CAPITAL
APPRECIATION
TRUST
[GRAPHIC OMITTED]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
ANNUAL REPORT
INVESTMENT PERFORMANCE
FOR THE YEAR ENDED
AUGUST 31, 1999
[HERITAGE LOGO]
--------------------
CAPITAL APPRECIATION
TRUST(TM)
--------------------
<PAGE>
October 11, 1999
Dear Fellow Shareholders:
On behalf of all of us at Heritage, I am pleased to report to you on
another successful year for Heritage Capital Appreciation Trust (the "Fund") for
the fiscal year ended August 31, 1999. For this period the Class A, B and C
Shares of your Fund returned +41.18%*, +40.27%* and +40.29%*, respectively. For
the same period, the Standard & Poor's 500 Composite Stock Price Index ("S & P
500") returned +39.80%.
Over longer term periods, your Fund has also delivered strong positive
results. Shown below are average annual returns through September 30, 1999, net
of all expenses and maximum front- and back- end sales charges, as applicable.
Obviously, if you did not incur sales charges during these periods, your own
returns would be higher.
CLASS A** CLASS B** CLASS C**
--------- --------- ---------
One Year ............... +28.73% +30.28% +34.28%
Three Year ............. +28.10% N/A +29.45%
Five Year .............. +23.04% N/A N/A
Ten Year ............... +15.13% N/A N/A
Recently this performance has been recognized by many independent outside
rating services and publications, including FORBES magazine, where your Fund was
included along with only 14 other funds in the FORBES Honor Roll(a), and
Morningstar Inc., where your Fund, based on 3, 210 domestic equity funds, was
rated 5-stars(b) for the overall period ended September 30, 1999. The FORBES
Honor Roll ranking was based on 1,231 stock, balanced, foreign and global funds
for the period August 31, 1987 to June 30, 1999.
As Herb Ehlers points out in the letter that follows, investing is a
long-term proposition, one that sometimes has, and again will, test our
patience. Please bear in mind that the extraordinary absolute returns your Fund
has produced recently should not be considered normal. We do believe, however,
that Herb Ehlers' philosophy that "Wealth is created through the long-term
ownership of a growing business" will continue to make sense as an investment
strategy through any market environment. Herb and his team at our subadviser,
Goldman Sachs Asset Management, will continue to focus on investing in growing
companies with recurring revenue streams, high free cash flow, dominant market
shares, pricing control and stock prices that are below the subadvisor's
estimates of the companies' true values. While not all companies we own will
meet all of these criteria, our portfolio, as a whole is comprised of companies
that we believe are well positioned for attractive future returns.
Thank you for your continuing investment in Heritage Capital Appreciation
Trust. If there are ever any suggestions you would like to share with us about
ways we could better serve you, 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 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 Class A Shares of 4.75%. These numbers also reflect a
contingent deferred sales load (CDSL) on Class B Shares of 5% on redemptions
made within the first year of purchase, declining to 0% over six years. A 1%
CDSL for Class C Shares is charged on redemptions made within 12 months of
purchase.
(a) The funds listed in the FORBES Honor Roll pass a stringent group of screens
for long-term after-tax performance, bull- and bear-market performance and
manager tenure for the period 8/31/87 to 6/30/99. The performance numbers
used for the Fund did take into account front-end sales charges. Past
performance is no guarantee of future results.
(b) Morningstar, Inc. brings both performance and risk together into one
evaluation. Heritage Capital Appreciation Trust Class A Shares also received
a 5-star rating out of 3,210 and 2,010 domestic equity funds, respectively
for the three- and five-year periods ended September 30, 1999. For the
ten-year period ended September 30, 1999, the Fund received a 4-star rating
out of 751 domestic equity funds. These ratings are subject to change every
month. The top 10% of domestic equity funds receive five stars and the next
22.5% receive four stars. The performance numbers used for the Fund did take
into account front-end sales charges. Past performance is no guarantee of
future results.
<PAGE>
October 5, 1999
Dear Fellow Shareholders:
The performance results for the Heritage Capital Appreciation Trust
("HCAT") for the fiscal year ended August 31, 1999 were just almost
unbelievable. By the way, as I mentioned in my last letter, I'll be referring to
HCAT as "our Fund" since we're all shareholders together. Our Fund's Class A
shares net asset value was up 41.2%* compared to 39.8% for the Standard & Poor's
500 Composite Stock Price Index ("S&P 500"), and ranked in the top 17%** of its
Morningstar peer group (Large Blend). For the three years ended August 31, 1999,
our Fund's Class A shares value was up at an annual rate of 31.8%* per year
compared to 28.6% for the S&P 500, and ranked in the top 1%** of 534 funds in
its Morningstar peer group.
I must stop here and mention my usual words of caution regarding these
terrific performance returns. I have two thoughts related to our Fund's
performance. First, it really is a phenomenal performance on both an absolute
and relative basis (compared to both the S&P 500 and the Morningstar peer
group). Second, it is unlikely to occur again for quite some time. As we all
must know, earning 41.2% in one year and an annual rate of 31.8% over three
years is just unsustainable. At those rates we'd own all the dollars in
existence within a lifetime! Indeed, even 15% per year is a difficult rate to
achieve over long periods of time; for example, at 15% per year, $100,000
increases in value to $100 million in 50 years.
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 twelve months ended August 31, 1999, our Fund benefited from its
holdings in various growth industries including broadcasting, internet,
retailing, entertainment, and telecommunications.
Our Fund had six stocks which more than doubled in the past year: AES
Corporation, one of the largest independent power producers in the world;
Valassis Communications, a leading marketing services firm featuring
free-standing newspaper inserts; Westwood One, a radio network providing news,
sports, weather, music, talk, traffic and entertainment to radio stations
nationwide; Telephone & Data Systems, an independent local telephone and
wireless (cellular) phone company; First Data Corporation, a computer services
firm; and Telecommunications Inc., the largest cable TV company in the nation,
which was acquired by AT&T.
As I mentioned in my last letter to shareholders, Telephone & Data Systems
("TDS") is finally, after ten years of flat stock performance, producing strong
stock performance. As of this letter, this stock almost tripled since August 31,
1998. Our patience, long tested, is finally being rewarded. TDS remains one of
the turtles in that well-known race with the hare.
- ----------------
* These returns are calculated without the imposition of front-end sales
charges.
** Morningstar, Inc. performance rankings for the Heritage Capital Appreciation
Trust Class A Shares were based on a quantitative measure of risk-adjusted
returns. This measure calculated by Morningstar shows how well a fund has
balanced risk and return relative to other funds in the same category. For
the 1-year period ended August 31, 1999, the Fund was ranked in the 17th
percentile out of 856 large blend funds. For the 3-year period ended August
31, 1999, the Fund was ranked in the 1st percentile out of 534 large blend
funds. The performance numbers used for the Fund did not take into account
front-end sales charges. See the previous letter by Stephen G. Hill for a
full statement of returns. Past performance is no guarantee of future
results.
2
<PAGE>
As with any portfolio of 45 stocks, our Fund has had its usual share of
disappointments (I.E. company fundamentals less than we expected and a stock
which declines). Service Corp International ("SRV"), the largest funeral home
and cemetery company in the world, continues to surprise us with adverse news
regarding its operations. As of fiscal year end, that stock had declined 58% and
has since declined another 43%. We're still holding most of our position, but
our patience is being tested. I keep asking myself, how difficult can the
funeral home/cemetery business be? Other stocks on the "disaster board" include
Waste Management, the largest waste company in the world, and McKesson HBOC, a
drug wholesaler and computer software firm. The latter two stocks have been
sold, so at least they'll be off the "disaster board" next year.
Our Fund's portfolio continues to emphasize media, entertainment,
pharmaceutical, and tele-communications stocks. We believe that these sectors of
the economy should continue to prosper as the economy grows during the next
decade.
We remain long-term bullish on America and the stock market. Over a long
time horizon, stocks have produced excellent results compared to inflation and
most other investment alternatives.
As we enter the next millennium, there are many reasons to be optimistic
about the world, America's economy and the stock market. But, more on all of
that, plus the phenomenal last 25 years in my next shareholder letter.
Sincerely,
/s/ HERBERT E. EHLERS
---------------------
Herbert E. Ehlers
Managing Director
Goldman Sachs Co.
Chief Investment Officer
Growth Equity Strategy
Goldman Sachs Asset Management
3
<PAGE>
GROWTH OF A $10,000 INVESTMENT
SINCE SEPTEMBER 1, 1989 OF HERITAGE CAPITAL APPRECIATION TRUST
CLASS A SHARES
[GRAPH OMITTED]
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF HERITAGE CAPITAL APPRECIATION TRUST
CLASS B SHARES ON JANUARY 2, 1998
[GRAPHIC OMITTED]
The Value Line Index does not include reinvestment of dividends.
- ----------------
* Average annual returns for Heritage Capital Appreciation Trust Class A and B
Shares are calculated in conformance with item 21 of Form N-1A, which assumes
the maximum sales load of 4.75% for Class A Shares, a 4% contingent deferred
sales load for Class B Shares and reinvestment of dividends for Class A and B
Shares. Performance presented represents historical data. 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 their
original cost. The Fund's past performance is not indicative of future
performance and should be considered in light of the Fund's investment policy
and objectives, the characteristics and quality of its portfolio securities,
and the periods selected.
4
<PAGE>
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF HERITAGE CAPITAL APPRECIATION TRUST
CLASS C SHARES ON APRIL 3, 1995
[GRAPHIC OMITTED]
The Value Line Index does not include reinvestment of dividends.
- ----------------
* Average annual returns for Heritage Capital Appreciation Trust Class C Shares
are calculated in conformance with item 21 of Form N-1A, which assumes
reinvestment of dividends for Class C Shares. Performance presented represents
historical data. 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 their original cost. The Fund's past performance is not
indicative of future performance and should be considered in light of the
Fund's investment policy and objectives, the characteristics and quality of
its portfolio securities, and the periods selected.
ANNUAL RETURN FOR CLASS A SHARES OF
HERITAGE CAPITAL APPRECIATION TRUST
[GRAPHIC OMITTED]
These returns are calculated without the imposition of front-end sales charges.
Past performance is no guarantee of future results.
5
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
AUGUST 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCK--94.8%(a)
- ----------------------
ADVERTISING/COMMUNICATIONS--0.5%
--------------------------------
37,000 Outdoor Systems Inc. * ........... $ 1,195,563
-----------
BANKING--2.0%
-------------
76,200 State Street Corporation ......... 4,562,475
-----------
BEVERAGES--0.8%
---------------
48,000 PepsiCo, Inc. .................... 1,638,000
-----------
BROADCASTING--21.5%
-------------------
42,700 AMFM Inc. * ...................... 2,102,975
291,000 AT&T - Liberty Media Group,
Class "A" * .................... 9,312,000
112,000 Cablevision Systems
Corporation, Class "A" * ....... 7,910,000
120,400 CBS Corporation .................. 5,658,800
142,349 Clear Channel
Communications Inc. * .......... 9,973,327
101,400 Infinity Broadcasting
Corporation, Class "A" * ....... 2,744,138
129,700 MediaOne Group Inc. * ............ 8,527,775
54,000 Westwood One, Inc. * ............. 2,072,250
-----------
48,301,265
-----------
COSMETICS/TOILETRIES--1.8%
--------------------------
67,200 Avon Products, Inc. .............. 2,948,400
22,000 Colgate-Palmolive Company ........ 1,177,000
-----------
4,125,400
-----------
DATA PROCESSING--4.0%
---------------------
160,000 First Data Corporation ........... 7,040,000
70,000 Checkfree Holdings
Corporation * .................. 2,047,500
-----------
9,087,500
-----------
ENTERTAINMENT--3.7%
-------------------
140,000 Time Warner, Inc. ................ 8,303,750
-----------
FINANCE--7.8%
-------------
55,400 AMBAC Financial Group, Inc. ...... 2,925,813
83,300 Fannie Mae ....................... 5,175,013
127,300 Freddie Mac ...................... 6,555,950
118,000 MBNA Corporation ................. 2,913,125
-----------
17,569,901
-----------
FOOD--2.8%
----------
98,000 Nabisco Group Holdings
Corporation .................... 1,739,500
76,300 Ralston Purina Group ............. 2,098,250
31,400 Wm. Wrigley Jr. Company .......... 2,459,012
-----------
6,296,762
-----------
HOTELS/MOTELS/INNS--0.9%
------------------------
57,400 Marriott International, Inc.,
Class "A" ...................... 1,965,950
-----------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
-------------------------
INSURANCE--2.6%
---------------
30,096 American International
Group, Inc. ...................... 2,789,523
84,400 Nationwide Financial
Services, Inc., Class "A" ........ 3,080,600
-----------
5,870,123
-----------
INTERNET--1.0%
--------------
57,788 Excite@Home Corporation,
Series "A" * ..................... 2,318,744
-----------
LEISURE/AMUSEMENT--0.3%
-----------------------
29,350 Hasbro, Inc. ....................... 717,240
-----------
PHARMACEUTICAL--10.1%
---------------------
68,300 American Home Products
Corporation ...................... 2,834,450
85,500 Bristol-Myers Squibb Company ....... 6,017,063
154,500 Pfizer, Inc. ....................... 5,832,375
67,000 Schering-Plough Corporation ........ 3,521,687
66,200 Warner-Lambert Company ............. 4,385,750
-----------
22,591,325
-----------
PUBLISHING--11.5%
-----------------
95,100 A.H. Belo Corporation,
Class "A" ........................ 1,800,956
104,800 Central Newspapers, Inc.,
Class "A" ........................ 4,434,350
56,000 Gannett Company .................... 3,804,500
142,000 New York Times Company,
Class "A" ........................ 5,546,875
28,000 Tribune Company .................... 2,612,750
159,500 Valassis Communications, Inc. ...... 6,978,125
36,290 Ziff-Davis, Inc. * ................. 560,226
-----------
25,737,782
-----------
REAL ESTATE INVESTMENT TRUST--0.5%
----------------------------------
45,000 Manufactured Home
Communities, Inc. ................ 1,096,875
-----------
RETAIL STORES--3.2%
-------------------
77,200 Tandy Corporation .................. 3,647,700
155,000 Walgreen Company ................... 3,594,062
-----------
7,241,762
-----------
SERVICES--3.2%
--------------
74,000 Cendant Corporation * .............. 1,327,375
45,100 Galileo International, Inc. ........ 2,187,350
261,000 Service Corporation
International .................... 3,605,062
-----------
7,119,787
-----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
AUGUST 31, 1999
(CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
- -------------------------
TELECOMMUNICATIONS--12.4%
-------------------------
47,000 American Tower Corporation,
Class "A" ....................... $ 1,069,250
28,000 Crown Castle International
Corporation * ................... 423,500
103,600 Echostar Communications
Corporation, Class "A" * ........ 8,663,550
62,000 MCI WorldCom, Inc. * .............. 4,696,500
42,000 QUALCOMM, Inc. * .................. 8,071,875
38,000 Sprint Corporation
(PCS Group) * ................... 2,270,500
36,300 Telephone & Data
Systems, Inc. ................... 2,522,850
------------
27,718,025
------------
UTILITIES-DIVERSIFIED--4.2%
---------------------------
153,300 AES Corporation ................... 9,303,394
------------
Total Common Stocks
(cost $146,718,963)........................... 212,761,623
------------
REPURCHASE AGREEMENT--4.8%(a)
- -----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated
August 31, 1999 @ 5.30% to be
repurchased at $10,756,583
on September 1, 1999, collateralized by
$11,000,000 United States Treasury Bonds,
6.38% due August 15, 2027, (market value
$10,997,833 including interest)
(cost $10,755,000)............................. 10,755,000
------------
TOTAL INVESTMENT PORTFOLIO
(cost $157,473,963)(b), 99.6%(a).............. 223,516,623
OTHER ASSETS AND LIABILITIES, net, 0.4%(a) 856,368
------------
NET ASSETS, 100.0% ............................ $224,372,991
============
- -------------------
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax
purposes is substantially the same. Market value includes net
unrealized appreciation of $66,042,660 which consists of aggregate
gross unrealized appreciation for all securities in which there is an
excess of market value over tax cost of $70,161,286 and aggregate
gross unrealized depreciation for all securities in which there is an
excess of tax cost over market value of $4,118,626.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C> <C>
Investments, at market value (identified cost $146,718,963) (Note 1) ..................... $ 212,761,623
Repurchase agreement (Identified cost $10,755,000) (Note 1) .............................. 10,755,000
Cash ..................................................................................... 769
Receivables:
Fund shares sold ....................................................................... 1,219,831
Dividends and interest ................................................................. 106,315
Deferred state qualification expenses (Note 1) ........................................... 12,017
Prepaid insurance (Note 1) ............................................................... 2,885
-------------
Total Assets ......................................................................... 224,858,440
LIABILITIES
- -----------
Payables (Note 4):
Fund shares redeemed ................................................................... $153,050
Accrued management fee ................................................................. 141,491
Accrued distribution fee ............................................................... 96,860
Other accrued expenses ................................................................. 94,048
Total Liabilities .................................................................... 485,449
-------------
Net assets, at market value .............................................................. $ 224,372,991
=============
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital ........................................................................ $ 136,297,828
Accumulated net realized gain .......................................................... 22,032,503
Net unrealized appreciation on investments ............................................. 66,042,660
-------------
Net assets, at market value .............................................................. $ 224,372,991
=============
CLASS A SHARES
- --------------
Net asset value and redemption price per share ( $169,067,206 divided by
6,221,217 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ...... $ 27.18
=============
Maximum offering price per share (100/95.25 of $27.18 ) .................................. $ 28.54
=============
CLASS B SHARES
- --------------
Net asset value, offering price and redemption price per share ( $20,137,316 divided by
762,639 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ........ $ 26.40
=============
CLASS C SHARES
- --------------
Net asset value, offering price and redemption price per share ( $35,168,469 divided by
1,332,714 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ...... $ 26.39
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
- -----------------
<S> <C> <C>
Income:
Dividends ................................................................... $ 1,173,882
Interest .................................................................... 373,119
------------
Total Income .............................................................. 1,547,001
Expenses (Notes 1 and 4):
Management fee .............................................................. $1,378,107
Distribution fee (Class A Shares) ........................................... 539,828
Distribution fee (Class B Shares) ........................................... 131,473
Distribution fee (Class C Shares) ........................................... 243,050
Shareholder servicing fees .................................................. 108,265
Custodian/Fund accounting fees .............................................. 75,818
Professional fees ........................................................... 47,971
State qualification expenses ................................................ 45,872
Reports to shareholders ..................................................... 10,473
Federal registration fees ................................................... 9,498
Trustees' fees and expenses ................................................. 9,288
Insurance ................................................................... 8,994
Other ....................................................................... 1,601
------------
Total expenses ............................................................ 2,610,238
------------
Net investment loss ........................................................... (1,063,237)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
- ------------------------------------------
Net realized gain from investment transactions ................................ 23,111,162
Net increase in unrealized appreciation of investments during the year ........ 31,487,745
------------
Net gain on investments .................................................... 54,598,907
------------
Net increase in net assets resulting from operations .......................... $ 53,535,670
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------
AUGUST 31, 1999 AUGUST 31, 1998
----------------- -----------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment loss ......................................................... $ (1,063,237) $ (413,139)
Net realized gain from investment transactions .............................. 23,111,162 9,960,883
Net increase in unrealized appreciation of investments during the year ...... 31,487,745 5,542,290
------------ ------------
Net increase in net assets resulting from operations ........................ 53,535,670 15,090,034
Distributions to shareholders from:
Net realized gains Class A Shares, ($1.32 and $2.13 per share, respectively). (6,989,221) (9,263,114)
Net realized gains Class B Shares, ($1.32 per share) ........................ (477,834) --
Net realized gains Class C Shares, ($1.32 and $2.13 per share, respectively). (983,407) (331,791)
Increase in net assets from Fund share transactions (Note 2) .................. 57,959,964 31,767,147
------------ ------------
Increase in net assets ........................................................ 103,045,172 37,262,276
Net assets, beginning of year ................................................. 121,327,819 84,065,543
------------ ------------
Net assets, end of year ....................................................... $224,372,991 $121,327,819
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<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 YEARS ENDED
AUGUST 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ............... $ 20.34 $ 18.60 $ 15.58 $ 15.53 $ 15.30
-------- -------- -------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) ............... (0.10) (0.07) (0.06) 0.00 (b) 0.08
Net realized and unrealized gain on
investments .................................. 8.26 3.94 4.85 1.81 1.37
-------- -------- -------- --------- --------
Total from Investment Operations ............... 8.16 3.87 4.79 1.81 1.45
-------- -------- -------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... -- -- -- (0.04) (0.06)
Distributions from net realized gains .......... (1.32) (2.13) (1.77) (1.72) (1.16)
-------- -------- -------- --------- --------
Total Distributions ............................ (1.32) (2.13) (1.77) (1.76) (1.22)
-------- -------- -------- --------- --------
NET ASSET VALUE, END OF YEAR ..................... $ 27.18 $ 20.34 $ 18.60 $ 15.58 $ 15.53
======== ======== ======== ========= ========
TOTAL RETURN (%) (c) ............................. 41.18 21.45 33.61 12.79 10.85
RATIOS (%)/ SUPPLEMENTAL DATA
Operating expenses, net, to average daily net
assets (a) ................................... 1.29 1.41 1.48 1.54 1.62
Net investment income (loss) to average daily
net assets ................................... (.45) (.34) (.30) (.02) .49
Portfolio turnover rate ......................... 44 25 42 54 66
Net assets, end of year (millions) .............. 169 104 81 70 73
<CAPTION>
CLASS B SHARES
--------------------------
FOR THE YEARS ENDED
AUGUST 31,
--------------------------
1999 1998/dagger//dagger/
-------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ............... $ 19.91 $ 19.36
-------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) ............... (0.19) (0.06)
Net realized and unrealized gain on
investments .................................. 8.00 0.61
-------- ----------
Total from Investment Operations ............... 7.81 0.55
-------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ -- --
Distributions from net realized gains ........... (1.32) --
-------- ----------
Total Distributions ............................. (1.32) --
-------- ----------
Net asset value, end of year ..................... $ 26.40 $ 19.91
======== ==========
TOTAL RETURN (%) (c) ............................. 40.27 2.84 (d)
RATIOS (%)/ SUPPLEMENTAL DATA
Operating expenses, net, to average daily net
assets (a) ................................... 1.92 2.01 (e)
Net investment income (loss) to average daily
net assets ................................... (1.10) (.86)(e)
Portfolio turnover rate ........................ 44 25
Net assets, end of year (millions) ............. 20 5
<CAPTION>
CLASS C SHARES
-------------------------------------------------------------------
FOR THE YEARS ENDED
AUGUST 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995/dagger/
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ............... $ 19.90 $ 18.34 $ 15.46 $ 15.50 $ 14.18
-------- -------- -------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) ............... (0.19) (0.09) (0.13) (0.03) (b) (0.01)
Net realized and unrealized gain on
investments .................................. 8.00 3.78 4.78 1.75 1.33
-------- -------- -------- ---------- ----------
Total from Investment Operations ............... 7.81 3.69 4.65 1.72 1.32
-------- -------- -------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... -- -- -- (0.04) --
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 YEAR ..................... $ 26.39 $ 19.90 $ 18.34 $ 15.46 $ 15.50
======== ======== ======== ========== ==========
TOTAL RETURN (%) (c) ............................. 40.29 20.72 32.91 12.16 9.31 (d)
RATIOS (%)/ SUPPLEMENTAL DATA
Operating expenses, net, to average daily net
assets (a) ................................... 1.92 2.00 2.04 2.05 2.17 (e)
Net investment income (loss) to average daily
net assets ................................... (1.10) (.90) (.88) (.57) (.33)(e)
Portfolio turnover rate ........................ 44 25 42 54 66
Net assets, end of year (millions) ............. 35 12 3 1 .4
</TABLE>
- -------
/dagger/ For the period April 3, 1995 (commencement of Class C Shares)
to August 31, 1995.
/dagger//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 and $0.04 per Class A Shares for the two
years ended August 31, 1995 and 1996, respectively. The
operating expense ratios including such items would have been
1.87% and 1.81% for Class A Shares for the two years ended
August 31, 1995 and 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,
1995 and 1996, respectively. The operating expense ratio
including such items would have been 2.30% and 2.42%
(annualized) for Class C Shares for the two years ended August
31, 1995 and 1996, respectively.
(b) 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.
(c) Does not reflect the imposition of a sales charge.
(d) Not annualized.
(e) Annualized.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
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 seeks to
achieve its objective by investing primarily in common stocks selected
for their potential to achieve capital appreciation over the long term.
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 maximum contingent deferred sales charge of 5% of the lower
of net asset value or purchase price payable upon any redemption made,
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 or the Nasdaq Stock Market 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 investment 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: The Fund is charged for those expenses which are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as trustees
fees, insurance expense, etc., are allocated proportionately among the
Heritage Funds. Expenses of the 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.
11
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 2: FUND SHARES. At August 31, 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 year
ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------- --------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED AUGUST 31, 1999
Shares sold ................... 1,525,107 $ 38,812,480 521,926 $ 13,082,756 906,945 $ 22,504,638
Shares issued on reinvestment
of distributions ............ 292,671 6,833,858 20,394 464,787 41,940 955,395
Shares redeemed ............... (698,608) (17,804,722) (54,591) (1,425,258) (224,397) (5,463,970)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 1,119,170 $ 27,841,616 487,729 $ 12,122,285 724,488 $ 17,996,063
============ ============ ============
Shares outstanding:
Beginning of year ............ 5,102,047 274,910 608,226
------------ ------------ ------------
End of year .................. 6,221,217 762,639 1,332,714
============ ============ ============
</TABLE>
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>
CLASS A SHARES CLASS B SHARES CLASS 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 year ended August 31, 1999,
purchases and sales of investment securities (excluding repurchase
agreements and short-tem obligations) aggregated $120,514,530 and
$76,851,297, 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 dated January 4, 1999, 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 fiscal year ending August 31,
1999.
The Manager entered into an agreement with 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 fiscal year ending
August 31, 1999 the subadviser earned $459,368, which was paid by the
Manager.
From December 12, 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
August 31, 1999 was $24,000. In addition, the Manager performs Fund
Accounting services for the Fund and charged $49,326 during the year, of
which $8,900 was payable as of August 31, 1999.
12
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $467,507 in front-end sales charges for Class A
Shares, $42,418 in contingent deferred sales charges for Class B Shares
and $11,984 in contingent deferred sales charges for Class C Shares for
the fiscal year ending August 31, 1999. From these fees, the Distributor
paid commissions to salespersons and incurred other distribution costs.
Agency brokerage commissions for the Fund for the year ended August 31,
1999 were $206,766, of which $2,580 was paid to Raymond James &
Associates, Inc.
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 or its affiliates (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 portfolio in the Heritage Mutual Funds.
Note 5: FEDERAL INCOME TAXES. For the year ended August 31, 1999, to reflect
reclassification arising from permanent book/tax differences primarily
attributable to a net operating loss, the Fund credited accumulated net
investment loss and charged accumulated net realized gain for
$1,063,237.
13
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Heritage Capital Appreciation Trust
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Heritage Capital Appreciation
Trust (the "Fund") at August 31, 1999, 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
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
October 13, 1999
- --------------------------------------------------------------------------------
1999 FEDERAL INCOME TAX NOTICE
(UNAUDITED)
- --------------------------------------------------------------------------------
During the year ended August 31, 1999, the Fund paid to shareholders
$8,450,462 or $1.32 per share from long-term capital gains.
14
<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
Mid Cap
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.
15M
AR5331 CA 10/99
[HERITAGE LOGO] Heritage Capital Appreciation Trust
P.O. Box 33022
St. Petersburg, FL 33733
- --------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
