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[HERITAGE LOGO]
MONEY MARKET FUND
AND
MUNICIPAL MONEY MARKET FUND
Heritage Cash Trust is a mutual fund offering shares in two separate
investment portfolios, the Money Market Fund and the Municipal Money Market Fund
(each a "Fund" and collectively, the "Funds"). The Money Market Fund seeks to
achieve maximum current income consistent with stability of principal by
investing exclusively in money market instruments. The Municipal Money Market
Fund seeks to achieve maximum current income that is exempt from Federal income
tax consistent with stability of principal by investing exclusively in money
market instruments. Each Fund will seek to stabilize its share price at $1.00
per share. The Money Market Fund offers two classes of shares, Class A shares
and Class C shares. Class C shares may be acquired only through exchanges of
Class C shares of other Heritage Mutual Funds. The Municipal Money Market Fund
consists of a single class of shares, Class A shares.
AN INVESTMENT IN EITHER FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO GUARANTEE THAT THE $1.00 PER SHARE PRICE WILL BE
MAINTAINED.
This Prospectus contains information that should be read before investing
in either Fund and should be kept for future reference. A Statement of
Additional Information relating to the Funds dated January 2, 1996 has been
filed with the Securities and Exchange Commission and is incorporated by
reference in this Prospectus. A copy of the Statement of Additional Information
is available free of charge and shareholder inquiries can be made by writing to
Heritage Asset Management, Inc. or by calling (800) 421-4184.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[HERITAGE LOGO]
Registered Investment Advisor--SEC
880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184
Prospectus Dated January 2, 1996
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
GENERAL INFORMATION................................................. 1
About the Trust and the Funds..................................... 1
Total Fund Expenses............................................... 1
Financial Highlights.............................................. 3
Differences Between A Shares and C Shares......................... 4
Investment Objectives, Policies and Risk Factors.................. 4
Net Asset Value................................................... 7
Yield............................................................. 7
INVESTING IN THE FUNDS.............................................. 8
How to Buy Shares................................................. 8
Minimum Investment Required/Accounts With Low Balances............ 9
Investment Programs............................................... 9
How to Redeem Shares.............................................. 10
Receiving Payment................................................. 11
Exchange Privilege................................................ 12
MANAGEMENT OF THE FUNDS............................................. 13
SHAREHOLDER AND ACCOUNT POLICIES.................................... 14
Dividends and Other Distributions................................. 14
Distribution Plans................................................ 15
Taxes............................................................. 15
Shareholder Information........................................... 16
</TABLE>
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GENERAL INFORMATION
ABOUT THE TRUST AND THE FUNDS
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Heritage Cash Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated June 21, 1985. The Trust is an
open-end diversified management investment company that offers shares in two
separate investment portfolios, the Money Market Fund and the Municipal Money
Market Fund, both of which are designed for individuals, institutions and
fiduciaries as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio limited to money market
instruments maturing in 397 days or less. The Money Market Fund offers two
classes of shares, Class A shares ("A shares") and Class C shares ("C shares").
C shares may be acquired only through exchanges of C shares of another Heritage
open-end investment company that is advised or administered by Heritage Asset
Management, Inc. ("Heritage Mutual Fund"). The Municipal Money Market Fund
offers A shares only. Each Fund requires a minimum initial investment of $1,000,
except for certain retirement accounts and investment plans for which lower
limits may apply. See "Investing in the Funds."
TOTAL FUND EXPENSES
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Shown below are all Class A operating expenses incurred by each Fund during
its 1995 fiscal year. Class A annual operating expenses are shown as an
annualized percentage of fiscal 1995 average daily net assets. Because C shares
of the Money Market Fund were not offered for sale prior to April 3, 1995, Class
C annual operating expenses are based on estimated expenses. Shareholder
transaction expenses for both classes are expressed as a percentage of maximum
public offering price, cost per transaction or as otherwise noted.
<TABLE>
<CAPTION>
MUNICIPAL
MONEY MARKET
MONEY MARKET FUND FUND
CLASS A CLASS C CLASS A
------- ------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales load "charge" on purchases..................... None None None
Contingent deferred sales load ("CDSL") (as a
percentage of original purchase price or redemption
proceeds, as applicable)........................... None 1.00%(1) None
Wire redemption fee.................................. $5.00 $5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES
Management fee (after fee waivers)................... 0.47% 0.47% 0.50%
12b-1 Distribution fee............................... 0.15% 0.15% 0.15%
Other expenses....................................... 0.17% 0.17% 0.12%
----- ----- -------
Total Fund operating expenses (after fee waivers).... 0.79% 0.79% 0.77%
===== ===== =======
</TABLE>
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(1) A CDSL will be imposed only on the redemption of C shares acquired through
an exchange of C shares of another Heritage Mutual Fund that did not satisfy
the one-year CDSL holding period. See "Exchange Privilege."
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The Funds' manager, Heritage Asset Management, Inc. (the "Manager"),
voluntarily will waive its fees and, if necessary, reimburse the Money Market
Fund to the extent that Class A and Class C annual operating expenses exceed
.79% of the average daily net assets attributable to that class for the fiscal
year ending August 31, 1996. In addition, the Manager will voluntarily waive its
fees and, if necessary, reimburse the Municipal Money Market Fund to the extent
that Class A annual operating expenses exceed .77% of the average daily net
assets for the fiscal year ending August 31, 1996. Absent fee waivers, the
management fee for each class of the Money Market Fund would have been .49%, and
total Fund operating expenses for each class would have been .81%. The Manager
did not waive its fees with respect to the Municipal Money Market Fund. To the
extent that the Manager waives or reimburses its fees with respect to one class,
it will do so with respect to the other class on a proportionate basis.
The impact of Fund operating expenses on earnings is illustrated in the
example below assuming a hypothetical $1,000 investment, a 5% annual rate of
return, and a redemption at the end of each period shown.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Money Market Fund Operating Expenses -- A
shares......................................... $ 8 $25 $44 $ 98
Total Money Market Fund Operating Expenses -- C
shares......................................... $ 18 $25 $44 $ 98
Total Municipal Money Market Fund Operating
Expenses -- A shares........................... $ 8 $25 $43 $ 95
</TABLE>
The impact of Fund operating expenses on earnings is illustrated in the
example below assuming a hypothetical $1,000 investment, a 5% annual rate of
return, and no redemption at the end of each period shown.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Money Market Fund Operating Expenses -- A
shares......................................... $8 $25 $44 $ 98
Total Money Market Fund Operating Expenses -- C
shares......................................... $8 $25 $44 $ 98
Total Municipal Money Market Fund Operating
Expenses -- A shares........................... $8 $25 $43 $ 95
</TABLE>
This is an illustration only and should not be considered a representation
of future expenses. Actual expenses and performance may be greater or less than
that shown above. The purpose of the above tables is to assist investors in
understanding the various costs and expenses that will be borne directly or
indirectly by shareholders. For a further discussion of these costs and
expenses, see "Management of the Funds" and "Distribution Plans."
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FINANCIAL HIGHLIGHTS
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The following table shows important financial information for an A share of
each Fund outstanding for the periods indicated, including net investment
income, dividends, and certain other information. It has been derived from
financial statements that have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon is included in the Statement of
Additional Information ("SAI"), which may be obtained by calling your Fund at
the telephone number on the front page of this prospectus. Financial highlights
are not presented for C shares of the Money Market Fund because no shares of
that class were outstanding for the periods indicated.
<TABLE>
<CAPTION>
MONEY MARKET FUND
CLASS A
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FOR THE YEARS ENDED AUGUST 31,
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1995 1994 1993 1992 1991 1990 1989 1988 1987 1986+
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD........ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income(a)... 0.50(b) .029(b) .025(b) .038(b) .063 .077 .084 .065 .054(b) .050(b)
LESS
DISTRIBUTIONS:
Dividends from
net
investment
income and
net realized
gains (a)... (0.050) (.029) (.025) (.038) (.063) (.077) (.084) (.065) (.054) (.050)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF
PERIOD........ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN
%............. 5.00 2.87 2.48 3.77 6.27 7.73 8.38 6.46 5.43 5.05(d)
RATIOS TO
AVERAGE DAILY
NET ASSETS
(%)/SUPPLEMENTAL
DATA:
Operating
expenses,
net......... .79(b) .79(b) .78(b) .78(b) .79 .81 .90 .94 1.00(b) 1.00(b)(c)
Net investment
income...... 5.00(b) 2.87(b) 2.47(b) 3.75(b) 6.20 7.73 8.51 6.47 5.45(b) 6.56(b)(c)
Net assets at
end of
period
(millions)
($)......... 1,294 982 925 953 890 727 475 230 153 139
</TABLE>
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+ For the period November 25, 1985 (commencement of operations) to August 31,
1986.
(a) Includes net realized gains (losses) which were ($.001), ($.001), $.001,
$.001, $.001, ($.001), $.001, $.001, ($.001) and less than $.003 per share,
respectively.
(b) Excludes management fees waived by the Manager in the amount of less than
$.001, $.001, $.001, $.001, $.001 and $.001 per share, respectively. The
operating expense ratios including such items would be .81%, .81%, .81%,
.78%, 1.01% and 1.12% (annualized), respectively.
(c) Annualized.
(d) Not annualized.
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MUNICIPAL MONEY MARKET FUND
CLASS A
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
------------------------------------
1995 1994 1993 1992+
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................... $1.000 $1.000 $1.000 $1.000
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)................................... .030 .019 .020 .005
LESS DISTRIBUTIONS:
Dividends from net investment income....................... (.030) (.019) (.020) (.005)
------ ------ ------
NET ASSET VALUE, END OF PERIOD............................... $1.000 $1.000 $1.000 $1.000
====== ====== ======
TOTAL RETURN %............................................... 3.04 1.90 2.02 .47(c)
RATIOS TO AVERAGE DAILY NET ASSETS (%)/SUPPLEMENTAL DATA:
Operating expenses, net.................................... .77 .77(a) .77(a) .77(a)(b)
Net investment income...................................... 3.05 1.89 1.98 2.32(b)
Net assets, end of period (millions) ($)................... 283 212 207 102
</TABLE>
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+ For the period June 17, 1992 (commencement of operations) to August 31,
1992.
(a) Excludes management fees waived by the Manager in the amount of less than
$.001, $.001, $.001 and $.001 per share, respectively. The operating expense
ratios including such items would be .79%, .77%, .83% and 1.11%
(annualized), respectively.
(b) Annualized.
(c) Not annualized.
DIFFERENCES BETWEEN A SHARES AND C SHARES
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The primary difference between the A shares and the C shares of the Money
Market Fund lies in their ongoing expenses, including asset-based sales charges
in the form of distribution fees and the possible imposition of a contingent
deferred sales load ("CDSL") on C shares. C shares acquired through an exchange
from another Heritage Mutual Fund that were held for a period of less than one
year remain subject to the imposition of a CDSL of 1% upon their sale until the
combined holding period of such shares other than money market shares reaches
one year. Each class is subject to an annual Rule 12b-1 fee of .15% of average
daily net assets. In addition, each class may bear differing amounts of certain
class-specific expenses, such as transfer agent fees, Securities and Exchange
Commission ("SEC") registration fees, state registration fees and expenses of
administrative personnel and services. Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
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The Money Market Fund's investment objective is to achieve maximum current
income consistent with stability of principal. The Municipal Money Market Fund's
investment objective is to achieve maximum current income exempt from Federal
income tax consistent with stability of principal. Each Fund pursues its
investment objective by investing in high quality securities with remaining
maturities of 397 days or less. The average dollar-weighted portfolio maturity
of money market instruments in each Fund's investment portfolio will be 90 days
or less. While there is no assurance that either Fund will achieve its
investment objective, each Fund will endeavor to do so by following the
investment policies described in this prospectus.
The following is a discussion of each Fund's principal investment
securities and practices, including the risks of investing in these securities
or engaging in these practices. For more detailed information about these
securities and Fund practices, see the SAI.
4
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MONEY MARKET FUND
The money market instruments in which the Money Market Fund may invest
include:
- - Commercial paper, including U.S. dollar-denominated commercial paper of
foreign issuers, and high quality short-term debt obligations, including
variable rate demand notes, that are rated in the highest rating category
(First Tier Securities) by at least two nationally recognized statistical
rating organizations ("NRSROs") (or by one if only one rating is assigned) and
in unrated securities determined by the Trust's Board of Trustees (the "Board
of Trustees" or the "Board") or the Manager to be of comparable quality. The
Fund also may invest up to 5% of its assets in securities receiving the second
highest rating (Second Tier Securities) or in unrated securities determined to
be of comparable quality. See "Appendix A -- Description of Securities
Ratings" in the SAI.
- - Marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, including those obligations purchased on a
when-issued or delayed-delivery basis and repurchase agreements relating to
these obligations. These securities include securities issued and guaranteed
by the U.S. Government, such as U.S. Treasury bills, notes, and bonds;
obligations backed by the "full faith and credit" of the United States, such
as Government National Mortgage Association securities; obligations supported
by the right of the issuer to borrow from the U.S. Treasury, such as those of
the Federal Home Loan Banks; and obligations supported only by the credit of
the issuer, such as those of the Federal Intermediate Credit Banks.
- - Instruments such as certificates of deposit, demand and time deposits, savings
shares and banker's acceptances of domestic banks and savings and loans that
have assets of at least $1 billion and capital, surplus, and undivided profits
of over $100 million as of the close of their most recent fiscal year, or
instruments that are insured by the Federal Deposit Insurance Corporation
("FDIC").
- - U.S. dollar-denominated certificates of deposit, time deposits, and banker's
acceptances of foreign branches of a domestic bank ("domestic Eurodollar
certificates") if such bank has assets of at least $1 billion and capital,
surplus, and undivided profits of over $100 million as of the close of its
most recent fiscal year.
- - U.S. dollar-denominated certificates of deposit, time deposits, and banker's
acceptances of foreign branches of a foreign bank ("foreign Eurodollar
certificates") if such bank has assets that are the equivalent of at least $2
billion as of the close of its most recent fiscal year.
- - U.S. dollar-denominated certificates of deposit, time deposits, and banker's
acceptances of U.S. branches of a foreign bank ("Yankee certificates") if such
bank has assets that are the equivalent of at least $2 billion as of the close
of its most recent fiscal year.
MUNICIPAL MONEY MARKET FUND
As a fundamental policy, the Municipal Money Market Fund normally will
invest at least 80% of its net assets in municipal securities, the interest on
which is, in the opinion of the issuer's bond counsel, exempt from Federal
income tax ("tax-exempt municipal securities") but which may or may not be an
item of tax preference for purposes of the Federal alternative minimum tax (the
"AMT"). Such interest may be subject to state and/or local income taxes. The
remaining portion of the Fund's investment portfolio may be invested in
short-term taxable investments. All of the Fund's investments must be determined
by the Board or, pursuant to authority delegated by the Board, by Alliance
Capital Management L.P. (the "Subadviser") to present minimum credit risks. The
instruments in which the Fund may invest include:
- - Municipal notes that generally are used to provide for short-term capital
needs and generally have maturities of one year or less. These include tax
anticipation and revenue anticipation notes that generally
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<PAGE> 8
are issued in anticipation of various seasonal revenues, bond anticipation
notes and tax-exempt commercial paper.
- - Short-term municipal bonds, including general obligation bonds, that are
secured by the issuer's pledge of its faith, credit and taxing power for
payment of principal and interest, and revenue bonds, that generally are paid
from the revenues of a particular facility or a specific excise or other
source.
- - Variable rate obligations whose interest rates are adjusted either at
predesignated periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Such adjustments minimize
changes in the market value of the obligation and, accordingly, enhance the
ability of the Fund to maintain a stable net asset value. Variable rate
securities may include participation interests in industrial development bonds
backed by letters of credit of FDIC member banks having total assets of more
than $1 billion. The letters of credit of any single bank will not apply to
variable rate obligations constituting more than 10% of the Fund's total
assets.
- - Taxable investments including obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities, high quality certificates of
deposit and bankers' acceptances, prime commercial paper and repurchase
agreements with respect to such obligations.
The Fund also may invest in stand-by commitments, which may involve certain
expenses and risks. Such commitments are not expected to comprise more than 5%
of its net assets. The Fund may commit up to 15% of its net assets to the
purchase of when-issued securities. The price of when-issued securities, which
generally is expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for such securities take place at a
later time. Normally the settlement date occurs from within ten days to one
month after the purchase of the issue. The value of when-issued securities may
fluctuate prior to their settlement, thereby creating an unrealized gain or loss
to the Fund. The Fund also may invest in reverse repurchase agreements and may
lend portfolio securities.
All of the Fund's municipal securities at the time of purchase will be
rated within the two highest quality ratings of Moody's Investors Service, Inc.
(Aaa and Aa, MIG-1 and MIG-2, or VMIG-1 and VMIG-2) or Standard & Poor's (AAA
and AA, SP-1 and SP-2 or A-1 and A-2), or if unrated, judged by the Board or,
pursuant to authority delegated by the Board, by the Subadviser to be of
comparable quality. Securities also must meet credit standards applied by the
Subadviser. See "Appendix A -- Description of Securities Ratings" in the SAI.
Each Fund's investment objective is fundamental and may not be changed
without the vote of a majority of the outstanding voting securities of that
Fund, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). Except as otherwise stated, all policies of each Fund described in this
prospectus may be changed by the Board of Trustees without shareholder approval.
Each Fund also may engage in the following types of investments. The SAI
contains more detailed information about each Fund's investment policies and
risks.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Fund purchases securities and simultaneously commits to resell the securities to
the original seller (a member bank of the Federal Reserve System or securities
dealers who are members of a national securities exchange or are market makers
in U.S. Government securities) at an agreed upon date and price reflecting a
market rate of interest unrelated to the coupon rate or the maturity of the
purchased securities. Although repurchase agreements carry certain risks not
associated with direct investments in securities, including possible decline in
the market value of the underlying securities and delays and costs to a Fund if
the other party to the repurchase agreement becomes bankrupt, a Fund intends to
enter into repurchase agreements only with banks and dealers in transactions
6
<PAGE> 9
believed by the Manager or Subadviser to present minimal credit risks in
accordance with guidelines established by the Board of Trustees.
RISKS OF FOREIGN BANK INVESTMENTS. Investments in foreign bank
instruments, including instruments of foreign branches of domestic banks,
present certain additional risks. These risks include the impact of future
political and economic developments, the possible establishment of exchange
controls and/or the adoption of other governmental restrictions that might
affect adversely the payment of principal and interest on such instruments. In
addition, there may be less publicly available information about a foreign bank
than about a domestic bank. See the SAI for a further discussion of these risks.
SECTION 4(2) COMMERCIAL PAPER. Most commercial paper is exempt from
registration requirements imposed by federal securities laws. In addition, some
commercial paper that is not exempt can be purchased and sold without
registration in transactions not involving a public offering pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"). The Funds'
investments in Section 4(2) commercial paper will be subject to their
nonfundamental 10% limitation on investments in illiquid securities, unless the
Section 4(2) commercial paper can be sold to qualified institutional buyers
("QIBs") under Rule 144A of the 1933 Act. As permitted by Rule 144A, the Board
has adopted guidelines and delegated the daily function of determining and
monitoring the liquidity of securities so purchased. Because it is not possible
to predict with assurance how the Rule 144A market will develop, the Board will
monitor the Funds' investments in Rule 144A securities, focusing on such factors
as liquidity and availability of information. This investment practice could
have the effect of increasing the level of illiquidity in the Funds to the
extent that QIBs become uninterested in purchasing such securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. The Funds may purchase
short-term U.S. Government obligations on a when-issued or delayed-delivery
basis (arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time); however, the Funds only will engage in
these transactions for the purpose of acquiring portfolio securities consistent
with their investment objective and policies, and not for investment leverage.
Prior to settlement of these transactions, the market price of the purchased
securities may vary from the purchase price.
NET ASSET VALUE
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The net asset values of the Money Market Fund's A shares and C shares and
the net asset value of the Municipal Money Market Fund's A shares are calculated
by dividing the value of the total assets of each Fund attributable to that
class, less liabilities attributable to that class, by the number of shares of
that class outstanding. Shares are valued daily at 12:00 p.m. Eastern time
immediately after the daily declaration of dividends on each day the New York
Stock Exchange ("Exchange") is open. Each Fund will use its best efforts to
maintain its net asset value per share at $1.00 by valuing its portfolio
securities using the amortized cost method, adding other assets, subtracting
liabilities and dividing by the number of shares outstanding. A Fund, however,
cannot guarantee that its net asset value per share will always remain at $1.00.
For more information on the calculation of net asset value, see "Net Asset
Value" in the SAI.
YIELD
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From time to time the Funds may advertise "yield" and "effective yield."
The Money Market Fund's yield is computed separately for A shares and C shares.
Both yield figures are based on historical earnings and
7
<PAGE> 10
are not intended to indicate future performance. The "yield" of a Fund refers to
the income generated by an investment in the Fund over a seven-day period. This
income is then "annualized." The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "average
yield" because of the compounding effect of this assumed reinvestment.
The Municipal Money Market Fund also may advertise its "tax-equivalent
yield." The "tax-equivalent yield" represents the taxable yield a shareholder
would have to earn before Federal income tax to equal the Fund's tax-free yield.
See "Calculating Yields" in the SAI.
INVESTING IN THE FUNDS
HOW TO BUY SHARES
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Shares of each Fund are offered continuously through the Trust's principal
underwriter, Raymond James & Associates, Inc. (the "Distributor"), and through
other participating dealers or banks that have dealer agreements with the
Distributor.
The Money Market Fund offers two classes of shares, A shares and C shares.
C shares may be acquired only through an exchange of C shares of another
Heritage Mutual Fund. See "Exchange Privileges." The Municipal Money Market Fund
offers and sells only A shares.
You may purchase A shares of a Fund directly by completing and signing the
Account Application found in this prospectus, and mailing it, along with your
payment, to Heritage Cash Trust - [name of the Fund], c/o Shareholder Services,
Heritage Asset Management, Inc., P.O. Box 33022, St. Petersburg, FL 33733.
A shares of a Fund also may be purchased through a registered
representative ("Representative") of the Distributor, a participating dealer or
a participating bank by placing an order for A shares with your Representative,
completing and signing the Representative's account application and making your
check payable to the fund or the Distributor.
The Distributor and certain participating dealers have established
automatic purchase procedures ("Sweep Programs") for each Fund's shareholders
who maintain a brokerage account with them. Free credit cash balances ("credit
balances") arising from sales of securities for cash, redemptions of debt
securities, dividend and interest payments and funds received from customers may
be invested automatically in A shares on a daily basis. Additional information
regarding this privilege can be obtained from your Representative. For
shareholders participating in Sweep Programs, Fund accounts may be established
as a part of the participating dealer's new account procedure.
Shares of a Fund are sold at their net asset value next determined after an
order is received by the Manager, in its capacity as transfer agent, without a
sales load. Initial and subsequent orders will be considered to be received by
the Manager, in its capacity as transfer agent, after payment by check is
converted into Federal funds (a commercial bank's deposit with the Federal
Reserve Bank that can be transferred to another member bank on the same day)
normally two days after receiving the check. If payment is made by bank wire,
the order will be considered received immediately. However, such orders received
by the Manager after 12:00 p.m. Eastern time will not be invested until the next
business day. Each Fund reserves the right to reject any purchase request.
8
<PAGE> 11
Purchases of Fund shares by customers of a Representative using a Sweep
Program usually will be made on the next business day following the day that
credit balances are generated in the customer's brokerage account. However,
credit balances arising from funds placed in the customer's account by personal
check or purchase of Fund shares by personal check usually will not be invested
until the second business day following the day that the deposit is credited to
the customer's account. Due to the foregoing practices, the Representative may,
under certain circumstances, obtain Fderal funds prior to purchasing Fund shares
for its customers and may, as a result, realize some benefit because of the
delay in investing these funds.
Shares may be purchased with Federal funds sent by Federal Reserve or bank
wire to State Street Bank and Trust Company, Boston, Massachusetts,
ABA#011-000-028, Account # 3196-769-8. Wire instructions should include (1) the
name of the Fund, (2) your account number assigned by the Fund, and (3) your
name. To open a new account with Federal funds or by wire, you must contact the
Manager or your Representative to obtain a Heritage Mutual Fund account number.
Commercial banks may elect to charge a fee for wiring funds to State Street Bank
and Trust Company. For more information on "How to Buy Shares," see "Investing
in the Funds" in the SAI.
MINIMUM INVESTMENT REQUIRED/ACCOUNTS WITH LOW BALANCES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Except as provided under "Investment Programs," the minimum initial
investment in each Fund is $1,000, and a minimum account balance of $1,000 must
be maintained. These minimum requirements may be waived at the discretion of the
Manager. In addition, initial investments in Individual Retirement Accounts
("IRAs") may be reduced or waived under certain circumstances. Contact the
Manager or your Representative for further information.
Due to the high cost of maintaining accounts with low balances, it is
currently the Trust's policy to redeem Fund shares in any account if the account
balance falls below the required minimum value of $1,000, except for retirement
accounts. The shareholder will be given 30 days' notice to bring the account
balance to the minimum required or the Trust may redeem shares in the account
and pay the proceeds to the shareholder.
INVESTMENT PROGRAMS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A variety of automated investment options are available for the purchase of
each Fund's A shares. These plans provide for automatic monthly investments of
$50 or more through various methods described below. You may change the amount
to be automatically invested or may discontinue this service at any time without
penalty. If you discontinue this service before reaching the required account
minimum, the account must be brought up to the minimum in order to remain open.
Shareholders desiring this service should complete the appropriate application
available from the Manager. You will receive a periodic confirmation of all
activity for your account.
AUTOMATIC INVESTMENT OPTIONS:
- ---------------------------------
1. Bank Draft Investing -- You may authorize the Manager to process a monthly
draft from your personal checking account for investment into either Fund.
The draft is returned by your bank the same way a canceled check is returned.
9
<PAGE> 12
2. Payroll Direct Deposit -- If your employer participates in a direct deposit
program (also known as ACH Deposits) you may have all or a portion of your
payroll directed to either Fund. This will generate a purchase transaction
each time you are paid by your employer. Your employer will report to you the
amount sent from each paycheck.
3. Government Direct Deposit -- If you receive a qualifying periodic payment
from the U. S. Government or other agency that participates in Direct
Deposit, you may have all or a part of each check directed to purchase shares
of either Fund. The U.S. Government or agency will report to you all payments
made.
4. Automatic Exchange -- If you own shares of another Heritage Mutual Fund, you
may elect to have a preset amount redeemed from that fund and exchanged into
the corresponding class of shares of either Fund. You will receive a
statement from the other Heritage Mutual Fund confirming the redemption.
You may change or terminate any of the above options at any time.
RETIREMENT PLANS:
- ------------------
Shares of either Fund may be purchased as an investment for Heritage IRA
plans. In addition, shares may be purchased as an investment for self-directed
IRAs, defined contribution plans, Simplified Employer Pension Plans ("SEPs") and
other retirement plan accounts. Generally, it will not be advantageous to hold
shares of the Municipal Money Market Fund in an IRA or other retirement plans.
HERITAGE IRA. Individuals who earn compensation and who have not reached
age 70 1/2 before the close of the year generally may establish a Heritage IRA.
An individual may make limited contributions to a Heritage IRA through the
purchase of shares of either Fund and/or other Heritage Mutual Funds. The
Internal Revenue Code of 1986, as amended (the "Code"), limits the deductibility
of IRA contributions to taxpayers who are not active participants (and whose
spouses are not active participants) in employer-provided retirement plans or
who have adjusted gross income below certain levels. Nevertheless, the Code
permits other individuals to make nondeductible IRA contributions up to $2,000
per year (or $2,250, if such contributions also are made for a nonworking spouse
and a joint return is filed). A Heritage IRA also may be used for certain
"rollovers" from qualified retirement plans and from Section 403(b) annuity
plans. For more detailed information on the Heritage IRA, please contact the
Manager.
Shares of either Fund may be used as the investment medium for qualified
retirement plans (defined benefit or defined contribution plans established by
corporations, partnerships or sole proprietorships). Contributions to qualified
plans may be made (within certain limits) on behalf of the employees, including
owner-employees, of the sponsoring entity.
See "Investing in the Funds" in the SAI for more information on the above
programs.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Redemptions of a Fund's shares can be made by:
CONTACTING YOUR REPRESENTATIVE. Your Representative will transmit an order
to either Fund for redemption by that Fund and may charge you for this service.
TELEPHONE REQUEST. You may redeem shares by placing a telephone request to
a Fund (800-421-4184) prior to the close of regular trading on the Exchange. If
you do not wish to have telephone exchange/redemption privileges, you should so
elect by completing the appropriate section of the Account Application.
10
<PAGE> 13
The Trust, Manager, Distributor and their Trustees, directors, officers and
employees are not liable for any loss arising out of telephone instructions they
reasonably believe are authentic. These parties will employ reasonable
procedures to confirm that telephone instructions are authentic. To the extent
that the Trust, Manager, Distributor and their Trustees, directors, officers and
employees do not follow reasonable procedures, some or all of them may be liable
for losses due to unauthorized or fraudulent transactions. For more information
on these procedures, see "Redeeming Shares - Telephone Transactions" in the SAI.
You may elect to have the funds wired to the bank account specified on the
Account Application. Funds normally will be sent the next business day, and you
will be charged a wire fee by the Manager (currently $5.00). For redemptions of
less than $25,000, you may request that the check be mailed to your address of
record, providing that such address has not been changed in the past 60 days.
For your protection, all other redemption checks will be transferred to the bank
account specified on the Account Application.
WRITTEN REQUEST. Fund shares may be redeemed by sending a written request
for redemption to "Heritage Cash Trust - [name of the applicable Fund], c/o
Shareholder Services, Heritage Asset Management, Inc., P.O. Box 33022, St.
Petersburg, FL 33733". Signature guarantees will be required on the following
types of requests: redemptions from any account that has had an address change
in the past 60 days, redemptions greater than $25,000, redemptions that are sent
to an address other than the address of record and exchanges or transfers into
other Heritage accounts that have different titles. The Manager will transmit an
order to the Fund for redemption.
SYSTEMATIC WITHDRAWAL PLAN. Withdrawal plans are available that provide
for regular periodic withdrawals of $50 or more on a monthly, quarterly,
semiannual or annual basis. Under these plans, sufficient shares of the
applicable Fund are redeemed to provide the amount of the periodic withdrawal
payment. The Manager reserves the right to cancel systematic withdrawals if
insufficient shares are available for two or more consecutive months.
REDEEMING BY CHECK. At your request, after receipt of a completed
signature card and good funds become available in the account, the Manager will
establish a checking account for redeeming Fund shares. With a Fund checking
account, shares may be redeemed simply by writing a check for $100 or more. The
redemption will be made at the net asset value next determined after the Manager
presents the check to the Fund. A check should not be written to close an
account. If you wish to redeem shares and have the proceeds available, a check
may be written on a Fund checking account and negotiated through a local bank
where you have an account. Canceled checks will be sent to you each month. All
checkwriting transactions are available to you at no charge, except as follows:
- - $15.00 charge for all attempted check redemptions in which the amount of the
check exceeds the available assets in your account; and
- - $15.00 charge for placing a stop payment order on a check.
Please contact the Manager or your Representative for further information,
or see "Redeeming Shares" in the SAI.
RECEIVING PAYMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If redemption of Fund shares is requested by contacting your
Representative, you normally will receive payment by check on the first business
day following the receipt of instructions. Redemption payments made by the
Manager to shareholders who have elected to redeem Fund shares by written
request normally are available to be mailed according to instructions within one
day following receipt of a valid redemption request.
11
<PAGE> 14
However, your right to redeem shares or receive payment therefrom may be
suspended or postponed at times when the Exchange is closed (other than
customary weekend and holiday closings) or during periods of emergency or other
periods as permitted by the Securities and Exchange Commission. In the case of
any such suspension, you may either withdraw your request for redemption or
receive payment based upon the net asset value next determined after the
suspension is lifted. If a redemption check remains outstanding after six
months, the Manager reserves the right to redeposit those funds into your
account. For more information on receiving payment, see "Redeeming
Shares -- Receiving Payment" in the SAI.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You may exchange some or all of your shares of each Fund for shares of the
same class of any other Heritage Mutual Fund. All exchanges will be based on the
respective net asset values of the Heritage Mutual Funds involved. All exchanges
are subject to the minimum investment requirements and any other applicable
terms set forth in the prospectus for the Heritage Mutual Fund whose shares are
being acquired. A sales load will be charged on the exchange of A shares of the
Fund for the A shares of a Heritage Mutual Fund equal to that charged on a
purchase of such Heritage Mutual Fund shares unless the Fund shares being
exchanged were themselves acquired by the exchange of other Heritage Mutual Fund
shares. A CDSL of 1% will be imposed on the redemption of C shares of the Money
Market Fund acquired through exchange of C shares of another Heritage Mutual
Fund if those shares were held for less than the required one-year CDSL holding
period. Exchanges involving the redemption of shares recently purchased by check
will be permitted only after the Heritage Mutual Fund whose shares have been
tendered for exchange is reasonably assured that the check has cleared, normally
seven calendar days following the purchase date. Shares acquired pursuant to a
telephone request for exchange will be held under the same account registration
as the shares redeemed through such exchange. For a discussion of limitation of
liability of certain entities, see "How to Redeem Shares - Telephone Requests."
Telephone exchanges can be effected by calling the Manager at (800)
421-4184 or by calling your Representative. In the event that you or your
Representative are unable to reach the Manager by telephone, an exchange can be
effected by sending a telegram to Heritage Asset Management, Inc., attention:
Shareholder Services. Telephone or telegram requests for an exchange received by
the Manager before 12:00 p.m. Eastern time will be effected on that day.
Requests for an exchange received after 12:00 p.m. will be effected on the
following business day. Due to the volume of calls or other unusual
circumstances, telephone exchanges may be difficult to implement during certain
time periods.
The exchange privilege is available only in states where shares of the
Heritage Mutual Fund being acquired may be legally sold. Each Heritage Mutual
Fund reserves the right to reject any order to acquire shares through exchange
or otherwise to restrict or terminate the exchange privilege at any time. In
addition, each Heritage Mutual Fund may terminate this exchange privilege upon
60 days' notice. For further information on this exchange privilege and for a
copy of any Heritage Mutual Fund prospectus, contact the Manager or your
Representative and see "Exchange Privilege" in the SAI.
12
<PAGE> 15
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
The business and affairs of each Fund are managed by or under the direction
of the Trust's Board of Trustees. The Trustees are responsible for managing the
Funds' business affairs and for exercising all the Funds' powers except those
reserved to the shareholders. A Trustee may be removed by the other Trustees or
a two-thirds vote of the outstanding Fund's shares.
INVESTMENT ADVISER, FUND ACCOUNTANT, ADMINISTRATOR AND TRANSFER AGENT
Heritage Asset Management, Inc. is the investment adviser, fund accountant,
administrator and transfer agent for each Fund. The Manager is responsible for
making investment decisions for the Money Market Fund and for reviewing and
establishing investment policies for each Fund as well as administering its
noninvestment affairs. The Manager is a wholly-owned subsidiary of Raymond James
Financial, Inc., which, together with its subsidiaries, provides a wide range of
financial services to retail and institutional clients. The Manager manages,
supervises and conducts the business and administrative affairs of the other
Heritage Mutual Funds with net assets totalling approximately $2.0 billion as of
October 31, 1995. The Manager's annual investment advisory and administration
fee is paid monthly by each Fund to the Manager and is based on its average
daily net assets as shown on the charts below. Each Fund pays the Manager
directly for fund accounting and transfer agent services.
MONEY MARKET FUND
<TABLE>
<CAPTION>
ADVISORY FEE
AS % OF AVERAGE
AVERAGE DAILY DAILY NET
NET ASSETS ASSETS
<S> <C>
- ---------------------------------------------------------
First $500 million...................... .500%
Second $500 million..................... .475%
Third $500 million...................... .450%
Fourth $500 million..................... .425%
Over $2 billion......................... .400%
</TABLE>
MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
ADVISORY FEE
AS % OF AVERAGE
AVERAGE DAILY DAILY NET
NET ASSETS ASSETS
<S> <C>
- ---------------------------------------------------------
First $250 million...................... .500%
Second $250 million..................... .475%
Third $250 million...................... .450%
Fourth $250 million..................... .425%
Over $1 billion......................... .400%
</TABLE>
The advisory fee may be reduced pursuant to regulations in various states
where Fund shares are qualified for sale which impose limitations on the annual
expense ratio of a Fund. The Manager reserves the right to discontinue any
voluntary waiver of its fees or reimbursement to a Fund in the future. The
Manager also may recover advisory fees waived in the two previous years if the
recovery does not cause a Fund to exceed applicable expense limitations. It
currently is not anticipated that the Manager will recover these fees. The
13
<PAGE> 16
Manager and the Distributor also are authorized to use the fees paid to them by
each Fund to compensate third parties who agree to provide administrative or
shareholder services to the Funds. The Manager, as transfer agent for the Funds,
maintains a share account for each shareholder.
SUBADVISER
The Manager has entered into an agreement with Alliance Capital Management
L.P. to provide investment advice and portfolio management services to the
Municipal Money Market Fund for a fee payable by the Manager equal to .125% of
the Fund's average daily net assets up to $100 million, .10% of average daily
net assets from $100 million to $250 million and .05% of average daily net
assets exceeding $250 million. Investment decisions for the Municipal Money
Market Fund are made by the Subadviser subject to review by the Manager and the
Board of Trustees. The Subadviser is a major international investment manager
supervising client accounts with assets totaling over $144 billion as of October
31, 1995. The Subadviser serves its clients, primarily major corporate employee
benefit funds, public employee retirement systems, investment companies,
foundations and endowment funds, with a staff of more than 1,350 employees
operating out of 5 domestic offices and the overseas offices of 9 subsidiaries.
The Subadviser is a limited partnership whose general partner, Alliance
Capital Management Corporation, is a wholly-owned subsidiary of Equitable
Investment Corporation, which in turn is a wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States ("Equitable"). ACMC, Inc.,
also a wholly-owned subsidiary of Equitable, owns approximately 59% of the
outstanding securities of the Subadviser. Equitable, one of the largest life
insurance companies in the United States, is a wholly-owned subsidiary of The
Equitable Companies Incorporated, a holding company controlled by AXA, a member
of a large French insurance group. AXA is indirectly controlled by a group of 5
French mutual insurance companies.
Fund purchases of portfolio securities are made from dealers, underwriters
and issuers; sales, if any, prior to maturity, are made to dealers and issuers.
The Funds normally will not incur any brokerage commission expense on such
transactions because money market instruments generally are traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission. The Manager or, for the Municipal Money Market Fund, the Subadviser
will effect transactions with those dealers it believes provide the most
favorable prices and are capable of providing efficient executions. Subject to
those requirements, the Manager or Subadviser, as the case may be, may consider
sales of shares of the Funds (and, if permitted by law, of other funds for which
the Manager or Subadviser, as the case may be, is the adviser or subadviser) as
a factor in the selection of broker-dealers to execute portfolio transactions
for each Fund. See the SAI for a further discussion of portfolio transactions
and brokerage services.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dividends from net investment income are declared daily and paid monthly.
Each Fund's net investment income for Saturdays, Sundays and holidays is
declared as a dividend on the next business day. You receive the dividend
declared on the day following the date on which your shares are purchased. If
you withdraw the entire balance of your account, you will be paid all dividends
declared through the date of the withdrawal. Dividends are declared
automatically and issued in additional shares of each Fund unless you request
cash
14
<PAGE> 17
payments. You also may elect to have your dividends automatically invested in
any other Heritage Mutual Fund. Distributions of net short-term capital gain, if
any, normally are made once each year near calendar year-end, although such
distributions may be made more frequently in order to maintain each Fund's net
asset value at $1.00 per share. Distribution options can be changed at any time
by notifying the Manager in writing.
Dividends paid by the Money Market Fund with respect to its A shares and C
shares are calculated in the same manner and at the same time and will be in the
same amount relative to the aggregate net asset value of the shares in each
class.
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As compensation for services rendered and expenses borne by the Distributor
in connection with the distribution of each class of each Fund's shares and in
connection with personal services rendered to shareholders and the maintenance
of shareholder accounts, each Fund pays the Distributor a service fee of up to
0.15% of that Fund's average daily net assets attributable to that class of
shares. This fee is computed daily and paid monthly.
The above-referenced fees paid to the Distributor are made under
Distribution Plans (each a "Plan") adopted pursuant to Rule 12b-1 under the 1940
Act. These Plans authorize the Distributor to spend such fees on any activities
or expenses intended to result in the sale of a Fund's shares, including, but
not limited to, compensation paid to Representatives, advertising, salaries and
other expenses of the Distributor relating to selling or servicing efforts;
expenses of organizing and conducting sales seminars; printing of prospectuses,
SAIs and reports for other than existing shareholders; and preparation and
distribution of advertising material and sales literature and other sales
promotion expenses. The Distributor has entered into dealer agreements with
participating dealers and/or banks who also will distribute shares of the Funds.
In addition, the Manager may elect to bear additional expenses incurred by the
Distributor and sales agents in providing such services.
If a Plan is terminated, the obligation of a Fund to make payments to the
Distributor pursuant to the Plan will cease and the Fund will not be required to
make any payment past the date the Plan terminates.
TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its taxable net investment income and realized net capital
gains that is distributed to its shareholders. Dividends paid by the Money
Market Fund generally are taxable to its shareholders as ordinary income,
notwithstanding that these dividends are paid in additional Fund shares.
Distributions by the Municipal Money Market Fund that it designates as "exempt-
interest dividends" generally may be excluded from gross income by its
shareholders. Interest on indebtedness incurred or continued by a shareholder to
purchase or carry Municipal Money Market Fund shares is not deductible. You will
receive Federal income tax information regarding dividends after the end of each
year including, for the Municipal Money Market Fund, the amount of
exempt-interest dividends (and the portion thereof, if any, that is an item of
tax preference for purposes of the AMT) and the amount of any taxable dividends.
Each Fund is required to withhold 31% of all taxable dividends payable to
individuals and certain other non-corporate shareholders who do not provide the
Fund with a correct taxpayer identification number or who otherwise are subject
to backup withholding.
15
<PAGE> 18
The foregoing is only a summary of the important Federal income tax
considerations generally affecting the Funds and their shareholders. See the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You therefore are urged to
consult your tax adviser.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each share of a Fund gives the shareholder one vote in matters submitted to
shareholders for a vote, except that, in matters affecting only one Fund, only
shares of that Fund are entitled to vote. Both classes of shares of the Money
Market Fund have equal voting rights, except that, in matters affecting only a
particular class, only shares of that class are entitled to vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or a Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by the Trustees or
shareholders at a special meeting. A special meeting of shareholders shall be
called by the Trustees upon the written request of shareholders owning at least
10% of the Trust's outstanding shares.
16
<PAGE> 19
No dealer, salesman, or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Trust or the Distributor. This Prospectus does
not constitute an offering in any state in which such offering may not lawfully
be made.
<PAGE> 20
[HERITAGE CASH TRUST (TM) LOGO]
MONEY MARKET FUND
AND
MUNICIPAL MONEY MARKET FUND
PROSPECTUS
January 2, 1996
Heritage Cash Trust
P.O. Box 33022
St. Petersburg, FL 33733
--------------------------------------------
Address Change Requested
Prospectus
INVESTMENT ADVISER/
SHAREHOLDER SERVICING AGENT
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
(800) 421-4184
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
110M HAM003
<PAGE>
HERITAGE CASH TRUST
MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") dated January 2,
1996 should be read with the Prospectus of Heritage Cash Trust-Money
Market and Municipal Money Market Funds, dated January 2, 1996. This SAI
is not a prospectus itself. To receive a copy of the Prospectus, write to
Heritage Asset Management, Inc. at the address below or call (800) 421-
4184.
Heritage Asset Management, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives . . . . . . . . . . . . . . . . . . . . 2
Investment Policies . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
CALCULATING YIELDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INVESTING IN THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . 14
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . . . 14
Telephone Transactions . . . . . . . . . . . . . . . . . . . . 16
Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . 16
Receiving Payment . . . . . . . . . . . . . . . . . . . . . . 16
EXCHANGE PRIVILEGE . . . . . . . . . . . . . . . . . . . . . . . . . . 17
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TRUST INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management of the Funds . . . . . . . . . . . . . . . . . . . 20
Investment Adviser and Administrator; Subadviser . . . . . . 23
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 26
Distribution of Shares . . . . . . . . . . . . . . . . . . . . 27
Administration of the Funds . . . . . . . . . . . . . . . . . 29
Potential Liability . . . . . . . . . . . . . . . . . . . . . 29
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
REPORT OF INDEPENDENT ACCOUNTANTS
Money Market Fund . . . . . . . . . . . . . . . . . . . . . A-5
Municipal Money Market Fund . . . . . . . . . . . . . . . . A-6
FINANCIAL STATEMENTS
Money Market Fund . . . . . . . . . . . . . . . . . . . . . A-7
Municipal Money Market Fund . . . . . . . . . . . . . . . . A-14
<PAGE>
GENERAL INFORMATION
-------------------
Heritage Cash Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated June 21,
1985. The Trust currently consists of two separate investment portfolios:
the Money Market Fund and the Municipal Money Market Fund (the "Municipal
Fund") (collectively the "Funds"). The Money Market Fund offers two
classes of shares, Class A shares that are not subject to any sales load
("A shares") and Class C shares offered subject to a contingent deferred
sales load ("CDSL") ("C shares"). C shares may be acquired only through
exchanges of C shares of other Heritage mutual funds for which Heritage
Asset Management, Inc. (the "Manager") serves as adviser or administrator
("Heritage Mutual Funds"). The Municipal Fund offers A shares only.
INVESTMENT INFORMATION
----------------------
Investment Objectives
---------------------
Each Fund's investment objective and certain investment policies
are described in the prospectus. The Funds also have adopted the
investment policies and restrictions described below.
Investment Policies
-------------------
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase
agreements with domestic commercial banks and with registered broker-
dealers who are members of a national securities exchange or market makers
in U.S. Government securities. A Fund's repurchase agreements will
require that the underlying security at all times have a value at least
equal to the resale price. If the seller of a repurchase agreement
defaults, the Fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of the sale are less than the
resale price provided in the agreement. In addition, even though the
Federal Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in insolvency proceedings, a
Fund may incur delays and costs in selling the underlying security or may
suffer a loss if the Fund is treated as an unsecured creditor and is
required to return the underlying security to the seller.
REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow by entering
into reverse repurchase agreements with the same parties with whom the
Fund may enter into repurchase agreements. Under a reverse repurchase
agreement, a Fund sells securities and agrees to repurchase them at a
mutually agreed upon price. At the time the Fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated account
with an approved custodian containing liquid high grade securities, marked
to market daily, having a value not less than the repurchase price
(including accrued interest). Reverse repurchase agreements involve the
- 2 -
<PAGE>
risk that the market value of securities retained in lieu of sale by the
Fund may decline below the price of the securities the Fund has sold but
is obliged to repurchase. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent,
such buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce the Fund's obligation to repurchase the
securities and the Fund's use of the proceeds of the reverse repurchase
agreement effectively may be restricted pending such decisions. Reverse
repurchase agreements create leverage, a speculative factor, and will be
considered borrowings for the purpose of the Fund's limitation on
borrowing.
SECTION 4(2) COMMERCIAL PAPER AND RULE 144A. Each Fund may
invest in Section 4(2) commercial paper. Most commercial paper is exempt
from registration requirements imposed by federal securities laws. In
addition, some commercial paper that is not exempt can be purchased and
sold without registration in transactions not involving a public offering
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"1933 Act"). The Manager or, for the Municipal Fund, Alliance Capital
Management L.P. (the "Subadviser"), considers legally restricted but
readily saleable Section 4(2) commercial paper to be liquid. The
Securities and Exchange Commission (the "SEC") staff, though, considers
such investments to be illiquid. Accordingly, until advised otherwise by
the staff, a Fund's investments in Section 4(2) commercial paper will be
subject to its limit on investments in illiquid securities.
SECURITIES LOANS. Each Fund may lend its securities. Securities
loans are made to broker-dealers or other financial institutions pursuant
to agreements requiring that loans be secured continuously by collateral
in cash or short-term debt obligations at least equal at all times to the
value of the securities lent. The borrower pays a Fund an amount equal to
any dividends or interest received on the securities lent. The Funds
retain all or a portion of the interest received on investments of the
cash collateral or receive a fee from the borrower. The Funds may call
such loans in order to sell the securities involved. In the event that a
Fund reinvests cash collateral, it is subject to the risk that both the
reinvested collateral and the loaned securities will decline in value. In
addition, in such event, it is possible that the securities loan may not
be collateralized fully.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Each Fund may
purchase and sell securities on a when-issued and delayed-delivery basis.
These transactions are made to secure what the Manager or, for the
Municipal Fund, the Subadviser considers to be advantageous prices or
yields. Settlement dates may be a month or more after entering into these
transactions, and market values of the securities purchased may vary from
the purchase prices. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Funds,
such as cash, U.S. Government securities or other liquid high-grade debt
obligations, which will be marked to market daily, sufficient to make
payment for the securities to be purchased, will be segregated by the
Funds' custodian on the Funds' records at the trade date and maintained
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<PAGE>
until the transaction settles. In when-issued and delayed-delivery
transactions, a Fund relies on the seller to complete the transaction.
The seller's failure to perform may cause a Fund to miss a price or yield
considered to be advantageous.
Money Market Fund
-----------------
EURODOLLAR AND YANKEE CERTIFICATES. The Money Market Fund may
purchase certificates of deposit, time deposits and bankers' acceptances
issued by foreign branches of domestic banks ("domestic Eurodollar
certificates") and foreign banks ("foreign Eurodollar certificates") or by
domestic branches of foreign banks ("Yankee certificates"). As a result
of federal and state laws and regulations, domestic branches of domestic
banks generally are, among other things, required to maintain specified
levels of reserves and are subject to other supervision and regulation
designed to promote financial soundness.
Domestic and foreign Eurodollar certificates, such as
certificates of deposit and time deposits, may be general obligations of
the parent bank in addition to the issuing branch or may be limited by the
terms of a specific obligation and governmental regulation. Such
obligations may be subject to different risks than are those of domestic
banks or domestic branches of foreign banks. These risks include foreign
economic and political developments, foreign governmental restrictions
that may affect adversely payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other
taxes on interest income. Foreign branches of foreign banks are not
necessarily subject to the same or similar regulatory requirements that
apply to domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and recordkeeping requirements. In
addition, less information may be publicly available about a foreign
branch of a domestic bank or a foreign bank than a domestic bank.
Yankee certificates may be general obligations of the parent bank
in addition to the issuing branch or may be limited by the terms of a
specific obligation and by federal and state regulation as well as
governmental action in the country in which the foreign bank has its head
office. The deposits of state-licensed domestic branches of foreign banks
may not be insured necessarily by the Federal Deposit Insurance
Corporation ("FDIC").
In view of the foregoing factors associated with the purchase of
domestic and foreign Eurodollar and Yankee certificates, the Money Market
Fund will evaluate carefully such investments on a case-by-case basis.
GNMA CERTIFICATES. The Money Market Fund may invest in
securities issued by the Government National Mortgage Association
("GNMA"), a wholly-owned U.S. Government corporation that guarantees the
timely payment of principal and interest. The market value and interest
yield of these instruments can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These
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securities represent ownership in a pool of federally insured mortgage
loans. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. GNMA
securities differ from conventional bonds in that principal is paid back
to the certificate holders over the life of the loan rather than at
maturity. As a result, the Money Market Fund will receive monthly
scheduled payments of principal and interest and may receive unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA securities may offer yields higher than those available from
other types of U.S. Government securities, GNMA securities may be less
effective than other types of securities as a means of "locking in"
attractive long-term rates because prepayment proceeds will be invested at
prevailing interest rates, that may be lower than the GNMA securities on
which the prepayments were made.
INDUSTRY CLASSIFICATIONS. For purposes of determining industry
classifications, the Money Market Fund relies upon classifications
established by the Manager that are based upon classifications contained
in the Directory of Companies Filing Annual Reports with the SEC and in
the Standard & Poor's Corporation Industry Classifications.
Municipal Fund
--------------
ALTERNATIVE MINIMUM TAX. The Municipal Fund may invest without
limit in tax-exempt municipal securities the interest on which is an item
of tax preference for purposes of the Federal alternative minimum tax
("AMT"). Such bonds ("AMT-Subject Bonds") have provided, and may continue
to provide, somewhat higher yields than other comparable municipal
securities. AMT-Subject Bonds generally are limited obligations of the
issuer, supported only by payments from private business entities that use
the facilities financed by the bonds (and the pledge, if any, of the real
and personal property so financed as security for such payment) and not by
the full faith and credit or taxing power of the state or any governmental
subdivision. It is not possible to provide specific details on each of
these obligations in which the Municipal Fund's assets may be invested.
MUNICIPAL SECURITIES. The Municipal Fund invests primarily in
municipal securities. Yields on municipal securities are dependent on a
variety of factors, including the general condition of the money market
and of the municipal bond and municipal note markets, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. Municipal securities with longer maturities tend to produce higher
yields and generally are subject to greater price movements than
obligations with shorter maturities. An increase in interest rates
generally will reduce the market value of portfolio investments, and a
decline in interest rates generally will increase the value of portfolio
investments. The achievement of the Municipal Fund's objectives is
dependent in part on the continuing ability of the issuers of municipal
securities in which the Municipal Fund invests to meet their obligations
for the payment of principal and interest when due. Municipal securities
have not been subject to registration with the SEC, although there have
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<PAGE>
been proposals that would require registration in the future. The
Municipal Fund generally will hold securities to maturity rather than
follow a practice of trading. However, the Municipal Fund may seek to
improve portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that occur in
securities markets. Obligations of issuers of municipal securities
are subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress or state legislatures or
referenda extending the time for payment of principal and/or interest or
imposing other constraints upon enforcement of such obligations or upon
the ability of municipalities to levy taxes. There also is the
possibility that, as a result of litigation or other conditions, the
ability of any issuer to pay, when due, the principal of and interest on
its municipal securities may be materially affected.
STANDBY COMMITMENTS. The Municipal Fund may purchase municipal
securities together with the right to resell them to the seller at an
agreed-upon price or yield within specified periods prior to their
maturity dates. Such a right to resell commonly is known as a "standby
commitment," and the aggregate price for securities with a standby
commitment may be higher than the price that otherwise would be paid. The
primary purpose of this practice is to permit the Municipal Fund to be as
fully invested as practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated redemptions. In
this regard, the Municipal Fund acquires standby commitments solely to
facilitate portfolio liquidity and does not exercise its rights thereunder
for trading purposes. Because the value of a standby commitment is
dependent on the ability of the standby commitment writer to meet its
obligation to repurchase, the Municipal Fund will enter into standby
commitment transactions only with municipal securities dealers that are
determined by the Subadviser to present minimal credit risks. The
acquisition of a standby commitment does not affect the valuation or
maturity of the underlying municipal securities that continue to be valued
in accordance with the amortized cost method. Standby commitments are
valued by the Municipal Fund at zero in determining net asset value. If
the Municipal Fund pays directly or indirectly for a standby commitment,
its cost is reflected as unrealized depreciation for the period during
which the commitment is held. Standby commitments do not affect the
average weighted maturity of the Municipal Fund's investment portfolio of
securities.
TAXABLE SECURITIES. Although the Municipal Fund is, and expects
to be, invested primarily in municipal securities, it may elect to invest
up to 20% of its total assets in taxable money market securities when such
action is deemed to be in the best interests of shareholders. Such
taxable money market securities are limited to remaining maturities of 397
days or less at the time of investment, and the Municipal Fund's municipal
and taxable securities are maintained at a dollar-weighted average of 90
days or less. Taxable money securities purchased by the Municipal Fund
are limited to: marketable obligations of, or guaranteed by, the U.S.
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<PAGE>
Government, its agencies or instrumentalities; repurchase agreements
involving such securities; certificates of deposit, bankers' acceptances
and interest-bearing savings deposits of banks having total assets of more
than $1 billion and that are members of the FDIC; and commercial paper of
prime quality rated A-1 or higher by Standard & Poor's ("S&P") or Prime-1
by Moody's Investors Service, Inc. ("Moody's") or, if not rated, deemed by
the Board of Trustees or, pursuant to authority delegated by the Board, by
the Subadviser to be of equal quality.
VARIABLE RATE OBLIGATIONS. The interest rate payable on certain
"variable rate" municipal securities in which the Municipal Fund may
invest is not fixed and may fluctuate based upon changes in market rates.
The interest rate payable on a variable rate municipal security is
adjusted either at pre-designated periodic intervals or whenever there is
a change in the market rate to which the security's interest rate is tied.
Other features may include the right of the Municipal Fund to demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of a variable rate municipal security is
that the interest rate adjustment minimizes changes in the market value of
the obligation. As a result, the purchase of variable rate municipal
securities can enhance the ability of the Municipal Fund to maintain a
stable net asset value per share and to sell an obligation prior to
maturity at a price approximating the full principal amount.
The payment of principal and interest by issuers of certain
municipal securities may be guaranteed by letters of credit or other
credit facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal security
meets the Municipal Fund's investment quality requirements. Variable rate
obligations purchased by the Municipal Fund may include participation
interests in variable rate industrial development bonds that are backed by
irrevocable letters of credit or guarantees of banks that meet the
criteria for banks described above in "Taxable Securities."
Purchase of a participation interest gives the Municipal Fund an
undivided interest in certain such bonds. The Municipal Fund can exercise
the right, on not more than 30 days' notice, to sell such an instrument
back to the bank from which it purchased the instrument and draw on the
letter of credit for all or any part of the principal amount of its
participation interest in the instrument, plus accrued interest, but will
do so only (1) as required to provide liquidity, (2) to maintain a high
quality investment portfolio, or (3) upon a default under the terms of the
demand instrument. Banks retain portions of the interest paid on such
variable rate industrial development bonds as their fees for servicing
such instruments and the issuance of related letters of credit and
repurchase commitments. The Municipal Fund will not purchase
participation interests in variable rate industrial development bonds
unless it receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned from the bonds in which it holds
participation interests is exempt from Federal income tax. The Subadviser
will monitor the pricing, quality and liquidity of variable rate demand
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<PAGE>
obligations and participation interests therein held by the Municipal Fund
on the basis of published financial information, rating agency reports and
other research services to which the Subadviser may subscribe.
INVESTMENT LIMITATIONS
----------------------
In addition to the limits disclosed in "Investment Policies"
above and the investment limitations described in the prospectus, the
Funds are subject to the following investment limitations, that are
fundamental policies of the Funds and may not be changed without the vote
of a majority of the outstanding voting securities of the Funds. Under
the Investment Company Act of 1940, as amended (the "1940 Act"), a "vote
of a majority of the outstanding voting securities" of a Fund means the
affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares present at a
shareholders meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
CONCENTRATION. The Money Market Fund will not purchase money
market instruments if as a result of such purchase more than 25% of the
value of its total net assets would be invested in any one industry.
However, the Money Market Fund may invest up to 100% of its assets in
domestic bank obligations and obligations of the U.S. Government, its
agencies, and instrumentalities, provided that it may not invest more than
25% of its net assets in (1) domestic Eurodollar certificates, unless the
domestic parent would be unconditionally liable if its foreign branch
failed to make payments on such instruments, and (2) Yankee certificates,
unless the branch issuing such instrument is subject to the same
regulation as U.S. banks.
The Municipal Fund will not purchase instruments if as a result
of such purchase more than 25% of the value of its total net assets would
be invested in any one industry, provided that for purposes of this policy
(1) there is no limitation with respect to tax-exempt municipal securities
(including industrial development bonds), securities issued or guaranteed
by the U.S. Government, its agencies, and instrumentalities, certificates
of deposit, bankers' acceptances and interest-bearing savings deposits
issued by domestic banks, and (2) consumer finance companies, industrial
finance companies, and gas, electric, water and telephone utility
companies are each considered to be separate industries. For purposes of
this restriction, the Municipal Fund will regard the entity that has the
primary responsibility for making payment of principal and interest as the
issuer.
INVESTING IN COMMODITIES, MINERALS OR REAL ESTATE. The Funds may
not invest in commodities, commodity contracts, oil, gas or other mineral
programs, or real estate, except that each may purchase money market
instruments issued by companies that invest in or sponsor such interests.
UNDERWRITING. The Funds may not engage in the underwriting of
money market instruments issued by others except as a Fund may be deemed
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<PAGE>
to be an underwriter under the 1933 Act in connection with the purchase
and sale of portfolio securities.
LOANS. The Funds may not engage in lending activities. However,
this policy does not apply to securities lending and repurchase
agreements. The Money Market Fund may not make secured loans of its
portfolio securities amounting to more than 25% of its total assets.
ISSUING SENIOR SECURITIES. The Money Market Fund may not issue
senior securities, except as permitted by the investment objective,
policies and investment limitations of the Fund. The Municipal Fund may
not issue senior securities. However, this policy does not apply to
investment policies otherwise permitted by the Municipal Fund, such as
making securities loans, borrowing money and engaging in repurchase
agreements and reverse repurchase agreements.
BORROWING MONEY. The Funds may not borrow money except as a
temporary measure for extraordinary or emergency purposes. A Fund may
enter into reverse repurchase agreements and otherwise borrow up to
one-third of the value of its total assets, including the amount borrowed,
in order to meet redemption requests without immediately selling portfolio
instruments. This latter practice is not for investment leverage but
solely to facilitate management of the portfolio by enabling a Fund to
meet redemption requests when the liquidation of portfolio instruments
would be inconvenient or disadvantageous. However, a Fund may not
purchase additional portfolio investments once borrowed funds exceed 5% of
total assets. When effecting reverse repurchase agreements, Fund assets
in an amount sufficient to make payment for the obligations to be
purchased will be segregated by the borrowing Fund's custodian and on the
Fund's records upon execution of the trade and maintained until the
transaction has been settled. During the period any reverse repurchase
agreements are outstanding, to the extent necessary to assure completion
of the reverse repurchase agreements, a Fund will restrict the purchase of
portfolio instruments to money market instruments maturing on or before
the expiration date of the reverse repurchase agreements. Interest paid
on borrowed funds will not be available for investment. Each Fund will
liquidate any such borrowings as soon as possible and may not purchase any
portfolio instruments while any borrowings are outstanding.
The Funds have adopted the following additional restrictions
that, together with certain limits described in the Funds' prospectus, are
nonfundamental policies and may be changed by the Board of Trustees
without shareholder approval in compliance with applicable law, regulation
or regulatory policy.
SELLING SHORT AND BUYING ON MARGIN. The Funds may not sell any
money market instruments short or purchase any money market instruments on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of money market instruments.
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<PAGE>
INVESTING IN NEW ISSUERS. Neither Fund may invest more than 5%
of its total assets in securities of issuers that have records of less
than three years of continuous operation.
ACQUIRING SECURITIES. The Funds may not acquire the voting
securities of any issuer, invest in securities for the purpose of
exercising control or management, or invest in securities issued by any
other investment company except as part of a merger, consolidation or
other acquisition, or as otherwise permitted by law.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF
THE TRUST. The Funds may not purchase or retain the securities of any
issuer if the officers and Trustees of the Trust or the Manager who own
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
DEALING IN PUTS AND CALLS. The Funds may not invest in puts,
calls, straddles, spreads or any combination thereof.
PLEDGING SECURITIES. The Funds may not pledge any securities
except to secure permitted borrowings, and then only in amounts not to
exceed 10% of a Fund's total assets.
Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of the investment, a later increase
or decrease in the percentage resulting from any change in value of net
assets will not result in a violation of such restriction.
NET ASSET VALUE
---------------
Each Fund determines its net investment income for dividend
purposes once each business day immediately prior to the determination of
net asset value. Each determination of net investment income includes all
accrued interest on portfolio investments of the Fund, less all accrued
expenses of the Fund. (A Fund will not have unrealized gains or losses so
long as it values its instruments by the amortized cost method.) Realized
gains and losses are reflected in a Fund's net asset value and are not
included in net investment income. All of a Fund's net investment income
is declared as dividends daily.
Net asset value for a share of each class of the Money Market
Fund and for an A share of the Municipal Fund is determined daily at 12:00
p.m. Eastern time immediately after the daily declaration of dividends,
Monday through Friday, except for the following New York Stock Exchange
(the "Exchange") holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Each Fund will seek to stabilize the net asset value per share of
its class(es) at $1.00 by use of the amortized cost method of valuation,
which the Board of Trustees has determined is the best method for
determining the value of portfolio instruments. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted for
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amortization of premiums or accumulation of discounts rather than at
current market value. The Board of Trustees periodically assess the
continued use of this valuation method and, if necessary, will consider
valuing Fund assets at their fair value as determined in good faith by the
Board of Trustees.
A Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with Rule 2a-7 under the 1940 Act
("Rule 2a-7"). Rule 2a-7 requires the Board to establish procedures
reasonably designed to stabilize the net asset value per share as computed
for purposes of distribution and redemption. The Board's procedures
include monitoring the relationship between the amortized cost value per
share and a net asset value per share based upon available indications of
market value. The Board of Trustees will decide what, if any, steps
should be taken if there is a difference of more than .5% between the two
methods. The Board of Trustees will take any steps they consider
appropriate (such as redemption in kind or shortening the average
portfolio maturity) to minimize any material dilution or other unfair
results arising from differences between the two methods of determining
net asset value.
Rule 2a-7 requires that a Fund limit its investments to
instruments that, in the opinion of the Board of Trustees, present minimal
credit risk and are of high quality as determined by any major rating
agency. If the instruments are not rated, the Board must determine that
they are of comparable quality. The Rule also requires a Fund to maintain
a dollar-weighted average portfolio maturity (not more than 90 days)
appropriate to the objective of maintaining a stable net asset value. In
addition, no instrument with a remaining maturity of more than 397 days
can be purchased by a Fund. For these purposes, each Fund treats variable
rate securities as maturing on the date of their next scheduled rate
adjustment and instruments purchased subject to repurchase agreements as
maturing as of the date that the repurchase is to be made. Should the
disposition of a portfolio security result in a Fund's dollar-weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon
as possible.
It is the Funds' usual practice to hold portfolio securities to
maturity and realize the instruments' stated full value, unless the
Manager or, in the case of the Municipal Fund, the Subadviser, determines
that sale or other disposition is appropriate in light of a Fund's
investment objective. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by
any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates the indicated daily yield
on shares of a Fund, computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value as computed above, may tend to
be higher than a similar computation made by using a method of valuation
based upon market prices and estimates. In periods of rising interest
rates, the daily yield on shares of a Fund computed the same way may tend
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to be lower than a similar computation made by using a method of
calculation based upon market prices and estimates.
CALCULATING YIELDS
------------------
Each class of a Fund computes its current and effective yield
quotations and A shares of the Municipal Fund calculates its tax-
equivalent yield using standardized methods required by the SEC. Each
class of a Fund from time to time advertises (1) its current yield based
on a recently ended seven-day period, computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical pre-
existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and
then multiplying the base return by (365/7), with the resulting yield
figure carried to at least the nearest hundredth of one percent, and
(2) its effective yield based on the same seven-day period by compounding
the base period and by adding 1, raising the sum to a power equal to
(365/7), and subtracting 1 from the result, according to the following
formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ]-1
For the seven-day period ended August 31, 1995, the A shares of
the Money Market Fund's current and effective yields were 5.00% and 5.12%,
respectively. There were no C shares of the Money Market Fund outstanding
during the above-referenced time period.
The Municipal Fund from time to time advertises its Class A tax-
equivalent yield and tax-equivalent effective yield, also based on a
recently ended seven-day period. These quotations are calculated by
dividing that portion of the Municipal Fund's yield (or effective yield,
as the case may be) that is tax-exempt by 1 minus a stated income tax rate
and adding the product to that portion, if any, of the Municipal Fund's
yield that is not tax-exempt, according to the following formula:
E
TAX-EQUIVALENT YIELD = (-----) +t
1-p
where E = the portion of yield that is tax-exempt, p = stated income tax
rate, and t = the portion of yield that is taxable.
For the seven-day period ended August 31, 1995, the A shares of
the Municipal Fund's current, effective and tax-equivalent (assuming the
maximum Federal income tax rate of 39.6%) yields were 2.97%, 3.01% and
4.98%, respectively.
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<PAGE>
Yield may fluctuate daily and does not provide a basis for
determining future yields. Because the yield of a Fund fluctuates, it
cannot be compared with yield on savings accounts or other investment
alternatives that provide an agreed-to or guaranteed fixed yield for a
stated period of time. However, yield information may be useful to an
investor considering temporary investments in money market instruments.
In comparing the yield of one money market fund to another, consideration
should be given to each fund's investment policies, including the types of
investments made, the average maturity of the portfolio securities and
whether there are any special account charges that may reduce the yield.
A Fund's class performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represents past
performance and is not intended to predict or indicate future results.
The return on an investment in a class will fluctuate. In Performance
Advertisements, a class may compare its taxable and tax-equivalent yields
with data published by Lipper Analytical Services, Inc. for money market
funds ("Lipper"), CDA Investment Technologies, Inc. ("CDA"),
IBC/Donoghue's Money Market Fund Report ("Donoghue"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data
Inc. ("ICD"). A Fund also may refer in such materials to mutual fund
performance rankings and other data, such as comparative asset, expense
and fee levels, published by Lipper, CDA, Donoghue, Wiesenberger or ICD.
Performance Advertisements also may refer to discussions of the Fund and
comparative mutual fund data and ratings reported in independent
periodicals, including The Wall Street Journal, Money Magazine, Forbes,
Business Week, Financial World, Barron's, Fortune, and The New York Times.
INVESTING IN THE FUNDS
----------------------
A shares and C shares are sold at their next determined net asset
value after an order is received, without a front-end sales load. The
procedures for purchasing each class of shares of each Fund is explained
in the prospectus under "How to Buy Shares." For customers of Raymond
James & Associates, Inc. ("RJA" or the "Distributor") or its affiliates,
credit balances will be invested automatically. Credit balances arising
from deposits made prior to the daily cashiering deadline (which varies
according to branch location of the customer's account) will be credited
to the brokerage account on the day of receipt. Deposits made after the
daily cashiering deadline of the Distributor's office in which the deposit
is made will be credited to the brokerage account on the next business day
following the day of deposit.
REDEEMING SHARES
----------------
The methods of redemption are described in the section of the
prospectus entitled "How to Redeem Shares."
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Systematic Withdrawal Plan
--------------------------
Shareholders may elect to make systematic withdrawals from a Fund
account of a minimum of $50 on a periodic basis. The amounts paid each
period are obtained by redeeming sufficient shares from an account to
provide the withdrawal amount specified. Since the amounts of the
withdrawals are selected by the shareholder, they are not necessarily
related to the dividends paid by the Fund. Accordingly, periodic
withdrawals may exceed dividends and may result in a depletion of the
shareholder's original investment in the Fund. The Systematic Withdrawal
Plan may be amended or terminated at any time by the shareholder or the
Fund on notice and, in any event, will be terminated when all shares owned
by the shareholder and available for the Systematic Withdrawal Plan have
been redeemed. For the shareholder's protection any change of payee must
be in writing. A shareholder's Systematic Withdrawal Plan also will be
terminated if the Fund is notified of his or her death. Accounts using
the Systematic Withdrawal Plan are subject to the minimum balance
requirements. See "Minimum Investment Required/Accounts with Low
Balances" in the prospectus. The Systematic Withdrawal Plan currently is
not available for shares held in an Individual Retirement Account, Section
403(b) annuity plan, defined contribution plan, Simplified Employee
Pension Plan or other retirement plans, unless the shareholder establishes
to the Manager's satisfaction that withdrawals from such an account may be
made without imposition of a penalty. Shareholders may change the amount
to be paid without charge not more than once a year by written notice to
the Distributor or the Manager.
Systematic withdrawals of C shares, if acquired by exchange of C
shares of another Heritage Mutual Fund will be charged a CDSL of 1% if the
C shares of that other Heritage Mutual Fund were held for less than one
year. Redemptions will be made at net asset value determined as of 12:00
p.m. Eastern time on the 10th day of each month or the 10th day of the
last month of each period, whichever is applicable, if the Exchange is
open for business on that day. If the Exchange is not open for business
on that day, the shares will be redeemed at net asset value determined as
of 12:00 p.m. Eastern time on the preceding business day, minus any
applicable CDSL for C shares. The check for the withdrawal payment
usually will be mailed on the next business day following redemption. If
a shareholder elects to participate in the Systematic Withdrawal Plan,
dividends on all shares in the account must be automatically reinvested in
Fund shares. A shareholder may terminate the Systematic Withdrawal Plan
at any time without charge or penalty by giving written notice to the
Manager or the Distributor. Each Fund, the Manager as transfer agent, and
the Distributor also reserve the right to modify or terminate the
Systematic Withdrawal Plan at any time.
Withdrawal payments are treated as a sale of shares rather than
as a dividend. If the periodic withdrawals exceed reinvested dividends,
the amount of the original investment may be correspondingly reduced.
- 14 -
<PAGE>
A Fund will not knowingly accept purchase orders from
shareholders for additional shares if they maintain a Systematic
Withdrawal Plan unless the purchase is equal to at least one year's
scheduled withdrawals. In addition, a shareholder who maintains such a
Plan may not make periodic investments under a Fund's Automatic Investment
Plan.
Telephone Transactions
----------------------
Shareholders may redeem shares by placing a telephone request to
either Fund. The Trust, Manager, Distributor and their Trustees,
directors, officers and employees are not liable for any loss arising out
of telephone instructions they reasonably believe are authentic. In
acting upon telephone instructions, these parties use procedures that are
reasonably designed to ensure that such instructions are genuine, such as
(1) obtaining some or all of the following information: account number,
name(s) and social security number registered to the account, and personal
identification; (2) recording all telephone transactions; and (3) sending
written confirmation of each transaction to the registered owner. If the
Trust, Manager, Distributor and their Trustees, directors, officers and
employees do not follow reasonable procedures, some or all of them may be
liable for any such losses.
Redemptions in Kind
-------------------
Each Fund is obligated to redeem shares for any shareholder for
cash during any 90-day period up to $250,000 or 1% of the Fund's net asset
value, whichever is less. Any redemption beyond this amount also will be
in cash unless the Board of Trustees determine that further cash payments
will have a material adverse effect on remaining shareholders. In such a
case, a Fund will pay all or a portion of the remainder of the redemption
in portfolio instruments, valued in the same way as the Fund determines
net asset value. The portfolio instruments will be selected in a manner
that the Board of Trustees deem fair and equitable. A redemption in kind
is not as liquid as a cash redemption. If a redemption is made in kind, a
shareholder receiving portfolio instruments and selling them before their
maturity could receive less than the redemption value thereof and could
incur certain transaction costs.
Receiving Payment
-----------------
If a request for redemption is received by a Fund in good order
(as described below) before 12:00 p.m. Eastern time on a day on which the
Exchange is open for business, the shares will be redeemed at the net
asset value per share determined at 12:00 p.m. Eastern time, minus any
applicable CDSL for C shares. Requests for redemption received by the
Fund after 12:00 p.m. Eastern time will be executed at the net asset value
determined as of 12:00 p.m. Eastern time on the next trading day on the
Exchange, minus any applicable CDSL for C shares.
- 15 -
<PAGE>
Payment for shares redeemed by a Fund normally will be made on
the business day after redemption was made. If the shares to be redeemed
have been recently purchased by personal check, the Fund may delay mailing
a redemption check until the purchase check has cleared, which may take up
to seven days. This delay can be avoided by wiring funds for purchases.
The proceeds of a redemption may be more or less than the original cost of
Fund shares.
If shares of a Fund are redeemed by a shareholder through the
Distributor, a participating dealer or participating bank
("Representative"), the redemption is settled with the shareholder as an
ordinary transaction. If a request for redemption is received before the
close of regular trading on the Exchange, shares will be redeemed at the
net asset value per share determined on that day, minus any applicable
CDSL for C shares. Requests for redemption received after the close of
regular trading will be executed on the next trading day. Payment for
shares redeemed normally will be made by the Fund to the Distributor or a
Representative by the third day after the day the redemption request was
made, provided that certificates for shares have been delivered in proper
form for transfer to the Fund or, if no certificates have been issued, a
written request signed by the shareholder has been provided to the
Distributor or a Representative prior to settlement date.
Other supporting legal documents may be required from
corporations or other organizations, fiduciaries or persons other than the
shareholder of record making the request for redemption. Questions
concerning the redemption of Fund shares can be directed to the
Distributor, a Representative or to the Manager.
EXCHANGE PRIVILEGE
------------------
Shareholders who have held Money Market Fund shares for at least
30 days may exchange some or all of their A shares or C shares for
corresponding classes of shares of any other Heritage Mutual Fund.
Exchanges of A shares that have not been subject to a front-end sales load
will be subject to a sales load upon exchange. Exchanges of C shares for
C shares of any other Heritage Mutual Fund subject to a CDSL will be
subject to a CDSL if they are redeemed within the first year. All
exchanges will be based on the respective net asset values of the Heritage
Mutual Funds involved. An exchange is effected through the redemption of
the shares tendered for exchange and the purchase of shares being acquired
at their respective net asset values as next determined following receipt
by the Heritage Mutual Fund whose shares are being exchanged of (1) proper
instructions and all necessary supporting documents as described in such
fund's prospectus, or (2) a telephone request for such exchange in
accordance with the procedures set forth in the prospectus and below.
Shares acquired pursuant to a telephone request for exchange will
be held under the same account registration as the shares redeemed through
such exchange. For a discussion of limitation of liability of certain
entities, see "Telephone Transactions."
- 16 -
<PAGE>
Telephone exchanges can be effected by calling the Manager at
800-421-4184 or by calling a registered representative of the Distributor,
a participating dealer or participating bank ("Representative"). In the
event that a shareholder or his Representative is unable to reach the
Manager by telephone, a telephone exchange can be effected by sending a
telegram to Heritage Asset Management, Inc., attention: Shareholder
Services. Telephone or telegram requests for an exchange received by a
Fund before 12:00 p.m. Eastern time will be effected at 12:00 p.m. Eastern
time on that day. Requests for an exchange received after the close of
regular trading will be effected on the Exchange's next trading day. Due
to the volume of calls or other unusual circumstances, telephone exchanges
may be difficult to implement during certain time periods.
TAXES
-----
Each Fund is treated for tax purposes as a separate corporation.
In order to continue to qualify for the favorable tax treatment afforded
to a regulated investment company ("RIC") under the Internal Revenue Code
of 1986, as amended (the "Code"), a Fund must distribute annually to its
shareholders at least 90% of its investment company taxable income
(generally, taxable net investment income and net short-term capital gain,
if any) plus, in the case of the Municipal Fund, its net interest income
excludable from gross income under section 103(a) of the Code, and must
meet several additional requirements. With respect to each Fund, these
requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments
with respect to securities loans, and gains from the sale or other
disposition of securities, or other income derived with respect to its
business of investing in securities; (2) the Fund must derive less than
30% of its gross income each taxable year from the sale or other
disposition of securities held for less than three months; (3) at the
close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities,
with those other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets;
and (4) at the close of each quarter of the Fund's taxable year, not more
than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of
any one issuer.
Dividends paid by the Municipal Fund will qualify as "exempt-
interest dividends" and thus will be excludable from gross income by its
shareholders, if that Fund satisfies the additional requirement that, at
the close of each quarter of its taxable year, at least 50% of the value
of its total assets consists of securities the interest on which is
excludable from gross income under section 103(a); the Municipal Fund
intends to continue to satisfy this requirement. The aggregate amount
designated for any year by the Municipal Fund as exempt-interest dividends
may not exceed its excludable interest for the year over certain amounts
disallowed as deductions.
- 17 -
<PAGE>
Tax-exempt interest attributable to certain private activity
bonds ("PABs") (including, in the case of a RIC receiving interest on such
bonds, a proportionate part of the exempt-interest dividends paid by that
RIC) is subject to the AMT. Exempt-interest dividends received by a
corporate shareholder also may be indirectly subject to that AMT without
regard to whether the Municipal Fund's tax-exempt interest was
attributable to such bonds.
Entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by PABs or
industrial development bonds ("IDBs") should consult their tax advisers
before purchasing shares of the Municipal Fund because, for users of
certain of these facilities, the interest on such bonds is not exempt from
Federal income tax. For these purposes, the term "substantial user" is
defined generally to include a "non-exempt person" who regularly uses in
trade or business a part of a facility financed from the proceeds of PABs
or IDBs.
Up to 85% of social security and railroad retirement benefits may
be included in taxable income for recipients whose adjusted gross income
(including income from tax-exempt sources such as the Municipal Fund) plus
50% of their benefits exceeds certain base amounts. Exempt-interest
dividends from the Municipal Fund still are tax-exempt to the extent
described above; they are only included in the calculation of whether a
recipient's income exceeds the established amounts.
If the Municipal Fund invests in any instruments that generate
taxable income, under the circumstances described in the Prospectus, the
portion of any dividend attributable to the interest earned thereon will
be taxable to that Fund's shareholders as ordinary income to the extent of
its earnings and profits, and only the remaining portion will qualify as
an exempt-interest dividend. Moreover, if the Municipal Fund realizes
capital gain as a result of market transactions, any distribution of that
gain will be taxable to its shareholders. There also may be collateral
Federal income tax consequences regarding the receipt of tax-exempt divi-
dends by shareholders such as S corporations, financial institutions, and
property and casualty insurance companies. A shareholder falling into any
of these categories should consult its tax adviser concerning its
investment in shares of the Municipal Fund. The exemption of certain
interest income for Federal income tax purposes does not necessarily
result in exemption thereof under the income or other tax laws of any
state or local taxing authority. A shareholder may be exempt from state
and local taxes on distributions of interest income derived from
obligations of the state and/or municipalities of the state in which he or
she is a resident, but generally will be taxed on income derived from
obligations of other jurisdictions.
Each Fund will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year
substantially all of its ordinary (taxable) income for that year and its
capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts.
- 18 -
<PAGE>
Each Fund is required to withhold 31% of any taxable dividends
payable to individuals and certain other noncorporate shareholders who do
not provide the Fund with correct taxpayer identification numbers or
otherwise are subject to backup withholding.
Shareholders (except for qualified retirement plans and accounts
and other tax-exempt investors in the Money Market Fund) will be subject
to Federal income tax on taxable dividends whether received as cash or in
additional Fund shares. No portion of any dividend paid by either Fund is
eligible for the dividends-received deduction available to corporations.
Because each Fund invests primarily for income and normally holds
portfolio instruments to maturity, neither Fund is expected to realize
long-term capital gains. Shareholders should consult their own tax
advisers regarding the status of their investment in either Fund under
state and local tax laws.
TRUST INFORMATION
-----------------
Management of the Funds
-----------------------
TRUSTEES AND OFFICERS. Trustees and officers are listed below
with their addresses, principal occupations and present positions,
including any affiliation with Raymond James Financial, Inc. ("RJF"), RJA
or the Manager.
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Trust During Past Five Years
<S> <C> <C>
Thomas A. James* Trustee Chairman of the Board since 1986 and Chief
880 Carillon Parkway Executive Officer since 1969 of RJF; Chairman
St. Petersburg, FL 33716 of the Board of RJA since 1986; Chairman of
the Board of Eagle Asset Management, Inc.
("Eagle") since 1984 and Chief Executive
Officer of Eagle since July 1994.
Richard K. Riess* Trustee President of Eagle, January 1995 to present,
880 Carillon Parkway Chief Operating Officer, July 1988 to
St. Petersburg, FL 33716 present, Executive Vice President, July 1988-
December 1993; President of Heritage Mutual
Funds, June 1985-November 1991.
Donald W. Burton Trustee President of South Atlantic Capital
614 W. Bay Street Corporation (venture capital) since October
Suite 200 1981.
Tampa, FL 33606
- 19 -
<PAGE>
Position with Principal Occupation
Name the Trust During Past Five Years
C. Andrew Graham Trustee Vice President of Financial Designs Ltd.
Financial Designs, Ltd. since 1992; Executive Vice President of the
1775 Sherman Street Madison Group, Inc., October 1991-1992;
Suite 1900 Principal of First Denver Financial
Denver, CO 80203 Corporation (investment banking) since 1987.
David M. Phillips Trustee Chairman and Chief Executive Officer of CCC
World Trade Center Chicago Information Services, Inc. since 1994 and of
444 Merchandise Mart InfoVest Corporation (information services to
Chicago, IL 60654 the insurance and auto industries and
consumer households) since October 1982.
Eric Stattin Trustee Litigation Consultant/Expert Witness and
2587 Fairway Village Drive private investor since February 1988.
Park City, UT 84060
James L. Pappas Trustee Dean of College of Business Administration
University of South Florida since August 1987 and Lykes Professor of
College of Business Banking and Finance since August 1986 at
Administration University of South Florida.
Tampa, FL 33620
Stephen G. Hill President Chief Executive Officer and President of the
880 Carillon Parkway Manager since April 1989 and Director since
St. Petersburg, FL 33716 December 31, 1994.
Donald H. Glassman Treasurer Treasurer of the Manager since May 1989;
880 Carillon Parkway Treasurer of Heritage Mutual Funds since May
St. Petersburg, FL 33716 1989.
Clifford J. Alexander Secretary Partner, Kirkpatrick & Lockhart LLP.
1800 Massachusetts Ave.
Washington, DC 20036
Patricia Schneider Assistant Compliance Administrator of the Manager.
880 Carillon Parkway Secretary
St. Petersburg, FL 33716
Robert J. Zutz Assistant Partner, Kirkpatrick & Lockhart LLP.
1800 Massachusetts Ave. Secretary
Washington, DC 20036
</TABLE>
* These Trustees are "interested persons" as defined in section
2(a)(19) of the 1940 Act.
- 20 -
<PAGE>
The Trustees and officers of the Trust, as a group, own less than
1% of the Funds' shares outstanding. The Trust's Declaration of Trust
provides that the Trustees will not be liable for errors of judgment or
mistakes of fact or law. However, they are not protected against any
liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office.
The Trust currently pays Trustees who are not "interested
persons" of the Trust $1,333.33 annually and $333.33 per meeting of the
Board of Trustees. Trustees also are reimbursed for any expenses incurred
in attending meetings. Because the Manager performs substantially all of
the services necessary for the operation of the Trust, the Trust requires
no employees. No officer, director or employee of the Manager receives
any compensation from the Trust for acting as a director or officer. The
following table shows the compensation earned by each Trustee for the
fiscal year ended August 31, 1995.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Retirement From the Trust and
Aggregate Benefits Accrued Estimated Annual the Heritage Family
Name of Person, Compensation From as Part of the Benefits Upon of Funds Paid
Position the Trust Trust's Expenses Retirement to Trustees
--------------- ----------------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C>
Donald W. Burton, $1,554 $0 $0 $14,000
Trustee
C. Andrew Graham, $1,776 $0 $0 $16,000
Trustee
David M. Phillips, $1,554 $0 $0 $14,000
Trustee
Eric Stattin, $1,776 $0 $0 $16,000
Trustee
James L. Pappas, $1,776 $0 $0 $16,000
Trustee
Richard K. Riess, $0 $0 $0 $0
Trustee
Thomas A. James, $0 $0 $0 $0
Trustee
- 21 -
<PAGE>
</TABLE>
Investment Adviser and Administrator; Subadviser
------------------------------------------------
The Funds' investment adviser and administrator, Heritage Asset
Management, Inc., was organized as a Florida corporation in 1985. All the
capital stock of the Manager is owned by RJF. RJF is a holding company
that, through its subsidiaries, is engaged primarily in providing
customers with a wide variety of financial services in connection with
securities, limited partnerships, options, investment banking and
related fields.
Under an Investment Advisory and Administration Agreement
("Advisory Agreement") dated November 13, 1985, as amended April 22, 1992,
between the Trust, on behalf of the Money Market Fund and the Municipal
Fund, the Manager provides each Fund with investment advice and portfolio
management services as well as administers the Fund's noninvestment
affairs.
The Manager also is obligated to furnish the Funds with office
space, administrative, and certain other services as well as executive and
other personnel necessary for the operation of the Funds. The Manager and
its affiliates also pay all the compensation of Trustees of the Trust who
are employees of the Manager and its affiliates. The Funds pay all of
their other expenses that are not assumed by the Manager. The Funds also
are liable for such nonrecurring expenses as may arise, including
litigation to which the Funds may be a party. The Funds also may have an
obligation to indemnify Trustees of the Trust and its officers with
respect to any such litigation.
The Advisory Agreement was approved by the Board of Trustees
(including all of the Trustees who are not "interested persons" of the
Manager, as defined under the 1940 Act) and by the shareholders of each
Fund in compliance with the 1940 Act. The Agreement will continue in
force for a period of two years unless its continuance is approved at
least annually thereafter by (1) a vote, cast in person at a meeting
called for that purpose, of a majority of those Trustees who are not
"interested persons" of the Manager or the applicable Fund, and by (2) the
majority vote of either the full Board of Trustees or the vote of a
majority of the outstanding shares of each Fund. The Agreement automati-
cally terminates on assignment, and is terminable on not more than 60
days' written notice by a Fund to the Manager. In addition, the Advisory
Agreement may be terminated on not less than 60 days' written notice by
the Manager to a Fund. In the event the Manager ceases to be the manager
of a Fund or the Distributor ceases to be principal distributor of Fund
shares, the right of a Fund to use the identifying name of "Heritage" may
be withdrawn.
The Manager shall not be liable to either Fund or any shareholder
for anything done or omitted by them, except acts or omissions involving
willful misfeasance, bad faith, gross negligence or reckless disregard of
- 22 -
<PAGE>
the duties imposed upon the Manager by the Advisory Agreement or for any
loss that may be sustained in the purchase, holding or sale of any
security.
All of the officers of the Trust except for Messrs. Alexander and
Zutz are officers or directors of the Manager. These relationships are
described under "Management of the Funds."
ADVISORY AND ADMINISTRATION FEE. The annual investment advisory
and administration fee paid monthly by each Fund to the Manager is based
on each Fund's average daily net assets as listed in the prospectus.
The Manager has voluntarily agreed to waive management fees to
the extent that the Money Market Fund Class A and Class C expenses exceed
.79% of the average daily net assets attributable to that class for this
fiscal year. The Manager also has agreed to waive its fees for A shares
of the Municipal Fund to the extent that expenses exceed .77% of the
average daily net assets attributable to that class for this fiscal year.
For the three fiscal years ended August 31, 1993, 1994 and 1995, the
Manager earned from the Money Market Fund $4,522,090 (before waiving
$193,112 of its fees), $4,775,851 (before waiving $207,108 of its fees)
and $5,436,551 (before waiving $244,977 of its fees), respectively. The
Municipal Fund paid the Manager for the fiscal years ended August 31,
1993, 1994 and 1995, fees of $817,314 (before waiving $106,464 of its
fees), $1,229,072 (before waiving $6,473 of its fees) and $1,226,671
(before waiving $40,432 of its fees), respectively.
CLASS SPECIFIC EXPENSES. The Money Market Fund may determine to
allocate certain of its expenses (in addition to distribution fees) to the
specific classes of the Money Market Fund's shares to which those expenses
are attributable.
STATE EXPENSE LIMITATIONS. Certain states have established
expense limitations for investment companies whose shares are registered
for sale in that state. If the Fund's operating expenses (including the
investment advisory fee, but not including distribution fees, brokerage
commissions, interest, taxes and extraordinary expenses) exceed state
expense limits, the Manager will reimburse the Fund for its expenses over
the limitation. If the Fund's monthly projected operating expenses exceed
applicable state expense limitations, the investment advisory fee paid
will be reduced monthly by the amount of the excess, subject to an annual
adjustment. If applicable state expense limitations are exceeded, the
amount to be reimbursed by the Manager will be limited to the amount of
the investment advisory fee and the Funds may have to cease offering their
shares for sale in such states until the expense ratio declines. Any fees
waived by the Manager can be recovered by it from the applicable Fund when
such recovery would not cause the Fund to exceed its expense limits. The
most restrictive current state expense limit is 2.5% of a Fund's first $30
million in average net assets, 2.0% of the next $70 million in average net
assets and 1.5% of all excess average net assets.
- 23 -
<PAGE>
INVESTMENT SUBADVISER. Alliance Capital Management L.P. has been
retained, under an investment subadvisory agreement (the "Subadvisory
Agreement") dated April 22, 1992 with the Manager, as the Municipal Fund's
investment subadviser. The Subadviser is a limited partnership whose sole
general partner is Alliance Capital Management Corporation, which is a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"). ACMC, Inc., also a wholly-owned subsidiary
of Equitable, owns approximately 55% of the outstanding securities of the
Subadviser.
The Subadvisory Agreement will continue in force if its
continuance is approved at least annually by (1) a vote, cast in person at
a meeting called for that purpose, of a majority of those Trustees who are
not "interested persons" of the Trust or the Subadviser, and by (2) the
majority vote of either the full Board of Trustees or the vote of a
majority of the outstanding shares of the Municipal Fund. The Subadvisory
Agreement automatically terminates on assignment, and is terminable (1) on
not more than 60 days' written notice by the Trust to the Manager and
Subadviser, (2) on not less than 60 days' written notice by the Manager to
the Subadviser, and (3) on not less than 90 days' notice by the Subadviser
to the Manager.
The Subadviser shall not be liable to the Trust, the Manager or
any shareholder for anything done or omitted by them, except acts or
omissions involving willful misfeasance, bad faith, negligence or reckless
disregard of the duties imposed upon the Subadviser by the Subadvisory
Agreement.
Portfolio Transactions
----------------------
Most purchases and sales of portfolio investments will be with
the issuer or with major dealers in money market instruments acting as
principal. Thus, the Funds do not expect to pay significant brokerage
commissions. In underwritten offerings, the price paid by the Fund
includes a disclosed, fixed commission or discount retained by the
underwriter. There generally is no stated commission in the case of
securities purchased from or sold to dealers, but the prices of such
securities usually include an undisclosed dealer's mark-up or mark-down.
The Manager or Subadviser will place all orders for the purchase and sale
of portfolio securities for the Funds and will buy and sell securities for
the Funds through a substantial number of brokers and dealers. In doing
so, the Manager or the Subadviser will use its best efforts to obtain for
the Funds the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions as
described below. Best execution, however, does not mean that a Fund
necessarily will be paying the lowest price or spread available. Rather
the Manager or Subadviser also will take into account such factors as size
of the transaction, the nature of the market for the security, the amount
of commission, the timing of the transaction taking into account market
prices and trends, the reputation, experience and financial stability of
- 24 -
<PAGE>
the broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
It is a common practice in the investment advisory business for
advisers of investment companies and other institutional investors to
receive research, statistical and quotation services from broker-dealers
who execute portfolio transactions for the clients of such advisers.
Consistent with the policy of most favorable price and execution, the
Manager or Subadviser may give consideration to research, statistical and
other services furnished by brokers or dealers. In addition, the Manager
or Subadviser may place orders with brokers who provide supplemental
investment and market research and securities and economic analysis and
may pay to these brokers a higher brokerage commission or spread than may
be charged by other brokers, provided that the Manager or Subadviser
determines in good faith that such commission or spread is reasonable in
relation to the value of brokerage and research services provided. Such
research and analysis may be useful to the Manager or Subadviser in
connection with services to clients other than the Fund.
In transactions in which brokerage commissions are involved
(which are expected to be few, if any), as permitted by Section 28(e) of
the Securities Exchange Act of 1934, as amended (the "1934 Act") the
Manager or Subadviser may cause the Funds to pay a broker-dealer who
provides "brokerage and research services" (as defined in the 1934 Act) to
the Manager or Subadviser an amount of disclosed commission for effecting
a securities transaction for a Fund in excess of the commission that
another broker-dealer would have charged for effecting that transaction if
the Manager or Subadviser determines in good faith that such amount of
commission is reasonable in relation to the brokerage and research
services. The Manager's and Subadviser's authority to cause the Funds to
pay any such greater commissions is subject to such policies as the Board
of Trustees may adopt from time to time.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies as the
Board of Trustees may determine, the Manager or Subadviser may consider
sales of shares of the Funds (and, if permitted by law, of other Heritage
Mutual Funds) as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.
Distribution of Shares
----------------------
The Distributor and Representative with whom the Distributor has
entered into dealer agreements offer shares of the Funds as agents on a
best efforts basis and are not obligated to sell any specific amount of
shares. Pursuant to its Distribution Agreements with the Funds, the
Distributor bears the cost of making information about the Funds available
through advertising, sales literature and other means, the cost of
printing and mailing prospectuses to persons other than shareholders, and
salaries and other expenses relating to selling efforts. The Funds pay
- 25 -
<PAGE>
the cost of registering and qualifying their shares under state and
federal securities laws and typesetting of their prospectuses and
printing and distributing prospectuses to existing shareholders.
As compensation for the services provided and expenses borne by
the Distributor pursuant to a Distribution Agreement, each class of each
Fund will pay the Distributor a distribution fee in accordance with the
Distribution Plan described below. The distribution fee is accrued daily
and paid monthly, and currently is equal on an annual basis to .15% of
average daily net assets of each class of each Fund. For the fiscal year
ended August 31, 1995, these fees amounted to $1,687,221 for the A shares
of Money Market Fund and $368,392 for A shares of the Municipal Fund.
There were no C shares of the Money Market Fund outstanding during these
periods. All of these fees were used by the Funds for payments to
underwriters.
In reporting amounts expended for the Money Market Fund under the
Distribution Plan to the Board of Trustees, the Distributor will allocate
expenses attributable to the sale of A shares and C shares to the
applicable class based on the ratio of sales of shares of that class to
the sales of all Money Market Fund shares. The fees paid by one class of
shares will not be used to subsidize the sale of any other class of
shares.
The Trust has adopted a Distribution Plan (the "Plan") on behalf
of each class of each Fund that, among other things, permits each Fund to
pay the Distributor the monthly distribution fee out of its net assets.
The Plan was approved by the initial shareholder of each Fund and the
Board of Trustees, including a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of the Plan or
the Distribution Agreement (the "Independent Trustees"), after determining
that there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders by enabling the Funds to increase their assets and
thereby realize economies of scale and its diversification goals. The
Plan also was approved by the initial shareholder of each Fund.
Each Plan may be terminated by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Funds. The Board of Trustees review quarterly a written
report of Plan costs and the purposes for which such costs have been
incurred. A Plan may be amended by vote of the Board of Trustees,
including a majority of the Independent Trustees cast in person at a
meeting called for such purpose. Any change in a Plan that would
materially increase the distribution cost to a class of a Fund requires
shareholder approval of that class.
The Distribution Agreement may be terminated at any time on 60
days' written notice without payment of any penalty by either party. The
Trust may effect such termination by vote of a majority of the outstanding
voting securities of the Trust or by vote of a majority of the Independent
Trustees. For so long as either the Class A Plan or the Class C Plan is
- 26 -
<PAGE>
in effect, selection and nomination of the Independent Trustees shall be
committed to the discretion of such disinterested persons.
The Distribution Agreement and each of the above-referenced Plans
will continue in effect for successive one-year periods, provided that
each such continuance is specifically approved (1) by the vote of a
majority of the Independent Trustees and (2) by the vote of a majority of
the entire Board of Trustees cast in person at a meeting called for that
purpose.
Administration of the Funds
---------------------------
ADMINISTRATIVE, FUND ACCOUNTING AND TRANSFER AGENT SERVICES. The
Manager, subject to the control of the Board of Trustees, will manage,
supervise and conduct the administrative and business affairs of the
Funds; furnish office space and equipment; oversee the activities of the
Subadviser and Custodian; and pay all salaries, fees and expenses of
officers and Trustees of the Trust who are affiliated with the Manager.
The Manager also will provide certain shareholder servicing activities for
customers of the Funds.
The Manager also is the dividend paying and shareholder servicing
agent for the Funds and performs fund accounting services for each Fund.
Each Fund pays the Manager the manager's cost plus ten percent for its
services as fund accountant and transfer and dividend disbursing agent.
For the three fiscal years ended August 31, 1993, 1994 and 1995, the
Manager earned $1,054,321, $1,234,112 and $1,437,554, respectively, from
the Money Market Fund and $46,473, $77,830 and $96,963, respectively, from
the Municipal Fund for its services as transfer agent. For the period
March 1, 1994 (commencement of Manager's engagement as fund accountant) to
August 31, 1994 and the fiscal year ended August 31, 1995, the Manager
earned $14,211 and $35,932, respectively, from each Fund for its services
as fund accountant.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 1912,
Boston, Massachusetts 02105, serves as custodian of the Funds' assets and
provides portfolio accounting and certain other services.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP of 1800 Massachusetts
Avenue, N.W. Washington, D.C. 20036, serves as counsel to the Trust.
Schifino & Fleischer, P.A. of 1 Tampa City Center, Suite 2700, Tampa,
Florida 33602, serves as counsel to the Distributor and the Manager.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109, are the independent
accountants for the Funds. The Financial Statements and Financial
Highlights of the Funds that appear in this Statement of Additional
Information have been audited by Coopers & Lybrand L.L.P. and included
herein in reliance upon the report of said firm of accountants, which is
given upon its authority as an expert in accounting and auditing.
- 27 -
<PAGE>
Potential Liability
-------------------
Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for obligations of the Trust.
To protect its shareholders, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of its shareholders
for acts or obligations of the Trust. These documents require notice of
this disclaimer to be given in each agreement, obligation or instrument
the Trust or its Board of Trustees enter into or sign. In the unlikely
event a shareholder is held personally liable for the Trust's obligations,
the Trust is required to use its property to protect or compensate the
shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will
occur only if the Trust itself cannot meet its obligations to indemnify
shareholders and pay judgments against them.
- 28 -
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
---------------------------------
Commercial Paper
----------------
MOODY'S. Moody's Investors Service, Inc. evaluates the salient
features that affect a commercial paper issuer's financial and competitive
position. Its appraisal includes, but is not limited to, the review of
such factors as: quality of management, industry strengths and risks,
vulnerability to business cycles, competitive position, liquidity
measurements, debt structure, operating trends and access to capital
markets. Differing degrees of weight are applied to these factors as
deemed appropriate for individual situations.
Commercial paper issuers rated "Prime-1" are judged to be of the
best quality. Their short-term debt obligations carry the smallest degree
of investment risk. Margins of support for current indebtedness are large
or stable with cash flow and asset protection well assured. Current
liquidity provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available. While
protection elements may change over the intermediate or long term, such
changes are most unlikely to impair the fundamentally strong position of
short-term obligations. Issuers in the commercial paper market rated
"Prime-2" are of high quality. Protection for short-term note holders is
issued with liquidity and value of current assets as well as cash
generation in sound relationship to current indebtedness. They are rated
lower than the best commercial paper issuers because margins of protection
may not be as large or because fluctuations of protective elements over
the near or intermediate term may be of greater amplitude. Temporary
increases in relative short and overall debt load may occur. Alternate
means of financing remain assured.
STANDARD & POOR'S. Standard & Poor's describes its highest ("A")
rating for commercial paper as follows, with the numbers 1, 2, and 3 being
used to denote relative strength within the "A" classification. Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt
rating should be "A" or better; in some instances "BBB" credits may be
allowed if other factors outweigh the "BBB." The issuer should have
access to at least two additional channels of borrowing. Basic earnings
and cash flow should have an upward trend, with allowances made for
unusual circumstances. Typically, the issuer's industry should be well
established and the issuer should have a strong position within its
industry. The reliability and quality of management should be
unquestioned.
Corporate Debt
--------------
MOODY'S. Moody's Investors Service, Inc. describes its
investment grade highest ratings for corporate bonds as follows: Bonds
that are rated Aaa are judged to be of the best quality. They carry the
<PAGE>
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present that make the long-term risk appear somewhat
larger than in Aaa securities.
STANDARD & POOR'S. Standard & Poor's describes its investment
grade ratings for corporate bonds as follows: Ratings of AAA are the
highest assigned by Standard & Poor's to debt obligations and indicate an
extremely strong capacity to pay principal and interest. Bonds rated AA
also qualify as high quality obligations. Capacity to pay principal and
interest is very strong, and in the majority of instances they differ from
AAA issues only in small degree.
DESCRIPTION OF MUNICIPAL SECURITIES
-----------------------------------
Municipal Notes generally are used to provide for short-term
capital needs and usually have maturities of one year or less. They
include the following:
Project Notes, which carry a U.S. Government guarantee, are
issued by public bodies ("local issuing agencies") created under
the laws of a state, territory, or U.S. possession. They have
maturities that range up to one year from the date of issuance.
Project Notes are backed by an agreement between the local
issuing agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide range of
financial assistance programs for housing, redevelopment, and
related needs (such as low-income housing programs and renewal
programs).
Tax Anticipation Notes are issued to finance working capital
needs of municipalities. Generally, they are issued in
anticipation of, and are payable from, seasonal tax revenues,
such as income, sales, use and business taxes.
Revenue Anticipation Notes are issued in expectation of receipt
of other types of revenues, such as Federal revenues available
under the Federal Revenue Sharing Programs.
Bond Anticipation Notes are issued to provide interim
financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money
for the repayment of the Notes.
A-2
<PAGE>
Construction Loan Notes are sold to provide construction
financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing
Administration under the Federal National Mortgage Association or
the Government National Mortgage Association.
Tax-Exempt Commercial Paper is a short-term obligation with a
stated maturity of 365 days or less. It is issued by agencies of
state and local governments to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term
financing.
Municipal Bonds, which meet longer-term capital needs and
generally have maturities of more than one year when issued, have
three principal classifications:
General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of
these obligations are used to fund a wide range of public
projects, including construction or improvement of schools,
highways and roads, and water and sewer systems. The basic
security behind General Obligation Bonds is the issuer's pledge
of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the
payment of debt service may be limited or unlimited as to the
rate or amount of special assessments.
Revenue Bonds generally are secured by the net revenues derived
from a particular facility, group of facilities, or, in some
cases, the proceeds of a special excise or other specific revenue
source. Revenue Bonds are issued to finance a wide variety of
capital projects including electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport
facilities; colleges and universities; and hospitals. Many of
these Bonds provide additional security in the form of a debt
service reserve fund to be used to make principal and interest
payments. Housing authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidized
and/or collateralized mortgages, and/or the net revenues from
housing or other public projects. Some authorities provide
further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve
fund.
Industrial Development Bonds are considered municipal bonds if
the interest paid thereon is exempt from Federal income tax and
are issued by or on behalf of public authorities to raise money
to finance various privately operated facilities for business and
manufacturing, housing, sports, and pollution control. These
Bonds are also used to finance public facilities such as
airports, mass transit systems, ports, and parking. The payment
of the principal and interest on such Bonds is dependent solely
A-3
<PAGE>
on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property
as security for such payment.
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
-------------------------------------------
Moody's
-------
Municipal Bonds that are rated Aaa by Moody's are judged to be of
the best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make long-term risks
appear somewhat larger than in Aaa securities.
Municipal Notes. Moody's ratings for state and municipal notes
and other short-term obligations are designated Moody's Investment Grade
("MIG") and for variable rate demand obligations are designated Variable
Moody's Investment Grade ("VMIG"). This distinction is in recognition of
the differences between short-term credit risk and long-term credit risk.
Notes bearing the designation MIG-1 or VMIG-1 are of the best quality,
enjoying strong protection from established cash flows for their servicing
or from established and broad-based access to the market for refinancing,
or both. Notes bearing the designation MIG-2 or VMIG-2 are judged to be
of high quality, with margins of protection ample although not so large as
in the preceding group.
Standard & Poor's
-----------------
Municipal Bonds rated AAA by S&P are the highest grade
obligations. This rating indicates an extremely strong capacity to pay
principal and interest. Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and
in the majority of instances they differ from AAA issues only in small
degree.
Municipal Notes. Municipal notes with maturities of three years
or less are usually given note ratings (designated SP-1, -2, or -3) by S&P
to distinguish more clearly the credit quality of notes as compared to
bonds. Notes rated SP-1 have a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming
safety characteristics are given the designation SP-1+.
A-4
<PAGE>
<PAGE> 1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Heritage Cash Trust-Money Market Fund:
We have audited the accompanying statement of net assets of Heritage Cash
Trust-Money Market Fund as of August 31, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the nine years in the period then ended and for the period November 25,
1985 (commencement of operations) to August 31, 1986. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Heritage Cash Trust-Money Market Fund as of August 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the nine years in the period then ended and for the period November 25, 1985
(commencement of operations) to August 31, 1986 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand
------------------------------------
Boston, Massachusetts
October 12, 1995
9
<PAGE> 2
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Heritage Cash Trust-Municipal Money Market Fund:
We have audited the accompanying statement of net assets of Heritage Cash
Trust-Municipal Money Market Fund as of August 31, 1995, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period then ended and for the
period June 17, 1992 (commencement of operations) to August 31, 1992. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Heritage Cash Trust-Municipal Money Market Fund as of August 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the three years in the period then ended and for the period June 17,
1992 (commencement of operations) to August 31, 1992 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand
Boston, Massachusetts
October 12, 1995
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
Of the dividends paid from net investment income for the year ended August
31, 1995, 100% were exempt interest dividends which are tax exempt for purposes
of regular federal income tax, and a portion were exempt interest dividends
which may be subject to the federal alternative minimum tax. Please consult a
tax adviser if you have questions about federal or state income tax laws, or on
how to prepare your tax return.
11
<PAGE> 3
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT--3.2% VALUE
- --------------------------------------------------------------------------------------------------------- --------------
<S> <C>
Repurchase Agreement with State Street Bank and Trust Company, dated August 31, 1995, @ 5.75%, to be
repurchased at $41,476,624 on September 1, 1995, (collateralized by $34,290,000 United States Treasury
Notes, 8.875%, due August 15, 2017 with a market value of $42,563,744 including interest) (cost
$41,470,000)............................................................................................. $ 41,470,000
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE(S)
- ------------------------ -----------------
<C> <S> <C> <C>
COMMERCIAL PAPER--85.0%
DOMESTIC--70.9%
BEVERAGES--4.6%
$ 50,000,000 The Coca-Cola Company, 5.62%-5.65%............................ 10/13/95-12/04/95 49,449,267
10,000,000 PepsiCo, Inc., 5.70%.......................................... 09/07/95 9,990,500
--------------
59,439,767
--------------
CHEMICALS--4.6%
50,000,000 Dupont (E.I.) De Nemours & Company, 5.66%-5.92%............... 09/20/95-09/22/95 49,839,506
10,000,000 Monsanto Company, 5.68%....................................... 09/06/95 9,992,111
--------------
59,831,617
--------------
COMPUTER/OFFICE EQUIPMENT--1.0%
2,500,000 Hewlett-Packard Company, 5.58%................................ 10/03/95 2,487,600
10,000,000 Xerox Credit Corporation, 5.73%............................... 10/05/95 9,945,883
--------------
12,433,483
--------------
CORPORATE FINANCE--11.5%
50,000,000 Ciesco, L.P., 5.67%-5.68%..................................... 10/11/95-11/14/95 49,490,928
50,000,000 Corporate Asset Funding Corporation, 5.64%-5.87%.............. 09/11/95-11/03/95 49,711,359
50,000,000 General Electric Capital Corporation, 5.68%-5.72%............. 09/06/95-11/24/95 49,791,430
--------------
148,993,717
--------------
DRUGS--5.7%
5,300,000 Abbott Laboratories, 5.82%.................................... 10/17/95 5,260,583
30,000,000 Lilly (Eli) & Company, 5.63%.................................. 10/12/95 29,807,813
21,000,000 Pfizer, Inc., 5.70%........................................... 09/29/95 20,906,900
18,158,000 Schering Corporation, 5.63%-5.88%............................. 10/04/95-11/02/95 18,045,761
--------------
74,021,057
--------------
ELECTRONICS--4.2%
5,000,000 Emerson Electric Company, 5.68%............................... 09/18/95 4,986,589
50,000,000 Motorola Credit Corporation, 5.69%-5.71%...................... 09/28/95-10/06/95 49,763,385
--------------
54,749,974
--------------
FOOD--8.0%
50,000,000 Cargill, Inc., 5.65%-5.68%.................................... 09/11/95-11/16/95 49,553,561
19,000,000 Campbell Soup Company, 5.68%-5.88%............................ 11/03/95-11/07/95 18,801,107
20,500,000 Heinz (H.J.) Company, 5.72%................................... 09/05/95-09/29/95 20,460,278
15,000,000 Kellogg Company, 5.83%........................................ 11/17/95 14,812,954
--------------
103,627,900
--------------
GRAPHIC ARTS PRINTING--0.2%
2,600,000 Donnelley (R.R.) & Sons Company, 5.73%........................ 09/20/95 2,592,137
--------------
HOUSEHOLD PRODUCTS--6.6%
35,000,000 The Kimberly-Clark Corporation, 5.63%......................... 09/21/95 34,890,528
50,000,000 The Procter & Gamble Company, 5.62%-5.92%..................... 09/07/95-11/20/95 49,816,860
--------------
84,707,388
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE(S) VALUE
- ------------------------ ----------------- --------------
<C> <S> <C> <C>
OIL & GAS--10.8%
$ 40,000,000 Amoco Company, 5.63%.......................................... 09/01/95 $ 40,000,000
50,000,000 Chevron Oil Finance Company, 5.71%............................ 09/05/95 49,968,278
50,000,000 Shell Oil Company, 5.63%...................................... 10/13/95 49,671,583
--------------
139,639,861
--------------
PUBLISHING--0.5%
7,000,000 McGraw-Hill, Inc., 5.68%...................................... 10/10/95 6,956,927
--------------
RETAIL--4.9%
10,000,000 Albertson's, Inc., 5.70%...................................... 09/05/95 9,993,667
20,000,000 Penney (J.C.) Funding Corporation, 5.72%...................... 09/22/95-10/06/95 19,911,022
33,000,000 Wal-Mart Stores, Inc., 5.68%.................................. 09/06/95 32,974,196
--------------
62,878,885
--------------
TELECOMMUNICATIONS--8.3%
50,000,000 AT&T Corporation, 5.60%-5.72%................................. 09/01/95-02/02/96 49,811,825
10,000,000 Bell Atlantic Network Funding, 5.68%.......................... 09/28/95 9,957,400
3,000,000 Southwestern Bell Capital Corporation, 5.68%.................. 10/03/95 2,984,853
45,000,000 Southwestern Bell Telephone Company, 5.66%.................... 10/31/95 44,575,500
--------------
107,329,578
--------------
Total Domestic Commercial Paper............................... 917,202,291
--------------
FOREIGN-14.1%(B)
CORPORATE FINANCE--4.4%
21,400,000 The Canadian Wheat Board, 5.55%-5.67%......................... 10/12/95-02/27/96 21,050,426
27,000,000 Province of Alberta, 5.61%-5.87%.............................. 09/12/95-01/12/96 26,663,312
9,100,000 Province of British Columbia, 5.60%-5.80%..................... 11/20/95-02/05/96 8,965,411
--------------
56,679,149
--------------
DRUGS--1.5%
20,000,000 SmithKline Beecham Corporation, 5.48%......................... 11/22/95 19,750,356
--------------
FOOD--5.0%
24,500,000 Nestle Capital Corporation, 5.68%-5.92%....................... 09/15/95-11/08/95 24,273,316
40,490,000 Unilever Capital Corporation, 5.63%-5.78%..................... 09/22/95-11/21/95 40,102,262
--------------
64,375,578
--------------
ELECTRONICS--0.1%
2,000,000 Siemens Corporation, 5.70%.................................... 09/07/95 1,998,100
--------------
UTILITIES--3.1%
40,000,000 Ontario Hydro, 5.72%-5.87%.................................... 09/01/95-09/08/95 39,989,990
--------------
Total Foreign Commercial Paper................................ 182,793,173
--------------
Total Commercial Paper (cost $1,099,995,464).................. 1,099,995,464
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE(S) VALUE
- ------------------------ ----------------- --------------
<C> <S> <C> <C>
CORPORATE NOTES--0.8%
Navistar Financial Corporation, Owner Trust, 1995-A, A-1,
$ 7,822,338 5.90%......................................................... 05/20/96 $ 7,823,232
3,000,000 Mobil Oil Corporation, 6.75%.................................. 10/01/95 3,001,749
--------------
Total Corporate Notes (cost $10,824,981)...................... 10,824,981
--------------
U.S. GOVERNMENT AND AGENCY SECURITIES--13.2%
21,381,469 Agency for International Development - Jamaica, 6.33%(d)...... 03/30/19 21,381,469
11,815,000 Agency for International Development - Sri-Lanka, 6.08%(d).... 06/15/12 11,883,727
50,000,000 Federal Home Loan Bank, 5.44%-6.53%........................... 09/26/95-02/15/96 49,588,489
48,500,000 Federal Home Loan Mortgage Corporation, 5.79%-6.01%........... 10/03/95-05/13/96 48,299,171
30,000,000 Federal National Mortgage Association, 5.50%-5.97%............ 12/12/95-06/12/96 29,825,690
10,000,000 U.S. Treasury Note, 4.625%.................................... 02/15/96 9,939,176
--------------
Total U.S. Government and Agency Securities
(cost $170,917,722)......................................... 170,917,722
--------------
TOTAL INVESTMENTS (cost $1,323,208,167)(c), 102.3%(a).................................... 1,323,208,167
OTHER ASSETS AND LIABILITIES, net, (2.3%)(a)............................................. (29,468,446)
--------------
NET ASSETS (net asset value, offering and redemption price of $1.00 per share divided by
1,294,009,037 shares outstanding), consisting of paid-in-capital net of accumulated net
realized loss of $269,316, 100.00%..................................................... $1,293,739,721
==============
</TABLE>
- ---------------
(a) Percentages are based on net assets.
(b) U.S. dollar denominated.
(c) The aggregate identified cost for federal income tax purposes is the same.
(d) Floating rate notes, which reset on a weekly basis.
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Interest................................................................................. $65,182,402
Expenses (Notes 1 and 4):
Management fee......................................................................... $5,436,551
Distribution fee....................................................................... 1,687,221
Shareholder servicing.................................................................. 1,437,554
Custodian/Fund accounting fees......................................................... 128,072
Amortization of state registration expenses............................................ 124,628
Reports to shareholders................................................................ 117,471
Federal registration fees.............................................................. 88,595
Professional fees...................................................................... 47,085
Insurance.............................................................................. 27,832
Trustees' fees and expenses............................................................ 9,923
Other.................................................................................. 26,059
----------
Total expenses before waiver..................................................... 9,130,991
Fees waived by Manager (Note 4).......................................................... (244,972) 8,886,019
---------- -----------
Net investment income.................................................................... 56,296,383
Realized Loss on Investments
Net realized loss from investment transactions........................................... (269,316)
-----------
Net increase in net assets resulting from operations..................................... $56,027,067
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income.......................................................... $ 56,296,383 $ 28,081,361
Net realized loss from investment transactions................................. (269,316 ) (15,719)
--------------- ---------------
Net increase in net assets resulting from operations............................. 56,027,067 28,065,642
Distributions to shareholders from net investment income ($.050 and $.029 per
share, respectively)........................................................... (56,296,383 ) (28,065,642)
Increase in net assets from Fund share transactions (Note 2)..................... 312,390,427 56,392,416
--------------- ---------------
Increase in net assets........................................................... 312,121,111 56,392,416
Net assets, beginning of year.................................................... 981,618,610 925,226,194
--------------- ---------------
Net assets, end of year.......................................................... $1,293,739,721 $ 981,618,610
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
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>
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986+
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD.............. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income (a)........ .050(b) .029(b) .025(b) .038(b) .063 .077 .084 .065 .054(b) .050(b)
LESS DISTRIBUTIONS:
Dividends from net
investment income
and net realized
gains (a)......... (.050) (.029) (.025) (.038) (.063) (.077) (.084) (.065) (.054) (.050)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN %........ 5.00 2.87 2.48 3.77 6.27 7.73 8.38 6.46 5.43 5.05(d)
RATIOS TO AVERAGE
DAILY NET ASSETS
(%)/SUPPLEMENTAL
DATA:
Operating expenses,
net............... .79(b) .79(b) .78(b) .78(b) .79 .81 .90 .94 1.00(b) 1.00(b)
Net investment
income............ 5.00(b) 2.87(b) 2.47(b) 3.75(b) 6.20 7.73 8.51 6.47 5.45(b) 6.56(b)
Net assets, end
of period
($ millions)...... 1,294 982 925 953 890 727 475 230 153 139
</TABLE>
- ---------
+ For the period November 25, 1985 (commencement of operations) to August 31,
1986.
(a) Includes net realized gains (losses) which were ($.001), ($.001), $.001,
$.001, $.001, ($.001), $.001, $.001, ($.001) and less than $.003 per share,
respectively.
(b) Excludes management fees waived by the Manager in the amount of less than
$.001, $.001, $.001, $.001, $.001 and $.001 per share, respectively. The
operating expense ratios including such items would be .81%, .81%, .81%,
.78%, 1.01% and 1.12% (annualized), respectively.
(c) Annualized.
(d) Not annualized.
6
<PAGE> 8
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Cash Trust (the "Trust") is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified,
open-end management investment company consisting of two separate
investment portfolios, the Money Market Fund (the "Fund") and the
Municipal Money Market Fund. The Fund is designed for investors who wish
to participate in a supervised portfolio of debt securities with
remaining maturities of not more than 397 days. The Fund offers two
classes of shares, Class A and Class C Shares. Class C Shares may be
acquired only through exchanges of Class C Shares of other Heritage
Mutual Funds. At August 31, 1995, there were no Class C Shares
outstanding. The policies described below are followed consistently by
the Fund in the preparation of its financial statements in conformity
with generally accepted accounting principles.
Security Valuation: The Fund uses the amortized cost method of security
valuation (as set forth in Rule 2a-7 under the Investment Company Act of
1940, as amended). The amortized cost of an instrument is determined by
valuing it at cost at the time of purchase and thereafter
accreting/amortizing any purchase discount/premium at a constant rate
until maturity, regardless of the effect of fluctuating interest rates
on the market value of the instrument.
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 is treated as a single corporate taxpayer
as provided for in The Tax Reform Act of 1986, as amended. 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. As of August 31, 1995, the Fund has net tax
basis capital loss carryforwards of $9,682 and $6,037 which may be
applied to any net taxable gains until their expiration dates in 2001
and 2002, respectively. In addition the Fund has post-October losses
that the Fund has deferred in the amount of $269,316.
Distribution of Income and Gains: Distributions from net investment
income and net realized gains available for distribution are declared
daily and paid monthly. The Fund uses the identified cost method for
determining realized gain or loss on investment transactions for both
financial and federal income tax reporting purposes.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
Capital Accounts: The Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting the
net asset value of the Fund.
Other: Investment transactions are recorded on a trade date basis which
is generally the same as settlement date. Interest income is recorded on
the accrual basis.
Note 2: FUND SHARES. At August 31, 1995, there was an unlimited number of
shares of beneficial interest of no par value authorized. Transactions
in shares of the Fund during the years ended August 31, 1995 and 1994,
at a constant net asset value of $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
----------------- ---------------
<S> <C> <C>
Shares sold.......................................................... 4,788,622,703 4,409,461,564
Shares issued in reinvestment of distributions....................... 55,467,958 27,661,751
Shares redeemed...................................................... (4,531,700,234) (4,380,730,899 )
----------------- ---------------
Net increase....................................................... 312,390,427 56,392,416
Shares outstanding:
Beginning of year.................................................. 981,618,610 925,226,194
----------------- ---------------
End of year........................................................ 1,294,009,037 981,618,610
================= ==============
</TABLE>
7
<PAGE> 9
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 3: PURCHASES, SALES AND MATURITIES OF SECURITIES. For the year ended
August 31, 1995, purchases, sales and maturities of short-term
investment securities excluding repurchase agreements aggregated
$10,019,437,155, $56,386,369 and $9,694,617,000, respectively. Purchases
and sales of U.S. government obligations aggregated $9,897,656 and
$25,782,143, respectively.
Note 4: MANAGEMENT, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND TRUSTEES'
FEES. Under the Fund's Investment Advisory and Administration Agreement
with Heritage Asset Management, Inc. (the "Manager"), the Fund agrees to
pay to the Manager for investment advice, portfolio management services
(including the placement of brokerage orders), and certain compliance
and administrative services a fee equal to an annual rate of 0.50% of
the first $500,000,000 of the Fund's average daily net assets, 0.475% of
the next $500,000,000, 0.45% of the next $500,000,000, 0.425% of the
next $500,000,000, and 0.40% of any excess over $2,000,000,000 of such
net assets, computed daily and payable monthly. The annual effective
management fee rate after fee waivers for the year ended August 31, 1995
was .46%. The amount payable to the Manager as of August 31, 1995 was
$295,047. The agreement also provides for a reduction in such fees in
any year to the extent that operating expenses of the Fund exceed
applicable state expense limitations. For the period January 2, 1992 to
December 31, 1992, the Manager voluntarily agreed to waive its fees and,
if necessary, reimburse the Fund to the extent that the Fund's annual
operating expenses exceeded .77%, on an annual basis, of the Fund's
average daily net assets. Effective January 1, 1993, this voluntary
expense limitation was changed to .79%, on an annual basis, of the
Fund's average daily net assets. Under these arrangements, management
fees of $244,972 ($.0002 per share) were waived during the year ended
August 31, 1995. If total Fund expenses fall below the expense
limitation agreed to by the Manager before the end of the year ending
August 31, 1997, the Fund may be required to pay the Manager a portion
or all of the waived management fee. In addition, the Fund may be
required to pay the Manager a portion or all of the management fee
waived ($207,108) in the prior year ended August 31, 1994 if total Fund
expenses fall below the annual expense limitation before the end of the
year ending August 31, 1996.
The Manager is also the Dividend Paying and Shareholder Servicing Agent
for the Fund. The amount payable to the Manager for such expenses as of
August 31, 1995 was $255,000. In addition, the Manager performs Fund
Accounting services for the Fund and charged $35,932 during the current
year of which $6,000 was payable as of August 31, 1995.
Pursuant to a plan adopted in accordance with Rule 12b-1 of the
Investment Company Act of 1940, as amended, the Fund pays Raymond James
& Associates, Inc. (the "Distributor") a fee equal to 0.15% of average
daily net assets for the services it provides in connection with the
promotion and distribution of Fund shares. Such fee is accrued daily and
payable monthly. The amount payable to the Distributor as of August 31,
1995 was $169,255. The Manager, Distributor, Fund Accountant and
Shareholder Servicing Agent are all wholly-owned subsidiaries of Raymond
James Financial, Inc.
Trustees of the Trust also serve as Trustees for Heritage Capital
Appreciation Trust, Heritage Income-Growth Trust, Heritage Income Trust,
Heritage Series Trust and Heritage U.S. Government Income Fund, mutual
funds that are also advised by the Manager or its affiliates
(collectively referred to as the Heritage Mutual Funds). Each Trustee of
the Heritage Mutual Funds who is not an interested person of the Manager
receives an annual fee of $8,000 and an additional fee of $2,000 for
each combined quarterly meeting of the Heritage Mutual Funds attended.
Trustees' fees and expenses are shared equally by each of the Heritage
Mutual Funds.
8
<PAGE> 10
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE VALUE
- -------------- ------------- ------------
<C> <S> <C> <C>
ALABAMA--8.4%
$ 5,500,000 Alabama Health and Education Financing Authority, 3.50%(b)
Hospital Revenue Bond
Daughters of Charity, Providence Hospital, Series 84......................... 06/01/14 $ 5,500,000
10,000,000 Jefferson County, 3.65%(b)
Sewer Revenue Bond, Series 95A
LOC: Bayerische Landesbank................................................... 09/01/25 10,000,000
8,300,000 City of McIntosh, 3.75%(b)
Pollution Control Revenue Bond,
Ciba-Geigy Corporation Project, Series 90, AMT
LOC: Union Bank of Switzerland............................................... 07/01/04 8,300,000
------------
23,800,000
------------
ARIZONA--2.0%
5,800,000 Pima County Industrial Development Authority, 3.65%(b)
Pollution Control Revenue Bond
Tucson Electric, Series 82A
LOC: Bank of America......................................................... 07/01/22 5,800,000
------------
ARKANSAS--10.5%
5,000,000 Arkansas Student Loan, 3.65%(b)
Series 93B-2, AMT
GIC: Bayerische Landesbank................................................... 06/01/10 5,000,000
1,100,000 Arkansas Student Loan, 3.65%(b)
Series 93B-4, AMT
GIC: Bayerische Landesbank................................................... 06/01/10 1,100,000
18,000,000 Clark County, 3.75%(b)
Solid Waste Revenue Bond
Reynolds Metals Project, Series 92, AMT
LOC: Trust Company Bank...................................................... 08/01/22 18,000,000
5,600,000 City of Jacksonville, 3.75%(b)
Industrial Development Revenue Bond
Regalware, Inc. Project, Series 85
LOC: NBD Corporation......................................................... 08/01/15 5,600,000
------------
29,700,000
------------
CALIFORNIA--3.6%
5,000,000 Los Angeles County GO, 4.50%
Tax and Revenue Anticipation Note, Series 95
LOC: (c)..................................................................... 07/01/96 5,027,978
5,000,000 San Bernandino County GO, 4.50%
Tax and Revenue Anticipation Note, Series 95
LOC: (d)..................................................................... 07/05/96 5,022,254
------------
10,050,232
------------
COLORADO--6.5%
12,700,000 Colorado Housing Finance Authority, 3.70%(b)
Multi Family Housing Revenue Bond
Central Park Project, Series 85
LOC: Chemical Bank........................................................... 05/01/97 12,700,000
5,600,000 Colorado Student Obligation Authority, 3.55%(b)
Student Loan Revenue Bond, Series 89A, AMT
LOC: Student Loan Marketing Association...................................... 03/01/24 5,600,000
------------
18,300,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 11
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE VALUE
- -------------- ------------- ------------
<C> <S> <C> <C>
GEORGIA--1.0%
$2,750,000 Cobb County, 3.75%(b)
Industrial Development Revenue Bond
Amoena Corporation Project, Series 92, AMT
LOC: Bayerische Hypobank..................................................... 01/01/07 $ 2,750,000
------------
IDAHO--1.4%
4,000,000 Idaho GO, 4.50%
Tax Anticipation Note, Series 95............................................. 06/27/96 4,022,118
------------
ILLINOIS--0.9%
2,530,000 Illinois Development Finance Authority, 3.60%(b)
Multi Family Housing Revenue Bond
River Oaks Project, Series 88, AMT
LOC: Swiss Bank.............................................................. 12/15/19 2,530,000
------------
INDIANA--6.3%
1,945,000 City of Columbus, 3.80%(b)
Economic Development Revenue Bond
Columbus Container, Series 89A, AMT
LOC: Bank One, Columbus...................................................... 01/01/00 1,945,000
4,350,000 City of Crawfordsville, 3.75%(b)
Industrial Development Revenue Bond
Precision Plastics of Indiana, Series 92
LOC: Northern Trust Company.................................................. 06/01/07 4,350,000
2,000,000 City of Indianapolis, 3.90%(b)
Industrial Development Revenue Bond
Altec Industries, Inc. Project, Series 89, AMT
LOC: First National Bank of Atlanta.......................................... 12/01/04 2,000,000
5,000,000 City of Portage, 3.80%(b)
Multi Family Housing Revenue Bond
Pedcor Investment Apartment Project, Series 95A, AMT
LOC: Federal Home Loan Bank.................................................. 08/01/30 5,000,000
4,600,000 City of Westfield, 4.15%(b)
Industrial Development Revenue Bond
PL Porter Project, Series 89, AMT
LOC: Bank of America......................................................... 12/01/09 4,600,000
------------
17,895,000
------------
KENTUCKY--1.8%
5,000,000 City of Louisville, 3.70%(b)
Airport Revenue Bond
Louisville Airport, Series 89B, AMT
LOC: National City Bank of Louisville........................................ 02/01/19 5,000,000
------------
LOUISIANA--1.7%
3,900,000 St. Charles Parish, 3.65%(b)
Shell Oil Company Project, Series 92A, AMT................................... 10/01/22 3,900,000
1,000,000 St. Charles Parish, 3.65%(b)
Shell Oil Company Project, Series 93, AMT.................................... 09/01/23 1,000,000
------------
4,900,000
------------
MAINE--0.6%
1,700,000 City of Bath GO, 4.375%
Bond Anticipation Note, Series 95A........................................... 06/27/96 1,704,989
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 12
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE VALUE
- -------------- ------------- ------------
<C> <S> <C> <C>
MICHIGAN--2.4%
$6,900,000 Michigan Higher Education, AMBAC, 3.55%(b)
Student Loan Revenue Bond, Series X11-B
BPA: Kredietbank............................................................. 10/01/13 $ 6,900,000
------------
MISSOURI--0.7%
2,000,000 City of St. Joseph, 3.90%(b)
Industrial Development Revenue Bond
Altec Industries, Inc., Series 89, AMT
LOC: First National Bank of Atlanta.......................................... 11/01/04 2,000,000
------------
MISSISSIPPI--1.1%
3,000,000 City of Olive Branch, 3.80%(b)
Industrial Development Revenue Bond
United Healthcare, Series 86, AMT
LOC: First Union Bank of North Carolina...................................... 11/01/11 3,000,000
------------
NEBRASKA--0.8%
2,200,000 Nebraska Higher Education, 3.65%(b)
Student Loan Revenue Bond, Series 88C, AMT
LOC: Student Loan Marketing Association...................................... 08/01/18 2,200,000
------------
NEW HAMPSHIRE--9.0%
19,000,000 New Hampshire Business Finance Authority, 3.75%(b)
Pollution Control Revenue Bond
Public Service Company of New Hampshire, Series 92D, AMT
LOC: Barclays Bank........................................................... 05/01/21 19,000,000
5,000,000 New Hampshire Housing Finance Authority, 3.75%(b)
Multi Family Housing Revenue Bond
Fairways Project, Series 94, AMT
LOC: General Electric Credit Corporation..................................... 01/01/24 5,000,000
1,600,000 New Hampshire Industrial Development Authority, 3.75%(b)
Pollution Control Revenue Bond
Connecticut Light & Power, Series 88, AMT
LOC: Union Bank of Switzerland............................................... 08/01/18 1,600,000
------------
25,600,000
------------
NEW MEXICO--3.2%
9,000,000 New Mexico Education Assistance Fund, 3.60%(b)
Student Loan Revenue Bond, Series 92
BPA: Internationale Nederlanden.............................................. 04/01/05 9,000,000
------------
NEVADA--2.8%
8,000,000 Clark County, 3.65%(b)
Industrial Development Revenue Bond
Nevada Cogeneration, Association 2, Series 92, AMT
LOC: Swiss Bank.............................................................. 12/01/22 8,000,000
------------
OHIO--1.4%
4,000,000 Ohio Air Authority, 3.70%(b)
Pollution Control Revenue Bond
JMG Funding Partnership, Series 94B, AMT
LOC: Societe Generale........................................................ 04/01/28 4,000,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 13
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE VALUE
- -------------- ------------- ------------
<C> <S> <C> <C>
OKLAHOMA--3.5%
$2,500,000 Oklahoma Industrial Authority, 4.20%(b)
Industrial Development Revenue Bond
Farley Candy Project, Series 94
LOC: Toronto Dominion........................................................ 05/01/19 $ 2,500,000
7,500,000 Optima Municipal Authority, 3.75%(b)
Industrial Development Revenue Bond
Seaboard Project, Series 94, AMT
LOC: Trust Company Bank...................................................... 09/01/19 7,500,000
------------
10,000,000
------------
PENNSYLVANIA--1.3%
3,700,000 Pennsylvania Higher Education, 3.75%(b)
Student Loan Revenue Bond, Series 88C, AMT
LOC: Student Loan Marketing Association...................................... 07/01/18 3,700,000
------------
RHODE ISLAND--2.5%
5,000,000 Rhode Island Port Authority, 3.60%(b)
Electric Revenue Bond
Newport Electric Corporation, Series 94
LOC: Canadian Imperial....................................................... 09/01/11 5,000,000
2,000,000 Rhode Island Higher Education, 3.65%(b)
Student Loan Revenue Bond, Series 95-1, AMT
LOC: National Westminister................................................... 07/01/19 2,000,000
------------
7,000,000
------------
TEXAS--11.9%
6,500,000 Capital Health Facilities Development, 3.55%(b)
Lake Travis Project, Series 86, AMT
LOC: Credit Suisse........................................................... 12/01/16 6,500,000
6,900,000 City of Galveston, 3.75%(b)
Industrial Development Revenue Bond
Mitchell Project, Series 93A, AMT
LOC: National Westminister................................................... 09/01/13 6,900,000
3,200,000 City of Gulf Coast, 3.70%(b)
Solid Waste Revenue Bond
CITGO Petroleum Corporation, Series 94, AMT
LOC: Wachovia Bank & Trust................................................... 04/01/26 3,200,000
1,000,000 City of Gulf Coast, 3.65%(b)
Port Facility
Amoco Oil Company, Series 93, AMT............................................ 04/08/28 1,000,000
5,000,000 Harris County GO, 4.25%
Tax Anticipation Note, Series 95............................................. 02/28/96 5,016,127
4,500,000 North Texas Higher Education, 3.75%(b)
Student Loan Revenue Bond, Series 90A, AMT
LOC: Student Loan Marketing Association...................................... 04/01/20 4,500,000
6,600,000 Panhandle Plains, 3.55%(b)
Student Loan Revenue Bond, Series 95A, AMT
LOC: Student Loan Marketing Association...................................... 06/01/25 6,600,000
------------
33,716,127
------------
VIRGINIA--1.6%
4,500,000 City of Richmond Housing Authority, 3.90%(b)
Housing-Tobacco Row, Series 89B-5, AMT
GIC: Westdeutsche Landesbank................................................. 10/01/24 4,500,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 14
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1995
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT MATURITY DATE VALUE
- -------------- ------------- ------------
<C> <S> <C> <C>
WISCONSIN--3.4%
$5,000,000 Wisconsin State GO, 4.50%
Operating Note, Series 95.................................................... 06/17/96 $ 5,028,482
4,600,000 Wisconsin Health and Education Financing Authority, 3.50%(b)
Hospital Revenue Bond
Daughters of Charity, St. Mary's Hospital, Series 92......................... 11/01/22 4,600,000
------------
9,628,482
------------
WEST VIRGINIA--8.6%
12,500,000 Grant County, 3.75%(b)
Industrial Development Revenue Bond
NB Partners LTD, Series 88B, AMT
LOC: Bank of America......................................................... 12/01/16 12,500,000
4,000,000 Marion County, 3.75%(b)
Resource Recovery Revenue Bond
Grant Town Cogen Project, Series 92, AMT
LOC: National Westminister................................................... 10/01/17 4,000,000
4,400,000 Marion County, 3.80%(b)
Resource Recovery Revenue Bond
Grant Town Cogen Project, Series 91B, AMT
LOC: National Westminister................................................... 10/01/17 4,400,000
3,400,000 Marion County, 3.80%(b)
Resource Recovery Revenue Bond
Grant Town Cogen Project, Series 90D, AMT
LOC: National Westminister................................................... 10/01/17 3,400,000
------------
24,300,000
------------
TOTAL INVESTMENTS (cost $279,996,948)(e), 98.9%(a)............................................. 279,996,948
OTHER ASSETS AND LIABILITIES, net, 1.1%(a)..................................................... 3,012,791
------------
NET ASSETS (net asset value, offering and redemption price of $1.00 per share divided by
283,076,115 shares outstanding) consisting of paid-in-capital net of accumulated realized loss $283,009,739
of $66,376, 100.00%........................................................................... ============
</TABLE>
- ---------------
(a) Percentages are based on net assets.
(b) Floating rate notes are securities which are generally payable on demand
within seven calendar days. Put bonds are securities which can be put back
to the issuer or remarketer either at the option of the holder, at a
specified date, or within a specified time period known at the time of
purchase. For these securities, the demand period and the remaining period
to put date, respectively, are used when calculating the weighted average
maturity of the portfolio.
(c) Credit enhancement provided by (all equally weighted): Bank of America,
Credit Suisse, Morgan Guaranty Trust Co., Swiss Bank, Union Bank of
Switzerland, Westdeutsche Landesbank.
(d) Credit enhancement provided by (all equally weighted): Banque Nationale De
Paris, Bank of Nova Scotia, Toronto Dominion.
(e) The aggregate identified cost for federal income tax purposes is the same.
AMBAC -- American Municipal Bond Assurance Corporation.
AMT -- Securities subject to Alternative Minimum Tax.
BPA -- Bond purchase agreement provided by noted institution.
GIC -- Credit enhancement provided by guaranteed investment contract with noted
institution.
GO -- General Obligation.
LOC -- Credit enhancement provided by letter of credit issued by noted
institution.
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 15
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Interest.................................................................................. $9,370,040
Expenses (Notes 1 and 4):
Management fee.......................................................................... $1,226,671
Distribution fee........................................................................ 368,392
Shareholder servicing................................................................... 96,963
Amortization of state registration expenses............................................. 81,311
Custodian/Fund accounting fees.......................................................... 61,825
Professional fees....................................................................... 44,775
Federal registration fees............................................................... 16,175
Trustees' fees and expenses............................................................. 9,573
Amortization of organization expenses................................................... 9,252
Insurance............................................................................... 6,727
Reports to shareholders................................................................. 2,759
Other................................................................................... 7,086
----------
Total expenses before waiver...................................................... 1,931,509
Fees waived by Manager (Note 4)........................................................... (40,432) 1,891,077
---------- ----------
Net investment income..................................................................... 7,478,963
Realized Loss on Investments
Net realized loss from investment transactions............................................ (46,523)
----------
Net increase in net assets resulting from operations...................................... $7,432,440
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income.......................................................... $ 7,478,963 $ 4,645,067
Net realized loss from investment transactions................................. (46,523) (2,029)
--------------- ---------------
Net increase in net assets resulting from operations............................. 7,432,440 4,643,038
Distributions to shareholders from net investment income ($.030 and $.019 per
share, respectively)........................................................... (7,478,963) (4,645,067)
Increase in net assets from Fund share transactions (Note 2)..................... 70,589,200 5,251,853
--------------- ---------------
Increase in net assets........................................................... 70,542,677 5,249,824
Net assets, beginning of year.................................................... 212,467,062 207,217,238
--------------- ---------------
Net assets, end of year.......................................................... $ 283,009,739 $ 212,467,062
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 16
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
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>
FOR THE YEARS ENDED AUGUST 31,
--------------------------------
1995 1994 1993 1992+
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD:.................... $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)............................... .030 .019 .020 .005
LESS DISTRIBUTIONS:
Dividends from net investment income................... (.030) (.019) (.020) (.005)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD:.......................... $1.000 $1.000 $1.000 $1.000
====== ====== ====== ======
TOTAL RETURN %........................................... 3.04 1.90 2.02 .47(c)
RATIOS TO AVERAGE DAILY NET ASSETS(%)/SUPPLEMENTAL DATA:
Operating expenses, net(a)............................. .77 .77 .77 .77(b)
Net investment income.................................. 3.05 1.89 1.98 2.32(b)
Net assets, end of period ($ millions)................. 283 212 207 102
</TABLE>
- ---------------
+ For the period June 17, 1992 (commencement of operations) to August 31, 1992.
(a) Excludes management fees waived by the Manager in the amount of less than
$.001, $.001, $.001 and $.001, per share, respectively. The operating
expense ratios including such items would be .79%, .77%, .83% and 1.11%
(annualized), respectively.
(b) Annualized.
(c) Not annualized.
8
<PAGE> 17
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Cash Trust (the "Trust") is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a no-load, diversified,
open-end management investment company consisting of two separate
investment portfolios, the Municipal Money Market Fund (the "Fund") and
the Money Market Fund. The Fund is designed for investors who wish to
participate in a supervised portfolio of federally tax-exempt debt
securities with remaining maturities of not more than 397 days. The
policies described below are followed consistently by the Fund in the
preparation of its financial statements in conformity with generally
accepted accounting principles.
Security Valuation: The Fund uses the amortized cost method of security
valuation (as set forth in Rule 2a-7 under the Investment Company Act of
1940, as amended). The amortized cost of an instrument is determined by
valuing it at cost at the time of purchase and thereafter
accreting/amortizing any purchase discount/premium at a constant rate
until maturity, regardless of the effect of fluctuating interest rates
on the market value of the instrument.
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 is treated as a single corporate taxpayer
as provided for in the Tax Reform Act of 1986, as amended. 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. As of August 31, 1995, the Fund has net tax
basis capital loss carryforwards of $17,824 and $2,029, which may be
applied against any realized net taxable gains until their expiration
dates in 2001 and 2002, respectively. In addition, the Fund has
post-October losses that the Fund has deferred in the amount of $46,523.
Distribution of Income and Gains: Distributions from net investment
income and net realized gains available for distribution are declared
daily and paid monthly. The Fund uses the identified cost method for
determining realized gain or loss on investments for both financial and
federal income tax reporting purposes.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
Organization Expenses: Expenses incurred in connection with the
formation of the Fund were deferred and are being amortized on a
straight-line basis over 60 months from the date of commencement of
operations.
Capital Accounts: The Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting the
net asset value of the Fund.
Other: Investment transactions are recorded on a trade date basis which
is generally the same as settlement date. Interest income is recorded on
the accrual basis.
Note 2: FUND SHARES. At August 31, 1995, there was an unlimited number of
shares of beneficial interest of no par value authorized. Transactions
in shares of the Fund during the years ended August 31, 1995 and 1994,
at a constant net asset value of $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Shares sold............................................................ 1,085,052,629 1,243,994,047
Shares issued in reinvestment of distributions......................... 7,350,654 4,609,272
Shares redeemed........................................................ (1,021,814,083) (1,243,351,466)
-------------- --------------
Net increase......................................................... 70,589,200 5,251,853
Shares outstanding:
Beginning of year.................................................... 212,486,915 207,235,062
-------------- --------------
End of year.......................................................... 283,076,115 212,486,915
============== ==============
</TABLE>
9
<PAGE> 18
- --------------------------------------------------------------------------------
HERITAGE CASH TRUST -- MUNICIPAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 3: PURCHASES, SALES AND MATURITIES OF SECURITIES. For the year ended
August 31, 1995, purchases, sales and maturities of short-term
investment securities aggregated $615,213,037, $491,667,045 and
$55,880,000, respectively.
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND
TRUSTEES' FEES. Under the Fund's Investment Advisory and Administration
Agreement with Heritage Asset Management, Inc. (the "Manager"), the Fund
agrees to pay to the Manager for investment advice, portfolio management
services (including the placement of brokerage orders), and certain
compliance and administrative services a fee equal to an annual rate of
0.50% of the first $500,000,000 of the Fund's average daily net assets,
0.475% of the next $500,000,000, 0.45% of the next $500,000,000, 0.425%
of the next $500,000,000, and 0.40% of any excess over $2,000,000,000 of
such net assets, computed daily and payable monthly. Effective February
27, 1995, the Manager agreed to waive management fees so that the fee
does not exceed the following levels, as a percentage of average daily
net assets: .50% of the first $250,000,000, .475% of the next
$250,000,000, .45% of the next $250,000,000, .425% of the next
$250,000,000 and .40% on assets over $1 billion of such net assets. The
annual effective management fee rate after fee waivers, for the year
ended August 31, 1995 was .50%. The amount payable to the Manager as of
August 31, 1995 was $77,839. The agreement also provides for a reduction
in such fees in any year to the extent that operating expenses of the
Fund exceed applicable state expense limitations. Since inception, the
Manager has voluntarily agreed to waive its fee and, if necessary,
reimburse the Fund to the extent that Fund operating expenses exceed
.77%, on an annual basis, of the Fund's average daily net assets. This
agreement is more restrictive than any state expense limitation. Under
the agreement, management fees of $40,432 ($.00002 per share) were
waived in the year ended August 31, 1995. If total Fund expenses fall
below the expense limitation agreed to by the Manager before the end of
the year ending August 31, 1997, the Fund may be required to pay the
Manager a portion or all of the waived management fee. In addition, the
Fund may be required to pay the Manager a portion or all of the
management fee waived ($6,473) in the prior year ended August 31, 1994
if total Fund expenses fall below the annual expense limitation before
the end of the year ending August 31, 1996.
The Manager has entered into an agreement with Alliance Capital
Management L.P. (the "Subadviser") to provide investment advice and
portfolio management services, including placement of brokerage orders,
to the Fund for a fee payable by the Manager equal to an annual rate of
.125% of average daily net assets on assets up to $100 million, .10% of
average daily net assets on assets from $100 million to $250 million, and
.05% on average daily net assets exceeding $250 million.
The Manager is also the Dividend Paying and Shareholder Servicing Agent
for the Fund. The amount payable to the Manager for such expenses as of
August 31, 1995 was $16,600. In addition, the Manager performs Fund
accounting services for the Fund and charged $35,932 during the current
year of which $6,000 was payable as of August 31, 1995.
Pursuant to a plan adopted in accordance with Rule 12b-1 of the
Investment Company Act of 1940, as amended, the Fund pays Raymond James &
Associates, Inc. (the "Distributor") a fee equal to 0.15% of average
daily net assets for the services it provides in connection with the
promotion and distribution of Fund shares. Such fee is accrued daily and
payable monthly. The amount payable to the Distributor as of August 31,
1995 was $35,673. The Manager, Distributor, Fund Accountant and
Shareholder Servicing Agent are all wholly-owned subsidiaries of Raymond
James Financial, Inc.
Trustees of the Trust also serve as Trustees for Heritage Capital
Appreciation Trust, Heritage Income-Growth Trust, Heritage Income Trust,
Heritage Series Trust and Heritage U.S. Government Income Fund, mutual
funds that are also advised by the Manager or its affiliates
(collectively referred to as the Heritage Mutual Funds). Each Trustee of
the Heritage Mutual Funds who is not an interested person of the Manager
receives an annual fee of $8,000 and an additional fee of $2,000 for each
combined quarterly meeting of the Heritage Mutual Funds attended.
Trustees' fees and expenses are shared equally by each of the Heritage
Mutual Funds.
10
<PAGE>
