INCOME-
GROWTH
TRUST
[GRAPHIC OMITTED]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH.
Annual Report
and Investment Performance
Review for the Year Ended
September 30, 1998
[LOGO]
______________
Income-Growth
Trust(TM)
______________
<PAGE>
November 19, 1998
Dear Fellow Shareholders:
I am pleased to provide you with the annual report for Heritage
Income-Growth Trust (the "Fund") for the fiscal year ended September 30, 1998.
For this period, your Fund had a total return of -0.34% and -1.08% on Class A
and Class C Shares, respectively.* Your Fund introduced Class B Shares on
January 2, 1998. From their introduction through September 30, 1998, the Class
B Shares had a total return of -4.50%.*
Although your Fund's total return seems to indicate a relatively flat year
for the stock market, this would not be the correct conclusion. The past fiscal
year actually was marked by extreme volatility with stocks moving strongly
higher in the first half of your Fund's fiscal year, then falling sharply
through the end of August, followed again by a rally in September. Further, the
returns of the stock market indices were dominated by the largest
capitalization stocks. While your Fund owns some of these stocks, such as
General Electric, the weighted market capitalization of your Fund's portfolio
was only about half that of the Standard & Poor's 500 Composite Stock Price
Index (S&P 500). During the most recent fiscal year, the S&P 500 had a positive
return of 9.06%.
As we have discussed in previous letters, your Fund is designed to provide
equity investors with a smoother ride than they may experience from the market
averages or from other more aggressive stock mutual funds. According to the
Value Line Mutual Fund Survey, your Fund had a Beta (a measure of a portfolio's
volatility relative to the overall market) of 0.60 while the average Beta for
your Fund's peer group was 0.86. The S&P 500, for comparison, has a Beta of
1.00.
I hope you will review the portfolio managers' letter that follows. In it,
Lou Kirschbaum and David Blount comment further on the factors that influenced
your Fund's performance over the last year. They also give their thoughts on
the current market environment we are facing.
We appreciate your continuing investment in Heritage Income-Growth Trust.
If there are ever ways which you believe we could serve you better, please call
us at (800) 709-3863. On behalf of all of us at Heritage, best wishes for a
happy and healthy holiday season.
Sincerely,
/s/ STEPHEN G. HILL
-------------------
Stephen G. Hill
President
- ----------
* These returns are calculated without the imposition of either front- or
back-end sales charges.
<PAGE>
November 19, 1998
Dear Fellow Shareholders:
In our letter to you a year ago, we noted the following:
". . . there is more uncertainty . . . than we have seen for some
time . . . A conventional cyclical contraction seems unlikely. But there is
sufficient concern about Japan as well as some of the emerging (and suddenly
submerging) economies in the Far East and Latin America that we expect the
volatility that has characterized U.S. financial markets . . . to continue for
some time."
Sometimes we would prefer not being right!
The past year has been frustrating for most investors. The stock market
was dominated by a relative handful of super-cap growth stocks that seemed for
a while as though they could only go higher. The larger body of stocks,
particularly mid-sized and smaller companies, languished late in calendar 1997,
rallied early in the new year, and declined sharply beginning in the spring.
The disparity was reflected in the performance of the Standard & Poor's 500
Composite Stock Price Index (S&P 500), against which most mutual funds are
measured.
The S&P 500 is a weighted index; that is, the larger companies have a
greater effect on performance than the smaller companies in the index. In most
years, there isn't much difference between the weighted and unweighted results.
In the past 12 months, however, the disparity was Grand Canyon sized. While S&P
500, as reported on a size-weighted basis, was up 9.1% in the year ended
September 30th, the same index on an equal-weighted basis was down 8% during
the same period -- a spread of more than 17%!
The Heritage Income-Growth Trust in the past year performed squarely in
between the weighted and unweighted S&P 500.
The most important contributors on the positive side were the
pharmaceutical stocks, including Schering-Plough, Warner-Lambert, American Home
Products, and Pharmacia & Upjohn. This group has been in favor because earnings
growth has been accelerating in an environment where aggregate corporate
profits have been losing momentum.
With interest rates generally declining and global economic turmoil making
news almost daily, defensive stocks were in favor, too. FPL Group, GTE, and
Wicor fall into the category of stocks that benefited from a general flight to
quality.
On the downside, the biggest disappointment of the past year was the
performance of Real Estate Investment Trusts (REITs). The group lagged the
market most of the year, even though operating results have met or exceeded
expectations in nearly all cases. Other than REITs, the sector that restrained
performance somewhat in the past year was the energy group. Declining oil and
gas prices hurt investor sentiment here. Still, the stocks produced healthy
dividend yields and the companies we hold generally took actions to beef up
their long-term prospects by redeploying capital during this period of
depressed commodity prices.
As always, we appreciate your continued confidence and support.
Sincerely,
/s/ LOU KIRSCHBAUM /s/ DAVID BLOUNT
- ------------------ -------------------
Lou Kirschbaum David Blount
Senior Vice President Vice President
Eagle Asset Management, Inc. Eagle Asset Management, Inc.
Portfolio Manager, Income-Growth Trust Portfolio Manager, Income-Growth Trust
<PAGE>
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION OF HERITAGE INCOME-GROWTH TRUST
CLASS A SHARES SINCE OCTOBER 1, 1988
[GRAPHIC OMITTED]
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION 0F HERITAGE INCOME-GROWTH TRUST
CLASS B SHARES
ON JANUARY 2, 1998
[GRAPHIC OMITTED]
(See footnotes on the following page)
3
<PAGE>
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION 0F HERITAGE INCOME-GROWTH TRUST
CLASS C SHARES ON APRIL 3, 1995
[GRAPHIC OMITTED]
* Total return for Heritage Income-Growth Trust Class A, Class B, and Class C
Shares, are calculated in conformance with item 21 of Form N-1A, which
assumes reinvestment of dividends and a sales load of 4.75% for Class A
Shares. Performance presented represents historical data. The investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. The Fund's past performance is not indicative of future
performance and should be considered in light of the Fund's investment
policy and objectives, the characteristics and quality of its portfolio
securities, and the periods selected. Since the period shown is less than
one year the aggregate total return in lieu of annualized total return is
used for Class B Shares. The Value Line Index does not include reinvestment
of dividends.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES SINCE FEBRUARY 1, 1990
LOUIS KIRSCHBAUM, PORTFOLIO MANAGER
[GRAPHIC OMITTED]
The Value Line Index does not include reinvestment of dividends.
** The Lipper Average returns are the average of the Equity Income Funds
tracked by Lipper Analytical Services Inc.
***Return for Heritage Income-Growth Trust Class A Shares does not reflect the
imposition of front-end sales load.
4
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -------------
<S> <C>
COMMON STOCKS--70.5%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--1.7%
- ----------------------------------
40,000 Omnicom Group, Inc.(b) ............... $1,800,000
----------
BANKING--5.5%
- ---------------
20,000 First Union Corporation .............. 1,023,750
15,100 Jefferson-Pilot Corporation,
ACES ................................ 1,434,500
31,000 Mellon Bank Corporation .............. 1,706,938
45,000 Norwest Corporation .................. 1,611,562
----------
5,776,750
----------
COATINGS, PAINT, VARNISHES--0.7%
- ----------------------------------
13,000 PPG Industries, Inc. ................. 709,312
----------
CONGLOMERATES/DIVERSIFIED--1.4%
- ---------------------------------
50,000 Harsco Corporation ................... 1,506,250
----------
CONTAINERS--0.5%
- ------------------
18,000 Crown Cork & Seal
Company, Inc. ....................... 481,500
----------
ELECTRONICS/ELECTRIC--2.0%
- ----------------------------
27,000 General Electric Company ............. 2,148,187
----------
FINANCE--1.8%
- ---------------
12,000 American Express Company ............. 931,500
14,000 Associates First
Capital Corporation ................. 913,500
----------
1,845,000
----------
FOOD--3.6%
- ------------
70,000 ConAgra, Inc. ........................ 1,885,625
37,000 H.J. Heinz Company ................... 1,891,625
----------
3,777,250
----------
INSURANCE--2.0%
- -----------------
51,000 SAFECO Corporation ................... 2,126,062
----------
INVESTMENT COMPANIES--1.5%
- ----------------------------
50,343 Security Capital
Preferred Growth(c) .................. 1,054,678
50,000 Security Capital US Realty* .......... 535,000
----------
1,589,678
----------
MANUFACTURING/DISTRIBUTIONS--2.1%
- -----------------------------------
92,000 Sysco Corporation .................... 2,167,750
----------
OFFICE EQUIPMENT--1.0%
- ------------------------
20,000 Hewlett-Packard Company(b) ........... 1,058,750
----------
OIL & GAS--7.8%
- -----------------
40,000 Ashland, Inc. ........................ 1,850,000
24,000 British Petroleum Company,
PLC, Sponsored ADR .................. 2,094,000
20,000 MCN Energy Group, Inc. ............... 341,250
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- ------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -------------------------
OIL & GAS (CONTINUED)
- -----------------------
26,000 Mobil Corporation ....................... 1,974,375
40,000 Royal Dutch Petroleum
Company, NY Shares,
ADR .................................... 1,905,000
---------
8,164,625
---------
PHARMACEUTICAL--9.4%
- ----------------------
32,000 American Home
Products Corporation(b) ................ 1,676,000
10,150 Bristol-Myers Squibb Company ............ 1,054,331
46,000 Pharmacia & Upjohn, Inc. ................ 2,308,625
27,000 Schering-Plough Corporation(b) .......... 2,796,188
27,000 Warner-Lambert Company .................. 2,038,500
---------
9,873,644
---------
REAL ESTATE INVESTMENT TRUST--6.7%
- ------------------------------------
60,000 Centertrust Retail
Properties, Inc. ....................... 780,000
41,500 Nationwide Health
Properties, Inc. ....................... 933,750
27,500 Prologis Trust .......................... 622,188
34,500 Spieker Properties, Inc. ................ 1,267,875
20,000 Starwood Hotels & Resorts ............... 610,000
15,000 Storage Trust Realty .................... 352,500
25,000 Sun Communities, Inc. ................... 839,062
32,000 The Rouse Company ....................... 862,000
40,000 Tower Realty Trust, Inc. ................ 795,000
---------
7,062,375
---------
REAL ESTATE/LAND DEVELOPMENT--0.4%
- ------------------------------------
25,000 Security Capital Group, Inc.,
Class "B"* ............................. 450,000
---------
RETAIL STORES--1.8%
- ---------------------
100,000 Intimate Brands, Inc. ................... 1,893,750
---------
TELECOMMUNICATIONS--5.6%
- --------------------------
55,000 ALLtel Corporation ...................... 2,605,625
9,000 BellSouth Corporation ................... 677,250
47,500 GTE Corporation ......................... 2,612,500
---------
5,895,375
---------
TOBACCO--2.2%
- ---------------
51,000 Phillip Morris Companies, Inc. .......... 2,349,187
---------
UTILITIES-ELECTRIC--5.7%
- --------------------------
36,000 FPL Group, Inc. ......................... 2,508,750
50,000 PacifiCorp .............................. 959,375
65,000 Sierra Pacific Resources ................ 2,522,813
---------
5,990,938
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1998
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -------------------------
UTILITIES-GAS--4.7%
- ---------------------
92,000 UGI Corporation ..................... $ 2,127,500
75,900 Wicor, Inc. ......................... 1,812,113
35,000 Williams Companies, Inc. ............ 1,006,250
-----------
4,945,863
-----------
UTILITIES-WATER--2.4%
- -----------------------
79,000 American Water Works
Company, Inc. ...................... 2,478,625
-----------
Total Common Stocks
(cost $65,567,701)........................... 74,090,871
-----------
CONVERTIBLE PREFERRED STOCKS--16.1%(a)
- --------------------------------------
AEROSPACE--0.6%
- -----------------
18,500 Coltec Capital Trust, 5.25% ......... 680,874
-----------
BROADCASTING--0.5%
- --------------------
60,000 Triathlon Broadcasting Company,
Series "A", 9.0% ................... 570,000
-----------
DATA PROCESSING--3.2%
- -----------------------
35,000 Microsoft Corporation, $2.20......... 3,373,125
-----------
FOOD--2.0%
- ------------
33,500 Ralston Purina Company, 7.0% ........ 2,043,500
-----------
FOOD SERVING--2.1%
- --------------------
42,000 Wendy's Financing,
Series "A", 5.0% ................... 2,202,375
-----------
MINING/DIVERSIFIED--0.7%
- --------------------------
43,800 Freeport-McMoran Cooper &
Gold Mine, Inc.,
Series "A", 7.0% ................... 706,275
-----------
OIL & GAS--1.2%
- -----------------
35,000 MCN Financing III, 8.0% ............. 1,235,938
-----------
PUBLISHING--2.0%
- ------------------
28,000 Houston Industries, Inc., 7.0% ...... 2,136,750
-----------
RETAIL STORES--1.7%
- ---------------------
35,000 Kmart Financing
Corporation, 7.75% ................. 1,750,000
-----------
TELECOMMUNICATIONS--1.0%
- --------------------------
19,000 Mediaone Group, 6.25% ............... 1,061,625
-----------
UTILITIES-GAS--1.1%
- ---------------------
8,200 Williams Companies, Inc., $3.50...... 1,105,196
-----------
Total Convertible Preferred
Stocks (cost $16,864,761)................. 16,865,658
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ---------
<S> <C>
CONVERTIBLE BONDS--8.6%(a)
- ---------------------------
AUTO PARTS/EQUIPMENT--1.7%
- ------------------------------
$ 1,750,000 Magna International, Inc.,
4.875%, 02/15/05 .......... 1,756,563
---------
CONGLOMERATES/DIVERSIFIED--1.0%
- -----------------------------------
1,250,000 Thermo Electron Corporation,
4.25%, 01/01/03 ........... 1,087,212
---------
MEDICAL EQUIPMENT/SUPPLY--1.2%
- ----------------------------------
1,500,000 ThermoLase Corporation,
4.375%, 08/05/04 .......... 1,217,970
---------
OIL & GAS--1.5%
- -------------------
2,190,000 Range Resources
6.0%, 02/01/07 ............ 1,574,457
---------
SERVICES--3.2%
- ------------------
1,000,000 Data Processing Resources
Corporation,
5.25%, 04/01/05 ........... 1,000,000
1,250,000 Equity Corporation
International,
4.5%, 12/31/04 ............ 1,331,250
650,000 Interim Services, Inc.,
4.5%, 06/01/05 ............ 559,260
500,000 Personnel Group,
5.75%, 07/01/04 ........... 455,000
---------
3,345,510
---------
Total Convertible Bonds
(cost $10,253,925)........................ 8,981,712
---------
Total Investment Portfolio excluding
repurchase agreement and covered call
options written (cost $92,686,387)........ 99,938,241
REPURCHASE AGREEMENT--4.9%(a)
- ------------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated
September 30, 1998 @ 5.4% to be
repurchased at $5,187,775 on October 1,
1998, collateralized by $5,005,000 United
States Treasury Notes, 6.5% due
August 31, 2001, (market value $5,315,838
including interest)
(cost $5,187,000)......................... 5,187,000
----------
TOTAL INVESTMENT PORTFOLIO EXCLUDING
COVERED CALL OPTIONS WRITTEN
(COST $97,873,387)(d), 100.1%(a).......... 105,125,241
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1998
(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
------
<S> <C> <C>
COVERED CALL OPTIONS WRITTEN--0.2%(a)*
- --------------------------------------
9,000 American Home Products
Corporation,
October 1998 @ 50 ........... (33,750)
15,000 Hewlett-Packard Company,
November 1998 @ 50 .......... (82,500)
14,000 Omnicom Group, Inc.,
November 1998 @ 45 .......... (47,250)
6,000 Schering-Plough Corporation,
November 1998 @ 100 ......... (50,250)
-----------
TOTAL COVERED CALL OPTIONS WRITTEN
(premium received $195,233)(d)(0.2%)(a)....... (213,750)
OTHER ASSETS AND LIABILITIES, NET, (0.1%)(a) ... 122,278
-----------
NET ASSETS, 100.0% ............................. $105,033,769
===========
<FN>
- ----------
* Non-income producing security.
(a) Percentages indicated are based on net assets.
(b) A portion of these shares were held by the custodian in connection with
covered call options written.
(c) Private placement securities are fair valued according to procedures
adopted by the Board of Trustees.
(d) The aggregate identified cost for federal income tax purposes is
substantially the same. Market value includes net unrealized appreciation
of $7,233,337 which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $13,251,001 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$6,017,665.
ACES--Adjustable Convertible Extendable Securities
ADR--American Depository Receipt
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
- ------
Investments, at market value (identified cost $92,686,387) (Note 1).......... $ 99,938,241
Repurchase agreement (identified cost $5,187,000) (Note 1)................... 5,187,000
Cash ........................................................................ 421,421
Receivables:
Investments sold ........................................................... 128,961
Fund shares sold ........................................................... 299,346
Dividends and interest ..................................................... 369,409
Deferred state qualification expenses (Note 1) .............................. 12,922
Prepaid insurance (Note 1) .................................................. 7,900
------------
Total assets ........................................................... 106,365,200
LIABILITIES
- -----------
Payables (Note 4):
Investments purchased ...................................................... $734,089
Fund shares redeemed ....................................................... 183,763
Accrued management fee ..................................................... 65,794
Accrued distribution fee ................................................... 43,701
Other accrued expenses ..................................................... 90,334
Covered call options written, at market value (premiums received $195,233)... 213,750
--------
Total liabilities ...................................................... 1,331,431
------------
Net assets, at market value ................................................. $105,033,769
============
NET ASSETS
- ----------
Net assets consist of:
Paid-in capital ............................................................ $ 93,111,139
Undistributed net investment income (Note 1) ............................... 431,852
Accumulated net realized gain (Note 1 and 5) ............................... 4,257,441
Net unrealized appreciation on investments and covered call options written 7,233,337
------------
Net assets, at market value ................................................. $105,033,769
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CLASS A SHARES
- --------------
Net asset value and redemption price per share ($67,964,355 divided by 4,534,195 shares of
beneficial interest outstanding, no par value) (Notes 1 and 2) ........................... $ 14.99
=======
Maximum offering price per share (100/95.25 of $14.99).................................... $ 15.74
=======
CLASS B SHARES
- --------------
Net asset value, offering price and redemption price per share ($6,477,326 divided by
437,027 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ......... $ 14.82
=======
CLASS C SHARES
- --------------
Net asset value, offering price and redemption price per share ($30,592,088 divided by
2,064,388 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ....... $ 14.82
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
- -----------------
<S> <C> <C>
Income:
Dividends ............................................................. $ 2,954,563
Interest .............................................................. 679,284
------------
Total income ...................................................... 3,633,847
Expenses (Notes 1 and 4):
Management fee ........................................................ $760,605
Distribution fee (Class A Shares) ..................................... 175,819
Distribution fee (Class B Shares)* .................................... 24,569
Distribution fee (Class C Shares) ..................................... 298,586
Professional fees ..................................................... 79,406
Custodian/Fund accounting fees ........................................ 74,652
Shareholder servicing fees ............................................ 68,749
State qualification expenses .......................................... 39,498
Reports to shareholders ............................................... 19,966
Federal registration fees ............................................. 8,870
Trustees' fees and expenses ........................................... 8,381
Insurance expense ..................................................... 5,322
Other ................................................................. 905
--------
Total expenses ...................................................... 1,565,328
------------
Net investment income .................................................. 2,068,519
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Net realized gain from investment transactions ......................... 4,966,952
Net realized gain from covered call options written (Note 1) ........... 200,372
Net decrease in unrealized appreciation of investments during the year . (9,276,676)
Net increase in unrealized appreciation of
covered call options written during the year .......................... 91,797
------------
Net loss on investments ............................................. (4,017,555)
------------
Net decrease in net assets resulting from operations ................ $ (1,949,036)
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------- -------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 2,068,519 $ 1,615,704
Net realized gain on investment transactions ...................................... 4,966,952 7,603,240
Net realized gain (loss) from covered call options written ........................ 200,372 (947,361)
Net increase (decrease) in unrealized appreciation of investments
and covered call options written during the year ................................. (9,184,879) 8,804,490
------------ ------------
Net increase (decrease) in net assets resulting from operations ................... (1,949,036) 17,076,073
------------ ------------
Distributions to shareholders from:
Net investment income, Class A Shares, ($.32 and $.38 per share, respectively)..... (1,348,467) (1,268,815)
Net investment income Class B Shares, ($.11 per share)*............................ (25,194) --
Net investment income, Class C Shares, ($.21 and $.30 per share, respectively)..... (365,109) (209,504)
Net realized gains, Class A Shares, ($1.33 and $1.49 per share, respectively)...... (5,225,121) (4,547,678)
Net realized gains, Class C Shares, ($1.33 and $1.49 per share, respectively)...... (1,955,616) (698,646)
Increase in net assets from Fund share transactions (Note 2) ....................... 30,771,013 25,878,134
------------ ------------
Increase in net assets ............................................................. 19,902,470 36,229,564
Net assets, beginning of year ...................................................... 85,131,299 48,901,735
------------ ------------
Net assets, end of year (including undistributed net
investment income of $431,852 and undistributed
net investment income of $236,695 respectively).................................... $105,033,769 $ 85,131,299
============ ============
<FN>
- ----------
* For the period January 2, 1998 (commencement of Class B Shares) to September
30, 1998.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
SHARES
-----------------------------------------------------------
FOR THE YEARS ENDED
SEPTEMBER 30,
-----------------------------------------------------------
1998* 1997* 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ......................... $ 16.65 $ 14.67 $ 12.56 $ 11.33 $ 12.28
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment Income ............ 0.36 0.40 0.36 0.27 0.30
Net realized and unrealized
gain (loss)
on investments .................. ( 0.37) 3.45 2.35 1.79 ( 0.09)
-------- -------- -------- -------- --------
Total from Investment
Operations ...................... ( 0.01) 3.85 2.71 2.06 0.21
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income ............... ( 0.32) ( 0.38) ( 0.35) ( 0.34) ( 0.24)
Distributions from net
realized gain on
investments ..................... ( 1.33) ( 1.49) ( 0.25) ( 0.49) ( 0.92)
-------- -------- -------- -------- --------
Total Distributions .............. ( 1.65) ( 1.87) ( 0.60) ( 0.83) ( 1.16)
-------- -------- -------- -------- --------
Net asset value, end
of year ......................... $ 14.99 $ 16.65 $ 14.67 $ 12.56 $ 11.33
======== ======== ======== ======== ========
Total Return(%)(c) ............... ( 0.34) 29.45 22.26 19.57 1.80
Ratios (%)/ Supplemental
Data:
Operating expenses to
average daily net assets ........ 1.29 1.34 1.51 1.64 1.64
Net investment income to
average daily net assets ........ 2.24 2.65 2.66 4.63 2.62
Portfolio turnover rate .......... 66 75 75 42 99
Net assets, end of year
($ millions)..................... 68 65 43 34 33
<CAPTION>
CLASS B CLASS C
SHARES SHARES
---------------------- ----------------------------------------------------
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------------------
1998/double dagger/* 1998* 1997* 1996 1995/dagger/
---------------------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ......................... $ 15.62 $ 16.49 $ 14.57 $ 12.51 $ 11.21
---------- -------- -------- -------- ---------
Income from Investment
Operations:
Net investment Income ............ 0.19 0.25 0.28 0.26 0.18
Net realized and unrealized
gain (loss)
on investments .................. ( 0.88) ( 0.38) 3.43 2.34 1.28
---------- -------- -------- -------- ---------
Total from Investment
Operations ...................... ( 0.69) ( 0.13) 3.71 2.60 1.46
---------- -------- -------- -------- ---------
Less Distributions:
Dividends from net
investment income ............... ( 0.11) ( 0.21) ( 0.30) ( 0.29) ( 0.16)
Distributions from net
realized gain on
investments ..................... -- ( 1.33) ( 1.49) ( 0.25) --
---------- -------- -------- -------- ---------
Total Distributions .............. ( 0.11) ( 1.54) ( 1.79) ( 0.54) ( 0.16)
---------- -------- -------- -------- ---------
Net asset value, end
of year ......................... $ 14.82 $ 14.82 $ 16.49 $ 14.57 $ 12.51
========== ======== ======== ======== =========
Total Return(%)(c) ............... ( 4.50) (b) ( 1.08) 28.49 21.37 13.18 (b)
Ratios (%)/ Supplemental
Data:
Operating expenses to
average daily net assets ........ 2.04 (a) 2.04 2.07 2.13 2.40 (a)
Net investment income to
average daily net assets ........ 1.75 (a) 1.51 1.87 2.05 4.61 (a)
Portfolio turnover rate .......... 66 66 75 75 42
Net assets, end of year
($ millions)..................... 6 31 21 6 0.2
<FN>
- ----------
* Per share amounts have been calculated using the monthly average share method,
which more appropriately presents per share data for the year since use of the
undistributed income method does not correspond with results of operations
/dagger/ For the period April 3, 1995 (commencement of Class C Shares) to
September 30, 1995.
/double dagger/ For the period January 2, 1998 (commencement of Class B
Shares) to September 30, 1998.
(a) Annualized.
(b) Not annualized.
(c) Does not reflect the imposition of a sales charge.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Income-Growth Trust (the
"Fund") is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's
investment objective is long-term total return by seeking, with
approximately equal emphasis, current income and capital appreciation.
The Fund currently issues Class A, Class B and Class C Shares. Class A
Shares are sold subject to a maximum sales charge of 4.75% of the
amount invested payable at the time of purchase. C lass B Shares, which
were offered to shareholders beginning January 2, 1998, are sold
subject to a 5% maximum contingent deferred sales load (based on the
lower of purchase price or redemption price), declining over a six year
period. Class C Shares, which were offered to shareholders beginning
April 3, 1995, are sold subject to a contingent deferred sales charge
of 1% of the lower of net asset value or purchase price payable upon
any redemption made in less than one year of purchase. The preparation
of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual
results could differ from those estimates. The following is a summary
of significant accounting policies:
SECURITY VALUATION: The Fund values investment securities at market
value based on the last quoted sales price as reported by the principal
securities exchange on which the security is traded. If no sale is
reported, market value is based on the last bid and in the absence of a
market quote, securities are valued using such methods as the Board of
Trustees believe would reflect fair market value. Short term
investments having a maturity of 60 days or less are valued at
amortized cost, which approximates market.
REPURCHASE AGREEMENTS: The Fund enters into repurchase agreements
whereby the Fund, through its custodian, receives delivery of the
underlying securities, the market value of which at the time of
purchase is required to be an amount equal to at least 100% of the
resale price.
FEDERAL INCOME TAXES: The Fund's policy is to comply with the
requirements of the Internal Revenue Code of 1986, as amended, which
are applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders.
Accordingly, no provision has been made for federal income and excise
taxes.
DISTRIBUTION OF INCOME AND GAINS: Distributions of net investment
income are made quarterly. Net realized gains from investment
transactions during any particular year in excess of available capital
loss carryforwards, which, if not distributed, would be taxable to the
Fund, will be distributed to shareholders in the following fiscal year.
The Fund uses the identified cost method for determining realized gain
or loss on investments for both financial and federal income tax
reporting purposes.
EXPENSES: The Fund is charged for those expenses that are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expense, etc., are all allocated proportionately among
the other Heritage Mutual funds. Expenses of the Fund are allocated to
each class of shares based upon their relative percentage of current
net assets. All expenses that are directly attributable to a specific
class of shares, such as distribution fees, are charged directly to
that class.
STATE QUALIFICATION EXPENSES: State qualification fees are amortized
based either on the time period covered by the qualification or as
related shares are sold, whichever is appropriate for each state.
OPTIONS: When the Fund writes a covered call option, the Fund receives
a premium on the sale of an option, but gives up the opportunity to
profit from any increase in stock value above the exercise price of the
option. If an option that the Fund has written either expires on its
stipulated expiration date, or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If
a call option that the Fund has written is exercised, the Fund realizes
a capital gain or loss from the sale of the underlying security, and
the proceeds from such sale are increased by the premium originally
received. The amount equal to the premium received by the Fund is
included in the Fund's Statement of Assets and Liabilities as an asset
and as an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of
the option written. The current market value of a written option is the
last offering price on the principal exchange on which such option is
traded.
CAPITAL ACCOUNTS: The Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward
is available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting the
net asset value of the Fund.
OTHER: For purposes of these financial statements, investment security
transactions are accounted for on a trade date basis. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. All original issue
discounts are accredited for both tax and financial reporting purposes.
11
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 2: FUND SHARES. At September 30, 1998, there was an unlimited number of
shares of beneficial interest of no par value authorized.
Transactions in Class A and C Shares of the Fund during the year ended
September 30, 1998 and Class B Shares from January 2, 1998
(commencement of Class B Shares) to September 30, 1998, were as
follows:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FOR THE YEAR ENDED SEPTEMBER 30, 1998 ------------------------------ -------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 917,869 $ 14,911,435 471,494 $7,619,757 1,149,224 $ 18,505,769
Shares issued on reinvestment of
distributions .................. 390,257 6,102,092 1,428 23,670 146,465 2,263,138
Shares redeemed ................. (654,456) (10,638,818) (35,895) (573,754) (474,527) (7,442,276)
-------- ------------- ------- ---------- --------- ------------
Net increase .................... 653,670 $ 10,374,709 437,027 $7,069,673 821,162 $ 13,326,631
============= ========== ============
Shares outstanding:
Beginning of year .............. 3,880,525 -- 1,243,226
--------- ------- ---------
End of year .................... 4,534,195 437,027 2,064,388
========= ======= =========
</TABLE>
Transactions in Class A and C Shares of the Fund during the year ended
September 30, 1997, were as follows:
<TABLE>
<CAPTION>
A SHARES C SHARES
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
FOR THE YEAR ENDED SEPTEMBER 30, 1997 ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Shares sold ...................... 1,014,926 $ 15,151,346 930,775 $ 13,719,015
Shares issued on reinvestment of
distributions ................... 407,737 5,534,395 63,094 854,415
Shares redeemed .................. (477,470) (7,113,898) (151,538) (2,267,139)
--------- ------------ -------- ------------
Net increase ..................... 945,193 $ 13,571,843 842,331 $ 12,306,291
============ ============
Shares outstanding:
Beginning of year ............... 2,935,332 400,895
--------- --------
End of year ..................... 3,880,525 1,243,226
========= =========
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the year ended September 30,
1998, purchases and sales of investment securities (excluding repurchase
agreements) aggregated $86,536,524 and $63,255,106, respectively. Agency
brokerage commissions for the same period aggregated $195,587 of which
$9,280 was paid to Raymond James & Associates, Inc.
Transactions in covered call options written on equity securities were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------- -------------
<S> <C> <C>
Outstanding September 30, 1997 ......... 915 $ 467,249
Written ............................... 2,502 1,014,953
Closed................................. (1,710) (794,888)
Exercised ............................. (980) (332,264)
Expired ............................... (357) (159,817)
Corporate Actions ..................... 70 --
------ ----------
Outstanding September 30, 1998 ......... 440 $ 195,233
====== ==========
</TABLE>
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT,
FUND ACCOUNTING AND TRUSTEES FEES. Under the Fund's Investment Advisory
and Administration Agreement with Heritage Asset Management, Inc. (the
"Manager"), the Fund agrees to pay to the Manager a fee equal to an
annualized rate of 0.75% of the first $100,000,000 of the Fund's average
daily net assets, and 0.60% of any excess over $100,000,000 of such net
assets, computed daily and payable monthly. Pursuant to the Prospectus
dated January 2, 1998, the Manager voluntarily agreed to waive its fees
and, if necessary, reimburse the Fund to the extent that Class A annual
operating expenses exceed 1.35% of the Class A Share average daily net
assets and to the extent that the Class B and Class C annual operating
expenses each exceed 2.10% of that classes' average daily net assets for
the fiscal year ending September 30, 1998. Under these agreements, no
fees were waived and no expenses were reimbursed for the year ended
September 30, 1998.
12
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
The Manager has entered into an agreement with Eagle Asset Management,
Inc. (the "Subadviser") for the Subadviser to provide to the Fund
investment advice, portfolio management services (including the
placement of brokerage orders) and certain compliance and other
services for a fee payable by the Manager equal to 50% of the fees
payable by the Fund to the Manager without regard to any reduction due
to the imposition of expense limitations. For the year ended September
30, 1998 the Subadviser earned $380,302 for subadviser fees, which was
paid by the Manager.
The Manager also is the Dividend Paying and Shareholder Servicing Agent
for the Fund. The amount payable to the Manager for such expenses as of
September 30, 1998 was $18,900. In addition, the Manager performs Fund
accounting services and charged $49,324 during the current period of
which $12,300 was payable as of September 30, 1998.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $369,431 in front-end sales charges for Class A
Shares, $15,682 in contingent deferred sales charges for Class B Shares
and $19,388 in contingent deferred sales charges for Class C Shares for
the year ended September 30, 1998. From these fees, the Distributor
paid commissions to salespersons and incurred other distribution costs.
Pursuant to the Class A Distribution Plan adopted in accordance with
Rule 12b-1 of the Investment Company Act of 1940, as amended, the Fund
is authorized to pay the Distributor a fee equal to .25% of the average
daily net assets for Class A Shares. The Class B and Class C Share
Distribution Plans provide for payments at an annual rate of up to
1.00% of average daily net assets for Class B and Class C Shares,
respectively. Such fees are accrued daily and payable monthly. Class B
Shares will convert to Class A Shares eight years after the end of the
calendar month in which the shareholder's order to purchase was
accepted. The Manager, Distributor, Fund Accountant and Shareholder
Servicing Agent are all wholly owned subsidiaries of Raymond James
Financial, Inc.
Trustees of the Fund also serve as Trustees for Heritage Cash Trust,
Heritage Capital Appreciation Trust, Heritage Income Trust, Heritage
Series Trust and Heritage U.S. Government Income Fund, investment
companies that are also advised by the Manager of the Trust
(collectively called the Heritage mutual funds). Each Trustee of the
Heritage mutual funds who is not an employee of the Manager or employee
of an affiliate of the Manager receives an annual fee of $8,666 and an
additional fee of $3,250 for each combined quarterly meeting of the
Heritage mutual funds attended. Trustees' fees and expenses are shared
equally by each of the Heritage mutual funds.
Note 5: FEDERAL INCOME TAXES. For the year ended September 30, 1998, to reflect
reclassifications arising from permanent book/tax differences primarily
attributable to distributions from Real Estate Investment Trusts, the
Fund charged undistributed net investment income $134,591, and credited
paid in capital $17,809 and accumulated net realized gain $116,782.
13
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Heritage Income-Growth Trust
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Heritage Income-Growth Trust (the
"Fund") at September 30, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
November 12, 1998
- --------------------------------------------------------------------------------
1998 FEDERAL INCOME TAX NOTICE
(UNAUDITED)
- --------------------------------------------------------------------------------
During the year ended September 30, 1998, the Fund paid to shareholders
$5,093,338 or $0.95 per share from long-term capital gains. For such period
68.1% of the income dividends qualified for the dividend received deduction
available to corporations.
14
<PAGE>
HERITAGE FAMILY OF FUNDS(TM)
FROM OUR FAMILY TO YOURS; THE INTELLIGENT CREATION OF WEALTH.
HERITAGE MONEY MARKET FUNDS
CASH TRUST MONEY MARKET
CASH TRUST MUNICIPAL MONEY MARKET
HERITAGE BOND FUNDS
INTERMEDIATE GOVERNMENT
HIGH YIELD
HERITAGE STOCK FUNDS
AGGRESSIVE GROWTH
CAPITAL APPRECIATION
GROWTH EQUITY
INCOME-GROWTH
INTERNATIONAL
MID CAP
SMALL CAP
VALUE EQUITY
We are pleased that many of you are also investors in these funds. For more
information and a prospectus for any of these mutual funds, please contact your
financial advisor. Please read the prospectus carefully before you invest in any
of the funds.
This report is for the information of shareholders of Heritage Income-Growth
Trust. It may also be used as sales literature when preceded or accompanied by
a prospectus.
1998 Heritage Asset Management, Inc.
8M
AR5314-IG 10/98
[LOGO] Heritage Income-Growth Trust
P.O. Box 33022
St. Petersburg, FL 33733
- --------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
