CAPITAL
APPRECIATION
TRUST
[PHOTO MONTAGE]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
SEMI-ANNUAL REPORT
(Unaudited) and Investment Performance
Review for the Six Month Period Ended
February 28, 1999
[HERITAGE LOGO]
---------------
Capital Appreciation
Trust(TM)
<PAGE>
April 12, 1999
Dear Fellow Shareholders:
It is my pleasure to provide you with the semiannual report for the
Heritage Capital Appreciation Trust for the six months ended February 28, 1999.
For this period, your Fund continued its recent excellent performance posting a
gain of 29.96%* for its Class A shares. The Class B and C shares, which have
different fee structures, returned +29.59%* and +29.61%*, respectively. As you
may recall, the stock market ended our last fiscal year with a significant
decline. The Dow Jones Industrial Average, for example, fell over 500 points on
the last day of our fiscal year, August 31, 1999. It's refreshing to be able to
report on the strong recovery we have experienced since then.
For longer periods, your Fund also continues to deliver strong positive
returns. Your Fund's average annual returns for the periods through March 31,
1999 are shown below. All returns are calculated net of all expenses and front
and back end sales charges, as applicable.
<TABLE>
<CAPTION>
CLASS A** CLASS B** CLASS C**
----------------- ----------------- -----------------
<S> <C> <C> <C>
One Year ............. +13.11% +14.07% +17.99%
Three Year ........... +27.90% N/A +29.20%
Five Year ............ +22.68% N/A N/A
Ten Year ............. +16.05% N/A N/A
Life of Fund ......... +15.22%(1) +26.30%(2) +27.28%(3)
</TABLE>
- ----------
1 December 12, 1985
2 January 2, 1998
3 April 3, 1995
Clearly, long-term investors in your Fund have been well rewarded.
However, as you can see, the most recent three years have been exceptional.
What you may infer from this is that other periods may not have been as
positive. That inference would be correct. In fact, in 1990 and 1994, both
difficult years for stocks in general, your Fund had negative returns. The
lesson, as we have discussed before, is that a patient long-term approach to
investing can be very rewarding. In any future market corrections, this history
should help us all stay the course and focus on the longer term reasons we
invested in the first place.
In the letter that follows, Herb Ehlers of our subadviser, Goldman Sachs
Asset Management, discusses the factors that have contributed to your Fund's
returns. As a reminder, Herb has managed your Fund's investment portfolio since
its inception in 1985. He is now the lead manager of a team of experienced
analysts and portfolio managers working together to manage your Fund's
portfolio. I hope you find Herb's comments helpful in understanding how your
Fund's portfolio is managed.
On behalf of all of us at Heritage, thank you for your continuing
confidence in Heritage Capital Appreciation Trust. If there are ever any
comments you would like to share with us about this or other Heritage funds,
please call us at 800/709-3863 (FUND).
Sincerely,
/s/ STEPHEN G. HILL
--------------------------
Stephen G. Hill
President
- ----------
* These returns are calculated without the imposition of either front- or
back-end sales charges.
** Performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost. Performance numbers reflect the current maximum front-end
sales load for A shares of 4.75%. These numbers also reflect a contingent
deferred sales load (CDSL) on B Shares of 5% on redemptions made within the
first year of purchase, declining to 0% over six years. A 1% CDSL for C
Shares is charged on redemptions made within 12 months of purchase.
1
<PAGE>
April 12, 1999
Dear Fellow Shareholders:
This is fun! Even though this is a report for the six months ended
February 28, 1999, I thought you'd be interested in some calendar year results.
I know I am, and since I am a shareholder of the Heritage Capital Appreciation
Trust ("HCAT"), I thought my fellow shareholders would be just as interested.
By the way, I'll be referring to HCAT as "our Fund," since we're all
shareholders together. For the calendar year ended December 31, 1998 our Fund's
Class A shares were up 34.2%* compared to its Lipper peer group of 20.1%*. For
the past two and three calendar years our Fund's Class A shares were up on a
cumulative basis 91.5%* and 127.7%* respectively, ranking in the top 6% and 4%
of its Lipper peer group, and more than doubling the peer group average
returns.** For the six month semi-annual period represented by this report
(ending 2/28/99), the Class A shares of our Fund were up 29.96%*.
I must stop here and mention my usual words of caution regarding these
terrific performance returns. By the way, I also make similar comments when
performance isn't quite so good. So, let's all keep in mind that investing is a
marathon, not a sprint. Performance plays out over very long periods of time.
Our Fund's performance in future time periods may not be quite so good as in
recent time periods. Of course, I have no idea of when those future time
periods might be. Let's all hope they're many years away. But when our Fund's
performance and the stock market returns aren't quite so impressive, we should
still feel comfortable that our Fund owns what we believe to be good companies
- -- leaders in their industries in many cases, and with excellent management.
Over the long-term, we believe our Fund's portfolio of companies should be able
to achieve increased earnings, high returns on capital, and increased value. If
so, over the long-term, the stocks of these companies should produce reasonable
returns.
During the six months ended February 28, 1999, our Fund benefited from its
holdings in various growth industries including broadcasting, entertainment,
retail stores, finance, banking, and publishing.
Telecommunications Inc., the largest cable TV company in the nation, was
our Fund's best performing stock (+90%), and has recently been acquired by
AT&T. Other cable TV and entertainment company stocks were also very strong,
including Liberty Media Group (+65%) and Time Warner (+60%). First Data, a
computer services company, and Walgreen, the well-known retail drug store
chain, were up 85% and 67%, respectively.
Even one of our long-time laggards, Telephone & Data Systems (TDS), a
rural/suburban local telephone and cellular phone company, finally produced a
strong return, up 52% for the past six months. If TDS can move triple from
these levels, it will finally justify our holding this stock for the past
decade. I'm sure you've figured it out by now, TDS has not been one of our
better performing investments, but we will continue to hold it as long as the
fundamental business continues to perform well.
Unfortunately, our Fund has also had a few disappointments over the past
six months. In particular, Service Corp. Int'l the largest funeral home and
cemetery company in the world (and a long time holding of our Fund), announced
that it's fourth quarter and 1998 earnings would not meet expectations,
whereupon its stock got sliced in half in less than a week. We don't believe
the business is as bad as the stock price would seem to indicate, and so we
recently added to our Fund's position in the stock.
- ----------
* These returns are calculated without the imposition of front- or back-end
sales charges.
** Lipper Analytical Services, Inc. performance rankings for the Capital
Appreciation Trust Class A Shares were 11 out of 208 and 5 out of 147
Capital Appreciation Funds, for the 2 and 3 year periods ended December 31,
1998, respectively. The performance numbers used for the Fund did not take
into account any front- or back-end sales charges. See the previous letter
by Stephen G. Hill for a full statement of returns since inception. Past
performance is no guarantee of future results.
2
<PAGE>
You should also know that our Fund owns very few direct technology and
Internet stocks, which has also been unfortunate since these two sectors have
been among the hottest sectors in the stock market. However, fortunately our
Fund does own a number of indirect technology and Internet-related businesses
such as cable TV (high speed Internet access), MCI Worldcom (Internet traffic),
broadcasting (Internet advertising), and Time Warner (one of the largest
Internet/cable companies). We have attempted to position our Fund so that our
Internet-related companies will achieve good results no matter which portal,
Internet retailer or other Internet site wins the Internet war. By the way, we
do believe that the Internet ranks with electricity, telephone, radio and
television as one of the important discoveries to impact our lives over the
next century. We continue to search for ways to invest in this new medium at
reasonable prices and within reasonable risk parameters.
Our portfolio team and I continue to be very bullish on America. The past
25 years have been phenomenal (more about this in our next report as I'm
running out of space), and we believe the next 25 years will be even better. We
believe 1) that capitalism will continue to flourish, not only in America, but
around the world, 2) that politicians won't interfere too much with free
enterprise, 3) that innovation and entrepreneurship will continue to flourish
(E.G. VCRs, satellites, personal computers, cellular telephones, digital
everything), 4) there will be no world wars and 5) America will continue as the
dominant military and economic power in the world. In short, America's economic
success will be even more exciting in the next century. It will be fun. I can't
wait, I'm so excited. May "the force" be with us.
Sincerely,
/s/ HERBERT E. EHLERS
---------------------------
Herbert E. Ehlers
Managing Director
Goldman Sachs & Company
Chief Investment Officer
Liberty Investment Management
a division of Goldman Sachs Asset
Management
3
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
FEBRUARY 28, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ---------
<S> <C>
COMMON STOCKS--93.5%(a)
=======================
BANKING--4.6%
- -----------------------
163,000 MBNA Corporation .................. $ 3,952,750
56,900 State Street Corporation .......... 4,363,518
-----------
8,316,268
-----------
BEVERAGES--1.0%
- ---------------------------
48,000 PepsiCo, Inc. ..................... 1,806,000
-----------
BROADCASTING--20.6%
- ----------------------
86,000 Cablevision Systems
Corporation* ...................... 5,590,000
106,000 CBS Corporation ................... 3,908,750
35,700 Chancellor Media Corporation*...... 1,561,875
77,000 Infinity Broadcasting
Corporation* ...................... 1,828,750
111,300 Jacor Communications, Inc.* ....... 7,763,175
172,500 Tele-Communications, Inc.,
Liberty Media, Class "A"*(b)...... 9,293,438
98,600 Tele-Communications, Inc.,
TCI Group, Class "A"*(c) ......... 6,193,313
60,000 Westwood One, Inc.* ............... 1,462,500
-----------
37,601,801
-----------
COSMETICS/TOILETRIES--1.5%
- --------------------------
67,200 Avon Products, Inc. ............... 2,797,200
-----------
DATA PROCESSING--1.4%
- -----------------------
27,000 Sterling Commerce, Inc.* .......... 702,000
19,000 Sun Microsystems, Inc.* ........... 1,848,938
-----------
2,550,938
-----------
FILMED ENTERTAINMENT--3.8%
- ----------------------------
106,200 Time Warner, Inc. ................. 6,849,900
-----------
FINANCE--7.8%
- ---------------
55,400 AMBAC Financial Group, Inc......... 3,102,400
68,500 Fannie Mae ........................ 4,795,000
107,200 Freddie Mac ....................... 6,311,400
-----------
14,208,800
-----------
FOOD--2.5%
- ----------
60,300 Ralston-Purina Group .............. 1,624,331
31,400 Wm. Wrigley Jr. Company ........... 2,920,200
-----------
4,544,531
-----------
HOTELS/MOTELS/INNS--1.8%
- --------------------------
90,400 Marriott International, Inc.,
Class "A" ......................... 3,254,400
-----------
HOUSEHOLD PRODUCTS--0.5%
- --------------------------
11,000 Colgate-Palmolive Company ......... 933,625
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
==========================
INSURANCE--4.2%
- -------------------
19,000 Aetna, Inc. ......................... 1,407,187
24,077 American International
Group, Inc. ........................ 2,743,273
77,400 Nationwide Financial Services, Inc... 3,516,863
---------
7,667,323
---------
INTERNET--0.6%
- --------------
6,000 America Online, Inc.* ................ 533,625
5,000 At Home Corporation, Series "A"* ..... 530,625
---------
1,064,250
---------
LEISURE/AMUSEMENT--0.8%
- -----------------------
40,900 Hasbro, Inc. ....................... 1,513,300
---------
PHARMACEUTICAL--10.2%
- ---------------------
58,300 American Home Products Corporation ... 3,468,850
34,600 Bristol-Myers Squibb Company.......... 4,357,438
42,800 Pfizer, Inc. ......................... 5,646,924
61,000 Schering-Plough Corporation .......... 3,412,188
22,700 Warner-Lambert Company ............... 1,567,718
---------
18,453,118
----------
POLLUTION CONTROL--0.9%
- -----------------------
34,000 Waste Management Holdings, Inc. ...... 1,661,750
----------
PUBLISHING--12.0%
- -----------------
95,100 A.H. Belo Corporation, Class "A" ..... 1,723,688
104,800 Central Newspapers, Inc., Class "A" .. 3,668,000
48,900 Gannett Company ...................... 3,105,150
142,000 New York Times Company, Class "A" .... 4,402,000
53,000 Tribune Company ...................... 3,514,563
114,800 Valassis Communications, Inc. ........ 5,510,400
----------
21,923,801
----------
REAL ESTATE INVESTMENT TRUST--0.6%
- ----------------------------------
45,000 Manufactured Home Communities, Inc. .. 1,046,250
----------
RETAIL STORES--7.2%
- -------------------
62,442 CVS Corporation ...................... 3,309,426
43,000 Rite Aid Corporation ................. 1,779,125
70,500 Tandy Corporation .................... 3,921,563
126,000 Walgreen Company ................... 4,032,000
----------
13,042,114
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
FEBRUARY 28, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
=========================
SERVICES--6.1%
- ---------------
142,908 First Data Corporation ............... $ 5,466,230
45,100 Galileo International, Inc. .......... 2,277,550
216,000 Service Corporation International .... 3,321,000
------------
11,064,780
------------
TELECOMMUNICATIONS--3.3%
- ------------------------
46,000 MCI WorldCom, Inc. ................... 3,795,000
43,000 Telephone & Data Systems, Inc.* ...... 2,160,750
------------
5,955,750
------------
UTILITIES-DIVERSIFIED--2.1%
- ---------------------------
104,500 AES Corporation ...................... 3,886,094
------------
Total Common Stocks
(cost $104,702,503)............................... 170,141,993
------------
REPURCHASE AGREEMENT--7.1%(A)
=============================
Repurchase Agreement with State Street
Bank and Trust Company, dated
February 26, 1999 @ 4.68% to be
repurchased at $12,977,059
on March 1, 1999, collateralized by
$12,945,000 United States Treasury Notes,
6.25% due January 31, 2002, (market value
$13,353,029 including interest)
(cost $12,972,000)................................ 12,972,000
------------
TOTAL INVESTMENT PORTFOLIO
(cost $117,674,503)(d), 100.6%(a)................ 183,113,993
OTHER ASSETS AND LIABILITIES, net, (0.6%)(a) (1,012,146)
------------
NET ASSETS, 100.0% ............................... $182,101,847
============
</TABLE>
- ----------
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) Name changed to AT&T--Liberty Media, Class "A" as
of March 10, 1999.
(c) Name changed to AT&T Corporation as of March 10,
1999.
(d) The aggregate identified cost for federal income tax
purposes is substantially the same. Market value includes
net unrealized appreciation of $65,439,490 which consists
of aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over
tax cost of $66,860,792 and aggregate gross unrealized
depreciation for all securities in which there is an excess
of tax cost over market value of $1,421,302.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
- ------
Investments, at market value (identified cost $104,702,503) (Note 1) $170,141,993
Repurchase agreement (identified cost $12,972,000) (Note 1)......... 12,972,000
Cash ............................................................... 306
Receivables:
Investments sold .................................................. 644,225
Fund shares sold .................................................. 620,077
Dividends and interest ............................................ 93,409
Deferred state qualification expenses (Note 1) ..................... 25,803
Prepaid insurance (Note 1) ......................................... 8,022
------------
Total assets .................................................. 184,505,835
Liabilities
- -----------
Payables (Note 4):
Investments purchased ............................................. $1,937,705
Fund shares redeemed .............................................. 182,142
Accrued management fee ............................................ 108,381
Accrued distribution fee .......................................... 67,872
Other accrued expenses ............................................ 107,888
Total liabilities ............................................. 2,403,988
------------
Net assets, at market value ........................................ $182,101,847
============
Net Assets
- ----------
Net assets consist of:
Paid-in capital ................................................... $109,692,985
Undistributed net investment loss ................................. (358,659)
Accumulated net realized gain ..................................... 7,328,031
Net unrealized appreciation on investments ........................ 65,439,490
------------
Net assets, at market value ........................................ $182,101,847
============
Class A Shares
- --------------
Net asset value and redemption price per share
($146,099,725 divided by 5,838,765 shares of beneficial interest
outstanding, no par value) (Notes 1 and 2) ....................... $ 25.02
=======
Maximum offering price per share (100/95.25 of $25.02).............. $ 26.27
=======
Class B Shares
- --------------
Net asset value, offering price and redemption price per share
($12,660,399 divided by 519,054 shares of beneficial interest
outstanding, no par value) (Notes 1 and 2) ........................ $ 24.39
=======
Class C Shares
- --------------
Net asset value, offering price and redemption price per share
($23,341,723 divided by 957,515 shares of beneficial interest
outstanding, no par value) (Notes 1 and 2) ........................ $ 24.38
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED FEBRUARY 28, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- -----------------
<S> <C> <C>
Income:
Dividends ........................................................ $ 553,008
Interest ......................................................... 184,475
-----------
Total income ................................................. 737,483
Expenses (Notes 1 and 4):
Management fee ................................................... $570,108
Distribution fee (Class A Shares) ................................ 239,492
Distribution fee (Class B Shares) ................................ 42,796
Distribution fee (Class C Shares) ................................ 86,646
Shareholder servicing fees ....................................... 41,268
Professional fees ................................................ 36,450
Custodian/Fund accounting fees ................................... 35,548
State qualification expenses ..................................... 19,317
Federal registration fees ........................................ 8,717
Reports to shareholders .......................................... 6,413
Trustees' fees and expenses ...................................... 4,855
Insurance expense ................................................ 3,857
Other ............................................................ 675
--------
Total expenses .................................................. 1,096,142
-----------
Net investment loss ............................................... (358,659)
-----------
Realized and Unrealized Gain on Investments
- -------------------------------------------
Net realized gain from investment transactions .................... 7,343,431
Net increase in unrealized appreciation of investments
during the period................................................. 30,884,575
-----------
Net gain on investments ......................................... 38,228,006
-----------
Net increase in net assets resulting from operations .............. $37,869,347
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
FEBRUARY 28, 1999 YEAR ENDED
(UNAUDITED) AUGUST 31, 1998
=================== ================
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment loss ............................................... $ (358,659) $ (413,139)
Net realized gain from investment transactions .................... 7,343,431 9,960,883
Net increase in unrealized appreciation of investments
during the period ................................................ 30,884,575 5,542,290
------------ ------------
Net increase in net assets resulting from operations .............. 37,869,347 15,090,034
------------ ------------
Distributions to shareholders from:
Net realized gains, Class A Shares,
($1.32 and $2.13 per share, respectively)......................... (6,989,209) (9,263,114)
Net realized gains, Class B Shares, ($1.32 per share) ............. (477,823) --
Net realized gains, Class C Shares,
($1.32 and $2.13 per share, respectively)......................... (983,408) (331,791)
Increase in net assets from Fund share transactions (Note 2) ....... 31,355,121 31,767,147
------------ ------------
Increase in net assets ............................................. 60,774,028 37,262,276
Net assets, beginning of period .................................... 121,327,819 84,065,543
------------ ------------
Net assets, end of period (including accumulated net
investment loss of $358,659 for the period ended
February 28, 1999)................................................ $182,101,847 $121,327,819
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
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
SIX MONTH
PERIOD FOR THE
ENDED YEARS ENDED
FEBRUARY 28, AUGUST 31,
1999 ================================================================
(UNAUDITED) 1998 1997 1996 1995 1994
================ =========== =========== ================ =========== ===========
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 20.34 $ 18.60 $ 15.58 $ 15.53 $ 15.30 $ 15.62
--------- -------- -------- --------- -------- --------
Income from Investment Operations:
Net investment income (loss)(a) ........... (.04) (.07) (.06) .00 (e) .08 .02
Net realized and unrealized gain on
investments .............................. 6.04 3.94 4.85 1.81 1.37 1.05
--------- -------- -------- --------- -------- --------
Total from Investment Operations .......... 6.00 3.87 4.79 1.81 1.45 1.07
--------- -------- -------- --------- -------- --------
Less Distributions:
Dividends from net investment
income ................................... -- -- -- (.04) (.06) (.03)
Distributions from net realized gains ..... (1.32) (2.13) (1.77) (1.72) (1.16) (1.36)
--------- -------- -------- --------- -------- --------
Total Distributions ....................... (1.32) (2.13) (1.77) (1.76) (1.22) (1.39)
--------- -------- -------- --------- -------- --------
Net asset value, end of period ............. $ 25.02 $ 20.34 $ 18.60 $ 15.58 $ 15.53 $ 15.30
========= ======== ======== ========= ======== ========
Total Return(%)(d) ......................... 29.96 (c) 21.45 33.61 12.79 10.85 7.07
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets ......................... 1.34 (b) 1.41 1.48 1.54 1.62 1.55
Net investment income (loss) to
average daily net assets(a) .............. (.37)(b) (.34) (.30) (.02) .49 .15
Portfolio turnover rate ................... 20 (c) 25 42 54 66 65
Net assets, end of period ($ millions)..... 146 104 81 70 73 74
<CAPTION>
CLASS B SHARES
=====================================
FOR THE
SIX MONTH
PERIOD FOR THE
ENDED PERIOD
FEBRUARY 28, ENDED
1999 AUGUST 31,
(UNAUDITED) 1998/double dagger/
================ ====================
<S> <C> <C>
Net asset value, beginning of period ....... $ 19.91 $ 19.36
--------- ---------
Income from Investment Operations:
Net investment income (loss)(a) ........... (.08) (.06)
Net realized and unrealized gain on
investments .............................. 5.88 .61
--------- ---------
Total from Investment Operations .......... 5.80 .55
--------- ---------
Less Distributions:
Dividends from net investment
income ................................... -- --
Distributions from net realized gains ..... (1.32) --
--------- ---------
Total Distributions ....................... (1.32) --
--------- ---------
Net asset value, end of period ............. $ 24.39 $ 19.91
========= =========
Total Return(%)(d) ......................... 29.59 (c) 2.84 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets ......................... 1.95 (b) 2.01 (b)
Net investment income (loss) to
average daily net assets(a) .............. (.99)(b) (.86)(b)
Portfolio turnover rate ................... 20 (c) 25
Net assets, end of period ($ millions)..... 13 5
<CAPTION>
CLASS C SHARES
==========================================================================
FOR THE
SIX MONTH
PERIOD FOR THE
ENDED YEARS ENDED
FEBRUARY 28, AUGUST 31,
1999 =========================================================
(UNAUDITED) 1998 1997 1996 1995/dagger/
================ =========== =========== ================ ================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 19.90 $ 18.34 $ 15.46 $ 15.50 $ 14.18
--------- -------- -------- --------- ---------
Income from Investment Operations:
Net investment income (loss)(a) ........... (.09) (.09) (.13) (.03)(e) (.01)
Net realized and unrealized gain on
investments .............................. 5.89 3.78 4.78 1.75 1.33
--------- -------- -------- --------- ---------
Total from Investment Operations .......... 5.80 3.69 4.65 1.72 1.32
--------- -------- -------- --------- ---------
Less Distributions:
Dividends from net investment
income ................................... -- -- -- ( .04) --
Distributions from net realized gains ..... ( 1.32) ( 2.13) ( 1.77) ( 1.72) --
--------- -------- -------- --------- ---------
Total Distributions ....................... ( 1.32) ( 2.13) ( 1.77) ( 1.76) --
--------- -------- -------- --------- ---------
Net asset value, end of period ............. $ 24.38 $ 19.90 $ 18.34 $ 15.46 $ 15.50
========= ======== ======== ========= =========
Total Return(%)(d) ......................... 29.61 (c) 20.72 32.91 12.16 9.31 (c)
Ratios (%)/ Supplemental Data:
Operating expenses, net, to average
daily net assets ......................... 1.95 (b) 2.00 2.04 2.05 2.17 (b)
Net investment income (loss) to
average daily net assets(a) .............. (.98)(b) (.90) (.88) (.57) (.33)(b)
Portfolio turnover rate ................... 20 (c) 25 42 54 66
Net assets, end of period ($ millions)..... 23 12 3 1 .4
</TABLE>
- -------
/dagger/ For the period April 3, 1995 (commencement of Class C Shares) to
August 31, 1995.
/double dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to August 31, 1998.
(a) Excludes management fees waived by the Manager in the amount of less than
$0.04, $0.04 and $0.04 per Class A Shares for the three years ended August
31, 1996, respectively. The operating expense ratios including such items
would have been 1.79%, 1.87% and 1.81% for Class A Shares for the three
years ended August 31, 1996, respectively. Excludes management fees waived
by the Manager in the amount of less than $0.04 and $0.04 per Class C
Share for the two years ended August 31, 1996, respectively. The operating
expense ratio including such items would have been 2.30% and 2.42%
(annualized) for Class C Shares, respectively.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
(e) Amounts calculated prior to reclassification of $23,981. The effect of such
reclassification would have no effect on net investment income for Class A
Shares and would have resulted in an increase in net investment income of
$0.10 for Class C shares.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
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 invests
principally in those equity securities that the Fund's portfolio
manager believes are undervalued and therefore offer above-average
potential for long-term appreciation. The Fund currently issues Class
A, Class B 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 B Shares, are sold subject to a 5% maximum
contingent deferred sales load (based on the lower of purchase price or
redemption price), declining over a six-year period. Class C Shares,
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
made in less than one year of purchase. The preparation of financial
statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting
policies:
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 amortized cost which, 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.
STATE QUALIFICATION EXPENSES: State qualification fees are amortized
based either on the time period covered by the qualification or as
related shares are sold, whichever is appropriate for each state.
EXPENSES: Each Fund is charged for those expenses that are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expense, etc., are allocated proportionately among the
Heritage Funds. Expenses of each Fund are allocated to each class of
shares based upon their relative percentage of current net assets. All
expenses that are directly attributable to a specific class of shares,
such as distribution fees are charged directly to that class.
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: For purposes of these financial statements, investment security
transactions are accounted for on a trade date basis. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
Note 2: FUND SHARES. At February 28, 1999, there was an unlimited number of
shares of beneficial interest of no par value authorized.
Transactions in Class A, B and C Shares of the Fund during the six month
period ended February 28, 1999, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
============================ ========================== ============================
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
============= ============== ============ ============= ============= ==============
<S> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED FEBRUARY 28, 1999
(UNAUDITED)
Shares sold .......................... 767,736 $ 18,322,845 234,045 $5,498,686 435,521 $ 10,124,802
Shares issued on reinvestment of
distributions ...................... 292,670 6,833,845 20,394 464,776 41,940 955,395
Shares redeemed ...................... (323,688) (7,649,635) (10,295) (241,137) (128,172) (2,954,456)
-------- ------------ ------- ---------- -------- ------------
Net increase ......................... 736,718 $ 17,507,055 244,144 $5,722,325 349,289 $ 8,125,741
============ ========== ============
Shares outstanding:
Beginning of period ................. 5,102,047 274,910 608,226
--------- ------- --------
End of period ....................... 5,838,765 519,054 957,515
========= ======= ========
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Transactions in Class A and C Shares of the Fund during the year ended
August 31, 1998 and Class B Shares from January 2, 1998 (commencement of
Class B Shares) to August 31, 1998, were as follows:
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
============================== ========================= ===========================
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
============= ================ =========== ============= ============ ==============
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED AUGUST 31, 1998
Shares sold .......................... 814,994 $ 18,387,400 283,707 $6,354,813 487,516 $10,793,635
Shares issued on reinvestment of
distributions ...................... 470,334 9,072,734 -- -- 17,500 331,791
Shares redeemed ...................... (567,161) (12,188,566) (9,797) (213,028) (34,936) (771,632)
-------- ------------- ------- ---------- ------- -----------
Net increase ......................... 718,167 $ 15,271,568 273,910 $6,141,785 470,080 $10,353,794
============= ========== ===========
Shares outstanding:
Beginning of year ................... 4,383,880 1,000 138,146
--------- ------- -------
End of year ......................... 5,102,047 274,910 608,226
========= ======= =======
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended
February 28, 1999, purchases and sales of investment securities
(excluding repurchase agreements and short-term obligations) aggregated
$46,366,254 and $28,952,775, respectively.
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT,
FUND ACCOUNTING 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 .75% of the Fund's average daily net assets, computed
daily and payable monthly. Pursuant to the current registration
statement, the Manager has agreed to waive its fees and, if necessary,
reimburse the Fund to the extent that Class A annual operating expenses
exceed 1.45% of the Class A Share average daily net assets and to the
extent that the Class B and Class C annual operating expenses each
exceed 2.20% of that classes' average daily net assets for the fiscal
year ending August 31, 1999. No fees were waived and no expenses were
reimbursed for the six month period ended February 28, 1999.
The Manager entered into an agreement with Liberty Investment
Management, a division of Goldman Sachs Asset 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. For the six month period ended February
28, 1999 the subadviser earned $190,036, which was paid by the Manager.
From December 1985 (commencement of operations) through February 26,
1995, Eagle Asset Management, Inc., a wholly owned subsidiary of Raymond
James Financial, Inc., was the sole 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
February 28, 1999 was $15,400. In addition, the Manager performs Fund
Accounting services and charged $23,448 during the six month period of
which $7,850 was payable as of February 28, 1999.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $230,854 in front-end sales charges for Class A
Shares, $8,711 in contingent deferred sales charges for Class B Shares
and $5,440 in contingent deferred sales charges for Class C Shares for
the six month period ended February 28, 1999. From these fees, the
Distributor paid commissions to salespersons and incurred other
distribution costs.
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 the Distributor a fee of up to .50% of the average
daily net assets for Class A Shares. The Class B and C Shares
Distribution Plan provides for payments at an annual rate of up to 1.00%
of the average daily net assets for Class B and Class C Shares,
respectively. Such fees are accrued daily and payable monthly. Class B
Shares will convert to Class A Shares eight years after the end of the
calendar month in which the shareholder's order to purchase was
accepted. 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, investment companies
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 employee of the Manager or an employee of an affiliate of the
Manager receives an annual fee of $8,666 and an additional fee of $3,250
for each combined quarterly meeting of the Heritage Mutual Funds
attended. Trustees' fees and expenses are paid equally by each of the
Heritage Mutual Funds.
Note 5: FEDERAL INCOME TAXES. For the year ended August 31, 1998, to reflect
reclassifications arising from permanent book/tax differences primarily
attributable to a net operating loss, the Fund credited accumulated net
investment loss and charged paid in capital $413,139.
10
<PAGE>
HERITAGE FAMILY OF FUNDS(TM)
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH
HERITAGE MONEY MARKET FUNDS
CASH TRUST MONEY MARKET
CASH TRUST MUNICIPAL MONEY MARKET
HERITAGE BOND FUNDS
HIGH YIELD
INTERMEDIATE GOVERNMENT
HERITAGE STOCK FUNDS
AGGRESSIVE GROWTH
CAPITAL APPRECIATION
GROWTH EQUITY
INCOME-GROWTH
INTERNATIONAL
MIDCAP
SMALL CAP
VALUE EQUITY
We are pleased that many of you are also investors in these funds. For more
information and a prospectus for any of these mutual funds, please contact your
financial advisor. Please read the prospectus carefully before you invest in any
of the funds.
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.
Copyright 1999 Heritage Asset Management, Inc.
11M
AR5331S CA 2/99
[HERITAGE LOGO] Heritage Capital Appreciation Trust
P.O. Box 33022
St. Petersburg, FL 33733
- -------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
