<PAGE> 1
May 9, 1996
Dear Fellow Shareholders:
It is my pleasure to provide you with the semiannual report for Heritage
Income-Growth Trust (the "Fund") for the six month period ended March 31, 1996.
For this period, the "A" shares and "C" shares of your Fund had positive total
returns of 13.03% and 12.61%, respectively.* These returns compare favorably
with the Standard & Poor's 500 Composite Stock Price Index, which registered a
gain of 11.71% for this same period.
As we have mentioned before, your Fund is an equity income fund designed to
participate in the potential long term gains of investments in equities while
reducing short term market volatility through the use of various income oriented
strategies for investing in the stock market. We certainly are pleased to have
outperformed broad stock market indexes such as the S&P 500 for the recent
semiannual period. However, it is important to remember that, because your Fund
is designed with stability and volatility reduction as goals, this type of
relative outperformance in such a strong stock market should be considered
unusual for your Fund. When judged by various volatility measures such as Beta
or Standard Deviation, your Fund continues to exhibit much greater relative
stability than the S&P 500 or equity mutual fund averages.
In the letter that follows, Lou Kirschbaum, the Fund's Portfolio Manager,
shares his thoughts on the recent performance of your Fund and on the outlook
for your Fund going forward. I hope you find his comments useful in
understanding how your portfolio is managed.
Thank you for continuing to make Heritage Income-Growth Trust part of your
investment portfolio. We look forward to helping serve your investment needs for
years to come.
Sincerely,
/s/ Stephen G. Hill
Stephen G. Hill
President
* Calculated without the imposition of front-end or contingent deferred sales
charges.
<PAGE> 2
May 9, 1996
Dear Fellow Shareholders:
The first half of fiscal 1996 was a very good period for the Heritage
Income-Growth Trust, as total returns have outperformed both the market, as
measured by the Standard & Poor's 500 Composite Stock Price Index, and the peer
group of equity income mutual funds. Importantly, we have accomplished these
results without increasing the Trust's risk profile. We continue to enjoy much
of our best relative performance on days when the market is down.
The relative defensiveness of our investment strategy is the result of a
combination of security selection, emphasizing companies that are dividend
payers and have traditionally been steady growers, and a well diversified
portfolio. On the last score, the largest single industry position in the Trust
on March 31 was Real Estate Investment Trusts, at 9.49%. In total, the portfolio
is diversified among nearly 50 industry groups.
For the past six months or so, we have been concerned that earnings
expectations built into the stock market were unreasonably high, and that the
inevitable adjustment downward would substantially increase price volatility.
(It isn't always fun being right.) More recently, we have been forced to contend
with an unexpected rise in long-term interest rates.
With this in mind, we have placed more emphasis than usual on balance sheet
quality, low valuations, and high income yields in selecting the securities to
hold in the Trust's portfolio. In addition, we have been using covered call
option writing more liberally to attempt to reduce portfolio volatility. Our
objective in taking this approach is to increase the portfolio's defensiveness
without ceding too much upside price potential.
In another sector, the convertible market has come alive following a
prolonged period of stagnation. Convertible securities play an important role in
the Trust, because they provide a blend of above-average income relative to
common stocks and participation in the performance of the underlying common
stock. Several convertible holdings have been among the Trust's best performers
over the past six months.
I appreciate your continuing confidence in Eagle Asset Management, and I
will work diligently to provide worthwhile investment returns, emphasizing
current yield, capital appreciation, and below-market risk.
Sincerely,
/s/ Louis Kirschbaum
Louis Kirschbaum
Senior Vice President
Eagle Asset Management, Inc.
2
<PAGE> 3
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------- -----------
<C> <S> <C>
COMMON STOCKS--57.8%(A)
- ------------------------
ADVERTISING/COMMUNICATIONS--2.3%
---------------------------------
20,000 Omnicom Group, Inc................................................................. $ 900,000
-----------
AUTO/TRUCK MANUFACTURERS--0.9%
--------------------------------
9,796 Ford Motor Company................................................................. 336,738
-----------
BANKING--4.4%
----------------
4,000 BankAmerica Corporation............................................................ 310,000
4,000 Bankers Trust New York Corporation................................................. 283,500
4,000 Chase Manhattan Corporation........................................................ 282,000
6,000 Greenpoint Financial Corporation................................................... 165,000
6,000 Mellon Bank Corporation............................................................ 330,750
4,000 NationsBank Corporation............................................................ 320,500
-----------
1,691,750
-----------
CHEMICALS--0.4%
-----------------
10,000 Crompton & Knowles Corporation..................................................... 146,250
-----------
CONGLOMERATES/DIVERSIFIED--1.4%
-------------------------------
15,000 Chemed Corporation................................................................. 556,875
-----------
DATA PROCESSING--4.8%
-----------------------
12,500 American Express Company, 6.25%, DECS.............................................. 737,500
8,000 Automatic Data Processing, Inc..................................................... 315,000
14,078 General Motors Corporation Class "E"............................................... 802,446
-----------
1,854,946
-----------
ELECTRONICS/ELECTRIC--2.0%
--------------------------
10,000 General Electric Company........................................................... 778,750
-----------
FILMED ENTERTAINMENT--0.6%
---------------------------
10,000 Carmike Cinemas, Inc., Class "A"*.................................................. 227,500
-----------
FINANCE--2.1%
---------------
10,000 American Express Company........................................................... 493,750
10,000 Federal National Mortgage Association.............................................. 318,750
-----------
812,500
-----------
FOOD--1.7%
-------------
7,500 Philip Morris Companies, Inc....................................................... 658,125
-----------
GRAPHIC ARTS--0.9%
--------------------
10,000 R.R. Donnelley & Sons Company (c).................................................. 345,000
-----------
HOTELS/MOTELS/INNS--0.9%
--------------------------
7,500 Marriott International, Inc........................................................ 356,250
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1996
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------- -----------
<C> <S> <C>
HOUSEHOLD PRODUCTS--1.3%
--------------------------
6,000 Procter & Gamble Company (c)....................................................... $ 508,500
-----------
INSURANCE--2.5%
-----------------
6,000 Jefferson-Pilot Corporation, ACES 7.25%............................................ 504,000
5,000 Marsh & McLennan Companies, Inc.................................................... 464,375
-----------
968,375
-----------
LEISURE/AMUSEMENT--0.5%
--------------------------
2,500 Eastman Kodak Company.............................................................. 177,500
-----------
MACHINERY--0.7%
------------------
10,000 Lincoln Electric Company, Class "A"................................................ 267,500
-----------
MANUFACTURING/DISTRIBUTIONS--1.2%
----------------------------------
7,000 Harsco Corporation................................................................. 463,750
-----------
OIL & GAS--3.5%
-----------------
6,000 Amoco Corporation(c)............................................................... 433,500
3,000 Mobil Shares Corporation........................................................... 347,625
10,000 Petroleum Geo-Services, ADR........................................................ 251,875
4,000 Schlumberger Ltd.(c)............................................................... 316,500
-----------
1,349,500
-----------
PHARMACEUTICAL--5.0%
----------------------
6,000 Merck & Company, Inc.(c)........................................................... 373,500
4,000 Pfizer, Inc. ...................................................................... 268,000
10,000 Schering-Plough Corporation........................................................ 581,250
6,000 Smithkline Beecham PLC, ADR(c)..................................................... 309,000
4,000 Warner-Lambert Company(c).......................................................... 413,000
-----------
1,944,750
-----------
PUBLISHING--2.6%
------------------
4,000 McGraw-Hill Companies, Inc. ....................................................... 347,000
10,000 Reuters Holdings PLC, ADR.......................................................... 651,250
-----------
998,250
-----------
REAL ESTATE INVESTMENT TRUST--7.5%
-------------------------------
12,000 Alexander Haagen Properties, Inc................................................... 138,000
22,000 Allied Capital Commercial Corporation.............................................. 415,250
10,000 Columbus Realty Trust.............................................................. 195,000
5,000 Duke Realty Investments, Inc....................................................... 150,625
10,000 Evans Withycombe Residential, Inc.................................................. 232,500
12,000 Health Care Property Investors, Inc................................................ 378,000
10,000 Manufactured Home Communities...................................................... 177,500
10,000 Patriot American Hospitality, Inc.................................................. 263,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1996
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------- -----------
<C> <S> <C>
17,500 Security Capital Industrial Trust.................................................. $ 306,250
12,500 Storage Trust Realty............................................................... 278,125
10,000 Storage USA, Inc................................................................... 343,750
-----------
2,878,750
-----------
RETAIL STORES--1.3%
-----------------
25,000 Intimate Brands, Inc............................................................... 484,375
-----------
STEEL/IRON--1.0%
--------------
10,000 Carpenter Technology Corporation................................................... 385,000
-----------
TELECOMMUNICATIONS--3.0%
-----------------------
12,000 ALLTEL Corporation................................................................. 372,000
10,000 GTE Corporation.................................................................... 438,750
9,000 Vodafone Group PLC, Sponsored ADR(c)............................................... 337,500
-----------
1,148,250
-----------
UTILITIES-ELECTRIC--1.2%
--------------------
25,000 Midamerican Energy Company......................................................... 446,875
-----------
UTILITIES-GAS--3.3%
----------------
25,000 UGI Corporation.................................................................... 531,250
10,000 Wicor, Inc......................................................................... 337,500
8,000 Williams Companies, Inc............................................................ 403,000
-----------
1,271,750
-----------
UTILITIES-WATER--0.8%
-------------------
8,000 American Water Works Company, Inc.................................................. 308,000
-----------
Total common stocks (cost $16,575,625)................................................................. 22,265,809
-----------
CONVERTIBLE PREFERRED STOCKS--8.5%(A)
- ------------------------------
BROADCASTING--0.8%
-----------------
30,000 Triathlon Broadcasting Company, Series "A", 9%..................................... 315,000
-----------
FILMED ENTERTAINMENT--1.6%
------------------------
15,000 AMC Entertainment, Inc., Series "B", $1.75......................................... 624,375
-----------
FINANCE--1.2%
------------
5,000 Travelers Group, Inc., $2.75....................................................... 445,000
-----------
GLASS PRODUCTS--0.7%
------------------
5,000 Corning, Inc., Series "M", 6% MIPS................................................. 271,875
-----------
OIL & GAS--0.7%
--------------
10,000 Callon Petroleum Company, $2.125................................................... 282,500
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1996
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------------- -----------
<C> <S> <C>
REAL ESTATE/LAND DEVELOPMENT--0.6%
---------------------------------
4,000 The Rouse Company, Series "A", 6.5%*............................................... $ 217,000
-----------
SERVICES--2.4%
------------
11,100 Service Corporation International, Series "A", $3.125.............................. 929,625
-----------
TOBACCO--0.5%
-------------
30,000 RJR Nabisco Holdings Corporation, Series "C", PERCS, $.6012........................ 183,750
-----------
Total convertible preferred stocks (cost $2,735,469)................................................... 3,269,125
-----------
CONVERTIBLE BONDS--18.9%(A)
- ----------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MATURITY MARKET
AMOUNT DATE VALUE
- ---------------- -------- -----------
<C> <S> <C> <C>
AUTO PARTS/EQUIPMENT--1.3%
-------------------------
$500,000 Magna International Inc., 5%............................................. 10/15/02 519,090
-----------
DATA PROCESSING--1.8%
--------------------
400,000 First Financial Management Corporation, 5%............................... 12/15/99 678,148
-----------
ELECTRONICS/ELECTRIC--1.1%
-----------------------
200,000 Diagnostic/Retrieval Systems, 9%......................................... 10/01/03 212,000
200,000 Richey Electronics, Inc., 7%............................................. 03/01/06 196,124
-----------
408,124
-----------
FOOD SERVING--0.4%
-----------------
200,000 TPI Enterprises, Inc., 8.25%............................................. 07/15/02 168,000
-----------
HEALTH CARE CENTERS--1.1%
-----------------------
200,000 Tenet Healthcare Corporation, 6%......................................... 12/01/05 219,000
200,000 US Diagnostic Labs, Inc., 9.0%........................................... 03/31/03 208,000
-----------
427,000
-----------
HOTELS/MOTELS/INNS--0.8%
-----------------------
250,000 Prime Hospitality Corporation, 7%........................................ 04/15/02 306,875
-----------
INSURANCE--0.7%
--------------
250,000 Leucadia National Corporation, 5.25%..................................... 02/01/03 256,050
-----------
MEDICAL EQUIPMENT/SUPPLY--0.6%
-----------------------------
250,000 Amsco International Corporation, 6.5%.................................... 10/15/02 239,375
-----------
METAL--0.6%
-----------
250,000 Phoenix Shannon, PLC, 9.5%............................................... 11/01/00 240,025
-----------
OFFICE EQUIPMENT--0.8%
--------------------
250,000 US Office Products Company, 5.50%........................................ 02/01/01 302,512
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1996
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY MARKET
AMOUNT DATE VALUE
- ---------------- -------- -----------
<C> <S> <C> <C>
PHARMACEUTICAL--1.5%
-------------------
$200,000 ICN Pharmaceutical, Inc., 8.5%........................................... 11/15/99 $ 239,250
300,000 NABI, Inc., 6.50%........................................................ 02/01/03 337,125
-----------
576,375
-----------
POLLUTION CONTROL--3.0%
---------------------
500,000 Thermo Electron Corporation Euro, 4.25%.................................. 01/01/03 608,750
200,000 Thermo Electron Corporation, 4.625%...................................... 08/01/97 567,000
-----------
1,175,750
-----------
REAL ESTATE INVESTMENT TRUST--1.9%
-------------------------------
250,000 Alexander Haagen Properties, Inc., 7.5%.................................. 01/15/01 216,248
300,000 Developers Diversified Realty Corporation, 7%............................ 08/15/99 294,750
200,000 LTC Properties, Inc., 7.75%.............................................. 01/01/02 202,000
-----------
712,998
-----------
SERVICES--2.0%
------------
250,000 Career Horizons, Inc., 7%................................................ 11/01/02 453,427
250,000 Youth Services International, Inc., 7%................................... 02/01/06 332,500
-----------
785,927
-----------
STEEL/IRON--1.3%
--------------
450,000 Trimas Corporation, 5%................................................... 08/01/03 483,750
-----------
Total convertible bonds (cost $6,200,375)..................................................... 7,279,999
-----------
Total investment portfolio excluding repurchase agreement (cost $25,511,469).................. 32,814,933
-----------
REPURCHASE AGREEMENT--14.8%(A)
- -----------------------------
Repurchase Agreement with State Street Bank and Trust Company, dated March 29, 1996, @
5.10%, to be repurchased at $5,712,427 on April 1, 1996, collateralized by $5,750,000 United
States Treasury Notes, 5.625%, due June 30, 1997, (market value $5,834,443 including
interest) (cost $5,710,000)................................................................. 5,710,000
-----------
TOTAL INVESTMENT PORTFOLIO (COST $31,221,469)(B), 100.0%(A)................................... 38,524,933
OTHER ASSETS AND LIABILITIES, INCLUDING COVERED CALL OPTIONS WRITTEN, 0.0%(A)................. (7,995)
-----------
NET ASSETS, 100.0%............................................................................ $38,516,938
===========
</TABLE>
- ---------------
* Not an income producing security.
(a) Percentages indicated are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same.
Market value includes net unrealized appreciation of $7,303,464, which
consists of aggregate gross unrealized appreciation for all securities in
which there is an excess of market value over tax cost of $7,453,110 and
aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over market value of $149,646.
(c) A portion of these shares were held by the custodian in connection with
covered call options written.
ACES-Adjustable Convertible Extendable Securities
ADR-American Depository Receipt
DECS -- Debt Exchangeable for Common Stock
MIPS-Monthly Income Preferred Stock
PERCS-Preferred Equity Redemption Cumulative Stock
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
COVERED CALL OPTIONS WRITTEN
MARCH 31, 1996
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SUBJECT MARKET
TO CALL VALUE
------- --------
<S> <C> <C>
Amoco Corporation, August 1996 @ $70........................................................... 4,000 $ 18,500
Merck & Company, Inc., July 1996 @ $65......................................................... 4,000 11,000
Procter & Gamble Company, April 1996 @ $85..................................................... 4,000 7,500
R.R. Donnelley & Sons Company, June 1996 @ $35................................................. 6,000 11,250
Schlumberger Ltd., May 1996 @ $80.............................................................. 2,000 5,250
Smithkline Beecham PLC, ADR, June 1996 @ $50................................................... 4,000 13,000
Vodafone Group PLC, Sponsored ADR, April 1996 @ $35............................................ 5,000 13,750
Warner-Lambert Company, July 1996 @ $105....................................................... 2,000 11,500
--------
$ 91,750(a)
========
</TABLE>
- ---------------
(a) At March 31, 1996 portfolio securities valued @ $1,842,250 were held in
escrow by the custodian in connection with covered call options written by
the Fund.
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
- -----
Investments, at market value (identified cost $25,511,469) (Note 1)...................... $32,814,933
Repurchase agreement (identified cost $5,710,000) (Note 1)............................... 5,710,000
Cash..................................................................................... 814
Receivables:
Investments sold....................................................................... 212,700
Fund shares sold....................................................................... 11,221
Dividends and interest................................................................. 215,193
Deferred state registration expenses (Note 1)............................................ 10,568
-----------
Total assets..................................................................... 38,975,429
Liabilities
- --------
Payables (Note 4):
Investments purchased.................................................................. $ 200,000
Fund shares redeemed................................................................... 54,311
Accrued management fee................................................................. 24,369
Accrued distribution fee............................................................... 8,556
Other accrued expenses................................................................. 79,505
Covered call options written, at market value (premiums received $110,319) (Notes 1 and
3)..................................................................................... 91,750
----------
Total liabilities................................................................ 458,491
-----------
Net assets, at market value.............................................................. $38,516,938
==========
Net Assets
- ---------
Net assets consist of:
Paid-in capital (Note 1)............................................................... $28,726,116
Undistributed net investment income (Note 1)........................................... 164,109
Accumulated net realized gain (Note 1)................................................. 1,745,984
Accumulated net realized gain on covered call options written.......................... 558,695
Net unrealized appreciation on investments............................................. 7,303,465
Net unrealized appreciation on covered call options written............................ 18,569
-----------
Net assets, at market value.............................................................. $38,516,938
==========
Class A Shares
- -------------
Net asset value and redemption price per share ($37,820,479 divided by 2,753,404 shares
of beneficial interest outstanding, no par value) (Note 2)............................. $13.74
======
Maximum offering price per share (100/95.25 of $13.74)................................... $14.43
Class C Shares ======
- ------------
Net asset value, offering price and redemption price per share ($696,459 divided by
50,945 shares of beneficial interest outstanding, no par value) (Notes 1 and 2)........ $13.67
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 10
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Income:
Dividends................................................................................. $ 487,800
Interest.................................................................................. 304,341
----------
Total income........................................................................ 792,141
Expenses (Notes 1 and 4):
Management fee............................................................................ $136,710
Distribution fee (Class A Shares)......................................................... 44,990
Distribution fee (Class C Shares)......................................................... 2,320
Professional fees......................................................................... 30,849
Custodian/Fund accounting fees............................................................ 23,167
State registration expenses............................................................... 13,854
Shareholder servicing fees................................................................ 12,606
Reports to shareholders................................................................... 8,769
Trustees' fees and expenses............................................................... 3,375
Insurance................................................................................. 2,956
Other expenses............................................................................ 2,353
--------
Total expenses...................................................................... 281,949
----------
Net investment income....................................................................... 510,192
----------
Realized and Unrealized Gain on Investments
Net realized gain from investment transactions.............................................. 2,569,371
Net realized gain from covered call options written (Note 1)................................ 15,243
Net increase in unrealized appreciation of investments during the period.................... 1,394,029
Net increase in unrealized appreciation of covered call options written during the period... 14,280
----------
Net gain on investments............................................................. 3,992,923
----------
Net increase in net assets resulting from operations................................ $4,503,115
=========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED FOR THE
MARCH 31, 1996 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1995
----------------- ------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................................................... $ 510,192 $ 964,709
Net realized gain from investment transactions........................... 2,569,371 411,468
Net realized gain from covered call options written...................... 15,243 38,733
Net increase in unrealized appreciation of investments and covered call
options written during the period...................................... 1,408,309 4,404,647
----------------- ------------------
Net increase in net assets resulting from operations..................... 4,503,115 5,819,557
Distributions to shareholders from:
Net investment income, Class A Shares ($.17 and $.34 per share,
respectively).......................................................... (534,930) (1,157,068)
Net investment income, Class C Shares ($.14 and $.16 per share,
respectively).......................................................... (4,276) (1,164)
Net realized gains, Class A Shares ($.25 and $.49 per share,
respectively).......................................................... (611,924) (1,189,190)
Net realized gains, Class C Shares ($.25 per share)...................... (8,187) --
Increase (decrease) in net assets from Fund share transactions (Note 2).... 551,162 (1,459,209)
----------------- ------------------
Increase in net assets..................................................... 3,894,960 2,012,926
Net assets, beginning of period............................................ 34,621,978 32,609,052
----------------- ------------------
Net assets, end of period (including undistributed net investment income of
$164,109 and $193,122, respectively)..................................... $38,516,938 $ 34,621,978
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 11
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES
--------------------------------------------------------- -------------------
FOR THE FOR THE
SIX MONTH SIX MONTH
PERIOD PERIOD
ENDED ENDED
MARCH 31, FOR THE YEARS ENDED SEPTEMBER 30, MARCH 31,
1996 ------------------------------------------ 1996
(UNAUDITED) 1995 1994 1993 1992 1991 (UNAUDITED) 1995+
--------- ------ ------ ------ ------ ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 12.56 $11.33 $12.28 $10.81 $ 9.87 $ 8.08 $ 12.51 $11.21
--------- ------ ------ ------ ------ ------ --------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)................... 0.18 0.27 0.30 0.39 0.28 0.36 0.14 0.18
Net realized and unrealized gain
(loss) on investments.................... 1.42 1.79 (0.09) 1.44 1.02 1.88 1.41 1.28
--------- ------ ------ ------ ------ ------ --------- -------
Total from Investment
Operations............................... 1.60 2.06 0.21 1.83 1.30 2.24 1.55 1.46
--------- ------ ------ ------ ------ ------ --------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income....... (0.17) (0.34) (0.24) (0.36) (0.36) (0.34) (0.14) (0.16 )
Distributions from net realized gain on
investments.............................. (0.25) (0.49) (0.92) -- -- (0.11) (0.25) --
--------- ------ ------ ------ ------ ------ --------- -------
Total Distributions........................ (0.42) (0.83) (1.16) (0.36) (0.36) (0.45) (0.39) (0.16 )
--------- ------ ------ ------ ------ ------ --------- -------
NET ASSET VALUE, END OF THE PERIOD........... $ 13.74 $12.56 $11.33 $12.28 $10.81 $ 9.87 $ 13.67 $12.51
======== ====== ====== ====== ====== ====== ======== ======
TOTAL RETURN (%)(D).......................... 13.03(c) 19.57 1.80 16.44 13.42 28.72 12.61(c) 13.18 (c)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily
net assets(a)............................ 1.54(b) 1.64 1.64 1.72 1.75 1.75 2.29(b) 2.40 (b)
Net investment income to average daily net
assets................................... 2.81(b) 4.63 2.62 2.67 2.77 4.02 2.14(b) 4.61 (b)
Portfolio turnover rate.................... 39(c) 42 99 130 71 81 39(c) 42
Average commission rate on portfolio
transactions............................. $ .0584 -- -- -- -- -- $ .0584 --
Net assets, end of the period ($
millions)................................ 38 34 33 34 27 20 0.7 0.2
</TABLE>
- ---------------
+ For the period April 3, 1995 (commencement of Class C Shares) to August 31,
1995.
(a) Excludes management fees waived by the Manager through 1992 in the amount of
less than $.01 and $.02 per Class A Share, respectively. The operating
expense ratios including such items would be 1.89%, and 2.11% (annualized)
per Class A Shares, respectively. The year 1993 includes previously waived
management fees paid to the Manager of $.01 per share.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
11
<PAGE> 12
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Income-Growth Trust (the
"Fund") is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund currently issues Class
A and Class C Shares. Class A Shares are sold subject to a maximum sales
charge of 4.75% of the amount invested payable at the time of purchase.
Class C Shares, which were offered to shareholders beginning April 3,
1995, are sold subject to a contingent deferred sales charge of 1% of
the lower of net asset value or purchase price payable upon any
redemptions within one year after purchase. The preparation of financial
statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts and disclosures. Actual results could differ from those
estimates. The following is a summary of significant accounting
policies.
Security Valuation: The Fund values investment securities at market
value based on the last quoted sales price as reported by the principal
securities exchange on which the security is traded. If no sale is
reported, market value is based on the last bid and in the absence of a
market quote, securities are valued using such methods as the Board of
Trustees believe would reflect fair market value. Short term investments
having a maturity of 60 days or less are valued at cost, which when
combined with accrued interest included in interest receivable or
discount earned, approximates market.
Repurchase Agreements: The Fund enters into repurchase agreements
whereby the Fund, through its custodian, receives delivery of the
underlying securities, the market value of which at the time of purchase
is required to be an amount equal to at least 100% of the resale price.
Federal Income Taxes: The Fund's policy is to comply with the
requirements of the Internal Revenue Code of 1986, as amended, which are
applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders.
Accordingly, no provision has been made for federal income and excise
taxes.
Distribution of Income and Gains: Distributions of net investment income
are made quarterly. Net realized gains from investment transactions
during any particular year in excess of available capital loss
carryforwards, which, if not distributed, would be taxable to the Fund,
will be distributed to shareholders in the following fiscal year.
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.
Option Accounting Principles: When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is included
in the Fund's Statement of Assets and Liabilities as an asset and as an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option
written. The current market value of a written option is the last
offering price on the principal exchange on which such option is traded.
The Fund receives a premium on the sale of an option, but gives up the
opportunity to profit from any increase in stock value above the
exercise price of the option. If an option which the Fund has written
either expires on its stipulated expiration date, or the Fund enters
into a closing purchase transaction, the Fund realizes a gain (or loss
if the cost of a closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such
option is extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by
the premium originally received.
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 Class A or Class C Shares of the Fund. These
reclassifications which have no impact on the net asset value for each
class of shares of the Fund, are primarily attributable to non-taxable
dividends in the computation of distributable income and capital gains
under Federal income tax rules and regulations versus generally accepted
accounting principles.
Other: Investment security transactions are accounted for on a trade
date plus one basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. All original issue discounts are accreted for both tax
and financial reporting purposes. Expenses of the Fund are allocated to
each class of shares based upon their relative percentage of current net
assets. Expenses that are directly attributable to a specific class of
shares, such as distribution fees, are allocated to that class.
12
<PAGE> 13
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 2: FUND SHARES. At March 31, 1996, there was an unlimited number of shares
of beneficial interest of no par value authorized.
Transactions in Class A Shares of the Fund during the six month period
ended March 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
MARCH 31, 1996 FOR THE YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1995
----------------------- -------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold.............................................. 131,233 $1,695,182 164,214 $ 1,854,451
Shares issued on reinvestment of distributions........... 85,999 1,091,684 208,793 2,247,195
Shares redeemed.......................................... (203,399) (2,667,085) (511,309) (5,762,051)
--------- ---------- ---------- -----------
Net increase (decrease).................................. 13,833 $ 119,781 (138,302) $(1,660,405)
========= ==========
Shares outstanding:
Beginning of period.................................... 2,739,571 2,877,873
--------- ----------
End of period.......................................... 2,753,404 2,739,571
======== =========
</TABLE>
Transactions in Class C Shares of the Fund during the six month period
ended March 31, 1996 and from April 3, 1995 (commencement of Class C
Shares) to September 30, 1995 were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MONTH APRIL 3, 1995
PERIOD ENDED (COMMENCEMENT OF
MARCH 31, 1996 CLASS C SHARES) TO
(UNAUDITED) SEPTEMBER 30, 1995
----------------------- ------------------------
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold 32,599 $ 419,796 17,555 $ 202,648
Shares issued on reinvestment of distributions 954 12,109 100 1,164
Shares redeemed........................................... (41) (524) (222) (2,616)
--------- ---------- ---------- ----------
Net increase.............................................. 33,512 $ 431,381 17,433 $ 201,196
========= =========
Shares outstanding:
Beginning of period..................................... 17,433 --
--------- ----------
End of period........................................... 50,945 17,433
======== =========
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended March
31, 1996, purchases and sales of investment securities (excluding
repurchase agreements) aggregated $12,930,266 and $16,064,966,
respectively. Agency brokerage commissions for the same period
aggregated $24,200, of which $1,410 was paid to Raymond James &
Associates, Inc.
Transactions in covered call options written on equity securities were
as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Outstanding September 30, 1995.................................................. 115 $ 34,477
Written....................................................................... 420 149,082
Terminated.................................................................... (110) (52,683)
Exercised..................................................................... (115) (20,557)
--------- ---------
Outstanding March 31, 1996...................................................... 310 $110,319
========== =========
</TABLE>
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND
TRUSTEES' FEES. Under the Fund's Investment Advisory and Administration
Agreement with Heritage Asset Management, Inc. (the "Manager"), the Fund
agrees to pay to the Manager a fee equal to an annualized rate of 0.75%
of the first $100,000,000 of the Fund's average daily net assets, and
0.60% of any excess over $100,000,000 of such net assets, computed daily
and payable monthly. 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. From October 1, 1995 to
January 31, 1996, the Manager has voluntarily agreed to waive its fee to
the extent that Fund operating
13
<PAGE> 14
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
expenses exceed 1.65% and 2.4% on Class A Shares and Class C Shares
respectively, on an annual basis, of the Fund's average daily net assets
attributable to each class of shares. Effective February 1, 1996, the
Manager has voluntarily agreed to waive its fee to the extent that Fund
operating expenses exceed 1.60% and 2.35% on Class A Shares and Class C
Shares respectively, on an annual basis, of the Fund's average daily net
assets attributable to each class of shares. This agreement is more
restrictive than any state expense limitation.
The Manager has entered into an agreement with Eagle Asset Management,
Inc. (the "Subadviser") for the Subadviser to provide to the Fund
investment advice, portfolio management services (including the
placement of brokerage orders) and certain compliance and other services
for a fee payable by the Manager equal to 50% of the fees payable by the
Fund to the Manager without regard to any reduction due to the
imposition of expense limitations.
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
March 31, 1996 was $6,975. In addition, the Manager performs Fund
accounting services and charged $15,695 during the current period of
which $2,300 was payable as of March 31, 1996.
Pursuant to the Class A Distribution Plan adopted in accordance with
Rule 12b-1 of the Investment Company Act of 1940, as amended, the Fund
is authorized to pay Raymond James & Associates, Inc. (the
"Distributor") a fee, equal to .25% of the average daily net assets for
Class A Shares. Under the Class C Distribution Plan the Fund may pay the
Distributor a fee equal to 1.00% of the average daily net assets for
Class C Shares. The Distributor, on Class C Shares, may retain the first
12 months distribution fee for reimbursement of amounts paid to the
broker/dealer at the time of purchase. Such fees are accrued daily and
payable monthly. During the period $44,990 and $2,320 were paid as
distribution fees for Class A Shares and Class C Shares, respectively.
The Manager, Distributor, Fund Accountant and Shareholder Servicing
Agent are all wholly-owned subsidiaries of Raymond James Financial, Inc.
Trustees of the Fund also serve as Trustees for Heritage Cash Trust,
Heritage Capital Appreciation Trust, Heritage Income Trust, Heritage
Series Trust and Heritage U.S. Government Income Fund, mutual funds
which are also advised by the Manager of the Fund (collectively called
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.
Note 5: DISTRIBUTION OF INCOME AND GAINS. The Fund uses the identified cost
method for determining realized gain or loss on investments for both
financial and federal income tax reporting purposes. Of the $1,189,190
net realized gain distributions paid in fiscal 1995, the Fund has
designated such amount as net long-term capital gains on a tax basis.
14
<PAGE> 15
HERITAGE INCOME-GROWTH TRUST is a member of the Heritage family of mutual funds.
Other investment alternatives available from Heritage include:
- HERITAGE CASH TRUST
MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
- HERITAGE CAPITAL APPRECIATION TRUST
- HERITAGE INCOME TRUST
HIGH YIELD BOND FUND
INTERMEDIATE GOVERNMENT FUND
- HERITAGE SERIES TRUST
EAGLE INTERNATIONAL EQUITY PORTFOLIO
GROWTH EQUITY FUND
SMALL CAP STOCK FUND
VALUE EQUITY FUND
- HERITAGE U.S. GOVERNMENT INCOME FUND
(A CLOSED-END FUND THAT TRADES ON
THE NEW YORK STOCK EXCHANGE)
We are pleased that many of you are also investors in these funds. For
information and a prospectus for any of these mutual funds, please contact your
account executive. Read the prospectus carefully before you invest in any of the
funds.
<PAGE> 16
[HERITAGE LOGO]
A mutual fund seeking
long-term total return
with approximately equal
emphasis on current income
and capital appreciation
SEMIANNUAL REPORT
(Unaudited) and Investment
Performance Review for the
Six Month Period Ended
MARCH 31, 1996
A member of the
Heritage Family of Mutual Funds(TM)
Heritage Income-Growth Trust
P.O. Box 33022
St. Petersburg, FL 33733
--------------------------------------------
Address Change Requested
Semiannual Report
INVESTMENT ADVISOR/
SHAREHOLDER SERVICING AGENT/
FUND ACCOUNTANT
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
(800) 421-4184
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
This report is for the information of shareholders of
Heritage Income-Growth Trust. It may also be used
as sales literature when preceded or accompanied
by a prospectus.
