INCOME
GROWTH
TRUST
[GRAPHIC OMITTED]
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH
SEMIANNUAL REPORT
(Unaudited) and Investment Performance
Review for the Six-Month Period Ended
March 31, 2000
[LOGO]
HERITAGE
-------------------
Income-Growth
Trust(TM)
-------------------
<PAGE>
May 23, 2000
Dear Shareholders:
I am pleased to provide you with the semiannual report for Heritage
Income-Growth Trust (the "Fund") for the six-month period ended March 31, 2000.
For this period, your Fund had a total return of +3.74%, +3.42%, +3.42% for
Class A, Class B and Class C shares, respectively.*
Ending 1999 with record highs that continued into early 2000, the markets began
to heed warnings from the Federal Reserve that higher interest rates were
inevitable. Investors' steady migration from blue chip standards to hot tech
stocks then slowed, as the technology sector experienced a degree of market
correction. Consequently, a ripple effect was felt throughout the marketplace,
as the tech-laden indexes became increasingly volatile.
As our portfolio managers Lou Kirschbaum and David Blount--who together have a
total of 42 years market experience--discuss in their letter, historically the
Heritage Income-Growth Trust has shown some of its best results during periods
of market volatility. We have mentioned before the benefits of designing an
investment portfolio that includes a variety of asset classes to best weather
the ever-cyclical nature of the marketplace. Using their resources of research
and market experience, managers Kirschbaum and Blount have selected portfolio
holdings they believe will perform most effectively in a potentially volatile
environment. Although markets are never predictable, we believe the design of
this Fund is appropriate as a long-term investment and as a part of many
investors' asset allocation programs.
Thank you for your continuing investment in Heritage Income-Growth Trust.
Please call your financial advisor or Heritage at (800) 421-4184 if you have
any questions.
Sincerely,
/s/ BRIAN C. LEE
----------------
Brian C. Lee
President
---------
* These returns are calculated without the imposition of either front-end or
contingent deferred sales charges.
<PAGE>
May 22, 2000
Dear Fellow Shareholders:
The past six months ended March 31, 2000 produced plenty of thrills and spills
as stock market sentiment careened through more ups and downs than the mighty
Cyclone (the famous Coney Island roller coaster). The first half of the period
(the December 1999 quarter) was driven by a breathtaking surge in the
technology sector, as many of these inherently volatile stocks doubled and
tripled in a euphoric millenium-ending rally. Participation in the market's
rally broadened a little in the most recent three months, but once again it was
the tech stocks in the lead.
Near the end of the March quarter, the technology component of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500") swelled to an all-time
high weighting (by market capitalization) of 35%. Few sectors in the stock
market's history have accounted for as much as 30% of the index weighting.
Perhaps reflecting this unusually intense concentration, many technology stocks
began to wobble mid-way through March and came under heavy selling pressure as
the second calendar quarter began.
It is not a coincidence that the Income-Growth Trust's relative performance,
which was disappointing in both relative and absolute terms for the six-months
covered by this report, began to improve as the period was ending and stepped
up dramatically in the early innings of the June quarter. April and May are not
the subject of this letter, but the Fund's improving trend of late is
noteworthy, nonetheless, since it is when the market becomes turbulent that the
Income-Growth Trust historically has achieved its most satisfactory results.
Indeed, the Fund's Class A Shares percentile ranking by Lipper, Inc.* -- on the
basis of 52-week trailing results in the equity income category -- moved up
from the 84th percentile (183 out of 219 funds) at the end of September 1999,
to the 51st percentile (112 out of 220 funds) on March 31, 2000 and improved
further to the 32nd percentile (62 out of 218 funds) near the end of April 2000
(the most recent data available as we pen these comments).
In the six-months ending March 31st, the Fund's Class A Shares produced a
positive total return of 3.74%**. This compared to the S&P 500's return of
17.5% (heavily influenced by the technology sector as noted above) and the 2.6%
performance of the Value Line Composite average. The comparison to the Value
Line average is meaningful, we think, because it is an unweighted index and,
therefore, is not distorted by the tech group's extraordinary influence.
Securities that contributed positively to the Fund's performance in the past
six months are a diverse lot, but the one thing they have in common is
improving earnings growth prospects. The list includes American Express,
General Electric, Marsh & McLennan among the bigger, more visible companies in
the portfolio; Omnicom and Safeguard Scientifics are among the non-household
names.
We highlight the pharmaceutical manufacturers as a group, which we singled out
as a "lowlight" in our comments six months ago. We noted then that the stocks
had underperformed even though the earnings results remained excellent, and
that our intent was to stick with them. Recent strong performance seems to have
justified our confidence in these stocks.
The portfolio's laggards were the interest rate sensitive securities, for the
most part. Utilities generally performed poorly (with the exception of the
Williams Companies, whose stock is driven by its rapidly growing
telecommunications business), as one might expect in a rising interest rate
environment. The same was true of financial stocks (other than American
Express). We trimmed the portfolio's exposure in the utility and financial
sectors as it became clearer that the interest rate trend will be unfavorable a
while
<PAGE>
longer. There are good values being created here, however, and we stand ready
to selectively increase our holdings in these solid, dividend paying stocks in
the quarters ahead.
Food stocks, along with consumer staples in general, have been struggling
because sales growth has been increasingly difficult to achieve. We have
materially reduced our exposure in this sector, because we expect the
underlying business environment will continue to be difficult here for some
time to come.
In managing the Income-Growth Trust, we plan to continue along our recent
course: that is, moderating the portfolio's interest rate sensitivity while
increasing projected earnings growth. At the same time, we continue to
emphasize rising dividends and discounted valuations in our investment
selection process. Our objective is to enhance the portfolio's growth profile
without sacrificing the Fund's inherent defensive posture. Our approach, which
is rooted in sound fundamental analysis, has been productive in the past and we
expect it will produce worthwhile results in the future.
Very Truly Yours,
/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
---------
* Lipper, Inc. performance rankings for Heritage Income-Growth Trust Class A
Shares was based on 183 out of 219 equity income funds for the 52 week
period ended September 30, 1999. Performance ranking for the 52 week period
ending March 31, 2000 was based on 112 out of 220 equity income funds. For
April 30, the 52 week performance ranking was based on 62 out of 218 equity
income funds. The performance numbers used for the Fund did not take into
account any front - or back - end sales charges. Past performance is no
guarantee of future results.
** These returns are calculated without the imposition of front-end sales
charges.
<PAGE>
--------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------------
COMMON STOCKS--79.9%(a)
=======================
AUTOMOTIVE--1.2%
---------------
19,000 Ford Motor Company .................... $ 872,813
----------
BANKS--2.2%
---------------
56,000 Mellon Financial Corporation .......... 1,652,000
----------
BEVERAGES--1.3%
---------------
28,000 PepsiCo, Inc. ......................... 967,750
----------
COMMUNICATION SERVICES--12.6%
-----------------------------
44,000 ALLtel Corporation .................... 2,774,750
25,000 AT&T Corporation ...................... 1,406,250
45,000 GTE Corporation ....................... 3,195,000
30,000 SBC Communications, Inc. .............. 1,260,000
11,500 US West Inc. .......................... 835,188
----------
9,471,188
----------
COMMUNICATIONS EQUIPMENT--0.8%
------------------------------
4,000 Motorola, Inc. (b) .................... 569,500
----------
COMPUTER EQUIPMENT--2.0%
------------------------
12,500 Dell Computer Corporation * ........... 674,219
2,500 Hewlett-Packard Company ............... 331,406
4,000 International Business Machines
Corporation ......................... 472,000
----------
1,477,625
COMPUTER PERIPHERAL EQUIPMENT--3.0%
-----------------------------------
20,000 Cisco Systems, Inc. (b) * ............. 1,546,250
6,000 EMC Corporation * ..................... 750,000
----------
2,296,250
----------
ELECTRONIC EQUIPMENT--4.5%
--------------------------
22,100 General Electric Company .............. 3,429,643
----------
FINANCIAL INSTITUTIONS--3.5%
----------------------------
12,000 American Express Company .............. 1,787,250
18,600 Freddie Mac ........................... 821,887
----------
2,609,137
FOOD--4.0%
----------
25,000 H.J. Heinz Company .................... 871,875
60,000 Sysco Corporation ..................... 2,141,250
----------
3,013,125
----------
INSURANCE--2.5%
---------------
12,000 Marsh & McLennan
Companies, Inc. ..................... 1,323,750
20,000 SAFECO Corporation .................... 531,250
----------
1,855,000
----------
LOGIC SEMICONDUCTORS--1.9%
--------------------------
11,000 Intel Corporation (b) ................. 1,451,313
----------
MARKET
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
=========================
MACHINERY--1.8%
---------------
18,000 Deere & Company ................... $ 684,000
30,000 Pall Corporation .................. 673,125
----------
1,357,125
----------
MANUFACTURING INDUSTRIES--1.5%
------------------------------
39,600 Harsco Corporation ................ 1,145,925
----------
OIL & GAS--7.8%
---------------
30,000 Atlantic Richfield Company ........ 2,550,000
32,000 Exxon Mobil Corporation ........... 2,490,000
22,000 Santa Fe International
Corporation ..................... 814,000
----------
5,854,000
----------
OTHER INVESTMENT COMPANIES--1.3%
--------------------------------
52,446 Security Capital Preferred
Growth (c) ...................... 1,001,201
----------
PHARMACEUTICAL--7.5%
--------------------
28,000 American Home Products
Corporation ..................... 1,501,500
11,000 Bristol-Myers Squibb Company ...... 635,250
13,000 Merck & Company, Inc. ............. 807,625
16,000 Pharmacia & Upjohn, Inc. .......... 948,000
22,000 Schering-Plough Corporation ....... 808,500
10,000 Warner-Lambert Company ............ 975,000
----------
5,675,875
----------
PRINTING & PUBLISHING--1.7%
---------------------------
28,000 McGraw-Hill Companies, Inc. ....... 1,274,000
----------
PROFESSIONAL SERVICES--3.8%
---------------------------
31,000 Omnicom Group, Inc. ............... 2,896,563
----------
RETAIL STORES--4.5%
-------------------
65,000 Intimate Brands, Inc. ............. 2,665,000
12,900 Wal-Mart Stores, Inc. ............. 715,950
----------
3,380,950
SOFTWARE--3.8%
--------------
7,500 Electronic Data Systems
Corporation ....................... 481,406
15,000 Microsoft Corporation * ........... 1,593,750
10,000 Oracle Corporation (b) * .......... 780,625
----------
2,855,781
----------
TRANSPORTATION EQUIPMENT--1.5%
------------------------------
22,000 Honeywell International Inc. ...... 1,159,125
----------
UTILITIES--5.2%
---------------
40,000 American Water Works
Company, Inc. ................... 950,000
27,400 NiSource Inc. ..................... 462,375
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
--------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
INVESTMENT PORTFOLIO
MARCH 31, 2000
(UNAUDITED)
(CONTINUED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ -------------
COMMON STOCKS (CONTINUED)
=========================
UTILITIES (CONTINUED)
---------------------
58,000 Williams Companies, Inc. .......... $ 2,548,375
-----------
3,960,750
-----------
Total Common Stocks (cost $47,792,635)....... 60,226,639
-----------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------------
CONVERTIBLE BONDS--8.7%(a)
==========================
AUTOMOTIVE--1.3%
----------------
$ 1,000,000 Magna International, Inc.,
5.0%, 10/15/02 .......... $ 950,000
----------
COMPUTER EQUIPMENT--1.0%
------------------------
250,000 Safeguard Scientifics Inc.,
5.0%, 06/15/06 .......... 752,500
----------
MEMORY & COMMODITY SEMICONDUCTORS--0.8%
---------------------------------------
500,000 Cypress Semiconductor,
4.0%, 02/01/05 .......... 623,750
----------
MISCELLANEOUS SERVICES--1.9%
----------------------------
1,800,000 Interim Services, Inc.,
4.5%, 06/01/05 .......... 1,437,750
----------
PHARMACEUTICAL--1.5%
--------------------
900,000 Alpharma Inc.,
3.0%, 06/01/06 .......... 1,144,125
----------
PROFESSIONAL SERVICES--0.6%
---------------------------
500,000 Young & Rubicam Inc.,
3.0%, 01/15/05 .......... 462,500
----------
RETAIL STORES--1.6%
-------------------
1,250,000 Charming Shoppes Inc.,
7.5%, 7/15/06 ........... 1,171,875
----------
Total Convertible Bonds (cost $5,987,255)..... 6,542,500
----------
MARKET
SHARES VALUE
------ ------------
CONVERTIBLE PREFERRED STOCKS--7.5% (a)
======================================
BANKS--1.3%
-----------
20,000 Sovereign Bancorp, Inc., 7.5% ......... $ 975,000
---------
RESTAURANTS--2.6%
-----------------
42,000 Wendy's Financing, Series "A",
5.0% ............................... 1,974,000
---------
UTILITIES--3.6%
---------------
17,300 Houston Industries, Inc., 7.0%........ 2,750,700
---------
MARKET
SHARES VALUE
------ ------------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
========================================
Total Convertible Preferred Stocks
(cost $4,093,989)...................... $ 5,699,700
-----------
Total Investment Portfolio excluding
repurchase agreement and excluding
covered call options written
(cost $57,873,879) .................... 72,468,839
-----------
REPURCHASE AGREEMENT--0.2%(a)
=============================
Repurchase Agreement with State Street
Bank and Trust Company, dated
March 31, 2000 @ 6.05% to be
repurchased at $116,019 on
April 01, 2000, collateralized by
$115,000 United States Treasury Notes,
6.50% due November 15, 2026,
(market value $124,138 including interest)
(cost $116,000).......................... 116,000
-----------
TOTAL INVESTMENT PORTFOLIO EXCLUDING COVERED
CALL OPTIONS WRITTEN
(cost $57,989,879)(d), 96.3%(a)........ 72,584,839
-----------
MARKET
SHARES VALUE
------ ---------------
COVERED CALL OPTIONS WRITTEN--(0.3%)(a)*
========================================
2,000 Motorola, Inc.,
May 2000 @ 175 .......... (9,500)
10,000 Cisco Systems, Inc.
April 2000 @ 70 ......... (88,750)
5,500 Intel Corporation,
April 2000 @ 130 ........ (48,125)
5,000 Oracle Corporation,
April 2000 @ 65 ......... (73,125)
5,000 Oracle Corporation,
April 2000 @ 75 ......... (36,875)
-----------
TOTAL COVERED CALL OPTIONS WRITTEN
(premium received $196,093), (0.3%)(a) (256,375)
OTHER ASSETS AND LIABILITIES, net, 4.0% (a) 3,051,469
-----------
NET ASSETS, 100.0% ..................... $75,379,933
===========
----------
* 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 $14,534,678 which consists of aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax
cost of $18,143,850 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value of
$3,609,172.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
--------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
------
Investments, at market value (identified cost $57,873,879) (Note 1) ..................... $72,468,839
Repurchase agreement (identified cost $116,000) (Note 1) ................................ 116,000
Cash .................................................................................... 205
Receivables:
Investments sold ....................................................................... 5,038,082
Fund shares sold ....................................................................... 27,551
Dividends and interest ................................................................. 209,960
Deferred state qualification expenses (Note 1) .......................................... 27,032
Prepaid insurance (Note 1) .............................................................. 10,660
-----------
Total Assets ........................................................................ 77,898,329
LIABILITIES
-----------
Payables (Note 4)
Investments purchased .................................................................. $1,830,765
Fund shares redeemed ................................................................... 288,572
Accrued management fee ................................................................. 57,953
Accrued distribution fee ............................................................... 31,149
Other accrued expenses ................................................................. 53,582
Covered call options written, at market value (premiums received $196,093)
(Notes 1 and 3). ....................................................................... 256,375
----------
Total Liabilities ................................................................... 2,518,396
-----------
Net assets, at market value ............................................................. $75,379,933
===========
NET ASSETS
----------
Net assets consist of:
Paid-in capital ........................................................................ $61,081,966
Undistributed net investment income (Note 1) ........................................... 395,754
Accumulated net realized loss (Notes 1 and 5) .......................................... (632,465)
Net unrealized appreciation on investments and covered call options written ............ 14,534,678
-----------
Net assets, at market value ........................................................ .... $75,379,933
===========
CLASS A SHARES
--------------
Net asset value and redemption price per share ($50,941,667 divided by
3,317,628 shares of beneficial interest outstanding, no par value)
(Notes 1 and 2) ........................................................................ $ 15.35
===========
Maximum offering price per share (100/95.25 of $15.35 ) ................................. $ 16.12
===========
CLASS B SHARES
--------------
Net asset value, offering price and redemption price per share ($5,375,657 divided by
354,409 shares of beneficial interest outstanding, no par value) (Notes 1 and 2) ....... $ 15.17
===========
CLASS C SHARES
--------------
Net asset value, offering price and redemption price per share ($19,062,609 divided
by 1,256,773 shares of beneficial interest outstanding, no par value)
(Notes 1 and 2) ........................................................................ $ 15.17
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
--------------------------------------------------------------------------------
HERITAGE INCOME-GROWTH TRUST
STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
-----------------
<S> <C> <C>
Income:
Dividends .................................................................... $1,084,678
Interest ..................................................................... 204,748
----------
Total income ............................................................... 1,289,426
Expenses (Notes 1 and 4):
Management fee ............................................................... $323,290
Distribution fee (Class A Shares) ............................................ 70,682
Distribution fee (Class B Shares) ............................................ 32,662
Distribution fee (Class C Shares) ............................................ 115,661
Custodian/Fund accounting fees ............................................... 34,495
Shareholder servicing fees ................................................... 33,243
Professional fees ............................................................ 21,074
State qualification expenses ................................................. 14,500
Reports to shareholders ...................................................... 7,607
Trustees' fees and expenses .................................................. 4,516
Insurance .................................................................... 2,569
Other ........................................................................ 536
--------
Total expenses ............................................................. 660,835
----------
Net investment income ......................................................... 628,591
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
------------------------------------------
Net realized gain from investment transactions ................................ 790,446
Net realized gain from covered call options written (Note 1) .................. 68,530
Net unrealized appreciation of investments during the period .................. 1,414,658
Net unrealized depreciation of covered call options written during the period . (60,282)
----------
Net gain on investments ..................................................... 2,213,352
----------
Net increase in net assets resulting from operations ........................ $2,841,943
==========
</TABLE>
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED FOR THE
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
================== ===================
Decrease in net assets:
<S> <C> <C>
Operations:
Net Investment income ............................................................. $ 628,591 $ 2,033,169
Net realized gain (loss) from investment transactions ............................. 790,446 (1,229,509)
Net realized gain (loss) from covered call options written ........................ 68,530 (165,980)
Net unrealized appreciation of investments during the period ...................... 1,354,376 5,946,965
------------- -------------
Net increase in net assets resulting from operations .............................. 2,841,943 6,584,645
Distributions to shareholders from:
Net investment income Class A Shares, ($ 0.15 and $0.33 per share, respectively) .. (599,458) (1,463,165)
Net investment income Class B Shares, ($ 0.09 and $0.22 per share, respectively) .. (43,931) (108,120)
Net investment income Class C Shares, ($ 0.09 and $0.22 per share, respectively) .. (158,070) (444,443)
Net realized gains Class A Shares, ($0.62 per share) .............................. -- (2,792,348)
Net realized gains Class B Shares, ($0.62 per share) .............................. -- (294,751)
Net realized gains Class C Shares, ($0.62 per share) .............................. -- (1,257,716)
Decrease in net assets from Fund share transactions (Note 2) ....................... (20,485,457) (11,432,965)
------------- -------------
Decrease in net assets ............................................................. (18,444,973) (11,208,863)
Net assets, beginning of period .................................................... 93,824,906 105,033,769
------------- -------------
Net assets, end of period (including undistributed net investment income of
$395,754 and $568,622, respectively) .............................................. $ 75,379,933 $ 93,824,906
============= =============
</TABLE>
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, ===========================================================
2000*
(UNAUDITED) 1999* 1998* 1997* 1996 1995
================ =========== =========== =========== =========== ===========
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 14.95 $ 14.99 $ 16.65 $ 14.67 $ 12.56 $ 11.33
--------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .......... 0.13 0.34 0.36 0.40 0.36 0.27
Net realized and unrealized
gain (loss) on
investments ................... 0.42 0.57 (0.37) 3.45 2.35 1.79
--------- -------- -------- -------- -------- --------
Total from investment
Operations .................... 0.55 0.91 (0.01) 3.85 2.71 2.06
--------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income ............. (0.15) (0.33) (0.32) (0.38) (0.35) (0.34)
Distributions from net
realized gains ................ -- (0.62) (1.33) (1.49) (0.25) (0.49)
--------- -------- -------- -------- -------- --------
Total Distributions ....... .... (0.15) (0.95) (1.65) (1.87) (0.60) (0.83)
--------- -------- -------- -------- -------- --------
Net asset value, end of
period ......................... $ 15.35 $ 14.95 $ 14.99 $ 16.65 $ 14.67 $ 12.56
========= ======== ======== ======== ======== ========
Total Return (%) (a) ............ 3.74 (b) 6.14 (0.34) 29.45 22.26 19.57
Ratios (%)/ Supplemental
Data:
Operating expenses, net, to
average daily net assets ...... 1.27 (c) 1.27 1.29 1.34 1.51 1.64
Net investment income to
average daily net assets ...... 1.71 (c) 2.19 2.24 2.65 2.66 4.63
Portfolio turnover rate ........ 37 (b) 46 66 75 75 42
Net assets, end of period
($ millions) .................. 51 60 68 65 43 34
<CAPTION>
CLASS B SHARES*
=============================================
FOR THE
SIX-MONTH
PERIOD
ENDED SEPTEMBER 30,
MARCH 31, ==============================
2000
(UNAUDITED) 1999 1998/dagger/
============== =========== ==================
<S> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 14.76 $ 14.82 $ 15.62
------------ -------- ----------
Income from Investment
Operations:
Net investment income .......... 0.07 0.22 0.19
Net realized and unrealized
gain (loss) on
investments ................... 0.43 0.56 (0.88)
------------ -------- ----------
Total from investment
Operations .................... 0.50 0.78 (0.69)
------------ -------- ----------
Less Distributions:
Dividends from net
investment income ............. (0.09) (0.22) (0.11)
Distributions from net
realized gains ................ -- (0.62) --
------------ -------- ----------
Total Distributions ....... .... (0.09) (0.84) (0.11)
------------ -------- ----------
Net asset value, end of
period ......................... $ 15.17 $ 14.76 $ 14.82
============ ======== ==========
Total Return (%) (a) ............ 3.42(b) 5.32 (4.50)(b)
Ratios (%)/ Supplemental
Data:
Operating expenses, net, to
average daily net assets ...... 2.03 (c) 2.02 2.04 (c)
Net investment income to
average daily net assets ...... .97 (c) 1.44 1.75 (c)
Portfolio turnover rate ........ 37 (b) 46 66
Net assets, end of period
($ millions) .................. 5 7 6
<CAPTION>
CLASS C SHARES
===================================================================================
FOR THE
SIX-MONTH
PERIOD FOR THE YEARS ENDED
ENDED SEPTEMBER 30,
MARCH 31, ====================================================================
2000*
(UNAUDITED) 1999* 1998* 1997* 1996 1995/double dagger/
============== =========== =========== =========== =========== ====================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 14.76 $ 14.82 $ 16.49 $ 14.57 $ 12.51 $ 11.21
------------ -------- -------- -------- -------- ------------
Income from Investment
Operations:
Net investment income .......... 0.07 0.22 0.25 0.28 0.26 0.18
Net realized and unrealized
gain (loss) on
investments ................... 0.43 0.56 (0.38) 3.43 2.34 1.28
------------ -------- -------- -------- -------- ------------
Total from investment
Operations .................... 0.50 0.78 (0.13) 3.71 2.60 1.46
------------ -------- -------- -------- -------- ------------
Less Distributions:
Dividends from net
investment income ............. (0.09) (0.22) (0.21) (0.30) (0.29) (0.16)
Distributions from net
realized gains ................ -- (0.62) (1.33) (1.49) (0.25) --
------------ -------- -------- -------- -------- ------------
Total Distributions ....... .... (0.09) (0.84) (1.54) (1.79) (0.54) (0.16)
------------ -------- -------- -------- -------- ------------
Net asset value, end of
period ......................... $ 15.17 $ 14.76 $ 14.82 $ 16.49 $ 14.57 $ 12.51
============ ======== ======== ======== ======== ============
Total Return (%) (a) ............ 3.42(b) 5.32 (1.08) 28.49 21.37 13.18(b)
Ratios (%)/ Supplemental
Data:
Operating expenses, net, to
average daily net assets ...... 2.03(c) 2.02 2.04 2.07 2.13 2.40(c)
Net investment income to
average daily net assets ...... .97(c) 1.44 1.51 1.87 2.05 4.61(c)
Portfolio turnover rate ........ 37(b) 46 66 75 75 42
Net assets, end of period
($ millions) .................. 19 26 31 21 6 0.2
</TABLE>
-------
* Per share amounts have been calculated using the average share
method.
/dagger/ For the period January 2, 1998 (commencement of Class B Shares)
to September 30, 1998.
/double dagger/ For the period April 3, 1995 (commencement of Class C Shares)
to September 30, 1995.
(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 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
accounting principles generally accepted in the United States 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 fees, distribution
fee, etc., while other expenses such as insurance expense, is 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 accreted for both tax and financial reporting purposes.
Note 2: FUND SHARES. At March 31, 2000 there were an unlimited number of shares
of beneficial interest of no par value authorized.
Transactions in Class A, B and C Shares of the Fund during the six-month
period ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIOD ENDED CLASS A SHARES CLASS B SHARES CLASS C SHARES
MARCH 31, 2000 (UNAUDITED) ============================== ============================= =============================
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
============= ================ ============= =============== ============= ===============
<S> <C> <C> <C> <C> <C> <C>
Shares sold . .................... 79,291 $ 1,191,898 16,246 $ 242,132 92,991 $ 1,370,911
Shares issued on reinvestment of
distributions ................... 37,421 553,326 2,789 40,696 9,848 143,638
Shares redeemed .................. (823,892) (12,293,775) (160,718) (2,375,487) (631,161) (9,358,796)
-------- ------------- -------- ------------ -------- ------------
Net decrease ..................... (707,180) $ (10,548,551) (141,683) $ (2,092,659) (528,322) $ (7,844,247)
============= ============ ============
Shares outstanding:
Beginning of period ............. 4,024,808 496,092 1,785,095
--------- -------- ---------
End of period ................... 3,317,628 354,409 1,256,773
========= ======== =========
</TABLE>
Transactions in Class A, B and C Shares of the Fund during the year
ended September 30, 1999, were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FOR THE YEAR ENDED SEPTEMBER 30, 1999 ================================ ============================= ==============================
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
=============== ================ ============= =============== ============= ================
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................... 352,146 $ 5,409,671 187,430 $ 2,858,535 299,442 $ 4,572,257
Shares issued on reinvestment of
distributions ................. 262,944 3,959,739 25,683 381,864 110,089 1,634,529
Shares redeemed ................. (1,124,477) (17,366,124) (154,048) (2,357,700) (688,824) (10,525,736)
---------- ------------- -------- ------------- -------- -------------
Net increase (decrease) ......... (509,387) $ (7,996,714) 59,065 $ 882,699 (279,293) $ (4,318,950)
============= ============= =============
Shares outstanding:
Beginning of year .............. 4,534,195 437,027 2,064,388
---------- -------- ---------
End of year .................... 4,024,808 496,092 1,785,095
========== ======== =========
</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, 2000, purchases and sales of investment securities (excluding
repurchase agreements) aggregated $31,647,049 and $53,572,894,
respectively. Agency brokerage commissions for the same period
aggregated $91,849 of which $4,387 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, 1999 .......... -- $ 0
Written ............................... 58,000 399,542
Closed ................................ (23,000) (137,075)
Exercised ............................. (12,500) (66,374)
Stock Splits .......................... 5,000 --
------- ----------
Outstanding March 31, 2000 .............. 27,500 $ 196,093
======= ==========
Note 4: MANAGEMENT, SUBADVISORY, DISTRIBUTION, SHAREHOLDER SERVICING AGENT,
FUND ACCOUNTING AND TRUSTEES FEES. Under the Fun'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 dated January 3, 2000, 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 Shares
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 ended September 30, 2000. Under
these agreements, no fees were waived and no expenses were reimbursed
for the six-month period ended March 31, 2000.
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, 2000 the Subadviser earned $161,645 for subadviser fees, which were
paid by the Manager.
The Manager also is the Dividend Paying, Shareholder Servicing Agent and
Fund Accountant for the Fund. The Manager charged $33,243 for Dividend
Paying and Shareholder Servicing and $24,300 for Fund Accounting
services of which $16,500 and $12,600 was payable as of March 31, 2000,
respectively.
Raymond James & Associates, Inc. (the "Distributor") has advised the
Fund that it received $21,868 in front-end sales charges for Class A
Shares, $23,530 in contingent deferred sales charges for Class B Shares
and $1,149 in contingent deferred sales charges for Class C Shares for
the six-month period ended March 31, 2000. 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, and Heritage
Series Trust, 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 portfolio in the Heritage mutual
funds.
Note 5: FEDERAL INCOME TAXES. For the year ended September 30, 1999, to reflect
reclassifications arising from permanent book/tax differences primarily
attributable to distributions from Real Estate Investment Trusts, the
Fund credited undistributed net investment income $119,329, and charged
paid in capital $110,751 and accumulated net realized gain $8,578. The
Fund has a net tax basis capital loss carryforward of $1,084,451, which
may be applied against any realized net taxable gains until its
expiration date of September 30, 2007.
12
<PAGE>
HERITAGE FAMILY OF FUNDS(TM)
FROM OUR FAMILY TO YOURS: THE INTELLIGENT CREATION OF WEALTH
HERITAGE STOCK FUNDS
AGGRESSIVE GROWTH
CAPITAL APPRECIATION
GROWTH EQUITY
INCOME-GROWTH
INTERNATIONAL
MID CAP
SMALL CAP
TECHNOLOGY
VALUE EQUITY
HERITAGE BOND FUNDS
HIGH YIELD
INTERMEDIATE GOVERNMENT
HERITAGE MONEY MARKET FUNDS
MONEY MARKET
MUNICIPAL MONEY MARKET
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.
(C) 2000 Heritage Asset Management, Inc.
5.5M 03/00 [GRAPHIC OMITTED] Printed on recycled paper
AR5315-IG
[LOGO] Heritage Income Growth Trust
P.O. Box 33022
St. Petersburg, FL 33733
--------------------------------------------------------------------------------
ADDRESS SERVICE REQUESTED
