.74) (.73) (.79) (.88)
--------- --------- --------- --------- ---------
Net asset value, end of year...................... $ 8.60 $ 9.55 $ 9.45 $ 8.97 $ 9.18
--------- --------- --------- --------- ---------
Per-share market value, end of year............... $ 8.500 $ 9.000 $ 8.688 $ 7.875 $ 8.750
Total investment return, market value @........... 2.34% 12.29% 20.27% (1.36%) .25%
Total investment return, net asset value @@....... (2.43%) 9.50% 14.83% 6.93% 8.46%
Net assets end of year (000s omitted)............. $ 108,951 $ 120,721 $ 119,285 $ 113,151 $ 115,642
Ratio of expenses to average daily net assets..... .73% .76% .76% .80% .78%
Ratio of net investment income to average daily
net assets...................................... 7.65% 7.68% 7.91% 8.47% 9.33%
Portfolio turnover rate........................... 33% 44% 130% 67% 75%
</TABLE>
@ 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.
@@ 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.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
At the annual meeting of shareholders of Fortis Securities, Inc., held on
December 10, 1998, the following individuals were elected to the Board of
Directors: Richard W. Cutting, Allen R. Freedman, Dr. Robert M. Gavin,
Benjamin S. Jaffray, Jean L. King, Dean C. Kopperud, Edward M. Mahoney, Robb
L. Prince, Leonard J. Santow, Noel S. Shadko and Joseph M. Wikler.
Shareholders also ratified the selection of KPMG LLP as independent public
accountants for Fortis Securities, Inc.
11
<PAGE>
INDEPENDENT AUDITORS' 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, 1999 and the related statement of operations for the year then ended,
statements of changes in net assets for each of the years in the two-year period
ended July 31, 1999 and the financial highlights for each of the years in the
five-year period ended July 31, 1999. 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
performed 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, 1999 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 LLP
Minneapolis, Minnesota
September 3, 1999
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.
PRESIDENT - FORTIS FINANCIAL GROUP,
FORTIS BENEFITS INSURANCE COMPANY AND
SENIOR VICE PRESIDENT, FORTIS
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 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 9/99
