<PAGE> 1
November 21, 1995
Dear Fellow Shareholders:
I am pleased to provide you with the annual report for the Limited Maturity
Government Portfolio (the "Fund") of Heritage Income Trust for the fiscal year
ended September 30, 1995. For this period, Class A Shares of your Fund had a
total return of +8.47% (without the imposition of a front-end sales load) as
compared to the Lehman Brothers 1 to 3 year U.S. Government Index, which had a
return of +8.19%. From April 3, 1995 when Class C Shares of your Fund were
introduced, through the end of the fiscal year, Class C Shares returned +4.90%.
In the letter that follows, H. Peter Wallace, your Fund's portfolio manager,
discusses the factors that materially affected your Fund's performance over its
most recent fiscal year. Obviously, the environment for investors in fixed
income securities was much more favorable than it was in the preceeding year
when your Fund (and many fixed income benchmarks) struggled to post even slight
positive returns.
At yesterday's Board of Trustees meeting for your Fund, the Board approved
several changes in the policies for your Fund. Among the most significant of
these is the lengthening of the range of the weighted average maturity for your
Fund's portfolio to three to ten years from the current requirement of less than
five years. Concurrent with this change, which will be effective on February 1,
1996, will be a change of your Fund's name to the Intermediate Government Fund
of Heritage Income Trust. While the lengthening of the portfolio may increase
the volatility of your returns, we and the Board believe that these changes also
will allow us the potential to deliver better performance for you in a variety
of fixed income environments.
On behalf of all of us at Heritage, thank you for your continuing investment
with us. We wish you a happy and healthy holiday season and a wonderful 1996!
Sincerely,
/s/Stephen G. Hill
Stephen G. Hill
President
Heritage Income Trust-Limited Maturity Government Portfolio is a member of the
Heritage Family of mutual funds. Other investment alternatives available to you
from Heritage include Heritage Cash Trust which consists of the Money Market and
Municipal Money Market Portfolios, Heritage Capital Appreciation Trust, Heritage
Income-Growth Trust, Heritage Income Trust Diversified Portfolio and Heritage
Series Trust, which consists of the Small Cap Stock, Value Equity and Growth
Equity Portfolios. We are pleased that many of you are also investors in these
funds. For information and a prospectus for any of these funds, please contact
your account executive. Read the Prospectus carefully before you invest in any
of the funds.
<PAGE> 2
November 21, 1995
Dear Shareholder:
It is a pleasure to report to you on the factors that influenced the performance
of Heritage Income Trust-Limited Maturity Government Portfolio. Your Fund
performed well in 1995 and there were a number of factors that influenced its
performance. The primary factor was the decline in domestic interest rates.
Interest rates, as measured by the three-year U.S. Treasury Note, fell from a
yield level of 6.87% on September 30, 1994 to a yield of 5.87% on September 30,
1995, a decline of 100 basis points or 1 full percentage point in yield.
The decline in interest rates was not smooth, with yields in the early portion
of the fiscal year, September of 1994 to late December of 1994, rising sharply
from 6.87% to 7.82%. This increase in yield was due to the bond market's
preoccupation with the potential of faster economic growth leading to higher
rates of inflation, which again, as throughout most of 1994, proved unfounded.
During this period, the Federal Reserve continued to increase short term
interest rates. Your Fund was defensively structured having a duration (price
sensitivity to interest rates) less than that of the Lehman Brothers 1-3 year
Government Bond Index. Your Fund was invested in shorter-term U.S. Treasury
securities, shorter-term mortgage related securities and CMO floating rate
securities as a defensive measure.
At the end of 1994, the market began to improve significantly as market
expectations for slower economic growth and the potential for an ease in
monetary policy by the Federal Reserve grew. Interest rates, as measured by the
yield of the three-year U.S. Treasury Note, declined sharply from 7.82% to
approximately 6.89% at the end of March 1995.
During the early stages of 1995, a strategic decision was made to reduce the
Fund's exposure to shorter-term mortgage securities. All floating rate
collateralized mortgage obligation securities were sold from the Fund's and
maturities were extended by the purchase of longer-term U.S. Treasury
securities. The Fund's duration was extended to be longer than that of the
Lehman Brothers 1-3 year Government Bond Index.
This decision was predicated on the belief that shorter-term mortgage securities
would under-perform fixed rate U.S. Treasury securities with defined cash flows
as the market rallied. This strategy proved beneficial as the economy weakened
and yields fell to approximately 5.85%, while the yields of shorter-term
mortgage securities widened to U.S. Treasury issues through the end of June
1995.
During the summer months, the domestic economy began to show signs of recovery
from its anemic second quarter growth rate. As a result, interest rates began to
rise sharply and your Fund was again shortened in terms of its duration to be
less than that of the Lehman Brothers 1-3 year Government Bond Index. Yields
eventually rose to approximately 6.23% in early August and then as the economy
softened again, declined to about 5.90% at the end of the fiscal year. During
this time the Fund duration was extended to exceed the duration of the Index.
Your Portfolio continues to maintain a low weighting in shorter-term mortgage
securities and strategically favors fixed rate Treasuries.
During the year, one mortgage derivative position, Federal National Mortgage
Association 1992-167 A, a principal only class, was fully paid down. The Fund
continues to hold one remaining principal only position, a small piece of
Federal National Mortgage Association 1989-16 C. We expect this holding to be
fully paid down in early 1996. Holding these small positions was generally
beneficial to the portfolio during the year.
Given the current low rate of inflation, and our belief that inflation will not
accelerate sharply in the remainder of 1995 and early 1996, we expect to
maintain our current duration and strategic posture for the near future.
Sincerely,
/s/H. Peter Wallace
H. Peter Wallace, CFA
Senior Vice-President
Heritage Asset Management, Inc.
2
<PAGE> 3
CHART
* AVERAGE ANNUAL TOTAL RETURNS FOR HIT-LMG CLASS A SHARES ARE CALCULATED IN
CONFORMANCE WITH ITEM 22 OF FORM N-1A, WHICH ASSUMES THE MAXIMUM SALES LOAD
OF 3.75% AND REINVESTMENT OF DIVIDENDS.
** FROM FUND INCEPTION ON 3/1/90.
3
<PAGE> 4
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
INVESTMENT PORTFOLIO
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
REPURCHASE AGREEMENT--2.3%(A) VALUE
- ---------------------------------------------------------------------------------------- -----------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company, dated September 29, 1995, @
6.10%, to be repurchased at $565,287 on October 2, 1995, collateralized by $445,000 United
States Treasury Bonds, 10.375% due November 15, 2009 (market value $585,217 including accrued
interest) (cost $565,000)....................................................................... $ 565,000
-----------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
<CAPTION>
PRINCIPAL MATURITY
AMOUNT DATE
----------
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--96.4%(A)
U.S. TREASURIES--91.9%
$5,000,000 U.S. Treasury Notes, 7.5%..............................................
01/31/97 5,107,810
1,500,000 U.S. Treasury Notes, 5.625%............................................
06/30/97 1,494,843
2,000,000 U.S. Treasury Notes, 6.5%..............................................
08/15/97 2,021,250
750,000 U.S. Treasury Notes, 7.375%............................................
11/15/97 771,328
6,500,000 U.S. Treasury Notes, 6.125%............................................
05/15/98 6,534,528
1,000,000 U.S. Treasury Notes, 7.0%..............................................
04/15/99 1,032,500
2,500,000 U.S. Treasury Notes, 6.875%............................................
08/31/99 2,575,000
1,500,000 U.S. Treasury Notes, 6.125%............................................
07/31/00 1,505,625
1,500,000 U.S. Treasury Notes, 6.25%.............................................
08/31/00 1,513,593
-----------
Total U.S. Treasuries.................................................. 22,556,477
-----------
U.S. GOVERNMENT AGENCIES--4.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION:
664,652 REMIC, 7.0%, 1164 F PAC................................................
03/15/05 667,357
81,869 REMIC, 10.0%, 16 C TAC.................................................
02/15/13 84,130
271,609 REMIC, 6.5%, 1177 GC PAC...............................................
06/15/17 270,965
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
85,815 REMIC, 1989-16 C, Principal Only TAC, 5.63%*...........................
03/25/19 84,508
-----------
Total U.S. Government Agencies......................................... 1,106,960
-----------
Total U.S. Government and Agency Securities (cost $23,413,567)......... 23,663,437
-----------
TOTAL INVESTMENT PORTFOLIO (COST $23,978,567)(B) 98.7%(A).................................... 24,228,437
OTHER ASSETS AND LIABILITIES, NET, 1.3%(A)................................................... 337,565
-----------
NET ASSETS, 100.0%........................................................................... $24,566,002
===========
</TABLE>
- -------------------
* Yield to maturity (unaudited)
(a) Percentages are based on net assets.
(b) The aggregate identified cost for federal income tax purposes is the same.
Market value includes net unrealized appreciation of $249,870, which
consists of aggregate gross unrealized appreciation for all securities in
which there is an excess of market value over tax cost of $256,766 and
aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over market value of $6,896.
PAC-Planned Amortization Class
REMIC-Real Estate Mortgage Investment Conduit
TAC-Targeted Amortization Class
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at market value (identified cost $23,413,567) (Note 1)....................... $ 23,663,437
Repurchase agreement (identified cost $565,000) (Note 1).................................. 565,000
Cash...................................................................................... 2,186
Receivables:
Interest................................................................................ 349,464
From Manager............................................................................ 15,921
Fund shares sold........................................................................ 23,100
Deferred state registration expenses (Note 1)............................................. 11,479
Prepaid insurance......................................................................... 2,434
------------
Total assets...................................................................... 24,633,021
Liabilities
Payables (Note 4):
Fund shares redeemed.................................................................... $ 13,272
Accrued professional fees............................................................... 24,733
Accrued distribution fee................................................................ 7,016
Other accrued expenses.................................................................. 21,998
--------
Total liabilities................................................................. 67,019
------------
Net assets, at market value............................................................... $ 24,566,002
===========
Net Assets
Net assets consist of:
Undistributed net investment income (Note 1)............................................ $ 721,566
Net unrealized appreciation on investments.............................................. 249,870
Accumulated net realized loss (Note 1).................................................. (7,327,485)
Paid-in capital......................................................................... 30,922,051
------------
Net assets, at market value............................................................... $ 24,566,002
===========
Class A Shares
Net asset value and redemption price per share ($24,499,439 divided by 2,636,948 shares of
beneficial interest outstanding, no par value) (Note 2)................................. $9.29
====
Maximum offering price per share (100/96.25 of $9.29)..................................... $9.65
====
Class C Shares
Net asset value, offering price and redemption price per share ($66,563 divided by 7,181
shares of beneficial interest outstanding, no par value) (Notes 1 and 2)................ $9.27
====
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest................................................................................ $ 1,892,860
Expenses (Notes 1 and 4):
Management fee.......................................................................... $ 146,658
Distribution fee........................................................................ 102,354
Professional fees....................................................................... 40,949
Custodian/Fund accounting fees.......................................................... 38,862
Amortization of state registration expenses............................................. 31,925
Shareholder servicing fees.............................................................. 29,973
Reports to shareholders................................................................. 18,404
Trustees' fees and expenses............................................................. 9,725
Insurance............................................................................... 4,971
Amortization of organization expenses................................................... 4,167
Other................................................................................... 2,239
---------
Total expenses before waiver and reimbursement........................................ 430,227
Fees waived by Manager (Note 4)....................................................... (146,658)
Reimbursement from Manager............................................................ (5,225) 278,344
--------- -----------
Net investment income..................................................................... 1,614,516
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions............................................ (712,069)
Net increase in unrealized appreciation of investments during the year.................... 1,324,202
-----------
Net gain on investments........................................................... 612,133
-----------
Net increase in net assets resulting from operations...................................... $ 2,226,649
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Decrease in net assets:
Operations:
Net investment income........................................................ $ 1,614,516 $ 2,985,426
Net realized loss from investment transactions............................... (712,069) (2,506,763)
Net increase (decrease) in unrealized appreciation of investments during the
year....................................................................... 1,324,202 (132,920)
------------------ ------------------
Net increase in net assets resulting from operations......................... 2,226,649 345,743
Distributions to shareholders from:
Net investment income, Class A Shares ($0.55 and $0.37 per share,
respectively).............................................................. (1,803,106) (2,604,342)
Net investment income, Class C Shares ($0.22 per share)...................... (702) --
Decrease in net assets from Fund share transactions (Note 2)................... (16,931,280) (58,333,599)
------------------ ------------------
Decrease in net assets......................................................... (16,508,439) (60,592,198)
Net assets, beginning of year.................................................. 41,074,441 101,666,639
------------------ ------------------
Net assets, end of year (including undistributed net investment income of
$721,566 and $909,583, respectively)......................................... $ 24,566,002 $ 41,074,441
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------
CLASS C
FOR THE YEARS ENDED SEPTEMBER 30, SHARES
---------------------------------------------------------- -------
1995 1994* 1993 1992 1991 1990 + 1995 ++
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................... $ 9.10 $ 9.44 $ 9.84 $10.00 $ 9.49 $9.60 $ 9.05
------ ------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(a)...... 0.62 0.43 0.59 0.52 0.67 0.32 0.21
Net realized and unrealized
gain (loss) on
investments................. 0.12 (0.40) (0.44) 0.10 0.49 (0.12) 0.23
------ ------ ------ ------ ------ ------ -------
Total from Investment
Operations.................. 0.74 0.03 0.15 0.62 1.16 0.20 0.44
------ ------ ------ ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (0.55) (0.37) (0.52) (0.55) (0.65) (0.27) (0.22)
Distributions from net
realized gains.............. -- -- (0.03) (0.23) -- (0.04) --
------ ------ ------ ------ ------ ------ -------
Total Distributions........... (0.55) (0.37) (0.55) (0.78) (0.65) (0.31) (0.22)
------ ------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD........................ $ 9.29 $ 9.10 $ 9.44 $ 9.84 $10.00 $9.49 $ 9.27
====== ====== ====== ====== ====== ====== =======
TOTAL RETURN (%)(D)............. 8.47 .36 1.58 6.47 12.64 2.11 (c) 4.90 (c)
RATIOS (%)/SUPPLEMENTAL DATA:
Operating expenses, net, to
average daily net
assets(a)................... 0.95 0.95 0.91 0.78 1.07 1.10 (b) 1.20 (b)
Net investment income to
average daily net assets.... 5.50 4.60 5.99 5.66 6.87 7.04 (b) 5.19 (b)
Portfolio turnover rate....... 162 214 150 123 202 76 (b) 162
Net assets, end of the period
($ millions)................ 24 41 102 111 5 4 0.07
</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.
+ For the period March 1, 1990 (commencement of operations) to September 30,
1990.
++ For the period April 3, 1995 (commencement of Class C Shares) to September
30, 1995.
(a) Excludes management fees waived and expenses reimbursed by the Manager in
the amount of $.06, $.03, $.01, $.02, $.24 and $.22 per Class A Share,
respectively. The operating expense ratios including such items would be
1.47%, 1.18%, 1.03%, 1.23%, 3.58% and 5.88% (annualized) for Class A
Shares, respectively. Excludes management fees waived and expenses
reimbursed by the Manager in the amount of $.06 per Class C Share. The
operating expense ratio including such items would be 1.72% (annualized)
for Class C Shares.
(b) Annualized.
(c) Not annualized.
(d) Does not reflect the imposition of a sales charge.
7
<PAGE> 8
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1: SIGNIFICANT ACCOUNTING POLICIES. Heritage Income Trust (the "Trust") 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 consisting of three separate investment
portfolios, the Limited Maturity Government Portfolio (the "Fund"), the
Diversified Portfolio and the Institutional Government Portfolio. The
Fund currently issues Class A and Class C Shares. Class A Shares are
sold subject to a maximum sales charge of 3.75% of the amount invested
payable at the time of purchase. Class C Shares, which were offered to
shareholders beginning April 3, 1995, are sold subject to a contingent
deferred sales charge of 1% of the lower of net asset value or purchase
price payable upon any redemptions within one year after purchase. The
policies described below are followed consistently by the Fund in the
preparation of financial statements for the Fund in conformity with
generally accepted accounting principles. Financial statements for the
Diversified Portfolio and the Institutional Government Portfolio are
presented separately.
Security Valuation: The Fund values investment securities at market
value based on the last 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 most recent quoted bid price and
in the absence of a market quote, securities are valued using such
methods as the Board of Trustees believes would reflect fair market
value. Investments in certain debt instruments not traded in an
organized market, are valued on the basis of valuations furnished by
independent pricing services or broker/dealers that utilize information
with respect to market transactions in such securities or comparable
securities, quotations from dealers, yields, maturities, ratings and
various relationships between securities. Short term investments having
a maturity of 60 days or less are valued at cost, which when combined
with accrued interest included in interest receivable or discount
earned, approximates market.
Repurchase Agreements: The Fund enters into repurchase agreements
whereby the Fund, through its custodian, receives delivery of the
underlying securities, the market value of which at the time of purchase
is required to be in an amount equal to at least 100% of the resale
price.
Federal Income Taxes: The Fund is treated as a single corporate taxpayer
as provided for in The Tax Reform Act of 1986, as amended. It is the
Fund's policy 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. As of September 30, 1995, the Fund has net tax
basis capital loss carry forwards of $6,719,571, which may be applied
against any realized net taxable gains until their expiration dates of
September 30, 2001 ($388,071), September 30, 2002 ($3,838,721) and
September 30, 2003 ($2,492,779). In addition, from November 1, 1994 to
September 30, 1995, the Fund incurred $607,914 of net realized capital
losses, which will be deferred and treated as arising on October 1, 1995
in accordance with regulations under the Internal Revenue Code.
Distribution of Income and Gains: Distributions of net investment income
are made monthly. Net realized gains from investment transactions for
the Fund 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 which are directly
attributable to it, such as management fee, custodian/fund accounting
fees, distribution fee, etc., while other expenses such as professional
fees, insurance expense, etc., are allocated proportionately among the
Portfolios. 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 allocated to that class.
State Registration Expenses: State registration fees are amortized based
either on the time period covered by the registration or as related
shares are sold, whichever is appropriate for each state.
Organization Expenses: Expenses incurred in connection with the
formation of the Trust were deferred equally between the Portfolios and
amortized on a straight-line basis over 60 months from the date of
commencement of operations.
Capital Accounts: The Fund reports the undistributed net investment
income and accumulated net realized gain (loss) accounts on a basis
approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting the
net asset value of Class A or Class C Shares of the Fund.
Other: Investment security transactions are accounted for on a trade
date plus one basis. Distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
premiums/original issue discounts are amortized/accreted for both
federal income tax and financial reporting purposes.
8
<PAGE> 9
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Note 2: FUND SHARES. At September 30, 1995, there was an unlimited number of
shares of beneficial interest of no par value authorized.
Transactions in Class A Shares of the Fund during the years ended
September 30, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold.......................................... 261,509 $ 2,378,159 1,328,760 $ 12,386,246
Shares issued on reinvestment of distributions....... 174,641 1,583,746 254,068 2,360,924
Shares redeemed...................................... (2,312,072) (20,959,770) (7,843,995) (73,080,769)
---------- ------------ ---------- ------------
Net decrease......................................... (1,875,922) $(16,997,865) (6,261,167) $(58,333,599)
=========== ===========
Shares outstanding:
Beginning of the year.............................. 4,512,870 10,774,037
---------- ----------
End of the year.................................... 2,636,948 4,512,870
========= =========
</TABLE>
Transactions for Class C Shares of the Fund from April 3, 1995
(commencement of Class C Shares) to September 30, 1995 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----- -------
<S> <C> <C>
Class C Shares
Shares sold................................................. 7,432 $68,909
Shares issued on reinvestment of distributions.............. 76 702
Shares redeemed............................................. (327) (3,026)
----- -------
Net increase................................................ 7,181 $66,585
=======
Shares outstanding:
Beginning of period....................................... --
-----
End of period............................................. 7,181
=====
</TABLE>
Note 3: PURCHASES AND SALES OF SECURITIES. For the year ended September 30,
1995, purchases, sales and paydowns of investment securities (excluding
repurchase agreements and short-term obligations) aggregated
$44,549,320, $56,734,502 and $3,386,940, respectively.
Note 4: MANAGEMENT, DISTRIBUTION, SHAREHOLDER SERVICING AGENT AND TRUSTEES'
FEES. Under the Fund's Investment Advisory and Administration Agreement
with Heritage Asset Management, Inc. (the "Manager"), the Fund agrees to
pay to the Manager a fee equal to an annual rate of 0.50% of the Fund's
average daily net assets, computed daily and payable monthly. The
agreement also provides for a reduction in such fees in any year to the
extent that operating expenses of the Fund exceed applicable state
expense limitations. From inception of the Fund, the Manager has reduced
its investment advisory fees and reimbursed the Fund to the extent that
operating expenses have exceeded amounts ranging from .60% to 1.15% of
average daily net assets. Effective March 1, 1993, the Manager
voluntarily agreed to waive its fee and, if necessary, reimburse the
Fund to the extent that the Fund operating expenses exceed .95% for
Class A Shares (1.20% for Class C Shares effective April 3, 1995), on an
annual basis, of the Fund's average daily net assets attributable to
each class of shares. This agreement is more restrictive than any state
expense limitation. Under the agreement, management fees waived and
expenses reimbursed totalled $151,883 ($0.06 per share for each class)
for the year ended September 30, 1995. If total Fund expenses fall below
the expense limitation agreed to by the Manager before the end of the
year ending September 30, 1997, the Fund may be required to pay the
Manager a portion or all of the waived management fee. In addition, the
Fund may be required to pay the Manager a portion or all of the
management fee waived ($146,407) in the prior year ended September 30,
1994, if total Fund expenses fall below the annual expense limitation
before the end of the year ending September 30, 1996.
The Manager is also the Dividend Paying and Shareholder Servicing Agent
for the Fund. The amount payable to the Manager for such expenses as of
September 30, 1995 was $7,200. In addition, the Manager performs Fund
accounting services and charged $28,242 during the current year of which
$6,900 was payable as of September 30, 1995.
9
<PAGE> 10
- --------------------------------------------------------------------------------
HERITAGE INCOME TRUST-LIMITED MATURITY GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
- --------------------------------------------------------------------------------
Pursuant to the Class A Distribution Plan adopted in accordance with
Rule 12b-1 of the Investment Company Act of 1940, as amended, the Fund
is authorized to pay Raymond James & Associates, Inc. (the
"Distributor") a fee equal to .35% of the average daily net assets for
Class A Shares purchased on or before March 31, 1995. The Fund paid the
Distributor a fee equal to .25% for Class A Shares purchased after March
31, 1995. Under the Class C Distribution Plan the Fund paid the
Distributor a fee equal to .60% of the average daily net assets for
Class C Shares. The Distributor, on Class C Shares, may retain the first
12 months distribution fee for reimbursement of amounts paid to the
broker/dealer at the time of purchase. Such fees are accrued daily and
payable monthly. During the period $102,285 and $69 were paid for
distribution fees for Class A Shares and Class C Shares, respectively.
The Manager, Distributor, Fund Accountant and Shareholder Servicing
Agent are all wholly-owned subsidiaries of Raymond James Financial, Inc.
Trustees of the Trust also serve as Trustees for Heritage Cash Trust,
Heritage Income-Growth Trust, Heritage Capital Appreciation Trust,
Heritage Series Trust and Heritage U. S. Government Income Fund, mutual
funds that are also advised by the Manager of the Fund (collectively
referred to as the Heritage mutual funds). Each Trustee of the Heritage
mutual funds who is not an interested person of the Manager receives an
annual fee of $8,000 and an additional fee of $2,000 for each combined
quarterly meeting of the Heritage mutual funds attended. Trustees' fees
and expenses are shared equally by each of the Heritage mutual funds.
10
<PAGE> 11
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Shareholders and Board of Trustees of
Heritage Income Trust-Limited Maturity Government Portfolio:
We have audited the accompanying statement of assets and liabilities of
Heritage Income Trust-Limited Maturity Government Portfolio, including the
investment portfolio, as of September 30, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Heritage Income Trust-Limited Maturity Government Portfolio as of September 30,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/Coopers & Lybrand
Boston, Massachusetts
November 27, 1995
11
<PAGE> 12
Heritage Income Trust
Limited Maturity Government Portfolio
P.O. Box 33022
St. Petersburg, FL 33733
--------------------------------------------
Address Change Requested
Annual Report
INVESTMENT ADVISOR/
SHAREHOLDER SERVICES AGENT/
FUND ACCOUNTANT
Heritage Asset Management, Inc.
P.O. Box 33022
St. Petersburg, FL 33733
(800) 421-4184
DISTRIBUTOR
Raymond James & Associates, Inc.
P.O. Box 12749
St. Petersburg, FL 33733
(813) 573-3800
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
INDEPENDENT ACCOUNTANT
Coopers & Lybrand L.L.P.
This report is for the information of shareholders of Heritage
Income Trust -- Limited Maturity Government Portfolio.
It may also be used as sales literature when preceded or
accompanied by a prospectus.
[HERITAGE LOGO]
LIMITED MATURITY
GOVERNMENT PORTFOLIO
A MUTUAL FUND SEEKING
HIGH CURRENT INCOME CONSISTENT
WITH THE PRESERVATION OF CAPITAL
ANNUAL REPORT
and Investment Performance
Review for the Year Ended
SEPTEMBER 30, 1995
A member of the
Heritage Family of Mutual Funds(TM)
