<PAGE> 1
October 12, 1995
Dear Fellow Shareholders:
I am pleased to provide you with the annual report for Heritage Capital
Appreciation Trust for the fiscal year ended August 31, 1995. For this twelve
month period, your Fund had a positive total return of 10.85% (calculated
without the imposition of a front-end sales load). For the same period, the
Standard & Poor's 500 Composite Stock Price Index had a total return of 21.49%
and the Value Line Index gained 10.66%.
In February of this year, shareholders of your Fund overwhelmingly approved
retaining Liberty Investment Management as the subadviser for your Fund's
investment portfolio*. This action allowed Herb Ehlers, Chairman and Chief
Executive Officer of Liberty, to continue as portfolio manager of your Fund.
Prior to this time, Herb had managed your Fund while serving as President of
Eagle Asset Management, your Fund's original subadviser. In the letter that
follows, Herb explains some of the reasons that, despite your Fund's strong
absolute performance, your Fund underperformed the S&P 500 Index in the most
recent fiscal year. In particular, Herb's comments may help you understand why
your Fund does not have any investments in the technology sector of the market,
why stock prices can sometimes lag the growth of a company's earnings or cash
flow, and why the investment discipline employed by Liberty requires patience in
order to realize value over the long run.
Other than the absence of technology stocks, what other factors contributed
to the investment performance of your Fund during the last fiscal year? Some of
your Fund's best performers were in the Leisure/Amusements industry with Mirage,
Circus Circus and Harrah's all delivering above-market performance. Mirage led
the way in this group appreciating over 60%. These companies are among the
better capitalized and, we believe, best managed companies in the growing gaming
industry. In the finance area, while all of your Fund's holdings appreciated,
the best performers were the Student Loan Marketing Association, which rebounded
nicely off its lows last year, and First Data Corp, a dominant player in the
credit card processing area. The largest holdings in the Finance sector are
Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National
Mortgage Association ("Fannie Mae"). While we believe that the earnings growth
from these companies continues to be excellent, their stock prices lagged the
market. As Herb Ehlers points out, stock prices often "close the valuation gap"
when booming stock markets return to more stable growth environments.
One of your Fund's other large positions last year was AT&T. Although AT&T
appreciated less than 10% during your Fund's fiscal year, subsequent to year end
the stock price increased by an additional 10% after the company announced a
major restructuring. We sold the entire position in September to lock in these
recent gains. The other companies in our Telecommunications sector, as a group,
enjoyed returns in line with the S&P 500.
Within both the Telecommunications area previously discussed as well as
Broadcasting, Cellular Communications and Filmed Entertainment, a large caution
flag called legislative reform seems to have been hung over the stocks we held.
Obviously, these industries have either been formed or have experienced
tremendous change in the past six decades. Yet they are still regulated in large
part under the Communications Act of 1934. Because of the uncertainty
surrounding the various bills in the House and Senate, many investors have
chosen to sit on the sidelines and wait until the future is more certain with
regard to how these industries will be regulated. We believe that this
uncertainty can create tremendous opportunities for companies in these
industries and for investors willing to take advantage of the existing
uncertainty. Again, while we were not well rewarded last year as many investors
avoided these stocks, we continue to believe that our patience will be rewarded
over the long run.
<PAGE> 2
In conclusion, we are in the unusual position of explaining why your Fund
appreciated "only" 11% last year. We are confident that many of the stocks in
your Fund's portfolio are now poised for relative outperformance, having failed
to fully participate in the market's recent rally despite the outstanding growth
rates of the companies' earnings and cash flows.
On behalf of all of us at Heritage, thank you for your continuing
investment in Heritage Capital Appreciation Trust. We look forward to serving
your investment needs for years to come.
Sincerely,
/s/ Stephen G. Hill
Stephen G. Hill
President
* Proxy Voting Results:
On February 7, 1995 a special shareholders' meeting was held. The
results of that meeting on the following items were as follows:
<TABLE>
<CAPTION>
SHARES
-----------------------------------------------
FOR AGAINST ABSTAINING
-------------- ----------- ------------
<S> <C> <C> <C>
To approve a Subadvisory agreement between Heritage
Asset Management, Inc. and Liberty Investment
Management with respect to the Trust: 2,486,649.190 60,751.340 182,844.098
============= ========== ===========
To ratify the selection of Coopers & Lybrand L.L.P. as
the Trust's independent accountants for the fiscal year
ended August 31, 1995: 2,529,768.223 40,646.664 159,829.741
============= ========== ===========
</TABLE>
<PAGE> 3
October 12, 1995
Dear Fellow Shareholders:
As the accompanying charts indicate, for the five year period ended August
31, 1995, Heritage Capital Appreciation Trust ("HCAT") performed in line with
the S&P 500 Composite Stock Price Index (101.2% for your Fund* and 102.1% for
S&P 500) and outperformed the Value Line Index. Furthermore, HCAT outperformed
the Value Line Index for the eighth straight year. However, after three straight
years of outperforming the S&P 500, HCAT's winning streak was (temporarily, we
hope!) snapped for the fiscal year ended August 31, 1995.
HCAT's calendar 1995 year-to-date investment performance has been one of
the Fund's strongest in a number of years, and business results of the companies
in the portfolio were superior as well. In absolute terms, the Fund's investment
performance was +15% from January 1, 1995 through August 31, 1995. The Fund's
investment performance for the past five fiscal years ended August 31 averaged
15% per year, so the performance for the first eight months of calendar 1995
essentially matched the results we might expect for an entire year, in terms of
both stock prices and the companies' earnings and cash flow. I thought it was
important to point out the good business results for the companies in the
portfolio, and the strong calendar 1995 year-to-date investment performance,
because almost all of the Fund's underperformance to the S&P 500 for the past
fiscal year occurred in calendar 1995, more specifically in just the four months
of January, March, April and May, a time period when technology stocks were very
hot (technology has accounted for approximately 30% of the S&P 500's increase
over the past year!).
We have had a long-standing policy of avoiding the technology sector,
especially semiconductors, computer and other hardware manufacturing stocks,
since we view such technology stocks as prone to underperform over the long run.
Indeed, the performance of the S&P technology sector has underperformed the S&P
500 by 3.4% per year for the past 10 1/2 years, and by 2.4% per year for the
past 15 1/2 years, ending June 30, 1995. If you're concerned about technology
stocks, this might be an appropriate time to consider HCAT, since your Fund is
essentially a "non-tech" portfolio.
Since "high-tech," "momentum," "sector rotation," "quantitative,"
"chartist" and other investment styles have been in vogue this year, I thought
this might be a good time to review our "buy the business" investment style.
Our first premise is that wealth is created through the long-term ownership
of a growing business. As such, we invest in companies whose businesses we
believe will appreciate substantially over the long-term. Each company is
analyzed as if we were going to own the entire entity. We buy, in our opinion,
healthy growing businesses that we believe we thoroughly understand. We prefer
those entities that have a seemingly dominant market position as this creates
pricing flexibility which, in turn, typically generates high operating margins
and little need for excessive debt. In addition, we seek companies whose
products/services have a long life cycle and generate a recurring revenue
stream. Furthermore, we have always invested in subscriber-based businesses
because of their excellent long-term fundamental characteristics. Two other
criteria are critical to our final selection: free cash flow and a stock price
below that of the entity's going-concern value. Above average returns can then
be achieved from both the company's excess growth and the market's eventual
recognition of its going-concern value. Our turnover is usually low. If our
company selection is successful, your Fund's portfolio could be quite boring.
But we believe that the portfolio will grow over time as the stock prices
ultimately reflect the companies' growth, which we hope exceeds that of the S&P
500.
We have always tried to assemble portfolio holdings that could achieve
consistent earnings and cash flow growth of 12%-15% per year, with stock prices
reflecting this growth. Because we also purchase stocks at what
<PAGE> 4
we believe is a discount to their real worth, portfolios could capture an
incremental 3%-4% as the difference between the stock price and the company's
real worth converge. We call this "closing the valuation gap."
Whenever we trail a run-away stock market we do so for the same three
reasons. First, the long-term growth rates of the companies within the portfolio
are usually a "modest," but consistent, 12%-15% per year. (I never thought I'd
be using the word "modest" to describe a 15% growth rate!) Time is required for
the long-term compounding effect of these double digit growth rates to favorably
impact the portfolio.
Second, time is also required for the "valuation gap" to close. Rarely does
the gap close evenly in each year. The valuation gap may not close at all in one
year, only to close at two to three times the expected rate in the second or
third year, thereby contributing the expected return to the overall portfolio.
Third, certain of our holdings are "event-driven" and therefore will not
provide the expected incremental return until the event occurs (Cellular
Communications Inc.'s mandatory redemption at $60 per share in October 1995 is
an example).
"Modest growth rates," "closing the valuation gap," and "event-driven"
returns can substantially lag a booming stock market. However, these stocks can
catch-up when the stock market stabilizes or corrects, and/or when the required
amount of time has elapsed for these factors to impact both the long-term
absolute and relative returns. As our past five year performance record so
clearly demonstrates, it would seem that the current environment is setting the
stage for future strong portfolio outperformance.
As we review the portfolio of companies we have selected, we are delighted
by their sound fundamentals. As a group, our companies are showing solid growth
in earnings and cash flow and strengthening franchises.
We believe that, in time, the excellent business fundamentals of our
holdings will be reflected in their respective stock prices. Sometimes this is a
longer time period than I would prefer. But it does happen, and the divergence
in the shorter time periods creates great buying opportunities. Indeed, patience
is one of the keys to successful long-term investing as it enables the portfolio
to capture the gains that come with the positive reversal of this divergence;
i.e., "closing the gap." We strongly believe not only in the long-term outlook
for the companies in the portfolio, but also the long-term performance of their
underlying stocks.
Again, I appreciate your patience, confidence and support. We will continue
to work diligently to produce good long-term results for HCAT.
Sincerely,
/s/ Herbert E. Ehlers
Herbert E. Ehlers
Chairman & Chief Executive Officer
Liberty Investment Management
* See accompanying chart.
<PAGE> 5
[INSERT CRC GRAPH]
Chart 1 shows growth of $10,000 Investment since inception of Heritage Capital
Appreciation Trust on December 12, 1985, compared to Standard & Poor's 500
Composite Stock Price Index and the Value Line Geometric Index for the same
period of time.
5
<PAGE> 6
[INSERT CRC GRAPH]
Chart 2 shows growth of $10,000 Investment since August 31, 1990 (last five
years), compared to Standard & Poor's 500 Composite Stock Price Index and the
Value Line Geometric Index.
6
<PAGE> 7
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
-----------
<S> <C>
REPURCHASE AGREEMENT--8.1%
- -------------------------
Repurchase Agreement with State Street Bank and Trust Company, dated August 31, 1995, @ 5.75%, to be
repurchased at $5,940,949 on September 1, 1995, (collateralized by $4,915,000 United States Treasury
Notes, 8.875%, due August 15, 2017, with a market value of $6,100,927, including interest)(cost
$5,940,000)........................................................................................... $ 5,940,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -------------
<C> <S> <C>
COMMON STOCK--86.7%
- --------------------
BANKING--1.8%
- -------------
6,000 Crestar Financial Corporation....................................................... 338,250
5,000 Integra Financial Corporation....................................................... 280,625
20,000 MBNA Corporation.................................................................... 710,000
-----------
1,328,875
-----------
BROADCASTING--11.9%
- ------------------
80,000 Bell Cablemedia PLC, ADR*........................................................... 1,520,000
13,500 Capital Cities/ABC, Inc. ........................................................... 1,552,500
50,000 Comcast UK Cable Partners, Class "A"*............................................... 784,375
84,000 Gaylord Entertainment Company, Class "A"............................................ 2,331,000
25,000 Liberty Media Group, Class "A"*..................................................... 664,063
100,000 Tele-Communications, Inc., Class "A"*............................................... 1,850,000
-----------
8,701,938
-----------
CONGLOMERATES/DIVERSIFIED--1.9%
- ----------------------------
42,000 Corning, Inc. ...................................................................... 1,370,250
-----------
COSMETICS--1.3%
- --------------
14,000 Avon Products, Inc. ................................................................ 988,750
-----------
ELECTRONICS--4.9%
- ---------------
25,000 AVX Corporation*.................................................................... 793,750
27,500 Duracell International, Inc. ....................................................... 1,227,187
30,000 Reuters Holdings PLC, ADR........................................................... 1,571,250
-----------
3,592,187
-----------
FILMED ENTERTAINMENT--2.2%
- ------------------------
38,000 Time Warner, Inc. .................................................................. 1,600,750
-----------
FINANCE--12.8%
- -------------
41,500 AMBAC, Inc. ........................................................................ 1,753,375
45,000 Federal Home Loan Mortgage Corporation.............................................. 2,891,250
30,000 Federal National Mortgage Association............................................... 2,861,250
15,000 First Data Corporation.............................................................. 875,625
19,000 Student Loan Marketing Association.................................................. 1,028,375
-----------
9,409,875
-----------
FOOD SERVING--1.9%
- -----------------
45,000 IHOP Corporation*................................................................... 1,153,125
50,000 TPI Enterprises, Inc.*.............................................................. 225,000
-----------
1,378,125
-----------
GLASS PRODUCTS--2.5%
- -------------------
80,000 Libbey, Inc. ....................................................................... 1,820,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------- -----------
<C> <S> <C>
HEALTH CARE CENTERS--1.8%
- -----------------------
40,000 Beverly Enterprises, Inc.*.......................................................... $ 530,000
50,000 Tenet Healthcare Corporation*....................................................... 793,750
-----------
1,323,750
-----------
HOTELS/MOTELS--1.7%
- ------------------
35,000 Marriott International, Inc. ....................................................... 1,242,500
-----------
INSURANCE--0.9%
- -------------
50,000 Western National Corporation........................................................ 625,000
-----------
LAND DEVELOPMENT--1.4%
- ----------------------
50,000 Rouse Company*...................................................................... 1,056,250
-----------
LEISURE/AMUSEMENT--5.1%
- -----------------------
32,000 Circus Circus Enterprises, Inc.*.................................................... 1,048,000
40,000 Harrah's Entertainment, Inc.*....................................................... 1,275,000
10,000 Hasbro, Inc. ....................................................................... 323,750
32,500 Mirage Resorts, Inc.*............................................................... 1,117,188
-----------
3,763,938
-----------
MEDICAL EQUIPMENT/SUPPLY--2.7%
- -----------------------------
110,000 Amsco International, Inc.*.......................................................... 1,966,250
-----------
PHARMACEUTICALS--0.6%
- -------------------
6,000 Pharmacia Aktiebolag, ADR........................................................... 165,750
7,000 Upjohn Company...................................................................... 296,625
-----------
462,375
-----------
POLLUTION CONTROL--2.0%
- ---------------------
45,000 Wheelabrator Technologies, Inc. .................................................... 703,125
25,000 WMX Technologies, Inc. ............................................................. 734,375
-----------
1,437,500
-----------
PUBLISHING--8.7%
- ---------------
18,000 A.H. Belo Corporation, Class "A".................................................... 632,250
30,000 Gannett Company..................................................................... 1,605,000
48,000 The E.W. Scripps Company, Class "A"................................................. 1,614,000
20,000 Tribune Company..................................................................... 1,340,000
80,000 Valassis Communications, Inc.*...................................................... 1,190,000
-----------
6,381,250
-----------
REAL ESTATE INVESTMENT TRUST--0.7%
- ------------------------------
30,000 Manufactured Home Communities, Inc.................................................. 487,500
-----------
SERVICES--2.6%
- ------------
55,000 Service Corporation International................................................... 1,925,000
-----------
TELECOMMUNICATIONS--12.2%
- ------------------------
50,000 AT&T Corporation.................................................................... 2,825,000
80,000 Airtouch Communications, Inc.*...................................................... 2,600,000
50,000 Telephone & Data Systems, Inc. ..................................................... 2,050,000
35,000 Vodafone Group PLC, Sponsored ADR................................................... 1,465,625
-----------
8,940,625
-----------
TOBACCO--2.3%
- -------------
60,000 RJR Nabisco Holdings Corporation.................................................... 1,710,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------- -----------
<C> <S> <C>
UTILITIES--2.8%
- ------------
70,000 AES Corporation*.................................................................... $ 1,295,000
35,000 Sithe Energies, Inc.*............................................................... 315,000
20,000 UGI Corporation..................................................................... 427,500
-----------
2,037,500
-----------
Total common stocks (cost $49,029,500)............................................................. 63,550,188
-----------
CONVERTIBLE PREFERRED STOCK--3.7%
- -----------------------------
CELLULAR COMMUNICATIONS
- ---------------------
50,000 Cellular Communications, Inc., Class "A"*........................................... 2,725,000
-----------
Total convertible preferred stock (cost $1,563,283)................................................ 2,725,000
-----------
DEBT EXCHANGEABLE FOR COMMON STOCK (DECS)--1.4%
- ------------------------------------------------
DATA PROCESSING
- --------------
20,000 American Express Company, 6.25%, maturing 10/15/96.................................. 987,500
-----------
Total DECS (cost $735,000)......................................................................... 987,500
-----------
TOTAL INVESTMENT PORTFOLIO (cost $57,267,783)(b), 99.9%(a)......................................... 73,202,688
OTHER ASSETS AND LIABILITIES, NET, 0.1%(a)......................................................... 77,636
-----------
NET ASSETS 100.0%.................................................................................. $73,280,324
==========
</TABLE>
- ------------------
* Not an income-producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is
$57,276,021. Market value includes net unrealized appreciation of
$15,926,667, which consists of aggregate gross unrealized appreciation for
all securities in which there is an excess of market value over tax cost of
$16,613,493 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value of $686,826.
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 10
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at market value (identified cost $51,327,783) (Note 1)......................... $67,262,688
Repurchase agreement (identified cost $5,940,000) (Note 1).................................. 5,940,000
Cash........................................................................................ 1,778
Receivables:
Investments sold.......................................................................... 112,228
Fund shares sold.......................................................................... 59,381
Dividends and interest.................................................................... 78,403
Deferred state registration expenses (Note 1)............................................... 14,543
Prepaid insurance........................................................................... 4,319
-----------
Total assets........................................................................ 73,473,340
Liabilities
Payables (Note 4):
Investments purchased..................................................................... $30,870
Fund shares redeemed...................................................................... 24,093
Accrued management fee.................................................................... 44,428
Accrued distribution fee.................................................................. 30,971
Accrued professional fees................................................................. 26,903
Other accrued expenses.................................................................... 35,751
-------
Total liabilities................................................................... 193,016
-----------
Net assets, at market value................................................................. $73,280,324
===========
Net Assets
Net assets consist of:
Undistributed net investment income....................................................... $ 202,995
Net unrealized appreciation on investments................................................ 15,934,905
Accumulated net realized gain............................................................. 5,514,345
Paid-in capital........................................................................... 51,628,079
-----------
Net assets, at market value................................................................. $73,280,324
===========
Class A Shares
Net asset value and redemption price per share ($72,837,320 divided by 4,690,175 shares of
beneficial interest outstanding, no par value) (Note 2)................................... $15.53
===========
Maximum offering price per share (100/95.25 of $15.53)...................................... $16.30
===========
Class C Shares
Net asset value, offering price and redemption price per share ($443,004 divided by 28,578
shares of beneficial interest outstanding, no par value) (Notes 1 and 2).................. $15.50
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 11
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Income:
Dividends.............................................................................. $ 900,342
Interest............................................................................... 597,661
-----------
Total income..................................................................... 1,498,003
Expenses (Notes 1 and 4):
Management fee......................................................................... $ 711,510
Distribution fee....................................................................... 355,486
Professional fees...................................................................... 83,632
Shareholder servicing.................................................................. 59,519
Custodian/Fund accounting fees......................................................... 50,331
Amortization of state registration expenses............................................ 33,606
Reports to shareholders................................................................ 16,583
Trustees' fees and expenses............................................................ 9,223
Insurance.............................................................................. 7,600
Other.................................................................................. 2,155
----------
Total expenses before waiver..................................................... 1,329,645
Fees waived by Manager (Note 4)........................................................ (177,878) 1,151,767
---------- -----------
Net investment income.................................................................... 346,236
-----------
Realized and Unrealized Gain on Investments
Net realized gain from investment transactions........................................... 6,822,883
Net increase in unrealized appreciation of investments during the year................... 127,074
-----------
Net gain on investments.......................................................... 6,949,957
-----------
Net increase in net assets resulting from operations..................................... $ 7,296,193
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Decrease in net assets:
Operations:
Net investment income........................................................ $ 346,236 $ 115,326
Net realized gain from investment transactions............................... 6,822,883 6,641,529
Net increase (decrease) in unrealized appreciation of investments during the
year....................................................................... 127,074 (1,517,671)
------------- -------------
Net increase in net assets resulting from operations......................... 7,296,193 5,239,184
Distributions to shareholders from:
Net investment income, Class A Shares, ($.06 and $.03 per share,
respectively).............................................................. (258,567) (158,881)
Net realized gains, Class A Shares, ($1.16 and $1.36 per share,
respectively).............................................................. (5,533,950) (6,632,397)
Increase (decrease) in net assets from Fund share transactions (Note 2)........ (2,600,669) 648,126
------------- -------------
Decrease in net assets......................................................... (1,096,993) (903,968)
Net assets, beginning of year.................................................. 74,377,317 75,281,285
------------- -------------
Net assets, end of year (including undistributed net investment income of
$202,995 and $115,326, respectively)......................................... $73,280,324 $74,377,317
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 12
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A SHARES
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 15.30 $ 15.62 $ 13.64 $ 12.55 $ 10.62 $ 14.48 $ 10.74 $ 13.31
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)...................... 0.08(a) 0.02(a) 0.03(a) 0.15(a) 0.28(a) 0.29(b) 0.14(b) 0.08(a)
Net realized and unrealized
gain (loss) on
investments................. 1.37 1.05 3.29 1.19 1.97 (2.82) 3.77 (1.39)
-------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations.................. 1.45 1.07 3.32 1.34 2.25 (2.53) 3.91 (1.31)
-------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (0.06) (0.03) (0.07) (0.25) (0.32) (0.19) (0.06) (0.11)
Distributions from net
realized gains.............. (1.16) (1.36) (1.27) -- -- (1.14) (0.11) (1.15)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions........... (1.22) (1.39) (1.34) (0.25) (0.32) (1.33) (0.17) (1.26)
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD........................ $ 15.53 $ 15.30 $ 15.62 $ 13.64 $ 12.55 $ 10.62 $ 14.48 $ 10.74
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(%)(E)............. 10.85 7.07 25.72 10.78 21.73 (18.73) 36.88 (8.75)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to
average daily net assets.... 1.62(a) 1.55(a) 1.56(a) 1.66(a) 1.86(a) 1.96(b) 2.00(b) 2.00(a)
Net investment income (loss)
to average daily net
assets...................... .49 .15 .24 1.09 2.38 2.54 1.19 .62
Portfolio turnover rate....... 66 65 55 57 80 45 60 103
Net assets, end of period ($
millions)................... 73 74 75 65 63 58 62 43
<CAPTION>
CLASS C
SHARES
-----------
1987 1986+ 1995++
-------- -------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 11.52 $ 9.70 $ 14.18
-------- -------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)...................... 0.08(b) 0.07(a) (0.01)(a)
Net realized and unrealized
gain (loss) on
investments................. 1.80 1.75 1.33
-------- -------- -----------
Total from Investment
Operations.................. 1.88 1.82 1.32
-------- -------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (0.05) -- --
Distributions from net
realized gains.............. (0.04) -- --
-------- -------- -----------
Total Distributions........... (0.09) -- --
-------- -------- -----------
NET ASSET VALUE, END OF
PERIOD........................ $ 13.31 $ 11.52 $ 15.50
======== ======== ===========
TOTAL RETURN(%)(E)............. 16.49 18.76(d) 9.31(d)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to
average daily net assets.... 2.00(b) 2.00(a)(c) 2.17(a)(c)
Net investment income (loss)
to average daily net
assets...................... .74 1.40(c) (0.33)(c)
Portfolio turnover rate....... 48 21(c) 66
Net assets, end of period ($
millions)................... 55 40 .4
</TABLE>
- ---------------
+ For the period December 12, 1985 (commencement of operations) to August 31,
1986.
++ For the period April 3, 1995 (commencement of Class C Shares) to August 31,
1995.
(a) Excludes management fees waived by the Manager in the amount of less than
$0.04, $0.04, $0.04, $0.03, $0.01, $0.01 and $0.02 per Class A Share,
respectively. The operating expense ratios including such items would be
1.87%, 1.81%, 1.81%, 1.84%, 1.87%, 2.06% and 2.31% (annualized) for Class A
Shares, respectively. Excludes management fees waived by the Manager in the
amount of less than $0.04 per Class C Share. The operating expense ratio
including such items would be 2.42% (annualized) for Class C Shares.
(b) Includes management fees previously waived by the Manager and recovered
during the year of less than $0.01 per share.
(c) Annualized.
(d) Not annualized.
(e) Does not reflect the imposition of a sales charge.
12
<PAGE> 13
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Capital Appreciation Trust
(the "Fund") is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund currently
issues Class A and Class C Shares. Class A Shares are sold subject to a
maximum sales charge of 4.75% of the amount invested payable at the time
of purchase. Class C Shares which were offered to shareholders beginning
April 3, 1995 are sold subject to a contingent deferred sales charge of
1% of the lower of net asset value or purchase price payable upon any
redemptions within one year after purchase. The policies described below
are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
Security Valuation: The Fund values investment securities at market
value based on the last quoted sales price as reported by the principal
securities exchange on which the security is traded. If no sale is
reported, market value is based on the most recent quoted bid price and
in the absence of a market quote, securities are valued using such
methods as the Board of Trustees believes would reflect fair market
value. Short term investments having a maturity of 60 days or less are
valued at cost which, when combined with accrued interest included in
interest receivable or discount earned, approximates market.
Repurchase Agreements: The Fund enters into repurchase agreements
whereby the Fund, through its custodian, receives delivery of the
underlying securities, the market value of which at the time of purchase
is required to be an amount equal to at least 100% of the resale price.
Federal Income Taxes: The Fund's policy is to comply with the
requirements of the Internal Revenue Code of 1986, as amended, which are
applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders.
Accordingly, no provision has been made for federal income and excise
taxes.
Distribution of Income and Gains: Distributions of net investment income
are made annually. Net realized gains from investment transactions
during any particular year in excess of available capital loss
carryforwards, which, if not distributed, would be taxable to the Fund,
will be distributed to shareholders in the following fiscal year. The
Fund uses the identified cost method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes. Of the $6,641,529 of realized gains for the year ended August
31, 1994 the Fund has designated $2,726,444 as net long-term capital
gains on a tax basis paid in 1995.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
Capital Accounts: The Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting the
net asset value of the Fund.
Other: Investment security transactions are accounted for on a trade
date plus one basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Expenses of the Fund are allocated to each class of
shares based upon their relative percentage of current net assets of
dividend eligible shares. All expenses that are directly attributable to
a specific class of shares, such as distribution fees, are allocated to
that class.
Note 2: FUND SHARES. At August 31, 1995, there was an unlimited number of shares
of beneficial interest of no par value authorized.
Transactions in Class A Shares of the Fund during the years ended August
31, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------------------- ---------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold........................................ 315,129 $ 4,487,563 2,079,461 $ 32,311,244
Shares issued on reinvestment of distributions..... 428,528 5,682,169 448,374 6,680,774
Shares redeemed.................................... (913,985) (13,189,775) (2,487,289) (38,343,892)
---------- ------------ ---------- ------------
Net increase (decrease)............................ (170,328) $ (3,020,043) 40,546 $ 648,126
=========== ===========
Shares outstanding:
Beginning of year................................ 4,860,503 4,819,957
---------- ----------
End of year...................................... 4,690,175 4,860,503
========= =========
</TABLE>
13
<PAGE> 14
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Transactions for Class C Shares of the Fund from April 3, 1995
(commencement of Class C Shares) to August 31, 1995 were as follows:
<TABLE>
<CAPTION>
CLASS C SHARES SHARES AMOUNT
---------------------------------------------------------------------------------------- ------ --------
<S> <C> <C>
Shares sold............................................................................. 29,005 $425,638
Shares redeemed......................................................................... (427) (6,264)
------ --------
Net increase............................................................................ 28,578 $419,374
========
Shares outstanding:
Beginning of period................................................................... --
------
End of period......................................................................... 28,578
======
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the year ended August 31, 1995,
purchases and sales of investment securities (excluding repurchase
agreements and short-term obligations) aggregated $39,863,365 and
$44,356,193, respectively.
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND
TRUSTEES' FEES. Under the Fund's Investment Advisory and Administration
Agreement with Heritage Asset Management, Inc. (the "Manager"), the Fund
agrees to pay to the Manager a fee equal to an annualized rate of 1.00%
of the first $100,000,000 of the Fund's average daily net assets, and
0.75% of any excess over $100,000,000 of such net assets, computed daily
and payable monthly. Since January 2, 1992, the Manager has voluntarily
agreed to waive .25% of its fee on the first $100 million of average net
assets. Fees waived by the Manager for the year ended August 31, 1995
amounted to $177,878 ($.03770 per share).
Effective February 27, 1995, the Manager entered into an agreement with
Liberty Investment Management (the "Subadviser") to provide to the Fund
investment advice, portfolio management services (including the
placement of brokerage orders) and certain compliance and other services
for a fee payable, by the Manager, equal to an annualized rate of .25%
of average daily net assets, computed daily and paid monthly. From
December 1985 (commencement of operations) through February 26, 1995,
Eagle Asset Management, Inc., a wholly-owned subsidiary of Raymond James
Financial, Inc., was subadviser to the Fund. Although, Eagle remains a
subadviser to the Fund, there are no assets currently allocated to
Eagle.
The Manager is also the Dividend Paying and Shareholder Servicing Agent
for the Fund. The amount payable to the Manager for such expenses as of
August 31, 1995 was $9,000. In addition, the Manager performs Fund
Accounting services and charged $32,742 during the current year of which
$5,400 was payable as of August 31, 1995.
Pursuant to the Class A Distribution Plan adopted in accordance with
Rule 12b-1 of the Investment Company Act of 1940, as amended, the Fund
is authorized to pay Raymond James & Associates, Inc. (the
"Distributor") a service fee of up to .50% of the average daily net
assets for Class A Shares purchased on or before March 31, 1995. The
Fund may pay the Distributor .25% for Class A Shares purchased after
March 31, 1995. The Class C Distribution Plan provides for payments at
an annual rate of up to 1.00% of the average daily net assets. The
Distributor, on Class C Shares, may retain the first 12 months
distribution fee for reimbursement of amounts paid to the broker/dealer
at the time of purchase. Such fees are accrued daily and payable
monthly. During the period $354,505 and $981 were paid for distribution
fees for Class A Shares and Class C Shares, respectively. The Manager,
Distributor, Fund Accountant and Shareholder Servicing Agent are all
wholly-owned subsidiaries of Raymond James Financial, Inc.
Trustees of the Fund also serve as Trustees for Heritage Cash Trust,
Heritage Income-Growth Trust, Heritage Income Trust, Heritage Series
Trust and Heritage U.S. Government Income Fund, Mutual Funds that are
also advised by the Manager (collectively referred to as the Heritage
Mutual Funds). Each Trustee of the Heritage Mutual Funds who is not an
interested person of the Manager receives an annual fee of $8,000 and an
additional fee of $2,000 for each combined quarterly meeting of the
Heritage Mutual Funds attended. Trustees' fees and expenses are shared
equally by each of the Heritage Mutual Funds.
14
<PAGE> 15
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Heritage Capital Appreciation Trust:
We have audited the accompanying statement of assets and liabilities of
Heritage Capital Appreciation Trust, including the investment portfolio, as of
August 31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's 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 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. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. 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
Heritage Capital Appreciation Trust as of August 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated therein, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand
Boston, Massachusetts
October 12, 1995
15
<PAGE> 16
LOGO
Heritage
--------------------
CAPITAL APPRECIATION
TRUST (TM)
--------------------
---------------------
A mutual fund seeking
---------------------
long-term capital
---------------------
appreciation
---------------------
ANNUAL REPORT
and Investment Performance
Review for the Year Ended
AUGUST 31, 1995
A member of the
Heritage Family of Mutual Funds(TM)
Heritage Capital Appreciation Trust --------------------
P.O. Box 33022 BULK RATE
St. Petersburg, FL 33733 U.S. POSTAGE
- ----------------------------------- PAID
MODERN MAILING
Address Change Requested --------------------
Annual Report
INVESTMENT ADVISOR/
SHAREHOLDER SERVICING AGENT/
FUND ACCOUNTANT
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
(800) 421-4184
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
This report is for the information of shareholders of
Heritage Capital Appreciation Trust, It may also be used as
sales literature when preceded or accompanied by a prospectus.
