<PAGE>
[LOGO]
FORTIS
Solid partners, flexible solutions-SM-
A disciplined, consistent
approach to investing
Fortis Securities, Inc.
annual report
JULY 31, 2000
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
DIRECTORS AND OFFICERS 13
- TOLL-FREE PERSONAL ASSISTANCE
- Shareholder Services
- (800) 800-2000, Ext. 3012
- 7:30 a.m. to 7:00 p.m. CST,
Monday thru Friday
- 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, 2000:
TOTAL NET ASSETS............................. $103,463,942
MARKET PRICE PER SHARE....................... $ 7.625
SHARES OUTSTANDING........................... 12,669,972
FOR THE YEAR ENDED JULY 31, 2000:
NET ASSET VALUE PER SHARE:
Beginning of year.......................... $ 8.60
End of year................................ $ 8.17
DISTRIBUTION FROM NET INVESTMENT INCOME:
Total dividends paid....................... $ 8,675,509
Dividends per share........................ $ .687
</TABLE>
<PAGE>
PORTFOLIO COMPOSITION BY SECTOR
AS OF 7/31/2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Corporate Bonds-Investment Grade 68.3%
Corporate Bonds-Non-Investment Grade 24.3%
U.S. Government Agencies 4.3%
Cash Equivalents/Receivables 2.1%
Asset Backed Securities 1.0%
</TABLE>
TOP 10 HOLDINGS AS OF 7/31/2000
<TABLE>
<CAPTION>
Percent of
Bonds Net Assets
-------------------------------------------------------------------
<C> <S> <C>
1. Georgia-Pacific Corp. (9.625%) 2022 2.1%
2. United Airlines (10.02%) 2014 2.1%
3. GTE Corp. (7.90%) 2027 1.9%
4. Time Warner Entertainment (8.375%) 2033 1.8%
5. Telecommunications, Inc. (9.80%) 2012 1.6%
6. News America Holdings (8.875%) 2023 1.5%
7. Quebec (Province of) (8.80%) 2003 1.5%
8. Worldcom, Inc. (8.25%) 2010 1.5%
9. TXU Electric Capital V (8.175%) 2037 1.5%
10. Noranda, Inc. (8.625%) 2002 1.5%
</TABLE>
DEAR SHAREHOLDER:
The tightening monetary policy that started in June 1999 dominated the past
twelve-month period that ended on July 31, 2000. At first, the Federal Reserve
had to balance fears that a strong economy and higher oil prices could fuel
inflation and concerns that the Y2k problem could severely hinder liquidity. The
Central Bank cautiously raised overnight rates by 0.50% during the first five
months of this period. This increase was viewed by investors as temporary and
pushed interest rates higher in anticipation of more aggressive moves in 2000.
Indeed, as U.S. economic expansion continued at a rapid pace, and job growth and
consumer spending continued to be strong, the Federal Reserve raised Fed Funds
rates by an additional 1% in 3 moves, the last one taking place in May with an
aggressive 0.50% increase.
While short term Treasury yields continued to move higher in 2000, long Treasury
yields moved lower in the wake of the announcement of a long Treasury buyback
program. These opposite moves resulted in an inverted yield curve for the first
time since 1994, where short term interest rates are higher than long term
interest rates. This inversion stood at 0.51% at the end of our 12-month period
with the 2-year Treasury yielding 6.29%, 0.64% higher than its year-ago level
and the 30-year yielding 5.78%, 0.33% lower than its level at the beginning of
the period.
Higher interest rates, Y2k concerns in 1999 and Treasury curve inversion in
2000, all combined with a volatile equity market to adversely affect the market
for corporate bonds. Fears of extensive corporate supply ahead of year-end 1999
and increased demand for higher quality and short duration instruments caused a
liquidity crunch that pushed corporate and other non-Treasury prices lower
relative to Treasuries. We took advantage of these lower prices to increase our
exposure to corporate investment grade securities and decreased our
lower-yielding mortgage-backed and asset-backed securities. We also repositioned
the lowest yielding portion of investment-grade and non-investment grade
securities to benefit from the high level of absolute yields.
By the end of July, as some signs of slowdown started to show in economic
releases, liquidity was partially restored and spreads moved tighter, but only
to the October 1998 levels. As a result, the best performing sector during this
period was the Treasury market as it benefited the most from the yield curve
inversion. For the past twelve-month period, the fund provided a distribution
yield of 9.0% and a total return of -1.59% at market.
Going forward, we expect that the economy will continue to show signs of slower
growth in the second half of 2000, probably enough to rule out another
tightening move by the Fed. This slowdown appears to be modest enough to qualify
for a "soft landing" and should lead to lower interest rate levels with tighter
yield spreads for non-Treasury securities, an environment that would give our
portfolio a total return advantage.
Sincerely,
<TABLE>
<S> <C>
/s/ Dean C. Kopperud /s/ Howard G. Hudson
Dean C. Kopperud Howard G. Hudson
President Vice President
</TABLE>
1
<PAGE>
FORTIS SECURITIES, INC.
SCHEDULE OF INVESTMENTS
July 31, 2000
ASSET BACKED SECURITIES-0.97%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
---------- ----------- ------------ ------------
<C> <S> <C> <C> <C>
MULTI-FAMILY LOANS-0.97%
$1,000,000 DLJ Mortgage Acceptance Corp., 8.80%
Multifamily Mtg Pass Thru Certificate Ser
1993-12 Class B1 9-18-2003................. BBB** $ 982,500 $ 997,909
------------ ------------
</TABLE>
CORPORATE BONDS-INVESTMENT GRADE-68.28%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ----------- ------------ ------------
<C> <S> <C> <C> <C>
CABLE AND OTHER PROGRAM
DISTRIBUTION-3.44%
$1,500,000 Telecommunications, Inc., 9.80% Sr
Note 2-1-2012.................... AA- $ 1,658,835 $ 1,704,003
1,800,000 Time Warner Entertainment, 8.375%
Sr Note 7-15-2033................ BBB 1,733,072 1,857,569
------------ ------------
3,391,907 3,561,572
------------ ------------
CABLE AND OTHER SUBSCRIPTION
PROGRAMMING-1.98%
1,000,000 Comcast Cable Communications, Inc.,
8.50% Note 5-1-2027 (with
rights).......................... BBB 998,338 1,038,320
1,000,000 Cox Enterprises, Inc., 8.00% Note
2-15-2007 (h).................... BBB+ 967,892 1,007,886
------------ ------------
1,966,230 2,046,206
------------ ------------
COMMERCIAL BANKING-1.79%
1,000,000 Comerica Bank, 7.875% 9-15-2026.... A- 988,430 971,645
1,000,000 National City Corp., 6.875% Sub
Note 5-15-2019................... A- 890,530 884,142
------------ ------------
1,878,960 1,855,787
------------ ------------
COURIERS-0.94%
1,000,000 Federal Express, 7.84% Pass Thru
Certificate Ser 1996-B2
1-30-2018........................ BBB+ 1,000,000 973,370
------------ ------------
DEPARTMENT STORES-4.26%
1,400,000 Dayton Hudson Co., 7.875% Deb
6-15-2023........................ A- 1,409,188 1,354,248
1,000,000 Federated Department Stores, 8.50%
Note 6-1-2010.................... BBB+ 1,015,939 990,471
500,000 May Department Stores Co., 8.50%
Note 6-1-2019.................... A+ 499,033 525,950
1,000,000 Saks, Inc., 7.375% Sub Deb
2-15-2019........................ Baa3* 924,722 653,082
1,000,000 Sears Roebuck Acceptance, 6.25%
5-1-2009......................... A- 876,792 882,168
------------ ------------
4,725,674 4,405,919
------------ ------------
DEPOSITORY CREDIT-BANKING-0.84%
1,000,000 Republic NY Capital I, 7.75% Deb
11-15-2026....................... A- 859,683 873,381
------------ ------------
ELECTRIC GENERATION, TRANSMISSION
AND DISTRIBUTION-4.15%
1,000,000 Duke Capital Corp., 8.00% Sr Note
10-1-2019........................ A 993,697 1,017,417
756,098 Niagara Mohawk Power Co., 7.625% Sr
Note 10-1-2005................... BBB- 741,148 747,269
1,000,000 NRG Energy, Inc., 8.00%
11-1-2003........................ BBB- 998,196 995,850
1,500,000 TXU Electric Capital V, 8.175% Deb
1-30-2037........................ BBB- 1,500,000 1,528,402
------------ ------------
4,233,041 4,288,938
------------ ------------
EXECUTIVE, LEGISLATIVE AND
GOVERNMENT SUPPORT-1.02%
1,000,000 New York (City of), 10.00% General
Obligation Taxable Bond Ser D
8-1-2005......................... A- 1,015,035 1,058,240
------------ ------------
FOREIGN GOVERNMENTS-1.51%
1,500,000 Quebec (Province of), 8.80% Bond
4-15-2003........................ A+ 1,637,670 1,560,979
------------ ------------
GROCERY STORES-0.92%
1,000,000 Fred Meyer, Inc., 7.45% Sub Note
3-1-2008......................... BBB- 949,456 956,046
------------ ------------
INSURANCE CARRIERS-2.87%
1,000,000 Mony Group, 8.35% Note 3-15-2010... A- 997,945 994,663
1,000,000 ReliaStar Financial Corp., 8.00%
Note 10-30-2006.................. A 996,711 1,011,270
1,000,000 Travelers Property Casualty, 7.75%
4-15-2026........................ A+ 924,921 968,182
------------ ------------
2,919,577 2,974,115
------------ ------------
LUMBER AND OTHER CONSTRUCTION
MATERIALS WHOLESALER-2.12%
2,150,000 Georgia-Pacific Corp., 9.625% Deb
3-15-2022........................ BBB- 2,169,817 2,194,129
------------ ------------
</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>
MANUFACTURING-BASIC CHEMICAL -1.42%
$1,500,000 Equistar Chemicals, L.P., 8.75% Sr
Note 2-15-2009................... BBB- $ 1,568,287 $ 1,468,204
------------ ------------
MANUFACTURING-MOTOR VEHICLE PARTS
-0.89%
1,000,000 TRW, Inc., 7.75% Sr Deb 6-1-2029... BBB 990,907 923,143
------------ ------------
MANUFACTURING-OTHER NONMETALLIC
MINERAL PRODUCT -1.33%
1,500,000 Masco Corp., 7.75% Sr Sub Note
8-1-2029......................... A- 1,482,113 1,375,870
------------ ------------
METAL ORE MINING-1.47%
1,500,000 Noranda, Inc., 8.625% Deb
7-15-2002........................ BBB 1,494,960 1,516,936
------------ ------------
MOTION PICTURE AND VIDEO
INDUSTRIES-3.24%
1,500,000 News America Holdings, Inc., 8.875%
Deb 4-26-2023.................... BBB- 1,489,639 1,571,356
1,000,000 Paramount Communications, 7.50%
7-15-2023........................ BBB+ 943,747 893,862
1,000,000 Seagram, J. & Co., 6.875% Deb
9-1-2023......................... BBB- 848,052 885,054
------------ ------------
3,281,438 3,350,272
------------ ------------
NATURAL GAS DISTRIBUTION-2.74%
1,500,000 Columbia Gas Systems, 7.62% Note
11-28-2025....................... BBB+ 1,423,535 1,390,736
500,000 Enron Corp., 6.95% Note
7-15-2028........................ BBB+ 452,088 446,193
1,000,000 Semco Enery, 8.95% 7-1-2003........ BBB 997,609 1,002,099
------------ ------------
2,873,232 2,839,028
------------ ------------
NAVIGATIONAL, MEASURING AND CONTROL
INSTRUMENTS-1.74%
1,000,000 Lockheed Corp., 7.875% 3-15-2023... BBB- 942,725 896,472
1,000,000 Raytheon Co., 7.20% Deb
8-15-2027........................ BBB- 881,972 900,319
------------ ------------
1,824,697 1,796,791
------------ ------------
OIL AND GAS EXTRACTION-2.82%
850,000 Burlington Resources, 9.125% Deb
10-1-2021........................ A- 942,427 956,945
1,000,000 Conoco, Inc., 6.95% Sr Note
4-15-2029........................ A- 881,990 915,546
1,000,000 Occidental Petroleum, 8.45% Sr Note
2-15-2029........................ BBB- 985,949 1,039,973
------------ ------------
2,810,366 2,912,464
------------ ------------
OTHER GENERAL MERCHANDISE
STORES-0.90%
1,000,000 K-Mart Corp., 8.375% 12-1-2004..... Baa* 945,234 933,420
------------ ------------
OTHER INVESTMENT POOLS AND
FUNDS-1.69%
1,000,000 EOP Operating LP, 7.50%
4-19-2029........................ BBB+ 923,568 873,823
1,000,000 Spieker Properties, 7.50%
10-1-2027........................ BBB 906,938 875,069
------------ ------------
1,830,506 1,748,892
------------ ------------
PIPELINE TRANSPORTATION OF NATURAL
GAS-4.04%
1,500,000 Coastal Corp., 7.42% Note
2-15-2037........................ BBB 1,427,808 1,395,381
500,000 NGC Corp. Capital Trust, 8.316% Sub
Deb 6-1-2027..................... BBB- 500,000 423,278
1,500,000 Tennessee Gas Pipeline, 7.625% Deb
4-1-2037......................... BBB+ 1,482,029 1,393,592
1,000,000 Williams Companies, Inc., 7.625%
Note 7-15-2019................... BBB- 970,450 969,987
------------ ------------
4,380,287 4,182,238
------------ ------------
RADIO AND TELEVISION
BROADCASTING-2.55%
1,000,000 Belo (A.H.) Corp., 7.25% Note
9-15-2027........................ BBB- 826,666 828,105
1,000,000 Hearst Argyle Television, 7.00%
1-15-2018........................ BBB- 870,245 852,751
1,000,000 Liberty Media Group, Inc., 8.25%
Deb 2-1-2030..................... BBB- 992,023 954,462
------------ ------------
2,688,934 2,635,318
------------ ------------
RAIL TRANSPORTATION-2.93%
1,500,000 CSX Corp., 7.95% Deb 5-1-2027...... BBB 1,355,717 1,461,198
500,000 CSX Corp., 8.625% Deb 5-15-2022.... BBB 523,857 515,072
1,000,000 Norfolk Southern Corp., 8.625%
5-15-2010........................ BBB 1,004,510 1,050,757
------------ ------------
2,884,084 3,027,027
------------ ------------
REAL ESTATE CREDIT (MORTGAGE
BANKING)-0.42%
406,000 Homeside, Inc., 11.25% Second
Priority Sr Secured Note
5-15-2003........................ A+ 413,974 438,988
------------ ------------
SALES FINANCING-0.82%
1,000,000 Finova Capital Corp., 7.625% Sr
Note 9-21-2009................... BBB- 993,850 843,785
------------ ------------
</TABLE>
3
<PAGE>
FORTIS SECURITIES, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 2000
CORPORATE BONDS-INVESTMENT GRADE-CONTINUED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
----------- ----------- ------------ ------------
<C> <S> <C> <C> <C>
SCHEDULED AIR TRANSPORTATION-4.38%
$1,000,000 AMR Corp., 10.00% Deb 4-15-2021.... BBB- $ 1,159,497 $ 1,057,422
1,200,000 Delta Air Lines, 10.50% Pass Thru
Certificate 4-30-2016............ BBB 1,440,734 1,300,260
2,000,000 United Airlines, 10.02% Deb
3-22-2014........................ BBB 2,369,156 2,168,720
------------ ------------
4,969,387 4,526,402
------------ ------------
SECURITIES AND COMMODITY CONTRACTS
AND BROKERAGE-1.44%
1,500,000 Goldman Sachs Group, Inc., 7.80% Sr
Note 1-28-2010................... A+ 1,490,288 1,493,546
------------ ------------
TELECOMMUNICATIONS-OTHER-2.47%
1,000,000 Worldcom, Inc., 7.875% Sr Note
5-15-2003........................ A- 995,686 1,012,338
1,500,000 Worldcom, Inc., 8.25% Note
5-15-2010........................ A- 1,490,699 1,546,602
------------ ------------
2,486,385 2,558,940
------------ ------------
TELECOMMUNICATIONS
CARRIERS-WIRED-3.53%
1,000,000 ALLTEL Corp., 6.80% Deb 5-1-2029... A- 866,064 859,927
2,000,000 GTE Corp., 7.90% Deb 2-1-2027...... A+ 2,000,000 1,925,698
1,000,000 Sprint Capital Corp., 6.875%
11-15-2028....................... BBB+ 901,125 865,097
------------ ------------
3,767,189 3,650,722
------------ ------------
TRAVELER ACCOMMODATION-1.21%
1,250,000 Park Place Entertainment, 8.50% Sr
Note 11-15-2006.................. BBB- 1,238,678 1,251,213
------------ ------------
WASTE COLLECTION-0.41%
500,000 Waste Management, Inc., 7.125% Sr
Note 12-15-2017.................. BBB 424,891 421,362
------------ ------------
TOTAL CORPORATE BONDS - INVESTMENT
GRADE............................ $ 71,586,737 $ 70,643,243
============ ============
</TABLE>
CORPORATE BONDS-NON-INVESTMENT GRADE-24.25%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
& Poor's
Principal Rating Market
Amount (Unaudited) Cost (b) Value (c)
---------- ----------- ------------ ------------
<C> <S> <C> <C> <C>
ANIMAL SLAUGHTERING AND PROCESSING-0.24%
$ 500,000 Fresh Foods, Inc., 10.75% Sr Sub Note
6-1-2006................................... B $ 500,000 $ 250,000
------------ ------------
CABLE AND OTHER PROGRAM DISTRIBUTION-2.60%
500,000 Cablevision S.A., 13.75% Note 4-30-2007
(e)........................................ BB 494,499 484,375
1,250,000 Charter Communications Holdings LLC, 9.92% Sr
Disc Note 4-1-2011 (Zero coupon through
4-1-2004, thereafter 9.92%) (f)............ B+ 884,606 709,375
500,000 NTL Communications Corp., 12.375% Sr Note Ser
B 10-1-2008 (Zero coupon through 10-1-2003,
thereafter 12.375%) (f).................... B 338,359 325,000
1,000,000 United International Holdings, Inc., 10.75%
Sr Disc Note Ser B 2-15-2008 (Zero coupon
through 2-15-2003, thereafter 10.75%)
(f)........................................ B- 771,024 727,500
250,000 United Pan-Europe Communications N.V., 11.25%
Sr Note Ser B 11-1-2009.................... B 248,236 216,875
500,000 United Pan-Europe Communications N.V., 13.75%
Sr Disc Note Ser B 2-1-2010 (Zero coupon
through 2-1-2005, thereafter 13.75%) (f)... B 276,035 222,500
------------ ------------
3,012,759 2,685,625
------------ ------------
CABLE AND OTHER SUBSCRIPTION
PROGRAMMING-0.69%
250,000 Adelphia Communications Corp., 9.375% Sr Note
11-15-2009................................. B+ 248,099 227,500
500,000 Callahan Nordhein-Westfalen, 14.00% Sr Note
7-15-2010 (e).............................. B- 500,000 488,750
------------ ------------
748,099 716,250
------------ ------------
ELECTRIC GENERATION, TRANSMISSION AND
DISTRIBUTION-0.63%
650,000 AES Corp., 9.50% Sr Note 6-1-2009............ BB 645,662 654,062
------------ ------------
FOREIGN GOVERNMENTS-0.29%
300,000 Brazil (Republic of), 11.625% Global Bond
4-15-2004.................................. B+ 297,773 304,800
------------ ------------
GAMBLING INDUSTRIES-1.14%
500,000 Argosy Gaming Co., 12.31% Sr Sub Note
6-1-2009................................... B 500,000 518,750
500,000 Isle of Capri Casinos, Inc., 8.75% Sub Note
4-15-2009.................................. B 455,470 455,000
</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>
$ 250,000 Mandalay Resort Group, 7.625% Sr Sub Deb
7-15-2013.................................. BB- $ 215,958 $ 205,000
------------ ------------
1,171,428 1,178,750
------------ ------------
GENERAL MEDICAL AND SURGICAL HOSPITALS-0.50%
500,000 Triad Hospitals Holdings, Inc., 11.00% Sr Sub
Note Ser B 5-15-2009....................... B- 504,845 520,000
------------ ------------
GROCERY STORES-0.75%
1,000,000 Big V Supermarkets, Inc., 11.00% Sr Sub Note
Ser B 2-15-2004............................ B- 1,007,160 780,000
------------ ------------
INSURANCE CARRIERS-0.66%
1,000,000 Conseco, Inc., 8.75% Note 2-9-2004........... BB- 999,516 680,000
------------ ------------
LIMITED-SERVICE EATING PLACES-0.25%
250,000 Sbarro, Inc., 11.00% Sr Note 9-15-2009....... BB- 246,938 256,875
------------ ------------
MANUFACTURING-MOTOR VEHICLE PARTS -0.73%
500,000 Holley Performance Products, 12.25% Sr Sub
Note Ser B 9-15-2007....................... B+ 482,958 310,000
500,000 Tenneco Automotive, Inc., 11.625% Sr Sub Note
Ser B 10-15-2009........................... B+ 500,000 445,000
------------ ------------
982,958 755,000
------------ ------------
MANUFACTURING-SOAP, CLEANING COMPOUND, TOILET
-0.24%
250,000 Chattem, Inc., 12.75% Sr Sub Note Ser B
6-15-2004.................................. B- 238,611 251,250
------------ ------------
MEDICAL AND DIAGNOSTIC LABORATORIES-0.61%
600,000 Unilab Finance Corp., 12.75% Sr Sub Note
10-1-2009.................................. B- 599,211 631,500
------------ ------------
MILLS-PULP, PAPER AND PAPERBOARD -0.99%
500,000 Packaging Corp. of America, 9.625% Sr Sub
Note 4-1-2009.............................. B+ 512,083 508,750
500,000 Stone Container Corp., 12.58% Sr Note
8-1-2016................................... B 500,000 517,500
------------ ------------
1,012,083 1,026,250
------------ ------------
NEWSPAPER, PERIODICAL, BOOK AND DATABASE
PUBLISHERS-0.44%
500,000 Affinity Group Holding, 11.00% Sr Note
4-1-2007................................... B 502,989 450,625
------------ ------------
NONDEPOSITORY CREDIT BANKING-0.28%
443,644 Sandia Mtg Corp., 9.14% 1991-A Variable Rate
Pass Thru Certificate Class B 8-1-2018
(e)........................................ NR 355,228 288,369
------------ ------------
OIL AND GAS EXTRACTION-0.44%
200,000 Ocean Energy, Inc., 8.875% Sr Sub Note Ser B
7-15-2007.................................. BB- 197,347 199,500
250,000 Swift Energy Co., 10.25% Sr Sub Note
8-1-2009................................... B- 254,712 255,625
------------ ------------
452,059 455,125
------------ ------------
OTHER INFORMATION SERVICES-2.52%
1,000,000 Exodus Communications, Inc., 11.625% Sr Note
7-15-2010 (e).............................. B 1,003,235 1,005,000
1,000,000 Globix Corp., 12.50% Sr Note 2-1-2010........ B- 1,000,000 790,000
1,000,000 PSINet, Inc., 11.00% Sr Note 8-1-2009........ B- 948,238 810,000
------------ ------------
2,951,473 2,605,000
------------ ------------
PRINTING AND RELATED SUPPORT ACTIVITIES-0.47%
500,000 Cadmus Communications Corp., 9.75% Sr Sub
Note 6-1-2009.............................. B 500,000 485,000
------------ ------------
RADIO AND TELEVISION BROADCASTING-0.46%
500,000 Ackerley Group, Inc., 9.00% Sr Sub Note Ser B
1-15-2009.................................. B 465,617 471,250
------------ ------------
SCHEDULED AIR TRANSPORTATION-0.52%
500,000 Northwest Airlines Trust No. 2, 13.875% Sub
Aircraft Note Ser D 6-21-2008 (e).......... NR 500,000 536,000
------------ ------------
TELECOMMUNICATIONS-OTHER-2.42%
250,000 FLAG Telecom Holdings Ltd., 11.625% Sr Note
3-30-2010.................................. B 242,849 235,000
750,000 Global Crossing Holdings Ltd., 9.50% Sr Note
11-15-2009................................. BB 728,223 727,500
500,000 Level 3 Communications, Inc., 12.875% Sr Disc
Note 3-15-2010 (Zero coupon through
3-15-2005, thereafter 12.875%) (f)......... B 282,792 263,750
250,000 Metromedia Fiber Network, Inc., 10.00% Sr
Note 12-15-2009............................ B+ 248,087 242,500
1,000,000 Spectrasite Holdings, Inc., 12.93% Sr Disc
Note Ser B 3-15-2010 (Zero coupon through
3-15-2005, thereafter 12.875%) (f)......... B- 562,686 556,750
500,000 Williams Communications Group, Inc., 10.875%
Sr Note 10-1-2009.......................... B+ 496,425 477,500
------------ ------------
2,561,062 2,503,000
------------ ------------
TELECOMMUNICATIONS CARRIERS-WIRED-2.26%
500,000 e.Spire Communications, Inc., 13.75% Sr Note
7-15-2007.................................. NR 500,000 310,000
500,000 e.Spire Communications, Inc., 13.75% Sr Note
7-15-2007 (e).............................. NR 567,521 310,000
</TABLE>
5
<PAGE>
FORTIS SECURITIES, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
July 31, 2000
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>
$ 250,000 Focal Communications Corp., 11.875% Sr Note
1-15-2010.................................. B- $ 244,428 $ 246,250
500,000 Intelcom Group (USA), Inc., 10.88%
5-1-2006 (Zero coupon through 5-1-2001,
thereafter 12.50%) (f)..................... B- 490,594 407,500
500,000 Intermedia Communications, Inc., 8.50% Sr
Note Ser B 1-15-2008....................... B 437,933 412,500
250,000 NEXTLINK Communications, Inc., 12.125% Sr
Disc Note 12-1-2009 (Zero coupon through
12-1-2004, thereafter 12.125%) (f)......... B 150,937 141,250
500,000 Nextlink Communications, L.L.C., 12.50% Sr
Note 4-15-2006............................. B 500,000 515,000
------------ ------------
2,891,413 2,342,500
------------ ------------
TELECOMMUNICATIONS CARRIERS-WIRELESS-4.12%
750,000 Dobson Communications, 10.875% Sr Note
7-1-2010 (e)............................... NR 744,372 731,250
500,000 Grupo Iusacell S.A. de C.V., 14.25% Sr Note
12-1-2006.................................. B+ 522,229 537,500
1,000,000 Leap Wireless International, Inc., 14.50% Sr
Disc Note 4-15-2010 (Zero coupon through
4-15-2005, thereafter 14.50%) (e) (f)...... CCC 475,801 440,000
500,000 Microcell Telecommunications, Inc., 12.52% Sr
Disc Note Ser B 6-1-2006 (Zero coupon
through 12-1-2001, thereafter 14.00%)
(f)........................................ B3* 464,471 467,500
500,000 Nextel Communications, Inc., 11.65% Sr Disc
Note 9-15-2007 (Zero coupon through
9-15-2002, thereafter 10.65%) (f).......... B 380,380 391,250
1,050,000 Omnipoint Corp., 11.625% Sr Note Ser A
8-15-2006.................................. CCC+ 836,367 1,176,000
500,000 PTC International Finance II S.A., 11.25% Sr
Sub Note 12-1-2009......................... B+ 498,787 520,000
------------ ------------
3,922,407 4,263,500
------------ ------------
TOTAL CORPORATE BONDS - NON-INVESTMENT
GRADE...................................... $ 27,069,291 $ 25,090,731
============ ============
</TABLE>
U.S. GOVERNMENT SECURITIES-4.34%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Cost (b) Value (c)
---------- ------------ ------------
<C> <S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.86%
MORTGAGE BACKED SECURITIES:
$ 125,934 9.00% 2022............................................................ $ 133,923 $ 129,505
288,606 10.50% 2017........................................................... 308,087 314,761
125,631 11.25% 2010........................................................... 135,877 139,277
140,678 11.50% 2014-2015...................................................... 154,160 157,120
124,680 11.75% 2010........................................................... 132,161 140,285
------------ ------------
864,208 880,948
------------ ------------
REMIC - IO & IO-ETTE:
1,180 10.90% Trust #1404-E Interest only Strip IO - Ette 2006 (e) (g)....... 297 6,856
------------ ------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 864,505 887,804
------------ ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.08%
MORTGAGE BACKED SECURITIES:
1,039,183 8.00% 2024-2025....................................................... 1,052,251 1,043,145
490,738 10.50% 2014-2020...................................................... 522,132 532,911
379,521 11.00% 2011-2018...................................................... 390,511 415,932
14,768 11.25% 2011........................................................... 15,332 16,275
41,414 12.00% 2014........................................................... 44,085 46,461
83,957 12.50% 2015........................................................... 94,819 96,078
------------ ------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 2,119,130 2,150,802
------------ ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.40%
MORTGAGE BACKED SECURITIES:
557,918 9.00% 2021............................................................ 562,364 574,958
679,195 9.50% 2019............................................................ 706,044 694,901
173,829 9.50% 2020............................................................ 180,945 180,293
------------ ------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION........................ 1,449,353 1,450,152
------------ ------------
TOTAL U.S. GOVERNMENT SECURITIES...................................... $ 4,432,988 $ 4,488,758
============ ============
</TABLE>
6
<PAGE>
COMMON STOCKS AND WARRANTS-0.03%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Cost (b) Value (c)
---------- ------------ ------------
<C> <S> <C> <C>
MANUFACTURING-CUT AND SEW APPAREL -0.02%
500 Hosiery Corp. of America, Inc. Class A (a)
(e)........................................ $ 8,460 $ 20,000
------------ ------------
TELECOMMUNICATIONS-OTHER-0.00%
500 @Track Communications,
Inc. (Warrants) (a) (e).................... 5,000 5,000
------------ ------------
TELECOMMUNICATIONS CARRIERS-WIRED-0.01%
500 RSL (Warrants) (a) (e)....................... 500 10,437
------------ ------------
TELECOMMUNICATIONS CARRIERS-WIRELESS-0.00%
1,000 Leap Wireless (Warrants) (a) (e)............. 262 250
------------ ------------
TOTAL COMMON STOCKS AND WARRANTS............. 14,222 35,687
------------ ------------
TOTAL LONG-TERM INVESTMENTS.................. $104,085,738 $101,256,328
============ ============
</TABLE>
SHORT-TERM INVESTMENTS-0.61%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value (c)
---------- ------------
<C> <S> <C>
CONSUMER LENDING-0.11%
$ 117,000 Associates Corp. Master Variable Rate Note,
Current rate - 6.50%....................... $ 117,000
------------
DEPOSITORY CREDIT-BANKING-0.50%
518,607 U.S. Bank N.A. Money Market Variable Rate
Time Deposit, Current rate - 6.43%......... 518,607
------------
TOTAL SHORT-TERM INVESTMENTS................. 635,607
------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $104,721,345) (b)................... $101,891,935
============
</TABLE>
(a) Presently non-income producing.
(b) At July 31, 2000, the cost of securities for federal income tax purposes
was $104,764,203 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 1,698,198
Unrealized depreciation..................................... (4,570,466)
--------------------------------------------------------------------------
Net unrealized depreciation................................. $ (2,872,268)
--------------------------------------------------------------------------
</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 6.69% of total net assets as of July 31, 2000.
(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>
1998 500 @Track Communications, Inc. (Warrants) -
144A $ 5,000
2000 500,000 Cablevision S.A. due 2007 - 144A 494,499
2000 500,000 Callahan Nordhein-Westfalen due 2010 -
144A 500,000
2000 750,000 Dobson Communications due 2010 - 144A 744,372
1998 500,000 e.Spire Communications, Inc. due 2007 -
144A 567,521
2000 1,000,000 Exodus Communications, Inc. due 2010 -
144A 1,003,235
1993 1,180 FHLMC Remic Trust #1404-E IO-Ette 2006 297
1994 500 Hosiery Corp. of America, Inc. Class A -
144A 8,460
2000 1,000,000 Leap Wireless due 2010 - 144A 475,801
2000 1,000 Leap Wireless (Warrants) 262
1994 500,000 Northwest Airlines Trust No. 2 due 2008 500,000
1996 500 RSL (Warrants) - 144A 500
1993 443,644 Sandia Mortgage Corp. due 2018 -
restricted 355,228
</TABLE>
The aggregate value of these securities at July 31, 2000, was $4,326,287
which represents 4.18% 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, 2000, 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, 2000, was $1,007,886, which represents .97% of
the total net assets.
* Moody's Rating
** Fitch's Rating
7
<PAGE>
FORTIS SECURITIES, INC.
Statement of Assets and Liabilities
July 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, as detailed in the accompanying schedules, at
market (cost $104,721,345) (Note 1).................................... $101,891,935
Receivables:
Investment securities sold............................................. 5,836
Interest and dividends................................................. 2,391,711
------------
TOTAL ASSETS............................................................... 104,289,482
------------
LIABILITIES
Dividends payable ($0.058 per share)..................................... 734,858
Payable for investment advisory and management fees (Note 2)............. 56,536
Accounts payable and accrued expenses.................................... 34,146
------------
TOTAL LIABILITIES.......................................................... 825,540
------------
NET ASSETS
Net proceeds of capital stock, par value $.01 per share-authorized
15,000,000 shares; respectively outstanding 12,669,972 shares.......... 127,663,651
Unrealized depreciation of investments................................... (2,829,410)
Undistributed net investment income...................................... 160,985
Accumulated net realized loss from sale of investments................... (21,531,284)
------------
TOTAL NET ASSETS........................................................... $103,463,942
============
NET ASSET VALUE PER SHARE.................................................. $8.17
============
</TABLE>
Statement of Operations
For the Year Ended July 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Income
Interest income........................................................ $ 9,716,650
-----------
Expenses:
Investment advisory and management fees (Note 2)..................... 664,943
Shareholders' notices and reports.................................... 55,675
Legal and auditing fees (Note 2)..................................... 27,650
Exchange listing fees................................................ 24,260
Directors' fees and expenses......................................... 16,625
Custodian fees....................................................... 5,600
Other................................................................ 20,298
-----------
Total expenses......................................................... 815,051
-----------
NET INVESTMENT INCOME...................................................... 8,901,599
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 1):
Net realized loss on investments......................................... (4,712,325)
Net change in unrealized depreciation of investments in securities....... (1,068,856)
-----------
NET LOSS ON INVESTMENTS.................................................... (5,781,181)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 3,120,418
===========
</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, 2000 JULY 31, 1999
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income.................................................... $ 8,901,599 $ 8,812,593
Net realized loss on investments......................................... (4,712,325) (4,496,304)
Net change in unrealized depreciation on investments..................... (1,068,856) (7,160,843)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ 3,120,418 (2,844,554)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................................... (8,675,509) (9,104,432)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from 8,270 and 19,522 shares issued as a result of reinvested
dividends, respectively................................................ 68,241 178,860
------------ ------------
TOTAL DECREASE IN NET ASSETS............................................... (5,486,850) (11,770,126)
NET ASSETS:
Beginning of year........................................................ 108,950,792 120,720,918
------------ ------------
End of year (includes undistributed (excess of distributions over) net
investment income of $160,985
and ($68,651), respectively)........................................... $103,463,942 $108,950,792
============ ============
</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 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, 2000, 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. The fund amortizes original issue discount, long term
bond premium and market discount. For the year ended July 31, 2000, the cost
of purchases and proceeds from sales of securities (other than short-term
securities) aggregated $67,560,880 and $67,899,973, 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, if any, on dividend
distributions of certain current year book-to-tax difference is presented as
"excess distributions of net realized gains" in the statements 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 investment income increased by $3,546, resulting
in a reclassification to reduce paid-in-capital by $3,546.
For federal income tax purposes, the fund had a capital loss carryover of
$21,488,426 at July 31, 2000, which, if not offset by subsequent capital
gains, will expire in 2001 through 2009. 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, 2000, 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, 2000, was
$4,326,287 which represents 4.18% 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
accounting principles generally accepted in the United States of America
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 $3,000 for the year ended July 31, 2000,
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,
--------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year................ $ 8.60 $ 9.55 $ 9.45 $ 8.97 $ 9.18
-------- -------- -------- -------- --------
Operations:
Investment income - net......................... .70 .70 .73 .72 .78
Net realized and unrealized gain (loss) on
investments................................... (.44) (.93) .11 .49 (.20)
-------- -------- -------- -------- --------
Total from operations......................... .26 (.23) .84 1.21 .58
-------- -------- -------- -------- --------
Distributions to shareholders:
From investment income - net.................... (.69) (.72) (.74) (.70) (.78)
Excess distributions of net realized gains...... -- -- -- (.03) (.01)
-------- -------- -------- -------- --------
Total distributions to shareholders............... (.69) (.72) (.74) (.73) (.79)
-------- -------- -------- -------- --------
Net asset value, end of year...................... $ 8.17 $ 8.60 $ 9.55 $ 9.45 $ 8.97
-------- -------- -------- -------- --------
Per-share market value, end of year............... $ 7.625 $ 8.500 $ 9.000 $ 8.688 $ 7.875
Total investment return, market value @........... (1.59%) 2.34% 12.29% 20.27% (1.36%)
Total investment return, net asset value @@....... 4.10% (2.43%) 9.50% 14.83% 6.93%
Net assets end of year (000s omitted)............. $103,464 $108,951 $120,721 $119,285 $113,151
Ratio of expenses to average monthly net assets... .77% .73% .76% .76% .80%
Ratio of net investment income to average monthly
net assets...................................... 8.42% 7.65% 7.68% 7.91% 8.47%
Portfolio turnover rate........................... 65% 33% 44% 130% 67%
</TABLE>
@ Total investment return, market value, is based on the change in market
price of a share during 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.
--------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
At the annual meeting of shareholders of Fortis Securities, Inc. held on
December 16, 1999, the following individuals were elected to the Board of
Directors: Richard W. Cutting, Allen R. Freedman, Dr. Robert M. Gavin, Jean L.
King, Dean C. Kopperud, Robb L. Prince, Leonard J. Santow, Noel F. Schenker
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 statements of assets and liabilities, including
the schedules of investments in securities, of Fortis Securities, Inc. as of
July 31, 2000 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, 2000 and the financial highlights for each of the years in the
five-year period ended July 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and the results of its operations, changes
in its net assets and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Minneapolis, Minnesota
September 1, 2000
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
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
Phillip O. Peterson MUTUAL FUND INDUSTRY CONSULTANT;
PARTNER OF KPMG LLP, THROUGH JUNE
1999
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 F. Schenker MARKETING CONSULTANT. PRIOR TO MAY
1996, SENIOR VICE PRESIDENT OF
MARKETING & STRATEGIC PLANNING,
ROLLERBLADE, INC.
Dr. Lemma W. Senbet CONSULTANT, INTERNATIONAL FINANCIAL
INSTITUTIONS; THE WILLIAM E. MAYER
PROFESSOR OF FINANCE AND CHAIR,
FINANCE DEPARTMENT, UNIVERSITY OF
MARYLAND, COLLEGE PARK, MD
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 Wells Fargo 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.
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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 provides a wide selection of investment products
including annuities, life insurance and mutual funds.
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 the international Fortis group, which operates in the
fields of insurance, banking and investments. Fortis' listed companies are
Fortis (B) of Belgium and Fortis (NL) of the Netherlands.
Fortis: steadfast for YOU!
FORTIS FINANCIAL GROUP
Fund management offered through
Fortis Advisors, Inc. since 1949
Securities offered through Fortis
Investors, Inc., member NASD, SIPC
Insurance products issued by
Fortis Benefits Insurance Company
& Fortis Insurance Company
P.O. Box 64284, St. Paul, MN 55104-0284
Telephone (800) 800-2000
http://www.ffg.us.fortis.com
FORTIS FINANCIAL GROUP ----------------------
P.O. Box 64284 PRSRT STD
St. Paul, MN 55164-0284 U.S. Postage
PAID
Fortis Securities, Inc. Permit No. 3794
Minneapolis, MN
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The Fortis brandmark and Fortis-Registered Trademark- are
servicemarks of Fortis (B) and Fortis (NL).
95387 -C-Fortis 9/00
