INCOME
GROWTH
TRUST
[GRAPHIC OMITTED]
FROM OUR FAMILY TO YOURS: THE INTELLEGENT CREATION OF WEALTH
SEMIANNUAL REPORT
(Unaudited) and Investment Performance
Review for the Six-Month Period Ended
March 31, 1999
[LOGO]
HERITAGE
----------------------
Income-Growth
Trust(TM)
----------------------
<PAGE>
May 18, 1999
Dear Fellow Shareholders:
I am pleased to provide you with the semiannual report for the Heritage
Income-Growth Trust (the "Fund") for the six month period ended March 31, 1999.
During this period, the stock market, as measured by the market
capitalization-weighted Standard & Poor's 500 Composite Stock Price Index (S&P
500), continued to move steadily higher, advancing by 18.47%. However, as we
discussed in our most recent annual report, the S&P 500 return at times is not
very reflective of the performance of the broad equity market performance. For
your Fund's semiannual period, the unweighted return of the Value Line
Composite Index of 1600 stocks actually declined by nearly 18%. Your Fund's
returns for the semiannual period were +8.43%, +8.02% and +8.02% for the Class
A, B and C shares, respectively.*
In addition to the continuing dominance of large capitalization stocks
over small capitalization stocks, "growth" stocks continued to outperform
"value" stocks during your Fund's semiannual period. As portfolio managers Lou
Kirschbaum and David Blount discuss in the letter that follows, your Fund's
focus on income-producing securities led to an increasing emphasis on value
stocks, which tend to pay higher dividends than do growth stocks. In the six
weeks since the end of March, the market has shown indications of broadening to
favor small cap and value stocks while the large cap growth sector has
experienced a minor correction. Over the long-term, investors in Heritage
Income-Growth Trust have participated in the appreciation of the recent
long-term bull market while enjoying significantly less volatility than the
market as a whole. On the volatility side, your Fund continues to have a Beta
(a measure of a portfolio's volatility relative to the overall market) of .59
according to Morningstar, Inc. while your Fund's peer group has an average Beta
of .91. The Beta for the S&P 500 is 1.00.
The average annualized performance for your Fund's shares as of March 31,
1999 is given below:
<TABLE>
<CAPTION>
ONE YEAR THREE YEAR FIVE YEAR TEN YEAR LIFE OF CLASS
-------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Class A -7.72% +12.96% +14.93% +12.09% 10.60%(1)
Class B -7.67% -- -- -- -0.40%(2)
Class C -3.85% +13.94% -- -- 17.22%(3)
</TABLE>
- ----------
(1) Inception date December 17, 1986
(2) Inception date January 2, 1998
(3) Inception date April 3, 1995
All of these results are calculated net of annual fund expenses and
maximum front end or contingent deferred sales charges.
Thank you for your continuing investment in Heritage Income-Growth Trust.
If there are any ideas you would like to share with us about how we could
better serve you, please call us at (800) 709-3863.
Sincerely,
/s/ STEPHEN G. HILL
-------------------
Stephen G. Hill
President
- ----------
* Calculated without the imposition of either front-end or contingent deferred
sales charges.
<PAGE>
May 18, 1999
Dear Fellow Shareholders:
The bear market is nearly a year old. Though this is not the way most
observers would characterize the STOCK MARKET'S behavior in the past 12 months,
clearly it describes the way most STOCKS have behaved.
We are witnessing a disconnect of historic proportion between the Standard
& Poor's 500 Composite Stock Price Index (S&P 500 or Index), and the vast body
of publicly traded stocks. Indeed, more than three-quarters of the stocks in
the S&P 500 have lagged the Index itself by 15% or more over the past 12
months.
Earnings expectations have been the principal differentiating factor
between the "haves" and "have-nots" (though some observers suggest it is size,
as measured by market capitalization, which really matters). The best
performing stocks (setting aside Internet stocks) have been companies that are
enjoying growth in both units (I.E., volume) and profit margins.
The list of stocks that are surpassing the Index is getting shorter and
shorter. This has been commented on ad nauseam, but one wonders who is paying
heed. Manifestations of complacency show up in the enormous valuation disparity
between the handful of earnings growth leaders and most of the rest of the
market. The "growth" vs. "value" contest has been almost entirely one-sided for
about a year and a half.
Eagle's orientation toward income-producing investments has driven our
stock selection increasingly toward the value side of the street in the past
year or so. To a large extent, this has not been a rewarding path. In addition,
convertible securities and Real Estate Investment Trusts (REITs), which form
the nucleus of our defensive efforts, have failed to perform well over the past
year. This isn't all bad; several convertible holdings have been among our
strongest performers. But the REITs have been acting like other small cap
stocks (I.E., dreadfully). Recent trends in the convertible securities market
are not encouraging new investment in this sector, except on an unusually
selective basis.
Looking at performance, the past year produced an unusual disparity
between a small number of large capitalization growth stocks that powered the
S&P 500 higher, and nearly everything else. For example, the market
cap-weighted S&P 500 gained 18.5% in the 12 months ending March 31, 1999. The
much broader (1600 stocks) and unweighted Value Line Composite Index was DOWN
17.5% during the same period. The Income-Growth Trust performance fell slightly
below the midpoint between these extremes.
Leading positive contributors among common stocks in the Trust's portfolio
were Intimate Brands, Omnicom, Alltel, and American Home Products. What these
stocks have in common is accelerating earnings momentum, as one might expect.
There were two standout performers among convertible securities in the Trust's
portfolio: Houston Industries exchangeable preferred shares (driven by Time
Warner common stock, into which they are convertible) and Mediaone Group
preferred stock (exchangeable for Airtouch Communications common shares). In
both cases the underlying common shares were driven higher by accelerating
growth and increasing valuations among telecommunications companies.
On the down side, earnings disappointments hurt the performance of several
holdings, including Harsco and MCN Energy. Several stocks were weak, though, in
spite of consistently good operating results. Heinz is notable among these;
indeed, not only has the company met earnings expectations but
<PAGE>
an ongoing restructuring promises to produce improving profitability in the
future. Also in the category of stocks that underperformed while the companies
themselves met every expectation were the Trust's REIT holdings, both
individually and as a group.
What might move investment flows in the direction of low valuations and
away from high sustained growth? Improving economic conditions in the Far East
and Latin America might help. So too would a few more dropouts among the growth
stock leadership, which might force investors to put a greater emphasis on
underlying values. Recent earnings difficulty reported by Coca-Cola and
Gillette may be precursors of a broader trend among multinational growth
stocks.
In the meantime, we are continuing to emphasize discounted valuations and
rising dividend streams in our stock selection process. We don't know when
defensive investing will come into vogue again, but we expect our discipline
will stand us in good stead when it does.
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>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ----------- -------------
COMMON STOCKS--72.2%(a)
- -----------------------
ADVERTISING/COMMUNICATIONS--3.4%
--------------------------------
45,000 Omnicom Group, Inc. ................... $3,597,188
----------
BANKING--5.0%
-------------
10,000 BankAmerica Corporation ............... 706,250
15,100 Jefferson-Pilot Corporation,
ACES .................................. 1,766,700
40,000 Mellon Bank Corporation ............... 2,815,000
----------
5,287,950
----------
BEVERAGES--1.5%
---------------
40,000 PepsiCo, Inc. ......................... 1,567,500
----------
CONGLOMERATES/DIVERSIFIED--0.8%
-------------------------------
35,000 Harsco Corporation(b) ................. 881,563
----------
ELECTRONICS/ELECTRIC--2.8%
--------------------------
26,800 General Electric Company .............. 2,964,750
----------
FINANCE--2.4%
-------------
12,000 American Express Company .............. 1,410,000
18,600 Freddie Mac ........................... 1,062,525
----------
2,472,525
----------
FOOD--4.0%
----------
37,000 H.J. Heinz Company .................... 1,752,875
92,000 Sysco Corporation ..................... 2,420,750
----------
4,173,625
----------
INSURANCE--2.0%
---------------
51,000 SAFECO Corporation .................... 2,062,312
----------
INVESTMENT COMPANY--0.9%
------------------------
52,446 Security Capital
Preferred Growth(c) ................... 953,475
----------
MANUFACTURING/DISTRIBUTIONS--0.8%
---------------------------------
50,900 Pall Corporation ...................... 843,031
----------
OIL & GAS--9.4%
---------------
45,000 Ashland, Inc. ......................... 1,842,187
227,308 British Petroleum Company,
PLC, Sponsored ADR .................... 2,756,401
20,000 MCN Energy Group, Inc. ................ 321,250
30,000 Mobil Corporation ..................... 2,640,000
45,000 Royal Dutch Petroleum
Company, NY Shares,
Sponsored ADR ......................... 2,340,000
----------
9,899,838
----------
PHARMACEUTICAL--11.6%
---------------------
47,000 American Home
Products Corporation ................... 3,066,750
30,000 Bristol-Myers Squibb Company ........... 1,929,375
30,000 Merck & Company(b) ..................... 2,405,625
54,000 Schering-Plough Corporation ............ 2,986,876
27,000 Warner-Lambert Company(b) .............. 1,787,062
----------
12,175,688
----------
REAL ESTATE INVESTMENT TRUST--6.7%
----------------------------------
45,000 Boston Properties Inc. ................. 1,423,125
60,000 Centertrust Retail
Properties, Inc. ....................... 690,000
37,000 Health Care Property
Investors, Inc. ........................ 1,063,750
53,900 Public Storage, Inc. ................... 1,347,500
63,800 Simon Property Group, Inc. ............. 1,750,512
25,000 Sun Communities, Inc. .................. 793,750
---------
7,068,637
---------
RETAIL STORES--3.4%
-------------------
75,000 Intimate Brands, Inc.(b) ............... 3,609,375
---------
TELECOMMUNICATIONS--6.0%
------------------------
55,000 ALLtel Corporation ..................... 3,430,625
47,500 GTE Corporation ........................ 2,873,750
---------
6,304,375
---------
TOBACCO--0.9%
-------------
25,500 Phillip Morris Companies, Inc. ......... 897,281
---------
UTILITIES-ELECTRIC--4.3%
------------------------
58,000 Florida Progress Corporation ........... 2,189,500
65,000 Sierra Pacific Resources ............... 2,287,188
---------
4,476,688
---------
UTILITIES-GAS--4.1%
-------------------
92,000 UGI Corporation ........................ 1,535,250
86,000 Wicor, Inc. ............................ 1,741,500
25,000 Williams Companies, Inc. ............... 987,500
---------
4,264,250
---------
UTILITIES-WATER--2.2%
---------------------
79,000 American Water Works
Company, Inc. .......................... 2,295,938
---------
Total Common Stocks
(cost $61,635,709)................................ 75,795,989
----------
PRINCIPAL MARKET
AMOUNT VALUE
- ------------- ---------------
CONVERTIBLE BONDS--5.2%(a)
- --------------------------
AUTO PARTS/EQUIPMENT--2.4%
--------------------------
$2,570,000 Magna International, Inc.,
4.875%, 02/15/05 ....................... 2,566,788
---------
CONGLOMERATES/DIVERSIFIED--1.1%
-------------------------------
1,250,000 Thermo Electron Corporation,
4.25%, 01/01/03 ........................ 1,110,937
---------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 1999
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------- --------------
CONVERTIBLE BONDS (CONTINUED)
- -----------------------------
SERVICES--1.7%
--------------
$1,800,000 Interim Services, Inc.,
4.5% 06/01/05 ...................... $ 1,372,500
500,000 Personnel Group of America,
5.75%, 07/01/04 .................... 369,375
-----------
1,741,875
-----------
Total Convertible Bonds
(cost $6,196,312)............................... 5,419,600
-----------
CONVERTIBLE PREFERRED STOCKS--18.5%(a)
- --------------------------------------
BROADCASTING--0.6%
------------------
60,000 Triathlon Broadcasting Company,
Series "A", 9.0% ................... 630,000
-----------
COSMETICS/TOILETRIES--0.5%
--------------------------
6,000 Estee Lauder TRACES, 6.25% ......... 541,875
-----------
DATA PROCESSING--2.8%
---------------------
30,000 Microsoft Corporation, $2.20........ 2,955,000
-----------
FOOD--1.7%
----------
40,500 Ralston Purina Company, 7.0% ....... 1,822,500
-----------
FOOD SERVING--2.4%
------------------
42,000 Wendy's Financing, Series "A",
5.0% ............................... 2,530,500
-----------
OIL & GAS--1.2%
---------------
40,000 MCN Financing III, 8.0% ............ 1,282,500
-----------
RETAIL STORES--2.3%
-------------------
40,000 Kmart Financing Corporation,
7.75% .............................. 2,420,000
-----------
TELECOMMUNICATIONS--2.3%
------------------------
29,000 Mediaone Group, 6.25% .............. 2,399,750
-----------
UTILITIES-ELECTRIC--3.2%
------------------------
28,000 Houston Industries, Inc., 7.0%..... 3,374,000
-----------
UTILITIES-GAS--1.5%
-------------------
8,200 Williams Companies, Inc., $3.50..... 1,527,250
-----------
Total Convertible Preferred Stocks
(cost $16,412,729).............................. 19,483,375
-----------
Total Investment Portfolio excluding
repurchase agreement and covered call
options written (cost $84,244,750).............. 100,698,964
-----------
REPURCHASE AGREEMENT--4.1%(a)
- -----------------------------
Repurchase Agreement with State Street
Bank and Trust Company, dated March
31, 1999 @ 4.78% to be repurchased at
$4,256,565 on April 1, 1999, collateralized
by $3,915,000 United States Treasury
Bonds, 6.5% due November 15, 2026,
(market value $4,342,767 including
interest) (cost $4,256,000)...................... 4,256,000
---------
TOTAL INVESTMENT PORTFOLIO EXCLUDING
COVERED CALL OPTIONS WRITTEN
(cost $88,500,750)(b), 100.0%(a).................. 104,954,964
-----------
MARKET
SHARES VALUE
-------- -------------
COVERED CALL OPTIONS WRITTEN--(0.1%)(a)*
- ----------------------------------------
10,000 Harsco Corporation,
April 1999 @ 30 .................. (2,500)
2,000 Intimate Brands, Inc.,
April 1999 @ 45 .................. (8,000)
10,000 Merck & Company, Inc.,
April 1999 @ 72.5 ................ (83,750)
9,000 Warner-Lambert Company,
April 1999 @ 75 .................. (2,250)
------------
TOTAL COVERED CALL OPTIONS WRITTEN
(premium received $91,207)(d) (0.1%)(a)........... (96,500)
OTHER ASSETS AND LIABILITIES, NET, 0.1%(a) ......... 132,408
------------
NET ASSETS, 100.0% ................................. $104,990,872
============
- ----------
* 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 $16,448,921, which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $21,980,546 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$5,531,625.
ACES -- Adjustable Convertible Extendable Securities
ADR -- American Depository Receipt
TRACES -- Trust Automatic Common Exchangeable
Securities
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
- ------
<S> <C>
Investments, at market value (identified cost $84,244,750) (Note 1)...................... $100,698,964
Repurchase agreement (identified cost $4,256,000) (Note 1)............................... 4,256,000
Cash .................................................................................... 334
Receivables:
Fund shares sold ....................................................................... 177,509
Dividends and interest ................................................................. 303,682
Deferred state qualification expenses (Note 1) .......................................... 22,315
Prepaid insurance (Note 1) .............................................................. 5,198
------------
Total assets ....................................................................... 105,464,002
Liabilities
- -----------
Payables (Note 4):
Fund shares redeemed ................................................................... $189,708
Accrued management fee ................................................................. 69,985
Accrued distribution fee ............................................................... 46,677
Other accrued expenses ................................................................. 70,260
Covered call options written, at market value (premiums received $91,207) (Notes 1 and 3) 96,500
--------
Total liabilities .................................................................. 473,130
------------
Net assets, at market value ............................................................. $104,990,872
============
Net Assets
- ----------
Net assets consist of:
Paid-in capital ........................................................................ $ 89,940,360
Undistributed net investment income (Note 1) ........................................... 485,050
Accumulated net realized loss (Notes 1 and 5) .......................................... (1,883,459)
Net unrealized appreciation on investments and covered call options written ............ 16,448,921
------------
Net assets, at market value ............................................................. $104,990,872
============
Class A Shares
- --------------
Net asset value and redemption price per share ($66,919,398 divided by 4,337,797 shares of
beneficial interest outstanding, no par value) (Notes 1 and 2) .......................... $15.43
======
Maximum offering price per share (100/95.25 of $15.43).................................... $16.20
======
Class B Shares
- --------------
Net asset value, offering price and redemption price per share ($8,009,683 divided by
525,596 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ........ $15.24
======
Class C Shares
- --------------
Net asset value, offering price and redemption price per share ($30,061,791 divided by
1,973,002 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ....... $15.24
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF OPERATIONS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- -----------------
<S> <C> <C>
Income:
Dividends ............................................................... $ 1,633,109
Interest ................................................................ 310,977
------------
Total income ........................................................ 1,944,086
Expenses (Notes 1 and 4):
Management fee .......................................................... $395,581
Distribution fee (Class A Shares) ....................................... 86,028
Distribution fee (Class B Shares) ....................................... 36,663
Distribution fee (Class C Shares) ....................................... 153,868
Shareholder servicing fees .............................................. 48,375
Professional fees ....................................................... 37,611
Custodian/Fund accounting fees .......................................... 35,187
State/Federal qualification expenses .................................... 21,299
Reports to shareholders ................................................. 12,875
Trustees' fees and expenses ............................................. 5,275
Insurance expense ....................................................... 2,703
Other ................................................................... 304
--------
Total expenses ........................................................ 835,769
------------
Net investment income .................................................... 1,108,317
------------
Realized and Unrealized Gain (Loss) on Investments
- --------------------------------------------------
Net realized loss from investment transactions ........................... (1,572,913)
Net realized loss from covered call options written (Note 1) ............. (222,968)
Net increase in unrealized appreciation of investments during the period . 9,220,877
Net decrease in unrealized appreciation of
covered call options written during the period .......................... (5,293)
------------
Net gain on investments ............................................... 7,419,703
------------
Net increase in net assets resulting from operations .................. $ 8,528,020
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
MARCH 31, 1999 FOR THE YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 1,108,317 $ 2,068,519
Net realized gain (loss) on investment transactions ................................ (1,572,913) 4,966,952
Net realized gain (loss) from covered call options written ......................... (222,968) 200,372
Net increase (decrease) in unrealized appreciation of investments
and covered call options written during the period ................................ 9,215,584 (9,184,879)
------------ ------------
Net increase (decrease) in net assets resulting from operations .................... 8,528,020 (1,949,036)
------------ ------------
Distributions to shareholders from:
Net investment income, Class A Shares, ($.17 and $.32 per share, respectively)...... (759,414) (1,348,467)
Net investment income, Class B Shares, ($.12 and $.11* per share, respectively)..... (53,306) (25,194)
Net investment income, Class C Shares, ($.12 and $.21 per share, respectively)...... (242,399) (365,109)
Net realized gains, Class A Shares, ($.62 and $1.33 per share, respectively)........ (2,792,440) (5,225,121)
Net realized gains, Class B Shares, ($.62 per share) ................................ (294,751) --
Net realized gains, Class C Shares, ($.62 and $1.33 per share, respectively)........ (1,257,828) (1,955,616)
Increase (decrease) in net assets from Fund share transactions (Note 2) .............. (3,170,779) 30,771,013
------------ ------------
Increase (decrease) in net assets .................................................... (42,897) 19,902,470
Net assets, beginning of period ...................................................... 105,033,769 85,131,299
------------ ------------
Net assets, end of period (including undistributed net investment income
of 485,050 and 431,852, respectively) .............................................. $104,990,872 $105,033,769
============ ============
</TABLE>
- ----------
* For the period January 2, 1998 (commencement of Class B Shares) to September
30, 1998.
The accompanying notes are an integral part of the financial statements.
7
<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
SIX MONTH
PERIOD FOR THE YEARS ENDED
ENDED SEPTEMBER 30,
MARCH 31, --------------------------------------------------
1999*
(UNAUDITED) 1998* 1997* 1996 1995 1994
-------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 14.99 $ 16.65 $ 14.67 $ 12.56 $ 11.33 $ 12.28
-------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment Income ..................... 0.18 0.36 0.40 0.36 0.27 0.30
Net realized and unrealized gain (loss)
on investments ........................... 1.05 (0.37) 3.45 2.35 1.79 (0.09)
-------- ------- ------- ------- ------- -------
Total from Investment Operations .......... 1.23 (0.01) 3.85 2.71 2.06 0.21
-------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income ...... (0.17) (0.32) (0.38) (0.35) (0.34) (0.24)
Distributions from net realized gain
on investments ........................... (0.62) (1.33) (1.49) (0.25) (0.49) (0.92)
-------- ------- ------- ------- ------- -------
Total Distributions ....................... (0.79) (1.65) (1.87) (0.60) (0.83) (1.16)
-------- ------- ------- ------- ------- -------
Net asset value, end of period ............. $ 15.43 $ 14.99 $ 16.65 $ 14.67 $ 12.56 $ 11.33
======== ======= ======= ======= ======= =======
Total Return(%)(a) ......................... 8.43 (b) (0.34) 29.45 22.26 19.57 1.80
Ratios (%)/ Supplemental Data:
Operating expenses to average daily
net assets ............................... 1.30 (c) 1.29 1.34 1.51 1.64 1.64
Net investment income to average daily
net assets ............................... 2.34 (c) 2.24 2.65 2.66 4.63 2.62
Portfolio turnover rate ................... 25 (b) 66 75 75 42 99
Net assets, end of period ($ millions)..... 67 68 65 43 34 33
<CAPTION>
CLASS B SHARES
--------------------------------------
FOR THE
SIX MONTH
PERIOD
ENDED
MARCH 31,
1999*
(UNAUDITED) 1998/double dagger/*
-------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ....... $ 14.82 $ 15.62
-------- ----------
Income from Investment Operations:
Net investment Income ..................... 0.12 0.19
Net realized and unrealized gain (loss)
on investments ........................... 1.04 (0.88)
-------- ----------
Total from Investment Operations .......... 1.16 (0.69)
-------- ----------
Less Distributions:
Dividends from net investment income ...... (0.12) (0.11)
Distributions from net realized gain
on investments ........................... (0.62) --
-------- ----------
Total Distributions ....................... (0.74) (0.11)
-------- ----------
Net asset value, end of period ............. $ 15.24 $ 14.82
======== ==========
Total Return(%)(a) ......................... 8.02 (b) (4.50) (b)
Ratios (%)/ Supplemental Data:
Operating expenses to average daily
net assets ............................... 2.05 (c) 2.04 (c)
Net investment income to average daily
net assets ............................... 1.60 (c) 1.75 (c)
Portfolio turnover rate ................... 25 (b) 66
Net assets, end of period ($ millions)..... 8 6
<CAPTION>
CLASS C SHARES
---------------------------------------------------------------
FOR THE
SIX MONTH
PERIOD FOR THE YEARS ENDED
ENDED SEPTEMBER 30,
MARCH 31, -----------------------------------------------
1999*
(UNAUDITED) 1998* 1997* 1996 1995/dagger/
------------ -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 14.82 $ 16.49 $ 14.57 $ 12.51 $ 11.21
-------- ------- ------- ------- ---------
Income from Investment Operations:
Net investment Income ..................... 0.12 0.25 0.28 0.26 0.18
Net realized and unrealized gain (loss)
on investments ........................... 1.04 (0.38) 3.43 2.34 1.28
-------- ------- ------- ------- ---------
Total from Investment Operations .......... 1.16 (0.13) 3.71 2.60 1.46
-------- ------- ------- ------- ---------
Less Distributions:
Dividends from net investment income ...... (0.12) (0.21) (0.30) (0.29) (0.16)
Distributions from net realized gain
on investments ........................... (0.62) (1.33) (1.49) (0.25) --
-------- ------- ------- ------- ---------
Total Distributions ....................... (0.74) (1.54) (1.79) (0.54) (0.16)
-------- ------- ------- ------- ---------
Net asset value, end of period ............. $ 15.24 $ 14.82 $ 16.49 $ 14.57 $ 12.51
======== ======= ======= ======= =========
Total Return(%)(a) ......................... 8.02 (b) (1.08) 28.49 21.37 13.18 (b)
Ratios (%)/ Supplemental Data:
Operating expenses to average daily
net assets ............................... 2.05 (c) 2.04 2.07 2.13 2.40 (c)
Net investment income to average daily
net assets ............................... 1.59 (c) 1.51 1.87 2.05 4.61 (c)
Portfolio turnover rate ................... 25 (b) 66 75 75 42
Net assets, end of period ($ millions)..... 30 31 21 6 2
</TABLE>
- -------
* 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) Does not reflect the imposition of a sales charge.
(b) Not annualized.
(c) Annualized.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Income-Growth Trust (the
"Fund") is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund'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. Class 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 to 0% 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 fees, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expenses, 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.
9
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
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.
Note 2: FUND SHARES. At March 31, 1999, there was an unlimited number of shares
of beneficial interest of no par value authorized.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FOR THE PERIOD ENDED MARCH 31, 1999 ----------------------------- ---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
(UNAUDITED) ------------- --------------- ------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 236,420 $ 3,580,245 147,360 $ 2,225,500 185,887 $ 2,794,491
Shares issued on reinvestment of
distributions ................. 222,372 3,308,440 22,496 331,334 98,463 1,450,272
Shares redeemed ................. (655,190) (9,986,177) (81,287) (1,223,628) (375,736) (5,651,256)
-------- ------------ ------- ------------ -------- ------------
Net increase (decrease) ......... (196,398) $ (3,097,492) 88,569 $ 1,333,206 (91,386) $ (1,406,493)
============ ============ ============
Shares outstanding:
Beginning of period ........... 4,534,195 437,027 2,064,388
--------- ------- ---------
End of period ................. 4,337,797 525,596 1,973,002
========= ======= =========
</TABLE>
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>
10
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
Note 3: PURCHASES AND SALES OF SECURITIES. For the six month period ended March
31, 1999, purchases and sales of investment securities (excluding
repurchase agreements) aggregated $25,281,057 and $31,727,796,
respectively. Agency brokerage commissions for the same period
aggregated $91,601, of which $3,198 was paid to Raymond James &
Associates, Inc.
Transactions in covered call options written on equity securities were
as follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
=========== =============
Outstanding September 30, 1998 ......... 440 $ 195,233
Written ............................... 2,411 821,529
Closed................................. (1,634) (582,422)
Exercised ............................. (492) (205,738)
Expired ............................... (525) (137,395)
Corporate Actions ..................... 110 --
------ ----------
Outstanding March 31, 1999 ............. 310 $ 91,207
====== ==========
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 current
registration statement, the Manager has agreed to waive its fees and, if
necessary, reimburse the Fund to the extent that Class A annual
operating expenses exceed 1.35% 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, 1999. Under these agreements, no
fees were waived and no expenses were reimbursed for the six month
period ended March 31, 1999.
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 six month period ended March
31, 1999, the Subadviser earned $197,790 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
March 31, 1999 was $24,600. In addition, the Manager performs Fund
accounting services and charged $24,263 during the current period of
which $11,700 was payable as of March 31, 1999.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $68,508 in front-end sales charges for Class A
Shares, $22,181 in contingent deferred sales charges for Class B Shares
and $10,337 in contingent deferred sales charges for Class C Shares for
the six month period ended March 31, 1999. 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.
11
<PAGE>
- --------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
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.
12
<PAGE>
HERITAGE FAMILY OF FUNDS (TM)
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH
HERITAGE MONEY MARKET FUNDS
Cash Trust Money Market
Cash Trust Municipal Money Market
HERITAGE BOND FUNDS
High Yield
Intermediate Government
HERITAGE STOCK FUNDS
Aggressive Growth
Capital Appreciation
Growth Equity
Income-Growth
International
Mid Cap
Small Cap
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.
Copyright 1999 Heritage Asset Management, Inc.
8M
AR5315S IG 03/99
{LOGO] Heritage Income-Growth Trust
P.O. Box 33022
St. Petersburg, FL 33733
- --------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
