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 29, 2000
[HERITAGE LOGO]
---------------
Capital Appreciation
Trust(TM)
<PAGE>
April 19, 2000
Dear Fellow Shareholders:
It is my pleasure to report to you on the performance of Heritage Capital
Appreciation Trust (the "Fund") for the semiannual period ended February 29,
2000. For this six-month period, the Class A, B and C shares of your Fund
delivered returns of +22.4%*, +22.1%* and +22.0%*, respectively. For the same
period, the Standard & Poor's 500 Composite Stock Price Index gained 4.1%.
In the seven weeks since the end of February 2000, the U.S. equity markets
have been extraordinarily volatile, especially for technology and other high
growth sectors of the market. Although we have bounced back off of the lows of
April 14, 2000, the correction for many parts of the market has been very
significant. In the letter that follows, Herb Ehlers, the portfolio manager for
your Fund since its inception, comments on the impressive performance of your
Fund and the U.S. stock market over recent periods. He also cautions about
possible downturns (such as the one we have experienced since the date of
Herb's letter), and reminds us again that investing is a marathon, not a
sprint. With that in mind, I hope you will find the long-term performance
results for your Fund (updated through March 31, 2000) to be helpful. All
returns are shown net of all expenses and front- and back- end sales charges,
as applicable.
<TABLE>
<CAPTION>
ENDED MARCH 31, 2000 CLASS A** CLASS B** CLASS C**
- -------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
One Year ..................... +33.20% +34.87% +38.94%
Three Year ................... +37.84% N/A +39.24%
Five Year .................... +28.89% N/A N/A
Ten Year ..................... +19.46% N/A N/A
Life of Class ................ +16.79% +32.52% +29.51%
</TABLE>
The Class A shares of the Fund have received a 5-Star overall rating***
from Morningstar, Inc. for the period ended March 31, 2000. This 5-Star rating
is based on risk and performance scores for the Fund compared to a universe of
3,571 domestic equity funds.
While we cannot predict what the markets will be like in the future, we
remain confident in the abilities of Herb Ehlers and his team of analysts and
portfolio managers at Goldman Sachs Asset Management to perform well for our
shareholders. I hope you find Herb's comments helpful in understanding better
how your Fund's investment portfolio is managed.
Effective April 3, 2000, I accepted a position as President and Chief
Operating Officer of Eagle Asset Management, Inc. ("Eagle"), an affiliate of
Heritage Asset Management, Inc. ("Heritage"), and a subadviser to several of
the Heritage mutual funds. Brian Lee, formerly Executive Vice-President of
Eagle is now President of Heritage. At the next meeting of your Fund's Board of
Trustees, we anticipate that Brian also will be named President of the various
Heritage mutual funds, including Heritage Capital Appreciation Trust. I have
enjoyed communicating with you over the past several years and am sure you will
enjoy reading Brian's comments in the future.
On behalf of all of us at Heritage, thank you for your continuing
confidence in Heritage Capital Appreciation Trust.
Sincerely,
[GRAPHIC OMITTED]
Stephen G. Hill
President
Heritage Capital Appreciation Trust
- ----------------
* 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. Commencment of Class A shares was December 12, 1985, January 2,
1998 for Class B shares and April 3, 1995 for Class C shares.
*** Morningstar, Inc. brings both performance and risk together in one
evaluation. Heritage Capital Appreciation Trust Class A Shares also
received a 5-star rating out of 3,571 and 2,283 domestic equity funds,
respectively for the three- and five-year periods ended February 29, 2000.
For the ten-year period ended February 29, 2000, the Fund received a
4-star rating out of 786 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>
March 27, 2000
Dear Fellow Shareholders:
The performance results for the Heritage Capital Appreciation Trust
("HCAT" and/or "our Fund") continue to be excellent. As I discuss in the next
paragraph, results won't always be this outstanding, but it sure is great fun
when they are! Even though this is a report for the six months ended February
29, 2000, I thought you'd be interested in the calendar year results since, as
in many facets of life, annual investment results are usually measured by the
time it takes for the earth to revolve around the sun (with a starting date of
January 1). For the calendar year ended December 31, 1999, our Fund's Class A
shares were up 40.4%* compared to 21.0% for the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"). This is on top of a 34.2%* gain for HCAT in
calendar 1998! For the six month semi-annual period represented by this report
(ending February 29, 2000), the Class A shares of our Fund were up 22.4%*
compared to 4.1% for the S&P 500. For the twelve months ended February 29,
2000, the Class A shares of our Fund were up 33.0%* compared to 11.7% for the
S&P 500. For the three years ended February 29, 2000, the Class A shares of our
Fund were up at an annual rate of 34.6%* compared to 21.8% for the S&P 500.
It's been quite a performance ride! Clearly, these have been the best of times.
Now for my usual words of caution regarding future returns. I know, I said
the same thing last year and look what happened: our Fund was up 33.0% in the
12 months ended 2/29/00. So bear with me because I feel I need to say it again.
First, HCAT's performance for the past one, three and five years has really
been terrific on both an absolute and relative basis (compared to both the S&P
500 and the Morningstar peer group). Second, such performance is unlikely to
occur again for quite some time (I was wrong when I said this last year, and
hopefully, my current prediction is equally wrong). But for the fun of it, and
in order to demonstrate how difficult it is to achieve a high rate of return
over a long time period, let's calculate what "only" 26% per year would mean in
total appreciation over 30 years. The answer: $100,000 would increase in value
to $100 million in only 30 years! Now that is difficult, and seems impossible.
Could anyone be so fortunate?!
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 29, 2000, our Fund benefited from its
holdings in various growth industries including cable TV and entertainment
(+61.8%), wireless communications (+51.9%), Internet/online (+155.4%), and
networking/telecom equipment (+216.7%).
The following five stocks in our Fund more than doubled during the past
six months and accounted for 70% of our Fund's total performance. Checkfree
Holdings Corp., a B2C (internet speak for "Business to Consumer") company and
the leader in bill presentment and bill payment over the Internet (i.e. we
won't have to write and mail any more checks, but instead, just click and the
bill is paid). In short, we'll be check free (hence the company's name)!;
Qualcomm, the founder of CDMA (Code Division Multiple Access) technology, which
we expect to be the leading wireless technology for third generation (3G)
wireless usage; Echostar Communications, one of two U.S. direct broadcast
satellite (DBS) television service companies, and better known as the DISH
network (we also own shares in the competitor GM Hughes Electronics, known for
its Direct TV service); Network Solutions, the leader in domain name
registrations for the internet (.com, .net, .org) and a leader in the
infrastructure of the Internet through its registry services; and the fifth
company, Crown Castle, one of the largest owners of communications towers for
wireless communications.
2
<PAGE>
In my last letter to shareholders, I commented on Telephone and Data
Systems, which after lagging far behind the pack for ten years, sprinted to
near the front during the prior year. Indeed, the stock was up 51.9% for the
six months ended February 29, 2000, after doubling in the prior year. TDS was
clearly one of the turtles in that well-known race with the hare. As I look
over our Fund's portfolio today, I can identify a number of turtles which I
believe have a reasonable chance of catching the famous hare. To name just a
few, Federal National Mortgage Association (Fannie Mae), Federal Home Loan
Mortgage Corporation (Freddie Mac), Cendant, Wrigley, Starwood, and Ambac would
all be wearing the turtle label today. A common theme weaving through the
turtles is that they are not "new economy" stocks. But unlike most new economy
stocks, the turtles are producing tons of cash flow.
While I am always hesitant to highlight one particular turtle (because
after all we own lots of them), I thought I would share our thoughts with you
on one of the slowest turtles in the portfolio for the past six months,
Harrah's Entertainment. Harrah's stock declined 34% in the six months ended
February 29, 2000, to $19 per share, and was one of the worst performers in the
portfolio. Harrah's operates 23 casinos in 12 different domestic markets.
Earnings are projected to be $1.65 - $1.70 per share this year and are expected
to increase to approximately $2.00 per share next year. Therefore, the stock
sells at 11.5x this year's EPS (earnings per share) and 9.5x next year's EPS.
EBITDA (earnings before interest, taxes, and depreciation) is projected to be
$850 million this year and $890 million next year, resulting in the company's
total enterprise value (market capitalization plus debt) to EBITDA ratio of
only 6.0x. We believe these are very attractive valuations for a company with
Harrah's strong franchises and expected earnings growth. If Harrah's shares
were valued at the same valuation that MGM is applying in its acquisition of
Mirage Resorts, Inc., then Harrah's would be worth over $40 per share. Of
course, the question is when does the turtle begin to run faster?
Unfortunately, we don't have the answer for that. But, we do like the gaming
business. We believe that Harrah's is one of the best in the business, and
management is shareholder oriented. We're comfortable owning this business for
the long term.
Hopefully, all of our Fund's turtles begin to run faster. We believe that
most of them will. But we also know that a few of them won't make it to the
finish line in a reasonable period of time, and therefore may be sold as we
balance corporate fundamentals versus our expected return on the stock.
Our Fund's portfolio continues to emphasize broadcasting, communications
services, communications equipment, and entertainment. 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.
Sincerely,
[GRAPHIC OMITTED]
Herbert E. Ehlers
Managing Director
Goldman Sachs & Co.
Chief Investment Officer
Growth Equity Strategy
Goldman Sachs Asset Management
* These returns are calculated without the imposition of front-end sales
charges.
3
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
FEBRUARY 29, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ -------------
<S> <C> <C>
COMMON STOCK--97.8%(A)
======================
BANKS--1.9%
- ----------------
82,200 State Street Corporation ............ $ 5,990,325
-----------
BEVERAGES--0.5%
- ------------------
52,000 PepsiCo, Inc. ....................... 1,677,000
-----------
BROADCASTING -- 10.9%
- --------------------------
45,700 AMFM Inc. * ......................... 2,804,838
135,000 Cablevision Systems
Corporation, Class "A" * ............ 8,665,313
129,400 CBS Corporation ..................... 7,707,388
153,349 Clear Channel Communications
Inc. * .............................. 10,216,877
158,650 Infinity Broadcasting
Corporation, Class "A" * ............ 5,066,884
-----------
34,461,300
-----------
COMMUNICATIONS SERVICES -- 10.7%
- --------------------------------------
202,250 Crown Castle International
Corporation * ....................... 6,522,563
87,000 General Motors Corporation,
Class "H" ........................... 10,483,500
124,500 MCI WorldCom, Inc. * ................ 5,555,812
64,400 Sprint Corporation
(PCS Group) * ....................... 3,332,700
29,300 Telephone & Data Systems, Inc. . 3,091,150
88,000 Vodafone AirTouch PLC,
Sponsored ADR * ..................... 5,076,500
-----------
34,062,225
-----------
COMMUNICATIONS EQUIPMENT -- 10.0%
- ---------------------------------------
207,200 Echostar Communications
Corporation, Class "A" * ............ 23,620,800
37,000 Nortel Networks Corporation ......... 4,125,500
29,000 QUALCOMM, Inc. * .................... 4,130,687
-----------
31,876,987
-----------
COMPUTER SYSTEMS DESIGN -- 6.0%
- -------------------------------------
172,000 First Data Corporation .............. 7,740,000
113,000 S1 Corporation * .................... 11,370,625
-----------
19,110,625
-----------
CONSTRUCTION AND CONSTRUCTION PRODUCTS -- 2.1%
- ----------------------------------------------------
34,930 Corning, Inc. ....................... 6,566,840
-----------
COSMETICS & TOILETRIES -- 0.8%
- ------------------------------------
52,000 Avon Products, Inc. ................. 1,407,250
24,000 Colgate-Palmolive Company ........... 1,252,500
-----------
2,659,750
-----------
ELECTRONIC EQUIPMENT -- 1.7%
- ----------------------------------
70,000 Gemstar International Group
Ltd. * .............................. 5,311,250
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ -------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
=========================
ENTERTAINMENT -- 13.9%
- ----------------------------
291,000 AT&T - Liberty Media Group,
Class "A" * ......................... 15,204,750
517,000 Harrah's Entertainment, Inc. * ...... 9,887,625
151,000 Time Warner, Inc. ................... 12,910,500
92,000 Westwood One, Inc. * ................ 6,146,750
-----------
44,149,625
-----------
FINANCIAL INSTITUTIONS -- 4.6%
- ------------------------------------
107,300 Fannie Mae .......................... 5,686,900
144,300 Freddie Mac ......................... 6,024,525
127,000 MBNA Corporation .................... 2,889,250
-----------
14,600,675
-----------
FOOD -- 1.0%
- -----------------
197,300 Nabisco Group Holdings
Corporation ......................... 1,701,712
20,400 Wm. Wrigley Jr. Company ............. 1,379,550
-----------
3,081,262
-----------
HOTELS, MOTELS, AND INNS -- 1.6%
- --------------------------------------
41,400 Marriott International, Inc.,
Class "A" ........................... 1,141,087
179,000 Starwood Hotels & Resorts
Worldwide Inc. ...................... 4,016,312
-----------
5,157,399
-----------
INFORMATION RETRIEVAL SERVICES -- 3.6%
- --------------------------------------------
75,000 Checkfree Holdings
Corporation * ....................... 6,595,313
45,000 Preview Travel Inc. * ............... 2,072,812
18,000 YAHOO! Inc. * ....................... 2,874,375
-----------
11,542,500
-----------
INSURANCE -- 1.7%
- -----------------------
75,000 AMBAC Financial Group, Inc. ......... 3,295,313
90,400 Nationwide Financial
Services, Inc., Class "A" ........... 2,084,850
-----------
5,380,163
-----------
MISCELLANEOUS SERVICES -- 1.5%
- ------------------------------------
276,000 Cendant Corporation * ............... 4,916,250
-----------
PHARMACEUTICAL -- 7.0%
- -----------------------------
73,300 American Home Products
Corporation ......................... 3,188,550
91,500 Bristol-Myers Squibb Company ........ 5,198,344
165,500 Pfizer, Inc. ........................ 5,316,687
72,000 Schering-Plough Corporation ......... 2,511,000
71,200 Warner-Lambert Company .............. 6,092,050
-----------
22,306,631
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
INVESTMENT PORTFOLIO
FEBRUARY 29, 2000
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------------ -------------
<S> <C> <C>
COMMON STOCK--(CONTINUED)
=========================
PRINTING AND PUBLISHING -- 7.4%
- -------------------------------------
139,100 A.H. Belo Corporation,
Class "A" ............................. $ 1,790,913
112,800 Central Newspapers, Inc.,
Class "A" ............................. 3,221,850
46,000 Gannett Company ....................... 2,998,625
152,000 New York Times Company,
Class "A" ............................. 6,422,000
60,000 Tribune Company ....................... 2,336,250
250,000 Valassis Communications, Inc. ......... 6,921,875
-------------
23,691,513
-------------
RETAIL STORES -- 1.4%
- --------------------------
166,000 Walgreen Company ...................... 4,284,875
-------------
SECURITY DEALERS -- 1.2%
- -----------------------------
94,000 Charles Schwab Corporation ............ 3,930,375
-------------
SOFTWARE -- 4.0%
- ----------------------
39,660 GetThere.com, Inc. * .................. 993,979
36,000 Network Solutions Inc.,
Class "A" * ........................... 11,607,750
-------------
12,601,729
-------------
UTILITIES -- 4.3%
- ----------------------
164,300 AES Corporation ....................... 13,770,394
-------------
Total Common Stocks (cost $ 216,683,882) $311,129,693
-------------
REPURCHASE AGREEMENT -- 2.7%(A)
===============================
Repurchase Agreement with State Street
Bank and Trust Company, dated
February 29, 2000 @ 5.55% to be
repurchased at $8,698,341 on
March 1, 2000, collateralized by
$8,985,000 United States Treasury Bonds,
5.00% due February 28, 2001, (market value
$8,868,476 including interest)
(cost $8,697,000).............................................................................. 8,697,000
-------------
TOTAL INVESTMENT PORTFOLIO
(cost $225,380,882)(b), 100.5% (a)........................................................... 319,826,693
OTHER ASSETS AND LIABILITIES, net, (0.5%) (a) ................................................. (1,598,112)
-------------
NET ASSETS, 100% .............................................................................. 318,228,581
=============
* 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 $94,445,811
which consists of aggregate gross unrealized
appreciation for all securities in which there is an
excess of market value over tax cost of $103,804,263
and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over
market value of $9,358,452.
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
- ------
Investments, at market value (identified cost $216,683,882) (Note 1) ..................... $311,129,693
Repurchase agreement (identified cost $8,697,000) (Note 1) ............................... 8,697,000
Cash ..................................................................................... 283
Receivables:
Investments sold ........................................................................ 144,520
Fund shares sold ........................................................................ 1,855,323
Dividends and interest .................................................................. 112,147
Deferred state qualification expenses (Note 1) ........................................... 26,805
Prepaid insurance (Note 1) ............................................................... 220
------------
Total Assets ......................................................................... 321,965,991
Liabilities
- -----------
Payables (Note 4):
Investments purchased ................................................................... $2,471,618
Fund shares redeemed .................................................................... 839,600
Accrued management fee .................................................................. 186,148
Accrued distribution fee ................................................................ 134,357
Other accrued expenses .................................................................. 105,687
----------
Total Liabilities .................................................................... 3,737,410
------------
Net assets, at market value .............................................................. $318,228,581
============
Net Assets
- ----------
Net assets consist of:
Paid-in capital ......................................................................... $201,806,880
Net investment loss (Note 1) ............................................................ (971,146)
Accumulated net realized gain ........................................................... 22,947,036
Net unrealized appreciation on investments .............................................. 94,445,811
------------
Net assets, at market value .............................................................. $318,228,581
============
Class A Shares
- --------------
Net asset value and redemption price per share ($223,690,050 divided by 7,303,735 shares
of
beneficial interest outstanding, no par value) (Notes 1 and 2) .......................... $ 30.63
============
Maximum offering price per share (100/95.25 of $30.63 ) .................................. $ 32.16
============
Class B Shares
- --------------
Net asset value, offering price and redemption price per share ($33,255,227 divided by
1,124,317
shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ................ $ 29.58
============
Class C Shares
- --------------
Net asset value, offering price and redemption price per share ($61,283,304 divided by
2,072,835
shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ................ $ 29.56
============
</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 29, 2000
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- -----------------
<S> <C> <C>
Income:
Dividends ........................................................... $ 647,236
Interest ............................................................ 337,312
-----------
Total income ....................................................... 984,548
Expenses (Notes 1 and 4):
Management fee ...................................................... $1,030,145
Distribution fee (Class A Shares) ................................... 347,892
Distribution fee (Class B Shares) ................................... 133,481
Distribution fee (Class C Shares) ................................... 237,482
Shareholder servicing fees .......................................... 75,337
Custodian/Fund accounting fees ...................................... 43,102
Professional fees ................................................... 25,035
State qualification expenses ........................................ 23,758
Federal registration fees ........................................... 16,483
Reports to shareholders ............................................. 13,926
Trustees' fees and expenses ......................................... 4,237
Insurance ........................................................... 2,666
Other ............................................................... 2,150
----------
Total expenses ..................................................... 1,955,694
-----------
Net investment loss .................................................. (971,146)
-----------
Realized and Unrealized Gain on Investment
- ------------------------------------------
Net realized gain from investment transactions ....................... 24,078,123
Net unrealized appreciation of investments during the period ......... 28,403,151
-----------
Net gain on investments ............................................ 52,481,274
-----------
Net increase in net assets resulting from operations ................. $51,510,128
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED FOR THE
FEBRUARY 29, 2000 YEAR ENDED
(UNAUDITED) AUGUST 31, 1999
=================== ================
Increase in net assets:
<S> <C> <C>
Operations:
Net investment loss ............................................................ $ (971,146) $ (1,063,237)
Net realized gain from investment transactions ................................. 24,078,123 23,111,162
Net unrealized appreciation of investments during the period ................... 28,403,151 31,487,745
------------- ------------
Net increase in net assets resulting from operations ........................... 51,510,128 53,535,670
Distributions to shareholders from:
Net realized gains Class A Shares, ($2.62 and $1.32 per share, respectively) ... (16,827,483) (6,989,221)
Net realized gains Class B Shares, ($2.62 and $1.32 per share, respectively) ... (2,297,243) (477,834)
Net realized gains Class C Shares, ($2.62 and $1.32 per share, respectively) ... (4,038,864) (983,407)
Increase in net assets from Fund share transactions (Note 2) .................... 65,509,052 57,959,964
------------- ------------
Increase in net assets .......................................................... 93,855,590 103,045,172
Net assets, beginning of period ................................................. 224,372,991 121,327,819
------------- ------------
Net assets, end of period (including accumulated net investment loss of $971,146
for the period ended February 29, 2000) ........................................ $ 318,228,581 $224,372,991
============= ============
</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
ENDED FOR THE YEARS ENDED
FEBRUARY 29, AUGUST 31,
2000 ====================================================
(UNAUDITED) 1999 1998 1997 1996
==================== =========== =========== =========== ================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 27.18 $ 20.34 $ 18.60 $ 15.58 $ 15.53
---------- -------- -------- -------- ---------
Income from Investment Operations:
Net investment income (loss)(a) ........... ( 0.07) ( 0.10) ( 0.07) ( 0.06) 0.00 (b)
Net realized and unrealized gain
on investments ........................... 6.14 8.26 3.94 4.85 1.81
---------- -------- -------- -------- ---------
Total from Investment
Operations ............................... 6.07 8.16 3.87 4.79 1.81
---------- -------- -------- -------- ---------
Less Distributions:
Dividends from net investment
income ................................... -- -- -- -- ( 0.04)
Distributions from net realized
gains .................................... ( 2.62) ( 1.32) ( 2.13) ( 1.77) ( 1.72)
---------- -------- -------- -------- ---------
Total Distributions ....................... ( 2.62) ( 1.32) ( 2.13) ( 1.77) ( 1.76)
---------- -------- -------- -------- ---------
Net asset value, end of period ............. $ 30.63 $ 27.18 $ 20.34 $ 18.60 $ 15.58
========== ======== ======== ======== =========
Total Return (%)(c). ....................... 22.44 (d) 41.18 21.45 33.61 12.79
Ratios (%)/ Supplemental Data
Operating expenses, net, to average
daily net assets ......................... 1.25 (e) 1.29 1.41 1.48 1.54
Net investment gain (loss) to average
daily net assets (a) ..................... (.53) (e) (.45) (.34) (.30) (.02)
Portfolio turnover rate ................... 31 (d) 44 25 42 54
Net assets, end of period ($ millions) 224 169 104 81 70
<CAPTION>
CLASS A
SHARES CLASS B SHARES
=========== =================================================
FOR THE
YEARS ENDED
AUGUST 31,
===========
1995 (UNAUDITED) 1999 1998/dagger/
=========== ================== =========== ==================
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 15.30 $ 26.40 $ 19.91 $ 19.36
-------- ---------- -------- ----------
Income from Investment Operations:
Net investment income (loss)(a) ........... 0.08 ( 0.14) ( 0.19) ( 0.06)
Net realized and unrealized gain
on investments ........................... 1.37 5.94 8.00 0.61
-------- ---------- -------- ----------
Total from Investment
Operations ............................... 1.45 5.80 7.81 0.55
-------- ---------- -------- ----------
Less Distributions:
Dividends from net investment
income ................................... ( 0.06) -- -- --
Distributions from net realized
gains .................................... ( 1.16) ( 2.62) ( 1.32) ---
-------- ---------- -------- ----------
Total Distributions ....................... ( 1.22) ( 2.62) ( 1.32) ---
-------- ---------- -------- ----------
Net asset value, end of period ............. $ 15.53 $ 29.58 $ 26.40 $ 19.91
======== ========== ======== ==========
Total Return (%)(c). ....................... 10.85 22.06 (d) 40.27 2.84 (d)
Ratios (%)/ Supplemental Data
Operating expenses, net, to average
daily net assets ......................... 1.62 1.90 (e) 1.92 2.01 (e)
Net investment gain (loss) to average
daily net assets (a) ..................... .49 (1.19) (e) (1.10) (.86) (e)
Portfolio turnover rate ................... 66 31 (d) 44 25
Net assets, end of period ($ millions) 73 33 20 5
<CAPTION>
CLASS C SHARES
==================
FOR THE
SIX-MONTH
PERIOD
ENDED
FEBRUARY 29,
2000
(UNAUDITED)
==================
<S> <C>
Net asset value, beginning of period ....... $ 26.39
----------
Income from Investment Operations:
Net investment income (loss)(a) ........... ( 0.13)
Net realized and unrealized gain
on investments ........................... 5.92
----------
Total from Investment
Operations ............................... 5.79
----------
Less Distributions:
Dividends from net investment
income ................................... --
Distributions from net realized
gains .................................... ( 2.62)
----------
Total Distributions ....................... ( 2.62)
----------
Net asset value, end of period ............. $ 29.56
==========
Total Return (%)(c). ....................... 22.03 (d)
Ratios (%)/ Supplemental Data
Operating expenses, net, to average
daily net assets ......................... 1.90 (e)
Net investment gain (loss) to average
daily net assets (a) ..................... (1.19) (e)
Portfolio turnover rate ................... 31 (d)
Net assets, end of period ($ millions) 61
<CAPTION>
CLASS C SHARES
===========================================================================
FOR THE YEARS ENDED
AUGUST 31,
============================================================================
1999 1998 1997 1996 1995/double 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) ........... ( 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 period ............. $ 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 ......................... 1.92 2.00 2.04 2.05 2.17 (e)
Net investment gain (loss) to average
daily net assets (a) ..................... (1.10) (.90) (.88) (.57) (.33) (e)
Portfolio turnover rate ................... 44 25 42 54 66
Net assets, end of period ($ millions) 35 12 3 1.0 0
</TABLE>
- -------
/dagger/ For the period January 2, 1998 (commencement of Class B Shares) to
August 31, 1998.
/double dagger/ For the period April 3, 1995 (commencement of Class C Shares)
to August 31, 1995.
(a) Excludes management fees waived by the Manager in the amount of less than
$0.04 and $0.04 per Class A Shares for the two years ended August 31, 1996
and 1995, 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, 1996 and 1995, 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.
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 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 accounting
principles generally accepted in the United States 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, distribution fee,
etc., while other expenses such as insurance expense, 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.
9
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Note 2: FUND SHARES. At February 29, 2000, 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 29, 2000, 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 PERIOD ENDED FEBRUARY 29, 2000
(UNAUDITED)
Shares sold ........................ 1,011,995 $ 30,989,689 350,105 $ 10,338,751 727,109 $ 21,577,184
Shares issued on reinvestment of
distributions .................... 534,790 16,204,151 74,580 2,185,187 134,326 3,934,392
Shares redeemed .................... (464,267) (14,282,220) (63,007) (1,850,140) (121,314) (3,587,942)
--------- ------------- ------- ------------ -------- ------------
Net increase ....................... 1,082,518 $ 32,911,620 361,678 $ 10,673,798 740,121 $ 21,923,634
============= ============ ============
Shares outstanding:
Beginning of period ............... 6,221,217 762,639 1,332,714
--------- ------- ---------
End of period ..................... 7,303,735 1,124,317 2,072,835
========= ========= =========
</TABLE>
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
==============================
SHARES AMOUNT
============= ================
<S> <C> <C>
FOR THE YEAR ENDED AUGUST 31, 1999
Shares sold .......................... 1,525,107 $ 38,812,480
Shares issued on reinvestment of
distributions ...................... 292,671 6,833,858
Shares redeemed ...................... (698,608) (17,804,722)
--------- --------------
Net increase ......................... 1,119,170 $ 27,841,616
==============
Shares outstanding:
Beginning of year ................... 5,102,047
---------
End of year ......................... 6,221,217
=========
<CAPTION>
CLASS B SHARES CLASS C SHARES
=========================== ============================
SHARES AMOUNT SHARES AMOUNT
============ ============== ============= ==============
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED AUGUST 31, 1999
Shares sold .......................... 521,926 $ 13,082,756 906,945 $ 22,504,638
Shares issued on reinvestment of
distributions ...................... 20,394 464,787 41,940 955,395
Shares redeemed ...................... (54,591) (1,425,258) (224,397) (5,463,970)
------- ------------ -------- ------------
Net increase ......................... 487,729 $ 12,122,285 724,488 $ 17,996,063
============ ============
Shares outstanding:
Beginning of year ................... 274,910 608,226
------- --------
End of year ......................... 762,639 1,332,714
======= =========
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the six-month period ended
February 29, 2000, purchases and sales of investment securities (excluding
repurchase agreements and short-tem obligations) aggregated $126,710,974
and $80,802,087, 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 3, 2000, the Manager has agreed to waive its fees and, if
necessary, reimburse the Fund to the extent that Class A annual operating
expenses exceed 1.40% 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 2.15% of that classes' average daily net assets for the fiscal year
ending August 31, 2000. No fees were waived and no expenses were
reimbursed for the six-month period ended February 29, 2000.
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 six-month period ended February 29, 2000
the subadviser earned $343,382, 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, Shareholder Servicing Agent and
Fund Accountant for the Fund. The Manager charged $75,337 for Dividend
Paying and Shareholder Servicing and $26,628 for Fund Accounting services
of which $26,699 and $9,200 was payable as of February 29, 2000,
respectively.
10
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE CAPITAL APPRECIATION TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Raymond James & Associates, Inc. (the "Distributor") has advised the Fund
that it received $100,602 in front-end sales charges for Class A Shares,
$12,213 in contingent deferred sales charges also for Class A Shares,
$30,412 in contingent deferred sales charges for Class B Shares and $9,380
in contingent deferred sales charges for Class C Shares for the six-month
period ended February 29, 2000. 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 and Heritage Series
Trust, 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.
11
<PAGE>
This page has been intentionally left blank.
12
<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
TECHNOLOGY
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 2000 Heritage Asset Management, Inc.
15M
AR5331 SCA 2/00
[HERITAGE LOGO] Heritage Capital Appreciation Trust
P.O. Box 33022
St. Petersburg, FL 33733
- -------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
