As filed with the Securities and Exchange Commission on January 30, 1997
File No. 33-7559
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 14
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
(Check appropriate box or boxes)
HERITAGE INCOME-GROWTH TRUST
(Exact name of registrant as specified in charter)
880 Carillon Parkway
St. Petersburg, FL 33716
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (813) 573-3800
STEPHEN G. HILL, PRESIDENT
880 Carillon Parkway
St. Petersburg, FL 33716
(Name and Address of Agent for Service)
Copies to:
CLIFFORD J. ALEXANDER, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective on February 1, 1997
pursuant to paragraph (b) of Rule 485.
Registrant filed a Notice pursuant to Rule 24f-2 under the Investment Company
Act of 1940 on or about November 27, 1996.
Page 1 of ____ Pages
Exhibit Index begins on Page ______
<PAGE>
HERITAGE INCOME-GROWTH TRUST
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Prospectus
Statement of Additional Information
Part C of Form N-1A
Signature Page
Exhibits
<PAGE>
HERITAGE INCOME-GROWTH TRUST
FORM N-1A CROSS-REFERENCE SHEET
PART A ITEM NO. PROSPECTUS CAPTION
- --------------- ------------------
1. Cover Page Cover Page
2. Synopsis Total Trust Expenses
3. Condensed Financial Financial Highlights;
Information Performance Information
4. General Description Cover Page; About the
of Registrant Trust; Investment
Objective, Policies and
Risk Factors
5. Management of the Management of the Trust
Fund
5A. Management's Inapplicable
Discussion of Fund
Performance
6. Capital Stock and Cover Page; About the
Other Securities Trust; Management of the
Trust; Choosing a Class of
Shares; Dividends and Other
Distributions; Taxes;
Shareholder Information
7. Purchases of Net Asset Value; Purchase
Securities Being Procedures; Minimum
Offered Investment Required/
Accounts with Low Balances;
Systematic Investment
Programs; Retirement Plans;
Choosing a Class of Shares;
What Class A Shares Will
Cost; What Class C Shares
Will Cost; Distribution
Plans
8. Redemption or Minimum Investment
Repurchase Required/Accounts With Low
Balances; How to Redeem
Shares; Receiving Payment;
Exchange Privilege
9. Pending Legal Inapplicable
Proceedings
<PAGE>
STATEMENT OF ADDITIONAL
PART B ITEM NO. INFORMATION CAPTION
- --------------- -------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information General Information
and History
13. Investment Objectives Investment Information-
and Policies Investment Objective,
Investment Policies and
Industry Classifications;
Investment Limitations
14. Management of the Management of the Trust
Fund
15. Control Persons and Five Percent Shareholders
Principal Holders of
Securities
16. Investment Advisory Management of the Trust,
and Other Services Investment Adviser and
Administrator; Subadviser;
Distribution of Shares;
Administration of the Trust
17. Brokerage Allocation Brokerage Practices
18. Capital Stock and General Information; Trust
Other Securities Information; Potential
Liability
19. Purchase, Redemption Net Asset Value; Investing
and Pricing of in the Trust; Redeeming
Securities Being Shares; Exchange Privilege
Offered
20. Tax Status Taxes
21. Underwriters Trust Information -
Distribution of Shares
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
PART C. OTHER INFORMATION
-----------------
Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of this
Registration Statement.
<PAGE>
<PAGE> 1
HERITAGE INCOME - GROWTH TRUST (TM) LOGO
Heritage Income-Growth Trust (the "Trust") is a mutual fund with the
investment objective of long-term total return by seeking, with approximately
equal emphasis, current income and capital appreciation. The Trust invests
primarily in income-producing securities that the Trust's investment subadviser
believes are consistent with its investment objective. The Trust offers two
classes of shares, Class A shares (sold subject to a front-end sales load) and
Class C shares (sold subject to a contingent deferred sales load).
This Prospectus contains information that should be read before investing in
the Trust and should be kept for future reference. A Statement of Additional
Information dated February 1, 1997 relating to the Trust 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.
TRUST 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 ASSET MANAGEMENT, INC. LOGO
Registered Investment Advisor--SEC
880 Carillon Parkway
St. Petersburg, Florida 33716
(800) 421-4184
Prospectus Dated February 1, 1997
<PAGE> 2
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL INFORMATION......................................... 1
About the Trust........................................... 1
Total Trust Expenses...................................... 1
Financial Highlights...................................... 3
Investment Objective, Policies and Risk Factors........... 4
Net Asset Value........................................... 7
Performance Information................................... 8
INVESTING IN THE TRUST...................................... 9
Purchase Procedures....................................... 9
Minimum Investment Required/Accounts With Low Balances.... 10
Systematic Investment Programs............................ 10
Retirement Plans.......................................... 10
Choosing a Class of Shares................................ 11
What Class A Shares Will Cost............................. 12
What Class C Shares Will Cost............................. 13
How to Redeem Shares...................................... 14
Receiving Payment......................................... 15
Exchange Privilege........................................ 16
MANAGEMENT OF THE TRUST..................................... 17
SHAREHOLDER AND ACCOUNT POLICIES............................ 18
Dividends and Other Distributions......................... 18
Distribution Plans........................................ 19
Taxes..................................................... 20
Shareholder Information................................... 20
</TABLE>
Prospectus
<PAGE> 3
GENERAL INFORMATION
ABOUT THE TRUST
------------------------------------------------------------
------------------------------------------------------------
Heritage Income-Growth Trust (the "Trust") was
established as a Massachusetts business trust under a
Declaration of Trust dated July 25, 1986. The Trust is an
open-end diversified management investment company designed
for individuals, institutions and fiduciaries whose
investment objective is long-term total return by seeking,
with approximately equal emphasis, current income and
capital appreciation. The Trust offers two classes of
shares, Class A shares ("A shares") and Class C shares ("C
shares"). The Trust requires a minimum initial investment of
$1,000, except for certain investment plans for which lower
limits may apply. See "Investing in the Trust."
TOTAL TRUST EXPENSES
------------------------------------------------------------
------------------------------------------------------------
Shown below are Class A and Class C expenses incurred
by the Trust during its 1996 fiscal year.
<TABLE>
<CAPTION>
CLASS A CLASS C
------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on
purchases (as a percentage of
offering price).................... 4.75% None
Maximum contingent deferred sales
load (as a percentage of original
purchase price or redemption (declining to 0% at
proceeds, as applicable)........... None 1.00% the first year)
Wire redemption fee (per
transaction)....................... $5.00 $5.00
ANNUAL TRUST OPERATING EXPENSES
Management fee....................... 0.75% 0.75%
12b-1 distribution fee............... 0.25% 1.00%
Other expenses....................... 0.51% 0.38%
---- ----
Total Trust operating expenses....... 1.51% 2.13%
==== ====
</TABLE>
Effective February 3, 1997, the Trust's manager,
Heritage Asset Management, Inc. (the "Manager"), voluntarily
will waive its fees and, if necessary, reimburse the Trust
to the extent that Class A annual operating expenses exceed
1.50% and to the extent that Class C annual operating
expenses exceed 2.25% of the average daily net assets
attributable to that class for the fiscal year ending
September 30, 1997. 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.
Due to the imposition of Rule 12b-1 distribution fees, it is
possible that long-term shareholders of the Trust may pay
more in total sales charges than the economic equivalent of
the maximum front-end sales load permitted by the rules of
the National Association of Securities Dealers, Inc.
The impact of Trust 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 Operating Expenses -- A
shares........................... $62 $93 $126 $219
Total Operating Expenses -- C
shares........................... $32 $67 $116 $253
</TABLE>
Prospectus 1
<PAGE> 4
The impact of Trust 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 Operating Expenses -- A
shares........................... $62 $93 $126 $219
Total Operating Expenses -- C
shares........................... $22 $67 $116 $253
</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
"What Class A Shares Will Cost," "What Class C Shares Will
Cost," "Management of the Trust" and "Distribution Plans."
Prospectus 2
<PAGE> 5
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following table shows important financial information for an A share
and a C share of the Trust outstanding for the periods indicated, including net
investment income, net realized and unrealized gain on investments, and certain
other information. It has been derived from financial statements appearing in
the Statement of Additional Information ("SAI"). The financial statements and
the information in this table for the fiscal year ended September 30, 1996 have
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in the SAI, which may be obtained by calling the Trust at
(800) 421-4184. Information presented for the years ended September 30, 1995 and
prior thereto was audited by other auditors who served as the Trust's
independent accountants for those years.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1996 1995 1994 1993 1992 1991
------- ------ ------ ------- ------ ------
<S> <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
------- ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)........................... 0.36 0.27 0.30 0.39 0.28 0.36
Net realized and unrealized gain (loss) on
investments...................................... 2.35 1.79 (0.09) 1.44 1.02 1.88
------- ------ ------ ------- ------ ------
Total from Investment Operations................... 2.71 2.06 0.21 1.83 1.30 2.24
------- ------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income............... (0.35) (0.34) (0.24) (0.36) (0.36) (0.34)
Distributions from net realized gain on
investments...................................... (0.25) (0.49) (0.92) -- -- (0.11)
------- ------ ------ ------- ------ ------
Total Distributions................................ (0.60) (0.83) (1.16) (0.36) (0.36) (0.45)
------- ------ ------ ------- ------ ------
NET ASSET VALUE, END OF THE PERIOD.................. $14.67 $12.56 $11.33 $ 12.28 $10.81 $ 9.87
======= ====== ====== ======= ====== ======
TOTAL RETURN (%)(D)................................. 22.26 19.57 1.80 16.44 13.42 28.72
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net
assets(a)........................................ 1.51 1.64 1.64 1.72 1.75 1.75
Net investment income to average daily net
assets........................................... 2.66 4.63 2.62 2.67 2.77 4.02
Portfolio turnover rate............................ 75 42 98 130 71 81
Average commission rate on portfolio
transactions..................................... $0.0595 -- -- -- -- --
Net assets, end of the period ($ millions)......... 43 34 33 34 27 20
<CAPTION>
CLASS C
----------------
CLASS A FOR THE YEARS
------------------------------------ ENDED
FOR THE YEARS ENDED SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ----------------
1990 1989 1988 1987+ 1996 1995++
------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD............ $10.41 $ 9.18 $ 9.98 $ 9.50 $12.51 $11.21
------- ------- ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)........................... 0.45 0.45 0.44 0.26 0.26 0.18
Net realized and unrealized gain (loss) on
investments...................................... (2.06) 1.22 (0.81) 0.38 2.34 1.28
------- ------- ------- ------ ------- ------
Total from Investment Operations................... (1.61) 1.67 (0.37) 0.64 2.60 1.46
------- ------- ------- ------ ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income............... (0.48) (0.44) (0.43) (0.16) (0.29) (0.16)
Distributions from net realized gain on
investments...................................... (0.24) -- -- -- (0.25) --
------- ------- ------- ------ ------- ------
Total Distributions................................ (0.72) (0.44) (0.43) (0.16) (0.54) (0.16)
------- ------- ------- ------ ------- ------
NET ASSET VALUE, END OF THE PERIOD.................. $ 8.08 $10.41 $ 9.18 $ 9.98 $ 14.57 $12.51
======= ======= ======= ====== ======= ======
TOTAL RETURN (%)(D)................................. (16.42) 18.80 (3.38) 6.79(c) 21.37 13.18(c)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to average daily net
assets(a)........................................ 1.75 1.75 1.75 1.75(b) 2.13 2.40(b)
Net investment income to average daily net
assets........................................... 4.77 4.72 5.01 4.29(b) 2.05 4.61(b)
Portfolio turnover rate............................ 156 249 184 91(b) 75 42(b)
Average commission rate on portfolio
transactions..................................... -- -- -- -- $0.0595 --
Net assets, end of the period ($ millions)......... 19 24 20 24 6 0.2
</TABLE>
- ---------------
+ For the period December 15, 1986 (commencement of operations) to September
30, 1987.
++ For the period April 3, 1995 (first offering of C shares) to September 30,
1995.
(a) Excludes management fees waived by the Offering Manager through 1992 in the
amount of less than $.01, $.01, $.02, $.02, $.01 and $.02 per A share,
respectively. The operating expense ratios including such items would be
1.75%, 1.94%, 1.96%, 1.92%, 1.89%, and 2.11% (annualized) per Class A share,
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 load.
Prospectus 3
<PAGE> 6
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BECAUSE THE TRUST
INVESTS PRIMARILY
IN COMMON STOCK
OR SECURITIES
CONVERTIBLE INTO
COMMON STOCK, THE
VALUE OF YOUR
INVESTMENT WILL
FLUCTUATE. YOU CAN
LOSE MONEY BY
INVESTING IN
THE TRUST.
The Trust's investment objective is long-term total return by seeking, with
approximately equal emphasis, current income and capital appreciation. The Trust
may invest a portion of its assets in lower-rated securities, as discussed
below. Although investing in lower-rated securities may offer the potential for
above-average income, it also increases the risk of loss of principal.
Therefore, an investment in the Trust is subject to a higher risk of loss of
principal than an investment in a fund that does not invest in lower-rated
securities. There can be no assurance that the Trust's investment objective will
be achieved. Trust shares will fluctuate in value as a result of changes in the
value of portfolio investments.
THE TRUST MAY INVEST
IN HIGH-YIELD
(OR "JUNK") BONDS.
The Trust invests primarily in income-producing securities that Eagle Asset
Management, Inc. (the "Subadviser") believes are consistent with the Trust's
investment objective. These securities may include equity securities,
convertible securities, corporate debt obligations, U.S. Government securities,
money market instruments, real estate investment trusts, and repurchase
agreements. The Trust also may write covered call options on common stocks in
order to earn additional income, engage in short sales "against the box," loan
portfolio securities and invest in warrants. The Trust will have a majority of
its investments in common stocks or securities convertible into common stocks.
The Trust may invest a portion of its assets in securities rated B or Ba by
Moody's Investors Service, Inc. ("Moody's") or B or BB by Standard & Poor's
Rating Services ("S&P") or, if unrated, deemed to be of comparable quality by
the Subadviser. The Trust may purchase and sell securities without regard to the
length of time the securities have been held. The Trust may invest up to 10% of
its net assets in illiquid securities. In addition, the Trust may invest up to
25% of its total assets in forward commitments, although the Trust has no
intention of investing in such securities at this time.
THE TRUST'S ASSETS
MAY BE INVESTED IN
FOREIGN SECURITIES.
INVESTING IN FOREIGN
SECURITIES SUBJECTS
THE TRUST TO GREATER
RISKS THAN INVESTING
IN DOMESTIC SECURITIES.
The Trust may invest up to 20% of its assets in foreign securities,
including American Depository Receipts ("ADRs") and similar investments. The
Trust also may purchase domestic Eurodollar certificates of deposit without
regard to the 20% limit. The Trust may engage in forward contracts to purchase
or sell foreign currencies at a future date.
For temporary defensive purposes during anticipated periods of general
market decline, the Trust may invest up to 100% of its assets in money market
instruments, including securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements secured thereby, as
well as bank certificates of deposit and banker's acceptances issued by banks
having net assets of at least $1 billion as of the end of their most recent
fiscal year, high grade commercial paper, and other long- and short-term debt
instruments that are rated A or higher by Moody's or S&P. It is impossible to
predict when, or for how long, such alternative strategies may be utilized. See
the Appendix in the SAI for a description of Moody's and S&P commercial paper
ratings.
The Trust's investment objective is fundamental and may not be changed
without the vote of a majority of the outstanding voting securities of the
Trust, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). All policies of the Trust described in this Prospectus may be changed by
the Board of Trustees without shareholder approval. The following is a
discussion of the types of investments in which the Trust may invest, including
the risks of investing in these securities. For a further discussion of the
Trust's investment policies and risks, see "Investment Information" in the SAI.
Prospectus 4
<PAGE> 7
American Depository Receipts. Sponsored ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities of foreign issuers and other forms of depository receipts for
securities of foreign issuers. Investing in ADRs involves greater risks than
normally are present in domestic investments. These risks are similar to the
risks of investing in foreign securities in general, as discussed below.
THE TRUST MAY INVEST
IN SECURITIES
CONVERTIBLE INTO
COMMON STOCK.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issue within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible stock matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally have higher yields than common stocks,
but lower yields than comparable non-convertible securities, are less subject to
fluctuation in value than the underlying stock because they have fixed-income
characteristics and provide the potential for capital appreciation if the market
price of the underlying common stock increases. The Trust only will invest in
convertible securities rated B or better by Moody's or S&P or, if unrated,
deemed to be of comparable quality by the Subadviser.
THE TRUST MAY INVEST
IN INVESTMENT
GRADE BONDS.
Debt Securities -- Investment Grade. The Trust may invest in
nonconvertible corporate debt obligations, primarily for interest income, that
are rated Baa by Moody's or BBB by S&P or above or, if unrated, deemed to be of
comparable quality by the Subadviser ("investment grade securities"). Debt
securities rated in the lowest category of investment grade securities are
deemed to have speculative characteristics. The Trust, at the discretion of the
Subadviser, may retain a security that has been downgraded below the initial
investment criteria.
Debt Securities -- Lower-Rated Securities. The Trust may invest in
convertible and nonconvertible securities rated below investment grade. However,
in no instance will the Trust invest 35% or more of its assets in such
lower-rated securities. The Trust will not invest more than 10% of its assets in
nonconvertible corporate debt obligations that are rated below investment grade
by Moody's or S&P or, if unrated, that are deemed to be of comparable quality by
the Subadviser. The Trust, at the discretion of the Subadviser, may retain a
security that has been downgraded below the initial investment criteria. The
prices of lower-rated securities tend to be less sensitive to interest rate
changes than higher-rated securities, but more sensitive to adverse economic
changes or individual corporate developments. Securities rated below investment
grade are deemed to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal and may involve major risk exposure
to adverse conditions. See the Appendix in the SAI for a description of
corporate debt ratings by Moody's and S&P.
Lower-rated securities (commonly referred to as "junk bonds") generally
offer a higher current yield than that available for higher-grade issues.
However, lower-rated securities involve higher risks, in that they are
especially subject to adverse changes in general economic conditions and in the
industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuations in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress that could affect
adversely their ability to make payments of interest and principal and increase
the possibility of default. In addition, the market for lower-
Prospectus 5
<PAGE> 8
rated securities has expanded rapidly in recent years, and its growth paralleled
a long economic expansion. The market for lower-rated securities generally is
thinner and less active than that for higher-quality securities, which may limit
the Trust's ability to sell such securities at fair value in response to changes
in the economy or financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, also may decrease the values and
liquidity of lower-rated securities, especially in a thinly traded market.
The table below shows the percentages of the Trust's assets invested during
fiscal 1996 in securities assigned to the various ratings categories by Moody's
and S&P and in unrated securities determined by the Subadviser to be of
comparable quality. These figures are dollar-weighted averages of month-end
Trust holdings for the fiscal year ended September 30, 1996, presented as a
percentage of total net assets. These percentages are historical and are not
necessarily indicative of the quality of current or future investment portfolio
holdings, which will vary.
<TABLE>
<CAPTION>
COMPARABLE QUALITY OF
RATED SECURITIES UNRATED SECURITIES AS A
AS A PERCENTAGE OF THE PERCENTAGE OF THE
TRUST'S ASSETS TRUST'S ASSETS
---------------------- -----------------------
MOODY'S/S&P RATINGS MOODY'S S&P MOODY'S S&P
------------------- -------- ------ --------- ------
<S> <C> <C> <C> <C>
A...................... 2.05% 4.11% 0.34% 0.89%
BBB/Baa................ 1.34 1.48 1.01 0.34
BB/Ba.................. 2.99 0.68 0.72 0.72
B...................... 7.02 4.86 2.65 4.53
CCC/Caa................ 0.00 0.52 0.00 0.00
----- ----- ---- ----
Total........ 13.41% 11.65% 4.72% 6.48%
===== ===== ==== ====
</TABLE>
Debt Securities -- Risk Factors. The market value of debt securities is
influenced primarily by the changes in the level of interest rates. Generally,
as interest rates rise, the market value of debt securities decreases.
Conversely, as interest rates fall, the market value of debt securities
increases.
EQUITY SECURITIES IN
WHICH THE TRUST
INVESTS GENERALLY WILL
HAVE A YIELD GREATER
THAN THE YIELD OF
ISSUERS INCLUDED IN
THE S&P 500.
Equity Securities. The Trust's investments in equities generally will have
a weighted average dividend yield in excess of the weighted average dividend
yield of the issuers included in the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500"). Further, equities in which the Trust may invest generally
will be those whose prospects for dividend growth and capital appreciation are
considered favorable by the Subadviser.
Foreign Securities -- Risk Factors. The Trust's foreign investments
involve certain risks not present in domestic investments. Most notably, there
generally is less publicly available information about foreign companies; there
may be less governmental regulation and supervision of foreign stock exchanges,
brokers and listed companies; such companies may use different accounting and
financial standards; the establishment of exchange controls or the adoption of
other foreign governmental restrictions might affect adversely the payment of
principal and/or interest on foreign investments; and fluctuations in monetary
exchange rates will affect the dollar value of foreign investments, dividends
and interest payments.
THE TRUST MAY WRITE
(SELL) CALL OPTIONS
ON UP TO 50% OF
IS ASSETS.
Options. The Trust may sell (write) covered call options on common stocks
in its investment portfolio or on common stocks into which securities held by it
are convertible to earn additional income. The Trust 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. The aggregate value of the
securities underlying call options (based on the lower of the option price or
market) may not
Prospectus 6
<PAGE> 9
exceed 50% of the Trust's net assets. The Trust also may purchase call options
to close out call options it has written. The principal risks associated with
the use of options are (1) possible lack of a liquid market for closing out
options positions; (2) the need for additional portfolio management skills and
techniques; and (3) losses due to unanticipated market price movements.
THE TRUST MAY INVEST
IN REAL ESTATE
INVESTMENT TRUSTS.
Real Estate Investment Trusts. The Trust may invest in different types of
real estate investment trusts ("REITs"), such as equity REITs, which own real
estate properties, and mortgage REITs, which make construction, development and
long-term mortgage loans. The value of an equity REIT may be affected by changes
in the value of the underlying property, while a mortgage REIT may be affected
by the quality of the credit extended. The performance of both types of REITs
depends upon conditions in the real estate industry, management skills and the
amount of cash flow. The risks associated with REITs include defaults by
borrowers, self-liquidation, failure to qualify as a "pass-through" entity under
the Federal tax law, failure to qualify as an exempt entity under the 1940 Act,
and the fact that REITs are not diversified.
Repurchase Agreements. The Trust may not enter into repurchase agreements
with respect to more than 25% of its total assets. A repurchase agreement is a
transaction in which the Trust purchases securities and simultaneously commits
to resell the securities to the original seller (a member bank of the Federal
Reserve System or a securities dealer who is a member of a national securities
exchange or is a market maker in U.S. Government securities) at an agreed upon
date and price reflecting a market rate of interest unrelated to the coupon rate
or maturity of the purchased securities. Although repurchase agreements carry
certain risks not associated with direct investment in securities, including
possible decline in the market value of the underlying securities and delays and
costs to the Trust if the other party to the repurchase agreement becomes
bankrupt, the Trust intends to enter into repurchase agreements only with banks
and dealers in transactions believed by the Subadviser to present minimal credit
risks in accordance with guidelines established by the Board of Trustees.
NET ASSET VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE NET ASSET VALUE OF
EACH CLASS OF TRUST
SHARES IS CALCULATED
DAILY AS OF THE CLOSE
OF REGULAR TRADING ON
THE NEW YORK STOCK
EXCHANGE.
The net asset values of A shares and C shares are calculated by dividing
the value of the total assets of the Trust attributable to that class, less
liabilities attributable to that class, by the number of shares outstanding of
that class. Shares are valued as of the close of regular trading on the New York
Stock Exchange ("Exchange") each day it is open. Trust securities and other
investments are stated at market value based on the last sales price as reported
by the principal securities exchange on which the securities are traded. If no
sale is reported, market value is based on the most recent quoted bid price. In
the absence of a readily available market quote, or if the Manager or the
Subadviser has reason to question the validity of market quotations it receives,
securities and other assets are valued using such methods as the Board of
Trustees believes would reflect fair value. Short-term investments that will
mature in 60 days or less are valued at amortized cost, which approximates
market value. Securities that are quoted in a foreign currency will be valued
daily in U.S. dollars at the foreign currency exchange rates prevailing at the
time the Trust calculates its net asset value per share. The per share net asset
value of A shares and C shares may differ as a result of the different daily
expense accruals applicable to each class. For more information on the
calculation of net asset value, see "Net Asset Value" in the SAI.
Prospectus 7
<PAGE> 10
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total return data of the A shares and C shares from time to time may be
included in advertisements about the Trust. Performance information is computed
separately for A shares and C shares in accordance with the methods described
below. Because C shares bear the expense of a higher distribution fee
attributable to the deferred sales load alternative, the performance of C shares
likely will be lower than that of A shares.
Total return with respect to a class for the one-, five- and ten-year
periods or, if such periods have not elapsed, the period since the establishment
of that class through the most recent calendar quarter represents the average
annual compounded rate of return on an investment of $1,000 in that class at the
public offering price (in the case of A shares, giving effect to the maximum
initial sales load of 4.75% and, in the case of C shares, giving effect to the
deduction of any contingent deferred sales load ("CDSL") that would be payable).
In addition, the Trust also may advertise the total return in the same manner,
but without taking into account the initial sales load or CDSL. The Trust also
may advertise total return calculated without annualizing the return, and total
return may be presented for other periods. By not annualizing the returns, the
total return calculated in this manner simply will reflect the increase in net
asset value per A share and C share over a period of time, adjusted for
dividends and other distributions. A share and C share performance may be
compared with various indices.
The Trust also may from time to time advertise the yield of A shares and C
shares and compare these yields to those of other mutual funds with similar
investment objectives. The yield of each class of the Trust will be computed by
dividing the net investment income per share earned during a 30-day (or one
month) period by the maximum offering price per share on the last day of the
period. Yield accounting methods differ from the methods used for other
accounting purposes; accordingly, the yield for a class may not equal the
dividend income actually paid to shareholders or the net investment income per
share reported in the Trust's financial statements.
All data is based on the Trust's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Trust's
investment portfolio and the Trust's operating expenses. Investment performance
also often reflects the risks associated with the Trust's investment objective
and policies. These factors should be considered when comparing the Trust's
investment results to those of other mutual funds and other investment vehicles.
Additional performance information is contained in the Trust's annual report to
shareholders, which may be obtained, without charge, by contacting the Trust at
(800) 421-4184. For more information on investment performance, see the SAI.
Prospectus 8
<PAGE> 11
INVESTING IN THE TRUST
PURCHASE PROCEDURES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO BUY SHARES:
Shares of the Trust 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 Distributor receives commissions consisting of that portion of
the sales load remaining after the dealer concession is paid to participating
dealers or banks. Such dealers may be deemed to be underwriters pursuant to the
Securities Act of 1933, as amended. For a discussion of the classes of shares
offered by the Trust, see "Choosing a Class of Shares."
- CALLING YOUR
REPRESENTATIVE
Shares of the Trust may be purchased through a registered representative of
the Distributor, a participating dealer or a participating bank
("Representative") by placing an order for Trust shares with your Representative
and remitting payment to the Distributor, participating dealer or bank within
three business days.
All purchase orders received by the Distributor prior to the close of
regular trading on the Exchange -- generally 4:00 p.m. Eastern time -- will be
executed at that day's offering price. Purchase orders received by your
Representative prior to the close of regular trading on the Exchange and
transmitted to the Distributor before 5:00 p.m. Eastern time on that day also
will receive that day's offering price. Otherwise, all purchase orders accepted
after the offering price is determined will be executed at the offering price
determined as of the close of regular trading on the Exchange on the next
trading day. See "What Class A Shares Will Cost" and "What Class C Shares Will
Cost."
- COMPLETING THE
ACCOUNT APPLICATION
CONTAINED IN THIS
PROSPECTUS AND
SENDING YOUR
CHECK; OR
You also may purchase shares of the Trust directly by completing and
signing the Account Application found in this Prospectus and mailing it, along
with your payment, to Heritage Income-Growth Trust, Heritage Asset Management,
Inc., P.O. Box 33022, St. Petersburg, FL 33733.
- SENDING A
FEDERAL FUNDS
WIRE.
Shares may be purchased with Federal funds (a commercial bank's deposit
with the Federal Reserve Bank that can be transferred to another member bank on
the same day) sent by Federal Reserve or bank wire to:
State Street Bank and Trust Company
Boston, Massachusetts
ABA #011-000-028
Account #3196-769-8
Heritage Income-Growth Trust
(The class of shares to be purchased)
(Your Account Number Assigned by the Trust)
(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 Trust" in the SAI.
Prospectus 9
<PAGE> 12
MINIMUM INVESTMENT REQUIRED/ACCOUNTS WITH LOW BALANCES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AN INITIAL INVESTMENT
MUST BE AT LEAST
$1,000. A MINIMUM
BALANCE OF $500 MUST
BE MAINTAINED.
Except as provided under "Systematic Investment Programs," the minimum
initial investment in the Trust is $1,000, and a minimum account balance of $500
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 Trust shares in any account if the
account balance falls below the required minimum value of $500, 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. The Trust does not apply this
minimum account balance requirement to accounts that fall below the minimum due
to market fluctuation.
SYSTEMATIC INVESTMENT PROGRAMS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING PLANS:
- -------------------------------
THE TRUST OFFERS
INVESTORS A VARIETY
OF CONVENIENT FEATURES
AND BENEFITS,
INCLUDING DOLLAR COST
AVERAGING.
A variety of systematic investment options are available for the purchase
of Trust shares. These options provide for systematic monthly investments of $50
or more through systematic investing, payroll or government direct deposit, or
exchange from another mutual fund advised or administered by the Manager
("Heritage Mutual Fund"). 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. You will receive a periodic
confirmation of all activity for your account. For additional information on
these options, see the Account Application or contact the Manager at (800)
421-4184 or your Representative.
RETIREMENT PLANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the Trust 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 Employee Pension Plans ("SEPs") and
other retirement plans. For more detailed information on retirement plans,
contact the Manager at (800) 421-4184 or your Representative and see "Investing
in the Trust" in the SAI.
Prospectus 10
<PAGE> 13
CHOOSING A CLASS OF SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A SHARES HAVE
A FRONT-END SALES
LOAD AND LOWER
ANNUAL EXPENSES
THAN C SHARES.
C SHARES HAVE A
CDSL ON REDEMPTIONS
WITHIN ONE YEAR
OF PURCHASE.
The Trust offers and sells two classes of shares, A shares and C shares.
The primary difference between the A shares and the C shares lies in their
initial sales load and CDSL structures and in their ongoing expenses, including
asset-based sales charges in the form of distribution fees. A shares may be
purchased at a price equal to their net asset value per share next determined
after receipt of an order, plus a sales load imposed at the time of purchase. C
shares may be purchased at a price equal to their net asset value per share next
determined after receipt of an order. A CDSL of 1% is imposed on C shares if you
hold those shares for less than one year. C shares are subject to higher ongoing
distribution fees than A shares. When you place an order for Trust shares, you
must specify which class of shares you wish to purchase.
YOU CAN CHOOSE
A SHARE CLASS THAT
MEETS YOUR INVESTMENT
OBJECTIVES. CONSULT WITH
YOUR REPRESENTATIVE.
The purchase plans offered by the Trust enable you to choose the class of
shares that you believe will be most beneficial given the amount of your
intended purchase, the length of time you expect to hold the shares and other
circumstances. You should consider whether, during the anticipated length of
your intended investment in the Trust, the accumulated continuing distribution
and service fees plus the CDSL on C shares would exceed the initial sales load
plus accumulated Rule 12b-1 distribution fees on A shares purchased at the same
time. Another factor to consider is whether the potentially higher yield of A
shares due to lower ongoing charges will offset the initial sales load paid on
such shares. Representatives may receive different compensation for sales of A
shares than sales of C shares.
If you purchase sufficient shares to qualify for a reduced sales load, you
may prefer to purchase A shares because similar reductions are not available on
the C shares. For example, if you intend to invest more than $1,000,000 in
shares of the Trust, you should purchase A shares. Moreover, all A shares are
subject to a lower Rule 12b-1 fee and, accordingly, are expected to pay
correspondingly higher dividends on a per share basis. If your purchase will not
qualify for a reduced sales load, you still may wish to purchase A shares if you
expect to hold your shares for an extended period of time because, depending on
the number of years you hold the investment, the continuing distribution and
service fees on C shares eventually would exceed the initial sales load plus the
continuing service fee on A shares during the life of your investment. However,
because initial sales loads are deducted at the time of purchase, not all of the
purchase payment for A shares is invested initially.
You might determine that it would be more advantageous to purchase C shares
in order to have all of your purchase payment invested initially. However, your
investment would remain subject to higher continuing distribution and service
fees and, if you hold your shares for less than one year, be subject to a CDSL.
For example, based on current fees and expenses for the Trust and the maximum
sales load on A shares, you would have to hold A shares approximately six years
before the accumulated distribution and service fees on the C shares would
exceed the initial sales load plus the accumulated service fees on the A shares.
Prospectus 11
<PAGE> 14
WHAT CLASS A SHARES WILL COST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SALES LOAD ON
A SHARES WILL VARY
DEPENDING ON THE
AMOUNT YOU INVEST.
A shares are sold each day on which the Exchange is open. A shares are sold
at their next determined net asset value plus a sales load as described below.
<TABLE>
<CAPTION>
SALES LOAD AS A
PERCENTAGE OF
----------------------------
NET AMOUNT DEALER CONCESSION
AMOUNT OF OFFERING INVESTED AS A PERCENTAGE OF
PURCHASE PRICE (NET ASSET VALUE) OFFERING PRICE(1)
--------- -------- ----------------- ------------------
<S> <C> <C> <C>
Less than $25,000.............. 4.75% 4.99% 4.25%
$25,000 to $49,999............. 4.25% 4.44% 3.75%
$50,000 to $99,999............. 3.75% 3.90% 3.25%
$100,000 to $249,999........... 3.25% 3.36% 2.75%
$250,000 to $499,999........... 2.50% 2.56% 2.00%
$500,000 to $999,999........... 1.50% 1.52% 1.25%
$1,000,000 and over............ 0.00% 0.00% 0.00%(2)
</TABLE>
- ---------------
(1) During certain periods, the Distributor may pay 100% of the sales load to
participating dealers. Otherwise, it will pay the dealer concession shown
above.
(2) The Manager may pay from its own resources up to 1.00% of the purchase
amount to the Distributor for purchases of $1,000,000 or more.
A shares may be sold at net asset value without any sales load to: the
Manager and the Subadviser; current and retired officers and Trustees of the
Trust; directors, officers, and full-time employees of the Manager, Subadviser
of any Heritage Mutual Fund, the Distributor and their affiliates; registered
representatives of broker-dealers that are parties to dealer agreements with the
Distributor (or financial institutions that have arrangements with such
broker-dealers); directors, officers and full-time employees of banks that are
parties to agency agreements with the Distributor; and all such persons'
immediate relatives and their beneficial accounts. In addition, the American
Psychiatric Association has entered into an agreement with the Distributor that
allows its members to purchase A shares at a sales load equal to two-thirds of
the percentages in the above table. The dealer concession also will be adjusted
in a like manner. A shares also may be purchased without sales loads by
investors who participate in certain broker-dealer wrap fee investment programs.
HERITAGE NET ASSET VALUE ("NAV") TRANSFER PROGRAM
- -----------------------------------------------------------
YOU MAY QUALIFY FOR A
PURCHASE WITH NO
SALES LOAD UNDER THE
HERITAGE NAV
TRANSFER PROGRAM.
A shares of the Trust may be sold at net asset value without any sales load
under the Manager's NAV Transfer Program. To qualify for the NAV Transfer
Program, you must provide adequate proof that within 90 days prior to the
purchase of a Heritage Mutual Fund you redeemed shares from a load or no-load
mutual fund other than a Heritage Mutual Fund or any money market fund. To
provide adequate proof you must complete a qualification form and provide a
statement showing the value liquidated from the other mutual fund.
COMBINED PURCHASE PRIVILEGE (RIGHT OF ACCUMULATION)
- -----------------------------------------------------------
YOU MAY QUALIFY FOR A
REDUCED SALES LOAD
BY COMBINING
PURCHASES.
You may qualify for the sales load reductions indicated in the above sales
load schedule by combining purchases of A shares into a single "purchase" if the
resulting "purchase" totals at least $25,000. For additional information
regarding the Combined Purchase Privilege, see the Account Application or
"Investing in the Trust" in the SAI.
Prospectus 12
<PAGE> 15
STATEMENT OF INTENTION
- ------------------------
A STATEMENT OF
INTENTION ALLOWS YOU
TO REDUCE THE SALES
LOAD ON COMBINED
PURCHASES OF $25,000
OR MORE OVER ANY
13-MONTH PERIOD.
You also may obtain the reduced sales loads shown in the above sales load
schedule by means of a written Statement of Intention, which expresses your
intention to invest not less than $25,000 within a period of 13 months in A
shares of the Trust or A shares of any other Heritage Mutual Fund subject to a
sales load ("Statement of Intention"). If you qualify for the Combined Purchase
Privilege, you may purchase A shares of the Heritage Mutual Funds under a single
Statement of Intention. In addition, if you own Class A shares of any other
Heritage Mutual Fund subject to a sales load, you may include those shares in
computing the amount necessary to qualify for a sales load reduction. The
Statement of Intention is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Statement of
Intention is 5% of such amount. If you would like to enter into a Statement of
Intention in conjunction with your initial investment in A shares of the Trust,
please complete the appropriate portion of the Account Application found in this
Prospectus. Current Trust shareholders desiring to do so can obtain a Statement
of Intention by contacting the Manager or the Distributor at the address or
telephone number listed on the cover of this Prospectus, or from their
Representative.
For more information on "What Class A Shares Will Cost" and a further
explanation of instances in which the sales load will be waived or reduced, see
"Investing in the Trust" in the SAI.
WHAT CLASS C SHARES WILL COST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CDSL, IF
APPLICABLE, IS BASED
ON THE LOWER OF
PURCHASE PRICE OR
REDEMPTION PRICE.
A CDSL of 1% is imposed on C shares if, less than one year from the date of
purchase, you redeem an amount that causes the current value of your account to
fall below the total dollar amount of C shares purchased subject to the CDSL.
The CDSL will not be imposed on the redemption of C shares acquired as dividends
or other distributions, or on any increase in the net asset value of the
redeemed C shares above the original purchase price. Thus, the CDSL will be
imposed on the lower of net asset value or purchase price.
Redemptions will be processed in a manner intended to minimize the amount
of redemption that will be subject to the CDSL. When calculating the CDSL, it
will be assumed that the redemption is made first of C shares acquired as
dividends, second of C shares that have been held for one year or longer, and
finally of C shares held for less than one year on a first-in first-out basis.
WAIVER OF THE CONTINGENT DEFERRED SALES LOAD. The CDSL currently is waived
for: (1) any partial or complete redemption in connection with a distribution
without penalty under Section 72(t) of the Internal Revenue Code of 1986, as
amended (the "Code"), from a qualified retirement plan, including a Keogh Plan
or IRA upon attaining age 70 1/2; (2) any redemption resulting from a tax-free
return of an excess contribution to a qualified employer retirement plan or an
IRA; (3) any partial or complete redemption following death or disability (as
defined in Section 72(m)(7) of the Code) of a shareholder (including one who
owns the shares as joint tenant with his spouse) from an account in which the
deceased or disabled is named, provided the redemption is requested within one
year of the death or initial determination of disability; (4) certain periodic
redemptions under the Systematic Withdrawal Plan from an account meeting certain
minimum balance requirements, in amounts representing certain maximums
established from time to time by the Distributor (currently a maximum of 12%
annually of the account balance at the
Prospectus 13
<PAGE> 16
beginning of the Systematic Withdrawal Plan); or (5) involuntary redemptions by
the Trust of C shares in shareholder accounts that do not comply with the
minimum balance requirements. The Distributor may require proof of documentation
prior to waiver of the CDSL described in sections (1) through (4) above,
including distribution letters, certification by plan administrators, applicable
tax forms or death or physicians certificates.
For more information about C shares, see "Reinstatement Privilege" and
"Exchange Privilege."
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THERE ARE SEVERAL WAYS
FOR YOU TO SELL
YOUR SHARES.
Redemptions of Trust shares can be made by:
CONTACTING YOUR REPRESENTATIVE. Your Representative will transmit an order
to the Trust for redemption and may charge you a fee for this service.
TELEPHONE REQUEST. You may redeem shares by placing a telephone request to
the Trust (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. 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 redemption proceeds wired to the bank account specified on
the Account Application. Redemption proceeds 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 $50,000, you may request that a check be
mailed to your address of record, providing that such address has not been
changed in the past 30 days. For your protection, the proceeds of all other
redemptions will be transferred to the bank account specified on the Account
Application.
WRITTEN REQUEST. Trust shares may be redeemed by sending a written request
for redemption to "Heritage Income-Growth Trust, Heritage Asset Management,
Inc., P.O. Box 33022, St. Petersburg, Florida 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 30 days, redemptions greater than
$50,000, 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 Trust 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 Trust
are redeemed to provide the amount of the periodic withdrawal payment. The
purchase of A shares while participating in the Systematic Withdrawal Plan
ordinarily will be disadvantageous to you because you will be paying a sales
load on the purchase of those shares at the same time that you are redeeming A
shares upon which you may have already paid a sales load. Therefore, the Trust
will not knowingly permit the purchase of A shares through the Systematic
Investment Plan if you are at the same time
Prospectus 14
<PAGE> 17
making systematic withdrawals of A shares. The Manager reserves the right to
cancel systematic withdrawals if insufficient shares are available for two or
more consecutive months.
YOU WILL NOT BE CHARGED
A SALES LOAD ON
A SHARES REDEEMED AND
REINVESTED WITHIN
90 DAYS OF REDEMPTION.
YOU MUST NOTIFY THE
TRUST WHEN YOU EXERCISE
THIS PRIVILEGE.
REINSTATEMENT PRIVILEGE. A shareholder who has redeemed any or all of his
A shares of the Trust may reinvest all or any portion of the redemption proceeds
in A shares at net asset value without any sales load, provided that such
reinvestment is made within 90 calendar days after the redemption date. A
shareholder who has redeemed any or all of his C shares of the Trust and has
paid a CDSL on those shares or has held those shares long enough so that the
CDSL no longer applies, may reinvest all or any portion of the redemption
proceeds in C shares at net asset value without paying a CDSL on future
redemptions of those shares, provided that such reinvestment is made within 90
calendar days after the redemption date. A reinstatement pursuant to this
privilege will not cancel the redemption transaction; therefore, (1) any gain
realized on the transaction will be recognized for Federal income tax purposes,
while (2) any loss realized will not be recognized for those purposes to the
extent that the redemption proceeds are reinvested in shares of the Trust. The
reinstatement privilege may be utilized by a shareholder only once, irrespective
of the number of shares redeemed, except that the privilege may be utilized
without limitation in connection with transactions whose sole purpose is to
transfer a shareholder's interest in the Trust to his defined contribution plan,
IRA or SEP. You must notify the Trust if you intend to exercise the
reinstatement privilege.
Contact the Manager or your Representative for further information or see
"Redeeming Shares" in the SAI.
RECEIVING PAYMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SALES PRICE
GENERALLY IS THE NEXT
NAV COMPUTED AFTER
THE RECEIPT OF YOUR
REDEMPTION REQUEST.
If a request for redemption is received by the Trust in good order (as
described below) before the close of regular trading on the Exchange, the shares
will be redeemed at the net asset value per share determined at the close of
regular trading on the Exchange on that day, less any applicable CDSL for C
shares. Requests for redemption received by the Trust after the close of regular
trading on the Exchange will be executed at the net asset value determined at
the close of regular trading on the Exchange on the next trading day, less any
applicable CDSL for C shares.
Payment for shares redeemed by the Trust normally will be made on the
business day after the redemption was made. If the shares to be redeemed
recently have been purchased by personal check, the Trust may delay mailing a
redemption check until the purchase check has cleared, which may take up to five
business 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 Trust
shares.
A redemption request will be considered to be received in "good order" if:
- the number or amount of shares and the class of shares to be redeemed and
shareholder account number have been indicated;
- any written request is signed by the shareholder and by all co-owners of
the account with exactly the same name or names used in establishing the
account;
- any written request is accompanied by certificates representing the
shares that have been issued, if any, and the certificates have been
endorsed for transfer exactly as the name or names appear on the
certificates or an accompanying stock power has been attached; and
Prospectus 15
<PAGE> 18
- the signatures on any written redemption request of $50,000 or more and
on any certificates for shares (or an accompanying stock power) have been
guaranteed by a national bank, a state bank that is insured by the
Federal Deposit Insurance Corporation, a trust company, or by any member
firm of the New York, American, Boston, Chicago, Pacific or Philadelphia
Stock Exchanges. Signature guarantees also will be accepted from savings
banks and certain other financial institutions that are deemed acceptable
by the Manager, as transfer agent, under its current signature guarantee
program.
The Trust has the right to suspend redemption or postpone payment at times
when the Exchange is closed (other than customary weekend or 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 less any applicable CDSL, 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
SHARES OF ONE
HERITAGE MUTUAL
FUND FOR SHARES OF
THE SAME CLASS OF
ANY OTHER HERITAGE
MUTUAL FUND.
If you have held A shares or C shares for at least 30 days, you may
exchange some or all of your shares 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.
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 five
business days following the purchase date. Exchanges of shares of Heritage
Mutual Funds generally will result in the realization of a taxable gain or loss
for Federal income tax purposes.
For purposes of calculating the commencement of the CDSL holding period for
shares exchanged from the Trust to the C shares of any other Heritage Mutual
Fund, except Heritage Cash Trust--Money Market Fund ("Money Market Fund"), the
original purchase date of those shares exchanged will be used. Any time period
that the exchanged shares were held in the Money Market Fund will not be
included in this calculation. As a result, if you redeem C shares of the Money
Market Fund before the expiration of the CDSL holding period, you will be
subject to the applicable CDSL.
If you exchange A shares or C shares for corresponding shares of the Money
Market Fund, you may, at any time thereafter, exchange such shares for the
corresponding class of shares of any other Heritage Mutual Fund. If you exchange
shares of the Money Market Fund acquired by purchase (rather than exchange) for
shares of another Heritage Mutual Fund, you will be subject to the sales load,
if any, that would be applicable to a purchase of that Heritage Mutual Fund.
A shares of the Trust may be exchanged for A shares of the Heritage Cash
Trust--Municipal Money Market Fund, which is the only class of shares offered by
that fund. If you exchange shares of the Heritage Cash Trust--Municipal Money
Market Fund acquired by purchase (rather than exchange) for shares of another
Heritage Mutual Fund, you also will be subject to the sales load, if any, that
would
Prospectus 16
<PAGE> 19
be applicable to a purchase of that Heritage Mutual Fund. C shares are not
eligible for exchange into the Heritage Cash Trust--Municipal Money Market Fund.
Shares acquired pursuant to a telephone request for exchange will be held
under the same account registration as the shares redeemed through such an
exchange. For a discussion of limitation of liability of certain entities, see
"How to Redeem Shares -- Telephone Request."
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. Due to the
volume of calls or other unusual circumstances, telephone exchanges may be
difficult to implement during certain time periods.
Each Heritage Mutual Fund reserves the right to reject any order to acquire
its 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.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
HERITAGE ASSET
MANAGEMENT, INC.
SERVES AS MANAGER FOR
THE TRUST, SUBJECT TO
THE DIRECTION OF THE
BOARD OF TRUSTEES.
The business and affairs of the Trust are managed by or under the direction
of its Board of Trustees. The Trustees are responsible for managing the Trust's
business affairs and for exercising all the Trust's powers except those reserved
to the shareholders. A Trustee may be removed by the other Trustees or by a
two-thirds vote of the outstanding Trust shares.
INVESTMENT ADVISER, FUND ACCOUNTANT, ADMINISTRATOR AND TRANSFER AGENT
Heritage Asset Management, Inc. is the Trust's investment adviser, fund
accountant, administrator and transfer agent. The Manager is responsible for
reviewing and establishing investment policies for the Trust as well as
administering the Trust's 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 Trust and other Heritage Mutual Funds with net
assets totalling approximately $2.6 billion as of December 31, 1996. The
Manager's annual investment advisory and administration fee paid monthly by the
Trust to the Manager is 0.75% of the first $100 million of the Trust's average
daily net assets and 0.60% on any assets over $100 million of the Trust's
average daily net assets. The Trust pays the Manager directly for fund
accounting and transfer agent services.
The Manager voluntarily waives fees or reimburses expenses as explained
under "Total Trust Expenses" and reserves the right to discontinue any voluntary
waiver of its fees or reimbursements to the Trust in the future. The Manager
also may recover advisory fees waived in the previous two years.
Prospectus 17
<PAGE> 20
SUBADVISER
THE MANAGER EMPLOYS
A SUBADVISER FOR
PROVIDING INVESTMENT
ADVICE AND PORTFOLIO
MANAGEMENT SERVICES
TO THE TRUST.
The Manager has entered into an agreement with Eagle Asset Management, Inc.
to provide investment advice and portfolio management services, including
placement of brokerage orders, to the Trust. For these services, the Manager
pays the Subadviser a fee equal to 50% of the fees payable to the Manager by the
Trust without regard to any reduction in fees actually paid to the Manager as a
result of voluntary fee waivers by the Manager. The Subadviser is a wholly owned
subsidiary of Raymond James Financial, Inc. The Subadviser acts as adviser to
the Heritage Series Trust-Eagle International Equity Portfolio. The Subadviser
also acts as subadviser to the Heritage Series Trust-Small Cap Stock Fund, the
Heritage Series Trust-Growth Equity Fund, the Heritage Series Trust-Value Equity
Fund, and the Heritage Capital Appreciation Trust (although no assets currently
are allocated to the Subadviser for the latter two funds), and advises private
investment accounts with net assets totalling approximately $2.7 billion as of
December 31, 1996.
BROKERAGE PRACTICES
The Subadviser may use the Distributor or other affiliated broker-dealers
as broker for agency transactions in listed and over-the-counter securities at
commission rates and under circumstances consistent with the policy of best
price and execution. See "Brokerage Practices" in the SAI.
PORTFOLIO MANAGEMENT
Louis Kirschbaum and David M. Blount serve as co-portfolio managers for the
Trust. Mr. Kirschbaum and Mr. Blount are responsible for the day-to-day
management of the Trust's investment portfolio, subject to the general oversight
of the Manager and the Board of Trustees. Mr. Kirschbaum has been a Senior Vice
President and a portfolio manager of the Subadviser since July 1986 and
portfolio manager of the Trust since February 1990. David M. Blount has been a
Vice President of the Subadviser since September 1993 and a portfolio manager of
the Trust since 1996. Mr. Blount was a Senior Associate Investment Analyst in
the high yield bond research and portfolio management area of Allstate Life
Insurance Company from 1991 to 1993. Mr. Blount is a Chartered Financial Analyst
and Certified Public Accountant.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEVERAL OPTIONS EXIST
FOR RECEIVING DIVIDENDS
AND OTHER
DISTRIBUTIONS.
Dividends from net investment income are declared and paid quarterly. The
Trust distributes to shareholders substantially all net realized capital gains
on portfolio securities after the end of the year in which the gains are
realized. Dividends and other distributions on shares held in retirement plans
and by shareholders maintaining a Systematic Withdrawal Plan generally are
declared and paid in additional Trust shares. Other shareholders may elect to:
- receive both dividends and other distributions in additional Trust
shares;
- receive dividends in cash and other distributions in additional Trust
shares;
- receive both dividends and other distributions in cash; or
- receive both dividends and other distributions in cash for investment
in another Heritage Mutual Fund.
Prospectus 18
<PAGE> 21
If you select none of these options, the first option will apply. In any
case when you receive a dividend or other distribution in additional Trust
shares, your account will be credited with shares valued at their net asset
value of the shares determined at the close of regular trading on the Exchange
on the day following the record date for the dividend or other distribution.
Distribution options can be changed at any time by notifying the Manager in
writing.
Dividends paid by the Trust 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,
except that dividends on C shares may be lower than dividends on A shares
primarily as a result of the higher distribution fee and class-specific expenses
applicable to C shares.
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE TRUST PAYS SERVICE
FEES AND DISTRIBUTION
FEES TO THE DISTRIBUTOR.
As compensation for services rendered and expenses borne by the Distributor
in connection with the distribution of A shares and in connection with personal
services rendered to Class A shareholders and the maintenance of Class A
accounts, the Trust may pay the Distributor distribution and service fees of up
to 0.25% of the Trust's average daily net assets attributable to A shares. This
fee is computed daily and paid monthly.
As compensation for services rendered and expenses borne by the Distributor
in connection with the distribution of C shares and in connection with personal
services rendered to Class C shareholders and the maintenance of Class C
accounts, the Trust pays the Distributor a service fee of 0.25% and a
distribution fee of 0.75% of the Trust's average daily net assets attributable
to C shares. This fee is computed daily and paid monthly.
The above-referenced fees paid to the Distributor are made under
Distribution Plans 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 shares and C shares, including compensation
(in addition to the sales load) 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,
statements of additional information 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 Trust.
If either Plan is terminated, the obligation of the Trust to make payments
to the Distributor pursuant to the Plan will cease and the Trust will not be
required to make any payment past the date the Plan terminates.
Prospectus 19
<PAGE> 22
TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE TRUST IS NOT
EXPECTED TO HAVE ANY
FEDERAL TAX LIABILITY.
HOWEVER, YOUR TAX
OBLIGATIONS ARE
DETERMINED BY YOUR
PARTICULAR TAX
CIRCUMSTANCES.
The Trust intends to continue to qualify for treatment as a regulated
investment company under the Code. By doing so, the Trust (but not its
shareholders) will be relieved of Federal income tax on that part of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign currency
transactions) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders.
Dividends from the Trust's investment company taxable income are taxable to
shareholders as ordinary income, to the extent of the Trust's earnings and
profits, whether received in cash or in additional Trust shares. Distributions
of the Trust's net capital gain, when designated as such, are taxable to
shareholders as long-term capital gains, whether received in cash or in
additional Trust shares and regardless of the length of time the shares have
been held. No substantial portion of the dividends paid by the Trust is expected
to be eligible for the dividends-received deduction allowed to corporations.
WHEN YOU SELL OR
EXCHANGE SHARES IT
GENERALLY IS CONSIDERED
A TAXABLE EVENT TO YOU.
Dividends and other distributions declared by the Trust in November or
December of any year and payable to shareholders of record on a date in one of
those months will be deemed to have been paid by the Trust and received by the
shareholders on December 31 of that year if they are paid by the Trust during
the following January. Shareholders receive Federal income tax information
regarding dividends and other distributions after the end of each year. The
Trust is required to withhold 31% of all dividends, capital gain distributions,
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the Trust with a correct taxpayer identification
number. Withholding at that rate also is required for from dividends and capital
gain distributions payable to such shareholders who otherwise are subject to
backup withholding. When you sell or exchange shares it generally is considered
a taxable event to you.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Trust and its shareholders. See the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are therefore urged to
consult your tax adviser.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU MAY VOTE ON
MATTERS SUBMITTED FOR
YOUR APPROVAL. EACH
SHARE YOU OWN ENTITLES
YOU TO ONE VOTE.
Each share of the Trust gives the shareholder one vote in matters submitted
to shareholders for a vote. A shares and C shares of the Trust 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's operation and for the election
of Trustees under certain circumstances. Trustees may be removed by the other
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.
Prospectus 20
<PAGE> 23
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than that 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.
Prospectus 21
<PAGE> 24
This page is intentionally left blank.
<PAGE> 25
<TABLE>
<S> <C>
(LOGO) HERITAGE FAMILY OF FUNDS HERITAGE FAMILY OF FUNDS
Account Application
P.O. Box 33022, St. Petersburg, FL 33733
[ ] New Account [ ] Update to Existing Account # ------------------
(Indicate fund in Fund Selection section below)
</TABLE>
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION
<TABLE>
<S> <C> <C>
[ ] Individual [ ] Joint Tenant with Right of Survivorship [ ] Corporation [ ] Gift to Minor
[ ] Trust [ ] Foundation or Exempt Organization [ ] Association, Partnership or other organization
- ----------------------------------------------------------- ---------------------------------------------
Name of account owner Social Security or Taxpayer ID #
- ----------------------------------------------------------- ---------------------------------------------
Joint owner/Trustee/Custodian Social Security or Taxpayer ID #
- ----------------------------------------------------------- ---------------------------------------------
Joint owner/Trustee Date of birth of first named owner
- ----------------------------------------------------------- ---------------------------------------------
Street address Daytime phone number
- ----------------------------------------------------------- ---------------------------------------------
Street address Are you a U.S. citizen? [ ] Yes [ ] No
- ----------------------------------------------------------- If no, country of residence
City, State and ZIP -----------------
</TABLE>
FUND SELECTION ($1,000 minimum initial investment unless participating in an
automatic investment plan)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Pay Pay capital
Fund name Share class Investment amount dividends in gains in:
A C Shares Cash Shares Cash
Heritage Series Trust:
[ ] Small Cap Stock Fund [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Growth Equity Fund [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Value Equity Fund [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Eagle International Equity
Portfolio [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Heritage Capital Appreciation
Trust [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Heritage Income-Growth Trust [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
Heritage Income Trust:
[ ] High Yield Bond Fund [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Intermediate Government Fund [ ] [ ] $ ---------------- [ ] [ ] [ ] [ ]
Heritage Cash Trust:
[ ] Money Market Fund [ ] $ ---------------- [ ] [ ] [ ] [ ]
[ ] Municipal Money Market Fund [ ] $ ---------------- [ ] [ ] [ ] [ ]
If none checked, all
reinvested in shares.
TOTAL INVESTMENT $ ----------------
</TABLE>
<PAGE> 26
SIGNATURES AND TAXPAYER IDENTIFICATION CERTIFICATION
Each person signing on behalf of an entity represents that his/her actions are
authorized. I have received and read a current prospectus for each fund in which
I am investing and understand that its terms are incorporated by reference into
this application. I understand that certain redemptions may be subject to a
contingent deferred sales load. I agree that the Fund, Manager, Distributor and
their Trustees, directors, officers and employees will not be held liable for
any loss, liability, damage, or expense for relying upon this application or any
instructions including telephone instructions they reasonably believe are
authentic. If a taxpayer identification number is not provided and certified,
all dividends paid will be subject to 31% Federal backup withholding.
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me).
2. I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
You must cross out item 2 above if you have been notified by the IRS that you
are currently subject to backup withholding because of under reporting interest
or dividends on your tax return.
<TABLE>
<S> <C>
X X
--------------------------------------------- ---------------------------------------------
Signature Date Signature Date
</TABLE>
REDUCED SALES CHARGES
STATEMENT OF INTENT
If you agree in advance to invest at least $25,000 in Heritage Mutual Funds
other than Heritage Cash Trust within 13 months, you will pay a reduced sales
charge on those investments. Investments made up to 90 days before adopting this
agreement are eligible for this discount. All prior investments can be applied
toward meeting the investment requirement.
[ ] I agree to invest at least the amount selected below over a 13-month period
beginning / / . I understand that an additional sales charge must
be paid if I do not complete this Statement of Intent.
[ ] $25,000 [ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000
[ ] $1,000,000
RIGHT OF ACCUMULATION
If you, your spouse, or your minor children own shares in other Heritage Mutual
Funds, you may qualify for a reduced sales charge. Class A shares of Heritage
Cash Trust are not eligible unless purchased by exchange from another Heritage
Mutual Fund. These shares can be credited to a Statement of Intent.
[ ] I qualify for the Right of Accumulation. Please link the following Heritage
accounts.
<TABLE>
<S> <C>
- ------------------------------------------ ----------------------------------------------
Fund/Account Number Fund/Account Number
- ------------------------------------------ ----------------------------------------------
Fund/Account Number Fund/Account Number
</TABLE>
TELEPHONE TRANSACTIONS
You may redeem shares by calling Heritage and requesting that funds be sent to
your address of record or the bank account listed in the Bank Account
Information section below. We will withdraw up to $50,000 from your account and
mail it to your address of record provided that address has not been changed in
the last 30 days.
You may also exchange between the same class shares of like-registered accounts
in any of the Heritage Mutual Funds by calling Heritage and requesting this
service. Please see the prospectus for certain requirements for exchanging
shares between funds.
If you DO NOT want to be able to process redemptions and exchanges via telephone
order, please check here: [ ]
<PAGE> 27
DOLLAR COST AVERAGING PLANS
AUTOMATIC INVESTING
You can instruct us to transfer funds from a specified bank checking account to
your Heritage Fund account. This transfer will be effected by either an
electronic transfer or by a paper draft. Complete the Bank Account Information
section below and attach a voided check to this application.
<TABLE>
<CAPTION>
Transfer Date Frequency (check one)
5th 15th Month- Quar- Semi- Annu-
Fund Amount ly terly Annually ally
<S> <C> <C> <C> <C> <C> <C> <C>
$ [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------- ------------------
$ [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------- ------------------
$ [ ] [ ] [ ] [ ] [ ] [ ]
- ------------------------------- ------------------
Choose one or both
</TABLE>
<TABLE>
<S> <C> <C>
I authorize Heritage to draw on my bank account, by check or electronic transfer,
ATTACH for investment in a Heritage fund. Heritage and my bank are not liable for any loss
VOIDED resulting from delays or dishonored draws. This program can be revoked by Heritage
CHECK without prior notice if any draw is dishonored. I can discontinue this program at
HERE any time.
X X
---------------------------------------- ----------------------------------------
Signature on checking account Signature on checking account
TO THE BANK NAMED BELOW:
</TABLE>
In consideration of your compliance with the request and authorization of the
depositor named above, Heritage Asset Management, Inc. agrees (1) To indemnify
and hold you harmless from any loss you may suffer as a consequence of your
actions resulting from or in connection with the execution and issuance of any
check, draft, or order, whether or not genuine, purporting to be executed and
received by you in the regular course of business under pre-authorized draft
arrangement of the Heritage funds, including any costs or expenses reasonably
incurred in connection therewith; (2) That in the event any such check, draft,
or order shall be dishonored, whether with or without cause, and whether
intentionally or inadvertently, to indemnify you and hold harmless from any loss
resulting from such dishonor including your costs and reasonable expenses,
except any losses due to your payment of any draw against insufficient funds;
(3) To defend at our cost and expense any action which might be brought by any
depositor or any other persons because of your actions taken pursuant to the
foregoing requests, or in any manner arising by reason of your participation in
the foregoing plan; and (4) That your participation in the plan or that of the
depositor may be terminated by notice from either party to the other.
AUTOMATIC EXCHANGE
You can instruct us to periodically exchange funds from one Heritage Mutual Fund
to a like-registered account in the same class of another Heritage Mutual Fund.
<TABLE>
<S> <C> <C> <C> <C>
Frequency (choose one): [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
Day of month (choose
one): [ ] 1st [ ] 5th [ ] 10th [ ] 20th
Fund to exchange from Fund to exchange to Amount
$
- ------------------------------------- ------------------------------------- ---------------
$
- ------------------------------------- ------------------------------------- ---------------
$
- ------------------------------------- ------------------------------------- ---------------
</TABLE>
DIRECTED DIVIDENDS
You can direct the dividend payments from one Heritage Mutual Fund into a
like-registered account in the same class of another Heritage Mutual Fund. In
the Fund Selection section above, check the box for cash dividends.
<TABLE>
<S> <C>
From fund To fund
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
</TABLE>
<PAGE> 28
SYSTEMATIC WITHDRAWAL PLAN (SWP)
You can receive monthly, quarterly, semiannually, or annually checks from your
account. The checks can be sent to you at your address of record, to an account
at a bank or other financial institution, or to another person you designate.
You may send checks to more than one place. If you begin a SWP in Class C shares
of a fund, you may redeem up to 12% annually of your current account value
without incurring a contingent deferred sales load.
<TABLE>
<S> <C> <C>
- ----------------------------------------------- Frequency (choose one): [ ] Monthly
Fund for Withdrawal [ ] Quarterly
[ ] Semiannually
[ ] Annually
</TABLE>
Day of month (choose one): [ ] 1st [ ] 5th [ ] 10th [ ] 20th
<TABLE>
<S> <C> <C>
Send payment to: Amount
[ ] My address of record. $ ---------------------------------
Payee name
[ ] The bank account listed in
the Bank Account Information $ ---------------------------------
section below. Payee address
[ ] The payee listed at the
right. (If you have more
than one payee, please $ ---------------------------------
attach a separate sheet City, State and ZIP
indicating the amount to be
sent to each.)
---------------------------------
Payee account number (if
applicable)
</TABLE>
BANK ACCOUNT INFORMATION
Provide bank checking account information if you are participating in an
Automatic Investment or Systematic Withdrawal Plan or if you wish for redemption
proceeds to be sent directly to your bank.
<TABLE>
<S> <C>
- ------------------------------------------------------- -------------------------------------------------------
Bank name Bank account number
- ------------------------------------------------------- -------------------------------------------------------
Address Bank routing (ABA) number (from your bank)
- -------------------------------------------------------
City, State and ZIP
</TABLE>
DEALER INFORMATION
We hereby authorize the Distributor to act as our agent in connection with
transactions under this authorization form and agree to notify the Distributor
of any purchases made under a Letter of Intent or Right of Accumulation. We
guarantee the signatures on this application and the legal capacity of the
signers.
If a Systematic Withdrawal Plan is being established, we believe that the amount
to be withdrawn is reasonable in light of the investor's circumstances and we
recommend establishment of the account.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------- ------------------ ----------------------------
Representative's name Branch number Representative's number
- ------------------------------------------------------- -------------------------------------------------------
Dealer name Branch office location
- ------------------------------------------------------- -------------------------------------------------------
Main office address Branch phone number
X
- ------------------------------------------------------- -------------------------------------------------------
City, State and ZIP Authorized representative's signature
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HERITAGE INCOME-GROWTH TRUST
This Statement of Additional Information ("SAI") dated February 1,
1997, should be read with the Prospectus of the Heritage Income-Growth Trust
dated February 1, 1997. 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..........................................................1
INVESTMENT INFORMATION.......................................................1
Investment Objective................................................1
Investment Policies.................................................1
Industry Classifications...........................................12
INVESTMENT LIMITATIONS......................................................12
NET ASSET VALUE.............................................................15
PERFORMANCE INFORMATION.....................................................16
INVESTING IN THE TRUST......................................................18
Systematic Investment Options......................................18
Retirement Plans...................................................18
Alternative Purchase Plans.........................................19
Class A Combined Purchase Privilege (Right of
Accumulation)....................................................20
Class A Statement of Intention.....................................21
REDEEMING SHARES............................................................21
Systematic Withdrawal Plan.........................................22
Telephone Transactions.............................................23
Redemptions in Kind................................................23
Receiving Payment..................................................23
EXCHANGE PRIVILEGE..........................................................24
TAXES.......................................................................25
TRUST INFORMATION...........................................................28
Management of the Trust............................................28
Five Percent Shareholders . .31
Investment Adviser and Administrator; Subadviser...................32
Brokerage Practices................................................33
Distribution of Shares.............................................35
Administration of the Trust........................................37
Potential Liability................................................38
APPENDIX...................................................................A-1
REPORT OF THE INDEPENDENT ACCOUNTANTS .....................................A-4
FINANCIAL STATEMENTS.......................................................A-5
<PAGE>
GENERAL INFORMATION
- -------------------
Heritage Income-Growth Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated July 25, 1986.
The Trust offers two classes of shares, Class A shares sold subject to a
front-end sales load ("A shares") and Class C shares sold subject to a
contingent deferred sales load ("CDSL") ("C shares").
INVESTMENT INFORMATION
- ----------------------
Investment Objective
--------------------
The Trust's investment objective, as described in the Prospectus, is
long-term total return by seeking, with approximately equal emphasis, current
income and capital appreciation. This objective cannot be changed without
shareholder approval.
Investment Policies
-------------------
CONVERTIBLE SECURITIES. The Trust may invest in convertible securities.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed-income
security. The Trust's investment subadviser, Eagle Asset Management, Inc.
("Eagle" or the "Subadviser"), will decide whether to invest in convertible
securities based upon a fundamental analysis of the long-term attractiveness of
the issuer and the underlying common stock, the evaluation of the relative
attractiveness of the current price of the underlying common stock, and the
judgment of the value of the convertible security relative to the common stock
at current prices.
COVERED CALL OPTIONS. The Trust may write covered call options on
securities to increase income in the form of premiums received from the
purchasers of the options. Because it can be expected that a call option will be
exercised if the market value of the underlying security increases to a level
greater than the exercise price, the Trust will write covered call options on
securities generally when the Subadviser believes that the premium received by
the Trust, plus anticipated appreciation in the market price of the underlying
security up to the exercise price of the option, will be greater than the total
appreciation in the price of the security.
The strategy also may be used to provide limited protection against a
decrease in the market price of the security in an amount equal to the premium
received for writing the call option, less any transaction costs. Thus, if the
market price of the underlying security held by the Trust declines, the amount
of such decline will be offset wholly or in part by the amount of the premium
<PAGE>
received by the Trust. If, however, there is an increase in the market price of
the underlying security and the option is exercised, the Trust will be obligated
to sell the security at less than its market value. The Trust would lose the
ability to participate in an increase in the value of such securities above the
exercise price of the call option. The Trust also gives up the ability to sell
the portfolio securities used to cover the call option while the call option is
outstanding.
EURODOLLAR CERTIFICATES. The Trust may purchase certificates of deposit
issued by foreign branches of domestic and foreign banks. 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 or 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 subject necessarily to the same or
similar regulatory requirements, loan limitations, and accounting, auditing and
recordkeeping requirements as are domestic banks or domestic branches of foreign
banks. In addition, less information may be publicly available about a foreign
branch of a domestic bank or a foreign bank than a domestic bank.
FOREIGN SECURITIES. The Trust may invest in foreign securities and
American, European, Global and International Depository Receipts ("ADRs,"
"EDRs," "GDRs" and "IDRs," respectively); however, such investments may not
exceed 20% of the Trust's investment portfolio. Investments in these types of
securities involve, among other factors, the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the Trust,
political or financial instability or diplomatic and other developments that
could affect such investments. Further, the economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States.
ADRs, EDRs, GDRs and IDRs are receipts that represent interests in, or
are convertible into, securities of foreign issuers. ADRs are receipts typically
issued by a U.S. bank or trust company evidencing ownership of the underlying
securities of foreign issuers and other forms of depository receipts for
securities of foreign issuers. EDRs and IDRs are receipts typically issued by a
European bank or trust company evidencing
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ownership of the underlying foreign securities. GDRs are receipts issued
globally for trading in non-U.S. securities markets and evidence a similar
ownership arrangement.
It is anticipated that in most cases the best available market for
foreign securities will be on exchanges or in over-the-counter markets located
outside the United States. Many foreign stock markets, while growing in volume
and sophistication, generally are not as developed as those in the United
States, and securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. In addition, foreign brokerage commissions generally
are higher than commissions on securities traded in the United States. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers and listed companies than in the United States.
It is the Trust's policy not to invest in foreign securities from
countries in which currency or trading restrictions are in force or where, in
the judgment of the Subadviser, such restrictions likely are to be imposed. It
should be understood, however, that certain currencies may become blocked (I.E.,
not freely available for transfer from a foreign country), resulting in the
possible inability of the Trust to convert proceeds realized upon the sale of
portfolio securities of the affected foreign companies into U.S. currency.
Because investments in foreign companies usually will involve
currencies of foreign countries, and because the Trust temporarily may hold
funds in bank deposits in foreign currencies during the completion of investment
programs, the value of Trust assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Trust may incur costs in connection with
conversions between various currencies. The Trust will conduct its foreign
currency exchange transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign currency exchange market. In addition, in order to
protect against uncertainty in the level of future exchange rates, the Trust may
enter into contracts to purchase or sell foreign currencies at a future date
(I.E., a "forward currency contract" or "forward contract").
FOREIGN CURRENCY FORWARD CONTRACTS. A forward currency contract
involves an obligation of the Trust to purchase or sell a specified currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers.
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The Trust may enter into forward currency contracts for the purchase or
sale of a specified currency at a specified future date either with respect to
specific transactions or with respect to portfolio positions in order to
minimize the risk to the Trust from adverse changes in the relationship between
the U.S. dollar and foreign currencies. For example, when the Subadviser
anticipates purchasing or selling a security, the Trust may enter into a forward
contract in order to set the exchange rate at which the transaction will be
made. The Trust also may enter into a forward contract to sell an amount of a
foreign currency approximating the value of some or all of the Trust's
securities positions denominated in such currency. The Trust also may use
forward contracts in one currency or a basket of currencies to attempt to hedge
against fluctuations in the value of securities denominated in a different
currency if the Subadviser anticipates that there will be a correlation between
the two currencies.
The Trust may use forward currency contracts to shift the Trust's
exposure to foreign currency exchange rate changes from one foreign currency to
another. For example, if the Trust owns securities denominated in a foreign
currency and the Subadviser believes that currency will decline relative to
another currency, it might enter into a forward contract to sell the appropriate
amount of the first foreign currency with payment to be made in the second
foreign currency. Transactions that use two foreign currencies are sometimes
referred to as "cross hedging." Use of a different foreign currency magnifies
the Trust's exposure to foreign currency exchange rate fluctuations. The Trust
also may purchase forward currency contracts to enhance income when the
Subadviser anticipates that the foreign currency will appreciate in value, but
securities denominated in that currency do not present attractive investment
opportunities.
A forward currency contract generally has no deposit requirement, and
no commissions are charged at any stage for trades. When the Trust enters into a
forward currency contract, it relies on its counterparty to make or take
delivery of the underlying currency at the maturity of the contract. Failure by
the counterparty to do so would result in the loss of any expected benefit of
the transaction.
Purchasers and sellers of forward currency contracts can enter into
offsetting closing transactions by selling or purchasing, respectively, an
instrument identical to the instrument purchased or sold. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contracts only
by negotiating directly with the counterparty. Thus, there can be no assurance
that the Trust will, in fact, be able to close out a forward currency contract
at a favorable price prior to maturity.
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In addition, in the event of insolvency of the counterparty, the Trust might be
unable to close out a forward currency contract at any time prior to maturity.
In either event, the Trust would continue to be subject to market risk with
respect to the position, and would continue to be required to maintain a
position in securities denominated in foreign currency or to maintain cash or
liquid assets in a segregated account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the forward
currency contract has been established. Thus, the Trust might need to purchase
or sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
The Trust may purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
Successful use of forward currency contracts will depend on the
Subadviser's skill in analyzing and predicting currency values. Forward
contracts may change substantially the Trust's investment exposure to changes in
currency exchange rates, and could result in losses to the Trust if currencies
do not perform as the Subadviser anticipates. There is no assurance that the
Subadviser's use of forward currency contracts will be advantageous to the Trust
or that it will hedge at an appropriate time.
FOREIGN CURRENCY STRATEGIES - SPECIAL CONSIDERATIONS. The
value of forward currency contracts depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of forward currency contracts, the Trust could be
disadvantaged by having to deal in the odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for
foreign currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions in
the interbank market and thus might not reflect odd-lot transactions when rates
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might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market.
Settlement of transactions involving foreign currencies might
be required to take place within the country issuing the underlying currency.
Thus, the Trust might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
COVER. Transactions using forward currency contracts expose
the Trust to an obligation to another party. The Trust will not enter into any
such transactions unless it owns either (1) an offsetting ("covered") position
in currencies or other forward contracts, or (2) cash and liquid assets with a
value, marked-to- market daily, sufficient to cover its potential obligations to
the extent not covered as provided in (1) above. The Trust will comply with
Securities and Exchange Commission ("SEC") guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or other liquid
assets in a segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be
sold while the position in the corresponding forward currency contract is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Trust's assets to cover or segregated
accounts could impede investment portfolio management or the Trust's ability to
meet redemption requests or other current obligations.
FORWARD COMMITMENTS. The Trust may make contracts to purchase
securities for a fixed price at a future date beyond customary settlement time
("forward commitments") if the Trust holds, and maintains until the settlement
date in a segregated account, cash, U.S. Government securities or high-grade
debt obligations in an amount sufficient to meet the purchase price, or if the
Trust enters into offsetting contracts for the forward sale of other securities
it owns. The Trust may invest up to 25% of its total assets in forward
commitments. Forward commitments may be considered securities in themselves and
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in value of the Trust's other assets. When such purchases are made through
dealers, the Trust relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the Trust of an advantageous yield or
price. Although the Trust generally will enter into forward commitments with the
intention of acquiring securities for its investment portfolio, the Trust may
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dispose of a commitment prior to settlement if the Subadviser deems it
appropriate to do so. The Trust may realize short-term profits or losses upon
the sale of forward commitments.
MONEY MARKET INSTRUMENTS. In addition to the investments described in
the Prospectus, the Trust also may invest in money market instruments, including
the following:
(1) 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 Bank Insurance Fund or the
Savings Institution Insurance Fund of the Federal Deposit Insurance Corporation.
(2) Commercial paper rated A-1 or A-2 by Standard & Poor's Ratings
Services ("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc.
("Moody's"). For a description of these ratings, see "Commercial Paper Ratings"
in the attached Appendix.
(3) High quality short-term corporate debt obligations, including
variable rate demand notes, having a maturity of one year or less. Because there
is no secondary trading market in demand notes, the inability of the issuer to
make required payments could impact adversely the Trust's ability to resell when
it deems advisable to do so.
REPURCHASE AGREEMENTS. The Trust may enter into repurchase agreements.
Although repurchase agreements carry certain risks not associated with direct
investment in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Trust if the other party to
the repurchase agreement becomes bankrupt, the Trust intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
the Subadviser to present minimal credit risks in accordance with guidelines
established by the Trust's Board of Trustees (the "Board of Trustees" or the
"Board"). The period of these repurchase agreements usually will be short, from
overnight to one week, and at no time will the Trust invest in repurchase
agreements of more than one year. The securities that are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. The Trust always will receive as
collateral securities whose market value, including accrued interest, will be at
least equal to 100% of the dollar amount invested by the Trust in each
agreement, and the Trust will make payment for such securities only upon
physical delivery or evidence of book entry transfer to the account of the
Trust's custodian bank.
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RESTRICTED AND ILLIQUID SECURITIES. The Trust may invest 10% of its net
assets in illiquid securities, including securities that are illiquid due to the
absence of a readily available market or due to legal or contractual
restrictions on resale, and repurchase agreements maturing in more than seven
days as limited by its investment restrictions. The assets used as cover for
over-the-counter ("OTC") call options written by the Trust will be considered
illiquid unless the OTC call options are sold to qualified dealers who agree
that the Trust may repurchase any OTC call option it writes at a maximum price
to be calculated by a formula set forth in the option agreement. The cover for
an OTC call option written subject to this procedure would be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
RISK FACTORS OF HIGH-YIELD SECURITIES. The Trust will not invest 35% or
more of its assets in convertible securities and nonconvertible corporate debt
obligations rated B or higher, but lower than Baa by Moody's, or BBB by S&P or,
if unrated, deemed to be of comparable quality by the Subadviser ("below
investment grade"), which are commonly referred to as "junk bonds." The prices
of lower-rated securities tend to be less sensitive to interest rate changes
than higher-rated securities, but more sensitive to adverse economic changes or
individual corporate developments. Securities rated below investment grade are
deemed to be predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal and may involve major risk exposure to adverse
conditions. The following supplements the disclosure in the Prospectus.
EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. The prices of
high-yield securities tend to be less sensitive to interest rate changes than
higher-rated investments, but may be more sensitive to adverse economic changes
or individual corporate developments. Periods of economic uncertainty and
changes generally result in increased volatility in market prices and yields of
high-yield securities and thus in the Trust's net asset value. A strong economic
downturn or a substantial period of rising interest rates could affect severely
the market for high-yield securities. In these circumstances, highly leveraged
companies might have difficulty in making principal and interest payments,
meeting projected business goals, and obtaining additional financing. Thus,
there could be a higher incidence of default. This would affect the value of
such securities and thus the Trust's net assets value. Further, if the issuer of
a security owned by the Trust defaults, the Trust might incur additional
expenses to seek recovery.
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Generally, when interest rates rise, the value of fixed-rate debt
obligations, including high-yield securities, tends to decrease; when interest
rates fall, the value of fixed-rate debt obligations tends to increase. If an
issuer of a high-yield security containing a redemption or call provision
exercises either provision in a declining interest rate market, the Trust would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if the Trust experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which the Trust's expenses could be allocated and in a reduced rate of return
for the Trust. While it is impossible to protect entirely against this risk,
diversification of the Trust's investment portfolio and the Subadviser's careful
analysis of prospective investment portfolio securities should minimize the
impact of a decrease in value of a particular security or group of securities in
the Trust's investment portfolio.
THE HIGH YIELD SECURITIES MARKET. The market for below- investment
grade bonds expanded rapidly in the 1980s, and its growth paralleled a long
economic expansion. During that period, the yields on below-investment grade
bonds rose dramatically. Such higher yields did not reflect the value of the
income stream that holders of such bonds expected, but rather the risk that
holders of such bonds could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. In fact, from 1989 to
1991 during a period of economic recession, the percentage of lower-quality
bonds that defaulted rose significantly, although the default rate decreased in
subsequent years. There can be no assurance that such declines in the below-
investment grade market will not reoccur. The market for below- investment grade
bonds generally is thinner and less active than that for higher-quality bonds,
which may limit the Trust's ability to sell such securities at fair value in
response to changes in the economy or financial markets. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, also may
decrease the values and liquidity of lower-rated securities, especially in a
thinly traded market.
CREDIT RATINGS. The credit ratings issued by credit rating services may
not reflect fully the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of high-yield securities. Also, credit rating agencies may fail to
change timely a credit rating to reflect changes in economic or company
conditions that affect a security's market value. Although the Subadviser
considers ratings of recognized rating services such as Moody's and S&P, the
Subadviser primarily relies on its own credit analysis, which includes a study
of existing debt, capital structure, ability to service debt and to pay
dividends, the issuer's sensitivity to economic conditions, its operating
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history and the current trend of earnings. The Subadviser continually monitors
the investments in the Trust's investment portfolio and carefully evaluates
whether to dispose of or retain high-yield securities whose credit ratings have
changed. See the Appendix for a description of corporate debt ratings.
LIQUIDITY AND VALUATION. Lower-rated bonds typically are traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
high-yield securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many high-yield securities may not
be as liquid as higher-grade bonds. A less active and thinner market for
high-yield securities than that available for higher-quality securities may
limit the Trust's ability to sell such securities at fair market value in
response to changes in the economy or the financial markets. The ability of the
Trust to value or sell high-yield securities also will be affected adversely to
the extent that such securities are thinly traded or illiquid. During such
periods, there may be less reliable, objective information available and thus
the responsibility of the Board to value high-yield, high-risk securities
becomes more difficult, with judgment playing a greater role. Further, adverse
publicity about the economy or a particular issuer may affect adversely the
public's perception of the value, and thus the liquidity of a high-yield
security, whether or not such perceptions are based on a fundamental analysis.
See "Determination of Net Asset Value."
SECURITIES LOANS. The Trust may loan investment portfolio securities to
qualified broker-dealers. Such loans may be terminated by the Trust at any time
and the market risk applicable to any security loaned remains a risk of the
Trust. Although voting rights, or rights to consent, with respect to the loaned
securities pass to the borrower, the Trust retains the right to call the loans
at any time on reasonable notice, and it will do so in order that the securities
may be voted by the Trust if the holders of such securities are asked to vote
upon or consent to matters materially affecting the investment. The Trust also
may call such loans in order to sell the securities involved. The borrower must
add to the collateral whenever the market value of the securities rises above
the level of such collateral. The Trust could incur a loss if the borrower
should fail financially at a time when the value of the loaned securities is
grater than the collateral. The primary objective of securities lending is to
supplement the Trust's income through investment of the cash collateral in
short-term interest-bearing obligations.
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SHORT SALES. A short sale involves the sale by the Trust of a security
that it may not own. The Trust may not make short sales of securities except
"against the box." A short sale "against the box" is a short sale whereby, at
the time of the sale, the Trust owns or has the immediate and unconditional
right, at no additional cost, to obtain the identical security. Not more than
10% of the Trust's net assets may be held as collateral for such sales at any
one time.
U.S. GOVERNMENT SECURITIES. The Trust may invest in U.S. Government
securities, including a variety of securities that are issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agreements
secured thereby. These securities include securities issued and guaranteed by
the U.S. Government, such as Treasury bills, Treasury notes, and Treasury 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.
WARRANTS. The Trust may invest up to 2% of its net assets in warrants
(other than warrants acquired as part of a unit or attached to securities at the
time of purchase), which entitle the holder to buy equity securities at a
specific price for a specific period of time. Warrants may be considered more
speculative than certain other types of investments in that they do not entitle
a holder to dividends or voting rights with respect to the securities that may
be purchased nor do they represent any rights in the assets of the issuing
company. Also, the value of a warrant does not change necessarily with the value
of the underlying securities, and a warrant ceases to have value if it is not
exercised prior to the expiration date.
ZERO COUPON SECURITIES. The Trust may invest in zero coupon securities,
which are debt obligations that do not entitle the holder to any periodic
payment of interest prior to maturity or a specified date when the securities
begin paying current interest. Zero coupon securities are issued and traded at a
discount from their face amount or par value, which discount rate varies
depending on the time remaining until cash payments begin, prevailing interest
rates, liquidity of the security and the perceived credit quality of the issuer.
The market prices of zero coupon securities generally are more volatile than the
prices of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do other types of debt
securities having similar maturities and credit value.
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Industry Classifications
------------------------
For purposes of determining industry classifications, the Trust relies
upon classifications established by Heritage Asset Management, Inc. ("Heritage"
or 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.
INVESTMENT LIMITATIONS
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In addition to the limits disclosed in "Investment Policies" above and
the investment limitations described in the Prospectus, the Trust is subject to
the following investment limitations that are fundamental policies of the Trust
and may not be changed without the vote of a majority of the outstanding voting
securities of the Trust. Under the Investment Company Act of 1940, as amended
(the "1940 Act"), a "vote of a majority of the outstanding voting securities" of
the Trust means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Trust 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.
DIVERSIFICATION. The Trust may not invest more than 5% of its total
assets in securities of any one issuer other than the U.S. Government or its
agencies and instrumentalities or buy more than 10% of the voting securities or
any other class of securities of any issuer.
INDUSTRY CONCENTRATION. The Trust may not purchase securities
if, as a result, more than 25% of its total assets would be
invested in any one industry.
BORROWING MONEY. The Trust may not borrow money, except from banks as a
temporary measure for extraordinary or emergency purposes, including the meeting
of redemption requests that might require the untimely disposition of
securities. The payment of interest on such borrowings will reduce the Trust's
net income during the period of such borrowing. Borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Trust's total assets at the time the borrowing
is made. The Trust may not make additional investments when borrowings exceed 5%
of the Trust's total assets.
INVESTING IN COMMODITIES, MINERALS OR REAL ESTATE. The Trust may not
invest in commodities, commodity contracts, oil, gas or other mineral programs,
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or real estate, except that it may (1) purchase securities secured by real
estate or issued by companies that invest in or sponsor such interests, (2)
write and purchase call options and purchase and sell forward contracts, and (3)
engage in transactions in forward commitments.
UNDERWRITING. The Trust may not underwrite the securities of other
issuers, except that the Trust may invest in securities that are not readily
marketable without registration under the Securities Exchange Act of 1933 Act,
as amended (the "1933 Act"), (restricted securities), if immediately after the
making of such investment not more than 5% of the value of the Trust's total
assets (taken at cost) would be so invested.
LOANS. The Trust may not make loans, except to the extent that the
purchase of a portion of an issue of publicly distributed or privately placed
notes, bonds or other evidences of indebtedness or deposits with banks and other
financial institutions may be considered loans. The Trust also may enter into
repurchase agreements and securities loans as permitted under the Trust's
investment policies. Privately placed securities typically are either restricted
as to resale or may not have readily available market quotations, and therefore
may not be as liquid as other securities.
ISSUING SENIOR SECURITIES. The Trust may not issue senior securities,
except as permitted by its investment objective and policies and investment
limitations of the Trust and except that the Trust may purchase and sell call
options and forward contracts.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
TRUSTEES OF THE TRUST. The Trust may not purchase or retain the securities of
any issuer if the officers and Trustees of the Trust or the Manager or
Subadviser owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
REPURCHASE AGREEMENTS AND LOANS OF PORTFOLIO SECURITIES. The Trust may
not enter into repurchase agreements with respect to more than 25% of its total
assets and may not lend portfolio securities amounting to more than 25% of its
total assets.
MARGIN PURCHASES. The Trust may not purchase securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions.
RESTRICTED SECURITIES. The Trust may not invest more than 5% of the
Trust's total assets (taken at cost) in securities that are not readily
marketable without registration under the 1933 Act (restricted securities).
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The Trust has adopted the following additional restrictions that,
together with certain limits described in the Trust's 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.
INVESTING IN INVESTMENT COMPANIES. The Trust may invest in securities
issued by other investment companies to the extent permitted by the 1940 Act and
the rules and regulations thereunder. Under these rules and regulations, the
Trust is prohibited from acquiring the securities of another investment company
if, as a result of such acquisition, the Trust owns more than 3% of the total
voting stock of the company, securities issued by any one investment company
represent more than 5% of the Trust's total assets, or securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Trust. The Trust's purchase of investment company
securities may result in the layering and duplication of expenses such that
shareholders indirectly bear a proportionate share of the operating expenses of
such companies, including advisory fees.
CONTROL PURPOSE. The Trust may not make investments for the purpose of
gaining control of an issuer's management.
PLEDGING SECURITIES. The Trust may not pledge any securities, except in
an amount of not more than 15% of its total assets, to secure borrowings for
temporary and emergency purposes or in connection with the writing of call
options. (The deposit in escrow of underlying securities in connection with the
writing of covered call options, and the deposit of margin in connection with
forward contracts, is not deemed to be a pledge or other encumbrance.)
UNSEASONED ISSUERS. The Trust may not invest more than 5% of its net
assets in securities of companies (other than obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities) that, including their
predecessors, have been in continuous operation for less than three years and in
equity securities that do not have readily available market quotations (other
than restricted securities).
WARRANTS. The Trust may not invest more than 2% of its net assets in
warrants (other than warrants acquired as part of a unit or attached to
securities at the time of purchase).
ILLIQUID INVESTMENTS. The Trust may not invest more than 10% of its net
assets in the aggregate in repurchase agreements of more than seven days'
duration, in securities without readily available market quotations, and in
restricted securities including privately placed securities.
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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. If at any time, the Trust's borrowings exceed its
limitations due to a decline in net assets, such borrowings will be promptly
reduced to the extent necessary to comply with the limitation.
NET ASSET VALUE
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The net asset values of A shares and C shares are determined daily,
Monday through Friday, except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day,
as of the close of regular trading on the New York Stock Exchange (the
"Exchange"). Net asset value for each class is calculated by dividing the value
of the total assets of the Trust attributable to that class, less all
liabilities (including accrued expenses) attributable to that class, by the
number of class shares outstanding, the result being adjusted to the nearest
whole cent. A security listed or traded on the Exchange, or other domestic or
foreign stock exchanges, is valued at its last sales price on the principal
exchange on which it is traded prior to the time when assets are valued. If no
sale is reported at that time or the security is traded in the OTC market, the
most recent bid price is used. Securities and other assets for which market
quotations are not readily available, or for which market quotes are not deemed
to be reliable, are valued at fair value as determined in good faith by the
Board of Trustees. Securities in a foreign currency will be valued daily in U.S.
dollars at the foreign currency exchange rates prevailing at the time the Trust
calculates the daily net asset value of each class. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
The Trust is open for business on days on which the Exchange is open
(each a "Business Day"). Trading in securities on European and Far Eastern
securities exchanges and OTC markets normally is completed well before the
Trust's close of business on each Business Day. In addition, European or Far
Eastern securities trading may not take place on all Business Days. Furthermore,
trading takes place in various foreign capital markets on days that are not
Business Days and on which the Trust's net asset value is not calculated.
Calculation of A shares and C shares net asset value does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. The Trust calculates net asset
value per share, and therefore effects sales and redemptions, as of the close of
regular trading on the Exchange each Business Day. If events materially
- 15 -
<PAGE>
affecting the value of such securities occur between the time when their prices
are determined and the time when the Trust's net asset value is calculated, such
securities will be valued at fair value by methods as determined in good faith
by or under the direction of the Board of Trustees.
The Board of Trustees may suspend the right of redemption or postpone
payment for more than seven days at times (1) during which the Exchange is
closed other than for the customary weekend and holiday closings, (2) during
which trading on the Exchange is restricted as determined by the SEC, (3) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practical for the Trust fairly to determine the value of its net assets, or (4)
for such other periods as the SEC may by order permit for the protection of the
holders of A shares and C shares.
PERFORMANCE INFORMATION
- -----------------------
The performance data for each class of the Trust quoted in advertising
and other promotional materials represents past performance and is not intended
to indicate future performance. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Average annual total return quotes for each class used
in the Trust's advertising and promotional materials are calculated according to
the following formula:
P(1+T)[SUPERSCRIPT]n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the 1, 5, 10 year period (or fractional
portion thereof).
In calculating the ending redeemable value for A shares, the current
maximum sales load of 4.75% is deducted from the initial $1,000 payment and all
dividends and other distributions by the Trust are assumed to have been
reinvested at net asset value on the reinvestment dates during the period. Based
on this formula, the total return, or "T" in the formula above, is computed by
finding the average annual compounded rates of return over the period that would
equate the initial amount invested to the ending redeemable value. The average
annualized total returns for A shares using this formula for the one- and
five-year periods ended September 30, 1996 and for the period December 15, 1986,
(commencement of operations) through September 30, 1996, were 16.41%, 13.35% and
- 16 -
<PAGE>
9.66%, respectively. The average annualized total returns for C shares using
this formula for the period April 3, 1995 (first offering of C shares) through
September 30, 1995, and the one-year period ended September 30, 1996 were 23.65%
and 20.37%, respectively.
In connection with communicating its total return to current or
prospective shareholders, the Trust also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes that may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs. In addition,
the Trust may from time to time include in advertising and promotional materials
total return figures that are not calculated according to the formula set forth
above for each class of shares. For example, in comparing the Trust's cumulative
total return with data published by Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc. or with such market indices as the Dow Jones
Industrial Average and the Standard & Poor's 500 Composite Stock Price Index,
the Trust calculates its cumulative total return for each class for the
specified periods of time by assuming an investment of $10,000 in shares of that
class and assuming the reinvestment of each dividend or other distribution at
net asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. The Trust does not, for these
purposes, deduct from the initial value invested any amount representing
front-end sales loads charged on A shares or CDSLs charged on C shares.
The A shares cumulative returns using this formula for the one- and
five-year periods ended September 30, 1996 and for the period December 15, 1986,
(commencement of operations) through September 30, 1996, were 22.26%, 96.55% and
159.18%, respectively. The C shares cumulative returns using this formula for
the period April 3, 1995 (first offering of C shares) to September 30, 1996 and
the one-year period ended September 30, 1996 were 37.36% and 21.37%,
respectively. By not annualizing the performance and excluding the effect of the
front-end sales load, the A shares and the CDSL on C shares, total return
calculated in this manner simply will reflect the increase in net asset value
per share over a period of time, adjusted for dividends and other distributions.
Calculating total return without taking into account the front-end sales load or
CDSL results in a higher rate of return than calculating total return net of the
sales load.
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<PAGE>
INVESTING IN THE TRUST
- ----------------------
A shares and C shares are sold at their next determined net asset value
on Business Days. The procedures for purchasing shares of the Trust are
explained in the Prospectus under "Investing in the Trust."
Systematic Investment Options
-----------------------------
1. Systematic Investing -- You may authorize the Manager to process a
monthly draft from your personal checking account for investment into the Trust.
The draft is returned by your bank the same way a canceled check is returned.
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 the Trust. 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
the Trust. 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 advised or administered by the Manager ("Heritage Mutual Fund"), you may
elect to have a preset amount redeemed from that fund and exchanged into the
corresponding class of shares of the Trust. 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
----------------
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 the Trust 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 $4,000, 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
- 18 -
<PAGE>
"rollovers" from qualified benefit plans and from Section 403(b) annuity plans.
For more detailed information on the Heritage IRA, please contact the Manager.
Trust shares may be used as the investment medium for qualified 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.
OTHER RETIREMENT PLANS. Multiple participant payroll deduction
retirement plans also may purchase A shares of any Heritage Mutual Fund at a
reduced sales load on a monthly basis during the 13-month period following such
a plan's initial purchase. The sales load applicable to an initial purchase of A
shares will be that normally applicable under the schedule of sales loads set
forth in the prospectus to an investment 13 times larger than such initial
purchase. The sales load applicable to each succeeding monthly purchase of A
shares will be that normally applicable, under such schedule, to an investment
equal to the sum of (1) the total purchase previously made during the 13-month
period and (2) the current month's purchase multiplied by the number of months
(including the current month) remaining in the 13- month period. Sales loads
previously paid during such period will not be adjusted retroactively on the
basis of later purchases. Multiple participant payroll deduction retirement
plans may purchase C shares at any time.
Alternative Purchase Plans
--------------------------
A shares are sold at their next determined net asset value plus a
front-end sales load on days the Exchange is open for business. C shares are
sold at their next determined net asset value on days the Exchange is open for
business, subject to a 1% CDSL if the investor redeems such shares in less than
one year. The Manager, as the Trust's transfer agent, will establish an account
with the Trust and will transfer funds to State Street Bank and Trust Company
(the "Custodian"). Normally, orders will be accepted upon receipt of funds and
will be executed at the net asset value determined as of the close of regular
trading on the Exchange on that day plus any applicable sales load. See
"Alternative Purchase Plans" in the Prospectus. The Trust reserves the right to
reject any order for Trust shares. The Trust's distributor, Raymond James &
Associates, Inc. ("RJA" or the "Distributor"), has agreed that it will hold the
Trust harmless in the event of loss as a result of cancellation of trades in
Trust shares by the Distributor, its affiliates or its customers.
- 19 -
<PAGE>
Class A Combined Purchase Privilege (Right Of Accumulation)
-----------------------------------------------------------
Certain investors may qualify for the Class A sales load reductions
indicated in the sales load schedule in the Prospectus by combining purchases of
A shares into a single "purchase," if the resulting purchase totals at least
$25,000. The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases that, in the aggregate, are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing A shares for his or their own account; a single
purchase by a trustee or other fiduciary purchasing A shares for a single trust,
estate or single fiduciary account although more than one beneficiary is
involved; or a single purchase for the employee benefit plans of a single
employer. The term "purchase" also includes purchases by a "company," as the
term is defined in the 1940 Act, but does not include purchases by any such
company that has not been in existence for at least six months or that has no
purpose other than the purchase of A shares or shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit card holders of a company, policy holders of
an insurance company, customers of either a bank or broker-dealer, or clients of
an investment adviser. A "purchase" also may include A shares purchased at the
same time through a single selected dealer of any other Heritage Mutual Fund
that distributes its shares subject to a sales load.
The applicable A shares initial sales load will be based on the total
of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the previous day)
of (a) all A shares held by the investor and (b) all A shares of any other
Heritage mutual fund advised or administered by the Manager ("Heritage Mutual
Fund") held by the investor and purchased at a time when A shares of such other
fund were distributed subject to a sales load (including Heritage Cash Trust
shares acquired by exchange); and
(iii) the net asset value of all A shares described in paragraph (ii)
owned by another shareholder eligible to combine his purchases with that of the
investor into a single "purchase."
A shares of Heritage Income Trust-Intermediate Government Fund
("Intermediate Government") purchased from February 1, 1992 through July 31,
1992, without payment of an initial sales load will be deemed to fall under the
provisions of paragraph (ii) as if they had been distributed without being
- 20 -
<PAGE>
subject to a sales load, unless those shares were acquired through an exchange
of other shares that were subject to a sales load.
To qualify for the Combined Purchase Privilege on a purchase through a
selected dealer, the investor or selected dealer must provide the Distributor
with sufficient information to verify that each purchase qualifies for the
privilege or discount.
Class A Statement Of Intention
------------------------------
Investors also may obtain the reduced sales loads shown in the
Prospectus by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $25,000 within a period of 13
months in A shares of the Trust or any other Heritage Mutual Fund. Each purchase
of A shares under a Statement of Intention will be made at the public offering
price or prices applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement. In addition, if you own Class A
shares of any other Heritage Mutual Fund subject to a sales load, you may
include those shares in computing the amount necessary to qualify for a sales
load reduction.
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount. A shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales load applicable
to the shares actually purchased if the full amount indicated is not purchased,
and such escrowed A shares will be redeemed involuntarily to pay the additional
sales load, if necessary. When the full amount indicated has been purchased, the
escrow will be released. To the extent an investor purchases more than the
dollar amount indicated on the Statement of Intention and qualifies for a
further reduced sales load, the sales load will be adjusted for the entire
amount purchased at the end of the 13-month period. The difference in sales load
will be used to purchase additional A shares of the Trust, subject to the rate
of sales load applicable to the actual amount of the aggregate purchases. An
investor may amend his/her Statement of Intention to increase the indicated
dollar amount and begin a new 13-month period. In that case, all investments
subsequent to the amendment will be made at the sales load in effect for the
higher amount. The escrow procedures discussed above will apply.
REDEEMING SHARES
- ----------------
The methods of redemption are described in the section of the
Prospectus entitled "How to Redeem Shares."
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<PAGE>
Systematic Withdrawal Plan
--------------------------
Shareholders may elect to make systematic withdrawals from a Trust
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. 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.
Redemptions will be made at net asset value determined as of the close
of regular trading on the Exchange on the 10th day of each month or the 10th day
of the last month of each period, whichever is applicable. Systematic
withdrawals of C shares, if made less than one year of the date of purchase,
will be charged a CDSL of 1%. If the Exchange is not open for business on that
day, the shares will be redeemed at net asset value determined as of the close
of regular trading on the Exchange 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 and other
distributions on all shares in the account must be reinvested automatically in
Trust 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. The Trust and its transfer agent and 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 or a capital gain distribution. These payments are taxable to the
extent that the total amount of the payments exceeds the tax basis of the shares
sold. If the periodic withdrawals exceed reinvested dividends and other
distributions, the amount of the original investment may be correspondingly
reduced.
Ordinarily, a shareholder should not purchase additional A shares if
maintaining a Systematic Withdrawal Plan of A shares because the shareholder may
incur tax liabilities in connection with such purchases and withdrawals. The
Trust will not knowingly accept purchase orders from shareholders for additional
- 22 -
<PAGE>
A 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 the Trust's
Automatic Investment Plan.
Telephone Transactions
----------------------
Shareholders may redeem shares by placing a telephone request to the
Trust. 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
-------------------
The Trust is obligated to redeem shares for any shareholder for cash
during any 90-day period up to $250,000 or 1% of the Trust'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, the Trust will pay all
or a portion of the remainder of the redemption in portfolio instruments, valued
in the same way as the Trust 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 could
receive less than the redemption value thereof and could incur certain
transaction costs.
Receiving Payment
-----------------
If a request for redemption is received by the Trust in good order (as
described in the Prospectus) before the close of regular trading on the
Exchange, the shares will be redeemed at the net asset value per share
determined at such close, minus any applicable CDSL for C shares. Requests for
redemption received by the Trust after the close of regular trading on the
Exchange will be executed at the net asset value determined as of such close on
the next trading day, minus any applicable CDSL for C shares.
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<PAGE>
If shares of the Trust are redeemed by a shareholder through the
Distributor or a participating dealer, 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 on the Exchange will be executed on the next trading day. Payment for
shares redeemed normally will be made by the Trust to the Distributor or a
participating dealer by the third business day after the day the redemption
request was made, provided that certificates for shares have been delivered in
proper form for transfer to the Trust or, if no certificates have been issued, a
written request signed by the shareholder has been provided to the Distributor
or a participating dealer 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 Trust
shares can be directed to registered representatives of the Distributor or a
participating dealer, or to the Manager.
EXCHANGE PRIVILEGE
- ------------------
Shareholders who have held Trust 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. 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.
A shares of Intermediate Government purchased from February 1, 1992
through July 31, 1992, without payment of an initial sales load may be exchanged
into A shares of the Trust without payment of any sales load. A shares of
Intermediate Government purchased after July 31, 1992 without an initial sales
load will be subject to a sales load when exchanged into A shares of the Trust,
unless those shares were acquired through an exchange of other shares that were
subject to an initial sales load.
- 24 -
<PAGE>
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" above.
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. Telephone or telegram requests for an exchange received by the
Trust before the close of regular trading on the Exchange will be effected at
the close of regular trading 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
- -----
In order to continue to qualify for the favorable tax treatment as a
regulated investment company ("RIC") under the Code, the Trust must distribute
annually to its shareholders at least 90% of its investment company taxable
income (generally consisting of net investment income, net short-term capital
gain and net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. These requirements
include the following: (1) the Trust 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
foreign currencies, or other income (including gains from options or forward
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Trust must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities or options, or foreign currencies or forward contracts thereon that
are not related directly to the Trust's principal business of investing in
securities, that are held for less than three months ("Short-Short Limitation");
(3) at the close of each quarter of the Trust'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 Trust's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and (4)
at the close of each quarter of the Trust'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.
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<PAGE>
The Trust will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary 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.
A redemption of Trust shares will result in a taxable gain or loss to
the redeeming shareholder, depending on whether the redemption proceeds are more
or less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any sales load paid on A shares). An exchange of Trust shares
for shares of another Heritage Mutual Fund generally will have similar tax
consequences. However, special rules apply when a shareholder disposes of Trust
shares through a redemption or exchange within 90 days after purchase thereof
and subsequently reacquires A shares of the Trust or acquires A shares of
another Heritage Mutual Fund without paying a sales load due to the 90-day
reinstatement or exchange privilege. In these cases, any gain on the disposition
of the original Trust A shares will be increased, or loss decreased, by the
amount of the sales load paid when those shares were acquired, and that amount
will increase the adjusted basis of the shares subsequently acquired. In
addition, if Trust shares are purchased (whether pursuant to the reinstatement
privilege or otherwise) within 30 days before or after redeeming other Trust
shares (regardless of class) at a loss, all or a portion of that loss will not
be deductible and will increase the basis of the newly purchased shares.
If Trust shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for a dividend or other distribution, the shareholder will pay full
price for the shares and receive some portion of the price back as a taxable
distribution.
Dividends and interest received by the Trust may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Trust may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
- 26 -
<PAGE>
production of, passive income. Under certain circumstances, the Trust will be
subject to Federal income tax on a portion of any "excess distribution" received
on stock it holds in a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Trust
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Trust's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.
If the Trust invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Trust would be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which most likely would have to be distributed to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax -- even if those
earnings and gain were not received by the Trust. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Trust,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of a
PFIC's stock over the adjusted basis in that stock (including mark-to-market
gain for each prior year for which an election was in effect).
The use of hedging strategies, such as entering into forward contracts,
involves complex rules that will determine for income tax purposes the character
and timing of recognition of the gains and losses the Trust realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options and forward contracts derived by the Trust with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options, and from foreign currencies and forward contracts
thereon that are not related directly to the Trust's principal business of
investing in securities, will be subject to the Short-Short Limitation if they
are held for less than three months.
The Trust may acquire zero coupon or other securities issued with
original issue discount ("OID"). As a holder of those securities, the Trust must
include in its income the OID that accrues on them during the taxable year, even
if the Trust receives no corresponding payment on them during the year. Because
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<PAGE>
the Trust annually must distribute substantially all of its investment company
taxable income, including any OID, to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax, the Trust may be required in a particular
year to distribute as a dividend an amount that is greater than the total amount
of cash it actually receives. Those distributions will be made from the Trust's
cash assets or from the proceeds of sales of portfolio securities, if necessary.
The Trust may realize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net capital
gain. In addition, any such gains may be realized on the disposition of
securities held for less than three months. Because of the Short- Short
Limitation, any such gains would reduce the Trust's ability to sell other
securities, or certain options or forward contracts, held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
TRUST INFORMATION
- -----------------
Management Of The Trust
-----------------------
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, the Manager and Eagle.
Position with Principal Occupation
Name the Trust Duing Past Five Years
---- --------- ---------------------
Thomas A. James* Trustee Chairman of the Board since 1986
880 Carillon Parkway and Chief Executive Officer
St. Petersburg, FL 33716 since 1969 of RJF; Chairman of
the Board of RJA since 1986;
Chairman of the Board of Eagle
since 1984 and Chief Executive
Officer of Eagle 1994 to 1996.
Richard K. Riess* Trustee Chief Executive Officer of Eagle
880 Carillon Parkway since 1996, President, 1995 to
St. Petersburg, FL present, Chief Operating
33716 Officer, 1988 to 1996, Executive
Vice President, 1988 to 1993;
President of Heritage Mutual
Funds, 1985 to 1991.
- 28 -
<PAGE>
Position with Principal Occupation
Name the Trust Duing Past Five Years
---- --------- ---------------------
Donald W. Burton Trustee President of South Atlantic
614 W. Bay Street Capital Corporation (venture
Suite 200 capital) since 1981.
Tampa, FL 33606
C. Andrew Graham Trustee Vice President of Financial
Financial Designs, Designs Ltd. since 1992;
Ltd. Executive Vice President of the
1775 Sherman Street Madison Group, Inc., 1991 to
Suite 1900 1992; Principal of First Denver
Denver, CO 80203 Financial Corporation
(investment banking) since 1987.
David M. Phillips Trustee Chairman and Chief Executive
World Trade Center Officer of CCC Information
Chicago Services, Inc. since 1994 and of
444 Merchandise Mart InfoVest Corporation (informa-
Chicago, IL 60654 tion services to the insurance
and auto industries and consumer
households) since 1982.
Eric Stattin Trustee Litigation Consultant/Expert
2587 Fairway Village Witness and private investor
Drive since 1988.
Park City, UT 84060
James L. Pappas Trustee Lykes Professor of Banking and
University of South Finance since 1986 at University
Florida of South Florida; Dean of
College of Business College of Business Administra-
Administration tion, 1987 to 1996.
Tampa, FL 33620
Stephen G. Hill President Chief Executive Officer and
880 Carillon Parkway President of the Manager since
St. Petersburg, FL 1989 and Director since 1994;
33716 Director of Eagle since 1995.
Donald H. Glassman Treasurer Treasurer of the Manager since
880 Carillon Parkway 1989; Treasurer of Heritage
St. Petersburg, FL Mutual Funds since 1989.
33716
- 29 -
<PAGE>
Position with Principal Occupation
Name the Trust Duing Past Five Years
---- --------- ---------------------
Clifford J. Alexander Secretary Partner, Kirkpatrick & Lockhart
1800 Massachusetts LLP (law firm).
Ave., N.W.
Washington, DC 20036
Patricia Schneider Assistant Compliance Administrator of the
880 Carillon Parkway Secretary Manager.
St. Petersburg, FL
33716
Robert J. Zutz Assistant Partner, Kirkpatrick & Lockhart
1800 Massachusetts Secretary LLP (law firm).
Ave., N.W.
Washington, DC 20036
* These Trustees are "interested persons" as defined
in section 2(a)(19) of the 1940 Act.
The Trustees and officers of the Trust, as a group, own less than 1% of
each class of the Trust's 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 $727 annually and $182 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
who is not an "interested person of the Trust" for the fiscal year ended
September 30, 1996.
- 30 -
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total
Compensation
Pension or From the Fund
Aggregate Retirement and the Heritage
Compensation Benefits Accrued Estimated Family of Funds
Name of Person, From the as Part of the Annual Benefits Paid
Position Trust Trust's Expenses Upon Retirement To Trustees
--------------- ------------ ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Donald W. Burton, $1,454 $0 $0 $17,000
Trustee
C. Andrew Graham, $1,454 $0 $0 $17,000
Trustee
David M. Phillips, $1,272 $0 $0 $15,000
Trustee
Eric Stattin, $1,454 $0 $0 $17,000
Trustee
James L. Pappas, $1,454 $0 $0 $17,000
Trustee
Richard K. Riess, $0 $0 $0 $0
Trustee
Thomas A. James, $0 $0 $0 $0
Trustee
</TABLE>
Five Percent Shareholders
-------------------------
As of December 31, 1996, there were no shareholders who owned of record
or beneficially five percent or more of the Trust's shares.
- 31 -
<PAGE>
Investment Adviser And Administrator; Subadviser
------------------------------------------------
The Trust's 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 October 31, 1986, between the Trust and the Manager and
subject to the control and direction of the Board of Trustees, the Manager is
responsible for reviewing and establishing investment policies for the Trust as
well as administering the Trust's noninvestment affairs. Under a Subadvisory
Agreement, Eagle, subject to direction by the Manager and the Board of Trustees,
provides investment advice and portfolio management services to the Trust for a
fee payable by the Manager.
The Manager also is obligated to furnish the Trust with office space,
administrative, and certain other services as well as executive and other
personnel necessary for the operation of the Trust. 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 Trust pays all its other
expenses that are not assumed by the Manager. The Trust also is liable for such
nonrecurring expenses as may arise, including litigation to which the Trust may
be a party. The Trust also may have an obligation to indemnify its Trustees and
officers with respect to any such litigation.
The Advisory Agreement and the Subadvisory Agreement each were approved
by the Board of Trustees of the Trust (including all of the Trustees who are not
"interested persons" of the Manager or Subadviser, as defined under the 1940
Act) and by the shareholders of the Trust in compliance with the 1940 Act. Each
Agreement will continue in force for only so long as 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
Manager, Subadviser or the Trust, 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 Trust. The Advisory and Subadvisory Agreements each automatically terminates
on assignment, and each is terminable on not more than 60 days' written notice
by the Trust to either party. In addition, the Advisory Agreement may be
terminated on not less than 60 days' written notice by the Manager to the Trust
and the Subadvisory Agreement may be terminated on not less than 60 days'
written notice by the Manager or 90 days' written notice by the Subadviser.
Under the terms of the Advisory Agreement, the Manager automatically becomes
responsible for the obligations of the Subadviser upon termination of the
- 32 -
<PAGE>
Subadvisory Agreement. In the event the Manager ceases to be the manager of the
Trust or the Distributor ceases to be principal distributor of Trust shares, the
right of the Trust to use the identifying name of "Heritage" may be withdrawn.
The Manager and Subadviser shall not be liable to the Trust 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 the duties imposed upon them by their agreements with the Trust or for any
losses 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 Trust."
ADVISORY AND ADMINISTRATION FEE. The annual investment advisory fee
paid monthly by the Trust to the Manager is based on the Trust's average daily
net assets as listed in the Prospectus.
The Manager voluntarily has agreed to waive management fees to the
extent that total annual operating expenses attributable to A shares exceed
1.60% of the average daily net assets or to the extent that total annual
operating expenses attributable to C shares exceed 2.35% of average daily net
assets. To the extent that the Manager waives its fees for one class, it will
waive its fees for the other class on a proportionate basis. The Manager has
entered into an agreement with the Subadviser to provide investment advice and
portfolio management services to the Trust for a fee paid by the Manager equal
to 50% of the fees payable to the Manager by the Trust, without regard to any
reduction in fees actually paid to the Manager as a result of expense
limitations. For the fiscal years ended September 30, 1994, 1995 and 1996, the
Manager earned approximately $252,000, $242,000 and $294,000, respectively. For
the three fiscal years ended September 30, 1994, 1995 and 1996, the Manager paid
the Subadviser approximately $126,000, $121,000 and $147,000, respectively.
CLASS-SPECIFIC EXPENSES. The Trust may determine to allocate certain of
its expenses (in addition to distribution fees) to the specific classes of the
Trust's shares to which those expenses are attributable.
Brokerage Practices
-------------------
The Trust may purchase and sell securities without regard to the length
of time the securities have been held. Thus, the turnover rate may vary greatly
from year to year or during periods within a year. The Trust's portfolio
turnover rate is computed by dividing the lesser of purchases or sales of
- 33 -
<PAGE>
securities for the period by the average value of portfolio securities for that
period. The Trust's annualized portfolio turnover rates for the fiscal years
ended September 30, 1995 and 1996, were approximately 42% and 75%, respectively.
The Subadviser is responsible for the execution of the Trust's
portfolio transactions and must seek the most favorable price and execution for
such transactions. Best execution, however, does not mean that the Trust
necessarily will be paying the lowest commission or spread available. Rather,
the Trust also will take into account such factors as size of the order,
difficulty of execution, efficiency of the executing broker's facilities, and
any risk assumed by the executing broker.
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 Subadviser may give
consideration to research, statistical and other services furnished by brokers
or dealers. In addition, the 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 Subadviser determines in
good faith that such commission is reasonable in relation to the value of
brokerage and research services provided. Such research and analysis may be
useful to the Subadviser in connection with services to clients other than the
Trust.
The Trust may use the Distributor as broker for agency transactions in
listed and over-the-counter securities at commission rates and under
circumstances consistent with the policy of best execution. Commissions paid to
the Distributor will not exceed "usual and customary brokerage commissions."
Rule l7e-1 under the 1940 Act defines "usual and customary" commissions to
include amounts that are "reasonable and fair compared to the commission, fee or
other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time."
The Subadviser also may select other brokers to execute portfolio
transactions. In the over-the-counter market, the Trust generally deals with
primary market-makers unless a more favorable execution can otherwise be
obtained.
- 34 -
<PAGE>
Aggregate brokerage commissions paid by the Trust for the three fiscal
years ended September 30, 1994, 1995 and 1996 amounted to $68,341, $53,748 and
$61,278, respectively. Those commissions were paid on brokerage transactions
worth $41,920,076, $28,057,262 and $56,150,173, respectively. Aggregate
brokerage commissions paid by the Trust to the Distributor, an affiliated
broker-dealer, amounted to $9,741, or 14.25%, $7,852, or 14.6% and $12,370, or
16.80%, respectively, of the aggregate commissions paid. These commissions were
paid on aggregate brokerage transactions of $3,733,597, or 8.91%, $1,830,625, or
6.5%, and $2,535,393, or 4.52% respectively, of the total aggregate brokerage
transactions.
The Trust may not buy securities from, or sell securities to, the
Distributor as principal. However, the Board of Trustees has adopted procedures
in conformity with Rule 10f-3 under the 1940 Act whereby the Trust may purchase
securities that are offered in underwritings in which the Distributor is a
participant. The Board of Trustees will consider the possibilities of seeking to
recapture for the benefit of the Trust expenses of certain portfolio
transactions, such as underwriting commissions and tender offer solicitation
fees, by conducting such portfolio transactions through affiliated entities,
including the Distributor, but only to the extent such recapture would be
permissible under applicable regulations, including the rules of the National
Association of Securities Dealers, Inc. and other self-regulatory organizations.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, the Trust expressly consented to the Distributor executing transactions
on an exchange on the Trust's behalf.
Distribution Of Shares
----------------------
The Distributor and Representatives with whom the Distributor has
entered into dealer agreements offer shares of the Trust as agents on a best
efforts basis and are not obligated to sell any specific amount of shares. In
this connection, the Distributor makes distribution and service payments to
Representatives in connection with the sale of C shares (in the case of A
shares, Representatives are compensated based on the amount of the initial sales
load). Pursuant to its Distribution Agreement with the Trust with respect to A
shares and C shares, the Distributor bears the cost of making information about
the Trust 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 Distributor
also pays service fees to Representatives for providing personal services to
Class A and Class C shareholders and for maintaining shareholder accounts. The
Trust pays the cost of registering and qualifying its shares under state and
federal securities laws and typesetting of its prospectuses and printing and
distributing prospectuses to existing shareholders.
- 35 -
<PAGE>
As compensation for the services provided and expenses borne by the
Distributor pursuant to the Distribution Agreement with respect to A shares, the
Trust pays the Distributor the sales load described in the Prospectus and a
distribution and service fee in accordance with the Class A Plan described
below. This fee is accrued daily and paid monthly, and currently is equal on an
annual basis to .25% of average daily net assets. For the fiscal year ended
September 30, 1996, the Distributor received A share distribution and service
fees in the amount of $94,590.
As compensation for the services provided and expenses borne by the
Distributor pursuant to the Distribution Agreement with respect to C shares, the
Trust pays the Distributor a distribution fee and a shareholder servicing fee in
accordance with the Class C Plan described below. The distribution fee is
accrued daily and paid monthly, and currently is equal to, on an annual basis,
an amount up to .75% of average daily net assets. The service fee is accrued
daily and paid monthly, and currently is equal to, on an annual basis, an amount
up to .25% of average daily net assets. For the fiscal year ended September 30,
1996, the Distributor received C share service and distribution fees in the
amount of $13,604.
In reporting amounts expended under the Plans 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 Trust 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 Class A Distribution Plan (the "Class A Plan")
which, among other things, permits it to pay the Distributor the above-described
fee out of its net assets to finance activity that is intended to result in the
sale and retention of A shares. As required by Rule 12b-1 under the 1940 Act,
the Class A Plan was approved by 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 Trust and its Class A
shareholders will benefit from the Class A Plan.
The Trust also has adopted a Class C Distribution Plan (the "Class C
Plan") which, among other things, permits it to pay the Distributor the
above-described fee out of its net assets to finance activity that is intended
to result in the sale and retention of C shares. The Distributor, on C shares,
may retain the first 12 months distribution fee for reimbursement of amounts
- 36 -
<PAGE>
paid to the broker-dealer at the time of purchase. The Class C Plan was approved
by the Board of Trustees, including a majority of the Independent Trustees after
determining that there is a reasonable likelihood that the Trust and its Class C
shareholders will benefit from the Class C Plan.
The Class A Plan and the Class C Plan each 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 Trust. 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 requires approval of that class of shareholders.
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 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.
For the three fiscal years ended September 30, 1994, 1995 and 1996, the
Distributor received $92,322, $27,055 and $173,493, respectively, as
compensation for the sale of A shares, of which it retained $13,334, $3,490 and
$8,559, respectively.
Administration Of The Trust
---------------------------
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 Trust; 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 Trust.
- 37 -
<PAGE>
The Manager also is the fund accountant and transfer and dividend
disbursing agent for the Trust. The Trust 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 September 30, 1994, 1995 and
1996, the Manager earned $29,355, $28,570 and $25,867, respectively, from the
Trust for its services as transfer agent. For the period March 1, 1994
(commencement of the Manager's engagement as fund accountant) to September 30,
1994, and the fiscal years ended September 30, 1995 and 1996, the Manager earned
$11,969, $28,932 and $31,011, respectively, from the Trust for its services as
fund accountant.
CUSTODIAN. State Street Bank and Trust Company, P.0. Box 1912, Boston,
Massachusetts 02105, serves as custodian of the Trust's assets.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP of 1800 Massachusetts Ave.,
N.W., Washington, D.C. 20036, serves as counsel to the Trust.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 400 North Ashley Street,
Suite 2800, Tampa, Florida 33602, are the independent public accountants for the
Trust. The Financial Statements and Financial Highlights of the Trust for the
fiscal year ended September 30, 1996 that appear in this SAI have been audited
by Price Waterhouse LLP, and are included herein in reliance upon the report of
said firm of accountants, which is given upon their authority as experts in
accounting and auditing. The Financial Highlights for the fiscal years ended
prior thereto and the Statement of Changes in Net Assets for the year ended
September 30, 1995 were audited by other independent public accountants.
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 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.
- 38 -
<PAGE>
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.
- 39 -
<PAGE>
APPENDIX
CORPORATE DEBT RATINGS
The rating services' description of corporate bond ratings in which the Trust
may invest are:
Description Of Moody's Investor's Service, Inc. Corporate Debt Rarings:
- ----------------------------------------------------------------------
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as "gilt
edged." 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.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what generally are 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 risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.
Baa -- Bonds that are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-1
<PAGE>
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bonding rating system. The
modifier 1 indicates that the company ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the company ranks in the lower end of its generic rating
category.
Description Of Standard & Poor's Corporate Debt Ratings:
- --------------------------------------------------------
AAA - Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB and B -- Debt rated "BB" and "B" is regarded, on balance, as predominately
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt likely
will have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. Debt rated
"BB" has less near-term vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions that could lead to inadequate capacity to meet
timely interest and principal payments. The "BB" rating category also is used
for debt subordinated to senior debt that is assigned an actual or implied
"BBB-" rating. Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions likely will impair capacity
or willingness to pay interest and repay principal. The "B" rating category also
is used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
A-2
<PAGE>
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
COMMERCIAL PAPER RATINGS
The rating services' descriptions of commercial paper ratings in which the Trust
may invest are:
Description Of Moody's Investors Service, Inc.:
- -----------------------------------------------
Prime-1. Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability often will be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2. Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term debt obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
affected more by external conditions. Ample alternate liquidity is maintained.
Description Of Standard & Poor's Commercial Paper Ratings:
- ----------------------------------------------------------
A-1. This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3
<PAGE>
The Report of Independent Accountants and Financial Statements are
incorporated herein by reference from the Trust's Annual Report to Shareholders
for the fiscal year ended September 30, 1996, filed with the Securities and
Exchange Commission on December 10, 1996, Accession No. 950144-96-008964.
<PAGE>
HERITAGE INCOME-GROWTH TRUST
----------------------------
PART C. OTHER INFORMATION
--------------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A of the Registration Statement:
Financial Highlights for: the Class A Shares for
the period December 15, 1986 (commencement of
operations) to September 30, 1987 and for each
of the nine years ended September 30, 1996;
the Class C Shares for the period April 3,
1995 (commencement of operations of Class C
Shares) to September 30, 1995 and for the one
year ended September 30, 1996.
Included in Part B of the Registration Statement:
Investment Portfolio - September 30, 1996
Statement of Assets and Liabilities -
September 30, 1996
Statement of Operations - for the year ended
September 30, 1996
Statements of Charges in Net Assets for the
years ended September 30, 1995 and
September 30, 1996
Notes to Financial Statements
Report of Price Waterhouse LLP, Independent
Accountants, dated November 12, 1996
(b) Exhibits:
(1) Declaration of Trust*
(2) (a) Bylaws*
(b) Amended and Restated Bylaws*
(3) Voting trust agreement--none
(4) (a) Specimen security relating to Class A
Shares***
(b) Specimen security relating to Class C
Shares***
(5) (a) Investment Advisory and Administration
Agreement*
C - 1
<PAGE>
(b) Subadvisory Agreement*
(6) Distribution Agreement*
(7) Bonus, profit sharing or pension plans--none
(8) Custodian Agreement*
(9) (a) Transfer Agency and Service Agreement*
(b) Fund Accounting and Pricing Service
Agreement*
(10) Opinion and consent of counsel**
(11) Accountants' consent (filed herewith)
(12) Financial statements omitted from prospectus
--none
(13) Letter of investment intent*
(14) Prototype retirement plan***
(15) (a) Class A Plan pursuant to Rule 12b-1*
(b) Class B Plan pursuant to Rule 12b-1*
(16) Performance Computation Schedule*
(17) Electronic Filers--Financial Data Schedule:
(a) Financial Data Schedule relating to
Class A (filed herewith)
(b) Financial Data Schedule relating to
Class C (filed herewith)
(18) Plan pursuant to Rule 18f-3 (filed herewith)
_______________
* Incorporated by reference from Post-Effective Amendment No. 12
to the Registration Statement of the Trust, SEC File No. 33-
7559, filed previously on January 26, 1996.
** Incorporated by reference to the Trust's Rule 24f-2 Notice
filed on November 27, 1996.
*** To be filed by subsequent amendment.
C - 2
<PAGE>
Item 25. Persons Controlled by or under
Common Control with Registrant
------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class December 31, 1996
- -------------- ------------------------
Class A Shares 2,775
Class C Shares 599
Item 27. Indemnification
---------------
Article XI, Section 2 of the Trust's Declaration of Trust provides
that:
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless
C - 3
<PAGE>
disregard of the duties involved in the conduct of his office (A) by the court
or other body approving the settlement; (B) by at least a majority of those
Trustees who are neither interested persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by independent
counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be such
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, or proceeding of the character described in
paragraph (a) of this Section 2 may be paid by the Trust from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust if it
is ultimately determined that he is not entitled to indemnification under this
Section 2; provided, however, that:
(i) such Covered Person shall have provided appropriate security
for such undertaking,
(ii) the Trust is insured against losses arising out of any such
advance payments or
(iii) either a majority of the Trustees who are neither interested
persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
According to Article XII, Section 1 of the Declaration of Trust, the
Trust is a trust, not a partnership. Trustees are not liable personally to any
person extending credit to, contracting with or having any claim against the
Trust.
Article XII, Section 2 of the Declaration of Trust provides that,
subject to the provisions of Section 1 of Article XII and to
C - 4
<PAGE>
Article XI, the Trustees are not liable for errors of judgment or mistakes of
fact or law, or for any act or omission in accordance with advice of counsel or
other experts or for failing to follow such advice. A Trustee, however, is not
protected from liability due to willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
Paragraph 8 of the Investment Advisory and Administration Agreement of
Heritage Income-Growth Trust ("Advisory Agreement") between the Trust and
Heritage Asset Management, Inc. ("Heritage") provides that, Heritage shall not
be liable for any error of judgment or mistake of law for any loss suffered by
the Trust in connection with the matters to which the Advisory Agreement relates
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under the Advisory Agreement. Any person, even though
also an officer, partner, employee, or agent of Heritage, who may be or become
an officer, director, employee or agent of the Trust shall be deemed, when
rendering services to the Trust or acting in any business of the Trust, to be
rendering such services to or acting solely for the Trust and not as an officer,
partner, employee, or agent or one under the control or direction of Heritage
even though paid by it.
Paragraph 9 of the Subadvisory Agreement for Heritage Income- Growth
Trust ("Subadvisory Agreement") between Heritage and Eagle Asset Management,
Inc. ("Eagle") provides that, in the absence of willful misfeasance, bad faith
or gross negligence on the part of Eagle or reckless disregard of its
obligations and duties under the Subadvisory Agreement, Eagle shall not be
subject to any liability to the Trust, or to any shareholder of the Trust, for
any act or omission in the course of, or connected with, rendering services
under the Subadvisory Agreement.
Paragraph 7 of the Distribution Agreement of Heritage Income-Growth
Trust ("Distribution Agreement") between the Trust and Raymond James &
Associates, Inc. ("Raymond James") provides that the Trust agrees to indemnify,
defend and hold harmless Raymond James, its several officers and directors, and
any person who controls Raymond James within the meaning of Section 15 of the
Securities Act of 1933, as amended (the "1933 Act"), from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Raymond James, its officers or
Trustees, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement, Prospectus
or Statement of Additional Information or arising out of or based upon any
alleged omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not misleading,
provided
C - 5
<PAGE>
that in no event shall anything contained in the Distribution Agreement be
construed so as to protect Raymond James against any liability to the Trust or
its shareholder to which Raymond James would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Distribution Agreement.
Paragraph 13 of the Heritage Funds Accounting and Pricing Services
Agreement ("Accounting Agreement") between the Trust and Heritage provides that
the Trust agrees to indemnify and hold harmless Heritage and its nominees from
all losses, damages, costs, charges, payments, expenses (including reasonable
counsel fees), and liabilities arising directly or indirectly from any action
that Heritage takes or does or omits to take to do (i) at the request or on the
direction of or in reasonable reliance on the written advice of the Trust or
(ii) upon Proper Instructions (as defined in the Accounting Agreement),
provided, that neither Heritage nor any of its nominees shall be indemnified
against any liability to the Trust or to its shareholders (or any expenses
incident to such liability) arising out of Heritage's own willful misfeasance,
willful misconduct, gross negligence or reckless disregard of its duties and
obligations specifically described in the Accounting Agreement or its failure to
meet the standard of care set forth in the Accounting Agreement.
Item 28. I. Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Heritage is a Florida corporation which offers investment management
services. Information as to the officers and directors of Heritage is included
in its current Form ADV filed with the Securities and Exchange Commission
("SEC") and is included by reference herein.
II. Business and Other Connections of Subadviser
--------------------------------------------
Eagle, a Florida corporation, is a registered investment adviser. All
of its stock is owned by Raymond James Financial, Inc. ("RJF"). Eagle is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Eagle is included in its current Form ADV filed with
the SEC and is incorporated by reference herein.
Item 29. Principal Underwriter
---------------------
(a) Raymond James is the principal underwriter for each of the
following investment companies: Heritage Cash Trust, Heritage Capital
C - 6
<PAGE>
Appreciation Trust, Heritage Income-Growth Trust, Heritage Income Trust,
Heritage Series Trust and Heritage U.S. Government Income Fund.
(b) The directors and officers of the Registrant's principal
underwriter are:
Positions & Offices Position
Name with Underwriter with Registrant
- ---- ---------------- ---------------
Thomas A. James Chief Executive Officer, Trustee
Director
Robert F. Shuck Executive V.P., Director None
Thomas S. Franke President, Chief Operating None
Officer, Director
Lynn Pippenger Secretary/Treasurer, None
Chief Financial Officer,
Director
Dennis Zank Executive VP of Operations None
and Administration, Director
Thom Tremaine Senior Vice President None
Francis Godbold Executive Vice President None
Paul Matecki Chief Legal Officer None
Joseph Tuorto Chief Compliance Officer None
Anne Rettig Assistant Treasurer None
Jodi Campos Vice President Controller None
Michael Cahill Assistant Vice President None
Controller
Sharry Mauney Assistant Secretary None
Grace Palsha Assistant Secretary None
Item 30. Location of Accounts and Records
--------------------------------
The books and other documents required by Rule 31a-1 under the
Investment Company Act of 1940 are maintained in the physical possession of the
Trust's Custodian through February 28, 1994, except that: Heritage maintains
some or all of the records required by Rule 31a-1(b)(1), (2) and (8); and the
Subadviser maintains some or all of the records required by Rule 31a-1(b)(2),
C - 7
<PAGE>
(5), (6), (9), (10) and (11). Since March 1, 1994, all required records are
maintained by Heritage.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
The Trust hereby undertakes to furnish each person to whom a prospectus
is delivered a copy of the its latest annual report(s) to shareholders, upon
request and without charge.
C - 8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of this requirements for effectiveness of this amendment to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 14 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg and the
State of Florida, on the 30th day of January, 1997. No material event requiring
prospectus disclosure has occurred since the latest of the three dates specified
in Rule 485(b)(2).
HERITAGE INCOME-GROWTH TRUST
By: /s/ Stephen G. Hill, President
------------------------------
Stephen G. Hill, President
Attest:
/s/ Donald H. Glassman
- -----------------------------
Donald H. Glassman, Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 14 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Stephen G. Hill
- ------------------------------------ President January 30, 1997
Stephen G. Hill
/s/Thomas A. James*
- ------------------------------------ Trustee January 30, 1997
Thomas A. James
/s/ Richard K. Riess*
- ------------------------------------ Trustee January 30, 1997
Richard K. Riess
/s/ C. Andrew Graham*
- ------------------------------------ Trustee January 30, 1997
C. Andrew Graham
/s/ David M. Phillips*
- ------------------------------------ Trustee January 30, 1997
David M. Phillips
/s/ James L. Pappas
- ------------------------------------ Trustee January 30, 1997
James L. Pappas
/s/ Donald W. Burton*
- ------------------------------------ Trustee January 30, 1997
Donald W. Burton
Eric Stattin*
- ------------------------------------ Trustee January 30, 1997
Eric Stattin
*By /s/ Donald H. Glassman, Attorney-In-Fact
----------------------------------------
Donald H. Glassman, Attorney-In-Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page
- ------ ----------- ----
1 Declaration of Trust*
2 (a) Bylaws*
(b) Amended and Restated Bylaws*
3 Voting trust agreement -- none
4 (a) Specimen security for Class A Shares***
(b) Specimen security for Class C Shares***
5 (a) Investment Advisory and Administration Agreement*
(b) Subadvisory Agreement*
6 Distribution Agreement*
7 Bonus, profit sharing or pension plans -- none
8 Custodian Agreement*
9 (a) Transfer Agency and Service Agreement*
(b) Fund Accounting and Pricing Service Agreement*
10 Opinion and consent of counsel**
11 Accountants' consent (filed herewith)
12 Financial statements omitted from prospectus -- none
13 Letter of investment intent*
14 Prototype retirement plan***
15 (a) Class A Plan pursuant to Rule 12b-1*
(b) Class C Plan pursuant to Rule 12b-1*
16 Performance Computation Schedule*
17 Electronic Filers -- Financial Data Schedule:
(a) Financial Data Schedule relating to Class A (filed
herewith)
(b) Financial Data Schedule relating to Class C (filed
herewith)
18 Plan pursuant to Rule 18f-3 (filed herewith)
_______________
* Incorporated by reference from Post-Effective Amendment No. 12 to the
Registration Statement of the Trust, SEC File No. 33-7559, filed previously
on January 26, 1996.
** Incorporated by reference to the Trust's Rule 24f-2 Notice filed on
November 27, 1996.
*** To be filed by subsequent amendment.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 14 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 12, 1996, relating to the financial statements and financial highlights
of The Heritage Income Growth Trust which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
Price Waterhouse LLP
400 North Ashley Street, Suite 2800
Tampa, Florida 33602
January 28, 1997
HERITAGE CASH TRUST
HERITAGE CAPITAL APPRECIATION TRUST
HERITAGE INCOME-GROWTH TRUST
HERITAGE INCOME TRUST
HERITAGE SERIES TRUST
Multiple Class Plan Pursuant to Rule 18f-3
The investment companies listed on Appendix A attached hereto (each a
"Fund" and collectively, the "Funds") hereby adopt this Multiple Class Plan
pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"). This Plan describes the classes of shares of interest of the Funds
on or after August 9, 1996.
A. CLASSES OFFERED.
----------------
1. CLASS A. Class A shares are offered to investors of each of
the Funds subject to an initial sales charge. The maximum sales charge
varies between 0.00% and 4.75% of the amount invested and may decline
based on discounts for volume purchases. The initial sales charge may
be waived for certain eligible purchasers or under certain
circumstances. If no initial sales charge is imposed on a purchase of
shares, a contingent deferred sales load ("CDSL") of up to 1% may be
imposed on any redemption of those shares within two years of the
purchase (consistent with the disclosure in the Fund's prospectus).
Class A shares also are subject to an annual service fee ranging from
0.15% to 0.25% and a distribution fee ranging from 0.00% to 0.25% of
the average daily net assets of the Class A shares paid pursuant to a
plan of distribution adopted pursuant to Rule 12b-1. Class A shares
require an initial investment of $1,000, except for certain retirement
accounts and investment plans for which lower limits may apply.
2. CLASS C. Class C shares are offered to investors of each of
the Funds subject to a CDSL on redemptions of shares held less than one
year. The Class C CDSL is equal to 1% of the lower of: (1) the net
asset value of the shares at the time of purchase or (2) the net asset
value of the shares at the time of redemption. Class C shares held
longer than one year and Class C shares acquired through reinvestment
of dividends or capital gains distributions on shares otherwise subject
to a Class C CDSL are not subject to the CDSL. The CDSL for Class C
shares of the Funds may be waived under certain circumstances.
Class C shares are subject to an annual service fee ranging from 0.15%
to 0.25% of average daily net assets and a distribution fee ranging
from 0.00% to 0.75% of average daily net assets of the Class C shares
of the Fund, each paid pursuant to a plan of distribution adopted
pursuant to Rule 12b-1. Class C shares require an initial investment of
$1,000, except for certain retirement accounts and investment plans for
which lower limits may apply.
<PAGE>
3. EAGLE CLASS. The Eagle International Equity Portfolio of
Heritage Series Trust offers the Eagle Class of Shares. Eagle Class
shares are offered to all investors without the imposition of an
initial sales charge or a contingent deferred sales load. Eagle Class
shares require an initial investment of $50,000, except for investors
who already maintain an account with Eagle Asset Management, Inc. for
which a $25,000 minimum initial investment applies. Eagle Class
shareholders incur an annual service fee of .25% of average daily net
assets and a distribution fee of .75% of average daily net assets of
the Eagle Class shares of the Portfolio, each paid pursuant to a plan
of distribution adopted pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1"). All of the shares of the Portfolio issued pursuant to a
Portfolio prospectus effective prior to the Implementation Date and
that are outstanding on the Implementation Date will be designated as
Eagle Class shares.
B. EXPENSE ALLOCATIONS OF EACH CLASS. Certain expenses may be attributable
to a particular class of shares of the Portfolio ("Class Expenses"). Class
Expenses are charged directly to the net assets of the particular class and,
thus are borne on a pro rata basis by the outstanding shares of that class.
In addition to the distribution and service fees described above, each
class also may pay a different amount of the following other expenses: (1) 12b-1
fees, (2) transfer agent fees identified as being attributable to a specific
class, (3) stationery, printing, postage, and delivery expenses related to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxy statements to current shareholders of a class, (4) Blue Sky
registration fees incurred by a specific class of shares, (5) Securities and
Exchange Commission registration fees incurred by a specific class of shares,
(6) expenses of administrative personnel and services required to support the
shareholders of a specific class, (7) trustees' fees or expenses incurred as a
result of issues relating to a specific class of shares, (8) accounting expenses
relating solely to a specific class of shares, (9) auditors' fees, litigation
expenses, and legal fees and expenses relating to a specific class of shares,
and (10) expenses incurred in connection with shareholders meetings as a result
of issues relating to a specific class of shares.
C. EXCHANGE FEATURES. If an investor has held Class A or Class C shares for at
least 30 days, the investor may exchange those shares for shares of the
corresponding class of any other mutual fund for which Heritage Asset
Management, Inc. serves as investment adviser ("Heritage mutual funds"). All
exchanges are subject to the minimum investment requirements and any other
applicable terms set forth in the prospectus for the Heritage mutual funds whose
shares are being acquired. Class C shares, however, are not eligible for
exchange into the Heritage Municipal Money Market Fund.
These exchange privileges may be modified or terminated by the
Portfolio, and exchanges may be made only into funds that are registered legally
for sale in the investor's state of residence.
D. ADDITIONAL INFORMATION. This Multiple Class Plan is qualified by and subject
to the terms of the then current prospectus for the applicable classes;
provided, however, that none of the terms set forth in any such prospectus shall
be inconsistent with the terms of the classes contained in this Plan. The
prospectuses for the Eagle Class and for the Class A and Class C contain
additional information about those classes and the Portfolio's multiple class
structure.
Dated: August 9, 1996, as amended on November 18, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 0
<NAME> HERITAGE INCOME GROWTH TRUST - A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> $41,805,110
<INVESTMENTS-AT-VALUE> $49,497,730
<RECEIVABLES> $1,568,294
<ASSETS-OTHER> $12,943
<OTHER-ITEMS-ASSETS> $0
<TOTAL-ASSETS> $51,078,967
<PAYABLE-FOR-SECURITIES> $1,593,740
<SENIOR-LONG-TERM-DEBT> $0
<OTHER-ITEMS-LIABILITIES> $583,492
<TOTAL-LIABILITIES> $2,177,232
<SENIOR-EQUITY> $0
<PAID-IN-CAPITAL-COMMON> $36,319,738
<SHARES-COMMON-STOCK> 3,336,227
<SHARES-COMMON-PRIOR> 2,757,004
<ACCUMULATED-NII-CURRENT> $242,254
<OVERDISTRIBUTION-NII> $0
<ACCUMULATED-NET-GAINS> $4,726,017
<OVERDISTRIBUTION-GAINS> $0
<ACCUM-APPREC-OR-DEPREC> $7,613,726
<NET-ASSETS> $48,901,735
<DIVIDEND-INCOME> $1,008,562
<INTEREST-INCOME> $628,893
<OTHER-INCOME> $0
<EXPENSES-NET> $601,190
<NET-INVESTMENT-INCOME> $1,036,265
<REALIZED-GAINS-CURRENT> $5,071,215
<APPREC-INCREASE-CURRENT> $1,700,001
<NET-CHANGE-FROM-OPS> $7,807,481
<EQUALIZATION> $0
<DISTRIBUTIONS-OF-INCOME> $987,133
<DISTRIBUTIONS-OF-GAINS> $685,375
<DISTRIBUTIONS-OTHER> $0
<NUMBER-OF-SHARES-SOLD> 958,043
<NUMBER-OF-SHARES-REDEEMED> (500,960)
<SHARES-REINVESTED> 122,140
<NET-CHANGE-IN-ASSETS> $8,144,784
<ACCUMULATED-NII-PRIOR> $964,709
<ACCUMULATED-GAINS-PRIOR> $450,201
<OVERDISTRIB-NII-PRIOR> $0
<OVERDIST-NET-GAINS-PRIOR> $0
<GROSS-ADVISORY-FEES> $293,974
<INTEREST-EXPENSE> $0
<GROSS-EXPENSE> $572,222
<AVERAGE-NET-ASSETS> $37,842,169
<PER-SHARE-NAV-BEGIN> $12.56
<PER-SHARE-NII> $0.36
<PER-SHARE-GAIN-APPREC> $2.35
<PER-SHARE-DIVIDEND> $0.35
<PER-SHARE-DISTRIBUTIONS> $0.25
<RETURNS-OF-CAPITAL> $0.00
<PER-SHARE-NAV-END> $14.67
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> $0
<AVG-DEBT-PER-SHARE> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 0
<NAME> HERITAGE INCOME GROWTH TRUST - C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> $41,805,110
<INVESTMENTS-AT-VALUE> $49,497,730
<RECEIVABLES> $1,568,294
<ASSETS-OTHER> $12,943
<OTHER-ITEMS-ASSETS> $0
<TOTAL-ASSETS> $51,078,967
<PAYABLE-FOR-SECURITIES> $1,593,740
<SENIOR-LONG-TERM-DEBT> $0
<OTHER-ITEMS-LIABILITIES> $583,492
<TOTAL-LIABILITIES> $2,177,232
<SENIOR-EQUITY> $0
<PAID-IN-CAPITAL-COMMON> $36,319,738
<SHARES-COMMON-STOCK> 3,336,227
<SHARES-COMMON-PRIOR> 2,757,004
<ACCUMULATED-NII-CURRENT> $242,254
<OVERDISTRIBUTION-NII> $0
<ACCUMULATED-NET-GAINS> $4,726,017
<OVERDISTRIBUTION-GAINS> $0
<ACCUM-APPREC-OR-DEPREC> $7,613,726
<NET-ASSETS> $48,901,735
<DIVIDEND-INCOME> $1,008,562
<INTEREST-INCOME> $628,893
<OTHER-INCOME> $0
<EXPENSES-NET> $601,190
<NET-INVESTMENT-INCOME> $1,036,265
<REALIZED-GAINS-CURRENT> $5,071,215
<APPREC-INCREASE-CURRENT> $1,700,001
<NET-CHANGE-FROM-OPS> $7,807,481
<EQUALIZATION> $0
<DISTRIBUTIONS-OF-INCOME> $987,133
<DISTRIBUTIONS-OF-GAINS> $685,375
<DISTRIBUTIONS-OTHER> $0
<NUMBER-OF-SHARES-SOLD> 958,043
<NUMBER-OF-SHARES-REDEEMED> (500,960)
<SHARES-REINVESTED> 122,140
<NET-CHANGE-IN-ASSETS> $8,144,784
<ACCUMULATED-NII-PRIOR> $964,709
<ACCUMULATED-GAINS-PRIOR> $450,201
<OVERDISTRIB-NII-PRIOR> $0
<OVERDIST-NET-GAINS-PRIOR> $0
<GROSS-ADVISORY-FEES> $293,974
<INTEREST-EXPENSE> $0
<GROSS-EXPENSE> $28,968
<AVERAGE-NET-ASSETS> $1,361,562
<PER-SHARE-NAV-BEGIN> $12.51
<PER-SHARE-NII> $0.26
<PER-SHARE-GAIN-APPREC> $2.34
<PER-SHARE-DIVIDEND> $0.29
<PER-SHARE-DISTRIBUTIONS> $0.25
<RETURNS-OF-CAPITAL> $0.00
<PER-SHARE-NAV-END> $14.57
<EXPENSE-RATIO> 2.29
<AVG-DEBT-OUTSTANDING> $0
<AVG-DEBT-PER-SHARE> $0
</TABLE>
